Amazon.com 2013 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... Kindle Worlds, the literary journal Day One, eight new Amazon Publishing imprints, and the launch of Amazon Publishing in the UK and Germany. Thousands of authors are already using these services to build fulfilling writing careers. Many write and tell us how we have helped them send their children...

  • Page 3
    ... than type it into an alphabet grid. The team has done a terrific job - the voice search actually works. In addition to Prime Instant Video, Fire TV gives you instant access to over 200,000 movies and TV episodes available a la carte, including new releases like Gravity, 12 Years a Slave, Dallas...

  • Page 4
    .... A third inward innovation is our Virtual Contact Center. It's an idea we started a few years back and have continued to grow with terrific results. Under this program, employees provide customer service support for Amazon and Kindle customers while working from home. This flexibility is ideal for...

  • Page 5
    ... service members and their families career opportunities and support. Our Military Talent team attended more than 50 recruiting events last year to help veterans find job opportunities at Amazon. In 2013, we hired more than 1,900 veterans. And once veterans join our team, we offer several programs...

  • Page 6
    ...on your own. And that's what I did." - Wendell Morris, YogaRat Login and Pay with Amazon For several years we've enabled Amazon customers to pay on other sites, such as Kickstarter, SmugMug, and Gogo Inflight, using the credit cards and shipping addresses already stored in their Amazon account. This

  • Page 7
    ... yet another account name and password. It's convenient for the customer and a business builder for the merchant. Cymax Stores, the online furniture retailer, has seen tremendous success with Login and Pay. It now accounts for 20% of their orders, tripling their new account registrations, and...

  • Page 8
    ...is really working for customers, we ...Amazon's CFO in the early days, and she left an indelible mark on the company. Joy was brilliant, intense, and so fun. She smiled a lot and her eyes were always wide... I feel super lucky to be a part of the Amazon team. As always, I attach a copy of our original ...

  • Page 9
    ... TO SHAREHOLDERS (Reprinted from the 1997 Annual Report) To our shareholders: Amazon.com passed many milestones in 1997: by year-end, we had served more than 1.5 million customers, yielding 838% revenue growth to $147.8 million, and extended our market leadership despite aggressive competitive entry...

  • Page 10
    ... to make Amazon.com the market leader in online bookselling. By many measures, Amazon.com came a long way in 1997 Sales grew from $15.7 million in 1996 to $147.8 million - an 838% increase. Cumulative customer accounts grew from 180,000 to 1,510,000 - a 738% increase. The percentage of orders from...

  • Page 11
    ... During 1997, we worked hard to expand our business infrastructure to support these greatly increased traffic, sales, and service levels Amazon.com's employee base grew from 158 to 614, and we significantly strengthened our management team. Distribution center capacity grew from 50,000...

  • Page 12
    ...(Address and telephone number, including area code, of registrant's principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, par value $.01 per share Nasdaq Global Select Market Securities...

  • Page 13
    ... Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Certain Relationships and Related Transactions Principal Accountant Fees and Services PART IV Item 15. Exhibits, Financial Statement Schedules Signatures 71 72...

  • Page 14
    ...Amazon Prime, an annual membership program that includes unlimited free shipping on millions of items, access to unlimited instant streaming of thousands of movies and TV episodes, and access to hundreds of thousands of books to borrow and read for free on a Kindle device. We fulfill customer orders...

  • Page 15
    ..., publishers, vendors, distributors, manufacturers, and producers of our products; (2) other online ecommerce and mobile e-commerce sites, including sites that sell or distribute digital content; (3) media companies, web portals, comparison shopping websites, and web search engines, either directly...

  • Page 16
    ... the Board Senior Vice President, Business Development Senior Vice President, Web Services Senior Vice President, International Consumer Business Vice President, Worldwide Controller, and Principal Accounting Officer Senior Vice President and Chief Financial Officer Senior Vice President, Ecommerce...

  • Page 17
    ... our network of sellers; our ability to offer products on favorable terms, manage inventory, and fulfill orders; the introduction of competitive websites, products, services, price decreases, or improvements; changes in usage or adoption rates of the Internet, e-commerce, electronic devices, and web...

  • Page 18
    ... rights; business licensing or certification requirements, such as for imports, exports, web services, and electronic devices; limitations on the repatriation and investment of funds and foreign currency exchange restrictions; limited fulfillment and technology infrastructure; shorter payable and...

