07-29-2006, 10:48 AM
[pre]Overstock.com Reports Second Quarter 2006 Financial Results
SALT LAKE CITY, July 28 -- Overstock.com, Inc. (Nasdaq: OSTK) (www.overstock.com) today reported financial results for its second quarter ended June 30, 2006.
* Q2 Total revenue: $160.0 million, up 6% versus 2005
* Q2 Gross profits: $23.0 million, up 1% versus 2005
* Q2 Gross margins: 14.4% compared to 15.1% in 2005
* Q2 Net loss: $(15.7) million or $(0.78) loss per share
Still chopping wood, still carrying water.
Dear Owners,
Q2 financial results came in where I expected. At the start of the year I said we would slow growth so we could focus on improving internal processes, then re-accelerate into the fourth quarter: this work has proceeded at a slightly faster pace than I had expected.
Operations Update
Order Flow Management and Customer Care -- For six months we have focused on fixing any issues in the order flow process. The process is now far better than it was under our old systems. These improvements are already showing up in our customer satisfaction scores, which have rebounded to extremely high levels (that is, where they were before the system changeover last year). Our new RightNow customer care application goes live next week: it is an incredible step up from the homegrown solution on which we survived for six years, and will provide tools to track and resolve customer issues: this should further increase customer satisfaction and reduce customer care costs.
Fulfillment Center Build-out -- We completed construction (at $1.5 million, a bit below budget) of a new three-level, 75,000 square-foot mezzanine in our fulfillment center in Salt Lake City. We should immediately see some improvement in picking efficiency, but the real payoff will come in Q4 and beyond. A latent benefit of the new mezzanine is that it increases warehouse capacity, delaying the need to lease additional space.
Returns -- We continue to wring out inefficiencies from the returns process. In addition, we're automating more of the process, making it easier for customers to return items on their own. Because the returns process has consistently been the biggest source of customer complaints, this should improve the customer experience.
Expense Management -- We are showing good discipline in managing operating expenses. Sales & marketing spend is down this year on both an absolute and relative basis, though I expect to see it ramp in Q3 and Q4 as we reaccelerate growth. While technology and other g&a expenses will outpace our revenue growth this year, I expect these to flatten going forward.
Cash -- In May, we raised $25 million by selling common stock, and we liquidated our $50 million of foreign bonds. We've also continued to reduce our overall and prepaid inventory (albeit at a slightly slower pace than I would have liked), resulting in some drag on gross margins that will continue through the end of 2006. With our Q2 cash raising efforts and our existing inventory line, I'm comfortable with our current cash position through the year.
IT Systems Update
Shopping Database -- We completed the shopping database roll-over from Oracle 9i to Oracle 10g. This 10g is an all-around great product: it is robust, easy to administer, has a great cost-based optimizer, and offers fast recovery when a node goes down.
ERP System -- The Oracle ERP system is functioning as intended. The vast majority of the issues we had with the ERP implementation have been resolved, and with a theoretical capacity of 12-15 times last year's Q4, the system has ample capacity to carry us through many holiday seasons.
Data Warehouse -- The Teradata Enterprise Data Warehouse (EDW) is giving us incredibly granular data. The EDW has been instrumental in several strategic projects we have undertaken this year, including improvements in pricing and inventory management, and is critical to the personalization engine we are building. I believe that the EDW will allow us to manage inventory and pricing better than we ever have, which should result in improvements in inventory turns and gross margins over time. The EDW is the foundation for our work on personalization, though this has continued to lag behind schedule.
Management Changes
The old-timers here will remember Jason Lindsey as the conservative yin to my yang. Jason was the CFO in the early years of the company, then became president briefly before retiring for a health reason. He is back as president and is contributing enormously, taking line responsibility for the entire buying team as well.
Jason's return has allowed me to take over Internal Marketing. This job encompasses website design and function, personalization of the website, and email marketing (which is becoming increasingly personalized). I will focus on completing the development of orderly testing and personalization, the foundations for which Holly so ably built. I am excited to have a real job again.
