Amazon.com 2003 Annual Report Download - page 61

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Since October, 2002, we grant restricted stock units as our primary form of stock-based compensation;
however, in certain of our foreign jurisdictions, we continue to grant stock options. Stock options granted after
December 31, 2002 are subject to variable accounting treatment. Restricted stock units and restricted stock are
generally measured at fair value on the date of grant based on the number of shares granted and the quoted price
of our common stock. Such value is recognized as an expense over the corresponding service period using the
accelerated method under FASB Interpretation (“FIN”) No. 28, Accounting for Stock Appreciation Rights and
Other Variable Stock Option or Award Plans. To the extent restricted stock or restricted stock units are forfeited
prior to vesting, the corresponding previously recognized expense is reversed as an offset to “Stock-based
compensation.”
We record the employer portion of payroll tax expense resulting from exercises of stock options and vesting
of restricted stock in “Fulfillment,” “Marketing,” “Technology and content,” and “General and administrative”
on our consolidated statements of operations and do not include such expenses in “Stock-based compensation.”
Stock-based compensation includes matching contributions under our 401(k) program.
Stock-based compensation consisted of the following (in thousands):
Years Ended December 31,
2003 2002 2001
Stock awards—variable accounting ........................... $51,875 $60,130 $ 484
Fixed accounting (1):
Restricted stock units .................................. 30,691 3,913 —
Restricted stock (2) .................................... 5,185 4,884 4,153
Total stock-based compensation ..................... $87,751 $68,927 $4,637
(1) Fair value of awards determined at grant date and recognized as expense over the service period.
(2) Includes expense associated with matching contributions under our 401(k) savings plan.
We granted stock awards representing 2 million, 3 million, and 46 million shares of common stock during
2003, 2002, and 2001. These awards generally vest over service periods of between three and six years.
The following table summarizes relevant information as if the fair value recognition provisions of SFAS No.
123, Accounting for Stock Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation—Transition and Disclosure, had been applied to all stock-based awards (in thousands, except per
share data):
Years Ended December 31,
2003 2002 2001
Net income (loss)—as reported ......................... $35,282 $(149,132) $(567,277)
Add: Stock-based compensation, as reported .............. 87,751 68,927 4,637
Deduct: Total stock-based compensation determined under fair
value based method for all awards ..................... (94,525) (148,083) (400,445)
Net income (loss)—SFAS No. 123 adjusted ............... $28,508 $(228,288) $(963,085)
Basic earnings (loss) per share—as reported ............... $ 0.09 $ (0.39) $ (1.56)
Diluted earnings (loss) per share—as reported ............. $ 0.08 $ (0.39) $ (1.56)
Basic and diluted earnings (loss) per share—SFAS No. 123
adjusted .......................................... $ 0.07 $ (0.60) $ (2.64)
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