Amazon.com Announces Third-Quarter Financial Results; Expects Record Holiday Shopping Season.Business Editors/High-Tech Writers SEATTLE--(BUSINESS WIRE)--Oct. 21, 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 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 third quarter ended September September: 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 $284 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 $151 million for the trailing twelve months ended September 30, 2002. Free cash flow was $239 million for the trailing twelve months, compared with $120 million for the trailing twelve months ended September 30, 2002. Common shares outstanding plus shares underlying stock-based employee awards totaled 433 million at September 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 $1.13 billion in the third quarter, compared with $851 million in third quarter 2002, an increase of 33%. Net sales benefited by $29 million from changes in foreign exchange rates compared with third 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 $52 million in the third quarter, or 5% of net sales, compared with an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $10 million in third 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 $46 million to $74 million, or 6% of net sales, compared with $27 million, or 3% of net sales, in third quarter 2002. Net income was $16 million in the third quarter, or $0.04 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with a net loss of $35 million, or $0.09 per share, in third 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 third quarter grew to $48 million, or $0.11 per diluted share, compared with $0 million, or $0.00 per diluted share, in third quarter 2002. "Thanks to free shipping and low prices, we expect more customers to turn to us for their holiday gifting needs this year--producing our biggest holiday shopping season ever," 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. , Amazon.com 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. . The Company currently offers Free Super Saver Super saver may refer to:
adjective successful, top, hit (informal) smash (informal) flourishing, lucrative, smash-hit (informal) chart-topping (informal) moneymaking, number one, highly successful CDs and DVDs. To encourage customers to try its newest stores, the Company is currently offering promotional discounts in apparel and sporting goods Noun 1. sporting goods - sports equipment sold as a commodity commodity, trade good, good - articles of commerce sports equipment - equipment needed to participate in a particular sport . See "Financial Measures" for additional information. Quarterly Highlights -- Worldwide unit growth was 36%, compared with third quarter 2002. -- Third-party seller units (new, used and refurbished items sold on the Company's Websites by businesses and individuals) grew to 22% of worldwide units in the third quarter, compared with 17% 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 21% to $709 million in the third quarter and segment operating income grew 137% to $63 million, or 9% of net sales, compared with third quarter 2002. -- International segment sales, representing the Company's U.K., German, French and Japanese sites, grew 61% to $425 million in the third quarter and benefited by $28 million from changes in foreign exchange rates compared with third quarter 2002. International segment operating income was $11 million, or 3% of net sales. -- Inventory turns for the trailing twelve months were 19, consistent with a year ago. -- The Company expanded selection by launching a sporting goods store in the U.S. and an electronics store in Japan. Financial Guidance The following forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. reflect Amazon Amazon, in Greek mythology Amazon (ăm`əzŏn), in Greek mythology, one of a tribe of warlike women who lived in Asia Minor. .com's expectations as of October October: see month. 21, 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. Fourth Quarter 2003 Guidance -- Fourth quarter net sales are expected to be between $1.76 billion and $1.91 billion, or grow between 23% and 34%, compared with fourth quarter 2002. -- Consolidated segment operating income is expected to be between $125 million and $155 million. -- Operating income is expected to be between $110 million and $140 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 December December: see month. 31, 2003 is identical to the closing price of $48.43 on September 30, 2003. Full Year 2004 Expectations -- Net sales are expected to be between $5.75 billion and $6.25 billion. -- Consolidated segment operating income is expected to be between $375 million and $475 million. -- Operating income is expected to be between $315 million and $415 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 December 31, 2003 and December 31, 2004 is identical to the closing price of $48.43 on September 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 December 31, 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 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 the attached "Pro Forma Statements Pro forma statement A financial statement showing the forecast or projected operating results and balance sheet, as in pro forma income statements, balance sheets, and statements of cash flows. of Operations." Pro Forma Net Income Pro forma net income excludes the following line items on the Company's statements of operations: -- Stock-based compensation, -- Amortization of 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 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 July: see month. 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 sporting goods, apparel and accessories, books, music, DVDs, electronics and office, kids and baby and home and garden. Amazon.com operates six Websites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.fr, www.amazon.co.jp and www.amazon.ca.
