Overstock.com 2007 Annual Report Download - page 60

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attributable to the parent. SFAS 141 (R) and SFAS 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early
adoption is prohibited. We have not yet determined the effect on our consolidated financial statements, if any, upon adoption of SFAS 141 (R) or SFAS 160.
In December 2007, the SEC issued SAB No. 110, Certain Assumptions Used in Valuation Methods—Expected Term("SAB 110"). According to
SAB 110, under certain circumstances the SEC staff will continue to accept the use of the simplified method as discussed in SAB 107, in developing an
estimate of expected term of "plain vanilla" share options in accordance with SFAS 123(R), beyond December 31, 2007. We will adopt SAB 110 effective
January 1, 2008 and will continue to use the simplified method in developing the expected term used for our valuation of stock-based compensation.
Results of Operations
The following table sets forth our results of operations expressed as a percentage of total revenue for 2005, 2006 and 2007:
Years ended December 31,
2005 2006 2007
(as a percentage of total revenue)
Revenue
Direct revenue 40.6% 38.5% 25.7%
Fulfillment partner revenue 59.4 61.5 74.3
Total revenue 100.0 100.0 100.0
Cost of goods sold
Direct 35.3 36.2 21.6
Fulfillment partner 50.1 51.8 61.6
Total cost of goods sold 85.4 88.0 83.2
Gross profit 14.6 12.0 16.8
Operating expenses:
Sales and marketing 9.7 9.0 7.4
Technology 3.5 8.3 7.8
General and administrative 4.1 5.9 5.5
Restructuring — 0.7 1.6
Total operating expenses 17.3 23.9 22.3
Operating loss (2.7) (11.9) (5.5)
Interest income, net 0.0 0.5 0.6
Interest expense (0.7) (0.6) (0.5)
Other (expense) income, net 0.6 0.0 (0.0)
Loss from continuing operations (2.8)% (12.0)% (5.4)%
Comparison of Years Ended December 31, 2006 and 2007
Revenue
Total revenue decreased 4% to $760.1 million for the year ended December 31, 2007, from $788.2 million in 2006. During the three months ended
December 31, 2006 and 2007, total revenue was $294.0 million and $291.3 million, respectively, a 1% decrease. Direct revenue decreased 35% from
$303.2 million in 2006 to $195.6 million in 2007, and comparing the fourth quarters, direct revenue decreased 32%, from $98.2 million in 2006 to
$66.9 million in 2007. On the other hand, fulfillment
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