Amazon.com Announces First Quarter Financial Results; For the First Time Sales of Electronics & Other General Merchandise Surpass $1.8 Billion and Comprise 25% of Total Sales over the Past Year.SEATTLE 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 first quarter ended March 31, 2005. 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. grew 33% to $523 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 $393 million for the trailing twelve months ended March 31, 2004. Free cash flow grew 21% to $417 million for the trailing twelve months, compared with $344 million for the trailing twelve months ended March 31, 2004. Common shares outstanding plus shares underlying stock-based awards outstanding totaled 434 million at March 31, 2005, compared with 432 million a year ago. Net sales 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 increased 24% to $1.90 billion in the first quarter, compared with $1.53 billion in first quarter 2004. Excluding the $30 million benefit from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 22% compared with first quarter 2004. Operating income 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. declined 2% to $108 million in the first quarter, compared with $110 million in first quarter 2004. As previously announced, the Company chose to adopt SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123(R), the new accounting rules on stock-based compensation, earlier than required, effective January January: see month. 1, 2005. Excluding the $14 million impact due to this adoption, operating income would have grown 10% to $122 million. Operating income benefited by $3 million from year-over-year changes in foreign exchange rates throughout the quarter. Net income was $78 million in the first quarter, or $0.18 per diluted 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 net income of $111 million, or $0.26 per diluted share, in first quarter 2004. Net income for the first quarter includes $56 million in income tax expense, compared with a $2 million income tax benefit in first quarter 2004. First quarter also includes a $26 million gain for the cumulative effect of a change in accounting principle related to the Company's early adoption of SFAS 123(R). "We're we're Contraction of we are. we're we are seeing especially heavy use of Amazon Amazon, in Greek mythology Amazon (ăm`əzŏn), in Greek mythology, one of a tribe of warlike women who lived in Asia Minor. Prime in Electronics, Tools, Kitchen, and Health & Personal Care," 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. "For $79 a year, Amazon Prime members get 'all-you-can-eat' free express shipping. Getting your items right away changes the way you use and think about Amazon.com." Amazon Prime, Amazon.com's first-ever membership program, was introduced February February: see month. 2005. For a flat membership fee of $79 per year, Amazon Prime members get unlimited, express two-day shipping for free, with no minimum purchase requirement on over a million eligible items sold by Amazon.com. Members can order as late as 6:30 p.m. ET and still get their order the next day for only $3.99 per item, and can share the benefits of Amazon Prime with up to four family members living in their household. Highlights --North America 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 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, were $1.03 billion, up 21% from first quarter 2004. Segment operating income decreased 13% to $66 million in first quarter 2005 from $76 million in first quarter 2004. --North America Media growth was 17% in the first quarter, compared with 16% in first quarter 2004. --International segment sales, representing the Company's U.K., German, French, Japanese 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 Chinese Chinese, subfamily of the Sino-Tibetan family of languages (see Sino-Tibetan languages), which is also sometimes grouped with the Tai, or Thai, languages in a Sinitic subfamily of the Sino-Tibetan language stock. sites, were $875 million, up 28% compared with first quarter 2004. Excluding the benefit from year-over-year changes in foreign exchange rates throughout the quarter, net sales growth was 24%. Segment operating income increased 51% to $62 million from $41 million in first quarter 2004. --On a trailing twelve month basis, International segment sales accounted for 45% of worldwide net sales, up from 40% for the trailing twelve months ended March 31, 2004. --Worldwide Electronics & other general merchandise 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 grew 45% to $481 million, and represented 25% of net sales, compared with 22% for first quarter 2004. --The Company has received 700,000 pre-orders for Harry Potter A potter is someone who makes pottery. Potter may also refer to: People
--Amazon Services Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and leading U.K. retailer Marks &
Spencer Spencer, city (1990 pop. 11,066), seat of Clay co., NW Iowa, on the Little Sioux River; inc. 1880. The city lies in a fertile farm area. Beef is processed, and Spencer's manufactures include work clothes, machinery, prefabricated buildings, and metal products. announced an agreement for Amazon to host and provide the
technology behind the Marks & Spencer branded website and its
in-store and telephone ordering and customer services systems.--A9.com, a subsidiary of Amazon.com, launched A9.com A9.com, which went live on April 14, 2004, is an Internet search engine from Amazon.com. Its results derive from Live Search, supplemented by Alexa, Amazon.com and other engines for specific search types[1]. OpenSearch OpenSearch is a collection of technologies that allow publishing of search results in a format suitable for syndication and aggregation. It is a way for websites and search engines to publish search results in a standard and accessible format. OpenSearch was developed by Amazon. , a collection of technologies built on top of popular open standards Specifications for hardware and software that are developed by a standards organization or a consortium involved in supporting a standard. Available to the public for developing compliant products, open standards imply "open systems;" that an existing component in a system can be replaced to allow content providers to publish their search results in a format suitable for syndication See syndication format. . OpenSearch enables content providers' results to be displayed anywhere, anytime. Any site that has content -- and a search box--can choose to return results on A9.com using OpenSearch RSS (Really Simple Syndication) A syndication format that was developed by Netscape in 1999 and became very popular for aggregating updates to blogs and the news sites. RSS has also stood for "Rich Site Summary" and "RDF Site Summary. . Customers can now view search results from The New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Times, Flickr Flickr is a photo sharing website and web services suite, and an online community platform, which is generally considered an early example of a Web 2.0 application. , Wikipedia The world's largest encyclopedia available on the Web at www.wikipedia.com. Using wiki software, Jimmy Wales started Wikipedia in 2001. By the end of 2005, there were 1.8 million entries in more than 100 languages on every conceivable subject, written and edited by hundreds of thousands and over 150 other content providers at www.a9.com. Financial Guidance The following forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. reflect Amazon.com's expectations as of April 26, 2005. Results may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending 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 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. Second Quarter 2005 Guidance --Net sales are expected to be between $1.675 billion and $1.825 billion, or grow between 21% and 32%, compared with second quarter 