Carnival Cruises 2006 Annual Report Download - page 15

Carnival฀Corporation฀&฀plc฀|฀page฀11
Consolidated฀Statements฀of฀Operations
2006 2005 2004
Deferral Direct Effect฀of Deferral Direct Effect฀of Deferral Direct Effect฀of
Method(a) Method Change Method Method Change Method Method Change
Other฀ship฀operating฀expenses ฀.฀.฀.฀.฀.฀.฀.฀ $1,484 $1,538 $฀ ฀ 54 $1,461 $1,465 $฀ ฀ ฀ 4 $1,270 $1,315 $฀ ฀ 45
Net฀income฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀ $2,333 $2,279 $฀(54) $2,257 $2,253 $฀ ฀ (4) $1,854 $1,809 $ ฀ (45)
Earnings฀per฀share
฀ Basic ฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀ $฀2.92 $฀2.85 $(0.07) $฀ 2.80 $฀ 2.80 $0.00 $฀ 2.31 $฀ 2.25 $(0.06)
฀ Diluted฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀ $฀2.83 $฀2.77 $(0.06) $฀ 2.70 $฀ 2.70 $0.00 $฀ 2.24 $฀ 2.18 $(0.06)
Consolidated฀Balance฀Sheets
2006 2005
Deferral Direct Effect฀of Deferral Direct Effect฀of
Method(a) Method Change Method Method Change
Prepaid฀expenses฀and฀other฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀. $฀ ฀ ฀ 434 $฀ ฀ ฀ 289 $(145) $฀ 352 $฀ 263 $(89)
Retained฀earnings฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀. $11,746 $11,600 $(146) $฀10,233 $฀10,141 $(92)
Accumulated฀other฀comprehensive฀income ฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀.฀. $฀ ฀ ฀ 660 $฀ ฀ ฀ 661 $฀ ฀ ฀ 1 $฀ 156 $฀ 159 $฀฀ 3
(a)฀฀The฀amounts฀disclosed฀under฀the฀deferral฀method฀for฀the฀year฀ended฀and฀at฀November฀30,฀2006฀are฀based฀on฀the฀estimated฀effect฀of฀not฀changing฀our฀dry-dock฀
accounting฀method฀to฀the฀direct฀expense฀method฀for฀this฀current฀period.฀Accordingly,฀these฀estimated฀current฀period฀amounts฀have฀not฀been฀previously฀reported,฀
but฀are฀being฀disclosed฀in฀accordance฀with฀the฀requirements฀of฀SFAS฀No.฀154.
In฀addition,฀as฀a฀result฀of฀this฀change฀in฀accounting฀method฀
retained฀earnings฀at฀November฀30,฀2003฀decreased฀by฀$43฀
million฀to฀$7.15฀billion฀from฀$7.19฀billion.
Goodwill
We฀review฀our฀goodwill฀for฀impairment฀annually,฀or,฀when฀
events฀or฀circumstances฀dictate,฀more฀frequently.฀All฀of฀our฀
goodwill฀has฀been฀allocated฀to฀our฀cruise฀reporting฀units.฀
There฀were฀no฀significant฀changes฀to฀our฀goodwill฀carrying฀
amounts฀since฀November฀30,฀2004,฀other฀than฀the฀changes฀
resulting฀from฀using฀different฀foreign฀currency฀translation฀rates฀
at฀each฀balance฀sheet฀date฀and฀a฀$20฀million฀reduction฀to฀
goodwill฀in฀fiscal฀2006฀resulting฀from฀the฀resolution฀of฀certain฀
P&O฀Princess฀Cruises฀plc’s฀(“P&O฀Princess”)฀tax฀contingency฀
liabilities฀that฀existed฀at฀the฀time฀of฀the฀DLC฀transaction.
