Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2014 |
Commitments and Contingencies Disclosure [Abstract] | ' |
Commitments and Contingencies | ' |
COMMITMENTS AND CONTINGENCIES |
Commitments |
We have entered into non-cancellable operating, capital, and financing leases for equipment and office, fulfillment center, and data center facilities. Rental expense under operating lease agreements was $252 million and $197 million for Q3 2014 and Q3 2013, and $700 million and $545 million for the nine months ended September 30, 2014 and 2013. |
The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal operations, as of September 30, 2014 (in millions): |
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| Three Months Ended December 31, | | Year Ended December 31, | | | | |
| 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | Thereafter | | Total |
Operating and capital commitments: | | | | | | | | | | | | | |
Debt principal and interest | $ | 222 | | | $ | 1,519 | | | $ | 82 | | | $ | 1,081 | | | $ | 69 | | | $ | 1,375 | | | $ | 4,348 | |
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Capital leases, including interest | 820 | | | 2,006 | | | 958 | | | 327 | | | 135 | | | 141 | | | 4,387 | |
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Financing lease obligations, including interest | 27 | | | 95 | | | 96 | | | 98 | | | 99 | | | 943 | | | 1,358 | |
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Operating leases | 225 | | | 798 | | | 745 | | | 667 | | | 582 | | | 2,470 | | | 5,487 | |
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Unconditional purchase obligations (1) | 167 | | | 475 | | | 375 | | | 300 | | | 123 | | | 28 | | | 1,468 | |
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Other commitments (2) (3) | 304 | | | 714 | | | 296 | | | 168 | | | 125 | | | 1,140 | | | 2,747 | |
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Total commitments | $ | 1,765 | | | $ | 5,607 | | | $ | 2,552 | | | $ | 2,641 | | | $ | 1,133 | | | $ | 6,097 | | | $ | 19,795 | |
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-1 | Includes unconditional purchase obligations related to long-term agreements to acquire and license digital content that are not reflected on the consolidated balance sheets. For those agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities and/or pricing as of the reporting date. Purchase obligations associated with renewal provisions solely at the option of the content provider are included to the extent such commitments are fixed or a minimum amount is specified. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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-2 | Includes the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit lease arrangements that have not been placed in service and digital content liabilities associated with long-term digital content assets with initial terms greater than one year. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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-3 | Excludes $626 million of tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any. | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pledged Assets |
As of September 30, 2014, and December 31, 2013, we have pledged or otherwise restricted $549 million and $482 million of our cash, cash equivalents, and marketable securities, and certain property and equipment as collateral for standby and trade letters of credit, guarantees, debt, real estate leases, and amounts due to third-party sellers in certain jurisdictions. |
Legal Proceedings |
The Company is involved from time to time in claims, proceedings, and litigation, including the matters described in Item 8 of Part II, “Financial Statements and Supplementary Data — Note 8 — Commitments and Contingencies — Legal Proceedings” of our 2013 Annual Report on Form 10-K and in Item 1 of Part I, “Financial Statements — Note 3 — Commitments and Contingencies — Legal Proceedings” of our Quarterly Reports on Form 10-Q for the Periods Ended March 31, 2014, and June 30, 2014, as supplemented by the following: |
In April 2011, Walker Digital LLC filed several complaints against Amazon.com, Inc. for patent infringement in the United States District Court for the District of Delaware. The complaints allege that we infringe several of the plaintiff’s U.S. patents by, among other things, providing “cross benefits” to customers through our promotions (U.S. Patent Nos. 7,831,470 and 7,827,056), using a customer’s identified original product to offer a substitute product (U.S. Patent No. 7,236,942), using our product recommendations and personalization features to offer complementary products together (U.S. Patent Nos. 6,601,036 and 6,138,105), enabling customers to subscribe to a delivery schedule for products they routinely use at reduced prices (U.S. Patent No. 5,970,470), and offering personalized advertising based on customers’ preferences identified using a data pattern (U.S. Patent No. 7,933,893). Another complaint, filed in the same court in October 2011, alleges that we infringe plaintiff’s U.S. Patent No. 8,041,711 by offering personalized advertising based on customer preferences that associate data with resource locators. Another complaint, filed in the same court in February 2012, alleges that we infringe plaintiff’s U.S. Patent No. 8,112,359 by using product information received from customers to identify and offer substitute products using a manufacturer database. In January 2013, the plaintiff filed another complaint in the same court alleging that we infringe U.S. Patent No. 6,381,582 by allowing customers to make local payments for products ordered online. All of the complaints seek monetary damages, interest, injunctive relief, costs, and attorneys’ fees. In March 2013, the complaints asserting U.S. Patent Nos. 7,236,942 and 7,933,893 were voluntarily dismissed with prejudice. In April 2013, the case asserting U.S. Patent No. 8,041,711 was stayed pending final resolution of the reexamination of that patent. In June 2013, the court granted defendants’ motions to dismiss the complaints asserting U.S. Patent Nos. 7,831,470, 7,827,056, and 8,112,359 for lack of standing. In July 2013, we filed motions seeking entry of a final judgment dismissing those claims with prejudice and for attorneys’ fees, and plaintiff filed notices of appeal from the June 2013 order granting the motions to dismiss. In October 2013, the court ruled that its dismissals are with prejudice, and Walker has appealed those rulings. In March 2014, the court stayed the case asserting U.S. Patent Nos. 6,601,036 and 6,138,105 pending the appeal of the cases asserting U.S. Patent Nos. 7,831,470, 7,827,056, and 8,112,359. In September 2014, the court dismissed the matter asserting U.S. Patent No. 6,381,582 with prejudice. We dispute the remaining allegations of wrongdoing and intend to defend ourselves vigorously in these matters. |
The outcomes of our legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular period. In addition, for some matters for which a loss is probable or reasonably possible, an estimate of the amount of loss or range of loss is not possible and we may be unable to estimate the possible loss or range of loss that could potentially result from the application of non-monetary remedies. |
See also “Note 8 — Income Taxes.” |