Amazon.com Announces Free Shipping and Low Prices Fuel 42% Unit Growth.Business Editors SEATTLE--(BUSINESS WIRE)--July 22, 2003 Amazon.com (Amazon.com, Seattle, WA, www.amazon.com) The largest online shopping site and one of the most widely known e-commerce sites on the Web. Founded by Jeff Bezos in 1995, it had 11 employees by year's end. Within four years, it had more than 1,600 employees and four million customers. , Inc. (Nasdaq:AMZN AMZN Amazon.com (NASDAQ symbol) ) today announced financial results for its second quarter ended June June: see month. 30, 2003. Operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. was $285 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 $48 million for the trailing twelve months ended June 30, 2002. Free cash flow was $245 million for the trailing twelve months, compared with $16 million for the trailing twelve months ended June 30, 2002. Common shares outstanding plus shares underlying stock-based employee awards totaled 433 million at June 30, 2003, an increase of 1% compared with a year ago. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight were $1.1 billion in the second quarter, compared with $806 million in the second quarter 2002, an increase of 37%. Net sales benefited by $55 million from changes in foreign exchange rates compared with the second quarter 2002. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $42 million, or 4% of net sales, compared with $1 million in the second quarter 2002. Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: segment operating income improved $41 million to $67 million, or 6% of net sales, compared with $26 million in the second quarter 2002. Net loss was $43 million, or $(0.11) per share, in the second quarter, compared with $94 million, or $(0.25) per share, in the second quarter 2002. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income in the second quarter, which includes interest expense, grew over $46 million to $42 million, or $0.10 per share, compared with a pro forma net loss of $4 million, or $(0.01) per share, in the second quarter 2002. "In January January: see month. , we shifted money from TV and print advertising to customers through lower prices and free shipping," said Amazon.com founder and chief executive officer 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. . "We're we're Contraction of we are. we're we are pleased with the results." Today the Company also announced it is lowering its Free Super Saver Super saver may refer to:
In currencies, this is the abbreviation for the British Pound. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 25 from GBP 39. The Company currently offers Free Super Saver Shipping on orders over $25 at www.amazon.com and free shipping options at its 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 also offers 30% off books over $15 and significant savings on electronics, tools, and bestselling bestselling adjective successful, top, hit (informal) smash (informal) flourishing, lucrative, smash-hit (informal) chart-topping (informal) moneymaking, number one, highly successful CDs and DVDs. "Amazon.com customers continue to respond in record numbers to our everyday low prices and free shipping," said Tom Szkutak, chief financial officer of Amazon.com. "Our strategy of offering low prices and free shipping, combined with the inherent advantages of online shopping, is allowing us to raise our guidance." See "Financial Measures" for additional information. Highlights of Second Quarter 2003 Results (comparisons are with the equivalent period of 2002) -- Worldwide unit growth was 42% in the second quarter. -- In June 2003, the Company sold over 1.4 million units worldwide of Harry Potter A potter is someone who makes pottery. Potter may also refer to: People
-- Third-party seller transactions (new, used and refurbished items sold on the Company's product detail pages by businesses and individuals) grew to 20% of worldwide units in the second quarter, compared with 14% of units a year ago. -- North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. segment sales, representing the Company's U.S. and Canadian sites, grew 20% to $703 million in the second quarter and segment operating income grew 53% to $55 million, or 8% of net sales. -- International segment sales, representing the Company's U.K., German, French and Japanese sites, grew 81% to $397 million in the second quarter and benefited by $54 million from changes in foreign exchange rates compared with the second quarter 2002. International segment operating income was $13 million, a $22 million improvement. -- Inventory turns for the trailing four quarters improved to 20 for the second quarter, up from 19. -- On May 28, 2003, the Company redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. all of its outstanding 10% Senior Discount Notes due May 2008, for $277 million, a redemption price Redemption price See: Call price redemption price 1. The price at which an open-end investment company will buy back its shares from the owners. In most cases, the redemption price is the net asset value per share. 2. of 105% of the $264 million principal amount. Financial Guidance and 2003 Expectations The following forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. reflect Amazon Amazon, in Greek mythology Amazon (ăm`əzŏn), in Greek mythology, one of a tribe of warlike women who lived in Asia Minor. .com's expectations as of July July: see month. 22, 2003. 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 2003 Guidance -- Third quarter net sales are expected to be between $1.075 billion and $1.15 billion, or grow between 26% and 35%, compared with third quarter 2002. -- Consolidated segment operating income is expected to be between $55 million and $70 million. -- Operating income is expected to be between $40 million and $55 million, assuming among other things that the Company does not record any revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. to its restructuring-related estimates and that the closing price of Amazon.com common stock on September September: see month. 30, 2003 is identical to the closing price of $36.32 on June 30, 2003. Full Year 2003 Expectations -- Net sales are expected to be between $4.9 billion and $5.1 billion, or grow between 25% and 30%, compared with 2002. -- Consolidated segment operating income is expected to be between $300 million and $340 million. -- Operating income is expected to be between $215 million and $255 million, assuming among other things that the Company does not record any revisions to its restructuring-related estimates and that the closing price of Amazon.com common stock on September 30, 2003 and December December: see month. 