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Amazon.com Announces Fourth Quarter Sales up 42% to $5.7 Billion; 2007 Free Cash Flow More Than Doubles, Surpassing $1 Billion for the First Time
SEATTLE, Jan 30, 2008 (BUSINESS WIRE) -- Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its fourth quarter and year ended December 31, 2007.

Operating cash flow was $1.41 billion in 2007, compared with $0.70 billion in 2006. Free cash flow increased 143% to $1.18 billion in 2007, compared with $0.49 billion in 2006.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 435 million on December 31, 2007, compared with 436 million a year ago.

Net sales increased 42% to $5.67 billion in the fourth quarter, compared with $3.99 billion in fourth quarter 2006. Excluding the $0.20 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 37% compared with fourth quarter 2006.

Operating income increased 38% to $271 million in the fourth quarter, compared with $197 million in fourth quarter 2006. Excluding the $14 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, operating income grew 31% compared with fourth quarter 2006.

Net income increased 112% to $207 million in the fourth quarter, or $0.48 per diluted share, compared with net income of $98 million, or $0.23 per diluted share, in fourth quarter 2006.

"This quarter showed accelerated sales growth and record operating profits," said Jeff Bezos, founder and CEO of Amazon.com. "In our view, these unusual financial results are driven by one thing: continuously improving the customer experience."

Full Year 2007

Net sales increased 39% to $14.84 billion, or 35% excluding the $0.40 billion favorable impact from year-over-year changes in foreign exchange rates throughout the year, compared with $10.71 billion in 2006.

Operating income increased 69% to $655 million, or 61% excluding the $29 million favorable impact from year-over-year changes in foreign exchange rates throughout the year, compared with $389 million in 2006.

Net income increased 150% to $476 million in 2007, or $1.12 per diluted share, compared with net income of $190 million, or $0.45 per diluted share, in 2006.

Highlights

-- The Company introduced Amazon Kindle, a revolutionary wireless portable reader that provides instant wireless downloads of more than 90,000 books, blogs, magazines and newspapers to a crisp, high-resolution electronic paper display. The Amazon Kindle team is scrambling to increase manufacturing, as demand remains higher than supply. Kindles are being delivered to customers on a first come, first served basis.

-- Amazon MP3 added DRM-free music downloads from Sony BMG Music Entertainment and Warner Music Group, making it the only retailer to offer DRM-free MP3 music downloads from all four major music labels as well as over 50,000 independent labels. The MP3 store now includes over 3.4 million songs from more than 270,000 artists. Pepsi will debut the Pepsi Stuff Amazon MP3 promotion, a massive collect-and-get program, during the upcoming Super Bowl.

-- Over 330,000 developers have registered to use Amazon Web Services (AWS), up more than 30,000 from last quarter.

-- Adoption of Amazon Elastic Compute Cloud (EC2) and Amazon Simple Storage Service (S3) continues to grow. As an indicator of adoption, bandwidth utilized by these services in fourth quarter 2007 was even greater than bandwidth utilized in the same period by all of Amazon.com's global websites combined.

-- AWS launched a limited beta of its SimpleDB Service, which allows queries to run on structured data in real time. This service works in conjunction with Amazon EC2 and Amazon S3, collectively providing the ability to store, process and query data sets in the cloud.

-- AWS launched European storage for Amazon S3, allowing software developers and businesses to store their data physically in Europe. Amazon S3 is a storage service in the cloud offering software developers and businesses low-cost access to the same scalable and reliable storage infrastructure Amazon uses to run its own global network of websites.

-- North America segment sales, representing the Company's U.S. and Canadian sites, were $3.08 billion, up 40% from fourth quarter 2006.

-- International segment sales, representing the Company's U.K., German, Japanese, French and Chinese sites, were $2.59 billion, up 46% from fourth quarter 2006. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, International sales grew 35%.

-- Worldwide Media sales grew 33% to $3.33 billion in fourth quarter 2007, compared with $2.50 billion in fourth quarter 2006.

-- Worldwide Electronics & Other General Merchandise sales grew 58% to $2.21 billion in fourth quarter 2007, compared with $1.40 billion in fourth quarter 2006, and increased to 39% of worldwide net sales compared with 35%.

-- A record number of customers took advantage of Amazon Prime, the Company's unlimited free-shipping program. Amazon Prime is now available in the U.K., Germany, Japan and the U.S.

-- Amazon.com shipped over half-a-million units in fourth quarter 2007 on behalf of sellers who utilized the Fulfillment by Amazon service.

Financial Guidance

The following forward-looking statements reflect Amazon.com's expectations as of January 30, 2008. 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.

First Quarter 2008 Guidance

-- Net sales are expected to be between $3.95 billion and $4.15 billion, or to grow between 31% and 38% compared with first quarter 2007.

-- Operating income is expected to be between $155 million and $200 million, or to grow between 7% and 38% compared with first quarter 2007. This guidance includes $55 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional acquired intangible assets are recorded and that there are no further revisions to stock-based compensation estimates.

Full Year 2008 Expectations

-- Net sales are expected to be between $18.75 billion and $19.75 billion, or to grow between 26% and 33% compared with 2007.

-- Operating income is expected to be between $785 million and $985 million, or to grow between 20% and 50% compared with 2007. This guidance includes $240 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional acquired 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, the extent to which we owe income taxes, 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, risks related to new products, services and technologies, system interruptions, significant indebtedness, government regulation and taxation, payments and fraud. 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, 2006, and subsequent filings.

About Amazon.com

Amazon.com, Inc., (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 books, movies, music & games, digital downloads, electronics & computers, home & garden, toys, kids & baby, grocery, apparel, shoes & jewelry, health & beauty, sports & outdoors, tools, and auto & industrial.

