Amazon.com Announces Record Free Cash Flow Fueled by Lower Prices and Free Shipping for Customers.SEATTLE Seattle (sēăt`əl), city (1990 pop. 516,259), seat of King co., W Wash., built on seven hills, between Elliott Bay of Puget Sound and Lake Washington; inc. 1869. -- Amazon.com (Amazon.com, Seattle, WA, www.amazon.com) The largest online shopping site and one of the most widely known e-commerce sites on the Web. Founded by Jeff Bezos in 1995, it had 11 employees by year's end. Within four years, it had more than 1,600 employees and four million customers. , Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :AMZN AMZN Amazon.com (NASDAQ symbol) ) today announced financial results for its second quarter ended June June: see month. 30, 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 52% to $624 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 $410 million for the trailing twelve months ended June 30, 2004. Free cash flow grew 37% to $486 million for the trailing twelve months, compared with $354 million for the trailing twelve months ended June 30, 2004. Common shares outstanding plus shares underlying stock-based awards outstanding totaled 438 million at June 30, 2005, compared with 434 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 26% to $1.75 billion in the second quarter, compared with $1.39 billion in second quarter 2004. Excluding the $25 million benefit from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 25% compared with second 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. increased 21% to $104 million in the second quarter, compared with $86 million in second 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 more than $5 million impact on the quarter's results from this adoption, operating income would have grown 27% to $110 million. Operating income benefited by $2 million from year-over-year changes in foreign exchange rates throughout the quarter. Net income was $52 million in the second quarter, or $0.12 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 $76 million, or $0.18 per diluted share in second quarter 2004, which includes $56 million in income tax expense, compared with $5 million income tax expense in second quarter 2004. "Amazon Amazon, in Greek mythology Amazon (ăm`əzŏn), in Greek mythology, one of a tribe of warlike women who lived in Asia Minor. Prime members love getting unlimited two-day shipping for free with no minimum order size," 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. "Though expensive for the company, Amazon Prime creates a premium experience for customers who join, and as a result we hope they'll they'll Contraction of they will. they'll will purchase more from us in the long term." 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. Sign up for Amazon Prime at www.amazon.com/prime. "We are pleased with our $486 million of free cash flow, up 37%," said Tom Szkutak, CFO See Chief Financial Officer. of Amazon.com. "We continue to offer lower prices and free two-day shipping for Amazon Prime members while generating additional free cash flow for our shareholders." 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 $960 million, up 21% from second quarter 2004. Segment operating income increased 9% to $72 million in second quarter 2005 from $66 million in second quarter 2004. --North America Other revenue, which includes Amazon Services' Merchant.com program, doubled to $50 million in second quarter 2005. --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 $793 million, up 33% from second quarter 2004. Excluding the benefit from year-over-year changes in foreign exchange rates throughout the quarter, net sales growth was 29%. Segment operating income increased 72% to $60 million in second quarter 2005 from $35 million in second quarter 2004. --On a trailing twelve month basis, International segment sales increased to 45% of worldwide net sales, up from 42% for the trailing twelve months ended June 30, 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 40% to $456 million, and increased to 26% of worldwide net sales, compared with 23% for second quarter 2004. --The Company received orders for more than 1.5 million copies of Harry Potter A potter is someone who makes pottery. Potter may also refer to: People
