Overstock.com 2010 Annual Report Download - page 63

Table of Contents
respective periods. The decrease in sales and marketing costs as a percentage of total net revenue was primarily due to more efficient marketing spending.
Sales and marketing expenses also include stock-based compensation expense of $608,000 and $634,000 for the years ended December 31, 2010 and
2009, respectively.
Costs associated with our discounted shipping and other promotions, such as coupons, are not included in marketing expense. Rather they are accounted
for as a reduction of revenue and therefore affect sales growth and gross margin. We consider discounted shipping and other promotions as an effective
marketing tool, and intend to continue to offer them as we deem appropriate as part of our overall marketing plan.
Technology expenses
We seek to efficiently invest in technology, including web services, customer support solutions, website search, and expansion of new and existing
product categories, as well as continuing to enhance the customer experience, improving our process efficiency and supporting our logistics infrastructure.
Technology expenses totaled $58.3 million and $52.3 million for the years ended December 31, 2010 and 2009, respectively, representing 5.4% and
6.0% of total net revenue for those respective periods. The $5.9 million increase is primarily due to a $6.5 million increase in salaries and benefits expense
(primarily due to increases in staffing), and a $1.5 million increase in depreciation expense as result of investments in information technology assets in 2010,
partially offset by a $1.4 million decrease in bonus expense in 2010 as a result of lower than expected financial performance for the year ended December 31,
2010.
Technology expenses include stock-based compensation expense of $1.1 million and $961,000 for the years ended December 31, 2010 and 2009,
respectively
General and administrative expenses
General and administrative ("G&A") expenses totaled $55.7 million and $48.9 million for the years ended December 31, 2010 and 2009, respectively,
representing approximately 5.1% and 5.6% of total net revenue for those respective periods. The $6.7 million increase is due to a $5.1 million increase in
salaries and benefits expense (primarily due to increases in staffing), a $2.3 million increase in professional service fees for our external auditors and a
$2.0 million increase in legal fees, partially offset by a $3.2 million decrease in bonus expense in 2010 as a result of lower than expected financial
performance for the year ended December 31, 2010. The increase in legal fees primarily resulted from a $2.6 million reduction in payments received from the
settlement of legal matters during 2010 compared to 2009. We recognized a reduction in G&A expenses of $4.5 million and $7.1 million during the years
ended December 31, 2010 and 2009, respectively, related to the settlement of legal matters.
General and administrative expenses include stock-based compensation expense of approximately $3.2 million and $3.0 million for the years ended
December 31, 2010 and 2009, respectively.
Restructuring
There were no restructuring charges during the years ended December 31, 2010 and 2009. We reversed $569,000 of lease termination costs liability
during the year ended December 31, 2010 due to changes in our estimate of sublease income, primarily as a result of our entering into agreements with a
sublessee to terminate the subleases and have us re-occupy a portion of the space previously abandoned, due to our growth and need for additional space.
During the year ended December 31, 2009, we reversed $66,000 of lease termination costs liability due to changes in our estimate of sublease income,
primarily as a result of entering into a sublease agreement for previously vacant space (see Item 15 of Part IV, "Financial Statements"—Note 3
—"Restructuring Expense").
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