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AMAZON.COM ANNOUNCES FINANCIAL RESULTS
FOR SECOND QUARTER 1999
AMAZON.COM'S COMMUNITY OF ONLINE SHOPPERS GROWS TO 10.7 MILLION
SEATTLE, Washington--July 21, 1999--Amazon.com, Inc. (NASDAQ: AMZN),
today announced financial results for the second quarter of 1999. Net sales for
the second quarter were $314.4 million, an increase of 171 percent over net
sales of $116.0 million for the second quarter of 1998.
Amazon.com reported a second-quarter pro forma operating loss of $67.3
million, or 21 percent of net sales, compared to a pro forma operating loss of
$12.8 million, or 11 percent of net sales, in the second quarter of 1998.
Second-quarter pro forma net loss of $82.8 million, or $0.51 per share, compared
with a pro forma net loss of $17.0 million, or $0.12 per share, in the second
quarter of 1998. On a GAAP basis, reported second-quarter net loss was $138.0
million, or $0.86 per share, and included $55.2 million of merger-,
acquisition-, investment-related costs and stock-based compensation charges.
Amazon.com announced that cumulative customer accounts, including
Auctions bidders and sellers, increased by 2.3 million during the second quarter
to 10.7 million at June 30, 1999, an increase of more than 220 percent from the
3.3 million customer accounts at June 30, 1998. Repeat customer orders
represented more than 70 percent of orders during the quarter ended June 30,
1999.
"We did a lot this quarter," said Jeff Bezos, Amazon.com founder and
CEO. "We're especially pleased that Amazon.com Auctions is our fastest-growing
business. And looking at the first few days of sales in our new Toys and
Electronics stores, we're shocked and grateful. In fact, we believe we're
already the No. 1 seller of children's products online."
Regarding Amazon.com's ongoing expansion, Bezos added, "We continue to
make great progress building out world-class distribution that will give
customers greater availability, faster shipping times, and even better service.
We have and will continue to invest in systems, people, and product expansion,
each of which helps us better serve customers. For the rest of 1999, we expect
to invest more heavily than we have in the past. Our goal remains to build the
world's most customer-centric company."
RECENT HIGHLIGHTS
10 MILLION CUSTOMERS; EXTENDING GLOBAL BRAND AND REACH
Less than four years after opening on the Internet, Amazon.com announced
in June that it had become the first e-commerce store to serve its 10 millionth
customer. In October 1997, Amazon.com became the first Internet retailer to
serve 1 million customers, and its cumulative customer base has grown tenfold in
21 months and is now equivalent to the population of Greece. These 10 million
customers represent an
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e-commerce watershed reflecting the appeal of online shopping to a broad range
of customers.
Amazon.com's brand and reach continued to grow during the second
quarter. Heads-down focus on customers helped make Amazon.com both the No. 1
online shopping site and the No. 8 Web property overall in the United States
during June, according to Media Metrix June 1999 data. An April study by Opinion
Research Corporation International of Princeton, New Jersey, estimated that 52
percent of the 196 million U.S. adults recognized Amazon.com, making it the
leading e-commerce brand in the country in terms of awareness. And on a
worldwide level, a June study of all global brands by Interbrand Newell and
Sorrell ranked Amazon.com as the 57th most valuable brand worldwide, just above
Hilton, Guinness, and Marriott, and just below Pampers.
AMAZON.COM LAUNCHES TOYS AND ELECTRONICS
Last week, Amazon.com launched two completely new stores: Amazon.com
Electronics and Amazon.com Toys. Together, these two stores turn what consumers
say are among the most difficult shopping experiences into hassle-free ones. In
a nationwide poll of people who have bought toys and electronics in stores, more
than half said they would prefer to buy toys and electronics online.
Amazon.com Electronics features a full range of popular electronics
products and brands: everything from the latest digital camcorders to computer
peripherals to televisions. Amazon.com Toys offers a broad selection ranging
from hot new toys usually found at superstores to specialty toys from hundreds
of small toymakers. Both new stores offer broad selection, great convenience,
low prices, and comprehensive information to help customers buy the right
products. In addition, both stores feature a no-risk returns policy and are
supported by Amazon.com's world-class customer service department so that
customers can buy electronics, toys, and games online with complete confidence.
AMAZON.COM AUCTIONS AND SOTHEBY'S
In June, Amazon.com announced its partnership with Sotheby's to launch a
joint online auction site. This 10-year alliance between the world's leading
e-commerce company and the international art auction house will create a new
standard in online buying and selling of authenticated and guaranteed auction
property. Sellers on this joint auction site will have the opportunity to market
to Amazon.com's more than 10.7 million customers with the benefit of Sotheby's
255-year art and auction expertise. The joint site will be devoted to the
general antiques collector and to the world of collectibles, featuring coins,
stamps, sports, and Hollywood memorabilia, fashion, animation art, toys, dolls,
and other collectibles, as well as general art and antiques, books, and jewelry.
