Amazon.com 2004 Annual Report Download - page 48

Stock-based compensation consisted of the following:
Year Ended December 31,
2004 2003 2002
(in thousands)
Stock awards—variable accounting (1) .................................. $ 4,577 $51,875 $60,130
Fixed accounting (2):
Restricted stock units (3) ......................................... 48,625 30,691 3,913
Restricted stock (4) .............................................. 4,500 5,185 4,884
Total stock-based compensation ............................... $57,702 $87,751 $68,927
(1) Variable accounting treatment results in expense or contra-expense recognition using the cumulative
expense method, calculated based on the quoted price of our common stock and vesting schedules of
underlying awards. To the extent stock options are forfeited prior to vesting, the corresponding previously
recognized expense is reversed as an offset to “Stock-based compensation.”
(2) The fair value of awards is determined at grant date based on the number of shares granted and the quoted
price of our common stock. Such value is recognized as expense over the service period using the
accelerated method under FIN No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock
Option or Award Plans.Tothe extent awards are forfeited prior to vesting, the corresponding previously
recognized expense is reversed as an offset to stock-based compensation.
(3) Since October 2002, we have awarded restricted stock units as our primary form of stock-based
compensation.
(4) Includes expense associated with matching contributions of 0.07 million and 0.03 million shares of our
common stock under our 401(k) savings plan during 2004 and 2003. No matching contributions were made
in 2002.
At December 31, 2004, we had 25 million stock awards outstanding, including 18 million stock options with
a$12.98 weighted average exercise price; 6 million restricted stock units; and 1 million shares of restricted stock.
Common shares outstanding (which include restricted stock) plus shares underlying stock options and restricted
stock units totaled 434 million and 433 million at December 31, 2004 and 2003. For additional information about
our stock-based compensation and awards see Item 8 of Part II, “Financial Statements and Supplementary
Data—Note 1—Description of Business and Accounting Policies—Stock-based Compensation.”
Other Operating Expense (Income)
Other operating expense (income) was $(8) million, $3 million, and $47 million for 2004, 2003, and 2002,
which includes restructuring-related expenses (credits) and amortization of other intangibles. Restructuring-
related expenses (credits) were $(9) million, $0 million, and $42 million; and amortization of other intangibles
was $1 million, $3 million, and $5 million for 2004, 2003, and 2002.
During 2004, we determined that certain of the office space previously vacated as part of our 2001
restructuring, which we had been unable to sublease due to poor real estate market conditions, was necessary for
our future needs. We have reduced our restructuring-related liability resulting in a gain of $13 million in 2004.
Lease-related payments for this office space, approximately $0.8 million per quarter, are expensed over the lease
period and classified to the corresponding operating expense categories on the consolidated statements of
operations.
In 2004, we streamlined our organizational structure in France to reduce our operating costs. These efforts
were primarily focused on eliminating French office positions in managerial, professional, clerical, and technical
roles. The number of employees affected totaled 52 and resulted in severance costs of $4 million classified in
“Other operating expense (income)” on the consolidated statements of operations.
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