SEATTLE, Apr 23, 2008 (BUSINESS WIRE) -- Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results
for its first quarter ended March 31, 2008.
Operating cash flow was $1.04 billion for the trailing twelve
months, compared with $0.73 billion for the trailing twelve months
ended March 31, 2007. Free cash flow increased 51% to $0.79 billion
for the trailing twelve months, compared with $0.52 billion for the
trailing twelve months ended March 31, 2007.
Common shares outstanding plus shares underlying stock-based
awards outstanding totaled 435 million on March 31, 2008, compared
with 430 million a year ago.
Net sales increased 37% to $4.13 billion in the first quarter,
compared with $3.02 billion in first quarter 2007. Excluding the $0.18
billion favorable impact from year-over-year changes in foreign
exchange rates throughout the quarter, net sales grew 31% compared
with first quarter 2007.
Operating income increased 36% to $198 million in the first
quarter, compared with $145 million in first quarter 2007. Excluding
the $14 million favorable impact from year-over-year changes in
foreign exchange rates throughout the quarter, operating income grew
27% compared with first quarter 2007.
Net income increased 30% to $143 million in the first quarter, or
$0.34 per diluted share, compared with net income of $111 million, or
$0.26 per diluted share, in first quarter 2007.
"Our sales growth this quarter was driven by low prices and
millions of in-stock items available for immediate shipment," said
Jeff Bezos, founder and CEO of Amazon.com. "We're grateful to our
customers."
Highlights
-- Kindle selection continues to grow - with more than 115,000
titles now available, up from 90,000 at launch.
-- Amazon Web Services (AWS) launched Elastic IP addresses and
the ability to provide compute instances in multiple
Availability Zones, two new features that enable Amazon
Elastic Compute Cloud (EC2) developers to build even more
powerful and fault-resilient applications in the cloud.
-- Over 370,000 developers have registered to use AWS, up more
than 35,000 from last quarter.
-- The Company launched Amazon TextBuyIt (www.textbuyit.com), a
service that lets customers use text messages to find and buy
products sold on Amazon.com. With the addition of TextBuyIt to
the existing mobile offering, customers can now shop, compare
prices and buy from virtually anywhere they are with any
mobile device.
-- The number of sellers using Fulfillment by Amazon increased by
more than 50% compared with fourth quarter 2007.
-- North America segment sales, representing the Company's U.S.
and Canadian sites, were $2.13 billion, up 31% from first
quarter 2007.
-- International segment sales, representing the Company's U.K.,
German, Japanese, French and Chinese sites, were $2.01
billion, up 44% from first quarter 2007, and increased to 49%
of worldwide net sales compared with 46%. Excluding the
favorable impact from year-over-year changes in foreign
exchange rates throughout the quarter, International sales
grew 31%.
-- Worldwide Media sales grew 28% to $2.54 billion in first
quarter 2008, compared with $1.99 billion in first quarter
2007.
-- Worldwide Electronics & Other General Merchandise sales grew
56% to $1.48 billion in first quarter 2008, compared with
$0.95 billion in first quarter 2007, and increased to 36% of
worldwide net sales compared with 31%.
Financial Guidance
The following forward-looking statements reflect Amazon.com's
expectations as of April 23, 2008. Results may be materially affected
by many factors, such as fluctuations in foreign exchange rates,
changes in global economic conditions and consumer spending, world
events, the rate of growth of the Internet and online commerce, and
the various factors detailed below.
Second Quarter 2008 Guidance
-- Net sales are expected to be between $3.875 billion and $4.075
billion, or to grow between 34% and 41% compared with second
quarter 2007.
-- Operating income is expected to be between $120 million and
$160 million, or to grow between 3% and 38% compared with
second quarter 2007. This guidance includes approximately $80
million for stock-based compensation and amortization of
intangible assets, and it assumes, among other things, that no
additional business acquisitions or investments are concluded
and that there are no further revisions to stock-based
compensation estimates.
Full Year 2008 Expectations
-- Net sales are expected to be between $19.1 billion and $20.0
billion, or to grow between 29% and 35% compared with 2007.
-- Operating income is expected to be between $740 million and
$940 million, or to grow between 13% and 43% compared with
2007. This guidance includes approximately $285 million for
stock-based compensation and amortization of intangible
assets, and it assumes, among other things, that no additional
business acquisitions or investments are concluded and that
there are no further revisions to stock-based compensation
estimates.
A conference call will be webcast live today at 2 p.m. PT/5 p.m.
ET, and will be available for at least three months at
www.amazon.com/ir. This call will contain forward-looking statements
and other material information regarding the Company's financial and
operating results.
These forward-looking statements are inherently difficult to
predict. Actual results could differ materially for a variety of
reasons, including, in addition to the factors discussed above, the
amount that Amazon.com invests in new business opportunities and the
timing of those investments, the mix of products sold to customers,
the mix of net sales derived from products as compared with services,
the extent to which we owe income taxes, competition, management of
growth, potential fluctuations in operating results, international
growth and expansion, the outcomes of legal proceedings and claims,
fulfillment center optimization, risks of inventory management,
seasonality, the degree to which the Company enters into, maintains
and develops commercial agreements, acquisitions and strategic
transactions, and risks of fulfillment throughput and productivity.
Other risks and uncertainties include, among others, risks related to
new products, services and technologies, system interruptions,
significant indebtedness, government regulation and taxation, payments
and fraud. More information about factors that potentially could
affect Amazon.com's financial results is included in Amazon.com's
filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K for the year ended December 31, 2007, and
subsequent filings.
About Amazon.com
Amazon.com, Inc., (NASDAQ:AMZN), a Fortune 500 company based in
Seattle, opened on the World Wide Web in July 1995 and today offers
Earth's Biggest Selection. Amazon.com, Inc. seeks to be Earth's most
customer-centric company, where customers can find and discover
anything they might want to buy online, and endeavors to offer its
customers the lowest possible prices. Amazon.com and other sellers
offer millions of unique new, refurbished and used items in categories
such as books, movies, music & games, digital downloads, electronics &
computers, home & garden, toys, kids & baby, grocery, apparel, shoes &
jewelry, health & beauty, sports & outdoors, tools, and auto &
industrial.