We lost two members of our management team. Kamille Twomey, who ran merchandising, decided to go to business school and Holly MacDonald-Korth, who ran Internal Marketing, has also decided to leave the company (though she may do some consulting work for us on several projects before returning to her family's business). Both of these women have left their marks on the company and earned my deep gratitude. We will all miss them. While I am at it, I shall forewarn that Tad Martin, who oversees project management, recently married. He and his wife are planning to live on the East Coast and so Tad will be leaving the company before the end of 2006.
Ralph Mondeaux and Dan Lee have taken over merchandising, and report to Jason Lindsey. Ralph came to Overstock.com from Baker & Taylor and has done a superb job running our Books, Music, Movies & Games department for the last year. Dan has been our Corporate Controller for the past three years.
In summary, as I said at the beginning of the year, our financial results for the first few quarters of 2006 will suffer from the large 2005 investments in the business, and the technology debacle they caused. However, by the end of Q3, we will have completed building a solid infrastructure throughout the company. For that reason, I believe that the internal health of the business has never been better.
I look forward to discussing these developments on our call. Until then,
I remain,
Your humble servant,
Patrick
PS If you have any questions, please feel free to email them to Kevin Moon at kmoon@overstock.com before the conference call, so we may address them.
Note to investors
In May the Board of Directors approved the implementation of the Direct Registration System (DRS) to provide the company's shareholders an alternative to holding paper certificates. (For a brief description of DRS and how it compares to holding physical certificates or holding stock in "street name" through a broker, please visit the SEC's website via the following link: http://www.sec.gov/investor/pubs/holdsec.htm). Like those who hold physical certificates, shareholders in DRS are registered on the company's books and those shares cannot be lent for short selling. There are advantages to DRS over paper certificates, namely, the shares are transferred electronically between the transfer agent and the shareholder's broker, which results in much more timely transactions, and the risk of loss, damage or theft is eliminated. The company has considered this matter carefully, and believes it is in the best interest of its stockholders to permit them to choose to hold uncertificated shares through DRS should they desire to do so. It is important to note that DRS does not replace shareholder's ability to obtain physical certificates if they prefer. For additional questions regarding DRS, please contact our transfer agent, Computershare, at (781) 575-2879.
Key financial and operating metrics
Total revenue -- Overstock.com reported total revenue for the three months ended June 30, 2006 of $160.0 million, a 6% increase from the $150.6 million reported in 2005. For the six months ended June 30, 2006, total revenue was $340.2 million, a 7% increase from the $316.5 million in 2005.
Gross profit and gross margins -- Gross profit for the three months ended June 30, 2006 was $23.0 million (14.4% margins), a 1% increase from the $22.7 million (15.1% margins) reported in 2005. For the six months ended June 30, 2006, gross profits were $48.2 million, a 1% increase from the $47.5 million in 2005.
Net loss -- Net loss for the three months ended June 30, 2006, was $15.7 million, or $0.78 loss per share, compared to $1.9 million, or $0.10 loss per share in 2005. For the six months ended June 30, 2006, net loss totaled $31.6 million, or $1.60 loss per share, compared to $6.2 million, or $0.32 loss per share in 2005.
Overstock.com had cash and marketable securities of $45.7 million and working capital of $78.5 million on June 30, 2006.
Gross bookings (excluding auctions and travel) -- Gross bookings for the three months ended June 30, 2006 totaled $172.1 million, a 5% increase from the $163.8 million reported last year. For the six months ended June 30, 2006, gross bookings totaled $373.0 million, a 7% increase from the $348.0 million in 2005.
About Overstock.com
Overstock.com, Inc. is an online "closeout" retailer offering discount, brand-name merchandise for sale over the Internet. The company offers its customers an opportunity to shop for bargains conveniently, while offering its suppliers an alternative inventory liquidation distribution channel. Overstock.com, headquartered in Salt Lake City, is a publicly traded company listed on the NASDAQ National Market System and can be found online at http://www.overstock.com.
Overstock.com® is a registered trademark of Overstock.com, Inc. All other trademarks are the property of their respective owners.
