Business Context and Reporting Period
Company: Amazon.com, Inc.
Filing Type: Form 8-K (Current Report)
Date: April 10, 2003
Subject: Regulation FD Disclosure regarding a change in financial reporting segments for 2003.
Amazon announced a restructuring of its reporting segments into North America and International to better reflect how management evaluates performance. This filing provides historical data for 2001 and 2002 restated under the new segment definitions. Consolidated net sales, gross profit, and net income figures remain unchanged by this reclassification.
Key Financial Metrics (2002 Full Year)
The following metrics represent the full year ended December 31, 2002, presented in thousands:
| Metric | North America | International | Consolidated |
|---|---|---|---|
| Net Sales | $2,761,457 | $1,171,479 | $3,932,936 |
| Gross Profit | $740,985 | $251,633 | $992,618 |
| Segment Income | $179,667 | $435 | $180,102 |
| Net Income (Loss) | $(149,132) |
Revenue Mix (2002): Media accounted for 79% of consolidated revenue, while Electronics and other general merchandise accounted for 19%. Non-retail "Other" activities comprised 2%.
Material Changes vs. Prior Period
Comparing 2002 to 2001, the company demonstrated significant growth and improved profitability:
- Revenue Growth: Consolidated net sales increased 26% year-over-year. International sales grew 77%, significantly outpacing North America's 12% growth.
- Profitability: Consolidated Net Loss improved dramatically from $(567,277) in 2001 to $(149,132) in 2002.
- Segment Performance:
- North America: Achieved positive segment income of $179,667 in 2002, compared to a loss of $(57,501) in 2001.
- International: Narrowed its segment loss significantly, moving from $(102,503) in 2001 to a near-breakeven $435 in 2002.
- Expense Reduction: Restructuring-related expenses dropped from $181,585 in 2001 to $41,573 in 2002. Amortization of goodwill decreased from $181,033 in 2001 to $5,478 in 2002.
Outlook, Risks, and Unusual Items
- Future Reporting: First quarter 2003 segment results will be reported on April 24, 2003.
- Segment Definitions:
- North America: Includes retail sales via amazon.com and amazon.ca, Syndicated Stores, and non-retail activities like Merchant.com.
- International: Includes retail sales via amazon.co.uk, .de, .fr, and .jp, plus export sales from these sites. It explicitly excludes export sales from the US/Canada sites.
- Unusual Items: The 2001 results included a cumulative effect of a change in accounting principle of $(10,523), which is not present in 2002.
Investor Verification Checklist
- Verify the April 24, 2003 earnings release for Q1 2003 results under the new segment structure.
- Confirm the sustainability of the International segment's path to profitability, given its historical losses.
- Review the composition of "Electronics and other general merchandise" revenue, which showed high volatility in growth rates (e.g., 1,054% growth in Q1 2002 International).
- Monitor stock-based compensation trends, which fluctuated significantly between quarters in 2002.
