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Amazon.com Announces Fourth Quarter Sales up 38% to $60.5 Billion

SEATTLE--(BUSINESS WIRE)--

Amazon.com, Inc. (AMZN) today announced financial results for its fourth quarter ended December 31, 2017.

Operating cash flow increased 7% to $18.4 billion for the trailing twelve months, compared with $17.3 billion for the trailing twelve months ended December 31, 2016. Free cash flow decreased to $8.4 billion for the trailing twelve months, compared with $10.5 billion for the trailing twelve months ended December 31, 2016. Free cash flow less lease principal repayments decreased to $3.4 billion for the trailing twelve months, compared with $6.5 billion for the trailing twelve months ended December 31, 2016. Free cash flow less finance lease principal repayments and assets acquired under capital leases decreased to an outflow of $1.5 billion for the trailing twelve months, compared with an inflow of $4.7 billion for the trailing twelve months ended December 31, 2016.

Common shares outstanding plus shares underlying stock-based awards totaled 504 million on December 31, 2017, compared with 497 million one year ago.

Fourth Quarter 2017

Net sales increased 38% to $60.5 billion in the fourth quarter, compared with $43.7 billion in fourth quarter 2016. Excluding the $1.1 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 36% compared with fourth quarter 2016.

Operating income increased 69% to $2.1 billion in the fourth quarter, compared with operating income of $1.3 billion in fourth quarter 2016.

Net income was $1.9 billion in the fourth quarter, or $3.75 per diluted share, compared with net income of $749 million, or $1.54 per diluted share, in fourth quarter 2016. The fourth quarter 2017 includes a provisional tax benefit for the impact of the U.S. Tax Cuts and Jobs Act of 2017 of approximately $789 million.

Full Year 2017

Net sales increased 31% to $177.9 billion, compared with $136.0 billion in 2016. Excluding the $210 million favorable impact from year-over-year changes in foreign exchange rates throughout the year, net sales increased 31% compared with 2016.

Operating income decreased 2% to $4.1 billion, compared with operating income of $4.2 billion in 2016.

Net income was $3.0 billion, or $6.15 per diluted share, compared with net income of $2.4 billion, or $4.90 per diluted share, in 2016.

Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We dont see positive surprises of this magnitude very often expect us to double down, said Jeff Bezos, Amazon founder and CEO. Weve reached an important point where other companies and developers are accelerating adoption of Alexa. There are now over 30,000 skills from outside developers, customers can control more than 4,000 smart home devices from 1,200 unique brands with Alexa, and were seeing strong response to our new far-field voice kit for manufacturers. Much more to come and a huge thank you to our customers and partners.

Highlights

Financial Guidance

The following forward-looking statements reflect Amazon.coms expectations as of February 1, 2018, 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 customer spending, world events, the rate of growth of the Internet, online commerce, and cloud services, and the various factors detailed below.

First Quarter 2018 Guidance

A conference call will be webcast live today at 2:30 p.m. PT/5:30 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Companys financial and operating results.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products and services sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income or other 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, proposed and completed acquisitions and strategic transactions, payments risks, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risks related to new products, services, and technologies, system interruptions, government regulation and taxation, and fraud. In addition, the current global economic climate amplifies many of these risks. More information about factors that potentially could affect Amazon.coms financial results is included in Amazon.coms filings with the Securities and Exchange Commission (SEC), including its most recent Annual Report on Form 10-K and subsequent filings.

Story Continues

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 SEC, corporate governance information (including our Code of Business Conduct and Ethics), and select press releases and social media postings, which may contain material information about us, and you may subscribe to be notified of new information posted to this site.

About Amazon

Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are some of the products and services pioneered by Amazon. For more information, visit www.amazon.com/about and follow @AmazonNews.

