Amazon.com Announces Operating Profit, Lowers Book Prices Again and Raises Financial Guidance — Third Price Cut in Nine Months Effective Today

Business Wire, April 23, 2002

Business Editors

SEATTLE--(BUSINESS WIRE)--Apr. 23, 2002

Amazon.com, Inc. (NASD:AMZN) today announced financial results for its first quarter ended March 31, 2002, and further reductions in book prices.

Net sales for the quarter were $847 million, compared with $700 million in the first quarter of 2001, an increase of 21%.

The Company recorded a first quarter 2002 operating profit of $2 million, compared with a loss of $217 million a year ago. Net loss for the first quarter of 2002 was $23 million, or $0.06 per share, compared with a first quarter 2001 net loss of $234 million (including restructuring-related and other charges of $114 million and goodwill amortization of $49 million), or $0.66 per share.

Amazon.com exceeded its pro forma operating profit goal for the quarter. Pro forma operating profit was $25 million, compared with a loss of $49 million in the first quarter of 2001, an improvement of over $70 million. Pro forma net loss, which includes net interest expense, for the first quarter of 2002 was $5 million, or $0.01 per share, compared with a pro forma net loss of $76 million, or $0.21 per share, in the first quarter of 2001. (Details on the differences between GAAP results and pro forma results are included below, with a tabular reconciliation of those differences included in the attached financial statements.)

The Company also announced that, effective today, Amazon.com has lowered book prices again. Customers can now save 30% on books over $15, unless marked otherwise.

"Last July we lowered book prices to 30% off books over $20, then six months later we introduced free Super Saver Shipping on orders over $99. Today, we're thrilled to extend our 30% discount to include books over $15," said Jeff Bezos, founder and CEO of Amazon.com. "We said we're the type of retailer that relentlessly works to lower prices for customers, but we didn't expect to be able to do it again so soon."

"We are ahead of schedule financially. Our continued operational progress and momentum allow us to further lower prices for customers and at the same time increase our 2002 guidance," said Warren Jenson, chief financial officer. "It's the best of all worlds -- lower prices for customers, better customer service and lower costs -- all driving us toward our objective of free cash flow for the year."

Highlights of First Quarter Results (comparisons are with the equivalent period of 2001)

-- Our segment reporting includes four segments: U.S. Books, Music and
DVD/Video; U.S. Electronics, Tools and Kitchen; International; and Services.
Allocation methodologies have been consistently applied.

-- 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, DVDs, video products and magazine subscriptions, and from stores
offering these products through our Syndicated Stores Program (whereby a
third-party seller's e-commerce Web site uses our e-commerce services and
tools, and offers our product selection), such as www.borders.com. This segment
also includes commissions and other amounts earned from sales of these
products, new or used, through Amazon Marketplace, and will include amounts
earned from offerings of these products by third-party sellers, if any, under
our Merchant@amazon.com Program (whereby a third-party seller offers its
products or services for sale on our Web site, either in our retail stores or
in a cobranded store on our Web site, or both).

-- The U.S. Electronics, Tools and Kitchen segment includes revenues, direct
costs and cost allocations associated with www.amazon.com retail sales of
electronics, computers, kitchen products and housewares, camera and photo
items, software, cell phones and service, tools and hardware, outdoor living
items, and computer and video game products, sold other than through our
Toysrus.com strategic alliance, as well as catalog sales of toys and tools and
hardware, and will include stores offering these products, if any, through our
Syndicated Stores Program. This segment also includes commissions earned from
sales of these products, new or used, through Amazon Marketplace and from
offerings of these products by third-party sellers under our
Merchant@amazon.com Program, such as Circuit City.

-- The International segment includes all revenues, direct costs and cost
allocations associated with the retail sales of our four internationally
focused Web sites--www.amazon.de, www.amazon.fr, www.amazon.co.jp and
www.amazon.co.uk--and from stores offering products through our Syndicated
Stores Program. This segment also includes commissions and other amounts earned
from sales of products, new or used, through Amazon Marketplace, and amounts
earned from offerings of products by third-party sellers, if any, under our
Merchant@amazon.com Program.

-- The Services segment includes revenues, direct costs and cost allocations
associated with our business-to-business strategic alliances, including the
Merchant Program (whereby a third-party seller's e-commerce Web site operates
at its own URL using our features and technology), such as www.target.com
beginning summer 2002, and, to the extent full product categories are not also
offered by our online retail stores, the Merchant@amazon.com Program, such as
our strategic alliance with Toysrus.com, as well as the strategic technology
alliance with America Online, Inc. This segment also includes Amazon Auctions,
zShops and Payments, and miscellaneous marketing and promotional agreements.

-- All references to customers mean customer accounts, which are unique e-mail
addresses, established either when a customer's initial order is shipped or
when a customer orders from certain third-party sellers on Amazon.com. Customer
accounts include customers of Amazon Marketplace, Auctions and zShops services
and from our Merchant@amazon.com and Syndicated Stores Programs, but exclude
Amazon.com Payments customers, our catalog customers and the customers of
selected companies with whom we have strategic marketing and promotional
relationships.

-- Trailing twelve-month net sales per active customer account figures include
all amounts earned through Internet sales, including net sales earned from new
or used products sold through Amazon Marketplace, Auctions and zShops services,
and products sold through our Merchant@amazon.com and Syndicated Stores
Programs, but excluding products sold through our catalogs and certain
strategic alliances and sales of inventory to Toysrus.com. A customer is
considered active upon placing an order.