Overstock.com 2004 Annual Report Download - page 92

Download and view the complete annual report

Please find page 92 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

In 2002, 2003 and 2004, over 99% of sales were made to customers in the United States of America. No individual geographical area accounted for more
than 10% of net sales in any of the periods presented. At December 31, 2003 and 2004, all of the Company's fixed assets were located in the United States of
America.
20. VARIABLE INTEREST ENTITY
In August 2004, the Company entered into an agreement which allows the Company to lend up to $10,000 to an entity for the purpose of buying
inventory, primarily to supply a new category within our jewelry store which allows customers purchasing diamond rings to select both a specific diamond
and ring setting. In November 2004, the Company loaned the entity $8,400. The promissory note bears interest at 3.75% per annum. The Company will also
receive fifty percent (50%) of any profits of the entity. Interest shall be due and payable quarterly on the fifteenth day of February, May, August and
November, commencing on November 15, 2004 until the due date of November 30, 2006, on which all principal and interest accrued and unpaid thereon,
shall be due and payable. The promissory note is collateralized by all of the assets of the entity.
The Company has a ten year option to purchase ("Purchase Option") 50% of the ownership and voting interest of the entity. The exercise price of the
Purchase Option is the sum of (a) one thousand dollars, and (b) $3.0 million, which may be paid, at the Company's election, in cash or by the forgiveness of
$3.0 million of the entity's indebtedness to the Company.
The entity was evaluated in accordance with FASB Interpretation No. 46 Revised, Consolidation of Variable Interest Entities—an Interpretation of ARB
No. 51, and it was determined to be a variable interest entity for which the Company was determined to be the primary beneficiary. As such, the financial
statements of the entity are consolidated into the financial statements of the Company.
The carrying amount and classification of the consolidated assets that are collateral for the entity's obligations include:
December 31,
2004
Cash $ 979
Accounts receivable 12
Inventory 7,325
Prepaid expenses 75
Property and equipment 224
$ 8,615
21. SHARE BUY BACK PROGRAM
During January 2005, the Company's Board of Directors authorized a stock buyback program under which the Company is authorized to repurchase up
to $50,000 of its common stock through December 31, 2007.
In February and March 2005 the Company entered into several purchased call options, pursuant to which the Company may purchase up to 1,250 shares
of its common stock at certain settlement dates. In connection with these repurchase transactions, the Company has paid approximately $47,507. Upon
F-29