Amazon.com Announces Record Sales Driven by Lower Prices and Expanded SelectionLaunches Jewelry Store, Raises Financial GuidanceSEATTLE--(BUSINESS WIRE)--April 22, 2004--Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its first quarter ended March 31, 2004. toshiba
Operating cash flow was $393 million for the trailing twelve months, compared with $164 million for the trailing twelve months ended March 31, 2003. Free cash flow grew $221 million, or 180%, to $344 million for the trailing twelve months, compared with $123 million for the trailing twelve months ended March 31, 2003.
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Common shares outstanding plus shares underlying stock-based awards totaled 432 million at March 31, 2004, flat compared with a year ago.
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Net sales were $1.53 billion in the first quarter, compared with $1.08 billion in first quarter 2003, an increase of 41%. Net sales, excluding the $87 million benefit from changes in foreign exchange rates, grew 33% compared with first quarter 2003.
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Operating income was $110 million in the first quarter, compared with $39 million in first quarter 2003. Consolidated segment operating income grew 73% to $117 million in the first quarter, compared with $67 million in first quarter 2003. Consolidated segment operating income, excluding the $7 million benefit from changes in foreign exchange rates, grew 64% compared with first quarter 2003. notebooks
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Net income was $111 million in the first quarter, or $0.26 per diluted share, compared with a net loss of $10 million, or $0.03 per share, in first quarter 2003. Pro forma net income in the first quarter grew 141% to $97 million, or $0.23 per diluted share, compared with $40 million, or $0.10 per diluted share, in first quarter 2003. hard drive
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"During our beta test more than 100,000 customers ordered items from our Jewelry store," said Jeff Bezos, founder and CEO of Amazon.com. "While the average margin in jewelry retailing is approximately 45% to 50%, we target substantially lower margins on our jewelry sales, and lower still -- about 13% -- on diamond jewelry. This is in keeping with our strategy of driving growth through low prices." gateway
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Amazon.com continues to offer Free Super Saver Shipping on orders over $25 at www.amazon.com and also has free shipping offers at its U.K., German, French, Japanese and Canadian sites. Amazon.com offers 30% off books over $15 and continues to lower prices every day across its product offerings, ranging from electronics to jewelry to sports and outdoors items to tools. software
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See "Financial Measures" for additional information. electronics
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Quarterly Highlights desktop pc
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-- North America segment sales, representing the Company's U.S. and Canadian sites, grew 20% to $847 million and segment operating income grew 46% to $76 million, compared with first quarter 2003. think pad
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-- International segment sales, representing the Company's U.K., German, French and Japanese sites, grew 80% to $684 million. Net sales, excluding the benefit from changes in foreign exchange rates, grew 58% compared with first quarter 2003. International segment operating income grew 163% to $41 million, compared with $16 million in first quarter 2003. data recovery
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-- For the first time, half of net sales came from products delivered to customers outside the U.S. keyboard
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-- Inventory turns for the trailing twelve months were 19, down from 20 a year ago. desktop
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-- On February 26, 2004, the Company redeemed $150 million of its 4.75% Convertible Subordinated Notes due 2009 for $154 million, a redemption price of 102.375%. refurbished laptops
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-- During the first quarter the Company also launched a Home & Garden store in Germany, and two new stores in the U.K.: Do-It-Yourself & Tools and Garden & Outdoors. lap top
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-- Again this year, the widely followed American Customer Satisfaction Index gave Amazon.com a score of 88 -- the highest customer satisfaction score ever recorded in any service industry, online or off. memory
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Financial Guidance as400
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The following forward-looking statements reflect Amazon.com's expectations as of April 22, 2004. 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 emerging nature and rate of growth of the Internet and online commerce, and the various factors detailed below. hardware
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Second Quarter 2004 Guidance storage
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-- Second quarter net sales are expected to be between $1.34 billion and $1.44 billion, or grow between 22% and 31%, compared with second quarter 2003. computer sales
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-- Consolidated segment operating income is expected to be between $85 million and $105 million, or grow between 27% and 56%, compared with second quarter 2003. printers
