Carnival Cruises 2008 Annual Report Download - page 70

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F-11
closing date of the DLC transaction. The terms of Carnival plc's deed of guarantee are
identical to those of Carnival Corporation's. In addition, Carnival Corporation and Carnival
plc have each extended their respective deeds of guarantee to the other's pre-DLC
indebtedness and certain other monetary obligations, or alternatively have provided
standalone guarantees in lieu of utilization of these deeds of guarantee, thus effectively
cross guaranteeing all Carnival Corporation and Carnival plc indebtedness and certain other
monetary obligations. Each deed of guarantee provides that the creditors to whom the
obligations are owed are intended third party beneficiaries of such deed of guarantee.
The deeds of guarantee are governed and construed in accordance with the laws of the
Isle of Man. Subject to the terms of the deeds of guarantee, the holders of indebtedness and
other obligations that are subject to the deeds of guarantee will have recourse to both
Carnival plc and Carnival Corporation though a Carnival plc creditor must first make written
demand on Carnival plc and a Carnival Corporation creditor on Carnival Corporation. Once the
written demand is made by letter or other form of notice, the holders of indebtedness or
other obligations may immediately commence an action against the relevant guarantor.
Accordingly, there is no requirement under the deeds of guarantee to obtain a judgment, take
other enforcement actions or wait any period of time prior to taking steps against the
relevant guarantor. All actions or proceedings arising out of or in connection with the
deeds of guarantee must be exclusively brought in courts in England.
Under the terms of the DLC transaction documents, Carnival Corporation and Carnival plc
are permitted to transfer assets between the companies, make loans to or investments in each
other and otherwise enter into intercompany transactions. The companies have entered into
some of these types of transactions and may enter into additional transactions in the future
to take advantage of the flexibility provided by the DLC structure and to operate both
companies as a single unified economic enterprise in the most effective manner. In addition,
under the terms of the Equalization and Governance Agreement and the deeds of guarantee, the
cash flow and assets of one company are required to be used to pay the obligations of the
other company, if necessary.
Given the DLC structure as described above, we believe that providing separate financial
statements for each of Carnival Corporation and Carnival plc would not present a true and
fair view of the economic realities of their operations. Accordingly, separate financial
statements for both Carnival Corporation and Carnival plc have not been presented.
Simultaneously with the completion of the DLC transaction, a partial share offer ("PSO")
for 20% of Carnival plc's shares was made and accepted, which enabled 20% of Carnival plc
shares to be exchanged for 41.7 million Carnival Corporation shares. The 41.7 million shares
of Carnival plc held by Carnival Corporation as a result of the PSO, which cost $1.05
billion, are being accounted for as treasury stock in the accompanying balance sheets.
NOTE 4 - Property and Equipment
Property and equipment consisted of the following (in millions):
November 30,
2008 2007
Ships $30,557 $29,324
Ships under construction 707 1,655
31,264 30,979
Land, buildings and improvements, including
leasehold improvements and port facilities 762 717
Computer hardware and software,
transportation equipment and other 847 844
Total property and equipment 32,873 32,540
Less accumulated depreciation and amortization (6,416) (5,901)
$26,457 $26,639
Capitalized interest, primarily on our ships under construction, amounted to $52
million, $44 million and $37 million in fiscal 2008, 2007 and 2006, respectively. Ships under
construction include progress payments for the construction of these ships, as well as design
and engineering fees, capitalized interest, construction oversight costs and various owner
supplied items. At November 30, 2008, five ships with an aggregate net book value of $1.9