  AMAZON.COM, INC. Consolidated Statements of Cash Flows (in millions)       Three Months Ended December 31,   Twelve Months Ended December 31,     2016   2017   2016   2017     (unaudited)         CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   $ 13,656     $ 12,767     $ 15,890     $ 19,334   OPERATING ACTIVITIES:                 Net income   749     1,856     2,371     3,033   Adjustments to reconcile net income to net cash from operating activities:                 Depreciation of property and equipment, including internal-use software and website development, and other amortization, including capitalized content costs   2,297     3,498     8,116     11,478   Stock-based compensation   887     1,179     2,975     4,215   Other operating expense, net   31     56     160     202   Other expense (income), net   21     (5 )   (20 )   (292 ) Deferred income taxes   (282 )   (308 )   (246 )   (29 ) Changes in operating assets and liabilities:                 Inventories   (1,043 )   (2,255 )   (1,426 )   (3,583 ) Accounts receivable, net and other   (1,924 )   (2,781 )   (3,367 )   (4,786 ) Accounts payable   7,283     8,907     5,030     7,175   Accrued expenses and other   2,254     2,061     1,724     283   Unearned revenue   714     136     1,955     738   Net cash provided by (used in) operating activities (1)   10,987     12,344     17,272     18,434   INVESTING ACTIVITIES:                 Purchases of property and equipment, including internal-use software and website development   (2,414 )   (3,619 )   (7,804 )   (11,955 ) Proceeds from property and equipment incentives   409     583     1,067     1,897   Acquisitions, net of cash acquired, and other   (3 )   (81 )   (116 )   (13,972 ) Sales and maturities of marketable securities   1,233     3,564     4,733     9,988   Purchases of marketable securities   (3,399 )   (2,479 )   (7,756 )   (13,777 ) Net cash provided by (used in) investing activities   (4,174 )   (2,032 )   (9,876 )   (27,819 ) FINANCING ACTIVITIES:                 Proceeds from long-term debt and other   537     61     621     16,231   Repayments of long-term debt and other   (84 )   (1,170 )   (354 )   (1,372 ) Principal repayments of capital lease obligations   (1,004 )   (1,472 )   (3,860 )   (4,799 ) Principal repayments of finance lease obligations   (41 )   (66 )   (147 )   (200 ) Net cash provided by (used in) financing activities (1)   (592 )   (2,647 )   (3,740 )   9,860   Foreign currency effect on cash and cash equivalents   (543 )   90     (212 )   713   Net increase (decrease) in cash and cash equivalents   5,678     7,755     3,444     1,188   CASH AND CASH EQUIVALENTS, END OF PERIOD   $ 19,334     $ 20,522     $ 19,334     $ 20,522   SUPPLEMENTAL CASH FLOW INFORMATION:                 Cash paid for interest on long-term debt   $ 144     $ 174     $ 290     $ 328   Cash paid for interest on capital and finance lease obligations   61    

84

    206    

319

  Cash paid for income taxes, net of refunds   95     92     412     957   Property and equipment acquired under capital leases   2,038     2,770     5,704     9,637   Property and equipment acquired under build-to-suit leases   416    

