Carnival Cruises 2007 Annual Report Download - page 17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
14 | CARNIVAL CORPORATION & PLC
The deeds of guarantee are governed and construed in
accordance with the laws of the Isle of Man. Subject to the
terms of the deeds of guarantee, the holders of indebtedness
and other obligations that are subject to the deeds of guarantee
will have recourse to both Carnival plc and Carnival Corporation
though a Carnival plc creditor must first make written demand
on Carnival plc and a Carnival Corporation creditor on Carnival
Corporation. Once the written demand is made by letter or
other form of notice, the holders of indebtedness or other
obligations may immediately commence an action against
the relevant guarantor. Accordingly, there is no requirement
under the deeds of guarantee to obtain a judgment, take other
enforcement actions or wait any period of time prior to taking
steps against the relevant guarantor. All actions or proceedings
arising out of or in connection with the deeds of guarantee
must be exclusively brought in courts in England.
Under the terms of the DLC transaction documents, Carnival
Corporation and Carnival plc are permitted to transfer assets
between the companies, make loans or investments in each
other and otherwise enter into intercompany transactions. The
companies have entered into some of these types of trans-
actions and may enter into additional transactions in the future
to take advantage of the flexibility provided by the DLC struc-
ture and to operate both companies as a single unified eco-
nomic enterprise in the most effective manner. In addition,
under the terms of the Equalization and Governance Agreement
and the deeds of guarantee, the cash flow and assets of one
company are required to be used to pay the obligations of the
other company, if necessary.
Given the DLC structure as described above, we believe
that providing separate financial statements for each of Carnival
Corporation and Carnival plc would not present a true and fair
view of the economic realities of their operations. Accordingly,
separate financial statements for both Carnival Corporation
and Carnival plc have not been presented.
Simultaneously with the completion of the DLC transaction,
a partial share offer (“PSO”) for 20% of Carnival plc’s shares
was made and accepted, 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 accompany-
ing balance sheets.
NOTE 4—PROPERTY AND EQUIPMENT
Property and equipment consisted of the following
(in millions):
November 30,
2007 2006
Ships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,324 $26,054
Ships under construction . . . . . . . . . . . . . . . . . 1,655 922
30,979 26,976
Land, buildings and improvements,
and port facilities ...................... 717 675
Computer hardware and software,
transportation equipment and other ....... 844 762
Total property and equipment . . . . . . . . . . . . . 32,540 28,413
Less accumulated depreciation
and amortization . . . . . . . . . . . . . . . . . . . . . . (5,901 ) (4,955)
$26,639 $23,458
Capitalized interest, primarily on our ships under construc-
tion, amounted to $44 million, $37 million and $21 million in
fiscal 2007, 2006 and 2005, respectively. Amounts related to
ships under construction include progress payments for the
construction of the ship, as well as design and engineering
fees, capitalized interest, construction oversight costs and
various owner supplied items. At November 30, 2007, six
ships with an aggregate net book value of $2.25 billion were
pledged as collateral pursuant to mortgages related to $950
million of debt and a $488 million contingent obligation (see
Notes 5 and 6).
Repairs and maintenance expenses, including minor
improvement costs and dry-dock expenses, were $561 million,
$518 million and $554 million in fiscal 2007, 2006 and 2005,
respectively.