Amazon.com Announces 33% Sales Growth Fueled by Lower Prices; Raises Financial Guidance; Free Super Saver Shipping on Orders Over $25 to Continue at Least Through the Holidays.Business Editors, High-Tech high-tech also hi-tech adj. Informal Of, relating to, or resembling high technology. high-tech Adjective same as hi-tech Adj. 1. Writers SEATTLE--(BUSINESS WIRE)--October 24, 2002 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 third quarter ended September September: see month. 30, 2002. Free cash flow was $120 million for the trailing four quarters, compared with negative $301 million for the four quarters ended September 2001. Free cash flow includes cash outflows for interest and capital expenditures and excludes proceeds from the exercise of stock-based employee awards. Common shares outstanding plus shares underlying stock-based employee awards totaled 430 million at September 30, 2002, a decrease of 2% 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 $851 million, compared with $639 million in the third quarter 2001, an increase of 33%, exceeding the Company's guidance of between $780 million and $830 million. Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. was $10 million, including restructuring-related and other charges of $37 million, compared with a loss of $70 million a year ago. 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 operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. was $27 million, or 3% of net sales, exceeding the Company's guidance of between $8 million and $17 million. This compares with a pro forma operating loss of $27 million in the third quarter 2001, an improvement of over $54 million. Net loss was $35 million, or $0.09 per share, compared with a third quarter 2001 net loss of $170 million, or $0.46 per share. Pro forma net profit, which includes interest expense, was $0.4 million, or $0.00 per share, compared with a pro forma net loss of $58 million, or $0.16 per share, in the third quarter 2001. (Details on the differences between GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). results and pro forma results are included below, with 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 those differences included in the attached financial statements.) "We've we've Contraction of we have. we've have lowered prices five times over the last 15 months, and simply put, it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have working," 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. "Based on the results so far, we've made the decision to leave Super Saver Super saver may refer to:
Today, Amazon.com offers 30% off books over $15; significantly lowered prices on electronics, tools, and bestselling bestselling adjective successful, top, hit (informal) smash (informal) flourishing, lucrative, smash-hit (informal) chart-topping (informal) moneymaking, number one, highly successful CDs and DVDs; and Free Super Saver Shipping on orders over $25. Highlights of Third Quarter Results (comparisons are with the equivalent period of 2001)
-- Our segment reporting includes four segments: North America Books, Music and DVD/Video ("BMVD"); North America Electronics, Tools and Kitchen ("ETK"); International; and Services.
-- Allocation methodologies for centrally incurred operating costs have been consistently applied and there are no internal transactions between segments.
-- The BMVD segment includes revenues, direct costs and cost allocations primarily associated with retail sales from www.amazon.com and www.amazon.ca for books, music, DVDs, video products and magazine subscription commissions. This segment also includes revenues from stores offering these products through our Syndicated Stores Program, such as www.borders.com; commissions and other amounts earned from sales of these products through Amazon Marketplace; and from offerings of these products by third-party sellers (such as magazine subscriptions) under our Merchant@amazon.com Program.
-- The ETK segment includes revenues, direct costs and cost allocations primarily associated with www.amazon.com retail sales of electronics, home improvement and home and garden products, as well as our catalog sales of toys and tools. This segment also includes commissions and other amounts earned from sales of these products through Amazon Marketplace and from offerings of these products by third-party sellers under our Merchant@amazon.com Program, including J&R Electronics.
-- The International segment includes all revenues, direct costs and cost allocations associated with the retail sales of our U.K., German, French and Japanese Web sites -- www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp. This segment also includes commissions and other amounts earned from sales of products through Amazon Marketplace and revenues from stores offering these products through our Syndicated Stores Program.
-- The Services segment includes revenues, direct costs and cost allocations associated with our business-to-business commercial agreements, including the Merchant Program, such as www.target.com, and, to the extent full product categories are not also offered by our online retail stores, the Merchant@amazon.com Program, such as Toysrus.com. This segment also includes our technology alliance with America Online and miscellaneous marketing, promotional and other agreements.
-- All 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 Web sites. Customer accounts include customers of Amazon Marketplace, Auctions, zShops and our Merchant@amazon.com and Syndicated Stores Programs, but exclude Merchant Program customers, Amazon.com Payments customers, our catalog customers and the customers of select companies with whom we have strategic marketing and promotional relationships. A customer is considered active upon placing an order.
Financial Guidance and 2003 Expectations 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 Amazon, in Greek mythology Amazon (ăm`əzŏn), in Greek mythology, one of a tribe of warlike women who lived in Asia Minor. .com's expectations as of October October: see month. 24, 2002. Results may be materially affected by many factors, such as changes in general 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. , 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. Fourth Quarter 2002 Guidance -- Fourth quarter net sales are expected to be between $1.325 billion and $1.425 billion, or grow between 19% and 28%. -- Fourth quarter pro forma operating profit is expected to be between $70 million and $95 million. Full Year 2003 Expectations -- Net sales are expected to grow over 10%. -- Pro forma operating profit is expected to be over $200 million. This amount could be impacted, either positively or negatively, by the investment choices the Company makes for the long term. A conference call will be Webcast live at www.amazon.com/ir today at 2 p.m. PT/5 p.m. ET and will be available through December December: see month. 31, 2002. This call will contain forward-looking statements and other material information. These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, among others, the rate of growth of the economy in general and of the Internet and online commerce; customer spending patterns; 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 service relationships with third-party sellers and other strategic transactions; foreign-currency exchange risks; seasonality; international growth and expansion; 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; and fluctuations in the value of securities and non-cash payments Amazon.com receives in connection with such transactions. 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. , inventory, limited operating history, government regulation and taxation, customer or third-party sellers fraud, Amazon.com Payments, and new business areas, business combinations and strategic alliances. 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, 2001, and all subsequent filings. Pro Forma Results Pro forma results, which generally exclude non-operational, non-cash expenses Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) and income as well as one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. charges, are provided as a complement to results provided in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. (known as "GAAP"). Management uses such pro forma measures internally to evaluate the Company's performance and manage its operations. A reconciliation of GAAP to pro forma is included in the attached financial statements. Pro forma operating results exclude the following line items on the Company's statements of operations: -- Stock-based compensation, -- Amortization of goodwill and 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. Pro forma net results exclude, in addition to the line items described above, the following line items on the Company's statements of operations: -- Other gains (losses), net, -- Equity in losses of equity-method investees, net, and -- Cumulative effect of change in accounting principle. 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 its virtual doors on the World Wide Web in July July: see month. 1995 and today offers Earth's Biggest Selection. Amazon.com seeks to be the world's most customer-centric company, where customers can find and discover anything they might want to buy online at a great price. Amazon.com and sellers list millions of unique new and used items in categories such as electronics, computers, kitchen and housewares house·wares pl.n. Cooking utensils, dishes, and other small articles used in a household, especially in the kitchen. , books, music, DVDs, videos, cameras and photo items, office products, toys, baby items and baby registry The configuration database in all 32-bit versions of Windows that contains settings for the hardware and software in the PC it is installed in. The Registry is made up of the SYSTEM.DAT and USER.DAT files. Many settings previously stored in the WIN.INI and SYSTEM. , software, computer and video games This article is about the British magazine covering computer and video games. For the American magazine, see Computer Games Magazine. Computer And Video Games (CVG , cell phones and service, tools and hardware, travel services, magazine subscriptions and outdoor living items. Through 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. , zShops and Auctions, any business or individual can sell virtually anything to Amazon.com's millions of customers. Amazon.com operates five international Web sites: www.amazon.ca, www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp.
