Amazon.com 2002 Annual Report Download - page 78

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Long-term capital lease obligations are as follows (in thousands):
December 31,
2002
Gross capital lease obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 9,083
Less imputed interest ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (592)
Present value of net minimum lease payments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,491
Less current portion ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (7,506)
Long-term capital lease obligationsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 985
Pledged Securities
The Company has pledged a portion of its marketable securities as collateral for stand-by letters of
credit that guarantee certain of its contractual obligations, a majority of which relates to property leases;
the swap agreement that hedges the foreign exchange risk on a portion of its 6.875% PEACS; and some of
its real estate lease agreements. The amount of marketable securities the Company is required to pledge
pursuant to the swap agreement Öuctuates with the fair market value of the swap obligation. The change
in the total amount of collateral pledged under these agreements is as follows (in thousands):
Standby
Letters of Swap Real Estate
Credit Agreement Leases Total
Balance at December 31, 2001 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $77,635 $48,498 $40,657 $166,790
Net change in collateral pledgedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (19,741) (25,403) (578) (45,722)
Balance at December 31, 2002 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $57,894 $23,095 $40,079 $121,068
Legal Proceedings
On April 12, 2001, the Company received a request from the Securities and Exchange Commission
(""SEC'') staÅ for the voluntary production of documents and information concerning, among other things,
previously reported sales of the Company's common stock by our Chairman and Chief Executive OÇcer,
JeÅrey Bezos, on February 2 and 5, 2001. The Company is cooperating with the SEC staÅ's continuing
inquiry.
A number of purported class action complaints were Ñled by holders of the Company's equity and
debt securities against the Company, its directors and certain of its senior oÇcers during 2001, in the
United States District Court for the Western District of Washington, alleging violations of the Securities
Act of 1933 (the ""1933 Act'') and/or the Securities Exchange Act of 1934 (the ""1934 Act''). On
October 5, 2001, plaintiÅs in the 1934 Act cases Ñled a consolidated amended complaint alleging that the
Company, together with certain of its oÇcers and directors and certain third-parties, made false or
misleading statements during the period from October 29, 1998 through July 23, 2001 concerning the
Company's business, Ñnancial condition and results, inventories, future prospects and strategic alliance
transactions. The 1933 Act complaint alleges that the defendants made false or misleading statements in
connection with our February 2000 oÅering of the 6.875% PEACS. The complaints seek recissionary
and/or compensatory damages and injunctive relief against all defendants. The Company disputes the
allegations of wrongdoing in these complaints and intends to vigorously defend itself in these matters.
On August 28, 2002, the Trustee for the Creditors' Trust for Living.com instituted an adversary
proceeding against a subsidiary of the Company in the United States Bankruptcy Court for the Western
District of Texas. The plaintiÅ alleges that Living.com's creditors are entitled to a contractual recovery of
69