2004. --Operating income is expected to be between $50 million and $80 million, or decline between (42%) and (7%), compared with second quarter 2004. This guidance includes stock-based compensation of $35 million, including the impact from the Company's January 1, 2005 early adoption of SFAS 123(R), and assumes, among other things, that no additional intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. are recorded and that there are no 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 restructuring-related estimates. Full Year 2005 Expectations --Net sales are expected to be between $8.175 billion and $8.675 billion, or grow between 18% and 25%, compared with 2004. --Operating income is expected to be between $395 million and $510 million, or between (10%) and 16% growth, compared with 2004. This expectation includes stock-based compensation of $115 million, including the impact from the Company's January 1, 2005 early adoption of SFAS 123(R), and assumes, among other things, that no additional intangible assets are recorded and that there are no further revisions to restructuring-related estimates. A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results. These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales derived 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, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. and claims, 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. 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. , risks of inventory management, seasonality, the degree to which the Company enters into, maintains and develops commercial agreements, acquisitions and strategic transactions, and risks of fulfillment throughput 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 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. , system interruptions, consumer trends, limited operating history, government regulation and taxation, fraud, and new business areas. More information about factors that potentially could affect Amazon.com's financial results is included in Amazon.com's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K 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 December: see month. 31, 2004, and all subsequent filings. Financial Measure The following measure is defined by the Securities and Exchange Commission as a non-GAAP financial measure. Free Cash Flow Operating cash flow is net cash provided by (used in) operating activities, including cash outflows for interest and excluding proceeds from the exercise of stock-based employee awards. Free cash flow is operating cash flow less cash outflows for purchases of fixed assets 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. ." About Amazon.com Amazon.com (NASDAQ: AMZN), a Fortune 500 company based in Seattle, opened its virtual doors on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer customers the lowest possible prices. Amazon.com and third-party sellers offer millions of unique new, refurbished, and used items in categories such as health and personal care, jewelry 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. and watches, gourmet food, sports and outdoors, apparel and accessories, books, music, DVDs, electronics and office, toys and baby, and home and garden. Amazon.com and its affiliates operate seven retail websites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and www.joyo Joyo may refer to:
As used herein, "Amazon.com," "we," "our" and similar terms include Amazon.com, Inc. and its subsidiaries, unless the context indicates otherwise.
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Three Months Twelve Months
Ended Ended
March 31, March 31,
--------------- ---------------
2005 2004 2005 2004
------- ------ -------- ------
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD $1,303 $1,102 $ 769 $ 496
OPERATING ACTIVITIES:
Net income 78 111 555 157
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation of fixed assets,
including internal-use software
and website development, and other
amortization 28 18 86 73
Stock-based compensation 19 7 70 68
Other operating expense (income) 1 - (7) 1
Losses (gains) on sales of marketable
securities, net - (1) 1 (7)
Remeasurements and other (14) (20) 8 88
Non-cash interest expense and other 1 1 5 6
Deferred income taxes 50 (7) (200) (6)
Cumulative effect of change in
accounting principle (26) - (26) -
Changes in operating assets and
liabilities:
Inventories 72 13 (110) (94)
Accounts receivable, net and other
current assets 10 14 (6) (12)
Accounts payable (425) (256) 117 138
Accrued expenses and other current
liabilities (31) (71) 24 (11)
Additions to unearned revenue 29 23 115 102
Amortization of previously unearned
revenue (25) (24) (107) (108)
Interest payable (61) (58) (2) (2)
------ ------ ------- ------
Net cash provided by (used in)
operating activities (294) (250) 523 393
INVESTING ACTIVITIES:
Purchases of fixed assets, including
internal-use software and website
development (26) (9) (106) (49)
Sales and maturities of marketable
securities and other investments 348 570 1,205 1,174
Purchases of marketable securities (504) (505) (1,583) (807)
Proceeds from sale of subsidiary - - - 5
Acquisitions, net of cash acquired (15) - (86) -
------ ------ ------- ------
Net cash provided by (used in)
investing activities (197) 56 (570) 323
FINANCING ACTIVITIES:
Proceeds from exercises of stock
options and other 9 15 55 140
Repayments of long-term debt and
capital lease obligations (265) (156) (267) (648)
------ ------ ------- ------
Net cash used in financing
activities (256) (141) (212) (508)
Foreign-currency effect on cash and
cash equivalents (23) 2 23 65
------ ------ ------- ------
Net increase (decrease) in cash and
cash equivalents (770) (333) (236) 273
------ ------ ------- ------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 533 $ 769 $ 533 $ 769
====== ====== ======= ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Fixed assets acquired under capital
leases and other financing
arrangements $ - $ 1 $ 1 $ 3
Cash paid for interest 84 86 106 122
Cash paid for income taxes 3 - 7 2
Note: The attached "Financial and Operational Summary" is an
integral part of the press release financial statements.
AMAZON.COM, INC.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
Three Months
Ended
March 31,
---------------
2005 2004
------- ------
Net sales $1,902 $1,530
Cost of sales 1,444 1,169
------ ------
Gross profit 458 361
Operating expenses (1):
Fulfillment 166 129
Marketing 45 34
Technology and content 92 58
General and administrative 46 30
Other operating expense 1 -
------ ------
Total operating expenses 350 251
------ ------
Income from operations 108 110
Interest income 9 6
Interest expense (26) (28)
Other income, net 3 1
Remeasurements and other 14 20
------ ------
Total non-operating income (expense) - (1)
------ ------
Income before income taxes 108 109
Provision (benefit) for income taxes 56 (2)
------ ------
Income before cumulative effect of change in accounting
principle 52 111
Cumulative effect of change in accounting principle 26 -
------ ------
Net income $ 78 $ 111
====== ======
Basic earnings per share:
Prior to cumulative effect of change in accounting
principle $ 0.13 $ 0.28
Cumulative effect of change in accounting principle 0.06 -
------ ------
$ 0.19 $ 0.28
====== ======
Diluted earnings per share:
Prior to cumulative effect of change in accounting
principle $ 0.12 $ 0.26
Cumulative effect of change in accounting principle 0.06 -
------ ------
$ 0.18 $ 0.26
====== ======
Weighted average shares used in computation of earnings
per share:
Basic 410 404
====== ======
Diluted 423 425
====== ======
(1) Includes stock-based compensation as follows:
Fulfillment $ 4 $ 1
Marketing 1 1
Technology and content 10 3
General and administrative 4 2
------ ------
$ 19 $ 7
====== ======
Note: The attached "Financial and Operational Summary" is an integral
part of the press release financial statements.
