FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2000
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 - 589,403,410 shares as of July 10, 2000.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
<TABLE>
<CAPTION>
May 31, November 30,
2000 1999
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $295,567 $ 521,771
Short-term investments 4,584 22,800
Accounts receivable, net 96,718 62,887
Consumable inventories, at average cost 94,691 84,019
Prepaid expenses and other 130,877 100,159
Total current assets 622,437 791,636
Property and Equipment, Net 6,674,115 6,410,527
Investments in and Advances to Affiliates 541,646 586,922
Goodwill, less Accumulated Amortization of
$92,300 and $85,272 455,314 462,340
Other Assets 48,662 34,930
$8,342,174 $8,286,355
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 208,864 $ 206,267
Accounts payable 194,623 195,879
Accrued liabilities 243,055 262,170
Customer deposits 854,383 675,816
Dividends payable 63,371 64,781
Total current liabilities 1,564,296 1,404,913
Long-Term Debt 871,048 867,515
Deferred Income and Other Long-Term Liabilities 91,235 82,680
Commitments and Contingencies (Note 5)
Shareholders' equity
Common Stock; $.01 par value; 960,000 shares
authorized; 617,389 and 616,966 shares
issued 6,174 6,170
Additional paid-in capital 1,770,040 1,757,408
Retained earnings 4,423,788 4,176,498
Unearned stock compensation (13,457) (9,945)
Accumulated other comprehensive (loss) income (35,807) 1,116
Treasury Stock; 14,030 shares at cost (335,143) -
Total shareholders' equity 5,815,595 5,931,247
$8,342,174 $8,286,355
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Three Months
Ended May 31, Ended May 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $1,700,005 $1,544,407 $875,127 $796,149
Costs and Expenses
Operating expenses 962,561 848,529 497,121 432,426
Selling and administrative 241,706 216,287 120,827 105,517
Depreciation and amortization 135,892 116,815 68,288 58,911
1,340,159 1,181,631 686,236 596,854
Operating Income Before
(Loss) Income From Affiliated
Operations 359,846 362,776 188,891 199,295
(Loss) Income From Affiliated
Operations, Net (5,909) (7,099) 5,528 (1,182)
Operating Income 353,937 355,677 194,419 198,113
Nonoperating Income (Expense)
Interest income 11,459 18,362 4,520 11,475
Interest expense, net of
capitalized interest (15,460) (26,880) (6,871) (13,490)
Other income, net 18,246 7,941 9,349 4,945
Income tax benefit 7,291 7,645 2,539 2,839
Minority interest (1,642) (540)
21,536 5,426 9,537 5,229
Net Income $ 375,473 $ 361,103 $203,956 $203,342
Earnings Per Share:
Basic $.61 $.59 $.34 $.33
Diluted $.61 $.59 $.34 $.33
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended May 31,
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net income $375,473 $361,103
Adjustments to reconcile net income
to net cash provided from operations:
Depreciation and amortization 135,892 116,815
Dividends received and loss
from affiliated operations, net 19,019 19,017
Minority interest 1,642
Other 562 2,225
Changes in operating assets and liabilities
Increase in:
Receivables (34,919) (25,046)
Consumable inventories (10,672) (5,586)
Prepaid expenses and other (30,733) (9,482)
(Decrease) increase in:
Accounts payable (1,256) 11,569
Accrued liabilities (17,356) (3,219)
Customer deposits 178,567 184,336
Net cash provided from operating
activities 614,577 653,374
INVESTING ACTIVITIES
Decrease (increase) in short-term
investments, net 23,596 (608,278)
Additions to property and equipment, net (392,437) (112,860)
Other, net (12,484) 44,212
Net cash used for investing activities (381,325) (676,926)
FINANCING ACTIVITIES
Proceeds from long-term debt 7,477 7,721
Principal payments of long-term debt (7,902) (363,799)
Dividends paid (129,593) (108,764)
Proceeds from issuance of Common Stock, net 5,705 733,882
Purchase of treasury stock (335,143)
Other (121)
Net cash (used for) provided from
financing activities (459,456) 268,919
Net (decrease) increase in cash and
cash equivalents (226,204) 245,367
Cash and cash equivalents at beginning
of period 521,771 137,273
Cash and cash equivalents at end of period $295,567 $382,640
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The financial statements included herein have been prepared by Carnival
Corporation, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission.
The accompanying consolidated balance sheet at May 31, 2000 and the
consolidated statements of operations for the six and three months ended May 31,
2000 and 1999 and the consolidated statements of cash flows for the six months
ended May 31, 2000 and 1999 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.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
May 31, November 30,
2000 1999
<S> <C> <C>
Ships $6,856,277 $6,543,592
Ships under construction 528,432 506,477
7,384,709 7,050,069
Land, buildings and improvements 235,745 235,333
Transportation and other equipment 425,061 395,008
Total property and equipment 8,045,515 7,680,410
Less accumulated depreciation and
amortization (1,371,400) (1,269,883)
$6,674,115 $6,410,527
</TABLE>
Capitalized interest, primarily on ships under construction, amounted to
$21.5 million and $19.9 million for the six months ended May 31, 2000 and 1999,
respectively, and $11.5 million and $9.5 million for the three months ended May
31, 2000 and 1999, respectively.
NOTE 3 - LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
May 31, November 30,
2000 1999
<S> <C> <C>
Unsecured 5.65% Notes Due October 15, 2000 $ 199,964 $ 199,920
Unsecured 6.15% Notes Due April 15, 2008 199,590 199,564
Unsecured 6.65% Debentures due January 15, 2028 199,288 199,274
Unsecured 6.15% Notes Due October 1, 2003 124,977 124,974
Unsecured 7.2% Debentures Due October 1, 2023 124,888 124,886
Unsecured 7.7% Notes Due July 15, 2004 99,952 99,947
Unsecured 7.05% Notes Due May 15, 2005 99,901 99,891
Other 31,352 25,326
1,079,912 1,073,782
Less portion due within one year (208,864) (206,267)
$ 871,048 $ 867,515
</TABLE>
NOTE 4 - SHAREHOLDERS' EQUITY
The Company's Articles of Incorporation 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 at the discretion of the Board of Directors and has a $.01 par
value. At May 31, 2000 and November 30, 1999, no Preferred Stock had been
issued.
