EX-99.1 7 dex991.htm PRESS RELEASE DATED JANUARY 22, 2002 Press Release dated January 22, 2002
 
Exhibit 99.1
 
 
LOGO
 
AMAZON.COM ANNOUNCES 4TH QUARTER PROFIT
Exceeds sales and profit objectives
Lower prices for customers drove sales and profits
Introduces everyday free Super Saver Shipping option for orders over $99
 
SEATTLE—(BUSINESS WIRE)—Jan. 22, 2002—Amazon.com, Inc. (NASD: AMZN) today announced financial results for its fourth quarter ended December 31, 2001.
 
Net sales for the quarter were a record $1.12 billion, compared with $972 million in the fourth quarter of 2000, an increase of 15%. It was Amazon.com’s first-ever billion-dollar quarter.
 
Amazon.com exceeded the goal it set a year ago—to reach pro forma operating profitability during the quarter—by delivering not only a pro forma operating profit, but also a pro forma net profit, which includes net interest expense. Pro forma operating profit was $59 million, compared with a loss of $60 million in the fourth quarter of 2000, an overall improvement of $119 million. Pro forma net profit for the fourth quarter of 2001 was $35 million, or $0.09 per share, compared with a pro forma net loss of $90 million, or $0.25 per share, in the fourth quarter of 2000.
 
On a GAAP basis, the Company recorded a fourth quarter 2001 net profit of $5 million, or $0.01 per share, compared with a fourth quarter 2000 net loss of $545 million, or $1.53 per share. Operating profit for the fourth quarter of 2001 was $15 million, compared with a loss of $322 million a year ago. (Details on the differences between GAAP results and pro forma operating profit and pro forma net profit are included below, with a detailed, tabular reconciliation of those differences.)
 
The Company also announced that effective today Amazon.com is providing a new class of economy shipping, Super Saver Shipping, which is free on qualifying orders. To qualify, orders must be over $99. (Other details and restrictions can be found at www.amazon.com/supersavershipping.) This is not a seasonal or limited-time promotion, but an indefinite, everyday, 365-days-a-year offer.
 
“There are two types of retailers: those that work hard to raise prices and those that work hard to lower prices. Though both models can be successful, we’ve decided to relentlessly follow the second model,” said Jeff Bezos, founder and CEO of Amazon.com. “In this spirit, we’re incredibly pleased to introduce Super Saver Shipping—free on orders over $99.”
 
“Our improvements in productivity allowed us to lower book prices and now allow us to offer free shipping,” said Warren Jenson, chief financial officer. “We expect that these money-saving initiatives for customers will continue to play an important role in our growth.”
 
International segment sales across the Company’s UK, Germany, France and Japan sites grew 81%. Including sales from the U.S. site, more than 29% of the Company’s sales were made to international customers. In addition, the Company’s operations for the UK and German sites had a combined pro forma operating profit for the fourth quarter of 2001, just three years after their launch.
 
Highlights of Fourth Quarter and Fiscal 2001 Results (comparisons are with fiscal 2000 and the fourth quarter of 2000)
 
 
•
 
Net sales for the 2001 fiscal year reached a record-setting $3.12 billion, a 13% increase.
 
 
•
 
Fiscal 2001 pro forma operating loss was $45 million, an improvement of more than $270 million.
 
 
•
 
Pro forma operating losses from our International sites declined by 76% to $11 million, or 4% of International net sales in fourth quarter 2001.

1
 
 
•
 
Electronics, Tools and Kitchen segment pro forma operating losses declined by $52 million, or 72%, to $20 million in fourth quarter 2001.
 
 
•
 
Marketplace (Used and other new) orders equaled approximately 15% of total U.S. orders in fourth quarter 2001, compared with 1% (Used launched November, 2000).
 
 
•
 
Annualized inventory turns improved 38% to 25 in fourth quarter 2001, up from 18.
 
 
•
 
Operating cash flow improved 41% to $349 million in fourth quarter 2001, a $101 million increase.
 
 
•
 
Cash and marketable securities were approximately $1 billion at December 31, 2001.
 
Financial Guidance
 
The following forward-looking statements reflect Amazon.com’s expectations as of January 22, 2002. Results may be materially affected by many factors, such as potential changes in general economic conditions and consumer spending, the emerging nature and rate of growth of the Internet and online commerce, and the various factors detailed below.
 
First Quarter 2002 Expectations
 
 
•
 
Net sales are expected to be between $775 million and $825 million, or grow between 11% and 18%.
 
 
•
 
Pro forma loss from operations is expected to be between break-even and $16 million, or between 0% and 2% of net sales.
 
Full Year 2002 Expectations
 
 
•
 
Net sales are expected to grow by 10% or more.
 
 
•
 
Positive operating cash flow, and possibly free cash flow, is expected.
 
 
•
 
Pro forma income from operations is expected to be $30 million or more.
 
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 economy in general and of the Internet 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 from products as compared with services, risks of inventory management, the degree to which the Company enters into, maintains and develops service relationships with third-party sellers 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, seasonality, international growth and expansion, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risk of future losses, significant amount of indebtedness, competition, potential fluctuations in operating results, management of potential growth, system interruption, consumer trends, fulfillment center optimization, inventory, limited operating history, government regulation and taxation, fraud and Amazon.com Payments, new business areas, business combinations, and strategic alliances. 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 for the year ended December 31, 2000, including all subsequent filings.
 
The Company intends to continue its practice of not updating forward-looking statements other than in publicly available documents.
 
Pro Forma Results
 
Pro forma results, which generally exclude non-operational, non-cash charges and benefits as well as one-time charges, are provided as a complement to results provided in accordance with accounting principles

2
generally accepted in the United States (known as “GAAP”). A reconciliation of GAAP to pro forma is included in the attached financial statements.
 
Management measures the progress of the business using pro forma operating results, which exclude the following line items on the Company’s statements of operations:
 
 
•
 
Stock-based compensation
 
 
•
 
Amortization of goodwill and other intangibles
 
 
•
 
Restructuring-related and other
 
Pro forma net results exclude, in addition to the line items described above, the following line items on our statements of operations:
 
 
•
 
Other gains (losses), net
 
 
•
 
Equity in losses of equity-method investees, net
 
 
•
 
Cumulative effect of change in accounting principle
 
Conference Call
 
A conference call will be Webcast live at www.amazon.com/ir today at 8:30 a.m. EST/5:30 a.m. PST and will be available through March 31, 2002. This call will contain forward-looking statements and other material information.
 
About Amazon.com
 
Amazon.com opened its virtual doors on the World Wide Web in July 1995 and today offers Earth’s Biggest Selection. 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, computers, kitchen and housewares, books, music, DVDs, videos, camera and photo items, toys, baby and baby registry, software, computer and video games, cell phones and service, tools and hardware, travel services, magazine subscriptions and outdoor living items. Through Amazon Marketplace, zShops and Auctions, any business or individual can sell virtually anything to Amazon.com’s millions of customers, and with Amazon.com Payments, sellers can accept credit card transactions, avoiding the hassles of offline payments. Amazon.com also offers the Amazon Credit Account, the online equivalent of a department store credit card, which provides shoppers the opportunity to buy now and pay later when shopping at Amazon.com.
 
