Amazon.com Announces 45% Free Cash Flow Growth and 26% Sales Growth, Fueled by Low Prices and Free Shipping; Raises Financial Guidance.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. -- 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 NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : AMZN AMZN Amazon.com (NASDAQ symbol) ) today announced financial results for its second quarter ended June June: see month. 30, 2004. 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 $410 million 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). , compared with $285 million for the trailing twelve months ended June 30, 2003. Free cash flow grew 45% to $354 million for the trailing twelve months, compared with $245 million for the trailing twelve months ended June 30, 2003. Common shares outstanding plus shares underlying stock-based awards outstanding totaled 434 million at June 30, 2004, compared with 433 million 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 $1.39 billion in the second quarter, compared with $1.10 billion in second quarter 2003, an increase of 26%. Net sales, excluding the $47 million benefit from changes in foreign exchange rates, grew 22% compared with second quarter 2003. 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 $86 million in the second quarter, compared with $42 million in second quarter 2003. 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 50% to $101 million in the second quarter, compared with $67 million in second quarter 2003. Consolidated segment operating income, excluding the $4 million benefit from changes in foreign exchange rates, grew 44% compared with second quarter 2003. Net income was $76 million in the second quarter, or $0.18 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 a net loss of $43 million, or $(0.11) per share, in second quarter 2003. 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 second quarter grew 77% to $75 million, or $0.18 per diluted share, compared with $42 million, or $0.10 per diluted share, in second quarter 2003. "Worldwide adoption of our everyday free shipping reached another record high point this quarter," 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. "While free shipping is expensive for the Company, it saves our customers tens of millions of dollars each quarter, and we plan to keep it in place indefinitely in·def·i·nite adj. Not definite, especially: a. Unclear; vague. b. Lacking precise limits: an indefinite leave of absence. c. ." Amazon.com continues to offer Free Super Saving Shipping on orders over $25 at www.amazon.com and also has free shipping offers at its U.K., German, French, Japanese Japanese (jăp'ənēz`), language of uncertain origin that is spoken by more than 125 million people, most of whom live in Japan. There are also many speakers of Japanese in the Ryukyu Islands, Korea, Taiwan, parts of the United States, and and Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. sites. Amazon.com offers 30% off books over $15 and continues to lower prices every day across its product offerings, ranging from electronics to jewelry jewelry, personal adornments worn for ornament or utility, to show rank or wealth, or to follow superstitious custom or fashion. The most universal forms of jewelry are the necklace, bracelet, ring, pin, and earring. to sports and outdoors items to tools. See "Financial Measures" for additional information. Highlights --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. segment sales, representing the Company's U.S. and Canadian sites, grew 13% to $792 million and segment operating income grew 21% to $66 million, compared with second quarter 2003. --International segment sales, representing the Company's U.K., German, French and Japanese sites, grew 50% to $595 million. Net sales, excluding the benefit from changes in foreign exchange rates, grew 38% compared with second quarter 2003. International segment operating income grew to $35 million, compared with $13 million in second quarter 2003. --International segment sales on a trailing-twelve-month basis were $2.51 billion, representing 42% of worldwide net sales. --Electronics & 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 sales were $1.36 billion for the trailing twelve months, representing 23% of worldwide net sales. --Inventory turns for the trailing twelve months were 18, down from 20 a year ago, as the Company continues to expand selection and availability. --The Company introduced two new stores in the U.S., offering more than 20,000 Beauty products and over 30,000 Musical Instrument items. 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 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 July July: see month. 22, 2004. Results may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending 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. Third Quarter 2004 Guidance --Third quarter net sales are expected to be between $1.425 billion and $1.525 billion, or grow between 26% and 34%, compared with third quarter 2003. --Consolidated segment operating income is expected to be between $80 million and $100 million, or grow between 9% and 36%, compared with third quarter 2003. --Operating income is expected to be between $50 million and $70 million, assuming, among other things, that the Company does not record any further 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 September September: see month. 30, 2004, is identical to the closing price of $54.40 on June 30, 2004. Full Year 2004 Expectations --Net sales are expected to be between $6.625 billion and $6.925 billion. --Consolidated segment operating income is expected to be between $475 million and $535 million. --Operating income is expected to be between $400 million and $460 million, assuming, among other things, that the Company does not record any further revisions to its restructuring-related estimates and that the closing price of Amazon.com common stock on December December: see month. 31, 2004, is identical to the closing price of $54.40 on June 30, 2004. A conference call will be Webcast live today at 2 p.m. PT/5 p.m. ET, and will be available at least through September 30, 2004, at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results. 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, 2003, 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 website 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, and --Other operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. (income). 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, --Other operating expense (income), and --Remeasurements and other. 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, opened on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. Amazon.com and other sellers offer millions of unique new, refurbished and used items in categories such as health and personal care, jewelry and watches, gourmet food, sports and outdoors, apparel and accessories, books, music, DVDs, electronics and office, kids and baby, and home and garden. Amazon.com operates six websites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.fr, www.amazon.co.jp and www.amazon.ca.