During the six months ended May 31, 2000 and 1999, the Company declared
cash dividends of $.21 and $.18 per share, or an aggregate of $128.2 million and
$110.4 million, respectively.
In February 2000, the Board of Directors authorized the repurchase of up to
$1 billion of the Company's Common Stock. As of May 31, 2000, the Company had
repurchased approximately 14 million shares of its Common Stock at a cost of
$335.1 million. Since May 31, 2000, the Company has repurchased an
additional 14 million shares at a cost of $274 million.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Capital Expenditures
A description of ships under contract for construction at July 14, 2000 is
as follows (in millions, except passenger capacity data):
<TABLE>
<CAPTION>
Expected Estimated
Service Passenger Total
Ship Date(1) Shipyard Capacity(2) Cost(3)
<S> <C> <C> <C> <C>
Carnival Cruise Lines
Carnival Victory 8/00 Fincantieri 2,758 $ 450
Carnival Spirit 4/01 Masa-Yards 2,124 375
Carnival Pride 1/02 Masa-Yards(4) 2,124 375
Carnival Legend 8/02 Masa-Yards(4) 2,124 375
Carnival Conquest 12/02 Fincantieri 2,974 500
Carnival Glory 8/03 Fincantieri 2,974 500
Newbuild 11/04 Fincantieri(5) 2,974 500
Total Carnival Cruise Lines 18,052 3,075
Holland America Line
Amsterdam 11/00 Fincantieri 1,380 300
Newbuild 10/02 Fincantieri(5) 1,848 410
Newbuild 8/03 Fincantieri(5) 1,848 410
Newbuild 1/04 Fincantieri(5) 1,848 410
Newbuild 9/04 Fincantieri(5) 1,848 410
Newbuild 6/05 Fincantieri(5) 1,848 410
Total Holland America Line 10,620 2,350
Total 28,672 $5,425
</TABLE>
(1) The expected service date is the date the ship 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 of the completed ship includes the contract price
with the shipyard, design and engineering fees, capitalized interest, various
owner supplied items and construction oversight costs.
(4) These construction contracts are denominated in German Marks
and have been fixed into U.S. dollars through the utilization of forward foreign
currency contracts.
(5) 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 ships under contract for construction, the Company
has paid approximately $528 million through May 31, 2000 and anticipates paying
approximately $914 million during the twelve month period ending May 31, 2001
and approximately $4.0 billion thereafter.
Litigation
Several actions (collectively the "Passenger Complaints") have been filed
against Carnival Cruise Lines ("Carnival") and one action has been filed against
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. The actions against Carnival 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. One member of the settlement class appealed
the court's approval of the settlement and a decision on such appeal is expected
shortly. A further appeal could be taken by either party which could result in
the settlement being delayed for an additional one year. 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. 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.
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. The two remaining actions, filed in California
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.
An action has been filed in Florida against Carnival alleging Carnival
violated the Americans with Disabilities Act ("ADA") by failing to make certain
of its cruise ships accessible to individuals with disabilities (the "ADA
Complaint"). Plaintiffs seek compensatory and statutory damages, special and
consequential damages, punitive and exemplary damages, injunctive relief and
fees and costs. This action is in progress and is proceeding.
It is not now possible to determine the ultimate outcome of the pending
Passenger, Travel Agent and ADA Complaints if such claims should proceed to
trial. Management believes that the Company has meritorious defenses to these
claims.
Several complaints were filed against the Company and four of its officers
on behalf of a purported class of purchasers of Common Stock of the Company,
claiming that statements made by the Company in public filings violate federal
securities laws. The plaintiffs seek unspecified compensatory damages,
attorneys' fees and costs and expert fees. After the court appoints lead
plaintiffs and a lead counsel, the plaintiffs will have sixty days to file a
consolidated amended complaint. It is not now possible to determine the ultimate
outcome of these pending complaints. Management believes that the Company and
these officers have meritorious defenses to these claims. Accordingly, the
Company and these officers intend to vigorously defend against all such actions.
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
claims and lawsuits, which are not covered by insurance, would not have a
material adverse effect on the Company's financial condition or results of
operations.
Contingent Obligations
The Company has certain contingent obligations or has provided letters of
credit related to two ship lease transactions which, at May 31, 2000, total
approximately $339 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 contingent
obligations.
Guarantees
At May 31, 2000, the Company has guaranteed approximately $100 million of
debt which includes, among other things, the acquisition indebtedness for the
Company's interest in Costa Crociere, S.p.A. ("Costa").
NOTE 6 - COMPREHENSIVE INCOME
Comprehensive income for the periods indicated was as follows (in
thousands):
<TABLE>
<CAPTION>
Six Months Three Months
Ended May 31, Ended May 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net income $375,473 $361,103 $203,956 $203,342
Changes in securities valuation
allowance (1,690) 7 (906) 8
Foreign currency translation
adjustment (35,233) (29,996) (16,544) (22,828)
Total comprehensive income $338,550 $331,114 $186,506 $180,522
</TABLE>
NOTE 7 - SEGMENT INFORMATION
The Company's cruise segment includes five cruise brands which have been
aggregated as a single operating segment based on the similarity of their
economic characteristics. Cruise revenues are comprised of sales of passenger
tickets, including, in some cases, air transportation to and from the cruise
ship, and revenues from certain onboard activities and other related services.
The tour segment represents the operations of Holland America Westours.
Selected segment information for the periods indicated was as follows (in
thousands):
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
May 31,2000 May 31, 1999
Operating Operating
income income
Revenues (loss) Revenues (loss)
<S> <C> <C> <C> <C>
Cruise $1,663,135 $384,831 $1,506,179 $388,346
Tour 44,768 (17,946) 46,124 (19,484)
Affiliated operations (5,909) (7,099)
Reconciling items (a) (7,898) (7,039) (7,896) (6,086)
$1,700,005 $353,937 $1,544,407 $355,677
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
May 31,2000 May 31, 1999
Operating Operating
income income
Revenues (loss) Revenues (loss)
<S> <C> <C> <C> <C>
Cruise $ 845,284 $200,697 $ 765,103 $207,912
Tour 37,333 (6,394) 38,620 (7,586)
Affiliated operations 5,528 (1,182)
Reconciling items (a) (7,490) (5,412) (7,574) (1,031)
$ 875,127 $194,419 $ 796,149 $198,113
</TABLE>
(a) Revenues consist of intersegment revenues. Operating loss represents
corporate expenses not allocated to segments.