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 300,000 movies and entertainment titles and 1 million cast and crew members dating from the birth of film.
 
CONTACT:
 
Amazon.com Investor Relations
Tim Halladay, 206/266-2171, ir@amazon.com
 
Amazon.com Public Relations
Bill Curry, 206/266-7180

3
 
AMAZON.COM, INC.
 
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
    
Three Months Ended
 December 31,
     
Year Ended
 December 31,
  
    
2001
     
2000
     
2001
     
2000
  
Net sales
   
$
1,115,171
 
   
$
972,360
 
   
$
3,122,433
 
   
$
2,761,983
 
Cost of sales
   
 
841,122
 
   
 
748,060
 
   
 
2,323,875
 
   
 
2,106,206
 
    
    
    
    
 
Gross profit
   
 
274,049
 
   
 
224,300
 
   
 
798,558
 
   
 
655,777
 
Operating expenses:
                            
Fulfillment
   
 
109,019
 
   
 
131,028
 
   
 
374,250
 
   
 
414,509
 
Marketing
   
 
34,450
 
   
 
55,195
 
   
 
138,283
 
   
 
179,980
 
Technology and content
   
 
52,325
 
   
 
69,791
 
   
 
241,165
 
   
 
269,326
 
General and administrative
   
 
19,575
 
   
 
28,232
 
   
 
89,862
 
   
 
108,962
 
Stock-based compensation
   
 
1,937
 
   
 
(1,112
)
   
 
4,637
 
   
 
24,797
 
Amortization of goodwill and other intangibles
   
 
37,537
 
   
 
79,210
 
   
 
181,033
 
   
 
321,772
 
Restructuring-related and other
   
 
4,681
 
   
 
184,052
 
   
 
181,585
 
   
 
200,311
 
    
    
    
    
 
Total operating expenses
   
 
259,524
 
   
 
546,396
 
   
 
1,210,815
 
   
 
1,519,657
 
    
    
    
    
 
Income (loss) from operations
   
 
14,525
 
   
 
(322,096
)
   
 
(412,257
)
   
 
(863,880
)
Interest income
   
 
6,030
 
   
 
10,979
 
   
 
29,103
 
   
 
40,821
 
Interest expense
   
 
(35,290
)
   
 
(36,094
)
   
 
(139,232
)
   
 
(130,921
)
Other income (expense), net
   
 
5,365
 
   
 
(5,365
)
   
 
(1,900
)
   
 
(10,058
)
Other gains (losses), net
   
 
16,312
 
   
 
(155,005
)
   
 
(2,141
)
   
 
(142,639
)
    
    
    
    
 
Net interest expense and other
   
 
(7,583
)
   
 
(185,485
)
   
 
(114,170
)
   
 
(242,797
)
    
    
    
    
 
Income (loss) before equity in losses of equity-method investees
   
 
6,942
 
   
 
(507,581
)
   
 
(526,427
)
   
 
(1,106,677
)
Equity in losses of equity-method investees, net
   
 
(1,855
)
   
 
(37,559
)
   
 
(30,327
)
   
 
(304,596
)
    
    
    
    
 
Income (loss) before change in accounting principle
   
 
5,087
 
   
 
(545,140
)
   
 
(556,754
)
   
 
(1,411,273
)
Cumulative effect of change in accounting principle
   
 
—  
 
   
 
—  
 
   
 
(10,523
)
   
 
—  
 
    
    
    
    
 
Net income (loss)
   
$
5,087
 
   
$
(545,140
)
   
$
(567,277
)
   
$
(1,411,273
)
    
    
    
    
 
Basic and diluted income (loss) per share:
                            
Prior to cumulative effect of change in accounting principle
   
$
0.01
 
   
$
(1.53
)
   
$
(1.53
)
   
$
(4.02
)
Cumulative effect of change in accounting principle
   
 
—  
 
   
 
—  
 
   
 
(0.03
)
   
 
—  
 
    
    
    
    
 
    
$
0.01
 
   
$
(1.53
)
   
$
(1.56
)
   
$
(4.02
)
    
    
    
    
 
Shares used in computation of
                            
Basic income (loss) per share
   
 
371,420
 
   
 
355,681
 
   
 
364,211
 
   
 
350,873
 
    
    
    
    
 
Diluted income (loss) per share
   
 
384,045
 
   
 
355,681
 
   
 
364,211
 
   
 
350,873
 
    
    
    
    
 
 
Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

4
AMAZON.COM, INC.
 
PRO FORMA STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
    
Three Months Ended
  
    
December 31, 2001
     
December 31, 2000
  
    
As Reported (1)
     
Pro Forma Adjustments
     
Pro Forma
     
As Reported (1)
     
Pro Forma Adjustments
     
Pro Forma
  
Net sales
   
$
1,115,171
 
   
$
—  
 
   
$
1,115,171
 
   
$
972,360
 
   
$
—  
 
   
$
972,360
 
Cost of sales
   
 
841,122
 
   
 
—  
 
   
 
841,122
 
   
 
748,060
 
   
 
—  
 
   
 
748,060
 
    
    
    
    
    
    
 
Gross profit
   
 
274,049
 
   
 
—  
 
   
 
274,049
 
   
 
224,300
 
   
 
—  
 
   
 
224,300
 
Operating expenses:
                                          
Fulfillment
   
 
109,019
 
   
 
—  
 
   
 
109,019
 
   
 
131,028
 
   
 
—  
 
   
 
131,028
 
Marketing
   
 
34,450
 
   
 
—  
 
   
 
34,450
 
   
 
55,195
 
   
 
—  
 
   
 
55,195
 
Technology and content
   
 
52,325
 
   
 
—  
 
   
 
52,325
 
   
 
69,791
 
   
 
—  
 
   
 
69,791
 
General and administrative
   
 
19,575
 
   
 
—  
 
   
 
19,575
 
   
 
28,232
 
   
 
—  
 
   
 
28,232
 
Stock-based compensation
   
 
1,937
 
   
 
(1,937
)
   
 
—  
 
   
 
(1,112
)
   
 
1,112
 
   
 
—  
 
Amortization of goodwill and other intangibles
   
 
37,537
 
   
 
(37,537
)
   
 
—  
 
   
 
79,210
 
   
 
(79,210
)
   
 
—  
 
Restructuring-related and other
   
 
4,681
 
   
 
(4,681
)
   
 
—  
 
   
 
184,052
 
   
 
(184,052
)
   
 
—  
 
    
    
    
    
    
    
 
Total operating expenses
   
 
259,524
 
   
 
(44,155
)
   
 
215,369
 
   
 
546,396
 
   
 
(262,150
)
   
 
284,246
 
    
    
    
    
    
    
 
Income (loss) from operations
   
 
14,525
 
   
 
44,155
 
   
 
58,680
 
   
 
(322,096
)
   
 
262,150
 
   
 
(59,946
)
Interest income
   
 
6,030
 
   
 
—  
 
   
 
6,030
 
   
 
10,979
 
   
 
—  
 
   
 
10,979
 
Interest expense
   
 
(35,290
)
   
 
—  
 
   
 
(35,290
)
   
 
(36,094
)
   
 
—  
 
   
 
(36,094
)
Other income (expense), net
   
 
5,365
 
   
 
—  
 
   
 
5,365
 
   
 
(5,365
)
   