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -----------------------
2003 2004 2003 2004
---------- --------- ---------- ----------
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD $ 495,773 $ 768,587 $ 738,254 $1,102,273
OPERATING ACTIVITIES:
Net income (loss) (43,314) 76,480 (53,435) 187,616
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Depreciation of fixed
assets, including
internal-use software
and website development,
and other amortization 19,003 18,129 38,753 35,810
Stock-based compensation 24,453 21,692 51,776 28,799
Other operating expense
(income) 913 (7,150) 1,825 (7,692)
Losses (gains) on sales
of marketable
securities, net (5,272) 77 (9,252) (1,010)
Remeasurements and other 60,216 (16,302) 82,450 (36,662)
Non-cash interest expense
and other 3,532 1,113 11,409 2,262
Changes in operating
assets and liabilities:
Inventories (2,479) (4,716) 28,146 8,454
Accounts receivable, net
and other current assets 5,914 (3,272) 33,147 7,026
Accounts payable 45,486 22,612 (181,119) (233,382)
Accrued expenses and
other current
liabilities (7,138) 6,861 (94,203) (66,908)
Additions to unearned
revenue 25,752 27,495 48,720 50,762
Amortization of
previously unearned
revenue (29,998) (25,058) (57,903) (49,125)
Interest payable 28,956 25,075 (26,072) (33,602)
--------- --------- --------- ----------
Net cash provided by
(used in) operating
activities 126,024 143,036 (125,758) (107,652)
INVESTING ACTIVITIES:
Sales and maturities of
marketable securities
and other investments 350,068 42,556 559,023 612,324
Purchases of marketable
securities (109,259) (250,702) (342,314) (755,381)
Purchases of fixed
assets, including
internal-use software
and website development (7,141) (14,143) (13,535) (23,656)
Proceeds from sale of
subsidiary and other - - - -
--------- --------- --------- ----------
Net cash provided by
(used in) investing
activities 233,668 (222,289) 203,174 (166,713)
FINANCING ACTIVITIES:
Proceeds from exercises
of stock options and
other 53,042 20,077 91,597 34,891
Repayments of long-term
debt, capital lease
obligations,
and other (280,918) (645) (284,139) (156,292)
--------- --------- --------- ----------
Net cash provided by
(used in) financing
activities (227,876) 19,432 (192,542) (121,401)
Foreign-currency effect
on cash and cash
equivalents 14,139 (7,616) 18,600 (5,357)
--------- --------- --------- ----------
Net increase (decrease)
in cash and cash
equivalents 145,955 (67,437) (96,526) (401,123)
--------- --------- --------- ----------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD $ 641,728 $ 701,150 $ 641,728 $ 701,150
========= ========= ========= ==========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Fixed assets acquired
under capital
leases and other
financing arrangements $ 415 $ 31 $ 1,076 $ 523
Cash paid for interest 2,601 45 86,816 86,068
Cash paid for income
taxes 307 561 609 1,008
Twelve Months Ended
June 30,
---------------------
2003 2004
---------- ---------
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD $ 270,438 $ 641,728
OPERATING ACTIVITIES:
Net income (loss) (85,864) 276,333
Adjustments to reconcile net income
(loss) to
net cash provided by (used in)
operating activities:
Depreciation of fixed assets, including
internal-use software
and website development, and other
amortization 79,117 72,615
Stock-based compensation 86,624 64,774
Other operating expense (income) 7,420 (6,765)
Losses (gains) on sales of marketable
securities, net (14,139) (1,356)
Remeasurements and other 122,042 10,985
Non-cash interest expense and other 26,470 3,771
Changes in operating assets and
liabilities:
Inventories (44,251) (96,478)
Accounts receivable, net and other
current assets 16,949 (25,816)
Accounts payable 131,127 115,469
Accrued expenses and other current
liabilities (11,362) 1,555
Additions to unearned revenue 94,720 103,683
Amortization of previously unearned
revenue (125,115) (102,962)
Interest payable 1,191 (5,680)
--------- ---------
Net cash provided by (used in)
operating activities 284,929 410,128
INVESTING ACTIVITIES:
Sales and maturities of marketable
securities and other investments 762,401 866,485
Purchases of marketable securities (544,020) (948,709)
Purchases of fixed assets, including
internal-use software and website
development (40,404) (56,084)
Proceeds from sale of subsidiary and
other - 5,072
--------- ---------
Net cash provided by (used in)
investing activities 177,977 (133,236)
FINANCING ACTIVITIES:
Proceeds from exercises of stock
options and other 163,011 106,616
Repayments of long-term debt, capital
lease obligations,
and other (290,939) (367,461)
--------- ---------
Net cash provided by (used in)
financing activities (127,928) (260,845)
Foreign-currency effect on cash and
cash equivalents 36,312 43,375
--------- ---------
Net increase (decrease) in cash and
cash equivalents 371,290 59,422
--------- ---------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 641,728 $ 701,150
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Fixed assets acquired under capital
leases and other financing
arrangements $ 1,964 $ 2,124
Cash paid for interest 117,356 119,199
Cash paid for income taxes 1,291 2,224
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 Six Months Ended
June 30, June 30,
---------------------- ----------------------
2003 2004 2003 2004
----------- ---------- ----------- ----------
Net sales $1,099,912 $1,387,341 $2,183,471 $2,917,690
Cost of sales 825,984 1,046,295 1,638,961 2,215,810
---------- ---------- ---------- ----------
Gross profit 273,928 341,046 544,510 701,880
Operating expenses:
Fulfillment 107,455 122,717 211,160 250,422
Marketing 25,326 31,839 53,553 65,475
Technology and content 52,135 58,475 102,223 113,551
General and
administrative 21,823 27,199 42,925 54,616
Stock-based
compensation (1) 24,453 21,692 51,776 28,799
Other operating
expense (income) 913 (7,150) 1,825 (7,692)
---------- ---------- ---------- ----------
Total operating
expenses 232,105 254,772 463,462 505,171
---------- ---------- ---------- ----------
