Amazon.com Inc 8-K 2004-10-21

Press Release October 21, 2004

Exhibit 99.1

LOGO

AMAZON.COM ANNOUNCES 76% FREE CASH FLOW GROWTH AND 29% SALES GROWTH - EXPECTS

RECORD HOLIDAY SEASON WITH EXPANDED SELECTION, LOWER PRICES, AND FREE SHIPPING

SEATTLE(BUSINESS WIRE)October 21, 2004Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its third quarter ended September 30, 2004.

Operating cash flow was $490 million for the trailing twelve months, compared with $284 million for the trailing twelve months ended September 30, 2003. Free cash flow grew 76% to $420 million for the trailing twelve months, compared with $239 million for the 2003 period.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 434 million at September 30, 2004, compared with 433 million a year ago.

Net sales were $1.46 billion in the third quarter, compared with $1.13 billion in third quarter 2003, an increase of 29%. Net sales, excluding the $57 million benefit from changes in foreign exchange rates, grew 24% compared with 2003.

Operating income was $81 million in the third quarter, compared with $52 million in third quarter 2003. Consolidated segment operating income grew 29% to $95 million in the third quarter, compared with $74 million in the third quarter 2003. Excluding the $4 million benefit from changes in foreign exchange rates, consolidated segment operating income grew 23% compared with third quarter 2003.

Net income was $54 million in the third quarter, or $0.13 per diluted share, compared with net income of $16 million, or $0.04 per diluted share, in third quarter 2003. Pro forma net income in the third quarter grew 52% to $73 million, or $0.17 per diluted share, compared with $48 million, or $0.11 per diluted share, in third quarter 2003.

Our decision to put dollars into lower prices and free shipping instead of TV advertising continues to be embraced by customers, said Jeff Bezos, founder and CEO of Amazon.com. Customer adoption of free shipping hit another record high this quarter.

Amazon.com continues to lower shipping and product prices for its worldwide customers. Customers shopping at www.amazon.co.uk now qualify for free shipping on orders of £19 or more, down from the prior threshold of £25.

See Financial Measures for additional information.

Highlights

North America segment sales, representing the Companys U.S. and Canadian sites, were $816 million, up 15% compared with third quarter 2003. Segment operating income declined $5 million to $57 million, compared with third quarter 2003. Increased adoption of free shipping contributed to an increase of $7 million in net shipping loss compared with the third quarter of 2003.

International segment sales, representing the Companys U.K., German, French, Japanese, and Chinese sites, were $646 million, up 52% compared with third quarter 2003, and accounted for 44% of worldwide net sales. Excluding the benefit from exchange rates, net sales growth was 39%. Segment operating income grew $26 million to $38 million, compared with third quarter 2003.

Electronics & Other General Merchandise sales grew 55% to $1.47 billion for the trailing twelve months, representing 23% of worldwide net sales. For the first time, North America Electronics & Other General Merchandise sales were over $1 billion on a trailing-twelve-month basis.

A9.com, a subsidiary of Amazon.com, launched a search engine at www.a9.com, to make Internet search more effective. The search engine with a memory helps users manage and organize their search results, and discover additional information sources such as the Internet Movie Database and Amazon.coms Search Inside the Book results.

Star Wars Trilogy was the top-selling DVD worldwide, and the U.K. site received a record 85,000 pre-orders.

The Company introduced Toy stores at both its German and Japanese websites. Customers now have their choice of over 20,000 toys, games, and hobby products, and enjoy discounts up to 30%.

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Amazon Web Services released Amazon E-Commerce Service 4.0 (ECS 4.0), offering software developers and website owners unprecedented access to Amazons technology platform and product data. Additionally, the Alexa Web Information Service (AWIS) gives first-ever access to the vast database of website information and usage data compiled by Alexa Internet (www.alexa.com). Access to both ECS 4.0 and AWIS is available at www.amazon.com/webservices, where over 65,000 individuals have registered and downloaded the free Amazon Web Services Software Developers Kit.

Amazon.coms second U.K. fulfillment center in Scotland is fully operational and prepared to help meet holiday demand from European customers.

The Company acquired Joyo.com Limited, a British Virgin Islands Company, which operates the Joyo.com website in cooperation with Chinese subsidiaries and affiliates. The Joyo.com website is the largest online retailer of books, music, and videos in China, and is Amazon.coms seventh global website.

Financial Guidance

The following forward-looking statements reflect Amazon.coms expectations as of October 21, 2004. Results may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce, and the various factors detailed below.

Fourth Quarter 2004 Guidance

Net sales are expected to be between $2.295 billion and $2.545 billion, or grow between 18% and 31%, compared with fourth quarter 2003.

Consolidated segment operating income is expected to be between $162 million and $222 million, or grow between 6% and 45%, compared with fourth quarter 2003.

Operating income is expected to be between $137 million and $197 million, assuming, among other things, that the Company does not record any further revisions to its restructuring-related estimates and that the closing price of Amazon.com common stock on December 31, 2004, is identical to the closing price of $40.86 on September 30, 2004.

Full Year 2004 Guidance

Net sales are expected to be between $6.675 billion and $6.925 billion, or grow between 27% and 32%, compared with 2003.

Consolidated segment operating income is expected to be between $475 million and $535 million, or grow between 31% and 48%, compared with 2003.

Operating income is expected to be between $415 million and $475 million, assuming, among other things, that the Company does not record any further revisions to its restructuring-related estimates and that the closing price of Amazon.com common stock on December 31, 2004, is identical to the closing price of $40.86 on September 30, 2004.

Full Year 2005 Expectations

Net sales are expected to be between $7.40 billion and $8.15 billion.

Consolidated segment operating income is expected to be between $500 million and $625 million.

Operating income is expected to be between $400 million and $525 million, excluding any impact from SFAS No. 123R, and assuming, among other things, that the Company does not record any further revisions to its restructuring-related estimates and that the closing price of Amazon.com common stock on December 31, 2005, is identical to the closing price of $40.86 on September 30, 2004.

