EX-99.1 2 dex991.htm PRESS RELEASE DATED JANUARY 28, 2010 PRESS RELEASE DATED JANUARY 28, 2010

Exhibit 99.1

LOGO

AMAZON.COM ANNOUNCES FOURTH QUARTER SALES UP 42% TO $9.5 BILLION

SEATTLE—(BUSINESS WIRE)—January 28, 2010—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its fourth quarter ended December 31, 2009.

Operating cash flow was $3.29 billion in 2009, compared with $1.70 billion in 2008. Free cash flow increased 114% to $2.92 billion in 2009, compared with $1.36 billion in 2008.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 461 million on December 31, 2009, compared with 446 million a year ago.

Net sales increased 42% to $9.52 billion in the fourth quarter, compared with $6.70 billion in fourth quarter 2008. Excluding the $354 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 37% compared with fourth quarter 2008.

Operating income increased 75% to $476 million in the fourth quarter, compared with $272 million in fourth quarter 2008. Excluding the $31 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, operating income would have grown 63% compared with fourth quarter 2008.

Net income increased 71% to $384 million in the fourth quarter, or $0.85 per diluted share, compared with net income of $225 million, or $0.52 per diluted share, in fourth quarter 2008.

“Millions of people now own Kindles,” said Jeff Bezos, founder and CEO of Amazon.com. “And Kindle owners read, a lot. When we have both editions, we sell 6 Kindle books for every 10 physical books. This is year-to-date and includes only paid books — free Kindle books would make the number even higher. It’s been an exciting 27 months.”

Full Year 2009

Net sales increased 28% to $24.51 billion, or 29% excluding the $182 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the year, compared with $19.17 billion in 2008.

Operating income increased 34% to $1.13 billion, or 39% excluding the $40 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the year, compared with $842 million in 2008. Included in 2009 operating income is the impact of our settlement with Toysrus.com LLC for $51 million. In 2008, operating income included a $53 million non-cash gain recognized on the sale of the Company’s European DVD rental assets.


Net income increased 40% to $902 million in 2009, or $2.04 per diluted share, compared with net income of $645 million, or $1.49 per diluted share, in 2008.

Highlights

 

   

Kindle and Kindle DX are available for immediate shipment to over 100 countries. Additionally, the Kindle for iPhone App is now available from the Apple App Store in more than 60 countries. Customers around the world can now synchronize reading between their Kindle, Kindle DX, personal computer, iPhone, iPod touch and soon, Blackberry, Mac and iPad.

 

   

The U.S. Kindle Store now has more than 410,000 books, including 100 of 112 New York Times Bestsellers, more than 8,000 blogs, and more than 130 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, The New Yorker, Newsweek, and Time.

 

   

The Company announced that authors and publishers around the world can now use the self-service Kindle Digital Text Platform (DTP) to upload and sell books in English, German and French to customers worldwide in the Kindle Store.

 

   

Amazon.com announced a new 70 percent royalty option for Kindle DTP, enabling authors and publishers to earn more royalties. Beginning June 30, authors and publishers who select the new royalty option will receive 70 percent of list price, net of delivery costs.

 

   

The Company introduced Kindle Development Kit, which gives developers access to programming interfaces, tools and documentation to build and upload active content for Kindle.

 

   

North America segment sales, representing the Company’s U.S. and Canadian sites, were $4.96 billion, up 36% from fourth quarter 2008.

 

   

International segment sales, representing the Company’s U.K., German, Japanese, French and Chinese sites, were $4.56 billion, up 49% from fourth quarter 2008. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, International sales grew 37%.

 

   

Worldwide Media sales grew 29% to $4.68 billion. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 23%.

 

   

Worldwide Electronics & Other General Merchandise sales grew 60% to $4.61 billion. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 54%.

 

   

The Company completed its acquisition of Zappos.com on November 1, 2009. Zappos.com contributed approximately $200 million to fourth quarter revenue.

