Overstock.com Reports FY and Q4 2012 Results

                 Overstock.com Reports FY and Q4 2012 Results

2012 revenues of $1.1 billion and net income of $14.7 million

PR Newswire

SALT LAKE CITY, Jan. 24, 2013

SALT LAKE CITY, Jan. 24, 2013 /PRNewswire/ -- Overstock.com, Inc. (NASDAQ:
OSTK) today reported financial results for fiscal year 2012 and the quarter
ended December 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120110/LA33954LOGO)

Key FY 2012 metrics (comparison to FY 2011):

  oRevenue: $1,099M vs. $1,054M (4% increase);
  oGross margin: 18.1% vs. 17.0% (110 basis point increase);
  oGross profit: $198.4M vs. $179.1M (11% increase);
  oSales and marketing expense: $63.5M vs. $61.8M (3% increase);
  oContribution (non-GAAP measure): $135.0M vs. $117.3M (15% increase);
  oG&A/Technology expense: $122.7M vs. $134.8M (9% decrease);
  oNet income (loss): $14.7M vs. $(19.4)M ($34.1M increase); and
  oDiluted EPS: $0.62/share vs. $(0.84)/share ($1.46 increase).

Key Q4 2012 metrics (comparison to Q4 2011):

  oRevenue: $342.0M vs. $314.1M (9% increase);
  oGross margin: 17.9% vs. 16.2% (170 basis point increase);
  oGross profit: $61.2M vs. $50.9M (20% increase);
  oSales and marketing expense: $20.6M vs. $18.9M (9% increase);
  oContribution (non-GAAP measure): $40.6M vs. $32.0M (27% increase);
  oG&A/Technology expense: $32.7M vs. $34.1M (4% decrease);
  oNet income (loss): $8.8M vs. $(3.4)M ($12.2M increase); and
  oDiluted EPS: $0.37/share vs. $(0.15)/share ($0.52 increase).

As previously announced, the Company will hold a conference call and webcast
to discuss its fiscal year and Q4 2012 financial results today, Thursday,
January 24, 2013, at 11:30 a.m. Eastern Time.

Webcast information

To access the live webcast and presentation slides, please go to
http://investors.overstock.com. To listen to the conference call via
telephone, dial (866) 551-1816 and enter conference ID 85851093 when prompted.
Participants outside the United States or Canada who do not have Internet
access should dial (706) 758-1198 then enter the conference ID provided above.

A replay of the conference call will be available at
http://investors.overstock.com starting two hours after the live call has
ended. An audio replay of the webcast will be available via telephone starting
at 12:30 p.m. Eastern Time on Thursday, January 24, 2013, through 11:59 p.m.
Eastern Time on Saturday, February 23, 2013. To listen to the recorded webcast
by phone, please dial (800) 585-8367 then enter the conference ID provided
above. Outside the U.S. or Canada please dial +1 (404) 537-3406 and enter
conference ID provided above.

Please email questions to Kevin Moon at kmoon@overstock.com prior to the
conference call.

Key financial and operating metrics:

Investors should review our financial statements and publicly-filed reports in
their entirety and not rely on any single financial measure.

Net revenue — Total net revenue for the fiscal year 2012 and 2011 was $1,099
million and $1,054 million, respectively, a 4% increase. The growth in net
revenue was primarily due to an increase in the average order size, which more
than offset fewer customer orders due to lower conversion rates compared to
last year. Total net revenue for Q4 2012 and 2011 was $342.0 million and
$314.1 million, respectively, a 9% increase.

Gross profit — Gross profit for the fiscal year 2012 and 2011 was $198.4
million and $179.1 million, respectively, an 11% increase, representing 18.1%
and 17.0% of total net revenue for those respective periods. The increase in
gross profit was primarily due to a shift in product sales mix, partially
offset by higher freight and return-related costs. Gross profit for Q4 2012
and 2011 was $61.2 million and $50.9 million, respectively, a 20% increase,
representing 17.9% and 16.2% of total net revenue for those respective
periods. The increase in gross profit was primarily due to a shift in product
sales mix and lower warehousing costs, partially offset by higher
return-related costs.

