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Amazon.com Announces Record Sales Driven by Lower Prices and Expanded Selection; Launches Jewelry Store; Raises Financial Guidance

SEATTLE--(BUSINESS WIRE)--April 22, 2004--Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its first quarter ended March 31, 2004.

Operating cash flow was $393 million for the trailing twelve months, compared with $164 million for the trailing twelve months ended March 31, 2003. Free cash flow grew $221 million, or 180%, to $344 million for the trailing twelve months, compared with $123 million for the trailing twelve months ended March 31, 2003.

Common shares outstanding plus shares underlying stock-based awards totaled 432 million at March 31, 2004, flat compared with a year ago.

Net sales were $1.53 billion in the first quarter, compared with $1.08 billion in first quarter 2003, an increase of 41%. Net sales, excluding the $87 million benefit from changes in foreign exchange rates, grew 33% compared with first quarter 2003.

Operating income was $110 million in the first quarter, compared with $39 million in first quarter 2003. Consolidated segment operating income grew 73% to $117 million in the first quarter, compared with $67 million in first quarter 2003. Consolidated segment operating income, excluding the $7 million benefit from changes in foreign exchange rates, grew 64% compared with first quarter 2003.

Net income was $111 million in the first quarter, or $0.26 per diluted share, compared with a net loss of $10 million, or $0.03 per share, in first quarter 2003. Pro forma net income in the first quarter grew 141% to $97 million, or $0.23 per diluted share, compared with $40 million, or $0.10 per diluted share, in first quarter 2003.

"During our beta test more than 100,000 customers ordered items from our Jewelry store," said Jeff Bezos, founder and CEO of Amazon.com. "While the average margin in jewelry retailing is approximately 45% to 50%, we target substantially lower margins on our jewelry sales, and lower still -- about 13% -- on diamond jewelry. This is in keeping with our strategy of driving growth through low prices."

Amazon.com continues to offer Free Super Saver Shipping on orders over $25 at www.amazon.com and also has free shipping offers at its U.K., German, French, Japanese and Canadian sites. Amazon.com offers 30% off books over $15 and continues to lower prices every day across its product offerings, ranging from electronics to jewelry to sports and outdoors items to tools.

    See "Financial Measures" for additional information.

    Quarterly Highlights

    --  North America segment sales, representing the Company's U.S.
        and Canadian sites, grew 20% to $847 million and segment
        operating income grew 46% to $76 million, compared with first
        quarter 2003.

    --  International segment sales, representing the Company's U.K.,
        German, French and Japanese sites, grew 80% to $684 million.
        Net sales, excluding the benefit from changes in foreign
        exchange rates, grew 58% compared with first quarter 2003.
        International segment operating income grew 163% to $41
        million, compared with $16 million in first quarter 2003.

    --  For the first time, half of net sales came from products
        delivered to customers outside the U.S.

    --  Inventory turns for the trailing twelve months were 19, down
        from 20 a year ago.

    --  On February 26, 2004, the Company redeemed $150 million of its
        4.75% Convertible Subordinated Notes due 2009 for $154
        million, a redemption price of 102.375%.

    --  During the first quarter the Company also launched a Home &
        Garden store in Germany, and two new stores in the U.K.:
        Do-It-Yourself & Tools and Garden & Outdoors.

    --  Again this year, the widely followed American Customer
        Satisfaction Index gave Amazon.com a score of 88 -- the
        highest customer satisfaction score ever recorded in any
        service industry, online or off.

    Financial Guidance

The following forward-looking statements reflect Amazon.com's expectations as of April 22, 2004. 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 emerging nature and rate of growth of the Internet and online commerce, and the various factors detailed below.

    Second Quarter 2004 Guidance

    --  Second quarter net sales are expected to be between $1.34
        billion and $1.44 billion, or grow between 22% and 31%,
        compared with second quarter 2003.

    --  Consolidated segment operating income is expected to be
        between $85 million and $105 million, or grow between 27% and
        56%, compared with second quarter 2003.

    --  Operating income is expected to be between $65 million and $85
        million, assuming, among other things, that the Company does
        not record any revisions to its restructuring-related
        estimates and that the closing price of Amazon.com common
        stock on June 30, 2004, is identical to the closing price of
        $43.28 on March 31, 2004.

    Full Year 2004 Expectations

    --  Net sales are expected to be between $6.45 billion and $6.85
        billion.

    --  Consolidated segment operating income is expected to be
        between $455 million and $535 million.

    --  Operating income is expected to be between $380 million and
        $460 million, assuming, among other things, that the Company
        does not record any revisions to its restructuring-related
        estimates and that the closing price of Amazon.com common
        stock on December 31, 2004, is identical to the closing price
        of $43.28 on March 31, 2004.

A conference call will be Webcast live today at 2 p.m. PT/5 p.m. ET and will be available at least through June 30, 2004, 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; competition; risks of inventory management; the degree to which the Company enters into, maintains and develops commercial agreements and strategic transactions; 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, potential fluctuations in operating results, management of potential growth, system interruptions, consumer trends, fulfillment center optimization, limited operating history, government regulation and taxation, fraud and new business areas. 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, 2003, and all subsequent filings.

Financial Measures

The following measures are defined by the Securities and Exchange Commission as non-GAAP financial measures.

