Amazon.com 2007 Annual Report Download - page 45

Other Operating Expense, Net
Other operating expense, net, was $9 million and $10 million during 2007 and 2006, primarily attributable
to amortization of other intangibles. Other operating expense, net, was $47 million in 2005, primarily attributable
to our settlement of a patent lawsuit for $40 million, as well as amortization of other intangibles of $5 million.
Income from Operations
Income from operations was $655 million, $389 million, and $432 million during 2007, 2006, and 2005.
The increase in 2007 from 2006 is primarily a result of the increased growth rate of our revenue and gross profit
relative to operating expenses. The decrease in 2006 from 2005 is primarily a result of an increase in spending
for technology and content.
Interest Expense and Income
The primary component of our net interest expense is the interest we incur on our long-term debt
instruments, including a $899 million principal balance of our 4.75% Convertible Subordinated Notes and a
€240 million ($350 million based on the exchange rate at December 31, 2007) principal balance of our 6.875%
PEACS at December 31, 2007. Interest expense was $77 million, $78 million, and $92 million in 2007, 2006,
and 2005, with declines primarily relating to principal repayments of $300 million and $265 million in 2006 and
2005.
Our total long-term indebtedness was $1.3 billion at both December 31, 2007 and 2006. See Item 8 of Part
II, “Financial Statements and Supplementary Data—Note 4—Long-Term Debt.”
Our interest income was $90 million, $59 million, and $44 million during 2007, 2006, and 2005. We
generally invest our excess cash in investment grade short- to intermediate-term fixed income securities and
AAA-rated money market mutual funds. Our interest income corresponds with the average balance of invested
funds and the prevailing rates we are earning on them, which vary depending on the geographies and currencies
in which they are invested.
Other Income (Expense), Net
Other income (expense), net, was $(1) million, $(4) million, and $2 million, in 2007, 2006 and 2005, and
consisted primarily of gains and losses on sales of marketable securities, foreign-currency transaction gains and
losses, and other miscellaneous losses.
Foreign-currency transaction gains and losses primarily relate to the interest payable on our 6.875%
PEACS, as well as foreign-currency gains and losses on cross-currency investments. Since interest payments on
our 6.875% PEACS are settled in Euros, the balance of interest payable is subject to gains or losses resulting
from changes in exchange rates between the U.S. Dollar and Euro between reporting dates and payment.
Remeasurements and Other
Remeasurements and other consisted of the following:
Year Ended December 31,
2007 2006 2005
(in millions)
Foreign-currency gain (loss) on remeasurement of 6.875% PEACS ...... $(33) $(37) $ 90
Loss on redemption of long-term debt ............................. — (6) (6)
Foreign-currency gain (loss) on intercompany balances ............... 32 50 (47)
Other ....................................................... (6) 4 5
Total remeasurements and other .............................. $ (7) $11 $42
(1) Each period the remeasurement of our 6.875% PEACS from Euros to U.S. Dollars results in gains or losses
recorded to “Remeasurements and other” on our consolidated statements of operations.
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