SEATTLE--April 24, 2001--Company Takes Previously Announced Restructuring Charges Amazon.com, Inc. (Nasdaq:AMZN) today announced financial results for the first quarter ended March 31, 2001.

Net sales were at the top end of the company's guidance, increasing 22 percent to $700 million, compared with $574 million in the first quarter of 2000. Gross profit for the quarter was $183 million, compared with $128 million for the first quarter of 2000, an increase of 43 percent. With another quarter of strong revenue growth, Electronics remained the company's second-biggest U.S. store, while net sales from Amazon.com's four international sites rose to $132 million, an increase of 76 percent from the first quarter of 2000.

Pro forma operating loss was $49 million in the first quarter of 2001, compared with a pro forma operating loss of $99 million in the first quarter of 2000. This marks the fifth sequential quarter in which pro forma absolute dollar operating losses have declined. The company posted a pro forma net loss of $0.21 per share, compared with $0.35 per share in the prior year quarter. A detailed reconciliation of GAAP to pro forma is included with the attached financial statements.

Net loss (GAAP) for the quarter was $234 million, or $0.66 per share. Excluding $114 million, which represents this quarter's portion of previously announced restructuring and other charges, and excluding a net gain of $23 million for certain other items, the net loss for the quarter would have been $143 million, or $0.40 per share. First quarter 2000 net loss was $308 million, or $0.90 per share. Amazon.com ended the quarter with $643 million in cash and marketable securities.

"This was another quarter of significant progress for Amazon.com


  • we are on track to reach our objective of pro forma operating profitability in the coming December quarter," said Warren Jenson, Amazon.com's chief financial officer.

"We're working hard every day to innovate, making Amazon.com even better for customers, and we're grateful for their response. Cumulative customer accounts grew to over 32 million, which includes 6 million international customers," said Jeff Bezos, founder and CEO of Amazon.com. "Again this quarter our customers responded with particularly strong purchase levels in our electronics, tools and kitchen stores and from our international sites."

On January 30, 2001, the company announced a reduction in its corporate staffing and a consolidation of its fulfillment and customer service center networks. The company took restructuring and other charges of $114 million during the first quarter of 2001, and expects to take additional restructuring and other charges of over $50 million during the second quarter of the year.

Highlights of First Quarter Results (all comparisons are with the prior year quarter)


  • Net sales rose 22% to $700 million.

  • Gross profit increased 43% to $183 million.

  • Worldwide, 3 million new customers ordered, including 1 million new International customers.

  • Pro forma loss from operations was $49 million, or 7% of net sales, compared with $99 million, or 17% of net sales.

  • Pro forma net loss was $0.21 per share, compared with $0.35 per share.

  • Net loss (GAAP) was $234 million, or $0.66 per share, down from $308 million, or $0.90 per share, an improvement of more than 24%. Excluding $114 million for this quarter's portion of previously announced restructuring and other charges, and excluding a net gain of $23 million for certain other items, the net loss would have been $143 million, or $0.40 per share.

  • Cash and marketable securities were $643 million at March 31, 2001.

Pro forma information regarding Amazon.com's results from operations is provided as a complement to results provided in accordance with accounting principles generally accepted in the United States (GAAP). Pro forma operating loss excludes stock-based compensation costs, amortization of goodwill and other intangibles, and impairment-related and other costs (including restructuring and other charges). Management measures the progress of the business using this pro forma information.

Pro forma net loss excludes stock-based compensation costs, amortization of goodwill and other intangibles, impairment-related and other costs (including restructuring and other charges), non-cash gains and losses, equity in losses of equity-method investees, and the cumulative effect of change in accounting principle. Operational Highlights


  • Amazon.com and Borders Group, Inc., (NYSE:BGP) announced an agreement to re-launch Borders.com as a co-branded Web site powered by Amazon.com's e-commerce platform.

  • Amazon Marketplace gross merchandise sales in March 2001 nearly doubled over December 2000, and over a quarter of a million Amazon.com customers have already made at least one purchase from Amazon Marketplace, a new service that allows customers to buy and sell used and collectible items directly from Amazon.com's product detail pages.

  • Amazon.com launched the Amazon Honor System (www.amazon.com/honor), now with over 1,000 participating Web sites, enabling online visitors to easily "tip" their favorite sites or to pay for access to premium content.

  • Amazon.com's Worldwide Digital Group launched three new initiatives: a Software Downloads store (www.amazon.com/software); a global alliance to offer the Adobe (Nasdaq:ADBE) Acrobat eBook Reader(TM) software in Amazon.com's e-Books store (www.amazon.com/ebooks), which offers nearly 2,000 Adobe Portable Document Format-based eBooks; and a new free music downloads community (www.amazon.com/music-downloads), designed to help fans discover the music of major-label and independent artists through thousands of free MP3 and Liquid Audio downloads and artist uploads.