Contribution (a non-GAAP financial measure) and contribution margin (a
non-GAAP financial measure) — Contribution for the fiscal year 2012 and 2011
was $135.0 million and $117.3 million, respectively, a 15% increase.
Contribution margin increased by 120 basis points to 12.3% from 11.1% in those
same periods. Contribution for Q4 2012 and 2011 was $40.6 million and $32.0
million, respectively, a 27% increase. Contribution margin was 11.9% and 10.2%
for those same periods.

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 total net revenue. We
believe contribution and 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.
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. 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 and contribution margin, see the
calculation of these non-GAAP financial measures and the reconciliation of
contribution to gross profit below (in thousands):

                                  Year ended December 31,
                                  2012         2011              2010
Total revenue                     $ 1,099,289  $   1,054,277     $  1,089,873
Cost of goods sold                  900,859        875,189          900,233
Gross profit                        198,430        179,088          189,640
Less: Sales and marketing expense   63,467         61,813           61,334
Contribution                      $ 134,963    $   117,275       $  128,306
Contribution margin               12.3%        11.1%             11.8%
                                               Three months ended December 31,
                                               2012              2011
Total revenue                                  $   342,034       $  314,077
Cost of goods sold                                 280,823          263,216
Gross profit                                       61,211           50,861
Less: Sales and marketing expense                  20,581           18,911
Contribution                                   $   40,630        $  31,950
Contribution margin                            11.9%             10.2%

Sales and marketing expenses — Sales and marketing expenses totaled $63.5
million and $61.8 million for the fiscal year 2012 and 2011, respectively, a
3% increase, and representing 5.8% and 5.9% of total net revenue for those
periods. Sales and marketing expenses totaled $20.6 million and $18.9 million
for Q4 2012 and 2011, respectively, a 9% increase, and representing 6.0% of
total net revenue for both periods.

Technology expenses — Technology expenses totaled $65.5 million and $67.0
million for the fiscal year 2012 and 2011, respectively, a 2% decrease, and
representing 6.0% and 6.4% of total net revenue for those periods. The $1.5
million decrease was primarily due to lower compensation related costs from
reduced staffing. Technology expenses totaled $18.6million and $16.4million
for Q4 2012 and 2011, respectively, a 14% increase, and representing 5.4% and
5.2% of total net revenue for those respective periods. The $2.2 million
increase is primarily due to an increase in third-party technology services.

General and administrative ("G&A") expenses — G&A expenses totaled $57.3
million and $67.8 million for the fiscal year 2012 and 2011, respectively, a
16% decrease, and representing 5.2% and 6.4% of total net revenue for those
periods. The $10.5 million decrease is largely due to lower legal fees. G&A
expenses totaled $14.1 million and $17.7million for Q4 2012 and 2011,
respectively, a 21% decrease, and representing 4.1% and 5.6% of total revenue
for those respective periods. The $3.6 million decrease is largely due to
lower legal fees, partially offset by an increase in compensation-related
costs from higher bonus expense.

Operating income (loss) — Operating income (loss) was $12.2 million and
$(17.5) million for the fiscal year 2012 and 2011, respectively, a $29.7
million increase. Operating income (loss) was $7.9 million and $(2.2) million
for Q4 2012 and 2011, respectively, a $10.1 million increase.

Restructuring — Restructuring costs totaled $76,000 and $0 for the fiscal year
2012 and 2011, respectively. Restructuring costs totaled $23,000 and $0 for Q4
2012 and 2011, respectively.

Interest income — Interest income was $116,000 and $161,000 for the fiscal
year 2012 and 2011, respectively, and $30,000 and $40,000 for Q4 2012 and
2011, respectively.

Interest expense — Interest expense totaled $809,000 and $2.5 million for the
fiscal year 2012 and 2011, respectively, a decrease of 67%. The decrease in
interest expense is primarily a result of the extinguishment of US Bank
finance obligations and Senior Notes during 2011. Interest expense totaled
$154,000 and $517,000 for Q4 2012 and 2011, respectively. In November 2012, we
fully paid the $17.0 million in advances under the U.S. Bank Financing
Agreement and the facility expired at the end of the year. In December 2012,
we entered into a $3.0 million credit agreement with U.S. Bank in order to
provide a line of credit whereby letters of credit could be issued by the
bank.