Amazon Web Services provides Amazon's developer customers with access to in-the-cloud infrastructure services based on Amazon's own back-end technology platform, which developers can use to enable virtually any type of business. Examples of the services offered by Amazon Web Services are Amazon Elastic Compute Cloud (Amazon EC2), Amazon Simple Storage Service (Amazon S3), Amazon SimpleDB, Amazon Simple Queue Service (Amazon SQS), Amazon Flexible Payments Service (Amazon FPS) and Amazon Mechanical Turk.

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 the Joyo Amazon websites at www.joyo.cn and www.amazon.cn.

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     Twelve Months
                                           Ended            Ended
                                       December 31,     December 31,
                                     ---------------- ----------------
                                      2007     2006    2007     2006
                                     ------- -------- ------- --------

CASH AND CASH EQUIVALENTS, BEGINNING
 OF PERIOD                           $1,366  $   693  $1,022  $ 1,013

OPERATING ACTIVITIES:
Net income                              207       98     476      190
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                    63       59     246      205
  Stock-based compensation               54       30     185      101
  Other operating expense, net            3        2       9       10
  Losses (gains) on sales of
   marketable securities, net             -        -       1       (2)
  Remeasurements and other               (1)       -      12       (6)
  Deferred income taxes                 (97)       8     (99)      22
  Excess tax benefits from stock-
   based compensation                  (163)     (64)   (257)    (102)
Changes in operating assets and
 liabilities:
  Inventories                          (231)    (127)   (303)    (282)
  Accounts receivable, net and other   (237)    (116)   (255)    (103)
  Accounts payable                    1,144      588     928      402
  Accrued expenses and other            399      246     429      241
  Additions to unearned revenue          79       75     244      206
  Amortization of previously
   unearned revenue                     (71)     (55)   (211)    (180)
                                     ------- -------- ------- --------
    Net cash provided by operating
     activities                       1,149      744   1,405      702

INVESTING ACTIVITIES:
Purchases of fixed assets, including
 internal-use software and website
 development                            (73)     (50)   (224)    (216)
Acquisitions, net of cash acquired,
 and other                              (29)      (2)    (75)     (32)
Sales and maturities of marketable
 securities and other investments       115      869   1,271    1,845
Purchases of marketable securities
 and other investments                 (153)  (1,340)   (930)  (1,930)
                                     ------- -------- ------- --------
    Net cash provided by (used in)
     investing activities              (140)    (523)     42     (333)

FINANCING ACTIVITIES:
Proceeds from exercises of stock
 options                                 12       18      91       35
Excess tax benefits from stock-based
 compensation                           164       64     257      102
Common stock repurchased                  -        -    (248)    (252)
Proceeds from long-term debt and
 other                                    3       17      24       98
Repayments of long-term debt and
 capital lease obligations              (11)      (7)    (74)    (383)
                                     ------- -------- ------- --------
    Net cash provided by (used in)
     financing activities               168       92      50     (400)

Foreign-currency effect on cash and
 cash equivalents                        (4)      16      20       40
                                     ------- -------- ------- --------
    Net increase in cash and cash
     equivalents                      1,173      329   1,517        9
                                     ------- -------- ------- --------

CASH AND CASH EQUIVALENTS, END OF
 PERIOD                              $2,539  $ 1,022  $2,539  $ 1,022
                                     ======= ======== ======= ========

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest               $    1  $     1  $   67  $    86
Cash paid for income taxes               10        1      24       15
Fixed assets acquired under capital
 leases and other financing
 arrangements                            32        7      74       69
Fixed assets acquired under build-
 to-suit leases                          15        -      15        -

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



                                      Three Months    Twelve Months
                                          Ended            Ended
                                      December 31,     December 31,
                                     --------------- -----------------
                                      2007    2006     2007     2006
                                     ------- ------- -------- --------

Net sales                            $5,673  $3,986  $14,835  $10,711
Cost of sales                         4,503   3,136   11,482    8,255
                                     ------- ------- -------- --------
Gross profit                          1,170     850    3,353    2,456

Operating expenses (1):
  Fulfillment                           478     337    1,292      937
  Marketing                             133      92      344      263
  Technology and content                221     177      818      662
  General and administrative             64      45      235      195
  Other operating expense, net            3       2        9       10
                                     ------- ------- -------- --------
      Total operating expenses          899     653    2,698    2,067
                                     ------- ------- -------- --------

Income from operations                  271     197      655      389

Interest income                          28      18       90       59
Interest expense                        (21)    (19)     (77)     (78)
Other income (expense), net               1      (8)      (1)      (4)
Remeasurements and other                  2       1       (7)      11
                                     ------- ------- -------- --------
      Total non-operating income
       (expense)                         10      (8)       5      (12)
                                     ------- ------- -------- --------

Income before income taxes              281     189      660      377

Provision for income taxes               74      91      184      187
                                     ------- ------- -------- --------

Net income                           $  207  $   98  $   476  $   190
                                     ======= ======= ======== ========


Basic earnings per share             $ 0.50  $ 0.24  $  1.15  $  0.46
                                     ======= ======= ======== ========

Diluted earnings per share           $ 0.48  $ 0.23  $  1.12  $  0.45
                                     ======= ======= ======== ========

Weighted average shares used in
 computation of earnings per share:
  Basic                                 416     413      413      416
                                     ======= ======= ======== ========

  Diluted                               427     422      424      424
                                     ======= ======= ======== ========

(1) Includes stock-based
 compensation as follows:
    Fulfillment                      $   11  $    6  $    39  $    24
    Marketing                             2       2        8        4
    Technology and content               31      15      103       54
    General and administrative           10       7       35       19