 

   

Amazon Relational Database Service (Amazon RDS), a new web service that makes it easy to set up, operate and scale relational databases in the cloud, was introduced by Amazon Web Services (AWS). Amazon RDS provides cost-efficient and resizable capacity while automating time-consuming database administration tasks, freeing users to focus on their application and their business.

 

   

AWS introduced Spot Instances for Amazon EC2, a new option that allows customers to purchase and consume Amazon EC2 compute resources. With Spot Instances, customers bid on unused Amazon EC2 capacity and run those instances for as long as their bid exceeds the current Spot Price. Spot Instances can enable lower costs and provide significant short-term capacity for customers with flexibility in when their applications can run.

 

   

Both Amazon EC2 and Amazon S3 lowered pricing during the quarter. Amazon EC2 lowered prices up to 15% for all On-demand instance families and sizes, while Amazon S3 introduced new pricing tiers that will reduce storage cost for multi-petabyte customers by more than 15%.


Separately, the Company is announcing that its Board of Directors has authorized the Company to repurchase up to $2 billion of the Company’s common stock. The program allows the Company to opportunistically repurchase its shares from time to time when it believes that doing so would enhance long-term shareholder value. The repurchase authorization does not have a fixed expiration. Purchases may be effected through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions or a combination of the foregoing. This stock repurchase authorization replaces the previous $1 billion stock repurchase authorization, approved by the Board of Directors in 2008.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of January 28, 2010. 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.

First Quarter 2010 Guidance

 

   

Net sales are expected to be between $6.45 billion and $7.00 billion, or to grow between 32% and 43% compared with first quarter 2009.

 

   

Operating income is expected to be between $275 million and $365 million, or to grow between 13% and 50% compared with first quarter 2009. This guidance includes approximately $110 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.

We are prospectively adopting Accounting Standard Update (ASU) No. 2009-13, Revenue Recognition – Multiple Deliverable Revenue Arrangements, as of January 1, 2010. The impact of the adoption of this standard is included in our first quarter 2010 guidance.

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; Electronics & Computers; Home & Garden; Toys, Kids & Baby; Grocery; Apparel, Shoes & Jewelry; Health & Beauty; 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. Kindle and Kindle DX are the revolutionary portable readers that wirelessly download books, magazines, newspapers, blogs and personal documents to a crisp, high-resolution electronic ink display that looks and reads like real paper. Kindle and Kindle DX utilize the same 3G wireless technology as advanced cell phones, so users never need to hunt for a Wi-Fi hotspot. Kindle is the #1 bestselling product across the millions of items sold on Amazon.

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.


AMAZON.COM, INC.

Consolidated Statements of Cash Flows

(in millions)

(unaudited)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2009     2008     2009     2008  

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

   $ 2,514      $ 1,650      $ 2,769      $ 2,539   

OPERATING ACTIVITIES:

        

Net income

     384        225        902        645   

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

     112        77        378        287   

Stock-based compensation

     100        79        341        275   

Other operating expense (income), net

     21        8        103        (24

Losses on sales of marketable securities, net

     (1     —          (4     (2

Other expense (income), net

     6        (17     (15     (34

Deferred income taxes

     (1     41        81        (5

Excess tax charges (benefits) from stock-based compensation

     (52     1        (105     (159

Changes in operating assets and liabilities:

        

Inventories

     (340     (102     (531     (232

Accounts receivable, net and other

     (509     (324     (481     (218

Accounts payable

     2,231        1,336        1,859        812   

Accrued expenses and other

     429        209        300        247   

Additions to unearned revenue

     444        162        1,054        449   

Amortization of previously unearned revenue

     (214     (124     (589     (344

Net cash provided by (used in) operating activities

     2,610        1,571        3,293        1,697   
                                

INVESTING ACTIVITIES:

        

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

     (137     (101     (373     (333

Acquisitions, net of cash acquired, and other

     1        (87     (40     (494

Sales and maturities of marketable securities and other investments

     688        272        1,966        1,305   

Purchases of marketable securities and other investments

     (2,160     (449     (3,890     (1,677

Net cash provided by (used in) investing activities

     (1,608     (365     (2,337     (1,199
                                

FINANCING ACTIVITIES:

        

Excess tax benefits (charges) from stock-based compensation

     52        (1     105        159   

Common stock repurchased

     —          (100     —          (100

Proceeds from long-term debt and other

     25        52        87        98   

Repayments of long-term debt and capital lease obligations

     (128     (15     (472     (355
                                

Net cash provided by (used in) financing activities

     (51     (64     (280     (198

Foreign-currency effect on cash and cash equivalents

     (21     (23     (1     (70
                                

Net increase in cash and cash equivalents

     930        1,119        675        230   
                                

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 3,444      $ 2,769      $ 3,444      $ 2,769   
                                

SUPPLEMENTAL CASH FLOW INFORMATION:

        

Cash paid for interest

   $ 2      $ 3      $ 32      $ 64   

Cash paid for income taxes

     4        25        48        53   

Fixed assets acquired under capital leases and other financing arrangements

     50        44        147        148   

Fixed assets acquired under build-to-suit leases

     55        37        188        72   

Conversion of debt

     —          —          —          605   


AMAZON.COM, INC.

Consolidated Statements of Operations

(in millions, except per share data)

(unaudited)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2009     2008     2009     2008  

Net sales

   $ 9,519      $ 6,704      $ 24,509      $ 19,166   

Cost of sales

     7,543        5,356        18,978        14,896   
                                

Gross profit

     1,976        1,348        5,531        4,270   

Operating expenses (1):

        

Fulfillment

     755        549        2,052        1,658   

Marketing

     274        169        680        482   

Technology and content

     350        278        1,240        1,033   

General and administrative

     100        72        328        279   

Other operating expense (income), net (2)

     21        8        102        (24
                                

Total operating expenses

     1,500        1,076        4,402        3,428   
                                

Income from operations

     476        272        1,129        842   

Interest income

     9        16        37        83   

Interest expense

     (8     (12     (34     (71

Other income (expense), net

     (6     26        29        47   
                                

Total non-operating income

     (5     30        32        59   
                                

Income before income taxes

     471        302        1,161        901   

Provision for income taxes

     (85     (79     (253     (247

Equity-method investment activity, net of tax

     (2     2        (6     (9
                                

Net income

   $ 384      $ 225      $ 902      $ 645   
                                

Basic earnings per share

   $ 0.87      $ 0.52      $ 2.08      $ 1.52   
                                

Diluted earnings per share

   $ 0.85      $ 0.52      $ 2.04      $ 1.49   
                                

Weighted average shares used in computation of earnings per share:

        

Basic

     440        428        433        423   
                                

Diluted

     450        436        442        432   
                                

 

(1)    Includes stock-based compensation as follows:

        

Fulfillment

   $ 23      $ 19      $ 79      $ 61   

Marketing

     6        4        20        13   

Technology and content

     52        42        182        151   

General and administrative

     19        14        60        50   

 

(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.


AMAZON.COM, INC.

Segment Information

(in millions)

(unaudited)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2009     2008     2009     2008  

North America

        

Net sales

   $ 4,956      $ 3,631      $ 12,828      $ 10,228   

Cost of sales

     3,786        2,850        9,538        7,733   
                                

Gross profit

     1,170        781        3,290        2,495   

Direct segment operating expenses (1)

     892        651        2,581        2,050   
                                

Segment operating income

   $ 278      $ 130      $ 709      $ 445   
                                

International

        

Net sales

   $ 4,563      $ 3,073      $ 11,681      $ 8,938   

Cost of sales

     3,757        2,506        9,440        7,163   
                                

Gross profit

     806        567        2,241        1,775   

Direct segment operating expenses (1)

     487        338        1,378        1,127   
                                

Segment operating income

   $ 319      $ 229      $ 863      $ 648   
                                

Consolidated

        