A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and will be available at least through December 31, 2004, at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Companys 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; competition; management of growth; potential fluctuations in operating results; 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; international growth and expansion; and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risk of future losses, significant amount of indebtedness, system interruptions, consumer trends, limited operating history, government regulation and taxation, fraud, and new business areas. More information about factors that potentially could affect Amazon.coms financial results is included in Amazon.coms filings

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with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2003, and all subsequent filings.

Financial Measures

The following measures are defined by the Securities and Exchange Commission as non-GAAP financial measures.

Free Cash Flow

Operating cash flow is net cash provided by (used in) operating activities, including cash outflows for interest and excluding proceeds from the exercise of stock-based employee awards. Free cash flow is operating cash flow less cash outflows for purchases of fixed assets, including internal-use software and website development. A tabular reconciliation of differences from the comparable GAAP measureoperating cash flowis included in the attached Supplemental Financial Information and Business Metrics.

Consolidated Segment Operating Income

Consolidated segment operating income is the sum of segment operating income of our individual segments and excludes the following line items on the Companys statements of operations:

Stock-based compensation and

Other operating expense (income).

A tabular reconciliation of differences from the comparable GAAP measureoperating incomeis included in the attached Pro Forma Statements of Operations.

Pro Forma Net Income

Pro forma net income excludes the following line items on the Companys statements of operations:

Stock-based compensation,

Other operating expense (income), and

Remeasurements and other.

A tabular reconciliation of differences from the comparable GAAP measurenet income (loss)is included in the attached Pro Forma Statements of Operations.

For additional information regarding these non-GAAP financial measures, see Exhibit 99.2 to our Form 8-K filed contemporaneously with the issuance of this release.

About Amazon.com

Amazon.com (NASDAQ: AMZN), a Fortune 500 company based in Seattle, opened its virtual doors on the World Wide Web in July 1995 and today offers Earths Biggest Selection. Amazon.com seeks to be Earths most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer customers the lowest possible prices. Amazon.com and third-party sellers offer millions of unique new, refurbished, and used items in categories such as health and personal care, jewelry and watches, gourmet food, sports and outdoors, apparel and accessories, books, music, DVDs, electronics and office, toys and baby, and home and garden.

Amazon.com and its affiliates operate seven websites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and www.joyo.com.

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

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AMAZON.COM, INC.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Twelve Months Ended September 30,
	2003			2004			2003			2004			2003			2004
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	641,728		$	701,150		$	738,254		$	1,102,273		$	327,564		$	666,418
OPERATING ACTIVITIES:
Net income (loss)		15,563			54,147			(37,872	)		241,763			(35,221	)		314,917
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of fixed assets, including internal-use software and website development, and other amortization		18,338			19,083			57,091			54,893			76,955			73,360
Stock-based compensation		20,936			9,274			72,712			38,073			108,392			53,112
Other operating expense (income)		786			4,505			2,611			(3,187	)		4,624			(3,046	)
Losses (gains) on sales of marketable securities, net		(141	)		220			(9,393	)		(790	)		(11,260	)		(995	)
Remeasurements and other		11,142			5,441			93,592			(31,221	)		134,888			5,284
Non-cash interest expense and other		1,343			1,140			12,752			3,402			19,902			3,568
Changes in operating assets and liabilities:
Inventories		(62,147	)		(69,626	)		(34,001	)		(61,172	)		(82,369	)		(103,957	)
Accounts receivable, net and other current assets		(14,844	)		(22,868	)		18,303			(15,842	)		16,775			(33,840	)
Accounts payable		49,535			95,529			(131,584	)		(137,853	)		131,254			161,463
Accrued expenses and other current liabilities		(5,109	)		8,668			(99,312	)		(58,240	)		(57,366	)		15,332
Additions to unearned revenue		29,932			33,707			78,652			84,469			98,415			107,458
Amortization of previously unearned revenue		(27,816	)		(27,029	)		(85,719	)		(76,154	)		(123,444	)		(102,175	)
Interest payable		(701	)		4,454			(26,773	)		(29,148	)		2,093			(525	)

Net cash provided by (used in) operating activities		36,817			116,645			(88,941	)		8,993			283,638			489,956
INVESTING ACTIVITIES:
Sales and maturities of marketable securities and other investments		21,988			395,087			581,011			1,007,411			733,768			1,239,584
Purchases of marketable securities		(71,880	)		(380,651	)		(414,194	)		(1,136,032	)		(587,714	)		(1,257,480	)
Purchases of fixed assets, including internal-use software and website development		(15,192	)		(28,722	)		(28,727	)		(52,378	)		(44,243	)		(69,614	)
Proceeds from sale of subsidiary and other		5,072						5,072						5,072
Acquisition, net of cash acquired					(71,195	)					(71,195	)					(71,195	)

Net cash provided by (used in) investing activities		(60,012	)		(85,481	)		143,162			(252,194	)		106,883			(158,705	)
FINANCING ACTIVITIES:
Proceeds from exercises of stock options and other		41,235			7,727			132,832			42,618			198,208			73,108
Repayments of long-term debt, capital lease obligations, and other		(3,437	)		(550	)		(287,576	)		(156,842	)		(290,250	)		(364,574	)

Net cash provided by (used in) financing activities		37,798			7,177			(154,744	)		(114,224	)		(92,042	)		(291,466	)
Foreign-currency effect on cash and cash equivalents		10,087			6,117			28,687			760			40,375			39,405

Net increase (decrease) in cash and cash equivalents		24,690			44,458			(71,836	)		(356,665	)		338,854			79,190

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	666,418		$	745,608		$	666,418		$	745,608		$	666,418		$	745,608

SUPPLEMENTAL CASH FLOW INFORMATION:
Fixed assets acquired under capital leases and other financing arrangements	$	1,572		$	135		$	2,648		$	658		$	3,374		$	687
Cash paid for interest		30,019			21,497			116,835			107,565			117,477			110,677
Cash paid for income taxes		1,019			1,651			1,628			2,659			1,613			2,856

Note: The attached Financial and Operational Highlights are an integral part of the press release financial statements.

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AMAZON.COM, INC.

