Amazon.com 2002 Annual Report Download - page 52

Download and view the complete annual report

Please find page 52 of the 2002 Amazon.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 98

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98

agreed to pay at inception and receive upon maturity 75 million Euros in exchange for receiving at
inception and paying at maturity $67 million. In addition, we agreed to receive in February of each year
27 million Euros corresponding with interest payments on 390 million Euros of the 6.875% PEACS and,
simultaneously, to pay $32 million. This agreement is cancelable, in whole or in part, at our option at no
cost on or after February 20, 2003 if our common stock price (converted into Euros) is greater than or
equal to 84.883 Euros, the minimum conversion price of the 6.875% PEACS. We account for the swap
agreement as a cash Öow hedge of the risk of exchange rate Öuctuations on the debt principal and interest.
Gains and losses on the swap agreement are initially recorded in ""Accumulated other comprehensive
income (loss)'' on our balance sheets and recognized in ""Other gains (losses), net'' on our statements of
operations upon the recognition of the corresponding currency losses and gains on the remeasurement of
the 6.875% PEACS.
Investment Risk
As of December 31, 2002, our recorded basis in equity securities was $19 million, including $4 million
classiÑed as ""Marketable securities'' and $15 million classiÑed as ""Other equity investments.'' We invest in
the stock and/or warrants of both private and public companies, including companies with which we have
formed commercial relationships, primarily for strategic purposes. At December 31, 2002, we held
investments in publicly-traded and privately held companies with a recorded basis of $11 million and
$8 million, respectively. We regularly review the carrying value of our investments and identify and record
losses when events and circumstances indicate that such declines in the fair value of such assets below our
accounting basis are other-than-temporary. During 2002, we recorded impairment losses totaling $8 million
to write-down several of our equity securities to fair value. The fair values of our investments are subject
to signiÑcant Öuctuations due to volatility of the stock market and changes in general economic conditions.
Based on the fair value of the publicly-traded equity securities we held at December 31, 2002 of
$42 million (recorded basis of $11 million), an assumed 15%, 30% and 50% adverse change to market
prices of these securities would result in a corresponding decline in total fair value of approximately
$6 million, $13 million and $21 million, respectively.
43