[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, 1997
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
(Registrant's 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 July 11, 1997.
Class A Common Stock, $.01 par value: 242,192,113 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, 1997 and November 30, 1996 1
Consolidated Statements of Operations -
Six and Three Months Ended May 31, 1997
and May 31, 1996 2
Consolidated Statements of Cash Flows -
Six Months Ended May 31, 1997
and May 31, 1996 3
Notes to Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. Other Information
Item 1: Legal Proceedings 15
Item 5: Other Information 15
Item 6: Exhibits and Reports on Form 8-K 17
/TABLE
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
May 31, November 30,
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 93,626 $ 111,629
Short-term investments 12,380 12,486
Accounts receivable 49,280 38,109
Consumable inventories, at average cost 54,902 53,281
Prepaid expenses and other 91,801 75,428
Total current assets 301,989 290,933
PROPERTY AND EQUIPMENT, NET 4,104,135 4,099,038
OTHER ASSETS
Investments in and advances to affiliates 385,023 430,330
Goodwill, less accumulated amortization of
$58,765 in 1997 and $55,274 in 1996 216,098 219,589
Other assets 63,037 61,998
$5,070,282 $5,101,888
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 62,090 $ 66,369
Accounts payable 108,135 84,748
Accrued liabilities 119,690 126,511
Customer deposits 490,632 352,698
Dividends payable 32,679 32,416
Total current liabilities 813,226 662,742
LONG-TERM DEBT 937,105 1,277,529
CONVERTIBLE NOTES 39,103
DEFERRED INCOME AND OTHER LONG-TERM LIABILITIES 89,621 91,630
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Class A Common Stock; $.01 par value; one vote per
share; 399,500 shares authorized; 242,122 and
239,733 shares issued and outstanding 2,421 2,397
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 862,682 819,610
Retained earnings 2,355,235 2,207,781
Other 9,442 546
Total shareholders' equity 3,230,330 3,030,884
$5,070,282 $5,101,888
</TABLE>
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Three Months
Ended, May 31, Ended, May 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES $1,117,696 $965,624 $596,614 $516,836
COSTS AND EXPENSES
Operating expenses 634,622 566,240 337,684 302,544
Selling and administrative 156,219 140,243 76,716 68,961
Depreciation and amortization 82,658 67,936 41,961 35,101
873,499 774,419 456,361 406,606
OPERATING INCOME BEFORE (LOSS)
INCOME FROM AFFILIATED
OPERATIONS 244,197 191,205 140,253 110,230
(LOSS) INCOME FROM AFFILIATED
OPERATIONS (11,694) 163 (2,712) 166
OPERATING INCOME 232,503 191,368 137,541 110,396
NONOPERATING INCOME (EXPENSE)
Interest income 3,382 15,104 1,565 7,259
Interest expense, net of
capitalized interest (31,536) (33,216) (14,446) (17,178)
Other income 2,105 5,069 459 4,309
Income tax benefit 6,353 5,023 2,328 1,497
(19,696) (8,020) (10,094) (4,113)
NET INCOME $ 212,807 $183,348 $127,447 $106,283
EARNINGS PER SHARE $.71 $.64 $.43 $.37
</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,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income $212,807 $183,348
Adjustments
Depreciation and amortization 82,658 67,936
Equity in loss (income) from affiliates and
dividends received 17,334 (163)
Other (834) 3,423
Changes in operating assets and liabilities
Increase in receivables (11,441) (2,557)
Increase in consumable inventories (1,621) (3,252)
Increase in prepaid and other (16,505) (6,459)
Increase in accounts payable 23,387 15,445
(Decrease) increase in accrued liabilities (6,821) 7,689
Increase in customer deposits 137,934 163,627
Net cash provided from operations 436,898 429,037
INVESTING ACTIVITIES
Decrease in short-term investments, net 106 24,099
Additions to property and equipment, net (84,132) (456,296)
Reductions in (additions to) investments in
and advances to affiliates 35,986 (187,099)
(Increase) decrease in other
non-current assets (1,039) 72,149
Net cash used for investing activities (49,079) (547,147)
FINANCING ACTIVITIES
Principal payments of long-term debt (369,997) (458,369)
Dividends paid (65,090) (51,268)
Proceeds from long-term debt 25,272 662,004
Issuance of common stock 3,993 1,545
Net cash (used for) provided from
financing activities (405,822) 153,912
Net (decrease) increase in cash and
cash equivalents (18,003) 35,802
Cash and cash equivalents at beginning
of period 111,629 53,365
Cash and cash equivalents at end of period $ 93,626 $ 89,167
Supplemental disclosure of non-cash transactions
Conversion of 4-1/2% Convertible Notes into
Class A Common Stock $ 39,085
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, 1997, and the
consolidated statements of operations and cash flows for the six and three
months ended May 31, 1997 and May 31, 1996 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 consisted of the following:
<TABLE>
<Caption
May 31, November 30,
1997 1996
(in thousands)
<S> <C> <C>
Vessels $4,270,800 $4,269,403
Vessels under construction 188,836 163,178
4,459,636 4,432,581
Land, buildings and improvements 185,970 170,466
Transportation and other equipment 232,513 204,776
Total property and equipment 4,878,119 4,807,823
Less - accumulated depreciation and
amortization (773,984) (708,785)
$4,104,135 $4,099,038
</TABLE>
Interest costs associated with the construction of vessels and buildings,
until they are placed in service, are capitalized and amounted to $7.4 million
and $13.8 million for the six months ended May 31, 1997 and May 31, 1996,
respectively and $3.9 million and $7.8 million for the three months ended May
31, 1997 and May 31, 1996, respectively.
