SEATTLE--(BUSINESS WIRE)--Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its second quarter ended June 30, 2008.

Operating cash flow was $1.09 billion for the trailing twelve months, compared with $0.89 billion for the trailing twelve months ended June 30, 2007. Free cash flow increased 16% to $0.82 billion for the trailing twelve months, compared with $0.70 billion for the trailing twelve months ended June 30, 2007.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 446 million on June 30, 2008, compared with 435 million a year ago.

Net sales increased 41% to $4.06 billion in the second quarter, compared with $2.89 billion in second quarter 2007. Excluding the $0.18 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 35% compared with second quarter 2007.

Operating income increased 86% to $217 million in the second quarter compared with $116 million in second quarter 2007. Excluding the $17 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, operating income grew 71% compared with second quarter 2007. Included in the second quarter 2008 operating income is a $53 million non-cash gain recognized on the sale of our European DVD rental assets.

Net income increased 102% to $158 million in the second quarter, or $0.37 per diluted share, compared with net income of $78 million, or $0.19 per diluted share, in second quarter 2007.

“Customers continue to take advantage of our low prices, free shipping and Amazon Prime,” said Jeff Bezos, founder and CEO of Amazon.com. “Amazon Prime membership costs less than a tank of gas – more and more customers are joining the program and enjoying its benefits.”

Highlights

• Worldwide Media sales grew 31% to $2.41 billion in second quarter 2008, compared with $1.83 billion in second quarter 2007.
• Worldwide Electronics & Other General Merchandise sales grew 58% to $1.53 billion in second quarter 2008, compared with $0.97 billion in second quarter 2007, and increased to 38% of worldwide net sales compared with 34%.
• North America segment sales, representing the Company’s U.S. and Canadian sites, were $2.17 billion, up 35% from second quarter 2007.
• International segment sales, representing the Company’s U.K., German, Japanese, French and Chinese sites, were $1.89 billion, up 47% from second quarter 2007, and increased to 47% of worldwide net sales compared with 45%. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, International sales grew 34%.
• Amazon.com customers can now take advantage of Bill Me Later, a new alternative payment method. Bill Me Later’s next-generation payments service provides customers another convenient payment option when shopping on Amazon.com.
• The Company acquired Fabric.com, a leading online fabric store that offers custom measured and cut fabrics, as well as patterns, sewing tools and accessories.
• Amazon.co.jp launched Convenience Store Pickup Service, which offers customers the option to pick up their orders at any of the 8,500 Lawson stores throughout Japan.
• Over 400,000 developers have registered to use Amazon Web Services (AWS), up more than 30,000 from last quarter.
• AWS released a new family of instance types, the high CPU family. These instances have proportionally more CPU resources than RAM (compared to standard instances) and are well suited for compute-intensive applications such as rendering, search indexing and computational analysis.
• Amazon.com introduced a limited beta version of Amazon Video On Demand. The service lets customers rent or buy ad-free movies and television shows and watch them instantly within their web browser on Macs or PCs and through Sony BRAVIA television sets with the use of the Sony BRAVIA Internet Video Link.

• Kindle selection continued to grow with more than 140,000 titles available.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of July 23, 2008. Results may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce and the various factors detailed below.

Third Quarter 2008 Guidance

• Net sales are expected to be between $4.200 billion and $4.425 billion, or to grow between 29% and 36% compared with third quarter 2007.
• Operating income is expected to be between $115 million and $160 million, or between 6% decline and 31% growth compared with third quarter 2007. This guidance includes approximately $80 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.

Full Year 2008 Expectations

• Net sales are expected to be between $19.35 billion and $20.10 billion, or to grow between 30% and 35% compared with 2007.
• Operating income is expected to be between $745 million and $920 million, or to grow between 14% and 40% compared with 2007. This guidance includes approximately $295 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.

A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains and develops commercial agreements, acquisitions and strategic transactions, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risks related to new products, services and technologies, system interruptions, significant indebtedness, government regulation and taxation, payments and fraud. More information about factors that potentially could affect Amazon.com’s financial results is included in Amazon.com’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2007, and subsequent filings.

About Amazon.com

Amazon.com, Inc. (NASDAQ: AMZN), a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com, Inc. seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices. Amazon.com and other sellers offer millions of unique new, refurbished and used items in categories such as books, movies, music & games, digital downloads, electronics & computers, home & garden, toys, kids & baby, grocery, apparel, shoes & jewelry, health & beauty, sports & outdoors, tools, and auto & industrial.

