Overstock.com Turns a Profit; Patrick Byrne Writes a Very Un-Patrick Byrne Letter to Shareholders
This morning we thought the KPMG audit team working on Overstock.com would continue slaving away through the extension deadline tomorrow to get that beast of 10-K finished. Well! Turns out they’ll be t of you tonight because the OSTK 10-K has been filed and, as promised Overstock shareholders, your humble servant Patrick Byrne and Co. are reporting an annual profit for the first time ever!
After such a high, restatement or not, we’re guessing Sam Antar definitely won’t be getting an apology but Gary Weiss has already noted a couple of things:
First–stop the presses! Overstock’s auditors at KPMG says that Overstock has insufficient internal controls.
Second, the Marin County District Attorney and four other DAs in northern California want the company to fork over $8.5 million to settle consumer ripoffs by Overstock. The company disagrees and is fighting it, so …. No, wait a moment, make that read “$7.5 million.”
First off, we share Gary’s shock — SHOCK! — on the insufficient internal controls revelation. Second – AUDITORS! We talked about this, remember? Read the 10-K carefully. Overstock’s “Risk Factors” section runs 25 pages for crissakes. A million fucking clams can’t get missed!
You know what though? Mistakes happen, so we’ll let it slide.
Oh, and about that letter to shareholders. Patsy doesn’t bring up former auditor Grant Thornton once, doesn’t quote Nietzsche, compiain about short sellers, bring up Facebook, or say anything remotely antagonizing (although on page 32, the Company’s states he still might).
This makes think: 1) Is he not feeling well? 2) We want the old Patrick back! Read for yourself:
In Q4 our revenues grew 27%, twice the ecommerce industry’s rate, and we earned $12.7 million in net income. In 2009 we grew revenues 6%, earned $7.7 million in net income, generated $46 million in operating cash flow, and generated $39 million in free cash flow. It’s nice to be profitable.
I am proud that, for the second year in a row, we rank number 2 in the NRF/Amex survey of American consumers, behind only LL Bean and ahead of Amazon, Zappos, eBay, Nordstrom, and many other fine firms.
As you may know, at the end of Q4 we engaged KPMG as our independent auditors, and announced that we were restating our FY 2008 and Q1, Q2 and Q3 2009 financial statements. I thank you for being patient with us as we worked through the questions raised by the SEC, the transition to the KPMG team, and the extra time it took to ensure that our financial statements are accurate.
I look forward to our conference call next Monday. Until then, I remain,
Your humble servant,
Patrick M. Byrne
Accounting News Roundup: Overstock.com Filing 10-K Late; Avoid Tax Related Status Updates on Facebook; IRS Is Getting to Most of Your Calls | 03.17.10
• Happy St. Patrick’s Day! Try to stay sober-ish at lunch today.
• Overstock.com Delays Filing 10-K, Reports Even More GAAP Violations, While Patrick Byrne Hides [White Collar Fraud]
Yesterday marked another SEC deadline that has come and gone, and if you’re one of those teams that has a client filing late, this means that your life is still not yours. Case in point, the KPMG team tasked with turning the ship around at Overstock.com still has some work to do as they filed form 12b-25 yesterday afternoon, notifying the SEC that the 10-K would be a tad late.
“Overstock.com nonchalantly lumped in its latest GAAP violations with other GAAP violations previously disclosed by the company on January 29, rather than separately disclosing them,” writes Sam Antar (emphasis original). Here are the new booboos:
Identification of amounts related to customer refunds and credits not properly included in the Company’s monthly reconciliation of customer refunds and credits to third party statements to determine the completeness and accuracy of returns expense.
The accounting for certain external audit fees on a ratable basis, instead of as incurred.
The recognition of co-branded credit card bounty revenue and promotion expense on an immediate recognition basis, instead of over time.
The late recognition of a reduction in the restructuring accrual for a new sublease and the recognition of interest expense related to the accretion of the restructuring accrual.
The Company reports that the filing will be delayed “until it has completed the restatement process and all procedures necessary,” to get things right. Patrick Byrne is nothing, if not thorough. Oh, and they mentioned that they’ll be reporting material weaknesses in their internal control system but, BUT! that they are still going to report their first annual profit. Shareholders can tepidly rejoice.
• IRS Uses Social Networks for Tax Probes [Web CPA]
The IRS has decided that the best way to discover your tax dodging ways is to look for clues in the one place no one can resist being completely and uncomfortably honest: Facebook.
Web CPA reports, “The Electronic Frontier Foundation has released documents uncovered from Freedom of Information Act requests, showing that the IRS as well as the FBI and other government agencies have been using social media sites like Facebook to collect information for investigations.”
