SEC Company Response from AMAZON COM (AMZN) — Jul 21, 2006
AMAZON COM INC
Date: July 21, 2006 · CIK: 0001018724 · Accession: 0001193125-06-151177
AI Filing Summary & Sentiment
Referenced dates: May 24, 2006
Letter
Division of Corporation Finance Securities and Exchange Commission Form 10-K for Fiscal Year Ended December 31, 2005 Filed February 17, 2006 Form 10-Q for Fiscal Quarter Ended March 31, 2006 File No. 0-22513
Dear Mr. Ohsiek:
On behalf of Amazon.com, Inc., this responds to your letter of July 6, 2006, regarding our Annual Report on Form 10-K for the year ended December 31, 2005 (the “2005 10-K”). Each of your comments is set forth below, followed by our response.
Pursuant to 17 C.F.R. § 200.83, we are requesting confidential treatment for portions of our responses to Comments 1 and 2. We request that these portions, as indicated by [***], be maintained in confidence, not be made part of any public record and not be disclosed to any person as they contain confidential information, disclosure of which would cause us competitive harm. In the event that the Staff receives a request for access to the confidential portions herein, whether pursuant to FOIA or otherwise, we respectfully request that we be notified immediately so that we may further substantiate this request for confidential treatment. Please address any notification of a request for access to such documents to the undersigned with a copy to the office of our General Counsel.
Form 10-K for Fiscal Year Ended December 31, 2005
Note 1 – Description of Business and Accounting Policies, page 53
Accrued Expense and Other Current Liabilities, page 57
Comment 1
We have reviewed your response to comment 7 in our letter dated May 24, 2006. Please demonstrate for us the immateriality of the income you recorded for unredeemed gift certificates relative
July 21, 2006
Page
to pretax earnings in each period presented. Otherwise revise your future filings as previously requested to disclose the amount of income you record for unredeemed gift certificates in each period presented. Also tell us and revise your proposed gift certificate policy disclosure to clarify what you mean when you say that you recognize revenue for gift certificates without expiration dates “when the likelihood of redemption becomes remote.” In particular, explain whether such recognition is based on specific identification of gift certificates that will not be redeemed, or based on experience with a homogeneous pool of transactions. Also clarify how you determine when the likelihood of redemption is remote, and whether the estimated breakage is recorded as other gift certificates in the homogeneous pool are redeemed, or whether the entire amount of breakage is recorded at the point in time when redemption is determined to be remote.
Response
Pursuant to 17 C.F.R. § 200.83, we hereby request confidential treatment of the numbers bracketed in the first paragraph of this response to Comment 1.
Revenue from unredeemed gift certificates was $[***], $[***] and $[***] million and [***]%, [***]% and [***]% as a percentage of revenue for the years ended December 31, 2005, 2004 and 2003. Income from unredeemed gift certificates would be determined net of associated costs. We do not specifically allocate costs of the gift certificate program between redeemed, unredeemed and expired gift certificates and therefore do not determine the impact of unredeemed certificates on income, so we believe the best measure of materiality is against revenue and not pretax income.
Revenue for an unredeemed gift certificate is recognized upon expiration, which is generally two years from date of issuance. For a gift certificate with no expiration date, revenue is recognized when historical experience indicates services will not be rendered, which is also generally two years from date of issuance. Such recognition is based on specific identification of gift certificates.
In future filings, our proposed policy disclosure with regard to gift certificates in Note 1 to the Financial Statements would be as follows:
“Included in Accrued expenses and other current liabilities at and are liabilities of $ million and $ million for unredeemed gift certificates. We recognize revenue from a gift certificate when a customer redeems it. If a gift certificate is not redeemed, we recognize revenue when it expires or, for a certificate without an expiration date, when the likelihood of its redemption becomes remote, generally two years from date of issuance.”
