Amazon.com 1998 Annual Report Download
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Bowne Conversion karen-ir-2.doc
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, 1998 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 incorporation (I.R.S. Employer Identification No.)
or organization)
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. [ ]
Aggregate market value of voting stock held by non-affiliates of the registrant as of February 28, 1999................ $ 11,495,058,788
Number of shares of common stock outstanding as of February 28, 1999............................................................. 161,096,869
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Annual Report, to the extent not set forth herein, is incorporated herein by reference
from the registrant's definitive proxy statement relating to the annual meeting of stockholders to be held on May 20, 1999, which
definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year
to which this Annual Report relates.
Table of contents
-
Page 1
... 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... -
Page 2
...Item 13. PART I Business ...Properties...Legal Proceedings...Submission of Matters to a Vote of Security Holders ...PART II Market for the Registrant's Common Stock and Related Stockholder Matters ...Selected Consolidated Financial Data ...Management's Discussion and Analysis of Financial Condition... -
Page 3
...participate in promotions and check order status. The key components of Amazon.com's offerings include browsing, searching, reviews and content, recommendations and personalization, 1-Click technology, secure credit card payment and availability and fulfillment. The Company's Web sites promote brand... -
Page 4
... books, music CD, video, DVD, computer game and other titles. The Company provides a selection of search tools to find books, music, video and other products based on keyword, title, subject, author, artist, musical instrument, label, actor, director, publication date or ISBN. Customers can also use... -
Page 5
... a number of e-mail addresses to enable customers to request information and to encourage feedback and suggestions. Users can also contact customer service representatives via telephone 24 hours a day, 7 days a week. The Company has automated certain of the tools used by its customer support and... -
Page 6
... book, music and video industries are intensely competitive. The Company's current or potential competitors include (1) online booksellers and vendors of other products such as CDs, videotapes and DVDs, (2) a number of indirect competitors, including Web portals and Web search engines such as Yahoo... -
Page 7
..., the level of traffic on our Web sites, the effects of acquisitions and other business combinations, and related integration, technical difficulties, system downtime or Internet brownouts, introductions of popular books, music selections and other products or services, Bowne Conversion 7 -
Page 8
..., the retail book, music and video industries are intensely competitive. Our current or potential competitors include (1) online booksellers and vendors of other products such as CDs, videotapes and DVDs, (2) a number of indirect competitors, including Web portals and Web search engines, such as... -
Page 9
... experience in purchasing, marketing and distributing products or services for these markets and may not benefit from any first-to-market advantages. It will be costly to establish international facilities and operations, promote our brand internationally, and develop localized Web sites and stores... -
Page 10
...not have "key person" life insurance policies. The loss of any of our executive officers or other key employees could harm our business. We rely on a small number of suppliers. We purchase a majority of our products from three major vendors, Ingram, B&T and Valley Media. In late 1998, Barnes & Noble... -
Page 11
... analysts, performance by other online commerce companies, and news reports relating to trends in the Internet, book, music, video or other product or service industries. Any of these events may cause our stock price to fall, which may adversely affect our business and financing opportunities. In... -
Page 12
...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 13
...the Gates Learning Foundation and Former Senior Vice President of the Interactive Media Division of Microsoft Corporation The Company's principal office facilities located in the United States currently total approximately 150,000 square feet and are located in Seattle, Washington under leases that... -
Page 14
...claims. Amazon.com has filed a counterclaim based in part on unfair competition and ...1998. 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." The following... -
Page 15
