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NASDAQ: TZOO
2013 Annual Report
2014 Proxy Statement

Table of contents

  • Page 1
    NASDAQ: TZOO 2013 Annual Report 2014 Proxy Statement

  • Page 2
    ... of Directors (Proposal 1) Corporate Governance Information About Executive Officers Approval of Stock Options (Proposal 2) Advisory Vote On the Compensation of Named Executive Officers (Proposal 3) Compensation Discussion and Analysis Security Ownership of Certain Beneficiary Owners and Management...

  • Page 3
    ..., New York, NY 10022 at 10:00 a.m. local time. In connection with the meeting, we enclose a notice of the meeting, a proxy statement and a proxy card. Detailed information relating to Travelzoo's activities and operating performance is contained in our 2013 Annual Report on Form 10-K, as filed with...

  • Page 4
    ... On May 9, 2014 To the Stockholders of Travelzoo Inc.: NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Travelzoo Inc., a Delaware corporation, will be held on Friday, May 9, 2014, at 10:00 a.m., local time, at 590 Madison Avenue, 37th Floor, New York, NY 10022, for the following...

  • Page 5
    ...there were 14,746,954 shares of our Common Stock issued and outstanding. Where and when is the Annual Meeting? The Annual Meeting of Stockholders will take place on May 9, 2014 at 590 Madison Avenue, 37th Floor, New York, NY 10022. The meeting will begin at 10:00 a.m. local time. What am I voting on...

  • Page 6
    ... in writing at Travelzoo Inc., Attention: Corporate Secretary, 800 W. El Camino Real, Suite 275, Mountain View, CA 94040 before the Annual Meeting that you have revoked your proxy, or Vote in person at the Annual Meeting. • How do I vote in person? If you are a stockholder of record, you...

  • Page 7
    ...8-K, which we intend to file within four business days following the Annual Meeting. You can obtain a copy of the Form 8-K by logging on to Travelzoo's investor relations website at www.travelzoo.com/ir, by calling the Securities and Exchange Commission (the "SEC") at (800) SEC-0330 for the location...

  • Page 8
    ... managing and running his own digital marketing and communications agency operating from Silicon Valley and New York. Previously, Mr. Neale-May held senior positions with marketing, promotions and public relations agencies, such as Ogilvy & Mather, in Silicon Valley, New York, London and Los Angeles...

  • Page 9
    ...: Accounting, finance, international management and non-executive directorships. Required Vote Our Certificate of Incorporation, as amended, does not authorize cumulative voting. Delaware law and our bylaws provide that directors are to be elected by a plurality of the votes of the shares present...

  • Page 10
    ..., (ii) the qualifications and independence of our independent registered public accounting firm, (iii) the performance of our independent registered public accounting firm and internal audit staff, and (iv) the compliance by Travelzoo with legal and regulatory requirements. A complete description of...

  • Page 11
    ... our website located at corporate.travelzoo.com/ governance. A copy of the code of ethics is also available in print to stockholders and interested parties without charge upon written request delivered to our Corporate Secretary at Travelzoo Inc., 800 W. El Camino Real, Suite 275, Mountain View, CA...

  • Page 12
    ...-sharing and hosting agreement among the Azzurro Capital Inc. entities operating the Travelzoo business in Asia Pacific and the Company related to cross-selling audiences and hosting and development services by the Company, which were entered into in connection with the sale of Asia Pacific business...

  • Page 13
    ... as Senior Vice President, Head of Global Client Group, of American Express Corporate Services. Mr. Webb holds a bachelor's degree with distinction in Policy Studies from Dartmouth College and an MBA from Columbia University Graduate School of Business in New York City. APPROVAL OF STOCK OPTIONS...

  • Page 14
    ... is any change in the number of shares of outstanding common stock of the Company by reason of a stock dividend, recapitalization, merger, consolidation, split-up, combination, exchange of shares or other similar event. Transfer Restrictions The Option is not transferable by Optionee other than by...

