FINANCE 510

FINANCE 510

download the most recent copy of the amazon’s  10-K report,

The parameters for the project deliverable are as follows.

  • The firm is looking to expand its operations by 10% of the firm’s net property, plant, and equipment. (Calculate this amount by taking 10% of the property, plant, and equipment figure that appears on the firm’s balance sheet.)
  • The estimated life of this new property, plant, and equipment will be 12 years. The salvage value of the equipment will be 5% of the property, plant and equipment’s cost.
  • The annual EBIT for this new project will be 18% of the project’s cost.
  • The company will use the straight-line method to depreciate this equipment. Also assume that there will be no increases in net working capital each year. Use 35% as the tax rate in this project.
  • The hurdle rate for this project will be the WACC that you are able to find on a financial website, such as Gurufocus.com. If you are unable to find the WACC for a company, contact your instructor. He or she will assign you a WACC rate.

Signature Assignment Deliverables

Prepare a narrated PowerPoint presentation that will highlight the following items.

  • Your calculations for the amount of property, plant, and equipment and the annual depreciation for the project
  • Your calculations that convert the project’s EBIT to free cash flow for the 12 years of the project.
  • The following capital budgeting results for the project
    • Net present value
    • Internal rate of return
    • Discounted payback period.
  • Your discussion of the results that you calculated above, including a recommendation for acceptance or rejection of the project

Once again, you may embed your Excel spreadsheets into your document. Be sure to follow APA standards for this project.

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

____________________________________

FORM 10-K ____________________________________

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to .

Commission File No. 000-22513 ____________________________________

AMAZON.COM, INC. (Exact name of registrant as specified in its charter)

Delaware 91-1646860 (State or other jurisdiction of

incorporation or organization) (I.R.S. Employer

Identification No.) 410 Terry Avenue North

Seattle, Washington 98109-5210 (206) 266-1000

(Address and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered

Common Stock, par value $.01 per share AMZN Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

____________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2019 $ 786,284,080,955 Number of shares of common stock outstanding as of January 22, 2020 497,810,444

____________________________________

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Report, to the extent not set forth herein, is incorporated herein by reference from the registrant’s definitive proxy statement relating to the Annual Meeting of Shareholders to be held in 2020, which definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates.

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AMAZON.COM, INC. FORM 10-K

For the Fiscal Year Ended December 31, 2019 INDEX

Page

PART I Item 1. Business 3 Item 1A. Risk Factors 6 Item 1B. Unresolved Staff Comments 15 Item 2. Properties 16 Item 3. Legal Proceedings 16 Item 4. Mine Safety Disclosures 16

PART II Item 5. Market for the Registrant’s Common Stock, Related Shareholder Matters, and Issuer Purchases of Equity Securities 17 Item 6. Selected Consolidated Financial Data 18 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 32 Item 8. Financial Statements and Supplementary Data 34 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 71 Item 9A. Controls and Procedures 71 Item 9B. Other Information 73

PART III Item 10. Directors, Executive Officers, and Corporate Governance 73 Item 11. Executive Compensation 73 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 73 Item 13. Certain Relationships and Related Transactions, and Director Independence 73 Item 14. Principal Accountant Fees and Services 73

PART IV Item 15. Exhibits, Financial Statement Schedules 74 Item 16. Form 10-K Summary 74 Signatures 76

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AMAZON.COM, INC.

PART I

Item 1. Business

This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements based on expectations, estimates, and projections as of the date of this filing. Actual results may differ materially from those expressed in forward-looking statements. See Item 1A of Part I — “Risk Factors.”

Amazon.com, Inc. was incorporated in 1994 in the state of Washington and reincorporated in 1996 in the state of Delaware. Our principal corporate offices are located in Seattle, Washington. We completed our initial public offering in May 1997 and our common stock is listed on the Nasdaq Global Select Market under the symbol “AMZN.”

As used herein, “Amazon.com,” “we,” “our,” and similar terms include Amazon.com, Inc. and its subsidiaries, unless the context indicates otherwise.

