ANNOUNCES 4TH QUARTER PROFIT
Exceeds sales and profit objectives
Lower prices for customers drove sales and profits
Introduces everyday free Super Saver Shipping option for orders over $99
WIRE)-Jan. 22, 2002-Amazon.com, Inc. (NASD: AMZN) today announced financial
results for its fourth quarter ended December 31, 2001.
for the quarter were a record $1.12 billion, compared with $972 million
in the fourth quarter of 2000, an increase of 15%. It was Amazon.com's
first-ever billion-dollar quarter.
exceeded the goal it set a year ago--to reach pro forma operating profitability
during the quarter--by delivering not only a pro forma operating profit,
but also a pro forma net profit, which includes net interest expense.
Pro forma operating profit was $59 million, compared with a loss of $60
million in the fourth quarter of 2000, an overall improvement of $119
million. Pro forma net profit for the fourth quarter of 2001 was $35 million,
or $0.09 per share, compared with a pro forma net loss of $90 million,
or $0.25 per share, in the fourth quarter of 2000.
On a GAAP
basis, the Company recorded a fourth quarter 2001 net profit of $5 million,
or $0.01 per share, compared with a fourth quarter 2000 net loss of $545
million, or $1.53 per share. Operating profit for the fourth quarter of
2001 was $15 million, compared with a loss of $322 million a year ago.
(Details on the differences between GAAP results and pro forma operating
profit and pro forma net profit are included below, with a detailed, tabular
reconciliation of those differences.)
also announced that effective today Amazon.com is providing a new class
of economy shipping, Super Saver Shipping, which is free on qualifying
orders. To qualify, orders must be over $99. (Other details and restrictions
can be found at www.amazon.com/supersavershipping.)
This is not a seasonal or limited-time promotion, but an indefinite, everyday,
are two types of retailers: those that work hard to raise prices and those
that work hard to lower prices. Though both models can be successful,
we've decided to relentlessly follow the second model," said Jeff
Bezos, founder and CEO of Amazon.com. "In this spirit, we're incredibly
pleased to introduce Super Saver Shipping--free on orders over $99."
improvements in productivity allowed us to lower book prices and now allow
us to offer free shipping," said Warren Jenson, chief financial officer.
"We expect that these money-saving initiatives for customers will
continue to play an important role in our growth."
segment sales across the Company's UK, Germany, France and Japan sites
grew 81%. Including sales from the U.S. site, more than 29% of the Company's
sales were made to international customers. In addition, the Company's
operations for the UK and German sites had a combined pro forma operating
profit for the fourth quarter of 2001, just three years after their launch.
of Fourth Quarter and Fiscal 2001 Results (comparisons are with fiscal
2000 and the fourth quarter of 2000)
- Net sales
for the 2001 fiscal year reached a record-setting $3.12 billion, a 13%
2001 pro forma operating loss was $45 million, an improvement of more
than $270 million.
- Pro forma
operating losses from our International sites declined by 76% to $11
million, or 4% of International net sales in fourth quarter 2001.
Tools and Kitchen segment pro forma operating losses declined by $52
million, or 72%, to $20 million in fourth quarter 2001.
(Used and other new) orders equaled approximately 15% of total U.S.
orders in fourth quarter 2001, compared with 1% (Used launched November,
inventory turns improved 38% to 25 in fourth quarter 2001, up from 18.
cash flow improved 41% to $349 million in fourth quarter 2001, a $101
and marketable securities were approximately $1 billion at December
forward-looking statements reflect Amazon.com's expectations as of January
22, 2002. Results may be materially affected by many factors, such as
potential changes in general economic conditions and consumer spending,
the emerging nature and rate of growth of the Internet and online commerce,
and the various factors detailed below.
Quarter 2002 Expectations
- Net sales
are expected to be between $775 million and $825 million, or grow between
11% and 18%.
- Pro forma
loss from operations is expected to be between break-even and $16 million,
or between 0% and 2% of net sales.
Year 2002 Expectations
- Net sales
are expected to grow by 10% or more.
operating cash flow, and possibly free cash flow, is expected.
- Pro forma
income from operations is expected to be $30 million or more.
