FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 1-9610
CARNIVAL CORPORATION
(Exact name of registrant as specified in its charter)
Republic of Panama 59-1562976
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3655 N.W. 87th Avenue, Miami, Florida 33178-2428
(Address of principal executive offices) (Zip code)
(305) 599-2600
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No__
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date.
Common Stock, $.01 par value - 613,174,060 shares as of
April 9, 1999.
<PAGE>
CARNIVAL CORPORATION
I N D E X
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets -
February 28, 1999 and November 30, 1998
Consolidated Statements of Operations -
Three Months Ended February 28, 1999
and February 28, 1998
Consolidated Statements of Cash Flows -
Three Months Ended February 28, 1999
and February 28, 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
<TABLE>
<CAPTION>
February 28, November 30,
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 574,254 $ 137,273
Short-term investments 216,993 5,956
Accounts receivable, net 72,947 60,837
Consumable inventories, at average cost 77,626 75,449
Prepaid expenses and other 94,968 90,764
Total current assets 1,036,788 370,279
PROPERTY AND EQUIPMENT, NET 5,764,498 5,768,114
INVESTMENTS IN AND ADVANCES TO AFFILIATES 534,413 546,693
GOODWILL, LESS ACCUMULATED AMORTIZATION OF
$75,548 AND $72,255 434,171 437,464
OTHER ASSETS 60,615 56,773
$7,830,485 $7,179,323
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 66,702 $ 67,626
Accounts payable 156,612 168,546
Accrued liabilities 203,886 206,968
Customer deposits 655,944 638,383
Dividends payable 55,174 53,590
Total current liabilities 1,138,318 1,135,113
LONG-TERM DEBT 1,355,569 1,563,014
DEFERRED INCOME AND OTHER LONG-TERM LIABILITIES 88,910 63,036
COMMITMENTS AND CONTINGENCIES (Note 5)
MINORITY INTEREST 133,786 132,684
SHAREHOLDERS' EQUITY
Common Stock; $.01 par value; 960,000 shares
authorized; 613,045 and 595,448 shares
issued and outstanding 6,130 5,955
Paid-in-capital 1,617,781 880,488
Retained earnings 3,482,215 3,379,628
Other 7,776 19,405
Total shareholders' equity 5,113,902 4,285,476
$7,830,485 $7,179,323
</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>
Three Months Ended February 28,
1999 1998
<S> <C> <C>
REVENUES $748,258 $557,838
COSTS AND EXPENSES
Operating expenses 416,103 307,595
Selling and administrative 110,770 78,834
Depreciation and amortization 57,904 43,008
584,777 429,437
OPERATING INCOME BEFORE
LOSS FROM AFFILIATED
OPERATIONS 163,481 128,401
LOSS FROM AFFILIATED
OPERATIONS, NET (5,917) (10,681)
OPERATING INCOME 157,564 117,720
NONOPERATING INCOME (EXPENSE)
Interest income 6,887 3,737
Interest expense, net of
capitalized interest (13,390) (12,559)
Other income (expense), net 2,996 (3,271)
Income tax benefit 4,806 4,287
Minority interest (1,102) -
197 (7,806)
NET INCOME $157,761 $109,914
EARNINGS PER SHARE:
Basic $.26 $.18
Diluted $.26 $.18
</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>
Three Months Ended February 28,
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES
Net income $157,761 $109,914
Adjustments
Depreciation and amortization 57,904 43,008
Dividends received and loss from
affiliated operations, net 5,917 21,231
Minority interest 1,102
Other 2,172 5,083
Changes in operating assets and liabilities
Increase in:
Receivables (12,333) (5,143)
Consumable inventories (2,177) (1,056)
Prepaid expenses and other (4,222) (11,639)
Increase (decrease) in:
Accounts payable (11,934) (7,308)
Accrued liabilities (2,958) (2,320)
Customer deposits 17,561 62,393
Net cash provided from operating
activities 208,793 214,163
INVESTING ACTIVITIES
(Increase) decrease in short-term
investments, net (210,686) 20
Additions to property and equipment, net (50,977) (361,739)
Other, net 21,167 74
Net cash used for investing activities (240,496) (361,645)
FINANCING ACTIVITIES
Proceeds from long-term debt 5,861 313,158
Principal payments of long-term debt (214,282) (147,407)
Proceeds from issuance of Common Stock, net 730,812 2,385
Dividends paid (53,590) (44,578)
Other (117) (1,993)
Net cash provided from
financing activities 468,684 121,565
Net increase (decrease) in cash and
cash equivalents 436,981 (25,917)
Cash and cash equivalents at beginning
of period 137,273 139,989
Cash and cash equivalents at end of period $574,254 $114,072
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
CARNIVAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS FOR PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The financial statements included herein have been prepared
by Carnival Corporation, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission.
The accompanying consolidated balance sheet at February 28,
1999 and the consolidated statements of operations for the three
months ended February 28, 1999 and 1998 and consolidated
statements of cash flows for the three months ended February 28,
1999 and 1998 are unaudited and, in the opinion of management,
contain all adjustments, consisting of only normal recurring
accruals, necessary for a fair presentation. The operations of
Carnival Corporation and its consolidated subsidiaries (referred
to collectively as the "Company") and its affiliates are seasonal
and results for interim periods are not necessarily indicative of
the results for the entire year. Certain amounts in prior periods
have been reclassified to conform with the current period's
presentation.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<Caption
February 28, November 30,
1999 1998
(in thousands)
<S> <C> <C>
Vessels $5,761,324 $5,754,218
Vessels under construction 543,448 526,529
6,304,772 6,280,747
Land, buildings and improvements 222,775 217,597
Transportation and other equipment 342,024 322,069
Total property and equipment 6,869,571 6,820,413
Less accumulated depreciation and
amortization (1,105,073) (1,052,299)
$5,764,498 $5,768,114
</TABLE>
During the three months ended February 28, 1999 and 1998,
interest costs of $10.4 million and $6.4 million, respectively,
were capitalized.
<PAGE>
NOTE 3 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<Caption
February 28, November 30,
1999 1998
(in thousands)
<S> <C> <C>
Commercial paper $ 161,309 $ 368,710
Unsecured 5.65% Notes Due October 15, 2000 199,855 199,833
Unsecured 6.15% Notes Due April 15, 2008 199,525 199,512
Unsecured 6.65% Debentures due January 15, 2028 199,255 199,249
Notes payable bearing interest at rates ranging
from 5.1% to 8.0%, secured by vessels,
maturing through 2009 172,058 174,198
Unsecured 6.15% Notes Due October 1, 2003 124,968 124,967
Unsecured 7.20% Debentures Due October 1, 2023 124,882 124,881
Unsecured 7.7% Notes Due July 15, 2004 99,939 99,936
Unsecured 7.05% Notes Due May 15, 2005 99,876 99,871
Other loans payable 40,604 39,483
1,422,271 1,630,640
Less portion due within one year (66,702) (67,626)
$1,355,569 $1,563,014
</TABLE>
NOTE 4 - SHAREHOLDERS' EQUITY
In December 1998, Carnival Corporation issued 17 million
shares of its Common Stock in a public offering and received net
proceeds of approximately $725 million. A portion of the proceeds
from the offering was used to repay $153 million of outstanding
commercial paper and the remainder has been invested in cash
equivalents and short-term investments.