Free Cash Flow

Operating cash flow is net cash provided by (used in) operating activities, including cash outflows for interest and excluding proceeds from the exercise of stock-based employee awards. Free cash flow is operating cash flow less cash outflows for purchases of fixed assets, including internal-use software and website development. A tabular reconciliation of differences from the comparable GAAP measure -- operating cash flow -- is included in the attached "Supplemental Financial Information and Business Metrics."

Consolidated Segment Operating Income

Consolidated segment operating income is the sum of segment operating income of our individual segments and excludes the following line items on the Company's statements of operations:

    --  Stock-based compensation, and

    --  Other operating expense (income).

A tabular reconciliation of differences from the comparable GAAP measure -- operating income -- is included in the attached "Pro Forma Statements of Operations."

Pro Forma Net Income

Pro forma net income excludes the following line items on the Company's statements of operations:

    --  Stock-based compensation,

    --  Other operating expense (income), and

    --  Remeasurements and other.

A tabular reconciliation of differences from the comparable GAAP measure -- net income (loss) -- is included in the attached "Pro Forma Statements of Operations."

For additional information regarding these non-GAAP financial measures, see Exhibit 99.2 to our Form 8-K filed contemporaneously with the issuance of this release.

About Amazon.com

Amazon.com, 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 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 and used items in categories such as health and personal care, jewelry and watches, gourmet food, sports and outdoors, apparel and accessories, books, music, DVDs, electronics and office, kids and baby, and home and garden.

Amazon.com operates six websites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.fr, www.amazon.co.jp and www.amazon.ca.


                           AMAZON.COM, INC.
                 Consolidated Statements of Cash Flows
                            (in thousands)
                              (unaudited)


                             Three Months Ended   Twelve Months Ended
                                  March 31,            March 31,
                            --------------------- --------------------
                              2003       2004       2003      2004
                            --------------------- --------------------

CASH AND CASH EQUIVALENTS,
 BEGINNING OF PERIOD        $738,254  $1,102,273  $296,689   $495,773

OPERATING ACTIVITIES:
Net income (loss)            (10,121)    111,136  (136,103)   156,539
Adjustments to reconcile
 net income (loss) to net
 cash provided by (used in)
 operating activities:
  Depreciation of fixed
   assets, including website
   development costs, and
   other amortization         19,750      17,681    81,084     73,489
  Stock-based compensation    27,323       7,107    85,319     67,535
  Other operating expense
   (income)                      912        (542)    7,881      1,298
  Gain on sales of marketable
   securities, net            (3,980)     (1,087)   (9,304)    (6,705)
  Remeasurements and other    22,234     (20,360)  126,447     87,503
  Non-cash interest expense
   and other                   7,877       1,149    30,402      6,190
Changes in operating assets
 and liabilities:
  Inventories                 30,625      13,170   (25,352)   (94,241)
  Accounts receivable, net
   and other current assets   27,233      10,298    (2,395)   (16,630)
  Accounts payable          (226,605)   (255,994)   58,223    138,343
  Accrued expenses and other
   current liabilities       (87,065)    (73,769)  (16,713)   (12,444)
  Additions to unearned
   revenue                    22,968      23,267    89,656    101,940
  Amortization of previously
   unearned revenue          (27,905)    (24,067) (126,038)  (107,902)
  Interest payable           (55,028)    (58,677)      435     (1,799)
                            --------- ----------- --------- ----------
Net cash provided by (used
 in) operating activities   (251,782)   (250,688)  163,542    393,116

INVESTING ACTIVITIES:
Sales and maturities of
 marketable securities and
 other investments           208,955     569,768   625,669  1,173,997
Purchases of marketable
 securities                 (233,055)   (504,679) (734,638)  (807,266)
Purchases of fixed assets,
 including internal-use
 software and website
 development                  (6,394)     (9,513)  (40,703)   (49,082)
Proceeds from sale of
 subsidiary and other              -           -         -      5,072
                            --------- ----------- --------- ----------
Net cash provided by (used
 in) investing activities    (30,494)     55,576  (149,672)   322,721

FINANCING ACTIVITIES:
Proceeds from exercises of
 stock options and other      38,555      14,814   152,835    139,581
Repayments of long-term
 debt, capital lease
 obligations, and other       (3,221)   (155,647)  (13,453)  (647,734)
                            --------- ----------- --------- ----------
Net cash provided by (used
 in) financing activities     35,334    (140,833)  139,382   (508,153)

Foreign-currency effect on
 cash and cash equivalents     4,461       2,259    45,832     65,130
                            --------- ----------- --------- ----------
Net increase (decrease) in
 cash and cash equivalents  (242,481)   (333,686)  199,084    272,814
                            --------- ----------- --------- ----------

CASH AND CASH EQUIVALENTS,
 END OF PERIOD              $495,773    $768,587  $495,773   $768,587
                            ========= =========== ========= ==========

SUPPLEMENTAL CASH FLOW
 INFORMATION:
Fixed assets acquired under
 capital leases and other
 financing arrangements         $661        $492    $2,760     $2,508
Cash paid for interest        84,215      86,023   115,321    121,755
Cash paid for income taxes       302         447      (454)     1,970


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



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

                                                 Three Months Ended
                                                      March 31,
                                               -----------------------
                                                     2003        2004
                                                ----------- ----------

Net sales                                      $1,083,559  $1,530,349
Cost of sales                                     812,977   1,169,515
                                                ----------  ----------
Gross profit                                      270,582     360,834