NOTE 3 - LONG-TERM DEBT AND CONVERTIBLE NOTES
Long-term debt consisted of the following:
<TABLE>
<Caption
May 31, November 30,
1997 1996
(in thousands)
<S> <C> <C>
Commercial Paper $161,980 $ 307,298
Unsecured 5.75% Notes Due March 15, 1998 200,000 200,000
$200 Million Multi-currency Revolving
Credit Facility Due 2001 166,000
Mortgages and other loans payable bearing interest
at rates ranging from 8% to 9.9%, secured by
vessels, maturing through 1999 107,859 140,277
Unsecured 6.15% Notes Due October 1, 2003 124,956 124,953
Unsecured 7.20% Debentures Due October 1, 2023 124,874 124,871
Unsecured 7.70% Notes Due July 15, 2004 99,919 99,913
Unsecured 7.05% Notes Due May 15, 2005 99,841 99,831
Other loans payable 79,766 80,755
999,195 1,343,898
Less portion due within one year (62,090) (66,369)
$937,105 $1,277,529
</TABLE>
The Company initiated its commercial paper programs in October 1996 which
are supported by the one billion dollar unsecured revolving credit facility
due 2001 (the "U.S. Dollar Revolver"). In January 1997, the Company extended
its commercial paper programs to include as support its $200 Million Multi-
currency Revolving Credit Facility Due 2001 (the "Multi-currency Revolving
Credit Facility"). Both revolving credit facilities bear interest at a maximum
of LIBOR plus 14 basis points ("BPS") and provide for a facility fee of six
BPS on the total facility. Any funds outstanding under the commercial paper
programs reduce the aggregate amount available under the U.S. Dollar Revolver
and the Multi-currency Revolving Credit Facility. As of May 31, 1997, the
Company had $162 million outstanding under its commercial paper programs and
$1,038 million available for borrowing under the U.S. Dollar Revolver and
Multi-currency Revolving Credit Facility.
The commercial paper outstanding as of May 31, 1997 bears interest at
5.63% and was due in June 1997. Since the commercial paper programs are
backed by long-term revolving credit facilities, balances outstanding under
the commercial paper programs have been classified as long-term in the
accompanying balance sheets. The Unsecured 5.75% Notes Due March 15, 1998 are
expected to be repaid through borrowings under the commercial paper programs,
the Company's U.S. Dollar Revolver or through the issuance of additional long-
term debt and, as such, have been classified as long-term in the accompanying
May 31, 1997 balance sheet.
During December 1996, the remaining outstanding amount of the Company's
4-1/2% Convertible Subordinated Notes Due July 1, 1997 were converted into
approximately 2.2 million shares of the Class A Common Stock of the Company
("Class A Common Stock").
NOTE 4 - SHAREHOLDERS' EQUITY
The following represents an analysis of the changes in shareholders' equity
for the six months ended May 31 1997:
<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 30,1996 $2,397 $550 $819,610 $2,207,781 $ 546 $3,030,884
Net income for the period 212,807 212,807
Cash dividends (65,353) (65,353)
Changes in securities
valuation allowance 207 207
Foreign currency
translation adjustment 8,009 8,009
Issuance of common stock
upon conversion of
Convertible Notes 23 39,755 39,778
Issuance of stock to
employees under stock
plans 1 3,317 (100) 3,218
Vested portion of common
stock under restricted
stock plan 780 780
Balance May 31, 1997 $2,421 $550 $862,682 $2,355,235 $9,442 $3,230,330
</TABLE>
NOTE 5 - 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 Remaining
Service Contract of Lower Total Cost to Be
Vessel Date Denomination Berths Cost Paid
<S> <C> <C> <C> <C> <C>
Holland America Line:
Rotterdam VI 10/97 Lire 1,320 $ 270 $ 186
HAL Newbuild 3/99 Lire 1,440 300 285
HAL Newbuild 10/99 Lire 1,440 300 285
Carnival Cruise Lines:
Elation 3/98 U. S. Dollar 2,040 300 278
Paradise 12/98 U. S. Dollar 2,040 300 282
Carnival Triumph 7/99 Lire 2,640 400 369
Carnival Victory 8/00 U. S. Dollar 2,640 430 426
13,560 $2,300 $2,111
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 $189
million through May 31, 1997 and anticipates paying approximately $600 million
during the twelve month period ending May 31, 1998 and approximately $1.5
billion beyond May 31, 1998.
In addition, in April 1997 the Company reached an agreement to acquire
the Club Med I, a 312 berth vessel, from Club Mediterranee, S.A. and Services
et Transports for approximately $45 million. The Company anticipates closing
on the purchase of the vessel in early 1998, with the vessel beginning
operation in the Company's luxury sail-cruise company, Windstar Cruises, in
May 1998.
Litigation
Several actions (collectively the "Port Charges Complaints") have been
filed against the Company or Holland America Westours on behalf of purported
classes of persons who traveled on a Company or Holland America Westours ship
and paid port charges to the Company or Holland America Westours. These
actions allege that statements made by the Company or Holland America Westours
in advertising and promotional materials concerning port charges were false
and misleading. Four such actions are pending against the Company in the
Circuit Court for Dade County, Florida, and others are pending against the
Company in the United States District Court for the Middle District of
Louisiana; the Chancery Court in Dyer County, Tennessee; the United States
District Court for the Western District of Kentucky, Louisville Division; the
United States District Court for the Eastern District of Michigan, Southern
Division; the United States District Court for the Northern District of
Georgia, Atlanta Division; the Superior Court in Maricopa County, Arizona; and
the United States District Court for the Southern District of Ohio, Western
Division. One such action was filed against Holland America Westours in the
Superior Court in King County, Washington. The Florida, Louisiana, Tennessee
and Washington actions have been brought on behalf of purported nationwide
classes; the other actions on behalf of purported statewide classes. A
nationwide class has been conditionally certified in the Tennessee action.
