Carnival Cruises 2007 Annual Report Download

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Let’s Cruise!
Let’s Cruise!
2007 ANNUAL REPORT

Table of contents

  • Page 1
    2 0 0 7 A N N U A L R E P O R T ! e s i u r C s ' t e L

  • Page 2
    .... Our company is dually listed on both the New York Stock Exchange and the London Stock Exchange under the symbol CCL. Carnival is the only company in the world to be included in both the S&P 500 Index in the United States and the FTSE 100 Index in the United Kingdom. Headquartered in Miami, Florida...

  • Page 3
    ... its two largest customer nationalities: Spaniards and Brazilians. Headquartered in Italy, Costa Cruises is the number one cruise line in Europe and South America. Cruising for nearly 60 years, the Genoa-based cruise line operates in the contemporary market offering state-of-the-art ships with...

  • Page 4
    ..., except per share amounts and other operating data) 2007 $ 13,033 $ 2,408 $ 2.95 2006 $ 11,839 $ 2,279 $ 2.77 2005 $ 11,094 $ 2,253 $ $ 2.70 0.80 2004 $ 9,727 $ 1,809 $ 2.18 Revenues Net Income Earnings Per Share Dividends Per Share Total Assets (a) Other Operating Data Passengers Carried (in...

  • Page 5
    ... increase in our cruise passengers as a record 7.7 million consumers embarked on Carnival-branded cruise vacations all over the world. Our ship building program fuels our global marketing strategy, as we build innovative vessels for our various brands. During the past year Carnival Corporation...

  • Page 6
    ...-Bob Dickinson and Peter Ratcliffe-who retired from their chief executive officer posts at Carnival Cruise Lines and Princess Cruises, respectively. Through dedicated service and hard work, these outstanding individuals guided our company to unprecedented heights. Their contributions to the...

  • Page 7
    ... of 100 shares of Carnival Corporation or Carnival plc. Employees, travel agents cruising at travel agent rates, tour conductors or anyone cruising on a reduced-rate or complimentary basis are excluded from this offer. This benefit is not transferable and cannot be used for casino credits/charges...

  • Page 8
    ... (in millions, except per share data) Years Ended November 30, 2007 2006 2005 Revenues Cruise Passenger tickets ...Onboard and other ...Other ... $ 9,792 2,846 395 13,033 $ 8,903 2,514 422 11,839 $ 8,399 2,338 357 11,094 Costs and Expenses Operating Cruise Commissions, transportation and other...

  • Page 9
    ...Customer deposits ...Total current liabilities ...Long-Term Debt ...Other Long-Term Liabilities and Deferred Income ...Commitments and Contingencies (Notes 6 and 7) Shareholders' Equity Common stock of Carnival Corporation; $.01 par value; 1,960 shares authorized; 643 shares at 2007 and 641 shares...

  • Page 10
    ... issue discount ...Other ...Changes in operating assets and liabilities, excluding businesses acquired and sold Receivables ...Inventories ...Prepaid expenses and other ...Accounts payable ...Accrued and other liabilities ...Customer deposits ...Net cash provided by operating activities ...Investing...

  • Page 11
    ... ...Unrealized loss on marketable security ...Minimum pension liability adjustments ...Changes related to cash flow derivative hedges, net ...Total comprehensive income ...Cash dividends declared ...Issuance of stock under stock plans ...Purchases of treasury stock ...Issuance of common stock upon...

  • Page 12
    ...Each company's shares are publicly traded; on the New York Stock Exchange ("NYSE") for Carnival Corporation and the London Stock Exchange for Cruise Brands Carnival Cruise Lines ...Princess Cruises ("Princess") ...Costa Cruises ("Costa") ...Holland America Line ...P&O Cruises ...Cunard Line ("Cunard...

  • Page 13
    ...'s carrying value over its estimated fair value. Dry-dock costs primarily represent planned major maintenance activities that are incurred when a ship is taken out of service for scheduled maintenance. These costs are expensed as incurred. Goodwill We review our goodwill for impairment annually, or...

  • Page 14
    ...when received. Customer deposits are subsequently recognized as cruise revenues, together with revenues from onboard and other activities, which include transportation and shore excursion revenues and all associated direct costs of a voyage, upon completion of voyages with durations of ten nights or...

  • Page 15
    ..., the ultimate loss may differ from the amounts provided. Selling and Administrative Expenses Selling expenses include items such as advertising, marketing, promotional and related costs. Advertising costs are charged to expense as incurred except for brochures and media production costs. The...

  • Page 16
    ... require collateral or other security to support normal credit sales. However, we do normally require collateral and/or guarantees to support notes receivable on significant asset sales and new ship progress payments to shipyards. NOTE 3-DLC STRUCTURE In 2003, Carnival Corporation and Carnival...

  • Page 17
    ..., which enabled 20% of Carnival plc shares to be exchanged for 41.7 million Carnival Corporation shares. The 41.7 million shares of Carnival plc held by Carnival Corporation as a result of the PSO, which cost $1.05 billion, are being accounted for as treasury stock in the accompanying balance sheets...