Operating expenses:
   Fulfillment                                    103,705     127,705
   Marketing                                       28,227      33,636
   Technology and content                          50,088      55,076
   General and administrative                      21,102      27,417
   Stock-based compensation (1)                    27,323       7,107
   Other operating expense (income)                   912        (542)
                                                ----------  ----------
         Total operating expenses                 231,357     250,399
                                                ----------  ----------

Income from operations                             39,225     110,435

Interest income                                     6,540       5,555
Interest expense                                  (36,511)    (27,731)
Other income, net                                   2,859       2,517
Remeasurements and other                          (22,234)     20,360
                                                ----------  ----------
         Total non-operating income (expense),
          net                                     (49,346)        701
                                                ----------  ----------

Net income (loss)                              $  (10,121) $  111,136
                                                ==========  ==========

Basic earnings (loss) per share                $    (0.03) $     0.28
                                                ==========  ==========

Diluted earnings (loss) per share              $    (0.03) $     0.26
                                                ==========  ==========

Weighted average shares used in computation of earnings
 (loss) per share:
   Basic                                          388,541     403,542
                                                ==========  ==========
   Diluted                                        388,541     424,519
                                                ==========  ==========

(1) Components of stock-based compensation:
     Fulfillment                               $    6,985  $    1,006
     Marketing                                        979         608
     Technology and content                        14,216       3,299
     General and administrative                     5,143       2,194
                                                ----------  ----------
                                               $   27,323  $    7,107
                                                ==========  ==========

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, 2003
                        -----------------------------------

                        As Reported Adjustments  Pro Forma
                            (1)
                        -----------  ----------  ----------

Net sales               $1,083,559  $      -    $1,083,559
Cost of sales              812,977         -       812,977
                         ----------  --------    ----------
Gross profit               270,582         -       270,582

Operating expenses:
 Fulfillment               103,705         -       103,705
 Marketing                  28,227         -        28,227
 Technology and content     50,088         -        50,088
 General and
  administrative            21,102         -        21,102
 Stock-based
  compensation              27,323   (27,323)            -
 Other operating expense
  (income)                     912      (912)            -
                         ----------  --------    ----------
       Total operating
        expenses           231,357   (28,235)      203,122
                         ----------  --------    ----------

Income from operations      39,225    28,235        67,460 (2)

Interest income              6,540         -         6,540
Interest expense           (36,511)        -       (36,511)
Other income, net            2,859         -         2,859
Remeasurements and other   (22,234)   22,234             -
                         ----------  --------    ----------
       Total non-operating
        income (expense),
        net                (49,346)   22,234       (27,112)
                         ----------  --------    ----------
Net income (loss)       $  (10,121) $ 50,469    $   40,348
                         ==========  ========    ==========

Basic earnings (loss)
 per share              $    (0.03) $   0.13    $     0.10
                         ==========  ========    ==========

Diluted earnings (loss)
 per share              $    (0.03) $   0.13    $     0.10
                         ==========  ========    ==========

Weighted average shares
 used in computation
 of earnings (loss) per
 share:
  Basic                    388,541                388,541
                         ==========             ===========
  Diluted                  388,541                411,091
                         ==========             ===========

Net cash used in
 operating activities                          $ (251,782)
Purchases of fixed
 assets, including
 internal-use
 software and website
 development                                       (6,394)
                                                -----------
Free cash flow                                 $ (258,176)
                                                ===========

Net cash provided by
 (used in) investing
 activities                                     $  (30,494)
                                                 ==========

Net cash provided by
 (used in) financing
 activities                                     $   35,334
                                                 ==========


                                   Three Months Ended
                                     March 31, 2004
                           ----------------------------------

                           As Reported Adjustments Pro Forma
                                (1)
                           -----------  ---------- ----------

Net sales                  $1,530,349  $      -   $1,530,349
Cost of sales               1,169,515         -    1,169,515
                            ----------  --------   ----------
Gross profit                  360,834         -      360,834

Operating expenses:
 Fulfillment                  127,705         -      127,705
 Marketing                     33,636         -       33,636
 Technology and content        55,076         -       55,076
 General and
  administrative               27,417         -       27,417
 Stock-based
  compensation                  7,107    (7,107)           -
 Other operating expense
  (income)                       (542)      542            -
                            ----------  --------   ----------
       Total operating
        expenses              250,399    (6,565)     243,834
                            ----------  --------   ----------

Income from operations        110,435     6,565      117,000 (2)

Interest income                 5,555         -        5,555
Interest expense              (27,731)        -      (27,731)
Other income, net               2,517         -        2,517
Remeasurements and other       20,360   (20,360)           -
                            ----------  --------   ----------
       Total non-operating
        income (expense),
        net                       701   (20,360)     (19,659)
                            ----------  --------   ----------
Net income (loss)          $  111,136  $(13,795)  $   97,341
                            ==========  ========   ==========

Basic earnings (loss)
 per share                 $     0.28  $  (0.04)  $     0.24
                            ==========  ========   ==========

Diluted earnings (loss)
 per share                 $     0.26  $  (0.03)  $     0.23
                            ==========  ========   ==========

Weighted average shares
 used in computation
 of earnings (loss) per
 share:
  Basic                       403,542                403,542
                            ==========             ==========
  Diluted                     424,519                424,519
                            ==========             ==========

Net cash used in
 operating activities                             $ (250,688)
Purchases of fixed
 assets, including
 internal-use
 software and website
 development                                          (9,513)
                                                   ----------
Free cash flow                                    $ (260,201)
                                                   ==========

Net cash provided by
 (used in) investing
 activities                                       $   55,576
                                                   ==========

Net cash provided by
 (used in) financing
 activities                                       $ (140,833)
                                                   ==========


(1) In accordance with accounting principles generally accepted in the
    United States.

