Fiscal year ends in December. USD in millions except per share data.
Amazon.com Inc. (AMZN) Income Statement
2005 2006 2007 2008 2009
Revenue $ 8,490 $ 10,711 $ 14,835 $ 19,166 $ 24,509
Cost of revenue $ 6,451 $ 8,255 $ 11,482 $ 14,896 $ 18,978
Gross profit $ 2,039 $ 2,456 $ 3,353 $ 4,270 $ 5,531
Operating expenses
Sales, General and administrative $ 1,156 $ 1,405 $ 1,880 $ 2,395 $ 4,300
Other operating expenses $ 451 $ 662 $ 818 $ 1,033 $ 102
Total operating expenses $ 1,607 $ 2,067 $ 2,698 $ 3,428 $ 4,402
Operating income $ 432 $ 389 $ 655 $ 842 $ 1,129
Interest Expense $ 92 $ 78 $ 77 $ 71 $ 34
Other income (expense) $ 88 $ 66 $ 82 $ 130 $ 66
Income before income taxes $ 428 $ 377 $ 660 $ 901 $ 1,161
Provision for income taxes $ 95 $ 187 $ 184 $ 247 $ 253
Other income $ (9) $ (6)
Net income from continuing operations $ 333 $ 190 $ 476 $ 645 $ 902
Cumulative effect of accounting changes $ 26
Net income $ 359 $ 190 $ 476 $ 645 $ 902
Net income available to common shareholders $ 359 $ 190 $ 476 $ 645 $ 902
Earnings per share
Basic $ 1 $ 0 $ 1 $ 2 $ 2
Diluted $ 1 $ 0 $ 1 $ 1 $ 2
Weighted average shares outstanding
Basic $ 412 $ 416 $ 413 $ 423 $ 433
Diluted $ 426 $ 424 $ 424 $ 432 $ 442
Cap spending $ 204 $ 216 $ 224 $ 333 $ 373
Common Size Income Statement
2005 2006 2007 2008 2009
Revenue 100% 100% 100% 100% 100%
Cost of revenue 76% 77% 77% 78% 77%
Gross profit 24% 23% 23% 22% 23%
Operating expenses 0% 0% 0% 0% 0%
Sales, General and administrative 14% 13% 13% 12% 18%
Other operating expenses 5% 6% 6% 5% 0%
Total operating expenses 19% 19% 18% 18% 18%
Operating income 5% 4% 4% 4% 5%
Interest Expense 1% 1% 1% 0% 0%
Other income (expense) 1% 1% 1% 1% 0%
Income before income taxes 5% 4% 4% 5% 5%
Provision for income taxes 1% 2% 1% 1% 1%
Other income 0% 0% 0% 0% 0%
Net income from continuing operations 4% 2% 3% 3% 4%
Percentage change analysis
2005 2006 2007 2008 2009
Revenue 26% 39% 29% 28%
Cost of revenue 28% 39% 30% 27%
Gross profit 20% 37% 27% 30%
Operating expenses
Sales, General and administrative 22% 34% 27% 80%
Other operating expenses 47% 24% 26% -90%
Total operating expenses 29% 31% 27% 28%
Operating income -10% 68% 29% 34%
Interest Expense -15% -1% -8% -52%
Other income (expense) -25% 24% 59% -49%
Income before income taxes -12% 75% 37% 29%
Provision for income taxes 97% -2% 34% 2%
Other income -33%
Net income from continuing operations -43% 151% 36% 40%
Cumulative effect of accounting changes -100%
Net income -47% 151% 36% 40%
Net income avail to com shareholders -47% 151% 36% 40%
Earnings per share
Basic -47% 150% 32% 37%
Diluted -46% 149% 33% 37%
Weighted average shares outstanding
Basic 1% -1% 2% 2%
Diluted 0% 0% 2% 2%
Cap spending 6% 4% 49% 12%
Fiscal year ends in December. USD in millions except per share data.
Amazon.com Inc. (AMZN) Balance Sheet
2005 2006 2007 2008 2009
Assets
Current assets
Cash and cash equivalents $ 1,013 $ 1,022 $ 2,539 $ 2,769 $ 3,444
Short-term investments $ 987 $ 997 $ 573 $ 958 $ 2,922
Total cash $ 2,000 $ 2,019 $ 3,112 $ 3,727 $ 6,366
Receivables $ 274 $ 399 $ 705 $ 827 $ 988
Inventories $ 566 $ 877 $ 1,200 $ 1,399 $ 2,171
Deferred income taxes $ 89 $ 78 $ 147 $ 204 $ 272
Total current assets $ 2,929 $ 3,373 $ 5,164 $ 6,157 $ 9,797
Non-current assets
Property, plant and equipment
Other properties $ 571 $ 824 $ 1,023 $ 1,409 $ 1,915
Property and equipment, at cost $ 571 $ 824 $ 1,023 $ 1,409 $ 1,915
Accumulated Depreciation $ (223) $ (367) $ (480) $ (555) $ (625)
Property, plant and equipment, net $ 348 $ 457 $ 543 $ 854 $ 1,290
Goodwill $ 195 $ 222 $ 438 $ 1,234
Intangible assets $ 159
Deferred income taxes $ 223 $ 199 $ 260 $ 145 $ 18
Other long-term assets $ 37 $ 139 $ 296 $ 720 $ 1,474
Total non-current assets $ 767 $ 990 $ 1,321 $ 2,157 $ 4,016
Total assets $ 3,696 $ 4,363 $ 6,485 $ 8,314 $ 13,813
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt $ 59
Accounts payable $ 1,366 $ 1,816 $ 2,795 $ 3,594 $ 5,605
Accrued liabilities $ 563 $ 716 $ 919 $ 1,093 $ 1,759
Total current liabilities $ 1,929 $ 2,532 $ 3,714 $ 4,746 $ 7,364
Non-current liabilities
Long-term debt $ 1,521 $ 1,247 $ 1,282 $ 409 $ 109
Other long-term liabilities $ 153 $ 292 $ 487 $ 1,083
Total non-current liabilities $ 1,521 $ 1,400 $ 1,574 $ 896 $ 1,192
Total liabilities $ 3,450 $ 3,932 $ 5,288 $ 5,642 $ 8,556
Stockholders' equity
Common stock $ 4 $ 4 $ 4 $ 4 $ 5
Additional paid-in capital $ 2,263 $ 2,517 $ 3,063 $ 4,121 $ 5,736
Retained earnings $ (2,027) $ (1,837) $ (1,375) $ (730) $ 172
