Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Accounting Policies [Abstract] | ' |
Principles of Consolidation | ' |
Principles of Consolidation |
The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries, which are comprised of KnowledgeStorm, Inc., Bitpipe, Inc., TechTarget Securities Corporation (“TSC”), TechTarget Limited, TechTarget (HK) Limited, TechTarget (Beijing) Information Technology Consulting Co., Ltd., TechTarget (Australia) Pty Ltd., TechTarget (Singapore) Pte Ltd. and E-Magine Médias SAS. KnowledgeStorm, Inc. and Bitpipe, Inc. feature websites that provide in-depth vendor generated content targeted to corporate IT professionals. TechTarget Securities Corporation is a Massachusetts security corporation incorporated in 2004. TechTarget Limited is a subsidiary doing business principally in the United Kingdom. TechTarget (HK) Limited (“TTGT HK”) is a subsidiary incorporated in Hong Kong in order to facilitate the Company’s activities in the Asia-Pacific region. Additionally, through its wholly-owned subsidiaries, TTGT HK and TechTarget (Beijing) Information Technology Consulting Co., Ltd. (“TTGT Consulting”, incorporated on December 16, 2011), the Company effectively controls a variable interest entity (“VIE”), Keji Wangtuo Information Technology Co., Ltd., (“KWIT”), which was incorporated under the laws of the People’s Republic of China (“PRC”) on November 27, 2007. TechTarget (Australia) Pty Ltd. (incorporated on December 15, 2011) and TechTarget (Singapore) Pte Ltd. (incorporated on February 12, 2012) are the entities through which the Company does business in Australia and Singapore, respectively and E-Magine Médias SAS (“LeMagIT”), a wholly-owned subsidiary of TechTarget Limited, is an entity through which the Company does business in France. |
PRC laws and regulations prohibit or restrict foreign ownership of Internet-related services and advertising businesses. To comply with these foreign ownership restrictions, the Company operates its websites and provides online advertising services in the PRC through KWIT. The Company entered into certain exclusive agreements with KWIT and its shareholders through TTGT HK, which obligated TTGT HK to absorb all of the risk of loss from KWIT’s activities and entitled TTGT HK to receive all of their residual returns. In addition, the Company entered into certain agreements with the authorized parties through TTGT HK, including Management and Consulting Services, Voting Proxy, Equity Pledge and Option Agreements. On December 31, 2011, TTGT HK assigned all of its rights and obligations to the newly formed wholly foreign-owned enterprise (“WFOE”), TTGT Consulting. The WFOE is established and existing under the laws of the PRC, and is wholly owned by TTGT HK. |
Based on these contractual arrangements, the Company consolidates the financial results of KWIT as required by Accounting Standards Codification (“ASC”) subtopic 810-10 (“ASC 810-10”), Consolidation: Overall, because the Company holds all the variable interests of KWIT through the WFOE, which is the primary beneficiary of KWIT. Despite the lack of technical majority ownership, there exists a parent-subsidiary relationship between the Company and the VIE through the aforementioned agreements, whereby the equity holders of KWIT assigned all of their voting rights underlying their equity interest in KWIT to the WFOE. In addition, through the other aforementioned agreements, the Company demonstrates its ability and intention to continue to exercise the ability to obtain substantially all of the profits and absorb all of the expected losses of KWIT. All significant intercompany accounts and transactions between the Company, its subsidiaries, and KWIT have been eliminated in consolidation. |
Use of Estimates | ' |
Use of Estimates |
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to revenue, long-lived assets, goodwill, the allowance for doubtful accounts, stock-based compensation, earnouts, self-insurance accruals and income taxes. Estimates of the carrying value of certain assets and liabilities are based on historical experience and on various other assumptions that the Company believes to be reasonable. Actual results could differ from those estimates. |
Revenue Recognition | ' |
Revenue Recognition |
The Company generates substantially all of its revenue from the sale of targeted advertising campaigns, which are delivered via its network of websites, and events. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. |
The majority of the Company’s online media sales involve multiple product offerings, which are described in more detail below. Because neither vendor-specific objective evidence of fair value nor third party evidence of fair value exists for all elements in the Company’s bundled product offerings, the Company uses an estimated selling price which represents management’s best estimate of the stand-alone selling price for each deliverable in an arrangement. The Company establishes best estimates considering multiple factors including, but not limited to, class of client, size of transaction, available media inventory, pricing strategies and market conditions. The Company believes the use of the best estimate of selling price allows revenue recognition in a manner consistent with the underlying economics of the transaction. The Company uses the relative selling price method to allocate consideration at the inception of the arrangement to each deliverable in a multiple element arrangement. The relative selling price method allocates any discount in the arrangement proportionately to each deliverable on the basis of the deliverable’s best estimated selling price. Revenue is then recognized as delivery occurs. |