  • Page 19
    ...' businesses and operations in the PRC through regulations and license requirements restricting (i) foreign investment in the Internet, IT infrastructure, retail, delivery, and other sectors, (ii) Internet content, and (iii) the sale of media and other products and services. For example, in order to...

  • Page 20
    ... equivalents, and marketable securities balances. Our Business Could Suffer if We Are Unsuccessful in Making, Integrating, and Maintaining Commercial Agreements, Strategic Alliances, and Other Business Relationships We provide e-commerce and other services to businesses through commercial agreements...

  • Page 21
    ... or slow to respond and prevent us from efficiently fulfilling orders or providing services to third parties, which may reduce our net sales and the attractiveness of our products and services. If we are unable to continually add software and hardware, effectively upgrade our systems and network...

  • Page 22
    ... and/or license agreements with our employees, customers, and others to protect our proprietary rights. Effective intellectual property protection may not be available in every country in which our products and services are made available. We also may not be able to acquire or maintain...

  • Page 23
    ... pricing, content, copyrights, distribution, mobile communications, electronic device certification, electronic waste, energy consumption, environmental regulation, electronic contracts and other communications, competition, consumer protection, web services, the provision of online payment services...

  • Page 24
    .... We Are Subject to Payments-Related Risks We accept payments using a variety of methods, including credit card, debit card, credit accounts (including promotional financing), gift cards, direct debit from a customer's bank account, consumer invoicing, physical bank check, and payment upon delivery...

  • Page 25
    ... center, customer service, and other facilities, principally in North America, Europe, and Asia. Item 3. Legal Proceedings See Item 8 of Part II, "Financial Statements and Supplementary Data-Note 8-Commitments and Contingencies- Legal Proceedings." Item 4. Mine Safety Disclosures Not applicable...

  • Page 26
    ... the high and low per share sale prices for our common stock for the periods indicated, as reported by the Nasdaq Global Select Market. High Low Year ended December 31, 2012 First Quarter Second Quarter Third Quarter Fourth Quarter Year ended December 31, 2013 First Quarter Second Quarter Third...

  • Page 27
    ... of Part II, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Historical results are not necessarily indicative of future results. Year Ended December 31, 2013 2012 2011 2010 2009 (in millions, except per share data) Statements of Operations: Net sales Income...

  • Page 28
    ... we sell from our inventory as product sales and recognize our net share of revenue of items sold by other sellers as services sales. We also offer other services such as AWS, fulfillment, publishing, digital content subscriptions, advertising, and co-branded credit cards. Our financial focus is on...

  • Page 29
    ... to build and deploy innovative and efficient software and electronic devices. We are also investing in AWS, which provides technology services that give developers and enterprises of all sizes access to technology infrastructure that enables virtually any type of business. Our financial reporting...

  • Page 30
    ... of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions. Certain estimates of discounted cash flows involve businesses and geographies with limited financial history and developing revenue models...

  • Page 31
    ...in jurisdictions for which we are not able to realize the related tax benefit, changes in foreign currency exchange rates, entry into new businesses and geographies and changes to our existing businesses, acquisitions (including integrations) and investments, changes in the valuation of our deferred...

  • Page 32
    ... seasonality, inventory management and category expansion, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates. Our principal sources of liquidity are cash flows generated from operations and our cash, cash equivalents, and marketable securities...

  • Page 33
    ...debt, and real estate lease agreements. As of December 31, 2013 and 2012, restricted cash, cash equivalents, and marketable securities were $301 million and $99 million. To the extent we process payments for third-party sellers or offer certain types of stored value to our customers, some states may...

  • Page 34
    ... in currency exchange rates impacted International net sales by $(1.3) billion, $(853) million, and $1.1 billion in 2013, 2012, and 2011. We expect that, over time, our International segment will represent 50% or more of our consolidated net sales. See Item 8 of Part II, "Financial Statements and...

  • Page 35
    ... 31, 2013 and 2012 include amounts earned from Fulfillment by Amazon programs related to shipping services. We expect our net cost of shipping to continue to increase to the extent our customers accept and use our shipping offers at an increasing rate, our product mix shifts to the electronics and...

