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Amazon.com Announces 22% Sales Growth Fueled by Lower Prices, Free Shipping; Amazon Prime Memberships MORE THAN Double from Year End; Raises Top Line and Lowers Bottom Line Guidance; Will Invest Heavily in Toy Category in Back Half of Year

SEATTLE--(BUSINESS WIRE)--July 25, 2006--Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its second quarter ended June 30, 2006.

Operating cash flow declined 2% to $610 million for the trailing twelve months, compared with $624 million for the trailing twelve months ended June 30, 2005. Free cash flow decreased 23% to $375 million for the trailing twelve months, compared with $486 million for the trailing twelve months ended June 30, 2005. The primary driver of the free cash flow decline was our increased expenditure in technology and content. Free cash flow was also reduced by a $40 million patent litigation settlement in third quarter 2005, $34 million from excess tax benefits for stock-based compensation now classified as financing cash flows, and investments in additional fulfillment capacity.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 443 million at June 30, 2006, compared with 438 million a year ago.

Net sales increased 22% to $2.14 billion in the second quarter, compared with $1.75 billion in second quarter 2005. Excluding the $24 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 23% compared with second quarter 2005.

Operating income decreased 55% to $47 million in the second quarter, compared with $104 million in second quarter 2005. The decline in operating income was mainly due to technology and content investments, lower prices including free shipping and Amazon Prime, and $20 million from a contract termination and related fee dispute.

Net income was $22 million in the second quarter, or $0.05 per diluted share, compared with net income of $52 million, or $0.12 per diluted share in second quarter 2005.

"We're investing in Amazon Prime and future technology initiatives," said Jeff Bezos, founder and CEO of Amazon.com. "Amazon Prime gets customers their products fast, and our investments in technology position us to innovate in seller platforms, web services, and digital. We're looking forward to the coming decrease in our year-over-year growth rates in technology spending in the second half of 2006."

Amazon Prime, Amazon.com's first-ever membership program, was introduced in 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 they 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 $1.16 billion, up 21% from second
        quarter 2005.

    --  International segment sales, representing the Company's U.K.,
        German, Japanese, French and Chinese sites, were $982 million,
        up 24% from second quarter 2005. Excluding the unfavorable
        impact from year-over-year changes in foreign exchange rates
        throughout the quarter, International net sales growth was
        27%.

    --  Worldwide Electronics & Other General Merchandise grew 37% to
        $624 million in second quarter 2006, and increased to 29% of
        worldwide net sales compared with 26% in second quarter 2005.

    --  The Company launched its new Toy and Baby stores on
        www.amazon.com, featuring tens of thousands of products
        offered by Amazon and leading mass market and specialty
        retailers. This is the largest selection of Toy and Baby
        products ever offered through Amazon.com, and for the first
        time ever, Toy and Baby products are eligible for Free Super
        Saver Shipping and Amazon Prime.

    --  The Company launched a Grocery store on www.amazon.com, with
        over 14,000 dry goods grocery products across more than 1,200
        brands - all eligible for Free Super Saver Shipping and Amazon
        Prime.

    --  Amazon's German website -- Amazon.de -- launched its Sporting
        Goods store, offering customers a selection of thousands of
        sporting goods in over 25 categories from top brands like
        Adidas, Burton, Nike, Puma, Quiksilver and Salomon.

    --  The Company extended its Enterprise Solutions agreement with
        Target.com through August 2010 and launched a new Sears Canada
        branded website providing Sears Canada with the tools and
        services to control its brand, merchandising and online
        business using Amazon Enterprise Solutions technology.

    --  Amazon S3, a simple storage service for software developers,
        gained momentum in its first full quarter after launch,
        providing businesses of all sizes -- from Microsoft to SmugMug
        -- with a web services solution for storing and retrieving any
        amount of data, at any time, from anywhere on the web.
        Developers continue to adopt Amazon's web services -- over
        180,000 have registered to date, up greater than 60%
        year-over-year.

    Financial Guidance

The following forward-looking statements reflect Amazon.com's expectations as of July 25, 2006. 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 2006 Guidance

    --  Net sales are expected to be between $2.17 billion and $2.33
        billion, or to grow between 17% and 25% compared with third
        quarter 2005.

    --  Operating income is expected to be between $7 million and $42
        million, or between (87%) decline and (24%) decline, compared
        with third quarter 2005. This guidance includes $38 million
        for stock-based compensation and amortization of intangible
        assets, and it assumes, among other things, that no additional
        intangible assets are recorded and that there are no further
        revisions to stock-based compensation estimates.

    Full Year 2006 Expectations

    --  Net sales are expected to be between $10.15 billion and $10.65
        billion, or to grow between 20% and 25% compared with 2005.

    --  Operating income is expected to be between $310 million and
        $440 million, or between (28%) decline and 2% growth, compared
        with 2005. This guidance includes $120 million for stock-based
        compensation and amortization of intangible assets, and it
        assumes, among other things, that no additional intangible
        assets are recorded and that there are no further revisions to
        stock-based compensation 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, payments risks, 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, 2005, and all subsequent filings.

