Amazon.com 2015 Annual Report Download - page 40

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Stock-Based Compensation
Stock-based compensation was $2.1 billion, $1.5 billion, and $1.1 billion during 2015, 2014, and 2013. The increase in
2015, 2014, and 2013, compared to the comparable prior year periods, is primarily due to an increase in the number of stock-
based compensation awards granted to existing and new employees.
Other Operating Expense (Income), Net
Other operating expense (income), net was $171 million, $133 million, and $114 million during 2015, 2014, and 2013,
and was primarily related to the amortization of intangible assets.
Income from Operations
For the reasons discussed above, income from operations increased to $2.2 billion in 2015, from $178 million in 2014
and $745 million in 2013.
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.
Interest Income and Expense
Our interest income was $50 million, $39 million, and $38 million during 2015, 2014, and 2013. 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 based on the prevailing rates, which vary depending on
the geographies and currencies in which they are invested.
Interest expense was $459 million, $210 million, and $141 million in 2015, 2014, and 2013. The increase is primarily due
to increases in our long-term debt, and capital and finance lease arrangements.
Our long-term debt was $8.2 billion and $8.3 billion as of December 31, 2015 and 2014. Our other long-term liabilities
were $9.9 billion and $7.4 billion as of December 31, 2015 and 2014. See Item 8 of Part II, “Financial Statements and
Supplementary Data—Note 5—Long-Term Debt and Note 6—Other Long-Term Liabilities” for additional information.
Other Income (Expense), Net
Other income (expense), net was $(256) million, $(118) million, and $(136) million during 2015, 2014, and 2013. The
primary component of other income (expense), net is related to foreign-currency gains (losses).
Income Taxes
Our effective tax rate is subject to significant variation due to several factors, including variability in our pre-tax and
taxable income and loss and the mix of jurisdictions to which they relate, changes in how we do business, acquisitions
(including integrations) and investments, audit-related developments, foreign currency gains (losses), changes in law,
regulations, and administrative practices, and relative changes of expenses or losses for which tax benefits are not recognized.
Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the
impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.
We recorded a provision for income taxes of $950 million, $167 million, and $161 million in 2015, 2014, and 2013. Our
provision for income taxes in 2015 was higher than in 2014 primarily due to an increase in U.S. pre-tax income and increased
losses in certain foreign subsidiaries for which we may not realize a tax benefit. Losses for which we may not realize a related
tax benefit, primarily due to losses of foreign subsidiaries, reduce our pre-tax income without a corresponding reduction in our
tax expense, and therefore increase our effective tax rate. We have recorded valuation allowances against the deferred tax assets
associated with losses for which we may not realize a related tax benefit. We generated income in lower tax jurisdictions
primarily related to our European operations, which are headquartered in Luxembourg.
Our provision for income taxes in 2014 was higher than in 2013 primarily due to the increased losses in certain foreign
subsidiaries for which we may not realize a tax benefit and audit-related developments, partially offset by the favorable impact
of earnings in lower tax rate jurisdictions. Losses for which we may not realize a related tax benefit were primarily generated
by our foreign subsidiaries. Income earned in lower tax jurisdictions was primarily related to our European operations.
We have tax benefits relating to excess stock-based compensation deductions and accelerated depreciation deductions that
are being utilized to reduce our U.S. taxable income. In December 2015, U.S. legislation was enacted that extended accelerated
depreciation deductions on qualifying property through 2019 and made permanent the U.S. federal research and development
credit. As of December 31, 2015, our federal net operating loss carryforward was approximately $1.1 billion and we had