Carnival Corporation's Certificate of Incorporation, as
amended, authorizes 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 February 28, 1999,
no Preferred Stock had been issued.
During the three months ended February 28, 1999 and 1998,
the Company declared a quarterly cash dividend of $.09 and $.075
per share aggregating $55,174 and $44,608, respectively.
<PAGE>
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Capital Expenditures
A description of ships under contract for construction at
February 28, 1999 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 Cruise Lines
Carnival Triumph 7/99 Fincantieri(4) 2,758 $ 410 $ 294
Carnival Victory 8/00 Fincantieri 2,758 440 433
Carnival Spirit 4/01 Masa-Yards 2,100 375 356
Carnival Conquest 12/02 Fincantieri 2,758 450 429
Carnival Glory 8/03 Fincantieri 2,758 450 429
Total Carnival Cruise Lines 13,132 2,125 1,941
Holland America Line
Volendam 8/99 Fincantieri(4) 1,440 300 238
Zaandam 3/00 Fincantieri(4) 1,440 300 255
Amsterdam 11/00 Fincantieri 1,380 300 51
Total Holland America Line 4,260 900 544
Total 17,392 $3,025 $2,485
</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.
In connection with the vessels under construction, the
Company has paid $540 million through February 28, 1999 and
anticipates paying approximately $890 million during the twelve
month period ending February 29, 2000 and approximately $1.6
billion thereafter.
Litigation
Several actions (collectively the "Passenger Complaints")
have been filed against Carnival Cruise Lines ("Carnival") or
Holland America Westours on behalf of purported classes of
persons who paid port charges to Carnival or Holland America Line
("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 has 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.
<PAGE>
Ship Lease Transactions
During August and December 1998, the Company entered into
lease out and lease back transactions with respect to two of its
vessels. The Company has effectively guaranteed certain
obligations or provided letters of credit to participants in the
transactions which, at February 28, 1999, total approximately
$327 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 approximately 18 years,
the Company has the right to exercise purchase options that would
terminate these transactions. As a result of these transactions,
the Company received approximately $44 million (net) which is
recorded as deferred income on the balance sheets and is being
amortized to nonoperating income over approximately 18 years.
NOTE 6 - EARNINGS PER SHARE
Earnings per share have been computed as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended February 28,
1999 1998
<S> <C> <C>
BASIC:
Net income $157,761 $109,914
Average common shares outstanding 608,940 594,734
Earnings per share $ .26 $ .18
DILUTED:
Net income $157,761 $109,914
Effect on net income of assumed
purchase of minority interest 1,102
Net income available assuming dilution $158,863 $109,914
Average common shares outstanding 608,940 594,734
Effect of dilutive securities:
Additional shares issuable upon:
Assumed exercise of Cunard
Line Limited's minority
shareholders purchase option 5,439
Various stock plans 3,881 3,078
Average common shares outstanding
assuming dilution 618,260 597,812
Earnings per share $ .26 $ .18
</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 have
been retroactively restated to give effect to this stock split.
<PAGE>
NOTE 7 - COMPREHENSIVE INCOME
Effective December 1, 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes standards for the
reporting and disclosure of comprehensive income and its
components. Comprehensive income is a measure that reflects all
changes in shareholders' equity, except those resulting from
transactions with shareholders. For the Company, comprehensive
income includes net income and foreign currency translation
adjustments and changes in the value of equity securities that
have not been included in net income. For the three months ended
February 28, 1999 and 1998, comprehensive income was $150.6
million and $112.5 million, respectively.
NOTE 8 - 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.
Had the above transactions occurred on December 1, 1997, the
Company's unaudited consolidated revenues for the three months
ended February 28, 1998 would have been approximately $664
million. The impact on the Company's three months ended February
28, 1998 unaudited net income and earnings per share would have
been immaterial.
NOTE 9 - RECENT PRONOUNCEMENTS
In June 1998, SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" was issued. SFAS No. 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 No. 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 No. 133 will
have, but does not currently expect the adoption to have a
material impact on its results of operations or cash flows.
<PAGE>
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Certain statements under this caption, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations", constitute "forward-looking statements" under the
Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). See "Part II. OTHER INFORMATION, ITEM 5 (a) Forward-
Looking Statements".
General
The Company earns its cruise revenues primarily from (i) the
sale of passenger tickets, which includes accommodations, meals,
and most shipboard activities, (ii) the sale of air
transportation to and from the cruise ship and (iii) the sale of
goods and services on board its cruise ships, such as casino
gaming, bar sales, gift shop sales and other related services.
The Company also derives revenues from the tour and related
operations of Holland America Westours.
Selected segment and statistical information for the periods
indicated is as follows:
<TABLE>
<CAPTION>
Three Months Ended February 28,
1999 1998
(in thousands, except selected statistical information)
<S> <C> <C>
REVENUES:
Cruise $741,076 $550,977
Tour 7,504 7,039
Intersegment revenues (322) (178)
$748,258 $557,838
OPERATING EXPENSES:
Cruise $407,066 $298,770
Tour 9,359 9,003
Intersegment expenses (322) (178)
$416,103 $307,595
OPERATING INCOME:
Cruise $180,434 $142,424
Tour (11,898) (10,521)
Loss from affiliates, net, and
corporate expenses (10,972) (14,183)
$157,564 $117,720
SELECTED STATISTICAL INFORMATION:
Passengers carried 517,000 427,000
Passenger cruise days (1) 3,505,000 2,827,000
Occupancy percentage 100.9% 105.9%
(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.
</TABLE>
Operations data expressed as a percentage of total revenues
for the periods indicated is as follows:
<TABLE>
<CAPTION>
Three Months Ended February 28,
1999 1998
<S> <C> <C>
REVENUES 100% 100%
COSTS AND EXPENSES:
Operating expenses 55 55
Selling and administrative 15 14
Depreciation and amortization 8 8
OPERATING INCOME BEFORE
LOSS FROM AFFILIATED
OPERATIONS 22 23
LOSS FROM AFFILIATED
OPERATIONS, NET (1) (2)
OPERATING INCOME 21 21
NONOPERATING EXPENSE - (1)
NET INCOME 21% 20%
</TABLE>
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 approximate 6.5%, 12.1% and 19.1% in the second,
third and fourth quarters of fiscal 1999, respectively, as
compared to the same periods of fiscal 1998. These increases are
primarily a result of the introduction into service of Carnival's
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 Cruises ("Windstar") Wind Surf in May 1998.
Including the impact of Cunard and Seabourn, average passenger
capacity is expected to increase 17.8%, 10.7% and 16.1% in the
second, third and fourth quarters of fiscal 1999, respectively,
as compared to the same periods of 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.