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2002 2001 2002 2001
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD $270,438 $462,949 $540,282 $822,435
OPERATING ACTIVITIES:
Net loss (35,080) (169,874) (151,783) (572,364)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation of fixed
assets and other
amortization 20,501 19,795 62,411 63,662
Stock-based compensation (832) (2,567) 33,247 2,700
Equity in losses of
equity-method investees,
net 557 4,982 3,469 28,472
Amortization of goodwill
and other intangibles 1,212 41,835 4,565 143,496
Non-cash restructuring-
related and other 2,370 1,881 2,370 70,410
Gain on sale of marketable
securities, net (3,020) (1,351) (3,833) (1,137)
Other losses (gains), net (2,261) 63,625 55,677 18,453
Non-cash interest expense
and other 7,911 6,834 22,436 20,119
Cumulative effect of
change in accounting
principle - - (801) 10,523
Changes in operating
assets and liabilities:
Inventories (24,029) (659) (2,935) 44,441
Prepaid expenses and
other current assets (14,670) 2,960 (31,420) 18,091
Accounts payable 49,408 (22,594) (106,296) (253,984)
Accrued expenses and
other current
liabilities 40,895 (9,721) (37,455) (15,212)
Unearned revenue 26,237 33,443 75,641 76,640
Amortization of
previously unearned
revenue (29,487) (30,100) (97,741) (95,400)
Interest payable (1,604) (2,892) (25,840) (27,812)
--------- --------- --------- ---------
Net cash provided by (used
in) operating activities 38,108 (64,403) (198,288) (468,902)
INVESTING ACTIVITIES:
Sales and maturities of
marketable securities and
other investments 50,621 141,724 400,532 303,061
Purchases of marketable
securities (28,186) (223,817) (462,290) (280,938)
Purchases of fixed assets,
including internal-use
software and Web site
development (11,353) (12,925) (23,647) (42,787)
--------- --------- --------- ---------
Net cash provided by
(used in) investing
activities 11,082 (95,018) (85,405) (20,664)
FINANCING ACTIVITIES:
Proceeds from exercise of
stock options and other 6,038 1,101 56,313 14,578
Proceeds from issuance of
common stock, net of
issuance costs - 99,831 - 99,831
Proceeds from long-term
debt and other - - - 10,000
Repayment of capital lease
obligations and other (4,126) (6,466) (12,121) (15,135)
--------- --------- --------- ---------
Net cash provided by
financing activities 1,912 94,466 44,192 109,274
Effect of exchange-rate
changes on cash and cash
equivalents 6,024 34,313 26,783 (9,836)
--------- --------- --------- ---------
Net increase (decrease) in
cash and cash equivalents 57,126 (30,642) (212,718) (390,128)
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $327,564 $432,307 $327,564 $432,307
========= ========= ========= =========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Fixed assets acquired
under capital leases $162 $2,014 $2,297 $4,483
Equity securities received
for commercial agreements - - - 331
Cash paid for interest 29,898 30,275 110,947 110,990
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 Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net sales $851,299 $639,281 $2,504,326 $2,007,262
Cost of sales 635,132 477,089 1,846,867 1,482,753
----------- ----------- ----------- -----------
Gross profit 216,167 162,192 657,459 524,509
Operating expenses:
Fulfillment 90,342 81,400 265,908 265,231
Marketing 26,728 32,537 87,804 103,833
Technology and
content 52,907 53,846 166,569 188,840
General and
administrative 18,698 21,481 59,034 70,287
Stock-based
compensation (1) (832) (2,567) 33,247 2,700
Amortization of
goodwill and other
intangibles 1,212 41,835 4,565 143,496
Restructuring-
related and other 36,757 3,994 46,731 176,904
----------- ----------- ----------- -----------
Total operating
expenses 225,812 232,526 663,858 951,291
----------- ----------- ----------- -----------
Loss from operations (9,645) (70,334) (6,399) (426,782)
Interest income 5,600 6,316 16,902 23,073
Interest expense (35,922) (35,046) (106,817) (103,942)
Other income (expense),
net 3,183 (2,203) 2,876 (7,265)
Other gains (losses),
net 2,261 (63,625) (55,677) (18,453)
----------- ----------- ----------- -----------
Total non-
operating
expenses, net (24,878) (94,558) (142,716) (106,587)
----------- ----------- ----------- -----------
Loss before equity in
losses of equity-
method investees (34,523) (164,892) (149,115) (533,369)
Equity in losses of
equity-method
investees, net (557) (4,982) (3,469) (28,472)
----------- ----------- ----------- -----------
Loss before change in
accounting principle (35,080) (169,874) (152,584) (561,841)
Cumulative effect of
change in accounting
principle - - 801 (10,523)
----------- ----------- ----------- -----------
Net loss $(35,080) $(169,874) $(151,783) $(572,364)
=========== =========== =========== ===========
Basic and diluted loss
per share:
Prior to cumulative
effect of change in
accounting
principle $(0.09) $(0.46) $(0.41) $(1.55)
Cumulative effect of
change in
accounting
principle - - 0.01 (0.03)
----------- ----------- ----------- -----------
$(0.09) $(0.46) $(0.40) $(1.58)
=========== =========== =========== ===========
Shares used in
computation of basic
and diluted loss per
share: 379,650 368,052 376,564 361,782
=========== =========== =========== ===========
(1) Components of
stock-based
compensation:
Fulfillment $(98) $(575) $5,512 $206
Marketing 115 (110) 2,419 370
Technology and
content (765) (948) 17,305 1,708
General and
administrative (84) (934) 8,011 416
----------- ----------- ----------- -----------
$(832) $(2,567) $33,247 $2,700
=========== =========== =========== ===========
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
September 30, 2002
--------------------------------------
As Reported Pro Forma
(1) Adjustments Pro Forma
------------ ------------ ------------
Net sales $851,299 $ - $851,299
Cost of sales 635,132 - 635,132
------------ ------------ ------------
Gross profit 216,167 - 216,167
Operating expenses:
Fulfillment 90,342 - 90,342
Marketing 26,728 - 26,728
Technology and content 52,907 - 52,907
General and administrative 18,698 - 18,698
Stock-based compensation (832) 832 -
Amortization of goodwill and
other intangibles 1,212 (1,212) -
Restructuring-related and
other 36,757 (36,757) -
------------ ------------ ------------
Total operating expenses 225,812 (37,137) 188,675
------------ ------------ ------------
Income (loss) from operations (9,645) 37,137 27,492
Interest income 5,600 - 5,600
Interest expense (35,922) - (35,922)
Other income (expense), net 3,183 - 3,183
Other gains (losses), net 2,261 (2,261) -
------------ ------------ ------------
Total non-operating expenses,
net (24,878) (2,261) (27,139)