Other income, net — Other income, net totaled $3.7 million and $278,000 for
the fiscal year 2012 and 2011, respectively. The increase in other income, net
is primarily due to a $2.2 million increase in Club O rewards breakage. In
addition, we had a $1.2 million prepayment penalty in 2011 paid to US Bank for
paying off our leases early. Other income, net totaled $1.3 million and
$(684,000) for Q4 2012 and 2011, respectively. The increase is primarily due
to $798,000 of increased Club O rewards breakage, and the $1.2 million
prepayment penalty paid in 2011.

Income taxes —Income tax expense totaled $485,000 and a benefit of $(142,000)
for the fiscal year 2012 and 2011, respectively. Income tax expense totaled
$303,000 and $60,000 for Q4 2012 and 2011, respectively.

Net income (loss) — Net income (loss) was $14.7 million and $(19.4) million
for the fiscal year 2012 and 2011, respectively, an increase of $34.1 million.
Earnings per share was $0.62 on a fully diluted basis for 2012, compared to
$(0.84) for 2011. Net income (loss) was $8.8 million and $(3.4) million for Q4
2012 and 2011, respectively, an increase of $12.2 million. Q4 2012 earnings
per share was $0.37 on a fully diluted basis, compared to $(0.15) for Q4 2011.

Free cash flow (a non-GAAP financial measure) — Free cash flow totaled $15.7
million and $16.9 million for the twelve months ended December 31, 2012 and
2011, respectively. The $1.2 million decrease was due to a $3.7 million
increase in capital expenditures, partially offset by a $2.5 million increase
in operating cash flows. 

Free cash flow 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 cash provided by (used in)
operating activities," is cash flow from operations reduced by "expenditures
for fixed assets, including internal-use software and website development." We
believe that cash flows from operating activities is an important measure,
since it includes both the cash impact of the continuing operations of the
business and changes in the balance sheet that impact cash. However, we
believe free cash flow is a useful measure to evaluate our business since
purchases of fixed assets are a necessary component of ongoing operations and
free cash flow measures the amount of cash we have available for mandatory
debt service and financing obligations, changes in our capital structure, and
future investments, after we have paid our operating expenses. Therefore, we
believe it is important to view free cash flow as a complement to our entire
consolidated statements of cash flows.

Our calculation of free cash flow is set forth below (in thousands):

                                             Year ended December 31,
                                             2012        2011       2010
Net cash provided by operating activities    $ 28,145    $ 25,663   $ 16,322
Expenditures for fixed assets, including
internal-use software and website              (12,489)    (8,741)    (20,511)
development
Free cash flow                               $ 15,656    $ 16,922   $ (4,189)

Cash and working capital — We had cash and cash equivalents of $93.5 million
and $97.0 million and working capital of $7.5 million and $(14.1) million at
December 31, 2012 and December 31, 2011, respectively.

About Overstock.com
Overstock.com (NASDAQ: OSTK) is an online discount retailer based in Salt Lake
City, Utah that sells a broad range of products including furniture, rugs,
bedding, electronics, clothing, jewelry, travel, cars, and insurance.
Worldstock.com, a fair trade department dedicated to selling artisan-crafted
products from around the world, offers additional unique items. Main Street
Revolution supports small businesses across the United States by providing
them a national customer base. A recent Nielsen State of the Media: Consumer
Usage Report placed Overstock.com among the top five most visited mass
merchandiser websites. The NRF Foundation/American Express Customer Choice
Awards ranks Overstock.com #4 in customer service among all U.S. retailers.
Overstock.com sells internationally under the name O.co. Overstock.com
(http://www.overstock.com and http://www.o.co) regularly posts information
about the company and other related matters under Investor Relations on its
website.

Overstock.com®, O.co®, Worldstock Fair Trade® and Club O Rewards® are
registered trademarks of Overstock.com, Inc. O.info™, Club O™, and Club O
Rewards Dollars™ and Your Savings Engine™ are trademarks 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 all
statements other than statements of historical fact. Our Annual Report on Form
10-K for the year ended December 31, 2011, which was filed with the Securities
and Exchange Commission on March 2, 2012, and our subsequent filings with the
Securities and Exchange Commission, including our Quarterly Report on Form
10-Q for the quarter ended September 30, 2012, which was filed on October 25,
2012, identify important factors that could cause our actual results to differ
materially from those contained in our projections, estimates or
forward-looking statements.

