updated 3/11/2005 2:40:39 PM ET 2005-03-11T19:40:39

Amazon.com Inc. has settled a securities class action for $27.5 million that alleged its executives lied about the company's financial condition.

In its annual report filed with the Securities and Exchange Commission, the Seattle-based Internet retailer said the plaintiffs alleged in August 2003 that the company and some of its officers made false or misleading statements from Oct. 29, 1998, through Oct. 23, 2001.

It said it expects most, if not all, of the settlement will funded by its insurers.

The company said it is facing another lawsuit alleging that it made false or misleading statements in connection with a February 2000 offering of convertible bonds.

Elsewhere in the filing, the company said that Cendant Publishing Inc., a unit of Cendant Corp., voluntarily withdrew its patent infringement lawsuit against Amazon.com in February.

The Cendant unit filed the lawsuit Oct. 29 alleging that the Amazon's recommendations feature infringes on a patent.

In other litigation, Amazon.com said Pinpoint Inc. refiled its patent infringement lawsuit, which also has to do with the recommendations feature, against Amazon and other companies in March. The original lawsuit, filed in July 2003, was dismissed without prejudice in December 2004.

Amazon.com said its expects its net income for 2005 to decline from a year ago because of a tax provision and expects it will pay taxes of $25 million for the period, compared with $4 million in 2004. The filing didn't provide further information.

In the year ended Dec. 31, 2004, the company received a tax benefit of $232.6 million, which led to 2004 net income of about $588.5 million. Amazon.com made changes in its valuation assessment of deferred tax assets during 2004.

Amazon.com reiterated that it expects net sales of between $8.05 billion and $8.65 billion for 2005. It expects operating income of $385 million and $510 million, which assumes, among other things, stock compensation expense of $115 million, and no further revisions to its restructuring-related estimates.

In 2004, Amazon.com had sales of $6.92 billion and operating income of $440.4 million.

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