Selected segment information for the Company's affiliated operations for
the periods indicated was as follows (in thousands):
Six Months Three Months
Ended May 31, Ended May 31,
<TABLE>
<CAPTION>
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $2,547,083 $2,380,851 $1,376,529 $1,195,895
Net loss $ (48,452) $ (23,788) $ (4,428) $ (3,368)
</TABLE>
The table above represents 100% of the affiliated companies' results of
operations.
NOTE 8 - EARNINGS PER SHARE
Earnings per share have been computed as follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
Six Months Three Months
Ended May 31, Ended May 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
BASIC:
Net income $375,473 $361,103 $203,956 $203,342
Average common shares outstanding 611,559 611,074 606,051 613,161
Earnings per share $ .61 $ .59 $ .34 $ .33
DILUTED:
Net income $375,473 $361,103 $203,956 $203,342
Effect on net income of assumed
purchase of minority interest 1,642 540
Net income available assuming
dilution $375,473 $362,745 $203,956 $203,882
Average common shares outstanding 611,559 611,074 606,051 613,161
Effect of dilutive securities:
Additional shares issuable upon:
Assumed exercise of Cunard Line
Limited's minority shareholders
purchase option 5,152 5,152
Various stock plans 2,603 3,760 1,908 3,621
Average shares outstanding
assuming dilution 614,162 619,986 607,959 621,934
Earnings per share $ .61 $ .59 $ .34 $ .33
</TABLE>
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. Pursuant to
SFAS No. 133, 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, as amended, is effective for the Company's
fiscal year beginning December 1, 2000. The Company has performed a preliminary
analysis of the impact of SFAS No. 133 on its existing and currently anticipated
activities and believes that the impact of its adoption will not be material to
its financial statements, however, the effect on the Company's financial
position depends on the fair values of the Company's derivatives and related
financial instruments at the date of adoption.
ITEM 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Certain statements under Item 2, "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. See
"Part II. OTHER INFORMATION, ITEM 5. (a) Forward-Looking Statements".
RESULTS OF OPERATIONS
The Company earns its cruise revenues primarily from (i) the sale of
passenger tickets, which includes accommodations, meals, and most onboard
activities, (ii) the sale of air transportation to and from the cruise ships and
(iii) the sale of goods and services on board its cruise ships, such as casino
gaming, bar sales, gift shop sales and other related services. The Company also
derives revenues from the tour and related operations of Holland America
Westours.
For selected segment information related to the Company's revenues and
operating income see Note 7 in the accompanying financial statements.
Operations data expressed as a percentage of total revenues and selected
statistical information for the periods indicated was as follows:
<TABLE>
<CAPTION>
Six Months Three Months
Ended May 31, Ended May 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues 100% 100% 100% 100%
Costs and Expenses
Operating expenses 57 55 57 54
Selling and administrative 14 14 14 13
Depreciation and amortization 8 8 8 8
Operating Income Before Income
from Affiliated Operations 21 23 21 25
Income from Affiliated
Operations, Net - - 1 -
Operating Income 21 23 22 25
Nonoperating Income 1 - 1 1
Net Income 22% 23% 23% 26%
Selected Statistical Information (in thousands):
Passengers carried 1,208 1,058 643 541
Passenger cruise days (1) 7,920 6,975 4,081 3,470
Occupancy percentage 102.8% 100.4% 102.3% 99.9%
</TABLE>
(1) A passenger cruise day is one passenger sailing for a period of one day.
For example, one passenger sailing on a one week cruise is seven passenger
cruise days.
GENERAL
The Company's cruise and tour operations experience varying degrees of
seasonality. The Company's revenue from the sale of passenger tickets for its
cruise operations is moderately seasonal. Historically, demand for cruises has
been greatest during the summer months. The Company's tour revenues are highly
seasonal with a vast majority of tour revenues generated during the late spring
and summer months in conjunction with the Alaska cruise season.
Average passenger capacity for the Company's cruise brands is expected to
increase by approximately 13.1% and 10.6% in the third and fourth quarters of
fiscal 2000, respectively, as compared to the same periods of fiscal 1999. These
increases are primarily a result of the introduction into service of the
Carnival Triumph in July 1999, Holland America's Zaandam and Volendam in May
2000 and November 1999, respectively, and the expected introduction into service
of the Carnival Victory in August 2000, partially offset by the expected
withdrawal from service of Holland America's Nieuw Amsterdam in October 2000.
The Nieuw Amsterdam has been contracted for sale which is scheduled for closing
in October 2000.
The year over year percentage increase in average passenger capacity
resulting from the delivery of vessels currently under contract for construction
for fiscal 2001 and 2002, net of the impact of the expected withdrawal from
service of Holland America's Nieuw Amsterdam, is expected to approximate 10.1%
and 6.9%, respectively.
The Company and Airtours plc ("Airtours"), a publicly traded leisure travel
company in which the Company holds an approximate 26% interest, each own a 50%
interest in Il Ponte S.p.A. ("Il Ponte"), the parent company of Costa Crociere,
S.p.A., 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. Airtours' revenues are very seasonal due to the nature of the
European leisure travel industry. Costa's revenues are moderately seasonal.
Typically, Airtours' and Costa's quarters ending June 30 and September 30
experience higher revenues, with revenues in the quarter ending September 30
being the highest.
On July 13, 2000 Airtours announced the acquisition of all the remaining
shares of Frosch Touristik GmbH, subject to regulatory clearance. Prior to this
acquisition, Airtours owned approximately 36% of this German tour operator. In
addition, Airtours stated that their investments in new markets, in particular
Germany, together with the reorganization of their existing operations, will
result in fiscal 2000 profits being below their original expectations.
In June 2000, management announced that it expects that the Company's net
revenue yields (net revenue per passenger day multiplied by occupancy) for the
second half of 2000 will be somewhat less than last year and that the Company's
earnings per share for fiscal 2000 will be slightly higher than fiscal 1999.
