Amazon.com 2007 Annual Report Download - page 58

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table shows the calculation of diluted shares (in millions):
Year Ended December 31,
2007 2006 2005
Shares used in computation of basic earnings per share ...................... 413 416 412
Total dilutive effect of outstanding stock awards (1) ........................ 11 8 14
Shares used in computation of diluted earnings per share .................... 424 424 426
(1) Calculated using the treasury stock method that assumes proceeds available to reduce the dilutive affect of
outstanding stock awards, which include the exercise price of stock options, the unrecognized deferred
compensation of stock awards, and assumed tax proceeds from excess stock-based compensation
deductions.
Treasury Stock
We account for treasury stock under the cost method and include treasury stock as a component of
stockholders’ equity.
Business Acquisitions
We acquired certain companies during 2007 for an aggregate cash purchase price of $33 million, including
cash payments of $24 million and future cash payments of $9 million. We also made principal payments of $13
million on acquired debt in connection with one of these acquisitions. Additional cash consideration for these
acquisitions is contingent upon continued employment. This amount is expensed as compensation over the
employment period and not included in the purchase price. Acquired intangibles totaled $18 million and have
estimated useful lives of between two and ten years. The excess of purchase price over the fair value of the net
assets acquired was $21 million and is classified as “Goodwill” on our consolidated balance sheets.
We acquired certain companies during 2006 for an aggregate cash purchase price of $50 million, including
cash paid of $30 million and $19 million in 2006 and 2007, and additional cash payments of $1 million due in
2008. Acquired intangibles totaled $17 million and have estimated useful lives of between one and ten years. The
excess of purchase price over the fair value of the net assets acquired was $33 million and is classified as
“Goodwill” on our consolidated balance sheets.
In 2005, we acquired certain companies for an aggregate cash purchase price of $29 million. Acquired
intangibles totaled $10 million and have estimated useful lives of between one and three years. The excess of
purchase price over the fair value of the net assets acquired was $19 million and is classified as “Goodwill” on
our consolidated balance sheets.
The results of operations of each of the businesses acquired in 2007, 2006, and 2005 have been included in
our consolidated results from each transaction closing date forward. The effect of these acquisitions on
consolidated net sales and operating income during 2007, 2006, and 2005 was not significant.
Cash and Cash Equivalents
We classify all highly liquid instruments, including money market funds that comply with Rule 2a-7 of the
Investment Company Act of 1940, with a remaining maturity of three months or less at the time of purchase as
cash equivalents.
50