Amazon.com 2005 Annual Report Download - page 75

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 4—LONG-TERM DEBT AND OTHER
Our long-term debt and other long-term liabilities are summarized as follows:
December 31,
2005 2004
(in millions)
4.75% Convertible Subordinated Notes due February 2009 ................... $ 900 $ 900
6.875% PEACS due February 2010 ..................................... 580 935
Other long-term debt and capital lease obligations .......................... 44 22
1,524 1,857
Less current portion of other long-term debt and capital lease obligations ....... (3) (2)
Total long-term debt and other ..................................... $1,521 $1,855
6.875% PEACS
In February 2000, we completed an offering of €690 million of our 6.875% Premium Adjustable
Convertible Securities due February 2010 (“6.875% PEACS”). The 6.875% PEACS are convertible, at the
holder’s option, into our common stock at a conversion price of €84.883 per share ($100.52, based on the
exchange rates as of December 31, 2005). Total common stock issuable, as of December 31, 2005, upon
conversion of our outstanding 6.875% PEACS was 5.8 million shares, which is excluded from our calculation of
earnings per share as its effect is anti-dilutive. The U.S. Dollar equivalent principal, interest, and conversion
price fluctuate based on the Euro/U.S. Dollar exchange ratio. Interest on the 6.875% PEACS is payable annually
in arrears in February of each year. The 6.875% PEACS are unsecured and are subordinated to any existing and
future senior indebtedness. The 6.875% PEACS rank equally with our outstanding 4.75% Convertible
Subordinated Notes. We have the right to redeem the 6.875% PEACS, in whole or in part, by paying the
principal, plus any accrued and unpaid interest. No premium payment is required for early redemption.
Upon the occurrence of a “fundamental change” prior to the maturity of the 6.875% PEACS, each holder
thereof has the right to require us to redeem all or any part of such holder’s 6.875% PEACS at a price equal to
100% of the principal amount of the notes being redeemed, together with accrued interest. As defined in the
indenture, a “fundamental change” is the occurrence of certain types of transactions in which our stockholders do
not receive publicly-traded securities.
The indenture governing the 6.875% PEACS contains certain affirmative covenants for us, including
making principal and interest payments when due, maintaining our corporate existence and properties, and
paying taxes and other claims in a timely manner. We were in compliance with these covenants through
December 31, 2005.
In the first quarter of 2005, we redeemed an aggregate principal amount of €200 million ($265 million based
on the Euro to U.S. Dollar exchange rate on the date of redemption) of our outstanding 6.875% PEACS. We
recorded a charge classified in “Remeasurements and other,” of approximately $4 million related to the
redemption, consisting of $2 million in unamortized deferred issuance charges and $2 million relating to
unrealized losses on our terminated currency swap that previously hedged a portion of our 6.875% PEACS.
Accrued and unpaid interest of $0.9 million was also paid at redemption and recorded to “Interest expense.”
During 2003, we terminated our Euro Currency Swap that previously was designated as a cash flow hedge
of a portion of the 6.875% PEACS’ principal and interest. Although neither party made cash payments to
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