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2004			2003			2004
Net sales	$	1,134,456		$	1,462,475		$	3,317,927		$	4,380,165
Cost of sales		848,635			1,106,824			2,487,596			3,322,634

Gross profit		285,821			355,651			830,331			1,057,531
Operating expenses:
Fulfillment		107,057			135,521			318,217			385,943
Marketing		28,943			34,347			82,496			99,822
Technology and content		53,775			64,823			155,998			178,374
General and administrative		22,393			25,907			65,318			80,523
Stock-based compensation ⁽¹⁾		20,936			9,274			72,712			38,073
Other operating expense (income)		786			4,505			2,611			(3,187	)

Total operating expenses		233,890			274,377			697,352			779,548

Income from operations		51,931			81,274			132,979			277,983
Interest income		4,324			7,553			16,625			18,419
Interest expense		(29,802	)		(26,307	)		(100,680	)		(80,093	)
Other income (expense), net		252			(2,932	)		6,796			(5,767	)
Remeasurements and other		(11,142	)		(5,441	)		(93,592	)		31,221

Total non-operating expense, net		(36,368	)		(27,127	)		(170,851	)		(36,220	)

Net income (loss)	$	15,563		$	54,147		$	(37,872	)	$	241,763

Basic earnings (loss) per share	$	0.04		$	0.13		$	(0.10	)	$	0.60

Diluted earnings (loss) per share	$	0.04		$	0.13		$	(0.10	)	$	0.57

Weighted average shares used in computation of earnings (loss) per share:
Basic		397,912			406,647			393,477			405,153

Diluted		422,802			424,777			393,477			423,924

⁽¹⁾ Components of stock-based compensation:
Fulfillment	$	4,374		$	2,001		$	16,221		$	6,294
Marketing		1,582			67			4,167			2,770
Technology and content		12,013			4,408			39,807			20,541
General and administrative		2,967			2,798			12,517			8,468

	$	20,936		$	9,274		$	72,712		$	38,073

Note: The attached Financial and Operational Highlights are an integral part of the press release financial statements.

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AMAZON.COM, INC.

Pro Forma Statements of Operations

(in thousands, except per share data)

(unaudited)


	Three Months Ended September 30, 2003									Three Months Ended September 30, 2004
	As Reported⁽¹⁾			Adjustments			Pro Forma			As Reported ⁽¹⁾			Adjustments			Pro Forma
Net sales	$	1,134,456		$			$	1,134,456		$	1,462,475		$			$	1,462,475
Cost of sales		848,635						848,635			1,106,824						1,106,824

Gross profit		285,821						285,821			355,651						355,651
Operating expenses:
Fulfillment		107,057						107,057			135,521						135,521
Marketing		28,943						28,943			34,347						34,347
Technology and content		53,775						53,775			64,823						64,823
General and administrative		22,393						22,393			25,907						25,907
Stock-based compensation		20,936			(20,936	)					9,274			(9,274	)
Other operating expense		786			(786	)					4,505			(4,505	)

Total operating expenses		233,890			(21,722	)		212,168			274,377			(13,779	)		260,598

Income from operations		51,931			21,722			73,653	⁽²⁾		81,274			13,779			95,053	⁽²⁾
Interest income		4,324						4,324			7,553						7,553
Interest expense		(29,802	)					(29,802	)		(26,307	)					(26,307	)
Other income (expense), net		252						252			(2,932	)					(2,932	)
Remeasurements and other		(11,142	)		11,142						(5,441	)		5,441

Total non-operating expense, net		(36,368	)		11,142			(25,226	)		(27,127	)		5,441			(21,686	)

Net income	$	15,563		$	32,864		$	48,427		$	54,147		$	19,220		$	73,367

Basic earnings per share	$	0.04		$	0.08		$	0.12		$	0.13		$	0.05		$	0.18

Diluted earnings per share	$	0.04		$	0.07		$	0.11		$	0.13		$	0.04		$	0.17

Weighted average shares used in computation of earnings per share:
Basic		397,912						397,912			406,647						406,647

Diluted		422,802						422,802			424,777						424,777

Net cash provided by operating activities							$	36,817								$	116,645
Purchases of fixed assets, including internal-use software and website development								(15,192	)								(28,722	)

Free cash flow							$	21,625								$	87,923

Net cash used in investing activities							$	(60,012	)							$	(85,481	)

Net cash provided by financing activities							$	37,798								$	7,177

⁽¹⁾	In accordance with accounting principles generally accepted in the United States.

⁽²⁾	Consolidated segment operating income.

Note: The attached Financial and Operational Highlights are an integral part of the press release financial statements.

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AMAZON.COM, INC.

Pro Forma Statements of Operations

(in thousands, except per share data)

(unaudited)


	Nine Months Ended September 30, 2003									Nine Months Ended September 30, 2004
	As Reported ⁽¹⁾			Adjustments			Pro Forma			As Reported ⁽¹⁾			Adjustments			Pro Forma
Net sales	$	3,317,927		$			$	3,317,927		$	4,380,165		$			$	4,380,165
Cost of sales		2,487,596						2,487,596			3,322,634						3,322,634

Gross profit		830,331						830,331			1,057,531						1,057,531
Operating expenses:
Fulfillment		318,217						318,217			385,943						385,943
Marketing		82,496						82,496			99,822						99,822
Technology and content		155,998						155,998			178,374						178,374
General and administrative		65,318						65,318			80,523						80,523
Stock-based compensation		72,712			(72,712	)					38,073			(38,073	)
Other operating expense (income)		2,611			(2,611	)					(3,187	)		3,187

Total operating expenses		697,352			(75,323	)		622,029			779,548			(34,886	)		744,662

Income from operations		132,979			75,323			208,302	⁽²⁾		277,983			34,886			312,869	⁽²⁾
Interest income		16,625						16,625			18,419						18,419
Interest expense		(100,680	)					(100,680	)		(80,093	)					(80,093	)
Other income (expense), net		6,796						6,796			(5,767	)					(5,767	)
Remeasurements and other		(93,592	)		93,592						31,221			(31,221	)

Total non-operating expense, net		(170,851	)		93,592			(77,259	)		(36,220	)		(31,221	)		(67,441	)

Net income (loss)	$	(37,872	)	$	168,915		$	131,043		$	241,763		$	3,665		$	245,428

Basic earnings (loss) per share	$	(0.10	)	$	0.43		$	0.33		$	0.60		$	0.01		$	0.61

Diluted earnings (loss) per share	$	(0.10	)	$	0.41		$	0.31		$	0.57		$	0.01		$	0.58

Weighted average shares used in computation of earnings (loss) per share:
Basic		393,477						393,477			405,153						405,153

Diluted		393,477						418,359			423,924						423,924

Net cash provided by (used in) operating activities							$	(88,941	)							$	8,993
Purchases of fixed assets, including internal-use software and website development								(28,727	)								(52,378	)

Free cash flow							$	(117,668	)							$	(43,385	)

Net cash provided by (used in) investing activities							$	143,162								$	(252,194	)

Net cash used in financing activities							$	(154,744	)							$	(114,224	)

⁽¹⁾	In accordance with accounting principles generally accepted in the United States.

