Overstock.com 2013 Annual Report Download - page 74

Table of Contents
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As used herein, "Overstock," "Overstock.com," "O.co," "we," "our" and similar terms include Overstock.com, Inc. and its subsidiaries, unless
the context indicates otherwise. We were formed on May 5, 1997 as D2-Discounts Direct, a limited liability company. On December 30, 1998, we were
reorganized as a C Corporation in the State of Utah and reincorporated in Delaware in May 2002. On October 25, 1999, we changed our name to
Overstock.com, Inc.
We are an online retailer offering discount brand name, non-brand name and closeout merchandise, including furniture, home decor, bedding and
bath, housewares, jewelry and watches, apparel and designer accessories, electronics and computers, and sporting goods, among other products. We also sell
hundreds of thousands of best seller and current run books, magazines, CDs, DVDs and video games ("BMMG"). We sell these products through our
Internet websites located at www.overstock.com, www.o.co and www.o.biz ("Website"). Although our three websites are located at different domain addresses,
the technology and equipment and processes supporting the Website and the process of order fulfillment described herein are the same for all three websites.
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The accompanying consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. All intercompany
account balances and transactions have been eliminated in consolidation.
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The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect
the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements
and accompanying notes. Estimates are used for, but not limited to, investment valuation, receivables valuation, revenue recognition, sales returns, incentive
discount offers, inventory valuation, depreciable lives of fixed assets and internally-developed software, goodwill valuation, intangible valuation, income
taxes, stock-based compensation, performance-based compensation, restructuring liabilities and contingencies. Actual results could differ materially from
those estimates.
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We classify all highly liquid instruments, including money market funds with a remaining maturity of three months or less at the time of purchase,
as cash equivalents. Cash equivalents were $58.1 million and $76.2 million at December 31, 2013 and 2012, respectively.
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We consider cash that is legally restricted and cash that is held as a compensating balance for letter of credit arrangements as restricted cash.
Restricted cash was $1.6 million and $1.9 million at December 31, 2013 and 2012, respectively.
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Our financial instruments, including cash, cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities are
carried at cost, which approximates their fair value because of the short-term maturity of these instruments.
We account for our assets and liabilities using a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are
observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market
assumptions. These two types of inputs have created the following fair-value hierarchy:
•Level 1—Quoted prices for identical instruments in active markets;
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