Carnival Cruises 2013 Annual Report Download - page 97

Table of Contents
Contingencies
We periodically assess the potential liabilities related to any lawsuits or claims brought against us, as well as for other known unasserted claims, including
environmental, legal, regulatory, guest and crew and tax matters. In addition, we periodically assess the recoverability of our trade and other receivables and
other counterparty credit exposures, such as contractual nonperformance by financial and other institutions with which we conduct significant business. Our
credit exposure includes contingent obligations related to cash payments received directly by travel agents and tour operators for cash collected by them on
cruise sales in most of Europe where we are obligated to extend credit in a like amount to these guests even if we do not receive payment from the travel agents
and tour operators. While it is typically very difficult to determine the timing and ultimate outcome of these matters, we use our best judgment to determine if it
is probable, or MLTN for income tax matters, that we will incur an expense related to the settlement or final adjudication of such matters and whether a
reasonable estimation of such probable or MLTN loss, if any, can be made. In assessing probable losses, we make estimates of the amount of probable
insurance recoveries, if any, which are recorded as assets. We accrue a liability and establish a reserve when we believe a loss is probable or MLTN for
income tax matters, and the amount of the loss can be reasonably estimated in accordance with U.S. generally accepted accounting principles (“U.S.
GAAP”). Such accruals and reserves are typically based on developments to date, management’s estimates of the outcomes of these matters, our experience in
contesting, litigating and settling other similar non-income tax matters, historical claims experience, actuarially determined estimates of liabilities and any
related insurance coverages. See Note 7 – “Contingencies,” Note 8 – “Income and Other Taxes” and Note 10 – “Fair Value Measurements, Derivative
Instruments and Hedging Activities” in the accompanying consolidated financial statements for additional information concerning our contingencies.
Given the inherent uncertainty related to the eventual outcome of these matters and potential insurance recoveries, it is possible that all or some of these matters
may be resolved for amounts materially different from any provisions or disclosures that we may have made with respect to their resolution. In addition, as
new information becomes available, we may need to reassess the amount of asset or liability that needs to be accrued related to our contingencies. All such
revisions in our estimates could materially impact our results of operations and financial position.
Results of Operations
We earn substantially all of our cruise revenues from the following:
• sales of passenger cruise tickets and, in some cases, the sale of air and other transportation to and from airports near our ships’ home ports and
cancellation fees. The cruise ticket price typically includes accommodations, most meals, some non-alcoholic beverages and most onboard
entertainment. We also collect governmental fees and taxes from our guests, and
• sales of goods and services primarily onboard our ships not included in the cruise ticket price including substantially all liquor and some non-alcoholic
beverage sales, shore excursions, casino gaming, gift shop sales, photo sales, full service spas, communication services, cruise vacation protection
programs and pre- and post-cruise land packages. These goods and services are provided either directly by us or by independent concessionaires, from
which we receive either a percentage of their revenues or a fee.
We incur cruise operating costs and expenses for the following:
• the costs of passenger cruise bookings, which represent costs that are directly associated with passenger cruise ticket revenues, and include travel agent
commissions, air and other transportation related costs, governmental fees and taxes that vary with guest head counts and related credit card fees,
• onboard and other cruise costs, which represent costs that are directly associated with onboard and other revenues, and include the costs of liquor and
some non-alcoholic beverages, costs of tangible goods sold by us in our gift shops and from our photo sales, communication costs, costs of cruise
vacation protection programs, costs of pre- and post-cruise land packages and related credit card fees. Concession revenues do not have significant
associated expenses because the costs and services incurred for concession revenues are borne by our concessionaires,
• fuel costs, which include fuel delivery costs,
• payroll and related costs, which represent all costs related to our shipboard personnel, including deck and engine crew, including officers, and hotel and
administrative employees, while costs associated with our shoreside personnel are included in selling and administrative expenses,
• food costs, which include both our guest and crew food costs and
• other ship operating costs, which include port costs that do not vary with guest head counts, repairs and maintenance, including minor improvements
and dry-dock expenses, hotel costs, entertainment, gains and losses on ship sales, including ship impairments, freight and logistics, insurance
premiums and all other ship operating costs and expenses.
For segment information related to our North America and EAA cruise brands’ revenues, expenses, operating income and other financial information, see Note
11 – “Segment Information” in the accompanying consolidated financial statements.
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