Overstock.com 2005 Annual Report Download - page 38

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As of December 31,
2001 2002 2003 2004 2005
(in thousands)
Balance Sheet Data:
Cash and cash equivalents $ 3,729 $ 11,059 $ 28,846 $ 198,678 $ 56,224
Marketable securities — 21,603 11,500 88,802 55,799
Working capital 3,308 36,157 46,101 267,947 80,162
Total assets 21,951 64,434 98,549 377,543 325,913
Total indebtedness 4,677 182 161 117,589 84,676
Redeemable common stock 5,284 4,363 2,978 3,166 3,205
Stockholders' equity 6,217 39,749 55,731 169,811 89,749
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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, home décor,
kitchenware, watches, jewelry, electronics & computers, sporting goods, apparel, designer accessories and travel, among other
products. We also sell books, magazines, CD's, DVD's, videocassettes and video games ("BMV"). 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.
In September 2004, we launched an online auction site—an online marketplace for the buying and selling of goods between our
customers—as part of our Website.
Our revenue is comprised of direct revenue and fulfillment partner revenue. During the year ended December 31, 2005, no single
customer accounted for more than 1% of our total revenue. Direct revenue includes sales made to individual consumers and
businesses, which are fulfilled from our warehouses in Salt Lake City, Utah or our outsourced warehouses located in Plainfield,
Indiana.
Our fulfillment partner revenue is generated when we sell merchandise of other retailers, cataloguers or manufacturers
("fulfillment partners") through our Website. 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 record revenue from the majority of these sales transactions
involving our fulfillment partners (excluding travel products) on a gross basis. Similar to our direct segment, fulfillment partner
products are available to both consumers and businesses. Our use of the term "partner" or "fulfillment partner" does not mean that we
have formed any legal partnerships with any of our fulfillment partners.
We currently offer air, hotel and car reservation services as well as cruise and vacation packages under the "Travel" tab on our
main website.
On July 1, 2005, we acquired all the outstanding capital stock of Ski West, Inc. ("Ski West") for an aggregate of $25.1 million
(including $111,000 of capitalized acquisition related expenses), and subject to potential additional earn-out payments (based on a
percentage of operating profits for each of the four calendar years beginning in 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
Amendment No. 1 to that Stock Purchase Agreement dated March 1, 2006 among the Company, Ski West, and all of the shareholders
of 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 offerings are primarily in
popular ski areas in the
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