Amazon.Com Announces Record Free Cash Flow Fueled by Lower Prices and Year-Round Free Shipping.Business Editors SEATTLE--(BUSINESS WIRE)--Jan. 27, 2004 Amazon.com (Amazon.com, Seattle, WA, www.amazon.com) The largest online shopping site and one of the most widely known e-commerce sites on the Web. Founded by Jeff Bezos in 1995, it had 11 employees by year's end. Within four years, it had more than 1,600 employees and four million customers. , Inc. (Nasdaq:AMZN AMZN Amazon.com (NASDAQ symbol) ) today announced financial results for its fourth quarter and year ended December December: see month. 31, 2003. Operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. was $392 million for 2003, compared with $174 million for 2002. Free cash flow was $346 million for 2003, compared with $135 million for 2002. Common shares outstanding plus shares underlying stock-based employee awards totaled 433 million at December 31, 2003, flat compared with a year ago. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight were $1.946 billion in the fourth quarter, compared with $1.429 billion in fourth quarter 2002, an increase of 36%. Net sales benefited by $98 million from changes in foreign exchange rates compared with fourth quarter 2002. Net sales were $5.264 billion in 2003, compared with $3.933 billion in 2002, an increase of 34%. Net sales benefited by $232 million from changes in foreign exchange rates compared with 2002. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $138 million in the fourth quarter, or 7% of net sales, compared with $71 million, or 5% of net sales, in fourth quarter 2002. Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: segment operating income grew to $153 million in the fourth quarter, or 8% of net sales, compared with $102 million, or 7% of net sales, in fourth quarter 2002. Operating income improved to $271 million in 2003, or 5% of net sales, compared with $64 million, or 2% of net sales, in 2002. Consolidated segment operating income was $361 million in 2003, or 7% of net sales, an improvement of $181 million compared with 2002. Net income was $73 million in the fourth quarter, or $0.17 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with $3 million, or $0.01 per diluted share, in fourth quarter 2002. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income in the fourth quarter grew 66% to $125 million, or $0.29 per diluted share, compared with $75 million, or $0.19 per diluted share, in fourth quarter 2002. Net income was $35 million in 2003, or $0.08 per diluted share, compared with a net loss of $149 million, or $(0.39) per share, in 2002. Pro forma net income for 2003 improved $190 million to $256 million, or $0.61 per diluted share, compared with $66 million, or $0.17 per diluted share, in 2002. "Our commitment to year-round free shipping and lower prices continues to be a win-win win-win adj. Of or being a situation in which the outcome benefits each of two often opposing groups: a win-win proposition for the buyer and the seller. for our customers and Amazon.com," said Jeff Bezos Jeffrey Preston Bezos (born January 12, 1964 , Albuquerque ) is the founder, president, chief executive officer, and chairman of the board of Amazon.com. Bezos, a Phi Beta Kappa graduate of Princeton University, worked as a financial analyst for D. E. Shaw & Co. , founder and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Amazon.com. "In addition to purchasing thousands of $29 DVD players A stand-alone device that plays DVDs. It contains a DVD drive and the electronics to decode the digital video. The device may play only manufactured DVDs, or it may be able to play DVD-R, DVD-RW and DVD+RW discs. DVD players are cabled to a TV or home theater system for display. this holiday season, customers also bought Tibetan yak cheese, pomegranate pomegranate (pŏm`grănĭt, pŏm`ə–), handsome deciduous and somewhat thorny large shrub or small tree (Punica granatum molasses molasses, sugar byproduct, the brownish liquid residue left after heat crystallization of sucrose (commercial sugar) in the process of refining. Molasses contains chiefly the uncrystallizable sugars as well as some remnant sucrose. and zero carb carb 1 n. Informal A carburetor. cheese straws." The Company also announced today that Amazon Amazon, in Greek mythology Amazon (ăm`əzŏn), in Greek mythology, one of a tribe of warlike women who lived in Asia Minor. .co.uk further lowered book prices by offering 30% off books over GBP GBP In currencies, this is the abbreviation for the British Pound. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 10, reduced from 30% off books over GBP 15. Amazon.com continues to offer Free Super Saver Super saver may refer to:
The most universal forms of jewelry are the necklace, bracelet, ring, pin, and earring. to sporting goods Noun 1. sporting goods - sports equipment sold as a commodity commodity, trade good, good - articles of commerce sports equipment - equipment needed to participate in a particular sport to tools. Amazon.com also announced that its Board of Directors has authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: a debt repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. program pursuant to which the Company may from time to time repurchase (through open market repurchases or private transactions), redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. or otherwise retire retire v. 1) to stop working at one's occupation. 2) to pay off a promissory note, and thus "retire" the loan. 3) for a jury to go into the jury room to decide on a verdict after all evidence, argument and jury instructions have been completed. , up to an aggregate of $500 million of its outstanding 4.75% Convertible Subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. Notes due 2009 and 6.875% Convertible Subordinated Notes due 2010. In addition to this debt repurchase program, as separately announced today, on February February: see month. 26, 2004, the Company will redeem $150 million in principal amount of its outstanding 4.75% Convertible Subordinated Notes due 2009 at a redemption price Redemption price See: Call price redemption price 1. The price at which an open-end investment company will buy back its shares from the owners. In most cases, the redemption price is the net asset value per share. 2. of 102.375%, plus accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. and unpaid interest from February 1 through February 25, 2004. See "Financial Measures" for additional information. Highlights of Fourth Quarter and 2003 Results -- North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. segment sales, representing the Company's U.S. and Canadian sites, grew 18% to $1.14 billion in the fourth quarter and segment operating income grew 39% to $114 million, or 10% of net sales, compared with fourth quarter 2002. -- International segment sales, representing the Company's U.K., German, French and Japanese sites, grew 74% to $804 million in the fourth quarter and benefited by $95 million from changes in foreign exchange rates compared with fourth quarter 2002. In 2003, International segment sales exceeded $2 billion for the first time. International segment operating income was $39 million, or 5% of net sales, in the fourth quarter, compared with $20 million, or 4% of net sales, in fourth quarter 2002. -- Electronics and Other General Merchandise MERCHANDISE. By this term is understood all those things which merchants sell either wholesale or retail, as dry goods, hardware, groceries, drugs, &c. It is usually applied to personal chattels only, and to those which are not required for food or immediate support, but such as remain revenues exceeded $1.1 billion in 2003. -- Inventory turns for the trailing twelve months In commerce, the trailing twelve months (TTM) is a moving measurement (for example, an average or a sum) over the 12 previous months, using the most recent data available. Also sometimes known as last twelve months (LTM). decreased 5% to 18 in 2003. -- On November November: see month. 