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AMAZON.COM ANNOUNCES FINANCIAL RESULTS
FOR THIRD QUARTER 1998
AMAZON.COM BECOMES #1 ONLINE MUSIC RETAILER WITH SALES OF $14.4 MILLION;
FIRST QUARTER TO ADD MORE THAN 1 MILLION CUSTOMERS
SEATTLE, WA-(October 28, 1998)-Amazon.com, Inc. (NASDAQ: AMZN) today announced
financial results for the third quarter of 1998. Net sales were $153.7 million,
an increase of 306 percent over net sales of $37.9 million for the third quarter
of 1997. Amazon.com also became the #1 online music retailer in its first full
quarter of music sales.
Amazon.com reported a third quarter pro forma operating loss of $21.0 million,
or 14 percent of net sales, compared to an operating loss of $10.3 million, or
27 percent of net sales, in the prior year. Pro forma net loss of $24.7 million,
or $0.49 per share, compared with a net loss of $9.6 million, or $0.21 per
share, in the third quarter of 1997. On a GAAP basis, reported third-quarter net
loss was $0.90 per share, and included $20.5 million of merger- and
acquisition-related costs.
Amazon.com announced that cumulative customer accounts increased by over 1.2
million during the third quarter to nearly 4.5 million at September 30, 1998, an
increase of over 377 percent from 940,000 customer accounts at September 30,
1997. Repeat customer orders represented more than 64 percent of orders placed
during the quarter ended September 30, 1998.
"We are very grateful to our customers for choosing Amazon.com as their online
music store so quickly," said Jeff Bezos, Amazon.com founder and chief executive
officer. "We work hard to earn the confidence of our customers. We're known for
service, ease of use, selection, and everyday low prices, and these are the
reasons our customers have made us the leading online music retailer. Though
pleased with these results, we know our growth initiatives will continue to
require aggressive investment and entail significant execution challenges."
RECENT HIGHLIGHTS
AMAZON.COM BECOMES THE #1 ONLINE MUSIC STORE, ADDS CLASSICAL
Third-quarter music sales were $14.4 million, the first full quarter following
the June launch of Amazon.com's music store. Amazon.com exited the quarter as
the leading online retailer of music less than four months after its launch.
Customer response was strong, augmented by the September launch of its
classical-music store.
Adding to the success of its overall music store, Amazon.com opened the
classical section of this store in early September. The classical section has
added more than 47,000 classical and opera CDs to the existing Amazon.com music
store, pushing the store's
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total number of CDs to more than 225,000--25 times the selection of the average
physical music store. Amazon.com also introduced a variety of classical-specific
features to help shoppers find and discover exactly the right CD, regardless of
their familiarity with classical music. Among those features are thousands of
classical-music reviews, editors' recommendations for more than 1,000 essential
classical and opera CDs, and more than 1,000 narrow-niche classical and opera
bestseller lists.
AMAZON.COM FORMALLY ENTERS EUROPEAN BOOK MARKET
In October Amazon.com formally entered the European market with the launch of
new stores in Germany and the United Kingdom. Amazon.de and Amazon.co.uk
replaced sites once operated by Telebook in Germany and Bookpages in the U.K.
Amazon.com purchased both companies in April. For the first time on a local
basis, the stores make available to Europeans a vast selection of titles,
guaranteed safety of transactions, unparalleled convenience, and electronic gift
certificates for worry-free gift giving. The two sites will significantly reduce
the cost and shipping time for thousands of U.S. titles, thanks to a large
supply of popular U.S. titles ready for immediate shipment from the U.K. and
Germany.
Amazon.de is headquartered and has a distribution center in Regensburg, Germany,
with editorial and marketing offices in Munich, Germany. The store initially
features over 400,000 titles from German publishers, as well as fast and easy
access to nearly 500,000 U.S. titles. Amazon.co.uk is headquartered and has a
distribution center in Slough, England. The store carries a complete catalog of
over 1.2 million titles from U.K. publishers, along with fast and easy access to
over 200,000 U.S. titles. Each store offers speedy delivery and an array of
personalization features to better serve book buyers, including instant
recommendations.
