New folderjsjfArrayStack.classpackage jsjf;publicsynchronize.docx

New folder/jsjf/ArrayStack.classpackage jsjf;
publicsynchronizedclass ArrayStack implements StackADT {
privatestaticfinal int DEFAULT_CAPACITY = 100;
private int top;
private Object[] stack;
public void ArrayStack();
public void ArrayStack(int);
public void push(Object);
private void expandCapacity();
public Object pop() throws
exceptions.EmptyCollectionException;
public Object peek() throws
exceptions.EmptyCollectionException;
public int size();
public boolean isEmpty();
public String toString();
}
New folder/jsjf/ArrayStack.javaNew
folder/jsjf/ArrayStack.javapackage jsjf;
import jsjf.exceptions.*;
import java.util.Arrays;
// -------------------------------------------------------
// Author: Yifu Wu
// Date: 03/10/16
// Source Name: ArrayStack<T>
// Due date: 03/10/16
// Description:
/**
* An array implementation of a stack in which the bottom of th
e

* stack is fixed at index 0.
*
* @author Java Foundations
* @version 4.0
*/
publicclassArrayStack<T>implementsStackADT<T>
{
privatefinalstaticint DEFAULT_CAPACITY =100;
privateint top;
private T[] stack;
/**
* Creates an empty stack using the default capacity.
*/
publicArrayStack()
{
this(DEFAULT_CAPACITY);
}
/**
* Creates an empty stack using the specified capacity.
* @param initialCapacity the initial size of the array
*/
publicArrayStack(int initialCapacity)
{
top =0;
stack =(T[])(newObject[initialCapacity]);
}
/**
* Adds the specified element to the top of this stack, expand
ing
* the capacity of the array if necessary.
* @param element generic element to be pushed onto stack
*/

publicvoid push(T element)
{
if(size()== stack.length)
expandCapacity();
stack[top]= element;
top++;
}
/**
* Creates a new array to store the contents of this stack with
* twice the capacity of the old one.
*/
privatevoid expandCapacity()
{
//stack = Arrays.copyOf(stack, stack.length * 2);
System.out.println("Expanding stack capacityn");
T[] temp =(T[])(newObject[2*top]);
for(int i=0; i< top; i++)
temp[i]= stack[i];
stack = temp;
}
/**
* Removes the element at the top of this stack and returns a
* reference to it.
* @return element removed from top of stack
* @throws EmptyCollectionException if stack is empty
*/
public T pop()throwsEmptyCollectionException
{
if(isEmpty())
thrownewEmptyCollectionException("stack");
top--;
T result = stack[top];

stack[top]=null;
return result;
}
/**
* Returns a reference to the element at the top of this stack.
* The element is not removed from the stack.
* @return element on top of stack
* @throws EmptyCollectionException if stack is empty
*/
public T peek()throwsEmptyCollectionException
{
if(isEmpty())
thrownewEmptyCollectionException("stack");
return stack[top-1];
}
/**
* Returns the number of elements in this stack.
* @return the number of elements in the stack
*/
publicint size()
{
// To be completed as a Programming Project
return top;
}
/**
* Returns true if this stack is empty and false otherwise.
* @return true if this stack is empty
*/
publicboolean isEmpty()
{

if(size()==0)
returntrue;
else
returnfalse;
}
/**
* Returns a string representation of this stack.
* @return a string representation of the stack
*/
publicString toString()
{
String result ="";
for(int i = top-1;i >=0;i--)
result +="["+(i +1)+"]"+ stack[i].toString()+"n";
return result;
}
}
New
folder/jsjf/exceptions/EmptyCollectionException.classpackage
jsjf.exceptions;
publicsynchronizedclass EmptyCollectionException extends
RuntimeException {
public void EmptyCollectionException(String);
}
New folder/jsjf/exceptions/EmptyCollectionException.javaNew
folder/jsjf/exceptions/EmptyCollectionException.java
// -------------------------------------------------------

// Author: Yifu Wu
// Date: 03/10/16
// Source Name: EmptyCollectionException
// Due date: 03/10/16
// Description:
/**
* Represents the situation in which a collection is empty.
*
* @version 4.0
*/
package jsjf.exceptions;
publicclassEmptyCollectionExceptionextendsRuntimeException
{
/**
* Sets up this exception with an appropriate message.
* @param collection the name of the collection
*/
publicEmptyCollectionException(String collection)
{
super("The "+ collection +" is empty.");
}
}
New folder/jsjf/StackADT.classpackage jsjf;
publicabstractinterface StackADT {
publicabstract void push(Object);
publicabstract Object pop();
publicabstract Object peek();
publicabstract boolean isEmpty();
publicabstract int size();
publicabstract String toString();
}

New folder/jsjf/StackADT.javaNew
folder/jsjf/StackADT.javapackage jsjf;
// -------------------------------------------------------
// Author: Yifu Wu
// Date: 03/10/16
// Source Name: StackADT<T>
// Due date: 03/10/16
// Description:
/**
* Defines the interface to a stack collection.
*
* @version 4.0
*/
publicinterfaceStackADT<T>
{
/**
* Adds the specified element to the top of this stack.
* @param element element to be pushed onto the stack
*/
publicvoid push(T element);
/**
* Removes and returns the top element from this stack.
* @return the element removed from the stack
*/
public T pop();
/**
* Returns without removing the top element of this stack.
* @return the element on top of the stack
*/
public T peek();

/**
* Returns true if this stack contains no elements.
* @return true if the stack is empty
*/
publicboolean isEmpty();
/**
* Returns the number of elements in this stack.
* @return the number of elements in the stack
*/
publicint size();
/**
* Returns a string representation of this stack.
* @return a string representation of the stack
*/
publicString toString();
}
New folder/PostfixEvaluator2.classpublicsynchronizedclass
PostfixEvaluator2 {
privatestaticfinal char ADD = 43;
privatestaticfinal char SUBTRACT = 45;
privatestaticfinal char MULTIPLY = 42;
privatestaticfinal char DIVIDE = 47;
private jsjf.ArrayStack stack;
public void PostfixEvaluator2();
public int evaluate(String);
private boolean isOperator(String);
private int evaluateSingleOperator(char, int, int);
}
New folder/PostfixEvaluator2.javaNew
folder/PostfixEvaluator2.java

// -------------------------------------------------------
// Author: Yifu Wu
// Date: 03/10/16
// Source Name: PostfixEvaluator2
// Due date: 03/10/16
// Description:
/* Represents an integer evaluator of postfix expressions. Assu
mes
* the operands are constants.
*
* @version 4.0
*/
import jsjf.*;
import java.util.Stack;
import java.util.Scanner;
publicclassPostfixEvaluator2
{
privatefinalstaticchar ADD ='+';
privatefinalstaticchar SUBTRACT ='-';
privatefinalstaticchar MULTIPLY ='*';
privatefinalstaticchar DIVIDE ='/';
privateArrayStack<Integer> stack;
/**
* Sets up this evalutor by creating a new stack.
*/
publicPostfixEvaluator2()
{
stack =newArrayStack<Integer>();
}
/**

* Evaluates the specified postfix expression. If an operand is
* encountered, it is pushed onto the stack. If an operator is
* encountered, two operands are popped, the operation is
* evaluated, and the result is pushed onto the stack.
* @param expr string representation of a postfix expression
* @return value of the given expression
*/
publicint evaluate(String expr)
{
int op1, op2, result =0;
String token;
Scanner parser =newScanner(expr);
while(parser.hasNext())
{
token = parser.next();
if(isOperator(token))
{
op2 =(stack.pop()).intValue();
op1 =(stack.pop()).intValue();
result = evaluateSingleOperator(token.charAt(0), op1
, op2);
stack.push(newInteger(result));
}
else
stack.push(newInteger(Integer.parseInt(token)));
}
return result;
}
/**
* Determines if the specified token is an operator.
* @param token the token to be evaluated
* @return true if token is operator

*/
privateboolean isOperator(String token)
{
return( token.equals("+")|| token.equals("-")||
token.equals("*")|| token.equals("/"));
}
/**
* Peforms integer evaluation on a single expression consisti
ng of
* the specified operator and operands.
* @param operation operation to be performed
* @param op1 the first operand
* @param op2 the second operand
* @return value of the expression
*/
privateint evaluateSingleOperator(char operation,int op1,int op2
)
{
int result =0;
switch(operation)
{
case ADD:
result = op1 + op2;
break;
case SUBTRACT:
result = op1 - op2;
break;
case MULTIPLY:
result = op1 * op2;
break;
case DIVIDE:
result = op1 / op2;
}

return result;
}
}
New folder/PostfixTester2.classpublicsynchronizedclass
PostfixTester2 {
public void PostfixTester2();
publicstatic void main(String[]);
}
New folder/PostfixTester2.javaNew folder/PostfixTester2.java
// -------------------------------------------------------
// Author: Yifu Wu
// Date: 03/10/16
// Source Name: PostfixTester2
// Due date: 03/10/16
// Description:
// Demonstrates the use of a stack to evaluate postfix expression
s.
// @author Java Foundations
// @version 4.0
import java.util.Scanner;
publicclassPostfixTester2
//-------------------------------------
// To Compile: javac PostfixTester.java
//-------------------------------------
{
/**
* Reads and evaluates multiple postfix expressions.
*/
publicstaticvoid main(String[] args)
{
String expression, again;

int result;
Scanner in =newScanner(System.in);
do
{
PostfixEvaluator2 evaluator =newPostfixEvaluator2();
System.out.println("Enter a valid post-
fix expression one token "+
"at a time with a space between each token (e.g. 5 4 + 3 2 1 -
+ *)");
System.out.println("Each token must be an integer or an operato
r (+,-,*,/)");
expression = in.nextLine();
result = evaluator.evaluate(expression);
System.out.println();
System.out.println("That expression equals "+ result);
System.out.print("Evaluate another expression [Y/N]? ");
again = in.nextLine();
System.out.println();
}
while(again.equalsIgnoreCase("y"));
}
}
//**************************************************
Output Display ****************************************
******************
//Enter a valid post-
fix expression one token at a time with a space between each to
ken (e.g. 5 4 + 3 2 1 - + *)
//Each token must be an integer or an operator (+,-,*,/)
//5 3 + 2 1 - 4 5 6 * + - -

//That expression equals 41
//Evaluate another expression [Y/N]? Y
ken (e.g. 5 4 + 3 2 1 - + *)
//2 4 6 7 + - * 3 - 5 4 7 + + -
//That expression equals -37
//Evaluate another expression [Y/N]?
ken (e.g. 5 4 + 3 2 1 - + *)
//8 7 2 1 + + - 6 / 8 7 - -
//That expression equals -1
//Evaluate another expression [Y/N]?
New folder/tp022871.BAT
@ECHO OFF
C:
CD "Usersy.wu2DesktopNew folder"
"C:Program Files (x86)Javajdk1.7.0binjava.exe"
PostfixTester2
PAUSE

New folder/tp06515e.BAT
@ECHO OFF
C:
PostfixTester2
PAUSE
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@ECHO OFF
C:
PostfixTester2
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PostfixTester2
PAUSE
Running Head: AMAZON.COM1
AMAZON.COM6
Amazon.com
Name
Institution
Tutor
Course
Date
Reasons for selecting amazon.com
The size of the company is an important aspect that necessitated
selection of this company. Large companies are ideal for
carrying out research portfolios due to their wide nature that
makes it possible to amass a lot of knowledge from. This is
because smaller companies have limited outreach limiting the
amount of information that can be obtained from them. The
importance of a research is the need to acquire important
information and this goal is achieved by identification of a

company that can help to that effect (Bohari, Cheng & Fuad,
2013).
Suitable business sector is another factor that informs the
selection of a company from which to conduct research. The
need of learners to forces on companies that will provide them
with the relevant information is apparent and therefore focusing
the research to companies that are in line with the said
profession. Different companies work differs due to differing
points of orientation and operation making it hugely important
to focus on a specific line of operation. This helps to ensure
that the researchers are able to make sense of the information
they collect from the said company (Bohari, Cheng & Fuad,
2013).
Accessibility of the company is another factor that informs the
selection of an ideal research ground. It is necessitated by the
need to have ample time for carrying out research as it is a time
intensive process and only prudent to select a company that can
be easily accessed for the needed research to be conducted.
Research entails the collection of data and some of the methods
employed in this regard take a lot of time to compile and
therefore making it crucial for the said researching ground to be
convenient for the researcher. Another aspect that informs the
accessibility of a company is the timeline in which the research
is allocated as this serves to prescribe the extent to which
deferent companies can be engaged and therefore adopting the
most efficient entity (Bohari, Cheng & Fuad, 2013).
The available resources allocated for the research also help to
stipulate the manner and scope with which a research can be
conducted in different centers hence helping to identify the
centre that performs better under the current budget. Resources
can be in the form of funds, time as well as human personnel
needed to facilitate the research (Bohari, Cheng & Fuad, 2013).
Comprehensive overview of the company and its history
Amazon.com is a company that currently has an international
outreach due to its extension to other parts of the world upon

establishment and has formed partnerships with other firms in
the industry. The Company stated humbly; struggling to meet
the market expectations as well as attracting clients in a small
scope as a result. The revision of strategies however enabled the
market to get off well as it created conditions which were
convenient to clients and with time the reach of the company
expanded to new markets. Where is the history about Amazon
and when was it formed?
Expansion to other market called for diversification due to the
different cultures and conditions present in different stations of
the company such as languages hence changing accordingly to
subdue difficulties that arise in the process. The company relied
on experienced gained in the past to take risks which proved to
be worth ones hence spurring the company to success despite
huge resources used during the investment (Amazon.com,
2014). What type of system was used to help Amazon in this
diversification process?
Efficiency has been integral for the overwhelming success of
the company and it has been achieved by using different
strategies aimed at cutting the time taken for businesses to be
actualized as well as cutting on the cost of doing business hence
helping the company have a competitive advantage over its
competitors. Some of the strategies that helped in this regard
include the use of robots to assist in the delivery of services.
Use of machines has proved to be a master stroke due to the
vast funds that they help to save as they are both faster and
cheaper than human personnel (Bohari, Cheng & Fuad, 2013).
What tool or method helped Amazon achieve efficiency?
Another strategy that has helped in the realization of the
success the company enjoys currently is the creation of different
programs in the market and hence helping to utilize the market
better by ensuring that almost all the needs of the clients can be
addressed by the same company without having to edge other
firms for such services (Gawer & Cusumano, 2014). What type
of strategies were utilize by Amazon?
The relative ease of doing business with the company has

attracted other firms that have worked with the company so as
to bring efficiency on their side. This relative ease of doing
business has been necessitated by the vast use of information
technology and therefore accomplishing tasks with utmost
efficiency. The use of these technologies has been due to the
need of the company to compete favorably with other company
in the market place. Despite the current efficient strategies,
pains are underway to ensure that the future of the company is
secure by ensuring that the company retains the existing pool of
clients as well as attracts new ones.The company also owes
most of its success to a good leadership that has led to hard
work consequently leading to success (Killen, Jugdev, Drouin &
Petit, 2012). What type of technologies was used?
The company also serves as a training ground for employees
who opt to work in other firms in the future and hence help
them to not only outshining competitors but also assist them
with highly experienced workforce. The company focuses on the
future by planning to place importance on customers as well as
plans making partnership with firms with share same objectives
(Kresta & Tichy, 2012). What type of training was provided?
Despite these milestone covered on the way the company facing
several hardships amongst them stiff completion, constrains in
resource needed to effect a given investment and challenges that
occur in the market such as fluctuation of the market force all
of which impact negatively on the company. Due to the
imperfections created in the business world the company, just
like other companies is faced by challenges that are as a result
of the dynamism of the industry (Kresta & Tichy, 2012). What
type of challenges affected the market?
The contributing sectors to the incomes of the company chiefly
is the sale of services to customers and factors present in the
business industry such as taxation are avenues through which
some of the income is used. The need to use available income to
invest in technology is apparent so as to make the company to
stay relevant in the market. Just like other business, the
company engages in practices such as borrowing and they

influence the performance of the company in the future in two
ways. They help the company make up for deficits that might
arise due to different forces at ply in the industry and also
impact on the returns obtained for services provided due
interests payable for such debts (Amazon.com, 2014).
The company’s assessment by audit firms as required by the
laws of the current show that the company is in line with the set
down standards by the government to regulate the industry.
However, several suits have been filed in different suits against
the firm by other firm in the context of bleach of terms of
operation (Amazon.com, 2014).
Primary competitors
Among competitor of the firm include firms whose business
landscape is similar to those of the company and others whose
services are substitutes for the services provided by the
company. They include physical world retailers, other online e-
commerce and mobile commercial site, media companies that
provide information storage among others (Vogel, 2014).
The factors that the company prides itself for helping it
favorably compete in the market are efficiency and
effectiveness in the market. The company also draws a lot of
success for the positive reputation it hold in the market place.
However, some competitors boast better resources making them
have an edge in the market as a result and this explain the
presence of alliance in the market force to enable firms to stay
ahead of other competitors (Amazon.com, 2014).
SWOT analysis of the company
The strengths of the company include its use of high technology
in the industry making it efficient in the provision of services,
its larger scope that owes to its expansion to different markets
around the world, the huge reputation it holds in the industry
and its ability to forge partnerships with other firms in the
market who compliment its services (Amazon.com, 2014).
The weaknesses of the firm include the debts that the company

incur due to expenditure that outweigh available finances, its
inability to match the financing capabilities of some of the
competitors and its inability to coexist smoothly with other
entities in the industry without leading to law suits (Vogel,
2014).
Opportunities that the company has include the potential of the
firm to make good use of the partnerships it has made with
other firms to overcome the adversaries of uncertain market
forces, the potential of the company to extend its market to
other parts of the world were the services are not found such as
Africa and the opportunity to use the positive reputation to
bringing more clients on board (Kresta & Tichy, 2012).
Threats that face the company is fluctuations of market forces
which lead to losses, the numerous suits filed by other entities
that may serve to tarnish its positive reputation and huge
financial abilities of competing firms that can aid in the
monopolization of the market and therefore locking the
company out of business (Killen, Jugdev, Drouin & Petit, 2012).
The company ought to address the issue of deficit of payment
with urgency by ensuring that the returns it make outweighs the
cost of production as this is a potential quicksand that can lead
to the collapse of the company. This is further acerbated by the
financing muscles of the competing firms. The company too
should embrace use of favorable terms of operations that do not
aggrieve other entities as the numerous law suits against the
company serve to dent its reputation (Gawer & Cusumano,
2014).
Strategies that the company can use to address these issues
include investing in a robust legal department that will serve to
direct its actions for better future performance and use cheaper
methods of production such as high technology to reduce the
cost of production which ensure that the company would not
have future deficits of payment that cripple its progress (Bohari,
Cheng & Fuad, 2013). Does Amazon use the cost of quality
method at all?

References
Amazon.com (2014). Annual report
Bohari, A. M., Cheng, W. H., & Fuad, N. (2013). An analysis
on the competitiveness of halal food industry in Malaysia: an
approach of SWOT and ICT strategy. Geografia: Malaysian
Journal of Society and Space, 9(1), 1-11.
Gawer, A., & Cusumano, M. A. (2014). Industry platforms and
ecosystem innovation. Journal of Product Innovation
Management, 31(3), 417-433.
Killen, C. P., Jugdev, K., Drouin, N., & Petit, Y. (2012).
Advancing project and portfolio management research:
Applying strategic management theories. International Journal
of Project Management, 30(5), 525-538.
Kresta, A., & Tichy, T. (2012). International Equity Portfolio
Risk Modeling: The Case of the NIG Model and Ordinary
Copula Functions*. Finance a Uver, 62(2), 141.
Vogel, H. L. (2014). Entertainment industry economics: A guide
for financial analysis. Cambridge University Press.
To our shareowners:
A dreamy business offering has at least four characteristics.
Customers love it, it can grow to very large
size, it has strong returns on capital, and it’s durable in time –
with the potential to endure for decades. When you
find one of these, don’t just swipe right, get married.
Well, I’m pleased to report that Amazon hasn’t been

monogamous in this regard. After two decades of risk
taking and teamwork, and with generous helpings of good
fortune all along the way, we are now happily wed to
what I believe are three such life partners: Marketplace, Prime,
and AWS. Each of these offerings was a bold bet
at first, and sensible people worried (often!) that they could not
work. But at this point, it’s become pretty clear
how special they are and how lucky we are to have them. It’s
also clear that there are no sinecures in business.
We know it’s our job to always nourish and fortify them.
We’ll approach the job with our usual tools: customer obsession
rather than competitor focus, heartfelt
passion for invention, commitment to operational excellence,
and a willingness to think long-term. With good
execution and a bit of continuing good luck, Marketplace,
Prime, and AWS can be serving customers and earning
financial returns for many years to come.
Marketplace
Marketplace’s early days were not easy. First, we launched
Amazon Auctions. I think seven people came, if
you count my parents and siblings. Auctions transformed into
zShops, which was basically a fixed price version
of Auctions. Again, no customers. But then we morphed zShops
into Marketplace. Internally, Marketplace was
known as SDP for Single Detail Page. The idea was to take our
most valuable retail real estate – our product
detail pages – and let third-party sellers compete against our
own retail category managers. It was more
convenient for customers, and within a year, it accounted for
5% of units. Today, more than 40% of our units are
sold by more than two million third-party sellers worldwide.
Customers ordered more than two billion units from
sellers in 2014.

The success of this hybrid model accelerated the Amazon
flywheel. Customers were initially drawn by our
fast-growing selection of Amazon-sold products at great prices
with a great customer experience. By then
allowing third parties to offer products side-by-side, we became
more attractive to customers, which drew even
more sellers. This also added to our economies of scale, which
we passed along by lowering prices and
eliminating shipping fees for qualifying orders. Having
introduced these programs in the U.S., we rolled them out
as quickly as we could to our other geographies. The result was
a marketplace that became seamlessly integrated
with all of our global websites.
We work hard to reduce the workload for sellers and increase
the success of their businesses. Through our
Selling Coach program, we generate a steady stream of
automated machine-learned “nudges” (more than 70
million in a typical week) – alerting sellers about opportunities
to avoid going out-of-stock, add selection that’s
selling, and sharpen their prices to be more competitive. These
nudges translate to billions in increased sales to
sellers.
To further globalize Marketplace, we’re now helping sellers in
each of our geographies – and in countries
where we don’t have a presence – reach out to our customers in
countries outside their home geographies. We
hosted merchants from more than 100 different countries last
year, and helped them connect with customers in
185 nations.
Almost one-fifth of our overall third-party sales now occur
outside the sellers’ home countries, and our
merchants’ cross-border sales nearly doubled last year. In the

EU, sellers can open a single account, manage their
business in multiple languages, and make products available
across our five EU websites. More recently, we’ve
started consolidating cross-border shipments for sellers and
helping them obtain ocean shipping from Asia to
Europe and North America at preferential, bulk rates.
Marketplace is the heart of our fast-growing operations in India,
since all of our selection in India is offered
by third-party sellers. Amazon.in now offers more selection
than any other e-commerce site in India – with more
than 20 million products offered from over 21,000 sellers. With
our Easy Ship service, we pick up products from
a seller and handle delivery all the way to the end customer.
Building upon Easy Ship, the India team recently
piloted Kirana Now, a service that delivers everyday essentials
from local kirana (mom and pop) stores to
customers in two to four hours, adding convenience for our
customers and increasing sales for the stores
participating in the service.
Perhaps most important for sellers, we’ve created Fulfillment by
Amazon. But I’ll save that for after we
discuss Prime.
Amazon Prime
Ten years ago, we launched Amazon Prime, originally designed
as an all-you-can-eat free and fast shipping
program. We were told repeatedly that it was a risky move, and
in some ways it was. In its first year, we gave up
many millions of dollars in shipping revenue, and there was no
simple math to show that it would be worth it.

