Overstock.com Inc. (NASDAQ:OSTK) filed Quarterly Report for the period ended 2012-03-31.
Overstock.com has a market cap of $134.7 million; its shares were traded at around $5.67 with and P/S ratio of 0.1.
Highlight of Business Operations:The allowance for returns was $6.3 million and $10.9 million at March 31, 2012 and December 31, 2011 respectively. The decrease in allowance for returns at March 31, 2012 compared to December 31, 2011 is primarily due to decreased revenues due to seasonality.
We expense the costs of producing advertisements the first time the advertising takes place and expense the cost of communicating advertising in the period during which the advertising space or airtime is used. Internet advertising expenses are recognized as incurred based on the terms of the individual agreements, which are generally: 1) a commission for traffic driven to the Website that generates a sale or 2) a referral fee based on the number of clicks on keywords or links to our Website generated during a given period. Advertising expense is included in sales and marketing expenses and totaled $12.5 million and $12.9 million during the three months ended March 31, 2012 and 2011, respectively. Prepaid advertising, which consists primarily of prepaid advertising airtime, (included in Prepaids and other assets in the accompanying consolidated balance sheets) was $992,000 and $1.4 million at March 31, 2012 and December 31, 2011, respectively.
Our fulfillment partner business continues to become a larger share of our total revenues. Nearly 85% of our revenues were fulfilled by our fulfillment partners in Q1 2012. As a result, we are able to operate the business with less inventory and we are converting revenues into cash on average nearly eight days before we pay our suppliers. This has reduced the demands on our own capital to operate the business. It has helped us to generate positive operating cash flows on a trailing twelve month basis every quarter for the past several years. Our working capital improved from $(14.1) million at December 31, 2011 to $(9.0) million at March 31. 2012.
While we believe that the cash and cash equivalents currently on hand, amounts available under our credit facility and expected cash flows from future operations will be sufficient to continue operations for at least the next twelve months; we may require additional financing. Our $20 million credit facility with U.S. Bank is scheduled to terminate on December 31, 2012. Although we have $20 million on deposit with U.S. Bank, and may repay and terminate the facility, we may attempt to renegotiate the facility or replace it. There can be no assurance we will be able to do so. There can be no assurance that if additional financing is necessary it will be available, or, if available, that such financing can be obtained on satisfactory terms. Failure to generate sufficient revenues, profits or to raise additional capital could have a material adverse effect on our operations and on our ability to achieve our intended business objectives. Any projections of future cash needs and cash flows are subject to substantial uncertainty.
The $9.2 million of net cash used in operating activities during the three months ended March 31, 2011 was primarily for payments of accounts payable of $28.0 million following the holiday season and a decrease in accrued liabilities of $3.3 million primarily due to a reduction of allowance for sales returns, partially offset by a decrease of $12.0 million in inventories and collection of accounts receivable of $5.7 million.
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