  • Page 15
    ... of our named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis and the other tabular and narrative disclosure in the Company's proxy statement for its 2014 Annual Meeting of Stockholders. Required Vote...

  • Page 16
    ... be designed to attract and retain superior employees in key competitive positions. We implement our compensation philosophy through setting base salaries for our executive officers, through the use of our executive bonus plan and through reviewing and approving other terms of employment agreements...

  • Page 17
    ... in on the Summary Compensation Table based upon their individual performance and salary ranges for similarly situated executives in 2013. Incentive Bonus Pay In 2013, 2012 and 2011, Mr. Christopher Loughlin, Mr. Glen Ceremony, Ms. Shirley Tafoya, Mr. Richard Singer and Mr. Mark Webb also received...

  • Page 18
    ... Company's publications, and the development of the Travelzoo brand. Ms. Tafoya received Discretionary Bonuses totaling $30,000 in 2013. Pursuant to the terms of Mr. Singer's employment agreement dated October 31, 2011, effective January 16, 2012 and as amended July 1, 2012 and January 1, 2013, Mr...

  • Page 19
    ... management to ensure the long-term success of the Company's Local Deals business, the development of the Company's leadership talent. Mr. Webb received Discretionary Bonuses totaling $60,000 for 2013. Other Compensation-Related Matters Stock Options. The Company grants certain executive officers...

  • Page 20
    ... the cost of personal entertainment. Named executive officers and employees may seek reimbursement for business related expenses in accordance with our business expense reimbursement policy. Employment Agreements. The Company has entered into employment agreements with the named executive officers...

  • Page 21
    ... 2011 Glen Ceremony (4) 2013 Chief Financial Officer (effective June 15, 2011) 556,500 43,500 (7) - 40,000 (12) 46,555 (17) 686,555 450,000 88,889 (8) - 116,178 (13) 3,903 (18) 658,970 2012 450,000 50,000 (8) 953,800 87,500 (13) 1,500 (18) 1,542,800 2011 Shirley Tafoya...

  • Page 22
    (6) Mr. Webb became the President, Local Deals on February 27, 2012. (7) For 2013, 2012 and 2011, amount consists of discretionary bonuses earned per the terms of Mr. Loughlin's employment agreement and/or at the discretion of the Board of Directors. (8) For 2013, 2012 and 2011, amount consists of ...

  • Page 23
    ..., as long as Mr. Ceremony's and Ms. Tafoya's employment remains in effect at such dates. Option Exercises and Stock Vested For the year ended December 31, 2013, there were no options exercised by any of our named executive officers. For the year ended December 31, 2013, 75,000 shares of Mr. Loughlin...

  • Page 24
    ... his move from London to New York City. Mr. Loughlin is also entitled to participate in or receive such benefits under the Company's employee benefit plans and policies and such other benefits which may be in effect from time to time and as are provided to similarly situated employees of the Company...

  • Page 25
    ... assign all of her interest in any and all such discoveries and work product to the Company. Furthermore, Ms. Tafoya agreed to not, directly or indirectly, solicit the Company's customers or employees during the term of her employment and for a period of one year thereafter. Mr. Singer entered into...

  • Page 26
    ...Committee Report The information contained in this report shall not be deemed to be "soliciting material" or "filed" with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Travelzoo specifically incorporates it by reference into a document filed under...

  • Page 27
    ...% - ** 1.53 52.26% Beneficial Owner Directors and Named Executive Officers Holger Bartel Ralph Bartel(3)* David J. Ehrlich Glen Ceremony Christopher Loughlin Donovan Neale-May Shirley Tafoya Kelly M. Urso Mark K. Webb Michael Karg Mary Reilly Directors and executive officers as a group (11 persons...

  • Page 28
    PRINCIPAL ACCOUNTANT FEES AND SERVICES Independent Public Accountants KPMG LLP ("KPMG") served as Travelzoo's independent registered public accounting firm for our 2013 fiscal year. KPMG representatives are expected to be present at the Annual Meeting and will be available to respond to questions at...