CUSTOMER EXPERIENCE
In May, Amazon.com began its everyday 50% discount on The New York Times
Best Seller list. The Amazon.com 50% discount, which is not a sale or short-term
promotion but everyday low pricing, applies to hardcover and paperback titles in
the best seller list's three generic categories: fiction, nonfiction, and
miscellaneous--at least 68
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titles each week at 50% off. In addition, Amazon.com continues to offer up to
40% off on hundreds of thousands of other titles.
In June, Amazon.com launched a new area of its music store, offering
free digital downloads of entire songs, a great way for music fans to discover
new music--and a superb way to promote artists and their CDs. The new area
contains full-length Liquid Audio and MP3 downloads from established artists,
including Lyle Lovett, Randy Newman, Cowboy Junkies, Pavement, Robert Cray,
Elliott Smith, Cheap Trick, Widespread Panic, Kelly Willis, Rufus Wainwright,
Cheryl Wheeler, Sarah McLachlan, Public Enemy, and Amazon.com Advantage band the
Stone Coyotes (the trio that served as the model for the band in Elmore
Leonard's new novel, Be Cool). The introduction of the Amazon.com
digital-download area followed free digital downloads of songs by Sarah
McLachlan in April and Public Enemy in May.
Also in June, PC World Magazine named Amazon.com the Best Shopping Web
Site. "E-commerce as it should be," said the magazine. In addition, PC World
named the Internet Movie Database, an Amazon.com site, as the Best Recreational
Web Site and said www.imdb.com is "authoritative, addictive."
DISTRIBUTION CENTER EXPANSION
Continuing its expansion, during the quarter Amazon.com announced plans
for two new distribution facilities in Kentucky and one in Georgia, which will
enable faster delivery to Amazon.com customers across the Midwest and Southeast
United States. The result is that by the busy 1999 holiday shopping season,
Amazon.com customers will benefit from nearly 4 million square feet of space at
seven distribution centers nationwide--more than 10 times the distribution
center floor space the company had in 1998.
In May, Amazon.co.uk, the U.K.'s leading online bookstore, announced two
new distribution units in Marston Gate, Bedfordshire, to further enhance service
to its customers. The units, which are 228,000 square feet and 500,000 square
feet in size, will provide Amazon.co.uk with a major distribution center to
allow the company to increase its stocking and shipping capacities to more than
12 times the current level, thus reducing total shipping time to customers.
MANAGEMENT TEAM EXPANSION
In late June, Amazon.com named Joseph Galli as its president and chief
operating officer. Until April, Galli, 41, was the president of Black & Decker's
Worldwide Power Tools and Accessories unit, a $3.1 billion business representing
nearly 70 percent of the company's sales. Galli joins Amazon.com after a highly
successful 19-year career with Black & Decker, where he was noted for making
DeWalt the No. 1 brand in power tools worldwide, and spent the last four years
rolling out that business in over 80 countries. Galli reports to Amazon.com's
founder and CEO, Jeff Bezos, and has been elected to the Amazon.com Board of
Directors.
Other recent additions to the management team include:
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o Bill Price, VP Customer Service, who joined Amazon.com in May
from MCI's Enhanced Voice Services (EVS) and, later, Call Center
Services (CCS) business units. Price built CCS into a global
customer-care outsourcing, automation, and consulting operation
and comes to Amazon.com with more than 20 years of experience in
customer care and services management.
o Daryl David, VP Human Resources and Strategic Growth, who joined
Amazon.com in July after serving as the executive vice
president, chief administrative officer, and acting chief
financial officer for Sanga International, a leading developer
of packaged application software for e-business enterprise
solutions. He has more than 20 years of experience in business
and human resources management.
o Kelyn Brannon, VP Finance and Chief Accounting Officer, who was
formerly Amazon.com's director of financial planning and
analysis. Prior to joining Amazon.com, she worked for Sun
Microsystems, where she headed the company's worldwide field
organization. Brannon joined Amazon.com in 1998 with more than
10 years of experience in finance.
VIDEO ADVANTAGE
In June, Amazon.com introduced Amazon.com Advantage for Video to help
its 10.7 million customers find, discover, and buy videos by independent and
special-interest filmmakers. Following the success of Advantage for Books and
Music, the addition of video into Amazon.com Advantage means customers now have
access to a broad selection of hard-to-find books, CDs, and videos. The
selection comes from authors, publishers, record labels, artists, filmmakers,
and video producers, whose works were previously unavailable to most people. The
Advantage program is now open to any genre of film or video, including
everything from film noir, spoofs, and fitness to documentaries and
instructional videos. For more information about Amazon.com Advantage for video,
or to join, visit: http://www.amazon.com/advantage
HOMEGROCER.COM, GEAR.COM INVESTMENTS
In May, Amazon.com announced a minority investment in HomeGrocer.com.