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
---------------------------------------
2003 2002 2003 2002
-------- -------- --------- ---------
CASH AND CASH
EQUIVALENTS,
BEGINNING
OF
PERIOD $641,728 $270,438 $ 738,254 $ 540,282
OPERATING
ACTIVITIES:
Net income
(loss) 15,563 (35,080) (37,872) (151,783)
Adjustments
to reconcile
net income
(loss) to
net cash
provided by
(used in)
operating
activities:
Depreciation
of
fixed assets
and other
amortization 18,338 20,501 57,091 62,411
Stock-based
compensation 20,936 (832) 72,712 33,247
Equity in
losses of
equity-
method
investees,
net - 557 436 3,469
Amortization
of
goodwill and
other
intangibles 786 1,212 2,611 4,565
Non-cash
restructuring-
related and
other - 2,370 - 2,370
Gain on sale
of marketable
securities,
net (141) (3,020) (9,393) (3,833)
Remeasurement
of 6.875%
PEACS and
other 11,142 (2,261) 93,156 55,677
Non-cash
interest
expense and
other 1,343 7,911 12,752 22,436
Cumulative
effect of
change in
accounting
principle - - - (801)
Changes in
operating
assets and
liabilities:
Inventories (62,147) (24,029) (34,001) (2,935)
Accounts
receivable,
net and
other
current
assets (14,844) (14,670) 18,303 (31,420)
Accounts
payable 49,535 49,408 (131,584) (106,296)
Accrued
expenses and
other
current
liabilities (5,109) 40,895 (99,312) (37,455)
Additions to
unearned
revenue 29,932 26,237 78,652 75,641
Amortization
of
previously
unearned
revenue (27,816) (29,487) (85,719) (97,741)
Interest
payable (701) (1,604) (26,773) (25,840)
-------- -------- --------- ---------
Net cash
provided by
(used in)
operating
activities 36,817 38,108 (88,941) (198,288)
INVESTING
ACTIVITIES:
Sales and
maturities of
marketable
securities 21,988 50,621 581,011 400,532
Purchases of
marketable
securities (71,880) (28,186) (414,194) (462,290)
Purchases of
fixed assets,
including
internal-use
software and
Website
development (15,192) (11,353) (28,727) (23,647)
Proceeds from
sale of
subsidiary
and other 5,072 - 5,072 -
Investments in
equity-method
investees and
other
investments - - - -
-------- -------- --------- ---------
Net cash
provided by
(used in)
investing
activities (60,012) 11,082 143,162 (85,405)
FINANCING
ACTIVITIES:
Proceeds from
exercises of
stock options
and other 41,235 6,038 132,832 56,313
Repayment of
long-term
debt,
capital lease
obligations,
and other (3,437) (4,126) (287,576) (12,121)
-------- -------- --------- ---------
Net cash
provided by
(used in)
financing
activities 37,798 1,912 (154,744) 44,192
Foreign-
currency
effect on
cash and cash
equivalents 10,087 6,024 28,687 26,783
-------- -------- --------- ---------
Net increase
(decrease) in
cash and cash
equivalents 24,690 57,126 (71,836) (212,718)
-------- -------- --------- ---------
CASH AND CASH
EQUIVALENTS,
END OF
PERIOD $666,418 $327,564 $ 666,418 $ 327,564
======== ======== ========= =========
SUPPLEMENTAL
CASH FLOW
INFORMATION:
Fixed assets
acquired
under capital
leases and
other
financing
arrange-
ments $ 1,572 $ 162 $ 2,648 $ 2,297
Cash paid
for
interest 30,019 29,898 116,835 110,947
Stock issued
in connection
with minority
investment - - - -
Twelve Months
Ended
September 30,
-------------------
2003 2002
--------- ---------
CASH AND CASH
EQUIVALENTS,
BEGINNING
OF
PERIOD $ 327,564 $ 432,307
OPERATING
ACTIVITIES:
Net income
(loss) (35,221) (146,696)
Adjustments
to reconcile
net income
(loss) to
net cash
provided by
(used in)
operating
activities:
Depreciation
of
fixed assets
and other
amortization 76,955 83,458
Stock-based
compensation 108,392 35,184
Equity in
losses of
equity-
method
investees,
net 1,136 5,324
Amortization
of
goodwill and
other
intangibles 3,524 42,102
Non-cash
restructuring-
related and
other 1,100 5,253
Gain on sale
of marketable
securities,
net (11,260) (4,031)
Remeasurement
of 6.875%
PEACS and
other 133,752 39,365
Non-cash
interest
expense and
other 19,902 28,946
Cumulative
effect of
change in
accounting
principle - (801)
Changes in
operating
assets and
liabilities:
Inventories (82,369) (16,748)
Accounts
receivable,
net and
other
current
assets 16,775 (28,779)
Accounts
payable 131,254 103,250
Accrued
expenses and
other
current
liabilities (57,366) 27,788
Additions to
unearned
revenue 98,415 113,739
Amortization
of
previously
unearned
revenue (123,444) (138,149)
Interest
payable 2,093 1,627
--------- ---------
Net cash
provided by
(used in)
operating
activities 283,638 150,832
INVESTING
ACTIVITIES:
Sales and
maturities of
marketable
securities 733,768 467,848
Purchases of
marketable
securities (587,714) (748,504)
Purchases of
fixed assets,
including
internal-use
software and
Website
development (44,243) (31,181)
Proceeds from
sale of
subsidiary
and other 5,072 -
Investments in
equity-method
investees and
other
investments - (6,198)
--------- ---------
Net cash
provided by
(used in)
investing
activities 106,883 (318,035)
FINANCING
ACTIVITIES:
Proceeds from
exercises of
stock options
and other 198,208 58,360
Repayment of
long-term
debt,
capital lease
obligations,
and other (290,250) (16,561)
--------- ---------
Net cash
provided by
(used in)
financing
activities (92,042) 41,799
Foreign-
currency
effect on
cash and cash
equivalents 40,375 20,661
--------- ---------
Net increase
(decrease) in
cash and cash
equivalents 338,854 (104,743)