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, but are not limited to, statements regarding accelerated growth, continued improvement of customer satisfaction scores, go-live date of new customer care application and the positive effects of this application, increases in margins, improved picking efficiencies, need for additional warehouse space, ease of customer returns, expense management reductions, need for additional capital, ease of administering Oracle 10g, reduced website downtime, capacity of Oracle ERP, Tad Martin's leaving the company's employ, the focus of internal website marketing, completion of the company's infrastructure, as well as all such other risks as identified in our Form 10-K for the year ended December 31, 2005, and all our subsequent filings with the Securities and Exchange Commission, which contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.
Overstock.com, Inc.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts)
Three months ended June 30, Six months ended June 30,
2005 2006 2005 2006
Revenue
Direct $60,064 $68,770 $127,948 $148,480
Fulfillment partner 90,574 91,198 188,571 191,694
Total revenue 150,638 159,968 316,519 340,174
Cost of goods sold
Direct 51,567 61,473 109,829 132,176
Fulfillment partner 76,375 75,501 159,232 159,842
Total cost of
goods sold 127,942 136,974 269,061 292,018
Gross profit 22,696 22,994 47,458 48,156
Operating expenses:
Sales and marketing 14,499 12,171 31,325 25,348
Technology 6,103 15,048 10,201 28,637
General and
administrative 7,566 12,453 14,913 25,807
Total operating
expenses 28,168 39,672 56,439 79,792
Operating income
(loss) (5,472) (16,678) (8,981) (31,636)
Interest income 896 2,215 1,540 2,530
Interest expense (1,517) (1,275) (2,962) (2,542)
Other income (expense),
net 4,170 (1) 4,170 (1)
Net income (loss) (1,923) (15,739) (6,233) (31,649)
Deemed dividend
related to redeemable
common stock (47) (33) (93) (66)
Net income (loss)
attributable to
common shares $(1,970) $(15,772) $(6,326) $(31,715)
Net income (loss)
per share
- basic $(0.10) $(0.78) $(0.32) $(1.60)
- diluted $(0.10) $(0.78) $(0.32) $(1.60)
Weighted average
common shares
outstanding
- basic 19,709 20,159 19,785 19,774
- diluted 19,709 20,159 19,785 19,774
Other data:
Shopping bookings
(in 000s) $163,775 $172,091 $347,990 $372,991
Travel bookings
(in 000s) $2,759 $5,979 $4,408 $18,307
Auction gross
merchandise volume
(in 000s) $7,362 $6,860 $12,964 $14,939
Average customer
acquisition cost
(shopping) $22.10 $22.98 $20.63 $21.05
Average registrant
acquisition cost
(auctions) $7.51 $2.06 $7.91 $2.54
Overstock.com, Inc.
Consolidated Balance Sheets (unaudited)
(in thousands, except per share amounts)
December 31, June 30,
2005 2006
Assets
Current assets:
Cash and cash equivalents $56,224 $45,665
Marketable securities 55,799 --
Cash, cash equivalents and
marketable securities 112,023 45,665
Accounts receivable, net 11,695 9,838
Inventories, net 93,269 74,822
Prepaid inventory 9,633 3,247
Prepaid expenses 8,508 9,776
Total current assets 235,128 143,348
Restricted cash 253 --
Property and equipment, net 63,914 64,611
Goodwill 13,169 13,169
Other long-term assets, net 13,449 12,069
Total assets $325,913 $233,197
Liabilities, Redeemable Securities and Stockholders' Equity
Current liabilities:
Accounts payable $101,436 $35,920
Accrued liabilities 46,847 23,504
Line of credit -- --
Capital lease obligations, current 6,683 5,401
Total current liabilities 154,966 64,825
Capital lease obligations, non-current 3,058 3,964
Convertible senior notes 74,935 75,107
Total liabilities 232,959 143,896
Redeemable common stock 3,205 2,398
Stockholders' equity:
Common stock 2 2
Additional paid-in capital 250,939 280,891