About Amazon.com

Amazon.com (Nasdaq:AMZN), a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com, Inc. seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. Amazon.com and other sellers offer millions of unique new, 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 and its affiliates operate websites, including 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,
                      -------------   --------------   ---------------
                       2006   2005     2006    2005     2006     2005
                      ------ ------   ------  ------   ------  -------

CASH AND CASH
 EQUIVALENTS,
 BEGINNING OF PERIOD  $ 507  $ 533   $1,013  $1,303  $   629  $   701

OPERATING ACTIVITIES:
Net income               22     52       73     130      302      531
Adjustments to
 reconcile net income
 to net cash from
 operating
 activities:
 Depreciation of fixed
  assets, including
  internal-use
  software
  and website
  development, and
  other amortization     43     26       83      55      149       95
  Stock-based
   compensation          30     26       41      45       84       74
  Other operating
   expense                3      2        6       3       10        2
  Losses (gains) on
   sales of marketable
   securities, net       (1)     -        1       -        -        -
  Remeasurements and
   other                (12)   (18)      (9)    (32)     (19)       5
  Non-cash interest
   expense and other      1      1        2       3        5        5
  Deferred income taxes  (2)    44        8      94      (15)    (154)
  Cumulative effect of
   change in accounting
   principle              -      -        -     (26)       -      (26)
Changes in operating
 assets and liabilities:
 Inventories             30     13       63      85     (128)     (93)
 Accounts receivable,
  net and other
  current assets         16      9       66      19      (37)       8
 Accounts payable         4     54     (438)   (370)     207      150
 Accrued expenses and
  other current
  liabilities             1     28      (71)    (66)      54       15
 Additions to unearned
  revenue                38     38       92      66      181      125
 Amortization of
  previously unearned
  revenue               (43)   (31)     (90)    (56)    (183)    (113)
                       -----  -----   ------  ------  -------  -------
   Net cash provided by
   (used in) operating
   activities           130    244     (173)    (50)     610      624

INVESTING ACTIVITIES:
Purchases of fixed
 assets, including
 internal-use
 software and website
 development            (58)   (46)    (104)    (73)    (235)    (138)
Acquisitions, net of
 cash acquired            -     (5)     (28)    (20)     (32)     (91)
Sales and maturities
 of marketable
 securities and other
 investments            249    142      537     490      883    1,305
Purchases of
 marketable
 securities            (232)  (235)    (362)   (738)  (1,009)  (1,568)
                       -----  -----   ------  ------  -------  -------
   Net cash provided by
    (used in) investing
    activities          (41)  (144)      43    (341)    (393)    (492)

FINANCING ACTIVITIES:
Proceeds from
 exercises of stock
 options                  7      8       13      17       55       42
Excess tax benefit on
 stock awards            21      1       29       2       34        2
Proceeds from long-
 term debt and other     66      -       69       -       82        -
Repayments of long-
 term debt and
 capital lease
 obligations            (21)     -     (334)   (266)    (341)    (267)
                       -----  -----   ------  ------  -------  -------
   Net cash provided by
    (used in) financing
    activities           73      9     (223)   (247)    (170)    (223)

Foreign-currency
 effect on cash and
 cash equivalents        14    (13)      23     (36)       7       19
                       -----  -----   ------  ------  -------  -------
   Net increase
    (decrease) in
    cash and cash
    equivalents         176     96     (330)   (674)      54      (72)
                       -----  -----   ------  ------  -------  -------

CASH AND CASH
 EQUIVALENTS, END OF
 PERIOD               $ 683  $ 629   $  683  $  629  $   683  $   629
                       =====  =====   ======  ======  =======  =======

SUPPLEMENTAL CASH
 FLOW INFORMATION:
Cash paid for
 interest             $   -  $   -   $   63  $   84  $    84  $   105
Cash paid for income
 taxes                    3      1        8       5       15        8


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

                                 Three Months Ended  Six Months Ended
                                      June 30,           June 30,
                                 ------------------  -----------------
                                     2006     2005      2006     2005
                                   -------  -------   -------- -------

Net sales                         $ 2,139  $ 1,753   $ 4,418  $ 3,655
Cost of sales                       1,630    1,303     3,361    2,746
                                   -------  -------   -------  -------
Gross profit                          509      450     1,057      909

Operating expenses (1):
 Fulfillment                          189      158       383      324
 Marketing                             53       42       107       87
 Technology and content               167      106       314      198
 General and administrative            50       38        95       85
 Other operating expense                3        2         6        3
                                   -------  -------   -------  -------
     Total operating expenses         462      346       905      697
                                   -------  -------   -------  -------

Income from operations                 47      104       152      212

Interest income                        13        9        27       18
Interest expense                      (19)     (22)      (38)     (48)
Other income (expense), net             1       (1)        -        2
Remeasurements and other               12       18         9       32
                                   -------  -------   -------  -------
     Total non-operating income
      (expense)                         7        4        (2)       4
                                   -------  -------   -------  -------

Income before income taxes             54      108       150      216

Provision for income taxes             32       56        77      112
                                   -------  -------   -------  -------

Income before cumulative effect
 of change in accounting
 principle                             22       52        73      104

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

Net income                        $    22  $    52   $    73  $   130
                                   =======  =======   =======  =======

Basic earnings per share:
 Prior to cumulative effect of
  change in accounting
  principle                       $  0.05  $  0.13   $  0.18  $  0.25
 Cumulative effect of change
  in accounting principle               -        -         -     0.07
                                   -------  -------   -------  -------
                                  $  0.05  $  0.13   $  0.18  $  0.32
                                   =======  =======   =======  =======

