our cash salary expense included in the “Fulfillment”, “Technology and content”, “Marketing”, and “General and administrative” line items would be higher. We compensate for this limitation by providing supplemental information about outstanding stock-based awards in the footnotes to our financial statements. Stock-based compensation programs are an important element of the Company’s compensation structure and all forms of stock-based awards are valued and included as appropriate in results of operations. 

Guidance 

The Company provided guidance on February 1, 2007 in its earnings release furnished on Form 8-K as follows: 

First Quarter 2007 Guidance 

Net sales are expected to be between $2.85 billion and $3.00 billion, or to grow between 25% and 32% compared with first quarter 2006. 

Operating income is expected to be between $82 million and $122 million, or between (22%) decline and 16% growth, compared with first quarter 2006. This guidance includes $38 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional intangible assets are recorded and that there are no further revisions to stock-based compensation estimates. 

Full Year 2007 Expectations 

Net sales are expected to be between $13.00 billion and $13.70 billion, or to grow between 21% and 28% compared with 2006. 

Operating income is expected to be between $355 million and $505 million, or between (9%) decline and 30% growth, compared with 2006. This guidance includes $165 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional intangible assets are recorded and that there are no further revisions to stock-based compensation estimates. 

These projections are subject to substantial uncertainty. See Item 1A of Part I, “Risk Factors.” 

Quantitative and Qualitative Disclosure About Market Risk



We are exposed to market risk for the effect of interest rate changes, foreign currency fluctuations, and changes in the market values of our investments. 

Information relating to quantitative and qualitative disclosure about market risk is set forth below and in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”. 

Interest Rate Risk 

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and our long-term debt. All of our cash equivalent and marketable fixed income securities are designated as available-for-sale and, accordingly, are presented at fair value on our balance sheets. We generally invest our excess cash in investment grade short- to intermediate-term fixed income securities and AAA-rated money market mutual funds. Fixed rate securities may have their fair market value adversely affected due to a rise in interest rates, and we may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates. 

The following table provides information about our cash equivalent and marketable fixed income securities, including principal cash flows