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PRESS RELEASE DATED OCTOBER 24, 2000 ANNOUNCING THE COMPANY'S THIRD QUARTER
FINANCIAL RESULTS EXHIBIT 99.1
(BW) (WA-AMAZON.COM) (AMZN) AMAZON.COM THIRD-QUARTER SALES UP 79%
YEAR-OVER-YEAR; ELECTRONICS STORE BECOMES SECOND-LARGEST BUSINESS AT AMAZON.COM,
SURPASSING MUSIC
US Books, Music and DVD/Video Segment Achieves 6% Pro Forma Operating Margin;
Cash and Marketable Securities of $900 Million
SEATTLE, WA--October 24, 2000--Amazon.com, Inc. (NASDAQ: AMZN) today
announced net sales for the third quarter of 2000 were $638 million, an increase
of 79% over net sales of $356 million for the third quarter of 1999. For the
first time, the Electronics store has grown to become the second-largest U.S.
store, behind Books and ahead of Music. Gross margin for the third quarter of
2000 was 26%, up from 20% for the third quarter of 1999.
Pro forma operating loss for the third quarter of 2000 was $68 million,
or 11% of sales, compared to a pro forma operating loss of $79 million, or 22%
of sales, in the third quarter of 1999. Third-quarter pro forma net loss was
$0.25 per share, an improvement over the pro forma net loss of $0.26 per share
in the third quarter of 1999.
Amazon.com's U.S. Books, Music and DVD/Video segment fully allocated
third-quarter pro forma operating profit was $25 million, or 6% of sales, up
from 0% in the same period a year ago.
"The strong growth in electronics is due to great prices and deep
selection combined with our widely recognized customer service. In September, 6
of the 10 top-selling items on Amazon.com were from our electronics store," said
Jeff Bezos, Amazon.com chief executive officer. "As always, we're grateful to
customers for continuing to choose Amazon.com."
"This was a strong quarter for Amazon.com; we are driving toward
profitability, and we surpassed our key internal operational and financial
objectives," said Warren Jenson, Amazon.com chief financial officer. "As we
enter our sixth holiday season, we are better prepared operationally than ever
to deliver for customers, while at the same time we expect to improve our
operating margin for the fourth consecutive quarter."
Amazon.com worldwide cumulative customer accounts increased by over 2.8
million during the quarter to over 25 million as of September 30, 2000. Sales
per active customer for the twelve months ended September 30, 2000, were $130,
up from $108 for the same period a year ago. As part of its agreement with
Amazon.com, Toysrus.com purchased at cost approximately $20 million of
toys-related inventory, which is included in third-quarter sales.
Amazon International sales, which comprise the Amazon.co.uk, Amazon.de,
and Amazon.fr businesses, were $88 million, up 121% from $40 million for the
third quarter of 1999. Amazon International added approximately 800,000 new
customer accounts in the third quarter of 2000, bringing cumulative Amazon
International customer accounts to approximately 3.9 million, an increase of
225% from approximately 1.2 million as of September 30, 1999.
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Operating cash usage in the third quarter was $4 million, compared to
$76 million in the third quarter of 1999.
Third-quarter GAAP net loss was $0.68 per share, compared to a net loss
of $0.59 per share in the third quarter of 1999.
RECENT HIGHLIGHTS
GLOBAL EXPANSION
- Amazon.com launched Amazon.fr, a French-language site offering
books, music CDs, DVDs and videos dedicated to customers in
France and to French-speaking customers around the world.
Amazon.fr was named the best overall online retailer by leading
French publications Capital, Le Monde and Journal du Net.
- Amazon.de launched a Software store.
EXPANDED SELECTION AND PARTNERSHIPS
- Amazon.com, in connection with a strategic alliance with
Toysrus.com, launched a co-branded toy store. The new online
store combined the strengths of the two e-tailers' prior stores,
to bring customers the best toy-buying experience available
online.
- Microsoft Corp. (NASDAQ: MSFT) announced its Microsoft Reader
had been selected by Amazon.com as the preferred format for
Amazon.com's forthcoming e-Books store.
- Amazon.com launched a Camera & Photo store, offering digital and
film cameras, optical gear, and accessories, and announced an
alliance with Ofoto, Inc., a premier online photography service.
- Apple (NASDAQ: AAPL) announced it had licensed Amazon.com's
1-Click patent and trademark for use in its Apple Online Store,
as part of an e-commerce patent cross-licensing agreement.
- Amazon.com launched a Computer & Video Games store, offering the
largest selection of computer and video games and accessories
available, online or off-, to provide a one-stop gaming
destination for both casual and hard-core gaming enthusiasts.
- Amazon.com launched a new-car buying service, providing
customers with a superior car-buying experience backed by
service and support from an expansive network of premier auto
dealers affiliated with its partner Greenlight.com.
