Overstock.com 2012 Annual Report Download

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TABLE OF CONTENTS
PART IV
Table of Contents




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
(Exact name of Registrant as specified in its charter)

(State or other jurisdiction of
incorporation or
organization)

(I.R.S. Employer
Identification Number)

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(Address of principal executive offices including zip code)

(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:



Common Stock, $0.0001 par value Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such




o 


Table of contents

  • Page 1
    ... of incorporation or organization) 87-0634302 (I.R.S. Employer Identification Number) 6350 South 3000 East Salt Lake City, Utah 84121 (Address of principal executive offices including zip code) (801) 947-3100 (Registrant's telephone number, including area code) Securities registered pursuant...

  • Page 2
    ... (June 30, 2012), was approximately $59.6 million based upon the last sales price reported by Nasdaq. For purposes of this disclosure, shares of Common Stock held by persons who hold more than 5% of the outstanding shares of Common Stock and shares held by officers and directors of the registrant...

  • Page 3
    ... Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Part IV 66 66 66 67 67 Item...

  • Page 4
    ...can meet our published product shipping standards even during periods of relatively high sales activity; our belief that we can maintain or improve upon customer service levels that we and our customers consider acceptable; our beliefs regarding the adequacy of our order processing systems and our...

  • Page 5
    of our business; • our belief that our sales through other ecommerce marketplace channels will be successful and become an important part of our business; and our belief that we can successfully offer and sell a constantly changing mix of products and services. ii •

  • Page 6
    ... we may make to our business model from time to time, including aspects relating to our product mix and the mix of direct/fulfillment partner sourcing of the products we offer; • • • the mix of products purchased by our customers; problems with cyber security or data breaches or the costs of...

  • Page 7
    • • optimization of our warehouse operations; risks of inventory management and seasonality. iii

  • Page 8
    Table of Contents In evaluating all forward-looking statements, you should specifically consider the risks outlined above and those described in Item ... to release publicly any update or revisions to any forward-looking statements to reflect any changes in our expectations or any change in events,...

  • Page 9
    ... customers by telephone, instant online chat and e-mail. We also derive revenue from other businesses advertising products or services on our Website. Nearly all of our sales are to customers located in the United States. During the years ended December 31, 2012 and 2011 no single customer accounted...

  • Page 10
    ... from credit card or other payment vendors whose services we offer to our customers (such as PayPal and BillMeLater), before we ship products to consumers or business purchasers. From time to time we grant credit to our business purchasers with normal credit terms (typically 30 days). For sales in...

  • Page 11
    ... organized into 21 main product lines: For the Home, Furniture, Bedding & Bath, Clothing & Shoes, Electronics, Jewelry, Watches, Sports and Outdoors, Books Media Music & Games, Luggage, Worldstock Fair Trade, Health & Beauty, Baby, Crafts & Sewing, Office, Gifts & Flowers, Toys & Hobbies, Pets, Main...

  • Page 12
    ...and advertising. Customer Service We are committed to providing superior customer service. We staff our customer service department with dedicated in-house and outsourced professionals who respond to phone, instant online chat and e-mail inquiries on products, ordering, shipping status, returns and...

  • Page 13

  • Page 14
    ... or actions, consumer protection, employment, intellectual property and other commercial litigation related to the conduct of our business. We also prosecute lawsuits to enforce our legal rights. Such litigation is costly and time consuming and can divert our management and key personnel...

  • Page 15
    ... of our policies on sharing non-public information with third parties, advance notice of any changes to our policies and, with limited exceptions, we must give consumers the right to prevent sharing of their non-public personal information with unaffiliated third parties. Further, the growth and...

  • Page 16
    ... Officer and Corporate 46 Secretary 53 Senior Vice President, Finance and Risk Management 37 Senior Vice President, Marketing 43 Senior Vice President, Merchandising and Supply Chain 37 Senior Vice President, Technology Senior Vice President, Customer and Partner Care and 44 Director Senior Vice...

  • Page 17
    ...Mumbai, India and a Master's of Business Administration Degree in Finance from Bentley University. Ms. Stormy D. Simon currently serves as our Senior Vice President, Customer and Partner Care. Ms. Simon has also served as a member of our board of directors since May 2011. Ms. Simon previously served...

  • Page 18
    ...on our Website and these fulfillment partners agree to conduct a number of other traditional retail operations with respect to their respective products, including maintaining inventory, preparing merchandise for shipment to individual customers and delivering purchased merchandise on a timely basis...