  • Page 36
    ... by similar products and services were as follows (in millions): Year Ended December 31, 2013 2012 2011 Net Sales: North America Media Electronics and other general merchandise Other (1) Total North America International Media Electronics and other general merchandise Other (1) Total International...

  • Page 37
    ... supplies. Shipping charges to receive products from our suppliers are included in our inventory, and recognized as cost of sales upon sale of products to our customers. The increase in cost of sales in absolute dollars in 2013, 2012, and 2011, compared to the comparable prior year periods, is...

  • Page 38
    ... well as sales by third parties for which we provide the fulfillment services. We evaluate our facility requirements as necessary. Marketing We direct customers to our websites primarily through a number of targeted online marketing channels, such as our Associates program, sponsored search, portal...

  • Page 39
    ..., $40 million, and $61 million during 2013, 2012, and 2011. We generally invest our excess cash in investment grade short- to intermediate-term fixed income securities and AAA-rated money market funds. Our interest income corresponds with the average balance of invested funds and the prevailing...

  • Page 40
    ... (loss) of LivingSocial Other equity-method investment activity: Amazon dilution gains on LivingSocial investment Recovery on sale of equity position Other, net Total other equity-method investment activity Equity-method investment activity, net of tax Effect of Exchange Rates $ (12) $ - (58) (70...

  • Page 41
    ... in) operating activities," for 2013, 2012, and 2011 (in millions): Year Ended December 31, 2013 2012 2011 Net cash provided by (used in) operating activities Purchases of property and equipment, including internal-use software and website development Free cash flow Net cash provided by (used in...

  • Page 42
    ... equivalent and marketable fixed income securities are designated as available-for-sale and, accordingly, are presented at fair value on our consolidated balance sheets. We generally invest our excess cash in investment grade short- to intermediate-term fixed income securities and AAA-rated money...

  • Page 43
    Foreign Exchange Risk During 2013, net sales from our International segment accounted for 40% of our consolidated revenues. Net sales and related expenses generated from our international websites, as well as those relating to www.amazon.ca (which is included in our North America segment), are ...

  • Page 44
    ... TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Ernst & Young LLP, Independent Registered Public Accounting Firm Consolidated Statements of Cash Flows Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Balance Sheets Consolidated Statements of...

  • Page 45
    ... consolidated balance sheets of Amazon.com, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2013. These financial statements are...

  • Page 46
    ... (income), net Losses (gains) on sales of marketable securities, net Other expense (income), net Deferred income taxes Excess tax benefits from stock-based compensation Changes in operating assets and liabilities: Inventories Accounts receivable, net and other Accounts payable Accrued expenses...

  • Page 47
    AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Year Ended December 31, 2013 2012 2011 Net product sales Net services sales Total net sales Operating expenses (1): Cost of sales Fulfillment Marketing Technology and content General and administrative Other...

  • Page 48
    .... CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Year Ended December 31, 2013 2012 2011 Net income (loss) $ Other comprehensive income (loss): Foreign currency translation adjustments, net of tax of $(20), $(30), and $20 Net change in unrealized gains on available-for-sale securities...

  • Page 49
    AMAZON.COM, INC. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) December 31, 2013 2012 ASSETS Current assets: Cash and cash equivalents Marketable securities Inventories Accounts receivable, net and other Total current assets Property and equipment, net Goodwill Other assets Total...

  • Page 50
    ...Treasury Stock Retained Earnings Balance as of January 1, 2011 Net income Other comprehensive income (loss) Exercise of common stock options Repurchase of common stock Excess tax benefits from stock-based compensation Stock-based compensation and issuance of employee benefit plan stock Issuance of...

  • Page 51
    .... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1-DESCRIPTION OF BUSINESS AND ACCOUNTING POLICIES Description of Business Amazon.com opened its virtual doors on the World Wide Web in July 1995. We seek to be Earth's most customer-centric company. In each of our two geographic segments, we serve...

  • Page 52
    ... to the carrier. Services sales represent third-party seller fees earned (including commissions) and related shipping fees, and non-retail activities such as AWS, advertising services, and our co-branded credit card agreements. Services sales, net of promotional discounts and return allowances, are...

  • Page 53
    ... our websites and applications supporting our business, which are capitalized and amortized over two years. General and Administrative General and administrative expenses consist of payroll and related expenses for employees involved in general corporate functions, including accounting, finance, tax...