Treasury stock $ (252) $ (500) $ (600) $ (600)
Accumulated other comprehensive income $ 6 $ (1) $ 5 $ (123) $ (56)
Total stockholders' equity $ 246 $ 431 $ 1,197 $ 2,672 $ 5,257
Total liabilities and stockholders' equity $ 3,696 $ 4,363 $ 6,485 $ 8,314 $ 13,813
Common Size Balance Sheet Statement
2005 2006 2007 2008 2009
Assets
Current assets
Cash and cash equivalents 27% 23% 39% 33% 25%
Short-term investments 27% 23% 9% 12% 21%
Total cash 54% 46% 48% 45% 46%
Receivables 7% 9% 11% 10% 7%
Inventories 15% 20% 19% 17% 16%
Deferred income taxes 2% 2% 2% 2% 2%
Total current assets 79% 77% 80% 74% 71%
Non-current assets 0% 0% 0% 0% 0%
Property, plant and equipment 0% 0% 0% 0% 0%
Other properties 15% 19% 16% 17% 14%
Property and equipment, at cost 15% 19% 16% 17% 14%
Accumulated Depreciation -6% -8% -7% -7% -5%
Property, plant and equipment, net 9% 10% 8% 10% 9%
Goodwill 0% 4% 3% 5% 9%
Intangible assets 4% 0% 0% 0% 0%
Deferred income taxes 6% 5% 4% 2% 0%
Other long-term assets 1% 3% 5% 9% 11%
Total non-current assets 21% 23% 20% 26% 29%
Total assets 100% 100% 100% 100% 100%
Liabilities and stockholders' equity
Liabilities
Current liabilities 0% 0% 0% 0% 0%
Short-term debt 0% 0% 0% 1% 0%
Accounts payable 37% 42% 43% 43% 41%
Accrued liabilities 15% 16% 14% 13% 13%
Total current liabilities 52% 58% 57% 57% 53%
Non-current liabilities 0% 0% 0% 0% 0%
Long-term debt 41% 29% 20% 5% 1%
Other long-term liabilities 0% 4% 5% 6% 8%
Total non-current liabilities 41% 32% 24% 11% 9%
Total liabilities 93% 90% 82% 68% 62%
Stockholders' equity 0% 0% 0% 0% 0%
Common stock 0% 0% 0% 0% 0%
Additional paid-in capital 61% 58% 47% 50% 42%
Retained earnings -55% -42% -21% -9% 1%
Treasury stock 0% -6% -8% -7% -4%
Accumulated other comprehensive income 0% 0% 0% -1% 0%
Total stockholders' equity 7% 10% 18% 32% 38%
Total liabilities and stockholders' equity 100% 100% 100% 100% 100%
Amazon.com Inc. (AMZN) Statement of Cash Flow
Fiscal year ends in December. USD in millions except per share data. 2005 2006 2007
Cash Flows From Operating Activities
Net income 359 190 476
Depreciation & amortization 121 25 35
Investments losses (gains)
Deferred income taxes 70 22 -99
Stock based compensation
Accounts receivable
Inventory -104 -282 -303
Accrued liabilities
Other working capital 257 746 1346
Other non-cash items 30 1 -50
Net cash provided by operating activities 733 702 1405
Cash Flows From Investing Activities
Investments in property, plant, and equipment -204 -216 -224
Acquisitions, net -24 -32 -75
Purchases of investments -1386 -1930 -930
Sales/Maturities of investments 836 1845 1271
Net cash used for investing activities -778 -333 42
Cash Flows From Financing Activities
Long-term debt issued
Long-term debt repayment
Excess tax benefit from stock based compensation
Common stock issued 66 35 91
Repurchases of treasury stock -252 -248
Other financing activities -259 -183 207
Net cash provided by (used for) financing activities -193 -400 50
Effect of exchange rate changes -52 40 20
Net change in cash -290 9 1517
Cash at beginning of period 1303 1013 1022
Cash at end of period 1013 1022 2539
Free Cash Flow
Operating cash flow 733 702 1405
Capital expenditure -204 -216 -224
Free cash flow 529 486 1181
Supplemental schedule of cash flow data
Cash paid for income taxes
Cash paid for interest
2008 2009
645 902
287 378
-4
-5 81
341
-481
-232 -531
300
946 2324
56 -17
1697 3293
-333 -373
-494 -40
-1677 -3890
1305 1966
-1199 -2337
87
-472
105
11
-100
-109
-198 -280
-70 -1
230 675
2539 2769
2769 3444
1697 3293
-333 -373
1364 2920
48
32
Amazon.com
Note: Blue numbers indicate numerical input by user
Forecast of Free Cash Flows for Amazon
Forecast
Parameters used in forecast Parameters 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Growth rate of revenues 26.2% 39.0% 29.0% 28.0% 28.0% 28.0% 20% 20% 15% 15% 10% 8% 8% 8% 6%
Cost of sales as % of revenues 77% 76% 77% 77% 78% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77%
SG&A as % of revenues 15% 14% 13% 13% 12% 18% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%
Other expenses as % of revenues 3% 18.9% 6.2% 5.5% 5.4% 0.4% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Total operating expenses 18.0% 18.9% 19.3% 18.2% 21.2% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0%
Depreciation as % of revenues 1.5% 1.4% 0.2% 0.2% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Effective tax rate 21.8% 22.2% 49.6% 27.9% 27.4% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8%
