Carnival Cruises 2007 Annual Report Download - page 19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16 | CARNIVAL CORPORATION & PLC
At November 30, 2007, the scheduled annual maturities of
our debt was as follows (in millions): $2,539, $329, $1,342,
$325, $1,028 and $3,289 in fiscal 2008 through 2012 and
thereafter, respectively.
Debt issuance costs are generally amortized to interest
expense using the straight-line method, which approximates
the effective interest method, over the term of the notes or
the noteholders first put option date, whichever is earlier. In
addition, all debt issue discounts are amortized to interest
expense using the effective interest rate method over the
term of the notes.
Convertible Notes
Carnival Corporation’s 2% convertible notes (“2% Notes”),
1.75% convertible notes (“1.75% Notes”) and zero-coupon
convertible notes (“Zero-Coupon Notes”) are convertible
into 15.2 million shares, a maximum of 20.9 million shares
(10.8 million shares during fiscal 2007) and 6.3 million shares,
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
2007 and 2005, and during the first and last quarters of fiscal
2006. In fiscal 2007, $4 million of our 2% Notes were con-
verted into 0.1 million shares of Carnival Corporation common
stock, of which a nominal amount was issued from treasury
stock and in fiscal 2006 and 2005 only nominal amounts
were converted.
The 1.75% Notes 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 is $63.73 per share. Thereafter,
this conversion trigger price increases each quarter based on
an annual rate of 1.75%, until maturity. The conditions for
conversion of the 1.75% Notes have not yet been satisfied.
In addition, holders may also surrender the 1.75% Notes for
conversion if their credit rating is Baa3 or lower by Moody’s
Investors Service and BBB- or lower by Standard & Poor’s
Rating Services. The 1.75% Notes interest is payable in cash
semi-annually in arrears 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.
The Zero-Coupon Notes have a 3.75% yield to maturity 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 trigger price increases at
an annual rate of 3.75% until maturity. The trigger price of
$39.55 for the 2007 fourth quarter was achieved and, accord-
ingly, the Zero-Coupon Notes are convertible during the 2008
first quarter at a conversion price of $35.96. During fiscal
2007, 2006 and 2005, $4 million, $69 million and $297 million
of our Zero-Coupon Notes were converted at their accreted
value into 0.1 million, 2.1 million and 9.0 million shares of
Carnival Corporation common stock, respectively, of which
a nominal amount, 1.9 million and 6.2 million shares were
issued from treasury stock, respectively. No Zero-Coupon
Notes were converted prior to fiscal 2005.
At November 30, 2007, our 2% Notes, 1.75% Notes and
Zero-Coupon Notes were classified as current liabilities, since
we may be required to repurchase all or a portion of these
notes at the option of the noteholders on April 15, 2008,
April 29, 2008 and October 24, 2008, respectively. If the 2%,
1.75% and Zero-Coupon noteholders do not exercise their
options, then we will change the classification of the notes to
long-term, as the next holders’ optional redemption date does
not occur until after November 30, 2008 as noted below.