Right. We suggest you stop talking about the six-figure 1099 you got that didn’t have any withholding and that you didn’t bother making estimated tax payments. Or roll the dice, lock up your privacy settings and continue with the financial TMI. Your choice.
• TIGTA: IRS on Track to Meet Goal of Answering 71% of Taxpayer Phone Calls After a 12-Minute Wait [TaxProf Blog]
The IRS is making good on its promise to ignore less than 30% of the phone calls from taxpayers needing help with their 2009 tax returns. They’re also getting to each caller in less than twelve minutes which is pretty good considering all the shit they’re putting up with these days (planes, packages full of personal items that might be a something, people having seizures, overzealous agents). If you’ve got an extra twelve minutes, call them up and thank them for their service.
SEC Deadline Watch: Filing Late? Your Life Isn’t Over
Hey CIT team, sorry to hear about the tardy filing. But you know what? Considering all that’s happened in the past year, filing a couple weeks late isn’t that bad. And besides, now that John Thain is running the show, all signs are pointing to a turnaround of epic proportions.
For the rest of you engagements teams that have a late filing, you might have been feeling like LOSERS last night and maybe you spent last night sobbing over it and now it’s carrying over to today. We’re here to give you permission to blow it off.
We realize that doesn’t help the attitude of your [insert pissed off team member] right now but you know what? Shit happens. They’ll get over it too. Will this affect your performance rating? Maybe. Maybe not. One thing is for sure though, there’s plenty of blame to go around so if you’re feeling guilty, knock it off. Will you get shipped off to an engagement where auditors go to die? It’s possible but you’ll probably be better off.
So maybe it feels like the end of the world right now but whatever your sitch is, we assure you, it’s not. This isn’t life or death. You’ve got to work at the IRS to make that claim.
CIT Unable To File Annual Report On Time Monday [Dow Jones via WSJ]
CIT Form 12b-25 [SEC]
Accounting News Roundup: Substance at Utah IRS Building Was ‘Non-hazardous’; Goldman Sachs Discloses Its Bad Publicity Risk; Resort Where Tiger Gave Apology Files for Bankruptcy | 03.02.10
• Suspicious substance at IRS called non-hazardous [KSL5]
After everything that has happened lately that is IRS-related, somehow that white powdery substance showing up at an IRS building and three employees having seizures is one giant coinky-dink.
• Goldman Discloses a New Risk: Bad Publicity [DealBook]
Team Jehovah pushed the button on its 10-K yesterday and because they’re the type of company to keep everything on the up and up, they put it out there that when every media source calls you out each time you break wind, you have a entirely new problem:
“Press coverage and other public statements that assert some form of wrongdoing, regardless of the factual basis for the assertions being made, often results in some type of investigation by regulators, legislators and law enforcement officials, or in lawsuits.
…adverse publicity…can also have a negative impact on our reputation and on the morale and performance of our employees, which could adversely affect our businesses and results of operations.”
You don’t think the name calling and nuclear testicle jokes can affect the bottom line? Think again. PwC bought it. Shouldn’t you?
• Sawgrass Resort Linked to Tiger Woods Apology Files Bankruptcy [Bloomberg]
At present, avoiding any contact with Tiger seems to be prudent.
SEC Deadline Watch: A Teaching Moment for Young Auditors
With the big SEC deadline on Monday there’s a good chance that some of you might be pulling some weekend hours. These are crucial moments where mistakes are not optional (especially food orders). Your attention to detail is paramount.
Being so close to a deadline can tempt some to cut corners, especially newbies. Things like ghost-ticking (btw, have we mentioned that everyone does this at some point?), plugging numbers and maybe not reading that draft of the 10-K as closely as you should are common shortcuts.
A reader passed along a link to an 8-K (no, not same form but the point is same you dolts) from 2005 for City National Bancshares Corporation of Newark, NJ and despite its age, it serves as an important teaching opportunity (emphasis unnecessary):
RESOLVED, a description of such 6% Non-cumulative Perpetual Preferred Stock, Series E, including the preferences and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption, all as set by the Board of Direc you fucking new when i asked you liartors of the Corporation, is set forth in the attached Certificate of Designation Establishing the 6% Non-cumulative Perpetual Preferred Stock, Series E and Fixing the Powers, Designations, Preferences and Relative, Participating, Optional and Other Special Rights, and the Qualifications, Limitations and Restrictions, of the 6% Non-cumulative Perpetual Preferred Stock, Series E.
Do you see what happens? Intentional? Accidental? Doesn’t matter now, but somehow this awesome embedded message slipped by someone and now it lives for all eternity at the SEC. The point is, you should probably read every word of the filing to find obvious mistakes like these. Whether you choose to suggest a correction to your client is another matter entirely. Personally, we could handle seeing more of this.