⁽²⁾	Consolidated segment operating income.

Note: The attached Financial and Operational Highlights are an integral part of the press release financial statements.

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AMAZON.COM, INC.

Segment Information

(in thousands)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2004			2003			2004
North America
Net sales	$	709,271		$	816,088		$	2,116,506		$	2,455,061
Cost of sales		508,150			592,747			1,538,496			1,786,133

Gross profit		201,121			223,341			578,010			668,928
Direct segment operating expenses		138,606			165,901			409,236			470,058

Segment operating income		62,515			57,440			168,774			198,870
International
Net sales		425,185			646,387			1,201,421			1,925,104
Cost of sales		340,485			514,077			949,100			1,536,501

Gross profit		84,700			132,310			252,321			388,603
Direct segment operating expenses		73,562			94,697			212,793			274,604

Segment operating income		11,138			37,613			39,528			113,999
Consolidated
Net sales		1,134,456			1,462,475			3,317,927			4,380,165
Cost of sales		848,635			1,106,824			2,487,596			3,322,634

Gross profit		285,821			355,651			830,331			1,057,531
Direct segment operating expenses		212,168			260,598			622,029			744,662

Segment operating income		73,653			95,053			208,302			312,869
Stock-based compensation		20,936			9,274			72,712			38,073
Other operating expense (income)		786			4,505			2,611			(3,187	)

Income from operations		51,931			81,274			132,979			277,983
Total non-operating expense, net		(36,368	)		(27,127	)		(170,851	)		(36,220	)

Net income (loss)	$	15,563		$	54,147		$	(37,872	)	$	241,763

Segment Highlights:
Y/Y net sales growth:
North America		21	%		15	%		18	%		16	%
International		61			52			69			60
Consolidated		33			29			32			32
Y/Y gross profit growth:
North America		30	%		11	%		16	%		16	%
International		38			56			59			54
Consolidated		32			24			26			27
Y/Y segment operating income growth:
North America		137	%		(8	%)		73	%		18	%
International		872			238			N/A			188
Consolidated		168			29			167			50
Net sales mix:
North America		63	%		56	%		64	%		56	%
International		37			44			36			44

Note: The attached Financial and Operational Highlights are an integral part of the press release financial statements.

8 of 18

AMAZON.COM, INC.

Supplemental Net Sales Information

(in thousands)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2004			2003			2004
North America
Media	$	502,271		$	563,595		$	1,518,581		$	1,704,084
Electronics and other general merchandise		180,418			228,626			526,002			678,864
Other		26,582			23,867			71,923			72,113

		709,271			816,088			2,116,506			2,455,061
International
Media		374,989			530,314			1,096,735			1,601,900
Electronics and other general merchandise		49,804			115,615			103,756			321,563
Other		392			458			930			1,641

		425,185			646,387			1,201,421			1,925,104
Consolidated
Media		877,260			1,093,909			2,615,316			3,305,984
Electronics and other general merchandise		230,222			344,241			629,758			1,000,427
Other		26,974			24,325			72,853			73,754

	$	1,134,456		$	1,462,475		$	3,317,927		$	4,380,165

Y/Y Net Sales Growth:
North America:
Media		15	%		12	%		13	%		12	%
Electronics and other general merchandise		35			27			34			29
Other		49			(10	)		26			0
International:
Media		50	%		41	%		63	%		46	%
Electronics and other general merchandise		259			132			197			210
Other		(31	)		17			(41	)		76
Consolidated:
Media		28	%		25	%		30	%		26	%
Electronics and other general merchandise		56			50			48			59
Other		46			(10	)		24			1
Consolidated Net Sales Mix:
Media		77	%		75	%		79	%		75	%
Electronics and other general merchandise		20			24			19			23
Other		2			2			2			2

Note: The attached Financial and Operational Highlights are an integral part of the press release financial statements.

9 of 18

AMAZON.COM, INC.

Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)


	September 30, 2003			December 31, 2003			September 30, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	666,418		$	1,102,273		$	745,608
Marketable securities		398,242			292,550			439,092

Cash, cash equivalents, and marketable securities		1,064,660			1,394,823			1,184,700
Inventories		241,667			293,917			357,320
Accounts receivable, net and other current assets		103,873			132,069			150,764

Total current assets		1,410,200			1,820,809			1,692,784
Fixed assets, net		221,459			224,285			226,762
Goodwill		69,121			69,121			137,584
Other assets		48,905			47,818			51,538

Total assets	$	1,749,685		$	2,162,033		$	2,108,668

LIABILITIES AND STOCKHOLDERS DEFICIT
Current liabilities:
Accounts payable	$	499,189		$	819,811		$	688,297
Accrued expenses and other current liabilities		236,184			317,730			269,178
Unearned revenue		40,843			37,844			46,144
Interest payable		44,476			73,100			43,952
Current portion of long-term debt and other		6,058			4,216			3,452

Total current liabilities		826,750			1,252,701			1,051,023
Long-term debt and other		2,080,969			1,945,439			1,778,722
Commitments and contingencies
Stockholders deficit:
Preferred stock, $0.01 par value:
Authorized shares 500,000
Issued and outstanding shares none
Common stock, $0.01 par value:
Authorized shares 5,000,000
Issued and outstanding shares 400,422, 403,354, and 407,464		4,004			4,034			4,075
Additional paid-in capital		1,852,308			1,899,398			1,981,659
Deferred stock-based compensation		(3,525	)		(2,850	)		(2,529	)
Accumulated other comprehensive income		36,761			37,739			28,383
Accumulated deficit		(3,047,582	)		(2,974,428	)		(2,732,665	)

Total stockholders deficit		(1,158,034	)		(1,036,107	)		(721,077	)

Total liabilities and stockholders deficit	$	1,749,685		$	2,162,033		$	2,108,668

Note: The attached Financial and Operational Highlights are an integral part of the press release financial statements.

