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Amazon.com Announces Record Free Cash Flow Fueled by Lower Prices and Free Shipping for Customers

SEATTLE--(BUSINESS WIRE)--July 26, 2005--Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its second quarter ended June 30, 2005.

Operating cash flow grew 52% to $624 million for the trailing twelve months, compared with $410 million for the trailing twelve months ended June 30, 2004. Free cash flow grew 37% to $486 million for the trailing twelve months, compared with $354 million for the trailing twelve months ended June 30, 2004.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 438 million at June 30, 2005, compared with 434 million a year ago.

Net sales increased 26% to $1.75 billion in the second quarter, compared with $1.39 billion in second quarter 2004. Excluding the $25 million benefit from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 25% compared with second quarter 2004.

Operating income increased 21% to $104 million in the second quarter, compared with $86 million in second quarter 2004. As previously announced, the Company chose to adopt SFAS 123(R), the new accounting rules on stock-based compensation, earlier than required, effective January 1, 2005. Excluding the more than $5 million impact on the quarter's results from this adoption, operating income would have grown 27% to $110 million. Operating income benefited by $2 million from year-over-year changes in foreign exchange rates throughout the quarter.

Net income was $52 million in the second quarter, or $0.12 per diluted share, compared with net income of $76 million, or $0.18 per diluted share in second quarter 2004, which includes $56 million in income tax expense, compared with $5 million income tax expense in second quarter 2004.

"Amazon Prime members love getting unlimited two-day shipping for free with no minimum order size," said Jeff Bezos, founder and CEO of Amazon.com. "Though expensive for the company, Amazon Prime creates a premium experience for customers who join, and as a result we hope they'll purchase more from us in the long term."

Amazon Prime, Amazon.com's first-ever membership program, was introduced February 2005. For a flat membership fee of $79 per year, Amazon Prime members get unlimited, express two-day shipping for free, with no minimum purchase requirement on over a million eligible items sold by Amazon.com. Members can order as late as 6:30 p.m. ET and still get their order the next day for only $3.99 per item, and can share the benefits of Amazon Prime with up to four family members living in their household. Sign up for Amazon Prime at www.amazon.com/prime.

"We are pleased with our $486 million of free cash flow, up 37%," said Tom Szkutak, CFO of Amazon.com. "We continue to offer lower prices and free two-day shipping for Amazon Prime members while generating additional free cash flow for our shareholders."

    Highlights

    --  North America segment sales, representing the Company's U.S.
        and Canadian sites, were $960 million, up 21% from second
        quarter 2004. Segment operating income increased 9% to $72
        million in second quarter 2005 from $66 million in second
        quarter 2004.

    --  North America Other revenue, which includes Amazon Services'
        Merchant.com program, doubled to $50 million in second quarter
        2005.

    --  International segment sales, representing the Company's U.K.,
        German, French, Japanese and Chinese sites, were $793 million,
        up 33% from second quarter 2004. Excluding the benefit from
        year-over-year changes in foreign exchange rates throughout
        the quarter, net sales growth was 29%. Segment operating
        income increased 72% to $60 million in second quarter 2005
        from $35 million in second quarter 2004.

    --  On a trailing twelve month basis, International segment sales
        increased to 45% of worldwide net sales, up from 42% for the
        trailing twelve months ended June 30, 2004.

    --  Worldwide Electronics & Other General Merchandise sales grew
        40% to $456 million, and increased to 26% of worldwide net
        sales, compared with 23% for second quarter 2004.

    --  The Company received orders for more than 1.5 million copies
        of Harry Potter and the Half-Blood Prince worldwide in advance
        of its July 16 release, making it Amazon.com's largest new
        product release.

    --  The Company's U.K. and German sites -- Amazon.co.uk and
        Amazon.de -- recently launched Search Inside the Book,
        enabling customers to preview the text inside hundreds of
        thousands of books.

    --  Amazon.de also introduced a new DVD rental service with
        subscription plans that start from just EUR 9.99 per month.
        Rental members also receive an extra 5% discount off
        Amazon.de's already low prices on their DVD purchases.

    Financial Guidance

The following forward-looking statements reflect Amazon.com's expectations as of July 26, 2005. Results may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce, and the various factors detailed below.

    Third Quarter 2005 Guidance

    --  Net sales are expected to be between $1.76 billion and $1.91
        billion, or grow between 20% and 31%, compared with third
        quarter 2004.

    --  Operating income is expected to be between $60 million and $90
        million, or between (26%) decline and 11% growth, compared
        with third quarter 2004. This guidance includes stock-based
        compensation of $35 million, including the impact from the
        Company's January 1, 2005 early adoption of SFAS 123(R), and
        assumes, among other things, that no additional intangible
        assets are recorded, and that there are no further revisions
        to restructuring-related estimates.

    Full Year 2005 Expectations

    --  Net sales are expected to be between $8.275 billion and $8.675
        billion, or grow between 20% and 25%, compared with 2004.

    --  Operating income is expected to be between $415 million and
        $515 million, or between (6%) decline and 17% growth, compared
        with 2004. This expectation includes stock-based compensation
        of $110 million, including the impact from the Company's
        January 1, 2005 early adoption of SFAS 123(R), and assumes,
        among other things, that no additional intangible assets are
        recorded and that there are no further revisions to
        restructuring-related estimates.

A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales derived from products as compared with services, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains and develops commercial agreements, acquisitions and strategic transactions, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risk of future losses, significant indebtedness, system interruptions, consumer trends, 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, 2004, and all subsequent filings.

Financial Measure

The following measure is defined by the Securities and Exchange Commission as a non-GAAP financial measure.

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."

About Amazon.com

Amazon.com (NASDAQ:AMZN), a Fortune 500 company based in Seattle, opened its virtual doors 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 customers the lowest possible prices. Amazon.com and third-party sellers offer millions of unique new, refurbished, 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, toys and baby, and home and garden.

Amazon.com and its affiliates operate seven retail websites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and www.joyo.com.

As used herein, "Amazon.com," "we," "our" and similar terms include Amazon.com, Inc. and its subsidiaries, unless the context indicates otherwise.


