What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-04 compared with 2021-02-03 · 177 added, 169 removed, 931 unchanged (27% of the section changed)

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

Report of Ernst & Young LLP , Independent Registered Public Accounting Firm ( PCAOB ID:

Consolidated Statements of Cash Flows

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Uncertain Tax Positions

Description of the Matter The Company is subject to income taxes in the U.S.

and numerous foreign jurisdictions and, as discussed in Note 9 of the consolidated financial statements, during the ordinary course of business, there are many tax positions for which the ultimate tax determination is uncertain.

Description of

the Matter As discussed in Notes 1 and 9 of the consolidated financial statements, the Company is subject to income taxes in the U.S.

and numerous foreign jurisdictions and during the ordinary course of business, there are many tax positions for which the ultimate tax determination is uncertain.

As a result, significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes.

The Company uses significant judgment in (1) determining whether a tax position’s technical merits are more likely than not to be sustained and (2) measuring the amount of tax benefit that qualifies for recognition.

As of December 31, 2020, the Company accrued liabilities of $2.8 billion for various tax contingencies.

Auditing the measurement of the Company’s tax contingencies was challenging because the evaluation of whether a tax position is more likely than not to be sustained and the measurement of the benefit of various tax positions can be complex, involves significant judgment, and is based on interpretations of tax laws and legal rulings.

How We Addressed the Matter in Our Audit We tested controls over the Company’s process to assess the technical merits of its tax contingencies, including controls over the assessment as to whether a tax position is more likely than not to be sustained, management’s process to measure the benefit of its tax positions, and the development of the related disclosures.

Auditing the recognition and measurement of the Company’s tax contingencies was challenging because the evaluation of whether a tax position is more likely than not to be sustained and the measurement of the benefit of various tax positions can be complex and involves significant auditor judgment.

Management’s evaluation of tax positions may involve the use of valuation methodologies and assumptions, including forecasts of income or loss, and is based on interpretations of tax laws and legal rulings.

measurement of the benefit of its tax positions, including the selection of valuation methodologies and assumptions;

determination of forecasts of income or loss;

and development of the related disclosures.

We involved our international tax, transfer pricing, and research and development tax professionals in assessing the technical merits of certain of the Company’s tax positions.

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We evaluated developments in the applicable regulatory environments to assess potential effects on the Company’s positions, including recent decisions in relevant court cases.

We analyzed the Company’s assumptions and data used to determine the amount of tax benefits to recognize and tested the accuracy of the Company’s calculations.

We have also evaluated the Company’s income tax disclosures included in Note 9 in relation to these matters.

We analyzed the appropriateness of the Company’s valuation methodologies and assumptions, including the determination of forecasts of income or loss, and the accuracy of the Company’s calculations and data used to determine the amount of tax benefits to recognize.

We have also evaluated the Company’s income tax disclosures in relation to these matters.

/s/ Ernst & Young LLP

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Balance as of January 1, 2019 491 $ 5 $ ( 1,837 ) $ 26,791 $ ( 1,035 ) $ 19,625 $ 43,549

Cumulative effect of change in accounting principles related to revenue recognition, income taxes, and financial instruments — — — — ( 4 ) 916 912

Cumulative effect of change in accounting principle related to leases — — — — — 7 7

Net income — — — — — 11,588 11,588

Other comprehensive income (loss) — — — — 49 — 49

Exercise of common stock options 7 — — — — — —

Stock-based compensation and issuance of employee benefit plan stock 7 — — 6,867 — — 6,867

Balance as of December 31, 2019 498 5 ( 1,837 ) 33,658 ( 986 ) 31,220 62,060

Cumulative effect of change in accounting principle related to leases — — — — — 7 7

Net income — — — — — 21,331 21,331

Other comprehensive income (loss) — — — — 806 — 806

Exercise of common stock options 7 — — — — — —

Stock-based compensation and issuance of employee benefit plan stock 5 — — 9,207 — — 9,207

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Other comprehensive income (loss) — — — — ( 1,196 ) — ( 1,196 )

Exercise of common stock options 5 — — — — — —

Stock-based compensation and issuance of employee benefit plan stock 6 — — 12,673 — — 12,673

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We seek to be Earth’s most customer-centric company.

In each of our segments, we serve our primary customer sets, consisting of consumers, sellers, developers, enterprises, and content creators.

In each of our segments, we serve our primary customer sets, consisting of consumers, sellers, developers, enterprises, content creators, advertisers, and employees.

We serve consumers through our online and physical stores and focus on selection, price, and convenience.

We offer programs that enable sellers to grow their businesses, sell their products in our stores, and fulfill orders through us, and programs that allow authors, musicians, filmmakers, skill and app developers, and others to publish and sell content.

We offer programs that enable sellers to grow their businesses, sell their products in our stores, and fulfill orders through us, and programs that allow authors, musicians, filmmakers, Twitch streamers, skill and app developers, and others to publish and sell content.

We serve developers and enterprises of all sizes through AWS, which offers a broad set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services.

We also manufacture and sell electronic devices.

In addition, we provide services, such as advertising to sellers, vendors, publishers, authors, and others, through programs such as sponsored ads, display, and video advertising.

In addition, we provide advertising services to sellers, vendors, publishers, authors, and others, through programs such as sponsored ads, display, and video advertising.

