Overstock.com 2007 Annual Report Download - page 64

and $4.2 million, respectively. The decrease from 2006 to 2007 is due primarily to the fact that we had $20 million of borrowings outstanding on our
inventory line of credit in the first quarter of 2006, and no borrowings outstanding during the same period in 2007.
Other income (expense) for the year ended December 31, 2006 was income of $81,000 and net expense of $92,000 in 2007.
Sale of discontinued operations
We determined during the fourth quarter of 2006 to sell our travel subsidiary ("OTravel"). As a result, OTravel's operations were classified as a
discontinued operation and therefore are not included in the results of continuing operations. The loss from discontinued operations for OTravel was
$6.9 million and $3.9 million for the years ended December 31, 2006 and 2007, respectively.
In conjunction with the discontinuance of OTravel, we 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. On April 25, 2007, we completed the sale of OTravel for cash proceeds of $9.9 million, net of cash transferred,
and $6.0 million of notes. Based on the estimated fair value of the discounted cash flows of the net proceeds from the sale, we recorded an additional goodwill
impairment of $3.8 million. There was no additional impairment of goodwill during the year ended December 31, 2007 (see Item 15 of Part IV, "Financial
Statements"—Note 4—"Acquisition and Subsequent Discontinued Operations").
Income taxes
Income taxes. For the year ended December 31, 2006 and 2007, we incurred net operating losses, and consequently paid insignificant amounts of
federal, state and foreign income taxes. As of December 31, 2006 and 2007, we had net operating loss carryforwards of approximately $145.2 million and
$164.2 million, respectively, which may be used to offset future taxable income. An additional $21.9 million of net operating losses are limited under Internal
Revenue Code Section 382 to $799,000 a year. These net operating loss carryforwards will begin to expire in 2018.
Seasonality
Based upon our historical experience, revenue typically increases during the fourth quarter because of the holiday retail season. The actual quarterly
results for each quarter could differ materially depending upon consumer preferences, availability of product and competition, among other risks and
uncertainties. Accordingly, there can be no assurances that seasonal variations will not materially affect our results of operations in the future. The following
table reflects our total revenues for each of the quarters since 2004 (in thousands):
First Quarter Second Quarter Third Quarter Fourth Quarter
2007 $ 157,930 $ 148,967 $ 161,930 $ 291,344
2006 178,044 159,192 156,885 294,029
2005 165,881 150,638 167,779 315,018
2004 82,078 87,792 103,444 221,321
Comparison of Years Ended December 31, 2005 and 2006
Revenue
During the year ended December 31, 2005 and 2006, total revenue decreased 1%, from $799.3 million in 2005 to $788.2 million in 2006. During the
same period, direct revenue decreased 7%,
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