The Company evaluates all deliverables of an arrangement at inception and each time an item is delivered, to determine whether they represent separate units of accounting. Based on this evaluation, the arrangement consideration is measured and allocated to each of these elements. |
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Online Media. Revenue for lead generation campaigns is recognized as follows: |
Beginning in the period ended March 31, 2012, the Company’s lead generation campaigns all offer the Activity Intelligence™ Dashboard (the “Dashboard”). In order to manage the lead generation component, the Company changed its operational approach and the contractual terms and conditions under which it sells its products. Instead of contracting to sell individual elements, the Company sells various lead generation campaigns with the Dashboard. Accordingly, for duration-based campaigns, revenue is recognized ratably over the duration of the campaigns, which is usually less than six months. Lead generation offerings may also include an additional service, Nurture & Qualify (formerly called Nurture & Notify), in which case revenue is recognized ratably over the period of the campaign as a combined unit of accounting. As part of these lead generation campaign offerings, the Company will guarantee a minimum number of qualified leads to be delivered over the course of the advertising campaign. The Company determines the content necessary to achieve performance guarantees. Scheduled end dates of advertising campaigns sometimes need to be extended, pursuant to the terms of the arrangement, to satisfy lead guarantees. The Company estimates a revenue reserve necessary to adjust revenue recognition for extended advertising campaigns. These estimates are based on the Company’s experience in managing and fulfilling these offerings. The customer has cancellation privileges which generally require advance notice by the customer and require proportional payment by the customer for the portion of the campaign period provided by the Company. Additionally, the Company offers sales incentives to certain customers, primarily in the form of volume rebates, which are classified as a reduction of revenues and are calculated based on the terms of the specific customer’s contract. The Company accrues for these sales incentives based on contractual terms and historical experience. |
The Company recognizes revenue on contracts where pricing is based on cost per lead in the period during which the leads are delivered to its customers. |
Revenue for other significant online media offerings is recognized as follows: |
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| • | | Custom Content Creation. Custom content revenue is recognized when the creation is completed and delivered to the customer, with the exception of microsites which are recognized over the period during which they are live. | | | | | | | | | | | | | | | | | |
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| • | | Content Sponsorships. Content sponsorship revenue is recognized ratably over the period in which the related content asset is available on the Company’s websites. | | | | | | | | | | | | | | | | | |
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| • | | List Rentals and IT Deal Alert™. List rental and IT Deal Alert revenue is recognized in the period in which the delivery of the report is made to the Company’s customer. | | | | | | | | | | | | | | | | | |
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| • | | Banners. Banner revenue is recognized in the period in which the banner impressions or clicks occur. | | | | | | | | | | | | | | | | | |
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| • | | Third Party Revenue Sharing Arrangements. Revenue from third party revenue sharing arrangements is recognized on a net basis in the period in which the services are performed. For certain third party agreements where the Company is the primary obligor, revenue is recognized on a gross basis in the period in which the services are performed. | | | | | | | | | | | | | | | | | |
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| • | | In 2011, revenue for elements of lead generation campaigns was recognized as follows: | | | | | | | | | | | | | | | | | |
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| • | | White Papers. White paper revenue was recognized ratably over the period in which the white paper was available on the Company’s websites. | | | | | | | | | | | | | | | | | |
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| • | | Webcasts, Podcasts, Videocasts and Virtual Trade Shows. Webcast, podcast, videocast, virtual trade show and similar content revenue was recognized ratably over the period in which the webcast, podcast, videocast or virtual trade show was available on the Company’s websites. | | | | | | | | | | | | | | | | | |
Event Sponsorships. Revenue from vendor-sponsored events, whether sponsored exclusively by a single vendor or in a multi-vendor sponsored event, is recognized upon completion of the event in the period the event occurs. The majority of the Company’s events are free to qualified attendees; however, certain events are based on a paid attendee model. The Company recognizes revenue for paid attendee events upon completion of the event. |
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Amounts collected or billed prior to satisfying the above revenue recognition criteria are recorded as deferred revenue. The Company excludes from its deferred revenue and accounts receivable balances amounts for which it has billed in advance prior to the start of a campaign or the delivery of services. |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