(2) Consolidated segment operating income.

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,
                                                ----------------------
                                                   2003        2004
                                                ----------  ----------
North America
 Net sales                                     $  704,712  $  846,841
 Cost of sales                                    517,880     620,966
                                                ----------  ----------
 Gross profit                                     186,832     225,875
 Direct segment operating expenses                135,171     150,366
                                                ----------  ----------
 Segment operating income                          51,661      75,509

International
 Net sales                                        378,847     683,508
 Cost of sales                                    295,097     548,549
                                                ----------  ----------
 Gross profit                                      83,750     134,959
 Direct segment operating expenses                 67,951      93,468
                                                ----------  ----------
 Segment operating income                          15,799      41,491

Consolidated
 Net sales                                      1,083,559   1,530,349
 Cost of sales                                    812,977   1,169,515
                                                ----------  ----------
 Gross profit                                     270,582     360,834
 Direct segment operating expenses                203,122     243,834
                                                ----------  ----------
 Segment operating income                          67,460     117,000
 Stock-based compensation                          27,323       7,107
 Other operating expense (income)                     912        (542)
                                                ----------  ----------

 Income from operations                            39,225     110,435
 Total non-operating income (expense), net        (49,346)        701
                                                ----------  ----------

 Net income (loss)                             $  (10,121) $  111,136
                                                ==========  ==========

Segment Highlights:
 Y / Y net sales growth:
  North America                                       13%         20%
  International                                       68          80
  Consolidated                                        28          41
 Y / Y gross profit growth:
  North America                                        8          21
  International                                       69          61
  Consolidated                                        21          33
 Y/Y segment operating income growth:
  North America                                       46          46
  International                                      N/A         163
  Consolidated                                       174          73
 Net sales mix:
  North America                                       65          55
  International                                       35          45


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


                           AMAZON.COM, INC.
                  Supplemental Net Sales Information
                            (in thousands)
                              (unaudited)


                                                 Three Months Ended
                                                      March 31,
                                               -----------------------
                                                   2003        2004
                                               -----------  ----------
North America
 Media                                         $  517,259  $  598,682
 Electronics and other general merchandise        168,145     224,433
 Other                                             19,308      23,726
                                                ----------  ----------
                                                  704,712     846,841

International
 Media                                            355,712     576,060
 Electronics and other general merchandise         22,863     107,001
 Other                                                272         447
                                                ----------  ----------
                                                  378,847     683,508

Consolidated
 Media                                            872,971   1,174,742
 Electronics and other general merchandise        191,008     331,434
 Other                                             19,580      24,173
                                                ----------  ----------
                                               $1,083,559  $1,530,349
                                                ==========  ==========

Y / Y Net Sales Growth:
North America:
 Media                                                 10%         16%
 Electronics and other general merchandise             32          33
 Other                                                (13)         23

International:
 Media                                                 66          62
 Electronics and other general merchandise            101         368
 Other                                                (45)         64

Consolidated:
 Media                                                 27          35
 Electronics and other general merchandise             37          74
 Other                                                (14)         23

Consolidated Net Sales Mix:
 Media                                                 80          77
 Electronics and other general merchandise             18          22
 Other                                                  2           1


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



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

                                 March 31,   December 31,  March 31,
                                    2003         2003         2004
                                 -----------  -----------  -----------
ASSETS
Current assets:
   Cash and cash equivalents    $   495,773  $ 1,102,273  $   768,587
   Marketable securities            586,779      292,550      229,554
                                 -----------  -----------  -----------
      Cash, cash equivalents,
       and marketable securities  1,082,552    1,394,823      998,141
   Inventories                      173,030      293,917      281,550
   Accounts receivable, net and
    other current assets             88,914      132,069      125,883
                                 -----------  -----------  -----------
        Total current assets      1,344,496    1,820,809    1,405,574

Fixed assets, net                   228,279      224,285      217,476
Goodwill                             70,811       69,121       69,121
Other assets                         62,347       47,818       46,390
                                 -----------  -----------  -----------
        Total assets            $ 1,705,933  $ 2,162,033  $ 1,738,561
                                 ===========  ===========  ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Accounts payable             $   393,696  $   819,811  $   567,563
   Accrued expenses and other
    current liabilities             234,194      317,730      244,398
   Unearned revenue                  42,979       37,844       37,053
   Interest payable                  16,632       73,100       14,424
   Current portion of long-term
    debt and other                   11,078        4,216        2,473
                                 -----------  -----------  -----------
        Total current
         liabilities                698,579    1,252,701      865,911

Long-term debt and other          2,296,418    1,945,439    1,777,700

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 --
          391,609, 403,354, and
           404,893                    3,916        4,034        4,049
   Additional paid-in capital     1,714,616    1,899,398    1,923,103
   Deferred stock-based
    compensation                     (5,420)      (2,850)      (2,273)
   Accumulated other
    comprehensive income             17,655       37,739       33,363

   Accumulated deficit           (3,019,831)  (2,974,428)  (2,863,292)
                                 -----------  -----------  -----------
        Total stockholders'
         deficit                 (1,289,064)  (1,036,107)    (905,050)
                                 -----------  -----------  -----------
            Total liabilities
             and stockholders'
             deficit            $ 1,705,933  $ 2,162,033  $ 1,738,561
                                 ===========  ===========  ===========