HomeGrocer.com (www.homegrocer.com) offers customers over 11,000 key grocery
items to meet their weekly shopping needs, including fresh produce, dairy, meat,
seafood, name-brand packaged goods, and specialty foods such as ethnic, natural,
and organic.
Last week, Amazon.com announced that it held a significant minority
stake in Gear.com (www.gear.com), which offers brand-name sporting goods to
Internet shoppers at prices from 20 to 90 percent off retail. Staffed by
knowledgeable sports enthusiasts, Gear.com is the only Internet store to offer
100-percent closeout merchandise in all sports categories. Sporting-goods
closeouts result from overproduction, a change of style, color, or function, and
the cancellation of preseason orders placed by retailers. Merchandise is new and
comes in mint condition and original packaging.
STOCK SPLIT; BOND REPURCHASE
Separately, Amazon.com today announced that its Board of Directors
approved a 2-for-1 split of its common stock. Stockholders will receive one
additional share for
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every share held on the record date of August 12, 1999. The split will take
effect on September 1, 1999, and additional shares will be mailed or delivered
on or about September 1, 1999, by the company's transfer agent, ChaseMellon
Shareholder Services.
During the quarter, Amazon.com repurchased $94.6 million in accreted
value of its senior discount notes, bringing the total accreted value purchased
to date to $178.4 million, representing approximately 50 percent of the original
face amount of the issue.
ABOUT AMAZON.COM, INC.
Amazon.com, Inc. (NASDAQ: AMZN), the Internet's No. 1 music, No. 1
video, and No. 1 book retailer, opened its virtual doors on the World Wide Web
in July 1995 and today offers Earth's Biggest Selection(TM) with online
auctions, toys, electronics, free electronic greeting cards, and more than 4.7
million book, music-CD, video, DVD, and computer-game titles. Amazon.com seeks
to be the world's most customer-centric company, where people can find and
discover anything they may want to buy online. As part of its efforts to provide
the best shopping experience for customers, Amazon.com provides secure
credit-card payment, personalized recommendations, streamlined ordering through
1-Click(SM) technology, and hassle-free auction bidding with Bid-Click(SM).
Amazon.com operates two international 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.
It also operates 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. Amazon.com also operates LiveBid.com
(www.livebid.com), the sole provider of live-event auctions on the Internet.
In addition, Amazon.com has invested in leading Internet retailers that
are improving the lives of customers by making shopping easier and more
convenient: drugstore.com, an online retail and information source for health,
beauty, wellness, personal care and pharmacy, at www.drugstore.com; Pets.com,
the online leader for pet products, expert information, and services, at
www.pets.com; HomeGrocer.com, the first fully integrated Internet
grocery-shopping and home-delivery service, with operations in Seattle and
Portland, Oregon, at www.homegrocer.com; and Gear.com, which offers brand name
sporting goods at prices from 20 to 90 percent off retail, at www.gear.com.
This announcement contains forward-looking statements that involve risks
and uncertainties that include, among others, Amazon.com's limited operating
history, anticipated losses, unpredictability of future revenues, potential
fluctuations in quarterly operating results, seasonality, consumer trends,
competition, risks of system interruption, management of potential growth, risks
related to auction services, 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, 1998
and Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
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Amazon.com, Amazon.com Auctions, Amazon.co.uk, Amazon.de, Internet Movie
Database, PlanetAll, Earth's Biggest Selection, Bid-Click, and 1-Click are
either registered trademarks or trademarks of Amazon.com, Inc., or its
affiliates. All other names mentioned herein may be trademarks of their
respective owners.
-0-
/CONTACT: Bill Curry, Amazon.com, (206) 834-7180
NOTE ON FINANCIAL PRESENTATION
Financial results are prepared in accordance with U.S. generally
accepted accounting principles. All of the charges associated with Amazon.com's
merger, acquisition, and investment activities have been included in "merger-,
acquisition-, and investment-related costs" in the accompanying financial
statements in order to enhance their informational value and to present the most
comparable classifications in the other line items. Among items included in
merger-, acquisition-, and investment-related costs are amortization of goodwill
and other purchased intangibles, equity in loss of investees, and certain
nonrecurring merger-, acquisition-, and investment-related costs. Pro forma
financial results exclude these merger-, acquisition-, and investment-related
costs and stock-based compensation.
CONTACTS:
Karen Cho Bill Curry
Investor Relations Public Relations
Amazon.com, Inc. Amazon.com, Inc.