31, 2003 is identical to the closing price of $36.32 on June 30, 2003. A conference call will be Webcast live today at 2 p.m. PT/5 p.m. ET and will be available at least through September 30, 2003, at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results. These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments; the mix of products sold to customers; the mix of net sales derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from products as compared with services; competition; risks of inventory management; the degree to which the Company enters into, maintains and develops commercial agreements and strategic transactions; seasonality; international growth and expansion; and risks of fulfillment ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. throughput The speed with which a computer processes data. It is a combination of internal processing speed, peripheral speeds (I/O) and the efficiency of the operating system and other system software all working together. 1. and productivity. Other risks and uncertainties include, among others, risk of future losses, significant amount of indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. , potential fluctuations in operating results, management of potential growth, system interruptions, consumer trends, fulfillment center optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. , limited operating history, government regulation and taxation, fraud and new business areas. More information about factors that potentially could affect Amazon.com's financial results is included in Amazon.com's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2002, and all subsequent filings. Financial Measures The following measures are defined by the Securities and Exchange Commission as non-GAAP financial measures. Free Cash Flow Operating cash flow is net cash provided by (used in) operating activities, including cash outflows for interest and excluding proceeds from the exercise of stock-based employee awards. Free cash flow is operating cash flow less cash outflows for purchases of fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → including internal-use software and 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, -- Amortization of goodwill and other intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. , and -- Restructuring-related and other. A tabular reconciliation of differences from the comparable GAAP measure -- operating income (loss) -- is included in "Segment Information" in the attached financial statements. Pro Forma Net Income (Loss) Pro forma net income (loss) excludes the following line items on the Company's statements of operations: -- Stock-based compensation, -- Amortization of goodwill and other intangibles, -- Restructuring-related and other, -- Remeasurement of 6.875% PEACS PEACS Portable Environmental/Acoustic Collection System and other, -- Equity in losses of equity-method investees, net, and -- Cumulative effect of change in accounting principle. A tabular reconciliation of differences from the comparable GAAP measure -- net income (loss) -- is included in the attached "Pro Forma Statements 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." For additional information regarding these non-GAAP financial measures, see exhibit 99.2 to our Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. filed contemporaneously con·tem·po·ra·ne·ous adj. Originating, existing, or happening during the same period of time: the contemporaneous reigns of two monarchs. See Synonyms at contemporary. with the issuance of this release. About Amazon.com Amazon.com, a Fortune 500 company based in Seattle Seattle (sēăt`əl), city (1990 pop. 516,259), seat of King co., W Wash., built on seven hills, between Elliott Bay of Puget Sound and Lake Washington; inc. 1869. , opened on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. Amazon.com and other sellers list millions of unique new and used items in categories such as apparel and accessories, electronics, computers, kitchenware and housewares house·wares pl.n. Cooking utensils, dishes, and other small articles used in a household, especially in the kitchen. , books, music, DVDs, videos, cameras and photo items, toys, baby items and baby registry The configuration database in all 32-bit versions of Windows that contains settings for the hardware and software in the PC it is installed in. The Registry is made up of the SYSTEM.DAT and USER.DAT files. Many settings previously stored in the WIN.INI and SYSTEM. , software, computer and video games This article is about the British magazine covering computer and video games. For the American magazine, see Computer Games Magazine. Computer And Video Games (CVG , cell phones and service, tools and hardware, magazine subscriptions and outdoor living items. Amazon.com operates six Web sites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.fr, www.amazon.co.jp and www.amazon.ca.
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
2003 2002 2003 2002
------------------- ------------------
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD $ 495,773 $ 296,689 $ 738,254 $ 540,282
OPERATING ACTIVITIES:
Net loss (43,314) (93,553) (53,435) (116,703)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation of fixed
assets and other
amortization 19,003 20,970 38,753 41,910
Stock-based compensation 24,453 23,148 51,776 34,079
Equity in losses of
equity-method investees,
net - 1,168 436 2,912
Amortization of other
intangibles 913 1,374 1,825 3,353
Gain on sale of
marketable securities,
net (5,272) (437) (9,252) (813)
Remeasurement of 6.875%
PEACS and other 60,216 63,454 82,014 57,938
Non-cash interest expense
and other 3,532 7,464 11,409 14,525
Cumulative effect of
change in accounting
principle - - - (801)
Changes in operating
assets and liabilities:
Inventories (2,479) 16,420 28,146 21,094
Accounts receivable, net
and other current assets 5,914 (13,430) 33,147 (16,750)
Accounts payable 45,486 (27,418) (181,119) (155,704)
Accrued expenses and
other current
liabilities (7,138) (12,489) (94,203) (78,350)
Additions to unearned
revenue 25,752 20,688 48,720 49,404
Amortization of
previously unearned
revenue (29,998) (30,921) (57,903) (68,254)
Interest payable 28,956 28,199 (26,072) (24,236)
---------- ---------- ---------- ----------
Net cash provided by
(used in) operating
activities 126,024 4,637 (125,758) (236,396)
INVESTING ACTIVITIES:
Sales and maturities of
marketable securities 350,068 213,336 559,023 349,911
Purchases of marketable
securities (109,259) (299,877) (342,314) (434,104)
Purchases of fixed
assets, including
internal-use software
and Web-site development (7,141) (7,440) (13,535) (12,294)
---------- ---------- ---------- ----------
Net cash provided by
(used in) investing
activities 233,668 (93,981) 203,174 (96,487)
FINANCING ACTIVITIES:
Proceeds from exercise of
stock options and other 53,042 42,866 91,597 50,275
Repayment of long-term
debt (277,249) - (277,249) -