  • Page 19
    ... of funds and management time and could have a negative impact on our business. Manufacturers may refuse to sell to us or through our site. We rely upon our fulfillment partners and other suppliers for the product offerings sold on our website and other products and services we use to run our...

  • Page 20
    ... delivery services to deliver products to our customers on a timely and consistent basis. Deterioration in our relationship with any one of these third parties could decrease our ability to track shipments, cause shipment delays, and increase our shipping costs and the number of damaged products...

  • Page 21
    ... interrupt the normal operation of the credit card processors, could have a material adverse effect on our business. We rely upon paid and natural search engines like Google, Bing, and Yahoo to rank our product offerings and may at times be subject to ranking penalties if they believe we are not...

  • Page 22
    ... to give customers the option of using payment cards to fund their payments or pay their fees. If we were unable to accept payment cards, our business would be seriously damaged. Our servers and the servers of our suppliers may also be vulnerable to computer viruses, physical or electronic break-ins...

  • Page 23
    ... effect on our business. The adverse effects could include our inability to source product or fulfill orders, our customers' or suppliers' inability to contact us or access our Website or call centers or chat lines, or the compromise of our customers' confidential data. Natural disasters and geo...

  • Page 24
    ... response to changes in the competitive environment, we may from time to time make competitive pricing, service, marketing or other decisions that could harm our business. For example, to the extent that we enter new lines of businesses such as third-party logistics, or discount brick and mortar...

  • Page 25
    ... and the systems used to process customers' orders and payments could harm our business. We have an evolving business model. Our business model has evolved in the past and continues to do so. In prior years we have added additional types of services and product offerings and in some cases we have...

  • Page 26
    ... governing online services, restrictions on importation of specified or proscribed items, importation quotas, consumer protection laws, enforcement of intellectual property rights, laws dealing with consumer and data protection, privacy, encryption, and restrictions on pricing or discounts; changes...

  • Page 27
    ... consumer demand for the products and services we sell, change the mix of products we sell to a mix with a lower average gross margin and result in slower inventory turnover and greater markdowns on inventory. Higher interest rates, transportation costs, inflation, higher costs of labor, insurance...

  • Page 28
    ... with respect to foreign currencies, foreign suppliers may require us to pay higher prices for products, which could negatively affect our profit margins. If we do not successfully optimize and operate our warehouse and customer service operations, our business could be harmed. We have expanded...

  • Page 29
    ...zone shipments necessary to ensure timely delivery for the holiday season. If too many customers access our Website within a short period of time due to increased holiday demand, we may experience system interruptions that make our Website unavailable or prevent us from efficiently fulfilling orders...

  • Page 30
    ... strategies or other competitive activities, our business would suffer. If the products that we offer on our Website do not reflect our customers' tastes and preferences, our sales and profit margins would decrease. Our success depends in part on our ability to offer products that reflect consumers...

  • Page 31
    Table of Contents to attract new customers and our financial condition would suffer. In addition, certain of our online marketing agreements may require us to pay upfront fees and make other payments prior to the realization of the sales, if any, associated with those payments. Current or future ...

  • Page 32
    ... harm our business. Our car listing service may be subject to a variety of regulatory requirements and risks. Many states and other jurisdictions, including Utah, where we are located, have regulations governing the conduct of car sellers and public advertisement for car sales. Generally, these...

  • Page 33
    ...regulations prevent users from selling items on our car listing site, they could harm our business. In addition, any negative publicity we receive regarding any allegations of unlawful or deceptive conduct may damage our reputation, our ability to attract new customers to our main shopping site, and...

  • Page 34
    ...; price competition that results in lower profit margins or losses; the amount and timing of operating costs and capital expenditures relating to the expansion of our business operations and infrastructure; the amount and timing of our purchases of inventory; our inability to manage distribution...

  • Page 35
    ... at a price above the then current market value of our common stock. In addition, our board of directors, without further stockholder approval, may issue preferred stock, with such terms as the board of directors may determine, that could have the effect of delaying or preventing a change in control...

  • Page 36
    Table of Contents The price of our stock may be vulnerable to manipulation. We filed an unfair business practice lawsuit against Morgan Stanley & Co. Incorporated, Goldman Sachs & Co., Bear Stearns Companies, Inc., Bank of America Securities LLC, Bank of New York, Citigroup Inc., Credit Suisse (USA...