Income from operations 41,823 86,274 81,048 196,709
Interest income 5,761 5,311 12,301 10,866
Interest expense (34,367) (26,055) (70,878) (53,786)
Other income (expense),
net 3,685 (5,352) 6,544 (2,835)
Remeasurements and other (60,216) 16,302 (82,450) 36,662
---------- ---------- ---------- ----------
Total non-operating
expense, net (85,137) (9,794) (134,483) (9,093)
---------- ---------- ---------- ----------
Net income (loss) $ (43,314) $ 76,480 $ (53,435) $ 187,616
========== ========== ========== ==========
Basic earnings (loss)
per share $ (0.11) $ 0.19 $ (0.14) $ 0.46
========== ========== ========== ==========
Diluted earnings
(loss) per share $ (0.11) $ 0.18 $ (0.14) $ 0.44
========== ========== ========== ==========
Weighted average shares used in
computation of earnings (loss)
per share:
Basic 393,876 405,268 391,223 404,399
========== ========== ========== ==========
Diluted 393,876 424,678 391,223 424,592
========== ========== ========== ==========
(1) Components of
stock-based compensation:
Fulfillment $ 4,862 $ 3,287 $ 11,847 $ 4,293
Marketing 1,606 2,095 2,585 2,703
Technology and content 13,578 12,834 27,794 16,133
General and
administrative 4,407 3,476 9,550 5,670
---------- ---------- ---------- ----------
$ 24,453 $ 21,692 $ 51,776 $ 28,799
========== ========== ========== ==========
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
June 30, 2003
----------------------------------
As Reported
(1) Adjustments Pro Forma
----------- ----------- ---------
Net sales $1,099,912 $ - $1,099,912
Cost of sales 825,984 - 825,984
---------- --------- ----------
Gross profit 273,928 - 273,928
Operating expenses:
Fulfillment 107,455 - 107,455
Marketing 25,326 - 25,326
Technology and content 52,135 - 52,135
General and administrative 21,823 - 21,823
Stock-based compensation 24,453 (24,453) -
Other operating expense (income) 913 (913) -
---------- --------- ----------
Total operating expenses 232,105 (25,366) 206,739
---------- --------- ----------
Income from operations 41,823 25,366 67,189 (2)
Interest income 5,761 - 5,761
Interest expense (34,367) - (34,367)
Other income (expense), net 3,685 - 3,685
Remeasurements and other (60,216) 60,216 -
---------- --------- ----------
Total non-operating
expense, net (85,137) 60,216 (24,921)
---------- --------- ----------
Net income (loss) $ (43,314) $ 85,582 $ 42,268
========== ========= ==========
Basic earnings (loss) per share $ (0.11) $ 0.22 $ 0.11
========== ========= ==========
Diluted earnings (loss) per share$ (0.11) $ 0.21 $ 0.10
========== ========= ==========
Weighted average shares used in computation
of earnings (loss)
per share:
Basic 393,876 393,876
========== ==========
Diluted 393,876 418,138
========== ==========
Net cash provided by operating
activities $ 126,024
Purchases of fixed assets, including
internal-use software
and website development (7,141)
----------
Free cash flow $ 118,883
==========
Net cash provided by (used in) investing
activities $ 233,668
==========
Net cash provided by (used in) financing
activities $ (227,876)
==========
Three Months Ended
June 30, 2004
----------------------------------
As Reported Adjustments Pro Forma
(1)
----------- ----------- ----------
Net sales $1,387,341 $ - $1,387,341
Cost of sales 1,046,295 - 1,046,295
---------- -------- ----------
Gross profit 341,046 - 341,046
Operating expenses:
Fulfillment 122,717 - 122,717
Marketing 31,839 - 31,839
Technology and content 58,475 - 58,475
General and administrative 27,199 - 27,199
Stock-based compensation 21,692 (21,692) -
Other operating expense (income) (7,150) 7,150 -
---------- -------- ----------
Total operating expenses 254,772 (14,542) 240,230
---------- -------- ----------
Income from operations 86,274 14,542 100,816 (2)
Interest income 5,311 - 5,311
Interest expense (26,055) - (26,055)
Other income (expense), net (5,352) - (5,352)
Remeasurements and other 16,302 (16,302) -
---------- -------- ----------
Total non-operating
expense, net (9,794) (16,302) (26,096)
---------- -------- ----------
Net income (loss) $ 76,480 $ (1,760) $ 74,720
========== ======== ==========
Basic earnings (loss) per share $ 0.19 $ (0.01) $ 0.18
========== ======== ==========
Diluted earnings (loss) per share$ 0.18 $ - $ 0.18
========== ======== ==========
Weighted average shares used in computation
of earnings (loss) per share:
Basic 405,268 405,268
========== ==========
Diluted 424,678 424,678
========== ==========
Net cash provided by operating
activities $ 143,036
Purchases of fixed assets, including
internal-use software
and website development (14,143)
----------
Free cash flow $ 128,893
==========
Net cash provided by (used in) investing
activities $ (222,289)
==========
Net cash provided by (used in) financing
activities $ 19,432
==========
(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)
Six Months Ended
June 30, 2003
----------------------------------
As Reported Adjustments Pro Forma
(1)
----------- ----------- ----------
Net sales $2,183,471 $ - $2,183,471
Cost of sales 1,638,961 - 1,638,961
---------- --------- ----------
Gross profit 544,510 - 544,510
Operating expenses:
Fulfillment 211,160 - 211,160
Marketing 53,553 - 53,553
Technology and content 102,223 - 102,223
General and administrative 42,925 - 42,925
Stock-based compensation 51,776 (51,776) -
Other operating expense (income) 1,825 (1,825) -
---------- --------- ----------
Total operating expenses 463,462 (53,601) 409,861
---------- --------- ----------
Income from operations 81,048 53,601 134,649 (2)
Interest income 12,301 - 12,301
Interest expense (70,878) - (70,878)
Other income (expense), net 6,544 - 6,544
Remeasurements and other (82,450) 82,450 -
---------- --------- ----------
Total non-operating
expense, net (134,483) 82,450 (52,033)
---------- --------- ----------
Net income (loss) $ (53,435) $ 136,051 $ 82,616
========== ========= ==========
Basic earnings (loss) per share $ (0.14) $ 0.35 $ 0.21
========== ========= ==========
Diluted earnings (loss) per share$ (0.14) $ 0.34 $ 0.20
========== ========= ==========
