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XO GROUP INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations(Edgar Glimpses Via Acquire Media NewsEdge) You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this report. Executive Overview XO Group Inc. is the premier media and technology company devoted to weddings, pregnancy, and everything in between, providing young women with the trusted information, products, and advice they need to guide them through the most transformative events of their lives. Our family of premium brands began with the number one wedding brand, The Knot, and has grown to include WeddingChannel.com, The Nest, The Bump, and Ijie.com. XO Group Inc. is recognized by the industry for innovation in all media - from the web to social media and mobile, magazines and books, and video - and our groundbreaking social platforms have ignited passionate communities across the world. XO Group has leveraged its customer loyalty into successful businesses in online sponsorship and advertising, registry services, e-commerce and publishing. In order to sustain growth within the customer groups we serve, we focus on our key growth strategy, which is to expand our position as a leading lifestage media company providing comprehensive information, services and products to couples from engagement through pregnancy on multiple platforms that remain relevant to the changing media landscape. To that end, we are focused on the following objectives: • Develop products and services to meet the needs of our audience members during critical lifestages. We continuously build tools and create services for our newly engaged, newlywed, and pregnant audiences in order to meet their needs for information and services across multiple media streams. We have built several mobile apps, including popular apps such as The Knot Wedding Planner, The Wedding Dress Look Book, and My Pregnancy Calendar by The Bump. Tools such as our newly designed global wedding planner present our lifestage content in innovative ways. On Valentine's Day 2013, we streamed our first ever live wedding, the culmination of our Knot Dream Wedding Contest in which our audience voted on the couple and elements of the wedding, and we continue to look for ways to increase our connection with our audience in innovative ways. • Leverage our strong brand and engaged audience for scalable advertising revenue growth. We have made significant investments in our infrastructure, especially that which supports our local advertising business. For example, we have launched a self-service platform that allows local vendors to automatically select their advertising programs. We have improved our ability to price display inventory dynamically, and we have launched a wedding vendor review site that enables brides to read reviews written by other recent brides. In February 2013, we launched updated local vendor store fronts, which operate like mini-websites for our vendors, featuring functionality including unlimited photos, videos, and reviews. We have launched partnerships to increase the reach for our local vendors, including a microsite built for KleinfeldBridal.com. We partner with our national advertisers to design highly targeted, integrated campaigns which reach our engaged audience. Recent campaigns have featured events organized by The Knot, The Knot Live TV, sponsorships of our mobile apps, and other lifestage buys across our brands and platforms. • Improve transaction growth with innovative solutions for our membership base. Our relationship with our audience also includes services that we provide directly, including the recently upgraded e-commerce shops for wedding items, the WeddingChannel.com registry platform, and other books, products, and services that we may sell from time to time. We are focused on connecting directly with our audience, presenting hard-to-find items, tools specific to the lifestages we serve as well as transactional opportunities. • Increase awareness of our brands and products. We believe that we have generally excelled at marketing to our consumers with compelling brands, engaging content and products and a highly successful consumer public relations program. We continue to garner attention for our brands via editorial appearances on national television, presence on newsstands, content syndication partnerships, and award-winning technology products. Our editors appear frequently on national and local television and radio programs, as well as attending industry trade shows around the country. In 2010, we increased the publication frequency of The Knot Weddings national magazine from semi-annually to quarterly. We also increased the publication frequency of The Bump local market guides from annually to semi-annually. Our content syndication and content distribution partnerships include AOL, MSN, Sling Media, Sugar Inc., McClatchy Tribune, YouTube, Yahoo! and The Huffington Post, among others. • Expand our brands internationally. We are focused on identifying opportunities in large international markets where we can use our brand recognition and editorial authority on the key lifestages of engagement, newlywed and first-time pregnancy to drive further growth. In 2009, we established a software development center in Guangzhou, China for the 12-------------------------------------------------------------------------------- Table of Contents