You can find these sites at www.amazon.de and www.amazon.co.uk.
AMAZON.COM ACQUISITIONS OF PLANETALL AND JUNGLEE
In August Amazon.com acquired two companies: PlanetAll and Junglee. PlanetAll
provides a unique Web-based address book, calendar, and reminder service.
Junglee is the leading provider of advanced Web-based virtual database (VDB)
technology that can help shoppers find and discover products on the Internet.
Together, these acquisitions are intended to speed Amazon.com's enhancement of
the e-commerce experience for its customers.
Amazon.com acquired 100 percent of Junglee and PlanetAll in exchange for equity
having an aggregate value of approximately $280 million. The PlanetAll
acquisition was accounted for as a pooling-of-interests and, as a result,
Amazon.com's financial statements have been restated for all periods presented.
The Junglee acquisition was accounted for under the purchase method of
accounting, with substantially all of the approximately $180 million purchase
price allocated to goodwill and other purchased
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intangibles. The goodwill and other purchased intangible assets will be
amortized on a straight-line basis over lives averaging approximately 3 years.
GROWING ASSOCIATE RELATIONSHIPS
In early September Amazon.com augmented its growing list of Associate
relationships when it announced one of the most extensive global merchant
programs on the Internet, featuring Amazon.com as the premier book merchant
throughout many of Yahoo!'s World sites. Amazon.com Associates now number more
than 140,000. Web-site operators continue to prefer Amazon.com for the powerful
benefits they receive from Amazon.com's leading traffic, content, customer
experience, brand, service, and cross-product capabilities.
ABOUT AMAZON.COM, INC.
Amazon.com, Inc., Earth's biggest book and music store (NASDAQ: AMZN), opened
its virtual doors on the World Wide Web in July 1995. Today, the Amazon.com
store offers more than 3 million books, CDs, audiobooks, DVDs, computer games,
and other titles, plus easy-to-use search-and-locate features, secure
credit-card payment, personalized recommendations, streamlined ordering through
1-Click(SM) technology, and direct shipping. In addition to its U.S.-based
bookstore, www.amazon.com, Amazon.com operates two European bookstore Web sites:
www.amazon.co.uk in the United Kingdom and www.amazon.de in Germany. Amazon.com
also operates PlanetAll (www.planetall.com), a Web-based address book, calendar,
and reminder service, and the Internet Movie Database (www.imdb.com), the Web's
comprehensive and authoritative source of information on more than 150,000
movies and entertainment programs and 500,000 cast and crew members dating from
the birth of film in 1892 to the present.
This announcement contains forward-looking statements that involve risks and
uncertainties that include, among others, Amazon.com's limited operating
history, anticipated losses, the unpredictability of its future revenues,
competition, risks associated with system development and operation risks,
management of potential growth, and risks of new business areas, international
expansion, business combinations, and strategic alliances. 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, 1997,
as amended by the Form 8-K filed September 11, 1998, and quarterly reports on
Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998.
NOTE ON FINANCIAL PRESENTATION
GAAP financial results are prepared in accordance with generally accepted
accounting principles. All of the charges associated with Amazon.com's merger
and acquisition activities have been included in the single-income-statement
line item titled "merger- and acquisition-related costs" in order to enhance the
informational value of the financials and to present the most comparable
classifications in the other line items. Among items
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included in merger- and acquisition-related costs are one-time merger-related
costs and purchase-price elements, including amortization of goodwill and other
purchased intangibles. Pro forma financial results exclude these merger- and
acquisition-related costs.
Amazon.com, Earth's Biggest Bookstore, and 1-Click are either registered
trademarks or trademarks of Amazon.com, Inc. All other names mentioned herein
may be trademarks of their respective owners.