  • Page 37
    ...Sandy, Utah on a month-by-month basis. We lease approximately 51,500 square feet of warehouse space in Hebron, Kentucky beginning in March 2013, for a term expiring in March 2016. Co-location data center We lease approximately 4,000 square feet at Old Mill Corporate Center I in Salt Lake City, Utah...

  • Page 38
    ... OF EQUITY SECURITIES Market information Our common stock is traded on the Nasdaq Global Market under the symbol "OSTK." The following table sets forth, for the periods indicated, the high and low sales prices per share for our common stock as reported by Nasdaq. Common Stock Price High Low Year...

  • Page 39
    ..., and the footnotes to the table disclose the number of shares purchased other than pursuant to a publicly announced plan or program and the nature of any such purchases. Column (b) sets forth the average price paid per share. Column (c) sets forth the total number of shares purchased as part of...

  • Page 40
    ... of the third year. Each restricted stock unit represents the right to one share of common stock upon vesting. During the years ended December 31, 2012, 2011 and 2010, we recorded stock based compensation related torestricted stock units of $3.5 million, $2.8 million and $3.5 million, respectively...

  • Page 41
    ... Fulfillment partner Total cost of goods sold Gross profit Operating expenses: Sales and marketing Technology General and administrative Restructuring(1) Total operating expenses Operating income (loss) Interest income Interest expense Other income (expense), net Income (loss) before income taxes...

  • Page 42
    Table of Contents Ts of December 31, 2012 2011 2010 (in thousands) 2009 2008 Balance Sheet Data: Cash and cash equivalents Restricted cash Marketable securities Working capital Total assets Total indebtedness Redeemable common stock Stockholders' equity (deficit) $ 93,547 1,905 - 7,497 181,985 1,...

  • Page 43
    ... customers by telephone, instant online chat and e-mail. We also derive revenue from other businesses advertising products or services on our Website. Nearly all of our sales are to customers located in the United States. During the years ended December 31, 2012 and 2011 no single customer accounted...

  • Page 44
    ... from credit card or other payment vendors whose services we offer to our customers (such as PayPal and BillMeLater), before we ship products to consumers or business purchasers. From time to time we grant credit to our business purchasers with normal credit terms (typically 30 days). For sales in...

  • Page 45
    ... Revenue related to merchandise sales is recognized upon delivery to our customers. As we ship high volumes of packages through multiple carriers, it is not practical for us to track the actual delivery date of each shipment. Therefore, we use estimates to determine which shipments are delivered and...

  • Page 46
    ... partners. Consignment We offer a consignment service to suppliers where the suppliers' merchandise is stored in and shipped from our warehouse. We pay the consignment supplier upon shipment of the consigned merchandise to the consumer. Revenue from consignment service business in 2012, 2011...

  • Page 47
    ... the product is shipped from our warehouses or from a fulfillment partner. Ecommerce marketplace channels were approximately 1% of our 2012 total net revenues. Other businesses We operate an online site for listing cars for sale as a part of our Website. The cars listing service allows dealers...

  • Page 48
    ... pays us fees for new accounts and for customer usage of the cards. The agreement also provides for a customer loyalty program offering reward points that customers will accrue from card usage and can use to make purchases on our Website (See "Club O loyalty program" above for more information). New...

  • Page 49
    ...the new cost basis of such products. Internal-use software and website development Included in fixed assets is the capitalized cost of internal-use software and website development, including software used to upgrade and enhance our Website and processes supporting our business. We capitalize costs...

  • Page 50
    ... the range is accrued. We expense legal fees as incurred. Accounting pronouncements issued not yet adopted See Item 15 of Part IV, "Financial Statements"-Note 2-"Accounting Policies" subheading "Accounting Pronouncements Issued Not Yet Adopted." Comparison of Years Ended December 31, 2012 and 2011...

  • Page 51
    ...$10.5 million compared to 2011, primarily due to lower legal fees. Our fulfillment partner business continues to make up a large percentage of our total revenues, expanding to nearly 86% of total net revenue in 2012. Our decision to shift sales from the Apparel & Shoes category away from the direct...