--The Company's U.K. and German sites -- Amazon.co.uk and Amazon.de -- recently launched Search Inside the Book, enabling customers to preview To see ahead of time. Page layout and word processing programs often have a preview function that lets you see how all the pages will appear before they are printed. In the days of character-based interfaces, a preview was absolutely necessary to see how different fonts would look or how the text inside hundreds of thousands of books. --Amazon.de also introduced a new 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 with subscription plans that start from just EUR EUR In currencies, this is the abbreviation for the Euro. 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. 9.99 per month. Rental members also receive an extra 5% discount off Amazon.de's already low prices on their DVD purchases. 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 July 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. Third Quarter 2005 Guidance --Net sales are expected to be between $1.76 billion and $1.91 billion, or grow between 20% and 31%, compared with third quarter 2004. --Operating income is expected to be between $60 million and $90 million, or between (26%) decline and 11% growth, compared with third 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 $8.275 billion and $8.675 billion, or grow between 20% and 25%, compared with 2004. --Operating income is expected to be between $415 million and $515 million, or between (6%) decline and 17% growth, compared with 2004. This expectation includes stock-based compensation of $110 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 Six Months Twelve Months
Ended Ended Ended
June 30, June 30, June 30,
------------ ------------ ------------
2005 2004 2005 2004 2005 2004
------------ ------------ ------------
CASH AND CASH
EQUIVALENTS,
BEGINNING OF PERIOD $ 533 $ 769 $1,303 $1,102 $ 701 $ 642
OPERATING ACTIVITIES:
Net income 52 76 130 188 531 276
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 26 18 55 36 95 73
Stock-based
compensation 26 22 45 29 74 65
Other operating
expense (income) 2 (7) 3 (8) 2 (7)
Losses (gains) on
sales of marketable
securities, net - - - (1) - (1)
Remeasurements and
other (18) (16) (32) (36) 5 11
Non-cash interest
expense and other 1 1 3 2 5 4
Deferred income taxes 44 (1) 94 (8) (154) (8)
Cumulative effect of
change in accounting
principle - - (26) - (26) -
Changes in operating
assets and
liabilities:
Inventories 13 (5) 85 8 (93) (96)
Accounts receivable,
net and other current
assets 9 (5) 19 10 8 (24)
Accounts payable 54 23 (370) (233) 150 115
Accrued expenses and
other current
liabilities 7 10 (25) (62) 21 8
Additions to unearned
revenue 38 27 66 50 125 104
Amortization of
previously unearned
revenue (31) (25) (56) (49) (113) (104)
Interest payable 21 25 (41) (34) (6) (6)
----- ----- ------ ------ ------- -----
Net cash provided by
(used in) operating
activities 244 143 (50) (108) 624 410
INVESTING ACTIVITIES:
Purchases of fixed
assets, including
internal-use
software and website
development (46) (14) (73) (24) (138) (56)
Sales and maturities
of marketable
securities and other
investments 142 43 490 612 1,305 866
Purchases of
marketable securities (235) (251) (738) (755) (1,568) (948)
Proceeds from sale of
subsidiary - - - - - 5
Acquisitions, net of
cash acquired (5) - (20) - (91) -
----- ----- ------ ------ ------- -----
Net cash used in
investing
activities (144) (222) (341) (167) (492) (133)
FINANCING ACTIVITIES:
Proceeds from
exercises of stock
options and other 9 20 19 35 44 106
Repayments of long-
term debt and capital
lease obligations - (1) (266) (156) (267) (367)
----- ----- ------ ------ ------- -----
Net cash provided by
(used in) financing
activities 9 19 (247) (121) (223) (261)
Foreign-currency
effect on cash and
cash equivalents (13) (8) (36) (5) 19 43
----- ----- ------ ------ ------- -----
Net increase
(decrease) in cash
and cash equivalents 96 (68) (674) (401) (72) 59
----- ----- ------ ------ ------- -----
CASH AND CASH
EQUIVALENTS, END OF
