SEC Comment Letter for JETBLUE AIRWAYS CORP (JBLU) (CIK 0001158463) (JBLU) — May 20, 2009
JETBLUE AIRWAYS CORP (JBLU) (CIK 0001158463)
Date: May 20, 2009 · CIK: 0001158463 · Accession: 0000000000-09-027026
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-49728
Letter
Mail Stop 3561 May 20, 2009 Via U.S. Mail and Facsimile Edward Barnes Chief Financial Officer JetBlue Airways Corporation 118-29 Queens Boulevard Forest Hills, New York 11375 RE: JetBlue Airways Corporation Form 10-K for the fiscal year ended December 31, 2008 File No. 000-49728
Dear Mr. Barnes:
We have reviewed your filing and have the following comments. We have limited our review to only financial statements and related disclosures and do not intend to expand our review to othe r portions of your document. Where indicated, we think you should revise your document in response to these comments a nd comply with the remaining comments in all future filings. If you disagree, we will consider your explanation as to why our comments are inappl icable or a revision is unnecessary. Please be as detailed as necessary in your explanat ion. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. After reviewing this information, we may raise additional comments. Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Edward Barnes JetBlue Airways Corporation Page 2
Form 10-K for the fiscal year ended December 31, 2008
Off-Balance Sheet Arrangements, page 38 1. We note from your disclosure on page 54 th at you hold variable interests in 45 of your 55 aircraft operating leases, which are owned by single ow ner trusts whose purpose is to purchase, finance, and leas e these aircrafts to you. Also, we note from page 38 that you have determined that you hold a variable interest in, but are not the primary beneficiary of, certain pass-through trusts, which are the purchaser of equipment notes issued by you to finance the acquisition of new aircraft and certain aircra ft spare parts owned by JetBlue and held by such pass- through trusts. Additionally, we note from your disclosures on pages 54 and 38 that you have determined that none of the above mentioned variable interest entities are required to be consolidated in your financial statements. In this regard, please tell us and revise future filing to disclose in the notes to your financial statements how you account for your interest in the abovementioned variable interest entities. Additiona lly, with regards to the aforementioned variable interest entities, please provide us with and revise future filings to include in your notes to your financial statements the disclosures outlined in Appendix C of FSP No. FAS 140-4 a nd FIN 46(R)-8, as applicable. Financial Statements
Note 1. Summary of Significant Accounting Policies
Investment Securities, page 47 2. We note from your disclosure on page 48 that at December 31, 2008 investment securities, which consisted of $244 million in student loan bonds were transferred to trading securities. Given the nature of a trad ing security, transfers into or from the trading category should be rare as described in paragraph 15 of SFAS No. 115. In light of this fact, please provide us with and disclose in future filings your rationale in transferring your investment securities in student loan bonds from available-for-sale into the trading category. Also, please revise future filings to provide in your notes to your financial statements the disclosures outlined in paragraph 21 (c) and (e) of SFAS No. 115, as applicable.
Note 2 – Long-term Debt, Short-term Borro wings, and Capital Lease Obligations, page 3. It appears from your disclosu re that the following ma y be embedded derivatives within the Debentures as defined in Note 2 to your financial statements:
• The provision increasing the convers ion rate depending upon the current common stock prices if a fundamental corporate change occurs prior to
Edward Barnes JetBlue Airways Corporation Page 3
October 15, 2013 for the Series A Debe ntures or October 15, 2015 for the Series B Debentures; and • The Share lending agreement with Morgan Stanley & Co. Incorporated, an affiliate of the underwriter of the offering, or the share borrower as described on page 52
We also note from your disclosure th at you evaluated the various embedded derivatives within the suppl ement indenture for bifurcation from the Debentures under the applicable provisions, and ba sed on your assessment you concluded these embedded derivatives were either (i) ex cluded from bifurcation as a result of being clearly and closing related to the Debentures or are indexed to your common stock and would be classified in stockholders’ equity if freestanding or (ii) the fair value of the embedded deriva tives was determined to be immaterial. In this regard, please provide us with a complete list of all the embedded derivatives you are referring to in paragraph five of page 52 and tell us the nature and significant terms of each embedde d derivative. For those embedded derivatives that you have determined to be immaterial, please provide us with the fair value assigned to each embedde d derivative and your method(s) and assumptions used in estimating such fai r-value at the inception date of the embedded derivative and at Decembe r 31, 2008. Additionally, for those embedded features that were not bifu rcated from the Debentures and not accounted for as a derivative, please fully explain to us how these embedded features did not meet the criteria in paragraph 12 of SFAS No. 133. If you are relying on the scope exception as outlined in paragraph 11(a), please fully explain to us on a separate basis how each embe dded feature meets the requirements in paragraph 12 through 32 of EITF 00-19 for equity classification. If the embedded features meet the requireme nts of equity classificati on, please explain to us on a separate basis if each embedded feature re presents a beneficial conversion feature pursuant to EITF 98-5 and 00-27 and your accounting associated with such embedded feature. We may have further comment upon receipt of your response. 4. Reference is made to the cash payment in the amount of $11 million, which was paid out in addition to the 16.9 million shar es of common stock issued to retire approximately $76 million principle amount of the Debentures. In this regard, please explain to us how you accounted for this cash payment in the amount of $11 million. We may have further comme nt upon receipt of your response.
