Amazon.com 2005 Annual Report Download - page 52

Download and view the complete annual report

Please find page 52 of the 2005 Amazon.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

Guidance
The Company provided guidance on February 2, 2006 in its earnings release furnished on Form 8-K as
follows:
First Quarter 2006 Guidance
• Net sales are expected to be between $2.14 billion and $2.29 billion, or grow between 13% and 20%,
compared with first quarter 2005.
• Operating income is expected to be between $70 million and $105 million, or decline between (35%)
and (3%), compared with first quarter 2005. This guidance includes $30 million for stock-based
compensation and amortization of intangible assets, and assumes, among other things, that no additional
intangible assets are recorded, and that there are no further revisions to stock-based compensation or
restructuring-related estimates.
Full Year 2006 Expectations
• Net sales are expected to be between $9.85 billion and $10.45 billion, or grow between 16% and 23%,
compared with 2005.
• Operating income is expected to be between $370 million and $510 million, or between (14%) decline
and 18% growth, compared with 2005. This guidance includes $135 million for stock-based
compensation and amortization of intangible assets, and assumes, among other things, that no additional
intangible assets are recorded and that there are no changes to stock-based compensation or
restructuring-related estimates.
These projections are subject to substantial uncertainty. See Item 1A. of Part 1, “Risk Factors.”
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
We are exposed to market risk for the effect of interest rate changes, foreign currency fluctuations, and
changes in the market values of our investments.
Information relating to quantitative and qualitative disclosure about market risk is set forth below and in
Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Liquidity and Capital Resources”.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and
our long-term debt. All of our cash equivalent and marketable fixed income securities are designated as
available-for-sale and, accordingly, are presented at fair value on our balance sheets. We generally invest our
excess cash in investment grade short- to intermediate-term fixed income securities and AAA-rated money
market mutual funds. Fixed rate securities may have their fair market value adversely affected due to a rise in
interest rates, and we may suffer losses in principal if forced to sell securities that have declined in market value
due to changes in interest rates.
44