Vendor Agreements, page 59
Comment 2
We have reviewed your response to comment 8 in our letter dated May 24, 2006. Please demonstrate for us the immateriality of total cooperative advertising receipts relative to pretax earnings for each period presented, or otherwise revise your future filings as previously requested to disclose the amount of cooperative advertising payments received each period. Also disclose the amount of total cooperative advertising payments included in the cost of sales versus the marketing line items on your statement of operations.
July 21, 2006
Page
Response
Pursuant to 17 C.F.R. § 200.83, we hereby request confidential treatment of the numbers bracketed in the fist paragraph of this response to Comment 2.
Cooperative advertising receipts included as a reduction to marketing expense were $[***], $[***] and $[***] million or [***]%, [***]% and [***]% of pretax income for the years ended December 31, 2005, 2004 and 2003. The receipts are significant as a percentage of pretax income in 2003 because this was our first breakeven year, but we believe they are not material because they do not reflect a significant event or trend.
Cooperative advertising receipts without specific performance criteria are included in cost of sales. Amounts identified by vendors as cooperating advertising receipts are not meaningfully different from other vendor pricing discounts without specific performance criteria. We disclose only net pricing from vendors because we lack objective and reliable evidence to allocate fair value to such individual discounts and a majority of such discounts are deducted directly from the vendor invoice (not received by us separately in cash).
If you have any questions or further comments, please contact me at (206) 266-2903 (telephone) or (206) 266-7010 (facsimile).
Very truly yours,
/s/ Mark S. Peek
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CORRESP
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filename1.htm
Correspondence
July 21, 2006
CONFIDENTIAL
FOR INFORMATION OF SEC STAFF ONLY
Confidential Treatment is requested
For a portion of this letter described below
Via Overnight Delivery
George F. Ohsiek, Jr.
Branch Chief
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re:
Amazon.com, Inc.
Form 10-K for Fiscal Year Ended December 31, 2005
Filed February 17, 2006
Form 10-Q for Fiscal Quarter Ended March 31, 2006
File No. 0-22513
Dear
Mr. Ohsiek:
On behalf of Amazon.com, Inc., this responds to your letter of July 6, 2006, regarding our Annual Report on Form 10-K
for the year ended December 31, 2005 (the “2005 10-K”). Each of your comments is set forth below, followed by our response.
Pursuant to 17 C.F.R. § 200.83, we are requesting confidential treatment for portions of our responses to Comments 1 and 2. We request that these portions, as indicated by [***], be maintained in confidence, not be made part of any
public record and not be disclosed to any person as they contain confidential information, disclosure of which would cause us competitive harm. In the event that the Staff receives a request for access to the confidential portions herein,
whether pursuant to FOIA or otherwise, we respectfully request that we be notified immediately so that we may further substantiate this request for confidential treatment. Please address any notification of a request for access to such
documents to the undersigned with a copy to the office of our General Counsel.
Form 10-K for Fiscal Year Ended December 31, 2005
Note 1 – Description of Business and Accounting Policies, page 53
Accrued Expense and Other Current Liabilities, page 57
Comment 1
We have reviewed your response to comment 7 in our letter dated May 24, 2006. Please demonstrate for us the immateriality of the
income you recorded for unredeemed gift certificates relative
July 21, 2006
Page
2
to pretax earnings in each period presented. Otherwise revise your future filings as previously requested to disclose the amount of income you record for
unredeemed gift certificates in each period presented. Also tell us and revise your proposed gift certificate policy disclosure to clarify what you mean when you say that you recognize revenue for gift certificates without expiration dates
“when the likelihood of redemption becomes remote.” In particular, explain whether such recognition is based on specific identification of gift certificates that will not be redeemed, or based on experience with a homogeneous pool of
transactions. Also clarify how you determine when the likelihood of redemption is remote, and whether the estimated breakage is recorded as other gift certificates in the homogeneous pool are redeemed, or whether the entire amount of breakage is
recorded at the point in time when redemption is determined to be remote.
Response
Pursuant to 17 C.F.R. § 200.83, we hereby request confidential treatment of the numbers bracketed in the first paragraph of this response to
Comment 1.
