Public Accounts CommitteeSupplementary written evidence from Amazon EU SarL

Thank you for the questions we received on Tuesday from the Committee of Public Accounts. I write to provide answers to those questions. For completeness, I enclose as an Exhibit a copy of my letter [Ev 56] to you dated 13 November which addressed a subset of these questions.

The table below provides 2011 sales originating in each European country, excluding countries from which sales did not exceed $10 million. Sales from these other European countries, relating principally to the Nordic operations of our LOVEFiLM subsidiary, have been aggregated with our international businesses into “Other International.”

The following sales amounts are not publically available at this level of detail, are unaudited, and are being provided solely for the purpose of responding to the Committee’s questions. In our public company filings with the U.S. Securities and Exchange Commission, we disclose sales, operating expenses, operating income and information for our two business segments, “North America” and “International.” The financial information included in this letter is derived from those data except for intercompany expenses.

Given the non-public nature of this information, we respectfully request confidential treatment.

Net Sales Twelve Months Ended December 31, 2011

(in millions)	Currency	Local Currency	USD
Germany	EUR	5,232	7,230
UK	GB	3,351	5,348
France	EUR	889	1,225
Italy	EUR	154	212
Spain	EUR	79	107
Other International			7,250
Total Net Sales International Segment			21,372
Total Net Sales North America Segment			26,705
Total Net Sales Worldwide			48,077

As shown in the table above, our sales from the UK for 2011 were £3,351 million, which consists of sales of £2,910 million related to orders on the amazon.co.uk website (as provided in our previous letter) and approximately £441 million in revenue from subsidiaries such as LOVEFiLM and from other business activity outside of the amazon.co.uk website.

Profits before income tax on our UK sales of £3,351 million were £74 million for 2011. Costs associated with these sales include cost of sales of £2,690 million; operating expenses of £417 million; intercompany charges of £151 million primarily for the use of intellectual property licensed from Amazon Europe Holding Technologies S.C.S; £12 million of stock based compensation for the UK group of companies; and £7 million of other expenses.

As a point of reference, below is our International segment and worldwide consolidated statement of operations information (the amounts below exclude the impact of intercompany transactions):

		Twelve Months Ended December 31, 2011		Nine Months Ended September 30, 2012
(in millions)	International Segment		Worldwide Consolidated		Worldwide Consolidated
Statement of Operations:
Net Sales	21,372 $		48,077 $		39,825 $
Segment operating expenses	(20,732)		(46,504)		(38,836)
Segment operating income	640		1,573		989
Segment operating margin	3.0%		3.3%		2.5%
Stock based compensation			(557)		(597)
Other operating expense			(154)		(121)
Income from operations			862		271
Operating margin			1.8%		0.7%

In 2006, as part of the establishment of our European headquarters in Luxembourg, we transferred ownership of a group of companies, including Amazon.co.uk Ltd, from our U.S. subsidiary Amazon.com Int’l, Inc. to Amazon Europe Holding Technologies S.C.S., and then to Amazon EU Sarl. Part of this process was to register the shares of Amazon EU Sarl with the Luxembourg authorities, which took one day to complete. Our Luxembourg entities do not have any preferred equity securities outstanding and have never issued preferred equity securities.

As described in more detail in our previous letter to your Committee, attached, Amazon.co.uk Ltd, is a UK company that provides fulfilment and logistics services; customer support services; accountancy, tax, legal, human resources, and localisation services; merchandising and marketing support services; and purchasing services. Amazon.co.uk Ltd is compensated for these services by Amazon EU Sarl; therefore it is not a “branch” or “place of business” of Amazon EU Sarl.

Statements of account are prepared for entities throughout Europe, and when required, audited, based on the requirements applicable in each country and include the impact of intercompany activity. These statements are prepared on a basis consistent with local accounting standards and other regulatory requirements. I am enclosing as Exhibits [not printed] the requested 2011 statements of account for Amazon.co.uk Ltd, Amazon EU Sarl, and Amazon Europe Holding Technologies S.C.S.

Andrew Cecil
Director, EU Public Policy

16 November 2012