Repayment of capital
lease obligations and
other (3,669) (3,432) (6,890) (7,995)
---------- ---------- ---------- ----------
Net cash provided by
(used in) financing
activities (227,876) 39,434 (192,542) 42,280
Foreign-currency effect
on cash and cash
equivalents 14,139 23,659 18,600 20,759
---------- ---------- ---------- ----------
Net increase (decrease)
in cash and cash
equivalents 145,955 (26,251) (96,526) (269,844)
---------- ---------- ---------- ----------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD $ 641,728 $ 270,438 $ 641,728 $ 270,438
========== ========== ========== ==========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Fixed assets acquired
under capital leases and
other financing
arrangements $ 415 $ 1,211 $ 1,076 $ 2,135
Cash paid for interest 2,601 566 86,816 81,049
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 2002 2003 2002
---------- -------- ---------- ----------
Net sales $1,099,912 $805,605 $2,183,471 $1,653,027
Cost of sales 825,984 587,438 1,638,961 1,211,735
---------- -------- ---------- ----------
Gross profit 273,928 218,167 544,510 441,292
Operating expenses:
Fulfillment 107,455 85,751 211,160 175,566
Marketing 25,326 28,832 53,553 61,076
Technology and content 52,135 58,165 102,223 113,662
General and
administrative 21,823 19,425 42,925 40,336
Stock-based
compensation (1) 24,453 23,148 51,776 34,079
Amortization of other
intangibles 913 1,374 1,825 3,353
Restructuring-related
and other - - - 9,974
---------- -------- ---------- ----------
Total operating
expenses 232,105 216,695 463,462 438,046
---------- -------- ---------- ----------
Income from operations 41,823 1,472 81,048 3,246
Interest income 5,761 5,650 12,301 11,302
Interest expense (34,367) (35,651) (70,878) (70,895)
Other income (expense),
net 3,685 (402) 6,544 (307)
Remeasurement of 6.875%
PEACS and other (60,216) (63,454) (82,014) (57,938)
---------- -------- ---------- ----------
Total non-
operating
expenses, net (85,137) (93,857) (134,047) (117,838)
---------- -------- ---------- ----------
Loss before equity in
losses of equity-
method investees (43,314) (92,385) (52,999) (114,592)
Equity in losses of
equity-method
investees, net - (1,168) (436) (2,912)
---------- -------- ---------- ----------
Loss before change in
accounting principle (43,314) (93,553) (53,435) (117,504)
Cumulative effect of
change in accounting
principle - - - 801
---------- -------- ---------- ----------
Net loss $ (43,314) $(93,553) $ (53,435) $ (116,703)
========== ======== ========== ==========
Basic and diluted loss
per share:
Prior to cumulative
effect of change in
accounting principle $ (0.11) $ (0.25) $ (0.14) $ (0.31)
Cumulative effect of
change in accounting
principle - - - -
---------- -------- ---------- ----------
$ (0.11) $ (0.25) $ (0.14) $ (0.31)
========== ======== ========== ==========
Weighted average shares
used in computation of
loss per share:
Basic and diluted 393,876 376,937 391,223 374,995
========== ======== ========== ==========
(1) Components of
stock-based
compensation:
Fulfillment $ 4,862 $ 3,839 $ 11,847 $ 5,610
Marketing 1,606 1,430 2,585 2,304
Technology and content 13,578 12,245 27,794 18,070
General and
administrative 4,407 5,634 9,550 8,095
---------- -------- ---------- ----------
$ 24,453 $ 23,148 $ 51,776 $ 34,079
========== ======== ========== ==========
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 Adjustments Adjusted
(1)
------------ ---------- ----------
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) -
Amortization of other
intangibles 913 (913) -
Restructuring-related and
other - - -
---------- ---------- ----------
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
Remeasurement of 6.875% PEACS
and other (60,216) 60,216 -
---------- ---------- ----------
Total non-operating
expenses, net (85,137) 60,216 (24,921)
---------- ---------- ----------
Income (loss) before equity in
losses of equity-method
investees (43,314) 85,582 42,268
Equity in losses of equity-
method investees, net - - -
---------- ---------- ----------
Net income (loss) $ (43,314) $ 85,582 $ 42,268 (3)
========== ========== ==========
Basic income (loss) per share: $ (0.11) $ 0.22 $ 0.11 (4)
========== ========== ==========
Diluted income (loss) per
share: $ (0.11) $ 0.21 $ 0.10 (4)
========== ========== ==========
Weighted average shares used
in computation of income
(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 Web-site 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)
==========
(1) In accordance with accounting principles generally accepted in
the United States.
(2) Consolidated segment operating income.
(3) Pro forma net income.
(4) Pro forma earnings per share.
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)
cont'd
Three Months Ended
June 30, 2002
--------------------------------
As Reported Adjustments Adjusted
(1)
----------- --------- --------
Net sales $ 805,605 $ - $805,605
Cost of sales 587,438 - 587,438
---------- --------- --------
Gross profit 218,167 - 218,167
Operating expenses:
Fulfillment 85,751 - 85,751
Marketing 28,832 - 28,832
Technology and content 58,165 - 58,165
General and administrative 19,425 - 19,425
Stock-based compensation 23,148 (23,148) -
Amortization of other intangibles 1,374 (1,374) -
Restructuring-related and other - - -
---------- --------- --------
Total operating expenses 216,695 (24,522) 192,173
---------- --------- --------
Income from operations 1,472 24,522 25,994 (2)
Interest income 5,650 - 5,650
Interest expense (35,651) - (35,651)
Other income (expense), net (402) - (402)
Remeasurement of 6.875% PEACS and
other (63,454) 63,454 -
---------- --------- --------
Total non-operating
expenses, net (93,857) 63,454 (30,403)
---------- --------- --------
Income (loss) before equity in
losses of equity-method investees (92,385) 87,976 (4,409)
Equity in losses of equity-method
investees, net (1,168) 1,168 -
---------- --------- --------
Net income (loss) $ (93,553) $ 89,144 $ (4,409)(3)
========== ========= ========
Basic income (loss) per share: $ (0.25) $ 0.24 $ (0.01)(4)
========== ========= ========
Diluted income (loss) per share: $ (0.25) $ 0.24 $ (0.01)(4)
========== ========= ========
Weighted average shares
used in computation of
income (loss) per share:
Basic 376,937 376,937
========== ========
Diluted 376,937 376,937
========== ========
Net cash provided by operating
activities $ 4,637
Purchases of fixed assets, including
internal-use software
and Web-site development (7,440)
--------
Free cash flow $ (2,803)
========
Net cash provided by (used in)
investing activities $ (93,981)
========
Net cash provided by (used in)
financing activities $ 39,434
========
(1) In accordance with accounting principles
generally accepted in the United States.
(2) Consolidated segment operating income.
(3) Pro forma net income.
(4) Pro forma earnings per share.