The Florida actions allege violations of the Florida Deceptive and Unfair
Trade Practices Act, fraudulent inducement, conversion and unjust enrichment.
The Louisiana, Tennessee, Kentucky, Michigan, Georgia, Arizona and Ohio
actions allege violations of various state consumer protection statutes,
fraud, fraudulent misrepresentations and/or omissions, negligent
misrepresentations and/or omissions, negligence, breach of fiduciary duties,
restitution, unjust enrichment, and breach of implied covenants of good faith
and fair dealing. The Washington action alleges claims of negligent
misrepresentation, unjust enrichment and violations of the Washington Consumer
Protection Act. Plaintiffs in these cases seek compensatory damages (in some
cases alleged to be up to $25,000 per putative class member) or,
alternatively, refunds of portions of port charges paid, disgorgement of
funds, an accounting, attorneys' fees and costs, prejudgment interest,
punitive damages and injunctive relief.
In May 1997, on the Company's motions, the Florida actions were dismissed
without prejudice and in June 1997 amended complaints were filed. The Company
has filed a motion to dismiss the Louisiana action on the grounds, among
others, that the putative representative plaintiff did not purchase a Company
cruise, and the plaintiff has indicated that it will stipulate to withdraw the
action with prejudice. In the Washington action, Holland America Westours'
motion to dismiss was denied, and the plaintiffs' motion for class
certification, opposed by Holland America Westours, is currently pending.
In June and August 1996, two complaints were filed against the Company
and Holland America Westours, respectively, in California Superior Court in
Los Angeles County (collectively the "Travel Agent Complaints") on behalf of
purported classes of all travel agencies who during the past four years booked
a cruise with the Company or Holland America Westours. The complaints in
these actions claim that the Company's and Holland America Westours'
advertising practices regarding port charges resulted in an improper
commission bypass and allege claims of breach of contract, negligent
misrepresentation, unjust enrichment, unlawful business practices and common
law fraud. The complaints seek unspecified compensatory damages (or
alternatively, the payment of usual and customary commissions on port charges
paid by passengers in excess of certain charges levied by government
authorities), an accounting, attorneys' fees and costs, punitive damages and
injunctive relief. The court has granted the motions of the Company and
Holland America Westours to dismiss or stay the California actions on grounds
of forum non conveniens. An action alleging claims similar to those raised in
the California actions, filed in the Judicial District Court in Hennepin
County, Minnesota, was withdrawn with prejudice after the Company filed a
motion to dismiss on the grounds, among others, that the putative
representative plaintiff had not booked any cruises with the Company.
The Port Charges Complaints and the remaining Travel Agent Complaint are
in the preliminary stages and it is not now possible to determine the ultimate
outcome of the lawsuits. Management believes that the Company has substantial
and meritorious defenses to the claims. Purported class actions similar to
the Port Charges Complaints and Travel Agent Complaints have been filed
against five other cruise lines.
In February 1997, Carnival Cruise Lines and certain other cruise lines
entered into an Assurance of Voluntary Compliance (the "Assurance") with the
Florida Attorney General's Office, which ended the Attorney General's
investigation into cruise industry practices concerning port charges. Under
the Assurance, Carnival Cruise Lines agreed that on or after June 1, 1997, it
would not charge customers fees or charges for cruise tickets in addition to
the advertised cruise price, other than fees or charges imposed by government
or quasi-governmental authority (as that term is defined in the Assurance).
Carnival Cruise Lines also paid $100,000 in attorneys' fees, costs and
investigative fees to the Attorney General's Office. In April 1997, Holland
America Westours also entered into the Assurance with the Attorney General and
paid $50,000 in attorneys' fees, costs and investigative fees to the Attorney
General's Office.
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 6 - RECENT EVENTS
In June 1997, the Company and Airtours plc ("Airtours"), a large publicly
traded (London Stock Exchange) tour company in which the Company holds a 29.5%
interest, successfully completed the joint offer to acquire an interest in the
outstanding equity securities of Costa Crociere, S.p.A. ("Costa Crociere"), an
Italian cruise company listed on the Milan Stock Exchange. With the
completion of the offer, the Company and Airtours each own 50% of Il Ponte,
S.p.A. ("Il Ponte"), a holding company which was purchased from the Costa
family. Il Ponte in turn now owns 98.2% of the ordinary share capital, 93.1%
of the savings shares and 46.8 percent of the savings share warrants of Costa
Crociere. The total cost of acquiring Il Ponte and Costa Crociere shares was
approximately $275 million, of which approximately $200 million was paid by Il
Ponte and the balance was paid equally by the Company and Airtours. The $200
million which was paid by Il Ponte was funded by borrowings, of which the
Company guaranteed $100 million. The Company intends to account for its
investment in Il Ponte using the equity method of accounting on a two month
lag basis.
NOTE 7 - RECENT PRONOUNCEMENTS
In January 1997 the Financial Accounting Standards Board issued Statement
of Financial Standard ("SFAS") No. 128, "Earnings Per Share" which requires
dual presentation of basic and fully diluted earnings per share. The adoption
of SFAS No. 128 is not expected to have a material effect on the Company's
earnings per share computation.