 
—  
 
   
 
(5,365
)
Other gains (losses), net
   
 
16,312
 
   
 
(16,312
)
   
 
—  
 
   
 
(155,005
)
   
 
155,005
 
   
 
—  
 
    
    
    
    
    
    
 
Net interest expense and other
   
 
(7,583
)
   
 
(16,312
)
   
 
(23,895
)
   
 
(185,485
)
   
 
155,005
 
   
 
(30,480
)
    
    
    
    
    
    
 
Income (loss) before equity in losses of equity-method investees
   
 
6,942
 
   
 
27,843
 
   
 
34,785
 
   
 
(507,581
)
   
 
417,155
 
   
 
(90,426
)
Equity in losses of equity-method investees, net
   
 
(1,855
)
   
 
1,855
 
   
 
—  
 
   
 
(37,559
)
   
 
37,559
 
   
 
—  
 
    
    
    
    
    
    
 
Net income (loss)
   
$
5,087
 
   
$
29,698
 
   
$
34,785
 
   
$
(545,140
)
   
$
454,714
 
   
$
(90,426
)
    
    
    
    
    
    
 
Net cash provided by operating activities
   
$
349,120
 
          
$
349,120
 
   
$
247,653
 
          
$
247,653
 
    
           
    
           
 
Basic and diluted income (loss) per share
   
$
0.01
 
          
$
0.09
 
   
 
1.53
)
          
 
0.25
)
    
           
    
           
 
Shares used in computation of
                                          
Basic income (loss) per share
   
 
371,420
 
          
 
371,420
 
   
 
355,681
 
          
 
355,681
 
    
           
    
           
 
Diluted income (loss) per share
   
 
384,045
 
          
 
384,045
 
   
 
355,681
 
          
 
355,681
 
    
           
    
           
 
(1)
 
In accordance with accounting principles generally accepted in the United States
 
Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

5
 
AMAZON.COM, INC.
 
PRO FORMA STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
    
Year Ended
  
    
December 31, 2001
    
December 31, 2000
  
    
As
 Reported (1)
     
Pro Forma Adjustments
    
Pro Forma
    
As
 Reported (1)
     
Pro Forma Adjustments
    
Pro Forma
  
Net sales
   
$
3,122,433
 
   
$
—  
 
  
$
3,122,433
 
  
$
2,761,983
 
   
$
—  
 
  
$
2,761,983
 
Cost of sales
   
 
2,323,875
 
   
 
—  
 
  
 
2,323,875
 
  
 
2,106,206
 
   
 
—  
 
  
 
2,106,206
 
    
    
   
   
    
   
 
Gross profit
   
 
798,558
 
   
 
—  
 
  
 
798,558
 
  
 
655,777
 
   
 
—  
 
  
 
655,777
 
Operating expenses:
                                       
Fulfillment
   
 
374,250
 
   
 
—  
 
  
 
374,250
 
  
 
414,509
 
   
 
—  
 
  
 
414,509
 
Marketing
   
 
138,283
 
   
 
—  
 
  
 
138,283
 
  
 
179,980
 
   
 
—  
 
  
 
179,980
 
Technology and content
   
 
241,165
 
   
 
—  
 
  
 
241,165
 
  
 
269,326
 
   
 
—  
 
  
 
269,326
 
General and administrative
   
 
89,862
 
   
 
—  
 
  
 
89,862
 
  
 
108,962
 
   
 
—  
 
  
 
108,962
 
Stock-based compensation
   
 
4,637
 
   
 
(4,637
)
  
 
—  
 
  
 
24,797
 
   
 
(24,797
)
  
 
—  
 
Amortization of goodwill and other intangibles
   
 
181,033
 
   
 
(181,033
)
  
 
—  
 
  
 
321,772
 
   
 
(321,772
)
  
 
—  
 
Restructuring-related and other
   
 
181,585
 
   
 
(181,585
)
  
 
—  
 
  
 
200,311
 
   
 
(200,311
)
  
 
—  
 
    
    
   
   
    
   
 
Total operating expenses
   
 
1,210,815
 
   
 
(367,255
)
  
 
843,560
 
  
 
1,519,657
 
   
 
(546,880
)
  
 
972,777
 
    
    
   
   
    
   
 
Loss from operations
   
 
(412,257
)
   
 
367,255
 
  
 
(45,002
)
  
 
(863,880
)
   
 
546,880
 
  
 
(317,000
)
Interest income
   
 
29,103
 
   
 
—  
 
  
 
29,103
 
  
 
40,821
 
   
 
—  
 
  
 
40,821
 
Interest expense
   
 
(139,232
)
   
 
—  
 
  
 
(139,232
)
  
 
(130,921
)
   
 
—  
 
  
 
(130,921
)
Other expense, net
   
 
(1,900
)
   
 
—  
 
  
 
(1,900
)
  
 
(10,058
)
   
 
—  
 
  
 
(10,058
)
Other gains (losses), net
   
 
(2,141
)
   
 
2,141
 
  
 
—  
 
  
 
(142,639
)
   
 
142,639
 
  
 
—  
 
    
    
   
   
    
   
 
Net interest expense and other
   
 
(114,170
)
   
 
2,141
 
  
 
(112,029
)
  
 
(242,797
)
   
 
142,639
 
  
 
(100,158
)
    
    
   
   
    
   
 
Loss before equity in losses of equity-method investees
   
 
(526,427
)
   
 
369,396
 
  
 
(157,031
)
  
 
(1,106,677
)
   
 
689,519
 
  
 
(417,158
)
Equity in losses of equity-method investees, net
   
 
(30,327
)
   
 
30,327
 
  
 
—  
 
  
 
(304,596
)
   
 
304,596
 
  
 
—  
 
    
    
   
   
    
   
 
Loss before change in accounting principle
   
 
(556,754
)
   
 
399,723
 
  
 
(157,031
)
  
 
(1,411,273
)
   
 
994,115
 
  
 
(417,158
)
Cumulative effect of change in accounting principle
   
 
(10,523
)
   
 
10,523
 
  
 
—  
 
  
 
—  
 
   
 
—  
 
  
 
—  
 
    
    
   
   
    
   
 
Net loss
   
$
(567,277
)
   
$
410,246
 
  
$
(157,031
)
  
$
(1,411,273
)
   
$
994,115
 
  
$
(417,158
)
    
    
   
   
    
   
 
Net cash used in operating activities
   
$
(119,782
)
         
$
(119,782
)
  
$
(130,442
)
         
$
(130,442
)
    
          
   
          
 
Basic and diluted loss per share:
                                       
Prior to cumulative effect of change in accounting principle
   
$
(1.53
)
         
$
(0.43
)
  
$
(4.02
)
         
$
(1.19
)
Cumulative effect of change in accounting principle
   
 
(0.03
)
         
 
—  
 
  
 
—  
 
         
 
—  
 
    
          
   
          
 
    
$
(1.56
)
         
$
(0.43
)
  
$
(4.02
)
         
$
(1.19
)
    
          
   
          
 
Shares used in computation of basic and diluted loss per share
   
 
364,211
 
         
 
364,211
 
  
 
350,873
 
         
 
350,873
 
    
          
   
          
 
(1)
 
In accordance with accounting principles generally accepted in the United States
 
Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

6
 
AMAZON.COM, INC.
 
