SEC Company Response from BED BATH & BEYOND, INC. (NXH, BBBYW) (CIK 0001130713) (NXH) — Feb 18, 2011
BED BATH & BEYOND, INC. (NXH, BBBYW) (CIK 0001130713)
Date: Feb. 18, 2011 · CIK: 0001130713 · Accession: 0001104659-11-008332
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-49799
Referenced dates: February 11, 2011, January 11, 2011, July 9, 2010
Letter
United States Securities and Exchange Commission Division of Corporation Finance Overstock.com, Inc. Form 10-Q for the Quarterly Period Ended September 30, 2010 Filed October 29, 2010 File No. 000-49799
Dear Mr. Mew:
Below are the responses of Overstock.com, Inc. (the “Company,” “we”, “us”, or “our”), to comments received from the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated February 11, 2011, with respect to the Company’s Form 10-Q for the Quarterly Period Ended September 30, 2010 filed with the Commission on October 29, 2010, File No. 000-49799. This letter has been reviewed by KPMG LLP, our independent registered public accounting firm, including its national office.
For your convenience, each response is prefaced by the exact text of the Staff’s corresponding comment in bold text.
Form 10-Q for the quarterly period ended September 30, 2010
2. Accounting Policies, page 7
Sales returns allowance, page 12
1. We acknowledge your response to comment one to our letter dated January 11, 2011. Explain to us in detail the events that necessitated the significant provision recorded in the fourth quarter of 2007 which, in retrospect, led to the gross cumulative excess in the allowance at the end of fiscal 2007.
In Exhibit 1 we have provided the requested response.
2. Refer to response number 28 in your prior letter dated July 9, 2010. You discuss various initiatives you implemented in early and late 2009 which you believe had an impact on reducing returns. Further, you state, “We monitored the impact of these initiatives in 2009, particularly during Q4 2009 following the introduction of the new supplier agreement, and determined at the end of 2009 that there was sufficient evidence of a sustained downward trend in returns from these initiatives (versus temporary or seasonal trends) and accordingly reduced our sales returns allowance based upon our analysis of trailing twelve month results.” Based on the information you have provided us, it is not clear how you concluded a downward trend in returns became apparent by the end of fiscal 2009 or early 2010. In this regard, we note the following from your Exhibit 1:
· Actual returns as a percentage of revenue on a trailing twelve month (“TTM”) basis decreased 4% from the fourth quarter of fiscal 2008 as compared to the fourth quarter of fiscal 2009.
· Actual returns as a percentage of revenue on a TTM basis increased by 5% from the first, second and third quarter of fiscal 2008 as compared to the first, second and third quarter of fiscal 2009, respectively.
· Actual returns as a percentage of revenue on a TTM basis only decreased by 3% in the fourth quarter of 2009 from the third quarter of fiscal 2009.
Please explain to us how a nominal decrease in the 2009 fourth quarter actual return experience on a TTM basis combined with the above factors justified the reduction in the gross cumulative excess in your allowance at fiscal year-end 2009 by over 77%. Further, it would appear that the downtrend in returns manifested itself in the fourth quarter of fiscal 2009. If this is the case, it is unclear to us whether you had sufficient experience to adequately conclude there was a sustained downward trend in returns as of December 31, 2009. Please explain to us how you could have reasonably concluded that sufficient evidence of a sustained downward trend in returns from these initiatives was established at the date the allowance for sales returns was substantially reduced.
In Exhibit 1 we have provided the requested response.
3. Exhibit 1 indicates that the amount charged to your statements of operations (“the provision”) as a percentage of revenue was 11% in the fourth quarter of 2007, 9.8% in the fourth quarter of 2008, and 7.1% in the fourth quarter of 2009. In fiscal years 2007 and 2008, the quarterly provision as a percentage of revenue was highest in the fourth quarter consistent with your July 9, 2010 response to prior comment 28. In fiscal 2009, your fourth quarter provision as a percentage of revenue was the lowest of any quarter in fiscal 2009. Further, the provision recorded in the fourth fiscal quarter of 2009 is a full percentage point below the provision as a percentage of revenue on a TTM basis of 8.1% whereas in the fourth fiscal quarter of 2008 and 2007 the provision as a percentage of revenue significantly exceeded the provision as a percentage of revenues on a TTM basis. We also note from Exhibit 3 that the vast majority of sales returns related to your fourth fiscal quarter 2009 were processed before you filed your Form 10-K for the year ended December 31, 2009. In this regard, it appears 98% of the returns related to sales made in fourth fiscal quarter of 2009 were processed through the end of February 2010. Therefore, it would appear you could have factored into the fourth quarter 2009 provision the actual return experience subsequent to year end. Please explain why the provision for the fourth quarter of 2009 was uncharacteristically low.
