EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

AMAZON.COM ANNOUNCES SECOND QUARTER FINANCIAL RESULTS;

FREE CASH FLOW EXCEEDS $1.5 BILLION

SEATTLE — (BUSINESS WIRE) — July 23, 2009 — Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its second quarter ended June 30, 2009.

Operating cash flow was $1.88 billion for the trailing twelve months, compared with $1.09 billion for the trailing twelve months ended June 30, 2008. Free cash flow increased 89% to $1.54 billion for the trailing twelve months, compared with $0.82 billion for the trailing twelve months ended June 30, 2008.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 451 million on June 30, 2009, compared with 446 million a year ago.

Net sales increased 14% to $4.65 billion in the second quarter, compared with $4.06 billion in second quarter 2008. Excluding the $227 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 20% compared with second quarter 2008.

Operating income decreased 27% to $159 million in the second quarter, compared with $217 million in second quarter 2008. The unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter on operating income was $30 million. Second quarter 2009 operating income includes the impact of our settlement with Toysrus.com LLC for $51 million, substantially all of which was expensed during the quarter. Additionally, second quarter 2008 operating income included a $53 million non-cash gain recognized on the sale of our European DVD rental assets.

Net income decreased 10% to $142 million in the second quarter, or $0.32 per diluted share, compared with net income of $158 million, or $0.37 per diluted share, in second quarter 2008.

“We’re pleased that customers saved more than $900 million with our free shipping offers, including Amazon Prime, over the last year,” said Jeff Bezos, founder and CEO of Amazon.com. “We’re staying heads down focused on providing customers low prices, vast selection, and fast delivery.”

Highlights

 

   

Amazon.com reduced the price of Kindle, the #1 bestseller in its consumer electronics store, to $299.

 

   

The Kindle Store offers more than 320,000 books, including 104 of 110 New York Times Best Sellers, more than 6,000 blogs and top U.S. and international newspapers and magazines. The Economist, Foreign Affairs, and PC Magazine join top-selling periodicals in the Kindle Store including The New York Times, The Wall Street Journal, The Washington Post, USA Today, The New Yorker, Time, and Newsweek.

 

   

North America segment sales, representing the Company’s U.S. and Canadian sites, were $2.45 billion, up 13% from second quarter 2008.

 

   

International segment sales, representing the Company’s U.K., German, Japanese, French and Chinese sites, were $2.20 billion, up 16% from second quarter 2008. Excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, International sales grew 28%.

 

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Worldwide Media sales grew 1% to $2.44 billion. Excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter sales grew 7%.

 

   

Worldwide Electronics & Other General Merchandise sales grew 35% to $2.07 billion. Excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter sales grew 41%.

 

   

Sellers utilizing Fulfillment by Amazon more than tripled compared to second quarter 2008, and the service has shipped more items year-to-date than in all of 2008.

 

   

Amazon launched its MP3 music service in France, offering more than 8 million DRM-free songs from all four major labels and hundreds of independent labels that can be played on any MP3 player.

 

   

The Company launched a beta version of Amazon Wireless (amazonwireless.com), a new website offering cell phones and service plans, hassle-free rebates and FREE Two-Day Shipping on a broad selection of phones initially from AT&T and Verizon Wireless.

 

   

Amazon Web Services (AWS) launched a public beta of the following new features to make using the Amazon Elastic Compute Cloud (Amazon EC2) even easier for developers: Amazon CloudWatch, a web service for monitoring AWS cloud resources; Auto Scaling for automatically growing and shrinking Amazon EC2 capacity based on demand; and Elastic Load Balancing for distributing incoming traffic across Amazon EC2 compute instances.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of July 23, 2009 and exclude Zappos.com, Inc. financial results. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce and the various factors detailed below.

Third Quarter 2009 Guidance

 

   

Net sales are expected to be between $4.75 billion and $5.25 billion, or to grow between 11% and 23% compared with third quarter 2008.

 

   

Operating income is expected to be between $120 million and $210 million, or between 22% decline and 36% growth compared with third quarter 2008. This guidance includes approximately $95 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.

A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains and develops commercial agreements, acquisitions and strategic transactions, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risks related to new products, services and

 

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technologies, system interruptions, government regulation and taxation, payments and fraud. In addition, the current global economic climate amplifies many of these risks. 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 most recent Annual Report on Form 10-K and subsequent filings.

