AMAZON COM INC (AMZN) SEC Filing 10-K Annual report for the fiscal year ending Sunday, December 31, 2017

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Exhibit 99.1
 amazonlogorgb.jpg
AMAZON.COM ANNOUNCES FOURTH QUARTER SALES UP 38% TO $60.5 BILLION
SEATTLE—(BUSINESS WIRE) February 1, 2018—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its fourth quarter ended December 31, 2017.
Operating cash flow increased 7% to $18.4 billion for the trailing twelve months, compared with $17.3 billion for the trailing twelve months ended December 31, 2016. Free cash flow decreased to $8.4 billion for the trailing twelve months, compared with $10.5 billion for the trailing twelve months ended December 31, 2016. Free cash flow less lease principal repayments decreased to $3.4 billion for the trailing twelve months, compared with $6.5 billion for the trailing twelve months ended December 31, 2016. Free cash flow less finance lease principal repayments and assets acquired under capital leases decreased to an outflow of $1.5 billion for the trailing twelve months, compared with an inflow of $4.7 billion for the trailing twelve months ended December 31, 2016.
Common shares outstanding plus shares underlying stock-based awards totaled 504 million on December 31, 2017, compared with 497 million one year ago.
Fourth Quarter 2017
Net sales increased 38% to $60.5 billion in the fourth quarter, compared with $43.7 billion in fourth quarter 2016. Excluding the $1.1 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 36% compared with fourth quarter 2016.
Operating income increased 69% to $2.1 billion in the fourth quarter, compared with operating income of $1.3 billion in fourth quarter 2016.
Net income was $1.9 billion in the fourth quarter, or $3.75 per diluted share, compared with net income of $749 million, or $1.54 per diluted share, in fourth quarter 2016. The fourth quarter 2017 includes a provisional tax benefit for the impact of the U.S. Tax Cuts and Jobs Act of 2017 of approximately $789 million.
Full Year 2017
Net sales increased 31% to $177.9 billion, compared with $136.0 billion in 2016. Excluding the $210 million favorable impact from year-over-year changes in foreign exchange rates throughout the year, net sales increased 31% compared with 2016.
Operating income decreased 2% to $4.1 billion, compared with operating income of $4.2 billion in 2016.
Net income was $3.0 billion, or $6.15 per diluted share, compared with net income of $2.4 billion, or $4.90 per diluted share, in 2016.
“Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don’t see positive surprises of this magnitude very often — expect us to double down,” said Jeff Bezos, Amazon founder and CEO. “We’ve reached an important point where other companies and developers are accelerating adoption of Alexa. There are now over 30,000 skills from outside developers, customers can control more than 4,000 smart home devices from 1,200 unique brands with Alexa, and we’re seeing strong response to our new far-field voice kit for manufacturers. Much more to come and a huge thank you to our customers and partners.”
Highlights
In 2017, more than five billion items shipped with Prime worldwide.
More new paid members joined Prime in 2017 than any previous year — both worldwide and in the U.S.
Fire TV Stick and Echo Dot were the best-selling products in 2017 across all of Amazon. Customers purchased tens of millions of Echo devices last year.