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 economy in general and 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 with services, risks of inventory management, the
degree to which the Company enters into, maintains and develops service
relationships with third-party sellers and other strategic transactions,
fluctuations in the value of securities and non-cash payments Amazon.com
receives in connection with such transactions, foreign currency exchange
risks, seasonality, international growth and expansion, and risks of fulfillment
throughput and productivity. Other risks and uncertainties include, among
others, risk of future losses, significant amount of indebtedness, competition,
potential fluctuations in operating results, management of potential growth,
system interruption, consumer trends, fulfillment center optimization,
inventory, limited operating history, government regulation and taxation,
fraud and Amazon.com Payments, new business areas, business combinations,
and strategic alliances. 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, including all
intends to continue its practice of not updating forward-looking statements
other than in publicly available documents.
results, which generally exclude non-operational, non-cash charges and
benefits as well as one-time charges, are provided as a complement to
results provided in accordance with accounting principles generally accepted
in the United States (known as "GAAP"). A reconciliation of
GAAP to pro forma is included in the attached financial statements.
measures the progress of the business using pro forma operating results,
which exclude the following line items on the Company's statements of
of goodwill and other intangibles
net results exclude, in addition to the line items described above, the
following line items on our statements of operations:
gains (losses), net
in losses of equity-method investees, net
effect of change in accounting principle
call will be Webcast live at www.amazon.com/ir
today at 8:30 a.m. EST/5:30 a.m. PST and will be available through March
31, 2002. This call will contain forward-looking statements and other
opened its virtual doors on the World Wide Web in July 1995 and today
offers Earth's Biggest Selection. 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 and sellers list millions of
unique new and used items in categories such as electronics, computers,
kitchen and housewares, books, music, DVDs, videos, camera and photo items,
toys, baby and baby registry, software, computer and video games, cell
phones and service, tools and hardware, travel services, magazine subscriptions
and outdoor living items. Through Amazon Marketplace, zShops and Auctions,
any business or individual can sell virtually anything to Amazon.com's
millions of customers, and with Amazon.com Payments, sellers can accept
credit card transactions, avoiding the hassles of offline payments. Amazon.com
also offers the Amazon Credit Account, the online equivalent of a department
store credit card, which provides shoppers the opportunity to buy now
and pay later when shopping at Amazon.com.
operates four international Web sites: www.amazon.co.uk, www.amazon.de,
www.amazon.fr 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 300,000 movies and entertainment titles
and 1 million cast and crew members dating from the birth of film.
Financial and Operational Highlights
Fourth Quarter Ended December 31, 2001
of Operations (all comparisons are with the comparable period of
revenue was approximately $125 million, up from $112 million.
The cash portion of Services net sales increased to approximately
$93 million, or 95% of net sales, from $75 million, or 78%; non-cash
Services revenues decreased to approximately $5 million, or 5%, from
$21 million, or 22%.
Excluding fourth quarter 2000 online sales of toys and video games,
which since September 2000 are now sold at www.amazon.com through
our strategic alliance with Toysrus.com and reported in our Services
segment, growth rates for our U.S. Electronics, Tools and Kitchen
segment would have been 5%.
margin, excluding the results of our Services segment, would have
been 23%, up from 21%.
Costs associated with our service revenues classified as cost of services
generally include fulfillment-related costs to ship products on behalf
of third-party sellers, costs to provide customer service, credit
card fees and other related costs.
Shipping gross loss was approximately $11 million, down from $17 million;
this includes the International segment's shipping gross loss of approximately
$6 million, up from $2 million. We continue to measure our shipping
results relative to their impact on our overall financial results,
with the viewpoint that shipping promotions are an effective promotional
tool. We will continue offering shipping promotions to our customers,
which reduce shipping revenue as a percentage of sales and will negatively
affect gross margins on our retail sales.
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
bad debt costs; and responding to inquiries from customers. Fulfillment
costs also include amounts paid to third-party cosourcers who assist
us in fulfillment and customer service operations.
the first quarter of 2001, we offered a limited non-compulsory exchange
of employee stock options.
exchange offer results in variable accounting treatment for approximately
12 million stock options at December 31, 2001, which includes approximately
11 million options granted under the exchange offer with an exercise
price of $13.375, and approximately 1 million options that were subject
to the exchange offer but were not exchanged. Variable accounting
treatment will result in unpredictable and potentially significant
charges or credits, dependent on fluctuations in quoted prices for
our common stock, which we are unable to forecast.
of Goodwill and Other Intangibles
Financial Accounting Standards Board issued SFAS No. 142, "Goodwill
and Other Intangible Assets" which requires use of a non-amortization
approach to account for purchased goodwill and certain intangibles,
effective January 1, 2002. We expect the adoption of this accounting
standard will result in approximately $25 million of intangible assets
being subsumed into goodwill, and will have the impact of substantially
reducing our amortization of goodwill and intangibles effective January
1, 2002. Transitional impairments, if any, are not expected to be
material; however, impairment reviews may result in future periodic
continued the 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 approximately $177 million during the first three quarters
of 2001, and $5 million in the fourth quarter ended December 31, 2001.