  • Page 29
    ... on the reviews and discussions referred to above, the committee recommended to the Board of Directors (and the Board of Directors has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2013 filed with the SEC. The...

  • Page 30
    ... Investor Relations, Travelzoo Inc., 590 Madison Avenue, 37th Floor, New York, New York 10022 or by telephone at (212) 484-4900. This proxy statement and the 2013 Annual Report are available on the Internet at corporate.travelzoo.com/annualreport. These documents are also included in our SEC filings...

  • Page 31
    ... information. A copy of any public filing is also available, at no charge, by contacting Investor Relations, Travelzoo Inc., 590 Madison Avenue, 37th Floor, New York, New York 10022 or by telephone at (212) 484-4900. INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON No director, executive...

  • Page 32
    ...who have multiple accounts in their names, can authorize us to discontinue mailings of multiple annual reports and proxy statements. Requests for additional copies, or requests for a single copy to be delivered to a shared address should be directed to Investor Relations, Travelzoo Inc., 590 Madison...

  • Page 33
    ... other matter properly presented at the meeting, or any adjournments or postponements thereof. This proxy, when properly executed, will be voted as directed by the stockholder. (Continued, and to be marked, dated and signed, on the other side) TRAVELZOO INC. Mailing Instructions If you receive this...

  • Page 34
    ... the proxy statement and 2013 Annual Report of Travelzoo Inc. Date , 2014 (signature) (signature, if jointly held) Please sign exactly as name appears at left. If stock is jointly held each owner should sign. Executors, Administrators, Trustees, Guardians and Corporate Officers should indicate their...

  • Page 35
    ... (Address of principal executive offices) 10022 (Zip code) Registrant's telephone number, including area code: (212) 484-4900 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $0.01 Par Value (Title of Class...

  • Page 36
    ...of June 28, 2013, the aggregate market value of voting stock held by non-affiliates of the Registrant, based upon the closing sales price for the Registrant's Common Stock, as reported on the NASDAQ Global Select Market, was $216,194,562. The number of shares of Travelzoo common stock outstanding as...

  • Page 37
    ... and Procedures Item 9B. Other Information PART III Item 10. Directors, Executive Officers and Corporate Governance of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships...

  • Page 38
    ... agencies. In addition, we operate Local Deals and Getaway services, which allow our subscribers to purchase vouchers for deals from local businesses such as spas, hotels and restaurants through the Travelzoo website and mobile applications. Voucher promotional offers are redeemable at the local...

  • Page 39
    ... and local businesses to advertise their offers on Travelzoo's media properties. Listing fees are based on audience reach, placement, number of listings, number of impressions, number of click-throughs, number of referrals, or percentage of the face value of vouchers sold. Insertion orders are...

  • Page 40
    ... include real-time listings, real-time updates, and performance tracking. See "Benefits to Travel, Entertainment and Local Businesses" below. New Advertising Opportunities. The Internet allows advertisers to advertise their sales and specials in a fast, flexible, and cost-effective manner that...

  • Page 41
    ... Newsflash e-mail alert service, and the Local Deals and Getaway e-mail alert services. We operate SuperSearch, a pay-per-click travel search tool and the Travelzoo Network, a network of third-party websites that list deals published by Travelzoo. We also operate Fly.com, a travel search engine that...

  • Page 42
    ... local markets Local targeting by zip code,100% share of voice for the local businesses, flexible publication schedule Breaking news offers delivered just-in-time Travelzoo Network A network of thirdparty websites that list outstanding deals published by Travelzoo iPhone and Android applications...

  • Page 43
    ...a network of websites that syndicate our deal content, including The Los Angeles Times and The Chicago Tribune. We have over 3 million fans on Facebook and Twitter. Our mobile apps have been downloaded 2.4 million times. Benefits to Travel, Entertainment and Local Businesses Our advertisers benefit...

