For the First Time Electronics and Other General Merchandise Sales Surpass $2 Billion over the Past Year; Expects Record Holiday Season
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SEATTLE--(BUSINESS WIRE)--Oct. 25, 2005--Amazon.com, Inc.
(NASDAQ:AMZN) today announced financial results for its third quarter
ended September 30, 2005.
Operating cash flow grew 35% to $661 million for the trailing
twelve months, compared with $490 million for the trailing twelve
months ended September 30, 2004. Free cash flow grew 13% to $475
million for the trailing twelve months, compared with $420 million for
the trailing twelve months ended September 30, 2004. As previously
announced in August 2005, the Company settled a patent lawsuit on
terms including a previously unanticipated one-time payment of $40
million in third quarter 2005. Excluding this payment, free cash flow
would have grown 22% to $515 million for the trailing twelve months.
Common shares outstanding plus shares underlying stock-based
awards outstanding totaled 438 million at September 30, 2005, compared
with 434 million a year ago.
Net sales increased 27% to $1.86 billion in the third quarter,
compared with $1.46 billion in third quarter 2004. Excluding the $7
million unfavorable impact from year-over-year changes in foreign
exchange rates throughout the quarter, net sales grew 28% compared
with third quarter 2004.
Operating income decreased 32% to $55 million in the third
quarter, compared with $81 million in third quarter 2004. Excluding
the negative impact of the $40 million legal settlement, operating
income would have increased 17% to $95 million.
Net income was $30 million in the third quarter, or $0.07 per
diluted share, compared with net income of $54 million, or $0.13 per
diluted share in third quarter 2004, which includes $21 million in
income tax expense, compared with $3 million income tax expense in
third quarter 2004. Excluding the negative impact of the $40 million
legal settlement -- $20 million after tax -- net income would have
been $50 million or $0.12 per diluted share.
"For $79 a year, Amazon Prime members get 'all-you-can-eat' free
express shipping," said Jeff Bezos, founder and CEO of Amazon.com.
"Customers continue to join Amazon Prime and we anticipate even higher
enrollment rates as we get closer to the holidays."
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.
Highlights
-- North America segment sales, representing the Company's U.S.
and Canadian sites, were $1.04 billion, up 28% from third
quarter 2004. Segment operating income increased 16% to $66
million in third quarter 2005 from $57 million in third
quarter 2004.
-- North America Other revenue, which includes Amazon Services'
Merchant.com program, increased to $53 million in third
quarter 2005.
-- International segment sales, representing the Company's U.K.,
German, French, Japanese, and Chinese sites, were $817
million, up 26% from third quarter 2004. Excluding the
unfavorable impact from year-over-year changes in foreign
exchange rates throughout the quarter, net sales growth was
28%. Segment operating income increased 46% to $55 million in
third quarter 2005 from $38 million in third quarter 2004.
-- International segment sales increased to 45% of worldwide net
sales on a trailing twelve-month basis, up from 43% for the
twelve months ended September 30, 2004.
-- Worldwide Electronics & Other General Merchandise sales grew
43% to $491 million in third quarter 2005, and increased to
26% of worldwide net sales, compared with 24% for third
quarter 2004.
-- The Company sold over 1.6 million copies of Harry Potter and
the Half-Blood Prince worldwide in third quarter 2005, making
it Amazon.com's largest new product release.
-- A9.com, a subsidiary of Amazon.com, launched A9.com Maps, a
new service that shows users an interactive map and over 35
million corresponding street-level images in a single
interface in 24 cities.
-- Customers shopping at www.amazon.co.uk now qualify for free
shipping on orders of GBP 15 or more, down from the prior
threshold of GBP 19.
-- In the aftermath of Hurricane Katrina, Amazon customers used
the Company's 1-click(R) technology to contribute more than
$12 million for American Red Cross relief efforts.
Financial Guidance
The following forward-looking statements reflect Amazon.com's
expectations as of October 25, 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.
Fourth Quarter 2005 Guidance
-- Net sales are expected to be between $2.86 billion and $3.16
billion, or grow between 13% and 24%, compared with fourth
quarter 2004.
-- Operating income is expected to be between $135 million and
$210 million, or between (17%) decline and 29% growth,
compared with fourth quarter 2004. This guidance includes $30
million for stock-based compensation and amortization of
intangible assets, and assumes, among other things, that no
additional intangible assets are recorded, and that there are
no further revisions to stock-based compensation or
restructuring-related estimates.