Our decision to go ahead was built on the positive results we’d
seen earlier when we introduced Free Super Saver
Shipping, and an intuition that customers would quickly grasp
that they were being offered the best deal in the
history of shopping. In addition, analysis told us that, if we
achieved scale, we would be able to significantly
lower the cost of fast shipping.
Our owned-inventory retail business was the foundation of
Prime. In addition to creating retail teams to
build each of our category-specific online “stores,” we have
created large-scale systems to automate much of
inventory replenishment, inventory placement, and product
pricing. The precise delivery-date promise of Prime
required operating our fulfillment centers in a new way, and
pulling all of this together is one of the great
accomplishments of our global operations team. Our worldwide
network of fulfillment centers has expanded
from 13 in 2005, when we launched Prime, to 109 this year. We
are now on our eighth generation of fulfillment
center design, employing proprietary software to manage
receipt, stowing, picking, and shipment. Amazon
Robotics, which began with our acquisition of Kiva in 2012, has
now deployed more than 15,000 robots to
support the stowing and retrieval of products at a higher density
and lower cost than ever before. Our owned-
inventory retail business remains our best customer-acquisition
vehicle for Prime and a critical part of building
out categories that attract traffic and third-party sellers.
Though fast delivery remains a core Prime benefit, we are
finding new ways to pump energy into Prime.
Two of the most important are digital and devices.
In 2011 we added Prime Instant Video as a benefit, now with
tens of thousands of movies and TV episodes

available for unlimited streaming in the U.S., and we’ve started
expanding the program into the U.K. and
Germany as well. We’re investing a significant amount on this
content, and it’s important that we monitor its
impact. We ask ourselves, is it worth it? Is it driving Prime?
Among other things, we watch Prime free trial starts,
conversion to paid membership, renewal rates, and product
purchase rates by members entering through this
channel. We like what we see so far and plan to keep investing
here.
While most of our PIV spend is on licensed content, we’re also
starting to develop original content. The
team is off to a strong start. Our show Transparent became the
first from a streaming service to win a Golden
Globe for best series and Tumble Leaf won the Annie for best
animated series for preschoolers. In addition to the
critical acclaim, the numbers are promising. An advantage of
our original programming is that its first run is on
Prime – it hasn’t already appeared anywhere else. Together with
the quality of the shows, that first run status
appears to be one of the factors leading to the attractive
numbers. We also like the fixed cost nature of original
programming. We get to spread that fixed cost across our large
membership base. Finally, our business model for
original content is unique. I’m pretty sure we’re the first
company to have figured out how to make winning a
Golden Globe pay off in increased sales of power tools and
baby wipes!
Amazon designed and manufactured devices – from Kindle to
Fire TV to Echo – also pump energy into
Prime services such as Prime Instant Video and Prime Music,
and generally drive higher engagement with every

element of the Amazon ecosystem. And there’s more to come –
our device team has a strong and exciting
roadmap ahead.
Prime isn’t done improving on its original fast and free shipping
promise either. The recently launched
Prime Now offers Prime members free two-hour delivery on
tens of thousands of items or one-hour delivery for a
$7.99 fee. Lots of early reviews read like this one, “In the past
six weeks my husband and I have made an
embarrassing number of orders through Amazon Prime Now.
It’s cheap, easy, and insanely fast.” We’ve
launched in Manhattan, Brooklyn, Miami, Baltimore, Dallas,
Atlanta, and Austin, and more cities are coming
soon.
Now, I’d like to talk about Fulfillment by Amazon. FBA is so
important because it is glue that inextricably
links Marketplace and Prime. Thanks to FBA, Marketplace and
Prime are no longer two things. In fact, at this
point, I can’t really think about them separately. Their
economics and customer experiences are now happily and
deeply intertwined.
FBA is a service for Marketplace sellers. When a seller decides
to use FBA, they stow their inventory in our
fulfillment centers. We take on all logistics, customer service,
and product returns. If a customer orders an FBA
item and an Amazon owned-inventory item, we can ship both
items to the customer in one box – a huge
efficiency gain. But even more important, when a seller joins
FBA, their items can become Prime eligible.
Maintaining a firm grasp of the obvious is more difficult than
one would think it should be. But it’s useful to
try. If you ask, what do sellers want? The correct (and obvious)

answer is: they want more sales. So, what
happens when sellers join FBA and their items become Prime
eligible? They get more sales.
Notice also what happens from a Prime member’s point of view.
Every time a seller joins FBA, Prime
members get more Prime eligible selection. The value of
membership goes up. This is powerful for our flywheel.
FBA completes the circle: Marketplace pumps energy into
Prime, and Prime pumps energy into Marketplace.
In a 2014 survey of U.S. sellers, 71% of FBA merchants
reported more than a 20% increase in unit sales
after joining FBA. In the holiday period, worldwide FBA units
shipped grew 50% over the prior year and
represented more than 40% of paid third-party units. Paid Prime
memberships grew more than 50% in the U.S.
last year and 53% worldwide. FBA is a win for customers and a
win for sellers.
Amazon Web Services
A radical idea when it was launched nine years ago, Amazon
Web Services is now big and growing fast.
Startups were the early adopters. On-demand, pay-as-you-go
cloud storage and compute resources dramatically
increased the speed of starting a new business. Companies like
Pinterest, Dropbox, and Airbnb all used AWS
services and remain customers today.
Since then, large enterprises have been coming on board as
well, and they’re choosing to use AWS for the
same primary reason the startups did: speed and agility. Having
lower IT cost is attractive, and sometimes the
absolute cost savings can be enormous. But cost savings alone
could never overcome deficiencies in performance

or functionality. Enterprises are dependent on IT – it’s mission
critical. So, the proposition, “I can save you a
significant amount on your annual IT bill and my service is
almost as good as what you have now,” won’t get too
many customers. What customers really want in this arena is
“better and faster,” and if “better and faster” can
come with a side dish of cost savings, terrific. But the cost
savings is the gravy, not the steak.
IT is so high leverage. You don’t want to imagine a competitor
whose IT department is more nimble than
yours. Every company has a list of technology projects that the
business would like to see implemented as soon
as possible. The painful reality is that tough triage decisions are
always made, and many projects never get done.
Even those that get resourced are often delivered late or with
incomplete functionality. If an IT department can
figure out how to deliver a larger number of business-enabling
technology projects faster, they’ll be creating
significant and real value for their organization.
These are the main reasons AWS is growing so quickly. IT
departments are recognizing that when they
adopt AWS, they get more done. They spend less time on low
value-add activities like managing datacenters,
networking, operating system patches, capacity planning,
database scaling, and so on and so on. Just as
important, they get access to powerful APIs and tools that
dramatically simplify building scalable, secure, robust,
high-performance systems. And those APIs and tools are
continuously and seamlessly upgraded behind the
scenes, without customer effort.
Today, AWS has more than a million active customers as

companies and organizations of all sizes use AWS
in every imaginable business segment. AWS usage grew by
approximately 90% in the fourth quarter of 2014
versus the prior year. Companies like GE, Major League
Baseball, Tata Motors, and Qantas are building new
applications on AWS – these range from apps for crowdsourcing
and personalized healthcare to mobile apps for
managing fleets of trucks. Other customers, like NTT
DOCOMO, the Financial Times, and the Securities and
Exchange Commission are using AWS to analyze and take
action on vast amounts of data. And many customers
like Condé Nast, Kellogg’s, and News Corp are migrating
legacy critical applications and, in some cases, entire
datacenters to AWS.
We’ve increased our pace of innovation as we’ve gone along –
from nearly 160 new features and services in
2012, to 280 in 2013, and 516 last year. There are many that
would be interesting to talk about – from WorkDocs
and WorkMail to AWS Lambda and the EC2 Container Service
to the AWS Marketplace – but for purposes of
brevity, I’m going to limit myself to one: our recently
introduced Amazon Aurora. We hope Aurora will offer
customers a new normal for a very important (but also very
problematic) technology that is a critical
underpinning of many applications: the relational database.
Aurora is a MySQL-compatible database engine that
offers the speed and availability of high-end commercial
databases with the simplicity and cost effectiveness of
open source databases. Aurora’s performance is up to 5x better
than typical MySQL databases, at one-tenth the
cost of commercial database packages. Relational databases is
an arena that’s been a pain point for organizations
and developers for a long time, and we’re very excited about
Aurora.

I believe AWS is one of those dreamy business offerings that
can be serving customers and earning financial
returns for many years into the future. Why am I optimistic? For
one thing, the size of the opportunity is big,
ultimately encompassing global spend on servers, networking,
datacenters, infrastructure software, databases,
data warehouses, and more. Similar to the way I think about
Amazon retail, for all practical purposes, I believe
AWS is market-size unconstrained.
Second, its current leadership position (which is significant) is
a strong ongoing advantage. We work hard –
very hard – to make AWS as easy to use as possible. Even so,
it’s still a necessarily complex set of tools with
rich functionality and a non-trivial learning curve. Once you’ve
become proficient at building complex systems
with AWS, you do not want to have to learn a new set of tools
and APIs assuming the set you already understand
works for you. This is in no way something we can rest on, but
if we continue to serve our customers in a truly
outstanding way, they will have a rational preference to stick
with us.
In addition, also because of our leadership position, we now
have thousands of what are effectively AWS
ambassadors roaming the world. Software developers changing
jobs, moving from one company to another,
become our best sales people: “We used AWS where I used to
work, and we should consider it here. I think we’d
get more done.” It’s a good sign that proficiency with AWS and
its services is already something software
developers are adding to their resumes.
Finally, I’m optimistic that AWS will have strong returns on
capital. This is one we as a team examine
because AWS is capital intensive. The good news is we like

what we see when we do these analyses.
Structurally, AWS is far less capital intensive than the mode
it’s replacing – do-it-yourself datacenters – which
have low utilization rates, almost always below 20%. Pooling of
workloads across customers gives AWS much
higher utilization rates, and correspondingly higher capital
efficiency. Further, once again our leadership position
helps: scale economies can provide us a relative advantage on
capital efficiency. We’ll continue to watch and
shape the business for good returns on capital.
AWS is young, and it is still growing and evolving. We think
we can continue to lead if we continue to
execute with our customers’ needs foremost in mind.
Career Choice
Before closing, I want to take a moment to update shareowners
on something we’re excited about and proud
of. Three years ago we launched an innovative employee benefit
– the Career Choice program, where we pre-pay
95% of tuition for employees to take courses for in-demand
fields, such as airplane mechanic or nursing,
regardless of whether the skills are relevant to a career at
Amazon. The idea was simple: enable choice.
We know that, for some of our fulfillment and customer service
center employees, Amazon will be a career.
For others, Amazon might be a stepping stone on the way to a
job somewhere else – a job that may require new
skills. If the right training can make the difference, we want to
help, and so far we have been able to help over
2,000 employees who have participated in the program in eight
different countries. There’s been so much interest

that we are now building onsite classrooms so college and
technical classes can be taught inside our fulfillment
centers, making it even easier for associates to achieve these
goals.
There are now eight FCs offering 15 classes taught onsite in our
purpose-built classrooms with high-end
technology features, and designed with glass walls to inspire
others to participate and generate encouragement
from peers. We believe Career Choice is an innovative way to
draw great talent to serve customers in our
fulfillment and customer service centers. These jobs can become
gateways to great careers with Amazon as we
expand around the world or enable employees the opportunity to
follow their passion in other in-demand
technical fields, like our very first Career Choice graduate did
when she started a new career as a nurse in her
community.
I would also like to invite you to come join the more than
24,000 people who have signed up so far to see
the magic that happens after you click buy on Amazon.com by
touring one of our fulfillment centers. In addition
to U.S. tours, we are now offering tours at sites around the
world, including Rugeley in the U.K. and Graben in
Germany and continuing to expand. You can sign up for a tour
at www.amazon.com/fctours.
* * *
Marketplace, Prime, and Amazon Web Services are three big
ideas. We’re lucky to have them, and we’re
determined to improve and nurture them – make them even
better for customers. You can also count on us to
work hard to find a fourth. We’ve already got a number of
candidates in work, and as we promised some twenty

years ago, we’ll continue to make bold bets. With the
opportunities unfolding in front of us to serve customers
better through invention, we assure you we won’t stop trying.
As always, I attach a copy of our original 1997 letter. Our
approach remains the same, because it’s still
Day 1.
Jeffrey P. Bezos
Founder and Chief Executive Officer
Amazon.com, Inc.
1997 LETTER TO SHAREHOLDERS
(Reprinted from the 1997 Annual Report)
To our shareholders:
Amazon.com passed many milestones in 1997: by year-end, we
had served more than 1.5 million customers,
yielding 838% revenue growth to $147.8 million, and extended
our market leadership despite aggressive
competitive entry.
But this is Day 1 for the Internet and, if we execute well, for
Amazon.com. Today, online commerce saves
customers money and precious time. Tomorrow, through
personalization, online commerce will accelerate the
very process of discovery. Amazon.com uses the Internet to
create real value for its customers and, by doing so,
hopes to create an enduring franchise, even in established and
large markets.
We have a window of opportunity as larger players marshal the
resources to pursue the online opportunity

and as customers, new to purchasing online, are receptive to
forming new relationships. The competitive
landscape has continued to evolve at a fast pace. Many large
players have moved online with credible offerings
and have devoted substantial energy and resources to building
awareness, traffic, and sales. Our goal is to move
quickly to solidify and extend our current position while we
begin to pursue the online commerce opportunities
in other areas. We see substantial opportunity in the large
markets we are targeting. This strategy is not without
risk: it requires serious investment and crisp execution against
established franchise leaders.
It’s All About the Long Term
We believe that a fundamental measure of our success will be
the shareholder value we create over the long
term. This value will be a direct result of our ability to extend
and solidify our current market leadership position.
The stronger our market leadership, the more powerful our
economic model. Market leadership can translate
directly to higher revenue, higher profitability, greater capital
velocity, and correspondingly stronger returns on
invested capital.
Our decisions have consistently reflected this focus. We first
measure ourselves in terms of the metrics most
indicative of our market leadership: customer and revenue
growth, the degree to which our customers continue to
purchase from us on a repeat basis, and the strength of our
brand. We have invested and will continue to invest
aggressively to expand and leverage our customer base, brand,
and infrastructure as we move to establish an
enduring franchise.
Because of our emphasis on the long term, we may make

decisions and weigh tradeoffs differently than
some companies. Accordingly, we want to share with you our
fundamental management and decision-making
approach so that you, our shareholders, may confirm that it is
consistent with your investment philosophy:
• We will continue to focus relentlessly on our customers.
• We will continue to make investment decisions in light of
long-term market leadership considerations
rather than short-term profitability considerations or short-term
Wall Street reactions.
• We will continue to measure our programs and the
effectiveness of our investments analytically, to
jettison those that do not provide acceptable returns, and to step
up our investment in those that work
best. We will continue to learn from both our successes and our
failures.
• We will make bold rather than timid investment decisions
where we see a sufficient probability of
gaining market leadership advantages. Some of these
investments will pay off, others will not, and we
will have learned another valuable lesson in either case.
• When forced to choose between optimizing the appearance of
our GAAP accounting and maximizing
the present value of future cash flows, we’ll take the cash flows.
• We will share our strategic thought processes with you when
we make bold choices (to the extent
competitive pressures allow), so that you may evaluate for
yourselves whether we are making rational

long-term leadership investments.
• We will work hard to spend wisely and maintain our lean
culture. We understand the importance of
continually reinforcing a cost-conscious culture, particularly in
a business incurring net losses.
• We will balance our focus on growth with emphasis on long-
term profitability and capital management.
At this stage, we choose to prioritize growth because we believe
that scale is central to achieving the
potential of our business model.
• We will continue to focus on hiring and retaining versatile and
talented employees, and continue to
weight their compensation to stock options rather than cash. We
know our success will be largely
affected by our ability to attract and retain a motivated
employee base, each of whom must think like,
and therefore must actually be, an owner.
We aren’t so bold as to claim that the above is the “right”
investment philosophy, but it’s ours, and we
would be remiss if we weren’t clear in the approach we have
taken and will continue to take.
With this foundation, we would like to turn to a review of our
business focus, our progress in 1997, and our
outlook for the future.
Obsess Over Customers
From the beginning, our focus has been on offering our
customers compelling value. We realized that the
Web was, and still is, the World Wide Wait. Therefore, we set
out to offer customers something they simply

could not get any other way, and began serving them with
books. We brought them much more selection than
was possible in a physical store (our store would now occupy 6
football fields), and presented it in a useful, easy-
to-search, and easy-to-browse format in a store open 365 days a
year, 24 hours a day. We maintained a dogged
focus on improving the shopping experience, and in 1997
substantially enhanced our store. We now offer
customers gift certificates, 1-ClickSM shopping, and vastly
more reviews, content, browsing options, and
recommendation features. We dramatically lowered prices,
further increasing customer value. Word of mouth
remains the most powerful customer acquisition tool we have,
and we are grateful for the trust our customers
have placed in us. Repeat purchases and word of mouth have
combined to make Amazon.com the market leader
in online bookselling.
By many measures, Amazon.com came a long way in 1997:
• Sales grew from $15.7 million in 1996 to $147.8 million – an
838% increase.
• Cumulative customer accounts grew from 180,000 to
1,510,000 – a 738% increase.
• The percentage of orders from repeat customers grew from
over 46% in the fourth quarter of 1996 to
over 58% in the same period in 1997.
• In terms of audience reach, per Media Metrix, our Web site
went from a rank of 90th to within the top
20.
• We established long-term relationships with many important
strategic partners, including America

Online, Yahoo!, Excite, Netscape, GeoCities, AltaVista,
@Home, and Prodigy.
Infrastructure
During 1997, we worked hard to expand our business
infrastructure to support these greatly increased
traffic, sales, and service levels:
• Amazon.com’s employee base grew from 158 to 614, and we
significantly strengthened our
management team.
• Distribution center capacity grew from 50,000 to 285,000
square feet, including a 70% expansion of our
Seattle facilities and the launch of our second distribution
center in Delaware in November.
• Inventories rose to over 200,000 titles at year-end, enabling us
to improve availability for our customers.
• Our cash and investment balances at year-end were $125
million, thanks to our initial public offering in
May 1997 and our $75 million loan, affording us substantial
strategic flexibility.
Our Employees
The past year’s success is the product of a talented, smart, hard-
working group, and I take great pride in
being a part of this team. Setting the bar high in our approach to
hiring has been, and will continue to be, the
single most important element of Amazon.com’s success.

It’s not easy to work here (when I interview people I tell them,
“You can work long, hard, or smart, but at
Amazon.com you can’t choose two out of three”), but we are
working to build something important, something
that matters to our customers, something that we can all tell our
grandchildren about. Such things aren’t meant to
be easy. We are incredibly fortunate to have this group of
dedicated employees whose sacrifices and passion
build Amazon.com.
Goals for 1998
We are still in the early stages of learning how to bring new
value to our customers through Internet
commerce and merchandising. Our goal remains to continue to
solidify and extend our brand and customer base.
This requires sustained investment in systems and infrastructure
to support outstanding customer convenience,
selection, and service while we grow. We are planning to add
music to our product offering, and over time we
believe that other products may be prudent investments. We also
believe there are significant opportunities to
better serve our customers overseas, such as reducing delivery
times and better tailoring the customer experience.
To be certain, a big part of the challenge for us will lie not in
finding new ways to expand our business, but in
prioritizing our investments.
We now know vastly more about online commerce than when
Amazon.com was founded, but we still have
so much to learn. Though we are optimistic, we must remain
vigilant and maintain a sense of urgency. The
challenges and hurdles we will face to make our long-term
vision for Amazon.com a reality are several:
aggressive, capable, well-funded competition; considerable
growth challenges and execution risk; the risks of

product and geographic expansion; and the need for large
continuing investments to meet an expanding market
opportunity. However, as we’ve long said, online bookselling,
and online commerce in general, should prove to
be a very large market, and it’s likely that a number of
companies will see significant benefit. We feel good about
what we’ve done, and even more excited about what we want to
do.
1997 was indeed an incredible year. We at Amazon.com are
grateful to our customers for their business and
trust, to each other for our hard work, and to our shareholders
for their support and encouragement.
Jeffrey P. Bezos
Founder and Chief Executive Officer
Amazon.com, Inc.
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, 2014
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 Name of Each Exchange on Which
Registered
Common Stock, par value $.01 per share 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 and posted on its corporate Web site, if any,
every Interactive Data File required
to be submitted and posted 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 and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this
Form 10-K.
Indicate by check mark whether the registrant is a large

accelerated filer, an accelerated filer, a non-accelerated filer, or
a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting
company) Smaller reporting company
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, 2014 $ 122,614,381,040
Number of shares of common stock outstanding as of January
16, 2015 464,383,939
____________________________________
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 2015, 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.
2

AMAZON.COM, INC.
FORM 10-K
For the Fiscal Year Ended December 31, 2014
INDEX
Page
PART I
Item 1. Business 3
Item 1A. Risk Factors 6
Item 1B. Unresolved Staff Comments 14
Item 2. Properties 15
Item 3. Legal Proceedings 15
Item 4. Mine Safety Disclosures 15
PART II
Item 5. Market for the Registrant’s Common Stock, Related
Shareholder Matters, and Issuer Purchases of
Equity Securities 16
Item 6. Selected Consolidated Financial Data 17
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operation 18
Item 7A. Quantitative and Qualitative Disclosure About Market
Risk 34
Item 8. Financial Statements and Supplementary Data 36
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 72
Item 9A. Controls and Procedures 72
Item 9B. Other Information 74
PART III
Item 10. Directors, Executive Officers, and Corporate
Governance 74

Item 11. Executive Compensation 74
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Shareholder Matters 74
Item 13. Certain Relationships and Related Transactions, and
Director Independence 74
Item 14. Principal Accountant Fees and Services 74
PART IV
Item 15. Exhibits, Financial Statement Schedules 75
Signatures 76
3
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
Amazon.com opened its virtual doors on the World Wide Web
in July 1995. 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 two geographic segments, we serve our primary customer
sets,
consisting of consumers, sellers, enterprises, and content
creators. In addition, we provide services, such as advertising
services
and co-branded credit card agreements.
We manage our business primarily on a geographic basis.
Accordingly, we have organized our operations into two
segments: North America and International. While each
reportable operating segment provides similar products and
services, a
majority of our technology costs are incurred in the U.S. and
included in our North America segment. Additional information
on
our operating segments and product information is contained in
Item 8 of Part II, “Financial Statements and Supplementary
Data—Note 12—Segment Information.” See Item 7 of Part II,
“Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Results of Operations—
Supplemental Information” for supplemental information about
our net
sales. Our company-sponsored research and development
expense is set forth within “Technology and content” in Item 8
of Part

II, “Financial Statements and Supplementary Data—
Consolidated Statements of Operations.”
Consumers
We serve consumers through our retail websites and focus on
selection, price, and convenience. We design our websites to
enable millions of unique products to be sold by us and by third
parties across dozens of product categories. Customers access
our websites directly and through our mobile websites and apps.
We also manufacture and sell electronic devices, including
Kindle e-readers, Fire tablets, Fire TVs, Echo, and Fire phones.
We strive to offer our customers the lowest prices possible
through low everyday product pricing and shipping offers, and
to improve our operating efficiencies so that we can continue to
lower prices for our customers. We also provide easy-to-use
functionality, fast and reliable fulfillment, and timely customer
service. In addition, we offer Amazon Prime, an annual
membership program that includes unlimited free shipping on
millions of
items, access to unlimited instant streaming of thousands of
movies and TV episodes, and access to hundreds of thousands
of
books to borrow and read for free on a Kindle device.
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; and digital delivery. 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 sell their products on

our websites and their own branded websites and to fulfill
orders through us. We are not the seller of record in these
transactions, but instead earn fixed fees, revenue share fees,
per-unit
activity fees, or some combination thereof.
Enterprises
We serve developers and enterprises of all sizes through
Amazon Web Services (“AWS”), which offers a broad set of
global compute, storage, database, analytics, applications, and
deployment services that enable virtually any type of business.
4
Content Creators
We serve authors and independent publishers with Kindle Direct
Publishing, an online platform that lets independent
authors and publishers choose a 70% 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, app
developers, and
others to publish and sell content.
Competition
Our businesses are rapidly evolving and intensely competitive.
Our current and potential competitors include: (1) physical-
world retailers, publishers, vendors, distributors, manufacturers,
and producers of our products; (2) other online e-commerce and
mobile e-commerce sites, including sites that sell or distribute
digital content; (3) media companies, web portals, comparison

shopping websites, web search engines, and social networks,
either directly or in collaboration with other retailers; (4)
companies
that provide e-commerce services, including website
development, fulfillment, customer service, and payment
processing;
(5) companies that provide information storage or computing
services or products, including infrastructure and other web
services; and (6) companies that design, manufacture, market,
or sell consumer electronics, telecommunication, and electronic
devices. 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. Many of our
current and potential competitors have greater resources, longer
histories, more customers, and greater brand recognition. They
may secure better terms from suppliers, adopt more aggressive
pricing, and devote more resources to technology,
infrastructure, fulfillment, and marketing. 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 33%, 34%, and 35% of
our annual revenue during the fourth quarter of 2014, 2013,
and 2012.
Employees
We employed approximately 154,100 full-time and part-time
employees as of December 31, 2014. 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. We
consider our employee relations to be good. Competition for
qualified personnel in our industry has historically been intense,
particularly for software engineers, computer scientists, and
other technical staff.
Available Information
Our investor relations website is www.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 and social media postings.
5
Executive Officers and Directors
The following tables set forth certain information regarding our
Executive Officers and Directors as of January 16, 2015:
Executive Officers of the Registrant
Name Age Position
Jeffrey P. Bezos 51 President, Chief Executive Officer, and
Chairman of the Board
Jeffrey M. Blackburn 45 Senior Vice President, Business
Development
Andrew R. Jassy 47 Senior Vice President, Amazon Web
Services
Diego Piacentini 54 Senior Vice President, International
Consumer Business
Shelley L. Reynolds 50 Vice President, Worldwide Controller,
and Principal Accounting Officer
Thomas J. Szkutak 54 Senior Vice President and Chief
Financial Officer
Jeffrey A. Wilke 48 Senior Vice President, Consumer Business
David A. Zapolsky 51 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 Senior Vice President,
Amazon Web Services, since April 2006.
Diego Piacentini. Mr. Piacentini has served as Senior Vice
President, International Consumer Business, since February
2012, and as Senior Vice President, International Retail, from
January 2007 until February 2012.
Shelley L. Reynolds. Ms. Reynolds has served as Vice
President, Worldwide Controller, and Principal Accounting
Officer
since April 2007.
Thomas J. Szkutak. Mr. Szkutak has served as Senior Vice
President and Chief Financial Officer since joining
Amazon.com in October 2002. Mr. Szkutak plans to retire in
June 2015.
Jeffrey A. Wilke. Mr. Wilke has served as Senior Vice
President, Consumer Business, since February 2012, 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 51 President, Chief Executive Officer, and
Chairman of the Board
Tom A. Alberg 74 Managing Director, Madrona Venture
Group
John Seely Brown 74 Visiting Scholar and Advisor to the
Provost, University of Southern California
William B. Gordon 64 Partner, Kleiner Perkins Caufield &
Byers
Jamie S. Gorelick 64 Partner, Wilmer Cutler Pickering Hale
and Dorr LLP
Judith A. McGrath 62 President, Astronauts Wanted * No
experience necessary
Alain Monié 64 Chief Executive Officer, Ingram Micro Inc.
Jonathan J. Rubinstein 58 Former Chairman and CEO, Palm,
Inc.
Thomas O. Ryder 70 Retired, Former Chairman, Reader’s
Digest Association, Inc.
Patricia Q. Stonesifer 58 President and Chief Executive
Officer, Martha’s Table
6
Item 1A. Risk Factors
Please carefully consider the following risk factors. If any of
the following risks occur, our business, financial condition,

operating results, and cash flows could be materially adversely
affected. In addition, the current 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 in different industries,
including retail, e-commerce services, digital content and
electronic devices, and web and infrastructure computing
services.
Some of our current and potential competitors have greater
resources, longer histories, more customers, and/or greater
brand
recognition. They may secure better terms from vendors, adopt
more aggressive pricing, and devote more resources to
technology, infrastructure, fulfillment, and marketing.
Competition may intensify 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, may increase our competition.
The
Internet facilitates competitive entry and comparison shopping,
and increased competition may reduce our sales and profits.
Our Expansion Places a Significant Strain on our Management,
Operational, Financial, and Other Resources
We are rapidly and significantly expanding our global
operations, including increasing our product and service
offerings
and scaling our infrastructure to support our retail and services
businesses. This expansion increases the complexity of our

business and places significant strain on our management,
personnel, operations, systems, technical performance, financial
resources, and internal financial control and reporting functions.
We may not be able to manage growth effectively, which 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 Business,
Legal, Financial, and Competitive Risks
We may have limited or no experience in our newer market
segments, and our customers may not adopt our new offerings.
These offerings may present new and difficult technology
challenges, and we may be subject 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 be lower than in our older activities, and we may not be
successful enough in these newer activities to recoup our
investments in them. If any of this were to occur, it could
damage our reputation, limit our growth, and negatively affect
our
operating results.
We May Experience Significant Fluctuations in Our Operating
Results and Growth Rate
We may not be 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 may not be 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 risks 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;
• 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 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;
7