24, 2003, the Company redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. $200 million of its 4.75% Convertible Subordinated Notes due 2009 for $206 million, a redemption price of 102.850%. For 2003, Amazon.com redeemed $464 million of its long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . -- The Company increased selection by adding over 40,000 unique gourmet food items, more than 60,000 unique jewelry items, and over 70,000 unique health and personal care items. -- The Company also launched a home and kitchen store in Japan and Marketplace in France and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of during the fourth quarter. Financial Guidance The following forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. reflect Amazon.com's expectations as of January January: see month. 27, 2004. Results may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. , world events, the emerging nature and rate of growth of the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the and online commerce, and the various factors detailed below. First Quarter 2004 Guidance -- First quarter net sales are expected to be between $1.39 billion and $1.49 billion, or grow between 28% and 38%, compared with first quarter 2003. -- Consolidated segment operating income is expected to be between $95 million and $115 million. -- Operating income is expected to be between $80 million and $100 million, assuming, among other things, that the Company does not record any revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. to its restructuring-related estimates and that the closing price of Amazon.com common stock on March 31, 2004, is identical to the closing price of $52.62 on December 31, 2003. Full Year 2004 Expectations -- Net sales are expected to be between $6.20 billion and $6.70 billion. -- Consolidated segment operating income is expected to be between $430 million and $530 million. -- Operating income is expected to be between $355 million and $455 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 $52.62 on December 31, 2003. A conference call will be Webcast live today at 2 p.m. PT/5 p.m. ET and will be available at least through March 31, 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. 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 de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. 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 ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. throughput The speed with which a computer processes data. It is a combination of internal processing speed, peripheral speeds (I/O) and the efficiency of the operating system and other system software all working together. 1. and productivity. Other risks and uncertainties include, among others, risk of future losses, significant amount of indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. , potential fluctuations in operating results, management of potential growth, system interruptions, consumer trends, fulfillment center optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. , 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2002, and all subsequent filings. Financial Measures The following measures are defined by the Securities and Exchange Commission as non-GAAP financial measures. 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 fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → including internal-use software and Web site development. A tabular tab·u·lar adj. 1. Having a plane surface; flat. 2. Organized as a table or list. 3. Calculated by means of a table. tabular resembling a table. reconciliation of differences from the comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure -- operating cash flow -- is included in the attached "Supplemental Financial Information and Business Metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. ." Consolidated Segment Operating Income 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: -- Stock-based compensation, -- Amortization of other intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. , and -- Restructuring-related and other. A tabular reconciliation of differences from the comparable GAAP measure -- operating income -- is included in the attached "Pro Forma Statements Pro forma statement A financial statement showing the forecast or projected operating results and balance sheet, as in pro forma income statements, balance sheets, and statements of cash flows. of Operations." Pro Forma Net Income Pro forma net income excludes the following line items on the Company's statements of operations: -- Stock-based compensation, -- Amortization of other intangibles, -- Restructuring-related and other, -- Remeasurement of 6.875% PEACS PEACS Portable Environmental/Acoustic Collection System and other, -- Equity in losses of equity-method investees, net, and -- Cumulative effect of change in accounting principle. A tabular reconciliation of differences from the comparable GAAP measure -- net income (loss) -- is included in the attached "Pro Forma Statements of Operations." For additional information regarding these non-GAAP financial measures, see exhibit 99.2 to our Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. filed contemporaneously con·tem·po·ra·ne·ous adj. Originating, existing, or happening during the same period of time: the contemporaneous reigns of two monarchs. See Synonyms at contemporary. with the issuance of this release. About Amazon.com Amazon.com, a Fortune 500 company based in Seattle Seattle (sēăt`əl), city (1990 pop. 516,259), seat of King co., W Wash., built on seven hills, between Elliott Bay of Puget Sound and Lake Washington; inc. 1869. , opened on the World Wide Web in July July: see month. 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 list millions of unique new and used items in categories such as health and personal care, jewelry and watches, gourmet food, sporting goods, apparel and accessories, books, music, DVDs, electronics and office, kids and baby, and home and garden. Amazon.com operates six Web sites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.fr, www.amazon.co.jp and www.amazon.ca.
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2003 2002 2003 2002
----------- --------- ----------- ---------
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD $ 666,418 $ 327,564 $ 738,254 $ 540,282
OPERATING ACTIVITIES:
Net income (loss) 73,154 2,651 35,282 (149,132)
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Depreciation of fixed
assets, including
Web site development
costs, and other
amortization 18,467 19,863 75,558 82,274
Stock-based compensation 15,039 35,680 87,751 68,927
Equity in losses of
equity-method investees,