NOTE 8 - TAXATION
Income Taxes
Non U.S. companies are exempt from U.S. corporate income tax on U.S.
source income from international passenger cruise operations if (i) their
countries of incorporation exempt shipping operations of U.S. persons from
income tax (the "Incorporation Test") and (ii) they meet either the "CFC Test"
or the "Publicly Traded Test." The Company and its subsidiaries involved in
the cruise ship operations meet the Incorporation Test because they are
incorporated in countries which provide the required exemption to U.S. persons
involved in shipping operations. A Company meets the CFC Test if it is a
controlled foreign corporation ("CFC") on any day during its fiscal year. A
CFC is defined by the Internal Revenue Code as a foreign corporation more
than 50% of whose stock is owned by U.S. persons, each of whom owns or is
considered to own 10% or more of the corporation's voting power ("U.S.
Shareholders"). Through the conversion date of July 15, 1997 (the "Conversion
Date") all of the outstanding shares of Class B Common Stock of the Company,
(the "Class B Common Stock") were owned by The Micky Arison 1994 "B" Trust
(the "B Trust"), a U.S. trust whose primary beneficiary is Micky Arison, the
Company's Chairman of the Board. Stock of the Company representing more than
50% of the total combined voting power of all classes of stock was owned by
the B Trust, which is a "United States Person", and thus, the Company meets
the definition of a CFC. Accordingly, the Company believes that it will meet
the CFC Test for its entire current taxable year.
A corporation meets the Publicly Traded Test if the stock of the
corporation (or the direct or indirect corporate parent thereof) is "primarily
and regularly traded on an established securities market" in the United
States. Although no Treasury regulations have been promulgated that explain
when stock is primarily and regularly traded for purposes of this exemption,
Treasury regulations have been promulgated interpreting a similar phrase under
another section, Section 884. Under the Section 884 regulations, stock is
considered primarily and regularly traded if: (i) 80% (by vote and value) of
the stock of the corporation is listed on an established securities market in
the United States where more shares are traded than in any other country, (ii)
trades of such stock are effected on such market, other than in de minimis
quantities, on at least 60 days during the taxable year, (iii) the aggregate
number of shares so traded is equal to 10% or more of the average number of
shares outstanding during the taxable year, and (iv) the company is not
"closely held." The Company believes that it will meet the foregoing
requirements for the portion of its taxable year beginning after the
Conversion Date and for future taxable years. Since the Conversion Date, the
Company has had only one class of stock outstanding, the Class A Common Stock,
which is listed on the New York Stock Exchange, where more shares trade than
in any other country. Trades of such common stock have been effected in more
than de minimis quantities on every business day since the Company's initial
public offering, and the annual volume of such trades has significantly
exceeded 10% of the average number of shares outstanding. Moreover, the
Company believes that any stock traded on the NYSE are considered as traded on
a qualifying exchange and, to the Company's knowledge, it is not closely held
because no person other than members of the Arison family and certain related
entities (the "Arison Group") owns more than 5% of its stock and the Arison
Group holds less than 50% of the outstanding shares.
Accordingly, the Company believes that virtually all of its income (with
the exception of its United States source income from the operation of
transportation, hotel and tour business of HAL) is exempt from United States
federal income taxes. There is, however, no authority that addresses the
treatment of a corporation that meets the shareholder test for a CFC for only
part of its taxable year. Similarly, there is no authority that addresses the
treatment of a corporation that meets the Publicly Traded Test for only a part
of its taxable year. If the Company or the subsidiaries were found to meet
neither the CFC Test nor the Publicly Traded Test, much of their income would
become subject to taxation by the United States at higher than normal
corporate tax rates.<PAGE>
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 cruise 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 and related operations of HAL Antillen N.V. ("HAL").
The following table presents selected segment and statistical information
for the periods indicated:
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended May 31, Three Months Ended May 31,
1997 1996 1997 1996
(in thousands, except selected statistical
information)
<S> <C> <C> <C> <C>
REVENUES:
Cruise $1,084,603 $931,019 $570,581 $489,332
Tour 37,670 40,778 30,475 33,539
Intersegment revenues (4,577) (6,173) (4,442) (6,035)
$1,117,696 $965,624 $596,614 $516,836
OPERATING EXPENSES:
Cruise $ 601,616 $532,695 $313,899 $278,008
Tour 37,583 39,718 28,227 30,571
Intersegment expenses (4,577) (6,173) (4,442) (6,035)
$ 634,622 $566,240 $337,684 $302,544
OPERATING INCOME:
Cruise $ 265,284 $206,524 $149,227 $115,700
Tour (16,608) (13,544) (5,879) (4,399)
(Loss) income from affiliates
and corporate expenses (16,173) (1,612) (5,807) (905)
$ 232,503 $191,368 $137,541 $110,396
SELECTED STATISTICAL INFORMATION:
Passengers Carried 950,000 843,000 495,000 436,000
Passenger Cruise Days 5,880,000 5,101,000 3,062,000 2,647,000
Occupancy Percentage 107.2% 107.1% 108.0% 107.2%
</TABLE>
The following table presents operations data expressed as a percentage of
total revenues for the periods indicated:
<TABLE>
<CAPTION>
Six Months Ended May 31, Three Months Ended May 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES 100% 100% 100% 100%
COSTS AND EXPENSES:
Operating expenses 57 59 57 59
Selling and administrative 14 14 13 13
Depreciation and amortization 7 7 7 7
OPERATING INCOME BEFORE
LOSS FROM AFFILIATED
OPERATIONS 22 20 23 21
Loss from affiliated
operations (1) - - -
OPERATING INCOME 21 20 23 21
NONOPERATING INCOME (EXPENSE) (2) (1) (2) -
NET INCOME 19% 19% 21% 21%
</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 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 which it records
using the equity basis of accounting. Starting with the Company's quarter
ended August 31, 1996, the Company's portion of Airtours' operating results
are being recorded by the Company on a two month lag basis. Airtours'
earnings are seasonal due to the nature of the European leisure travel
industry. Demand for Airtours vacations is highest during the summer months
when Europeans typically take extended vacations. During the last two fiscal
years, Airtours' third and fourth fiscal quarters, ending June 30 and
September 30, respectively, have been profitable, with the fourth quarter
being its most profitable quarter. During this same period, Airtours
experienced seasonal losses in its first and second fiscal quarters ending on
December 31 and March 31, respectively.