Current assets other than cash as % revenues 4.50% 22.6% 21.9% 17.7% 17.7% 25.9% 4.5% 4.5% 4.5% 5% 5% 5% 5% 5% 5% 5% 5%
Current liabilities as % of revenues 25% 22.7% 23.6% 25.0% 24.8% 30.0% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%
Net P&E as % revenue 4% 4.1% 4.3% 3.7% 4.5% 5.3% 4% 4% 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04
Net P&E as % following year revenue 3.5% 3.2% 3.1% 2.8% 2.7% 2.5% 3.5% 3.5% 4% 4% 4% 4% 4% 4% 4% 4% 4%
Growth rate of net P&E 40% 31.3% 18.8% 57.3% 51.1% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40%
For FCFE calculations
Debt to Total Liabilities and Net Worth 25% 35.8% 29.7% 27.8% 13.4% 21.1% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%
Interest rate 4% 0.0% 5.6% 4.9% 7.9% 2.9% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4%
Effective tax rate for interest 38.70% 38.5% 38.5% 38.7% 38.5% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7%
Free cash flows to the firm (FCFF) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Revenue Forecasts $ 8,490 $ 10,711 $ 14,835 $ 19,166 $ 24,509 $ 31,372 $ 51,399 $ 61,679 $ 74,015 $ 85,117 $ 97,884 $ 107,673 $ 116,287 $ 125,590 $ 135,637 $ 143,775
Cost of sales $ 6,451 $ 8,255 $ 11,482 $ 14,896 $ 18,978 $ 24,156 $ 39,577 $ 47,493 $ 56,991 $ 65,540 $ 75,371 $ 82,908 $ 89,541 $ 96,704 $ 104,440 $ 110,707
SG&A expenses $ 1,156 $ 1,405 $ 1,880 $ 2,395 $ 4,300 $ 4,706 $ 7,710 $ 9,252 $ 11,102 $ 12,768 $ 14,683 $ 16,151 $ 17,443 $ 18,838 $ 20,346 $ 21,566
Other operating expenses $ 451 $ 662 $ 818 $ 1,033 $ 102 $ 941 $ 1,542 $ 1,850 $ 2,220 $ 2,554 $ 2,937 $ 3,230 $ 3,489 $ 3,768 $ 4,069 $ 4,313
Total Operating expenses $ 1,607 $ 2,067 $ 2,698 $ 4,061 $ 4,402 $ 4,402 $ 4,402 $ 4,402 $ 4,402 $ 4,402 $ 4,402 $ 4,402 $ 4,402 $ 4,402 $ 4,402 $ 4,402
Depreciation and amortization $ 121 $ 25 $ 35 $ 287 $ 378 $ 232 $ 424 $ 389 $ 466 $ 536 $ 617 $ 678 $ 733 $ 791 $ 855 $ 906
Net Income $ 359 $ 190 $ 476 $ 645 $ 902 $ 3,219 $ 5,229 $ 6,396 $ 7,675 $ 8,827 $ 10,151 $ 11,166 $ 12,059 $ 13,024 $ 14,066 $ 14,909
Other income $ 5 $ 59 $ 32
Tax rate $ 0 $ 0 $ 0 $ 0 $ 0
EBIT $ 480 $ 215 $ 511 $ 932 $ 1,280 $ 3,219 $ 5,229 $ 6,396 $ 7,675 $ 8,827 $ 10,151 $ 11,166 $ 12,059 $ 13,024 $ 14,066 $ 14,909
EBIT(1-t) $ 373 $ 108 $ 369 $ 677 $ 1,001 $ 2,517 $ 4,089 $ 5,002 $ 6,002 $ 6,902 $ 7,938 $ 8,732 $ 9,430 $ 10,184 $ 10,999 $ 11,659
Depreciation and amortization $ 121 $ 25 $ 35 $ 287 $ 378 $ 232 $ 424 $ 389 $ 466 $ 536 $ 617 $ 678 $ 733 $ 791 $ 855 $ 906
After-tax EBITDA $ 494 $ 133 $ 404 $ 964 $ 1,379 $ 2,749 $ 4,514 $ 5,390 $ 6,468 $ 7,439 $ 8,554 $ 9,410 $ 10,163 $ 10,976 $ 11,854 $ 12,565
Change in net working capital
Current assets less cash $ 1,916 $ 2,351 $ 2,625 $ 3,388 $ 6,353 $ 1,412 $ 2,313 $ 2,776 $ 3,331 $ 3,830 $ 4,405 $ 4,845 $ 5,233 $ 5,652 $ 6,104 $ 6,470
Prior year C.A. less cash $ 1,916 $ 2,351 $ 2,625 $ 3,388 $ 3,388 $ 1,412 $ 2,313 $ 2,776 $ 3,331 $ 3,830 $ 4,405 $ 4,845 $ 5,233 $ 5,652 $ 6,104
Change in current assets less cash $ 435 $ 274 $ 763 $ 2,965 $ (1,976) $ 901 $ 463 $ 555 $ 500 $ 575 $ 440 $ 388 $ 419 $ 452 $ 366
Current liabilities $ 1,929 $ 2,532 $ 3,714 $ 4,746 $ 7,364 $ 7,843 $ 12,850 $ 15,420 $ 18,504 $ 21,279 $ 24,471 $ 26,918 $ 29,072 $ 31,397 $ 33,909 $ 35,944
Prior year C.L. $ 1,929 $ 2,532 $ 3,714 $ 4,746 $ 4,746 $ 7,843 $ 12,850 $ 15,420 $ 18,504 $ 21,279 $ 24,471 $ 26,918 $ 29,072 $ 31,397 $ 33,909
Change in current liabilities $ 603 $ 1,182 $ 1,032 $ 2,618 $ 3,097 $ 5,007 $ 2,570 $ 3,084 $ 2,776 $ 3,192 $ 2,447 $ 2,153 $ 2,326 $ 2,512 $ 2,035
Change in non-cash W.C. $ 168 $ 908 $ 269 $ (347) $ (5,073) $ (4,106) $ (2,107) $ (2,529) $ (2,276) $ (2,617) $ (2,007) $ (1,766) $ (1,907) $ (2,060) $ (1,668)
Gross capital expenditures
Net P&E $ 348 $ 457 $ 543 $ 854 $ 1,290 $ 2,358 $ 2,159 $ 2,591 $ 2,979 $ 3,426 $ 3,769 $ 4,070 $ 4,396 $ 4,747 $ 5,032 $ -
Prior year Net P&E $ 571 $ 824 $ 1,023 $ 1,409 $ 1,290 $ 2,358 $ 2,159 $ 2,591 $ 2,979 $ 3,426 $ 3,769 $ 4,070 $ 4,396 $ 4,747 $ 5,032
Change in Net P&E $ (114) $ (281) $ (169) $ (119) $ 1,068 $ (199) $ 432 $ 389 $ 447 $ 343 $ 301 $ 326 $ 352 $ 285 $ (5,032)
Add depreciation $ 25 $ 35 $ 287 $ 378 $ 232 $ 424 $ 389 $ 466 $ 536 $ 617 $ 678 $ 733 $ 791 $ 855 $ 906
Gross capital expenditures $ - $ (89) $ (246) $ 118 $ 259 $ 1,300 $ 225 $ 820 $ 855 $ 983 $ 959 $ 980 $ 1,058 $ 1,143 $ 1,139 $ (4,126)
FCFF $ 54 $ (258) $ 577 $ 1,467 $ 6,522 $ 8,394 $ 6,677 $ 8,142 $ 8,732 $ 10,213 $ 10,437 $ 10,870 $ 11,740 $ 12,774 $ 18,360