net - 700 436 4,169
Amortization of other
intangibles 141 913 2,752 5,478
Non-cash restructuring-
related and other - 1,100 - 3,470
Gain on sale of
marketable securities,
net (205) (1,867) (9,598) (5,700)
Remeasurement of 6.875%
PEACS and other 36,505 40,596 129,661 96,273
Non-cash interest
expense and other 166 7,150 12,918 29,586
Cumulative effect of
change in accounting
principle - - - (801)
Changes in operating
assets and liabilities:
Inventories (42,785) (48,368) (76,786) (51,303)
Accounts receivable, net
and other current
assets (17,998) (1,528) 305 (32,948)
Accounts payable 299,316 262,838 167,732 156,542
Accrued expenses and
other current
liabilities 73,572 41,946 (25,740) 4,491
Additions to unearned
revenue 22,989 19,763 101,641 95,404
Amortization of
previously unearned
revenue (26,021) (37,725) (111,740) (135,466)
Interest payable 28,623 28,867 1,850 3,027
---------- --------- ---------- ---------
Net cash provided by
operating activities 480,963 372,579 392,022 174,291
INVESTING ACTIVITIES:
Sales and maturities of
marketable securities 232,173 152,757 813,184 553,289
Purchases of marketable
securities (121,448) (173,520) (535,642) (635,810)
Purchases of fixed
assets, including
internal-use software
and Web site development (17,236) (15,516) (45,963) (39,163)
Proceeds from sale of
subsidiary and other - - 5,072 -
---------- --------- ---------- ---------
Net cash provided by
(used in) investing
activities 93,489 (36,279) 236,651 (121,684)
FINANCING ACTIVITIES:
Proceeds from exercises
of stock options and
other 30,490 65,376 163,322 121,689
Repayment of long-term
debt, capital lease
obligations,
and other (207,732) (2,674) (495,308) (14,795)
---------- --------- ---------- ---------
Net cash provided by
(used in) financing
activities (177,242) 62,702 (331,986) 106,894
Foreign-currency effect
on cash and cash
equivalents 38,645 11,688 67,332 38,471
---------- --------- ---------- ---------
Net increase in cash and
cash equivalents 435,855 410,690 364,019 197,972
---------- --------- ---------- ---------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD $1,102,273 $ 738,254 $1,102,273 $ 738,254
========== ========= ========== =========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Fixed assets acquired
under capital leases and
other financing
arrangements $ 29 $ 726 $ 2,677 $ 3,023
Cash paid for interest 3,112 642 119,947 111,589
Cash paid for income
taxes 197 (15) 1,825 1,448
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
AMAZON.COM, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net sales $1,945,772 $1,428,610 $5,263,699 $3,932,936
Cost of sales 1,518,935 1,093,451 4,006,531 2,940,318
---------- ---------- ---------- ----------
Gross profit 426,837 335,159 1,257,168 992,618
Operating expenses:
Fulfillment 158,815 126,559 477,032 392,467
Marketing 40,291 37,579 122,787 125,383
Technology and
content 51,811 49,048 207,809 215,617
General and
administrative 22,984 20,015 88,302 79,049
Stock-based
compensation (1) 15,039 35,680 87,751 68,927
Amortization of other
intangibles 141 913 2,752 5,478
Restructuring-related
and other 140 (5,158) 140 41,573
---------- ---------- ---------- ----------
Total operating
expenses 289,221 264,636 986,573 928,494
---------- ---------- ---------- ----------
Income from operations 137,616 70,523 270,595 64,124
Interest income 5,330 6,785 21,955 23,687
Interest expense (29,299) (36,108) (129,979) (142,925)
Other income (expense),
net (3,988) 2,747 2,808 5,623
Remeasurement of 6.875%
PEACS and other (36,505) (40,596) (129,661) (96,273)
---------- ---------- ---------- ----------
Total non-
operating
expenses, net (64,462) (67,172) (234,877) (209,888)
---------- ---------- ---------- ----------
Income (loss) before
equity in losses of
equity-method
investees 73,154 3,351 35,718 (145,764)
Equity in losses of
equity-method
investees, net - (700) (436) (4,169)
---------- ---------- ---------- ----------
Income (loss) before
change in accounting
principle 73,154 2,651 35,282 (149,933)
Cumulative effect of
change in accounting
principle - - - 801
---------- ---------- ---------- ----------
Net income (loss) $ 73,154 $ 2,651 $ 35,282 $ (149,132)
========== ========== ========== ==========
Basic earnings (loss)
per share:
Prior to cumulative
effect of change in
accounting
principle $ 0.18 $ 0.01 $ 0.09 $ (0.40)
Cumulative effect of
change in accounting
principle - - - 0.01
---------- ---------- ---------- ----------
$ 0.18 $ 0.01 $ 0.09 $ (0.39)
========== ========== ========== ==========
Diluted earnings (loss)
per share:
Prior to cumulative
effect of change in
accounting
principle $ 0.17 $ 0.01 $ 0.08 $ (0.40)
Cumulative effect of
change in accounting
principle - - - 0.01
---------- ---------- ---------- ----------
$ 0.17 $ 0.01 $ 0.08 $ (0.39)
========== ========== ========== ==========
Weighted average shares used in
computation of earnings (loss) per
share:
Basic 401,422 383,702 395,479 378,363
========== ========== ========== ==========
Diluted 425,214 407,056 419,352 378,363
========== ========== ========== ==========
(1) Components of
stock-based
compensation:
Fulfillment $ 1,739 $ 6,614 $ 17,960 $ 12,126
Marketing 802 1,820 4,968 4,239
Technology and
content 9,747 18,621 49,555 35,926
General and
administrative 2,751 8,625 15,268 16,636
---------- ---------- ---------- ----------
$ 15,039 $ 35,680 $ 87,751 $ 68,927
========== ========== ========== ==========
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
AMAZON.COM, INC.
Pro Forma Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
December 31, 2003
-----------------------------------
As Reported Adjustments Pro Forma
(1)
----------- ----------- -----------
Net sales $1,945,772 $ - $1,945,772
Cost of sales 1,518,935 - 1,518,935
---------- ---------- ----------
Gross profit 426,837 - 426,837
Operating expenses:
Fulfillment 158,815 - 158,815
Marketing 40,291 - 40,291
Technology and content 51,811 - 51,811
General and administrative 22,984 - 22,984
Stock-based compensation 15,039 (15,039) -
Amortization of other
intangibles 141 (141) -
Restructuring-related and other 140 (140) -
---------- ---------- ----------
Total operating expenses 289,221 (15,320) 273,901
---------- ---------- ----------
Income from operations 137,616 15,320 152,936 (2)
Interest income 5,330 - 5,330
Interest expense (29,299) - (29,299)
Other income (expense), net (3,988) - (3,988)
Remeasurement of 6.875% PEACS
and other (36,505) 36,505 -
---------- ---------- ----------
Total non-operating
expenses, net (64,462) 36,505 (27,957)
---------- ---------- ----------
Income before equity in losses
of equity-method investees 73,154 51,825 124,979
Equity in losses of equity-
method investees, net - - -
---------- ---------- ----------
Net income $ 73,154 $ 51,825 $ 124,979
========== ========== ==========
Basic earnings per share $ 0.18 $ 0.13 $ 0.31
========== ========== ==========
Diluted earnings per share $ 0.17 $ 0.12 $ 0.29
========== ========== ==========
Weighted average shares used in computation
of earnings per share:
Basic 401,422 401,422
========== ===========
Diluted 425,214 425,214
========== ===========
Net cash provided by operating
activities $ 480,963
Purchases of fixed assets, including
internal-use software
and Web site development (17,236)
-----------
Free cash flow $ 463,727
===========
Net cash provided by (used in) investing
activities $ 93,489
===========
