[NOTIFY] 72731,737
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 1-9610
CARNIVAL CORPORATION
(Exact name of registrant as specified in its charter)
Republic of Panama 59-1562976
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3655 N.W. 87th Avenue, Miami, Florida 33178-2428
(Address of principal executive offices)
(zip code)
(305) 599-2600
(Registrants telephone number, including area code)
None.
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No__
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of June 28, 1996.
Class A Common Stock, $.01 par value: 235,278,746 shares
Class B Common Stock, $.01 par value: 54,957,142 shares
CARNIVAL CORPORATION
I N D E X
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1: Financial Statements
Consolidated Balance Sheets -
May 31, 1996 and November 30, 1995 1
Consolidated Statements of Operations -
Six and Three Months Ended May 31, 1996
and May 31, 1995 2
Consolidated Statements of Cash Flows -
Six Months Ended May 31, 1996
and May 31, 1995 3
Notes to Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 1: Legal Proceedings 13
Item 4: Submission of Matters to a Vote of Security Holders 14
Item 5: Other Information 15
Item 6: Exhibits and Reports on Form 8-K 15
</TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS May 31, November 30,
CURRENT ASSETS 1996 1995
<S> <C> <C>
Cash and cash equivalents $ 89,167 $ 53,365
Short-term investments 26,065 50,395
Accounts receivable 35,385 33,080
Consumable inventories, at average cost 52,072 48,820
Prepaid expenses and other 77,092 70,718
Total current assets 279,781 256,378
PROPERTY AND EQUIPMENT--at cost, less
accumulated depreciation and
amortization 3,806,703 3,414,823
OTHER ASSETS
Goodwill, less accumulated amortization of
$51,783 in 1996 and $48,292 in 1995 223,080 226,571
Investments in affiliates 343,152 25,569
Long-term notes receivable 92,177 78,907
Other assets 31,670 103,239
$4,776,563 $4,105,487
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 72,682 $ 72,752
Accounts payable 105,682 90,237
Accrued liabilities 121,172 113,483
Customer deposits 456,233 292,606
Dividends payable 25,644 25,632
Total current liabilities 781,413 594,710
LONG-TERM DEBT 1,238,757 1,035,031
CONVERTIBLE NOTES 114,991 115,000
OTHER LONG-TERM LIABILITIES 17,093 15,873
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY
Class A Common Stock; $.01 par value; one vote per
share; 399,500 shares authorized; 235,274 and
229,839 shares issued and outstanding 2,353 2,298
Class B Common Stock; $.01 par value;
five votes per share; 100,500 shares authorized;
54,957 shares issued and outstanding 550 550
Paid-in-capital 741,583 594,811
Retained earnings 1,884,208 1,752,140
Less-other (4,385) (4,926)
Total shareholders' equity 2,624,309 2,344,873
$4,776,563 $4,105,487
</TABLE>
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Six Months Three Months
<TABLE>
<CAPTION>
Ended May 31, Ended May 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES $965,624 $872,646 $516,836 $452,826
COSTS AND EXPENSES
Operating expenses 566,240 513,176 302,544 265,947
Selling and administrative 140,243 124,246 68,961 60,071
Depreciation and amortization 67,936 62,044 35,101 30,540
774,419 699,466 406,606 356,558
OPERATING INCOME 191,205 173,180 110,230 96,268
NONOPERATING INCOME (EXPENSE)
Interest income 15,104 6,906 7,259 4,907
Interest expense, net of
capitalized interest (33,216) (33,315) (17,178) (15,764)
Other income 5,232 5,189 4,475 3,827
Income tax benefit 5,023 5,361 1,497 531
(7,857) (15,859) (3,947) (6,499)
NET INCOME $183,348 $157,321 $106,283 $ 89,769
EARNINGS PER SHARE $.64 $.56 $.37 $.32
</TABLE>
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended May 31,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $183,348 $157,321
Adjustments:
Depreciation and amortization 67,936 62,044
Other 3,423 3,395
Changes in operating assets and liabilities:
Increase in receivables (2,557) (11,219)
Increase in consumable inventories (3,252) (3,788)
Increase in prepaid and other (6,459) (30,320)
Increase in accounts payable 15,445 1,263
Increase (decrease) in accrued liabilities 7,689 (4,968)
Increase in customer deposits 163,627 137,498
Net cash provided from operations 429,200 311,226
INVESTING ACTIVITIES:
Decrease in short-term investments, net 24,099 5,864
Additions to property and equipment, net (456,296) (75,919)
(Additions to) reductions in investments
in affiliates (163,116) 11,927
Increase in long-term notes receivable (23,566) (833)
Decrease in other non-current assets 71,569 848
Net cash used for investing activities (547,310) (58,113)
FINANCING ACTIVITIES:
Principal payments of long-term debt (458,369) (307,257)
Proceeds from long-term debt 662,004 136,212
Dividends paid (51,268) (42,386)
Issuance of common stock 1,545 47,724
Net cash provided from (used for)
financing activities 153,912 (165,707)
Net increase in cash and
cash equivalents 35,802 87,406
Cash and cash equivalents at beginning
of period 53,365 54,105
Cash and cash equivalents at end of period $89,167 $141,511
Supplemental disclosure:
Non-cash effect of issuance of Class A
Common Stock in connection with investment
in Airtours plc $144,171 $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS FOR PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The financial statements included herein have been prepared by Carnival
Corporation without audit pursuant to the rules and regulations of the
Securities and Exchange Commission.