Full Year 2005 Guidance
-- Net sales are expected to be between $8.373 billion and $8.673
billion, or grow between 21% and 25%, compared with 2004.
-- Operating income is expected to be between $403 million and
$478 million, or between (9%) decline and 8% growth, compared
with 2004. This guidance includes $144 million for stock-based
compensation, amortization of intangible assets and the $40
million legal settlement, and assumes, among other things,
that no additional intangible assets are recorded and that
there are no changes to stock-based compensation or
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.
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 Nine Months Twelve Months
Ended Ended Ended
September 30, September 30, September 30,
------------- ----------------- -----------------
2005 2004 2005 2004 2005 2004
------ ----- -------- ------- -------- -------
CASH AND CASH
EQUIVALENTS,
BEGINNING OF
PERIOD $ 629 $ 701 $ 1,303 $ 1,102 $ 746 $ 666
OPERATING
ACTIVITIES:
Net income 30 54 160 242 507 315
Adjustments to
reconcile net
income to net
cash provided
by operating
activities:
Depreciation of
fixed assets,
including
internal-use
software and
website
development,
and other
amortization 30 19 85 55 106 73
Stock-based
compensation 26 9 71 38 90 53
Other operating
expense (income) - 5 3 (3) (3) (3)
Losses (gains) on
sales of
marketable
securities, net - - - (1) - (1)
Remeasurements and
other (6) 5 (38) (31) (6) 5
Non-cash interest
expense and other 1 1 4 3 5 4
Deferred income
taxes 23 (4) 116 (12) (128) (13)
Cumulative effect
of change in
accounting
principle - - (26) - (26) -
Changes in
operating assets
and liabilities: - - - - - -
Inventories (76) (70) 10 (61) (98) (104)
Accounts
receivable, net
and other current
assets (12) (18) 6 (9) 14 (25)
Accounts payable 147 96 (224) (138) 201 161
Accrued expenses
and other current
liabilities (5) 9 (30) (53) 8 19
Additions to
unearned revenue 28 34 95 84 120 108
Amortization of
previously
unearned revenue (32) (27) (87) (76) (118) (102)
Interest payable (1) 4 (42) (29) (11) -
----- ----- ------- ------- ------- -------
Net cash
provided by
operating
activities 153 117 103 9 661 490
INVESTING
ACTIVITIES:
Purchases of fixed
assets, including
internal-use
software and
website
development (76) (29) (149) (52) (186) (70)
Acquisitions, net
of cash acquired (4) (71) (24) (71) (24) (71)
Sales and
maturities of
marketable
securities and
other investments 163 395 653 1,007 1,072 1,239
Purchases of
marketable
securities (289) (380) (1,027) (1,136) (1,475) (1,257)
----- ----- ------- ------- ------- -------
Net cash used
in investing
activities (206) (85) (547) (252) (613) (159)
FINANCING
ACTIVITIES:
Proceeds from
exercises of
stock options and
other 23 8 42 43 59 73
Proceeds from
long-term debt
and other 13 - 13 - 13 -
Repayments of
long-term debt
and capital lease
obligations (6) (1) (272) (157) (272) (364)
----- ----- ------- ------- ------- -------
Net cash
provided
by (used in)
financing
activities 30 7 (217) (114) (200) (291)
Foreign-currency
effect on cash
and cash
equivalents (6) 6 (42) 1 6 40
----- ----- ------- ------- ------- -------
Net increase
(decrease) in
cash and cash
equivalents (29) 45 (703) (356) (146) 80
----- ----- ------- ------- ------- -------
CASH AND CASH
EQUIVALENTS, END
OF PERIOD $ 600 $ 746 $ 600 $ 746 $ 600 $ 746
===== ===== ======= ======= ======= =======
SUPPLEMENTAL CASH
FLOW INFORMATION:
Cash paid for
interest $ 21 $ 21 $ 105 $ 108 $ 105 $ 111
Cash paid for
income taxes 6 2 11 3 12 3
AMAZON.COM, INC.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------------------
2005 2004 2005 2004
------ ------ ------ ------
Net sales $1,858 $1,463 $5,513 $4,380
Cost of sales 1,395 1,107 4,141 3,322
------ ------ ------ ------
Gross profit 463 356 1,372 1,058
Operating expenses(1):
Fulfillment 171 138 495 392
Marketing 44 34 131 103
Technology and content 121 69 319 199
General and administrative 32 29 117 89
Other operating expense (income) 40 5 43 (3)
------ ------ ------ ------
Total operating expenses 408 275 1,105 780
------ ------ ------ ------
Income from operations 55 81 267 278
Interest income 12 7 30 19
Interest expense (22) (26) (70) (80)
Other income (expense), net - - 2 -
Remeasurements and other 6 (5) 38 31
------ ------ ------ ------
Total non-operating income
