EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

AMAZON.COM ANNOUNCES THIRD QUARTER SALES UP 28% TO $5.45 BILLION;

NEWEST KINDLE NOW SHIPPING AND LOWERING PRICE TO $259 FROM $279

SEATTLE—(BUSINESS WIRE)—October 22, 2009—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its third quarter ended September 30, 2009.

Operating cash flow was $2.25 billion for the trailing twelve months, compared with $1.27 billion for the trailing twelve months ended September 30, 2008. Free cash flow increased 98% to $1.92 billion for the trailing twelve months, compared with $0.97 billion for the trailing twelve months ended September 30, 2008.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 451 million on September 30, 2009, compared with 448 million a year ago.

Net sales increased 28% to $5.45 billion in the third quarter, compared with $4.26 billion in third quarter 2008. Excluding the $41 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 29% compared with third quarter 2008.

Operating income increased 62% to $251 million in the third quarter, compared with $154 million in third quarter 2008. Excluding the $10 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, operating income would have grown 69% compared with third quarter 2008.

Net income increased 68% to $199 million in the third quarter, or $0.45 per diluted share, compared with net income of $118 million, or $0.27 per diluted share, in third quarter 2008.

“Kindle has become the #1 bestselling item by both unit sales and dollars – not just in our electronics store but across all product categories on Amazon.com. It’s also the most wished for and the most gifted. We are grateful for and energized by this customer response,” said Jeff Bezos, founder and CEO of Amazon.com. “Earlier this week we began shipping the latest generation Kindle. Its 3G wireless works in the U.S. and 100 countries, and we’ve just lowered its price to $259.”

Highlights

 

   

This week we started shipping Kindle with U.S. & International Wireless and lowered its price to $259 from $279. This newest Kindle is available to ship to customers living outside the U.S. Customers in more than 100 countries around the world, and U.S. customers traveling abroad, can take advantage of Kindle’s 3G wireless technology to download a title in 60 seconds or less.

 

   

The U.S. Kindle Store now has more than 360,000 books, including 101 of 112 New York Times Bestsellers, more than 7,000 blogs, and more than 90 top U.S. and International newspapers and magazines, including: The New York Times, The Wall Street Journal, The Times (U.K.), Le Monde, The Economist, Newsweek, Time, and Fortune. Kindle owners can also select from over 60,000 audiobooks from Audible.com and listen to them directly on their Kindle.

 

Page 1 of 12


   

The Company announced “Kindle for PC,” the free application for reading Kindle books on the PC. Kindle for PC features Amazon’s Whispersync technology, which automatically saves and synchronizes customers’ bookmarks and last page read across devices, including the Kindle, Kindle DX, iPhone, iPod touch, and PC.

 

   

North America segment sales, representing the Company’s U.S. and Canadian sites, were $2.84 billion, up 23% from third quarter 2008.

 

   

International segment sales, representing the Company’s U.K., German, Japanese, French and Chinese sites, were $2.61 billion, up 33% from third quarter 2008. Excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, International sales grew 35%.

 

   

Worldwide Media sales grew 17% to $2.93 billion. Excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter sales grew 18%.

 

   

Worldwide Electronics & Other General Merchandise sales grew 44% to $2.36 billion. Excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter sales grew 45%.

 

   

Amazon.com launched “Local Express Delivery,” a new shipping option giving customers same-day delivery on thousands of items in seven major cities: New York, Philadelphia, Boston, Baltimore, Las Vegas, Seattle and Washington D.C. Amazon Prime members pay just $5.99 per item for the service.

 

   

The Company continues to expand and enhance free shipping offers across the world. Amazon.co.uk began offering free shipping on all products in the U.K., eliminating the prior threshold of £5; while Amazon.co.jp now offers free same-day delivery service to Amazon Prime customers in the Kanto and Kansai regions of Japan.

 

   

Items shipped on behalf of sellers who utilized Fulfillment by Amazon (FBA) more than tripled from the prior year. Sellers can still join FBA and take advantage of Amazon’s extended delivery promise for the holidays – customers can order items as late as December 23rd and still get them in time for the holidays.

 

   

Amazon.com expanded its Frustration-Free Packaging program, offering additional items from Fisher-Price, Mattel, Kingston and other leading toy and electronics manufacturers in easy-to-open, environmentally friendly packaging.