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 data)
                              (unaudited)

----------------------------------------------------------------------
                                                               Y / Y
                                                                  %
                       Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Change
                       ------- ------- ------- ------- ------- ------
Cash Flows and Shares

Operating cash flow --
 Trailing Twelve
 Months (TTM)          $  164  $  285  $  284  $  392  $  393    140%

Purchases of fixed assets
 (including internal-use
 software
    and website
     development) --
     TTM               $   41  $   40  $   44  $   46  $   49     21%

Free cash flow
 (operating cash flow
 less purchases of
 fixed assets) -- TTM  $  123  $  245  $  239  $  346  $  344    180%

Common shares and
 stock-based awards
 outstanding              432     433     433     433     432      0%
Common shares
 outstanding              392     397     400     403     405      3%
Stock-based awards
 outstanding               41      36      33      29      27   (32%)
Stock-based awards
 outstanding -- % of
 common shares
 outstanding               10%      9%      8%      7%      7%   N/A

Results of Operations

Worldwide (WW) net
 sales                 $1,084  $1,100  $1,134  $1,946  $1,530     41%
WW net sales -- Y / Y
 growth, excluding the
 effect of foreign
 exchange rates            22%     30%     30%     29%     33%   N/A
WW net sales --  TTM   $4,169  $4,463  $4,747  $5,264  $5,710     37%
WW net sales shipped
 outside the U.S. --
 TTM % of net sales        37%     39%     40%     43%     46%   N/A

Gross profit           $  271  $  274  $  286  $  427  $  361     33%
Gross margin -- % of
 WW net sales            25.0%   24.9%   25.2%   21.9%   23.6%   N/A
Gross profit -- TTM    $1,040  $1,096  $1,165  $1,257  $1,347     30%
Gross margin -- TTM %
 of WW net sales         24.9%   24.6%   24.6%   23.9%   23.6%   N/A

Fulfillment costs -- %
 of WW net sales          9.6%    9.8%    9.4%    8.2%    8.3%   N/A
Fulfillment costs --
 TTM % of WW net sales    9.7%    9.6%    9.4%    9.1%    8.8%   N/A

Consolidated direct
 segment operating
 expenses              $  203  $  207  $  212  $  274  $  244     20%
Consolidated direct
 segment operating
 expenses -- TTM       $  817  $  832  $  855  $  896  $  937     15%

Consolidated segment
 operating income      $   67  $   67  $   74  $  153  $  117     73%
Consolidated segment
 operating margin -- %
 of WW net sales          6.2%    6.1%    6.5%    7.9%    7.6%   N/A
Consolidated segment
 operating income --
 TTM                   $  223  $  264  $  310  $  361  $  411     84%
Consolidated segment
 operating margin --
 TTM % of WW net sales    5.3%    5.9%    6.5%    6.9%    7.2%   N/A

GAAP operating income  $   39  $   42  $   52  $  138  $  110    182%
GAAP operating margin
 -- % of WW net sales     3.6%    3.8%    4.6%    7.1%    7.2%   N/A
GAAP operating income
 -- TTM                $  102  $  142  $  204  $  271  $  342    237%
GAAP operating margin
 -- TTM % of WW net
 sales                    2.4%    3.2%    4.3%    5.1%    6.0%   N/A

Pro forma net income   $   40  $   42  $   48  $  125  $   97    141%
Diluted pro forma net
 income per share      $ 0.10  $ 0.10  $ 0.11  $ 0.29  $ 0.23    130%
Pro forma net income
 -- TTM                $  112  $  158  $  206  $  256  $  313    180%

GAAP net income (loss) $  (10) $  (43) $   16  $   73  $  111    N/A
GAAP net income (loss)
 per share             $(0.03) $(0.11) $ 0.04  $ 0.17  $ 0.26    N/A
GAAP net income (loss)
 -- TTM                $ (136) $  (86) $  (35) $   35  $  157    N/A

North America segment:
  Net sales            $  705  $  703  $  709  $1,142  $  847     20%
  Net sales -- TTM     $2,845  $2,961  $3,083  $3,258  $3,401     20%
  Gross profit         $  187  $  190  $  201  $  289  $  226     21%
  Gross margin -- % of
   North American net
   sales                   27%     27%     28%     25%     27%   N/A
  Gross profit -- TTM  $  754  $  774  $  821  $  867  $  906     20%
  Gross margin -- TTM
   % of North America
   net sales               27%     26%     27%     27%     27%   N/A
  Operating income     $   52  $   55  $   63  $  114  $   76     46%
  Operating margin --
   % of North America
   net sales                7%      8%      9%     10%      9%   N/A
  Operating income --
   TTM                 $  196  $  215  $  251  $  283  $  307     57%
  Operating margin --
   TTM % of North
   America net sales        7%      7%      8%      9%      9%   N/A
----------------------------------------------------------------------

Note: The attached "Financial and Operational Highlights" are an
      integral part of this Supplemental Financial Information and
      Business Metrics