Financial instruments consist of cash and cash equivalents, short and long-term investments, accounts receivable, accounts payable and contingent consideration. Due to their short-term nature and/or liquidity, the carrying value of these instruments approximates their estimated fair values. See Note 3 for further information on the fair value of the Company’s investments. The fair value of contingent consideration was estimated using a discounted cash flow method described in Note 4. |
Long-Lived Assets, Goodwill and Indefinite-lived Intangible Assets | ' |
Long-Lived Assets, Goodwill and Indefinite-lived Intangible Assets |
Long-lived assets consist primarily of property and equipment, capitalized software, goodwill and other intangible assets. The Company reviews long-lived assets, including property and equipment and finite intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Conditions that would trigger an impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset or an adverse action or a significant decrease in the market price. A specifically identified intangible asset must be recorded as a separate asset from goodwill if either of the following two criteria is met: (1) the intangible asset acquired arises from contractual or other legal rights; or (2) the intangible asset is separable. Accordingly, intangible assets consist of specifically identified intangible assets. Goodwill is the excess of any purchase price over the estimated fair value of net tangible and intangible assets acquired. |
Goodwill and indefinite-lived intangible assets are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. Separable intangible assets that are not deemed to have an indefinite life are amortized over their estimated useful lives, which range from two to ten years, using methods of amortization that are expected to reflect the estimated pattern of economic use, and are reviewed for impairment when events or changes in circumstances suggest that the assets may not be recoverable. Consistent with the Company’s determination that it has only one reporting segment, it has been determined that there is only one reporting unit and goodwill is tested for impairment at the entity level. The Company performs its annual test of impairment of goodwill as of December 31st of each year and whenever events or changes in circumstances suggest that the carrying amount may not be recoverable using the two step process required by ASC 350, Intangibles – Goodwill and Other. The first step of the impairment test is to identify potential impairment by comparing the reporting unit’s fair value with its net book value (or carrying amount), including goodwill. The fair value is estimated based on a market value approach. If the fair value of the reporting unit exceeds its carrying amount, the reporting unit’s goodwill is not considered to be impaired and the second step of the impairment test is not performed. Whenever indicators of impairment are present, the Company would perform the second step and compare the implied fair value of the reporting unit’s goodwill, as defined by ASC 350, to its carrying value to determine the amount of the impairment loss, if any. As of December 31, 2013, there are no indications of impairment based on the step one analysis, and the Company’s estimated fair value exceeded its goodwill carrying value by a significant margin. |
Based on the aforementioned evaluation, the Company believes that, as of the balance sheet date presented, none of the Company’s goodwill or other long-lived assets were impaired. The Company did not have any intangible assets with indefinite lives as of December 31, 2013 or 2012. |
Allowance for Doubtful Accounts | ' |
Allowance for Doubtful Accounts |
The Company offsets gross trade accounts receivable with an allowance for doubtful accounts. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in their existing accounts receivable. The allowance for doubtful accounts is reviewed on a regular basis, and all past due balances are reviewed individually for collectability. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Provisions for doubtful accounts are recorded in general and administrative expense. |
Below is a summary of the changes in the Company’s allowance for doubtful accounts for the years ended December 31, 2013, 2012 and 2011. |
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| | Balance at | | | Provision | | | Acquired in | | | Write-offs, | | | Balance at | |
Beginning | Business | Net of | End of |
of Period | Combinations | Recoveries | Period |
Year ended December 31, 2011 | | $ | 1,026 | | | $ | 316 | | | $ | — | | | $ | (280 | ) | | $ | 1,062 | |
Year ended December 31, 2012 | | $ | 1,062 | | | $ | 827 | | | | — | | | $ | (978 | ) | | $ | 911 | |
Year ended December 31, 2013 | | $ | 911 | | | $ | 564 | | | | — | | | $ | (562 | ) | | $ | 913 | |
Property and Equipment | ' |
Property and Equipment |
Property and equipment is stated at cost. Property and equipment acquired through acquisitions of businesses are initially recorded at fair value. Depreciation is calculated on the straight-line method based on the month the asset is placed in service over the following estimated useful lives: |
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| | Estimated Useful Life | | | | | | | | | | | | | | | | | | |
Furniture and fixtures | | 5 years | | | | | | | | | | | | | | | | | | |
Computer equipment and software | | 2–3 years | | | | | | | | | | | | | | | | | | |
Internal-use software and website development costs | | 3–4 years | | | | | | | | | | | | | | | | | | |
