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Amazon.com Releases 2001 Second Quarter Results.



Business/High-Tech Editors

SEATTLE--(BUSINESS WIRE)--July 23, 2001

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
 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.
 Improves to $28 Million

Used Orders Approximately ap·prox·i·mate  
adj.
1. Almost exact or correct: the approximate time of the accident.

2.
 10% of Total U.S. Orders

Expands Strategic Alliance with America Online See AOL.

Amazon.com (Amazon.com, Seattle, WA, www.amazon.com) The largest online shopping site and one of the most widely known e-commerce sites on the Web. Founded by Jeff Bezos in 1995, it had 11 employees by year's end. Within four years, it had more than 1,600 employees and four million customers. , Inc. (Nasdaq:AMZN AMZN Amazon.com (NASDAQ symbol) ) today announced financial results for its second quarter ended June June: see month.  30, 2001.

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 within the range of the company's guidance, increasing 16 percent to $668 million, compared with $578 million in the second quarter of 2000. Pro forma loss from operations improved by 69 percent to $28 million, or 4 percent of net sales, compared with $89 million, or 15 percent of net sales in the second quarter of 2000.

Pro forma net loss, which includes net interest expense, improved by 50 percent to $58 million, or $0.16 per share, compared with $116 million, or $0.33 per share in the second quarter of 2000. Net loss (GAAP GAAP

See: Generally Accepted Accounting Principles


GAAP

See generally accepted accounting principles (GAAP).
) for the quarter improved by 47 percent to $168 million, or $0.47 per share, from $317 million, or $0.91 per share. A detailed reconciliation of GAAP to pro forma is included with the attached financial statements.

"We continue to make progress toward reaching pro forma operating profitability in the fourth quarter of 2001," said Warren Warren.

1 City (1990 pop. 144,864), Macomb co., SE Mich., a suburb of Detroit; est. 1837, inc. as a city 1957. It is an important metalworking center where steel is processed.
 Jenson Jenson is a surname, and may refer to:
  • Dan Jenson
  • Jane Jensen
  • Merrill Jenson
  • Nicolas Jenson
  • Robert Jenson
  • Roy Jenson
  • Sasha Jenson
It may also be used as a first name, as in the case of Jenson Button.
, 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 chief financial officer. "This quarter, the U.S. was profitable on a pro forma operating basis for the first time, and this is our sixth sequential One after the other in some consecutive order such as by name or number.  quarter of improved absolute pro forma operating results."

"We thank our over 21 million customers who have purchased in the last year, more than 1 million of whom have purchased a used product from one of our more than 60,000 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.  sellers," said David Risher, Amazon.com's senior vice president of marketing and 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.
. "In fact, this quarter, roughly 10 percent of our U.S. orders were for a used product, and we're we're  

Contraction of we are.


we're we are
 very pleased that so many of our customers have embraced Embraced is a Swedish melodic black metal band, formed in Malmö, Sweden in 1993. The band split up in 2000, and reunited in 2004. Line-up
  • Kalle Johansson - Vocals
  • Julius Chmielewski - Keyboards
  • Sven Karlsson - Keyboards
 this option."

Today the company also announced an expanded strategic alliance with America Online, Inc., a subsidiary of AOL (A division of Time Warner, Inc., New York, NY, www.aol.com) The world's largest online information service with access to the Internet, e-mail, chat rooms and a variety of databases and services.  Time Warner (NYSE NYSE

See: New York Stock Exchange
:AOL). Amazon.com's e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers.  platform will power 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.  Online's Shop@ destinations. America Online, Inc., also invested $100 million in Amazon.com common stock, priced at the lower of $15.282 per share or the average closing price of Amazon.com common stock from July July: see month.  24 to July 30, 2001. The common stock was sold pursuant to a registration statement that Amazon.com previously filed with the Securities and Exchange Commission.

"We've we've  

Contraction of we have.

we've have
 worked hard to build the easiest-to-use, most customer-focused and technologically sophisticated e-commerce platform," 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. "We are pleased that today's alliance with America Online will bring many of these same benefits to AOL's merchants and more than 30 million members."

Highlights of Second Quarter Results (comparisons are with the second quarter of 2000)
-- Our segment reporting includes four segments: U.S. Books, Music and
DVD/Video; U.S. Electronics, Tools and Kitchen; International; and Services.
Allocation methodologies are consistent with past presentations.

-- The U.S. Books, Music and DVD/Video segment includes revenues, direct costs
and cost allocations associated with retail sales from www.amazon.com for
books, music and DVD/video products, and includes amounts earned on sales of
similar products sold through Amazon Marketplace.

-- The U.S. Electronics, Tools and Kitchen segment includes revenues, direct
costs and cost allocations associated with www.amazon.com retail sales of
Electronics (consumer electronics products, camera and photo items, software,
computer and video games, and cell phones and related service), Tools (tools
and hardware) and Kitchen (kitchen and housewares products and outdoor living
items) products, toys and video games sold other than through our Toysrus.com
strategic alliance, and new initiatives, and includes amounts earned on sales
of similar products sold through Amazon Marketplace.

-- U.S. Retail represents the combination of the U.S. Books, Music and
DVD/Video segment and the U.S. Electronics, Tools and Kitchen segment.

-- The Services segment includes revenues, direct costs and cost allocations
associated with the Company's business-to-business strategic relationships,
including our strategic alliance with Toysrus.com, and miscellaneous
advertising revenues, as well as amounts from Amazon Auctions, zShops and
Payments. Amounts earned from the Services segment are attributed to the U.S.

-- U.S. represents the combination of U.S. Retail and the Services segment.

-- The International segment includes all revenues, direct costs and cost
allocations associated with the retail sales of the Company's four
internationally focused sites: www.amazon.de, www.amazon.fr, www.amazon.co.jp
and www.amazon.co.uk.

-- Trailing twelve-month sales per active customer account figures include all
amounts earned through Internet sales, including revenue earned from our
strategic relationships with selected companies, but exclude catalog sales and
sales of inventory to Toysrus.com.

-- All references to customers mean customer accounts. Customer accounts
exclude the customers of selected companies with whom we have strategic
relationships, and customer accounts of our catalog businesses, but include
customer accounts shared with Toysrus.com and customers of Amazon Auctions,
zShops and Marketplace services.


Business Outlook

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 23, 2001. Given the potential changes in general 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. , the emerging nature of online retail and the various other risk factors discussed below, actual results may differ materially. The company intends to continue its practice of not updating forward-looking statements other than in publicly available statements.

Third Quarter 2001 Expectations

-- Net sales are expected to be between $625 million and $675

million.

-- Gross margin is expected to be between 24 and 27 percent of

net sales.

-- Absolute pro forma operating losses are expected to be

approximately flat with to very slightly down from the second

quarter of 2001.

-- Cash 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
, including the $100 million

investment from America Online, Inc., announced today, are

expected to be over $600 million at September September: see month.  30, 2001.

Fourth Quarter 2001 Expectations

-- Net sales are expected to increase between 10 percent and 20

percent over the fourth quarter of 2000.

-- Pro forma operating profitability is expected for the quarter.

