JetBlue Airlines 2006 Annual Report Download - page 61

had applied the fair value method to measure stock-based compensation, which is described more
fully in Note 7, as required under the disclosure provisions of SFAS 123 (in millions, except per share
amounts):
Year Ended December 31,
2005 2004
Net income (loss), as reported ........................................ $ (20) $ 46
Add: Stock-based compensation expense included in reported net income
(loss), net of tax................................................... 8 1
Deduct: Stock-based compensation expense determined under the fair
value method, net of tax
Crewmember stock purchase plan ................................. (14) (7)
Employee stock options .......................................... (95) (13)
Pro forma net income (loss) .......................................... $ (121) $ 27
Earnings (loss) per common share:
Basic – as reported ................................................ $ (0.13) $ 0.30
Basic – pro forma ................................................. $ (0.76) $ 0.18
Diluted – as reported .............................................. $ (0.13) $ 0.28
Diluted – pro forma ............................................... $ (0.76) $ 0.16
In December 2005, we accelerated the vesting of 19.9 million stock options, representing 64%of
the options then outstanding. This action resulted in non-cash, stock-based compensation expense of
$7 million in 2005. It also resulted in an increase of $72 million, net of tax, in the pro forma employee
stock option stock-based compensation expense shown above. The decision to accelerate vesting of
these options was made primarily to avoid recognizing the related compensation cost in our future
consolidated financial statements upon our adoption of SFAS 123(R).
Our policy is to issue new shares for purchases under our CSPP and exercises of stock options
under our 2002 Plan.
New Accounting Standards: In July 2006, the Financial Accounting Standards Board, or FASB,
issued Interpretation 48, Accounting for Uncertainty in Income Taxes—An Interpretation of FASB
Statement 109, or FIN 48, which clarifies the accounting and disclosure requirements for uncertainty in
tax positions, as defined. FIN 48 requires a two-step approach to evaluate tax positions and determine
if they should be recognized in the financial statements. The two-step approach involves recognizing
any tax positions that are ‘‘more likely that not’’ to occur and then measuring those positions to
determine if they are recognizable in the financial statements. We will adopt FIN 48 on
January 1, 2007 and we do not believe its adoption will result in a material cumulative-effect
adjustment.
In September 2006, the FASB issued Statement of Financial Accounting Standards 157, Fair
Value Measurements, or SFAS 157, which defines fair value, establishes a framework for measuring fair
value and requires enhanced disclosures about fair value measurements. SFAS 157 requires companies
to disclose the fair value of its financial instruments according to a fair value hierarchy, as defined and
may be required to provide additional disclosures based on that hierarchy. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. We are currently evaluating the impact adoption of SFAS 157 may have on
our consolidated financial statements.
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