Amazon.com Announces First Quarter Financial Results
For the First Time Sales of Electronics & Other General Merchandise Surpass $1.8 Billion and Comprise 25% of Total Sales over the Past Year
SEATTLE--(BUSINESS WIRE)--April 26, 2005--Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its first quarter ended March 31, 2005. Operating cash flow grew 33% to $523 million for the trailing twelve months, compared with $393 million for the trailing twelve months ended March 31, 2004. Free cash flow grew 21% to $417 million for the trailing twelve months, compared with $344 million for the trailing twelve months ended March 31, 2004.
Common shares outstanding plus shares underlying stock-based awards outstanding totaled 434 million at March 31, 2005, compared with 432 million a year ago.
Net sales increased 24% to $1.90 billion in the first quarter, compared with $1.53 billion in first quarter 2004. Excluding the $30 million benefit from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 22% compared with first quarter 2004.
Operating income declined 2% to $108 million in the first quarter, compared with $110 million in first quarter 2004. As previously announced, the Company chose to adopt SFAS 123(R), the new accounting rules on stock-based compensation, earlier than required, effective January 1, 2005. Excluding the $14 million impact due to this adoption, operating income would have grown 10% to $122 million. Operating income benefited by $3 million from year-over-year changes in foreign exchange rates throughout the quarter.
Net income was $78 million in the first quarter, or $0.18 per diluted share, compared with net income of $111 million, or $0.26 per diluted share, in first quarter 2004. Net income for the first quarter includes $56 million in income tax expense, compared with a $2 million income tax benefit in first quarter 2004. First quarter also includes a $26 million gain for the cumulative effect of a change in accounting principle related to the Company's early adoption of SFAS 123(R).
"We're seeing especially heavy use of Amazon Prime in Electronics, Tools, Kitchen, and Health & Personal Care," said Jeff Bezos, founder and CEO of Amazon.com. "For $79 a year, Amazon Prime members get 'all-you-can-eat' free express shipping. Getting your items right away changes the way you use and think about Amazon.com."
Amazon Prime, Amazon.com's first-ever membership program, was introduced February 2005. For a flat membership fee of $79 per year, Amazon Prime members get unlimited, express two-day shipping for free, with no minimum purchase requirement on over a million eligible items sold by Amazon.com. Members can order as late as 6:30 p.m. ET and still get their order the next day for only $3.99 per item, and can share the benefits of Amazon Prime with up to four family members living in their household.
Highlights
* North America segment sales, representing the Company's U.S. and Canadian sites, were $1.03 billion, up 21% from first quarter 2004. Segment operating income decreased 13% to $66 million in first quarter 2005 from $76 million in first quarter 2004.
* North America Media growth was 17% in the first quarter, compared with 16% in first quarter 2004.
* International segment sales, representing the Company's U.K., German, French, Japanese and Chinese sites, were $875 million, up 28% compared with first quarter 2004. Excluding the benefit from year-over-year changes in foreign exchange rates throughout the quarter, net sales growth was 24%. Segment operating income increased 51% to $62 million from $41 million in first quarter 2004.
* On a trailing twelve month basis, International segment sales accounted for 45% of worldwide net sales, up from 40% for the trailing twelve months ended March 31, 2004.
* Worldwide Electronics & other general merchandise sales grew 45% to $481 million, and represented 25% of net sales, compared with 22% for first quarter 2004.
* The Company has received 700,000 pre-orders for Harry Potter and the Half Blood Prince, the sixth book in J.K. Rowling's epic Harry Potter series. Amazon.com is offering its U.S. customers guaranteed delivery of the book on the release date, Saturday, July 16, 2005, for the same price as standard shipping, with free delivery for Amazon Prime members.
* Amazon Services Europe and leading U.K. retailer Marks & Spencer announced an agreement for Amazon to host and provide the technology behind the Marks & Spencer branded website and its in-store and telephone ordering and customer services systems.
* A9.com, a subsidiary of Amazon.com, launched A9.com OpenSearch, a collection of technologies built on top of popular open standards to allow content providers to publish their search results in a format suitable for syndication. OpenSearch enables content providers' results to be displayed anywhere, anytime. Any site that has content -- and a search box--can choose to return results on A9.com using OpenSearch RSS. Customers can now view search results from The New York Times, Flickr, Wikipedia and over 150 other content providers at www.a9.com.
Financial Guidance
The following forward-looking statements reflect Amazon.com's expectations as of April 26, 2005. Results may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce, and the various factors detailed below.
* Second Quarter 2005 Guidance
* Net sales are expected to be between $1.675 billion and $1.825 billion, or grow between 21% and 32%, compared with second quarter 2004.
* Operating income is expected to be between $50 million and $80 million, or decline between (42%) and (7%), compared with second quarter 2004. This guidance includes stock-based compensation of $35 million, including the impact from the Company's January 1, 2005 early adoption of SFAS 123(R), and assumes, among other things, that no additional intangible assets are recorded and that there are no further revisions to restructuring-related estimates.
Full Year 2005 Expectations
* Net sales are expected to be between $8.175 billion and $8.675 billion, or grow between 18% and 25%, compared with 2004.
* Operating income is expected to be between $395 million and $510 million, or between (10%) and 16% growth, compared with 2004. This expectation includes stock-based compensation of $115 million, including the impact from the Company's January 1, 2005 early adoption of SFAS 123(R), and assumes, among other things, that no additional intangible assets are recorded and that there are no further revisions to restructuring-related estimates.
A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results.
These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales derived from products as compared with services, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains and develops commercial agreements, acquisitions and strategic transactions, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risk of future losses, significant indebtedness, system interruptions, consumer trends, limited operating history, government regulation and taxation, fraud, and new business areas. More information about factors that potentially could affect Amazon.com's financial results is included in Amazon.com's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2004, and all subsequent filings.
Financial Measure
The following measure is defined by the Securities and Exchange Commission as a non-GAAP financial measure.
Free Cash Flow
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."
About Amazon.com
Amazon.com (NASDAQ: AMZN), a Fortune 500 company based in Seattle, opened its virtual doors on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer customers the lowest possible prices. Amazon.com and third-party sellers offer millions of unique new, refurbished, and used items in categories such as health and personal care, jewelry and watches, gourmet food, sports and outdoors, apparel and accessories, books, music, DVDs, electronics and office, toys and baby, and home and garden.
Amazon.com and its affiliates operate seven retail websites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and www.joyo.com.
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