AMAZON.COM, INC.
Segment Information
(in millions)
(unaudited)
Three Months
Ended
March 31,
--------------
2005 2004
------ ------
North America
Net sales $1,027 $ 847
Cost of sales 748 621
------ ------
Gross profit 279 226
Direct segment operating expenses (1) 213 150
------ ------
Segment operating income 66 76
International
Net sales 875 683
Cost of sales 696 548
------ ------
Gross profit 179 135
Direct segment operating expenses (1) 117 94
------ ------
Segment operating income 62 41
Consolidated
Net sales 1,902 1,530
Cost of sales 1,444 1,169
------ ------
Gross profit 458 361
Direct segment operating expenses 330 244
------ ------
Segment operating income 128 117
Stock-based compensation (19) (7)
Other operating expense (1) -
------ ------
Income from operations 108 110
Total non-operating income (expense), net - (1)
Provision for income taxes (56) 2
Cumulative effect of change in accounting principle 26 -
------ ------
Net income $ 78 $ 111
====== ======
Segment Highlights:
Y/Y net sales growth:
North America 21% 20%
International 28 80
Consolidated 24 41
Y/Y gross profit growth:
North America 23% 21%
International 33 61
Consolidated 27 33
Y/Y segment operating income growth:
North America (13%) 46%
International 51 163
Consolidated 10 73
Net sales mix:
North America 54% 55%
International 46 45
(1) A significant majority of our costs for "Technology and content"
are incurred in the United States and most of these costs are
allocated to our North America segment.
Note: The attached "Financial and Operational Summary" is an integral
part of the press release financial statements.
AMAZON.COM, INC.
Supplemental Net Sales Information
(in millions)
(unaudited)
Three Months Ended
March 31,
---------------------
2005 2004
--------- ---------
North America
Media $ 699 $ 599
Electronics and other general merchandise 282 224
Other 46 24
--------- ---------
1,027 847
International
Media 675 576
Electronics and other general merchandise 199 107
Other 1 -
--------- ---------
875 683
Consolidated
Media 1,374 1,175
Electronics and other general merchandise 481 331
Other 47 24
--------- ---------
$ 1,902 $ 1,530
========= =========
Y/Y Net Sales Growth:
North America:
Media 17% 16%
Electronics and other general merchandise 25 33
Other 96 23
International:
Media 17% 62%
Electronics and other general merchandise 86 368
Other 74 65
Consolidated:
Media 17% 35%
Electronics and other general merchandise 45 74
Other 95 23
Consolidated Net Sales Mix:
Media 72% 77%
Electronics and other general merchandise 25 22
Other 3 1
Note: The attached "Financial and Operational Summary" is an
integral part of the press release financial statements.
AMAZON.COM, INC.
Consolidated Balance Sheets
(in millions, except per share data)
March 31, December 31, March 31,
2005 2004 2004
--------- -------- -----------
ASSETS (unaudited) (unaudited)
Current assets:
Cash and cash equivalents $ 533 $ 1,303 $ 769
Marketable securities 618 476 229
--------- -------- -----------
Cash, cash equivalents, and
marketable securities 1,151 1,779 998
Inventories 403 480 282
Deferred tax assets, current
portion 68 81 1
Accounts receivable, net and
other current assets 171 199 125
--------- -------- -----------
Total current assets 1,793 2,539 1,406
Fixed assets, net 245 246 218
Deferred tax assets, long-term
portion 239 282 7
Goodwill 149 139 69
Other assets 46 42 39
--------- -------- -----------
Total assets $ 2,472 $ 3,248 $ 1,739
========= ======== ===========
LIABILITIES AND STOCKHOLDERS'
DEFICIT
Current liabilities:
Accounts payable $ 704 $ 1,142 $ 568
Accrued expenses and other
current liabilities 309 361 245
Unearned revenue 45 41 37
Interest payable 13 74 14
Current portion of long-term debt
and other 2 2 2
--------- -------- -----------
Total current liabilities 1,073 1,620 866
Long-term debt and other 1,561 1,855 1,778
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.01 par value:
Authorized shares -- 500
Issued and outstanding shares
-- none - - -
Common stock, $0.01 par value:
Authorized shares -- 5,000
Issued and outstanding shares
-- 411, 410 and 405 shares 4 4 4
Additional paid-in capital 2,118 2,123 1,921
Accumulated other comprehensive
income 24 32 33
Accumulated deficit (2,308) (2,386) (2,863)
--------- -------- -----------
Total stockholders' deficit (162) (227) (905)
--------- -------- -----------
Total liabilities and
stockholders' deficit $ 2,472 $ 3,248 $ 1,739
========= ======== ===========
Note: The attached "Financial and Operational Summary" is 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 %
Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Change
------------------------------------------------------
Cash Flows and
Shares
Operating cash
flow --
trailing twelve
months (TTM) $393 $410 $490 $567 $523 33%
Purchase of
fixed assets
(incl.