... 14 - 52 (52) - - - (52) (0.00) 79,146 1998 Statement of Operations Data (1): Net sales ...Cost of sales ...Gross profit...Operating expenses: Marketing and sales...Product development...General and administrative ...Merger and acquisition related costs, including amortization of goodwill and other... -
Page 16
... customer orders accounted for over 60% of orders placed on the Amazon.com Web site during the fiscal year ended December 31, 1998. Additionally, the increase in net sales in 1998 was partially due to the opening of the music store in June 1998, the United Kingdom and German stores in October 1998... -
Page 17
... and its planned distribution network expansion. Marketing and sales expenses increased in 1998 and 1997 primarily due to increases in the Company's advertising and promotional expenditures, increased payroll and related costs associated with fulfilling customer demand and increased credit card fees... -
Page 18
... to the growth of its business, including investments associated with products, services and international expansion. Merger and Acquisition Related Costs, Including Amortization of Goodwill and Other Purchased Intangibles Merger and acquisition related costs, including amortization of goodwill... -
Page 19
...'s issuance of capital stock. As of December 31, 1998, the Company's principal sources of liquidity consisted of $373.4 million of cash and marketable securities. As of that date, the Company's principal commitments consisted of obligations outstanding under its Senior Discount Bowne Conversion 19 -
Page 20
... announced plans to continue developing distribution infrastructure to increase efficiency and support greater customer demand and to increase its inventory to provide better availability to customers and achieve purchasing efficiencies. Senior Discount Notes In May 1998, the Company completed the... -
Page 21
.... Amazon.com's current systems and products may contain undetected errors or defects with Year 2000 date functions that may result in material costs. In addition, the Company utilizes third-party equipment, software and content, including non-information technology systems, such as security systems... -
Page 22
its marketable securities, which are classified as available-for-sale as of December 31, 1998. The Company's Senior Discount Notes, Convertible Notes and other long-term debt have fixed interest rates and the fair value of these instruments is affected by changes in market interest rates. The ... -
Page 23
Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Ernst & Young LLP, Independent Auditors ...Consolidated Balance Sheets ...Consolidated Statements of Operations...Consolidated Statements of Stockholders' Equity...Consolidated Statements ... -
Page 24
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Stockholders Amazon.com, Inc. We have audited the accompanying consolidated balance sheets of Amazon.com, Inc. as of December 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity ... -
Page 25
AMAZON.COM, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) ASSETS December 31, 1998 1997 Current assets: Cash ...Marketable securities...Inventories...Prepaid expenses and other ...Total current assets...Fixed assets, net ...Deposits and other...Goodwill and other purchased ... -
Page 26
AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Years Ended December 31, 1998 1997 1996 $ 609,996 $......Operating expenses: Marketing and sales ...Product development ...General and administrative...Merger and acquisition related costs, including ... -
Page 27
... ...Public stock offering, net of $4,897 issuance costs ...Conversion of preferred stock into common stock ...Issuance of common stock for fixed assets and accrued product development...Issuance of capital stock ...Exercise of common stock options...Deferred compensation related to stock options... -
Page 28
...of marketable securities...Purchases of marketable securities ...Purchases of fixed assets ...Acquisitions, dispositions, and investments in businesses ...Net cash used in investing activities...Financing activities Net proceeds from initial public offering ...Proceeds from exercise of stock options... -
Page 29
... POLICIES Description of Business Amazon.com, Inc. ("Amazon.com" or the "Company"), an Internet retailer, was incorporated in July 1994 and opened its virtual doors on the Web in July 1995. Amazon.com offers book, music CD, video, DVD, computer game and other titles on its Web sites. Business... -
Page 30
... approximate fair value. The fair market value for long-term debt and marketable securities is based on quoted market prices where available. Deferred Charges In May 1998, the Company issued approximately $326 million gross proceeds of 10% Senior Discount Notes due 2008 (the "Senior Discount Notes... -
Page 31
... exchange contracts or other such derivative instruments. Segment and Geographic Information The Company operates in one principal business segment across domestic and international markets. International sales, including export sales from the United States, represented approximately 20%, 25%, and... -