10 of 18

AMAZON.COM, INC.

Supplemental Financial Information and Business Metrics

(in millions, except per share data)

(unaudited)


	Q3 2003			Q4 2003			Q1 2004			Q2 2004			Q3 2004			Y/Y % Change
Cash Flows and Shares
Operating cash flow trailing twelve months (TTM)	$	284		$	392		$	393		$	410		$	490		73	%
Purchases of fixed assets (including internal-use software and website development) TTM	$	44		$	46		$	49		$	56		$	70		57	%
Free cash flow (operating cash flow less purchases of fixed assets) TTM	$	239		$	346		$	344		$	354		$	420		76	%
Common shares and stock-based awards outstanding		433			433			432			434			434		<1	%
Common shares outstanding		400			403			405			407			407		2	%
Stock-based awards outstanding		33			29			27			27			27		(18	%)
Stock-based awards outstanding % of common shares outstanding		8.1	%		7.3	%		6.8	%		6.7	%		6.6	%	N/A
Results of Operations
Worldwide (WW) net sales	$	1,134		$	1,946		$	1,530		$	1,387		$	1,462		29	%
WW net sales Y/Y growth, excluding the effect of foreign exchange rates		29.8	%		29.4	%		33.2	%		21.9	%		23.9	%	N/A
WW net sales TTM	$	4,747		$	5,264		$	5,710		$	5,998		$	6,326		33	%
WW net sales shipped outside the U.S. TTM % of net sales		40.5	%		43.4	%		45.7	%		47.0	%		48.2	%	N/A
Gross profit	$	286		$	427		$	361		$	341		$	356		24	%
Gross margin % of WW net sales		25.2	%		21.9	%		23.6	%		24.6	%		24.3	%	N/A
Gross profit TTM	$	1,165		$	1,257		$	1,347		$	1,415		$	1,484		27	%
Gross margin TTM % of WW net sales		24.6	%		23.9	%		23.6	%		23.6	%		23.5	%	N/A
Fulfillment costs % of WW net sales		9.4	%		8.2	%		8.3	%		8.8	%		9.3	%	N/A
Fulfillment costs TTM % of WW net sales		9.4	%		9.1	%		8.8	%		8.6	%		8.6	%	N/A
Consolidated direct segment operating expenses	$	212		$	274		$	244		$	240		$	261		23	%
Consolidated direct segment operating expenses TTM	$	855		$	896		$	937		$	970		$	1,019		19	%
Consolidated segment operating income	$	74		$	153		$	117		$	101		$	95		29	%
Consolidated segment operating margin % of WW net sales		6.5	%		7.9	%		7.6	%		7.3	%		6.5	%	N/A
Consolidated segment operating income TTM	$	310		$	361		$	411		$	444		$	466		50	%
Consolidated segment operating margin TTM % of WW net sales		6.5	%		6.9	%		7.2	%		7.4	%		7.4	%	N/A
GAAP operating income	$	52		$	138		$	110		$	86		$	81		57	%
GAAP operating margin % of WW net sales		4.6	%		7.1	%		7.2	%		6.2	%		5.6	%	N/A
GAAP operating income TTM	$	204		$	271		$	342		$	386		$	416		104	%
GAAP operating margin TTM% of WW net sales		4.3	%		5.1	%		6.0	%		6.4	%		6.6	%	N/A
Pro forma net income	$	48		$	125		$	97		$	75		$	73		52	%
Pro forma net income per diluted share	$	0.11		$	0.29		$	0.23		$	0.18		$	0.17		55	%
Pro forma net income TTM	$	206		$	256		$	313		$	345		$	370		79	%
GAAP net income	$	16		$	73		$	111		$	76		$	54		248	%
GAAP net income per diluted share	$	0.04		$	0.17		$	0.26		$	0.18		$	0.13		225	%
GAAP net income (loss) TTM	$	(35	)	$	35		$	157		$	276		$	315		N/A
North America segment:
Net sales	$	709		$	1,142		$	847		$	792		$	816		15	%
Net sales TTM	$	3,083		$	3,258		$	3,401		$	3,490		$	3,597		17	%
Gross profit	$	201		$	289		$	226		$	220		$	223		11	%
Gross margin % of North American net sales		28.4	%		25.3	%		26.7	%		27.7	%		27.4	%	N/A
Gross profit TTM	$	821		$	867		$	906		$	935		$	958		17	%
Gross margin TTM % of North America net sales		26.6	%		26.6	%		26.6	%		26.8	%		26.6	%	N/A
Operating income	$	63		$	114		$	76		$	66		$	57		(8	%)
Operating margin % of North America net sales		8.8	%		10.0	%		8.9	%		8.3	%		7.0	%	N/A
Operating income TTM	$	251		$	283		$	307		$	318		$	313		25	%
Operating margin TTM % of North America net sales		8.1	%		8.7	%		9.0	%		9.1	%		8.7	%	N/A

Note: The attached Financial and Operational Highlights are an integral part of this Supplemental Financial Information and Business Metrics

11 of 18

AMAZON.COM, INC.