• 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 free shipping, continue to reduce
prices worldwide, and provide additional benefits to our
customers;
• 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;
• the extent to which our equity-method investees record
significant operating and non-operating items;
• the extent to which operators of the networks between our
customers and our websites 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
• terrorist attacks and armed hostilities.
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 websites,
and
promote our brand internationally. Our international operations
may not be 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 of e-commerce and other services,
electronic devices, and competition, and 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, and
restrictions on pricing or discounts;
• 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;
8

• 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 e-commerce and other online and web services
grow, competition will intensify. 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. We may not be able to
hire, train, retain, and manage required personnel, which 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 and
regulatory licensing requirements, www.amazon.cn is operated
by PRC companies that are indirectly owned, either wholly or
partially, by PRC nationals. In addition, we provide certain
technology services in conjunction 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 retail trading
activities.
For www.amazon.in, we provide certain marketing tools and
logistics services to third party sellers to enable them to sell
online
and deliver to customers. Although we believe these structures
and activities comply with existing laws, they involve unique
risks, and the PRC is actively considering changes in its foreign
investment rules that could impact these structures and
activities.
There are substantial uncertainties regarding the interpretation
of PRC and Indian laws and regulations, and it is possible that
the
government will ultimately take a view contrary to ours. In
addition, our Chinese and Indian businesses and operations may
be
unable to continue to operate if we or our affiliates are unable
to access sufficient funding or in China enforce contractual
relationships with respect to management and control of such
businesses. If our international activities were found to be in
violation of any existing or future PRC, Indian or other laws or
regulations or if interpretations of those laws and regulations
were to change, our businesses in those countries could be
subject to fines and other financial penalties, have licenses
revoked, or
be forced to shut down entirely.
If We Do Not Successfully Optimize and Operate Our
Fulfillment and Data Centers, Our Business Could Be Harmed
If we do not adequately predict customer demand or otherwise
optimize and operate our fulfillment and data centers
successfully, it could result in excess or insufficient fulfillment
or data center capacity, or result in increased costs, impairment
charges, or both, or harm our business in other ways. As we

continue to add fulfillment, warehouse, and data center
capability or
add new businesses with different requirements, our fulfillment
and data center networks become increasingly complex and
operating them becomes more challenging. There can be no
assurance that we will be able to operate our networks
effectively.
In addition, a failure to optimize inventory in our fulfillment
centers will increase our net shipping cost by requiring long-
zone or partial shipments. Orders from several of our websites
are fulfilled primarily from a single location, and we have only
a
limited ability to reroute orders to third parties for drop-
shipping. We and our co-sourcers may be unable to adequately
staff our
fulfillment and customer service centers. If the other businesses
on whose behalf we perform inventory fulfillment services
deliver product to our fulfillment centers in excess of forecasts,
we may be unable to secure sufficient storage space and may be
unable to optimize our fulfillment centers.
We rely on a limited number of shipping companies to deliver
inventory to us and completed orders to our customers. If we
are not able to negotiate acceptable terms with these companies
or they experience performance problems or other difficulties, it
could negatively impact our operating results and customer
experience. In addition, our ability to receive inbound inventory
efficiently and ship completed orders to customers also may be
negatively affected by inclement weather, fire, flood, power
loss,
earthquakes, labor disputes, acts of war or terrorism, acts of
God, and similar factors.
Third parties either drop-ship or otherwise fulfill an increasing
portion of our customers’ orders, and we are increasingly

reliant on the reliability, quality, and future procurement of
their services. Under some of our commercial agreements, we
maintain the inventory of other companies, thereby increasing
the complexity of tracking inventory and operating our
fulfillment
centers. Our failure to properly handle such inventory or the
inability of these other companies to accurately forecast product
demand would result in unexpected costs and other harm to our
business and reputation.
9
The Seasonality of Our Business Places Increased Strain on Our
Operations
We expect a disproportionate amount of our net sales to occur
during our fourth quarter. If we do not stock or restock
popular products in sufficient amounts such that we fail to meet
customer demand, it could significantly affect our revenue and
our future growth. If we overstock products, we may be required
to take significant inventory markdowns or write-offs and incur
commitment costs, which could reduce profitability. We may
experience an increase in our net shipping cost due to
complimentary upgrades, split-shipments, and additional long-
zone shipments necessary to ensure timely delivery for the
holiday
season. If too many customers access our websites within a
short period of time due to increased holiday demand, we may
experience system interruptions that make our websites
unavailable or prevent us from efficiently fulfilling orders,
which may
reduce the volume of goods we sell and the attractiveness of our
products and services. In addition, we may be unable to
adequately staff our fulfillment and customer service centers

during these peak periods and delivery and other fulfillment
companies and customer service co-sourcers may be unable to
meet the seasonal demand. We also face risks described
elsewhere
in this Item 1A relating to fulfillment center optimization and
inventory.
We generally have payment terms with our retail vendors that
extend beyond the amount of time necessary to collect
proceeds from our consumer customers. As a result of holiday
sales, as of December 31 of each year, our cash, cash
equivalents,
and marketable securities balances typically reach their highest
level (other than as a result of cash flows provided by or used in
investing and financing activities). This operating cycle results
in a corresponding increase in accounts payable as of
December 31. Our accounts payable balance generally declines
during the first three months of the year, resulting in a
corresponding decline in our cash, cash equivalents, and
marketable securities balances.
Our Business Could Suffer if We Are Unsuccessful in Making,
Integrating, and Maintaining Commercial Agreements,
Strategic Alliances, and Other Business Relationships
We provide e-commerce and other services to businesses
through commercial agreements, strategic alliances, and
business
relationships. Under these agreements, we provide web services,
technology, fulfillment, computing, digital storage, and other
services, as well as enable sellers to offer products or services
through our websites. These arrangements are complex and
require
substantial infrastructure capacity, personnel, and other
resource commitments, which may limit the amount of business
we can

service. We may not be able to implement, maintain, and
develop the components of these commercial relationships,
which may
include web services, fulfillment, customer service, inventory
management, tax collection, payment processing, hardware,
content, and third-party software, and engaging third parties to
perform services. The amount of compensation we receive under
certain of our commercial agreements is partially dependent on
the volume of the other company’s sales. Therefore, if the other
company’s offering is not successful, the compensation we
receive may be lower than expected or the agreement may be
terminated. Moreover, we may not be able to enter into
additional commercial relationships and strategic alliances on
favorable
terms. We also may be subject to claims from businesses to
which we provide these services if we are unsuccessful in
implementing, maintaining, or developing these services.
As our agreements terminate, we may be unable to renew or
replace these agreements on comparable terms, or at all. We
may in the future enter into amendments on less favorable terms
or encounter parties that have difficulty meeting their
contractual obligations to us, which could adversely affect our
operating results.
Our present and future e-commerce services agreements, other
commercial agreements, and strategic alliances create
additional risks such as:
• disruption of our ongoing business, including loss of
management focus on existing businesses;
• impairment of other relationships;
• variability in revenue and income from entering into,
amending, or terminating such agreements or relationships; and

• difficulty integrating under the commercial agreements.
Our Business Could Suffer if We Are Unsuccessful in Making,
Integrating, and Maintaining Acquisitions and Investments
We have acquired and invested in a number of companies, and
we may acquire or invest in or enter into joint ventures with
additional companies. These transactions create risks such as:
• disruption of our ongoing business, including loss of
management focus on existing businesses;
• problems retaining key personnel;
• additional operating losses and expenses of the businesses we
acquired or in which we invested;
• the potential impairment of tangible and intangible assets and
goodwill, including as a result of acquisitions;
10
• the potential impairment of customer and other relationships
of the company we acquired or in which we invested or
our own customers as a result of any integration of operations;
• the difficulty of incorporating acquired technology and rights
into our offerings and unanticipated expenses related to
such integration;
• the difficulty of integrating a new company’s accounting,
financial reporting, management, information and
information security, human resource, and other administrative

systems to permit effective management, and the lack
of control if such integration is delayed or not implemented;
• for investments in which an investee’s financial performance
is incorporated into our financial results, either in full or
in part, the dependence on the investee’s accounting, financial
reporting, and similar systems, controls, and processes;
• the difficulty of implementing at companies we acquire the
controls, procedures, and policies appropriate for a larger
public company;
• potential unknown liabilities associated with a company we
acquire or in which we invest; and
• for foreign transactions, additional risks related to the
integration of operations across different cultures and
languages,
and the economic, political, and regulatory risks associated with
specific countries.
As a result of future acquisitions or mergers, we might need to
issue additional equity securities, spend our cash, or incur
debt, contingent liabilities, or amortization expenses related to
intangible assets, any of which could reduce our profitability
and
harm our business. In addition, valuations supporting our
acquisitions and strategic investments could change rapidly
given the
current global economic climate. We could determine that such
valuations have experienced impairments or other-than-
temporary declines in fair value which could adversely impact
our financial results.
We Have Foreign Exchange Risk

The results of operations of, and certain of our intercompany
balances associated with, our international websites and
product and service offerings are exposed to foreign exchange
rate fluctuations. Upon translation, operating results may differ
materially from expectations, and we may record significant
gains or losses on the remeasurement of intercompany balances.
As
we have expanded our international operations, our exposure to
exchange rate fluctuations has increased. We also hold cash
equivalents and/or marketable securities in foreign currencies
including British Pounds, Chinese Yuan, Euros, and Japanese
Yen.
If the U.S. Dollar strengthens compared to these currencies,
cash equivalents, and marketable securities balances, when
translated, may be materially less than expected and vice versa.
The Loss of Key Senior Management Personnel Could
Negatively Affect Our Business
We depend on our senior management and other key personnel,
particularly Jeffrey P. Bezos, our President, CEO, and
Chairman. We do not have “key person” life insurance policies.
The loss of any of our executive officers or other key employees
could harm our business.
We Could Be Harmed by Data Loss or Other Security Breaches
As a result of our services being web-based and the fact that we
process, store, and transmit large amounts of data,
including personal information, for our customers, failure to
prevent or mitigate data loss or other security breaches,
including
breaches of our vendors’ technology and systems, could expose
us or our customers to a risk of loss or misuse of such
information, adversely affect our operating results, result in
litigation or potential liability for us, and otherwise harm our

business. We use third party technology and systems for a
variety of reasons, including, without limitation, encryption and
authentication technology, employee email, content delivery to
customers, back-office support, and other functions. Some
subsidiaries had past security breaches, and, although they did
not have a material adverse effect on our operating results, there
can be no assurance of a similar result in the future. Although
we have developed systems and processes that are designed to
protect customer information and prevent data loss and other
security breaches, including systems and processes designed to
reduce the impact of a security breach at a third party vendor,
such measures cannot provide absolute security.
We Face Risks Related to System Interruption and Lack of
Redundancy
We experience occasional system interruptions and delays that
make our websites and services unavailable or slow to
respond and prevent us from efficiently fulfilling orders or
providing services to third parties, which may reduce our net
sales
and the attractiveness of our products and services. If we are
unable to continually add software and hardware, effectively
upgrade our systems and network infrastructure, and take other
steps to improve the efficiency of our systems, it could cause
system interruptions or delays and adversely affect our
operating results.
11
Our computer and communications systems and operations
could be damaged or interrupted by fire, flood, power loss,
telecommunications failure, earthquakes, acts of war or
terrorism, acts of God, computer viruses, physical or electronic

break-
ins, and similar events or disruptions. Any of these events could
cause system interruption, delays, and loss of critical data, and
could prevent us from accepting and fulfilling customer orders
and providing services, which could make our product and
service offerings less attractive and subject us to liability. Our
systems are not fully redundant and our disaster recovery
planning
may not be sufficient. In addition, we may have inadequate
insurance coverage to compensate for any related losses. Any of
these events could damage our reputation and be expensive to
remedy.
We Face Significant Inventory Risk
In addition to risks described elsewhere in this Item 1A relating
to fulfillment center and inventory optimization by us and
third parties, we are exposed to significant inventory risks that
may adversely affect our operating results as a result of
seasonality, new product launches, rapid changes in product
cycles and pricing, defective merchandise, changes in consumer
demand and consumer spending patterns, changes in consumer
tastes with respect to our products, and other factors. We
endeavor to accurately predict these trends and avoid
overstocking or understocking products we manufacture and/or
sell.
Demand for products, however, can change significantly
between the time inventory or components are ordered and the
date of
sale. In addition, when we begin selling or manufacturing a new
product, it may be difficult to establish vendor relationships,
determine appropriate product or component selection, and
accurately forecast demand. The acquisition of certain types of
inventory or components may require significant lead-time and
prepayment and they may not be returnable. We carry a broad
selection and significant inventory levels of certain products,

such as consumer electronics, and we may be unable to sell
products in sufficient quantities or during the relevant selling
seasons. Any one of the inventory risk factors set forth above
may
adversely affect our operating results.
We May Not Be Able to Adequately Protect Our Intellectual
Property Rights or May Be Accused of Infringing Intellectual
Property Rights of Third Parties
We regard our trademarks, service marks, copyrights, patents,
trade dress, trade secrets, proprietary technology, 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, and others to protect our proprietary rights.
Effective
intellectual property protection may not be available in every
country in which our products and services are made available.
We
also may not be able to acquire or maintain appropriate domain
names in all countries in which we do business. Furthermore,
regulations governing domain names may not protect our
trademarks and similar proprietary rights. We may be unable to
prevent
third parties from acquiring domain names that are similar to,
infringe upon, or diminish the value of our trademarks and other
proprietary rights.
We may not be able to discover or determine the extent of any
unauthorized use of our proprietary rights. Third parties that
license our proprietary rights also may take actions that
diminish the value of our proprietary rights or reputation. The
protection
of our intellectual property may require the expenditure of

significant financial and managerial resources. Moreover, the
steps we
take to protect our intellectual property may not adequately
protect our rights or prevent third parties from infringing or
misappropriating our proprietary rights. We also cannot be
certain that others will not independently develop or otherwise
acquire equivalent or superior technology or other intellectual
property rights.
Other parties also may claim that we infringe their proprietary
rights. We have been subject to, and expect to continue to be
subject to, claims and legal proceedings regarding alleged
infringement by us of the intellectual property rights of third
parties.
Such claims, whether or not meritorious, may result in the
expenditure of significant financial and managerial resources,
injunctions against us, or the payment of damages, including to
satisfy indemnification obligations. We may need to obtain
licenses from third parties who allege that we have infringed
their rights, but such licenses may not be available on terms
acceptable to us or at all. In addition, we may not be able to
obtain or utilize on terms that are favorable to us, or at all,
licenses
or other rights with respect to intellectual property we do not
own. These risks have been amplified by the increase in third
parties whose sole or primary business is to assert such claims.
Our digital content offerings depend in part on effective digital
rights management technology to control access to digital
content. If the digital rights management technology that we use
is compromised or otherwise malfunctions, we could be subject
to claims, and content providers may be unwilling to include
their content in our service.
We Have a Rapidly Evolving Business Model and Our Stock
Price Is Highly Volatile

We have a rapidly evolving business model. The trading price
of our common stock fluctuates significantly in response to,
among other risks, the risks described elsewhere in this Item
1A, as well as:
• changes in interest rates;
12
• conditions or trends in the Internet and the industry segments
we operate in;
• quarterly variations in operating results;
• fluctuations in the stock market in general and market prices
for Internet-related companies in particular;
• changes in financial estimates by us or securities analysts and
recommendations by securities analysts;
• changes in our capital structure, including issuance of
additional debt or equity to the public;
• changes in the valuation methodology of, or performance by,
other e-commerce or technology companies; and
• transactions in our common stock by major investors and
certain analyst reports, news, and speculation.
Volatility in our stock price could adversely affect our business
and financing opportunities and force us to increase our
cash compensation to employees or grant larger stock awards
than we have historically, which could hurt our operating

results or
reduce the percentage ownership of our existing stockholders,
or both.
Government Regulation Is Evolving and Unfavorable Changes
Could Harm Our Business
We are subject to general business regulations and laws, as well
as regulations and laws specifically governing the Internet,
e-commerce, electronic devices, and other services. Existing
and future laws and regulations may impede our growth. These
regulations and laws may cover taxation, privacy, data
protection, pricing, content, copyrights, distribution, mobile
communications, electronic device certification, electronic
waste, energy consumption, environmental regulation,
electronic
contracts and other communications, competition, consumer
protection, web services, the provision of online payment
services,
information reporting requirements, unencumbered Internet
access to our services, the design and operation of websites, the
characteristics and quality of products and services, and the
commercial operation of unmanned aircraft systems. It is not
clear
how existing laws governing issues such as property ownership,
libel, and personal privacy apply to the Internet, e-commerce,
digital content, and web services. Jurisdictions may regulate
consumer-to-consumer online businesses, including certain
aspects
of our seller programs. Unfavorable regulations and laws could
diminish the demand for our products and services and increase
our cost of doing business.
We Do Not Collect Sales or Consumption Taxes in Some
Jurisdictions

U.S. Supreme Court decisions restrict the imposition of
obligations to collect state and local sales taxes with respect to
remote sales. However, an increasing number of states have
considered or adopted laws or administrative practices that
attempt
to impose obligations on out-of-state retailers to collect taxes
on their behalf. We support a Federal law that would allow
states to
require sales tax collection under a nationwide system. More
than half of our revenue is already earned in jurisdictions where
we
collect sales tax or its equivalent. A successful assertion by one
or more states or foreign countries requiring us to collect taxes
where we do not do so could result in substantial tax liabilities,
including for past sales, as well as penalties and interest.
We Could be Subject to Additional Income Tax Liabilities
We are subject to income taxes in the U.S. (federal and state)
and numerous foreign jurisdictions. Tax laws, regulations,
and administrative practices in various jurisdictions may be
subject to significant change due to economic, political, and
other
conditions, and significant judgment is required in evaluating
and estimating our provision and accruals for these taxes. There
are
many transactions that occur during the ordinary course of
business for which the ultimate tax determination is uncertain.
Our
effective tax rates could be adversely affected by 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, 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 and changes to our existing businesses,
acquisitions (including integrations) and investments, 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,
including fundamental changes to the tax laws applicable to
corporate
multinationals. The U.S., many countries in the European
Union, and a number of other countries are actively considering
changes in this regard.
Except as required under U.S. tax laws, we do not provide for
U.S. taxes on our undistributed earnings of foreign
subsidiaries that have not been previously taxed since we intend
to invest such undistributed earnings indefinitely outside of the
U.S. If our intent changes or if these funds are needed for our
U.S. operations, we would be required to accrue or pay U.S.
taxes
on some or all of these undistributed earnings and our effective
tax rate would be adversely affected. We are also subject to
audit
in various jurisdictions, and such jurisdictions may assess
additional income tax liabilities against us. In addition, in
October
2014, the European Commission opened a formal investigation
to examine whether decisions by the tax authorities in
Luxembourg with regard to the corporate income tax paid by
certain of our subsidiaries comply with European Union rules
on
state aid. If this matter is adversely resolved, Luxembourg may
be required to assess, and we may be required to pay, additional

13
amounts with respect to current and prior periods and our taxes
in the future could increase. Although we believe our tax
estimates are reasonable, the final outcome of tax audits,
investigations, and any related litigation could be materially
different
from our historical income tax provisions and accruals.
Developments in an audit, litigation, or the relevant laws,
regulations,
administrative practices, principles, and interpretations could
have a material effect on our operating results or cash flows in
the
period or periods for which that development occurs, as well as
for prior and subsequent periods. For instance, the IRS is
seeking
to increase our U.S. taxable income related to transfer pricing
with our foreign subsidiaries for transactions undertaken in
2005
and 2006, and we are currently contesting the matter in U.S.
Tax Court. In addition to the risk of additional tax for 2005 and
2006 transactions, if this litigation is adversely determined or if
the IRS were to seek transfer pricing adjustments of a similar
nature for transactions in subsequent years, Amazon could be
subject to significant additional tax liabilities.
Our Supplier Relationships Subject Us to a Number of Risks
We have significant suppliers, including licensors, and in some
cases, limited or single-sources of supply, that are
important to our sourcing, services, manufacturing, and any
related ongoing servicing of merchandise and content. We do
not
have long-term arrangements with most of our suppliers to
guarantee availability of merchandise, content, components, or
services, particular payment terms, or the extension of credit

limits. If our current suppliers were to stop selling or licensing
merchandise, content, components, or services to us on
acceptable terms, or delay delivery, including as a result of one
or more
supplier bankruptcies due to poor economic conditions, as a
result of natural disasters, or for other reasons, we may be
unable to
procure alternatives from other suppliers in a timely and
efficient manner and on acceptable terms, or at all. In addition,
if our
suppliers or other vendors violate applicable laws, regulations,
our code of standards and responsibilities, or implement
practices
regarded as unethical, unsafe, or hazardous to the environment,
it could damage our reputation, limit our growth, and negatively
affect our operating results.
We May be Subject to Risks Related to Government Contracts
and Related Procurement Regulations
Our contracts with U.S., as well as state, local, and foreign,
government entities are subject to various procurement
regulations and other requirements relating to their formation,
administration, and performance. We may be subject to audits
and
investigations relating to our government contracts, and any
violations could result in various civil and criminal penalties
and
administrative sanctions, including termination of contract,
refunding or suspending of payments, forfeiture of profits,
payment
of fines, and suspension or debarment from future government
business. In addition, such contracts may provide for
termination
by the government at any time, without cause.