internal-use
software &
website
development) --
TTM $49 $56 $70 $89 $106 116%
Free cash flow
(operating cash
flow less
purchases of
fixed assets)
-- TTM $344 $354 $420 $477 $417 21%
Common shares
and stock-based
awards
outstanding 432 434 434 434 434 less than 1%
Common shares
outstanding 405 407 407 410 411 1%
Stock-based
awards
outstanding 27 27 27 25 24 (14%)
Stock-based
awards
outstanding --
% of common
shares
outstanding 6.8% 6.7% 6.6% 6.0% 5.7% N/A
Results of
Operations
Worldwide (WW)
net sales $1,530 $1,387 $1,462 $2,541 $1,902 24%
WW net sales --
Y/Y growth,
excluding the
effect of
foreign
exchange rates 33.2% 21.9% 23.9% 26.2% 22.3% N/A
WW net sales --
TTM $5,710 $5,998 $6,326 $6,921 $7,292 28%
Gross profit $361 $341 $356 $544 $458 27%
Gross margin --
% of WW net
sales 23.6% 24.6% 24.3% 21.4% 24.1% N/A
Gross profit --
TTM $1,347 $1,415 $1,484 $1,602 $1,700 26%
Gross margin --
TTM % of WW net
sales 23.6% 23.6% 23.5% 23.1% 23.3% N/A
Fulfillment
costs,
excluding
stock-based
compensation --
% of WW net
sales 8.3% 8.8% 9.3% 8.0% 8.6% N/A
Fulfillment
costs,
excluding
stock-based
compensation --
TTM % of WW net
sales 8.8% 8.6% 8.6% 8.5% 8.6% N/A
Operating income $110 $86 $81 $162 $108 (2%)
Operating margin
-- % of WW net
sales 7.2% 6.2% 5.6% 6.4% 5.7% N/A
Operating income
-- TTM $342 $386 $416 $440 $438 28%
Operating margin
-- TTM % of WW
net sales 6.0% 6.4% 6.6% 6.4% 6.0% N/A
Net income (a) $111 $76 $54 $347 $78 (30%)
Net income per
diluted share
(a) $0.26 $0.18 $0.13 $0.82 $0.18 (29%)
Net income --
TTM (a) $157 $276 $315 $588 $555 255%
Net income per
diluted share
-- TTM (a) $0.37 $0.65 $0.74 $1.39 $1.31 253%
Segments
North America
segment:
Net sales $847 $792 $816 $1,392 $1,027 21%
Net sales --
Y/Y growth,
excluding the
effect of
foreign
exchange
rates 19.9% 12.7% 15.0% 21.8% 21.1% N/A
Net sales --
TTM $3,401 $3,490 $3,597 $3,847 $4,027 18%
Gross profit $226 $220 $223 $355 $279 23%
Gross margin
-- % of North
America net
sales 26.7% 27.7% 27.4% 25.5% 27.2% N/A
Gross profit
-- TTM $906 $935 $958 $1,024 $1,077 19%
Gross margin
-- TTM % of
North America
net sales 26.6% 26.8% 26.6% 26.6% 26.7% N/A
Operating
income $76 $66 $57 $122 $66 (13%)
Operating
margin -- %
of North
America net
sales 8.9% 8.3% 7.0% 8.8% 6.4% N/A
Operating
income -- TTM $307 $318 $313 $321 $311 1%
Operating
margin -- TTM
% of North
America net
sales 9.0% 9.1% 8.7% 8.3% 7.7% N/A
International
segment:
Net sales $683 $595 $646 $1,149 $875 28%
Net sales --
Y/Y growth,
excluding the
effect of
foreign
exchange
rates 57.9% 38.1% 38.9% 32.5% 23.8% N/A
Net sales --
TTM $2,310 $2,508 $2,729 $3,074 $3,265 41%
Net sales --
TTM % of WW
net sales 40.5% 41.8% 43.1% 44.4% 44.8% N/A
Gross profit $135 $121 $132 $190 $179 33%
Gross margin
-- % of
International
net sales 19.8% 20.4% 20.5% 16.5% 20.5% N/A
Gross profit
-- TTM $442 $479 $527 $578 $623 41%
Gross margin
-- TTM % of
International
net sales 19.1% 19.1% 19.3% 18.8% 19.1% N/A
Operating
income $41 $35 $38 $55 $62 51%
Operating
margin -- %
of
International
net sales 6.1% 5.9% 5.8% 4.8% 7.2% N/A
Operating
income -- TTM $104 $126 $153 $169 $190 83%
Operating
margin -- TTM
% of
International
net sales 4.5% 5.0% 5.6% 5.5% 5.8% N/A
----------------------------------------------------------------------
Note: The attached "Financial and Operational Summary" is an integral
part of this Supplemental Financial Information and Business Metrics.
(a) Q4 2004 net income includes a $244 million benefit from realizing
a deferred tax asset related primarily to net operating loss
carryforwards attributable to continuing operations; Q1 2005 net
income includes a $56 million tax expense primarily due to taxable
income resulting from the transfer of certain assets from U.S. to
international locations.
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except inventory turnover, accounts payable days, and
employee data)
(unaudited)
----------------------------------------------------------------------
Y/Y %
Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Change
-------------------------------------------------
Segments (continued)
Consolidated
segments:
Operating expenses $244 $240 $261 $367 $330 35%
Operating expenses
-- TTM $937 $970 $1,019 $1,112 $1,198 28%
Operating income $117 $101 $95 $177 $128 10%
Operating margin --
% of consolidated
sales 7.6% 7.3% 6.5% 7.0% 6.8% N/A
Operating income --
TTM $411 $444 $466 $490 $502 22%
Operating margin --
TTM % of
consolidated net
sales 7.2% 7.4% 7.4% 7.1% 6.9% N/A
Supplemental North
America Segment Net
Sales:
Media $599 $542 $564 $885 $699 17%
Media -- TTM $2,351 $2,394 $2,455 $2,589 $2,690 14%
Electronics and
other general
merchandise $224 $226 $229 $449 $282 25%
Electronics and
other general
merchandise -- TTM $935 $983 $1,031 $1,128 $1,185 27%
Electronics and
other general
merchandise -- TTM
% of North America
net sales 27% 28% 29% 29% 29% N/A
Other $24 $25 $24 $58 $46 96%
Other -- TTM $115 $113 $111 $130 $153 33%
Supplemental
International
Segment Net Sales:
Media $576 $496 $530 $911 $675 17%
Media -- TTM $2,000 $2,129 $2,285 $2,513 $2,612 31%
Electronics and
other general
merchandise $107 $99 $116 $237 $199 86%
Electronics and
other general
merchandise -- TTM $309 $377 $442 $558 $651 111%
Electronics and
other general
merchandise -- TTM
% of International
net sales 13% 15% 16% 18% 20% N/A
Other $0 $1 $0 $1 $1 74%
Other -- TTM $1 $2 $2 $2 $3 96%
Supplemental
Worldwide Net Sales:
Media $1,175 $1,037 $1,094 $1,796 $1,374 17%
Media -- TTM $4,351 $4,523 $4,740 $5,102 $5,302 22%
Electronics and
other general
merchandise $331 $325 $344 $686 $481 45%
Electronics and
other general
merchandise -- TTM $1,244 $1,360 $1,474 $1,686 $1,835 48%
Electronics and
other general
merchandise -- TTM
% of WW net sales 22% 23% 23% 24% 25% N/A
Other $24 $25 $24 $59 $47 95%
Other -- TTM $116 $115 $113 $133 $156 34%
Balance Sheet
Cash and marketable
securities $998 $1,151 $1,185 $1,779 $1,151 15%
Inventory, net --
ending $282 $284 $357 $480 $403 43%
Inventory -- average
inventory % of TTM
net sales 4.1% 4.3% 4.6% 4.9% 5.0% N/A
Inventory turnover,
average -- TTM 18.7 17.9 16.6 15.7 15.5 (17%)
Fixed assets, net $218 $216 $227 $246 $245 13%
Accounts payable days
-- ending 44 51 57 53 44 (1%)
Other
Employees (full-time
and part-time;
excludes contractors
& temporary
personnel) 8,100 8,200 8,800 9,000 9,400 16%
----------------------------------------------------------------------
Note: The attached "Financial and Operational Summary" is an integral
part of this Supplemental Financial Information and Business Metrics.
