Overstock.com 2011 Annual Report Download - page 82

Table of Contents
debt, net of $77,000 of associated unamortized discount. Of the $34.6 million in Senior Notes retired during the year ended December 31, 2011, $10.1 million
were held by Chou and $21.7 million were held by Fairfax. Chou and Fairfax are beneficial owners of more than 5% of our common stock. We retired
$25.4 million of the Senior Notes during the year ended December 31, 2010 for $24.9 million in cash, resulting in a gain of $346,000 on early extinguishment
of debt, net of $158,000 of associated unamortized discount.
As of December 31, 2011 and December 31, 2010, zero and $34.5 million of the Senior Notes, net of debt discount remained outstanding, respectively.
Off-balance sheet arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to
investors.
Non-GAAP financial measures
Regulation G, Conditions for Use of Non-GAAP Financial Measures, and other SEC regulations regulate the disclosure of certain non-GAAP financial
information.
Contribution (a non-GAAP financial measure) (which we reconcile to "Gross profit" in our statement of operations) consists of gross profit less sales and
marketing expense and reflects an additional way of viewing our results. Contribution Margin is Contribution as a percentage of revenues. When viewed with
our GAAP gross profit less sales and marketing expenses, we believe Contribution and Contribution margin provides management and users of the financial
statements information about our ability to cover our operating costs, such as technology and general and administrative expenses. Contribution and
Contribution Margin are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the
exclusion of GAAP financial measures. You should review our financial statements and publicly-filed reports in their entirety and not rely on any single
financial measure. The material limitation associated with the use of Contribution is that it is an incomplete measure of profitability as it does not include all
operating expenses or non-operating income and expenses. Management compensates for these limitations when using this measure by looking at other
GAAP measures, such as operating income (loss) and net income (loss).
For further details on Contribution, see the calculation of this non-GAAP measure below (in thousands):
Year ended December 31,
2011 2010 2009
Total revenue $ 1,054,277 $ 1,089,873 $ 876,769
Cost of goods sold 875,189 900,233 712,017
Gross profit 179,088 189,640 164,752
Less: Sales and marketing expense 61,813 61,334 55,549
Contribution $ 117,275 $ 128,306 $ 109,203
Contribution margin 11.1% 11.8% 12.5%
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
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