  • Page 44
    ... Travelocity United Airlines Virgin America Virgin Atlantic Windstar Cruises As discussed in Note 12 to the accompanying consolidated financial statements, we did not have any advertisers that accounted for 10% or more of our total revenues during the years ended December 31, 2013, 2012 and 2011...

  • Page 45
    ... MSN and Yahoo! that offer listings or other advertising opportunities to travel, entertainment and local businesses. We compete with search engines like Google and Bing that offer pay-per-click listings. We compete with travel meta-search engines like Kayak and online travel and entertainment deal...

  • Page 46
    ...registered travelzoo.com, travelzoo.ca, travelzoo.co.jp, travelzoo.com.au, travelzoo.com.tw, travelzoo.co.uk, travelzoo.de, travelzoo.fr, travelzoo.org, travelzoo.net, weekend.com, and weekends.com, among other domain names, and have registered "Travelzoo" as a trademark in the United States, Canada...

  • Page 47
    ... period, or escheat claims related to shares not issued in the Company's merger with Travelzoo.com Corporation; and volatility of our operating results in new markets. • We may significantly increase our operating expenses related to advertising campaigns for the Travelzoo and Fly.com brands, as...

  • Page 48
    ..., we launched our Local Deals format of advertising and during the second quarter of 2011, we launched our Getaway format of advertising, under which we sell vouchers directly to consumers to advertise promotional deals provided by merchants. For example, a consumer could buy a voucher for $99 for...

  • Page 49
    ... of deals that offer attractive quality, value and variety to consumers or favorable payment terms to us. We must continue to attract and retain advertisers in order to increase revenue and maintain profitability. If new advertisers do not find our marketing and promotional services effective...

  • Page 50
    ... depending on volume of hotel bookings. An increase in our refund rates related to our Local Deals and Getaway could reduce our liquidity and profitability. We provide refunds related to our Local Deals and Getaway voucher sales. As we increase our revenue, our refund rates may exceed our historical...

  • Page 51
    ...the distribution of e-mails or other messages or any increase in the associated costs would materially and adversely affect our revenue and profitability. In addition, the shift in our website traffic originating from mobile devices accessing our services may decrease our subscribers' willingness to...

  • Page 52
    ... us to comply. Moreover, under payment card rules and our contracts with our card processors, if there is a security breach of payment card information that we store, we could be liable to the payment card issuing banks for their cost of issuing new cards and related expenses. If we fail to comply...

  • Page 53
    ... tax of $7.7 million and $7.0 million in 2013 and 2012, respectively. We intend to continue adding a significant number of subscribers in selected countries in which we operate as we believe this is one of the factors that will allow us to increase our advertising rates and increase our revenues in...

  • Page 54
    ... including a significant shift of business to mobile platforms; evolving industry standards, including both formal and de facto standards relating to online advertising; developments and changes relating to the Internet; competing products and services that offer increased functionality; and changes...

  • Page 55
    ..., marketing and other resources and larger advertiser bases. We compete with search engines like Google and Bing that offer pay-per-click listings. We compete with travel metasearch engines like Kayak and online travel and entertainment deal publishers. We compete with large online travel agencies...

  • Page 56
    • Integration of the acquired company's accounting, human resources, and other administrative systems, and coordination of product, engineering, and sales and marketing functions. Transition of operations, users, and customers onto our existing platforms. Failure to obtain required approvals on a...

  • Page 57
    ..., 2013, Azzurro is the Company's largest stockholder, holding approximately 48.2% of our outstanding shares. Risks Related to Legal Uncertainty We may become subject to shareholder lawsuits over securities violations due to volatile stock price and this can be burdensome to management and costly to...

  • Page 58
    ... and other claims based on the nature and content of Internet materials. The implementation of the CARD Act and similar state and foreign laws may harm our Local Deals business. Vouchers which are issued under our Local Deals and Getaway may be considered gift cards, gift certificates, stored value...