Free cash flows to equity (FCFE) $ 2,005 $ 2,006 $ 2,007 $ 2,008 $ 2,009 $ 2,001 $ 2,002 $ 2,003 $ 2,004 $ 2,005 $ 2,006 $ 2,007 $ 2,008 $ 2,009 $ 2,010 $ 2,011
FCFF $ 54 $ (258) $ 577 $ 1,467 $ 6,522 $ 8,394 $ 6,677 $ 8,142 $ 8,732 $ 10,213 $ 10,437 $ 10,870 $ 11,740 $ 12,774 $ 18,360
Debt and other non-current liabilities $ 1,521 $ 1,400 $ 1,574 $ 896 $ 1,192 $ 573 $ (504) $ (922) $ (1,457) $ (1,915) $ (2,483) $ (2,910) $ (3,270) $ (3,659) $ (4,102) $ (5,777)
Prior year debt and other non-current liab. $ 1,521 $ 1,400 $ 1,574 $ 896 $ 1,574 $ 573 $ (504) $ (922) $ (1,457) $ (1,915) $ (2,483) $ (2,910) $ (3,270) $ (3,659) $ (4,102)
Net increase (add) $ (121) $ 174 $ (678) $ 296 $ (1,001) $ (1,076) $ (419) $ (535) $ (457) $ (569) $ (426) $ (360) $ (389) $ (444) $ (1,675)
Interest before tax $ 78 $ 77 $ 71 $ 34 $ 23 $ (20) $ (37) $ (58) $ (77) $ (99) $ (116) $ (131) $ (146) $ (164) $ (231)
Subtract after-tax interest expense $ 48 $ 47 $ 44 $ 21 $ 14 $ (12) $ (23) $ (36) $ (47) $ (61) $ (71) $ (80) $ (90) $ (101) $ (142)
FCFE $ (115) $ (132) $ (145) $ 1,742 $ 5,507 $ 7,330 $ 6,281 $ 7,643 $ 8,321 $ 9,705 $ 10,082 $ 10,590 $ 11,441 $ 12,431 $ 16,826
FCFE = FCFF - Interest Exp (1-t) - Principal repayments + new debt issues - preferred dividends
Amazon.com
Note: Blue numbers indicate numerical input by user
Forecast of Free Cash Flows for Amazon
Forecast
Parameters used in forecast Parameters 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Growth rate of revenues 26.2% 39.0% 29.0% 28.0% 30.0% 34.1% 29.2% 26.4% 25.0% 24.1% 10.0% 8% 8% 4% 4%
Cost of sales as % of revenues 77% 76% 77% 77% 78% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77%
Total operating expenses 18.0% 18.9% 19.3% 18.2% 21.2% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0%
Depreciation as % of revenues 1.5% 1.4% 0.2% 0.2% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Effective tax rate 21.8% 22.2% 49.6% 27.9% 27.4% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8%
Current assets other than cash as % revenues 20% 22.6% 21.9% 17.7% 17.7% 25.9% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20%
Current liabilities as % of revenues 25% 22.7% 23.6% 25.0% 24.8% 30.0% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%
Net P&E as % revenue 4% 4.1% 4.3% 3.7% 4.5% 5.3% 4% 4% 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04
Net P&E as % following year revenue 3.5% 3.2% 3.1% 2.8% 2.5% 2.8% 3.5% 3.5% 4% 4% 4% 4% 4% 4% 4% 4% 4%
Growth rate of net P&E 40% 31.3% 18.8% 57.3% 51.1% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40%
For FCFE calculations
Debt to Total Liabilities and Net Worth 25% 35.8% 29.7% 27.8% 13.4% 21.1% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%
Interest rate 4% 0.0% 5.6% 4.9% 7.9% 2.9% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4%
Effective tax rate for interest 38.70% 38.5% 38.5% 38.7% 38.5% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7%
Free cash flows to the firm (FCFF) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Net Revenue $ 8,490 $ 10,711 $ 14,835 $ 19,166 $ 24,509 $ 33,899 $ 45,457 $ 58,708 $ 74,234 $ 92,816 $ 115,222 $ 126,744 $ 136,884 $ 147,834 $ 153,748 $ 159,898
North America $ 4,711 $ 5,869 $ 8,095 $ 10,228 $ 12,828 $ 17,743 $ 24,435 $ 31,111 $ 38,648 $ 47,149 $ 56,866 $ 59,343 $ 56,811 $ 52,708 $ 44,923 $ 35,403
International $ 3,779 $ 4,842 $ 6,740 $ 8,938 $ 11,681 $ 16,156 $ 21,022 $ 27,597 $ 35,586 $ 45,667 $ 58,356 $ 67,401 $ 80,073 $ 95,126 $ 108,824 $ 124,495
Cost of sales $ 6,451 $ 8,255 $ 11,482 $ 14,896 $ 18,978 $ 26,102 $ 35,002 $ 45,205 $ 57,160 $ 71,468 $ 88,721 $ 97,593 $ 105,400 $ 113,833 $ 118,386 $ 123,121
Gross Margin $ 2,039 $ 2,456 $ 3,353 $ 4,270 $ 5,530 $ 7,797 $ 10,455 $ 13,503 $ 17,074 $ 21,348 $ 26,501 $ 29,151 $ 31,483 $ 34,002 $ 35,362 $ 36,776
Total Operating expenses $ 1,607 $ 2,067 $ 2,698 $ 4,061 $ 4,402 $ 6,102 $ 8,182 $ 10,567 $ 13,362 $ 16,707 $ 20,740 $ 22,814 $ 24,639 $ 26,610 $ 27,675 $ 28,782
Depreciation and amortization $ 121 $ 25 $ 35 $ 287 $ 378 $ 232 $ 424 $ 370 $ 468 $ 585 $ 726 $ 798 $ 862 $ 931 $ 969 $ 1,007
Net Income $ 359 $ 190 $ 476 $ 645 $ 902 $ 1,445 $ 2,649 $ 3,629 $ 4,831 $ 6,179 $ 7,789 $ 5,539 $ 5,982 $ 6,460 $ 6,719 $ 6,988
Other income $ 5 $ 59 $ 32
Tax rate $ 0 $ 0 $ 0 $ 0 $ 0 $ 7,797 $ 10,455 $ 13,503
EBIT $ 480 $ 215 $ 511 $ 932 $ 1,280 $ 1,677 $ 3,073 $ 3,999 $ 5,299 $ 6,764 $ 8,515 $ 6,337 $ 6,844 $ 7,392 $ 7,687 $ 7,995
