Amazon.com 2002 Annual Report Download - page 19

‚ an increase in the prices of fuel and gasoline, which are used in the transportation of packages, as
well as an increase in the prices of other energy products, primarily natural gas and electricity,
which are used in our operating facilities.
Finally, both seasonal Öuctuations in Internet usage and traditional retail seasonality are likely to
aÅect our business. Internet usage generally slows during the summer months, and sales in almost all of
our product groups, particularly toys and electronics, usually increase signiÑcantly in the fourth calendar
quarter of each year.
We Have Foreign Exchange Risk
The results of operations of our internationally-focused Web sites are exposed to foreign exchange rate
Öuctuations as the Ñnancial results of the applicable subsidiaries are translated from the local currency into
U.S. Dollars upon consolidation. As exchange rates vary, net sales and other operating results, when
translated, may diÅer materially from expectations.
In addition, our 6.875% Convertible Subordinated Notes due 2010 (""6.875% PEACS'') are
denominated in Euros, not U.S. Dollars. When we periodically remeasure the principal of the 6.875%
PEACS based on Öuctuations in the Euro/U.S. Dollar exchange ratio, we will record non-cash gains or
losses in ""Other gains (losses), net'' on our statements of operations. Furthermore, we have invested some
of the proceeds from the 6.875% PEACS in Euro-denominated cash equivalents and marketable securities.
Accordingly, if the U.S. Dollar strengthens compared to the Euro, cash equivalents and marketable
securities balances, when translated, may be materially less than expected and vice versa.
Our Past and Planned Future Growth Will Place a SigniÑcant Strain on our Management, Operational
and Financial Resources
We have rapidly and signiÑcantly expanded our operations and will endeavor to expand further to
pursue growth of our product and service oÅerings and customer base. Such growth will continue to place
a signiÑcant strain on our management, operational and Ñnancial resources. We also need to train and
manage our employee base. Our current and planned personnel, systems, procedures and controls may not
be adequate to support and eÅectively manage our future operations. We may not be able to hire, train,
retain, motivate and manage required personnel, which may limit our growth.
In addition, we do not expect to beneÑt in our newer market segments from the Ñrst-to-market
advantage that we experienced in the online book channel. Our gross proÑts in our newer business
activities may be lower than in our older business activities. In addition, we may have limited or no
experience in new product and service activities and our customers may not favorably receive our new
businesses. To the extent we pursue strategic alliances to facilitate new product or service activities, the
alliances may not be successful. If any of this were to occur, it could damage our reputation and negatively
aÅect revenue growth.
The Loss of Key Senior Management Personnel Could Negatively AÅect Our Business
We depend on the continued services and performance of our senior management and other key
personnel, particularly JeÅrey P. Bezos, our President, Chief Executive OÇcer and Chairman of the Board.
We do not have ""key person'' life insurance policies. The loss of any of our executive oÇcers or other key
employees could harm our business.
System Interruption and the Lack of Integration and Redundancy in Our Systems May AÅect Our Sales
Customer access to our Web sites directly aÅects the volume of goods we sell and the services we
oÅer and thus aÅects our net sales. We experience occasional system interruptions that make our Web
sites unavailable or prevent us from eÇciently fulÑlling orders or providing services to third parties, which
may reduce our net sales and the attractiveness of our products and services. To prevent system
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