Overstock.com 2010 Annual Report Download - page 79

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Table of Contents
For further details on Contribution, see the calculation of this non-GAAP measure below (in thousands):
Year ended December 31,
2010 2009 2008
Total revenue $ 1,089,873 $ 876,769 $ 829,850
Cost of goods sold 900,233 712,017 685,614
Gross profit 189,640 164,752 144,236
Less: Sales and marketing expense 61,334 55,549 57,668
Contribution $ 128,306 $ 109,203 $ 86,568
Contribution margin 11.8% 12.5% 10.4%
Free Cash Flow
Free cash flow (a non-GAAP financial measure) reflects an additional way of viewing our cash flows and liquidity that, when viewed with our GAAP
results, provides a more complete understanding of factors and trends affecting our cash flows and liquidity. Free cash flow, which we reconcile to "Net cash
provided by (used in) operating activities", is cash flows from operations reduced by "Expenditures for fixed assets, including internal-use software and
website development." We believe that cash flows from operating activities is an important measure, since it includes both the cash impact of the continuing
operations of the business and changes in the balance sheet that impact cash. However, we believe free cash flow is a useful measure to evaluate our business
since purchases of fixed assets are a necessary component of ongoing operations and free cash flow measures the amount of cash we have available for future
investment, debt retirement or other changes to our capital structure after we have paid all of our expenses. Therefore, we believe it is important to view free
cash flow as a complement to our entire consolidated statements of cash flows as calculated below (in thousands):
Year ended December 31,
2010 2009 2008
Net cash provided by operating activities $ 16,322 $46,117 $ 6,444
Expenditures for fixed assets, including internal-use software and
website development (20,511) (7,275) (18,707)
Free cash flow $ (4,189)$38,842 $(12,263)
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