                           AMAZON.COM, INC.
        Supplemental Financial Information and Business Metrics
    (in millions, except inventory turnover, accounts payable days,
                          and employee data)
                              (unaudited)
----------------------------------------------------------------------
                                                               Y / Y
                                                                  %
                       Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Change
                       ------- ------- ------- ------- ------- ------
International segment:
  Net sales            $  379  $  397  $  425  $  804  $  684     80%
  Net sales -- Y / Y
   growth, excluding
   the effect of
   foreign exchange
   rates                   45%     57%     50%     54%     58%   N/A
  Net sales -- TTM     $1,324  $1,502  $1,663  $2,005  $2,310     74%
  Gross profit         $   84  $   84  $   85  $  138  $  135     61%
  Gross margin -- % of
   International net
   sales                   22%     21%     20%     17%     20%   N/A
  Gross profit -- TTM  $  286  $  322  $  345  $  391  $  442     55%
  Gross margin -- TTM
   % of International
   net sales               22%     21%     21%     19%     19%   N/A
  Operating income     $   16  $   13  $   11  $   39  $   41    163%
  Operating margin --
   % of International
   net sales                4%      3%      3%      5%      6%   N/A
  Operating income --
   TTM                 $   27  $   49  $   59  $   78  $  104    285%
  Operating margin --
   TTM % of
   International net
   sales                    2%      3%      4%      4%      5%   N/A

Supplemental Worldwide
 Net Sales:
  Media                $  873  $  865  $  877  $1,434  $1,175     35%
  Media -- TTM         $3,286  $3,503  $3,695  $4,049  $4,351     32%
  Electronics and
   other general
   merchandise         $  191  $  209  $  230  $  473  $  331     74%
  Electronics and
   other general
   merchandise -- TTM  $  799  $  868  $  951  $1,103  $1,244     56%
  Other                $   20  $   26  $   27  $   39  $   24     23%
  Other -- TTM         $   84  $   93  $  101  $  112  $  116     38%

Supplemental North
 America Segment Net
 Sales:
  Media                $  517  $  499  $  502  $  751  $  599     16%
  Media -- TTM         $2,041  $2,101  $2,167  $2,269  $2,351     15%`
  Electronics and
   other general
   merchandise         $  168  $  177  $  180  $  353  $  224     33%
  Electronics and
   other general
   merchandise -- TTM  $  722  $  769  $  816  $  879  $  935     30%
  Other                $   19  $   26  $   27  $   38  $   24     23%
  Other -- TTM         $   82  $   91  $  100  $  110  $  115     39%

Supplemental
 International Segment
 Net Sales:
  Media                $  356  $  366  $  375  $  683  $  576     62%
  Media -- TTM         $1,245  $1,402  $1,527  $1,779  $2,000     61%
  Electronics and
   other general
   merchandise         $   23  $   31  $   50  $  121  $  107    368%
  Electronics and
   other general
   merchandise -- TTM  $   77  $   99  $  135  $  225  $  309    299%
  Other                $    0  $    0  $    0  $    0  $    0     64%
  Other -- TTM         $    2  $    1  $    1  $    1  $    1   (20%)


Balance Sheet

Cash and marketable
 securities            $1,083  $  989  $1,065  $1,395  $  998    (8%)

Inventory, net --
 ending                $  173  $  178  $  242  $  294  $  282     63%
Inventory -- average
 inventory % of TTM
 net sales                  4%      4%      4%      4%      4%   N/A
Inventory turnover,
 average -- TTM          19.7    20.2    18.9    18.4    18.7    (5%)

Fixed assets, net      $  228  $  222  $  221  $  224  $  217    (5%)

Accounts payable days
 -- ending                 44      49      54      50      44      1%

Other

Employees (full-time
 and part-time)         7,700   7,600   7,900   7,800   8,100      5%
----------------------------------------------------------------------

Note: The attached "Financial and Operational Highlights" are an
      integral part of this Supplemental Financial Information and
      Business Metrics
                           AMAZON.COM, INC.
                 Financial and Operational Highlights
                              (unaudited)

Quarterly Results of Operations (comparisons are with the equivalent period of the prior year, unless otherwise stated)

    Net Sales

    --  As our financial reporting currency is the U.S. Dollar, our
        total revenue, profit, and operating and free cash flow has
        recently benefited significantly from weakness in the U.S.
        Dollar in comparison to the currencies of our international
        websites. While we believe that our increasing diversification
        beyond the U.S. economy through our international businesses
        benefits our shareholders, it is important to evaluate our
        growth rates after the effect of currency changes.

    --  Shipping revenue, which excludes amounts earned from
        third-party sellers, was approximately $94 million, up 20%
        from $78 million.

    Gross Profit

    --  Gross profit benefited by approximately $17 million from
        changes in foreign exchange rates compared with first quarter
        2003.

    --  Net shipping cost was approximately $43 million, up from a
        cost of $27 million, as a result of our free shipping offers.
        We view our shipping offers as an effective marketing tool and
        intend to continue offering them.

    Fulfillment

    --  Fulfillment costs represent those costs incurred in operating
        and staffing our fulfillment and customer service centers,
        credit card fees and bad debt costs, including costs
        associated with our guarantee for certain third-party seller
        transactions. Fulfillment costs also include amounts paid to
        third parties, who assist us in fulfillment and customer
        service operations.

    --  Costs incurred in operating and staffing our fulfillment and
        customer service centers on behalf of other businesses, such
        as Toysrus.com and Target, are classified as cost of sales
        rather than fulfillment.

    --  Credit card fees associated with third-party seller
        transactions are based on the gross purchase price of
        underlying transactions, and therefore represent a larger
        percentage of our recorded commission revenue than credit card
        fees on our retail sales. Accordingly, this negatively affects
        fulfillment as a percentage of net sales.