 

   

Amazon Web Services (AWS) launched Amazon Virtual Private Cloud (Amazon VPC), a secure and seamless bridge between a company’s existing IT infrastructure and the AWS cloud, enabling enterprises to connect their existing infrastructure to AWS compute resources.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of October 22, 2009. This guidance excludes the impact of Zappos.com, Inc., including approximately $35 million of expenses primarily related to employee compensation costs, amortization of intangibles and merger-related expenses that would be recognized in the fourth quarter 2009 if the transaction closes as planned. 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.

Fourth Quarter 2009 Guidance

 

   

Net sales are expected to be between $8.125 billion and $9.125 billion, or to grow between 21% and 36% compared with fourth quarter 2008.

 

   

Operating income is expected to be between $300 million and $425 million, or to grow between 10% and 56% compared with fourth quarter 2008. This guidance includes approximately $100 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.

 

Page 2 of 12


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 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.

 

Page 3 of 12


AMAZON.COM, INC.

Consolidated Statements of Cash Flows

(in millions)

(unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
    Twelve Months Ended
September 30,
 
     2009     2008     2009     2008     2009     2008  

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

   $ 1,936      $ 1,548      $ 2,769      $ 2,539      $ 1,650      $ 1,366   

OPERATING ACTIVITIES:

            

Net income

     199        118        518        420        743        627   

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

     96        76        266        210        343        273   

Stock-based compensation

     90        70        242        197        320        251   

Other operating expense (income), net

     9        7        80        (32     90        (29

Losses (gains) on sales of marketable securities, net

     (1     1        (3     (2     (3     (2

Other expense (income), net

     (9     (24     (21     (17     (38     (18

Deferred income taxes

     77        (17     84        (47     125        (144

Excess tax charges (benefits) from stock-based compensation

     17        (53     (52     (160     (52     (323

Changes in operating assets and liabilities:

            

Inventories

     (276     (243     (192     (130     (293     (361

Accounts receivable, net and other

     (155     (9     28        106        (296     (131

Accounts payable

     701        362        (372     (524     964        620   

Accrued expenses and other

     (3     101        (131     39        77        437   

Additions to unearned revenue

     197        121        610        286        772        366   

Amortization of previously unearned revenue

     (143     (86     (375     (220     (499     (291
                                                

Net cash provided by (used in) operating activities

     799        424        682        126        2,253        1,275   

INVESTING ACTIVITIES:

            

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

     (103     (102     (236     (231     (337     (305

Acquisitions, net of cash acquired, and other

     (5     (8     (40     (408     (127     (436

Sales and maturities of marketable securities and other investments

     586        582        1,277        1,033        1,550        1,149   

Purchases of marketable securities and other investments

     (780     (478     (1,730     (1,229     (2,179     (1,382
                                                

Net cash provided by (used in) investing activities

     (302     (6     (729     (835     (1,093     (974

FINANCING ACTIVITIES:

            

Excess tax benefits (charges) from stock-based compensation

     (17     53        53        160        52        323   

Common stock repurchased

     —          —          —          —          (100     —     

Proceeds from long-term debt and other

     101        2        97        62        149        91   

Repayments of long-term debt and capital lease obligations

     (20     (295     (379     (355     (394     (380
                                                

Net cash provided by (used in) financing activities

     64        (240     (229     (133     (293     34   

Foreign-currency effect on cash and cash equivalents

     17        (76     21        (47     (3     (51
                                                

Net increase (decrease) in cash and cash equivalents

     578        102        (255     (889     864        284   

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 2,514      $ 1,650      $ 2,514      $ 1,650      $ 2,514      $ 1,650   
                                                

SUPPLEMENTAL CASH FLOW INFORMATION:

            

Cash paid for interest

   $ 2      $ 14      $ 30      $ 61      $ 32      $ 62   

Cash paid for income taxes

     10        5        44        28        69        38   

Fixed assets acquired under capital leases and other financing arrangements

     60        37        97        104        141        136   

Fixed assets acquired under build-to-suit leases

     16        19        133        35        170        50   

Conversion of debt

     —          132        —          605        —          605   

 

Page 4 of 12


AMAZON.COM, INC.

