Overstock.com 2012 Annual Report Download - page 29

Table of Contents
our fulfillment and customer service centers at optimal levels. Our failure to do so could negatively impact our operating results and customer
experience.
Our cash, cash equivalents, investments in precious metals and short-term investments are subject to a risk of loss based upon the solvency of the
financial institutions in which they are maintained and movement in the precious metals markets.
We maintain the majority of our cash, cash equivalents and short-term investments in accounts with a small number of major financial institutions
within the United States, in the form of demand deposits, money market accounts, time deposits, U.S. Treasury Bills and other short-term investments.
Our deposits in these institutions generally exceed the amounts of insurance provided, and some deposits may not be covered by insurance at all. We
keep our precious metals in a secure third party facility. If any of these institutions were to become insolvent, we could lose some, or all, of such
deposits, which would have a material adverse effect on our financial condition. Our investment in precious metals is also subject to price movements in
the precious metals markets.
If we fail to accurately forecast our expenses and revenues, our business, prospects, financial condition and results of operations may suffer and
the price of our securities may decline.
The rapidly evolving nature of our industry and the constantly evolving nature of our business, make forecasting operating results difficult. Since
2005, we have completed several large, complex and expensive infrastructure upgrades in order to increase our ability to handle larger volumes of sales
and to develop or increase our ability to perform a variety of analytical procedures relating to our business. We are continuing to upgrade and further
expand these and other components of our infrastructure. In the past, we have experienced difficulties with upgrades of our infrastructure, and have
incurred increased expenses as a result of these difficulties. As a result of these expenditures on our infrastructure, our ability to reduce spending is
limited. Therefore, any significant shortfall in the revenues for which we have built and are continuing to build our infrastructure would likely harm our
business.
The seasonality of our business places increased strain on our operations.
A disproportionate amount of our sales normally occur during our fourth quarter. If we do not stock or are otherwise unable to source products
sufficient to meet customer demand, our business would be adversely affected. If we liquidate products, as we have in the past, we may be required to
take significant inventory markdowns or write-offs, which could reduce gross profits. We may experience an increase in our net shipping cost due to
complimentary upgrades, split-shipments, and additional long-zone shipments necessary to ensure timely delivery for the holiday season. If too many
customers access our Website within a short period of time due to increased holiday demand, we may experience system interruptions that make our
Website unavailable or prevent us from efficiently fulfilling orders, which may reduce the volume of goods we sell and the attractiveness of our
products and services. In addition, we may be unable to adequately staff our fulfillment and customer service centers during peak periods, and delivery
services and other fulfillment companies and customer service providers may be unable to meet the seasonal demand.
Significant merchandise returns could harm our business.
We allow our customers to return products, subject to our returns policies. If merchandise returns are significant, our business, prospects, financial
condition and results of operations could be harmed. Further, we modify our policies relating to returns from time to time and any policies intended to
reduce the number of product returns may result in customer dissatisfaction and fewer repeat customers.
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