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-- Operating income is expected to be between $65 million and $85 million, assuming, among other things, that the Company does not record any revisions to its restructuring-related estimates and that the closing price of Amazon.com common stock on June 30, 2004, is identical to the closing price of $43.28 on March 31, 2004. mainframe
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Full Year 2004 Expectations computer repair
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-- Net sales are expected to be between $6.45 billion and $6.85 billion. network
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-- Consolidated segment operating income is expected to be between $455 million and $535 million. desktops
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-- Operating income is expected to be between $380 million and $460 million, assuming, among other things, that the Company does not record any revisions to its restructuring-related estimates and that the closing price of Amazon.com common stock on December 31, 2004, is identical to the closing price of $43.28 on March 31, 2004. hosting
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A conference call will be Webcast live today at 2 p.m. PT/5 p.m. ET and will be available at least through June 30, 2004, at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results. internet
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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; risks of inventory management; the degree to which the Company enters into, maintains and develops commercial agreements and strategic transactions; seasonality; international growth and expansion; and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risk of future losses, significant amount of indebtedness, potential fluctuations in operating results, management of potential growth, system interruptions, consumer trends, fulfillment center optimization, 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, 2003, and all subsequent filings. digital camera
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Financial Measures xseries
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The following measures are defined by the Securities and Exchange Commission as non-GAAP financial measures. data storage
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Free Cash Flow rational
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Operating cash flow is net cash provided by (used in) operating activities, including cash outflows for interest and excluding proceeds from the exercise of stock-based employee awards. Free cash flow is operating cash flow less cash outflows for purchases of fixed assets, including internal-use software and website development. A tabular reconciliation of differences from the comparable GAAP measure -- operating cash flow -- is included in the attached "Supplemental Financial Information and Business Metrics." battery
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Consolidated Segment Operating Income western digital
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Consolidated segment operating income is the sum of segment operating income of our individual segments and excludes the following line items on the Company's statements of operations: networks
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-- Stock-based compensation, and cheap laptops
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-- Other operating expense (income). brother
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A tabular reconciliation of differences from the comparable GAAP measure -- operating income -- is included in the attached "Pro Forma Statements of Operations." camera
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Pro Forma Net Income sharp
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Pro forma net income excludes the following line items on the Company's statements of operations: windows
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-- Stock-based compensation, linux
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-- Other operating expense (income), and used laptops
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-- Remeasurements and other. scanners
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A tabular reconciliation of differences from the comparable GAAP measure -- net income (loss) -- is included in the attached "Pro Forma Statements of Operations." workstation
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For additional information regarding these non-GAAP financial measures, see Exhibit 99.2 to our Form 8-K filed contemporaneously with the issuance of this release. backup
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About Amazon.com routers
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Amazon.com, 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 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 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, kids and baby, and home and garden. notebook battery
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Amazon.com operates six websites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.fr, www.amazon.co.jp and www.amazon.ca. lotus