Page 32
... leading provider of Web-based virtual database technology which allows visitors to access a variety of products sold by other merchants. The Company issued approximately 4.7 million shares of common stock and assumed all outstanding options and warrants in connection with the acquisition of Junglee... -
Page 33
... November 1998, the Company sold the employment business unit of Junglee in exchange for cash and approximately 1.7 million shares of the purchaser's common stock. There was no gain or loss recorded from this sale. The investment is recorded at cost and is classified within marketable securities in... -
Page 34
... covenants at December 31, 1998. A portion of the net proceeds from the offering of the Senior Discount Notes was used to retire approximately $75 million of indebtedness outstanding as of December 31, 1997. Future principal payments related to the Senior Discount Notes do not commence until... -
Page 35
...interest ...Present value of net minimum lease payments ...Less current portion ...Long-term capital lease obligation...$ 145 62 - - - - $ 207 20 187 124 $ 63 $ 47,626 37,718 11,615 6,077 4,712 27,081 $ 134,829 Legal Proceedings In October 1998, Wal-Mart Stores, Inc. ("Wal-Mart") filed a lawsuit in... -
Page 36
...may be added to the aggregate number of shares available for issuance under the 1997 Stock Option Plan. In connection with the acquisition of Junglee and the merger with PlanetAll in August 1998, the Company assumed outstanding options to purchase common stock originally issued under these companies... -
Page 37
... canceled ...Options exercised ...Balance December 31, 1998... At December 31, 1998, 12.8 million shares of common stock were available for future grant under the Plans. The following table summarizes information about options outstanding and exercisable at December 31, 1998: Options Outstanding... -
Page 38
... in other companies or other entities, or in exchange for assets used in or related to the business of such entities. At December 31, 1998, common stock reserved for future issuance is as follows (in thousands): Stock options...50,853 Shelf registration...15,000 Total...65,853 Bowne Conversion 38 -
Page 39
... under Section 382 of the Internal Revenue Code of 1986, as amended. Substantially all of these carryforwards will begin to expire at various times starting in 2011. To the extent that net operating loss carryforwards, when realized, relate to stock option deductions of approximately $103 million... -
Page 40
..., acquisitions or investments in complementary businesses, products and technologies and repurchases and retirement of debt. Authorized Shares On February 10, 1999, the Board of Directors approved an increase in authorized shares of common stock and preferred stock, par value $0.01 per share... -
Page 41
... Registrant Information regarding...relating to the Company's annual meeting of stockholders to be held on May 20, 1999, and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) List of Documents Filed as a Part of This Annual Report... -
Page 42
... Plan of Merger dated as of August 3, 1998, by and among Amazon.com, Inc., AJ Acquisition, Inc. and Junglee Corporation (incorporated by reference to the Company's Current Report on Form 8-K dated August 3, 1998). Agreement and Plan of Merger dated as of August 3, 1998, by and among Amazon.com, Inc... -
Page 43
... Plan or Agreement (b) Reports on Form 8-K: On October 26, 1998, the Company filed a Form 8-K/A under Item 5, which amended the Company's Current Report on Form 8-K dated August 12, 1998, regarding its acquisition of Junglee Corp. On October 28, 1998, the Company filed a Form 8-K under Item... -
Page 44
.... AMAZON.COM, INC. Date: March 5, 1999 By: /s/ JEFFREY P. BEZOS Jeffrey P. Bezos President, Chief Executive Officer and Chairman of the Board 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... -
Page 45
... Balance at Beginning of Period $ 800 $ - $ - Charged/ (Credited) Inventory to Costs Disposed or and Expenses Written Off (in thousands) $ 4,420 $ (620) $ 800 Balance at End of Period $ 4,600 $ 800 $ - Year Ended December 31, 1998...December 31, 1997...December 31, 1996... Bowne Conversion 45 -
Page 46
... Plan of Merger dated as of August 3, 1998, by and among Amazon.com, Inc., AJ Acquisition, Inc. and Junglee Corporation (incorporated by reference to the Company's Current Report on Form 8-K dated August 3, 1998). Agreement and Plan of Merger dated as of August 3, 1998, by and among Amazon.com, Inc... -
Page 47
... and McConnell Development, Inc. (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the Quarterly Period Ended September 30, 1997). Lease Agreement, dated April 17, 1998, by and between Bookpages Limited and Amazon.com, Inc. and Slough Trading Estate Limited (incorporated...