The accompanying consolidated balance sheet at May 31, 1996, the
consolidated statements of operations and cash flows for the six and three
months ended May 31,1996 and May 31, 1995 are unaudited and, in the opinion
of management, contain all adjustments, consisting of only normal recurring
accruals, necessary for a fair presentation. The operations of Carnival
Corporation and its subsidiaries (the "Company") are seasonal and results for
interim periods are not necessarily indicative of the results for the entire
year.
The accompanying financial statements include the consolidated balance
sheets and statements of operations and cash flows of the Company and its
subsidiaries. All material intercompany transactions and accounts have been
eliminated in consolidation. Certain amounts in prior periods have been
reclassified to conform with the current period's presentation.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<Caption
May 31, November 30,
1996 1995
(in thousands)
<S> <C> <C>
Vessels $3,962,696 $3,467,731
Vessels under construction 208,966 289,661
4,171,662 3,757,392
Land, buildings and improvements 159,544 132,183
Transportation and other equipment 188,826 174,903
Total property and equipment 4,520,032 4,064,478
Less - accumulated depreciation and
amortization (713,329) (649,655)
$3,806,703 $3,414,823
</TABLE>
Interest costs associated with the construction of vessels and buildings,
until they are placed in service, are capitalized and amounted to $13.8
million and $8.1 million for the six months ended May 31, 1996 and May 31,
1995, respectively and $7.8 million and $4.3 million for the three months
ended May 31, 1996 and May 31, 1995, respectively.
NOTE 3 - INVESTMENTS IN AFFILIATES
In April 1996, the Company acquired a 29.6% equity interest in Airtours plc
("Airtours"), a large United Kingdom, publicly traded integrated tour
company, for approximately $307 million. The Company entered into an
unsecured five year $200 million multi-currency revolving credit facility
("Multi-currency Revolving Credit Facility") and funded approximately $163
million of the acquisition cost through this facility. To fund the remaining
purchase price, the Company issued 5,301,186 shares of Class A common stock
valued at approximately $144 million. The Company's investment in Airtours
will be accounted for using the equity method of accounting. The Company
will record its equity in Airtours' earnings on a two month lag basis.
Consequently, the Company will not report its equity in Airtours' earnings
for the period April through June 1996 until Carnival's third quarter ending
August 31, 1996.
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<Caption
May 31, November 30,
1996 1995
(in thousands)
<S> <C> <C>
Unsecured Revolving Credit Facility Due 2000 $ 238,000 $ 185,000
Multi-currency Revolving Credit Facility Due 2001 168,000 -
Mortgages and other loans payable bearing interest
at rates ranging from 8% to 9.9%, secured by
vessels, maturing through 1999 174,300 208,078
Unsecured 5.75% Notes Due March 15, 1998 200,000 200,000
Unsecured 6.15% Notes Due October 1, 2003 124,950 124,946
Unsecured 7.20% Debentures Due October 1, 2023 124,869 124,867
Unsecured 7.70% Notes Due July 15, 2004 99,907 99,902
Unsecured 7.05% Notes Due May 15, 2005 99,821 99,811
Other loans payable 81,592 65,179
1,311,439 1,107,783
Less portion due within one year (72,682) (72,752)
$1,238,757 $1,035,031
</TABLE>
The Multi-currency Revolving Credit Facility bears interest at LIBOR plus
17 basis points, and provides for a facility fee of .06% on the total
facility. As of May 31, 1996, the Company had an undrawn balance of $32
million under the facility. As of May 31, 1996, the Company also had $512
million available for borrowing under its $750 Million Revolver and an
additional $250 million available under a short-term revolving credit
facility to be used for general corporate purposes.
