Amazon.com 2002 Annual Report Download - page 67

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Restricted stock and restricted stock units are measured at fair value on the date of grant based on
the number of shares granted and the quoted price of the Company's common stock. Such value is
recognized as an expense ratably over the corresponding employee service period. To the extent restricted
stock or restricted stock units are forfeited prior to vesting, the corresponding previously recognized
expense is reversed as an oÅset to ""Stock-based compensation.'' Stock-based compensation associated with
restricted stock units was $4 million during 2002.
During the Ñrst quarter of 2001, the Company oÅered 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 employee stock
options to purchase 12 million shares of common stock with an exercise price of $13.375. The option
exchange oÅer resulted in variable accounting treatment for, at the time of the exchange, approximately
15 million stock options, which includes options granted under the exchange oÅer and 3 million options,
with a weighted average exercise price of $52.41, that were subject to the exchange oÅer but were not
exchanged. Variable accounting will continue until all options subject to variable accounting treatment are
exercised, cancelled or expired. At December 31, 2002, approximately 5 million options remain under
variable accounting treatment, which includes 4 million options granted under the exchange oÅer and
1 million options, with a weighted average exercise price of $43.49, that were subject to the exchange oÅer
but were not exchanged.
The following table summarizes relevant information as to reported results under the Company's
intrinsic value method of accounting for stock awards, with supplemental information as if the fair value
recognition provisions of SFAS No. 123, ""Accounting for Stock Based Compensation,'' had been applied
(in thousands, except per share data):
For the Years Ended December 31,
2002 2001 2000
Net loss, as reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(149,132) $(567,277) $(1,411,273)
Add: Stock-based compensation, as reported ÏÏÏÏÏÏÏÏÏÏ 68,927 4,637 24,797
Deduct: Total stock-based compensation determined
under fair value based method for all awardsÏÏÏÏÏÏÏÏ (148,083) (400,445) (333,836)
Adjusted net loss, fair value method for all stock-based
awards ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $(228,288) $(963,085) $(1,720,312)
Basic and diluted loss per share Ì as reported ÏÏÏÏÏÏÏÏ $ (0.39) $ (1.56) $ (4.02)
Basic and diluted loss per share Ì SFAS No. 123
adjustedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ (0.60) $ (2.64) $ (4.90)
The fair value for each option granted was estimated at the date of grant using a Black-Scholes
option-pricing model, assuming no expected dividends and the following weighted average assumptions:
For the Years Ended
December 31,
2002 2001 2000
Average risk-free interest rates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.1% 4.1% 6.2%
Average expected life (in years)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.3 3.3 3.0
Volatility ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 81.8% 98.0% 89.6%
The weighted average fair value of stock awards (including restricted stock units granted in 2002)
granted during 2002, 2001 and 2000 was $14.99, $5.98 and $22.12, respectively.
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