Amazon.com 2004 Annual Report Download - page 80

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Pledged Securities
We are required to pledge a portion of our marketable securities as collateral for standby letters of credit that
guarantee certain of our contractual obligations and for real estate lease agreements. The amount required to be
pledged for real estate lease agreements changes over the life of our leases; with fluctuations in our market
capitalization, which is common shares outstanding multiplied by the closing price of our common stock; and
based on our credit-rating. The change in the total amount of collateral required to be pledged under these
agreements is as follows:
Standby
Letters of
Credit (1)
Line of
Credit (2)
Real Estate
Leases (3) Total
(in thousands)
Balance at December 31, 2003 ............................. $60,799 $ — $25,936 $ 86,735
Net change in collateral pledged ............................ (10,383) 1,933 (4,412) (12,862)
Balance at December 31, 2004 (4) .......................... $50,416 $1,933 $21,524 $ 73,873
(1) Pursuant to available standby letter-of-credit facilities totaling $151 million.
(2) Pursuant to an available line of credit totaling $10 million.
(3) The required amount of collateral to be pledged on certain of our real estate leases fluctuates based on our
market capitalization. At December 31, 2004, our market capitalization was $18.1 billion. If our market
capitalization decreases, the required amount of collateral to be pledged will increase $5 million (if market
capitalization is less than $18 billion but more than $13 billion) or $11 million (if our market capitalization
is less than $13 billion).
(4) Includes $10 million of cash equivalents pledged as collateral. See “Note 2—Cash, Cash Equivalents, and
Marketable Securities.”
Legal Proceedings
Anumber of purported class action complaints were filed by holders of our equity and debt securities
against us, our directors, and certain of our senior officers during 2001, in the United States District Court for the
Western District of Washington, alleging violations of the 1933 Act and/or the 1934 Act (the “Securities Class
Actions”). On August 1, 2003, plaintiffs in the 1934 Act cases filed a second consolidated amended complaint
alleging that we, together with certain of our officers and directors, made false or misleading statements during
the period from October 29, 1998 through October 23, 2001 concerning our business, financial 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 offering of the 6.875%
PEACS. The complaints seek damages and injunctive relief against all defendants. We dispute the allegations of
wrongdoing in these complaints and have been vigorously defending ourselves in these matters. See “Note 15—
Subsequent Events (Unaudited).”
On October 29, 2002, Gary Gerlinger, individually and on behalf of all other similarly situated consumers in
the United States who, during the period from August 1, 2001 to the present, purchased books online from either
Amazon.com or Borders.com, instituted an action against us and Borders in the United States District Court for
the Northern District of California. The complaint alleges that the agreement pursuant to which an affiliate of
Amazon.com operates Borders.com as a co-branded site violates federal anti-trust laws, California statutory law,
and the common law of unjust enrichment. The complaint seeks injunctive relief, damages, including treble
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