  • Page 59
    ... advertisers, merchants, subscribers or third parties and as a result our revenue and goodwill could be materially and adversely affected. In addition, we may acquire personal or confidential information from users of our websites and mobile applications, related to our Local Deals and planned hotel...

  • Page 60
    ...shares originally received by Travelzoo.com Corporation in 1998 were valid, but the Company believes that only a portion of such requests were valid. In response to the pending reviews referred to above, and in response to other persons claiming to be former stockholders of Travelzoo.com Corporation...

  • Page 61
    ...money services business, our regulatory compliance costs to meet these obligations would likely increase which could reduce our net income. In addition, the costs for third parties to sell vouchers would increase, which may restrict our ability to enlist third parties to issue vouchers. Our internal...

  • Page 62
    ... operations, including offices in Chicago, Illinois; Austin, Texas; Boston, Massachusetts; Las Vegas, Nevada; Los Angeles, California; Miami, Florida; Mountain View, California; San Francisco, California; Toronto, Ontario; and Vancouver, British Columbia. We also have leased offices for our Europe...

  • Page 63
    ... $23.00 On February 11, 2014, the last reported sales price of our common stock on the NASDAQ Global Select Market was $22.59 per share. As of February 12, 2014, there were approximately 158 stockholders of record of our shares. Dividend Policy Travelzoo has not declared or paid any cash dividends...

  • Page 64
    ...performance on the following graph is not indicative of future stock price performance. Measurement Point 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 Travelzoo Inc. NASDAQ Market Index S&P 500 Publishing $ $ $ 100 $ 100 $ 100 $ 221.04 $ 143.89 $ 56.61 $ 744.24 $ 168...

  • Page 65
    ... in our other SEC filings. The forward-looking statements included in this report reflect the beliefs of our management on the date of this report. Travelzoo undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or...

  • Page 66
    ... 20 e-mail newsletter, and the Newsflash e-mail alert service. We operate SuperSearch, a pay-per-click travel search tool, and the Travelzoo Network, a network of third-party websites that list deals published by Travelzoo. We also operate Fly.com, a travel search engine that allows users to quickly...

  • Page 67
    ...of Internet traffic to our services, in particular our Search products, SuperSearch and Fly.com, the competitive market pricing of voucher-based offerings may lead to us reducing our take rate (i.e. our commission) in order to maintain or grow the number of quality deals and merchants we are seeking...

  • Page 68
    ... face value of vouchers that we sell for Local Deals and Getaway increases or the total number of vouchers sold increases because we have credit card fees based upon face value of vouchers sold, due to customer service costs related to vouchers sold and due to subscriber refunds on vouchers sold. We...

  • Page 69
    ....com in 2009, Local Deals in 2010, Getaway in 2011 as well as our mobile application launches in 2011 and 2012. In late 2012, we bought an online hotel booking platform to serve hotels and to facilitate the development of our hotel booking platform. We have also increased our spending on addressing...

  • Page 70
    ...our operations for the periods indicated. Year Ended December 31, 2013 2012 2011 Revenues Cost of revenues Gross profit Operating expenses: Sales and marketing General and administrative Unexchanged promotional shares Total operating expenses Income from operations Other income Income before income...

  • Page 71
    ...a license agreement with Travelzoo Inc. and is not owned by the Company. The total subscriber amounts exclude Asia Pacific subscribers of 3,600,000, 3,600,000 and 3,100,000 for the years ended December 31, 2013, 2012 and 2011, respectively. Annual revenue divided by number of employees at the end of...

  • Page 72
    ...publications (Top 20, Website, Newsflash, Travelzoo Network) and Getaway vouchers. Search revenue includes SuperSearch and Fly.com. Local revenue includes Local Deals vouchers and entertainment offers (vouchers and direct bookings). Year Ended December 31, 2013 2012 2011 North America Travel Search...