  • Page 52
    ... total revenue for the year ended December 31, 2012 was an increase of 10% in average order size, from $123 to $135, primarily due to a sales mix shift into more home and garden products, partially offset by a decrease of 3% in customer orders due to lower conversion rates compared to last year. 43

  • Page 53
    ... our direct business and fulfillment partner business; changes in vendor and / or customer pricing, including competitive pricing; inventory management decisions within the direct business; sales coupons and promotions; product mix of sales; and operational and fulfillment costs. The following...

  • Page 54
    ... 2012 when compared to the same period in 2011 are primarily due to shifts in the sales mix into higher margin home and garden products and lower credit card fees, partially offset by higher returns-related and freight costs. The shift of business between direct to fulfillment partner (or vice versa...

  • Page 55
    ... 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 and gross margin. We consider discounted shipping and other promotions, such as our new policy of free shipping on orders...

  • Page 56
    ... $76,000 of restructuring charges during the year ended December 31, 2012 due to ceasing the use of some of our office facilities, changes in our estimate of sublease income as a result of our entering into a new sublease agreement and termination of an existing sublease. There were no restructuring...

  • Page 57
    ...), all of which resulted in a net loss for the year. Revenue for 2011 decreased by $35.6 million (3%), compared to 2010. Visits to our website were down 1% and new customer growth fell 9% which was partially offset by a slightly higher average order size. We believe our revenues were adversely...

  • Page 58
    ... inbound and outbound freight and higher product costs of returned goods due to a sales mix shift to the home and garden category. Fulfillment partner gross margin declined by 50 basis points, largely due to competitive pricing initiatives. Sales and marketing expenses as a percentage of revenue...

  • Page 59
    ... Fulfillment partner Total cost of goods sold Gross profit Operating expenses: Sales and marketing Technology General and administrative Restructuring Total operating expenses Operating income (loss) Interest income Interest expense Other income (expense), net Net income (loss) before income taxes...

  • Page 60
    ... mix between our direct business and fulfillment partner business; changes in vendor and / or customer pricing, including competitive pricing; inventory management decisions within the direct business; sales coupons and promotions; product mix of sales; and operational and fulfillment costs. 51

  • Page 61
    ... 31, 2011 is primarily due to competitive pricing initiatives, partially offset by a decline in credit card processing fees. The shift of business between direct to fulfillment partner (or vice versa) is an economic decision based on the economics of each particular product offering at the time and...

  • Page 62
    ... such as our ability to manage costs at our warehouses, significant changes in the number of units received and fulfilled, the extent to which we use third party fulfillment services and warehouses, and our ability to effectively manage customer service costs and credit card fees. There have been no...

  • Page 63
    ... for affiliate marketing and television advertising. Sales and marketing expenses include stock-based compensation expense of $377,000 and $608,000 for the years ended December 31, 2011 and 2010, respectively Costs associated with our discounted shipping and other promotions, such as coupons, are...

  • Page 64
    ... reversals during the year ended December 31, 2011. 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 sub lessee to terminate the subleases...

  • Page 65
    ..., our only available credit facility was a $3.0 million facility solely to support letters of credit. At December 31, 2012, our cash and cash equivalents balance was $93.5 million. Cash flow information is as follows: Year ended December 31 2012 2011 Cash provided by (used in): Operating activities...

  • Page 66
    ... of orders sold but not yet delivered to our customers due to shipping holidays near year-end, partially offset by a decrease in accounts payable of $7.9 million, an increase in accounts receivable of $5.8 million and an increase in inventory of $3.5 million primarily for home and garden products...

  • Page 67
    ... of credit (which was used for the retirement of long-term debt). Stock Repurchase Program At present we do not have an authorized stock repurchase program, and we did not repurchase any shares of our common stock in the market or any of our debt during 2012. Our board of directors may authorize...

  • Page 68
    ... enforceability of the purchase orders under applicable law, the amount of purchase obligations shown in the table above would be less. Other From time to time we enter into long-term contractual agreements for marketing, technology, or other services. Tax Contingencies Our contractual obligations...

  • Page 69
    ..., we believe Contribution and Contribution margin provides management and users of the financial statements information about our ability to cover our operating costs, such as technology and general and administrative expenses. Contribution and Contribution Margin are used in addition to and in...

  • Page 70
    ... $ 16,922 $ ITEM 7T. QUTNTITTTIVE TND QUTLITTTIVE DISCLOSURES TBOUT MTRKET RISK We do not use derivative financial instruments in our investment portfolio, except, prior to January 1, 2013, for an interest rate cap agreement on our line of credit (which expired on December 31, 2012), and we have...

