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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ____________________________________
FORM 10-Q
____________________________________ 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to             .
Commission File No. 000-22513
____________________________________
AMAZON.COM, INC.
(Exact name of registrant as specified in its charter)
 ____________________________________
Delaware 91-1646860
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
410 Terry Avenue North, Seattle, Washington 98109-5210
(206) 266-1000
(Address and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, par value $.01 per shareAMZNNasdaq Global Select Market
____________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
501,751,183 shares of common stock, par value $0.01 per share, outstanding as of October 21, 2020


Table of Contents
AMAZON.COM, INC.
FORM 10-Q
For the Quarterly Period Ended September 30, 2020
INDEX
 
  Page
PART I. FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
  Three Months Ended
September 30,
Nine Months Ended
September 30,
Twelve Months Ended
September 30,
 201920202019202020192020
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD$22,965 $37,842 $32,173 $36,410 $21,032 $23,554 
OPERATING ACTIVITIES:
Net income2,134 6,331 8,320 14,109 11,347 17,377 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization of property and equipment and capitalized content costs, operating lease assets, and other5,563 6,523 15,619 17,633 19,881 23,803 
Stock-based compensation1,779 2,288 5,024 6,646 6,441 8,486 
Other operating expense (income), net47 67 114 416 186 466 
Other expense (income), net388 (1,051)246 (1,255)443 (1,749)
Deferred income taxes92 295 612 1,082 784 1,267 
Changes in operating assets and liabilities:
Inventories(381)(3,899)(1,762)(3,178)(3,112)(4,694)
Accounts receivable, net and other(1,181)(2,016)(3,776)(3,608)(5,172)(7,515)
Accounts payable226 3,658 (2,490)4,231 4,393 14,914 
Accrued expenses and other(722)(310)(4,277)(1,375)(1,612)1,520 
Unearned revenue(53)78 1,225 932 1,753 1,417 
Net cash provided by (used in) operating activities7,892 11,964 18,855 35,633 35,332 55,292 
INVESTING ACTIVITIES:
Purchases of property and equipment(4,697)(11,063)(11,549)(25,317)(15,282)(30,629)
Proceeds from property and equipment sales and incentives1,312 1,255 2,800 3,467 3,414 4,838 
Acquisitions, net of cash acquired, and other(398)(1,735)(1,684)(1,945)(2,015)(2,722)
Sales and maturities of marketable securities7,251 13,135 15,056 32,899 16,994 40,525 
Purchases of marketable securities(8,542)(17,468)(25,368)(51,678)(27,428)(58,122)
Net cash provided by (used in) investing activities(5,074)(15,876)(20,745)(42,574)(24,317)(46,110)
FINANCING ACTIVITIES:
Proceeds from short-term debt, and other415 1,311 722 4,361 1,292 5,042 
Repayments of short-term debt, and other(341)(1,349)(704)(3,886)(1,129)(4,701)
Proceeds from long-term debt287  453 9,994 589 10,412 
Repayments of long-term debt(14)(1,198)(115)(1,439)(124)(2,490)
Principal repayments of finance leases(2,307)(2,857)(6,848)(8,274)(8,754)(11,054)
Principal repayments of financing obligations (12)(3)(44)(129)(68)
Net cash provided by (used in) financing activities(1,960)(4,105)(6,495)712 (8,255)(2,859)
Foreign currency effect on cash, cash equivalents, and restricted cash(269)377 (234)21 (238)325 
Net increase (decrease) in cash, cash equivalents, and restricted cash589 (7,640)(8,619)(6,208)2,522 6,648 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD$23,554 $30,202 $23,554 $30,202 $23,554 $30,202 
See accompanying notes to consolidated financial statements.
3

Table of Contents
AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
 
  
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2019202020192020
Net product sales$39,726 $52,774 $109,866 $144,859 
Net service sales30,255 43,371 83,220 115,650 
Total net sales69,981 96,145 193,086 260,509 
Operating expenses:
Cost of sales41,302 57,106 111,559 154,023 
Fulfillment10,167 14,705 28,040 40,043 
Technology and content9,200 10,976 26,191 30,691 
Marketing4,752 5,434 12,707 14,605 
General and administrative1,348 1,668 3,791 4,700 
Other operating expense (income), net55 62 136 421 
Total operating expenses66,824 89,951 182,424 244,483 
Operating income3,157 6,194 10,662 16,026 
Interest income224 118 621 455 
Interest expense(396)(428)(1,145)(1,233)
Other income (expense), net(353)925 (215)1,165 
Total non-operating income (expense)(525)615 (739)387 
Income before income taxes2,632 6,809 9,923 16,413 
Provision for income taxes(494)(569)(1,588)(2,298)
Equity-method investment activity, net of tax(4)91 (15)(6)
Net income$2,134 $6,331 $8,320 $14,109 
Basic earnings per share$4.31 $12.63 $16.87 $28.24 
Diluted earnings per share$4.23 $12.37 $16.53 $27.72 
Weighted-average shares used in computation of earnings per share:
Basic495 501 493 500 
Diluted504 512 503 509 
See accompanying notes to consolidated financial statements.