We have organized our operations into three segments:

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See “Note 10 — Segment Information.”

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

“Proceeds from short-term debt, and other” were reclassified from “Proceeds from long-term debt and other” and “Repayments of short-term debt, and other” were reclassified from “Repayments of long-term debt and other” on our consolidated statements of cash flows.

Principles of Consolidation

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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 years 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 the year ended December 31, 2020, based on servers that were included in “Property and equipment, net” as of December 31, 2019 and those acquired during the year ended December 31, 2020, was a reduction in depreciation and amortization expense of $ 2.7 billion and an increase in net income of $ 2.0 billion, or $ 4.06 per basic share and $ 3.98 per diluted share.

Actual results could differ materially from these estimates.

For example, in Q4 2021 we completed a useful life study for our servers and networking equipment and are increasing the useful lives from four years to five years for servers and from five years to six years for networking equipment in January 2022, which, based on servers and networking equipment that are included in “Property and equipment, net” as of December 31, 2021, will have an anticipated impact to our 2022 operating income of $ 3.1 billion.

We had previously increased the useful life of our servers from three years to four years in January 2020.

Supplemental Cash Flow Information

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Property and equipment acquired under finance leases $ 13,723 $ 11,588 $ 7,061

Property and equipment acquired under build-to-suit arrangements $ 3,641 $ 1,362 $ 2,267

Property and equipment acquired under build-to-suit lease arrangements $ 1,362 $ 2,267 $ 5,616

Earnings Per Share

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Revenue from such arrangements is recognized over the subscription period.

Advertising services - We provide advertising services to sellers, vendors, publishers, authors, and others, through programs such as sponsored ads, display, and video advertising.

Revenue is recognized as ads are delivered based on the number of clicks or impressions.

AWS - Our AWS arrangements include global sales of compute, storage, database, and other services.

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Sales commissions we pay in connection with contracts that exceed one year are capitalized and amortized over the contract term.

Other - Other revenue primarily includes sales of advertising services, which are recognized as ads are delivered based on the number of clicks or impressions.

Other - Other revenue includes sales related to various other service offerings, which are recognized as or when those services are performed.

Return Allowances

Return allowances, which reduce revenue and cost of sales, are estimated using historical experience.

Liabilities for return allowances are included in “Accrued expenses and other” and were $ 623 million, $ 712 million, and $ 859 million as of December 31, 2018, 2019, and 2020.

Liabilities for return allowances are included in “Accrued expenses and other” and were $ 712 million, $ 859 million, and $ 1.0 billion as of December 31, 2019, 2020, and 2021.

Additions to the allowance were $ 2.5 billion, $ 3.5 billion, and $ 5.1 billion and deductions from the allowance were $ 2.5 billion, $ 3.6 billion, and $ 4.9 billion in 2019, 2020, and 2021.

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When volume rebates can be reasonably estimated, we record a portion of the rebate as we make progress towards the purchase threshold.

Fulfillment costs primarily consist of those costs incurred in operating and staffing our North America and International segments’ fulfillment centers, physical stores, and customer service centers, including costs attributable to buying, receiving, inspecting, and warehousing inventories;

Fulfillment costs primarily consist of those costs incurred in operating and staffing our North America and International segments’ fulfillment centers, physical stores, and customer service centers, including facilities and equipment expenses, such as depreciation and amortization, and rent;

costs attributable to buying, receiving, inspecting, and warehousing inventories;

picking, packaging, and preparing customer orders for shipment;

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facilities and equipment expenses, such as depreciation and amortization expense and rent;

and professional fees and litigation costs.

and professional fees.

Stock-Based Compensation

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We consider many factors when estimating expected forfeitures, including historical forfeiture experience and employee level.

Additionally, stock-based compensation includes stock appreciation rights that are expected to settle in cash.

Additionally, stock-based compensation includes stock

appreciation rights that are expected to settle in cash.

These liability-classified awards are remeasured to fair value at the end of each reporting period until settlement or expiration.

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Other Income (Expense), Net

Other income (expense), net, consists primarily of valuations and adjustments of equity securities of $ 145 million, $ 231 million, and $ 833 million in 2018, 2019, and 2020, equity warrant valuation gains (losses) of $( 131 ) million, $ 11 million, and $ 1.5 billion in 2018, 2019, and 2020, and foreign currency gains (losses) of $( 206 ) million, $( 20 ) million, and $ 35 million in 2018, 2019, and 2020.

During the period from January 1, 2021 to February 2, 2021, we expect to record upward adjustments relating to equity investments in private companies of approximately $ 1.5 billion.

In addition, for this same period, our equity and equity warrant investments in public companies, which are subject to volatility based on changes in market prices, have experienced gains of approximately $ 1.5 billion based on available trading prices.

Other income (expense), net, is as follows (in millions):

Year Ended December 31,

2019 2020 2021

Marketable equity securities valuation gains (losses) $ 7 $ 525 $ 11,526

Equity warrant valuation gains (losses) 11 1,527 1,315

Upward adjustments relating to equity investments in private companies 328 342 1,866

Foreign currency gains (losses) ( 20 ) 35 ( 55 )

Other, net ( 123 ) ( 58 ) ( 19 )

Total other income (expense), net 203 2,371 14,633

Included in other income (expense), net in 2021 is a marketable equity securities valuation gain of $ 11.8 billion from our equity investment in Rivian Automotive, Inc.