Diluted earnings per share:
 Prior to cumulative effect of
  change in accounting
  principle                       $  0.05  $  0.12   $  0.17  $  0.24
 Cumulative effect of change
  in accounting principle               -        -         -     0.07
                                   -------  -------   -------  -------
                                  $  0.05  $  0.12   $  0.17  $  0.31
                                   =======  =======   =======  =======

Weighted average shares used in
 computation of earnings per share:
  Basic                               418      411       417      410
                                   =======  =======   =======  =======

  Diluted                             426      425       426      425
                                   =======  =======   =======  =======

(1) Includes stock-based
 compensation as follows:
 Fulfillment                      $     7  $     5   $    10  $     8
 Marketing                              1        2         2        3
 Technology and content                16       13        23       23
 General and administrative             6        6         6       11


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

                             Three Months Ended     Six Months Ended
                                   June 30,             June 30,
                                --------------       ---------------
                                 2006    2005         2006     2005
                                ------  ------       ------   ------
North America
 Net sales                     $1,157  $  960       $2,404   $1,987
 Cost of sales                    848     682        1,753    1,430
                                ------  ------       ------   ------
 Gross profit                     309     278          651      557
 Direct segment operating
  expenses (1)                    284     206          565      420
                                ------  ------       ------   ------
 Segment operating income          25      72           86      137

International
 Net sales                        982     793        2,014    1,668
 Cost of sales                    782     621        1,608    1,316
                                ------  ------       ------   ------
 Gross profit                     200     172          406      352
 Direct segment operating
  expenses (1)                    145     112          293      229
                                ------  ------       ------   ------
 Segment operating income          55      60          113      123

Consolidated
 Net sales                      2,139   1,753        4,418    3,655
 Cost of sales                  1,630   1,303        3,361    2,746
                                ------  ------       ------   ------
 Gross profit                     509     450        1,057      909
 Direct segment operating
  expenses                        429     318          858      649
                                ------  ------       ------   ------
 Segment operating income          80     132          199      260
 Stock-based compensation         (30)    (26)         (41)     (45)
 Other operating expense           (3)     (2)          (6)      (3)
                                ------  ------       ------   ------
 Income from operations            47     104          152      212
 Total non-operating income
  (expense), net                    7       4           (2)       4
 Provision for income taxes       (32)    (56)         (77)    (112)
 Cumulative effect of change in
  accounting principle              -       -            -       26
                                ------  ------       ------   ------

 Net income                    $   22  $   52       $   73   $  130
                                ======  ======       ======   ======

Segment Highlights:
 Y/Y net sales growth:
  North America                    21%     21%          21%      21%
  International                    24      33           21       30
  Consolidated                     22      26           21       25
 Y/Y gross profit growth:
  North America                    11%     27%          17%      25%
  International                    16      42           16       37
  Consolidated                     13      32           16       29
 Y/Y segment operating income
  growth:
  North America                  (66%)      9%        (37%)     (3%)
  International                    (8)     72           (8)      61
  Consolidated                    (39)     31          (23)      20
 Net sales mix:
  North America                    54%     55%          54%      54%
  International                    46      45           46       46


(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 Ended    Six Months Ended
                                   June 30,             June 30,
                                --------------       --------------
                                 2006    2005         2006     2005
                                ------  ------       ------   ------
North America
 Media                         $  730  $  632       $1,545   $1,331
 Electronics and other general
  merchandise                     365     278          738      559
 Other                             62      50          121       97
                                ------  ------       ------   ------
    Total North America         1,157     960        2,404    1,987

International
 Media                            718     614        1,481    1,289
 Electronics and other general
  merchandise                     259     178          524      377
 Other                              5       1            9        2
                                ------  ------       ------   ------
    Total International           982     793        2,014    1,668

Consolidated
 Media                          1,448   1,246        3,026    2,620
 Electronics and other general
  merchandise                     624     456        1,262      936
 Other                             67      51          130       99
                                ------  ------       ------   ------
    Total Consolidated         $2,139  $1,753       $4,418   $3,655
                                ======  ======       ======   ======

Y/Y Net Sales Growth:
North America:
 Media                             15%     17%          16%      17%
 Electronics and other general
  merchandise                      32      23           32       24
 Other                             25     105           25      100
    Total North America            21      21           21       21

International:
 Media                             17%     24%          15%      20%
 Electronics and other general
  merchandise                      45      80           39       83
 Other                            354      35          388       49
    Total International            24      33           21       30

Consolidated:
 Media                             16%     20%          16%      18%
 Electronics and other general
  merchandise                      37      40           35       43
 Other                             32     103           31       99
    Total Consolidated             22      26           21       25

Y/Y Net Sales Growth Excluding
 Effect of Exchange Rates:
International:
 Media                             20%     20%          22%      17%
 Electronics and other general
  merchandise                      48      75           46       77
 Other                            362      32          412       45
    Total International            27      29           28       26

Consolidated:
 Media                             18%     18%          19%      17%
 Electronics and other general
  merchandise                      38      39           38       41
 Other                             32     103           32       99
    Total Consolidated             23      25           24       23

Consolidated Net Sales Mix:
 Media                             68%     71%          68%      71%
 Electronics and other general
  merchandise                      29      26           29       26
 Other                              3       3            3        3