Weighted average shares used in computation
of earnings (loss) per share:
Basic 391,223 391,223
========== ==========
Diluted 391,223 414,965
========== ==========
Net cash used in operating
activities $ (125,758)
Purchases of fixed assets, including
internal-use software
and website development (13,535)
----------
Free cash flow $ (139,293)
==========
Net cash provided by (used in) investing
activities $ 203,174
==========
Net cash used in financing
activities $ (192,542)
==========
Six Months Ended
June 30, 2004
----------------------------------
As Reported Adjustments Pro Forma
(1)
----------------------------------
Net sales $2,917,690 $ - $2,917,690
Cost of sales 2,215,810 - 2,215,810
---------- -------- ----------
Gross profit 701,880 - 701,880
Operating expenses:
Fulfillment 250,422 - 250,422
Marketing 65,475 - 65,475
Technology and content 113,551 - 113,551
General and administrative 54,616 - 54,616
Stock-based compensation 28,799 (28,799) -
Other operating expense (income) (7,692) 7,692 -
---------- -------- ----------
Total operating expenses 505,171 (21,107) 484,064
---------- -------- ----------
Income from operations 196,709 21,107 217,816 (2)
Interest income 10,866 - 10,866
Interest expense (53,786) - (53,786)
Other income (expense), net (2,835) - (2,835)
Remeasurements and other 36,662 (36,662) -
---------- -------- ----------
Total non-operating
expense, net (9,093) (36,662) (45,755)
---------- -------- ----------
Net income (loss) $ 187,616 $(15,555) $ 172,061
========== ======== ==========
Basic earnings (loss) per share $ 0.46 $ (0.03) $ 0.43
========== ======== ==========
Diluted earnings (loss) per share$ 0.44 $ (0.03) $ 0.41
========== ======== ==========
Weighted average shares used in computation
of earnings (loss) per share:
Basic 404,399 404,399
========== ==========
Diluted 424,592 424,592
========== ==========
Net cash used in operating
activities $ (107,652)
Purchases of fixed assets, including
internal-use software
and website development (23,656)
----------
Free cash flow $ (131,308)
==========
Net cash provided by (used in) investing
activities $ (166,713)
==========
Net cash used in financing
activities $ (121,401)
==========
(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 Six Months Ended
June 30, June 30,
---------------------- ----------------------
2003 2004 2003 2004
---------- ---------- ---------- ----------
North America
Net sales $ 702,523 $ 792,132 $1,407,235 $1,638,973
Cost of sales 512,466 572,420 1,030,346 1,193,386
---------- ---------- ---------- ----------
Gross profit 190,057 219,712 376,889 445,587
Direct segment
operating expenses 135,459 153,791 270,630 304,157
---------- ---------- ---------- ----------
Segment operating income 54,598 65,921 106,259 141,430
International
Net sales 397,389 595,209 776,236 1,278,717
Cost of sales 313,518 473,875 608,615 1,022,424
---------- ---------- ---------- ----------
Gross profit 83,871 121,334 167,621 256,293
Direct segment
operating expenses 71,280 86,439 139,231 179,907
---------- ---------- ---------- ----------
Segment operating income 12,591 34,895 28,390 76,386
Consolidated
Net sales 1,099,912 1,387,341 2,183,471 2,917,690
Cost of sales 825,984 1,046,295 1,638,961 2,215,810
---------- ---------- ---------- ----------
Gross profit 273,928 341,046 544,510 701,880
Direct segment
operating expenses 206,739 240,230 409,861 484,064
---------- ---------- ---------- ----------
Segment operating income 67,189 100,816 134,649 217,816
Stock-based compensation 24,453 21,692 51,776 28,799
Other operating expense
(income) 913 (7,150) 1,825 (7,692)
---------- ---------- ---------- ----------
Income from operations 41,823 86,274 81,048 196,709
Total non-operating
expense, net (85,137) (9,794) (134,483) (9,093)
---------- ---------- ---------- ----------
Net income (loss) $ (43,314) $ 76,480 $ (53,435) $ 187,616
========== ========== ========== ==========
Segment Highlights:
Y/Y net sales growth:
North America 20% 13% 17% 16%
International 81 50 74 65
Consolidated 37 26 32 34
Y/Y gross profit growth:
North America 12% 16% 10% 18%
International 75 45 72 53
Consolidated 26 25 23 29
Y/Y segment operating
income growth:
North America 53% 21% 49% 33%
International N/A 177 N/A 169
Consolidated 158 50 166 62
Net sales mix:
North America 64% 57% 64% 56%
International 36 43 36 44
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 Six Months Ended
June 30, June 30,
----------------------- -----------------------
2003 2004 2003 2004
---------- ---------- ---------- ----------
North America
Media $ 499,051 $ 541,807 $1,016,310 $1,140,489
Electronics and
other general
merchandise 177,439 225,805 345,584 450,238
Other 26,033 24,520 45,341 48,246
---------- ---------- ---------- ----------
702,523 792,132 1,407,235 1,638,973
International
Media 366,034 495,526 721,746 1,071,586
Electronics and other
general merchandise 31,089 98,947 53,952 205,948
Other 266 736 538 1,183
---------- ---------- ---------- ----------
397,389 595,209 776,236 1,278,717
Consolidated
Media 865,085 1,037,333 1,738,056 2,212,075
Electronics and other
general merchandise 208,528 324,752 399,536 656,186
Other 26,299 25,256 45,879 49,429
---------- ---------- ---------- ----------
$1,099,912 $1,387,341 $2,183,471 $2,917,690
========== ========== ========== ==========
Y/Y Net Sales Growth:
North America:
Media 14% 9% 12% 12%
Electronics and other
general merchandise 36 27 34 30
Other 53 (6) 15 6
International:
Media 75% 35% 71% 48%
Electronics and other
general merchandise 221 218 156 282
Other (49) 177 (47) 120
Consolidated:
Media 33% 20% 30% 27%
Electronics and other
general merchandise 49 56 43 64
Other 50 (4) 14 8
Consolidated Net Sales Mix:
Media 79% 75% 80% 76%
Electronics and other
general merchandise 19 23 18 22
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)
June 30, December 31, June 30,
2003 2003 2004
----------- ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 641,728 $ 1,102,273 $ 701,150
Marketable securities 347,044 292,550 450,201
