Overstock.com 2015 Annual Report Download

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
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oo 
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
(Exact name of registrant as specified in its charter)
  
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)


(Address of principal executive offices)
(Zip code)

(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
  
Common Stock, $0.0001 par value Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), (2) has been subject to such filing requirements for the past 90 days. Yes ý
No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files). Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer x
Non-accelerated filer o Smaller reporting company o
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the act). Yes o No ý
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of the last business day of the registrant's most recently
completed second quarter (June 30, 2015), was approximately $274.3 million based upon the last sales price reported by Nasdaq. For purposes of this disclosure, shares of Common
Stock held by persons who hold more than 5% of the outstanding shares of Common Stock and shares held by officers and directors of the registrant have been excluded in that such
persons may be deemed to be affiliates. This determination is not necessarily conclusive.
There were 25,294,179 shares of the Registrant’s common stock, par value $0.0001, outstanding on March 1, 2016.

Certain information required by Part III of Form 10-K is incorporated by reference to the Registrant's proxy statement for the 2016 Annual Stockholders
Meeting, which will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates.

Table of contents

  • Page 1
    ... or organization) 87-0634302 (I.R.S. Employer Identification Number) 84121 (Zip code) 6350 South 3000 East Salt Lase City, Utah (Address of principal executive offices) (801) 947-3100 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of...

  • Page 2

  • Page 3
    ... Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Part III Directors, Executive Officers and Corporate Governance Executive Compensation...

  • Page 4
    ... measures or amounts or non-GAAP financial measures or amounts or anticipated changes in any of them; our plans and expectations regarding our design and construction of an office campus in Salt Lake City to serve as our corporate headquarters; our beliefs and expectations regarding the adequacy...

  • Page 5
    ... we offer to members of the United States Armed uorces and/or to fulltime, post-secondary students or others, and including our community site and our public service pet adoption program; our expectations regarding the costs and benefits of transitioning some of our marketing efforts from coupons to...

  • Page 6
    ... online payments to mobile and multi-channel commerce and payments; the extent to which we owe income or sales taxes or are required to collect sales taxes or report sales or to modify our business model in order to avoid being required to collect sales taxes or report sales or avoid the application...

  • Page 7
    date of this report or any changes in our expectations or any change in any events, conditions or circumstances on which any of our forward-looking statements are based. 6

  • Page 8
    ... by telephone, instant online chat and e-mail. We also derive revenue from other businesses advertising products or services on our Website. Our sales are primarily to customers located in the United States. During the years ended December 31, 2015, 2014 and 2013 no single customer accounted for...

  • Page 9
    ..., Bed & Bath, Women, Men, Jewelry, Watches, Health & Beauty, Electronics, Worldstock, Sports & Outdoors, Craft & Sewing, Luggage & Bags, Baby, Kids, Toys & Hobbies, Books Movies Music Games, Office, Pet Supplier, Liquidations, Farmers Market, As Seen on TV, Emergency Preparedness, Food & Gifts, Main...

  • Page 10
    ... on price; product quality and assortment; shopping convenience; website organization and load speed; order processing and fulfillment; order delivery time; customer service; website functionality on mobile devices; brand recognition; and brand reputation. We compete with other online retailers...

  • Page 11
    ... website and systems development than we do. Many have supply chain operations that decrease product shipping times to their customers, or have options for in-store product pick-up options or allow in-store returns and offer other delivery and returns options that we do not have. New technologies...

  • Page 12
    ... information set forth under Item 15 of Part IV, "Financial Statements"-Note 12. Commitments and Contingencies, Legal Proceedings, contained in the "Notes to Consolidated Financial Statements" of this Annual Report on Form 10-K. Government Regulation Our main business is subject to general business...

  • Page 13
    ... a number of senior accounting and internal audit positions with Oracle Corporation. He holds a B.S. in Business Administration with an emphasis in accounting and finance from the University of California Berkeley, Haas School of Business, and is a certified public accountant (CA - inactive status...

