Press Release

<< Back Announces Financial Results For Second Quarter 1999's Community of Online Shoppers Grows to 10.7 Million

SEATTLE, Washington-July 21,, 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. 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. 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, founder and CEO. "We're especially pleased that 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'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, announced in June that it had become the first e-commerce store to serve its 10 millionth customer. In October 1997, 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 e-commerce watershed reflecting the appeal of online shopping to a broad range of customers.'s brand and reach continued to grow during the second quarter. Heads-down focus on customers helped make 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, 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 as the 57th most valuable brand worldwide, just above Hilton, Guinness, and Marriott, and just below Pampers. Launches Toys and Electronics

Last week, launched two completely new stores: Electronics and 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. Electronics features a full range of popular electronics products and brands: everything from the latest digital camcorders to computer peripherals to televisions. 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's world-class customer service department so that customers can buy electronics, toys, and games online with complete confidence. Auctions and Sotheby's

In June, 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'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, began its everyday 50% discount on The New York Times Best Seller list. The 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 titles each week at 50% off. In addition, continues to offer up to 40% off on hundreds of thousands of other titles.

In June, 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 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 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 the Best Shopping Web Site. "E-commerce as it should be," said the magazine. In addition, PC World named the Internet Movie Database, an site, as the Best Recreational Web Site and said is "authoritative, addictive."

Distribution Center Expansion

Continuing its expansion, during the quarter announced plans for two new distribution facilities in Kentucky and one in Georgia, which will enable faster delivery to customers across the Midwest and Southeast United States. The result is that by the busy 1999 holiday shopping season, 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,, 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 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, 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 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's founder and CEO, Jeff Bezos, and has been elected to the Board of Directors.

Other recent additions to the management team include:

  • Bill Price, VP Customer Service, who joined 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 with more than 20 years of experience in customer care and services management.
  • Daryl David, VP Human Resources and Strategic Growth, who joined 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.
  • Kelyn Brannon, VP Finance and Chief Accounting Officer, who was formerly's director of financial planning and analysis. Prior to joining, she worked for Sun Microsystems, where she headed the company's worldwide field organization. Brannon joined in 1998 with more than 10 years of experience in finance.

Video Advantage

In June, introduced 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 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 Advantage for video, or to join, visit:, Investments

In May, announced a minority investment in ( 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, announced that it held a significant minority stake in (, which offers brand-name sporting goods to Internet shoppers at prices from 20 to 90 percent off retail. Staffed by knowledgeable sports enthusiasts, 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, today announced that its Board of Directors approved a 2-for-1 split of its common stock. Stockholders will receive one additional share for 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, 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, Inc., 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 SelectionTM with online auctions, toys, electronics, free electronic greeting cards, and more than 4.7 million book, music-CD, video, DVD, and computer-game titles. 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, provides secure credit-card payment, personalized recommendations, streamlined ordering through 1-ClickSM technology, and hassle-free auction bidding with Bid-ClickSM. operates two international Web sites: in the United Kingdom and in Germany. also operates PlanetAll (, a Web-based address book, calendar, and reminder service. It also operates the Internet Movie Database (, 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. also operates (, the sole provider of live-event auctions on the Internet. In addition, has invested in leading Internet retailers that are improving the lives of customers by making shopping easier and more convenient:, an online retail and information source for health, beauty, wellness, personal care and pharmacy, at;, the online leader for pet products, expert information, and services, at;, the first fully integrated Internet grocery-shopping and home-delivery service, with operations in Seattle and Portland, Oregon, at; and, which offers brand name sporting goods at prices from 20 to 90 percent off retail, at

This announcement contains forward-looking statements that involve risks and uncertainties that include, among others,'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's financial results is included in'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., Auctions,,, Internet Movie Database, PlanetAll, Earth's Biggest Selection, Bid-Click, and 1-Click are either registered trademarks or trademarks of, 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'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        Six Months Ended
                                     June 30,              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

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,
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'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)
                                       June 30,	         December 31,
                                         1999               1998
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
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

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