----------- ----------- -----------
Cash, cash equivalents, and
marketable securities 988,772 1,394,823 1,151,351
Inventories 178,107 293,917 284,194
Accounts receivable, net and
other current assets 84,375 132,069 125,647
----------- ----------- -----------
Total current assets 1,251,254 1,820,809 1,561,192
Fixed assets, net 221,674 224,285 215,871
Goodwill 70,811 69,121 69,121
Other assets 53,115 47,818 41,926
----------- ----------- -----------
Total assets $ 1,596,854 $ 2,162,033 $ 1,888,110
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
DEFICIT
Current liabilities:
Accounts payable $ 445,098 $ 819,811 $ 585,124
Accrued expenses and other
current liabilities 232,231 317,730 249,843
Unearned revenue 38,733 37,844 39,487
Interest payable 45,179 73,100 39,498
Current portion of long-term
debt and other 8,143 4,216 2,402
----------- ----------- -----------
Total current liabilities 769,384 1,252,701 916,354
Long-term debt and other 2,074,306 1,945,439 1,762,614
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 -- 396,730,
403,354, and 406,711 3,967 4,034 4,067
Additional paid-in capital 1,790,835 1,899,398 1,964,342
Deferred stock-based
compensation (4,201) (2,850) (1,872)
Accumulated other comprehensive
income 25,708 37,739 29,417
Accumulated deficit (3,063,145) (2,974,428) (2,786,812)
----------- ----------- -----------
Total stockholders' deficit (1,246,836) (1,036,107) (790,858)
----------- ----------- -----------
Total liabilities and
stockholders' deficit $ 1,596,854 $ 2,162,033 $ 1,888,110
=========== =========== ===========
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 %
Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Change
------- ------- ------- ------- ------- ------
Cash Flows and Shares
Operating cash flow --
trailing twelve months
(TTM) $ 285 $ 284 $ 392 $ 393 $ 410 44%
Purchases of fixed
assets (including
internal-use software
and website
development) -- TTM $ 40 $ 44 $ 46 $ 49 $ 56 39%
Free cash flow
(operating cash flow
less purchases of
fixed assets) -- TTM $ 245 $ 239 $ 346 $ 344 $ 354 45%
Common shares and
stock-based awards
outstanding 433 433 433 432 434 0%
Common shares
outstanding 397 400 403 405 407 3%
Stock-based awards
outstanding 36 33 29 27 27 (25%)
Stock-based awards
outstanding -- % of
common shares
outstanding 9.2% 8.1% 7.3% 6.8% 6.7% N/A
Results of Operations
Worldwide (WW) net
sales $1,100 $1,134 $1,946 $1,530 $1,387 26%
WW net sales -- Y/Y
growth, excluding the
effect of foreign
exchange rates 29.7% 29.8% 29.4% 33.2% 21.9% N/A
WW net sales -- TTM $4,463 $4,747 $5,264 $5,710 $5,998 34%
WW net sales shipped
outside the U.S. --
TTM % of net sales 39.1% 40.5% 43.4% 45.7% 44.5% N/A
Gross profit $ 274 $ 286 $ 427 $ 361 $ 341 25%
Gross margin --
% of WW net sales 24.9% 25.2% 21.9% 23.6% 24.6% N/A
Gross profit -- TTM $1,096 $1,165 $1,257 $1,347 $1,415 29%
Gross margin -- TTM
% of WW net sales 24.6% 24.6% 23.9% 23.6% 23.6% N/A
Fulfillment costs --
% of WW net sales 9.8% 9.4% 8.2% 8.3% 8.8% N/A
Fulfillment costs --
TTM % of WW net sales 9.6% 9.4% 9.1% 8.8% 8.6% N/A
Consolidated direct
segment operating
expenses $ 207 $ 212 $ 274 $ 244 $ 240 16%
Consolidated direct
segment operating
expenses -- TTM $ 832 $ 855 $ 896 $ 937 $ 970 17%
Consolidated segment
operating income $ 67 $ 74 $ 153 $ 117 $ 101 50%
Consolidated segment
operating margin --
% of WW net sales 6.1% 6.5% 7.9% 7.6% 7.3% N/A
Consolidated segment
operating income --
TTM $ 264 $ 310 $ 361 $ 411 $ 444 68%
Consolidated segment
operating margin --
TTM % of WW net sales 5.9% 6.5% 6.9% 7.2% 7.4% N/A
GAAP operating income $ 42 $ 52 $ 138 $ 110 $ 86 106%
GAAP operating margin
-- % of WW net sales 3.8% 4.6% 7.1% 7.2% 6.2% N/A
GAAP operating income
-- TTM $ 142 $ 204 $ 271 $ 342 $ 386 172%
GAAP operating margin
-- TTM % of WW net
sales 3.2% 4.3% 5.1% 6.0% 6.4% N/A
Pro forma net income $ 42 $ 48 $ 125 $ 97 $ 75 77%
Diluted pro forma net
income per share $ 0.10 $ 0.11 $ 0.29 $ 0.23 $ 0.18 80%
Pro forma net income
-- TTM $ 158 $ 206 $ 256 $ 313 $ 345 118%
GAAP net income (loss) $ (43) $ 16 $ 73 $ 111 $ 76 N/A
GAAP net income (loss)
per share $(0.11) $ 0.04 $ 0.17 $ 0.26 $ 0.18 N/A
GAAP net income (loss)
-- TTM $ (86) $ (35) $ 35 $ 157 $ 276 N/A
North America segment:
Net sales $ 703 $ 709 $1,142 $ 847 $ 792 13%
Net sales -- TTM $2,961 $3,083 $3,258 $3,401 $3,490 18%
Gross profit $ 190 $ 201 $ 289 $ 226 $ 220 16%
Gross margin --
% of North American
net sales 27.1% 28.4% 25.3% 26.7% 27.7% N/A
Gross profit -- TTM $ 774 $ 821 $ 867 $ 906 $ 935 21%
Gross margin -- TTM
% of North America
net sales 26.2% 26.6% 26.6% 26.6% 26.8% N/A
Operating income $ 55 $ 63 $ 114 $ 76 $ 66 21%
Operating margin --
% of North America
net sales 7.8% 8.8% 10.0% 8.9% 8.3% N/A
Operating income --
TTM $ 215 $ 251 $ 283 $ 307 $ 318 48%
Operating margin --
TTM % of North
America net sales 7.3% 8.1% 8.7% 9.0% 9.1% 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 %
Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Change
------- ------- ------- ------- ------- ------
International segment:
Net sales $ 397 $ 425 $ 804 $ 684 $ 595 50%
Net sales -- Y/Y
growth, excluding
the effect of
foreign exchange
rates 56.9% 50.4% 53.6% 57.9% 38.1% N/A
Net sales -- TTM $1,502 $1,663 $2,005 $2,310 $2,508 67%
Gross profit $ 84 $ 85 $ 138 $ 135 $ 121 45%
Gross margin --
% of International
net sales 21.1% 19.9% 17.2% 19.8% 20.4% N/A
Gross profit -- TTM $ 322 $ 345 $ 391 $ 442 $ 479 49%
Gross margin --
TTM % of
International
net sales 21.4% 20.7% 19.5% 19.1% 19.1% N/A
Operating income $ 13 $ 11 $ 39 $ 41 $ 35 177%
Operating margin --
% of International
net sales 3.2% 2.6% 4.8% 6.1% 5.9% N/A
Operating income --
TTM $ 49 $ 59 $ 78 $ 104 $ 126 156%
Operating margin --
TTM % of
International net
sales 3.3% 3.6% 3.9% 4.5% 5.0% N/A
Supplemental Worldwide
Net Sales:
Media $ 865 $ 877 $1,434 $1,175 $1,037 20%
Media -- TTM $3,503 $3,695 $4,049 $4,351 $4,523 29%
Electronics and other
general merchandise $ 209 $ 230 $ 473 $ 331 $ 325 56%
Electronics and other
general merchandise
-- TTM $ 868 $ 951 $1,103 $1,244 $1,360 57%