--------- ---------
CASH AND CASH
EQUIVALENTS,
END OF
PERIOD $ 666,418 $ 327,564
========= =========
SUPPLEMENTAL
CASH FLOW
INFORMATION:
Fixed assets
acquired
under capital
leases and
other
financing
arrange-
ments $ 3,374 $ 3,411
Cash paid
for
interest 117,477 112,141
Stock issued
in connection
with minority
investment - 5,000
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
AMAZON.COM, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------
2003 2002 2003 2002
---------- -------- ---------- ----------
Net sales $1,134,456 $851,299 $3,317,927 $2,504,326
Cost of sales 848,635 635,132 2,487,596 1,846,867
---------- -------- ---------- ----------
Gross profit 285,821 216,167 830,331 657,459
Operating expenses:
Fulfillment 107,057 90,342 318,217 265,908
Marketing 28,943 26,728 82,496 87,804
Technology and content 53,775 52,907 155,998 166,569
General and administrative 22,393 18,698 65,318 59,034
Stock-based compensation (1) 20,936 (832) 72,712 33,247
Amortization of other
intangibles 786 1,212 2,611 4,565
Restructuring-related and
other - 36,757 - 46,731
---------- -------- ---------- ----------
Total operating
expenses 233,890 225,812 697,352 663,858
---------- -------- ---------- ----------
Income (loss) from
operations 51,931 (9,645) 132,979 (6,399)
Interest income 4,324 5,600 16,625 16,902
Interest expense (29,802) (35,922) (100,680) (106,817)
Other income, net 252 3,183 6,796 2,876
Remeasurement of 6.875%
PEACS and other (11,142) 2,261 (93,156) (55,677)
---------- -------- ---------- ----------
Total non-operating
expenses, net (36,368) (24,878) (170,415) (142,716)
---------- -------- ---------- ----------
Income (loss) before equity
in losses of equity-method
investees 15,563 (34,523) (37,436) (149,115)
Equity in losses of equity-
method investees, net - (557) (436) (3,469)
---------- -------- ---------- ----------
Income (loss) before change
in accounting principle 15,563 (35,080) (37,872) (152,584)
Cumulative effect of change
in accounting principle - - - 801
---------- -------- ---------- ----------
Net income (loss) $ 15,563 $(35,080)$ (37,872)$ (151,783)
========== ======== ========== ==========
Basic and diluted earnings
(loss) per share:
Prior to cumulative effect
of change in accounting
principle $ 0.04 $ (0.09)$ (0.10)$ (0.41)
Cumulative effect of change
in accounting principle - - - (0.01)
---------- -------- ---------- ----------
$ 0.04 $ (0.09)$ (0.10)$ (0.40)
========== ======== ========== ==========
Weighted average shares used in computation of
earnings (loss) per share:
Basic 397,912 379,650 393,477 376,564
========== ======== ========== ==========
Diluted 422,802 379,650 393,477 376,564
========== ======== ========== ==========
(1) Components of stock-
based compensation:
Fulfillment $ 4,374 $ (98)$ 16,221 $ 5,512
Marketing 1,582 115 4,167 2,419
Technology and content 12,013 (765) 39,807 17,305
General and administrative 2,967 (84) 12,517 8,011
---------- -------- ---------- ----------
$ 20,936 $ (832)$ 72,712 $ 33,247
========== ======== ========== ==========
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
AMAZON.COM, INC.
Pro Forma Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended
September 30, 2003
----------------------------------
As Reported Adjustments Pro Forma
(1)
---------- ------------ ----------
Net sales $1,134,456 $ - $1,134,456
Cost of sales 848,635 - 848,635
---------- ----------- ----------
Gross profit 285,821 - 285,821
Operating expenses:
Fulfillment 107,057 - 107,057
Marketing 28,943 - 28,943
Technology and content 53,775 - 53,775
General and administrative 22,393 - 22,393
Stock-based compensation 20,936 (20,936) -
Amortization of other intangibles 786 (786) -
Restructuring-related and other - - -
---------- ----------- ----------
Total operating expenses 233,890 (21,722) 212,168
---------- ----------- ----------
Income (loss) from operations 51,931 21,722 73,653 (2)
Interest income 4,324 - 4,324
Interest expense (29,802) - (29,802)
Other income, net 252 - 252
Remeasurement of 6.875% PEACS and
other (11,142) 11,142 -
---------- ----------- ----------
Total non-operating
expenses, net (36,368) 11,142 (25,226)
---------- ----------- ----------
Income (loss) before equity in
losses of equity-method
investees 15,563 32,864 48,427
Equity in losses of equity-method
investees, net - - -
---------- ----------- ----------
Net income (loss) $ 15,563 $ 32,864 $ 48,427
========== =========== ==========
Basic earnings (loss) per share $ 0.04 $ 0.08 $ 0.12
========== =========== ==========
Diluted earnings (loss) per share$ 0.04 $ 0.07 $ 0.11
========== =========== ==========
Weighted average shares used in computation of
earnings (loss) per share:
Basic 397,912 397,912
========== ==========
Diluted 422,802 422,802
========== ==========
Net cash provided by operating
activities $ 36,817
Purchases of fixed assets, including
internal-use software
and Website development (15,192)
----------
Free cash flow $ 21,625
==========
Net cash provided by (used in)
investing activities $ (60,012)
==========
Net cash provided by financing
activities $ 37,798
==========
(1) In accordance with accounting principles generally accepted in the
United States.
(2) Consolidated segment operating income.
