1
Financial Statement Analysis
Overstock.com
War
2
Overstock.com
Overview of Business
What do they do?
www.overstock.com
Performance?
http://finance.yahoo.com/q/bc?s=OSTK&t=5y&l=on&z=l&q=l&c=
3
Overstock.com:
Overview of Business
Key success factors?
Key risks factors?
4
1. Revenue Recognition
2. Reserve for Returns
3. Allowance for Doubtful Accounts
4. Allowance for Obsolete and Damaged
Inventory
5. Accounting for Income Taxes
6. Valuation of Long–Lived and Intangible
Assets and Goodwill
5
238.9/91.8 – 1 = 160%
What is the gross merchandise sales growth
rate?
294.8/154.5 – 1 = 91%
Income Statement – Annual
Overstock.com Inc.
Restated as of: 12/31/03 12/31/02 12/31/03 12/31/02
Source Document: 10–K 10–K 10–K 10–K
Direct Revenue 136.6 77.9 136.6 77.9
Gross
As Reported
GAAP vs. Gross Basis Sales
(see reconciliation on page 4 of 10K)
7Source: Nissim and Penman (2001)
Mean reversion in sales
growth rate
8
What is the GAAP based growth rate in gross
profit?
25.3/18.3 = 39%
What is the gross basis growth rate in gross
profit?
25.3/18.3 = 39%
GAAP Basis vs. Gross Basis
Gross Profit
Income Statement – Annual
Overstock.com Inc.
Restated as of: 12/31/03 12/31/02 12/31/03 12/31/02
Source Document: 10–K 10-K 10-K 10–K
Direct Revenue 136.6 77.9 136.6 77.9
Comm./Partner 100.8 12.4 140.7 63.4
Warehouse 1.5 1.5 1.5 1.5
Sales Returns and Discounts 16.0 11.7
Gross Revenue 294.8 154.5
Gross
As Reported
10
Accounting Performance vs.
Economic Performance
Overstock.com is ‘investing’ significant
amounts to fuel sales growth, customer
loyalty and brand awareness.
Most of these amounts must be