EBIT(1-t) $ 373 $ 108 $ 369 $ 677 $ 1,001 $ 1,312 $ 2,403 $ 3,127 $ 4,144 $ 5,289 $ 6,659 $ 4,956 $ 5,352 $ 5,780 $ 6,012 $ 6,252
Depreciation and amortization $ 121 $ 25 $ 35 $ 287 $ 378 $ 548 $ 630 $ 662 $ 695 $ 729 $ 766 $ 798 $ 862 $ 931 $ 969 $ 1,007
After-tax EBITDA $ 494 $ 133 $ 404 $ 964 $ 1,379 $ 1,860 $ 3,033 $ 3,789 $ 4,839 $ 6,018 $ 7,425 $ 5,754 $ 6,215 $ 6,712 $ 6,980 $ 7,259
Change in net working capital
Current assets less cash $ 1,916 $ 2,351 $ 2,625 $ 3,388 $ 6,353 $ 6,780 $ 9,091 $ 11,742 $ 14,847 $ 18,563 $ 23,044 $ 25,349 $ 27,377 $ 29,567 $ 30,750 $ 31,980
Prior year C.A. less cash $ 1,916 $ 2,351 $ 2,625 $ 3,388 $ 3,388 $ 6,780 $ 9,091 $ 11,742 $ 14,847 $ 18,563 $ 23,044 $ 25,349 $ 27,377 $ 29,567 $ 30,750
Change in current assets less cash $ 435 $ 274 $ 763 $ 2,965 $ 3,392 $ 2,312 $ 2,650 $ 3,105 $ 3,716 $ 4,481 $ 2,304 $ 2,028 $ 2,190 $ 1,183 $ 1,230
Current liabilities $ 1,929 $ 2,532 $ 3,714 $ 4,746 $ 7,364 $ 8,475 $ 11,364 $ 14,677 $ 18,559 $ 23,204 $ 28,806 $ 31,686 $ 34,221 $ 36,959 $ 38,437 $ 39,974
Prior year C.L. $ 1,929 $ 2,532 $ 3,714 $ 4,746 $ 4,746 $ 8,475 $ 11,364 $ 14,677 $ 18,559 $ 23,204 $ 28,806 $ 31,686 $ 34,221 $ 36,959 $ 38,437
Change in current liabilities $ 603 $ 1,182 $ 1,032 $ 2,618 $ 3,729 $ 2,890 $ 3,313 $ 3,882 $ 4,646 $ 5,602 $ 2,881 $ 2,535 $ 2,738 $ 1,478 $ 1,537
Change in non-cash W.C. $ 168 $ 908 $ 269 $ (347) $ (337) $ (578) $ (663) $ (776) $ (929) $ (1,120) $ (576) $ (507) $ (548) $ (296) $ (307)
Gross capital expenditures
Net P&E $ 348 $ 457 $ 543 $ 854 $ 1,290 $ 2,358 $ 2,055 $ 2,598 $ 3,249 $ 4,033 $ 4,436 $ 4,791 $ 5,174 $ 5,381 $ 5,596 $ -
Prior year Net P&E $ 571 $ 824 $ 1,023 $ 1,409 $ 1,290 $ 2,358 $ 2,055 $ 2,598 $ 3,249 $ 4,033 $ 4,436 $ 4,791 $ 5,174 $ 5,381 $ 5,596
Change in Net P&E $ (114) $ (281) $ (169) $ (119) $ 1,068 $ (303) $ 543 $ 650 $ 784 $ 403 $ 355 $ 383 $ 207 $ 215 $ (5,596)
Add depreciation $ 25 $ 35 $ 287 $ 378 $ 232 $ 424 $ 370 $ 468 $ 585 $ 726 $ 798 $ 862 $ 931 $ 969 $ 1,007
Gross capital expenditures $ - $ (89) $ (246) $ 118 $ 259 $ 1,300 $ 121 $ 913 $ 1,118 $ 1,369 $ 1,129 $ 1,153 $ 1,246 $ 1,138 $ 1,184 $ (4,589)
FCFF $ 54 $ (258) $ 577 $ 1,467 $ 897 $ 3,490 $ 3,538 $ 4,497 $ 5,578 $ 7,416 $ 5,177 $ 5,476 $ 6,121 $ 6,092 $ 12,156
Free cash flows to equity (FCFE) $ 2,005 $ 2,006 $ 2,007 $ 2,008 $ 2,009 $ 2,001 $ 2,002 $ 2,003 $ 2,004 $ 2,005 $ 2,006 $ 2,007 $ 2,008 $ 2,009 $ 2,010 $ 2,011
FCFF $ 54 $ (258) $ 577 $ 1,467 $ 897 $ 3,490 $ 3,538 $ 4,497 $ 5,578 $ 7,416 $ 5,177 $ 5,476 $ 6,121 $ 6,092 $ 12,156
Debt and other non-current liabilities $ 1,521 $ 1,400 $ 1,574 $ 896 $ 1,192 $ 1,757 $ 1,536 $ 1,507 $ 1,475 $ 1,439 $ 1,260 $ 1,204 $ 1,174 $ 1,088 $ 1,068 $ (408)
Prior year debt and other non-current liab. $ 1,521 $ 1,400 $ 1,574 $ 896 $ 1,574 $ 1,757 $ 1,536 $ 1,507 $ 1,475 $ 1,439 $ 1,260 $ 1,204 $ 1,174 $ 1,088 $ 1,068
Net increase (add) $ (121) $ 174 $ (678) $ 296 $ 183 $ (220) $ (30) $ (31) $ (36) $ (179) $ (55) $ (31) $ (85) $ (20) $ (1,476)
Interest before tax $ 78 $ 77 $ 71 $ 34 $ 70 $ 61 $ 60 $ 59 $ 58 $ 50 $ 48 $ 47 $ 44 $ 43 $ (16)
Subtract after-tax interest expense $ 48 $ 47 $ 44 $ 21 $ 43 $ 38 $ 37 $ 36 $ 35 $ 31 $ 30 $ 29 $ 27 $ 26 $ (10)
FCFE $ (115) $ (132) $ (145) $ 1,742 $ 1,036 $ 3,232 $ 3,472 $ 4,429 $ 5,507 $ 7,206 $ 5,092 $ 5,416 $ 6,009 $ 6,046 $ 10,690
FCFE = FCFF - Interest Exp (1-t) - Principal repayments + new debt issues - preferred dividends
Valuation
Date of valuation 11/22/2010
Capital costs Assigned Reported Source for reported figure
Current 20-year T-bond rate 4.00% 4.00% source: http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml as of 11/01/10
Equity risk premium 4.80% 4.80% the geometric average of the equity risk premium for returns on the S&P 500 from 1928 to 2009.
Amazon beta 1.05 1.05 source: Value Line
Cost of equity 9.04%
Cost of debt 6.88% 6.88% source: Amazon's Annual 2009 report page 65
Effective tax rate 38.7% 38.7% source: 2009 reported effective tax rate
Amazon after-tax kd 4.2%
Debt value estimate: book value (000s) 1,474,000 1,474,000 source: 2009 balance sheet: long term debt plus other long-term liabilities
Current market value of Amazon
Number of shares outstanding (000s) 448,000 448,000 source: Value Line
Price $165.23 165.23 source: quote 10-29-2009, Value Line
Equity value (000s) 74,023,040
Total value 75,497,040
Debt ratio 1.95%
WACC 8.95% Formula: WACC = (D/V)kd(1-t) + (E/V)ke, where V=D+E. Market values were used.
Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
FCFF $ 6,522 $ 8,394 $ 6,677 $ 8,142 $ 8,732 $ 10,213 $ 10,437 $ 10,870 $ 11,740 $ 12,774 $ 18,360
FCFE $ 5,507 $ 7,330 $ 6,281 $ 7,643 $ 8,321 $ 9,705 $ 10,082 $ 10,590 $ 11,441 $ 12,431 $ 16,826
Valuation
Terminal growth rate assumption 4%
Date of the first CF forecast 12/31/2010
Days left 39
FCFF FCFE
Cost of capital 8.95% 9.04%
Cash flow in 2020 18,359.67 16,826.21
Terminal value at 2020 $386,064 $333,853 Constant growth model: V = CF(1+g)/(k-g)
Present value of Terminal Value $150,433 $128,858
Present value of intermediate CF 70,828 65,878
Total $221,260 $194,736
Add Cash 6,280 6,280
Subtract value of debt 1,474
Equity value $226,066 $201,016
Shares outstanding as of 10/29/10 448.00
Value per share $504.61 $448.70
Current Price as of 10/29/10 $165.23
Undervalued 67% 63%
Amazon.com
Note: Blue numbers indicate numerical input by user
Forecast of Free Cash Flows for Amazon
Forecast
Parameters used in forecast Parameters 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Growth rate of revenues 26.2% 39.0% 29.0% 28.0% 28% 20% 20% 15% 10% 10% 8% 6% 6% 6% 6%
Cost of sales as % of revenues 77% 76% 77% 77% 78% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77%
SG&A as % of revenues 15% 14% 13% 13% 12% 18% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%
Other expenses as % of revenues 3% 18.9% 6.2% 5.5% 5.4% 0.4% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Total operating expenses 18.0% 18.9% 19.3% 18.2% 21.2% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0%
Depreciation as % of revenues 1.5% 1.4% 0.2% 0.2% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Effective tax rate 21.8% 22.2% 49.6% 27.9% 27.4% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8% 21.8%
Current assets other than cash as % revenues 4.50% 22.6% 21.9% 17.7% 17.7% 25.9% 4.5% 4.5% 4.5% 5% 5% 5% 5% 5% 5% 5% 5%
Current liabilities as % of revenues 25% 22.7% 23.6% 25.0% 24.8% 30.0% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%
Net P&E as % revenue 4% 4.1% 4.3% 3.7% 4.5% 5.3% 4% 4% 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04
Net P&E as % following year revenue 3.5% 3.2% 3.1% 2.8% 3.5% 4.7% 3.5% 3.5% 4% 4% 4% 4% 4% 4% 4% 4% 4%
Growth rate of net P&E 40% 31.3% 18.8% 57.3% 51.1% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40% 40%
For FCFE calculations
Debt to Total Liabilities and Net Worth 25% 35.8% 29.7% 27.8% 13.4% 21.1% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%
Interest rate 4% 0.0% 5.6% 4.9% 7.9% 2.9% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4%
Effective tax rate for interest 38.70% 38.5% 38.5% 38.7% 38.5% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7% 38.7%
Free cash flows to the firm (FCFF) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Revenue Forecasts $ 8,490 $ 10,711 $ 14,835 $ 19,166 $ 24,509 $ 24,532 $ 27,599 $ 33,119 $ 38,087 $ 41,895 $ 46,085 $ 49,772 $ 52,758 $ 55,923 $ 59,279 $ 62,836
Cost of sales $ 6,451 $ 8,255 $ 11,482 $ 14,896 $ 18,978 $ 18,890 $ 21,251 $ 25,502 $ 29,327 $ 32,259 $ 35,485 $ 38,324 $ 40,624 $ 43,061 $ 45,645 $ 48,383
SG&A expenses $ 1,156 $ 1,405 $ 1,880 $ 2,395 $ 4,300 $ 2,395 $ 4,140 $ 4,968 $ 5,713 $ 6,284 $ 6,913 $ 7,466 $ 7,914 $ 8,389 $ 8,892 $ 9,425
Other operating expenses $ 451 $ 662 $ 818 $ 1,033 $ 102 $ 736 $ 828 $ 994 $ 1,143 $ 1,257 $ 1,383 $ 1,493 $ 1,583 $ 1,678 $ 1,778 $ 1,885
Total Operating expenses $ 1,607 $ 2,067 $ 2,698 $ 4,061 $ 4,402 $ 368 $ 414 $ 497 $ 571 $ 628 $ 691 $ 747 $ 791 $ 839 $ 889 $ 943
Depreciation and amortization $ 121 $ 25 $ 35 $ 287 $ 378 $ 154 $ 360 $ 209 $ 240 $ 264 $ 290 $ 314 $ 332 $ 352 $ 373 $ 396
Net Income $ 359 $ 190 $ 476 $ 645 $ 902 $ 3,830 $ 2,676 $ 3,434 $ 3,950 $ 4,345 $ 4,779 $ 5,161 $ 5,471 $ 5,799 $ 6,147 $ 6,516
Other income $ 5 $ 59 $ 32
Tax rate $ 0 $ 0 $ 0 $ 0 $ 0
EBIT $ 480 $ 215 $ 511 $ 932 $ 1,280 $ 3,830 $ 2,676 $ 3,434 $ 3,950 $ 4,345 $ 4,779 $ 5,161 $ 5,471 $ 5,799 $ 6,147 $ 6,516
EBIT(1-t) $ 373 $ 108 $ 369 $ 677 $ 1,001 $ 2,995 $ 2,093 $ 2,686 $ 3,089 $ 3,397 $ 3,737 $ 4,036 $ 4,278 $ 4,535 $ 4,807 $ 5,096
Depreciation and amortization $ 121 $ 25 $ 35 $ 287 $ 378 $ 154 $ 360 $ 209 $ 240 $ 264 $ 290 $ 314 $ 332 $ 352 $ 373 $ 396
After-tax EBITDA $ 494 $ 133 $ 404 $ 964 $ 1,379 $ 3,149 $ 2,453 $ 2,894 $ 3,329 $ 3,661 $ 4,028 $ 4,350 $ 4,611 $ 4,887 $ 5,181 $ 5,491
Change in net working capital
Current assets less cash $ 1,916 $ 2,351 $ 2,625 $ 3,388 $ 6,353 $ 1,104 $ 1,242 $ 1,490 $ 1,714 $ 1,885 $ 2,074 $ 2,240 $ 2,374 $ 2,517 $ 2,668 $ 2,828
Prior year C.A. less cash $ 1,916 $ 2,351 $ 2,625 $ 3,388 $ 3,388 $ 1,104 $ 1,242 $ 1,490 $ 1,714 $ 1,885 $ 2,074 $ 2,240 $ 2,374 $ 2,517 $ 2,668
Change in current assets less cash $ 435 $ 274 $ 763 $ 2,965 $ (2,284) $ 138 $ 248 $ 224 $ 171 $ 189 $ 166 $ 134 $ 142 $ 151 $ 160
Current liabilities $ 1,929 $ 2,532 $ 3,714 $ 4,746 $ 7,364 $ 6,133 $ 6,900 $ 8,280 $ 9,522 $ 10,474 $ 11,521 $ 12,443 $ 13,189 $ 13,981 $ 14,820 $ 15,709
Prior year C.L. $ 1,929 $ 2,532 $ 3,714 $ 4,746 $ 4,746 $ 6,133 $ 6,900 $ 8,280 $ 9,522 $ 10,474 $ 11,521 $ 12,443 $ 13,189 $ 13,981 $ 14,820
Change in current liabilities $ 603 $ 1,182 $ 1,032 $ 2,618 $ 1,387 $ 767 $ 1,380 $ 1,242 $ 952 $ 1,047 $ 922 $ 747 $ 791 $ 839 $ 889