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 Adjusted
(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) -
Amortization of other
intangibles 1,825 (1,825) -
Restructuring-related and
other - - -
----------- ---------- -----------
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
Remeasurement of 6.875% PEACS
and other (82,014) 82,014 -
----------- ---------- -----------
Total non-operating
expenses, net (134,047) 82,014 (52,033)
----------- ---------- -----------
Income (loss) before equity in
losses of equity-method
investees (52,999) 135,615 82,616
Equity in losses of equity-
method investees, net (436) 436 -
----------- ---------- -----------
Income (loss) before change in
accounting principle (53,435) 136,051 82,616
Cumulative effect of change in
accounting principle - - -
----------- ---------- -----------
Net income (loss) $(53,435) $136,051 $82,616 (3)
=========== ========== ===========
Basic income (loss) per share:
Prior to cumulative effect
of change in accounting
principle $(0.14) $0.35 $0.21
Cumulative effect of change
in accounting principle - - -
----------- ---------- -----------
$(0.14) $0.35 $0.21 (4)
=========== ========== ===========
Diluted income (loss) per
share:
Prior to cumulative effect
of change in accounting
principle $(0.14) $0.34 $0.20
Cumulative effect of change
in accounting principle - - -
----------- ---------- -----------
$(0.14) $0.34 $0.20 (4)
=========== ========== ===========
Weighted average shares
used in computation of
income (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 Web-site development (13,535)
-----------
Free cash flow $(139,293)
===========
Net cash provided by (used in)
investing activities $203,174
===========
Net cash provided by (used in)
financing activities $(192,542)
===========
(1) In accordance with accounting principles generally accepted
in the United States.
(2) Consolidated segment operating income.
(3) Pro forma net income.
(4) Pro forma earnings per share.
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)
cont'd
Six Months Ended
June 30, 2002
----------------------------------
As Reported Adjustments Adjusted
(1)
----------- ---------- -----------
Net sales $1,653,027 $ - $1,653,027
Cost of sales 1,211,735 - 1,211,735
----------- ---------- -----------
Gross profit 441,292 - 441,292
Operating expenses:
Fulfillment 175,566 - 175,566
Marketing 61,076 - 61,076
Technology and content 113,662 - 113,662
General and administrative 40,336 - 40,336
Stock-based compensation 34,079 (34,079) -
Amortization of other
intangibles 3,353 (3,353) -
Restructuring-related and other 9,974 (9,974) -
----------- ---------- -----------
Total operating expenses 438,046 (47,406) 390,640
----------- ---------- -----------
Income from operations 3,246 47,406 50,652 (2)
Interest income 11,302 - 11,302
Interest expense (70,895) - (70,895)
Other income (expense), net (307) - (307)
Remeasurement of 6.875% PEACS and
other (57,938) 57,938 -
----------- ---------- -----------
Total non-operating
expenses, net (117,838) 57,938 (59,900)
----------- ---------- -----------
Income (loss) before equity in
losses of equity-method
investees (114,592) 105,344 (9,248)
Equity in losses of equity-method
investees, net (2,912) 2,912 -
----------- ---------- -----------
Income (loss) before change in
accounting principle (117,504) 108,256 (9,248)
Cumulative effect of change in
accounting principle 801 (801) -
----------- ---------- -----------
Net income (loss) $(116,703) $107,455 $(9,248)(3)
=========== ========== ===========
Basic income (loss) per share:
Prior to cumulative effect of
change in accounting principle $(0.31) $0.29 $(0.02)
Cumulative effect of change in
accounting principle - - -
----------- ---------- -----------
$(0.31) $0.29 $(0.02)(4)
=========== ========== ===========
Diluted income (loss) per share:
Prior to cumulative effect of
change in accounting principle $(0.31) $0.29 $(0.02)
Cumulative effect of change in
accounting principle - - -
----------- ---------- -----------
$(0.31) $0.29 $(0.02)(4)
=========== ========== ===========
Weighted average shares used in
computation of income (loss)
per share:
Basic 374,995 374,995
=========== ===========
Diluted 374,995 374,995
=========== ===========
Net cash used in operating
activities $(236,396)
Purchases of fixed assets,
including internal-use
software and Web-site
development (12,294)
-----------
Free cash flow $(248,690)
===========
Net cash provided by (used in)
investing activities $(96,487)
===========
Net cash provided by (used in)
financing activities $42,280
===========
(1) In accordance with accounting principles generally accepted
in the United States.
(2) Consolidated segment operating income.
(3) Pro forma net income.
(4) Pro forma earnings per share.
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 2002 2003 2002
----------- --------- ----------- -----------
North America
Net sales $ 702,523 $ 586,479 $ 1,407,235 $ 1,207,782
Cost of sales 512,466 416,350 1,030,346 864,131
----------- --------- ----------- -----------
Gross profit 190,057 170,129 376,889 343,651
Direct segment
operating expenses 135,459 134,468 270,630 272,564
----------- --------- ----------- -----------
Segment operating
income 54,598 35,661 106,259 71,087
International
Net sales 397,389 219,126 776,236 445,245
Cost of sales 313,518 171,088 608,615 347,604
----------- --------- ----------- -----------
Gross profit 83,871 48,038 167,621 97,641
Direct segment
operating expenses 71,280 57,705 139,231 118,076
----------- --------- ----------- -----------
Segment operating
income (loss) 12,591 (9,667) 28,390 (20,435)
Consolidated
Net sales 1,099,912 805,605 2,183,471 1,653,027
Cost of sales 825,984 587,438 1,638,961 1,211,735
----------- --------- ----------- -----------
Gross profit 273,928 218,167 544,510 441,292
Direct segment
operating expenses 206,739 192,173 409,861 390,640
----------- --------- ----------- -----------
Segment operating
income 67,189 25,994 134,649 50,652
Stock-based
compensation 24,453 23,148 51,776 34,079
Amortization of
other intangibles 913 1,374 1,825 3,353
Restructuring-
related and other - - - 9,974
----------- --------- ----------- -----------
Income from
operations 41,823 1,472 81,048 3,246
Total non-operating
expenses, net (85,137) (93,857) (134,047) (117,838)
Equity in losses of
equity-method
investees, net - (1,168) (436) (2,912)
Cumulative effect
of change in
accounting
principle - - - 801
----------- --------- ----------- -----------
Net loss $ (43,314) $ (93,553) $ (53,435)$ (116,703)
=========== ========= =========== ===========
Segment Highlights:
Y / Y net sales
growth:
North America 20% 9% 17% 9%