Amazon Web Services provides Amazon’s developer customers with access to in-the-cloud infrastructure services based on Amazon's own back-end technology platform, which developers can use to enable virtually any type of business. Examples of the services offered by Amazon Web Services are Amazon Elastic Compute Cloud (Amazon EC2), Amazon Simple Storage Service (Amazon S3), Amazon SimpleDB, Amazon Simple Queue Service (Amazon SQS), Amazon Flexible Payments Service (Amazon FPS) and Amazon Mechanical Turk.

Amazon and its affiliates operate websites, including www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and the Joyo Amazon websites at www.joyo.cn and www.amazon.cn.

As used herein, “Amazon.com,” “we,” “our” and similar terms include Amazon.com, Inc., and its subsidiaries, unless the context indicates otherwise.

AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in millions)
(unaudited)
		Three Months Ended								Six Months Ended								Twelve Months Ended
		June 30,								June 30,								June 30,
			2008				2007				2008				2007				2008				2007
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		$	1,496			$	748			$	2,539			$	1,022			$	1,004			$	683
OPERATING ACTIVITIES:
Net income			158				78				301				189				588				306
Adjustments to reconcile net income to net cash from operating activities:
Depreciation of fixed assets, including internal-use software and website development, and other amortization
			70				60				134				122				259				244
Stock-based compensation			73				46				127				80				232				140
Other operating expense (income), net			(45	)			3				(39	)			3				(32	)			7
Losses (gains) on sales of marketable securities, net			-				-				(3	)			1				(3	)			(2	)
Other income, net			9				5				7				9				10				9
Deferred income taxes			(10	)			(2	)			(29	)			-				(128	)			14
Excess tax benefits from stock-based compensation			(43	)			(35	)			(106	)			(60	)			(304	)			(133	)
Changes in operating assets and liabilities:
Inventories			(35	)			25				113				151				(341	)			(193	)
Accounts receivable, net and other			(25	)			(10	)			115				56				(197	)			(113	)
Accounts payable			116				82				(886	)			(520	)			562				319
Accrued expenses and other			62				31				(63	)			(28	)			394				256
Additions to unearned revenue			87				64				165				109				300				223
Amortization of previously unearned revenue			(70	)			(48	)			(134	)			(92	)			(252	)			(182	)
Net cash provided by (used in) operating activities			347				299				(298	)			20				1,088				895
INVESTING ACTIVITIES:
Purchases of fixed assets, including internal-use software and website development
			(69	)			(47	)			(130	)			(82	)			(272	)			(195	)
Acquisitions, net of cash acquired, and other			(44	)			(22	)			(400	)			(22	)			(452	)			(26	)
Sales and maturities of marketable securities and other investments			181				161				452				945				777				2,253
Purchases of marketable securities and other investments			(369	)			(180	)			(750	)			(694	)			(987	)			(2,262	)
Net cash provided by (used in) investing activities			(301	)			(88	)			(828	)			147				(934	)			(230	)
FINANCING ACTIVITIES:
Proceeds from exercises of stock options			6				35				8				44				56				65
Excess tax benefits from stock-based compensation			43				35				106				60				304				133
Common stock repurchased			-				-				-				(248	)			-				(500	)
Proceeds from long-term debt and other			1				-				52				-				83				3
Repayments of long-term debt and capital lease obligations			(36	)			(29	)			(60	)			(46	)			(96	)			(67	)
Net cash provided by (used in) financing activities			14				41				106				(190	)			347				(366	)
Foreign-currency effect on cash and cash equivalents			(8	)			4				29				5				43				22
Net increase (decrease) in cash and cash equivalents			52				256				(991	)			(18	)			544				321
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	1,548			$	1,004			$	1,548			$	1,004			$	1,548			$	1,004
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest		$	1			$	1			$	47			$	44			$	70			$	68
Cash paid for income taxes			15				7				23				10				37				17
Fixed assets acquired under capital leases and other financing arrangements			52				9				67				21				121				68
Fixed assets acquired under build-to-suit leases			13				-				17				-				31				-
Conversion of debt			473				-				473				-				474				-

AMAZON.COM, INC.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
			2008				2007				2008				2007
Net sales		$	4,063			$	2,886			$	8,198			$	5,901
Cost of sales			3,096				2,185				6,275				4,480
Gross profit			967				701				1,923				1,421
Operating expenses (1):
Fulfillment			361				258				715				518
Marketing			102				65				205				137
Technology and content			258				201				492				387
General and administrative			74				58				135				114
Other operating expense (income), net			(45	)			3				(39	)			3
Total operating expenses			750				585				1,508				1,159
Income from operations			217				116				415				262