Contacts:
Karen Cho Kay Dangaard
Investor Relations Media Relations
Amazon.com, Inc. Amazon.com, Inc.
(206) 694-2171 (206) 834-7180
ir@amazon.com dangaard@amazon.com
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AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
(Unaudited) (Unaudited)
Net sales $ 153,698 $ 37,887 $ 357,103 $ 81,747
Cost of sales 118,823 30,717 276,679 65,842
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Gross profit 34,875 7,170 80,424 15,905
Operating expenses:
Marketing and sales 37,517 11,516 84,522 23,596
Product development 13,374 3,998 29,526 8,650
General and administrative 4,978 1,972 10,342 4,930
Merger and acquisition related costs 20,512 -- 25,925 --
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Total operating expenses 76,381 17,486 150,315 37,176
Loss from operations (41,506) (10,316) (69,891) (21,271)
Interest income 4,754 688 9,789 1,118
Interest expense (8,419) (19) (18,017) (59)
------------- ------------- ------------- -------------
Net interest income (expense) (3,665) 669 (8,228) 1,059
Net loss $ (45,171) $ (9,647) $ (78,119) $ (20,212)
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Basic and diluted loss per share $ (0.90) $ (0.21) $ (1.60) $ (0.48)
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Shares used in computation of basic
and diluted loss per share 50,234 45,865 48,700 42,438
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PRO FORMA RESULTS EXCLUDING MERGER
AND ACQUISITION RELATED COSTS
Pro forma loss from operations, excluding merger and
acquisition related costs $ (20,994) $ (10,316) $ (43,966) $ (21,271)
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Pro forma net loss, excluding merger and acquisition
related costs $ (24,659) $ (9,647) $ (52,194) $ (20,212)
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Pro forma basic and diluted loss per share, excluding
merger and acquisition related costs $ (0.49) $ (0.21) $ (1.07) $ (0.48)
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Shares used in computation of pro forma basic
and diluted loss per share 50,234 45,865 48,700 42,438
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NOTE: Pro forma results for the quarter and nine months ended September 30, 1998
and 1997 are presented for informational purposes only. These results present
the operating results of Amazon.com, excluding charges of $20.5 million and
$25.9 million for the quarter and nine months ended September 30, 1998,
respectively, for merger and acquisition related costs arising from Amazon.com's
April 1998 acquisitions of Bookpages, Telebook and Internet Movie Database, and
the August 1998 acquisitions of Junglee and PlanetAll, and are not prepared in
accordance with generally accepted accounting principles.
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AMAZON.COM, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -------------
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash $ 14,856 $ 1,876
Marketable securities 322,404 123,499
Inventories 19,772 8,971
Prepaid expenses and other 17,625 3,363
------------- -------------
Total current assets 374,657 137,709
Fixed assets, net 23,821 9,726
Deposits and other 582 169
Goodwill and other purchased intangibles, net 213,064 --
Deferred charges 7,590 2,240
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Total assets $ 619,714 $ 149,844
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LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 60,046 $ 33,027
Accrued advertising 11,857 3,454
Other liabilities and accrued expenses 26,868 6,570
Current portion of long-term debt 684 1,500
------------- -------------
Total current liabilities 99,455 44,551
Long-term debt 340,392 76,521
Long-term portion of capital lease obligation 103 181
Stockholders' Equity:
Preferred stock, $0.01 par value:
Authorized shares -- 10,000,000
Issued and outstanding shares -- none -- --
Common stock, $0.01 par value:
Authorized shares -- 300,000,000
Issued and outstanding shares -- 52,725,622
and 48,302,958 shares, respectively 527 483
Additional paid-in capital 298,322 67,552
Note receivable from officer for common stock (1,099) --
Deferred compensation (2,943) (1,930)
Other gains (losses) 590 --
Accumulated deficit (115,633) (37,514)
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Total stockholders' equity 179,764 28,591
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Total liabilities & stockholders' equity $ 619,714 $ 149,844
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