Amazon.com 2007 Annual Report Download - page 36

$905 million at December 31, 2007, 2006, and 2005 and were primarily Euros, British Pounds, and Japanese
Yen.
Cash provided by operating activities was $1.4 billion, $702 million, and $733 million in 2007, 2006, and
2005. Our operating cash flows result primarily from cash received from our customers, from sellers, and from
non-retail activities such as our co-branded credit card agreements, Amazon Enterprise Solutions, and
miscellaneous marketing and promotional agreements, offset by cash payments we make for products and
services, employee compensation (less amounts capitalized pursuant to SOP 98-1 that are reflected as cash used
in investing activities), payment processing and related transaction costs, operating leases, and interest payments
on our long-term debt obligations. Cash received from customers, sellers, developers, and other activities
generally corresponds to our net sales. Because our customers primarily use credit cards to buy from us, our
receivables from customers settle quickly.
Cash provided by (used in) investing activities corresponds with purchases, sales, and maturities of
marketable securities, cash outlays for acquisitions and intellectual property rights, and purchases of fixed assets,
including internal-use software and website development costs. Cash provided by (used in) investing activities
was $42 million, $(333) million, and $(778) million in 2007, 2006, and 2005, with the variability caused
primarily by purchases, maturities, and sales of marketable securities. Capital expenditures were $224 million,
$216 million and $204 million in 2007, 2006 and 2005, with the sequential increases primarily reflecting
additional investments in technology infrastructure, fulfillment-related assets and the development of new
features and product offerings on our websites. Capital expenditures included $108 million, $108 million and $79
million for internal-use software and website development during 2007, 2006 and 2005. Stock-based
compensation capitalized for internal-use software and website development costs does not affect cash flows. We
made payments for the acquisition of certain companies and intellectual property rights, resulting in cash
payments, net of acquired cash, of $75 million, $32 million, and $24 million in 2007, 2006 and 2005 attributable
to cash provided by investing activities.
Cash provided by (used in) financing activities was $50 million, $(400) million, and $(193) million in 2007,
2006, and 2005. Cash outflows from financing activities result from repurchases of common stock, repayments
of long-term debt, and payments on capital lease obligations. We repurchased 6 million shares of common stock
for $248 million in 2007, and 8 million shares of common stock for $252 million in 2006, under a $500 million
repurchase program authorized by our Board of Directors in 2006. Repayments on long-term debt and payments
on capital lease obligations were $74 million, $383 million, and $270 million in 2007, 2006, and 2005.
Repayments on long-term debt include €250 million and €200 million of our 6.875% PEACS for $300 million
and $265 million in 2006 and 2005. See Item 8 of Part II, “Financial Statements and Supplementary Data—
Note 4—Long-Term Debt.” Cash inflows from financing activities primarily result from proceeds from tax
benefits relating to excess stock-based compensation deductions and exercises of employee stock options. SFAS
No. 123(R), Accounting for Stock Based Compensation, requires tax benefits relating to excess stock-based
compensation deductions be presented as financing cash flows. Cash inflows from tax benefits related to stock-
based compensation deductions were $257 million, $102 million and $7 million in 2007, 2006, and 2005. Cash
inflows from proceeds from exercise of employee stock options were $91 million, $35 million, and $59 million
in 2007, 2006, and 2005. We expect cash proceeds from exercises of stock options will decline over time as we
continue issuing restricted stock units as our primary vehicle for stock-based awards.
In 2007, 2006 and 2005 we recorded net tax provisions of $184 million, $187 million, and $95 million. A
majority of this provision is non-cash. We have current tax benefits and net operating losses relating to excess
stock-based compensation deductions that are being utilized to reduce our U.S. taxable income. As such, cash
taxes paid were $24 million, $15 million, and $12 million for 2007, 2006, and 2005. We endeavor to optimize
our global taxes on a cash basis, rather than on a financial reporting basis.
In February 2008, our Board of Directors authorized a debt repurchase program, replacing our previous debt
repurchase authorization in its entirety, pursuant to which we may from time to time repurchase (through open
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