  • The Trilogy/Fortune Survey on Customer Relations 2001 named Amazon.com the best non-Fortune 500 company overall at managing customer relations. Business Outlook

The following forward-looking statements reflect Amazon.com's expectations as of April 24, 2001. Given the potential changes in general economic conditions and consumer spending, the emerging nature of online retail, and the various other risk factors discussed below, actual results may differ materially. The company intends to continue its practice of not updating forward-looking statements other than in publicly available statements. Second Quarter 2001 Expectations


  • Net sales are expected to be between $650 million and $700 million.

  • Gross margin is expected to be between 23 and 26 percent of net sales.

  • Absolute pro forma operating losses are expected to be flat to slightly improved from the first quarter of 2001.

  • Cash and marketable securities are expected to be approximately $600 million as of June 30, 2001, and approximately $900 million at December 31, 2001. Full Year 2001 Expectations

  • Net sales are expected to increase between 20 and 30 percent over 2000.

  • Pro forma operating losses are expected to be between 3 and 6 percent of net sales for the year, with pro forma operating profitability expected in the fourth quarter.

  • Cash and marketable securities are expected to be approximately $900 million at December 31, 2001.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, among others, the rate of growth of the Internet and online commerce, customer spending patterns, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales derived from products as compared to services, risks of inventory management, the degree to which the company enters into service relationships and other strategic transactions, fluctuations in the value of securities and non-cash payments Amazon.com receives in connection with such transactions, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, Amazon.com's anticipated losses, significant amount of indebtedness, competition, seasonality, potential fluctuations in operating results, management of potential growth, system interruption, consumer trends, fulfillment center optimization, inventory, limited operating history, fraud and Amazon Payments, and new business areas, international expansion, business combinations, strategic alliances and strategic partnerships. More information about factors that potentially could affect Amazon.com's financial results is included in Amazon.com's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2000. Conference Call

A conference call to discuss first quarter 2001 financial results and 2001 business outlook will be Webcast live on Tuesday, April 24, 2001, at 5:00 p.m. EDT/2:00 p.m. PDT. This conference call will be available at www.amazon.com/ir through June 30, 2001, and will contain forward-looking statements and other material information. About Amazon.com

Amazon.com (Nasdaq:AMZN) opened its virtual doors on the World Wide Web in July 1995 and today offers Earth's Biggest Selection, along with online auctions and free electronic greeting cards. Amazon.com seeks to be the world's most customer-centric company, where customers can find and discover anything they might want to buy online. Amazon.com lists millions of unique items in categories such as electronics, kitchen and housewares, books, music, DVDs, videos, camera and photo items, toys, software, computer and video games, tools and hardware, outdoor living and wireless products. Through Amazon.com zShops, any business or individual can sell virtually anything to Amazon.com's over 32 million cumulative customers, and with Amazon Payments, sellers can accept credit card transactions, avoiding the hassles of offline payments.

Amazon.com operates four international Web sites: www.amazon.fr, www.amazon.co.uk, www.amazon.de and www.amazon.co.jp. It also operates the Internet Movie Database (www.imdb.com), the Web's comprehensive and authoritative source of information on more than 250,000 movies and entertainment titles and one million cast and crew members dating from the birth of film in 1891 to 2003.