The Company and Airtours plc ("Airtours"), a publicly traded
leisure travel company in which the Company holds a 26% interest,
each own a 50% interest in Il Ponte S.p.A. ("Il Ponte"), the
parent company of Costa Crociere, S.p.A. ("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.
As a result of the recent military conflict in Yugoslavia,
the Company is currently experiencing a slow down in its cruise
booking patterns on its Eastern Mediterranean cruise itineraries
and, to a lesser extent, also for its Western Mediterranean
cruise itineraries. As a consequence of the conflict, the Company
has changed the itineraries of certain of its Eastern
Mediterranean cruises. Due to the uncertainties surrounding the
current situation, management is unable to determine the possible
impact of these events on the Company's results of operations for
fiscal 1999. The Company has approximately 5% of its consolidated
fiscal 1999 passenger capacity scheduled to operate in either the
Eastern or Western Mediterranean. Additionally, the Company's
unconsolidated affiliate, Costa also has itineraries scheduled
for the Eastern and Western Mediterranean. Management believes
that any effects of this unusual and infrequent event on the
Company's operations will be temporary and should not result in
any long term adverse effects.
Three Months Ended February 28, 1999 ("1999") Compared
To Three Months Ended February 28, 1998 ("1998")
Revenues
The increase in total revenues of $190.4 million, or 34.1%,
was almost entirely due to an increase in cruise revenues.
Approximately $104.5 million of the increase is due to the
acquisition and consolidation of Cunard and Seabourn and $85.6
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
16.9% in passenger capacity and a .5% increase in total revenue
per passenger cruise day, offset slightly by a 1.6% decrease in
occupancy rates. Passenger capacity increased due primarily to
the addition of the new vessels previously discussed and
Carnival's Elation in March 1998.
Cost and Expenses
Operating expenses increased $108.5 million, or 35.3%.
Cruise operating costs increased by $108.3 million, or 36.2% in
1999. Approximately $72.4 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 52.6% and 54.2% in
1999 and 1998, respectively. Cruise operating costs, excluding
Cunard and Seabourn, increased $35.9 million primarily as a
result of increases in passenger capacity, partially offset by
lower fuel costs.
Selling and administrative expenses increased $31.9 million,
or 40.5%, of which $19.9 million, or 25.2%, 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 14.1% in 1999 and 1998. 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 $14.9 million, or
34.6%, to $57.9 million in 1999 from $43.0 million in 1998
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 1999, the Company recorded $5.9 million of losses
from affiliated operations as compared with $10.7 million of
losses in 1998. The Company's portion of Airtours' losses
increased $.4 million to $8.5 million in 1999. The Company
recorded income (losses) of $2.6 million and $(.9) million during
1999 and 1998, respectively, related to its interest in Il Ponte.
The affiliated operations for 1998 includes Seabourn.
Nonoperating Income (Expense)
Gross interest expense (excluding capitalized interest)
increased $4.8 million in 1999 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 $4.0 million
due primarily to higher levels of investments in ship
construction projects during 1999 as compared with 1998.
Interest income increased $3.2 million in 1999 primarily as
a result of higher average investment balances resulting from the
investment of proceeds received by the Company upon the sale of
its Common Stock in December 1998 (see Note 4 in the accompanying
financial statements).
Other income in 1999 of $3 million primarily relates to the
Company's collection of insurance proceeds compared to other
expenses in 1998 of $3.3 million primarily related to the accrual
of certain litigation costs.
Minority interest was $1.1 million which represents the
minority shareholders' interest in Cunard Line Limited's net
income.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash
The Company's business provided $208.8 million of net cash
from operations during fiscal 1999, a decrease of 2.5% compared
to 1998. The decrease was primarily due to changes in cash
payments and receipts relating to operating assets and
liabilities substantially offset by higher net income.
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.
Uses of Cash
During 1999, the Company made net expenditures of
approximately $51.0 million on capital projects, of which $17.5
million was spent in connection with its ongoing shipbuilding
program. The nonshipbuilding capital expenditures consisted
primarily of computer equipment, vessel refurbishments, tour
assets and other equipment.
During 1999, the Company had net repayments of $207.4
million under its commercial paper programs, including $153
million funded from the proceeds of its Common Stock offering.
Additionally, the Company paid quarterly cash dividends of $53.6
million in 1999.
Future Commitments
The Company has contracts for the delivery of eight new
vessels over the next five years. The Company will pay
approximately $890 million during the twelve months ending
February 29, 2000 relating to the construction and delivery of
these new ships and approximately $1.6 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 February 28, 1999, the Company had $1.42 billion of long-
term debt of which $66.7 million is due during the twelve months
ended February 29, 2000. See Notes 3 and 5 in the accompanying
financial statements for more information regarding the Company's
debts and commitments.
Funding Sources
At February 28, 1999, the Company had approximately $791.2
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 February 28, 1999, the Company had
approximately $1.07 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 debt
and/or equity securities in the public or private markets.
OTHER MATTER
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 May 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 February 28, 1999 was approximately
$9 million, of which $5 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.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
Several actions collectively referred to as the "Passenger
Complaints" were previously reported in the Company's Annual
Report on Form 10-K for the year ended November 30, 1998 (the
"1998 Form 10-K"). The following are material subsequent
developments in such cases.
In the action filed against Carnival in Florida in 1996 by
Michelle Hackbarth, Larry Katz, Michelle A. Sutton, Pedro Rene
Mier, and others, on behalf of purported nationwide classes, the
court denied the plaintiffs' motion for class certification on
March 8, 1999.
Several actions collectively referred to as the "Travel
Agent Complaints" were previously reported in the 1998 Form 10-K
and the following are the material subsequent developments in
such cases.
In the action filed against Holland America Westours in
Washington in September 1997 by N.G.L. Travel Associates, on
behalf of a purported nationwide class of travel agencies who
booked cruises with Holland America Westours, the court denied
both parties requests for reconsideration of the summary judgment
rulings. Holland America Westours has asked the Court of Appeals
to take discretionary review of the court's orders regarding
summary judgment and class certification. The Court of Appeals
will not decide whether to take review until at least May 1999.
For a description of other pending litigation, see the 1998
Form 10-K and Note 5 in Part I of this Form 10-Q.
Item 5. Other Information.
(a) FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q and in the future
filings by the Company with the Securities and Exchange
Commission, in the Company's press releases, and in oral
statements made by or with the approval of an authorized
executive officer constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors, which may cause the
actual results, 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, including the effects on consumer demand of armed
conflicts or political instability; 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 HAL Antillen N.V. and Subsidiaries Key Management Incentive Plan.
10.2 Note Extension and Satisfaction Agreement, dated February 17, 1999,
between Carnival Corporation, Sherwood Weiser and others.
10.3 Stock Purchase Agreement, dated February 17, 1999, between
Carnival Corporation, Sherwood Weiser and others.
