Amazon.com 2001 Annual Report Download - page 37

Amortization of Goodwill and Other Intangibles
Amortization of goodwill and other intangibles was $181 million, $322 million and $215 million for 2001,
2000 and 1999, respectively. During the fourth quarter of 2000, we recorded an impairment loss of $184 million
on goodwill and other intangibles relating to certain of our 1999 acquisitions. This impairment loss reduced our
recorded basis in goodwill and other intangibles and had the effect of reducing amortization expense during
2001. In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” which requires use of a
nonamortization approach to account for purchased goodwill and certain intangibles, effective January 1, 2002.
Under this nonamortization approach, goodwill and certain intangibles will not be amortized into results of
operations, but instead will be reviewed for impairment and written down and charged to results of operations
only in the periods in which the recorded value of goodwill and certain intangibles is more than its fair value. We
expect the adoption of this accounting standard will result in approximately $25 million of other intangible assets
being subsumed into goodwill, and will have the effect of substantially reducing our amortization of goodwill
and intangibles commencing January 1, 2002. Transitional impairments, if any, are not expected to be material;
however, impairment reviews may result in future periodic write-downs.
Restructuring-Related and Other
Restructuring-related and other expenses were $182 million, $200 million and $8 million for 2001, 2000 and
1999, respectively. In the first quarter of 2001, we announced and began implementation of our operational
restructuring plan to reduce operating costs, streamline our organizational structure, and consolidate certain of
our fulfillment and customer service operations. This initiative involved the reduction of employee staff by
approximately 1,300 positions in managerial, professional, clerical, technical and fulfillment roles; consolidation
of our Seattle, Washington corporate office locations; closure of our McDonough, Georgia fulfillment center;
seasonal operation of our Seattle, Washington fulfillment center (if necessary); closure of our customer service
centers in Seattle, Washington and The Hague, Netherlands; and migration of a large portion of our technology
infrastructure to a new operating platform, which entails ongoing lease obligations for technology infrastructure
no longer being utilized. Each component of the restructuring plan has been substantially completed. As of
December 31, 2001, 1,327 employees had been terminated, and actual termination benefits paid were
$12 million.
Costs that relate to ongoing operations are not part of restructuring charges and are not included in
“Restructuring-related and other.” In accordance with EITF Issue No. 96-9, “Classification of Inventory
Markdowns and Other Costs Associated with a Restructuring,” all inventory adjustments that may result from the
closure or seasonal operation of our fulfillment centers are classified in “Cost of goods sold” on the statements of
operations. As of December 31, 2001, there have been no significant inventory write downs resulting from the
restructuring, and none are anticipated.
For the year ended December 31, 2001, the charges associated with the restructuring were as follows (in
thousands):
Asset impairments .......................................................... $ 68,528
Continuing lease obligations .................................................. 87,049
Termination benefits ........................................................ 14,970
Broker commissions, professional fees and other miscellaneous restructuring costs ....... 11,038
$181,585
Asset impairments primarily relate to the closure of the McDonough, Georgia fulfillment center, the write-
off of leasehold improvements in vacated corporate office space, and the decline in the fair value of assets in the
Seattle, Washington fulfillment center. For assets to be disposed of, we estimated the fair value based on
expected salvage value less costs to sell. For assets held for continued use, the decline in fair value was measured
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