purpose of increasing technology development productivity without materially growing technology costs. The software development center is also serving as a development resource for expanding our business in China. With a large number of weddings and an affinity for Western styles, we believe there is a substantial opportunity to serve Chinese couples with information and services about Western-style weddings, through the offices we opened in Beijing and Shanghai. In November 2010, we launched Ijie.com. The website provides Western inspiration and local resources for weddings, newlyweds and pregnancy in China. During the year, we launched partnerships with two of the largest portals in China, SINA and cn.msn.com, for which we provide wedding and lifestyle content on cobranded "Wedding" channels. In addition, we have established an exclusive licensing arrangement for a major Australian media company to represent our brands in Australia. Since our company's inception, we have produced relevant content for our audience and introduced efficient marketing platforms for our advertisers, both online and offline, which has enabled us to gain a significant market share. But with a strong digital focus to our products and services, we believe that many aspects of the industries in which we operate, such as wedding planning, remain substantially analog. For example, a bride has to taste the cake at the bakery, tour the reception site, sample the caterer's menu, try on the dress at a salon, and so on. Even with digital marketing, social media, and other communication between bride and vendor, a substantial amount of wedding spending is transacted offline and has not been disrupted by digital technologies. Recently, consumers have rapidly adopted smartphones, tablet computers and other mobile technology and have been using these devices as their primary access point to digital services. We believe this behavior has started to become and will continue to be a disruptive force in the wedding services industry, similar to what many other industries experienced with the initial adoption of the commercial Internet, as more efficient marketplaces were created between buyers and sellers that reduced inefficiencies inherent in legacy business models. We believe this disruption creates opportunity to tap into a greater portion of the $70 billion wedding industry than our current business does today. For this reason, we expect to increase operating expenses in order to launch new technology and features in the near future that we think will enable our brides to find the exact wedding services, products and information that they want more easily, and will let our brides and vendors conduct business with each other much more efficiently. Our goal is to create a new way for women to navigate one of the most transformative events of their lives, allowing our brides to orchestrate each aspect of their wedding planning process, from discovery to purchase and everything in between, with a set of simple yet useful online digital services. We believe we are well-positioned to capitalize on the opportunity because we already have deep engagement with a substantial number of the brides who are planning a wedding in the United States, from a perspective of both brand recognition and useful information. We have also developed strong commercial relationships over many years with the vendors and marketers who want to reach these brides. We believe the engagement and commercial relationships have proved to our brides, vendors and advertisers that we deliver value through our existing products and services, and we expect these relationships to provide us with a competitive advantage as we begin to deliver new products and services. Our quarterly revenue and operating results have fluctuated significantly in the past and are expected to continue to fluctuate significantly in the future as a result of a variety of factors, many of which are outside of our control. These factors include the level of online usage and traffic on our websites, seasonal demand for e-commerce, including sales of registry products and wedding-related merchandise, the addition or loss of advertisers, the advertising budgeting cycles of specific advertisers, the regional and national magazines' publishing cycles, the amount and timing of capital expenditures and other costs relating to the expansion of our operations, including those related to acquisitions, the introduction of new sites and services by us or our competitors, changes in our pricing policies or the pricing policies of our competitors, and general economic conditions, as well as economic conditions specific to the Internet, online and offline media and e-commerce. The Internet advertising and online markets in which our brands operate are rapidly evolving and intensely competitive, and we expect competition to intensify in the future. There are many wedding-related and baby-related sites on the Internet, which are developed and maintained by online content providers. New media platforms such as blogs, microblogs, social networks, and publisher networks are proliferating rapidly, including popular new sites like WeddingWire, Project Wedding, Wedding Bee, BabyCenter (published by Johnson & Johnson), Kaboose (published by Disney), and Café Mom. Retail stores, manufacturers, wedding magazines and regional wedding directories also have