Carnival Cruises 2011 Annual Report Download - page 30

At November 30, 2011, none of our newbuild passenger capacity under contract that is exposed to currency
exchange risk is hedged. The only newbuild contracts that have currency exchange risk for our cruise brands are
two Princess and one P&O Cruises (UK) euro-denominated newbuild contracts with remaining commitments
totaling $2.0 billion.
The cost of shipbuilding orders that we may place in the future for our cruise brands that is denominated in a
currency that is different than their functional currency is expected to be affected by foreign currency exchange
rate fluctuations. Given the movement in the U.S. dollar and sterling relative to the euro over the past several
years, the U.S. dollar and sterling cost to order new cruise ships has been volatile. If the U.S. dollar or sterling
declines against the euro, this may affect our desire to order future new cruise ships for U.S. dollar or sterling
functional currency brands.
Interest Rate Risks
We manage our exposure to fluctuations in interest rates through our investment and debt portfolio management
strategies. These strategies include purchasing high quality short-term investments with floating interest rates,
and evaluating our debt portfolio to make periodic adjustments to the mix of fixed and floating rate debt through
the use of interest rate swaps and the issuance of new debt or the early retirement of existing debt. At
November 30, 2011, 65% and 35% (69% and 31% at November 30, 2010) of our debt bore fixed and floating
interest rates, respectively, including the effect of interest rate swaps.
Fuel Price Risks
Our exposure to market risk for changes in fuel prices substantially all relate to the consumption of fuel on our
ships. As previously discussed, in fiscal 2011 we implemented a fuel derivatives program to mitigate a portion of
our economic risk attributable to potentially significant fuel price increases. We designed our fuel derivatives
program to maximize operational flexibility by utilizing derivative markets with significant trading liquidity. As
part of our fuel derivatives program, we will evaluate various derivative products and strategies. During 2011, we
entered into zero cost collars that established ceiling and floor Brent prices. These derivatives are based on Brent
prices whereas the actual fuel used on our ships is marine fuel. Changes in the Brent prices may not show a high
degree of correlation with changes in our underlying marine fuel prices. We will not realize any economic gain
or loss upon the maturity of our zero cost collars unless the price of Brent is above the ceiling price or below the
floor price. We believe that these derivatives will act as economic hedges, however hedge accounting is not
applied.
At November 30, 2011, our outstanding fuel derivatives consisted of zero cost collars on Brent for a portion of
our estimated fuel consumption as follows:
Maturities (a)
Barrels
(in thousands)
Weighted-Average
Floor Price
Weighted-Average
Ceiling Price
Percent of Estimated
Fuel Consumption
2012
Q3............................... 522 $75 $135 10%
Q4............................... 522 75 135 10%
1,044 $75 $135
Fiscal 2013 ........................ 2,112 $74 $132 10%
Fiscal 2014 ........................ 2,112 $71 $128 10%
Fiscal 2015 ........................ 2,160 $71 $125 10%
(a) Fuel derivatives mature evenly over each quarter within the above fiscal years.
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