International 81 71 74 71
Consolidated 37 21 32 21
Y / Y gross profit
growth:
North America 12 13 10 13
International 75 64 72 70
Consolidated 26 21 23 22
Gross margin:
North America 27 29 27 28
International 21 22 22 22
Consolidated 25 27 25 27
Segment operating
margin:
North America 8 6 8 6
International 3 (4) 4 (5)
Consolidated 6 3 6 3
Net sales mix:
North America 64 73 64 73
International 36 27 36 27
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 2002 2003 2002
----------- --------- ----------- -----------
North America
Media $499,051 $439,245 $1,016,310 $910,588
Electronics and other
general merchandise 177,439 130,203 345,584 257,847
Other 26,033 17,031 45,341 39,347
----------- --------- ----------- -----------
702,523 586,479 1,407,235 1,207,782
International
Media 366,034 208,923 721,746 423,192
Electronics and other
general merchandise 31,089 9,685 53,952 21,043
Other 266 518 538 1,010
----------- --------- ----------- -----------
397,389 219,126 776,236 445,245
Consolidated
Media 865,085 648,168 1,738,056 1,333,780
Electronics and other
general merchandise 208,528 139,888 399,536 278,890
Other 26,299 17,549 45,879 40,357
----------- --------- ----------- -----------
$1,099,912 $805,605 $2,183,471 $1,653,027
=========== ========= =========== ===========
Y / Y Net Sales Growth:
North America:
Media 14% 6% 12% 7%
Electronics and other
general merchandise 36 18 34 14
Other 53 13 15 23
International:
Media 75 64 71 64
Electronics and other
general merchandise 221 629 156 810
Other (49) - (47) -
Consolidated:
Media 33 20 30 20
Electronics and other
general merchandise 49 25 43 22
Other 50 16 14 26
Consolidated Net Sales
Mix:
Media 79 81 80 81
Electronics and other
general merchandise 19 17 18 17
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 2002 2002
------------ ------------ ----------
ASSETS
Current assets:
Cash and cash equivalents $641,728 $738,254 $270,438
Marketable securities 347,044 562,715 553,141
Inventories 178,107 202,425 126,794
Accounts receivable, net and
other current assets 84,375 112,282 93,204
------------ ------------ ----------
Total current assets 1,251,254 1,615,676 1,043,577
Fixed assets, net 221,674 239,398 249,452
Goodwill, net 70,811 70,811 70,811
Other intangibles, net 1,635 3,460 5,585
Other equity investments 12,764 15,442 18,476
Other assets 38,716 45,662 47,146
------------ ------------ -----------
Total assets $1,596,854 $1,990,449 $1,435,047
============ ============ ===========
LIABILITIES AND STOCKHOLDERS'
DEFICIT
Current liabilities:
Accounts payable $445,098 $618,128 $296,368
Accrued expenses and other
current liabilities 232,231 314,935 236,234
Unearned revenue 38,733 47,916 69,128
Interest payable 45,179 71,661 44,396
Current portion of long-term
debt and other 8,143 13,318 14,406
------------ ------------ -----------
Total current liabilities 769,384 1,065,958 660,532
Long-term debt and other 2,074,306 2,277,305 2,218,426
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, 387,906
and 380,304 3,967 3,879 3,803
Additional paid-in capital 1,790,835 1,649,946 1,546,941
Deferred stock-based
compensation (4,201) (6,591) (9,778)
Accumulated other comprehensive
income (loss) 25,708 9,662 (7,596)
Accumulated deficit (3,063,145) (3,009,710) (2,977,281)
----------- ------------ -----------
Total stockholders' deficit (1,246,836) (1,352,814) (1,443,911)
----------- ------------ -----------
Total liabilities and
stockholders' deficit $1,596,854 $1,990,449 $1,435,047
=========== ============ ===========
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 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Change
------- ------- ------- ------- ------- ------
Cash Flows and Shares
Operating cash flow --
TTM $ 48 $ 151 $ 174 $ 164 $ 285 490%
Purchases of fixed
assets -- TTM $ 33 $ 31 $ 39 $ 41 $ 40 23%
Free cash flow
(operating cash flow
less purchases of
fixed assets) -- TTM $ 16 $ 120 $ 135 $ 123 $ 245 1,471%
Common shares and
stock-based awards
outstanding 430 430 433 432 433 1%
Common shares
outstanding 380 381 388 392 397 4%
Stock-based employee
awards outstanding 50 48 45 41 36 (27%)
Stock-based employee
awards outstanding --
% of common shares
outstanding 13% 13% 12% 10% 9% N/A
Results of Operations
Worldwide (WW) net
sales $ 806 $ 851 $1,429 $1,084 $1,100 37%
WW net sales -- Y / Y
growth, excluding the
effect of foreign
exchange rates 21% 30% 25% 22% 30% N/A
WW net sales --
trailing twelve months
(TTM) $3,407 $3,619 $3,933 $4,169 $4,463 31%
WW net sales shipped
outside the U.S. -- %
of net sales -- TTM 31% 33% 36% 37% 39% N/A
Gross profit $ 218 $ 216 $ 335 $ 271 $ 274 26%
Gross margin -- % of WW
net sales 27.1% 25.4% 23.5% 25.0% 24.9% N/A
Gross profit -- TTM $ 878 $ 932 $ 993 $1,040 $1,096 25%
Gross margin -- TTM %
of WW net sales 25.8% 25.7% 25.2% 24.9% 24.6% N/A
Fulfillment costs -- %
of WW net sales 10.6% 10.6% 8.9% 9.6% 9.8% N/A
Fulfillment costs --
TTM % of WW net sales 10.7% 10.4% 10.0% 9.7% 9.6% N/A
Consolidated direct
segment operating
expenses $ 192 $ 189 $ 233 $ 203 $ 207 8%
Consolidated direct
segment operating
expenses -- TTM $ 795 $ 795 $ 813 $ 817 $ 832 5%
Consolidated segment
operating income $ 26 $ 27 $ 102 $ 67 $ 67 158%
Consolidated segment
operating margin -- %
of WW net sales 3.2% 3.2% 7.1% 6.2% 6.1% N/A
Consolidated segment
operating income --
TTM $ 82 $ 137 $ 180 $ 223 $ 264 221%
Consolidated segment
operating margin --
TTM % of WW net sales 2.4% 3.8% 4.6% 5.3% 5.9% N/A
GAAP operating income
(loss) $ 1 $ (10) $ 71 $ 39 $ 42 N/A
GAAP operating margin
-- % of WW net sales 0.2% (1.1%) 4.9% 3.6% 3.8% N/A
GAAP operating income
(loss) -- TTM $ (53) $ 8 $ 64 $ 102 $ 142 N/A
GAAP operating margin
-- TTM % of WW net
sales (1.5%) 0.2% 1.6% 2.4% 3.2% N/A
Pro forma net income
(loss) $ (4) $ 0 $ 75 $ 40 $ 42 N/A
Diluted pro forma net
income (loss) per
share $(0.01) $ 0.00 $ 0.19 $ 0.10 $ 0.10 N/A
Pro forma net income
(loss) -- TTM $ (32) $ 26 $ 66 $ 112 $ 158 N/A
GAAP net income (loss) $ (94) $ (35) $ 3 $ (10) $ (43) (54%)
GAAP net income (loss)
per share $(0.25) $(0.09) $ 0.01 $(0.03) $(0.11) (56%)
GAAP net loss -- TTM $ (281) $ (147) $ (149) $ (136) $ (86) (69%)
North America segment:
Net sales $ 586 $ 587 $ 967 $ 705 $ 703 20%
Net sales -- TTM $2,561 $2,647 $2,761 $2,845 $2,961 16%
Gross profit $ 170 $ 155 $ 243 $ 187 $ 190 12%
Gross margin -- % of
North America net
sales 29% 26% 25% 27% 27% N/A
Gross profit -- TTM $ 696 $ 717 $ 741 $ 754 $ 774 11%
Gross margin -- TTM %
of North America net
sales 27% 27% 27% 27% 26% N/A
Operating income $ 36 $ 26 $ 82 $ 52 $ 55 53%
Operating margin -- %
of North America net
sales 6% 4% 9% 7% 8% N/A
Operating income --