------------ ------------ ------------
Income (loss) before equity in
losses of equity-method
investees (34,523) 34,876 353
Equity in losses of equity-
method investees, net (557) 557 -
------------ ------------ ------------
Net income (loss) $(35,080) $35,433 $353
============ ============ ============
Net cash provided by (used in)
operating activities $38,108 $38,108
============ ============
Basic and diluted income (loss)
per share $(0.09) $0.09 $0.00
============ ============ ============
Shares used in computation
of income (loss) per share
Basic 379,650 379,650
============ ============
Diluted 379,650 398,361
============ ============
Three Months Ended
September 30, 2001
--------------------------------------
As Reported Pro Forma
(1) Adjustments Pro Forma
------------ ------------ ------------
Net sales $639,281 $ - $639,281
Cost of sales 477,089 - 477,089
------------ ------------ ------------
Gross profit 162,192 - 162,192
Operating expenses:
Fulfillment 81,400 - 81,400
Marketing 32,537 - 32,537
Technology and content 53,846 - 53,846
General and administrative 21,481 - 21,481
Stock-based compensation (2,567) 2,567 -
Amortization of goodwill and
other intangibles 41,835 (41,835) -
Restructuring-related and
other 3,994 (3,994) -
------------ ------------ ------------
Total operating expenses 232,526 (43,262) 189,264
------------ ------------ ------------
Income (loss) from operations (70,334) 43,262 (27,072)
Interest income 6,316 - 6,316
Interest expense (35,046) - (35,046)
Other income (expense), net (2,203) - (2,203)
Other gains (losses), net (63,625) 63,625 -
------------ ------------ ------------
Total non-operating expenses,
net (94,558) 63,625 (30,933)
------------ ------------ ------------
Income (loss) before equity in
losses of equity-method
investees (164,892) 106,887 (58,005)
Equity in losses of equity-
method investees, net (4,982) 4,982 -
------------ ------------ ------------
Net income (loss) $(169,874) $111,869 $(58,005)
============ ============ ============
Net cash provided by (used in)
operating activities $(64,403) $(64,403)
============ ============
Basic and diluted income (loss)
per share $(0.46) $0.30 $(0.16)
============ ============ ============
Shares used in computation
of income (loss) per share
Basic 368,052 368,052
============ ============
Diluted 368,052 368,052
============ ============
(1) In accordance with accounting principles generally accepted in
the United States.
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)
Nine Months Ended
September 30, 2002
--------------------------------------
As Reported Pro Forma
(1) Adjustments Pro Forma
------------ ------------ ------------
Net sales $2,504,326 $ - $2,504,326
Cost of sales 1,846,867 - 1,846,867
------------ ------------ ------------
Gross profit 657,459 - 657,459
Operating expenses:
Fulfillment 265,908 - 265,908
Marketing 87,804 - 87,804
Technology and content 166,569 - 166,569
General and administrative 59,034 - 59,034
Stock-based compensation 33,247 (33,247) -
Amortization of goodwill and
other intangibles 4,565 (4,565) -
Restructuring-related and
other 46,731 (46,731) -
------------ ------------ ------------
Total operating expenses 663,858 (84,543) 579,315
------------ ------------ ------------
Income (loss) from operations (6,399) 84,543 78,144
Interest income 16,902 - 16,902
Interest expense (106,817) - (106,817)
Other income (expense), net 2,876 - 2,876
Other gains (losses), net (55,677) 55,677 -
------------ ------------ ------------
Total non-operating expenses,
net (142,716) 55,677 (87,039)
------------ ------------ ------------
Loss before equity in losses of
equity-method investees (149,115) 140,220 (8,895)
Equity in losses of equity-
method investees, net (3,469) 3,469 -
------------ ------------ ------------
Loss before change in
accounting principle (152,584) 143,689 (8,895)
Cumulative effect of change in
accounting principle 801 (801) -
------------ ------------ ------------
Net loss $(151,783) $142,888 $(8,895)
============ ============ ============
Net cash used in operating
activities $(198,288) $(198,288)
============ ============
Basic and diluted loss per
share:
Prior to cumulative effect of
change in accounting
principle $(0.41) $0.39 $(0.02)
Cumulative effect of change in
accounting principle 0.01 (0.01) -
------------ ------------ ------------
$(0.40) $0.38 $(0.02)
============ ============ ============
Shares used in computation of
basic and diluted loss
per share: 376,564 376,564
============ ============
Nine Months Ended
September 30, 2001
--------------------------------------
As Reported Pro Forma
(1) Adjustments Pro Forma
------------ ------------ ------------
Net sales $2,007,262 $ - $2,007,262
Cost of sales 1,482,753 - 1,482,753
------------ ------------ ------------
Gross profit 524,509 - 524,509
Operating expenses:
Fulfillment 265,231 - 265,231
Marketing 103,833 - 103,833
Technology and content 188,840 - 188,840
General and administrative 70,287 - 70,287
Stock-based compensation 2,700 (2,700) -
Amortization of goodwill and
other intangibles 143,496 (143,496) -
Restructuring-related and
other 176,904 (176,904) -
------------ ------------ ------------
Total operating expenses 951,291 (323,100) 628,191
------------ ------------ ------------
Income (loss) from operations (426,782) 323,100 (103,682)
Interest income 23,073 - 23,073
Interest expense (103,942) - (103,942)
Other income (expense), net (7,265) - (7,265)
Other gains (losses), net (18,453) 18,453 -
------------ ------------ ------------
Total non-operating expenses,
net (106,587) 18,453 (88,134)
------------ ------------ ------------
Loss before equity in losses of
equity-method investees (533,369) 341,553 (191,816)
Equity in losses of equity-
method investees, net (28,472) 28,472 -
------------ ------------ ------------
Loss before change in
accounting principle (561,841) 370,025 (191,816)
Cumulative effect of change in
accounting principle (10,523) 10,523 -
------------ ------------ ------------
Net loss $(572,364) $380,548 $(191,816)
============ ============ ============
Net cash used in operating
activities $(468,902) $(468,902)
============ ============
Basic and diluted loss per
share:
Prior to cumulative effect of
change in accounting
principle $(1.55) $1.02 $(0.53)
Cumulative effect of change in
accounting principle (0.03) 0.03 -
------------ ------------ ------------
$(1.58) $1.05 $(0.53)
============ ============ ============
Shares used in computation of
basic and diluted loss
per share: 361,782 361,782
============ ============
(1) In accordance with accounting principles generally accepted in
the United States.