In July 1992, the Company issued $115 million of 4-1/2% Convertible
Subordinated Notes Due July 1, 1997 (the "Convertible Notes"). The
Convertible Notes are convertible into 57.55 shares of the Company's Class A
Common Stock per $1,000 of notes. As of May 31, 1996 the Convertible Notes
are convertible into a total of approximately 6.6 million shares of Class A
Common Stock. The Convertible Notes are redeemable in whole or in part at
the Company's option on or after July 3, 1996.
NOTE 5 - SHAREHOLDERS' EQUITY
The following represents an analysis of the changes in shareholders' equity
for the six months ended May 31, 1996:
<TABLE>
<CAPTION>
COMMON STOCK
$.01 PAR VALUE PAID-IN RETAINED
CLASS A CLASS B CAPITAL EARNINGS OTHER TOTAL
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance November 30,1995 $2,298 $550 $594,811 $1,752,140 $(4,926) $2,344,873
Net income for the period 183,348 183,348
Cash dividends (51,280) (51,280)
Changes in securities
valuation allowance (231) (231)
Issuance of common stock 53 144,118 144,171
Issuance of stock to
employees under stock plans 2 2,654 2,656
Vested portion of common
stock under restricted
stock plan 772 772
Balance May 31, 1996 $2,353 $550 $741,583 $1,884,208 $(4,385) $2,624,309
</TABLE>
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Capital Expenditures
The following table provides a description of ships currently under
contract for construction (in millions of dollars):
<TABLE>
<CAPTION>
Expected Number Estimated
Service Contract of Lower Total
Ship Name Operating Unit Date Denomination Berths Cost
<S> <C> <C> <C> <C> <C>
Carnival Destiny Carnival Cruise Lines 11/96 Lire 2,640 $ 430
Rotterdam VI Holland America Line 10/97 Lire 1,320 235
Elation Carnival Cruise Lines 3/98 U. S. Dollar 2,040 300
Paradise Carnival Cruise Lines 12/98 U. S. Dollar 2,040 300
Carnival Triumph Carnival Cruise Lines 7/99 Lire 2,640 415
10,680 $1,680
</TABLE>
The Company pays for the majority of the cost of the vessels upon delivery
from the shipyards which, on an average, occurs approximately six weeks prior
to the introduction of the vessel into service.
Contracts denominated in foreign currencies have been fixed into U.S.
Dollars through the utilization of forward currency contracts. In connection
with the vessels under construction described above, the Company has paid
$209 million through May 31, 1996 and anticipates paying approximately $301
million during the twelve month period ended May 31, 1997 and approximately
$1.2 billion beyond May 31, 1997. In connection with the delivery of
Carnival Cruise Lines' Inspiration and Holland America Line's Veendam, the
Company paid $392 million in the first half of fiscal 1996.
Litigation
During 1995, the Company received $40 million in cash, in addition to other
consideration, from the settlement of litigation with Metra Oy, the former
parent company of Wartsila Marine Industries Incorporated ("Wartsila"),
related to losses suffered in connection with the construction of three of
the Company's cruise ships.
On June 25, 1996, the Company reached an agreement with the trustees of
Wartsila and creditors for the bankruptcy which resulted in a cash payment of
approximately $80 million. After payment of certain costs, the Company
expects the net proceeds to amount to approximately $75 million. This
transaction will be accounted for in the Company's third fiscal quarter ended
August 31, 1996.
In April 1996, a complaint was filed in the Circuit Court of the Eleventh
Judicial Circuit against the Company and a complaint was filed in the
Superior Court of Washington against Holland America Line - Westours Inc., a
wholly-owned subsidiary of the Company (the "Complaints"). The Complaints,
brought on behalf of a purported class of all persons who traveled on a
Company ship within the past four years and paid "Port Charges" to the
Company, allege that statements made by the Company in advertising and
promotional materials concerning Port Charges were false and misleading. The
Complaints allege claims of negligent misrepresentation and unjust enrichment
and violations of the Washington Consumer Protection Act and seek unspecified
compensatory damages on behalf of the purported class (or, alternatively,
refunds of Port Charges allegedly in excess of certain charges levied by
governmental authorities), attorney's fees and costs and punitive damages and
injunctive relief. Two other complaints containing allegations similar to
those set forth in the Complaints have been filed in the Circuit Court of the
Eleventh Judicial Circuit against the Company since the filing of the
Complaints. All of the actions are in their early stages and it is not now
possible to determine the ultimate outcome of the suits. Management of the
Company believes that the Company has substantial and meritorious defenses to
the claims and intends to vigorously defend the lawsuits. Management
understands that similar purported class action lawsuits were filed in state
courts in Florida, California and Washington against five other cruise lines.
