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Fiscal Year FocusDocument Fiscal Period FocusQ1Trading SymbolAMZNEntity Registrant NameAMAZON COM INCEntity Central Index Key 0001018724Current Fiscal Year End Date--12-31Entity Filer CategoryLarge Accelerated Filer'Entity Common Stock, Shares Outstanding-CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Millions3 Months Ended Mar. 31, 2009 12 Months Ended Mar. 31, 2010 12 Months Ended Mar. 31, 2009 .CASH AND CASH EQUIVALENTS, BEGINNING OF PERIODOPERATING ACTIVITIES: Net incomeJAdjustments to reconcile net income to net cash from operating activities:mDepreciation of fixed assets, including internal-use software and website development, and other amortizationStock-based compensation%Other operating expense (income), net5Losses (gains) on sales of marketable securities, netOther expense (income), netDeferred income taxes;Excess tax charges (benefits) from stock-based compensation,Changes in operating assets and liabilities: Inventories"Accounts receivable, net and otherAccounts payableAccrued expenses and otherAdditions to unearned revenue+Amortization of previously unearned revenue3Net cash provided by (used in) operating activitiesINVESTING ACTIVITIES:RPurchases of fixed assets, including internal-use software and website development-Acquisitions, net of cash acquired, and otherCSales and maturities of marketable securities and other investments8Purchases of marketable securities and other investments3Net cash provided by (used in) investing activitiesFINANCING ACTIVITIES:;Excess tax benefits (charges) from stock-based compensationCommon stock repurchased&Proceeds from long-term debt and other:Repayments of long-term debt and capital lease obligations3Net cash provided by (used in) financing activities4Foreign-currency effect on cash and cash equivalents4Net increase (decrease) in cash and cash equivalents(CASH AND CASH EQUIVALENTS, END OF PERIOD-CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)"In Millions, except Per Share data Net salesOperating expenses: Cost of sales Fulfillment[1] MarketingTechnology and contentGeneral and administrativeTotal operating expensesIncome from operationsInterest incomeInterest expenseOther income (expense), net$Total non-operating income (expense)Income before income taxesProvision for income taxes-Equity-method investment activity, net of taxBasic earnings per shareDiluted earnings per shareBWeighted average shares used in computation of earnings per share:BasicDiluted [1]Includes stock-based compensation as follows: Fulfillment $ 18 $ 15 Marketing 5 4 Technology and content 47 36 General and administrative 17 12=CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $)%Stock-based compensation, Fulfillment#Stock-based compensation, Marketing0Stock-based compensation, Technology and content4Stock-based compensation, General and administrative#CONSOLIDATED BALANCE SHEETS (USD $) 12 Months Ended Dec. 31, 2009 Current assets:Cash and cash equivalentsMarketable securitiesDeferred tax assetsTotal current assetsFixed assets, netGoodwill Other assets Total assetsCurrent liabilities:Total current liabilitiesLong-term debtOther long-term liabilitiesCommitments and contingenciesStockholders' equity:^Preferred stock, $0.01 par value: Authorized shares - 500 Issued and outstanding shares - noneuCommon stock, $0.01 par value: Authorized shares - 5,000 Issued shares - 462 and 461 Outstanding shares - 446 and 444Treasury stock, at costAdditional paid-in capital$Accumulated other comprehensive lossRetained earningsTotal stockholders' equity*Total liabilities and stockholders' equity3CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)-Share data in Millions, except Per Share dataMar. 31, 2010 Dec. 31, 2009 < Preferred stock, par value"Preferred stock, Authorized sharesPreferred stock, Issued shares#Preferred stock, outstanding sharesCommon stock, par valueCommon stock, Authorized sharesCommon stock, Issued shares Common stock, Outstanding sharesAccounting Policies�  Note 1 Accounting Policies Unaudited Interim Financial Information We have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) for interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2010 due to seasonal and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item8 of Part II, Financial Statements and Supplementary Data, of our 2009 Annual Report on Form 10-K. Prior Period Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation.We no longer present gross profit in our consolidated statement of operations as we believe income from operations is a more meaningful measure due to the diversity of our product categories and services. 