SIX MONTHS ENDED MAY 31, 2000 ("2000") COMPARED
TO SIX MONTHS ENDED MAY 31, 1999 ("1999")
Revenues
The increase in total revenues of $155.6 million, or 10.1%, was entirely
due to a 10.4% increase in cruise revenues. The cruise revenue changes resulted
from an increase of approximately 10.8% in passenger capacity, a 2.7% increase
in occupancy rates partially offset by a 3.1% decrease in total revenue per
passenger cruise day. The increase in passenger capacity resulted primarily
from the introduction into service of the Carnival Triumph in July 1999 and
Holland America's Volendam in November 1999. The decrease in revenue per
passenger was primarily due to lower cruise ticket prices and a reduction in the
number of passengers electing to use the Company's air program. The decrease
in revenue per passenger is net of the impact of higher cruise ticket prices
from the Company's Millennium cruises in the first quarter of fiscal 2000. When
a passenger elects to provide his or her own transportation, rather than
purchasing air transportation from the Company, both the Company's cruise
revenues and operating expenses decrease by approximately the same amount.
Costs and Expenses
Operating expenses increased $114.0 million, or 13.4%. Cruise operating
costs increased by $115.7 million, or 14.3%. Cruise operating costs increased in
2000 primarily due to additional costs associated with the increased passenger
capacity, increases in fuel costs, and operational costs related primarily to
the Company's Millennium cruises. Commencing in the fourth quarter of fiscal
1999, the Company began to incur significantly higher fuel costs due to a very
large increase in the price of bunker fuel. The increase in fuel costs
increased the Company's operating expenses by approximately $30 million for the
first six months of 2000. Assuming fuel prices in the third and fourth quarters
of fiscal 2000 remain at the same levels as the end of the second quarter of
fiscal 2000, the Company estimates that its fuel costs, excluding the impact on
Costa's operations, will increase for the full fiscal year 2000 by approximately
$50 million as compared to 1999 due to the higher fuel prices. Cruise operating
costs as a percentage of cruise revenues were 55.7% and 53.8% in 2000 and 1999,
respectively.
Selling and administrative expenses increased $25.4 million, or 11.8%,
primarily due to an increase in advertising and payroll and related costs.
Selling and administrative expenses as a percentage of revenues were 14.2% and
14.0% during 2000 and 1999, respectively.
Depreciation and amortization increased by $19.1 million, or 16.3%
primarily due to the additional depreciation associated with the increase in the
size of the fleet and Cunard and Seabourn's ship refurbishment expenditures.
Affiliated Operations
During 2000, the Company recorded $5.9 million of losses from affiliated
operations as compared with $7.1 million of losses in 1999. The Company's
portion of Airtours' losses increased $13.2 million to $27.4 million. The
Company recorded income of $19.9 million and $7.2 million for the first six
months of 2000 and 1999, respectively, related to its interest in Il Ponte. See
the three month analysis below for a discussion of certain non-recurring events
and the "General" section for a discussion of Airtours' and Costa's seasonality.
Nonoperating Income (Expense)
Gross interest expense (excluding capitalized interest) decreased to $37.0
million from $46.8 million primarily as a result of lower average outstanding
debt balances partially offset by a slightly higher weighted average borrowing
cost.
Other income in 2000 of $18.2 million primarily relates to $15.1 million of
compensation received from the shipyard related to the late delivery of Holland
America's Zaandam, net of certain related expenses.
THREE MONTHS ENDED MAY 31, 2000 ("2000") COMPARED
TO THREE MONTHS ENDED MAY 31, 1999 ("1999")
Revenues
The increase in total revenues of $79.0 million, or 9.9%, was entirely due
to a 10.5% increase in cruise revenues. The cruise revenue changes resulted from
an increase of approximately 14.8% in passenger capacity, a 2.8% increase in
occupancy rates partially offset by a 7.1% decrease in total revenue per
passenger cruise day. The increase in passenger capacity resulted primarily
from the introduction into service of the Carnival Triumph in July 1999 and
Holland America's Zaandam and Volendam in May 2000 and November 1999,
respectively. The decrease in revenue per passenger was primarily due to lower
cruise ticket prices and a reduction in the number of passengers electing to use
the Company's air program.
Costs and Expenses
Operating expenses increased $64.7 million, or 15.0%. Cruise operating
costs increased by $66.9 million, or 16.6%, to $470.7 million in 2000 from
$403.8 million in 1999. Cruise operating costs increased in 2000 primarily due
to additional costs associated with the increased passenger capacity and
increases in fuel costs. Cruise operating costs as a percentage of cruise
revenues were 55.7% and 52.8% in 2000 and 1999, respectively.
Selling and administrative expenses increased $15.3 million, or 14.5%,
primarily due to an increase in advertising and payroll and related costs.
Selling and administrative expenses as a percentage of revenues were 13.8% and
13.3% during 2000 and 1999, respectively.
Depreciation and amortization increased by $9.4 million, or 15.9% primarily
due to the additional depreciation associated with the increase in the size of
the fleet and Cunard and Seabourn ship refurbishment expenditures.
Affiliated Operations
During 2000, the Company recorded $5.5 million of income from affiliated
operations as compared with $1.2 million of losses in 1999. The Company's
portion of Airtours' losses increased $5.3 million to $11.0 million. The Company
recorded income of $15.1 million and $4.6 million during 2000 and 1999,
respectively, related to its interest in Il Ponte. During the second quarter of
2000, the Company's results from affiliated operations included non-recurring
net gains of $10.7 million primarily related to a reversal of Costa tax
liabilities. See the "General" section for a discussion of Airtours' and
Costa's seasonality.
Nonoperating Income (Expense)
Gross interest expense (excluding capitalized interest) decreased to $18.4
million from $23.0 million primarily as a result of lower average outstanding
debt balances partially offset by a slightly higher weighted average borrowing
cost.
Other income in 2000 of $9.3 million primarily relates to $6.6 million of
compensation received from the shipyard related to the late delivery of Holland
America's Zaandam, net of certain related expenses.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash
The Company's business provided $614.6 million of net cash from operations
during the six months ended May 31, 2000, a decrease of 5.9% compared to 1999.
The decrease was primarily due to changes in operating assets and liabilities
partially offset by higher net income.
Uses of Cash
During the first half of fiscal 2000, the Company made net expenditures of
approximately $392.4 million on capital projects, of which $325 million was
spent in connection with its ongoing shipbuilding program. The nonshipbuilding
capital expenditures consisted primarily of computer related expenditures, ship
refurbishments, tour assets and other equipment.
In February 2000, the Company's Board of Directors authorized the
repurchase of up to $1 billion of the Company's Common Stock. As of July 14,
2000, the Company had repurchased 28 million shares of its Common Stock at a
cost of approximately $610 million.
