FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 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)
Registrant's telephone number, including area code (305) 599-2600
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
Common Stock New York Stock
($.01 par value) Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None.
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in any definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].
The aggregate market value of the voting stock held by
non-affiliates of the Registrant is approximately
$14,371,000,000 based upon the closing market price on
February 12, 1999 of a share of Common Stock on the New York
Stock Exchange as reported by the Wall Street Journal.
At February 12, 1999, the Registrant had outstanding
612,903,484 shares of its Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
The information described below and contained in the
Registrant's 1998 annual report to shareholders to be furnished
to the Commission pursuant to Rule 14a-3(b) of the Exchange Act
is shown in Exhibit 13 and is incorporated by reference into this
Annual Report on Form 10-K.
Part and Item of the Form 10-K
Part II
Item 5(a) and (b). Market for the Registrant's Common Equity and Related
Stockholder Matters - Market Information and Holders
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
Item 8. Financial Statements and Supplementary Data
The information described below and contained in the
Registrant's 1999 definitive Proxy Statement, to be filed with
the Commission is incorporated by reference into this Form 10-K.
Part and Item of the Form 10-K
Part III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
<PAGE>
PART I
Item 1. Business
A. General
Carnival Corporation was incorporated under the laws of the
Republic of Panama in November 1974. Carnival Corporation, including
its wholly and majority owned subsidiaries (referred to collectively as
the "Company"), is the world's largest multiple-night cruise company
based on the number of passengers carried, revenues generated and
available capacity. The Company offers a broad range of leading cruise
brands serving the contemporary cruise market through Carnival Cruise
Lines ("Carnival"), the premium cruise market through Holland America
Line ("Holland America") and the luxury cruise market through Cunard
Line ("Cunard"), Seabourn Cruise Line ("Seabourn") and Windstar Cruises
("Windstar") (collectively the "Majority Owned Cruise Operations"). The
Company also owns equity interests in Costa Crociere S.p.A. ("Costa"),
an Italian cruise company, and Airtours plc ("Airtours"), an integrated
leisure travel group of companies which also operates cruise ships
(collectively the "Affiliated Cruise Operations"). Costa and Airtours'
Sun Cruises target the contemporary cruise market.
A summary of the cruise operations of the Company and its affiliates
is as follows:
<TABLE>
<CAPTION>
Percentage
Owned by Primary
Cruise Carnival Number Passenger Geographic
Brand Corporation of Ships Capacity(1) Market
<S> <C> <C> <C> <C>
Majority Owned Cruise
Operations:
Carnival 100% 13 24,404 North America
Holland America 100% 8 10,302 North America
Windstar 100% 4 756 North America
Cunard (2) 68% 5 3,380 Worldwide
Seabourn (2) 68% 3 624 North America
33 39,466
Affiliated Cruise
Operations:
Costa 50%(3) 7 7,644 Europe
Airtours' Sun Cruises 26% 3 2,924 Europe
10 10,568
43 50,034
</TABLE>
(1) In accordance with cruise industry practice, all passenger capacities
indicated within this document are calculated based on two passengers per
cabin even though some cabins can accommodate three or four passengers.
(2) In May 1998, the Company and a group of investors acquired the assets
of Cunard, a cruise company operating five luxury ships, for $500 million,
as adjusted. Simultaneous with the acquisition, Seabourn Cruise Line
Limited, a luxury cruise line in which the Company owned a 50% interest,
was combined with Cunard. The Company now owns 68% of the combined entity,
which is named Cunard Line Limited. See Note 13 to the Financial Statements
as included in Exhibit 13 to this Form 10-K.
(3) The 50% equity interest of Costa not owned by the Company is owned by
Airtours. Including the Company's interest in Airtours, it beneficially
owns 63% of Costa.
Historically, the Company's cruise brands have been marketed primarily
in North America. The Company began to globalize its cruise business by
expanding its markets into Europe through the acquisition of its interest
in Airtours in April 1996, Costa in June 1997 and Cunard in May 1998.
Airtours, which is headquartered in Manchester, England, is the largest air
inclusive tour operator in the world, selling packaged tours in the
Austrian, British, Belgian, Dutch, French, German, Irish, Polish,
Scandinavian, Swiss and North American markets. Additionally, it operates
three cruise ships (a fourth ship is expected to enter service in April
1999) under the Sun Cruises name. Costa, which is headquartered in Genoa,
Italy, has sales offices in Argentina, Brazil, England, Florida, France,
Italy, Spain and Switzerland and sells the majority of its cruises in
Southern Europe, primarily in Italy, France and Spain. Cunard Line Limited,
which is headquartered in Miami, Florida, has Cunard and Seabourn sales
offices in Miami, New York City, England, Germany and Australia, and sells
a substantial number of its cruises in Europe, primarily in the United
Kingdom and Germany. The cruise markets in Europe are much smaller than the
North American market. Industry-wide European cruise passengers carried in
1998 are estimated to be approximately 1.3 million compared to
approximately 5.4 million from North America.
The Company has signed agreements with two shipyards providing for the
construction of additional cruise ships. A summary of new ship agreements
for the Company's Majority Owned Cruise Operations is as follows:
<TABLE>
<CAPTION>
EXPECTED
SERVICE PASSENGER
VESSEL DATE(1) CAPACITY
Carnival:
<S> <C> <C>
Carnival Triumph 7/99 2,758
Carnival Victory 8/00 2,758
Newbuild 4/01 2,100
Carnival Conquest 12/02 2,758
Carnival Glory 8/03 2,758
Total Carnival 13,132(2)
Holland America:
Volendam 8/99 1,440
Zaandam 3/00 1,440
Newbuild 11/00 1,380
Total Holland America 4,260
Total 17,392
</TABLE>
(1) The expected service date is the date the vessel is expected to begin
revenue generating activities.
(2) The Company also has options for the construction of two additional
vessels each with a passenger capacity of 2,100. No assurance can be given
that the options to construct the vessels will be exercised.
As a result of this shipbuilding program the Company currently expects
the passenger capacity for its Majority Owned Cruise Operations to increase
from 39,466 to 56,858, or by 44.1%, by the summer of 2003, assuming none of
the Company's existing fleet is retired, no new contracts are entered into
and the options described above are not exercised.
During 1997, the Company announced that it was in negotiations with
shipyards to build a new class of ships for each of its Carnival, Holland
America and Costa brands. The first of these orders has been placed by
Costa to construct the Costa Atlantica, a 2,112 passenger capacity, 82,000
gross registered ton vessel, which is expected to enter service in the
spring of 2000. In February 1998, the Company announced agreements for this
new class of vessel for the Carnival brand, which include a contract to
purchase one vessel for delivery in 2001 and options to acquire two
additional vessels. Additionally, although no assurances can be made, the
Company hopes to finalize orders for a new class of vessel for Holland
America and an ocean liner for Cunard, known as the Queen Mary Project, in
1999.
In addition to its cruise operations, the Company operates a tour
business, through Holland America Line-Westours Inc. ("Holland America
Westours"), which markets sightseeing tours both separately and as a part
of Holland America cruise/tour packages. Holland America Westours operates
14 hotels in Alaska and the Canadian Yukon, two luxury dayboats offering
tours to the glaciers of Alaska and the Yukon River, over 280 motor coaches
used for sightseeing and charters in the states of Washington and Alaska
and in the Canadian Rockies and 13 private domed rail cars which are run on
the Alaska Railroad between Anchorage and Fairbanks.
B. Cruise Ship Segment - Majority Owned Cruise Operations
North American Cruise Industry
The passenger cruise industry as it exists today began in
approximately 1970. Over time, the industry has evolved from a trans-ocean
carrier service into a vacation alternative to land-based resorts and
sightseeing destinations. According to Cruise Lines International
Association ("CLIA"), an industry trade group, in 1970 approximately
500,000 North American passengers took cruises for three consecutive nights
or more. CLIA estimates that this number reached 5.4 million passengers in
1998, an average compound annual growth rate of 8.9% since 1970. Also,
according to CLIA, by the end of 1998 the number of ships in service
totaled 145 with an aggregate capacity of approximately 140,000 lower
berths. CLIA estimates that the number of passengers carried in North
America increased from 5.051 million in 1997 to 5.4 million in 1998 or
6.9%.
CLIA estimates that the number of cruise passengers will grow to
approximately 6.0 million in 1999. CLIA projections (updated for recently
announced shipbuilding contracts) indicate that by the end of 1999, 2000
and 2001 North America will be served by 155, 167 and 174 vessels,
respectively, having an aggregate capacity of approximately 155,000,
172,000 and 185,000 lower berths, respectively. CLIA estimates of new ship
introductions are based on scheduled ship deliveries and could change. The
lead time for design, construction and delivery of a typical large cruise
ship is approximately two to three years. Additionally, CLIA's estimates of
capacity do not include assumptions related to unannounced ship withdrawals
due to age or changes in itineraries and, accordingly, could indicate a
higher percentage growth in capacity than will actually occur. Nonetheless,
management believes net capacity serving North American cruise passengers
will increase over the next several years, barring unforeseen events.
A comparison of CLIA's North American cruise passengers and Company
total worldwide passenger growth over the last five years based on
passengers carried for at least three consecutive nights is as follows:
<TABLE>
<CAPTION>
NORTH AMERICAN COMPANY
CRUISE CRUISE
YEAR PASSENGERS(1) PASSENGERS(2)
(Calendar Year) (Fiscal Year)
<S> <C> <C>
1998 5,400,000(est.) 2,045,000
1997 5,051,000 1,945,000
1996 4,659,000 1,764,000
1995 4,378,000 1,543,000
1994 4,448,000 1,354,000
</TABLE>
(1) Source: CLIA
(2) Represents the Company's worldwide cruise passengers.
From 1994 through 1998, the Company's average compound annual growth
rate in total number of passengers carried worldwide was 10.9% versus the
industry average of 5.1% for North America.
The Company's passenger capacity has grown from 23,995 at November 30,
1994 to 39,466 at November 30, 1998. In 1995, with the delivery of the
Imagination, capacity increased by 2,040 berths. During 1996, net capacity
increased by 4,802 berths due to delivery of the Inspiration, the Veendam
and the Carnival Destiny, net of the 1,146 berth decrease due to the sale
of the Festivale. In 1997 net capacity increased 241 berths due to the
delivery of the Rotterdam VI net of the 1,075 berth decrease due to the
sale of the Rotterdam V. During 1998, with the delivery of the Elation and
the Paradise, the purchase of the Wind Surf, the acquisition of Cunard and
the consolidation of Seabourn, capacity increased by 8,396 berths.
In spite of the cruise industry's growth since 1970, management
believes cruises represent only approximately 2% of the applicable North
American vacation market, defined as persons who travel for leisure
purposes on trips of three nights or longer involving at least one night's
stay in a hotel. Only an estimated 9.0% of the North American population
has ever taken a cruise.
Cruise Ships and Itineraries
Under the Carnival name, the Company serves the contemporary market
with 13 ships (the "Carnival Ships"). All of the Carnival Ships were
designed by and built for Carnival, including 12 SuperLiners, which are
among the largest in the cruise industry. Nine of the Carnival Ships
operate in the Caribbean during all or a portion of the year and two
Carnival Ships call on ports on the Mexican Riviera year round. Carnival
Ships also offer cruises to Alaska, Canada, the Hawaiian Islands, the
Bahamas and the Panama Canal. See "Sales and Marketing".
Through its wholly owned subsidiary, HAL Antillen, N.V. ("HAL"), the
Company operates 12 ships offering premium or luxury vacations. Eight of
these ships, the Rotterdam, Nieuw Amsterdam, Noordam, Westerdam, Statendam,
Maasdam, Ryndam and Veendam, are operated under the Holland America name
(the "Holland America Ships"). The remaining four ships, the Wind Star,
Wind Song, Wind Spirit and Wind Surf, are operated under the Windstar name
(the "Windstar Ships").
The Holland America Ships offer premium cruises of various lengths in
Alaska, the Caribbean, Panama Canal, Europe, Hawaii, South America and
other worldwide itineraries. Cruise lengths vary from seven to 97 days,
with a large proportion of cruises being seven or ten days in length.
Periodically, the Holland America Ships make longer grand cruises or
operate on special itineraries. For example, in 1998, the Rotterdam made a
97-day world cruise and the Nieuw Amsterdam made a series of 15-day South
China Sea Explorer cruises. Holland America will continue to offer these
special and longer itineraries in order to increase travel opportunities
for its customers and strengthen its cruise offerings in view of the fleet
expansion. The majority of the Holland America Ships operate in the
Caribbean during fall to spring and in Alaska and Europe during spring to
fall. In order to offer a unique destination and compete with other cruise
lines more effectively while operating in the Caribbean, in December 1997
Holland America introduced into its Caribbean itineraries a private island,
Half Moon Cay. Half Moon Cay is a 2400-acre island acquired by Holland
America in December 1996. Facilities were constructed on the island on 45
acres along a crescent-shaped white sand beach. The remainder of the island
remains undeveloped. The facilities on Half Moon Cay include bars, shops,
restrooms, a post office, a chapel and an ice cream shop, as well as a
food pavilion with open-air dining shelters and a bandstand.
The four Windstar Ships currently operate in the Caribbean, Europe and
Costa Rica and offer a casual, yet luxurious, cruise experience onboard
these modern sail ships.
Through Cunard Line Limited, the Company operates eight ships. Five of
these ships currently operate under the Cunard brand (the "Cunard Ships")
and three operate under the Seabourn brand (the "Seabourn Ships"). The
Cunard and Seabourn Ships offer luxury cruises of varying lengths in the
Caribbean, Panama Canal, Europe, Transatlantic, South America, Asia and
other worldwide itineraries. Cruise length varies from six to 104 days,
with many of the cruises being six to 14 days in length. Periodically,
these ships make longer grand cruises or operate on special itineraries.
For example, Cunard offers two world cruises and a New England Autumn
cruise.
Summary information concerning the Company's ships is as follows
(primary areas of operation reflect 1998 itineraries and are subject to
change in future years).
<TABLE>
<CAPTION>
1998
GROSS PRIMARY
YEAR PAX REGISTERED AREAS OF
NAME REGISTRY BUILT CAP TONS OPERATION
<S> <C> <C> <C> <C> <C>
Carnival:
Paradise Panama 1998 2,040 70,367 (1)
Elation Panama 1998 2,040 70,367 Mexican Riviera
Carnival Destiny Panama 1996 2,642 101,350 Caribbean
Inspiration Panama 1996 2,040 70,367 Caribbean
Imagination Panama 1995 2,040 70,367 Caribbean
Fascination Panama 1994 2,040 70,367 Caribbean
Sensation Panama 1993 2,044 70,367 Caribbean
Ecstasy Liberia 1991 2,040 70,367 Caribbean
Fantasy Liberia 1990 2,044 70,367 Bahamas
Celebration Liberia 1987 1,486 47,262 Caribbean
Jubilee Panama 1986 1,486 47,262 Alaska, Hawaii,
Mexican Riviera,
Panama Canal
Holiday Panama 1985 1,448 46,052 Mexican Riviera
Tropicale Liberia 1982 1,014 36,674 Caribbean
Total Carnival Ships Capacity......... 24,404
Holland America:
Rotterdam Netherlands 1997 1,316 62,000 Europe, Worldwide
Veendam Bahamas 1996 1,266 55,451 Eastern Canada,
Caribbean
Ryndam Netherlands 1994 1,266 55,451 Alaska, Caribbean
Maasdam Netherlands 1993 1,266 55,451 Alaska,
Panama Canal
Statendam Netherlands 1993 1,266 55,451 Alaska, Hawaii,
Caribbean
Westerdam Netherlands 1986 1,494 53,872 Alaska, Caribbean
Noordam Netherlands 1984 1,214 33,930 Alaska, Caribbean
Nieuw Amsterdam Netherlands 1983 1,214 33,930 Alaska, South
America, Asia/Pacific
Total Holland America
Ships Capacity....................... 10,302
Windstar Cruises:
Wind Surf Bahamas 1990 312 14,745 Caribbean, Europe
Wind Spirit Bahamas 1988 148 5,736 Caribbean, Europe
Wind Song Bahamas 1987 148 5,703 Costa Rica, Europe
Wind Star Bahamas 1986 148 5,703 Caribbean, Europe
Total Windstar Ships Capacity......... 756
Cunard:
Royal Viking Sun Bahamas 1988 758 37,845 Worldwide (2)
Sea Goddess II Bahamas 1985 116 4,253 Asia, Europe (2)
Sea Goddess I Bahamas 1984 116 4,253 Caribbean,
Europe (2)
Vistafjord Bahamas 1973 675 24,492 Worldwide (3)
Queen Elizabeth 2 England 1969 1,715 70,327 Transatlantic,
Worldwide
Total Cunard Ships Capacity........... 3,380
Seabourn:
Seabourn Legend Norway 1992 208 9,975 Pacific, Europe
Seabourn Spirit Norway 1989 208 9,975 Asia, Europe
Seabourn Pride Norway 1988 208 9,975 South America,
Europe, Caribbean
Total Seabourn Ships Capacity......... 624
Total Capacity........................... 39,466
</TABLE>
(1) The Paradise was in service for only five days during fiscal
1998. During fiscal 1999, the primary area of operation is expected to be
the Caribbean.
(2) In late 1999, these ships will be transferred to Seabourn.
(3) In late 1999, this ship's name will be changed to the Caronia.
__________________________
Cruise Ship Construction
The Company has signed agreements with two shipyards providing for the
construction of additional cruise ships. A summary of new ship agreements
for the Company's Majority Owned Cruise Operations is as follows:
<TABLE>
<CAPTION>
EXPECTED GROSS ESTIMATED REMAINING
SERVICE PAX REGISTERED TOTAL COST
VESSEL DATE(1) SHIPYARD CAP TONS COST(2) TO BE PAID
<S> <C> <C> <C> <C> <C> <C>
(In millions)
Carnival
Carnival Triumph 7/99 Fincantieri(3) 2,758 101,000 $ 410 $ 299
Carnival Victory 8/00 Fincantieri 2,758 101,000 440 434
Newbuild 4/01 Masa-Yards 2,100 82,000 375 357
Carnival Conquest 12/02 Fincantieri 2,758 101,000 450 429
Carnival Glory 8/03 Fincantieri 2,758 101,000 450 429
Total Carnival Ships 13,132 2,125 1,948
Holland America
Volendam 8/99 Fincantieri(3) 1,440 63,000 300 240
Zaandam 3/00 Fincantieri(3) 1,440 63,000 300 256
Newbuild 11/00 Fincantieri 1,380 61,000 300 55
Total Holland America Ships 4,260 900 551
Total (4) 17,392 $3,025 $2,499
</TABLE>
(1) No assurances can be made that the vessels under construction will be
introduced into service by the expected service dates.
(2) Estimated total cost is the total cost of the completed vessel
and includes the contract price with the shipyard, design and
engineering fees, estimated capitalized interest, various owner
supplied items and construction oversight costs.
(3) These construction contracts are denominated in Italian Lira and have
been fixed into U.S. dollars through the utilization of forward foreign
currency contracts.
(4) The Company has options for the construction of two additional 82,000
gross registered ton vessels, each with a passenger capacity of 2,100. The
estimated total cost of approximately $400 million each is denominated
principally in German Marks and has not been fixed into U.S. dollars. No
assurance can be given that the options to construct the vessels will be
exercised.
During 1997, the Company announced that it was in negotiations with
shipyards to build a new class of ships for each of its Carnival, Holland
America and Costa brands. The first of these orders has been placed by
Costa to construct the Costa Atlantica, a 2,112 passenger, 82,000 gross
registered ton vessel for approximately 700 billion Lira (approximately
U.S. $410 million), which is expected to enter service in the spring of
2000. In February 1998, the Company announced other agreements for this new
class of vessel for the Carnival brand, which include a contract to
purchase one vessel for delivery in 2001 and options to acquire two
additional vessels described above. Additionally, although no assurances
can be made, the Company hopes to finalize orders for a new class of vessel
for Holland America and an ocean liner for Cunard in 1999.
Cruise Pricing
Each of the Company's cruise brands publishes brochures with prices
for the upcoming seasons. Brochure prices vary by cruise line, by category
of cabin, by ship and itinerary. Brochure prices are regularly discounted
through the Company's early booking discount program and other promotions.
The cruise price includes all meals and entertainment onboard and use of,
or admission to, a wide variety of activities and facilities, such as a
fully equipped casino, nightclubs, theatrical shows, movies, parties, a
discotheque, a health club and swimming pools, on each ship.
On-Board and Other Revenues
The Company derives revenues from certain on-board activities and
services including casino gaming, bar sales, gift shop sales, entertainment
arcades, shore tours, art auctions, photography, spa services and
promotional advertising by merchants located in ports of call.
The casinos, which contain slot machines and gaming tables including
blackjack, and in most cases craps, roulette and stud poker, are
generally open only when the ships are at sea in international waters. The
Company also earns revenue from the sale of alcoholic and other beverages.
On-board activities are either performed directly by the Company or by
independent concessionaires, from which the Company collects a percentage
of revenues.
The Company receives additional revenue from the sale to its
passengers of shore excursions at each ship's ports of call. They include
bus and taxi sightseeing excursions, local boat and beach parties, and
nightclub and casino visits. On the Carnival, Windstar, Cunard and Seabourn
Ships, such shore excursions are primarily operated by independent tour
operators. On the Holland America Ships, shore excursions are operated by
Holland America Westours and independent parties.
In conjunction with its cruise vacations on its ships, all of the
Company's cruise operations sell pre-cruise and post-cruise land packages.
Carnival packages generally include one, two or three-night vacations near
attractions, such as Universal Studios and Walt Disney World in Orlando,
Florida, or in proximity to other vacation destinations in Central and
South Florida, Los Angeles, California and San Juan, Puerto Rico. Holland
America packages outside of Alaska generally include one, two or three-
night vacations, including stays in unique European port cities or near
attractions in Central and South Florida. Cunard and Seabourn packages
include numerous luxury and/or exotic packages, such as world class golf
programs, wine tastings and tours of the Galapagos Islands and the Hidden
Kingdoms of Nepal.
In conjunction with its Alaskan cruise vacations on its Holland
America and Carnival Ships, the Company sells pre- and post-cruise land
packages which are more fully described below (see Part I, Item 1.
Business, C. Tour Segment).
Passengers
The aggregate number of passengers carried and occupancy percentage for
the Company's ships is as follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
1998 1997 1996
<S> <C> <C> <C>
Passengers Carried 2,045,000 1,945,000 1,764,000
Occupancy Percentage (1) 106.3% 108.3% 107.6%
</TABLE>
(1) In accordance with cruise industry practice, occupancy percentage
is calculated based on two passengers per cabin even though some cabins can
accommodate three or four passengers. The percentages in excess of 100%
indicate that more than two passengers occupied some cabins.
The actual occupancy percentage for all cruises on the Company's ships
during each quarter of fiscal 1997 and 1998 was as follows:
<TABLE>
<CAPTION>
OCCUPANCY
QUARTERS ENDED PERCENTAGE
<S> <C>
February 28, 1997 106.4%
May 31, 1997 108.0
August 31, 1997 114.3
November 30, 1997 104.2
February 28, 1998 105.9
May 31, 1998 105.4
August 31, 1998 111.5
November 30, 1998 102.1
</TABLE>
Sales and Marketing
The Company's brands are positioned to appeal to each of the three
major market segments (contemporary, premium and luxury). The
contemporary segment is served typically by cruises that are seven days
or shorter in length, are priced at per diems of $200 or less, and
feature a casual ambiance. The Company believes that the success and
growth of the Carnival brand is attributable in large part to its early
recognition of this market segmentation and its efforts to reach and
promote the expansion of the contemporary segment. The premium segment
typically is served by cruises that last for seven to 14 days or more
at per diems of $250 or higher, and appeal principally to more affluent
customers. The luxury segment, which is not as large as the other
segments, is served by cruises with per diems of $300 or higher.
During 1998, the Company created a marketing association called
"The World's Leading Cruise Lines" for its family of six cruise
brands, including Costa, in order to both educate the consumer about
the overall breadth of the Company's cruise brands, as well as to
increase the effectiveness and efficiency of marketing the brands. This
initiative is meant to supplement the existing marketing programs of
each individual brand.
The Company's various cruise lines employ over 300 personnel,
excluding reservation agents, in the sales and sales support area, who
among other things, focus on motivating, training and supporting the retail
travel agent community which sells substantially all of the Company's
cruises, which arrangement is encouraged as a matter of policy. Travel
agents generally receive a standard commission of 10% plus the potential of
additional commissions based on sales volume. Commission rates on cruise
vacations are often higher than commission rates earned by travel agents on
sales of airline tickets and hotel rooms. Moreover, since cruise vacations
are substantially all-inclusive, sales of the Company's cruise vacations
generally yield higher commissions to travel agents than commissions earned
on selling airline tickets and hotel rooms. During fiscal 1998, no
controlled group of travel agencies accounted for more than 10% of the
Company's consolidated revenues.
Carnival
Carnival believes that its success is due in large part to its unique
brand positioning within the industry. Carnival markets the Carnival Ship
cruises not only as alternatives to competitors' cruises, but as vacation
alternatives to land-based resorts and sightseeing destinations. Carnival
seeks to attract passengers from the broad vacation market, including those
who have never been on a cruise ship before and who might not otherwise
consider a cruise as a vacation alternative. Carnival's strategy has been
to emphasize the cruise experience itself rather than particular
destinations, as well as the advantages of a prepaid, all-inclusive
vacation package. Carnival markets the Carnival Ship cruises as the "Fun
Ships" experience, which includes a wide variety of shipboard activities
and entertainment, such as full-scale casinos and nightclubs, an atmosphere
of pampered service and high quality food.
The Company markets the Carnival Ships as the "Fun Ships" and uses,
among others, the themes "Carnival's Got the Fun" and "The Most Popular
Cruise Line in the World!". Carnival advertises nationally directly to
consumers on network television and through extensive print media. Carnival
believes its advertising generates interest in cruise vacations generally
and results in a higher degree of consumer awareness of the "Fun Ships"
concept and the "Carnival" name in particular. Substantially all of
Carnival's cruise bookings are made through travel agents. In fiscal 1998,
Carnival took reservations from about 29,000 of approximately 49,000 travel
agency locations known to the Company in the United States and Canada.
Travel agents generally receive a standard commission of 10% plus the
potential of additional commissions based on sales volume.
Carnival engages in substantial promotional efforts designed to
motivate and educate retail travel agents about its "Fun Ships" cruise
vacations. Carnival employs approximately 110 business development managers
and 50 in-house service representatives to motivate independent travel
agents and to promote its cruises. Carnival believes it has one of the
largest sales forces in the industry.
To facilitate access and to simplify the reservation process, Carnival
employs approximately 700 reservation agents to take bookings from
independent travel agents. Carnival's fully-automated reservation system
allows its reservation agents to respond quickly to book staterooms on its
ships. Additionally, through Leisure Shopper and Cruise Director, travel
agents have the ability to make reservations through their own computer
terminals directly into Carnival's computerized reservations system.
Substantially all of Carnival's cruises are generally booked several
months in advance of the sailing date. This lead time allows Carnival to
adjust its prices, if necessary, in relation to demand for available
cabins, as indicated by the level of advance bookings. Carnival's
SuperSaver fares, introduced several years ago, are designed to encourage
potential passengers to book cruise reservations earlier, which helps the
Company to more effectively manage overall yields (pricing and occupancy).
Carnival's payment terms require that a passenger pay approximately 20% of
the cruise price within seven days of the reservation date and the balance
not later than 45 days before the sailing date for three, four and five day
cruises and 70 days before the sailing date for seven-day cruises.
Holland America and Windstar
The Holland America and Windstar Ships cater to the premium and luxury
markets, respectively. The Company believes that the hallmarks of the
Holland America experience are beautiful ships and gracious, attentive
service. Holland America communicates this difference as "A Tradition of
Excellence", a reference to its long-standing reputation for "world class"
service and cruise itineraries.
Substantially all of Holland America's bookings are made through
travel agents. In fiscal 1998, Holland America took reservations from about
20,000 of approximately 49,000 travel agency locations known to the Company
in the United States and Canada. Travel agents generally receive a standard
commission of 10% plus the potential of additional commissions based on
sales volume.
Holland America has focused much of its sales effort at creating an
excellent relationship with the travel agency community. This is related to
its marketing philosophy that travel agents have a large impact on the
consumer cruise selection process and will recommend Holland America more
often because of its excellent reputation for service to both consumers and
independent travel agents. Holland America solicits continuous feedback
from consumers and the independent travel agents making bookings with
Holland America to ensure they are receiving excellent service.
Holland America's marketing communication strategy is primarily
composed of newspaper and magazine advertising, large scale brochure
distribution, direct mail solicitations to past passengers (referred to as
"alumni") and television and radio spots. Holland America engages in
substantial promotional efforts designed to motivate and educate retail
travel agents about its products. Holland America employs approximately 45
field sales representatives, 23 inside sales representatives and 16 sales
and service representatives to support the field sales force. To facilitate
access to Holland America and to simplify the reservation process for the
Holland America Ships, Holland America employs approximately 260
reservation agents to take bookings from travel agents. Additionally,
through Leisure Shopper and Cruise Director, travel agents have the ability
to make reservations directly into Holland America's reservations system.
Holland America's cruises generally are booked several months in advance of
the sailing date.
Windstar has its own marketing and reservations staff. Field sales
representatives for both Holland America and Carnival act as field sales
representatives for Windstar. Marketing efforts are devoted primarily to
i) travel agent support and awareness, ii) direct mail solicitation of past
passengers and iii) distribution of brochures. The marketing features the
distinctive nature of the graceful, modern sail ships and the distinctive
"casually elegant" experience on "intimate itineraries" (apart from the
normal cruise experience). Windstar's cruise market positioning is embodied
in the phrase "180 degrees from ordinary".