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
Three Months Ended
September 30, 2002
---------------------------------
As Reported Adjustments Pro Forma
(1)
----------- --------- ----------
Net sales $ 851,299 $ - $ 851,299
Cost of sales 635,132 - 635,132
---------- --------- ----------
Gross profit 216,167 - 216,167
Operating expenses:
Fulfillment 90,342 - 90,342
Marketing 26,728 - 26,728
Technology and content 52,907 - 52,907
General and administrative 18,698 - 18,698
Stock-based compensation (832) 832 -
Amortization of other intangibles 1,212 (1,212) -
Restructuring-related and other 36,757 (36,757) -
---------- --------- ----------
Total operating expenses 225,812 (37,137) 188,675
---------- --------- ----------
Income (loss) from operations (9,645) 37,137 27,492(2)
Interest income 5,600 - 5,600
Interest expense (35,922) - (35,922)
Other income, net 3,183 - 3,183
Remeasurement of 6.875% PEACS and
other 2,261 (2,261) -
---------- --------- ----------
Total non-operating expenses,
net (24,878) (2,261) (27,139)
---------- --------- ----------
Income (loss) before equity in losses
of equity-method investees (34,523) 34,876 353
Equity in losses of equity-method
investees, net (557) 557 -
---------- --------- ----------
Net income (loss) $ (35,080) $ 35,433 $ 353
========== ========= ==========
Basic earnings (loss) per share $ (0.09) $ 0.09 $ -
========== ========= ==========
Diluted earnings (loss) per share $ (0.09) $ 0.09 $ -
========== ========= ==========
Weighted average shares used in computation of
earnings (loss) per share:
Basic 379,650 379,650
========== ==========
Diluted 379,650 398,361
========== ==========
Net cash provided by operating
activities $ 38,108
Purchases of fixed assets, including internal-
use software
and Website development (11,353)
----------
Free cash flow $ 26,755
==========
Net cash provided by (used in)
investing activities $ 11,082
==========
Net cash provided by financing
activities $ 1,912
==========
(1) In accordance with accounting principles generally accepted in the
United States.
(2) Consolidated segment operating income.
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
AMAZON.COM, INC.
Pro Forma Statements of Operations
(in thousands, except per share data)
(unaudited)
Nine Months Ended
September 30, 2003
----------------------------------
As Reported Adjustments Pro Forma
(1)
----------- ----------- ----------
Net sales $3,317,927 $ - $3,317,927
Cost of sales 2,487,596 - 2,487,596
---------- ----------- ----------
Gross profit 830,331 - 830,331
Operating expenses:
Fulfillment 318,217 - 318,217
Marketing 82,496 - 82,496
Technology and content 155,998 - 155,998
General and administrative 65,318 - 65,318
Stock-based compensation 72,712 (72,712) -
Amortization of other intangibles 2,611 (2,611) -
Restructuring-related and other - - -
---------- ----------- ----------
Total operating expenses 697,352 (75,323) 622,029
---------- ----------- ----------
Income (loss) from operations 132,979 75,323 208,302 (2)
Interest income 16,625 - 16,625
Interest expense (100,680) - (100,680)
Other income, net 6,796 - 6,796
Remeasurement of 6.875% PEACS and
other (93,156) 93,156 -
---------- ----------- ----------
Total non-operating
expenses, net (170,415) 93,156 (77,259)
---------- ----------- ----------
Income (loss) before equity in
losses of equity-method
investees (37,436) 168,479 131,043
Equity in losses of equity-method
investees, net (436) 436 -
---------- ----------- ----------
Income (loss) before change in
accounting principle (37,872) 168,915 131,043
Cumulative effect of change in
accounting principle - - -
---------- ----------- ----------
Net income (loss) $ (37,872)$ 168,915 $ 131,043
========== =========== ==========
Basic earnings (loss) per share:
Prior to cumulative effect of
change in accounting principle $ (0.10)$ 0.43 $ 0.33
Cumulative effect of change in
accounting principle - - -
---------- ----------- ----------
$ (0.10)$ 0.43 $ 0.33
========== =========== ==========
Diluted earnings (loss) per
share:
Prior to cumulative effect of
change in accounting principle $ (0.10)$ 0.41 $ 0.31
Cumulative effect of change in
accounting principle - - -
---------- ----------- ----------
$ (0.10)$ 0.41 $ 0.31
========== =========== ==========
Weighted average shares used in computation of
earnings (loss) per share:
Basic 393,477 393,477
========== ==========
Diluted 393,477 418,359
========== ==========
Net cash used in operating
activities $ (88,941)
Purchases of fixed assets, including
internal-use software
and Website development (28,727)
----------
Free cash flow $ (117,668)
==========
Net cash provided by (used in)
investing activities $ 143,162
==========
Net cash provided by (used in)
financing activities $ (154,744)
==========
(1) In accordance with accounting principles generally accepted in the
United States.
(2) Consolidated segment operating income.