  • Page 71
    ... control over financial reporting as of December 31, 2012. In making our assessment of the effectiveness of internal control over financial reporting, management used the criteria set forth in Internal Control-Integrated uramework issued by the Committee of Sponsoring Organizations of the Treadway...

  • Page 72
    ... control issues and instances of fraud, if any, within the Company have been detected. The effectiveness of our internal control over financial reporting as of December 31, 2012 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is in Item...

  • Page 73
    ... income (loss), changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2012, and our report dated February 21, 2013 expressed an unqualified opinion on those consolidated financial statements. /s/ KPMG LLP Salt Lake City, Utah February 21...

  • Page 74
    ... During the fiscal quarter ended December 31, 2012, there has not occurred any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. None. OTHER INFORMTTION 65

  • Page 75
    ... accounting officer in the Investor Relations section of our Website, www.overstock.com. We will provide a copy of the relevant portion to any person without any charge upon request in writing addressed to Overstock.com. Attn: Investor Relations, 6350 South 3000 East, Salt Lake City, UT 84121. ITEM...

  • Page 76
    ... TOTTL RETURN ITEM 13. CERTTIN RELTTIONSHIPS TND RELTTED TRTNSTCTIONS, TND DIRECTOR INDEPENDENCE The information required by this Item is incorporated by reference to our definitive proxy statement for the 2013 annual meeting of stockholders. ITEM 14. PRINCIPTL TCCOUNTING FEES TND SERVICES The...

  • Page 77
    Table of Contents PTRT IV ITEM 15. 1. EXHIBITS, FINTNCITL STTTEMENT SCHEDULES Financial Statements INDEX TO CONSOLIDTTED FINTNCITL STTTEMENTS Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations and Comprehensive Income (Loss) ...

  • Page 78
    68

  • Page 79
    ... Exhibit Number Description of Document 10.7 Sublease Agreement by and between Overstock.com, Inc., Information Technology International, Inc., and Old Mill Building LLC (incorporated by reference to Exhibit 99.3 to our Report on Form 8K/A filed on December 7, 2004). Old Mill Corporate Center...

  • Page 80
    ... the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections. (a) Incorporated by reference to exhibits of the same number filed with our Form 10-Q (File No. 000-49799), filed on August 13, 2002. 69

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    Table of Contents (b) Incorporated by reference to exhibits of the same number filed with our Registration Statement on Form S-1 (File No. 33383728), which became effective on May 29, 2002. (c) Management contract or compensatory plan or arrangement. (d) Pursuant to Rule 406T of Regulation ...

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    ...-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to ... Vice President, Finance and Risk Management (Principal Financial Officer and Principal Accounting Officer) Chairman of the Board and Director ...

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    Table of Contents Signature Title Date /s/ BARCLAY F. CORBUS Barclay F. Corbus /s/ JOSEPH J. TABACCO, JR. Joseph J. Tabacco, Jr. /s/ SAMUEL A. MITCHELL Samuel A. Mitchell Director Director Director February 21, 2013 February 21, 2013 February 21, 2013 72

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    ... of the Public Company Accounting Oversight Board (United States), Overstock.com, Inc.'s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control-Integrated uramework issued by the Committee of Sponsoring Organizations of the Treadway...

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    ..., $0.0001 par value: Authorized shares-5,000 Issued and outstanding shares-none Common stock, $0.0001 par value Authorized shares-100,000 Issued shares-26,481 and 26,241 Outstanding shares-23,451 and 23,279 Additional paid-in capital Accumulated deficit Treasury stock: Shares at cost-3,030 and 2,962...

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    ...(1) Fulfillment partner Total cost of goods sold Gross profit Operating expenses: Sales and marketing(1) Technology(1) General and administrative(1) Restructuring Total operating expenses Operating income (loss) Interest income Interest expense Other income, net Income (loss) before income taxes...

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    See accompanying notes to consolidated financial statements. F-3

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    ... of stock options Stock-based compensation to employees and directors Common stock issued upon vesting of restricted stock Purchase of treasury stock Treasury stock issued for 401(k) matching contributions Redeemable common stock repurchased under rescission offer Lapse of rescission rights of...

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    2010 Net loss Stock-based compensation to employees and directors Common stock issued upon vesting of restricted stock Purchase of treasury stock Lapse of rescission rights of redeemable common stock Deemed dividend related to redeemable common stock 25,877 $ 2 $349,747 $ (242,327) 2,862 $(76,764...

