Amazon.com 2006 Annual Report Download - page 71

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Upon the occurrence of a “fundamental change” prior to the maturity of the 4.75% Convertible
Subordinated Notes, each holder thereof has the right to require us to redeem all or any part of such holder’s
4.75% Convertible Subordinated Notes 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 4.75% Convertible Subordinated Notes 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, 2006.
In 2004, we redeemed an aggregate principal amount of $150 million of our outstanding 4.75% Convertible
Subordinated Notes. As provided in the underlying indenture, the redemption price of $154 million represented a
$4 million (2.375%) premium over the face amount of the redeemed notes. We recorded a charge in 2004
classified in “Remeasurements and other,” of $6 million related to this redemption, consisting of a premium of
$4 million and unamortized deferred issuance costs of $2 million.
Based upon quoted market prices, the fair value of our 4.75% Convertible Subordinated Notes as of
December 31, 2006 and 2005 was $883 million and $868 million.
Note 5—OTHER LONG-TERM LIABILITIES
Our other long-term liabilities are summarized as follows:
December 31,
2006 2005
(in millions)
Tax contingencies ....................................................... $ 75 $20
Long-term capital lease obligations ......................................... 20 5
Other ................................................................. 58 46
$153 $71
Tax Contingencies
As of December 31, 2006, the Company has provided tax reserves of approximately $75 million for U.S.
and foreign income taxes, which primarily relate to restructuring of certain foreign operations and intercompany
pricing between our subsidiaries. See “Note 12—Income Taxes” for discussion of tax contingencies.
Capital Leases
Certain of our equipment fixed assets, primarily related to technology, have been acquired under
capital leases. Long-term capital lease obligations were as follows:
December 31,
2006
(in millions)
Gross capital lease obligations ....................................................... $60
Less imputed interest .............................................................. (5)
Present value of net minimum lease payments ........................................... 55
Less current portion ............................................................... (35)
Total long-term capital lease obligations ............................................... $20
63