Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Commitments We have entered into non-cancellable operating, capital, and finance leases for equipment and office, fulfillment, sortation, delivery, data center, physical store, and renewable energy facilities. Rental expense under operating lease agreements was $411 million and $791 million for Q1 2017 and Q1 2018 . The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal operations and are generally cancellable, as of March 31, 2018 (in millions): Nine Months Ended December 31, Year Ended December 31, 2018 2019 2020 2021 2022 Thereafter Total Debt principal and interest $ 669 $ 2,167 $ 2,075 $ 1,832 $ 2,049 $ 31,768 $ 40,560 Capital lease obligations, including interest (1) 4,571 5,584 3,385 794 339 580 15,253 Finance lease obligations, including interest (2) 347 473 482 491 493 4,095 6,381 Operating leases 1,977 2,549 2,426 2,191 1,924 12,442 23,509 Unconditional purchase obligations (3) 2,685 3,607 3,241 3,066 2,965 7,956 23,520 Other commitments (4) (5) 1,469 1,280 849 640 488 5,265 9,991 Total commitments $ 11,718 $ 15,660 $ 12,458 $ 9,014 $ 8,258 $ 62,106 $ 119,214 ___________________ (1) Excluding interest, current capital lease obligations of $5.8 billion and $6.2 billion are recorded within “Accrued expenses and other” as of December 31, 2017 and March 31, 2018 , and $8.4 billion and $8.5 billion are recorded within “Other long-term liabilities” as of December 31, 2017 and March 31, 2018 . (2) Excluding interest, current finance lease obligations of $282 million and $294 million are recorded within “Accrued expenses and other” as of December 31, 2017 and March 31, 2018 , and $4.7 billion and $4.8 billion are recorded within “Other long-term liabilities” as of December 31, 2017 and March 31, 2018 . (3) Includes unconditional purchase obligations related to certain products offered in our Whole Foods Market stores and long-term agreements to acquire and license digital media content that are not reflected on the consolidated balance sheets. For those digital media content 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. (4) Includes the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit lease arrangements and equipment lease arrangements that have not been placed in service and digital media content liabilities associated with long-term digital media content assets with initial terms greater than one year. (5) Excludes $2.6 billion of accrued tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any. Pledged Assets As of December 31, 2017 and March 31, 2018 , we have pledged or otherwise restricted $1.4 billion and $1.0 billion of our cash, cash equivalents, and marketable securities, and certain property and equipment as collateral for real estate leases, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit. Other Contingencies In 2016, we determined that we processed and delivered orders of consumer products for certain individuals and entities located outside Iran covered by the Iran Threat Reduction and Syria Human Rights Act or other United States sanctions and export control laws. The consumer products included books, music, other media, apparel, home and kitchen, health and beauty, jewelry, office, consumer electronics, software, lawn and patio, grocery, and automotive products. Our review is ongoing and we have voluntarily reported these orders to the United States Treasury Department’s Office of Foreign Assets Control and the United States Department of Commerce’s Bureau of Industry and Security. We intend to cooperate fully with OFAC and BIS with respect to their review, which may result in the imposition of penalties. For additional information, see Item 5 of Part II, “Other Information — Disclosure Pursuant to Section 13(r) of the Exchange Act.” We are subject to claims related to various indirect taxes (such as sales, value added, consumption, service, and similar taxes), including in jurisdictions in which we already collect and remit such taxes. If the relevant taxing authorities were successfully to pursue these claims, we could be subject to significant additional tax liabilities. For example, in June 2017, the State of South Carolina issued an assessment for uncollected sales and use taxes for the period from January 2016 to March 2016, including interest and penalties. South Carolina is alleging that we should have collected sales and use taxes on transactions by our third-party sellers. We believe the assessment is without merit. If South Carolina or other states were successfully to seek additional adjustments of a similar nature, we could be subject to significant additional tax liabilities. We intend to defend ourselves vigorously in this matter. 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 7 — Commitments and Contingencies — Legal Proceedings” of our 2017 Annual Report on Form 10-K as supplemented by the following: In December 2014, Smartflash LLC and Smartflash Technologies Limited filed a complaint against Amazon.com, Inc., Amazon.com, LLC, AMZN Mobile, LLC, Amazon Web Services, Inc. and Audible, Inc. for patent infringement in the United States District Court for the Eastern District of Texas. The complaint alleges, among other things, that Amazon Appstore, Amazon Instant Video, Amazon Music, Audible Audiobooks, the Amazon Mobile Ad Network, certain Kindle and Fire devices, Kindle e-bookstore, Amazon’s proprietary Android operating system, and the servers involved in operating Amazon Appstore, Amazon Instant Video, Amazon Music, the Fire TV app, Audible Audiobooks, Cloud Drive, Cloud Player, Amazon Web Services, and Amazon Mobile Ad Network infringe seven related U.S. Patents: Nos. 7,334,720; 7,942,317; 8,033,458; 8,061,598; 8,118,221; 8,336,772; and 8,794,516, all entitled “Data Storage and Access Systems.” The complaint seeks an unspecified amount of damages, an injunction, enhanced damages, attorneys’ fees, costs, and interest. In May 2015, the case was stayed until further notice. In March 2017, in an unrelated lawsuit, the United States Court of Appeals for the Federal Circuit entered judgment invalidating all asserted claims of U.S. Patent Nos. 7,334,720; 8,118,221; and 8,336,772. In April 2018, in an unrelated lawsuit, the United States Court of Appeals for the Federal Circuit entered judgment invalidating all asserted claims of U.S. Patent Nos. 7,942,317; 8,033,458; 8,061,598; and 8,794,516. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter. In October 2017, SRC Labs, LLC and Saint Regis Mohawk Tribe filed a complaint for patent infringement against Amazon Web Services, Inc., Amazon.com, Inc., and VADATA, Inc. in the United States District Court for the Eastern District of Virginia. The complaint alleges, among other things, that certain AWS EC2 Instances infringe U.S. Patent Nos. 6,434,687, entitled “System and method for accelerating web site access and processing utilizing a computer system incorporating reconfigurable processors operating under a single operating system image”; 7,149,867, entitled “System and method of enhancing efficiency and utilization of memory bandwidth in reconfigurable hardware”; 7,225,324 and 7,620,800, both entitled “Multi-adaptive processing systems and techniques for enhancing parallelism and performance of computational functions”; and 9,153,311, entitled “System and method for retaining DRAM data when reprogramming reconfigurable devices with DRAM memory controllers.” The complaint seeks an unspecified amount of damages, enhanced damages, interest, and a compulsory on-going royalty. In February 2018, the Virginia district court transferred the case to the United States District Court for the Western District of Washington. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter. The outcomes of our legal proceedings and other contingencies 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 the matters disclosed above that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is immaterial, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies. See also “Note 7 — Income Taxes.” |