Carnival Cruises 2009 Annual Report Download - page 51

the euro as of November 30, 2009, assuming no changes in comparative interest rates, we estimate that these
foreign currency swaps and forwards’ fair values would change by $53 million, which would be offset by a
corresponding change of $53 million in the U.S. dollar value of our net investments. In addition, based upon a
10% hypothetical change in the U.S. dollar compared to the euro, sterling and Australian dollar, which are the
functional currencies that we translate into our U.S. dollar reporting currency, assuming no changes in
comparable interest rates, we estimate that our 2010 full year December 18, 2009 guidance would change by
approximately $165 million.
Newbuild Currency Risk
During 2009, we entered into foreign currency forwards for two-thirds of the final euro-denominated
shipyard payments expected to be settled in 2010 for Azura to hedge it into sterling at a forward rate of
£0.88. Based upon a 10% hypothetical change in the sterling compared to the euro as of November 30, 2009,
assuming no changes in comparative interest rates, the estimated fair value of these foreign currency forwards
would change by $41 million, which would be offset by a corresponding change of $41 million in the sterling
value of the related foreign currency ship construction contract and result in no net impact to us.
In 2008, we entered into a call option and a put option that were designed as a zero cost collar, and are
collectively designated as a cash flow hedge of Nieuw Amsterdam’s final shipyard payment, which is expected to
be settled in 2010. Under this zero cost collar the minimum exchange rate we would be required to pay is $1.28
to the euro and the maximum exchange rate we would be required to pay is $1.45 to the euro. If the spot rate is in
between these two amounts on the date of delivery, then we would not owe or receive any payments under this
zero cost collar. Based upon a 10% hypothetical change in the U.S. dollar compared to the euro as of
November 30, 2009, assuming no changes in comparative interest rates, the estimated fair value of this foreign
currency zero cost collar would change by approximately $35 million, which would be offset by a corresponding
change of approximately $35 million in the U.S. dollar value of the related foreign currency ship construction
contract and result in no net impact to us.
At November 30, 2009, we have three euro-denominated shipbuilding commitments scheduled for delivery
between May 2010 and May 2011, with remaining total payments of $1.3 billion assigned to two of our U.S.
dollar functional currency brands for which we have not entered into any foreign currency contracts. Therefore,
the U.S. dollar cost of these ships will increase or decrease based upon changes in the exchange rate until the
payments are made under the shipbuilding contracts or we enter into foreign currency hedges. A portion of our
net investment in euro-denominated cruise operations effectively acts as an economic hedge against a portion of
these euro commitments. Accordingly, a portion of any increase or decrease in our ship costs resulting from
changes in the exchange rates will be offset by a corresponding change in the net assets of our euro-denominated
cruise operations. Based upon a 10% hypothetical change in the U.S. dollar compared to the euro as of
November 30, 2009, assuming no changes in comparative interest rates, the unpaid cost of these ships would
have a corresponding change of $131 million.
At November 30, 2009, we also have $660 million remaining on a euro-denominated shipbuilding
commitment for Cunard’s Queen Elizabeth, which is scheduled for delivery in September 2010. We have not
entered into any foreign currency contracts for this ship. Therefore, the sterling cost of this ship will increase or
decrease based upon changes in the exchange rate until the payments are made under the shipbuilding contract or
we enter into a foreign currency hedge. Based upon a 10% hypothetical change in the sterling to euro foreign
currency exchange rate as of November 30, 2009, assuming no changes in comparative interest rates and
assuming the U.S. dollar exchange rate to the sterling remains constant, the unpaid cost of this ship would have a
corresponding change of $66 million.
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