Note 12. Contingencies, page 63
5. We note from your disclosure that various of your real property leases and various agreements among airlines relating to fuel consortia or fuel farms at airports require you to indemnify the lessor agains t environmental liab ilities associated with the real property or operations described under the agreement, even if you are not the party responsible for the initi al event that caused the environmental damage. In this regard, please tell us the amount recognized in your financial
Edward Barnes JetBlue Airways Corporation Page 4
statements as an asset retirement obl igation (ARO) as required by SFAS No. 143 and FIN 47 and your method and assumptions used in calculating such amount for each year presented. If no ARO amount has been recognized, please fully explain why no ARO is required to be recognize d. We may have further comment upon receipt of your response.
As appropriate, please respond to these co mments within 10 business days or tell us when you will provide us with a response. Pl ease furnish a cover letter that keys your responses to our comments and provides any requested information. Detailed cover letters greatly facilitate our review. Please understand that we may have additional comments after reviewing your responses to our comments. We urge all persons who are responsi ble for the accuracy an d adequacy of the disclosure in the filing to be certain that the filing includes all in formation required under the Securities Exchange Act of 1934 and th at they have provided all information investors require for an informed invest ment decision. Since the company and its management are in possession of all facts re lating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the filing;
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing.
Edward Barnes JetBlue Airways Corporation Page 5
You may contact Jeffrey Jaramillo at (202) 551-3212 if you have questions regarding comments on the financia l statements and related matte rs. Please contact me at (202) 551-3813 with any other questions.
Sincerely,
L i n d a C v r k e l B r a n c h C h i e f
Via facsimile: Edward Barnes, Chief Financial Officer
Show Raw Text
Mail Stop 3561
May 20, 2009
Via U.S. Mail and Facsimile
Edward Barnes Chief Financial Officer JetBlue Airways Corporation 118-29 Queens Boulevard Forest Hills, New York 11375
RE: JetBlue Airways Corporation
Form 10-K for the fiscal year ended December 31, 2008
File No. 000-49728
Dear Mr. Barnes:
We have reviewed your filing and have the following comments. We have
limited our review to only financial statements and related disclosures and do not intend
to expand our review to othe r portions of your document. Where indicated, we think you
should revise your document in response to these comments a nd comply with the
remaining comments in all future filings. If you disagree, we will consider your explanation as to why our comments are inappl icable or a revision is unnecessary. Please
be as detailed as necessary in your explanat ion. In some of our comments, we may ask
you to provide us with information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall
disclosure in your filing. We look forward to working with you in these respects. We
welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Edward Barnes
JetBlue Airways Corporation
Page 2
Form 10-K for the fiscal year ended December 31, 2008
Off-Balance Sheet Arrangements, page 38
1. We note from your disclosure on page 54 th at you hold variable interests in 45 of
your 55 aircraft operating leases, which are owned by single ow ner trusts whose
purpose is to purchase, finance, and leas e these aircrafts to you. Also, we note
from page 38 that you have determined that you hold a variable interest in, but are
not the primary beneficiary of, certain pass-through trusts, which are the
purchaser of equipment notes issued by you to finance the acquisition of new
aircraft and certain aircra ft spare parts owned by JetBlue and held by such pass-
through trusts. Additionally, we note from your disclosures on pages 54 and 38
that you have determined that none of the above mentioned variable interest
entities are required to be consolidated in your financial statements. In this regard, please tell us and revise future filing to disclose in the notes to your
financial statements how you account for your interest in the abovementioned
variable interest entities. Additiona lly, with regards to the aforementioned
variable interest entities, please provide us with and revise future filings to include in your notes to your financial statements the disclosures outlined in
Appendix C of FSP No. FAS 140-4 a nd FIN 46(R)-8, as applicable.
Financial Statements
Note 1. Summary of Significant Accounting Policies
Investment Securities, page 47
2. We note from your disclosure on page 48 that at December 31, 2008 investment
securities, which consisted of $244 million in student loan bonds were transferred to trading securities. Given the nature of a trad ing security, transfers into or from
the trading category should be rare as described in paragraph 15 of SFAS No.