Change in non-cash W.C. $ 168 $ 908 $ 269 $ (347) $ (3,671) $ (629) $ (1,132) $ (1,018) $ (781) $ (859) $ (756) $ (612) $ (649) $ (688) $ (729)
Gross capital expenditures
Net P&E $ 348 $ 457 $ 543 $ 854 $ 1,290 $ 2,000 $ 1,159 $ 1,333 $ 1,466 $ 1,613 $ 1,742 $ 1,847 $ 1,957 $ 2,075 $ 2,199 $ -
Prior year Net P&E $ 571 $ 824 $ 1,023 $ 1,409 $ 854 $ 2,000 $ 1,159 $ 1,333 $ 1,466 $ 1,613 $ 1,742 $ 1,847 $ 1,957 $ 2,075 $ 2,199
Change in Net P&E $ (114) $ (281) $ (169) $ (119) $ 1,146 $ (841) $ 174 $ 133 $ 147 $ 129 $ 105 $ 111 $ 117 $ 124 $ (2,199)
Add depreciation $ 25 $ 35 $ 287 $ 378 $ 154 $ 360 $ 209 $ 240 $ 264 $ 290 $ 314 $ 332 $ 352 $ 373 $ 396
Gross capital expenditures $ - $ (89) $ (246) $ 118 $ 259 $ 1,300 $ (481) $ 383 $ 373 $ 411 $ 419 $ 418 $ 443 $ 470 $ 498 $ (1,803)
FCFF $ 54 $ (258) $ 577 $ 1,467 $ 5,520 $ 3,562 $ 3,643 $ 3,974 $ 4,032 $ 4,467 $ 4,687 $ 4,780 $ 5,067 $ 5,370 $ 8,024
Free cash flows to equity (FCFE) $ 2,005 $ 2,006 $ 2,007 $ 2,008 $ 2,009 $ 2,001 $ 2,002 $ 2,003 $ 2,004 $ 2,005 $ 2,006 $ 2,007 $ 2,008 $ 2,009 $ 2,010 $ 2,011
FCFF $ 54 $ (258) $ 577 $ 1,467 $ 5,520 $ 3,562 $ 3,643 $ 3,974 $ 4,032 $ 4,467 $ 4,687 $ 4,780 $ 5,067 $ 5,370 $ 8,024
Debt and other non-current liabilities $ 1,521 $ 1,400 $ 1,574 $ 896 $ 1,192 $ 943 $ 575 $ 336 $ 115 $ (44) $ (226) $ (389) $ (515) $ (647) $ (788) $ (1,520)
Prior year debt and other non-current liab. $ 1,521 $ 1,400 $ 1,574 $ 896 $ 1,574 $ 943 $ 575 $ 336 $ 115 $ (44) $ (226) $ (389) $ (515) $ (647) $ (788)
Net increase (add) $ (121) $ 174 $ (678) $ 296 $ (631) $ (367) $ (239) $ (221) $ (159) $ (182) $ (163) $ (125) $ (133) $ (141) $ (732)
Interest before tax $ 78 $ 77 $ 71 $ 34 $ 38 $ 23 $ 13 $ 5 $ (2) $ (9) $ (16) $ (21) $ (26) $ (32) $ (61)
Subtract after-tax interest expense $ 48 $ 47 $ 44 $ 21 $ 23 $ 14 $ 8 $ 3 $ (1) $ (6) $ (10) $ (13) $ (16) $ (19) $ (37)
FCFE $ (115) $ (132) $ (145) $ 1,742 $ 4,865 $ 3,181 $ 3,396 $ 3,750 $ 3,874 $ 4,290 $ 4,534 $ 4,667 $ 4,950 $ 5,249 $ 7,329
FCFE = FCFF - Interest Exp (1-t) - Principal repayments + new debt issues - preferred dividends
Valuation
Date of valuation
Capital costs Assigned Reported Source for reported figure
Current 20-year T-bond rate 4.00% 4.00% source: http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml as of 11/01/10
Equity risk premium 4.80% 4.80% source: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html
Amazon beta 1.05 1.05 source: Value Line
Cost of equity 9.0%
Cost of debt 6.88% 6.88% source: Amazon's Annual 2009 report page 65
Effective tax rate 38.7% 38.7% source: 2009 reported effective tax rate
Amazon after-tax kd 4.2%
Debt value estimate: book value (000s) 1,192,000 1,192,000 source: 2009 balance sheet: long term debt plus other long-term liabilities
Current market value of Amazom
Number of shares outstanding (000s) 448,000 448,000 source: Value Line
Price $165.23 165.23 source: quote 10-29-2009, Value Line
Equity value (000s) 74,023,040
Total value 75,215,040
Debt ratio 1.58%
WACC 8.96% Formula: WACC = (D/V)kd(1-t) + (E/V)ke, where V=D+E. Market values should be used.
Forecasts
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
FCFF $ 5,520 $ 3,562 $ 3,643 $ 3,974 $ 4,032 $ 4,467 $ 4,687 $ 4,780 $ 5,067 $ 5,370 $ 8,024
FCFE $ 4,865 $ 3,181 $ 3,396 $ 3,750 $ 3,874 $ 4,290 $ 4,534 $ 4,667 $ 4,950 $ 5,249 $ 7,329
Valuation
Terminal growth rate assumption 4%
FCFF FCFE
Cost of capital 9.0% 9.0%
Cash flow in 2013 - -
Terminal value at 2020 $168,123 $145,419 Constant growth model: V = CF(1+g)/(k-g)
Present value of Terminal Value $65,393 $56,128
Present value of intermediate CF 34,549 32,268
Total $99,942 $88,396
Add Cash 6,280 6,280
Subtract value of debt 1,192
Equity value $105,030 $94,676
Shares outstanding as of 10/29/10 448.00
Value per share $234.44 $211.33
Current Price as of 10/29/10 $165.23
Undervalued 30% 22%
Net Sales North America
2004 2005 2006 2007 2008
Media 2589 3046 3582 $ 4,630 $ 5,350
Electronics 1128 1443 2024 $ 3,139 $ 4,430
Other 130 222 263 $ 326 $ 448
Total North America 3847 4711 5869 $ 8,095 $ 10,228
Net Sales International
2004 2005 2006 2007 2008
Media $ 2,513 $ 2,885 $ 3,485 $ 4,612 $ 5,734
Electronics $ 559 $ 886 $ 1,337 $ 2,071 $ 3,110
Other $ 2 $ 8 $ 20 $ 57 $ 94
Total International $ 3,074 $ 3,779 $ 4,842 $ 6,740 $ 8,938
Growth rates 23% 28% 39% 33%
Net Sales Consolidated
2004 2005 2006 2007 2008
Media 5,102 5,931 7,067 9,242 11,084
Electronics 1,687 2,329 3,361 5,210 7,540
Other 132 230 283 383 542
Total consolidated 6,921 8,490 10,711 14,835 19,166
Revenue by Segment
Media
2004 2005 2006 2007 2008
North America $ 2,589 $ 3,046 $ 3,582 $ 4,630 $ 5,350
International $ 2,513 $ 2,885 $ 3,485 $ 4,612 $ 5,734
Consolidated $ 5,102 $ 5,931 $ 7,067 $ 9,242 $ 11,084
Electronics
2004 2005 2006 2007 2008
North America $ 1,128 $ 1,443 $ 2,024 $ 3,139 $ 4,430
International $ 559 $ 886 $ 1,337 $ 2,071 $ 3,110
Consolidated $ 1,687 $ 2,329 $ 3,361 $ 5,210 $ 7,540
Other
2004 2005 2006 2007 2008
North America $ 130 $ 222 $ 263 $ 326 $ 448
International $ 2 $ 8 $ 20 $ 57 $ 94
Consolidated $ 132 $ 230 $ 283 $ 383 $ 542
Includes non-retail activities, such as Amazon Enterprise Solutions, our co-branded credit card agreements,
and miscellaneous marketing and promotional activities.