General We seek to be Earth’s most customer-centric company. We are guided by four principles: customer obsession rather than competitor focus, passion for

invention, commitment to operational excellence, and long-term thinking. In each of our segments, we serve our primary customer sets, consisting of consumers, sellers, developers, enterprises, and content creators. In addition, we provide services, such as advertising to sellers, vendors, publishers, and authors, through programs such as sponsored ads, display, and video advertising.

We have organized our operations into three segments: North America, International, and Amazon Web Services (“AWS”). These segments reflect the way the Company evaluates its business performance and manages its operations. Information on our net sales is contained in Item 8 of Part II, “Financial Statements and Supplementary Data — Note 10 — Segment Information.” The financial results of Whole Foods Market, Inc. (“Whole Foods Market”) have been included in our consolidated financial statements from the date of acquisition on August 28, 2017.

Consumers We serve consumers through our online and physical stores and focus on selection, price, and convenience. We design our stores to enable hundreds of

millions of unique products to be sold by us and by third parties across dozens of product categories. Customers access our offerings through our websites, mobile apps, Alexa, devices, streaming, and physically visiting our stores. We also manufacture and sell electronic devices, including Kindle, Fire tablet, Fire TV, Echo, Ring, and other devices, and we develop and produce media content. We seek to offer our customers low prices, fast and free delivery, easy-to-use functionality, and timely customer service. In addition, we offer Amazon Prime, a membership program that includes unlimited free shipping on over 100 million items, access to unlimited streaming of tens of thousands of movies and TV episodes, including Amazon Original content, and other benefits.

We fulfill customer orders in a number of ways, including through: North America and International fulfillment and delivery networks that we operate; co- sourced and outsourced arrangements in certain countries; digital delivery; and through our physical stores. We operate customer service centers globally, which are supplemented by co-sourced arrangements. See Item 2 of Part I, “Properties.”

Sellers We offer programs that enable sellers to grow their businesses, sell their products in our stores, and fulfill orders through us. We are not the seller of record

in these transactions. We earn fixed fees, a percentage of sales, per-unit activity fees, interest, or some combination thereof, for our seller programs.

Developers and Enterprises We serve developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions, through our AWS segment, which

offers a broad set of global compute, storage, database, and other service offerings.

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Content Creators We serve authors and independent publishers with Kindle Direct Publishing, an online service that lets independent authors and publishers choose a royalty

option and make their books available in the Kindle Store, along with Amazon’s own publishing arm, Amazon Publishing. We also offer programs that allow authors, musicians, filmmakers, skill and app developers, and others to publish and sell content.

Competition Our businesses encompass a large variety of product types, service offerings, and delivery channels. The worldwide marketplace in which we compete is

evolving rapidly and intensely competitive, and we face a broad array of competitors from many different industry sectors around the world. Our current and potential competitors include: (1) physical, e-commerce, and omnichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products we offer and sell to consumers and businesses; (2) publishers, producers, and distributors of physical, digital, and interactive media of all types and all distribution channels; (3) web search engines, comparison shopping websites, social networks, web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers; (4) companies that provide e-commerce services, including website development and hosting, omnichannel sales, inventory, and supply chain management, advertising, fulfillment, customer service, and payment processing; (5) companies that provide fulfillment and logistics services for themselves or for third parties, whether online or offline; (6) companies that provide information technology services or products, including on-premises or cloud-based infrastructure and other services; (7) companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices; and (8) companies that sell grocery products online and in physical stores. We believe that the principal competitive factors in our retail businesses include selection, price, and convenience, including fast and reliable fulfillment. Additional competitive factors for our seller and enterprise services include the quality, speed, and reliability of our services and tools, as well as customers’ ability and willingness to change business practices. Some of our current and potential competitors have greater resources, longer histories, more customers, greater brand recognition, and greater control over inputs critical to our various businesses. They may secure better terms from suppliers, adopt more aggressive pricing, pursue restrictive distribution agreements that restrict our access to supply, direct consumers to their own offerings instead of ours, lock-in potential customers with restrictive terms, and devote more resources to technology, infrastructure, fulfillment, and marketing. The Internet facilitates competitive entry and comparison shopping, which enhances the ability of new, smaller, or lesser-known businesses to compete against us. Each of our businesses is also subject to rapid change and the development of new business models and the entry of new and well-funded competitors. Other companies also may enter into business combinations or alliances that strengthen their competitive positions.