-- Cash and marketable securities, including the $100 million

investment from America Online, Inc., announced today, are

expected to be approximately $900 million at December December: see month.  31,

2001.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, among others, 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, customer spending patterns, 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, risks of inventory management, the degree to which the company enters into service relationships and other strategic transactions, fluctuations in the value of securities and non-cash payments Amazon.com receives in connection with such transactions, foreign currency exchange risks, 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, Amazon.com's anticipated 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.
, competition, seasonality, potential fluctuations in operating results, management of potential growth, system interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's.
     2. Interruption of the use of a thing is natural or civil.
, 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.
, inventory, limited operating history, fraud and Amazon Payments, new business areas, international expansion, business combinations, strategic alliances and strategic partnerships. 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, 2000, and all subsequent filings, including Quarterly Reports on Form 10-Q Form 10-Q

See 10-Q.
.

Pro Forma Results

Pro forma information regarding Amazon.com's results from operations is provided as a complement to results provided 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 accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area.  (GAAP). Pro forma operating loss excludes stock-based compensation costs, amortization of goodwill and other intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. , and restructuring-related and other costs. Management measures the progress of the business using this pro forma information.

Pro forma net loss excludes stock-based compensation costs, amortization of goodwill and other intangibles, restructuring-related and other costs, other gains, equity in losses of equity-method investees, and the cumulative effect of change in accounting principle.

Conference Call

A conference call to discuss second quarter 2001 financial results and 2001 business outlook will be Webcast live on Monday Monday: see week. , July 23, 2001, at 5:00 p.m. EDT/2:00 p.m. PDT PDT
abbr.
Pacific Daylight Time


PDT Pacific Daylight Time

PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico

PDT 
. This conference call will be available at www.amazon.com/ir through September 30, 2001, and will contain forward-looking statements and other material information.

About Amazon.com

Amazon.com (Nasdaq:AMZN) opened its virtual doors on the World Wide Web in July 1995 and today offers Earth's Biggest Selection, along with online auctions and free electronic greeting cards See e-card. . Amazon.com seeks to be the world's most customer-centric company, where customers can find and discover anything they might want to buy online. Amazon.com and sellers list millions of unique new and used items in categories such as electronics, kitchen and housewares house·wares  
pl.n.
Cooking utensils, dishes, and other small articles used in a household, especially in the kitchen.
, books, music, DVDs, videos, camera and photo items, toys, software, computer and video games This article is about the British magazine covering computer and video games. For the American magazine, see Computer Games Magazine.

Computer And Video Games (CVG
, cell phones and service, tools and hardware, and outdoor living products. Through Amazon Marketplace, zShops and Auctions, any business or individual can sell virtually anything to Amazon.com's over 35 million cumulative customer accounts, and with Amazon Payments, sellers can accept credit card transactions, avoiding the hassles of offline (1) Not connected to the Internet, online service or internal network. See offline file.

(2) Not connected to or not installed in the computer. If a terminal, printer or other device is physically connected to the computer, but is not turned on or in ready mode, it is
 payments.

Amazon.com operates four international Web sites: www.amazon.co.uk, www.amazon.de, www.amazon.fr and www.amazon.co.jp. It also operates the Internet Movie Database (www.imdb.com), the Web's comprehensive and authoritative source of information on more than 275,000 movies and entertainment titles and 1 million cast and crew members dating from the birth of film.

                           AMAZON.COM, INC.
                       Statements of Operations
                 (in thousands, except per share data)
                              (unaudited)


                       Three Months Ended        Six Months Ended
                            June 30,                 June 30,
                   -----------------------   -------------------------
                       2001        2000          2001          2000
                   ----------  -----------   ----------    -----------

Net sales            $667,625    $577,876    $1,367,981    $1,151,765
Cost of sales         487,905     441,812     1,005,664       887,567
                   ----------  ----------    ----------    ----------
Gross profit          179,720     136,064       362,317       264,198

Operating expenses:
 Fulfillment           85,583      87,597       183,831       187,060
 Marketing             34,658      42,216        71,296        82,864
 Technology
  and content          64,710      67,132       134,994       128,376
 General
  and administrative   22,778      28,468        48,806        54,513
 Stock-based
  compensation          2,351       8,166         5,267        21,818
 Amortization of
  goodwill and other
   intangibles         50,830      80,413       101,661       163,368
 Restructuring-related
  and other            58,650       2,449       172,910         4,468
                   ----------  ----------    ----------    ----------
    Total operating
     expenses         319,560     316,441       718,765       642,467
                   ----------  ----------    ----------    ----------
Loss
 from operations     (139,840)   (180,377)     (356,448)     (378,269)

Interest income         6,807      10,314        16,757        20,440
Interest expense      (35,148)    (33,397)      (68,896)      (61,018)
Other expense, net     (1,178)     (3,272)       (5,062)       (8,046)
Other gains, net       11,315          --        45,172            --
                   ----------  ----------    ----------    ----------
    Net interest
     expense and
     other            (18,204)    (26,355)      (12,029)      (48,624)
                   ----------  ----------    ----------    ----------
Loss before equity
 in losses of equity-
  method investees   (158,044)   (206,732)     (368,477)     (426,893)

Equity in losses of
 equity-method
  investees, net      (10,315)   (110,452)      (23,490)     (198,716)
                   ----------  ----------    ----------    ----------
Net loss before
 change in accounting
  principle          (168,359)   (317,184)     (391,967)     (625,609)

Cumulative effect
 of change in accounting
  principle                --          --       (10,523)           --
                   ----------  ----------    ----------    ----------
Net loss            $(168,359)  $(317,184)    $(402,490)    $(625,609)
                   ==========  ==========    ==========    ==========

Basic and diluted loss per share:
 Prior to cumulative effect
  of change in accounting
   principle           $(0.47)     $(0.91)       $(1.09)       $(1.80)
 Cumulative effect
  of change in accounting
   principle               --          --         (0.03)           --
                   ----------  ----------    ----------    ----------
                       $(0.47)     $(0.91)       $(1.12)       $(1.80)
                   ==========  ==========    ==========    ==========

Shares used in computation
 of basic and diluted
  loss per share      359,752     349,886       358,595       346,680
                   ==========  ==========    ==========    ==========

Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.


                           AMAZON.COM, INC.
                  Pro Forma Statements of Operations
                 (in thousands, except per share data)
                              (unaudited)


                                            Three Months Ended
                                              June 30, 2001
                                  ------------------------------------
                                                Pro Forma
                                  As Reported  Adjustments  Pro Forma
                                  ------------------------------------

Net sales                            $667,625         --    $667,625
Cost of sales                         487,905         --     487,905
                                  ------------------------------------
Gross profit                          179,720         --     179,720

Operating expenses:
 Fulfillment                           85,583         --      85,583
 Marketing                             34,658         --      34,658
 Technology and content                64,710         --      64,710
 General and administrative            22,778         --      22,778
 Stock-based compensation               2,351     (2,351)         --
 Amortization of goodwill
  and other intangibles                50,830    (50,830)         --
 Restructuring-related and other       58,650    (58,650)         --
                                  ------------------------------------
   Total operating expenses           319,560   (111,831)    207,729
                                  ------------------------------------

Loss from operations                 (139,840)   111,831     (28,009)

Interest income                         6,807         --       6,807
Interest expense                      (35,148)        --     (35,148)
Other expense, net                     (1,178)        --      (1,178)
Other gains, net                       11,315    (11,315)         --
                                  ------------------------------------
   Net interest expense and other     (18,204)   (11,315)    (29,519)
                                  ------------------------------------