$700
$600
$500
$400
$300
$200
$100
$-
2004 2005 2006 2007 2008 2009
Net Sales International
2004 2005 2006 2007 2008
Media $ 2,513 $ 2,885 $ 3,485 $ 4,612 $ 5,734
Electronics $ 559 $ 886 $ 1,337 $ 2,071 $ 3,110
Other $ 2 $ 8 $ 20 $ 57 $ 94
Total International $ 3,074 $ 3,779 $ 4,842 $ 6,740 $ 8,938
Growth rates 23% 28% 39% 33%
Growth rates in International segment
2005 2006 2007 2008 2009
Media 15% 21% 32% 24% 19%
Electronics 58% 51% 55% 50% 53%
Other 300% 150% 185% 65% 10%
Total International 23% 28% 39% 33% 31%
350%
300%
250%
200%
Media
150%
Electronics
100%
Other
50%
Total International
0%
0%
CAGR CAGR 14000
2009 2004-2009 2006-2009 Net Sales North A
12000
$ 5,964 18% 19%
$ 6,314 41% 46% 10000
$ 550 33% 28%
$ 12,828 27% 30% 8000
6000
4000
CAGR CAGR
2009 2004-2009 2006-2009 2000
$ 6,810 22% 25%
$ 4,768 54% 53% 0
$ 103 73% 2004 2005 2006 2007 2008 2009
120%
$ 11,681 31% 34%
31%
$14,000
CAGR CAGR $12,000
2009 2004-2009 2006-2009
12,774 20% 22% $10,000
11,082 46% 49%
$8,000
653 38% 32%
24,509 29% 32% $6,000
$4,000
$2,000
CAGR CAGR
2009 2004-2009 2006-2009 $-
$ 5,964 18% 19% 2004 2005 2006 2007 2008 2009
$ 6,810 22% 25%
$ 12,774 20% 22%
$14,000
$12,000
CAGR CAGR
2009 2004-2009 2006-2009 $10,000
$ 6,314 41% 46%
$8,000
$ 4,768 54% 53%
$ 11,082 46% 49% $6,000
$4,000
CAGR CAGR
$2,000
2009 2004-2009 2006-2009
$ 550 33% 28% $-
$ 103 120% 73% 2004 2005 2006 2007 2008
$ 653 38% 32%
t card agreements,
North America
International
Consolidated
CAGR CAGR
2009 2004-2009 2006-2009
$ 6,810 22% 25%
$ 4,768 54% 53%
$ 103 120% 73%
$ 11,681 31% 34%
31%
CAGR 2004-
2009
22%
54%
120%
31%
Media
Electronics
Other
Total International
Net Sales North America
Media
Electronics
Other
Total North America
2009
Net Sales International
Segment
Media
Electronics
Other
Total International
2009
$12,000
Media
$10,000
$8,000
North America North America
International $6,000
International
Consolidated Consolidated
$4,000
$2,000
$-
2009 2004 2005 2006 2007 2008 2009
North America
International
Consolidated
Direct Competitor Comparison
Barnes and
AMZN Noble EBAY Industry
Market Cap: 76.65B 882.96M 40.24B 87.76M
Employees: 24,300 40,000 16,400 519
Qtrly Rev Growth (yoy): 38.70% 20.80% 0.50% 9.20%
Revenue (ttm): 30.78B 6.05B 9.03B 280.68M
Gross Margin (ttm): 22.71% 27.64% 71.96% 29.43%
EBITDA (ttm): 1.84B 201.37M 2.78B 7.78M
Operating Margin (ttm): 4.91% -0.32% 22.23% -2.48%
Net Income (ttm): 1.12B -39.00M 2.60B N/A
EPS (ttm): 2.47 -0.7 1.96 N/A
P/E (ttm): 69.22 N/A 15.74 27.69
PEG (5 yr expected): 2.52 8.39 2.33 1.04
P/S (ttm): 2.46 0.16 4.35 0.75
Financial Highlights
Fiscal Year AMZN E-BAY Barnes and Noble
Fiscal Year Ends: 31-Dec 31-Dec 1-May
Most Recent Quarter (mrq): 30-Sep-10 30-Sep-10 31-Jul-10
Profitability
Profit Margin (ttm): 3.64% 28.75% -0.63%
Operating Margin (ttm): 4.91% 22.23% -0.32%
Management Effectiveness
Return on Assets (ttm): 8.16% 6.73% N/A
Return on Equity (ttm): 22.44% 18.69% -4.38%
Income Statement
Revenue (ttm): 30.78B 9.03B 6.05B
Revenue Per Share (ttm): 69.16 6.94 109.06
Qtrly Revenue Growth (yoy): 38.70% 0.50% 20.80%
Gross Profit (ttm): 5.53B 6.25B 1.68B
EBITDA (ttm): 1.84B 2.78B 201.37M
Net Income Avl to Common (ttm): 1.12B 2.60B -39.00M
Diluted EPS (ttm): 2.47 1.96 -0.7
Qtrly Earnings Growth (yoy): 16.10% 23.50% N/A
Balance Sheet (Q3 2010)
Total Cash 5.88B 5.33B 27.02M
Total Cash Per Share 13.11 4.09 0.45
Total Debt 164.00M 0 630.00M
Total Debt/Equity 2.56 N/A 76.03
Current Ratio 1.5 2.48 1.03
Book Value Per Share 14.25 11.53 14.85
Cash Flow Statement
Operating Cash Flow (ttm): 2.62B 2.66B -97.47M
Levered Free Cash Flow (ttm): 1.18B 879.67M N/A
166.848