JetBlue Airlines 2006 Annual Report Download - page 67

Additionally, SFAS 123(R) requires us to estimate pre-vesting option forfeitures at the time of
grant and periodically revise those estimates in subsequent periods if actual forfeitures differ from
those estimates. We record stock-based compensation expense only for those awards expected to vest
using an estimated forfeiture rate based on our historical pre-vesting forfeiture data. Previously, we
accounted for forfeitures as they occurred under the pro forma disclosure provisions of SFAS 123 for
periods prior to 2006.
The following table shows our assumptions used to compute the stock-based compensation
expense and pro forma information for stock option grants and purchase rights under our CSPP
issued for the years ended December 31:
Stock Options
2006 2005 2004
Expected term (years) ............................ 4.1-7.0 2.5-5.9 2.5-5.9
Expected volatility of common stock................ 44.1%38.0%38.1%
Risk-free interest rate............................. 4.8%4.0%3.1%
Weighted average fair value of stock options ........ $ 5.32 $ 5.18 $ 6.17
CSPP
2006 2005 2004
Expected term (years) ............................ 0.5-2.0 0.5-2.0 0.5-2.0
Expected volatility of common stock................ 44.5%38.0%38.1%
Risk-free interest rate............................. 5.0%3.9%2.0%
Weighted average fair value of purchase rights ....... $ 3.75 $ 4.33 $ 5.95
Unrecognized stock-based compensation expense was approximately $35 million as of
December 31, 2006, relating to a total of nine million unvested stock options under our 2002 Plan and
purchase rights under our CSPP. We expect to recognize this stock-based compensation expense over
a weighted average period of approximately three years. The total fair value of stock options vested
during the years ended December 31, 2006, 2005 and 2004 was approximately $2 million, $126 million
and $15 million, respectively.
Crewmember Stock Purchase Plan: Our CSPP, which is available to all employees, had
5.1 million shares of our common stock initially reserved for issuance at its inception in April 2002.
The reserve automatically increases each January by an amount equal to 3%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 9.1 million shares. The plan will terminate no
later than the last business day of April 2012.
The plan has a series of successive overlapping 24-month offering periods, with a new offering
period beginning on the first business day of May and November each year. Employees can only join
an offering period on the start date and participate in one offering period at a time. Employees may
contribute up to 10%of their pay, through payroll deductions, toward the purchase of common stock
at the lower of 85%of the fair market value per share at the beginning of the offering period or on
the purchase date. Purchase dates occur on the last business day of April and October each year.
If the fair market value per share of our common stock on any purchase date within a particular
offering period is less than the fair market value per share on the start date of that offering period,
then the participants in that offering period will automatically be transferred and enrolled in the new
two-year offering period which will begin on the next business day following such purchase date and
the related purchase of shares. During 2006, 2005 and 2004, certain participants were automatically
transferred and enrolled in new offering periods due to decreases in our stock price.
Should we be acquired by merger or sale of substantially all of our assets or more than 50%of
our outstanding voting securities, then all outstanding purchase rights will automatically be exercised
immediately prior to the effective date of the acquisition at a price equal to the lower of 85%of the
fair market value per share on the start date of the offering period in which the participant is enrolled
or 85%of the fair market value per share immediately prior to the acquisition.
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