Loss before equity in losses of
 equity-method investees             (158,044)   100,516     (57,528)

Equity in losses of
 equity-method investees, net         (10,315)    10,315          --
                                  ------------------------------------

Net loss                            $(168,359)  $110,831    $(57,528)
                                  ====================================
Cash provided by (used in)
 operating activities                 $ 2,485                $ 2,485
                                  ===========            ============

Basic and diluted loss per share       $(0.47)                $(0.16)
                                  ===========            ===========

Shares used in computation of basic
 and diluted loss per share           359,752                359,752
                                  ===========            ===========


                                            Three Months Ended
                                              June 30, 2000
                                  ------------------------------------
                                                Pro Forma
                                  As Reported  Adjustments  Pro Forma
                                  ------------------------------------

Net sales                            $577,876         --    $577,876
Cost of sales                         441,812         --     441,812
                                  ------------------------------------
Gross profit                          136,064         --     136,064

Operating expenses:
 Fulfillment                           87,597         --      87,597
 Marketing                             42,216         --      42,216
 Technology and content                67,132         --      67,132
 General and administrative            28,468         --      28,468
 Stock-based compensation               8,166     (8,166)         --
 Amortization of goodwill
  and other intangibles                80,413    (80,413)         --
 Restructuring-related and other        2,449     (2,449)         --
                                  ------------------------------------
   Total operating expenses           316,441    (91,028)    225,413
                                  ------------------------------------

Loss from operations                 (180,377)    91,028     (89,349)

Interest income                        10,314         --      10,314
Interest expense                      (33,397)        --     (33,397)
Other expense, net                     (3,272)        --      (3,272)
Other gains, net                           --         --          --
                                  ------------------------------------
   Net interest expense and other     (26,355)        --     (26,355)
                                  ------------------------------------

Loss before equity in losses of
 equity-method investees             (206,732)    91,028    (115,704)

Equity in losses of
 equity-method investees, net        (110,452)   110,452          --
                                  ------------------------------------

Net loss                            $(317,184)  $201,480   $(115,704)
                                  ====================================
Cash provided by (used in)
 operating activities               $ (54,029)             $ (54,029)
                                  ===========            ============

Basic and diluted loss per share:      $(0.91)                $(0.33)
                                  ===========            ===========

Shares used in computation of basic
 and diluted loss per share           349,886                349,886
                                  ===========            ===========

Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.


                           AMAZON.COM, INC.
                  Pro Forma Statements of Operations
                 (in thousands, except per share data)
                              (unaudited)

                                            Six Months Ended
                                              June 30, 2001
                                  ------------------------------------
                                                Pro Forma
                                  As Reported  Adjustments  Pro Forma
                                  ------------------------------------

Net sales                          $1,367,981         --  $1,367,981
Cost of sales                       1,005,664         --   1,005,664
                                  ------------------------------------
Gross profit                          362,317         --     362,317

Operating expenses:
 Fulfillment                          183,831         --     183,831
 Marketing                             71,296         --      71,296
 Technology and content               134,994         --     134,994
 General and administrative            48,806         --      48,806
 Stock-based compensation               5,267     (5,267)         --
 Amortization of goodwill
  and other intangibles               101,661   (101,661)         --
 Restructuring-related and other      172,910   (172,910)         --
                                  ------------------------------------
   Total operating expenses           718,765   (279,838)    438,927
                                  ------------------------------------

Loss from operations                 (356,448)   279,838     (76,610)

Interest income                        16,757         --      16,757
Interest expense                      (68,896)        --     (68,896)
Other expense, net                     (5,062)        --      (5,062)
Other gains, net                       45,172    (45,172)         --
                                  ------------------------------------
   Net interest expense and other     (12,029)   (45,172)    (57,201)
                                  ------------------------------------

Loss before equity in losses of
 equity-method investees             (368,477)   234,666    (133,811)

Equity in losses of
 equity-method investees, net         (23,490)    23,490          --
                                  ------------------------------------

Net loss before change
 in accounting principle             (391,967)   258,156    (133,811)

Cumulative effect of change
 in accounting principle              (10,523)    10,523          --
                                  ------------------------------------

Net loss                            $(402,490)  $268,679   $(133,811)
                                  ====================================
Cash provided by (used in)
 operating activities               $(404,499)             $(404,499)
                                  ===========            ===========
Basic and diluted loss per share:
Prior to cumulative effect of change
 in accounting principle               $(1.09)                $(0.37)
Cumulative effect of change
 in accounting principle                (0.03)                    --
                                  -----------            -----------
                                       $(1.12)                $(0.37)
                                  ===========            ===========

Shares used in computation of basic
 and diluted loss per share           358,595                358,595
                                  ===========            ===========


                                            Six Months Ended
                                              June 30, 2000
                                  ------------------------------------
                                                Pro Forma
                                  As Reported  Adjustments  Pro Forma
                                  ------------------------------------

Net sales                          $1,151,765         --  $1,151,765
Cost of sales                         887,567         --     887,567
                                  ------------------------------------
Gross profit                          264,198         --     264,198

Operating expenses:
 Fulfillment                          187,060         --     187,060
 Marketing                             82,864         --      82,864
 Technology and content               128,376         --     128,376
 General and administrative            54,513         --      54,513
 Stock-based compensation              21,818    (21,818)         --
 Amortization of goodwill
  and other intangibles               163,368   (163,368)         --
 Restructuring-related and other        4,468     (4,468)         --
                                  ------------------------------------
   Total operating expenses           642,467   (189,654)    452,813
                                  ------------------------------------

Loss from operations                 (378,269)   189,654    (188,615)

Interest income                        20,440         --      20,440
Interest expense                      (61,018)        --     (61,018)
Other expense, net                     (8,046)        --      (8,046)
Other gains, net                           --         --          --
                                  ------------------------------------
   Net interest expense and other     (48,624)        --     (48,624)
                                  ------------------------------------

Loss before equity in losses of
 equity-method investees             (426,893)   189,654    (237,239)

Equity in losses of
 equity-method investees, net        (198,716)   198,716          --
                                  ------------------------------------

Net loss before change
 in accounting principle             (625,609)   388,370    (237,239)

Cumulative effect of change
 in accounting principle                   --         --          --
                                  ------------------------------------

Net loss                            $(625,609)  $388,370   $(237,239)
                                  ====================================

Cash provided by (used in)
 operating activities              $ (374,407)            $ (374,407)
                                  ============            ============
Basic and diluted loss per share:
Prior to cumulative effect of change
 in accounting principle               $(1.80)                $(0.68)
Cumulative effect of change
 in accounting principle                   --                     --
                                  -----------            -----------
                                       $(1.80)                $(0.68)
                                  ===========            ===========

Shares used in computation of basic
 and diluted loss per share           346,680                346,680
                                  ===========            ===========

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 June 30, 2001
                       -------------------------------------------
                                      U.S. Retail
                       -------------------------------------------
                                        Electronics,
                       Books, Music      Tools and
                       and DVD/Video      Kitchen          Total
                       -------------------------------------------
Net sales               $  389,723      $  110,957      $  500,680
Gross profit               110,844          13,159         124,003
Pro forma income
 (loss) from
 operations                 38,967         (41,322)         (2,355)
Other non-cash and
 restructuring-
 related operating
 expenses                       --              --              --
Net interest expense
 and other                      --              --              --
Equity in losses
 of equity-method
 investees, net                 --              --              --
Net loss                        --              --              --