PLATFORM GROWTH
- Amazon.com announced the availability of Mobile Auctions, a
wireless service that provides customers the ability to search
for new auction items, enter and monitor bids, and track sales,
and offers mobile alerts for Amazon Auctions directly from a
mobile phone.
- Enrollment in the Amazon.com Associates Program surpassed
500,000 members, reinforcing its position as the largest and
most popular program of its kind.
BUSINESS OUTLOOK
The following forward looking-statements reflect Amazon.com's
expectations as of October 24, 2000. Given the emerging nature of online retail,
potential changes in general economic conditions, and the various other risk
factors discussed below, actual
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results may differ materially. The company intends to continue its practice of
not updating forward-looking statements until its next quarterly results
announcement, other than in publicly available statements.
Fourth Quarter 2000 Expectations
- Sales are expected to be between $950 million and $1.05 billion.
- Gross margin is expected to be seasonally down compared to the
third quarter of this year, although up strongly over the fourth
quarter of 1999.
- Pro forma operating losses are expected to be between 5% and 8%
of sales.
- Cash and marketable securities at year-end are expected to be
over $1 billion.
2001 Expectations
- Sales are expected to be approximately $4 billion.
- Pro forma loss from operations is expected to narrow to less
than 5% of sales, perhaps substantially so.
- Cash and marketable securities as of March 31, 2001, are
expected to be approximately $700 million, and the company
expects to generate significant positive cash flow from
operations for the nine months ended December 31, 2001.
The aforementioned forward-looking statements are inherently difficult
to predict. Actual results could differ materially for a variety of reasons,
including the rate of growth of the Internet and online commerce, the amount
that Amazon.com invests in new business opportunities and the timing of those
investments, customer spending patterns, the mix of products sold to customers,
the mix of revenues derived from products sales as compared to services, risks
of inventory management, the magnitude of losses arising from investments
accounted for under the equity method, the degree to which the company enters
into Amazon Commerce Network and other strategic transactions, fluctuations in
the value of securities and non-cash payments Amazon.com receives in connection
with such transactions, and risks of distribution and fulfillment throughput and
productivity. Other risks and uncertainties include Amazon.com's limited
operating history, anticipated losses, potential fluctuations in quarterly
operating results, seasonality, consumer trends, competition, risks associated
with distribution center expansion, adverse consequences arising from system
interruptions, risks associated with management of potential growth, risks
related to auction and zShops services, risks related to fraud and Amazon.com
Payments, 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 and 10-K/A for the year ended December 31, 1999, and
its Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
A live Webcast of Amazon.com's third quarter 2000 financial results
conference call can be heard at 2:00 p.m. PDT/5:00 p.m. EDT today at
www.amazon.com/ir. The call will also be archived and available until December
31, 2000.
ABOUT AMAZON.COM
Amazon.com (Amazon.com, Inc., and its subsidiaries) is the Internet's
No. 1 retailer. Amazon.com (Nasdaq: AMZN) opened its virtual doors on the World
Wide Web in July 1995 and today offers Earth's Biggest Selection, along with
online auctions and free electronic greeting cards. Amazon.com seeks to be the
world's most customer-centric company, where customers can find and discover
anything they might want to buy online. Amazon.com lists more than 28 million
unique items in categories such as electronics, kitchen products, books, music,
DVDs, videos, camera and photo items, toys, software, computer and video games,
tools and hardware, and lawn and patio items. Through Amazon.com zShops, any
business or individual can sell virtually anything to Amazon.com's more than 25
million customers, and with Amazon.com Payments, sellers can accept credit card
transactions, avoiding the hassles of offline payments.
Amazon.com operates three international Web sites: www.amazon.fr,
www.amazon.co.uk and www.amazon.de. It also operates the Internet Movie Database
(www.imdb.com), the Web's comprehensive and authoritative source of information
on more than 250,000 movies and entertainment titles and 1 million cast and crew
members dating from the birth of film in 1891 to 2003.
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Amazon Anywhere is the leader in mobile e-commerce, providing access
from anywhere in the world to Amazon.com, Amazon.co.uk and Amazon.de on personal
digital assistants (PDAs) and through handheld wireless Internet devices that
use HDML or the Wireless Application Protocol.
NOTES ON FINANCIAL PRESENTATION
Historical results of operations are preliminary and unaudited.
Financial results are prepared in accordance with U.S. generally accepted
accounting principles. Pro forma financial results exclude stock-based
compensation costs, amortization of goodwill and other intangibles,
acquisition-related and other costs, non-cash investment gains and losses, net,
and equity in losses of equity-method investees, net.
The Electronics store business includes Amazon Electronics, Video Games
and Software. Customer accounts exclude Amazon Commerce Network partners'
businesses and Amazon.com's catalog businesses but include users of Amazon
Marketplace services. Trailing twelve-month sales per active customer figures
include revenue recorded from Amazon Commerce Network partners and exclude
catalog sales and $20 million from the sale of inventory to Toysrus.com.
