Carnival Cruises 2004 Annual Report Download - page 31

28 Carnival Corporation & plc
Notes to Consolidated Financial Statements (continued)
Carnival Corporation Nonvested Stock
Carnival Corporation has issued nonvested 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 2004,
2003 and 2002, 160,000 shares, 455,000 shares and
150,000 shares, respectively, of Carnival Corporation
common stock were issued, which were valued at $7
million, $14 million and $4 million, respectively. Unearned
stock compensation was recorded within shareholders’
equity at the date of award based on the quoted market
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
earlier of the vesting date or the officers’ estimated
retirement 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, 2004 and 2003 there
were 1,065,000 shares and 1,055,000 shares, respec-
tively, 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 and are funded at or above the
level required by U.S. or UK regulations. The remaining
defined benefit plans are primarily unfunded. In deter-
mining our plans’ benefit obligations at November 30,
2004, we used assumed weighted-average discount
rates of 5.5% and 5.2% 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, 2004 and 2003, our single employer
plans had aggregated additional minimum pension liabil-
ity adjustments, less allowable intangible assets, of $17
million and $14 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 that was
available to their shipboard non-officers. 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, 2004 and
2003, we had recorded a long-term pension liability of
$22 million and $19 million, which represented our esti-
mate of the present value of the entire liability due by
us under this plan.
P&O Cruises, Princess and Cunard also participate in
an industry-wide British Merchant Navy Officers Pension
Fund (“MNOPF”), which also is a defined benefit multi-
employer 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 participates in a Dutch ship-
board 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.
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 $380 million, assuming a 7.8% discount rate.
At November 30, 2004, our external actuary informally
updated the March 31, 2003 valuation and estimated
that the New Section deficit was approximately 760 mil-
lion sterling, or $1.44 billion, assuming a 5.2% discount
rate. The amount of the fund deficit could vary consider-
ably if different assumptions and/or estimates were
used in its calculation. Our share of any liability with
respect to the fund’s deficit is uncertain, and the MNOPF’s
participating employers are seeking guidance from the
court, which is expected to be given during the second
quarter of 2005.
Substantially all of any MNOPF fund deficit liability
which we may have relates to P&O Cruises and Princess
liabilities, which existed prior to the DLC transaction.
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 con-
tributions to fund the deficit, as they are contributed,
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. Finally, if it is determined
that we are responsible for a portion of the MNOPF
deficit, we expect that we will have to record an expense
in the amount of our estimated future contributions in
the period that such amount can be reasonably estimated.
We have recently received indicative calculations from
the MNOPF setting out our share of the fund’s deficit
based on different possible court outcomes. These
indicative calculations, which could vary depending on