A few of the selected numbers and comments from AMZN Q1 '98 10Q filed Friday May 15, 1998:
[comments in these brackets[ ] are mine]
49,451,496 shares of $0.01 par value common stock outstanding as of April 30,
1998 (after adjusting for the Company's 2-for-1 stock split payable on June 1,
1998)
MARCH 31, DECEMBER 31,
1998 1997
Total assets ................................. $ 145,007 $ 149,006
========= =========
[shareholder equity fell quite a bit]
Total stockholders' equity ........... $ 19,827 28,486
THREE MONTHS ENDED
MARCH 31,
------------------------
1998 1997
-------- --------
----------------------------------------------------------------------------------------
Net sales ............................................... $ 87,375 $ 16,005
Cost of sales ........................................... 68,054 12,484
-------- --------
Gross profit ............................................ 19,321 3,521
Operating expenses:
Marketing and sales ............................19,503 3,906
Product development ............................6,729 1,575
General and administrative ...................1,963 1,142
-------- --------
Total operating expenses .................28,195 6,623
Loss from operations ............................. (8,874) (3,102)
Interest income ......................................... 1,640 64
Interest expense ........................................(2,025) --
-------- --------
Net loss ................................................ $ (9,259) $ (3,038)
======== ========
Pro forma basic and diluted loss
per share ......... $ (0.20) $ (0.08)
======== ========
Shares used in computation of
pro forma basic and diluted loss
per share ....................................... 46,622 38,804
======== ========
Net cash provided by (used in)
operating activities.................................. (6,555) 1,203
On April 27, 1998, the Company announced the acquisition of three Internet
companies: Bookpages Limited ("Bookpages"), Telebook, Inc. ("Telebook") and
Internet Movie Database Limited ("IMDB"). Bookpages and Telebook are online
booksellers. Bookpages has operations in the United Kingdom and Telebook has
operations primarily in Germany through its ABC Bucherdienst subsidiary. IMDB
operates a comprehensive repository for movie information on the Internet. Each
of the acquisitions will be accounted for under the purchase method of
accounting. The Company will incur charges of approximately $55 million in the
aggregate in connection with the three transactions. The consideration for the
acquisitions was comprised of cash [how much?]and common stock. The Company
issued an aggregate of approximately 540,000 shares of common stock to effect the
transactions. The Company expects to amortize the intangibles resulting from the
acquisitions over approximately two years.
On May 8, 1998, the Company completed an offering of approximately $326 million
gross proceeds of 10% Senior Discount Notes due 2008 (the "Senior Discount
Notes"). The Senior Discount Notes will mature on May 1, 2008. The Senior
Discount Notes were sold at a substantial discount from their principal amount
at maturity of $530 million. There will not be any payment of interest on the
Senior Discount Notes prior to November 1, 2003. From and after May 1, 2003, the
Senior Discount Notes will bear interest, which will be payable in cash, at a
rate of 10% per annum on each May 1 and November 1, commencing November 1, 2003.
The net proceeds from the offering have and will be used to retire approximately
$75 million of existing indebtedness, and for general corporate purposes,
including working capital to fund anticipated operating losses, the expansion of
the Company's core business, investments in new business segments and markets,
including the Company's planned sales of music products and international
expansion, and capital expenditures. The Company expects, if the opportunity
arises, to use an unspecified portion of the net proceeds to acquire or invest
in complementary businesses, products and technologies.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
[selected excerpts ]
...........Particular attention should
be paid to the cautionary statements involving the Company's limited operating
history, the unpredictability of its future revenues, the unpredictable and
evolving nature of its business model, the intensely competitive online commerce
and retail book and music industries, and the risks associated with capacity
constraints, systems development, management of growth, acquisitions, any new
products and international or domestic business expansion. Except as required by
law, the Company undertakes no obligation to update any forward-looking
statement, whether as a result of new information, future events or otherwise.
Readers, however, should carefully review the factors set forth in other reports
or documents that the Company files from time to time with the SEC...............
........Since inception, the Company has incurred significant losses and as of March 31,
1998, had an accumulated deficit of $42.9 million. The Company believes that its
success will depend in large part on its ability to (i) extend its brand
position, (ii) provide its customers with outstanding value and a superior
shopping experience and (iii) achieve sufficient sales volume to realize
economies of scale. Accordingly, the Company intends to continue to invest
heavily in marketing and promotion, product development and technology, and
operating infrastructure development.
.....The Company also offers attractive pricing
programs, which have reduced its gross margins. Because the Company has
relatively low product gross margins, achieving profitability given planned
investment levels depends upon the Company's ability to generate and sustain
substantially increased revenue levels. As a result, the Company believes that
it will continue to incur substantial operating losses for the foreseeable
future and that the rate at which such losses will be incurred may increase
significantly from current levels.........
......In addition, expenses associated with the
amortization of intangibles resulting from the Company's recent acquisitions and
interest expenses related to the Senior Discount Notes (as defined below) will
further affect the Company's net loss. Although the Company has experienced
significant revenue growth in recent periods, such growth rates are not
sustainable and will decrease in the future.............
......As a result of the Company's limited operating history and the emerging nature
of the markets in which it competes, the Company is unable to accurately
forecast its revenues. .......Accordingly, any significant
shortfall in revenues in relation to the Company's planned expenditures would
have an immediate adverse effect on the Company's business, prospects, financial
condition and results of operations.........
