Shift in Stock Options May Be At Expense of Accounting Purists
Stock options long have been the compensation expense that the tech world avoided treating as a compensation expense -- relegating the cost to footnotes, bypassing the income statement. Now that Microsoft Corp., with the granddaddy of such compensation programs, has decided to ditch stock options in favor of restricted stock -- which the accounting rules say must be expensed -- the accounting purists have won.
Not so fast.
Check out the earnings news releases of Amazon.com.
In a less widely heralded move, the Internet retailer late last year moved from stock options to restricted stock, which it said would better align employee and outside shareholder interests. Following the accounting rules, Amazon does indeed expense the cost of the restricted shares it issues to employees. But it continues to encourage Wall Street to ignore the large cost. How so? Along with net income, it uses a pro forma, or "as if," version of its earnings that backs out the cost.
While it isn't clear if Microsoft will take the same approach, accounting specialists predict Amazon's method will become commonplace as more companies move to expense stock-related compensation in their income statements. More such expensing is likely to occur because some companies will follow Microsoft's example and accounting rule-makers are expected eventually to require all companies to treat options-based compensation as an expense, possibly as early as next year.
If you simply pro-forma those expenses back out, you've defeated the whole purpose," says Kenneth Broad, portfolio manager at Transamerica Investment Management, who is selling Amazon stock short in his personal account, a bearish bet that its shares will fall. The point of expensing stock compensation, he says, is "to quantify the value-conveyance from shareholders to employees."
A spokesman for Microsoft says the company hasn't determined whether it will provide earnings numbers that exclude expenses from employee restricted stock in its earnings releases. But Bob Austrian, an analyst who follows Microsoft for Banc of America Securities, says he expects the company will provide earnings figures to Wall Street that exclude expenses from restricted stock, which he predicts will amount to 10% of its earnings long term.
Amazon's move away from stock options put it out in front of a push by many accounting specialists, securities regulators and investors to force companies to treat options as the often-painful expense it is. Expensing the cost of restricted stock also can be painful, which helps explain the appeal of Amazon's use of pro-forma numbers.
In the first quarter, Amazon's stock-based compensation amounted to $27 million. In calculating pro-forma results without this expense, Amazon converted a $10 million loss into a profit. Overall, Amazon reported pro-forma earnings of $40 million, which also excluded expenses for restructuring and currency fluctuations. Most of its stock expense in the first quarter was from options, with $6 million related to restricted shares.
Amazon shares, which have doubled in price this year, are no bargain even with stock-compensation expenses excluded. The company's shares were down 60 cents, or 1.57%, at $37.65 as of 4 p.m. Friday in Nasdaq Stock Market trading. At that price, they trade at 78 times this year's projected earnings, based on Amazon's pro-forma method. That is more than four times the price-to-earnings ratio of the broader market. Now subtract the $30 million to $40 million in expenses that Amazon says it will incur this year tied to restricted stock, and Amazon's price-to-earnings ratio surges to between 92 and 97, based on some analysts' estimated share count for the company.
Amazon says it long has used pro-forma metrics along with net income, and investors can focus on the figure they choose. "We think all the GAAP [Generally Accepted Accounting Principles] numbers are important, but the one management is most focused on is free-cash flow," says Bill Curry, an Amazon spokesman. Free-cash flow represents cash from operations, after capital expenditures and interest payments.
Specifically, Amazon's pro-forma earnings figures exclude charges or credits based on the fluctuation of the euro, which affect the value of the company's debt, and fluctuations in the company's share price, which affects its expensing of certain options. Such items are difficult to forecast, the company says. Wall Street analysts provide only pro-forma earnings estimates for Amazon to earnings-tracker Thomson First Call. Analyst reports on the company tend to emphasize earnings excluding stock-compensation and certain other expenses.
While some investors, such as Mr. Broad, consider it useful to consider stock-related compensation costs, he doesn't appear to be in the majority. "I've been finding more and more willingness on the part of investors to back out the expenses associated with noncash employee compensation," says Lehman Brothers accounting analyst Robert Willens, who doesn't mind the approach as long as companies thoroughly define what is excluded from their pro-forma numbers.
One possible motivation for Amazon to calculate pro-forma results by excluding stock-based compensation is that most rivals in the Internet world don't expense their stock options. Amazon's "just afraid of people misreading them and comparing them to companies who aren't doing it," says Dave Hutchison , a research analyst at investment-management firm Insight Capital Research & Management in Walnut Creek, Calif., which holds Amazon shares. Mr. Hutchison, a proponent of expensing stock compensation, says Amazon's emphasis on pro-forma numbers means "they're doing it, but then they're not doing it." Amazon says harsh comparisons with other companies aren't a consideration in its decision to use pro-forma numbers.
Another tech company, online DVD-rental store Netflix Inc., will begin expensing stock options in its quarterly financial results to be released later this month. Like Amazon, it plans to offer earnings metrics that exclude stock expenses. Expensing stock options is "good public policy," says Netflix Chief Financial Officer Barry McCarthy. But, he adds, "the marketplace just learns to look beyond it."