Net cash provided by (used in) financing
activities $ (177,242)
===========
Three Months Ended
December 31, 2002
-----------------------------------
As Reported Adjustments Pro Forma
(1)
----------- ----------- -----------
Net sales $1,428,610 $ - $ 1,428,610
Cost of sales 1,093,451 - 1,093,451
---------- -------- -----------
Gross profit 335,159 - 335,159
Operating expenses:
Fulfillment 126,559 - 126,559
Marketing 37,579 - 37,579
Technology and content 49,048 - 49,048
General and administrative 20,015 - 20,015
Stock-based compensation 35,680 (35,680) -
Amortization of other
intangibles 913 (913) -
Restructuring-related and
other (5,158) 5,158 -
---------- -------- -----------
Total operating expenses 264,636 (31,435) 233,201
---------- -------- -----------
Income from operations 70,523 31,435 101,958 (2)
Interest income 6,785 - 6,785
Interest expense (36,108) - (36,108)
Other income (expense), net 2,747 - 2,747
Remeasurement of 6.875% PEACS
and other (40,596) 40,596 -
---------- -------- -----------
Total non-operating
expenses, net (67,172) 40,596 (26,576)
---------- -------- -----------
Income before equity in losses
of equity-method investees 3,351 72,031 75,382
Equity in losses of equity-
method investees, net (700) 700 -
---------- -------- -----------
Net income $ 2,651 $ 72,731 $ 75,382
========== ======== ===========
Basic earnings per share $ 0.01 $ 0.19 $ 0.20
========== ======== ===========
Diluted earnings per share $ 0.01 $ 0.18 $ 0.19
========== ======== ===========
Weighted average shares used in
computation of earnings
per share:
Basic 383,702 383,702
========== ===========
Diluted 407,056 407,056
========== ===========
Net cash provided by operating
activities $ 372,579
Purchases of fixed assets,
including internal-use software
and Web site development (15,516)
-----------
Free cash flow $ 357,063
===========
Net cash provided by (used in)
investing activities $ (36,279)
===========
Net cash provided by (used in)
financing activities $ 62,702
===========
(1) In accordance with accounting principles generally accepted in the
United States.
(2) Consolidated segment operating income.
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
AMAZON.COM, INC.
Pro Forma Statements of Operations
(in thousands, except per share data)
(unaudited)
Twelve Months Ended
December 31, 2003
----------------------------------
As Reported Adjustments Pro Forma
(1)
----------- ---------- -----------
Net sales $5,263,699 $ - $5,263,699
Cost of sales 4,006,531 - 4,006,531
---------- -------- ----------
Gross profit 1,257,168 - 1,257,168
Operating expenses:
Fulfillment 477,032 - 477,032
Marketing 122,787 - 122,787
Technology and content 207,809 - 207,809
General and administrative 88,302 - 88,302
Stock-based compensation 87,751 (87,751) -
Amortization of other
intangibles 2,752 (2,752) -
Restructuring-related and other 140 (140) -
---------- -------- ----------
Total operating expenses 986,573 (90,643) 895,930
---------- -------- ----------
Income from operations 270,595 90,643 361,238 (2)
Interest income 21,955 - 21,955
Interest expense (129,979) - (129,979)
Other income, net 2,808 - 2,808
Remeasurement of 6.875% PEACS and
other (129,661) 129,661 -
---------- -------- ----------
Total non-operating
expenses, net (234,877) 129,661 (105,216)
---------- -------- ----------
Income (loss) before equity in
losses of equity-method
investees 35,718 220,304 256,022
Equity in losses of equity-method
investees, net (436) 436 -
---------- -------- ----------
Income (loss) before change in
accounting principle 35,282 220,740 256,022
Cumulative effect of change in
accounting principle - - -
---------- -------- ----------
Net income (loss) $ 35,282 $220,740 $ 256,022
========== ======== ==========
Basic earnings (loss) per share:
Prior to cumulative effect of
change in accounting principle $ 0.09 $ 0.56 $ 0.65
Cumulative effect of change in
accounting principle - - -
---------- -------- ----------
$ 0.09 $ 0.56 $ 0.65
========== ======== ==========
Diluted earnings (loss) per
share:
Prior to cumulative effect of
change in accounting principle $ 0.08 $ 0.53 $ 0.61
Cumulative effect of change in
accounting principle - - -
---------- -------- ----------
$ 0.08 $ 0.53 $ 0.61
========== ======== ==========
Weighted average shares used in computation of earnings
(loss) per share:
Basic 395,479 395,479
========== ==========
Diluted 419,352 419,352
========== ==========
Net cash provided by operating
activities $ 392,022
Purchases of fixed assets, including
internal-use software
and Web site development (45,963)
----------
Free cash flow $ 346,059
==========
Net cash provided by (used in) investing
activities $ 236,651
==========
Net cash provided by (used in) financing
activities $ (331,986)
==========
Twelve Months Ended
December 31, 2002
-------------------------------------
As Reported Adjustments Pro Forma
(1)
----------- ------------- -----------
Net sales $3,932,936 $ - $3,932,936
Cost of sales 2,940,318 - 2,940,318
---------- ----------- ----------
Gross profit 992,618 - 992,618
Operating expenses:
Fulfillment 392,467 - 392,467
Marketing 125,383 - 125,383
Technology and content 215,617 - 215,617
General and administrative 79,049 - 79,049
Stock-based compensation 68,927 (68,927) -
Amortization of other
intangibles 5,478 (5,478) -
Restructuring-related and
other 41,573 (41,573) -
---------- ----------- ----------
Total operating expenses 928,494 (115,978) 812,516
---------- ----------- ----------
Income from operations 64,124 115,978 180,102 (2)
Interest income 23,687 - 23,687
Interest expense (142,925) - (142,925)
Other income, net 5,623 - 5,623
Remeasurement of 6.875% PEACS
and other (96,273) 96,273 -
---------- ----------- ----------
Total non-operating
expenses, net (209,888) 96,273 (113,615)
---------- ----------- ----------
Income (loss) before equity in
losses of equity-method
investees (145,764) 212,251 66,487
Equity in losses of equity-
method investees, net (4,169) 4,169 -
---------- ----------- ----------
Income (loss) before change in
accounting principle (149,933) 216,420 66,487
Cumulative effect of change in
accounting principle 801 (801) -
---------- ----------- ----------
Net income (loss) $ (149,132) $ 215,619 $ 66,487
========== =========== ==========
Basic earnings (loss) per
share:
Prior to cumulative effect of
change in accounting
principle $ (0.40) $ 0.58 $ 0.18
Cumulative effect of change
in accounting principle 0.01 (0.01) -
---------- ----------- ----------
$ (0.39) $ 0.57 $ 0.18
========== =========== ==========
Diluted earnings (loss) per
share:
Prior to cumulative effect of
change in accounting
principle $ (0.40) $ 0.57 $ 0.17
Cumulative effect of change
in accounting principle 0.01 (0.01) -
---------- ----------- ----------
$ (0.39) $ 0.56 $ 0.17
========== =========== ==========
Weighted average shares used in
computation of earnings (loss)
per share:
Basic 378,363 378,363
========== ==========
Diluted 378,363 399,656
========== ==========
Net cash provided by operating
activities $ 174,291
Purchases of fixed assets,
including internal-use
software and Web site
development (39,163)
----------
Free cash flow $ 135,128
==========
Net cash provided by (used in)
investing activities $ (121,684)
==========
Net cash provided by (used in)
financing activities $ 106,894
==========
(1) In accordance with accounting principles generally accepted in the
United States.