Our investment in Rivian’s preferred stock was accounted for at cost, with adjustments for observable changes in prices or impairments, prior to Rivian’s initial public offering in November 2021, which resulted in the conversion of our preferred stock to Class A common stock.

As of December 31, 2021, we held 158 million shares of Rivian’s Class A common stock, representing an approximate 18 % ownership interest, and an approximate 16 % voting interest.

We determined that we have the ability to exercise significant influence over Rivian through our equity investment, our commercial arrangement for the purchase of electric vehicles, and one of our employees serving on Rivian’s board of directors.

We elected the fair value option to account for our equity investment in Rivian, and the 2021 valuation gain is primarily comprised of the gain recognized upon the initial public offering, and also includes subsequent changes in fair value through December 31, 2021.

As of December 31, 2021, our equity investment in Rivian had a fair value of $ 15.6 billion, which reflects a discount for lack of marketability until Q1 2022 of approximately $ 800 million due to regulatory sales restrictions, and is included in “Marketable securities” on our consolidated balance sheets.

Summarized financial information of Rivian as disclosed in its SEC filings is as follows (in millions):

December 31, 2019 Year Ended

December 31, 2020 Nine Months Ended

September 30, 2021

Revenues $ — $ — $ 1

Gross profit — — ( 82 )

Loss from operations ( 409 ) ( 1,021 ) ( 1,766 )

Net loss ( 426 ) ( 1,018 ) ( 2,227 )

December 31, 2020 September 30, 2021

Total current assets $ 3,016 $ 5,345

Total assets 4,602 8,488

Total current liabilities 611 1,047

Total liabilities 742 4,201

Contingently redeemable convertible preferred stock 5,244 7,894

Income tax expense includes U.S.

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We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent cumulative loss experience and expectations of future earnings, capital gains and investment in such jurisdiction, the carry-forward periods available to us for tax reporting purposes, and other relevant factors.

The effects of the COVID-19 pandemic on our business make estimates of future earnings in relevant jurisdictions more challenging.

We utilize a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies).

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We hold equity warrants giving us the right to acquire stock of other companies.

As of December 31, 2019 and 2020, these warrants had a fair value of $ 669 million and $ 3.0 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.

As of December 31, 2020 and 2021, these warrants had a fair value of $ 3.0 billion and $ 3.4 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.

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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 2020, customer receivables, net, were $ 12.6 billion and $ 14.8 billion, vendor receivables, net, were $ 4.2 billion and $ 4.8 billion, and seller receivables, net, were $ 863 million and $ 381 million.

As of December 31, 2020 and 2021, customer receivables, net, were $ 14.8 billion and $ 20.2 billion, vendor receivables, net, were $ 4.8 billion and $ 5.3 billion, and seller receivables, net, were $ 381 million and $ 1.0 billion.

Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory.

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Receivables are considered impaired and written-off when it is probable that all contractual payments due will not be collected in accordance with the terms of the agreement.

The allowance for doubtful accounts was $ 495 million, $ 718 million, and $ 1.1 billion as of December 31, 2018, 2019, and 2020.

Additions to the allowance were $ 878 million, $ 1.0 billion, and $ 1.4 billion, and deductions to the allowance were $ 731 million, $ 793 million, and $ 1.0 billion in 2018, 2019, and 2020.

The allowance for doubtful accounts was $ 718 million, $ 1.1 billion, and $ 1.1 billion as of December 31, 2019, 2020, and 2021.

Additions to the allowance were $ 1.0 billion, $ 1.4 billion, and $ 1.0 billion, and deductions to the allowance were $ 793 million, $ 1.0 billion, and $ 1.1 billion in 2019, 2020, and 2021.

Software Development Costs

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The building is depreciated over the shorter of its useful life or the term of the obligation.

If we do not control the building after the construction period ends, the assets and liabilities for construction costs are derecognized, and we classify the lease as either operating or finance.

If we do not control the building after the construction period ends, the assets and liabilities for construction costs are derecognized, and we classify the lease as operating.

Goodwill and Indefinite-Lived Intangible Assets

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acquired intangible assets, net of accumulated amortization;

certain equity investments;

equity warrant assets;

long-term deferred tax assets;

and lease prepayments made prior to lease commencement.

and certain equity investments.

Digital Video and Music Content

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Such investments are included in “Cash and cash equivalents” or “Marketable securities” on the accompanying consolidated balance sheets.

Marketable debt securities are classified as available-for-sale and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive income (loss).” Each reporting period, we evaluate whether declines in fair value below carrying value are due to expected credit losses, as well as our ability and intent to hold the investment until a forecasted recovery occurs.

Marketable fixed income securities are classified as available-for-sale and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive income (loss).” Each reporting period, we evaluate whether declines in fair value below carrying value are due to expected credit losses, as well as our ability and intent to hold the investment until a forecasted recovery occurs.

Expected credit losses are recorded as an allowance through “Other income (expense), net” on our consolidated statements of operations.

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If the investment is impaired, we write it down to its estimated fair value.

As of December 31, 2019 and 2020, these investments had a carrying value of $ 1.5 billion and $ 2.7 billion.

Equity investments are accounted for using the equity method of accounting if the investment gives us the ability to exercise significant influence, but not control, over an investee.

As of December 31, 2020 and 2021, these investments had a carrying value of $ 2.7 billion and $ 603 million.