(expense) (4) (24) - (30)
------ ------ ------ ------
Income before income taxes 51 57 267 248
Provision for income taxes 21 3 133 6
------ ------ ------ ------
Income before cumulative effect of change
in accounting principle 30 54 134 242
Cumulative effect of change in accounting
principle - - 26 -
------ ------ ------ ------
Net income $ 30 $ 54 $ 160 $ 242
====== ====== ====== ======
Basic earnings per share:
Prior to cumulative effect of change in
accounting principle $ 0.07 $ 0.13 $ 0.33 $ 0.60
Cumulative effect of change in
accounting principle - - 0.06 -
------ ------ ------ ------
$ 0.07 $ 0.13 $ 0.39 $ 0.60
====== ====== ====== ======
Diluted earnings per share:
Prior to cumulative effect of change in
accounting principle $ 0.07 $ 0.13 $ 0.32 $ 0.57
Cumulative effect of change in
accounting principle - - 0.06 -
------ ------ ------ ------
$ 0.07 $ 0.13 $ 0.38 $ 0.57
====== ====== ====== ======
Weighted average shares used in computation
of earnings per share:
Basic 413 407 411 405
====== ====== ====== ======
Diluted 428 425 426 424
====== ====== ====== ======
(1)Includes stock-based compensation
as follows:
Fulfillment $ 5 $ 2 $ 13 $ 6
Marketing 2 - 5 3
Technology and content 13 4 36 21
General and administrative 6 3 17 8
------ ------ ------ ------
$ 26 $ 9 $ 71 $ 38
====== ====== ====== ======
AMAZON.COM, INC.
Segment Information
(in millions)
(unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
-------------- ----------------
2005 2004 2005 2004
------ ------ ------ ------
North America
Net sales $1,041 $ 816 $3,028 $2,455
Cost of sales 749 593 2,179 1,786
------ ------ ------ ------
Gross profit 292 223 849 669
Direct segment operating expenses (1) 226 166 645 470
------ ------ ------ ------
Segment operating income 66 57 204 199
International
Net sales 817 647 2,485 1,925
Cost of sales 646 514 1,962 1,536
------ ------ ------ ------
Gross profit 171 133 523 389
Direct segment operating expenses (1) 116 95 346 275
------ ------ ------ ------
Segment operating income 55 38 177 114
Consolidated
Net sales 1,858 1,463 5,513 4,380
Cost of sales 1,395 1,107 4,141 3,322
------ ------ ------ ------
Gross profit 463 356 1,372 1,058
Direct segment operating expenses 342 261 991 745
------ ------ ------ ------
Segment operating income 121 95 381 313
Stock-based compensation (26) (9) (71) (38)
Other operating income (expense) (40) (5) (43) 3
------ ------ ------ ------
Income from operations 55 81 267 278
Total non-operating income (expense),
net (4) (24) - (30)
Provision for income taxes (21) (3) (133) (6)
Cumulative effect of change in
accounting principle - - 26 -
------ ------ ------ ------
Net income $ 30 $ 54 $ 160 $ 242
====== ====== ====== ======
Segment Highlights:
Y/Y net sales growth:
North America 28% 15% 23% 16%
International 26 52 29 60
Consolidated 27 29 26 32
Y/Y gross profit growth:
North America 31% 11% 27% 16%
International 29 56 35 54
Consolidated 30 24 30 27
Y/Y segment operating income growth:
North America 16% (8%) 3% 18%
International 46 238 56 188
Consolidated 28 29 22 50
Net sales mix:
North America 56% 56% 55% 56%
International 44 44 45 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 Nine Months
Ended Ended
September 30, September 30,
--------------- ----------------
2005 2004 2005 2004
------ ------ ------ ------
North America
Media $ 684 $ 564 $2,015 $1,704
Electronics and other general
merchandise 304 228 863 679
Other 53 24 150 72
------ ------ ------ ------
1,041 816 3,028 2,455
International
Media 629 530 1,917 1,601
Electronics and other general
merchandise 187 116 565 322
Other 1 1 3 2
------ ------ ------ ------
817 647 2,485 1,925
Consolidated
Media 1,313 1,094 3,932 3,305
Electronics and other general
merchandise 491 344 1,428 1,001
Other 54 25 153 74
------ ------ ------ ------
$1,858 $1,463 $5,513 $4,380
====== ====== ====== ======
Y/Y Net Sales Growth:
North America:
Media 21% 12% 18% 12%
Electronics and other general
merchandise 33 27 27 29
Other 122 (10) 108 -
International:
Media 19% 41% 20% 46%
Electronics and other general
merchandise 62 132 76 210
Other 177 17 85 76
Consolidated:
Media 20% 25% 19% 26%
Electronics and other general
merchandise 43 50 43 59
Other 123 (10) 107 1
Consolidated Net Sales Mix:
Media 71% 75% 71% 75%
Electronics and other general
merchandise 26 24 26 23
Other 3 2 3 2
AMAZON.COM, INC.
