Amazon.com 2000 Annual Report Download - page 59

Note 8—LONG-TERM DEBT
The Company’s long-term debt is summarized as follows:
December 31,
2000 1999
(in thousands)
Convertible Subordinated Notes ............................... $1,249,807 $1,249,807
Euro Convertible Subordinated Notes ........................... 650,463 —
Senior Discount Notes ...................................... 210,278 190,728
Capital lease obligations .................................... 24,837 31,266
Other long-term debt ....................................... 8,656 8,859
2,144,041 1,480,660
Less current portion of long-term debt .......................... (4,831) (4,520)
Less current portion of capital lease obligations ................... (11,746) (9,802)
$2,127,464 $1,466,338
Euro Convertible Subordinated Notes
On February 16, 2000, the Company completed an offering of 690 million Euros of 6.875% Convertible
Subordinated Notes due 2010, also known as PEACS ‘‘Premium Adjustable Convertible Securities.’’ The
PEACS are convertible into the Company’s common stock at an initial conversion price of 104.947 Euros per
share. Interest on the PEACS is payable annually in arrears in February of each year, commencing in February
2001. The PEACS are unsecured and are subordinated to all of the Company’s existing and future senior
indebtedness. The PEACS rank equally with the Company’s outstanding 4.75% Convertible Subordinated
Notes due 2009 (the ‘‘Convertible Notes’’). The conversion price for the PEACS will be reset on February 16,
2001 and February 16, 2002, but in no event will the conversion price be reset lower than 84.883 Euros per
share. Subject to certain conditions, the PEACS may be redeemed at the Company’s option on or after
February 20, 2003, in whole or in part, at the redemption price of 1,000 Euros per note, plus accrued and
unpaid interest.
In order to hedge a portion of the risk of exchange rate fluctuations between the U.S. dollar and the Euro,
the Company entered into a cross-currency swap agreement and into a series of foreign currency forward
purchase agreements. Under the swap agreement, the Company 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, the Company agreed to receive in February of each year 27 million Euros for interest payments on
390 million Euros of the PEACS and, simultaneously, to pay $32 million. This agreement is cancelable, in
whole or in part, at the Company’s option at no cost on or after February 20, 2003 if the Company’s
underlying stock price (converted into Euros) is greater than or equal to the minimum conversion price of the
PEACS. Under the forward purchase agreements, the Company agreed to pay $18 million and receive
21 million Euros in February 2001. The Company accounts for these agreements as hedges of the risk of
exchange rate fluctuations on the debt principal and interest. Currency gains and losses on the hedge
agreements are recognized upon the recognition of the corresponding currency gains and losses on the hedged
liabilities.
At December 31, 2000, debt of 615 million Euros was also designated as a hedge of the risk of foreign
exchange fluctuations on a portion of the 624 million Euro cash equivalent and marketable fixed-income
securities classified as available-for-sale. Accordingly, currency gains and losses on the Euro debt were
included in ‘‘Accumulated other comprehensive loss’’ as an offset to the currency changes in the underlying
available-for-sale cash equivalents and investments.
AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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