Overstock.com 2010 Annual Report Download - page 80

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Table of Contents
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts. Our financial instruments consist of
cash and cash equivalents, marketable securities, trade accounts and contracts receivable, accounts payable and long-term obligations. We consider
investments in highly-liquid instruments with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents.
Our exposure to market risk for changes in interest rates relates primarily to our short-term investments and short-term obligations; thus, fluctuations in
interest rates would not have a material impact on the fair value of these securities. However, the fair values of our investments may be subject to fluctuations
due to volatility of the stock market in general, investment-specific circumstances, and changes in general economic conditions.
At December 31, 2010, we had $124.0 million in cash and cash equivalents. Hypothetically, an increase or decrease in interest rates of one hundred basis
points would have an estimated impact of $1.3 million on our earnings or loss, or the fair market value or cash flows of these instruments.
At December 31, 2010, we had approximately a face amount of $34.6 million of convertible senior notes outstanding which bear interest at a fixed rate
of 3.75%. At December 31, 2010, there were no borrowings outstanding under our lines of credit and letters of credit totaling $2.4 million were outstanding
under our credit facilities.
On February 1, 2011 our Board of Directors approved a $10 million increase to our previously-announced debt repurchase program. With this increase
we may repurchase up to $15 million of our outstanding Senior Notes. On February 7, 2011, we retired an additional $10.1 million of our outstanding Senior
Notes, reducing the balance outstanding to a face amount of $24.5 million.
The fair value of the convertible senior notes is sensitive to interest rate changes. Interest rate changes would result in increases or decreases in the fair
value of the convertible senior notes, due to differences between market interest rates and rates in effect at the inception of the obligation. Unless we elect to
repurchase our convertible senior notes in the open market, changes in the fair value of convertible senior notes have no impact on our cash flows or
consolidated financial statements. The estimated fair value of our 3.75% convertible senior notes at December 31, 2010 was $33.2 million. The fair value of
the convertible senior notes was derived using a convertible pricing model with observable market inputs, which include stock price, dividend payments,
borrowing costs, equity volatility, interest rates and interest spread.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item are included in Part IV, Item 15 of this Form 10-K and are presented beginning on
page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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