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 September 30, 2002
--------------------------------------------
North America
--------------------------------------------
Books, Music Electronics,
and DVD/Video Tools and Total
Kitchen
-------------- --------------- -------------
Net sales $412,428 $128,516 $540,944
Gross profit 116,458 13,027 129,485
Pro forma income (loss)
from operations 43,102 (24,071) 19,031
Stock-based compensation
Amortization of other
intangibles
Restructuring-related and
other
Total non-operating
expenses, net
Equity in losses of
equity-method investees,
net
Net loss
Segment highlights:
Y / Y net sales growth 17% 25% 19%
Y / Y gross profit growth 25% (2%) 21%
Gross margin 28% 10% 24%
Pro forma operating
margin 10% (19%) 4%
Net sales mix 49% 15% 64%
Three Months Ended September 30, 2002
--------------------------------------------
International Services Consolidated
-------------- --------------- -------------
Net sales $263,540 $46,815 $851,299
Gross profit 60,728 25,954 216,167
Pro forma income (loss)
from operations 819 7,642 27,492
Stock-based compensation 832
Amortization of other
intangibles (1,212)
Restructuring-related and
other (36,757)
Total non-operating
expenses, net (24,878)
Equity in losses of
equity-method investees,
net (557)
------------
Net loss $(35,080)
------------
Segment highlights:
Y / Y net sales growth 90% 1% 33%
Y / Y gross profit growth 116% (5%) 33%
Gross margin 23% 55% 25%
Pro forma operating
margin 0% 16% 3%
Net sales mix 31% 5% 100%
Three Months Ended September 30, 2001
--------------------------------------------
North America
--------------------------------------------
Books, Music Electronics,
and DVD/Video Tools and
Kitchen Total
-------------- --------------- -------------
Net sales $351,431 $103,112 $454,543
Gross profit 93,354 13,327 106,681
Pro forma income (loss)
from operations 26,223 (33,107) (6,884)
Stock-based compensation
Amortization of goodwill
and other intangibles
Restructuring-related and
other
Total non-operating
expenses, net
Equity in losses of
equity-method investees,
net
Net loss
Segment highlights:
Y / Y net sales growth (12%) 6% (9%)
Y / Y gross profit growth (14%) 49% (9%)
Gross margin 27% 13% 23%
Pro forma operating margin 7% (32%) (2%)
Net sales mix 55% 16% 71%
Three Months Ended September 30, 2001
--------------------------------------------
International Services Consolidated
-------------- --------------- -------------
Net sales $138,491 $46,247 $639,281
Gross profit 28,163 27,348 162,192
Pro forma income (loss)
from operations (28,000) 7,812 (27,072)
Stock-based compensation 2,567
Amortization of goodwill
and other intangibles (41,835)
Restructuring-related and
other (3,994)
Total non-operating
expenses, net (94,558)
Equity in losses of
equity-method investees,
net (4,982)
------------
Net loss $(169,874)
------------
Segment highlights:
Y / Y net sales growth 58% (12%) 0%
Y / Y gross profit growth 49% (11%) (3%)
Gross margin 20% 59% 25%
Pro forma operating
margin (20%) 17% (4%)
Net sales mix 22% 7% 100%
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)
Nine Months Ended September 30, 2002
--------------------------------------------
North America
--------------------------------------------
Electronics,
Books, Music Tools and
and DVD/Video Kitchen Total
-------------- --------------- -------------
Net sales $1,267,193 $383,150 $1,650,343
Gross profit 363,266 50,968 414,234
Pro forma income (loss)
from operations 138,558 (63,325) 75,233
Stock-based compensation
Amortization of other
intangibles
Restructuring-related and
other
Total non-operating
expenses, net
Equity in losses of
equity-method investees,
net
Cumulative effect of
change in accounting
principle
Net loss
Segment highlights:
Y / Y net sales growth 10% 16% 11%
Y / Y gross profit growth 16% 17% 16%
Gross margin 29% 13% 25%
Pro forma operating
margin 11% (17%) 5%
Net sales mix 51% 15% 66%
Nine Months Ended September 30, 2002
--------------------------------------------
International Services Consolidated
-------------- --------------- -------------
Net sales $707,517 $146,466 $2,504,326
Gross profit 157,101 86,124 657,459
Pro forma income (loss)
from operations (20,632) 23,543 78,144
Stock-based compensation (33,247)
Amortization of other
intangibles (4,565)
Restructuring-related and
other (46,731)
Total non-operating
expenses, net (142,716)
Equity in losses of
equity-method investees,
net (3,469)
Cumulative effect of
change in accounting
principle 801
------------
Net loss $(151,783)
------------
Segment highlights:
Y / Y net sales growth 77% 15% 25%
Y / Y gross profit growth 84% 5% 25%
Gross margin 22% 59% 26%
Pro forma operating
margin (3%) 16% 3%
Net sales mix 28% 6% 100%
Nine Months Ended September 30, 2001
--------------------------------------------
North America
--------------------------------------------
Electronics,
Books, Music Tools and
and DVD/Video Kitchen Total
-------------- --------------- -------------
Net sales $1,150,740 $330,576 $1,481,316
Gross profit 313,317 43,706 357,023
Pro forma income (loss)
from operations 92,815 (120,262) (27,447)
Stock-based compensation
Amortization of goodwill
and other intangibles
Restructuring-related and
other