Equity investments are accounted for using the equity method of accounting, or at fair value if we elect the fair value option, if the investment gives us the ability to exercise significant influence, but not control, over an investee.

Equity-method investments are included within “Other assets” on our consolidated balance sheets.

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Each reporting period, we evaluate whether declines in fair value below carrying value are other-than-temporary and if so, we write down the investment to its estimated fair value.

Equity investments that have readily determinable fair values are included in “Marketable securities” on our consolidated balance sheets and measured at fair value with changes recognized in “Other income (expense), net” on our consolidated statements of operations.

Equity investments that have readily determinable fair values, including investments for which we have elected the fair value option, are included in “Marketable securities” on our consolidated balance sheets and measured at fair value with changes recognized in “Other income (expense), net” on our consolidated statements of operations.

Long-Lived Assets

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Accrued Expenses and Other

Included in “Accrued expenses and other” on our consolidated balance sheets are liabilities primarily related to leases and asset retirement obligations, payroll and related expenses, tax-related liabilities, unredeemed gift cards, customer liabilities, current debt, acquired digital media content, and other operating expenses.

Included in “Accrued expenses and other” on our consolidated balance sheets are liabilities primarily related to leases and asset retirement obligations, tax-related liabilities, payroll and related expenses, unredeemed gift cards, customer liabilities, marketing liabilities, current debt, acquired digital media content, and other operating expenses.

As of December 31, 2020 and 2021, our liabilities for payroll related expenses were $ 7.6 billion and $ 9.1 billion and our liabilities for unredeemed gift cards were $ 4.7 billion and $ 5.2 billion.

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Assets and liabilities of these subsidiaries are translated into U.S.

Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates

prevailing throughout the period.

Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period.

Translation adjustments are included in “Accumulated other comprehensive income (loss),” a separate component of stockholders’ equity, and in the “Foreign currency effect on cash, cash equivalents, and restricted cash,” on our consolidated statements of cash flows.

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As of December 31, 2020 and 2021, 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.

and foreign government and agency securities, other investment grade securities, and marketable equity securities.

Cash equivalents and marketable securities are recorded at fair value.

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___________________

(1) The related unrealized gain (loss) recorded in “Other income (expense), net” was $ 448 million for the year ended December 31, 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.

(1) The related unrealized gain (loss) recorded in “Other income (expense), net” was $ 4 million, $ 448 million, and $ 11.6 billion for the years ended December 31, 2019, 2020, and 2021.

(2) We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable fixed income securities primarily as collateral for real estate, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit.

We classify cash, cash equivalents, and marketable fixed income 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 7 — Commitments and Contingencies.”

The following table summarizes gross gains and gross losses realized on sales of available-for-sale fixed income marketable securities (in millions):

(3) Our equity investment in Rivian of $ 15.6 billion reflects a discount for lack of marketability until Q1 2022 due to regulatory sales restrictions.

In addition, we are subject to contractual sales restrictions until Q2 2022.

The following table summarizes gross gains and gross losses realized on sales of marketable fixed income securities (in millions):

Year Ended December 31,

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Note 4 — LEASES

We have entered into non-cancellable operating and finance leases for fulfillment, delivery, office, physical store, data center, and sortation facilities as well as server and networking equipment, vehicles, and aircraft.

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 $ 68.1 billion and $ 72.2 billion as of December 31, 2020 and 2021.

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Year Ended December 31,

2019 2020 2021

Operating lease cost $ 3,669 $ 5,019 $ 7,199

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December 31, 2020 December 31, 2021

Weighted-average remaining lease term – operating leases 11.5 11.3

Weighted-average remaining lease term – finance leases 5.5 6.2

Weighted-average remaining lease term – operating leases 10.7 years 11.3 years

Weighted-average remaining lease term – finance leases 6.2 years 8.1 years

Weighted-average discount rate – operating leases 2.5 % 2.2 %

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2019 Acquisition Activity

On April 12, 2018, we acquired Ring Inc.

for cash consideration of approximately $ 839 million, net of cash acquired, and on September 11, 2018, we acquired PillPack, Inc.

for cash consideration of approximately $ 753 million, net of cash acquired, to expand our product and service offerings.

During 2018, we also acquired certain other companies for an aggregate purchase price of $ 57 million.

2019 Acquisition Activity

During 2019, we acquired certain companies for an aggregate purchase price of $ 315 million, net of cash acquired.

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During 2020, we acquired certain companies for an aggregate purchase price of $ 1.2 billion, net of cash acquired, of which $ 1.1 billion was capitalized to in-process research and development intangible assets (“IPR&D”).

2021 Acquisition Activity

During 2021, we acquired certain companies for an aggregate purchase price of $ 496 million, net of cash acquired.

The primary reason for all acquisitions was to acquire technologies and know-how to enable Amazon to serve customers more effectively.

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Note 6 — DEBT

As of December 31, 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 $ 924 million as of December 31, 2019 and 2020.

As of December 31, 2021, we had $ 49.7 billion of unsecured senior notes outstanding (the “Notes”).

We issued $ 18.5 billion of Notes in May 2021, of which $ 1.0 billion was issued for green or social projects, such as projects related to clean transportation, renewable energy, sustainable buildings, affordable housing, or socioeconomic advancement and empowerment, and the remainder for general corporate purposes.