  • Page 54
    ... accounted for using the FIFO method, and are valued at the lower of cost or market value. This valuation requires us to make judgments, based on currently-available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors...

  • Page 55
    ...-party sellers, and therefore these products are not included in our inventories. Accounts Receivable, Net and Other Included in "Accounts receivable, net and other" on our consolidated balance sheets are amounts primarily related to vendor and customer receivables. As of December 31, 2013 and 2012...

  • Page 56
    ..." on our consolidated balance sheets are amounts primarily related to acquired intangible assets, net of amortization; digital video content, net of amortization; long-term deferred tax assets; certain equity investments; marketable securities restricted for longer than one year, the majority of...

  • Page 57
    ... to Amazon Prime memberships and AWS. Foreign Currency We have internationally-focused websites for the United Kingdom, Germany, France, Japan, Canada, China, Italy, Spain, Brazil, India, Mexico, and Australia. Net sales generated from these websites, as well as most of the related expenses directly...

  • Page 58
    ... of credit, guarantees, debt, and real estate lease agreements. We classify cash and marketable securities with use restrictions of less than twelve months as "Accounts receivable, net and other" and of twelve months or longer as non-current "Other assets" on our consolidated balance sheets. See...

  • Page 59
    ...realized on sales of available-for-sale marketable securities (in millions): Year Ended December 31, 2013 2012 2011 Realized gains Realized losses $ 6 $ (7) 20 10 $ 15 11 The following table summarizes the contractual maturities of our cash equivalent and marketable fixed income securities as...

  • Page 60
    ... millions): Purchase Price Cash paid, net of cash acquired Stock options assumed Allocation Goodwill Intangible assets (1): Marketing-related Contract-based Technology-based Customer-related Property and equipment Deferred tax assets Other assets acquired Deferred tax liabilities Other liabilities...

  • Page 61
    ...Purchase Price Cash paid, net of cash acquired Existing equity interest Indemnification holdbacks Stock options assumed Allocation Goodwill Intangible assets (1): Marketing-related Customer-related Contract-based Property and equipment Deferred tax assets Other assets acquired Accounts payable Debt...

  • Page 62
    ...Gross (1) 2013 Accumulated Amortization (1) Acquired Intangibles, Net Acquired Intangibles, Gross (1) 2012 Accumulated Amortization (1) Acquired Intangibles, Net Marketing-related Contract-based Technology- and content-based Customer-related Acquired intangibles (2) 6.3 3.0 4.4 2.4 4.2 $ 429 173...

  • Page 63
    ... recast to present its Korean operations as discontinued operations. December 31, 2013 2012 Balance Sheet: Current assets Non-current assets Current liabilities Non-current liabilities Redeemable stock $ 81 152 298 36 315 $ 74 216 336 14 205 Balance sheet financial information as of December...

  • Page 64
    ... is payable semi-annually in arrears in May and November. We may redeem the Notes at any time in whole, or from time to time, in part at specified redemption prices. We are not subject to any financial covenants under the Notes. We used the net proceeds from the issuance of the Notes for general...

  • Page 65
    ... $457 million as of December 31, 2013, and $336 million as of December 31, 2012, for U.S. and foreign income taxes. These contingencies primarily relate to transfer pricing, state income taxes, and research and development credits. See "Note 11- Income Taxes" for discussion of tax contingencies. 54

  • Page 66
    ... office, fulfillment center, and data center facilities. Rental expense under operating lease agreements was $759 million, $561 million, and $381 million for 2013, 2012, and 2011. The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal...

  • Page 67
    ... 2011, Personalweb Technologies, LLC filed a complaint against Amazon.com, Inc. and Amazon Web Services, LLC in the United States District Court for the Eastern District of Texas. The complaint alleges, among other things, that "Amazon Simple Storage Service (S3) and Amazon ElastiCache" infringe...

  • Page 68
    ...2013, continued the stay pending a decision by the United States Supreme Court. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter. In May 2012, Clouding IP, LLC f/k/a/ STEC IP, LLC filed a complaint against Amazon.com, Inc. and Amazon Web Services, LLC...