Net sales

   $ 9,519      $ 6,704      $ 24,509      $ 19,166   

Cost of sales

     7,543        5,356        18,978        14,896   
                                

Gross profit

     1,976        1,348        5,531        4,270   

Direct segment operating expenses

     1,379        989        3,959        3,177   
                                

Segment operating income

     597        359        1,572        1,093   

Stock-based compensation

     (100     (79     (341     (275

Other operating income (expense), net (2)

     (21     (8     (102     24   
                                

Income from operations

     476        272        1,129        842   

Total non-operating income (expense), net

     (5     30        32        59   

Provision for income taxes

     (85     (79     (253     (247

Equity-method investment activity, net of tax

     (2     2        (6     (9
                                

Net income

   $ 384      $ 225      $ 902      $ 645   
                                

Segment Highlights:

        

Y/Y net sales growth:

        

North America

     36     18     25     26

International

     49        19        31        33   

Consolidated

     42        18        28        29   

Y/Y gross profit growth:

        

North America

     50     12     32     23

International

     42        20        26        34   

Consolidated

     47        15        30        27   

Y/Y segment operating income growth:

        

North America

     113     (15 %)      60     11

International

     39        31        33        44   

Consolidated

     66        9        44        29   

Net sales mix:

        

North America

     52     54     52     53

International

     48        46        48        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.


AMAZON.COM, INC.

Supplemental Net Sales Information

(in millions)

(unaudited)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2009     2008     2009     2008  

North America

        

Media

   $ 2,099      $ 1,751      $ 5,964      $ 5,350   

Electronics and other general merchandise

     2,662        1,733        6,314        4,430   

Other

     195        147        550        448   
                                

Total North America

   $ 4,956      $ 3,631      $ 12,828      $ 10,228   
                                

International

        

Media

   $ 2,580      $ 1,889      $ 6,810      $ 5,734   

Electronics and other general merchandise

     1,947        1,156        4,768        3,110   

Other

     36        28        103        94   
                                

Total International

   $ 4,563      $ 3,073      $ 11,681      $ 8,938   
                                

Consolidated

        

Media

   $ 4,679      $ 3,640      $ 12,774      $ 11,084   

Electronics and other general merchandise

     4,609        2,889        11,082        7,540   

Other

     231        175        653        542   
                                

Total Consolidated

   $ 9,519      $ 6,704      $ 24,509      $ 19,166   
                                

Y/Y Net Sales Growth:

        

North America:

        

Media

     20     7     11     16

Electronics and other general merchandise

     54        30        43        41   

Other

     33        33        23        38   

Total North America

     36        18        25        26   

International:

        

Media

     37     12     19     24

Electronics and other general merchandise

     68        32        53        50   

Other

     27        40        9        65   

Total International

     49        19        31        33   

Consolidated:

        

Media

     29     9     15     20

Electronics and other general merchandise

     60        31        47        45   

Other

     32        34        20        42   

Total Consolidated

     42        18        28        29   

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

        

International:

        

Media

     26     22     20     22

Electronics and other general merchandise

     56        46        56        49   

Other

     18        58        19        67   

Total International

     37        31        33        31   

Consolidated:

        

Media

     23     15     16     19

Electronics and other general merchandise

     54        36        48        44   

Other

     30        38        22        42   

Total Consolidated

     37        24        29        28   

Consolidated Net Sales Mix:

        

Media

     49     54     52     58

Electronics and other general merchandise

     48        43        45        39   

Other

     3        3        3        3   


AMAZON.COM, INC.

Consolidated Balance Sheets

(in millions, except per share data)

 

     December 31,
2009
    December 31,
2008
 
     (unaudited)        

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 3,444      $ 2,769   

Marketable securities

     2,922        958   

Inventories

     2,171        1,399   

Accounts receivable, net and other

     988        827   

Deferred tax assets

     272        204   
                

Total current assets

     9,797        6,157   

Fixed assets, net

     1,290        854   

Deferred tax assets

     18        145   

Goodwill

     1,234        438   

Other assets

     1,474        720   
                

Total assets

   $ 13,813      $ 8,314   
                

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 5,605      $ 3,594   

Accrued expenses and other

     1,759        1,152   
                

Total current liabilities

     7,364        4,746   

Long-term debt

     109        409   

Other long-term liabilities

     1,083        487   

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 — 461 and 445

    

