Amazon.com 2006 Annual Report Download - page 38

in inventory turnover over time as it is affected by several factors, including our product mix, our mix of third-
party sales, and the extent we choose to utilize outsource fulfillment providers, among other factors. The decline
in inventory turnover is primarily attributed to our emphasis on category expansion and maintaining wide
selection of in-stock inventory, which enables faster delivery of products to our customers.
The following summarizes our principal contractual commitments as of December 31, 2006:
2007 2008 2009 2010 2011 Thereafter Total
(in millions)
Operating and capital commitments:
Debt principal and other (1) ................ $ 17 $— $ 930 $317 $— $— $1,264
Debt interest (1) ......................... 66 66 44 22 — — 198
Capital leases, including interest ............ 35 7 5 4 4 5 60
Operating leases ......................... 129 113 91 72 50 184 639
Other commitments ...................... 20 5 8 6 1 19 59
Purchase obligations (2) ................... 420 11 12 9 10 5 467
Total commitments ................... $687 $202 $1,090 $430 $ 65 $213 $2,687
(1) At December 31, 2006, the Euro to U.S. Dollar exchange rate was 1.3201. Due to changes in the Euro/U.S.
Dollar exchange ratio, our remaining principal debt obligation under the 6.875% PEACS since issuance in
February 2000 has increased by $80 million as of December 31, 2006. The principal and interest
commitments reflect the partial redemptions of the 6.875% PEACS and 4.75% Convertible Subordinated
Notes.
(2) Consists of legally-binding commitments to purchase inventory and significant non-inventory commitments.
Pledged Securities
We are required to support certain letters of credit, debt, and real estate leases by pledging or otherwise
restricting cash and marketable securities. We classify marketable securities, where a use restriction exists for a
period of twelve months or longer, as non-current “Other assets” on our consolidated balance sheets. The balance
of pledged securities at December 31, 2006 consisted of $50 million in “Marketable securities” and $86 million
in “Other assets”. The amount required to be pledged for certain real estate lease agreements changes over the
life of our leases with fluctuations in our market capitalization (common shares outstanding multiplied by the
closing price of our common stock) and based on our credit-rating. Information about collateral required to be
pledged under these agreements is as follows:
Standby and Trade
Letters of
Credit (1) Debt (2)
Real Estate
Leases (3) Total
(in millions)
Balance at December 31, 2005............................ $59 $14 $18 $ 91
Net change in collateral pledged .......................... 1 42 2 45
Balance at December 31, 2006............................ $60 $56 $20 $136
(1) Pursuant to available standby and trade letter-of-credit facilities totaling $233 million. See Item 8 of Part II,
“Financial Statements and Supplementary Data—Note 6—Commitments and Contingencies.”
(2) Represents collateral for certain debt related to our international operations.
(3) At December 31, 2006, our market capitalization was $16.3 billion. The required amount of collateral to be
pledged will increase by $6 million if our market capitalization is equal to or below $13 billion and decrease
by $5 million if our market capitalization exceeds $18 billion.
We believe that current cash, cash equivalents, and marketable securities balances will be sufficient to meet
our anticipated operating cash needs for at least the next 12 months. However, any projections of future cash
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