                           AMAZON.COM, INC.                       Statements of Operations                 (in thousands, except per share data)                              (unaudited)                                            Three Months Ended                                                March 31,                                          ----------------------                                             2001         2000                                          ---------    ---------    Net sales                                 $ 700,356    $ 573,889 Cost of sales                               517,759      445,755                                          ---------    ---------Gross profit                                182,597      128,134Operating expenses:                       Fulfillment                                 98,248       99,463 Marketing                                   36,638       40,648 Technology and content                      70,284       61,244 General and administrative                  26,028       26,045 Stock-based compensation                     2,916       13,652 Amortization of goodwill                  and other intangibles                      50,831       82,955 Impairment-related and other               114,260        2,019                                          ---------    ---------  Total operating expenses                  399,205      326,026                                          ---------    ---------Loss from operations                       (216,608)    (197,892)Interest income                               9,950       10,126Interest expense                            (33,748)     (27,621)Other expense, net                           (3,884)      (4,774)  Non-cash gains and losses, net             33,857         --                                          ---------    ---------  Net interest income (expense)             and other                                  6,175      (22,269)                                          ---------    ---------Loss before equity in losses              of equity-method investees                (210,433)    (220,161)Equity in losses of                       equity-method investees, net               (13,175)     (88,264)                                          ---------    ---------Net loss before change in                 accounting principle                      (223,608)    (308,425)Cumulative effect of change               in accounting principle                    (10,523)        --                                          ---------    ---------Net loss                                  $(234,131)   $(308,425)                                          =========    =========    Basic and diluted loss per share:                         Prior to cumulative effect of             change in accounting principle          $   (0.63)   $   (0.90) Cumulative effect of change               in accounting principle                     (0.03)        --                                          ---------    ---------                                          $   (0.66)   $   (0.90)                                          =========    =========   Shares used in computation                of basic and diluted loss per share        357,424      343,884                                          =========    =========    Note: The attached "Financial and Operational Highlights" are anintegral part of the press release financial statements.                           AMAZON.COM, INC.                  Pro Forma Statements of Operations                 (in thousands, except per share data)                              (unaudited)                                   Three Months Ended March 31, 2001                                  -------------------------------------                                                 Pro Forma                                             As Reported    Adjustments   Pro Forma                                ------------------------------------- Net sales                         $ 700,356         --      $ 700,356 Cost of sales                       517,759         --        517,759                                 -------------------------------------Gross profit                        182,597         --        182,597 Operating expenses: Fulfillment                         98,248         --         98,248  Marketing                           36,638         --         36,638  Technology and content              70,284         --         70,284  General and administrative          26,028         --         26,028  Stock-based compensation             2,916       (2,916)        --    Amortization of goodwill  and other intangibles              50,831      (50,831)        --    Impairment-related and other       114,260     (114,260)        --                                   -------------------------------------  Total operating expenses          399,205     (168,007)     231,198                                 -------------------------------------Loss from operations               (216,608)     168,007      (48,601)Interest income                       9,950         --          9,950 Interest expense                    (33,748)        --        (33,748)Other expense, net                   (3,884)        --         (3,884)Non-cash gains and losses, net       33,857      (33,857)        --                                   -------------------------------------  Net interest expense   and other                          6,175      (33,857)     (27,682)                                -------------------------------------Loss before equity in losses of equity-method investees        (210,433)     134,150      (76,283)Equity in losses of equity-method investees, net       (13,175)      13,175         --   Net loss before change in accounting principle              (223,608)     147,325      (76,283)Cumulative effect of change in accounting principle            (10,523)      10,523         --                                   -------------------------------------Net loss                          $(234,131)   $ 157,848    $ (76,283)                                =====================================Basic and diluted loss per share: Prior to cumulative effect  of change in accounting  principle                         $ (0.63)                $   (0.21) Cumulative effect of change  in accounting principle             (0.03)                    --                                      ---------                 ---------                                     $ (0.66)                $   (0.21)                                  =========                 ========= Shares used in computation of basic and diluted loss per share                          357,424                   357,424                                   =========                 =========                                    Three Months Ended March 31, 2000                                  -------------------------------------                                                 Pro Forma                                             As Reported    Adjustments   Pro Forma                                ------------------------------------- Net sales                         $ 573,889         --      $ 573,889 Cost of sales                       445,755         --        445,755                                 -------------------------------------Gross profit                        128,134         --        128,134 Operating expenses:                                                    Fulfillment                         99,463         --         99,463  Marketing                           