  • Page 18
    ...November 30, 2007 exchange rate) and $434 million under unsecured term loan facilities, which proceeds were used to pay a portion of the Carnival Freedom, Emerald Princess, AIDAdiva and Queen Victoria purchase prices, respectively. These facilities bear an aggregate weighted-average interest rate of...

  • Page 19
    ... the closing price of the Carnival Corporation common stock is greater than a specified trigger price for a defined duration of time in the preceding fiscal quarter. The trigger price increases at an annual rate of 3.75% until maturity. The trigger price of $39.55 for the 2007 fourth quarter was...

  • Page 20
    ... Facilities Carnival Corporation, Carnival plc and certain of Carnival plc's subsidiaries are parties to an unsecured multi-currency revolving credit facility for $1.2 billion, â,¬400 million and £200 million (aggregating $2.21 billion U.S. dollars at the November 30, 2007 exchange rates) (the...

  • Page 21
    ...ship orders placed in December 2007, was as follows: Expected Service Date (a) Passenger Capacity Estimated Total Cost (b) Euro Sterling USD (in millions) Brand and Ship Carnival Cruise Lines Carnival Splendor (c) ...Carnival Dream ...Carnival Magic ...Total Carnival Cruise Lines ...Holland America...

  • Page 22
    ... ships. NOTE 7- CONTINGENCIES Litigation In January 2006, a lawsuit was filed against Carnival Corporation and its subsidiaries and affiliates, and other nonaffiliated cruise lines in New York on behalf of a purported class of owners of intellectual property rights to musical plays and other works...

  • Page 23
    ...all of our ships covering our legal liability to crew, guests and other third parties as well as loss or damage to our vessels arising from war or war-like actions, including terrorist incidents. Under the terms of our war risk insurance coverage, which is typical for war risk policies in the marine...

  • Page 24
    ... and the Carnival plc share repurchase authorization requires annual shareholder approval. At November 30, 2007, there were 71.1 million shares of Carnival Corporation common stock reserved for issuance pursuant to its convertible notes and its employee benefit and dividend reinvestment plans...

  • Page 25
    ... a net unrealized gain of $3 million and a net unrealized loss of $4 million, respectively. We also had interest rate swap agreements designated as cash flow hedges whereby we received variable interest rate payments in exchange for making fixed interest rate payments. At November 30, 2007 and 2006...

  • Page 26
    ... revenues include revenues for the cruise portion of a tour, when a cruise is sold along with a land tour package by Holland America Tours or Princess Tours, and shore excursion and port hospitality services provided to cruise guests by these tour companies. These intersegment revenues, which are...

  • Page 27
    ... shares available for future grant at November 30, 2007. These plans allow us to issue stock options, restricted stock awards and restricted stock units (collectively "incentive awards"). Incentive awards are primarily granted to management level employees and members of our Board of Directors...

  • Page 28
    ... employees. Since fiscal 2001, Carnival Corporation director options vest evenly over five years and have a ten-year term. A combined summary of Carnival Corporation and Carnival plc stock option activity during the year ended November 30, 2007 was as follows: WeightedAverage Exercise Price Weighted...

  • Page 29
    ... 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 determining all of our plans' benefit obligations at November 30, 2007, we assumed a weightedaverage discount rate...

  • Page 30
    ... treasury stock and newly issued Carnival Corporation common stock, which represented a noncash financing activity. NOTE 15 -ACQUISITION In September 2007, we entered into an agreement with Orizonia Corporation, Spain's largest travel company to operate Ibero Cruises, a Spanish cruise line, for...

  • Page 31
    ... or could be interpreted differently. For example, changes to how Section 883 of the Internal Revenue Code and related regulations are interpreted could result in additional uncertain income tax position liabilities having to be recognized. The Internal Revenue Service is currently auditing our...

  • Page 32
    ... which is included in this 2007 Annual Report. Micky Arison Chairman of the Board and Chief Executive Officer January 29, 2008 Howard S. Frank Vice Chairman of the Board and Chief Operating Officer January 29, 2008 David Bernstein Senior Vice President and Chief Financial Officer January 29, 2008...

  • Page 33
    REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM To the Boards of Directors and Shareholders of Carnival Corporation and Carnival plc: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, cash flows and shareholders' ...

  • Page 34
    ...attacks and threats thereof, availability and pricing of air service and other world events, and their impact on the demand for cruises; •฀฀ conditions฀in฀the฀cruise฀and฀land-based฀vacation฀indus tries, including competition from other cruise ship operators and providers of other...

  • Page 35
    ...year-over-year percentage increase in our ALBD capacity for fiscal 2008, 2009, 2010, 2011, and 2012, resulting primarily from new ships entering service is currently expected to be 9.0%, 5.6%, 7.8%, 5.4% and 4.0%, respectively. The above percentages exclude any other future ship orders, acquisitions...