4

Table of Contents
AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
 
  
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2019202020192020
Net income$2,134 $6,331 $8,320 $14,109 
Other comprehensive income (loss):
Net change in foreign currency translation adjustments:
Foreign currency translation adjustments, net of tax of $1, $(15), $(6) and $(2)
(368)408 (369)(260)
Reclassification adjustment for foreign currency translation included in “Other operating expense (income), net,” net of tax of $29, $0, $29 and $0
(108) (108) 
Net foreign currency translation adjustments(476)408 (477)(260)
Net change in unrealized gains (losses) on available-for-sale debt securities:
Unrealized gains (losses), net of tax of $(2), $(10), $(13) and $(73)
9 35 85 239 
Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $0, $5, $0 and $7
(2)(17)(2)(22)
Net unrealized gains (losses) on available-for-sale debt securities7 18 83 217 
Total other comprehensive income (loss)(469)426 (394)(43)
Comprehensive income$1,665 $6,757 $7,926 $14,066 
See accompanying notes to consolidated financial statements.

5

Table of Contents
AMAZON.COM, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
 
December 31, 2019September 30, 2020
 (unaudited)
ASSETS
Current assets:
Cash and cash equivalents$36,092 $29,930 
Marketable securities18,929 38,472 
Inventories20,497 23,735 
Accounts receivable, net and other20,816 20,832 
Total current assets96,334 112,969 
Property and equipment, net72,705 99,981 
Operating leases25,141 34,119 
Goodwill14,754 14,960 
Other assets16,314 20,150 
Total assets$225,248 $282,179 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$47,183 $58,334 
Accrued expenses and other32,439 34,327 
Unearned revenue8,190 9,251 
Total current liabilities87,812 101,912 
Long-term lease liabilities39,791 48,589 
Long-term debt23,414 32,929 
Other long-term liabilities12,171 15,974 
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock, $0.01 par value:
Authorized shares — 500
Issued and outstanding shares — none
  
Common stock, $0.01 par value:
Authorized shares — 5,000
Issued shares — 521 and 525
Outstanding shares — 498 and 502
5 5 
Treasury stock, at cost(1,837)(1,837)
Additional paid-in capital33,658 40,307 
Accumulated other comprehensive income (loss)(986)(1,029)
Retained earnings31,220 45,329 
Total stockholders’ equity62,060 82,775 
Total liabilities and stockholders’ equity$225,248 $282,179 
See accompanying notes to consolidated financial statements.