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

                                    June 30,   December 31,  June 30,
                                      2006         2005        2005
                                   ----------- ----------- -----------
ASSETS                             (unaudited)             (unaudited)
Current assets:
 Cash and cash equivalents             $683      $1,013        $629
 Marketable securities                  736         987         696
 Inventories                            521         566         383
 Deferred tax assets, current
  portion                                66          89          63
 Accounts receivable, net and other
  current assets                        225         274         155
                                   ----------- ----------- -----------
    Total current assets              2,231       2,929       1,926

Fixed assets, net                       405         348         267
Deferred tax assets, long-term
 portion                                208         223         206
Goodwill                                193         159         154
Other assets                            128          37          48
                                   ----------- ----------- -----------
    Total assets                     $3,165      $3,696      $2,601
                                   =========== =========== ===========

LIABILITIES AND STOCKHOLDERS'
 EQUITY (DEFICIT)
Current liabilities:
 Accounts payable                      $943      $1,366        $735
 Accrued expenses and other current
  liabilities                           515         563         409
                                   ----------- ----------- -----------
    Total current liabilities         1,458       1,929       1,144

Long-term debt and other              1,324       1,521       1,521

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  --
   419, 416 and 412                       4           4           4
 Additional paid-in capital           2,334       2,263       2,161
 Accumulated other comprehensive
  (loss) income                          (2)          6          27
 Accumulated deficit                 (1,953)     (2,027)     (2,256)
                                   ----------- ----------- -----------
Total stockholders' equity
 (deficit)                              383         246         (64)
                                   ----------- ----------- -----------
Total liabilities and
 stockholders' equity (deficit)      $3,165      $3,696      $2,601
                                   =========== =========== ===========


                           AMAZON.COM, INC.
        Supplemental Financial Information and Business Metrics
                 (in millions, except per share data)
                              (unaudited)

----------------------------------------------------------------------
                                                                 Y/Y %
                       Q2 2005  Q3 2005 Q4 2005 Q1 2006 Q2 2006 Change
                       -----------------------------------------------

Cash Flows and Shares

Operating cash flow --
 trailing twelve months
 (TTM) (1)              $  624  $  661  $  733  $  724  $  610    (2%)

Purchase of fixed
 assets (incl.
 internal-use software
 & website development)
 -- TTM                 $  138  $  186  $  204  $  223  $  235    70%

Free cash flow
 (operating cash flow
 less purchases of
 fixed assets) -- TTM
 (1)                    $  486  $  475  $  529  $  501  $  375   (23%)

Common shares and
 stock-based awards
 outstanding               438     438     438     438     443     1%
Common shares
 outstanding               412     414     416     417     419     2%
Stock-based awards
 outstanding                26      24      22      21      24    (6%)
Stock-based awards
 outstanding -- % of
 common shares
 outstanding               6.3%    5.8%    5.2%    4.9%    5.8%  N/A

Results of Operations

Worldwide (WW) net
 sales                  $1,753  $1,858  $2,977  $2,279  $2,139    22%
WW net sales -- Y/Y
 growth, excluding the
 effect of foreign
 exchange rates           24.6%   27.6%   21.9%   24.8%   23.4%  N/A
WW net sales --  TTM    $7,658  $8,054  $8,490  $8,867  $9,253    21%
WW net sales -- TTM Y/Y
 growth, excluding the
 effect of foreign
 exchange rates           24.4%   25.2%   23.7%   24.3%   24.0%  N/A

Gross profit            $  450  $  463  $  667  $  547  $  509    13%
Gross margin -- % of WW
 net sales                25.7%   24.9%   22.4%   24.0%   23.8%  N/A
Gross profit -- TTM     $1,809  $1,917  $2,039  $2,128  $2,187    21%
Gross margin -- TTM %
 of WW net sales          23.6%   23.8%   24.0%   24.0%   23.6%  N/A

Operating income (1)(3) $  104  $   55  $  165  $  106  $   47   (55%)
Operating margin -- %
 of WW net sales (1)       6.0%    3.0%    5.5%    4.6%    2.2%  N/A
Operating income -- TTM
 (1)(3)                 $  456  $  430  $  432  $  430  $  372   (18%)
Operating margin -- TTM
 % of WW net sales (1)     6.0%    5.3%    5.1%    4.8%    4.0%  N/A

Net income (1)(2)       $   52  $   30  $  199  $   51  $   22   (58%)
Net income per diluted
 share (1)(2)           $ 0.12  $ 0.07  $ 0.47  $ 0.12  $ 0.05   (58%)
Net income -- TTM
 (1)(2)                 $  531  $  507  $  359  $  332  $  302   (43%)
Net income per diluted
 share -- TTM (1)(2)    $ 1.25  $ 1.19  $ 0.84  $ 0.78  $ 0.71   (43%)