Intellectual Property We regard our trademarks, service marks, copyrights, patents, domain names, trade dress, trade secrets, proprietary technologies, and similar intellectual

property as critical to our success, and we rely on trademark, copyright, and patent law, trade-secret protection, and confidentiality and/or license agreements with our employees, customers, partners, and others to protect our proprietary rights. We have registered, or applied for the registration of, a number of U.S. and international domain names, trademarks, service marks, and copyrights. Additionally, we have filed U.S. and international patent applications covering certain of our proprietary technology. We have licensed in the past, and expect that we may license in the future, certain of our proprietary rights to third parties.

Seasonality Our business is affected by seasonality, which historically has resulted in higher sales volume during our fourth quarter, which ends December 31. We

recognized 34%, 31%, and 31% of our annual revenue during the fourth quarter of 2017, 2018, and 2019. Fourth quarter 2017 results include revenue attributable to Whole Foods Market, which we acquired on August 28, 2017.

Employees We employed approximately 798,000 full-time and part-time employees as of December 31, 2019. However, employment levels fluctuate due to seasonal

factors affecting our business. Additionally, we utilize independent contractors and temporary personnel to supplement our workforce. We have works councils, statutory employee representation obligations, and union agreements in certain countries outside the United States and at certain of our studio operations within the United States. We consider our employee relations to be good. Competition for qualified personnel has historically been intense, particularly for software engineers, computer scientists, and other technical staff.

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Available Information Our investor relations website is amazon.com/ir and we encourage investors to use it as a way of easily finding information about us. We promptly make

available on this website, free of charge, the reports that we file or furnish with the Securities and Exchange Commission (“SEC”), corporate governance information (including our Code of Business Conduct and Ethics), and select press releases.

Executive Officers and Directors The following tables set forth certain information regarding our Executive Officers and Directors as of January 22, 2020:

Information About Our Executive Officers

Name Age Position Jeffrey P. Bezos 56 President, Chief Executive Officer, and Chairman of the Board Jeffrey M. Blackburn 50 Senior Vice President, Business Development Andrew R. Jassy 52 CEO Amazon Web Services Brian T. Olsavsky 56 Senior Vice President and Chief Financial Officer Shelley L. Reynolds 55 Vice President, Worldwide Controller, and Principal Accounting Officer Jeffrey A. Wilke 53 CEO Worldwide Consumer David A. Zapolsky 56 Senior Vice President, General Counsel, and Secretary

Jeffrey P. Bezos. Mr. Bezos has been Chairman of the Board of Amazon.com since founding it in 1994 and Chief Executive Officer since May 1996. Mr. Bezos served as President of the Company from founding until June 1999 and again from October 2000 to the present.

Jeffrey M. Blackburn. Mr. Blackburn has served as Senior Vice President, Business Development, since April 2006. Andrew R. Jassy. Mr. Jassy has served as CEO Amazon Web Services since April 2016, and Senior Vice President, Amazon Web Services, from April

2006 until April 2016. Brian T. Olsavsky. Mr. Olsavsky has served as Senior Vice President and Chief Financial Officer since June 2015, Vice President, Finance for the Global

Consumer Business from December 2011 to June 2015, and numerous financial leadership roles across Amazon with global responsibility since April 2002. Shelley L. Reynolds. Ms. Reynolds has served as Vice President, Worldwide Controller, and Principal Accounting Officer since April 2007. Jeffrey A. Wilke. Mr. Wilke has served as CEO Worldwide Consumer since April 2016, Senior Vice President, Consumer Business, from February 2012

until April 2016, and as Senior Vice President, North America Retail, from January 2007 until February 2012. David A. Zapolsky. Mr. Zapolsky has served as Senior Vice President, General Counsel, and Secretary since May 2014, Vice President, General Counsel,

and Secretary from September 2012 to May 2014, and as Vice President and Associate General Counsel for Litigation and Regulatory matters from April 2002 until September 2012.