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1 — ACCOUNTING POLICIES AND SUPPLEMENTAL DISCLOSURES
Unaudited Interim Financial Information
We have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated cash flows, operating results, and balance sheets for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2020 due to seasonal and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our 2019 Annual Report on Form 10-K.
Prior Period Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. Proceeds from and repayments of short-term debt, and other were reclassified from proceeds from and repayments of long-term debt, and other on our consolidated statements of cash flows.
Principles of Consolidation
The consolidated financial statements include the accounts of Amazon.com, Inc. and its consolidated entities (collectively, the “Company”), consisting of its wholly-owned subsidiaries and those entities in which we have a variable interest and of which we are the primary beneficiary, including certain entities in India and certain entities that support our seller lending financing activities. Intercompany balances and transactions between consolidated entities are eliminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, income taxes, useful lives of equipment, commitments and contingencies, valuation of acquired intangibles and goodwill, stock-based compensation forfeiture rates, vendor funding, inventory valuation, collectability of receivables, and valuation and impairment of investments. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, these estimates have become more challenging, and actual results could differ materially from these estimates.
We review the useful lives of equipment on an ongoing basis, and effective January 1, 2020 we changed our estimate of the useful life for our servers from three to four years. The longer useful life is due to continuous improvements in our hardware, software, and data center designs. The effect of this change in estimate for Q3 2020, based on servers that were included in “Property and equipment, net” as of June 30, 2020 and those acquired during the quarter ended September 30, 2020, was a reduction in depreciation and amortization expense of $634 million and an increase in net income of $479 million, or $0.95 per basic share and $0.93 per diluted share. The effect of this change in estimate for the nine months ended September 30, 2020, based on servers that were included in “Property and equipment, net” as of December 31, 2019 and those acquired during the nine months ended September 30, 2020, was a reduction in depreciation and amortization expense of $2.1 billion and an increase in net income of $1.6 billion, or $3.23 per basic share and $3.18 per diluted share.
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Supplemental Cash Flow Information
The following table shows supplemental cash flow information (in millions):
Three Months Ended
September 30,
Nine Months Ended
September 30,
Twelve Months Ended
September 30,
201920202019202020192020
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on debt$287 $285 $720 $715 $842 $869 
Cash paid for operating leases872 1,159 2,420 3,275 2,420 4,215 
Cash paid for interest on finance leases167 155 481 484 585 650 
Cash paid for interest on financing obligations14 28 20 71 72 90 
Cash paid for income taxes, net of refunds241 502 692 1,293 863 1,481 
Assets acquired under operating leases2,299 6,115 5,393 11,870 5,393 14,346 
Property and equipment acquired under finance leases3,606 3,571 9,541 8,892 13,222 13,075 
Property and equipment acquired under build-to-suit arrangements390 366 1,109 1,228 2,252 1,480 
Earnings per Share
Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when we have a net loss, stock awards are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect.
The following table shows the calculation of diluted shares (in millions):
  
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2019202020192020
Shares used in computation of basic earnings per share495 501 493 500 
Total dilutive effect of outstanding stock awards9 11 10 9 
Shares used in computation of diluted earnings per share504 512 503 509 
Inventories
Inventories, consisting of products available for sale, are primarily accounted for using the first-in, first-out method, and are valued at the lower of cost and net realizable value. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category. The inventory valuation allowance, representing a write-down of inventory, was $1.6 billion and $1.9 billion as of December 31, 2019 and September 30, 2020.
Accounts Receivable, Net and Other
Included in “Accounts receivable, net and other” on our consolidated balance sheets are amounts primarily related to customers, vendors, and sellers. As of December 31, 2019 and September 30, 2020, customer receivables, net, were $12.6 billion and $13.1 billion, vendor receivables, net, were $4.2 billion and $3.3 billion, and seller receivables, net, were $863 million and $446 million. Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory.
We estimate losses on receivables based on expected losses, including our historical experience of actual losses. The allowance for doubtful accounts was $718 million and $968 million as of December 31, 2019 and September 30, 2020.
Digital Video and Music Content
The total capitalized costs of video, which is primarily released content, and music as of December 31, 2019 and September 30, 2020 were $5.8 billion and $6.3 billion. Total video and music expense was $1.9 billion and $2.8 billion in Q3 2019 and Q3 2020, and $5.5 billion and $8.0 billion for the nine months ended September 30, 2019 and 2020.
Unearned Revenue
Unearned revenue is recorded when payments are received or due in advance of performing our service obligations and is recognized over the service period. Unearned revenue primarily relates to prepayments of AWS services and Amazon Prime memberships. Our total unearned revenue as of December 31, 2019 was $10.2 billion, of which $7.1 billion was recognized as
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revenue during the nine months ended September 30, 2020. Included in “Other long-term liabilities” on our consolidated balance sheets was $2.0 billion and $1.9 billion of unearned revenue as of December 31, 2019 and September 30, 2020.
Additionally, we have performance obligations, primarily related to AWS, associated with commitments in customer contracts for future services that have not yet been recognized in our consolidated financial statements. For contracts with original terms that exceed one year, those commitments not yet recognized were $44.8 billion as of September 30, 2020. The weighted average remaining life of our long-term contracts is 3.4 years. However, the amount and timing of revenue recognition is largely driven by customer usage, which can extend beyond the original contractual term.
Note 2 — FINANCIAL INSTRUMENTS
Cash, Cash Equivalents, Restricted Cash, and Marketable Securities
As of December 31, 2019 and September 30, 2020, our cash, cash equivalents, restricted cash, and marketable securities primarily consisted of cash, AAA-rated money market funds, U.S. and foreign government and agency securities, and other investment grade securities. Cash equivalents and marketable securities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
We measure the fair value of money market funds and certain marketable equity securities based on quoted prices in active markets for identical assets or liabilities. Other marketable securities were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. We did not hold significant amounts of cash, cash equivalents, restricted cash, or marketable securities categorized as Level 3 assets as of December 31, 2019 and September 30, 2020.
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The following table summarizes, by major security type, our cash, cash equivalents, restricted cash, and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in millions):
 December 31, 2019September 30, 2020
  