  • Page 14
    ... reduce our ability to conduct our business. If our Website or our mobile app or any of the many systems necessary to support the operation of either of them fail at any time to operate well and quickly enough to satisfy a potential customer, we may quickly lose the opportunity to convert...

  • Page 15
    ...Most of our customers use credit cards to pay for their purchases. Under payment card rules and our contracts with our card processors, if there is a breach of payment card information that we store, we could be liable to the payment card issuing banks for their cost of issuing new cards and related...

  • Page 16
    ... are willing to incur losses in order to increase revenues, may result in our pricing of products or services below prices at which we can make a profit, may cause us to lose sales entirely, and may have a material adverse effect on our business. Our competitors are rapidny devenoping a wide variety...

  • Page 17
    ... partners whose products we offer for sale on our Website. Sales through our partners accounted for approximately 92% of our net revenues for the year ended December 31, 2015. If we do not maintain our existing relationships or build new relationships with partners on acceptable commercial...

  • Page 18
    ... on in connection with our sale and the delivery of products to our customers, we depend upon third parties for all or substantially all of the services we offer, including our insurance offerings, our consumer financing offerings, our new and used car listings, our car-related services and our pet...

  • Page 19
    ... effective and efficient advertising and marketing programs, it could have a material adverse effect on our business. We reny upon paid and naturan search engines incnuding Googne, Bing, and Yahoo! to rank our product offerings. Our financian resunts may suffer if search engines change their ranking...

  • Page 20
    ... our business. We routinely receive orders placed with fraudulent credit card data. If we fail to adequately control fraudulent credit card transactions it could reduce our net revenues and our gross profit or cause credit card or payment system companies to disallow their cards' use for customer...

  • Page 21
    ... 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...

  • Page 22
    ... and necessary marketing services on acceptable terms, our ability to attract new customers and our financial condition would suffer. In addition, certain of our online marketing agreements may require us to pay upfront fees and make other payments prior to the realization of the sales, if any...

  • Page 23
    ...presence in the state, to collect state sales tax if the remote seller contracted for advertising services with an Internet advertiser in that state. In New York and states passing similar laws, we have terminated our use of locally based Internet advertisers. Many other states currently have passed...

  • Page 24
    ... also result in increases in the cost to us of the goods and services we sell. The occurrence of any of the foregoing could have a material adverse effect on our business. Over the last few years the percentage of our sales from home and garden products has increased substantially. We believe that...

  • Page 25
    ... of our e-commerce businesses. If we fail to do so, we may lose customers. If competitors introduce new products or services using new technologies or if new industry standards and practices emerge, our Website, our mobile app and our proprietary technology and systems may become obsolete. Our...

  • Page 26
    ... safe harbor in order to receive personal information from the EU to enable us to provide goods and services to our customers and users in the EU, process payments, maintain customer and user accounts, personalize and improve the functionality of our website, and to take other actions in connection...

  • Page 27
    ... indemnity agreement we entered into in connection with our credit facinity. In the third quarter of 2014, we purchased land in Salt Lake City, Utah in preparation for our construction of our future headquarters. In purchasing the land, we became subject to the risks of owning real estate, including...

  • Page 28
    ... could have a material adverse effect on our business. We may fain to quanify for hedge accounting treatment. In connection with the financing we obtained to fund a portion of the construction of our new corporate headquarters, we have entered into interest rate swap transactions with certain of our...

  • Page 29
    ... to our business, including but not limited to revenue recognition, estimating valuation allowances and accrued liabilities (including allowances for returns, credit card chargebacks, doubtful accounts and obsolete and damaged inventory), internal use software and website development (acquired...

  • Page 30
    ... present we do not accept bitcoin payments directly, but use a third party vendor to accept bitcoin payments on our behalf. That third party vendor then immediately converts the bitcoin payments into U.S. dollars so that we receive payment for the product sold at the sales price in U.S. dollars. 29

  • Page 31
    ... in the United States or elsewhere as we expand internationally. Our competitors or others could adopt product or service marks similar to our marks, or try to prevent us from using our marks, thereby impeding our ability to build brand identity and possibly leading to customer confusion. Any...