Consolidated Balance Sheets
(in millions, except per share data)
September December September
30, 31, 30,
2005 2004 2004
---------- ------- ----------
ASSETS (unaudited) (unaudited)
Current assets:
Cash and cash equivalents $ 600 $ 1,303 $ 746
Marketable securities 819 476 439
---------- ------- ----------
Cash, cash equivalents, and
marketable securities 1,419 1,779 1,185
Inventories 456 480 357
Deferred tax assets, current portion 58 81 1
Accounts receivable, net and other
current assets 188 199 150
---------- ------- ----------
Total current assets 2,121 2,539 1,693
Fixed
assets, net 322 246 227
Deferred tax assets, long-term
portion 190 282 11
Goodwill 159 139 138
Other assets 40 42 40
---------- ------- ----------
Total assets $ 2,832 $ 3,248 $ 2,109
========== ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts
payable $ 876 $ 1,142 $ 689
Accrued expenses and other current
liabilities 340 361 269
Unearned revenue 48 41 46
Interest payable 32 74 44
Current portion of long-term debt
and other 17 2 3
---------- ------- ----------
Total current liabilities 1,313 1,620 1,051
Long-term debt and other 1,513 1,855 1,780
Commitments and contingencies
Stockholders' Equity (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 --
414, 410 and 407 shares 4 4 4
Additional paid-in capital 2,215 2,123 1,979
Accumulated other comprehensive
income 13 32 28
Accumulated deficit (2,226) (2,386) (2,733)
---------- ------- ----------
Total stockholders'
equity (deficit) 6 (227) (722)
---------- ------- ----------
Total liabilities and
stockholders' equity
(deficit) $ 2,832 $ 3,248 $ 2,109
========== ======= ==========
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except per share data)
(unaudited)
----------------------------------------------------------------------
Y/Y %
Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Change
-------------------------------------------------
Cash Flows and Shares
Operating cash flow
-- trailing twelve
months (TTM) (1) $ 490 $ 567 $ 523 $ 624 $ 661 35%
Purchase of fixed
assets (incl.
internal-use
software & website
development) -- TTM $ 70 $ 89 $ 106 $ 138 $ 186 166%
Free cash flow
(operating cash flow
less purchases of
fixed assets) --
TTM (1) $ 420 $ 477 $ 417 $ 486 $ 475 13%
Common shares and
stock-based awards
outstanding 434 434 434 438 438 1%
Common shares
outstanding 407 410 411 412 414 2%
Stock-based awards
outstanding 27 25 24 26 24 (10%)
Stock-based awards
outstanding -- % of
common shares
outstanding 6.5% 6.0% 5.7% 6.3% 5.8% N/A
Results of Operations
Worldwide (WW) net
sales $1,463 $2,541 $1,902 $ 1,753 $ 1,858 27%
WW net sales -- Y/Y
growth, excluding
the effect of
foreign exchange
rates 23.9% 26.2% 22.3% 24.6% 27.6% N/A
WW net sales -- TTM $6,326 $6,921 $7,292 $ 7,658 $ 8,054 27%
Gross profit $ 356 $ 544 $ 458 $ 450 $ 463 30%
Gross margin -- % of
WW net sales 24.3% 21.4% 24.1% 25.7% 24.9% N/A
Gross profit -- TTM $1,484 $1,602 $1,700 $ 1,809 $ 1,917 29%
Gross margin -- TTM %
of WW net sales 23.5% 23.1% 23.3% 23.6% 23.8% N/A
Fulfillment costs,
excluding stock-
based compensation
-- % of WW net sales 9.3% 8.0% 8.6% 8.7% 8.9% N/A
Fulfillment costs,
excluding stock-
based compensation
-- TTM % of WW net