Total
Estimated
Fair Value
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Total
Estimated
Fair Value
Cash$9,776 $9,553 $— — $9,553 
Level 1 securities:
Money market funds18,850 17,701 — — 17,701 
Equity securities (1)202 452 
Level 2 securities:
Foreign government and agency securities4,794 10,270 1  10,271 
U.S. government and agency securities7,080 7,656 34 (3)7,687 
Corporate debt securities11,881 18,849 276 (5)19,120 
Asset-backed securities2,360 3,245 31 (5)3,271 
Other fixed income securities394 500 8  508 
Equity securities (1)5 114 
$55,342 $67,774 $350 $(13)$68,677 
Less: Restricted cash, cash equivalents, and marketable securities (2)(321)(275)
Total cash, cash equivalents, and marketable securities$55,021 $68,402 
___________________
(1)The related unrealized gain (loss) recorded in “Other income (expense), net” was $(55) million and $150 million in Q3 2019 and Q3 2020, and $27 million and $351 million for the nine months ended September 30, 2019 and 2020.
(2)We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable securities as collateral for real estate leases, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit. We classify cash, cash equivalents, and marketable securities with use restrictions of less than twelve months as “Accounts receivable, net and other” and of twelve months or longer as non-current “Other assets” on our consolidated balance sheets. See “Note 4 — Commitments and Contingencies.”
The following table summarizes the remaining contractual maturities of our cash equivalents and marketable fixed income securities as of September 30, 2020 (in millions):
Amortized
Cost
Estimated
Fair Value
Due within one year$38,791 $38,803 
Due after one year through five years16,106 16,400 
Due after five years through ten years753 758 
Due after ten years2,571 2,597 
Total$58,221 $58,558 
Actual maturities may differ from the contractual maturities because borrowers may have certain prepayment conditions.
Equity Warrants and Non-Marketable Equity Investments
We hold equity warrants giving us the right to acquire stock of other companies. As of December 31, 2019 and September 30, 2020, these warrants had a fair value of $669 million and $1.4 billion, and are recorded within “Other assets” on our consolidated balance sheets with gains and losses recognized in “Other income (expense), net” on our consolidated statements of operations. These warrants are primarily classified as Level 2 assets.
As of December 31, 2019 and September 30, 2020, equity investments not accounted for under the equity-method and without readily determinable fair values, had a carrying value of $1.5 billion and $2.6 billion, and are recorded within “Other assets” on our consolidated balance sheets with adjustments recognized in “Other income (expense), net” on our consolidated statements of operations.
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Consolidated Statements of Cash Flows Reconciliation
The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown in the consolidated statements of cash flows (in millions):
December 31, 2019September 30, 2020
Cash and cash equivalents$36,092 $29,930 
Restricted cash included in accounts receivable, net and other276 239 
Restricted cash included in other assets42 33 
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows$36,410 $30,202 
Note 3 — LEASES
Gross assets acquired under finance leases, inclusive of those where title transfers at the end of the lease, are recorded in “Property and equipment, net” and were $57.4 billion and $64.9 billion as of December 31, 2019 and September 30, 2020. Accumulated amortization associated with finance leases was $30.0 billion and $34.2 billion as of December 31, 2019 and September 30, 2020.
Lease cost recognized in our consolidated statements of operations is summarized as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
 2019202020192020
Operating lease cost$934 $1,334 $2,644 $3,551 
Finance lease cost:
Amortization of lease assets2,609 2,200 7,319 6,123 
Interest on lease liabilities164 154 479 474 
Finance lease cost2,773 2,354 7,798 6,597 
Variable lease cost244 308 775 866 
Total lease cost$3,951 $3,996 $11,217 $11,014 
Other information about lease amounts recognized in our consolidated financial statements is summarized as follows:
 December 31, 2019September 30, 2020
Weighted-average remaining lease term – operating leases11.5 years11.1 years
Weighted-average remaining lease term – finance leases5.5 years6.1 years
Weighted-average discount rate – operating leases3.1 %2.6 %
Weighted-average discount rate – finance leases2.7 %2.3 %
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Our lease liabilities were as follows (in millions):
December 31, 2019
 Operating LeasesFinance LeasesTotal
Gross lease liabilities$31,963 $28,875 $60,838 
Less: imputed interest(6,128)(1,896)(8,024)