In the normal course of business, various other claims and lawsuits have
been filed or are pending against the Company. The majority of these claims
and lawsuits are covered by insurance. Management believes the outcome of
any such suits which are not covered by insurance would not have a material
adverse effect on the Company's financial condition or results of operations.
NOTE 7 - RECENT EVENTS
In February 1996, the Company sold an option to NCL Holding AS, the parent
company of Norwegian Cruise Line, Ltd. (formerly named Kloster Cruise
Ltd.), to purchase $101 million principal amount of 13 percent senior secured
notes due 2003 of Norwegian Cruise Line, Ltd.(the "NCL Bonds") that were
owned by the Company. The option was exercised in April 1996 and the Company
sold the NCL Bonds to NCL Holding AS. The transaction resulted in a small
gain.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements under this caption, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", constitute
"forward-looking statements" under the Private Securities Litigation Reform
Act of 1995 (the "Reform Act"). See Part II Other Information Item
5(a),"Forward-Looking Statements."
General
The Company earns its revenues primarily from (i) the sale of passenger
tickets, which include accommodations, meals, most shipboard activities and
in many cases airfare, and (ii) the sale of goods and services on board its
cruise ships, such as casino gaming, liquor sales, gift shop sales and other
related services. The Company also derives revenues from the tour operations
of HAL Antillen N.V. ("HAL").
The following table presents selected segment and statistical information
for the periods indicated:
<TABLE>
<CAPTION>
Six Months Ended May 31, Three Months Ended May 31,
1996 1995 1996 1995
(in thousands)
<S> <C> <C> <C> <C>
REVENUES:
Cruise $931,019 $838,607 $489,332 $425,962
Tour 40,778 38,848 33,539 31,557
Intersegment revenues (6,173) (4,809) (6,035) (4,693)
$965,624 $872,646 $516,836 $452,826
OPERATING EXPENSES:
Cruise $532,695 $481,318 $278,008 $243,819
Tour 39,718 36,667 30,571 26,821
Intersegment expenses (6,173) (4,809) (6,035) (4,693)
$566,240 $513,176 $302,544 $265,947
OPERATING INCOME:
Cruise $204,749 $185,489 $114,629 $ 98,282
Tour (13,544) (12,309) (4,399) (2,014)
$191,205 $173,180 $110,230 $ 96,268
SELECTED STATISTICAL INFORMATION:
Passengers Carried 843 697 436 354
Passenger Cruise Days 5,101 4,276 2,647 2,169
Occupancy Percentage 107.1% 100.1% 107.2% 100.3%
</TABLE>
The following table sets forth statements of operations data expressed as a
percentage of total revenues:
<TABLE>
<CAPTION>
Six Months Ended May 31, Three Months Ended May 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES 100% 100% 100% 100%
COSTS AND EXPENSES:
Operating expenses 59 59 59 59
Selling and administrative 14 14 13 13
Depreciation and amortization 7 7 7 7
OPERATING INCOME 20 20 21 21
NONOPERATING INCOME (EXPENSE) (1) (2) - (1)
NET INCOME 19% 18% 21% 20%
</TABLE>
The Company's different businesses experience varying degrees of
seasonality. The Company's revenue from the sale of passenger tickets for
Carnival Cruise Lines' ("Carnival") ships is moderately seasonal.
Historically, demand for Carnival cruises has been greatest during the period
from late June through August and lower during the fall months. HAL cruise
revenues are more seasonal than Carnival's cruise revenues. Demand for HAL
cruises is strongest during the summer months when HAL ships operate in
Alaska and Europe for which HAL obtains higher pricing. Demand for HAL
cruises is lower during the winter months when HAL ships sail in the more
competitive markets. The Company's tour revenues are extremely seasonal with
a large majority of tour revenues generated during the late spring and
summer months in conjunction with the Alaska cruise season. In April 1996
the Company made an investment in Airtours plc which it will record using the
equity basis of accounting. Airtours operating results will be recorded by
the Company on a two month lag basis starting with the Company's quarter
ending August 31, 1996. Airtours' earnings are extremely seasonal with
significant profits being generated during Airtours' fourth fiscal quarter
ending September 30, less profits in their third fiscal quarter ended June
30, and Airtours incurs seasonal losses in their first two fiscal quarters
ending December 31 and March 31.