SEGMENT INFORMATION
(in thousands)
(unaudited)
 
    
Three Months Ended December 31, 2001
  
    
U.S. Retail
                    
    
Books, Music and DVD/Video
    
Electronics, Tools and Kitchen
    
Total
    
Services
    
International
    
Consolidated
  
Net sales
   
$
538,012
 
  
$
216,614
 
  
$
754,626
 
  
$
98,113
 
  
$
262,432
 
  
$
1,115,171
 
Gross profit
   
 
139,812
 
  
 
34,678
 
  
 
174,490
 
  
 
44,531
 
  
 
55,028
 
  
 
274,049
 
Pro forma income (loss) from operations
   
 
63,938
 
  
 
(20,423
)
  
 
43,515
 
  
 
25,715
 
  
 
(10,550
)
  
 
58,680
 
Stock-based compensation
                                 
 
(1,937
)
Amortization of goodwill and other intangibles
                                 
 
(37,537
)
Restructuring-related and other
                                 
 
(4,681
)
Net interest expense and other
                                 
 
(7,583
)
Equity in losses of equity-method investees, net
                                 
 
(1,855
)
                                  
 
Net income (loss)
                                 
$
5,087
 
                                  
 
Segment highlights:
                                     
Y / Y net sales growth
   
 
5
%
  
 
(2
%)
  
 
3
%
  
 
3
%
  
 
81
%
  
 
15
%
Y / Y gross profit growth
   
 
1
%
  
 
55
%
  
 
8
%
  
 
21
%
  
 
110
%
  
 
22
%
Gross margin
   
 
26
%
  
 
16
%
  
 
23
%
  
 
45
%
  
 
21
%
  
 
25
%
Pro forma operating margin
   
 
12
%
  
 
(9
%)
  
 
6
%
  
 
26
%
  
 
(4
%)
  
 
5
%
Net sales mix
   
 
48
%
  
 
19
%
  
 
67
%
  
 
9
%
  
 
24
%
  
 
100
%
                                      
    
Three Months Ended December 31, 2000
  
    
U.S. Retail
                    
    
Books, Music and DVD/Video
    
Electronics, Tools and Kitchen
    
Total
    
Services
    
International
    
Consolidated
  
Net sales
   
$
511,671
 
  
$
220,203
 
  
$
731,874
 
  
$
95,601
 
  
$
144,885
 
  
$
972,360
 
Gross profit
   
 
138,989
 
  
 
22,407
 
  
 
161,396
 
  
 
36,672
 
  
 
26,232
 
  
 
224,300
 
Pro forma income (loss) from operations
   
 
39,122
 
  
 
(72,725
)
  
 
(33,603
)
  
 
17,207
 
  
 
(43,550
)
  
 
(59,946
)
Stock-based compensation
                                 
 
1,112
 
Amortization of goodwill and other intangibles
                                 
 
(79,210
)
Restructuring-related and other
                                 
 
(184,052
)
Net interest expense and other
                                 
 
(185,485
)
Equity in losses of equity-method investees, net
                                 
 
(37,559
)
                                  
 
Net loss
                                 
$
(545,140
)
                                  
 
Segment highlights:
                                     
Y / Y net sales growth
   
 
11
%
  
 
62
%
  
 
23
%
  
 
967
%
  
 
104
%
  
 
44
%
Y / Y gross profit growth
   
 
79
%
  
 
N/A
 
  
 
152
%
  
 
315
%
  
 
77
%
  
 
155
%
Gross margin
   
 
27
%
  
 
10
%
  
 
22
%
  
 
38
%
  
 
18
%
  
 
23
%
Pro forma operating margin
   
 
8
%
  
 
(33
%)
  
 
(5
%)
  
 
18
%
  
 
(30
%)
  
 
(6
%)
Net sales mix
   
 
53
%
  
 
22
%
  
 
75
%
  
 
10
%
  
 
15
%
  
 
100
%

7
    
Year Ended December 31, 2001
  
    
U.S. Retail
                    
    
Books, Music and DVD/Video
    
Electronics, Tools and Kitchen
    
Total
    
Services
    
International
    
Consolidated
  
Net sales
   
$
1,688,752
 
  
$
547,190
 
  
$
2,235,942
 
  
$
225,117
 
  
$
661,374
 
  
$
3,122,433
 
Gross profit
   
 
453,129
 
  
 
78,384
 
  
 
531,513
 
  
 
126,439
 
  
 
140,606
 
  
 
798,558
 
Pro forma income (loss) from operations
   
 
156,753
 
  
 
(140,685
)
  
 
16,068
 
  
 
42,042
 
  
 
(103,112
)
  
 
(45,002
)
Stock-based compensation
                                 
 
(4,637
)
Amortization of goodwill and other intangibles
                                 
 
(181,033
)
Restructuring-related and other
                                 
 
(181,585
)
Net interest expense and other
                                 
 
(114,170
)
Equity in losses of equity-method investees, net
                                 
 
(30,327
)
Cumulative effect of change in accounting principle
                                 
 
(10,523
)
                                  
 
Net loss
                                 
$
(567,277
)
                                  
 
Segment highlights:
                                     
Y / Y net sales growth
   
 
(1
%)
  
 
13
%
  
 
2
%
  
 
13
%
  
 
74
%
  
 
13
%
Y / Y gross profit growth
   
 
9
%
  
 
76
%
  
 
15
%
  
 
9
%
  
 
82
%
  
 
22
%
Gross margin
   
 
27
%
  
 
14
%
  
 
24
%
  
 
56
%
  
 
21
%
  
 
26
%
Pro forma operating margin
   
 
9
%
  
 
(26
%)
  
 
1
%
  
 
19
%
  
 
(16
%)
  
 
(1
%)
Net sales mix
   
 
54
%
  
 
18
%
  
 
72
%
  
 
7
%
  
 
21
%
  
 
100
%
                                      
    
Year Ended December 31, 2000
  
    
U.S. Retail
                    
    
Books, Music and DVD/Video
    
Electronics, Tools and Kitchen
    
Total
    
Services
    
International
    
Consolidated
  
Net sales
   
$
1,698,266
 
  
$
484,151
 
  
$
2,182,417
 
  
$
198,491
 
  
$
381,075
 
  
$
2,761,983
 
Gross profit
   
 
417,452
 
  
 
44,655
 
  
 
462,107
 
  
 
116,234
 
  
 
77,436
 
  
 
655,777
 
Pro forma income (loss) from operations
   
 
71,441
 
  
 
(269,890
)
  
 
(198,449
)
  
 
26,519
 
  
 
(145,070
)
  
 
(317,000
)
Stock-based compensation
                                 
 
(24,797
)
Amortization of goodwill and other intangibles
                                 
 
(321,772
)
Restructuring-related and other
                                 
 
(200,311
)
Net interest expense and other
                                 
 
(242,797
)
Equity in losses of equity-method investees, net
                                 
 
(304,596
)
                                  
 
Net loss
                                 
$
(1,411,273
)
                                  
 
Segment highlights:
                                     
Y / Y net sales growth
   
 
30
%
  
 
221
%
  
 
50
%
  
 
N/A
 
  
 
127
%
  
 
68
%
Y / Y gross profit growth
   
 
59
%
  
 
N/A
 
  
 