  • Page 73
    ..., payments made to third-party partners of the Travelzoo Network, fees we pay related to user searches on Fly.com, amortization of capitalized website development costs, credit card fees, certain estimated subscriber refunds and customer service costs associated with vouchers we sell, and salary...

  • Page 74
    ... with sales, marketing and production staff, expenses related to our participation in industry conferences, and public relations expenses. Sales and marketing expenses were $74.9 million, $68.2 million and $65.5 million for 2013, 2012 and 2011, respectively. Advertising expenses accounted for...

  • Page 75
    ... information on the unexchanged promotional shares contingency. Other Income Other income consisted primarily of interest earned on cash, cash equivalents and restricted cash as well as income from Travelzoo Asia Pacific. Other income was $429,000, $309,000 and $302,000 for 2013, 2012 and 2011...

  • Page 76
    ... increase in payments made to third-party partners of the Travelzoo Network, Local Deals and Getaway credit card fees, customer service and certain subscriber refunds, and a $1.8 million increase in Search traffic acquisition costs, offset by a $2.0 million decrease in television advertising expense...

  • Page 77
    ... Travelzoo.com Corporation, and who failed to submit requests to convert their shares into shares of Travelzoo Inc. within the required time period. See Note 1 to the accompanying consolidated financial statements for further information on the unexchanged promotional shares contingency and related...

  • Page 78
    ... depend on a number of factors, including market acceptance of our products and services, the amount of our resources we devote to the development of new products, cash payments to former stockholders of Travelzoo.com Corporation or to their original domicile state as unclaimed property, expansion...

  • Page 79
    ... advertising sold to advertisers through agencies are reported at the net amount billed to the agency. We started selling vouchers for local businesses such as spas, hotels and restaurants using our Local Deals product in the third quarter 2010 and our Getaways products in the second quarter 2011...

  • Page 80
    ... such as our liability to former stockholders of Travelzoo.com Corporation that may be realized as a result of our cash program for these claimants, state unclaimed property claims and lawsuits, including a derivative lawsuit as well as a patent infringement lawsuit. Please refer to Note 5 to the...

  • Page 81
    ... all other variables held constant. The foreign currency exchange rates we used were based on market rates in effect at December 31, 2013. The sensitivity analysis indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would result in an incremental $157,000 foreign...

  • Page 82
    ... Data TRAVELZOO INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of Stockholders' Equity...

  • Page 83
    ...OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Travelzoo Inc.: We have audited the accompanying consolidated balance sheets of Travelzoo Inc. and subsidiaries (Travelzoo) as of December 31, 2013 and 2012, and the related consolidated statements of operations...

  • Page 84
    ... assets, net Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses Deferred revenue Deferred rent Reserve for unexchanged promotional shares Payable to shareholders for reverse/forward stock split Total current liabilities Long-term tax liabilities...

  • Page 85
    TRAVELZOO INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2013 2012 2011 Revenues Cost of revenues Gross profit Operating expenses: Sales and marketing General and administrative Unexchanged promotional shares Total operating expenses ...

  • Page 86
    TRAVELZOO INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) Year Ended December 31, 2013 2012 2011 Net income (loss) Other comprehensive income (loss): Foreign currency translation adjustment Total comprehensive income (loss) $ (5,011) $ 207 (4,804) $ 18,198 685 18,883 ...

  • Page 87
    ..., December 31, 2012 Stock-based compensation expense Repurchase of common stock Shares fractionalized from reverse/ forward stock split, including transaction costs Proceeds from sale of shares fractionalized from reverse/forward stock split, including transaction costs Foreign currency translation...

  • Page 88
    ... of year Supplemental disclosure of cash flow information: Cash paid for income taxes, net of refunds received Funds held by transfer agent for settlement of reverse/forward stock split Payable to shareholders for reverse/forward stock split Leasehold improvements funded by landlord See accompanying...