Segment highlights:
Y / Y net sales
 growth                         1%             21%              5%
Y / Y gross
 profit growth                 28%            111%             33%
Gross margin                   28%             12%             25%
Pro forma
 operating margin              10%            (37%)             0%


                          Services     International    Consolidated
                         -------------------------------------------
Net sales               $   38,599      $  128,346      $  667,625
Gross profit                26,352          29,365         179,720
Pro forma income
 (loss) from
 operations                  4,339         (29,993)        (28,009)
Other non-cash and
 restructuring-
 related operating
 expenses                       --              --        (111,831)
Net interest expense
 and other                      --              --         (18,204)
Equity in losses
 of equity-method
 investees, net                 --              --         (10,315)
                                                        -----------
Net loss                        --              --     $  (168,359)
                                                        ===========

Segment highlights:
Y / Y net sales
 growth                        41%             75%             16%
Y / Y gross
 profit growth                 (1%)            80%             32%
Gross margin                   68%             23%             27%
Pro forma
 operating margin              11%            (23%)            (4%)


                             Three Months Ended June 30, 2000
                       -------------------------------------------
                                      U.S. Retail
                       -------------------------------------------
                                        Electronics,
                       Books, Music      Tools and
                       and DVD/Video      Kitchen          Total
                       -------------------------------------------
Net sales               $  385,275      $   91,755      $  477,030
Gross profit                86,862           6,249          93,111
Pro forma income
 (loss) from
 operations                 10,056         (69,077)        (59,021)
Other non-cash
 and restructuring-
 related operating
 expenses                       --              --              --
Net interest
 expense and other              --              --              --
Equity in losses
 of equity-method
 investees, net                 --              --              --
Net loss                        --              --              --

Segment highlights:
Y / Y net sales
 growth                        38%             N/A             70%
Y / Y gross
 profit growth                 41%             N/A             56%
Gross margin                   23%              7%             20%
Pro forma
 operating margin               3%            (75%)           (12%)


                          Services     International    Consolidated
                         -------------------------------------------
Net sales               $   27,453      $   73,393      $  577,876
Gross profit                26,667          16,286         136,064
Pro forma income
 (loss) from
 operations                  4,175         (34,503)        (89,349)
Other non-cash
 and restructuring-
 related operating
 expenses                       --              --         (91,028)
Net interest
 expense and other              --              --         (26,355)
Equity in losses
 of equity-method
 investees, net                 --              --        (110,452)
                                                        -----------
Net loss                        --              --      $ (317,184)
                                                        ===========
Segment highlights:
Y / Y net sales
 growth                        N/A            134%             84%
Y / Y gross
 profit growth                 N/A            148%            101%
Gross margin                   97%             22%             24%
Pro forma
 operating margin              15%            (47%)           (15%)


                              Six Months Ended June 30, 2001
                       -------------------------------------------
                                      U.S. Retail
                       -------------------------------------------
                                        Electronics,
                       Books, Music      Tools and
                       and DVD/Video      Kitchen          Total
                       -------------------------------------------
Net sales               $  799,309      $  227,464      $1,026,773
Gross profit               219,963          30,379         250,342
Pro forma income
 (loss) from
 operations                 66,592         (87,155)        (20,563)
Other non-cash
 and restructuring-
 related operating
 expenses                       --              --              --
Net interest expense
 and other                      --              --              --
Equity in losses
 of equity-method
 investees, net                 --              --              --
Cumulative effect
 of change in
 accounting
 principle                      --              --              --

Net loss                        --              --              --

Segment highlights:
Y / Y net sales
 growth                         2%             37%              8%
Y / Y gross
 profit growth                 30%            128%             37%
Gross margin                   28%             13%             24%
Pro forma
 operating margin               8%            (38%)            (2%)


                          Services     International    Consolidated
                         -------------------------------------------
Net sales               $   80,757      $  260,451      $1,367,981
Gross profit                54,560          57,415         362,317
Pro forma income
 (loss) from
 operations                  8,515         (64,562)        (76,610)
Other non-cash
 and restructuring-
 related operating
 expenses                       --              --        (279,838)
Net interest
 expense and other              --              --         (12,029)
Equity in losses
 of equity-method
 investees, net                 --              --         (23,490)
Cumulative effect
 of change in
 accounting
 principle                      --              --         (10,523)
                                                        -----------
Net loss                        --              --      $ (402,490)
                                                        ===========
Segment highlights:
Y / Y net sales
 growth                        61%             75%             19%
Y / Y gross
 profit growth                 12%             78%             37%
Gross margin                   68%             22%             26%
Pro forma
 operating margin              11%            (25%)            (6%)


                              Six Months Ended June 30, 2000
                       -------------------------------------------
                                      U.S. Retail
                       -------------------------------------------
                                        Electronics,
                       Books, Music      Tools and
                       and DVD/Video      Kitchen          Total
                       -------------------------------------------
Net sales               $  786,690      $  166,351      $  953,041
Gross profit               169,717          13,308         183,025
Pro forma income
 (loss) from
 operations                  7,631        (136,326)       (128,695)
Other non-cash
 and restructuring-
 related operating
 expenses                       --              --              --
Net interest
 expense and other              --              --              --
Equity in losses
 of equity-method
 investees, net                 --              --              --
Net loss                        --              --              --

Segment highlights:
Y / Y net sales
 growth                        44%             N/A             74%
Y / Y gross
 profit growth                 40%             N/A             53%
Gross margin                   22%              8%             19%
Pro forma
 operating margin               1%            (82%)           (14%)


                          Services     International    Consolidated
                         -------------------------------------------
Net sales               $   50,199      $  148,525      $1,151,765
Gross profit                48,851          32,322         264,198
Pro forma income
 (loss) from
 operations                  2,031         (61,951)       (188,615)
Other non-cash
 and restructuring-
 related operating
 expenses                       --              --        (189,654)
Net interest
 expense and other              --              --         (48,624)
Equity in losses
 of equity-method
 investees, net                 --              --        (198,716)
                                                        -----------
Net loss                        --              --      $ (625,609)
                                                        ===========
Segment highlights:
Y / Y net sales
 growth                        N/A            160%             89%
Y / Y gross
 profit growth                 N/A            176%            100%
Gross margin                   97%             22%             23%
Pro forma
 operating margin               4%            (42%)           (16%)


Supplemental geographical segment information is as follows (in
thousands):

                     Three Months Ended        Three Months Ended
                       June 30, 2001             June 30, 2000
                    ======================    ======================
                                Pro Forma                 Pro Forma
                                 Income                    Income
                               (Loss) from               (Loss) from
                    Net Sales   Operations    Net Sales   Operations
                    ----------------------    ----------------------
 U.S.
   Books, Music
    and DVD/Video   $  389,723  $   38,967    $  385,275  $   10,056
   Electronics,
    Tools and
    Kitchen            110,957     (41,322)       91,755     (69,077)
                    ----------------------    ----------------------
    U.S. Retail        500,680      (2,355)      477,030     (59,021)
   Services             38,599       4,339        27,453       4,175
                    ----------------------    ----------------------
    Total U.S.         539,279       1,984       504,483     (54,846)


 International         128,346     (29,993)       73,393     (34,503)
                    ----------------------    ----------------------
Total
 Consolidated       $  667,625  $  (28,009)   $  577,876  $  (89,349)
                    ======================    ======================


                      Six Months Ended         Six Months Ended
                       June 30, 2001             June 30, 2000
                    ======================    ======================
                                Pro Forma                 Pro Forma
                                 Income                    Income
                               (Loss) from               (Loss) from
                    Net Sales   Operations    Net Sales   Operations
                    ----------------------    ----------------------
 U.S.
   Books, Music
    and DVD/Video   $  799,309  $   66,592    $  786,690  $    7,631
   Electronics,
    Tools and
    Kitchen            227,464     (87,155)      166,351    (136,326)
                    ----------------------    ----------------------
    U.S. Retail      1,026,773     (20,563)      953,041    (128,695)
   Services             80,757       8,515        50,199       2,031
                     ----------------------    ----------------------
    Total U.S.       1,107,530     (12,048)    1,003,240    (126,664)


 International         260,451     (64,562)      148,525     (61,951)
                    ----------------------    ----------------------
Total
 Consolidated       $1,367,981  $  (76,610)   $1,151,765  $ (188,615)
                    ======================    ======================

Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.


