12 earnings per share basic earnings per share is

12

Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted-average number of shares
outstanding during each period. Diluted earnings per share is computed by dividing adjusted net income by the
weighted-average number of shares, common stock equivalents and other potentially dilutive securities
outstanding during each period. For earnings per share purposes, Carnival Corporation common stock and
Carnival plc ordinary shares are considered a single class of shares since they have equivalent rights (see Note 3).
All shares that were issuable under our outstanding convertible notes that had contingent share conversion
features were considered outstanding for our diluted earnings per share computations, if dilutive, using the “if
converted” method of accounting from the date of issuance.
Share-Based Compensation
We recognize compensation expense for all share-based compensation awards using the fair value method.
Share-based compensation cost is recognized ratably using the straight-line attribution method over the expected
vesting period or to the retirement eligibility date, if less than the vesting period, when vesting is not contingent
upon any future performance. For performance-based share awards, we recognize compensation cost over the
vesting period based on the probability of the performance condition being achieved over the vesting period. If
the performance condition is not met, compensation expense will not be recognized and any previously
recognized compensation expense will be reversed. In addition, we estimate the amount of expected forfeitures,
based on historical forfeiture experience, when calculating compensation cost. If the actual forfeitures that occur
are significantly different from the estimate, then we revise our estimates.
NOTE 3 – DLC Arrangement
In 2003, Carnival Corporation and Carnival plc (formerly known as P&O Princess Cruises plc) completed a DLC
transaction, which implemented Carnival Corporation & plc’s DLC arrangement. The contracts governing the
DLC arrangement provide that Carnival Corporation and Carnival plc each continue to have separate boards of
directors, but the boards and senior executive management of both companies are identical. The constitutional
documents of each of the companies also provide that, on most matters, the holders of the common equity of both
companies effectively vote as a single body. On specified matters where the interests of Carnival Corporation’s
shareholders may differ from the interests of Carnival plc’s shareholders (a “class rights action” such as
transactions primarily designed to amend or unwind the DLC arrangement), each shareholder body will vote
separately as a class. Generally, no class rights action will be implemented unless approved by both shareholder
bodies.