Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 Free cash flow (a non-GAAP financial measure) — Free cash flow for 2011 and 2010 totaled $16.9 million and $(4.2) million, respectively. The $21.1 million year over year increase was primarily due to $11.8 million decrease in capital expenditures in 2011 over 2010, and a $9.3 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 future investment, debt retirement or other changes to our capital structure after we have paid all of our 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, 2011 2010 2009 Net cash provided by operating activities $ 25,663 $ 16,322 $ 46,117 Expenditures for fixed assets, including internal-use software and website development (8,741) (20,511) (7,275) Free cash flow $ 16,922 $ (4,189) $ 38,842 Cash and working capital — At December 31, 2011, we had cash and cash equivalents of $97.0 million. Working capital was $(14.1) million and $14.7 million at December 31, 2011 and December 31, 2010, respectively. The net change in cash from December 31, 2010 to December 31, 2011 was a decrease of $27.0 million. This was due to $43.8 million of cash outflows from financing activities and $8.9 million from investing activities, offset by $25.7 million of positive cash flows from operating activities. Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 On September 15, 2009, we received a notice from the Securities and Exchange Commission ("SEC") stating that the SEC is conducting an investigation concerning our previously-announced financial restatements of 2006 and 2008 and other matters. The subpoena accompanying the notice covers documents related to the restatements and also to our billings to our partners in the fourth quarter of 2008 and related collections, and our accounting for and implementation of software relating to our accounting for customer refunds and credits, including offsets to partners, and related matters. Prior to October 2010, the SEC asked us for information in the form of records connected to this matter, all of which we have provided. The SEC has interviewed several witnesses. However, we do not know the present status of the investigation. Since October 2010, we have not been asked for more information, and we know of no person interviewed in this matter since October 2010. We have cooperated and intend to continue to cooperate fully with the investigation. We establish liabilities when a particular contingency is probable and estimable. We believe the $2.4 million accrued at December 31, 2011 in our consolidated financial statements is adequate in light of the probable and estimable liabilities. It is reasonably possible that the potential losses may exceed our accrued liabilities for contingencies. We have other contingencies which are reasonably possible; however, the reasonably possible exposure to losses cannot currently be estimated. We recognized a reduction in legal expenses of zero, $4.5 million and $7.1 million during the years ended December 31, 2011, 2010 and 2009 respectively, related to the settlement of legal matters. Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 Ten times FCF equating to a $160M market cap online retail company with a very respectable brand notwithstanding Sam, I Am, A CONVICTED FELANNE along with SCAM, and over $1B in annual sales, is DIRT CHEAP. I would be a buyer again this morning. ;) Link to comment Share on other sites More sharing options...
Josh4580 Posted March 2, 2012 Share Posted March 2, 2012 Parsad, any comments on this quarters results? Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted March 2, 2012 Author Share Posted March 2, 2012 Those are truly dreadful numbers. While the retail sector in general has shown modest improvement over the Christmas period, Overstock have increased SG&A only to record a decline in revenue YoY. When you bear in mind that Amazon took a pasting because their revenue increased over the same period by only 35%, you realize how bad the situation is at Overstock. You can no longer blame the Google search engine penalty that hit sales in Q1 and Q2, or the re-branding efforts from last year - to me, it looks like there is something fundamentally wrong with the business. Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 3.75% Convertible Senior Notes In November 2004, we completed an offering of $120.0 million of 3.75% Convertible Senior Notes due 2011 (the "Senior Notes"). Proceeds to us were $116.2 million, net of $3.8 million of initial purchaser's discount and debt issuance costs. The discount and debt issuance costs were being amortized using the straight-line method which approximated the effective interest method. We recorded amortization of discount and debt issuance costs related to this offering totaling $77,000, $228,000 and $331,000 during the years ended December 31, 2011, 2010 and 2009, respectively. Interest on the Senior Notes was payable semi-annually on June 1 and December 1 of each year. The Senior Notes were scheduled to mature on December 1, 2011 and were unsecured and ranked equally in right of payment with all existing and future unsecured, unsubordinated debt and senior in right of payment to any existing and future subordinated indebtedness. We retired all of the remaining $34.6 million of the Senior Notes during the year ended December 31, 2011, for $34.6 million in cash, resulting in a loss of $54,000 on early extinguishment of debt, net of $77,000 of associated unamortized discount. Of the $34.6 million in Senior Notes retired during the year ended December 31, 2011, $10.1 million were held by Chou Associates Management, Inc. or an affiliate of Chou ("Chou") and $21.7 million were held by Fairfax Financial Holdings Limited or an affiliate of Fairfax ("Fairfax"). Chou and Fairfax are beneficial owners of more than 5% of our common stock. We retired $25.4 million of the Senior Notes during the year ended December 31, 2010 for $24.9 million in cash, resulting in a gain of $346,000 on early extinguishment of debt, net of $158,000 of associated unamortized discount. Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 Sanjeev is tuned into the conference call, aren't all of you? ;) Link to comment Share on other sites More sharing options...