  • Page 32
    ... financial and managerial resources, and the payment of damages or settlement amounts. Additionally, we may become subject to injunctions prohibiting us from using software or business processes we currently use or may need to use in the future, or requiring us to obtain licenses from third parties...

  • Page 33
    ... online payment services is currently unsettled. In addition, governmental agencies could require changes in the way this business is conducted. Under our seller programs, we may be unable to prevent sellers from collecting payments, fraudulently or otherwise, when buyers never receive the products...

  • Page 34
    ...operating histories, larger customer bases and significantly greater financial, marketing and other resources than we do. Our continued development of Supplier Oasis may require substantial investments over a lengthy period of time. Further, most of the risks applicable to our business generally are...

  • Page 35
    ...the cost of advertising and changes in our sales and marketing expenditures; our inability to retain existing customers or encourage repeat purchases; the extent to which our existing and future marketing campaigns are successful; price competition that results in losses or lower profit margins; the...

  • Page 36
    ... company or changes in our management that the stockholders of our company may deem advantageous. These provisions among other things permit the board of directors to establish the number of directors; provide that only one-third of our board of directors is elected at each of our annual meetings...

  • Page 37
    ... new corporate headquarters in Salt Lake City, Utah and we expect to complete and occupy our new headquarters in 2016. We lease approximately 3,000 square feet of office space in Ireland. We lease approximately 3,000 square feet of office space in China. Warehouse, fulfillment and customer service...

  • Page 38
    ... square feet in the United States for warehouse, fulfillment, customer service, and other operations. Data centers • We lease approximately 9,000 square feet in the United States for various data centers. We use the above facilities in both our direct and partner business segments and we believe...

  • Page 39
    ... ISSUER PURCHTSES OF EQUITY SECURITIES Market information Our common stock is traded on the Nasdaq Global Market under the symbol "OSTK." The following table sets forth, for the periods indicated, the high and low sales prices per share for our common stock as reported by Nasdaq. Common Stogs Prige...

  • Page 40
    ..., the board of directors may issue non-qualified and incentive stock options to our employees and directors and non-qualified stock options to our consultants, as well as restricted stock units and other types of equity awards. Options granted under the Plan generally expire at the end of ten years...

  • Page 41
    ... 2013 (1) 2012 2011 (in thousands, exgept per share data) Consolidated Statement of Operations Data: Revenue, net Direct Partner and other Total net revenue Cost of goods sold Direct Partner and other Total cost of goods sold Gross profit Operating expenses: Sales and marketing Technology General...

  • Page 42
    ...) for income taxes in 2013. We evaluated these changes in accordance with Staff Accounting Bulletin No. 99, Materiality ("SAB 99"), and Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements ("SAB 108...

  • Page 43
    ... by telephone, instant online chat and e-mail. We also derive revenue from other businesses advertising products or services on our Website. Our sales are primarily to customers located in the United States. During the years ended December 31, 2015, 2014 and 2013 no single customer accounted for...

  • Page 44
    ... to help improve the lives of people in emerging economies; Main Street Revolution, a store within our Website that features products from small businesses across the United States who offer their products using our national marketing and distribution channels; Supplier Oasis, a single integration...

  • Page 45
    ... and other similar offers, which, when used by our customers, are treated as a reduction of revenue. Deferred revenue Customer orders are recorded as deferred revenue prior to delivery of products or services ordered. We record amounts received for Club O Gold membership fees as deferred revenue and...

  • Page 46
    ...our returns processing facility more than 45 days after initial delivery. If our customer returns an item that has been opened or shows signs of wear, we issue a partial refund minus the original shipping charge and actual return shipping fees. Revenue is recorded net of estimated returns. We record...

  • Page 47
    ... and revenue growth during those periods), along with our forecasted growth rates, projected future taxable income, including the impact of any costs associated with our recent acquisition, and tax planning strategies. We perform multiple sensitivity analyses to address how potential changes in...

  • Page 48
    ... no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. We expense legal fees as incurred (see Item 15 of Part IV, "Financial Statements"-Note 12. Commitments and Contingencies). Recently issued accounting standards In May...