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
Nine Months Ended
September 30, 2002
---------------------------------
As Reported Adjustments Pro Forma
(1)
----------- --------- ----------
Net sales $2,504,326 $ - $2,504,326
Cost of sales 1,846,867 - 1,846,867
---------- --------- ----------
Gross profit 657,459 - 657,459
Operating expenses:
Fulfillment 265,908 - 265,908
Marketing 87,804 - 87,804
Technology and content 166,569 - 166,569
General and administrative 59,034 - 59,034
Stock-based compensation 33,247 (33,247) -
Amortization of other intangibles 4,565 (4,565) -
Restructuring-related and other 46,731 (46,731) -
---------- --------- ----------
Total operating expenses 663,858 (84,543) 579,315
---------- --------- ----------
Income (loss) from operations (6,399) 84,543 78,144(2)
Interest income 16,902 - 16,902
Interest expense (106,817) - (106,817)
Other income, net 2,876 - 2,876
Remeasurement of 6.875% PEACS and
other (55,677) 55,677 -
---------- --------- ----------
Total non-operating expenses,
net (142,716) 55,677 (87,039)
---------- --------- ----------
Income (loss) before equity in losses
of equity-method investees (149,115) 140,220 (8,895)
Equity in losses of equity-method
investees, net (3,469) 3,469 -
---------- --------- ----------
Income (loss) before change in
accounting principle (152,584) 143,689 (8,895)
Cumulative effect of change in
accounting principle 801 (801) -
---------- --------- ----------
Net income (loss) $ (151,783) $ 142,888 $ (8,895)
========== ========= ==========
Basic earnings (loss) per share:
Prior to cumulative effect of change
in accounting principle $ (0.41) $ 0.39 $ (0.02)
Cumulative effect of change in
accounting principle 0.01 (0.01) -
---------- --------- ----------
$ (0.40) $ 0.38 $ (0.02)
========== ========= ==========
Diluted earnings (loss) per share:
Prior to cumulative effect of change
in accounting principle $ (0.41) $ 0.39 $ (0.02)
Cumulative effect of change in
accounting principle 0.01 (0.01) -
---------- --------- ----------
$ (0.40) $ 0.38 $ (0.02)
========== ========= ==========
Weighted average shares used in computation of
earnings (loss) per share:
Basic 376,564 376,564
========== ==========
Diluted 376,564 376,564
========== ==========
Net cash used in operating activities $ (198,288)
Purchases of fixed assets, including internal-
use software and Website development (23,647)
----------
Free cash flow $ (221,935)
==========
Net cash provided by (used in)
investing activities $ (85,405)
==========
Net cash provided by (used in)
financing activities $ 44,192
==========
(1) In accordance with accounting principles generally accepted in the
United States.
(2) Consolidated segment operating income.
Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.
AMAZON.COM, INC.
Segment Information
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -----------------------
2003 2002 2003 2002
---------- -------- ---------- ----------
North America
Net sales $ 709,271 $587,004 $2,116,506 $1,794,786
Cost of sales 508,150 432,319 1,538,496 1,296,450
---------- -------- ---------- ----------
Gross profit 201,121 154,685 578,010 498,336
Direct segment operating
expenses 138,606 128,339 409,236 400,903
---------- -------- ---------- ----------
Segment operating income 62,515 26,346 168,774 97,433
International
Net sales 425,185 264,295 1,201,421 709,540
Cost of sales 340,485 202,813 949,100 550,417
---------- -------- ---------- ----------
Gross profit 84,700 61,482 252,321 159,123
Direct segment operating
expenses 73,562 60,336 212,793 178,412
---------- -------- ---------- ----------
Segment operating income
(loss) 11,138 1,146 39,528 (19,289)
Consolidated
Net sales 1,134,456 851,299 3,317,927 2,504,326
Cost of sales 848,635 635,132 2,487,596 1,846,867
---------- -------- ---------- ----------
Gross profit 285,821 216,167 830,331 657,459
Direct segment operating
expenses 212,168 188,675 622,029 579,315
---------- -------- ---------- ----------
Segment operating income 73,653 27,492 208,302 78,144
Stock-based compensation 20,936 (832) 72,712 33,247
Amortization of other
intangibles 786 1,212 2,611 4,565
Restructuring-related and
other - 36,757 - 46,731
---------- -------- ---------- ----------
Income (loss) from
operations 51,931 (9,645) 132,979 (6,399)
Total non-operating
expenses, net (36,368) (24,878) (170,415) (142,716)
Equity in losses of
equity-method investees,
net - (557) (436) (3,469)
Cumulative effect of
change in accounting
principle - - - 801
---------- -------- ---------- ----------
Net income (loss) $ 15,563 $(35,080) $ (37,872) $ (151,783)
========== ======== ========== ==========
Segment Highlights:
Y / Y net sales growth:
North America 21% 17% 18% 12%
International 61 91 69 78
Consolidated 33 33 32 25
Y / Y gross profit
growth:
North America 30 15 16 14
International 38 118 59 86
Consolidated 32 33 26 25
Gross margin:
North America 28 26 27 28
International 20 23 21 22
Consolidated 25 25 25 26
Segment operating margin:
North America 9 4 8 5
International 3 n/a 3 (3)
Consolidated 6 3 6 3
Net sales mix:
North America 63 69 64 72
International 37 31 36 28
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 Nine Months Ended
September 30, September 30,
--------------------- -----------------------
2003 2002 2003 2002
---------- -------- ---------- ----------
North America
Media $ 502,271 $435,793 $1,518,581 $1,346,381
Electronics and other
general merchandise 180,418 133,355 526,002 391,202
Other 26,582 17,856 71,923 57,203
---------- -------- ---------- ----------
709,271 587,004 2,116,506 1,794,786
International
Media 374,989 249,855 1,096,735 673,047
Electronics and other