In June 1997, the Company made an investment in Costa Crociere, through
an investment in Il Ponte (See Note 6), which it will record using the equity
basis of accounting. Starting with the Company's quarter ending November 30,
1997, the Company's portion of Costa Crociere's operating results will be
recorded by the Company on a two month lag basis. Historically, demand for
Costa Crociere's cruises has been greatest during the summer months when their
ships operate in the Mediterranean and Northern Europe for which they obtain
higher pricing. Demand for Costa Crociere cruises is lower during the winter
months when their ships sail in more competitive markets.
Six Months Ended May 31, 1997 Compared
To Six Months Ended May 31, 1996
Revenues
The increase in total revenues of $152.1 million, or 15.7%, from the
first six months of 1996 to the first six months of 1997 was due to an
increase in cruise revenues. The increase in cruise revenues was primarily
the result of a 15.2% increase in capacity for the period resulting from the
addition of Carnival Cruise Lines' cruise ships Inspiration and Carnival
Destiny in March and November 1996, respectively, and Holland America Line's
cruise ship Veendam in May 1996. The capacity increase resulting from the
introduction of new vessels was partially offset by the removal from service
from the Carnival Cruise Lines fleet of the Festivale in April 1996.
Occupancy rates were up .1% and gross revenue per passenger cruise day was up
1.1% resulting in an increase of 1.1% in gross yield (total revenue per
available lower berth day). Gross revenue per passenger cruise day increased
primarily due to higher pricing associated with the Carnival Destiny as well
as the other cruise products. This higher pricing was partially offset by the
effect of a reduction in the percentage of passengers electing the Company's
air program. When a passenger elects to purchase his/her own air
transportation, rather than use the Company's air program, both the Company's
cruise revenues and operating expenses decrease by approximately the same
amount.
Average capacity is expected to increase approximately 10.2% and 9.1%
during the third and fourth fiscal quarters of 1997, respectively, as compared
with the same periods in 1996. Average capacity is expected to increase
approximately 12.3% during the fiscal year ending November 30, 1997 as
compared with the fiscal year ended November 30, 1996. The increases in
capacity are primarily as a result of the introduction into service of the
vessels described above and the Rotterdam VI which will be introduced into
service in October 1997. The existing Rotterdam V is scheduled to discontinue
service at the end of September 1997.
Costs and Expenses
Operating expenses increased $68.4 million, or 12.1%, from the first six
months of 1996 to the first six months of 1997. Cruise operating costs
increased by $68.9 million, or 12.9%, to $601.6 million in the first six
months of 1997 from $532.7 million in the first six months of 1996, primarily
due to additional costs associated with the increased capacity.
Selling and administrative costs increased $16.0 million, or 11.4%,
during the first six months of 1997 as compared with the same six months of
1996 primarily due to an increase in advertising expense and payroll and
related costs associated with the increase in capacity.
Depreciation and amortization increased by $14.7 million, or 21.7%, to
$82.7 million in the first six months of 1997 from $67.9 million in the first
six months of 1996 primarily due to the addition of the Inspiration, the
Veendam and the Carnival Destiny.
Affiliated Operations
During the first six months of 1997, the Company recorded $11.7 million
of losses from affiliated operations. Approximately $8.3 million of such
losses were attributable to the Company's 29.5% interest in Airtours, acquired
in April 1996. Airtours' earnings are seasonal, historically incurring losses
during its first two fiscal quarters and profits during its last two fiscal
quarters. See "General" above for a further discussion of Airtours'
seasonality. Had the Company owned its interest in Airtours during the first
six months of 1996, the Company's earnings for the 1996 period, excluding the
cost of capital, would have been reduced by approximately $10.6 million.
Nonoperating Income (Expense)
Interest income decreased $11.7 million in 1997 primarily due to a
decrease in cash balances and notes receivable. Cash balances were unusually
high during the first half of fiscal 1996, because of United Kingdom
regulatory requirements which caused the Company to deposit funds in escrow
approximately three months prior to acquiring an interest in Airtours. Notes
receivable decreased due to the sale by the Company in the second quarter of
1996 of its holding of 13% senior secured notes due 2003 of Kloster Cruise
Limited. Gross interest expense (excluding capitalized interest) decreased
$8.0 million in 1997 as a result of lower debt balances. Capitalized interest
decreased $6.3 million due to lower levels of investments in ship construction
projects during the first half of 1997 as compared with the same period in
1996. Other income decreased by $3.0 million in 1997 primarily because the
first half of fiscal 1996 included income resulting from the sale of an option
to Kloster Cruise Limited to buy back their 13% senior secured notes.