Consolidated Statements of Operations

(in millions, except per share data)

(unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2009     2008     2009     2008  

Net sales

   $ 5,449      $ 4,264      $ 14,989      $ 12,463   

Cost of sales

     4,176        3,265        11,435        9,541   
                                

Gross profit

     1,273        999        3,554        2,922   

Operating expenses (1):

        

Fulfillment

     466        393        1,297        1,109   

Marketing

     149        108        406        313   

Technology and content

     315        264        890        755   

General and administrative

     83        73        228        208   

Other operating expense (income), net (2)

     9        7        80        (32
                                

Total operating expenses

     1,022        845        2,901        2,353   
                                

Income from operations

     251        154        653        569   

Interest income

     7        21        28        67   

Interest expense

     (7     (17     (26     (60

Other income, net

     11        24        35        22   
                                

Total non-operating income

     11        28        37        29   
                                

Income before income taxes

     262        182        690        598   

Provision for income taxes

     (60     (59     (169     (167

Equity-method investment activity, net of tax

     (3     (5     (3     (11
                                

Net income

   $ 199      $ 118      $ 518      $ 420   
                                

Basic earnings per share

   $ 0.46      $ 0.28      $ 1.20      $ 1.00   
                                

Diluted earnings per share

   $ 0.45      $ 0.27      $ 1.18      $ 0.97   
                                

Weighted average shares used in computation of earnings per share:

        

Basic

     432        427        431        421   
                                

Diluted

     441        436        439        431   
                                

 

        

(1)    Includes stock-based compensation as follows:

        

Fulfillment

   $ 22      $ 15      $ 57      $ 42   

Marketing

     5        4        14        10   

Technology and content

     48        38        130        109   

General and administrative

     15        13        41        36   

 

(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 in Q2 2009.

 

Page 5 of 12


AMAZON.COM, INC.

Segment Information

(in millions)

(unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2009     2008     2009     2008  

North America

        

Net sales

   $ 2,843      $ 2,302      $ 7,872      $ 6,597   

Cost of sales

     2,091        1,716        5,754        4,883   
                                

Gross profit

     752        586        2,118        1,714   

Direct segment operating expenses (1)

     596        498        1,687        1,400   
                                

Segment operating income

   $ 156      $ 88      $ 431      $ 314   
                                

International

        

Net sales

   $ 2,606      $ 1,962      $ 7,117      $ 5,866   

Cost of sales

     2,085        1,549        5,681        4,658   
                                

Gross profit

     521        413        1,436        1,208   

Direct segment operating expenses (1)

     327        270        892        788   
                                

Segment operating income

   $ 194      $ 143      $ 544      $ 420   
                                

Consolidated

        

Net sales

   $ 5,449      $ 4,264      $ 14,989      $ 12,463   

Cost of sales

     4,176        3,265        11,435        9,541   
                                

Gross profit

     1,273        999        3,554        2,922   

Direct segment operating expenses

     923        768        2,579        2,188   
                                

Segment operating income

     350        231        975        734   

Stock-based compensation

     (90     (70     (242     (197

Other operating income (expense), net (2)

     (9     (7     (80     32   
                                

Income from operations

     251        154        653        569   

Total non-operating income, net

     11        28        37        29   

Provision for income taxes

     (60     (59     (169     (167

Equity-method investment activity, net of tax

     (3     (5     (3     (11
                                

Net income

   $ 199      $ 118      $ 518      $ 420   
                                

Segment Highlights:

        

Y/Y net sales growth:

        

North America

     23     29     19     32

International

     33        33        21        41   

Consolidated

     28        31        20        36   

Y/Y gross profit growth:

        

North America

     28     28     24     29

International

     26        37        19        42   

Consolidated

     27        31        22        34   

Y/Y segment operating income growth:

        

North America

     77     12     37     27

International

     36        46        30        53   

Consolidated

     52        31        33        41   

Net sales mix:

        

North America

     52     54     53     53

International

     48        46        47        47   

 

(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 in Q2 2009.

 

Page 6 of 12


AMAZON.COM, INC.