In Exhibit 1 we have provided the requested response.
4. You disclose that your actual product returns have not differed materially from your estimates. It appears from the information you have provided that you were significantly over reserved at the end of fiscal 2007 and 2008 and continue to be over reserved, although less so, at the end of fiscal 2009. Please explain to us how you were able to conclude that the differences between your estimates and actual return experience were not material to your net income (loss).
In Exhibit 1 we have provided the requested response.
5. Please show us how you calculated the effect on net income (loss) if booked to actual reflected in your Exhibit 2a.
In Exhibit 2 (rows 15-19) we have provided the requested information.
6. You disclose on pages 57 and F-16 of your 2009 Form 10-K “We are not currently aware of any trends that would significantly change future returns experience compared to historical experience.” Please explain to us how you concluded that your reduction of the sales return reserve from 2008 to 2009 was due to no apparent material reason as suggested by your disclosure or revise your disclosure accordingly.
In Exhibit 1 we have provided the requested response.
7. You disclose in each of your quarterly reports for 2010 that the decrease in the sales returns reserve compared to December 31, 2009 is primarily due to decreased revenues due to seasonality. We are not clear how or to what extent your initiatives are having an impact. If your initiatives are having an impact on your allowance in 2010, please revise your disclosure as previously requested.
In Exhibit 1 we have provided the requested response.
Please note that in an effort to better understand the Staff’s views and perspectives on this matter, we have asked KPMG’s national office (Carmen Bailey and Douglas Besch) to participate in future discussions with the staff concerning this matter.
At your request the Company acknowledges that:
1. the company is responsible for the adequacy and accuracy of the disclosure in the filing;
2. staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
3. the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Please direct any questions that you have with respect to the foregoing to the undersigned at (801) 947-3242.
Very truly yours,
/s/ Stephen J. Chesnut
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CORRESP 1 filename1.htm 6350 South 3000 East 801.947.3100 phone Salt Lake City, Utah 84121 801.944.4629 fax February 18, 2011 Mr. Andrew Mew Accounting Branch Chief United States Securities and Exchange Commission Division of Corporation Finance Mail Stop 3561 100 F Street, NE Washington, D.C. 20549 Re: Overstock.com, Inc. Form 10-Q for the Quarterly Period Ended September 30, 2010 Filed October 29, 2010 File No. 000-49799 Dear Mr. Mew: Below are the responses of Overstock.com, Inc. (the “Company,” “we”, “us”, or “our”), to comments received from the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated February 11, 2011, with respect to the Company’s Form 10-Q for the Quarterly Period Ended September 30, 2010 filed with the Commission on October 29, 2010, File No. 000-49799. This letter has been reviewed by KPMG LLP, our independent registered public accounting firm, including its national office. For your convenience, each response is prefaced by the exact text of the Staff’s corresponding comment in bold text. Form 10-Q for the quarterly period ended September 30, 2010 2. Accounting Policies, page 7 Sales returns allowance, page 12 1. We acknowledge your response to comment one to our letter dated January 11, 2011. Explain to us in detail the events that necessitated the significant provision recorded in the fourth quarter of 2007 which, in retrospect, led to the gross cumulative excess in the allowance at the end of fiscal 2007. In Exhibit 1 we have provided the requested response. 2. Refer to response number 28 in your prior letter dated July 9, 2010. You discuss various initiatives you implemented in early and late 2009 which you believe had an impact on reducing returns. Further, you state, “We monitored the impact of these initiatives in 2009, particularly during Q4 2009 following the introduction of the new supplier agreement, and determined at the end of 2009 that there was sufficient evidence of a sustained downward trend in returns from these initiatives (versus temporary or seasonal trends) and accordingly reduced our sales returns allowance based upon our analysis of trailing twelve month results.” Based on the information you have provided us, it is not clear how you concluded a downward trend in returns became apparent by the end of fiscal 2009 or early 2010. In this regard, we note the following from your Exhibit 1: · Actual returns as a percentage of revenue on a trailing twelve month (“TTM”) basis decreased 4% from the fourth quarter of fiscal 2008 as compared to the fourth quarter of fiscal 2009. · Actual returns as a percentage of revenue on a TTM basis increased by 5% from the first, second and third quarter of fiscal 2008 as compared to the first, second and third