About Amazon.com

Amazon.com, Inc. (NASDAQ: AMZN), a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth’s Biggest Selection. Amazon.com, Inc. seeks to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. Amazon.com and other sellers offer millions of unique new, refurbished and used items in categories such as Books; Movies, Music & Games; Digital Downloads; Computers & Office; Electronics; Home & Garden; Grocery, Health & Beauty; Toys, Kids & Baby; Apparel, Shoes & Jewelry; Sports & Outdoors; and Tools, Auto & Industrial.

Amazon Web Services provides Amazon’s developer customers with access to in-the-cloud infrastructure services based on Amazon’s own back-end technology platform, which developers can use to enable virtually any type of business. Examples of the services offered by Amazon Web Services are Amazon Elastic Compute Cloud (Amazon EC2), Amazon Simple Storage Service (Amazon S3), Amazon Elastic Block Store, Amazon SimpleDB, Amazon Simple Queue Service (Amazon SQS), Amazon Flexible Payments Service (Amazon FPS), Amazon Mechanical Turk and Amazon CloudFront.

Amazon and its affiliates operate websites, including www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and www.amazon.cn.

As used herein, “Amazon.com,” “we,” “our” and similar terms include Amazon.com, Inc., and its subsidiaries, unless the context indicates otherwise.

 

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AMAZON.COM, INC.

Consolidated Statements of Cash Flows

(in millions)

(unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
    Twelve Months Ended
June 30,
 
     2009     2008     2009     2008     2009     2008  

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

   $ 1,701      $ 1,496      $ 2,769      $ 2,539      $ 1,548      $ 1,004   

OPERATING ACTIVITIES:

            

Net income

     142        158        319        301        663        588   

Adjustments to reconcile net income to net cash from operating activities:

            

Depreciation of fixed assets, including internal-use software and website development, and other amortization

     84        70        171        134        323        259   

Stock-based compensation

     85        73        152        127        300        232   

Other operating expense (income), net

     60        (45     71        (39     86        (32

Gains on sales of marketable securities, net

     —          —          (2     (3     (1     (3

Other expense (income), net

     (14     9        (12     7        (53     10   

Deferred income taxes

     6        (10     7        (29     30        (128

Excess tax benefits from stock-based compensation

     (20     (43     (70     (106     (122     (304

Changes in operating assets and liabilities:

            

Inventories

     (23     (35     84        113        (261     (341

Accounts receivable, net and other

     16        (25     183        115        (149     (197

Accounts payable

     56        116        (1,073     (886     625        562   

Accrued expenses and other

     (6     62        (128     (63     182        394   

Additions to unearned revenue

     207        87        413        165        696        300   

Amortization of previously unearned revenue

     (125     (70     (232     (134     (441     (252
                                                

Net cash provided by (used in) by operating activities

     468        347        (117     (298     1,878        1,088   

INVESTING ACTIVITIES:

            

Purchases of fixed assets, including internal-use software and website development

     (78     (69     (133     (130     (336     (272

Acquisitions, net of cash acquired, and other

     (19     (44     (35     (400     (129     (452

Sales and maturities of marketable securities and other investments

     378        181        692        452        1,545        777   

Purchases of marketable securities and other investments

     (560     (369     (951     (750     (1,877     (987
                                                

Net cash provided by (used in) investing activities

     (279     (301     (427     (828     (797     (934

FINANCING ACTIVITIES:

            

Excess tax benefits from stock-based compensation

     20        43        70        106        122        304   

Common stock repurchased

     —          —          —          —          (100     —     

Proceeds from long-term debt and other

     2        7        6        60        44        139   

Repayments of long-term debt and capital lease obligations

     (25     (36     (368     (60     (663     (96
                                                

Net cash provided by (used in) financing activities

     (3     14        (292     106        (597     347   

Foreign-currency effect on cash and cash equivalents

     49        (8     3        29        (96     43   
                                                

Net increase (decrease) in cash and cash equivalents

     235        52        (833     (991     388        544   

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 1,936      $ 1,548      $ 1,936      $ 1,548      $ 1,936      $ 1,548   
                                                

SUPPLEMENTAL CASH FLOW INFORMATION:

            

Cash paid for interest

   $ 2      $ 1      $ 28      $ 47      $ 43      $ 70   

Cash paid for income taxes

     23        15        34        23        64        37   

Fixed assets acquired under capital leases and other financing arrangements

     19        52        37        67        118        121   

Fixed assets acquired under build-to-suit leases

     61        13        117        17        173        31   

Conversion of debt

     —          473        —          473        132        474   

 

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AMAZON.COM, INC.

