Amazon.com (AMZN)

SHIPPING; INTRODUCES NEW EXPRESS SHIPPING PROGRAM — AMAZON PRIME

SEATTLE—(BUSINESS WIRE)—February 2, 2005—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its fourth quarter and year ended December 31, 2004.

Operating cash flow was $567 million for 2004, compared with $392 million for 2003. Free cash flow grew 38% to $477 million for 2004, compared with $346 million for 2003. Common shares outstanding plus shares underlying stock-based awards outstanding totaled 434 million at December 31, 2004, compared with 433 million a year ago.

Net sales were $2.54 billion in the fourth quarter, compared with $1.95 billion in fourth quarter 2003, an increase of 31%. Net sales, excluding the $85 million benefit from changes in foreign exchange rates, grew 26% compared with fourth quarter 2003.

Operating income was $162 million in the fourth quarter, compared with $138 million in fourth quarter 2003. Consolidated segment operating income grew 16% to $177 million in the fourth quarter, compared with $153 million in the fourth quarter 2003. Excluding the $5 million benefit from changes in foreign exchange rates, consolidated segment operating income grew 13% compared with fourth quarter 2003.

Net income was $347 million in the fourth quarter, or $0.82 per diluted share, compared with net income of $73 million, or $0.17 per diluted share, in fourth quarter 2003. Pro forma net income in the fourth quarter was $394 million, or $0.93 per diluted share, compared with $125 million, or $0.29 per diluted share, in fourth quarter 2003. Excluding the benefit from realizing a $244 million deferred tax asset related primarily to net operating loss carryforwards attributable to continuing operations, fourth quarter pro forma net income would have been $149 million, or $0.35 per diluted share.

Today the Company also introduced “Amazon Prime,” Amazon.com’s first ever membership program. For a flat membership fee of $79 per year, members get unlimited, express two-day shipping for free, with no minimum purchase requirement. Members also get one-day, overnight shipping for only $3.99 per item—order as late as 6:30PM ET.

“Amazon Prime is ‘all-you-can-eat’ express shipping,” said Jeff Bezos, founder and CEO of Amazon.com. “Though expensive for the Company in the short-term, it’s a significant benefit and more convenient for customers. With Amazon Prime, there’s no minimum purchase to think about, and no consolidating orders—two-day shipping becomes an everyday experience rather than an occasional indulgence.”

Members can also share the benefits of Amazon Prime with up to four family members living in their household. Details can be found at www.amazon.com/prime.

Full Year 2004

Net sales were $6.92 billion in 2004, compared with $5.26 billion in 2003, an increase of 31%. Net sales, excluding the $276 benefit from foreign exchange rates, grew 26% compared with 2003.

Operating income was $440 million in 2004, compared with $271 million in 2003. Consolidated segment operating income grew 36% to $490 million in 2004, compared with $361 million in 2003. Excluding the $20 million benefit from foreign exchange rates, consolidated segment operating income grew 30% in 2004 compared with 2003.

Net income was $588 million in 2004, or $1.39 per diluted share, compared with net income of $35 million, or $0.08 per diluted share, in 2003. Pro forma net income for 2004 was $639 million, or $1.50 per diluted share, compared with $256 million, or $0.61 per diluted share, in 2003. Excluding the benefit from realizing a $244 million deferred tax asset related primarily to net operating loss carryforwards attributable to continuing operations, 2004 pro forma net income would have been $395 million, or $0.93 per diluted share.

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Amazon.com also announced today that on March 7, 2005 it will redeem €200 million ($261 million at the Euro to U.S. dollar exchange rate on January 31, 2005) in principal amount of its outstanding 6.875% Convertible Subordinated Notes due 2010, plus accrued and unpaid interest from and including February 16, 2005 to March 6, 2005, under its previously announced $500 million debt repurchase authorization. No premium payment is required to redeem these notes.