During the six months ended May 31, 2000, the Company had net borrowings of
$7.5 million under its commercial paper programs and made principal payments
totaling $7.9 million pursuant to various notes payable. In addition, the
Company paid cash dividends of $129.6 million in the first half of fiscal 2000.
Future Commitments
As of July 14, 2000, the Company, excluding Costa, has contracts for the
delivery of thirteen new ships over the next five years. The Company's remaining
obligations related to these contracts is to pay approximately $914 million
during the twelve months ending May 31, 2001 and approximately $4.0 billion
thereafter.
In addition to these ship construction contracts, the Company has a letter
of intent for the construction of Cunard Line's Queen Mary 2. No assurance can
be given that this letter of intent will result in a ship construction contract.
At May 31, 2000, the Company had $1.08 billion of long-term debt of which
$208.9 million is due during the twelve months ending May 31, 2001. See Notes 3
and 5 in the accompanying financial statements for more information regarding
the Company's debts and commitments.
Funding Sources
At May 31, 2000, the Company had approximately $300.2 million in cash, cash
equivalents and short-term investments. These funds along with future cash from
operations are expected to be the Company's principal sources of capital to fund
its working capital and debt service requirements, capital projects, stock
repurchase program and dividend payments. Additionally, the Company may also
fund a portion of these cash requirements from borrowings under its revolving
credit facilities or commercial paper programs. At May 31, 2000, the Company had
approximately $1.2 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.
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, 1999 (the "1999 Form 10-K") and its Quarterly Report on
Form 10-Q for the quarter ended February 29, 2000 (the "First Quarter 2000 10-
Q"). The following is the significant subsequent development in such cases.
In the Florida action, Carnival filed a motion for rehearing and
clarification of the Third District Court of Appeal's reversal of the trial
court's denial of class certification. That motion was denied on May 31, 2000.
On June 30, 2000, Carnival filed a notice with the Florida Supreme Court
requesting discretionary review of the District Court's decision.
Several actions collectively referred to as the "Travel Agent Complaints"
were previously reported in the 1999 Form 10-K and the First Quarter 2000 10-Q.
The following is the significant subsequent development in such cases.
In the Florida action, N.G.L. Travel Associates had appealed the decision
of the circuit court dismissing the action with prejudice. On May 31, 2000, the
appellate court upheld the dismissal of the action. On June 14, 2000, N.G.L.
Travel Associates filed a motion for rehearing of the appellate court's
decision.
The Company previously reported in the First Quarter 2000 10-Q that several
complaints were filed against the Company and four of its officers on behalf of
a purported class of purchasers of Common Stock of the Company, claiming that
statements made by the Company in public filings violate federal securities
laws. On March 27, 2000 and April 27, 2000, three additional substantially
identical complaints were filed against the Company and certain of its officers
in the United States District Court for the Southern District of Florida by
Howard Lean, Arthur Earle and the International Brotherhood of Electrical
Workers, Local 98 Pension Fund, respectively, on behalf of themselves and a
purported class action of persons who purchased Common Stock of the Company
during the same class period as the previously reported actions. These
complaints will be collectively referred to as the "Stock Purchaser Complaints".
The following are significant subsequent developments in such cases.
On April 28, 2000, certain of the plaintiffs filed a motion seeking their
appointment as lead plaintiffs and for appointment of lead counsel for all the
plaintiffs. The Company responded to this motion to preserve its defenses to
any future motion for class certification. After the court appoints lead
plaintiffs and lead counsel, the plaintiffs will have sixty days to file a
consolidated amended complaint.
On December 17, 1998, a complaint was filed against Carnival in the U.S.
District Court for the Southern District of Florida by Access Now, Inc. and
Edward S. Resnick, alleging Carnival violated the Americans with Disabilities
Act by failing to make certain of its cruise ships accessible to individuals
with disabilities (the "ADA Complaint"). The plaintiffs seek injunctive relief
and fees and costs. By order of the court dated March 17, 1999, the proceeding
was stayed, with the court retaining jurisdiction while settlement negotiations
are ongoing.
Carnival's potential liability for accessibility issues under the ADA may
also be impacted by the June 22, 2000 decision of a three-judge panel of the
United States Court of Appeals for the 11th Circuit in Stevens v. Premier
Cruises, Inc. There the court held that vessels flying under a foreign flag
were subject to the accessibility requirements of the ADA. Prior to the
decision, one of the defenses available to Carnival in defending the ADA
Complaint was that the statute was inapplicable to foreign flag ships. The
Stevens decision, which eliminates that defense, is now the applicable law in
the 11th Circuit, which includes Florida, Georgia and Alabama. The decision is
subject to a motion by the defendant for a rehearing by the entire 11th Circuit,
or a request for review may be filed with the U.S. Supreme Court.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders of the Company was held on April 10,
2000 (the Annual Meeting). Holders of Common Stock were entitled to elect
sixteen directors at such annual meeting. On all matters which came before the
Annual Meeting, holders of Common Stock were entitled to one vote for each share
held. Proxies for 556,408,376 of the 617,254,814 shares of Common Stock
entitled to vote were received in connection with the Annual Meeting.
The following table sets forth the names of the sixteen persons elected at
the Annual Meeting to serve as directors until the next annual meeting of
shareholders of the Company and the number of votes cast for, against or
withheld with respect to each person.
NAME OF DIRECTOR FOR AGAINST WITHHELD
Micky Arison 543,542,946 -0- 12,865,430
Shari Arison 546,079,105 -0- 10,329,271
Maks L. Birnbach 547,171,153 -0- 9,237,223
Atle Brynestad 547,609,920 -0- 8,798,456
Richard G. Capen, Jr. 544,727,032 -0- 11,681,344
David Crossland 541,578,617 -0- 14,829,759
Robert H. Dickinson 546,259,574 -0- 10,148,802
James M. Dubin 546,606,928 -0- 9,801,448
Howard S. Frank 546,255,618 -0- 10,152,758
A. Kirk Lanterman 546,254,353 -0- 10,154,023
Modesto A. Maidique 547,057,141 -0- 9,351,235
William S. Ruben 547,573,620 -0- 8,834,756
Stuart Subotnick 547,602,948 -0- 8,805,428
Sherwood M. Weiser 522,831,696 -0- 33,576,680
Meshulam Zonis 546,242,923 -0- 10,165,453
Uzi Zucker 543,580,058 -0- 12,828,318
The following table sets forth certain additional matters which were
submitted to the shareholders for approval at the Annual Meeting and the
tabulation of the votes with respect to each such matter.