Revenue from unredeemed gift certificates was $[***], $[***] and $[***] million and [***]%, [***]% and [***]% as a
percentage of revenue for the years ended December 31, 2005, 2004 and 2003. Income from unredeemed gift certificates would be determined net of associated costs. We do not specifically allocate costs of the gift certificate program between
redeemed, unredeemed and expired gift certificates and therefore do not determine the impact of unredeemed certificates on income, so we believe the best measure of materiality is against revenue and not pretax income.
Revenue for an unredeemed gift certificate is recognized upon expiration, which is generally two years from date of issuance. For a gift certificate with
no expiration date, revenue is recognized when historical experience indicates services will not be rendered, which is also generally two years from date of issuance. Such recognition is based on specific identification of gift certificates.
In future filings, our proposed policy disclosure with regard to gift certificates in Note 1 to the Financial Statements would be as
follows:
“Included in Accrued expenses and other current liabilities at
and
are liabilities of $ million and
$ million for unredeemed gift certificates. We recognize revenue from a gift certificate when a customer redeems it. If a gift certificate is not redeemed, we recognize revenue when it expires
or, for a certificate without an expiration date, when the likelihood of its redemption becomes remote, generally two years from date of issuance.”
Vendor Agreements, page 59
Comment 2
We have reviewed your response to comment 8 in our letter dated May 24, 2006. Please demonstrate for us the immateriality of total cooperative
advertising receipts relative to pretax earnings for each period presented, or otherwise revise your future filings as previously requested to disclose the amount of cooperative advertising payments received each period. Also disclose the amount of
total cooperative advertising payments included in the cost of sales versus the marketing line items on your statement of operations.
July 21, 2006
Page
3
Response
Pursuant to 17 C.F.R. § 200.83, we hereby request confidential treatment of the numbers bracketed in the fist paragraph of this response to
Comment 2.
Cooperative advertising receipts included as a reduction to marketing expense were $[***], $[***] and $[***] million or
[***]%, [***]% and [***]% of pretax income for the years ended December 31, 2005, 2004 and 2003. The receipts are significant as a percentage of pretax income in 2003 because this was our first breakeven year, but we believe they are not
material because they do not reflect a significant event or trend.
Cooperative advertising receipts without specific performance criteria
are included in cost of sales. Amounts identified by vendors as cooperating advertising receipts are not meaningfully different from other vendor pricing discounts without specific performance criteria. We disclose only net pricing from vendors
because we lack objective and reliable evidence to allocate fair value to such individual discounts and a majority of such discounts are deducted directly from the vendor invoice (not received by us separately in cash).
If you have any questions or further comments, please contact me at (206) 266-2903 (telephone) or (206) 266-7010 (facsimile).
Very truly yours,
/s/ Mark S. Peek
Mark S. Peek
Senior Vice President and Chief
Accounting Officer
cc:
Sarah Goldberg
Staff Accountant
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Robyn Manuel
Staff Accountant
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Jeffrey P. Bezos
President and Chief Executive Officer
Amazon.com, Inc.
P.O. Box 81226
Seattle, WA 98108-1226
Thomas J. Szkutak
Senior Vice President and Chief Financial Officer
Amazon.com, Inc.
P.O. Box 81226
Seattle, WA 98108-1226
July 21, 2006
Page
4
L. Michelle Wilson
Senior Vice President and General Counsel
Amazon.com, Inc.
P.O. Box 81226
Seattle, WA 98108-1226
Shelley Reynolds
Vice President and Controller
Amazon.com, Inc.
P.O. Box 81226
Seattle, WA 98108-1226
Greg Beams
Partner
Ernst & Young LLP
999 Third Avenue, Suite 3500
Seattle, WA 98104
Ken Marceron
Partner
Ernst & Young LLP
1225 Connecticut Ave, N.W., 8th Floor
Washington, DC 20036
Ronald O. Mueller
Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5306
Amazon.com Audit Committee Members