90
%
  
 
N/A
 
  
 
118
%
  
 
126
%
Gross margin
   
 
25
%
  
 
9
%
  
 
21
%
  
 
59
%
  
 
20
%
  
 
24
%
Pro forma operating margin
   
 
4
%
  
 
(56
%)
  
 
(9
%)
  
 
13
%
  
 
(38
%)
  
 
(11
%)
Net sales mix
   
 
61
%
  
 
18
%
  
 
79
%
  
 
7
%
  
 
14
%
  
 
100
%
 
Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

8
AMAZON.COM, INC.
 
BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
 
    
December 31, 2001
     
December 31, 2000
  
ASSETS
              
Current assets:
              
Cash and cash equivalents
   
$
540,282
 
   
$
822,435
 
Marketable securities
   
 
456,303
 
   
 
278,087
 
Inventories
   
 
143,722
 
   
 
174,563
 
Prepaid expenses and other current assets
   
 
67,613
 
   
 
86,044
 
    
    
 
Total current assets
   
 
1,207,920
 
   
 
1,361,129
 
Fixed assets, net
   
 
271,751
 
   
 
366,416
 
Goodwill, net
   
 
45,367
 
   
 
158,990
 
Other intangibles, net
   
 
34,382
 
   
 
96,335
 
Investments in equity-method investees
   
 
10,387
 
   
 
52,073
 
Other equity investments
   
 
17,972
 
   
 
40,177
 
Other assets
   
 
49,768
 
   
 
60,049
 
    
    
 
Total assets
   
$
1,637,547
 
   
$
2,135,169
 
    
    
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
              
Current liabilities:
              
Accounts payable
   
$
444,748
 
   
$
485,383
 
Accrued expenses and other current liabilities
   
 
305,064
 
   
 
272,683
 
Unearned revenue
   
 
87,978
 
   
 
131,117
 
Interest payable
   
 
68,632
 
   
 
69,196
 
Current portion of long-term debt and other
   
 
14,992
 
   
 
16,577
 
    
    
 
Total current liabilities
   
 
921,414
 
   
 
974,956
 
Long-term debt and other
   
 
2,156,133
 
   
 
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—373,218 and 357,140, respectively
   
 
3,732
 
   
 
3,571
 
Additional paid-in capital
   
 
1,462,769
 
   
 
1,338,303
 
Deferred stock-based compensation
   
 
(9,853
)
   
 
(13,448
)
Accumulated other comprehensive loss
   
 
(36,070
)
   
 
(2,376
)
Accumulated deficit
   
 
(2,860,578
)
   
 
(2,293,301
)
    
    
 
Total stockholders' deficit
   
 
(1,440,000
)
   
 
(967,251
)
    
    
 
Total liabilities and stockholders' deficit
   
$
1,637,547
 
   
$
2,135,169
 
    
    
 
 
Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

9
AMAZON.COM, INC.
 
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
    
Three Months Ended December 31,
     
Year Ended
 December 31,
  
    
2001
     
2000
     
2001
     
2000
  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
   
$
432,307
 
   
$
647,048
 
   
$
822,435
 
   
$
133,309
 
OPERATING ACTIVITIES:
                            
Net income (loss)
   
 
5,087
 
   
 
(545,140
)
   
 
(567,277
)
   
 
(1,411,273
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
                            
Depreciation of fixed assets and other amortization
   
 
21,047
 
   
 
22,741
 
   
 
84,709
 
   
 
84,460
 
Stock-based compensation
   
 
1,937
 
   
 
(1,112
)
   
 
4,637
 
   
 
24,797
 
Equity in losses of equity-method investees, net
   
 
1,855
 
   
 
37,559
 
   
 
30,327
 
   
 
304,596
 
Amortization of goodwill and other intangibles
   
 
37,537
 
   
 
79,210
 
   
 
181,033
 
   
 
321,772
 
Non-cash restructuring-related and other
   
 
2,883
 
   
 
184,052
 
   
 
73,293
 
   
 
200,311
 
Loss (gain) on sale of marketable securities, net
   
 
(198
)
   
 
3,877
 
   
 
(1,335
)
   
 
(280
)
Other losses (gains), net
   
 
(16,312
)
   
 
155,005
 
   
 
2,141
 
   
 
142,639
 
Non-cash interest expense and other
   
 
6,510
 
   
 
6,450
 
   
 
26,629
 
   
 
24,766
 
Cumulative effect of change in accounting principle
   
 
—  
 
   
 
—  
 
   
 
10,523
 
   
 
—  
 
Changes in operating assets and liabilities:
                            
Inventories
   
 
(13,813
)
   
 
(10,683
)
   
 
30,628
 
   
 
46,083
 
Prepaid expenses and other current assets
   
 
2,641
 
   
 
3,412
 
   
 
20,732
 
   
 
(8,585
)
Accounts payable
   
 
209,546
 
   
 
180,674
 
   
 
(44,438
)
   
 
22,357
 
Accrued expenses and other current liabilities
   
 
65,243
 
   
 
113,374
 
   
 
50,031
 
   
 
93,967
 
Unearned revenue
   
 
38,098
 
   
 
31,727
 
   
 
114,738
 
   
 
97,818
 
Amortization of previously unearned revenue
   
 
(40,408
)
   
 
(42,653
)
   
 
(135,808
)
   
 
(108,211
)
Interest payable
   
 
27,467
 
   
 
29,160
 
   
 
(345
)
   
 
34,341
 
    
    
    
    
 
Net cash provided by (used in) operating activities
   
 
349,120
 
   
 
247,653
 
   
 
(119,782
)
   
 
(130,442
)
INVESTING ACTIVITIES:
                            
Sales and maturities of marketable securities
   
 
67,316
 
   
 
23,811
 
   
 
370,377
 
   
 
545,724
 
Purchases of marketable securities
   
 
(286,214
)
   
 
(88,715
)
   
 
(567,152
)
   
 
(184,455
)
Purchases of fixed assets, including internal-use software and web-site development
   
 
(7,534
)
   
 
(37,331
)
   
 
(50,321
)
   
 
(134,758
)
Investments in equity-method investees and other investments
   
 
(6,198
)
   
 
(691
)
   
 
(6,198
)
   
 
(62,533
)
    
    
    
    
 
Net cash provided by (used in) investing activities
   
 
(232,630
)
   
 
(102,926
)
   
 
(253,294
)
   
 
163,978
 
FINANCING ACTIVITIES:
                            
Proceeds from exercise of stock options and other
   
 
2,047
 
   
 
4,980
 
   
 
16,625
 
   
 
44,697
 
Proceeds from issuance of common stock, net of issuance costs
   
 
—  
 
   
 
—  
 
   
 
99,831
 
   
 
—  
 
Proceeds from long-term debt and other
   
 
—  
 
   
 
—  
 
   
 
10,000
 
   
 
681,499
 
Repayment of long-term debt and other
   
 
(4,440
)
   
 
(3,930
)
   
 
(19,575
)
   
 
(16,927
)
Financing costs
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
(16,122
)
    
    
    
    
 
Net cash provided by (used in) financing activities
   
 
(2,393
)
   
 
1,050
 
   
 
106,881
 
   
 
693,147
 
Effect of exchange-rate changes on cash and cash equivalents
   
 
(6,122
)
   