quarter of fiscal 2009, respectively. · Actual returns as a percentage of revenue on a TTM basis only decreased by 3% in the fourth quarter of 2009 from the third quarter of fiscal 2009. Please explain to us how a nominal decrease in the 2009 fourth quarter actual return experience on a TTM basis combined with the above factors justified the reduction in the gross cumulative excess in your allowance at fiscal year-end 2009 by over 77%. Further, it would appear that the downtrend in returns manifested itself in the fourth quarter of fiscal 2009. If this is the case, it is unclear to us whether you had sufficient experience to adequately conclude there was a sustained downward trend in returns as of December 31, 2009. Please explain to us how you could have reasonably concluded that sufficient evidence of a sustained downward trend in returns from these initiatives was established at the date the allowance for sales returns was substantially reduced. 2 In Exhibit 1 we have provided the requested response. 3. Exhibit 1 indicates that the amount charged to your statements of operations (“the provision”) as a percentage of revenue was 11% in the fourth quarter of 2007, 9.8% in the fourth quarter of 2008, and 7.1% in the fourth quarter of 2009. In fiscal years 2007 and 2008, the quarterly provision as a percentage of revenue was highest in the fourth quarter consistent with your July 9, 2010 response to prior comment 28. In fiscal 2009, your fourth quarter provision as a percentage of revenue was the lowest of any quarter in fiscal 2009. Further, the provision recorded in the fourth fiscal quarter of 2009 is a full percentage point below the provision as a percentage of revenue on a TTM basis of 8.1% whereas in the fourth fiscal quarter of 2008 and 2007 the provision as a percentage of revenue significantly exceeded the provision as a percentage of revenues on a TTM basis. We also note from Exhibit 3 that the vast majority of sales returns related to your fourth fiscal quarter 2009 were processed before you filed your Form 10-K for the year ended December 31, 2009. In this regard, it appears 98% of the returns related to sales made in fourth fiscal quarter of 2009 were processed through the end of February 2010. Therefore, it would appear you could have factored into the fourth quarter 2009 provision the actual return experience subsequent to year end. Please explain why the provision for the fourth quarter of 2009 was uncharacteristically low. In Exhibit 1 we have provided the requested response. 4. You disclose that your actual product returns have not differed materially from your estimates. It appears from the information you have provided that you were significantly over reserved at the end of fiscal 2007 and 2008 and continue to be over reserved, although less so, at the end of fiscal 2009. Please explain to us how you were able to conclude that the differences between your estimates and actual return experience were not material to your net income (loss). In Exhibit 1 we have provided the requested response. 5. Please show us how you calculated the effect on net income (loss) if booked to actual reflected in your Exhibit 2a. In Exhibit 2 (rows 15-19) we have provided the requested information. 6. You disclose on pages 57 and F-16 of your 2009 Form 10-K “We are not currently aware of any trends that would significantly change future returns experience compared to historical experience.” Please explain to us how you concluded that your reduction of the sales return reserve from 2008 to 2009 was due to no apparent material reason as suggested by your disclosure or revise your disclosure accordingly. In Exhibit 1 we have provided the requested response. 3 7. You disclose in each of your quarterly reports for 2010 that the decrease in the sales returns reserve compared to December 31, 2009 is primarily due to decreased revenues due to seasonality. We are not clear how or to what extent your initiatives are having an impact. If your initiatives are having an impact on your allowance in 2010, please revise your disclosure as previously requested. In Exhibit 1 we have provided the requested response. Please note that in an effort to better understand the Staff’s views and perspectives on this matter, we have asked KPMG’s national office (Carmen Bailey and Douglas Besch) to participate in future discussions with the staff concerning this matter. At your request the Company acknowledges that: 1. the company is responsible for the adequacy and accuracy of the disclosure in the filing; 2. staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and 3. the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. Please direct any questions that you have with respect to the foregoing to the undersigned at (801) 947-3242. Very truly yours, /s/ Stephen J. Chesnut Stephen J. Chesnut Senior Vice President, Finance and Risk Management Overstock.com, Inc. 4 Exhibits: Exhibit 1 — Confidential Information to be delivered with Confidential Treatment Rule 83 document. Exhibit 2 — Confidential Information to be delivered with Confidential Treatment Rule 83 document. 5