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 are the primary beneficiary (collectively, the Company). Intercompany balances and transactions have been 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. Estimates are used for, but not limited to, valuation of inventory, sales returns, income taxes, stock-based compensation, valuation of acquired intangibles and goodwill, determining the selling price of deliverables in multiple element revenue arrangements, contingencies, valuation of investments, collectability of receivables, incentive discount offers, and depreciable lives of fixed assets and internally-developed software. Actual results could differ materially from those estimates. Recent Accounting Pronouncements In June 2009, the Financial Accounting Standards Board (FASB) issued authoritative guidance on the consolidation of variable interest entities. The new guidance requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (VIE), and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. We adopted this guidance on January1, 2010. Adoption did not have a material impact on our consolidated fi1Cash, Cash Equivalents, and Marketable Securities�  Note 2 Cash, Cash Equivalents, and Marketable Securities As of March31, 2010, and December31, 2009, our cash, cash equivalents, and marketable securities primarily consisted of cash, government and government agency securities, AAA-rated money market funds, and other investment grade securities. Our marketable fixed-income securities have maturities of less than 5 years. Cash equivalents and marketable securities are recorded at fair value. 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 be< tween 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: Level1Valuations based on quoted prices for identical assets and liabilities in active markets. Level2Valuations 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. Level3Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. 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 securities categorized as Level 3 as of March31, 2010, or December31, 2009. 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): March31, 2010 December31, 2009 Cost or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Total Estimated FairValue Total Estimated Fair Value Cash $ 412 $ 0 $ 0 $ 412 $ 391 Level 1 securities: Money market funds 1,262 0 0 1,262 2,750 Equity securities 1 0 0 1 1 Level 2 securities: Foreign government and agency securities 1,537 10 0 1,547 1,999 U.S. government and agency securities 1,894 5 (2 ) 1,897 1,268 Corporate debt securities (1) 209 5 0 214 211 Asset-backed securities 39 2 0 41 46 Other fixed income securities 7 0 0 7 6 $ 5,361 $ 22 $ (2 ) 5,381 6,672 Less: Long-term marCommitments and Contingencies�  Note 3 Commitments and Contingencies Commitments We have entered into non-cancellable operating and capital leases for fixed assets and office, fulfillment, and data center facilities. Rental expense under operating lease agreements was $48 million and $41 million for Q1 2010 and Q1 2009. In December 2007, we entered into a series of leases and other agreements for the lease of corporate office space to be developed in Seattle, Washington, with initial terms of up to 16 years commencing on completion of development between 2010 and 2013, with options to extend for two five-year periods. Related to these leases, we expect to occupy approximately 1.7million square feet of office space. We also have an option to lease up to an additional approximately 500,000 square feet at rates based on fair market values at the time the option is exercised, subject to certain conditions. In addition, if interest rates exceed a certain threshold, we have the option to provide financing for one of the buildings. The following summarizes our principal contractual commitments, excluding open orders for inventory purchases that support normal operations, as of March31, 2010: Nine Months Ended December31, 2010 Year Ended December31, Thereafter Total 2011 2012 2013 2014 (in millions) Operating and capital commitments: Debt principal and interes< t $ 42 $ 52 $ 59 $ 58 $ $ $ 211 Capital leases, including interest 110 114 63 13 5 0 305 Operating leases 134 169 157 149 144 283 1,036 Other commitments (1)(2) 175 105 91 87 86 1,157 1,701 Total commitments $ 461 $ 440 $ 370 $ 307 $ 235 $ 1,440 $ 3,253 (1) Includes the estimated timing and amounts of payments for rent, operating expenses, and tenant improvements associated with approximately 1.7million square feet of corporate office space being developed in Seattle, Washington. The amount of space available and our financial and other obligations under the lease agreements are affected by various factors, including government