EX-99.1 2 a06-10710_1ex99d1.htm EX-99

Exhibit 99.1

 

NEWS RELEASE

April 28, 2006

 

 

Media Contact:

Scott Blevins, Overstock.com, Inc.

+1 (801) 947-3133

sblevins@overstock.com

 

Investor Contact:

Kevin Moon, Overstock.com, Inc.

+1 (801) 947-3282

kmoon@overstock.com

 

Overstock.com Reports First Quarter 2006 Financial Results

 

Summary of results:

 

      Q1 Total revenue: $180.2 million, up 9% versus 2005

      Q1 Gross profits: $25.2 million, up 2% versus 2005

      Q1 Gross margins: 14.0% compared to 14.9% in 2005

      Q1 Net loss: $(15.9) million or $(0.82) earnings per share

 

SALT LAKE CITY — Overstock.com, Inc. (NASDAQ: OSTK) today reported financial results for its first quarter ended March 31, 2006.

 

 

“Chop wood, carry water.”

 

 

- Wu Li

 

 

Dear Owners,

 

We lost $15.9 million in Q1. I anticipate Q2 will look about the same, before we start climbing out of this hole in the second half of 2006. Our theme for this year is to slow growth during the first half of the year so we can work on improving internal business processes in preparation for stronger performance in Q4 and beyond. We continue to anticipate things will look better in Q3, and to be out of the ditch by Q4. Nothing that has happened recently suggests to me that we should change course.

 

Sales and operating expenses in Q1 were just what I expected, though margins were a bit lower than I anticipated. The lower margins are a function of a couple of things. Part of it stemmed from warehouse costs that were simply carryover from the systems problems that plagued us in the last part of 2005. We are currently working on an improved build-out of our Salt Lake City fulfillment warehouse, and I am hopeful

 

-more-



 

that when we finish this in June, we will see a drop in our variable handling costs immediately. Additionally, a small amount comes from customer service costs, which again, were inflated due to our systemic problems in 2005, but also because we are emphasizing quality over cost: when our new customer service application goes live in June, I expect a significant drop in these costs.

 

Again, I believe that Q2 will look like this past quarter. It is going to take until Q3 to start seeing the benefits of the various technologies and platforms we have spent the last year building. I believe that our expense management (how much it costs to handle a package, a customer service call, etc.) will be much better starting in June and July. Other corporate expense management looks good. But gross margins will likely remain where they are in Q2 for other reasons. As a result of improvements in our inventory management systems, I believe we are carrying more inventory than we really need, and we plan to bring it down another $15-20 million over the next few months.

 

We ended Q1 with $52 million in cash and marketable securities, including $20 million of borrowings on our inventory lines. We have an additional $30 million of availability on our lines, and are continuing to reduce inventory to turn it back into cash.

 

In summary, I’m committed to stay the course: slowing growth while we improve our systems and enhance the service we provide to our customers. Unfortunately, Q2 will be another disappointing quarter at the bottom line; then the tide should start coming back in by Q3 and we should be afloat in Q4.

 

Your humble servant,

 

Patrick

 

Key financial and operating metrics

 

Total revenue—For the quarter ended March 31, 2006, Overstock.com reported total revenue of $180.2 million, a 9% increase from the $165.9 million reported in 2005.

 

Gross profit and gross margins—For the quarter ended March 31, 2006, Overstock.com reported gross profit of $25.2 million (14.0% margins), a 2% increase from the $24.8 million (14.9% margins) reported in 2005.

 

Net income (loss)—For the quarter ended March 31, 2006, Overstock.com reported net loss of $15.9 million, or $0.82 loss per share, compared to $4.3 million, or $0.22 loss per share, reported last year.

 

Overstock.com had cash and marketable securities of $51.8 million and working capital of $66.8 million on March 31, 2006.

 

2



 

Gross bookings (excluding auctions and travel)—For the quarter ended March 31, 2006, Overstock.com reported gross bookings of $200.9 million, a 9% increase from the $184.2 million reported last year.

 

# # #

 

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 the amount of the loss we are likely to incur in the second quarter of 2006, the  build-out of our Salt Lake City fulfillment warehouse, potential decreases in our supply chain costs and customer service costs, the potential benefits of the various technologies and platforms we have been building, our expense management (how much it costs to handle a package, or a customer service call, etc.), and other corporate expense management, our gross margins, the appropriate level of our inventory and our plans to reduce the amount of our inventory, the possibility that we may reduce prices, and the possibility that the tide should start coming back in by Q3 and we should be afloat in Q4, 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.