Outstanding shares — 444 and 428

     5        4   

Treasury stock, at cost

     (600     (600

Additional paid-in capital

     5,736        4,121   

Accumulated other comprehensive income (loss)

     (56     (123

Retained earnings (accumulated deficit)

     172        (730
                

Total stockholders’ equity

     5,257        2,672   
                

Total liabilities and stockholders’ equity

   $ 13,813      $ 8,314   
                


AMAZON.COM, INC.

Supplemental Financial Information and Business Metrics

(in millions, except per share data)

(unaudited)

 

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

Cash Flows and Shares

            

Operating cash flow — trailing twelve months (TTM)

   $ 1,697      $ 1,757      $ 1,878      $ 2,253      $ 3,293      94

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

   $ 333      $ 326      $ 336      $ 337      $ 373      12

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

   $ 1,364      $ 1,431      $ 1,542      $ 1,916      $ 2,920      114

Free cash flow — TTM Y/Y growth

     16     82     89     98     114   N/A   

Invested capital (1)

   $ 3,333      $ 3,501      $ 3,666      $ 3,847      $ 4,449      N/A   

Return on invested capital (2)

     41     41     42     50     66   N/A   

Common shares and stock-based awards outstanding

     446        447        451        451        461      3

Common shares outstanding

     428        429        432        433        444      4

Stock-based awards outstanding

     18        17        19        18        17      (6 %) 

Stock-based awards outstanding — % of common shares outstanding

     4.2     4.0     4.4     4.2     3.8   N/A   

Results of Operations

            

Worldwide (WW) net sales

   $ 6,704      $ 4,889      $ 4,651      $ 5,449      $ 9,519      42

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

     24     25     20     29     37   N/A   

WW net sales — TTM

   $ 19,166      $ 19,921      $ 20,509      $ 21,693      $ 24,509      28

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

     28     27     24     24     29   N/A   

Gross profit

   $ 1,348      $ 1,148      $ 1,133      $ 1,273      $ 1,976      47

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

     20     27     23     29     42   N/A   

Gross margin — % of WW net sales

     20.1     23.5     24.4     23.4     20.8   N/A   

Gross profit — TTM

   $ 4,270      $ 4,462      $ 4,628      $ 4,902      $ 5,531      30

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

     26     26     24     25     31   N/A   

Gross margin — TTM % of WW net sales

     22.3     22.4     22.6     22.6     22.6   N/A   

Operating income (3)

   $ 272      $ 244      $ 159      $ 251      $ 476      75

Operating income — Y/Y growth (decrease), excluding F/X

     10     39     (13 %)      69     63   N/A   

Operating margin — % of WW net sales

     4.1     5.0     3.4     4.6     5.0   N/A   

Operating income — TTM (3) (4)

   $ 842      $ 887      $ 829      $ 925      $ 1,129      34

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

     27     30     13     22     39   N/A   

Operating margin — TTM % of WW net sales

     4.4     4.5     4.0     4.3     4.6   N/A   

Net income (3)

   $ 225      $ 177      $ 142      $ 199      $ 384      71

Net income per diluted share

   $ 0.52      $ 0.41      $ 0.32      $ 0.45      $ 0.85      66

Net income — TTM (3) (4)

   $ 645      $ 679      $ 663      $ 743      $ 902      40

Net income per diluted share — TTM

   $ 1.49      $ 1.56      $ 1.52      $ 1.69      $ 2.04      37

Segments

            

North America Segment:

            