(206) 694-2171 (206) 834-7180
ir@amazon.com
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AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
----------------------- -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Net sales $ 314,377 $ 115,982 $ 608,019 $ 203,343
Cost of sales 246,846 89,794 475,696 157,857
--------- --------- --------- ---------
Gross profit 67,531 26,188 132,323 45,486
Operating expenses:
Marketing and sales 85,949 26,968 146,667 46,873
Product development 34,288 8,745 57,690 15,942
General and administrative 14,546 3,273 25,790 5,268
Merger, acquisition and investment related costs, including
amortization of intangibles and equity in earnings of affiliates 50,553 5,410 75,773 5,411
Stock-based compensation 4,669 192 4,782 377
--------- --------- --------- ---------
Total operating expenses 190,005 44,588 310,702 73,871
Loss from operations (122,474) (18,400) (178,379) (28,385)
Interest income 12,901 3,390 23,827 5,035
Interest expense (28,435) (7,569) (45,123) (9,598)
--------- --------- --------- ---------
Net interest expense (15,534) (4,179) (21,296) (4,563)
Net loss $(138,008) $ (22,579) $(199,675) $ (32,948)
========= ========= ========= =========
Basic and diluted loss per share $ (0.86) $ (0.15) $ (1.26) $ (0.23)
========= ========= ========= =========
Shares used in computation of basic
and diluted loss per share 161,170 146,277 159,053 143,802
========= ========= ========= =========
PRO FORMA RESULTS EXCLUDING MERGER AND ACQUISITION, INVESTMENT AND STOCK-BASED COMPENSATION COSTS (SEE NOTE 2 BELOW)
Pro forma loss from operations, excluding merger and
acquisition, investment and stock-based compensation costs $ (67,252) $ (12,798) $ (97,824) $ (22,597)
========= ========= ========= =========
Pro forma net loss, excluding merger and acquisition, investment
and stock-based compensation costs $ (82,786) $ (16,977) $(119,120) $ (27,160)
========= ========= ========= =========
Pro forma basic and diluted loss per share, excluding merger and
acquisition, investment and stock-based compensation costs $ (0.51) $ (0.12) $ (0.75) $ (0.19)
========= ========= ========= =========
Shares used in computation of pro forma basic
and diluted loss per share 161,170 146,277 159,053 143,802
========= ========= ========= =========
NOTE 1: On January 4, 1999, the Company effected a three-for-one stock split in
the form of a stock dividend to stockholders of record on December 18, 1998.
Accordingly, the accompanying consolidated balance sheets and statements of
operations have been restated to reflect the split.
NOTE 2: Pro forma results for the quarter and 6-month periods ended June 30,
1999 and 1998 are presented for informational purposes only and are not prepared
in accordance with generally accepted accounting principles. These results
present the operating results of Amazon.com, excluding charges of $55.2 million
and $80.6 million, and $5.6 million and $5.8 million, for the 3-month and
6-month periods ended June 30, 1999 and 1998, respectively, related to
stock-based compensation and arising from Amazon.com's merger, acquisition and
investment activities. Among items included in merger and acquisition related
costs are amortization of goodwill and other purchased intangibles, equity in
loss of investees, and certain non-recurring merger and acquisition related
costs.
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AMAZON.COM, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash $ 42,539 $ 25,561
Marketable securities 1,101,698 347,884
Inventories 59,387 29,501
Prepaid expenses and other 53,334 21,308
----------------------------------
Total current assets 1,256,958 424,254
Fixed assets, net 156,333 29,791
Other investments 106,020 7,740
Intangibles and other, net 741,865 179,263
Deferred charges 37,038 7,412
----------------------------------
Total assets $ 2,298,214 $ 648,460
==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 165,983 $ 113,273
Accrued advertising 22,364 13,071
Interest payable 23,960 10
Other liabilities and accrued expenses 55,764 34,413
Current portion of long-term debt and other 9,873 808
----------------------------------
Total current liabilities 277,944 161,575
Long-term debt and other 1,449,224 348,140
Stockholders' equity:
Preferred stock, $0.01 par value:
Authorized shares -- 150,000
Issued and outstanding shares -- none - -
Common stock, $0.01 par value:
Authorized shares -- 1,500,000
Issued and outstanding shares -- 168,153 and 159,267
shares at June 30, 1999 and December 31, 1998, respectively 1,682 1,593
Additional paid-in capital 979,424 300,130
Note receivable from officer for common stock (1,171) (1,099)
Stock-based compensation (37,743) (1,625)
Accumulated other comprehensive income (9,411) 1,806
Accumulated deficit (361,735) (162,060)
----------------------------------
Total stockholders' equity 571,046 138,745
----------------------------------
Total liabilities and stockholders' equity $ 2,298,214 $ 648,460
==================================
NOTE 1: On January 4, 1999, the Company effected a three-for-one stock split in
the form of a stock dividend to stockholders of record on December 18, 1998.
Accordingly, the accompanying consolidated balance sheets and statements of
operations have been restated to reflect the split.