Six Months Ended May 31, 1996 Compared
To Six Months Ended May 31, 1995
Revenues
The increase in total revenues from the first half of 1995 to the first
half of 1996 was primarily comprised of a $92.4 million, or 11.0%, increase
in cruise revenues. The increase in cruise revenues was primarily the result
of an 11.5% increase in capacity for the period resulting from the addition
of Carnival Cruise Lines' cruise ships Imagination in July 1995 and
Inspiration in March 1996. Occupancy rates were up 7% and gross pricing was
down 7% resulting in gross yield (total revenue per lower berth) remaining
essentially unchanged. Net yields, ie. net revenue per lower berth (net
revenue is total revenues less travel agent commissions, airfare costs and
other less significant cruise costs), increased 1% during the first half of
the year due to improved net pricing.
Average capacity is expected to increase 17% during the third quarter of
1996 and 8% during the fourth fiscal quarter as compared with the same
periods in 1995 as a result of the introduction into service of the
Imagination in July 1995, the Inspiration in March 1996, and the Veendam in
May 1996. See "PART II. ITEM 5. OTHER INFORMATION - Forward Looking
Statements".
Costs and Expenses
Operating expenses increased $53.1 million, or 10.3%, from the first half
of 1995 to the first half of 1996. Cruise operating costs increased by $51.4
million, or 10.7%, to $532.7 million in the first half of 1996 from $481.3
million in the first half of 1995, primarily due to additional costs
associated with the increased capacity.
Selling and administrative costs increased $16.0 million, or 12.9%,
primarily due to an increase in advertising expenses and an increase in
payroll and related costs during the first half of 1996 as compared with the
same period of 1995.
Depreciation and amortization increased by $5.9 million, or 9.5%, to $67.9
million in the first half of 1996 from $62.0 million in the first half of
1995 primarily due to the addition of the Imagination and Inspiration.
Nonoperating Income (Expense)
Total nonoperating expense (net of nonoperating income) decreased to $7.9
million for the first half of 1996 from $15.9 million in the first half of
1995. Interest income increased $8.2 million primarily due to earnings on
the NCL Bonds and, to a lesser degree, increases in cash balances. Cash
balances, up to the closing of the Airtours transaction, increased due to
United Kingdom regulatory requirements applicable to the Company's tender
offer to acquire its interest in Airtours (see Note 3 in the accompanying
financial statements for more information related to the Airtours
acquisition). Gross interest expense (excluding capitalized interest)
increased $5.5 million primarily as a result of additional borrowings
required in connection with the acquisition of Airtours. Capitalized interest
increased $5.6 million due to higher investment levels in vessels under
construction.
Three Months Ended May 31, 1996 Compared
To Three Months Ended May 31, 1995
Revenues
The increase in total revenues from the second quarter of 1995 to the
second quarter of 1996 was comprised principally of a $63.4 million, or
14.9%, increase in cruise revenues. The increase in cruise revenues was
primarily the result of an 14.3% increase in capacity for the period
resulting from the addition of Carnival Cruise Lines cruise ship Imagination
in July 1995 and Inspiration in March 1996. Occupancy rates were up 7% and
gross pricing was down 6% resulting in gross yield increasing by
approximately 1%. Net yields increased approximately 2% primarily due to the
improvement in gross yields discussed above as well as additional
improvements in net pricing.
Costs and Expenses
Operating expenses increased $36.6 million, or 13.8%, from the second
quarter of 1995 to the second quarter of 1996. Cruise operating costs
increased by $34.2 million, or 14.0%, to $278.0 million in the second quarter
of 1996 from $243.8 million in the second quarter of 1995, primarily due to
additional costs associated with the increased capacity.
Selling and administrative costs increased $8.9 million, or 14.8%,
primarily due to an increase in payroll and related costs and an increase in
advertising expenses during the second quarter of 1996 as compared with the
same quarter of 1995.
Depreciation and amortization increased by $4.6 million, or 14.9%, to $35.1
million in the second quarter of 1996 from $30.5 million in the second
quarter of 1995 primarily due to the addition of the Imagination and
Inspiration.