Segments

North America Segment:
  Net sales             $  960  $1,041  $1,683  $1,247  $1,157    21%
  Net sales -- Y/Y
   growth, excluding
   the effect of
   foreign exchange
   rates                  21.0%   27.4%   20.8%   21.3%   20.4%  N/A
  Net sales -- TTM      $4,195  $4,420  $4,711  $4,931  $5,128    22%
  Gross profit          $  278  $  292  $  418  $  341  $  309    11%
  Gross margin -- % of
   North America net
   sales                  29.0%   28.1%   24.8%   27.3%   26.7%  N/A
  Gross profit -- TTM   $1,135  $1,204  $1,267  $1,329  $1,361    20%
  Gross margin -- TTM %
   of North America net
   sales                  27.1%   27.2%   26.9%   27.0%   26.5%  N/A
  Operating income (3)  $   72  $   66  $   92  $   62  $   25   (66%)
  Operating margin -- %
   of North America net
   sales                   7.5%    6.4%    5.5%    5.0%    2.1%  N/A
  Operating income --
   TTM (3)              $  317  $  326  $  296  $  292  $  245   (23%)
  Operating margin --
   TTM % of North
   America net sales       7.6%    7.4%    6.3%    5.9%    4.8%  N/A

International Segment:
  Net sales             $  793  $  817  $1,294  $1,032  $  982    24%
  Net sales -- Y/Y
   growth, excluding
   the effect of
   foreign exchange
   rates                  29.3%   27.8%   23.2%   28.9%   27.0%  N/A
  Net sales -- TTM      $3,463  $3,634  $3,779  $3,936  $4,125    19%
  Net sales -- TTM % of
   WW net sales           45.2%   45.1%   44.5%   44.4%   44.6%  N/A
  Gross profit          $  172  $  171  $  249  $  206  $  200    16%
  Gross margin -- % of
   International net
   sales                  21.7%   20.9%   19.3%   20.0%   20.4%  N/A
  Gross profit -- TTM   $  674  $  713  $  772  $  799  $  827    23%
  Gross margin -- TTM %
   of International net
   sales                  19.5%   19.6%   20.4%   20.3%   20.0%  N/A
  Operating income      $   60  $   55  $   93  $   58  $   55    (8%)
  Operating margin -- %
   of International net
   sales                   7.6%    6.7%    7.1%    5.6%    5.6%  N/A
  Operating income --
   TTM                  $  216  $  233  $  270  $  265  $  260    21%
  Operating margin --
   TTM % of
   International net
   sales                   6.2%    6.4%    7.1%    6.7%    6.3%  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 %
                   Q2 2005  Q3 2005  Q4 2005  Q1 2006  Q2 2006  Change
                   ---------------------------------------------------
Segments
 (continued)

Consolidated
 Segments:
  Operating
   expenses        $   318  $   342  $   482  $   427  $   429    35%
  Operating
   expenses -- TTM $ 1,276  $ 1,358  $ 1,473  $ 1,570  $ 1,681    32%
  Operating income
   (3)             $   132  $   121  $   185  $   120  $    80   (39%)
  Operating margin
   -- % of
   consolidated
   sales               7.5%     6.5%     6.2%     5.3%     3.7%  N/A
  Operating income
   -- TTM (3)      $   533  $   559  $   566  $   558  $   506    (5%)
  Operating margin
   -- TTM % of
   consolidated
   net sales           7.0%     6.9%     6.7%     6.3%     5.5%  N/A

Supplemental North
 America Segment
 Net Sales:
  Media            $   632  $   684  $ 1,030  $   815  $   730    15%
  Media -- TTM     $ 2,780  $ 2,901  $ 3,046  $ 3,163  $ 3,260    17%
  Electronics and
   other general
   merchandise     $   278  $   304  $   580  $   374  $   365    32%
  Electronics and
   other general
   merchandise --
   TTM             $ 1,236  $ 1,311  $ 1,443  $ 1,534  $ 1,622    31%
  Electronics and
   other general
   merchandise --
   TTM % of North
   America net
   sales                29%      30%      31%      31%      32%  N/A
  Other            $    50  $    53  $    73  $    58  $    62    25%
  Other -- TTM     $   178  $   208  $   222  $   234  $   246    38%

Supplemental
 International
 Segment Net
 Sales:
  Media            $   614  $   629  $   968  $   763  $   718    17%
  Media -- TTM     $ 2,730  $ 2,828  $ 2,885  $ 2,972  $ 3,077    13%
  Electronics and
   other general
   merchandise     $   178  $   187  $   321  $   265  $   259    45%
  Electronics and
   other general
   merchandise --
   TTM             $   730  $   801  $   886  $   952  $ 1,033    42%
  Electronics and
   other general
   merchandise --
   TTM % of
   International
   net sales            21%      22%      23%      24%      25%  N/A
  Other            $     1  $     1  $     5  $     4  $     5   354%
  Other -- TTM     $     3  $     4  $     8  $    11  $    15   399%

Supplemental
 Worldwide Net
 Sales:
  Media            $ 1,246  $ 1,313  $ 1,998  $ 1,578  $ 1,448    16%
  Media -- TTM     $ 5,510  $ 5,730  $ 5,931  $ 6,135  $ 6,337    15%
  Electronics and
   other general
   merchandise     $   456  $   491  $   901  $   639  $   624    37%
  Electronics and
   other general
   merchandise --
   TTM             $ 1,966  $ 2,113  $ 2,329  $ 2,486  $ 2,655    35%
  Electronics and
   other general
   merchandise --
   TTM % of WW net
   sales                26%      26%      27%      28%      29%  N/A
  Other            $    51  $    54  $    78  $    62  $    67    32%
  Other -- TTM     $   181  $   211  $   230  $   245  $   261    44%