 
29,610
 
   
 
(15,958
)
   
 
(37,557
)
    
    
    
    
 
Net increase (decrease) in cash and cash equivalents
   
 
107,975
 
   
 
175,387
 
   
 
(282,153
)
   
 
689,126
 
    
    
    
    
 
CASH AND CASH EQUIVALENTS, END OF PERIOD
   
$
540,282
 
   
$
822,435
 
   
$
540,282
 
   
$
822,435
 
    
    
    
    
 
SUPPLEMENTAL CASH FLOW INFORMATION:
                            
Fixed assets acquired under capital leases
   
$
114
 
   
$
113
 
   
$
4,597
 
   
$
4,459
 
Fixed assets acquired under financing agreements
   
 
1,000
 
   
 
—  
 
   
 
1,000
 
   
 
4,844
 
Equity securities received for commercial agreements
   
 
—  
 
   
 
—  
 
   
 
331
 
   
 
106,848
 
Stock issued in connection with business acquisitions and minority investments
   
 
5,000
 
   
 
—  
 
   
 
5,000
 
   
 
32,130
 
Cash paid for interest
   
 
1,194
 
   
 
1,870
 
   
 
112,184
 
   
 
67,252
 
 
Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

10
 
AMAZON.COM, INC.
 
SUPPLEMENTAL FINANCIAL INFORMATION AND BUSINESS METRICS
(unaudited)
(in millions, except per share data)
 
    
Q4
2000
     
Q1
2001
     
Q2
2001
     
Q3
2001
     
Q4 2001
       
Y/Y Growth %
  
Results of Operations
                                            
                                             
Net sales
   
$
972
 
   
$
700
 
   
$
668
 
   
$
639
 
   
$
1,115
 
     
15
%
Net sales—trailing twelve months (TTM)
   
$
2,762
 
   
$
2,888
 
   
$
2,978
 
   
$
2,980
 
   
$
3,122
 
     
13
%
Net sales to customers outside the U.S. —% of net sales
   
 
21
%
   
 
26
%
   
 
28
%
   
 
29
%
   
 
29
%
     
N/A
 
                                             
Gross profit
   
$
224
 
   
$
183
 
   
$
180
 
   
$
162
 
   
$
274
 
     
22
%
Gross margin—% of net sales
   
 
23.1
%
   
 
26.1
%
   
 
26.9
%
   
 
25.4
%
   
 
24.6
%
     
N/A
 
Gross profit—TTM
   
$
656
 
   
$
710
 
   
$
754
 
   
$
749
 
   
$
799
 
     
22
%
Gross margin—TTM % of net sales
   
 
23.7
%
   
 
24.6
%
   
 
25.3
%
   
 
25.1
%
   
 
25.6
%
     
N/A
 
                                             
Fulfillment costs—% of net sales
   
 
13.5
%
   
 
14.0
%
   
 
12.8
%
   
 
12.7
%
   
 
9.8
%
     
N/A
 
Fulfillment costs—% of U.S. Retail and International combined net sales
   
 
14.9
%
   
 
14.9
%
   
 
13.6
%
   
 
13.7
%
   
 
10.7
%
     
N/A
 
                                             
Pro forma operating expenses
   
$
284
 
   
$
231
 
   
$
208
 
   
$
189
 
   
$
215
 
     
(24
%)
Pro forma operating expenses—TTM
   
$
973
 
   
$
977
 
   
$
959
 
   
$
912
 
   
$
844
 
     
(13
%)
                                             
Pro forma operating income (loss)
   
$
(60
)
   
$
(49
)
   
$
(28
)
   
$
(27
)
   
$
59
 
     
N/A
 
Pro forma operating margin—% of net sales
   
 
(6.2
%)
   
 
(6.9
%)
   
 
(4.2
%)
   
 
(4.2
%)
   
 
5.3
%
     
N/A
 
Pro forma operating income (loss)—TTM
   
$
(317
)
   
$
(266
)
   
$
(205
)
   
$
(164
)
   
$
(45
)
     
(86
%)
                                             
GAAP operating income (loss)
   
$
(322
)
   
$
(217
)
   
$
(140
)
   
$
(70
)
   
$
15
 
     
N/A
 
GAAP operating income (loss)—% of net sales
   
 
(33.1
%)
   
 
(30.9
%)
   
 
(20.9
%)
   
 
(11.0
%)
   
 
1.3
%
     
N/A
 
GAAP operating income (loss)—TTM
   
$
(864
)
   
$
(883
)
   
$
(842
)
   
$
(749
)
   
$
(412
)
     
(52
%)
                                             
Pro forma net income (loss)
   
$
(90
)
   
$
(76
)
   
$
(58
)
   
$
(58
)
   
$
35
 
     
N/A
 
Pro forma net income (loss) per share
   
$
(0.25
)
   
$
(0.21
)
   
$
(0.16
)
   
$
(0.16
)
   
$
0.09
 
     
N/A
 
Pro forma net income (loss)—TTM
   
$
(417
)
   
$
(372
)
   
$
(314
)
   
$
(282
)
   
$
(157
)
     
(62
%)
                                             
GAAP net income (loss)
   
$
(545
)
   
$
(234
)
   
$
(168
)
   
$
(170
)
   
$
5
 
     
N/A
 
GAAP net income (loss) per share
   
$
(1.53
)
   
$
(0.66
)
   
$
(0.47
)
   
$
(0.46
)
   
$
0.01
 
     
N/A
 
GAAP net income (loss)—TTM
   
$
(1,411
)
   
$
(1,337
)
   
$
(1,188
)
   
$
(1,118
)
   
$
(567
)
     
(60
%)
                                             
U.S. books, music and DVD/video (US BMVD) segment:
                                            
US BMVD net sales
   
$
512
 
   
$
410
 
   
$
390
 
   
$
351
 
   
$
538
 
     
5
%
US BMVD net sales—TTM
   
$
1,698
 
   
$
1,706
 
   
$
1,711
 
   
$
1,662
 
   
$
1,689
 
     
(1
%)
US BMVD gross profit
   
$
139
 
   
$
109
 
   
$
111
 
   
$
93
 
   
$
140
 
     
1
%
US BMVD pro forma operating margin—% of US BMVD net sales
   
 
8
%
   
 
7
%
   
 
10
%
   
 
7
%
   
 
12
%
     
N/A
 
                                             
U.S. electronics, tools and kitchen (US ETK) segment:
                                            
US ETK net sales
   
$
220
 
   
$
117
 
   
$
111
 
   
$
103
 
   
$
217
 
     
(2
%)
US ETK net sales—TTM
   
$
484
 
   
$
526
 
   
$
545
 
   
$
551
 
   
$
547
 
     
13
%
US ETK gross profit
   
$
22
 
   
$
17
 
   
$
13
 
   
$
13
 
   
$
35
 
     
55
%
US ETK pro forma operating margin—% of US ETK net sales
   
 
(33
%)
   
 
(39
%)
   
 
(37
%)
   
 
(32
%)
   
 
(9
%)
     
N/A
 
                                             
Services segment:
                                            
