Travelzoo 2012 Annual Report Download - page 97

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If we sell additional equity or convertible debt securities, the sale could dilute the ownership of our existing stockholders. If we issue debt
securities or establish a new credit facility, our fixed obligations could increase, and we may be required to agree to operating covenants that
would restrict our operations. We cannot be sure that any such financing will be available in amounts or on terms acceptable to us.
If the development of our business is less favorable than expected, we may decide to significantly reduce the size of our operations and
marketing expenses in certain markets with the objective of reducing cash outflow.
The information set forth under “Note 3 — Commitments and Contingencies” to the consolidated financial statements included in Part II,
Item 8 of this report is incorporated herein by reference. Litigation and claims against the Company may result in legal defense costs, settlements
or judgments that could have a material impact on our financial condition.
The following summarizes our principal contractual commitments as of December 31, 2012 (in thousands):
We also have contingencies related to net unrecognized tax benefits of approximately $10.0 million as of December 31, 2012 . We are
unable to make reasonably reliable estimates on the timing of the cash settlements with the respective taxing authorities.
Critical Accounting Policies
We believe that there are a number of accounting policies that are critical to understanding our historical and future performance, as these
policies affect the reported amounts of revenue and the more significant areas involving management’s judgments and estimates. These
significant accounting policies relate to revenue recognition, reserve for subscriber refunds, allowance for doubtful accounts, income tax and loss
contingencies. These policies, and our procedures related to these policies, are described in detail below.
Revenue Recognition
We recognize revenue on arrangements in accordance with the SEC Staff Accounting Bulletin for revenue recognition. We recognize
advertising revenues in the period in which the advertisement is displayed, provided that evidence of an arrangement exists, the fees are fixed or
determinable and collection of the resulting receivable is reasonably assured. Effective January 1, 2011, we adopted ASU 2009-
13. The adoption
of this new accounting standard had no material impact on the Company’s consolidated results of operations. If fixed-
fee advertising is displayed
over a term greater than one month, revenues are recognized ratably over the period as described below. The majority of insertion orders have
terms that begin and end in a quarterly reporting period. In the cases where at the end of a quarterly reporting period the term of an insertion
order is not complete, the Company allocates the total arrangement fee to each element based on the relative estimated selling price of each
element. The Company uses prices stated on its internal rate card, which represents stand-alone sales prices, to establish estimated selling prices.
The stand-alone price is the price that would be charged if the advertiser purchased only the individual insertion. Fees for variable-fee
advertising arrangements are recognized based on the number of impressions displayed, number of clicks delivered, or number of referrals
generated during the period. Under these policies, no revenue is recognized unless persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed or determinable, and collection is deemed reasonably assured. The Company evaluates each of these criteria as follows:
39
2013
2014
2015
2016
2017
Thereafter
Total
Operating leases
$
5,049
$
2,669
$
2,507
$
1,969
$
975
$
2,370
$
15,539
Purchase obligations
1,182
688
205
17
—
—
2,092
Total commitments
$
6,231
$
3,357
$
2,712
$
1,986
$
975
$
2,370
$
17,631
•
Evidence of an arrangement.
We consider an insertion order signed by the advertiser or its agency to be evidence of an
arrangement.
•
Delivery.
Delivery is considered to occur when the advertising has been displayed and, if applicable, the click-throughs have
been delivered.
•
Fixed or determinable fee.
We consider the fee to be fixed or determinable if the fee is not subject to refund or adjustment and
payment terms are standard.