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Amazon.com Releases 2001 First Quarter Results; Net Sales Up 22% -- Strong Sales in Electronics and International; Gross Profit Up 43%

SEATTLE--April 24, 2001--

Company Takes Previously Announced Restructuring Charges

Amazon.com, Inc. (Nasdaq:AMZN) today announced financial results for the first quarter ended March 31, 2001.

Net sales were at the top end of the company's guidance, increasing 22 percent to $700 million, compared with $574 million in the first quarter of 2000. Gross profit for the quarter was $183 million, compared with $128 million for the first quarter of 2000, an increase of 43 percent. With another quarter of strong revenue growth, Electronics remained the company's second-biggest U.S. store, while net sales from Amazon.com's four international sites rose to $132 million, an increase of 76 percent from the first quarter of 2000.

Pro forma operating loss was $49 million in the first quarter of 2001, compared with a pro forma operating loss of $99 million in the first quarter of 2000. This marks the fifth sequential quarter in which pro forma absolute dollar operating losses have declined. The company posted a pro forma net loss of $0.21 per share, compared with $0.35 per share in the prior year quarter. A detailed reconciliation of GAAP to pro forma is included with the attached financial statements.

Net loss (GAAP) for the quarter was $234 million, or $0.66 per share. Excluding $114 million, which represents this quarter's portion of previously announced restructuring and other charges, and excluding a net gain of $23 million for certain other items, the net loss for the quarter would have been $143 million, or $0.40 per share. First quarter 2000 net loss was $308 million, or $0.90 per share. Amazon.com ended the quarter with $643 million in cash and marketable securities.

"This was another quarter of significant progress for Amazon.com

  • we are on track to reach our objective of pro forma operating profitability in the coming December quarter," said Warren Jenson, Amazon.com's chief financial officer.

"We're working hard every day to innovate, making Amazon.com even better for customers, and we're grateful for their response. Cumulative customer accounts grew to over 32 million, which includes 6 million international customers," said Jeff Bezos, founder and CEO of Amazon.com. "Again this quarter our customers responded with particularly strong purchase levels in our electronics, tools and kitchen stores and from our international sites."

On January 30, 2001, the company announced a reduction in its corporate staffing and a consolidation of its fulfillment and customer service center networks. The company took restructuring and other charges of $114 million during the first quarter of 2001, and expects to take additional restructuring and other charges of over $50 million during the second quarter of the year.

Highlights of First Quarter Results (all comparisons are with the prior year quarter)

  • Net sales rose 22% to $700 million.

  • Gross profit increased 43% to $183 million.

  • Worldwide, 3 million new customers ordered, including 1 million new International customers.

  • Pro forma loss from operations was $49 million, or 7% of net sales, compared with $99 million, or 17% of net sales.

  • Pro forma net loss was $0.21 per share, compared with $0.35 per share.

  • Net loss (GAAP) was $234 million, or $0.66 per share, down from $308 million, or $0.90 per share, an improvement of more than 24%. Excluding $114 million for this quarter's portion of previously announced restructuring and other charges, and excluding a net gain of $23 million for certain other items, the net loss would have been $143 million, or $0.40 per share.

  • Cash and marketable securities were $643 million at March 31, 2001.

Pro forma information regarding Amazon.com's results from operations is provided as a complement to results provided in accordance with accounting principles generally accepted in the United States (GAAP). Pro forma operating loss excludes stock-based compensation costs, amortization of goodwill and other intangibles, and impairment-related and other costs (including restructuring and other charges). Management measures the progress of the business using this pro forma information.

Pro forma net loss excludes stock-based compensation costs, amortization of goodwill and other intangibles, impairment-related and other costs (including restructuring and other charges), non-cash gains and losses, equity in losses of equity-method investees, and the cumulative effect of change in accounting principle. Operational Highlights

  • Amazon.com and Borders Group, Inc., (NYSE:BGP) announced an agreement to re-launch Borders.com as a co-branded Web site powered by Amazon.com's e-commerce platform.

  • Amazon Marketplace gross merchandise sales in March 2001 nearly doubled over December 2000, and over a quarter of a million Amazon.com customers have already made at least one purchase from Amazon Marketplace, a new service that allows customers to buy and sell used and collectible items directly from Amazon.com's product detail pages.

  • Amazon.com launched the Amazon Honor System (www.amazon.com/honor), now with over 1,000 participating Web sites, enabling online visitors to easily "tip" their favorite sites or to pay for access to premium content.

  • Amazon.com's Worldwide Digital Group launched three new initiatives: a Software Downloads store (www.amazon.com/software); a global alliance to offer the Adobe (Nasdaq:ADBE) Acrobat eBook Reader(TM) software in Amazon.com's e-Books store (www.amazon.com/ebooks), which offers nearly 2,000 Adobe Portable Document Format-based eBooks; and a new free music downloads community (www.amazon.com/music-downloads), designed to help fans discover the music of major-label and independent artists through thousands of free MP3 and Liquid Audio downloads and artist uploads.