We also had other long-term debt and borrowings under our credit facility of $ 924 million and $ 803 million as of December 31, 2020 and 2021.

Our total long-term debt obligations are as follows (in millions):

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0.56 % - 2.77 %

10,000 10,000

2021 Notes issuance of $ 18.5 billion

2023 - 2061 0.25 % - 3.25 %

0.35 % - 3.31 %

Credit Facility 338 803

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The estimated fair value of the Notes was approximately $ 37.7 billion and $ 53.3 billion as of December 31, 2020 and 2021, 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”).

We have a $ 1.0 billion secured revolving credit facility with a lender that is secured by certain seller receivables, which we increased from $ 740 million in November 2021 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.

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The estimated fair value of the Credit Facility, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2020 and 2021.

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 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 2020.

As of December 31, 2021, future principal payments for our total long-term debt were as follows (in millions):

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Thereafter 34,750

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 December 31, 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 0.11 %.

Dollar and Euro commercial paper programs (the “Commercial Paper Programs”) under which we may from time to time issue unsecured commercial paper up to a total of $ 10.0 billion (including up to € 3.0 billion) at the date of issue, with individual maturities that may vary but will not exceed 397 days from the date of issue.

There were $ 725 million of borrowings outstanding under the Commercial Paper Programs as of December 31, 2020 and 2021, which were included in “Accrued expenses and other” on our consolidated balance sheets and had a weighted-average effective interest rate, including

issuance costs, of 0.11 % and 0.08 %, respectively.

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 undrawn portion of the credit facility.

We also have a $ 7.0 billion unsecured revolving credit facility with a syndicate of lenders with a term that extends to June 2023, which was amended in November 2021 to replace LIBOR as the applicable benchmark rate for loans denominated in certain foreign currencies (the “Credit Agreement”).

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 Credit Agreement is the applicable benchmark rate specified in the Credit Agreement plus 0.50 %, with a commitment fee of 0.04 % on the undrawn portion of the credit facility.

There were no borrowings outstanding under the Credit Agreement as of December 31, 2020 and 2021.

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Note 7 — COMMITMENTS AND CONTINGENCIES

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 December 31, 2021 (in millions):

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___________________

(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.

(1) Includes non-cancellable financing obligations for fulfillment, sortation, and data center facilities.

Excluding interest, current financing obligations of $ 111 million and $ 196 million are recorded within “Accrued expenses and other” and $ 3.4 billion and $ 6.2 billion are recorded within “Other long-term liabilities” as of December 31, 2020 and 2021.

The weighted-average remaining term of the financing obligations was 19.0 and 18.8 years and the weighted-average imputed interest rate was 3.8 % and 3.2 % as of December 31, 2020 and 2021.

(2) Includes unconditional purchase obligations related to long-term agreements to acquire and license digital media content that are not reflected on the consolidated balance sheets and certain products offered in our Whole Foods Market stores.

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.

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(4) Excludes approximately $ 3.2 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, 2019 and 2020, we have pledged or otherwise restricted $ 994 million and $ 875 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 6 — Debt.”

In addition, in May 2021, we entered into an agreement to acquire MGM Holdings Inc.

(“MGM”) for approximately $ 8.5 billion, including MGM’s debt, subject to customary closing conditions.

We expect to fund this acquisition with cash on hand.

During 2021, no vendor accounted for 10% or more of our purchases.

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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.

We are disputing claims and denials of refunds or credits related to various non-income taxes (such as sales, value added, consumption, service, and similar taxes), including in jurisdictions in which we already collect and remit these taxes.

These non-income tax contr oversies typically relate to (i) the taxability of products and services, including cross-border intercompany transactions, (ii) collection and withholding on transactions with third parties, and (iii) the adequacy of compliance with reporting obligations, including evolving documentation requirements.

Due to the inherent complexity and uncertainty of these matters and the judicial and regulatory processes in certain jurisdictions, the final outcome of any such controversies may be materially different from our expectations.

Legal Proceedings

The Company is involved from time to time in claims, proceedings, and litigation, including the following:

In March 2015, Zitovault, LLC filed a complaint against Amazon.com, Inc., Amazon.com, LLC, Amazon Web Services, Inc., and Amazon Web Services, LLC for patent infringement in the United States District Court for the Eastern District of Texas.

The complaint alleges that Elastic Compute Cloud, Virtual Private Cloud, Elastic Load Balancing, Auto-Scaling, and Elastic Beanstalk infringe U.S.

6,484,257, entitled “System and Method for Maintaining N Number of Simultaneous Cryptographic Sessions Using a Distributed Computing Environment.” The complaint seeks injunctive relief, an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, and interest.

In January 2016, the case was transferred to the United States District Court for the Western District of Washington.

In June 2016, the case was stayed pending resolution of a review petition we filed with the United States Patent and Trademark Office.

In January 2019, the stay of the case was lifted following resolution of the review petition.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

In November 2015, Eolas Technologies, Inc.

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We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

Beginning in March 2020, a number of class-action complaints were filed alleging, among other things, price fixing arrangements between Amazon.com, Inc.

and third-party sellers in Amazon’s stores, monopolization and attempted monopolization of an alleged market in online retail or other submarkets, and consumer protection and unjust enrichment claims.

In March 2020, Frame-Wilson v.

Beginning in March 2020, with Frame-Wilson v.