Balance Sheet

Cash and
 marketable
 securities        $ 1,325  $ 1,419  $ 2,000  $ 1,334  $ 1,419     7%

Inventory, net --
 ending            $   383  $   456  $   566  $   538  $   521    36%
Inventory --
 average inventory
 % of TTM net
 sales                 5.0%     5.2%     5.4%     5.3%     5.3%  N/A
Inventory
 turnover, average
 -- TTM               15.3     14.8     14.1     14.4     14.3    (6%)

Fixed assets, net  $   267  $   322  $   348  $   361  $   405    52%

Accounts payable
 days -- ending    $    51  $    58  $    54  $    48  $    53     3%

Other

Employees (full-
 time and part-
 time; excludes
 contractors &
 temporary
 personnel)         10,200   11,200   12,000   12,400   12,700    24%

----------------------------------------------------------------------

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

(1) The Company settled a patent lawsuit on terms including a one-time
    payment of $40 million in Q3 2005. This negatively impacts TTM
    operating cash flow and free cash flow by $40 million for all
    periods that include Q3 2005. The settlement negatively affected
    Q3 2005 operating income by $40 million, and Q3 2005 net income by
    $20 million after tax.

(2) Q4 2005 net income includes a tax benefit of $90 million related
    to determining that certain of our deferred tax assets are
    realizable.

(3) In Q2 2006, a fee dispute with Toysrus.com reduced our operating
    income by $20 million.
                           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 $128 million, up 24% from $103 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 term.

    --  Net sales include fixed fees, commissions and per-unit fees
        earned from third-party sellers and similar amounts earned
        through Amazon Enterprise Solutions.

    Cost of Sales

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

    --  Inbound shipping charges to receive products from our
        suppliers are included in inventory cost and recognized as
        cost of sales upon sale to our customers.

    --  Outbound shipping costs totaled $188 million, up 27% from $148
        million. Net shipping loss was $60 million, or 2.8% of net
        sales, up 33% from a net shipping loss of $45 million, or 2.6%
        of net sales, resulting primarily from our free shipping
        offers and Amazon Prime. To the extent our customers use our
        free shipping offers at an increasing rate, including
        memberships in Amazon Prime, our net cost of shipping will
        increase.

    --  While costs associated with free shipping, including Amazon
        Prime, 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 offer free
        membership trials for Amazon Prime and expect to continue to
        offer these trials in the future.

    Operating Expenses

    --  Depreciation expense for fixed assets, including amortization
        of internal-use software and website development, was $41
        million, up from $26 million. Depreciation is recorded on a
        straight-line basis over the estimated useful lives of the
        assets--generally two years or less for assets such as
        internal-use software and our DVD rental library, three years
        for our technology infrastructure, five years for furniture
        and fixtures and ten years for heavy equipment. Depreciation
        expense is generally classified within operating expense
        categories on the consolidated statements of operations, and
        certain assets, such as our DVD rental library, are amortized
        to cost of sales.

    --  Stock-based compensation was $30 million compared to $26
        million in the prior year. The estimation of stock awards that
        will ultimately vest requires judgment, and to the extent
        actual results or updated estimates differ from our current
        estimates, such amounts will be recorded as a cumulative
        adjustment in the period estimates are revised.

    --  Operating expenses with and without stock-based compensation
        are as follows:
                     Three Months Ended        Three Months Ended
                       June 30, 2006              June 30, 2005
                 -------------------------- --------------------------
                    As    Stock-Based          As    Stock-Based
                 Reported Compensation  Net Reported Compensation  Net
                 -------- ----------------- -------- -----------------
Operating
Expenses:
 Fulfillment     $   189    $     (7) $182  $   158    $     (5) $153
 Marketing            53          (1)   52       42          (2)   40
 Technology and
  content            167         (16)  151      106         (13)   93
 General and
  administrative      50          (6)   44       38          (6)   32
 Other operating
  expense              3           -     3        2           -     2
                  -------    --------  ----  -------    --------  ----
 Total operating
  expenses       $   462    $    (30) $432  $   346    $    (26) $320
                  =======    ========  ====  =======    ========  ====

Year-over-year
Percentage
 Growth:
 Fulfillment          20%               20%      25%               25%
 Marketing            26                28       24                26
 Technology and
  content             58                63       49                59
 General and
  administrative      32                37       25                19

Percent of Net
Sales:
 Fulfillment         8.9%              8.5%     9.0%              8.7%
 Marketing           2.5               2.4      2.4               2.3
 Technology and
  content            7.8               7.1      6.0               5.3
 General and
  administrative     2.4               2.1      2.2               1.8
    Fulfillment

    --  Fulfillment costs represent 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; and payment processing fees and
        transaction costs, including costs associated with our
        guarantee of certain third-party seller transactions and
        responding to inquiries from customers. Fulfillment costs also
        include amounts paid to third parties who assist us in
        fulfillment and customer service operations.

    --  Payment processing fees charged to us associated with
        third-party seller sales are based on the gross purchase price
        of underlying transactions, and transaction costs, such as our
        A to Z Guarantee, are higher as a percentage of revenue versus
        our retail sales. Accordingly, third-party sales have higher
        fulfillment costs as a percentage of net sales.