  • Page 89
    ... Newsflash e-mail alert service, the SuperSearch pay-per-click travel search tool, and the Travelzoo Network, a network of third-party websites that list travel deals published by Travelzoo. We also operate Fly.com, a travel search engine that allows users to quickly and easily find the best prices...

  • Page 90
    ...shares originally received by Travelzoo.com Corporation in 1998 were valid, but the Company believes that only a portion of such requests were valid. In response to the pending reviews referred to above, and in response to other persons claiming to be former stockholders of Travelzoo.com Corporation...

  • Page 91
    ... Europe on the Travelzoo website, in the Travelzoo Top 20 e-mail newsletter, in Newsflash, from SuperSearch, from the Travelzoo Network, and from Fly.com. The Company also generates revenue from the sale of vouchers through our Local Deals and Getaway e-mail alert services. Advertising revenues are...

  • Page 92
    ... advertisers through agencies are reported at the net amount billed to the agency. The Company started selling vouchers for Local Deals in third quarter 2010 and Getaway in second quarter 2011, from local businesses such as spas, hotels and restaurants. The Company earns a fee for acting as an agent...

  • Page 93
    ...-pricing model. The value of the portion of the award that is expected to vest is recognized as expense over the related employees' requisite service periods in the Company's consolidated statements of operations. Total stock-based compensation for the years ended December 31, 2013, 2012 and 2011...

  • Page 94
    ...revenue earned from customers located in the U.S. and internationally. As of December 31, 2013 and 2012, the Company did not have any customers that accounted for 10% or more of its accounts receivable. (n) Recent Accounting Pronouncements In February 2013, the FASB amended ASU 2011-5 to improve the...

  • Page 95
    ...deposit under the lease of our corporate headquarters and a $804,000 deposit with our banks in Europe for our merchant accounts. Cash equivalents consist of highly ...December 31, 2013 and 2012 (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical...

  • Page 96
    ... internal-use software and website development costs include $321,000 and $1.2 million, respectively, of in process construction and development expected to be deployed in 2014. The details of intangible consist of the following (in thousands): December 31, 2013 2012 Internet domain names...

  • Page 97
    ...428 $ 756 Local Deals and Getaway merchant payable included in accounts payable was $27.2 million and $23.4 million, as of December 31, 2013 and 2012, respectively. The details of accrued expenses consist of the following (in thousands): December 31, 2013 2012 Accrued advertising expense Accrued...

  • Page 98
    ... September 2012, Metasearch Systems filed similar lawsuits against several of Travelzoo's competitors including Expedia, Inc., Orbitz Worldwide, Inc., Travelocity.com, LP, Priceline.com, Inc., Yahoo! Inc., American Express Company, KAYAK Software Corp., and BookIt.com. The action seeks unspecified...

  • Page 99
    ...shares originally received by Travelzoo.com Corporation in 1998 were valid, but the Company believes that only a portion of such requests were valid. In response to the pending reviews referred to above, and in response to other persons claiming to be former stockholders of Travelzoo.com Corporation...

  • Page 100
    ...payments ...2012, an income tax benefit of $800,000 was recorded to recognize the foreign net operating loss carryforward deferred tax assets due to a partial release of valuation allowance. During 2011, an income tax benefit of $268,000 was recorded in stockholders' equity for the tax benefit of stock...

  • Page 101
    ... of the following (in thousands): Year Ended December 31, 2013 2012 2011 Federal tax at statutory rates State taxes, net of federal income tax benefit Foreign losses not benefited Change of valuation allowance Unexchanged promotional shares Non-deductible expenses and other Total income tax expense...

  • Page 102
    ... balance at December 31, 2011 Increase related to prior year tax positions Decrease related to prior year tax positions Increase related to current year tax positions Settlements Lapse of statute of limitations Unrecognized tax benefits balance at December 31, 2012 Increase related to prior year tax...