  • Page 69
    ..., Inc. and Amazon Web Services, LLC in the United States District Court for the District of Delaware. The complaint alleges, among other things, that the use of certain Kindle devices, Kindle apps and/or Amazon.com, Inc.'s website to purchase and receive electronic media infringes nine U.S. Patents...

  • Page 70
    ... Communication System," and that Amazon.com, Inc. infringes U.S. Patent No. 5,786,748, entitled "Method And Apparatus For Giving Notification Of Express Mail Delivery," by providing tracking and notification services to customers who purchase products directly from Amazon.com, Inc. The complaint...

  • Page 71
    ... program. Stock Award Plans Employees vest in restricted stock unit awards over the corresponding service term, generally between two and five years. Stock Award Activity The following table summarizes our restricted stock unit activity (in millions): Weighted Average Grant-Date Fair Value Number...

  • Page 72
    ... in accumulated other comprehensive loss are recorded net of their related income tax effects. Note 11-INCOME TAXES In 2013, 2012, and 2011, we recorded net tax provisions of $161 million, $428 million, and $291 million. We have tax benefits relating to excess stock-based compensation deductions and...

  • Page 73
    ... accounting for differences between income taxes computed at the federal statutory rate and the provision recorded for income taxes are as follows: Year Ended December 31, 2013 2012 2011 Federal statutory rate Effect of: Impact of foreign tax differential State taxes, net of federal benefits Tax...

  • Page 74
    ...31, 2013 and 2012, related to net operating losses that result from excess stock-based compensation and for which any benefit realized will be recorded to stockholders' equity. (3) Excluding $227 million and $146 million of deferred tax assets as of December 31, 2013 and 2012, related to tax credits...

  • Page 75
    ... rate. As of December 31, 2013 and 2012, we had accrued interest and penalties, net of federal income tax benefit, related to tax contingencies of $33 million and $25 million. Interest and penalties, net of federal income tax benefit, recognized for the years ended December 31, 2013, 2012, and 2011...

  • Page 76
    ... sales from these sites to customers in the U.S. and Canada), but excludes export sales from our U.S. and Canadian websites. Information on reportable segments and reconciliation to consolidated net income (loss) is as follows (in millions): Year Ended December 31, 2013 2012 2011 North America Net...

  • Page 77
    Net sales generated from these internationally-focused websites are denominated in local functional currencies. Revenues are translated at average rates prevailing throughout the period. Net sales attributed to foreign countries are as follows (in millions): Year Ended December 31, 2013 2012 2011 ...

  • Page 78
    ... per share data): Year Ended December 31, 2013 (1) Fourth Quarter Third Quarter Second Quarter First Quarter Net sales Income (loss) from operations Income (loss) before income taxes Provision (benefit) for income taxes Net income (loss) Basic earnings per share Diluted earnings per share Shares...

  • Page 79
    ...as of December 31, 2013, our internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Ernst...

  • Page 80
    ...internal control over financial reporting as of December 31, 2013, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Amazon.com, Inc. as of December 31, 2013 and 2012...

  • Page 81
    ... relating to our 2014 Annual Meeting of Shareholders and is incorporated herein by reference. To the extent permissible under Nasdaq rules, we intend to disclose amendments to our Code of Business Conduct and Ethics, as well as waivers of the provisions thereof, on our investor relations website...

  • Page 82
    ... Balance Sheets as of December 31, 2013 and 2012 Consolidated Statements of Stockholders' Equity for each of the three years ended December 31, 2013 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Registered Public Accounting Firm (2) Index to Financial Statement...

  • Page 83
    ...to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, as of January 30, 2014. AMAZON.COM, INC. By: /s/ Jeffrey P. Bezos Jeffrey P. Bezos President, Chief...

  • Page 84
    ... financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2013, formatted in XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets...

  • Page 85
    ... closing prices. Measurement points are the last trading day of each of Amazon's fiscal years ended December 31, 2008, 2009, 2010, 2011, 2012, and 2013. $800 $700 $600 $500 Dollars $400 $300 $200 $100 $0 2008 2009 2010 2011 2012 2013 Year Ended December 31 Cumulative Total Return Year Ended...

  • Page 86
    amazon.com amazon.ca amazon.co.uk amazon.cn amazon.in amazon.de a m a z o n . it amazon.fr a m a zo n . es amazon.co.jp amazon.com.br amazon.com.mx amazon.com.au