PERIOD $ 629 $ 701 $ 629 $ 701 $ 629 $ 701
===== ===== ====== ====== ======= =====
SUPPLEMENTAL CASH FLOW
INFORMATION:
Cash paid for interest $ - $ - $ 84 $ 86 $ 105 $ 119
Cash paid for income
taxes 1 1 5 1 8 2
AMAZON.COM, INC.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
------------- ------------
2005 2004 2005 2004
------------- ------------
Net sales $1,753 $1,387 $3,655 $2,918
Cost of sales 1,303 1,046 2,746 2,216
------ ------ ------ ------
Gross profit 450 341 909 702
Operating expenses (1):
Fulfillment 158 126 324 255
Marketing 42 34 87 68
Technology and content 106 71 198 130
General and administrative 38 31 85 60
Other operating expense (income) 2 (7) 3 (8)
------ ------ ------ ------
Total operating expenses 346 255 697 505
------ ------ ------ ------
Income from operations 104 86 212 197
Interest income 9 5 18 11
Interest expense (22) (26) (48) (54)
Other income (expense), net (1) - 2 1
Remeasurements and other 18 16 32 36
------ ------ ------ ------
Total non-operating income
(expense) 4 (5) 4 (6)
------ ------ ------ ------
Income before income taxes 108 81 216 191
Provision for income taxes 56 5 112 3
------ ------ ------ ------
Income before cumulative effect of
change in accounting principle 52 76 104 188
Cumulative effect of change in
accounting principle - - 26 -
------ ------ ------ ------
Net income $ 52 $ 76 $ 130 $ 188
====== ====== ====== ======
Basic earnings per share:
Prior to cumulative effect of change
in accounting principle $ 0.13 $ 0.19 $ 0.25 $ 0.46
Cumulative effect of change in
accounting principle - - 0.07 -
------ ------ ------ ------
$ 0.13 $ 0.19 $ 0.32 $ 0.46
====== ====== ====== ======
Diluted earnings per share:
Prior to cumulative effect of change
in accounting principle $ 0.12 $ 0.18 $ 0.24 $ 0.44
Cumulative effect of change in
accounting principle - - 0.07 -
------ ------ ------ ------
$ 0.12 $ 0.18 $ 0.31 $ 0.44
====== ====== ====== ======
Weighted average shares used in
computation of earnings per share:
Basic 411 405 410 404
====== ====== ====== ======
Diluted 425 425 425 425
====== ====== ====== ======
(1) Includes stock-based compensation
as follows:
Fulfillment $ 5 $ 3 $ 8 $ 4
Marketing 2 2 3 3
Technology and content 13 13 23 16
General and administrative 6 4 11 6
------ ------ ------ ------
$ 26 $ 22 $ 45 $ 29
====== ====== ====== ======
AMAZON.COM, INC.
Segment Information
(in millions)
(unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
------------- ------------
2005 2004 2005 2004
------------- ------------
North America
Net sales $ 960 $ 791 $1,987 $1,639
Cost of sales 682 571 1,430 1,193
------ ------ ------ ------
Gross profit 278 220 557 446
Direct segment operating expenses (1) 206 154 420 304
------ ------ ------ ------
Segment operating income 72 66 137 142
International
Net sales 793 596 1,668 1,279
Cost of sales 621 475 1,316 1,023
------ ------ ------ ------
Gross profit 172 121 352 256
Direct segment operating expenses (1) 112 86 229 180
------ ------ ------ ------
Segment operating income 60 35 123 76
Consolidated
Net sales 1,753 1,387 3,655 2,918
Cost of sales 1,303 1,046 2,746 2,216
------ ------ ------ ------
Gross profit 450 341 909 702
Direct segment operating expenses 318 240 649 484
------ ------ ------ ------
Segment operating income 132 101 260 218
Stock-based compensation (26) (22) (45) (29)
Other operating income (expense) (2) 7 (3) 8
------ ------ ------ ------
Income from operations 104 86 212 197
Total non-operating income (expense),
net 4 (5) 4 (6)
Provision for income taxes (56) (5) (112) (3)
Cumulative effect of change in
accounting principle - - 26 -
------ ------ ------ ------
Net income $ 52 $ 76 $ 130 $ 188
====== ====== ====== ======
Segment Highlights:
Y/Y net sales growth:
North America 21% 13% 21% 16%
International 33 50 30 65
Consolidated 26 26 25 34
Y/Y gross profit growth:
North America 27% 16% 25% 18%
International 42 45 37 53
Consolidated 32 25 29 29
Y/Y segment operating income growth:
North America 9% 21% (3%) 33%
International 72 177 61 169
Consolidated 31 50 20 62
Net sales mix:
North America 55% 57% 54% 56%
International 45 43 46 44
(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.
AMAZON.COM, INC.