  • The Trilogy/Fortune Survey on Customer Relations 2001 named Amazon.com the best non-Fortune 500 company overall at managing customer relations. Business Outlook

The following forward-looking statements reflect Amazon.com's expectations as of April 24, 2001. Given the potential changes in general economic conditions and consumer spending, the emerging nature of online retail, and the various other risk factors discussed below, actual results may differ materially. The company intends to continue its practice of not updating forward-looking statements other than in publicly available statements. Second Quarter 2001 Expectations

  • Net sales are expected to be between $650 million and $700 million.

  • Gross margin is expected to be between 23 and 26 percent of net sales.

  • Absolute pro forma operating losses are expected to be flat to slightly improved from the first quarter of 2001.

  • Cash and marketable securities are expected to be approximately $600 million as of June 30, 2001, and approximately $900 million at December 31, 2001. Full Year 2001 Expectations

  • Net sales are expected to increase between 20 and 30 percent over 2000.

  • Pro forma operating losses are expected to be between 3 and 6 percent of net sales for the year, with pro forma operating profitability expected in the fourth quarter.

  • Cash and marketable securities are expected to be approximately $900 million at December 31, 2001.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, among others, the rate of growth of the Internet and online commerce, customer spending patterns, 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 to services, risks of inventory management, the degree to which the company enters into service relationships and other strategic transactions, fluctuations in the value of securities and non-cash payments Amazon.com receives in connection with such transactions, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, Amazon.com's anticipated losses, significant amount of indebtedness, competition, seasonality, potential fluctuations in operating results, management of potential growth, system interruption, consumer trends, fulfillment center optimization, inventory, limited operating history, fraud and Amazon Payments, and new business areas, international expansion, business combinations, strategic alliances and strategic partnerships. 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, 2000. Conference Call

A conference call to discuss first quarter 2001 financial results and 2001 business outlook will be Webcast live on Tuesday, April 24, 2001, at 5:00 p.m. EDT/2:00 p.m. PDT. This conference call will be available at www.amazon.com/ir through June 30, 2001, and will contain forward-looking statements and other material information. About Amazon.com

Amazon.com (Nasdaq:AMZN) opened its virtual doors on the World Wide Web in July 1995 and today offers Earth's Biggest Selection, along with online auctions and free electronic greeting cards. Amazon.com seeks to be the world's most customer-centric company, where customers can find and discover anything they might want to buy online. Amazon.com lists millions of unique items in categories such as electronics, kitchen and housewares, books, music, DVDs, videos, camera and photo items, toys, software, computer and video games, tools and hardware, outdoor living and wireless products. Through Amazon.com zShops, any business or individual can sell virtually anything to Amazon.com's over 32 million cumulative customers, and with Amazon Payments, sellers can accept credit card transactions, avoiding the hassles of offline payments.

Amazon.com operates four international Web sites: www.amazon.fr, www.amazon.co.uk, www.amazon.de and www.amazon.co.jp. It also operates the Internet Movie Database (www.imdb.com), the Web's comprehensive and authoritative source of information on more than 250,000 movies and entertainment titles and one million cast and crew members dating from the birth of film in 1891 to 2003.

                           AMAZON.COM, INC.
                       Statements of Operations
                 (in thousands, except per share data)
                              (unaudited)

                                            Three Months Ended
                                                March 31,
                                          ----------------------
                                             2001         2000
                                          ---------    ---------    
Net sales                                 $ 700,356    $ 573,889 
Cost of sales                               517,759      445,755
                                          ---------    ---------
Gross profit                                182,597      128,134

Operating expenses:                      
 Fulfillment                                 98,248       99,463
 Marketing                                   36,638       40,648
 Technology and content                      70,284       61,244
 General and administrative                  26,028       26,045
 Stock-based compensation                     2,916       13,652
 Amortization of goodwill                
  and other intangibles                      50,831       82,955
 Impairment-related and other               114,260        2,019
                                          ---------    ---------
  Total operating expenses                  399,205      326,026
                                          ---------    ---------
Loss from operations                       (216,608)    (197,892)

Interest income                               9,950       10,126
Interest expense                            (33,748)     (27,621)
Other expense, net                           (3,884)      (4,774)
  Non-cash gains and losses, net             33,857         --
                                          ---------    ---------
  Net interest income (expense)          
   and other                                  6,175      (22,269)
                                          ---------    ---------
Loss before equity in losses             
 of equity-method investees                (210,433)    (220,161)

Equity in losses of                      
 equity-method investees, net               (13,175)     (88,264)
                                          ---------    ---------
Net loss before change in                
 accounting principle                      (223,608)    (308,425)

Cumulative effect of change              
 in accounting principle                    (10,523)        --
                                          ---------    ---------
Net loss                                  $(234,131)   $(308,425)
                                          =========    =========   
 Basic and diluted loss per share:                        
 Prior to cumulative effect of           
  change in accounting principle          $   (0.63)   $   (0.90)
 Cumulative effect of change             
  in accounting principle                     (0.03)        --
                                          ---------    ---------
                                          $   (0.66)   $   (0.90)
                                          =========    =========   
Shares used in computation               
 of basic and diluted loss per share        357,424      343,884
                                          =========    =========

    Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.


