Carnival Cruises 2010 Annual Report Download - page 20

Convertible Notes
On September 24, 2010, we issued a notice of redemption to the noteholders of our 2% Convertible Notes (“2%
Notes”) that all of the outstanding 2% Notes would be redeemed by October 25, 2010 (the “Redemption Date”),
for cash at a price equal to 100% of the principal amount outstanding plus unpaid accrued interest. As a result of
the redemption, the 2% Notes became convertible into shares of Carnival Corporation common stock through the
Redemption Date, for which we elected to deliver cash in lieu of common stock. All of the $595 million of
outstanding 2% Notes were redeemed or converted for cash. The $52 million of cash paid upon conversion in
excess of the 2% Notes carrying value was recorded as a reduction to additional paid-in capital.
NOTE 6 – Commitments
Ship Commitments
At November 30, 2010, we had 10 ships under contract for construction with an aggregate passenger capacity of
27,500. The estimated total cost of these ships is approximately $6.1 billion, which includes the contract price
with the shipyard, design and engineering fees, capitalized interest, construction oversight costs and various
owner supplied items. We have paid $603 million through November 30, 2010 and anticipate paying $2.1 billion,
$1.8 billion, $1.0 billion and $625 million of the remaining estimated total costs in fiscal 2011, 2012, 2013 and
2014, respectively.
Operating Leases, Port Facilities and Other Commitments
Rent expense under our operating leases, primarily for office and warehouse space, was $61 million, $54 million
and $52 million in fiscal 2010, 2009 and 2008, respectively. At November 30, 2010, minimum amounts payable
for our operating leases, with initial or remaining terms in excess of one year, and for the annual usage of port
facilities and other contractual commitments with remaining terms in excess of one year, were as follows (in
millions):
Fiscal
2011 2012 2013 2014 2015 Thereafter Total
Operating leases ................. $ 44 $ 39 $ 34 $ 25 $ 23 $108 $ 273
Port facilities and other ............ 118 114 107 100 98 811 1,348
$162 $153 $141 $125 $121 $919 $1,621
NOTE 7 – Contingencies
Litigation
In the normal course of our business, various claims and lawsuits have been filed or are pending against us. Most
of these claims and lawsuits are covered by insurance and, accordingly, the maximum amount of our liability, net
of any insurance recoverables, is typically limited to our self-insurance retention levels. However, the ultimate
outcome of these claims and lawsuits which are not covered by insurance cannot be determined at this time.
Contingent Obligations – Lease Out and Lease Back Type (“LILO”) Transactions
At November 30, 2010, Carnival Corporation had estimated contingent obligations totaling $551 million,
excluding termination payments as discussed below, to participants in LILO transactions for two of its ships. At
the inception of these leases, the aggregate of the net present value of these obligations was paid by Carnival
Corporation to a group of major financial institutions, who agreed to act as payment undertakers and directly pay
these obligations. Accordingly, these contingent obligations are considered extinguished, and neither the funds
nor the contingent obligations have been included in our accompanying Consolidated Balance Sheets.
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