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AMAZON.COM, INC. Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended Twelve Months Ended March 31, March 31, --------------------- -------------------- 2003 2004 2003 2004 --------------------- -------------------- CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $738,254 $1,102,273 $296,689 $495,773 OPERATING ACTIVITIES: Net income (loss) (10,121) 111,136 (136,103) 156,539 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation of fixed assets, including website development costs, and other amortization 19,750 17,681 81,084 73,489 Stock-based compensation 27,323 7,107 85,319 67,535 Other operating expense (income) 912 (542) 7,881 1,298 Gain on sales of marketable securities, net (3,980) (1,087) (9,304) (6,705) Remeasurements and other 22,234 (20,360) 126,447 87,503 Non-cash interest expense and other 7,877 1,149 30,402 6,190 Changes in operating assets and liabilities: Inventories 30,625 13,170 (25,352) (94,241) Accounts receivable, net and other current assets 27,233 10,298 (2,395) (16,630) Accounts payable (226,605) (255,994) 58,223 138,343 Accrued expenses and other current liabilities (87,065) (73,769) (16,713) (12,444) Additions to unearned revenue 22,968 23,267 89,656 101,940 Amortization of previously unearned revenue (27,905) (24,067) (126,038) (107,902) Interest payable (55,028) (58,677) 435 (1,799) --------- ----------- --------- ---------- Net cash provided by (used in) operating activities (251,782) (250,688) 163,542 393,116 INVESTING ACTIVITIES: Sales and maturities of marketable securities and other investments 208,955 569,768 625,669 1,173,997 Purchases of marketable securities (233,055) (504,679) (734,638) (807,266) Purchases of fixed assets, including internal-use software and website development (6,394) (9,513) (40,703) (49,082) Proceeds from sale of subsidiary and other - - - 5,072 --------- ----------- --------- ---------- Net cash provided by (used in) investing activities (30,494) 55,576 (149,672) 322,721 FINANCING ACTIVITIES: Proceeds from exercises of stock options and other 38,555 14,814 152,835 139,581 Repayments of long-term debt, capital lease obligations, and other (3,221) (155,647) (13,453) (647,734) --------- ----------- --------- ---------- Net cash provided by (used in) financing activities 35,334 (140,833) 139,382 (508,153) Foreign-currency effect on cash and cash equivalents 4,461 2,259 45,832 65,130 --------- ----------- --------- ---------- Net increase (decrease) in cash and cash equivalents (242,481) (333,686) 199,084 272,814 --------- ----------- --------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD $495,773 $768,587 $495,773 $768,587 ========= =========== ========= ========== SUPPLEMENTAL CASH FLOW INFORMATION: Fixed assets acquired under capital leases and other financing arrangements $661 $492 $2,760 $2,508 Cash paid for interest 84,215 86,023 115,321 121,755 Cash paid for income taxes 302 447 (454) 1,970 Note: The attached "Financial and Operational Highlights" are an thinkpad 570
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AMAZON.COM, INC. Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three Months Ended March 31, ----------------------- 2003 2004 ----------- ---------- Net sales $1,083,559 $1,530,349 Cost of sales 812,977 1,169,515 ---------- ---------- Gross profit 270,582 360,834 Operating expenses: Fulfillment 103,705 127,705 Marketing 28,227 33,636 Technology and content 50,088 55,076 General and administrative 21,102 27,417 Stock-based compensation (1) 27,323 7,107 Other operating expense (income) 912 (542) ---------- ---------- Total operating expenses 231,357 250,399 ---------- ---------- Income from operations 39,225 110,435 Interest income 6,540 5,555 Interest expense (36,511) (27,731) Other income, net 2,859 2,517 Remeasurements and other (22,234) 20,360 ---------- ---------- Total non-operating income (expense), net (49,346) 701 ---------- ---------- Net income (loss) $ (10,121) $ 111,136 ========== ========== Basic earnings (loss) per share $ (0.03) $ 0.28 ========== ========== Diluted earnings (loss) per share $ (0.03) $ 0.26 ========== ========== Weighted average shares used in computation of earnings (loss) per share: Basic 388,541 403,542 ========== ========== Diluted 388,541 424,519 ========== ========== (1) Components of stock-based compensation: Fulfillment $ 6,985 $ 1,006 Marketing 979 608 Technology and content 14,216 3,299 General and administrative 5,143 2,194 ---------- ---------- $ 27,323 $ 7,107 ========== ========== Note: The attached "Financial and Operational Highlights" are an laptops
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AMAZON.COM, INC. Pro Forma Statements of Operations (in thousands, except per share data) (unaudited) Three Months Ended March 31, 2003 ----------------------------------- As Reported Adjustments Pro Forma (1) ----------- ---------- ---------- Net sales $1,083,559 $ - $1,083,559 Cost of sales 812,977 - 812,977 ---------- -------- ---------- Gross profit 270,582 - 270,582 Operating expenses: Fulfillment 103,705 - 103,705 Marketing 28,227 - 28,227 Technology and content 50,088 - 50,088 General and administrative 21,102 - 21,102 Stock-based compensation 27,323 (27,323) - Other operating expense (income) 912 (912) - ---------- -------- ---------- Total operating expenses 231,357 (28,235) 203,122 ---------- -------- ---------- Income from operations 39,225 28,235 67,460 (2) Interest income 6,540 - 6,540 Interest expense (36,511) - (36,511) Other income, net 2,859 - 2,859 Remeasurements and other (22,234) 22,234 - ---------- -------- ---------- Total non-operating income (expense), net (49,346) 22,234 (27,112) ---------- -------- ---------- Net income (loss) $ (10,121) $ 50,469 $ 40,348 ========== ======== ========== Basic earnings (loss) per share $ (0.03) $ 0.13 $ 0.10 ========== ======== ========== Diluted earnings (loss) per share $ (0.03) $ 0.13 $ 0.10 ========== ======== ========== Weighted average shares used in computation of earnings (loss) per share: Basic 388,541 388,541 ========== =========== Diluted 388,541 411,091 ========== =========== Net cash used