Consolidated Statements of Operations

(in millions, except per share data)

(unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2009     2008     2009     2008  

Net sales

   $ 4,651      $ 4,063      $ 9,541      $ 8,198   

Cost of sales

     3,518        3,096        7,260        6,275   
                                

Gross profit

     1,133        967        2,281        1,923   

Operating expenses (1):

        

Fulfillment

     409        361        831        715   

Marketing

     129        102        257        205   

Technology and content

     299        258        575        492   

General and administrative

     77        74        145        135   

Other operating expense (income), net (2)

     60        (45     71        (39
                                

Total operating expenses

     974        750        1,879        1,508   
                                

Income from operations

     159        217        402        415   

Interest income

     8        20        20        46   

Interest expense

     (7     (21     (19     (43

Other income (expense), net

     19        (8     24        (3
                                

Total non-operating income (expense)

     20        (9     25        —     
                                

Income before income taxes

     179        208        427        415   

Provision for income taxes

     (39     (46     (108     (108

Equity-method investment activity, net of tax

     2        (4     —          (6
                                

Net income

   $ 142      $ 158      $ 319      $ 301   
                                

Basic earnings per share

   $ 0.33      $ 0.38      $ 0.74      $ 0.72   
                                

Diluted earnings per share

   $ 0.32      $ 0.37      $ 0.73      $ 0.70   
                                

Weighted average shares used in computation of earnings per share:

        

Basic

     431        420        430        419   
                                

Diluted

     440        430        438        428   
                                

 

        

(1)    Includes stock-based compensation as follows:

        

Fulfillment

   $ 20      $ 16      $ 35      $ 27   

Marketing

     5        4        9        6   

Technology and content

     46        40        82        71   

General and administrative

     14        13        26        23   

 

(2) Q2 2008 includes a $53 million non-cash gain recognized on the sale of our European DVD rental assets. Q2 2009 includes the impact of our settlement with Toysrus.com LLC for $51 million, substantially all of which was expensed during the quarter.

 

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AMAZON.COM, INC.

Segment Information

(in millions)

(unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2009     2008     2009     2008  
North America         

Net sales

   $ 2,451      $ 2,168      $ 5,030      $ 4,294   

Cost of sales

     1,779        1,609        3,664        3,166   
                                

Gross profit

     672        559        1,366        1,128   

Direct segment operating expenses (1)

     547        463        1,091        902   
                                

Segment operating income

   $ 125      $ 96      $ 275      $ 226   
                                

International

        

Net sales

   $ 2,200      $ 1,895      $ 4,511      $ 3,904   

Cost of sales

     1,739        1,487        3,596        3,109   
                                

Gross profit

     461        408        915        795   

Direct segment operating expenses (1)

     282        259        565        518   
                                

Segment operating income

   $ 179      $ 149      $ 350      $ 277   
                                

Consolidated

        

Net sales

   $ 4,651      $ 4,063      $ 9,541      $ 8,198   

Cost of sales

     3,518        3,096        7,260        6,275   
                                

Gross profit

     1,133        967        2,281        1,923   

Direct segment operating expenses

     829        722        1,656        1,420   
                                

Segment operating income

     304        245        625        503   

Stock-based compensation

     (85     (73     (152     (127

Other operating income (expense), net (2)

     (60     45        (71     39   
                                

Income from operations

     159        217        402        415   

Total non-operating income, net

     20        (9     25        —     

Provision for income taxes

     (39     (46     (108     (108

Equity-method investment activity, net of tax

     2        (4     —          (6
                                

Net income

   $ 142      $ 158      $ 319      $ 301   
                                

Segment Highlights:

        

Y/Y net sales growth:

        

North America

     13     35     17     33

International

     16        47        16        46   

Consolidated

     14        41        16        39   

Y/Y gross profit growth:

        

North America

     20     29     21     29

International

     13        52        15        45   

Consolidated

     17        38        19        35   

Y/Y segment operating income growth:

        

North America

     30     17     22     35

International

     20        80        27        57   

Consolidated

     24        49        24        46   

Net sales mix:

        

North America

     53     53     53     52

International

     47        47        47        48   

 

(1) A significant majority of our costs for “Technology and content” are incurred in the United States and most of these costs are allocated to our North America segment.
(2) Q2 2008 includes a $53 million non-cash gain recognized on the sale of our European DVD rental assets. Q2 2009 includes the impact of our settlement with Toysrus.com LLC for $51 million, substantially all of which was expensed during the quarter.

 

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AMAZON.COM, INC.

Supplemental Net Sales Information

(in millions)

(unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2009     2008     2009     2008  

North America

        

Media

   $ 1,148      $ 1,148      $ 2,454      $ 2,354   

Electronics and other general merchandise

     1,187        920        2,359        1,746   

Other

     116        100        217        194   
                                

Total North America

     2,451        2,168        5,030        4,294   
                                

International

        

Media

   $ 1,294      $ 1,258      $ 2,712      $ 2,596   

Electronics and other general merchandise

     882        611        1,756        1,265   

Other

     24        26        43        43   
                                

Total International

     2,200        1,895        4,511        3,904   
                                

Consolidated

        

Media

   $ 2,442      $ 2,406      $ 5,166      $ 4,950   

Electronics and other general merchandise

     2,069        1,531        4,115        3,011   

Other

     140        126        260        237   
                                

Total Consolidated

   $ 4,651      $ 4,063      $ 9,541      $ 8,198   
                                

Y/Y Net Sales Growth:

        

North America:

        

Media

     0     25     4     23

Electronics and other general merchandise

     29        52        35        49   

Other

     16        38        12        39   

Total North America

     13        35        17        33   

International:

        

Media

     3     38     4     36

Electronics and other general merchandise

     45        68        39        69   

Other

     (8     140        1        100   

Total International

     16        47        16        46   

Consolidated:

        

Media

     1     31     4     29

Electronics and other general merchandise

     35        58        37        57   

Other

     11        52        10        47   

Total Consolidated

     14        41        16        39   

Y/Y Net Sales Growth Excluding Effect of Exchange Rates:

        

International:

        

Media

     12     25     15     23

Electronics and other general merchandise

     60        52        55        54   

Other

     10        121        22        85   

Total International

     28        34        28        32   

Consolidated:

        

Media

     7     25     10     23

Electronics and other general merchandise

     41        52        44        51   

Other

     15        49        13        45   

Total Consolidated

     20        35        22        33   

Consolidated Net Sales Mix:

        

Media

     52     59     54     60

Electronics and other general merchandise

     45        38        43        37   

Other

     3        3        3        3   

 

Page 7 of 12


AMAZON.COM, INC.

Consolidated Balance Sheets

(in millions, except per share data)

 

     June 30,
2009
    December 31,
2008
    June 30,
2008
 
     (unaudited)           (unaudited)  

ASSETS

      

Current assets:

      

Cash and cash equivalents

   $ 1,936      $ 2,769      $ 1,548   

Marketable securities

     1,276        958        832   

Inventories

     1,325        1,399        1,107   

Accounts receivable, net and other

     584        827        586   

Deferred tax assets

     183        204        163   
                        

Total current assets

     5,304        6,157        4,236   

Fixed assets, net

     981        854        651   

Deferred tax assets

     118        145        284   

Goodwill

     451        438        400   

Other assets

     821        720        751   
                        

Total assets

   $ 7,675      $ 8,314      $ 6,322   
                        

LIABILITIES AND STOCKHOLDERS’ EQUITY

      

Current liabilities:

      

Accounts payable

   $ 2,508      $ 3,594      $ 1,963   

Accrued expenses and other

     1,128        1,152        1,253   
                        

Total current liabilities

     3,636        4,746        3,216   

Long-term debt

     109        409        433   

Other long-term liabilities

     674        487        443   

Commitments and contingencies

      

Stockholders’ equity:

      

Preferred stock, $0.01 par value:

      

Authorized shares — 500

      