sales 8.6% 8.5% 8.6% 8.6% 8.5% N/A
Operating income (1) $ 81 $ 162 $ 108 $ 104 $ 55 (32%)
Operating margin -- %
of WW net sales (1) 5.6% 6.4% 5.7% 6.0% 3.0% N/A
Operating income --
TTM (1) $ 416 $ 440 $ 438 $ 456 $ 430 3%
Operating margin --
TTM % of WW net
sales (1) 6.6% 6.4% 6.0% 6.0% 5.3% N/A
Net income (1) (2) $ 54 $ 347 $ 78 $ 52 $ 30 (45%)
Net income per
diluted
share (1) (2) $ 0.13 $ 0.82 $ 0.18 $ 0.12 $ 0.07 (45%)
Net income --
TTM (1) (2) $ 315 $ 588 $ 555 $ 531 $ 507 61%
Net income per
diluted share -- TTM
(1) (2) $ 0.74 $ 1.39 $ 1.31 $ 1.25 $ 1.19 61%
Segments
North America Segment:
Net sales $ 816 $1,392 $1,027 $ 960 $ 1,041 28%
Net sales -- Y/Y
growth, excluding
the effect of
foreign exchange
rates 15.0% 21.8% 21.1% 21.0% 27.4% N/A
Net sales -- TTM $3,597 $3,847 $4,027 $ 4,195 $ 4,420 23%
Gross profit $ 223 $ 355 $ 279 $ 278 $ 292 31%
Gross margin -- %
of North America
net sales 27.4% 25.5% 27.2% 29.0% 28.1% N/A
Gross profit -- TTM $ 958 $1,024 $1,077 $ 1,135 $ 1,204 26%
Gross margin -- TTM
% of North America
net sales 26.6% 26.6% 26.7% 27.1% 27.2% N/A
Operating income $ 57 $ 122 $ 66 $ 72 $ 66 16%
Operating margin --
% of North America
net sales 7.0% 8.8% 6.4% 7.5% 6.4% N/A
Operating income --
TTM $ 313 $ 321 $ 311 $ 317 $ 326 4%
Operating margin --
TTM % of North
America net sales 8.7% 8.3% 7.7% 7.6% 7.4% N/A
International Segment:
Net sales $ 647 $1,149 $ 875 $ 793 $ 817 26%
Net sales -- Y/Y
growth, excluding
the effect of
foreign exchange
rates 38.9% 32.5% 23.8% 29.3% 27.8% N/A
Net sales -- TTM $2,729 $3,074 $3,265 $ 3,463 $ 3,634 33%
Net sales -- TTM %
of WW net sales 43.1% 44.4% 44.8% 45.2% 45.1% N/A
Gross profit $ 133 $ 190 $ 180 $ 172 $ 171 29%
Gross margin -- %
of International
net sales 20.5% 16.5% 20.5% 21.7% 20.9% N/A
Gross profit -- TTM $ 527 $ 578 $ 623 $ 674 $ 713 35%
Gross margin -- TTM
% of International
net sales 19.3% 18.8% 19.1% 19.5% 19.6% N/A
Operating income $ 38 $ 55 $ 63 $ 60 $ 55 46%
Operating margin --
% of International
net sales 5.8% 4.8% 7.2% 7.6% 6.7% N/A
Operating income --
TTM $ 153 $ 169 $ 190 $ 216 $ 233 52%
Operating margin --
TTM % of
International net
sales 5.6% 5.5% 5.8% 6.2% 6.4% N/A
----------------------------------------------------------------------
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except inventory turnover, accounts payable days, and
employee data)
(unaudited)
----------------------------------------------------------------------
Y/Y %
Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Change
-------------------------------------------------
Segments (continued)
Consolidated Segments:
Operating expenses $ 261 $ 367 $ 330 $ 318 $ 342 31%
Operating expenses
-- TTM $1,019 $1,112 $1,198 $ 1,276 $ 1,358 33%
Operating income $ 95 $ 177 $ 129 $ 132 $ 121 28%
Operating margin --
% of consolidated
sales 6.5% 7.0% 6.8% 7.5% 6.5% N/A
Operating income --
TTM $ 466 $ 490 $ 502 $ 533 $ 559 20%
Operating margin --
TTM % of
consolidated net
sales 7.4% 7.1% 6.9% 7.0% 6.9% N/A
Supplemental North
America Segment Net
Sales:
Media $ 564 $ 885 $ 699 $ 632 $ 684 21%
Media -- TTM $2,455 $2,589 $2,690 $ 2,780 $ 2,901 18%
Electronics and
other general
merchandise $ 228 $ 449 $ 281 $ 278 $ 304 33%
Electronics and