    Stock-Based Compensation

    --  We granted less than a half million stock awards during the
        quarter at a weighted average fair value of $47.

    --  Stock-based awards generally vest over service periods of
        between three to six years.

    --  At March 31, 2004, there were 27 million stock awards
        outstanding, which are excluded from common stock outstanding,
        consisting of 23 million stock options ($13 average exercise
        price) and 4 million restricted stock units. Additionally, 1
        million shares of restricted stock are included in common
        stock outstanding.

    --  Since October 2002, we have awarded restricted stock units as
        our primary form of stock-based compensation. Restricted stock
        units, under fixed accounting, are generally measured at fair
        value on the date of grant based on the number of shares
        granted and the quoted price of our common stock. Such value
        is recognized as an expense over the corresponding service
        period. To the extent that restricted stock units are
        forfeited prior to vesting, the corresponding previously
        recognized expense is reversed as an offset to stock-based
        compensation.

    --  At March 31, 2004, 1 million stock awards were subject to
        variable accounting. Stock option grants after December 31,
        2002, are subject to variable accounting treatment. Variable
        accounting treatment results in expense or contra-expense
        recognition using the cumulative expense method, calculated
        based on the quoted price of our common stock and vesting
        schedules of underlying awards. For example, since the closing
        price of our common stock on March 31, 2004, was less than the
        closing price on December 31, 2003, we recorded a
        contra-expense associated with variable accounting treatment
        for the first quarter of 2004.

    --  Stock-based compensation consisted of $3 million
        contra-expense for stock awards under variable accounting and
        $10 million for stock awards under fixed accounting.
        "Stock-based compensation" includes matching stock
        contributions under our 401(k) program but excludes payroll
        tax expense resulting from exercises of stock-based awards.

    Other Operating Expense (Income)

    --  Included in "Other operating expense (income)" are
        restructuring-related expenses and amortization of other
        intangibles.

    --  Our first quarter 2001 operational restructuring plan is
        complete; however, we may periodically adjust our
        restructuring-related estimates in the future, such as lease
        obligations, if necessary.

    --  During the first quarter we determined that some of the office
        space previously vacated as part of our 2001 restructuring,
        which we had been unable to sublease due to poor real estate
        market conditions, was necessary for our future needs. Future
        lease payments for this office space will be expensed over the
        lease period and classified to the corresponding operating
        expense categories on the consolidated statements of
        operations.

    --  Cash payments resulting from our operational restructuring
        were $2 million, compared with $16 million in first quarter
        2003.

    --  We estimate, based on currently available information, the
        remaining net cash outflows associated with
        restructuring-related leases and other commitments will be $4
        million in 2004, and $23 million thereafter. Amounts due
        within 12 months are included within "Accrued expenses and
        other current liabilities" and the remaining amounts within
        "Long-term debt and other" on our balance sheet. These amounts
        are net of anticipated sublease income of approximately $33
        million (we have signed sublease agreements for $14 million).

    Remeasurements and Other

    --  "Remeasurements and other" primarily consisted of
        foreign-currency gains on remeasurement of 6.875% PEACS from
        Euros to U.S. Dollars of $20 million, compared with a loss of
        $25 million in first quarter 2003.

    --  Other includes a $3 million loss from remeasurement of
        intercompany balances, corresponding with a decision reached
        during the fourth quarter of 2003 that intercompany balances
        denominated in foreign currencies would be repaid amongst
        subsidiaries. Also, during the first quarter, approximately
        $135 million of these balances were repaid among the entities.

    --  In connection with our February 2004 $150 million redemption
        of our 4.75% Convertible Subordinated Notes due 2009, we
        recorded a charge of $6 million, consisting of a $4 million
        (2.375%) premium and approximately $2 million of remaining
        deferred issuance charges.

    --  Other also includes a gain of $6 million relating to the
        settlement of a contractual dispute.

    --  In April 2004, we entered into an agreement to sell one of our
        equity investments. At closing, which is anticipated in the
        second quarter of 2004, we expect to record a gain of
        approximately $14 million classified in "Remeasurements and
        other."

    Income Taxes

    --  At March 31, 2004, we had net operating loss carryforwards
        (NOLs) of approximately $2.8 billion primarily related to U.S.
        federal taxes. Utilization of NOLs, which begin to expire at
        various times starting in 2010, may be subject to certain
        limitations. Approximately $1.7 billion of our NOLs relate to
        tax deductible stock-based compensation in excess of amounts
        recognized for financial reporting purposes -- to the extent
        that any of this amount is realized for tax purposes but not
        financial reporting purposes, the resulting tax benefits will
        be credited to stockholders' equity, rather than results of
        operations.

    Net Income (Loss)

    --  We do not believe that our reported net income for the quarter
        ended March 31, 2004, should be viewed, on its own, as a
        material positive event or should be considered predictive of
        future results. For example, we are unable to forecast the
        effect on our future reported results of certain items,
        including the effect that fluctuations in foreign currency
        rates will have on the remeasurement of our 6.875% PEACS and
        intercompany balances. Additionally, we are unable to forecast
        the effect on stock-based compensation of changes in the
        quoted price of our common stock due to variable accounting
        treatment. The remeasurement of our 6.875% PEACS represented
        significant gains during the quarter and may result in
        significant charges or gains in future periods.