Board of Directors

Name Age Position Jeffrey P. Bezos 56 President, Chief Executive Officer, and Chairman of the Board Rosalind G. Brewer 57 Group President, Americas and Chief Operating Officer, Starbucks Corporation Jamie S. Gorelick 69 Partner, Wilmer Cutler Pickering Hale and Dorr LLP Daniel P. Huttenlocher 61 Dean, MIT Schwarzman College of Computing Judith A. McGrath 67 Senior Advisor, Astronauts Wanted * No experience necessary Indra K. Nooyi 64 Former Chief Executive Officer, PepsiCo, Inc. Jonathan J. Rubinstein 63 Former co-CEO, Bridgewater Associates, LP Thomas O. Ryder 75 Retired, Former Chairman, Reader’s Digest Association, Inc. Patricia Q. Stonesifer 63 Former President and Chief Executive Officer, Martha’s Table Wendell P. Weeks 60 Chief Executive Officer, Corning Incorporated

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Item 1A. Risk Factors

Please carefully consider the following discussion of significant factors, events, and uncertainties that make an investment in our securities risky. The events and consequences discussed in these risk factors could, in circumstances we may or may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, growth, reputation, prospects, financial condition, operating results (including components of our financial results), cash flows, liquidity, and stock price. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. In addition, the global economic climate amplifies many of these risks.

We Face Intense Competition Our businesses are rapidly evolving and intensely competitive, and we have many competitors across geographies, including cross-border competition, and

in different industries, including physical, e-commerce, and omnichannel retail, e-commerce services, web and infrastructure computing services, electronic devices, digital content, advertising, grocery, and transportation and logistics services. Some of our current and potential competitors have greater resources, longer histories, more customers, and/or greater brand recognition, particularly with our newly-launched products and services and in our newer geographic regions. They may secure better terms from vendors, adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfillment, and marketing.

Competition continues to intensify, including with the development of new business models and the entry of new and well-funded competitors, and as our competitors enter into business combinations or alliances and established companies in other market segments expand to become competitive with our business. In addition, new and enhanced technologies, including search, web and infrastructure computing services, digital content, and electronic devices continue to increase our competition. The Internet facilitates competitive entry and comparison shopping, which enhances the ability of new, smaller, or lesser known businesses to compete against us. As a result of competition, our product and service offerings may not be successful, we may fail to gain or may lose business, and we may be required to increase our spending or lower prices, any of which could materially reduce our sales and profits.

Our Expansion Places a Significant Strain on our Management, Operational, Financial, and Other Resources We are continuing to rapidly and significantly expand our global operations, including increasing our product and service offerings and scaling our

infrastructure to support our retail and services businesses. The complexity of the current scale of our business can place significant strain on our management, personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions, and our expansion increases these factors. Failure to manage growth effectively could damage our reputation, limit our growth, and negatively affect our operating results.

Our Expansion into New Products, Services, Technologies, and Geographic Regions Subjects Us to Additional Risks We may have limited or no experience in our newer market segments, and our customers may not adopt our product or service offerings. These offerings,

which can present new and difficult technology challenges, may subject us to claims if customers of these offerings experience service disruptions or failures or other quality issues. In addition, profitability, if any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them. Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off.

We Experience Significant Fluctuations in Our Operating Results and Growth Rate We are not always able to accurately forecast our growth rate. We base our expense levels and investment plans on sales estimates. A significant portion of

our expenses and investments is fixed, and we are not always able to adjust our spending quickly enough if our sales are less than expected. Our revenue growth may not be sustainable, and our percentage growth rates may decrease. Our revenue and operating profit growth depends on the

continued growth of demand for the products and services offered by us or our sellers, and our business is affected by general economic and business conditions worldwide. A softening of demand, whether caused by changes in customer preferences or a weakening of the U.S. or global economies, may result in decreased revenue or growth.

