Royal Caribbean Cruise Lines 2013 Annual Report Download - page 90
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. EARNINGS PER SHARE
A reconciliation between basic and diluted earnings
per share is as follows (in thousands, except per
share data):
Year Ended December 31,
Net income for basic
and diluted earnings
per share
Weighted-average
common shares
outstanding
Dilutive effect of stock
options, performance
share awards and
restricted stock awards
Diluted weighted-average
shares outstanding
Basic earnings per share:
Net income
Diluted earnings per share:
Net income
Diluted earnings per share did not reflect options to
purchase an aggregate of 1.9 million, 3.1 million and
2.8 million shares for each of the years ended Decem-
ber 31, 2013, 2012 and 2011, respectively, because the
effect of including them would have been antidilutive.
NOTE 11. RETIREMENT PLAN
We maintain a defined contribution pension plan
covering full-time shoreside employees who have
completed the minimum period of continuous service.
Annual contributions to the plan are discretionary
and are based on fixed percentages of participants’
salaries and years of service, not to exceed certain
maximums. Pension expenses were $13.0 million,
$15.2 million and $15.3 million for the years ended
December 31, 2013, 2012 and 2011, respectively.
NOTE 12. INCOME TAXES
We are subject to corporate income taxes in countries
where we have operations or subsidiaries. We and
the majority of our ship-operating and vessel-owning
subsidiaries are currently exempt from United States
corporate tax on United States source income from the
international operation of ships pursuant to Section
883 of the Internal Revenue Code. Regulations under
Section 883 have limited the activities that are con-
sidered the international operation of a ship or inci-
dental thereto. Accordingly, our provision for United
States federal and state income taxes includes taxes
on certain activities not considered incidental to the
international operation of our ships.
Additionally, some of our ship-operating subsidiaries
are subject to income tax under the tonnage tax
regimes of Malta or the United Kingdom. Under these
regimes, income from qualifying activities is not
subject to corporate income tax. Instead, these sub-
sidiaries are subject to a tonnage tax computed by
reference to the tonnage of the ship or ships regis-
tered under the relevant provisions of the tax regimes.
Income from activities not considered qualifying
activities, which we do not consider significant, remains
subject to Maltese or United Kingdom corporate
income tax.
Income tax expense for items not qualifying under
Section 883, tonnage taxes and income taxes for
the remainder of our subsidiaries was approximately
$24.9 million, $55.5 million and $20.7 million and was
recorded within Other (expense) income for the years
ended December 31, 2013, 2012 and 2011, respectively.
In addition, all interest expense and penalties related
to income tax liabilities are classified as income tax
expense within Other (expense) income.
We do not expect to incur income taxes on future dis-
tributions of undistributed earnings of foreign subsid-
iaries. Consequently, no deferred income taxes have
been provided for the distribution of these earnings.
Deferred tax assets, related valuation allowances and
deferred tax liabilities related to our operations are
not material as of December 31, 2013 and 2012.
We regularly review deferred tax assets for recover-
ability based on our history of earnings, expectations
of future earnings, and tax planning strategies. Real-
ization of deferred tax assets ultimately depends on
the existence of sufficient taxable income to support
the amount of deferred taxes. A valuation allowance
is recorded in those circumstances in which we con-
clude it is not more-likely-than-not we will recover
the deferred tax assets prior to their expiration. Dur-
ing 2012, we determined that a 100% valuation allow-
ance of our deferred tax assets was required resulting
in a deferred income tax expense of $33.7 million. In
addition, Pullmantur has a deferred tax liability that
was recorded at the time of acquisition. This liability
represents the tax effect of the basis difference
between the tax and book values of the trademarks
and trade names that were acquired at the time of
the acquisition. Due to the impairment charge related
to these intangible assets, we reduced the deferred
tax liability and recorded a deferred tax benefit of
$5.2 million. The net $28.5 million impact of these
adjustments was recognized in earnings during the
fourth quarter of 2012 and was reported within Other
(expense) income in our statements of comprehensive
income (loss).