  • Page 103
    ... annually starting on July 1, 2011. The options expire in November 2019. As of December 31, 2013, 225,000 of the options are vested and 300,000 options are outstanding. In January 2012, the Company granted executives stock options to purchase 100,000 shares of common stock with an exercise price...

  • Page 104
    ... value of 2013, 2012 and 2009 stock options was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions: 2013 2012 2009 Weighted-average fair value of options granted per share Historical volatility Risk-free interest rate Dividend yield Expected...

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    ... by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2013, 2012, and 2011. This amount changes based on the fair market value of the Company's stock. The Company's policy is to issue shares from the...

  • Page 106
    ... fractional shares from the reverse/forward split in the open market and the sales proceeds of $13.6 million are held by the Company's transfer agent in anticipation of the payment to be made to the fractionalized shareholders and are included in Funds Held for Reverse/Forward Stock Split on...

  • Page 107
    ...related to the reverse/forward split, which includes transaction costs and the amount required to be funded by the Company in excess of the funds received from the open market sales of the aggregated fractional shares for the transaction. Subsequent to December 31, 2013, the Company's transfer agent...

  • Page 108
    ...publications (Top 20, Website, Newsflash, Travelzoo Network) and Getaway vouchers. Search revenue includes SuperSearch and Fly.com. Local revenue includes Local Deals vouchers and entertainment offers (vouchers and direct bookings). Year Ended December 31, 2013 2012 2011 North America Travel Search...

  • Page 109
    ...-sharing and hosting agreement among the Azzurro Capital Inc. entities operating the Travelzoo business in Asia Pacific and the Company related to cross-selling audiences and hosting and development services by the Company, which were entered into in connection with the sale of Asia Pacific business...

  • Page 110
    ... per share amounts) for 2013 and 2012: Quarter Ended Dec 31, 2013 Sep 30, 2013 Jun 30, 2013 Mar 31, 2013 Dec 31, 2012 Sep 30, 2012 Jun 30, 2012 Mar 31, 2012 Revenues Cost of revenues Gross profit Operating expenses: Sales and marketing General and administrative Unexchanged promotional shares Total...

  • Page 111
    ...31, 2013 has been audited by KPMG LLP, Travelzoo's independent registered public accounting firm, as stated in their report which appears in Part II, Item 8 of this Annual Report on Form 10-K. /s/ CHRISTOPHER LOUGHLIN Christopher Loughlin Chief Executive Officer /s/ GLEN CEREMONY Glen Ceremony Chief...

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    Item 9B. Other Information Not applicable. 77

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    PART III Item 10. Directors, Executive Officers and Corporate Governance of the Registrant Information required by this item is incorporated by reference to Travelzoo's Definitive Proxy Statement for the 2014 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of ...

  • Page 114
    ... Information regarding principal accountant fees and services is set forth in the definitive Proxy Statement relating to our 2014 Annual Meeting of Stockholders, which is incorporated herein by reference. PART IV Item 15. Exhibits and Financial Statement Schedules The following documents are filed...

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    ... has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TRAVELZOO INC. By: /s/ GLEN CEREMONY Glen Ceremony Chief Financial Officer Date: February 12, 2014 KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby...

  • Page 116
    ...Statement on Form S-4 (File No. 333-55026), filed February 14, 2002). 3.2‡ - Certificate of Incorporation of Travelzoo Inc. and Certificates of Amendment To the Certificate of Incorporation to Effect a Reverse Stock Split Followed by a Forward Stock Split Of Travelzoo's Common Stock. By-laws of...

  • Page 117
    ... 28, 2011) Nonqualified Stock Option Agreement between Travelzoo Inc. and Christopher Loughlin dated July 22, 2013. Subsidiaries of Travelzoo Inc. Consent of Independent Registered Public Accounting Firm Power of Attorney (included on signature page) Certification of Chief Executive Officer Pursuant...

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    Investors Relations: Travelzoo Inc. ATTN: Investor Relations 590 Madison Avenue 37th Floor New York, NY 10022 Web site: www.travelzoo.com/ir