Overstock.com 2007 Annual Report Download - page 127

Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
18. PERFORMANCE SHARE PLAN (Continued)
in economic value is 10% compounded annually or less, the percentage will be 0%. If the growth in economic value is 25% compounded annually, the
percentage will be 100%. If the growth in economic value is 40% compounded annually or more, the percentage will be 200%. If the percentage growth is
between these percentages, the payment percentage will be determined on the basis of straight line interpolation. Amounts payable under the plan were
originally payable in cash. During interim and annual periods prior to the third quarter of 2007, the Company recorded compensation expense based upon the
period-end stock price and estimates regarding the ultimate growth in economic value that is expected to occur. These estimates included assumed future
growth rates in revenues, gross margins and other factors. If the Company were to use different assumptions, the estimated compensation charges could be
significantly different.
An amendment to the Performance Share Plan to allow the Company to make payments in the form of common stock was approved by the shareholders
on May 15, 2007. In the third quarter of 2007, the Company determined the fair value of the awards on the amendment date and determined on August 7,
2007 to make the payments in the form of common stock, rather than cash. Therefore, the Company reclassified awards under the performance share plan
from their current status as liability awards to equity awards in accordance with FAS 123(R).
As of December 31, 2006, the Company had accrued $900,000 in total compensation expense under the plan. During the first six months of 2007, the
Company accrued an additional $650,000 related to performance shares prior to the determination to make the payments in the form of common stock. The
Company reclassified the total liability of approximately $1.6 million related to performance share awards granted prior to the determination to additional-
paid-in-capital on August 7, 2007.
Over the remaining six months of 2007, the Company reduced the estimated compensation expense under the plan by approximately $550,000, based on
changes in its estimate of growth in economic value over the remaining twelve months of the plan. As of December 31, 2007, the cumulative expense related
to the performance share awards was $1.0 million.
19. EMPLOYEE RETIREMENT PLAN
The Company has a 401(k) defined contribution plan which permits participating employees to defer up to a maximum of 25% of their compensation,
subject to limitations established by the Internal Revenue Code. Employees who have completed a half-year of service and are 21 years of age or older are
qualified to participate in the plan. The Company matches 50% of the first 6% of each participant's contributions to the plan. Beginning in 2006, the
Company's matching contribution is comprised of common stock issued from treasury to employees. Participant contributions are immediately vested.
Company contributions vest based on the participant's years of service at 20% per year over five years. The Company's matching contribution totaled
$261,000, $389,000 and $494,000 during 2005, 2006 and 2007, respectively. In addition, the Company made discretionary contributions of $342,000,
$409,000 and $408,000 during 2005, 2006 and 2007 to eligible participants as of the end of each respective calendar year. The contributions in 2006 and 2007
were settled with Company stock in the following year.
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