Carnival Cruises 2004 Annual Report Download - page 18

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 state-
ments for both Carnival Corporation and Carnival plc
have not been presented.
Simultaneously with the completion of the DLC trans-
action, 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 accompanying
balance sheets. The holders of Carnival Corporation
shares, including the new shareholders who exchanged
their Carnival plc shares for Carnival Corporation shares
under the PSO, now own an economic interest equal to
approximately 79%, and holders of Carnival plc shares
now own an economic interest equal to approximately
21%, of Carnival Corporation & plc.
The management of Carnival Corporation and
Carnival plc ultimately agreed to enter into the DLC
transaction because, among other things, the creation
of Carnival Corporation & plc would result in a company
with complementary well-known brands operating glob-
ally with enhanced growth opportunities, benefits of
sharing best practices and generating cost savings,
increased financial flexibility and access to capital markets
and a DLC structure, which allows for continued partici-
pation in an investment in the global cruise industry
by Carnival plc’s shareholders who wish to continue to
hold shares in a UK-listed company.
Carnival plc was the third largest cruise company in
the world and operated many well-known global brands
with leading positions in the U.S., UK, Germany and
Australia. The combination of Carnival Corporation with
Carnival plc under the DLC structure has been accounted
for under U.S. generally accepted accounting principles
(“GAAP”) as an acquisition of Carnival plc by Carnival
Corporation pursuant to SFAS No. 141. The purchase
price of $25.31 per share was based upon the average of
the quoted closing market price of Carnival Corporation’s
shares beginning two days before and ending two days
after January 8, 2003, the date the Carnival plc board
agreed to enter into the DLC transaction. The number
of additional shares effectively issued in the combined
entity for purchase accounting purposes was 209.6 million.
In addition, Carnival Corporation incurred $60 million of
direct acquisition costs, which have been included in
the purchase price. The aggregate purchase price of
$5.36 billion, computed as described above, was allo-
cated to the assets and liabilities of Carnival plc as follows
(in millions):
Ships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,669
Ships under construction . . . . . . . . . . . . . . . . . . . . . 233
Other tangible assets . . . . . . . . . . . . . . . . . . . . . . . 866
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,387
Trademarks(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,237
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,939)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,095)
$ 5,358
(a) Trademarks are non-amortizable and represent the Princess,
P&O Cruises, P&O Cruises Australia and AIDA trademarks’
estimated fair values.
The information presented below gives pro forma
effect to the DLC transaction between Carnival Corporation
and Carnival plc. Management has prepared the pro
forma information based upon the companies’ reported
financial information and, accordingly, the pro forma
information should be read in conjunction with the com-
panies’ financial statements.
As noted above, the DLC transaction has been
accounted for as an acquisition of Carnival plc by Carnival
Corporation, using the purchase method of accounting.
Carnival plc’s accounting policies have been conformed
to Carnival Corporation’s policies. Carnival plc’s reporting
period has been changed to Carnival Corporation’s report-
ing period, and the pro forma information presented below
covers the same periods of time for both companies.
Carnival Corporation & plc 15