We May Be Subject to Product Liability Claims if People or
Property Are Harmed by the Products We Sell
Some of the products we sell or manufacture may expose us to
product liability claims relating to personal injury, death, or
environmental or property damage, and may require product
recalls or other actions. Certain third parties also sell products
using
our e-commerce platform that may increase our exposure to
product liability claims, such as if these sellers do not have
sufficient
protection from such claims. Although we maintain liability
insurance, we cannot be certain that our coverage will be
adequate
for liabilities actually incurred or that insurance will continue
to be available to us on economically reasonable terms, or at all.
In
addition, some of our agreements with our vendors and sellers
do not indemnify us from product liability.
We Are Subject to Payments-Related Risks
We accept payments using a variety of methods, including
credit card, debit card, credit accounts (including promotional
financing), gift cards, direct debit from a customer’s bank
account, consumer invoicing, physical bank check, and payment
upon
delivery. For existing and future payment options we offer to
our customers, we may become subject to additional regulations
and compliance requirements (including obligations to
implement enhanced authentication processes that could result
in
significant costs and reduce the ease of use of our payments
products), as well as fraud. For certain payment methods,
including
credit and debit cards, we pay interchange and other fees, which

may increase over time and raise our operating costs and lower
profitability. We rely on third parties to provide certain
Amazon-branded payment methods and payment processing
services,
including the processing of credit cards, debit cards, electronic
checks, and promotional financing. In each case, it could
disrupt
our business if these companies become unwilling or unable to
provide these services to us. We also offer co-branded credit
card
programs, which could adversely affect our operating results if
terminated. We are also subject to payment card association
operating rules, including data security rules, certification
requirements, and rules governing electronic funds transfers,
which
could change or be reinterpreted to make it difficult or
impossible for us to comply. If we fail to comply with these
rules or
requirements, or if our data security systems are breached or
compromised, we may be liable for card issuing banks’ costs,
subject to fines and higher transaction fees, and lose our ability
to accept credit and debit card payments from our customers,
process electronic funds transfers, or facilitate other types of
online payments, and our business and operating results could
be
adversely affected.
14
In addition, we provide regulated services in certain
jurisdictions because we enable customers to keep account
balances
with us and transfer money to third parties, and because we
provide services to third parties to facilitate payments on their

behalf.
In these jurisdictions, we may be subject to requirements for
licensing, regulatory inspection, bonding and capital
maintenance,
the use, handling, and segregation of transferred funds,
consumer disclosures, and authentication. We are also subject to
or
voluntarily comply with a number of other laws and regulations
relating to payments, money laundering, international money
transfers, privacy and information security, and electronic fund
transfers. If we were found to be in violation of applicable laws
or regulations, we could be subject to additional requirements
and civil and criminal penalties, or forced to cease providing
certain services.
We Could Be Liable for Fraudulent or Unlawful Activities of
Sellers
The law relating to the liability of providers of online payment
services is currently unsettled. In addition, governmental
agencies could require changes in the way this business is
conducted. Under our seller programs, we may be unable to
prevent
sellers from collecting payments, fraudulently or otherwise,
when buyers never receive the products they ordered or when
the
products received are materially different from the sellers’
descriptions. Under our A2Z Guarantee, we reimburse buyers
for
payments up to certain limits in these situations, and as our
marketplace seller sales grow, the cost of this program will
increase
and could negatively affect our operating results. We also may
be unable to prevent sellers on our sites or through other seller
sites from selling unlawful goods, selling goods in an unlawful
manner, or violating the proprietary rights of others, and could

face civil or criminal liability for unlawful activities by our
sellers.
Item 1B. Unresolved Staff Comments
None.
15
Item 2. Properties
As of December 31, 2014, we operated the following facilities
(in thousands):
Description of Use
Square
Footage (1) Location
Lease
Expirations
Owned office space 1,802 North America
Leased office space 5,672 North America From 2015 through
2028
Leased office space 3,371 International From 2015 through
2027
Sub-total 10,845
Owned fulfillment, data centers, and other 735 North America
Leased fulfillment, data centers, and other 57,898 North
America From 2015 through 2029
Owned fulfillment, data centers, and other 272 International
Leased fulfillment, data centers, and other 43,969 International
From 2015 through 2033
Sub-total 102,874

Total 113,719
___________________
(1) For leased properties, represents the total leased space
excluding sub-leased space.
We own and lease our corporate headquarters in Seattle,
Washington. Additionally, we own and lease corporate office,
fulfillment, sortation, delivery, warehouse operations, data
center, customer service, and other facilities, principally in
North
America, Europe, and Asia.
Item 3. Legal Proceedings
See Item 8 of Part II, “Financial Statements and Supplementary
Data—Note 8—Commitments and Contingencies—
Legal Proceedings.”
Item 4. Mine Safety Disclosures
Not applicable.
16
PART II
Item 5. Market for the Registrant’s Common Stock, Related
Shareholder Matters, and Issuer Purchases of Equity
Securities
Market Information
Our common stock is traded on the NASDAQ Global Select

Market under the symbol “AMZN.” The following table sets
forth the high and low per share sale prices for our common
stock for the periods indicated, as reported by the NASDAQ
Global
Select Market.
High Low
Year ended December 31, 2013
First Quarter $ 284.72 $ 252.07
Second Quarter 283.34 245.75
Third Quarter 320.57 277.16
Fourth Quarter 405.63 296.50
Year ended December 31, 2014
First Quarter $ 408.06 $ 330.88
Second Quarter 348.30 284.38
Third Quarter 364.85 304.59
Fourth Quarter 341.26 284.00
Holders
As of January 16, 2015, there were 2,744 shareholders of record
of our common stock, although there is a much larger
number of beneficial owners.
Dividends
We have never declared or paid cash dividends on our common
stock. See Item 7 of Part II, “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources.”
Recent Sales of Unregistered Securities
None.

Issuer Purchases of Equity Securities
None.
17
Item 6. Selected Consolidated Financial Data
The following selected consolidated financial data should be
read in conjunction with the consolidated financial statements
and the notes thereto in Item 8 of Part II, “Financial Statements
and Supplementary Data,” and the information contained in
Item 7 of Part II, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.” Historical
results
are not necessarily indicative of future results.
Year Ended December 31,
2014 2013 2012 2011 2010
(in millions, except per share data)
Statements of Operations:
Net sales $ 88,988 $ 74,452 $ 61,093 $ 48,077 $ 34,204
Income from operations $ 178 $ 745 $ 676 $ 862 $ 1,406
Net income (loss) $ (241) $ 274 $ (39) $ 631 $ 1,152
Basic earnings per share (1) $ (0.52) $ 0.60 $ (0.09) $ 1.39 $
2.58
Diluted earnings per share (1) $ (0.52) $ 0.59 $ (0.09) $ 1.37 $
2.53
Weighted average shares used in computation of
earnings per share:
Basic 462 457 453 453 447

Diluted 462 465 453 461 456
Statements of Cash Flows:
Net cash provided by (used in) operating activities $ 6,842 $
5,475 $ 4,180 $ 3,903 $ 3,495
Purchases of property and equipment, including
internal-use software and website development (4,893) (3,444)
(3,785) (1,811) (979)
Free cash flow (2) $ 1,949 $ 2,031 $ 395 $ 2,092 $ 2,516
December 31,
2014 2013 2012 2011 2010
(in millions)
Balance Sheets:
Total assets $ 54,505 $ 40,159 $ 32,555 $ 25,278 $ 18,797
Total long-term obligations $ 15,675 $ 7,433 $ 5,361 $ 2,625 $
1,561
___________________
(1) For further discussion of earnings per share, see Item 8 of
Part II, “Financial Statements and Supplementary Data—Note
1—
Description of Business and Accounting Policies.”
(2) Free cash flow, a non-GAAP financial measure, is defined as
net cash provided by operating activities less cash expenditures
for purchases of property and equipment, including internal-use
software and website development, both of which are
presented on our consolidated statements of cash flows. See
Item 7 of Part II, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations—Results of
Operations—Non-GAAP Financial Measures” for additional
information as well as alternative free cash flow measures.

18
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than
statements of historical fact, including statements regarding
guidance,
industry prospects, or future results of operations or financial
position, made in this Annual Report on Form 10-K are
forward-
looking. We use words such as anticipates, believes, expects,
future, intends, and similar expressions to identify forward-
looking
statements. Forward-looking statements reflect management’s
current expectations and are inherently uncertain. Actual results
could differ materially for a variety of reasons, including,
among others, fluctuations in foreign exchange rates, changes in
global
economic conditions and consumer spending, world events, the
rate of growth of the Internet and online commerce, the amount
that Amazon.com invests in new business opportunities and the
timing of those investments, the mix of products sold to
customers, the mix of net sales derived from products as
compared with services, the extent to which we owe income
taxes,
competition, management of growth, potential fluctuations in
operating results, international growth and expansion, the
outcomes of legal proceedings and claims, fulfillment,

sortation, delivery, and data center optimization, risks of
inventory
management, seasonality, the degree to which the Company
enters into, maintains, and develops commercial agreements,
acquisitions and strategic transactions, payments risks, and
risks of fulfillment throughput and productivity. In addition, the
current global economic climate amplifies many of these risks.
These risks and uncertainties, as well as other risks and
uncertainties that could cause our actual results to differ
significantly from management’s expectations, are described in
greater
detail in Item 1A of Part I, “Risk Factors.”
Overview
Our primary source of revenue is the sale of a wide range of
products and services to customers. The products offered on
our consumer-facing websites primarily include merchandise
and content we have purchased for resale from vendors and
those
offered by third-party sellers, and we also manufacture and sell
electronic devices. Generally, we recognize gross revenue from
items we sell from our inventory as product sales and recognize
our net share of revenue of items sold by other sellers as service
sales. We also offer other services such as AWS, fulfillment,
publishing, digital content subscriptions, advertising, and co-
branded credit cards.
Our financial focus is on long-term, sustainable growth in free
cash flow1 per share. Free cash flow is driven primarily by
increasing operating income and efficiently managing working
capital2 and cash capital expenditures. Increases in operating
income primarily result from increases in sales of products and
services and efficiently managing our operating costs, partially
offset by investments we make in longer-term strategic
initiatives. To increase sales of products and services, we focus

on
improving all aspects of the customer experience, including
lowering prices, improving availability, offering faster delivery
and
performance times, increasing selection, increasing product
categories and service offerings, expanding product
information,
improving ease of use, improving reliability, and earning
customer trust. We also seek to efficiently manage shareholder
dilution
while maintaining the flexibility to issue shares for strategic
purposes, such as financings, acquisitions, and aligning
employee
compensation with shareholders’ interests. We utilize restricted
stock units as our primary vehicle for equity compensation
because we believe this compensation model aligns the long-
term interests of our shareholders and employees. In measuring
shareholder dilution, we include all vested and unvested stock
awards outstanding, without regard to estimated forfeitures.
Total
shares outstanding plus outstanding stock awards were 483
million and 476 million as of December 31, 2014 and 2013.
We seek to reduce our variable costs per unit and work to
leverage our fixed costs. 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. Our fixed costs
include the costs necessary to 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. 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. To decrease
our variable costs on a per unit basis and enable us to lower
prices
for customers, we seek to increase our direct sourcing, increase
discounts from suppliers, and reduce defects in our processes.
To
minimize growth in fixed costs, we seek to improve process
efficiencies and maintain a lean culture.
_______________________
(1) Free cash flow, a non-GAAP financial measure, is defined as
net cash provided by operating activities less cash expenditures
for purchases of property and equipment, including internal-use
software and website development, both of which are
presented on our consolidated statements of cash flows. See
“Results of Operations—Non-GAAP Financial Measures”
below for additional information as well as alternative free cash
flow measures.
(2) Working capital consists of accounts receivable, inventory,
and accounts payable.
19
Because of our model we are able to turn our inventory quickly
and have a cash-generating operating cycle3. On average,
our high inventory velocity means we generally collect from
consumers before our payments to suppliers come due.
Inventory
turnover4 was 9 for 2014, 2013, and 2012. We expect
variability in inventory turnover over time since it is affected
by several
factors, including our product mix, the mix of sales by us and
by other sellers, our continuing focus on in-stock inventory

availability and selection of product offerings, our investment
in new geographies and product lines, and the extent to which
we
choose to utilize third-party fulfillment providers. Accounts
payable days5 were 73, 74, and 76 for 2014, 2013, and 2012.
We
expect some variability in accounts payable days over time
since they are affected by several factors, including the mix of
product sales, the mix of sales by other sellers, the mix of
suppliers, seasonality, and changes in payment terms over time,
including the effect of balancing pricing and timing of payment
terms with suppliers.
We expect spending in technology and content will increase
over time as we add computer scientists, designers, software
and hardware engineers, and merchandising employees. Our
technology and content investment and capital spending projects
often support a variety of product and service offerings due to
geographic expansion and the cross-functionality of our systems
and operations. We seek to efficiently invest in several areas of
technology and content such as web services, expansion of new
and existing product categories and offerings, and initiatives to
expand our ecosystem of digital products and services, as well
as
in technology infrastructure to enhance the customer experience
and improve our process efficiencies. 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 people’s lives. To best take
advantage of
these continued advances in technology, we are investing in
initiatives to build and deploy innovative and efficient software
and
electronic devices. We are also investing in AWS, which

provides technology services that give developers and
enterprises of all
sizes access to technology infrastructure that enables virtually
any type of business.
Our financial reporting currency is the U.S. Dollar and changes
in foreign exchange rates significantly affect our reported
results and consolidated trends. 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.
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. We believe that our increasing
diversification beyond
the U.S. economy through our growing international businesses
benefits our shareholders over the long-term. We also believe it
is useful to evaluate our operating results and growth rates
before and after the effect of currency changes.
In addition, the remeasurement of our intercompany balances
can result in significant gains and charges associated with the
effect of movements in foreign currency exchange rates.
Currency volatilities may continue, which may significantly
impact
(either positively or negatively) our reported results and
consolidated trends and comparisons.
For additional information about each line item summarized
above, refer to Item 8 of Part II, “Financial Statements and
Supplementary Data—Note 1—Description of Business and
Accounting Policies.”

Critical Accounting Judgments
The preparation of financial statements in conformity with
generally accepted accounting principles of the United States
(“GAAP”) requires estimates and assumptions that affect the
reported amounts of assets and liabilities, revenues and
expenses,
and related disclosures of contingent assets and liabilities in the
consolidated financial statements and accompanying notes. The
SEC has defined a company’s critical accounting policies as the
ones that are most important to the portrayal of the
company’s financial condition and results of operations, and
which require the company to make its most difficult and
subjective
judgments, often as a result of the need to make estimates of
matters that are inherently uncertain. Based on this definition,
we
have identified the critical accounting policies and judgments
addressed below. We also have other key accounting policies,
which involve the use of estimates, judgments, and assumptions
that are significant to understanding our results. For additional
information, see Item 8 of Part II, “Financial Statements and
Accounting Policies.” Although we believe that our estimates,
assumptions, and judgments are reasonable, they are based upon
information presently available. Actual results may differ
significantly from these estimates under different assumptions,
judgments, or conditions.
_______________________
(3) The operating cycle is the number of days of sales in
inventory plus the number of days of sales in accounts
receivable
minus accounts payable days.
(4) Inventory turnover is the quotient of trailing twelve month

cost of sales to average inventory over five quarter ends.
(5) Accounts payable days, calculated as the quotient of
accounts payable to current quarter cost of sales, multiplied by
the
number of days in the current quarter.
20
Inventories
Inventories, consisting of products available for sale, are
primarily accounted for using the first-in first-out (“FIFO”)
method, and are valued at the lower of cost or market value.
This valuation requires us to make judgments, based on
currently-
available information, about the likely method of disposition,
such as through sales to individual customers, returns to product
vendors, or liquidations, and expected recoverable values of
each disposition category. These assumptions about future
disposition of inventory are inherently uncertain and changes in
our estimates and assumptions may cause us to realize material
write-downs in the future. As a measure of sensitivity, for every
1% of additional inventory valuation allowance as of
December 31, 2014, we would have recorded an additional cost
of sales of approximately $95 million.
In addition, we enter into supplier commitments for certain
electronic device components. These commitments are based
on forecasted customer demand. If we reduce these
commitments, we may incur additional costs.
Goodwill

We evaluate goodwill for impairment annually or more
frequently when an event occurs or circumstances change that
indicate the carrying value may not be recoverable. Our annual
testing date is October 1. We test goodwill for impairment by
first
comparing the book value of net assets to the fair value of the
reporting units. If the fair value is determined to be less than
the
book value or qualitative factors indicate that it is more likely
than not that goodwill is impaired, a second step is performed to
compute the amount of impairment as the difference between
the estimated fair value of goodwill and the carrying value. We
estimate the fair value of the reporting units using discounted
cash flows. Forecasts of future cash flows are based on our best
estimate of future net sales and operating expenses, based
primarily on expected category expansion, pricing, market
segment
share, and general economic conditions. Certain estimates of
discounted cash flows involve businesses and geographies with
limited financial history and developing revenue models.
Changes in these forecasts could significantly change the
amount of
impairment recorded, if any.
During the year, management monitored the actual performance
of the business relative to the fair value assumptions used
during our annual goodwill impairment test. For the periods
presented, no triggering events were identified that required an
interim impairment test. As a measure of sensitivity, a 10%
decrease in the fair value of any of our reporting units as of
December 31, 2014, would have had no impact on the carrying
value of our goodwill.
Financial and credit market volatility directly impacts our fair
value measurement through our weighted average cost of
capital that we use to determine a discount rate and through our

stock price that we use to determine our market capitalization.
During times of volatility, significant judgment must be applied
to determine whether credit or stock price changes are short-
term
in nature or a longer-term trend. We have not made any
significant changes to the accounting methodology used to
evaluate
goodwill impairment. Changes in our estimated future cash
flows and asset fair values may cause us to realize material
impairment charges in the future. As a measure of sensitivity, a
prolonged 20% decrease from our December 31, 2014 closing
stock price would not be an indicator of possible impairment.
Stock-Based Compensation
We measure compensation cost for stock awards at fair value
and recognize it as compensation expense over the service
period for awards expected to vest. The fair value of restricted
stock units is determined based on the number of shares granted
and the quoted price of our common stock. The estimated
number of stock awards that will ultimately vest requires
judgment,
and to the extent actual results or updated estimates differ from
our current estimates, such amounts will be recorded as a
cumulative adjustment in the period estimates are revised. We
consider many factors when estimating expected forfeitures,
including employee classification, economic environment, and
historical experience. We update our estimated forfeiture rate
quarterly. We have not made any significant changes to the
accounting methodology used to evaluate stock-based
compensation.
Changes in our estimates and assumptions may cause us to
realize material changes in stock-based compensation expense
in the
future. As a measure of sensitivity, a 1% change to our
estimated forfeiture rate would have had an approximately $30

million
impact on our 2014 operating income. Our estimated forfeiture
rate as of December 31, 2014 and 2013 was 27%.
We utilize the accelerated method, rather than the straight-line
method, for recognizing compensation expense. For
example, over 50% of the compensation cost related to an award
vesting ratably over four years is expensed in the first year. If
forfeited early in the life of an award, the compensation expense
adjustment is much greater under an accelerated method than
under a straight-line method.
Income Taxes
We are subject to income taxes in the U.S. (federal and state)
and numerous foreign jurisdictions. Tax laws, regulations,
and administrative practices in various jurisdictions may be
subject to significant change due to economic, political, and
other
conditions, and significant judgment is required in evaluating
and estimating our provision and accruals for these taxes. There
are
21
many transactions that occur during the ordinary course of
business for which the ultimate tax determination is uncertain.
Our
effective tax rates could be adversely affected by 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, 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 and changes to our existing businesses,
acquisitions (including integrations) and investments, 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,
including fundamental changes to the tax laws applicable to
corporate
multinationals. The U.S., many countries in the European
Union, and a number of other countries are actively considering
changes in this regard.
Except as required under U.S. tax laws, we do not provide for
U.S. taxes on our undistributed earnings of foreign
subsidiaries that have not been previously taxed since we intend
to invest such undistributed earnings indefinitely outside of the
U.S. If our intent changes or if these funds are needed for our
U.S. operations, we would be required to accrue or pay U.S.
taxes
on some or all of these undistributed earnings and our effective
tax rate would be adversely affected. We are also subject to
audit
in various jurisdictions, and such jurisdictions may assess
additional income tax liabilities against us. In addition, in
October
2014, the European Commission opened a formal investigation
to examine whether decisions by the tax authorities in
Luxembourg with regard to the corporate income tax paid by
certain of our subsidiaries comply with European Union rules
on
state aid. If this matter is adversely resolved, Luxembourg may
be required to assess, and we may be required to pay, additional
amounts with respect to current and prior periods and our taxes
in the future could increase. Although we believe our tax

estimates are reasonable, the final outcome of tax audits,
investigations, and any related litigation could be materially
different
from our historical income tax provisions and accruals.
Developments in an audit, litigation, or the relevant laws,
regulations,
administrative practices, principles, and interpretations could
have a material effect on our operating results or cash flows in
the
period or periods for which that development occurs, as well as
for prior and subsequent periods. For instance, the IRS is
seeking
to increase our U.S. taxable income related to transfer pricing
with our foreign subsidiaries for transactions undertaken in
2005
and 2006, and we are currently contesting the matter in U.S.
Tax Court. In addition to the risk of additional tax for 2005 and
2006 transactions, if this litigation is adversely determined or if
the IRS were to seek transfer pricing adjustments of a similar
nature for transactions in subsequent years, Amazon could be
subject to significant additional tax liabilities.
Recent Accounting Pronouncements
Data—Note 1—Description of Business and Accounting
Policies—Recent Accounting Pronouncements.”
22
Liquidity and Capital Resources
Cash flow information is as follows (in millions):

2014 2013 2012
Cash provided by (used in):
Operating activities $ 6,842 $ 5,475 $ 4,180
Investing activities (5,065) (4,276) (3,595)
Financing activities 4,432 (539) 2,259
Our financial focus is on long-term, sustainable growth in free
cash flow. Free cash flow, a non-GAAP financial measure,
was $1.9 billion for 2014, compared to $2.0 billion and $395
million for 2013 and 2012. See “Results of Operations—Non-
GAAP Financial Measures” for a reconciliation of free cash
flow to cash provided by operating activities. The decrease in
free
cash flow for 2014, compared to the comparable prior year
period, was due to increased cash capital expenditures partially
offset
by higher operating cash flows. The increase in free cash flow
for 2013, compared to the comparable prior year period, was
due
to higher operating cash flows and decreased cash capital
expenditures. Operating cash flows and free cash flows can be
volatile
and are sensitive to many factors, including changes in working
capital, the timing and magnitude of capital expenditures,
including our decision to finance property and equipment under
capital leases and other financing arrangements, and our net
income (loss). Working capital at any specific point in time is
subject to many variables, including seasonality, inventory
management and category expansion, the timing of cash receipts
and payments, vendor payment terms, and fluctuations in
foreign exchange rates.
Our principal sources of liquidity are cash flows generated from
operations and our cash, cash equivalents, and marketable

securities balances, which, at fair value, were $17.4 billion,
$12.4 billion, and $11.4 billion as of December 31, 2014, 2013,
and
2012. Cash and cash equivalents also reflects net proceeds from
the issuance of $6.0 billion of long-term debt as of December
31, 2014. Amounts held in foreign currencies were $5.4 billion,
$5.6 billion, and $5.1 billion as of December 31, 2014, 2013,
and
2012, and were primarily British Pounds, Chinese Yuan, Euros,
and Japanese Yen.
Cash provided by operating activities was $6.8 billion, $5.5
billion, and $4.2 billion in 2014, 2013, and 2012. Our
operating cash flows result primarily from cash received from
our consumer, seller, and enterprise 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.
Cash
received from our consumer, seller, and enterprise customers,
and other activities generally corresponds to our net sales.
Because
consumers primarily use credit cards to buy from us, our
receivables from consumers settle quickly. The increase in
operating
cash flow in 2014, compared to the comparable prior year
period, was primarily due to the increase in non-cash charges to
net
income, including depreciation, amortization, and stock-based
compensation, partially offset by changes in working capital.
The
increase in operating cash flow in 2013, compared to the
comparable prior year period, was primarily due to the increase

in net
income, excluding depreciation, amortization, and stock-based
compensation, partially offset by changes in working capital.
Cash provided by (used in) investing activities corresponds with
cash capital expenditures, including leasehold
improvements, internal-use software and website development
costs, cash outlays for acquisitions, investments in other
companies and intellectual property rights, and purchases, sales,
and maturities of marketable securities. Cash provided by (used
in) investing activities was $(5.1) billion, $(4.3) billion, and
$(3.6) billion in 2014, 2013, and 2012, with the variability
caused
primarily by changes in capital expenditures, purchases,
maturities, and sales of marketable securities and other
investments, and
changes in cash paid for acquisitions. Cash capital expenditures
were $4.9 billion, $3.4 billion, and $3.8 billion during 2014,
2013, and 2012. In December 2012, we acquired 11 buildings
comprising 1.8 million square feet of our previously leased
corporate office space and three city blocks in Seattle,
Washington for $1.4 billion. Excluding this acquisition,
increases in
capital expenditures primarily reflect additional capacity to
support our fulfillment operations and additional investments in
support of continued business growth due to investments in
technology infrastructure, including AWS, during all three
periods.
We expect this trend to continue over time. Capital expenditures
included $537 million, $493 million, and $381 million for
internal-use software and website development during 2014,
2013, and 2012. Stock-based compensation capitalized for
internal-
use software and website development costs does not affect cash
flows. In 2014, 2013, and 2012, we made cash payments, net of
acquired cash, related to acquisition and other investment

