Amazon.com, Inc. was incorporated in 1994 in the state of Washington and reincorporated in 1996 in the state of Delaware. The company industries are Retail-Catalog & Mail Order Houses. The number of shares of common stock outstanding as of January 16, 2015 are 464,383,939 with par value $0.01 per share and number of shareholders are 2744. Amazon has authorized 500 million shares of $0.01 par value preferred stock. No preferred stock was outstanding for any period presented. The SIC code of the company is 5961. Every December 31 is the end of company’s fiscal year.
Amazon.com started as an online bookstore, but soon diversified, selling DVDs, VHSs, CDs, video and MP3 downloads/streaming, software, video games, electronics, apparel, furniture, food, toys, and jewelry. The company also produces consumer electronics—notably, Amazon Kindle e-book readers, Fire tablets, Fire TV and Fire Phone — and is a major provider of cloud computing services. The company adopts low price strategy. Amazon produces many products and some of them are unique, such as Kindle e-book readers, Fire tablets.
The businesses are rapidly evolving and intensely competitive. The main four competitors are eBay with SIC code 7389; Alibaba with SIC code 5961; Google with SIC code 7370; Barnes & Noble with SIC code 594. Amazon did a lot for its product patent protections. The company filed U.S. and international patent applications covering certain of our proprietary technology. The key risks that the company faces in the future are competitive risk, technology risk, financial risk and legal risk. Free shipping offers are used to encourage increase in basket size since customers have to spend over a certain amount to receive free shipping. The level at which free-shipping is set is critical to profitability and Amazon has changed it as competition has changed and for promotional reasons.
Amazon had a viable and innovative business model built around a market-changing customer value proposition and a radical profit formula, which upended the staid book industry. A few years later, the company seized its white space when it devised a new value proposition, offering a commission-based brokerage service to buyers and sellers of used books. Then it moved into its white space again by developing a model to serve an entirely different customer: third-party sellers. Amazon transformed its business from direct sales to a sales-and-service model, aggregating many sellers under one virtual roof and receiving commissions from the other companies' sales. The company doesn’t have an ethical code under its operates.
The Exhibit 1 shows the year ended December 31, 2013 the compensation reportable for the named executive officers, as determined by SEC rules. Amazon measures compensation cost for stock awards at fair value and recognize it as compensation expense over the service period for awards expected to vest. $1,600,000 represents the approximate aggregate incremental cost to Amazon.com of security arrangements for Mr. Bezos in addition to security arrangements provided at business facilities and for business travel. $3,200 represents the value of shares of common stock the company contributed to the named executive officer’s account in 401(k) plan. $55,905 represents expatriation benefits, including a cost of living and housing allowance in the amount of $33,566 and tax reimbursement in connection with such benefits in the amount of $22,339.
Amazon utilizes hedging to offset the risk of any of its positions which shows in Exhibit 2. 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 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,…