Amazon.com 2015 Annual Report Download - page 38

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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, 2015 Year Ended December 31, 2014 Year Ended December 31, 2013
As
Reported Stock-Based
Compensation Net
As
Reported
Stock-Based
Compensation Net As
Reported Stock-Based
Compensation Net
Operating Expenses:
Cost of sales $ 71,651 $
—
$71,651 $62,752 $
—
$62,752 $ 54,181 $
—
$54,181
Fulfillment 13,410 (482) 12,928 10,766 (375) 10,391 8,585 (294) 8,291
Marketing 5,254 (190) 5,064 4,332 (125) 4,207 3,133 (88) 3,045
Technology and content 12,540 (1,224) 11,316 9,275 (804) 8,471 6,565 (603) 5,962
General and administrative 1,747 (223) 1,524 1,552 (193) 1,359 1,129 (149) 980
Other operating expense
(income), net 171
—
171 133
—
133 114
—
114
Total operating expenses $ 104,773 $ (2,119) $102,654 $88,810 $(1,497) $87,313 $ 73,707 $ (1,134) $72,573
Year-over-year Percentage Growth:
Fulfillment 25% 24%25% 25% 34% 34%
Marketing 21 20 38 38 30 30
Technology and content 35 34 41 42 44 44
General and administrative 13 12 37 39 26 27
Percent of Net Sales:
Fulfillment 12.5% 12.1%12.1% 11.7% 11.5% 11.1%
Marketing 4.9 4.7 4.9 4.7 4.2 4.1
Technology and content 11.7 10.6 10.4 9.5 8.8 8.0
General and administrative 1.6 1.4 1.7 1.5 1.5 1.3
Operating expenses without stock-based compensation are non-GAAP financial measures. See “Non-GAAP Financial
Measures” and Item 8 of Part II, “Financial Statements and Supplementary Data—Note 1—Description of Business and
Accounting Policies—Stock-Based Compensation.”
In 2014, we recorded charges estimated at $170 million primarily related to Fire phone inventory valuation and supplier
commitment costs, the majority of which was included in the North America segment.
Cost of Sales
Cost of sales primarily consists of the purchase price of consumer products, digital media content costs where we record
revenue gross, including Prime Video and Prime Music, packaging supplies, sortation and delivery centers and related
equipment costs, and inbound and outbound shipping costs, including where we are the transportation service provider.
Shipping costs 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 2015, 2014, and 2013, compared to the comparable prior year periods,
is primarily due to increased product and shipping costs resulting from increased sales. The increase in 2014 was also impacted
by the expansion of digital offerings and Fire phone inventory valuation and supplier commitment costs.
Costs to operate our AWS segment are primarily classified as “Technology and content” as we leverage a shared
infrastructure that supports both our internal technology requirements and external sales to AWS customers.
Fulfillment
Fulfillment costs primarily consist of those costs incurred in operating and staffing our North America and International
fulfillment and customer service centers and payment processing costs. While AWS payment processing and related transaction
costs are included in fulfillment, AWS costs are primarily classified as “Technology and content.” Fulfillment costs as a
percentage of net sales may vary due to several factors, such as payment processing and related transaction costs, our level of
productivity and accuracy, changes in volume, size, and weight of units received and fulfilled, timing of fulfillment capacity
expansion, the extent we utilize fulfillment services provided by third parties, mix of products and services sold, and our ability
to affect customer service contacts per unit by implementing improvements in our operations and enhancements to our
customer self-service features. Additionally, because payment processing and fulfillment costs associated with seller
transactions are based on the gross purchase price of underlying transactions, and payment processing and related transaction