Reaches $100 Million Quarter Three Years After Opening Store Surpasses 3 Million Customers
SEATTLE, WA (July 22, 1998)-- Amazon.com, Inc. (NASDAQ: AMZN), today announced financial results for the second quarter of 1998. Net sales were $116.0 million, an increase of 316 percent over net sales of $27.9 million for the second quarter of 1997.
Amazon.com also reported a second-quarter pro forma operating loss of $11.6 million, or 10 percent of net sales, compared with an operating loss of $7.1 million, or 25 percent of net sales, in the prior year. The company reported a pro forma net loss of $15.8 million, or $0.33 per share, compared with a net loss of $6.7 million, or $0.16 per share, in the second quarter of 1997. On a GAAP basis, reported net loss was $0.44 per share and included $5.4 million of amortization of goodwill and other purchased intangibles, arising primarily from three April 1998 acquisitions: Bookpages Ltd., Telebook Inc., and Internet Movie Database Ltd.
Amazon.com also announced that cumulative customer accounts increased by 880,000 during the quarter to over 3,140,000 at June 30, 1998, an increase of 415 percent from 610,000 customer accounts at June 30, 1997. Repeat customer orders represented more than 63 percent of orders placed during the quarter ended June 30, 1998.
"Our leadership position comes from our obsessive focus on customers," said Jeff Bezos, Amazon.com's founder and chief executive officer. "Customers want selection, ease of use, and the lowest prices. These are the elements we work hard to provide. We continued to improve our customer experience during the quarter with the opening of our music store, our easier-to-navigate store layout, and our expansion into the local U.K. and German book markets. These initiatives will continue to require aggressive investment and entail significant execution challenges."
Recent Highlights
Music and International Expansion
In June, Amazon.com expanded its product line to include music. The launch of the music store accompanied a major update of the company's award-winning Web site. The music store offers more than 125,000 titles, 10 times the CD selection of the typical music store, and everyday savings of up to 40 percent. Music fans can now search for their favorite music by CD title, artist, song title, or label and listen to more than 225,000 song samples. In addition, the new Amazon.com music store features expert and customer reviews, interviews, essentials lists, the hottest CDs from around the country and the world, music in the news, and music recommendations.
Coincident with the opening of its music store, Amazon.com significantly redesigned its store and enhanced the customer shopping experience. The new store design allows customers to move easily between the book and music areas, making it fast and simple for customers to find what they are looking for and discover new titles. Customers can also take advantage of an integrated shopping cart, 1-Click(SM) ordering, and consolidated shipping across both books and music.
During the month of April, the company completed the previously announced acquisitions of Bookpages Ltd., Telebook Inc., and Internet Movie Database Ltd. The acquisitions have enabled Amazon.com to accelerate its expansion into the European marketplace and to obtain a foundation for a best-of-breed video store. The acquisitions have been accounted for under the purchase method of accounting.
Strengthened Management
As part of its ongoing commitment to provide customers with outstanding selection, convenience, and service, Amazon.com recently announced the appointment of Jimmy Wright to the position of vice president and chief logistics officer. Wright joins Amazon.com with more than 26 years of experience in logistics management and was recognized as one of the key logistics leaders within Wal-Mart Stores Inc. Wright joined Wal-Mart in 1985 and served as vice president of distribution from 1990 to his retirement in 1998. During that time he was responsible for more than 30 regional and specialty distribution centers, which accounted for 38 million square feet of retail distribution space, staffed by more than 32,000 employees. Wright will be responsible for all global supply-chain activities at Amazon.com, including management of the company's distribution centers, product purchasing, distribution, and shipping.
New Associate Partners
Recently, Amazon.com added to its growing list of Associates, including a multi-year, multi-million dollar agreement naming Amazon.com as Quicken.com's exclusive bookseller in the United States and its preferred provider of books in the United Kingdom and Germany. Other new Associates include Compaq Computer Corp., which will include Amazon.com in new shipments of Compaq Presario personal computers, Spinner.com, and ABCNews.com.
Increased Cash Position, Strategic Flexibility
In May, Amazon.com significantly strengthened its cash position and increased its strategic flexibility through a $326-million (gross proceeds) offering of 10% senior discount notes. A portion of the offering proceeds was used to retire approximately $75 million of existing debt. The senior discount notes mature in May 2008 and begin to bear cash interest in May 2003. Prior to that date Amazon.com is not required to pay cash interest; however, the company will accrue noncash interest expense during that time to reflect the accretion of the debt to its face amount of $530 million.
On June 1, 1998, Amazon.com effected a 2-for-1 split of its common stock. The share and per share amounts included in this release are presented on a post-split basis.
GAAP financial results are prepared in accordance with generally accepted accounting principles. Pro forma financial results exclude amortization of goodwill and other purchased intangibles.
