Amazon.com 1997 Annual Report Download

Download and view the complete annual report

Please find the complete 1997 Amazon.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 48

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NO. 000-22513
AMAZON.COM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 91-1646860
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1516 SECOND AVENUE
SEATTLE, WASHINGTON 98101
(206) 622-2335
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [ X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Table of contents

  • Page 1
    ... (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR VALUE $.01 PER SHARE Indicate by check...

  • Page 2
    Aggregate market value of voting stock held by non-affiliates of the registrant as of March 13, 1998 ...$787,637,606 Number of shares of common stock outstanding as of March 13, 1998 DOCUMENTS INCORPORATED BY REFERENCE The information required by Part III of this Report, to the extent not set forth ...

  • Page 3
    ... and Qualitative Disclosures about Market Risk . Financial Statements and Supplementary Data . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . PART III Directors and Executive Officers of the Registrant . Executive Compensation . Security Ownership of Certain...

  • Page 4
    ... and browse features, e-mail services, personalized shopping services, Web-based credit card payment and direct shipping to customers. The Company intends over time to expand its catalog into other information-based products, such as music. Amazon.com has virtually unlimited online shelf space and...

  • Page 5
    .... Customers can select and order gifts, choose from a number of gift-wraps and have packages wrapped and sent with a personalized message. Out-of-Print. Amazon.com began offering an out-of-print book service in March 1997. More than one million out-of-print titles are listed in the Company...

  • Page 6
    ... has developed customized information systems and trained dedicated ordering personnel who specialize in sourcing hard-to-find books. TECHNOLOGY The Company has implemented an array of site management, search, customer interaction, transaction-processing and fulfillment services and systems using...

  • Page 7
    ..., authorizing and charging customer credit cards. The Amazon.com Web site also incorporates a variety of search and database tools. A group of systems administrators and network managers monitor and operate the Company's Web site, network operations and transaction-processing systems. The continued...

  • Page 8
    ...management of growth. To address these risks, the Company must, among other things, maintain and increase its customer base, implement and successfully execute its business and marketing strategy, continue to develop and upgrade its technology and transaction-processing systems, improve its Web site...

  • Page 9
    ... the level of use of the Internet and online services and increasing consumer acceptance of the Internet and other online services for the purchase of consumer products such as those offered by the Company, (vii) the Company's ability to upgrade and develop its systems and infrastructure and attract...

  • Page 10
    ...The Company uses an internally developed system for its Web site, search engine and substantially all aspects of transaction processing, including order management, cash and credit card processing, purchasing, inventory management and shipping. The Company will be required to add additional software...

  • Page 11
    ... only limited experience in sourcing, marketing and distributing products on an international basis and in developing localized versions of its Web site and other systems. The Company expects to incur significant costs in establishing international facilities and operations, in promoting its brand...

  • Page 12
    ... render the Company's existing Web site and proprietary technology and systems obsolete. The Company's success will depend, in part, on its ability to license leading technologies useful in its business, enhance its existing services, develop new services and technology that address the increasingly...

  • Page 13
    ... on the Company's business, prospects, financial condition and results of operations. Moreover, the applicability to the Internet and other online services of existing laws in various jurisdictions governing issues such as property ownership, sales and other taxes, libel and personal privacy is...

  • Page 14
    ...1991 to January 1995, Ms. Covey served as Chief Financial Officer of Digidesign, Inc., a developer of random access digital audio systems and software. Prior to that, she was an associate at Wasserstein Perella & Co., and a certified public accountant at Arthur Young & Company (now Ernst & Young LLP...

  • Page 15
    ...Product Development in November 1997. From July 1991 to February 1997, Mr. Risher held a variety of marketing and project management positions at Microsoft Corporation, including Team Manager for Microsoft Access and Founder and Product Unit Manager for MS Investor, Microsoft's Web site for personal...

  • Page 16
    ... ended December 31, 1997. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Market Information The common stock is traded on The NASDAQ National Market under the symbol "AMZN." Information regarding the market prices of the Company's common stock may be found...

