|Amazon.com Announces Financial Results for Third Quarter 1999|
Toys, Electronics, and zShops make Amazon.com the one-stop destination for holiday shopping SEATTLE, WA-October 27, 1999-Having added a complete toy store, a complete electronics store, and zShops, Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for the third quarter of 1999. Net sales for the third quarter were $356 million, an increase of 132 percent over net sales of $154 million for the third quarter of 1998.
Amazon.com reported a third-quarter pro forma operating loss of $79 million, compared to a pro forma operating loss of $21 million in the third quarter of 1998. Third-quarter pro forma net loss of $86 million, or $0.26 per share, compared with a pro forma net loss of $24 million, or $0.08 per share, in the third quarter of 1998. On a GAAP basis, reported third-quarter net loss was $197 million, or $0.59 per share, and included $111 million of merger-, acquisition-, investment-related costs, and stock-based compensation charges.
Amazon.com announced that cumulative customer accounts, including Auctions users, increased by 2.4 million during the third quarter to 13.1 million at September 30, 1999, an increase of more than 190 percent from 4.5 million customer accounts at September 30, 1998. Repeat customer orders represented more than 72 percent of orders during the quarter ended September 30, 1999, up from 70 percent in the previous quarter.
The growth in sales and customers accompanied the addition of a complete toy store, a complete electronics store, and the introduction of zShops to Amazon.com. zShops make it possible for any individual or business to sell through Amazon.com, reaching more than 13 million experienced online shoppers. Also, the company's new All Product Search helps shoppers find anything they want to buy on the Net, making Amazon.com the one destination for shoppers to find whatever they are looking for.
"In the third quarter, we announced our new Toys Store, which was immediately recognized by both Forrester Research and MSNBC as the best toy store on the Internet," said Jeff Bezos, Amazon.com founder and CEO. "Toys and our other product expansions round out our rich selection and establish Amazon.com as the one-stop holiday shopping destination."
Regarding Amazon.com's ongoing expansion, the company will be working hard during the holiday season to deliver the great service that Amazon.com customers have come to expect. The company has substantially increased its customer-service capability and increased distribution square footage more than four times compared to the 1998 holiday season, which will help the company better serve customers during this busy time. The company expects its combined focus on growth and customer satisfaction will impact fourth-quarter financial performance, relative to the third quarter, primarily in four ways: first, top-line revenues will increase significantly; second, gross margins will decrease; third, fulfillment expenses as a percentage of sales will slightly increase or be flat; and fourth, marketing expenses will increase.
Heads-down focus on customers helped Amazon.com continue to improve customer experience and grow brand and reach. Recent highlights include Amazon.com rated as:
In early October, Amazon.com introduced Wish List, an advanced and extensive online gift registry for the coming holiday season (http://www.amazon.com/wishlist). Designed to take the stress and hassle out of finding the perfect gift, Wish List was the No. 1 customer request during last year's holiday shopping season. Since its introduction, Wish List has seen faster adoption than almost any other feature Amazon.com has offered its customers.
In late September, Amazon.com introduced zShops, which enable anyone to offer merchandise for sale at Amazon.com, whether they are micro-manufacturers or major manufacturers, small businesses or global corporations, or specialized retailers. With zShops, anyone can now offer a vast array of popular or hard-to-find items to Amazon.com's more than 13 million customers.
With the launch of zShops, Amazon.com introduced Amazon.com Payments, which allows individuals to pay for zShops purchases with credit cards using Amazon.com's 1-Click payment feature, thus eliminating what is considered the greatest inconvenience of online transactions between individuals: the delays, hassles, and risks of sending checks and money orders through regular mail.
All Products Search
All Products Search, located in the search box on the upper-left of the Amazon.com Welcome page, helps shoppers find anything for sale on the Net, providing customers with a convenient, easy-to-use guide for finding and discovering exactly what they want among the Net's millions of offerings. This customized and specialized Web search engine is dedicated solely to shopping and makes Amazon.com the place to start online shopping.
In early October, Amazon.com launched Amazon.com Anywhere, an initiative in wireless e-commerce that allows customers to shop and check the status of auction items at Amazon.com securely when they are away from their desktop computers. With the national launch of the new Palm VIITM organizer, Amazon.com's vast selection of merchandise is now accessible to customers anywhere, anytime.
Management Team Expansion
The company continued to build on its management strength, naming Warren C. Jenson as its senior vice president and chief financial officer. Jenson had been executive vice president and CFO at Delta Airlines, the largest domestic airline. Prior to Delta, Jenson was CFO of NBC, a division of General Electric. Jenson came to Amazon.com with a strong record of achievement in financial management, innovative transactions, and Web-based initiatives. Jeffrey A. Wilke was named vice president-general manager of operations. Wilke was formerly vice president and general manager of AlliedSignal's Pharmaceutical Fine Chemicals unit. Wilke was directly responsible for 15 plants/distribution centers in the U.S., Europe, and Asia.
Amazon.com made a significant minority investment in Della & James, the first company to bring together wedding registries from a broad selection of premier national retailers and local stores, creating the best way to register for and purchase wedding gifts. As part of the strategic relationship with Amazon.com, Della & James' wedding-gift registry will be available through Amazon.com, enabling Amazon.com's 13 million customers to find wedding registries and purchase wedding gifts through Della & James.
About Amazon.com, Inc.