                           AMAZON.COM, INC.
                  Pro Forma Statements of Operations
                 (in thousands, except per share data)
                              (unaudited)

                                   Three Months Ended March 31, 2001  
                                ------------------------------------- 
                                                Pro Forma             
                                As Reported    Adjustments   Pro Forma
                                ------------------------------------- 

Net sales                         $ 700,356         --      $ 700,356 
Cost of sales                       517,759         --        517,759 
                                -------------------------------------
Gross profit                        182,597         --        182,597 

Operating expenses:
 Fulfillment                         98,248         --         98,248 
 Marketing                           36,638         --         36,638 
 Technology and content              70,284         --         70,284 
 General and administrative          26,028         --         26,028 
 Stock-based compensation             2,916       (2,916)        --   
 Amortization of goodwill
  and other intangibles              50,831      (50,831)        --   
 Impairment-related and other       114,260     (114,260)        --   
                                -------------------------------------
  Total operating expenses          399,205     (168,007)     231,198 
                                -------------------------------------
Loss from operations               (216,608)     168,007      (48,601)

Interest income                       9,950         --          9,950 
Interest expense                    (33,748)        --        (33,748)
Other expense, net                   (3,884)        --         (3,884)
Non-cash gains and losses, net       33,857      (33,857)        --   
                                -------------------------------------
  Net interest expense
   and other                          6,175      (33,857)     (27,682)
                                -------------------------------------
Loss before equity in losses
 of equity-method investees        (210,433)     134,150      (76,283)

Equity in losses of
 equity-method investees, net       (13,175)      13,175         --   

Net loss before change in
 accounting principle              (223,608)     147,325      (76,283)

Cumulative effect of change
 in accounting principle            (10,523)      10,523         --   
                                -------------------------------------
Net loss                          $(234,131)   $ 157,848    $ (76,283)
                                =====================================
Basic and diluted loss per share:
 Prior to cumulative effect
  of change in accounting
  principle                         $ (0.63)                $   (0.21)
 Cumulative effect of change
  in accounting principle             (0.03)                    --    
                                  ---------                 --------- 
                                    $ (0.66)                $   (0.21)
                                  =========                 ========= 
Shares used in computation
 of basic and diluted loss
 per share                          357,424                   357,424 
                                  =========                 ========= 


                                   Three Months Ended March 31, 2000  
                                ------------------------------------- 
                                                Pro Forma             
                                As Reported    Adjustments   Pro Forma
                                ------------------------------------- 

Net sales                         $ 573,889         --      $ 573,889 
Cost of sales                       445,755         --        445,755 
                                -------------------------------------
Gross profit                        128,134         --        128,134 

Operating expenses:                                                   
 Fulfillment                         99,463         --         99,463 
 Marketing                           40,648         --         40,648 
 Technology and content              61,244         --         61,244 
 General and administrative          26,045         --         26,045 
 Stock-based compensation            13,652      (13,652)        --   
 Amortization of goodwill                                             
  and other intangibles              82,955      (82,955)        --   
 Impairment-related and other         2,019       (2,019)        --   
                                -------------------------------------
  Total operating expenses          326,026      (98,626)     227,400 
                                -------------------------------------
Loss from operations               (197,892)      98,626      (99,266)

Interest income                      10,126         --         10,126 
Interest expense                    (27,621)        --        (27,621)
Other expense, net                   (4,774)        --         (4,774)
Non-cash gains and losses, net         --           --           --   
                                -------------------------------------
  Net interest expense                                                
   and other                        (22,269)        --        (22,269)
                                -------------------------------------
Loss before equity in losses                                          
 of equity-method investees        (220,161)      98,626     (121,535)

Equity in losses of                                                   
 equity-method investees, net       (88,264)      88,264         --   
                                -------------------------------------
Net loss before change in                                             
 accounting principle              (308,425)     186,890     (121,535)

Cumulative effect of change                                           
 in accounting principle               --           --           --   
                                -------------------------------------
Net loss                          $(308,425)   $ 186,890    $(121,535)
                                =====================================
Basic and diluted loss per share:                                   
 Prior to cumulative effect                                           
  of change in accounting                                             
  principle                       $   (0.90)                $   (0.35)
 Cumulative effect of change                                          
  in accounting principle             --                         --   
                                  ---------                 --------- 
                                  $   (0.90)                $   (0.35)
                                  =========                 ========= 
Shares used in computation                                            
 of basic and diluted loss                                            
 per share                          343,884                   343,884 
                                  =========                 ========= 

    Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.