Three Months Ended May 31, 1997 Compared
To Three Months Ended May 31, 1996
Revenues
The increase in total revenues of $80 million, or 15.4%, from the second
quarter of 1996 to the second quarter of 1997 was due to an increase in cruise
revenues. The increase in cruise revenues was primarily the result of a 14.8%
increase in capacity for the period resulting from the addition of Carnival
Cruise Lines' cruise ships Inspiration and Carnival Destiny in March and
November 1996, respectively, and Holland America Line's cruise ship Veendam in
May 1996. The increase in capacity from the new vessel additions was
partially offset by the removal from service from the Carnival Cruise Lines
fleet of the Festivale in April 1996. Occupancy rates were up .8% and gross
revenue per passenger cruise day was up .8% resulting in an increase of 1.6%
in gross yield. For a description of the gross revenue per passenger cruise
day increase, see the explanation of Revenues in the Six Months Ended May 31,
1997 Compared To Six Months Ended May 31, 1996 discussion above.
Costs and Expenses
Operating expenses increased $35.1 million, or 11.6%, from the second
quarter of 1996 to the second quarter of 1997. Cruise operating costs
increased by $35.9 million, or 12.9%, to $313.9 million in the second quarter
of 1997 from $278.0 million in the second quarter of 1996, primarily due to
additional costs associated with the increased capacity.
Selling and administrative costs increased $7.8 million, or 11.2%,
primarily due to an increase in advertising expense and payroll and related
costs during the second quarter of 1997 as compared with the same quarter of
1996 mainly resulting from the increase in capacity.
Depreciation and amortization increased by $6.9 million, or 19.5%, to
$42.0 million in the second quarter of 1997 from $35.1 million in the second
quarter of 1996 primarily due to the addition of the Inspiration, the Veendam
and the Carnival Destiny.
Affiliated Operations
During the second quarter of 1997, the Company recorded $2.7 million of
losses from affiliated operations. Approximately $2.3 million of such losses
were attributable to the Company's 29.5% interest in Airtours, acquired in
April 1996. Airtours' earnings are seasonal, historically incurring losses
during their first two fiscal quarters and profits during their last two
fiscal quarters. Had the Company owned its interest in Airtours during the
entire second fiscal quarter of 1996, the Company's earnings for that period,
excluding the cost of capital, would have been reduced by approximately $2.9
million.
Nonoperating Income (Expense)
Interest income decreased, gross interest expense (excluding capitalized
interest) decreased and other income decreased in the second quarter of fiscal
1997 for the same reasons as discussed in the Nonoperating Income (Expense)
explanation in the Six Months Ended May 31, 1997 Compared To Six Months Ended
May 31, 1996 discussion above. Capitalized interest decreased $3.9 million
due to lower levels of investments in ship construction projects during the
second quarter of 1997 as compared with the same period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
The Company's business provided $436.9 million of net cash from
operations during the six months ended May 31, 1997, an increase of 1.8%
compared to the corresponding period in 1996.
During the six months ended May 31, 1997, the Company expended
approximately $84.1 million on capital projects, of which $26 million was
spent in connection with its ongoing shipbuilding program. The remainder was
spent on the acquisition of a private island in the Caribbean, to be used as a
destination for the HAL ships, transportation equipment, vessel
refurbishments, tour assets and other equipment.
The Company made scheduled principal payments totaling approximately
$32.4 million under various individual vessel mortgage loans during the six
months ended May 31, 1997. During this same period, the Company made net
repayments of $311 million under its commercial paper programs.
Future Commitments
The Company has contracts for the delivery of seven new vessels over the
next four years. The Company will pay approximately $600 million during the
twelve month period ending May 31, 1998 relating to the construction and
delivery of those new cruise ships and approximately $1.5 billion beyond May
31, 1998. The Company also has an agreement to acquire a 312 berth cruise
ship in the spring of 1998 for approximately $45 million. At May 31, 1997,
the Company had $1 billion of long-term debt of which $262 million is due
during the twelve month period ending May 31, 1998. Included in the $262
million of debt due during the next twelve months is $200 million of Unsecured
5.75% Notes Due March 15, 1998 which the Company plans to repay through
borrowings under the commercial paper programs, the Company's U.S. Dollar
Revolver and/or through issuance of additional long-term debt. See Note 3 in
the accompanying financial statements for more information regarding the
Company's debt. The Company also enters into forward foreign currency
contracts and interest rate swap agreements to hedge the impact of foreign
currency and interest rate fluctuations.
In June 1997, the Company and Airtours completed the acquisition of Costa
Crociere, an Italian cruise company listed on the Milan Stock Exchange. The
total cost of the Costa Crociere acquisition was approximately $275 million,
with the Company and Airtours each responsible for funding 50%. The Company
funded its portion of the purchase price through the guarantee of
approximately $100 million of the debt of Il Ponte, a holding company which
was purchased from the Costa family, with the remainder of its 50% of the
purchase price funded from borrowings under the Company's commercial paper
programs. (See Note 6 for additional information related to the acquisition.)
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 also fund a portion of these cash requirements from
borrowings under its U.S. Dollar Revolver or commercial paper programs and/or
through the issuance of long-term debt in the public or private markets. As
of May 31, 1997, the Company had $1,038 million available for borrowing under
its U.S. Dollar Revolver and Multi-currency Revolving Credit Facility.
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 and/or commercial paper programs, the
Company believes that it will be able to secure such financing from banks or
through the offering of short-term or long-term debt and/or equity securities
in the public or private markets. 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. At May 31, 1997, a balance of $270 million aggregate
principal amount of debt or equity securities remains available for issuance
under the Shelf Registration.<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The discussions of legal proceedings set forth in "PART I. FINANCIAL
INFORMATION, ITEM 1. FINANCIAL STATEMENTS, NOTE 5 - COMMITMENTS AND
CONTINGENCIES" contained herein and "PART I. ITEM 3. LEGAL PROCEEDINGS" in
the Company's Annual Report on Form 10-K for the fiscal year ended November
30, 1996 are incorporated by reference into this Item.