Amazon.com, Inc.

was filed in the United States District Court for the Western District of Washington.

Beginning in April 2020, class action complaints were filed in the Superior Court of Quebec – Division of Montreal, the Ontario Superior Court of Justice, and the Federal Court of Canada against Amazon.com, Inc.

and related entities.

The complaints allege several distinct purported classes, including consumers who purchased a product through Amazon’s stores and consumers who purchased a product offered by Amazon through another e-commerce retailer.

filed in the United States District Court for the Western District of Washington, a number of cases have been filed in the U.S.

and Canada alleging, among other things, price fixing arrangements between Amazon.com, Inc.

and third-party sellers in Amazon’s stores, monopolization and attempted monopolization, and consumer protection and unjust enrichment claims.

Some of the cases include allegations of several distinct purported classes, including consumers who purchased a product through Amazon’s stores and consumers who purchased a product offered by Amazon through another e-commerce retailer.

The complaints seek billions of dollars of alleged actual damages, treble damages, punitive damages, and injunctive relief.

Individuals have also initiated arbitrations based on substantially similar allegations.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in these matters.

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We disagree with the preliminary assertions of the European Commission and intend to defend ourselves vigorously in this matter.

In July 2021, the Luxembourg National Commission for Data Protection (the “CNPD”) issued a decision against Amazon Europe Core S.à r.l.

claiming that Amazon’s processing of personal data did not comply with the EU General Data Protection Regulation.

The decision imposes a fine of € 746 million and corresponding practice revisions.

We believe the CNPD’s decision to be without merit and intend to defend ourselves vigorously in this matter.

In November 2021, Jawbone Innovations, LLC filed a complaint against Amazon.com, Inc.

and Amazon.com Services, Inc.

in the United States District Court for the Eastern District of Texas.

The complaint alleges, among other things, that Amazon Echo smart speakers and displays, Fire TV Cube, and Echo Buds infringe U.S.

7,246,058, entitled “Detecting Voiced and Unvoiced Speech Using Both Acoustic and Nonacoustic Sensors”;

8,019,091, entitled “Voice Activity

Detector (VAD)-Based Multiple-Microphone Acoustic Noise Suppression”;

8,280,072, entitled “Microphone Array with Rear Venting”;

8,321,213 and 8,326,611, both entitled “Acoustic Voice Activity Detection (AVAD) for Electronic Systems”;

8,467,543, entitled “Microphone and Voice Activity Detection (VAD) Configurations for Use with Communications Systems”;

10,779,080, entitled “Dual Omnidirectional Microphone Array (DOMA)”;

and 11,122,357, entitled “Forming Virtual Microphone Arrays Using Dual Omnidirectional Microphone Array (DOMA).” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

In December 2021, the Italian Competition Authority (the “ICA”) issued a decision against Amazon Services Europe S.à r.l., Amazon Europe Core S.à r.l., Amazon EU S.à r.l., Amazon Italia Services S.r.l., and Amazon Italia Logistica S.r.l.

claiming that certain of our marketplace and logistics practices in Italy infringed EU competition rules.

The decision imposes a fine of € 1.13 billion and remedial actions.

We believe the ICA’s decision to be without merit and intend to defend ourselves vigorously in this matter.

In January 2022, VideoLabs, Inc.

and VL Collective IP LLC filed a complaint against Amazon.com, Inc.

and Amazon Web Services, Inc.

in the United States District Court for the Western District of Texas.

The complaint alleges, among other things, that Amazon Prime Video, Amazon Glow, Amazon Echo Show, Fire TV, Fire TV Cube, Fire TV Stick, Fire Tablets, AWS Elemental MediaConvert, AWS Elemental Live, AWS Elemental Server, AWS Elemental MediaPackage, AWS Elemental MediaLive, and Amazon Elastic Transcoder infringe U.S.

7,769,238 and 8,139,878, both entitled “Picture Coding Method and Picture Decoding Method”;

and 7,970,059, entitled “Variable Length Coding Method and Variable Length Decoding Method”;

that Amazon Prime Video, AWS Elemental MediaConvert, AWS Elemental Live, AWS Elemental Server, AWS Elemental MediaPackage, AWS Elemental MediaLive, Amazon Elastic Transcoder, and Amazon Kinesis Video Streams infringe U.S.

8,605,794, entitled “Method for Synchronizing Content-Dependent Data Segments of Files”;

that Amazon Echo Show, Amazon Echo Spot, Amazon Connect, Amazon Chime, and Amazon Kinesis Video Streams infringe U.S.

7,266,682, entitled “Method and System for Transmitting Data from a Transmitter to a Receiver and Transmitter and Receiver Therefore”;

that AWS Auto Scaling and Amazon EC2 Auto Scaling infringe U.S.

6,880,156, entitled “Demand Responsive Method and Apparatus to Automatically Activate Spare Servers”;

and that Amazon Prime Video infringes U.S.

7,440,559, entitled “System and Associated Terminal, Method and Computer Program Product for Controlling the Flow of Content.” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

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.

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.

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There were no repurchases of common stock in 2019, 2020, or 2021.

During the period from January 1, 2022 through February 2, 2022, we repurchased 0.5 million shares of our common stock for $ 1.3 billion.

Stock Award Plans

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taxable income.