Leasehold improvements | | Shorter of useful life or remaining duration of lease | | | | | | | | | | | | | | | | | | |
Property and equipment consists of the following: |
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| | As of December 31, | | | | | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | | | | | |
Furniture and fixtures | | $ | 848 | | | $ | 1,277 | | | | | | | | | | | | | |
Computer equipment and software | | | 4,026 | | | | 4,014 | | | | | | | | | | | | | |
Leasehold improvements | | | 1,294 | | | | 1,362 | | | | | | | | | | | | | |
Internal-use software and website development costs | | | 15,028 | | | | 12,817 | | | | | | | | | | | | | |
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| | | 21,196 | | | | 19,470 | | | | | | | | | | | | | |
Less: accumulated depreciation and amortization | | | (11,739 | ) | | | (10,653 | ) | | | | | | | | | | | | |
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| | $ | 9,457 | | | $ | 8,817 | | | | | | | | | | | | | |
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Depreciation expense was $3.8 million, $3.3 million and $2.8 million for the years ended December 31, 2013, 2012 and 2011, respectively. Repairs and maintenance charges that do not increase the useful life of the assets are charged to operations as incurred. The Company wrote off approximately $2.7 million, $0.8 million and $1.3 million of fully depreciated assets that were no longer in service during 2013, 2012 and 2011, respectively. |
Depreciation expense is classified as a component of operating expense in the Company’s results of operations. |
Internal-Use Software and Website Development Costs | ' |
Internal-Use Software and Website Development Costs |
The Company capitalizes costs incurred during the development of its website applications and infrastructure as well as certain costs relating to internal-use software. The estimated useful life of costs capitalized is evaluated for each specific project. Capitalized internal-use software and website development costs are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss would be recognized only if the carrying amount of the asset is not recoverable and exceeds its fair value. The Company capitalized internal-use software and website development costs of $3.6 million, $3.0 million and $3.2 million for the years ended December 31, 2013, 2012 and 2011, respectively. |
Concentrations of Credit Risk and Off-Balance Sheet Risk | ' |
Concentrations of Credit Risk and Off-Balance Sheet Risk |
Financial instruments that potentially expose the Company to concentrations of credit risk consist mainly of cash and cash equivalents, investments and accounts receivable. The Company maintains its cash and cash equivalents and investments principally in accredited financial institutions of high credit standing. The Company routinely assesses the credit worthiness of its customers. The Company generally has not experienced any significant losses related to individual customers or groups of customers in any particular industry or area. The Company does not require collateral. Due to these factors, no additional credit risk beyond amounts provided for collection losses is believed by management to be probable in the Company’s accounts receivable. |
No single customer represented 10% or more of total accounts receivable at December 31, 2013 or 2012. No single customer accounted for 10% or more of total revenue in the year ended December 31, 2013. One customer accounted for both 12.0% and 12.8% of total revenue for the years ended December 31, 2012 and 2011, respectively. |
Income Taxes | ' |
Income Taxes |
The Company’s deferred tax assets and liabilities are recognized based on temporary differences between the financial reporting and income tax bases of assets and liabilities using statutory rates. A valuation allowance is established against net deferred tax assets if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return using a “more likely than not” threshold as required by the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes. |
The Company recognizes any interest and penalties related to unrecognized tax benefits in income tax expense. |
Stock-Based Compensation | ' |
Stock-Based Compensation |
The Company has two stock-based employee compensation plans which are more fully described in Note 10. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized in the Consolidated Statement of Comprehensive (Loss) Income using the straight-line method over the vesting period of the award or using the accelerated method if the award is contingent upon performance goals. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock option awards. |
Comprehensive (Loss) Income | ' |
Comprehensive (Loss) Income |
Comprehensive (loss) income includes all changes in equity during a period, except those resulting from investments by stockholders and distributions to stockholders. The Company’s comprehensive (loss) income includes changes in the fair value of the Company’s unrealized (losses) gains on available for sale securities and foreign currency translation. |
Foreign Currency | ' |
Foreign Currency |
The functional currency for each of the Company’s subsidiaries is each country’s local currency. All assets and liabilities are translated into U.S. dollar equivalents at either the exchange rate in effect on the balance sheet date or at a historical rate. Revenues and expenses are translated at average exchange rates. Translation gains or losses are recorded in stockholders’ equity as an element of accumulated other comprehensive income (loss). |
Net (Loss) Income Per Share | ' |
Net (Loss) Income Per Share |