Amazon.com commenced its Amazon Commerce Network program in the fall of
1999 to develop new strategic relationships and expand the products and services
the company offers to its customers. As part of this program, Amazon.com entered
into a variety of relationships with third parties, including relationships
where the company invested in its partners and relationships where the company
received securities of its partners as payment for services it provides to them.
These relationships, particularly those in which Amazon.com receives securities
in payment for its services, require reporting and disclosure that involve
estimates to determine fair value, the recognition of revenue over time, and the
ongoing accounting for the company's investments in its partners. Estimates of
fair value are based on the use of independent third party appraisals when
appropriate. Amazon.com has received informal inquiries from the SEC staff with
respect to accounting treatment and disclosures for some of its initial Amazon
Commerce Network transactions and has responded to those questions. Amazon.com
reviewed the accounting for the transactions with its auditors and the SEC
staff, and the company believes that the accounting treatment, and disclosures,
were appropriate. Amazon.com will continue to cooperate with the SEC staff if
they have further questions.
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AMAZON.COM, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 637,858 $ 355,777 $ 1,789,623 $ 963,797
Cost of sales 470,579 285,300 1,358,146 760,998
----------- ----------- ----------- -----------
Gross profit 167,279 70,477 431,477 202,799
Operating expenses:
Marketing, sales and fulfillment 138,342 86,842 408,266 233,725
Technology and content 71,159 44,451 199,535 102,002
General and administrative 26,217 18,382 80,730 44,094
Stock-based compensation 4,091 11,789 25,909 16,569
Amortization of goodwill and other intangibles 79,194 74,343 242,562 132,393
Acquisition-related and other (Note 3) 11,791 1,779 16,259 5,987
----------- ----------- ----------- -----------
Total operating expenses 330,794 237,586 973,261 534,770
----------- ----------- ----------- -----------
Loss from operations (163,515) (167,109) (541,784) (331,971)
Interest income 9,402 12,699 29,842 36,479
Interest expense (33,809) (21,470) (94,827) (66,424)
Other income (expense), net 3,353 2,159 (4,693) 2,037
Non-cash investment gains and losses, net (Note 4) 12,366 -- 12,366 --
----------- ----------- ----------- -----------
Net interest expense and other (8,688) (6,612) (57,312) (27,908)
----------- ----------- ----------- -----------
Loss before equity in losses of equity-method investees (172,203) (173,721) (599,096) (359,879)
Equity in losses of equity-method investees, net (68,321) (23,359) (267,037) (36,876)
----------- ----------- ----------- -----------
Net loss $ (240,524) $ (197,080) $ (866,133) $ (396,755)
=========== =========== =========== ===========
Basic and diluted loss per share $ (0.68) $ (0.59) $ (2.48) $ (1.23)
=========== =========== =========== ===========
Shares used in computation of basic
and diluted loss per share (Note 1) 353,954 332,488 349,258 323,064
=========== =========== =========== ===========
PRO FORMA RESULTS (NOTE 2)
Pro forma loss from operations $ (68,439) $ (79,198) $ (257,054) $ (177,022)
=========== =========== =========== ===========
Pro forma net loss $ (89,493) $ (85,810) $ (326,732) $ (204,930)
=========== =========== =========== ===========
Pro forma basic and diluted loss per share $ (0.25) $ (0.26) $ (0.94) $ (0.63)
=========== =========== =========== ===========
Shares used in computation of pro forma basic
and diluted loss per share (Note 1) 353,954 332,488 349,258 323,064
=========== =========== =========== ===========
</TABLE>
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 balance
sheets and statements of operations have been restated to reflect the splits.
NOTE 2: Pro forma results for the 3-month and 9-month periods ended September
30, 2000 and 1999 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 net amounts of
$151.0 million and $111.3 million for the 3-month periods, and $539.4 million
and $191.8 million for the 9-month periods ended September 30, 2000 and 1999,
respectively, related to amortization of goodwill and other intangibles; equity
in losses of equity-method investees, net; stock-based compensation;
acquisition-related and other costs; and non-cash investment gains and losses,
net.
NOTE 3: Acquisition-related and other expenses for the 3-month and 9-month
periods ended September 30, 2000 includes $11.1 million related to the loss on
retirement of certain fixed assets to be disposed of.
NOTE 4: Non-cash investment gains and losses, net for the 3-month and 9-month
periods ended September 30, 2000 includes the following items: a gain of $40.2
million related to the acquisition of HomeGrocer.com, Inc., previously one of
the Company's equity-method investees, by Webvan Group, Inc.; a gain of $20.1
million representing the previously unearned revenue recognized upon the
termination of the Company's commercial agreement with living.com, which filed
for bankruptcy during the 3-month period ended September 30, 2000; a loss of
$14.1 million, representing the Company's investment in living.com at the time
of its bankruptcy; and losses totaling $33.8 million to record certain of the
Company's investments at their fair values as of September 30, 2000.