Cash taxes paid, net of refunds, were $ 1.2 billion, $ 881 million, and $ 1.7 billion for 2018, 2019, and 2020.

companies are eligible for a deduction that lowers the effective tax rate on certain foreign income.

This regime is referred to as the Foreign-Derived Intangible Income deduction (“FDII”).

In addition, certain foreign subsidiary earnings and losses are subject to current U.S.

Cash taxes paid, net of refunds, were $ 881 million, $ 1.7 billion, and $ 3.7 billion for 2019, 2020, and 2021.

Certain foreign subsidiary earnings and losses are subject to current U.S.

taxation and the subsequent repatriation of those earnings is not subject to tax in the U.S.

tax rules also provide for enhanced accelerated depreciation deductions by allowing the election of full expensing of qualified property, primarily equipment, through 2022.

Our federal tax provision included the election of full expensing of qualified property for 2018 and 2019 and a partial election for 2020.

Our federal tax provision included the election of full expensing of qualified property for 2019 and a partial election for 2020 and 2021.

The components of the provision for income taxes, net are as follows (in millions):

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Stock-based compensation (1) ( 850 ) ( 1,107 ) ( 1,094 )

Foreign income deduction (FDII) ( 43 ) ( 72 ) ( 372 )

2017 Impact of U.S.

Tax Act ( 157 ) — —

Foreign income deduction (2) ( 72 ) ( 372 ) ( 301 )

Other, net 153 98 194

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Our tax provision includes $ 1.4 billion, $ 1.8 billion, and $ 1.9 billion of excess tax benefits from stock-based compensation for 2019, 2020, and 2021.

Our provision for income taxes in 2019 was higher than in 2018 primarily due to an increase in U.S.

pre-tax income, a decline in excess tax benefits from stock-based compensation, and the one-time provisional tax benefit of the U.S.

Tax Act recognized in 2018.

companies are eligible for a deduction that lowers the effective tax rate on certain foreign income.

This regime is referred to as the Foreign-Derived Intangible Income deduction (“FDII”).

Our provision for income taxes in 2020 was higher than in 2019 primarily due to an increase in pretax income.

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In addition, our Luxembourg operations generated earnings in 2020 and utilized deferred tax assets previously subject to valuation allowances.

Our provision for income taxes in 2021 was higher than in 2020 primarily due to an increase in pretax income.

This was partially offset by an increase in U.S.

federal research and development credits and the impact of the distribution of certain intangible assets from Luxembourg to the U.S.

in Q4 2021, resulting in the utilization of $ 2.6 billion of Luxembourg deferred tax assets previously subject to a valuation allowance.

We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S.

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Operating lease assets ( 9,539 ) ( 14,422 )

Assets held for investment ( 569 ) ( 4,019 )

Other items ( 893 ) ( 668 )

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If not utilized, a portion of these losses will begin to expire in 2022.

All remaining federal tax credits, which were primarily related to the U.S.

federal research and development credit, reduced our federal tax liability in 2020.

We regularly assess whether it is more likely than not that we will realize our deferred tax assets in each taxing jurisdiction in which we operate.

In performing this assessment with respect to each jurisdiction, we review all available evidence, including recent cumulative loss experience and expectations of future earnings, capital gains, and investment in such jurisdiction, the carry-forward periods available to us for tax reporting purposes, and other relevant factors.

The effects of the COVID-19 pandemic on our business make estimates of future earnings more challenging.

Since Q2 2017, we have recorded a valuation allowance against our net deferred tax assets in Luxembourg.

There is still significant uncertainty whether our earnings in Luxembourg are sustainable in the future and we will maintain the valuation allowance until sufficient positive evidence exists to support a release of the valuation allowance.

Tax Contingencies

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(1) As of December 31, 2021, we had approximately $ 3.2 billion of accrued tax contingencies of which $ 1.6 billion, if fully recognized, would decrease our effective tax rate.

The decrease in our tax contingencies in 2020 was primarily a result of developments in our global tax controversies.

As of December 31, 2020 and 2021, we had accrued interest and penalties, net of federal income tax benefit, related to tax contingencies of $ 83 million and $ 110 million.

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These examinations may lead to ordinary course adjustments or proposed adjustments to our taxes or our net operating losses with respect to years under examination as well as subsequent periods.

During Q3 2020, we resolved the audits of tax years 2007 through 2012 with the IRS for amounts that were materially consistent with our accrual.

We resolved the audits of tax years 2007 through 2015 with the IRS for amounts that were materially consistent with our accrual.

In October 2014, the European Commission opened a formal investigation to examine whether decisions by the tax authorities in Luxembourg with regard to the corporate income tax paid by certain of our subsidiaries comply with European Union rules on state aid.

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Based on that decision the European Commission announced an estimated recovery amount of approximately € 250 million, plus interest, for the period May 2006 through June 2014, and ordered Luxembourg tax authorities to calculate the actual amount of additional taxes subject to recovery.

Luxembourg computed an initial recovery amount, consistent with the European Commission’s decision, that we deposited into escrow in March 2018, subject to adjustment pending conclusion of all appeals.

Luxembourg computed an initial recovery amount, consistent with the European Commission’s decision, which we deposited into escrow in March 2018, subject to adjustment pending conclusion of all appeals.

In December 2017, Luxembourg appealed the European Commission’s decision.

In May 2018, we appealed.

We believe the European Commission’s decision to be without merit and will continue to defend ourselves vigorously in this matter.