 

3



 

Overstock.com, Inc.

Consolidated Statements of Operations (unaudited)

(in thousands, except per share amounts)

 

 

 

 

 

Three months ended March 31,

 

 

 

 

 

2005

 

2006

 

Revenue

 

 

 

 

 

 

 

Direct

 

 

 

$

67,884

 

$

79,710

 

Fulfillment partner

 

 

 

97,997

 

100,496

 

 

 

 

 

 

 

 

 

Total revenue

 

 

 

165,881

 

180,206

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

 

Direct

 

 

 

58,262

 

70,703

 

Fulfillment partner

 

 

 

82,857

 

84,341

 

 

 

 

 

 

 

 

 

Total cost of goods sold

 

 

 

141,119

 

155,044

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

24,762

 

25,162

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

 

 

16,826

 

13,177

 

Technology

 

 

 

4,099

 

13,589

 

General and administrative

 

 

 

7,346

 

13,354

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

 

28,271

 

40,120

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

(3,509

)

(14,958

)

 

 

 

 

 

 

 

 

Interest income

 

 

 

644

 

315

 

Interest expense

 

 

 

(1,445

)

(1,267

)

 

 

 

 

 

 

 

 

Net income (loss)

 

 

 

(4,310

)

(15,910

)

Deemed dividend related to redeemable common stock

 

 

 

(46

)

(33

)

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shares

 

 

 

$

(4,356

)

$

(15,943

)

 

 

 

 

 

 

 

 

Net income (loss) per share

 

 

 

 

 

 

 

- basic

 

 

 

$

(0.22

)

$

(0.82

)

- diluted

 

 

 

$

(0.22

)

$

(0.82

)

Weighted average common shares outstanding

 

 

 

 

 

 

 

- basic

 

 

 

19,862

 

19,385

 

- diluted

 

 

 

19,862

 

19,385

 

 

 

 

 

 

 

 

 

Other data:

 

 

 

 

 

 

 

Shopping bookings (in 000s)

 

 

 

$

184,215

 

$

200,900

 

Travel bookings (in 000s)

 

 

 

$

1,649

 

$

10,611

 

Auction gross merchandise volume (in 000s)

 

 

 

$

5,602

 

$

8,079

 

Average customer acquisition cost (shopping)

 

 

 

$

19.50

 

$

19.40

 

Average registrant acquisition cost (auctions)

 

 

 

$

8.26

 

$

2.94

 

 



 

Overstock.com, Inc.

Consolidated Balance Sheets (unaudited)

(in thousands, except per share amounts)

 

 

 

December 31,
2005

 

March 31,
2006

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

56,224

 

$

2,618

 

Marketable securities

 

55,799

 

49,220

 

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

112,023

 

51,838

 

Accounts receivable, net

 

11,695

 

8,266

 

Inventories, net

 

93,269

 

81,351

 

Prepaid inventory

 

9,633

 

8,839

 

Prepaid expenses

 

8,508

 

10,388

 

 

 

 

 

 

 

Total current assets

 

235,128

 

160,682

 

Restricted cash

 

253

 

55

 

Property and equipment, net

 

63,914

 

66,279

 

Goodwill

 

13,169

 

13,169

 

Other long-term assets, net

 

13,449

 

12,770

 

 

 

 

 

 

 

Total assets

 

$

325,913

 

$

252,955

 

 

 

 

 

 

 

Liabilities, Redeemable Securities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

101,436

 

$

37,101

 

Accrued liabilities

 

46,847

 

31,167

 

Line of credit

 

 

20,000

 

Capital lease obligations, current

 

6,683

 

5,618

 

 

 

 

 

 

 

Total current liabilities

 

154,966

 

93,886

 

Capital lease obligations, non-current

 

3,058

 

3,969

 

Convertible senior notes

 

74,935

 

75,021

 

 

 

 

 

 

 

Total liabilities

 

232,959

 

172,876

 

 

 

 

 

 

 

Redeemable common stock

 

3,205

 

2,684

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

2

 

2

 

Additional paid-in capital

 

250,939

 

253,976

 

Accumulated deficit

 

(96,829

)

(112,772

)

Treasury stock

 

(65,325

)

(65,273

)

Accumulated other comprehensive gain (loss)

 

962

 

1,462

 

 

 

 

 

 

 

Total stockholders’ equity

 