                           AMAZON.COM, INC.
                            Balance Sheets
                 (in thousands, except per share data)
                              (unaudited)

                                              June 30,    December 31,
                                                2001         2000
                                            -----------   -----------
ASSETS
Current assets:
 Cash and cash equivalents                 $   462,949    $   822,435
 Marketable securities                         146,020        278,087
 Inventories                                   129,035        174,563
 Prepaid expenses and other current assets      71,353         86,044
                                            -----------   -----------
   Total current assets                        809,357      1,361,129

Fixed assets, net                              292,422        366,416
Goodwill, net                                   89,002        158,990
Other intangibles, net                          63,893         96,335
Investments in equity-method investees          12,223         52,073
Other equity investments                        24,729         40,177
Other assets                                    53,410         60,049
                                            -----------   -----------
   Total assets                            $ 1,345,036    $ 2,135,169
                                            ===========   ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
 Accounts payable                          $   257,976    $   485,383
 Accrued expenses and other current
  liabilities                                  241,149        272,683
 Unearned revenue                               86,945        131,117
 Interest payable                               43,833         69,196
 Current portion of long-term debt and
    other                                       18,337         16,577
                                            -----------   -----------
   Total current liabilities                   648,240        974,956

Long-term debt and other                     2,126,727      2,127,464

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 --
   362,191 and 357,140 shares at
    June 30, 2001 and December 31, 2000,
     respectively                                3,622          3,571
Additional paid-in capital                   1,356,216      1,338,303
Deferred stock-based compensation              (10,132)       (13,448)
Accumulated other comprehensive loss           (83,846)        (2,376)
Accumulated deficit                         (2,695,791)    (2,293,301)
                                            -----------   -----------
  Total stockholders' deficit               (1,429,931)      (967,251)
                                            -----------   -----------
   Total liabilities and stockholders'
    deficit                                $ 1,345,036    $ 2,135,169
                                            ===========   ===========

Note: The attached "Financial and Operational Highlights" are an
integral part of the press release financial statements.


                           AMAZON.COM, INC.
                       Statements of Cash Flows
                            (in thousands)
                              (unaudited)


                                                 Three Months Ended
                                                       June 30,
                                               -----------------------
                                                   2001        2000
                                               -----------------------
CASH AND CASH EQUIVALENTS,
 BEGINNING OF PERIOD                            $ 446,944   $ 755,133
OPERATING ACTIVITIES:
Net loss                                         (168,359)   (317,184)
Adjustments to reconcile net loss to net cash
 provided by (used in) operating activities:
  Depreciation of fixed assets and other
   amortization                                    20,794      20,682
  Stock-based compensation                          2,351       8,166
  Equity in losses of equity-method investees,
   net                                             10,315     110,452
  Amortization of goodwill and other intangibles   50,830      80,413
  Non-cash restructuring-related and other costs    6,525       2,449
  Amortization of previously unearned revenue     (31,908)    (20,203)
  Loss (gain) on sale of marketable securities        187       1,648
  Other gains, net                                (11,315)         --
  Non-cash interest expense and other               6,713       6,208
  Cumulative effect of change in accounting
   principle                                          --           --

Changes in operating assets and liabilities:
 Inventories                                       25,277        (103)
 Prepaid expenses and other current assets        (12,203)      4,104
 Accounts payable                                  (1,632)     30,442
 Accrued expenses and other current liabilities    52,271        (756)
 Unearned revenue                                  25,192       1,011
 Interest payable                                  27,447      18,642
                                               ----------   ----------
Net cash provided by (used in) operating
 activities                                         2,485     (54,029)

INVESTING ACTIVITIES:
Sales and maturities of marketable securities      66,971      68,949
Purchases of marketable securities                (26,743)    (21,930)
Purchases of fixed assets, including
 internal-use software and web-site development   (10,425)    (28,878)
Investments in equity-method investees and
 other investments                                     --      (8,595)
                                               ----------   ----------
  Net cash provided by investing activities        29,803       9,546

FINANCING ACTIVITIES:
Proceeds from exercise of stock options             7,644      13,794
Proceeds from long-term debt and other                 --       1,625
Repayment of long-term debt and other              (4,094)     (5,197)
Financing costs                                        --        (227)
                                               ----------   ----------
 Net cash provided by financing activities          3,550       9,995
Effect of exchange rate changes on cash and cash
 equivalents                                      (19,833)       (268)
                                               ----------   ----------
Net increase (decrease) in cash and
 cash equivalents                                  16,005     (34,756)
                                               ----------   ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD        $ 462,949   $ 720,377
                                               ==========   ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Fixed assets acquired under capital leases      $     171   $     844
Fixed assets acquired under financing agreements       --         293
Stock issued in connection with business
 acquisitions                                          --      30,000
Equity securities received for commercial
 agreements                                            --          --
Cash paid for interest                              1,198       7,996


                                                   Six Months Ended
                                                        June 30,
                                               -----------------------
                                                   2001        2000
                                               -----------------------

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD  $ 822,435   $ 133,309
OPERATING ACTIVITIES:
Net loss                                         (402,490)   (625,609)
Adjustments to reconcile net loss to net cash
 provided by (used in) operating activities:
  Depreciation of fixed assets and other
   amortization                                    43,867      38,862
  Stock-based compensation                          5,267      21,818
  Equity in losses of equity-method investees,
   net                                             23,490     198,716
  Amortization of goodwill and other intangibles  101,661     163,368
  Non-cash restructuring-related and other costs   68,529       4,468
  Amortization of previously unearned revenue     (65,300)    (38,688)
  Loss (gain) on sale of marketable securities        214        (952)
  Other gains, net                                (45,172)         --
  Non-cash interest expense and other              13,285      12,089
  Cumulative effect of change in accounting
   principle                                       10,523          --

Changes in operating assets and liabilities:
 Inventories                                       45,100      48,286
 Prepaid expenses and other current assets         15,131       1,037
 Accounts payable                                (231,390)   (176,787)
 Accrued expenses and other current liabilities    (5,491)    (32,294)
 Unearned revenue                                  43,197       1,625
 Interest payable                                 (24,920)      9,654
                                               ----------   ----------
Net cash provided by (used in) operating
 activities                                      (404,499)   (374,407)

