Amazon.com 2011 Annual Report Download - page 35

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Operating Expenses
Information about operating expenses with and without stock-based compensation is as follows (in millions):
Year Ended December 31, 2011 Year Ended December 31, 2010 Year Ended December 31, 2009
As
Reported
Stock-Based
Compensation Net
As
Reported
Stock-Based
Compensation Net
As
Reported
Stock-Based
Compensation Net
Operating Expenses:
Cost of sales ...... $37,288 $ — $37,288 $26,561 $ — $26,561 $18,978 $ — $18,978
Fulfillment ....... 4,576 (133) 4,443 2,898 (90) 2,808 2,052 (79) 1,973
Marketing ........ 1,630 (39) 1,591 1,029 (27) 1,002 680 (20) 660
Technology and
content ......... 2,909 (292) 2,617 1,734 (223) 1,511 1,240 (182) 1,058
General and
administrative . . . 658 (93) 565 470 (84) 386 328 (60) 268
Other operating
expense (income),
net ............ 154 — 154 106 — 106 102 — 102
Total operating
expenses . . . $47,215 $(557) $46,658 $32,798 $(424) $32,374 $23,380 $(341) $23,039
Year-over-year
Percentage Growth:
Fulfillment ....... 58% 58% 41% 42% 24% 24%
Marketing ........ 58 59 51 52 41 41
Technology and
content ......... 68 73 40 43 20 20
General and
administrative . . . 40 46 44 45 17 17
Percent of Net Sales:
Fulfillment ....... 9.5% 9.2% 8.5% 8.2% 8.4% 8.1%
Marketing ........ 3.4 3.3 3.0 2.9 2.8 2.7
Technology and
content ......... 6.1 5.4 5.1 4.4 5.1 4.3
General and
administrative . . . 1.4 1.2 1.4 1.1 1.3 1.1
Operating expenses without stock-based compensation are non-GAAP financial measures. See “Non-GAAP
Financial Measures” and Item 8 of Part I, “Financial Statements and Supplementary Data—Note 1—Description
of Business and Accounting Policies—Stock-Based Compensation.”
Cost of Sales
Cost of sales consists of the purchase price of consumer products and digital content where we are the seller of
record, inbound and outbound shipping charges, and packaging 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 2011, 2010, and 2009 compared to the comparable prior
year periods is primarily due to increased product, digital content, including Prime Instant Video, and shipping
costs resulting from increased sales.
Consolidated gross profit and gross margin for each of the periods presented were as follows:
Year Ended December 31,
2011 2010 2009
Gross profit (in millions) ............................................. $10,789 $7,643 $5,531
Gross margin ...................................................... 22.4% 22.3% 22.6%
Gross margin for 2011 remained relatively consistent with the prior year periods. We believe that income
from operations is a more meaningful measure than gross profit and gross margin due to the diversity of our
product categories and services.
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