10.4 Shareholders' Agreement, dated June 30, 1998, between
Carnival Corporation, Sherwood Weiser and others.
12 Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
On December 17, 1998, the Company filed a Current Report on
Form 8-K related to its December 17, 1998 press release
announcing the results of operations for the fiscal year ended
November 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CARNIVAL CORPORATION
Date: April 12, 1999 BY/s/ Howard S. Frank
Howard S. Frank
Vice Chairman of the Board of
Directors and Chief
Operating Officer
Date: April 12, 1999 BY/s/ Gerald R. Cahill
Gerald R. Cahill
Senior Vice President-Finance
and Chief Financial and
Accounting Officer
<PAGE>
INDEX TO EXHIBITS
Page No. in
Sequential
Numbering
System
Exhibits
10.1 HAL Antillen N.V. and Subsidiaries Key Management Incentive Plan.
10.2 Note Extension and Satisfaction Agreement, dated February 17, 1999,
between Carnival Corporation, Sherwood Weiser and others.
10.3 Stock Purchase Agreement, dated February 17, 1999, between
Carnival Corporation, Sherwood Weiser and others.
10.4 Shareholders' Agreement, dated June 30, 1998, between
Carnival Corporation, Sherwood Weiser and others.
12 Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule (for SEC use only).
EXHIBIT 10.1
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.
In computing Net Income, there shall be disregarded the financial
results of Il Ponte SpA and Carnival Investments Limited.
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. Amounts to be received in
cases of eligible retirement, death or disability are specified
under Method of Calculating Share Values and Payment below.
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 for all participants shall be
variable. 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 2.4%. The dollar value of each Share will equal an
amount computed by: (i) taking an amount equal to the Plan
Percentage of the Net Income; and (ii) dividing that amount by
the total number of 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, 1999 would
be subject to a restriction on sale that would not end until the
first trading day in January, 2001). 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.
99-A/MIPPLAN.99
1/25/99
EXHIBIT 10.2
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, (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 and (iii) extend the
Shareholders' put option, as set forth in the Stock Purchase
Agreement, in conformity with the extension of the maturity of
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. Extension of Shareholders' Put Option. In
conformity with the extension of maturity of the CCL Notes under
Section 1 above, CCL hereby agrees effective as of the date
hereof, to extend the period for the exercise of the
Shareholders' put option with respect to the shares pledged as
collateral for the CCL Notes, as set forth in the Stock Purchase
Agreement, 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 6.0(b)(i) of the Merger Agreement.
4. 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."
5. 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.
6. 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.
7. 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 perfor
mance 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.
8. 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.
9. 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.
10. 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 10.3
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of the 17th
day of February, 1999, is entered into by and among the
shareholders of CRC Holdings, Inc., a Florida corporation
("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 (a) Series A Redeemable
Convertible Preferred Stock, par value $.01 per share, of Wyndham
International, Inc. (the "OpCo Series A Preferred") and (b)
Series B Redeemable Convertible Preferred Stock, par value $.01
per share, of Wyndham International, Inc. (the "OpCo Series B
Preferred"), as set forth opposite such Shareholder's name on
Schedule A (the aggregate amount of shares of OpCo Series A
Preferred and OpCo Series B Preferred owned by the Shareholders,
the "Preferred Shares");
WHEREAS, the Preferred Shares are currently pledged to
CCL pursuant to the terms of those certain Security and Pledge
Agreements, dated as of November 30, 1994, as amended
(collectively and together with any other related instruments or
agreements, the "Pledge Agreements") 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 principal
amount plus accrued and unpaid interest in respect of such
Shareholder's CCL Note);
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 of certain
assets and liabilities of CRC as described in the Merger
Agreement and the transactions contemplated by the Satisfaction
Agreement (as hereinafter defined), CRC will be merged (the
"Merger") with and into Jackpot;
WHEREAS, in connection with the execution of the
Merger Agreement, the parties to this Agreement entered into that
certain Note Extension and Satisfaction Agreement, dated as of
the date hereof (the "Satisfaction Agreement"), pursuant to
which, among other things (a) the Shareholders agreed to repay
the CCL Notes upon consummation of the Merger and (b) CCL agreed
to extend the maturity of the CCL Notes.
WHEREAS, in order to facilitate the repayment of a
portion of the CCL Notes prior to the consummation of the Merger,
the Shareholders desire to sell, transfer and assign all of the
Preferred Shares together with all dividends thereon and CCL
desires to purchase and acquire all of the Preferred Shares
together with all dividends thereon upon the terms and conditions
and subject to the provisions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual
premises contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Purchase and Sale of Shares.
(a) Subject to the terms and conditions of this
Agreement, each Shareholder agrees to sell, transfer and assign
to CCL the Preferred Shares and CCL agrees to purchase from the
Shareholders the Preferred Shares.
(b) CCL shall at the Closing release the Preferred
Shares from the lien of the Pledge Agreements and the
Shareholders shall simultaneously deliver to CCL or one of its
affiliates the certificates representing the Preferred Shares
purchased hereunder together with executed stock powers in a form
sufficient to convey to CCL or one of its affiliates good and
valid title to the Preferred Shares free and clear of all, liens,
charges, security interests, options, rights, encumbrances and
claims of any kind or nature whatsoever, along with all right,
title and interest in and to all accrued and unpaid dividends on
the Shares, including all of the securities received with respect
to the Preferred Shares from the stock dividend declared on
December 22, 1998 (the "Dividend Shares" and together with the
Preferred Shares, the "Shares"). Schedule A sets forth the
number of Dividend Shares owned by each Shareholder and to be
transferred to CCL hereunder. The Shareholders shall at the
Closing deliver irrevocable transfer instructions to the Wyndham
International, Inc. ("Wyndham") transfer agent which direct such
transfer agent to deliver certificates representing the Dividend
Shares to CCL.
2. Purchase Price; Closing.
(a) The aggregate purchase price (the "Purchase
Price") for the Shares shall be an amount equal to the product of
(x) 838,896 (representing the number of Preferred Shares) and (y)
$5.625 (representing the closing trading price of one share of
common stock of Patriot American Hospitality, Inc. ("Patriot")
and one share of common stock of Wyndham paired and transferrable
only in combination as a single unit on February 12, 1999, as
reported on the New York Stock Exchange). The Purchase Price
shall be paid upon the Closing as a reduction in the amounts
owing under the CCL Notes with such reduction first being applied
to all accrued but unpaid interest on such notes and all
remaining proceeds being applied to a reduction in the principal
amounts owing under such notes and interest shall thereupon cease
to accrue on such amounts. The CCL Notes shall be further
reduced in the aggregate amount of $369,114 upon receipt by CCL
of the certificates representing the Dividend Shares. After such
reduction, the CCL Notes shall thereby represent the principal
amounts owing to CCL as set forth on Schedule B.
(b) The closing of the transactions contemplated
hereby (the "Closing") shall take place immediately following the
execution of this Agreement at the offices of CRC Holdings, Inc.,
3250 Mary Street, Miami, FL 33133, or at such other place as the
parties may materially agree upon.
