Amazon.com 2000 Annual Report Download - page 28

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including
statements regarding industry prospects and future results of operations or financial position, made in this
Annual Report on Form 10-K are forward looking. We use words such as anticipates, believes, expects, future,
and intends and similar expressions to identify forward-looking statements. Forward-looking statements reflect
management’s current expectations and are inherently uncertain. Our actual results may differ significantly
from management’s expectations. The following discussion includes forward-looking statements regarding
expectations of future operating net profit, net sales, gross profit, certain operating expenses, improvement in
operating loss and cash, cash equivalents and marketable securities balances, all of which are inherently
difficult to predict. Actual results could differ significantly for a variety of reasons, including the rate of growth
of the Internet and online commerce and the U.S and global economies in general, the amount that we invest in
new business opportunities and the timing of those investments, customer spending patterns, the mix of
products sold to customers, the mix of revenues derived from product sales as compared to services, risks of
inventory management, and risks of distribution and fulfillment throughput and productivity. These risks and
uncertainties, as well as other risks and uncertainties that could cause our actual results to differ significantly
from management’s expectations, are described in greater detail in Item 1 of Part I, ‘‘Business—Additional
Factors That May Affect Future Results.’’
Results of Operations
Net Sales
Net sales includes the selling price of consumer products sold by us, less promotional gift certificates and
sales returns; outbound shipping charges billed to our customers; service revenues earned in connection with
our business-to-business strategic relationships (‘‘service revenues’’); and commissions earned from our
Amazon Marketplace, Auctions, zShops, Payments and other service initiatives.
Net sales were $2.8 billion, $1.6 billion and $610 million for 2000, 1999 and 1998, respectively. Increases
in absolute dollars of net sales during 2000 are primarily due to increased unit sales in our existing stores,
enhancements and additions to our product offerings, and increases in our service revenues from strategic
partners. Increases in absolute dollars of net sales during 1999 were due to factors including increased unit
sales and the introduction of new product lines.
Net sales for our U.S. Books, Music and DVD/video segment were $1.7 billion, $1.3 billion and
$588 million for 2000, 1999 and 1998, respectively. Annual growth rates for the U.S. Books, Music, and
DVD/video segment were 30%, 122% and 298% for 2000, 1999 and 1998, respectively. Declines in year-over-
year growth rates during 2000 are reflective of several factors including the relative maturity and increasing
revenue base of this segment, a current-year focus on balancing revenue growth with operating efficiency, a
shift in marketing strategy aimed to expand our business beyond this segment, and a general slowdown in
consumer spending. The decline in growth rate during 1999 as compared to 1998 was due to factors including
the relative maturity and increasing revenue base of the segment.
Net sales for our Early-Stage Businesses and Other segment were $683 million and $164 million for 2000
and 1999, respectively. Our Early-Stage Business and Other segment commenced operations in 1999 and,
accordingly, no corresponding amounts are associated with 1998. Included in net sales for this segment are
U.S.-based consumer products sales and related shipping charges primarily for our electronics and home
improvement stores as well as service revenues. Growth in net sales during 2000 reflects a significant increase
in units sold by our electronics and home improvement stores in comparison with 1999, as well as
enhancements to our existing product offerings with our addition of kitchen and wireless products. Service
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