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

                         Three Months   Six Months      Twelve Months
                            Ended          Ended            Ended
                           June 30,       June 30,         June 30,
                         ------------   ------------     ------------
                         2005    2004   2005    2004     2005    2004
                         ------------   ------------     ------------

CASH AND CASH
 EQUIVALENTS,
 BEGINNING OF PERIOD    $ 533   $ 769 $1,303  $1,102  $   701   $ 642

OPERATING ACTIVITIES:
Net income                 52      76    130     188      531     276
Adjustments to
 reconcile net income
 to net cash provided
 by (used in)
 operating activities:
  Depreciation of fixed
   assets, including
   internal-use software
   and website
   development, and
   other amortization      26      18     55      36       95      73
  Stock-based
   compensation            26      22     45      29       74      65
  Other operating
   expense (income)         2      (7)     3      (8)       2      (7)
  Losses (gains) on
   sales of marketable
   securities, net          -       -      -      (1)       -      (1)
  Remeasurements and
   other                  (18)    (16)   (32)    (36)       5      11
  Non-cash interest
   expense and other        1       1      3       2        5       4
  Deferred income taxes    44      (1)    94      (8)    (154)     (8)
  Cumulative effect of
   change in accounting
   principle                -       -    (26)      -      (26)      -
Changes in operating
 assets and
 liabilities:
  Inventories              13      (5)    85       8      (93)    (96)
  Accounts receivable,
   net and other current
   assets                   9      (5)    19      10        8     (24)
  Accounts payable         54      23   (370)   (233)     150     115
  Accrued expenses and
   other current
   liabilities              7      10    (25)    (62)      21       8
  Additions to unearned
   revenue                 38      27     66      50      125     104
  Amortization of
   previously unearned
   revenue                (31)    (25)   (56)    (49)    (113)   (104)
  Interest payable         21      25    (41)    (34)      (6)     (6)
                         -----   ----- ------  ------  -------   -----
    Net cash provided by
     (used in) operating
     activities           244     143    (50)   (108)     624     410

INVESTING ACTIVITIES:
Purchases of fixed
 assets, including
 internal-use
 software and website
 development              (46)    (14)   (73)    (24)    (138)    (56)
Sales and maturities
 of marketable
 securities and other
 investments              142      43    490     612    1,305     866
Purchases of
 marketable securities   (235)   (251)  (738)   (755)  (1,568)   (948)
Proceeds from sale of
 subsidiary                 -       -      -       -        -       5
Acquisitions, net of
 cash acquired             (5)      -    (20)      -      (91)      -
                         -----   ----- ------  ------  -------   -----
    Net cash used in
     investing
     activities          (144)   (222)  (341)   (167)    (492)   (133)

FINANCING ACTIVITIES:
Proceeds from
 exercises of stock
 options and other          9      20     19      35       44     106
Repayments of long-
 term debt and capital
 lease obligations          -      (1)  (266)   (156)    (267)   (367)
                         -----   ----- ------  ------  -------   -----
    Net cash provided by
    (used in) financing
    activities              9      19   (247)   (121)    (223)   (261)

Foreign-currency
 effect on cash and
 cash equivalents         (13)     (8)   (36)     (5)      19      43
                         -----   ----- ------  ------  -------   -----
    Net increase
    (decrease) in cash
    and cash equivalents   96     (68)  (674)   (401)     (72)     59
                         -----   ----- ------  ------  -------   -----

CASH AND CASH
 EQUIVALENTS, END OF
 PERIOD                 $ 629   $ 701 $  629  $  701  $   629   $ 701
                         =====   ===== ======  ======  =======   =====

SUPPLEMENTAL CASH FLOW
 INFORMATION:
Cash paid for interest  $   -   $   - $   84  $   86  $   105   $ 119
Cash paid for income
 taxes                      1       1      5       1        8       2


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

                                        Three Months    Six Months
                                           Ended           Ended
                                          June 30,        June 30,
                                        -------------   ------------
                                        2005    2004    2005    2004
                                        -------------   ------------

Net sales                             $1,753  $1,387  $3,655  $2,918
Cost of sales                          1,303   1,046   2,746   2,216
                                       ------  ------  ------  ------
Gross profit                             450     341     909     702

Operating expenses (1):
  Fulfillment                            158     126     324     255
  Marketing                               42      34      87      68
  Technology and content                 106      71     198     130
  General and administrative              38      31      85      60
  Other operating expense (income)         2      (7)      3      (8)
                                       ------  ------  ------  ------
          Total operating expenses       346     255     697     505
                                       ------  ------  ------  ------

Income from operations                   104      86     212     197

Interest income                            9       5      18      11
Interest expense                         (22)    (26)    (48)    (54)
Other income (expense), net               (1)      -       2       1
Remeasurements and other                  18      16      32      36
                                       ------  ------  ------  ------
          Total non-operating income
           (expense)                       4      (5)      4      (6)
                                       ------  ------  ------  ------

Income before income taxes               108      81     216     191

Provision for income taxes                56       5     112       3
                                       ------  ------  ------  ------

Income before cumulative effect of
 change in accounting principle           52      76     104     188

Cumulative effect of change in
 accounting principle                      -       -      26       -
                                       ------  ------  ------  ------

Net income                            $   52  $   76  $  130  $  188
                                       ======  ======  ======  ======

Basic earnings per share:
  Prior to cumulative effect of change
   in accounting principle            $ 0.13  $ 0.19  $ 0.25  $ 0.46
  Cumulative effect of change in
   accounting principle                    -       -    0.07       -
                                       ------  ------  ------  ------
                                      $ 0.13  $ 0.19  $ 0.32  $ 0.46
                                       ======  ======  ======  ======

Diluted earnings per share:
  Prior to cumulative effect of change
   in accounting principle            $ 0.12  $ 0.18  $ 0.24  $ 0.44
  Cumulative effect of change in
   accounting principle                    -       -    0.07       -
                                       ------  ------  ------  ------
                                      $ 0.12  $ 0.18  $ 0.31  $ 0.44
                                       ======  ======  ======  ======

Weighted average shares used in
 computation of earnings per share:
  Basic                                  411     405     410     404
                                       ======  ======  ======  ======