Other $ 26 $ 27 $ 39 $ 24 $ 25 (4%)
Other -- TTM $ 93 $ 101 $ 112 $ 116 $ 115 24%
Supplemental North
America Segment Net
Sales:
Media $ 499 $ 502 $ 751 $ 599 $ 542 9%
Media -- TTM $2,101 $2,167 $2,269 $2,351 $2,394 14%
Electronics and other
general merchandise $ 177 $ 180 $ 353 $ 224 $ 226 27%
Electronics and other
general merchandise
-- TTM $ 769 $ 816 $ 879 $ 935 $ 983 28%
Other $ 26 $ 27 $ 38 $ 24 $ 25 (6%)
Other -- TTM $ 91 $ 100 $ 110 $ 115 $ 113 24%
Supplemental
International Segment
Net Sales:
Media $ 366 $ 375 $ 683 $ 576 $ 496 35%
Media -- TTM $1,402 $1,527 $1,779 $2,000 $2,129 52%
Electronics and other
general merchandise $ 31 $ 50 $ 121 $ 107 $ 99 218%
Electronics and other
general merchandise
-- TTM $ 99 $ 135 $ 225 $ 309 $ 377 281%
Other $ 0 $ 0 $ 0 $ 0 $ 1 177%
Other -- TTM $ 1 $ 1 $ 1 $ 1 $ 2 26%
Balance Sheet
Cash and marketable
securities $ 989 $1,065 $1,395 $ 998 $1,151 16%
Inventory, net --
ending $ 178 $ 242 $ 294 $ 282 $ 284 60%
Inventory -- average
inventory % of TTM
net sales 3.7% 4.0% 4.1% 4.1% 4.3% N/A
Inventory turnover,
average -- TTM 20.2 18.9 18.4 18.7 17.9 (12%)
Fixed assets, net $ 222 $ 221 $ 224 $ 217 $ 216 (3%)
Accounts payable days
-- ending 49 54 50 44 51 4%
Other
Employees (full-time
and part-time;
excludes contractors
& temporary personnel) 7,600 7,900 7,800 8,100 8,200 8%
----------------------- ------ ------ ------ ------ ------ ------
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)
Quarterly Results of Operations (comparisons are with the equivalent period of the prior year, unless otherwise stated) Net Sales --In the second quarter 2003 we sold over 1.4 million units worldwide of Harry Potter A potter is someone who makes pottery. Potter may also refer to: People
--Shipping revenue, which excludes amounts earned from third-party sellers, was $84 million, up 5% from $80 million. Cost of Sales --Cost of sales consists of the purchase price of consumer products sold by us, inbound in·bound 1 adj. Bound inward; incoming: inbound commuter traffic. Adj. 1. inbound and outbound out·bound adj. Outward bound; headed away: outbound trains. Adj. 1. outbound - that is going out or leaving; "the departing train"; "an outward journey"; "outward-bound ships" shipping charges to us, packaging supplies, and certain costs associated with our service revenues. --Outbound shipping-related costs totaled $119 million, up from $106 million. Net shipping cost was $34 million, up from a net cost of $26 million, resulting primarily from our free shipping offers. We view free shipping as an effective marketing tool and intend to continue offering it indefinitely. 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. --Second quarter direct segment operating expenses as a percentage of net sales:
2004 2003
---- ----
Fulfillment 8.8% 9.8%
Marketing 2.3% 2.3%
Technology and content 4.2% 4.7%
General and administrative 2.0% 2.0%
--Depreciation was $18 million in second quarter 2004 and $70 million over the trailing twelve months. 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. --Costs incurred in operating and staffing our fulfillment and customer service centers on behalf of other businesses, such as Toysrus.com and Target, are classified as cost of sales rather than fulfillment. --Credit card fees associated with third-party seller transactions are based on the gross purchase price of underlying transactions, and therefore represent a larger percentage of our recorded commission revenue than credit card fees on our retail sales. Accordingly, this negatively affects fulfillment costs as a percentage of net sales. --We announced the opening of a new European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. fulfillment center in Scotland Scotland, political division of Great Britain (1991 pop. 4,957,000), 30,414 sq mi (78,772 sq km), comprising the northern portion of the island of Great Britain and many surrounding islands. , which is scheduled to begin operations in the second half of 2004. The center is approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 300,000 square feet and over time will employ approximately 300 associates. Technology and content --Our spending in technology and content has increased as we are adding computer scientists and software engineers to continue to improve our process efficiency and enhance the customer experience on our websites. We expect absolute dollars spent in technology and content to increase over time. General and administrative --The increase in general and administrative expense is primarily due to increases in legal fees. We expect general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. to increase in absolute dollars over time. Stock-Based Compensation --Stock-based compensation consisted of $9 million expense for stock awards under variable accounting and $13 million for stock awards under fixed accounting plus matching stock contributions under our 401(k) program. 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 is not classified in "Stock-based compensation". --We granted 2 million stock awards, primarily 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. , during the quarter at a per share weighted average fair value of $47. --Stock-based awards generally fully vest over service periods of between three and six years. --At June 30, 2004, there were 28 million stock awards outstanding, consisting of 21 million stock options with a $13 weighted average exercise price, 6 million restricted stock units and 0.5 million shares of restricted stock (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 on an accelerated basis 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. --At June 30, 2004, 1 million outstanding stock awards, primarily options, were subject to variable accounting. Stock option grants after December 31, 2002, are subject to variable accounting treatment. Variable accounting treatment results in expense or contra-expense recognition using the cumulative expense method, calculated based on the