40,648         --         40,648  Technology and content              61,244         --         61,244  General and administrative          26,045         --         26,045  Stock-based compensation            13,652      (13,652)        --    Amortization of goodwill                                               and other intangibles              82,955      (82,955)        --    Impairment-related and other         2,019       (2,019)        --                                   -------------------------------------  Total operating expenses          326,026      (98,626)     227,400                                 -------------------------------------Loss from operations               (197,892)      98,626      (99,266)Interest income                      10,126         --         10,126 Interest expense                    (27,621)        --        (27,621)Other expense, net                   (4,774)        --         (4,774)Non-cash gains and losses, net         --           --           --                                   -------------------------------------  Net interest expense                                                   and other                        (22,269)        --        (22,269)                                -------------------------------------Loss before equity in losses                                           of equity-method investees        (220,161)      98,626     (121,535)Equity in losses of                                                    equity-method investees, net       (88,264)      88,264         --                                   -------------------------------------Net loss before change in                                              accounting principle              (308,425)     186,890     (121,535)Cumulative effect of change                                            in accounting principle               --           --           --                                   -------------------------------------Net loss                          $(308,425)   $ 186,890    $(121,535)                                =====================================Basic and diluted loss per share:                                    Prior to cumulative effect                                             of change in accounting                                               principle                       $   (0.90)                $   (0.35) Cumulative effect of change                                            in accounting principle             --                         --                                     ---------                 ---------                                   $   (0.90)                $   (0.35)                                  =========                 ========= Shares used in computation                                             of basic and diluted loss                                             per share                          343,884                   343,884                                   =========                 =========     Note: The attached "Financial and Operational Highlights" are anintegral part of the press release financial statements.                           AMAZON.COM, INC.                          Segment Information                            (in thousands)                              (unaudited)                            Three Months Ended March 31, 2001                   ---------------------------------------------------                           U.S. Retail                   ------------------------                   Books,  Electronics,                   Music     Tools                  and DVD/    and                              Consol-                   Video    Kitchen  Total    Int'l  Services  idated                   ---------------------------------------------------Net sales        $409,586 $116,507 $526,093 $132,105 $42,158 $700,356Gross profit      109,119   17,220  126,339   28,050  28,208  182,597Pro forma income  (loss) from  operations        27,625  (45,833) (18,208) (34,569)  4,176  (48,601)Other non-cash  operating expenses                                          (168,007)Net interest  expense and other                                              6,175Equity in losses  of equity-method  investees, net                                               (13,175)Cumulative effect of  change in accounting  principle                                                    (10,523)                                                           -----------Net loss                                                   $ (234,131)                                                           ===========Segment highlights: Y / Y net sales growth 2%      56%      11%      76%     85%      22% Y / Y gross   profit growth        32%     144%      41%      75%     27%      43% Gross margin          27%      15%      24%      21%     67%      26% Pro forma   operating margin      7%     (39%)     (3%)    (26%)    10%     (7%)                             Three Months Ended March 31, 2000                   ---------------------------------------------------                         U.S. Retail                   ------------------------                   Books,  Electronics,                   Music     Tools                  and DVD/    and                              Consol-                   Video    Kitchen  Total    Int'l  Services  idated                   ---------------------------------------------------Net sales        $401,415  $74,596 $476,011  $75,132 $22,746 $573,889Gross profit       82,855    7,059   89,914   16,036  22,184  128,134Pro forma loss from operations   (2,425) (67,249) (69,674) (27,448) (2,144) (99,266)Other non-cash operating expenses                                           (98,626)Net interest                                                  expense and other                                            (22,269)Equity in losses                                              of equity-method                                             investees, net                                               (88,264)Cumulative effect                                             of change in                                                 accounting  principle                                                       --                                                            --------- Net loss                                                    $(308,425)                                                            =========Segment highlights:Y / Y net  sales growth          50%     N/A       78%     192%     N/A      95%Y / Y gross          profit growth         40%     N/A       51%     211%     N/A      98%Gross margin           21%       9%      19%      21%     98%      22%Pro forma            operating margin      (1%)    (90%)    (15%)    (37%)    (9%)   (17%)    Note: The attached "Financial and Operational Highlights" are anintegral part of the press release financial statements.                                 AMAZON.COM, INC.                                  