  • Page 17
    ... Long-term debt, net of current portion ...76,702 Stockholders' equity ...28,486 (1) See Note 1 -- "Accounting Policies" of Notes to Financial Statements. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Annual Report on Form 10-K and the documents...

  • Page 18
    beliefs and certain assumptions made by management. All statements, trends, analyses and other information contained in this report relative to trends in net sales, gross margin, anticipated expense levels and liquidity and capital resources, as well as other statements, including, but not limited ...

  • Page 19
    ...management of growth. To address these risks, the Company must, among other things, maintain and increase its customer base, implement and successfully execute its business and marketing strategy, continue to develop and upgrade its technology and transaction-processing systems, improve its Web site...

  • Page 20
    ... the level of use of the Internet and online services and increasing consumer acceptance of the Internet and other online services for the purchase of consumer products such as those offered by the Company, (vii) the Company's ability to upgrade and develop its systems and infrastructure and attract...

  • Page 21
    ... pursue its aggressive branding and marketing campaign and expects its costs of fulfillment to increase based on anticipated sales growth. Therefore, the Company expects marketing and sales expenses to increase significantly in absolute dollars. Product Development 1997 Product development...$12,485...

  • Page 22
    ..., 1997 the Company's cash and cash equivalents were $109.8 million, compared to $6.2 million at December 31, 1996. Net cash provided by operating activities of $3.5 million for the year ended December 31, 1997 was primarily attributable to increases of $29.8 million in accounts payable, $5.1 million...

  • Page 23
    ... price for the warrants is $52.11 per share. The Company expects to use the proceeds of the Loan to support its strategy of investing heavily in marketing and promotion, product development and technology and operating infrastructure development and may commit to significant fixed expenditures. The...

  • Page 24
    ... new, management does not expect Year 2000 issues related to its own internal systems to be significant. The Company has initiated formal communications with all of its significant suppliers and service providers to determine the extent to which the Company's interface systems are vulnerable to...

  • Page 25
    ... of the initial application of SFAS No. 128, the number of shares used in the calculation of basic net loss per share has changed to exclude common equivalent shares, even when antidilutive, and exercised but unvested shares subject to repurchase by the Company. Previously reported periods affected...

  • Page 26
    ...in all material respects, the financial position of Amazon.com, Inc. at December 31, 1997 and 1996 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Also, in our opinion...

  • Page 27
    ...: Accounts payable ...Accrued advertising ...Accrued product development ...Other liabilities and accrued expenses...Current portion of long-term debt ...Total current liabilities...Long-term portion of debt ...Long-term portion of capital lease obligation ...Stockholders' Equity: Preferred stock...

  • Page 28
    AMAZON.COM, INC. STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) YEARS ENDED DECEMBER 31, 1997 Net sales ...$147,758 Cost of sales ...118,945 Gross profit...Operating expenses: Marketing and sales ...Product development...General and administrative ...Total operating expenses...Loss ...

  • Page 29
    ... ACCUMULATED SHARES AMOUNT COMMON STOCKCAPITAL SHARES AMOUNT COMPENSATION DEFICIT Balance at December 31, 1994...$ Sale of common stock ...Reclassification of accumulated deficit due to termination of S Corporation status ...Advances received for common stock ...Exercise of common stock options...

  • Page 30
    ... 1996...Sale of preferred stock...Exercise of common stock options .. 3,401 200 518 Public stock offering, net of $1,117 issuance costs ...Conversion of preferred 49,103 -- stock into common stock Issuance of common stock for fixed assets and accrued product development ...Unearned compensation...

  • Page 31
    stock options ...Net loss for the year ended 1,354 (27,590) December 31, 1997 Balance at December 31, 1997... $28,486 See accompanying notes. 25

  • Page 32
    ... ...Deposits...Accounts payable ...Accrued advertising...Other liabilities and accrued expenses ...Net cash provided by (used in) ...INFORMATION Common stock issued for fixed assets and accrued product development Fixed assets acquired under capital lease...$362 Fixed assets acquired under financing...

