Overstock.com 2009 Annual Report Download - page 102

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Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements
1. BUSINESS AND ORGANIZATION
Overstock.com, Inc. (the "Company") is an online "closeout" retailer offering discount, brand-name merchandise for sale primarily over the Internet. The
Company's merchandise offerings include bed-and-bath goods, home décor, kitchenware, watches, jewelry, electronics and computers, sporting goods,
apparel, and designer accessories, among other products. The Company also sells books, magazines, CDs, DVDs and video games ("BMMG"). As part of its
Website, the Company also offers an online auction service, which acts as an online marketplace for the buying and selling of goods and services, as well as
an online site for listing cars and homes for sale. In October 2009, the Company launched O.biz, a website where customers can shop for bulk and business
related items.
The Company was formed on May 5, 1997 as D2—Discounts Direct, a limited liability company. On December 30, 1998, the Company was reorganized
as a C Corporation in the State of Utah and reincorporated in Delaware in May 2002. On October 25, 1999, the Company changed its name to
Overstock.com, Inc. On July 23, 2003, the Company formed Overstock Mexico, S. de R. L. de C.V., a wholly owned subsidiary, to distribute products in
Mexico. The Company ceased operations of its Mexico Operations on October 24, 2008.
The Company has organized its operations into two principal segments based on the primary source of revenue: Direct revenue and Fulfillment partner
revenue (see "Note 25—Business Segments").
2. ACCOUNTING POLICIES
Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The consolidated financial
statements include the accounts of the Company's OTravel subsidiary through April 25, 2007 and the Company's Overstock Mexico, S. de R. L. de C.V.
subsidiary through October 24, 2008 (see "Note 5—Acquisition and Subsequent Discontinued Operations"). All intercompany account balances and
transactions have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires estimates and assumptions that affect
the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements
and accompanying notes. Estimates are used for, but not limited to, valuation of investments, receivables valuation, revenue recognition, sales returns,
incentive discount offers, inventory valuation, depreciable lives and valuation of fixed assets and internally-developed software, valuation of acquired
intangibles and goodwill, income taxes, stock-based compensation, restructuring liabilities and contingencies. Actual results could differ materially from those
estimates.
Cash equivalents
The Company classifies all highly liquid instruments, including money market funds with a remaining maturity of three months or less at the time of
purchase, as cash equivalents. Cash equivalents as of December 31, 2008 and 2009 are $97.4 million and $129.2 million, respectively.
F-8