Balance Sheets                       (in thousands, except per share data)                                    (unaudited)                                           MARCH 31,    DECEMBER 31,                                             2001          2000                                        ------------   -----------ASSETSCurrent assets: Cash and cash equivalents              $   446,944    $   822,435 Marketable securities                      196,029        278,087 Inventories                                155,562        174,563 Prepaid expenses and  other current assets                       57,175         86,044                                        -----------    -----------  Total current assets                      855,710      1,361,129Fixed assets, net                           304,179        366,416Goodwill, net                               123,996        158,990Other intangibles, net                       80,424         96,335Investments in equity-method investees                                   22,539         52,073Other equity investments                     28,503         40,177Other assets                                 54,804         60,049                                        -----------    ----------- Total assets                           $ 1,470,155    $ 2,135,169                                        ===========    ===========LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilities: Accounts payable                       $   257,411    $   485,383 Accrued expenses and other  current liabilities                       217,613        272,683 Unearned revenue                            93,661        131,117 Interest payable                            16,720         69,196 Current portion of long-term  debt and other                             19,305         16,577                                        -----------    -----------  Total current liabilities                 604,710        974,956Long-term debt and other                  2,118,856      2,127,464Commitments and contingenciesStockholders' deficit: Preferred stock, $0.01 par value:  Authorized shares -- 500,000  Issued and outstanding shares -- none        --             -- Common stock, $0.01 par value:  Authorized shares -- 5,000,000  Issued and outstanding shares   -- 358,847 and 357,140   shares at March 31, 2001 and   December 31, 2000, respectively            3,588          3,571 Additional paid-in capital               1,344,083      1,338,303 Deferred stock-based compensation          (10,532)       (13,448) Accumulated other comprehensive loss       (63,118)        (2,376) Accumulated deficit                     (2,527,432)    (2,293,301)                                        -----------    -----------   Total stockholders' deficit           (1,253,411)      (967,251)                                        -----------    -----------     Total liabilities and      stockholders' deficit             $ 1,470,155    $ 2,135,169                                        ===========    ===========Note: The attached "Financial and Operational Highlights" are anintegral part of the press release financial statements.                       AMAZON.COM, INC.                   Statements of Cash Flows                        (in thousands)                          (unaudited)                                                THREE MONTHS ENDED                                                    MARCH 31,                                             -----------------------                                                2001         2000                                             -----------------------CASH AND CASH EQUIVALENTS, BEGINNING  OF PERIOD OPERATING ACTIVITIES:             $ 822,435    $ 133,309Net loss                                      (234,131)    (308,425)Adjustments to reconcile net loss to net cash used in operating activities:  Depreciation of fixed assets                  23,073       18,180  Stock-based compensation                       2,916       13,652  Equity in losses of   equity-method investees, net                 13,175       88,264  Amortization of goodwill   and other intangibles                        50,831       82,955  Non-cash impairment-related   and other costs                              62,004        2,019  Amortization of previously   unearned revenue                            (33,392)     (18,485)  Loss (gain) on sale of   marketable securities                            27       (2,600)  Non-cash gains and losses, net               (33,857)        --  Non-cash interest expense and other            6,572        5,881  Cumulative effect of change   in accounting principle                      10,523         --Changes in operating assets and liabilities:  Inventories                                   19,823       48,389  Prepaid expenses and                 other current assets                         27,334       (3,067)  Accounts payable                            (229,758)    (207,229)  Accrued expenses and                 other current liabilities                   (57,762)     (31,538)  Unearned revenue                              18,005          614  Interest payable                             (52,367)      (8,988)                                              ---------    ---------Net cash used in                 operating activities                         (406,984)    (320,378)INVESTING ACTIVITIES:           Sales and maturities of          marketable securities                          94,366      380,345Purchases of marketable securities             (30,378)     (28,856)Purchases of fixed assets                      (19,437)     (26,601)Investments in equity-method investees and other investments                  --        (47,487)                                             ---------    ---------   Net cash provided by investing activities    44,551      277,401FINANCING ACTIVITIES:Proceeds from exercise of stock options          5,833       21,359Proceeds from long-term debt and other          10,000      679,374Repayment of long-term debt and other           (4,575)      (4,023)Financing costs                                   --        (15,895)                                             ---------    ---------  Net cash provided by   financing activities                         11,258      680,815Effect of exchange rate changes on cash and cash equivalents                  (24,316)     (16,014)                                             ---------    ---------Net increase (decrease) in cash and cash equivalents                    (375,491)     621,824                                             ---------    ---------CASH AND CASH EQUIVALENTS, END OF PERIOD                               $ 446,944    $ 755,133                                             =========    =========SUPPLEMENTAL CASH FLOW INFORMATION:Fixed assets acquired under capital leases                        $   2,298    $   3,502Fixed assets acquired under financing agreements                             --          4,551Equity securities received for commercial agreements                         331       97,839Cash paid for interest                          86,224       35,835Note: The attached "Financial and Operational Highlights" are anintegral part of the press release financial statements.                           AMAZON.COM, INC.        