Amazon Web Services provides Amazon's developer customers with
access to in-the-cloud infrastructure services based on Amazon's own
back-end technology platform, which developers can use to enable
virtually any type of business. Examples of the services offered by
Amazon Web Services are Amazon Elastic Compute Cloud (Amazon EC2),
Amazon Simple Storage Service (Amazon S3), Amazon SimpleDB, Amazon
Simple Queue Service (Amazon SQS), Amazon Flexible Payments Service
(Amazon FPS) and Amazon Mechanical Turk.
Amazon and its affiliates operate websites, including
www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp,
www.amazon.fr, www.amazon.ca, and the Joyo Amazon websites at
www.joyo.cn and www.amazon.cn.
As used herein, "Amazon.com," "we," "our" and similar terms
include Amazon.com, Inc., and its subsidiaries, unless the context
indicates otherwise.
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Three Months Twelve Months
Ended Ended
March 31, March 31,
---------------- ----------------
2008 2007 2008 2007
-------- ------- ------- --------
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD $ 2,539 $1,022 $ 748 $ 507
OPERATING ACTIVITIES:
Net income 143 111 508 249
Adjustments to reconcile net income
to net cash from operating
activities:
Depreciation of fixed assets,
including internal-use software
and website development, and
other amortization 65 62 249 227
Stock-based compensation 54 34 205 124
Other operating expense, net 6 - 15 7
Losses (gains) on sales of
marketable securities, net (3) - (3) (3)
Remeasurements and other (1) 3 7 (8)
Deferred income taxes (19) 2 (119) 14
Excess tax benefits from stock-
based compensation (64) (24) (297) (119)
Changes in operating assets and
liabilities:
Inventories 148 126 (281) (189)
Accounts receivable, net and other 139 66 (182) (87)
Accounts payable (1,003) (602) 528 241
Accrued expenses and other (125) (58) 362 248
Additions to unearned revenue 79 45 277 198
Amortization of previously
unearned revenue (64) (44) (230) (176)
-------- ------- ------- --------
Net cash provided by (used in)
operating activities (645) (279) 1,039 726
INVESTING ACTIVITIES:
Purchases of fixed assets, including
internal-use software and website
development (61) (34) (251) (205)
Acquisitions, net of cash acquired,
and other (355) (1) (430) (4)
Sales and maturities of marketable
securities and other investments 271 784 758 2,340
Purchases of marketable securities
and other investments (382) (514) (798) (2,314)
-------- ------- ------- --------
Net cash provided by (used in)
investing activities (527) 235 (721) (183)
FINANCING ACTIVITIES:
Proceeds from exercises of stock
options 2 9 85 37
Excess tax benefits from stock-based
compensation 64 24 297 119
Common stock repurchased - (248) - (500)
Proceeds from long-term debt and
other 52 - 76 54
Repayments of long-term debt and
capital lease obligations (26) (17) (83) (44)
-------- ------- ------- --------
Net cash provided by (used in)
financing activities 92 (232) 375 (334)
Foreign-currency effect on cash and
cash equivalents 37 2 55 32
-------- ------- ------- --------
Net increase (decrease) in cash
and cash equivalents (1,043) (274) 748 241
-------- ------- ------- --------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 1,496 $ 748 $1,496 $ 748
======== ======= ======= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 46 $ 43 $ 70 $ 66
Cash paid for income taxes 8 3 28 13
Fixed assets acquired under capital
leases and other financing
arrangements 15 11 78 76
Fixed assets acquired under build-
to-suit leases 4 - 19 -
AMAZON.COM, INC.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
Three Months
Ended
March 31,
---------------
2008 2007
------- -------
Net sales $4,135 $3,015
Cost of sales 3,179 2,296
------- -------
Gross profit 956 719
Operating expenses (1):
Fulfillment 354 260
Marketing 103 72
Technology and content 234 186
General and administrative 61 56
Other operating expense, net 6 -
------- -------
Total operating expenses 758 574
------- -------
Income from operations 198 145
Interest income 26 20
Interest expense (22) (19)
Other income, net 3 -
Remeasurements and other 2 (2)
------- -------
Total non-operating income (expense) 9 (1)
------- -------
Income before income taxes 207 144
Provision for income taxes 62 33
Equity-method investment activity, net of tax 2 -
------- -------
Net income $ 143 $ 111
======= =======
Basic earnings per share $ 0.34 $ 0.27
======= =======
Diluted earnings per share $ 0.34 $ 0.26
======= =======
Weighted average shares used in computation of
earnings per share:
Basic 417 412
======= =======
Diluted 426 420
======= =======
(1) Includes stock-based compensation as follows:
Fulfillment $ 11 $ 7
Marketing 2 1
Technology and content 31 19
General and administrative 10 7
AMAZON.COM, INC.
Segment Information
(in millions)
(unaudited)
Three Months
Ended
March 31,
---------------
2008 2007
------- -------
North America
Net sales $2,126 $1,622
Cost of sales 1,557 1,183
------- -------
Gross profit 569 439
Direct segment operating expenses (1) 439 353
------- -------
Segment operating income $ 130 $ 86
======= =======
International
Net sales $2,009 $1,393
Cost of sales 1,622 1,113
------- -------
Gross profit 387 280
Direct segment operating expenses (1) 259 187
------- -------
Segment operating income $ 128 $ 93
======= =======
Consolidated
Net sales $4,135 $3,015
Cost of sales 3,179 2,296
------- -------
Gross profit 956 719
Direct segment operating expenses 698 540
------- -------
Segment operating income 258 179
Stock-based compensation (54) (34)
Other operating expense, net (6) -
------- -------
Income from operations 198 145
Total non-operating income (expense), net 9 (1)
Provision for income taxes (62) (33)
Equity-method investment activity, net of tax (2) -
------- -------
Net income $ 143 $ 111
======= =======
Segment Highlights:
Y/Y net sales growth:
North America 31% 30%
International 44 35
Consolidated 37 32
Y/Y gross profit growth:
North America 29% 29%
International 38 36
Consolidated 33 31
Y/Y segment operating income growth:
North America 52% 39%
International 36 61
Consolidated 44 50
Net sales mix:
North America 51% 54%
International 49 46
--------------------------
(1) A significant majority of our costs for "Technology and content"
are incurred in the United States and most of these costs are
allocated to our North America segment.
