Overstock.com 2011 Annual Report Download - page 129

Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
13. COMMITMENTS AND CONTINGENCIES (Continued)
case is in its early stages. The nature of the loss contingencies relating to claims that have been asserted against us are described above. However, no estimate
of the loss or range of loss can be made. We intend to vigorously defend this action and pursue our indemnification rights with our vendors, if any.
On September 15, 2009, we received a notice from the Securities and Exchange Commission ("SEC") stating that the SEC is conducting an investigation
concerning our previously-announced financial restatements of 2006 and 2008 and other matters. The subpoena accompanying the notice covers documents
related to the restatements and also to our billings to our partners in the fourth quarter of 2008 and related collections, and our accounting for and
implementation of software relating to our accounting for customer refunds and credits, including offsets to partners, and related matters. Prior to October
2010, the SEC asked us for information in the form of records connected to this matter, all of which we have provided. The SEC has interviewed several
witnesses. However, we do not know the present status of the investigation. Since October 2010, we have not been asked for more information, and we know
of no person interviewed in this matter since October 2010. We have cooperated and intend to continue to cooperate fully with the investigation.
We establish liabilities when a particular contingency is probable and estimable. We believe the $2.4 million accrued at December 31, 2011 in our
consolidated financial statements is adequate in light of the probable and estimable liabilities. It is reasonably possible that the potential losses may exceed our
accrued liabilities for contingencies.
We have other contingencies which are reasonably possible; however, the reasonably possible exposure to losses cannot currently be estimated.
We recognized a reduction in legal expenses of zero, $4.5 million and $7.1 million during the years ended December 31, 2011, 2010 and 2009
respectively, related to the settlement of legal matters.
14. INDEMNIFICATIONS AND GUARANTEES
During our normal course of business, we have made certain indemnities, commitments, and guarantees under which we may be required to make
payments in relation to certain transactions. These indemnities include, but are not limited to, indemnities to various lessors in connection with facility leases
for certain claims arising from such facility or lease, and indemnities to our directors and officers to the maximum extent permitted under the laws of the State
of Delaware. The duration of these indemnities, commitments, and guarantees varies, and in certain cases, is indefinite. In addition, the majority of these
indemnities, commitments, and guarantees do not provide for any limitation of the maximum potential future payments we could be obligated to make. As
such, we are unable to estimate with any reasonableness our potential exposure under these items. We have not recorded any liability for these indemnities,
commitments, and guarantees in the accompanying consolidated balance sheets. We do, however, accrue for losses for any known contingent liability,
including those that may arise from indemnification provisions, when future payment is both probable and reasonably estimable.
15. STOCKHOLDERS' EQUITY
Common Stock
Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally
available and when declared by the Board of Directors, subject to prior rights of holders of all classes of stock outstanding having priority rights as to
dividends. No dividends have been declared or paid on our common stock through December 31, 2011.
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