Overstock.com 2004 Annual Report Download - page 42

Download and view the complete annual report

Please find page 42 of the 2004 Overstock.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

Results of Operations
The following table sets forth our results of operations expressed as a percentage of total revenue for 2002, 2003 and 2004.
Year ended December 31,
2002 2003 2004
(as a percentage of
total revenue)
Revenue
Direct revenue 86.5% 57.8% 43.1%
Fulfillment partner revenue 13.5 42.2 56.9
Total revenue 100.0 100.0 100.0
Cost of goods sold
Direct 77.0 52.0 37.5
Fulfillment partner 3.0 37.3 49.2
Total cost of goods sold 80.0 89.3 86.7
Gross profit 20.0 10.7 13.3
Operating expenses:
Sales and marketing expenses 9.4 8.4 8.2
General and administrative expenses 11.8 7.1 6.1
Amortization of stock-based compensation 3.2 0.3 0.1
Total operating expenses 24.4 15.8 14.4
Operating loss (4.4) (5.1) (1.1)
Interest income 0.4 0.2 0.2
Interest expense (0.5) (0.0) (0.1)
Other income (expense), net (0.5) 0.0 0.0
Net loss (5.0)% (4.9)% (1.0)%
Comparison of Years Ended December 31, 2003 and 2004
Revenue
Beginning July 1, 2003, customer returns from sales shipped by our fulfillment partners are returned directly to us and processed through our Salt Lake
City warehouse, rather than returned to our fulfillment partners, as they previously were. We made the decision to change this policy to have more control
over the Overstock customer shopping experience, as we believe that a seamless customer experience is key to creating loyal, long-term customers. By
accepting returns at our warehouse, we can verify that fulfillment partner products are being packaged and shipped to our standards. Additionally, as customer
returns are now all shipped to one location, the process is simpler and more convenient for our customers.
As a result of this change in business practices, we now record the majority of these sales transactions shipped by our fulfillment partners on a gross basis
instead of a net basis as we have historically done. Therefore, from the third quarter 2003 forward, revenue recorded in accordance with accounting principles
generally accepted in the United States ("GAAP") will increase significantly from our results as reported in SEC filings prior to the third quarter of 2003.
Additionally, direct revenue, as a percentage of total revenue will decrease significantly while fulfillment partner revenue, as a percentage of total revenue,
will increase significantly. As a result, for each of the years presented, we believe that for year-over-year comparison purposes, gross bookings comparisons
may be more
38