Supplemental Financial Information and Business Metrics

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

(unaudited)


	Q3 2003			Q4 2003			Q1 2004			Q2 2004			Q3 2004			Y/Y % Change
International segment:
Net sales	$	425		$	804		$	684		$	595		$	646		52	%
Net sales Y/Y growth, excluding the effect of foreign exchange rates		50.4	%		53.6	%		57.9	%		38.1	%		38.9	%	N/A
Net sales TTM	$	1,663		$	2,005		$	2,310		$	2,508		$	2,729		64	%
Gross profit	$	85		$	138		$	135		$	121		$	132		56	%
Gross margin % of International net sales		19.9	%		17.2	%		19.8	%		20.4	%		20.5	%	N/A
Gross profit TTM	$	345		$	391		$	442		$	479		$	527		53	%
Gross margin TTM % of International net sales		20.7	%		19.5	%		19.1	%		19.1	%		19.3	%	N/A
Operating income	$	11		$	39		$	41		$	35		$	38		238	%
Operating margin % of International net sales		2.6	%		4.8	%		6.1	%		5.9	%		5.8	%	N/A
Operating income TTM	$	59		$	78		$	104		$	126		$	153		158	%
Operating margin TTM % of International net sales		3.6	%		3.9	%		4.5	%		5.0	%		5.6	%	N/A
Supplemental Worldwide Net Sales:
Media	$	877		$	1,434		$	1,175		$	1,037		$	1,094		25	%
Media TTM	$	3,695		$	4,049		$	4,351		$	4,523		$	4,740		28	%
Electronics and other general merchandise	$	230		$	473		$	331		$	325		$	344		50	%
Electronics and other general merchandise TTM	$	951		$	1,103		$	1,244		$	1,360		$	1,474		55	%
Other	$	27		$	39		$	24		$	25		$	24		(10	%)
Other TTM	$	101		$	112		$	116		$	115		$	113		11	%
Supplemental North America Segment Net Sales:
Media	$	502		$	751		$	599		$	542		$	564		12	%
Media TTM	$	2,167		$	2,269		$	2,351		$	2,394		$	2,455		13	%
Electronics and other general merchandise	$	180		$	353		$	224		$	226		$	229		27	%
Electronics and other general merchandise TTM	$	816		$	879		$	935		$	983		$	1,031		26	%
Other	$	27		$	38		$	24		$	25		$	24		(10	%)
Other TTM	$	100		$	110		$	115		$	113		$	111		10	%
Supplemental International Segment Net Sales:
Media	$	375		$	683		$	576		$	496		$	530		41	%
Media TTM	$	1,527		$	1,779		$	2,000		$	2,129		$	2,285		50	%
Electronics and other general merchandise	$	50		$	121		$	107		$	99		$	116		132	%
Electronics and other general merchandise TTM	$	135		$	225		$	309		$	377		$	442		228	%
Other	$	0		$	0		$	0		$	1		$	0		17	%
Other TTM	$	1		$	1		$	1		$	2		$	2		48	%
Balance Sheet
Cash and marketable securities	$	1,065		$	1,395		$	998		$	1,151		$	1,185		11	%
Inventory, net ending	$	242		$	294		$	282		$	284		$	357		48	%
Inventory average inventory % of TTM net sales		4.0	%		4.1	%		4.1	%		4.3	%		4.6	%	N/A
Inventory turnover, average TTM		18.9			18.4			18.7			17.9			16.6		(12	%)
Fixed assets, net	$	221		$	224		$	217		$	216		$	227		2	%
Accounts payable days ending		54			50			44			51			57		6	%
Other *
Employees (full-time and part-time; excludes contractors & temporary personnel)		7,900			7,800			8,100			8,200			8,800		11	%

Note: The attached Financial and Operational Highlights are an integral part of this Supplemental Financial Information and Business Metrics

*	Includes over 250 employees of Joyo.com.

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AMAZON.COM, INC.

Financial and Operational Highlights

(unaudited)

Quarterly Results of Operations (comparisons are with the equivalent period of the prior year, unless otherwise stated)

Net Sales

Shipping revenue, which excludes amounts earned from third-party sellers, was $87 million, up 13% from $77 million.

Cost of Sales

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

Outbound shipping-related costs totaled $128 million, up from $104 million. Net shipping loss was $41 million, up from a net loss of $27 million, resulting primarily from our free-shipping offers. We view free-shipping offers as an effective worldwide marketing tool and intend to continue offering them indefinitely.

Direct Segment Operating Expense

Third quarter direct segment operating expenses as a percentage of net sales were as follows:


	2004		2003
Fulfillment	9.3	%	9.4	%
Technology and content	4.4	%	4.7	%
Marketing	2.3	%	2.6	%
General and administrative	1.8	%	2.0	%

Depreciation was $19 million in third quarter 2004 and $72 million over the trailing twelve months.

Fulfillment

Fulfillment costs include those costs incurred in operating and staffing our fulfillment and customer service centers, credit card fees, and bad debt costs, including costs associated with our guarantee for certain third-party seller transactions. Fulfillment costs also include amounts paid to third parties, who assist us in fulfillment and customer service operations.

Credit card fees associated with third-party seller transactions are based on the gross purchase price of underlying transactions, and therefore represent a larger percentage of our recorded revenue than credit card fees on our retail sales. Bad debt costs, including costs associated with our guarantee program, are also higher as a percentage of recorded revenue versus our retail sales. Accordingly, fulfillment costs as a percentage of net sales are higher for third-party seller transactions than for our retail sales.

Our new fulfillment center in Scotland began fulfilling customer orders in the third quarter and is now fully operational. The center is approximately 300,000 square feet and currently employs over 200 permanent associates.

Fulfillment costs decreased as a percentage of sales from the prior year, but increased in absolute dollars due to variable costs corresponding with sales volume, our mix of product sales, credit card fees, and bad debt costs, including costs associated with our guarantee for certain third-party seller transactions. We expect absolute amounts spent in fulfillment to increase over time.

Technology and Content

Our spending in technology and content has increased as we are adding computer scientists and software engineers to enhance the customer experience on our websites and those websites powered by us, and improve our process efficiency. Additionally, we continue to invest in several areas of technology, including seller platform, A9.com, web services, and additional development centers. We intend to continue investing in these and other initiatives and expect absolute dollars spent in technology and content to increase over time as we continue to add computer scientists and software engineers to our staff.

A significant majority of these costs are incurred in the U.S. and most of them are allocated to our North America segment.

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We expense all costs related to the development of internal-use software other than those incurred during the application development stage. Costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software, generally two years. For the three months ended September 30, 2004 and 2003, we capitalized $12 million and $9 million of internal-use software costs, which was offset by amortization of previously capitalized amounts of $8 million and $6 million.

