Carnival Cruises 2004 Annual Report Download - page 24

Carnival Corporation & plc 21
In connection with our cruise ships under contract
for construction, we have paid $429 million through
November 30, 2004 and anticipate paying the remaining
estimated total costs as follows: $1.54 billion, $1.40 bil-
lion, $1.33 billion, $1.60 billion and $357 million in fiscal
2005 through 2009, respectively.
Subsequent to November 30, 2004, Costa entered
into a ship construction contract with Fincantieri for a
3,000 passenger ship, which has an estimated all-in cost
of 475 million euros, and is expected to enter service
in June 2007.
Operating Leases
Rent expense under our operating leases, primarily
for office and warehouse space, was $50 million, $48
million and $15 million in fiscal 2004, 2003 and 2002,
respectively. At November 30, 2004, minimum annual
rentals for our operating leases, with initial or remaining
terms in excess of one year, were as follows (in millions):
$51, $37, $25, $21, $18 and $79 in fiscal 2005 through
2009 and thereafter, respectively.
Port Facilities and Other
At November 30, 2004, we had commitments through
2052, with initial or remaining terms in excess of one
year, to pay minimum amounts for our annual usage of
port facilities and other contractual commitments as fol-
lows (in millions): $135, $92, $73, $72, $66 and $368 in
fiscal 2005 through 2009 and thereafter, respectively.
Note 8—Contingencies
Litigation
In 2002, two actions (collectively, the “Facsimile
Complaints”) were filed against Carnival Corporation on
behalf of purported classes of persons who received
unsolicited advertisements via facsimile, alleging that
Carnival Corporation and other defendants distributed
unsolicited advertisements via facsimile in contraven-
tion of the U.S. Telephone Consumer Protection Act.
The plaintiffs seek to enjoin the sending of unsolicited
facsimile advertisements and statutory damages. The
advertisements referred to in the Facsimile Complaints
that reference a Carnival Cruise Line product were not
sent by Carnival Corporation, but rather were distributed
by a professional faxing company at the behest of travel
agencies. We do not advertise directly to the traveling
public through the use of facsimile transmission. The
ultimate outcomes of the Facsimile Complaints cannot
be determined at this time. We believe that we have
meritorious defenses to these claims and, accordingly,
we intend to vigorously defend against these actions.
In February 2001, Holland America Line-USA, Inc.
(“HAL-USA”), our wholly-owned subsidiary, received a
grand jury subpoena requesting that it produce docu-
ments and records relating to the air emissions from
Holland America Line ships in Alaska. HAL-USA responded
to the subpoena. The ultimate outcome of this matter
cannot be determined at this time.
In August 2002, Holland America Line’s Ryndam dis-
charged wastewater from the ship while in Juneau,
Alaska. In December 2004, a plea agreement between
HAL Maritime Ltd. (“HAL Maritime”), a wholly-owned
subsidiary, and the U.S. government was entered in
which HAL Maritime pled guilty to a single misdemeanor.
Pursuant to the plea agreement, HAL Maritime paid
a $0.2 million criminal fine, a $0.5 million community
service payment, and agreed to expend $1.3 million
toward the implementation of a Focused Environmental
Compliance Plan. The agreement also provides for a
three-year probationary term, with the ability to request
early termination of probation after two years. HAL
Maritime also paid a civil fine of $65,000 to the State
of Alaska as a result of the same event.
In March 2004, Holland America Line notified the
United States and Netherlands governmental authorities
that one of its chief engineers had admitted to improp-
erly processing bilge water on the Noordam. A subse-
quent internal investigation has determined that the
improper operation may have begun in January 2004
and may have continued sporadically through March 4,
2004. Holland America Line and three shipboard engi-
neers have received grand jury subpoenas from the
Office of the U.S. Attorney in Tampa, Florida. If the
government investigations result in charges being filed,
a judgment could include, among other forms of relief,
fines and debarment from federal contracting, which
would prohibit operations in Glacier Bay National Park
and Preserve (“Glacier Bay”) during the period of debar-
ment. The ultimate outcome of this matter cannot be
determined at this time.
In August 2004, Holland America Line was notified
by the National Park Service (“NPS”) that the Volendam
and Statendam may have violated opacity standards
while operating in Glacier Bay. In November 2004, NPS
notified Holland America Line in separate letters that a
Violation of Record would be entered in the permanent
park files for each ship. Holland America Line intends to
vigorously oppose the decision in each case. The ulti-
mate outcome of these matters cannot be determined
at this time. However, if the Violations of Record are
not reversed and either ship receives a second such
violation within three years, that ship may be barred
from entry into Glacier Bay.
If Holland America Line were to lose its Glacier Bay
permits as a result of the Ryndam plea or the Noordam
investigations, or if the Statendam or Volendam were
prohibited from entering Glacier Bay, we would not
expect the impact on our financial statements to be
material to us since we believe there are additional
attractive alternative destinations in Alaska and else-
where that can be substituted for Glacier Bay.