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


                                    Three Months      Twelve Months
                                         Ended             Ended
                                     December 31,      December 31,
                                   ---------------- ------------------
                                     2007    2006     2007     2006
                                   -------- ------- -------- ---------
North America
  Net sales                        $ 3,084  $2,208  $ 8,095  $ 5,869
  Cost of sales                      2,386   1,676    6,064    4,344
                                   -------- ------- -------- ---------
  Gross profit                         698     532    2,031    1,525
  Direct segment operating
   expenses (1)                        545     409    1,631    1,295
                                   -------- ------- -------- ---------
  Segment operating income         $   153  $  123  $   400  $   230
                                   ======== ======= ======== =========

International
  Net sales                        $ 2,589  $1,778  $ 6,740  $ 4,842
  Cost of sales                      2,117   1,460    5,418    3,911
                                   -------- ------- -------- ---------
  Gross profit                         472     318    1,322      931
  Direct segment operating
   expenses (1)                        297     212      873      661
                                   -------- ------- -------- ---------
  Segment operating income         $   175  $  106  $   449  $   270
                                   ======== ======= ======== =========

Consolidated
  Net sales                        $ 5,673  $3,986  $14,835  $10,711
  Cost of sales                      4,503   3,136   11,482    8,255
                                   -------- ------- -------- ---------
  Gross profit                       1,170     850    3,353    2,456
  Direct segment operating
   expenses                            842     621    2,504    1,956
                                   -------- ------- -------- ---------
  Segment operating income             328     229      849      500
  Stock-based compensation             (54)    (30)    (185)    (101)
  Other operating expense, net          (3)     (2)      (9)     (10)
                                   -------- ------- -------- ---------
  Income from operations               271     197      655      389
  Total non-operating income
   (expense)                            10      (8)       5      (12)
  Provision for income taxes           (74)    (91)    (184)    (187)
                                   -------- ------- -------- ---------

  Net income                       $   207  $   98  $   476  $   190
                                   ======== ======= ======== =========

Segment Highlights:
  Y/Y net sales growth:
    North America                       40%     31%      38%      25%
    International                       46      37       39       28
    Consolidated                        42      34       39       26
  Y/Y gross profit growth:
    North America                       31%     27%      33%      20%
    International                       48      28       42       21
    Consolidated                        38      27       37       20
  Y/Y segment operating income
   growth:
    North America                       25%     33%      74%     (22%)
    International                       65      15       66        -
    Consolidated                        44      24       70      (12)
  Net sales mix:
    North America                       54%     55%      55%      55%
    International                       46      45       45       45

----------------------------------
    (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     Twelve Months
                                          Ended            Ended
                                      December 31,     December 31,
                                    ---------------- -----------------
                                      2007    2006     2007     2006
                                    -------- ------- -------- --------
North America
  Media                             $ 1,637  $1,251  $ 4,630  $ 3,582
  Electronics and other general
   merchandise                        1,336     876    3,139    2,024
  Other                                 111      81      326      263
                                    -------- ------- -------- --------
    Total North America               3,084   2,208    8,095    5,869

International
  Media                               1,692   1,247    4,612    3,485
  Electronics and other general
   merchandise                          877     523    2,071    1,337
  Other                                  20       8       57       20
                                    -------- ------- -------- --------
    Total International               2,589   1,778    6,740    4,842

Consolidated
  Media                               3,329   2,498    9,242    7,067
  Electronics and other general
   merchandise                        2,213   1,399    5,210    3,361
  Other                                 131      89      383      283
                                    -------- ------- -------- --------
    Total Consolidated              $ 5,673  $3,986  $14,835  $10,711
                                    ======== ======= ======== ========

Y/Y Net Sales Growth:
North America:
  Media                                  31%     21%      29%      18%
  Electronics and other general
   merchandise                           53      51       55       40
  Other                                  37      11       24       18
    Total North America                  40      31       38       25

International:
  Media                                  36%     29%      32%      21%
  Electronics and other general
   merchandise                           68      63       55       51
  Other                                 143      68      186      151
    Total International                  46      37       39       28

Consolidated:
  Media                                  33%     25%      31%      19%
  Electronics and other general
   merchandise                           58      55       55       44
  Other                                  47      14       35       23
    Total Consolidated                   42      34       39       26

Y/Y Net Sales Growth Excluding
 Effect of Exchange Rates:
International:
  Media                                  26%     21%      25%      21%
  Electronics and other general
   merchandise                           55      50       45       49
  Other                                 124      55      165      147
    Total International                  35      28       31       28

Consolidated:
  Media                                  28%     21%      27%      19%
  Electronics and other general
   merchandise                           54      51       51       43
  Other                                  45      14       34       23
    Total Consolidated                   37      30       35       26

Consolidated Net Sales Mix:
  Media                                  59%     63%      62%      66%
  Electronics and other general
   merchandise                           39      35       35       31
  Other                                   2       2        3        3

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



                                           December 31,  December 31,
                                               2007          2006
                                           ------------- -------------
ASSETS                                     (unaudited)
Current assets:
  Cash and cash equivalents                     $ 2,539       $ 1,022
  Marketable securities                             573           997
  Inventories                                     1,200           877
  Accounts receivable, net and other                705           399
  Deferred tax assets                               147            78
                                           ------------- -------------
    Total current assets                          5,164         3,373
Fixed assets, net                                   543           457
Deferred tax assets                                 260           199
Goodwill                                            222           195
Other assets                                        296           139
                                           ------------- -------------
    Total assets                                $ 6,485       $ 4,363
                                           ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                $ 2,795       $ 1,816
Accrued expenses and other                          919           716
                                           ------------- -------------
Total current liabilities                         3,714         2,532
Long-term debt                                    1,282         1,247
Other long-term liabilities                         292           153