in operating activities $ (251,782) Purchases of fixed assets, including internal-use software and website development (6,394) ----------- Free cash flow $ (258,176) =========== Net cash provided by (used in) investing activities $ (30,494) ========== Net cash provided by (used in) financing activities $ 35,334 ========== Three Months Ended March 31, 2004 ---------------------------------- As Reported Adjustments Pro Forma (1) ----------- ---------- ---------- Net sales $1,530,349 $ - $1,530,349 Cost of sales 1,169,515 - 1,169,515 ---------- -------- ---------- Gross profit 360,834 - 360,834 Operating expenses: Fulfillment 127,705 - 127,705 Marketing 33,636 - 33,636 Technology and content 55,076 - 55,076 General and administrative 27,417 - 27,417 Stock-based compensation 7,107 (7,107) - Other operating expense (income) (542) 542 - ---------- -------- ---------- Total operating expenses 250,399 (6,565) 243,834 ---------- -------- ---------- Income from operations 110,435 6,565 117,000 (2) Interest income 5,555 - 5,555 Interest expense (27,731) - (27,731) Other income, net 2,517 - 2,517 Remeasurements and other 20,360 (20,360) - ---------- -------- ---------- Total non-operating income (expense), net 701 (20,360) (19,659) ---------- -------- ---------- Net income (loss) $ 111,136 $(13,795) $ 97,341 ========== ======== ========== Basic earnings (loss) per share $ 0.28 $ (0.04) $ 0.24 ========== ======== ========== Diluted earnings (loss) per share $ 0.26 $ (0.03) $ 0.23 ========== ======== ========== Weighted average shares used in computation of earnings (loss) per share: Basic 403,542 403,542 ========== ========== Diluted 424,519 424,519 ========== ========== Net cash used in operating activities $ (250,688) Purchases of fixed assets, including internal-use software and website development (9,513) ---------- Free cash flow $ (260,201) ========== Net cash provided by (used in) investing activities $ 55,576 ========== Net cash provided by (used in) financing activities $ (140,833) ========== (1) In accordance with accounting principles generally accepted in the laptop computers
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AMAZON.COM, INC. Segment Information (in thousands) (unaudited) Three Months Ended March 31, ---------------------- 2003 2004 ---------- ---------- North America Net sales $ 704,712 $ 846,841 Cost of sales 517,880 620,966 ---------- ---------- Gross profit 186,832 225,875 Direct segment operating expenses 135,171 150,366 ---------- ---------- Segment operating income 51,661 75,509 International Net sales 378,847 683,508 Cost of sales 295,097 548,549 ---------- ---------- Gross profit 83,750 134,959 Direct segment operating expenses 67,951 93,468 ---------- ---------- Segment operating income 15,799 41,491 Consolidated Net sales 1,083,559 1,530,349 Cost of sales 812,977 1,169,515 ---------- ---------- Gross profit 270,582 360,834 Direct segment operating expenses 203,122 243,834 ---------- ---------- Segment operating income 67,460 117,000 Stock-based compensation 27,323 7,107 Other operating expense (income) 912 (542) ---------- ---------- Income from operations 39,225 110,435 Total non-operating income (expense), net (49,346) 701 ---------- ---------- Net income (loss) $ (10,121) $ 111,136 ========== ========== Segment Highlights: Y / Y net sales growth: North America 13% 20% International 68 80 Consolidated 28 41 Y / Y gross profit growth: North America 8 21 International 69 61 Consolidated 21 33 Y/Y segment operating income growth: North America 46 46 International N/A 163 Consolidated 174 73 Net sales mix: North America 65 55 International 35 45 AMAZON.COM, INC. Supplemental Net Sales Information (in thousands) (unaudited) Three Months Ended March 31, ----------------------- 2003 2004 ----------- ---------- North America Media $ 517,259 $ 598,682 Electronics and other general merchandise 168,145 224,433 Other 19,308 23,726 ---------- ---------- 704,712 846,841 International Media 355,712 576,060 Electronics and other general merchandise 22,863 107,001 Other 272 447 ---------- ---------- 378,847 683,508 Consolidated Media 872,971 1,174,742 Electronics and other general merchandise 191,008 331,434 Other 19,580 24,173 ---------- ---------- $1,083,559 $1,530,349 ========== ========== Y / Y Net Sales Growth: North America: Media 10% 16% Electronics and other general merchandise 32 33 Other (13) 23 International: Media 66 62 Electronics and other general merchandise 101 368 Other (45) 64 Consolidated: Media 27 35 Electronics and other general merchandise 37 74 Other (14) 23 Consolidated Net Sales Mix: Media 80 77 Electronics and other general merchandise 18 22 Other 2 1 AMAZON.COM, INC. Consolidated Balance Sheets (in thousands, except per share data) (unaudited) March 31, December 31, March 31, 2003 2003 2004 ----------- ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 495,773 $ 1,102,273 $ 768,587 Marketable securities 586,779 292,550 229,554 ----------- ----------- ----------- Cash, cash equivalents, and marketable securities 1,082,552 1,394,823 998,141 Inventories 173,030 293,917 281,550 Accounts receivable, net and other current assets 88,914 132,069 125,883 ----------- ----------- ----------- Total current assets 1,344,496 1,820,809 1,405,574 Fixed assets, net 228,279 224,285 217,476 Goodwill 70,811 69,121 69,121 Other assets 62,347 47,818 46,390 ----------- ----------- ----------- Total assets $ 1,705,933 $ 2,162,033 $ 1,738,561 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 393,696 $ 819,811 $ 567,563 Accrued expenses and other current liabilities 234,194 317,730 244,398 Unearned revenue 42,979 37,844 37,053 Interest payable 16,632 73,100 14,424 Current portion of long-term