115. In light of this fact, please provide us with and disclose in future filings your rationale in transferring your investment securities in student loan bonds from
available-for-sale into the trading category. Also, please revise future filings to
provide in your notes to your financial statements the disclosures outlined in
paragraph 21 (c) and (e) of SFAS No. 115, as applicable.
Note 2 – Long-term Debt, Short-term Borro wings, and Capital Lease Obligations, page
50
3. It appears from your disclosu re that the following ma y be embedded derivatives
within the Debentures as defined in Note 2 to your financial statements:
• The provision increasing the convers ion rate depending upon the current
common stock prices if a fundamental corporate change occurs prior to
Edward Barnes
JetBlue Airways Corporation
Page 3
October 15, 2013 for the Series A Debe ntures or October 15, 2015 for the
Series B Debentures; and
• The Share lending agreement with Morgan Stanley & Co. Incorporated, an
affiliate of the underwriter of the offering, or the share borrower as
described on page 52
We also note from your disclosure th at you evaluated the various embedded
derivatives within the suppl ement indenture for bifurcation from the Debentures
under the applicable provisions, and ba sed on your assessment you concluded
these embedded derivatives were either (i) ex cluded from bifurcation as a result of
being clearly and closing related to the Debentures or are indexed to your
common stock and would be classified in stockholders’ equity if freestanding or
(ii) the fair value of the embedded deriva tives was determined to be immaterial.
In this regard, please provide us with a complete list of all the embedded
derivatives you are referring to in paragraph five of page 52 and tell us the nature
and significant terms of each embedde d derivative. For those embedded
derivatives that you have determined to be immaterial, please provide us with the
fair value assigned to each embedde d derivative and your method(s) and
assumptions used in estimating such fai r-value at the inception date of the
embedded derivative and at Decembe r 31, 2008. Additionally, for those
embedded features that were not bifu rcated from the Debentures and not
accounted for as a derivative, please fully explain to us how these embedded features did not meet the criteria in paragraph 12 of SFAS No. 133. If you are
relying on the scope exception as outlined in paragraph 11(a), please fully explain
to us on a separate basis how each embe dded feature meets the requirements in
paragraph 12 through 32 of EITF 00-19 for equity classification. If the embedded
features meet the requireme nts of equity classificati on, please explain to us on a
separate basis if each embedded feature re presents a beneficial conversion feature
pursuant to EITF 98-5 and 00-27 and your accounting associated with such
embedded feature. We may have further comment upon receipt of your response.
4. Reference is made to the cash payment in the amount of $11 million, which was paid out in addition to the 16.9 million shar es of common stock issued to retire
approximately $76 million principle amount of the Debentures. In this regard,
please explain to us how you accounted for this cash payment in the amount of $11 million. We may have further comme nt upon receipt of your response.
Note 12. Contingencies, page 63
5. We note from your disclosure that various of your real property leases and various
agreements among airlines relating to fuel consortia or fuel farms at airports
require you to indemnify the lessor agains t environmental liab ilities associated
with the real property or operations described under the agreement, even if you
are not the party responsible for the initi al event that caused the environmental
damage. In this regard, please tell us the amount recognized in your financial
Edward Barnes
JetBlue Airways Corporation
Page 4
statements as an asset retirement obl igation (ARO) as required by SFAS No. 143
and FIN 47 and your method and assumptions used in calculating such amount for
each year presented. If no ARO amount has been recognized, please fully explain
why no ARO is required to be recognize d. We may have further comment upon
receipt of your response.
As appropriate, please respond to these co mments within 10 business days or tell
us when you will provide us with a response. Pl ease furnish a cover letter that keys your
responses to our comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we may have additional comments after reviewing your responses to our comments.
We urge all persons who are responsi ble for the accuracy an d adequacy of the
disclosure in the filing to be certain that the filing includes all in formation required under
the Securities Exchange Act of 1934 and th at they have provided all information
investors require for an informed invest ment decision. Since the company and its
management are in possession of all facts re lating to a company’s disclosure, they are
responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the
filing;
staff comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the filing; and
the company may not assert staff comments as a defense in any proceeding initiated
by the Commission or any person under the federal securities laws of the United States.
In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comments on your filing.
Edward Barnes
JetBlue Airways Corporation Page 5
You may contact Jeffrey Jaramillo at (202) 551-3212 if you have questions
regarding comments on the financia l statements and related matte rs. Please contact me at
(202) 551-3813 with any other questions.
Sincerely,
L i n d a C v r k e l B r a n c h C h i e f
Via facsimile: Edward Barnes, Chief Financial Officer