Carnival Cruises 2007 Annual Report Download - page 22

CARNIVAL CORPORATION & PLC | 19
(a) The expected service date is the month in which the ship is currently expected to begin its first revenue generating cruise.
(b) Estimated total cost of the completed ship includes the contract price with the shipyard, design and engineering fees, capitalized interest, construction oversight
costs and various owner supplied items. All of our ship construction contracts are with the Fincantieri shipyards in Italy, except for AIDA’s and Seabourn’s which are
with the Meyer Werft shipyard in Germany and T. Mariotti shipyard in Italy, respectively. In addition, the estimated total cost reflects the currency denomination that
we are committed to expend, including the effect of foreign currency swaps and nonderivative designated cash equivalent hedge balances.
(c) These construction contracts are denominated in Euros and, accordingly, the Euro amounts have been fixed into Sterling or U.S. dollars, which are the functional
currencies of the cruise brands that are expected to operate the ships, by utilizing foreign currency swaps and designated Euro cash equivalent balances.
(d) These construction contracts are denominated in Euros, which is the functional currency of the cruise brands that are expected to operate the ships.
(e) These ship orders were entered into in December 2007.
(f) The estimated total costs of these contracts denominated in Euros and Sterling have been translated into U.S. dollars using the November 30, 2007 exchange rates.
In connection with our cruise ships under contract for
construction listed above, we have paid $1.01 billion through
November 30, 2007 and anticipate paying the remaining esti-
mated total costs as follows: $2.68 billion, $2.96 billion, $3.33
billion, $2.20 billion and $1.15 billion in fiscal 2008, 2009,
2010, 2011 and 2012, respectively.
Operating Leases
Rent expense under our operating leases, primarily for
office, warehouse and ship operating leases, was $46 million,
$47 million and $50 million in fiscal 2007, 2006 and 2005,
respectively. At November 30, 2007, minimum annual rentals
for our operating leases, with initial or remaining terms in
excess of one year, were as follows (in millions): $38, $40,
$33, $31, $30 and $158 in fiscal 2008 through 2012 and
thereafter, respectively.
Port Facilities and Other
At November 30, 2007, minimum amounts payable for our
annual usage of port facilities and other contractual commit-
ments with remaining terms in excess of one year were as
follows (in millions): $111, $95, $75, $51, $45 and $184 in
fiscal 2008 through 2012 and thereafter, respectively.
NOTE 7—CONTINGENCIES
Litigation
In January 2006, a lawsuit was filed against Carnival
Corporation and its subsidiaries and affiliates, and other non-
affiliated cruise lines in New York on behalf of a purported
class of owners of intellectual property rights to musical plays
and other works performed in the U.S. The plaintiffs claim
infringement of copyrights to Broadway, off Broadway and
other plays. The suit seeks payment of (i) damages, (ii) disgorge-
ment of alleged profits and (iii) an injunction against future
infringement. In the event that an award is given in favor of
the plaintiffs, the amount of damages, if any, which Carnival
Corporation and its subsidiaries and affiliates would have to
pay is not currently determinable. The ultimate outcome of
this matter cannot be determined at this time. However, we
intend to vigorously defend this matter.
In the normal course of our business, various other claims
and lawsuits have been filed or are pending against us. Most
of these claims and lawsuits are covered by insurance and,
accordingly, the maximum amount of our liability, net of any
insurance recoverables, is typically limited to our self-insurance
retention levels. However, the ultimate outcome of these
claims and lawsuits which are not covered by insurance
cannot be determined at this time.
Contingent Obligations
At November 30, 2007, Carnival Corporation had contingent
obligations totaling approximately $1.07 billion to participants
in lease out and lease back type transactions for three of its
ships. At the inception of the leases, the entire amount of
the contingent obligations was paid by Carnival Corporation
to major financial institutions to enable them to directly pay
these obligations. Accordingly, these obligations are consid-
ered extinguished, and neither the funds nor the contingent
obligations have been included on our balance sheets. Carnival
Corporation would only be required to make payments for
these contingent obligations in the remote event of nonperfor-
mance by these major financial institutions, all of which have
long-term credit ratings of AA or higher. In addition, Carnival
Corporation obtained a direct guarantee from AA or higher
rated financial institutions for $278 million of the above noted
contingent obligations, thereby further reducing the already
remote exposure to this portion of the contingent obligations.
In certain cases, if the credit ratings of the major financial
institutions who are directly paying the contingent obligations
fall below AA-, which we believe is remote, then Carnival
Corporation will be required to move those funds being held
by those institutions to other financial institutions whose
credit ratings are AA- or above. If such unlikely events were
to occur, we would incur costs that we estimate would not be
material to our financial statements. If Carnival Corporation’s
credit rating, which is A-, falls below BBB, it would be required
to provide a standby letter of credit for $77 million, or alterna-
tively provide mortgages in the aggregate amount of $77 million
on two of its ships.