debt and other 11,078 4,216 2,473 ----------- ----------- ----------- Total current liabilities 698,579 1,252,701 865,911 Long-term debt and other 2,296,418 1,945,439 1,777,700 Commitments and contingencies Stockholders' deficit: Preferred stock, $0.01 par value: Authorized shares -- 500,000 Issued and outstanding shares -- none - - - Common stock, $0.01 par value: Authorized shares -- 5,000,000 Issued and outstanding shares -- 391,609, 403,354, and 404,893 3,916 4,034 4,049 Additional paid-in capital 1,714,616 1,899,398 1,923,103 Deferred stock-based compensation (5,420) (2,850) (2,273) Accumulated other comprehensive income 17,655 37,739 33,363 Accumulated deficit (3,019,831) (2,974,428) (2,863,292) ----------- ----------- ----------- Total stockholders' deficit (1,289,064) (1,036,107) (905,050) ----------- ----------- ----------- Total liabilities and stockholders' deficit $ 1,705,933 $ 2,162,033 $ 1,738,561 =========== =========== =========== AMAZON.COM, INC. Supplemental Financial Information and Business Metrics (in millions, except per share data) (unaudited) ---------------------------------------------------------------------- Y / Y % Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Change ------- ------- ------- ------- ------- ------ Cash Flows and Shares Operating cash flow -- Trailing Twelve Months (TTM) $ 164 $ 285 $ 284 $ 392 $ 393 140% Purchases of fixed assets (including internal-use software and website development) -- TTM $ 41 $ 40 $ 44 $ 46 $ 49 21% Free cash flow (operating cash flow less purchases of fixed assets) -- TTM $ 123 $ 245 $ 239 $ 346 $ 344 180% Common shares and stock-based awards outstanding 432 433 433 433 432 0% Common shares outstanding 392 397 400 403 405 3% Stock-based awards outstanding 41 36 33 29 27 (32%) Stock-based awards outstanding -- % of common shares outstanding 10% 9% 8% 7% 7% N/A Results of Operations Worldwide (WW) net sales $1,084 $1,100 $1,134 $1,946 $1,530 41% WW net sales -- Y / Y growth, excluding the effect of foreign exchange rates 22% 30% 30% 29% 33% N/A WW net sales -- TTM $4,169 $4,463 $4,747 $5,264 $5,710 37% WW net sales shipped outside the U.S. -- TTM % of net sales 37% 39% 40% 43% 46% N/A Gross profit $ 271 $ 274 $ 286 $ 427 $ 361 33% Gross margin -- % of WW net sales 25.0% 24.9% 25.2% 21.9% 23.6% N/A Gross profit -- TTM $1,040 $1,096 $1,165 $1,257 $1,347 30% Gross margin -- TTM % of WW net sales 24.9% 24.6% 24.6% 23.9% 23.6% N/A Fulfillment costs -- % of WW net sales 9.6% 9.8% 9.4% 8.2% 8.3% N/A Fulfillment costs -- TTM % of WW net sales 9.7% 9.6% 9.4% 9.1% 8.8% N/A Consolidated direct segment operating expenses $ 203 $ 207 $ 212 $ 274 $ 244 20% Consolidated direct segment operating expenses -- TTM $ 817 $ 832 $ 855 $ 896 $ 937 15% Consolidated segment operating income $ 67 $ 67 $ 74 $ 153 $ 117 73% Consolidated segment operating margin -- % of WW net sales 6.2% 6.1% 6.5% 7.9% 7.6% N/A Consolidated segment operating income -- TTM $ 223 $ 264 $ 310 $ 361 $ 411 84% Consolidated segment operating margin -- TTM % of WW net sales 5.3% 5.9% 6.5% 6.9% 7.2% N/A GAAP operating income $ 39 $ 42 $ 52 $ 138 $ 110 182% GAAP operating margin -- % of WW net sales 3.6% 3.8% 4.6% 7.1% 7.2% N/A GAAP operating income -- TTM $ 102 $ 142 $ 204 $ 271 $ 342 237% GAAP operating margin -- TTM % of WW net sales 2.4% 3.2% 4.3% 5.1% 6.0% N/A Pro forma net income $ 40 $ 42 $ 48 $ 125 $ 97 141% Diluted pro forma net income per share $ 0.10 $ 0.10 $ 0.11 $ 0.29 $ 0.23 130% Pro forma net income -- TTM $ 112 $ 158 $ 206 $ 256 $ 313 180% GAAP net income (loss) $ (10) $ (43) $ 16 $ 73 $ 111 N/A GAAP net income (loss) per share $(0.03) $(0.11) $ 0.04 $ 0.17 $ 0.26 N/A GAAP net income (loss) -- TTM $ (136) $ (86) $ (35) $ 35 $ 157 N/A North America segment: Net sales $ 705 $ 703 $ 709 $1,142 $ 847 20% Net sales -- TTM $2,845 $2,961 $3,083 $3,258 $3,401 20% Gross profit $ 187 $ 190 $ 201 $ 289 $ 226 21% Gross margin -- % of North American net sales 27% 27% 28% 25% 27% N/A Gross profit -- TTM $ 754 $ 774 $ 821 $ 867 $ 906 20% Gross margin -- TTM % of North America net sales 27% 26% 27% 27% 27% N/A Operating income $ 52 $ 55 $ 63 $ 114 $ 76 46% Operating margin -- % of North America net sales 7% 8% 9% 10% 9% N/A Operating income -- TTM $ 196 $ 215 $ 251 $ 283 $ 307 57% Operating margin -- TTM % of North America net sales 7% 7% 8% 9% 9% 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 % Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Change ------- ------- ------- ------- ------- ------ International segment: Net sales $ 379 $ 397 $ 425 $ 804 $ 684 80% Net sales -- Y / Y growth, excluding the effect of foreign exchange rates 45% 57% 50% 54% 58% N/A Net sales -- TTM $1,324 $1,502 $1,663 $2,005 $2,310 74% Gross profit $ 84 $ 84 $ 85 $ 138 $ 135 61% Gross margin -- % of International net sales 22% 21% 20% 17% 20% N/A Gross profit -- TTM $ 286 $ 322 $ 345 $ 391 $ 442 55% Gross margin -- TTM % of International net sales 22% 21% 21% 19% 19% N/A Operating income $ 16 $ 13 $ 11 $ 39 $ 41 163% Operating margin -- % of International net sales 4% 3% 3% 5% 6% N/A Operating income -- TTM $ 27 $ 49 $ 59 $ 78 $ 104 285% Operating margin -- TTM % of International net sales 2% 3% 4% 4% 5% N/A Supplemental Worldwide Net Sales: Media $ 873 $ 865 $ 877 $1,434 $1,175 35% Media -- TTM $3,286 $3,503 $3,695 $4,049 $4,351 32% Electronics and other general merchandise $ 191 $ 209 $ 230 $ 473 $ 331 74% Electronics and other general merchandise -- TTM $ 799 $ 868 $ 951 $1,103 $1,244 56% Other $ 20 $ 26 $ 27 $ 39 $ 24 23% Other -- TTM $ 84 $ 93 $ 101 $ 112 $ 116 38% Supplemental North America Segment Net Sales: Media $ 517 $ 499 $ 502 $ 751 $ 599 16% Media -- TTM $2,041 $2,101 $2,167 $2,269 $2,351 