AMAZON.COM, INC.
Supplemental Net Sales Information
(in millions)
(unaudited)
Three Months
Ended
March 31,
---------------
2008 2007
------- -------
North America
Media $1,205 $ 990
Electronics and other general merchandise 826 564
Other 95 68
------- -------
Total North America 2,126 1,622
International
Media 1,338 1,000
Electronics and other general merchandise 655 383
Other 16 10
------- -------
Total International 2,009 1,393
Consolidated
Media 2,543 1,990
Electronics and other general merchandise 1,481 947
Other 111 78
------- -------
Total Consolidated $4,135 $3,015
======= =======
Y/Y Net Sales Growth:
North America:
Media 22% 21%
Electronics and other general merchandise 46 51
Other 40 17
Total North America 31 30
International:
Media 34% 31%
Electronics and other general merchandise 71 44
Other 58 150
Total International 44 35
Consolidated:
Media 28% 26%
Electronics and other general merchandise 56 48
Other 43 26
Total Consolidated 37 32
Y/Y Net Sales Growth Excluding Effect of Exchange
Rates:
International:
Media 22% 24%
Electronics and other general merchandise 56 34
Other 47 128
Total International 31 27
Consolidated:
Media 21% 23%
Electronics and other general merchandise 50 44
Other 41 25
Total Consolidated 31 29
Consolidated Net Sales Mix:
Media 61% 66%
Electronics and other general merchandise 36 31
Other 3 3
AMAZON.COM, INC.
Consolidated Balance Sheets
(in millions, except per share data)
March 31, December March 31,
31,
2008 2007 2007
----------- -------- -----------
ASSETS (unaudited) (unaudited)
Current assets:
Cash and cash equivalents $ 1,496 $ 2,539 $ 748
Marketable securities 655 573 672
Inventories 1,077 1,200 754
Accounts receivable, net and other 581 705 358
Deferred tax assets 156 147 68
----------- -------- -----------
Total current assets 3,965 5,164 2,600
Fixed assets, net 594 543 442
Deferred tax assets 280 260 225
Goodwill 392 222 196
Other assets 652 296 198
----------- -------- -----------
Total assets $ 5,883 $ 6,485 $ 3,661
=========== ======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,864 $ 2,795 $ 1,211
Accrued expenses and other 781 902 620
Current portion of long-term debt 906 17 16
----------- -------- -----------
Total current liabilities 3,551 3,714 1,847
Long-term debt 467 1,282 1,251
Other long-term liabilities 395 292 210
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value:
Authorized shares -- 500
Issued and outstanding shares --
none - - -
Common stock, $0.01 par value:
Authorized shares -- 5,000
Issued shares -- 432, 431, and
424
Outstanding shares -- 417, 416,
and 409 4 4 4
Treasury stock, at cost (500) (500) (500)
Additional paid-in capital 3,191 3,063 2,586
Accumulated other comprehensive
income 7 5 3
Accumulated deficit (1,232) (1,375) (1,740)
----------- -------- -----------
Total stockholders' equity 1,470 1,197 353
----------- -------- -----------
Total liabilities and
stockholders' equity $ 5,883 $ 6,485 $ 3,661
=========== ======== ===========
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except per share data)
(unaudited)
----------------------------------------------------------------------
Y/Y %
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Change
-----------------------------------------------
Cash Flows and Shares
Operating cash flow --
trailing twelve months
(TTM) $ 726 $ 895 $ 1,001 $ 1,405 $ 1,039 43%
Purchases of fixed
assets (incl.
