Overstock.com 2004 Annual Report Download - page 54

on market conditions and other factors, these purchases may be commenced or suspended at any time or from time to time without prior notice.
In February and March 2005, we entered into several purchased call options, pursuant to which we may purchase up to 1,250,000 shares of our common
stock at certain settlement dates. In connection with these repurchase transactions, we have paid approximately $47.5 million. Upon settlement, we, at our
option, may elect to settle the contracts by physical settlement, net share settlement or net cash settlement. Accordingly, we expect to receive, either our
capital investment returned with a premium or shares of our common stock, depending on whether the market price of our common stock is above or below
pre-determined prices agreed in connection with each such transaction.
As a result of these structured stock repurchase transactions, we have market risk exposure to the trading price of our common stock. The objective and
general strategy of the transactions is to implement a portion of the stock repurchases authorized by our Board of Directors. The instruments used to manage
our exposure are call spreads which have the economic effect described in the preceding paragraph. We have had no such arrangements prior to
February 2005. We may enter into similar transactions in the future.
At December 31, 2004, we had not entered into any of the structured stock repurchase transactions described herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item are included in Part IV, Item 15 of this Form 10-K and are presented beginning on
page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we
conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934. Based on this evaluation, our principal executive officer and our principal financial officer concluded that the Company maintained effective
disclosure controls and procedures as of the end of the period covered by this report.
Management's Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act
Rule 13a-15(f). In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act,
management conducted an assessment, based on the criteria in Internal Control—Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may
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