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Amazon.com Expects Pro Forma Operating Profitability in Fourth Quarter 2001

Fourth Quarter 2000 Pro Forma Operating Loss Improves from 26 Percent to 6 Percent of Net Sales; Announces Restructuring

• Over 35 Percent of Customers Purchase Items from Electronics, Kitchen, Tools or Toys; 
• International Sales More Than Double;
• Gross Profit Up 155 Percent;
• Inventory $175 Million -- 18 Turns

Amazon.com, Inc. announced that net sales for the fourth quarter of 2000 were $972 million, an increase of 44 percent over net sales of $676 million in the fourth quarter of 1999.

The fourth quarter net sales growth reflects exceptionally strong sales in Amazon.com's international sites and its Electronics, Kitchen and Tools & Hardware stores, with Electronics being its second largest U.S. store for the year. In the quarter, over 35 percent of U.S. customers purchased items from the company's Electronics, Kitchen, Tools & Hardware or Toys & Games stores, an increase of 47 percent over the prior year, demonstrating to customers the attractiveness of the Amazon.com platform. For the year ended December 31, 2000, net sales were $2.76 billion, a 68 percent increase over 1999 net sales of $1.64 billion.

"Over the past year, our U.S. pro forma operating loss decreased from 24 percent of net sales in the fourth quarter of 1999 to less than 2 percent in the fourth quarter of 2000,'' said Warren Jenson, Amazon.com chief financial officer. "While the strength of consumer spending remains uncertain, and there are no guarantees, we expect Amazon.com as a whole to reach operating profitability in the fourth quarter of this year.''

"We've evolved a great deal in five years, and in 2000 we learned a tremendous amount about the operating characteristics of our model, while improving our bottom line each quarter of the year,'' said Jeff Bezos, Amazon.com chief executive officer. ``That learning, combined with even more hard work, positions Amazon.com to profitably serve customers better than ever.''

Gross profit for the fourth quarter of 2000 was $224 million, an increase of 155 percent over the prior year. Pro forma operating loss for the fourth quarter of 2000 was $60 million, or 6 percent of net sales, compared to a pro forma operating loss of $175 million, or 26 percent of net sales, in the fourth quarter of 1999. U.S. pro forma operating loss for the fourth quarter of 2000 was $16 million, or 2 percent of U.S. net sales. Fourth-quarter pro forma net loss was $0.25 per share, an improvement over the pro forma net loss of $0.55 per share in the prior year period. While net sales grew 44 percent for the quarter, inventory declined 21 percent from the prior year to $175 million, reflecting improvement in asset turnover.

Fourth-quarter GAAP net loss was $545 million, or $1.53 per share, and includes charges totaling $339 million for the impairment of goodwill and equity investments. This compares to a net loss of $323 million, or $0.96 per share, in the fourth quarter of 1999.

The company also announced a reduction in its corporate staffing and a consolidation of its distribution and customer service center network, resulting in the closure of a distribution center in McDonough, Georgia, and a customer service center in Seattle, Washington. The company's Seattle distribution center will be operated seasonally. This restructuring reduces staffing by approximately 15 percent of Amazon.com's overall workforce, or 1,300 jobs, and will result in a charge in excess of $150 million in the first half of 2001. In addition to a standard severance package, the company has established a trust fund of Amazon.com stock to be distributed to affected employees in 2003.

A conference call to discuss fourth quarter 2000 financial results and the 2001 business outlook will be Webcast live on Tuesday, January 30, 2001, at 5:00 p.m. EST/2:00 p.m. PST. This conference call will be available at www.amazon.com/ir through March 31, 2001, and will contain forward-looking statements and other material information.

Business Outlook

The following forward-looking statements reflect Amazon.com's expectations as of January 30, 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 until its next quarterly results announcement, other than in publicly available statements.

First Quarter 2001 Expectations

• Net sales are expected to grow to between $650 million and $700 million.
• Gross margin is expected to be between 21 percent and 23 percent of net sales.
• Pro forma operating losses are expected to decrease year over year to between 10 percent and 13 percent of net sales.
• Cash and marketable securities are expected to be over $650 million as of March 31, 2001, which includes up to $50 million of cash outflow in connection with the restructuring.

2001 Expectations

• Net sales are expected to increase between 20 percent and 30 percent over 2000.
• Pro forma operating losses are expected to be between 4 percent and 7 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 over $900 million at December 31, 2001. Unless the company chooses to raise cash to further strengthen its balance sheet or for strategic flexibility, it has no reason to do so.

Source: Amazon.com 01/30/01

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