Parsad Posted March 2, 2012 Share Posted March 2, 2012 Parsad, any comments on this quarters results? Very disappointing! I've got a bunch of questions in to the webcast, so let's see how many they answer. Frankly, I don't know how you lose money when you have $1B in revenues. You should be able to squeeze out a 1% net profit margin. It's not like they are Sears and have all this capex and built in cost. Zappos hit $1B at the same time and sold for $900M...this thing is at $140M! Either they need new blood in there or people aren't doing their job! And why they hell would they pay bonuses in 2011 with a year like this? I'd like to see Fairfax and Francis throw their weight around a little more on this thing too. I know Sam is on the board, but this thing needs someone to turn it around like Netjets. Just no reason why it should lose money and be valued where it is! Cheers! Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 I remember begging Patrick for "international sales" by the power of the internet. Chou and Watsa can help plenty here by opening doors to The Far East! Sales across the entire paradigm will rise again or the INTERNET is a BIG FAKE, and it's NOT! ;) International business We began selling products through our Website to customers outside the United States in late August 2008. As of December 31, 2011, we were offering products to customers in over 105 countries and non-U.S. territories. We do not have sales operations outside the United States, and are using a U.S. based third party to provide logistics and fulfillment for all international orders. Revenue generated from our international business is included in either direct or fulfillment partner revenue, depending on whether the product is shipped from our warehouses or from a fulfillment partner. Less than 1% of our sales are made to international customers. Total revenues from International sales were $8.8 million $9.4 million and $5.1 million for the years ended December 31, 2011, 2010 and 2009 respectively. Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted March 2, 2012 Author Share Posted March 2, 2012 Sanjeev is tuned into the conference call, aren't all of you? ;) I am, popcorn at the ready, should be entertaining at least! Link to comment Share on other sites More sharing options...
link01 Posted March 2, 2012 Share Posted March 2, 2012 I remember begging Patrick for "international sales" by the power of the internet. Chou and Watsa can help plenty here by opening doors to The Far East! Sales across the entire paradigm will rise again or the INTERNET is a BIG FAKE, and it's NOT! carl, they need to find a way to squeeze a little coin from their domestic biz 1st before they jump into building out international materially. it pains me to say it but right now overstock looks broken. Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 I am hearing a key senior leader with brand recognition in retail tied to Marketing is imminent. Stormy, "the best," is moving along fine with her customer care skills up the SUPPLY CHAIN to their partners and suppliers. Sales baby, sales! Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 Kill that "SERIAL KILLER" at Goldman SUCKS, PATRICK! ;) Link to comment Share on other sites More sharing options...
Guest Hester Posted March 2, 2012 Share Posted March 2, 2012 "There's a serial killer on the lose, and it's Goldman Sachs" -Pat Byrne on the CC Link to comment Share on other sites More sharing options...
Parsad Posted March 2, 2012 Share Posted March 2, 2012 Actually, the call is pretty damn good! They are addressing some of the issues that we had, as well as some other large shareholders: - cut expenses - hire a reputable executive from a reputable company to take this thing to another level - legal expenses should come down this year considerably - stop the crazy marketing ideas like O.co...Patrick's idea And then unfortunately right now, Patrick said "I feel there was a serial killer on the loose...Goldman Sachs." They've got to move Patrick to the Chairman position, and just let the rest of the executives run this thing. Geez! Cheers! Link to comment Share on other sites More sharing options...
Guest Hester Posted March 2, 2012 Share Posted March 2, 2012 They've spent the last 10 minutes talking about their ridiculous legal forays and Pat's TV appearances. Just saying. Link to comment Share on other sites More sharing options...
