Amazon.com 2001 Annual Report Download - page 79

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 11—STOCK-BASED COMPENSATION
During the first quarter of 2001, the Company offered a limited non-compulsory exchange of employee
stock options. The exchange resulted in the voluntary cancellation of employee stock options to purchase
31 million shares of common stock with varying exercise prices in exchange for 12 million employee stock
options with an exercise price of $13.375. The option exchange offer resulted in variable accounting treatment
for, at the time of the exchange, approximately 15 million stock options, which includes options granted under
the exchange offer and 3 million options, with a weighted average exercise price of $52.41, that were subject to
the exchange offer but were not exchanged. Variable accounting will continue until all options subject to variable
accounting treatment are exercised, cancelled or expired. At December 31, 2001, approximately 12 million
options remain under variable accounting treatment, which includes 11 million options granted under the
exchange offer and 1 million options, with a weighted average exercise price of $39.61, that were subject to the
exchange offer but were not exchanged.
Stock-based compensation includes stock-based charges resulting from variable accounting treatment of
certain options, option-related deferred compensation recorded at the Company’s initial public offering, as well
as certain other compensation and severance arrangements. Stock-based compensation also includes the portion
of acquisition-related consideration conditioned on the continued tenure of key employees of certain acquired
businesses, which must be classified as compensation expense rather than as a component of purchase price
under accounting principles generally accepted in the United States. The following table shows the amounts of
stock-based compensation that would have been recorded under the following categories had stock-based
compensation not been separately stated on the consolidated statements of operations.
For the Years Ended December 31,
2001 2000 1999
(in thousands)
Fulfillment ............................................... $ 481 $(1,606) $ 188
Marketing ............................................... 690 (858) 3,957
Technology and content .................................... 2,723 28,253 25,322
General and administrative .................................. 743 (992) 1,151
$4,637 $24,797 $30,618
Note 12—RESTRUCTURING-RELATED AND OTHER
Restructuring-related and other expenses were $182 million, $200 million and $8 million for 2001, 2000 and
1999, respectively. In the first quarter of 2001, the Company announced and began implementation of its
operational restructuring plan to reduce operating costs, streamline its organizational structure, and consolidate
certain of its fulfillment and customer service operations. This initiative involved the reduction of employee staff
by approximately 1,300 positions throughout the Company in managerial, professional, clerical, technical and
fulfillment roles; consolidation of its Seattle, Washington corporate office locations; closure of its McDonough,
Georgia fulfillment center; seasonal operation of its Seattle, Washington fulfillment center (if necessary); closure
of its customer service centers in Seattle, Washington and The Hague, Netherlands; and migration of a large
portion of its technology infrastructure to a new operating platform, which entails ongoing lease obligations for
technology infrastructure no longer being utilized. Each component of the restructuring plan has been
substantially completed. As of December 31, 2001, 1,327 employees had been terminated, and actual termination
benefits paid were $12 million.
Costs that relate to ongoing operations are not part of restructuring charges and are not included in
“Restructuring-related and other.” In accordance with EITF Issue No. 96-9, “Classification of Inventory
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