Accumulated deficit (96,829) (128,544)
Treasury stock (65,325) (65,251)
Accumulated other comprehensive gain (loss) 962 (195)
Total stockholders' equity 89,749 86,903
Total liabilities, redeemable securities
and stockholders' equity $325,913 $233,197
Overstock.com, Inc.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Three months ended Six months ended Twelve months ended
June 30, June 30, June 30,
2005 2006 2005 2006 2005 2006
Cash flows
from
operating
activities:
Net loss $(1,923) $(15,739) $(6,233) $(31,649) $(6,339) $(50,334)
Adjustments
to reconcile
net loss to
cash provided
by (used in)
operating
activities
Depreciation
and
amorti-
zation 2,930 7,709 4,565 14,544 6,856 25,593
Realized
(gain)
loss from
marketable
securities (25) (1,868) (26) (2,085) (28) 1,292
Loss on
disposition
of property
and
equipment -- 1 -- 599 34 2,056
Stock-based
compensation
from stock
options 53 1,088 73 2,046 175 2,045
Stock options
issued to
consultants
for services (15) (9) (415) 34 294 60
Issuance of
common stock
from
treasury as
compensation 60 105 311 612 311 744
Amortization
of debt
discount and
deferred
financing
fees 116 139 423 278 570 475
Gain from
retirement
of
convertible
senior
notes (4,170) -- (4,170) -- (4,170) (1,988)
Changes in
operating
assets and
liabilities:
Accounts
receivable,
net 755 (1,572) 3 1,857 867 (3,255)
Inventories,
net (11,419) 6,529 (14,989) 18,447 (29,784) (13,275)
Prepaid
inventory (503) 5,592 1,912 6,386 (5,756) 7,163
Prepaid
expenses 1,666 716 (4,636) (1,164) (5,721) (1,467)
Other
long-term
assets,
net 603 (29) (11) 18 415 (2,122)
Accounts
payable (374) (1,181) (24,574) (65,516) 17,964 (4,487)
Accrued
liabi-
lities 2,148 (7,663) 2,494 (23,343) 15,500 (2,271)
Net cash
provided
by
(used in)
opera-
ting
acti-
vities (10,098) (6,182) (45,273) (78,936) (8,812) (39,771)
Cash flows from
investing
activities:
(Increase)
decrease in
restricted
cash 179 55 769 253 1,042 833
Investments in
marketable
securities (36,047) -- (161,991) -- (242,626) (23,552)
Sales of
marketable
securities 102,926 49,475 162,188 56,756 175,087 110,833
Expenditures
for
property
and
equipment (11,246) (5,366) (24,276) (12,211) (31,411) (32,675)
Acquisition
of Ski West
(net of cash
acquired) -- -- -- -- -- (24,620)
Other
investments -- -- -- (100) -- (100)
Proceeds from
the sale of
property and
equipment -- 1 -- 1 20 2
Net cash
provided
by
(used in)
investing
acti-
vities 55,812 44,165 (23,310) 44,699 (97,888) 30,721
Cash flows
from
financing
activities:
Payments on
capital lease
obligations (2,901) (326) (3,052) (2,754) (3,356) (6,788)
Borrowings
on line of
credit -- 42,530 -- 73,258 -- 85,126
Payments on
line of credit -- (62,530) -- (73,258) (1,000) (85,126)
Proceeds from
the issuance
of convertible
senior notes -- -- -- -- 116,199 --
Payments to
retire
convertible
senior notes (27,935) -- (27,935) -- (27,935) (7,735)
Payments of
deferred
financing
fees -- -- -- -- (301) --
Proceeds from
the issuance
of common
stock -- 25,000 -- 25,000 75,207 25,000
Purchase of
treasury
stock (24,133) -- (24,133) -- (24,133) --
Purchased
call options
for purchase
of treasury
stock -- -- (47,507) -- (47,507) --
Settlement of
call options
for cash -- -- -- -- -- 7,937
Exercise of
stock options 3,002 434 3,908 1,461 5,237 4,868
Net
provided
by
(used in)
financing
activities (51,967) 5,108 (98,719) 23,707 92,411 23,282
Effect of
exchange rate
changes on cash (8) (44) (26) (29) (9) 83
Net increase
(decrease) in
cash and cash
equivalents (6,261) 43,047 (167,328) (10,559) (14,298) 14,315
Cash and cash
equivalents,
beginning of
period 37,611 2,618 198,678 56,224 45,648 31,350
Cash and cash
equivalents,
end of
period $31,350 $45,665 $31,350 $45,665 $31,350 $45,665
SOURCE Overstock.com, Inc.