........The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors [2 pages worth]........
........The Company expects that it will experience seasonality in its business,
reflecting a combination of seasonal fluctuations in Internet usage and
traditional retail seasonality patterns. Internet usage and the rate of Internet
growth may be expected to decline during the summer. Further, sales in the
traditional retail book industry are generally significantly higher in the
fourth calendar quarter of each year...........
.......The Company may establish
one or more additional distribution centers within the next 12 months, which
would require it to commit to lease obligations, stock inventories, purchase
fixed assets and install leasehold improvements. In addition, the Company has
announced plans to continue to increase its merchandise inventory in order to
provide better availability to customers and achieve purchasing efficiencies......
.......The Senior Discount Notes are redeemable, at the option of the Company, in
whole or in part, at any time on or after May 1, 2003, at the redemption
prices set forth in the Indenture for the Senior Discount Notes (the
"Indenture"), plus accrued interest, if any, to the date of redemption. At any
time prior to May 1, 2001, the Company also may redeem up to 35% of the
aggregate principal amount at maturity of the Senior Discount Notes with the
proceeds of one or more sales of Capital Stock ....... [now we know how they plan to
repay the debt, by selling more shares = DILUTION]
[SOME BOILERPLATE LANGUAGE...........BUT IT IS SO TRUE.....]
............The online commerce market, particularly over the Web, is new, rapidly evolving
and intensely competitive. In addition, the retail book and music industries are
intensely competitive. The Company's current or potential competitors include
(i) various online booksellers and vendors of other products such as CDs and
videotapes, including entrants into narrow specialty niches, (ii) a number of
indirect competitors that specialize in online commerce or derive a substantial
portion of their revenues from online commerce, through which retailers other
than the Company may offer products and (iii) publishers, distributors and
retail vendors of books, music and other products, including Barnes & Noble,
Inc., Bertelsmann AG and other large specialty booksellers and integrated media
corporations, many of which possess significant brand awareness, sales volume
and customer bases. The Company believes that the principal competitive factors
in its market are brand recognition, selection, personalized services,
convenience, price, accessibility, customer service, quality of search tools,
quality of editorial and other site content, and reliability and speed of
fulfillment. Many of the Company's competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than the Company. Certain of the
Company's competitors may be able to secure merchandise from vendors on more
favorable terms, devote greater resources to marketing and promotional
campaigns, adopt more aggressive pricing or inventory availability policies and
devote substantially more resources to Web site and systems development than the
Company. Increased competition may result in reduced operating margins, loss of
market share and a diminished brand franchise. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors.
The Company expects that competition in the online commerce market will
intensify in the future. For example, as various market segments obtain large,
loyal customer bases, participants in those segments may seek to leverage their
market power to the detriment of participants in other market segments. In
addition, new technologies and the expansion of existing technologies may
increase the competitive pressures on online retailers, including the Company.
For example, "shopping agent" technologies will permit customers to quickly
compare the Company's prices with those of its competitors. Competitive
pressures created by any one of the Company's competitors, or by the Company's
competitors collectively, could have a material adverse effect on the Company's
business, prospects, financial condition and results of operations...................
.......The Company has significant indebtedness outstanding, principally the
Senior Discount Notes ........., capitalized lease obligations and
other equipment financing. The Company may incur substantial additional
indebtedness in the future. The level of the Company's indebtedness, among other
things, could (i) make it difficult for the Company to make payments on the
Senior Discount Notes, (ii) make it difficult for the Company to obtain any
necessary financing in the future for working capital, capital expenditures,
debt service requirements or other purposes, (iii) limit the Company's
flexibility in planning for, or reacting to changes in, its business, and (iv)
make it more vulnerable in the event of a downturn in its business.
At any time prior to May 1, 2001, the Company also may redeem up to 35% of the
aggregate principal amount at maturity of the Senior Discount Notes with the
proceeds of one or more sales of Capital Stock
Recent Sales of Unregistered Equity Securities
The Company issued 540,066 shares of its common stock (the "Common Stock") in
connection with the acquisition of the following companies: Bookpages on April
17, 1998; Telebook on April 24, 1998; and IMDB on April 24, 1998. The form of
the transactions for Bookpages and IMDB was an exchange of the Company's Common
Stock plus, in the case of IMDB, cash for the entire issued share capital of the
acquired businesses. For Telebook, the form of the transaction was a merger,
whereby Telebook was merged into a wholly-owned subsidiary of the Company in
exchange for shares of the Company's Common Stock. No underwriters were used and
the recipients of the Company's Common Stock were the shareholders of the
acquired companies.
Twenty-one of the former shareholders of the acquired companies are non-U.S.
residents who collectively received 351,324 shares of the Company's Common
Stock. The shares were not registered under the Securities Act of 1933, as
amended (the "Securities Act") pursuant to the safe harbor contained in
Regulation S thereunder. The shares issued to non-U.S. residents were sold in
offshore transactions in accordance with the offering restrictions of Regulation
S and no directed selling efforts were made in the United States.
[the entire 10 Q can be found at edgar-online.com It is about 85 pages long
with all the attachments. Above are the most important parts, IMHO.........;^) ] |