online sites that compete with us for online advertising and merchandise revenue. We expect competition to increase because of the business opportunities presented by the growth of the Internet and e-commerce. Competition may also intensify as a result of industry consolidation and a lack of substantial barriers to entry in our market. In the wedding market, we also face competition for our services from bridal magazines. Brides magazine (published by Condé Nast), Bridal Guide (published by RFP LLC), and Martha Stewart Weddings (published by Martha Stewart Living Omnimedia) are dominant bridal publications in terms of revenue and circulation. Leading publications for parents include Parenting (published by Bonnier), Parents (published by Meredith), and American Baby (published by Meredith). We believe that the principal competitive factors in the wedding market are brand recognition, convenience, ease of use, information, quality of 13-------------------------------------------------------------------------------- Table of Contents service and products, member affinity and loyalty, reliability and selection. As to these factors, we believe that we compete favorably. Our dedicated editorial, sales and product staffs concentrate their efforts on producing the most comprehensive wedding resources available. Generally, many of our current and potential competitors have longer operating histories, significantly greater financial, technical and marketing resources and high name recognition. Therefore, these competitors have a significant ability to attract advertisers and users. In addition, many independent or start-up competitors may be able to respond more quickly than we can to new or emerging technologies and changes in Internet user requirements, and other competitors may be able to devote greater resources than we do to the development, promotion and sale of services. There can be no assurance that our current or potential competitors will not develop products and services comparable or superior to those developed by us or adapt more quickly than we do to new technologies, evolving industry trends or changing Internet user preferences. Any such developments or advantages of our competitors may have an impact on our future operations and may cause our past financial results not to be necessarily indicative of future operating results. Increased competition could result in price reductions, reduced margins or loss of market share, any of which would materially and adversely affect our business, results of operations and financial condition. First Quarter 2013 Highlights During the first quarter of 2013, both our net revenue and net income increased compared to the same period in 2012. The highlights of the first quarter of 2013 were: • Total net revenue increased 1.7% to $30.3 million. • National online advertising increased 3.7% to $6.6 million. • Local online advertising revenue increased 10.7% to $13.6 million. • Registry services revenue increased by 15.7% to $1.2 million. • Merchandise revenue decreased 31.9% to $3.8 million. • Publishing and other revenue increased by 12.7% to $5.1 million. • We generated operating income of $2.8 million, compared to $590,000 in the prior year. The year-over-year increase in operating income was primarily due to a decrease in operating expenses. The decrease in operating expenses was primarily attributable to a decrease in stock-based compensation expense driven by the timing of annual grants and the impact of a lower estimated accrual for stock-based compensation compared to the prior year, partially offset by increased technology-related costs. • Net income attributable to XO Group Inc. for the three months ended March 31, 2013 was $1.7 million, or $0.07 per basic share and $0.07 per diluted share, compared to $397,000, or $0.02 per basic share and $0.02 per diluted share for the three months ended March 31, 2012. • At March 31, 2013, our total cash and cash equivalents were $74.9 million, which decreased $2.5 million from December 31, 2012. The overall decrease in cash and cash equivalents was primarily driven by cash used in financing activities of $1.5 million, specifically cash used to satisfy tax withholding obligations for employees related to the vesting of their restricted stock awards. The decrease in cash and cash equivalents was also attributable to capital expenditures of $1.2 million for the quarter ended March 31, 2013, of which $805,000 related to capitalized software and approximately $381,000 related to servers and other computer equipment. These decreases were partially offset by cash generated from operations of $211,000. • At March 31, 2013, we had no debt. 14-------------------------------------------------------------------------------- Table of Contents Results of Operations Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012 The following table summarizes results of operations for the three months ended March 31, 2013 compared to the three months ended March 31, 2012: Three Months Ended March 31, 2013 2012 Increase/(Decrease) % of Net % of Net Amount Revenue Amount Revenue Amount % (In Thousands, Except for per Share Data) Net revenue $ 30,273 100.0 % $ 29,779 100.0 % 494 1.7 % Cost of revenue 4,696 15.5 4,864 16.3 (168 ) (3.5 ) Gross profit 25,577 84.5 24,915 83.7 662 2.7 Operating expenses 22,770 75.2 24,325 81.7 (1,555 ) (6.4 ) Income from operations 2,807 