Overstock.com 2011 Annual Report Download - page 77

Table of Contents
Cash received from customers generally corresponds to our net revenues as our customers primarily use credit cards to buy from us causing our
receivables from these sales transactions to settle quickly. We have payment terms with our fulfillment partners that generally extend beyond the amount of
time necessary to collect proceeds from our customers. As a result, following our typically seasonally strong fourth quarter sales, at December 31 of each
year, our cash, cash equivalents and accounts payable balances normally reach their highest level (other than as a result of cash flows provided by or used in
investing and financing activities). However, our accounts payable balance normally declines during the first three months following year-end, which
normally results in a decline in our cash and cash equivalents balances from the year-end balance. The seasonality of our business causes payables and
accruals to grow significantly in the fourth quarter, and then decrease in the first quarter when they are paid.
The $25.7 million of net cash provided by operating activities during the year ended December 31, 2011 was primarily due to a decrease in inventory of
$9.1 million from an effort to maintain lower inventory levels and a shift in sales mix, particularly in clothing and shoes, from a direct inventory-based model
to a fulfillment partner-based model to reduce seasonal inventory risks, an increases in accrued liabilities of $7.0 million primarily related to marketing and
legal expenses, an increase in deferred revenue of $4.0 million primarily due to continued growth of our Club O loyalty program and an increase in accounts
payable of $2.9 million.
The $16.3 million of net cash provided by operating activities during the year ended December 31, 2010 was primarily due to positive net income of
$13.9 million for the year ended December 31, 2010. Net cash was also provided by increases of deferred revenue of $3.4 million primarily due to our launch
of our Club O loyalty program. The cash inflows were offset by cash outflows of $8.7 million due to an increase in inventory and $9.3 million due to a
decrease in accounts payable. The increase in inventory was a result of increased purchases of inventory to meet holiday sales demand and support growth in
the business. The decrease in accounts payable balance is due to increased and earlier sales and holiday shipments resulting in increased payments to suppliers
prior to year-end when compared to the same period in 2009.
Cash (used in) provided by investing activities
Cash provided by investing activities corresponds with purchases, sales, and maturities of marketable securities and cash expenditures for fixed assets,
including internal-use software and website development costs. For the years ended December 31, 2011 and 2010, investing activities resulted in net cash
outflows of $8.9 million and $22.7 million, respectively.
The $8.9 million used in investing activities during the year ended December 31, 2011 resulted primarily from expenditures for fixed assets of
$8.7 million, which largely consisted of software and hardware purchases.
The $22.7 million used in investing activities during the year ended December 31, 2010 resulted primarily from expenditures for fixed assets of
$20.5 million, which largely consisted of software and hardware purchases for our data warehouse and other data storage infrastructure in order to support our
growth, and a $1.7 million investment in precious metals in an effort to diversify our investments.
Cash used in financing activities
For the years ended December 31, 2011 and 2010, financing activities resulted in net cash outflows of $43.8 million and $9.4 million, respectively.
Financing activities for the year ended December 31, 2011 resulted in net cash outflows of $43.8 million primarily from $34.6 million used for
retirement of long-term debt, $24.9 million used for
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