quoted price of our common stock and vesting schedules Vesting Schedule Schedule setting forth when, and to what extent, options become exercisable or restricted stock or stock units are no longer subject to forfeiture (for example, 20% per year over five years). of underlying awards. For example, since the closing price of our common stock on June 30, 2004 ($54.40), was greater than the closing price on March 31, 2004 ($43.28), we recorded an expense associated with variable accounting treatment for the second quarter of 2004. Other Operating Expense (Income) --Included in "Other operating expense (income)" are restructuring-related expenses and 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. . --Our first quarter 2001 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 is complete; however, we may periodically adjust our restructuring-related estimates, such as lease obligations, in the future if necessary. --During the second quarter we determined that some of the office space previously vacated as part of our 2001 restructuring, which we had been unable to 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. due to poor real estate market conditions, was necessary for our future needs. This resulted in a gain of $7 million for the second quarter. Future lease payments for this office space will be expensed over the lease period and classified to the corresponding operating expense categories on the consolidated statements of operations. --We estimate, based on currently available information, the remaining net cash outflows associated with restructuring-related leases and other commitments will be $2 million in 2004, and $17 million thereafter. Amounts due within twelve 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 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. and other" on our balance sheet. These amounts are net of anticipated sublease income of $25 million (we have signed sublease agreements for $14 million). --Cash payments resulting from our 2001 operational restructuring were $1 million, compared with $4 million in second quarter 2003. --We plan to streamline streamline, path of a fluid flowing steadily and without appreciable turbulence. A body is said to be streamlined if its shape offers the least possible resistance to a current of air, water, or other fluid. our organizational structure  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. in France and reduce our operating costs operating costs npl → gastos mpl operacionales . We anticipate the costs associated with these efforts will be approximately $5 million; however, the reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. is subject to regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. review, which may impact the severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when terms. We anticipate the number of employees affected and severance terms will be finalized See finalization. in third quarter 2004 and corresponding costs will be recorded at that time and classified in "Other operating expense (income)". Other Income (Expense), Net --Other expense in second quarter 2004 was primarily miscellaneous foreign, state and other income taxes. Remeasurements and Other --Remeasurements includes foreign-currency gains on remeasurement of 6.875% PEACS PEACS Portable Environmental/Acoustic Collection System from Euros to U.S. Dollars of $8 million, compared with a loss of $38 million in second quarter 2003. --Other includes a $7 million loss from remeasurement of intercompany balances, which are to be repaid amongst subsidiaries. --Other also includes a gain of $14 million related to the sale of an equity investment, classified within "Investing Activities" on our statement of cash flows. Income Taxes --At June 30, 2004, we had net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. (NOLs) of approximately $2.8 billion, primarily related to U.S. federal taxes. 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 $1.8 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 tax benefits 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 do not believe that our reported net income for the second quarter 2004 should be viewed, on its own, as a material positive event or should be considered predictive of future results. For example, we are unable to forecast the effect on our future reported results of certain items, including the effect that fluctuations in foreign currency rates will have on the remeasurement of our 6.875% PEACS and intercompany balances. Additionally, we are unable to forecast the effect on stock-based compensation of changes in the quoted price of our common stock due to variable accounting treatment. The remeasurement of our 6.875% PEACS represented significant gains during the quarter and may result in significant charges or gains in future periods. Foreign Exchange --As our financial reporting currency Reporting Currency The currency used in published reports and financial documents. Notes: All annual and quarterly reports state the currency in which their results are listed. is the U.S. Dollar, our total sales, profit, and operating and free cash flow have benefited significantly the past eight quarters from weakness in the U.S. Dollar in comparison to the currencies of our international websites. We believe it is important to evaluate our growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. after the effect of currency changes. -- The effect of changes in exchange rates in the second quarter is as follows (in millions):
Effect of exchange rate on: 2004 2003
---- ----
Net Sales $ 47 $ 55
Gross Profit 10 12
Operating Income 4 3
Net Interest Expense & Other (1) (2)
Remeasurements & Other(1) 3 (35)
Net Income (Loss) 6 (34)
Earnings Per Share $0.02 $(0.09)
(1) Includes foreign-currency gains (losses) on remeasurement of
6.875% PEACS and intercompany balances, and realized
currency-related gains associated with sales of Euro-denominated
investments held by a U.S. functional-currency subsidiary.