    --  The increase in fulfillment costs in absolute dollars relates
        to costs from expanding fulfillment capacity and variable
        costs. Variable costs correspond with sales volume and
        inventory levels, our mix of product sales, and payment
        processing and related transaction costs, including mix of
        payment methods and costs from our guarantee for certain
        third-party seller transactions.

    --  We expanded our fulfillment capacity in the first half of 2006
        and throughout 2005 through gains in efficiencies as well as
        increases in leased warehouse space. We plan to continue
        expanding our worldwide fulfillment capacity--although to add
        less space than in 2005--in order to accommodate greater
        selection and to meet anticipated shipment volumes from sales
        of our own products as well as sales by third parties for
        which we provide the fulfillment. We expect absolute amounts
        spent in fulfillment and fulfillment-related cost of sales to
        increase over time.

    Marketing

    --  Marketing costs increased in absolute terms, primarily
        corresponding with revenue growth as we utilized variable
        online marketing channels, such as our Associates program,
        sponsored search and other variable marketing initiatives. 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 or its effect. 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 research and
        development, including application development, editorial
        content, merchandising selection, and systems and
        telecommunications support, as well as costs associated with
        systems and telecommunications infrastructure.

    --  In 2005, we added a significant number of computer scientists,
        software engineers and employees involved in editorial
        content, merchandising selection and systems support. We are
        investing in several areas of technology including seller
        platforms, web services and digital initiatives. In addition,
        we increased spending on our technology infrastructure so that
        we can continue to enhance the customer experience and improve
        our process efficiency.

    --  We expect the year-over-year percentage growth in technology
        and content, excluding stock-based compensation, to decrease
        in the second half of 2006.

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

    --  Certain costs relating to the development of internal-use
        software and website development, including software to
        upgrade and enhance our websites and processes supporting our
        business, are capitalized and depreciated over two years. In
        Q2 2006 and Q2 2005, we capitalized $32 million (including $5
        million of stock-based compensation) and $22 million
        (including $3 million of stock-based compensation) of costs
        associated with internal-use software and website development.
        Amortization of previously capitalized amounts was $20 million
        and $12 million for Q2 2006 and Q2 2005.

    --  We expect absolute amounts spent in technology and content to
        increase over time.

    General and Administrative

    --  The increase in general and administrative costs in Q2 2006 is
        primarily due to increases in payroll and related expenses.

    --  Additionally, in Q1 2005 we recorded a charge of $8 million
        related to possible settlements of outstanding litigation, and
        in Q2 2005 the favorable resolution of one of these matters
        resulted in a $3 million expense reduction.

    --  We expect absolute amounts spent in general and administrative
        to increase over time.

    Stock-Based Compensation

    --  Stock-based compensation was $30 million, up from $26 million,
        reflecting grants to new employees and our annual
        performance-based awards that are granted in Q2 of each year.

    --  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).
        The adoption of SFAS 123(R) in Q1 2005 resulted in a
        cumulative benefit from accounting change of $26 million,
        which reflects the net cumulative impact of estimating
        forfeitures in the determination of period expense, rather
        than recording forfeitures when they occur as previously
        permitted.

    --  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 6 million shares
        in the quarter. Our annual stock awards are granted in the
        second quarter.

    --  As of June 30, 2006, there were 24 million shares underlying
        outstanding stock awards, consisting of 10 million shares
        underlying stock options with a $15 weighted-average exercise
        price and 14 million shares underlying restricted stock units.
        As of June 30, 2005, there were 26 million shares underlying
        outstanding stock awards.

    --  As of June 30, 2006, outstanding common shares plus shares
        underlying outstanding stock-based awards were 443 million, up
        1% from 438 million as of June 30, 2005. 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.

    Other Operating Expense

    --  Other operating expense primarily includes costs related to
        intangibles amortization.

    --  We acquired one company during Q1 2006 for a purchase price of
        $47 million, including a $28 million cash payment in Q1 2006
        and $19 million due in 2007. The excess of purchase price over
        the fair value of the net assets acquired was $33 million and
        is classified as goodwill on our consolidated balance sheets.
        Acquired other intangibles totaled $14 million and have
        estimated useful lives of between one and ten years. The
        results of operations of the acquired business have been
        included in our consolidated results from the closing date
        forward. The effect of this acquisition on consolidated net
        sales and operating income during the first half of 2006 was
        not significant.

    Remeasurements and Other

    --  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.

    --  Remeasurement of the principal amount of our 6.875% PEACS from
        Euros to U.S. dollars resulted in a foreign-currency loss of
        $16 million, compared with a gain of $42 million.

    --  Remeasurement of foreign-currency intercompany balances that
        are to be repaid among subsidiaries represented a $26 million
        gain, compared with a loss of $25 million.

    Income Taxes

    --  Our tax provision for interim periods is determined using an
        estimate of the annual effective tax rate. Our provision for
        income taxes was $32MM in Q2 - or a 59% rate for the quarter -
        which includes a $4 million year-to-date adjustment to reflect
        our current estimate of our annual effective tax rate of 51%.

    --  There is a potential for significant volatility of our 2006
        effective tax rate due to several factors, including from
        variability in accurately predicting our taxable income and
        the taxable jurisdictions to which it relates.

    --  The effective tax rate was higher than the 35% statutory rate,
        resulting from steps we initiated to establish our European
        headquarters in Luxembourg, which we expect will benefit our
        effective tax rate over time.