Present value of lease liabilities25,835 26,979 52,814 
Less: current portion of lease liabilities(3,139)(9,884)(13,023)
Total long-term lease liabilities$22,696 $17,095 $39,791 
September 30, 2020
 Operating LeasesFinance LeasesTotal
Gross lease liabilities$42,014 $29,801 $71,815 
Less: imputed interest(6,759)(2,051)(8,810)
Present value of lease liabilities35,255 27,750 63,005 
Less: current portion of lease liabilities(4,156)(10,260)(14,416)
Total long-term lease liabilities$31,099 $17,490 $48,589 
Note 4 — COMMITMENTS AND CONTINGENCIES
Commitments
We have entered into non-cancellable operating and finance leases and financing obligations for equipment and office, fulfillment, sortation, delivery, data center, physical store, and renewable energy facilities.
The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal operations and are generally cancellable, as of September 30, 2020 (in millions): 
 Three Months Ended December 31,Year Ended December 31,  
 20202021202220232024ThereafterTotal
Long-term debt principal and interest$282 $2,188 $2,647 $3,271 $4,272 $38,738 $51,398 
Operating lease liabilities1,139 5,032 4,584 4,204 3,865 23,190 42,014 
Finance lease liabilities, including interest2,363 10,145 6,507 2,753 1,291 6,742 29,801 
Financing obligations, including interest48 211 214 217 220 3,694 4,604 
Unconditional purchase obligations (1)416 4,027 3,562 3,194 3,049 2,296 16,544 
Other commitments (2) (3)1,260 3,963 3,290 2,268 2,238 23,612 36,631 
Total commitments$5,508 $25,566 $20,804 $15,907 $14,935 $98,272 $180,992 
___________________
(1)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.
(2)Includes the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit lease arrangements and lease arrangements prior to the lease commencement date, liabilities associated with digital media content agreements with initial terms greater than one year, and asset retirement obligations.
(3)Excludes approximately $3.0 billion of accrued tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.
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Pledged Assets
As of December 31, 2019 and September 30, 2020, we have pledged or otherwise restricted $994 million and $921 million 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. Additionally, we have pledged our cash and seller receivables for debt related to our Credit Facility. See “Note 5 — Debt.”
Other Contingencies
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. In September 2019, the South Carolina Administrative Law Court ruled in favor of the Department of Revenue and we have appealed the decision to the state Court of Appeals. We believe the assessment is without merit and intend to defend ourselves vigorously in this matter. If other tax authorities were successfully to seek additional adjustments of a similar nature, we could be subject to significant additional tax liabilities.
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 2019 Annual Report on Form 10-K and in Item 1 of Part I, “Financial Statements — Note 4 — Commitments and Contingencies — Legal Proceedings” of our Quarterly Reports on Form 10-Q for the periods ended March 31, 2020 and June 30, 2020.
In addition, we are regularly subject to claims, litigation, and other proceedings, including potential regulatory proceedings, involving patent and other intellectual property matters, taxes, labor and employment, competition and antitrust, privacy and data protection, consumer protection, commercial disputes, goods and services offered by us and by third parties, and other matters.
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. We evaluate, on a regular basis, developments in our legal proceedings and other contingencies that could affect the amount of liability, including amounts in excess of any previous accruals and reasonably possible losses disclosed, and make adjustments and changes to our accruals and disclosures as appropriate. For the matters we disclose 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. Until the final resolution of such matters, if any of our estimates and assumptions change or prove to have been incorrect, we may experience losses in excess of the amounts recorded, which could have a material effect on our business, consolidated financial position, results of operations, or cash flows.
See also “Note 7 — Income Taxes.”
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Note 5 — DEBT
As of September 30, 2020, we had $32.2 billion of unsecured senior notes outstanding (the “Notes”), including $10.0 billion issued in June 2020 for general corporate purposes. We also have other long-term debt and borrowings under our credit facility of $1.6 billion and $1.0 billion as of December 31, 2019 and September 30, 2020. Our total long-term debt obligations are as follows (in millions):