Supplemental Net Sales Information
(in millions)
(unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
------------ ------------
2005 2004 2005 2004
------------ ------------
North America
Media $ 632 $ 541 $1,331 $1,141
Electronics and other general
merchandise 278 226 559 450
Other 50 24 97 48
------ ------ ------ ------
960 791 1,987 1,639
International
Media 614 496 1,289 1,072
Electronics and other general
merchandise 178 99 377 206
Other 1 1 2 1
------ ------ ------ ------
793 596 1,668 1,279
Consolidated
Media 1,246 1,037 2,620 2,213
Electronics and other general
merchandise 456 325 936 656
Other 51 25 99 49
------ ------ ------ ------
$1,753 $1,387 $3,655 $2,918
====== ====== ====== ======
Y/Y Net Sales Growth:
North America:
Media 17% 9% 17% 12%
Electronics and other general
merchandise 23 27 24 30
Other 105 (6) 100 6
International:
Media 24% 35% 20% 48%
Electronics and other general
merchandise 80 218 83 282
Other 35 176 49 120
Consolidated:
Media 20% 20% 18% 27%
Electronics and other general
merchandise 40 56 43 64
Other 103 (4) 99 8
Consolidated Net Sales Mix:
Media 71% 75% 72% 76%
Electronics and other general
merchandise 26 23 26 22
Other 3 2 3 2
AMAZON.COM, INC.
Consolidated Balance Sheets
(in millions, except per share data)
June 30, Dec. 31, June 30,
2005 2004 2004
-------- -------- --------
ASSETS (unaudited) (unaudited)
Current assets:
Cash and cash equivalents $ 629 $ 1,303 $ 701
Marketable securities 696 476 450
------- ------- -------
Cash, cash equivalents, and
marketable securities 1,325 1,779 1,151
Inventories 383 480 284
Deferred tax assets, current portion 63 81 1
Accounts receivable, net and other
current assets 155 199 125
------- ------- -------
Total current assets 1,926 2,539 1,561
Fixed assets, net 267 246 216
Deferred tax assets, long-term portion 206 282 6
Goodwill 154 139 69
Other assets 48 42 36
------- ------- -------
Total assets $ 2,601 $ 3,248 $ 1,888
======= ======= =======
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 735 $ 1,142 $ 585
Accrued expenses and other current
liabilities 317 361 250
Unearned revenue 52 41 39
Interest payable 32 74 40
Current portion of long-term debt
and other 8 2 2
------- ------- -------
Total current liabilities 1,144 1,620 916
Long-term debt and other 1,521 1,855 1,763
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 --
412, 410 and 407 shares 4 4 4
Additional paid-in capital 2,161 2,123 1,963
Accumulated other comprehensive
income 27 32 29
Accumulated deficit (2,256) (2,386) (2,787)
------- ------- -------
Total stockholders' deficit (64) (227) (791)
------- ------- -------
Total liabilities and
stockholders' deficit $ 2,601 $ 3,248 $ 1,888
======= ======= =======
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except per share data)
(unaudited)
----------------------------------------------------------------------
Y/Y %
Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Change
------------------------------------------------
Cash Flows and Shares
Operating cash flow
-- trailing twelve
months (TTM) $ 410 $ 490 $ 567 $ 523 $ 624 52%
Purchase of fixed
assets (incl.
