Vonage 2012 Annual Report Download - page 65

F-12 VONAGE ANNUAL REPORT 2012
present, our New Jersey tax returns remain open from 2007 to present,
our Canada tax return remains open from 2009 to present, and other
domestic and foreign tax returns remain open for all periods to which
those filings relate. We recognize the tax benefit from an uncertain tax
position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the
financial statements from such a position are measured based on the
largest benefit that has a greater than 50 percent likelihood of being
realized upon ultimate resolution.
We have not had any unrecognized tax benefits. We
recognize interest and penalties accrued related to unrecognized tax
benefits as components of our income tax provision. We have not had
any interest and penalties accrued related to unrecognized tax benefits.
Foreign Currency
Generally, the functional currency of our non-United States
subsidiaries is the local currency. The financial statements of these
subsidiaries are translated to United States dollars using month-end
rates of exchange for assets and liabilities, and average rates of
exchange for revenues, costs, and expenses. Translation gains and
losses are deferred and recorded in accumulated other comprehensive
income as a component of stockholders’ equity.
Share-Based Compensation
We account for share-based compensation in accordance
with FASB ASC 718, “Compensation-Stock Compensation”. Under the
fair value recognition provisions of this pronouncement, share-based
compensation cost is measured at the grant date based on the fair value
of the award, reduced as appropriate based on estimated forfeitures,
and is recognized as expense over the applicable vesting period of the
stock award using the accelerated method. The excess tax benefit
associated with stock compensation deductions have not been recorded
in additional paid-in capital. When evaluating whether an excess tax
benefit has been realized, share based compensation deductions are
not considered realized until NOLs are no longer sufficient to offset
taxable income. Such excess tax benefits will be recorded when
realized.
Earnings (Loss) per Share
Net income (loss) per share has been computed according
to FASB ASC 260, “Earnings per Share”, which requires a dual
presentation of basic and diluted earnings per share (“EPS”). Basic EPS
represents net income (loss) divided by the weighted average number
of common shares outstanding during a reporting period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock, including warrants, stock options and
restricted stock units under our 2001 Stock Incentive Plan and 2006
Incentive Plan, and our prior third lien convertible notes, were exercised
or converted into common stock. The dilutive effect of outstanding
warrants, stock options, and restricted stock units is reflected in diluted
earnings per share by application of the treasury stock method. In
applying the treasury stock method for stock-based compensation
arrangements, the assumed proceeds are computed as the sum of the
amount the employee must pay upon exercise and the amounts of
average unrecognized compensation cost attributed to future services.
The dilutive effect of our prior third lien convertible notes was reflected
in diluted earnings per share using the if-converted method.
The following table sets forth the computation for basic and diluted net income (loss) per share for years ended December 31, 2012, 2011
and 2010:
For the Years Ended December 31,
2012 2011 2010
Numerator
Numerator for basic earnings per share - net income (loss) $ 36,627 $409,044 $ (83,665)
Numerator for diluted earnings per share - net income (loss) $ 36,627 $409,044 $ (83,665)
Denominator
Basic weighted average common shares outstanding 224,264 224,324 209,868
Dilutive effect of stock options and restricted stock units 8,369 17,420 —
Diluted weighted average common shares outstanding 232,633 241,744 209,868
Basic net income (loss) per share
Basic net income (loss) per share $ 0.16 $1.82 $(0.40)
Diluted net income (loss) per share
Diluted net income (loss) per share $ 0.16 $1.69 $(0.40)
The following shares were excluded from the calculation of diluted loss per share because of their anti-dilutive effects:
For the Years Ended December 31,
2012 2011 2010
Common stock warrant —63
514
Convertible notes ——
10,421
Restricted stock units 2,468 655 2,332
Employee stock options 32,746 21,482 35,729
35,214 22,200 48,996
VONAGE HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)