3. Shareholders' Representations and Warranties. In order
to induce CCL to enter into this Agreement, each Shareholder
severally (but not jointly) represents and warrants to CCL as
follows:
(a) Such Shareholder is of legal age and competence
and has full power and authority to execute and deliver this
Agreement, and when fully executed and delivered, this Agreement
will constitute a legal, valid and binding obligation of the
Shareholder enforceable in accordance with its terms.
(b) The Preferred Shares set forth opposite such
Shareholder's name on Schedule A hereto and the Dividend Shares
set forth opposite such Shareholder's name on Schedule A hereto
are owned by such Shareholder free and clear of any and all
liens, charges, security interests, options, rights, encumbrances
and claims of any kind or nature whatsoever, other than the liens
under the Pledge Agreements, and the sale, transfer and
assignment of such Shares, will be made free and clear of all
liens, charges, security interests, options, rights, encumbrances
and claims of any kind or nature whatsoever. The Dividend Shares
constitute all dividends paid or payable with respect to the
Preferred Shares, other than the dividends previously delivered
to CCL. Other than (i) the Pledge Agreements, (ii) that certain
Series A and Series B Preferred Stock Lockup Agreement, dated
June 30, 1998, by and among the Shareholders, CCL, Patriot and
Wyndham and (iii) the Rights of First Offer with respect to the
Shares provided in the Certificate of Designations, Preferences
and Rights of A Series of Preferred Stock of Wyndham, there are
no voting trusts, voting agreements, lockup agreements, buy-sell
agreements or similar understandings applicable to such Shares.
(c) The execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and the
fulfillment of the terms and provisions hereof does not and will
not constitute a default or conflict with, any material
agreement, indenture or other instrument to which the Shareholder
is bound, any judgment, decree, order or award of any court,
government body or arbitrator to which the Shareholder is
subject, any law, rule or regulation applicable to the
Shareholder, any charter documents relating to the Shares or the
Lockup Agreement.
(d) The Shareholder hereby recognizes and
acknowledges that the Purchase Price has been reached as a result
of arms-length negotiations among the Shareholders and CCL and
that the Purchase Price is no indication of the actual market
value of the Shares.
4. CCL's Representations and Warranties. In order to
induce the Shareholders to enter into this Agreement, CCL
represents and warrants the following:
(a) CCL has full power and authority to execute and
deliver this Agreement, and when fully executed and delivered,
this Agreement will constitute a legal, valid and binding
obligation of CCL enforceable in accordance with its terms.
(b) The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and the
fulfillment of the terms or provisions hereof does not and will
not constitute a default or conflict with, any material
agreement, indenture or other instrument to which CCL is bound,
any judgment, decree, order or award of any court, government
body or arbitrator to which CCL is subject, or any law, rule or
regulation applicable to CCL.
(c) CCL has such knowledge and experience in
business matters and it is capable of evaluating and has
evaluated the merits and risks of the purchase of the Shares.
(d) CCL hereby recognizes and acknowledges that the
Purchase Price has been reached as a result of arms-length
negotiations among the Shareholders and CCL and that the Purchase
Price is no indication of the actual market value of the Shares.
(e) CCL understands and acknowledges that the sale
and transfer of the Shares pursuant to this Agreement have not
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any other applicable securities laws, the
Shares are being sold and transferred to CCL in a transaction not
requiring registration under the Securities Act, and the Shares
may not be offered, sold or otherwise transferred by CCL except
in compliance with the registration requirements of the
Securities Act or any other applicable securities laws or
pursuant to an exemption thereunder. The Shares which CCL is
acquiring will be acquired solely for the account of CCL and are
not being purchased with a view to effecting a public
distribution within the meaning of the federal securities laws.
(f) CCL is not relying on any representations or
warranties, explicit or implied, from any party (including any
Shareholder) in connection with the matters set forth in this
Agreement, other than the express representations and warranties
included in Section 3 hereof. CCL has had access to such
financial and other information concerning Wyndham, Patriot and
the Shares as it has deemed necessary in connection with its
decision to purchase the Shares, including an opportunity to ask
questions of and request information from the Shareholders,
Patriot and Wyndham. CCL acknowledges that one Shareholder is a
director of Wyndham (the "Director Shareholder") and CCL further
acknowledges that no information relating to Wyndham or Patriot
shall be attributed to any Shareholder (including the Director
Shareholder) based on any knowledge or information that may have
come to the attention of the Director Shareholder in his capacity
as a member of the Board of Directors of Wyndham. CCL hereby
waives and releases the Shareholders from any and all claims,
whether known or unknown, relating to the value of the Shares or
the Purchase Price. Notwithstanding the foregoing, CCL does not
waive or release the Shareholders from any and all claims,
whether known or unknown, arising from a breach of any
representation or warranty of any Shareholder contained herein.
(g) CCL is an institutional "accredited investor"
within the meaning of subparagraph (a)(1), (2), (3), or (7) of
Rule 501 under the Securities Act. CCL is aware that it may be
required to bear the economic risk of an investment in the Shares
for an indefinite period of time and CCL is able to bear such
risk for an indefinite period.
5. Further Assurances. The parties will, upon reasonable
request, execute and deliver all such further assignments,
endorsements and other documents as may be necessary in order to
perfect the purchase by CCL of the Shares.
6. Entire Agreement; No Oral Modification. This Agreement
contains the entire agreement among the parties hereto with
respect to the purchase and sale of the Shares and supersedes all
prior agreements and understandings with respect thereto and may
not be amended or modified except in a writing signed by all of
the parties hereto.
7. Binding Effect; Benefits. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and
their respective heirs, successors and assigns; however, nothing
in this Agreement, expressed or implied, is intended to confer
any benefit on any other person other than the parties hereto,
the affiliate of CCL, if any, designated to take title to the
Shares or their respective heirs, successors or assigns.
8. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and
the same instrument.
9. Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with the laws of the
United States and the State of Florida, both substantive and
remedial. Exclusive venue and jurisdiction for any action
arising hereunder shall lie in the competent court of
jurisdiction located in Dade County, Florida, and the parties
specifically agree to submit to such jurisdiction and waive any
objections to such venue.
10. Headings. The section headings herein are included
for convenience only and are not to be deemed a part of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
SHAREHOLDERS:
/s/ Sherwood Weiser
SHERWOOD WEISER
/s/ Donald Lefton
DONALD LEFTON
/s/ Thomas F. Hewitt
THOMAS F. HEWITT
/s/ Peter L. Sibley
PETER L. SIBLEY
/s/ Robert Sturges
ROBERT STURGES
/s/ W. Peter Temling
W. PETER TEMLING
CARNIVAL CORPORATION:
By: /s/ Gerald R. Cahill
Name: Gerald R. Cahill
Title: Sr. Vice President-Finance
and CFO
SCHEDULE A
Number of Number of
Name of Shareholder Preferred Shares Dividend Shares
Sherwood Weiser 276,176 20,253
Donald Lefton 276,176 20,253
Thomas Hewitt 102,337 7,505
Peter Sibley 102,337 7,505
Robert Sturges 40,935 3,002
W. Peter Temling 40,935 3,002
TOTAL: 838,896 61,519
SCHEDULE B
Principal
Principal and Outstanding Under
Accrued Interest the CCL Notes
Name of Shareholder Prior to Sale of Immediately
Shares Following Sale of
Shares
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
W. Peter Temling 984,406 736,136
EXHIBIT 10.4
SHAREHOLDERS' AGREEMENT
(CRC Holdings, Inc.)