Amazon.com, Inc.
Financial and Operational Summary
(unaudited)
Quarterly Results of Operations (comparisons are with the
equivalent period of the prior year, unless otherwise stated)
Net Sales
-- Shipping revenue, which excludes amounts earned from
third-party sellers where we don't provide fulfillment
services, was $108 million, up 15% from $94 million.
-- Amounts paid in advance for subscription services, including
amounts received from online DVD rentals, Amazon Prime, and
other membership programs, are deferred and recognized as
revenue over the subscription terms.
-- Amounts earned from third-party sales on our websites are
recorded as net amounts.
Cost of Sales
-- Cost of sales consists of the purchase price of products sold
by us, inbound and outbound shipping charges, packaging
supplies, and costs incurred in operating and staffing our
fulfillment and customer service centers on behalf of other
businesses, such as Toysrus.com and Target.com.
-- Outbound shipping-related costs totaled $163 million, up 19%
from $137 million. Net shipping loss was $55 million, up 29%
from a net loss of $43 million, resulting primarily from our
free shipping offers and Amazon Prime.
Operating Expenses
-- Depreciation and amortization of fixed assets was $22 million,
up from $17 million and is classified within the corresponding
operating expense categories.
-- As previously announced, we chose to early adopt SFAS 123(R),
the new accounting rules on stock-based compensation,
effective January 1, 2005. Stock-based compensation increased
$12 million to $19 million, including the $14 million impact
from our early adoption of SFAS 123(R). Stock-based
compensation would have been $5 million under our prior
accounting method, down $2 million versus first quarter 2004.
-- In accordance with SAB 107, issued March 2005, we present
stock-based compensation within the same operating expense
line items as cash compensation.
-- Operating expenses with and without stock-based compensation
are as follows:
Q1 2005 Q1 2004
------------------------- -------------------------
As Stock- As Stock-
Reported Based Net Reported Based Net
Compen- Compen-
sation sation
-------- ------- ------- -------- ------- -------
Operating
Expenses (in
millions):
Fulfillment $ 166.6 $ (3.6) $163.0 $ 128.7 $ (1.0) $127.7
Marketing 44.6 (1.5) 43.1 34.2 (0.6) 33.6
Technology and
content 91.8 (9.8) 82.0 58.4 (3.3) 55.1
General and
administrative 46.4 (4.6) 41.8 29.6 (2.2) 27.4
Other operating
expense
(income) 1.3 - 1.3 (0.5) - (0.5)
------- ------ ------ ------- ------ ------
Total operating
expenses $ 350.7 $(19.5) $331.2 $ 250.4 $ (7.1) $243.3
======= ====== ====== ======= ====== ======
Year-over-year
Percentage
Growth:
Fulfillment 29.4 % 27.6 % 16.3 % 23.1 %
Marketing 30.3 28.1 17.2 19.2
Technology and
content 57.3 49.0 (9.2) 10.0
General and
administrative 56.8 52.7 12.8 29.9
Percent of Net
Sales:
Fulfillment 8.8 % 8.6 % 8.4 % 8.3 %
Marketing 2.3 2.3 2.2 2.2
Technology and
content 4.8 4.3 3.8 3.6
General and
administrative 2.4 2.2 1.9 1.8
Fulfillment --Fulfillment costs include 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 buying, receiving, inspecting and warehousing inventories; credit card fees; and bad debt costs, including costs associated with our guarantee of certain third-party seller transactions. Fulfillment costs also include amounts paid to third parties, who assist us in fulfillment and customer service operations. --Credit card fees associated with third-party seller transactions are assessed on the gross purchase price of underlying transactions, and therefore represent a larger percentage of our recorded net revenue than credit card fees for our retail sales. Bad debt costs, including costs associated with our guarantee program, are also higher as a percentage of recorded net revenue versus our retail sales. Accordingly, these items negatively affect fulfillment costs as a percentage of net sales. --Fulfillment costs increased in absolute dollars and as a percentage of sales from the prior year due to variable costs corresponding with sales volume, our mix of product sales, credit card fees, and bad debt costs, including costs associated with our guarantee of certain third-party seller transactions. We expanded our fulfillment capacity in 2004 and plan to further expand our worldwide fulfillment capacity in 2005. We also recorded a charge of $5 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc certain 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. fulfillment equipment removed from service in the first quarter which is classified as depreciation and amortization on our cash flow statement. We expect absolute amounts spent in fulfillment to increase over time. Marketing --Marketing efforts include targeted online marketing channels, such as our Associates and Syndicated Stores programs, sponsored search, portal advertising, e-mail campaigns and other initiatives. Our marketing expenses are largely variable, based on growth in sales and changes in rates. To the extent there is increased or decreased competition for these traffic sources, or to the extent our mix of these channels shifts, we would expect to see a corresponding change in our marketing expense. While costs associated with free shipping are not included in marketing expense, we view our free-shipping offers as an effective worldwide marketing tool and intend to continue offering them indefinitely in·def·i·nite adj. Not definite, especially: a. Unclear; vague. b. Lacking precise limits: an indefinite leave of absence. c. . We expect absolute amounts spent in marketing to increase over time. Technology and Content --Technology and content expenses consist principally of payroll payroll a list of employees, their salary rates, tax deductions, amounts paid, payroll tax, long service leave entitlements. and related expenses for employees involved in development of our websites, including application development, editorial content, merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. selection and systems and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. support; costs associated with the systems and telecommunications infrastructure; and costs of acquired content. --Our spending in technology and content has increased as we are adding computer scientists and software engineers to continue to enhance the customer experience on our websites and those websites powered by us, and to improve our process efficiency. Additionally, we continue to invest in several areas of technology, including seller platforms, A9.com, web services (1) Loosely, any online service delivered over the Web. Such usage appears in articles from non-technical sources, but not in IT-oriented publications, because definition #2 below describes the correct use of the term. , additional development centers