Web site: http://www.overstock.com
[/pre]
SALT LAKE CITY, July 28 -- Overstock.com, Inc. (Nasdaq: OSTK) (www.overstock.com) today reported financial results for its second quarter ended June 30, 2006.
* Q2 Total revenue: $160.0 million, up 6% versus 2005
* Q2 Gross profits: $23.0 million, up 1% versus 2005
* Q2 Gross margins: 14.4% compared to 15.1% in 2005
* Q2 Net loss: $(15.7) million or $(0.78) loss per share
Still chopping wood, still carrying water.
Dear Owners,
Q2 financial results came in where I expected. At the start of the year I said we would slow growth so we could focus on improving internal processes, then re-accelerate into the fourth quarter: this work has proceeded at a slightly faster pace than I had expected.
Operations Update
Order Flow Management and Customer Care -- For six months we have focused on fixing any issues in the order flow process. The process is now far better than it was under our old systems. These improvements are already showing up in our customer satisfaction scores, which have rebounded to extremely high levels (that is, where they were before the system changeover last year). Our new RightNow customer care application goes live next week: it is an incredible step up from the homegrown solution on which we survived for six years, and will provide tools to track and resolve customer issues: this should further increase customer satisfaction and reduce customer care costs.
Fulfillment Center Build-out -- We completed construction (at $1.5 million, a bit below budget) of a new three-level, 75,000 square-foot mezzanine in our fulfillment center in Salt Lake City. We should immediately see some improvement in picking efficiency, but the real payoff will come in Q4 and beyond. A latent benefit of the new mezzanine is that it increases warehouse capacity, delaying the need to lease additional space.
Returns -- We continue to wring out inefficiencies from the returns process. In addition, we're automating more of the process, making it easier for customers to return items on their own. Because the returns process has consistently been the biggest source of customer complaints, this should improve the customer experience.
Expense Management -- We are showing good discipline in managing operating expenses. Sales & marketing spend is down this year on both an absolute and relative basis, though I expect to see it ramp in Q3 and Q4 as we reaccelerate growth. While technology and other g&a expenses will outpace our revenue growth this year, I expect these to flatten going forward.
Cash -- In May, we raised $25 million by selling common stock, and we liquidated our $50 million of foreign bonds. We've also continued to reduce our overall and prepaid inventory (albeit at a slightly slower pace than I would have liked), resulting in some drag on gross margins that will continue through the end of 2006. With our Q2 cash raising efforts and our existing inventory line, I'm comfortable with our current cash position through the year.
IT Systems Update
Shopping Database -- We completed the shopping database roll-over from Oracle 9i to Oracle 10g. This 10g is an all-around great product: it is robust, easy to administer, has a great cost-based optimizer, and offers fast recovery when a node goes down.
ERP System -- The Oracle ERP system is functioning as intended. The vast majority of the issues we had with the ERP implementation have been resolved, and with a theoretical capacity of 12-15 times last year's Q4, the system has ample capacity to carry us through many holiday seasons.
Data Warehouse -- The Teradata Enterprise Data Warehouse (EDW) is giving us incredibly granular data. The EDW has been instrumental in several strategic projects we have undertaken this year, including improvements in pricing and inventory management, and is critical to the personalization engine we are building. I believe that the EDW will allow us to manage inventory and pricing better than we ever have, which should result in improvements in inventory turns and gross margins over time. The EDW is the foundation for our work on personalization, though this has continued to lag behind schedule.
Management Changes
The old-timers here will remember Jason Lindsey as the conservative yin to my yang. Jason was the CFO in the early years of the company, then became president briefly before retiring for a health reason. He is back as president and is contributing enormously, taking line responsibility for the entire buying team as well.
Jason's return has allowed me to take over Internal Marketing. This job encompasses website design and function, personalization of the website, and email marketing (which is becoming increasingly personalized). I will focus on completing the development of orderly testing and personalization, the foundations for which Holly so ably built. I am excited to have a real job again.