general merchandise 49,804 13,875 103,756 34,918
Other 392 565 930 1,575
---------- -------- ---------- ----------
425,185 264,295 1,201,421 709,540
Consolidated
Media 877,260 685,648 2,615,316 2,019,428
Electronics and other
general merchandise 230,222 147,230 629,758 426,120
Other 26,974 18,421 72,853 58,778
---------- -------- ---------- ----------
$1,134,456 $851,299 $3,317,927 $2,504,326
========== ======== ========== ==========
Y / Y Net Sales Growth:
North America:
Media 15% 16% 13% 10%
Electronics and other
general merchandise 35 21 34 17
Other 49 25 26 24
International:
Media 50 85 63 71
Electronics and other
general merchandise 259 327 197 528
Other (31) n/a (41) n/a
Consolidated:
Media 28 34 30 25
Electronics and other
general merchandise 56 30 48 25
Other 46 29 24 27
Consolidated Net Sales
Mix:
Media 77 81 79 81
Electronics and other
general merchandise 20 17 19 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)
September 30, December 31, September 30,
2003 2002 2002
------------ ----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 666,418 $ 738,254 $ 327,564
Marketable securities 398,242 562,715 538,238
------------ ----------- -----------
Cash, cash equivalents,
and marketable
securities 1,064,660 1,300,969 865,802
Inventories 241,667 202,425 151,514
Accounts receivable, net and
other current assets 103,873 112,282 102,291
------------ ----------- -----------
Total current assets 1,410,200 1,615,676 1,119,607
Fixed assets, net 221,459 239,398 239,238
Goodwill, net 69,121 70,811 70,811
Other intangibles, net 659 3,460 4,373
Other equity investments 12,949 15,442 16,498
Other assets 35,297 45,662 46,878
------------ ----------- -----------
Total assets $ 1,749,685 $ 1,990,449 $ 1,497,405
============ =========== ===========
LIABILITIES AND STOCKHOLDERS'
DEFICIT
Current liabilities:
Accounts payable $ 499,189 $ 618,128 $ 347,519
Accrued expenses and other
current liabilities 236,184 314,935 241,674
Unearned revenue 40,843 47,916 65,878
Interest payable 44,476 71,661 42,793
Current portion of long-term
debt and other 6,058 13,318 13,134
------------ ----------- -----------
Total current liabilities 826,750 1,065,958 710,998
Long-term debt and other 2,080,969 2,277,305 2,264,846
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 -- 400,422,
387,906 and 381,216 4,004 3,879 3,812
Additional paid-in capital 1,852,308 1,649,946 1,550,118
Deferred stock-based
compensation (3,525) (6,591) (7,775)
Accumulated other
comprehensive income (loss) 36,761 9,662 (12,233)
Accumulated deficit (3,047,582) (3,009,710) (3,012,361)
------------ ----------- -----------
Total stockholders'
deficit (1,158,034) (1,352,814) (1,478,439)
------------ ----------- -----------
Total liabilities and
stockholders'
deficit $ 1,749,685 $ 1,990,449 $ 1,497,405
============ =========== ===========
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
%
Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Change
------- ------- ------- ------- ------- ------
Cash Flows and Shares
Operating cash flow --
Trailing Twelve Months
(TTM) $ 151 $ 174 $ 164 $ 285 $ 284 88%
Purchases of fixed
assets -- TTM $ 31 $ 39 $ 41 $ 40 $ 44 42%
Free cash flow
(operating cash flow
less purchases of
fixed assets) -- TTM $ 120 $ 135 $ 123 $ 245 $ 239 100%
Common shares and
stock-based awards
outstanding 430 433 432 433 433 1%
Common shares
outstanding 381 388 392 397 400 5%
Stock-based employee
awards outstanding 48 45 41 36 33 (33%)
Stock-based employee
awards outstanding --
% of common shares
outstanding 13% 12% 10% 9% 8% N/A
Results of Operations
Worldwide (WW) net
sales $ 851 $1,429 $1,084 $1,100 $1,134 33%
WW net sales -- Y / Y
growth, excluding the
effect of foreign
exchange rates 30% 25% 22% 30% 30% N/A
WW net sales -- TTM $3,619 $3,933 $4,169 $4,463 $4,747 31%
WW net sales shipped
outside the U.S. -- %
of net sales -- TTM 33% 36% 37% 39% 40% N/A
Gross profit $ 216 $ 335 $ 271 $ 274 $ 286 32%
Gross margin -- % of WW
net sales 25.4% 23.5% 25.0% 24.9% 25.2% N/A
Gross profit -- TTM $ 932 $ 993 $1,040 $1,096 $1,165 25%
Gross margin -- TTM %
of WW net sales 25.7% 25.2% 24.9% 24.6% 24.6% N/A
Fulfillment costs -- %
of WW net sales 10.6% 8.9% 9.6% 9.8% 9.4% N/A
Fulfillment costs --
TTM % of WW net sales 10.4% 10.0% 9.7% 9.6% 9.4% N/A
Consolidated direct
segment operating
expenses $ 189 $ 233 $ 203 $ 207 $ 212 12%
Consolidated direct
segment operating
expenses -- TTM $ 795 $ 813 $ 817 $ 832 $ 855 8%
Consolidated segment
operating income $ 27 $ 102 $ 67 $ 67 $ 74 168%
Consolidated segment
operating margin -- %
of WW net sales 3.2% 7.1% 6.2% 6.1% 6.5% N/A
Consolidated segment
operating income --
TTM $ 137 $ 180 $ 223 $ 264 $ 310 127%
Consolidated segment
operating margin --
TTM % of WW net sales 3.8% 4.6% 5.3% 5.9% 6.5% N/A
GAAP operating income
(loss) $ (10) $ 71 $ 39 $ 42 $ 52 N/A
GAAP operating margin
-- % of WW net sales (1.1%) 4.9% 3.6% 3.8% 4.6% N/A
GAAP operating income
-- TTM $ 8 $ 64 $ 102 $ 142 $ 204 N/A
GAAP operating margin
-- TTM % of WW net
sales 0.2% 1.6% 2.4% 3.2% 4.3% N/A
Pro forma net income $ 0 $ 75 $ 40 $ 42 $ 48 N/A
Diluted pro forma net
income per share $ 0.00 $ 0.19 $ 0.10 $ 0.10 $ 0.11 N/A
Pro forma net income --
TTM $ 26 $ 66 $ 112 $ 158 $ 206 697%
GAAP net income (loss) $ (35) $ 3 $ (10) $ (43) $ 16 N/A
GAAP net income (loss)
per share $(0.09) $ 0.01 $(0.03) $(0.11) $ 0.04 N/A
GAAP net loss -- TTM $ (147) $ (149) $ (136) $ (86) $ (35) (76%)
North America segment:
Net sales $ 587 $ 967 $ 705 $ 703 $ 709 21%
Net sales -- TTM $2,647 $2,761 $2,845 $2,961 $3,083 16%
Gross profit $ 155 $ 243 $ 187 $ 190 $ 201 30%
Gross margin -- % of
North America net
sales 26% 25% 27% 27% 28% N/A