and digital initiatives. We intend to continue investing in areas of technology and other initiatives and expect absolute dollars spent in technology and content to increase over time as we continue to add computer scientists and software engineers to our staff. --A significant majority of these technology costs are incurred in the U.S. and most of them are allocated to our North America segment. --We expense costs related to the development of internal-use software and website development other than those incurred during the application development stage. Costs incurred during the application development stage are capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. and amortized over the two-year estimated useful life of the software. We capitalized $18 million of internal-use software costs, including $2 million associated with stock-based compensation, which is excluded from purchases of fixed assets on our 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: statements of cash flows since it is stock based rather than cash; compared with $7 million a year ago. These amounts were partially offset by amortization of previously capitalized amounts of $10 million and $7 million. General and Administrative --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. increased due to an $8 million charge related to possible settlements of outstanding litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , as well as due to increases in payroll and related costs, professional fees and legal costs. We expect absolute dollars spent in general and administrative to increase over time. Stock-Based Compensation --Prior to January 1, 2005, we accounted for stock-based awards under the intrinsic value Intrinsic Value 1. The value of a company or an asset based on an underlying perception of the value. 2. For call options, this is the difference between the underlying stock's price and the strike price. method which resulted in compensation expense for restricted stock and 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. at grant date fair value based on the number of shares granted and the quoted price of our common stock, and for stock options to the extent option exercise prices were set below market prices on the date of grant. Also, stock options granted subsequent to December 31, 2002, and stock-based awards subject to an exchange offer, other modifications, or performance criteria criteria (krītēr´ē  ),n. , were subject to variable accounting treatment. --We early adopted SFAS No. 123(R) as of January 1, 2005, which requires measurement of compensation cost for stock-based awards at grant date fair value. The fair value of restricted stock and restricted stock units is determined based on the number of shares granted and the quoted price of our common stock, while the fair value of stock options is determined using a Black-Scholes valuation model. The fair value is recognized as an expense over the service period, net of estimated forfeitures, using the accelerated method under SFAS 123(R). Because we implemented SFAS 123(R), we no longer have stock awards subject to variable accounting treatment. --The requirement of SFAS 123(R) to estimate future forfeitures resulted in a cumulative benefit from accounting change of $26 million which reflects the net cumulative impact of estimating forfeitures in the determination of period expense, rather than recording forfeitures when they occur as previously permitted. --Prior to our adoption of SFAS 123(R), cash retained as a result of excess tax deductions Tax deduction An expense that a taxpayer is allowed to deduct from taxable income. tax deduction See deduction. relating to stock-based compensation was presented in operating cash flows, along with other tax cash flows. SFAS 123(R) requires that these excess tax benefits be presented as financing cash inflows. Tax benefits resulting from stock-based compensation deductions in excess of amounts reported for financial reporting purposes were $1 million in the first quarter. --Stock-based awards generally vest over service periods of between three and six years. --Stock-based compensation was $19 million for the first quarter, primarily consisting of $12 million in expense for restricted stock unit awards and $7 million for stock options, substantially all of which were granted prior to October October: see month. 2002. Under our previous accounting method, our first quarter stock-based compensation would have been $5 million. --Payroll tax expense resulting from exercises of stock-based awards is a cash expense and is not categorized cat·e·go·rize tr.v. cat·e·go·rized, cat·e·go·riz·ing, cat·e·go·riz·es To put into a category or categories; classify. cat as stock-based compensation. --We granted stock awards, substantially all of which have been restricted stock units since October 2002, of 0.5 million during the first quarter at a per-share weighted average fair value of $39. Our annual stock awards are granted in the second quarter. --At March 31, 2005, there were 434 million common shares and stock-based awards outstanding, up from 432 million at March 31, 2004. This total includes all stock-based awards outstanding, without regard for estimated forfeitures, consisting of vested vested adj. referring to having an absolute right or title, when previously the holder of the right or title only had an expectation. Examples: after 20 years of employment Larry Loyal's pension rights are now vested. (See: vest, vested remainder) and unvested awards, and in-the-money In-the-money A put option that has a strike price higher than the underlying futures price, or a call option with a strike price lower than the underlying futures price. For example, if the March COMEX silver futures contract is trading at $6 an ounce, a March call with a strike and out-of-the-money out-of-the-money Used to describe a call option with a strike price above the price of the underlying asset or a put option with a strike price below the price of the underlying asset. stock options. --At March 31, 2005, there were 24 million stock awards outstanding, consisting of 17 million stock options with a $13 weighted average exercise price and 7 million restricted stock units. At March 31, 2004, there were 27 million stock awards outstanding. 