    Cash Flows and Balance Sheet

    --  Operating cash flows and free cash flows can be volatile and
        are sensitive to many factors, including changes in working
        capital. Working capital at any specific point in time is
        subject to many variables, including world events,
        seasonality, the timing of expense payments, discounts offered
        by vendors, vendor payment terms and fluctuations in foreign
        exchange rates.

    --  Our cash, cash equivalents and marketable securities of $998
        million, at fair value, primarily consist of cash, commercial
        paper and short-term securities, U.S. Treasury notes and
        bonds, asset-backed and agency securities, and certificates of
        deposit. Included is amounts held in foreign currencies of
        $578 million, primarily in Euros and British Pounds.

    --  We have pledged approximately $86 million of our marketable
        securities as collateral for property leases and other
        contractual obligations, compared with $105 million as of
        March 31, 2003.

    --  "Other assets" includes, among other things, deferred issuance
        costs on long-term debt, intangibles and other equity
        investments.

    --  "Unearned revenue" is recorded when payments are received from
        third parties in advance of our providing the associated
        service.

    --  "Accrued expenses and other current liabilities" includes,
        among other things, liabilities for gift certificates,
        marketing activities, and workforce costs, including accrued
        payroll, vacation, and other benefits.

    --  "Long-term debt and other" primarily includes the following
        (in millions):
                                 Principal   Interest    Principal
                                at Maturity     Rate      Due Date
                              ----------------------------------------

Convertible Subordinated Notes    $900 (1)   4.750%   February 2009
PEACS                              849 (2)   6.875%   February 2010
                              -------------
                                $1,749 (3)
                              =============

(1) Convertible at the holders' option into our common stock at
    $78.0275 per share. We have the right to redeem the Convertible
    Subordinated Notes, in whole or in part, at a redemption price of
    102.375% of the principal, which decreases every February by 47.5
    basis points until maturity, plus any accrued and unpaid interest.
    In February 2004 we redeemed $150 million of our 4.75% Convertible
    Subordinated Notes.

(2) EUR 690 million principal amount, convertible at the holders'
    option into our common stock at EUR 84.883 ($104 at March 31,
    2004) per share. We have the right to redeem the PEACS, in whole
    or in part, by paying the EUR 690 million, plus any accrued and
    unpaid interest. We do not hedge any portion of the PEACS. The
    U.S. Dollar equivalent principal, interest and conversion price
    fluctuates based on the Euro/U.S. Dollar exchange ratio.

(3) The "if converted" number of shares associated with each of our
    convertible debt instruments (approximately 20 million total
    shares) are excluded from diluted shares as their effect is
    anti-dilutive.



    Certain Definitions and Other

    --  We present segment information along two lines: 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 expenses (income), 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.

    --  The North America segment consists of amounts earned from
        retail sales of consumer products (including from third-party
        sellers) through www.amazon.com and www.amazon.ca; from North
        America focused Syndicated Stores, such as www.cdnow.com; from
        our mail-order tool catalog; and from non-retail activities
        such as North America focused Merchant.com, marketing and
        promotional agreements.

    --  The International segment consists of amounts earned from
        retail sales of consumer products (including from third-party
        sellers) through www.amazon.co.uk, www.amazon.de,
        www.amazon.fr and www.amazon.co.jp; from internationally
        focused Syndicated Stores; and from non-retail activities such
        as internationally focused marketing and promotional
        agreements. This segment includes export sales from
        www.amazon.co.uk, www.amazon.de, www.amazon.fr and
        www.amazon.co.jp (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 revenue 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 of books, music,
        DVD/video, magazine subscriptions, software, video games and
        video game consoles. Electronics and other general merchandise
        consists of amounts earned from retail sales from all sellers
        of items not included in Media, such as electronics and
        office, kids and baby, home and garden, apparel, sports and
        outdoors, gourmet food, jewelry, and health and personal care.
        The Other category consists of non-retail activities, such as
        the Merchant.com program and miscellaneous marketing and
        promotional activities.

    --  Operating cycle is number of days of sales in inventory plus
        number of days of sales in accounts receivable minus accounts
        payable days. Inventory turnover is the quotient of annualized
        cost of sales to average inventory. Accounts payable days is
        calculated as the quotient of accounts payable to cost of
        sales, multiplied by the number of days in the period.

    --  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
        certain third-party sellers on our websites. Customer accounts
        include customers of Amazon Marketplace, Auctions and zShops
        and our Merchants@ and Syndicated Stores Programs, but exclude
        Merchant.com Program customers, Amazon.com Payments customers,
        our catalog customers and the customers of select companies
        with whom we have a technology alliance or marketing and
        promotional relationships. A customer is considered active
        upon placing an order.

    --  References to units mean units sold (net of returns and
        cancellations) by us and third-party sellers at Amazon.com
        domains worldwide -- such as www.amazon.com, www.amazon.ca,
        www.amazon.fr, www.amazon.co.uk, www.amazon.de and
        www.amazon.co.jp -- and at Syndicated Stores domains, as well
        as Amazon.com-owned items sold at non-Amazon.com domains, such
        as books, music and DVD/video items ordered from Amazon.com's
        store at www.target.com. Units do not include Amazon.com gift
        certificates.



    CONTACT: Amazon.com
             Tim Stone, 206-266-2171 (Investor Relations)
             ir@amazon.com
             www.amazon.com/ir
              or
             Patty Smith, 206/266-7180 (Public Relations)

    SOURCE: Amazon.com, Inc.

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