ITEM 5: Other Information
(a) Conversion of Class B Common Stock
On July 15, 1997, the B Trust exercised its right to convert all of the
54,957,142 shares of Class B Common Stock held by it into an equal number of
shares of Class A Common Stock. Prior to July 1, 1997, the B Trust had been
restricted from converting such shares under a stockholders agreement with the
Company. Prior to the conversion of the Class B Common Stock, the B Trust was
the controlling stockholder of the Company. The holders of Class B Common
Stock had the power to elect 75% of the directors of the Company and the Class
B Common Stock had five votes per share (as opposed to one vote per share for
the Class A Common Stock) for all other voting matters. As a result of the
conversion of the Class B Common Stock, (i) there will be no shares of Class B
Common Stock outstanding, (ii) all holders of Class A Common Stock (including
the B Trust) will vote as one class in all elections for directors, and (iii)
all shares of Class A Common Stock (including the shares held by the B Trust)
will have one vote per share for all other voting matters. As a result of the
conversion, the B Trust owns 18.49% of the outstanding Class A Common Stock of
the Company. Although the B Trust is not currently a party to any proxy or
voting trust arrangements with respect to the Class A Common Stock that it
holds, the B Trust is not prohibited from entering into such arrangements in
the future.
(b) Taxation of the Company
The following discussion summarizes the expected United States Federal
income taxation of the Company's current operations following the conversion
of the Class B Common Stock. This discussion revises the tax disclosure in
the Company's Form 10-K for the fiscal year ended November 30, 1996. State
and local taxes are not discussed. The discussion is based on the current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
proposed, temporary, and final Treasury regulations, administrative rulings,
and court decisions. All of the foregoing are subject to change, possibly
with retroactive effect, and any change thereto could affect the accuracy of
this discussion.
Carnival Corporation is a Panamanian corporation, and its subsidiaries
that earn income from the international operation, or from the rental on a
full or bareboat basis, of ships ("Shipping Income") (collectively, the
"Shipping Companies") are Panamanian, Liberian, Netherlands Antilles, and
Bahamian corporations. Accordingly, the Company's income from sources outside
of the United States generally is not subject to tax. Moreover, the Company
believes that, under current law, all or virtually all of its income from
sources within the United States ("United States Source Income") that
constitutes Shipping Income will be exempt from United States corporate tax if
the Shipping Companies meet the requirements of Section 883 of the Code.
(Certain of the Company's United States Source Income, such as Holland America
Line's income from bus, hotel and tour operations, is not Shipping Income, and
thus is subject to United States tax.) Section 883 of the Code provides that
Shipping Income of a foreign corporation is exempt from United States
corporate income tax if such foreign corporation meets an "Incorporation Test"
and either a "CFC Test" or a "Publicly Traded Test". As discussed below, the
Company believes that it meets these requirements for all of the current
fiscal year and will continue to meet them for future fiscal years.
A corporation meets the Incorporation Test if it is organized under the
laws of a foreign country that grants an equivalent exemption to corporations
organized in the United States (an "equivalent exemption jurisdiction"). The
Company believes that Panama, the Netherlands Antilles, the Bahamas, and
Liberia are equivalent exemptions jurisdictions. If however, Panamanian,
Netherlands Antilles, the Bahamian, or Liberian law were to change adversely,
the Company would consider taking appropriate steps (including reincorporating
in another jurisdiction) so as to remain eligible for the exemption from
United States Federal income tax provided by Section 883 of the Code.
A corporation meets the CFC Test if it is a controlled foreign
corporation, which the Code defines as a corporation more than 50% of whose
voting power or equity value is owned (or considered as owned) on any day of
its fiscal year by United States persons who each own (or are considered as
owning) stock representing 10% or more of the corporation's voting power ("10%
Shareholders"). Prior to the Conversion Date, the B Trust, which is a United
States person, owned all of the Company's Class B Stock, which represented
more than 50% of the total combined voting power of all classes of the
Company's stock. Accordingly, the Company believes that it will meet the CFC
Test for its entire current taxable year. There is, however, no authority
that addresses the treatment under Section 883 of a corporation that meets the
shareholder test for a CFC for only part of its taxable year.
A corporation meets the Publicly Traded Test if the stock of the
corporation (or the direct or indirect corporate parent thereof) is "primarily
and regularly traded on an established securities market" in the United
States. The Company believes that it will satisfy the requirements of the
Publicly Traded Test during the portion of its taxable year following the
Conversion Date (although the regulations do not specifically address the
effect of satisfying these requirements for only a portion of the taxable
year) and for subsequent taxable years. No Treasury regulations have been
promulgated that explain when stock will be considered "primarily and
regularly traded on an established securities market" for purposes of Section
883; however, Treasury regulations have been promulgated interpreting a
similar phrase under Section 884 of the Code which was enacted as part of the
same legislation that added the Publicly Traded Test to Section 883. Under
the Section 884 regulations, stock is considered primarily and regularly
traded on an established securities market in the United States in any taxable
year if: (i) 80% (by vote and value) of the stock of such corporation is
listed on an established securities market in the United States where more
shares are traded than in any other country, (ii) trades of such stock are
effected on such market, other than in de minimis quantities, on at least 60
days during the taxable year, (iii) the aggregate number of shares so traded
is equal to 10% or more of the average number of shares outstanding during the
taxable year, and (iv) the company is not "closely held". A class of stock is
treated as meeting the requirements of clauses (ii) and (iii) if the class of
stock is regularly quoted by brokers or dealers making a market in the stock.