Services net sales
   
$
96
 
   
$
42
 
   
$
39
 
   
$
46
 
   
$
98
 
     
3
%
Services net sales—TTM
   
$
198
 
   
$
218
 
   
$
229
 
   
$
223
 
   
$
225
 
     
13
%
Services gross profit
   
$
37
 
   
$
28
 
   
$
26
 
   
$
27
 
   
$
45
 
     
21
%
Services pro forma operating margin—% of Services net sales
   
 
18
%
   
 
10
%
   
 
11
%
   
 
17
%
   
 
26
%
     
N/A
 
                                             
International segment:
                                            
International net sales
   
$
145
 
   
$
132
 
   
$
128
 
   
$
138
 
   
$
262
 
     
81
%
International net sales—TTM
   
$
381
 
   
$
438
 
   
$
493
 
   
$
544
 
   
$
661
 
     
74
%
International gross profit
   
$
26
 
   
$
28
 
   
$
29
 
   
$
28
 
   
$
55
 
     
110
%
International pro forma operating margin—% of International
                                            
net sales
   
 
(30
%)
   
 
(26
%)
   
 
(23
%)
   
 
(20
%)
   
 
(4
%)
     
N/A
 
 
Note: The attached “Financial and Operational Highlights” are an integral part of this Supplemental Financial Information and Business Metrics.

11
 
AMAZON.COM, INC.
 
SUPPLEMENTAL FINANCIAL INFORMATION AND BUSINESS METRICS
(unaudited)
(in millions, except, net sales per active customer, marketing cost per new customer account, inventory turnover, accounts payable days, and employee data)
 
    
Q4 2000
     
Q1 2001
     
Q2 2001
     
Q3 2001
     
Q4 2001
     
Y / Y
Growth %
  
Customer Data *
                                          
New customer accounts
   
 
4.1
 
   
 
3.0
 
   
 
2.6
 
   
 
2.9
 
   
 
4.7
 
   
15
%
Active customer accounts—TTM
   
 
19.8
 
   
 
20.5
 
   
 
21.1
 
   
 
23.0
 
   
 
24.7
 
   
25
%
New customer accounts—international
   
 
1.1
 
   
 
1.0
 
   
 
0.9
 
   
 
1.0
 
   
 
1.6
 
   
45
%
Active customer accounts—international—TTM
   
 
4.2
 
   
 
4.9
 
   
 
5.4
 
   
 
6.1
 
   
 
6.9
 
   
64
%
Net sales (excluding catalog sales) per active customer account—TTM
   
$
134
 
   
$
135
 
   
$
136
 
   
$
126
 
   
$
123
 
   
(8
%)
Marketing cost per new customer account
   
$
13
 
   
$
12
 
   
$
14
 
   
$
11
 
   
$
7
 
   
(46
%)
U.S. customers (excluding Marketplace, Auctions and zShops customers) ordering from non-US BMVD stores
   
 
36
%
   
 
19
%
   
 
21
%
   
 
22
%
   
 
37
%
   
N/A
 
                                           
Balance Sheet
                                          
Cash and marketable securities
   
$
1,101
 
   
$
643
 
   
$
609
 
   
$
668
 
   
$
997
 
   
(9
%)
Inventory, net
   
$
175
 
   
$
156
 
   
$
129
 
   
$
131
 
   
$
144
 
   
(18
%)
Inventory—% of net sales
   
 
17
%
   
 
24
%
   
 
21
%
   
 
20
%
   
 
12
%
   
N/A
 
Inventory—% of TTM net sales
   
 
7
%
   
 
6
%
   
 
5
%
   
 
5
%
   
 
5
%
   
N/A
 
Inventory turnover—annualized
   
 
17.7
 
   
 
12.6
 
   
 
13.7
 
   
 
14.7
 
   
 
24.5
 
   
38
%
Inventory turnover—TTM
   
 
11.7
 
   
 
13.0
 
   
 
14.0
 
   
 
14.8
 
   
 
15.8
 
   
35
%
Fixed assets, net
   
$
366
 
   
$
304
 
   
$
292
 
   
$
288
 
   
$
272
 
   
(26
%)
Accounts payable days—ending
   
 
60
 
   
 
45
 
   
 
48
 
   
 
46
 
   
 
49
 
   
(18
%)
                                           
Cash Flows
                                          
Cash generated by (used in) operations
   
$
248
 
   
$
(407
)
   
$
2
 
   
$
(64
)
   
$
349
 
   
41
%
Cash used in operations—TTM
   
$
(130
)
   
$
(217
)
   
$
(161
)
   
$
(221
)
   
$
(120
)
   
(8
%)
Purchases of fixed assets
   
$
(37
)
   
$
(19
)
   
$
(10
)
   
$
(13
)
   
$
(8
)
   
(78
%)
Purchases of fixed assets—TTM
   
$
(135
)
   
$
(128
)
   
$
(109
)
   
$
(80
)
   
$
(50
)
   
(63
%)
Other
                                          
Common shares outstanding
   
 
357
 
   
 
359
 
   
 
362
 
   
 
372
 
   
 
373
 
   
5
%
Options outstanding—% of common shares outstanding
   
 
20
%
   
 
12
%
   
 
12
%
   
 
18
%
   
 
18
%
   
N/A
 
Employees (full-time and part-time)
   
 
9,000
 
   
 
8,600
 
   
 
7,800
 
   
 
7,900
 
   
 
7,800
 
   
(13
%)
*
 
Our customer account and active customer calculation methodology was modified in the third quarter 2001, primarily to include all customers who order new and used products through Amazon Marketplace. Our prior methodology did not capture all such customers. If second quarter 2001 customer metrics were presented under the modified methodology, new customer accounts, active customer accounts, International customer accounts, International active customer accounts, TTM net sales per active customer account, and marketing cost per new customer account would have been 2.7 million, 21.9 million, .8 million, 5.5 million, $131, and $13, respectively. Amounts prior to the 2001 second quarter have not been recalculated under the current methodology.
 
Note: The attached “Financial and Operational Highlights” are an integral part of this Supplemental Financial Information and Business Metrics.

12
AMAZON.COM, INC.
Financial and Operational Highlights
Fourth Quarter Ended December 31, 2001
(unaudited)
 
Results of Operations (all comparisons are with the comparable period of 2000)
 
Net Sales
 
 
•
 
Shipping revenue was approximately $125 million, up from $112 million.
 
 
•
 
The cash portion of Services net sales increased to approximately $93 million, or 95% of net sales, from $75 million, or 78%; non-cash Services revenues decreased to approximately $5 million, or 5%, from $21 million, or 22%.
 
 
•
 
Excluding fourth quarter 2000 online sales of toys and video games, which since September 2000 are now sold at www.amazon.com through our strategic alliance with Toysrus.com and reported in our Services segment, growth rates for our U.S. Electronics, Tools and Kitchen segment would have been 5%.
 
Gross Profit
 
 
•
 
Gross margin, excluding the results of our Services segment, would have been 23%, up from 21%.
 
 
•
 
Costs associated with our service revenues classified as cost of services generally include fulfillment-related costs to ship products on behalf of third-party sellers, costs to provide customer service, credit card fees and other related costs.
 
 
•
 
Shipping gross loss was approximately $11 million, down from $17 million; this includes the International segment’s shipping gross loss of approximately $6 million, up from $2 million. We continue to measure our shipping results relative to their impact on our overall financial results, with the viewpoint that shipping promotions are an effective promotional tool. We will continue offering shipping promotions to our customers, which reduce shipping revenue as a percentage of sales and will negatively affect gross margins on our retail sales.
 