Net sales

   $ 3,631      $ 2,578      $ 2,451      $ 2,843      $ 4,956      36

Net sales — Y/Y growth, excluding F/X

     18     22     13     24     36   N/A   

Net sales — TTM

   $ 10,228      $ 10,681      $ 10,963      $ 11,503      $ 12,828      25

Gross profit

   $ 781      $ 694      $ 672      $ 752      $ 1,170      50

Gross margin — % of North America net sales

     21.5     26.9     27.4     26.5     23.6   N/A   

Gross profit — TTM

   $ 2,495      $ 2,620      $ 2,733      $ 2,899      $ 3,290      32

Gross margin — TTM % of North America net sales

     24.4     24.5     24.9     25.2     25.6   N/A   

Operating income

   $ 130      $ 150      $ 125      $ 156      $ 278      113

Operating margin — % of North America net sales

     3.6     5.8     5.1     5.5     5.6   N/A   

Operating income — TTM

   $ 445      $ 464      $ 494      $ 562      $ 709      60

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

     11     5     8     20     59   N/A   

Operating margin — TTM % of North America net sales

     4.4     4.4     4.5     4.9     5.5   N/A   

International Segment:

            

Net sales

   $ 3,073      $ 2,311      $ 2,200      $ 2,606      $ 4,563      49

Net sales — Y/Y growth, excluding F/X

     31     28     28     35     37   N/A   

Net sales — TTM

   $ 8,938      $ 9,240      $ 9,546      $ 10,190      $ 11,681      31

Net sales — TTM % of WW net sales

     47     46     47     47     48   N/A   

Gross profit

   $ 567      $ 454      $ 461      $ 521      $ 806      42

Gross margin — % of International net sales

     18.5     19.6     20.9     20.0     17.7   N/A   

Gross profit — TTM

   $ 1,775      $ 1,842      $ 1,895      $ 2,003      $ 2,241      26

Gross margin — TTM % of International net sales

     19.9     19.9     19.9     19.7     19.2   N/A   

Operating income

   $ 229      $ 172      $ 179      $ 194      $ 319      39

Operating margin — % of International net sales

     7.4     7.4     8.1     7.4     7.0   N/A   

Operating income — TTM

   $ 648      $ 692      $ 722      $ 773      $ 863      33

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

     42     52     49     49     41   N/A   

Operating margin — TTM % of International net sales

     7.3     7.5     7.6     7.6     7.4   N/A   

Consolidated Segments:

            

Operating expenses

   $ 989      $ 826      $ 829      $ 923      $ 1,379      40

Operating expenses — TTM

   $ 3,177      $ 3,306      $ 3,412      $ 3,567      $ 3,959      25

Operating income

   $ 359      $ 322      $ 304      $ 350      $ 597      66

Operating margin — % of consolidated sales

     5.4     6.6     6.5     6.4     6.3   N/A   

Operating income — TTM

   $ 1,093      $ 1,156      $ 1,216      $ 1,335      $ 1,572      44

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

     28     28     29     35     48   N/A   

Operating margin — TTM % of consolidated net sales

     5.7     5.8     5.9     6.2     6.4   N/A   


AMAZON.COM, INC.

Supplemental Financial Information and Business Metrics

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

(unaudited)

 

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

Supplemental

            

Supplemental North America Segment Net Sales:

            

Media

   $ 1,751      $ 1,305      $ 1,148      $ 1,412      $ 2,099      20

Media — Y/Y growth, excluding F/X

     8     9     0     14     19   N/A   

Media — TTM

   $ 5,350      $ 5,450      $ 5,449      $ 5,616      $ 5,964      11

Electronics and other general merchandise

   $ 1,733      $ 1,172      $ 1,187      $ 1,293      $ 2,662      54

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

     30     42     29     36     54   N/A   

Electronics and other general merchandise — TTM

   $ 4,430      $ 4,776      $ 5,043      $ 5,385      $ 6,314      43

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

     43     45     46     47     49   N/A   

Other

   $ 147      $ 101      $ 116      $ 138      $ 195      33

Other — TTM

   $ 448      $ 455      $ 471      $ 502      $ 550      23

Supplemental International Segment Net Sales:

            