We lost two members of our management team. Kamille Twomey, who ran merchandising, decided to go to business school and Holly MacDonald-Korth, who ran Internal Marketing, has also decided to leave the company (though she may do some consulting work for us on several projects before returning to her family's business). Both of these women have left their marks on the company and earned my deep gratitude. We will all miss them. While I am at it, I shall forewarn that Tad Martin, who oversees project management, recently married. He and his wife are planning to live on the East Coast and so Tad will be leaving the company before the end of 2006.
Ralph Mondeaux and Dan Lee have taken over merchandising, and report to Jason Lindsey. Ralph came to Overstock.com from Baker & Taylor and has done a superb job running our Books, Music, Movies & Games department for the last year. Dan has been our Corporate Controller for the past three years.
In summary, as I said at the beginning of the year, our financial results for the first few quarters of 2006 will suffer from the large 2005 investments in the business, and the technology debacle they caused. However, by the end of Q3, we will have completed building a solid infrastructure throughout the company. For that reason, I believe that the internal health of the business has never been better.
I look forward to discussing these developments on our call. Until then,
I remain,
Your humble servant,
Patrick
PS If you have any questions, please feel free to email them to Kevin Moon at kmoon@overstock.com before the conference call, so we may address them.
Note to investors
In May the Board of Directors approved the implementation of the Direct Registration System (DRS) to provide the company's shareholders an alternative to holding paper certificates. (For a brief description of DRS and how it compares to holding physical certificates or holding stock in "street name" through a broker, please visit the SEC's website via the following link: http://www.sec.gov/investor/pubs/holdsec.htm). Like those who hold physical certificates, shareholders in DRS are registered on the company's books and those shares cannot be lent for short selling. There are advantages to DRS over paper certificates, namely, the shares are transferred electronically between the transfer agent and the shareholder's broker, which results in much more timely transactions, and the risk of loss, damage or theft is eliminated. The company has considered this matter carefully, and believes it is in the best interest of its stockholders to permit them to choose to hold uncertificated shares through DRS should they desire to do so. It is important to note that DRS does not replace shareholder's ability to obtain physical certificates if they prefer. For additional questions regarding DRS, please contact our transfer agent, Computershare, at (781) 575-2879.
Key financial and operating metrics
Total revenue -- Overstock.com reported total revenue for the three months ended June 30, 2006 of $160.0 million, a 6% increase from the $150.6 million reported in 2005. For the six months ended June 30, 2006, total revenue was $340.2 million, a 7% increase from the $316.5 million in 2005.
Gross profit and gross margins -- Gross profit for the three months ended June 30, 2006 was $23.0 million (14.4% margins), a 1% increase from the $22.7 million (15.1% margins) reported in 2005. For the six months ended June 30, 2006, gross profits were $48.2 million, a 1% increase from the $47.5 million in 2005.
Net loss -- Net loss for the three months ended June 30, 2006, was $15.7 million, or $0.78 loss per share, compared to $1.9 million, or $0.10 loss per share in 2005. For the six months ended June 30, 2006, net loss totaled $31.6 million, or $1.60 loss per share, compared to $6.2 million, or $0.32 loss per share in 2005.
Overstock.com had cash and marketable securities of $45.7 million and working capital of $78.5 million on June 30, 2006.
Gross bookings (excluding auctions and travel) -- Gross bookings for the three months ended June 30, 2006 totaled $172.1 million, a 5% increase from the $163.8 million reported last year. For the six months ended June 30, 2006, gross bookings totaled $373.0 million, a 7% increase from the $348.0 million in 2005.
About Overstock.com
Overstock.com, Inc. is an online "closeout" retailer offering discount, brand-name merchandise for sale over the Internet. The company offers its customers an opportunity to shop for bargains conveniently, while offering its suppliers an alternative inventory liquidation distribution channel. Overstock.com, headquartered in Salt Lake City, is a publicly traded company listed on the NASDAQ National Market System and can be found online at http://www.overstock.com.
Overstock.com® is a registered trademark of Overstock.com, Inc. All other trademarks are the property of their respective owners.
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, but are not limited to, statements regarding accelerated growth, continued improvement of customer satisfaction scores, go-live date of new customer care application and the positive effects of this application, increases in margins, improved picking efficiencies, need for additional warehouse space, ease of customer returns, expense management reductions, need for additional capital, ease of administering Oracle 10g, reduced website downtime, capacity of Oracle ERP, Tad Martin's leaving the company's employ, the focus of internal website marketing, completion of the company's infrastructure, as well as all such other risks as identified in our Form 10-K for the year ended December 31, 2005, and all our subsequent filings with the Securities and Exchange Commission, which contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.