Amazon.com, Inc., is Earth's biggest book and music store. Amazon.com offers a catalog of more than 3 million book, music, and other titles, plus easy-to-use search and browse features, e-mail services, personalized shopping services, secure Web-based credit card payment, and direct shipping to customers. Amazon.com has virtually unlimited online shelf space and offers customers a vast selection through an efficient search-and-retrieval interface as well as streamlined ordering through 1-Click(SM) technology. Amazon.com pioneered the concept of syndicated selling on the Internet and has more than 90,000 members in its Associates Program, including AOL.com, Yahoo!, Netscape, Excite, the AltaVista Search Service, the @Home Network, and iVillage.
This announcement contains forward-looking statements that involve risks and uncertainties that include, among others, Amazon.com's limited operating history, the unpredictability of its future revenues, and risks associated with capacity constraints, management of growth, and new business opportunities. More information about factors that potentially could affect Amazon.com's financial results is included in the company's Annual Report on Form 10-K for the year ended December 31, 1997, and quarterly report on Form 10-Q for the quarter ended March 31, 1998, both filed with the Securities and Exchange Commission.
Amazon.com, Earth's Biggest Bookstore, and 1-Click are service marks of Amazon.com, Inc. All other names are trademarks of their respective owners.
Consolidated Statements of Operations*
(in thousands, except per share amounts)
Quarter Ended June 30 Six Months Ended June 30 1998 1997 1998 1997 (Unaudited) (Unaudited)Net sales $115,977 $27,855 $203,352 $43,860Cost of sales 89,786 22,633 157,840 35,117Gross profit 26,191 5,222 45,512 8,743Operating expenses:Marketing and sales 26,452 7,773 45,955 11,679Product development 8,060 2,808 14,789 4,383 General and administrative 3,262 1,708 5,225 2,850Amortization of goodwill and other purchased intangibles 5,413 -- 5,413 -- Total operating expenses 43,187 12,289 71,382 18,912Loss from operations (16,996) (7,067) (25,870) (10,169)Interest income 3,334 366 4,974 430Interest expense (7,564) (4) (9,589) (4)Net interest income (expense) (4,230) 362 (4,615) 426Net loss $(21,226) $(6,705) $(30,485) $(9,743)Basic and dilutedloss per share $(0.44) $(0.16) $(0.64) $(0.24)Shares used in computation of basic and diluted loss per share 47,977 42,634 47,299 40,719Pro Forma Results Excluding Amortization of Goodwill and Other Purchased IntangiblesPro forma loss from operations, excluding amortization of goodwill and other purchasedintangibles $(11,583) $(7,067) $(20,457) $(10,169)Pro forma net loss, excluding amortization of goodwill and otherpurchased intangibles $(15,813) $(6,705) $(25,072) $(9,743)Pro forma basic and dilutedloss per share, excluding amortization of goodwilland other purchasedintangibles $(0.33) $(0.16) $(0.53) $(0.24)Shares used in computation of pro forma basic anddiluted loss per share 47,977 42,634 47,299 40,719Note: Pro forma results for the quarter and six months ended June 30, 1998, and June 30, 1997, are presented for informational purposes only. These results present the operating results of the Company excluding charges of $5.4 million for the amortization of goodwill and otherpurchased intangibles arising from the Company's April 1998 acquisitions of Bookpages Ltd., Telebook Inc., and Internet Movie Database Ltd. and are not prepared in accordance with generally accepted accountingprinciples. AMAZON.COM, INC. Consolidated Balance Sheets (in thousands, except share data) June 30, December 31, 1998 1997 (Unaudited) (Audited)ASSETSCurrent Assets:Cash and investments $339,919 $125,066Inventories 17,035 8,971Prepaid expenses and other 12,487 3,298Total current assets 369,441 137,335Fixed assets, net 14,014 9,265Deposits and other 284 166Goodwill and otherpurchased intangibles, net 52,398 -Deferred charges 7,622 2,240Total assets $443,759 $149,006LIABILITIES & STOCKHOLDERS' EQUITYCurrent Liabilities:Accounts payable $47,556 $32,697Accrued advertising 9,971 3,454Other liabilities and accrued expenses 13,713 6,167Current portion of long-term debt 684 1,500Total current liabilities 71,924 43,818Long-term portion of debt 332,225 76,521Long-term portionof capital lease obligation 181 181Stockholders' Equity:Preferred stock, $0.01 par value:Authorized shares -- 10,000,000Issued and outstanding shares -- none - -Common stock, $0.01 par value:Authorized shares -- 300,000,000Issued and outstanding shares -- 49,669,601 and 47,874,338 shares, respectively 497 479Additional paid-in capital 104,368 63,552Deferred compensation (1,301) (1,930)Other gains (losses) (35) -Accumulated deficit (64,100) (33,615)Total stockholders' equity 39,429 28,486Total liabilities& stockholders' equity $443,759 $149,006