Amazon.com 2006 Annual Report Download - page 72

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The remainder of our other long-term liabilities primarily include asset retirement obligations and deferred
rental liabilities.
NOTE 6—COMMITMENTS AND CONTINGENCIES
Commitments
We lease office and fulfillment center facilities and fixed assets under non-cancelable operating and capital
leases. Rental expense under operating lease agreements was $132 million, $84 million, and $55 million for
2006, 2005, and 2004.
The following summarizes our principal contractual commitments, excluding open orders for inventory
purchases that support normal operations, 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
Total commitments ................... $267 $191 $1,078 $421 $ 55 $208 $2,220
(1) Under our 6.875% PEACS, the principal payment due in 2010 and the annual interest payments fluctuate
based on the Euro/U.S. Dollar exchange ratio. 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 this instrument since issuance in February 2000 has increased by $80 million as of December 31,
2006. The principal and interest commitments at December 31, 2006 reflect the partial redemptions of the
6.875% PEACS and 4.75% Convertible Subordinated Notes.
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 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.
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