Carnival Cruises 2012 Annual Report Download - page 80

Table of Contents
Upon the closing of the DLC transaction, Carnival Corporation and Carnival plc also executed the Equalization and Governance Agreement, which provides
for the equalization of dividends and liquidation distributions based on an equalization ratio and contains provisions relating to the governance of the DLC
arrangement. Because the equalization ratio is 1 to 1, one Carnival plc ordinary share is entitled to the same distributions, subject to the terms of the
Equalization and Governance Agreement, as one share of Carnival Corporation common stock. In a liquidation of either company or both companies, if the
hypothetical potential per share liquidation distributions to each company’s shareholders are not equivalent, taking into account the relative value of the two
companies’ assets and the indebtedness of each company, to the extent that one company has greater net assets so that any liquidation distribution to its
shareholders would not be equivalent on a per share basis, the company with the ability to make a higher net distribution is required to make a payment to the
other company to equalize the possible net distribution to shareholders, subject to certain exceptions.
At the closing of the DLC transaction, Carnival Corporation and Carnival plc also executed deeds of guarantee. Under the terms of Carnival Corporation’s
deed of guarantee, Carnival Corporation has agreed to guarantee all indebtedness and certain other monetary obligations of Carnival plc that are incurred under
agreements entered into on or after the closing date of the DLC transaction. The terms of Carnival plc’s deed of guarantee mirror 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 arrangement, 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 flows and assets of one company are required to be used to pay the obligations of the other company, if necessary.
Given our DLC arrangement, 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.
NOTE 4 – Property and Equipment
Property and equipment consisted of the following (in millions):
November 30,
2012 2011
Ships, including ship improvements $40,774 $39,764
Ships under construction 380 526
41,154 40,290
Land, buildings and improvements, including leasehold improvements and port facilities 901 898
Computer hardware and software, transportation equipment and other 1,146 1,016
Total property and equipment 43,201 42,204
Less accumulated depreciation and amortization (11,064) (10,150)
$32,137(a) $32,054(a)
(a) At November 30, 2012 and 2011, the net carrying values of ships and ships under construction for our North America, EAA, Cruise Support and
Tour and Other segments were $18.0 billion, $12.8 billion, $0.2 billion and $0.1 billion and $17.9 billion, $12.8 billion, $0.2 billion and $0.1
billion, respectively.
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