Gross profit -- TTM $ 717 $ 741 $ 754 $ 774 $ 821 15%
Gross margin -- TTM %
of North America net
sales 27% 27% 27% 26% 27% N/A
Operating income $ 26 $ 82 $ 52 $ 55 $ 63 137%
Operating margin -- %
of North America net
sales 4% 9% 7% 8% 9% N/A
Operating income --
TTM $ 166 $ 180 $ 196 $ 215 $ 251 51%
Operating margin --
TTM % of North
America net sales 6% 7% 7% 7% 8% 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
%
Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Change
------- ------- ------- ------- ------- ------
International segment:
Net sales $ 264 $ 462 $ 379 $ 397 $ 425 61%
Net sales -- Y / Y
growth, excluding
the effect of
foreign exchange
rates 75% 62% 45% 57% 50% N/A
Net sales -- TTM $ 973 $1,172 $1,324 $1,502 $1,663 71%
Gross profit $ 61 $ 93 $ 84 $ 84 $ 85 38%
Gross margin -- % of
International net
sales 23% 20% 22% 21% 20% N/A
Gross profit -- TTM $ 215 $ 252 $ 286 $ 322 $ 345 60%
Gross margin -- TTM
% of International
net sales 22% 21% 22% 21% 21% N/A
Operating income $ 1 $ 20 $ 16 $ 13 $ 11 872%
Operating margin --
% of International
net sales 0% 4% 4% 3% 3% N/A
Operating income
(loss) -- TTM $ (29) $ 0 $ 27 $ 49 $ 59 N/A
Operating margin --
TTM % of
International net
sales (3%) 0% 2% 3% 4% N/A
Supplemental North
America Segment Net
Sales:
Media $ 436 $ 649 $ 517 $ 499 $ 502 15%
Media -- TTM $1,930 $1,995 $2,041 $2,101 $2,167 12%
Electronics and
other general
merchandise $ 133 $ 290 $ 168 $ 177 $ 180 35%
Electronics and
other general
merchandise -- TTM $ 633 $ 681 $ 722 $ 769 $ 816 29%
Other $ 18 $ 28 $ 19 $ 26 $ 27 49%
Other -- TTM $ 84 $ 85 $ 82 $ 91 $ 100 20%
Supplemental
International Segment
Net Sales:
Media $ 250 $ 431 $ 356 $ 366 $ 375 50%
Media -- TTM $ 925 $1,104 $1,245 $1,402 $1,527 65%
Electronics and
other general
merchandise $ 14 $ 31 $ 23 $ 31 $ 50 259%
Electronics and
other general
merchandise -- TTM $ 45 $ 66 $ 77 $ 99 $ 135 196%
Other $ 1 $ 0 $ 0 $ 0 $ 0 (31%)
Other -- TTM $ 2 $ 2 $ 2 $ 1 $ 1 (38%)
Supplemental Worldwide
Net Sales:
Media $ 686 $1,079 $ 873 $ 865 $ 877 28%
Media -- TTM $2,855 $3,099 $3,286 $3,503 $3,695 29%
Electronics and
other general
merchandise $ 147 $ 321 $ 191 $ 209 $ 230 56%
Electronics and
other general
merchandise -- TTM $ 679 $ 747 $ 799 $ 868 $ 951 40%
Other $ 18 $ 29 $ 20 $ 26 $ 27 46%
Other -- TTM $ 86 $ 87 $ 84 $ 93 $ 101 19%
Balance Sheet
Cash and marketable
securities $ 866 $1,301 $1,083 $ 989 $1,065 23%
Inventory, net $ 152 $ 202 $ 173 $ 178 $ 242 60%
Inventory -- TTM, % of
TTM net sales 4% 4% 4% 4% 4% N/A
Inventory turnover --
TTM 19.4 19.3 19.7 20.2 18.9 (3%)
Fixed assets, net $ 239 $ 239 $ 228 $ 222 $ 221 (7%)
Accounts payable days
-- ending 50 52 44 49 54 8%
Other
Employees (full-time
and part-time) 7,800 7,500 7,700 7,600 7,900 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) Third Quarter 2003 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, was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $77 million, up 5% from $73 million. -- Worldwide unit growth was 36%, compared with 41% in second quarter 2003, and third-party units as a percentage of worldwide units were 22%, compared with 19% in second quarter 2003. Gross Profit -- Gross profit benefited by approximately $6 million, and consolidated segment operating income by approximately $1 million, from changes in foreign exchange rates compared with third quarter 2002. -- Shipping loss was approximately $27 million, up from a loss of $10 million. We continue to measure our shipping results relative to their effect on our overall financial results and intend to continue providing our customers with free shipping offers. Fulfillment -- Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service centers, credit card fees and bad debt costs, including costs associated with our guarantee for certain third-party seller transactions. Fulfillment costs also include amounts paid to third-parties, who assist us in fulfillment and customer service operations. -- 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 -- We granted less than a half 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 September 30, 2003, there were 33 million stock awards outstanding, which are excluded from common stock outstanding, consisting of 28 million stock options ($12 average exercise price) and 5 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. . There are also 1 million shares of restricted stock, which are included in common stock outstanding. -- Since October 2002, we have awarded restricted stock units as our primary form of stock-based compensation. Restricted stock units, under fixed accounting, are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of our common stock. Such value is recognized as an expense 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 September 30, 2003, 1 million stock awards were subject to variable accounting. 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. -- "Stock-based compensation" consisted of $10 million for stock awards under variable accounting and $10 million for stock awards under fixed accounting. "Stock-based compensation" includes matching stock contributions 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. -- Using the following hypothetical Hypothetical is an adjective, meaning of or pertaining to a hypothesis. See:
stock above and below our September 30, 2003 closing price of $48.43, our hypothetical stock-based compensation expense for the three months ended September 30, 2003 would have been affected by variable accounting treatment as follows (in millions, except percentages and per share amounts):
Hypothetical Hypothetical Hypothetical vs.
