Carnival Cruises 2009 Annual Report Download - page 31

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(a) The risk-free interest rate was based on U.S. Treasury zero-coupon issues with a remaining term equal to the
expected option life assumed at the date of grant.
(b) The expected volatility was based on a weighting of the implied volatilities derived from our exchange
traded options and convertible notes and the historical volatility of our common stock.
(c) The average expected life was based on the contractual term of the option and expected employee exercise
behavior. Based on our assessment of employee groupings and observable behaviors, we determined that a
single grouping was appropriate.
Stock Option Plans
The Committee generally sets stock option exercise prices at 100% or more of the fair market value of the
underlying common stock/ordinary shares on the date the option was granted. Stock options granted during fiscal
2007 were granted at an exercise price per share equal to the fair market value of the Carnival Corporation
common stock and Carnival plc ordinary shares on the date of grant. Generally, employee options either vest
evenly over five years or at the end of three years. Our employee options granted prior to October 2005 have a
ten-year term and those options granted thereafter have a seven-year term. In the fourth quarter of fiscal 2007, the
Committee decided to cease granting employee stock options, and to instead grant restricted stock units
(“RSUs”) or restricted stock awards (“RSAs”) to our employee groups who were previously granted
options. This change from options to RSUs or RSAs enables us to grant equity awards in a more uniform method
to our employees. Since fiscal 2001, Carnival Corporation Board of Director options vest evenly over five years
and have a ten-year term. In 2008, the Committee decided to also cease granting stock options to non-executive
board members, and will instead grant them RSAs and/or RSUs.
A combined summary of Carnival Corporation and Carnival plc stock option activity during the year ended
November 30, 2009 was as follows:
Shares
Weighted-
Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic
Value (a)
(in years) (in millions)
Outstanding at November 30, 2008 ........... 16,688,152 $42.03
Exercised ............................... (144,163) $21.79
Forfeited or expired ....................... (1,197,732) $44.74
Outstanding at November 30, 2009 ........... 15,346,257 $42.54 3.4 $20
Exercisable at November 30, 2009 ........... 13,883,830 $41.61 3.3 $20
(a) The aggregate intrinsic value represents the amount by which the fair value of underlying stock exceeds the
option exercise price at November 30, 2009.
As of the dates of exercise, the total intrinsic value of options exercised in fiscal 2009, 2008 and 2007 was
$1 million, $5 million and $31 million, respectively. As of November 30, 2009, there was $9 million of total
unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a
weighted-average period of 1.4 years.
Restricted Stock Awards and Restricted Stock Units
RSAs generally have the same rights as Carnival Corporation common stock, except for transfer restrictions
and forfeiture provisions. RSAs have been granted to certain officers and non-executive board members and
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