internal-use
software & website
development) -- TTM $ 56 $ 70 $ 89 $ 106 $ 138 146%
Free cash flow
(operating cash flow
less purchases of
fixed assets) -- TTM $ 354 $ 420 $ 477 $ 417 $ 486 37%
Common shares and
stock-based awards
outstanding 434 434 434 434 438 1%
Common shares
outstanding 407 407 410 411 412 1%
Stock-based awards
outstanding 27 27 25 24 26 (5%)
Stock-based awards
outstanding -- % of
common shares
outstanding 6.7% 6.5% 6.0% 5.7% 6.3% N/A
Results of Operations
Worldwide (WW) net
sales $1,387 $1,462 $2,541 $ 1,902 $1,753 26%
WW net sales -- Y/Y
growth, excluding
the effect of
foreign exchange
rates 21.9% 23.9% 26.2% 22.3% 24.6% N/A
WW net sales -- TTM $5,998 $6,326 $6,921 $ 7,292 $7,658 28%
Gross profit $ 341 $ 356 $ 544 $ 458 $ 450 32%
Gross margin -- % of
WW net sales 24.6% 24.3% 21.4% 24.1% 25.7% N/A
Gross profit -- TTM $1,415 $1,484 $1,602 $ 1,700 $1,809 28%
Gross margin -- TTM %
of WW net sales 23.6% 23.5% 23.1% 23.3% 23.6% N/A
Fulfillment costs,
excluding stock-
based compensation
-- % of WW net sales 8.8% 9.3% 8.0% 8.6% 8.7% N/A
Fulfillment costs,
excluding stock-
based compensation
-- TTM % of WW net
sales 8.6% 8.6% 8.5% 8.6% 8.6% N/A
Operating income $ 86 $ 81 $ 162 $ 108 $ 104 21%
Operating margin -- %
of WW net sales 6.2% 5.6% 6.4% 5.7% 6.0% N/A
Operating income --
TTM $ 386 $ 416 $ 440 $ 438 $ 456 18%
Operating margin --
TTM % of WW net
sales 6.4% 6.6% 6.4% 6.0% 6.0% N/A
Net income (a) $ 76 $ 54 $ 347 $ 78 $ 52 (32%)
Net income per
diluted share (a) $ 0.18 $ 0.13 $ 0.82 $ 0.18 $ 0.12 (32%)
Net income --
TTM (a) $ 276 $ 315 $ 588 $ 555 $ 531 92%
Net income per
diluted share -- TTM
(a) $ 0.65 $ 0.74 $ 1.39 $ 1.31 $ 1.25 92%
Segments
North America
Segment:
Net sales $ 791 $ 816 $1,392 $ 1,027 $ 960 21%
Net sales -- Y/Y
growth, excluding
the effect of
foreign exchange
rates 12.7% 15.0% 21.8% 21.1% 21.0% N/A
Net sales -- TTM $3,490 $3,597 $3,847 $ 4,027 $4,195 20%
Gross profit $ 220 $ 223 $ 355 $ 279 $ 278 27%
Gross margin -- %
of North America
net sales 27.7% 27.4% 25.5% 27.2% 29.0% N/A
Gross profit -- TTM $ 935 $ 958 $1,024 $ 1,077 $1,135 21%
Gross margin -- TTM
% of North America
net sales 26.8% 26.6% 26.6% 26.7% 27.1% N/A
Operating income $ 66 $ 57 $ 122 $ 66 $ 72 9%
Operating margin --
% of North America
net sales 8.3% 7.0% 8.8% 6.4% 7.5% N/A
Operating income --
TTM $ 318 $ 313 $ 321 $ 311 $ 317 (0%)
Operating margin --
TTM % of North
America net sales 9.1% 8.7% 8.3% 7.7% 7.6% N/A
International
Segment:
Net sales $ 596 $ 646 $1,149 $ 875 $ 793 33%
Net sales -- Y/Y
growth, excluding
the effect of
foreign exchange
rates 38.1% 38.9% 32.5% 23.8% 29.3% N/A
Net sales -- TTM $2,508 $2,729 $3,074 $ 3,265 $3,463 38%
Net sales -- TTM %
of WW net sales 41.8% 43.1% 44.4% 44.8% 45.2% N/A
Gross profit $ 121 $ 132 $ 190 $ 180 $ 172 42%
Gross margin -- %
of International
net sales 20.4% 20.5% 16.5% 20.5% 21.7% N/A
Gross profit -- TTM $ 479 $ 527 $ 578 $ 623 $ 674 41%
Gross margin -- TTM
% of International
net sales 19.1% 19.3% 18.8% 19.1% 19.5% N/A
Operating income $ 35 $ 38 $ 55 $ 63 $ 60 72%
Operating margin --
% of International
net sales 5.9% 5.8% 4.8% 7.2% 7.6% N/A
Operating income --
TTM $ 126 $ 153 $ 169 $ 190 $ 216 71%
Operating margin --
TTM % of
International net
sales 5.0% 5.6% 5.5% 5.8% 6.2% 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; 2005 net
income includes a $56 million tax expense for Q1 2005 and a $56
million tax expense for Q2 2005 primarily due to taxable income
resulting from the transfer of certain operating 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 %
Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Change
------------------------------------------------
Segments (continued)
Consolidated
Segments:
Operating expenses $ 240 $ 261 $ 367 $ 330 $ 318 33%
Operating expenses
-- TTM $ 970 $1,019 $1,112 $1,198 $ 1,276 32%
Operating income $ 101 $ 95 $ 177 $ 129 $ 132 31%
Operating margin --
% of consolidated
sales 7.3% 6.5% 7.0% 6.8% 7.5% N/A
Operating income --
TTM $ 444 $ 466 $ 490 $ 502 $ 533 20%
Operating margin --
TTM % of
consolidated net
sales 7.4% 7.4% 7.1% 6.9% 7.0% N/A
Supplemental North
America Segment Net
Sales:
Media $ 541 $ 564 $ 885 $ 699 $ 632 17%
Media -- TTM $2,394 $2,455 $2,589 $2,690 $ 2,780 16%
Electronics and
other general
merchandise $ 226 $ 229 $ 449 $ 281 $ 278 23%
Electronics and
other general
merchandise -- TTM $ 983 $1,031 $1,128 $1,185 $ 1,236 26%
Electronics and
other general