approvals and permits, interest rates, development costs, and other expenses and our exercise of certain rights under the lease agreements. (2) Excludes $184 million of tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any. Pledged Securities We have pledged or otherwise restricted a portion of our cash and marketable securities as collateral for standby and trade letters of credit, guarantees, debt and real estate leases. We classify cash and marketable securities with use restrictions of twelve months or longer as non-current Other assets on our consolidated balance sheets. The amount required to be pledged for certain real estate lease agreements changes over the life of our leases based on our credit rating and changes in our market capitalization. Information about collaterStockholders' Equity� Note 4 Stockholders Equity Stock Award Activity We granted restricted stock units representing 2.4million and 0.6million shares of common stock during Q1 2010 and Q1 2009 with a per share weighted average fair value of $134.18 and $58.74. In March 2010, we granted approximately 2.0million annual stock awards and we expect to grant additional annual stock awards in Q2 2010. In 2009, we granted all of our annual stock awards in Q2. Common shares outstanding plus shares underlying outstanding stock awards totaled 463million and 461million at March31, 2010 and December31, 2009. These totals include all stock-based awards outstanding, excluding estimated forfeitures. The following table summarizes our restricted stock unit activity for Q1 2010 (inmillions): NumberofUnits Outstanding at December 31, 2009 15.7 Units granted 2.4 Units vested (0.9 ) Units forfeited (0.3 ) Outstanding at March 31, 2010 16.9 Scheduled vesting for outstanding restricted stock units at March31, 2010 is as follows (in millions): Nine Months Ended December31, 2010 Year Ended December31, Thereafter Total 2011 2012 2013 2014 Scheduled vesting restricted stock units 4.9 5.7 3.9 1.8 0.4 0.2 16.9 As of March31, 2010, there was $557 million of net unrecognized compensation cost related to unvested stock-based compensation arrangements. This compensation is recognized on an accelerated basis, with approximately half of the compensation expected to be expensed in the next twelve months, and has a weighted average recognition period of 1.2 years. Comprehensive IncomeU Note 5 Comprehensive Income Comprehensive income was $210 million and $157 million for Q1 2010 and Q1 2009. The primary differences between net income as reported and comprehensive income are foreign currency translation adjustments, net of tax, and changes in unrealized gains and losses on available-for-sale securities, net of tax. Income TaxesE  Note 6 Income Taxes Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the < annual effective tax rate, and if our estimated tax rate changes we make a cumulative adjustment. The 2010 annual effective tax rate is estimated to be lower than the 35% U.S. federal statutory rate primarily due to anticipated earnings of our subsidiaries in jurisdictions where our effective tax rate is lower than in the U.S. Cash paid for income taxes was $4 million and $11 million in Q1 2010 and Q1 2009. As of March31, 2010, and December31, 2009, tax contingencies (gross unrecognized tax benefits) were $184 million and $181 million. Due to the nature of our business operations, we expect the total amount of tax contingences for prior period tax positions will grow over the next 12 months in comparable amounts to the prior 12 months. We do not believe it is reasonably possible that the total amount of tax contingencies will significantly decrease within the next 12 months. We are under examination, or may be subject to examination, by the Internal Revenue Service (IRS) for calendar years 2005 through 2009. Additionally, any net operating losses that were generated in prior years and utilized in 2005 through 2009 may also be subject to examination by the IRS. We are under examination, or may be subject to examination, in the following major jurisdictions for the years specified: Kentucky for 2005 through 2009, France for 2007 through 2009, Germany for 2003 through 2009, Luxembourg for 2005 through 2009, and the United Kingdom for 2004 through 2009. In addition, in 2007, Japanese tax authorities assessed income tax, including penalties and interest, of approximately $120 million against one of our U.S. subsidiaries for the years 2003 through 2005. We believe that these claims are without merit and are disputing the assessment. Further proceedings on the assessment have been stayed during negotiations between U.S. and Japanese authorities over the double taxation issues the assessment