TTM $ 141 $ 166 $ 180 $ 196 $ 215 53%
Operating margin --
TTM % of North
America net sales 5% 6% 7% 7% 7% 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 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Change
------- ------- ------- ------- ------- ------
International segment:
Net sales $ 219 $ 264 $ 462 $ 379 $ 397 81%
Net sales -- Y / Y
growth, excluding
the effect of
foreign exchange
rates 71% 75% 62% 45% 57% N/A
Net sales -- TTM $ 847 $ 973 $1,172 $1,324 $1,502 77%
Gross profit $ 48 $ 61 $ 93 $ 84 $ 84 75%
Gross margin -- % of
International net
sales 22% 23% 20% 22% 21% N/A
Gross profit -- TTM $ 182 $ 215 $ 252 $ 286 $ 322 77%
Gross margin -- TTM %
of International net
sales 21% 22% 21% 22% 21% N/A
Operating income $ (10) $ 1 $ 20 $ 16 $ 13 N/A
Operating margin -- %
of International net
sales (4%) 0% 4% 4% 3% N/A
Operating income --
TTM $ (58) $ (29) $ 0 $ 27 $ 49 N/A
Operating margin --
TTM % of
International net
sales (7%) (3%) 0% 2% 3% N/A
Supplemental North
America Segment Net
Sales:
Media $ 439 $ 436 $ 649 $ 517 $ 499 14%
Media -- TTM $1,871 $1,930 $1,995 $2,041 $2,101 12%
Electronics and other
general merchandise $ 130 $ 133 $ 290 $ 168 $ 177 36%
Electronics and other
general merchandise
-- TTM $ 610 $ 633 $ 681 $ 722 $ 769 26%
Other $ 17 $ 18 $ 28 $ 19 $ 26 53%
Other -- TTM $ 80 $ 84 $ 85 $ 82 $ 91 14%
Supplemental
International Segment
Net Sales:
Media $ 209 $ 250 $ 431 $ 356 $ 366 75%
Media -- TTM $ 811 $ 925 $1,104 $1,245 $1,402 73%
Electronics and other
general merchandise $ 10 $ 14 $ 31 $ 23 $ 31 221%
Electronics and other
general merchandise
-- TTM $ 35 $ 45 $ 66 $ 77 $ 99 183%
Other $ 1 $ 1 $ 0 $ 0 $ 0 (49%)
Other -- TTM $ 2 $ 2 $ 2 $ 2 $ 1 (4%)
Supplemental Worldwide
Net Sales:
Media $ 648 $ 686 $1,079 $ 873 $ 865 33%
Media -- TTM $2,682 $2,855 $3,099 $3,286 $3,503 31%
Electronics and other
general merchandise $ 140 $ 147 $ 321 $ 191 $ 209 49%
Electronics and other
general merchandise
-- TTM $ 644 $ 679 $ 747 $ 799 $ 868 35%
Other $ 18 $ 18 $ 29 $ 20 $ 26 50%
Other -- TTM $ 81 $ 86 $ 87 $ 84 $ 93 14%
Balance Sheet
Cash and marketable
securities $ 824 $ 866 $1,301 $1,083 $ 989 20%
Inventory, net $ 127 $ 152 $ 202 $ 173 $ 178 40%
Inventory -- % of TTM
net sales 4% 4% 4% 4% 4% N/A
Inventory turnover --
TTM 18.9 19.4 19.3 19.7 20.2 7%
Fixed assets, net $ 249 $ 239 $ 239 $ 228 $ 222 (11%)
Accounts payable days
-- ending 46 50 52 44 49 7%
Other
Employees (full-time
and part-time) 7,700 7,800 7,500 7,700 7,600 (1%)
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) Second Quarter 2003 Results of Operations (comparisons are with the equivalent period of the prior year) Net Sales -- Shipping revenue, which excludes amounts earned from third-party sellers, was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $80 million, down from $81 million. Gross Profit -- Gross profit benefited by approximately $12 million, and consolidated segment operating income by approximately $3 million, from changes in foreign exchange rates compared with second quarter 2002. -- Shipping loss was approximately $26 million, down from income of $2 million. We continue to measure our shipping results relative to their effect on our overall financial results, with the viewpoint that free shipping offers are an effective marketing tool. We intend to continue offering our customers free shipping alternatives, which will reduce shipping revenue as a percentage of sales and negatively affect gross margins. Fulfillment -- Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service centers, credit card fees and bad debt costs. Fulfillment costs also include amounts paid to third-parties, who assist us in fulfillment and customer service operations. Certain of our fulfillment-related costs incurred on behalf of other businesses, such as Toysrus.com and Target, are classified as cost of sales rather than fulfillment. -- Credit card fees associated with third-party seller transactions represent a significant percentage relative to commission amounts earned, and as a result, negatively affect fulfillment as a percentage of net sales. Stock-Based Compensation -- Stock based compensation consisted of $15 million for stock awards under variable accounting and $10 million for stock awards under fixed accounting. Stock based compensation includes matching contributions Matching Contribution A type of contribution an employer chooses to make to his or her employee's employer-sponsored retirement plan. The contribution is based on elective deferral contributions made by the employee. under our 401(k) program but excludes payroll tax Payroll Tax Tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee. In most countries, including the U.S., both state and federal authorities collect some form of payroll tax. expense resulting from exercises of stock-based awards. -- We granted 2 million stock awards during the quarter with vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: periods generally ranging from three to six years. At June 30, 2003, outstanding stock awards consisted of 32 million stock options ($12 average exercise price), 4 million restricted stock units Restricted stock units Similar to restricted stock. However, the unit represents a promise that employees will receive stock in the future. The units do not pay dividends until the stock is vested. and 1 million shares of restricted stock. Restricted stock is included in common stock outstanding; restricted stock units are not. -- Since the fourth quarter 2002, we have awarded restricted stock units as our primary form of stock-based compensation. Restricted stock units are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of our common stock. Such value is recognized as an expense over the corresponding service period. To the extent that restricted stock units are forfeited for·feit n. 1. Something surrendered or subject to surrender as punishment for a crime, an offense, an error, or a breach of contract. 2. Games a. prior to vesting, the corresponding previously recognized expense is reversed as an offset to stock-based compensation. -- At June 30, 2003, 2 million stock awards are subject to variable accounting, of which less than 1 million options granted under the January 2001 exchange offer are scheduled 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. in the third quarter of 2003. Stock option grants after December 31, 2002 are subject to variable accounting treatment. -- Under variable stock award accounting, we will incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. unpredictable charges or credits dependent on the fluctuations in market prices of our common stock, which we are unable to forecast. For example, if at the end of any quarter the quoted price of our common stock is lower than the quoted price at the end of the previous quarter, or to the extent previously-recorded amounts relate to unvested portions of awards that were cancelled can·cel v. can·celed also can·celled, can·cel·ing also can·cel·ling, can·cels also can·cels v.tr. 1. To cross out with lines or other markings. See Synonyms at erase. 2. , compensation expense associated with variable accounting will be recalculated using the cumulative expense method and may result in a net benefit to our results of operations. -- Using the following hypothetical Hypothetical is an adjective, meaning of or pertaining to a hypothesis. See:
stock above and below our June 30, 2003 closing price of $36.32, our hypothetical stock-based compensation expense for the three months ended June 30, 2003 would have been affected by variable accounting treatment as follows (in millions, except percentages and per share amounts):
Percentage Hypothetical Hypothetical
Difference Hypothetical Market Stock-Based vs.
Closing Price (1) Price per Share (1) Compensation Actual Stock-
Expense Based
Compensation
Expense
----------------- ------------------- --------------- -------------
(25)% $27.24 $15 $(10)
(10)% 32.69 20 (4)
0 % 36.32 24 (2) --
10 % 39.95 29 4
25 % 45.40 35 11
-----------------
(1) Hypothetical -- not a prediction of future performance of quoted
prices of our common stock.
(2) Represents actual stock-based compensation expense for the
second quarter 2003.
Restructuring-Related and Other -- As previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). , in the first quarter 2001 we announced and began implementation of our operational restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). plan. The restructuring is complete; however, we may adjust our restructuring-related estimates in the future, if necessary. -- Cash payments resulting from our operational restructuring were $4 million, compared with $13 million in the second quarter 2002. -- We estimate, based on currently available information, the remaining net cash outflows associated with restructuring-related leases and other commitments will be $6 million in the remainder of 2003, $12 million in 2004, and $19 million thereafter. Amounts due within 12 months are included within "Accrued expenses Accrued Expense An accounting expense recognized in the books before it is paid for. It is a liability, usually current. These expenses are typically periodic and documented upon a company's balance sheet due to the high probability of collection. and other current liabilities Other Current Liabilities A balance sheet entry used by companies to group together current liabilities that are not assigned to common liabilities such as debt obligations or accounts payable. " and the remaining amounts within "Long-term debt 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 sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner. income of approximately $47 million (we have signed sublease agreements on $10 million in future income) on gross lease obligations of $83 million. Other Income, Net -- Other income, net primarily consisted of net gains on sales of marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has . Remeasurement of 6.875% PEACS and Other -- Remeasurement of 6.875% PEACS and other primarily consisted of foreign-currency losses on remeasurement of 6.875% PEACS from Euros to U.S. Dollars of $38 million, compared with $71 million in the second quarter 2002. -- In connection with our May 28, 2003 redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. of our 10% Senior Discounts Notes, we recorded a charge of $15 million representing a 5% premium and $2 million of remaining deferred issuance costs. Additionally, we paid $2 million for interest 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. between May 1, 2003 and May 28, 2003 which was recorded to "Interest expense." -- During the second quarter of 2003, we terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: our cross-currency swap agreement that hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. a portion of principal and interest payments on our PEACS. No cash was paid or received to terminate Terminate (terminat.exe) was a shareware modem terminal and host program for MS-DOS and compatible operating systems developed from the early to the late 1990s by the Dane Bo Bendtsen. The last release (5. the swap agreement, however we recorded a charge of $6 million to "Remeasurement of 6.875% PEACS and other," representing the remaining fair value of the swap asset. At June 30, 2003, the balance of the cumulative losses related to the swap agreement, included in "Accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. other comprehensive income (loss)" on our consolidated balance sheets, was $14 million, which will be amortized to "Remeasurement of 6.875% PEACS and other" over the remaining life of the PEACS. If we redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. or otherwise restructure our PEACS prior to maturity, any remaining cumulative unrealized loss resulting from the swap agreement would be recognized as a charge to "Remeasurement of 6.875% PEACS and other." Income Taxes -- At June 30, 2003, we had net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. (NOLs) of approximately $2.7 billion related to U.S. federal, state and foreign jurisdictions. Utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be of NOLs, which begin to expire at various times starting in 2010, may be subject to certain limitations. Approximately $1.3 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 any of this amount is realized, the resulting benefit will be credited to stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. , rather than results of operations. Net Loss -- Although we reported a $50 million improvement in our net loss, we believe that this improvement is not necessarily predictive of future trends for a variety of reasons. For example, we are unable to forecast the effect on our future reported results of certain items, including the stock-based compensation associated with variable accounting treatment and the gain or loss associated with the remeasurement of our 6.875% PEACS that results from fluctuations in foreign exchange rates. These items represented significant charges during the first and second quarters of 2003 and may result in significant charges or gains in future periods. 