merchandise -- TTM
% of North America
net sales 28% 29% 29% 29% 29% N/A
Other $ 24 $ 24 $ 58 $ 46 $ 50 105%
Other -- TTM $ 113 $ 111 $ 130 $ 153 $ 178 58%
Supplemental
International
Segment Net Sales:
Media $ 496 $ 530 $ 911 $ 675 $ 614 24%
Media -- TTM $2,129 $2,285 $2,513 $2,612 $ 2,730 28%
Electronics and
other general
merchandise $ 99 $ 116 $ 237 $ 199 $ 178 80%
Electronics and
other general
merchandise -- TTM $ 377 $ 442 $ 558 $ 651 $ 730 94%
Electronics and
other general
merchandise -- TTM
% of International
net sales 15% 16% 18% 20% 21% N/A
Other $ 1 $ 0 $ 1 $ 1 $ 1 35%
Other -- TTM $ 2 $ 2 $ 2 $ 3 $ 3 60%
Supplemental
Worldwide Net Sales:
Media $1,037 $1,094 $1,796 $1,374 $ 1,246 20%
Media -- TTM $4,523 $4,740 $5,102 $5,302 $ 5,510 22%
Electronics and
other general
merchandise $ 325 $ 344 $ 686 $ 480 $ 456 40%
Electronics and
other general
merchandise -- TTM $1,360 $1,474 $1,686 $1,835 $ 1,966 45%
Electronics and
other general
merchandise -- TTM
% of WW net sales 23% 23% 24% 25% 26% N/A
Other $ 25 $ 24 $ 59 $ 47 $ 51 103%
Other -- TTM $ 115 $ 113 $ 133 $ 156 $ 181 58%
Balance Sheet
Cash and marketable
securities $1,151 $1,185 $1,779 $1,151 $ 1,325 15%
Inventory, net --
ending $ 284 $ 357 $ 480 $ 403 $ 383 35%
Inventory -- average
inventory % of TTM
net sales 4.3% 4.6% 4.9% 5.0% 5.0% N/A
Inventory turnover,
average -- TTM 17.9 16.6 15.7 15.5 15.3 (14%)
Fixed assets, net $ 216 $ 227 $ 246 $ 245 $ 267 24%
Accounts payable days
-- ending 51 57 53 44 51 1%
Other
Employees (full-time
and part-time;
excludes contractors
& temporary
personnel) 8,200 8,800 9,000 9,400 10,200 25%
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 don't 1. Contraction of do not. 2. Nonstandard Contraction of does not. n. A statement of what should not be done: a list of the dos and don'ts. provide fulfillment services, was $103 million, up 22% from $84 million. --Amounts paid in advance for subscription services, including amounts received from online DVD rentals Online DVD rentals allow a person to rent DVDs by mail. Generally, all interaction between the renter and the rental company takes place through the company's website. How it works Most companies operate on the following model: --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 in·bound 1 adj. Bound inward; incoming: inbound commuter traffic. Adj. 1. inbound and outbound out·bound adj. Outward bound; headed away: outbound trains. Adj. 1. outbound - that is going out or leaving; "the departing train"; "an outward journey"; "outward-bound ships" shipping charges, packaging supplies, and service costs such as those incurred in operating and staffing our fulfillment and customer service centers on behalf of third-party sellers. --Outbound shipping-related costs totaled $148 million, up 25% from $119 million. Net shipping loss was $45 million, up 31% from a net shipping loss of $35 million, resulting primarily from our free shipping offers and Amazon Prime. 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. --Depreciation and amortization of fixed assets was $25 million, up from $18 million, and is classified within the corresponding 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. 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 $4 million to $26 million. Stock-based compensation would have been $20 million under our prior accounting method, down $2 million versus Q2 2004. --In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with SAB SAB Spontaneous abortion. See Abortion. 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:
Q2 2005 Q2 2004
-------------------------- ----------------------------
As Stock-Based As Stock-Based
Reported Compensation Net Reported Compensation Net
-------- ------------ ---- -------- ------------ ------
Operating
Expenses (in
millions):
Fulfillment $ 158 $ (5) $ 153 $ 126 $ (3) $ 123
Marketing 42 (2) 40 34 (2) 32
Technology and
content 106 (13) 93 71 (13) 58
General and
administrative 38 (6) 32 31 (4) 27
Other operating
expense (income) 2 - 2 (7) - (7)
------- ---------- ----- ------- --------- -----
Total operating
expenses $ 346 $ (26) $ 320 $ 255 $ (22) $ 233
======= ========== ===== ======= ========= =====
Year-over-Year
Percentage
Growth:
Fulfillment 25.0 % 24.5 % 12.2 % 14.2 %
Marketing 23.5 25.9 26.0 25.7
Technology and
content 48.7 59.4 8.5 12.2
General and
administrative 24.6 18.9 16.9 24.6
Percent of Net
Sales:
Fulfillment 9.0 % 8.7 % 9.1 % 8.8 %
