Carnival Cruises 2003 Annual Report Download - page 29

26 Carnival Corporation & plc
Carnival Corporation Restricted Stock
Carnival Corporation has issued restricted stock to
a few officers. These shares have the same rights as
Carnival Corporation common stock, except for transfer
restrictions and forfeiture provisions. During fiscal 2003,
2002 and 2001, 455,000 shares, 150,000 shares and
150,000 shares, respectively, of Carnival Corporation
common stock were issued, which were valued at $14
million, $4 million and $5 million, respectively. Unearned
stock compensation was recorded within shareholders’
equity at the date of award based on the quoted mar-
ket price of the Carnival Corporation common stock on
the date of grant and is amortized to expense using the
straight-line method from the grant date through the ear-
lier of the vesting date or the officers estimated retire-
ment date. These shares either have three or five-year
cliff vesting or vest evenly over five years after the grant
date. As of November 30, 2003 and 2002 there were
1,055,000 shares and 750,000 shares, respectively,
issued under the plan which remained to be vested.
Defined Benefit Pension Plans
We have several defined benefit pension plans,
which cover some of our shipboard and shoreside
employees. The U.S. and UK shoreside employee plans
are closed to new membership. The plans are funded,
at a minimum, in accordance with U.S. or UK regulatory
requirements, with the remaining plans being primarily
unfunded. In determining our plans’ benefit obligations
at November 30, 2003, we used assumed weighted-
average discount rates of 6.0% and 5.3% for our U.S.
and foreign plans, respectively. The net liabilities related
to the obligations under these single employer defined
benefit pension plans are not material.
A minimum pension liability adjustment is required
when the actuarial present value of accumulated bene-
fits exceeds plan assets and accrued pension liabilities.
At November 30, 2003 and 2002, our single employer
plans had aggregated additional minimum pension liabil-
ity adjustments, less allowable intangible assets, of $14
million and $15 million, respectively, which are included
in AOCI.
In addition, P&O Cruises participated in a Merchant
Navy Ratings Pension Fund (“MNRPF”), which is a
defined benefit multiemployer pension plan. This plan
has a significant funding deficit and has been closed to
further benefit accrual since prior to the completion of
the DLC transaction. P&O Cruises, along with other
unrelated employers, are making payments into this plan
under a non-binding Memorandum of Understanding to
reduce the deficit. Accordingly, at November 30, 2003,
we had recorded a long-term pension liability of $19
million, which represented our estimate of the present
value of the entire liability due by us under this plan.
P&O Cruises, Princess and Cunard Line Limited also
participate in an industry-wide British merchant navy
officers pension fund (“MNOPF”), which also is a defined
benefit multiemployer pension plan that is available to
certain of their shipboard British officers. The MNOPF
is divided into two sections, the “New Section” and
the “Old Section,” each of which covers a different
group of participants, with the Old Section closed to
further benefit accrual and the New Section only closed
to new membership. Holland America Line also partici-
pates in a Dutch shipboard officers defined benefit
multiemployer pension plan. Our multiemployer yearly
pension fund plan expenses are based on the amount
of contributions we are required to make annually into
the plans.
Total expense for all of our defined benefit pension
plans, including our multiemployer plans, was $17 mil-
lion, $11 million and $8 million in fiscal 2003, 2002 and
2001, respectively.
As of March 31, 2003, the date of the most recent
formal actuarial valuation prepared by the MNOPF’s
actuary, the New Section of the MNOPF was estimated
to have a fund deficit of approximately 200 million ster-
ling, or $340 million, assuming a 7.7% discount rate.
At November 30, 2003, our external actuary informally
updated the March 31, 2003 valuation and estimated
that the New Section deficit was approximately 640
million sterling, or $1.1 billion, assuming a 5.3% discount
rate. This 5.3% is the assumed discount rate we have
used for determining our other foreign pension plans
obligations. Based solely upon our share of current
contributions to the MNOPF, our share of these deficit
amounts would be between $27 million and $85 million,
depending on whether the deficit was $340 million or
$1.1 billion, respectively. However, the extent of our
portion of any liability with respect to the fund’s deficit
is uncertain, and is the subject of ongoing litigation, the
outcome of which cannot be determined at this time.
In addition, the amount of the fund deficit is subject to
estimates and assumptions, which could cause the
deficit amount to vary considerably.
A substantial portion of any MNOPF fund deficit lia-
bility which we may have relates to P&O Cruises and
Princess liabilities which existed prior to the DLC trans-
action. However, since the MNOPF is a multiemployer
plan and it is not probable that we will withdraw from
the plan nor is our share of the liability certain, we are
required to record our MNOPF plan expenses, including
any contributions to fund the deficit, as they are con-
tributed, instead of as a Carnival plc acquisition liability
that existed at the DLC transaction date. It is currently
expected that deficit funding contributions, if any, will
be required to be paid over at least ten years.
Notes to Consolidated Financial Statements (continued)