    --  We expect cash taxes paid in 2006 to be approximately $25
        million compared with $12 million in 2005. We endeavor to
        optimize our global taxes on a cash basis, rather than on a
        financial reporting basis.

    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 Q2 2006
        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 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:
                              Three Months Ended June 30,
                 -----------------------------------------------------
                            2006                       2005
                  -------------------------  -------------------------
                   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        $2,163   $  (24)  $ 2,139  $1,728   $   25   $ 1,753
Gross profit        514       (5)      509     445        5       450
Operating
 expenses           460        2       462     343        3       346
Income from
 operations          49       (2)       47     102        2       104
Net interest
 expense and
 other               (4)      (1)       (5)    (14)       -       (14)
Remeasurements
 and other (3)        2       10        12       1       17        18
Net income           19        3        22      43        9        52
Diluted earnings
 per share       $ 0.04   $ 0.01   $  0.05  $ 0.10   $ 0.02   $  0.12


    (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.


    Other

    --  In March 2006, the Superior Court of New Jersey terminated our
        contract with Toysrus.com LLC but declined to award damages to
        either party. We continued to provide services to Toysrus.com
        during the contractual wind-down period in Q2 2006, but
        Toysrus.com is contesting the amount of fees owed to
        compensate us for that work. This fee dispute reduced our
        income from operations for Q2 2006 by approximately $20
        million, and the fee dispute together with the termination of
        the Toysrus.com contract reduced our operating cash flows and
        free cash flows for Q2 2006 by approximately $20 million. Had
        we not retained $13 million against payments otherwise due to
        Toysrus.com, our operating cash flows and free cash flows for
        Q2 2006 would have been lower by that amount. We are appealing
        the trial court's initial rulings in Toysrus.com's favor
        regarding the contract termination and the fee dispute.

    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.

    --  Additionally, 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--effectively a reclassification between operating cash
        flows and financing cash flows. Tax benefits resulting from
        stock-based compensation deductions in excess of amounts
        reported for financial reporting purposes--which negatively
        impacted operating cash flow--were $21 million in Q2 2006 and
        $34 million for the trailing twelve months; such amounts
        should be less than $100 million in 2006 - compared with $7
        million for 2005 - but are subject to considerable
        variability. Accordingly, amounts presented for operating cash
        flows and free cash flows for 2006 will be negatively affected
        in comparison to prior results; however, there is no change in
        economic substance resulting from this change in reporting
        classification.

    --  Our cash, cash equivalents and marketable securities of $1.42
        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 $738
        million, primarily in Euros, British Pounds and Japanese Yen.

    --  Accounts receivable, net and other current assets include
        accounts receivable from merchant partners, vendors and credit
        card companies, interest receivables and prepaid 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.

    --  Other assets include, among other things, $85 million of
        restricted long-term marketable securities, $9 million of
        deferred issuance costs on long-term debt, $8 million of
        certain equity investments, and $21 million of other
        intangibles, net. Marketable securities restricted for longer
        than one year are related to collateralization of debt for our
        international operations - such amounts at December 31, 2005
        were insignificant.

    --  Accrued expenses and other current liabilities include, among
        other things, liabilities for gift certificates of $126
        million, professional fees, marketing activities, workforce
        costs--including accrued payroll, vacation and other
        benefits--and unearned revenue of $53 million, which is
        recorded when payments are received or due in advance of
        performing our service obligations and is amortized over the
        service period.

    --  Long-term debt and other primarily include 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")              307 (2) (4)  6.875%   February 2010
                             ----------
                                $1,207 (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
    101.425% of the principal, which decreases every February 1 by
    47.5 basis points until maturity, plus any accrued and unpaid
    interest.

(2) EUR 240 million principal amount, convertible at the holders'
    option into our common stock at EUR 84.883 per share ($109 per
    share based on the Euro/U.S. dollar exchange rate as of June 30,
    2006). 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
    fluctuate based on the Euro/U.S. dollar exchange ratio.

(3) The "if converted" number of shares associated with our
    convertible debt instruments (approximately 14 million total
    shares) is excluded from diluted shares as they are antidilutive.

(4) As previously announced, in Q1 2006 we redeemed EUR 250
    million--or $300 million at the Euro to U.S. dollar exchange rate
    on the redemption date--in principal amount of our PEACS at par.


    Certain Definitions and Other

    --  We present segment information for 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 expense, 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.borders.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 Enterprise Solutions program,
        and 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 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 rentals 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 Amazon Enterprise Solutions program
        and miscellaneous marketing and promotional activities, such
        as our co-branded credit card programs.

    --  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 trailing twelve month cost of
        sales to average inventory over five quarter ends.

    --  Return on invested capital is trailing-twelve-month free cash
        flow divided by average total assets less current liabilities
        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@ and Syndicated Stores programs, but exclude
        certain customers, including DVD rental customers, customers
        associated with certain of our acquisitions (including
        Joyo.com customers), Amazon Enterprise Solutions 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. Customers are 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 Enterprise Solutions sellers.
        Sellers are 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 by 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
             Kim Nelson, 206-266-2171
             ir@amazon.com
             www.amazon.com/ir
             or
             Amazon.com Public Relations
             Patty Smith, 206-266-7180

    SOURCE: Amazon.com, Inc.

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