Amazon.com 2001 Annual Report Download - page 80

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Markdowns and Other Costs Associated with a Restructuring,” all inventory adjustments that may result from the
closure or seasonal operation of the Company’s fulfillment centers are classified in “Cost of goods sold” on the
consolidated statements of operations. As of December 31, 2001, there have been no significant inventory write
downs resulting from the restructuring, and none are anticipated.
For the year ended December 31, 2001, the charges associated with the restructuring were as follows (in
thousands):
Asset impairments ......................................... $ 68,528
Continuing lease obligations ................................. 87,049
Termination benefits ....................................... 14,970
Broker commissions, professional fees and other miscellaneous
restructuring costs ....................................... 11,038
$181,585
Asset impairments primarily relate to the closure of the McDonough, Georgia fulfillment center, the write-
off of leasehold improvements in vacated corporate office space, and the other-than-temporary decline in the fair
value of assets in the Seattle, Washington fulfillment center. For assets to be disposed of, the Company estimated
the fair value based on expected salvage value less costs to sell. For assets held for continued use, the decline in
fair value was measured using discounted estimates of future cash flows. The Company is actively seeking third-
party buyers for the assets held for disposal. At December 31, 2001 the carrying amount of assets held for
disposal was not significant.
Continuing lease obligations primarily relate to heavy equipment previously used in the McDonough,
Georgia fulfillment center, vacated corporate office space, technology infrastructure no longer being utilized, and
the unutilized portion of the Company’s back-up data center. Where possible, the Company is actively seeking
third parties to sub-lease abandoned equipment and facilities. Amounts expensed represent estimates of
undiscounted future cash outflows, offset by anticipated third-party sub-leases. At December 31, 2001, the
Company remains obligated under lease obligations of $121 million associated with its January 2001 operational
restructuring, offset by estimates of future sub-lease income of $68 million, of which $17 million are to be
received under non-cancelable subleases.
Termination benefits are comprised of severance-related payments for all employees to be terminated in
connection with the operational restructuring, as well as $2.5 million of the Company’s common stock
contributed to a trust fund for the benefit of terminated employees. Termination benefits do not include any
amounts for employment-related services prior to termination. Other restructuring costs include professional fees,
decommissioning costs of vacated facilities, broker commissions and other miscellaneous expenses directly
attributable to the restructuring.
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