Amazon.com 2004 Annual Report Download - page 40

Since our 6.875% PEACS, which are due in 2010, are denominated in Euros, our U.S. Dollar equivalent
interest payments and principal obligations fluctuate with the Euro to U.S. Dollar exchange rate. We currently do
not hedge our exposure to foreign currency effects on our interest or principal obligations relating to the 6.875%
PEACS, and, as a result, any fluctuations in the exchange rate will have an effect on our interest expense and, to
the extent we make principal payments, the amount of U.S. Dollar equivalents necessary for principal settlement.
Additionally, since our interest payable on our 6.875% PEACS is due in Euros, the balance of interest payable is
subject to gains or losses on currency movements until the date of the interest payment. Gains or losses on the
remeasurement of our Euro-denominated interest payable are classified as “Other expense (income), net” on our
consolidated statements of operations.
The following summarizes our principal contractual commitments as of December 31, 2004:
2005 2006 2007 2008 2009 Thereafter Total
(in thousands)
Operating and capital commitments:
Debt principal and other (1) . . $ 128 $ 1,250 $ 340 $ 373 $ 899,760 $ 951,089 $1,852,940
Debt interest (1) ............ 107,026 107,026 107,026 107,026 85,656 64,287 578,047
Capital leases .............. 1,298 510 22 — — — 1,830
Operating leases (2) ......... 61,222 64,390 55,678 51,990 43,184 186,737 463,201
Purchase obligations (3) ..... 227,950 — — — — — 227,950
Total operating and capital
commitments ................ 397,624 173,176 163,066 159,389 1,028,600 1,202,113 3,123,968
Restructuring-related commitments:
Operating leases, net of
estimated sublease
income (4) .............. 3,057 1,903 1,843 1,497 1,374 1,305 10,979
Other .................... 1,910 — — — — — 1,910
Total restructuring-related
commitments ................ 4,967 1,903 1,843 1,497 1,374 1,305 12,889
Total commitments ............. $402,591 $175,079 $164,909 $160,886 $1,029,974 $1,203,418 $3,136,857
(1) The principal payment due in 2010 and the annual interest payments due under our 6.875% PEACS fluctuate based on
the Euro/U.S. Dollar exchange ratio, which, at December 31, 2004, was 1.3552. As of December 31, 2004, our principal
debt obligation for the 6.875% PEACS has increased by $255 million since its issuance in February 2000 due to
fluctuations in the Euro/U.S. Dollar exchange ratio. Additionally, on March 7, 2005, we redeemed 200 million Euros of
our outstanding 6.875% PEACS, which is not reflected in the table above.
(2) Pursuant to SFAS No. 13, “Accounting for Leases,”lease agreements are categorized at their inception as either
operating or capital leases depending on certain defined criteria. Although operating leases represent obligations for us,
pursuant to SFAS No. 13 they are not reflected on the balance sheet. As of December 31, 2004, we have remaining
obligations under operating leases for equipment and real estate of $463 million. If we had applied to our operating
leases the same convention used for capital leases, which, however, would not be in accordance with GAAP, we would
have recorded approximately $335 million of additional obligations on our balance sheet at December 31, 2004.
(3) Consists primarily of legally-binding commitments to purchase inventory. Legally-binding commitments associated with
non-inventory purchases are not significant.
(4) Net of an estimated $20 million in sublease rentals. At December 31, 2004, we had signed sublease agreements totaling
$13 million.
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