You apparently are misunderstanding basic accounting. AMZN
has already /paid/ for the warehouses and office space.
They will lose no more cash on those, except in day to
day operating costs, and taxes. Depreciation is how the
government forces them to recognize the purchase- it
affects their earnings statement, but in actuality they
are not spending that money. It is virtual.
AMZN is /not/ going to run out of money.
Brian,
There is confusion here on both side although it would ne nice if you would read the 10Ks and 10Qs before you correct another.
Amazon has not paid for the wharehouses. In fact, Amazon does not own them. Amazon leased these wharehouses and at a very high rate due to the fact they were built by the developer to suit Amazon's needs. Thus, Amazon will have continual lease payments which in effect is debt. These debt payments are fixed and there are still the variable costs of labor, utilities, etc.
So we have two very high cash outflows that are fixed. One is the interest on the junk bonds and the other is the lease payments on the fulfillment centers.
The total misunderstanding of the Amazon financial model astounds me. No one has been talking about the cash outflows of the fulfillment centers being established in Europe. Amazon states in their press releases they opened a fulfillment center each time they opened one in the US. Therefore, the majority of the public assumes Amazon bought the land, paid for the construction and no more cash outlay is needed except the costs of operations. Go read the SEC filings and you will find Amazon owns almost nothing. The cash they did expend during the contruction of the fulfillment center was only for the shelving, office equipment, packaging equipment, forklifts, etc. Those products are owned by Amazon but the bulding and the land is not.
You make this stsement:
AMZN is /not/ going to run out of money.
I suppose one is to assume you know this as a fact. Please do not make statements you have not researched nor can back up. I anticipate Amazon will be out of cash again Q3 2001 but I am not going to make a statement to the effect that is fact.
Glenn |