  Diluted                                425     425     425     425
                                       ======  ======  ======  ======

(1) Includes stock-based compensation
    as follows:
      Fulfillment                     $    5  $    3  $    8  $    4
      Marketing                            2       2       3       3
      Technology and content              13      13      23      16
      General and administrative           6       4      11       6
                                       ------  ------  ------  ------
                                      $   26  $   22  $   45  $   29
                                       ======  ======  ======  ======


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

                                         Three Months    Six Months
                                            Ended           Ended
                                           June 30,        June 30,
                                        -------------    ------------
                                        2005     2004    2005    2004
                                        -------------    ------------

North America
  Net sales                           $  960   $  791  $1,987  $1,639
  Cost of sales                          682      571   1,430   1,193
                                       ------   ------  ------  ------
  Gross profit                           278      220     557     446
  Direct segment operating expenses (1)  206      154     420     304
                                       ------   ------  ------  ------
  Segment operating income                72       66     137     142

International
  Net sales                              793      596   1,668   1,279
  Cost of sales                          621      475   1,316   1,023
                                       ------   ------  ------  ------
  Gross profit                           172      121     352     256
  Direct segment operating expenses (1)  112       86     229     180
                                       ------   ------  ------  ------
  Segment operating income                60       35     123      76

Consolidated
  Net sales                            1,753    1,387   3,655   2,918
  Cost of sales                        1,303    1,046   2,746   2,216
                                       ------   ------  ------  ------
  Gross profit                           450      341     909     702
  Direct segment operating expenses      318      240     649     484
                                       ------   ------  ------  ------
  Segment operating income               132      101     260     218
  Stock-based compensation               (26)     (22)    (45)    (29)
  Other operating income (expense)        (2)       7      (3)      8
                                       ------   ------  ------  ------
  Income from operations                 104       86     212     197
  Total non-operating income (expense),
   net                                     4       (5)      4      (6)
  Provision for income taxes             (56)      (5)   (112)     (3)
  Cumulative effect of change in
   accounting principle                    -        -      26       -
                                       ------   ------  ------  ------

  Net income                          $   52   $   76  $  130  $  188
                                       ======   ======  ======  ======

Segment Highlights:
  Y/Y net sales growth:
    North America                         21%      13%     21%     16%
    International                         33       50      30      65
    Consolidated                          26       26      25      34
  Y/Y gross profit growth:
    North America                         27%      16%     25%     18%
    International                         42       45      37      53
    Consolidated                          32       25      29      29
  Y/Y segment operating income growth:
    North America                          9%      21%     (3%)    33%
    International                         72      177      61     169
    Consolidated                          31       50      20      62
Net sales mix:
    North America                         55%      57%     54%     56%
    International                         45       43      46      44


    (1) A significant majority of our costs for "Technology and
        content" are incurred in the United States and most of these
        costs are allocated to our North America segment.


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

                                        Three Months     Six Months
                                            Ended           Ended
                                           June 30,        June 30,
                                         ------------    ------------
                                         2005    2004    2005    2004
                                         ------------    ------------

North America
  Media                                $  632  $  541  $1,331  $1,141
  Electronics and other general
   merchandise                            278     226     559     450
  Other                                    50      24      97      48
                                        ------  ------  ------  ------
                                          960     791   1,987   1,639

International
  Media                                   614     496   1,289   1,072
  Electronics and other general
   merchandise                            178      99     377     206
  Other                                     1       1       2       1
                                        ------  ------  ------  ------
                                          793     596   1,668   1,279

Consolidated
  Media                                 1,246   1,037   2,620   2,213
  Electronics and other general
   merchandise                            456     325     936     656
  Other                                    51      25      99      49
                                        ------  ------  ------  ------
                                       $1,753  $1,387  $3,655  $2,918
                                        ======  ======  ======  ======

Y/Y Net Sales Growth:
North America:
  Media                                    17%      9%     17%     12%
  Electronics and other general
   merchandise                             23      27      24      30
  Other                                   105      (6)    100       6

International:
  Media                                    24%     35%     20%     48%
  Electronics and other general
   merchandise                             80     218      83     282
  Other                                    35     176      49     120

Consolidated:
  Media                                    20%     20%     18%     27%
  Electronics and other general
   merchandise                             40      56      43      64
  Other                                   103      (4)     99       8

Consolidated Net Sales Mix:
  Media                                    71%     75%     72%     76%
  Electronics and other general
   merchandise                             26      23      26      22
  Other                                     3       2       3       2


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

                                         June 30,  Dec. 31,  June 30,
                                           2005      2004      2004
                                         --------  --------  --------
ASSETS                                 (unaudited)         (unaudited)
Current assets:
  Cash and cash equivalents             $   629   $ 1,303   $   701
  Marketable securities                     696       476       450
                                         -------   -------   -------
     Cash, cash equivalents, and
      marketable securities               1,325     1,779     1,151
  Inventories                               383       480       284
  Deferred tax assets, current portion       63        81         1
  Accounts receivable, net and other
   current assets                           155       199       125
                                         -------   -------   -------
     Total current assets                 1,926     2,539     1,561

Fixed assets, net                           267       246       216
Deferred tax assets, long-term portion      206       282         6
Goodwill                                    154       139        69
Other assets                                 48        42        36
                                         -------   -------   -------
     Total assets                       $ 2,601   $ 3,248   $ 1,888
                                         =======   =======   =======

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Accounts payable                      $   735   $ 1,142   $   585
  Accrued expenses and other current
   liabilities                              317       361       250
  Unearned revenue                           52        41        39
  Interest payable                           32        74        40
  Current portion of long-term debt
   and other                                  8         2         2
                                         -------   -------   -------
     Total current liabilities            1,144     1,620       916

Long-term debt and other                  1,521     1,855     1,763

Commitments and contingencies

Stockholders' deficit:
  Preferred stock, $0.01 par value:
    Authorized shares -- 500
    Issued and outstanding shares --
     none                                     -         -         -
  Common stock, $0.01 par value:
    Authorized shares -- 5,000
    Issued and outstanding shares --
     412, 410 and 407 shares                  4         4         4
  Additional paid-in capital              2,161     2,123     1,963
  Accumulated other comprehensive
   income                                    27        32        29
  Accumulated deficit                    (2,256)   (2,386)   (2,787)
                                         -------   -------   -------
     Total stockholders' deficit            (64)     (227)     (791)
                                         -------   -------   -------
     Total liabilities and
      stockholders' deficit             $ 2,601   $ 3,248   $ 1,888
                                         =======   =======   =======


