Press Release

<< Back Announces Financial Results For Second Quarter 1998

Reaches $100 Million Quarter Three Years After Opening Store Surpasses 3 Million Customers

SEATTLE, WA (July 22, 1998)--, 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. 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. 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,'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, 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 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, 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 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, recently announced the appointment of Jimmy Wright to the position of vice president and chief logistics officer. Wright joins 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, including management of the company's distribution centers, product purchasing, distribution, and shipping.

New Associate Partners

Recently, added to its growing list of Associates, including a multi-year, multi-million dollar agreement naming as'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 in new shipments of Compaq Presario personal computers,, and

Increased Cash Position, Strategic Flexibility

In May, 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 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, 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., Inc., is Earth's biggest book and music store. 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. 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. pioneered the concept of syndicated selling on the Internet and has more than 90,000 members in its Associates Program, including, 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,'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'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., Earth's Biggest Bookstore, and 1-Click are service marks of, 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   $43,860
Cost of sales                89,786     22,633         157,840    35,117
Gross profit                 26,191      5,222          45,512     8,743

Operating expenses:
Marketing and sales          26,452      7,773          45,955    11,679
Product development           8,060      2,808          14,789     4,383        
General and administrative    3,262      1,708           5,225     2,850
Amortization of goodwill and other purchased intangibles   
                               5,413       --            5,413        --         
Total operating expenses      43,187    12,289          71,382    18,912
Loss from operations        (16,996)   (7,067)        (25,870)  (10,169)
Interest income                3,334       366           4,974       430
Interest expense             (7,564)       (4)         (9,589)       (4)
Net interest income
 (expense)                    (4,230)      362          (4,615)      426
Net loss                    $(21,226) $(6,705)        $(30,485) $(9,743)
Basic and diluted
loss 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    40,719

Pro Forma Results Excluding Amortization of Goodwill 
and Other Purchased Intangibles
Pro forma loss from
   operations, excluding
   amortization of goodwill
   and other purchased
intangibles                  $(11,583) $(7,067)      $(20,457) $(10,169)
Pro forma net loss,
  excluding amortization
  of goodwill and other
purchased intangibles        $(15,813) $(6,705)      $(25,072)  $(9,743)
Pro forma basic and diluted
loss per share, excluding 
amortization of goodwill
and other purchased
intangibles                   $(0.33)   $(0.16)        $(0.53)   $(0.24)
Shares used in computation
 of pro forma basic and
diluted loss per share         47,977    42,634         47,299    40,719

Note:  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 other
purchased 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 accounting

                                 AMAZON.COM, INC.
                           Consolidated Balance Sheets
                        (in thousands, except share data)

                                      June 30,      December 31,
                                        1998           1997
                                    (Unaudited)      (Audited)

Current Assets:
Cash and investments                   $339,919       $125,066
Inventories                              17,035          8,971
Prepaid expenses and other               12,487          3,298
Total current assets                    369,441        137,335

Fixed assets, net                        14,014          9,265
Deposits and other                          284            166
Goodwill and other
purchased intangibles, net               52,398              -
Deferred charges                          7,622          2,240
Total assets                           $443,759       $149,006

Current Liabilities:
Accounts payable                        $47,556        $32,697
Accrued advertising                       9,971          3,454
Other liabilities and accrued expenses   13,713          6,167
Current portion of long-term debt           684          1,500
Total current liabilities                71,924         43,818

Long-term portion of debt               332,225         76,521
Long-term portion
of capital lease obligation                 181            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
 -- 49,669,601 and 47,874,338 shares,
 respectively                               497            479

Additional paid-in capital              104,368         63,552
Deferred compensation                   (1,301)        (1,930)
Other gains (losses)                       (35)             -
Accumulated deficit                    (64,100)       (33,615)
Total stockholders' equity               39,429         28,486

Total liabilities
& stockholders' equity                 $443,759       $149,006

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