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, and vendor payment terms. For example, our second quarter 2003 trailing twelve month operating cash flow and free cash flow were positively impacted by approximately $20 million because, as previously reported, a credit card service provider unintentionally failed to make a scheduled quarter-end payment to us until the third quarter 2002, and in the 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 of $989 million are estimated fair value and 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. obligations, U.S. Treasury notes and bonds and asset-backed and agency securities. -- We have pledged pledge n. 1. A solemn binding promise to do, give, or refrain from doing something: signed a pledge never to reveal the secret; a pledge of money to a charity. 2. a. approximately $104 million of our marketable Marketable are securities that can be easily converted into cash. Such securities will generally have highly liquid markets allowing the security to be sold at a reasonable price very quickly. securities as collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although for property leases and other contractual obligations, compared with $124 million at June 30, 2002. -- Long-term debt primarily includes the following (in millions):
Principal Interest Principal
at Maturity Rate Due Date
------------------ --------- ---------------
Convertible Subordinated
Notes $1,250 (1) 4.750% February 2009
PEACS 792 (2) 6.875% February 2010
------------------
$2,042
==================
---------------
(1) Convertible at the holders' option into our common stock at
$78.0275 per share. We have the right to redeem the
Convertible Subordinated Notes, in whole or in part, at a
redemption price of 102.85% of the principal, which decreases
to 100% over time, plus any unaccrued and unpaid interest.
(2) EUR 690 million principal amount, convertible at the holders'
option into our common stock at EUR 84.883 per share. The U.S.
Dollar equivalent principal, interest, and conversion price
fluctuates based on the Euro/U.S. Dollar exchange ratio. We
have the right to redeem the PEACS, in whole or in part, by
paying the EUR 690 million, plus any accrued and unpaid
interest. Because we have terminated our cross-currency swap
agreement relating to the PEACS, we have additional interest
expense exposure to fluctuations in the Euro/US dollar
exchange ratio.
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 exclude stock-based compensation, amortization of goodwill and other intangibles, and restructuring-related and other charges, each of which is not allocated to segment results. All other centrally-incurred operating costs operating costs npl → gastos mpl operacionales are fully allocated to segment results. Our operating results, particularly for the International segment, are affected by movements in foreign exchange rates. -- The North America segment consists of amounts earned from retail sales of consumer products through www.amazon.com and www.amazon.ca (including from third-party sellers), from North America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. focused Syndicated Stores, such as www.cdnow CDNOW.com was an online retailer, founded in February 1994 by twin brothers Jason Olim and Matthew Olim of Ambler, Pennsylvania. CDNOW was initially launched as a telnet (text-only) service in August 1994, and then as a website in September 1994. .com, and mail-order mail order n. An order for goods to be shipped through the mail.  -or catalogs and from non-retail activities such asNorth America focused Merchant.com, marketing and promotional agreements. -- The International segment consists of amounts earned from retail sales of consumer products through www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp (including from third-party sellers), from internationally focused Syndicated Stores and from non-retail activities such as internationally focused marketing and promotional agreements. This segment includes export sales from www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp (including export sales from these sites to customers in the U.S. and Canada 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 have also provided supplemental revenue information within each segment for three categories: "Media," "Electronics and other general merchandise MERCHANDISE. By this term is understood all those things which merchants sell either wholesale or retail, as dry goods, hardware, groceries, drugs, &c. It is usually applied to personal chattels only, and to those which are not required for food or immediate support, but such as remain " and "Other." Media consists of amounts earned from retail sales from all sellers of books, music, DVD/video, magazine subscriptions, software and video games See video game console. . Electronics and other general merchandise consists of amounts earned from retail sales from all sellers of items not included in Media, such as electronics, toys, home improvement, home and garden, and apparel. The Other category consists of non-retail activities, such as the Merchant.com program and miscellaneous marketing and promotional activities. -- All references to customers mean customer accounts, which are unique e-mail addresses See Internet address. e-mail address - electronic mail address , established either when a customer's initial order is shipped or when a customer orders from certain third-party sellers on our Web sites. Customer accounts include customers of Amazon Marketplace Amazon Marketplace ( i.e:Third-party Marketplace ) is Amazon.com's fixed-price online marketplace that allows sellers to survey their goods alongside Amazon's offerings. Buyers can buy new and used items sold directly by a third party through Amazon. , Auctions and zShops and our Merchants@ and Syndicated Stores Programs, but exclude Merchant.com Program customers, Amazon.com Payments customers, our catalog 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. customers and the customers of select companies with whom we have a technology alliance or marketing and promotional relationships. A customer is considered active upon placing an order. -- All references to units mean units sold (net of returns and cancellations) by us and third-party sellers at Amazon.com domains worldwide -- such as www.amazon.com, www.amazon.ca, www.amazon.fr, www.amazon.co.uk, www.amazon.de and www.amazon.co.jp -- and at Syndicated Stores domains, as well as Amazon.com-owned items sold at non-Amazon.com domains, such as books, music and DVD/video items ordered from Amazon.com's store at www.target.com. Units do not include Amazon.com gift certificates. |
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