other general
merchandise -- TTM $1,031 $1,128 $1,185 $ 1,236 $ 1,311 27%
Electronics and
other general
merchandise -- TTM
% of North America
net sales 29% 29% 29% 29% 30% N/A
Other $ 24 $ 58 $ 46 $ 50 $ 53 122%
Other -- TTM $ 111 $ 130 $ 153 $ 178 $ 208 88%
Supplemental
International
Segment Net Sales:
Media $ 530 $ 911 $ 675 $ 614 $ 629 19%
Media -- TTM $2,285 $2,513 $2,612 $ 2,730 $ 2,828 24%
Electronics and
other general
merchandise $ 116 $ 237 $ 199 $ 178 $ 187 62%
Electronics and
other general
merchandise -- TTM $ 442 $ 558 $ 651 $ 730 $ 801 81%
Electronics and
other general
merchandise -- TTM
% of International
net sales 16% 18% 20% 21% 22% N/A
Other $ 1 $ 1 $ 1 $ 1 $ 1 177%
Other -- TTM $ 2 $ 2 $ 3 $ 3 $ 4 97%
Supplemental
Worldwide Net Sales:
Media $1,094 $1,796 $1,374 $ 1,246 $ 1,313 20%
Media -- TTM $4,740 $5,102 $5,302 $ 5,510 $ 5,730 21%
Electronics and
other general
merchandise $ 344 $ 686 $ 480 $ 456 $ 491 43%
Electronics and
other general
merchandise -- TTM $1,474 $1,686 $1,835 $ 1,966 $ 2,113 43%
Electronics and
other general
merchandise -- TTM
% of WW net sales 23% 24% 25% 26% 26% N/A
Other $ 25 $ 59 $ 47 $ 51 $ 54 123%
Other -- TTM $ 113 $ 133 $ 156 $ 181 $ 211 88%
Balance Sheet
Cash and marketable
securities $1,185 $1,779 $1,151 $ 1,325 $ 1,419 20%
Inventory, net --
ending $ 357 $ 480 $ 403 $ 383 $ 456 28%
Inventory -- average
inventory % of TTM
net sales 4.6% 4.9% 5.0% 5.0% 5.2% N/A
Inventory turnover,
average -- TTM 16.6 15.7 15.5 15.3 14.8 (11%)
Fixed assets, net $ 227 $ 246 $ 245 $ 267 $ 322 42%
Accounts payable days
-- ending 57 53 44 51 58 1%
Other
Employees (full-time
and part-time;
excludes contractors
& temporary
personnel) 8,800 9,000 9,400 10,200 11,100 27%
----------------------------------------------------------------------
Note: The attached "Financial and Operational Summary" is an integral
part of this Supplemental Financial Information and Business Metrics.
(1) As previously announced in August 2005, the Company settled a
patent lawsuit on terms including a previously unanticipated one-time
payment of $40 million in Q3 2005, which negatively impacted Q3 2005
operating cash flow, free cash flow and operating income by $40
million and net income by $20 million after tax.
(2) 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, a $56 million tax
expense for Q2 2005, and a $21 million tax expense for Q3 2005,
primarily due to taxable income resulting from the transfer of certain
operating assets from U.S. to international locations.
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 was $112 million, up 30% from $87 million.
-- Amounts paid in advance for subscription services, including
amounts received from online DVD rentals, Amazon Prime, and other
membership programs, are deferred and classified in "Unearned
revenue" on our balance sheets and recognized as revenue over the
subscription term.
-- 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, and amortization of our DVD rental library.
-- Outbound shipping-related costs totaled $159 million, up 25% from
$128 million. Net shipping loss was $47 million, up 15% from a net
shipping loss of $41 million, resulting primarily from our free
shipping offers and Amazon Prime.