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    ...fixed assets Stock-based compensation to employees and directors Amortization of debt discount and deferred loan costs (Gain) loss from early extinguishment of debt Restructuring charge (reversals) Changes in operating assets and liabilities: Restricted cash Accounts receivable, net Inventories, net...

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    F-5

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    ... sell these products through our Internet websites located at www.overstock.com, www.o.co and www.o.biz ("Website"). Although our three websites are located at different domain addresses, the technology and equipment and processes supporting the Website and the process of order fulfillment described...

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    ...the following fair-value hierarchy: • • Level 1-Quoted prices for identical instruments in active markets; Level 2-Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all...

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    ... balance sheets (Note 18-Employee Retirement Plan). -The fair value was determined based on the income approach, in which we used internal cash flow projections over the life of the underlying lease agreements discounted based on a credit adjusted risk-free rate of return. See the roll forward...

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    ...Continued) 2. TCCOUNTING POLICIES (Continued) Allowance for doubtful accounts From time to time, we grant credit to some of our business customers on normal credit terms (typically 30 days). We perform credit evaluations of our business customers' financial condition and payment history and maintain...

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    ... cost of internal-use software and website development, including software used to upgrade and enhance our Website and processes supporting our business. We capitalize costs incurred during the application development stage of internal-use software and amortize these costs over the estimated useful...

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    ...2012, 2011, and 2010. Goodwill Goodwill represents the excess of the purchase price paid over the fair value of the tangible net assets acquired in business combinations. Goodwill is not amortized but is tested for impairment at least annually. When evaluating whether goodwill is impaired, we make...

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    ... Revenue related to merchandise sales is recognized upon delivery to our customers. As we ship high volumes of packages through multiple carriers, it is not practical for us to track the actual delivery date of each shipment. Therefore, we use estimates to determine which shipments are delivered and...

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    ... the product is shipped from our warehouses or from a fulfillment partner. Ecommerce marketplace channels were approximately 1% of our 2012 total net revenues. Other businesses We operate an online site for listing cars for sale as a part of our Website. The cars listing service allows dealers...

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    ... pays us fees for new accounts and for customer usage of the cards. The agreement also provides for a customer loyalty program offering reward points that customers will accrue from card usage and can use to make purchases on our Website (See "Club O loyalty program" above for more information). New...

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    ... was $182,000 and $187,000 at December 31, 2012 and 2011, respectively. Cost of goods sold Cost of goods sold includes product costs, warehousing costs, outbound shipping costs, handling and fulfillment costs, customer service costs and credit card fees, and is recorded in the same period in which...

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    ... within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. We expense legal fees as incurred. Restructuring Restructuring expenses are primarily comprised of lease termination costs. ASC Topic 420, Accounting for Costs Associated with...

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    ... this approach excess tax benefits related to stock based compensation are the last to be realized. Earnings (loss) per share Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common shares by the weighted average number of common shares outstanding during the...

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    ... financial statements. Accounting pronouncements issued not yet adopted In July 2011, the Financial Accounting Standards Board ("FASB") issued ASU No. 2012-02, Intangibles-Goodwill and Other (FASB Accounting Standards Codification Topic 350) which permits an entity to make a qualitative assessment...

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    ..., other Credit card receivables $ 10,888 $ 9,182 20,070 (797) 8,033 6,042 14,075 (574) Less: allowance for doubtful accounts Accounts receivable, net $ 19,273 $ 13,501 6. INVENTORIES Inventories consist of the following (in thousands): December 31, 2012 2011 Product inventory Inventory in...

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    ... $ 12,651 8. FIXED TSSETS Fixed assets consist of the following (in thousands): December 31, 2012 2011 Computer hardware and software, including internal-use software and website development Furniture and equipment Leasehold improvements Less: accumulated depreciation and amortization $ 151,155...

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    ..., 2012 2011 Payments owed or received prior to product delivery Club O membership fees and reward points Unredeemed gift cards Other Total deferred revenue $ 29,280 $ 17,691 3,579 5,193 2,973 3,738 2,579 1,356 $ 38,411 $ 27,978 12. BORROWINGS U.S. Bank uinancing Agreement On December 26, 2012, we...