INVESTING ACTIVITIES:
Sales and maturities of marketable securities     161,337     449,294
Purchases of marketable securities                (57,121)    (50,786)
Purchases of fixed assets, including internal-use
 software and web-site development                (29,862)    (55,479)
Investments in equity-method investees and other
 investments                                           --     (56,082)
                                               ----------   ----------
 Net cash provided by investing activities         74,354     286,947

FINANCING ACTIVITIES:
Proceeds from exercise of stock options            13,477      35,153
Proceeds from long-term debt and other             10,000     680,999
Repayment of long-term debt and other              (8,669)     (9,220)
Financing costs                                        --     (16,122)
                                               ----------   ----------
 Net cash provided by financing activities         14,808     690,810
Effect of exchange rate changes on cash and cash
 equivalents                                      (44,149)    (16,282)
                                               ----------   ----------
Net increase (decrease) in cash and cash
 equivalents                                     (359,486)    587,068
                                               ----------   ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD        $ 462,949   $ 720,377
                                               ==========   ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Fixed assets acquired under capital leases      $   2,469   $   4,346
Fixed assets acquired under financing agreements       --       4,844
Stock issued in connection with business
 acquisitions                                          --      30,000
Equity securities received for commercial
 agreements                                           331      97,839
Cash paid for interest                             87,422      43,831

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
                              (unaudited)
                 (in millions, except per share data)


                              2000                                Y/Y
                     -------------------------
                        Q2       Q3       Q4  Q1 2001  Q2 2001  Growth
                                                                   %
                     -------------------------------------------------
Results of Operations

Net sales          $   578  $   638  $   972  $   700  $   668   16%
Net sales -
 trailing twelve
 months (TTM)      $ 2,184  $ 2,466  $ 2,762  $ 2,888  $ 2,978   36%
Net sales outside
 the U.S.
 (including .com
 export sales) -
 % of net sales        23%      23%      21%      26%      28%   N/A

Gross profit       $   136  $   167  $   224  $   183  $   180   32%
Gross margin - %
 of net sales        23.5%    26.2%    23.1%    26.1%    26.9%   N/A

Fulfillment costs -
 % of net sales      15.2%    15.1%    13.5%    14.0%    12.8%   N/A

Pro forma operating
 expenses          $   225  $   236  $   284  $   231  $   208   (8%)

Pro forma operating
 loss              $   (89) $   (68) $   (60) $   (49) $   (28) (69%)
Pro forma operating
 loss - % of net
 sales              (15.5%)  (10.7%)   (6.2%)   (6.9%)   (4.2%)  N/A

Pro forma net loss $  (116) $   (89) $   (90) $   (76) $   (58) (50%)
Pro forma net loss
 per share         $ (0.33) $ (0.25) $ (0.25) $ (0.21) $ (0.16) (52%)

GAAP net loss      $  (317) $  (241) $  (545) $  (234) $  (168) (47%)
GAAP net loss per
 share             $ (0.91) $ (0.68) $ (1.53) $ (0.66) $ (0.47) (48%)

U.S. books, music and DVD/video (US BMVD) segment:
 US BMVD net sales $   385  $   400  $   512  $   410  $   390    1%
 US BMVD gross
  profit           $    87  $   109  $   139  $   109  $   111   28%
 US BMVD pro forma
  operating income
  - % of US BMVD
  net sales             3%       6%       8%       7%      10%   N/A

U.S. electronics, tools and kitchen (US ETK) segment:
 US ETK net sales  $    92  $    98  $   220  $   117  $   111   21%
 US ETK gross
  profit           $     6  $     9  $    22  $    17  $    13  117%
 US ETK pro forma
  operating loss -
  % of US ETK net
  sales               (75%)    (62%)    (33%)    (39%)    (37%)  N/A

Services segment:
 Services net
  sales            $    27  $    53  $    96  $    42  $    39   44%
 Services gross
  profit           $    27  $    31  $    37  $    28  $    26   (4%)
 Services pro forma
  operating income
  - % of services
  net sales            15%      14%      18%      10%      11%   N/A

U.S. Retail and
 Services combined
 pro forma
 operating  income
 (loss) - % of U.S.
 Retail and
 Services net sales   (11%)     (5%)     (2%)     (2%)      0%   N/A

International segment:
 International net
  sales            $    73  $    88  $   145  $   132  $   128   75%
 International
  gross profit     $    16  $    19  $    26  $    28  $    29   81%
 International pro
  forma operating
  loss - % of
  international net
  sales               (47%)    (45%)    (30%)    (26%)    (23%)  N/A


                           AMAZON.COM, INC.
        Supplemental Financial Information and Business Metrics
                              (unaudited)
   (in millions, except cost per new customer account, net sales per
  active customer account, inventory turnover, accounts payable days,
                          and employee data)

                             2000
                    -------------------------                    Y/Y
                       Q2       Q3       Q4  Q1 2001  Q2 2001  Growth
                                                                  %
                    -------------------------------------------------
Customer Data

New customer
 accounts             2.5      2.9      4.1      3.0     2.6    4%
Cumulative customer
 accounts            22.5     25.4     29.5     32.5    35.1   56%
Active customer
 accounts - TTM      17.0     18.2     19.8     20.5    21.1   24%

New customer accounts
 - international      0.6      0.9      1.1      1.0     0.9   50%
Cumulative customer
 accounts -
 international        3.0      3.9      5.0      6.0     6.9  130%
Active customer
 accounts -
 international -
 TTM                  2.7      3.3      4.2      4.9     5.4  100%

Cost per new customer
 account         $     17 $     15 $     13  $    12 $    14  (18%)

Net sales (excluding
 catalog sales and
 inventory sales to
 Toysrus.com) per
 active customer
 account - TTM   $    125 $    130 $    134  $   135 $   136    9%

U.S. customers
 purchasing from
 non-US BMVD stores   13%      14%      36%      19%      21%   N/A

Balance Sheet

Cash and marketable
 securities      $   908  $    900 $  1,101  $   643 $   609  (33%)

Inventory, net   $   172  $    164 $    175  $   156 $   129  (25%)
Inventory - % of net
 sales                30%      26%      18%      22%     19%    N/A
Inventory turnover
 - annualized        10.3     11.2     17.7     12.6    13.7   33%

Fixed assets,
 net             $    344 $    352 $    366  $   304 $   292  (15%)

Accounts payable days
 - ending              59       60       60       45      48  (19%)

Cash Flows

Cash generated by
 (used in)
 operations      $   (54) $     (4) $   248  $  (407) $    2  104%
Cash used in
 operations -
 TTM             $  (418) $   (347) $  (130) $  (217) $ (161) (61%)

Purchases of fixed
 assets          $   (29) $    (42) $   (37) $   (19) $  (10) (66%)

Other

Employees (full-time
 and part-time)    7,700     8,500    9,000    8,600   7,800    1%


                           AMAZON.COM, INC.
                 Financial and Operational Highlights
                  Second Quarter Ended June 30, 2001
                              (unaudited)


Results of Operations (all comparisons are with the second quarter of 2000)

Net Sales


-- Our segment reporting includes four segments: U.S. Books, Music and
DVD/Video; U.S. Electronics, Tools and Kitchen; International; and Services.
Allocation methodologies are consistent with past presentations.

-- The U.S. Books, Music and DVD/Video segment includes revenues, direct costs
and cost allocations associated with retail sales from www.amazon.com for
books, music and DVD/video products, and includes amounts earned on sales of
similar products sold through Amazon Marketplace.