Nonoperating Income (Expense)
Total nonoperating expense (net of nonoperating income) decreased to $3.9
million for the second quarter of 1996 from $6.5 million in the second
quarter of 1995. Interest income increased $2.4 million primarily due to
earnings on the NCL Bonds and, to a lesser degree, an increase in cash
balances. Cash balances, up to the closing of the Airtours transaction,
increased due to United Kingdom regulatory requirements applicable to the
Company's tender offer to acquire its interest in Airtours (see Note 3 in the
accompanying financial statements for more information related to the
Airtours acquisition). Gross interest expense (excluding capitalized
interest) increased $4.9 million as a result of additional borrowings
required in connection with the acquisition of Airtours and the delivery of
the Inspiration. This increase was partially offset by a decrease in
interest expense due to a lower average borrowing rate. Capitalized
interest increased $3.5 million due to higher investment levels in vessels
under construction.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
The Company's business provided $429.2 million of net cash from operations
during the six months ended May 31, 1996, an increase of 37.9% compared to
the corresponding period in 1995. The increase between periods was primarily
the result of an increase in net income and changes in working capital
accounts, primarily customer deposits.
During the six months ended May 31, 1996, the Company expended
approximately $456 million on capital projects, of which $413 million was
spent in connection with its ongoing shipbuilding program and $21 million was
spent on the expansion of the Company's shore side operations facilities
located in Miami, Florida. The remainder was spent on vessel refurbishments,
tour assets and other equipment. Amounts expended on the shipbuilding
program included payments of $221 million related to the Inspiration which
entered service in March 1996 and $171 million related to Holland America
Line's Veendam which entered service in May 1996.
In April 1996, the Company closed on its transaction to acquire 29.6% of
Airtours. The Company paid approximately $163 million in cash and funded the
remaining purchase price of approximately $144 million through the issuance
of 5,301,186 shares of the Company's Class A Common Stock. See below for a
discussion regarding the funding of the cash portion of the acquisition.
The Company made scheduled principal payments totaling approximately $34
million under various individual vessel mortgage loans and repaid $422
million of the outstanding balance on the $750 Million Revolving Credit
Facility Due 2000 (the "$750 Million Revolver") during the six months ended
May 31, 1996. The Company borrowed $475 million under the $750 Million
Revolver for the final payment on the Inspiration and the Veendam. The
Company also borrowed $168 million under a $200 Million Multi-currency
Revolving Credit Facility Due 2001 (the "$200 Million Multi-currency
Revolver") during the same six months which was largely for the Airtours
investment described above.
During the six months ended May 31, 1996, the Company declared and paid
cash dividends of approximately $51 million.
Future Commitments
The Company has contracts for the delivery of five new vessels over the
next three years. The Company will pay approximately $301 million during the
twelve month period ending May 31, 1997 relating to the construction and
delivery of those new cruise ships and approximately $1.2 billion beyond May
31, 1997. See Note 6 in the accompanying financial statements for more
information related to commitments for the construction of cruise ships. In
addition, the Company has $1.4 billion of long-term debt and convertible
notes of which $73 million is due during the twelve month period ending May
31, 1997. See Note 4 in the accompanying financial statements for more
information regarding the Company's debt. Also, see "PART II. ITEM 5. OTHER
INFORMATION - Forward Looking Statements".
Funding Sources
Cash from operations is expected to be the Company's principal source of
capital to fund its debt service requirements and ship construction costs.
In addition, the Company may fund a portion of the construction cost of new
ships from borrowings under its revolving credit facilities and/or through
the issuance of long-term debt in the public or private markets. As of May
31, 1996, the Company had $512 million available for borrowing under its $750
Million Revolver, $32 million available under the $200 Million Multi-currency
Revolver and an additional $250 million available under a short-term
revolving credit facility to be used for general corporate purposes.
To the extent that the Company should require or choose to fund future
capital commitments from sources other than operating cash or from borrowings
under its revolving credit facilities, the Company believes that it will be
able to secure such financing from banks or through the offering of debt
and/or equity securities in the public or private markets. See "PART II.
ITEM 5. OTHER INFORMATION - Forward Looking Statements". In this regard, the
Company has filed two Registration Statements on Form S-3 (the "Shelf
Registration") relating to a shelf offering of up to $500 million aggregate
principal amount of debt or equity securities. Through May 31, 1996, the
Company has issued $230 million of debt securities under the shelf. A
balance of $270 million aggregate principal amount of debt or equity
securities remains available for issuance under the Shelf Registration.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
During 1995, the Company received $40 million in cash, in addition to other
consideration, from the settlement of litigation with Metra Oy, the former
parent company of Wartsila Marine Industries Incorporated ("Wartsila"),
related to losses suffered in connection with the construction of three of
the Company's cruise ships.