activity of $979 million, $312 million, and $745 million.
23
Additionally, in January 2015, we signed an agreement to
acquire a technology company for approximately $350 million
in
cash, which we expect to satisfy with cash on hand. We expect
the acquisition to close in the first half of 2015, subject to
closing
conditions.
Cash provided by (used in) financing activities was $4.4 billion,
$(539) million, and $2.3 billion in 2014, 2013, and 2012.
Cash outflows from financing activities result from common
stock repurchases, principal payments on obligations related to
capital and finance leases, and repayments of long-term debt.
Principal payments on obligations related to capital leases,
finance
leases, and repayments of long-term debt were $1.9 billion, $1.0
billion, and $588 million in 2014, 2013, and 2012. Property and
equipment acquired under capital leases were $4.0 billion, $1.9
billion, and $802 million in 2014, 2013, and 2012, with the
increases reflecting additional investments in support of
continued business growth primarily due to investments in
technology
infrastructure for AWS. We expect this trend to continue over
time. We repurchased 5.3 million shares of common stock for
$960
million in 2012 under the $2.0 billion repurchase program
authorized by our Board of Directors in January 2010. Cash
inflows
from financing activities primarily result from proceeds from
long-term debt and tax benefits relating to excess stock-based

compensation deductions. Proceeds from long-term debt and
other were $6.4 billion, $394 million, and $3.4 billion in 2014,
2013, and 2012. During 2014, cash inflows from financing
activities consisted primarily of net proceeds from the issuance
of
$6.0 billion of senior nonconvertible unsecured debt in five
tranches maturing in 2019 through 2044. During 2012, cash
inflows
from financing activities consisted primarily of net proceeds
from the issuance of $3.0 billion of senior nonconvertible
unsecured
debt in three tranches maturing in 2015 through 2022. See Item
8 of Part II, “Financial Statements and Supplementary Data—
Note 6—Long-Term Debt” for additional discussion of the
notes. Tax benefits relating to excess stock-based compensation
deductions are presented as financing cash flows. Cash inflows
from tax benefits related to stock-based compensation
deductions
were $6 million, $78 million, and $429 million in 2014, 2013,
and 2012.
In September 2014, we entered into an unsecured revolving
credit facility (the “Credit Agreement”) with a syndicate of
lenders that provides us with a borrowing capacity of up to $2.0
billion. We had no borrowings outstanding under the Credit
Agreement as of December 31, 2014. See Item 8 of Part II,
“Financial Statements and Supplementary Data—Note 6—Long-
Term Debt” for additional information.
In 2014, 2013, and 2012 we recorded net tax provisions of $167
million, $161 million, and $428 million. Except as
required under U.S. tax laws, we do not provide for U.S. taxes
on our undistributed earnings of foreign subsidiaries that have
not
been previously taxed since we intend to invest such
undistributed earnings indefinitely outside of the U.S. If our

intent changes
or if these funds are needed for our U.S. operations, we would
be required to accrue or pay U.S. taxes on some or all of these
undistributed earnings and our effective tax rate would be
adversely affected. As of December 31, 2014, cash, cash
equivalents,
and marketable securities held by foreign subsidiaries were $4.6
billion, which included undistributed earnings of foreign
subsidiaries indefinitely invested outside of the U.S. of $2.5
billion. 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 2014, U.S. legislation was enacted providing a one
year extension of accelerated depreciation deductions on
qualifying property through 2014. Cash taxes paid (net of
refunds) were $177 million, $169 million, and $112 million for
2014,
2013, and 2012. As of December 31, 2014, our federal net
operating loss carryforward was approximately $1.9 billion and
we
had approximately $443 million of federal tax credits
potentially available to offset future tax liabilities. Our federal
tax credits
are primarily related to the U.S. federal research and
development credit, which expired in 2014. As we utilize our
federal net
operating losses and tax credits, we expect cash paid for taxes
to significantly increase. We endeavor to manage our global
taxes
on a cash basis, rather than on a financial reporting basis.
Our liquidity is also affected by restricted cash balances that are
pledged as collateral for standby and trade letters of credit,
guarantees, debt, and real estate leases. To the extent we
process payments for third-party sellers or offer certain types of

stored
value to our customers, some jurisdictions may restrict our use
of those funds. These restrictions would result in the
reclassification of a portion of our cash and cash equivalents
from “Cash and cash equivalents” to “Accounts receivable, net
and
other” on our consolidated balance sheets. As of December 31,
2014 and 2013, restricted cash, cash equivalents, and
marketable
securities were $450 million and $301 million. See Item 8 of
Part II, “Financial Statements and Supplementary Data—Note
8—
Commitments and Contingencies” for additional discussion of
our principal contractual commitments, as well as our pledged
assets. Purchase obligations and open purchase orders,
consisting of inventory and significant non-inventory
commitments, were
$4.5 billion as of December 31, 2014. Purchase obligations and
open purchase orders are generally cancellable in full or in part
through the contractual provisions.
On average, our high inventory velocity means we generally
collect from consumers before our payments to suppliers
come due. Inventory turnover was 9 for 2014, 2013, and 2012.
We expect variability in inventory turnover over time since it is
affected by several factors, including our product mix, the mix
of sales by us and by third-party sellers, our continuing focus
on in-stock inventory availability and selection of product
offerings, our investment in new geographies and product lines,
and
the extent to which we choose to utilize third-party fulfillment
providers.
24

We believe that cash flows generated from operations and our
cash, cash equivalents, and marketable securities balances,
and borrowing available under our credit agreements will be
sufficient to meet our anticipated operating cash needs for at
least
the next 12 months. However, any projections of future cash
needs and cash flows are subject to substantial uncertainty. See
Item 1A of Part I, “Risk Factors.” We continually evaluate
opportunities to sell additional equity or debt securities, obtain
credit
facilities, obtain capital, finance, and operating lease
arrangements, repurchase common stock, pay dividends, or
repurchase,
refinance, or otherwise restructure our debt for strategic reasons
or to further strengthen our financial position.
The sale of additional equity or convertible debt securities
would likely be dilutive to our shareholders. In addition, we
will, from time to time, consider the acquisition of, or
investment in, complementary businesses, products, services,
capital
infrastructure and technologies, which might affect our liquidity
requirements or cause us to secure additional financing, or issue
additional equity or debt securities. There can be no assurance
that additional lines-of-credit or financing instruments will be
available in amounts or on terms acceptable to us, if at all.
25
Results of Operations
We have organized our operations into two segments: North
America and International. We present our segment

information along the same lines that our Chief Executive
Officer reviews our operating results in assessing performance
and
allocating resources.
Net Sales
Net sales include product and service sales. Product sales
represent revenue from the sale of products and related shipping
fees and digital media content where we record revenue gross.
Service sales represent third-party seller fees earned (including
commissions) and related shipping fees, digital content
subscriptions, and non-retail activities such as AWS,
advertising services,
and our co-branded credit card agreements. Amazon Prime
membership fees are allocated between product sales and
service
sales and amortized over the life of the membership according
to the estimated delivery of services. Net sales information is as
follows (in millions):
2014 2013 2012
Net Sales:
North America $ 55,469 $ 44,517 $ 34,813
International 33,519 29,935 26,280
Total consolidated $ 88,988 $ 74,452 $ 61,093
Year-over-year Percentage Growth:
North America 25% 28% 30%
International 12 14 23
Total consolidated 20 22 27
Year-over-year Percentage Growth, excluding effect of foreign

exchange rates:
Net Sales Mix:
Total consolidated 100% 100% 100%
Sales increased 20%, 22%, and 27% in 2014, 2013, and 2012,
compared to the comparable prior year periods. Changes in
foreign currency exchange rates impacted net sales by $(636)
million, $(1.3) billion, and $(854) million for 2014, 2013, and
2012. For a discussion of the effect on sales growth of foreign
exchange rates, see “Effect of Foreign Exchange Rates” below.
North America sales increased 25%, 28%, and 30% in 2014,
2013, and 2012, compared to the comparable prior year
periods. The sales growth in each year primarily reflects
increased unit sales, including sales by marketplace sellers, and
AWS,
which was partially offset by AWS pricing changes. Increased
unit sales were driven largely by our continued efforts to reduce
prices for our customers, including from our shipping offers, by
sales in faster growing categories such as electronics and other
general merchandise, by increased in-stock inventory
availability, and by increased selection of product offerings.
International sales increased 12%, 14%, and 23% in 2014, 2013,
and 2012, compared to the comparable prior year periods.
The sales growth in each year primarily reflects increased unit
sales, including sales by marketplace sellers. Increased unit

sales
were driven largely by our continued efforts to reduce prices for
our customers, including from our shipping offers, by sales in
faster growing categories such as electronics and other general
merchandise, by increased in-stock inventory availability, and
by
increased selection of product offerings. Additionally, changes
in foreign currency exchange rates impacted International net
sales by $(580) million, $(1.3) billion, and $(853) million in
2014, 2013, and 2012.
26
Supplemental Information
Supplemental information about outbound shipping results is as
2014 2013 2012
Outbound Shipping Activity:
Shipping revenue (1)(2)(3) $ 4,486 $ 3,097 $ 2,280
Shipping costs (4) (8,709) (6,635) (5,134)
Net shipping cost $ (4,223) $ (3,538) $ (2,854)
Shipping revenue 45 % 36 % 47 %
Shipping costs 31 29 29
Net shipping cost 19 24 17
Percent of Net Sales:

Shipping revenue 5.1 % 4.1 % 3.7 %
Shipping costs (9.8) (8.9) (8.4)
Net shipping cost (4.7)% (4.8)% (4.7)%
___________________
(1) Excludes amounts earned on shipping activities by third-
party sellers where we do not provide the fulfillment service.
(2) Includes a portion of amounts earned from Amazon Prime
memberships.
(3) Includes amounts earned from Fulfillment by Amazon
programs related to shipping services.
(4) Includes sortation and delivery center costs.
We expect our net cost of shipping to continue to increase to the
extent our customers accept and use our shipping offers at
an increasing rate, our product mix shifts to the electronics and
other general merchandise category, we reduce shipping rates,
we
use more expensive shipping methods, and we offer additional
services. We seek to mitigate costs of shipping over time in part
through achieving higher sales volumes, optimizing placement
of fulfillment centers, negotiating better terms with our
suppliers,
and achieving better operating efficiencies. We believe that
offering low prices to our customers is fundamental to our
future
success, and one way we offer lower prices is through shipping
offers.
27
We have aggregated our products and services into groups of
similar products and services and provided the supplemental

disclosure of net sales (in millions) below. We evaluate whether
additional disclosure is appropriate when a product or service
category begins to approach a significant level of net sales. For
the periods presented, no individual product or service
represented more than 10% of net sales.
2014 2013 2012
Net Sales:
North America
Media $ 11,567 $ 10,809 $ 9,189
Electronics and other general merchandise 38,517 29,985
23,273
Other (1) 5,385 3,723 2,351
Total North America $ 55,469 $ 44,517 $ 34,813
International
Media $ 10,938 $ 10,907 $ 10,753
15,355
Other (1) 212 211 172
Total International $ 33,519 $ 29,935 $ 26,280
Consolidated
Media $ 22,505 $ 21,716 $ 19,942
38,628
Other (1) 5,597 3,934 2,523
Total consolidated $ 88,988 $ 74,452 $ 61,093

North America
Media 7% 18% 15%
Electronics and other general merchandise 28 29 34
Other 45 58 64
Total North America 25 28 30
International
Media —% 1% 9%
Other 1 22 11
Total International 12 14 23
Consolidated
Media 4% 9% 12%
Other 42 56 59
Year-over-year Percentage Growth, excluding effect of foreign
exchange rates:
International
Media 2% 7% 12%
Other 1 26 15
Total International 14 19 27
Consolidated
Media 5% 12% 14%
Other 42 56 59

Consolidated Net Sales Mix:
Media 25% 29% 33%
Other 7 5 4
Total consolidated 100% 100% 100%
_____________________________
(1) Includes sales from non-retail activities, such as AWS sales,
which are included in the North America segment, and
advertising services and our co-branded credit card agreements,
which are included in both segments.
28
Operating Expenses
Information about operating expenses with and without stock-
based compensation is as follows (in millions):
Year Ended December 31, 2014 Year Ended December 31, 2013
Year Ended December 31, 2012
As
Reported
Stock-Based
Compensation Net
As
Reported

Stock-Based
Compensation Net
As
Reported
Stock-Based
Compensation Net
Operating Expenses:
Cost of sales $ 62,752 $ — $ 62,752 $ 54,181 $ — $ 54,181 $
45,971 $ — $ 45,971
Fulfillment 10,766 (375) 10,391 8,585 (294) 8,291 6,419 (212)
6,207
Marketing 4,332 (125) 4,207 3,133 (88) 3,045 2,408 (61) 2,347
Technology and content 9,275 (804) 8,471 6,565 (603) 5,962
4,564 (434) 4,130
General and administrative 1,552 (193) 1,359 1,129 (149) 980
896 (126) 770
Other operating expense
(income), net 133 — 133 114 — 114 159 — 159
Total operating expenses $ 88,810 $ (1,497) $ 87,313 $ 73,707
$ (1,134) $ 72,573 $ 60,417 $ (833) $ 59,584
Fulfillment 25% 25% 34% 34% 40% 40%
Marketing 38 38 30 30 48 47
Technology and content 41 42 44 44 57 58
General and administrative 37 39 26 27 36 36
Percent of Net Sales:
Fulfillment 12.1% 11.7% 11.5% 11.1% 10.5% 10.2%
Marketing 4.9 4.7 4.2 4.1 3.9 3.8
Technology and content 10.4 9.5 8.8 8.0 7.5 6.8
General and administrative 1.7 1.5 1.5 1.3 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
Accounting Policies—Stock-Based Compensation.”
We recorded charges related to Fire phone inventory valuation
and supplier commitment costs, substantially all of which,
$170 million, was recorded during the third quarter of 2014.
Cost of Sales
Cost of sales consists of the purchase price of consumer
products and digital media content where we record revenue
gross,
including Prime Instant Video, packaging supplies, and inbound
and outbound shipping costs, including sortation and delivery
centers, and related equipment costs. 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 2014, 2013,
and 2012, compared to the comparable prior year periods, is
primarily due to increased product, digital media content, and
shipping costs resulting from increased sales, as well as from
expansion of digital offerings. The increase in 2014 was also
impacted by Fire phone inventory valuation and supplier
commitment costs.
Consolidated gross profit and gross margin for each of the
periods presented were as follows (in millions):
2014 2013 2012

Gross profit $ 26,236 $ 20,271 $ 15,122
Gross margin 29.5% 27.2% 24.8%
Gross margin increased in 2014, compared to the comparable
prior year periods, primarily due to service sales increasing
as a percentage of total sales. Service sales represent third-party
seller fees earned (including commissions) and related shipping
fees, digital content subscriptions, and non-retail activities such
as AWS, advertising services, and our co-branded credit card
agreements.
29
We believe that income (loss) from operations is a more
meaningful measure than gross profit and gross margin due to
the
diversity of our product categories and services.
Fulfillment
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 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.
The increase in fulfillment costs in absolute dollars in 2014,
periods, is primarily due to variable costs corresponding with
increased physical and digital product and service sales volume,
inventory levels, and sales mix; costs from expanding
fulfillment capacity; and payment processing and related
transaction costs.
We seek to expand our fulfillment capacity to accommodate
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. We evaluate our facility requirements as
necessary.
Marketing
We direct customers to our websites primarily through a number
of targeted online marketing channels, such as our
Associates program, sponsored search, portal advertising, email
marketing campaigns, and other initiatives. Our marketing
expenses are largely variable, based on growth in sales and
changes in rates. To the extent there is increased or decreased
competition for these traffic sources, or to the extent our mix of
these channels shifts, we would expect to see a corresponding
change in our marketing expense.
The increase in marketing costs in absolute dollars in 2014,
periods, is primarily due to increased spending on online

marketing channels, such as our sponsored search programs,
payroll
and related expenses, and television advertising.
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.
Technology and Content
We seek to efficiently invest in several areas of technology and
content such as technology infrastructure, including AWS,
expansion of new and existing product categories and offerings,
and initiatives to expand our ecosystem of digital products and
services, as well as in technology infrastructure so we may
continue to enhance the customer experience and improve our
process
efficiency through rapid technology developments while
operating at an ever increasing scale. We expect spending in
technology
and content to increase over time as we continue to add
employees and technology infrastructure. Digital media content
where
we record revenue gross, including Prime Instant Video, is
included in cost of sales.
Technology costs consist principally of research and
development activities including payroll and related expenses
for
employees involved in application, production, maintenance,
operation, and platform development for new and existing
products
and services, as well as AWS and other technology
infrastructure expenses.

Content costs consist principally of payroll and related expenses
for employees involved in category expansion, editorial
content, buying, and merchandising selection.
The increase in technology and content costs in absolute dollars
in 2014, 2013, and 2012, compared to the comparable
prior year periods, is primarily due to increased spending on
technology infrastructure, including AWS, and increases in
payroll
and related expenses, including those associated with our
initiatives to expand our ecosystem of digital products and
services. We
expect these trends to continue over time as we invest in these
areas by increasing payroll and related expenses and adding
technology infrastructure.
For 2014, 2013, and 2012, we capitalized $641 million
(including $104 million of stock-based compensation), $581
million (including $87 million of stock-based compensation),
and $454 million (including $74 million of stock-based
compensation) of costs associated with internal-use software
and website development. Amortization of previously
capitalized
30
amounts was $559 million, $451 million, and $327 million for
2014, 2013, and 2012. A majority of our technology costs are
incurred in the U.S., most of which are allocated to our North
America segment. Infrastructure, other technology, and
operating
costs incurred to support AWS are included in technology and
content.

General and Administrative
The increase in general and administrative costs in absolute
dollars in 2014, 2013, and 2012, compared to the comparable
prior year periods, is primarily due to increases in payroll and
related expenses and professional service fees.
Stock-based compensation was $1.5 billion, $1.1 billion, and
$833 million during 2014, 2013, and 2012. The increase in
2014, 2013, and 2012, 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 $133 million, $114
million, and $159 million during 2014, 2013, and 2012, and
was primarily related to the amortization of intangible assets.
Income from Operations
For the reasons discussed above, income from operations
decreased 76% in 2014, increased 10% in 2013, and decreased
22% in 2012.
Interest Income and Expense
Our interest income was $39 million, $38 million, and $40
million during 2014, 2013, and 2012. 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.
The primary components of our interest expense are related to
our long-term debt and capital and finance lease
arrangements. Interest expense was $210 million, $141 million,
and $92 million in 2014, 2013, and 2012.
Our long-term debt was $8.3 billion and $3.2 billion as of
December 31, 2014 and 2013. Our other long-term liabilities
were $7.4 billion and $4.2 billion as of December 31, 2014 and
2013. See Item 8 of Part II, “Financial Statements and
Supplementary Data—Note 6—Long-Term Debt and Note 7—
Other Long-Term Liabilities” for additional information.
Other Income (Expense), Net
Other income (expense), net was $(118) million, $(136) million,
and $(80) million during 2014, 2013, and 2012. 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 $167 million, $161
million, and $428 million in 2014, 2013, and 2012. 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 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. Income earned in lower
tax jurisdictions is primarily related to our European operations,
which are headquartered in Luxembourg.
In 2013, our provision for income taxes was lower than in 2012
primarily due to a decline in the proportion of our losses
for which we may not realize a related tax benefit, the favorable
impact of earnings in lower tax rate jurisdictions, and the
31
retroactive extension in 2013 of the U.S. federal research and
development credit to 2012. In 2013, we recognized tax benefits
for a greater proportion of losses for which we may not realize a
tax benefit, primarily due to losses of certain foreign

subsidiaries, as compared to 2012. The favorable impact of
earnings in lower tax rate 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 2014, U.S. legislation was enacted providing a one
year
extension of accelerated depreciation deductions on qualifying
property and the U.S. federal research and development credit
through December 31, 2014. As of December 31, 2014, our
federal net operating loss carryforward was approximately $1.9
billion and we had approximately $443 million of federal tax
credits potentially available to offset future tax liabilities. Our
federal tax credits are primarily related to the U.S. federal
research and development credit, which expired in 2014.
Data-Note 11-Income Taxes” for additional information.
Equity-Method Investment Activity, Net of Tax
Equity-method investment activity, net of tax, was $37 million,
$(71) million, and $(155) million in 2014, 2013, and 2012.
Details of the activity are provided below (in millions):
2014 2013 2012
Equity in earnings (loss) of LivingSocial:
Impairment charges recorded by LivingSocial $ — $ (12) $
(170)
Gain on existing equity interests, LivingSocial acquisitions —

— 75
Operating and other earnings (losses) (1) 36 (58) (96)
Total equity in earnings (loss) of LivingSocial 36 (70) (191)
Other equity-method investment activity:
Amazon dilution gains on LivingSocial investment — — 37
Other, net 1 (1) (1)
Total other equity-method investment activity 1 (1) 36
Equity-method investment activity, net of tax $ 37 $ (71) $
(155)
___________________
(1) Includes a $65 million gain related to LivingSocial’s
disposal of its Korean operations in the first quarter of 2014.
Effect of Foreign Exchange Rates
The effect on our consolidated statements of operations from
changes in foreign exchange rates versus the U.S. Dollar is as
Year Ended December 31, 2014 Year Ended December 31, 2013
Year Ended December 31, 2012
At Prior
Year
Rates (1)
Exchange
Rate
Effect (2)
As

Reported
At Prior
Year
Rates (1)
Exchange
Rate
Effect (2)
As
Reported
At Prior
Year
Rates (1)
Exchange
Rate
Effect (2)
As
Reported
Net sales $ 89,624 $ (636) $ 88,988 $ 75,736 $ (1,284) $ 74,452
$ 61,947 $ (854) $ 61,093
Operating expenses 89,466 (656) 88,810 74,962 (1,255) 73,707
61,257 (840) 60,417
Income (loss) from operations 158 20 178 774 (29) 745 690 (14)
676

___________________
(1) Represents the outcome that would have resulted had foreign
exchange rates in the reported period been the same as those in
effect in the comparable prior year period for operating results.
(2) Represents the increase or decrease in reported amounts
resulting from changes in foreign exchange rates from those in
effect in the comparable prior year period for operating results.
32
Non-GAAP Financial Measures
Regulation G, Conditions for Use of Non-GAAP Financial
Measures, and other SEC regulations define and prescribe the
conditions for use of certain non-GAAP financial information.
Our measures of “Free cash flow,” operating expenses with and
without stock-based compensation, and the effect of foreign
exchange rates on our consolidated statements of operations,
meet
the definition of non-GAAP financial measures.
We provide multiple measures of free cash flow, and ratios
based on them, because we believe these measures provide
additional perspective on the impact of acquiring property and
equipment with cash and through capital and finance leases.
Free cash flow is cash flow from operations reduced by
“Purchases of property and equipment, including internal-use
software and website development,” which are included in cash
flow from investing activities. The following is a reconciliation
of free cash flow to the most comparable GAAP cash flow
measure, “Net cash provided by (used in) operating activities,”

for
2014, 2013, and 2012 (in millions):
2014 2013 2012
5,475 $ 4,180
Purchases of property and equipment, including internal-use
software and website
development (4,893 ) (3,444) (3,785)
Free cash flow $ 1,949 $ 2,031 $ 395
Net cash provided by (used in) investing activities $ (5,065) $
(4,276) $ (3,595)
Net cash provided by (used in) financing activities $ 4,432 $
(539) $ 2,259
Free cash flow less lease principal repayments is free cash flow
reduced by “Principal repayments of capital lease
obligations,” and “Principal repayments of finance lease
obligations,” which are included in cash flow from financing
activities.
The following is a reconciliation of free cash flow less lease
principal repayments to the most comparable GAAP cash flow
measure, “Net cash provided by (used in) operating activities,”
for 2014, 2013, and 2012 (in millions):
2014 2013 2012
5,475 $ 4,180
development (4,893 ) (3,444) (3,785)
Principal repayments of capital lease obligations (1,285 ) (775)

(486)
Principal repayments of finance lease obligations (135 ) (5)
(20)
Free cash flow less lease principal repayments $ 529 $ 1,251 $
(111)
(4,276) $ (3,595)
(539) $ 2,259
33
Free cash flow less finance principal lease repayments and
capital acquired under capital leases is free cash flow reduced
by “Principal repayments of finance lease obligations,” which
are included in cash flow from financing activities, and property
and equipment acquired under capital leases. In this measure,
property and equipment acquired under capital leases is
reflected
as if these assets had been acquired with cash. The following is
a reconciliation of free cash flow less finance principal lease
repayments and capital acquired under capital leases to the most
comparable GAAP cash flow measure, “Net cash provided by
(used in) operating activities,” for 2014, 2013, and 2012 (in
millions):
2014 2013 2012
5,475 $ 4,180
development (4,893 ) (3,444) (3,785)