A class of stock of a company is "closely held" under the Section 884
regulations if 50% or more of its outstanding shares of stock is owned (within
the meaning of the applicable regulations) for more than 30 days during the
relevant taxable year by persons who (a) each own 5% or more of the value of
the outstanding shares of stock and (b) are not (or fail to document that they
are) "qualifying shareholders" for purposes of this provision of Section 884.
Except in the context of determining whether stock of a corporation is
"closely held", the Section 884 regulations do not address whether a
corporation can meet the primarily and regularly traded test for a portion of
its taxable year.
The Company believes that it will meet the foregoing requirements for the
portion of its taxable year beginning after the Conversion Date and for future
taxable years. Since the Conversion Date, the Company has had only one class
of stock outstanding, the Class A Common Stock, which is listed on the New
York Stock Exchange, where more shares trade than in any other country.
Trades of such common stock have been effected in more than de minimis
quantities on every business day since the Company's initial public offering,
and the annual volume of such trades has significantly exceeded 10% of the
average number of shares outstanding. Moreover, the Company believes that any
stock traded on the NYSE should be treated as if it is regularly quoted by
brokers or dealers making a market in that stock. Finally, to the Company's
knowledge, it is not closely held because no person other than members of the
Arison Group owns more than 5% of its stock and the Arison Group holds less
than 50% of the outstanding shares.
The Company is not aware of any planned changes in ownership of its stock
or the listing of or trading in its stock that would adversely affect its
ability to meet the Publicly Traded Test and thus qualify for the exemption
under Section 883; however, in the future circumstances may occur which may
not be within the Company's control. Moreover, future regulations promulgated
under Section 883 might adopt an interpretation of the phrase "primarily and
regularly traded on an established securities market" that is not consistent
with the Company's interpretation of the regulations under Section 884 and the
Company might not be able to meet the requirements of those regulations.
Finally, whether or not such regulations are promulgated, there is no
assurance that the Company's interpretation of such phrase with respect to
either its current taxable year or future taxable years will be accepted by
the Internal Revenue Service or the courts.
Section 883 of the Code applies only to income derived from the
international operation of ships, and its legislative history indicates that
Section 883 of the Code does not apply to Shipping Income that is treated as
100% United States Source Income under certain source of income rules, such as
income derived from transportation that both begins and ends in the United
States. Accordingly, any such income may well be subject to United States
corporate tax unless another exception was applicable. Although the matter is
not entirely free from doubt, the Company does not believe that any
significant portion of its Shipping Income from its current operations is 100%
United States Source Income (and thereby subject to United States corporate
tax) under the applicable provisions of the Code.
(c) 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; consumer demand for cruises; pricing policies
followed by competitors of the Company; 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 "Market 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, 1996); 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; delivery of
new vessels on schedule and at the contracted price; 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>
<S> <C>
(a) Exhibits
11 Statement Regarding Computation of Per Share Earnings
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
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 15, 1997 BY/s/ Micky Arison
Micky Arison
Chairman of the Board and Chief
Executive Officer
Dated: July 15, 1997 BY/s/ Howard S. Frank
Howard S. Frank
Vice-Chairman, Chief Financial and
Accounting Officer<PAGE>
INDEX TO EXHIBITS
</TABLE>
<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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net income $212,807 $183,348 $127,447 $106,283
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 1,386
Adjusted net income $212,807 $186,120 $127,447 $107,669
Weighted average shares
outstanding 297,910 287,190 298,126 288,960
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
Adjusted weighted average
shares outstanding 297,910 293,808 298,126 295,578
Earnings per share:
Primary $0.71 $0.64 $0.43 $0.37
Fully Diluted* $0.71 $0.63 $0.43 $0.36
</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 were anti-dilutive or resulted 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,
1997 1996
<S> <C> <C>
Net income $212,807 $183,348
Income tax benefit (6,353) (5,023)
Income before income tax benefit 206,454 178,325
Adjustment to earnings:
Equity in loss (income) of affiliates
and dividends received 17,334 (163)
Earnings as adjusted 223,788 178,162
Fixed Charges:
Interest expense, net 31,536 33,216
Interest portion of rental expense (1) 932 931
Capitalized interest 7,415 13,754
Total fixed charges 39,883 47,901
Fixed charges not affecting earnings:
Capitalized interest (7,415) (13,754)
Earnings before fixed charges $256,256 $212,309
Ratio of earnings to fixed charges 6.4 x 4.4 x
</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-30-1997
<PERIOD-END> MAY-31-1997
<CASH> 93,626
<SECURITIES> 12,380
<RECEIVABLES> 49,280
<ALLOWANCES> 0
<INVENTORY> 54,902
<CURRENT-ASSETS> 301,989
<PP&E> 4,878,119
<DEPRECIATION> 773,984
<TOTAL-ASSETS> 5,070,282
<CURRENT-LIABILITIES> 813,226
<BONDS> 937,105
<COMMON> 2,971
0
0
<OTHER-SE> 3,227,359
<TOTAL-LIABILITY-AND-EQUITY> 5,070,282
<SALES> 0
<TOTAL-REVENUES> 1,117,696
<CGS> 0
<TOTAL-COSTS> 634,622
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,951
<INCOME-PRETAX> 206,454
<INCOME-TAX> 6,353
<INCOME-CONTINUING> 212,807
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 212,807
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.71
</TABLE>