Overstock.com, Inc.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts)
Three months ended June 30, Six months ended June 30,
2005 2006 2005 2006
Revenue
Direct $60,064 $68,770 $127,948 $148,480
Fulfillment partner 90,574 91,198 188,571 191,694
Total revenue 150,638 159,968 316,519 340,174
Cost of goods sold
Direct 51,567 61,473 109,829 132,176
Fulfillment partner 76,375 75,501 159,232 159,842
Total cost of
goods sold 127,942 136,974 269,061 292,018
Gross profit 22,696 22,994 47,458 48,156
Operating expenses:
Sales and marketing 14,499 12,171 31,325 25,348
Technology 6,103 15,048 10,201 28,637
General and
administrative 7,566 12,453 14,913 25,807
Total operating
expenses 28,168 39,672 56,439 79,792
Operating income
(loss) (5,472) (16,678) (8,981) (31,636)
Interest income 896 2,215 1,540 2,530
Interest expense (1,517) (1,275) (2,962) (2,542)
Other income (expense),
net 4,170 (1) 4,170 (1)
Net income (loss) (1,923) (15,739) (6,233) (31,649)
Deemed dividend
related to redeemable
common stock (47) (33) (93) (66)
Net income (loss)
attributable to
common shares $(1,970) $(15,772) $(6,326) $(31,715)
Net income (loss)
per share
- basic $(0.10) $(0.78) $(0.32) $(1.60)
- diluted $(0.10) $(0.78) $(0.32) $(1.60)
Weighted average
common shares
outstanding
- basic 19,709 20,159 19,785 19,774
- diluted 19,709 20,159 19,785 19,774
Other data:
Shopping bookings
(in 000s) $163,775 $172,091 $347,990 $372,991
Travel bookings
(in 000s) $2,759 $5,979 $4,408 $18,307
Auction gross
merchandise volume
(in 000s) $7,362 $6,860 $12,964 $14,939
Average customer
acquisition cost
(shopping) $22.10 $22.98 $20.63 $21.05
Average registrant
acquisition cost
(auctions) $7.51 $2.06 $7.91 $2.54
Overstock.com, Inc.
Consolidated Balance Sheets (unaudited)
(in thousands, except per share amounts)
December 31, June 30,
2005 2006
Assets
Current assets:
Cash and cash equivalents $56,224 $45,665
Marketable securities 55,799 --
Cash, cash equivalents and
marketable securities 112,023 45,665
Accounts receivable, net 11,695 9,838
Inventories, net 93,269 74,822
Prepaid inventory 9,633 3,247
Prepaid expenses 8,508 9,776
Total current assets 235,128 143,348
Restricted cash 253 --
Property and equipment, net 63,914 64,611
Goodwill 13,169 13,169
Other long-term assets, net 13,449 12,069
Total assets $325,913 $233,197
Liabilities, Redeemable Securities and Stockholders' Equity
Current liabilities:
Accounts payable $101,436 $35,920
Accrued liabilities 46,847 23,504
Line of credit -- --
Capital lease obligations, current 6,683 5,401
Total current liabilities 154,966 64,825
Capital lease obligations, non-current 3,058 3,964
Convertible senior notes 74,935 75,107
Total liabilities 232,959 143,896
Redeemable common stock 3,205 2,398
Stockholders' equity:
Common stock 2 2
Additional paid-in capital 250,939 280,891
Accumulated deficit (96,829) (128,544)
Treasury stock (65,325) (65,251)
Accumulated other comprehensive gain (loss) 962 (195)
Total stockholders' equity 89,749 86,903
Total liabilities, redeemable securities
and stockholders' equity $325,913 $233,197
Overstock.com, Inc.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Three months ended Six months ended Twelve months ended
June 30, June 30, June 30,
2005 2006 2005 2006 2005 2006
Cash flows
from
operating
activities:
Net loss $(1,923) $(15,739) $(6,233) $(31,649) $(6,339) $(50,334)
Adjustments
to reconcile
net loss to
cash provided
by (used in)
operating
activities
Depreciation
and
amorti-
zation 2,930 7,709 4,565 14,544 6,856 25,593
Realized
(gain)
loss from
marketable
securities (25) (1,868) (26) (2,085) (28) 1,292
Loss on
disposition
of property
and
equipment -- 1 -- 599 34 2,056
Stock-based
compensation
from stock
options 53 1,088 73 2,046 175 2,045
Stock options
issued to
consultants
for services (15) (9) (415) 34 294 60
Issuance of
common stock
from
treasury as
compensation 60 105 311 612 311 744
Amortization
of debt
discount and
deferred
financing
fees 116 139 423 278 570 475
Gain from
retirement
of
convertible
senior
notes (4,170) -- (4,170) -- (4,170) (1,988)
Changes in
operating
assets and
liabilities:
Accounts
receivable,
net 755 (1,572) 3 1,857 867 (3,255)
Inventories,
net (11,419) 6,529 (14,989) 18,447 (29,784) (13,275)
Prepaid
inventory (503) 5,592 1,912 6,386 (5,756) 7,163
Prepaid
expenses 1,666 716 (4,636) (1,164) (5,721) (1,467)
Other
long-term
assets,
net 603 (29) (11) 18 415 (2,122)
Accounts
payable (374) (1,181) (24,574) (65,516) 17,964 (4,487)
Accrued
liabi-
lities 2,148 (7,663) 2,494 (23,343) 15,500 (2,271)
Net cash
provided
by
(used in)
opera-
ting
acti-
vities (10,098) (6,182) (45,273) (78,936) (8,812) (39,771)
Cash flows from
investing
activities:
(Increase)
decrease in
restricted
cash 179 55 769 253 1,042 833
Investments in
marketable
securities (36,047) -- (161,991) -- (242,626) (23,552)
Sales of
marketable
securities 102,926 49,475 162,188 56,756 175,087 110,833
Expenditures
for
property
and
equipment (11,246) (5,366) (24,276) (12,211) (31,411) (32,675)
Acquisition
of Ski West
(net of cash
acquired) -- -- -- -- -- (24,620)
Other
investments -- -- -- (100) -- (100)
Proceeds from
the sale of
property and
equipment -- 1 -- 1 20 2
Net cash
provided
by
(used in)
investing
acti-
vities 55,812 44,165 (23,310) 44,699 (97,888) 30,721
Cash flows
from
financing
activities:
Payments on
capital lease
obligations (2,901) (326) (3,052) (2,754) (3,356) (6,788)
Borrowings
on line of
credit -- 42,530 -- 73,258 -- 85,126
Payments on
line of credit -- (62,530) -- (73,258) (1,000) (85,126)
Proceeds from
the issuance
of convertible
senior notes -- -- -- -- 116,199 --
Payments to
retire
convertible
senior notes (27,935) -- (27,935) -- (27,935) (7,735)
Payments of
deferred
financing
fees -- -- -- -- (301) --
Proceeds from
the issuance
of common
stock -- 25,000 -- 25,000 75,207 25,000
Purchase of
treasury
stock (24,133) -- (24,133) -- (24,133) --
Purchased
call options
for purchase
of treasury
stock -- -- (47,507) -- (47,507) --
Settlement of
call options
for cash -- -- -- -- -- 7,937
Exercise of
stock options 3,002 434 3,908 1,461 5,237 4,868
Net
provided
by
(used in)
financing
activities (51,967) 5,108 (98,719) 23,707 92,411 23,282
Effect of
exchange rate
changes on cash (8) (44) (26) (29) (9) 83
Net increase
(decrease) in
cash and cash
equivalents (6,261) 43,047 (167,328) (10,559) (14,298) 14,315
Cash and cash
equivalents,
beginning of
period 37,611 2,618 198,678 56,224 45,648 31,350
Cash and cash
equivalents,
end of
period $31,350 $45,665 $31,350 $45,665 $31,350 $45,665
SOURCE Overstock.com, Inc.
Web site: http://www.overstock.com
[/pre]