Property and equipment acquired under capital leases (4,008 )
(1,867) (802)
Principal repayments of finance lease obligations (135 ) (5)
(20)
Free cash flow less finance principal lease repayments and
capital acquired under
capital leases $ (2,194) $ 159 $ (427)
(4,276) $ (3,595)
(539) $ 2,259
All of these free cash flow measures have limitations as they
omit certain components of the overall cash flow statement
and do not represent the residual cash flow available for
discretionary expenditures. For example, these measures of free
cash
flow do not incorporate the portion of payments representing
principal reductions of debt or cash payments for business
acquisitions. Additionally, our mix of property and equipment
acquisitions with cash or other financing options may change
over
time. Therefore, we believe it is important to view free cash
flow measures only as a complement to our entire consolidated
statements of cash flows.
Operating expenses with and without stock-based compensation
is provided to show the impact of stock-based
compensation, which is non-cash and excluded from our internal
operating plans and measurement of financial performance
(although we consider the dilutive impact to our shareholders
when awarding stock-based compensation and value such
awards
accordingly). In addition, unlike other centrally-incurred
operating costs, stock-based compensation is not allocated to
segment

results and therefore excluding it from operating expenses is
consistent with our segment presentation in our footnotes to the
consolidated financial statements.
Operating expenses without stock-based compensation has
limitations since it does not include all expenses primarily
related to our workforce. More specifically, if we did not pay
out a portion of our compensation in the form of stock-based
compensation, our cash salary expense included in the
“Fulfillment,” “Marketing,” “Technology and content,” and
“General and
administrative” line items would be higher.
Information regarding the effect of foreign exchange rates,
versus the U.S. Dollar, on our consolidated statements of
operations is provided to show reported period operating results
had the foreign exchange rates remained the same as those in
effect in the comparable prior year period.
Guidance
We provided guidance on January 29, 2015, in our earnings
release furnished on Form 8-K as set forth below. These
forward-looking statements reflect Amazon.com’s expectations
as of January 29, 2015, and are subject to substantial
uncertainty.
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 consumer
spending, world events, the rate of growth of the Internet and
online
commerce, as well as those outlined in Item 1A of Part I, “Risk
Factors.”
First Quarter 2015 Guidance

• Net sales are expected to be between $20.9 billion and $22.9
billion, or to grow between 6% and 16% compared
with first quarter 2014.
• Operating income (loss) is expected to be between $(450)
million and $50 million, compared to $146 million in
first quarter 2014.
• This guidance includes approximately $450 million for stock-
based compensation and amortization of intangible
assets, and it assumes, among other things, that no additional
business acquisitions, investments, restructurings, or
legal settlements are concluded and that there are no further
revisions to stock-based compensation estimates.
34
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
We are exposed to market risk for the effect of interest rate
changes, foreign currency fluctuations, and changes in the
market values of our investments. Information relating to
quantitative and qualitative disclosures about market risk is set
forth
below and in Item 7 of Part II, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—
Liquidity and Capital Resources.”
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates
primarily to our investment portfolio and our long-term

debt. Our long-term debt is carried at amortized cost and
fluctuations in interest rates do not impact our consolidated
financial
statements. However, the fair value of our debt, on which we
pay interest at a fixed rate, will generally fluctuate with
movements
of interest rates, increasing in periods of declining rates of
interest and declining in periods of increasing rates of interest.
All of
our cash equivalent and marketable fixed income securities are
designated as available-for-sale and, accordingly, are presented
at
fair value on our consolidated balance sheets. We generally
invest our excess cash in investment grade short- to
intermediate-
term fixed income securities and AAA-rated money market
funds. Fixed income securities may have their fair market value
adversely affected due to a rise in interest rates, and we may
suffer losses in principal if forced to sell securities that have
declined in market value due to changes in interest rates.
The following table provides information about our current and
long-term cash equivalent and marketable fixed income
securities, including principal cash flows by expected maturity
and the related weighted average interest rates as of December
31,
2014 (in millions, except percentages):
2015 2016 2017 2018 2019 Thereafter Total
Estimated
Fair Value as
of December
31, 2014

Money market funds $ 10,718 $ — $ — $ — $ — $ — $ 10,718
$ 10,718
Weighted average interest rate 0.09% —% —% —% —% —%
0.09%
Corporate debt securities 85 131 154 22 — — 392 401
Weighted average interest rate 1.05% 1.05% 1.48% 1.65% —%
—% 1.25%
U.S. government and agency
securities 1,865 342 156 19 1 — 2,383 2,406
Weighted average interest rate 0.33% 0.79% 1.11% 1.91%
2.17% —% 0.46%
Asset backed securities 19 43 7 — — — 69 69
Weighted average interest rate 0.64% 0.95% 1.10% —% —% —
% 0.88%
Foreign government and agency
securities 1 27 49 — — — 77 80
Weighted average interest rate 0.04% 0.05% —% —% —% —%
0.02%
Other securities 12 10 7 4 — — 33 33
Weighted average interest rate 0.48% 1.01% 1.23% 0.57% —%
—% 0.81%
$ 12,700 $ 553 $ 373 $ 45 $ 1 $ — $ 13,672
Cash equivalent and marketable
fixed income securities $ 13,707
As of December 31, 2014, we had $9.9 billion of debt, including
the current portion, primarily consisting of the following
fixed rate unsecured debt (in millions):

0.65% Notes due on November 27, 2015 $ 750
1.20% Notes due on November 29, 2017 $ 1,000
2.50% Notes due on November 29, 2022 $ 1,250
2.60% Notes due on December 5, 2019 $ 1,000
35
The fair value of our debt will fluctuate with movements of
interest rates, increasing in periods of declining rates of interest
and declining in periods of increasing rates of interest. Based
upon quoted market prices and Level 2 inputs, the fair value of
our
total debt was $10.0 billion as of December 31, 2014.
Foreign Exchange Risk
During 2014, net sales from our International segment
accounted for 38% of our consolidated revenues. Net sales and
related expenses generated from our internationally focused
websites, as well as those relating to www.amazon.ca and
www.amazon.com.mx (which are included in our North America
segment), are denominated in the functional currencies of the
corresponding websites and primarily include British Pounds,
Chinese Yuan, Euros, and Japanese Yen. The results of
operations
of, and certain of our intercompany balances associated with,
our internationally-focused websites are exposed to foreign
exchange rate fluctuations. Upon consolidation, as foreign
exchange rates vary, net sales and other operating results may
differ

materially from expectations, and we may record significant
gains or losses on the remeasurement of intercompany balances.
For
example, as a result of fluctuations in foreign exchange rates
during 2014, International segment revenues decreased $580
million in comparison with the prior year.
We have foreign exchange risk related to foreign-denominated
cash, cash equivalents, and marketable securities (“foreign
funds”). Based on the balance of foreign funds as of December
31, 2014, of $5.4 billion, an assumed 5%, 10%, and 20%
adverse
change to foreign exchange would result in fair value declines
of $270 million, $535 million, and $1.1 billion. All investments
are classified as “available-for-sale.” Fluctuations in fair value
are recorded in “Accumulated other comprehensive loss,” a
separate component of stockholders’ equity.
We have foreign exchange risk related to our intercompany
balances denominated in various foreign currencies. Based on
the intercompany balances as of December 31, 2014, an
assumed 5%, 10%, and 20% adverse change to foreign exchange
would
result in losses of $145 million, $310 million, and $700 million,
recorded to “Other income (expense), net.”
See Item 7 of Part II, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations—Results
of Operations—Effect of Foreign Exchange Rates” for
additional information on the effect on reported results of
changes in
foreign exchange rates.
Investment Risk
As of December 31, 2014, our recorded basis in equity

investments was $209 million. These investments primarily
relate
to equity-method and cost-method investments in private
companies. We review our investments for impairment when
events
and circumstances indicate that the decline in fair value of such
assets below the carrying value is other-than-temporary. Our
analysis includes review of recent operating results and trends,
recent sales/acquisitions of the investee securities, and other
publicly available data. The current global economic climate
provides additional uncertainty. Valuations of private
companies are
inherently more complex due to the lack of readily available
market data. As such, we believe that market sensitivities are
not
practicable.
36
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Ernst & Young LLP, Independent Registered Public
Accounting Firm 37
Consolidated Statements of Cash Flows 38
Consolidated Statements of Operations 39
Consolidated Statements of Comprehensive Income 40
Consolidated Balance Sheets 41
Consolidated Statements of Stockholders’ Equity 42
Notes to Consolidated Financial Statements 43

37
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Amazon.com, Inc.
We have audited the accompanying consolidated balance sheets
of Amazon.com, Inc. as of December 31, 2014 and 2013,
and the related consolidated statements of operations,
comprehensive income, stockholders’ equity, and cash flows for
each of
the three years in the period ended December 31, 2014. These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial
position of Amazon.com, Inc. at December 31, 2014 and 2013,

and the consolidated results of its operations and its cash flows
for each of the three years in the period ended December 31,
2014, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United
States), Amazon.com, Inc.’s internal control over financial
reporting as of December 31, 2014, based on criteria established
in
Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission
(2013 framework) and our report dated January 29, 2015
expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Seattle, Washington
January 29, 2015
38
AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
2014 2013 2012
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
$ 8,658 $ 8,084 $ 5,269
OPERATING ACTIVITIES:

Net income (loss) (241) 274 (39)
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation of property and equipment, including internal-use
software and
website development, and other amortization 4,746 3,253 2,159
Stock-based compensation 1,497 1,134 833
Other operating expense (income), net 129 114 154
Losses (gains) on sales of marketable securities, net (3) 1 (9)
Other expense (income), net 62 166 253
Deferred income taxes (316) (156) (265)
Excess tax benefits from stock-based compensation (6) (78)
(429)
Changes in operating assets and liabilities:
Inventories (1,193) (1,410) (999)
Accounts receivable, net and other (1,039) (846) (861)
Accounts payable 1,759 1,888 2,070
Accrued expenses and other 706 736 1,038
Additions to unearned revenue 4,433 2,691 1,796
Amortization of previously unearned revenue (3,692) (2,292)
(1,521)
Net cash provided by (used in) operating activities 6,842 5,475
4,180
INVESTING ACTIVITIES:
development (4,893) (3,444) (3,785)
Acquisitions, net of cash acquired, and other (979) (312) (745)
Sales and maturities of marketable securities and other
investments 3,349 2,306 4,237
Purchases of marketable securities and other investments
(2,542) (2,826) (3,302)

Net cash provided by (used in) investing activities (5,065)
(4,276) (3,595)
FINANCING ACTIVITIES:
Excess tax benefits from stock-based compensation 6 78 429
Common stock repurchased — — (960)
Proceeds from long-term debt and other 6,359 394 3,378
Repayments of long-term debt (513) (231) (82)
Principal repayments of capital lease obligations (1,285) (775)
(486)
Principal repayments of finance lease obligations (135) (5) (20)
Net cash provided by (used in) financing activities 4,432 (539)
2,259
Foreign-currency effect on cash and cash equivalents (310) (86)
(29)
Net increase (decrease) in cash and cash equivalents 5,899 574
2,815
CASH AND CASH EQUIVALENTS, END OF PERIOD $
14,557 $ 8,658 $ 8,084
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt $ 91 $ 97 $ 31
Cash paid for income taxes (net of refunds) 177 169 112
Property and equipment acquired under capital leases 4,008
1,867 802
Property and equipment acquired under build-to-suit leases 920
877 29
See accompanying notes to consolidated financial statements.
39
AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

2014 2013 2012
Net product sales $ 70,080 $ 60,903 $ 51,733
Net service sales 18,908 13,549 9,360
Total net sales 88,988 74,452 61,093
Operating expenses (1):
Cost of sales 62,752 54,181 45,971
Fulfillment 10,766 8,585 6,419
Marketing 4,332 3,133 2,408
Technology and content 9,275 6,565 4,564
General and administrative 1,552 1,129 896
Other operating expense (income), net 133 114 159
Total operating expenses 88,810 73,707 60,417
Income from operations 178 745 676
Interest income 39 38 40
Interest expense (210) (141) (92)
Other income (expense), net (118) (136) (80)
Total non-operating income (expense) (289) (239) (132)
Income (loss) before income taxes (111) 506 544
Provision for income taxes (167) (161) (428)
Equity-method investment activity, net of tax 37 (71) (155)
Net income (loss) $ (241) $ 274 $ (39)
Basic earnings per share $ (0.52) $ 0.60 $ (0.09)
Diluted earnings per share $ (0.52) $ 0.59 $ (0.09)
Weighted average shares used in computation of earnings per
share:
Basic 462 457 453
Diluted 462 465 453

_____________
(1) Includes stock-based compensation as follows:
Fulfillment $ 375 $ 294 $ 212
Marketing 125 88 61
Technology and content 804 603 434
General and administrative 193 149 126
40
AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
(in millions)
2014 2013 2012
Net income (loss) $ (241) $ 274 $ (39)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $(3),
$(20), and
$(30) (325) 63 76
Net change in unrealized gains on available-for-sale securities:
Unrealized gains (losses), net of tax of $1, $3, and $(3) 2 (10)
8
Reclassification adjustment for losses (gains) included in
“Other

income (expense), net,” net of tax of $(1), $(1), and $3 (3) 1
(7)
Net unrealized gains (losses) on available-for-sale securities (1)
(9) 1
Total other comprehensive income (loss) (326) 54 77
Comprehensive income (loss) $ (567) $ 328 $ 38
41
AMAZON.COM, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
2014 2013
ASSETS
Current assets:
Cash and cash equivalents $ 14,557 $ 8,658
Marketable securities 2,859 3,789
Inventories 8,299 7,411
Accounts receivable, net and other 5,612 4,767
Total current assets 31,327 24,625
Property and equipment, net 16,967 10,949
Goodwill 3,319 2,655
Other assets 2,892 1,930

Total assets $ 54,505 $ 40,159
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 16,459 $ 15,133
Accrued expenses and other 9,807 6,688
Unearned revenue 1,823 1,159
Total current liabilities 28,089 22,980
Long-term debt 8,265 3,191
Other long-term liabilities 7,410 4,242
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.01 par value:
Authorized shares — 500
Issued and outstanding shares — none — —
Common stock, $0.01 par value:
Authorized shares — 5,000
Issued shares — 488 and 483
Outstanding shares — 465 and 459 5 5
Treasury stock, at cost (1,837) (1,837)
Additional paid-in capital 11,135 9,573
Accumulated other comprehensive loss (511) (185)
Retained earnings 1,949 2,190
Total stockholders’ equity 10,741 9,746
Total liabilities and stockholders’ equity $ 54,505 $ 40,159

42
AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY
(in millions)
Common Stock
Shares Amount
Treasury
Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Stockholders’
Equity
Balance as of January 1, 2012 455 $ 5 $ (877) $ 6,990 $ (316)
$ 1,955 $ 7,757

Net loss — — — — — (39) (39)
Other comprehensive income — — — — 77 — 77
Exercise of common stock options 4 — — 8 — — 8
Repurchase of common stock (5) — (960) — — — (960)
Excess tax benefits from stock-based
compensation — — — 429 —
— 429
Stock-based compensation and issuance of
employee benefit plan stock — — — 854 —
— 854
Issuance of common stock for acquisition
activity — — — 66 —
— 66
Balance as of December 31, 2012 454 5 (1,837) 8,347 (239)
1,916 8,192
Net income — — — — — 274 274
Other comprehensive income — — — — 54 — 54
Repurchase of common stock — — — — — — —
— 73
employee benefit plan stock — — — 1,149 —

— 1,149
Balance as of December 31, 2013 459 5 (1,837) 9,573 (185)
2,190 9,746
Net loss — — — — — (241) (241)
Other comprehensive loss — — — — (326) — (326)
— 6
employee benefit plan stock — — — 1,510 —
— 1,510
Issuance of common stock for acquisition
activity — — — 44 —
— 44
Balance as of December 31, 2014 465 $ 5 $ (1,837) $ 11,135 $
(511) $ 1,949 $ 10,741
43

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—DESCRIPTION OF BUSINESS AND ACCOUNTING
POLICIES
Description of Business
Amazon.com opened its virtual doors on the World Wide Web
in July 1995. We seek to be Earth’s most customer-centric
company. In each of our two geographic segments, we serve our
primary customer sets, consisting of consumers, sellers,
enterprises, and content creators. We serve consumers through
our retail websites and focus on selection, price, and
convenience.
We also manufacture and sell electronic devices. We offer
programs that enable sellers to sell their products on our
websites and
their own branded websites and to fulfill orders through us, and
programs that allow authors, musicians, filmmakers, app
developers, and others to publish and sell content. We serve
developers and enterprises of all sizes through AWS, which
provides
access to technology infrastructure that enables virtually any
type of business. In addition, we provide services, such as
advertising services and co-branded credit card agreements.
We have organized our operations into two segments: North
America and International. See “Note 12—Segment
Information.”
Prior Period Reclassifications
Certain prior period amounts have been reclassified to conform

to the current period presentation, including the expanded
presentation of “Net cash provided by (used in) financing
activities” on our consolidated statements of cash flows and
components of the provision for income taxes in “Note 11—
Income Taxes.”
Principles of Consolidation
The consolidated financial statements include the accounts of
Amazon.com, Inc., its wholly-owned subsidiaries, and those
entities in which we have a variable interest and of which we
are the primary beneficiary (collectively, the “Company”).
Intercompany balances and transactions between consolidated
entities are eliminated.
Use of Estimates
The preparation of financial statements in conformity with
GAAP requires estimates and assumptions that affect the
reported amounts of assets and liabilities, revenues and
expenses, and related disclosures of contingent liabilities in the
consolidated financial statements and accompanying notes.
Estimates are used for, but not limited to, determining the
selling
price of products and services in multiple element revenue
arrangements and determining the lives of these elements,
incentive
discount offers, sales returns, vendor funding, stock-based
compensation forfeiture rates, income taxes, valuation and
impairment
of investments, inventory valuation and inventory purchase
commitments, collectability of receivables, valuation of
acquired
intangibles and goodwill, depreciable lives of property and
equipment, internal-use software and website development
costs,

acquisition purchase price allocations, investments in equity
interests, and contingencies. Actual results could differ
materially
from those estimates.
Earnings per Share
Basic earnings per share is calculated using our weighted-
average outstanding common shares. Diluted earnings per share
is calculated using our weighted-average outstanding common
shares including the dilutive effect of stock awards as
determined
under the treasury stock method. In periods when we have a net
loss, stock awards of 17 million and 15 million in 2014 and
2012, were excluded as their inclusion would have an
antidilutive effect.
The following table shows the calculation of diluted shares (in
millions):
2014 2013 2012
Shares used in computation of basic earnings per share 462 457
453
Total dilutive effect of outstanding stock awards — 8 —
Shares used in computation of diluted earnings per share 462
465 453
44
Revenue
We recognize revenue from product sales or services rendered

when the following four criteria are met: persuasive
evidence of an arrangement exists, delivery has occurred or
service has been rendered, the selling price is fixed or
determinable,
and collectability is reasonably assured. Revenue arrangements
with multiple deliverables are divided into separate units and
revenue is allocated using estimated selling prices if we do not
have vendor-specific objective evidence or third-party evidence
of the selling prices of the deliverables. We allocate the
arrangement price to each of the elements based on the relative
selling
prices of each element. Estimated selling prices are
management’s best estimates of the prices that we would charge
our
customers if we were to sell the standalone elements separately
and include considerations of customer demand, prices charged
by us and others for similar deliverables, and the price if largely
based on the cost of producing the product or service.
Sales of our digital devices, including Kindle e-readers, Fire
tablets, Fire TVs, Echo, and Fire phones, are considered
arrangements with multiple deliverables, consisting of the
device, undelivered software upgrades and/or undelivered non-
software services such as cloud storage and free trial
memberships to other services. The revenue allocated to the
device, which
is the substantial portion of the total sale price, and related
costs are generally recognized upon delivery. Revenue related
to
undelivered software upgrades and/or undelivered non-software
services is deferred and recognized generally on a straight-line
basis over the estimated period the software upgrades and non-
software services are expected to be provided for each of these
devices.
Sales of Amazon Prime memberships are also considered

arrangements with multiple deliverables, including shipping
benefits, Prime Instant Video, Prime Music, Prime Photo, and
access to the Kindle Owners’ Lending Library. The revenue
related
to the deliverables is amortized over the life of the membership
based on the estimated delivery of services. Amazon Prime
membership fees are allocated between product sales and
service sales. Costs to deliver Amazon Prime benefits are
recognized as
cost of sales as incurred. As we add more benefits to the Prime
membership, we will update the method of determining the
estimated selling prices of each element as well as the
allocation of Prime membership fees.
We evaluate whether it is appropriate to record the gross
amount of product sales and related costs or the net amount
earned as commissions. Generally, when we are primarily
obligated in a transaction, are subject to inventory risk, have
latitude in
establishing prices and selecting suppliers, or have several but
not all of these indicators, revenue is recorded at the gross sale
price. We generally record the net amounts as commissions
earned if we are not primarily obligated and do not have latitude
in
establishing prices. Such amounts earned are determined using a
fixed percentage, a fixed-payment schedule, or a combination of
the two.
Product sales represent revenue from the sale of products and
related shipping fees and digital media content where we
record revenue gross. Product sales and shipping revenues, net
of promotional discounts, rebates, and return allowances, are
recorded when the products are shipped and title passes to
customers. Retail sales to customers are made pursuant to a
sales
contract that provides for transfer of both title and risk of loss

upon our delivery to the carrier. Amazon’s electronic devices
sold
through retailers are recognized at the point of sale to
consumers.
Service sales represent third-party seller fees earned (including
commissions) and related shipping fees, digital content
subscriptions, and non-retail activities such as AWS,
advertising services, and our co-branded credit card agreements.
Service
sales, net of promotional discounts and return allowances, are
recognized when service has been rendered.
Return allowances, which reduce revenue, are estimated using
historical experience. Allowance for returns was $147
million, $167 million, and $198 million as of December 31,
2014, 2013, and 2012. Additions to the allowance were $1.1
billion,
$907 million, and $702 million, and deductions to the allowance
were $1.1 billion, $938 million, and $659 million as of
December 31, 2014, 2013, and 2012. Revenue from product
sales and services rendered is recorded net of sales and
consumption
taxes. Additionally, we periodically provide incentive offers to
our customers to encourage purchases. Such offers include
current
discount offers, such as percentage discounts off current
purchases, inducement offers, such as offers for future
discounts subject
to a minimum current purchase, and other similar offers.
Current discount offers, when accepted by our customers, are
treated as
a reduction to the purchase price of the related transaction,
while inducement offers, when accepted by our customers, are
treated
as a reduction to purchase price based on estimated future

redemption rates. Redemption rates are estimated using our
historical
experience for similar inducement offers. Current discount
offers and inducement offers are presented as a net amount in
“Total
net sales.”
Cost of Sales
Cost of sales consists of the purchase price of consumer
products and digital media content where we record revenue
gross,
including Prime Instant Video, packaging supplies, and inbound
and outbound shipping costs, including sortation and delivery
centers, and related equipment costs. Shipping costs to receive
products from our suppliers are included in our inventory, and
45
recognized as cost of sales upon sale of products to our
customers. Payment processing and related transaction costs,
including
those associated with seller transactions, are classified in
“Fulfillment” on our consolidated statements of operations.
Vendor Agreements
We have agreements with our vendors to receive funds for
cooperative marketing efforts, promotions, and volume
rebates. We generally consider amounts received from vendors
to be a reduction of the prices we pay for their goods or
services,
and therefore record those amounts as a reduction of the cost of
inventory or cost of services. Vendor rebates are typically

dependent upon reaching minimum purchase thresholds. We
evaluate the likelihood of reaching purchase thresholds using
past
experience and current year forecasts. When volume rebates can
be reasonably estimated, we record a portion of the rebate as we
make progress towards the purchase threshold.
When we receive direct reimbursements for costs incurred by us
in advertising the vendor’s product or service, the amount
we receive is recorded as an offset to “Marketing” on our
consolidated statements of operations.
Fulfillment
Fulfillment costs represent those costs incurred in operating and
staffing our fulfillment and customer service centers,
including costs attributable to buying, receiving, inspecting, and
warehousing inventories; picking, packaging, and preparing
customer orders for shipment; payment processing and related
transaction costs, including costs associated with our guarantee
for certain seller transactions; responding to inquiries from
customers; and supply chain management for our manufactured
electronic devices. Fulfillment costs also include amounts paid
to third parties that assist us in fulfillment and customer service
operations.
Marketing
Marketing costs consist primarily of targeted online advertising,
television advertising, public relations expenditures, and
payroll and related expenses for personnel engaged in
marketing, business development, and selling activities. We pay
commissions to participants in our Associates program when
their customer referrals result in product sales and classify such
costs as “Marketing” on our consolidated statements of
operations. We also participate in cooperative advertising

arrangements
with certain of our vendors, and other third parties.
Advertising and other promotional costs are expensed as
incurred and were $3.3 billion, $2.4 billion, and $2.0 billion in
2014, 2013, and 2012. Prepaid advertising costs were not
significant as of December 31, 2014 and 2013.
Technology and Content
Technology costs consist principally of research and
development activities including payroll and related expenses
for
employees involved in application, production, maintenance,
operation, and platform development for new and existing
products
and services, as well as AWS and other technology
infrastructure expenses.
Content costs consist principally of payroll and related expenses
for employees involved in category expansion, editorial
content, buying, and merchandising selection.
Technology and content costs are expensed as incurred, except
for certain costs relating to the development of internal-use
software and website development, including software used to
upgrade and enhance our websites and applications supporting
our
business, which are capitalized and amortized over two years.
General and Administrative
General and administrative expenses consist of payroll and
related expenses for employees involved in general corporate
functions, including accounting, finance, tax, legal, and human
resources, among others; costs associated with use by these

functions of facilities and equipment, such as depreciation
expense and rent; professional fees and litigation costs; and
other
general corporate costs.
Compensation cost for all stock awards expected to vest is
measured at fair value on the date of grant and recognized over
the service period. The fair value of restricted stock units is
determined based on the number of shares granted and the
quoted
price of our common stock and the fair value of stock options
are estimated on the date of grant using a Black-Scholes model.
Such value is recognized as expense over the service period, net
of estimated forfeitures, using the accelerated method. The
estimated number of stock awards that will ultimately vest
requires judgment, and to the extent actual results or updated
46
estimates differ from our current estimates, such amounts will
be recorded as a cumulative adjustment in the period estimates
are
revised. We consider many factors when estimating expected
forfeitures, including employee classification, economic
environment, and historical experience.
Other Operating Expense (Income), Net
Other operating expense (income), net, consists primarily of
intangible asset amortization expense and expenses related to
legal settlements.