BROKER
MATTER FOR AGAINST WITHHELD NONVOTES
Approval of an amendment
to the Company's Second Amended
and Restated Articles of
Incorporation to prohibit any
person, other than certain
existing holders, from acquiring
or holding shares that would give
such person in the aggregate more
than 4.9% of the value of the
shares of Common Stock of the
Company: 489,433,040 35,646,196 7,825,712 23,503,428
Approval of Pricewaterhouse-
Coopers LLP as independent
certified public accountants
for the Company for the fiscal
year ending November 30, 2000: 553,174,593 995,543 2,238,240 -0-
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 and presentations made by or with the approval
of an authorized executive officer of the Company constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual results,
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, political instability or adverse media publicity; 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; changes in food
and fuel commodity prices; delivery of new vessels on schedule and at the
contracted price; weather patterns; unscheduled ship repairs and drydocking;
incidents involving cruise vessels at sea; changes in foreign currency prices
which may impact the income or loss from certain affiliated operations and
certain cruise related revenues and expenses; and changes in laws and
regulations applicable to the Company.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Certificate of Amendment of Articles of Incorporation of Carnival
Corporation.
12 Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARNIVAL CORPORATION
Date: July 14, 2000 BY/s/ Howard S. Frank
Howard S. Frank
Vice Chairman of the Board of
Directors and Chief
Operating Officer
Date: July 14, 2000 BY/s/ Gerald R. Cahill
Gerald R. Cahill
Senior Vice President-Finance
and Chief Financial and
Accounting Officer
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF
CARNIVAL CORPORATION
We the undersigned M. MICKY ARISON and ARNALDO PEREZ, President and
Secretary, respectively, of CARNIVAL CORPORATION, a corporation organized and
existing in accordance with the laws of the Republic of Panama, do hereby
certify that the Articles of Incorporation of said corporation have been amended
as follows:
1. Articles Fourth through Thirteenth of the Corporation's Second Amended
and Restated Articles of Incorporation, as the same may be amended from time to
time (the "Articles"), are hereby renumbered as Articles Sixth through
Fifteenth.
2. The following two articles shall be added as the new Articles Fourth
and Fifth:
Article 4. Restrictions on Transfer.
(a) Definitions. For purposes of these Articles 4 and 5, the following
terms shall have the following meanings:
"Amendment Date" shall mean the date that Articles 4 and 5 are adopted in a
Certificate of Amendment that is properly filed.
"Beneficial Ownership" shall mean ownership of Shares by a Person
who would be treated as an owner of such Shares directly, indirectly or
constructively through the application of Section 267(b) of the Code, as
modified in any way by Section 883 of the Code and the regulations promulgated
thereunder. The terms "Beneficial Owner", "Beneficially Owns" and "Beneficially
Owned" shall have correlative meanings.
"Charitable Beneficiary" shall mean the organization or organizations
described in Section 170(c)(2) and 501(c)(3) of the Code selected by the Excess
Share Trustee.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
"Excess Shares" shall mean Shares resulting from an event described in
Section 4(c) hereof.
"Excess Share Trust" shall mean the trust created pursuant to Article 5
hereof.
"Excess Share Trustee" shall mean a Person, who shall be unaffiliated with
the Corporation, any Purported Beneficial Transferee and any Purported Record
Transferee, appointed by the Board of Directors as the trustee of the Excess
Shares Trust.
"Existing Holders" shall mean (i) any member of the group of Persons that
jointly filed the Third Amended and Restated Schedule 13D with the United States
Securities and Exchange Commission on November 22, 1999 with respect to the
beneficial ownership of shares of Common Stock; and (ii) any Permitted
Transferee.
"Market Price" of any class of Shares on any date shall mean the average of
the Closing Price for the five (5) consecutive trading days ending on such date,
or if such date is not a trading date, the five consecutive trading days
preceding such date. The "Closing Price" on any date shall mean (i) the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system on which
such class of Shares are listed or admitted to trading on the New York Stock
Exchange, or (ii) if such class of Shares are listed or admitted to trading on
the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which such class of Shares are listed or
admitted to trading, or (iii) if such class of Shares are not listed or admitted
to trading on any national securities exchange, the last quoted price, or if not
so quoted, the average of the high bid and low asked prices in the over-the-
counter market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System or, if such system is no longer in use, the
principal other automated quotations system that may then be in use, or (iv) if
such class of Shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such class of Shares selected by the Board of Directors.
"Ownership Limit" shall mean, in the case of a Person other than an
Existing Holder (as defined below), Beneficial Ownership of more than four
and nine-tenths percent (4.9%), by value, vote or number, of the Shares.
The Ownership Limit shall not apply to any Existing Holder.
"Permitted Transfer" shall mean a Transfer by an Existing Holder to any
Person which does not result in the Corporation losing its exemption from
taxation on gross income derived from the international operation of a ship or
ships within the meaning of Section 883 of the Code. Any such transferee is
herein referred to as a "Permitted Transferee."
"Person" shall mean a person as defined by Section 7701(a) of the Code.
"Purported Beneficial Holder" shall mean, with respect to any event (other
than a purported Transfer, but including holding Shares in excess of the
Ownership Limitation on the Amendment Date) which results in Excess Shares, the
Person for whom the Purported Record Holder held Shares that, pursuant to
Section 4(c) hereof, became Excess Shares upon the occurrence of such event.
"Purported Beneficial Transferee" shall mean, with respect to any purported
Transfer which results in Excess Shares, the purported beneficial transferee for
whom the Purported Record Transferee would have acquired Shares if such Transfer
had been valid under Section 4(b) hereof.
"Purported Record Holder" shall mean, with respect to any event (other than
a purported Transfer, but including holding Shares in excess of the Ownership
Limitation on the Amendment Date) which results in Excess Shares, the record
holder of the Shares that, pursuant to Section 4(c) hereof, became Excess Shares
upon the occurrence of such event.
"Purported Record Transferee" shall mean, with respect to any purported
Transfer which results in Excess Shares, the record holder of the Shares if such
Transfer had been valid under Section 4(b) hereof.
"Restriction Termination Date" shall mean such date as may be determined by
the Board of Directors in its sole discretion (and for any reason) as the date
on which the ownership and transfer restrictions set forth in Articles 4 and 5
should cease to apply.