THIS SHAREHOLDERS' AGREEMENT (the "Agreement") dated as of
this 30th day of June, 1998, by and between Carnival Corporation,
a Panamanian corporation ("CCL"); and Sherwood M. Weiser, Donald
E. Lefton, Thomas F. Hewitt, Peter L. Sibley, CHC Investors
Partners, L.P., a Delaware limited partnership, Robert Sturges,
W. Peter Temling, Irving Zeldman, Douglas J. Weiser, Warren P.
Weiser, Bradley A. Weiser, Robyn C. Fisher, and Lisa Tabatchnick
(collectively the "W-L Shareholders" and individually a "W-L
Shareholder")
RECITALS
A. CCL and the W-L Shareholders are the sole shareholders of
CRC Holdings, Inc., a Florida corporation (the "Company"), and as
of the effective date of this Agreement own the number of shares
of the issued and outstanding capital stock of the Company in the
percentages set forth in Exhibit A attached hereto. CCL and the
W-L Shareholders may sometimes hereafter be collectively referred
to as the "Shareholders" or individually as "Shareholder."
B. The Shareholders desire to enter into this Agreement
pursuant to Section 607.0731 of the Florida Business Corporation
Act, for the purpose of providing (1) that so long as CCL and/or
its "Covered Transferees" (as such term is defined in Section 1
of this Agreement) and any of the W-L Shareholders and/or their
Covered Transferees own shares of the common stock of the
Company,. they will vote their shares of the capital stock of the
Company for the election of certain directors designated by CCL
and certain directors designated by the W-L Shareholders (all as
herein set forth) and for certain directors jointly agreed to by
CCL and the W-L Shareholders and (2) for the harmonious and
successful management and control of the Company.
AGREEMENT
In consideration of the premises and of the benefits flowing
to the parties hereto and to the Company, by virtue of the
Agreements herein set forth CCL and the W-L Shareholders agree as
follows:
1. Covered Transferees. As used in this Agreement, the
term "Covered Transferees" shall mean (a) CCL and the W-L
Shareholders, (b) the parents, siblings, spouse or lineal
descendants of any individual Shareholder or Covered Transferee,
(c) a trust for the benefit of such Covered Transferees (provided
that the voting rights with respect to shares of capital stock of
the Company owned by any such trust are retained only by the
transferor or a Covered Transferee), (d) an "Affiliate", (as such
term is defined in Rule 144 promulgated under the Securities Act
of 1933, as amended) of CCL or any W-L Shareholder or Covered
Transferee or (e) in the case of CCL, any member of a "group"
which at the time of transfer of shares of capital stock of the
Company by CCL owns 5% or more of the issued and outstanding
shares of common stock of CCL and has filed a Schedule 13D or 13G
with respect to such 5% or more ownership.
2. Articles of Incorporation and Bylaws. None of the
Shareholders or their Covered Transferees shall vote their shares
or execute a written consent for the amendment of the Articles
Incorporation or Bylaws of the Company unless the holders of a
majority of the shares of capital stock of the Company owned by
each of CCL and its Covered Transferees and the W-L Shareholders
and their Covered Transferees first execute and deliver to the
other Shareholders and their Covered Transferees a written
statement that they are in favor of the adoption of the
amendment. If both such statements are delivered at least ten
days prior to the date of the meeting at which the shareholders
of the Company will vote on such amendment, then all Shareholders
and their Covered Transferees shall vote their shares of the
capital stock of the Company for the proposed amendment. In the
event of any conflict between the provisions of this Agreement
and the Articles of Incorporation and/or Bylaws of the Company,
as among the Shareholders and their Covered Transferees, the
provisions of this Agreement shall take precedence.
3. Directors.
3.1. At each election of directors of the Company, CCL and
the W-L Shareholders and their respective Covered Transferees
shall vote their shares of the capital stock of the Company to
elect as directors of the Company (a) two persons designated in
writing by the holders of a majority of the shares of capital
stock of the Company owned by CCL and its Covered Transferees;
(b) subject to the provisions of the next sentence, at least two
persons designated in writing by the holders of a majority of the
shares of capital stock of the Company owned by the W-L
Shareholders and their Covered Transferee(s); and (c) only such
other persons (the "Independent Directors") as are first agreed
to in writing by the holders of a majority of the shares of the
capital stock of the Company owned by each of CCL and its Covered
Transferees and the W-L Shareholders and their Covered
Transferees. Notwithstanding the foregoing, in the event that
pursuant to clause (b) of the preceding sentence, the W-L
Shareholders and their Covered Transferees designate three, four,
five or six persons and all of such designees consist solely of
more than two of Sherwood M. Weiser, Donald E. Lefton, Thomas F.
Hewitt, Peter Sibley, Robert Sturges and W. Peter Temling, CCL
and its Covered Transferees and the W-L Shareholders and their
Covered Transferees shall vote their shares of the capital stock
of the Company to elect all of such persons so designated by the
W-L Shareholders as directors pursuant to said clause (b). In
the event that the holders of a majority of the shares of the
capital stock of the Company owned by each of CCL and its Covered
Transferees and the W-L Shareholders and their Covered
Transferees cannot agree on one or more persons to vote for as
Independent Directors, they shall submit such disagreement to
those of the Independent Directors then in office who are not
employees of the Company or any of its subsidiaries and shall
then vote their shares of capital stock of the Company for such
nominees as are chosen by such Independent Directors, provided
that without the consent of the majority in interest of both CCL
and its Covered Transferees and the W-L Shareholders and their
Covered Transferees the number of Independent Directors shall not
be increased beyond the number of Independent Directors
hereinafter designated in this Agreement.
3.2. Initially, CCL designates pursuant to clause (a) of
Section 3.1, Micky Arison and Howard S. Frank as directors and
the W-L Shareholders designate pursuant to clause (b) of Section
3.1, Sherwood M. Weiser, Donald E. Lefton, Thomas F. Hewitt,
Peter Sibley, Robert Sturges and W. Peter Temling as directors
and CCL and the W-L Shareholders agree, pursuant to clause (c) of
Section 3.1, that Meryl Comer and Earl W. Powell shall serve as
Independent Directors.