Issued and outstanding shares — none

     —          —          —     

Common stock, $0.01 par value:

      

Authorized shares — 5,000

      

Issued shares — 448, 445 and 440

      

Outstanding shares — 432, 428 and 426

     4        4        4   

Treasury stock, at cost

     (600     (600     (500

Additional paid-in capital

     4,321        4,121        3,794   

Accumulated other comprehensive income (loss)

     (58     (123     6   

Accumulated deficit

     (411     (730     (1,074
                        

Total stockholders’ equity

     3,256        2,672        2,230   
                        

Total liabilities and stockholders’ equity

   $ 7,675      $ 8,314      $ 6,322   
                        

 

Page 8 of 12


AMAZON.COM, INC.

Supplemental Financial Information and Business Metrics

(in millions, except per share data)

(unaudited)

 

     Q2 2008     Q3 2008     Q4 2008     Q1 2009     Q2 2009     Y/Y %
Change
 

Cash Flows and Shares

            

Operating cash flow — trailing twelve months (TTM)

   $ 1,088      $ 1,275      $ 1,697      $ 1,757      $ 1,878      73

Purchases of fixed assets (incl. internal-use software & website development) — TTM

   $ 272      $ 305      $ 333      $ 326      $ 336      23

Free cash flow (operating cash flow less purchases of fixed assets) — TTM

   $ 816      $ 970      $ 1,364      $ 1,431      $ 1,542      89

Free cash flow — TTM Y/Y growth

     16     21     16     82     89   N/A   

Common shares and stock-based awards outstanding

     446        448        446        447        451      1

Common shares outstanding

     426        429        428        429        432      1

Stock-based awards outstanding

     20        19        18        17        19      (4 )% 

Stock-based awards outstanding — % of common shares outstanding

     4.6     4.5     4.2     4.0     4.4   N/A   

Results of Operations

            

Worldwide (WW) net sales

   $ 4,063      $ 4,264      $ 6,704      $ 4,889      $ 4,651      14

WW net sales — Y/Y growth, excluding F/X

     35     28     24     25     20   N/A   

WW net sales — TTM

   $ 17,133      $ 18,135      $ 19,166      $ 19,921      $ 20,509      20

WW net sales — TTM Y/Y growth, excluding F/X

     35     33     28     27     24   N/A   

Gross profit

   $ 967      $ 999      $ 1,348      $ 1,148      $ 1,133      17

Gross profit — Y/Y growth, excluding F/X

     32     29     20     27     23   N/A   

Gross margin — % of WW net sales

     23.8     23.4     20.1     23.5     24.4   N/A   

Gross profit — TTM

   $ 3,855      $ 4,092      $ 4,270      $ 4,462      $ 4,628      20

Gross profit — TTM Y/Y growth, excluding F/X

     32     31     26     26     24   N/A   

Gross margin — TTM % of WW net sales

     22.5     22.6     22.3     22.4     22.6   N/A   

Operating income (1)

   $ 217      $ 154      $ 272      $ 244      $ 159      (27 )% 

Operating margin — % of WW net sales

     5.3     3.6     4.1     5.0     3.4   N/A   

Operating income — TTM (1)

   $ 808      $ 840      $ 842      $ 887      $ 829      3

Operating income — TTM Y/Y growth, excluding F/X

     52     36     27     30     13   N/A   

Operating margin — TTM % of WW net sales

     4.7     4.6     4.4     4.5     4.0   N/A   

Net income (1)

   $ 158      $ 118      $ 225      $ 177      $ 142      (10 )% 

Net income per diluted share

   $ 0.37      $ 0.27      $ 0.52      $ 0.41      $ 0.32      (12 )% 

Net income — TTM (1)

   $ 588      $ 627      $ 645      $ 679      $ 663      13

Net income per diluted share — TTM

   $ 1.38      $ 1.46      $ 1.49      $ 1.56      $ 1.52      10

Segments

            

North America Segment:

            