Percentage Difference Market Stock-Based Actual Stock-
Closing Price (1) Price per Share Compensation Based
(1) Expense Compensation
Expense
----------------------------------------------------------------------
(25)% $36.32 $14 $(7)
(10)% 43.59 18 (3)
0 % 48.43 21 (2) --
10 % 53.27 24 3
25 % 60.54 29 8
(1) Hypothetical -- not a prediction of future quoted prices of our
common stock.
(2) Represents actual stock-based compensation expense for third
quarter 2003.
Restructuring-Related and Other -- In 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 $3 million, compared with $8 million in third quarter 2002. -- We estimate, based on currently available information, the remaining net cash outflows associated with restructuring-related leases and other commitments will be $2 million in the remainder of 2003, $11 million in 2004, and $20 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 $45 million (we have signed sublease agreements on $15 million in future income) on gross lease and other obligations of $79 million. 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 $12 million, compared with $0 million in third quarter 2002. -- Other includes a $2 million gain on sale of our mail order toy 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. business, for $5 million in cash. Income Taxes -- At September 30, 2003, we had net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. (NOLs) of approximately $2.9 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 expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. at various times starting in 2010, may be subject to certain limitations. Approximately $1.6 billion of our NOLs relate to tax deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). stock-based compensation in excess of amounts recognized for financial reporting purposes -- to the extent that any of this amount is realized for tax purposes but not financial reporting purposes, the resulting 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 Income (Loss) -- Although we reported net income for third quarter of 2003, we believe that this positive net income result should not be viewed as a material positive event and is not 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. These items represented significant charges during the first, second and third 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. -- Our cash, cash equivalents and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has of $1.1 billion, at fair value, primarily consist of cash, commercial paper and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. securities, U.S. Treasury U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. notes and bonds 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 $106 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 $135 million at September 30, 2002. -- "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 " includes amounts received from third-parties in advance of us providing the associated service. -- "Accrued expenses and other current liabilities" includes, among other things, liabilities for gift certificates, marketing activities, and workforce costs, including accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. payroll payroll a list of employees, their salary rates, tax deductions, amounts paid, payroll tax, long service leave entitlements. , vacation VACATION. That period of time between the end of one term and beginning of another. During vacation, rules and orders are made in such cases as are urgent, by a judge at his chambers. , and other benefits. -- "Long-term debt and other" primarily includes the following (in millions):
Principal Interest Principal
at Maturity Rate Due Date
-----------------------------------
Convertible Subordinated Notes $1,250 (1) 4.750% February 2009
PEACS 805 (2) 6.875% February 2010
---------
$2,055 (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
102.85% of the principal, which decreases to 100% over time, plus
any accrued and unpaid interest.
(2) Euro 690 million principal amount, convertible at the holders'
option into our common stock at Euro 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
Euro 690 million, plus any accrued and unpaid interest. Because we
do not hedge any portion of the PEACS, we have interest expense
exposure to fluctuations in the Euro/US dollar exchange ratio.
(3) The "if converted" number of shares associated with each of our
convertible debt instruments (approximately 24 million total
shares) are excluded from diluted shares as their effect is
anti-dilutive.
Certain Definitions and Other -- We present segment information along two lines: North America and International. We measure operating results of our segments using an internal performance measure of direct segment operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. that excludes stock-based compensation, 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, 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 provide 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, video games See video game console. and video game consoles This is a list of video game consoles by the era they appeared in. Eras are named based on the dominant console type of the era (even though not all consoles of those eras are of the same type). Some eras are referred to based on how many bits a major console could process. . Electronics and other general merchandise consists of amounts earned from retail sales from all sellers of items not included in Media, such as electronics and office, kids and baby, home and garden, apparel and sporting goods. 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 Websites. Customer accounts include customers of Amazon Marketplace Amazon Marketplace ( i.e:Third-party Marketplace ) is Amazon.com's fixed-price online marketplace that allows sellers to survey their goods alongside Amazon's offerings. Buyers can buy new and used items sold directly by a third party through Amazon. , Auctions and zShops and our Merchants@ and Syndicated Stores Programs, but exclude Merchant.com Program customers, Amazon.com Payments customers, our catalog customers and the customers of select companies with whom we have a technology alliance or marketing and promotional 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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