Overstock.com,Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands)
                                            December31,  December31,
                                            2012          2011
Assets
Current assets:
Cash and cash equivalents                   $  93,547     $  96,985
Restricted cash                                1,905         2,036
Accounts receivable, net                       19,273        13,501
Inventories, net                               26,464        22,993
Prepaid inventories, net                       1,912         1,027
Prepaids and other assets                      12,897        12,651
Total current assets                           155,998       149,193
Fixed assets, net                              21,037        25,322
Goodwill                                       2,784         2,784
Other long-term assets, net                    2,166         2,260
Total assets                                $  181,985    $  179,559
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                            $  62,416     $  70,332
Accrued liabilities                            47,674        47,902
Deferred revenue                               38,411        27,978
Line of credit                                 -             17,000
Capital lease obligations, current             -             110
Total current liabilities                      148,501       163,322
Capital lease obligations, non-current         -             2
Other long-term liabilities                    2,522         2,998
Total liabilities                              151,023       166,322
Stockholders' equity:
Common stock                                   2             2
Additional paid-in capital                     356,895       353,368
Accumulated deficit                            (247,096)     (261,765)
Treasury stock                                 (78,839)      (78,368)
Total stockholders' equity                     30,962        13,237
Total liabilities and stockholders' equity  $  181,985    $  179,559



Overstock.com,Inc.
Consolidated Statements of Operations and
Comprehensive Income (Loss) (Unaudited)
(in thousands, except per share data)
                                         Year ended December 31
                                         2012         2011         2010
Revenue, net
Direct                                  $ 155,516    $ 163,609    $ 209,646
Fulfillment partner                       943,773      890,668      880,227
Total net revenue                          1,099,289    1,054,277    1,089,873
Cost of goods sold
Direct                                     140,536      149,660      187,124
Fulfillment partner                        760,323      725,529      713,109
Total cost of goods sold                   900,859      875,189      900,233
Gross profit                               198,430      179,088      189,640
Operating expenses:
Sales and marketing                        63,467       61,813       61,334
Technology                                 65,467       67,043       58,260
General and administrative                 57,259       67,766       55,650
Restructuring                              76           -            (569)
Total operating expenses                   186,269      196,622      174,675
Operating income (loss)                    12,161       (17,534)     14,965
Interest income                            116          161          157
Interest expense                           (809)        (2,485)      (2,962)
Other income, net                          3,686        278          2,088
Income (loss) before income taxes          15,154       (19,580)     14,248
Provision (benefit) for income taxes       485          (142)        359
Net income (loss)                          14,669       (19,438)     13,889
Deemed dividend related to redeemable      -            (12)         (112)
common stock
Net income (loss) attributable to        $ 14,669     $ (19,450)   $ 13,777
common shares
Net income (loss) per common
share—basic:
Net income (loss) attributable to        $ 0.63       $ (0.84)     $ 0.60
common shares—basic
Weighted average common shares             23,387       23,259       23,019
outstanding—basic
Net income (loss) per common
share—diluted:
Net income (loss) attributable to        $ 0.62       $ (0.84)     $ 0.59
common shares—diluted
Weighted average common shares             23,672       23,259       23,366
outstanding—diluted
Comprehensive income (loss)              $ 14,669     $ (19,438)   $ 13,889
Other data:
Gross bookings                           $ 1,253,629  $ 1,181,319  $ 1,210,983