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    ... the finance obligations remained outstanding. U.S. Bank Purchasing Card Agreement We have a commercial purchasing card (the "Purchasing Card") agreement with U.S. Bank. We use the Purchasing Card for business purpose purchasing and must pay it in full each month. At December 31, 2012, $3.9 million...

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    ... the years ended December 31, 2012, 2011 and 2010, respectively. Interest onthe Senior Notes was payable semi-annually on June 1 and December 1 of each year. The Senior Notes were scheduled to mature on December 1, 2011 and were unsecured and ranked equally in right of payment with all existing and...

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    ... $ 5,326 Legal Proceedings From time to time, we are involved in litigation concerning consumer protection, employment, intellectual property and other commercial matters related to the conduct and operation of our business and the sale of products on our Website. In connection with such litigation...

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    ... Fraud and Abuse Act, Video Privacy Protection Act, and California's Consumer Legal Remedies Act and Computer Crime Law. The complaint relates to our use of a product known as Facebook Beacon, created and provided to us by Facebook, Inc. Facebook Beacon provided the means for Facebook users to share...

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    ..." charge on her return of a vacuum cleaner. We filed a motion to dismiss based upon assertions that our agreement with our customers requires all such actions to be arbitrated in Salt Lake City, Utah. Alternatively, we asked that the case be transferred to the United States District Court for...

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    ... a user and server terminals, text input functionalities and search processes. We believe a third party vendor of search products and services sold to us is contractually obligated to indemnify us in this action as it pertains to the search patent. On October 14, 2011, a jury returned a verdict...

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    ... concerning our pricing, price reductions, sources of products and shipping charges. The complaint asks for damages in the amount of not less than $15 million. The suit is in the discovery stage. Trial has been set tentatively for September 9, 2013. The nature of the loss contingencies relating...

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    ... patent covering the imaging technology that facilitates prediction of color and location within digital cameras. We tendered defense of the case to an indemnitor which accepted the defense. Following a ruling in our favor, the case was dismissed and in September 2012, Digitech filed a new complaint...

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    ... by the stockholders on May 3, 2012 (as so amended and restated, the "Plan"). Under the Plan, the board of directors may issue incentive stock options to employees and directors of the Company and non-qualified stock options to consultants, as well as restricted stock units and other types of equity...

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    ...18.08 17.34 17.34 17.59 The following table summarizes information about stock options as of December 31, 2012 (in thousands, except per share data): Options Outstanding Weighted Tverage Exercise Price Weighted Tverage Remaining Contract Life Tggregate Intrinsic Value Options Exercisable Weighted...

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    ...the right to one share of common stock upon vesting. During the years ended December 31, 2012, 2011 and 2010, we recorded stock based compensation relatedto restricted stock units of $3.5 million, $2.8 million and $3.5 million, respectively. Changes to the estimated forfeiture rate are accounted for...

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    ...income, net consisted of the following (in thousands): Years ended December 31, 2012 2011 2010 Gift card and Club-O rewards breakage Sublease income Gain (loss) from early retirement of convertible senior notes Loss from early retirement of finance obligations Other Total other income, net $ 3,308...

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    ... ownership changes. Ownership changes under IRS Code Section 382 would limit the amount of net operating losses that could be used in any annual period. Our carry-forwards begin to expire in 2018. The income tax provision differs from the amount computed by applying the U.S. federal income tax rate...

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    ... Reporting . Segments were determined based on how we manage the business. There were no inter-segment sales or transfers during the years ended December 31, 2012, 2011 and 2010. We evaluate the performance of our segments and allocate resources to them based primarily on gross profit. The table...

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    ... with sales fulfilled from warehouses maintained by our fulfillment partners. Costs for this segment include product costs, outbound freight and fulfillment costs, credit card fees and customer service costs. Assets have not been allocated between the segments for our internal management purposes...

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    ... Statements (Continued) 22. BUSINESS SEGMENTS (Continued) For the years ended December 31, 2012, 2011 and 2010, over 99% of sales were made to customers in the United States of America. At December 31, 2012 and December 31, 2011, all of our fixed assets were located in the United States of America...

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    ... Fulfillment partner Total cost of goods sold Gross profit Operating expenses: Sales and marketing Technology General and administrative Restructuring Total operating expenses Operating income Interest income Interest expense Other income (expense), net Net income before income taxes Provision...