On June 25, 1996, the Company reached an agreement with the trustees of
Wartsila and creditors for the bankruptcy which resulted in a cash payment of
approximately $80 million. After payment of certain costs, the Company
expects the net proceeds to amount to approximately $75 million. This
transaction will be accounted for in the Company's third fiscal quarter ended
August 31, 1996.
In April 1996, a complaint was filed in the Circuit Court of the Eleventh
Judicial Circuit against the Company and a complaint was filed in the
Superior Court of Washington against Holland America Line - Westours Inc., a
wholly-owned subsidiary of the Company (the "Complaints"). The Complaints,
brought on behalf of a purported class of all persons who traveled on a
Company ship within the past four years and paid "Port Charges" to the
Company, allege that statements made by the Company in advertising and
promotional materials concerning Port Charges were false and misleading. The
Complaints allege claims of negligent misrepresentation and unjust enrichment
and violations of the Washington Consumer Protection Act and seek unspecified
compensatory damages on behalf of the purported class (or, alternatively,
refunds of Port Charges allegedly in excess of certain charges levied by
governmental authorities), attorney's fees and costs and punitive damages and
injunctive relief. Two other complaints containing allegations similar to
those set forth in the Complaints have been filed in the Circuit Court of the
Eleventh Judicial Circuit against the Company since the filing of the
Complaints. All of the actions are in their early stages and it is not now
possible to determine the ultimate outcome of the suits. Management of the
Company believes that the Company has substantial and meritorious defenses to
the claims and intends to vigorously defend the lawsuits. Management
understands that similar purported class action lawsuits were filed in state
courts in Florida, California and Washington against five other cruise lines.
In the normal course of business, various other claims and lawsuits have
been filed or are pending against the Company. The majority of these claims
and lawsuits are covered by insurance. Management believes the outcome of
any such suits which are not covered by insurance would not have a material
adverse effect on the Company's financial condition or results of operations.
ITEM 4: Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held on April 15,
1996 (the "Annual Meeting"). Holders of Class A Common Stock were entitled
to elect four of the fifteen directors to be elected at the Annual Meeting
and the holders of Class B Common Stock were entitled to elect the remaining
eleven directors. On all other matters which came before the Annual Meeting,
holders of Class A Common Stock were entitled to one vote for each share held
and holders of Class B Common Stock were entitled to five votes for each
share held. Proxies for (i) 207,395,697 shares of the 229,958,843 shares of
Class A Common Stock entitled to vote and (ii) 54,957,142 shares of the
54,957,142 shares of Class B Common Stock entitled to vote, were received in
connection with the annual meeting.
The following table sets forth the names of the four persons elected at the
Annual Meeting to serve as Class A Directors until the next annual meeting of
shareholders of the Company and the number of votes cast for or withheld with
respect to each person.
<TABLE>
<CAPTION>
CLASS A DIRECTORS FOR WITHHELD
<S> <C> <C>
William S. Ruben 207,031,786 363,911
Stuart S. Subotnick 207,034,447 361,250
Sherwood M Weiser 207,023,647 372,050
Uzi Zucker 207,025,241 370,456
</TABLE>
The following eleven persons were elected to serve as Class B Directors by
the unanimous vote of 54,957,142 shares of Class B Common Stock voted at the
Annual Meeting: Micky Arison, Shari Arison Dorsman, Maks L. Birnbach, David
Crossland, Robert H. Dickinson, James Dubin, Howard S. Frank, A. Kirk
Lanterman, Meshulam Zonis, Richard G. Capen, Jr. and Modesto Maidique.
The following table sets forth certain additional matters which were
submitted to the shareholders for approval at the Annual Meeting and
tabulation of the votes of the shares of Class A Common Stock with respect to
each such matter. All shares of Class B Common Stock voted at the Annual
Meeting were cast in favor of each of the additional matters.
<TABLE>
<CAPTION>
MATTER FOR AGAINST WITHHELD
<S> <C> <C> <C>
Ratification of Accountants 207,144,614(1) 92,538 161,372
</TABLE>
(1) The shareholders approved the selection of Price Waterhouse LLP as the
independent certified public accountants of the Company.