internal-use software
& website development)
-- TTM $ 205 $ 195 $ 201 $ 224 $ 251 22%
Free cash flow
(operating cash flow
less purchases of
fixed assets) -- TTM $ 521 $ 700 $ 800 $ 1,181 $ 788 51%
Free cash flow -- TTM
Y/Y growth 4% 87% 118% 143% 51% N/A
Common shares and
stock-based awards
outstanding 430 435 435 435 435 1%
Common shares
outstanding 409 413 415 416 417 2%
Stock-based awards
outstanding 21 22 20 18 18 (14%)
Stock-based awards
outstanding -- % of
common shares
outstanding 5.1% 5.3% 4.9% 4.4% 4.3% N/A
Results of Operations
Worldwide (WW) net
sales $ 3,015 $ 2,886 $ 3,262 $ 5,673 $ 4,135 37%
WW net sales -- Y/Y
growth, excluding F/X 29% 33% 38% 37% 31% N/A
WW net sales -- TTM $11,447 $12,193 $13,149 $14,835 $15,955 39%
WW net sales -- TTM Y/Y
growth, excluding F/X 27% 29% 32% 35% 35% N/A
Gross profit $ 719 $ 701 $ 762 $ 1,170 $ 956 33%
Gross profit -- Y/Y
growth, excluding F/X 28% 36% 36% 33% 28% N/A
Gross margin -- % of WW
net sales 23.8% 24.3% 23.4% 20.6% 23.1% N/A
Gross profit -- TTM $ 2,628 $ 2,820 $ 3,032 $ 3,353 $ 3,589 37%
Gross profit -- TTM Y/Y
growth, excluding F/X 22% 27% 31% 33% 33% N/A
Gross margin -- TTM %
of WW net sales 23.0% 23.1% 23.1% 22.6% 22.5% N/A
Operating income $ 145 $ 116 $ 123 $ 271 $ 198 36%
Operating margin -- %
of WW net sales 4.8% 4.0% 3.8% 4.8% 4.8% N/A
Operating income -- TTM
(1) $ 429 $ 498 $ 581 $ 655 $ 708 65%
Operating income -- TTM
Y/Y growth, excluding
F/X (4%) 29% 56% 61% 57% N/A
Operating margin -- TTM
% of WW net sales 3.7% 4.1% 4.4% 4.4% 4.4% N/A
Net income $ 111 $ 78 $ 80 $ 207 $ 143 30%
Net income per diluted
share $ 0.26 $ 0.19 $ 0.19 $ 0.48 $ 0.34 28%
Net income -- TTM $ 249 $ 306 $ 367 $ 476 $ 508 104%
Net income per diluted
share -- TTM $ 0.59 $ 0.72 $ 0.87 $ 1.12 $ 1.20 103%
Segments
North America Segment:
Net sales $ 1,622 $ 1,601 $ 1,788 $ 3,084 $ 2,126 31%
Net sales -- Y/Y
growth, excluding
F/X 30% 38% 42% 39% 31% N/A
Net sales -- TTM $ 6,244 $ 6,687 $ 7,219 $ 8,095 $ 8,598 38%
Gross profit $ 439 $ 434 $ 460 $ 698 $ 569 29%
Gross margin -- % of
North America net
sales 27.1% 27.1% 25.7% 22.6% 26.7% N/A
Gross profit -- TTM $ 1,623 $ 1,747 $ 1,864 $ 2,031 $ 2,160 33%
Gross margin -- TTM %
of North America net
sales 26.0% 26.1% 25.8% 25.1% 25.1% N/A
Operating income $ 86 $ 82 $ 79 $ 153 $ 130 52%
Operating margin -- %
of North America net
sales 5.3% 5.1% 4.4% 5.0% 6.1% N/A
Operating income --
TTM $ 254 $ 312 $ 369 $ 400 $ 445 75%
Operating income --
TTM Y/Y growth,
excluding F/X (13%) 27% 84% 73% 74% N/A
Operating margin --
TTM % of North
America net sales 4.1% 4.7% 5.1% 4.9% 5.2% N/A
International Segment:
Net sales $ 1,393 $ 1,285 $ 1,474 $ 2,589 $ 2,009 44%
Net sales -- Y/Y
growth, excluding
F/X 27% 26% 33% 35% 31% N/A
Net sales -- TTM $ 5,203 $ 5,506 $ 5,930 $ 6,740 $ 7,357 41%
Net sales -- TTM % of
WW net sales 45% 45% 45% 45% 46% N/A
Gross profit $ 280 $ 267 $ 302 $ 472 $ 387 38%
Gross margin -- % of
International net
sales 20.1% 20.8% 20.5% 18.2% 19.3% N/A
Gross profit -- TTM $ 1,005 $ 1,072 $ 1,168 $ 1,322 $ 1,430 42%
Gross margin -- TTM %
of International net
sales 19.3% 19.5% 19.7% 19.6% 19.4% N/A
Operating income $ 93 $ 83 $ 98 $ 175 $ 128 36%
Operating margin -- %
of International net
sales 6.7% 6.4% 6.6% 6.8% 6.4% N/A
Operating income --
TTM $ 306 $ 333 $ 380 $ 449 $ 483 58%
Operating income --
TTM Y/Y growth,
excluding F/X 9% 19% 37% 53% 44% N/A
Operating margin --
TTM % of
International net
sales 5.9% 6.0% 6.4% 6.7% 6.6% N/A
----------------------------------------------------------------------
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except inventory turnover, accounts payable days and
employee data)
(unaudited)
----------------------------------------------------------------------
Y/Y %
Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Change
-----------------------------------------------
Segments (continued)
Consolidated Segments:
Operating expenses $ 540 $ 536 $ 585 $ 842 $ 698 29%
Operating expenses --
TTM $ 2,068 $ 2,175 $ 2,283 $ 2,504 $ 2,661 29%
Operating income $ 179 $ 165 $ 177 $ 328 $ 258 44%
Operating margin -- %
of consolidated
sales 6.0% 5.7% 5.4% 5.8% 6.2% N/A
Operating income --
TTM (1) $ 560 $ 645 $ 749 $ 849 $ 928 66%
Operating income --
TTM Y/Y growth,
excluding F/X (2%) 24% 59% 64% 59% N/A
Operating margin --
TTM % of
consolidated net
sales 4.9% 5.3% 5.7% 5.7% 5.8% N/A
Supplemental North
America Segment Net
Sales:
Media $ 990 $ 923 $ 1,081 $ 1,637 $ 1,205 22%
Media -- Y/Y growth,
excluding F/X 21% 26% 37% 30% 21% N/A
Media -- TTM $ 3,757 $ 3,949 $ 4,245 $ 4,630 $ 4,845 29%
Electronics and other
general merchandise $ 564 $ 606 $ 631 $ 1,336 $ 826 46%
Electronics and other
general merchandise
-- Y/Y growth,
excluding F/X 51% 66% 54% 53% 46% N/A
Electronics and other
general merchandise
-- TTM $ 2,214 $ 2,456 $ 2,678 $ 3,139 $ 3,400 54%
Electronics and other
general merchandise
-- TTM % of North
America net sales 35% 37% 37% 39% 40% N/A
Other $ 68 $ 72 $ 76 $ 111 $ 95 40%
Other -- TTM $ 273 $ 282 $ 296 $ 326 $ 353 29%
Supplemental
International Segment
Net Sales:
Media $ 1,000 $ 910 $ 1,010 $ 1,692 $ 1,338 34%
Media -- Y/Y growth,
excluding F/X 24% 23% 27% 26% 22% N/A
Media -- TTM $ 3,722 $ 3,914 $ 4,167 $ 4,612 $ 4,950 33%
Electronics and other
general merchandise $ 383 $ 364 $ 448 $ 877 $ 655 71%
Electronics and other
general merchandise
-- Y/Y growth,
excluding F/X 34% 34% 45% 55% 56% N/A
Electronics and other
general merchandise
-- TTM $ 1,455 $ 1,560 $ 1,717 $ 2,071 $ 2,344 61%
Electronics and other
general merchandise
-- TTM % of
International net
sales 28% 28% 29% 31% 32% N/A
Other $ 10 $ 11 $ 16 $ 20 $ 16 58%