Operating Expenses
-- Fixed assets include assets such as furniture and fixtures, heavy
equipment, technology infrastructure, internal-use software and
website development, and our DVD rental library. Depreciation
expense is generally classified within the corresponding operating
expense categories on the consolidated statements of operations,
and certain assets, such as our DVD rental library, are amortized
to "Cost of sales." Depreciation expense for fixed assets,
including amortization of internal-use software and website
development, was $29 million, up from $19 million, and is
classified within the corresponding operating expense categories.
-- Stock-based compensation increased $17 million to $26 million. We
chose to early-adopt SFAS 123(R), the new accounting rules on
stock-based compensation, effective January 1, 2005. Stock-based
compensation would have been $30 million, under our prior
accounting method, up $21 million versus Q3 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:
Q3 2005 Q3 2004
-------------------------- --------------------------
As Stock-Based As Stock-Based
Reported Compensation Net Reported Compensation Net
-------- ----------------- -------- -----------------
Operating
Expenses:
Fulfillment $171 $ (5) $166 $138 $(2) $136
Marketing 44 (2) 42 34 - 34
Technology and
content 121 (13) 108 69 (4) 65
General and
administrative 32 (6) 26 29 (3) 26
Other operating
expense (income) 40 - 40 5 - 5
---- ----- ---- ---- --- ----
Total operating
expenses $408 $ (26) $382 $275 $(9) $266
==== ===== ==== ==== === ====
Year-over-year Percentage
Growth:
Fulfillment 24 % 23 % 23 % 27 %
Marketing 28 23 13 19
Technology and
content 74 66 5 21
General and
administrative 12 1 13 16
Percent of Net
Sales:
Fulfillment 9.2 % 8.9 % 9.4 % 9.3 %
Marketing 2.4 2.3 2.4 2.3
Technology and
content 6.5 5.8 4.7 4.4
General and
administrative 1.7 1.4 2.0 1.8
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 on these transactions than credit card fees
for our retail sales transactions. 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 primarily due to variable costs corresponding with sales and
inventory volumes, our mix of product sales, costs associated with
credit card fees, bad debt costs, including costs of our guarantee
of certain third-party seller transactions. We expanded our
fulfillment capacity in 2005 through gains in efficiencies as well
as increases in leased warehouse space. We plan to continue
expanding our worldwide fulfillment capacity in order to
accommodate greater selection and 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; and costs associated with the systems and
telecommunications infrastructure.
-- 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. As we have done throughout the year, 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
$25 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 $12 million a year ago. These
amounts were partially offset by amortization of previously
capitalized amounts of $14 million and $8 million.
General and Administrative
-- General and administrative costs increased primarily due to
payroll and related expenses, professional fees, and legal costs,
offset by a $12 million benefit for actual and expected
reimbursement by an insurer of certain legal costs previously
incurred by us. We expect absolute dollars spent in general and
administrative to increase over time.
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-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 $2 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 1 million shares at
a per-share weighted-average fair value of $40. Our annual stock
awards are granted in the second quarter.
-- At September 30, 2005, there were 438 million common shares and
stock-based awards outstanding, up 1% from 434 million at
September 30, 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 September 30, 2005, there were 24 million stock awards
outstanding, consisting of 14 million stock options with a $14
weighted-average exercise price and 10 million restricted stock
units. At September 30, 2004 there were 27 million stock awards
outstanding.
Other Operating Expense (Income)
-- We settled a patent lawsuit on terms including a previously
unanticipated one-time payment of $40 million in Q3 2005 that was
recorded to "Other operating expense (income)" on the consolidated
statements of operations. Operating cash flow, free cash flow,
operating income, and net income were negatively impacted by this
legal settlement, as follows:
Q3 2005
-------------------------------------------------
Operating Cash Free Cash Operating Net
Flow (TTM) Flow (TTM) Income Income
-------------------------------------------------
As reported $ 661 $ 475 $ 55 $30
Legal settlement 40 40 40 20
------- ------- ---- ---
Adjusted $ 701 $ 515 $ 95 $50
======= ======= ==== ===
-- Included in "Other operating expense (income)" are amortization of
intangibles and restructuring-related expenses or credits.
-- We acquired certain companies during the three quarters ended
September 30, 2005, for an aggregate cash purchase price of $29
million. The excess of purchase price over the fair value of the
net assets acquired was $19 million and is classified as
"Goodwill" on our consolidated balance sheets. Acquired other
intangibles totaled $10 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 Q3 2005.
Remeasurements and Other
-- We realized a $4 million gain primarily associated with the sale
of certain equity investments.
