UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2004
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
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 or Organization) |
(I.R.S. Employer Identification No.) |
1200 12th Avenue South, Suite 1200, Seattle, Washington 98144-2734
(206) 266-1000
(Address 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
408,051,981 shares of common stock, par value $0.01 per share outstanding as of October 14, 2004
AMAZON.COM, INC.
FORM 10-Q
For the Three Months Ended September 30, 2004
| Page | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. |
3 | |||
| 3 | ||||
| Consolidated Statements of Cash Flows — Twelve months ended September 30, 2004 and 2003 |
4 | |||
| 5 | ||||
| Consolidated Balance Sheets — September 30, 2004 and December 31, 2003 |
6 | |||
| Notes to Consolidated Financial Statements — September 30, 2004 |
7 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
23 | ||
| Item 3. |
57 | |||
| Item 4. |
58 | |||
| PART II. OTHER INFORMATION | ||||
| Item 1. |
59 | |||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
59 | ||
| Item 3. |
59 | |||
| Item 4. |
59 | |||
| Item 5. |
59 | |||
| Item 6. |
60 | |||
| 61 | ||||
2
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
$ | 701,150 | $ | 641,728 | $ | 1,102,273 | $ | 738,254 | ||||||||
| OPERATING ACTIVITIES: |
||||||||||||||||
| Net income (loss) |
54,147 | 15,563 | 241,763 | (37,872 | ) | |||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||||||||||
| Depreciation of fixed assets, including internal-use software and website development, and other amortization |
19,083 | 18,338 | 54,893 | 57,091 | ||||||||||||
| Stock-based compensation |
9,274 | 20,936 | 38,073 | 72,712 | ||||||||||||
| Other operating expense (income) |
4,505 | 786 | (3,187 | ) | 2,611 | |||||||||||
| Losses (gains) on sales of marketable securities, net |
220 | (141 | ) | (790 | ) | (9,393 | ) | |||||||||
| Remeasurements and other |
5,441 | 11,142 | (31,221 | ) | 93,592 | |||||||||||
| Non-cash interest expense and other |
1,140 | 1,343 | 3,402 | 12,752 | ||||||||||||
| Changes in operating assets and liabilities: |
||||||||||||||||
| Inventories |
(69,626 | ) | (62,147 | ) | (61,172 | ) | (34,001 | ) | ||||||||
| Accounts receivable, net and other current assets |
(22,868 | ) | (14,844 | ) | (15,842 | ) | 18,303 | |||||||||
| Accounts payable |
95,529 | 49,535 | (137,853 | ) | (131,584 | ) | ||||||||||
| Accrued expenses and other current liabilities |
8,668 | (5,109 | ) | (58,240 | ) | (99,312 | ) | |||||||||
| Additions to unearned revenue |
33,707 | 29,932 | 84,469 | 78,652 | ||||||||||||
| Amortization of previously unearned revenue |
(27,029 | ) | (27,816 | ) | (76,154 | ) | (85,719 | ) | ||||||||
| Interest payable |
4,454 | (701 | ) | (29,148 | ) | (26,773 | ) | |||||||||
| Net cash provided by (used in) operating activities |
116,645 | 36,817 | 8,993 | (88,941 | ) | |||||||||||
| INVESTING ACTIVITIES: |
||||||||||||||||
| Sales and maturities of marketable securities and other investments |
395,087 | 21,988 | 1,007,411 | 581,011 | ||||||||||||
| Purchases of marketable securities |
(380,651 | ) | (71,880 | ) | (1,136,032 | ) | (414,194 | ) | ||||||||
| Purchases of fixed assets, including internal-use software and website development |
(28,722 | ) | (15,192 | ) | (52,378 | ) | (28,727 | ) | ||||||||
| Proceeds from sale of subsidiary and other |
— | 5,072 | — | 5,072 | ||||||||||||
| Acquisition, net of cash acquired |
(71,195 | ) | — | (71,195 | ) | — | ||||||||||
| Net cash provided by (used in) investing activities |
(85,481 | ) | (60,012 | ) | (252,194 | ) | 143,162 | |||||||||
| FINANCING ACTIVITIES: |
||||||||||||||||
| Proceeds from exercises of stock options and other |
7,727 | 41,235 | 42,618 | 132,832 | ||||||||||||
| Repayments of long-term debt, capital lease obligations, and other |
(550 | ) | (3,437 | ) | (156,842 | ) | (287,576 | ) | ||||||||