Other -- TTM $ 26 $ 33 $ 46 $ 57 $ 63 141%
Supplemental Worldwide
Net Sales:
Media $ 1,990 $ 1,833 $ 2,091 $ 3,329 $ 2,543 28%
Media -- Y/Y growth,
excluding F/X 23% 25% 32% 28% 21% N/A
Media -- TTM $ 7,479 $ 7,863 $ 8,412 $ 9,242 $ 9,795 31%
Electronics and other
general merchandise $ 947 $ 970 $ 1,079 $ 2,213 $ 1,481 56%
Electronics and other
general merchandise
-- Y/Y growth,
excluding F/X 44% 53% 51% 54% 50% N/A
Electronics and other
general merchandise
-- TTM $ 3,669 $ 4,015 $ 4,395 $ 5,210 $ 5,744 57%
Electronics and other
general merchandise
-- TTM % of WW net
sales 32% 33% 33% 35% 36% N/A
Other $ 78 $ 83 $ 92 $ 131 $ 111 43%
Other -- TTM $ 299 $ 315 $ 342 $ 383 $ 416 39%
Balance Sheet
Cash and marketable
securities (2) $ 1,565 $ 1,836 $ 2,087 $ 3,309 $ 2,395 53%
Inventory, net --
ending $ 754 $ 735 $ 970 $ 1,200 $ 1,077 43%
Inventory -- average
inventory % of TTM net
sales 6.0% 5.9% 6.2% 6.1% 5.9% N/A
Inventory turnover,
average -- TTM 12.9 12.9 12.4 12.7 13.1 1%
Fixed assets, net $ 442 $ 443 $ 491 $ 543 $ 594 34%
Accounts payable days
-- ending 47 54 62 57 53 12%
Other
Employees (full-time
and part-time;
excludes contractors &
temporary personnel) 14,000 14,400 15,800 17,000 17,800 27%
----------------------------------------------------------------------
Note: The attached "Financial and Operational Summary" is an integral
part of this Supplemental Financial Information and Business Metrics.
(1) In Q2 2006, a fee dispute with Toysrus.com reduced our operating
income by $20 million.
(2) Includes restricted cash, classified within "Other Assets" on our
consolidated balance sheet, of: $145 million Q1 2007, $171 million Q2
2007, $179 million Q3 2007, $197 million Q4 2007 and $245 million Q1
2008.
Amazon.com, Inc.
Financial and Operational Summary
(unaudited)
Quarterly Results of Operations (comparisons are with the
equivalent period of the prior year, unless otherwise stated)
Net Sales
-- Revenue is generally recorded gross for sales of our own
inventory and net for sales by other sellers. Amounts paid in
advance for subscription services, including amounts received
for Amazon Prime and other membership programs, are deferred
and recognized as revenue over the subscription term. For our
products with multiple elements, where a standalone value for
each element cannot be established, we recognize the revenue
and related cost over the estimated economic life of the
product.
-- Shipping revenue, which includes amounts earned from our
Amazon Prime membership and Fulfillment by Amazon programs,
was $192 million, up 27% from $151 million.
Cost of Sales
-- Cost of sales consists of the purchase price of products sold
by us, inbound and outbound shipping charges, packaging
supplies, and costs incurred in operating and staffing our
fulfillment and customer service centers on behalf of other
businesses.
-- Payment processing and related transaction costs, including
those associated with seller transactions, are classified in
"Fulfillment" on our consolidated statements of operations.
-- Shipping charges to receive products from our suppliers are
included in our inventory and recognized as "Cost of sales"
upon sale of products to our customers.
-- Outbound shipping costs totaled $320 million, up 35% from $238
million. Net shipping cost was $128 million, or 3.1% of net
sales, up 48% from $87 million, or 2.9% of net sales. One way
we offer lower prices is through free-shipping offers that
result in a net cost to us in delivery of products.
Operating Expenses
-- Depreciation expense for fixed assets, including amortization
of internal-use software and website development, was $71
million, up from $60 million. Depreciation is recorded on a
straight-line basis over the estimated useful lives of the
assets (generally two years or less for assets such as
internal-use software, two or three years for our technology
infrastructure, five years for furniture and fixtures, and ten
years for heavy equipment).
-- Stock-based compensation was $54 million, compared with $34
million. We utilize the accelerated, rather than a
straight-line, method for recognizing stock-based
compensation. Under this method, over 50% of the compensation
cost would be expensed in the first year of a typical
four-year vesting term. The increase in stock-based
compensation is primarily attributable to an increase in total
stock compensation value granted to our employees.
-- Operating expenses with and without stock-based compensation
are as follows:
Three Months Ended March Three Months Ended March
31, 2008 31, 2007
-------------------------- --------------------------
As Stock-Based As Stock-Based
Reported Compensation Net Reported Compensation Net
-------------------------- --------------------------
(in millions)
Operating
Expenses:
Fulfillment $ 354 $(11) $343 $ 260 $ (7) $253
Marketing 103 (2) 101 72 (1) 71
Technology and
content 234 (31) 203 186 (19) 167
General and
administrative 61 (10) 51 56 (7) 49
Other operating
expenses 6 - 6 - - -
-------- ------------ ---- -------- ------------ ----
Total
operating
expenses $ 758 $(54) $704 $ 574 $(34) $540
-------- ------------ ---- -------- ------------ ----
Year-over-year
Percentage
Growth:
Fulfillment 36% 36% 35% 33%
Marketing 43 42 34 31
Technology and
content 26 21 27 20
General and
administrative 10 5 24 10
Percent of Net
Sales:
Fulfillment 8.6% 8.3% 8.6% 8.4%
Marketing 2.5 2.4 2.4 2.3
Technology and
content 5.6 4.9 6.2 5.5
General and
administrative 1.5 1.2 1.9 1.6
Fulfillment
-- Certain of our fulfillment-related costs that are incurred on
behalf of other businesses are classified as cost of sales
rather than fulfillment.