Commitments and contingencies

Stockholders' equity:
  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 shares -- 431 and 422
    Outstanding shares -- 416 and 414                 4             4
  Treasury stock, at cost                          (500)         (252)
  Additional paid-in capital                      3,063         2,517
  Accumulated other comprehensive income
   (loss)                                             5            (1)
  Accumulated deficit                            (1,375)       (1,837)
                                           ------------- -------------
    Total stockholders' equity                    1,197           431
                                           ------------- -------------
    Total liabilities and stockholders'
     equity                                     $ 6,485       $ 4,363
                                           ============= =============

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

----------------------------------------------------------------------
                                                                Y/Y %
                        Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Change
                        ----------------------------------------------
Cash Flows and Shares

Operating cash flow --
 trailing twelve months
 (TTM)                  $   702 $   726 $   895 $ 1,001 $ 1,405   100%

Purchases of fixed
 assets (incl.
 internal-use software
 & website development)
 -- TTM                 $   216 $   205 $   195 $   201 $   224     4%

Free cash flow
 (operating cash flow
 less purchases of
 fixed assets) -- TTM   $   486 $   521 $   700 $   800 $ 1,181   143%
Free cash flow -- TTM
 Y/Y growth                (8%)      4%     87%    118%    143%    N/A

Common shares and
 stock-based awards
 outstanding                436     430     435     435     435     0%
Common shares
 outstanding                414     409     413     415     416     1%
Stock-based awards
 outstanding                 22      21      22      20      18  (17%)
Stock-based awards
 outstanding -- % of
 common shares
 outstanding               5.3%    5.1%    5.3%    4.9%    4.4%    N/A

Results of Operations

Worldwide (WW) net
 sales                  $ 3,986 $ 3,015 $ 2,886 $ 3,262 $ 5,673    42%
WW net sales -- Y/Y
 growth, excluding F/X      30%     29%     33%     38%     37%    N/A
WW net sales -- TTM     $10,711 $11,447 $12,193 $13,149 $14,835    39%
WW net sales -- TTM Y/Y
 growth, excluding F/X      26%     27%     29%     32%     35%    N/A

Gross profit            $   850 $   719 $   701 $   762 $ 1,170    38%
Gross margin -- % of WW
 net sales                21.3%   23.8%   24.3%   23.4%   20.6%    N/A
Gross profit -- TTM     $ 2,456 $ 2,628 $ 2,820 $ 3,032 $ 3,353    37%
Gross margin -- TTM %
 of WW net sales          22.9%   23.0%   23.1%   23.1%   22.6%    N/A

Operating income        $   197 $   145 $   116 $   123 $   271    38%
Operating margin -- %
 of WW net sales           4.9%    4.8%    4.0%    3.8%    4.8%    N/A
Operating income -- TTM
 (1)                    $   389 $   429 $   498 $   581 $   655    69%
Operating income -- TTM
 Y/Y growth, excluding
 F/X                      (10%)    (4%)     29%     56%     61%    N/A
Operating margin -- TTM
 % of WW net sales         3.6%    3.7%    4.1%    4.4%    4.4%    N/A

Net income              $    98 $   111 $    78 $    80 $   207   112%
Net income per diluted
 share                  $  0.23 $  0.26 $  0.19 $  0.19 $  0.48   109%
Net income -- TTM       $   190 $   249 $   306 $   367 $   476   150%
Net income per diluted
 share -- TTM           $  0.45 $  0.59 $  0.72 $  0.87 $  1.12   150%

Segments

North America Segment:
  Net sales             $ 2,208 $ 1,622 $ 1,601 $ 1,788 $ 3,084    40%
  Net sales -- Y/Y
   growth, excluding
   F/X                      31%     30%     38%     42%     39%    N/A
  Net sales -- TTM      $ 5,869 $ 6,244 $ 6,687 $ 7,219 $ 8,095    38%
  Gross profit          $   532 $   439 $   434 $   460 $   698    31%
  Gross margin -- % of
   North America net
   sales                  24.1%   27.1%   27.1%   25.7%   22.6%    N/A
  Gross profit -- TTM   $ 1,525 $ 1,623 $ 1,747 $ 1,864 $ 2,031    33%
  Gross margin -- TTM %
   of North America net
   sales                  26.0%   26.0%   26.1%   25.8%   25.1%    N/A
  Operating income      $   123 $    86 $    82 $    79 $   153    25%
  Operating margin -- %
   of North America net
   sales                   5.5%    5.3%    5.1%    4.4%    5.0%    N/A
  Operating income --
   TTM (1)              $   230 $   254 $   312 $   369 $   400    74%
  Operating income --
   TTM Y/Y growth,
   excluding F/X          (22%)   (13%)     27%     84%     73%    N/A
  Operating margin --
   TTM % of North
   America net sales       3.9%    4.1%    4.7%    5.1%    4.9%    N/A

International Segment:
  Net sales             $ 1,778 $ 1,393 $ 1,285 $ 1,474 $ 2,589    46%
  Net sales -- Y/Y
   growth, excluding
   F/X                      28%     27%     26%     33%     35%    N/A
  Net sales -- TTM      $ 4,842 $ 5,203 $ 5,506 $ 5,930 $ 6,740    39%
  Net sales -- TTM % of
   WW net sales             45%     45%     45%     45%     45%    N/A
  Gross profit          $   318 $   280 $   267 $   302 $   472    48%
  Gross margin -- % of
   International net
   sales                  17.9%   20.1%   20.8%   20.5%   18.2%    N/A
  Gross profit -- TTM   $   931 $ 1,005 $ 1,072 $ 1,168 $ 1,322    42%
  Gross margin -- TTM %
   of International net
   sales                  19.2%   19.3%   19.5%   19.7%   19.6%    N/A
  Operating income      $   106 $    93 $    83 $    98 $   175    65%
  Operating margin -- %
   of International net
   sales                   6.0%    6.7%    6.4%    6.6%    6.8%    N/A
  Operating income --
   TTM                  $   270 $   306 $   333 $   380 $   449    66%
  Operating income --
   TTM Y/Y growth,
   excluding F/X             0%      9%     19%     37%     53%    N/A
  Operating margin --
   TTM % of
   International net
   sales                   5.6%    5.9%    6.0%    6.4%    6.7%    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 %
                        Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Change
                        ----------------------------------------------
Segments (continued)