                           AMAZON.COM, INC.
                          Segment Information
                            (in thousands)
                              (unaudited)

                            Three Months Ended March 31, 2001
                   ---------------------------------------------------
                           U.S. Retail
                   ------------------------
                   Books,  Electronics,
                   Music     Tools
                  and DVD/    and                              Consol-
                   Video    Kitchen  Total    Int'l  Services  idated
                   ---------------------------------------------------

Net sales        $409,586 $116,507 $526,093 $132,105 $42,158 $700,356
Gross profit      109,119   17,220  126,339   28,050  28,208  182,597
Pro forma income 
 (loss) from 
 operations        27,625  (45,833) (18,208) (34,569)  4,176  (48,601)
Other non-cash 
 operating expenses                                          (168,007)
Net interest 
 expense and other                                              6,175
Equity in losses 
 of equity-method 
 investees, net                                               (13,175)
Cumulative effect of 
 change in accounting 
 principle                                                    (10,523)
                                                           -----------
Net loss                                                   $ (234,131)
                                                           ===========
Segment highlights:
 Y / Y net sales growth 2%      56%      11%      76%     85%      22%
 Y / Y gross 
  profit growth        32%     144%      41%      75%     27%      43%
 Gross margin          27%      15%      24%      21%     67%      26%
 Pro forma 
  operating margin      7%     (39%)     (3%)    (26%)    10%     (7%)



                             Three Months Ended March 31, 2000
                   ---------------------------------------------------
                         U.S. Retail
                   ------------------------
                   Books,  Electronics,
                   Music     Tools
                  and DVD/    and                              Consol-
                   Video    Kitchen  Total    Int'l  Services  idated
                   ---------------------------------------------------
Net sales        $401,415  $74,596 $476,011  $75,132 $22,746 $573,889
Gross profit       82,855    7,059   89,914   16,036  22,184  128,134
Pro forma loss
 from operations   (2,425) (67,249) (69,674) (27,448) (2,144) (99,266)
Other non-cash
 operating expenses                                           (98,626)
Net interest                                                 
 expense and other                                            (22,269)
Equity in losses                                             
 of equity-method                                            
 investees, net                                               (88,264)
Cumulative effect                                            
 of change in                                                
 accounting 
 principle                                                       --
                                                            --------- 
Net loss                                                    $(308,425)
                                                            =========
Segment highlights:
Y / Y net 
 sales growth          50%     N/A       78%     192%     N/A      95%
Y / Y gross         
 profit growth         40%     N/A       51%     211%     N/A      98%
Gross margin           21%       9%      19%      21%     98%      22%
Pro forma           
 operating margin      (1%)    (90%)    (15%)    (37%)    (9%)   (17%)


    Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.


                                 AMAZON.COM, INC.
                                  Balance Sheets
                       (in thousands, except per share data)
                                    (unaudited)

                                           MARCH 31,    DECEMBER 31,
                                             2001          2000
                                        ------------   -----------
ASSETS
Current assets:
 Cash and cash equivalents              $   446,944    $   822,435
 Marketable securities                      196,029        278,087
 Inventories                                155,562        174,563
 Prepaid expenses and
  other current assets                       57,175         86,044
                                        -----------    -----------
  Total current assets                      855,710      1,361,129

Fixed assets, net                           304,179        366,416
Goodwill, net                               123,996        158,990
Other intangibles, net                       80,424         96,335
Investments in equity-method
 investees                                   22,539         52,073
Other equity investments                     28,503         40,177
Other assets                                 54,804         60,049
                                        -----------    -----------
 Total assets                           $ 1,470,155    $ 2,135,169
                                        ===========    ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
 Accounts payable                       $   257,411    $   485,383
 Accrued expenses and other
  current liabilities                       217,613        272,683
 Unearned revenue                            93,661        131,117
 Interest payable                            16,720         69,196
 Current portion of long-term
  debt and other                             19,305         16,577
                                        -----------    -----------
  Total current liabilities                 604,710        974,956

Long-term debt and other                  2,118,856      2,127,464

Commitments and contingencies

Stockholders' deficit:
 Preferred stock, $0.01 par value:
  Authorized shares -- 500,000
  Issued and outstanding shares -- none        --             --
 Common stock, $0.01 par value:
  Authorized shares -- 5,000,000
  Issued and outstanding shares
   -- 358,847 and 357,140
   shares at March 31, 2001 and
   December 31, 2000, respectively            3,588          3,571
 Additional paid-in capital               1,344,083      1,338,303
 Deferred stock-based compensation          (10,532)       (13,448)
 Accumulated other comprehensive loss       (63,118)        (2,376)
 Accumulated deficit                     (2,527,432)    (2,293,301)
                                        -----------    -----------
   Total stockholders' deficit           (1,253,411)      (967,251)
                                        -----------    -----------
     Total liabilities and
      stockholders' deficit             $ 1,470,155    $ 2,135,169
                                        ===========    ===========

Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.


                       AMAZON.COM, INC.
                   Statements of Cash Flows
                        (in thousands)
                          (unaudited)
                                                THREE MONTHS ENDED
                                                    MARCH 31,
                                             -----------------------
                                                2001         2000
                                             -----------------------

CASH AND CASH EQUIVALENTS, BEGINNING 
 OF PERIOD OPERATING ACTIVITIES:             $ 822,435    $ 133,309

Net loss                                      (234,131)    (308,425)
Adjustments to reconcile net loss to 
net cash used in operating activities:
  Depreciation of fixed assets                  23,073       18,180
  Stock-based compensation                       2,916       13,652
  Equity in losses of
   equity-method investees, net                 13,175       88,264
  Amortization of goodwill
   and other intangibles                        50,831       82,955
  Non-cash impairment-related
   and other costs                              62,004        2,019
  Amortization of previously
   unearned revenue                            (33,392)     (18,485)
  Loss (gain) on sale of
   marketable securities                            27       (2,600)
  Non-cash gains and losses, net               (33,857)        --
  Non-cash interest expense and other            6,572        5,881
  Cumulative effect of change
   in accounting principle                      10,523         --
Changes in operating assets and liabilities:
  Inventories                                   19,823       48,389
  Prepaid expenses and              
   other current assets                         27,334       (3,067)
  Accounts payable                            (229,758)    (207,229)
  Accrued expenses and              
   other current liabilities                   (57,762)     (31,538)
  Unearned revenue                              18,005          614
  Interest payable                             (52,367)      (8,988)
                                              ---------    ---------
Net cash used in                
 operating activities                         (406,984)    (320,378)

INVESTING ACTIVITIES:           
Sales and maturities of         
 marketable securities                          94,366      380,345
Purchases of marketable securities             (30,378)     (28,856)
Purchases of fixed assets                      (19,437)     (26,601)
Investments in equity-method
 investees and other investments                  --        (47,487)
                                             ---------    ---------
   Net cash provided by investing activities    44,551      277,401

FINANCING ACTIVITIES:
Proceeds from exercise of stock options          5,833       21,359
Proceeds from long-term debt and other          10,000      679,374
Repayment of long-term debt and other           (4,575)      (4,023)
Financing costs                                   --        (15,895)
                                             ---------    ---------
  Net cash provided by
   financing activities                         11,258      680,815
Effect of exchange rate changes
 on cash and cash equivalents                  (24,316)     (16,014)
                                             ---------    ---------
Net increase (decrease) in
 cash and cash equivalents                    (375,491)     621,824
                                             ---------    ---------
CASH AND CASH EQUIVALENTS,
 END OF PERIOD                               $ 446,944    $ 755,133
                                             =========    =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Fixed assets acquired
 under capital leases                        $   2,298    $   3,502
Fixed assets acquired under
 financing agreements                             --          4,551
Equity securities received
 for commercial agreements                         331       97,839
Cash paid for interest                          86,224       35,835

Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.

                           AMAZON.COM, INC.
        Supplemental Financial Information and Business Metrics
          (in millions, except per share, inventory turnover,
    cost per new customer, and net sales per active customer data)
                              (unaudited)

----------------------------------------------------------------------
                                               2000                   
                                 -------------------------------------
                       Q4 1999      Q1        Q2        Q3        Q4  
                      ------------------------------------------------
Results of Operations

Net sales             $   676   $   574   $   578   $   638   $   972
Net sales -- trailing
 twelve months (TTM)  $ 1,640   $ 1,920   $ 2,184   $ 2,466   $ 2,762

Gross profit          $    88   $   128   $   136   $   167   $   224
Gross margin 
 -- % of net sales       13.0%     22.3%     23.5%     26.2%     23.1%

Fulfillment costs 
 -- % of net sales       15.8%     17.3%     15.2%     15.1%     13.5%

Pro forma 
 operating loss       $  (175)  $   (99)  $   (89)  $   (68)  $   (60)
Pro forma 
 operating loss
 -- % of net sales      (25.9%)   (17.3%)   (15.5%)   (10.7%)   (6.2%)

Pro forma net loss    $  (185)  $  (122)  $  (116)  $   (89)  $   (90)
Pro forma net loss 
 per share            $ (0.55)  $ (0.35)  $ (0.33)  $ (0.25)  $ (0.25)

GAAP net loss         $  (323)  $  (308)  $  (317)  $  (241)  $  (545)
GAAP net loss 
 per share            $ (0.96)  $ (0.90)  $ (0.91)  $ (0.68)  $ (1.53)

U.S. books, music and
 DVD/video pro forma
 operating income (loss) 
 -- % of U.S. books, music 
 and DVD/video net sales
                           (4%)      (1%)       3%        6%        8%

U.S. electronics, tools and
 kitchen pro forma operating
 loss -- % of U.S. 
 electronics, tools
 and kitchen net sales    (78%)     (90%)     (75%)     (62%)    (33%)

U.S. retail pro forma
 operating loss -- % of 
 U.S. retail net sales    (21%)     (15%)     (12%)      (7%)     (5%)

International pro forma
 operating loss -- % of
 international net sales  (43%)     (37%)     (47%)     (45%)    (30%)

Services pro forma operating
 income (loss) -- % of
 services net sales      (238%)      (9%)      15%       14%       18%

Customer Data

New customers             3.8       3.1       2.5       2.9       4.1
Cumulative customers     16.9      20.0      22.5      25.4      29.5
Active customers -- TTM  14.1      15.9      17.0      18.2      19.8

New customers --
 international            0.6       0.6       0.6       0.9       1.1
Cumulative customers --
 international            1.8       2.4       3.0       3.9       5.0
Active customers --
 international -- TTM     1.7       2.2       2.7       3.3       4.2

Cost per new customer   $  19     $  13        17        15        13

Net sales (excluding catalog
 sales and inventory sales
 to toysrus.com) per
 active customer 
 -- TTM                 $ 113     $ 117     $ 125     $ 130     $ 134

U.S. customers purchasing
 from non-books, music and
 DVD/video stores          24%       11%       13%       14%       36%

Balance Sheet

Cash and marketable
 securities           $   706   $ 1,009   $   908   $   900   $ 1,101

Inventory, net        $   221   $   172   $   172   $   164   $   175
Inventory -- % of 
 net sales                 33%       30%       30%       26%       18%
Inventory turnover --
 annualized              13.9       9.1      10.3      11.2      17.7

Fixed assets, net     $   318   $   334   $   344   $   352   $   366

Cash Flows

Cash generated by 
 (used in)
 operations           $    32   $  (320)  $   (54)  $    (4)  $   248

Purchases of 
 fixed assets         $  (105)  $   (27)  $   (29)  $   (42)  $   (37)


                                      -------------------
                                                  Y / Y  
                                       Q1 2001  Growth % 
                                      ------------------- 
Results of Operations                                          

Net sales                            $   700          22%      
Net sales -- trailing                      
 twelve months (TTM)                 $ 2,888          50%             

Gross profit                         $   183          43%      
Gross margin                                                   
 -- % of net sales                      26.1%         N/A      

Fulfillment costs                                              
 -- % of net sales                      14.0%         N/A      

Pro forma                                                      
 operating loss                      $   (49)        (51%)     
Pro forma                                                      
 operating loss                                                
 -- % of net sales                      (6.9%)        N/A      

Pro forma net loss                   $   (76)        (38%)     
Pro forma net loss                                             
 per share                           $ (0.21)        (40%)     

GAAP net loss                        $  (234)        (24%)     
GAAP net loss                                                  
 per share                           $ (0.66)        (27%)     

U.S. books, music and                                          
 DVD/video pro forma                                           
 operating income (loss)                                       
 -- % of U.S. books, music                                     
 and DVD/video net sales                   7%         N/A       

U.S. electronics, tools and                                    
 kitchen pro forma operating                                   
 loss -- % of                                                  
  U.S. electronics, tools                                      
   and kitchen net sales                 (39%)        N/A      

U.S. retail pro forma                                          
 operating loss -- % of U.S.                                   
 retail net sales                         (3%)        N/A      

International pro forma                                        
 operating loss -- % of                                        
 international net sales                 (26%)        N/A      

Services pro forma operating                                   
 income (loss) -- % of                                         
 services net sales                       10%         N/A      

Customer Data                                                  

New customers                            3.0          (3%)     
Cumulative customers                    32.5          63%      
Active customers -- TTM                 20.5          29%      

New customers --                                               
 international                           1.0          67%      
Cumulative customers --                                        
 international                           6.0         150%      
Active customers --                                            
 international -- TTM                    4.9         123%      

Cost per new customer                  $  12          (8%)     

Net sales (excluding catalog                                   
 sales and inventory sales                                     
 to toysrus.com) per                                           
 active customer                                               
 -- TTM                                $ 135          15%      

U.S. customers purchasing                                      
 from non-books, music and                        
 DVD/video stores                         19%         N/A

Balance Sheet                                     

Cash and marketable                               
 securities                            $ 643         (36%)

Inventory, net                         $ 156         (10%)
Inventory -- % of                                 
 net sales                                22%         N/A
Inventory turnover --                             
 annualized                             12.6          38%

Fixed assets, net                      $ 304          (9%) 

Cash Flows                                        

Cash generated by                                 
 (used in)                                        
 operations                            $(407)         27%

Purchases of                                      
 fixed assets                          $ (19)        (30%)



                           AMAZON.COM, INC.
                 Financial and Operational Highlights
                          First Quarter 2001
                              (unaudited)

Results of Operations (all comparisons are to the prior year quarter)

Net Sales

  • Orders from repeat customers represented 78% of total, up from 76%.

  • Shipping revenue across all segments was approximately $82 million, up from $75 million.

  • Cash-based portion of Services revenues was approximately 79%, up from 25%.

  • Sales to customers outside the U.S., including export sales from www.amazon.com, increased to approximately 26% of net sales, from approximately 24% of net sales. Gross Profit

  • Gross margin, excluding the results of our Services segment, would have been 23%, up from 19%.

  • Shipping gross loss was approximately $5 million, down from slightly positive. We will continue to offer shipping promotions to our customers; accordingly, shipping gross margins may fluctuate. Fulfillment

  • Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service centers, including costs attributable to receiving, inspecting and warehousing inventories; picking, packaging and preparing customers' orders for shipment; credit card fees; and responding to inquiries from customers.

  • Fulfillment costs amounted to approximately 14% of net sales, down from 17% of net sales; excluding net sales from our Services segment, fulfillment costs were approximately 15%, down from 18%. Stock-Based Compensation

  • Stock-based compensation comprises the portion of acquisition-related consideration conditioned on the continued tenure of key employees of certain of our acquired businesses, which must be classified as compensation expense rather than as a component of purchase price under accounting principles generally accepted in the United States. Stock-based compensation also includes stock-based charges such as option-related deferred compensation recorded at our initial public offering, as well as certain other compensation and severance arrangements.

  • During the first quarter of 2001, we offered a limited non-compulsory exchange of employee stock options. This option exchange offer results in variable accounting treatment for approximately 15 million stock options, which includes approximately 12 million options granted under the exchange offer with an exercise price of $13.375, and options that were subject to the exchange offer but were not exchanged. Variable accounting treatment will result in unpredictable charges, recorded to "Stock-based compensation," dependent on fluctuations in quoted prices for our common stock. As the quoted price of our common stock at March 31, 2001, did not exceed the exercise price of any option subject to variable accounting treatment, no compensation expense was recorded in the first quarter of 2001. Impairment-Related and Other

  • We began implementation of our operational restructuring plan to reduce our operating costs, streamline our organizational structure and consolidate certain of our fulfillment and customer service operations. As a result of this initiative, we recorded restructuring and other charges of $114 million during the first quarter, and anticipate additional charges of over $50 million during the second quarter of 2001. This initiative involves the reduction of employee staff by approximately 1,300 positions throughout the Company in managerial, professional, clerical, technical and fulfillment roles; consolidation of our Seattle corporate office locations; closure of our McDonough, Georgia, fulfillment center; seasonal operation of our Seattle fulfillment center; closure of our customer service centers in Seattle and The Hague, Netherlands; and migration of a large portion of our technology infrastructure to a Linux-based operating platform, which entails ongoing lease obligations for equipment no longer utilized. We anticipate that each component of the restructuring plan will be substantially complete by June 30, 2001.

  • Costs that relate to ongoing operations are not part of restructuring and other charges. All inventory adjustments that may result from the closure or seasonal operation of our fulfillment centers are classified in "Cost of goods sold" on the consolidated statements of operations. As of March 31, 2001, there have been no significant inventory write-downs resulting from the restructuring, and none are anticipated.

  • For the quarter ended March 31, 2001, the charges associated with our restructuring were as follows (in thousands):

Asset impairments                                        $ 58,748
Continuing lease obligations                               34,292
Termination benefits                                       15,088
Broker commissions, professional fees and other
 miscellaneous restructuring costs                          6,132
                                                         ---------
                                                         $114,260
                                                         =========

  • Asset impairments primarily relate to the closure of the McDonough, Georgia, fulfillment center, the write-off of leasehold improvements in vacated corporate office space, and the other-than-temporary decline in the fair value of assets in the Seattle fulfillment center. For assets to be disposed, we estimated the fair value based on expected salvage value less costs to sell. For assets held for continued use, the decline in fair value was measured using discounted estimates of future cash flows. We are actively seeking third-party buyers for the assets held for disposal.

  • Continuing lease obligations primarily relate to heavy equipment previously used in the McDonough, Georgia, fulfillment center, vacated corporate office space, technology hardware removed from service as part of the migration to a Linux-based operating platform, and unutilized overcapacity at our backup data center. Where possible, we are actively seeking third parties to sublease abandoned equipment and facilities. Amounts expensed represent estimates of undiscounted future cash outflows, offset by anticipated third-party subleases.

  • Termination benefits comprise severance-related payments for all employees to be terminated in connection with the operational restructuring, as well as the contribution of common stock to a trust for the benefit of terminated employees. Termination benefits do not include any amounts for employment-related services prior to termination. Other restructuring costs include professional fees, decommissioning costs of vacated facilities, broker commissions and other miscellaneous expenses directly attributable to the restructuring.

  • First quarter 2001 cash payments resulting from the restructuring were $10 million.