-- The increase in fulfillment costs in absolute dollars relates
to variable costs corresponding with sales volume and
inventory levels; our mix of product sales; payment processing
and related transaction costs, including mix of payment
methods and costs from our guarantee for certain seller
transactions; and costs from expanding fulfillment capacity.
-- Additionally, because payment processing costs associated with
seller transactions are based on the gross purchase price of
underlying transactions, and payment processing and related
transaction costs are higher as a percentage of revenue versus
our retail sales, sales by sellers have higher fulfillment
costs as a percent of net sales.
-- We expanded our fulfillment capacity in Q1 2008 and throughout
2007 through gains in efficiencies and increases in leased
warehouse space. This expansion is designed to accommodate
greater selection and in-stock inventory levels and meet
anticipated shipment volumes from sales of our own products as
well as sales by sellers for whom we provide fulfillment
services.
Technology and Content
-- Technology and content expenses consist principally of payroll
and related expenses for employees involved in application
development, category expansion, editorial content, buying,
merchandising selection, and systems support, as well as costs
associated with the compute, storage and telecommunications
infrastructure.
-- We continue to invest in several areas of technology and
content including seller platforms, web services, and digital
initiatives, as well as expansion of new and existing product
categories. We are also investing in technology infrastructure
so that we can continue to enhance the customer experience and
improve our process efficiency and support our infrastructure
web services.
-- Certain costs relating to development of internal-use software
and website development, including development of software to
upgrade and enhance our websites and processes supporting our
business, are capitalized and amortized over two years.
-- During Q1 2008 and Q1 2007, we capitalized $57 million
(including $22 million acquired under business combinations
and $6 million of stock-based compensation) and $29 million
(including $4 million of stock-based compensation) of costs
associated with internal-use software and website development.
Amortization of previously capitalized amounts was $33 million
and $27 million for Q1 2008 and Q1 2007.
Stockholders' Equity and Stock-Based Awards
-- As of March 31, 2008, outstanding common shares plus shares
underlying outstanding stock-based awards were 435 million, up
from 430 million as of March 31, 2007. This total includes all
stock-based awards outstanding, without regard for estimated
forfeitures, consisting of vested and unvested awards and
in-the-money and out-of-the-money stock options.
-- As of March 31, 2008, stock-based awards outstanding were 18
million, or 4.3% of shares outstanding, down from 21 million,
or 5.1% of outstanding shares. Outstanding stock awards
consist of 16 million shares of restricted stock units and 2
million stock options with a $22.47 weighted-average exercise
price.
-- We granted stock awards, which consist primarily of restricted
stock units, representing 1.0 million shares of common stock
during both Q1 2008 and Q1 2007.
-- We repurchased 6.3 million shares of our common stock for $248
million in Q1 2007.
-- In February 2008, our Board of Directors authorized a 24-month
program to repurchase up to an aggregate of $1 billion of our
common stock.
Other Operating Expense, Net
-- Other operating expense, net, primarily includes costs related
to intangibles amortization.
Other Income (Expense), Net
-- Other income (expense), net, consists primarily of gains or
losses on marketable securities, foreign-currency transaction
gains and losses, and other miscellaneous gains and losses.
-- Foreign-currency transaction gains and losses primarily relate
to the interest payable on our 6.875% PEACS, as well as
foreign-currency gains and losses on cross-currency
investments. Since interest payments on our 6.875% PEACS are
settled in Euros, the balance of interest payable is subject
to gains or losses resulting from changes in exchange rates
between the U.S. Dollar and Euro between reporting dates and
payment.
Remeasurements and Other
-- The remeasurement of our 6.875% PEACS and intercompany
balances can result in significant gains and losses associated
with the effect of movements in currency exchange rates.
Income Taxes
-- Our provision for interim periods is determined using an
estimate of our annual effective tax rate. Each quarter we
update our estimate of the annual effective tax rate, and if
our estimated tax rate changes we make a cumulative
adjustment. The 2008 annual effective tax rate is estimated to
be lower than the 35% U.S. federal statutory rate primarily
due to anticipated earnings of our subsidiaries outside of the
U.S. in jurisdictions where our effective tax rate is lower
than in the U.S.
-- A majority of our tax provision is non-cash. We have current
tax benefits and net operating losses relating to excess
stock-based compensation that are being utilized to reduce our
taxable income. As such, cash paid for income taxes in Q1 2008
was $8 million compared with $3 million in Q1 2007.
-- We estimate our 2008 effective tax rate will be approximately
30% and cash taxes paid will be less than $75 million.
However, our effective tax rate is subject to significant
variation due to several factors, including variability in
accurately predicting the amount and mix of taxable income by
jurisdiction and business acquisitions or investments. We
endeavor to optimize our global taxes on a cash basis, rather
than on a financial reporting basis.