(2) Consolidated segment operating income.
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
AMAZON.COM, INC.
Segment Information
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
North America
Net sales $1,141,907 $ 966,671 $3,258,413 $2,761,457
Cost of sales 853,253 724,023 2,391,749 2,020,472
---------- ---------- ---------- ----------
Gross profit 288,654 242,648 866,664 740,985
Direct segment
operating expenses 174,383 160,414 583,619 561,318
---------- ---------- ---------- ----------
Segment operating
income 114,271 82,234 283,045 179,667
International
Net sales 803,865 461,939 2,005,286 1,171,479
Cost of sales 665,682 369,428 1,614,782 919,846
---------- ---------- ---------- ----------
Gross profit 138,183 92,511 390,504 251,633
Direct segment
operating expenses 99,518 72,787 312,311 251,198
---------- ---------- ---------- ----------
Segment operating
income 38,665 19,724 78,193 435
Consolidated
Net sales 1,945,772 1,428,610 5,263,699 3,932,936
Cost of sales 1,518,935 1,093,451 4,006,531 2,940,318
---------- ---------- ---------- ----------
Gross profit 426,837 335,159 1,257,168 992,618
Direct segment
operating expenses 273,901 233,201 895,930 812,516
---------- ---------- ---------- ----------
Segment operating
income 152,936 101,958 361,238 180,102
Stock-based
compensation 15,039 35,680 87,751 68,927
Amortization of other
intangibles 141 913 2,752 5,478
Restructuring-related
and other 140 (5,158) 140 41,573
---------- ---------- ---------- ----------
Income from operations 137,616 70,523 270,595 64,124
Total non-operating
expenses, net (64,462) (67,172) (234,877) (209,888)
Equity in losses of
equity-method
investees, net - (700) (436) (4,169)
Cumulative effect of
change in accounting
principle - - - 801
---------- ---------- ---------- ----------
Net income (loss) $ 73,154 $ 2,651 $ 35,282 $ (149,132)
========== ========== ========== ==========
Segment Highlights:
Y / Y net sales growth:
North America 18% 13% 18% 12%
International 74 76 71 77
Consolidated 36 28 34 26
Y / Y gross profit growth:
North America 19 11 17 13
International 49 66 55 78
Consolidated 27 22 27 24
Gross margin:
North America 25 25 27 27
International 17 20 19 21
Consolidated 22 23 24 25
Segment operating margin:
North America 10 9 9 7
International 5 4 4 0
Consolidated 8 7 7 5
Net sales mix:
North America 59 68 62 70
International 41 32 38 30
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
AMAZON.COM, INC.
Supplemental Net Sales Information
(in thousands)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
North America
Media $ 750,891 $ 648,568 $2,269,472 $1,994,949
Electronics and other
general merchandise 352,517 289,839 878,519 681,041
Other 38,499 28,264 110,422 85,467
---------- ---------- ---------- ----------
1,141,907 966,671 3,258,413 2,761,457
International
Media 682,741 430,618 1,779,476 1,103,665
Electronics and other
general merchandise 120,850 30,959 224,606 65,877
Other 274 362 1,204 1,937
---------- ---------- ---------- ----------
803,865 461,939 2,005,286 1,171,479
Consolidated
Media 1,433,632 1,079,186 4,048,948 3,098,614
Electronics and other
general merchandise 473,367 320,798 1,103,125 746,918
Other 38,773 28,626 111,626 87,404
---------- ---------- ---------- ----------
$1,945,772 $1,428,610 $5,263,699 $3,932,936
========== ========== ========== ==========
Y / Y Net Sales Growth:
North America:
Media 16% 11% 14% 10%
Electronics and other
general merchandise 22 20 29 18
Other 36 7 29 18
International:
Media 59 71 61 71
Electronics and other
general merchandise 290 193 241 308
Other (24) (29) (38) 280
Consolidated:
Media 33 29 31 26
Electronics and other
general merchandise 48 27 48 26
Other 35 7 28 19
Consolidated Net Sales Mix:
Media 74 76 77 79
Electronics and other
general merchandise 24 22 21 19
Other 2 2 2 2
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
AMAZON.COM, INC.
Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
December 31, December 31,
2003 2002
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 1,102,273 $ 738,254
Marketable securities 292,550 562,715
----------- -----------
Cash, cash equivalents, and marketable
securities 1,394,823 1,300,969
Inventories 293,917 202,425
Accounts receivable, net and other current
assets 132,069 112,282
----------- -----------
Total current assets 1,820,809 1,615,676
Fixed assets, net 224,285 239,398
Goodwill, net 69,121 70,811
Other intangibles, net 518 3,460
Other equity investments 14,831 15,442
Other assets 32,469 45,662
----------- -----------
Total assets $ 2,162,033 $ 1,990,449
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 819,811 $ 618,128
Accrued expenses and other current
liabilities 317,730 314,935
Unearned revenue 37,844 47,916
Interest payable 73,100 71,661
Current portion of long-term debt and other 4,216 13,318
----------- -----------
Total current liabilities 1,252,701 1,065,958
Long-term debt and other 1,945,439 2,277,305
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 --
403,354 and 387,906 4,034 3,879
Additional paid-in capital 1,899,398 1,649,946
Deferred stock-based compensation (2,850) (6,591)
Accumulated other comprehensive income 37,739 9,662
Accumulated deficit (2,974,428) (3,009,710)
----------- -----------
Total stockholders' deficit (1,036,107) (1,352,814)
----------- -----------
Total liabilities and stockholders'
deficit $ 2,162,033 $ 1,990,449
=========== ===========
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except per share data)
(unaudited)
----------------------------------------------------------------------
Y/Y %
Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Change
------- ------- ------- ------- ------- ------
Cash Flows and Shares
Operating cash flow --
Trailing Twelve Months
(TTM) $ 174 $ 164 $ 285 $ 284 $ 392 125%
Purchases of fixed
assets (including
internal-use software
and Web site
development) -- TTM $ 39 $ 41 $ 40 $ 44 $ 46 17%
Free cash flow
(operating cash flow
less purchases of fixed
assets) -- TTM $ 135 $ 123 $ 245 $ 239 $ 346 156%
Common shares and stock-
based awards
outstanding 433 432 433 433 433 0%
Common shares
outstanding 388 392 397 400 403 4%
Stock-based employee
awards outstanding 45 41 36 33 29 (35%)
Stock-based employee
awards outstanding -- %
of common shares
outstanding 12% 10% 9% 8% 7% N/A
Results of Operations
Worldwide (WW) net
sales $1,429 $1,084 $1,100 $1,134 $1,946 36%
WW net sales -- Y / Y
growth, excluding the
effect of foreign
exchange rates 25% 22% 30% 30% 29% N/A
WW net sales -- TTM $3,933 $4,169 $4,463 $4,747 $5,264 34%
WW net sales shipped
outside the U.S. -- TTM
% of net sales 36% 37% 39% 40% 43% N/A
Gross profit $ 335 $ 271 $ 274 $ 286 $ 427 27%
Gross margin -- % of WW
net sales 23.5% 25.0% 24.9% 25.2% 21.9% N/A
Gross profit -- TTM $ 993 $1,040 $1,096 $1,165 $1,257 27%
Gross margin -- TTM % of
WW net sales 25.2% 24.9% 24.6% 24.6% 23.9% N/A
Fulfillment costs -- %
of WW net sales 8.9% 9.6% 9.8% 9.4% 8.2% N/A
Fulfillment costs -- TTM
% of WW net sales 10.0% 9.7% 9.6% 9.4% 9.1% N/A
Consolidated direct
segment operating
expenses $ 233 $ 203 $ 207 $ 212 $ 274 17%
Consolidated direct
segment operating
expenses -- TTM $ 813 $ 817 $ 832 $ 855 $ 896 10%
Consolidated segment
operating income $ 102 $ 67 $ 67 $ 74 $ 153 50%
Consolidated segment
operating margin -- %
of WW net sales 7.1% 6.2% 6.1% 6.5% 7.9% N/A
Consolidated segment
operating income --
TTM $ 180 $ 223 $ 264 $ 310 $ 361 101%
Consolidated segment
operating margin -- TTM
% of WW net sales 4.6% 5.3% 5.9% 6.5% 6.9% N/A
GAAP operating income $ 71 $ 39 $ 42 $ 52 $ 138 95%
GAAP operating margin --
% of WW net sales 4.9% 3.6% 3.8% 4.6% 7.1% N/A
GAAP operating income --
TTM $ 64 $ 102 $ 142 $ 204 $ 271 322%
GAAP operating margin --
TTM % of WW net sales 1.6% 2.4% 3.2% 4.3% 5.1% N/A
Pro forma net income $ 75 $ 40 $ 42 $ 48 $ 125 66%
Diluted pro forma net
income per share $ 0.19 $ 0.10 $ 0.10 $ 0.11 $ 0.29 N/A
Pro forma net income --
TTM $ 66 $ 112 $ 158 $ 206 $ 256 285%
GAAP net income (loss) $ 3 $ (10) $ (43) $ 16 $ 73 N/A
GAAP net income (loss)
per share $ 0.01 $(0.03) $(0.11) $ 0.04 $ 0.17 N/A
GAAP net income (loss)
-- TTM $ (149) $ (136) $ (86) $ (35) $ 35 N/A
North America segment:
Net sales $ 967 $ 705 $ 703 $ 709 $1,142 18%
Net sales -- TTM $2,761 $2,845 $2,961 $3,083 $3,258 18%
Gross profit $ 243 $ 187 $ 190 $ 201 $ 289 19%
Gross margin -- % of
North American net
sales 25% 27% 27% 28% 25% N/A
Gross profit -- TTM $ 741 $ 754 $ 774 $ 821 $ 867 17%
Gross margin -- TTM %
of North America net
sales 27% 27% 26% 27% 27% N/A
Operating income $ 82 $ 52 $ 55 $ 63 $ 114 39%
Operating margin -- %
of North America net
sales 9% 7% 8% 9% 10% N/A
Operating income --
TTM $ 180 $ 196 $ 215 $ 251 $ 283 58%
Operating margin --
TTM % of North
America net sales 7% 7% 7% 8% 9% N/A
------------------------------- ------- ------- ------- ------- ------
Note: The attached "Financial and Operational Highlights" are an
integral part of this Supplemental Financial Information and Business
Metrics.