15%` Electronics and other general merchandise $ 168 $ 177 $ 180 $ 353 $ 224 33% Electronics and other general merchandise -- TTM $ 722 $ 769 $ 816 $ 879 $ 935 30% Other $ 19 $ 26 $ 27 $ 38 $ 24 23% Other -- TTM $ 82 $ 91 $ 100 $ 110 $ 115 39% Supplemental International Segment Net Sales: Media $ 356 $ 366 $ 375 $ 683 $ 576 62% Media -- TTM $1,245 $1,402 $1,527 $1,779 $2,000 61% Electronics and other general merchandise $ 23 $ 31 $ 50 $ 121 $ 107 368% Electronics and other general merchandise -- TTM $ 77 $ 99 $ 135 $ 225 $ 309 299% Other $ 0 $ 0 $ 0 $ 0 $ 0 64% Other -- TTM $ 2 $ 1 $ 1 $ 1 $ 1 (20%) Balance Sheet Cash and marketable securities $1,083 $ 989 $1,065 $1,395 $ 998 (8%) Inventory, net -- ending $ 173 $ 178 $ 242 $ 294 $ 282 63% Inventory -- average inventory % of TTM net sales 4% 4% 4% 4% 4% N/A Inventory turnover, average -- TTM 19.7 20.2 18.9 18.4 18.7 (5%) Fixed assets, net $ 228 $ 222 $ 221 $ 224 $ 217 (5%) Accounts payable days -- ending 44 49 54 50 44 1% Other Employees (full-time and part-time) 7,700 7,600 7,900 7,800 8,100 5% ---------------------------------------------------------------------- AMAZON.COM, INC. Financial and Operational Highlights (unaudited) laptop parts
software
Quarterly Results of Operations (comparisons are with the equivalent period of the prior year, unless otherwise stated) hard drives
electronics
Net Sales canon
desktop pc
-- As our financial reporting currency is the U.S. Dollar, our total revenue, profit, and operating and free cash flow has recently benefited significantly from weakness in the U.S. Dollar in comparison to the currencies of our international websites. While we believe that our increasing diversification beyond the U.S. economy through our international businesses benefits our shareholders, it is important to evaluate our growth rates after the effect of currency changes. desktop computers
think pad
-- Shipping revenue, which excludes amounts earned from third-party sellers, was approximately $94 million, up 20% from $78 million. repair
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Gross Profit cisco
keyboard
-- Gross profit benefited by approximately $17 million from changes in foreign exchange rates compared with first quarter 2003. monitor
desktop
-- Net shipping cost was approximately $43 million, up from a cost of $27 million, as a result of our free shipping offers. We view our shipping offers as an effective marketing tool and intend to continue offering them. infosys
refurbished laptops
Fulfillment wipro
lap top
-- Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service centers, credit card fees and bad debt costs, including costs associated with our guarantee for certain third-party seller transactions. Fulfillment costs also include amounts paid to third parties, who assist us in fulfillment and customer service operations. refurbished
memory
-- Costs incurred in operating and staffing our fulfillment and customer service centers on behalf of other businesses, such as Toysrus.com and Target, are classified as cost of sales rather than fulfillment. intel
as400
-- Credit card fees associated with third-party seller transactions are based on the gross purchase price of underlying transactions, and therefore represent a larger percentage of our recorded commission revenue than credit card fees on our retail sales. Accordingly, this negatively affects fulfillment as a percentage of net sales. averatec
hardware
Stock-Based Compensation dual xeon
storage
-- We granted less than a half million stock awards during the quarter at a weighted average fair value of $47. seagate
computer sales
-- Stock-based awards generally vest over service periods of between three to six years. computer hardware
printers
-- At March 31, 2004, there were 27 million stock awards outstanding, which are excluded from common stock outstanding, consisting of 23 million stock options ($13 average exercise price) and 4 million restricted stock units. Additionally, 1 million shares of restricted stock are included in common stock outstanding. technology
mainframe
-- Since October 2002, we have awarded restricted stock units as our primary form of stock-based compensation. Restricted stock units, under fixed accounting, are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of our common stock. Such value is recognized as an expense over the corresponding service period. To the extent that restricted stock units are forfeited prior to vesting, the corresponding previously recognized expense is reversed as an offset to stock-based compensation. samsung
computer repair
-- At March 31, 2004, 1 million stock awards were subject to variable accounting. Stock option grants after December 31, 2002, are subject to variable accounting treatment. Variable accounting treatment results in expense or contra-expense recognition using the cumulative expense method, calculated based on the quoted price of our common stock and vesting schedules of underlying awards. For example, since the closing price of our common stock on March 31, 2004, was less than the closing price on December 31, 2003, we recorded a contra-expense associated with variable accounting treatment for the first quarter of 2004. used computers
network
-- Stock-based compensation consisted of $3 million contra-expense for stock awards under variable accounting and $10 million for stock awards under fixed accounting. "Stock-based compensation" includes matching stock contributions under our 401(k) program but excludes payroll tax expense resulting from exercises of stock-based awards. digital cameras
desktops
Other Operating Expense (Income) cognos
hosting
