 Printer-friendly view | | << Back | | 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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