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) --Included in "Other operating expense (income)" are restructuring-related expenses or credits 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. . --Amortization of other intangibles was $1 million for first quarter 2005, and is expected to be $3 million for the remainder of 2005, $4 million in both 2006 and 2007, and $2 million in 2008, based on intangibles as of March 31, 2005. --We acquired certain companies in March 2005 for an aggregate cash purchase price of $18 million. The excess of purchase price over the fair value of the net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. acquired was $10 million and is classified as "Goodwill" on our consolidated balance sheets consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. . Acquired other intangibles totaled $8 million and have estimated useful lives of between one and four years. The results of operations of each of the acquired businesses have been included in our consolidated results as of the closing date of acquisition. The effect of these acquisitions on consolidated net sales and operating income was not significant for the first quarter. Operating Income --Our income from operations was $108 million, down from $110 million. This decrease is due to the $14 million impact resulting from our early adoption of SFAS 123(R), an $8 million charge related to possible settlements of outstanding litigation, and a $5 million loss for fulfillment assets removed from service during first quarter 2005. These items, and other operating expense increases, were partially offset by a 24% growth in net sales and a 27% increase in gross profit. Other Income (Expense), Net --Other income of $3 million was primarily a foreign-currency gain on interest payable for our 6.875% PEACS PEACS Portable Environmental/Acoustic Collection System . Remeasurements and Other --Remeasurement of the principal amount of our 6.875% PEACS from Euros to U.S. Dollars resulted in a foreign-currency gain of $35 million, compared with a gain of $20 million. --Remeasurement of foreign-currency intercompany balances which are to be repaid amongst subsidiaries represented a $14 million loss, compared with a loss of $3 million. Income Taxes and Deferred Tax Assets --Our first quarter 2005 effective tax rate was higher than the 35% statutory rate primarily due to taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. associated with the first quarter 2005 transfer of certain assets from the U.S. to international locations. We expect these asset transfers to result in tax expense for financial reporting purposes above the statutory rate throughout 2005 and beneficially impact our effective tax rate over time. Since we have Net Operating Losses Net operating losses Losses that a firm can take advantage of to reduce taxes. ("NOLs") for tax purposes, these asset transfers will not have a significant effect on cash taxes paid, which we expect to be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $25 million in 2005, compared with $4 million in 2004. --SFAS 109 requires that deferred tax assets be evaluated for future realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. and reduced by a valuation allowance to the extent we believe a portion will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets including our recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income, the carry-forward See Loss Carry-Back. periods available to us for tax reporting purposes, and other relevant factors. Significant judgment is required in making this assessment, and it is very difficult to predict when, if ever, our assessment may conclude that the remaining portion of our deferred tax assets are realizable. --At March 31, 2005, approximately $760 million of our gross deferred tax assets were related to approximately $2.4 billion of NOLs, the majority of which 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. after 2016. Our NOL NOL - Never Offline deferred tax assets are reduced by a valuation allowance of approximately $510 million due to uncertainty about their future realization. The remainder of our deferred tax assets relate to temporary timing differences between tax and financial reporting. --Substantially all of the unrealized $510 million NOL deferred tax assets, if realized, would 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 for financial reporting purposes since they primarily relate to tax-deductible Tax-deductible The effect of creating a tax deduction, such as charitable contributions and mortgage interest. stock-based compensation in excess of amounts recognized for financial reporting purposes. --Classification of deferred tax assets between current and long-term asset Long-term assets or noncurrent assets are those assets usually in service over one year such as lands and buildings, plants and equipment, and long-term investments. These often receive favorable tax treatment over current assets. categories is based on the expected timing of realization, and the valuation allowance is allocated ratably. Net Income --We believe that our reported net income in first quarter 2005 should not be viewed, on its own, as a material positive event, and may not necessarily be predictive of our future results for a variety of reasons. For example, the remeasurement of our 6.875% PEACS and intercompany balances can result in significant gains and charges associated with the effect of movements in currency exchange rates. Accordingly, we encourage investors to evaluate the effect on our operating trends of these items since future changes in currency exchange rates may create significant variability in our future operating results. 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 flows have benefited significantly the past eleven quarters from weakness in the U.S. Dollar in comparison to the currencies of our international websites. We believe it is important to also 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 on our consolidated statements of operations from year-over-year changes in exchange rates versus the U.S. Dollar throughout the period is as follows:
Q1 2005 Q1 2004
---------------------------- ----------------------------
At Prior Exchange At Prior Exchange
Year Rate As Year Rate As
Rates (1) Effect Reported Rates (1) Effect Reported
(2) (2)
--------- -------- --------- --------- -------- ---------
(in millions, except per share amounts)
Net sales $1,871.4 $ 30.2 $1,901.6 $1,442.9 $ 87.4 $1,530.3
Gross profit 452.1 6.4 458.5 343.7 17.1 360.8
Operating
expenses 346.9 3.8 350.7 239.9 10.5 250.4
Operating
income 105.2 2.6 107.8 103.8 6.6 110.4
Net interest
expense and
other (17.6) 4.1 (13.5) (19.0) (2.4) (21.4)
Remeasure-
ments and
other (3) (5.9) 19.4 13.5 (0.1) 20.5 20.4
Income
before
income
taxes 81.8 26.0 107.8 84.8 24.6 109.4
Net income 65.7 12.5 78.2 86.5 24.6 111.1
Diluted
earnings
per share $ 0.15 $ 0.03 $ 0.18 $ 0.20 $ 0.06 $ 0.26
(1) Represents the outcome that would have resulted had currency
exchange rates in the current period been the same as those in
effect in the comparable prior year period.
(2) Represents the increase (decrease) in reported amounts
resulting from changes in exchange rates from those in effect
in the comparable prior year period.
(3) 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. subsidiary.