  • We anticipate the restructuring charges, including over $50 million of charges expected to be recorded during the three months ending June 30, 2001, will result in the following net cash outflows (in thousands):

                                      Termination
                              Leases   Benefits      Other     Total
                             -------    -------    -------     -------
Year Ending December 31,
   2001                      $33,728   $ 12,160    $ 9,186    $ 55,074
   2002                       30,258         78      1,024      31,360
   2003                        4,078         --          2       4,080
   2004                        1,514         --          1       1,515
   2005                        1,474         --         --       1,474
   Thereafter                  6,007         --         --       6,007
                             -------    -------    -------     -------
Total estimated cash
 outflows                    $77,059    $12,238   $ 10,213    $ 99,510
                             =======    =======   ========    ========

Net Interest Expense and Other

  • Other gains and losses primarily relate to miscellaneous taxes and foreign currency transaction losses. Non-Cash Gains and Losses

  • Non-cash gains and losses includes a gain of $22 million associated with the termination of our services contract with Kozmo.com, and a gain of $46 million on the remeasurement of our Euro-denominated debt due to fluctuations in currency exchange rates. These gains were offset by non-cash impairment losses of $36 million relating to other-than-temporary declines in the fair value of Webvan Group, Inc., Sotheby's Holdings, Inc., WeddingChannel.com and drugstore.com, inc. Other non-cash gains recorded during the first quarter of 2001 were primarily related to the acquisitions of certain investees by unrelated third parties, and the recording to fair value of our warrant investments consistent with SFAS 133.

  • In connection with the termination of our commercial agreement with Kozmo.com in February 2001, we recorded a non-cash gain of $22 million, representing the amount of unearned revenue associated with the contract. Since services had not yet been performed under the contract, no amounts associated with this commercial agreement were recognized in "Net sales" during any period. Furthermore, during 1999, we made a cash investment of $60 million to acquire preferred stock of Kozmo.com and accounted for our investment under the equity method of accounting. Pursuant to the equity method of accounting, we recorded our share of Kozmo.com losses, which, during 2000, reduced the basis in our investment to zero. Accordingly, at the time Kozmo.com announced its intentions to cease operations in April 2001, we did not have any further loss exposure relating to our investment. We do not expect to recover any portion of our investment in Kozmo.com. Equity in Losses of Equity-Method Investees

  • Equity in losses of equity-method investees represents our share of losses of companies in which we have investments that give us the ability to exercise significant influence, but not control, over an investee. Equity-method losses reduce our underlying investment balances until the recorded basis is reduced to zero. Loss Per Share

  • The effect of stock options is antidilutive and, accordingly, is excluded from diluted loss per share. If the effect of stock options was included, the number of shares used in computation of diluted loss per share would have been approximately 374 million, compared to 357 million shares used in computation of basic and diluted loss per share for the three months ended March 31, 2001. Financial Condition Cash and Marketable Securities

  • Cash and marketable securities are impacted by the effect of quarterly fluctuations in foreign currency exchange rates, particularly the Euro.

  • Our marketable securities, by major security type, as of March 31, 2001, were as follows (at fair value; in thousands):

Corporate notes and bonds                             $ 15,548
Asset-backed and agency securities                      37,729
Treasury notes and bonds                               120,862
Equity securities                                       21,890
                                                      --------
                                                     $ 196,029
                                                      ========

Accounts Payable

  • Ending accounts payable days were approximately 45 days, a decrease of approximately 7 days, primarily attributable to our changing mix of business. Certain Definitions and Other

  • In January 2001, the Company reorganized its segment reporting to include four segments: U.S. Books, Music and DVD/Video; U.S. Electronics, Tools and Kitchen; International; and Services. Allocation methodologies are consistent with past presentations, and prior period amounts have been reclassified to conform with current period presentation.

  • The U.S. Books, Music and DVD/Video segment includes revenues, direct costs and cost allocations associated with retail sales from www.amazon.com for books, music and DVD/video products, and includes amounts earned on sales of similar products sold through Amazon Marketplace.

  • The U.S. Electronics, Tools and Kitchen segment includes revenues, direct costs, and cost allocations associated with www.amazon.com retail sales of Electronics (consumer electronics, camera and photo items, software, computer and video games, and wireless products), Tools (tools and hardware) and Kitchen (kitchen and housewares products and outdoor living items) products, toys sold other than through our Toysrus.com strategic alliance, and new initiatives, and includes amounts earned on sales of similar products sold through Amazon Marketplace.

  • U.S. Retail represents the combination of the U.S. Books, Music and DVD/Video segment and the U.S. Electronics, Tools and Kitchen segment.

  • The International segment includes all revenues, direct costs and cost allocations associated with the retail sales of the Company's four internationally focused sites: www.amazon.de, www.amazon.fr, www.amazon.co.jp and www.amazon.co.uk.

  • The Services segment includes revenues, direct costs and cost allocations associated with the Company's business-to-business strategic relationships, including our strategic alliance with Toysrus.com, and miscellaneous advertising revenues, as well as amounts from Amazon Auctions, zShops and Payments.

  • Trailing twelve-month sales per active customer figures include all amounts earned through Internet sales, including revenue earned from our strategic relationships with selected companies, but exclude catalog sales and sales of inventory to Toysrus.com.

  • Customer accounts exclude the customers of selected companies with whom we have strategic relationships and customers of Amazon.com's catalog businesses, but include customers shared with Toysrus.com and customers of Amazon Auctions, zShops and Marketplace services.


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