843

    1,209    

3,541

  ______________________________ (1)   As a result of accounting guidance adopted in Q1 2017, we retrospectively adjusted our consolidated statements of cash flows to reclassify excess tax benefits of $336 million for the three-months ended December 31, 2016 and $829 million for the twelve-months ended December 31, 2016 from financing activities to operating activities.   AMAZON.COM, INC. Consolidated Statements of Operations (in millions, except per share data)       Three Months Ended December 31,   Twelve Months Ended December 31,     2016   2017   2016   2017     (unaudited)         Net product sales   $ 30,629     $ 41,325     $ 94,665     $ 118,573   Net service sales   13,112     19,128     41,322     59,293   Total net sales   43,741     60,453     135,987     177,866   Operating expenses:                 Cost of sales   28,958     38,494     88,265     111,934   Fulfillment   5,719     8,974     17,619     25,249   Marketing   2,513     3,440     7,233     10,069   Technology and content   4,545     6,314     16,085     22,620   General and administrative   717     1,044     2,432     3,674   Other operating expense, net   34     60     167     214   Total operating expenses   42,486     58,326     131,801     173,760   Operating income   1,255     2,127     4,186     4,106   Interest income   30     66     100     202   Interest expense   (133 )   (339 )   (484 )   (848 ) Other income (expense), net   14     18     90     346   Total non-operating income (expense)   (89 )   (255 )   (294 )   (300 ) Income before income taxes   1,166     1,872     3,892     3,806   Provision for income taxes   (414 )   (16 )   (1,425 )   (769 ) Equity-method investment activity, net of tax   (3 )       (96 )   (4 ) Net income   $ 749     $ 1,856     $ 2,371     $ 3,033   Basic earnings per share   $ 1.57     $ 3.85     $ 5.01     $ 6.32   Diluted earnings per share   $ 1.54     $ 3.75     $ 4.90     $ 6.15   Weighted-average shares used in computation of earnings per share:                 Basic   476     483     474     480   Diluted   486     496     484     493     AMAZON.COM, INC. Consolidated Statements of Comprehensive Income (in millions)       Three Months Ended December 31,   Twelve Months Ended December 31,     2016   2017   2016   2017     (unaudited)         Net income   $ 749     $ 1,856     $ 2,371     $ 3,033   Other comprehensive income (loss):                 Foreign currency translation adjustments, net of tax of $(68), $10, $(49), and $5   (412 )   47     (279 )   533   Net change in unrealized gains (losses) on available-for-sale securities:                 Unrealized gains (losses), net of tax of $22, $4, $(12), and $5   (54 )   (29 )   9     (39 ) Reclassification adjustment for losses (gains) included in Other income (expense), net, net of tax of $0, $0, $0, and $0   3     (1 )   8     7   Net unrealized gains (losses) on available-for-sale securities   (51 )   (30 )   17     (32 ) Total other comprehensive income (loss)   (463 )   17     (262 )   501   Comprehensive income   $ 286     $ 1,873     $ 2,109     $ 3,534     AMAZON.COM, INC. Segment Information (in millions)       Three Months Ended December 31,   Twelve Months Ended December 31,     2016   2017   2016   2017     (unaudited)         North America                 Net sales   $ 26,240     $ 37,302     $ 79,785     $ 106,110   Operating expenses   25,424     35,610     77,424     103,273   Operating income   $ 816     $ 1,692     $ 2,361     $ 2,837                     International                 Net sales   $ 13,965     $ 18,038     $ 43,983     $ 54,297   Operating expenses   14,452     18,957     45,266     57,359   Operating income (loss)   $ (487 )   $ (919 )   $ (1,283 )   $ (3,062 )                   AWS                 Net sales   $ 3,536     $ 5,113     $ 12,219     $ 17,459   Operating expenses   2,610     3,759     9,111     13,128   Operating income   $ 926     $ 1,354     $ 3,108     $ 4,331                     Consolidated                 Net sales   $ 43,741     $ 60,453     $ 135,987     $ 177,866   Operating expenses   42,486     58,326     131,801     173,760   Operating income   1,255     2,127     4,186     4,106   Total non-operating income (expense)   (89 )   (255 )   (294 )   (300 ) Provision for income taxes   (414 )   (16 )   (1,425 )   (769 ) Equity-method investment activity, net of tax   (3 )       (96 )   (4 ) Net income   $ 749     $ 1,856     $ 2,371     $ 3,033                     Segment Highlights:                 Y/Y net sales growth:                 North America   22 %   42 %   25 %   33 % International   18     29     24     23   AWS   47     45     55     43   Consolidated   22     38     27     31   Net sales mix:                 North America   60 %   62 %   59 %   60 % International   32     30     32     30   AWS   8     8     9     10   Consolidated   100 %   100 %   100 %   100 %   AMAZON.COM, INC. Consolidated Balance Sheets (in millions, except per share data)       December 31, 2016   December 31, 2017          

ASSETS

        Current assets:         Cash and cash equivalents   $ 19,334     $ 20,522   Marketable securities   6,647     10,464   Inventories   11,461     16,047   Accounts receivable, net and other   8,339     13,164   Total current assets   45,781     60,197   Property and equipment, net   29,114     48,866   Goodwill   3,784     13,350   Other assets   4,723     8,897   Total assets   $ 83,402     $ 131,310  

LIABILITIES AND STOCKHOLDERS EQUITY

        Current liabilities:         Accounts payable   $ 25,309     $ 34,616   Accrued expenses and other   13,739     18,170   Unearned revenue   4,768     5,097   Total current liabilities   43,816     57,883   Long-term debt   7,694     24,743   Other long-term liabilities   12,607     20,975   Commitments and contingencies         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 500 and 507         Outstanding shares 477 and 484   5     5   Treasury stock, at cost   (1,837 )   (1,837 ) Additional paid-in capital   17,186     21,389   Accumulated other comprehensive loss   (985 )   (484 ) Retained earnings   4,916     8,636   Total stockholders equity   19,285     27,709   Total liabilities and stockholders equity   $ 83,402     $ 131,310     AMAZON.COM, INC. Supplemental Financial Information and Business Metrics (in millions, except per share data) (unaudited)       Q3 2016   Q4 2016   Q1 2017   Q2 2017   Q3 2017   Q4 2017  

Y/Y %Change

Cash Flows and Shares                            

Operating cash flow trailing twelve months (TTM) (1)

  $ 15,004     $ 17,272     $ 17,634     $ 17,885     $ 17,077     $ 18,434     7 %

Operating cash flow TTM Y/Y growth

  51 %   43 %   53 %   37 %   14 %   7 %   N/A

Purchases of property and equipment, including internal-use software and website development, net of proceeds from property and equipment incentives TTM

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