Fulfillment
 
 
•
 
Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service centers, including costs attributable 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 also include amounts paid to third-party cosourcers who assist us in fulfillment and customer service operations.
 
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 12 million stock options at December 31, 2001, which includes approximately 11 million options granted under the exchange offer with an exercise price of $13.375, and approximately 1 million options that were subject to the exchange offer but were not exchanged. Variable accounting treatment will result in unpredictable and potentially significant charges or credits, dependent on fluctuations in quoted prices for our common stock, which we are unable to forecast.
 
Amortization of Goodwill and Other Intangibles
 
 
•
 
The Financial Accounting Standards Board issued SFAS No. 142, “Goodwill and Other Intangible Assets” which requires use of a non-amortization approach to account for purchased goodwill and

13
 
certain intangibles, effective January 1, 2002. We expect the adoption of this accounting standard will result in approximately $25 million of intangible assets being subsumed into goodwill, and will have the impact of substantially reducing our amortization of goodwill and intangibles effective January 1, 2002. Transitional impairments, if any, are not expected to be material; however, impairment reviews may result in future periodic write-downs.
 
Restructuring-Related and Other
 
 
•
 
We continued the implementation of our operational restructuring plan to reduce our operating costs, streamline our organizational structure and consolidate certain of our fulfillment and customer service operations. As a result of this initiative, we recorded restructuring and other charges of approximately $177 million during the first three quarters of 2001, and $5 million in the fourth quarter ended December 31, 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 corporate office locations; closure of our McDonough, Georgia, fulfillment center; seasonal operation of our Seattle fulfillment center (if necessary); closure of our customer service centers in Seattle and The Hague, Netherlands; and ongoing lease obligations for technology infrastructure no longer utilized. Each component of the restructuring plan has been substantially completed.
 
 
•
 
Costs that relate to ongoing operations, including inventory write-downs, are not part of restructuring charges. There have been no significant inventory write-downs resulting from the restructuring, and none are anticipated.
 
 
•
 
Cash payments resulting from the restructuring were $49 million in 2001, $14 million of which was paid in the December quarter. We anticipate the restructuring charges will result in the following net cash outflows:
 
    
Leases (a)
     
Termination Benefits
   
Other
   
Total
    
(in thousands)
Year Ending December 31,
                      
2002
   
$
35,578
     
$
61
   
$
5,159
   
$
40,798
2003
   
 
5,476
     
 
—
   
 
3,031
   
 
8,507
2004
   
 
2,016
     
 
—
   
 
—
   
 
2,016
2005
   
 
1,983
     
 
—
   
 
—
   
 
1,983
2006
   
 
2,068
     
 
—
   
 
—
   
 
2,068
Thereafter
   
 
6,066
     
 
—
   
 
—
   
 
6,066
    
    
  
  
Total estimated cash outflows
   
$
53,187
     
$
61
   
$
8,190
   
$
61,438
    
    
  
  
(a)
 
Net of anticipated sublease income of approximately $68 million.
 
Other Income (Expense), Net
 
 
•
 
Other income (expense) consists primarily of net realized gains and losses on sales of marketable securities, miscellaneous state and foreign taxes and certain foreign-currency-related transaction gains and losses.
 
Other Gains (Losses), Net
 
 
•
 
Other gains, net were $16 million for the three months ended December 31, 2001, primarily consisting of a foreign-currency gain on 6.875% PEACS.
 
 
•
 
Currency gains and losses arising from the remeasurement of the 6.875% PEACS principal from Euros to U.S. dollars are recorded each quarter. We are unable to forecast the gains or losses associated with

14
 
our PEACS that will result from fluctuations in foreign exchange rates in future periods. Absent the foreign-currency gain recorded this quarter, we would have reported a fourth quarter 2001 GAAP net loss.
 
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.
 
Income Taxes
 
 
•
 
At December 31, 2001, we had net operating losses of approximately $2.3 billion related to U.S. federal, state and foreign jurisdictions.
 
Earnings per Share
 
 
•
 
Diluted earnings per share is computed using the weighted average number of common and common stock equivalent shares outstanding during the period; common stock equivalent shares such as options, warrants and convertible securities are excluded from the computation if their effect is antidilutive.
 
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 Euro investments, classified as available for sale, had a balance of 179 million Euros ($158 million, based on the exchange rate as of December 31, 2001).
 
 
•
 
Our marketable securities, at estimated fair value, consist of the following, as of December 31, 2001  (in thousands):
 
Certificates of deposit
   
$
18,159
Commercial paper and short-term obligations
   
 
28,622
Corporate notes and bonds
   
 
37,602
Asset-backed and agency securities
   
 
232,821
Treasury notes and bonds
   
 
125,947
Equity securities
   
 
13,152
    
    
$
456,303
    
 
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, and prior period amounts have been reclassified to conform with the current period presentation.
 
 
•
 
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, DVD and video products and for magazine subscriptions, including commissions earned on sales of similar products, new or used, through Amazon Marketplace. This segment also includes product sales, direct costs and cost allocations associated with stores offering these products through our Syndicated Stores program, such as www.borders.com.

15
 
 
•
 
The U.S. Electronics, Tools and Kitchen segment includes revenues, direct costs and cost allocations associated with www.amazon.com retail sales of electronics, computers, kitchen and housewares, camera and photo items, software, cell phones and service, tools and hardware, outdoor living items, and computer and video games products, sold other than through our Toysrus.com strategic alliance, as well as catalog sales of toys, tools and hardware. This segment also includes commissions earned on sales of similar products, new or used, through Amazon Marketplace. This segment includes commissions and other amounts earned from offerings of these products by third-party sellers under our Merchant@amazon.com Program, including our strategic alliance with Circuit City, and will include stores offering these products, if any, through its Syndicated Stores.
 
 
•
 
The International segment includes all revenues, direct costs and cost allocations associated with the retail sales of our four internationally-focused sites: www.amazon.de, www.amazon.fr, www.amazon.co.jp and www.amazon.co.uk.
 
 
•
 
The Services segment includes revenues, direct costs and cost allocations associated with our business-to-business strategic alliances, including the Merchant Program and certain aspects of the Merchant@amazon.com Program, as well as the strategic alliance with America Online. This segment also includes Amazon Auctions, zShops and Payments, and miscellaneous marketing and promotional agreements.
 
 
•
 
All references to customers mean customer accounts, which are unique e-mail addresses, established either when a customer’s order is shipped or when a customer orders from a third-party seller. Customer accounts include customers of Amazon Marketplace, Auctions and zShops services, and customer accounts under our Merchant@amazon.com and Syndicated Stores programs, but exclude Amazon Payments customers, our catalog customers, and the customers of selected companies with whom we have strategic marketing and promotional relationships.
 
 
•
 
Trailing twelve-month net sales per active customer account figures include all amounts earned through Internet sales, including net sales earned from new or used products sold through Amazon Marketplace, Auctions and zShops services, and products sold through our Merchant@amazon.com and Syndicated Stores programs, but excluding products sold through our catalogs and certain strategic alliances and sales of inventory to Toysrus.com. A customer is considered active upon placing an order.

16