Amazon.com 2013 Annual Report Download - page 32

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Liquidity and Capital Resources
Cash flow information is as follows (in millions):
Year Ended December 31,
2013 2012 2011
Cash provided by (used in):
Operating activities $ 5,475 $ 4,180 $ 3,903
Investing activities (4,276)(3,595)(1,930)
Financing activities (539) 2,259 (482)
Our financial focus is on long-term, sustainable growth in free cash flow. Free cash flow, a non-GAAP financial measure,
was $2.0 billion for 2013, compared to $395 million and $2.1 billion for 2012 and 2011. See “Results of Operations—Non-
GAAP Financial Measures” below for a reconciliation of free cash flow to cash provided by operating activities. The increase
in free cash flow for 2013, compared to the comparable prior year period, was primarily due to higher operating cash flows and
decreased capital expenditures. The decrease in free cash flow for 2012, compared to the comparable prior year period, was due
to increased capital expenditures, including a $1.4 billion purchase of property in December 2012, partially offset by higher
operating cash flows. Operating cash flows and free cash flows can be volatile and are sensitive to many factors, including
changes in working capital, the timing and magnitude of capital expenditures, and our net income (loss). Working capital at any
specific point in time is subject to many variables, including 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 balances, which, at fair value, were $12.4 billion, $11.4 billion, and $9.6 billion as of December 31, 2013,
2012, and 2011. Amounts held in foreign currencies were $5.6 billion, $5.1 billion, and $4.1 billion as of December 31, 2013,
2012, and 2011, and were primarily Euros, British Pounds, Japanese Yen, and Chinese Yuan.
Cash provided by operating activities was $5.5 billion, $4.2 billion, and $3.9 billion in 2013, 2012, and 2011. Our
operating cash flows result primarily from cash received from our consumer, seller, and enterprise customers, advertising
agreements, and our co-branded credit card agreements, offset by cash payments we make for products and services, employee
compensation (less amounts capitalized related to internal-use software that are reflected as cash used in investing activities),
payment processing and related transaction costs, operating leases, and interest payments on our long-term obligations. Cash
received from our consumer, seller, and enterprise customers, and other activities generally corresponds to our net sales.
Because consumers primarily use credit cards to buy from us, our receivables from consumers settle quickly. The increase in
operating cash flow in 2013, compared to the comparable prior year period, was primarily due to the increase in net income,
excluding depreciation, amortization, and stock-based compensation, partially offset by changes in working capital. The
increase in operating cash flow in 2012, compared to the comparable prior year period, was primarily due to the increase in net
income, excluding depreciation, amortization, and stock-based compensation, additions to unearned revenue, and changes in
working capital, partially offset by increased tax benefits on excess stock-based compensation deductions.
Cash provided by (used in) investing activities corresponds with capital expenditures, including leasehold improvements,
internal-use software and website development costs, cash outlays for acquisitions, investments in other companies and
intellectual property rights, and purchases, sales, and maturities of marketable securities. Cash provided by (used in) investing
activities was $(4.3) billion, $(3.6) billion, and $(1.9) billion in 2013, 2012, and 2011, with the variability caused primarily by
changes in capital expenditures, purchases, maturities, and sales of marketable securities and other investments, and changes in
cash paid for acquisitions. Capital expenditures were $3.4 billion, $3.8 billion, and $1.8 billion during 2013, 2012, and 2011. In
December 2012, we acquired 11 buildings comprising 1.8 million square feet of our previously leased corporate office space
and three city blocks in Seattle, Washington for $1.4 billion. Excluding this acquisition, increases in capital expenditures
primarily reflect additional capacity to support our fulfillment operations and additional investments in support of continued
business growth due to investments in technology infrastructure, including AWS, during all three periods. We expect this trend
to continue over time. Capital expenditures included $493 million, $381 million, and $256 million for internal-use software and
website development during 2013, 2012, and 2011. Stock-based compensation capitalized for internal-use software and website
development costs does not affect cash flows. In 2013, 2012, and 2011, we made cash payments, net of acquired cash, related
to acquisition and other investment activity of $312 million, $745 million, and $705 million.
Cash provided by (used in) financing activities was $(539) million, $2.3 billion, and $(482) million in 2013, 2012, and
2011. Cash outflows from financing activities result from common stock repurchases, payments on obligations related to
capital leases and leases accounted for as financing arrangements, and repayments of long-term debt. Payments on obligations
related to capital leases and leases accounted for as financing arrangements and repayments of long-term debt were $1.0