Cash Flows and Balance Sheet --Operating cash flows and free cash flows can be volatile With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. and are sensitive to many factors, including changes in working capital. Working capital at any specific point in time is subject to many variables, including world events, seasonality, the timing of expense payments, discounts offered by vendors, vendor payment terms, and fluctuations in foreign exchange rates. --Our cash, cash equivalents, and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has of $1.15 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, asset-backed and agency securities, corporate notes and bonds and 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. Included are amounts held in foreign currencies of $605 million, primarily in Euros, British Pounds, and Yen. --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. $78 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 primarily for standby standby Medtalk adjective Referring to the immediate availability of a certain specialist–anesthesiologist, surgeon, who can be deployed in a medical emergency. Cf Concurrent. letters of credit and property leases, compared with $86 million as of March 31, 2004. --"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 , net and other current assets Other Current Assets A balance sheet item that includes the value of non-cash assets due within one year. Notes: Examples are things like prepaid expenses and accounts receivable. " includes accounts receivable from merchant partners, vendors and credit card companies, interest receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed and $16 million of prepaid expenses Prepaid Expense An asset that arises on a balance sheet because of the payment of something in advance (prepayment). Services for the payment will be received in the near future. . --"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, $15 million of deferred issuance costs on 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. , $14 million of certain equity investments and $13 million of other intangibles, net. --"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. --Amounts related to restructuring-related leases and other commitments due within twelve months are $4 million and are included in "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 $8 million is included in "Long-term debt and other" on our balance sheet. These amounts are net of anticipated sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. income of $19 million (we have signed sublease agreements for $12 million). --"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, 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) 4.750% February 2009
Premium Adjustable Convertible
Securities ("PEACS") 635 (2)(3) 6.875% February 2010
-------------
$ 1,535 (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 101.9% of the principal, which decreases
every February 1st by 47.5 basis points until maturity, plus
any accrued and unpaid interest.
(2) In March 2005, we redeemed an aggregate principal amount of
$265 million, using funds held in a European currency, of our
PEACS under our January 2004 debt repurchase authorization. No
redemption premium was required. We recorded a charge of $4
million, classified in "Remeasurements and other," consisting
of $2 million in unamortized debt issuance costs and $2
million relating to unrealized losses from our currency swap
which was terminated in 2003. Accrued and unpaid interest of
$1 million was paid at redemption.
(3) EUR 490 million principal amount, convertible at the holders'
option into our common stock at EUR 84.883 per share ($110.05
per share based on the U.S. Dollars per Euro exchange rate as
of March 31, 2005). 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. Due to fluctuations in this exchange ratio,
our principal debt obligation since issuance in February 2000
has increased by $152 million as of March 31, 2005.
(4) The "if converted" number of shares associated with our
convertible debt instruments (approximately 17 million total
shares) are excluded from diluted shares as their effect is
antidilutive.
Legal Proceedings --We previously reported class action complaints filed in 2001 by holders of our equity and debt securities alleging violations of the Securities Act of 1933 (the "1933 Act") and the Securities Exchange Act of 1934 (the "1934 Act"). We recently signed a Stipulation An agreement between attorneys that concerns business before a court and is designed to simplify or shorten litigation and save costs. During the course of a civil lawsuit, criminal proceeding, or any other type of litigation, the opposing attorneys may come to an agreement of Settlement with respect to the 1934 Act claims and agreed in principle to settle the 1933 Act claims. If finalized See finalization. and approved by the Court, these settlements would dispose of dis·pose v. dis·posed, dis·pos·ing, dis·pos·es v.tr. 1. To place or set in a particular order; arrange. 2. all claims asserted in these lawsuits in exchange for payments totaling $47.5 million, substantially all of which we expect to be funded by our insurers. Certain Definitions and Other --We present segment information along two lines: North America and International. We measure operating results of our segments using an internal performance measure of direct segment operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. that excludes stock-based compensation and other operating expenses (income), each of which is not allocated to segment results. Other centrally incurred operating costs operating costs npl → gastos mpl operacionales are fully allocated to segment results. Our operating results, particularly for the International segment, are affected by movements in foreign exchange rates. --The North America segment consists of amounts earned from retail sales of consumer products (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. phone
orders; from our Amazon Prime membership program; and from non-retail
activities such as North America-focused Merchant.com, marketing, and
promotional agreements. This segment includes export sales from
www.amazon.com and www.amazon.ca.--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.co.jp, www.amazon.fr, and since September September: see month. 2004, www.joyo.com; from internationally focused Syndicated Stores; from our DVD DVD: see digital versatile disc. DVD in full digital video disc or digital versatile disc Type of optical disc. The DVD represents the second generation of compact-disc (CD) technology. rental RENTAL. A roll or list of the rents of an estate containing the description of the lands let, the names of the tenants, and other particulars connected with such estate. This is the same as rent roll, from which it is said to be corrupted. service in the U.K.; and from non-retail activities such as internationally focused marketing and promotional agreements. This segment includes export sales from these internationally based sites (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 DVD rental and 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, camera and photo, toys and baby, tools, home and garden, apparel, sports and outdoors, kitchen and housewares house·wares pl.n. Cooking utensils, dishes, and other small articles used in a household, especially in the kitchen. , gourmet food, jewelry, health and personal care, beauty, and musical instruments. The Other category consists of non-retail activities, such as the Merchant.com program and miscellaneous marketing and promotional activities, such as our co-branded credit card program. --Operating cycle is number of days of sales in inventory plus number of days of sales in accounts receivable minus accounts payable days. Inventory days are calculated as 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 inventory 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. Accounts payable days are calculated as the quotient of accounts payable to cost of sales, multiplied by the number of days in the period. Inventory turns are calculated as the quotient of cost of sales to average inventory over five quarters. --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@, Syndicated Stores programs, but exclude DVD rental customers, customers associated with certain of our acquisitions (including Joyo.com customers), 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 when they have placed an order during the preceding twelve-month period. --References to sellers or merchants mean active seller accounts, which are established when a seller receives an order from a customer account. Seller accounts include sellers in Amazon Marketplace, Auctions, zShops, and Merchants@ platforms, but exclude Merchant.com sellers. A seller is considered active when they have received an order during the preceding twelve-month period. --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.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, and www.amazon.ca -- 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 sold do not include units associated with certain of our acquisitions (including Joyo.com units), Amazon.com gift certificates or DVD rentals. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion