[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 August 31, 1998
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 October 7, 1998.
Common Stock, $.01 par value: 595,417,219 shares outstanding
CARNIVAL CORPORATION
I N D E X
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1: Financial Statements
Consolidated Balance Sheets -
August 31, 1998 and November 30, 1997 1
Consolidated Statements of Operations -
Nine and Three Months Ended August 31, 1998
and 1997 2
Consolidated Statements of Cash Flows -
Nine Months Ended August 31, 1998 and 1997 3
Notes to Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II. Other Information
Item 1: Legal Proceedings 22
Item 5: Other Information 23
Item 6: Exhibits and Reports on Form 8-K 24
/TABLE
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
<TABLE>
<CAPTION>
August 31, November 30,
1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 125,127 $ 139,989
Short-term investments 21,411 9,738
Accounts receivable, net 73,268 57,090
Consumable inventories, at average cost 74,150 54,970
Prepaid expenses and other 88,956 74,238
Total current assets 382,912 336,025
PROPERTY AND EQUIPMENT, NET 5,481,600 4,327,413
OTHER ASSETS
Investments in and advances to affiliates 452,904 479,329
Goodwill, less accumulated amortization of
$68,947 and $62,256 439,721 212,607
Other assets 35,212 71,401
$6,792,349 $5,426,775
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 72,423 $ 59,620
Accounts payable 160,988 106,783
Accrued liabilities 219,873 154,253
Customer deposits 630,668 420,908
Dividends payable 44,656 44,578
Total current liabilities 1,128,608 786,142
LONG-TERM DEBT 1,374,896 1,015,294
DEFERRED INCOME AND OTHER LONG-TERM LIABILITIES 52,679 20,241
MINORITY INTEREST 131,783
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Common Stock; $.01 par value;
960,000 shares authorized; 595,413 and
594,408 shares issued and outstanding 5,954 5,944
Paid-in-capital 880,136 863,125
Retained earnings 3,212,595 2,731,213
Other 5,698 4,816
Total shareholders' equity 4,104,383 3,605,098
$6,792,349 $5,426,775
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.<PAGE>
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Three Months
Ended August 31, Ended August 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES $2,280,735 $1,923,117 $1,061,539 $805,421
COSTS AND EXPENSES
Operating expenses 1,210,294 1,022,742 540,343 388,120
Selling and administrative 262,550 221,702 98,766 65,483
Depreciation and amortization 146,689 125,886 57,423 43,228
1,619,533 1,370,330 696,532 496,831
OPERATING INCOME BEFORE INCOME
(LOSS) FROM AFFILIATED
OPERATIONS 661,202 552,787 365,007 308,590
INCOME (LOSS) FROM AFFILIATED
OPERATIONS 808 (1,323) 13,842 10,371
OPERATING INCOME 662,010 551,464 378,849 318,961
NONOPERATING INCOME (EXPENSE)
Interest income 8,369 5,742 2,484 2,360
Interest expense, net of
capitalized interest (43,512) (43,510) (18,777) (11,974)
Other income, net 2,303 5,561 2,965 3,456
Income tax expense (5,877) (8,557) (12,738) (14,910)
Minority interest (8,031) - (8,031) -
(46,748) (40,764) (34,097) (21,068)
NET INCOME $ 615,262 $ 510,700 $344,752 $297,893
EARNINGS PER SHARE:
Basic $1.03 $.86 $.58 $.50
Diluted $1.03 $.86 $.58 $.50
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.<PAGE>
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION> Nine Months Ended August 31,
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 615,262 $ 510,700
Adjustments
Depreciation and amortization 146,689 125,886
Dividends received in excess of
income from affiliates 12,865 8,236
Other (5,756) (2,615)
Changes in operating assets and liabilities,
net of businesses acquired and consolidated
(Increase) decrease in:
Receivables (12,406) (12,350)
Consumable inventories (2,614) (1,113)
Prepaid expenses and other (4,314) 86
Increase in:
Accounts payable 11,200 27,273
Accrued liabilities 51,021 10,997
Customer deposits 65,943 41,900
Net cash provided from operations 877,890 709,000
INVESTING ACTIVITIES
Decrease in short-term investments 2,537 2,173
Additions to property and equipment, net (808,151) (158,913)
Reductions in (additions to)
investments in and advances to
affiliates, net 5,133 (780)
Acquisition of Cunard and consolidation of
Seabourn, net of cash balances acquired (247,549)
Decrease (increase) in other 61,976 (993)
Net cash used for investing activities (986,054) (158,513)
FINANCING ACTIVITIES
Principal payments of long-term debt (974,082) (383,484)
Dividends paid (133,802) (97,769)
Proceeds from long-term debt 1,188,623 28,131
Proceeds from issuance of common stock 12,563 6,444
Net cash provided from (used for)
financing activities 93,302 (446,678)
Net (decrease) increase in cash and
cash equivalents (14,862) 103,809
Cash and cash equivalents at beginning
of period 139,989 111,629
Cash and cash equivalents at end of period $ 125,127 $ 215,438
Supplemental disclosure of non-cash transactions
Conversion of 4-1/2% Convertible Notes into
Class A Common Stock $ 39,085
Conversion of Class B Common Stock into
Class A Common Stock $ 550
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.<PAGE>
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 August 31, 1998 and the
consolidated statements of operations for the nine and three months ended
August 31, 1998 and 1997 and consolidated statements of cash flows for the
nine months ended August 31, 1998 and 1997 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 and affiliates are seasonal and results for
interim periods are not necessarily indicative of the results for the entire
year. 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
August 31, November 30,
1998 1997
(in thousands)
<S> <C> <C>
Vessels $ 5,431,832 $4,536,382
Vessels under construction 550,017 182,929
5,981,849 4,719,311
Land, buildings and improvements 205,267 194,013
Transportation and other equipment 306,643 268,520
Total property and equipment 6,493,759 5,181,844
Less - accumulated depreciation and
amortization (1,012,159) (854,431)
$ 5,481,600 $4,327,413
</TABLE>
Interest costs associated with the construction of property and
equipment, consisting primarily of vessels, are capitalized during the
construction period and amounted to $23.6 million and $12.3 million for the
nine months ended August 31, 1998 and 1997, respectively, and $7.6 million and
$4.9 million for the three months ended August 31, 1998 and 1997,
respectively.
NOTE 3 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<Caption
August 31, November 30,
1998 1997
(in thousands)
<S> <C> <C>
Commercial Paper $ 157,036 $ 288,614
Unsecured 5.75% Notes Due March 15, 1998 200,000
Mortgages and other loans payable bearing interest
at rates ranging from 5.6% to 9.9%, secured by
vessels, maturing through 2007 197,909 79,830
Unsecured 6.65% Debentures Due January 15, 2028 199,242
Unsecured 5.65% Notes Due October 15, 2000 199,811
Unsecured 6.15% Notes Due April 15, 2008 199,499
Unsecured 6.15% Notes Due October 1, 2003 124,965 124,960
Unsecured 7.20% Debentures Due October 1, 2023 124,880 124,876
Unsecured 7.7% Notes Due July 15, 2004 99,933 99,924
Unsecured 7.05% Notes Due May 15, 2005 99,866 99,851
Other loans payable 44,178 56,859
1,447,319 1,074,914
Less portion due within one year (72,423) (59,620)
$1,374,896 $1,015,294
</TABLE>
NOTE 4 - SHAREHOLDERS' EQUITY
An analysis of the changes in shareholders' equity for the nine months
ended August 31, 1998 is as follows:
<TABLE>
<Caption
COMMON PAID-IN- RETAINED
STOCK CAPITAL EARNINGS OTHER TOTAL
(in thousands)
<S> <C> <C> <C> <C> <C>
Balances at November 30,
1997 as previously
reported $2,972 $866,097 $2,731,213 $4,816 $3,605,098
Two-for-one stock split
effective June 12, 1998 2,972 (2,972)
Balances at November 30,
1997 as adjusted 5,944 863,125 2,731,213 4,816 3,605,098
Net income 615,262 615,262
Cash dividends (133,880) (133,880)
Changes in securities
valuation allowance 219 219
Foreign currency
translation adjustment 4,247 4,247
Issuance of stock to
employees under stock
plans 10 17,011 (4,651) 12,370
Vested portion of common
stock under restricted
stock plan 1,067 1,067
Balances at August 31, 1998 $5,954 $880,136 $3,212,595 $5,698 $4,104,383
</TABLE>
The Certificate of Incorporation authorizes the Board of Directors, at
its discretion, to issue up to 40 million shares of Preferred Stock. The
stock is issuable in series which may vary as to certain rights and
preferences and has a $.01 par value. As of August 31, 1998, no such shares
had been issued.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Capital Expenditures
A description of ships under contract for construction at August 31, 1998
is as follows (in millions, except berth data):
<TABLE>
<CAPTION>
Expected Number
Service of Lower Estimated Remaining
Vessel Date(1) Shipyard Berths Total Cost to Be Paid
<S> <C> <C> <C> <C> <C>
Carnival Cruise Lines
Paradise 11/98 Masa-Yards 2,044 $ 300 $ 239
Carnival Triumph 7/99 Fincantieri(2) 2,758 410 323
Carnival Victory 8/00 Fincantieri 2,758 440 434
CCL Newbuild 4/01 Masa-Yards 2,100 375 357
CCL Newbuild 12/02 Fincantieri 2,758 450 430
CCL Newbuild 8/03 Fincantieri 2,758 450 430
Total Carnival Cruise Lines 15,176 2,425 2,213
Holland America Line
Volendam 8/99 Fincantieri(2) 1,440 300 243
Zaandam 3/00 Fincantieri(2) 1,440 300 259
HAL Newbuild 11/00 Fincantieri(2) 1,380 300 60
Total Holland America Line 4,260 900 562
Total 19,436 $3,325 $2,775
</TABLE>
(1) The expected service date is the date the vessel is expected to begin
revenue generating activities.
(2) The construction contracts with such shipyards are denominated in
Italian Lire. Contracts have been fixed into U.S. Dollars through the
utilization of forward currency contracts.
In connection with the vessels under construction described in the above
table, Carnival Corporation and its majority owned subsidiaries ("the
Company") have paid $550 million through August 31, 1998 and anticipate paying
approximately $900 million during the twelve month period ending August 31,
1999 and approximately $1.9 billion beyond August 31, 1999.
Litigation
Several actions (collectively the "Passenger Complaints") have been filed
against Carnival Corporation or Holland America Westours on behalf of
purported classes of persons who paid port charges to Carnival Corporation or
Holland America Westours, alleging that statements made in advertising and
promotional materials concerning port charges were false and misleading. The
Passenger Complaints allege violations of the various state consumer
protection acts and claims of fraud, conversion, breach of fiduciary duties
and unjust enrichment. Plaintiffs seek compensatory damages or, alternatively,
refunds of portions of port charges paid, attorneys' fees, costs, prejudgment
interest, punitive damages and injunctive and declaratory relief.
The Company has reached an agreement in principle to settle one of the
Passenger Complaints filed against it under terms that would apply to a
nationwide class of Carnival Cruise Lines passengers. Should the court
approve the settlement, the Company will seek its enforcement with respect to
the plaintiffs in each of the remaining Passenger Complaints, and will
thereafter seek the dismissal of such Complaints under principles of res
judicata. Under the terms of the settlement, the Company will issue travel
vouchers with a face value of $15-$40, depending on specified criteria, to
certain of its passengers who are residents of the U.S. or its territories and
who sailed on a Carnival Cruise Lines ship between April 1992 and June 1997.
The Company will also pay a portion of the plaintiffs' legal fees. The terms
of such settlement, however, are subject to the parties entering into a
definitive agreement.
Holland America Westours recently entered into a settlement agreement for
the one Passenger Complaint filed against it. The settlement agreement was
approved by the court on September 28, 1998. Certain of the plaintiffs have
indicated that they may appeal. Unless successfully appealed, Holland America
Westours will issue travel vouchers with a face value of $10-$50 depending on
specified criteria, to certain of its passengers who are U.S. residents and
who sailed between April 1992 and April 1996, and pay a portion of the
plaintiff's legal fees.
The impact of the settlement of the Passenger Complaints on the Company
is not reasonably estimable since both the amount of the travel vouchers to be
redeemed and the effect of the travel voucher redemption on revenues is not
known. Accordingly, the Company has not established a liability for the
travel voucher portion of the settlements and will account for the redemption
of the vouchers as a reduction of future revenues. However, the Company has
previously established a liability for the estimated distribution costs of the
settlement notices and plaintiffs' legal cost. The Company does not believe
the settlements will have a material adverse impact on the Company's financial
condition or results of operations.
Three complaints were filed against Carnival Corporation and/or Holland
America Westours (collectively the "Travel Agent Complaints") on behalf of
purported classes of travel agencies who during the past four years booked a
cruise with Carnival Corporation or Holland America Westours, claiming that
advertising practices regarding port charges resulted in an improper
commission bypass. These actions allege violations of state consumer
protection laws, claims of breach of contract, negligent misrepresentation,
unjust enrichment, unlawful business practices and common law fraud, and they
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.
It is not now possible to determine the ultimate outcome of the pending
Passenger and Travel Agent Complaints if such claims should proceed to trial.
Management believes it has meritorious defenses to the claims. Management
understands that purported class actions similar to the Passenger and Travel
Agent Complaints have been filed against several 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.
Leasing Transaction
During August 1998, the Company entered into a lease out and lease back
transaction with respect to one of its vessels. The Company has effectively
guaranteed certain obligations or provided letters of credit to participants
in the transaction which, at August 31, 1998, total approximately $300
million. Only in the unlikely or remote event of non performance by certain
major financial institutions, which have long term credit ratings of AAA,
would the Company be required to make any payments under these guarantees.
After 18 years, the Company has the right to exercise a purchase option that
would terminate this transaction. As a result of this transaction, the
Company received approximately $21 million (net) which is being amortized to
nonoperating income over 18 years.
NOTE 6 - EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share" ("FAS 128"), and per share amounts have been
computed thereunder as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Nine Months Three Months
Ended August 31, Ended August 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
BASIC:
Net income $615,262 $510,700 $344,752 $297,893
Average common shares outstanding 594,908 593,966 595,234 594,278
Basic per share amount $ 1.03 $ .86 $ .58 $ .50
DILUTED:
Net income $615,262 $510,700 344,752 $297,893
Interest expense related to 4.5%
Convertible Subordinated Notes - 38 - -
Income available assuming dilution $615,262 $510,738 $344,752 $297,893
Average common shares outstanding 594,908 593,966 595,234 594,278
Effect of dilutive securities:
Additional shares issuable upon
assumed conversion of 4.5%
Convertible Subordinated Notes - 170 - -
Various employee stock plans 3,482 2,160 3,606 2,414
Average shares outstanding
assuming dilution 598,390 596,296 598,840 596,692
Diluted per share amount $ 1.03 $ .86 $ .58 $ .50
</TABLE>
On April 13, 1998, the Board of Directors of the Company approved a
two-for-one split of its Common Stock. The additional shares were distributed
on June 12, 1998 to shareholders of record on May 29, 1998. All share and per
share data presented herein have been retroactively restated to give effect to
this stock split.
NOTE 7 - ACQUISITION
On May 28, 1998, the Company and a group of investors acquired the
operating assets of Cunard, a cruise company operating five luxury cruise
ships, for $500 million, adjusted for working capital and debt assumed. After
the adjustment for working capital and debt assumed, the Company's cash
portion of the investment was approximately $257 million. Goodwill generated
from the transaction is being amortized using the straight line method over 40
years. The Company is accounting for the acquisition using the purchase
accounting method. Simultaneous with the acquisition, Seabourn Cruise Line
Limited ("Seabourn"), a luxury cruise line in which the Company owned a 50%
interest, was merged with Cunard. The Company owns approximately 68% of the
merged entity, which is named Cunard Line Limited. Commencing on May 28,
1998, the financial results of Cunard Line Limited have been included in the
Company's consolidated financial statements. Prior to May 28, 1998, the
Company's 50% interest in Seabourn was accounted for using the equity method
of accounting.
Had the above transactions occurred on December 1, 1996, the Company's
consolidated revenues for the nine months ended August 31, 1998 and 1997 would
have been approximately $2.5 billion and $2.27 billion, respectively, and $959
million for the three months ended August 31, 1997.
The Company has the option at any time to purchase the 32% minority
interest in Cunard Line Limited for approximately five million shares of the
Company's common stock. If the Company does not exercise its option, the
minority shareholders, under certain circumstances, can require the Company on
May 28, 2001 to purchase their shares for approximately five million shares of
the Company's common stock.
The preliminary impact on the Company's assets and liabilities related to
the acquisition of Cunard and consolidation of Seabourn was as follows (in
millions):
<TABLE>
<CAPTION>
<S> <C>
Fair value of Cunard assets $544
Seabourn assets consolidated 191
Debt assumed (157)
Other liabilities assumed (198)
Minority interest (123)
Cash paid for acquisition 257
Cash of acquired companies (9)
Net cash paid as reflected
in the Statement of Cash Flows $248
</TABLE>
NOTE 8 - RECENT PRONOUNCEMENTS
In April 1998, Statement of Position 98-5 - "Reporting on the Costs of
Start-Up Activities" ("SOP") was issued. The SOP 98-5 requires that all
start-up or pre-operating costs be expensed as incurred. In July 1998, the
Company adopted SOP 98-5 and, accordingly, expensed $8.6 million of previously
deferred start-up costs. The $8.6 million represents the cumulative effect
from the Company changing this policy, which is included in other nonoperating
expenses in the accompanying statement of operations.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities ("SFAS 133") was issued. SFAS 133 establishes a new model
for accounting for derivatives and hedging activities and is effective for
fiscal years beginning after June 15, 1999. The Company is still in the
process of assessing the impact of the adoption of SFAS 133 but does not
currently expect the adoption to have a material impact on the financial
statements.
NOTE 9 - RECENT EVENTS
In June 1998, CHC International, Inc. ("CHC"), a 23% owned affiliate,
consummated its merger with Patriot American Hospitality, Inc. ("Patriot")
under which Patriot acquired CHC's hotel management division and CHC's
shareholders received shares of redeemable preferred stock convertible into
Patriot common stock. As a result of this transaction, the Company recognized
a gain of $8.4 million which is included in other nonoperating income in the
accompanying statement of operations.
In July 1998, in connection with Airtours plc's ("Airtours") acquisition
of the common stock of a United Kingdom based tour company, Airtours issued
approximately 18.5 million shares of its common stock, at approximately $6.90
per share. The issuance of these shares reduced the Company's ownership of
Airtours by approximately 1% to approximately 26%. As a result of this
transaction, the Company recognized a net gain, after a provision for deferred
income taxes, of $11.8 million which is included in other nonoperating income
in the accompanying statement of operations.
<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 includes accommodations, meals, and most shipboard
activities, (ii) the sale of air transportation to and from the cruise ship
and (iii) 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"), which owns Holland America Westours and Holland America
Cruise Line.
The following table presents selected segment and statistical information
for the periods indicated:
<TABLE>
<CAPTION>
Nine Months Three Months
Ended August 31, Ended August 31,
1998 1997 1998 1997
(in thousands, except selected statistical information)
<S> <C> <C> <C> <C>
REVENUES:
Cruise $2,090,667 $1,753,416 $ 908,606 $668,813
Tour 248,630 218,681 203,177 181,011
Intersegment revenues (58,562) (48,980) (50,244) (44,403)
$2,280,735 $1,923,117 $1,061,539 $805,421
OPERATING COSTS AND
EXPENSES:
Cruise $1,067,089 $ 902,786 $ 433,263 $301,170
Tour 201,767 168,936 157,324 131,353
Intersegment expenses (58,562) (48,980) (50,244) (44,403)
$1,210,294 $1,022,742 $ 540,343 $388,120
OPERATING INCOME:
Cruise $ 655,733 $ 539,566 $ 335,889 $274,282
Tour 14,116 18,783 31,329 35,391
Income (loss) from
affiliates and
corporate expenses (7,839) (6,885) 11,631 9,288
$ 662,010 $ 551,464 $ 378,849 $318,961
SELECTED STATISTICAL INFORMATION:
Passengers Carried 1,522,000 1,504,000 599,000 554,000
Passenger Cruise
Days (1) 9,662,000 9,167,000 3,731,000 3,286,000
Occupancy Percentage 107.8%(2) 109.6% 111.5%(2) 114.3%
(1) A passenger cruise day is one passenger sailing for a period of one day.
For example, one passenger sailing on a one week cruise is seven passenger
cruise days.
(2) Includes the effect of Cunard and Seabourn brands since May 28, 1998 which
have lower occupancy percentages than the Company's other brands.
</TABLE>
Operations data expressed as a percentage of total revenues for the
periods indicated is as follows:
<TABLE>
<CAPTION>
Nine Months Three Months
Ended August 31, Ended August 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES 100% 100% 100% 100%
COSTS AND EXPENSES:
Operating expenses 53 53 51 48
Selling and administrative 12 12 9 8
Depreciation and amortization 6 6 6 5
OPERATING INCOME BEFORE
INCOME (LOSS) FROM AFFILIATED
OPERATIONS (1) 29 29 34 39
Income (loss) from affiliated
operations - - 1 1
OPERATING INCOME 29 29 35 40
NONOPERATING EXPENSE (2) (2) (3) (3)
NET INCOME 27% 27% 32% 37%
(1) In the third quarter of 1998 the reduction in operating income as a
percentage of revenue is primarily due to the acquisition and consolidation of
Cunard and Seabourn which have significantly higher operating expenses as a
percentage of revenues than the Company's other brands.
</TABLE>
The Company's cruise and tour operations experience varying degrees of
seasonality. The Company's revenue from the sale of passenger tickets for its
cruise operations is moderately seasonal. Historically, demand for cruises
has been greatest during the summer months. The Company's tour revenues are
extremely seasonal with the majority of tour revenues generated during the
late spring and summer months in conjunction with the Alaska cruise season.
In June 1997, the Company and Airtours plc ("Airtours"), a publicly
traded (London Stock Exchange) travel company in which the Company currently
holds an approximate 26% interest, each acquired a 50% interest in Il Ponte
S.p.A. ("Costa"), the parent company of Costa Crociere S.p.A., an Italian
cruise company. The Company records its interest in Airtours and Costa using
the equity basis of accounting and records its portion of Airtours' and
Costa's operating results on a two month lag basis. Demand for Costa's and
Airtours' products is seasonal due to the nature of the European leisure
travel industry and Mediterranean cruise season. Typically, Airtours and
Costa's quarters ending June 30 and September 30 experience higher demand,
with demand in the quarter ending September 30 being the highest. Demand for
Costa's and Airtours' products is lower in their quarters ending December 31
and March 31.
Average capacity for the Company's cruise brands, excluding the impact of
the acquisition and consolidation of Cunard and Seabourn, is expected to
increase 11.4% in the fourth quarter of fiscal 1998, as compared to the same
period of fiscal 1997. This increase is primarily a result of the
introduction into service of Holland America Line's new Rotterdam in November
1997, Carnival Cruise Lines' Elation in March 1998 and Windstar Cruises' Wind
Surf in May 1998. Including the impact of Cunard and Seabourn, average
capacity is expected to increase 24.6% in the fourth quarter of fiscal 1998,
as compared to the same period of fiscal 1997. The acquisition and
consolidation of Cunard and Seabourn is not expected to materially affect the
Company's consolidated earnings in 1998.
The year over year percentage increase in average cruise capacity,
excluding the impact of Cunard and Seabourn, resulting from the delivery of
vessels currently under contract for construction for the years 1999 and 2000
is expected to approximate 13.6% and 13.1%, respectively. Including the
impact of Cunard and Seabourn, the year over year increase in average capacity
for 1999 and 2000 is expected to approximate 18.4%, and 11.8%, respectively.
Nine Months Ended August 31, 1998 Compared
To Nine Months Ended August 31, 1997
Revenues
The increase in total revenues of $357.6 million, or 18.6%, was due
primarily to an increase in cruise revenues of $337.3 million, or 19.2%.
Approximately $155 million of the cruise revenue increase is due to the
acquisition and consolidation of Cunard and Seabourn and $182.5 million is due
to increased cruise revenues from Carnival Cruise Lines, Holland America Line
and Windstar Cruises. The increase from Carnival Cruise Lines, Holland
America Line and Windstar Cruises resulted from an increase of 8.2% in total
revenue per passenger cruise day and a 2.7% increase in capacity, offset
slightly by a 0.7% decrease in occupancy rates. Total revenue per passenger
cruise day increased primarily due to strong demand for the Company's cruise
brands and the introduction of Holland America Line's new Rotterdam in
November 1997, which has obtained higher pricing. Capacity increased due to
the addition of new vessels discussed above offset by the MS Ecstasy being out
of service for six weeks during the 1998 third quarter (see Nonoperating
Income (Expense) below). Tour revenues increased $29.9 million, or 13.7%, due
primarily to an increase in the number of tours sold.
Costs and Expenses
Operating expenses increased $187.6 million, or 18.3%. Cruise operating
costs increased by $164.3 million, or 18.2%, to $1.07 billion in the first
nine months of 1998 from $902.8 million in the comparable 1997 period.
Approximately $94 million of the cruise operating costs increase is due to the
acquisition and consolidation of Cunard and Seabourn. Excluding Cunard and
Seabourn, cruise operating costs as a percentage of revenues are 50% and 52%
in the first nine months of 1998 and 1997, respectively. Cruise operating
costs, excluding Cunard and Seabourn, increased primarily as a result of
increases in capacity, airfare costs and commission expense, partially offset
by lower fuel costs. Airfare costs increased due to a higher rate per air
passenger as well as a higher percentage of passengers electing the Company's
air program. The increase in commission expense resulted from the increase in
passenger ticket revenues. Tour operating expenses increased $32.8 million, or
19.4% primarily due to the increase in tour volume and higher expenses
incurred primarily as a result of increased tour content.
Selling and administrative expenses increased $40.8 million, or 18.4%, of
which $25.6 million, or 11.5%, was due to the acquisition and consolidation of
Cunard and Seabourn. Excluding Cunard and Seabourn, selling and
administrative expenses as a percentage of revenues are 11% and 12% in the
first nine months of 1998 and 1997, respectively. Selling and administrative
expenses, excluding Cunard and Seabourn, increased primarily as a result of
increases in payroll and related costs.
Depreciation and amortization increased by $20.8 million, or 16.5%, to
$146.7 million in the first nine months of 1998 from $125.9 million in the
first nine months of 1997 primarily due to the additional depreciation
associated with the increase in capacity and the acquisition and consolidation
of Cunard and Seabourn.
Affiliated Operations
During the first nine months of 1998, the Company recorded $.8 million of
income from affiliated operations as compared with $1.3 million of losses in
the first nine months of 1997. The Company's portion of Airtours' losses
increased $3.1 million to $4.5 million in the first nine months of 1998. The
Company recorded income of $9.0 million during the first nine months of 1998
related to its interest in Costa. The Company did not record earnings from
its investment in Costa in the first nine months of 1997 since Costa was
acquired in June 1997 and its operating results are recorded on a two month
lag basis. The affiliated operations for the nine months of 1998 includes
Seabourn Cruise Line through May 28, 1998 after which its results are included
in the Company's consolidated results.
Nonoperating Income (Expense)
Interest income increased $2.6 million in 1998 primarily due to an
increase in average cash and short term investment balances and notes
receivable. Gross interest expense (excluding capitalized interest) increased
$11.3 million in 1998 primarily as a result of higher average debt balances,
arising from the acquisition and consolidation of Cunard and Seabourn, as well
as investments in new vessel projects. Capitalized interest increased $11.3
million due to higher levels of investments in ship construction projects
during the first nine months of fiscal 1998 as compared with the first nine
months of fiscal 1997.
Included in other income in the first nine months of 1998 were gains of
$8.4 and $11.8 million resulting from the closing of the sale of CHC's hotel
management division and Airtours' issuance of its common stock, respectively.
Additionally, other expense includes $8.6 million of previously deferred
start-up costs which were expensed and represent the cumulative effect from
the Company changing its policy in connection with its early adoption of SOP
98-5. See Notes 8 and 9 in the accompanying financial statements.
In July 1998, a fire broke out on the mooring deck on Carnival Cruise
Line's Ecstasy. There were no serious injuries to passengers or crew, however,
there was damage to the ship's aft section. The time necessary to complete
repairs to the Ecstasy resulted in the ship being out of service for six weeks
during the third quarter of 1998. The Ecstasy fire resulted in a reduction in
earnings of approximately $18.4 million in the third quarter of 1998. This
reduction was comprised of lost revenue, net of related variable expenses, of
$11.1 million, and costs associated with repairs to the ship, passenger
handling and various other costs, net of estimated insurance recoveries, of
$7.3 million. The costs of $7.3 million were included in other expenses.
Minority interest was approximately $8.0 million which represents the
minority shareholders' interest in Cunard Line Limited, including Seabourn
Cruise Line, since its acquisition and consolidation by the Company on May 28,
1998.
Income tax expense decreased $2.7 million primarily due to the lower
profits realized by the tour operations.
Three Months Ended August 31, 1998 Compared
To Three Months Ended August 31, 1997
Revenues
The increase in total revenues of $256.1 million, or 31.8%, was due to a
$239.8 million, or 35.9%, increase in cruise revenues. Approximately $155
million of the cruise revenue increase is due to the acquisition and
consolidation of Cunard and Seabourn, and $85.0 million is due to increased
cruise revenues from Carnival Cruise Lines, Holland America Line and Windstar
Cruises. The increase from Carnival Cruise Lines, Holland America Line and
Windstar Cruises was primarily the result of an 8.3% increase in total revenue
per passenger cruise day, a 3.5% increase in capacity, and a 0.5% increase in
occupancy rates. Total revenue per passenger cruise day and capacity
increased primarily due to the same reasons discussed above in the nine month
explanations. Tour revenues increased $22.2 million, or 12.2%, due primarily
to an increase in the number of tours sold.
Costs and Expenses
Operating expenses increased $152.2 million, or 39.2%. Cruise operating
costs increased by $132.1 million, or 43.9%, to $433.3 million in the third
quarter of 1998 from $301.2 million in the third quarter of 1997.
Approximately $94 million of the cruise operating costs increase is due to the
acquisition and consolidation of Cunard and Seabourn. Excluding Cunard and
Seabourn, cruise operating costs as a percentage of revenues are 45% in both
1998 and 1997. Cruise operating costs, excluding Cunard and Seabourn,
increased primarily as a result of the increases in capacity, airfare costs
and commission expense, partially offset by lower fuel costs. Airfare costs
increased due to a higher rate per air passenger as well as a higher
percentage of passengers electing the Company's air program. The increase in
commission expense was associated with the increase in passenger ticket
revenues. Tour operating expenses increased $26.0 million, or 19.8%,
primarily due to the increase in tour volume and higher expenses incurred
primarily as a result of increased tour content.
Selling and administrative expenses increased $33.3 million, or 50.8%, of
which $25.6 million, or 39.0%, is due to the acquisition and consolidation of
Cunard and Seabourn. Excluding Cunard and Seabourn, selling and
administrative expenses as a percentage of revenues were 8% in the third
quarter of both 1998 and 1997. Selling and administrative expenses, excluding
Cunard and Seabourn, increased as a result of increases in advertising
expenses and payroll and related costs.
Depreciation and amortization increased by $14.2 million, or 32.8%, to
$57.4 million in the third quarter of 1998 from $43.2 million in the third
quarter of 1997 primarily due to the acquisition and consolidation of Cunard
and Seabourn and the additional depreciation associated with the increase in
other capacity.
Affiliated Operations
During the third quarter of 1998, the Company recorded $13.8 million of
income from affiliated operations as compared with $10.4 million of income in
the third quarter of 1997. The Company's portion of Airtours' income
decreased $.1 million to $6.8 million in the third quarter of 1998. The
Company also recorded income of $6.6 million during the third quarter of 1998
related to its interest in Costa.
Nonoperating Income (Expense)
Gross interest expense (excluding capitalized interest) increased $9.5
million in 1998 primarily as a result of higher average debt balances due to
the acquisition and consolidation of Cunard and Seabourn, as well as
investments in new vessel projects. Capitalized interest increased $2.7
million due to higher levels of investments in ship construction projects
during the third quarter of fiscal 1998 as compared with the third quarter of
fiscal 1997.
Other income, net, minority interest and income tax expense increased or
decreased primarily for the same reasons discussed above in the nine month
explanations.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash
The Company's business provided $877.9 million of net cash from
operations during the nine months ended August 31, 1998, an increase of 23.8%
compared to the corresponding period in 1997.
In January 1998, the Company completed an offering of $200 million of
6.65% Debentures Due January 15, 2028. In addition, in April 1998 the Company
completed an offering of $200 million of 5.65% Notes Due October 15, 2000 and
$200 million of 6.15% Notes Due April 15, 2008.
Uses of Cash
During the nine months ended August 31, 1998, the Company made net
expenditures of approximately $808.2 million on capital projects, of which
$752.4 million was spent in connection with its ongoing shipbuilding program.
The shipbuilding expenditures included the final payment on Carnival Cruise
Lines' Elation, which was delivered to the Company in late February, the
acquisition of Windstar Cruises' Wind Surf, which went into service in April
1998 and the payment of approximately $232 million for the HAL Newbuild
scheduled to enter service in September 2000. The nonshipbuilding capital
expenditures consisted primarily of improvements to a private island in the
Caribbean (HAL began to use the island during the first quarter of 1998 as a
destination for certain of its itineraries), transportation equipment, ship
refurbishments, tour assets and other equipment.
The Company paid $257 million related to the acquisition of Cunard. See
Note 7 in the accompanying financial statements.
The Company made scheduled principal payments totaling approximately
$39.7 million under various individual vessel mortgage loans during the nine
months ended August 31, 1998. In March 1998 the Company paid at maturity $200
million due on the 5.75% Notes Due March 15, 1998.
Future Commitments
The Company has contracts for the delivery of nine new vessels over the
next five years. The Company will pay approximately $900 million during the
twelve months ending August 31, 1999 relating to the construction and delivery
of those new ships and approximately $1.9 billion beyond August 31, 1999.
In addition to the ship construction contracts discussed above, the
Company has options to construct two additional vessels for Carnival Cruise
Lines for delivery in 2001 and 2002. The Company is also in negotiations with
several shipbuilding yards for a new class of vessel for Holland America Line
and is in the initial planning phase related to the construction of a new ship
for Cunard. No assurance can be given that the two options for Carnival
Cruise Lines will be exercised, the negotiations for the Holland America Line
vessel will be successful or that the new Cunard shipbuilding project will be
continued.
At August 31, 1998, the Company had $1.45 billion of long-term debt of
which $72.4 million is due during the twelve months ending August 31, 1999.
See Note 3 in the accompanying financial statements for more information
regarding the Company's debt.
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 revolving credit facilities or commercial paper programs
and/or through the issuance of long-term debt in the public or private
markets. As of August 31, 1998, the Company had $1.07 billion available for
borrowing under its revolving credit facilities.
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 debt and/or equity securities in the public
or private markets. Also, the Company has filed Registration Statements on
Form S-3 (the "Shelf Registration") relating to shelf offerings of debt or
equity securities. As of August 31, 1998, the remaining aggregate principal
amount of debt or equity securities available under the Shelf Registration is
$400 million.
Year 2000
The Year 2000 computer issue is primarily the result of computer programs
using a two digit format, as opposed to four digits, to indicate the year.
Such programs will be unable to interpret dates beyond the year 1999, which
could cause a system failure or other computer errors and a disruption in the
operation of such systems.
The term "Company" as used in this Section refers to Carnival Corporation
and its consolidated subsidiaries.
State of Readiness
The Company has established internally staffed project teams to address
Year 2000 issues. Each team has implemented a plan that focuses on Year 2000
compliance efforts for IT and non-IT systems for their respective companies.
The systems include (1) information systems software and hardware (e.g.
reservations, accounting and associated systems, personal computers and
software and various end-user developed applications) and (2) building
facilities and shipboard equipment (e.g. shipboard navigation, control, power
generation and distribution systems, operating systems and shipbuilding and
communication systems).
The Company's Year 2000 plan addresses the Year 2000 issues in multiple
phases, including: (1) inventory of the Company's systems, equipment and
suppliers that may be vulnerable to Year 2000 issues; (2) assessment of
inventoried items to determine risks associated with their failure to be Year
2000 compliant; (3) testing of systems and/or components to determine if Year
2000 compliant, both prior and/or subsequent to remediation; (4) remediation
and implementation of systems; and (5) contingency planning to assess
reasonably likely worst case scenarios.
Inventories have been substantially completed for all Company shoreside
software applications, hardware and operating systems. A risk assessment was
then prepared based on feedback from the Company's respective business units.
Most of the Company's critical internally developed software systems have been
successfully tested and remediated. Most of the Company's reservations
systems have been remediated and tested and all are expected to be fully
implemented by the end of calendar year 1998. Remediation of the Company's
other critical shoreside software and hardware applications are also estimated
to be completed by the end of calendar year 1998.
Inventories have been substantially completed for all building facilities
and shipboard equipment systems. A risk assessment has been substantially
completed and is expected to be finalized by the end of calendar year 1998.
In certain cases, the Company has retained third party consultants to analyze
the shipboard hardware and embedded system inventories and assist the Company
in testing, remediation and implementation of these applications. This process
is expected to be completed by the end of the third calendar quarter of 1999.
Internally developed shipboard information systems have been remediated and
will be tested and fully implemented on ships in mid 1999.
The Company is tracking the Year 2000 compliance status of its material
vendors and suppliers via the Company's own internal vendor compliance effort.
Year 2000 correspondence was sent to critical vendors and suppliers, with
continued follow up for those who failed to respond. All vendor responses are
currently being evaluated to assess any possible risk to or effect on the
Company's operations. The Company expects to implement additional procedures
for assessing its critical vendors.
Risks of Company's Year 2000 Issues
The Company is in the process of determining its contingency plans which
will include the identification of its most reasonably likely worst case
scenarios. Currently, the most reasonably likely sources of risk to the
Company include (1) the disruption of transportation channels relevant to the
Company's operations, including ports and transportation vendors (airlines) as
a result of a general failure of support systems and necessary infrastructure;
(2) the disruption of travel agency and other sales distribution systems; and
(3) the inability of principal product suppliers to be Year 2000 ready, which
could result in delays in deliveries from such suppliers.
Based on its current assessment efforts, the Company does not believe
that Year 2000 issues will have a material adverse effect on its financial
condition or results of operations. However, the Company's Year 2000 issues
and any potential business interruptions, costs, damages or losses related
thereto, are dependent, to a significant degree, upon the Year 2000 compliance
of third parties, both domestic and international, such as governmental
agencies, vendors and suppliers. Consequently, the Company is unable to
determine at this time whether Year 2000 failures will materially affect the
Company. The Company believes that its compliance efforts have and will
reduce the impact on the Company of any such failures.
Contingency Plans
The Company is preparing its contingency plans to identify and determine
how to handle its most reasonably likely worst scenarios. Preliminary
contingency plans are currently being reviewed. Comprehensive contingency
plans are estimated to be complete by mid 1999.
Costs
The Company does not expect the costs associated with its Year 2000
efforts will be material. The Company estimates aggregate expenditures of
approximately $16 million to address Year 2000 issues through December 1999.
These aggregate expenditures include $9 million of costs that are being
charged to expense and $7 million of costs related to the accelerated
replacement of non-compliant systems due to Year 2000 issues which will be
capitalized. The total amount expended through August 31, 1998 was
approximately $7 million, of which $4 million has been charged to expense and
$3 million has been capitalized related to the accelerated replacement of
non-compliant systems due to Year 2000 issues. These costs do not include costs
incurred by the Company as a result of the failure of any third parties,
including suppliers, to become Year 2000 compliant or costs to implement any
contingency plans.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Several actions collectively referred to as the "Passenger Complaints"
were previously reported in the Company's Annual Report on Form 10-K for the
year ended November 30, 1997 (the "1997 Form 10-K") and Quarterly Reports on
Form 10-Q for the quarters ended February 28 and May 31, 1998 (the "Quarterly
Form 10-Q's"). The following are the material subsequent developments in such
cases.
In the action filed against the Company in Ohio by Cathy J. Miller and
others, the Company has filed a motion to dismiss on the grounds of improper
forum, the plaintiffs have responded, and the Company's reply is due in
October 1998. In the action filed against the Company in Georgia by Elizabeth
Forsling, the United States District Court granted the plaintiff's motion to
remand. Thereafter, the Company moved before the Georgia state court to
dismiss the case on the grounds of improper forum. Plaintiff's response is
due in October 1998. In the action filed against the Company in Tennessee by
Brent Mezzacasa and others, the plaintiffs have appealed the Chancery Court's
dismissal to the Tennessee Court of Appeals, the Company has responded, and
plaintiffs' have replied. An argument date has not yet been set. In the
action filed against the Company in Illinois by John R. Birdsell and others,
the court has overruled the Company's objection to the court's exercise of
personal jurisdiction. The Company must answer or otherwise respond in
October 1998, and the Company intends to move to dismiss on the grounds of
improper forum.
In the action filed against the Company in Florida by Michelle Hackbarth
and others, the Company has reached an agreement in principle to settle the
action under terms that would apply to a nationwide class of Carnival Cruise
Lines passengers. Should the court approve the settlement, the Company will
seek its enforcement with respect to the plaintiffs in each of the remaining
Passenger Complaints, and will thereafter seek the dismissal of such
Complaints under principles of res judicata. Under the terms of the
settlement, the Company will issue travel vouchers with a face value of $15-$40,
depending on specified criteria, to certain of its passengers who are
residents of the U.S. or its territories and who sailed on a Carnival Cruise
Lines ship between April 1992 and June 1997. The Company will also pay a
portion of the plaintiffs legal fees. The terms of such settlement, however,
are subject to the parties entering into a definitive agreement.
In the action filed against Holland America Westours in Washington by
Francine Pickett, the settlement agreement received final court approval in
September 1998. Certain plaintiffs have indicated that they may appeal. An
appeal may delay the issuance of the travel vouchers contemplated by the
settlement agreement.
Several actions referred to as the "Travel Agent Complaints" were
previously reported in the 1997 Form 10-K and in the Quarterly Form 10-Q's,
and the following are the material subsequent developments in such cases.
In the action filed against the Company in Florida by N.G.L. Travel
Associates, a hearing will be held on November 19, 1998 to consider the
Company's motion to dismiss the action. In the action filed against the
Company in Alabama by Flora Price and others, the United States District Court
has indicated that it will deny the plaintiffs' motion to remand and grant the
Company's motion to dismiss the case. The plaintiffs have indicated that they
may appeal.
The Company previously reported in the Quarterly Form 10-Q's that HAL
Beheer, B.V., a Netherlands affiliate that employs crew members on board
Holland America Line ships, entered into a Plea Agreement with the U.S.
Department of Justice. On October 8, 1998, the Court accepted the Plea
Agreement and entered judgment consistent therewith.
It is not now possible to determine the ultimate outcome of the pending
Passenger and Travel Agent Complaints if such claims should proceed to trial.
Management believes it has meritorious defenses to the claims. Management
understands that purported class actions similar to the Passenger and Travel
Agent Complaints have been filed against several other cruise lines.
For a description of other pending litigation, see the 1997 Form 10-K and
the Quarterly Form 10-Q's.
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 Private Securities Litigation Reform Act of 1995. 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; changes in tax laws and regulations
(see Part II, Item 5 (d) - Taxation of the Company in the Company's filing of
Form 10-K for the period ended November 30, 1997); 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; unscheduled ship
repairs and drydocking; incidents involving cruise vessels at sea; the impact
of the Year 2000 issues on the Company; and changes in laws and government
regulations applicable to the Company.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C>
(a) Exhibits
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
27.1 Restated Financial Data Schedule - February 28, 1998
27.2 Restated Financial Data Schedule - November 30, 1997
27.3 Restated Financial Data Schedule - August 31, 1997
27.4 Restated Financial Data Schedule - May 31, 1997
27.5 Restated Financial Data Schedule - February 28, 1997
27.6 Restated Financial Data Schedule - November 30, 1996
27.7 Restated Financial Data Schedule - August 31, 1996
27.8 Restated Financial Data Schedule - May 31, 1996
27.9 Restated Financial Data Schedule - February 29, 1996
27.10 Restated Financial Data Schedule - November 30, 1995
</TABLE>
(b) Reports on Form 8-K
None.
SIGNATURES
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
Date: October 15, 1998 BY \s\ Howard S. Frank
Howard S. Frank
Vice Chairman and Chief
Operating Officer
Date: October 15, 1998 BY \s\ Gerald R. Cahill
Gerald R. Cahill
Senior Vice President Finance
and Chief Financial and
Accounting Officer<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page No. in
Sequential
Numbering
System
<S> <C>
Exhibits
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
27.1 Restated Financial Data Schedule - February 28, 1998
27.2 Restated Financial Data Schedule - November 30, 1997
27.3 Restated Financial Data Schedule - August 31, 1997
27.4 Restated Financial Data Schedule - May 31, 1997
27.5 Restated Financial Data Schedule - February 28, 1997
27.6 Restated Financial Data Schedule - November 30, 1996
27.7 Restated Financial Data Schedule - August 31, 1996
27.8 Restated Financial Data Schedule - May 31, 1996
27.9 Restated Financial Data Schedule - February 29, 1996
27.10 Restated Financial Data Schedule - November 30, 1995
</TABLE>
<PAGE>
EXHIBIT 12
CARNIVAL CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
<TABLE>
<CAPTION>
Nine Months Ended August 31,
1998 1997
<S> <C> <C>
Net income $615,262 $510,700
Income tax expense 5,877 8,557
Income before income tax expense 621,139 519,257
Adjustments to earnings:
Minority interest 8,031 -
Dividends received in excess of
income from affiliates 12,865 8,236
Earnings as adjusted 642,035 527,493
Fixed Charges:
Interest expense, net 43,512 43,510
Interest portion of rental expense (1) 2,636 1,761
Capitalized interest 23,586 12,305
Total fixed charges 69,734 57,576
Fixed charges not affecting earnings:
Capitalized interest (23,586) (12,305)
Earnings before fixed charges $688,183 $572,764
Ratio of earnings to fixed charges 9.9 x 9.9 x
</TABLE>
________________________
(1) Represents one-third of rental expense, which management believes
to be representative of the interest portion of rental expense.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> AUG-31-1998
<CASH> 125,127
<SECURITIES> 21,411
<RECEIVABLES> 73,268
<ALLOWANCES> 0
<INVENTORY> 74,150
<CURRENT-ASSETS> 382,912
<PP&E> 6,493,759
<DEPRECIATION> 1,012,159
<TOTAL-ASSETS> 6,792,349
<CURRENT-LIABILITIES> 1,128,608
<BONDS> 1,374,896
<COMMON> 5,954
0
0
<OTHER-SE> 4,098,429
<TOTAL-LIABILITY-AND-EQUITY> 6,792,349
<SALES> 0
<TOTAL-REVENUES> 2,280,735
<CGS> 0
<TOTAL-COSTS> 1,210,294
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,098
<INCOME-PRETAX> 621,139
<INCOME-TAX> 5,877
<INCOME-CONTINUING> 615,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 615,262
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> FEB-28-1998
<CASH> 114,072
<SECURITIES> 9,718
<RECEIVABLES> 61,349
<ALLOWANCES> 0
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