-- Included in "Other operating expense (income)" are restructuring-related expenses and amortization of other intangibles. netfinity
internet
-- Our first quarter 2001 operational restructuring plan is complete; however, we may periodically adjust our restructuring-related estimates in the future, such as lease obligations, if necessary. cheap computer
digital camera
-- During the first quarter we determined that some of the office space previously vacated as part of our 2001 restructuring, which we had been unable to sublease due to poor real estate market conditions, was necessary for our future needs. Future lease payments for this office space will be expensed over the lease period and classified to the corresponding operating expense categories on the consolidated statements of operations. printer
xseries
-- Cash payments resulting from our operational restructuring were $2 million, compared with $16 million in first quarter 2003. maxtor
data storage
-- We estimate, based on currently available information, the remaining net cash outflows associated with restructuring-related leases and other commitments will be $4 million in 2004, and $23 million thereafter. Amounts due within 12 months are included within "Accrued expenses and other current liabilities" and the remaining amounts within "Long-term debt and other" on our balance sheet. These amounts are net of anticipated sublease income of approximately $33 million (we have signed sublease agreements for $14 million). hitachi
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Remeasurements and Other websphere
battery
-- "Remeasurements and other" primarily consisted of foreign-currency gains on remeasurement of 6.875% PEACS from Euros to U.S. Dollars of $20 million, compared with a loss of $25 million in first quarter 2003. it support
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-- Other includes a $3 million loss from remeasurement of intercompany balances, corresponding with a decision reached during the fourth quarter of 2003 that intercompany balances denominated in foreign currencies would be repaid amongst subsidiaries. Also, during the first quarter, approximately $135 million of these balances were repaid among the entities. music
networks
-- In connection with our February 2004 $150 million redemption of our 4.75% Convertible Subordinated Notes due 2009, we recorded a charge of $6 million, consisting of a $4 million (2.375%) premium and approximately $2 million of remaining deferred issuance charges. toner
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-- Other also includes a gain of $6 million relating to the settlement of a contractual dispute. wholesale
brother
-- In April 2004, we entered into an agreement to sell one of our equity investments. At closing, which is anticipated in the second quarter of 2004, we expect to record a gain of approximately $14 million classified in "Remeasurements and other." netvista
camera
Income Taxes networking
sharp
-- At March 31, 2004, we had net operating loss carryforwards (NOLs) of approximately $2.8 billion primarily related to U.S. federal taxes. Utilization of NOLs, which begin to expire at various times starting in 2010, may be subject to certain limitations. Approximately $1.7 billion of our NOLs relate to tax deductible stock-based compensation in excess of amounts recognized for financial reporting purposes -- to the extent that any of this amount is realized for tax purposes but not financial reporting purposes, the resulting tax benefits will be credited to stockholders' equity, rather than results of operations. cheap
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Net Income (Loss) monitors
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-- We do not believe that our reported net income for the quarter ended March 31, 2004, should be viewed, on its own, as a material positive event or should be considered predictive of future results. For example, we are unable to forecast the effect on our future reported results of certain items, including the effect that fluctuations in foreign currency rates will have on the remeasurement of our 6.875% PEACS and intercompany balances. Additionally, we are unable to forecast the effect on stock-based compensation of changes in the quoted price of our common stock due to variable accounting treatment. The remeasurement of our 6.875% PEACS represented significant gains during the quarter and may result in significant charges or gains in future periods. computer support
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Cash Flows and Balance Sheet cameras
scanners
-- Operating cash flows and free cash flows can be volatile and are sensitive to many factors, including changes in working capital. Working capital at any specific point in time is subject to many variables, including world events, seasonality, the timing of expense payments, discounts offered by vendors, vendor payment terms and fluctuations in foreign exchange rates. panasonic
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-- Our cash, cash equivalents and marketable securities of $998 million, at fair value, primarily consist of cash, commercial paper and short-term securities, U.S. Treasury notes and bonds, asset-backed and agency securities, and certificates of deposit. Included is amounts held in foreign currencies of $578 million, primarily in Euros and British Pounds. iseries
backup
-- We have pledged approximately $86 million of our marketable securities as collateral for property leases and other contractual obligations, compared with $105 million as of March 31, 2003. information technology
routers
-- "Other assets" includes, among other things, deferred issuance costs on long-term debt, intangibles and other equity investments. 180gxp