Amazon.com (Amazon.com, Inc. and its subsidiaries) is the Internet's No. 1 music, No. 1 video, and No. 1 book retailer. Amazon.com opened its virtual doors on the World Wide Web in July 1995 and today offers Earth's Biggest Selection with online auctions, toys, electronics, and free electronic greeting cards. Amazon.com lists more than 18 million unique items in categories including books, CDs, toys, electronics, videos, DVDs, and computer games. Through Amazon.com zShops, any business or individual can sell virtually anything to Amazon.com's more than 13 million customers, and with Amazon.com Payments, any seller can accept credit-card transactions, avoiding the hassles of offline payments.
Amazon.com seeks to be the world's most customer-centric company, where customers can find and discover anything they may want to buy online. Amazon.com's All Product Search scours the Web to help customers find merchandise that is not available at Amazon.com, Amazon.com Auctions, or Amazon.com zShops, making Amazon.com the shopping destination to find anything.
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 Amazon.com LiveBid Auctions (http://livebid.amazon.com), the leading provider of live-event auctions on the Internet.
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, Portland, Oregon, and Southern California, 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. Amazon.com also has a minority interest in Della & James, the leading online wedding-gift registry, at www.dellajames.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 Reports on Form 10-Q for the quarters ended March 31, 1999 and June 30, 1999. Amazon.com, Amazon.com Auctions, Amazon.co.uk, Amazon.de, Internet Movie Database, PlanetAll, Earth's Biggest Selection, zShops, 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.
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.
Consolidated Statements of Operations
(in thousands, except per share amounts) (unaudited)
Quarter Ended Nine Months Ended September 30, September 30, 1999 1998 1999 1998 Net sales $355,777 $153,648 $963,797 $356,992 Cost of sales 285,300 118,823 760,998 276,680 Gross profit 70,477 34,825 202,799 80,312 Operating expenses: Marketing and sales 86,555 37,454 233,222 84,325 Product development 44,608 13,227 102,298 29,168 General and administrative 18,512 4,951 44,301 10,220 Merger, acquisition and investment-related costs, including amortization of intangibles and equity in earnings of affiliates 99,481 19,486 175,255 24,901 Stock-based compensation 11,789 1,214 16,570 1,591 Total operating expenses 260,945 76,332 571,646 150,205 Loss from operations (190,468) (41,507) (368,847) (69,893) Interest income 12,699 4,755 36,479 9,790 Interest expense (21,470) (8,419) (66,424) (18,017) Other income (expense) 2,159 - 2,037 - Net interest expense (6,612) (3,664) (27,908) (8,227) Net loss $(197,080) $(45,171) $(396,755) $(78,120) Basic and diluted loss per share $(0.59) $(0.15) $(1.23) $(0.27) Shares used in computation of basic and diluted loss per share 332,488 301,405 323,064 292,206 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 $(79,198) $(20,807) $(177,022) $(43,401) Pro forma net loss, excluding merger and acquisition, investment and stock-based compensation costs $(85,810) $(24,471) $(204,930) $(51,628) Pro forma basic and diluted loss per share, excluding merger and acquisition, investment and stock-based compensation costs $(0.26) $(0.08) $(0.63) $(0.18) Shares used in computation of pro forma basic and diluted loss per share 332,488 301,405 323,064 292,206
Note 1: The Company effected a three-for-one stock split and two-for-one stock split on January 4, 1999 and September 1, 1999, respectively. Each stock split was in the form of a stock dividend to stockholders of record on December 18, 1998 and August 12, 1999, respectively. Accordingly, the accompanying consolidated balance sheets and statements of operations have been restated to reflect the splits.
Note 2: Pro forma results for the quarter and 9-month periods ended September 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 $111.3 million and $20.7 million for the 3-month periods ended September 30, 1999 and 1998, and $191.8 million and $26.5 million for the 9-month periods ended September 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.
Consolidated Balance Sheets
(in thousands, except per share data)
SEPTEMBER 30, DECEMBER 31, 1999 1998 (Unaudited) ASSETS Current assets: Cash $43,149 $25,561 Marketable securities 862,536 347,884 Inventories 118,793 29,501 Prepaid expenses and other 55,590 21,308 Total current assets 1,080,068 424,254 Fixed assets, net 221,243 29,791 Other investments 196,317 7,740 Intangibles and other, net 705,932 179,263 Deferred charges 36,239 7,412 Total assets $2,239,799 $648,460 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $236,711 $113,273 Accrued advertising 24,567 13,071 Interest payable 10,045 10 Other liabilities and accrued expenses 73,572 34,413 Current portion of long-term debt and other 12,776 808 Total current liabilities 357,671 161,575 Long-term debt and other 1,462,203 348,140 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 -- 3,000,000 Issued and outstanding shares -- 339,235 and 318,534 shares at September 30, 1999 and December 31, 1998, respectively 3,393 3,186 Additional paid-in capital 1,027,655 298,537 Note receivable from officer for common stock (1,171) (1,099) Stock-based compensation (32,180) (1,625) Accumulated other comprehensive income (18,957) 1,806 Accumulated deficit (558,815) (162,060) Total stockholders' equity 419,925 138,745 Total liabilities and stockholders' equity $2,239,799 $648,460Note 1: The Company effected a three-for-one stock split and two-for-one stock split on January 4, 1999 and September 1, 1999, respectively. Each stock split was in the form of a stock dividend to stockholders of record on December 18, 1998 and August 12, 1999, respectively. Accordingly, the accompanying consolidated balance sheets and statements of operations have been restated to reflect the splits.