Overstock.com 2004 Annual Report Download - page 36

As of December 31,
2000 2001 2002 2003 2004
(in thousands)
Balance Sheet Data:
Cash and cash equivalents $ 8,348 $ 3,729 $11,059 $28,846 $198,678
Marketable securities — — 21,603 11,500 88,802
Working capital 6,440 3,071 35,679 45,284 266,668
Total assets 30,401 21,714 63,956 97,732 376,264
Total indebtedness 3,591 4,677 182 161 117,589
Redeemable common stock 4,930 5,284 4,363 2,978 3,166
Stockholders' equity 12,349 5,980 39,271 54,914 168,532
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following Management's Discussion and Analysis of Financial Condition and Results of Operation should be read in conjunction with our
Consolidated Financial Statements and the related Notes thereto. This discussion contains forward-looking statements based upon current expectations that
involve risks and uncertainties, such as our plans, objectives, expectations and intentions, as set forth under "Special Note Regarding Forward-Looking
Statements." Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of
several factors, including those set forth in the following discussion and under "Risk Factors" and elsewhere in this Form 10-K.
Overview
We are an online "closeout" retailer offering discount brand name merchandise, including bed-and-bath goods, furniture, kitchenware, watches, jewelry,
computers and electronics, sporting goods, apparel and designer accessories and travel. Our company, based in Salt Lake City, Utah, was founded in 1997,
and we launched our first Website through which customers could purchase products in March 1999.
Our revenue is comprised of direct revenue and fulfillment partner revenue. Direct revenue includes sales made to individual consumers and businesses,
which are fulfilled from our warehouse in Salt Lake City, Utah or our outsourced warehouse located in Plainfield, Indiana, and sales from our warehouse store
which we closed in January 2004. Customers place orders through our main website, www.overstock.com. Although we historically operated a separate
business-to-business ("B2B") Website, our direct revenue has predominantly been based on purchases made directly through our main consumer Website. As
a result, during the third quarter of 2004, we integrated the B2B Website into our consumer Website, and B2B clients now buy products primarily through our
Club O frequent buyers club and our Club O Gold bulk purchase program.
During 2003, Safeway, Inc. accounted for approximately 9% of our total revenue. However, our relationship with Safeway terminated in February 2004.
During 2004, no single customer accounted for more than 1% of our total revenue.
Our fulfillment partner revenue is generated when we sell merchandise of other retailers, cataloguers or manufacturers ("fulfillment partners") through
our Website. Prior to July 1, 2003, we did not own or physically handle the merchandise we sold in these transactions, as the merchandise was shipped
directly by a third party vendor, which also handled all customer returns related to those sales. Beginning July 1, 2003, we took responsibility for returned
items relating to these sales and we now handle the resale of returned items. As a result, beginning July 1, 2003, we are considered to be the primary obligor
for the majority of these sales transactions, and we assume the risk of loss on returned items. As a consequence, we now record revenue from the majority of
these sales transactions involving our fulfillment partners (excluding auction and travel products) on a gross basis, rather than on a net basis as we did prior to
July 1, 2003. Similar to our direct segment, fulfillment partner products are
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