Overstock.com 2005 Annual Report Download - page 105

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Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
23. BUSINESS SEGMENTS
Segment information has been prepared in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information. Segments were determined based on products and services provided by each segment. Accounting policies of the
segments are the same as those described in Note 2. There were no inter-segment sales or transfers during 2003, 2004 or 2005. The
Company evaluates the performance of its segments and allocates resources to them based primarily on gross profit. The table below
summarizes information about reportable segments (in thousands):
Direct
Fulfillment
partner Consolidated
2003
Revenue $ 138,134 $ 100,811 $ 238,945
Cost of goods sold 123,963 89,190 213,153
Gross profit 14,171 11,621 25,792
Operating expenses (37,840 )
Other income, net 500
Net loss $ (11,548 )
2004
Revenue $ 213,210 $ 281,425 $ 494,635
Cost of goods sold 184,928 243,468 428,396
Gross profit 28,282 37,957 66,239
Operating expenses (71,128 )
Other income, net 349
Net loss $ (4,540 )
2005
Revenue $ 324,875 $ 478,947 $ 803,822
Cost of goods sold 282,377 400,889 683,266
Gross profit 42,498 78,058 120,556
Operating expenses (144,350 )
Other income, net (1,124 )
Net loss $ (24,918 )
The direct segment includes revenues, direct costs, and allocations associated with sales fulfilled from our warehouse. Costs for
this segment include product costs, inbound freight, warehousing, and fulfillment costs, credit card fees and customer service costs.
The fulfillment partner segment includes revenues, direct costs and cost allocations associated with the Company's third party
fulfillment partner sales and are earned from selling the merchandise of third parties over the Company's Websites. Prior to July 1,
2003, this was reported as the "commission revenue" segment, as only the commission portion of the sales transactions were recorded
as revenue (i.e., recorded "net"). The costs for the previous commission segment only included credit card fees and customer service
costs. From July 1, 2003 forward, due to a change in the company's business practices, including the partner sales return process, these
sales transactions are now recorded based upon the gross sales price. As a result, this segment's name has been changed to the
"fulfillment partner" segment, and the costs for this
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