These amounts represent the impact on reported results that is
due to year-over-year changes in exchange rates. Absent
year-over-year changes in exchange rates, reported amounts would
have been lower (higher) by these amounts.
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. For example, in second quarter 2003 we purchased and received customer payment for over 1.4 million units of Harry Potter and the Order of the Phoenix, for which payment was generally not due to our vendors until after the second quarter of 2003. --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 $1.15 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, certificates of deposit, and asset-backed and agency securities. Included is amounts held in foreign currencies of $645 million, primarily in Euros and British Pounds. --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. $80 million of our marketable 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 $87 million as of December 31, 2003. --"Other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. " includes, among other things, deferred issuance costs on long-term debt, intangibles and other equity investments. --"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 our 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 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. 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):
Principal Interest Principal
at Maturity Rate Due Date
----------- -------- ----------
Convertible
Subordinated Notes $ 900 (1) (2) 4.750% February 2009
PEACS 841 (3) 6.875% February 2010
----
$ 1,741 (4)
=======
-----------------
(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
102.375% of the principal, which decreases every February by 47.5
basis points until maturity, plus any accrued and unpaid interest.
(2) During the previous twelve-month period we redeemed an
aggregate principal amount of $350 million: $150 million in
February 2004 and $200 million in November 2003.
(3) EUR 690 million principal amount, convertible at the holders'
option into our common stock at EUR 84.883 per share ($103.50 per
share based on the exchange rate as of June 30, 2004). We have the
right to redeem the PEACS, in whole or in part, by paying the
principal amount, plus any accrued and unpaid interest. We do not
hedge any portion of the PEACS. The U.S. Dollar equivalent
principal, interest and conversion price fluctuates based on the
Euro/U.S. Dollar exchange ratio.
(4) The "if converted" number of shares associated with each of
our convertible debt instruments (approximately 20 million total
shares) are excluded from diluted shares as their effect is
anti-dilutive.
Certain Definitions and Other --We present segment information along two lines: 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. and International. We measure operating results of our segments using an internal performance measure of direct segment operating expenses that excludes stock-based compensation and other operating expenses (income), each of which is not allocated to segment results. Other centrally incurred operating costs are fully allocated to segment results. Our operating results, particularly for the International segment, are affected by movements in foreign exchange rates. --The North America segment consists of amounts earned from retail sales of consumer products (including from third-party sellers) through www.amazon.com and www.amazon.ca; from North America focused Syndicated Stores, such as www.cdnow 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; from 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 as North America focused Merchant.com,
marketing and promotional agreements.--The International segment consists of amounts earned from retail sales of consumer products (including from third-party sellers) through www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp; from internationally focused Syndicated Stores; and from non-retail activities such as internationally focused marketing and promotional agreements. This segment includes export sales from www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp (including export sales from these sites to customers in the U.S. and Canada 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 ), but excludes export sales from www.amazon.com and www.amazon.ca. --We provide supplemental sales information within each segment for three categories: "Media", "Electronics and other general merchandise" and "Other." Media consists of amounts earned from 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, tools, home and garden, apparel, sports and outdoors, gourmet food, jewelry, health and personal care and beauty. The Other category consists of non-retail activities, such as the Merchant.com program and miscellaneous marketing and promotional activities. --Operating cycle is number of days of sales in inventory plus number of days of sales in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying minus accounts payable days. Inventory turnover is the quotient quotient - The number obtained by dividing one number (the "numerator") by another (the "denominator"). If both numbers are rational then the result will also be rational. of annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. cost of sales to average inventory. Accounts payable days is calculated as the quotient of accounts payable to cost of sales, multiplied mul·ti·ply 1 v. mul·ti·plied, mul·ti·ply·ing, mul·ti·plies v.tr. 1. To increase the amount, number, or degree of. 2. Mathematics To perform multiplication on. by the number of days in the period. --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 websites. 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 relationship. A customer is considered active upon placing an order. --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 through catalogs and at non-Amazon.com domains, such as books, music and DVD/video items ordered from Amazon.com's store at www.target.com. Units do not include Amazon.com gift certificates. |
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