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Amazon.com Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: July 27, 2012 06:11AM
Amazon.com Inc. (AMZN) filed Quarterly Report for the period ended 2012-06-30.
Highlight of Business Operations:Cash provided by (used in) investing activities corresponds with 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 $(595) million and $(951) million for Q2 2012 and Q2 2011, and $(144) million and $(561) million for the six months ended June 30, 2012 and 2011, with the variability caused primarily by purchases, maturities, and sales of marketable securities and other investments, increased capital expenditures, and increases in cash paid for acquisitions. Capital expenditures were $657 million and $433 million during Q2 2012 and Q2 2011, and $1.04 billion and $731 million for the six months ended June 30, 2012 and 2011, with the increases primarily reflecting additional investments in support of continued business growth due to investments in technology infrastructure, including AWS, and additional capacity to support our fulfillment operations. We expect this trend to continue over time. Capital expenditures included $91 million and $62 million for internal-use software and website development during Q2 2012 and Q2 2011, and $167 million and $115 million for the six months ended June 30, 2012 and 2011. Stock-based compensation capitalized for internal-use software and website development costs does not affect cash flows. We made cash payments, net of acquired cash, related to acquisition and other investment activity of $624 million and $469 million during Q2 2012 and Q2 2011, and $673 million and $608 million during the six months ended June 30, 2012 and 2011.
We recorded net tax provisions of $109 million and $49 million in Q2 2012 and Q2 2011, and $151 million and $138 million for the six months ended June 30, 2012 and 2011. A majority of this provision is non-cash. We have current tax benefits and net operating losses relating to excess stock-based compensation deductions that are being utilized to reduce our U.S. taxable income. Except as required under U.S. tax law, 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. Cash taxes paid (net of refunds) were $20 million and $(1) million for Q2 2012 and Q2 2011, and $39 million and $6 million for the six months ended June 30, 2012 and 2011. As of December 31, 2011, our federal net operating loss carryforward was approximately $384 million and we had approximately $273 million of federal tax credits potentially available to offset future tax liabilities. Once we utilize federal net operating losses and tax credits, we expect cash paid for taxes to significantly increase. We endeavor to optimize our global taxes on a cash basis, rather than on a financial reporting basis.
Sales increased 29% in Q2 2012 and 32% for the six months ended June 30, 2012, compared to the comparable prior year periods. Changes in currency exchange rates impacted net sales by $(272) million for Q2 2012 and $477 million for Q2 2011, and by $(328) million and $621 million for the six months ended June 30, 2012 and 2011. For a discussion of the effect on sales growth of exchange rates, see Effect of Exchange Rates below.
International sales grew 22% in Q2 2012 and 27% for the six months ended June 30, 2012, compared to the comparable prior year periods. The sales growth primarily reflects increased unit sales, partially offset by a higher percentage of 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 currency exchange rates impacted International net sales by $(269) million for Q2 2012 and by $473 million for Q2 2011, and $(323) million and $614 million for the six months ended June 30, 2012 and 2011. We expect that, over time, our International segment will represent 50% or more of our consolidated net sales.
Our interest income was $10 million and $16 million during Q2 2012 and Q2 2011, and $22 million and $31 million for the six months ended June 30, 2012 and 2011. 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 and the prevailing rates we are earning on them, which vary depending on the geographies and currencies in which they are invested.
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