"Shares" shall mean shares of the Corporation as may be authorized and
issued from time to time pursuant to Article 3.
"Transfer" shall mean any sale, transfer, gift, hypothecation, pledge,
assignment, devise or other disposition of Shares (including (i) the granting of
any option or interest similar to an option (including an option to acquire an
option or any series of such options) or entering into any agreement for the
sale, transfer or other disposition of Shares or (ii) the sale, transfer,
assignment or other disposition of any securities or rights convertible into or
exchangeable for Shares), whether voluntary or involuntary, whether of record,
constructively or beneficially and whether by operation of law or otherwise.
For purposes of this definition, whether securities or rights are convertible or
exchangeable for Shares shall be determined in accordance with Sections 267(b)
and 883 of the Code.
(b) Restrictions of Transfers and Other Events.
Except as provided in Section 4(i) hereof, from the Amendment Date until
the Restriction Termination Date: (1) no Person (other than an Existing
Holder) shall Beneficially Own Shares in excess of the Ownership Limit; (2)
any Transfer that, if effective, would result in any Person (other than an
Existing Holder) Beneficially Owning Shares in excess of the Ownership
Limit shall be void ab initio as to the Transfer of that number of
Shares which would be otherwise Beneficially Owned by such Person in
excess of the Ownership Limit and the intended transferee shall acquire
no rights in such Shares in excess of the Ownership Limit; and (3) any
Transfer of Shares that, if effective, would result in the Corporation being
"closely held" within the meaning of Section 883 of the Code and the
regulations promulgated thereunder shall be void ab initio as to the
Transfer of that number of Shares which would cause the Corporation to be
"closely held" within the meaning of Section 883 of the Code and the regulations
promulgated thereunder and the intended transferee shall acquire no rights in
such Shares.
(c) Excess Shares.
(1) If, notwithstanding the other provisions contained in these
Articles, at any time from the Amendment Date until the Restriction
Termination Date, there is a purported Transfer or other event such that any
Person (other than an Existing Holder) would Beneficially Own Shares in
excess of the Ownership Limit, then, except as otherwise provided in
Section 4(i) hereof, such Shares which would be in excess of the
Ownership Limit (rounded up to the nearest whole
share), shall automatically be designated as Excess Shares (without
reclassification), as further described in Section 4(c)(3) hereof. The
designation of such Shares as Excess Shares shall be effective as of the close
of business on the business day prior to the date of the Transfer or other
event. If, after designation of such Shares owned directly by a Person as
Excess Shares, such Person still owns Shares in excess of the applicable
Ownership Limit, Shares Beneficially Owned by such Person constructively in
excess of the Ownership Limit shall be designated as Excess Shares until such
Person does not own Shares in excess of the applicable Ownership Limit. Where
such Person owns Shares constructively through one or more Persons and the
Shares held by such other Persons must be designated as Excess Shares, the
designation of Shares held by such other Persons as Excess Shares shall be pro
rata.
(2) If, notwithstanding the other provisions contained in these
Articles, at any time from the Amendment Date until the Restriction
Termination Date, there is a purported Transfer or other event which, if
effective, would cause the Corporation to become "closely held" within the
meaning of Section 883 of the Code and regulations promulgated there-
under, then, except as otherwise provided in Section 4(i) hereof, the
Shares being Transferred or which are otherwise affected by such event
and which, in either case, would cause, when taken together with all
other Shares, the Corporation to be "closely held"
within the meaning of Section 883 of the Code and the regulations promulgated
thereunder (rounded up to the nearest whole share) shall automatically be
designated as Excess Shares (without reclassification). The designation of such
Shares as Excess Shares shall be effective as of the close of business on the
business day prior to the date of the Transfer or other event. If, after
designation of such Shares owned directly by a Person as Excess Shares, such
Person still owns Shares in excess of the applicable Ownership Limit, Shares
Beneficially Owned by such Person constructively in excess of the Ownership
Limit shall be designated as Excess Shares until such Person does not own Shares
in excess of the applicable Ownership Limit. Where such Person owns Shares
constructively through one or more Persons and the Shares held by such other
Persons must be designated as Excess Shares, the designation of Shares held by
such other Persons as Excess Shares shall be pro rata.
(d) Remedies for Breach.
If the Board of Directors or their designees shall at any time determine in
good faith that a purported Transfer or other event has taken place in violation
of Section 4(b) hereof or that a Person intends to acquire or has attempted to
acquire Beneficial Ownership of any Shares in violation of Section 4(b) hereof,
the Board of Directors or their designees may take such action as they deem
advisable to refuse to give effect to or to prevent such Transfer or other
event, including, but not limited to, refusing to give effect to such Transfer
or other event on the books of the Corporation or instituting proceedings to
enjoin such Transfer or other event or transaction; provided, however, that any
Transfers or attempted Transfers (or, in the case of events other than a
Transfer, Beneficial Ownership) in violation of Section 4(b) hereof shall be
void ab initio and automatically result in the designation and treatment
described in Section 4(c) hereof, irrespective of any action (or non-action) by
the Board of Directors or their designees.
(e) Notice of Restricted Transfer.
Any Person who acquires or attempts to acquire Shares in violation of
Section 4(b) hereof, or any Person who is a purported transferee such that
Excess Shares result under Section 4(c) hereof, shall immediately give written
notice to the Corporation of such Transfer, attempted Transfer or other event
and shall provide to the Corporation such other information as the Corporation
may request in order to determine the effect, if any, of such Transfer or
attempted Transfer or other event on the Corporation's status as qualifying for
exemption from taxation on gross income from the international operation of a
ship or ships within the meaning of Section 883 of the Code.
(f) Owners Required to Provide Information.
After the Amendment Date and prior to the Restriction Termination Date: (1)
Every Beneficial Owner of three percent (3%) or more, by vote, value or number,
or such lower percentages as required pursuant to regulations under the Code, of
the outstanding Shares shall promptly after becoming such a three percent (3%)
Beneficial Owner, give written notice to the Corporation stating the name and
address of such Beneficial Owner, the general ownership structure of such
Beneficial Owner, the number of shares of each class of Shares Beneficially
Owned, and a description of how such Shares are held. (2) Each Person who is a
Beneficial Owner of Shares and each Person (including the shareholder of record)
who is holding Shares for a Beneficial Owner shall provide on demand to the
Corporation such information as the Corporation may request from time to time in
order to determine the Corporation's status as exempt from taxation on gross
income from the international operation of a ship or ships within the meaning of
Section 883 of the Code and to ensure compliance with the Ownership Limit.