Marketing 2.4 2.3 2.4 2.3
Technology and
content 6.0 5.3 5.1 4.2
General and
administrative 2.2 1.8 2.2 2.0
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; picking, packaging and preparing customer orders for shipment; 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, as third-party sales increase, credit card fees and bad debt costs on these sales will negatively affect fulfillment costs as a percentage of net sales. --Fulfillment costs increased in absolute dollars 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 the first half of 2005 through gains in efficiencies as well as increases in leased warehouse space. We plan to continue expanding our worldwide fulfillment capacity to meet anticipated shipment volumes from sales of our own products as well as sales by third parties where we provide the fulfillment. We expect absolute amounts spent in fulfillment and fulfillment-related cost of sales 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 primarily 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, search, 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. , and digital initiatives. We intend to continue investing in areas of technology and content, 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 our technology costs are incurred in the U.S. and most of them are allocated to our 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. --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 $22 million of internal-use software and website development costs, including $3 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 $10 million a year ago. These amounts were partially offset by amortization of previously capitalized amounts of $12 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 payroll and related expenses. We expect absolute dollars spent in general and administrative to increase over time. --In Q1 we recorded a charge of $8 million 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. , and in Q2 the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. resolution of one of these matters resulted in a $3 million expense reduction. 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. --As of January 1, 2005, we adopted SFAS 123(R), 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. --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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc stock-based compensation was presented in operating cash flows, along with other tax cash flows. SFAS 123(R) requires benefits relating to excess stock-based compensation deductions to 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. --Stock-based awards generally vest over service periods of between two and five years. --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 October: see month. 2002, of 4 million shares at a per-share weighted-average fair value of $34. Our annual stock awards are granted in the second quarter. --At June 30, 2005, there were 438 million common shares and stock-based awards outstanding, up 1% from 434 million at December 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 June 30, 2005, there were 26 million stock awards outstanding, consisting of 16 million stock options with a $14 weighted-average exercise price and 10 million restricted stock units. At June 30, 2004 there were 28 million stock awards outstanding. Other Operating Expense (Income) --Included in "Other operating expense (income)" are amortization of 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 expenses or credits. --Amortization of other intangibles was $1 million, and is expected to be $3 million for the remainder of 2005, $4 million in both 2006 and 2007, and $1 million in 2008, based on intangibles as of June 30, 2005. --We acquired certain companies in the first half of 2005 for an aggregate cash purchase price of $24 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 $16 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 $7 million and have estimated useful lives of between one and three 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 Q2. Other Income (Expense), Net --Other expense of $1 million includes gains and losses 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 and foreign-currency transaction gains and losses, including the currency effect on the 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 $42 million, compared with a gain of $8 million. --Remeasurement of foreign-currency intercompany balances that are to be repaid among subsidiaries represented a $25 million loss, compared with a loss of $7 million. --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. Income Taxes and Deferred Tax Assets --Our Q2 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 Q1 2005 transfer of certain operating assets Operating Assets Another term for working capital. 