科技公司找到新的障眼法
长期以来，科技公司一直不愿将股票期权计入公司开支，而是将其列入损益表的脚注内容中。由于实行此种奖励计划的鼻祖微软公司(Microsoft Corp.)现已决定中止股票期权计划，代之以限制性股票，而后者是会计规程明文规定必须计作开支的项目，因此会计规范严格化的主张者们认为获得了胜利。
但他们可别高兴得太早。
查看一下亚马逊(Amazon.com)公布的收益消息便知端倪。
去年末，这家互联网零售商并未大肆张扬，就决定以限制性股票代替股票期权，称此举将更好地协调员工和外部股东的利益。
亚马逊的确遵守了会计规定，将向员工发行限制性股票的成本计为支出。但该公司仍继续鼓励华尔街忽视这笔庞大的开支，其策略就是在提供净利润的同时，还使用预估收益这一名目将上述限制性股票发行费用剔除在外。
虽然微软是否会采用同样手段目前尚未可知，但会计专家预计，随著更多公司开始在损益表中将股票奖励计为支出项目，亚马逊的方法将被广泛效仿。由于一些公司将追随微软的作法，因而可能将出现更多将上述奖励成本计为支出的操作。而且预计会计规章制定者最早可能将于明年要求所有公司都在支出中计入以期权为基础的奖励费用。
Transamerica Investment Management投资组合经理肯尼斯．布罗德(Kenneth Broad)说，提供预估数据使得将期权奖励费用计入支出项目的意义丧失殆尽。在他的个人帐户中，他卖空了亚马逊股票。
微软发言人称，公司尚未决定是否在收益报告中提供不包括员工限制性股票相关费用的收益数据。但美银证券(Banc of America Securities)负责跟踪微软股票的分析师鲍勃．奥斯特里安(Bob Austrian)预计，该公司将向分析师提供这样的收益数据，他还预计，微软与员工限制性股票相关的费用将占其长期利润的10%。
亚马逊中止股票期权计划使其免遭许多竭力推动公司将股票期权计入支出项目的会计专家、证券监管者和投资者的攻击。但在支出中计入限制性股票费用对公司来说也同样痛苦，这解释了亚马逊提供预估数据的原因。
第一财政季度，亚马逊的股票相关费用达2,700万美元。在计算不含这笔费用的预估业绩时，该公司将1,000万美元的亏损转变为赢利。总体而言，亚马逊公布当季预估利润4,000万美元，其中也不包括重组和汇率变动带来的费用。该公司第一财政季度的股票相关费用大部分来自股票期权，与限制性股票相关的费用只有600万美元。
即使不包括股票奖励费用，亚马逊股票依旧非常昂贵，其股价今年已涨了1倍。美东时间上周五下午4点，那斯达克上市的亚马逊股价跌60美分，至37.65美元，跌幅1.57%。该价位相当于亚马逊基于预估方法得出的本财年每股收益预期的78倍。这个数字比大盘市场的本益比高出3倍多。现在，减去亚马逊所说今年与限制性股票相关的3,000万-4,000万美元费用，则该公司本益比将飙升至92-97，这是基于一些分析师估计的该公司股票数得出的数据。
亚马逊表示，公司长期以来一直同时提供净利润和预估数据，由投资者选择侧重哪个数据。该公司发言人比尔．柯利(Bill Curry)说，公司认为美国一般公认会计准则(GAAP)所包括的全部项目都很重要，但公司管理层最注重的是自由现金流。
亚马逊的预估收益中还不包括欧元汇率波动及公司股价波动造成的支出。该公司称，这些项目难以预计。Thomson First Call调查的分析师也仅仅提供对亚马逊预估收益的预期。
虽然布罗德等投资者认为，有必要考虑股票相关费用，但雷曼兄弟(Lehman Brothers)的会计分析师罗伯特．威伦斯(Robert Willens)却不愿从众。他说，他发现越来越多的投资者情愿公司损益表的支出中不包括与员工非现金奖励计划相关的费用。他本人的态度是，只要公司详尽说明预估数据中不包括的项目，他并不反对公司提供预估收益数据。
亚马逊计算不包括股票相关奖励费用的预估业绩，一个可能的动机是，多数互联网公司都没有将股票期权计作支出费用。加州投资管理公司Insight Capital Research & Management的研究分析师戴夫．哈奇逊(Dave Hutchison)说，亚马逊此举可以避免让投资者误以为其业绩不如那些公司。Insight Capital持有亚马逊的股份。哈奇逊本人赞成公司将股票奖励费用计入支出项目。但亚马逊表示，激烈的行业竞争并非公司决定提供预估数据的原因。
在本月晚些时候将公布的季度业绩中，另一家科技公司网上DVD出租商店Netflix Inc.将开始计入股票期权这项支出。像亚马逊一样，该公司也将同时提供不包括股票费用的收益数据。