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AMAZON.COM, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 2) $ 647,048 $ 133,309
Marketable securities (Note 2) 252,976 572,879
Inventories 163,880 220,646
Prepaid expenses and other current assets 99,181 85,344
----------- -----------
Total current assets 1,163,085 1,012,178
Fixed assets, net 352,290 317,613
Goodwill, net 383,996 534,699
Other purchased intangibles, net 136,474 195,445
Investments in equity-method investees 91,131 226,727
Other investments 73,345 144,735
Deferred charges and other 54,306 40,154
----------- -----------
Total assets $ 2,254,627 $ 2,471,551
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 304,709 $ 463,026
Accrued expenses and other current liabilities 160,073 181,909
Unearned revenue 142,046 54,790
Interest payable 35,056 24,888
Current portion of long-term debt and other 17,213 14,322
----------- -----------
Total current liabilities 659,097 738,935
Long-term debt 2,082,697 1,466,338
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $0.01 par value:
Authorized shares -- 500,000
Issued and outstanding shares -- none -- --
Common stock, $0.01 par value:
Authorized shares -- 5,000,000
Issued and outstanding shares -- 356,102 and 345,155
shares at September 30, 2000 and December 31, 1999, respectively 3,561 3,452
Additional paid-in capital 1,342,574 1,194,369
Stock-based compensation (19,504) (47,806)
Accumulated other comprehensive loss (65,637) (1,709)
Accumulated deficit (1,748,161) (882,028)
----------- -----------
Total stockholders' equity (deficit) (487,167) 266,278
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 2,254,627 $ 2,471,551
=========== ===========
</TABLE>
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 balance
sheets and statements of operations have been restated to reflect the splits.
NOTE 2: The Company classifies all highly liquid instruments with an original
maturity of three months or less as cash equivalents. Marketable securities
consist primarily of equity securities and high quality short- to
intermediate-term fixed income securities. Investments are included in
marketable securities if they do not meet the definition of a cash equivalent
and if the Company does not have the positive intent to hold the investment for
over one year. During the quarter ended September 30, 2000 we reclassified
approximately $96.1 million of investments to marketable securities that were
previously classified as "Other investments" or "Investments in equity-method
investees."
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AMAZON.COM, INC.
SEGMENT INFORMATION
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 2000 THREE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------------------- --------------------------------------------------
US Books, Early-Stage US Books, Early-Stage
Music and Businesses Music and Businesses
DVD/Video International And Other Consolidated DVD/Video International And Other Consolidated
--------- ------------- ----------- ------------ --------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 399,905 $ 87,665 $ 150,288 $ 637,858 $ 301,307 $ 39,682 $ 14,788 $ 355,777
Gross profit 108,746 18,882 39,651 167,279 64,100 8,995 (2,618) 70,477
PROFORMA OPERATING
INCOME (LOSS) BY SEGMENT 24,688 (39,569) (53,558) (68,439) (109) (18,138) (60,951) (79,198)
Other operating expenses -- -- -- (95,076) -- -- -- (87,911)
Net interest expense and
other -- -- -- (8,688) -- -- -- (6,612)
Equity in losses of
equity-method
investees, net -- -- -- (68,321) -- -- -- (23,359)
--------- --------- --------- --------- --------- --------- --------- ---------
Net loss -- -- -- $(240,524) -- -- -- $(197,080)
========= =========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 2000 NINE MONTHS ENDED SEPTEMBER 30, 1999
-------------------------------------------------- --------------------------------------------------
US Books, Early-Stage US Books, Early-Stage
Music and Businesses Music and Businesses
DVD/Video International And Other Consolidated DVD/Video International And Other Consolidated
--------- ------------- ----------- ------------ --------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $1,186,595 $236,190 $366,838 $1,789,623 $848,422 $96,746 $18,629 $963,797
Gross profit 278,463 51,205 101,809 431,477 185,046 20,728 (2,975) 202,799
PROFORMA OPERATING
INCOME (LOSS) BY SEGMENT 32,319 (101,519) (187,854) (257,054) (14,373) (48,425) (114,224) (177,022)
Other operating expenses -- -- -- (284,730) -- -- -- (154,949)
Net interest expense
and other -- -- -- (57,312) -- -- -- (27,908)
Equity in losses of
equity-method
investees, net -- -- -- (267,037) -- -- -- (36,876)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss -- -- -- $ (866,133) -- -- -- $ (396,755)
=========== ===========
</TABLE>
NOTE 1: The Company identifies operating segments based on product line
information, considering line maturity, within the United States and separately
identifies its international operations as an operating segment.
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