| Net cash provided by (used in) financing activities |
7,177 | 37,798 | (114,224 | ) | (154,744 | ) | ||||||||||
| Foreign-currency effect on cash and cash equivalents |
6,117 | 10,087 | 760 | 28,687 | ||||||||||||
| Net increase (decrease) in cash and cash equivalents |
44,458 | 24,690 | (356,665 | ) | (71,836 | ) | ||||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 745,608 | $ | 666,418 | $ | 745,608 | $ | 666,418 | ||||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
||||||||||||||||
| Fixed assets acquired under capital leases and other financing arrangements |
$ | 135 | $ | 1,572 | $ | 658 | $ | 2,648 | ||||||||
| Cash paid for interest |
21,497 | 30,019 | 107,565 | 116,835 | ||||||||||||
| Cash paid for income taxes |
1,651 | 1,019 | 2,659 | 1,628 | ||||||||||||
See accompanying notes to consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Twelve Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
$ | 666,418 | $ | 327,564 | ||||
| OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
314,917 | (35,221 | ) | |||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation of fixed assets, including internal-use software and website development, and other amortization |
73,360 | 76,955 | ||||||
| Stock-based compensation |
53,112 | 108,392 | ||||||
| Other operating expense (income) |
(3,046 | ) | 4,624 | |||||
| Gains on sales of marketable securities, net |
(995 | ) | (11,260 | ) | ||||
| Remeasurements and other |
5,284 | 134,888 | ||||||
| Non-cash interest expense and other |
3,568 | 19,902 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Inventories |
(103,957 | ) | (82,369 | ) | ||||
| Accounts receivable, net and other current assets |
(33,840 | ) | 16,775 | |||||
| Accounts payable |
161,463 | 131,254 | ||||||
| Accrued expenses and other current liabilities |
15,332 | (57,366 | ) | |||||
| Additions to unearned revenue |
107,458 | 98,415 | ||||||
| Amortization of previously unearned revenue |
(102,175 | ) | (123,444 | ) | ||||
| Interest payable |
(525 | ) | 2,093 | |||||
| Net cash provided by operating activities |
489,956 | 283,638 | ||||||
| INVESTING ACTIVITIES: |
||||||||
| Sales and maturities of marketable securities and other investments |
1,239,584 | 733,768 | ||||||
| Purchases of marketable securities |
(1,257,480 | ) | (587,714 | ) | ||||
| Purchases of fixed assets, including internal-use software and website development |
(69,614 | ) | (44,243 | ) | ||||
| Proceeds from sale of subsidiary and other |
— | 5,072 | ||||||
| Acquisition, net of cash acquired |
(71,195 | ) | — | |||||
| Net cash provided by (used in) investing activities |
(158,705 | ) | 106,883 | |||||
| FINANCING ACTIVITIES: |
||||||||
| Proceeds from exercises of stock options and other |
73,108 | 198,208 | ||||||
| Repayments of long-term debt, capital lease obligations, and other |
(364,574 | ) | (290,250 | ) | ||||
| Net cash used in financing activities |
(291,466 | ) | (92,042 | ) | ||||
| Foreign-currency effect on cash and cash equivalents |
39,405 | 40,375 | ||||||
| Net increase in cash and cash equivalents |
79,190 | 338,854 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 745,608 | $ | 666,418 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: |
||||||||
| Fixed assets acquired under capital leases and other financing arrangements |
$ | 687 | $ | 3,374 | ||||
| Cash paid for interest |
110,677 | 117,477 | ||||||
| Cash paid for income taxes |
2,856 | 1,613 | ||||||
See accompanying notes to consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net sales |
$ | 1,462,475 | $ | 1,134,456 | $ | 4,380,165 | $ | 3,317,927 | ||||||||
| Cost of sales |
1,106,824 | 848,635 | 3,322,634 | 2,487,596 | ||||||||||||
| Gross profit |
355,651 | 285,821 | 1,057,531 | 830,331 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Fulfillment |
135,521 | 107,057 | 385,943 | 318,217 | ||||||||||||
| Marketing |
34,347 | 28,943 | 99,822 | 82,496 | ||||||||||||
| Technology and content |
||||||||||||||||