                           AMAZON.COM, INC.
       Supplemental Financial Information and Business Metrics
                 (in millions, except per share data)
                             (unaudited)
----------------------------------------------------------------------
                                                                Y/Y %
                      Q2 2004 Q3 2004 Q4 2004  Q1 2005 Q2 2005 Change
                      ------------------------------------------------
Cash Flows and Shares

Operating cash flow
 -- trailing twelve
 months (TTM)          $  410  $  490  $  567  $   523 $  624      52%

Purchase of fixed
 assets (incl.
 internal-use
 software & website
 development) -- TTM   $   56  $   70  $   89  $   106 $  138     146%

Free cash flow
 (operating cash flow
 less purchases of
 fixed assets) -- TTM  $  354  $  420  $  477  $   417 $  486      37%

Common shares and
 stock-based awards
 outstanding              434     434     434      434    438       1%
Common shares
 outstanding              407     407     410      411    412       1%
Stock-based awards
 outstanding               27      27      25       24     26     (5%)
Stock-based awards
 outstanding -- % of
 common shares
 outstanding              6.7%    6.5%    6.0%     5.7%   6.3%    N/A

Results of Operations

Worldwide (WW) net
 sales                 $1,387  $1,462  $2,541  $ 1,902 $1,753      26%
WW net sales -- Y/Y
 growth, excluding
 the effect of
 foreign exchange
 rates                   21.9%   23.9%   26.2%    22.3%  24.6%    N/A
WW net sales --  TTM   $5,998  $6,326  $6,921  $ 7,292 $7,658      28%

Gross profit           $  341  $  356  $  544  $   458 $  450      32%
Gross margin -- % of
 WW net sales            24.6%   24.3%   21.4%    24.1%  25.7%    N/A
Gross profit -- TTM    $1,415  $1,484  $1,602  $ 1,700 $1,809      28%
Gross margin -- TTM %
 of WW net sales         23.6%   23.5%   23.1%    23.3%  23.6%    N/A

Fulfillment costs,
 excluding stock-
 based compensation
 -- % of WW net sales     8.8%    9.3%    8.0%     8.6%   8.7%    N/A
Fulfillment costs,
 excluding stock-
 based compensation
 -- TTM % of WW net
 sales                    8.6%    8.6%    8.5%     8.6%   8.6%    N/A

Operating income       $   86  $   81  $  162  $   108 $  104      21%
Operating margin -- %
 of WW net sales          6.2%    5.6%    6.4%     5.7%   6.0%    N/A
Operating income --
 TTM                   $  386  $  416  $  440  $   438 $  456      18%
Operating margin --
 TTM % of WW net
 sales                    6.4%    6.6%    6.4%     6.0%   6.0%    N/A

Net income (a)         $   76  $   54  $  347  $    78 $   52    (32%)
Net income per
 diluted share (a)     $ 0.18  $ 0.13  $ 0.82  $  0.18 $ 0.12    (32%)
Net income --
 TTM (a)               $  276  $  315  $  588  $   555 $  531      92%
Net income per
 diluted share -- TTM
 (a)                   $ 0.65  $ 0.74  $ 1.39  $  1.31 $ 1.25      92%

Segments

North America
 Segment:
  Net sales            $  791  $  816  $1,392  $ 1,027 $  960      21%
  Net sales -- Y/Y
   growth, excluding
   the effect of
   foreign exchange
   rates                 12.7%   15.0%   21.8%    21.1%  21.0%    N/A
  Net sales -- TTM     $3,490  $3,597  $3,847  $ 4,027 $4,195      20%
  Gross profit         $  220  $  223  $  355  $   279 $  278      27%
  Gross margin -- %
   of North America
   net sales             27.7%   27.4%   25.5%    27.2%  29.0%    N/A
  Gross profit -- TTM  $  935  $  958  $1,024  $ 1,077 $1,135      21%
  Gross margin -- TTM
   % of North America
   net sales             26.8%   26.6%   26.6%    26.7%  27.1%    N/A
  Operating income     $   66  $   57  $  122  $    66 $   72       9%
  Operating margin --
   % of North America
   net sales              8.3%    7.0%    8.8%     6.4%   7.5%    N/A
  Operating income --
   TTM                 $  318  $  313  $  321  $   311 $  317     (0%)
  Operating margin --
   TTM % of North
   America net sales      9.1%    8.7%    8.3%     7.7%   7.6%    N/A

International
 Segment:
  Net sales            $  596  $  646  $1,149  $   875 $  793      33%
  Net sales -- Y/Y
   growth, excluding
   the effect of
   foreign exchange
   rates                 38.1%   38.9%   32.5%    23.8%  29.3%    N/A
  Net sales -- TTM     $2,508  $2,729  $3,074  $ 3,265 $3,463      38%
  Net sales -- TTM %
   of WW net sales       41.8%   43.1%   44.4%    44.8%  45.2%    N/A
  Gross profit         $  121  $  132  $  190  $   180 $  172      42%
  Gross margin -- %
   of International
   net sales             20.4%   20.5%   16.5%    20.5%  21.7%    N/A
  Gross profit -- TTM  $  479  $  527  $  578  $   623 $  674      41%
  Gross margin -- TTM
   % of International
   net sales             19.1%   19.3%   18.8%    19.1%  19.5%    N/A
  Operating income     $   35  $   38  $   55  $    63 $   60      72%
  Operating margin --
   % of International
   net sales              5.9%    5.8%    4.8%     7.2%   7.6%    N/A
  Operating income --
   TTM                 $  126  $  153  $  169  $   190 $  216      71%
  Operating margin --
   TTM % of
   International net
   sales                  5.0%    5.6%    5.5%     5.8%   6.2%    N/A
----------------------------------------------------------------------

Note: The attached "Financial and Operational Summary" is an integral
      part of this Supplemental Financial Information and Business
      Metrics.