Consolidated Segments:
  Operating expenses    $   621 $   540 $   536 $   585 $   842    35%
  Operating expenses --
   TTM                  $ 1,956 $ 2,068 $ 2,175 $ 2,283 $ 2,504    28%
  Operating income      $   229 $   179 $   165 $   177 $   328    44%
  Operating margin -- %
   of consolidated
   sales                   5.7%    6.0%    5.7%    5.4%    5.8%    N/A
  Operating income --
   TTM (1)              $   500 $   560 $   645 $   749 $   849    70%
  Operating income --
   TTM Y/Y growth,
   excluding F/X          (11%)    (2%)     24%     59%     64%    N/A
  Operating margin --
   TTM % of
   consolidated net
   sales                   4.7%    4.9%    5.3%    5.7%    5.7%    N/A

Supplemental North
 America Segment Net
 Sales:
  Media                 $ 1,251 $   990 $   923 $ 1,081 $ 1,637    31%
  Media -- Y/Y growth,
   excluding F/X            21%     21%     26%     37%     30%    N/A
  Media -- TTM          $ 3,582 $ 3,757 $ 3,949 $ 4,245 $ 4,630    29%
  Electronics and other
   general merchandise  $   876 $   564 $   606 $   631 $ 1,336    53%
  Electronics and other
   general merchandise
   -- Y/Y growth,
   excluding F/X            51%     51%     66%     54%     53%    N/A
  Electronics and other
   general merchandise
   -- TTM               $ 2,024 $ 2,214 $ 2,456 $ 2,678 $ 3,139    55%
  Electronics and other
   general merchandise
   -- TTM % of North
   America net sales        34%     35%     37%     37%     39%    N/A
  Other                 $    81 $    68 $    72 $    76 $   111    37%
  Other -- TTM          $   263 $   273 $   282 $   296 $   326    24%

Supplemental
 International Segment
 Net Sales:
  Media                 $ 1,247 $ 1,000 $   910 $ 1,010 $ 1,692    36%
  Media -- Y/Y growth,
   excluding F/X            21%     24%     23%     27%     26%    N/A
  Media -- TTM          $ 3,485 $ 3,722 $ 3,914 $ 4,167 $ 4,612    32%
  Electronics and other
   general merchandise  $   523 $   383 $   364 $   448 $   877    68%
  Electronics and other
   general merchandise
   -- Y/Y growth,
   excluding F/X            50%     34%     34%     45%     55%    N/A
  Electronics and other
   general merchandise
   -- TTM               $ 1,337 $ 1,455 $ 1,560 $ 1,717 $ 2,071    55%
  Electronics and other
   general merchandise
   -- TTM % of
   International net
   sales                    28%     28%     28%     29%     31%    N/A
  Other                 $     8 $    10 $    11 $    16 $    20   143%
  Other -- TTM          $    20 $    26 $    33 $    46 $    57   186%

Supplemental Worldwide
 Net Sales:
  Media                 $ 2,498 $ 1,990 $ 1,833 $ 2,091 $ 3,329    33%
  Media -- Y/Y growth,
   excluding F/X            21%     23%     25%     32%     28%    N/A
  Media -- TTM          $ 7,067 $ 7,479 $ 7,863 $ 8,412 $ 9,242    31%
  Electronics and other
   general merchandise  $ 1,399 $   947 $   970 $ 1,079 $ 2,213    58%
  Electronics and other
   general merchandise
   -- Y/Y growth,
   excluding F/X            51%     44%     53%     51%     54%    N/A
  Electronics and other
   general merchandise
   -- TTM               $ 3,361 $ 3,669 $ 4,015 $ 4,395 $ 5,210    55%
  Electronics and other
   general merchandise
   -- TTM % of WW net
   sales                    31%     32%     33%     33%     35%    N/A
  Other                 $    89 $    78 $    83 $    92 $   131    47%
  Other -- TTM          $   283 $   299 $   315 $   342 $   383    35%

Balance Sheet

Cash and marketable
 securities (2)         $ 2,105 $ 1,565 $ 1,836 $ 2,087 $ 3,309    57%

Inventory, net --
 ending                 $   877 $   754 $   735 $   970 $ 1,200    37%
Inventory -- average
 inventory % of TTM net
 sales                     6.0%    6.0%    5.9%    6.2%    6.1%    N/A
Inventory turnover,
 average -- TTM            12.7    12.9    12.9    12.4    12.7   (1%)

Fixed assets, net       $   457 $   442 $   443 $   491 $   543    19%

Accounts payable days
 -- ending                   53      47      54      62      57     7%

Other

Employees (full-time
 and part-time;
 excludes contractors &
 temporary personnel)    13,900  14,000  14,400  15,800  17,000    22%

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


(1) In Q2 2006, a fee dispute with Toysrus.com reduced our operating
 income by $20 million.
(2) Includes restricted cash, classified within "Other Assets" on our
 consolidated balance sheet, of: $86 million Q4 2006, $145 million Q1
 2007, $171 million Q2 2007, $179 million Q3 2007 and $197 million Q4
 2007.