Maturities (1)Stated Interest RatesEffective Interest RatesDecember 31, 2019September 30, 2020
2012 Notes issuance of $3.0 billion
20222.50%2.66%1,250 1,250 
2014 Notes issuance of $6.0 billion
2021 - 2044
3.30% - 4.95%
3.43% - 5.11%
5,000 5,000 
2017 Notes issuance of $17.0 billion
2023 - 2057
2.40% - 5.20%
2.56% - 4.33%
17,000 16,000 
2020 Notes issuance of $10.0 billion
2023 - 2060
0.40% - 2.70%
0.56% - 2.77%
 10,000 
Credit Facility740 413 
Other long-term debt830 625 
Total face value of long-term debt24,820 33,288 
Unamortized discount and issuance costs, net(101)(204)
Less current portion of long-term debt(1,305)(155)
Long-term debt$23,414 $32,929 
___________________
(1) The weighted average remaining lives of the 2012, 2014, 2017, and 2020 Notes were 2.2, 12.1, 16.5, and 19.0 years as of September 30, 2020. The combined weighted average remaining life of the Notes was 16.0 years as of September 30, 2020.
Interest on the Notes is payable semi-annually in arrears. We may redeem the Notes at any time in whole, or from time to time, in part at specified redemption prices. We are not subject to any financial covenants under the Notes. The estimated fair value of the Notes was approximately $26.2 billion and $37.3 billion as of December 31, 2019 and September 30, 2020, which is based on quoted prices for our debt as of those dates.
In October 2016, we entered into a $500 million secured revolving credit facility with a lender that is secured by certain seller receivables, which we subsequently increased to $740 million and may from time to time increase in the future subject to lender approval (the “Credit Facility”). The Credit Facility is available until October 2022, bears interest at the London interbank offered rate (“LIBOR”) plus 1.40%, and has a commitment fee of 0.50% on the undrawn portion. There were $740 million and $413 million of borrowings outstanding under the Credit Facility as of December 31, 2019 and September 30, 2020, which had a weighted-average interest rate of 3.4% and 3.1%, respectively. As of December 31, 2019 and September 30, 2020, we have pledged $852 million and $475 million of our cash and seller receivables as collateral for debt related to our Credit Facility. The estimated fair value of the Credit Facility, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2019 and September 30, 2020.
Other long-term debt, including the current portion, had a weighted-average interest rate of 4.1% and 2.9% as of December 31, 2019 and September 30, 2020. We used the net proceeds from the issuance of this debt primarily to fund certain business operations. The estimated fair value of other long-term debt, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2019 and September 30, 2020.
In April 2018, we established a commercial paper program (the “Commercial Paper Program”) under which we may from time to time issue unsecured commercial paper up to a total of $7.0 billion at any time, with individual maturities that may vary but will not exceed 397 days from the date of issue. In June 2020, we increased the size of the Commercial Paper Program to $10.0 billion. There were no borrowings outstanding under the Commercial Paper Program as of December 31, 2019. There were $725 million of borrowings outstanding under the Commercial Paper Program as of September 30, 2020, which are included in “Accrued expenses and other” on our consolidated balance sheets and have a weighted average effective interest rate, including issuance costs, of 0.13%. We use the net proceeds from the issuance of commercial paper for general corporate purposes.
In April 2018, in connection with our Commercial Paper Program, we amended and restated our unsecured revolving credit facility (the “Credit Agreement”) with a syndicate of lenders to increase our borrowing capacity thereunder to $7.0 billion. In June 2020, we further amended and restated the Credit Agreement to extend the term to June 2023, and it may be extended for up to three additional one-year terms if approved by the lenders. The interest rate applicable to outstanding balances under the amended and restated Credit Agreement is LIBOR plus 0.50%, with a commitment fee of 0.04% on the
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undrawn portion of the credit facility. There were no borrowings outstanding under the Credit Agreement as of December 31, 2019 and September 30, 2020.
We also utilize other short-term credit facilities for working capital purposes. These amounts are included in “Accrued expenses and other” on our consolidated balance sheets.
Note 6 — STOCKHOLDERS’ EQUITY
Stock Repurchase Activity
In February 2016, the Board of Directors authorized a program to repurchase up to $5.0 billion of our common stock, with no fixed expiration. There were no repurchases of common stock during the nine months ended September 30, 2019 or 2020.
Stock Award Activity
Common shares outstanding plus shares underlying outstanding stock awards totaled 512 million and 518 million as of December 31, 2019 and September 30, 2020. These totals include all vested and unvested stock awards outstanding, including those awards we estimate will be forfeited. Stock-based compensation expense is as follows (in millions):
  
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2019202020192020
Cost of sales$39 $75 $106 $193 
Fulfillment301 316 895 993 
Technology and content966 1,267 2,719 3,649 
Marketing298 446 813 1,233 
General and administrative175 184