The following information was filed by AMAZON COM INC on Thursday, February 1, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Click a sentiment analysis snippet below from AMAZON COM INC's Management Discussions to find these positive and negative remarks within their 10-K Annual report:
  • amzn_10k_2018-02-02_5_14
    Financial - Expense
    Our variable costs include product and content costs, payment processing and related transaction costs, picking, packaging, and preparing orders for shipment, transportation, customer service support, costs necessary to run AWS, and a portion of our marketing costs.
  • amzn_10k_2018-02-02_53_166
    Financial - Expense
    We expect our cost of shipping to continue to increase to the extent our customers accept and use our shipping offers at an increasing rate, we reduce shipping rates, we use more expensive shipping methods, and we offer additional services.
  • amzn_10k_2018-02-02_55_171
    Financial - Expense
    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 network and physical store 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.
  • amzn_10k_2018-02-02_51_261
    Financial - Expense
    Cost of sales primarily consists of the purchase price of consumer products, digital media content costs where we record revenue gross, including video and music, packaging supplies, sortation and delivery center and related equipment costs, and inbound and outbound shipping costs, including where we are the transportation service provider.
  • amzn_10k_2018-02-02_60_266
    Financial - Expense
    While costs associated with Amazon Prime memberships and other shipping offers are not included in marketing expense, we view these offers as effective worldwide marketing tools, and intend to continue offering them indefinitely.
  • amzn_10k_2018-02-02_11_31
    Revenue - Product
    Likewise, if the U.S. Dollar strengthens year-over-year relative to currencies in our international locations, our consolidated net sales and operating expenses will be lower than if currencies had remained constant.
  • amzn_10k_2018-02-02_57_173
    Revenue - Product
    We seek to expand our fulfillment network to accommodate a greater selection and in-stock inventory levels and to meet anticipated shipment volumes from sales of our own products as well as sales by third parties for which we provide the fulfillment services.
  • amzn_10k_2018-02-02_42_151
    Revenue - Product
    Increased unit sales were driven largely by our continued efforts to reduce prices for our customers, including from our shipping offers, increased in-stock inventory availability, and increased selection.
  • amzn_10k_2018-02-02_41_148
    Revenue - Product
    Increased unit sales were driven largely by our continued efforts to reduce prices for our customers, including from our shipping offers, increased in-stock inventory availability, and increased selection.
  • amzn_10k_2018-02-02_61_178
    Financial - Expense
    Technology and content costs include payroll and related expenses for employees involved in the research and development of new and existing products and services, development, design, and maintenance of our websites, curation and display of products and services made available on our websites, and infrastructure costs.
  • amzn_10k_2018-02-02_29_101
    Other - Other
    We had no borrowings outstanding under our $3.0 billion unsecured revolving credit facility the Credit Agreement and $592 million of borrowings outstanding under our $600 million secured revolving credit facility the Credit Facility as of December 31, 2017.
  • amzn_10k_2018-02-02_27_88
    Other - Other
    Cash capital expenditures were $4.6 billion, $6.7 billion, and $10.1 billion in 2015, 2016, and 2017, which primarily reflect additional capacity to support our fulfillment operations and additional investments in support of continued business growth in technology infrastructure the majority of which is to support AWS, during all three periods.
  • amzn_10k_2018-02-02_56_264
    Financial - Expense
    The increase in fulfillment costs in absolute dollars in 2016 and 2017, compared to the comparable prior year periods, is primarily due to variable costs corresponding with increased product and service sales volume and inventory levels, and costs from expanding our fulfillment network, which includes physical stores.
  • amzn_10k_2018-02-02_65_268
    Financial - Expense
    Other operating expense, net was $171 million, $167 million, and $214 million during 2015, 2016, and 2017, and was primarily related to the amortization of intangible assets.
  • amzn_10k_2018-02-02_9_21
    Other - Other
    We seek to invest efficiently in several areas of technology and content, including AWS, and expansion of new and existing product categories and service offerings, as well as in technology infrastructure to enhance the customer experience and improve our process efficiencies.
  • amzn_10k_2018-02-02_64_267
    Financial - Expense
    The increase in general and administrative costs in absolute dollars in 2016 and 2017, compared to the comparable prior year periods, is primarily due to increases in payroll and related expenses and professional service fees.
  • amzn_10k_2018-02-02_27_86
    Financial - Expense
