Amazon.com 2000 Annual Report Download - page 32

Amortization of Goodwill and Other Intangibles
Amortization of goodwill and other intangibles was $322 million, $215 million and $43 million for 2000,
1999 and 1998, respectively. These costs increased in 2000 relating to the full year of amortization for the
acquisitions completed in 1999, and increased during 1999 resulting from amortization of goodwill recorded in
connection with acquisitions completed during the first part of 1999. During the fourth quarter of 2000, we
recorded an impairment loss on goodwill and other intangibles of $184 million relating to certain of our 1999
acquisitions (See ‘‘Results of Operations—Impairment-Related and Other’’). This impairment loss reduced our
recorded basis in goodwill and other intangibles as of December 31, 2000 and will have the effect of reducing
amortization expense in 2001. The Financial Accounting Standards Board has tentatively decided to require use
of a nonamortization approach to account for purchased goodwill. Under a nonamortization approach, goodwill
would not be amortized into earnings, but instead would be reviewed for impairment, that is, written down and
charged to earnings only in the periods in which the recorded value of goodwill is more than its fair value. If
this tentative decision is finalized, our amortization of goodwill and other intangibles would significantly
decline in future periods.
Impairment-Related and Other
Impairment-related and other was $200 million, $8 million and $4 million for 2000, 1999 and 1998,
respectively. We record impairment losses on goodwill and other intangible assets when events and
circumstances indicate that such assets might be impaired and the estimated fair value of the asset is less than
its recorded amount. Conditions that would necessitate an impairment assessment include material adverse
changes in operations, significant adverse differences in actual results in comparison with initial valuation
forecasts prepared at the time of acquisition, a decision to abandon acquired products, services or technologies,
or other significant adverse changes that would indicate the carrying amount of the recorded asset might not be
recoverable. During the fourth quarter of 2000, we identified indicators of possible impairment of our recorded
goodwill and other intangibles. Such indicators included the general slowdown in consumer spending, our
decline in market capitalization as determined by the quoted market price for our common stock, the pervasive
and significant declines in e-commerce business valuations in comparison with the market valuations at the
time we invested in our acquisitions, and changes in our strategic plans for certain of our acquired businesses.
Based on the results of our discounted cash flow analyses, we identified certain levels of impairment
corresponding with the business-unit goodwill and other intangibles initially recorded in connection with the
following acquisitions: Alexa Internet, Back to Basics Toys, Inc., Acme Electric Motor Co. (Tool Crib) and
LiveBid.com, Inc. Accordingly, we recorded an impairment loss of $184 million during the fourth quarter of
2000. No impairments were identified in the Company’s enterprise-level goodwill and other intangibles, and no
impairments of goodwill and other intangibles were recorded in 1999 and 1998.
Loss from Operations
Our loss from operations was $864 million, $606 million and $109 million for 2000, 1999 and 1998,
respectively. These increases are primarily due to the aggressive expansion of our business through strategic
acquisitions and investments, new consumer product-line offerings, launching additional internationally-focused
Web sites, and significantly increasing our fulfillment capacity in advance of demand. Additionally, during
2000 our operating loss included impairment-related and other costs of $200 million primarily relating to the
impairment of goodwill and other intangibles. Our operating expenses have historically increased more quickly
than our revenues as we have expanded our operations. We expect that our overall loss from operations
incurred in 2001 will decrease significantly as a percentage of net sales, and in absolute dollars, compared to
2000. However, any such projections are subject to substantial uncertainty. See Item 1 of Part I ‘‘Business—
Additional Factors that May Affect Future Results.’’
Net Interest Expense and Other
Net interest expense and other, excluding ‘‘Non-cash gains and losses,’’ was $100 million, $37 million
and $13 million for 2000, 1999 and 1998, respectively. Included was interest income of $41 million,
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