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    ...861 18,911 16,404 17,734 53,049 Cost of goods sold Direct Fulfillment partner Total cost of goods sold Gross profit Operating expenses: Sales and marketing Technology General and administrative Total operating expenses Operating income (loss) Interest income Interest expense Other income (expense...

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    ... at End of Year Year ended December 31, 2012 Deferred tax valuation allowance Allowance for sales returns Allowance for doubtful accounts Year ended December 31, 2011 Deferred tax valuation allowance Allowance for sales returns Allowance for doubtful accounts Year ended December 31, 2010 Deferred...

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    ...[Date] Number of Shares Subject to Awarh: Purchase Price per Share: [Number of Shares] $0.0001 $ [Participant will vest in [vest percentage] of the RSUs awarheh by this Agreement at the close of business on [hate or hates], subject to the provisions of the Restricteh Stock Unit Agreement attacheh...

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    ... Restricteh Stock Unit Grant Notice, if the status of the Participant as a Service Proviher is terminateh for any reason or no reason prior to vesting, the unvesteh RSUs awarheh by this Agreement will thereupon terminate anh be forfeiteh at no cost to the Company anh without any payment (in Shares...

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    ... or service relationship of the Participant at any time for any reason whatsoever, with or without gooh cause or notice. 12. Address for Notices. Any notice to be given to the Company unher the terms of this Agreement must be ahhresseh to the Company at 6350 South 3000 East, Salt Lake City, Utah...

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    ...such registration requirements. However, any sale of any Shares by the Participant will be subject to the Company's Insiher Trahing Policy as amenheh from time to time anh any other policies ahopteh by the Company relating to the sale of Company Common Stock anh any market blackoutperioh that may be...

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    ... has receiveh a right to purchase stock unher the Plan, anh has receiveh, reah anh unherstooh a hescription of the Plan. The Participant unherstanhs that the Plan is hiscretionary in nature anh may be mohifieh, suspenheh or terminateh by the Company at any time. 23. Electronic Delivery. The Company...

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    QuickLinks Exhibit 10.12 OVERSTOCK.COM, INC. RESTRICTED STOCK UNIT GRANT NOTICE (2005 Equity Incentive Plan) OVERSTOCK.COM, INC. RESTRICTED STOCK UNIT AGREEMENT (2005 Equity Incentive Plan)

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    ... Inc. During 2012 the Company paid its non-employee directors $50,000 annually, at the rate of $12,500 per quarter. During 2013 the Company will pay its non-employee directors $60,000 annually, at the rate of $15,000 per quarter. The Company also grants restricted stock units to directors, generally...

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    QuickLinks Exhibit 10.16 Summary of Unwritten Compensation Arrangements Applicable to Non-Employee Directors of Overstock.com, Inc.

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    ... Trade Names Overstock.com Services, Inc. Market Partner Holdings, Inc. Market Partner Operations, Inc. Market Partner SR, Inc. Market Partner BB, Inc. Market Partner BC, Inc. Market Partner EB, Inc. Market Partner NE, Inc. My Current, Inc. Utah Utah Utah Utah Utah Utah Utah Utah Utah Overstock...

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    QuickLinks Exhibit 21

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    ... December 31, 2012, and the related financial statement schedule, and the effectiveness of internal control over financial reporting as of December 31, 2012, which reports appear in the December 31, 2012 annual report on Form 10-K of Overstock.com, Inc. /s/ KPMG LLP Salt Lake City, Utah February 21...

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    QuickLinks Exhibit 23 Consent of Independent Registered Public Accounting Firm

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    ... which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over...

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    QuickLinks Exhibit 31.1 CERTIFICATION

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    ...or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 21, 2013 /s/ STEPHEN J. CHESNUT Stephen J. Chesnut Senior Vice President, Finance and Risk Management (principal financial officer)

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    QuickLinks Exhibit 31.2 CERTIFICATION

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    ..., as applicable, and that information contained in such Report fairly presents in all material respects the financial condition and results of operations of Overstock.com, Inc. Date: February 21, 2013 /s/ JONATHAN E. JOHNSON III Name: Title: Jonathan E. Johnson III Acting Chief Executive Officer...

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    QuickLinks EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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    ... that information contained in such Report fairly presents in all material respects the financial condition and results of operations of Overstock.com, Inc. Date: February 21, 2013 /s/ STEPHEN J. CHESNUT Name: Title: Stephen J. Chesnut Senior Vice President, Finance and Risk Management (principal...

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    QuickLinks EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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