    Cash provided by used in investing activities corresponds with cash capital expenditures, including leasehold improvements, internal-use software and website development costs, incentives received from property and equipment vendors, cash outlays for acquisitions, investments in other companies and intellectual property rights, and purchases, sales, and maturities of marketable securities.
  • amzn_10k_2018-02-02_113_243
    Revenue - Geography
    Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and customer spending, world events, the rate of growth of the Internet, online commerce, and cloud services, as well as those outlined in Item 1A of Part I, Risk Factors.
  • amzn_10k_2018-02-02_70_200
    Financial - Expense
    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.
  • amzn_10k_2018-02-02_40_145
    Revenue - Product
    For a discussion of the effect on sales growth of foreign exchange rates, see Effect of Foreign Exchange Rates below.
  • amzn_10k_2018-02-02_18_55
    Revenue - Geography
    Finally, foreign governments may enact tax laws in response to the 2017 Tax Act that could result in further changes to global taxation and materially affect our financial position and results of operations.
  • amzn_10k_2018-02-02_5_15
    Financial - Expense
    Our fixed costs include the costs necessary to build and run our technology infrastructure to build, enhance, and add features to our websites and web services, our electronic devices, and digital offerings and to build and optimize our fulfillment centers and physical stores.
  • amzn_10k_2018-02-02_55_172
    Financial - Expense
    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 and fulfillment costs are higher as a percentage of sales versus our retail sales, sales by our sellers have higher fulfillment costs as a percent of net sales.
  • amzn_10k_2018-02-02_42_150
    Revenue - Product
    The sales growth in each year primarily reflects increased unit sales, including sales by third-party sellers.
  • amzn_10k_2018-02-02_41_147
    Revenue - Product
    The sales growth in each year primarily reflects increased unit sales, including sales by third-party sellers, and, in 2017, the impact of the acquisition of Whole Foods Market.
  • amzn_10k_2018-02-02_5_13
    Financial - Expense
    We seek to reduce our variable costs per unit and work to leverage our fixed costs.
  • amzn_10k_2018-02-02_59_265
    Financial - Expense
    The increase in marketing costs in absolute dollars in 2016 and 2017, compared to the comparable prior year periods, is primarily due to payroll and related expenses, as well as increased spending on online marketing channels.
  • amzn_10k_2018-02-02_18_53
    Revenue - Geography
    Our effective tax rates could be affected by numerous factors, such as intercompany transactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, the applicability of special tax regimes, losses incurred 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, changes to our existing businesses and operations, acquisitions including integrations and investments and how they are financed, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, and changes in the relevant tax, accounting, and other laws, regulations, administrative practices, principles, and interpretations.
  • amzn_10k_2018-02-02_43_154
    Revenue - Product
    The sales growth primarily reflects increased customer usage, partially offset by pricing changes.
  • amzn_10k_2018-02-02_6_248
    Financial - Cash Flow
    See Results of Operations Non-GAAP Financial Measures below for additional information on our non-GAAP free cash flows financial measures.
  • amzn_10k_2018-02-02_66_190
    Financial - Income
    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.
  • amzn_10k_2018-02-02_26_79
    Financial - Cash Flow
    Our operating cash flows result primarily from cash received from our consumer, seller, developer, enterprise, and content creator 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.
  • amzn_10k_2018-02-02_48_162
    Financial - Income
    The increase in AWS operating income in absolute dollars in 2016 and 2017, compared to the comparable prior year periods, is primarily due to increased customer usage and cost structure productivity, partially offset by pricing changes and increased spending on technology infrastructure and sales and marketing expenses and related payroll, which was primarily driven by additional investments to support the business growth.
  • amzn_10k_2018-02-02_9_22
    Financial - Expense
    We believe that advances in technology, specifically the speed and reduced cost of processing power and the advances of wireless connectivity, will continue to improve the consumer experience on the Internet and increase its ubiquity in peoples lives.
  • amzn_10k_2018-02-02_5_16
    Financial - Expense
    Variable costs generally change directly with sales volume, while fixed costs generally are dependent on the timing of capacity needs, geographic expansion, category expansion, and other factors.
  • amzn_10k_2018-02-02_61_179
    Financial - Expense
    Infrastructure costs include servers, networking equipment, and data center related depreciation, rent, utilities, and other expenses necessary to support AWS, as well as these and other efforts.
  • amzn_10k_2018-02-02_114_245
    Revenue - Geography
