Carnival Cruises 2004 Annual Report Download - page 21

Notes to Consolidated Financial Statements (continued)
18 Carnival Corporation & plc
Convertible Notes
Carnival Corporation’s 2% convertible notes (“2%
Notes”), its zero-coupon convertible notes (“Zero-Coupon
Notes”) and its 1.75% convertible notes (“1.75% Notes”)
are convertible into 15.3 million shares, 17.4 million
shares and a maximum of 20.9 million shares (10.8 mil-
lion shares during fiscal 2004), respectively, of Carnival
Corporation common stock.
The 2% Notes are convertible at a conversion price
of $39.14 per share, subject to adjustment, during any
fiscal quarter for which the closing price of the Carnival
Corporation common stock is greater than $43.05 per
share for a defined duration of time in the preceding
fiscal quarter. The conditions for conversion of the 2%
Notes were satisfied throughout fiscal 2004 and, accord-
ingly, the 2% Notes were convertible into Carnival
Corporation common stock commencing with the second
quarter of fiscal 2004. A nominal amount of 2% Notes
were converted in fiscal 2004.
At November 30, 2004, the 2% Notes were classified
as a current liability, since we may be required to redeem
the notes at the option of the holders on April 15, 2005
at their face value plus any unpaid accrued interest. If
the noteholders do not exercise this option, then we
will change the classification of the 2% Notes to long-
term debt, as the next optional redemption date does
not occur until April 15, 2008. We do not currently expect
these noteholders to exercise their put options, as the
current market value of the 2% Notes is greater than
the redemption price.
The Zero-Coupon Notes have a 3.75% yield to matu-
rity and are convertible during any fiscal quarter for which
the closing price of the Carnival Corporation common
stock is greater than a specified trigger price for a defined
duration of time in the preceding fiscal quarter. The trig-
ger price commenced at a low of $31.94 per share for
the first quarter of fiscal 2002 and increases at an annual
rate of 3.75% thereafter, until maturity. Since the third
quarter of 2003, the Zero-Coupon Notes have been
convertible into Carnival Corporation common stock for
the quarter following that quarter in which it was con-
vertible as a result of Carnival Corporation’s common
stock achieving its target conversion trigger price per
share, which ranged from $33.77 for the 2003 third
quarter to $35.38 for the 2004 fourth quarter, for the
requisite periods of time. No Zero-Coupon Notes were
converted in fiscal 2003 or 2004.
The 1.75% Notes, which were issued in April 2003,
are convertible at a conversion price of $53.11 per
share, subject to adjustment, during any fiscal quarter
for which the closing price of the Carnival Corporation
common stock is greater than a specified trigger price
for a defined duration of time in the preceding fiscal
quarter. During the fiscal quarters ending from August 31,
2003 through April 29, 2008, the trigger price will be
$63.73 per share. Thereafter, this conversion trigger
price increases each quarter based on an annual rate
of 1.75%, until maturity. In addition, holders may also
surrender the 1.75% Notes for conversion if they have
been called for redemption or for other specified occur-
rences, including the credit rating assigned to the 1.75%
Notes being Baa3 or lower by Moody’s Investors Serv-
ice and BBB- or lower by Standard & Poor’s Rating
Services, as well as certain corporate transactions. The
conditions for conversion of the 1.75% Notes have not
been met since their issuance. The 1.75% Notes inter-
est is payable in cash semi-annually in arrears, commen-
cing October 29, 2003 through April 29, 2008. Effective
April 30, 2008, the 1.75% Notes no longer require a
cash interest payment, but interest will accrete at a 1.75%
yield to maturity.
Subsequent to April 29, 2008 and October 23, 2008,
we may redeem all or a portion of the 1.75% Notes and
Zero-Coupon Notes, respectively, at their accreted values
and subsequent to April 14, 2008, we may redeem all
or a portion of our 2% Notes at their face value plus
any unpaid accrued interest, subject to the noteholders’
right to convert.
In addition, on April 29 of 2008, 2013, 2018, 2023
and 2028 the 1.75% noteholders, on April 15 of 2005,
2008 and 2011 the 2% noteholders and on October 24
of 2006, 2008, 2011 and 2016 the Zero-Coupon note-
holders may require us to repurchase all or a portion of
the outstanding 1.75% Notes and Zero-Coupon Notes
at their accreted values and the 2% Notes at their face
value plus any unpaid accrued interest.