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

-- Revenue is generally recorded gross for sales of our own inventory and net for sales by other sellers.

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

-- Shipping revenue, which includes amounts earned from our Amazon Prime membership and Fulfillment by Amazon programs, was $265 million, up 38% from $192 million.

Cost of Sales

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

-- Payment processing and related transaction costs, including those associated with seller transactions, are classified in "Fulfillment" on our consolidated statements of operations.

-- Shipping charges to receive products from our suppliers are included in our inventory and recognized as "Cost of sales" upon sale of products to our customers.

-- Outbound shipping costs totaled $449 million, up 42% from $317 million. Net shipping cost was $184 million, or 3.2% of net sales, up 47% from $125 million, or 3.1% of net sales. One way we offer lower prices is through free-shipping offers that result in a net cost to us in delivery of products.

Operating Expenses

-- Depreciation expense for fixed assets, including amortization of internal-use software and website development, was $69 million, up from $59 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, two or three years for our technology infrastructure, five years for furniture and fixtures, and ten years for heavy equipment).

-- General and administrative expenses increased $16 million from the prior year due to increases in payroll and related expenses, professional fees, and the impact of last year's $8 million insurance recovery benefit.

-- Stock-based compensation was $54 million, compared with $30 million. We utilize the accelerated, rather than a straight-line, method for recognizing stock-based compensation. Under this method, over 50% of the compensation cost would be expensed in the first year of a typical four-year vesting term.

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

                                          Three Months Ended December
                                                    31, 2007
                                          ----------------------------
                                             As    Stock-Based
                                          Reported Compensation  Net
                                          ----------------------------
                                                 (in millions)
Operating Expenses:
  Fulfillment                             $    478 $       (11) $467
  Marketing                                    133          (2)  131
  Technology and content                       221         (31)  190
  General and administrative                    64         (10)   54
  Other operating expenses                       3           -     3
                                          -------- ------------ ----
    Total operating expenses              $    899 $       (54) $845
                                          -------- ------------ ----

Year-over-year Percentage Growth:
  Fulfillment                                   42%               41%
  Marketing                                     45                45
  Technology and content                        25                18
  General and administrative                    41                42

Percent of Net Sales:
  Fulfillment                                  8.4%              8.2%
  Marketing                                    2.3               2.3
  Technology and content                       3.9               3.4
  General and administrative                   1.1               1.0

                                          Three Months Ended December
                                                    31, 2006
                                          ----------------------------
                                             As    Stock-Based
                                          Reported Compensation  Net
                                          ----------------------------
                                                (in millions)
Operating Expenses:
  Fulfillment                             $   337  $        (6) $331
  Marketing                                    92           (2)   90
  Technology and content                      177          (15)  162
  General and administrative                   45           (7)   38
  Other operating expenses                      2            -     2
                                          -------- ------------ -----
    Total operating expenses              $   653  $       (30) $623
                                          -------- ------------ -----

Year-over-year Percentage Growth:
  Fulfillment                                  35%                34%
  Marketing                                    35                 35
  Technology and content                       34                 32
  General and administrative                   (7)               (16)

Percent of Net Sales:
  Fulfillment                                 8.5%               8.3%
  Marketing                                   2.3                2.3
  Technology and content                      4.5                4.1
  General and administrative                  1.1                1.0

-- The increase in stock-based compensation is primarily attributable to an increase in total stock compensation value granted to our employees.

Fulfillment

-- Certain of our fulfillment-related costs that are incurred on behalf of other businesses are classified as cost of sales rather than fulfillment.

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

-- Additionally, because payment processing costs associated with seller transactions are based on the gross purchase price of underlying transactions, and payment processing and related transaction costs are higher as a percentage of revenue versus our retail sales, sales by sellers have higher fulfillment costs as a percent of net sales.

-- We expanded our fulfillment capacity in 2007 and 2006 through gains in efficiencies and increases in leased warehouse space. This expansion is designed to accommodate greater selection and in-stock inventory levels and meet anticipated shipment volumes from sales of our own products as well as sales by sellers for whom we provide the fulfillment.

Technology and Content

-- Technology and content expenses consist principally of payroll and related expenses for employees involved in application development, category expansion, editorial content, buying, merchandising selection, and systems support, as well as costs associated with the compute, storage and telecommunications infrastructure.

-- We continue to invest in several areas of technology and content including seller platforms, web services, and digital initiatives, as well as expansion of new and existing product categories. We are also investing in technology infrastructure so that we can continue to enhance the customer experience and improve our process efficiency and support our infrastructure web services. The growth rate of our technology and content spending decreased in 2007 compared with the prior year.

-- We intend to continue investing in areas of technology and content as we continue to add employees to our staff and add technology infrastructure.

-- Certain costs relating to development of internal-use software and website development, including development of software to upgrade and enhance our websites and processes supporting our business, are capitalized and amortized over two years.

                                                       Q4 2007 Q4 2006
                                                       ------- -------
                                                        (in millions)
    Capitalization                                       $ 33    $ 31

    Amortization                                          (31)    (26)
                                                       ------- -------
          Net capitalization                             $  2    $  5
                                                       ======= =======

Stockholders' Equity and Stock-Based Awards

-- As of December 31, 2007, outstanding common shares plus shares underlying outstanding stock-based awards were 435 million, down from 436 million as of December 31, 2006. 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.

-- As of December 31, 2007, stock-based awards outstanding were 18 million, or 4.4% of shares outstanding, down from 22 million, or 5.3% of outstanding shares. Underlying outstanding stock awards consist of 16 million shares of restricted stock units and 2 million stock options with a $17.46 weighted-average exercise price.