We are also subject to taxation in various states and other foreign jurisdictions including China, Germany, India, Japan, Luxembourg, and the United Kingdom.

On May 12, 2021, the European Union General Court annulled the European Commission’s state aid decision.

In July 2021, the European Commission appealed the decision to the European Court of Justice.

We will continue to defend ourselves vigorously in this matter.

We are also subject to taxation in various states and other foreign jurisdictions including China, France, Germany, India, Japan, Luxembourg, and the United Kingdom.

We are under, or may be subject to, audit or examination and additional assessments by the relevant authorities in respect of these particular jurisdictions primarily for 2009 and thereafter.

Changes in tax laws, regulations, administrative practices, principles, and interpretations may impact our tax contingencies.

The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued.

It is reasonably possible that within the next twelve months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax examinations in one or more jurisdictions.

The timing of the resolution of income tax controversies is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued.

It is reasonably possible that within the next twelve months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax controversies in one or more jurisdictions.

These assessments or settlements could result in changes to our contingencies related to positions on prior years’ tax filings.

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Subscription services (4) 19,210 25,207 31,768

Advertising services (5) 12,625 19,773 31,160

AWS 35,026 45,370 62,202

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(4) Includes annual and monthly fees associated with Amazon Prime memberships, as well as digital video, audiobook, digital music, e-book, and other non-AWS subscription services.

(5) Primarily includes sales of advertising services, as well as sales related to our other service offerings.

Net sales generated from our internationally-focused online stores are denominated in local functional currencies.

Revenues are translated at average rates prevailing throughout the period.

(5) Includes sales of advertising services to sellers, vendors, publishers, authors, and others, through programs such as sponsored ads, display, and video advertising.

(6) Includes sales related to various other service offerings.

Net sales are attributed to countries primarily based on country-focused online and physical stores or, for AWS purposes, the selling entity.

Net sales attributed to countries that represent a significant portion of consolidated net sales are as follows (in millions):

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___________________

(1) Includes property and equipment added under finance leases of $ 2.0 billion, $ 3.8 billion, and $ 5.6 billion in 2018, 2019, and 2020, and under financing obligations of $ 3.0 billion, $ 1.3 billion, and $ 2.7 billion in 2018, 2019, and 2020.

(2) Includes property and equipment added under finance leases of $ 8.4 billion, $ 10.6 billion, and $ 7.7 billion in 2018, 2019, and 2020, and under financing obligations of $ 245 million, $ 0 million, and $ 130 million in 2018, 2019, and 2020.

(1) Includes property and equipment added under finance leases of $ 3.8 billion, $ 5.6 billion, and $ 3.6 billion in 2019, 2020, and 2021, and under build-to-suit lease arrangements of $ 1.3 billion, $ 2.7 billion, and $ 5.6 billion in 2019, 2020, and 2021.

(2) Includes property and equipment added under finance leases of $ 10.6 billion, $ 7.7 billion, and $ 3.5 billion in 2019, 2020, and 2021, and under build-to-suit lease arrangements of $ 0 million , $ 130 million, and $ 51 million in 2019, 2020, and 2021.

property and equipment, net and operating leases were $ 69.8 billion, $ 109.5 billion, and $ 155.0 billion, in 2019, 2020, and 2021, and non-U.S.

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Consolidated $ 15,150 $ 16,239 $ 22,909

Note 11 — QUARTERLY RESULTS (UNAUDITED)

The following tables contain selected unaudited statement of operations information for each quarter of 2019 and 2020.

The following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented.

The operating results for any quarter are not necessarily indicative of results for any future period.

Our business is affected by seasonality, which historically has resulted in higher sales volume during our fourth quarter.

Unaudited quarterly results are as follows (in millions, except per share data):

Year Ended December 31, 2019 (1)

Quarter Second

Quarter Third

Quarter Fourth

Net sales $ 59,700 $ 63,404 $ 69,981 $ 87,437

Operating income 4,420 3,084 3,157 3,879

Income before income taxes 4,401 2,889 2,632 4,053

Provision for income taxes ( 836 ) ( 257 ) ( 494 ) ( 786 )

Net income 3,561 2,625 2,134 3,268

Basic earnings per share 7.24 5.32 4.31 6.58

Diluted earnings per share 7.09 5.22 4.23 6.47

Shares used in computation of earnings per share:

Basic 491 493 495 496

Diluted 502 503 504 505

Year Ended December 31, 2020 (1)

Quarter Second

Quarter Third

Quarter Fourth

Net sales $ 75,452 $ 88,912 $ 96,145 $ 125,555

Operating income 3,989 5,843 6,194 6,873

Income before income taxes 3,383 6,221 6,809 7,765

Provision for income taxes ( 744 ) ( 984 ) ( 569 ) ( 566 )

Net income 2,535 5,243 6,331 7,222

Basic earnings per share 5.09 10.50 12.63 14.38

Diluted earnings per share 5.01 10.30 12.37 14.09

Shares used in computation of earnings per share:

Basic 498 500 501 502

Diluted 506 509 512 513

___________________

(1) The sum of quarterly amounts, including per share amounts, may not equal amounts reported for year-to-date periods.

This is due to the effects of rounding and changes in the number of weighted-average shares outstanding for each period.

Changes in and Disagreements with Accountants On Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data