Amazon.com 2001 Annual Report Download - page 84

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
U.S. Electronics, Tools and Kitchen Segment
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, camera and photo items, software,
computer and video games, cell phones and service, tools and hardware, outdoor living items, kitchen and
houseware products, toys and video games sold other than through the Company’s strategic alliance with
Toysrus.com, Inc., as well as catalog sales of toys, tools and hardware. This segment also includes commissions
from sales of these products, new or used, through Amazon Marketplace and commissions and other amounts
earned from offerings of these products by third-party sellers through the Company’s [email protected]
Program, such as its strategic alliance with Circuit City.
Services Segment
The Services segment includes revenues, direct costs, and cost allocations associated with the Company’s
business-to-business strategic alliances, including the Merchant Program and, to the extent product categories are
not also offered by the Company through its online retail stores, the [email protected] Program, as well as
the strategic alliance with America Online, Inc. This segment also includes Auctions, zShops and Payments, and
miscellaneous marketing and promotional agreements.
In 2001, the Company entered into numerous strategic alliances with such companies as America Online
and Target Corporation in the U.S., and Virgin Wines in the U.K. The Company also expanded its strategic
alliance with Toysrus.com to include Babiesrus.com and Imaginarium.com co-branded stores at
www.amazon.com. In addition, the Company entered into strategic alliances with Expedia, Inc., Hotwire and
National Leisure Group, Inc. to create a travel store. Amounts associated with each of these strategic alliances are
included in the Services segment. In 2001, the strategic alliance with Toysrus.com contributed a significant
amount of revenue to the Services segment.
Included in service revenues are equity-based revenues of $27 million, $79 million and $7 million for 2001,
2000 and 1999 respectively. Equity-based service revenues result from private and public securities received and
amortized into results of operations. Also included in services revenues are $2 million and $29 million for 2001
and 2000, respectively, representing amounts associated with sales of inventory, at cost, to Toysrus.com in
connection with the transition of the toys and video games product categories to Toysrus.com. No such amounts
were recorded during 1999.
International Segment
The International segment includes all revenues, direct costs, and cost allocations associated with the retail
sales of the Company’s four internationally-focused Web sites: www.amazon.co.uk,www.amazon.de,
www.amazon.fr and www.amazon.co.jp. These international sites share a common Amazon.com experience, but
are localized in terms of language, products, customer service and fulfillment. This segment includes
commissions and other amounts earned from offerings of products by third-party sellers through the Company’s
[email protected] Program, and product revenues from stores offering these products through the
Company’s internationally-focused Syndicated Stores program, such as our Syndicated Store at
www.waterstones.co.uk.
The Company measures the results of operations of its reportable segments using a pro forma measure. Pro
forma results from operations, which excludes stock-based compensation, amortization of goodwill and other
intangibles, and restructuring-related and other charges are not in conformity with accounting principles
generally accepted in the United States.
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