Forum Archive Index - January 2002

["Mike Hudson" <mikehudson@clear.net.nz>]

Below is an extract from the Amazon 4^th Quarter announcement. Apparently there are two different measures of profit GAAP (Generally Accepted Accounting Principles) which is what most of us lay people would understand as profit and "Pro Forma" which is what the company prefers to present.

This is the explanation of "pro forma".

"Management measures the progress of the business using pro forma operating results, which exclude the following line items on the Company's statements of operations:

• Stock-based compensation
• Amortization of goodwill and other intangibles
• Restructuring-related and other

Pro forma net results exclude, in addition to the line items described above, the following line items on our statements of operations:

• Other gains (losses), net
• Equity in losses of equity-method investees, net
• Cumulative effect of change in accounting principle"

Would any one like to hazard a guess at the actual numbers? I wouldn’t have a clue although it looks to me as though there was a loss of $7m. What ever it was it pleased the punters as the share price of this turkey rose 24% today. Perhaps Snoopy or Peter might like to run the rule over the full announcement at http://biz.yahoo.com/bw/020122/220044_1.html

The sooner this "pro forma" nonsense is knocked on the head the better. What amazes me is that analysts and brokers swallow it hook line and sinker.

AMAZON.COM, INC.

Statements of Operations

(in thousands, except per share data) (unaudited)

                                               Three Months Ended             Year Ended

                                                      December 31,                December 31,

---------------------------------------------------------------------------------------------------------------------------

                                              2001              2000               2001               2000

----------------------------------------------------------------------------------------------------------------------------

Net sales                              $ 1,115,171      $ 972,360     $ 3,122,433       $ 2,761,983

Cost of sales                              841,122         748,060       2,323,875           2,106,206

----------------------------------------------------------------------

Gross profit                                  274,049         224,300       798,558               655,777

Operating expenses:

Fulfillment                                   109,019        131,028        374,250               414,509

Marketing                                       34,450         55,195         138,283              179,980

Technology and content                  52,325             69,791 2       41,165 2           69,326

General and A                                 19,575          28,232             89,862           108,962

Stock-based compensation               1,937            (1,112)              4,637 2           4,797

Amortization of goodwill andother

intangibles                                    37,537            79,210               181,033      321,772

Restructuring-related and

other                                             4,681          184,052                 181,585       200,311

----------------------------------------------------------------------------------------------------------------------------------

Total operating expenses               259,524         546,396               1,210,815    1,519,657

------------------------------------------------------------------------------------------------------------------------------------

Income (loss) fromoperations           14,525         (322,096)               (412,257)    (863,880)

Interest income                                6,030         10,979                       29,103        40,821

Interest expense                           (35,290)        (36,094)                    (139,232)  (130,921)

Other income(expense), net             5,365           (5,365)                        (1,900)    (10,058)

Other gains(losses), net                 16,312         (155,005)                      (2,141)  (142,639)

----------------------- --------------------------------------------------------------------------------------------------------------

Net interest expense and other       (7,583)         (185,485)                   (114,170) (242,797)

----------------------------------------------------------------------------------------------------------------------------------------

Income (loss) before equity in losses of

equity-method investees                6,942            (507,581)                   (526,427)  (1,106,677)

Equity in losses ofequity-method

investees, net                               (1,855)             (37,559)                   (30,327)    (304,596)

------------------------------------------------------------------------------------------------------------------------------------------

Income (loss) beforechange in

accounting principle                      5,087              (545,140)                 (556,754)    (1,411,273)

Cumulative effect ofchange in accounting

principle - -                                                                                            (10,523) -

--------------------------------------------------------------------------------------------------------------------------------------------

Net income (loss)                            $ 5,087         $ (545,140)                $ (567,277)  $ (1,411,273)

======================================================================

Cheers

Mike H