Basic earnings per share is computed based on the weighted average number of common shares and vested restricted stock awards outstanding during the period. Because the holders of unvested restricted stock awards do not have nonforfeitable rights to dividends or dividend equivalents, the Company does not consider these awards to be participating securities that should be included in its computation of earnings per share under the two-class method. Diluted earnings per share is computed using the weighted average number of common shares and vested restricted stock awards outstanding during the period, plus the dilutive effect of potential future issuances of common stock relating to stock option programs and other potentially dilutive securities using the treasury stock method. In calculating diluted earnings per share, the dilutive effect of stock options and restricted stock awards is computed using the average market price for the respective period. In addition, the assumed proceeds under the treasury stock method include the average unrecognized compensation expense and assumed tax benefit of stock options and restricted stock awards that are in-the-money. This results in the “assumed” buyback of additional shares, thereby reducing the dilutive impact of stock options and restricted stock awards. |
A reconciliation of the numerator and denominator used in the calculation of basic and diluted net (loss) income per share is as follows: |
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| | For the Years Ended December 31, | | | | | | | | | |
| | 2013 | | | 2012 | | | 2011 | | | | | | | | | |
Numerator: | | | | | | | | | | | | | | | | | | | | |
Net (loss) income | | $ | (1,837 | ) | | $ | 4,024 | | | $ | 4,689 | | | | | | | | | |
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Denominator: | | | | | | | | | | | | | | | | | | | | |
Basic: | | | | | | | | | | | | | | | | | | | | |
Weighted average shares of common stock and vested restricted stock awards outstanding | | | 37,886,492 | | | | 40,211,075 | | | | 38,531,645 | | | | | | | | | |
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Diluted: | | | | | | | | | | | | | | | | | | | | |
Weighted average shares of common stock and vested restricted stock awards outstanding | | | 37,886,492 | | | | 40,211,075 | | | | 38,531,645 | | | | | | | | | |
Effect of potentially dilutive shares | | | — | | | | 698,668 | | | | 2,035,806 | | | | | | | | | |
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Total weighted average shares of common stock and vested restricted stock awards outstanding | | | 37,886,492 | | | | 40,909,743 | | | | 40,567,451 | | | | | | | | | |
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Calculation of Net (Loss) Income Per Common Share: | | | | | | | | | | | | | | | | | | | | |
Basic: | | | | | | | | | | | | | | | | | | | | |
Net (loss) income applicable to common stockholders | | $ | (1,837 | ) | | $ | 4,024 | | | $ | 4,689 | | | | | | | | | |
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Weighted average shares of stock outstanding | | | 37,886,492 | | | | 40,211,075 | | | | 38,531,645 | | | | | | | | | |
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Net (loss) income per common share | | $ | (0.05 | ) | | $ | 0.1 | | | $ | 0.12 | | | | | | | | | |
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Diluted: | | | | | | | | | | | | | | | | | | | | |
Net (loss) income applicable to common stockholders | | $ | (1,837 | ) | | $ | 4,024 | | | $ | 4,689 | | | | | | | | | |
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Weighted average shares of stock outstanding | | | 37,886,492 | | | | 40,909,743 | | | | 40,567,451 | | | | | | | | | |
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Net (loss) income per common share(1) | | $ | (0.05 | ) | | $ | 0.1 | | | $ | 0.12 | | | | | | | | | |
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-1 | Shares used to calculate diluted earnings per share exclude 0.5 million shares related to outstanding stock options and unvested restricted stock awards for the year ended December 31, 2013 that would have been dilutive if the Company had net income during that period. Additionally, in calculating diluted earnings per share, 5.3 million, 4.2 million and 2.7 million shares related to outstanding stock options and unvested restricted stock awards were excluded for the years ended December 31, 2013, 2012 and 2011, respectively, because they were anti-dilutive. | | | | | | | | | | | | | | | | | | | |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements |
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”) to provide guidance on the presentation of unrecognized tax benefits. ASU 2013-11 requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows: to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 is effective for the Company in the first quarter of fiscal 2014 with earlier adoption permitted. ASU 2013-11 should be applied prospectively with retroactive application permitted. The Company is currently evaluating the impact of the pending adoption of ASU 2013-11 on its consolidated financial statements starting in 2014. |
In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires additional disclosure about material changes in the components of accumulated other comprehensive income, including amounts reclassified and amounts due to current period other comprehensive income. The standard was effective in the first quarter of fiscal 2013. The Company has not adopted the disclosure provisions required by this ASU as there are no material components of accumulated other comprehensive income nor have there been any material reclassifications out of accumulated other comprehensive income during the periods ended December 31, 2013, 2012 or 2011. |