ITEM 5: Other Information
(a) Forward-Looking Statements
Certain statements in this Form 10-Q and in the future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases, and in oral statements made by or with the approval of an
authorized executive officer constitute "forward-looking statements" within
the meaning of the Reform Act. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among
others, the following: general economic and business conditions which may
impact levels of disposable income of consumers and pricing and passenger
yields for the Company's cruise products; increases in cruise industry
capacity in the Caribbean and Alaska; changes in tax laws and
regulations(especially any change affecting the Company's status as a
"controlled foreign corporation" as defined in Section 957(a) of the Internal
Revenue Code of 1986, as amended) (see "Markets for the Registrant's Common
Equity and Related Stockholders' Matters - Taxation of the Company" in the
Company's Annual Report on Form 10-K for the year ended November 30, 1995);
the ability of the Company to implement its shipbuilding program and to
expand its business outside the North American market where it has less
experience; weather patterns in the Caribbean; unscheduled ship repairs and
drydocking; incidents involving cruise vessels at sea; and changes in laws
and government regulations applicable to the Company (including the
implementation of the "Safety of Life at Sea Convention" and changes in
Federal Maritime Commission surety and guaranty arrangements).
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C>
(a) Exhibits
11 Statement regarding computation of per share earnings
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
Current report on Form 8-K (File No. 1-9610) Filed with the Commission
on May 1, 1996 related to two purported class action suits regarding "Port
Charges".
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARNIVAL CORPORATION
Dated: July 1, 1996 BY \s\ Micky Arison
Micky Arison
Chairman of the Board and Chief
Executive Officer
Dated: July 1, 1996 BY \s\ Howard S. Frank
Howard S. Frank
Vice-Chairman, Chief Financial and
Accounting Officer
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page No. in
Sequential
Numbering
System
<S> <C>
Exhibits
11 Statement regarding computation of per share earnings
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
</TABLE>
EXHIBIT 11
CARNIVAL CORPORATION
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended May 31, Three Months Ended May 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net income $183,348 $157,321 $106,283 $ 89,769
Adjustments to net income for
the purpose of computing fully
diluted earnings per share:
Interest reduction from
assumed conversion of 4.5%
Convertible Subordinated
Notes 2,772 2,770 1,386 1,385
Adjusted net income $186,120 $160,091 $107,669 $ 91,154
Weighted average shares
outstanding 287,190 283,356 288,960 283,886
Adjustments to weighted
average shares outstanding for the
purpose of computing fully diluted
earnings per share:
Additional shares issuable upon
assumed conversion of 4.5%
Convertible Subordinated
Notes 6,618 6,618 6,618 6,618
Adjusted weighted average
shares outstanding 293,808 289,974 295,578 290,504
Earnings per share:
Primary $0.64 $0.56 $0.37 $0.32
Fully Diluted* $0.63 $0.55 $0.36 $0.31
</TABLE>
*In accordance with Accounting Principles Board Opinion No. 15, the Company
does not present fully diluted EPS in its financial statements because the
Company's convertible securities are anti-dilutive or result in a less than
3% dilution for the periods presented.
EXHIBIT 12
CARNIVAL CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
<TABLE>
<CAPTION>
Six Months Ended May 31,
1996 1995
<S> <C> <C>
Net Income $183,348 $157,321
Income tax benefit (5,023) (5,361)
Income before income tax benefit 178,325 151,960
Fixed Charges:
Interest expense, net 33,216 33,315
Interest portion of rental expense (1) 931 841
Capitalized interest 13,754 8,149
Total Fixed Charges 47,901 42,305
Fixed Charges Not Currently Affecting Income:
Capitalized interest (13,754) (8,149)
Earnings before fixed charges $212,472 $186,116
Ratio of earnings to fixed charges 4.4x 4.4x
</TABLE>
________________________
(1) Represents one-third of rental expense, which Company management believes
to be representative of the interest portion of rental expense.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAY-31-1996
<CASH> 89,167
<SECURITIES> 26,065
<RECEIVABLES> 35,385
<ALLOWANCES> 0
<INVENTORY> 52,072
<CURRENT-ASSETS> 279,781
<PP&E> 4,520,032
<DEPRECIATION> 713,329
<TOTAL-ASSETS> 4,776,563
<CURRENT-LIABILITIES> 781,413
<BONDS> 1,353,748
<COMMON> 2,903
0
0
<OTHER-SE> 2,621,406
<TOTAL-LIABILITY-AND-EQUITY> 4,776,563
<SALES> 0
<TOTAL-REVENUES> 965,624
<CGS> 0
<TOTAL-COSTS> 566,240
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,970
<INCOME-PRETAX> 178,325
<INCOME-TAX> 5,023
<INCOME-CONTINUING> 183,348
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183,348
<EPS-PRIMARY> 0.64
<EPS-DILUTED> 0.63
</TABLE>