Supplemental Net Sales Information

(in millions)

(unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2009     2008     2009     2008  

North America

        

Media

   $ 1,412      $ 1,245      $ 3,865      $ 3,599   

Electronics and other general merchandise

     1,293        950        3,652        2,697   

Other

     138        107        355        301   
                                

Total North America

     2,843        2,302        7,872        6,597   

International

        

Media

     1,517        1,249        4,229        3,845   

Electronics and other general merchandise

     1,064        690        2,821        1,955   

Other

     25        23        67        66   
                                

Total International

     2,606        1,962        7,117        5,866   

Consolidated

        

Media

     2,929        2,494        8,094        7,444   

Electronics and other general merchandise

     2,357        1,640        6,473        4,652   

Other

     163        130        422        367   
                                

Total Consolidated

   $ 5,449      $ 4,264      $ 14,989      $ 12,463   
                                

Y/Y Net Sales Growth:

        

North America:

        

Media

     13     15     7     20

Electronics and other general merchandise

     36        51        35        50   

Other

     29        41        18        40   

Total North America

     23        29        19        32   

International:

        

Media

     22     24     10     32

Electronics and other general merchandise

     54        54        44        64   

Other

     4        49        2        78   

Total International

     33        33        21        41   

Consolidated:

        

Media

     17     19     9     26

Electronics and other general merchandise

     44        52        39        55   

Other

     25        42        15        45   

Total Consolidated

     28        31        20        36   

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

        

International:

        

Media

     22     18     17     22

Electronics and other general merchandise

     58        48        56        52   

Other

     14        52        19        71   

Total International

     35        28        30        31   

Consolidated:

        

Media

     18     17     13     21

Electronics and other general merchandise

     45        49        44        51   

Other

     26        43        18        44   

Total Consolidated

     29        28        25        31   

Consolidated Net Sales Mix:

        

Media

     54     59     54     60

Electronics and other general merchandise

     43        38        43        37   

Other

     3        3        3        3   

 

Page 7 of 12


AMAZON.COM, INC.

Consolidated Balance Sheets

(in millions, except per share data)

 

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

ASSETS

      

Current assets:

      

Cash and cash equivalents

   $ 2,514      $ 2,769      $ 1,650   

Marketable securities

     1,487        958        674   

Inventories

     1,617        1,399        1,315   

Accounts receivable, net and other

     671        827        597   

Deferred tax assets

     80        204        194   
                        

Total current assets

     6,369        6,157        4,430   

Fixed assets, net

     1,086        854        731   

Deferred tax assets

     206        145        278   

Goodwill

     457        438        405   

Other assets

     854        720        722   
                        

Total assets

   $ 8,972      $ 8,314      $ 6,566   
                        

LIABILITIES AND STOCKHOLDERS’ EQUITY

      

Current liabilities:

      

Accounts payable

   $ 3,354      $ 3,594      $ 2,242   

Accrued expenses and other

     1,183        1,152        902   
                        

Total current liabilities

     4,537        4,746        3,144   

Long-term debt

     116        409        393   

Other long-term liabilities

     734        487        502   

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 — 449, 445 and 443

      

Outstanding shares — 433, 428 and 429

     4        4        4   

Treasury stock, at cost

     (600     (600     (500

Additional paid-in capital

     4,428        4,121        4,051   

Accumulated other comprehensive income (loss)

     (35     (123     (73

Accumulated deficit

     (212     (730     (955
                        

Total stockholders’ equity

     3,585        2,672        2,527   
                        

Total liabilities and stockholders’ equity

   $ 8,972      $ 8,314      $ 6,566   
                        

 

Page 8 of 12


AMAZON.COM, INC.

Supplemental Financial Information and Business Metrics

(in millions, except per share data)

(unaudited)

 

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

Cash Flows and Shares

            

Operating cash flow — trailing twelve months (TTM)

   $ 1,275      $ 1,697      $ 1,757      $ 1,878      $ 2,253      77

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

   $ 305      $ 333      $ 326      $ 336      $ 337      11

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

   $ 970      $ 1,364      $ 1,431      $ 1,542      $ 1,916      98

Free cash flow — TTM Y/Y growth

     21     16     82     89     98   N/A   

Common shares and stock-based awards outstanding

     448        446        447        451        451      1

Common shares outstanding

     429        428        429        432        433      1

Stock-based awards outstanding

     19        18        17        19        18      (6 )% 

Stock-based awards outstanding — % of common shares outstanding

     4.5     4.2     4.0     4.4     4.2   N/A   

Results of Operations

            

