This excerpt taken from the AMZN 10-K filed Mar 11, 2005.
Earnings (Loss) per Share
In accordance with SFAS No. 128, Earnings per Share, the weighted-average number of shares used to calculate basic earnings (loss) per share excludes shares of restricted stock since they are subject to repurchase or forfeiture.
For periods when we have net income, the dilutive effect of outstanding stock awards, including restricted stock, is included in the calculation of diluted earnings per share using the treasury stock method for assumed proceeds, if any. For periods when we have a net loss, the effect of outstanding stock awards, including restricted stock, is antidilutive and therefore excluded from the calculation of diluted loss per share.
Stock issuable upon conversion of our convertible debt instruments is excluded from the calculation of diluted earnings per share as its effect is antidilutive. See Note 4Long-Term Debt and Other.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table shows the calculation of diluted shares (in thousands):