JetBlue Airlines 2004 Annual Report Download - page 68

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JETBLUE AIRWAYS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2004
Note 6—Stock-Based Compensation (Continued)
The following is a summary of CSPP share reserve activity for the years ended December 31:
2004 2003 2002
Weighted Weighted Weighted
Shares Average Shares Average Shares Average
Available for future purchases,
beginning of year ............. 5,026,822 3,010,923 —
Shares reserved for issuance(1) .... 3,062,073 2,869,128 3,375,000
Common stock purchased ........ (1,037,445) $ 15.14 (853,229) $ 11.08 (364,077) $ 10.20
Available for future purchases, end
of year .................... 7,051,450 5,026,822 3,010,923
(1) On January 1, 2005, the number of shares reserved for issuance was increased by 3,127,097 shares.
The fair value of each purchase right is estimated at the inception of each offering period using
the Black-Scholes option pricing model. The following table shows our assumptions and weighted
average fair values of stock-based compensation used to compute the pro forma information for CSPP
purchase rights included in Note 1:
Year of Purchase Right
2004 2003 2002
Risk-free interest rate ................................. 2.0% 1.3% 2.7%
Average expected life (years) ........................... 1.25 1.25 1.25
Expected volatility of common stock ...................... 38.1% 41.5% 41.3%
Weighted average fair value of purchase rights ............... $ 8.93 $ 11.44 $ 5.44
Stock Incentive Plan: The 2002 Stock Incentive Plan, or the 2002 Plan, provides for incentive and
non-qualified stock options to be granted to certain employees and members of our Board of Directors.
The 2002 Plan became effective following our initial public offering and provided that all outstanding
options under the 1999 Stock Option/Stock Issuance Plan, or the 1999 Plan, be transferred to the 2002
Plan. No further option grants will be made under the 1999 Plan. The transferred options continue to
be governed by their existing terms. Stock options under the 2002 Plan become exercisable when
vested, which occurs in annual installments of three to seven years or upon the occurrence of a change
in control, and expire 10 years from the date of grant. Our policy is to grant options with the exercise
price equal to the market price of the underlying common stock on the date of grant. The number of
shares reserved for issuance will automatically increase each January by an amount equal to 4% of the
total number of shares of our common stock outstanding on the last trading day in December of the
prior calendar year. In no event will any such annual increase exceed 8.1 million shares.
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