-- The U.S. Electronics, Tools and Kitchen segment includes revenues, direct
costs and cost allocations associated with www.amazon.com retail sales of
Electronics (consumer electronics products, camera and photo items, software,
computer and video games, and cell phones and related service), Tools (tools
and hardware) and Kitchen (kitchen and housewares products and outdoor living
items) products, toys and video games sold other than through our Toysrus.com
strategic alliance, and new initiatives, and includes amounts earned on sales
of similar products sold through Amazon Marketplace.

-- U.S. Retail represents the combination of the U.S. Books, Music and
DVD/Video segment and the U.S. Electronics, Tools and Kitchen segment.

-- The Services segment includes revenues, direct costs and cost allocations
associated with the Company's business-to-business strategic relationships,
including our strategic alliance with Toysrus.com, and miscellaneous
advertising revenues, as well as amounts from Amazon Auctions, zShops and
Payments. Amounts earned from the Services segment are attributed to the U.S.

-- U.S. represents the combination of U.S. Retail and the Services segment.

-- The International segment includes all revenues, direct costs and cost
allocations associated with the retail sales of the Company's four
internationally focused sites: www.amazon.de, www.amazon.fr, www.amazon.co.jp
and www.amazon.co.uk.

-- Trailing twelve-month sales per active customer account figures include all
amounts earned through Internet sales, including revenue earned from our
strategic relationships with selected companies, but exclude catalog sales and
sales of inventory to Toysrus.com.

-- All references to customers mean customer accounts. Customer accounts
exclude the customers of selected companies with whom we have strategic
relationships, and customer accounts of our catalog businesses, but include
customer accounts shared with Toysrus.com and customers of Amazon Auctions,
zShops and Marketplace services.


Gross Profit

-- Gross margin, excluding the results of our Services segment,

would have been 24%, up from 20%.

-- Shipping gross loss was approximately $2 million, down from

gross profit of $7 million. We will from time to time continue

to offer shipping promotions to our customers and may continue

to experience fluctuating fluc·tu·ate  
v. fluc·tu·at·ed, fluc·tu·at·ing, fluc·tu·ates

v.intr.
1. To vary irregularly. See Synonyms at swing.

2. To rise and fall in or as if in waves; undulate.

v.
 shipping margins.

Fulfillment

-- Fulfillment costs represent 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 receiving, inspecting and

warehousing inventories; picking, packaging and preparing

customers' orders for shipment; credit card fees and bad debt

costs; and responding to inquiries from customers.

-- Fulfillment costs amounted to approximately 13% of net sales,

down from 15% of net sales; excluding net sales from our

Services segment, fulfillment costs would have been

approximately 14%, down from 16%.

Stock-Based Compensation

-- During the first quarter of 2001, we offered a limited

non-compulsory exchange of employee stock options. This option

exchange offer results in variable accounting treatment for

approximately 13 million stock options at June 30, 2001, which

includes approximately 12 million options granted under the

exchange offer with an exercise price of $13.375, and options

that were subject to the exchange offer but were not

exchanged. Variable accounting treatment will result in

unpredictable charges or credits, recorded to "Stock-based

compensation," dependent on fluctuations in quoted prices for

our common stock.

-- Stock-based compensation includes stock-based charges

resulting from variable accounting treatment, option-related

deferred compensation recorded at our initial public offering

and certain other compensation and severance The act of dividing, or the state of being divided.

The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when
 arrangements.

Stock-based compensation also includes the portion of

acquisition-related consideration conditioned on the continued

tenure tenure, in education
tenure, in education, a guarantee of the permanence of a college or university teacher's position, awarded upon successful completion of a probationary period, usually seven years.
 of key employees of certain of our acquired businesses.

During the quarter, stock-based compensation related to

variable accounting treatment was $4 million, and the

termination The point where a line, channel or circuit ends. See SCSI termination and hybrid.  of certain acquisition-related employees prior to

vesting Vesting

The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account.

Notes:
 in stock-based compensation awards had the effect of

reducing stock-based compensation to $2 million.

Amortization of Goodwill and Other Intangibles

-- The Financial Accounting Standards Board Financial Accounting Standards Board (FASB)

Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP).
 issued 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
 No. 142

"Goodwill and Other 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.
" which requires use of a

non-amortization approach to account for purchased goodwill

and certain intangibles, effective January January: see month.  1, 2002. We expect

the adoption of this accounting standard will have the impact,

commencing January 1, 2002, of reducing to zero our

amortization of goodwill and significantly reducing our

amortization of intangibles.

Restructuring-Related and Other

-- We continued the 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 to reduce our operating costs operating costs nplgastos mpl operacionales , streamline streamline, path of a fluid flowing steadily and without appreciable turbulence. A body is said to be streamlined if its shape offers the least possible resistance to a current of air, water, or other fluid.

our organizational structure This article has no lead section.

To comply with Wikipedia's lead section guidelines, one should be written.
 and consolidate Consolidate

To combine the assets, liabilities, and other financial items of two or more entities into one.

Notes:
This term is generally used in the context of consolidated financial statements.
 certain of our

fulfillment and customer service operations. As a result of

this initiative, we recorded restructuring and other charges

of approximately $114 million during the first quarter and $59

million during the second quarter of 2001. This initiative

involved the reduction of employee staff by approximately

1,300 positions throughout the Company in managerial,

professional, clerical, technical and fulfillment roles;

consolidation of our 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.  corporate office locations;

closure of our McDonough, Georgia McDonough is a city in Henry County, Georgia, United States. The population was 8,493 at the 2000 census. Census Estimates of 2005 indicate a population of 15,523. This is due both in part to growth of the city and extension of the city limits. , fulfillment center;

seasonal operation of our Seattle fulfillment center; closure

of our customer service centers in Seattle and The Hague Hague   , The or 's Gra·ven·ha·ge

The de facto capital of the Netherlands, in the western part of the country near the North Sea. The Hague grew around a palace built c.
,

Netherlands Netherlands (nĕth`ərləndz), Du. Nederland or Koninkrijk der Nederlanden, officially Kingdom of the Netherlands, constitutional monarchy (2005 est. pop. 16,407,000), 15,963 sq mi (41,344 sq km), NW Europe. ; and migration of a large portion of our

technology infrastructure to a Linux-based operating platform,

which entails ongoing lease obligations for equipment no

longer utilized. Each component of the restructuring plan has

been substantially completed as of June 30, 2001.

-- Costs that relate to ongoing operations are not part of

restructuring and other charges. All inventory adjustments

that may result from the closure or seasonal operation of our

fulfillment centers are classified in "Cost of goods sold Cost of goods sold

The total cost of buying raw materials, and paying for all the factors that go into producing finished goods.


cost of goods sold 
" on

the 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 operations. There were no

significant inventory write-downs resulting from the

restructuring.

-- For the quarter ended June 30, 2001, the charges associated

with our restructuring were as follows (in thousands):

          Asset impairments                              $  7,225
          Continuing lease obligations                     49,713
          Termination benefits                               (327)
          Broker commissions, professional fees and
           other miscellaneous restructuring costs          2,039
                                                         --------
                                                         $ 58,650
                                                         ========


-- Continuing lease obligations primarily relate to technology

infrastructure no longer being utilized. Where possible, we

are actively seeking third parties to sublease sublease n. the lease of all or a portion of premises by a tenant who has leased the premises from the owner. A sublease may be prohibited by the original lease, or require written permission from the owner.  abandoned

equipment. Amounts expensed represent estimates of

undiscounted future cash outflows, offset by anticipated

third-party subleases.

