Amazon.com 2005 Annual Report Download - page 87

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
North America
The North America segment consists of amounts earned from retail sales of consumer products (including
from third-party sellers) and subscriptions through North America-focused websites such as www.amazon.com
and www.amazon.ca; from North America-focused Syndicated Stores, such as www.borders.com; from our
mail-order tool catalog phone orders; from our Amazon Prime membership program; and from non-retail
activities such as North America-focused Amazon Enterprise Solutions, marketing, and promotional agreements.
This segment includes export sales from www.amazon.com and www.amazon.ca.
International
The International segment consists of amounts earned from retail sales of consumer products (including
from third-party sellers) and subscriptions through internationally focused websites such as www.amazon.co.uk,
www.amazon.de,www.amazon.co.jp,www.amazon.fr, and since September 2004, www.joyo.com; from
internationally focused Syndicated Stores; from our DVD rental service and from non-retail activities such as
internationally focused marketing and promotional agreements. This segment includes export sales from these
internationally based sites (including export sales from these sites to customers in the U.S. and Canada), but
excludes export sales from www.amazon.com and www.amazon.ca.
Information on reportable segments and reconciliation to consolidated net income is as follows (in millions):
Year Ended December 31,
2005 2004 2003
(in millions)
North America
Net sales ......................................................... $4,711 $3,847 $3,259
Cost of sales ...................................................... 3,444 2,823 2,392
Gross profit ....................................................... 1,267 1,024 867
Direct segment operating expenses .................................... 971 703 584
Segment operating income ........................................... $ 296 $ 321 $ 283
International
Net sales ......................................................... $3,779 $3,074 $2,005
Cost of sales ...................................................... 3,007 2,496 1,615
Gross profit ....................................................... 772 578 390
Direct segment operating expenses .................................... 502 409 312
Segment operating income ........................................... $ 270 $ 169 $ 78
Consolidated
Net sales ......................................................... $8,490 $6,921 $5,264
Cost of sales ...................................................... 6,451 5,319 4,007
Gross profit ....................................................... 2,039 1,602 1,257
Direct segment operating expenses .................................... 1,473 1,112 896
Segment operating income ........................................... 566 490 361
Stock-based compensation ........................................... (87) (58) (88)
Other operating income (expense) ..................................... (47) 8 (3)
Income from operations ............................................. 432 440 270
Total non-operating expense, net ...................................... (4) (85) (231)
Benefit (provision) for income taxes ................................... (95) 233 (4)
Cumulative effect of change in accounting principle ...................... 26 — —
Net income ....................................................... $ 359 $ 588 $ 35
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