Marketing

Marketing efforts include targeted online marketing channels, such as our Associates and Syndicated Stores programs, portal advertising, e-mail campaigns, sponsored search, and other initiatives. Since our marketing expenses are largely variable, we expect absolute amounts spent in marketing to increase over time. To the extent there is increased or decreased competition for these traffic sources, or to the extent our mix of these channels shifts, we would expect to see a corresponding change in our marketing expense. While costs associated with free shipping are not included in marketing expense, we view our free-shipping offers as an effective worldwide marketing tool and intend to continue offering them indefinitely.

General and Administrative

General and Administrative costs increased primarily due to increases in professional fees. We expect absolute dollars spent in general and administrative to increase over time.

Stock-Based Compensation

Since October 2002, we have awarded restricted stock units as our primary form of stock-based compensation. Restricted stock units, under fixed accounting, are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of our common stock. Such value is recognized as an expense on an accelerated basis over the corresponding service period. To the extent that restricted stock units are forfeited prior to vesting, the corresponding previously recognized expense is reversed as an offset to stock-based compensation.

Stock-based awards generally fully vest over service periods of between three and six years.

Stock-based compensation was $9 million for the quarter, consisting of $6 million in contra-expense for stock awards under variable accounting, and $15 million for stock awards under fixed accounting plus matching stock contributions under our 401(k) program. Payroll tax expense resulting from exercises of stock-based awards is not classified in Stock-based compensation, but is allocated to the corresponding operating expense categories on the statement of operations.

We granted 0.7 million stock awards, primarily restricted stock units, during the quarter at a per-share weighted average fair value of $40.12. Year-to-date we have granted 2.7 million stock awards, primarily restricted stock units, at a per-share average fair value of $44.59.

At September 30, 2004, there were 27 million stock awards outstanding, consisting of 20 million stock options with a $12.90 weighted average exercise price, 6 million restricted stock units, and 0.5 million shares of restricted stock (included in common stock outstanding).

At September 30, 2004, 1.4 million outstanding stock awards, primarily options, were subject to variable accounting. Stock option grants after December 31, 2002, are subject to variable accounting treatment. Variable accounting treatment results in expense or contra-expense recognition using the cumulative expense method, calculated based on the quoted price of our common stock and vesting schedules of underlying awards. For example, since the closing price of our common stock on September 30, 2004, $40.86, was lower than the closing price on June 30, 2004, $54.40, we recorded a contra-expense associated with variable accounting treatment for the third quarter of 2004.

Other Operating Expense (Income)

Included in Other operating expense (income) are restructuring-related expenses or credits and amortization of other intangibles. Amortization of other intangibles was $0.3 million and $1 million for the three months ended September 30, 2004 and 2003.

Our first quarter 2001 operational restructuring plan is complete; however, we may periodically adjust our restructuring-related estimates, such as lease obligations, in the future if necessary.

Cash payments resulting from our 2001 operational restructuring were $2 million, compared with $3 million in 2003.

We streamlined our organizational structure in France to reduce our operating costs. The severance terms associated with these efforts were finalized in the third quarter, and corresponding costs of $4 million were recorded. We expect payment to occur in the fourth quarter of 2004.

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We estimate, based on currently available information, the remaining net cash outflows associated with restructuring-related leases and other commitments will be $5 million in 2004, and $16 million thereafter. Amounts due within twelve months are included within Accrued expenses and other current liabilities and the remaining amounts within Long-term debt and other on our balance sheet. These amounts are net of anticipated sublease income of $25 million (we have signed sublease agreements for $13 million).

Other Income (Expense), Net

Other expense in third quarter 2004 was primarily foreign, state, and other income taxes.

Remeasurements and Other

Remeasurements includes foreign-currency losses on remeasurement of 6.875% PEACS from Euros to U.S. Dollars of $17 million, compared with a loss of $12 million.

Other includes a $7 million gain from the remeasurement of foreign-currency intercompany balances, which are to be repaid amongst subsidiaries, and a $4 million gain on sales of Euro-denominated investments.

Income Taxes

At September 30, 2004, we had net operating loss carryforwards (NOLs) of approximately $2.8 billion, primarily related to U.S. federal taxes. Utilization of NOLs, which begin to expire at various times starting in 2010, may be subject to certain limitations. Approximately $1.0 billion of our NOLs are attributable to continuing operations, and the related tax benefits, if realized, will be credited to results of operations for both financial reporting and tax reporting purposes. The remainder, approximately $1.8 billion, relates to tax deductible stock-based compensation in excess of amounts recognized for financial reporting purposes, and the related tax benefits, if realized, will be credited to stockholders equity rather than to results of operations for financial reporting purposes.

Net Income (Loss)

We believe that our reported net income for the third quarter 2004 should not be viewed, on its own, as a material positive event and is not necessarily predictive of future results for a variety of reasons. For example, we are unable to forecast the effect on our future reported results of certain items, including the effect that fluctuations in foreign currency rates will have on the remeasurement of our 6.875% PEACS and intercompany balances. The remeasurement of our 6.875% PEACS represented a significant charge during the quarter and may result in significant charges or gains in future periods.

Additionally, we are unable to forecast the effect of stock-based compensation, which is based in part on the quoted price of our common stock in accordance with variable accounting treatment. In the third quarter of 2004 variable accounting treatment resulted in a credit to our operating results of $6 million due to a decline in price of our common stock. Comparisons to prior year quarter and year-to-date periods show improvement in operating income of $16 million and $46 million resulting from the effects of changing stock prices on variable accounting treatment. Variable accounting has resulted in significant expense and contra-expense in past periods and will continue to be unpredictable going forward.

Foreign Exchange

As our financial reporting currency is the U.S. Dollar, our total sales, profit, and operating and free cash flow have benefited significantly the past nine quarters from weakness in the U.S. Dollar in comparison to the currencies of our international websites. We believe it is important to evaluate our growth rates after the effect of currency changes.

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The effect of changes in exchange rates in the third quarter is as follows (in millions):


*Effect of exchange rate on:*	2004			2003
Net sales	$	57		$	29
Gross profit		12			6
Operating expenses		(7	)		(5	)
Operating income		4			1
Net interest expense and other		(1	)		(2	)
Remeasurements and other ⁽¹⁾		(6	)		(12	)
Net income (loss)		(3	)		(13	)
Diluted earnings (loss) per diluted share	$	(0.01	)	$	(0.03	)

⁽¹⁾	Includes foreign-currency gains (losses) on remeasurement of 6.875% PEACS and intercompany balances, and realized currency-related gains associated with sales of Euro-denominated investments held by a U.S. functional-currency subsidiary.