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except inventory turnover, accounts payable days, and
employee data)
(unaudited)
----------------------------------------------------------------------
Y/Y %
Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Change
------- ------- ------- ------- ------- ------
International segment:
Net sales $ 462 $ 379 $ 397 $ 425 $ 804 74%
Net sales -- Y / Y
growth, excluding the
effect of foreign
exchange rates 62% 45% 57% 50% 54% N/A
Net sales -- TTM $1,172 $1,324 $1,502 $1,663 $2,005 71%
Gross profit $ 93 $ 84 $ 84 $ 85 $ 138 49%
Gross margin -- % of
International net
sales 20% 22% 21% 20% 17% N/A
Gross profit -- TTM $ 252 $ 286 $ 322 $ 345 $ 391 55%
Gross margin -- TTM %
of International net
sales 21% 22% 21% 21% 19% N/A
Operating income $ 20 $ 16 $ 13 $ 11 $ 39 96%
Operating margin -- %
of International net
sales 4% 4% 3% 3% 5% N/A
Operating income --
TTM $ 0 $ 27 $ 49 $ 59 $ 78 N/A
Operating margin --
TTM % of
International net
sales 0% 2% 3% 4% 4% N/A
Supplemental North
America Segment Net
Sales:
Media $ 649 $ 517 $ 499 $ 502 $ 751 16%
Media -- TTM $1,995 $2,041 $2,101 $2,167 $2,269 14%
Electronics and other
general merchandise $ 290 $ 168 $ 177 $ 180 $ 353 22%
Electronics and other
general merchandise
-- TTM $ 681 $ 722 $ 769 $ 816 $ 879 29%
Other $ 28 $ 19 $ 26 $ 27 $ 38 36%
Other -- TTM $ 85 $ 82 $ 91 $ 100 $ 110 29%
Supplemental
International Segment
Net Sales:
Media $ 431 $ 356 $ 366 $ 375 $ 683 59%
Media -- TTM $1,104 $1,245 $1,402 $1,527 $1,779 61%
Electronics and other
general merchandise $ 31 $ 23 $ 31 $ 50 $ 121 290%
Electronics and other
general merchandise
-- TTM $ 66 $ 77 $ 99 $ 135 $ 225 241%
Other $ 0 $ 0 $ 0 $ 0 $ 0 (24%)
Other -- TTM $ 2 $ 2 $ 1 $ 1 $ 1 (38%)
Supplemental Worldwide
Net Sales:
Media $1,079 $ 873 $ 865 $ 877 $1,434 33%
Media -- TTM $3,099 $3,286 $3,503 $3,695 $4,049 31%
Electronics and other
general merchandise $ 321 $ 191 $ 209 $ 230 $ 473 48%
Electronics and other
general merchandise
-- TTM $ 747 $ 799 $ 868 $ 951 $1,103 48%
Other $ 29 $ 20 $ 26 $ 27 $ 39 35%
Other -- TTM $ 87 $ 84 $ 93 $ 101 $ 112 28%
Balance Sheet
Cash and marketable
securities $1,301 $1,083 $ 989 $1,065 $1,395 7%
Inventory, net $ 202 $ 173 $ 178 $ 242 $ 294 45%
Inventory -- % of TTM
net sales 4% 4% 4% 4% 4% N/A
Inventory turnover --
TTM 19.3 19.7 20.2 18.9 18.4 (5%)
Fixed assets, net $ 239 $ 228 $ 222 $ 221 $ 224 (6%)
Accounts payable days --
ending 52 44 49 54 50 (5%)
Other
Employees
(full-time and
part-time) 7,500 7,700 7,600 7,900 7,800 4%
----------------------------------------------------------------------
Note: The attached "Financial and Operational Highlights" are an
integral part of this Supplemental Financial Information and Business
Metrics.
AMAZON.COM, INC. Financial and Operational Highlights (unaudited) Fourth Quarter 2003 Results of Operations (comparisons are with the equivalent period of the prior year, unless otherwise stated) Net Sales -- Shipping revenue, which excludes amounts earned from third-party sellers, was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $137 million, up 13% from $121 million. Gross Profit -- Gross profit benefited by approximately $17 million, and consolidated segment operating income by approximately $6 million, from changes in foreign exchange rates compared with fourth quarter 2002. -- Shipping loss was approximately $56 million, up from a loss of $30 million. We continue to measure our shipping results relative to their effect on our overall financial results and intend to continue providing our customers with free shipping offers. Fulfillment -- 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. -- Certain of our fulfillment-related costs incurred on behalf of other businesses, such as Toysrus.com and Target, are classified as cost of sales rather than fulfillment. -- Credit card fees associated with third-party seller transactions represent a significant percentage relative to commission amounts earned, and as a result, negatively affect fulfillment as a percentage of net sales. Stock-Based Compensation -- We granted less than a half million stock awards during the quarter with vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: periods generally ranging from three to six years. -- At December 31, 2003, there were 29 million stock awards outstanding, which are excluded from common stock outstanding, consisting of 25 million stock options ($12 average exercise price) and 4 million restricted stock units Restricted stock units Similar to restricted stock. However, the unit represents a promise that employees will receive stock in the future. The units do not pay dividends until the stock is vested. . There are also 1 million shares of restricted stock, which are included in common stock outstanding. -- Since October October: see month. 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 for·feit n. 1. Something surrendered or subject to surrender as punishment for a crime, an offense, an error, or a breach of contract. 2. Games a. prior to vesting, the corresponding previously recognized expense is reversed as an offset to stock-based compensation. -- At December 31, 2003, 1 million stock awards were subject to variable accounting. Stock option grants after December 31, 2002 are subject to variable accounting treatment. Under variable stock award accounting, we will incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. unpredictable charges or credits dependent on the fluctuations in market prices of our common stock, which we are unable to forecast. For example, if at the end of any quarter the quoted price of our common stock is lower than the quoted price at the end of the previous quarter, or to the extent previously-recorded amounts relate to unvested portions of awards that were cancelled can·cel v. can·celed also can·celled, can·cel·ing also can·cel·ling, can·cels also can·cels v.tr. 1. To cross out with lines or other markings. See Synonyms at erase. 2. , compensation expense associated with variable accounting will be recalculated using the cumulative expense method and may result in a net benefit to our results of operations. -- "Stock-based compensation" consisted of $6 million for stock awards under variable accounting and $9 million for stock awards under fixed accounting. "Stock-based compensation" includes matching stock contributions under our 401(k) program but excludes payroll tax Payroll Tax Tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee. In most countries, including the U.S., both state and federal authorities collect some form of payroll tax. expense resulting from exercises of stock-based awards. Restructuring-Related and Other -- In first quarter 2001 we announced and began implementation of our operational restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). plan. The restructuring is complete; however, we may periodically adjust our restructuring-related estimates in the future, if necessary. -- Cash payments resulting from our operational restructuring were $3 million, compared with $11 million in fourth quarter 2002. -- We estimate, based on currently available information, the remaining net cash outflows associated with restructuring-related leases and other commitments will be $10 million in 2004, and $20 million thereafter. Amounts due within 12 months are included within "Accrued expenses Accrued Expense An accounting expense recognized in the books before it is paid for. It is a liability, usually current. These expenses are typically periodic and documented upon a company's balance sheet due to the high probability of collection. and other current liabilities Other Current Liabilities A balance sheet entry used by companies to group together current liabilities that are not assigned to common liabilities such as debt obligations or accounts payable. " and the remaining amounts within "Long-term debt and other" on our balance sheet. These amounts are net of anticipated sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. income of approximately $39 million (we have signed sublease agreements on $15 million in future income) on gross lease and other obligations of $69 million. Remeasurement of 6.875% PEACS and Other -- "Remeasurement of 6.875% PEACS and other" primarily consisted of foreign-currency losses on remeasurement of 6.875% PEACS from Euros to U.S. Dollars of $65 million, compared with $38 million in fourth quarter 2002. -- Other includes a $36 million gain 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. -- In connection with our November 24, 2003 redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. of $200 million of our 4.75% Convertible Subordinated Notes due 2009, we recorded a charge of $9 million representing a 2.85% premium and approximately $3 million of remaining deferred issuance charges. Income Taxes -- At December 31, 2003, we had net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. (NOLs) of approximately $2.9 billion related to U.S. federal, state and foreign jurisdictions. Utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be of NOLs, which begin to expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. at various times starting in 2010, may be subject to certain limitations. Approximately $1.6 billion of our NOLs relate to tax deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). 