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), these asset transfers will not have a significant effect on cash taxes paid in 2005, 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, compared with $4 million in 2004. In Q2, we paid cash taxes of $1 million, and year to date we have paid cash taxes of $5 million. --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 is realizable. --At June 30, 2005, approximately $730 million of our gross deferred tax assets were related to approximately $2.3 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. 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:
Q2 2005 Q2 2004
------------------------- -------------------------
At At
Prior Exchange Prior Exchange
Year Rate As Year Rate As
Rates Effect Reported Rates Effect Reported
(1) (2) (1) (2)
------- -------- -------- ------- -------- --------
(in millions, except per share amounts)
Net sales $1,728 $ 25 $1,753 $1,340 $ 47 $1,387
Gross profit 445 5 450 331 10 341
Operating expenses 343 3 346 249 6 255
Operating income 102 2 104 82 4 86
Net interest
expense and other (14) - (14) (20) (1) (21)
Remeasurements and
other (3) 1 17 18 13 3 16
Net income 43 9 52 70 6 76
Diluted earnings
per share $ 0.10 $0.02 $ 0.12 $ 0.16 $0.02 $ 0.18
(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 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 of $1.32 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, corporate notes and bonds, asset-backed and agency securities, 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 $679 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. $72 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 $80 million as of June 30, 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 $14 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, $14 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. , $18 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 $6 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 $7 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 $8 million. --"Accrued expenses and other current liabilities" includes, among other things, liabilities for gift certificates, professional fees, 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") 593 (2) 6.875% February 2010
---------
$1,493 (3)
=========
(1) Convertible at the holders' option into our common stock at
$78.0275 per share. We have the right to redeem the Convertible
Subordinated Notes, in whole or in part, at a redemption price of
101.9% of the principal, which decreases every February 1 by 47.5
basis points until maturity, plus any accrued and unpaid interest.
(2) EUR 490 million principal amount, convertible at the holders'
option into our common stock at EUR 84.883 per share ($103 per
share based on the euro/U.S. dollar exchange rate as of June 30,
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 $110 million as
of June 30, 2005.
(3) The "if converted" number of shares associated with our
convertible debt instruments (approximately 17 million total
shares) is excluded from diluted shares as their effect is
antidilutive.
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 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 North America-focused websites such as 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 International-focused websites such as 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 rental service in the U.K. and DE; 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. Accounts payable 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 accounts payable to cost of sales, multiplied mul·ti·ply 1 v. mul·ti·plied, mul·ti·ply·ing, mul·ti·plies v.tr. 1. To increase the amount, number, or degree of. 2. Mathematics To perform multiplication on. by the number of days in the period. Inventory turns are calculated as the quotient of cost of sales to average inventory over five quarter ends. --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. |
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