  • Page 49
    ..., requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases...

  • Page 50
    ... sales mix shift into home and garden products becomes fully realized. In addition, the percentage of revenue we defer from orders taken but not delivered was less due to the timing of year end. These increases were partially offset by increased promotional activities including coupons, site sales...

  • Page 51
    ... of our new corporate headquarters in Salt Lake City, Utah and we expect to complete the project in 2016. We estimate that the total project will cost approximately $99 million, and as of December 31, 2015 we have incurred approximately $55.7 million in costs. In connection with this project...

  • Page 52
    ...shift into home and garden products becomes fully realized. In addition, the percentage of revenue we defer from orders taken but not delivered was less due to the timing of quarter end. These increases were partially offset by increased promotional activities including coupons, site sales, and Club...

  • Page 53
    ... program see Item 15 of Part IV, Financial Statements-Note 2. Accounting Policies, Club O loyalty program. Gross profit and gross margin Our overall gross margins fluctuate based on our sales volume mix between our direct business and partner business; changes in supplier cost and / or sales price...

  • Page 54
    ... into higher margin home and garden products, partially offset by increased promotional activities including coupons, site sales, and Club O Rewards (which we recognize as a reduction of revenue) due to our driving a higher proportion of our sales using such promotions. Cost of goods sold includes...

  • Page 55
    ... 2015, the number of unique visitors to our site decreased by approximately 8% as compared to Q4 2014, in part we believe as a result of such changes. Technology expenses We seek to invest efficiently in technology, including web services, customer support solutions, website search, expansion of new...

  • Page 56
    ... expense categories on the consolidated statements of operations as follows (in thousands): Year ended Degember 31, 2015 2014 Cost of goods sold - direct Technology General and administrative Total depreciation, including internal-use software and website development Non-operating ingome (expense...

  • Page 57
    ... 19.0% in 2013. The decrease in gross margin was largely due to increased promotional activities including coupons, site sales, and Club O rewards due to our driving a higher proportion of our sales using those channels. Sales and marketing expenses as a percentage of revenue increased from 7.0% to...

  • Page 58
    ..., and technical consulting. General and administrative expense in 2014 increased $3.6 million compared to 2013, primarily due to an increase in staff and travel related costs and professional fees, partially offset by a decrease in legal costs. Provision (benefit) for income taxes in 2014 was...

  • Page 59
    ... 31, 2014, 2013 and 2012: Year ended Degember 31 2014 2013 (as a pergentage of total revenue) 2012 Revenue, net Direct Partner and other Total net revenue Cost of goods sold Direct Partner and other Total cost of goods sold Gross profit Operating expenses: Sales and marketing Technology General and...

  • Page 60
    ... in sales of home and garden products. Gross profit and gross margin The following table reflects our net revenues, cost of goods sold and gross profit for the years ended December 31, 2014 and 2013 (in thousands): Year ended Degember 31, 2014 2013 $ Change % Change Revenue, net Direct Partner...

  • Page 61
    ... information regarding our classification of fulfillment costs, gross profit and margin, thus enabling investors to better compare our gross margin with others in our industry (in thousands): Year ended Degember 31, 2014 2013 Total revenue, net Cost of goods sold Product costs and other cost...

  • Page 62
    ... expense categories on the consolidated statements of operations as follows (in thousands): Year ended Degember 31, 2014 2013 Cost of goods sold - direct Technology General and administrative Total depreciation, including internal-use software and website development Non-operating ingome (expense...

  • Page 63
    ... substantial uncertainty. As we have previously announced, we are building a new corporate headquarters in Salt Lake City, Utah. We currently estimate the total cost of the headquarters, including the cost of the land and related equipment and furniture, at approximately $99 million. We had incurred...

  • Page 64
    ... 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 partners that generally extend beyond the amount of time necessary to...

  • Page 65
    ...periods (in thousands): Payments Due by Period Contragtual Obligations 2016 2017 2018 2019 2020 Thereafter Total Operating leases Naming rights Purchase obligations Technology, marketing and other services Headquarters construction costs U.S. Bank term loan payments U.S. Bank master lease agreement...