Our sales and operating results will also fluctuate for many other reasons, including due to factors described elsewhere in this section and the following: • our ability to retain and increase sales to existing customers, attract new customers, and satisfy our customers’ demands;

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• our ability to retain and expand our network of sellers; • our ability to offer products on favorable terms, manage inventory, and fulfill orders; • the introduction of competitive stores, websites, products, services, price decreases, or improvements; • changes in usage or adoption rates of the Internet, e-commerce, electronic devices, and web services, including outside the U.S.; • timing, effectiveness, and costs of expansion and upgrades of our systems and infrastructure; • the success of our geographic, service, and product line expansions; • the extent to which we finance, and the terms of any such financing for, our current operations and future growth; • the outcomes of legal proceedings and claims, which may include significant monetary damages or injunctive relief and could have a material adverse

impact on our operating results; • variations in the mix of products and services we sell; • variations in our level of merchandise and vendor returns; • the extent to which we offer fast and free delivery, continue to reduce prices worldwide, and provide additional benefits to our customers; • factors affecting our reputation or brand image; • the extent to which we invest in technology and content, fulfillment, and other expense categories; • increases in the prices of fuel and gasoline, as well as increases in the prices of other energy products and commodities like paper and packing supplies

and hardware products; • the extent to which operators of the networks between our customers and our stores successfully charge fees to grant our customers unimpaired and

unconstrained access to our online services; • our ability to collect amounts owed to us when they become due; • the extent to which use of our services is affected by spyware, viruses, phishing and other spam emails, denial of service attacks, data theft, computer

intrusions, outages, and similar events; and • disruptions from natural or man-made disasters, extreme weather, geopolitical events and security issues (including terrorist attacks and armed

hostilities), labor or trade disputes, and similar events.

Our International Operations Expose Us to a Number of Risks Our international activities are significant to our revenues and profits, and we plan to further expand internationally. In certain international market segments,

we have relatively little operating experience and may not benefit from any first-to-market advantages or otherwise succeed. It is costly to establish, develop, and maintain international operations and stores, and promote our brand internationally. Our international operations may not become profitable on a sustained basis.

In addition to risks described elsewhere in this section, our international sales and operations are subject to a number of risks, including: • local economic and political conditions; • government regulation (such as regulation of our product and service offerings and of competition); restrictive governmental actions (such as trade

protection measures, including export duties and quotas and custom duties and tariffs); nationalization; and restrictions on foreign ownership; • restrictions on sales or distribution of certain products or services and uncertainty regarding liability for products, services, and content, including

uncertainty as a result of less Internet-friendly legal systems, local laws, lack of legal precedent, and varying rules, regulations, and practices regarding the physical and digital distribution of media products and enforcement of intellectual property rights;

• business licensing or certification requirements, such as for imports, exports, web services, and electronic devices; • limitations on the repatriation and investment of funds and foreign currency exchange restrictions; • limited fulfillment and technology infrastructure; • shorter payable and longer receivable cycles and the resultant negative impact on cash flow; • laws and regulations regarding consumer and data protection, privacy, network security, encryption, payments, advertising, and restrictions on pricing or

discounts;

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• lower levels of use of the Internet; • lower levels of consumer spending and fewer opportunities for growth compared to the U.S.; • lower levels of credit card usage and increased payment risk; • difficulty in staffing, developing, and managing foreign operations as a result of distance, language, and cultural differences; • different employee/employer relationships and the existence of works councils and labor unions; • compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government officials

and other third parties; • laws and policies of the U.S. and other jurisdictions affecting trade, foreign investment, loans, and taxes; and • geopolitical events, including war and terrorism. As international physical, e-commerce, and omnichannel retail and other services grow, competition will intensify, including through adoption of evolving

business models. Local companies may have a substantial competitive advantage because of their greater understanding of, and focus on, the local customer, as well as their more established local brand names. The inability to hire, train, retain, and manage sufficient required personnel may limit our international growth.

The People’s Republic of China (“PRC”) and India regulate Amazon’s and its affiliates’ businesses and operations in country through regulations and license requirements that may restrict (i) foreign investment in and operation of the Internet, IT infrastructure, data centers, retail, delivery, and other sectors, (ii) Internet content, and (iii) the sale of media and other products and services. For example, in order to meet local ownership, regulatory licensing, and cybersecurity requirements, we provide certain technology services in China through contractual relationships with third parties that hold PRC licenses to provide services. In India, the government restricts the ownership or control of Indian companies by foreign entities involved in online multi-brand 

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