Overstock.com,Inc.
Consolidated Statements of Operations and
Comprehensive Income (Loss) (Unaudited)
(in thousands, except per share data)
                                              Three months ended December 31,
                                              2012              2011
Revenue, net
Direct                                       $    46,468       $   47,256
Fulfillment partner                               295,566          266,821
Total net revenue                                  342,034          314,077
Cost of goods sold
Direct                                             41,114           43,927
Fulfillment partner                                239,709          219,289
Total cost of goods sold                           280,823          263,216
Gross profit                                       61,211           50,861
Operating expenses:
Sales and marketing                                20,581           18,911
Technology                                         18,622           16,404
General and administrative                         14,093           17,734
Restructuring                                      23               -
Total operating expenses                           53,319           53,049
Operating income (loss)                            7,892            (2,188)
Interest income                                    30               40
Interest expense                                   (154)            (517)
Other income, net                                  1,322            (684)
Income (loss) before income taxes                  9,090            (3,349)
Provision (benefit) for income taxes               303              60
Net income (loss)                                  8,787            (3,409)
Deemed dividend related to redeemable common       -                -
stock
Net income (loss) attributable to common      $    8,787        $   (3,409)
shares
Net income (loss) per common share—basic:
Net income (loss) attributable to common      $    0.37         $   (0.15)
shares—basic
Weighted average common shares                     23,450           23,278
outstanding—basic
Net income (loss) per common share—diluted:
Net income (loss) attributable to common      $    0.37         $   (0.15)
shares—diluted
Weighted average common shares                     24,064           23,278
outstanding—diluted
Comprehensive income (loss)                   $    8,787        $   (3,409)
Other data:
Gross bookings                                $    403,019      $   366,391



Overstock.com,Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
                                            Year ended December 31
                                            2012        2011        2010
Cashflowsfromoperatingactivities:
Net income (loss)                           $ 14,669    $ (19,438)  $ 13,889
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization                 16,009      16,350      14,580
Realized gain on marketable securities        (9)         -           -
Loss on disposition of fixed assets           72          -           -
Stock-based compensation to employees and     3,527       3,051       5,056
directors
Amortization of debt discount and deferred    73          127         391
loan costs
Loss (gain) from early extinguishment of      -           1,253       (346)
debt
Restructuring charges (reversals)             76          -           (569)
Changes in operating assets and
liabilities:
Restricted cash                               131         506         1,872
Accounts receivable, net                      (5,772)     59          (1,920)
Inventories, net                              (3,471)     9,121       (8,739)
Prepaid inventories, net                      (885)       1,055       797
Prepaids and other assets                     1,294       (456)       368
Other long-term assets, net                   (267)       (160)       (215)
Accounts payable                              (7,902)     2,944       (9,315)
Accrued liabilities                           (459)       6,952       (2,575)
Deferred revenue                              10,433      3,951       3,362
Other long-term liabilities                   626         348         (314)
Net cash provided by operating activities     28,145      25,663      16,322
Cash flows from investing activities:
Purchases of marketable securities            (82)        (160)       (136)
Purchases of intangible assets                (6)         (4)         (396)
Sale of marketable securities prior to        154         -           -
maturity
Investment in precious metals                 (1,397)     -           (1,657)
Expenditures for fixed assets, including
internal-use software and website             (12,489)    (8,741)     (20,511)
development
Proceeds from sale of fixed assets            56          -           -
Net cash used in investing activities         (13,764)    (8,905)     (22,700)
Cash flows from financing activities:
Payments on capital lease obligations         (112)       (730)       (490)
Drawdowns on line of credit                   -           17,000      -
Payments on line of credit                    (17,000)    -           -
Capitalized financing costs                   -           (140)       -
Proceeds from finance obligations             -           1,429       16,383
Payments on finance obligations               -           (24,918)    (841)
Paydown on direct financing arrangement       (236)       (216)       (197)
Payments to retire convertible senior         -           (34,615)    (24,865)
notes
Purchase of redeemable stock                  -           -           (26)
Purchase of treasury stock                    (471)       (1,604)     (825)
Exercise of stock options                     -           -           1,503
Net cash used in financing activities         (17,819)    (43,794)    (9,358)
Net decrease in cash and cash equivalents     (3,438)     (27,036)    (15,736)
Cash and cash equivalents, beginning of       96,985      124,021     139,757
period
Cash and cash equivalents, end of period   $ 93,547    $ 96,985    $ 124,021



SOURCE Overstock.com, Inc.

Website: http://www.overstock.com
Contact: Media, Kirstie Burden, Overstock.com, Inc., +1-801-947-3116,
kburden@overstock.com, or Investors, Kevin Moon, Overstock.com, Inc.,
+1-801-947-3282, kmoon@overstock.com
 
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