Cunard and Seabourn
Since December 1995, the Company has owned a 50% equity interest in
Seabourn Cruise Line Limited. Simultaneously with the Company's acquisition
of the assets of Cunard in May 1998, Cunard and Seabourn were combined to
form Cunard Line Limited, in which the Company owns a 68% equity interest.
Cunard Line Limited currently operates eight ships in its Cunard and
Seabourn brands.
The Cunard brand currently operates five ships in the luxury
market segment. Cunard's most visible asset is the Queen Elizabeth 2
(the "QE2"). The QE2 is the only active passenger ship of its size
built specifically for navigating ocean waters and currently offering
Transatlantic cruises, and thus enjoys a unique standing among modern
passenger ships. Since being acquired by the Company, Cunard has
redefined itself as the brand that offers classic "Old World" cruising
with a British essence.
The Seabourn brand currently operates three ships, which offer ultra-
luxury cruising with an intense focus on service and cuisine, which
management believes enables Seabourn to be marketed as the "Best of the
Best" in luxury worldwide cruising.
Seabourn and Cunard currently market and sell their products through
one combined sales and marketing organization. This combined organization
has sales offices in Miami, New York City, England, Germany and Australia.
Marketing efforts are devoted primarily to i) travel agent support and
awareness, ii) direct mail solicitation of past passengers and iii)
targeted print media campaigns and brochure distribution. Cunard Line
Limited has consolidated and streamlined its entire organization, including
its sales and marketing activities, and implemented a new pricing program
called "Simplicity Pricing", a less complicated pricing structure than
previously used.
Cunard Line Limited employs approximately 47 field sales
representatives, 25 inside sales representatives and seven sales and
service representatives to support its field sales force. They also employ
approximately 99 Cruise Sales Consultants to take bookings, substantially
all of which come from travel agents. Travel agents generally receive a
standard commission of approximately 10% plus the potential for additional
commissions based upon sales volume.
During late 1999, Cunard will be refurbishing the Royal Viking Sun and
will transfer it along with the Sea Goddess I and II ships to the Seabourn
brand. Management believes these ships more appropriately fit within the
Seabourn brand. Additionally, after a major refurbishment in late 1999,
Cunard's Vistafjord will be renamed the "Caronia", the name once used by
two of Cunard's former "Old World" ships. The QE2 will also undergo a major
refurbishment in late 1999. Management is currently revising cruising
itineraries and schedules for the year 2000 in order to more appropriately
coordinate individual ship itineraries with their new branding strategies.
Seasonality
The Company's different businesses experience varying degrees of
seasonality. The Company's revenue from the sale of passenger tickets for
Carnival, Cunard, Seabourn and Windstar ships is moderately seasonal.
Historically, revenues for Carnival, Cunard, Seabourn and Windstar cruises
have been greater during the periods from late June through August and
lower during the fall months. Holland America cruise revenues are more
seasonal than the Company's other brands' cruise revenues. Revenues for
Holland America cruises are highest during the summer months when Holland
America ships operate in Alaska and Europe for which it obtains higher
pricing. Revenues for Holland America cruises are lower during the winter
months when Holland America ships sail in more competitive markets.
Competition
In addition to competing with each other, cruise lines compete for
consumer disposable leisure time dollars with other vacation alternatives
such as land-based resort hotels and sightseeing destinations, and consumer
demand for such activities is typically influenced by general economic
conditions.
As described under Part I, Item 1. Business, B. Cruise Ship Segment,
North American Cruise Industry, the North American cruise industry had an
aggregate of 145 ships and 140,000 lower berths at the end of 1998. From
the end of 1998 through the end of 2001, CLIA currently estimates that 29
new ships will be introduced into the North American market with a capacity
of approximately 45,000 lower berths. These estimates of new ship
introductions are based on scheduled ship deliveries and the actual number
of ships could change. The lead time for design, construction and delivery
of a typical large cruise ship is approximately two to three years.
Additionally, these estimates of capacity do not include assumptions
related to unannounced ship withdrawals due to age or changes in
itineraries and, accordingly, could indicate a higher percentage growth in
capacity than will actually occur. Nonetheless, management believes net
capacity serving North American cruise passengers will increase over the next
several years, barring unforeseen events, and thus may increase the levels
of competition within the industry.
The Company is the largest cruise company in the world based on
passengers carried, revenues generated and available capacity. The primary
methods of competition among cruise lines are in the areas of cruise
pricing, cruise product and cruise destination. Each of the Company's
cruise brands and its primary cruise competition is discussed below.
The Carnival Ships compete with cruise ships operated by five
different cruise lines which operate year round from Florida, California or
Puerto Rico with similar itineraries and with nine other cruise lines
operating seasonally from ports in Florida, California or Puerto Rico,
including cruise ships operated by Holland America and Costa. Competition
for cruise passengers is substantial. Ships operated by Royal Caribbean
International and Norwegian Cruise Line sail regularly from Miami and ships
operated by Celebrity Cruises, owned by Royal Caribbean Cruises Ltd., and
Princess Cruises sail regularly from Ft. Lauderdale on itineraries similar
to those of the Carnival Ships. Carnival competes year round with ships
operated by Royal Caribbean International embarking from Los Angeles to the
west coast of Mexico. Cruise lines such as Norwegian Cruise Line, Royal
Caribbean International and Princess Cruises offer voyages competing with
Carnival from San Juan to the Caribbean.
In 1998, the Walt Disney Co. entered the cruise market with the
introduction of the first of two new cruise ships. The Disney ship competes
primarily with Carnival in the Caribbean and Bahamian marketplaces.
In Alaska, Holland America and Carnival compete directly with cruise
ships operated by nine different cruise lines with the largest competitors
being Princess Cruises, Royal Caribbean International and Celebrity
Cruises. Over the past several years, there has been a steady increase in
the available capacity among cruise lines operating in Alaska. In the
Caribbean, Holland America competes with cruise ships operated by 16
different cruise lines, its primary competitors being Princess Cruises,
Royal Caribbean International, Celebrity Cruises and Norwegian Cruise Line,
as well as Carnival and Costa.
The Windstar, Cunard and Seabourn ships' primary unaffiliated
competitors within the cruise industry include: Crystal Cruises, Radisson
Seven Seas, Renaissance Cruises and Silversea Cruises.
Governmental Regulations
The Company's ships are registered in the Bahamas, England, Liberia,
Netherlands, Norway or Panama, as more fully described under Part I, Item
1. Business, B. Cruise Ships and Itineraries and, accordingly, are
regulated by these jurisdictions. The Company's ships that call on United
States ports are subject to inspection by the United States Coast Guard for
compliance with the Convention for the Safety of Life at Sea and by the
United States Public Health Service for sanitary standards. The Company is
also regulated by the Federal Maritime Commission ("FMC"), which, among
other things, certifies the Company on the basis of its ability to meet
obligations to passengers for refunds in case of nonperformance. The
Company believes it is in compliance with all material regulations
applicable to its ships and has all the necessary licenses to conduct its
business. In connection with a significant portion of its Alaska cruise
operations, Holland America relies on concession permits from the National
Park Service, which are periodically renewed, to operate its cruise ships
in Glacier Bay National Park. There can be no assurance that these permits
will continue to be renewed or that regulations relating to the renewal of
such permits, including preference rights, will remain unchanged in the
future.
The International Maritime Organization (the "IMO"), which operates
under the United Nations, has adopted safety standards as part of the
"Safety of Life at Sea" ("SOLAS") Convention, generally applicable to all
passenger ships carrying 36 or more passengers. Generally, SOLAS
establishes vessel design, structural features, materials, construction and
life saving equipment requirements to improve passenger safety. The current
SOLAS requirements are phased in through the year 2010.
In 1993, SOLAS was amended to adopt the "International Safety
Management Code" (the "ISM Code"). The ISM Code provides an international
standard for the safe management and operation of ships and for pollution
prevention. The ISM Code became mandatory for passenger vessel operators,
such as the Company, on July 1, 1998. All of the Company's Majority Owned
Cruise Operations and Affiliated Cruise Operations have obtained the
required certificates demonstrating compliance with the ISM Code.
Public Law 89-777 administered by the FMC requires most cruise line
operators to establish financial responsibility for nonperformance of
transportation. The FMC's regulations require that a cruise line
demonstrate its financial responsibility through a guaranty, escrow
arrangement, surety bond, insurance or self-insurance. Currently, the
amount required must equal 110% of the cruise line's highest amount of
customer deposits over a two-year period up to a maximum coverage level of
$15 million. In 1995, the FMC introduced proposals to increase the coverage
requirements under the FMC regulations. These proposed changes to the
regulations are viewed favorably by the Company and, if enacted, are not
expected to have a material effect on the Company.
Management believes that virtually all of the Company's income (with
the exception of the United States source income from the transportation,
hotel and tour business of Holland America Westours) is exempt from United
States federal income taxes. If the Company was found not to meet certain
tests under the Internal Revenue Code or if the Internal Revenue Code were
to be changed in a manner adverse to the Company, much of the Company's
income would become subject to taxation by the U.S. at higher than normal
corporate tax rates. For an additional discussion of the Company's
taxation, see Note 2 to the Company's Consolidated Financial Statements in
Exhibit 13 incorporated by reference into this Annual Report on Form 10-K.
From time to time, various other regulatory and legislative changes
have been or may be proposed that could have an effect on the cruise
industry in general.
Financial Information
For financial information about the Company's cruise ship segment with
respect to each of the three years in the period ended November 30, 1998,
see Note 10 "Segment Information" to the Company's Consolidated Financial
Statements in Exhibit 13 incorporated by reference into this Annual Report
on Form 10-K.
C. Tour Segment
In addition to its cruise business, the Company markets sightseeing
tours separately and as a part of cruise/tour packages under the Holland
America Westours and Gray Line names. Tour operations are based in Alaska,
Washington State and western Canada. Since a substantial portion of Holland
America Westours' business is derived from the sale of tour packages in
Alaska during the summer tour season, tour operations are highly seasonal.
Holland America Westours
Holland America Westours is an indirect wholly owned subsidiary of
HAL, a wholly owned subsidiary of the Company. The group of companies which
together comprise the tour operations perform three independent yet
interrelated functions. During 1998, as part of an integrated travel
program to destinations in Alaska, the tour service group offered 38
different tour programs varying in length from 10 to 18 days. The
transportation group and hotel group support the tour service group by
supplying facilities needed to conduct tours. Facilities include dayboats,
motor coaches, rail cars and hotels.
Two luxury dayboats perform an important role in the integrated Alaska
travel program offering tours to the glaciers of Alaska and the Yukon
River. The Yukon Queen cruises the Yukon River between Dawson City, Yukon
Territory and Eagle, Alaska and the Ptarmigan operates on Portage Lake in
Alaska. The two dayboats have a combined capacity of 249 passengers.
A fleet of over 280 motor coaches using the trade name Gray Line
operate in Alaska, Washington and western Canada. These motor coaches are
used for extended trips, city sightseeing tours and charter hire. Holland
America Westours conducts its tours both as part of a cruise/tour package
and as individual sightseeing products sold under the Gray Line name.
Additionally, Holland America Westours operates express Gray Line motor
coach service between downtown Seattle and the Seattle-Tacoma International
Airport.
Thirteen private domed rail cars, which are called "McKinley
Explorers", run on the Alaska Railroad between Anchorage and Fairbanks,
stopping at Denali National Park.
In connection with its tour operations, Holland America Westours owns
or leases motor coach maintenance shops in Seattle, Washington, and in
Juneau, Fairbanks, Anchorage, Skagway and Ketchikan, Alaska. Holland
America Westours also owns or leases service offices at Anchorage, Denali
Park, Fairbanks, Juneau, Ketchikan and Skagway in Alaska, at Whitehorse in
the Yukon Territory, in Seattle, Washington, Vancouver, British Columbia
and Victoria, British Columbia. Certain real property facilities on federal
land are used in Holland America Westours' tour operations pursuant to
permits from the applicable federal agencies.
Westmark Hotels
Holland America Westours owns and/or operates 14 hotels in Alaska and
the Canadian Yukon under the name Westmark Hotels. Four of the hotels are
located in Canada's Yukon Territory and offer a combined total of 585
rooms. The remaining 10 hotels, all located throughout Alaska, provide a
total of 1,455 rooms, bringing the total number of hotel rooms to 2,040.
The hotels play an important role in Holland America Westours tour
programs during the summer months when they provide accommodations to the
tour passengers. The hotels located in the larger metropolitan areas remain
open during the entire year, acting during the winter season as centers for
local community activities while continuing to accommodate the traveling
public. Most of the Westmark hotels include dining, lounge and conference
or meeting room facilities. Certain hotels have gift shops and other
tourist services on the premises.
The hotels are summarized as follows:
<TABLE>
<CAPTION>
OPEN DURING
NAME LOCATION ROOMS 1998 SEASON
<S> <C> <C> <C>
Alaska Hotels:
Westmark Anchorage Anchorage 198 year-round
Westmark Inn Anchorage 91 seasonal
Westmark Inn Fairbanks 170 seasonal
Westmark Fairbanks Fairbanks 244 year-round
The Baranof Juneau 196 year-round
Westmark Cape Fox Ketchikan 72 year-round
Westmark Shee Atika Sitka 101 year-round
Westmark Inn Skagway Skagway 195 seasonal
Westmark Tok Tok 92 seasonal
Westmark Valdez Valdez 97 year-round
1,455
Canadian Hotels (Yukon Territory):
Westmark Inn Beaver Creek 174 seasonal
Westmark Klondike Inn Whitehorse 99 seasonal
Westmark Whitehorse Whitehorse 181 year-round
Westmark Inn Dawson 131 seasonal
585
2,040
</TABLE>
Eleven of the hotels are wholly owned by Holland America Westours
subsidiaries. Of the remaining three hotels, the Westmark Cape Fox and
Westmark Shee Atika are operated by Westmark under management or lease
arrangements involving third parties and the Westmark Anchorage is 90%
owned by a Holland America Westours subsidiary.
For the hotels that operate year-round, the occupancy percentage for
fiscal 1998 was 57.4% (55.9% for fiscal 1997), and for the hotels that
operate only during the summer months, the occupancy percentage for fiscal
1998 was 71.6% (71.4% for fiscal 1997).
Sales and Marketing
Holland America Westours has its own marketing staff devoted to i)
travel agent support and awareness, ii) direct mail solicitation of past
customers, iii) use of consumer magazine and newspaper advertising to
develop prospects and enhance awareness and iv) distribution of brochures.
Additionally, television and radio spots are used to market its tour and
cruise packages. The Westours marketing message leverages the company's 52
years of Alaska tourism leadership and its extensive array of hotel and
transportation assets to create a brand preference for Holland America
Westours. To the prospective vacationer the company endeavors to convince
them that "Westours is Alaska".
Holland America Westours tours are marketed both separately and as
part of cruise/tour packages. Although most Holland America Westours
cruise/tours include a Holland America cruise as the cruise segment, other
cruise lines also market Holland America Westours tours as a part of their
cruise/tour packages and sightseeing excursions. Tours sold separately are
marketed through independent travel agents and also directly by Holland
America Westours, utilizing sales desks in major hotels. General marketing
for the hotels is done through various media in Alaska, Canada and the
contiguous United States. Travel agents, particularly in Alaska, are
solicited, and displays are used in airports in Seattle, Washington,
Portland, Oregon and various Alaskan cities. Room rates at Westmark Hotels
are on the upper end of the scale for hotels in Alaska and the Canadian
Yukon.
Concessions
Certain tours in Alaska are conducted on federal property requiring
concession permits from the applicable federal agencies, such as the
National Park Service and the United States Forest Service.
Seasonality
Holland America Westours tour revenues are extremely seasonal with a
large majority generated during the late spring and summer months in
connection with the Alaska cruise season. Holland America Westours tours
are conducted in Washington State, western Canada and Alaska. The Alaska
tours coincide to a great extent with the Alaska cruise season, May through
September. Washington tours are conducted year-round although demand is
greatest during the summer months. During periods in which tour demand is
low, Holland America Westours seeks to maximize its motor coach charter
activity such as operating charter tours to ski resorts in Washington and
western Canada.
Competition
Holland America Westours competes with independent tour operators and
motor coach charter operators in Washington, Alaska and the Canadian
Rockies. The primary competitors in Alaska and the Canadian Rockies are
Princess Tours (with approximately 150 motor coaches and three hotels) and
Alaska Sightseeing/Trav-Alaska (with approximately 30 motor coaches). The
primary competitor in Washington is Gazelle (with approximately 15 motor
coaches).
Westmark Hotels compete with various hotels throughout Alaska, many of
which charge prices below those charged by Westmark Hotels. Dining
facilities in the hotels also compete with the many restaurants in the same
geographic areas.
Government Regulations
Holland America Westours motor coach operations are subject to
regulation both at the federal and state levels, including primarily the
U.S. Department of Transportation, the Washington Utilities Department of
Transportation, the British Columbia Motor Carrier Commission and the
Alaska Department of Transportation. Certain of Holland America Westours
tours involve federal properties and are subject to regulation by various
federal agencies, such as the National Park Service and the U.S. Forest
Service.
In connection with the operation of its beverage facilities in the
Westmark Hotels, Holland America Westours is required to comply with state,
county and/or city ordinances regulating the sale and consumption of
alcoholic beverages. Violations of these ordinances could result in fines,
suspensions or revocation of such licenses and preclude the sale of any
alcoholic beverages by the hotel involved.
In the operation of its hotels, Holland America Westours is required
to comply with applicable building and fire codes. Changes in these codes
have in the past and may in the future, require expenditures to ensure
continuing compliance such as the installation of sprinkler systems.
From time to time, various other regulatory and legislative changes
have been or may be proposed that could have an effect on the tour industry
in general.
Financial Information
For financial information about the Company's tour segment with
respect to each of the three years in the period ended November 30, 1998,
see Note 10 "Segment Information" to the Company's Consolidated Financial
Statements in Exhibit 13 incorporated by reference into this Annual Report
on Form 10-K.
D. Employees
The Company's operations have approximately 3,800 full-time and 1,800
part-time/seasonal employees engaged in shoreside operations. The Company
also employs approximately 1,200 officers and 15,200 crew and staff on its
ships. Due to the seasonality of its Alaska and Canadian operations, HAL
and its subsidiaries increase their work force during the summer months,
employing additional full-time and part-time personnel. The Company has
entered into agreements with unions covering certain employees in its
hotel, motorcoach and ship operations. The Company considers its employee
and union relations generally to be good.
E. Suppliers
The Company's largest purchases are for airfare, advertising, fuel,
food and related items, hotel supplies and products related to passenger
accommodation. Although the Company chooses to use a limited number of
suppliers for most of its food and fuel purchases, most of the necessary
supplies are available from numerous sources at competitive prices. The use
of a limited number of suppliers enables the Company to, among other
things, obtain volume discounts.
Management believes that there are currently eight shipyards in the
world capable of the quality construction of large passenger cruise ships.
The Company currently has contracts, including options, with two of these
shipyards for the construction of ten ships to enter service over the next
five years (see Part I, Item 1. Business, B. Cruise Ship Segment - Majority
Owned Cruise Operations - Cruise Ship Construction). The Company's primary
competitors also have contracts to construct new cruise ships (see Part I,
Item 1. Business, B. Cruise Ship Segment - Majority Owned Cruise Operations
- - Competition). If the Company elects to build additional ships in the
future, there is no assurance that any of these shipyards will have the
available capacity to build additional new ships for the Company at the
times desired by the Company or that the shipyards will agree to build
additional ships at a cost acceptable to the Company. Additionally, there
is no assurance that ships under contract for construction will be
delivered.
F. Insurance
The Company maintains insurance covering legal liabilities related to
crew, passengers and other third parties on its ships in operation through
The Standard Steamship Owners Protection & Indemnity Association Limited
(the "SSOPIA"), Steamship Mutual Underwriting Association Ltd. (the
"SMUAL") and Assurance Foreningen Gard (the "GARD"). The amount and terms
of this insurance is governed by the rules of the foregoing protection and
indemnity associations.
The Company currently maintains insurance on the hull and
machinery of each vessel in amounts equal to the approximate market
value of each vessel. The Company maintains war risk insurance on each
vessel which includes legal liability to crew and passengers, including
terrorist risks for which coverage would be excluded under SSOPIA,
SMUAL or GARD. The coverage for hull and machinery and war risks is
provided by international markets, including underwriters at Lloyds.
The Company, as currently required by the FMC, maintains at all times
three $15 million performance bonds for all of the Company's ships, to
cover passenger ticket liabilities in the event of a canceled or
interrupted cruise. See Part I, Item 1. Business, B. Cruise Ship
Segment - Majority Owned Cruise Operations - Governmental Regulations
for a discussion of changes to the performance bond requirements
proposed by the FMC. The Company also maintains other performance bonds
as required by various foreign authorities who regulate certain of the
Company's operations in their jurisdictions.
The Company maintains certain levels of self insurance for the
above mentioned risks through the use of substantial deductibles. Such
deductibles may be increased in the future. The Company does not
currently carry coverage related to loss of earnings or revenues for
its cruise operations other than for the QE2.
The Company also maintains various other insurance policies to protect
the assets and earnings arising from the operations of Holland America
Westours and other activities.
G. Investments in Affiliates
Airtours plc
In April 1996, the Company acquired a 28% interest in Airtours for
approximately $307 million. In 1998, the Company's interest in Airtours was
reduced to approximately 26% as a result of the conversion of Airtours
preference shares into Airtours common stock and the issuance of Airtours
common stock in conjunction with two of its acquisitions. Airtours is the
largest air inclusive tour operator in the world and is publicly traded on
the London Stock Exchange. Airtours provides air inclusive packaged
holidays to the Austrian, British, Belgian, Dutch, French, German, Irish,
Polish, Scandinavian, Swiss and North American markets. Airtours provided
holidays to approximately eight million people in fiscal 1998 and owns or
operates over 800 retail travel shops, 26 holiday hotels, three cruise
ships (an additional ship is scheduled to be delivered in 1999), 36
aircraft and develops and markets vacation ownership resorts in the Canary
Islands and Orlando, Florida. The cruise ships are operated under the Sun
Cruises brand. In 1997, Airtours acquired a 50% interest in Costa, as
discussed below. During 1998, Airtours made several acquisitions, including
a 36% interest in FTi, a German tour operator, and a 100% interest in
Direct Holidays, a direct to customer retail tour operator in the United
Kingdom. Airtours also acquired tour operations based in Ireland and
Atlanta, Georgia. In December 1998, Airtours successfully completed an
approximate $500 million convertible debenture offering, which will provide
Airtours with additional working capital to fund its operations and/or
future acquisitions, as required. If this convertible debt was converted
into Airtours common stock, the Company's interest in Airtours would be
reduced to approximately 23%.
Costa Crociere S.p.A.
In June 1997, the Company and Airtours completed a joint offer to
acquire the equity securities of Costa, an Italian cruise company. 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. As a result of the acquisition, Il Ponte owns approximately 100% of
Costa. The cost of the Company's acquisition of its 50% direct interest was
approximately $141 million, of which approximately $103 million was paid by
Il Ponte and the balance was paid by the Company. The $103 million paid by
Il Ponte was funded through Il Ponte debt, which is guaranteed by the
Company.
Costa is headquartered in Genoa, Italy and is Europe's largest cruise
line based on number of passengers carried and available capacity. Costa is
primarily targeted to the contemporary market and has sales offices in
Argentina, Brazil, England, Florida, France, Italy, Spain and Switzerland,
and employs over 200 personnel in the sales and sales support area,
excluding reservation agents. Costa's ships' primary itineraries include
Europe, the Caribbean and South America. The major market for Costa cruises
is Southern Europe with the majority of Costa's cruises being sold in
Italy, Spain and France.
The itineraries of Costa's ships during the summer months consist
primarily of various locations in Europe. During the winter months, the
vessels operate primarily in the Caribbean and South America. See Part I,
Item 1. Business, B. Cruise Ship Segment for a discussion of competition
and certain government regulations, which affect Costa.
Costa operates six ships which are registered in Liberia and one
registered in the Bahamas which have an aggregate passenger capacity of
7,644 passengers. In January 1998, Costa signed an agreement to construct
an eighth ship, the Costa Atlantica, with a passenger capacity of 2,112 for
approximately 700 billion Lira (see "Cruise Ship Construction").
Seasonality
The Company's equity in the earnings of Airtours and Il Ponte are
recorded on a two-month lag basis using the equity method of accounting.
Costa's and Airtours' earnings are seasonal due to the nature of the
European leisure travel industry and European cruise season. Typically,
Airtours' and Costa's quarters ending June 30 and September 30 experience
higher earnings, with earnings in quarter ending September 30 being their
highest.
H. Trademarks
The Company owns numerous trademarks which it believes are widely
recognized throughout the world and have considerable value.
Item 2. Properties
The Company's cruise ships and private island, Half Moon Cay, are
described in Section B of Item 1 under the heading Cruise Ship Segment -
Cruise Ships and Itineraries. The properties associated with Holland
America Westours tour operations are described in Section C of Item 1 under
the heading "Tour Segment".
Carnival's principal shoreside operations and the Company's corporate
headquarters are located at 3655 N.W. 87th Avenue, Miami, Florida. These
Company-owned facilities include approximately 456,000 square feet of
office space. HAL headquarters are at 300 Elliott Avenue West in Seattle,
Washington in approximately 128,000 square feet of leased office space.
Cunard Line Limited headquarters are at 6100 Blue Lagoon Drive in Miami,
Florida in approximately 51,000 square feet of leased office space.
The Company's cruise ships, tour properties and shoreside operations
facilities are well maintained and in good condition.
Item 3. Legal Proceedings
Several actions (collectively, the "Passenger Complaints"), as
previously reported, have been filed against Carnival or Holland America
Westours on behalf of purported classes of persons who paid port charges to
Carnival or Holland America, 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 status of each pending Passenger
Complaint is as follows:
In 1996, four Passenger Complaints were filed against Carnival in the
Circuit Court for the Eleventh Judicial Circuit in Dade County, Florida, by
Michelle Hackbarth, Larry Katz, Michelle A. Sutton, Pedro Rene Mier, and
others, respectively, on behalf of purported nationwide classes. In
February 1998, Carnival's motions to dismiss the plaintiffs' second amended
complaints were granted in part and denied in part. In May 1998, the court
consolidated all four actions. The court has lifted, solely with respect to
the issue of class certification, a previously-imposed stay on discovery.
Plaintiffs' motion for class certification was argued on January 13, 1999,
and a decision on that motion has not yet been rendered.
Carnival had previously reached an agreement-in-principle to settle
the action filed against it by Michelle Hackbarth and others under terms
that would apply to a nationwide class of Carnival passengers. That
agreement-in-principle was subject to the parties' entering into a
definitive agreement. A definitive agreement was not executed, and the
action is now proceeding.
In March 1997, a Passenger Complaint was filed against Carnival in the
Chancery court in Dyer County, Tennessee, by Brent Mezzacasa and others, on
behalf of a purported nationwide class. The complaint also named, as
co-defendants, Norwegian Cruise Lines, Royal Caribbean Cruise Lines and
Princess Cruise Lines. Simultaneous with the filing of the complaint, the
court granted Plaintiffs' motion to conditionally certify the class. In
October 1997, the court granted Carnival's motion to dismiss on the grounds
of inconvenient forum. Plaintiffs' appeal from that order is under
consideration in the Tennessee Court of Appeals.
In April 1997, a Passenger Complaint was filed against Carnival in the
Court of Common Pleas, Montgomery County, Ohio, by Cathy J. Miller and
others, on behalf of a purported statewide class. Carnival's motion to
dismiss on inconvenient forum grounds is under consideration. In October
1997, a Passenger Complaint was filed against Carnival in Georgia state
court by Elizabeth Forsling on behalf of a purported statewide class, and
in February 1999, the court granted Carnival's motion to dismiss on
inconvenient forum grounds.
In March 1998, a Passenger Complaint was filed against Carnival in the
Circuit Court for the 20th Judicial Circuit in St. Clair County, Illinois,
by John R. Birdsell and others on behalf of a purported nationwide class.
The complaint also names, as co-defendants, Norwegian Cruise Lines, Royal
Caribbean Cruise Lines and Princess Cruise Lines. The court overruled
Carnival's objection to the court's exercise of personal jurisdiction and
denied its motion to dismiss on grounds of improper forum. Carnival is now
appealing the trial court's decision and plaintiffs have moved to certify a
class.
In April 1996, a Passenger Complaint was filed against Holland America
Westours in the Superior Court in King County, Washington, by Francine
Pickett and others on behalf of a purported nationwide class. The court
denied both Holland America Westours' motion to dismiss and the plaintiffs'
motion for class certification. Thereafter Holland America Westours entered
into a settlement agreement for this action, the only Passenger Complaint
filed against it. The settlement agreement was approved by the court on
September 28, 1998. Five members of the settlement class have appealed the
court's approval of the settlement. The appeal is likely to take between
one and two years to be resolved. Unless the appeal is successful, Holland
America 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 will pay a portion of
the plaintiffs' legal fees. The amount and timing of the travel vouchers to
be redeemed and the effects of the travel voucher redemption on revenues is
not reasonably determinable. Accordingly, the Company will account for the
redemption of the vouchers as a reduction of future revenues. In 1998, the
Company established a liability for the estimated distribution costs of the
settlement notices and plaintiffs' legal costs.
Several complaints have been filed against Carnival and/or Holland
America Westours (collectively the "Travel Agent Complaints") on behalf of
purported classes of travel agencies who had booked a cruise with Carnival
or Holland America, 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. The status of each pending Travel Agent
Complaint is as follows:
In August 1997, a Travel Agent Complaint was filed against Carnival in
the Circuit Court for the Eleventh Judicial Circuit in Dade County,
Florida, by N.G.L. Travel Associates, on behalf of a purported nationwide
class of travel agencies who booked cruises with Carnival. The court
dismissed the action with prejudice in January 1999, and plaintiff has
appealed.
In September 1997, a Travel Agent Complaint was filed against Holland
America Westours in the Superior Court of the State of Washington for King
County by N.G.L. Travel Associates on behalf of a purported nationwide
class of travel agencies who booked cruises with Holland America. Holland
America Westours filed summary judgment motions as to all of the claims.
The motions were granted as to every claim except for one alleging a breach
of contract under the Sales Agreement between Holland America Westours and
GEM, the travel agent consortium of which N.G.L. Travel Associates was a
member. Both parties have requested the court to reconsider its rulings on the
summary judgment motions; those requests are pending. The court has ruled
that a class of travel agents will be certified in this matter. The exact
composition of the class is uncertain at this time as the order signed by
the court is inconsistent with the previous decisions made by the court on
the summary judgment motions. Holland America Westours expects the
situation to be clarified in the near future and may appeal the court's
class certification order.
In August 1996, a Travel Agent Complaint was filed against Carnival
and Holland America Westours in the Superior Court in Los Angeles, County,
California, by Nelsons Travel Associates, on behalf of purported nationwide
classes of travel agencies who booked cruises with Carnival and Holland
America. Upon Carnival's and Holland America Westours' motions to dismiss
or stay the action on the grounds of inconvenient forum, the court stayed
the action, pending resolution of the Florida and Washington actions.
In February 1998, a Travel Agent Complaint was filed against Carnival
in Alabama state court by Flora Price and others on behalf of a purported
statewide class of travel agencies who booked cruises with Carnival. The
case was removed to the United States District Court for the Northern
District of Alabama which granted Carnival's motion to dismiss or transfer
on the grounds of inconvenient forum.
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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
Pursuant to General Instruction G(3), the information regarding
executive officers of the Company called for by Item 401(b) of Regulation
S-K is hereby included in Part 1 of this Annual Report on Form 10-K.
The following table sets forth the name, age and title of each
executive officer. Titles listed relate to positions within the Company
unless otherwise noted.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Micky Arison 49 Chairman of the Board of Directors
and Chief Executive Officer
Gerald R. Cahill 47 Senior Vice President-Finance and Chief
Financial Officer
Robert H. Dickinson 56 President and Chief Operating Officer
of Carnival and Director
Howard S. Frank 57 Vice Chairman of the Board of Directors
and Chief Operating Officer
A. Kirk Lanterman 67 Chairman of the Board of Directors
and Chief Executive Officer of
Holland America Line-Westours Inc.
and Director
Peter T. McHugh 51 President and Chief Operating Officer
of Holland America Line-Westours Inc.
Lowell Zemnick 55 Vice President and Treasurer
Meshulam Zonis 65 Senior Vice President-Operations of
Carnival and Director
</TABLE>
Business Experience of Officers
Micky Arison, has been Chief Executive Officer since 1979 and Chairman
of the Board of Directors since 1990. He was President from 1979 to May
1993 and has also been a director since June 1987. Prior to 1979, he served
Carnival for successive two-year periods as sales agent, reservations
manager and as Vice President in charge of passenger traffic. He is the son
of Ted Arison, Carnival Corporation's founder.
Gerald R. Cahill, is a Certified Public Accountant and has been Senior
Vice President-Finance, Chief Financial Officer and Chief Accounting
Officer since January 1998. From September 1994 to January 1998 he was Vice
President-Finance. He was the Chief Financial Officer from 1988 to 1992 and
the Chief Operating Officer from 1992 to 1994 of Safecard Services, Inc.
From 1979 to 1988 he held financial positions at Resorts International Inc.
and, prior to that, spent six years with Price Waterhouse LLP.
Robert H. Dickinson, has been President and Chief Operating Officer of
Carnival since May 1993. From 1979 to May 1993, he was Senior Vice
President-Sales and Marketing of Carnival. He has also been a director
since June 1987.
Howard S. Frank, has been Vice Chairman of the Board of Directors
since October 1993, Chief Operating Officer since January 1998 and a
director since 1992. From July 1989 to January 1998 he was Chief Financial
Officer and Chief Accounting Officer and from July 1989 to October 1993 he
was Senior Vice President-Finance. From July 1975 through June 1989, he was
a partner with Price Waterhouse LLP.
A. Kirk Lanterman, is a Certified Public Accountant and has been a
director since April 1992. He has been Chairman of the Board of Directors
of Holland America Line-Westours Inc. since March 1997 and has been Chief
Executive Officer of Holland America Line-Westours Inc. since January 1989.
From January 1983 to March 1997, he was President of Holland America
Line-Westours Inc. and from January 1983 to January 1989 he was Chief
Operating Officer of Holland America Line-Westours Inc.
Peter T. McHugh, has been President and Chief Operating Officer of
Holland America Line-Westours Inc. since March 1997. From January 1996 to
March 1997 he was Executive Vice President of Holland America Line-Westours
Inc. From January 1992 to December 1995 he was Chief Executive Officer and
Responsible Officer of Pan American World Airways.
Lowell Zemnick, is a Certified Public Accountant and has been a Vice
President since 1980 and Treasurer since September 1990. He was the Chief
Financial Officer of Carnival from 1980 to September 1990 and was the Chief
Financial Officer of Carnival Corporation from May 1987 through June 1989.
Meshulam Zonis, has been Senior Vice President-Operations of Carnival
since 1979. He has also been a director since June 1987. From 1974 through
1979, he was Vice President-Operations of Carnival.
Special Note Regarding Forward-Looking Statements
Certain statements under the headings "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business"
and elsewhere in this Annual Report on Form 10-K and certain oral
statements by authorized officers of the Company 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; 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; computer program Year 2000 compliance; and changes
in laws and regulations applicable to the Company.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
A. Market Information
The information required by Item 201(a) of Regulation S-K, Market
Information, is shown in Exhibit 13 and is incorporated by reference into
this Annual Report on Form 10-K.
B. Holders
The information required by Item 201(b) of Regulation S-K, Holders of
common stock, is shown in Exhibit 13 and is incorporated by reference into
this Annual Report on Form 10-K.
C. Dividends
The Company declared cash dividends on all of its Common Stock in the
amount of $.055 per share in each of the first three quarters of fiscal
1997, $.075 in the fourth quarter of fiscal 1997, $.075 in each of the
first three quarters of fiscal 1998, and $.09 in the fourth quarter of
fiscal 1998 and first quarter of fiscal 1999. Payment of future dividends
on the Common Stock will depend upon, among other factors, the Company's
earnings, financial condition and capital requirements. The Company may
also declare special dividends to all stockholders in the event that
members of the Arison family and certain related entities (the "Arison
Group") are required to pay additional income taxes by reason of their
ownership of the Common Stock because of an income tax audit of the
Company. 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 has been retroactively restated
to give effect to this stock split.
While no tax treaty currently exists between the Republic of Panama
and the United States, under current law the Company believes that
distributions to its shareholders are not subject to taxation under the
laws of the Republic of Panama. Dividends paid by the Company will be
taxable as ordinary income for United States Federal income tax purposes to
the extent of the Company's current or accumulated earnings and profits,
but generally will not qualify for any dividends-received deduction.
The payment and amount of any dividend is within the discretion of the
Board of Directors, and it is possible that the amount of any dividend may
vary from the levels discussed above.
Item 6. Selected Financial Data
The information required by Item 6, Selected Financial Data for each
of the five years in the period ended November 30, 1998, is shown in
Exhibit 13 and is incorporated by reference into this Annual Report on Form
10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, is shown in
Exhibit 13 and is incorporated by reference into this Annual Report on Form
10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by Item 7A, Quantitative and Qualitative
Disclosures About Market Risk, is shown in Exhibit 13 and is incorporated
by reference into this Annual Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data
The financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated January 25, 1999, is shown in Exhibit 13
and is incorporated by reference into this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Items 10, 11, 12 and 13. Directors and Executive Officers of the
Registrant, Executive Compensation, Security Ownership of Certain
Beneficial Owners and Management, and Certain Relationships and
Related Transactions
The information required by Items 10, 11, 12 and 13 is incorporated by
reference to the Registrant's definitive Proxy Statement to be filed with
the Commission not later than 120 days after the close of the fiscal year
except that the information concerning the Registrant's executive officers
called for by Item 401(b) of Regulation S-K has been included in Part I of
this Annual Report on Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1)-(2) Financial Statements and Schedules:
The financial statements shown in Exhibit 13 are hereby incorporated
herein by reference.
(3) Exhibits:
The exhibits listed on the accompanying Exhibit Index are filed or
incorporated by reference as part of this Annual Report on Form 10-K and
such Exhibit Index is hereby incorporated herein by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
November 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the
City of Miami, and the State of Florida on this 24th day of February, 1999.
CARNIVAL CORPORATION
By /s/ Micky Arison
Micky Arison
Chairman of the Board of
Directors and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Micky Arison Chairman of the Board of February 24, 1999
Micky Arison Directors and Chief Executive
Officer
/s/ Howard S. Frank Vice Chairman of the Board of February 24, 1999
Howard S. Frank Directors and Chief Operating
Officer
/s/ Gerald R. Cahill Senior Vice President-Finance February 24, 1999
Gerald R. Cahill and Chief Financial and
Accounting Officer
/s/ Shari Arison Director February 24, 1999
Shari Arison
/s/ Maks L. Birnbach Director February 24, 1999
Maks L. Birnbach
/s/ Richard G. Capen, Jr.Director February 24, 1999
Richard G. Capen, Jr.
/s/ David Crossland Director February 24, 1999
David Crossland
/s/ Robert H. Dickinson Director February 24, 1999
Robert H. Dickinson
/s/ James M. Dubin Director February 24, 1999
James M. Dubin
/s/ A. Kirk Lanterman Director February 24, 1999
A. Kirk Lanterman
/s/ Modesto A. Maidique Director February 24, 1999
Modesto A. Maidique
/s/ William S. Ruben Director February 24, 1999
William S. Ruben
/s/ Stuart S. Subotnick Director February 24, 1999
Stuart S. Subotnick
/s/ Sherwood M. Weiser Director February 24, 1999
Sherwood M. Weiser
/s/ Meshulam Zonis Director February 24, 1999
Meshulam Zonis
/s/ Uzi Zucker Director February 24, 1999
Uzi Zucker
<PAGE>
INDEX TO EXHIBITS
Page No. in
Sequential
Numbering
System
Exhibits
3.1-Second Amended and Restated Articles of Incorporation of the
Company. (1)
3.2-Form of By-laws of the Company.(2)
4.1-Agreement of the Company dated February 25, 1999 to furnish
certain debt instruments to the Securities and Exchange
Commission.
4.2-Revolving Credit Agreement dated as of July 1, 1993, Amended
and Restated as of December 17, 1996, by and among Carnival
Corporation, Citibank, N.A. and various other lenders.(3)
4.3-Form of Indenture, dated March 1, 1993, between Carnival
Cruise Lines, Inc. and First Trust National Association, as
Trustee, relating to the Debt Securities, including form of Debt
Security.(4)
10.1-Retirement and Consulting Agreement dated
November 18, 1998 between Alton Kirk Lanterman, Carnival
Corporation and Holland America Line-Westours Inc.
10.2-Executive Long-term Compensation Agreement dated January 16,
1998 between Robert H. Dickinson and Carnival Corporation. (5)
10.3-1994 Carnival Cruise Line Key Management Incentive Plan as
amended on January 5, 1998. (6)
10.4-Amended and Restated Carnival Corporation 1992 Stock Option
Plan. (7)
10.5-Carnival Cruise Lines, Inc. 1993 Restricted Stock Plan
adopted on January 15, 1993 and as amended January 5, 1998 and
December 21, 1998.
10.6-Carnival Corporation "Fun Ship" Nonqualified Savings Plan.
(8)
10.7 -Amendments to The Carnival Corporation Nonqualified
Retirement Plan for Highly Compensated. (9)
10.8-Letter Agreement dated July 11, 1989, between the Company
and the Ted Arison Irrevocable Trust. (10)
10.9-Amendment to Consulting Agreement Dated August 5, 1996
between the Company and Arison Investments Ltd. (11)
10.10-Carnival Cruise Lines, Inc. 1987 Stock Option Plan.(12)
10.11-Carnival Cruise Lines, Inc. 1987 Restricted Stock Plan.(13)
10.12-Carnival Cruise Lines, Inc. Retirement Plan.(14)
10.13-Carnival Cruise Lines, Inc. Non-Qualified Retirement
Plan.(15)
10.14-1993 Outside Directors' Stock Option Plan.(16)
10.15-HAL Antillen N.V. and subsidiaries Key Management Incentive
Plan.
10.16-Form of Deferred Compensation Agreement between the Company
and each of Meshulam Zonis and Robert H. Dickinson.(17)
10.17-Consulting Agreement/Registration Rights Agreement dated
June 14, 1991, between the Company and Ted Arison.(18)
10.18-Indemnity Agreement between the Company and Ted Arison.(19)
10.19-First Amendment to Consulting Agreement/Registration Rights
Agreement.(20)
10.20-Consulting Agreement dated July 31, 1992, between the
Company and Arison Investments Ltd.(21)
10.21-Organization agreement dated February 25, 1994 between the
Company and the principals of The Continental Companies.(22)
10.22-Stock Purchase Agreement between Carnival Corporation and
CHC International.(23)
10.23-Stock Purchase Agreement between Carnival Corporation,
Sherwood Weiser and others.(24)
10.24-Shareholders' Agreement dated February 21, 1996 between
Carnival Corporation and David Crossland.(25)
10.25-Maks L. Birnbach Director's Agreement.(26)
10.26-William S. Ruben Director's Agreement.(27)
10.27-Stuart Subotnick Director's Agreement.(28)
10.28-Sherwood M. Weiser Director's Agreement.(29)
10.29-Uzi Zucker Director's Agreement. (30)
10.30-David Crossland Director's Agreement.(31)
10.31-James M. Dubin Director's Agreement.(32)
10.32-Modesto M. Maidique Director's Agreement.(33)
10.33-Richard G. Capen Director's Agreement.(34)
10.34-Shari Arison Dorsman Director's Agreement.(35)
10.35-Amendment of Stock Purchase Agreement and Security and
Pledge Agreement, dated June 15, 1998, between Carnival
Corporation, Sherwood Weiser and others.
10.36-Executive Long-term Compensation Agreement dated January
11, 1999, between the Company and Micky Arison.
10.37-Executive Long-term Compensation Agreement dated January
11, 1999, between the Company and Howard S. Frank.
10.38-Note Extension and Satisfaction Agreement, dated February
17, 1999, between Carnival Corporation, Sherwood Weiser and others.
12.0-Ratio of Earnings to Fixed Charges.
13.0-Portions of 1998 Annual Report incorporated by reference
into 1998 Annual Report on Form 10-K.
21-Subsidiaries of the Company.
23.0-Consent of PricewaterhouseCoopers LLP.
27.0-Financial Data Schedule (for SEC use only).
<PAGE>
Sequential
Numbering
System
Exhibits
(1)Incorporated by reference to Exhibit No. 3 to the registrant's
registration statement on Form S-3 (File No. 333-68999), filed
with the Securities and Exchange Commission.
(2)Incorporated by reference to Exhibit No. 3.2 to the
registrant's registration statement on Form S-1 (File No.
33-14844), filed with the Securities and Exchange Commission.
(3)Incorporated by reference to Exhibit No. 4.1 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(4)Incorporated by reference to Exhibit No. 4 to the registrant's
registration statement on Form S-3 (File No. 33-53136), filed
with the Securities and Exchange Commission.
(5)Incorporated by reference to Exhibit No. 10.2 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1997 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(6)Incorporated by reference to Exhibit No. 10.3 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1997 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(7)Incorporated by reference to Exhibit No. 10.4 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1997 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(8)Incorporated by reference to Exhibit No. 10.6 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1997 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(9)Incorporated by reference to Exhibit No. 10.7 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1997 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(10)Incorporated by reference to Exhibit No. 4.10 to the
registrant's registration statement on Form S-1 (File No.
33-31795), filed with the Securities and Exchange Commission.
(11)Incorporated by reference to Exhibit No. 10.2 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(12)Incorporated by reference to Exhibit No. 10.1 to the
registrant's registration statement on Form S-1 (File No.
33-14844), filed with the Securities and Exchange Commission.
(13)Incorporated by reference to Exhibit No. 10.2 to the
registrant's registration statement on Form S-1 (File No.
33-14844), filed with the Securities and Exchange Commission.
(14)Incorporated by reference to Exhibit No. 10.3 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1990 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(15)Incorporated by reference to Exhibit No. 10.4 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1990 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(16)Incorporated by reference to Exhibit No. 10.6 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1993 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(17)Incorporated by reference to Exhibit No. 10.17 to the
registrant's registration statement on Form S-1 (File No.
33-14844), filed with the Securities and Exchange Commission.
(18)Incorporated by reference to Exhibit No. 4.3 to
post-effective amendment no. 1 on Form S-3 to the registrant's
registration statement on Form S-1 (File No. 33-24747), filed
with the Securities and Exchange Commission.
(19)Incorporated by reference to Exhibit No. 10.18 to the
registrant's registration statement on Form S-1 (File No.
33-14844), filed with the Securities and Exchange Commission.
(20)Incorporated by reference to Exhibit No. 10.40 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1992 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(21)Incorporated by reference to Exhibit No. 10.39 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1992 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(22)Incorporated by reference to Exhibit 10.1 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended February 28,
1994 (Commission File No. 1-9610), filed with the Securities and
Exchange Commission.
(23)Incorporated by reference to Exhibit No. 10.31 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1994 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(24)Incorporated by reference to Exhibit No. 10.32 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1994 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(25)Incorporated by reference to Exhibit 10.4 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended February 28,
1996 (Commission File No. 1-9610), filed with the Securities and
Exchange Commission.
(26)Incorporated by reference to Exhibit No. 28.1 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1990 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(27)Incorporated by reference to Exhibit No. 28.2 to the
registrant's registration statement on Form S-1 (File No.
33-14844), filed with the Securities and Exchange Commission.
(28)Incorporated by reference to Exhibit No. 28.3 to the
registrant's registration statement on Form S-1 (File No.
33-14844), filed with the Securities and Exchange Commission.
(29)Incorporated by reference to Exhibit No. 28.4 to the
registrant's registration statement on Form S-1 (File No.
33-14844), filed with the Securities and Exchange Commission.
(30)Incorporated by reference to Exhibit No. 28.5 to the
registrant's registration statement on Form S-1 (File No.
33-14844), filed with the Securities and Exchange Commission.
(31)Incorporated by reference to Exhibit No. 10.4 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(32)Incorporated by reference to Exhibit No. 10.5 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(33)Incorporated by reference to Exhibit No. 10.6 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(34)Incorporated by reference to Exhibit No. 10.7 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
(35)Incorporated by reference to Exhibit No. 10.8 to the
registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996 (Commission File No. 1-9610), filed with the
Securities and Exchange Commission.
EXHIBIT 4.1
February 24, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, DC 20549
RE: Carnival Corporation
Commission File No. 1-9610
Gentlemen:
Pursuant to Item 601 (b) (4) (iii) of Regulation S-K promulgated
under the Securities Exchange Act of 1934, as amended, Carnival
Corporation (the "Company") hereby agrees to furnish copies of
certain long-term debt instruments to the Securities and Exchange
Commission upon the request of the Commission, and, in accordance
with such regulation, such instruments are not being filed as
part of the Annual Report on Form 10-K of the Company for its
fiscal year ended November 30, 1998.
Very truly yours,
CARNIVAL CORPORATION
/s/ Arnaldo Perez
Arnaldo Perez
General Counsel
EXHIBIT 10.1
RETIREMENT AND CONSULTING AGREEMENT
AGREEMENT made this 18th day of November, 1998 between
CARNIVAL CORPORATION, having its principal place of business at
3655 N.W. 87th Avenue, Miami, Florida 33178, and its wholly owned
subsidiary, Holland America Line-Westours Inc., having its
principal place of business at 300 Elliott Avenue West, Seattle,
Washington 98119 (collectively, the "Companies") and Alton Kirk
Lanterman, ("Lanterman"), residing at 714 W. Galer Street,
Seattle, Washington, 98119.
RECITALS
A. Lanterman has served as Chairman or President and
Chief Executive Officer of Holland America Line-
Westours Inc. ("HAL") since January 1989, and has
performed exemplary service during said years.
B. The Companies desire to compensate Lanterman for such
exemplary service by way of retirement pay.
C. The Companies desire to retain Lanterman's consulting
services following such retirement on the terms set
forth in this Agreement.
IN CONSIDERATION of past services as related above and the
consulting services related below, it is agreed as follows:
1. Compensation For Past Services and Consulting
Services
1.1 For a period of fifteen (15) years following the
date of retirement by Lanterman from active
services with the Companies (the "Retirement
Date"), the Companies shall pay to Lanterman, in
monthly installments of $88,625, an annual
compensation of $1,063,500.
1.2 In the event of Lanterman's death prior to the
Retirement Date, or prior to the fifteenth
anniversary of the Retirement Date, the unpaid
balance of this total compensation ($15,952,500)
shall be paid in full to Lanterman's estate within
30 days of his death. The unpaid balance shall be
its then present value calculated by utilization
of an interest rate of 8.5% per year.
2. Consulting Services
Commencing on the Retirement Date and for a period of fifteen
(15) years, Lanterman agrees to perform consulting services for
the Companies in regard to the business operations of HAL upon
the specific written request of the Companies. Such services
shall be provided during normal business hours, on such dates,
for such time and at such locations as shall be agreeable to
Lanterman. Such services shall not require more than five (5)
hours in any calendar month, unless expressly consented to by
Lanterman, whose consent may be withheld for any reason
whatsoever. The Companies will reimburse Lanterman for any out-
of-pocket expenses incurred by him in the performance of said
services.
3. Independent Contractor
Lanterman acknowledges that commencing on the
Retirement Date, he will be solely an independent contractor and
consultant. He further acknowledges that he will not consider
himself to be an employee of the Companies, and will not be
entitled to any of the Companies employment rights or benefits.
4. Confidentiality
Lanterman will keep in strictest confidence, both
during the term of this Agreement and subsequent to termination
of this Agreement, and will not during the term of this Agreement
or thereafter disclose or divulge to any person, firm or
corporation, or use directly or indirectly, for his own benefit
or the benefit of others, any confidential information of the
Companies, including, without limitation, any trade secrets
respecting the business or affairs of the Companies which he may
acquire or develop in connection with or as a result of the
performance of his services hereunder. In the event of an actual
or threatened breach by Lanterman of the provisions of this
paragraph, the Companies shall be entitled to injunctive relief
restraining Lanterman from the breach or threatened breach as its
sole remedy. The Companies hereby waive their rights for damages,
whether consequential or otherwise.
5. Enforceable
The provisions of this Agreement shall be enforceable
notwithstanding the existence of any claim or cause of action of
Lanterman against the Companies, or the Companies against
Lanterman, whether predicated on this Agreement or otherwise.
6. Applicable Law
This Agreement shall be construed in accordance with
the laws of the State of Washington, and venue for any litigation
concerning an alleged breach of this Agreement shall be in King
County, Washington, and the prevailing party shall be entitled to
reasonable attorney's fees and costs incurred.
7. Entire Agreement
This Agreement contains the entire agreement of the
parties relating to the subject matter hereof. A similar
agreement of November 1997 shall become null and void upon the
execution of this Agreement. Any notice to be given under this
Agreement shall be sufficient if it is in writing and is sent by
certified or registered mail to Lanterman or to the Companies to
the attention of the President, or otherwise as directed by the
Companies, from time to time, at the addresses as they appear in
the opening paragraph of the Agreement.
8. Waiver
The waiver by either party of a breach of any provision
of this Agreement shall not operate or be construed as a waiver
of any subsequent breach.
IN WITNESS WHEREOF, the Companies and Lanterman have duly
executed this agreement as of the day and year first above
written.
CARNIVAL CORPORATION
By: /s/ Howard S. Frank
Its: Vice Chairman and COO
HOLLAND AMERICA LINE-
WESTOURS INC.
By: /s/ Larry D. Calkins
Its: Vice President -
Finance
/s/ Alton Kirk Lanterman
Signature
Alton Kirk Lanterman
Print Full Name
EXHIBIT 10.5
CARNIVAL CRUISE LINES, INC.
1993 RESTRICTED STOCK PLAN
(adopted by the Board of Directors on January 15, 1993,
amended on January 5, 1998 and December 21, 1998)
1. Purpose of the Plan. The purpose of the Carnival
Cruise Lines, Inc., 1993 Restricted Stock Plan (the "Plan") is to
provide incentives in the form of ownership of the Class A Common
Stock ("Common Stock"), of Carnival Cruise Lines, Inc.
(the "Company"), to certain selected employees of the Company and
its subsidiaries ("Participants"), by making awards of Common
Stock ("Stock Awards"), subject to certain restrictions and
forfeiture provisions.
2. Participation. Participation in the Plan shall
be limited to officers, directors and key employees of the
Company designated from time to time by the Compensation
Committee of the Board of Directors of the Company.
3. Common Stock Reserved for the Plan. The shares
subject to Stock Awards under the Plan shall consist of 2,000,000
authorized but unissued shares of Common Stock or previously
issued shares reacquired and held by the Company, and such amount
of shares shall be and is hereby reserved for issuance pursuant
to this Plan.
4. Grant of Awards. (a) The Compensation Committee
shall have the authority and responsibility, within the
limitations of the Plan, to determine the officers, directors and
key employees of the Company to whom Stock Awards shall be
granted, the number of shares of Common Stock which will comprise
each Stock Award, and the vesting schedule of each Stock Award.
(b) The Company shall not issue fractional shares
under the Plan.
5. Terms and Conditions. Each Stock Award granted
under the Plan shall be subject to the following express terms
and conditions and to such other terms and conditions as the
Compensation Committee may deem appropriate:
(a) Restrictions on Forfeitable Common Stock.
Each of the Common Stock granted pursuant to a Stock Award
shall be subject to the following restrictions until the
Participant acquires a nonforfeitable right to the shares:
such shares may not be sold, exchanged, transferred, pledged,
hypothecated, or otherwise disposed of by the Participant
until Participant's right to such shares becomes
nonforfeitable. Notwithstanding the foregoing, nothing
herein shall preclude a Participant from:
(i) making a gift of any shares of Common Stock
to a spouse, child, step-child, grandchild, parent,
sibling, or legal dependent of the Participant; or
(ii) transferring shares of Common Stock to a
corporation or partnership owned, directly or
indirectly by the Participant or any of the persons
listed in (i); or
(iii) making a gift of any shares of Common Stock
to a trust of which the beneficiary or
beneficiaries of the corpus and income are the
Participant or any of the persons listed in (i);
provided that the Common Stock so given shall remain subject
to the restrictions, obligations and conditions described in
this section 5.
(b) Time When Common Stock Is Nonforfeitable.
Participants shall acquire a fully nonforfeitable right to the
Common Stock awarded under the Plan upon the earlier of (i) the
date of the Participant's actual retirement at or after age 65,
(ii) the date of the Participant's death or disability, or (iii)
on such date as otherwise determined by the Compensation
Committee. In addition, the Participant shall acquire
nonforfeitable rights to the Common Stock awarded under the Plan
in accordance with the vesting (i.e., acquisition of
nonforfeitable rights) schedule as set by the Compensation
Committee at the time of the Stock Award, provided that full
vesting under such schedule shall take place no sooner than five
years after date of Stock Award and no later than ten years after
such date.
(c) Forfeiture Due to Termination of Employment.
Unless otherwise determined by the Plan Administration Committee,
if a Participant leaves the employment of the Company for any
reason other than retirement at or after age 65, or death or
disability, all shares as to which the Participant does not have
a nonforfeitable right shall be forfeited and returned to the
Company.
(d) Definition of Disability, Years of Service, and
Retirement. The term "disability" as used in this section means
"total and permanent disability". The terms "total and permanent
disability," "years of service," and "retirement" shall be
determined in accordance with applicable Company personnel
policies.
(e) Rights and Obligations With Respect to Stock. A
certificate or certificates for all shares of Common Stock
granted pursuant to a Stock Award hereunder shall be registered
in the name of each Participant and delivered to him as soon as
reasonably practicable, and he shall thereupon be a stockholder
and, except as otherwise expressly provided to the contrary
herein, have all the rights of a stockholder with respect to such
shares, including the right to vote and receive all dividends or
other distributions made or paid with respect to such shares;
provided, however, that such shares of Common Stock, and any new,
additional or different securities the Participant may become
entitled to receive with respect to such shares by virtue of a
stock split or stock dividend or any other change in the
corporate or capital structure of the Company, shall be subject
to the terms and conditions hereof. In order to enforce such
terms and conditions, the Company may cause a legend or legends
making appropriate reference to such terms and conditions to be
imposed on each share of Common Stock subject to a Stock Award.
6. Amendments or Termination. The Company may
amend, alter or discontinue the Plan, but no amendment or
alteration shall be made which would impair the rights of any
Participant under any award previously granted without the
consent of such Participant.
7. Compliance With Other Laws and Regulations. This
Plan and Stock Awards hereunder shall be subject to all
applicable federal and state laws, rules and regulations and such
approvals by any governmental or regulatory agency or national
securities exchange as may be required. The Company shall not be
required to issue or deliver any certificates for shares of
Common Stock prior to the completion of any registration or
qualification of such shares under any federal or state law, or
any ruling or regulation of any government body or national
securities exchange which the Company shall, in its sole
discretion, determine to be necessary or advisable.
8. Effective Date of Plan. The Plan shall be
effective on the date the shareholders of the Company
adopt the Plan.
EXHIBIT 10.15
KEY MANAGEMENT INCENTIVE PLAN TERMS
HAL ANTILLEN N.V. AND SUBSIDIARIES
OBJECTIVE
By providing a means whereby Plan participants can share in the
net income of the Holland America Line group of companies (HAL),
the Key Management Incentive Plan (the "Plan") is designed to
focus managerial attention on the objective of maximizing the
profitability of Holland America Line.
PLAN ADMINISTRATION
The Plan Administrator is the Chairman and Chief Executive
Officer of Holland America Line-Westours Inc. (HALW). The Plan
Administrator can delegate administrative functions regarding the
Plan to one or more HALW Vice Presidents. The Plan Administrator
has sole and final authority and discretion in resolving any
questions regarding the administration or terms of the Plan not
addressed in this document as well as in resolving any
ambiguities that may exist in this document.
PLAN YEAR AND NET INCOME
As used in this document, the term "Plan Year" refers to HAL's
fiscal year (December 1 - November 30) and the term "Net Income"
refers to a Plan Year's consolidated net income for HAL Antillen
N.V. and its direct and indirect subsidiaries (whose results are
consolidated with those of HAL Antillen N.V. for financial
reporting purposes), as reported in the Plan Year's annual
audited consolidated financial statements for HAL Antillen N.V.
PARTICIPATION
The Plan Administrator shall determine which employees will be
Plan participants and the specific number of Shares in the Plan
that each participant will have. In making these determinations,
the Plan Administrator shall consider level of responsibility,
the degree the position can impact the Plan's objectives,
individual experience, seniority, prior participation levels,
compensation paid outside HAL for similar work and such other
factors as the Plan Administrator deems appropriate. Employees
are not entitled to challenge determinations by the Plan
Administrator on grounds of uniformity, consistency or similar
bases. There is no limit to the number of participants or the
aggregate number of Shares. Decisions regarding participation
and number of Shares are made separately as to each Plan Year.
The Plan Administrator may allow new hires or employees assuming
new positions to join the Plan during the Plan Year. Each
participant will be advised of his/her Shares during the first 90
days of each Plan Year or, if later, within 90 days of becoming a
participant. The Plan Administrator may increase or decrease a
participant's Shares during a Plan Year due to changes in
position responsibilities. The number of Shares as of the last
day of the Plan Year is determinative for purposes of calculating
payments under the Plan. Participation in the Plan is suspended
during any Company approved leave of absence.
CANCELLATION OF SHARES
Except in the case of eligible retirement, death or disability
requiring termination of employment, Shares are automatically
cancelled immediately upon termination of employment. For these
purposes, the reason for termination of employment is irrelevant.
Consequently, it will make no difference if employment is
terminated by the employer or the participant. The cancellation
of Shares automatically terminates any right of a participant to
receive any amounts under the Plan as to the Plan Year during
which cancellation occurs. In other words, any participant whose
employment terminates prior to the end of the Plan Year will not
receive any amount under the Plan as to that Plan Year unless the
termination was due to eligible retirement, death or disability
requiring termination of employment. Termination of employment
will not effect the amount to which a person would be entitled as
to any Plan Year prior to termination. An "eligible retirement"
applies to persons who, at the time of retirement, are at least
65 years of age and have been employed by the HAL group of
companies for at least the immediately preceding 15 years.
METHOD OF CALCULATING SHARE VALUES AND PAYMENT
The dollar value of a Share will be a fixed value (determined as
provided below) as to those participants that had fixed Share
values during the fiscal year ending November 30, 1997. The
dollar value of a Share for all other participants shall be
variable:
a. Fixed Shares: Participants with a fixed
Share value will receive $50.00/Share for each $1,000,000 of
Net Income during the Plan Year (pro rated for increments of
less than $1,000,000). The fixed Share value is subject to
adjustment by the Plan Administrator at any time prior to
the commencement of the Plan Year to which such adjustment
relates.
b. Variable Shares: Prior to the beginning
of each Plan Year, the Plan Administrator, with the approval
of the HALW Board of Directors, will establish a Plan
Percentage for that Plan Year except that until changed by
the HALW Board of Directors, the Plan Percentage shall be
3.4%. The dollar value of each variable Share will equal an
amount computed by:
(i) taking an amount equal to the Plan Percentage of
the Net Income and deducting from that the total
amount paid to participants with fixed Shares; and
(ii) dividing that amount by the total number of
variable Shares as of the last day of the Plan
Year.
Notwithstanding the foregoing, the dollar value of a Share for
any Plan participant who participates in the Plan for less than
12 months (i.e., due to suspension in Plan participation, because
he/she only becomes a participant after December 1st of the Plan
Year, because of an eligible retirement, because he/she dies or
because he/she is required to terminate employment due to
disability) shall be proportionately reduced to reflect the
actual duration of Plan participation (in full months). For pro
ration purposes, only those months in which the participant had
at least 15 days of active employment will be included. For
example, if a participant was on a Company approved leave of
absence for 3 months (or only became a Plan participant on
February 20th or died on September 8th), the value of each Share
of that participant will be 75% (9/12ths) of the value of a Share
for a full-year participant. The aggregate reduction in payments
shall be allocated pro rata among all participants.
Payment of the Share value will be made on a date determined by
the Plan Administrator but in any event within 75 days after the
conclusion of the Plan Year. At the discretion of the Plan
Administrator, advance partial payments may be made based on
anticipated Net Income. All payments are subject to applicable
withholding taxes. Cash awards are subject to partial payment in
Carnival Stock on the terms described below.
SENIOR MANAGEMENT COMMON STOCK AWARD
A predetermined portion of the Plan payment otherwise due will be
made to specified participants in the form of Carnival
Corporation Class A shares of common stock ("Carnival Stock")
based on the following table:
Amount of
Incentive
Share Level Award in
Carnival Stock
20 or more 25%
10 - 19.99 20%
Less than 10 -0-
Notwithstanding the foregoing, no portion of any payment to the
Plan Administrator, in his/her capacity as a participant, shall
be made in Carnival Stock. The actual number of shares of
Carnival Stock to be received by each participant referred to in
the foregoing table shall be determined by dividing the amount of
the participant's Plan payment to be received in Carnival Stock
(as above provided) by the average closing price for Carnival
Stock for the last ten (10) trading days of the Plan Year, as
quoted on the national stock exchange on which the Carnival Stock
is traded. Fractional shares of Carnival Stock will not be
issued.
The value of Carnival Stock received by Plan participants will be
reported to governmental taxing authorities, and taxes shall be
withheld in respect of such Carnival Stock, in accordance with
the requirements of applicable law. Carnival Stock issued will
be subject to a restriction on sale commencing from date of
issuance and continuing until, but not including, the first
trading day in the second January following the end of the Plan
Year in respect of which the Carnival Stock was issued (e.g.,
Carnival Stock issued in respect of the Plan Year ending November
30, 1998 would be subject to a restriction on sale that would not
end until the first trading day in January, 2000). Holders will
be eligible to receive dividends during the restriction period.
DURATION OF PLAN
The Plan will be effective until terminated by the HAL Antillen
N.V. Board of Directors. Termination will be effective beginning
with the second full Plan Year following action by the Board of
Directors.
PURCHASE FOR INVESTMENT
Whether or not the shares of Carnival Stock covered by the Plan
have been registered under the Securities Act of 1933, as
amended, each person acquiring shares of Carnival Stock under the
Plan may be required by Carnival to give a representation in
writing that such person is acquiring such shares for investment
and not with a view to, or for sale in connection with, the
distribution of any part thereof. Carnival will endorse any
necessary legend referring to the foregoing restriction upon the
certificate or certificates representing any shares of Carnival
Stock issued or transferred to the Plan participants upon the
grant of any shares of Carnival Stock under the Plan.
AMENDMENT OF PLAN
Any amendment to the Plan shall comply with all applicable laws
and applicable stock exchange listing requirements.
GOVERNMENTAL AND OTHER REGULATIONS
The Plan and the Carnival Stock awards under the Plan shall be
subject to all applicable federal and state laws, rules and
regulations and such approvals by any governmental or regulatory
agency or national securities exchange, as may be required.
Carnival Corporation shall not be required to issue or deliver
any certificates or shares of Carnival Stock prior to the
completion of any registration or qualification of such shares
under any federal or state law, or any ruling or regulations of
any governmental body or national securities exchange which
Carnival Corporation shall, in its sole discretion, determine to
be necessary or advisable.
EXHIBIT 10.35
AMENDMENT OF
STOCK PURCHASE AGREEMENT
AND
SECURITY AND PLEDGE AGREEMENT
This Amendment of Stock Purchase Agreement and Security
and Pledge Agreement (this "Amendment") is dated as of the 15th
day of June, 1998 by and among (i) Carnival Corporation ("CCL")
and (ii) Sherwood M. Weiser ("Weiser"), Donald E. Lefton
("Lefton"), Thomas F. Hewitt ("Hewitt"), Peter Sibley
("Sibley"), W. Peter Temling ("Temling") and Robert B. Sturges
("Sturges") (Weiser, Lefton, Hewitt, Sibley, Temling and Sturges
are sometime collectively referred to herein a the "Buyers" and
individually as a "Buyer").
R E C I T A L S:
A. CCL and the Buyers entered into that certain Stock
Purchase Agreement dated as of November 30, 1994 (the "Purchase
Agreement") pursuant to which the Buyers acquired an aggregate of
2,610,000 (as adjusted for 2-for-1 stock split) shares of CHC
International, Inc. ("CHC") Common Stock.
B. The purchase price for such shares of CHC Common
Stock was paid by each Buyer's delivery to CCL of (a) such
Buyer's promissory note in the amount set forth in the Agreement
(collectively, the "Original Notes") and (b) a Security and
Pledge Agreement dated as of November 30, 1994, pursuant to which
each Buyer granted to CCL a security interest in and to the CHC
Common Stock it acquired pursuant to the Agreement (each, a
"Pledge Agreement").
C. The entire principal balance and all interest
accrued under the Original Notes remains outstanding on the date
hereof.
D. The Buyers desire to exchange the shares of CHC
Common Stock for shares of Wyndham International, Inc.
("Wyndham") Series A Redeemable Convertible Preferred Stock and
Series B Redeemable Convertible Preferred Stock pursuant to that
certain Agreement and Plan of Merger by and among Patriot
American Hospitality Operating Company (n/k/a Wyndham
International, Inc.), Patriot American Hospitality, Inc. and CHC
dated as of September 30, 1997 and other documents contemplated
thereby (collectively, the "Merger Documents").
E. Certain shares of CHC Common Stock are currently
pledged as collateral for the Original Notes. The Buyers desire
to substitute such collateral with shares of (i) CSMC-Management
Services Inc. (which name may be later changed to CCR
International, Inc.) Common Stock (the "CSMC Shares") and (ii)
Wyndham Series A Redeemable Convertible Preferred Stock and
Series B Redeemable Convertible Preferred Stock, in the amounts
set forth on Exhibit A hereto (the "WYNDHAM Shares", which
together with the CSMC Shares shall be referred to herein as the
"WYNDHAM/CSMC Shares").
F. CCL has agreed to accept the Wyndham/CSMC Shares as
substitute collateral as for the loans evidenced by the Original
Notes further provided herein.
G. The principal balance of the loans evidenced by the
Original Notes, will be renewed and evidenced by Renewal
Promissory Notes dated the date hereof from each of the Buyers
(the "Renewal Notes").
In consideration of these recitals and the covenants
contained in this Amendment, the parties agree as follows:
1. Definitions. Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to such
terms in the Purchase Agreement.
2. Recitals. The parties hereto acknowledge and agree
that the foregoing recitals are true and correct and constitute a
part of this Amendment.
3. Amendments of the Purchase Agreement.
(a) Section 4.1 of the Purchase Agreement shall be
deleted and replaced in its entirety with the following:
"4.1 Sale and Purchase. Subject to Article V, at
any time between May 30, 1996 and June 30, 1999, upon
written notice from Weiser (the "Put Notice"), CCL
shall purchase from Buyers, on the date and in the
manner set forth in this Article IV, all (but not
less than all) of the CSMC Management Services, Inc.
Common Stock, par value $.01 per share, (the "CSMC
Shares") and the Wyndham International, Inc. Series A
Redeemable Convertible Preferred Stock, par value
$.01 per share, and Series B Redeemable Convertible
Preferred Stock, par value $.01 per share, (the
"WYNDHAM Shares", which collectively with the CSMC
Shares shall be referred to as the "WYNDHAM/CSMC
Shares"), described on Exhibit A to the Amendment of
Stock Purchase Agreement and Security and Pledge
Agreement dated June 15, 1998 then held by Buyers, at
the Purchase Price paid by Buyers hereunder, together
with an amount necessary so that the aggregate
purchase price to be paid by CCL pursuant to this
Article IV returns to each Buyer his original
investment of $6.25 per share of CHC International,
Inc. Common Stock (as adjusted for the 2-for-1 stock
split) purchased from CCL on the date of CCL's sale
of the Purchased Shares hereunder (the "Closing
Date") and also provides such Buyer with a rate of
return thereon of 6.10% per annum, in each case from
the Closing Date until the date the Wyndham/CSMC
Shares are acquired by CCL pursuant to this Article
IV. Each of the Buyers agrees that Weiser shall have
the sole right to deliver the Put Notice. For the
sake of clarity, the parties acknowledge that this
Section 4.1 has been amended in order to permit the
Buyers to exchange the Purchased Shares. In order to
put CCL in the same position as it was prior to such
sale, the 'put' provided for under this Section 4.1
shall apply to the Wyndham/CSMC Shares, which were
acquired by the Buyers at the time of and in
connection with the exchange of the Purchased
Shares."
(b) All references contained in the Sections 4.2
and 4.4 of the Purchase Agreement to "Purchased Shares" are
hereby deleted and replaced in their entirety with "WYNDHAM/CSMC
Shares".
(c) All references contained in Article V of the
Purchase Agreement to "fourth anniversary" are hereby deleted and
replaced in their entirety with "June 30, 1999".
4. Amendments of Each Pledge Agreement.
(a) Subsection (a) of Section 1 of each Pledge
Agreement is hereby deleted and replaced in its entirety with the
following:
"(a) the number of shares of Common Stock, par value
$.005 per share, of CSMC Management Services Inc.,
and the number of shares of Series A Redeemable
Convertible Preferred Stock, par value $.01 per
share, and Series B Redeemable Convertible Preferred
Stock, par value $.01 per share, of Wyndham
International, Inc. set forth opposite such Debtor's
name on Exhibit A to the Amendment of Stock Purchase
Agreement and Security and Pledge Agreement dated as
of June 15, 1998 (the "Amendment")(collectively the
"WYNDHAM/CSMC Shares");";
(b) Section 2 of each Pledge Agreement is hereby
deleted and replaced in its entirety with the following:
"2. Stock Purchase Agreement. This Agreement was
executed and delivered pursuant to the terms,
conditions and requirements of the Stock Purchase
Agreement dated as of November 30, 1994, as amended
(the "Purchase Agreement") pursuant to which Secured
Party sold certain shares of common stock of CHC
International, Inc. to Debtor. As of the date of the
Amendment, Debtor exchanged of all of such shares of
CHC International, Inc. for the Wyndham/CSMC Shares
and substituted such shares as Collateral hereunder.
The security interests herein granted ("Security
Interests") shall secure full payment and performance
of: (a) that certain Promissory Note dated November
30, 1994 made by Debtor and payable to Secured Party
(the "Original Note"), which obligation has been
renewed pursuant to that certain Renewal Promissory
Note dated June 15, 1998 made by Debtor and payable
to Secured Party (the "Note"); and (b) the due and
punctual observance and performance of each and every
agreement, covenant and condition on Debtor's part to
be observed or performed under this Agreement and the
Note (all of which debts, duties, liabilities and
obligations hereinbefore described and covered by
this Agreement and the Note are hereinafter referred
to as the "Obligation")."
5. Representations and Warranties. Each Buyer hereby
represents and warrants to CCL and covenants for the benefit of
CCL as follows:
(a) Each Buyer is the sole legal and equitable
owner of the Wyndham/CSMC Shares described on Exhibit A hereto
free from any adverse claim, lien, security interest, encumbrance
or other rights, title or interest of any person, except for (i)
the security interest created by the Pledge Agreement, as
amendment hereby; (ii) as described in Section 5(d) hereof; and
(iii) claims arising under the Merger Documents.
(b) Except for the Wyndham Shares described in
Section 5(d) below, each Buyer has delivered to CCL all stock
certificates evidencing the Wyndham/CSMC Shares pledged and
assigned as contemplated under this Amendment, together with duly
executed stock powers in blank.
(c) The amount outstanding under the Renewal Note
is intended by the Buyers to be and remain fully secured by the
Pledge Agreement and each Buyer hereby expressly reaffirms the
representations and warranties set forth in the Pledge Agreement.
(d) Immediately upon the release of the Wyndham
Shares withheld from delivery by Wyndham pursuant to Section 8 of
that certain Stockholder Indemnification Agreement by and among
Wyndham and each of the Buyers and the other stockholders of CHC,
each Buyer agrees to deliver to CCL all stock certificates
actually released by Wyndham, which shares evidenced thereby have
been pledged and assigned as contemplated under this Amendment,
together with duly executed stock powers in blank.
6. Agreement. All parties agree that, except as
provided in this Amendment, all other terms and conditions of the
Purchase Agreement and Pledge Agreement remain in full force and
effect.
7. Counterparts. This Amendment may be executed in any
number of counterparts and by the separate parties to this
Amendment in separate counterparts, all of which shall be deemed
to be an original and one and the same instrument.
8. Effective Date. Notwithstanding the date of this
Amendment, this Amendment shall not become effective until, and
shall become effective simultaneously with, the closing of the
transaction contemplated by the Merger Documents.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be made, executed and delivered as of the day and
year first above written.
CARNIVAL CORPORATION
By:/s/ Gerald R. Cahill
Print Name: Gerald R. Cahill
Title: Senior Vice President and CFO
/s/ Sherwood M. Weiser
SHERWOOD M. WEISER
/s/ Donald E. Lefton
DONALD E. LEFTON
/s/ Thomas F. Hewitt
THOMAS F. HEWITT
/s/ Peter Sibley
PETER SIBLEY
/s/ W. Peter Temling
W. PETER TEMLING
/s/ Robert B. Sturges
ROBERT B. STURGES
EXHIBIT A
WYNDHAM/CSMC SHARES
CSMC Wyndham Wyndham
Management Series A Series B
Name of Buyer Shares Shares Shares
Weiser 859,248 138,088 138,088
Lefton 859,248 138,088 138,088
Sibley 318,394 51,169 51,169
Hewitt 318,394 51,169 51,169
Sturges 127,358 20,467 20,467
Temling 127,358 20,467 20,467
TOTAL 2,610,000 419,448 419,448
EXHIBIT 10.36
EXECUTIVE LONG-TERM COMPENSATION AGREEMENT
THIS EXECUTIVE LONG-TERM COMPENSATION AGREEMENT is entered
into this 11th day of January, 1999, to be effective as of the
1st day of January, 1998, by and between CARNIVAL CORPORATION
("Carnival") with its principal place of business located at 3655
N.W. 87th Avenue, Miami, Florida 33178, and MICKY ARISON (the
"Individual").
R E C I T A L S
WHEREAS, the Individual is currently employed as the
Chairman and Chief Executive Officer of Carnival;
WHEREAS, Carnival wishes to provide long-term incentive and
reward to the Individual for the continuation of his full-time
employment with Carnival, in addition to the Individual's annual
compensation consisting of a base salary and annual bonus; and
WHEREAS, the Individual desires to continue in the employ of
Carnival until his retirement in consideration for Carnival's
payment of compensation for his services during the period prior
to retirement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Carnival shall continue to employ the Individual as
Chairman and Chief Executive Officer and the Individual shall
continue to serve Carnival in such executive capacity until such
employment is terminated by either party.
2. Subject to the provisions of this Agreement, Carnival
shall pay the Individual as long-term compensation, beginning
January 1, 1998 and continuing during the term of his employment
with Carnival, the stock compensation benefit described as
follows ("Stock Compensation Benefit"):
(A) Pursuant to the terms of Carnival's 1992 Stock
Option Plan, the Individual shall receive in
January of each year during the term of his
employment (commencing effective January of 1998)
an option to purchase 120,000 <1> shares of
Carnival Corporation Common Stock (the "Stock
Option Benefit"). For purposes of this Agreement,
the exercise price of the options shall be the
average of the high and low sales price of Common
Stock on the New York Stock Exchange Corporate
Tape on the date of the quarterly Board of
Directors meeting held in January of each year
(the "Grant Date"). Said options shall vest
ratably over a five (5) year period as more
particularly set forth in a Nonqualified Stock
Option Agreement to be entered into annually
substantially in the form attached hereto as
Exhibit A.
(B) Pursuant to the terms of Carnival's 1993
Restricted Stock Plan, the Individual shall
receive annually on the Grant Date 60,000 <2>
restricted shares of Carnival Corporation Common
Stock (the "Restricted Stock Benefit"). Except as
otherwise provided in Section 3 hereof, these
shares shall vest on the fifth anniversary of the
date of such annual grant.
<1> The number of shares has been adjusted to reflect the 2-for-1
stock split effective June 12, 1998.
<2> The number of shares has been adjusted to reflect the 2-for-1
stock split effective June 12, 1998.
3. Notwithstanding anything herein to the contrary, no
payment of any Stock Compensation Benefit shall be made, and all
unvested options and restricted stock issued hereunder and all
rights under the Agreement shall be forfeited, if any of the
following events shall occur:
(A) The Individual's employment with Carnival is
terminated for cause. For purposes of this Agreement,
"for cause" shall be defined as any action or inaction
by the Individual which constitutes fraud,
embezzlement, misappropriation, dishonesty, breach of
trust, a felony or moral turpitude, as determined by
its Board of Directors;
(B) The Individual voluntarily terminates his employment
with Carnival prior to attaining sixty (60) years of
age unless such voluntary termination is directly
related to the Individual being diagnosed with a
terminal medical condition;
(C) The Individual shall engage in competition, as more
particularly described in Section 6 hereof, either (i)
during the term of his employment with Carnival; (ii)
following the Individual's voluntary termination of his
employment with Carnival; or (iii) following Carnival's
termination of the Individual's employment with
Carnival either for cause, as defined in (A) above, or
other than for cause; or
(D) The Individual violates the nondisclosure provisions
set forth in Section 7 hereof.
In the event the Individual voluntarily terminates his
employment either (a) following attaining the age of sixty (60)
or (b) prior to attaining the age of sixty (60) as a direct
result of the Individual being diagnosed with a terminal medical
condition, then all unvested options and restricted stock
previously granted hereunder will not be forfeited by the
Individual and will continue to vest as scheduled, unless and
until the Individual engages in competition in violation of
Section 6 hereof or violates the nondisclosure provisions set
forth in Section 7 hereof.
In the event Carnival terminates the Individual's employment
with Carnival for a reason other than for cause, as defined in
Section 3(A) above, then, unless and until the Individual engages
in competition in violation of Section 6 hereof or violates the
nondisclosure provisions set forth in Section 7 hereof, (i) each
annual grant of the Stock Option Benefit shall continue to vest
as scheduled; and (ii) each annual grant of the Restricted Stock
Benefit shall vest and shall continue to vest in accordance with
the alternative vesting schedule set forth on Exhibit B
("Alternative Vesting Schedule I").
In the event the Individual voluntarily terminates his
employment with Carnival within 14 days of his receipt of notice
that Carnival's Board of Directors or appropriate committee of
the Board, has determined that the Individual's annual grant of
the Restricted Stock Benefit will be reduced by more than 25% in
any one year, then (i) all unvested options issued hereunder
shall be forfeited; (ii) each annual grant of the Restricted
Stock Benefit shall be subject to the alternative vesting
schedule set forth on Exhibit C ("Alternative Vesting Schedule
II"); and (iii) all unvested restricted stock issued hereunder,
after application of Alternative Vesting Schedule II, and all
rights under this Agreement shall be forfeited. Notwithstanding
the foregoing, this paragraph of Section 3 shall be null and void
once the Individual attains the age of sixty (60).
4. Intentionally Deleted.
5. Each annual grant of the Stock Compensation Benefit is
contingent on the Individual's satisfactory performance of his
duties as determined by Carnival's Board of Directors or
appropriate committee of the Board.
6. The services of the Individual are unique,
extraordinary and essential to the business of Carnival,
particularly in view of the Individual's access to Carnival's
confidential information and trade secrets. Accordingly, in
consideration of the Stock Compensation Benefits payable
hereunder, the Individual agrees that he will not, without the
prior written approval of the Board of Directors, at anytime
during the term of his employment with Carnival and (except as
provided below) for five (5) years following the date on which
the Individual's employment with Carnival terminates, directly or
indirectly, within the United States or its territories, engage
in any business activity directly or indirectly competitive with
the business of Carnival, or its subsidiaries or divisions, or
serve as an officer, director, owner, consultant, or employee of
any organization then in competition with Carnival or any of its
subsidiaries or divisions. In addition, the Individual agrees
that during such five (5) year period following his employment
with Carnival, he will not solicit, either directly or
indirectly, any employee of Carnival, its subsidiaries or
division, who was such at the time of the Individual's separation
from employment hereunder. In the event that the provisions of
this Section 6 should ever be adjudicated to exceed the time,
geographic or other limitations permitted by applicable law in
any jurisdiction, then such provisions shall be deemed reformed
in such jurisdiction to the maximum time, geographic or other
limitations permitted by applicable law.
Notwithstanding the foregoing, the provisions of this
Section 6 shall be null and void if, prior to attaining the age
of sixty (60), the Individual voluntarily terminates his
employment with Carnival within 14 days of his receipt of notice
that Carnival's Board of Directors or appropriate committee of
the Board, has determined that the Individual's annual grant of
the Restricted Stock Benefit will be reduced by more than 25% in
any one year.
7. The Individual expressly agrees and understands that
Carnival owns and/or controls information and material which is
not generally available to third parties and which Carnival
considers confidential, including, without limitation, methods,
products, processes, customer lists, trade secrets and other
information applicable to its business and that it may from time
to time acquire, improve or produce additional methods, products,
processes, customers lists, trade secrets and other information
(collectively, the "Confidential Information"). The Individual
hereby acknowledges that each element of the Confidential
Information constitutes a unique and valuable asset of Carnival,
and that certain items of the Confidential Information have been
acquired from third parties upon the express condition that such
items would not be disclosed to Carnival and its officers and
agents other than in the ordinary course of business. The
Individual hereby acknowledges that disclosure of Carnival's
Confidential Information to and/or use by anyone other than in
Carnival's ordinary course of business would result in
irreparable and continuing damage to Carnival. Accordingly, the
Individual agrees to hold the Confidential Information in the
strictest secrecy, and covenants that, during the term of his
employment with Carnival or at any time thereafter, he will not,
without the prior written consent of the Board of Directors,
directly or indirectly, allow any element of the Confidential
Information to be disclosed, published or used, nor permit the
Confidential Information to be discussed, published or used,
either by himself or by any third parties, except in effecting
Individual's duties for Carnival in the ordinary course of
business. The Individual agrees to keep all such records in
connection with the Individual's employment as Carnival may
direct, and all such records shall be the sole and absolute
property of Carnival. The Individual further agrees that, within
five (5) days of Carnival's request, he shall surrender to
Carnival any and all documents, memoranda, books, papers,
letters, price lists, notebooks, reports, logbooks, code books,
salesmen records, customer lists, activity reports, video or
audio recordings, computer programs and any and all other data
and information and any and all copies thereof relating to
Carnival's business or any Confidential Information.
8. Except as otherwise provide in Section 6 hereof, the
restrictive covenants contained in Sections 6 and 7 herein shall
survive the termination or expiration of this Agreement and any
termination of the Individual's employment.
9. Nothing herein shall be construed as conferring upon
the Individual the right to continue in the employ of Carnival as
an executive or in any other capacity.
10. The Stock Compensation Benefit payable under this
Agreement shall not be deemed salary or other compensation to the
Individual for the purpose of computing benefits to which such
Individual may be entitled under any pension or profit sharing
plan or other arrangement of Carnival for the benefit of its
employees.
11. The Compensation Committee of Carnival's Board of
Directors shall have the full power and authority to interpret,
construe and administer this Agreement. No officer or director
of Carnival shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration
of this Agreement unless such action or omission is attributable
to his own willful misconduct or lack of good faith.
12. This Agreement shall not be, nor shall it be construed
to constitute an employment agreement between the Individual and
Carnival.
13. This Agreement shall be governed by, and shall be
construed and interpreted in accordance with, the laws of the
State of Florida and the parties agree to submit to the
jurisdiction of the United States District Court for the Southern
District of Florida for the resolution of any disputes arising
under this Agreement.
14. In the event that any party to this Agreement
institutes suit against the other party to this Agreement to
enforce any of its rights hereunder, the "prevailing party" in
such action shall be entitled to recover from the other party all
reasonable costs incurred in pursuing such action, including
reasonable attorneys' fees. For purposes of this Agreement,
"prevailing party" shall mean the party recovering judgment in
the case and not being liable on any counterclaim brought in the
case.
15. This Agreement constitutes the entire agreement
between Carnival and the Individual with respect to the long-term
compensation of the Individual as described herein and supersedes
all prior negotiations, agreements, understandings and
arrangements, both oral and written, between Carnival and the
Individual with respect to such subject matter. This Agreement
may not be modified in any way, except by a written instrument
executed by each of Carnival and the Individual.
16. This Agreement shall be for the benefit of, and shall
be binding upon, each of Carnival and the Individual and their
respective heirs, personal representatives, legal
representatives, successors and assigns.
17. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this
Agreement shall not affect the enforceability of the remaining
portions of this Agreement or any part hereof, all of which are
inserted conditionally on their being valid in law. In the event
that any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid by
a court of competent jurisdiction, then, in any such event, this
Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted.
18. The waiver by either party of a breach or violation of
any term or provision of this Agreement by the other party shall
not operate nor be construed as a waiver of any subsequent breach
or violation of any provision of this Agreement nor of any other
right or remedy.
IN WITNESS WHEREOF, each of the parties has executed and
delivered this Agreement as of the date first above written.
CARNIVAL CORPORATION
By:/s/ Howard S. Frank
Howard S. Frank
Title: Vice Chairman and Chief
Operating Officer
/s/ Micky Arison
Micky Arison
EXHIBIT A
CARNIVAL CORPORATION
1992 STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
Carnival Corporation, f/k/a Carnival Cruise Lines, Inc. (the
"Company"), having heretofore adopted the Carnival Corporation
1992 Stock Option Plan (the "Plan") and entered into that certain
Executive Long-Term Compensation Agreement effective as of
January 1, 1998 between the Company and Micky Arison (the
"Compensation Agreement"), hereby irrevocably grants to MICKY
ARISON (the "Optionee"), effective _______________ (the "Grant
Date"), the right and option (the "Option") to purchase One
Hundred Twenty Thousand (120,000) shares of Common Stock on the
following terms and conditions:
1. Each defined term used in this Agreement and not
otherwise defined herein shall have the meaning assigned to it in
the Plan.
2. This Option shall not be exercisable, in whole or in
part, except as follows:
a) Exercisable as to Twenty Four Thousand (24,000)
shares of Common Stock on or after the first
anniversary of the Grant Date;
b) Exercisable as to an additional Twenty Four
Thousand (24,000) shares of Common Stock on or
after the second anniversary of the Grant Date;
c) Exercisable as to an additional Twenty Four
Thousand (24,000) shares of Common Stock on or
after the third anniversary of the Grant Date;
d) Exercisable as to an additional Twenty Four
Thousand (24,000) shares of Common Stock on or
after the fourth anniversary of the Grant Date;
e) Exercisable as to an additional Twenty Four
Thousand (24,000) shares of Common Stock on or
after the fifth anniversary of the Grant Date.
3. Notwithstanding the provisions of paragraph 2, if
Optionee's employment by the Company or any Subsidiary shall
terminate by reason of his death or Disability, this Option shall
become immediately exercisable in full in respect of the
aggregate number of shares of Common Stock covered hereby.
4. Unless otherwise provided in the Compensation
Agreement, the unexercised portion of this Option shall
automatically and without notice terminate and become null and
void at the time of the earliest of the following to occur:
a) the expiration of ten (10) years from the Grant
Date;
b) the expiration of one (1) year from the date the
Optionee's employment with the Company or any of
its Subsidiaries shall terminate by reason of
Disability; provided, however, that if the
Optionee shall die during such one-year period,
the provisions of subparagraph (c) below shall
apply;
c) the expiration of one (1) year from the date of
the Optionee's death, if such death occurs either
during employment by the Company or any of its
Subsidiaries or during the one-year period
described in subparagraph (b) above;
d) the date the Company terminates the Optionee's
employment with the Company or any of its
Subsidiaries "for cause" (as defined in the
Compensation Agreement);
e) the date on which the Optionee voluntarily
terminates his employment with the Company or any
of its Subsidiaries prior to attaining sixty (60)
years of age, unless such voluntary termination is
directly related to the Optionee being diagnosed
with a terminal medical condition; and
f) the violation by the Optionee of noncompete and/or
nondisclosure provisions set forth in Sections 6
and 7 of the Compensation Agreement.
5. The purchase price for each of the shares of Common
Stock purchased pursuant to this Option shall be ___________ and
____/100 Dollars ($______). This Option is not intended to be an
"incentive stock option" within the meaning of Section 422(b) of
the Internal Revenue Code of 1986, as amended.
6. Unless Optionee utilizes a cashless exercise program,
if available and authorized by the Company from time to time,
this Option shall be deemed exercised when the Optionee (a)
delivers written notice to the Company at its principal business
office, directed to the attention of its Secretary, of the
decision to exercise, specifying the number of shares with
respect to which this Option is exercised and the price per share
designated in this Option, and (b) concurrently tenders to the
Company full payment for the shares of Common Stock to be
purchased pursuant to such exercise. Full payment for shares of
Common Stock purchased by the Optionee shall be made at the time
of any exercise, in whole or in part, of this Option, and
certificates for such shares shall be delivered to the Optionee
as soon thereafter as is reasonably possible. No shares of
Common Stock shall be transferred to the Optionee until full
payment therefor has been made, and the Optionee shall have none
of the rights of a shareholder with respect to any shares of
Common Stock subject to this Option until a certificate for such
shares shall have been issued and delivered to the Optionee.
Such payment shall be made in cash or by check or money order
payable to the Company, in each case payable in U.S. Currency.
(In the Committee's discretion, such payment may be made by
delivery of shares of Common Stock having a fair market value
[determined as of the date this Option is so exercised in whole
or in part] that, when added to the value of any cash, check,
promissory note or money order satisfying the foregoing
requirements, will equal the aggregate purchase price.)
7. This Option and the rights evidenced hereby are not
transferable in any manner other than by will or by the laws of
descent and distribution and during the Optionee's lifetime shall
be exercisable only by the Optionee (or the Optionee's court-
appointed legal representative).
8. The Company's obligation to deliver shares of Common
Stock upon the exercise of this Option shall be subject to all
applicable federal, state and local withholding requirements,
including the payment by the Optionee of any applicable federal,
state and local withholding tax. The Company may withhold
delivery of shares of Common Stock until the Optionee pays to the
Company the amount of tax it is required to withhold under any
applicable law. If the Optionee fails to remit to the Company
such tax, the Company may sell such portion of the shares of
Common Stock as are sufficient to satisfy the Company's
obligation to withhold such tax.
9. The Company's obligation to deliver shares of Common
Stock in respect of this Option shall be subject to all
applicable laws, rules and regulations and such approvals by any
governmental agency as may be required.
10. The Optionee, by his acceptance hereof, represents and
warrants to the Company that his purchase of shares of Common
Stock upon the exercise of this Option shall be for investment
and not with a view to, or for sale in connection with, the
distribution of any part thereof; provided, however, that this
representation and warranty shall be inoperative if, in the
opinion of counsel to the Company, a proposed sale or
distribution of such shares is pursuant to an applicable
effective registration statement under the Securities Act of
1933, as amended, and any applicable state "blue sky" or other
securities laws or is exempt from registration thereunder. The
Company will endorse an appropriate legend referring to the
foregoing restriction upon the certificate or certificates
representing any shares of Common Stock issued or transferred to
the Optionee upon the exercise of this Option.
11. This Agreement shall be subject to all the terms and
provisions of the Plan and the Compensation Agreement, which are
incorporated by reference herein and are made a part hereof,
including without limitation the provisions of paragraph 13 of
the Plan generally relating to adjustments to the number of
shares of Common Stock subject to this Option and to the Option
purchase price on certain changes in capitalization and the
effects of certain reorganizations and other transactions. In
the event there is any inconsistency between the provisions of
this Agreement and the Plan, the provisions of the Plan shall
govern. By entering into this Agreement, the Optionee agrees and
acknowledges his receipt of a copy of the Plan.
12. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the Company has caused these presents to
be signed by its duly authorized officer as of the _____ day of
January, _____.
CARNIVAL CORPORATION
By:__________________________
Howard S. Frank
Title:Vice Chairman and Chief
Operating Officer
ACCEPTED AND AGREED THIS _____
DAY OF JANUARY, ______.
______________________________
Micky Arison
Optionee
EXHIBIT B
ALTERNATIVE VESTING SCHEDULE I
1. Vest as to 20% of the Restricted Stock Benefit on the
first anniversary of the grant date thereof;
2. Vest as to 40% of the Restricted Stock Benefit on the
second anniversary of the grant date thereof;
3. Vest as to 60% of the Restricted Stock Benefit on the
third anniversary of the grant date thereof;
4. Vest as to 80% of the Restricted Stock Benefit on the
fourth anniversary of the grant date thereof; and
5. Vest as to 100% of the Restricted Stock Benefit on the
fifth anniversary of the grant date thereof.
EXHIBIT C
ALTERNATIVE VESTING SCHEDULE II
1. Vested as to 0% of the Restricted Stock Benefit if
termination occurs between the grant date and the first
anniversary of the grant date thereof;
2. Vested as to 20% of the Restricted Stock Benefit if
termination occurs between the first and second
anniversaries of the grant date thereof;
3. Vested as to 40% of the Restricted Stock Benefit if
termination occurs between the second and third
anniversaries of the grant date thereof;
4. Vested as to 60% of the Restricted Stock Benefit if
termination occurs between the third and fourth
anniversaries of the grant date thereof;
5. Vested as to 80% of the Restricted Stock Benefit if
termination occurs between fourth and fifth
anniversaries of the grant date thereof; and
6. Vested as to 100% of the Restricted Stock Benefit if
termination occurs after the fifth anniversary of the
grant date thereof.
EXHIBIT 10.37
EXECUTIVE LONG-TERM COMPENSATION AGREEMENT
THIS EXECUTIVE LONG-TERM COMPENSATION AGREEMENT is entered
into this 11th day of January, 1999, to be effective as of the
1st day of January, 1998, by and between CARNIVAL CORPORATION
("Carnival") with its principal place of business located at 3655
N.W. 87th Avenue, Miami, Florida 33178, and HOWARD S. FRANK (the
"Individual").
R E C I T A L S
WHEREAS, the Individual is currently employed as the Vice
Chairman and Chief Operating Officer of Carnival;
WHEREAS, Carnival wishes to provide long-term incentive and
reward to the Individual for the continuation of his full-time
employment with Carnival, in addition to the Individual's annual
compensation consisting of a base salary and annual bonus; and
WHEREAS, the Individual desires to continue in the employ of
Carnival until his retirement in consideration for Carnival's
payment of compensation for his services during the period prior
to retirement;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Carnival shall continue to employ the Individual as
Vice Chairman and Chief Operating Officer and the Individual
shall continue to serve Carnival in such executive capacity until
such employment is terminated by either party.
2. Subject to the provisions of this Agreement, Carnival
shall pay the Individual as long-term compensation, beginning
January 1, 1998 and continuing during the term of his employment
with Carnival, the stock compensation benefit described as
follows ("Stock Compensation Benefit"):
(A) Pursuant to the terms of Carnival's
1992 Stock Option Plan, the Individual shall
receive in January of each year during the term of
his employment (commencing effective January of
1998) an option to purchase 100,000 <1> shares of
Carnival Corporation Common Stock (the "Stock
Option Benefit"). For purposes of this Agreement,
the exercise price of the options shall be the
average of the high and low sales price of Common
Stock on the New York Stock Exchange Corporate
Tape on the date of the quarterly Board of
Directors meeting held in January of each year
(the "Grant Date"). Said options shall vest
ratably over a five (5) year period as more
particularly set forth in a Nonqualified Stock
Option Agreement to be entered into annually
substantially in the form attached hereto as
Exhibit A.
(B) Pursuant to the terms of Carnival's 1993
Restricted Stock Plan, the Individual shall
receive annually on the Grant Date 50,000 <2>
restricted shares of Carnival Corporation Common
Stock (the "Restricted Stock Benefit"). Except as
otherwise provided in Section 3 hereof, these
shares shall vest on the fifth anniversary of the
date of such annual grant.
<1> The number of shares has been adjusted to reflect the 2-for-1
stock split effective June 12, 1998.
<2> The number of shares has been adjusted to reflect the 2-for-1
stock split effective June 12, 1998.
3. Notwithstanding anything herein to the contrary, no
payment of any Stock Compensation Benefit shall be made, and all
unvested options and restricted stock issued hereunder and all
rights under the Agreement shall be forfeited, if any of the
following events shall occur:
(A) The Individual's employment with Carnival is
terminated for cause. For purposes of this Agreement,
"for cause" shall be defined as any action or inaction
by the Individual which constitutes fraud,
embezzlement, misappropriation, dishonesty, breach of
trust, a felony or moral turpitude, as determined by
its Board of Directors;
(B) The Individual voluntarily terminates his employment
with Carnival prior to attaining sixty-two (62) years
of age unless such voluntary termination is directly
related to the Individual being diagnosed with a
terminal medical condition;
(C) The Individual shall engage in competition, as more
particularly described in Section 6 hereof, either (i)
during the term of his employment with Carnival; (ii)
following the Individual's voluntary termination of his
employment with Carnival; or (iii) following Carnival's
termination of the Individual's employment with
Carnival either for cause, as defined in (A) above, or
other than for cause; or
(D) The Individual violates the nondisclosure provisions
set forth in Section 7 hereof.
In the event the Individual voluntarily terminates his
employment either (a) following attaining the age of sixty-two
(62) or (b) prior to attaining the age of sixty-two (62) as a
direct result of the Individual being diagnosed with a terminal
medical condition, then all unvested options and restricted stock
previously granted hereunder will not be forfeited by the
Individual and will continue to vest as scheduled, unless and
until the Individual engages in competition in violation of
Section 6 hereof or violates the nondisclosure provisions set
forth in Section 7 hereof.
In the event Carnival terminates the Individual's employment
with Carnival for a reason other than for cause, as defined in
Section 3(A) above, then, unless and until the Individual engages
in competition in violation of Section 6 hereof or violates the
nondisclosure provisions set forth in Section 7 hereof, (i) each
annual grant of the Stock Option Benefit shall continue to vest
as scheduled; and (ii) each annual grant of the Restricted Stock
Benefit shall vest and shall continue to vest in accordance with
the alternative vesting schedule set forth on Exhibit B
("Alternative Vesting Schedule I").
In the event the Individual voluntarily terminates his
employment with Carnival within 14 days of his receipt of notice
that Carnival's Chairman and Chief Executive Officer, with
approval and ratification of the Board of Directors or
appropriate committee of the Board, has determined that the
Individual's annual grant of the Restricted Stock Benefit will be
reduced by more than 25% in any one year, then (i) all unvested
options issued hereunder shall be forfeited; (ii) each annual
grant of the Restricted Stock Benefit shall be subject to the
alternative vesting schedule set forth on Exhibit C ("Alternative
Vesting Schedule II"); and (iii) all unvested restricted stock
issued hereunder, after application of Alternative Vesting
Schedule II, and all rights under this Agreement shall be
forfeited. Notwithstanding the foregoing, this paragraph of
Section 3 shall be null and void once the Individual attains the
age of sixty-two (62).
4. Intentionally Deleted.
5. Each annual grant of the Stock Compensation Benefit is
contingent on the Individual's satisfactory performance of his
duties as determined by Carnival's Chairman, and ratified and
approved by Carnival's Board of Directors or appropriate
committee of the Board.
6. The services of the Individual are unique,
extraordinary and essential to the business of Carnival,
particularly in view of the Individual's access to Carnival's
confidential information and trade secrets. Accordingly, in
consideration of the Stock Compensation Benefits payable
hereunder, the Individual agrees that he will not, without the
prior written approval of the Board of Directors, at anytime
during the term of his employment with Carnival and (except as
provided below) for five (5) years following the date on which
the Individual's employment with Carnival terminates, directly or
indirectly, within the United States or its territories, engage
in any business activity directly or indirectly competitive with
the business of Carnival, or its subsidiaries or divisions, or
serve as an officer, director, owner, consultant, or employee of
any organization then in competition with Carnival or any of its
subsidiaries or divisions. In addition, the Individual agrees
that during such five (5) year period following his employment
with Carnival, he will not solicit, either directly or
indirectly, any employee of Carnival, its subsidiaries or
division, who was such at the time of the Individual's separation
from employment hereunder. In the event that the provisions of
this Section 6 should ever be adjudicated to exceed the time,
geographic or other limitations permitted by applicable law in
any jurisdiction, then such provisions shall be deemed reformed
in such jurisdiction to the maximum time, geographic or other
limitations permitted by applicable law.
Notwithstanding the foregoing, the provisions of this
Section 6 shall be null and void if, prior to attaining the age
of sixty-two (62), the Individual voluntarily terminates his
employment with Carnival within 14 days of his receipt of notice
that Carnival's Chairman, with approval and ratification of the
Board of Directors or appropriate committee of the Board, has
determined that the Individual's annual grant of the Restricted
Stock Benefit will be reduced by more than 25% in any one year.
7. The Individual expressly agrees and understands that
Carnival owns and/or controls information and material which is
not generally available to third parties and which Carnival
considers confidential, including, without limitation, methods,
products, processes, customer lists, trade secrets and other
information applicable to its business and that it may from time
to time acquire, improve or produce additional methods, products,
processes, customers lists, trade secrets and other information
(collectively, the "Confidential Information"). The Individual
hereby acknowledges that each element of the Confidential
Information constitutes a unique and valuable asset of Carnival,
and that certain items of the Confidential Information have been
acquired from third parties upon the express condition that such
items would not be disclosed to Carnival and its officers and
agents other than in the ordinary course of business. The
Individual hereby acknowledges that disclosure of Carnival's
Confidential Information to and/or use by anyone other than in
Carnival's ordinary course of business would result in
irreparable and continuing damage to Carnival. Accordingly, the
Individual agrees to hold the Confidential Information in the
strictest secrecy, and covenants that, during the term of his
employment with Carnival or at any time thereafter, he will not,
without the prior written consent of the Board of Directors,
directly or indirectly, allow any element of the Confidential
Information to be disclosed, published or used, nor permit the
Confidential Information to be discussed, published or used,
either by himself or by any third parties, except in effecting
Individual's duties for Carnival in the ordinary course of
business. The Individual agrees to keep all such records in
connection with the Individual's employment as Carnival may
direct, and all such records shall be the sole and absolute
property of Carnival. The Individual further agrees that, within
five (5) days of Carnival's request, he shall surrender to
Carnival any and all documents, memoranda, books, papers,
letters, price lists, notebooks, reports, logbooks, code books,
salesmen records, customer lists, activity reports, video or
audio recordings, computer programs and any and all other data
and information and any and all copies thereof relating to
Carnival's business or any Confidential Information.
8. Except as otherwise provide in Section 6 hereof, the
restrictive covenants contained in Sections 6 and 7 herein shall
survive the termination or expiration of this Agreement and any
termination of the Individual's employment.
9. Nothing herein shall be construed as conferring upon
the Individual the right to continue in the employ of
Carnival as an executive or in any other capacity.
10. The Stock Compensation Benefit payable under this
Agreement shall not be deemed salary or other compensation to the
Individual for the purpose of computing benefits to which such
Individual may be entitled under any pension or profit sharing
plan or other arrangement of Carnival for the benefit of its
employees.
11. The Compensation Committee of Carnival's Board of
Directors shall have the full power and authority to interpret,
construe and administer this Agreement. No officer or director
of Carnival shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration
of this Agreement unless such action or omission is attributable
to his own willful misconduct or lack of good faith.
12. This Agreement shall not be, nor shall it be construed
to constitute an employment agreement between the Individual and
Carnival.
13. This Agreement shall be governed by, and shall be
construed and interpreted in accordance with, the laws of the
State of Florida and the parties agree to submit to the
jurisdiction of the United States District Court for the Southern
District of Florida for the resolution of any disputes arising
under this Agreement.
14. In the event that any party to this Agreement
institutes suit against the other party to this Agreement to
enforce any of its rights hereunder, the "prevailing party" in
such action shall be entitled to recover from the other party all
reasonable costs incurred in pursuing such action, including
reasonable attorneys' fees. For purposes of this Agreement,
"prevailing party" shall mean the party recovering judgment in
the case and not being liable on any counterclaim brought in the
case.
15. This Agreement constitutes the entire agreement
between Carnival and the Individual with respect to the long-term
compensation of the Individual as described herein and supersedes
all prior negotiations, agreements, understandings and
arrangements, both oral and written, between Carnival and the
Individual with respect to such subject matter. This Agreement
may not be modified in any way, except by a written instrument
executed by each of Carnival and the Individual.
16. This Agreement shall be for the benefit of, and shall
be binding upon, each of Carnival and the Individual and their
respective heirs, personal representatives, legal
representatives, successors and assigns.
17. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this
Agreement shall not affect the enforceability of the remaining
portions of this Agreement or any part hereof, all of which are
inserted conditionally on their being valid in law. In the event
that any one or more of the words, phrases, sentences, clauses or
sections contained in this Agreement shall be declared invalid by
a court of competent jurisdiction, then, in any such event, this
Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, or
section or sections had not been inserted.
18. The waiver by either party of a breach or violation of
any term or provision of this Agreement by the other party shall
not operate nor be construed as a waiver of any subsequent breach
or violation of any provision of this Agreement nor of any other
right or remedy.
IN WITNESS WHEREOF, each of the parties has executed and
delivered this Agreement as of the date first above written.
CARNIVAL CORPORATION
By:/s/ Micky Arison
Micky Arison
Title: Chairman and Chief
Executive Officer
/s/ Howard S. Frank
Howard S. Frank
EXHIBIT A
CARNIVAL CORPORATION
1992 STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
Carnival Corporation, f/k/a Carnival Cruise Lines, Inc. (the
"Company"), having heretofore adopted the Carnival Corporation
1992 Stock Option Plan (the "Plan") and entered into that certain
Executive Long-Term Compensation Agreement effective as of
January 1, 1998 between the Company and Howard S. Frank (the
"Compensation Agreement"), hereby irrevocably grants to HOWARD S.
FRANK (the "Optionee"), effective ______________ (the "Grant
Date"), the right and option (the "Option") to purchase One
Hundred Thousand (100,000) shares of Common Stock on the
following terms and conditions:
1. Each defined term used in this Agreement and not
otherwise defined herein shall have the meaning assigned to it in
the Plan.
2. This Option shall not be exercisable, in whole or in
part, except as follows:
a) Exercisable as to Twenty Thousand (20,000) shares
of Common Stock on or after the first anniversary
of the Grant Date;
b) Exercisable as to an additional Twenty Thousand
(20,000) shares of Common Stock on or after the
second anniversary of the Grant Date;
c) Exercisable as to an additional Twenty Thousand
(20,000) shares of Common Stock on or after the
third anniversary of the Grant Date;
d) Exercisable as to an additional Twenty Thousand
(20,000) shares of Common Stock on or after the
fourth anniversary of the Grant Date;
e) Exercisable as to an additional Twenty Thousand
(20,000) shares of Common Stock on or after the
fifth anniversary of the Grant Date.
3. Notwithstanding the provisions of paragraph 2, if
Optionee's employment by the Company or any Subsidiary shall
terminate by reason of his death or Disability, this Option shall
become immediately exercisable in full in respect of the
aggregate number of shares of Common Stock covered hereby.
4. Unless otherwise provided in the Compensation
Agreement, the unexercised portion of this Option shall
automatically and without notice terminate and become null and
void at the time of the earliest of the following to occur:
a) the expiration of ten (10) years from the Grant
Date;
b) the expiration of one (1) year from the date the
Optionee's employment with the Company or any of
its Subsidiaries shall terminate by reason of
Disability; provided, however, that if the
Optionee shall die during such one-year period,
the provisions of subparagraph (c) below shall
apply;
c) the expiration of one (1) year from the date of
the Optionee's death, if such death occurs either
during employment by the Company or any of its
Subsidiaries or during the one-year period
described in subparagraph (b) above;
d) the date the Company terminates the Optionee's
employment with the Company or any of its
Subsidiaries "for cause" (as defined in the
Compensation Agreement);
e) the date on which the Optionee voluntarily
terminates his employment with the Company or any
of its Subsidiaries prior to attaining sixty two
(62) years of age, unless such voluntary
termination is directly related to the Optionee
being diagnosed with a terminal medical condition;
and
f) the violation by the Optionee of noncompete and/or
nondisclosure provisions set forth in Sections 6
and 7 of the Compensation Agreement.
5. The purchase price for each of the shares of Common
Stock purchased pursuant to this Option shall be ___________ and
_____/100 Dollars ($_______). This Option is not intended to be
an "incentive stock option" within the meaning of Section 422(b)
of the Internal Revenue Code of 1986, as amended.
6. Unless Optionee utilizes a cashless exercise program,
if available and authorized by the Company from time to time,
this Option shall be deemed exercised when the Optionee (a)
delivers written notice to the Company at its principal business
office, directed to the attention of its Secretary, of the
decision to exercise, specifying the number of shares with
respect to which this Option is exercised and the price per share
designated in this Option, and (b) concurrently tenders to the
Company full payment for the shares of Common Stock to be
purchased pursuant to such exercise. Full payment for shares of
Common Stock purchased by the Optionee shall be made at the time
of any exercise, in whole or in part, of this Option, and
certificates for such shares shall be delivered to the Optionee
as soon thereafter as is reasonably possible. No shares of
Common Stock shall be transferred to the Optionee until full
payment therefor has been made, and the Optionee shall have none
of the rights of a shareholder with respect to any shares of
Common Stock subject to this Option until a certificate for such
shares shall have been issued and delivered to the Optionee.
Such payment shall be made in cash or by check or money order
payable to the Company, in each case payable in U.S. Currency.
(In the Committee's discretion, such payment may be made by
delivery of shares of Common Stock having a fair market value
[determined as of the date this Option is so exercised in whole
or in part] that, when added to the value of any cash, check,
promissory note or money order satisfying the foregoing
requirements, will equal the aggregate purchase price.)
7. This Option and the rights evidenced hereby are not
transferable in any manner other than by will or by the laws of
descent and distribution and during the Optionee's lifetime shall
be exercisable only by the Optionee (or the Optionee's court-
appointed legal representative).
8. The Company's obligation to deliver shares of Common
Stock upon the exercise of this Option shall be subject to all
applicable federal, state and local withholding requirements,
including the payment by the Optionee of any applicable federal,
state and local withholding tax. The Company may withhold
delivery of shares of Common Stock until the Optionee pays to the
Company the amount of tax it is required to withhold under any
applicable law. If the Optionee fails to remit to the Company
such tax, the Company may sell such portion of the shares of
Common Stock as are sufficient to satisfy the Company's
obligation to withhold such tax.
9. The Company's obligation to deliver shares of Common
Stock in respect of this Option shall be subject to all
applicable laws, rules and regulations and such approvals by any
governmental agency as may be required.
10. The Optionee, by his acceptance hereof, represents and
warrants to the Company that his purchase of shares of Common
Stock upon the exercise of this Option shall be for investment
and not with a view to, or for sale in connection with, the
distribution of any part thereof; provided, however, that this
representation and warranty shall be inoperative if, in the
opinion of counsel to the Company, a proposed sale or
distribution of such shares is pursuant to an applicable
effective registration statement under the Securities Act of
1933, as amended, and any applicable state "blue sky" or other
securities laws or is exempt from registration thereunder. The
Company will endorse an appropriate legend referring to the
foregoing restriction upon the certificate or certificates
representing any shares of Common Stock issued or transferred to
the Optionee upon the exercise of this Option.
11. This Agreement shall be subject to all the terms and
provisions of the Plan and the Compensation Agreement, which are
incorporated by reference herein and are made a part hereof,
including without limitation the provisions of paragraph 13 of
the Plan generally relating to adjustments to the number of
shares of Common Stock subject to this Option and to the Option
purchase price on certain changes in capitalization and the
effects of certain reorganizations and other transactions. In
the event there is any inconsistency between the provisions of
this Agreement and the Plan, the provisions of the Plan shall
govern. By entering into this Agreement, the Optionee agrees and
acknowledges his receipt of a copy of the Plan.
12. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the Company has caused these presents to
be signed by its duly authorized officer as of the ______ day of
January, _____.
CARNIVAL CORPORATION
By:____________________________
Micky Arison
Title:Chairman and Chief Executive
Officer
ACCEPTED AND AGREED THIS _____
DAY OF JANUARY, ______.
______________________________
Howard S. Frank
Optionee
EXHIBIT B
ALTERNATIVE VESTING SCHEDULE I
1. Vest as to 20% of the Restricted Stock Benefit on the
first anniversary of the grant date thereof;
2. Vest as to 40% of the Restricted Stock Benefit on the
second anniversary of the grant date thereof;
3. Vest as to 60% of the Restricted Stock Benefit on the
third anniversary of the grant date thereof;
4. Vest as to 80% of the Restricted Stock Benefit on the
fourth anniversary of the grant date thereof; and
5. Vest as to 100% of the Restricted Stock Benefit on the
fifth anniversary of the grant date thereof.
EXHIBIT C
ALTERNATIVE VESTING SCHEDULE II
1. Vested as to 0% of the Restricted Stock Benefit if
termination occurs between the grant date and the first
anniversary of the grant date thereof;
2. Vested as to 20% of the Restricted Stock Benefit if
termination occurs between the first and second
anniversaries of the grant date thereof;
3. Vested as to 40% of the Restricted Stock Benefit if
termination occurs between the second and third
anniversaries of the grant date thereof;
4. Vested as to 60% of the Restricted Stock Benefit if
termination occurs between the third and fourth
anniversaries of the grant date thereof;
5. Vested as to 80% of the Restricted Stock Benefit if
termination occurs between fourth and fifth
anniversaries of the grant date thereof; and
6. Vested as to 100% of the Restricted Stock Benefit if
termination occurs after the fifth anniversary of the
grant date thereof.
EXHIBIT 10.38
NOTE EXTENSION AND SATISFACTION AGREEMENT
This Note Extension and Satisfaction Agreement, dated
as of February 17, 1999 (this "Agreement"), is entered into by
and among the shareholders of CRC Holdings, Inc. ("CRC")
identified on Schedule A attached hereto (each a "Shareholder"
and, collectively, the "Shareholders") and Carnival Corporation,
a Panama corporation ("CCL").
WHEREAS, each Shareholder owns, beneficially and of
record, the number of shares of common stock, par value $.005 per
share ("CRC Common Stock"), of CRC set forth opposite such
Shareholder's name on Schedule A (collectively, the "Shares"),
which Shares are currently pledged to CCL to secure in part
certain obligations of the Shareholders owing to CCL, as
evidenced by promissory notes (collectively, the "CCL Notes")
made by the Shareholders in favor of CCL (Schedule B attached
hereto sets forth, for each Shareholder as of the date hereof,
the outstanding principal amount of and accrued and unpaid
interest on such Shareholder's CCL Note before and after giving
effect to the transactions (the "Related Transactions")
contemplated by the Stock Purchase Agreement, dated as of the
date hereof, among CCL and the Shareholders);
WHEREAS, the CCL Notes were executed and delivered by
the Shareholders in connection with the transactions contemplated
by the Stock Purchase Agreement, dated as of November 30, 1994,
as amended (the "Stock Purchase Agreement"), among CCL and the
Shareholders;
WHEREAS, CRC and Jackpot Enterprises, Inc. ("Jackpot")
have entered into that certain Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), pursuant to
which, among other things, following the spinoff (the "Spinoff")
of certain assets and liabilities of CRC as described in the
Merger Agreement, CRC will be merged (the "Merger") with and into
Jackpot;
WHEREAS, as consideration for the Merger, Jackpot has
agreed (i) to issue and deliver to holders of CRC Common Stock at
the effective time of the Merger (the "Effective Time") (other
than CCL and the Shareholders in respect of the Shares) and
certain holders of options to purchase CRC Common Stock the
number of shares of common stock, $.01 par value per share, of
Jackpot (the "Share Merger Consideration") determined in
accordance with the Merger Agreement, (ii) to issue a promissory
note to CCL in exchange for shares of CRC Common Stock held
beneficially and of record by CCL at the Effective Time in the
principal amount determined in accordance with the Merger
Agreement (the "Jackpot Note I") and (iii) to issue substantially
identical promissory notes to the Shareholders in exchange for
the Shares in the principal amount determined in accordance with
the Merger Agreement (the "Jackpot Note II" and, together with
the Share Merger Consideration and the Jackpot Note I, the
"Merger Consideration"), all as set forth in the Merger
Agreement;
WHEREAS, subject to the conditions herein set forth and
concurrently with the consummation of the Merger, the
Shareholders desire to repay in full amounts remaining
outstanding under the CCL Notes by (i) assigning to CCL all of
the Shareholders' right, title and interest in and to the Jackpot
Note II and (ii) transferring to CCL the Spinco Interest (as
defined herein) received by the Shareholders pursuant to the
Spinoff; and
WHEREAS, in order to facilitate the repayment of the
CCL Notes as contemplated herein, CCL has agreed to (i) extend
the maturity of the CCL Notes to provide adequate time for the
Merger to be consummated and (ii) provide for the release of the
Shares from the lien of the Security and Pledge Agreements, dated
as of November 30, 1994, as amended (collectively, the "Pledge
Agreements"), between each Shareholder and CCL, pursuant to which
the Shareholders pledged, among other things, the Shares as
collateral security for the CCL Notes.
NOW THEREFORE, in consideration of the foregoing and
the mutual representations, warranties and agreements contained
herein, the parties hereto agree as follows:
1. Extension of Maturity. In order to facilitate the
repayment in full of the CCL Notes as contemplated herein, CCL
hereby agrees effective as of the date hereof, that (a) the
maturity of the CCL Notes shall be extended to the earlier of (i)
the closing date of the Merger and (ii) December 31, 1999, or
such later date specified in an amendment to Section 6.01(b)(i)
of the Merger Agreement and (b) interest in respect of the CCL
Notes shall cease to accrue (it being understood and agreed that
(x) upon any termination of this Agreement under Section 8 below
interest will accrue retroactive to the date hereof on the terms
set forth in the CCL Notes with respect to the portion of the
principal amount of the CCL Notes as shall remain unsatisfied on
the date of such termination and (y) in the event the Related
Transactions shall not have been consummated as described under
Section 7(b)(iii), interest will accrue retroactive to the date
hereof on the terms set forth in the CCL Notes with respect to
the portion of the principal amount of the CCL Notes as shall
remain unsatisfied following the Closing hereunder).
2. Repayment of the CCL Notes; Release of Shareholder
Agreements.
(a) Upon delivery to CCL at the Closing as
provided in Section 4 below of (i) the Jackpot Note II (which
shall be assigned by the Shareholders to CCL hereunder with the
consent of Jackpot as contemplated by and immediately upon the
closing under the Merger Agreement) and (ii) certificates
evidencing 2,610,000 membership units or other equivalent equity
interests (the "Spinco Interest") of the limited liability entity
to be formed to effectuate the Spinoff ("Spinco") (representing
21.5189% of the aggregate equity interests of Spinco on a fully
diluted basis at the time of the Spinoff), in the case of each of
clauses (i) and (ii) free and clear of any liens, claims,
options, defects in title, proxies, voting agreements,
shareholder agreements, charges or encumbrances of any nature or
kind ("Encumbrances"), the CCL Notes shall be deemed repaid and
satisfied in full (assuming the Related Transactions have been
consummated).
(b) Effective immediately upon full satisfaction
of the CCL Notes as provided in clause (a) above, CCL, in respect
of the Shareholders, and the Shareholders, in respect of CCL,
hereby irrevocably and unconditionally release and forever
discharge each other, and each of their respective agents,
attorneys, affiliates, heirs and legal representatives and, in
the case of the release of CCL, the officers, directors and
shareholders of CCL and its subsidiaries, and the respective
successors and assigns of any of the foregoing, from any and all
claims, demands, debts, liabilities, obligations, causes of
actions or claims for relief of any kind or nature, whether known
or unknown, which they may have or which may hereafter be
asserted or accrue against any of them resulting from or in any
way relating to any of the Stock Purchase Agreement, the CCL
Notes, the Pledge Agreements and any other related instruments or
agreements (collectively, the "Shareholder Agreements").
3. Closing. Subject to the conditions herein set
forth, the closing (the "Closing") shall take place at the
offices of CRC Holdings, Inc., 3250 Mary Street, Miami, Florida
33133, at 9:00 a.m., on the closing date of the Merger, or at
such other place and time as may be mutually agreed by the
parties. The actual time and date of the Closing is herein
referred to as the "Closing Date."
4. Deliveries at the Closing. At the Closing: (a) CCL
will deliver to the Shareholders the Shares, free and clear of
any liens in favor of CCL, including, but not limited to, the
liens created pursuant to the Pledge Agreements and the other
Shareholder Agreements; and (b) the Shareholders will deliver or
cause to be delivered to CCL free and clear of any Encumbrances
(i) the Jackpot Note II, (ii) certificates representing the
Spinco Interest and (iii) any other documents, certificates or
agreements that in the reasonable judgment of CCL are necessary
to make effective the transactions contemplated by this Agreement
and vest in CCL good, valid and marketable title to the Jackpot
Note II and the Spinco Interest, free and clear of any
Encumbrances. Effective immediately upon such delivery, each
Shareholder (severally and not jointly, and without
representation or warranty except as provided herein) hereby
assigns and transfers to CCL all of such Shareholder's right,
title and interest in and to the Jackpot Note II.
5. Shareholders' Representations and Warranties.
Each Shareholder severally (but not jointly) represents and
warrants to CCL as follows:
(a) Such Shareholder has the full power,
authority and legal right to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
(b) This Agreement has been duly and validly
executed and delivered by such Shareholder and constitutes a
valid and binding agreement of such Shareholder, enforceable
against such Shareholder in accordance with its terms, subject to
applicable principles of equity, bankruptcy, reorganization,
insolvency or other laws affecting the enforcement of creditors'
rights generally.
(c) Upon the occurrence of the Spinoff, such
Shareholder will have good, valid and marketable title to its
portion of the Spinco Interest, free and clear of any
Encumbrances, other than under the Shareholder Agreements, and
upon transfer to CCL by such Shareholder of its portion of the
Spinco Interest and the Jackpot Note II and satisfaction of the
CCL Notes as provided hereunder, CCL will acquire record and
good, valid and marketable title to such portion of the Spinco
Interest and the Jackpot Note II, free and clear of all
Encumbrances.
6. CCL Representations and Warranties. CCL represents
and warrants to the Shareholders as follows:
(a) CCL is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization. CCL has the full power, authority
and legal right to execute, deliver and carry out the terms and
provisions of this Agreement, to consummate the transactions
contemplated hereby and to perform, comply with or satisfy all of
the agreements, obligations and conditions required to be
complied with or satisfied by CCL under this Agreement, and has
taken all necessary action to authorize the execution, delivery
and performance of this Agreement.
(b) This Agreement has been duly and validly
authorized, executed and delivered by CCL and constitutes a valid
and binding agreement of CCL, enforceable against CCL in
accordance with its terms, subject to applicable principles of
equity, bankruptcy, reorganization, insolvency or other laws
affecting the enforcement of creditors' rights generally.
7. Conditions to the Obligations of the Shareholders
and CCL.
(a) The obligations of the Shareholders
hereunder are subject to the compliance by CCL with the
deliveries specified in Section 4 of this Agreement and the
satisfaction or, if permitted by applicable law, waiver of the
following condition:
(i) the representations and warranties of
CCL shall be true and correct at and as of the Closing Date
as though such representations and warranties were made at
and as of such date.
(b) The obligations of CCL hereunder are subject
to the compliance by the Shareholders with the deliveries
specified in Section 4 of this Agreement and the satisfaction or,
if permitted by applicable law, waiver of the following
conditions:
(i) the representations and warranties of
the Shareholders shall be true and correct at and as of the
Closing Date as though such representations and warranties
were made at and as of such date;
(ii) all of the conditions to the Merger
shall have been satisfied or waived by the appropriate
parties and the Spinoff shall have occurred; and
(iii) the Related Transactions shall have
been consummated; provided, that in the event the Related
Transactions shall not have been consummated the parties
will endeavor in good faith to negotiate an appropriate
modification to this Agreement to provide for a partial
repayment of the CCL Notes.
8. Termination. The transactions contemplated herein
may be terminated or abandoned at any time prior to the Closing:
(a) by mutual consent of CCL and the
Shareholders holding a majority of the Shares;
(b) by any party if the Merger shall not have
occurred on or before December 31, 1999, or such later date
specified in an amendment to Section 6.01(b)(i) of the Merger
Agreement for termination thereof; and
(c) automatically, upon termination of the
Merger Agreement.
CCL and the Shareholders acknowledge and agree that
notwithstanding any termination of this Agreement, the extension
of the maturity of the CCL Notes to December 31, 1999 shall
survive such termination.
9. Miscellaneous.
(a) All representations, warranties and
covenants shall survive the Closing.
(b) This Agreement may be executed in any number
of counterparts, each of which shall, when executed, be deemed to
be an original and all of which shall be deemed to be one and the
same instrument.
(c) This Agreement shall be governed by and con-
strued and enforced in accordance with the laws of the State of
Florida, without reference to the conflict of laws principles
thereof.
IN WITNESS WHEREOF, each Shareholder and CCL has
executed or caused this Agreement to be executed on the date
first above written.
/s/ Sherwood M. Weiser
Sherwood M. Weiser
/s/ Donald E. Lefton
Donald E. Lefton
/s/ Thomas Hewitt
Thomas Hewitt
/s/ Peter Sibley
Peter Sibley
/s/ W. Peter Temling
W. Peter Temling
/s/ Robert Sturges
Robert Sturges
CARNIVAL CORPORATION
By: /s/ Gerald R. Cahill
Name: Gerald R. Cahill
Title: Sr. Vice President-Finance
and CFO
Schedule A
Name of Shareholder Number of Shares
Sherwood Weiser 859,248
Donald Lefton 859,248
Thomas Hewitt 318,394
Peter Sibley 318,394
Robert Sturges 127,358
Peter Temling 127,358
Schedule B
Principal and Accrued Interest
Before Related After Related
Name of Shareholder Transactions Transactions
Sherwood Weiser $6,641,505 $4,966,497
Donald Lefton 6,641,505 4,966,497
Thomas Hewitt 2,461,007 1,840,334
Peter Sibley 2,461,007 1,840,334
Robert Sturges 984,406 736,136
Peter Temling 984,406 736,136
Total $20,173,837 $15,085,934
EXHIBIT 12
CARNIVAL CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Income from continuing
operations $835,885 $666,050 $566,302 $451,091 $381,765
Income tax expense 3,815 6,233 9,045 9,374 10,053
Income from continuing
operations before
income taxes 839,700 672,283 575,347 460,465 391,818
Adjustment to earnings:
Minority interest 11,102
Income from affiliates in
excess of dividends
received (63,059) (46,569) (43,224) 0 0
Earnings as adjusted 787,743 625,714 532,123 460,465 391,818
Fixed Charges:
Interest expense, net 57,772 55,898 64,092 63,080 51,378
Interest portion of
rent expense (1) 3,480 3,528 3,093 2,529 2,575
Fixed charges associated with
discontinued operations 928
Capitalized interest 35,130 16,846 25,799 18,762 21,888
Total fixed charges 96,382 76,272 92,984 84,371 76,769
Fixed charges not affecting
earnings:
Capitalized interest (35,130) (16,846) (25,799) (18,762) (21,888)
Earnings before fixed
charges $848,995 $685,140 $599,308 $526,074 $446,699
Ratio of earnings to
fixed charges 8.8 x 9.0 x 6.4 x 6.2x 5.8 x
</TABLE>
___________________
(1) Represents one-third of rent expense, which management
believes to be representative of the interest portion of rent
expense.
EXHIBIT 13
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
<TABLE>
<CAPTION>
ASSETS NOVEMBER 30,
1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 137,273 $ 139,989
Short-term investments 5,956 9,738
Accounts receivable, net 60,837 57,090
Consumable inventories, at average cost 75,449 54,970
Prepaid expenses and other 90,764 74,238
Total current assets 370,279 336,025
PROPERTY AND EQUIPMENT, Net 5,768,114 4,327,413
OTHER ASSETS
Investments in and advances to affiliates 546,693 479,329
Goodwill, less accumulated amortization of
$72,255 and $62,256 437,464 212,607
Other assets 56,773 71,401
$7,179,323 $5,426,775
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 67,626 $ 59,620
Accounts payable 168,546 106,783
Accrued liabilities 206,968 154,253
Customer deposits 638,383 420,908
Dividends payable 53,590 44,578
Total current liabilities 1,135,113 786,142
LONG-TERM DEBT 1,563,014 1,015,294
DEFERRED INCOME AND OTHER LONG-TERM LIABILITIES 63,036 20,241
COMMITMENTS AND CONTINGENCIES (Notes 2 and 9)
MINORITY INTEREST 132,684
SHAREHOLDERS' EQUITY
Common Stock; $.01 par value; 960,000 shares
authorized; 595,448 and 594,408 shares issued and
outstanding 5,955 5,944
Paid-in-capital 880,488 863,125
Retained earnings 3,379,628 2,731,213
Other 19,405 4,816
Total shareholders' equity 4,285,476 3,605,098
$7,179,323 $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>
YEARS ENDED NOVEMBER 30,
1998 1997 1996
<S> <C> <C> <C>
REVENUES $3,009,306 $2,447,468 $2,212,572
COSTS AND EXPENSES
Operating expenses 1,619,377 1,322,669 1,241,269
Selling and administrative 369,469 296,533 274,855
Depreciation and amortization 200,668 167,287 144,987
2,189,514 1,786,489 1,661,111
OPERATING INCOME BEFORE INCOME FROM
AFFILIATED OPERATIONS 819,792 660,979 551,461
INCOME FROM AFFILIATED OPERATIONS, NET 76,732 53,091 45,967
OPERATING INCOME 896,524 714,070 597,428
NONOPERATING INCOME (EXPENSE)
Interest income 10,257 8,675 18,597
Interest expense, net of
capitalized interest (57,772) (55,898) (64,092)
Other income, net 1,793 5,436 23,414
Income tax expense (3,815) (6,233) (9,045)
Minority interest (11,102)
(60,639) (48,020) (31,126)
NET INCOME $ 835,885 $ 666,050 $ 566,302
EARNINGS PER SHARE:
Basic $1.40 $1.12 $.98
Diluted $1.40 $1.12 $.96
</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>
YEARS ENDED NOVEMBER 30,
1998 1997 1996
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 835,885 $666,050 $566,302
Adjustments to reconcile net income to
net cash provided from operating activities:
Depreciation and amortization 200,668 167,287 144,987
Income from affiliates in excess of
dividends received (63,059) (46,569) (43,224)
Minority interest 11,102
Other (8,428) 2,540 19,639
Changes in operating assets and liabilities,
excluding businesses acquired and consolidated:
Decrease (increase) in:
Receivables 137 (21,229) (4,432)
Consumable inventories (3,913) (1,689) (4,461)
Prepaid expenses and other (15,369) 903 (4,919)
Increase (decrease) in:
Accounts payable 18,758 22,035 (5,489)
Accrued liabilities 42,401 20,042 13,028
Customer deposits 73,658 68,210 60,092
Net cash provided from operating
activities 1,091,840 877,580 741,523
INVESTING ACTIVITIES
Additions to property and equipment, net (1,150,413) (497,657) (901,905)
Proceeds from sale of assets 47,028 17,041 94,291
Proceeds from litigation settlements
applied to cost of ships 43,050
Acquisition of consolidated subsidiaries, net (242,868)
Purchase of equity interests in affiliates (38,378) (163,112)
Other (additions to) reductions in
investments in and advances to
affiliates, net (380) 39,540 (23,903)
Decrease in short-term investments, net 4,052 2,748 37,710
Other, net 21,528 21,805 94,644
Net cash used for investing activities (1,321,053) (454,901) (819,225)
FINANCING ACTIVITIES
Proceeds from long-term debt 1,404,395 155,366 971,361
Principal payments of long-term debt (1,006,586) (424,391) (735,246)
Dividends paid (178,458) (130,456) (103,877)
Proceeds from issuance of Common Stock 11,399 5,162 3,728
Other (4,253)
Net cash provided from (used for)
financing activities 226,497 (394,319) 135,966
Net (decrease) increase in cash and
cash equivalents (2,716) 28,360 58,264
Cash and cash equivalents at beginning
of year 139,989 111,629 53,365
Cash and cash equivalents at end of year $ 137,273 $139,989 $111,629
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
CARNIVAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
Description of Business
Carnival Corporation, a Panamanian corporation, and its
wholly and majority owned subsidiaries (referred to collectively
as the "Company") operate five cruise lines under the brand names
Carnival Cruise Lines ("Carnival"), Cunard Line ("Cunard"),
Holland America Line ("Holland America"), Seabourn Cruise Line
("Seabourn") and Windstar Cruises ("Windstar") and a tour
business, Holland America Westours. Carnival operates thirteen
cruise ships cruising primarily in the Caribbean, Mexican Riviera
and Alaska. Holland America operates eight cruise ships cruising
primarily in Alaska, the Caribbean and Europe and Windstar
operates four luxury, sail-powered vessels which call on more
exotic locations inaccessible to larger ships, primarily in the
Caribbean, Europe and Central America. Cunard and Seabourn
operate five and three luxury cruise vessels, respectively, to
worldwide destinations (see Note 13). Holland America Line-
Westours Inc. markets sightseeing tours both separately and as a
part of Holland America cruise/tour packages. Holland America
Westours operates 14 hotels in Alaska and the Canadian Yukon, two
luxury dayboats offering tours to the glaciers of Alaska and the
Yukon River, over 280 motor coaches used for sightseeing and
charters in the states of Washington and Alaska and in the
Canadian Rockies and 13 private domed rail cars which are run on
the Alaskan Railroad between Anchorage and Fairbanks.
The Company has a 50% direct equity interest in Il Ponte
S.p.A. ("Il Ponte"), the parent company of Costa Crociere, S.p.A.
("Costa"), an Italian cruise company. Additionally, the Company
has a 26% interest in Airtours plc ("Airtours"), a large publicly
traded air-inclusive integrated leisure travel company
headquartered in England, and a 23% interest in a casino
development and management company, CRC Holdings, Inc. ("CRC").
Costa operates seven cruise ships in Europe, the Caribbean and
South America and its cruises are marketed primarily to
Europeans. Airtours provided holidays for approximately eight
million people in 1998 primarily from the United Kingdom,
Scandinavia and North America and owns or operates over 800
retail travel shops, 36 aircraft, three cruise ships (an
additional ship is scheduled to be delivered in 1999), 26 holiday
hotels and develops and markets vacation ownership resorts.
Airtours also owns the other 50% of Il Ponte not owned by the
Company. CRC's casino activities are located in the United States
and Canada.
Preparation of Financial Statements
The accompanying financial statements present the
consolidated balance sheets, statements of operations and cash
flows of the Company. Preparation of financial statements in
accordance with generally accepted accounting principles requires
the use of management estimates. Actual results could differ from
these estimates. All material intercompany transactions and
accounts have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents and Short-Term Investments
Cash and cash equivalents include investments with original
maturities of three months or less and are stated at cost which
approximates market value. At November 30, 1998 and 1997, cash
and cash equivalents include $94 million and $105 million of
investments, respectively, primarily comprised of commercial
paper.
Short-term investments are comprised of marketable debt
which are categorized as available for sale and, accordingly, are
stated at their fair values. Unrealized gains and losses are
included as a component of other shareholders' equity until
realized.
Property and Equipment
Property and equipment is stated at cost. Depreciation and
amortization is computed using the straight-line method over
estimated useful lives as follows:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Vessels 11-30
Buildings and improvements 10-40
Equipment 2-20
Leasehold improvements shorter of the lease term
or related asset life
</TABLE>
The Company capitalizes interest on vessels and other
capital projects during the construction period. Interest is
capitalized using rates equivalent to the Company's weighted
average borrowing rate.
The Company reviews its long-lived assets, identifiable
intangibles and goodwill and reserves for their impairment, based
generally upon estimated future undiscounted cash flows, whenever
events or changes in circumstances indicate the carrying amount
of these assets may not be fully recoverable.
Costs associated with drydocking are capitalized as prepaid
expenses and charged to expense generally over the lesser of 12
months or the period to the next scheduled drydock.
Investments in and Advances to Affiliates
The Company accounts for its investments based on its
ability to exercise influence over the financial and operating
policies of the investee. The Company consolidates affiliates in
which it has control, as typically evidenced by a direct
ownership interest of greater than 50%. For affiliates where
significant influence exists, as typically evidenced by a direct
ownership interest from 20% to 50%, the investment is accounted
for using the equity method. When the Company does not have
significant influence, as typically evidenced by a direct
ownership interest of less than 20% or where the ability to
exercise control or significant influence is temporary, the
investment is accounted for using the cost method.
The Company's percentage share of the affiliated companies'
net income (loss), net of amortization of goodwill, as well as
any related interest income or royalty fee income from those
affiliates, is recorded as "Income from Affiliated Operations,
Net" in the accompanying statements of operations. The Company's
investments in and advances to affiliates are reported as
"Investments in and Advances to Affiliates" in the accompanying
balance sheets. In the event of the issuance of stock by an
affiliate, the Company generally recognizes a gain or loss (see
Note 4). At November 30, 1998 and 1997, the costs in excess of
the net assets acquired of affiliates ("goodwill") was $241 and
$266 million, respectively, and it is being amortized using the
straight-line method over periods ranging from 30 to 40 years.
Goodwill
Goodwill of $275 million resulting from the acquisition of
HAL Antillen, N.V. ("HAL"), the parent company of Holland
America, Windstar and Holland America Westours, and $235 million
resulting from the acquisition of Cunard and consolidation of
Seabourn is being amortized using the straight-line method over
40 years.
Foreign Currency Contracts
All of the Company's significant contracts to buy foreign
currency are forward contracts entered into to hedge foreign
currency fluctuations of firm commitments related to the
construction of cruise ships. These off-balance sheet contracts
are not held for trading purposes. Changes in the market value
and any discounts or premiums on these forward foreign currency
contracts are recorded at maturity, which coincides with the
dates when the related foreign currency payments are to be made,
with any resulting gain or loss included in the cost of the
vessel.
Revenue and Expense Recognition
Customer cruise deposits represent unearned revenues and are
initially recorded as customer deposit liabilities on the balance
sheet when received. Customer deposits are subsequently
recognized as cruise revenue, together with revenue from
shipboard activities and all associated direct costs of a voyage,
generally upon completion of voyages with durations of ten days
or less and on a pro rata basis for voyages in excess of ten
days. Certain revenues and expenses from pro rata voyages are
estimated. Revenues and expenses from tour and related services
are recognized at the time the services are performed or expenses
are incurred.
Advertising Costs
Substantially all of the Company's advertising costs are
charged to expense as incurred, except costs which result in
tangible assets, such as brochures, which are recorded as prepaid
expenses and charged to expense as consumed. Advertising expense
totaled $142 million in 1998, $112 million in 1997 and $109
million in 1996. At November 30, 1998 and 1997, $18.8 million and
$17.2 million, respectively, of advertising related costs,
principally brochures, were included in prepaid expenses and
other in the accompanying balance sheets.
Foreign Currency Transactions
Substantially all of the Company's operating and financing
transactions are settled in U.S. dollars. Gains or losses
resulting from these types of transactions which are denominated
in other currencies and remeasurements of assets and liabilities
denominated in other currencies are recognized in income
currently.
Income Taxes
Under the Internal Revenue Code, corporations incorporated
outside the United States ("U.S.") 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 one of three tests with
respect to their stockholders: a "CFC Test" (which is satisfied
if the company is a controlled foreign corporation), an "Ultimate
Owner Test" (which is satisfied if the majority of the company's
stock is ultimately owned by residents of certain foreign
countries) or a "Publicly Traded Test" (described below). The
Company's cruise ship operations meet the Incorporation Test
since they are incorporated in countries which exempt U.S.
persons involved in shipping operations from their income tax.
The Company does not currently meet either the CFC Test or the
Ultimate Owner Test. However, management believes that the
Company has met the Publicly Traded Test since July 16, 1997.
During fiscal 1996 and through July 15, 1997 of fiscal 1997,
management believes that the Company met the CFC Test.
Accordingly, management believes that the Company's income from
cruise operations has been and is exempt from U.S. income tax.
However, there is no authority that addresses the treatment of a
corporation that meets the CFC Test and the Publicly Traded Test
for only part of its taxable year, as the Company did in fiscal
1997.
A corporation meets the Publicly Traded Test if the stock of
the corporation (or its direct or indirect corporate parent) is
"primarily and regularly traded on an established securities
market" in the U.S. Although no U.S. Department of Treasury
("Treasury") regulations have been promulgated which explain when
stock is primarily and regularly traded for purposes of this
exemption, Treasury regulations have been promulgated which
interpret a similar phrase under another section. Under that
section's 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 U.S. where more shares are traded than in any other country,
(ii) trades of the stock are effected on that market, other than
in small 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."
Management believes that the Company meets these requirements.
The Company has only one class of stock outstanding, the Common
Stock, which is listed on the New York Stock Exchange ("NYSE"),
where more shares trade than in any other country. Trades of the
Common Stock have been effected in more than acceptable
quantities on every business day since the Company's initial
public offering, and the annual volume of these trades has
significantly exceeded 10% of the average number of shares
outstanding. Moreover, management believes that any stock traded
on the NYSE is considered as traded on a qualifying exchange and,
to the best of management's knowledge, the Company 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 the Company's stock and the Arison Group holds less than
50% of the outstanding shares.
Accordingly, management believes that virtually all of the
Company's income (with the exception of its U.S. source income
from the transportation, hotel and tour businesses of Holland
America Westours) is exempt from U.S. federal income taxes. If
the Company was found not to meet the Publicly Traded Test (and
also did not meet the CFC Test or the Ultimate Owner Test) or if
the Internal Revenue Code were to be changed in a manner adverse
to the Company, much of the Company's income would become subject
to taxation by the U.S. at higher than normal corporate tax
rates.
Earnings Per Share
In 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share" which
requires the dual presentation of basic and diluted earnings per
share. Basic earnings per share is computed by dividing net
income by the weighted average number of shares of common stock
outstanding during each period. Diluted earnings per share is
computed by dividing net income, as adjusted, by the weighted
average number of shares of common stock, common stock
equivalents and other potentially dilutive securities outstanding
during each period. In accordance with the provisions of SFAS No.
128, and as a result of the 1998 stock split, the Company has
retroactively restated prior years' earnings per share (see Notes
6 and 12).
Stock-Based Compensation
The Company accounts for stock-based compensation using the
intrinsic value method and discloses certain fair market value
pro forma information with respect to its stock-based
compensation activities (see Note 11).
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
November 30,
1998 1997
(in thousands)
<S> <C> <C>
Vessels $5,754,218 $4,536,382
Vessels under construction 526,529 182,929
6,280,747 4,719,311
Land, buildings and improvements 217,597 194,013
Transportation and other equipment 322,069 268,520
Total property and equipment 6,820,413 5,181,844
Less accumulated depreciation and amortization (1,052,299) (854,431)
$5,768,114 $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 $35.1 million in 1998, $16.8 million
in 1997 and $25.8 million in 1996.
NOTE 4 - INVESTMENTS IN AND ADVANCES TO AFFILIATES
In June 1997, the Company and Airtours completed a joint offer to
acquire the equity securities of Costa, an Italian cruise company. The
Company and Airtours each own 50% of Il Ponte, a holding company which
currently owns approximately 100% of Costa. The cost of the Company's
acquisition of its 50% direct interest was approximately $141 million, of
which approximately $103 million was paid by Il Ponte and the balance was
paid by the Company. The $103 million paid by Il Ponte was funded through
Il Ponte debt, which is guaranteed by the Company and is outstanding at
November 30, 1998. The Company is recording its interest in Il Ponte's
consolidated results of operations on a two-month lag basis using the
equity method. It is not practicable to estimate the fair value of Il
Ponte as it is not a publicly traded entity.
In April 1996, the Company acquired a 28% interest in Airtours for
approximately $307 million. Approximately $163 million was paid in cash
and the balance in 10,602,372 shares of the Company's Common Stock. At
November 30, 1998, the market value of the Company's investment in
Airtours, based on the closing price of Airtours' stock on the London
Stock Exchange, was approximately $835 million as compared with the
carrying value of the Company's investment in Airtours of $432 million.
The Company is recording its interest in Airtours' consolidated results
of operations on a two-month lag basis using the equity method. In 1998,
the Company's interest in Airtours has been reduced to approximately 26%
as a result of the conversion of Airtours preference shares into Airtours
common stock and the issuance of Airtours common stock in conjunction
with two of its acquisitions, as discussed below.
In July and September 1998, Airtours issued approximately 18.5
million and 2.2 million shares of its common stock at $7.02 per share and
$6.00 per share, respectively, in connection with acquisitions. The
issuance of these shares reduced the Company's ownership of Airtours from
approximately 27% to 26%. As a result of these transactions, the Company
recognized a net gain, after a provision for deferred income taxes, of
$14.8 million, which is included in other nonoperating income in the
accompanying statements of operations.
At November 30, 1997, the Company owned a 23% interest in CHC
International, Inc. ("CHC"), a hotel and casino management and
development company. In June 1998, CHC consummated its merger with
Patriot American Hospitality, Inc. ("Patriot"), whereby Patriot acquired
CHC's hotel management division and CHC's shareholders received shares of
redeemable preferred stock convertible into Patriot common stock
("Patriot Stock"). Immediately prior to this merger, CHC's gaming
division was spun off into CRC, in which the Company continues to own a
23% interest. As a result of the merger with Patriot, the Company
recognized a gain of $8.4 million, which is included in other
nonoperating income in the accompanying statements of operations. The
Company accounts for this investment using the equity method.
Additionally, the Company holds $16.3 million of secured 6% notes
receivable (the "TCC Notes") from the 1994 sale of a 25% interest in CHC
to other shareholders of CHC (the "TCC Principals"). One of the TCC
Principals is a member of the Company's board of directors. The TCC
Notes, as amended, contain a put option which the TCC Principals can
exercise, requiring the Company to repurchase all of these CRC shares
representing approximately 24% of CRC and 838,896 shares of Patriot Stock
(received by the TCC Principals as a result of the above merger) in
exchange for the full principal and interest due under the TCC Notes. At
November 30, 1998, the carrying value of the Company's CRC investment,
including the TCC Notes and a $1.5 million interest bearing note
receivable from CRC, is approximately $21.7 million as compared to an
estimated fair value of approximately $29 million. The estimated fair
value of this investment was determined based on expected future
discounted cash flows, public market prices and other available
information.
In September 1997, the Company announced that it was dissolving its
Asian cruise joint venture with Hyundai Merchant Marine (formed in
September 1996) and would repurchase the cruise ship Tropicale from the
joint venture. In September 1997, the Company repurchased the Tropicale
from the joint venture for $93 million. The remaining deferred gain of
$55.2 million which resulted from the sale of the Tropicale to the joint
venture in 1996, was reclassified as a reduction of the Company's cost
basis of the Tropicale upon its repurchase from the joint venture.
Dividends received from affiliates were $13.7 million, $11.4 million
and $2.7 million in fiscal 1998, 1997 and 1996, respectively.
Financial information for affiliated companies accounted for using
the equity method is as follows (in thousands):
<TABLE>
<CAPTION>
Balance Sheet Data: As of End of Fiscal Year
1998 1997
<S> <C> <C>
Current assets $1,722,616 $1,297,311
Long-term assets $2,115,373 $1,792,080
Current liabilities $1,560,228 $1,359,822
Long-term liabilities $1,325,220 $1,250,973
Shareholders' equity $ 952,541 $ 478,596
</TABLE>
<TABLE>
<CAPTION>
Income Statement Data: Fiscal Years Ended
1998 1997 1996
<S> <C> <C> <C>
Revenues $5,282,230 $3,965,223 $2,877,892
Gross margin $1,128,305 $ 702,162 $ 444,009
Net income $ 264,936 $ 174,354 $ 106,605
</TABLE>
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
November 30,
1998 1997
(in thousands)
<S> <C> <C>
Commercial paper $ 368,710 $ 288,614
Unsecured 5.75% Notes Due March 15, 1998 200,000
Unsecured 5.65% Notes Due October 15, 2000 199,833
Unsecured 6.15% Notes Due April 15, 2008 199,512
Unsecured 6.65% Debentures Due January 15, 2028 199,249
Mortgages and other loans payable bearing interest
at rates ranging from 5.1% to 9.1%, secured by
vessels, maturing through 2009 174,198 79,830
Unsecured 6.15% Notes Due October 1, 2003 124,967 124,960
Unsecured 7.20% Debentures Due October 1, 2023 124,881 124,876
Unsecured 7.7% Notes Due July 15, 2004 99,936 99,924
Unsecured 7.05% Notes Due May 15, 2005 99,871 99,851
Other loans payable 39,483 56,859
1,630,640 1,074,914
Less portion due within one year (67,626) (59,620)
$1,563,014 $1,015,294
</TABLE>
At November 30, 1998, the outstanding commercial paper bears
interest at approximately 5% and was due in December 1998. At November
30, 1997, the interest rate on the outstanding commercial paper was
approximately 5.6%. Since the commercial paper is backed by the long-term
revolving credit facilities described below, balances outstanding under
the commercial paper programs have been classified as long-term in the
accompanying balance sheets.
The Company's commercial paper programs are supported by a $1
billion unsecured revolving credit facility due December 2001 and a $200
million multi-currency revolving credit facility due January 2002. Both
revolving credit facilities bear interest at LIBOR plus 14 basis points
("BPS") and provide for a facility fee of six BPS on each facility. Any
funds outstanding under the commercial paper programs reduce the
aggregate amount available under these facilities. At November 30, 1998,
the Company had $831.3 million available for borrowing under these
facilities. These facilities contain covenants that require the Company,
among other things, to maintain minimum debt service coverage and limit
debt to capital ratios. At November 30, 1998, the Company was in
compliance with all of its debt covenants.
The Unsecured 5.75% Notes Due March 15, 1998, which were outstanding
at November 30, 1997, were repaid through the issuance of long-term debt
and, accordingly, were classified as long-term in the accompanying
balance sheet.
At November 30, 1998, property and equipment with a net book value
of $595 million was pledged as collateral against the mortgage
indebtedness.
At November 30, 1998, the scheduled annual maturities of the
Company's long-term debt are summarized as follows (in thousands):
Fiscal
1999 $ 67,626
2000 220,231
2001 24,830
2002 388,548
2003 144,825
Thereafter 784,580
$1,630,640
NOTE 6 - SHAREHOLDERS' EQUITY
An analysis of the changes in shareholders' equity for each of the
three years in the period ended November 30, 1998 is as follows:
<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>
Balances at November 30, 1995 $2,298 $550 $594,811 $1,752,140 $(4,926) $2,344,873
Net income 566,302 566,302
Cash dividends (110,661) (110,661)
Changes in securities
valuation allowance (199) (199)
Foreign currency
translation adjustment 4,126 4,126
Issuance of stock upon
conversion of
convertible notes 44 76,250 76,294
Issuance of stock in
connection with
investment in Airtours 53 144,118 144,171
Issuance of stock
under stock plans 2 4,431 4,433
Vested portion of
stock under restricted
stock plan 1,545 1,545
Balances at November 30, 1996 2,397 550 819,610 2,207,781 546 3,030,884
Net income 666,050 666,050
Cash dividends (142,618) (142,618)
Changes in securities
valuation allowance 355 355
Foreign currency
translation adjustment 3,592 3,592
Issuance of stock upon
conversion of
convertible notes 23 39,755 39,778
Conversion of Class B
Common Stock into
Class A Common Stock 550 (550)
Issuance of stock
under stock plans 2 6,732 (947) 5,787
Vested portion of
stock under restricted
stock plan 1,270 1,270
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 835,885 835,885
Cash dividends (187,470) (187,470)
Changes in securities
valuation allowance 270 270
Foreign currency
translation adjustment 17,447 17,447
Issuance of stock
under stock plans 11 17,363 (4,651) 12,723
Vested portion of
stock under restricted
stock plan 1,523 1,523
Balances at November 30, 1998 $5,955 $880,488 $3,379,628 $19,405 $4,285,476
</TABLE>
On April 13, 1998, the Board of Directors approved a two-for-one
split of the Company's 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 has been retroactively
restated to give effect to this stock split.
On July 15, 1997, 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, exercised its right to convert all of the
109,914,284 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
shareholders agreement with the Company. Prior to the conversion of the
Class B Common Stock, the B Trust was the controlling shareholder of the
Company.
On April 13, 1998, the Company's shareholders approved amendments to
the Company's Articles of Incorporation which (1) eliminated the Class B
Common Stock and designated a single class of Common Stock, (2) increased
the number of authorized shares of Common Stock to 960 million, and (3)
authorized the Board of Directors, at its discretion, to issue up to 40
million shares of Preferred Stock. The Preferred Stock is issuable in
series which may vary as to certain rights and preferences and has a $.01
par value. At November 30, 1998, no Preferred Stock had been issued.
At November 30, 1998 there were approximately 16.9 million shares of
Common Stock reserved for issuance pursuant to the Company's stock
option, employee stock purchase, management incentive, dividend
reinvestment and restricted stock plans.
During 1998, the Company declared quarterly cash dividends
aggregating $.315 per share. In October 1998, the Board of Directors
increased the quarterly dividends from $.075 per share to $.09 per share.
At November 30, 1998, retained earnings included undistributed
earnings of affiliates (accounted for using the equity method) of
approximately $138 million. At November 30, 1998 and 1997, other
shareholders' equity included cumulative foreign currency translation
adjustments which increased shareholders' equity by $25.2 million and
$7.7 million, respectively.
NOTE 7 - FINANCIAL INSTRUMENTS
The Company estimates the fair market value of financial instruments
through the use of public market prices, quotes from financial
institutions and other available information. Considerable judgment is
required in interpreting data to develop estimates of market value and,
accordingly, amounts are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.
Certain Short-Term Financial Instruments
The carrying amounts of cash, cash equivalents, accrued liabilities
and dividends payable approximate their fair values due to the short-term
maturities of these instruments.
Other Assets
At November 30, 1998, long-term other assets include Patriot Stock
(see Note 4), other marketable securities held in a "Rabbi Trust" for
certain of the Company's non-qualified benefit plans and long-term
receivables. These assets have a carrying value of $48.7 million and have
a fair value of approximately $40 million. Fair value is estimated based
on quoted market prices or expected future discounted cash flows.
Long-term Debt
At November 30, 1998 and 1997, the fair value of the Company's long-
term debt, including the current portion, was approximately $1.647
billion and $1.089 billion, respectively, which was approximately $16
million and $14 million more than the carrying value, respectively. The
fair value of the long-term debt is more than the carrying value due to
the Company's issuance of fixed rate debt obligations at interest rates
above market rates at the measurement dates. The fair value of the
Company's long-term debt is estimated based on the quoted market price
for the same or similar issues or on the applicable year end rates
offered to the Company for debt of similar terms and maturity.
Foreign Currency Contracts
The Company enters into forward foreign currency contracts to reduce
its exposures relating to rate changes in foreign currency. These
contracts are subject to gain or loss from changes in foreign currency
rates, however, any realized gain or loss will be offset by gains or
losses on the underlying hedged foreign currency transactions. Certain
exposures to credit losses related to counterparty nonperformance exist,
however, the Company does not anticipate nonperformance by the
counterparties as they are large, well-established financial
institutions. The fair values of the Company's forward hedging
instruments discussed below are estimated based on prices quoted by
financial institutions for these or similar instruments, adjusted for
maturity differences.
Several of the Company's contracts for the construction of cruise
vessels are denominated in Italian Lira. The Company entered into forward
foreign currency contracts with notional amounts of $745 million and $834
million at November 30, 1998 and 1997, respectively, to fix the price of
these vessels into U.S. dollars (see Note 9). At November 30, 1998 and
1997, these forward contracts had an estimated fair value of
approximately $815 million and $876 million, resulting in gains of $70
million and $41 million, respectively.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company's Chairman of the Board was the indirect majority
shareholder of Carnival Air Lines, Inc. ("Carnival Air"), an airline
which conducted charter services and scheduled carrier services. In
September 1997, Carnival Air was merged with and became a wholly owned
subsidiary of Pan Am Corporation ("Pan Am"). As a result of the merger,
the Company's Chairman of the Board became an indirect shareholder of
approximately 42% of Pan Am. During 1998, Pan Am filed for bankruptcy and
the Company agreed, as part of Pan Am's plan of reorganization and in
exchange for a release of claims, to waive its $1.6 million unsecured
claim for accrued and unpaid licensing fees. Accordingly, the Company
wrote off its receivable from Pan Am in 1998.
The Company's Chairman of the Board is the indirect sole shareholder
of the sole general partner of the partnership ("Partnership") which owns
the Miami Heat, a professional basketball team. During 1998, the Company
entered into a two-year sponsorship agreement with the Partnership under
which the Company agreed to pay an aggregate of approximately $.7 million
in exchange for various advertising and other services.
A director of the Company is employed by an investment banking firm
which was paid approximately $2.7 million in underwriting fees for
assisting the Company in connection with its issuances of long-term debt
during fiscal 1998. Additionally, the Company paid this firm
approximately $2.1 million in underwriting fees in connection with its
public offering of Common Stock in December 1998 (see Note 16).
A director of the Company is a partner in a law firm which acted as
the Company's primary outside counsel and provided services to the
Company in connection with various litigation, corporate and other
matters. The Company paid the law firm $.9 million, $1.1 million and $1.0
million in fiscal 1998, 1997 and 1996, respectively.
The owner of a travel agency located in Seattle, Washington is the
wife of an executive officer and director of the Company. The travel
agency sells cruises and other products and receives a commission based
on the amount of sales. During fiscal 1998, 1997 and 1996, the travel
agency generated revenues for the Company of approximately $11 million,
$8 million and $7 million, respectively, and received commissions from
the Company related to such revenues of approximately $1.7 million, $1.2
million and $1.2 million, respectively.
Pursuant to agreements between the Company, its founder and certain
irrevocable trusts, the beneficiaries of which are the children of the
Company's founder and certain others, the Company has granted certain
registration rights with respect to a substantial portion of their shares
of Common Stock. The Company has agreed to prepare and file with the
Securities and Exchange Commission a registration statement and pay all
expenses relating to such registration, except for these parties' legal
fees and disbursements, selling costs, underwriting discounts and
applicable filing fees.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Capital Expenditures
A description of ships under contract for construction at November
30, 1998 is as follows (in millions, except passenger capacity data):
<TABLE>
<CAPTION>
Expected Estimated Remaining
Service Passenger Total Cost to Be
Vessel Date (1) Shipyard Capacity(2) Cost(3) Paid
<S> <C> <C> <C> <C> <C>
Carnival:
Carnival Triumph 7/99 Fincantieri(4) 2,758 $ 410 $ 299
Carnival Victory 8/00 Fincantieri 2,758 440 434
Newbuild 4/01 Masa-Yards 2,100 375 357
Carnival Conquest 12/02 Fincantieri 2,758 450 429
Carnival Glory 8/03 Fincantieri 2,758 450 429
Total Carnival 13,132 2,125 1,948
Holland America:
Volendam 8/99 Fincantieri(4) 1,440 300 240
Zaandam 3/00 Fincantieri(4) 1,440 300 256
Newbuild 11/00 Fincantieri 1,380 300 55
Total Holland America 4,260 900 551
Total 17,392 $3,025 $2,499
</TABLE>
(1) The expected service date is the date the vessel is expected to
begin revenue generating activities.
(2) In accordance with cruise industry practice, passenger capacity is
calculated based on two passengers per cabin even though some cabins can
accommodate three or four passengers.
(3) Estimated total cost is the total cost of the completed vessel
and includes the contract price with the shipyard, design and
engineering fees, estimated capitalized interest, various owner
supplied items and construction oversight costs.
(4) These construction contracts are denominated in Italian Lira and
have been fixed into U.S. dollars through the utilization of forward
foreign currency contracts (see Note 7).
In connection with the vessels under construction, the Company has
paid $526 million through November 30, 1998 and anticipates paying
approximately $680 million during fiscal 1999 and approximately $1.8
billion thereafter.
Litigation
Several actions (collectively the "Passenger Complaints") have been
filed against Carnival or Holland America Westours on behalf of purported
classes of persons who paid port charges to Carnival or Holland America,
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. These actions are in various stages of progress and
are proceeding.
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.
Five members of the settlement class have appealed the court's approval
of the settlement. The appeal is likely to take between one and two years
to be resolved. Unless the appeal is successful, Holland America 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 will pay a portion of the
plaintiffs' legal fees. The amount and timing of the travel vouchers to
be redeemed and the effects of the travel voucher redemption on revenues
is not reasonably determinable. 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. In 1998 the Company established a liability for the
estimated distribution costs of the settlement notices and plaintiffs'
legal costs.
Several complaints were filed against Carnival and/or Holland
America Westours (collectively the "Travel Agent Complaints") on behalf
of purported classes of travel agencies who had booked a cruise with
Carnival or Holland America, claiming that advertising practices
regarding port charges resulted in an improper commission bypass. These
actions, filed in California, Alabama, Washington and Florida, 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. These
actions are in various stages of progress and are proceeding.
It is not now possible to determine the ultimate outcome of the
pending Passenger and Travel Agent Complaints. 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.
Ship Lease 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 November 30, 1998, total
approximately $300 million. Only in the remote event of nonperformance 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 $22 million (net)
which is recorded as deferred income on the balance sheet and is being
amortized to nonoperating income over 18 years.
Operating Leases
Rent expense for all operating leases, primarily office and
warehouse space, for fiscal 1998, 1997 and 1996 was approximately $10.4
million, $10.6 million and $9.3 million, respectively. At November 30,
1998, minimum annual rentals for all operating leases, with initial or
remaining terms in excess of one year, were as follows (in thousands):
Fiscal
1999 $ 8,280
2000 8,421
2001 6,538
2002 5,281
2003 4,278
Thereafter 26,158
$58,956
Guaranty
At November 30, 1998, the Company has guaranteed approximately $103
million of the debt of Il Ponte that was incurred in connection with the
Company's acquisition of an interest in Costa (see Note 4).
Other
At November 30, 1998, the Company has a commitment through 2013,
cancellable under certain remote circumstances, to pay a minimum amount
for its annual usage of certain port facilities as follows (in
thousands):
Fiscal
1999 $ 6,863
2000 8,853
2001 9,402
2002 9,315
2003 11,548
Thereafter 137,465
$183,446
NOTE 10 - SEGMENT INFORMATION
The Company's cruise segment currently operates twenty-nine
passenger cruise ships and four luxury sailing vessels. Cruise revenues
are comprised of sales of passenger tickets, including, in some cases,
air transportation to and from the cruise ship, and revenues from
on-board activities and other related services. The tour business
represents the operations of Holland America Westours. The corporate
segment is primarily comprised of cash and cash equivalents, goodwill,
and investments, including the Company's investments in and advances to
affiliates and the related earnings from these affiliates. Intersegment
revenues primarily represent charges for the cruise portion of a tour
when a cruise is sold as a part of a tour package. Export sales represent
revenues identified with the Company's domestic operations, which were
generated from outside the U.S. Segment and export sales information for
each of the three years in the period ended November 30, 1998 is as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
REVENUES
Cruise $2,797,856 $2,257,567 $2,003,458
Tour 274,491 242,646 263,356
Intersegment revenues (63,041) (52,745) (54,242)
$3,009,306 $2,447,468 $2,212,572
GROSS OPERATING PROFIT
Cruise $1,338,833 $1,072,758 $ 913,880
Tour 51,096 52,041 57,423
$1,389,929 $1,124,799 $ 971,303
DEPRECIATION AND AMORTIZATION
Cruise $ 189,345 $ 157,454 $ 135,694
Tour 9,491 8,862 8,317
Corporate 1,832 971 976
$ 200,668 $ 167,287 $ 144,987
OPERATING INCOME
Cruise $ 822,242 $ 656,009 $ 535,814
Tour 9,248 13,262 21,252
Corporate 65,034 44,799 40,362
$ 896,524 $ 714,070 $ 597,428
IDENTIFIABLE ASSETS
Cruise $6,149,625 $4,744,140 $4,514,675
Tour 174,140 163,941 150,851
Corporate 855,558 518,694 436,362
$7,179,323 $5,426,775 $5,101,888
CAPITAL EXPENDITURES
Cruise $1,113,191 $ 414,963 $ 841,871
Tour 28,480 42,507 14,964
Corporate 8,742 40,187 1,810
$1,150,413 $ 497,657 $ 858,645
EXPORT SALES $ 342,017 $ 213,405 $ 198,046
</TABLE>
NOTE 11 - BENEFIT PLANS
Stock Option Plans
The Company has stock option plans for certain employees and
directors. The plans are administered by a committee of three directors
of the Company (the "Committee") which determines who is eligible to
participate, the number of shares for which options are to be granted and
the amounts that may be exercised within a specified term. The option
exercise price is generally established by the Committee at 100% of the
fair market value of the Common Stock on the date the option is granted.
Substantially all options granted during 1998, 1997 and 1996 were granted
at an exercise price per share equal to the fair market value of the
Company's Common Stock on the date of grant. Employee options generally
vest evenly over five years and have a ten year term and director's
options vest immediately and have a five year term. Options may be
extended for such periods as may be determined by the Committee but only
for so long as the optionee remains an employee or director of the
Company. At November 30, 1998, options for 5,387,056 shares were
available for future grants. A summary of the status of options in the
stock option plans is as follows:
<TABLE>
<CAPTION>
Weighted
Average Exercise Price Number of Options
Per Share Years Ended November 30,
1998 1997 1996 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Outstanding Options-
Beginning of Year $11.88 $10.38 $10.18 5,502,580 4,871,880 4,949,472
Options Granted $27.34 $19.55 $12.31 1,157,344 858,000 180,000
Options Exercised $10.53 $ 8.83 $ 7.96 (652,350) (222,500) (247,992)
Options Canceled $22.86 $ 8.00 $ 7.05 (20,000) (4,800) (9,600)
Outstanding Options-
End of Year $14.95 $11.88 $10.38 5,987,574 5,502,580 4,871,880
Options Exercisable -
End of Year $10.91 $10.34 $9.84 3,405,630 3,117,380 2,240,680
</TABLE>
Information with respect to stock options outstanding and stock options
exercisable at November 30, 1998 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Average Average Average
Exercise Remaining Exercise Exercise
Price Range Shares Life (Years) Price Shares Price
<S> <C> <C> <C> <C> <C>
$1.94 -$2.25 37,480 -- (1) $2.06 37,480 $2.06
$6.94 -$10.22 682,900 3.8 $7.41 673,300 $7.38
$10.59-$15.00 3,313,550 6.3 $11.29 2,491,950 $11.26
$16.28-$21.91 857,644 8.1 $19.39 202,900 $19.95
$24.94-$26.41 976,000 9.1 $26.40 -- --
$34.91-$41.34 120,000 9.6 $38.00 -- --
Total 5,987,574 6.8 $14.95 3,405,630 $10.91
</TABLE>
(1) These stock options do not have an expiration date.
During fiscal 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123, and pursuant to its provisions
elected to continue using the intrinsic-value method of accounting for
stock-based awards. Accordingly, the Company has not recognized
compensation expense for its noncompensatory stock option awards. The
following table reflects the Company's pro forma net income and earnings
per share for fiscal 1998, 1997 and 1996 had the Company elected to adopt
the fair value approach (which charges earnings for the estimated fair
value of stock options) of SFAS No. 123:
<TABLE>
<CAPTION>
1998 1997 1996
(in thousands, except per share data)
<S> <C> <C> <C>
Net Income:
As reported $835,885 $666,050 $566,302
Pro forma $831,153 $664,324 $565,952
Earnings per share:
As reported:
Basic $1.40 $1.12 $.98
Diluted $1.40 $1.12 $.96
Pro forma:
Basic $1.40 $1.12 $.98
Diluted $1.39 $1.12 $.96
</TABLE>
These pro forma amounts may not be representative of the effect on
pro forma net income in future years, since the estimated fair value of
stock options is amortized over the vesting period, pro forma
compensation expense related to grants made prior to 1996 is not
considered and additional options may be granted in future years.
The weighted average fair values of the Company's options granted
during fiscal 1998, 1997 and 1996 were $7.61, $5.79 and $4.49 per share,
respectively, at the dates of grant. The fair values of options were
estimated using the Black-Scholes option pricing model with the following
weighted average assumptions for fiscal 1998, 1997 and 1996,
respectively; expected dividend yields of 1.62%, 1.78% and 1.78%;
expected volatility of 20.5%, 22.7% and 28.6%; risk free interest rates
of 5.3%, 6.2% and 5.8%; and expected option life of six years for all
periods.
Restricted Stock Plans
The Company has restricted stock plans under which certain key
employees are granted restricted shares of the Company's Common Stock.
Shares are awarded in the name of each of the participants, who have all
the rights of other Common Stock shareholders, subject to certain
restriction and forfeiture provisions. During fiscal 1998 and 1997,
150,000 and 46,574 shares of Common Stock valued at $4.4 million and $.9
million, respectively, were issued. There were no restricted shares
issued during fiscal 1996. Unearned compensation is recorded in other
stockholders' equity at the date of award based on the quoted market
price of the shares on the date of grant. Unearned compensation is
amortized to expense over the vesting period. As of November 30, 1998 and
1997 there were 321,038 shares ($5.3 million) and 237,438 shares ($2.2
million) issued under the plans which remain to be vested (expensed),
respectively.
Management Incentive Plans
Most shoreside managerial employees of Carnival and HAL participate
in management incentive plans. Certain of the participating employees
receive a portion of their incentive compensation award in Common Stock
of the Company, instead of the entire amount being paid in cash. During
fiscal 1998, 1997 and 1996, 61,214, 85,430 and 85,376 shares of Common
Stock with a quoted market value of $1.6 million, $1.3 million and $1.1
million, respectively, were issued under these plans.
Defined Benefit Pension Plans
The Company adopted two defined benefit pension plans (qualified and
non-qualified) effective January 1, 1989 which together covered all
full-time employees of the Company working in the U.S., excluding HAL
employees. Effective January 1, 1998, the Company established two defined
contribution plans, a 401(K)/profit sharing plan and a non-qualified
savings/profit sharing plan, with the intent to largely replace the
defined benefit plans. Accordingly, no further benefits accrue under the
qualified defined benefit plan after December 31, 1997. Effective January
1, 1998, participants in the non-qualified defined benefit plan elected
to either remain in the non-qualified defined benefit plan or participate
in the non-qualified savings/profit sharing plan. Also, during 1998,
Carnival established a non-qualified defined benefit plan for certain of
its shipboard employees.
The Company's funding policy for the qualified defined benefit plan
is to annually contribute at least the minimum amount required under the
applicable labor regulations.
Pension costs for the defined benefit pension plans were $1.9
million, $2.5 million and $2.2 million for fiscal 1998, 1997 and 1996,
respectively. The curtailment of the benefits described above resulted in
a minimal gain in 1998.
Defined Contribution Plans
The Company has various defined contribution plans, including the
two defined contribution plans established January 1, 1998 as described
above, available to substantially all U.S. and Canadian employees and
certain United Kingdom employees. The Company contributes to these plans
based on employee contributions, salary levels and length of service.
Total expense relating to these plans in fiscal 1998, 1997 and 1996 was
$5.3 million, $2.5 million and $2.4 million, respectively.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan, which is authorized
to issue up to 4,000,000 shares of Common Stock to substantially all
employees of Carnival Corporation and its wholly owned subsidiaries. The
purchase price is derived from a formula based on 85% of the fair market
value of the Common Stock during the six-month purchase period, as
defined. During 1998, 1997 and 1996, the Company sold 175,971, 173,776
and 115,856 shares, respectively, at a weighted average share price of
$24.45, $14.52 and $11.08, respectively, under this plan.
NOTE 12 - EARNINGS PER SHARE
Earnings per share amounts have been computed as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
Years Ended November 30,
1998 1997 1996
<S> <C> <C> <C>
BASIC:
Net income $835,885 $666,050 $566,302
Average common shares outstanding 595,037 594,076 579,008
Earnings per share $1.40 $1.12 $.98
DILUTED:
Net income $835,885 $666,050 $566,302
Effect on net income of assumed
issuance of affiliate securities (356) (3,452)
Interest expense related to
convertible notes 38 4,661
Income available assuming dilution $835,885 $665,732 $567,511
Average common shares outstanding 595,037 594,076 579,008
Effect of dilutive securities:
Additional shares issuable upon:
Assumed conversion of
convertible notes 128 11,080
Various stock plans 3,411 2,344 1,352
Average shares outstanding
assuming dilution 598,448 596,548 591,440
Earnings per share $1.40 $1.12 $.96
</TABLE>
NOTE 13 - 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 a working capital deficiency and
debt assumed. 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 combined with Cunard. The Company owns
approximately 68% of the combined 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 (see Notes 2 and 4).
Had the above transactions occurred on December 1, 1996, the
Company's unaudited consolidated revenues for fiscal 1998 and 1997 would
have been approximately $3.23 billion and $2.92 billion, respectively.
The impact on the Company's fiscal 1998 and 1997 unaudited net income and
earnings per share would have been immaterial.
The Company may purchase at any time the 32% minority interest in
Cunard Line Limited for a maximum of approximately 5.4 million shares
(subject to adjustment, as defined) of the Company's Common Stock. If the
Company does not purchase the minority interest, the minority
shareholders, under certain circumstances, can require the Company on May
28, 2001 to purchase their shares for a maximum of approximately 5.4
million shares (subject to adjustment, as defined) of the Company's
Common Stock. Since its issuance, this option to purchase the minority
interest has been antidilutive for earnings per share purposes.
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):
Fair value of Cunard assets $553
Seabourn assets consolidated 191
Debt assumed (157)
Other liabilities assumed (199)
Minority interest (122)
Cash paid for acquisition 266
Other adjustments (14)
252
Cash of acquired companies (9)
Net cash paid as reflected
in the 1998 Statement of Cash Flows $243
NOTE 14 - RECENT PRONOUNCEMENTS
In April 1998, Statement of Position 98-5 - "Reporting on the Costs
of Start-Up Activities" ("SOP 98-5") was issued. SOP 98-5 requires that
all start-up or pre-operating costs be expensed as incurred. In 1998, the
Company adopted SOP 98-5 and, accordingly, expensed $8.7 million of
previously deferred start-up costs. The $8.7 million represents the
cumulative effect from the Company changing this policy, which amount is
included in other nonoperating expenses in the accompanying statements of
operations.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133") was issued. SFAS 133 requires that
all derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives are recorded each period
in current earnings or other comprehensive income depending on whether a
derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999 (December 1,
1999 for the Company). The Company has not yet determined the impact that
the adoption of SFAS 133 will have, but does not currently expect the
adoption to have a material impact on its results of operations or cash
flows.
NOTE 15 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
1998 1997 1996
<S> <C> <C> <C>
(in thousands)
Cash paid during the year for:
Interest (net of amount capitalized) $ 54,572 $ 56,967 $ 68,337
Income taxes $ 5,144 $ 5,755 $ 8,752
Noncash investing and financing activities:
Common Stock issued under various
stock plans $ 5,975 $ 2,247 $ 1,102
Common Stock issued upon conversion
of convertible notes (see Note 6) $ 39,085 $ 76,294
Common Stock issued for acquisition
of an interest in Airtours (see Note 4) $144,171
Conversion of Class B Common Stock
into Class A Common Stock $ 550
Sale of Rotterdam V $ 31,208
</TABLE>
NOTE 16 - SUBSEQUENT EVENT
In December 1998, the Company sold 17 million shares of its Common
Stock in a public offering. Net proceeds to the Company from the offering
totaled approximately $725 million.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Carnival Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations and of cash flows present
fairly, in all material respects, the financial position of Carnival
Corporation and its subsidiaries at November 30, 1998 and 1997, and the
results of their operations and their cash flows for each of the three
years in the period ended November 30, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Miami, Florida
January 25, 1999
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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, bar sales, gift shop sales and other
related services. The Company also derives revenues from the tour and
related operations of Holland America Westours.
For selected segment and export sales information related to the
Company's revenues, gross operating profit, operating income and other
financial information, see Note 10 in the accompanying financial
statements. Operations data expressed as a percentage of total revenues
and selected statistical information for the periods indicated is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
1998 1997 1996
<S> <C> <C> <C>
REVENUES 100% 100% 100%
COSTS AND EXPENSES:
Operating expenses 54 54 56
Selling and administrative 12 12 12
Depreciation and amortization 7 7 7
OPERATING INCOME BEFORE INCOME
FROM AFFILIATED OPERATIONS 27 27 25
INCOME FROM AFFILIATED OPERATIONS, NET 3 2 2
OPERATING INCOME 30 29 27
NONOPERATING EXPENSE (2) (2) (1)
NET INCOME 28% 27% 26%
SELECTED STATISTICAL INFORMATION
(in thousands):
Passengers carried 2,045 1,945 1,764
Passenger cruise days (1) 13,009 11,908 10,583
Occupancy percentage 106.3% 108.3% 107.6%
</TABLE>
(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.
GENERAL
The growth in the Company's revenues during the last three fiscal
years has primarily been a function of the expansion of its fleet
capacity and, additionally in 1998, its ability to obtain significantly
higher net yields than in previous years.
Fixed costs, including depreciation, fuel, insurance and crew costs,
represent more than one-third of the Company's operating expenses and do
not change significantly in relation to changes in passenger loads and
aggregate passenger ticket revenue.
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 greater during the summer months. The Company's tour
revenues are extremely seasonal with a majority of tour revenues
generated during the late spring and summer months in conjunction with
the Alaska cruise season.
The year over year percentage increase in average passenger capacity
for the Company's cruise brands, excluding the impact of the acquisition
and consolidation of Cunard and Seabourn, is expected to be 13.7% during
fiscal 1999 as compared to fiscal 1998. This increase is primarily a
result of the introduction into service of Carnival's Elation in March
1998 and Paradise in late November 1998, the expected introduction into
service of the Carnival Triumph in July 1999 and Holland America's
Volendam in August 1999 and the introduction into service of Windstar's
Wind Surf in May 1998. Including the impact of Cunard and Seabourn,
average passenger capacity is expected to increase 18.5% in fiscal 1999
as compared to fiscal 1998. The acquisition and consolidation of Cunard
and Seabourn is not expected to materially affect the Company's
consolidated net income in 1999.
The year over year percentage increase in average passenger
capacity, excluding the impact of Cunard and Seabourn, resulting from the
delivery of vessels currently under contract for construction for the
fiscal years 2000 and 2001 is expected to approximate 12.9% and 11.9%,
respectively. Including the impact of Cunard and Seabourn, the year over
year increase in average passenger capacity for fiscal 2000 and 2001 is
expected to approximate 11.7% and 10.9%, respectively.
In June 1997, the Company and Airtours, a publicly traded leisure
travel company in which the Company holds a 26% interest, each acquired a
50% interest in Il Ponte, the parent company of Costa, an Italian cruise
company. The Company records its interest in Airtours and Il Ponte using
the equity method of accounting and records its portion of Airtours' and
Il Ponte's consolidated operating results on a two-month lag basis.
Demand for Airtours' and Costa's products is seasonal due to the nature
of the European leisure travel industry and European 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.
Fiscal 1998 Compared To Fiscal 1997
Revenues
The increase in total revenues of $561.8 million, or 23.0%, was due
primarily to an increase in cruise revenues of $540.3 million, or 23.9%.
Approximately $281.9 million of the cruise revenue increase is due to the
acquisition and consolidation of Cunard and Seabourn and $258.4 million
is due to increased cruise revenues from Carnival, Holland America and
Windstar. The increase from Carnival, Holland America and Windstar
resulted from an increase of approximately 7.0% in total revenue per
passenger cruise day and a 4.8% increase in passenger capacity, offset
slightly by a .6% 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's new
Rotterdam VI in November 1997, which has obtained higher pricing.
Passenger capacity increased due to the addition of new vessels discussed
previously partially offset by the Ecstasy being out of service for two
months during 1998 (see Nonoperating Income (Expense)). Tour revenues
increased $31.8 million, or 13.1% to $274.5 million in 1998 from $242.6
million in 1997 due primarily to an increase in the number of tours sold.
Cost and Expenses
Operating expenses increased $296.7 million, or 22.4%. Cruise
operating costs increased by $274.2 million, or 23.1% in 1998.
Approximately $177.5 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
cruise revenues were 50.9% and 52.5% in 1998 and 1997, respectively.
Cruise operating costs, excluding Cunard and Seabourn, increased
primarily as a result of increases in passenger capacity and airfare
costs, 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. Tour operating expenses
increased $32.8 million, or 17.2% 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 $72.9 million, or
24.6%, of which $46.8 million, or 15.8%, was due to the acquisition and
consolidation of Cunard and Seabourn. Excluding Cunard and Seabourn,
selling and administrative expenses as a percentage of revenues were
11.8% and 12.1% in 1998 and 1997, respectively. Selling and
administrative expenses, excluding Cunard and Seabourn, increased
primarily as a result of increases in advertising and payroll and related
costs.
Depreciation and amortization increased by $33.4 million, or 20.0%,
to $200.7 million in 1998 from $167.3 million in 1997 primarily due to
the additional depreciation associated with the increase in the size of
the fleet and the acquisition and consolidation of Cunard and Seabourn.
Affiliated Operations
During 1998, the Company recorded $76.7 million of income from
affiliated operations as compared with $53.1 million of income in 1997.
The Company's portion of Airtours' income increased $3.7 million to $39.4
million in 1998. The Company recorded income of $39.9 million and $15.5
million during 1998 and 1997, respectively, related to its interest in Il
Ponte. The Company did not record earnings from its investment in Il
Ponte in the first nine months of 1997 since Il Ponte was acquired in
June 1997 and its consolidated operating results are recorded on a two-
month lag basis. The affiliated operations for 1998 includes Seabourn
through May 28, 1998 after which its results are included in the
Company's consolidated results.
Nonoperating Income (Expense)
Gross interest expense (excluding capitalized interest) increased
$20.2 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 $18.3 million due primarily to higher levels of
investments in ship construction projects during fiscal 1998 as compared
with fiscal 1997.
Included in other income in 1998 were gains of $8.4 and $14.8
million resulting from the closing of the sale of CHC's hotel management
division and Airtours' issuances of its common stock, respectively. In
the event that Airtours issues additional common stock in the future, the
Company may recognize gains or losses related to these future issuances.
Additionally, other expense includes $8.7 million of previously deferred
start-up costs, which were expensed in 1998 and represent the cumulative
effect from the Company changing its policy in connection with its early
adoption of SOP 98-5 (see Notes 4 and 14 in the accompanying financial
statements).
In July 1998, a fire occurred on the mooring deck on Carnival Cruise
Lines' 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 approximately two months during 1998. The Ecstasy fire
resulted in a reduction in earnings of approximately $19.3 million in
1998. This reduction was comprised of lost revenue, net of related
variable expenses, of $12.0 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 $11.1 million which represents the minority
shareholders' interest in Cunard Line Limited's net income since its
acquisition and consolidation by the Company on May 28, 1998.
Fiscal 1997 Compared To Fiscal 1996
Revenues
The increase in total revenues of $234.9 million, or 10.6%, was due
primarily to an increase in cruise revenues of $254.1 million, or 12.7%,
from 1996 to 1997, which was partially offset by a decrease in tour
revenues. The increase in cruise revenues was primarily the result of an
11.7% increase in passenger capacity for the period resulting from the
addition of Carnival's cruise ships Inspiration and Carnival Destiny in
March and November 1996, respectively, and Holland America's cruise ships
Veendam and Rotterdam VI in May 1996 and November 1997. The passenger
capacity increase resulting from the introduction of new vessels was
partially reduced by the removal from service from Carnival's fleet of
the Festivale in April 1996 and Holland America's Rotterdam V in
September 1997.
Occupancy rates in fiscal 1997 were up .7% and gross revenue per
passenger cruise day was up .1% resulting in an increase of .9% in gross
yield (total revenue per lower berth).
Revenues from the Company's tour operations decreased $20.7 million,
or 7.9%, to $242.6 million in 1997 from $263.4 million in 1996. The
decrease was primarily the result of a decrease in the tour and
transportation revenues due to a reduction in the number of tour
passengers.
Costs and Expenses
Operating expenses increased $81.4 million, or 6.6%, from 1996 to
1997. Cruise operating costs increased by $95.2 million, or 8.7%, to
$1,184.8 million in 1997 from $1,089.6 million in 1996, primarily due to
additional costs associated with the increased passenger capacity in
1997. Tour operating expenses decreased $15.3 million, or 7.4%, from 1996
to 1997 primarily due to the decrease in tour passengers.
Selling and administrative costs increased $21.7 million, or 7.9%,
primarily due to an increase in payroll and related costs associated with
the increase in passenger capacity during 1997 as compared with 1996.
Depreciation and amortization increased by $22.3 million, or 15.4%,
to $167.3 million in 1997 from $145.0 million in 1996 primarily due to
the addition of the Inspiration, the Carnival Destiny and the Veendam.
Affiliated Operations
Approximately $35.7 million of income from affiliated operations in
1997 was attributable to the Company's 28% interest in Airtours. The
Company acquired its equity interest in Airtours in April 1996 and
recorded its share of Airtours' earnings on a two-month lag basis. During
1996, the Company's share of earnings for Airtours was recorded for
Airtours' six months ended September 30, 1996, which also amounted to
$35.7 million. Airtours' operations are seasonal and historically have
resulted in losses for the first half of its fiscal year. Had the Company
recorded its equity in Airtours' earnings for Airtours' entire fiscal
year ended September 30, 1996, the Company's share of Airtours' earnings
would have been $22.2 million instead of the $35.7 million recorded by
the Company in 1996.
In June 1997 the Company acquired an approximate 50% interest in Il
Ponte. The Company recorded its share of Il Ponte's earnings on a two-
month lag basis. During 1997, the Company's share of earnings from Il
Ponte, amounting to $15.5 million, was recorded for Il Ponte's three
months ended September 30, 1997.
See the "General" section for a discussion of Airtours' and Costa's
seasonality. See Note 4 in the accompanying financial statements for more
information regarding the Company's equity investments.
Nonoperating Income (Expense)
Interest income decreased $9.9 million in 1997 primarily due to a
decrease in cash equivalent balances and notes receivable. During 1996,
the Company was holding 13% senior secured notes (which were redeemed in
April 1996) of Norwegian Cruise Line, Ltd. and, to a lesser degree,
increased cash balances. Gross interest expense (excluding capitalized
interest) decreased $17.1 million in 1997 as a result of reduced debt
balances. Capitalized interest decreased $9.0 million due primarily to
lower levels of investments in ship construction projects during fiscal
1997 as compared with fiscal 1996.
Other income in fiscal 1997 of $5.4 million represents the net
effect of the recognition of the remaining deferred gain from the sale of
Carnival's Festivale, less a loss from the sale of Holland America's
Rotterdam V, and certain other miscellaneous gains and losses. Other
income amounted to $23.4 million in 1996 primarily as a result of a $32.0
million gain from settlement of bankruptcy claims against the Wartsila
shipyard less a loss of $15.8 million on the sale of notes receivable
generated from the sale of Carnival's Crystal Palace Hotel and Casino.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash
The Company's business provided $1.1 billion of net cash from
operations during fiscal 1998, an increase of 24.4% compared to fiscal
1997. The increase was primarily due to higher net income.
In January 1998, the Company completed an offering of $200 million
of 6.65% Debentures Due January 15, 2028. Additionally, 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.
During fiscal 1998, the Company had net borrowings of $80.1 million under
its commercial paper programs.
Uses of Cash
During fiscal 1998, the Company made net expenditures of
approximately $1.15 billion on capital projects, of which $1.04 billion
was spent in connection with its ongoing shipbuilding program. The
shipbuilding expenditures included the final payments on Carnival's
Elation and Paradise, which were delivered to the Company in late
February and October, respectively, the acquisition of Windstar's Wind
Surf, which went into service in May 1998 and the payment of
approximately $232 million for the Holland America Newbuild scheduled to
enter service in November 2000. The nonshipbuilding capital expenditures
consisted primarily of improvements to a private island in the Caribbean
(Holland America began to use the island during the first quarter of 1998
as a destination for certain of its itineraries), transportation
equipment, vessel refurbishments, tour assets and other equipment.
The Company paid $266 million related to the acquisition of Cunard
(see Note 13 in the accompanying financial statements).
The Company made scheduled principal payments totaling approximately
$63.4 million under various individual vessel mortgage loans during
fiscal 1998. In March 1998, the Company paid at maturity $200 million due
on the 5.75% Notes Due March 15, 1998. Additionally, the Company paid
cash dividends of $178.5 million in fiscal 1998.
Future Commitments
The Company has contracts for the delivery of eight new vessels over
the next five years. The Company will pay approximately $680 million
during fiscal 1999 relating to the construction and delivery of these new
ships and approximately $1.8 billion thereafter.
In addition to these ship construction contracts, the Company has
options to construct two additional vessels for Carnival for expected
service in 2002, if the options are exercised. The Company is also in
negotiations with several shipbuilding yards for a new class of vessel
for Holland America and is in the initial planning phase of a new ocean
liner for Cunard. No assurance can be given that the two options for
Carnival will be exercised, the negotiations for the Holland America
vessel will be successful or that the new Cunard shipbuilding project
will be continued.
At November 30, 1998, the Company had $1.63 billion of long-term
debt of which $67.6 million is due in fiscal 1999. See Notes 5 and 9 in
the accompanying financial statements for more information regarding the
Company's debts and commitments.
Funding Sources
In December 1998, the Company issued 17 million shares of its Common
Stock and received net proceeds of approximately $725 million. The
Company issued this stock concurrent with the addition of the Company's
Common Stock to the S&P 500 Composite Index. A portion of the proceeds
from the offering was used to repay $153 million of the Company's
outstanding commercial paper and the remainder was invested in short-term
investments. These remaining funds are available to the Company for
general corporate purposes, which may include repayment of indebtedness,
financing of capital commitments under its shipbuilding program and
possible future acquisitions to expand its business.
At December 31, 1998, the Company had approximately $650 million in
cash, cash equivalents and short-term investments. These funds along with
cash from operations are expected to be the Company's principal source of
capital to fund its debt service requirements and ship construction
costs. Additionally, the Company may also fund a portion of these cash
requirements from borrowings under its revolving credit facilities or
commercial paper programs. At December 31, 1998, the Company had
approximately $1.1 billion available for borrowing under its revolving
credit facilities.
To the extent that the Company is required to or chooses to fund
future cash requirements from sources other than as discussed above,
management 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.
OTHER MATTERS
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.
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 information technology ("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, safety, 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 remediated and tested.
All of the Company's reservations systems have been remediated, tested
and are in production. Remediation and integration testing of other
critical shoreside software and hardware applications, including
purchased software, are estimated to be completed by July 1999. However,
ongoing certification testing of remediated systems that corroborates
prior test results and corroborates integration of remediated items with
related hardware and operating systems will occur throughout 1999.
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 March 1999. 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 are expected to be tested
and fully implemented on ships by 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. Prior to mid 1999, the
Company expects to implement additional procedures for assessing the Year
2000 compliance status of its most critical vendors and will modify its
contingency plans accordingly.
Risks of Company's Year 2000 Issues
The Company is in the process of preparing 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 government 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 in the process of preparing its contingency plans to
identify and determine how to handle its most reasonably likely worst
case scenarios. Preliminary contingency plans are currently being
drafted. Comprehensive contingency plans are estimated to be complete by
mid 1999.
Costs
The Company does not expect that 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.
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 November 30, 1998 was
approximately $8 million, of which $4 million has been charged to expense
and $4 million has been capitalized. 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.
Market Risks
The Company is principally exposed to market risks from fluctuations
in interest rates, foreign currency exchange rates and equity prices. The
Company seeks to minimize these risks through its regular operating and
financing activities, its long-term investment strategy and, when
considered appropriate, through the use of derivative financial
instruments. The Company's policy is to not use financial instruments for
trading or other speculative purposes.
In order to limit its exposure to interest rate fluctuations, the
Company has entered into fixed rate debt instruments for the majority of
its long-term debt. The Company's primary foreign currency exchange risk
relates to its outstanding obligations under its foreign currency
denominated shipbuilding contracts. The Company manages this risk through
the use of foreign currency forward contracts (see Notes 2 and 7 in the
accompanying financial statements).
Additionally, the Company's investments in foreign affiliates
subjects it to foreign currency exchange rate and equity price risks.
Management considers its investments in foreign affiliates to be
denominated in relatively stable currencies and of a long-term nature
and, accordingly, does not typically manage its related foreign currency
exchange rate and equity price risks through the use of financial
instruments.
Other market risk exposures to the Company relate to food and fuel
commodity prices and the selling of certain of its cruises and incurring
certain cruise-related expenses in foreign currencies. The Company does
not typically manage these risks through the use of financial
instruments. However, the Company does not expect changes in food and
fuel commodity prices and foreign currency denominated cruise revenue and
expenses to materially affect its operating results.
Exposure to Interest Rates
At November 30, 1998, the Company's long-term debt had a carrying
value of $1.631 billion. The fair value of this debt at November 30, 1998
was $1.647 billion. Based upon a hypothetical 10% decrease or increase in
the period end market interest rate, the fair value of this liability
would increase or decrease by approximately $46 million.
This hypothetical amount is determined by considering the impact of
the hypothetical interest rates on the Company's existing debt. This
analysis does not consider the effects of the changes in the level of
overall economic activity that could exist in such environments.
Furthermore, since substantially all of the Company's fixed rate debt
cannot be prepaid, it is most likely management would be unable to take
any significant steps to mitigate its exposure in the event of a
significant decrease in market interest rates.
Exposure to Exchange Rates
As a result of the Company having outstanding obligations under ship
construction contracts denominated in a foreign currency, it is affected
by fluctuations in the value of the U.S. dollar as compared to certain
European currencies. Foreign currency forward contracts are used to hedge
against this risk. Accordingly, increases and decreases in the fair value
of these foreign currency forward contracts are offset by changes in the
U.S. dollar value of the net underlying foreign currency denominated ship
construction obligations.
At November 30, 1998, the Company's foreign currency forward
contracts which hedge its shipbuilding activities had notional amounts
and maturity dates of $539 million in 1999 and $206 million in 2000. The
fair value of these contracts was $815 million at November 30, 1998.
Based upon a 10% strengthening or weakening of the U.S. dollar compared
to the Euro, the estimated fair value of these contracts would decrease
or increase by $82 million which would be offset by a decrease or
increase of $82 million in the U.S. dollar value of the related foreign
currency ship construction obligations.
The cost of shipbuilding orders which the Company may place in the
future may be affected by foreign currency exchange rate fluctuations.
Should the U.S. dollar weaken relative to the Euro, future orders for new
ship construction in certain European shipyards may be at higher prices.
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below for the fiscal years
1994 through 1998 and as of the end of each such fiscal year are derived
from the financial statements of the Company and should be read in
conjunction with such financial statements and the related notes.
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $3,009,306 $2,447,468 $2,212,572 $1,998,150 $1,806,016
Operating income
before income from
affiliated operations $ 819,792 $ 660,979 $ 551,461 $ 490,038 $ 443,674
Operating income $ 896,524 $ 714,070 $ 597,428 $ 490,038 $ 443,674
Net income $ 835,885 $ 666,050 $ 566,302 $ 451,091 $ 381,765
Earnings per share (1):
Basic $1.40 $1.12 $.98 $.79 $.68
Diluted $1.40 $1.12 $.96 $.79 $.67
Dividends declared
per share (1) $.315 $.240 $.190 $.158 $.142
Passenger cruise days 13,009 11,908 10,583 9,201 8,102
Occupancy percentage (2) 106.3% 108.3% 107.6% 105.0% 104.0%
AS OF NOVEMBER 30,
1998 1997 1996 1995 1994
(in thousands)
BALANCE SHEET DATA:
Total assets $7,179,323 $5,426,775 $5,101,888 $4,105,487 $3,669,823
Long-term debt and
convertible notes $1,563,014 $1,015,294 $1,316,632 $1,150,031 $1,161,904
Total shareholders'
equity $4,285,476 $3,605,098 $3,030,884 $2,344,873 $1,928,934
</TABLE>
----------------------------------
(1) All per share amounts have been adjusted to reflect two-for-one
stock splits effective November 30, 1994 and June 12, 1998.
(2) In accordance with cruise industry practice, occupancy percentage
is calculated based upon two passengers per cabin even though some
cabins can accommodate three or four passengers. The percentages in
excess of 100% indicate that more than two passengers occupied some
cabins.
<PAGE>
MARKET PRICE FOR COMMON STOCK
The following table sets forth for the periods indicated the high
and low Common Stock sales prices, as adjusted for the June 12, 1998
two-for-one stock split, on the New York Stock Exchange:
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
Fiscal Year ended November 30, 1998:
First Quarter $29.500 $24.938
Second Quarter $38.250 $29.531
Third Quarter $42.625 $28.438
Fourth Quarter $35.438 $19.000
Fiscal Year ended November 30, 1997:
First Quarter $18.375 $14.875
Second Quarter $19.750 $17.063
Third Quarter $22.625 $18.813
Fourth Quarter $27.125 $21.844
</TABLE>
As of January 18, 1999, there were approximately 4,540 holders of
record of the Company's Common Stock. While no tax treaty currently
exists between the Republic of Panama and the United States, under
current law, the Company believes that distributions to its
shareholders are not subject to taxation under the laws of the Republic
of Panama.
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA (unaudited)
Quarterly financial results for fiscal 1998 are as follows:
<TABLE>
<CAPTION>
QUARTERS ENDED
FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $557,838 $661,358 $1,061,539 $728,571
Gross profit $250,243 $299,002 $ 521,196 $319,488
Operating income before
income from affiliated
operations $128,401 $167,794 $ 365,007 $158,590
Operating income $117,720 $165,441 $ 378,849 $234,514
Net income $109,914 $160,596 $ 344,752 $220,623
Earnings per share (1):
Basic $.18 $.27 $.58 $.37
Diluted $.18 $.27 $.58 $.37
Dividends declared per share (1) $.075 $.075 $.075 $.09
</TABLE>
Quarterly financial results for fiscal 1997 are as follows:
<TABLE>
<CAPTION>
QUARTERS ENDED
FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $521,082 $596,614 $805,421 $524,351
Gross profit $224,144 $258,930 $417,301 $224,424
Operating income before
income from affiliated
operations $103,944 $140,253 $308,590 $108,192
Operating income $ 94,962 $137,541 $318,961 $162,606
Net income $ 85,360 $127,447 $297,893 $155,350
Earnings per share (1):
Basic $.14 $.21 $.50 $.26
Diluted $.14 $.21 $.50 $.26
Dividends declared per share (1) $.055 $.055 $.055 $.075
</TABLE>
(1) Adjusted for the June 12, 1998 two-for-one stock split.
FORWARD-LOOKING STATEMENTS
Certain statements in the Shareholders' Letter and under the
headings "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere in this Annual Report 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, performances or achievements of the Company to be
materially different from any future results, performances 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; 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; computer program Year 2000 compliance; and changes in
laws and regulations applicable to the Company.
EXHIBIT 21
LIST OF SUBSIDIARIES AND AFFILIATES OF CARNIVAL CORPORATION
<TABLE>
<CAPTION>
Jurisdiction of Incorporation
Name of Subsidiary or Organization
<S> <C> <C>
(15) Airtours plc (26% interest) United Kingdom
(9) Alaska Overland, Inc. Alaska
(5) Alaska Travel Center, Inc. Washington
(8) Anchorage Hotel Associates, Inc. (90% interest) Alaska
Carnival Investments Limited Bahamas
Carnival (UK) plc United Kingdom
Celebration Cruises Inc. Liberia
(11) Costa Crociere S.p.A. Italy
CRC Holdings, Inc. (23.18% interest) Florida
Crowne Plaza Holdings, Inc. Florida
(10) Cunard Line Limited (68.3% interest) Bahamas
(13) Cunard White Star Limited Bermuda
(5) Evergreen Trails, Inc. Washington
Futura Cruises Inc. Panama
Gemward Limited Ireland
Golden Falcon International S.A. Panama
HAL Antillen N.V. Netherlands Antilles
(1) HAL Beheer B.V. Netherlands
(1) HAL Buitenland B.V. Netherlands
(1) HAL Cruises Limited Bahamas
(1) HAL Properties Limited Bahamas
(1) HAL Services B.V. Holland
(1) HAL Shipping Limited British Virgin Islands
(3) Holland America Line Inc. Delaware
(1) Holland America Line N.V. Netherlands Antilles
(4) Holland America Line-Westours Inc. Washington
(3)(14)Il Ponte S.p.A. (50.0% interest) Italy
Jubilee Cruises Inc. Liberia
(5) Leisure Corporation Alaska
(12) SeaVacations Limited United Kingdom
SeaVacations UK Limited United Kingdom
(6) Trailways Tours, Inc. Washington
Trident Insurance Company Limited Bermuda
Utopia Cruises Inc. Panama
(1) West Coast Cruise Limited British Virgin Islands
(5)(7) Westmark Hotels of Canada Limited Canada
(5) Westmark Hotels, Inc. Alaska
(8) Westmark Kodiak Inc. Alaska
(8) Westmark Third Avenue Inc. Alaska
(5) Westours Motor Coaches, Inc. Alaska
(5) White Pass & Yukon Motorcoaches Inc. Alaska
(2) Wind Spirit Limited Bahamas
(2) Wind Star Limited Bahamas
(1) Wind Surf Limited Bahamas
(1) Windstar Sail Cruises Limited Bahamas
(1) Worldwide Shore Services Inc. Washington
____________
(1) Subsidiary of HAL Antillen N.V.
(2) Subsidiary of Windstar Sail Cruises Limited
(3) Subsidiary of HAL Buitenland B.V.
(4) Subsidiary of Holland America Line Inc.
(5) Subsidiary of Holland America Line-Westours Inc.
(6) Subsidiary of Evergreen Trails, Inc.
(7) Holland America Line-Westours Inc. owns all of the common stock and
noncumulative redeemable preferred stock, while Westmark Hotels,
Inc. owns all of the redeemable preferred Class B stock and the
redeemable preferred Class C stock
(8) Subsidiary of Westmark Hotels, Inc.
(9) Subsidiary of Westours Motor Coaches, Inc.
(10) Subsidiary of Carnival Investments Limited
(11) Subsidiary of Il Ponte S.p.A.
(12) Subsidiary of SeaVacations UK Limited
(13) Subsidiary of Cunard Line Limited
(14) Owned 50% by Airtours plc
(15) Airtours plc is an affiliate of Carnival (UK) plc
</TABLE>
EXHIBIT 23
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements on Forms S-
3 (No. 33-63563, No. 333-43269 and No. 333-68999) and Registration Statements
on Forms S-8 (No. 33-45287, No. 33-45288, No. 33-51195, No. 33-53099 and No.
333-43885) of Carnival Corporation of our report dated January 25, 1999
appearing on page 34 of the Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K.
/S/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
February 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
<CASH> 137,273
<SECURITIES> 5,956
<RECEIVABLES> 60,837
<ALLOWANCES> 0
<INVENTORY> 75,449
<CURRENT-ASSETS> 370,279
<PP&E> 6,820,413
<DEPRECIATION> 1,052,299
<TOTAL-ASSETS> 7,179,323
<CURRENT-LIABILITIES> 1,135,113
<BONDS> 1,563,014
<COMMON> 5,955
0
0
<OTHER-SE> 4,279,521
<TOTAL-LIABILITY-AND-EQUITY> 7,179,323
<SALES> 0
<TOTAL-REVENUES> 3,009,306
<CGS> 0
<TOTAL-COSTS> 1,619,377
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,772
<INCOME-PRETAX> 850,802
<INCOME-TAX> 3,815
<INCOME-CONTINUING> 835,885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 835,885
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
</TABLE>