Media

   $ 1,889      $ 1,418      $ 1,294      $ 1,517      $ 2,580      37

Media — Y/Y growth, excluding F/X

     22     17     12     22     26   N/A   

Media — TTM

   $ 5,734      $ 5,814      $ 5,849      $ 6,118      $ 6,810      19

Electronics and other general merchandise

   $ 1,156      $ 874      $ 882      $ 1,064      $ 1,947      68

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

     46     50     60     58     56   N/A   

Electronics and other general merchandise — TTM

   $ 3,110      $ 3,330      $ 3,603      $ 3,977      $ 4,768      53

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

     35     36     38     39     41   N/A   

Other

   $ 28      $ 19      $ 24      $ 25      $ 36      27

Other — TTM

   $ 94      $ 96      $ 94      $ 95      $ 103      9

Supplemental Worldwide Net Sales:

            

Media

   $ 3,640      $ 2,723      $ 2,442      $ 2,929      $ 4,679      29

Media — Y/Y growth, excluding F/X

     15     13     7     18     23   N/A   

Media — TTM

   $ 11,084      $ 11,264      $ 11,298      $ 11,734      $ 12,774      15

Electronics and other general merchandise

   $ 2,889      $ 2,046      $ 2,069      $ 2,357      $ 4,609      60

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

     36     46     41     45     54   N/A   

Electronics and other general merchandise — TTM

   $ 7,540      $ 8,106      $ 8,646      $ 9,362      $ 11,082      47

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

     39     41     42     43     45   N/A   

Other

   $ 175      $ 120      $ 140      $ 163      $ 231      32

Other — TTM

   $ 542      $ 551      $ 565      $ 597      $ 653      20

Balance Sheet

            

Cash and marketable securities (5)

   $ 4,035      $ 3,025      $ 3,504      $ 4,304      $ 6,672      65

Inventory, net — ending

   $ 1,399      $ 1,266      $ 1,325      $ 1,617      $ 2,171      55

Inventory turnover, average — TTM

     12.2        12.5        12.4        12.1        12.2      0

Fixed assets, net

   $ 854      $ 889      $ 981      $ 1,086      $ 1,290      51

Accounts payable — ending

   $ 3,594      $ 2,380      $ 2,508      $ 3,354      $ 5,605      56

Accounts payable days — ending

     62        57        65        72        68      11

Other

            

WW shipping revenue

   $ 266      $ 190      $ 185      $ 208      $ 341      29

WW shipping costs

   $ 508      $ 358      $ 332      $ 388      $ 696      37

WW net shipping costs

   $ 242      $ 168      $ 147      $ 180      $ 355      46

WW net shipping costs — % of WW net sales

     3.6     3.4     3.1     3.3     3.7   N/A   

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

     20,700        20,600        21,000        21,700        24,300      17

 

(1) Average Total Assets minus Current Liabilities (excluding current portion of Long Term Debt) over five quarter ends.
(2) TTM Free Cash Flow divided by Invested Capital.
(3) Q2 2009 includes the impact of our settlement with Toysrus.com LLC for $51 million.
(4) Q2 2008 includes a $53 million non-cash gain recognized on the sale of our European DVD rental assets.
(5) Includes restricted cash, classified within “Other Assets” on our consolidated balance sheet, of: $308 million Q4 2008, $295 million Q1 2009, $292 million Q2 2009, $303 million Q3 2009, and $306 million in Q4 2009.


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 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. Units sold do not include units associated with certain of our acquisitions or Amazon.com gift certificates.

 

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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 represent those costs incurred in operating and staffing our fulfillment and customer service centers, including costs attributable to buying, receiving, inspecting, and warehousing inventories; picking, packaging, and preparing customer orders for shipment; payment processing and related transaction costs, including costs associated with our guarantee for certain seller transactions; and responding to inquiries from customers.

Marketing

 

   

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

 

   

Marketing expenses also consist of public relations expenditures; payroll and related expenses for personnel engaged in marketing, business development, and selling activities; and to a lesser extent, traditional advertising.

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 used internally and supporting Amazon Web Services.

 

   

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    Mary Osako, 206/266-7180
www.amazon.com/ir   

 

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