  • Page 66
    ... agreements for technology, marketing or other services. Headquarters construction costs We have entered into various agreements under which we have incurred obligations relating to our plans to build an approximately 225,000 square foot building in Salt Lake City, Utah, to serve as our corporate...

  • Page 67
    ... certain other banks in connection with the construction of our new corporate headquarters (the "Project"). The Facility is governed by a Loan Agreement dated as of October 24, 2014 which provides for an aggregate credit amount of $55.8 million, consisting of (i) a senior secured real estate loan of...

  • Page 68
    ...under the Real Estate Loan. We have not borrowed any amounts under the Revolving Loan. U.S. Bank master lease agreement In November 2015, we entered into a Master Lease Agreement and a Financial Covenants Rider (collectively, the "Master Lease Agreement") with U.S. Bank Equipment Finance, a division...

  • Page 69
    ... contribution margin provide management and users of the financial statements information about our ability to cover our operating costs, such as technology and general and administrative expenses, while reflecting the selling costs we incurred to generate our revenues. Club O Rewards and gift card...

  • Page 70
    ...Contribution and Contribution Margin, see the calculation of these non-GAAP financial measures below (in thousands): Year ended Degember 31, 2015 2014 2013 Total net revenue Cost of goods sold Gross profit Less: Sales and marketing expense Plus: Club O Rewards and gift card breakage (included in...

  • Page 71
    ... income in our statements of comprehensive income (see Item 15 of Part IV, "Financial Statements"-Note 2. Accounting Policies, Derivative financial instruments). Our exposure to market risk for changes in interest rates relates primarily to our short-term investments and short-term obligations; thus...

  • Page 72
    ... control issues and instances of fraud, if any, within the Company have been detected. We acquired Cirrus Services LLC during 2015 and we excluded from our assessment of internal control over financial reporting as of December 31, 2015, Cirrus Services LLC's internal control over financial reporting...

  • Page 73
    ... income, changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2015, and our report dated March 8, 2016 expressed an unqualified opinion on those consolidated financial statements. /s/ KPMG LLP Salt Lake City, Utah March 8, 2016...

  • Page 74
    ...in Internal Control Over Finangial Reporting During the fiscal quarter ended December 31, 2015, there has not occurred any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting...

  • Page 75
    ITEM 9B. OTHER INFORMTTION None. 74

  • Page 76
    ... "Business-Executive Officers of the Registrant." Information required by Item 10 of Part III regarding our board of directors and any material changes to the process by which security holders may recommend nominees to the board of directors will be included in our definitive proxy statement for...

  • Page 77
    ...RETURN ITEM 13. CERTTIN RELTTIONSHIPS TND RELTTED TRTNSTCTIONS, TND DIRECTOR INDEPENDENCE The information required by this Item is incorporated by reference to our definitive proxy statement for the 2016 annual meeting of stockholders. ITEM 14. PRINCIPTL TCCOUNTING FEES TND SERVICES The information...

  • Page 78
    ... not applicable, or the information has otherwise been shown in the consolidated financial statements or notes thereto. 3. Exhibits Exhibits 2.1 Asset Purchase Agreement by and between Cirrus Technologies, LLC, as Seller, and Cirrus Services LLC, as Buyer, dated as of August 26, 2015 (incorporated...

  • Page 79
    ... Overstock.com, Inc., Information Technology International, Inc., and Old Mill Building LLC (incorporated by reference to Exhibit 99.3 to our Current Report on Form 8-K/A filed on December 7, 2004 (File No. 000-49799)). Old Mill Corporate Center Fourth Amendment to the Lease Agreement dated as of...

  • Page 80
    ... as of October 24, 2014 by and between Overstock.com, Inc., O.com Land, LLC, U.S. Bank National Association and the other Banks party thereto from time to time (the "Loan Agreement") (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on October 28, 2014 (File No. 000...

  • Page 81
    ...Deed of Trust, Assignment of Rents, Security Agreement and Financing Statement dated October 24, 2014, made by O.com Land, LLC to First American Title Insurance Company, as trustee, and U.S. Bank National Association, as Administrative Bank for the Banks party to the Loan Agreement from time to time...