Worldwide (WW) net sales

   $ 4,264      $ 6,704      $ 4,889      $ 4,651      $ 5,449      28

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

     28     24     25     20     29   N/A   

WW net sales — TTM

   $ 18,135      $ 19,166      $ 19,921      $ 20,509      $ 21,693      20

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

     33     28     27     24     24   N/A   

Gross profit

   $ 999      $ 1,348      $ 1,148      $ 1,133      $ 1,273      27

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

     29     20     27     23     29   N/A   

Gross margin — % of WW net sales

     23.4     20.1     23.5     24.4     23.4   N/A   

Gross profit — TTM

   $ 4,092      $ 4,270      $ 4,462      $ 4,628      $ 4,902      20

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

     31     26     26     24     25   N/A   

Gross margin — TTM % of WW net sales

     22.6     22.3     22.4     22.6     22.6   N/A   

Operating income (1)

   $ 154      $ 272      $ 244      $ 159      $ 251      62

Operating margin — % of WW net sales

     3.6     4.1     5.0     3.4     4.6   N/A   

Operating income — TTM (1) (2)

   $ 840      $ 842      $ 887      $ 829      $ 925      10

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

     36     27     30     13     22   N/A   

Operating margin — TTM % of WW net sales

     4.6     4.4     4.5     4.0     4.3   N/A   

Net income (1)

   $ 118      $ 225      $ 177      $ 142      $ 199      68

Net income per diluted share

   $ 0.27      $ 0.52      $ 0.41      $ 0.32      $ 0.45      66

Net income — TTM (1) (2)

   $ 627      $ 645      $ 679      $ 663      $ 743      19

Net income per diluted share — TTM

   $ 1.46      $ 1.49      $ 1.56      $ 1.52      $ 1.69      16

Segments

            

North America Segment:

            

Net sales

   $ 2,302      $ 3,631      $ 2,578      $ 2,451      $ 2,843      23

Net sales — Y/Y growth, excluding F/X

     29     18     22     13     24   N/A   

Net sales — TTM

   $ 9,680      $ 10,228      $ 10,681      $ 10,963      $ 11,503      19

Gross profit

   $ 586      $ 781      $ 694      $ 672      $ 752      28

Gross margin — % of North America net sales

     25.5     21.5     26.9     27.4     26.5   N/A   

Gross profit — TTM

   $ 2,412      $ 2,495      $ 2,620      $ 2,733      $ 2,899      20

Gross margin — TTM % of North America net sales

     24.9     24.4     24.5     24.9     25.2   N/A   

Operating income

   $ 88      $ 130      $ 150      $ 125      $ 156      77

Operating margin — % of North America net sales

     3.8     3.6     5.8     5.1     5.5   N/A   

Operating income — TTM

   $ 468      $ 445      $ 464      $ 494      $ 562      20

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

     26     11     5     8     20   N/A   

Operating margin — TTM % of North America net sales

     4.8     4.4     4.4     4.5     4.9   N/A   

International Segment:

            

Net sales

   $ 1,962      $ 3,073      $ 2,311      $ 2,200      $ 2,606      33

Net sales — Y/Y growth, excluding F/X

     28     31     28     28     35   N/A   

Net sales — TTM

   $ 8,455      $ 8,938      $ 9,240      $ 9,546      $ 10,190      21

Net sales — TTM % of WW net sales

     47     47     46     47     47   N/A   

Gross profit

   $ 413      $ 567      $ 454      $ 461      $ 521      26

Gross margin — % of International net sales

     21.1     18.5     19.6     20.9     20.0   N/A   

Gross profit — TTM

   $ 1,680      $ 1,775      $ 1,842      $ 1,895      $ 2,003      19

Gross margin — TTM % of International net sales

     19.9     19.9     19.9     19.9     19.7   N/A   

Operating income

   $ 143      $ 229      $ 172      $ 179      $ 194      36

Operating margin — % of International net sales

     7.3     7.4     7.4     8.1     7.4   N/A   

Operating income — TTM

   $ 594      $ 648      $ 692      $ 722      $ 773      30

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

     41     42     52     49     49   N/A   

Operating margin — TTM % of International net sales

     7.0     7.3     7.5     7.6     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)

 

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

Segments (continued)

            

Consolidated Segments:

            

Operating expenses

   $ 768      $ 989      $ 826      $ 829      $ 923      20

Operating expenses — TTM

   $ 3,030      $ 3,177      $ 3,306      $ 3,412      $ 3,567      18

Operating income

   $ 231      $ 359      $ 322      $ 304      $ 350      52

Operating margin — % of consolidated sales

     5.4     5.4     6.6     6.5     6.4   N/A   

Operating income — TTM

   $ 1,062      $ 1,093      $ 1,156      $ 1,216      $ 1,335      26

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

     35     28     28     29     35   N/A   

Operating margin — TTM % of consolidated net sales

     5.9     5.7     5.8     5.9     6.2   N/A   

Supplemental North America Segment Net Sales:

            

Media

   $ 1,245      $ 1,751      $ 1,305      $ 1,148      $ 1,412      13

Media — Y/Y growth, excluding F/X

     15     8     9     0     14   N/A   

Media — TTM

   $ 5,235      $ 5,350      $ 5,450      $ 5,449      $ 5,616      7

Electronics and other general merchandise

   $ 950      $ 1,733      $ 1,172      $ 1,187      $ 1,293      36

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

     51     30     42     29     36   N/A   

Electronics and other general merchandise — TTM

   $ 4,033      $ 4,430      $ 4,776      $ 5,043      $ 5,385      34

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

     42     43     45     46     47   N/A   

Other

   $ 107      $ 147      $ 101      $ 116      $ 138      29

Other — TTM

   $ 412      $ 448      $ 455      $ 471      $ 502      22

Supplemental International Segment Net Sales:

            

Media

   $ 1,249      $ 1,889      $ 1,418      $ 1,294      $ 1,517      22

Media — Y/Y growth, excluding F/X

     18     22     17     12     22   N/A   

Media — TTM

   $ 5,537      $ 5,734      $ 5,814      $ 5,849      $ 6,118      10

Electronics and other general merchandise

   $ 690      $ 1,156      $ 874      $ 882      $ 1,064      54

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

     48     46     50     60     58   N/A   

Electronics and other general merchandise — TTM

   $ 2,832      $ 3,110      $ 3,330      $ 3,603      $ 3,977      40

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

     33     35     36     38     39   N/A   

Other

   $ 23      $ 28      $ 19      $ 24      $ 25      4

Other — TTM

   $ 86      $ 94      $ 96      $ 94      $ 95      11

Supplemental Worldwide Net Sales:

            

Media

   $ 2,494      $ 3,640      $ 2,723      $ 2,442      $ 2,929      17

Media — Y/Y growth, excluding F/X

     17     15     13     7     18   N/A   

Media — TTM

   $ 10,772      $ 11,084      $ 11,264      $ 11,298      $ 11,734      9

Electronics and other general merchandise

   $ 1,640      $ 2,889      $ 2,046      $ 2,069      $ 2,357      44

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

     49     36     46     41     45   N/A   

Electronics and other general merchandise — TTM

   $ 6,865      $ 7,540      $ 8,106      $ 8,646      $ 9,362      36

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

     38     39     41     42     43   N/A   

Other

   $ 130      $ 175      $ 120      $ 140      $ 163      25

Other — TTM

   $ 498      $ 542      $ 551      $ 565      $ 597      20

Balance Sheet

            

Cash and marketable securities (3)

   $ 2,572      $ 4,035      $ 3,025      $ 3,504      $ 4,304      67

Inventory, net — ending

   $ 1,315      $ 1,399      $ 1,266      $ 1,325      $ 1,617      23

Inventory turnover, average — TTM

     12.4        12.2        12.5        12.4        12.1      (2 )% 

Fixed assets, net

   $ 731      $ 854      $ 889      $ 981      $ 1,086      49

Accounts payable days — ending

     63        62        57        65        72      14

Other

            

WW shipping revenue

   $ 191      $ 266      $ 190      $ 185      $ 208      8

WW shipping costs

   $ 323      $ 508      $ 358      $ 332      $ 388      20

WW net shipping costs

   $ 132      $ 242      $ 168      $ 147      $ 180      37

WW net shipping costs — % of WW net sales

     3.1     3.6     3.4     3.1     3.3   N/A   

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

     20,500        20,700        20,600        21,000        21,700      6

 

(1) Q2 2009 includes the impact of our settlement with Toysrus.com LLC for $51 million, substantially all of which was expensed in Q2 2009.
(2) Q2 2008 includes a $53 million non-cash gain recognized on the sale of our European DVD rental assets.
(3) Includes restricted cash, classified within “Other Assets” on our consolidated balance sheet, of: $248 million Q3 2008, $308 million Q4 2008, $295 million Q1 2009, $292 million Q2 2009, and $303 million Q3 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.

 

   

Tax benefits relating to excess stock-based compensation deductions are reported 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    Craig Berman, 206/266-7180
www.amazon.com/ir   

 

Page 12 of 12