Overstock.com 2005 Annual Report Download - page 60

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts. Our financial
instruments consist of cash and cash equivalents, marketable securities, trade accounts and contracts receivable, accounts payable and
long-term obligations. We consider investments in highly-liquid instruments purchased with a remaining maturity of 90 days or less at
the date of purchase to be cash equivalents. Our exposure to market risk for changes in interest rates relates primarily to our short-term
investments and short-term obligations; thus, fluctuations in interest rates would not have a material impact on the fair value of these
securities.
At December 31, 2005, we had $56.2 million in cash and cash equivalents and $55.8 million in marketable securities. A
hypothetical increase or decrease in interest rates of one hundred basis points would have an estimated impact of approximately
$1.1 million on our earnings or loss, or the fair market value or cash flows of these instruments.
At December 31, 2005, we had approximately $74.9 million of convertible senior notes outstanding which bear interest at a fixed
rate of 3.75%. In addition, at December 31, 2005, there were no borrowings outstanding under our lines of credit and letters of credit
totaling $9.5 million were outstanding under our credit facilities.
The fair value of the convertible senior notes is sensitive to interest rate changes. Interest rate changes would result in increases
or decreases in the fair value of the convertible senior notes, due to differences between market interest rates and rates in effect at the
inception of the obligation. Unless we elect to repurchase our convertible senior notes in the open market, changes in the fair value of
convertible senior notes have no impact on our cash flows or consolidated financial statements. The estimated fair value of our 3.75%
Convertible Senior Notes of December 31, 2005 and 2004 was $54.7 million and $116.3 million, respectively.
In January 2005, our Board of Directors authorized a share repurchase program under which we were authorized to repurchase up
to $50.0 million of our common stock through December 31, 2007. In April 2005, the Board authorized an increase to the share
repurchase program from $50.0 million to a total of $100.0 million. Additionally, on June 14, 2005, the Board of Directors amended
the stock repurchase program to authorize the repurchase of our Convertible Senior Notes.
Under the share repurchase program, we repurchased approximately 665,000 shares of our common stock in open market
transactions for $24.1 million during the year ended December 31, 2005. In addition, approximately 1.0 million shares of common
stock were acquired as a result of the settlement of $41.1 million of structured stock repurchase transactions during the year ended
December 31, 2005. The structured stock repurchase transactions not settled in stock were settled in cash totaling $7.9 million which
we received in July 2005. These transactions are recorded in shareholder's equity in the accompanying consolidated balance sheets. As
of December 31, 2005, we have utilized all of the $100.0 million authorized by the board under the repurchase program.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item are included in Part IV, Item 15 of this Form 10-K and are
presented beginning on page F-1.
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