-- We granted restricted stock unit awards of 0.3 million shares in fourth quarter and 8 million shares in 2007, compared with 1.3 million shares and 9 million shares.

-- We repurchased 8.2 million shares of our common stock for $252 million in 2006 and 6.3 million shares for $248 million in first quarter 2007. In April 2007, our Board of Directors authorized a 24-month program to repurchase up to an aggregate of $500 million of our common stock.

Other Operating Expense, Net

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

Other Income (Expense), Net

-- Other income (expense), net, consists primarily of gains or losses on marketable securities, foreign-currency transaction gains and losses, and other miscellaneous gains and losses.

-- Foreign-currency transaction gains (losses) primarily relate to the interest payable on our 6.875% PEACS, as well as foreign-currency gains and losses on cross-currency investments. Since interest payments on our 6.875% PEACS are settled in Euros, the balance of interest payable is subject to gains or losses resulting from changes in exchange rates between the U.S. Dollar and Euro between reporting dates and payment.

Remeasurements and Other

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

Income Taxes

-- Our annual effective tax rate was 28%, compared with 50%. The effective tax rate in 2007 was lower than the 35% statutory rate primarily due to earnings of our subsidiaries outside of the U.S. in jurisdictions where our effective tax rate is lower than in the U.S. The effective tax rate in 2006 was higher than the 35% U.S. federal statutory rate resulting from the establishment of our European headquarters in Luxembourg, which we expect will benefit our effective tax rate over time. Associated with the establishment of our European headquarters, we transferred certain of our operating assets in 2006 from the U.S. to international locations, which resulted in taxable income and exposure to additional taxable income assertions by taxing jurisdictions.

-- A majority of our tax provision is non-cash. We have current tax benefits and net operating losses relating to excess stock-based compensation that are being utilized to reduce our taxable income. As such, cash paid for income taxes in 2007 was $24 million compared with $15 million in 2006.

-- We expect our 2008 effective tax rate to be approximately 30% and we estimate cash taxes paid to be less than $75 million. However, our effective tax rate is subject to significant variation due to several factors, including variability in accurately predicting the amount and mix of taxable income by jurisdiction and business acquisitions or investments. We endeavor to optimize our global taxes on a cash basis, rather than on a financial reporting basis.

-- We file U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. We are under examination, or may be subject to examination, by the Internal Revenue Service ("IRS") for calendar years 2004 through 2006. Additionally, any net operating losses that were generated in prior years and utilized in these years may also be subject to examination by the IRS. We are under examination, or may be subject to examination, in the following major jurisdictions for the years specified: Kentucky for 2003 through 2006, France for 2005 through 2006, Germany for 2004 through 2006, Luxembourg for 2003 through 2006 and the United Kingdom for 1999 through 2006. In addition, in February 2007, Japanese tax authorities assessed income tax, including penalties and interest, of approximately $93 million against one of our U.S. subsidiaries for the years 2003 through 2005. We believe that these claims are without merit and are disputing the assessment. Further proceedings on the assessment will be stayed during negotiations between U.S. and Japanese authorities over the double taxation issues the assessment raises, and we have provided bank guarantees to suspend enforcement of the assessment. We also may be subject to income tax examination by Japanese tax authorities for 2006.

Foreign Exchange

-- 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 December 31,
                  ----------------------------------------------------
                             2007                      2006
                  -------------------------- -------------------------
                  At Prior Exchange            At    Exchange
                                              Prior
                    Year     Rate      As     Year     Rate      As
                   Rates   Effect   Reported Rates   Effect   Reported
                     (1)      (2)              (1)      (2)
                  -------- -------- -------- ------- -------- --------
                                     (in millions)
Net sales         $  5,478 $    195 $  5,673 $3,864  $   122  $ 3,986
Gross profit         1,134       36    1,170    829       21      850
Operating
 expenses              877       22      899    640       13      653
Income from
 operations            257       14      271    189        8      197
Net interest
 income (expense)
 and other (3)           8        -        8     (2)      (7)      (9)
Remeasurements
 and other income
 (expense) (4)           -        2        2      1        -        1
Net income             195       12      207     97        1       98
Diluted earnings
 per share        $   0.45 $   0.03 $   0.48 $ 0.23  $     -  $  0.23

(1)  Represents the outcome that would have resulted had exchange
 rates in the reported 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 or 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 and losses on cross-currency
 investments.
(4)  Includes foreign-currency gains and losses on remeasurement of
 6.875% PEACS and intercompany balances.

Cash Flows and Balance Sheet

-- SFAS 123(R) requires tax benefits relating to excess stock-based compensation to be presented as financing cash flows. Excess tax benefits from stock-based compensation were $257 million in 2007, compared with $102 million in 2006.

-- Our cash, cash equivalents and marketable securities of $3.11 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 $1.20 billion, primarily in Euros, British Pounds and Japanese Yen.

-- Other assets include, among other things, $197 million of marketable securities restricted for longer than one year, $28 million of intellectual property rights, $26 million of other intangibles, net, and $17 million of certain equity investments. Marketable securities restricted for longer than one year relate to collateralization of bank guarantees and debt for our international operations.

-- We acquired certain companies during 2007 for an aggregate purchase price of $33 million, including cash payments of $24 million and future cash payments of $9 million. We also made principal payments of $13 million on acquired debt in connection with one of these acquisitions. Additional cash consideration for these acquisitions is contingent upon continued employment. This amount is expensed as compensation over the employment period and not included in the purchase price. Acquired intangibles totaled $18 million and have estimated useful lives of between one and ten years. The excess of purchase price over the fair value of the net assets acquired was $21 million and is classified as "Goodwill" on our consolidated balance sheets. The results of operations of the acquired companies have been included in our consolidated results from each closing date forward. The effect of these acquisitions on consolidated net sales and operating income was not significant.