raises, and we have provided bank guarantees to suspend enforcement of the assessment. We also may be subject to income tax examination by Japanese tax authorities for 2006 through 2009. Segment Information2  Note 7 Segment Information We have organized our operations into two principal segments: North America and International. We present our segment information along the same lines that our chief executive reviews our operating results in assessing performance and allocating resources. We allocate operating expenses to segment results, excluding the line item Other operating expense (income), net and operating expenses attributable to stock-based compensation. A significant majority of our costs for Technology and content are incurred in the United States and most of these costs are allocated to our North America segment. There are no internal revenue transactions between our reporting segments. Information on reportable segments and reconciliation to consolidated net income was as follows: ThreeMonthsEnded March31, 2010 2009 (in millions) North America Net sales $ 3,780 $ 2,578 Operating expenses Cost of sales 2,761 1,884 Direct segment operating expenses (1) 746 544 Segment operating income $ 273 $ 150 International Net sales $ 3,351 $ 2,311 Operating expenses Cost of sales 2,740 1,857 Direct segment operating expenses (1) 377 282 Segment operating income $ 234 $ 172 Consolidated Net sales $ 7,131 $ 4,889 Operating expenses Cost of sales 5,501 3,741 Direct segment operating expenses (1) 1,123 826 Segment operating income 507 322 Stock-based compensation (87 ) (67 ) Other operating income (expense), net (26 ) (11 ) Income from operations 394 244 Total non-operating income (expense) 7 4 Provis<�ion for income taxes (100 ) (69 ) Equity-method investment activity, net of tax (2 ) (2 ) Net income $ 299 $ 177 (1) Represents the fulfillment, marketing, technology and content, and general and administrative operating expenses, excluding stock-based compensation, that are allocated to segments. ��# M 6U>������ =&9"1���#� &�''�)��+��-~z� F���  ó  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$  ��������� � � � �� � � � � � � � � �  ~ h�@�  �  �  �  � � � � � � � � � ~ V�Aj�l�&>�@�dd�7 F��� $��N�  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$ $��������� � � � � �������������������� � � � � � � ��@��@��@`�@� � ��r@ f@�@8�@� �  ��]@�U@�y@Ps@� !��U@�P@�v@r@� "�:@&@�]@3�� #� ���� $� �@7�>�� %� 4��O@,@� &� �U��H��a� b�� '� (�t@�Z@�s�q�� )�`|@�d@`h��g�� *������� �@p�@� +��v��^�N@ o@� ,��g@�i@0�@�@� -�`l��Z�0�� x�� .�(��H����@t�@� /� 0��a��K��|�`t�� 1�3�.��E�`c�� 2�@�@�s@��@�@� 3����px����X��� 4����`b�X������ 5� 6��U@�H@�a@ b@� 7�Y�� 8�O@@_@H@� 9��N�pu�e����D�lF000000000000000000000000 �!�"�#�� :� �U@0r�@X@ ��� !;�!�G��F�� c�� "<�"������a@�i@� #=�#М@��@М@��@� <000>�@�dd�7 F��� ��  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �} �} �} �$ ��������� � � � � �������������� >� ?� � � @~ ۻ@~ �@� A� B~ }�@~ :�@� C~ �@� D~ `z@� D� E~  i@� D~ `@� D� F~ �v@� D~ 0q@� D� G~ @X@� D~ Q@� D� "~ :@ ~ &@ � H~ Q�@ ~ %�@ � I~ �x@ ~ �n@ � J~ &@ ~ (@ � K~ � ~ (� � L~ @~ @� M~ @~ @� N~ y@~ o@� O~ Y�~ @Q�� P~ �~ �� ~ !�r@~ ! f@� Q~  �P@~  �D@� R~  �P@~  �D@� S� T~ �{@~ �z@� U~ `|@~ P{@� V�8��*>">FFFF>>>>>>>>>>>>>">>>�@�dd� �7 F��� f�  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$ ������� W� � � � X�2@.@� Y�@@� Z��G@B@� [�1@(@�@d*$$$>�@�dd�7 F��� �  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$ ��������� � � � � ������������������ \� � � ]� ^� _�М@�@� `�&�@Ԧ@� (�p�@��@� )�x�@��@� a��p@q@� b��@�"�@� c� p�@(�@� a� 0@2@� d� H�@H�@� e� ��@�@� f� ��@���@� g� *�F�@�@� +���@|�@� h�I�@ļ@� i�``@@[@� j�0�@�@� k� l� l� m� n� l� l� o�@@� p�������� q���@h�@� r� b�L�� s�p}@�e@� t��@��@� u�!��@!���@�@JD*$$$$$$$$$$$$$$$$**$$$$$$>�@�dd�7 F���  ��  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$  ��������� �� v� w� x� y� z� �? �?� {�@@@@� |�� }�� ~� �? �?� ���@��@� ���|@�|@� �� �{@�{@� �*$$$$$$$>�@�dd�7 F��� ��  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$ ���� �� � �� �� ~(>�@�dd�7 F��� Z�  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$ ���� �� � �� �� ~(>�@�dd�7 F��� )�  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$ ���� �� � �� �� ~(>�@�dd�7 F��� ��  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$ ���� �� � �� �� ~(>�@�dd�7 F��� ��  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$ ���� �� � �� �� ~(>�@�dd�7 F��� ��  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$ ���� �� � �� �� ~(>�@�dd�7 F��� e�  d����MbP?_*+��%������" dFXX�?�?U} �<} �} �$ ���� �� � �� �� ~(>�@�dd�7 ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������Oh��+'��0P(�08� sshxbrl����՜.��+,��D��՜.��+,��l(� � 4 $�,