9.3 590 2.0 2,217 375.8 Loss in equity interest (58 ) (0.2 ) - - (58 ) (100.0 ) Interest and other income (expense), net 13 - (4 ) - 17 (425.0 ) Income before income taxes 2,762 9.1 586 2.0 2,176 371.3 Provision for income taxes 1,089 3.6 234 0.8 855 365.4 Net income 1,673 5.5 352 1.2 1,321 375.3 Plus: net loss attributable to noncontrolling interest - - 45 0.1 (45 ) (100.0 ) Net income attributable to XO Group Inc. $ 1,673 5.5 % $ 397 1.3 % 1,276 321.4 % Net income per share attributable to XO Group Inc. common stockholders: Basic $ 0.07 $ 0.02 $ 0.05 250.0 % Diluted $ 0.07 $ 0.02 $ 0.05 250.0 % Net Revenue Net revenue increased to $30.3 million for the three months ended March 31, 2013, from $29.8 million for the three months ended March 31, 2012. The following table sets forth revenue by category for the three months ended March 31, 2013 compared to the three months ended March 31, 2012, the percentage increase or decrease between those periods, and the percentage of total net revenue that each category represented for those periods: Three Months Ended March 31, Percentage Percentage of Net Revenue Increase/ Total Net Revenue 2013 2012 (Decrease) 2013 2012 (In Thousands) National online sponsorship and advertising $ 6,575 $ 6,342 3.7 % 21.7 % 21.3 % Local online sponsorship and advertising 13,560 12,247 10.7 44.8 41.1 Total online sponsorship and advertising 20,135 18,589 8.3 66.5 62.4 Registry services 1,174 1,014 15.7 3.9 3.4 Merchandise 3,818 5,609 (31.9 ) 12.6 18.8 Publishing and other 5,146 4,567 12.7 17.0 15.4 Total net revenue $ 30,273 $ 29,779 1.7 % 100.0 % 100.0 % Online sponsorship and advertising - The increase in total online sponsorship and advertising of 8.3% was primarily driven by an increase in revenue from local advertising programs. Local online sponsorship and advertising revenue increased 10.7%, primarily attributable to an increase in the number of local vendors advertising with us on our network of websites, as well as an 15-------------------------------------------------------------------------------- Table of Contents increase in average vendor spending. As of March 31, 2013, we had over 22,500 local vendors displaying over 30,400 profiles, compared to 21,500 vendors displaying over 29,000 profiles as of March 31, 2012. The increase in national online sponsorship and advertising revenue was primarily attributable to revenue from several new key customers related to TheBump.com. Registry services - The increase of 15.7% was primarily driven by an increase in registry sales from our registry retail partners. Merchandise - The decrease of 31.9% was primarily driven by a decrease in revenue generated from an e-commerce company we acquired in May 2009 due to changes in the environment for search engine optimization, which reduced site traffic. Also contributing to the decrease was the negative impact to our traffic and conversion rates across our sites as users increasingly access our shops via mobile devices. Publishing and other - The increase of 12.7% was primarily driven by an increase in revenue per advertising page sold related to The Knot national magazines. Also contributing to the increase was an increase in the number of advertising pages as well as in revenue per advertising page sold related to The Knot regional magazines. Higher sales and the addition of a second publication of The Bump magazine in one of its markets also contributed to the increase. Gross Profit/Gross Margin Cost of revenues consists of the cost of merchandise sold, including outbound shipping costs, costs related to the production of national and regional magazines, payroll and related expenses for our personnel who are responsible for the production of online and offline media, and costs of Internet and hosting services. The majority of the costs are shared over various revenue streams. Gross margin improved 0.8% to 84.5%, compared to 83.7% in 2012. The following table presents the components of gross profit and gross margin for the three months ended March 31, 2013 compared to the three months ended March 31, 2012: Three Months Ended March 31, 2013 2012 Increase/(Decrease) Gross Gross Gross Gross Gross Gross Profit Margin % Profit Margin % Profit Margin % (In Thousands) Online sponsorship and advertising (national and local) $ 19,640 97.5 % $ 18,175 97.8 % $ 1,465 (0.3 )% Registry 1,174 100.0 1,014 100.0 160 - Merchandise 1,341 35.1 2,551 45.5 (1,210 ) (10.4 ) Publishing and other 3,422 66.5 3,175 69.5 247 (3.0 ) Total gross profit $ 25,577 84.5 % $ 24,915 83.7 % $ 662 0.8 % Although online sponsorship and advertising gross margin decreased slightly from the prior year, it remains a high gross margin business. The increase in local online sponsorship and advertising revenue for the three months ended March 31, 2013 was the primary driver of the increase in our total gross profit over the prior year comparable period. Partially offsetting the increase in gross profit attributable to the increase in local online sponsorship and advertising revenue were increased direct costs for merchandising, specifically personalization labor and shipping costs, compared to the three months ended March 31, 2012. Operating Expenses Operating expenses decreased 6.4% to $22.8 million in the three months ended March 31, 2013, compared to $24.3 million in the three months ended March 31, 2012, primarily attributable to a decrease in stock-based