Overstock.com 2005 Annual Report Download - page 10

industry verticals, such as florist supplies, restaurant supplies, and office supplies. Revenue from our bulk buys and business supplies
business is included in the fulfillment partner segment, as it is not significant enough to separate out as its own segment at this early
stage of the business.
Bulk buys and business supplies business
In August 2004, we merged our B2B site (www.overstockb2b.com) into our B2C site, and opened a "Club O Gold" membership
program (into which our current B2B customers were grandfathered). The terms of this program include a higher annual fee ($99.95),
Club O Gold pricing (that is, our B2C price less 5% on single product purchases and steeper discounts for products purchased in bulk),
and access to a special, small business-focused, customer service team. During 2005, we morphed this program into our "Bulk Buys &
Business Supplies" tab. For this tab, we have added a number of suppliers specific to various industry verticals, such as florist
supplies, restaurant supplies, and office supplies. The majority of revenue from our bulk buys and business supplies business is
included in the fulfillment partner segment, as most of the product sold is supplied by fulfillment partners.
Travel business
During the fourth quarter of 2003, we added a discount travel department to our Website. We used fulfillment partners to supply
the travel products and services (flights, hotels, rental cars, etc.). For the first and second quarters of 2004, our revenues from the
Travel department were insignificant. During May of 2004, we closed our travel department so we could improve the travel product
offerings. In January 2005, we re-opened the travel department on our Website. We currently offer air, hotel and car reservation
services as well as cruise and vacation packages.
In addition, on July 1, 2005, we acquired all the outstanding capital stock of Ski West, Inc. ("Ski West"). Ski West is an on-line
travel company whose proprietary technology provides easy consumer access to a large, fragmented, hard-to-find inventory of
lodging, vacation, cruise and transportation bargains. The travel products are primarily in popular ski areas in the U.S. and Canada,
with more recent expansion into the Caribbean and Mexico, as well as cruises. We paid an aggregate of $25.1 million (including
$111,000 of capitalized acquisition related expenses) for Ski West, and we may be subject to additional earn-out payments (based on
a percentage of operating profits for each of the four calendar years beginning with 2006 as follows: 50%, 33.3%, 20%, and 10%,
respectively), subject to reduction under certain circumstances, pursuant to a Stock Purchase Agreement dated June 24, 2005 and the
First Amendment to the Stock Purchase Agreement among the Company, Ski West, and all of the shareholders of Ski West.
Effective upon the closing, Ski West became a wholly-owned subsidiary of the Company, and we integrated the Ski West travel
offerings with our existing travel offerings and changed its name to OTravel.com, Inc. Revenue from our travel business is included in
the fulfillment partner segment, as it is not significant enough to separate out as its own segment.
Auctions business
During September 2004, we added an online auction service to our Website. Our auction tab allows sellers to list items for sale,
buyers to bid on items of interest, and users to browse through listed items online. We are not the seller of the items sold on the
auction site and we have no control over the pricing of those items. Therefore, for these sales we record only our listing fees and
commissions for items sold as revenue. Revenue from our auction business is included in the fulfillment partner segment, as it is not
significant enough to segregate as its own segment.
7