    This guidance anticipates a favorable impact of approximately $1.2 billion or 330 basis points from foreign exchange rates.
  • amzn_10k_2018-02-02_53_164
    Financial - Expense
    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.
  • amzn_10k_2018-02-02_81_225
    Financial - Cash Flow
    We provide multiple measures of free cash flows because we believe these measures provide additional perspective on the impact of acquiring property and equipment with cash and through capital and finance leases.
  • amzn_10k_2018-02-02_28_98
    Other - Other
    During 2017, cash inflows from financing activities consisted primarily of net proceeds from the issuance of $16.0 billion of senior unsecured notes in seven tranches maturing in 2020 through 2057.
  • amzn_10k_2018-02-02_43_153
    Revenue - Product
    AWS sales increased 55% and 43% in 2016 and 2017, compared to the comparable prior year periods.
  • amzn_10k_2018-02-02_42_149
    Revenue - Product
    International sales increased 24% and 23% in 2016, and 2017, compared to the comparable prior year periods.
  • amzn_10k_2018-02-02_41_146
    Revenue - Geography
    North America sales increased 25% and 33% in 2016 and 2017, compared to the comparable prior year periods.
  • amzn_10k_2018-02-02_40_143
    Revenue - Product
    Sales increased 27% and 31% in 2016 and 2017, compared to the comparable prior year periods.
  • amzn_10k_2018-02-02_70_198
    Financial - Income
    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, changes in our stock price, foreign currency gains losses, tax law developments including changes in statutes, regulations, case law, and administrative practices, and relative changes of expenses or losses for which tax benefits are not recognized.
  • amzn_10k_2018-02-02_3_11
    Revenue - Product
    We seek to increase unit sales across our businesses, through increased product selection, across numerous product categories.
  • amzn_10k_2018-02-02_4_247
    Financial - Cash Flow
    Our financial focus is on long-term, sustainable growth in free cash flows
  • amzn_10k_2018-02-02_80_224
    Financial - Cash Flow
    Our measures of free cash flows and the effect of foreign exchange rates on our consolidated statements of operations, meet the definition of non-GAAP financial measures.
  • amzn_10k_2018-02-02_2_7
    Other - Other
    These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results to differ significantly from managements expectations, are described in greater detail in Item 1A of Part I, Risk Factors.
  • amzn_10k_2018-02-02_71_202
    Financial - Income
    The 2017 Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries as of 2017, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax.
  • amzn_10k_2018-02-02_62_185
    Financial - Expense
    The increase in technology and content costs in absolute dollars in 2016 and 2017, compared to the comparable prior year periods, is primarily due to increased payroll and related costs associated with technical teams responsible for expanding our existing products and services and initiatives to introduce new products and service offerings, and an increase in spending on technology infrastructure.
  • amzn_10k_2018-02-02_114_244
    Revenue - Product
    Net sales are expected to be between $47.75 billion and $50.75 billion, or to grow between 34% and 42% compared with first quarter 2017.
  • amzn_10k_2018-02-02_39_257
    Revenue - Geography
    Year-over-year Percentage Growth, excluding the effect of foreign exchange rates:
  • amzn_10k_2018-02-02_53_167
    Financial - Expense
    We seek to mitigate costs of shipping over time in part through achieving higher sales volumes, optimizing our fulfillment network, negotiating better terms with our suppliers, and achieving better operating efficiencies.
  • amzn_10k_2018-02-02_11_30
    Revenue - Product
    For example, if the U.S. Dollar weakens year-over-year relative to currencies in our international locations, our consolidated net sales and operating expenses will be higher than if currencies had remained constant.
  • amzn_10k_2018-02-02_11_32
    Financial - Shares / Equity
    We believe that our increasing diversification beyond the U.S. economy through our growing international businesses benefits our shareholders over the long-term.

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Exhibit 12.1 - STATEMENT REGARDING CALCULATION OF RATIOS

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Exhibit 21.1 - SUBSIDARIES OF THE REGISTRANT

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Exhibit 23.1 - CONSENTS OF EXPERTS AND COUNSEL

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Exhibit 31.1 - RULE 13A-14(A)/15D-14(A) CERTIFICATION

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Exhibit 31.2 - RULE 13A-14(A)/15D-14(A) CERTIFICATION

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Exhibit 32.1 - SECTION 1350 CERTIFICATION

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Exhibit 32.2 - SECTION 1350 CERTIFICATION

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  • Form Type: Annual
  • Number of times amended: 0
  • Accession Number: 0001018724-18-000005
  • Submitted to the SEC: Thursday, February 1, 2018 8:41:15 PM EST
  • Accepted by the SEC: Friday, February 2, 2018
  • Fiscal Year ending: December 2017
  • Industry: Retail Catalog And Mail Order Houses