JetBlue Airlines 2013 Annual Report Download - page 62

JETBLUE AIRWAYS CORPORATION-2013Annual Report56
PART II
ITEM 8Financial Statements and Supplementary Data
The 2011 CSPP has a series of six months 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.
Employees may contribute up to 10% of their pay, through payroll deductions,
toward the purchase of common stock. Purchase dates occur on the last
business day of April and October each year.
Until April 2013 our 2011 CSPP was considered non-compensatory as the
purchase price discount was 5% based upon the stock price on the date
of purchase. The plan was amended and restated in May 2013, with the
CSPP purchase price discount increasing to 15% based upon the stock
price on the date of purchase. In accordance with the Compensation-
Stock Compensation topic of the Codification the 2011 CSPP no longer
meets the non-compensatory definition as the terms of the plan are more
favorable than those to all holders of the common stock. For all offering
periods starting from May 2013 the compensation cost relating to the
discount is recognized over the offering period. For the year ended
December 31, 2013 the total expense recognized relating to the 2011
CSPP was approximately $2 million.
Should we be acquired by merger or sale of substantially all of our assets or
sale of more than 50% of our outstanding voting securities, all outstanding
purchase rights will automatically be exercised immediately prior to the
effective date of the acquisition at a price equal to 85% of the fair market
value per share immediately prior to the acquisition.
Our original CSPP was available to all employees at its inception in April
2002. The following is a summary of CSPP share reserve activity under
the original CSPP for the year ended December 31, 2011. There was no
activity in 2012 and 2013 under the original CSPP and the shares remain
reserved at December 31, 2013.
2011
Shares
Weighted
Average
Available for future purchases, beginning of year 20,923,959
Shares reserved for issuance —
Common stock purchased (1,617,602) $ 4.76
AVAILABLE FOR FUTURE PURCHASES, END OF YEAR 19,306,357
Taxation
The Compensation-Stock Compensation topic of the Codification requires
deferred taxes be recognized on temporary differences that arise with
respect to stock-based compensation attributable to nonqualified stock
options and awards. However, no tax benefit is recognized for stock-based
compensation attributable to incentive stock options (ISO) or CSPP shares
until there is a disqualifying disposition, if any, for income tax purposes.
A portion of our stock-based compensation is attributable to ISO and
CSPP shares; therefore, our effective tax rate is subject to fluctuation.
LiveTV Equity Incentive Plan
In April 2009, our Board of Directors approved the LiveTV Equity Incentive
Plan, or EIP, an equity based incentive plan for certain members of
leadership at our wholly-owned subsidiary, LiveTV. Notional equity units
were available under the EIP, representing up to 12% of the notional equity
interest of LiveTV. Compensation cost was recorded ratably over the
service period. In May 2011, we terminated the EIP. In exchange for the
release of their rights under the EIP, participants were granted restricted
stock units under the 2002 Plan.
NOTE 8 LiveTV
Through December 31, 2013, LiveTV had installed in-flight entertainment
systems for other airlines on 461 aircraft and had firm commitments for
installations of in-flight entertainment and Ka broadband connectivity on 196
additional aircraft scheduled to be installed through 2015, with options for
nine additional in-flight entertainment installations through 2016. Revenues
in 2013, 2012 and 2011 were $72 million, $81 million and $82 million,
respectively. Deferred profit on hardware sales and advance deposits for
future hardware sales are included in other accrued liabilities and other
long term liabilities on our consolidated balance sheets depending on
whether we expect to recognize it in the next 12 months or beyond. They
totaled $42 million and $34 million as of December 31, 2013 and 2012,
respectively. Deferred profit to be recognized on installations completed
through December 31, 2013 will be approximately $3 million per year
from 2014 through 2018 and $6 million thereafter. The net book value
of equipment installed for other airlines was approximately $102 million
and $109 million as of December 31, 2013 and 2012, respectively, and
is included in other assets on our consolidated balance sheets.
In December 2011, LiveTV terminated its contract with one of its airline
customers. In connection with the termination, the customer paid
approximately $16 million, which was included in other accrued liabilities
on the consolidated balance sheet as of December 31, 2011. Upon fulfilling
our obligation to deactivate service on the customer’s aircraft, we recorded
a gain of $8 million in other operating expenses in 2012.
NOTE 9 Income Taxes
The provision for income taxes consisted of the following for the years ended December 31 (in millions):
2013 2012 2011
Deferred:
Federal $ 95 $ 68 $ 51
State 12 8 7
Deferred income tax expense 107 76 58
Current income tax expense 4 5 1
TOTAL INCOME TAX EXPENSE $ 111 $ 81 $ 59