Net sales

   $ 2,168      $ 2,302      $ 3,631      $ 2,578      $ 2,451      13

Net sales — Y/Y growth, excluding F/X

     35     29     18     22     13   N/A   

Net sales — TTM

   $ 9,166      $ 9,680      $ 10,228      $ 10,681      $ 10,963      20

Gross profit

   $ 559      $ 586      $ 781      $ 694      $ 672      20

Gross margin — % of North America net sales

     25.8     25.5     21.5     26.9     27.4   N/A   

Gross profit — TTM

   $ 2,286      $ 2,412      $ 2,495      $ 2,620      $ 2,733      20

Gross margin — TTM % of North America net sales

     24.9     24.9     24.4     24.5     24.9   N/A   

Operating income

   $ 96      $ 88      $ 130      $ 150      $ 125      30

Operating margin — % of North America net sales

     4.4     3.8     3.6     5.8     5.1   N/A   

Operating income — TTM

   $ 458      $ 468      $ 445      $ 464      $ 494      8

Operating income — TTM Y/Y growth, excluding F/X

     46     26     11     5     8   N/A   

Operating margin — TTM % of North America net sales

     5.0     4.8     4.4     4.4     4.5   N/A   

International Segment:

            

Net sales

   $ 1,895      $ 1,962      $ 3,073      $ 2,311      $ 2,200      16

Net sales — Y/Y growth, excluding F/X

     34     28     31     28     28   N/A   

Net sales — TTM

   $ 7,967      $ 8,455      $ 8,938      $ 9,240      $ 9,546      20

Net sales — TTM % of WW net sales

     47     47     47     46     47   N/A   

Gross profit

   $ 408      $ 413      $ 567      $ 454      $ 461      13

Gross margin — % of International net sales

     21.5     21.1     18.5     19.6     20.9   N/A   

Gross profit — TTM

   $ 1,569      $ 1,680      $ 1,775      $ 1,842      $ 1,895      21

Gross margin — TTM % of International net sales

     19.7     19.9     19.9     19.9     19.9   N/A   

Operating income

   $ 149      $ 143      $ 229      $ 172      $ 179      20

Operating margin — % of International net sales

     7.9     7.3     7.4     7.4     8.1   N/A   

Operating income — TTM

   $ 550      $ 594      $ 648      $ 692      $ 722      31

Operating income — TTM Y/Y growth, excluding F/X

     47     41     42     52     49   N/A   

Operating margin — TTM % of International net sales

     6.9     7.0     7.3     7.5     7.6   N/A   

 

Page 9 of 12


AMAZON.COM, INC.

Supplemental Financial Information and Business Metrics

(in millions, except inventory turnover, accounts payable days and employee data)

(unaudited)

 

     Q2 2008     Q3 2008     Q4 2008     Q1 2009     Q2 2009     Y/Y %
Change
 
Segments (continued)             

Consolidated Segments:

            

Operating expenses

   $ 722      $ 768      $ 989      $ 826      $ 829      15

Operating expenses — TTM

   $ 2,847      $ 3,030      $ 3,177      $ 3,306      $ 3,412      20

Operating income

   $ 245      $ 231      $ 359      $ 322      $ 304      24

Operating margin — % of consolidated sales

     6.0     5.4     5.4     6.6     6.5   N/A   

Operating income — TTM

   $ 1,008      $ 1,062      $ 1,093      $ 1,156      $ 1,216      21

Operating income — TTM Y/Y growth, excluding F/X

     49     35     28     28     29   N/A   

Operating margin — TTM % of consolidated net sales

     5.9     5.9     5.7     5.8     5.9   N/A   

Supplemental North America Segment Net Sales:

            

Media

   $ 1,148      $ 1,245      $ 1,751      $ 1,305      $ 1,148      0

Media — Y/Y growth, excluding F/X

     24     15     8     9     0   N/A   

Media — TTM

   $ 5,071      $ 5,235      $ 5,350      $ 5,450      $ 5,449      7

Electronics and other general merchandise

   $ 920      $ 950      $ 1,733      $ 1,172      $ 1,187      29

Electronics and other general merchandise — Y/Y growth, excluding F/X

     52     51     30     42     29   N/A   

Electronics and other general merchandise — TTM

   $ 3,714      $ 4,033      $ 4,430      $ 4,776      $ 5,043      36

Electronics and other general merchandise — TTM % of North America net sales

     41     42     43     45     46   N/A   

Other

   $ 100      $ 107      $ 147      $ 101      $ 116      16

Other — TTM

   $ 381      $ 412      $ 448      $ 455      $ 471      24

Supplemental International Segment Net Sales:

            

Media

   $ 1,258      $ 1,249      $ 1,889      $ 1,418      $ 1,294      3

Media — Y/Y growth, excluding F/X

     25     18     22     17     12   N/A   

Media — TTM

   $ 5,299      $ 5,537      $ 5,734      $ 5,814      $ 5,849      10

Electronics and other general merchandise

   $ 611      $ 690      $ 1,156      $ 874      $ 882      45

Electronics and other general merchandise — Y/Y growth, excluding F/X

     52     48     46     50     60   N/A   

Electronics and other general merchandise — TTM

   $ 2,590      $ 2,832      $ 3,110      $ 3,330      $ 3,603      39

Electronics and other general merchandise — TTM % of International net sales

     33     33     35     36     38   N/A   

Other

   $ 26      $ 23      $ 28      $ 19      $ 24      (8 )% 

Other — TTM

   $ 78      $ 86      $ 94      $ 96      $ 94      20

Supplemental Worldwide Net Sales:

            

Media

   $ 2,406      $ 2,494      $ 3,640      $ 2,723      $ 2,442      1

Media — Y/Y growth, excluding F/X

     25     17     15     13     7   N/A   

Media — TTM

   $ 10,370      $ 10,772      $ 11,084      $ 11,264      $ 11,298      9

Electronics and other general merchandise

   $ 1,531      $ 1,640      $ 2,889      $ 2,046      $ 2,069      35

Electronics and other general merchandise — Y/Y growth, excluding F/X

     52     49     36     46     41   N/A   

Electronics and other general merchandise — TTM

   $ 6,304      $ 6,865      $ 7,540      $ 8,106      $ 8,646      37

Electronics and other general merchandise — TTM % of WW net sales

     37     38     39     41     42   N/A   

Other

   $ 126      $ 130      $ 175      $ 120      $ 140      11

Other — TTM

   $ 459      $ 498      $ 542      $ 551      $ 565      23
Balance Sheet             

Cash and marketable securities (2)

   $ 2,625      $ 2,572      $ 4,035      $ 3,025      $ 3,504      33

Inventory, net — ending

   $ 1,107      $ 1,315      $ 1,399      $ 1,266      $ 1,325      20

Inventory — average inventory % of TTM net sales

     5.9     6.3     6.4     6.2     6.3   N/A   

Inventory turnover, average — TTM

     13.0        12.4        12.2        12.5        12.4      (5 )% 

Fixed assets, net

   $ 651      $ 731      $ 854      $ 889      $ 981      51

Accounts payable days — ending

     58        63        62        57        65      12
Other             

WW shipping revenue

   $ 186      $ 191      $ 266      $ 190      $ 185      0

WW shipping costs

   $ 314      $ 323      $ 508      $ 358      $ 332      6

WW net shipping costs

   $ 128      $ 132      $ 242      $ 168      $ 147      14

WW net shipping costs — % of WW net sales

     3.2     3.1     3.6     3.4     3.1   N/A   

Employees (full-time and part-time; excludes contractors & temporary personnel)

     18,400        20,500        20,700        20,600        21,000      14

 

(1) Q2 2008 includes a $53 million non-cash gain recognized on the sale of our European DVD rental assets. Q2 2009 includes the impact of our settlement with Toysrus.com LLC for $51 million, substantially all of which was expensed during the quarter.
(2) Includes restricted cash, classified within “Other Assets” on our consolidated balance sheet, of: $245 million Q2 2008, $248 million Q3 2008, $308 million Q4 2008 and $295 million Q1 2009, $292 million Q2 2009.

 

Page 10 of 12


Amazon.com, Inc.

Certain Definitions and Other

Segment Reporting

 

   

We present segment information for North America and International. We measure operating results of our segments using an internal performance measure of direct segment operating expenses that excludes stock-based compensation and other operating expense, each of which is not allocated to segment results. Other centrally incurred operating costs are fully allocated to segment results. Our operating results, particularly for the International segment, are affected by movements in foreign exchange rates.

 

   

The North America segment consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through North America-focused websites such as www.amazon.com and www.amazon.ca. This segment includes export sales from www.amazon.com and www.amazon.ca.

