Overstock.com 2007 Annual Report Download - page 109

Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
4. ACQUISITION AND SUBSEQUENT DISCONTINUED OPERATIONS
On July 1, 2005, the Company 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).
Ski West was an on-line travel company whose proprietary technology dprovidedconsumer access to a large, fragmented, hard-to-find inventory of
lodging, vacation, cruise and transportation bargains. The travel offerings were primarily in popular ski areas in the U.S. and Canada. Effective upon the
closing, Ski West became a wholly-owned subsidiary of the Company, integrated the Ski West travel offerings with the Company's existing travel offerings
and changed its name to OTravel.com, Inc ("OTravel").
During the fourth quarter of 2006, in conjunction with the facilities consolidation and restructuring program described in Note 3, management decided to
sell OTravel. The Company evaluated its plan to sell OTravel in accordance with SFAS No. 144, Accounting for the Impairment of Long-lived
Assets("SFAS 144"), which requires that long-lived assets be classified as held for sale only when certain criteria are met. The Company classified the
OTravel assets and liabilities as "held for sale" as it met these criteria as of December 31, 2006, which include: management's commitment to a plan to sell the
assets; availability of the assets for immediate sale in their present condition; an active program to locate buyers and other actions to sell the assets has been
initiated; sale of the assets is probable and their transfer is expected to qualify for recognition as a completed sale within one year; assets are being marketed at
reasonable prices in relation to their fair value; and unlikelihood that significant changes will be made to the plan to the sell the assets. Results of operations
for the subsidiary were included in the fulfillment partner segment prior to being classified as discontinued operations.
The Company also determined that the OTravel subsidiary met the definition of a "component of an entity" and has been accounted for as a discontinued
operation under SFAS 144. The results of operations for this subsidiary have been classified as discontinued operations in all periods presented. In
conjunction with the discontinuance of OTravel, the Company performed an evaluation of the goodwill associated with the reporting unit pursuant to
SFAS 142 and SFAS 144 and determined that goodwill of approximately $4.5 million was impaired as of December 31, 2006, based on a non-binding letter
of intent from a third party to purchase this business. During the quarter ended March 31, 2007, the Company received a revised offer from this third party to
purchase its OTravel business and, in April 2007, the Company completed the sale of OTravel under these revised terms. Accordingly, the Company
evaluated its goodwill as of March 31, 2007 and, based on the estimated fair value of the discounted cash flows of the net proceeds from the sale, determined
that an additional $3.8 million of goodwill was impaired.
On April 25, 2007, the Company completed the sale of OTravel.com to Castles Travel, Inc., an affiliate of Kinderhook Industries, LLC, and Castles
Media Company LLC, for $17.0 million. The Company received cash proceeds, net of cash transferred, of $9.9 million and two $3.0 million promissory
notes. The $3.0 million senior note matures three years from the closing date and bears interest, payable quarterly, of 4.0%, 10.0% and 14.0% per year in the
first, second and third years, respectively. The $3.0 million junior note matures five years from the closing date and bears interest of 8.0% per year,
compounded annually, and is payable in full at maturity.
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