  • Page 36
    ...In addition, our nonU.S. dollar cruise operations' depreciation and net interest expense were impacted by the changes in exchange rates for fiscal 2007 compared to 2006. CRITICAL ACCOUNTING ESTIMATES Our critical accounting estimates are those which we believe require our most significant judgments...

  • Page 37
    ... yields, net cruise costs per ALBD, interest and discount rates, cruise itineraries, technological changes, consumer demand, governmental regulations and the effects of competition. In addition, third party appraisers are sometimes used to determine fair values of ships and cruise lines and some of...

  • Page 38
    ...฀of฀goods฀and/or฀services฀primarily฀onboard฀our฀ ships (which include bar and some beverage sales, casino gaming, shore excursions, gift shop and spa sales and photo and art sales) and pre and post-cruise land packages. These goods and services are either provided directly by us or...

  • Page 39
    ... includes the three ships chartered to the Military Sealift Command in connection with our Hurricane Katrina relief efforts in the first quarter of 2006 and the fourth quarter of 2005 at 100%. (b) Fuel cost per metric ton is calculated by dividing the cost of our fuel by the number of metric tons...

  • Page 40
    ... and increased guest spending on our ships. Other non-cruise revenues increased $20 million, or 3.8%, to $553 million in 2007 from $533 million in 2006 primarily due to the increase in the number of cruise/tours sold and higher cruise/tour prices. Costs and Expenses Net cruise costs increased $763...

  • Page 41
    ... Carnival Freedom, Emerald Princess, AIDAdiva, Costa Serena and Queen Victoria. In addition to our new shipbuilding program, we had capital expenditures of $383 million for ship improvements and refurbishments and $161 million for Alaska tour assets, cruise port facility developments and information...

  • Page 42
    ... cash dividends of $990 million and purchased $326 million of Carnival Corporation common stock and Carnival plc ordinary shares in open market transactions during fiscal 2007. Future Commitments and Funding Sources At November 30, 2007, our contractual cash obligations, including new ship orders...

  • Page 43
    ... EXCHANGE RATE RISKS Our growing international business operations are conducted primarily through AIDA in Germany, Costa in Southern Europe and China, Ibero Cruises in Spain, P&O Cruises, Ocean Village and Cunard in the UK and P&O Cruises Australia in Australia, which subject us to an increasing...

  • Page 44
    ... to be affected by foreign currency exchange rate fluctuations. Given the decline in the U.S. dollar relative to the Euro over the past several years, the U.S. dollar cost to order new cruise ships at current exchange rates has increased significantly. If the U.S. dollar remains at current levels or...

  • Page 45
    ..., 2007 interest rates, our annual interest expense on variable rate debt, including the effect of our interest rate swaps, would decrease or increase by approximately $13 million. In addition, based upon a hypothetical 10% increase or decrease in Carnival Corporation's November 30, 2007 common stock...

  • Page 46
    ...593 (a) Includes the results of Carnival plc since April 17, 2003. Accordingly, the information for 2003 is not comparable to other periods. In addition, the 2006 net income was reduced by $57 million of share-based compensation expense related to the expensing of stock options and RSUs as a result...

  • Page 47
    ...as a guide to their future performance. All dividends for both Carnival Corporation and Carnival plc are declared in U.S. dollars. Holders of Carnival Corporation common stock and Carnival plc ADSs receive a dividend payable in U.S. dollars. The dividends payable for Carnival plc ordinary shares are...

  • Page 48
    ... in Carnival Corporation common stock at a price equal to the market value. At the end of each fiscal year the total value of the investment is computed by taking the number of shares owned, assuming Carnival Corporation dividends are reinvested on an annual basis, multiplied by the market price of...

  • Page 49
    ... Index 2005 S&P 500 Index 2006 2007 FTSE 100 Index Assumes $100 Invested on December 1, 2002 Assumes Dividends Reinvested Years Ended November 30, 2002 2003 2004 2005 2006 2007 Carnival plc ADS ...Dow Jones Index ...S&P 500 Index ...FTSE 100 Index...$100 $100 $100 $100 $139 $136 $115 $104 $224...

  • Page 50
    ... the Northern Hemisphere summer months, and holidays. This higher demand during the third quarter results in higher net revenue yields and, accordingly, the largest share of our net income is earned during this period. The seasonality of our results is increased due to ships being taken out of...

  • Page 51
    ...contacting our investor relations department at our corporate headquarters or registered office. Our chief executive, chief operating and chief financial officers have furnished the Sections 302 and 906 certifications required by the U.S. Securities and Exchange Commission in our joint Annual Report...

  • Page 52

  • Page 53
    C A R N I V A L C O R P O R A T I O N & P L C Carnival Place | 3655 N.W. 87th Avenue | Miami, Florida 33178-2428 | U.S.A. | www.carnivalcorp.com Carnival House | 5 Gainsford Street | London SE1 2NE | UK | www.carnivalplc.com