Carnival Cruises 2008 Annual Report Download - page 97

F-38
At November 30, 2008 and 2007, we had working capital deficits of $4.1 billion and $5.3
billion, respectively. Our November 30, 2008 deficit included $2.5 billion of customer
deposits, which represent the passenger revenues we collect in advance of sailing dates and,
accordingly, is substantially more of a deferred revenue item rather than an actual current
cash liability. We use our long-term ship assets to realize a portion of this deferred
revenue in addition to consuming current assets. In addition, our November 30, 2008 working
capital deficit included $1.6 billion of current debt obligations, which included $649
million outstanding under our Facility. Our Facility, substantially all of which matures in
2012, is available to provide long-term rollover financing of our current debt. After
excluding customer deposits and current debt obligations from our working capital deficit
balance, our non-GAAP adjusted working capital deficit was only $4 million.
We continue to generate substantial cash from operations and have strong investment
grade credit ratings of A-/A3, which provide us with flexibility in most financial credit
market environments to refinance our current debt, if necessary. Accordingly, we believe we
have the ability to maintain a substantial working capital deficit and still meet our
operating, investing and financing needs over the next 12 months. As explained above, our
business model allows us to operate with a significant working capital deficit and,
accordingly, we believe we will continue to have a working capital deficit for the
foreseeable future.
Our Standard & Poor's Rating Services A- credit rating recently was assigned a negative
outlook, which reflects their concern that the weakened state of the economy and the pull
back in consumer spending will pressure our ability to sustain our A- credit rating. If we
were to be downgraded by S&P to BBB+, although this would result in a slight increase in our
borrowing costs on a prospective basis, we do not believe it would have a material adverse
impact on our financial results or our ability to obtain committed credit facilities or issue
debt.
During fiscal 2008, our net expenditures for capital projects were $3.4 billion, of
which $2.7 billion was spent for our ongoing new shipbuilding program, including $2.1 billion
for the final delivery payments for Ventura, AIDAbella, Eurodam, Carnival Splendor and Ruby
Princess. In addition to our new shipbuilding program, we had capital expenditures of $391
million for ship improvements and replacements and $231 million for Alaska tour assets,
cruise port facility developments and information technology and other assets. Also during
fiscal 2008, we received an aggregate of $141 million from the sale of the QE2 and the final
payment on the 2003 sale of Holland America Line's Nieuw Amsterdam.
During fiscal 2008, under our Facility we borrowed and repaid $4.1 billion and $4.2
billion, respectively, in connection with our needs for cash at various times throughout the
year. In addition, during fiscal 2008 we borrowed $2.2 billion of other long-term debt,
principally under ship financing and related facilities compared to $2.7 billion in 2007, or
a decrease of $500 million. We repaid $1.2 billion of other long-term debt, which was
primarily comprised of $302 million of our 1.75% Notes, $233 million of our Zero-Coupon
Notes, $308 million upon maturity of our 4.4% and 6.15% fixed rate notes and $206 million of
our semi-annual export credit facility payments. Finally, we paid cash dividends of $1.3
billion in 2008 and purchased $83 million, net, of Carnival Corporation common stock and
Carnival plc ordinary shares in open market transactions.