10-QPeriod: Q3 FY2005

AMAZON COM INC Quarterly Report for Q3 Ended Sep 30, 2005

Filed October 27, 2005For Securities:AMZN

Summary

Amazon.com, Inc. (AMZN) reported its third-quarter results for the period ending September 30, 2005. The company demonstrated continued revenue growth, with consolidated net sales increasing by 27% year-over-year to $1.86 billion. This growth was driven by both its North America and International segments, which saw sales rise by 28% and 26% respectively, excluding currency effects. Despite revenue growth, net income for the quarter declined significantly to $30 million from $54 million in the prior year. This decrease was largely attributed to a $40 million patent litigation settlement expense incurred in the current quarter and an increase in the effective tax rate. Operational efficiency remains a focus, with gross profit increasing 30% year-over-year to $463 million, and gross margin improving slightly to 24.9%. Investments in technology and content continue, with significant spending in these areas to enhance customer experience and operational efficiency. The company maintained a strong liquidity position with $1.4 billion in cash, cash equivalents, and marketable securities. Management is focused on long-term free cash flow growth and efficient working capital management.

Key Highlights

  • 1Consolidated net sales increased 27% to $1.86 billion in Q3 2005 compared to $1.46 billion in Q3 2004.
  • 2North America net sales grew 28% (excluding currency effects) to $1.04 billion, while International net sales grew 26% (excluding currency effects) to $817 million.
  • 3Net income decreased to $30 million in Q3 2005 from $54 million in Q3 2004, impacted by a $40 million patent litigation settlement.
  • 4Gross profit increased 30% to $463 million, with gross margin improving to 24.9% from 24.3% in the prior year.
  • 5The company continues to invest in technology and content, with spending in this area increasing by 60% year-over-year for the nine-month period.
  • 6Cash, cash equivalents, and marketable securities totaled $1.4 billion as of September 30, 2005, providing a strong liquidity position.
  • 7The company adopted SFAS 123(R) for stock-based compensation as of January 1, 2005, impacting the presentation of expenses and cash flows.

Frequently Asked Questions

Amazon.com's consolidated net sales for the third quarter of 2005 increased by 27% year-over-year to $1.86 billion, up from $1.46 billion in the same period of 2004. This growth was broad-based across both the North America and International segments.

Net income for Q3 2005 was $30 million, a decrease from $54 million in Q3 2004. This was primarily due to a $40 million expense related to a patent litigation settlement in the current quarter and an increase in the effective tax rate.

Amazon continues to invest heavily in technology and content, with spending in this area increasing significantly year-over-year to enhance customer experience and operational efficiency. Despite these investments and the litigation settlement, gross profit grew 30% year-over-year, indicating effective management of core operational costs and a slight improvement in gross margin.

As of September 30, 2005, Amazon maintained a strong liquidity position with $1.4 billion in cash, cash equivalents, and marketable securities, providing ample resources for ongoing operations and strategic initiatives.