-- We file U.S. federal income tax returns as well as income tax
returns in various states and foreign jurisdictions. We are
under examination, or may be subject to examination, by the
Internal Revenue Service ("IRS") for calendar years 2004
through 2007. Additionally, any net operating losses that were
generated in prior years and utilized in these years may also
be subject to examination by the IRS. We are under
examination, or may be subject to examination, in the
following major jurisdictions for the years specified:
Kentucky for 2003 through 2007, France for 2005 through 2007,
Germany for 2003 through 2007, Luxembourg for 2003 through
2007 and the United Kingdom for 1999 through 2007. In
addition, in 2007, Japanese tax authorities assessed income
tax, including penalties and interest, of approximately $106
million against one of our U.S. subsidiaries for the years
2003 through 2005. We believe that these claims are without
merit and are disputing the assessment. Further proceedings on
the assessment will be stayed during negotiations between U.S.
and Japanese authorities over the double taxation issues the
assessment raises, and we have provided bank guarantees to
suspend enforcement of the assessment. We also may be subject
to income tax examination by Japanese tax authorities for 2006
and 2007.
Foreign Exchange
-- The effect on our consolidated statements of operations from
year-over-year changes in exchange rates versus the U.S.
dollar throughout the period is as follows:
Three Months Ended March 31,
---------------------------------------------------
2008 2007
------------------------- -------------------------
At Exchange At Exchange
Prior Prior
Year Rate As Year Rate As
Rates Effect Reported Rates Effect Reported
(1) (2) (1) (2)
------- -------- -------- ------- -------- --------
(in millions)
Net sales $3,950 $ 185 $4,135 $2,931 $ 84 $3,015
Gross profit 921 35 956 702 17 719
Operating expenses 736 22 758 564 10 574
Income from
operations 184 14 198 138 7 145
Net interest income
and other (3) 7 - 7 1 - 1
Remeasurements and
other income
(expense) (4) (1) 3 2 (1) (1) (2)
Net income 132 11 143 106 5 111
Diluted earnings
per share $ 0.31 $0.03 $ 0.34 $ 0.25 $0.01 $ 0.26
(1) Represents the outcome that would have resulted had exchange
rates in the reported period been the same as those in effect in the
comparable prior year period for operating results, and if we did not
incur the variability associated with remeasurements for our 6.875%
PEACS and intercompany balances.
(2) Represents the increase or decrease in reported amounts
resulting from changes in exchange rates from those in effect in the
comparable prior year period for operating results, and if we did not
incur the variability associated with remeasurements for our 6.875%
PEACS and intercompany balances.
(3) Includes foreign-currency gains and losses on cross-currency
investments.
(4) Includes foreign-currency gains and losses on remeasurement of
6.875% PEACS and intercompany balances.
Cash Flows and Balance Sheet
-- SFAS 123(R) requires tax benefits relating to excess
stock-based compensation to be presented as financing cash
flows. Excess tax benefits from stock-based compensation were
$64 million in Q1 2008 and $297 million for the trailing
twelve months, compared with $24 million in Q1 2007 and $119
million for the trailing twelve months ended March 31, 2007.
-- Our cash, cash equivalents and marketable securities of $2.15
billion, at fair value, primarily consist of cash, investment
grade securities and AAA-rated money market mutual funds.
Included are amounts held in foreign currencies of $1.05
billion, primarily in Euros, British Pounds and Japanese Yen.
-- Other assets include, among other things, $245 million of
marketable securities restricted for longer than one year,
$171 million of certain equity investments, $154 million of
other intangibles, net, and $39 million of intellectual
property rights. Marketable securities restricted for longer
than one year relate primarily to collateralization of bank
guarantees and debt for our international operations.
-- We acquired certain companies during Q1 2008 for an aggregate
purchase price of $319 million. Acquired intangibles totaled
$134 million and have estimated useful lives of between two
and ten years. The excess of purchase price over the fair
value of the net assets acquired was $167 million and is
classified as "Goodwill" on our consolidated balance sheets.
The purchase price allocation for each acquisition is
preliminary and subject to revision, and any change to the
fair value of net assets acquired will lead to a corresponding
change to the purchase price allocable to goodwill. The
results of operations of the acquired companies have been
included in our consolidated results from each closing date
forward. The effect of these acquisitions on consolidated net
sales and operating income for Q1 2008 was not significant.
-- Accrued expenses and other current liabilities include, among
other things, liabilities for gift certificates of $205
million, professional fees, marketing activities, workforce
costs - including accrued payroll, vacation and other benefits
- and unearned revenue of $120 million, which is recorded when
payments are received in advance of performing our service
obligations and is recognized over the service period.
-- Long-term debt primarily includes the following:
March December
31, 31,
2008 2007
------- --------
(in millions)
4.75% Convertible Subordinated Notes due February 2009
(1) $ 899 $ 899
6.875% PEACS due February 2010 (2) 379 350
Other long-term debt 95 50
------- --------
1,373 1,299
Less current portion of long-term debt (906) (17)
------- --------
$ 467 $1,282
======= ========
(1) The 4.75% Convertible Subordinated Notes are convertible into
our common stock at the holders' option at a conversion price of
$78.0275 per share. Total common stock issuable upon conversion of our
outstanding 4.75% Convertible Subordinated Notes is 11.5 million
shares, which is excluded from our calculation of earnings per share
as its effect is currently anti-dilutive. We have the right to redeem
the 4.75% Convertible Subordinated Notes, in whole or in part, by
paying the principal and a redemption premium, plus any accrued and
unpaid interest. At March 31, 2008, the redemption premium was 0.475%.
(2) The 6.875% Premium Adjustable Convertible Securities ("6.875%
PEACS") are convertible into our common stock at the holders' option
at a conversion price of EUR 84.883 per share ($134.01 per share,
based on the exchange rate as of March 31, 2008). Total common stock
issuable upon conversion of our outstanding 6.875% PEACS is
2.8 million shares, which is excluded from our calculation of earnings
per share as its effect is currently anti-dilutive. The U.S. Dollar
equivalent principal, interest and conversion price fluctuate based on
the Euro/U.S. Dollar exchange ratio. We have the right to redeem the
6.875% PEACS, in whole or in part, by paying the principal plus any
accrued and unpaid interest.