Total non-operating
expenses, net
Equity in losses of
equity-method investees,
net
Cumulative effect of
change in accounting
principle
Net loss
Segment highlights:
Y / Y net sales growth (3%) 25% 2%
Y / Y gross profit growth 13% 96% 19%
Gross margin 27% 13% 24%
Pro forma operating
margin 8% (36%) (2%)
Net sales mix 57% 17% 74%
Nine Months Ended September 30, 2001
--------------------------------------------
International Services Consolidated
-------------- --------------- -------------
Net sales $398,942 $127,004 $2,007,262
Gross profit 85,578 81,908 524,509
Pro forma income (loss)
from operations (92,562) 16,327 (103,682)
Stock-based compensation (2,700)
Amortization of goodwill
and other intangibles (143,496)
Restructuring-related and
other (176,904)
Total non-operating
expenses, net (106,587)
Equity in losses of
equity-method investees,
net (28,472)
Cumulative effect of
change in accounting
principle (10,523)
------------
Net loss $(572,364)
------------
Segment highlights:
Y / Y net sales growth 69% 23% 12%
Y / Y gross profit growth 67% 3% 22%
Gross margin 21% 64% 26%
Pro forma operating
margin (23%) 13% (5%)
Net sales mix 20% 6% 100%
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)
September 30, December 31,
2002 2001
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $327,564 $540,282
Marketable securities 538,238 456,303
Inventories 151,514 143,722
Prepaid expenses and other current
assets 102,291 67,613
--------------- ---------------
Total current assets 1,119,607 1,207,920
Fixed assets, net 239,238 271,751
Goodwill, net 70,811 45,367
Other intangibles, net 4,373 34,382
Investments in equity-method investees 1,136 10,387
Other equity investments 15,362 17,972
Other assets 46,878 49,768
--------------- ---------------
Total assets $1,497,405 $1,637,547
=============== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $347,519 $444,748
Accrued expenses and other current
liabilities 241,674 305,064
Unearned revenue 65,878 87,978
Interest payable 42,793 68,632
Current portion of long-term debt
and other 13,134 14,992
--------------- ---------------
Total current liabilities 710,998 921,414
Long-term debt and other 2,264,846 2,156,133
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
-- 381,216 and 373,218,
respectively 3,812 3,732
Additional paid-in capital 1,550,118 1,462,769
Deferred stock-based compensation (7,775) (9,853)
Accumulated other comprehensive
loss (12,233) (36,070)
Accumulated deficit (3,012,361) (2,860,578)
--------------- ---------------
Total stockholders' deficit (1,478,439) (1,440,000)
--------------- ---------------
Total liabilities and
stockholders' deficit $1,497,405 $1,637,547
=============== ===============
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
(unaudited)
(in millions, except per share data)
Y / Y
%
Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Growth
-------- ------- ------- ------- ------- ------
Results of Operations
Net sales $ 639 $1,115 $ 847 $ 806 $ 851 33%
Net sales
-- trailing twelve
months (TTM) $2,980 $3,122 $3,269 $3,407 $3,619 21%
Net sales shipped
outside the U.S.
-- % of net sales 29% 29% 34% 34% 36% N/A
Gross profit $ 162 $ 274 $ 223 $ 218 $ 216 33%
Gross margin
-- % of net sales 25.4% 24.6% 26.3% 27.1% 25.4% N/A
Gross profit -- TTM $ 749 $ 799 $ 839 $ 878 $ 932 24%
Gross margin -- TTM
% of net sales 25.1% 25.6% 25.7% 25.8% 25.7% N/A
Fulfillment costs
-- % of net sales 12.7% 9.8% 10.6% 10.6% 10.6% N/A
Fulfillment costs
-- TTM % of net sales 13.3% 12.0% 11.2% 10.7% 10.4% N/A
Fulfillment costs
-- % of net sales,
excluding Services net
sales 13.7% 10.7% 11.3% 11.3% 11.2% N/A
Pro forma operating
expenses $ 189 $ 215 $ 198 $ 192 $ 189 0%
Pro forma operating
expenses -- TTM $ 912 $ 844 $ 811 $ 795 $ 795 (13%)
Pro forma operating
income (loss) $ (27) $ 59 $ 25 $ 26 $ 27 N/A
Pro forma operating
margin -- % of
net sales (4.2%) 5.3% 2.9% 3.2% 3.2% N/A
Pro forma operating
income (loss) -- TTM $(164) $ (45) $ 28 $ 82 $ 137 N/A
Pro forma operating
income (loss) -- TTM
% of net sales (5.5%) (1.4%) 0.9% 2.4% 3.8% N/A
GAAP operating income
(loss) $ (70) $ 15 $ 2 $ 1 $ (10) (86%)
GAAP operating income
(loss) -- % of
net sales (11.0%) 1.3% 0.2% 0.2% (1.1%) N/A
GAAP operating income
(loss) -- TTM $(749) $ (412) $ (194) $ (53) $ 8 N/A
GAAP operating income
(loss) -- TTM % of
net sales (25.1%) (13.2%) (5.9%) (1.5%) 0.2% N/A
Pro forma net income
(loss) $ (58) $ 35 $ (5) $ (4) $ 0 N/A
Pro forma net income
(loss) per share $(0.16) $0.09 $(0.01) $(0.01) $ 0.00 N/A
Pro forma net income
(loss) -- TTM $ (282) $ (157) $ (86) $ (32) $ 26 N/A
GAAP net income (loss) $ (170) $ 5 $ (23) $ (94) $ (35) (79%)
GAAP net income (loss)
per share $(0.46) $ 0.01 $(0.06) $(0.25) $(0.09) N/A
GAAP net income (loss)
-- TTM $(1,118) $ (567) $ (356) $ (281) $ (147) (87%)
North America Books, Music and
DVD/Video (BMVD) segment:
BMVD net sales $351 $538 $443 $412 $412 17%
BMVD net sales
-- TTM $1,662 $1,689 $1,722 $1,744 $1,805 9%
BMVD gross profit $ 93 $ 140 $ 123 $ 124 $ 116 25%
BMVD pro forma
operating profit
(loss) $ 26 $ 64 $ 46 $ 49 $ 43 64%
BMVD pro forma
operating margin
-- % of BMVD net sales 7% 12% 10% 12% 10% N/A
North America Electronics,
Tools and Kitchen (ETK)
segment:
ETK net sales $ 103 $ 217 $ 126 $ 128 $ 129 25%
ETK net sales -- TTM $ 551 $ 547 $ 557 $ 574 $ 600 9%
ETK gross profit $ 13 $ 35 $ 19 $ 19 $ 13 (2%)
ETK pro forma
operating profit
(loss) $ (33) $ (20) $ (21) $ (18) $ (24) (27%)
ETK pro forma
operating margin
-- % of ETK net sales (32%) (9%) (16%) (14%) (19%) N/A
International segment:
International net
sales $ 138 $ 262 $ 226 $ 218 $ 264 90%
International net
sales -- TTM $ 544 $ 661 $ 755 $ 845 $ 970 78%
International gross
profit $ 28 $ 55 $ 49 $ 47 $ 61 116%
International pro
forma operating
profit (loss) $ (28) $ (11) $ (11) $ (10) $ 1 N/A
International pro
forma operating
margin -- % of
International net
sales (20%) (4%) (5%) (5%) 0% N/A
Services segment:
Services net sales $ 46 $ 98 $ 53 $ 47 $ 47 1%
Services net sales
-- TTM $ 223 $ 225 $ 236 $ 244 $ 245 10%
Services gross
profit $ 27 $ 45 $ 32 $ 29 $ 26 (5%)
Services pro forma
operating profit
(loss) $ 8 $ 26 $ 10 $ 6 $ 8 (2%)
Services pro forma
operating margin --
% of Services net
sales 17% 26% 20% 12% 16% 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
(unaudited)
(in millions, except inventory turnover, accounts
payable days, and employee data)
Y / Y
%
Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Growth
-------- ------- ------- ------- ------- ------
Balance Sheet
Cash and marketable
securities $ 668 $ 997 $ 745 $ 824 $ 866 30%
Inventory, net $ 131 $ 144 $ 139 $ 127 $ 152 16%
Inventory -- % of TTM
net sales 5% 5% 4% 4% 4% N/A
Inventory turnover
-- TTM 14.8 15.8 17.4 18.9 19.4 31%
Fixed assets, net $ 288 $ 272 $ 256 $ 249 $ 239 (17%)
Accounts payable days
-- ending 46 49 45 46 50 10%
Cash Flows
Operating cash flow
-- TTM $ (221) $ (120) $ 46 $ 48 $ 151 N/A
Free cash flow
(operating cash flow
less purchases of
fixed assets) -- TTM $ (301) $ (170) $ 10 $ 16 $ 120 N/A
Adjusted free cash flow
(free cash flow less
repayment of capital
lease obligations)
-- TTM $ (320) $ (190) $ (9) $ (3) $ 103 N/A
Other
Common shares
outstanding 372 373 375 380 381 3%
Stock-based employee
awards outstanding --
% of common shares
outstanding 18% 18% 17% 13% 13% N/A
Employees (full-time
and part-time) 7,900 7,800 7,900 7,700 7,800 (2%)
------------------------------- ------- ------- ------- ------- ------
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 Third Quarter Ended September 30, 2002 (unaudited) Results of Operations (all comparisons are with the equivalent period of 2001) Net Sales
-- Our segment reporting includes four segments: North America Books, Music and DVD/Video ("BMVD"); North America Electronics, Tools and Kitchen ("ETK"); International; and Services.
-- Allocation methodologies for centrally incurred operating costs have been consistently applied and there are no internal transactions between segments.
-- The BMVD segment includes revenues, direct costs and cost allocations primarily associated with retail sales from www.amazon.com and www.amazon.ca for books, music, DVDs, video products and magazine subscription commissions. This segment also includes revenues from stores offering these products through our Syndicated Stores Program, such as www.borders.com; commissions and other amounts earned from sales of these products through Amazon Marketplace; and from offerings of these products by third-party sellers (such as magazine subscriptions) under our Merchant@amazon.com Program.
-- The ETK segment includes revenues, direct costs and cost allocations primarily associated with www.amazon.com retail sales of electronics, home improvement and home and garden products, as well as our catalog sales of toys and tools. This segment also includes commissions and other amounts earned from sales of these products through Amazon Marketplace and from offerings of these products by third-party sellers under our Merchant@amazon.com Program, including J&R Electronics.
-- The International segment includes all revenues, direct costs and cost allocations associated with the retail sales of our U.K., German, French and Japanese Web sites -- www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp. This segment also includes commissions and other amounts earned from sales of products through Amazon Marketplace and revenues from stores offering these products through our Syndicated Stores Program.
-- The Services segment includes revenues, direct costs and cost allocations associated with our business-to-business commercial agreements, including the Merchant Program, such as www.target.com, and, to the extent full product categories are not also offered by our online retail stores, the Merchant@amazon.com Program, such as Toysrus.com. This segment also includes our technology alliance with America Online and miscellaneous marketing, promotional and other agreements.
-- All 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 Web sites. Customer accounts include customers of Amazon Marketplace, Auctions, zShops and our Merchant@amazon.com and Syndicated Stores Programs, but exclude Merchant Program customers, Amazon.com Payments customers, our catalog customers and the customers of select companies with whom we have strategic marketing and promotional relationships. A customer is considered active upon placing an order.