Supplemental Financial Information and Business Metrics          (in millions, except per share, inventory turnover,    cost per new customer, and net sales per active customer data)                              (unaudited)----------------------------------------------------------------------                                               2000                                                    -------------------------------------                       Q4 1999      Q1        Q2        Q3        Q4                        ------------------------------------------------Results of OperationsNet sales             $   676   $   574   $   578   $   638   $   972Net sales -- trailing twelve months (TTM)  $ 1,640   $ 1,920   $ 2,184   $ 2,466   $ 2,762Gross profit          $    88   $   128   $   136   $   167   $   224Gross margin  -- % of net sales       13.0%     22.3%     23.5%     26.2%     23.1%Fulfillment costs  -- % of net sales       15.8%     17.3%     15.2%     15.1%     13.5%Pro forma  operating loss       $  (175)  $   (99)  $   (89)  $   (68)  $   (60)Pro forma  operating loss -- % of net sales      (25.9%)   (17.3%)   (15.5%)   (10.7%)   (6.2%)Pro forma net loss    $  (185)  $  (122)  $  (116)  $   (89)  $   (90)Pro forma net loss  per share            $ (0.55)  $ (0.35)  $ (0.33)  $ (0.25)  $ (0.25)GAAP net loss         $  (323)  $  (308)  $  (317)  $  (241)  $  (545)GAAP net loss  per share            $ (0.96)  $ (0.90)  $ (0.91)  $ (0.68)  $ (1.53)U.S. books, music and DVD/video pro forma operating income (loss)  -- % of U.S. books, music  and DVD/video net sales                           (4%)      (1%)       3%        6%        8%U.S. electronics, tools and kitchen pro forma operating loss -- % of U.S.  electronics, tools and kitchen net sales    (78%)     (90%)     (75%)     (62%)    (33%)U.S. retail pro forma operating loss -- % of  U.S. retail net sales    (21%)     (15%)     (12%)      (7%)     (5%)International pro forma operating loss -- % of international net sales  (43%)     (37%)     (47%)     (45%)    (30%)Services pro forma operating income (loss) -- % of services net sales      (238%)      (9%)      15%       14%       18%Customer DataNew customers             3.8       3.1       2.5       2.9       4.1Cumulative customers     16.9      20.0      22.5      25.4      29.5Active customers -- TTM  14.1      15.9      17.0      18.2      19.8New customers -- international            0.6       0.6       0.6       0.9       1.1Cumulative customers -- international            1.8       2.4       3.0       3.9       5.0Active customers -- international -- TTM     1.7       2.2       2.7       3.3       4.2Cost per new customer   $  19     $  13        17        15        13Net sales (excluding catalog sales and inventory sales to toysrus.com) per active customer  -- TTM                 $ 113     $ 117     $ 125     $ 130     $ 134U.S. customers purchasing from non-books, music and DVD/video stores          24%       11%       13%       14%       36%Balance SheetCash and marketable securities           $   706   $ 1,009   $   908   $   900   $ 1,101Inventory, net        $   221   $   172   $   172   $   164   $   175Inventory -- % of  net sales                 33%       30%       30%       26%       18%Inventory turnover -- annualized              13.9       9.1      10.3      11.2      17.7Fixed assets, net     $   318   $   334   $   344   $   352   $   366Cash FlowsCash generated by  (used in) operations           $    32   $  (320)  $   (54)  $    (4)  $   248Purchases of  fixed assets         $  (105)  $   (27)  $   (29)  $   (42)  $   (37)                                      -------------------                                                  Y / Y                                         Q1 2001  Growth %                                       ------------------- Results of Operations                                          Net sales                            $   700          22%      Net sales -- trailing                       twelve months (TTM)                 $ 2,888          50%             Gross profit                         $   183          43%      Gross margin                                                    -- % of net sales                      26.1%         N/A      Fulfillment costs                                               -- % of net sales                      14.0%         N/A      Pro forma                                                       operating loss                      $   (49)        (51%)     Pro forma                                                       operating loss                                                 -- % of net sales                      (6.9%)        N/A      Pro forma net loss                   $   (76)        (38%)     Pro forma net loss                                              per share                           $ (0.21)        (40%)     GAAP net loss                        $  (234)        (24%)     GAAP net loss                                                   per share                           $ (0.66)        (27%)     U.S. books, music and                                           DVD/video pro forma                                            operating income (loss)                                        -- % of U.S. books, music                                      and DVD/video net sales                   7%         N/A       U.S. electronics, tools and                                     kitchen pro forma operating                                    loss -- % of                                                    U.S. electronics, tools                                         and kitchen net sales                 (39%)        N/A      U.S. retail pro forma                                           operating loss -- % of U.S.                                    retail net sales                         (3%)        N/A      International pro forma                                         operating loss -- % of                                         international net sales                 (26%)        N/A      Services pro forma operating                                    income (loss) -- % of                                          services net sales                       10%         N/A      Customer Data                                                  New customers                            3.0          (3%)     Cumulative customers                    32.5          63%      Active customers -- TTM                 20.5          29%      New customers --                                                international                           1.0          67%      Cumulative customers --                                         international                           6.0         150%      Active customers --                                             international -- TTM                    4.9         123%      Cost per new customer                  $  12          (8%)     Net sales (excluding catalog                                    sales and inventory sales                                      to toysrus.com) per                                            active customer                                                -- TTM                                $ 135          15%      U.S. customers purchasing                                       from non-books, music and                         DVD/video stores                         19%         N/ABalance Sheet                                     Cash and marketable                                securities                            $ 643         (36%)Inventory, net                         $ 156         (10%)Inventory -- % of                                  net sales                                22%         N/AInventory turnover --                              annualized                             12.6          38%Fixed assets, net                      $ 304          (9%) Cash Flows                                        Cash generated by                                  (used in)                                         operations                            $(407)         27%Purchases of                                       fixed assets                          $ (19)        (30%)                           AMAZON.COM, INC.                 Financial and Operational Highlights                          First Quarter 2001                              (unaudited)