  • Page 82
    ...FNY Managed Accounts LLC in favor of Overstock.com, Inc. (incorporated by reference to exhibit 10.2 to our report on Form 8-K filed August 5, 2015 (File No. 000-49799)). Master Lease Agreement dated as of November 6, 2015 with U.S. Bank Equipment Finance, a division of U.S. Bank National Association...

  • Page 83
    ..., Jr. Chief Executive Officer and Director (Principal Executive Officer) Chairman of the Board President and Director Senior Vice President, Finance and Risk Management (Principal Financial Officer and Principal Accounting Officer) Director Director Director Director Director March 8, 2016 March...

  • Page 84
    ... uramework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 8, 2016 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. /s/ KPMG LLP Salt Lake City, Utah March...

  • Page 85
    ... Fixed assets, net Precious metals Deferred tax assets, net Intangible assets, net Goodwill Other long-term assets Total assets Liabilities and Stogsholders' Equity Current liabilities: Accounts payable Accrued liabilities Deferred revenue Finance obligations, current Other current liabilities Total...

  • Page 86
    ... Statements of Ingome (in thousands, exgept per share data) Year ended Degember 31, 2015 2014 2013 Revenue, net Direct Partner and other Total net revenue Cost of goods sold Direct(1) Partner and other Total cost of goods sold Gross profit Operating expenses: Sales and marketing(1) Technology...

  • Page 87
    Overstogs.gom, Ing. Consolidated Statements of Comprehensive Ingome (in thousands) Year ended Degember 31, 2015 2014 2013 Consolidated net income Other comprehensive loss: Unrealized loss on cash flow hedges, net of benefit for taxes of $513, $387, and $0 Other comprehensive loss Comprehensive ...

  • Page 88
    ..., Ing. Consolidated Statements of Changes in Stogsholders' Equity (in thousands, exgept per share data) Year ended Degember 31, 2015 2014 2013 Equity attributable to stogsholders of Overstogs.gom, Ing. Number of common shares issued Balance at beginning of year Common stock issued upon vesting of...

  • Page 89
    ... Consolidated Statements of Cash Flows (in thousands) Year ended Degember 31, 2015 Cash ...Cost method investments Acquisitions of businesses, net of cash acquired Expenditures for fixed assets, including internal-use software and website development Proceeds from sale of fixed assets Net cash used...

  • Page 90
    ...) (in thousands) Year ended Degember 31, 2015 2014 2013 Supplemental disglosures of gash flow information: Cash paid during the period: Interest paid Taxes paid Non-gash investing and finanging agtivities: Fixed assets, including internal-use software and website development, costs financed through...

  • Page 91
    ..., we changed our name to Overstock.com, Inc. We are an online retailer offering a broad range of price-competitive brand name, non-brand name and closeout products, including furniture, home decor, bedding and bath, housewares, jewelry and watches, apparel and designer accessories, health and beauty...

  • Page 92
    ... liabilities. The fair values of our investments in money market mutual funds, trading securities, and deferred compensation liabilities are determined using quoted market prices from daily exchange traded markets on the closing price as of the balance sheet date and are classified as Level 1. The...

  • Page 93
    ... of trade amounts due from customers in the United States and from uncleared credit card transactions at period end. Accounts receivable are recorded at invoiced amounts and do not bear interest. Allowance for doubtful accounts From time to time, we grant credit to some of our business customers on...

  • Page 94
    ...expense categories on the consolidated statements of income as follows (in thousands): Year ended Degember 31, 2015 2014 2013 Cost of goods sold - direct Technology General and administrative Total depreciation, including internal-use software and website development Capitalized interest $ 283 22...

  • Page 95
    ... off-site secure facility. Because these assets consist of actual precious metals, rather than financial instruments, we account for them as a cost method investment initially recorded at cost (including transaction fees) and then adjusted to the lower of cost or market based on an average unit cost...