Gross Profit -- Shipping loss increased to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $10 million, from a loss of $2 million. We continue to measure our shipping results relative to their impact on our overall financial results, with the viewpoint that shipping promotions are an effective marketing tool. We expect to continue offering our customers free shipping offers, which reduce shipping revenue as a percentage of sales and negatively affect gross margins on our retail sales. Fulfillment -- Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service centers, including costs attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to receiving, inspecting and warehousing inventories; picking, packaging and preparing customers' orders for shipment; credit card fees and bad debt costs; and responding to inquiries from customers. Fulfillment costs also include amounts paid to third-party cosourcers, who assist us in fulfillment and customer service operations. Certain Services segment fulfillment-related costs incurred on behalf of third-party sellers are classified as cost of sales rather than fulfillment. Stock-Based Compensation -- During the first quarter 2001, we offered a limited non-compulsory exchange of employee stock options, which results in variable accounting treatment for approximately 8 million stock options at September 30, 2002, including approximately 7 million options granted under the exchange offer with an exercise price of $13.375. Variable accounting treatment will result in unpredictable charges or credits dependent on the fluctuations in quoted prices for our common stock, which we are unable to forecast. -- Cumulative compensation expense recorded at September 30, 2002, associated with variable accounting was approximately $29 million -- based on exercises to date and a quarter-end closing common stock price of $15.93 -- of which $12 million is associated with options exercised and no longer subject to future variability. -- We have quantified the hypothetical Hypothetical is an adjective, meaning of or pertaining to a hypothesis. See:
compensation associated with various quoted prices of our common stock using a sensitivity analysis for our outstanding stock options subject to variable accounting. We have provided this information to give additional insight into the future volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the we may experience in our results of operations to the extent that the quoted price for our common stock is above $13.375. This sensitivity analysis is not a prediction "Prediction is very difficult, especially if it's about the future." - Niels Bohr A prediction is a statement or claim that a particular event will occur in the future in more certain terms than a forecast. of future performance of the quoted prices of our common stock. Using the following hypothetical market prices of our common stock above $13.375 (including the actual expense associated with options exercised), our hypothetical cumulative compensation expense at September 30, 2002, and the difference between hypothetical cumulative compensation expense and actual cumulative compensation expense recorded at September 30, 2002, resulting from variable accounting treatment would have been as follows (in thousands):
Hypothetical Hypothetical vs.
Hypothetical Hypothetical Cumulative Cumulative
Increase Market Price Compensation Compensation Expense
Over $13.375 per Share Expense Sept. 30, 2002
------------- ------------ ------------- ---------------------
5% $14.04 $17,051 $(12,424)
10% $14.71 $21,618 $ (7,857)
15% $15.38 $26,185 $ (3,290)
25% $16.72 $35,319 $ 5,844
50% $20.06 $58,155 $ 28,680
-- Commencing in the fourth quarter of 2002, stock-based compensation will also include amounts associated with our planned restricted stock unit program. Under this program, we will award 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. as our primary vehicle for employee equity compensation. Restricted stock units are 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 ratably 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 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: , the corresponding previously recognized expense is reversed as an offset to "Stock-based compensation." Amortization of Goodwill and Other Intangibles -- As a result of our adoption of Statement of Financial Accounting Standards No. 141 and No. 142, during the first quarter 2002 we reclassified $25 million of other intangibles (comprising only assembled as·sem·ble v. as·sem·bled, as·sem·bling, as·sem·bles v.tr. 1. To bring or call together into a group or whole: assembled the jury. 2. workforce intangibles) to goodwill and discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: the amortization of our goodwill assets. Restructuring-Related and Other
-- Our segment reporting includes four segments: North America Books, Music and DVD/Video ("BMVD"); North America Electronics, Tools and Kitchen ("ETK"); International; and Services.
-- Allocation methodologies for centrally incurred operating costs have been consistently applied and there are no internal transactions between segments.
-- The BMVD segment includes revenues, direct costs and cost allocations primarily associated with retail sales from www.amazon.com and www.amazon.ca for books, music, DVDs, video products and magazine subscription commissions. This segment also includes revenues from stores offering these products through our Syndicated Stores Program, such as www.borders.com; commissions and other amounts earned from sales of these products through Amazon Marketplace; and from offerings of these products by third-party sellers (such as magazine subscriptions) under our Merchant@amazon.com Program.
-- The ETK segment includes revenues, direct costs and cost allocations primarily associated with www.amazon.com retail sales of electronics, home improvement and home and garden products, as well as our catalog sales of toys and tools. This segment also includes commissions and other amounts earned from sales of these products through Amazon Marketplace and from offerings of these products by third-party sellers under our Merchant@amazon.com Program, including J&R Electronics.
-- The International segment includes all revenues, direct costs and cost allocations associated with the retail sales of our U.K., German, French and Japanese Web sites -- www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp. This segment also includes commissions and other amounts earned from sales of products through Amazon Marketplace and revenues from stores offering these products through our Syndicated Stores Program.
-- The Services segment includes revenues, direct costs and cost allocations associated with our business-to-business commercial agreements, including the Merchant Program, such as www.target.com, and, to the extent full product categories are not also offered by our online retail stores, the Merchant@amazon.com Program, such as Toysrus.com. This segment also includes our technology alliance with America Online and miscellaneous marketing, promotional and other agreements.
-- All 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 Web sites. Customer accounts include customers of Amazon Marketplace, Auctions, zShops and our Merchant@amazon.com and Syndicated Stores Programs, but exclude Merchant Program customers, Amazon.com Payments customers, our catalog customers and the customers of select companies with whom we have strategic marketing and promotional relationships. A customer is considered active upon placing an order.
(in thousands) Leases (a) Other Total
---------- ----- -----
Three Months Ending Dec. 31,
2002 $6,235 $ -- $6,235
Year Ending Dec. 31,
2003 16,170 1,580 17,750
2004 14,581 1,000 15,581
2005 7,903 3,113 11,016
2006 5,326 -- 5,326
Thereafter 17,872 -- 17,872
--------- ---------- --------
Total estimated cash outflows $68,087 $5,693 $73,780
========= ========== ========
(a) Net of anticipated sublease income of approximately $53
million on gross lease obligations of $121 million.
Other Income (Expense), Net -- Other income, net was $3 million for the third quarter 2002, primarily consisting of net realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. on sales of 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 . Other Gains (Losses), Net -- Other gains, net were $2 million for the third quarter 2002, and primarily consist of a $2 million net gain on sales of equity investments and a nominal Trifling, token, or slight; not real or substantial; in name only. Nominal capital, for example, refers to extremely small or negligible funds, the use of which in a particular business is incidental. NOMINAL. Relating to a name. foreign-currency gain on the remeasurement of our 6.875% convertible subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes from Euros to U.S. dollars (we are unable to predict the gains or losses that will result from fluctuations in foreign exchange rates in future periods). Income Taxes
-- Our segment reporting includes four segments: North America Books, Music and DVD/Video ("BMVD"); North America Electronics, Tools and Kitchen ("ETK"); International; and Services.
-- Allocation methodologies for centrally incurred operating costs have been consistently applied and there are no internal transactions between segments.