-- Accrued expenses and other current liabilities include, among other things, liabilities for gift certificates of $240 million, professional fees, marketing activities, workforce costs - including accrued payroll, vacation and other benefits - and unearned revenue of $91 million, which is recorded when payments are received in advance of performing our service obligations and is recognized over the service period. At December 31, 2006, accrued expenses and other current liabilities included liabilities for gift certificates of $183 million and unearned revenue of $78 million.

-- Long-term debt primarily includes the following:

                                             December 31, December 31,
                                                 2007         2006
                                             ------------ ------------
                                                   (in millions)
        4.75% Convertible Subordinated
        Notes due February 2009 (1)               $  899       $  900
        6.875% PEACS due February 2010 (2)           350          317
        Other long-term debt                          50           46
                                             ------------ ------------
                                                   1,299        1,263
        Less current portion of long-term
        debt                                         (17)         (16)
                                             ------------ ------------
                                                  $1,282       $1,247
                                             ============ ============

        (1) The 4.75% Convertible Subordinated Notes are convertible
         into our common stock at the holders' option at a conversion
         price of $78.0275 per share. Total common stock issuable upon
         conversion of our outstanding 4.75% Convertible Subordinated
         Notes is 11.5 million shares, which is excluded from our
         calculation of earnings per share as its effect is currently
         anti-dilutive. We have the right to redeem the 4.75%
         Convertible Subordinated Notes, in whole or in part, by
         paying the principal and a redemption premium, plus any
         accrued and unpaid interest. The redemption premium was 0.95%
         of the principal at December 31, 2007, and decreases to
         0.475% on February 1, 2008, and will decrease to zero at
         maturity in February 2009.
        (2) The 6.875% Premium Adjustable Convertible Securities
         ("6.875% PEACS") are convertible into our common stock at the
         holders' option at a conversion price of EUR 84.883 per share
         ($123.84 per share, based on the exchange rate as of December
         31, 2007). Total common stock issuable upon conversion of our
         outstanding 6.875% PEACS is 2.8 million shares, which is
         excluded from our calculation of earnings per share as its
         effect is currently anti-dilutive. The U.S. Dollar equivalent
         principal, interest and conversion price fluctuate based on
         the Euro/U.S. Dollar exchange ratio. We have the right to
         redeem the 6.875% PEACS, in whole or in part, by paying the
         principal plus any accrued and unpaid interest.

-- Other long-term liabilities include tax contingencies, long-term capital lease obligations, deferred tax liabilities, non-current unearned revenue and other long-term obligations.

-- We capitalized construction in progress of $15 million and recorded a corresponding long-term liability related to our Seattle corporate office space subject to leases scheduled to begin in 2010 and 2011. Where we are involved in the construction of structural improvements prior to the commencement of the lease or take some level of construction risk, we are considered the owner of the assets during the construction period under generally accepted accounting principles. Accordingly, as the landlord incurs the construction project costs, the assets and corresponding financial obligation are recorded in "Fixed assets, net" and "Other long-term liabilities" on our consolidated balance sheet. Once the construction is completed, if the lease meets certain "sale-leaseback" criteria, we will remove the asset and related financial obligation from the balance sheet and treat the building lease as an operating lease. If upon completion of construction, the project does not meet the "sale-leaseback" criteria, the leased property will be treated as a capital lease for financial reporting purposes.

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

-- The North America segment consists of amounts earned from retail sales of products (including from sellers) and subscriptions through North America-focused websites such as www.amazon.com, www.shopbop.com, www.endless.com and www.amazon.ca; from our Amazon Prime membership program; and from non-retail activities such as our North America-focused Amazon Enterprise Solutions program, Amazon Web Services, 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 sellers) and subscriptions through internationally focused websites such as www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, and our Joyo Amazon websites at www.joyo.cn and www.amazon.cn; and from non-retail activities such as internationally-focused Amazon Enterprise Solutions program, Amazon Web Services, 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 retail sales from all sellers in categories such as books, movies, music, digital downloads, software and video games (including game consoles). Electronics and Other General Merchandise consists of amounts earned from retail sales from all sellers of items in categories not included in Media, such as electronics and computers, Amazon Kindle, home and garden, toys, kids and baby, grocery, apparel, shoes and jewelry, health and beauty, sports and outdoors, tools, and auto and industrial. The Other category consists of non-retail activities, such as the Amazon Enterprise Solutions program, Amazon Web Services, 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 excess tax benefits from stock-based compensation. 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 other sellers on our websites. Customer accounts 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, Amazon Web Services 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 means seller accounts, which are established when a seller receives an order from a customer account. Seller accounts exclude Amazon Enterprise Solutions sellers. Sellers are considered active when they have received an order from a customer during the preceding twelve-month period.

-- References to registered developers mean cumulative registered developer accounts, which are established when potential developers enroll with Amazon Web Services and receive a developer access key.

-- References to units mean physical and digital units sold (net of returns and cancellations) by us and 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, www.amazon.ca and the Joyo Amazon websites at www.joyo.cn and www.amazon.cn, as well as Amazon.com-owned items sold through non-Amazon.com domains, such as books, music and movie items ordered from Amazon.com's store at www.target.com. Units sold do not include units associated with certain of our acquisitions, Amazon.com gift certificates or DVD rentals.

SOURCE: Amazon.com, Inc.

Amazon.com, Inc.
Investor Relations
Curt Fischer, 206-266-2171
ir@amazon.com
www.amazon.com/ir
or
Public Relations
Patty Smith, 206-266-7180

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