  • Page 96
    ... using the straight line method of amortization over their useful lives, with the exception of certain intangibles (such as acquired technology, customer relationships, and trade names) which are amortized using an accelerated method of amortization based on cash flows. These assets are reviewed...

  • Page 97
    ...into a loan agreement in connection with the construction of our new corporate headquarters. We began borrowing under the facility in October 2015. Because amounts borrowed on the loan will carry a variable LIBOR-based interest rate, we will be affected by changes in certain market conditions. These...

  • Page 98
    ... has occurred or the service has been provided; (3) the selling price or fee revenue earned is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. Revenue related to merchandise sales is recognized upon delivery to our customers. As we ship high volumes of...

  • Page 99
    ...the bank pays us fees for new accounts and for customer usage of the cards. The agreement also provides for a customer loyalty program offering reward points that customers will accrue from card usage and can use to make purchases on our Website (see Club O loyalty program above for more information...

  • Page 100
    ..., 2015 and 2014, respectively. Cost of goods sold Cost of goods sold includes product costs, warehousing costs, outbound shipping costs, handling and fulfillment costs, customer service costs and credit card fees, and is recorded in the same period in which related revenues have been recorded. Cost...

  • Page 101
    ... a sale or 2) a referral fee based on the number of clicks on keywords or links to our Website generated during a given period. Advertising expense is included in sales and marketing expenses and totaled $115.0 million, $99.6 million and $82.1 million during the years ended December 31, 2015, 2014...

  • Page 102
    ... 5, 2015, our Board of Directors authorized a stock repurchase program under which we may repurchase shares of our outstanding common stock for up to $25 million at any time through December 31, 2017. To date, we have not made any repurchases under this program. Recently issued accounting standards...

  • Page 103
    ..., requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases...

  • Page 104
    ... acquired company included in our financial statements was $1.9 million and $769,000, respectively, for the year ended December 31, 2015. The net sales of the acquired entity were generated primarily from transactions with SpeedRoute. The following unaudited pro forma financial information presents...

  • Page 105
    ... Accounts receivable, other Credit card receivables Less: allowance for doubtful accounts Accounts receivable, net $ 9,023 7,570 16,593 (465) $ 11,292 8,182 19,474 (511) $ 16,128 $ 18,963 5. INVENTORIES Inventories consist of the following (in thousands): Degember 31, 2015 2014 Product...

  • Page 106
    ... assets consist of the following (in thousands): Degember 31, 2015 2014 Computer hardware and software, including internal-use software and website development Construction in progress - building Land Furniture and equipment Leasehold improvements Less: accumulated depreciation Total fixed assets...

  • Page 107
    ... of the following (in thousands): Degember 31, 2015 2014 Payments owed or received prior to product delivery Club O membership fees and reward points In store credits Unredeemed gift cards Other Total deferred revenue 11. BORROWINGS U.S. Bank term loan and revolving loan agreement $ 28,811 13,094...

  • Page 108
    ...00% or an Alternate Base Rate plus 1.00%. However, we have entered into interest rate swap agreements designed to fix our interest rate on the Real Estate Loan and the Term Loan at approximately 4.6% annually (see Derivative financial instruments in Note 2. Accounting Policies). Monthly payments of...

  • Page 109
    ... accompanying consolidated balance sheets. U.S. Bank commercial purchasing card agreement We have a commercial purchasing card (the "Purchasing Card") agreement with U.S. Bank. We use the Purchasing Card for business purpose purchasing and must pay it in full each month. At December 31, 2015, $641...

  • Page 110
    ..., employment, intellectual property and other commercial matters related to the conduct and operation of our business and the sale of products on our Website. In connection with such litigation, we may be subject to significant damages. In some instances other parties may have contractual 108

  • Page 111
    ... with 27 other defendants in the United States District Court in the Northern District of California. We are alleged to have infringed a patent covering search and categorization software. We believe that certain third party vendors of products and services sold to us are contractually obligated...

  • Page 112
    ... or used, false statements and records to conceal, avoid or decrease an obligation to pay or transmit money to Delaware in violation of the Delaware False Claims and Reporting Act. The complaint seeks an injunction, monetary damages (including treble damages) penalties, and attorney's fees and costs...