-- The BMVD segment includes revenues, direct costs and cost allocations primarily associated with retail sales from www.amazon.com and www.amazon.ca for books, music, DVDs, video products and magazine subscription commissions. This segment also includes revenues from stores offering these products through our Syndicated Stores Program, such as www.borders.com; commissions and other amounts earned from sales of these products through Amazon Marketplace; and from offerings of these products by third-party sellers (such as magazine subscriptions) under our Merchant@amazon.com Program.
-- The ETK segment includes revenues, direct costs and cost allocations primarily associated with www.amazon.com retail sales of electronics, home improvement and home and garden products, as well as our catalog sales of toys and tools. This segment also includes commissions and other amounts earned from sales of these products through Amazon Marketplace and from offerings of these products by third-party sellers under our Merchant@amazon.com Program, including J&R Electronics.
-- The International segment includes all revenues, direct costs and cost allocations associated with the retail sales of our U.K., German, French and Japanese Web sites -- www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp. This segment also includes commissions and other amounts earned from sales of products through Amazon Marketplace and revenues from stores offering these products through our Syndicated Stores Program.
-- The Services segment includes revenues, direct costs and cost allocations associated with our business-to-business commercial agreements, including the Merchant Program, such as www.target.com, and, to the extent full product categories are not also offered by our online retail stores, the Merchant@amazon.com Program, such as Toysrus.com. This segment also includes our technology alliance with America Online and miscellaneous marketing, promotional and other agreements.
-- All 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 Web sites. Customer accounts include customers of Amazon Marketplace, Auctions, zShops and our Merchant@amazon.com and Syndicated Stores Programs, but exclude Merchant Program customers, Amazon.com Payments customers, our catalog customers and the customers of select companies with whom we have strategic marketing and promotional relationships. A customer is considered active upon placing an order.
Financial Condition -- Our marketable securities, at estimated fair value, consist of the following, as of September 30, 2002 (in thousands):
Asset-backed and agency securities $327,561
Treasury notes and bonds 132,557
Commercial paper and short-term obligations 37,281
Certificates of deposit 20,727
Corporate notes and bonds 16,963
Equity securities 3,149
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$538,238
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-- Our segment reporting includes four segments: North America Books, Music and DVD/Video ("BMVD"); North America Electronics, Tools and Kitchen ("ETK"); International; and Services.
-- Allocation methodologies for centrally incurred operating costs have been consistently applied and there are no internal transactions between segments.
-- The BMVD segment includes revenues, direct costs and cost allocations primarily associated with retail sales from www.amazon.com and www.amazon.ca for books, music, DVDs, video products and magazine subscription commissions. This segment also includes revenues from stores offering these products through our Syndicated Stores Program, such as www.borders.com; commissions and other amounts earned from sales of these products through Amazon Marketplace; and from offerings of these products by third-party sellers (such as magazine subscriptions) under our Merchant@amazon.com Program.
-- The ETK segment includes revenues, direct costs and cost allocations primarily associated with www.amazon.com retail sales of electronics, home improvement and home and garden products, as well as our catalog sales of toys and tools. This segment also includes commissions and other amounts earned from sales of these products through Amazon Marketplace and from offerings of these products by third-party sellers under our Merchant@amazon.com Program, including J&R Electronics.
-- The International segment includes all revenues, direct costs and cost allocations associated with the retail sales of our U.K., German, French and Japanese Web sites -- www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp. This segment also includes commissions and other amounts earned from sales of products through Amazon Marketplace and revenues from stores offering these products through our Syndicated Stores Program.
-- The Services segment includes revenues, direct costs and cost allocations associated with our business-to-business commercial agreements, including the Merchant Program, such as www.target.com, and, to the extent full product categories are not also offered by our online retail stores, the Merchant@amazon.com Program, such as Toysrus.com. This segment also includes our technology alliance with America Online and miscellaneous marketing, promotional and other agreements.
-- All 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 Web sites. Customer accounts include customers of Amazon Marketplace, Auctions, zShops and our Merchant@amazon.com and Syndicated Stores Programs, but exclude Merchant Program customers, Amazon.com Payments customers, our catalog customers and the customers of select companies with whom we have strategic marketing and promotional relationships. A customer is considered active upon placing an order.
Principal Interest Principal
at Maturity Rate Due Date
----------- -------- ----------
(in millions)
Senior Discount Notes $ 264 10.000% May 2008
Convertible Subordinated Notes 1,250 4.750% Feb. 2009
Convertible PEACS 681(a) 6.875% Feb. 2010
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Total long-term debt $2,195
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(a) 690 million Euros.
Certain Definitions and Other
-- Our segment reporting includes four segments: North America Books, Music and DVD/Video ("BMVD"); North America Electronics, Tools and Kitchen ("ETK"); International; and Services.
-- Allocation methodologies for centrally incurred operating costs have been consistently applied and there are no internal transactions between segments.
-- The BMVD segment includes revenues, direct costs and cost allocations primarily associated with retail sales from www.amazon.com and www.amazon.ca for books, music, DVDs, video products and magazine subscription commissions. This segment also includes revenues from stores offering these products through our Syndicated Stores Program, such as www.borders.com; commissions and other amounts earned from sales of these products through Amazon Marketplace; and from offerings of these products by third-party sellers (such as magazine subscriptions) under our Merchant@amazon.com Program.
-- The ETK segment includes revenues, direct costs and cost allocations primarily associated with www.amazon.com retail sales of electronics, home improvement and home and garden products, as well as our catalog sales of toys and tools. This segment also includes commissions and other amounts earned from sales of these products through Amazon Marketplace and from offerings of these products by third-party sellers under our Merchant@amazon.com Program, including J&R Electronics.
-- The International segment includes all revenues, direct costs and cost allocations associated with the retail sales of our U.K., German, French and Japanese Web sites -- www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp. This segment also includes commissions and other amounts earned from sales of products through Amazon Marketplace and revenues from stores offering these products through our Syndicated Stores Program.
-- The Services segment includes revenues, direct costs and cost allocations associated with our business-to-business commercial agreements, including the Merchant Program, such as www.target.com, and, to the extent full product categories are not also offered by our online retail stores, the Merchant@amazon.com Program, such as Toysrus.com. This segment also includes our technology alliance with America Online and miscellaneous marketing, promotional and other agreements.
-- All 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 Web sites. Customer accounts include customers of Amazon Marketplace, Auctions, zShops and our Merchant@amazon.com and Syndicated Stores Programs, but exclude Merchant Program customers, Amazon.com Payments customers, our catalog customers and the customers of select companies with whom we have strategic marketing and promotional relationships. A customer is considered active upon placing an order.
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