compensation expense. As a percentage of net revenue, operating expenses were 75.2% and 81.7% for the three months ended March 31, 2013 and 2012, respectively. The following table presents the components of operating expenses and the percentage of revenue that each component represented for the three months ended March 31, 2013 compared to the three months ended March 31, 2012: 16-------------------------------------------------------------------------------- Table of Contents Three Months Ended March 31, Percentage Percentage of Operating Expenses Increase/ Total Net Revenue 2013 2012 (Decrease) 2013 2012 (In Thousands)Product and content development $ 6,872 $ 6,592 4.2 % 22.7 % 22.1 % Sales and marketing 9,976 11,153 (10.6 ) 33.0 37.5 General and administrative 4,819 5,634 (14.5 ) 15.9 18.9 Depreciation and amortization 1,103 946 16.6 3.6 3.2 Total operating expenses $ 22,770 $ 24,325 (6.4 )% 75.2 % 81.7 % Product and Content Development - The increase of 4.2% was primarily attributable to an increase in expenditures related to our technology development projects. The expenses were primarily related to personnel costs. Sales and Marketing - The decrease of 10.6% was primarily attributable to a decrease in stock-based compensation expense driven by the timing of annual grants and the impact of a lower estimated accrual for stock-based compensation compared to the prior year, as well as lower personnel costs, including salaries and benefits expense. General and Administrative - The decrease of 14.5% was primarily attributable to a decrease in stock-based compensation expense driven by the timing of annual grants and the impact of a lower estimated accrual for stock-based compensation compared to the prior year. Depreciation and Amortization - The increase of 16.6% was primarily attributable to the increase in amortization expense related to the tradenames of WeddingChannel.com, Inc. and an e-commerce company we acquired in May 2009. Until the fourth quarter of 2012, these intangible assets were considered to be indefinite-lived. During the annual impairment analysis in 2012, we concluded that these tradenames were definite-lived assets and should be amortized over their estimated useful lives. Loss in Equity Interests Loss in equity interests for the three months ended March 31, 2013 and 2012 was $58,000 and $0, respectively. On April 20, 2012, we purchased a 5% equity investment in Catchafire, Inc., an organization that helps match professionals offering pro bono services with not-for-profit organizations looking for specific skill sets for programs they want to launch. During the three months ended March 31, 2013, we recognized a loss of $11,000 on our investment in this entity. On December 10, 2012, we paid $1.0 million in cash and contributed the assets of an entity in which we previously owned a controlling interest in exchange for a 17.4% equity investment in Pricing Engine, Inc., an unrelated third-party. During the three months ended March 31, 2013, we recognized a loss on equity investment of $47,000 representing our share of Pricing Engine, Inc.'s losses for the three months ended March 31, 2013. Interest and Other Income Interest and other income, net was $13,000 for the three months ended March 31, 2013, compared to interest and other expense, net of $4,000 for the three months ended March 31, 2012. The change was attributable to fluctuating foreign currency translation gains and losses incurred during each period. Provision for Income Taxes The effective tax rate for the three months ended March 31, 2013 was 38.5%, compared to 40.0% for the three months ended March 31, 2012. Although the rate did not change significantly year over year, our effective tax rate could fluctuate and could be adversely affected to the extent earnings are lower than anticipated in states where we have lower statutory tax rates and higher than anticipated in states where we have higher statutory tax rates. Our effective tax rate could also fluctuate due to the income recognized by our international entities, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, accounting principles, or interpretations thereof. 17-------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources Cash Flow Cash and cash equivalents consist of cash and highly liquid investments with maturities of 90 days or less at the date of acquisition. At March 31, 2013, we had $74.9 million in cash and cash equivalents, compared to $68.7 million at March 31, 2012. The following table sets forth our cash flows from operating activities, investing activities and financing activities for the periods indicated: Three Months Ended March 31, 2013 2012 (In Thousands) Net cash provided by operating activities $ 210 $ 6,143 Net cash used in investing activities (1,189 ) (656 ) Net cash used in financing activities (1,481 ) (14,194 ) Decrease in cash and cash equivalents $ (2,460 ) $ (8,707 ) Operating Activities Net cash provided by operating activities was $210,000 for the three months ended March 31, 2013. This was driven by our net income of $1.7 million, plus adjustments of $4.0 million for non-cash items including depreciation, amortization, stock-based compensation, and reserves for returns. These contributions to cash from operations were partially offset by the change in operating assets and liabilities of $5.5 million, driven by a $4.4 million decrease in accounts