Amazon.com 2007 Annual Report Download - page 37

market repurchases or private transactions), redeem, or otherwise retire up to all of our outstanding 4.75%
Convertible Subordinated Notes due 2009 (“4.75% Convertible Subordinated Notes”) and 6.875% PEACS. The
outstanding principal of our 4.75% Convertible Subordinated Notes as of this authorization was $899 million,
and the outstanding principal amount of our 6.875% PEACS was €240 million. In August 2006, our Board of
Directors authorized a 24-month program to repurchase up to $500 million of our common stock, pursuant to
which we repurchased $252 million and $248 million of our common stock in 2006 and 2007, respectively. In
April 2007, our Board authorized a new 24-month program to repurchase up to $500 million of our common
stock, which was replaced in February 2008 by a 24-month program to repurchase up to $1 billion of our
common stock.
Since our 6.875% PEACS, which are due in 2010, are denominated in Euros, our U.S. Dollar equivalent
interest payments and principal obligations fluctuate with the Euro to U.S. Dollar exchange rate. As a result, any
fluctuations in the exchange rate will have an effect on our interest expense and, to the extent we make principal
payments, the amount of U.S. Dollar equivalents necessary for principal settlement. Additionally, since our
interest payable on our 6.875% PEACS is due in Euros, the balance of interest payable is subject to gains or
losses on currency movements until the date of the interest payment. Gains or losses on the remeasurement of our
Euro-denominated interest payable are classified as “Other income (expense), net” on our consolidated
statements of operations.
On average, our high inventory velocity means we collect from our customers before our payments to
suppliers come due. Inventory turnover was 13, 13, and 14 for 2007, 2006, and 2005. Inventory turnover has
declined slightly over the last several years, primarily due to category expansion and changes in product mix, and
our continuing focus on in-stock inventory availability, which enables faster delivery of products to our
customers. We expect some variability in inventory turnover over time as it is affected by several factors,
including our product mix, the mix of sales by us and by other sellers, our continuing focus on in-stock inventory
availability, our investment in new geographies and product lines, and the extent to which we choose to utilize
outsource fulfillment providers.
The following summarizes our principal contractual commitments as of December 31, 2007:
2008 2009 2010 2011 2012 Thereafter Total
(in millions)
Operating and capital commitments:
Debt principal (1) ........................ $ 17 $ 932 $350 $— $— $— $1,299
Debt interest (1) ......................... 69 46 24 — — — 139
Capital leases, including interest ............ 32 29 23 6 6 5 101
Operating leases ......................... 132 107 89 69 52 201 650
Other commitments (2)(3) ................. 60 64 80 60 43 579 886
Purchase obligations (4) ................... 485 ———— — 485
Total commitments ................... $795 $1,178 $566 $135 $101 $785 $3,560
(1) At December 31, 2007, the Euro to U.S. Dollar exchange rate was 1.459. 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 $114 million as of December 31, 2007. The principal and interest commitments
reflect the partial redemptions of the 6.875% PEACS and 4.75% Convertible Subordinated Notes.
(2) Includes the estimated timing and amounts of payments for rent, operating expenses, and tenant
improvements associated with approximately 800,000 square feet of corporate office space in Seattle,
Washington. We also have the right to occupy up to an additional approximately 800,000 square feet
subject to a termination fee, estimated to be up to approximately $40 million, if we do not elect to occupy
this additional space. The amount of space available and our financial and other obligations under the lease
agreements are affected by various factors, including government approvals and permits, interest rates,
development costs and other expenses and our exercise of certain rights under the lease agreements. See
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