Overstock.com 2006 Annual Report Download - page 53

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In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an Interpretation of
FASB Statement No. 109," (FIN 48). FIN 48 prescribes a comprehensive model for how a company should recognize, measure,
present, and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return. FIN 48 is
effective for us on January 1, 2007. We are currently evaluating the impact of this interpretation and do not expect the adoption of FIN
48 to have a material impact on our consolidated financial statements.
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (SAB 108). SAB 108
was issued to provide interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be
considered in quantifying a current year misstatement. The provisions of SAB 108 are effective for us for the December 31, 2006
year-end. The adoption of SAB 108 did not have a material impact on our consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," (SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value
measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value
measurements. SFAS 157 becomes effective for us on January 1, 2008. Upon adoption, the provisions of SFAS 157 are to be applied
prospectively with limited exceptions. We do not expect the adoption of SFAS 157 to have a material impact on our consolidated
financial statements.
Results of Operations
The following table sets forth our results of operations expressed as a percentage of total revenue for 2004, 2005 and 2006.
Years ended December 31,
2004 2005 2006
(as a percentage of
total revenue)
Revenue
Direct revenue 43.1% 40.6% 38.5%
Fulfillment partner revenue 56.9 59.4 61.5
Total revenue 100.0 100.0 100.0
Cost of goods sold
Direct 37.4 35.3 36.2
Fulfillment partner 49.2 50.1 51.8
Total cost of goods sold 86.6 85.4 88.0
Gross profit 13.4 14.6 12.0
Operating expenses:
Sales and marketing 8.2 9.7 9.0
Technology 1.7 3.5 8.3
General and administrative 4.5 4.1 5.9
Restructuring — — 0.7
Total operating expenses 14.4 17.3 23.9
Operating loss (1.0) (2.7) (11.9)
Interest income, net 0.2 (0.0) 0.5
Interest expense (0.1) (0.7) (0.6)
Other (expense) income, net (0.0)0.6 0.0
Loss from continuing operations (0.9)% (2.8)% (12.0)%
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