This initiative involved 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 (if necessary);
closure of our customer service centers in Seattle and The Hague,
Netherlands; and ongoing lease obligations for technology infrastructure
no longer utilized. Each component of the restructuring plan has been
Costs that relate to ongoing operations, including inventory write-downs,
are not part of restructuring charges. There have been no significant
inventory write-downs resulting from the restructuring, and none are
Cash payments resulting from the restructuring were $49 million in
2001, $14 million of which was paid in the December quarter. We anticipate
the restructuring charges will result in the following net cash outflows:
income (expense) consists primarily of net realized gains and losses
on sales of marketable securities, miscellaneous state and foreign taxes
and certain foreign-currency-related transaction gains and losses.
Gains (Losses), Net
gains, net were $16 million for the three months ended December 31,
2001, primarily consisting of a foreign-currency gain on 6.875% PEACS.
gains and losses arising from the remeasurement of the 6.875% PEACS
principal from Euros to U.S. dollars are recorded each quarter. We are
unable to forecast the gains or losses associated with our PEACS that
will result from fluctuations in foreign exchange rates in future periods.
Absent the foreign-currency gain recorded this quarter, we would have
reported a fourth quarter 2001 GAAP net loss.
in Losses of Equity-Method Investees
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.
- At December
31, 2001, we had net operating losses of approximately $2.3 billion
related to U.S. federal, state and foreign jurisdictions.
earnings per share is computed using the weighted average number of
common and common stock equivalent shares outstanding during the period;
common stock equivalent shares such as options, warrants and convertible
securities are excluded from the computation if their effect is antidilutive.
- Cash and
marketable securities are impacted by the effect of quarterly fluctuations
in foreign-currency exchange rates, particularly the Euro. Our Euro
investments, classified as available for sale, had a balance of 179
million Euros ($158 million, based on the exchange rate as of December
- Our marketable
securities, at estimated fair value, consist of the following, as of
December 31, 2001 (in thousands):
Definitions and Other
- Our segment
reporting includes 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 the 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, DVD and video products and for magazine subscriptions,
including commissions earned on sales of similar products, new or used,
through Amazon Marketplace. This segment also includes product sales,
direct costs and cost allocations associated with stores offering these
products through our Syndicated Stores program, such as www.borders.com.
- The U.S.
Electronics, Tools and Kitchen segment includes revenues, direct costs
and cost allocations associated with www.amazon.com retail sales of
electronics, computers, kitchen and housewares, camera and photo items,
software, cell phones and service, tools and hardware, outdoor living
items, and computer and video games products, sold other than through
our Toysrus.com strategic alliance, as well as catalog sales of toys,
tools and hardware. This segment also includes commissions earned on
sales of similar products, new or used, through Amazon Marketplace.
This segment includes commissions and other amounts earned from offerings
of these products by third-party sellers under our Merchant@amazon.com
Program, including our strategic alliance with Circuit City, and will
include stores offering these products, if any, through its Syndicated
- The International
segment includes all revenues, direct costs and cost allocations associated
with the retail sales of our 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 our business-to-business strategic alliances, including the Merchant
Program and certain aspects of the Merchant@amazon.com Program, as well
as the strategic alliance with America Online. This segment also includes
Amazon Auctions, zShops and Payments, and miscellaneous marketing and
- All references
to customers mean customer accounts, which are unique e-mail addresses,
established either when a customer's order is shipped or when a customer
orders from a third-party seller. Customer accounts include customers
of Amazon Marketplace, Auctions and zShops services, and customer accounts
under our Merchant@amazon.com and Syndicated Stores programs, but exclude
Amazon Payments customers, our catalog customers, and the customers
of selected companies with whom we have strategic marketing and promotional
twelve-month net sales per active customer account figures include all
amounts earned through Internet sales, including net sales earned from
new or used products sold through Amazon Marketplace, Auctions and zShops
services, and products sold through our Merchant@amazon.com and Syndicated
Stores programs, but excluding products sold through our catalogs and
certain strategic alliances and sales of inventory to Toysrus.com. A
customer is considered active upon placing an order.