89,749

 

77,395

 

 

 

 

 

 

 

Total liabilities, redeemable securities and stockholders’ equity

 

$

325,913

 

$

252,955

 

 



 

Overstock.com, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

 

 

 

Three months ended March 31,

 

Twelve months ended March 31,

 

 

 

2005

 

2006

 

2005

 

2006

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net loss

 

$

(4,310

)

$

(15,910

)

$

(6,597

)

$

(36,518

)

Adjustments to reconcile net loss to cash provided by (used in) operating activities

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

1,635

 

6,835

 

4,816

 

20,814

 

Realized (gain) loss from marketable securities

 

(1

)

(217

)

(3

)

3,135

 

Loss on disposition of property and equipment

 

 

598

 

34

 

2,055

 

Stock-based compensation

 

20

 

958

 

245

 

1,010

 

Stock options issued to consultants for services

 

(400

)

43

 

598

 

54

 

Issuance of common stock from treasury as compensation

 

251

 

507

 

251

 

699

 

Amortization of debt discount and deferred financing fees

 

307

 

139

 

454

 

452

 

Gain from retirement of convertible senior notes

 

 

 

 

(6,158

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

(752

)

3,429

 

4,732

 

(928

)

Inventories, net

 

(3,570

)

11,918

 

(16,798

)

(31,223

)

Prepaid inventory

 

2,415

 

794

 

(6,697

)

1,068

 

Prepaid expenses

 

(6,302

)

(1,880

)

(8,283

)

(517

)

Other long-term assets, net

 

(614

)

47

 

(172

)

(1,490

)

Accounts payable

 

(24,200

)

(64,335

)

25,275

 

(3,680

)

Accrued liabilities

 

346

 

(15,680

)

13,795

 

7,540

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

(35,175

)

(72,754

)

11,650

 

(43,687

)

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

(Increase) decrease in restricted cash

 

590

 

198

 

(1,012

)

957

 

Investments in marketable securities

 

(125,944

)

 

(216,263

)

(59,599

)

Sales of marketable securities

 

59,262

 

7,281

 

73,444

 

164,284

 

Expenditures for property and equipment

 

(13,030

)

(6,845

)

(21,364

)

(38,555

)

Acquisition of Ski West (net of cash acquired)

 

 

 

 

(24,620

)

Other investments

 

 

(100

)

 

(100

)

Proceeds from the sale of property and equipment

 

 

 

20

 

1

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

(79,122

)

534

 

(165,175

)

42,368

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Payments on capital lease obligations

 

(151

)

(2,428

)

(789

)

(9,363

)

Borrowings on line of credit

 

 

30,728

 

1,000

 

42,596

 

Payments on line of credit

 

 

(10,728

)

(1,000

)

(22,596

)

Proceeds from the issuance of convertible senior notes

 

 

 

116,199

 

 

Payments of deferred financing fees

 

 

 

(301

)

 

Payments to retire convertible senior notes

 

 

 

 

(35,670

)

Proceeds from the issuance of common stock

 

 

 

113,064

 

 

Purchase of treasury stock

 

 

 

 

(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

 

906

 

1,027

 

3,027

 

7,436

 

 

 

 

 

 

 

 

 

 

 

Net provided by (used in) financing activities

 

(46,752

)

18,599

 

183,693

 

(33,793

)

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(18

)

15

 

5

 

119

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(161,067

)

(53,606

)

30,173

 

(34,993

)

Cash and cash equivalents, beginning of period

 

198,678

 

56,224

 

7,438

 

37,611

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

37,611

 

$

2,618

 

$

37,611

 

$

2,618

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

 

Interest paid

 

$

586

 

$

278

 

$

735

 

$

4,800

 

Deemed dividend on redeemable common shares

 

$

46

 

$

33

 

$

186

 

$

172

 

Lapse of rescission rights on redeemable common stock

 

$

 

$

554

 

$

 

$

700

 

Settlement of purchased call options for treasury stock

 

$

 

$

 

$

 

$

41,121

 

Equipment and software acquired under capital leases

 

$

15,197

 

$

2,582

 

$

17,012

 

$

2,823

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

 

 

 

Fair value of assets acquired, net of cash acquired

 

$

 

$

 

$

 

$

25,956

 

Fair value of liabilities assumed

 

 

 

 

(1,336

)

 

 

 

 

 

 

 

 

 

 

Cash paid to purchase businesses

 

$

 

$

 

$

 

$

24,620