Results of Operations (all comparisons are to the prior year quarter)

Net Sales


  • Orders from repeat customers represented 78% of total, up from 76%.

  • Shipping revenue across all segments was approximately $82 million, up from $75 million.

  • Cash-based portion of Services revenues was approximately 79%, up from 25%.

  • Sales to customers outside the U.S., including export sales from www.amazon.com, increased to approximately 26% of net sales, from approximately 24% of net sales. Gross Profit

  • Gross margin, excluding the results of our Services segment, would have been 23%, up from 19%.

  • Shipping gross loss was approximately $5 million, down from slightly positive. We will continue to offer shipping promotions to our customers; accordingly, shipping gross margins may fluctuate. Fulfillment

  • Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service centers, including costs attributable to receiving, inspecting and warehousing inventories; picking, packaging and preparing customers' orders for shipment; credit card fees; and responding to inquiries from customers.

  • Fulfillment costs amounted to approximately 14% of net sales, down from 17% of net sales; excluding net sales from our Services segment, fulfillment costs were approximately 15%, down from 18%. Stock-Based Compensation

  • Stock-based compensation comprises the portion of acquisition-related consideration conditioned on the continued tenure of key employees of certain of our acquired businesses, which must be classified as compensation expense rather than as a component of purchase price under accounting principles generally accepted in the United States. Stock-based compensation also includes stock-based charges such as option-related deferred compensation recorded at our initial public offering, as well as certain other compensation and severance arrangements.

  • During the first quarter of 2001, we offered a limited non-compulsory exchange of employee stock options. This option exchange offer results in variable accounting treatment for approximately 15 million stock options, which includes approximately 12 million options granted under the exchange offer with an exercise price of $13.375, and options that were subject to the exchange offer but were not exchanged. Variable accounting treatment will result in unpredictable charges, recorded to "Stock-based compensation," dependent on fluctuations in quoted prices for our common stock. As the quoted price of our common stock at March 31, 2001, did not exceed the exercise price of any option subject to variable accounting treatment, no compensation expense was recorded in the first quarter of 2001. Impairment-Related and Other

  • We began implementation of our operational restructuring plan to reduce our operating costs, streamline our organizational structure and consolidate certain of our fulfillment and customer service operations. As a result of this initiative, we recorded restructuring and other charges of $114 million during the first quarter, and anticipate additional charges of over $50 million during the second quarter of 2001. This initiative involves the reduction of employee staff by approximately 1,300 positions throughout the Company in managerial, professional, clerical, technical and fulfillment roles; consolidation of our Seattle corporate office locations; closure of our McDonough, Georgia, fulfillment center; seasonal operation of our Seattle fulfillment center; closure of our customer service centers in Seattle and The Hague, Netherlands; and migration of a large portion of our technology infrastructure to a Linux-based operating platform, which entails ongoing lease obligations for equipment no longer utilized. We anticipate that each component of the restructuring plan will be substantially complete by June 30, 2001.

  • Costs that relate to ongoing operations are not part of restructuring and other charges. All inventory adjustments that may result from the closure or seasonal operation of our fulfillment centers are classified in "Cost of goods sold" on the consolidated statements of operations. As of March 31, 2001, there have been no significant inventory write-downs resulting from the restructuring, and none are anticipated.

  • For the quarter ended March 31, 2001, the charges associated with our restructuring were as follows (in thousands):
Asset impairments                                        $ 58,748Continuing lease obligations                               34,292Termination benefits                                       15,088Broker commissions, professional fees and other miscellaneous restructuring costs                          6,132                                                         ---------                                                         $114,260                                                         =========

  • Asset impairments primarily relate to the closure of the McDonough, Georgia, fulfillment center, the write-off of leasehold improvements in vacated corporate office space, and the other-than-temporary decline in the fair value of assets in the Seattle fulfillment center. For assets to be disposed, we estimated the fair value based on expected salvage value less costs to sell. For assets held for continued use, the decline in fair value was measured using discounted estimates of future cash flows. We are actively seeking third-party buyers for the assets held for disposal.

  • Continuing lease obligations primarily relate to heavy equipment previously used in the McDonough, Georgia, fulfillment center, vacated corporate office space, technology hardware removed from service as part of the migration to a Linux-based operating platform, and unutilized overcapacity at our backup data center. Where possible, we are actively seeking third parties to sublease abandoned equipment and facilities. Amounts expensed represent estimates of undiscounted future cash outflows, offset by anticipated third-party subleases.