-- We anticipate the restructuring charges restructuring charge

The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings.
 will result in the

following net cash outflows:

                                      Termination
  (in thousands)              Leases   Benefits     Other      Total
  Year Ending December 31,
    2001                    $ 35,678   $ 12,108   $  4,630   $ 52,416
    2002                      34,059         78      3,538     37,675
    2003                       4,643       --         --        4,643
    2004                       1,589       --         --        1,589
    2005                       1,563       --         --        1,563
    Thereafter                 6,473       --         --        6,473
                            --------   --------   --------   --------
  Total estimated cash
   outflows                 $ 84,005   $ 12,186   $  8,168   $104,359
                            ========   ========   ========   ========

First and second quarter 2001 cash payments resulting from the
restructuring, which are included in the above amounts, were $10
million and $11 million, respectively.


Net Interest Expense and Other

-- Other expense primarily relates to net realized gains Realized Gain

A gain resulting from selling an asset at a price higher than the original purchase price.

Notes:
There may be tax consequences for a realized profit.
 and

losses on sales of marketable securities, miscellaneous

operating taxes and foreign currency transaction losses.

Other Gains

-- Other gains, net were $11 million for the three months ended

June 30, 2001, consisting of the following (in thousands):


          Foreign currency gain on PEACS              $ 22,876
          Foreign currency losses on conversion
           of Euro-denominated investments              (6,216)
          Other than temporary impairment losses,
           equity investments                           (4,858)
          Warrant remeasurements and other                (487)
                                                      --------
                                                      $ 11,315
                                                      ========


-- As of June 30, 2001, our recorded basis in our investment in

Webvan Webvan was an online "credit and delivery" grocery business that went bankrupt in 2001. It was headquartered in Foster City, California, USA, near Silicon Valley. It delivered products to customers' homes within a 30-minute window of their choosing.  Group, Inc., was reduced to zero as Webvan Group, Inc.

ceased operations and announced their intentions to file for

bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most . We do not expect to recover any portion of our

investment in Webvan Group, Inc.

Equity in Losses of Equity-Method Investees

-- Equity in losses of equity-method investees represents our

share of losses of companies in which we have investments that

give us the ability to exercise significant influence, but not

control, over an investee. Equity-method losses reduce our

underlying investment balances until the recorded basis is

reduced to zero.

Loss Per Share


-- Our segment reporting includes four segments: U.S. Books, Music and
DVD/Video; U.S. Electronics, Tools and Kitchen; International; and Services.
Allocation methodologies are consistent with past presentations.

-- The U.S. Books, Music and DVD/Video segment includes revenues, direct costs
and cost allocations associated with retail sales from www.amazon.com for
books, music and DVD/video products, and includes amounts earned on sales of
similar products sold through Amazon Marketplace.

-- The U.S. Electronics, Tools and Kitchen segment includes revenues, direct
costs and cost allocations associated with www.amazon.com retail sales of
Electronics (consumer electronics products, camera and photo items, software,
computer and video games, and cell phones and related service), Tools (tools
and hardware) and Kitchen (kitchen and housewares products and outdoor living
items) products, toys and video games sold other than through our Toysrus.com
strategic alliance, and new initiatives, and includes amounts earned on sales
of similar products sold through Amazon Marketplace.

-- U.S. Retail represents the combination of the U.S. Books, Music and
DVD/Video segment and the U.S. Electronics, Tools and Kitchen segment.

-- The Services segment includes revenues, direct costs and cost allocations
associated with the Company's business-to-business strategic relationships,
including our strategic alliance with Toysrus.com, and miscellaneous
advertising revenues, as well as amounts from Amazon Auctions, zShops and
Payments. Amounts earned from the Services segment are attributed to the U.S.

-- U.S. represents the combination of U.S. Retail and the Services segment.

-- The International segment includes all revenues, direct costs and cost
allocations associated with the retail sales of the Company's four
internationally focused sites: www.amazon.de, www.amazon.fr, www.amazon.co.jp
and www.amazon.co.uk.

-- Trailing twelve-month sales per active customer account figures include all
amounts earned through Internet sales, including revenue earned from our
strategic relationships with selected companies, but exclude catalog sales and
sales of inventory to Toysrus.com.

-- All references to customers mean customer accounts. Customer accounts
exclude the customers of selected companies with whom we have strategic
relationships, and customer accounts of our catalog businesses, but include
customer accounts shared with Toysrus.com and customers of Amazon Auctions,
zShops and Marketplace services.


Financial Condition

Cash and Marketable Securities

-- Cash and marketable securities are impacted by the effect of

quarterly fluctuations in foreign currency exchange rates,

particularly the Euro.

-- Our marketable securities, at fair value, consist of the

following, as of June 30, 2001 (in thousands):


          Corporate notes and bonds               $ 14,898
          Asset-backed and agency securities        34,346
          Treasury notes and bonds                  83,950
          Equity securities                         12,826
                                                  --------
                                                  $146,020
                                                  ========


Certain Definitions and Other


-- Our segment reporting includes four segments: U.S. Books, Music and
DVD/Video; U.S. Electronics, Tools and Kitchen; International; and Services.
Allocation methodologies are consistent with past presentations.

-- The U.S. Books, Music and DVD/Video segment includes revenues, direct costs
and cost allocations associated with retail sales from www.amazon.com for
books, music and DVD/video products, and includes amounts earned on sales of
similar products sold through Amazon Marketplace.

-- The U.S. Electronics, Tools and Kitchen segment includes revenues, direct
costs and cost allocations associated with www.amazon.com retail sales of
Electronics (consumer electronics products, camera and photo items, software,
computer and video games, and cell phones and related service), Tools (tools
and hardware) and Kitchen (kitchen and housewares products and outdoor living
items) products, toys and video games sold other than through our Toysrus.com
strategic alliance, and new initiatives, and includes amounts earned on sales
of similar products sold through Amazon Marketplace.

-- U.S. Retail represents the combination of the U.S. Books, Music and
DVD/Video segment and the U.S. Electronics, Tools and Kitchen segment.

-- The Services segment includes revenues, direct costs and cost allocations
associated with the Company's business-to-business strategic relationships,
including our strategic alliance with Toysrus.com, and miscellaneous
advertising revenues, as well as amounts from Amazon Auctions, zShops and
Payments. Amounts earned from the Services segment are attributed to the U.S.

-- U.S. represents the combination of U.S. Retail and the Services segment.

-- The International segment includes all revenues, direct costs and cost
allocations associated with the retail sales of the Company's four
internationally focused sites: www.amazon.de, www.amazon.fr, www.amazon.co.jp
and www.amazon.co.uk.

-- Trailing twelve-month sales per active customer account figures include all
amounts earned through Internet sales, including revenue earned from our
strategic relationships with selected companies, but exclude catalog sales and
sales of inventory to Toysrus.com.

-- All references to customers mean customer accounts. Customer accounts
exclude the customers of selected companies with whom we have strategic
relationships, and customer accounts of our catalog businesses, but include
customer accounts shared with Toysrus.com and customers of Amazon Auctions,
zShops and Marketplace services.
COPYRIGHT 2001 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2001, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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