-- Remeasurement of the principal amount of our 6.875% PEACS from
euros to U.S. dollars resulted in a foreign-currency gain of $4
million, compared with a loss of $16 million.
-- Remeasurement of foreign-currency intercompany balances that are
to be repaid among subsidiaries represented a $2 million loss,
compared with a gain 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 tax provision for interim periods is determined using an
estimate of the annual effective tax rate, with the cumulative
effect of a change to the estimated annual rate being recorded in
the interim period such a change is made. The Q3 2005 tax
provision includes a cumulative adjustment benefit of $4 million
to reflect our current estimate of our annual effective tax rate
of 50%.
-- Our effective tax rate for Q3 2005 and for the three quarters
ended September 30, 2005, remains higher than the 35% statutory
rate associated with taxable income resulting from 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. 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. Cash paid for income
taxes was $6 million and $2 million in Q3 2005 and Q3 2004, and
for the three quarters ended September 30, 2005 and 2004 was $11
million and $3 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 September 30, 2005, approximately $720 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
-- Our financial reporting currency is the U.S. dollar and changes in
exchange rates significantly affect our reported results and
consolidated trends. For example, during Q3 2005 our consolidated
revenue and operating income were negatively affected by the
strengthening of the U.S. Dollar in comparison to the currencies
of internationally focused websites, but our consolidated revenue
and operating income from Q2 2002 through Q2 2005 have benefited
from weakness in the U.S. dollar in comparison to the same
currencies.
-- 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:
Q3 2005 Q3 2004
------------------------- ------------------------
At At
Prior Exchange Prior Exchange
Year Rate Year Rate
Rates Effect As Rates Effect As
(1) (2) Reported (1) (2) Reported
------- -------- -------- ------- -------- --------
(in millions, except per share amounts)
Net sales $1,865 $ (7) $1,858 $1,406 $ 57 $1,463
Gross profit 464 (1) 463 344 12 356
Operating expenses 408 - 408 282 (7) 275
Income from
operations 56 (1) 55 77 4 81
Net interest
expense and other (10) - (10) (18) (1) (19)
Remeasurements and
other (3) 4 2 6 1 (6) (5)
Net income 29 1 30 57 (3) 54
Diluted earnings
per share $ 0.07 $ - $ 0.07 $ 0.13 $ - $ 0.13
(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 for operating results,
and if we did not incur the variability associated with
remeasurements for our 6.875% PEACS and intercompany balances.
(2) Represents the increase (decrease) in reported amounts resulting
from changes in exchange rates from those in effect in the
comparable prior year period for operating results, and if we did
not incur the variability associated with remeasurements for our
6.875% PEACS and intercompany balances.
(3) Includes foreign-currency gains (losses) on remeasurement of
6.875% PEACS and intercompany balances compared to prior quarter,
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
and timing of capital expenditures. 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 $1.4
billion, at fair value, primarily consist of cash, investment
grade securities, and AAA-rated money market mutual funds.
Included are amounts held in foreign currencies of $687 million,
primarily in euros, British pounds, and yen.
-- We have pledged $79 million of our cash and marketable securities
as collateral primarily for standby letters of credit and real
estate leases, compared with $76 million as of September 30, 2004.
-- "Accounts receivable, net and other current assets" includes
accounts receivable from merchant partners, vendors and credit
card companies, interest receivables, and $20 million of prepaid
expenses.
-- "Other assets" includes, among other things, $13 million of
deferred issuance costs on long-term debt, $9 million of certain
equity investments, and $13 million of other intangibles, net.
-- "Unearned revenue" is recorded when payments are received from
third parties or customers in advance of our providing the
associated service.
-- Amounts related to restructuring-related leases and other
commitments due within twelve months are $4 million and are
included in "Accrued expenses and other current liabilities," and
the remaining $5 million is included in "Long-term debt and other"
on our balance sheet. These amounts are net of anticipated
sublease income of $6 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").......... 589 (2) 6.875% February 2010
-----------
$ 1,489 (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 ($102 per
share based on the euro/U.S. dollar exchange rate as of September
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 $106 million as
of September 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)
and subscriptions 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
Amazon Services' 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)
and subscriptions through internationally 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 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 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.
-- 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), Amazon Services' 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 Amazon Services' 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 Investor Relations
Tim Stone, 206-266-2171
ir@amazon.com
www.amazon.com/ir
or
Amazon.com Public Relations
Patty Smith, 206-266-7180
SOURCE: Amazon.com, Inc.