 

   

The International segment consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through internationally focused websites such as www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr and www.amazon.cn. This segment includes export sales from these internationally based sites (including export sales from these sites to customers in the U.S. and Canada), but excludes export sales from www.amazon.com and www.amazon.ca.

 

   

We provide supplemental sales information within each segment for three categories: Media, Electronics and Other General Merchandise, and Other. Media consists of amounts earned from retail sales from all sellers in categories such as books, movies, music, digital downloads, software and video games (including game consoles). Electronics and Other General Merchandise consists of amounts earned from retail sales from all sellers of items in categories not included in Media, such as electronics and computers, devices, home and garden, toys, kids and baby, grocery, apparel, shoes and jewelry, health and beauty, sports and outdoors, tools, and auto and industrial. Other consists of non-retail activities, such as the Amazon Enterprise Solutions program, Amazon Web Services, and miscellaneous marketing and promotional activities, such as our co-branded credit card programs.

Customer Accounts

 

   

References to customers mean customer accounts, which are unique e-mail addresses, established either when a customer’s initial order is shipped or when a customer orders from other sellers on our websites. Customer accounts exclude certain customers, including customers associated with certain of our acquisitions (including www.amazon.cn customers), Amazon Enterprise Solutions program customers, Amazon.com Payments customers, Amazon Web Services customers, and the customers of select companies with whom we have a technology alliance or marketing and promotional relationship. Customers are considered active when they have placed an order during the preceding twelve-month period.

Seller Accounts

 

   

References to sellers means seller accounts, which are established when a seller receives an order from a customer account. Seller accounts exclude Amazon Enterprise Solutions sellers. Sellers are considered active when they have received an order from a customer during the preceding twelve-month period.

Registered Developers

 

   

References to registered developers mean cumulative registered developer accounts, which are established when potential developers enroll with Amazon Web Services and receive a developer access key.

Units

 

   

References to units mean physical and digital units sold (net of returns and cancellations) by us and sellers at Amazon.com domains worldwide — such as www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca and www.amazon.cn, as well as Amazon.com-owned items sold through non-Amazon.com domains, such as books, music and movie items ordered from Amazon.com’s store at www.target.com. Units sold do not include units associated with certain of our acquisitions or Amazon.com gift certificates.

 

Page 11 of 12


Cash Flows and Return on Invested Capital

 

   

Free cash flow is cash flow from operations reduced by purchases of fixed assets, including internal-use software and website development.

 

   

SFAS 123(R) requires the reporting of tax benefits relating to excess stock-based compensation deductions as financing cash flows.

 

   

Return on invested capital is trailing twelve month free cash flow divided by average total assets less current liabilities (excluding current portion of our long-term debt) over five quarter ends.

Net Sales

 

   

Revenue is generally recorded gross for sales of our own inventory and net for sales by other sellers. Amounts paid in advance for subscription services, including amounts received for Amazon Prime and other membership programs, are deferred and recognized as revenue over the subscription term. For our products with multiple elements, where a standalone value for each element cannot be established, we recognize the revenue and related cost over the estimated economic life of the product.

Cost of Sales

 

   

Cost of sales consists of the purchase price of consumer products and content sold by us, inbound and outbound shipping charges, packaging supplies, and costs incurred in operating and staffing our fulfillment and customer service centers on behalf of other businesses.

Fulfillment

 

   

Fulfillment costs relate to variable costs corresponding with sales volume and inventory levels; our mix of product sales; payment processing and related transaction costs, including mix of payment methods and costs from our guarantee for certain seller transactions; and costs from expanding fulfillment capacity.

Marketing

 

   

Marketing consists primarily of online advertising, including through our Associates program, sponsored search, portal advertising, e-mail campaigns, and other initiatives.

Technology and Content

 

   

Technology and content expenses consist principally of payroll and related expenses for employees involved in application development, category expansion, editorial content, buying, merchandising selection and systems support, as well as costs associated with the compute, storage and telecommunications infrastructure.

 

   

A significant majority of our costs for “Technology and content” are incurred in the United States and most of these costs are allocated to our North America segment.

Contacts:

 

Amazon.com Investor Relations   Amazon.com Public Relations
Rob Eldridge, 206/266-2171, ir@amazon.com   Patty Smith, 206/266-7180
www.amazon.com/ir  

 

Page 12 of 12