Overstock.com 2010 Annual Report Download - page 72

Table of Contents
and financing activities). However, our accounts payable balance normally declines during the first three months following year-end, which normally results
in a decline in our cash and cash equivalents balances from the year-end balance. The seasonality of our business causes payables and accruals to grow
significantly in the fourth quarter, and then decrease in the first quarter when they are paid.
The $16.3 million of net cash provided by operating activities during the year ended December 31, 2010 was primarily due to positive net income of
$13.9 million for the year ended December 31, 2010. Net cash was also provided by increases of deferred revenue of $3.4 million primarily due to our launch
of our Club O loyalty program. The cash inflows were offset by cash outflows of $8.7 million due to an increase in inventory and $9.3 million due to a
decrease in accounts payable. The increase in inventory was a result of increased purchases of inventory to meet holiday sales demand and support growth in
the business. The decrease in accounts payable balance is due to increased and earlier sales and holiday shipments resulting in increased payments to suppliers
prior to year-end when compared to the same period in 2009.
The $46.1 million of net cash provided by operating activities during the year ended December 31, 2009 was primarily due to positive net income of
$7.7 million for the year ended December 31, 2009. Net cash was also provided by increases in accounts payable of $18.6 million due to increased unpaid
purchases of inventory related to both increased fulfillment partner sales at the end of the fourth quarter and increased purchases of inventory made at the end
of the fourth quarter to meet holiday sales demand and other demand. A $9.1 million increase in accrued liabilities also contributed to this increase in cash
provided by operating activities and related to an increased payroll and bonus accrual.
The increase in cash provided by operations related to the increase of accounts payable and accrued liabilities was partially offset by $4.5 million of
increased accounts receivable related primarily to uncleared credit card transactions at year end and $2.1 million of increased inventory prepayments made as
of December 31, 2009 to secure inventory to be delivered in the first quarter of 2010 to support sales. Prepayments for inventory at the end of the prior year
were lower due to the decreased sales demand experienced by the retail industry due to generally poor economic conditions at that time.
Cash (used in) provided by investing activities
Cash provided by investing activities corresponds with purchases, sales, and maturities of marketable securities and cash expenditures for fixed assets,
including internal-use software and website development costs. For the years ended December 31, 2010 and 2009, investing activities resulted in net cash
outflows of $22.7 million and net cash inflows of $2.9 million, respectively.
The $22.7 million used in investing activities during the year ended December 31, 2010 resulted primarily from expenditures for fixed assets of
$20.5 million, which largely consisted of software and hardware purchases for our data warehouse and other data storage infrastructure in order to support our
growth, and a $1.7 million investment in precious metals in an effort to diversify our investments.
Investing activities for the year ended December 31, 2009 provided net cash of $2.9 million, primarily from the sale of marketable securities of
$8.9 million and the collection of a $1.3 million note receivable related to a settlement of notes from the sale of our travel subsidiary to Castles Travel,
partially offset by capital expenditures of $7.3 million.
Cash used in financing activities
For the years ended December 31, 2010 and 2009, financing activities resulted in net cash outflows of $9.4 million and $5.7 million, respectively.
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