Our฀goodwill฀impairment฀reviews฀consist฀of฀a฀two-step฀
process฀of฀first฀determining฀the฀fair฀value฀of฀the฀reporting฀unit฀
and฀comparing฀it฀to฀the฀carrying฀value฀of฀the฀net฀assets฀allo-
cated฀to฀the฀reporting฀unit.฀Fair฀values฀of฀our฀reporting฀units฀
were฀determined฀based฀on฀our฀estimates฀of฀comparable฀market฀
prices฀or฀discounted฀future฀cash฀flows.฀If฀this฀fair฀value฀exceeds฀
the฀carrying฀value,฀which฀was฀the฀case฀for฀our฀reporting฀units,฀
no฀further฀analysis฀or฀goodwill฀write-down฀is฀required.฀If฀the฀
fair฀value฀of฀the฀reporting฀unit฀is฀less฀than฀the฀carrying฀value฀
of฀the฀net฀assets,฀the฀implied฀fair฀value฀of฀the฀reporting฀unit฀is฀
allocated฀to฀all฀the฀underlying฀assets฀and฀liabilities,฀including฀
both฀recognized฀and฀unrecognized฀tangible฀and฀intangible฀
assets,฀based฀on฀their฀fair฀value.฀If฀necessary,฀goodwill฀is฀then฀
written-down฀to฀its฀implied฀fair฀value.
Trademarks
The฀costs฀of฀developing฀and฀maintaining฀our฀trademarks฀
are฀expensed฀as฀incurred.฀However,฀for฀acquisitions฀made฀
after฀June฀2001,฀we฀have฀allocated฀a฀portion฀of฀the฀purchase฀
price฀to฀the฀acquiree’s฀identified฀trademarks.฀The฀trademarks฀
that฀Carnival฀Corporation฀recorded฀as฀part฀of฀its฀acquisition฀of฀
P&O฀Princess,฀which฀are฀estimated฀to฀have฀an฀indefinite฀use-
ful฀life฀and,฀therefore,฀are฀not฀amortizable,฀are฀reviewed฀for฀
impairment฀annually,฀or,฀when฀events฀or฀circumstances฀dictate,฀
more฀frequently.฀Our฀trademarks฀would฀be฀considered฀impaired฀
if฀their฀carrying฀value฀exceeds฀their฀estimated฀fair฀value.
Derivative฀Instruments฀and฀Hedging฀Activities
We฀utilize฀derivative฀and฀nonderivative฀financial฀instruments,฀
such฀as฀foreign฀currency฀swaps฀and฀foreign฀currency฀debt฀
obligations฀to฀limit฀our฀exposure฀to฀fluctuations฀in฀foreign฀
currency฀exchange฀rates,฀and฀interest฀rate฀swaps฀to฀manage฀
our฀interest฀rate฀exposure฀and฀to฀achieve฀a฀desired฀proportion฀
of฀variable฀and฀fixed฀rate฀debt฀(see฀Notes฀5฀and฀10).
All฀derivatives฀are฀recorded฀at฀fair฀value,฀and฀the฀changes฀
in฀fair฀value฀are฀immediately฀included฀in฀earnings฀if฀the฀deriva-
tives฀do฀not฀qualify฀as฀being฀effective฀hedges.฀If฀a฀derivative฀฀
is฀a฀fair฀value฀hedge,฀then฀changes฀in฀the฀fair฀value฀of฀the฀
derivative฀are฀offset฀against฀the฀changes฀in฀the฀fair฀value฀of฀
the฀underlying฀hedged฀item.฀If฀a฀derivative฀is฀a฀cash฀flow฀
hedge,฀then฀changes฀in฀the฀fair฀value฀of฀the฀derivative฀are฀
recognized฀as฀a฀component฀of฀accumulated฀other฀compre-
hensive฀income฀(“AOCI”)฀until฀the฀underlying฀hedged฀item฀฀
is฀recognized฀in฀earnings.฀If฀a฀derivative฀or฀a฀nonderivative฀
financial฀instrument฀is฀designated฀as฀a฀hedge฀of฀our฀net฀