Parsad Posted March 2, 2012 Share Posted March 2, 2012 They answered three of my questions earlier that coincided with another shareholder's questions (bonuses, Worldstock, expenses), and then no comment on the question on why two enormously different valuations between Zappos and Overstock.com. Cheers! Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 Hmm, issuing tasty STRAIGHT debt at 8 percent--God willing and the CRICK don't rise--in order to buy back DIRT CHEAP STOCK! $50-100M back of the envelope Byrne SWAG! Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 I think Watsa and Chou can help there, don't you Sanjeev! ;) This doesn't sound like a BEND over and hold on for DEAR LIFE like Level 3, does it! LOL! Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 Jonathon is taking SAM, I AM, a CONVICTED FELANNE, out to his LEGAL woodshed! ;) No filings, amended or otherwise necessary, NOT MATERIAL! Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 I am going to wait for Sam the Spam to throw out some new Scam making Overstock appear as a Sham and load up my truck again........ ;) BYRNE em BABY!!!!!!!!!! ;) Link to comment Share on other sites More sharing options...
Ballinvarosig Investors Posted March 2, 2012 Author Share Posted March 2, 2012 Honestly, I can't say I was impressed. There was no real explanation as it why sales just fell off a cliff for their busiest period in Q4. Apparently the decline has abated, but who is to say we won't see it again? As for Patrick's confidence in the team, again, this is puzzling given the performance of Q4. While they are making the right noises about cutting expenses, that's all for nothing if sales growth is sluggish. The comments about Goldman Sachs were quite frankly embarrassing and it's ridiculous that they continue to go on about how they nearly went under. Investors don't care about former glories, it's akin to Kodak talking about all that money they used to make in the 90's! If I was an investors, I would be much more concerned at why little (filings not being made in time) and large (o.co re-branding) keep happening. You can forgive a one-off issue, but there are no one-off's when it comes to Overstock. Link to comment Share on other sites More sharing options...
Guest Hester Posted March 2, 2012 Share Posted March 2, 2012 I am going to wait for Sam the Spam to throw out some new Scam making Overstock appear as a Sham and load up my truck again........ ;) BYRNE em BABY!!!!!!!!!! ;) There's a haiku in there somewhere Link to comment Share on other sites More sharing options...
Guest ValueCarl Posted March 2, 2012 Share Posted March 2, 2012 The comments about Goldman may be exactly the answer Sanjeev is looking for tied to valuations! He with the PEN POWER to issue reports and influence market participants; PRICES SECURITIES! I am looking forward to the right financier in order to loan straight debt to Overstock at "fair rates" so Patrick, etal, can buy back their DIRT CHEAP stock that the GOLDMAN BLOOD SUCKING SQUID holds at BAY including but not limited to all of its extensions in the market, i.e. ASSOCIATES! <Interest expense — Interest expense was $2.5 million and $3.0 million in 2011 and 2010, and $517,000 and $732,000 during the fourth quarter of those same periods. Interest expense is related to interest incurred on our Senior Notes, finance obligations, line of credit, and capital leases. The decrease in interest expense in 2011 is primarily a result of extinguishments of our Senior Notes, partially offset by an increase from our finance obligations and line of credit.> Read more here: http://www.bradenton.com/2012/03/02/3913215/overstockcom-reports-fy-and-q4.html#storylink=cpy Link to comment Share on other sites More sharing options...
Eric50 Posted March 2, 2012 Share Posted March 2, 2012 Sanjeev - I don't think you can compare Zappos with Overstock. Zappos has/had a far superior business model and a much more competent management. Its business model is based on very liberal free return policies: you can order 10 pairs of shoes and return them for free no questions asked. Margins are also much higher as they don't really compete on price. Bezos understood that years ago and tried to replicate it through endless.com as he could not implement those free return policies through the regular amazon website (you can't have different return policies across the site, you can't have the same liberal return policies for books). Then he got lucky a couple of years ago when the VCs backing zappos wanted/needed to get out quickly. That allowed him to get a key competitor at a decent price (I think he overpaid but it's arguable that it will pay off over time). Tony Hsieh is a far better CEO than Patrick Byrne. He has a clear strategy and is focused on execution. We can't really say that of Byrne.... Having said that, I agree that ostk is dirt cheap. All we need (I own a few shares) is someone at the top with at least some kind of discipline... Eric Link to comment Share on other sites More sharing options...
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