  • Page 33
    ...5, 1994. The Company is an online retailer of books and other information-based products on the Company's Web site and offers more than 2.5 million titles. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make...

  • Page 34
    ...and consultants, systems and telecommunications infrastructure and costs of acquired content. To date, all product development costs have been expensed as incurred. Stock Compensation The Company has elected to apply the disclosure-only provisions of Statement of Financial Accounting Standard ("SFAS...

  • Page 35
    ...the SEC required that, even where antidilutive, common and common equivalent shares issued during the 12-month period prior to the filing of an initial public offering be included in the calculation of earnings per share as if they were outstanding for all periods presented (using the treasury stock...

  • Page 36
    ... accounts payable aging and limit its capital and acquisition expenditures. The Loan contains standard events of default, including, among other things, a change in ownership or control. As a result, the Loan may reduce the Company's operational flexibility and may limit its ability to pursue market...

  • Page 37
    ... of Delaware with authorized capital of 5,000,000 shares of $0.01 par value preferred stock and 25,000,000 shares of $0.01 par value common stock. The accompanying financial statements have been restated to reflect the reincorporation. On April 18, 1997, the Company increased its authorized common...

  • Page 38
    31

  • Page 39
    ... the aggregate number of shares available for issuance under the 1997 Stock Option Plan. Generally, options are granted by the Company's Board of Directors at an exercise price of not less than the fair market value of the Company's common stock at the date of grant. Each outstanding option granted...

  • Page 40
    AMAZON.COM, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes the Company's stock option activity: NUMBER OF SHARES Balance, December 31, 1994 ...Options granted...Options canceled...Options exercised...Balance December 31, 1995 ...Options granted: At fair market value...

  • Page 41
    AMAZON.COM, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) the pro forma amounts of the Company's net loss and net loss per share for the years ended December 31, 1997, 1996 and 1995 would have been as follows: FOR THE YEARS ENDED DECEMBER 31, 1997 Net loss -- as reported ...Net loss -- pro forma...

  • Page 42
    ... for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows: DECEMBER 31, 1997 1996 (IN THOUSANDS) Deferred tax assets: Net operating loss carryforwards ...Reserves ...Compensation expense ...Other...

  • Page 43
    ... of the initial application of SFAS No. 128, the number of shares used in the calculation of basic net loss per share has changed to exclude common equivalent shares, even when antidilutive, and exercised but unvested shares subject to repurchase by the Company. Previously reported periods affected...

  • Page 44
    .... Such Proxy Statement will be filed within 120 days of December 31, 1997, the Company's year end. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) LIST OF DOCUMENTS FILED AS A PART OF THIS REPORT: (1) Index to Financial Statements: Report of Ernst & Young LLP...

  • Page 45
    December 20, 1996, from the Company to Joy D. Covey. 37

  • Page 46
    ... February 12, 1997, by and between the Company and Digital Financial Services, a division of General Electric Capital Corporation. 10.17** -Lease Agreement, dated August 22, 1997, by and between the Company and McConnell Development, Inc. 10.18++ -Credit Agreement, dated December 23, 1997, by and...

  • Page 47
    ...duly authorized. AMAZON.COM, INC. Date: March 30, 1998 By: /s/ JEFFREY P. BEZOS Jeffrey P. Bezos, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in...

  • Page 48
    ... II -- VALUATION AND QUALIFYING ACCOUNTS ALLOWANCE FOR DOUBTFUL ACCOUNTS CHARGED/ (CREDITED) TO COSTS AND EXPENSES COLLECTION OF ACCOUNTS PREVIOUSLY WRITTEN OFF (IN THOUSANDS) $ ---- YEAR ENDED BALANCE AT BEGINNING OF PERIOD ACCOUNTS WRITTEN OFF BALANCE AT END OF PERIOD December 31, 1997...