payable and accrued expenses due to payments made during the first quarter of 2013, a $1.7 million increase in prepaid expenses, primarily due to business insurance for the 2013 policy year, and a $1.0 million increase in inventory in anticipation of the peak season for e-commerce sales, partially offset by an increase in deferred revenue of $1.6 million due to advanced billings for our upcoming publications. Net cash provided by operating activities was $6.1 million for the three months ended March 31, 2012. This was driven by our net income of $352,000, plus adjustments of $4.9 million for non-cash items, including depreciation, amortization, stock-based compensation and reserves for returns. Also contributing to the increase in cash was a $2.7 million decrease in accounts receivable due to increased collection efforts, in addition to an increase in deferred revenue of $1.5 million due to advanced billings for our upcoming publications. These contributions to cash from operations were offset by a $3.4 million decrease in accounts payable and accrued expenses due to payments made during the first quarter of 2012. Investing Activities Net cash used in investing activities was $1.2 million for the three months ended March 31, 2013, consisting of capitalized expenditures of $1.2 million, of which $805,000 related to capitalized software and $381,000 related to purchases of fixed assets. Net cash used in investing activities was $656,000 for the three months ended March 31, 2012, primarily consisting of capitalized expenditures of fixed assets of $649,000. Financing Activities Net cash used in financing activities was $1.5 million for the three months ended March 31, 2013, primarily driven by cash used to satisfy tax withholding obligations for employees related to the vesting of their restricted stock awards of $1.6 million, partially offset by the proceeds from the issuances of common stock in connection with our employee stock purchase plan, the exercise of stock options and grants of restricted stock of $148,000. Net cash used in financing activities was $14.2 million for the three months ended March 31, 2012. This was driven by repurchases of our common stock under our Board-approved stock repurchase programs. On December 19, 2011, the Board of Directors authorized a stock repurchase program of $20.0 million of our common stock. Under this program, we repurchased 1.4 million shares of our stock in the open market at an average price of $8.86 per share, for a total price of $12.7 million during the three months ended March 31, 2012. All shares were retired upon repurchase. We also used $1.6 million of cash to satisfy tax withholding obligations for employees related to the vesting of their restricted stock awards. These uses of cash were offset by the proceeds from the issuance of common stock under our restricted stock and employee stock purchase plan of $144,000. 18-------------------------------------------------------------------------------- Table of Contents Off-Balance Sheet Arrangements As of March 31, 2013, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Seasonality We believe that the impact of the frequency of weddings varying from quarter to quarter results in lower registry services and merchandise revenues in the first and fourth quarters. Critical Accounting Policies and Estimates Our discussion of results of operations and financial condition relies on our consolidated financial statements, which are prepared based on certain critical accounting policies that require management to make judgments and estimates that are subject to varying degrees of uncertainty. We believe that investors need to be aware of these policies and how they impact our financial statements as a whole, as well as our related discussion and analysis presented herein. While we believe that these accounting policies are based on sound measurement criteria, actual future events can result in outcomes that may be materially different from these estimates or forecasts. The accounting policies and related risks described in our Annual Report on Form 10-K for the year ended December 31, 2012 are those that depend most heavily on these judgments and estimates. As of March 31, 2013, there have been no material changes to any of the critical accounting policies contained therein. Recently Adopted Accounting Pronouncements In February 2013, the accounting standard relating to comprehensive income was updated to require entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. This updated standard is effective for annual and interim reporting periods beginning after December 15, 2012. The adoption of this updated standard did not result in a material impact on our condensed consolidated financial statements. Recently Issued Accounting Pronouncements In July 2012, the accounting standard relating to indefinite-lived intangible assets was updated to reduce the cost and complexity of performing an impairment test on such assets required under Topic 350. The amendment to the standard allows an entity to first assess the qualitative factors to determine if the indefinite-lived intangible asset is impaired as a basis to determine whether or not to perform the quantitative impairment test. This updated standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. This is not expected to have a material impact on our consolidated financial statements. |