  • Page 113
    ... board of directors may issue incentive stock options to employees and directors of the Company and non-qualified stock options to consultants, as well as restricted stock units and other types of equity awards of the Company. Options granted under this Plan generally expire at the end of ten years...

  • Page 114
    ... there was no tax benefit realized due to our net operating loss position. Restricted Stock Awards For the years ended December 31, 2015, 2014 and 2013, we granted 239,000, 242,000 and 275,000 restricted stock units, respectively. The cost of restricted stock units is determined using the fair value...

  • Page 115
    ... the right to one share of common stock upon vesting. During the years ended December 31, 2015, 2014 and 2013, we recorded stock based compensation related to restricted stock units of $3.5 million, $4.0 million and $3.3 million, respectively. Changes to the estimated forfeiture rate are accounted...

  • Page 116
    ...requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered. 114

  • Page 117
    .... Our NOLs begin to expire in 2019 to 2035 if unused. In accordance with an Internal Revenue Code section 382 study completed during 2014, the NOL carryforwards indicated above are not limited in future periods. At December 31, 2015, we had income tax net operating loss carryforwards related to our...

  • Page 118
    ... the attributes are used. As of December 31, 2015, we were under audit by the Internal Revenue Service for our 2013 federal income tax return. The IRS has not indicated or communicated any deficiencies. We expect the audit to conclude in 2016. We operate under an income tax holiday in Ireland, which...

  • Page 119
    ... credit card fees and customer service costs. The partner segment includes revenues, direct costs and cost allocations associated with sales of inventory owned by our partners. Costs for this segment include product costs, outbound freight and fulfillment costs, credit card fees and customer service...

  • Page 120
    ... 31, 2015 (in thousands, exgept per share data) Consolidated Statement of Operations Data: Revenue, net Direct Partner and other Total net revenue Cost of goods sold Direct Partner and other Total cost of goods sold Gross profit Operating expenses: Sales and marketing Technology General and...

  • Page 121
    ... (in thousands, exgept per share data) Consolidated Statement of Operations Data: Revenue, net Direct Partner and other Total net revenue Cost of goods sold Direct Partner and other Total cost of goods sold Gross profit Operating expenses: Sales and marketing Technology General and administrative...

  • Page 122
    ... Tggounts (in thousands) Balange at Beginning of Year Charged to Expense Dedugtions Balange at End of Year Year ended December 31, 2015 Deferred tax valuation allowance Allowance for sales returns Allowance for doubtful accounts Year ended December 31, 2014 Deferred tax valuation allowance...

  • Page 123
    ... the Company intends to continue to pay its non-employee directors $60,000 annually, at the rate of $15,000 per quarter. The Company also grants restricted stock units to directors, generally at the first Board meeting after a director first joins the Board, and periodically thereafter. In 2015, the...

  • Page 124
    ..., Inc. O.com Ventures, Inc. Memici, Inc. Cirrus Services LLC Pro Securities, LLC SpeemRoute LLC Revolution 4 LLC Utah Utah Utah Utah Utah Utah Utah Utah Utah Utah Irelanm Utah Utah Utah Utah Utah Utah California New York Utah Overstock.com Services My Current SOFS O.co Irelanm.ie Overstock.com...

  • Page 125
    ..., Inc. and subsidiaries as of and for the year ended December 31, 2015. Our audit of internal control over financial reporting of Overstock.com, Inc. also excluded an evaluation of the internal control over financial reporting of Cirrus Services LLC. /s/ KPMG LLP Salt Lake City, Utah March 8, 2016

  • Page 126
    ... material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or...

  • Page 127
    ... material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or...

  • Page 128
    ...of 2002, that the Annual Report of Overstock.com, Inc. on Form 10-K for the year ended December 31, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and that information contained in such Report fairly presents in all material...

  • Page 129
    ...of 2002, that the Annual Report of Overstock.com, Inc. on Form 10-K for the year ended December 31, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and that information contained in such Report fairly presents in all material...

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