(a) Q4 2004 net income includes a $244 million benefit from realizing
    a deferred tax asset related primarily to net operating loss
    carryforwards attributable to continuing operations; 2005 net
    income includes a $56 million tax expense for Q1 2005 and a $56
    million tax expense for Q2 2005 primarily due to taxable income
    resulting from the transfer of certain operating assets from U.S.
    to international locations.


                           AMAZON.COM, INC.
       Supplemental Financial Information and Business Metrics
 (in millions, except inventory turnover, accounts payable days, and
                            employee data)
                             (unaudited)
----------------------------------------------------------------------
                                                                Y/Y %
                      Q2 2004 Q3 2004 Q4 2004 Q1 2005  Q2 2005 Change
                      ------------------------------------------------
Segments (continued)

Consolidated
 Segments:
  Operating expenses   $  240  $  261  $  367  $  330  $   318     33%
  Operating expenses
   -- TTM              $  970  $1,019  $1,112  $1,198  $ 1,276     32%
  Operating income     $  101  $   95  $  177  $  129  $   132     31%
  Operating margin --
   % of consolidated
   sales                  7.3%    6.5%    7.0%    6.8%     7.5%   N/A
  Operating income --
   TTM                 $  444  $  466  $  490  $  502  $   533     20%
  Operating margin --
   TTM % of
   consolidated net
   sales                  7.4%    7.4%    7.1%    6.9%     7.0%   N/A

Supplemental North
 America Segment Net
 Sales:
  Media                $  541  $  564  $  885  $  699  $   632     17%
  Media -- TTM         $2,394  $2,455  $2,589  $2,690  $ 2,780     16%
  Electronics and
   other general
   merchandise         $  226  $  229  $  449  $  281  $   278     23%
  Electronics and
   other general
   merchandise -- TTM  $  983  $1,031  $1,128  $1,185  $ 1,236     26%
  Electronics and
   other general
   merchandise -- TTM
   % of North America
   net sales               28%     29%     29%     29%      29%   N/A
  Other                $   24  $   24  $   58  $   46  $    50    105%
  Other -- TTM         $  113  $  111  $  130  $  153  $   178     58%

Supplemental
 International
 Segment Net Sales:
  Media                $  496  $  530  $  911  $  675  $   614     24%
  Media -- TTM         $2,129  $2,285  $2,513  $2,612  $ 2,730     28%
  Electronics and
   other general
   merchandise         $   99  $  116  $  237  $  199  $   178     80%
  Electronics and
   other general
   merchandise -- TTM  $  377  $  442  $  558  $  651  $   730     94%
  Electronics and
   other general
   merchandise -- TTM
   % of International
   net sales               15%     16%     18%     20%      21%   N/A
  Other                $    1  $    0  $    1  $    1  $     1     35%
  Other -- TTM         $    2  $    2  $    2  $    3  $     3     60%

Supplemental
 Worldwide Net Sales:
  Media                $1,037  $1,094  $1,796  $1,374  $ 1,246     20%
  Media -- TTM         $4,523  $4,740  $5,102  $5,302  $ 5,510     22%
  Electronics and
   other general
   merchandise         $  325  $  344  $  686  $  480  $   456     40%
  Electronics and
   other general
   merchandise -- TTM  $1,360  $1,474  $1,686  $1,835  $ 1,966     45%
  Electronics and
   other general
   merchandise -- TTM
   % of WW net sales       23%     23%     24%     25%      26%   N/A
  Other                $   25  $   24  $   59  $   47  $    51    103%
  Other -- TTM         $  115  $  113  $  133  $  156  $   181     58%

Balance Sheet

Cash and marketable
 securities            $1,151  $1,185  $1,779  $1,151  $ 1,325     15%

Inventory, net --
 ending                $  284  $  357  $  480  $  403  $   383     35%
Inventory -- average
 inventory % of TTM
 net sales                4.3%    4.6%    4.9%    5.0%     5.0%   N/A
Inventory turnover,
 average -- TTM          17.9    16.6    15.7    15.5     15.3   (14%)

Fixed assets, net      $  216  $  227  $  246  $  245  $   267     24%

Accounts payable days
 -- ending                 51      57      53      44       51      1%

Other

Employees (full-time
 and part-time;
 excludes contractors
 & temporary
 personnel)             8,200   8,800   9,000   9,400   10,200     25%

                           Amazon.com, Inc.
                   Financial and Operational Summary
                              (unaudited)

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


    Net Sales

    --  Shipping revenue, which excludes amounts earned from
        third-party sellers where we don't provide fulfillment
        services, was $103 million, up 22% from $84 million.

    --  Amounts paid in advance for subscription services, including
        amounts received from online DVD rentals, Amazon Prime, and
        other membership programs, are deferred and recognized as
        revenue over the subscription terms.

    --  Amounts earned from third-party sales on our websites are
        recorded as net amounts.

    Cost of Sales

    --  Cost of sales consists of the purchase price of products sold
        by us, inbound and outbound shipping charges, packaging
        supplies, and service costs such as those incurred in
        operating and staffing our fulfillment and customer service
        centers on behalf of third-party sellers.

    --  Outbound shipping-related costs totaled $148 million, up 25%
        from $119 million. Net shipping loss was $45 million, up 31%
        from a net shipping loss of $35 million, resulting primarily
        from our free shipping offers and Amazon Prime.

    Operating Expenses

    --  Depreciation and amortization of fixed assets was $25 million,
        up from $18 million, and is classified within the
        corresponding operating expense categories.

    --  As previously announced, we chose to early-adopt SFAS 123(R),
        the new accounting rules on stock-based compensation,
        effective January 1, 2005. Stock-based compensation increased
        $4 million to $26 million. Stock-based compensation would have
        been $20 million under our prior accounting method, down $2
        million versus Q2 2004.

    --  In accordance with SAB 107, issued March 2005, we present
        stock-based compensation within the same operating expense
        line items as cash compensation.

    --  Operating expenses with and without stock-based compensation
        are as follows:

                        Q2 2005                    Q2 2004
               -------------------------- ----------------------------
                  As    Stock-Based         As     Stock-Based
               Reported Compensation Net  Reported Compensation  Net
               -------- ------------ ---- -------- ------------ ------
Operating
 Expenses (in
 millions):
 Fulfillment   $   158  $       (5) $ 153  $   126  $      (3) $ 123
 Marketing          42          (2)    40       34         (2)    32
 Technology and
  content          106         (13)    93       71        (13)    58
 General and
  administrative    38          (6)    32       31         (4)    27
 Other operating
  expense (income)   2           -      2       (7)         -     (7)
                -------  ----------  -----  -------  ---------  -----
  Total operating
   expenses    $   346  $      (26) $ 320  $   255  $     (22) $ 233
                =======  ==========  =====  =======  =========  =====

Year-over-Year
 Percentage
 Growth:
 Fulfillment      25.0 %             24.5 %   12.2 %            14.2 %
 Marketing        23.5               25.9     26.0              25.7
 Technology and
  content         48.7               59.4      8.5              12.2
 General and
  administrative  24.6               18.9     16.9              24.6

Percent of Net
 Sales:
 Fulfillment       9.0 %              8.7 %    9.1 %             8.8 %
 Marketing         2.4                2.3      2.4               2.3
 Technology and
  content          6.0                5.3      5.1               4.2
 General and
  administrative   2.2                1.8      2.2               2.0

    Fulfillment

    --  Fulfillment costs include those costs incurred in operating
        and staffing our fulfillment and customer service centers,
        including costs attributable to buying, receiving, inspecting
        and warehousing inventories; picking, packaging and preparing
        customer orders for shipment; credit card fees; and bad debt
        costs, including costs associated with our guarantee of
        certain third-party seller transactions. Fulfillment costs
        also include amounts paid to third parties, who assist us in
        fulfillment and customer service operations.

    --  Credit card fees associated with third-party seller
        transactions are assessed on the gross purchase price of
        underlying transactions, and therefore represent a larger
        percentage of our recorded net revenue than credit card fees
        for our retail sales. Bad debt costs, including costs
        associated with our guarantee program, are also higher as a
        percentage of recorded net revenue versus our retail sales.
        Accordingly, as third-party sales increase, credit card fees
        and bad debt costs on these sales will negatively affect
        fulfillment costs as a percentage of net sales.

    --  Fulfillment costs increased in absolute dollars from the prior
        year due to variable costs corresponding with sales volume,
        our mix of product sales, credit card fees, and bad debt
        costs, including costs associated with our guarantee of
        certain third-party seller transactions. We expanded our
        fulfillment capacity in 2004 and the first half of 2005
        through gains in efficiencies as well as increases in leased
        warehouse space. We plan to continue expanding our worldwide
        fulfillment capacity to meet anticipated shipment volumes from
        sales of our own products as well as sales by third parties
        where we provide the fulfillment. We expect absolute amounts
        spent in fulfillment and fulfillment-related cost of sales to
        increase over time.

    Marketing

    --  Marketing efforts include targeted online marketing channels,
        such as our Associates and Syndicated Stores programs,
        sponsored search, portal advertising, e-mail campaigns and
        other initiatives. Our marketing expenses are largely
        variable, based on growth in sales and changes in rates. To
        the extent there is increased or decreased competition for
        these traffic sources, or to the extent our mix of these
        channels shifts, we would expect to see a corresponding change
        in our marketing expense. While costs associated with free
        shipping are not included in marketing expense, we view our
        free shipping offers as an effective worldwide marketing tool
        and intend to continue offering them indefinitely. We expect
        absolute amounts spent in marketing to increase over time.

    Technology and Content

    --  Technology and content expenses consist principally of payroll
        and related expenses for employees involved in development of
        our websites, including application development, editorial
        content, merchandising selection and systems and
        telecommunications support; costs associated with the systems
        and telecommunications infrastructure; and costs of acquired
        content.

    --  Our spending in technology and content has primarily increased
        as we are adding computer scientists and software engineers to
        continue to enhance the customer experience on our websites
        and those websites powered by us, and to improve our process
        efficiency. Additionally, we continue to invest in several
        areas of technology, including seller platforms, search, web
        services, and digital initiatives. We intend to continue
        investing in areas of technology and content, and expect
        absolute dollars spent in technology and content to increase
        over time as we continue to add computer scientists and
        software engineers to our staff.

    --  A significant majority of our technology costs are incurred in
        the U.S. and most of them are allocated to our North America
        segment.

    --  We expense costs related to the development of internal-use
        software and website development other than those incurred
        during the application development stage. Costs incurred
        during the application development stage are capitalized and
        amortized over the two-year estimated useful life of the
        software. We capitalized $22 million of internal-use software
        and website development costs, including $3 million associated
        with stock-based compensation, which is excluded from
        purchases of fixed assets on our consolidated statements of
        cash flows since it is stock based rather than cash, compared
        with $10 million a year ago. These amounts were partially
        offset by amortization of previously capitalized amounts of
        $12 million and $7 million.

    General and Administrative

    --  General and administrative costs increased due to payroll and
        related expenses. We expect absolute dollars spent in general
        and administrative to increase over time.

    --  In Q1 we recorded a charge of $8 million related to possible
        settlements of outstanding litigation, and in Q2 the favorable
        resolution of one of these matters resulted in a $3 million
        expense reduction.

    Stock-Based Compensation

    --  Prior to January 1, 2005, we accounted for stock-based awards
        under the intrinsic value method, which resulted in
        compensation expense for restricted stock and restricted stock
        units at grant date fair value based on the number of shares
        granted and the quoted price of our common stock, and for
        stock options to the extent option exercise prices were set
        below market prices on the date of grant. Also, stock options
        granted subsequent to December 31, 2002 and stock-based awards
        subject to an exchange offer, other modifications, or
        performance criteria, were subject to variable accounting
        treatment.

    --  As of January 1, 2005, we adopted SFAS 123(R), which requires
        measurement of compensation cost for stock-based awards at
        grant date fair value. The fair value of restricted stock and
        restricted stock units is determined based on the number of
        shares granted and the quoted price of our common stock, while
        the fair value of stock options is determined using a
        Black-Scholes valuation model. The fair value is recognized as
        an expense over the service period, net of estimated
        forfeitures, using the accelerated method under SFAS 123(R).
        Because we implemented SFAS 123(R), we no longer have stock
        awards subject to variable accounting treatment.

    --  Prior to our adoption of SFAS 123(R), cash retained as a
        result of excess tax deductions relating to stock-based
        compensation was presented in operating cash flows, along with
        other tax cash flows. SFAS 123(R) requires benefits relating
        to excess stock-based compensation deductions to be presented
        as financing cash inflows. Tax benefits resulting from
        stock-based compensation deductions in excess of amounts
        reported for financial reporting purposes were $1 million.

    --  Stock-based awards generally vest over service periods of
        between two and five years.

    --  Payroll tax expense resulting from exercises of stock-based
        awards is a cash expense and is not categorized as stock-based
        compensation.

    --  We granted stock awards, substantially all of which have been
        restricted stock units since October 2002, of 4 million shares
        at a per-share weighted-average fair value of $34. Our annual
        stock awards are granted in the second quarter.

    --  At June 30, 2005, there were 438 million common shares and
        stock-based awards outstanding, up 1% from 434 million at
        December 31, 2004. This total includes all stock-based awards
        outstanding, without regard for estimated forfeitures,
        consisting of vested and unvested awards, and in-the-money and
        out-of-the-money stock options.

    --  At June 30, 2005, there were 26 million stock awards
        outstanding, consisting of 16 million stock options with a $14
        weighted-average exercise price and 10 million restricted
        stock units. At June 30, 2004 there were 28 million stock
        awards outstanding.

    Other Operating Expense (Income)

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

    --  Amortization of other intangibles was $1 million, and is
        expected to be $3 million for the remainder of 2005, $4
        million in both 2006 and 2007, and $1 million in 2008, based
        on intangibles as of June 30, 2005.

    --  We acquired certain companies in the first half of 2005 for an
        aggregate cash purchase price of $24 million. The excess of
        purchase price over the fair value of the net assets acquired
        was $16 million and is classified as "Goodwill" on our
        consolidated balance sheets. Acquired other intangibles
        totaled $7 million and have estimated useful lives of between
        one and three years. The results of operations of each of the
        acquired businesses have been included in our consolidated
        results as of the closing date of acquisition. The effect of
        these acquisitions on consolidated net sales and operating
        income was not significant for Q2.

    Other Income (Expense), Net

    --  Other expense of $1 million includes gains and losses on sales
        of marketable securities and foreign-currency transaction
        gains and losses, including the currency effect on the
        interest payable for our 6.875% PEACS.

    Remeasurements and Other

    --  Remeasurement of the principal amount of our 6.875% PEACS from
        euros to U.S. dollars resulted in a foreign-currency gain of
        $42 million, compared with a gain of $8 million.

    --  Remeasurement of foreign-currency intercompany balances that
        are to be repaid among subsidiaries represented a $25 million
        loss, compared with a loss of $7 million.

    --  The remeasurement of our 6.875% PEACS and intercompany
        balances can result in significant gains and charges
        associated with the effect of movements in currency exchange
        rates.

    Income Taxes and Deferred Tax Assets

    --  Our Q2 effective tax rate was higher than the 35% statutory
        rate primarily due to taxable income associated with the Q1
        2005 transfer of certain operating assets from the U.S. to
        international locations. We expect these asset transfers to
        result in tax expense for financial reporting purposes above
        the statutory rate throughout 2005 and beneficially impact our
        effective tax rate over time. Since we have Net Operating
        Losses (NOLs), these asset transfers will not have a
        significant effect on cash taxes paid in 2005, which we expect
        to be approximately $25 million, compared with $4 million in
        2004. In Q2, we paid cash taxes of $1 million, and year to
        date we have paid cash taxes of $5 million.

    --  SFAS 109 requires that deferred tax assets be evaluated for
        future realization and reduced by a valuation allowance to the
        extent we believe a portion will not be realized. We consider
        many factors when assessing the likelihood of future
        realization of our deferred tax assets including our recent
        cumulative earnings experience by taxing jurisdiction,
        expectations of future taxable income, the carry-forward
        periods available to us for tax reporting purposes, and other
        relevant factors. Significant judgment is required in making
        this assessment, and it is very difficult to predict when, if
        ever, our assessment may conclude that the remaining portion
        of our deferred tax assets is realizable.

    --  At June 30, 2005, approximately $730 million of our gross
        deferred tax assets were related to approximately $2.3 billion
        of NOLs, the majority of which expire after 2016. Our NOL
        deferred tax assets are reduced by a valuation allowance of
        approximately $510 million due to uncertainty about their
        future realization. The remainder of our deferred tax assets
        relate to temporary timing differences between tax and
        financial reporting.

    --  Substantially all of the unrealized $510 million NOL deferred
        tax assets, if realized, would be credited to "Stockholders'
        equity" rather than results of operations for financial
        reporting purposes since they primarily relate to
        tax-deductible stock-based compensation in excess of amounts
        recognized for financial reporting purposes.

    --  Classification of deferred tax assets between current and
        long-term asset categories is based on the expected timing of
        realization, and the valuation allowance is allocated ratably.

    Foreign Exchange

    --  As our financial reporting currency is the U.S. dollar, our
        total sales, profit, and operating and free cash flows have
        benefited significantly the past eleven quarters from weakness
        in the U.S. dollar in comparison to the currencies of our
        international websites. We believe it is important to also
        evaluate our growth rates after the effect of currency
        changes.

    --  The effect on our consolidated statements of operations from
        year-over-year changes in exchange rates versus the U.S.
        dollar throughout the period is as follows:

                            Q2 2005                   Q2 2004
                   ------------------------- -------------------------
                     At                        At
                    Prior  Exchange          Prior   Exchange
                    Year     Rate      As     Year     Rate      As
                   Rates    Effect  Reported Rates    Effect  Reported
                     (1)     (2)              (1)       (2)
                   ------- -------- -------- ------- -------- --------
                         (in millions, except per share amounts)
Net sales          $1,728    $  25   $1,753  $1,340    $  47   $1,387
Gross profit          445        5      450     331       10      341
Operating expenses    343        3      346     249        6      255
Operating income      102        2      104      82        4       86
Net interest
 expense and other    (14)       -      (14)    (20)      (1)     (21)
Remeasurements and
 other (3)              1       17       18      13        3       16
Net income             43        9       52      70        6       76
Diluted earnings
 per share         $ 0.10    $0.02   $ 0.12  $ 0.16    $0.02   $ 0.18

(1) Represents the outcome that would have resulted had currency
    exchange rates in the current period been the same as those in
    effect in the comparable prior year period.

