Carnival Cruises 2004 Annual Report Download - page 19

Notes to Consolidated Financial Statements (continued)
The following pro forma information has been pre-
pared assuming the DLC transaction had occurred on
December 1, 2002 and 2001, respectively, rather than
April 17, 2003, and has not been adjusted to reflect any
net transaction benefits. In addition, the pro forma infor-
mation does not purport to represent what the results
of operations actually could have been if the DLC trans-
action had occurred on December 1, 2002 and 2001
or what those results will be for any future periods (in
millions, except earnings per share).
Years Ended
November 30,
2003 2002
Pro forma revenues . . . . . . . . . . . . . . . . . . $7,596 $6,768
Pro forma net income(a)-(d) . . . . . . . . . . . . . . $1,159 $1,271
Pro forma earnings per share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.46 $ 1.60
Diluted(e) . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.43 $ 1.57
Pro forma weighted-average
shares outstanding
Basic . . . . . . . . . . . . . . . . . . . . . . . . . 797 795
Diluted(e) . . . . . . . . . . . . . . . . . . . . . . . 840 833
(a) In accordance with SFAS No. 141, pro forma net income
was reduced by $51 million in 2003 and $103 million in 2002
for Carnival plc’s nonrecurring costs related to its terminated
Royal Caribbean International Ltd. transaction and the com-
pletion of the DLC transaction with Carnival Corporation,
which were expensed by Carnival plc prior to April 17, 2003.
(b) As a result of the reduction in depreciation expense due to
the revaluation of Carnival plc’s ships carrying values, pro
forma net income has been increased by $16 million in 2003
and $14 million in 2002.
(c) The 2003 pro forma net income included a $13 million non-
recurring expense related to a DLC litigation matter and
$19 million of income related to the receipt of nonrecurring
net insurance proceeds.
(d) The 2002 pro forma net income included a $51 million non-
recurring income tax benefit related to an Italian incentive
tax law, which allowed Costa to receive an income tax ben-
efit for contractual expenditures during 2002 incurred on
the construction of a new ship.
(e) The 2003 and 2002 diluted earnings per share and outstand-
ing diluted shares have been restated, and we have reduced
previously reported diluted earnings per share amounts by
$0.02 each year as a result of the early adoption of EITF
No. 04-08.
Note 4—Property and Equipment
Property and equipment consisted of the following
(in millions):
November 30,
2004 2003
Ships . . . . . . . . . . . . . . . . . . . . . . . . . . $22,572 $18,134
Ships under construction. . . . . . . . . . . . 429 886
23,001 19,020
Land, buildings and improvements,
and port facilities . . . . . . . . . . . . . . . . 555 504
Transportation equipment and other . . . 628 549
Total property and equipment . . . . . . . . 24,184 20,073
Less accumulated depreciation
and amortization . . . . . . . . . . . . . . . . (3,361) (2,551)
$20,823 $17,522
Capitalized interest, primarily on our ships under
construction, amounted to $26 million, $49 million and
$39 million in fiscal 2004, 2003 and 2002, 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, 2004, nine ships with an aggre-
gate net book value of $2.92 billion were pledged as
collateral pursuant to mortgages related to $1.68 billion
of debt and a $476 million contingent obligation (see
Notes 6 and 7).
Maintenance and repair expenses and dry-dock amorti-
zation were $353 million, $256 million and $178 million
in fiscal 2004, 2003 and 2002, respectively.
In fiscal 2002 we reduced the carrying value of one
of our ships by recording an impairment charge of
$20 million based on negotiations with unrelated third
parties and other available evidence.
Note 5—Variable Interest Entity
In accordance with Financial Accounting Standards
Board Interpretation (“FIN”) No. 46, “Consolidation of
Variable Interest Entities,” we have determined that we
are carrying a loan, initially made in April 2001, to a ship
repair facility that is a variable interest entity (“VIE”).
Although we use this facility for some of our ship repair
work, we are not a “primary beneficiary” and, accord-
ingly, this entity is not consolidated in our financial
statements. At November 30, 2004 and 2003, our loan
to this VIE, which is also our maximum exposure to
loss, was $41 million.
16 Carnival Corporation & plc