3.3. No Shareholder or his or her Covered Transferees shall
vote to remove a director designated pursuant to clauses (a) or
(b) of Section 3.1 unless the designating Shareholder(s) and
their Covered Transferees give written notice to the other
Shareholders and their Covered Transferees that the designating
Shareholders and their Covered Transferees want that director
removed. No Shareholder or his or her Covered Transferee shall
vote to remove an Independent Director unless such removal is
first agreed to in writing by the holders of a majority of the
shares of capital stock of the Company owned by each of CCL and
its Covered Transferees and the W-L Shareholders and their
Covered Transferees. In any such event, all of the Shareholders
and their Covered Transferees shall vote their shares of the
capital stock of the Company to remove such Independent Director.
In the event of the death, resignation or removal of a director
designated by one or more Shareholders and their Covered
Transferees pursuant to clauses (a) or (b) of Section 3.1, the
Shareholders and their Covered Transferees shall vote their
shares of the capital stock of the Company to elect as a
replacement director a person designated by the Shareholder(s)
and Covered Transferees who originally designated the deceased,
resigned or removed person as a director of the Company. In the
event of the death, resignation or removal of an Independent
Director, the Shareholders and their Covered Transferees shall
vote their shares of capital stock of the Company pursuant to
clause (c) of Section 3.1 for the election of a replacement.
4. Share Certificates. All transfers of shares of capital
stock of the Company to Covered Transferees shall be subject to
all of the terms, conditions and provisions of this Agreement.
All certificates representing shares of the capital stock of the
Company held by Shareholders and Covered Transferees shall be
endorsed with the following legend:
The Shares represented by this certificate are subject
to the terms and conditions of a Shareholders'
Agreement dated as of __________, 1998 which Agreement,
among other things, contains various provisions with
respect to the manner in which the Shares are to be
voted.
All Shareholders who presently hold certificates evidencing
their ownership of shares of the capital stock of the Company
shall, as soon as reasonably possible after the execution of this
Shareholders' Agreement deliver their certificates to the
Secretary of the Company, who will then add the aforedescribed
legend to such certificates and who will return such certificates
forthwith to the respective shareholders.
In connection with the transfer of shares of the capital
stock of the Company by a Shareholder or a Covered Transferee to
a Covered Transferee, the transferor shall cause the certificates
that are issued to the Covered Transferee to bear said legend and
to have the Covered Transferee execute a copy of this Agreement
in the place provided for its execution by Covered Transferees.
In connection with the transfer of shares of the capital stock of
the Company by a Shareholder or Covered Transferee to a non-
Covered Transferee, the transferor shall cause the certificates
that are issued to the non-Covered Transferee not to bear said
legend.
5. Term. The term of this Agreement shall be effective as
of the date set forth in the preamble to this Agreement and shall
terminate on the earlier of (a) the dissolution of the Company,
(b) the written agreement of all CCL and its Covered Transferees
and the W-L Shareholders and their Covered Transferees, (c) at
such time as either CCL and its Covered 'Transferees in the
aggregate or the W-L Shareholders and their Covered Transferees
in the aggregate cease to own, of record or beneficially, at
least 10% of the issued and outstanding shares of capital stock
of the Company, or (d) 10 years from the date of this Agreement.
6. Counterparts and Telefax Executions. Any notices or
written consents of Shareholders or Covered Transferees may be
executed in counterparts. In lieu of original signatures on any
such instrument, a telefax copy of the signatures shall suffice;
provided, however, it is expected, but not necessary to give
effect to any such telefax copy, that the Shareholder or Covered
Transferee who executes any such instrument and sends a telefax
copy will as soon thereafter-as practicable send the original
executed copy to the persons to whom such telefax copy was sent.
7. Remedies. In addition to any of the remedies which may
be provided for in this Agreement or by law, in the event of a
breach of this Agreement by any Shareholder or Covered
Transferee, the other Shareholders and Covered Transferees shall
have the right to seek an injunction (both temporary and
permanent), specific performance and other equitable remedies.
In the event of any dispute, arbitration or litigation between or
among the Shareholders and/or Covered Transferees to enforce the
provisions of, or with respect to this Agreement, the prevailing
party(ies) shall be entitled to reasonable attorneys' and court
costs, including those for appellate proceedings and for
paralegals and similar persons.
8. Miscellaneous.
8.1. Notices. All notices, demands or requests
provided for or permitted to be given pursuant to this Agreement
must be in writing and shall be delivered or sent, with the
copies indicated, by personal delivery, telefax or overnight
delivery service to the parties as follows (or at such other
address as a party as shall be specified by notice given pursuant
to this Section):
To any one or more of the W-L Shareholders: [addressee]
c/o Carnival Resorts &
Casinos
3250 Mary Street, 5th Floor
Miami, FL 33133
Telefax: (305) 445-4255
With a copy to each of: Greenberg Traurig, P.A..
1221 Brickell Avenue
22nd Floor
Miami, Florida 33131
Telefax: (305) 579-0717
Attn: David S. Kenin, Esq.
and to: Sherwood M. Weiser
Chairman of the Board and
Chief Executive Officer
CRC Holdings, Inc.
3250 Mary Street, 5th Floor
Miami, FL 33133
Telefax: (305) 445-4255
To CCL: Howard S. Frank
Vice Chairman and
Chief Operating Officer
Carnival Corp.
3655 N.W. 87 Avenue
Miami, FL 33178
Telefax: (305) 471-4700
With a copy to each of: Holland & Knight
701 Brickell Avenue
Miami, FL 33131
Telefax: (305) 789-7799
Attn: Bruce Jay Colan, Esq.
and to: Arnaldo Perez, Esq.
Vice President and General
Counsel
Carnival Corporation
3655 N.W. 87th Avenue
Miami, Florida 33178-2428
Telefax: (305) 406-4758
To a Covered Transferee: Such address as the
Covered Transferee gives to
the Shareholders and other
Covered Transferees
All notices shall be deemed given one business day after
their delivery to the addresses for the respective party(ies),
with the copies indicated as provided in this Section.
8.2. Entire Agreement. This Agreement, contains the
sole and entire agreement among the Shareholders with respect to
their subject matter and supersedes any and all other prior
written or oral agreements among them with respect to such
subject matter.
8.3. Amendment. No amendment or modification of this
Agreement shall be valid unless in writing and duly executed by
the parties affected by the amendment or modification.
8.4. Binding Effect. This Agreement shall he binding
upon the parties and their respective representatives, successors
and assigns.
8.5. Waiver. Waiver by any party of any breach of any
provision of this Agreement shall not be considered as or
constitute a continuing waiver or a waiver of any other breach of
the same or any other provision of this Agreement.
8.6. Captions. The captions contained in this
Agreement are inserted only as a matter of convenience or
reference and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any of its provisions.
8.7. Construction. In the construction of this
Agreement, whether or not so expressed, words used in the
singular or in the plural, respectively, include both the plural
and the singular and the masculine, feminine and neuter genders
include all other genders. Since all parties have engaged in the
drafting of this Agreement, no presumption of construction
against any party shall apply.
8.8. Section, Schedule and Exhibit References. All
references contained in this Agreement to Sections, Schedules and
Exhibits shall be deemed to be references to Sections of, and
Schedules and Exhibits attached to, this Agreement, except to the
extent that any such reference specifically refers to another
document. All references to Sections shall be deemed to also
refer to all subsections of such Sections, if any.
8.9. Severability. In the event that any portion of
this Agreement is illegal or unenforceable, it shall affect no
other provisions of this Agreement, and the remainder of this
Agreement shall be valid and enforceable in accordance with its
terms.
8.10. Absence of Third Party Beneficiaries. Nothing
in this Agreement, express or implied, is intended to (a) confer
upon any entity or person other than the parties to this
Agreement and their authorized successors and assigns any rights
or remedies under or by reason of this Agreement as a third-party
beneficiary or otherwise; or (b) authorize anyone not a party to
this Agreement to maintain an action or institute an arbitration
proceeding pursuant to or based upon this Agreement.
8.11. Business Day. As used in this Agreement, the
term "business day" means any day other than a Saturday, Sunday
or legal or bank holiday in the City of Miami, Florida. If any
time period set forth in this Agreement expires on other than a
business day in such City, such period shall be extended to and
through the next succeeding business day in such City.
8.12. Assignment. Neither this Agreement nor any
rights in and to shares of the capital stock of the Company may
be assigned by any party without the written consent of all other
parties.
8.13. Other Documents. The parties shall take all
such actions and execute all such documents which may be
necessary to carry out the purposes of this Agreement, whether or
not specifically provided for in this Agreement. .
8.14. Governing Law. This Agreement and the
interpretation of its terms shall be governed by the laws of the
State of Florida, without application of conflicts of law
principles.
8.15. Attorneys' Fees. CCL and the W-L Shareholders
shall pay their respective attorneys' fees for the negotiation
and preparation of this Agreement.
8.16. W-L Shareholders' Representative. Each of the W-
L Shareholders on. his or her their own behalf and an behalf of
their respective Covered Transferees designates Sherwood M.
Weiser, and in his absence or during periods of his
unavailability Donald E. Lefton, as his or her representative for
all purposes under this Agreement, including designation of
directors, receipt of disclosures, granting and/or executing
consents or waivers, receiving notices and agreeing to and
executing amendments and/or modifications to this Agreement. Any
such receipt, grant, agreement and/or execution by the W-L
Shareholders' representative shall he valid and binding on all of
the W-L Shareholders and their Covered Transferees. The
designation by the W-L Shareholders of the their representative
may not be revoked without the written consent of CCL.
8.17. CCL's Representative. CCL on its own behalf and
on behalf of its Covered Transferees designates CCL (or, if CCL
no longer owns shares of capital stock of the Company, Micky
Arison) as his, her or its representative for all purposes under
this Agreement, including designation of directors, receipt of
disclosures, granting and/or executing consents or waivers,
receiving notices and agreeing to and executing amendments and/or
modifications to this Agreement. Any such receipt, grant,
agreement and/or execution by CCL's representative shall be valid
and binding on CCL and its Covered Transferees. The designation
by CCL of CCL's representative may not be revoked without the
written consent of the W-L Shareholders' Representative.
8.18. Counterparts. This Agreement may be executed
and delivered in two or more counterparts, each of which shall be
deemed to be an original and all of which, taken together, shall
be deemed to be one agreement.
The parties have executed this Agreement as of the date set
forth above.
CARNIVAL CORPORATION., a
Panamanian corporation
By:/s/ Gerald R. Cahill
Name: Gerald R. Cahill
Title: Sr. Vice President Finance
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 L. Sibley
Peter L. Sibley
CHC Investors Partners, L.P.
By:CHC Operating Corporation,
its General Partner
By:/s/ Karim Alibhai
Name:Karim Alibhai
Title:President
/s/ Robert Sturges
Robert Sturges
/s/ W. Peter Temling
W. Peter Temling
/s/ Irving Zeldman
Irving Zeldman
/s/ Douglas J. Weiser
Douglas J. Weiser
/s/ Warren P. Weiser
Warren P. Weiser
/s/ Bradley A. Weiser
Bradley A. Weiser
/s/ Robyn C. Fisher
Robyn C. Fisher
/s/ Lisa Tabatchnick
Lisa Tabatchnick
COVERED TRANSFEREES
_____________________________
_____________________________
_____________________________
EXHIBIT A
W-L Shareholders Number of Shares Owned Percentage of Ownership
CARNIVAL CORPORATION 2,490,000 23.18%
SHERWOOD M. WEISER 2,324,670 21.64%
DONALD E. LEFTON 2,324,670 21.64%
THOMAS F. HEWITT 861,865 8.02%
PETER L. SIBLEY 861,865 8.02%
CHC INVESTORS PARTNERS, L.P. 531,026 4.94%
ROBERT STURGES 362,358 3.37%
W. PETER TEMLING 466,035 4.34%
IRVING ZELDMAN 400,273 3.73%
DOUGLAS J. WEISER 19,840 0.18%
WARREN P. WEISER 19,840 0.18%
BRADLEY A. WEISER 19,840 0.18%
ROBYN C. FISHER 29,760 0.28%
LISA TABATCHNICK 29,760 0.28%
TOTAL 10,741,802 100.00%
EXHIBIT 12
CARNIVAL CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
<TABLE>
<CAPTION>
Three Months Ended February 28,
1999 1998
<S> <C> <C>
Net income $157,761 $109,914
Income tax benefit (4,806) (4,287)
Income before income tax benefit 152,955 105,627
Adjustment to earnings:
Minority interest 1,102
Dividends received and loss from
affiliated operations, net 5,917 21,231
Earnings as adjusted 159,974 126,858
Fixed Charges:
Interest expense, net 13,390 12,559
Interest portion of rent expense (1) 790 708
Capitalized interest 10,406 6,402
Total fixed charges 24,586 19,669
Fixed charges not affecting earnings:
Capitalized interest (10,406) (6,402)
Earnings before fixed charges $174,154 $140,125
Ratio of earnings to fixed charges 7.1 x 7.1 x
</TABLE>
________________________
(1) Represents one-third of rent expense, which management
believes
to be representative of the interest portion of rent expense.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> FEB-28-1999
<CASH> 574,254
<SECURITIES> 216,993
<RECEIVABLES> 72,947
<ALLOWANCES> 0
<INVENTORY> 77,626
<CURRENT-ASSETS> 1,036,788
<PP&E> 6,869,571
<DEPRECIATION> 1,105,073
<TOTAL-ASSETS> 7,830,485
<CURRENT-LIABILITIES> 1,138,318
<BONDS> 1,355,569
<COMMON> 6,130
0
0
<OTHER-SE> 5,107,772
<TOTAL-LIABILITY-AND-EQUITY> 7,830,485
<SALES> 0
<TOTAL-REVENUES> 748,258
<CGS> 0
<TOTAL-COSTS> 416,103
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,390
<INCOME-PRETAX> 154,057
<INCOME-TAX> 4,806
<INCOME-CONTINUING> 157,761
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 157,761
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