-- In February 2008, our Board of Directors authorized a debt
repurchase program pursuant to which the Company may from time
to time repurchase (through open market repurchases or private
transactions), redeem or otherwise retire, up to all of its
outstanding 4.75% Convertible Subordinated Notes due 2009 (of
which $899 million in principal is outstanding) and 6.875%
PEACS due 2010 (of which EUR 240 million in principal is
outstanding).
-- Other long-term liabilities include tax contingencies,
long-term capital lease obligations, deferred tax liabilities,
non-current unearned revenue and other long-term obligations.
-- We capitalized construction in progress of $4 million and
recorded a corresponding long-term liability related to our
Seattle corporate office space subject to leases scheduled to
begin in 2010 and 2011. Where we are involved in the
construction of structural improvements prior to the
commencement of the lease or take some level of construction
risk, we are considered the owner of the assets during the
construction period under generally accepted accounting
principles. Accordingly, as the landlord incurs the
construction project costs, the assets and corresponding
financial obligation are recorded in "Fixed assets, net" and
"Other long-term liabilities" on our consolidated balance
sheet. Once the construction is completed, if the lease meets
certain "sale-leaseback" criteria, we will remove the asset
and related financial obligation from the balance sheet and
treat the building lease as an operating lease. If upon
completion of construction, the project does not meet the
"sale-leaseback" criteria, the leased property will be treated
as a capital lease for financial reporting purposes.
Certain Definitions and Other
-- We present segment information for North America and
International. We measure operating results of our segments
using an internal performance measure of direct segment
operating expenses that excludes stock-based compensation and
other operating expense, each of which is not allocated to
segment results. Other centrally incurred operating costs are
fully allocated to segment results. Our operating results,
particularly for the International segment, are affected by
movements in foreign exchange rates. A significant majority of
our technology costs are incurred in the U.S. and most of them
are allocated to our North America segment.
-- The North America segment consists of amounts earned from
retail sales of products (including from sellers) and
subscriptions through North America-focused websites such as
www.amazon.com, www.audible.com, www.shopbop.com,
www.endless.com and www.amazon.ca; from our Amazon Prime
membership program; and from non-retail activities such as our
North America-focused Amazon Enterprise Solutions program,
Amazon Web Services, and marketing and promotional agreements.
This segment includes export sales from www.amazon.com and
www.amazon.ca.
-- The International segment consists of amounts earned from
retail sales of consumer products (including from sellers) and
subscriptions through internationally focused websites such as
www.amazon.co.uk, www.amazon.de, www.amazon.co.jp,
www.amazon.fr, and our Joyo Amazon websites at www.joyo.cn and
www.amazon.cn; from our Amazon Prime membership program; and
from non-retail activities such as internationally-focused
Amazon Enterprise Solutions program, marketing and promotional
agreements. This segment includes export sales from these
internationally based sites (including export sales from these
sites to customers in the U.S. and Canada), but excludes
export sales from www.amazon.com and www.amazon.ca.
-- We provide supplemental sales information within each segment
for three categories: Media, Electronics and Other General
Merchandise, and Other. Media consists of amounts earned from
retail sales from all sellers in categories such as books,
movies, music, digital downloads, software and video games
(including game consoles). Electronics and Other General
Merchandise consists of amounts earned from retail sales from
all sellers of items in categories not included in Media, such
as electronics and computers, devices, home and garden, toys,
kids and baby, grocery, apparel, shoes and jewelry, health and
beauty, sports and outdoors, tools, and auto and industrial.
The Other category consists of non-retail activities, such as
the Amazon Enterprise Solutions program, Amazon Web Services,
and miscellaneous marketing and promotional activities, such
as our co-branded credit card programs.
-- Operating cash flow is net cash provided by (used in)
operating activities, including cash outflows for interest and
excluding excess tax benefits from stock-based compensation.
Free cash flow is operating cash flow less cash outflows for
purchases of fixed assets, including internal-use software and
website development.
-- Operating cycle is number of days of sales in inventory plus
number of days of sales in trade accounts receivable minus
accounts payable days. Accounts payable days are calculated as
the quotient of ending accounts payable to cost of sales,
multiplied by the number of days in the period. Inventory
turns are calculated as the quotient of trailing-twelve-month
cost of sales to average inventory over five quarter ends.
-- Return on invested capital is trailing-twelve-month free cash
flow divided by average total assets less current liabilities
(excluding current portion of our long-term debt) over five
quarter ends.
-- References to customers mean customer accounts, which are
unique e-mail addresses, established either when a customer's
initial order is shipped or when a customer orders from other
sellers on our websites. Customer accounts exclude certain
customers, including DVD rental customers, customers
associated with certain of our acquisitions (including
Joyo.com customers), Amazon Enterprise Solutions program
customers, Amazon.com Payments customers, Amazon Web Services
customers, and the customers of select companies with whom we
have a technology alliance or marketing and promotional
relationship. Customers are considered active when they have
placed an order during the preceding twelve-month period.
-- References to sellers means seller accounts, which are
established when a seller receives an order from a customer
account. Seller accounts exclude Amazon Enterprise Solutions
sellers. Sellers are considered active when they have received
an order from a customer during the preceding twelve-month
period.
-- References to registered developers mean cumulative registered
developer accounts, which are established when potential
developers enroll with Amazon Web Services and receive a
developer access key.
-- References to units mean physical and digital units sold (net
of returns and cancellations) by us and sellers at Amazon.com
domains worldwide - such as www.amazon.com, www.amazon.co.uk,
www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca
and the Joyo Amazon websites at www.joyo.cn and www.amazon.cn,
as well as Amazon.com-owned items sold through non-Amazon.com
domains, such as books, music and movie items ordered from
Amazon.com's store at www.target.com. Units sold do not
include units associated with certain of our acquisitions,
Amazon.com gift certificates or DVD rentals.
SOURCE: Amazon.com, Inc.
Amazon.com Investor Relations
Rob Eldridge, 206-266-2171
ir@amazon.com
www.amazon.com/ir
or
Amazon.com Public Relations
Craig Berman, 206-266-7180