  • Termination benefits comprise severance-related payments for all employees to be terminated in connection with the operational restructuring, as well as the contribution of common stock to a trust for the benefit of terminated employees. Termination benefits do not include any amounts for employment-related services prior to termination. Other restructuring costs include professional fees, decommissioning costs of vacated facilities, broker commissions and other miscellaneous expenses directly attributable to the restructuring.

  • First quarter 2001 cash payments resulting from the restructuring were $10 million.

  • We anticipate the restructuring charges, including over $50 million of charges expected to be recorded during the three months ending June 30, 2001, will result in the following net cash outflows (in thousands):
                                      Termination                              Leases   Benefits      Other     Total                             -------    -------    -------     -------Year Ending December 31,   2001                      $33,728   $ 12,160    $ 9,186    $ 55,074   2002                       30,258         78      1,024      31,360   2003                        4,078         --          2       4,080   2004                        1,514         --          1       1,515   2005                        1,474         --         --       1,474   Thereafter                  6,007         --         --       6,007                             -------    -------    -------     -------Total estimated cash outflows                    $77,059    $12,238   $ 10,213    $ 99,510                             =======    =======   ========    ========

Net Interest Expense and Other


  • Other gains and losses primarily relate to miscellaneous taxes and foreign currency transaction losses. Non-Cash Gains and Losses

  • Non-cash gains and losses includes a gain of $22 million associated with the termination of our services contract with Kozmo.com, and a gain of $46 million on the remeasurement of our Euro-denominated debt due to fluctuations in currency exchange rates. These gains were offset by non-cash impairment losses of $36 million relating to other-than-temporary declines in the fair value of Webvan Group, Inc., Sotheby's Holdings, Inc., WeddingChannel.com and drugstore.com, inc. Other non-cash gains recorded during the first quarter of 2001 were primarily related to the acquisitions of certain investees by unrelated third parties, and the recording to fair value of our warrant investments consistent with SFAS 133.

  • In connection with the termination of our commercial agreement with Kozmo.com in February 2001, we recorded a non-cash gain of $22 million, representing the amount of unearned revenue associated with the contract. Since services had not yet been performed under the contract, no amounts associated with this commercial agreement were recognized in "Net sales" during any period. Furthermore, during 1999, we made a cash investment of $60 million to acquire preferred stock of Kozmo.com and accounted for our investment under the equity method of accounting. Pursuant to the equity method of accounting, we recorded our share of Kozmo.com losses, which, during 2000, reduced the basis in our investment to zero. Accordingly, at the time Kozmo.com announced its intentions to cease operations in April 2001, we did not have any further loss exposure relating to our investment. We do not expect to recover any portion of our investment in Kozmo.com. Equity in Losses of Equity-Method Investees

  • Equity in losses of equity-method investees represents our share of losses of companies in which we have investments that give us the ability to exercise significant influence, but not control, over an investee. Equity-method losses reduce our underlying investment balances until the recorded basis is reduced to zero. Loss Per Share

  • The effect of stock options is antidilutive and, accordingly, is excluded from diluted loss per share. If the effect of stock options was included, the number of shares used in computation of diluted loss per share would have been approximately 374 million, compared to 357 million shares used in computation of basic and diluted loss per share for the three months ended March 31, 2001. Financial Condition Cash and Marketable Securities

  • Cash and marketable securities are impacted by the effect of quarterly fluctuations in foreign currency exchange rates, particularly the Euro.

  • Our marketable securities, by major security type, as of March 31, 2001, were as follows (at fair value; in thousands):
Corporate notes and bonds                             $ 15,548Asset-backed and agency securities                      37,729Treasury notes and bonds                               120,862Equity securities                                       21,890                                                      --------                                                     $ 196,029                                                      ========

Accounts Payable


  • Ending accounts payable days were approximately 45 days, a decrease of approximately 7 days, primarily attributable to our changing mix of business. Certain Definitions and Other

  • In January 2001, the Company reorganized its segment reporting to include four segments: U.S. Books, Music and DVD/Video; U.S. Electronics, Tools and Kitchen; International; and Services. Allocation methodologies are consistent with past presentations, and prior period amounts have been reclassified to conform with current period presentation.

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

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

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

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

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

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

  • Customer accounts exclude the customers of selected companies with whom we have strategic relationships and customers of Amazon.com's catalog businesses, but include customers shared with Toysrus.com and customers of Amazon Auctions, zShops and Marketplace services.