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 benefit will be credited to stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. , rather than results of operations. Net Income (Loss) -- We are unable to forecast the effect on our future reported results of certain items, including the stock-based compensation associated with variable accounting treatment and the gain or loss associated with the remeasurement of our 6.875% PEACS and intercompany balances that results from fluctuations in foreign exchange rates. These items represented significant quarterly charges and gains during 2003 and may result in significant charges or gains in future periods. -- Although we reported net income for fourth quarter 2003, we believe that this net income result should not be viewed as a material positive event and is not necessarily predictive of future reported results for a variety of reasons. For example, had we not changed our intent as to the settlement of intercompany balances during the fourth quarter, we would have had a net loss of less than half a million for the year and our net income for the fourth quarter would have been reduced by almost 50%. Cash Flows and Balance Sheet -- Operating cash flows and free cash flows can be volatile With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. 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. -- Our cash, cash equivalents and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has of $1.4 billion, at fair value, primarily consist of cash, commercial paper and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. securities, U.S. Treasury U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. notes and bonds and asset-backed and agency securities. -- We have pledged pledge n. 1. A solemn binding promise to do, give, or refrain from doing something: signed a pledge never to reveal the secret; a pledge of money to a charity. 2. a. approximately $87 million of our marketable Marketable are securities that can be easily converted into cash. Such securities will generally have highly liquid markets allowing the security to be sold at a reasonable price very quickly. securities as collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although for property leases and other contractual obligations, compared with $121 million at December 31, 2002. -- "Unearned revenue Unearned Revenue When an individual or company receives money for a service or product that has yet to be fulfilled. Notes: For example, prepayment on a lease contract - the revenue is a liability until it has been earned. See also: Earned Income, Passive Income " is recorded when payments are received from third parties in advance of us providing the associated service. -- "Accrued expenses and other current liabilities" includes, among other things, liabilities for gift certificates, marketing activities, and workforce costs, including accrued payroll payroll a list of employees, their salary rates, tax deductions, amounts paid, payroll tax, long service leave entitlements. , vacation VACATION. That period of time between the end of one term and beginning of another. During vacation, rules and orders are made in such cases as are urgent, by a judge at his chambers. , and other benefits. -- "Long-term debt and other" primarily includes the following (in millions): -0-
Principal Interest Principal
at Maturity Rate Due Date
----------------------------------
Convertible Subordinated Notes $ 1,050 (1) 4.750% February
2009
PEACS 870 (2) 6.875% February
----------- 2010
$ 1,920 (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 102.85% of the principal, which decreases
every February by 47.5 basis points until maturity, plus any
accrued and unpaid interest. In February 2004 we will redeem
$150 million of our 4.75% Convertible Subordinated Notes for
face value plus a 2.375% premium, which will result in a
$6 million charge to "Remeasurement of 6.875% PEACS and
other" in our first quarter GAAP results, consisting of the
$4 million premium and $2 million of unamortized debt issue
costs.
(2) Euro 690 million principal amount, convertible at the holders'
option into our common stock at Euro 84.883 per share. The U.S.
Dollar equivalent principal, interest, and conversion price
fluctuates based on the Euro/U.S. Dollar exchange ratio. We
have the right to redeem the PEACS, in whole or in part, by
paying the Euro 690 million, plus any accrued and unpaid
interest. Because we do not hedge any portion of the PEACS,
we have interest expense exposure to fluctuations in the
Euro/US dollar exchange ratio.
(3) The "if converted" number of shares associated with each of
our convertible debt instruments (approximately 22 million
total shares) are excluded from diluted shares as their effect
is anti-dilutive. We have a program to repurchase or redeem up
to an additional $500 million of our remaining outstanding
convertible debt over time.
Certain Definitions and Other -- 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 Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. that excludes stock-based compensation, amortization of goodwill and other intangibles, and restructuring-related and other charges, each of which is not allocated to segment results. All other centrally-incurred operating costs operating costs npl → gastos mpl operacionales 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 through www.amazon.com and www.amazon.ca (including from third-party sellers), from North America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. focused Syndicated Stores, such as www.cdnow CDNOW.com was an online retailer, founded in February 1994 by twin brothers Jason Olim and Matthew Olim of Ambler, Pennsylvania. CDNOW was initially launched as a telnet (text-only) service in August 1994, and then as a website in September 1994. .com, our mail-order mail order n. An order for goods to be shipped through the mail.  -or tool catalog catalog, descriptive list, on cards or in a book, of the contents of a library. Assurbanipal's library at Nineveh was cataloged on shelves of slate. The first known subject catalog was compiled by Callimachus at the Alexandrian Library in the 3d cent. B.C. and from non-retail activities such asNorth America focused Merchant.com, marketing and promotional agreements. -- The International segment consists of amounts earned from retail sales of consumer products through www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp (including from third-party sellers), 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. -- 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 See video game console. and video game consoles This is a list of video game consoles by the era they appeared in. Eras are named based on the dominant console type of the era (even though not all consoles of those eras are of the same type). Some eras are referred to based on how many bits a major console could process. . 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, sporting goods, 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. -- All references to customers mean customer accounts, which are unique e-mail addresses See Internet address. e-mail address - electronic mail address , established either when a customer's initial order is shipped or when a customer orders from certain third-party sellers on our Web sites. Customer accounts include customers of Amazon Marketplace Amazon Marketplace ( i.e:Third-party Marketplace ) is Amazon.com's fixed-price online marketplace that allows sellers to survey their goods alongside Amazon's offerings. Buyers can buy new and used items sold directly by a third party through Amazon. , 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. -- All 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. |
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