Other Income (Expense), Net
Other income (expense), net, consists primarily of foreign
currency losses of $(127) million, $(137) million, and $(95)
million in 2014, 2013, and 2012, and realized gains and losses
on marketable securities sales of $3 million, $(1) million, and
$10
million in 2014, 2013, and 2012.
Income Taxes
Income tax expense includes U.S. (federal and state) and
foreign income taxes. Except as required under U.S. tax laws,
we
do not provide for U.S. taxes on our undistributed earnings of
foreign subsidiaries that have not been previously taxed since
we
intend to invest such undistributed earnings indefinitely outside
of the U.S. If our intent changes or if these funds are needed for
our U.S. operations, we would be required to accrue or pay U.S.
taxes on some or all of these undistributed earnings and our
effective tax rate would be adversely affected. Undistributed
earnings of foreign subsidiaries that are indefinitely invested
outside
of the U.S were $2.5 billion as of December 31, 2014.
Determination of the unrecognized deferred tax liability that
would be
incurred if such amounts were repatriated is not practicable.
Deferred income tax balances reflect the effects of temporary
differences between the carrying amounts of assets and
liabilities and their tax bases and are stated at enacted tax rates
expected to be in effect when taxes are actually paid or
recovered.
Deferred tax assets are evaluated for future realization and

reduced by a valuation allowance to the extent we believe they
will not be realized. We consider many factors when assessing
the likelihood of future realization of our deferred tax assets,
including our recent cumulative earnings experience and
expectations of future taxable income and capital gains by
taxing
jurisdiction, the carry-forward periods available to us for tax
reporting purposes, and other relevant factors. We allocate our
valuation allowance to current and long-term deferred tax assets
on a pro-rata basis.
We utilize a two-step approach to recognizing and measuring
uncertain income tax positions (tax contingencies). The first
step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates it is
more likely
than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes. The second
step is to measure the tax benefit as the largest amount which is
more than 50% likely of being realized upon ultimate
settlement. We consider many factors when evaluating our tax
positions and estimating our tax benefits, which may require
periodic adjustments and which may not accurately forecast
actual outcomes. We include interest and penalties related to
our tax
contingencies in income tax expense.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement
date. To increase the comparability of fair value measures, the
following hierarchy prioritizes the inputs to valuation
methodologies used to measure fair value:

Level 1—Valuations based on quoted prices for identical assets
and liabilities in active markets.
Level 2—Valuations based on observable inputs other than
quoted prices included in Level 1, such as quoted prices
for similar assets and liabilities in active markets, quoted prices
for identical or similar assets and liabilities in markets that
are not active, or other inputs that are observable or can be
corroborated by observable market data.
Level 3—Valuations based on unobservable inputs reflecting
our own assumptions, consistent with reasonably
available assumptions made by other market participants. These
valuations require significant judgment.
For our cash, cash equivalents, or marketable securities, we
measure the fair value of money market funds and equity
securities based on quoted prices in active markets for identical
assets or liabilities. All other financial instruments were valued
either based on recent trades of securities in inactive markets or
based on quoted market prices of similar instruments and other
significant inputs derived from or corroborated by observable
market data. We did not hold any cash, cash equivalents, or
marketable securities categorized as Level 3 assets as of
December 31, 2014, or December 31, 2013.
47
As part of entering into commercial agreements, we often obtain
equity warrant assets giving us the right to acquire stock
primarily in private companies. We record these assets in
“Other assets” on the accompanying consolidated balance
sheets.
Equity warrant assets are classified as Level 3 assets, and the

balances and related activity for our equity warrant assets were
not
significant for the periods ended December 31, 2014, 2013, and
2012.
Cash and Cash Equivalents
We classify all highly liquid instruments with an original
maturity of three months or less at the time of purchase as cash
equivalents.
Inventories
Inventories, consisting of products available for sale, are
primarily accounted for using the FIFO method, and are valued
at
the lower of cost or market value. This valuation requires us to
make judgments, based on currently-available information,
about
the likely method of disposition, such as through sales to
individual customers, returns to product vendors, or
liquidations, and
expected recoverable values of each disposition category.
We provide Fulfillment by Amazon services in connection with
certain of our sellers’ programs. Third-party sellers
maintain ownership of their inventory, regardless of whether
fulfillment is provided by us or the third-party sellers, and
therefore
these products are not included in our inventories.
We also purchase electronic device components from a variety
of suppliers and use several contract manufacturers to
provide manufacturing services for our products. During the
normal course of business, in order to manage manufacturing
lead

times and help ensure adequate component supply, we enter into
agreements with contract manufacturers and suppliers. A
portion
of our reported purchase commitments arising from these
agreements consists of firm, non-cancellable commitments.
These
commitments are based on forecasted customer demand. If we
reduce these commitments, we may incur additional costs.
Accounts Receivable, Net and Other
Included in “Accounts receivable, net and other” on our
consolidated balance sheets are amounts primarily related to
vendor and customer receivables. As of December 31, 2014 and
2013, vendor receivables, net, were $1.4 billion and $1.3
billion,
and customer receivables, net, were $1.9 billion and $1.7
billion.
We estimate losses on receivables based on known troubled
accounts and historical experience of losses incurred.
Receivables are considered impaired and written-off when it is
probable that all contractual payments due will not be collected
in
accordance with the terms of the agreement. The allowance for
doubtful accounts was $190 million, $153 million, and $116
million as of December 31, 2014, 2013, and 2012. Additions to
the allowance were $225 million, $172 million, and $136
million, and deductions to the allowance were $188 million,
$135 million, and $102 million as of December 31, 2014, 2013,
and
2012.
Internal-use Software and Website Development
Costs incurred to develop software for internal use and our

websites are capitalized and amortized over the estimated
useful life of the software. Costs related to design or
maintenance of internal-use software and website development
are
expensed as incurred. For the years ended 2014, 2013, and
2012, we capitalized $641 million (including $104 million of
stock-
based compensation), $581 million (including $87 million of
stock-based compensation), and $454 million (including $74
million of stock-based compensation) of costs associated with
internal-use software and website development. Amortization of
previously capitalized amounts was $559 million, $451 million,
and $327 million for 2014, 2013, and 2012.
Property and Equipment, Net
Property and equipment are stated at cost less accumulated
depreciation. Property includes buildings and land that we own,
along with property we have acquired under build-to-suit,
financing, and capital lease arrangements. Equipment includes
assets
such as furniture and fixtures, heavy equipment, servers and
networking equipment, and internal-use software and website
development. Depreciation is recorded on a straight-line basis
over the estimated useful lives of the assets (generally the lesser
of
40 years or the remaining life of the underlying building, two
years for assets such as internal-use software, three years for
our
servers, five years for networking equipment, five years for
furniture and fixtures, and ten years for heavy equipment).
Depreciation expense is classified within the corresponding
operating expense categories on our consolidated statements of
operations.

48
Leases and Asset Retirement Obligations
We categorize leases at their inception as either operating or
capital leases. On certain of our lease agreements, we may
receive rent holidays and other incentives. We recognize lease
costs on a straight-line basis without regard to deferred payment
terms, such as rent holidays, that defer the commencement date
of required payments. Additionally, incentives we receive are
treated as a reduction of our costs over the term of the
agreement. Leasehold improvements are capitalized at cost and
amortized
over the lesser of their expected useful life or the non-
cancellable term of the lease.
We establish assets and liabilities for the estimated construction
costs incurred under build-to-suit lease arrangements to the
extent we are involved in the construction of structural
improvements or take construction risk prior to commencement
of a
lease. Upon occupancy of facilities under build-to-suit leases,
we assess whether these arrangements qualify for sales
recognition
under the sale-leaseback accounting guidance. If we continue to
be the deemed owner, the facilities are accounted for as finance
leases.
We establish assets and liabilities for the present value of
estimated future costs to retire long-lived assets at the
termination
or expiration of a lease. Such assets are depreciated over the
lease period into operating expense, and the recorded liabilities
are
accreted to the future value of the estimated retirement costs.

Goodwill
We evaluate goodwill for impairment annually or more
frequently when an event occurs or circumstances change that
indicate the carrying value may not be recoverable. We test
goodwill for impairment by first comparing the book value of
net
assets to the fair value of the reporting units. If the fair value is
determined to be less than the book value or qualitative factors
indicate that it is more likely than not that goodwill is impaired,
a second step is performed to compute the amount of
impairment
as the difference between the estimated fair value of goodwill
and the carrying value. We estimate the fair value of the
reporting
units using discounted cash flows. Forecasts of future cash
flows are based on our best estimate of future net sales and
operating
expenses, based primarily on expected category expansion,
pricing, market segment share, and general economic
conditions.
We conduct our annual impairment test as of October 1 of each
year, and have determined there to be no impairment for
any of the periods presented. There were no triggering events
identified from the date of our assessment through December
31,
2014 that would require an update to our annual impairment
test. See “Note 4—Acquisitions, Goodwill, and Acquired
Intangible
Assets.”
Other Assets
Included in “Other assets” on our consolidated balance sheets

are amounts primarily related to acquired intangible assets,
net of amortization; acquired digital media content, net of
amortization; long-term deferred tax assets; certain equity
investments;
marketable securities restricted for longer than one year, the
majority of which are attributable to collateralization of bank
guarantees and debt related to our international operations;
intellectual property rights, net of amortization; and equity
warrant
assets.
Content Costs
We obtain video and music content to be made available to
Prime members through licensing agreements that have a wide
range of licensing provisions and generally have terms from one
to five years with fixed payment schedules. When the license
fee for a specific movie, television, or music title is
determinable or reasonably estimable and available for
streaming, we
recognize an asset representing the fee per title and a
corresponding liability for the amounts owed. We relieve the
liability as
payments are made and we amortize the asset as cost of sales on
a straight-line basis over each title’s contractual window of
availability, which typically ranges from six months to five
years. If we are unable to reasonably estimate the cost per title,
no
asset or liability is recorded and licensing costs are expensed as
incurred. We also develop original content. The production
costs
of internally developed content are capitalized only if
persuasive evidence exists that the production will generate
revenue.
Because we have limited history to support the economic
benefits of our content, we have generally expensed such costs

as
incurred. As we develop more experience or otherwise obtain
the necessary evidence that future revenue will be earned
through
licensing or Prime membership activity, a portion of future
production costs may be capitalized.
Investments
We generally invest our excess cash in investment grade short-
to intermediate-term fixed income securities and AAA-
rated money market funds. Such investments are included in
“Cash and cash equivalents,” or “Marketable securities” on the
accompanying consolidated balance sheets, classified as
available-for-sale, and reported at fair value with unrealized
gains and
losses included in “Accumulated other comprehensive loss.”
49
Equity investments are accounted for using the equity method of
accounting if the investment gives us the ability to
exercise significant influence, but not control, over an investee.
The total of our investments in equity-method investees,
including identifiable intangible assets, deferred tax liabilities,
and goodwill, is included within “Other assets” on our
consolidated balance sheets. Our share of the earnings or losses
as reported by equity-method investees, amortization of the
related intangible assets, and related gains or losses, if any, are
classified as “Equity-method investment activity, net of tax” on
our consolidated statements of operations. Our share of the net
income or loss of our equity-method investees includes
operating
and non-operating gains and charges, which can have a

significant impact on our reported equity-method investment
activity and
the carrying value of those investments. In the event that net
losses of the investee reduce our equity-method investment
carrying
amount to zero, additional net losses may be recorded if other
investments in the investee, not accounted for under the equity
method, are at-risk even if we have not committed to provide
financial support to the investee. We regularly evaluate these
investments, which are not carried at fair value, for other-than-
temporary impairment. We also consider whether our equity-
method investments generate sufficient cash flows from their
operating or financing activities to meet their obligations and
repay
their liabilities when they come due.
We record purchases, including incremental purchases, of
shares in equity-method investees at cost. Reductions in our
ownership percentage of an investee, including through dilution,
are generally valued at fair value, with the difference between
fair value and our recorded cost reflected as a gain or loss in
our equity-method investment activity. In the event we no
longer
have the ability to exercise significant influence over an equity-
method investee, we would discontinue accounting for the
investment under the equity method.
Equity investments without readily determinable fair values for
which we do not have the ability to exercise significant
influence are accounted for using the cost method of accounting
and classified as “Other assets” on our consolidated balance
sheets. Under the cost method, investments are carried at cost
and are adjusted only for other-than-temporary declines in fair
value, certain distributions, and additional investments.
Equity investments that have readily determinable fair values

are classified as available-for-sale and are included in
“Marketable securities” in our consolidated balance sheets and
are recorded at fair value with unrealized gains and losses, net
of
tax, included in “Accumulated other comprehensive loss.”
We periodically evaluate whether declines in fair values of our
investments below their book value are other-than-
temporary. This evaluation consists of several qualitative and
quantitative factors regarding the severity and duration of the
unrealized loss as well as our ability and intent to hold the
investment until a forecasted recovery occurs. Additionally, we
assess
whether we have plans to sell the security or it is more likely
than not we will be required to sell any investment before
recovery
of its amortized cost basis. Factors considered include quoted
market prices; recent financial results and operating trends;
implied
values from any recent transactions or offers of investee
securities; credit quality of debt instrument issuers; other
publicly
available information that may affect the value of our
investments; duration and severity of the decline in value; and
our strategy
and intentions for holding the investment.
Long-Lived Assets
Long-lived assets, other than goodwill, are reviewed for
impairment whenever events or changes in circumstances
indicate
that the carrying amount of the assets might not be recoverable.
Conditions that would necessitate an impairment assessment
include a significant decline in the observable market value of
an asset, a significant change in the extent or manner in which

an
asset is used, or any other significant adverse change that would
indicate that the carrying amount of an asset or group of assets
may not be recoverable.
For long-lived assets used in operations, impairment losses are
only recorded if the asset’s carrying amount is not
recoverable through its undiscounted, probability-weighted
future cash flows. We measure the impairment loss based on the
difference between the carrying amount and estimated fair
value. Long-lived assets are considered held for sale when
certain
criteria are met, including when management has committed to a
plan to sell the asset, the asset is available for sale in its
immediate condition, and the sale is probable within one year of
the reporting date. Assets held for sale are reported at the lower
of cost or fair value less costs to sell. Assets held for sale were
not significant as of December 31, 2014 or 2013.
Accrued Expenses and Other
Included in “Accrued expenses and other” on our consolidated
balance sheets are liabilities primarily related to
unredeemed gift cards, leases and asset retirement obligations,
current debt, acquired digital media content, and other operating
expenses.
50
As of December 31, 2014 and 2013 our liabilities for
unredeemed gift cards was $1.7 billion and $1.4 billion. We
reduce
the liability for a gift card when redeemed by a customer. If a
gift card is not redeemed, we recognize revenue when it expires

or
when the likelihood of its redemption becomes remote,
generally two years from the date of issuance.
Unearned Revenue
Unearned revenue is recorded when payments are received in
advance of performing our service obligations and is
recognized over the service period. Unearned revenue primarily
relates to prepayments of Amazon Prime memberships and AWS
services.
Foreign Currency
We have internationally-focused websites for the United
Kingdom, Germany, France, Japan, Canada, China, Italy, Spain,
Brazil, India, Mexico, Australia, and the Netherlands. Net sales
generated from these websites, as well as most of the related
expenses directly incurred from those operations, are
denominated in local functional currencies. The functional
currency of our
subsidiaries that either operate or support these websites is
generally the same as the local currency. Assets and liabilities
of these
subsidiaries are translated into U.S. Dollars at period-end
foreign exchange rates, and revenues and expenses are
translated at
average rates prevailing throughout the period. Translation
adjustments are included in “Accumulated other comprehensive
loss,”
a separate component of stockholders’ equity, and in the
“Foreign-currency effect on cash and cash equivalents,” on our
consolidated statements of cash flows. Transaction gains and
losses including intercompany transactions denominated in a
currency other than the functional currency of the entity
involved are included in “Other income (expense), net” on our

consolidated statements of operations. In connection with the
settlement and remeasurement of intercompany balances, we
recorded losses of $98 million, $84 million, and $95 million in
2014, 2013, and 2012.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued
an Accounting Standard Update (“ASU”) amending
revenue recognition guidance and requiring more detailed
disclosures to enable users of financial statements to understand
the
nature, amount, timing, and uncertainty of revenue and cash
flows arising from contracts with customers. The guidance is
effective for annual and interim reporting periods beginning
after December 15, 2016, with early adoption prohibited. We
are
currently evaluating the impact this ASU will have on our
consolidated financial statements.
51
Note 2—CASH, CASH EQUIVALENTS, AND MARKETABLE
SECURITIES
As of December 31, 2014 and 2013, our cash, cash equivalents,
and marketable securities primarily consisted of cash, U.S.
and foreign government and agency securities, AAA-rated
money market funds, and other investment grade securities.
Cash
equivalents and marketable securities are recorded at fair value.
The following table summarizes, by major security type, our
cash, cash equivalents, and marketable securities that are
measured at fair value on a recurring basis and are categorized

using
the fair value hierarchy (in millions):
December 31, 2014
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Total
Estimated
Fair Value
Cash $ 4,155 $ — $ — $ 4,155
Level 1 securities:
Money market funds 10,718 — — 10,718
Equity securities 2 2 — 4
Level 2 securities:
Foreign government and agency securities 80 — — 80
U.S. government and agency securities 2,407 1 (2) 2,406
Corporate debt securities 401 1 (1) 401
Asset-backed securities 69 — — 69
Other fixed income securities 33 — — 33

$ 17,865 $ 4 $ (3) $ 17,866
Less: Restricted cash, cash equivalents, and marketable
securities (1) (450)
Total cash, cash equivalents, and marketable securities $ 17,416
December 31, 2013
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Total
Estimated
Fair Value
Cash $ 3,008 $ — $ — $ 3,008
Level 1 securities:
Money market funds 5,914 — — 5,914
Equity securities 3 1 — 4
Level 2 securities:
Foreign government and agency securities 757 2 (1) 758
U.S. government and agency securities 2,224 1 (3) 2,222
Corporate debt securities 739 3 (1) 741

Asset-backed securities 65 — — 65
Other fixed income securities 36 — — 36
$ 12,746 $ 7 $ (5) $ 12,748
Less: Restricted cash, cash equivalents, and marketable
securities (1) (301)
Total cash, cash equivalents, and marketable securities $ 12,447
___________________
(1) We are required to pledge or otherwise restrict a portion of
our cash, cash equivalents, and marketable securities as
collateral
for standby and trade letters of credit, guarantees, debt, real
estate leases, and amounts due to third-party sellers in certain
jurisdictions. We classify cash, cash equivalents and marketable
securities with use restrictions of less than twelve months as
“Accounts receivable, net and other” and of twelve months or
longer as non-current “Other assets” on our consolidated
balance sheets. See “Note 8—Commitments and Contingencies.”
52
The following table summarizes gross gains and gross losses
realized on sales of available-for-sale marketable securities
(in millions):
2014 2013 2012
Realized gains $ 8 $ 6 $ 20
Realized losses 5 7 10

The following table summarizes the contractual maturities of
our cash equivalents and marketable fixed-income securities
as of December 31, 2014 (in millions):
Amortized
Cost
Estimated
Fair Value
Due within one year $ 12,553 $ 12,552
Due after one year through five years 798 799
Due after five years through ten years 132 132
Due after ten years 224 224
Total $ 13,707 $ 13,707
Actual maturities may differ from the contractual maturities
because borrowers may have certain prepayment conditions.
Note 3—PROPERTY AND EQUIPMENT
Property and equipment, at cost, consisted of the following (in
millions):
December 31,
2014 2013
Gross property and equipment (1):
Land and buildings $ 7,150 $ 4,584
Equipment and internal-use software (2) 14,213 9,274
Other corporate assets 304 231
Construction in progress 1,063 720
Gross property and equipment 22,730 14,809
Total accumulated depreciation (1) 5,763 3,860

Total property and equipment, net $ 16,967 $ 10,949
___________________
(1) Excludes the original cost and accumulated depreciation of
fully-depreciated assets.
(2) Includes internal-use software of $1.3 billion and $1.1
billion as of December 31, 2014 and 2013.
Depreciation expense on property and equipment was $3.6
billion, $2.5 billion, and $1.7 billion, which includes
amortization of property and equipment acquired under capital
leases of $1.5 billion, $826 million, and $510 million for 2014,
2013, and 2012. Gross assets remaining under capital leases
were $7.9 billion and $4.2 billion as of December 31, 2014 and
2013. Accumulated depreciation associated with capital leases
was $3.3 billion and $1.9 billion as of December 31, 2014 and
2013.
We capitalize construction in progress and record a
corresponding long-term liability for build-to-suit lease
agreements
where we are considered the owner, for accounting purposes,
during the construction period. For buildings under build-to-suit
lease arrangements where we have taken occupancy, which do
not qualify for sales recognition under the sale-leaseback
accounting guidance, we determined that we continue to be the
deemed owner of these buildings. This is principally due to our
significant investment in tenant improvements. As a result, the
buildings are being depreciated over the shorter of their useful
lives or the related leases’ terms. Additionally, certain build-to-
suit lease arrangements and finance leases provide purchase
options. Upon occupancy, the long-term construction
obligations are considered long-term finance lease obligations
with
amounts payable during the next 12 months recorded as
“Accrued expenses and other.” Gross assets remaining under

finance
leases were $1.4 billion and $578 million as of December 31,
2014 and 2013. Accumulated depreciation associated with
finance
leases was $87 million and $22 million as of December 31, 2014
and 2013.
53
Cash paid for interest on capital and finance leases was $86
million, $41 million, and $51 million for 2014, 2013, and
2012.
Note 4—ACQUISITIONS, GOODWILL, AND ACQUIRED
INTANGIBLE ASSETS
2014 Acquisition Activity
On September 25, 2014, we acquired Twitch Interactive, Inc.
(“Twitch”) for approximately $842 million in cash, as
adjusted for the assumption of options and other items. During
2014, we acquired certain other companies for an aggregate
purchase price of $20 million. We acquired Twitch because of
its user community and the live streaming experience it
provides. The primary reasons for our other 2014 acquisitions
were to acquire technologies and know-how to enable Amazon
to
serve customers more effectively.
Acquisition-related costs were expensed as incurred and not
significant. The aggregate purchase price of these acquisitions
was allocated as follows (in millions):
Purchase Price

Cash paid, net of cash acquired $ 813
Stock options assumed 44
Indemnification holdback 5
$ 862
Allocation
Goodwill $ 707
Intangible assets (1):
Marketing-related 23
Contract-based 1
Technology-based 33
Customer-related 173
230
Property and equipment 16
Deferred tax assets 64
Other assets acquired 34
Deferred tax liabilities (88)
Other liabilities assumed (101)
$ 862
___________________
(1) Acquired intangible assets have estimated useful lives of
between one and five years, with a weighted-average
amortization
period of five years.
The fair value of assumed stock options of $39 million,
estimated using the Black-Scholes model, will be expensed over
the remaining service period. We determined the estimated fair
value of identifiable intangible assets acquired primarily by
using
the income approach. These assets are included within “Other
assets” on our consolidated balance sheets and are being

amortized
to operating expenses on a straight-line or accelerated basis
over their estimated useful lives.
Subsequent to September 30, 2014, we made minor
measurement period adjustments to the preliminary purchase
price
allocation that impacted goodwill, customer-related intangible
assets, property and equipment, and deferred taxes and are
reflected in the table above. We have not retrospectively
adjusted our previously reported consolidated financial
statements.
54
Pro Forma Financial Information – 2014 Acquisition Activity
(unaudited)
The acquired companies were consolidated into our financial
statements starting on their respective acquisition dates. The
aggregate net sales and operating loss of the companies
acquired was $40 million and $30 million for the year ended
December
31, 2014. The following pro forma financial information
presents our results as if the current year acquisitions had
occurred at
the beginning of 2013 (in millions):
2014 2013
Net sales $ 89,041 $ 74,505
Net income (loss) $ (287) $ 180