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-- "Unearned revenue" is recorded when payments are received from third parties in advance of our providing the associated service. security
lotus
-- "Accrued expenses and other current liabilities" includes, among other things, liabilities for gift certificates, marketing activities, and workforce costs, including accrued payroll, vacation, and other benefits. virus
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-- "Long-term debt and other" primarily includes the following (in millions): thinkpad 600
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Principal Interest Principal at Maturity Rate Due Date ---------------------------------------- Convertible Subordinated Notes $900 (1) 4.750% February 2009 PEACS 849 (2) 6.875% February 2010 ------------- $1,749 (3) ============= (1) Convertible at the holders' option into our common stock at thinkpad 390x
$78.0275 per share. We have the right to redeem the Convertible thinkpad a31
Subordinated Notes, in whole or in part, at a redemption price of thinkpad x20
102.375% of the principal, which decreases every February by 47.5 bios update
basis points until maturity, plus any accrued and unpaid interest. laptops
In February 2004 we redeemed $150 million of our 4.75% Convertible toshiba
Subordinated Notes. laptop battery
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(2) EUR 690 million principal amount, convertible at the holders' microsoft
option into our common stock at EUR 84.883 ($104 at March 31, laptop computers
2004) per share. We have the right to redeem the PEACS, in whole laptop computer
or in part, by paying the EUR 690 million, plus any accrued and desktop computer
unpaid interest. We do not hedge any portion of the PEACS. The notebooks
U.S. Dollar equivalent principal, interest and conversion price lenovo
fluctuates based on the Euro/U.S. Dollar exchange ratio. hard drive
travelstar
(3) The "if converted" number of shares associated with each of our gateway
convertible debt instruments (approximately 20 million total laptop parts
shares) are excluded from diluted shares as their effect is software
anti-dilutive. hard drives
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canon
Certain Definitions and Other desktop pc
desktop computers
-- We present segment information along two lines: North America and International. We measure operating results of our segments using an internal performance measure of direct segment operating expenses that excludes stock-based compensation and other operating expenses (income), each of which is not allocated to segment results. Other centrally incurred operating costs are fully allocated to segment results. Our operating results, particularly for the International segment, are affected by movements in foreign exchange rates. think pad
repair
-- The North America segment consists of amounts earned from retail sales of consumer products (including from third-party sellers) through www.amazon.com and www.amazon.ca; from North America focused Syndicated Stores, such as www.cdnow.com; from our mail-order tool catalog; and from non-retail activities such as North America focused Merchant.com, marketing and promotional agreements. data recovery
cisco
-- The International segment consists of amounts earned from retail sales of consumer products (including from third-party sellers) through www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp; from internationally focused Syndicated Stores; and from non-retail activities such as internationally focused marketing and promotional agreements. This segment includes export sales from www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp (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. keyboard
monitor
-- We provide supplemental revenue 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 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, kids and baby, home and garden, apparel, sports and outdoors, gourmet food, jewelry, and health and personal care. The Other category consists of non-retail activities, such as the Merchant.com program and miscellaneous marketing and promotional activities. desktop
infosys
-- Operating cycle is number of days of sales in inventory plus number of days of sales in accounts receivable minus accounts payable days. Inventory turnover is the quotient of annualized cost of sales to average inventory. Accounts payable days is calculated as the quotient of accounts payable to cost of sales, multiplied by the number of days in the period. refurbished laptops
wipro
-- 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 Merchant.com Program customers, Amazon.com Payments customers, our catalog customers and the customers of select companies with whom we have a technology alliance or marketing and promotional relationships. A customer is considered active upon placing an order. lap top
refurbished
-- References to units mean units sold (net of returns and cancellations) by us and third-party sellers at Amazon.com domains worldwide -- such as www.amazon.com, www.amazon.ca, www.amazon.fr, www.amazon.co.uk, www.amazon.de and www.amazon.co.jp -- and at Syndicated Stores domains, as well as Amazon.com-owned items sold at non-Amazon.com domains, such as books, music and DVD/video items ordered from Amazon.com's store at www.target.com. Units do not include Amazon.com gift certificates. memory
intel
Contacts as400
averatec
hardware
Amazon.com dual xeon
Tim Stone, 206-266-2171 (Investor Relations) storage
ir@amazon.com seagate
www.amazon.com/ir computer sales
or
Patty Smith, 206/266-7180 (Public Relations)
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