These amounts represent the impact on reported results that is due to year-over-year changes in exchange rates. Absent year-over-year changes in exchange rates, reported amounts would have been lower (higher) by these amounts.

Cash Flows and Balance Sheet

Operating cash flows and free cash flows can be volatile and are sensitive to many factors, including changes in working capital. Working capital at any specific point in time is subject to many variables, including world events, seasonality, the timing of expense payments, discounts offered by vendors, vendor payment terms, and fluctuations in foreign exchange rates.

Our cash, cash equivalents, and marketable securities of $1.18 billion, at fair value, primarily consist of cash, commercial paper and short-term securities, U.S. Treasury notes and bonds, asset-backed, and agency securities and certificates of deposit. Included is amounts held in foreign currencies of $693 million, primarily in Euros, British Pounds, and Yen.

We have pledged $76 million of our marketable securities as collateral for property leases and other contractual obligations, compared with $87 million as of December 31, 2003.

On September 7, 2004 we acquired all outstanding shares of Joyo.com Limited, a British Virgin Islands Company, which operates the Joyo.com website in cooperation with Chinese subsidiaries and affiliates. The Joyo.com website is the largest online retailer of books, music, and videos in China, and is Amazon.coms seventh global website. Results of operations for Joyo.com have been included in our consolidated results from the date of acquisition forward. Results were not significant in the third quarter, and are not expected to be significant in the fourth quarter. The purchase price was $74 million, composed of $72 million in cash, the assumption of employee stock options, and transaction-related costs. We recorded $68 million in goodwill related to the acquisition.

Other assets includes, among other things, deferred issuance costs on long-term debt, other equity investments, and intangibles.

Unearned revenue is recorded when payments are received from third parties in advance of our providing the associated service.

Accrued expenses and other current liabilities includes, among other things, liabilities for gift certificates, marketing activities, and workforce costs, including accrued payroll, vacation, and other benefits.

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Long-term debt and other primarily includes the following (in millions):


	Principal at Maturity			Interest Rate	Principal Due Date
Convertible Subordinated Notes	$	900	⁽¹⁾⁽²⁾	4.750%	February 2009
PEACS ⁽³⁾		858	⁽⁴⁾	6.875%	February 2010

	$	1,758	⁽⁵⁾

⁽¹⁾

Convertible at the holders option into our common stock at $78.0275 per share. We have the right to redeem the Convertible Subordinated Notes, in whole or in part, at a redemption price of 102.375% of the principal, which decreases every Februaryby 47.5 basis points until maturity, plus any accrued and unpaid interest.

⁽²⁾	During the previous twelve-month period we redeemed an aggregate principal amount of $350 million: $150 million in February 2004 and $200 million in November 2003.

⁽³⁾	PrEmium Adjustable Convertible Securities.

⁽⁴⁾

690 million principal amount, convertible at the holders option into our common stock at 84.883 per share ($105.56 per share based on the exchange rate as of September 30, 2004). We have the right to redeem the PEACS, in whole or in part, by paying the principal amount, plus any accrued and unpaid interest. We do not hedge any portion of the PEACS. The U.S. Dollar equivalent principal, interest, and conversion price fluctuates based on the Euro/U.S. Dollar exchange ratio. Due to fluctuations in this exchange ratio, our principal debt obligation since issuance in February 2000 has increased by $178 million as of September 30, 2004.

⁽⁵⁾	The if converted number of shares associated with our convertible debt instruments (approximately 20 million total shares) are excluded from diluted shares as their effect is anti-dilutive.

Certain Definitions and Other

We present segment information along two lines: 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 expenses (income), 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 third-party sellers) through www.amazon.com and www.amazon.ca; from North America focused Syndicated Stores, such as www.cdnow.com; from our mail-order tool catalog; and from non-retail activities such as North America focused Merchant.com, marketing, and promotional agreements. 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 third-party sellers) through www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, and, since September 7, 2004, www.joyo.com; from internationally focused Syndicated Stores; and from non-retail activities such as internationally focused marketing and promotional agreements. 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 of books, music, DVD/video, magazine subscriptions, software, video games, and video game consoles. Electronics and other general merchandise consists of amounts earned from retail sales from all sellers of items not included in Media, such as electronics and office, toys and baby, tools, home and garden, apparel, sports and outdoors, gourmet food, jewelry, health and personal care, beauty, and musical instruments. The Other category consists of non-retail activities, such as the Merchant.com program and miscellaneous marketing and promotional activities.

Operating cycle is number of days of sales in inventory plus number of days of sales in accounts receivable minus accounts payable days. Inventory turnover is the quotient of trailing-twelve-months cost of sales to average inventory. Accounts payable days is calculated as the quotient of accounts payable to cost of sales, multiplied by the number of days in the period.

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References to customers mean customer accounts, which are unique e-mail addresses, established either when a customers initial order is shipped or when a customer orders from certain third-party sellers on our websites. Customer accounts include customers of Amazon Marketplace, Auctions and zShops, and our Merchants@ and Syndicated Stores programs, but exclude Joyo.com customers, Merchant.com program customers, Amazon.com Payments customers, our catalog customers, and the customers of select companies with whom we have a technology alliance or marketing and promotional relationship. A customer is considered active when they have placed an order during the preceding twelve-month period.

References to sellers or merchants mean active seller accounts, which are established when a seller receives an order from a customer account. Seller accounts include sellers in Amazons Marketplace, Auctions, zShops, and Merchants@ platforms, but exclude Merchant.com sellers. A seller is considered active when they have received an order during the preceding twelve-month period.

References to units mean units sold (net of returns and cancellations) by us and third-party sellers at Amazon.com domains worldwidesuch as www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, and www.amazon.caand at Syndicated Stores domains, as well as Amazon.com-owned items sold through catalogs and at non-Amazon.com domains, such as books, music, and DVD/video items ordered from Amazon.coms store at www.target.com. Units do not include Joyo.com units sold or Amazon.com gift certificates.


Contacts:

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

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