(2) Represents the increase (decrease) in reported amounts resulting
    from changes in exchange rates from those in effect in the
    comparable prior year period.

(3) Includes foreign-currency gains (losses) on remeasurement of
    6.875% PEACS and intercompany balances, and realized
    currency-related gains associated with sales of euro-denominated
    investments held by a U.S. subsidiary.



    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 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 $1.32
        billion, at fair value, primarily consist of cash, commercial
        paper and short-term securities, corporate notes and bonds,
        asset-backed and agency securities, and U.S. Treasury notes
        and bonds. Included are amounts held in foreign currencies of
        $679 million, primarily in euros, British pounds, and yen.

    --  We have pledged $72 million of our marketable securities as
        collateral primarily for standby letters of credit and
        property leases, compared with $80 million as of June 30,
        2004.

    --  "Accounts receivable, net and other current assets" includes
        accounts receivable from merchant partners, vendors and credit
        card companies, interest receivables and $14 million of
        prepaid expenses.

    --  "Other assets" includes, among other things, $14 million of
        deferred issuance costs on long-term debt, $18 million of
        certain equity investments and $13 million of other
        intangibles, net.

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

    --  Amounts related to restructuring-related leases and other
        commitments due within twelve months are $6 million and are
        included in "Accrued expenses and other current liabilities,"
        and the remaining $7 million is included in "Long-term debt
        and other" on our balance sheet. These amounts are net of
        anticipated sublease income of $8 million.

    --  "Accrued expenses and other current liabilities" includes,
        among other things, liabilities for gift certificates,
        professional fees, 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
Premium Adjustable Convertible
 Securities ("PEACS")                   593 (2)  6.875% February 2010
                                      ---------
                                     $1,493 (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
    101.9% of the principal, which decreases every February 1 by 47.5
    basis points until maturity, plus any accrued and unpaid interest.

(2) EUR 490 million principal amount, convertible at the holders'
    option into our common stock at EUR 84.883 per share ($103 per
    share based on the euro/U.S. dollar exchange rate as of June 30,
    2005). We have the right to redeem the PEACS, in whole or in part,
    by paying the principal amount, 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. Due to
    fluctuations in this exchange ratio, our principal debt obligation
    since issuance in February 2000 has increased by $110 million as
    of June 30, 2005.

(3) The "if converted" number of shares associated with our
    convertible debt instruments (approximately 17 million total
    shares) is excluded from diluted shares as their effect is
    antidilutive.



    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 North America-focused websites such as
        www.amazon.com and www.amazon.ca; from North America-focused
        Syndicated Stores, such as www.cdnow.com; from our mail-order
        tool catalog phone orders; from our Amazon Prime membership
        program; and from non retail activities such as North
        America-focused Merchant.com, marketing, and promotional
        agreements. This segment includes export sales from
        www.amazon.com and www.amazon.ca.

    --  The International segment consists of amounts earned from
        retail sales of consumer products (including from third-party
        sellers) through International-focused websites such as
        www.amazon.co.uk, www.amazon.de, www.amazon.co.jp,
        www.amazon.fr, and since September 2004, www.joyo.com; from
        internationally focused Syndicated Stores; from our DVD rental
        service in the U.K. and DE; and from non-retail activities
        such as internationally focused marketing and promotional
        agreements. This segment includes export sales from these
        internationally based sites (including export sales from these
        sites to customers in the U.S. and Canada), but excludes
        export sales from www.amazon.com and www.amazon.ca.

    --  We provide supplemental sales information within each segment
        for three categories: "Media," "Electronics and other general
        merchandise," and "Other." Media consists of amounts earned
        from DVD rental and 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, camera and photo, toys and baby,
        tools, home and garden, apparel, sports and outdoors, kitchen
        and housewares, gourmet food, jewelry, health and personal
        care, beauty, and musical instruments. The Other category
        consists of non retail activities, such as the Merchant.com
        program and miscellaneous marketing and promotional
        activities, such as our co-branded credit card program.

    --  Operating cycle is number of days of sales in inventory plus
        number of days of sales in accounts receivable minus accounts
        payable days. Accounts payable days are calculated as the
        quotient of accounts payable to cost of sales, multiplied by
        the number of days in the period. Inventory turns are
        calculated as the quotient of cost of sales to average
        inventory over five quarter ends.

    --  References to customers mean customer accounts, which are
        unique e-mail addresses, established either when a customer's
        initial order is shipped or when a customer orders from
        certain third-party sellers on our websites. Customer accounts
        include customers of Amazon Marketplace, Auctions and zShops,
        and our Merchants@, Syndicated Stores programs, but exclude
        DVD rental customers, customers associated with certain of our
        acquisitions (including Joyo.com customers), 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
        relationship. A customer is considered active when they have
        placed an order during the preceding twelve-month period.

    --  References to sellers or merchants mean active seller
        accounts, which are established when a seller receives an
        order from a customer account. Seller accounts include sellers
        in Amazon Marketplace, Auctions, zShops, and Merchants@
        platforms, but exclude Merchant.com sellers. A seller is
        considered active when they have received an order during the
        preceding twelve-month period.

    --  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.co.uk,
        www.amazon.de, www.amazon.co.jp, www.amazon.fr, and
        www.amazon.ca--and at Syndicated Stores domains, as well as
        Amazon.com-owned items sold through catalogs and at
        non-Amazon.com domains, such as books, music, and DVD/video
        items ordered from Amazon.com's store at www.target.com. Units
        sold do not include units associated with certain of our
        acquisitions (including Joyo.com units), Amazon.com gift
        certificates or DVD rentals.



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

    SOURCE: Amazon.com, Inc.

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