In 2013, we acquired several companies in cash transactions for
an aggregate purchase price of $195 million, resulting in
goodwill of $103 million and acquired intangible assets of $83
million. The primary reasons for these acquisitions were to
expand our customer base and sales channels and to obtain
certain technologies to be used in product development. We
determined the estimated fair value of identifiable intangible
assets acquired primarily by using the income and cost
approaches.
These assets are included within “Other assets” on our
consolidated balance sheets and are being amortized to
operating
expenses on a straight-line or accelerated basis over their
estimated useful lives. Acquisition-related costs were expensed
as
incurred and were not significant.
Pro forma results of operations have not been presented because
the effects of these acquisitions, individually and in the
aggregate, were not material to our consolidated results of
operations.
In May 2012, we acquired Kiva Systems, Inc. (“Kiva”) for a
purchase price of $678 million. The primary reason for this
acquisition was to improve fulfillment center productivity.
Acquisition-related costs were expensed as incurred and were
not
significant. The aggregate purchase price of this acquisition was
allocated as follows (in millions):
Purchase Price
Cash paid, net of cash acquired $ 613

Stock options assumed 65
$ 678
Allocation
Goodwill $ 560
Intangible assets (1):
Marketing-related 5
Contract-based 3
Technology-based 168
Customer-related 17
193
Property and equipment 9
Deferred tax assets 34
Other assets acquired 41
Deferred tax liabilities (81)
Other liabilities assumed (78)
$ 678
___________________
(1) Acquired intangible assets have estimated useful lives of
between four and 10 years, with a weighted-average
amortization
period of five years.
The fair value of assumed stock options was estimated using the
Black-Scholes model. We determined the estimated fair
value of identifiable intangible assets acquired primarily by
using the income and cost approaches. These assets are included
55
within “Other assets” on our consolidated balance sheets and

are being amortized to operating expenses on a straight-line or
accelerated basis over their estimated useful lives.
Pro forma results of operations have not been presented because
the effect of this acquisition was not material to our
consolidated results of operations.
Goodwill
The goodwill of the acquired companies is generally not
deductible for tax purposes and is primarily related to expected
improvements in sales growth from future product and service
offerings and new customers and fulfillment center
productivity,
together with certain intangible assets that do not qualify for
separate recognition. The following summarizes our goodwill
activity in 2014 and 2013 by segment (in millions):
North
America International Consolidated
Goodwill - January 1, 2013 $ 1,937 $ 615 $ 2,552
New acquisitions 99 4 103
Other adjustments (1) (3) 3 —
Goodwill - December 31, 2013 2,033 622 2,655
New acquisitions (2) 553 162 715
Other adjustments (1) (2) (49) (51)
Goodwill - December 31, 2014 $ 2,584 $ 735 $ 3,319
___________________
(1) Primarily includes changes in foreign exchange rates.
(2) Primarily includes the goodwill of Twitch.
Intangible Assets
Acquired intangible assets, included within “Other assets” on

our consolidated balance sheets, consist of the following (in
millions):
December 31,
2014 2013
Weighted
Average Life
Remaining
Acquired
Intangibles,
Gross (1)
Accumulated
Amortization
(1)
Acquired
Intangibles,
Net
Acquired
Intangibles,
Gross (1)
Accumulated
Amortization
(1)
Acquired

Intangibles,
Net
Marketing-related 5.3 $ 457 $ (199) $ 258 $ 429 $ (156) $ 273
Contract-based 2.2 172 (125) 47 173 (110) 63
Technology- and
content-based 3.5 370 (129) 241 278 (74) 204
Customer-related 2.5 535 (317) 218 368 (263) 105
Acquired
intangibles (2) 3.5 $ 1,534 $ (770) $ 764 $ 1,248 $ (603) $ 645
___________________
(1) Excludes the original cost and accumulated amortization of
fully-amortized intangibles.
(2) Intangible assets have estimated useful lives of between one
and 10 years.
56
Amortization expense for acquired intangibles was $181
million, $168 million, and $163 million in 2014, 2013, and
2012.
Expected future amortization expense of acquired intangible
assets as of December 31, 2014 is as follows (in millions):
2015 $ 202
2016 185
2017 161
2018 106
2019 79
Thereafter 31

$ 764
Note 5—EQUITY-METHOD INVESTMENTS
LivingSocial’s summarized condensed financial information, as
provided to us by LivingSocial, is as follows (in millions):
2014 2013 2012
Statement of Operations:
Revenue $ 231 $ 302 $ 347
Gross profit 194 253 280
Operating expenses 296 282 367
Operating loss from continuing operations (102) (29) (87)
Net loss from continuing operations (73) (16) (79)
Net income (loss) from discontinued operations, net of tax (1)
173 (156) (574)
Net income (loss) $ 100 $ (172) $ (653)
___________________
(1) In January 2014, LivingSocial completed the sale of its
Korean operations for approximately $260 million and, in the
first
quarter of 2014, recognized a gain on disposal of $205 million,
net of tax. The statement of operations information above
has been recast to present the Korean operations, and certain
other operations, as discontinued operations.
December 31,
2014 2013
Balance Sheet:

Current assets $ 163 $ 182
Non-current assets 29 61
Current liabilities 137 301
Non-current liabilities 34 33
Redeemable stock 366 315
Balance sheet financial information as of December 31, 2013
included $146 million in assets and $122 million in liabilities
that LivingSocial classified as held for sale for its Korean
operations.
As of December 31, 2014, our total investment in LivingSocial
is approximately 31% of voting stock and has a book value
of $75 million.
57
Note 6—LONG-TERM DEBT
In December 2014 and November 2012, we issued $6.0 billion
and $3.0 billion of unsecured senior notes as described in
the table below (collectively, the “Notes”). As of December 31,
2014 and 2013, the unamortized discount on the Notes was $96
million and $23 million. We also have other long-term debt with
a carrying amount, including the current portion, of $881
million and $967 million as of December 31, 2014 and 2013.
The face value of our total long-term debt obligations is as
follows
(in millions):
December 31,
2014 2013
0.65% Notes due on November 27, 2015 (1) $ 750 $ 750

1.20% Notes due on November 29, 2017 (1) 1,000 1,000
2.50% Notes due on November 29, 2022 (1) 1,250 1,250
2.60% Notes due on December 5, 2019 (2) 1,000 —
Other long-term debt 881 967
Total debt 9,881 3,967
Less current portion of long-term debt (1,520) (753)
Face value of long-term debt $ 8,361 $ 3,214
_____________________________
(1) Issued in November 2012, effective interest rates of the
2015, 2017, and 2022 Notes were 0.84%, 1.38%, and 2.66%.
(2) Issued in December 2014, effective interest rates of the
2019, 2021, 2024, 2034, and 2044 Notes were 2.73%, 3.43%,
3.90%,
4.92%, and 5.11%.
Interest on the Notes issued in 2014 is payable semi-annually in
arrears in June and December. Interest on the Notes issued
in 2012 is payable semi-annually in arrears in May and
November. We may redeem the Notes at any time in whole, or
from time
to time, in part at specified redemption prices. We are not
subject to any financial covenants under the Notes. The
proceeds from
the Notes are used for general corporate purposes. The
estimated fair value of the Notes was approximately $9.1 billion
and $2.9
billion as of December 31, 2014 and 2013, which is based on
quoted prices for our publicly-traded debt as of those dates.

The other debt, including the current portion, had a weighted
average interest rate of 5.5% as of December 31, 2014 and
2013. We used the net proceeds from the issuance of this debt
primarily to fund certain international operations. The estimated
fair value of the other long-term debt, which is based on Level 2
inputs, approximated its carrying value as of December 31,
2014 and 2013.
As of December 31, 2014, future principal payments for our
total debt were as follows (in millions):
2015 $ 1,520
2016 36
2017 1,037
2018 38
2019 1,000
Thereafter 6,250
$ 9,881
On September 5, 2014, we entered into an unsecured revolving
credit facility (the “Credit Agreement”) with a syndicate of
lenders that provides us with a borrowing capacity of up to $2.0
billion. The Credit Agreement has a term of two years, but it
may be extended for up to three additional one-year terms if
approved by the lenders. The initial interest rate applicable to
outstanding balances under the Credit Agreement is the London
interbank offered rate (“LIBOR”) plus 0.625%, under our
current credit ratings. If our credit ratings are downgraded this
rate could increase to as much as LIBOR plus 1.00%. There
were
no borrowings outstanding under the Credit Agreement as of
December 31, 2014.

58
Note 7—OTHER LONG-TERM LIABILITIES
Our other long-term liabilities are summarized as follows (in
millions):
December 31,
2014 2013
Long-term capital lease obligations $ 3,026 $ 1,435
Long-term finance lease obligations 1,198 555
Construction liabilities 467 385
Tax contingencies 510 457
Long-term deferred tax liabilities 1,021 571
Other 1,188 839
Total other long-term liabilities $ 7,410 $ 4,242
Capital and Finance Leases
Certain of our equipment, primarily related to technology
infrastructure, and buildings have been acquired under capital
leases. Long-term capital lease obligations are as follows (in
millions):
December 31, 2014
Gross capital lease obligations $ 5,182
Less imputed interest (143)
Present value of net minimum lease payments 5,039
Less current portion of capital lease obligations (2,013)
Total long-term capital lease obligations $ 3,026
We continue to be the deemed owner after occupancy of certain

facilities that were constructed as build-to-suit lease
arrangements and previously reflected as “Construction
liabilities.” As such, these arrangements are accounted for as
finance
leases. Long-term finance lease obligations are as follows (in
millions):
December 31, 2014
Gross finance lease obligations $ 1,629
Less imputed interest (364)
Present value of net minimum lease payments 1,265
Less current portion of finance lease obligations (67)
Total long-term finance lease obligations $ 1,198
Construction Liabilities
We capitalize construction in progress and record a
corresponding long-term liability for build-to-suit lease
agreements
where we are considered the owner during the construction
period for accounting purposes. These liabilities primarily
relate to
our corporate buildings and fulfillment, sortation, delivery, and
data centers.
Tax Contingencies
We have recorded tax reserves for tax contingencies, inclusive
of accrued interest and penalties, for U.S. and foreign
income taxes. These contingencies primarily relate to transfer
pricing, state income taxes, and research and development
credits.
See “Note 11—Income Taxes” for discussion of tax
contingencies.

59
Note 8—COMMITMENTS AND CONTINGENCIES
Commitments
We have entered into non-cancellable operating, capital, and
finance leases for equipment and office, fulfillment, sortation,
delivery, and data center facilities. Rental expense under
operating lease agreements was $961 million, $759 million, and
$561
million for 2014, 2013, and 2012.
The following summarizes our principal contractual
commitments, excluding open orders for purchases that support
normal operations, as of December 31, 2014 (in millions):
2015 2016 2017 2018 2019 Thereafter Total
Operating and capital commitments:
Debt principal and interest $ 1,842 $ 323 $ 1,322 $ 310 $ 1,272
$ 9,403 $ 14,472
Capital leases, including interest 2,060 1,727 1,030 178 89 98
5,182
Finance lease obligations, including
interest 110 112 115 117 119 1,056 1,629
Operating leases 868 791 728 634 549 2,343 5,913
Unconditional purchase obligations (1) 489 435 351 118 38 3
1,434
Other commitments (2) (3) 928 333 160 140 90 845 2,496
Total commitments $ 6,297 $ 3,721 $ 3,706 $ 1,497 $ 2,157 $
13,748 $ 31,126

___________________
(1) Includes unconditional purchase obligations related to long-
term agreements to acquire and license digital content that are
not reflected on the consolidated balance sheets. For those
agreements with variable terms, we do not estimate the total
obligation beyond any minimum quantities and/or pricing as of
the reporting date. Purchase obligations associated with
renewal provisions solely at the option of the content provider
are included to the extent such commitments are fixed or a
minimum amount is specified.
(2) Includes the estimated timing and amounts of payments for
rent and tenant improvements associated with build-to-suit lease
arrangements that have not been placed in service and media
content liabilities associated with long-term media content
assets with initial terms greater than one year.
(3) Excludes $710 million of tax contingencies for which we
cannot make a reasonably reliable estimate of the amount and
period of payment, if any.
Pledged Assets
As of December 31, 2014 and 2013, we have pledged or
otherwise restricted $602 million and $482 million of our cash,
cash equivalents, and marketable securities, and certain
property and equipment as collateral for standby and trade
letters of
credit, guarantees, debt relating to certain international
operations, real estate leases, and amounts due to third-party
sellers in
certain jurisdictions.
Suppliers

During 2014, no vendor accounted for 10% or more of our
purchases. We generally do not have long-term contracts or
arrangements with our vendors to guarantee the availability of
merchandise, particular payment terms, or the extension of
credit
limits.
Legal Proceedings
The Company is involved from time to time in claims,
proceedings, and litigation, including the following:
In November 2007, an Austrian copyright collection society,
Austro-Mechana, filed lawsuits against Amazon.com
International Sales, Inc., Amazon EU Sarl, Amazon.de GmbH,
Amazon.com GmbH, and Amazon Logistik in the Commercial
Court of Vienna, Austria and in the District Court of Munich,
Germany seeking to collect a tariff on blank digital media sold
by
our EU-based retail websites to customers located in Austria. In
July 2008, the German court stayed the German case pending a
final decision in the Austrian case. In July 2010, the Austrian
court ruled in favor of Austro-Mechana and ordered us to report
all
sales of products to which the tariff potentially applies for a
determination of damages. We contested Austro-Mechana’s
claim
and in September 2010 commenced an appeal in the Commercial
Court of Vienna. We lost this appeal and in March 2011
commenced an appeal in the Supreme Court of Austria. In
October 2011, the Austrian Supreme Court referred the case to
the

60
European Court of Justice (ECJ). In July 2013, the European
Court of Justice ruled that EU law does not preclude application
of
the tariff where certain conditions are met and directed the case
back to the Austrian Supreme Court for further proceedings. In
October 2013, the Austrian Supreme Court referred the case
back to the Commercial Court of Vienna for further fact finding
to
determine whether the tariff on blank digital media meets the
conditions set by the ECJ. In December 2012, a German
copyright
collection society, Zentralstelle für private Überspielungsrechte
(ZPU), filed a complaint against Amazon EU Sarl, Amazon
Media EU Sarl, Amazon Services Europe Sarl, Amazon
Payments Europe SCA, Amazon Europe Holding Technologies
SCS, and
Amazon Eurasia Holdings Sarl in the District Court of
Luxembourg seeking to collect a tariff on blank digital media
sold by the
Amazon.de retail website to customers located in Germany. In
January 2013, a Belgian copyright collection society,
AUVIBEL,
filed a complaint against Amazon EU Sarl in the Court of First
Instance of Brussels, Belgium, seeking to collect a tariff on
blank
digital media sold by the Amazon.fr retail website to customers
located in Belgium. In November 2013, the Belgian court ruled
in favor of AUVIBEL and ordered us to report all sales of
products to which the tariff potentially applies for a
determination of
damages. We dispute the allegations of wrongdoing and intend
to defend ourselves vigorously in these matters.
In May 2009, Big Baboon, Inc. filed a complaint against

Amazon.com, Inc. and Amazon Payments, Inc. for patent
infringement in the United States District Court for the Central
District of California. The complaint alleges, among other
things,
that our third-party selling and payments technology infringes
patents owned by Big Baboon, Inc. purporting to cover an
“Integrated Business-to-Business Web Commerce And Business
Automation System” (U.S. Patent Nos. 6,115,690 and
6,343,275) and seeks injunctive relief, monetary damages,
treble damages, costs, and attorneys’ fees. In February 2011, the
Court
entered an order staying the lawsuit pending the outcome of the
Patent and Trademark Office’s re-examination of the patent. We
dispute the allegations of wrongdoing and intend to defend
ourselves vigorously in this matter.
In April 2011, Walker Digital LLC filed several complaints
against Amazon.com, Inc. for patent infringement in the United
States District Court for the District of Delaware. The
complaints allege that we infringe several of the plaintiff’s U.S.
patents by,
among other things, providing “cross benefits” to customers
through our promotions (U.S. Patent Nos. 7,831,470 and
7,827,056),
using a customer’s identified original product to offer a
substitute product (U.S. Patent No. 7,236,942), using our
product
recommendations and personalization features to offer
complementary products together (U.S. Patent Nos. 6,601,036
and
6,138,105), enabling customers to subscribe to a delivery
schedule for products they routinely use at reduced prices (U.S.
Patent
No. 5,970,470), and offering personalized advertising based on
customers’ preferences identified using a data pattern (U.S.
Patent No. 7,933,893). Another complaint, filed in the same

court in October 2011, alleges that we infringe plaintiff’s U.S.
Patent
No. 8,041,711 by offering personalized advertising based on
customer preferences that associate data with resource locators.
Another complaint, filed in the same court in February 2012,
alleges that we infringe plaintiff’s U.S. Patent No. 8,112,359 by
using product information received from customers to identify
and offer substitute products using a manufacturer database. In
January 2013, the plaintiff filed another complaint in the same
court alleging that we infringe U.S. Patent No. 6,381,582 by
allowing customers to make local payments for products ordered
online. All of the complaints seek monetary damages, interest,
injunctive relief, costs, and attorneys’ fees. In March 2013, the
complaints asserting U.S. Patent Nos. 7,236,942 and 7,933,893
were voluntarily dismissed with prejudice. In April 2013, the
case asserting U.S. Patent No. 8,041,711 was stayed pending
final
resolution of the reexamination of that patent. In June 2013, the
court granted defendants’ motions to dismiss the complaints
asserting U.S. Patent Nos. 7,831,470, 7,827,056, and 8,112,359
for lack of standing. In July 2013, we filed motions seeking
entry
of a final judgment dismissing those claims with prejudice and
for attorneys’ fees, and plaintiff filed notices of appeal from the
June 2013 order granting the motions to dismiss. In October
2013, the court ruled that its dismissals are with prejudice, and
Walker has appealed those rulings. In March 2014, the court
stayed the case asserting U.S. Patent Nos. 6,601,036 and
6,138,105
pending the appeal of the cases asserting U.S. Patent Nos.
7,831,470, 7,827,056, and 8,112,359. In September 2014, the
court
dismissed the matter asserting U.S. Patent No. 6,381,582 with
prejudice. In January 2015, the court dismissed with prejudice
the
complaint asserting U.S. Patent No. 8,041,711, and the United

States Court of Appeals for the Federal Circuit affirmed the
dismissal of the complaints asserting U.S. Patent Nos.
7,831,470, 7,827,056, and 8,112,359. We dispute the remaining
allegations
of wrongdoing and intend to defend ourselves vigorously in
these matters.
In March 2012, OIP Technologies, Inc. filed a complaint against
Amazon.com, Inc. for patent infringement in the United
States District Court for the Northern District of California. The
complaint alleged, among other things, that certain aspects of
our pricing methods infringed U.S. Patent No. 7,970,713,
entitled “Method And Apparatus For Automatic Pricing In
Electronic
Commerce.” The complaint sought three times an unspecified
amount of damages, attorneys’ fees, and interest. In September
2012, the court invalidated the plaintiff’s patent and dismissed
the case with prejudice. In September 2012, OIP appealed the
judgment of the district court to the United States Court of
Appeals for the Federal Circuit, which, in November 2012,
stayed all
proceedings pending its decision in a separate case that raises a
related question of law and, in June 2013, continued the stay
pending a decision by the United States Supreme Court. In July
2014, the court of appeals lifted the stay. We dispute the
allegations of wrongdoing and intend to defend ourselves
vigorously in this matter.
In June 2012, Hand Held Products, Inc., a subsidiary of
Honeywell, filed a complaint against Amazon.com, Inc., AMZN
Mobile, LLC, AmazonFresh, LLC, A9.com, Inc., A9
Innovations, LLC, and Quidsi, Inc. in the United States District
Court for
the District of Delaware. The complaint alleges, among other
things, that the use of mobile barcode reader applications,

61
including Amazon Mobile, Amazon Price Check, Flow, and
AmazonFresh, infringes U.S. Patent No. 6,015,088, entitled
“Decoding Of Real Time Video Imaging.” The complaint seeks
an unspecified amount of damages, interest, and an injunction.
We dispute the allegations of wrongdoing and intend to defend
In July 2012, Norman Blagman filed a purported class-action
complaint against Amazon.com, Inc. for copyright
infringement in the United States District Court for the
Southern District of New York. The complaint alleges, among
other
things, that Amazon.com, Inc. sells digital music in our Amazon
MP3 Store obtained from defendant Orchard Enterprises and
other unnamed “digital music aggregators” without obtaining
mechanical licenses for the compositions embodied in that
music. The complaint seeks certification as a class action,
statutory damages, attorneys’ fees, and interest. We dispute the
allegations of wrongdoing and intend to defend ourselves
vigorously in this matter.
In August 2012, an Australian quasi-government entity named
Commonwealth Scientific and Industrial Research
Organization filed a complaint against Amazon.com, Inc. in the
United States District Court for the Eastern District of Texas.
The
complaint alleges, among other things, that the sale of “products
which are operable according to the Institute of Electrical and
Electronics Engineers (“IEEE”) 802.11a, g, n, and/or draft n
standards” infringe U.S. Patent No. 5,487,069, entitled
“Wireless
LAN.” The complaint seeks an unspecified amount of damages,

enhanced damages, attorneys’ fees, and injunctive relief. We
dispute the allegations of wrongdoing and intend to defend
In November 2012, Lexington Luminance LLC filed a complaint
against Amazon.com, Inc. and Amazon Digital Services,
Inc. in the United States District Court for the District of
Massachusetts. The complaint alleges, among other things, that
certain
light-emitting diodes in certain Kindle devices infringe U.S.
Patent No. 6,936,851, entitled “Semiconductor Light-Emitting
Device And Method For Manufacturing Same.” The complaint
seeks an unspecified amount of damages and an injunction or, in
the absence of an injunction, a compulsory ongoing royalty. In
March 2014, the Court invalidated the plaintiff’s patent and
dismissed the case with prejudice, and the plaintiff appealed the
judgment to the United States Court of Appeals for the Federal
Circuit. We dispute the allegations of wrongdoing and intend to
defend ourselves vigorously in this matter.
In May 2013, Adaptix, Inc. filed a complaint against
Amazon.com, Inc. in the United States District Court for the
Eastern
District of Texas. The complaint alleges, among other things,
that certain Kindle devices infringe U.S. Patent Nos. 7,454,212
and
6,947,748, both entitled “OFDMA With Adaptive Subcarrier-
Cluster Configuration And Selective Loading.” The complaint
seeks an unspecified amount of damages, interest, injunctive
relief, and attorneys’ fees. In March 2014, the case was
transferred
to the United States District Court for the Northern District of
California. We dispute the allegations of wrongdoing and intend
to
defend ourselves vigorously in this matter.

In July 2013, Telebuyer, LLC filed a complaint against
Amazon.com, Inc., Amazon Web Services, LLC, and VADATA,
Inc. in the United States District Court for the Eastern District
of Virginia. The complaint alleges, among other things, that
certain features used on our retail website—including high
resolution video and still images, user-indicated areas of
interest,
targeted follow-up communications, vendor proposals, on-line
chat, Gold Box and Lightning Deals, and vendor ratings—
infringe
seven U.S. patents: Nos. 6,323,894, 7,835,508, 7,835,509,
7,839,984, 8,059,796, and 8,098,272, all entitled “Commercial
Product Routing System With Video Vending Capability,” and
8,315,364, entitled “Commercial Product Routing System With
Mobile Wireless And Video Vending Capability.” The
complaint seeks an unspecified amount of damages, interest,
and
injunctive relief. In September 2013, the case was transferred to
the United States District Court for the Western District of
Washington. We dispute the allegations of wrongdoing and
intend to defend ourselves vigorously in this matter.
In August 2013, Cellular Communications Equipment, LLC
filed a complaint against Amazon.com, Inc. in the United
States District Court for the Eastern District of Texas. The
complaint alleges, among other things, that certain Kindle
devices
infringe U.S. Patent Nos.: 6,819,923, entitled “Method For
Communication Of Neighbor Cell Information”; 7,215,962,
entitled
“Method For An Intersystem Connection Handover”; 7,941,174,
entitled “Method For Multicode Transmission By A Subscriber
Station”; and 8,055,820 entitled “Apparatus, System, And
Method For Designating A Buffer Status Reporting Format
Based On
Detected Pre-Selected Buffer Conditions.” In March 2014, the

plaintiff filed an amended complaint that alleges, among other
things, that certain Kindle devices infringe U.S. Patent No.
8,055,820, entitled “Apparatus, System, And Method For
Designating
A Buffer Status Reporting Format Based On Detected Pre-
Selected Buffer Conditions.” The amended complaint seeks an
unspecified amount of damages and interest. In January 2015,
the court dismissed with prejudice the claim of infringement of
U.S. Patent No. 7,215,962. We dispute the allegations of
wrongdoing and intend to defend ourselves vigorously in this
matter.
Beginning in August 2013, a number of complaints were filed
alleging, among other things, that Amazon.com, Inc. and
several of its subsidiaries failed to compensate hourly workers
for time spent waiting in security lines and otherwise violated
federal and state wage and hour statutes and common law. In
August 2013, Busk v. Integrity Staffing
Solution
s, Inc. and
Amazon.com, Inc. was filed in the United States District Court
for the District of Nevada, and Vance v. Amazon.com, Inc.,
Zappos.com Inc., another affiliate of Amazon.com, Inc., and
Kelly Services, Inc. was filed in the United States District Court
for
the Western District of Kentucky. In September 2013, Allison v.
Amazon.com, Inc. and Integrity Staffing

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