(g) Remedies Not Limited.
Subject to Section 4(l) hereof, nothing contained in these Articles shall
limit the authority of the Board of Directors to take such other action as they
deem necessary or advisable to protect the interests of the Corporation's
shareholders by preservation of the Corporation's status as exempt from taxation
on gross income from the international operation of a ship or ships within the
meaning of Section 883 of the Code and to ensure compliance with the Ownership
Limit.
(h) Ambiguity.
In the case of an ambiguity in the application of any of the provisions of
these Articles, including any definition contained in Section 4(a) hereof, the
Board of Directors shall have the power to determine the application of the
provisions of these Articles with respect to any situation based on the facts
known to them.
(i) Exception.
The Board of Directors upon receipt of a ruling from the Internal Revenue
Service or an opinion of tax counsel, satisfactory to them in their sole and
absolute discretion, in each case to the effect that the Corporation's status as
exempt from taxation on gross income from the international operation of a ship
or ships within the meaning of Section 883 of the Code will not be jeopardized,
may exempt a Person (or may generally exempt any class of Persons) from the
Ownership Limit if the Board of Directors, in its sole discretion, ascertains
that such Person's (or Persons') Beneficial Ownership of Shares will not
jeopardize the Corporation's status as exempt from taxation on gross income from
the international operation of a ship or ships within the meaning of Section 883
of the Code. The Board of Directors may require representation and undertakings
from such Person or Persons as are necessary to make such determination.
(j) Legend.
After the Amendment Date, and prior to the Restriction Termination Date,
each certificate for the Shares shall bear the following legend:
The Shares represented by this certificate are subject to restrictions on
transfer. Unless excepted by the Board of Directors or exempted by the terms of
the Articles of Incorporation of Carnival Corporation, no Person may (1)
Beneficially Own Shares in excess of 4.9% of the outstanding Shares, by value,
vote or number, determined as provided in the Articles of Incorporation of
Carnival Corporation, and computed with regard to all outstanding Shares and, to
the extent provided by the Code, all Shares issuable under existing options and
exchange rights that have not been exercised; or (2) Beneficially Own Shares
which would result in the Corporation being "closely held". Unless so excepted,
any acquisition of Shares and continued holding of ownership constitutes a
continuous representation of compliance with the above limitations, and any
Person who attempts to Beneficially Own Shares in excess of the above
limitations has an affirmative obligation to notify the Corporation immediately
upon such attempt. If the restrictions on transfer are violated, the transfer
will be void ab initio and the Shares represented hereby will be designated and
treated as Excess Shares that will be held in trust. Excess Shares may not be
transferred at a profit and may be purchased by the Corporation. In addition,
certain Beneficial Owners must give written notice as to certain information on
demand and on exceeding certain ownership levels. All terms not defined in this
legend have the meanings provided in the Articles of Incorporation of Carnival
Corporation. The Corporation will mail without charge to any requesting
shareholder a copy of the Articles of Incorporation, including the express terms
of each class and series of the authorized Shares of the Corporation, within
five (5) days after receipt of a written request therefor.
(k) Severability.
If any provision of Article 4 or 5 or any application of any such provision
is determined to be invalid by any Panamanian court or United States Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected, and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
(l) New York Stock Exchange Transactions.
Nothing in these Articles shall preclude the settlement of any transaction
entered into through the facilities of the New York Stock Exchange. The fact
that the settlement of any transaction occurs shall not negate the effect of any
other provision of these Articles and any transferee in such a transaction shall
be subject to all the provisions and limitations set forth in these Articles.
Article 5. Excess Shares.
(a) Ownership In Trust.
Upon any purported Transfer or other event that results in Excess
Shares pursuant to Section 4(c) hereof, such Excess Shares shall be deemed to
have been transferred to the Excess Share Trustee, as trustee of the Excess
Share Trust, for the benefit of the Charitable Beneficiary effective as
of the close of business on the business day prior to the date of the
Transfer or other event. Excess Shares so held in trust shall be issued
and outstanding shares of the Corporation. The Purported Record Transferee
or Purported Record Holder shall have no rights in such Excess Shares.
The Purported Beneficial Transferee or Purported Beneficial Holder shall
have no rights in such Excess Shares except as provided in Section 5(c) or
(e). The Excess Share Trustee may resign at any time so long as the
Corporation shall have appointed a successor trustee. The
Excess Share Trustee shall, from time to time, designate one or more charitable
organization or organizations as the Charitable Beneficiary.
(b) Dividend Rights.
Excess Shares shall be entitled to the same dividends determined as if
the designation of Excess Shares had not occurred. Any dividend or distribution
paid prior to the discovery by the Corporation that the Shares have been
designated as Excess Shares shall be repaid to the Excess Share Trust upon
demand. Any dividend or distribution declared but unpaid shall be paid to the
Excess Share Trust. All dividends received or other income earned by the Excess
Share Trust shall be paid over to the Charitable Beneficiary.
(c) Rights Upon Liquidation.
Upon liquidation, dissolution or winding up of the Corporation, the
Purported Beneficial Transferee or Purported Beneficial Holder shall receive,
for each Excess Share, the lesser of (1) the amount per share of any
distribution made upon liquidation, dissolution or winding up or (2) (x) in the
case of Excess Shares resulting from a purported Transfer, the price per share
of the Shares in the transaction that created such Excess Shares (or, in the
case of the devise, gift or other similar event, the Market Price of such Shares
on the date of such devise, gift or other similar event) or (y) in the case of
Excess Shares resulting from an event other than a purported Transfer, the
Market Price of the Shares on the date of such event. Any amounts received in
excess of such amount shall be paid to the Charitable Beneficiary.
(d) Voting Rights.
The Excess Share Trustee shall be entitled to vote the Excess Shares on
behalf of the Charitable Beneficiary on any matter. Subject to Panamanian law,
any vote cast by a Purported Record Transferee with respect to the Excess Shares
prior to the discovery by the Corporation that the Excess Shares were held in
trust will be rescinded ab initio; provided, however, that if the Corporation
has already taken irreversible action with respect to a merger, reorganization,
sale of all or substantially all the assets, dissolution of the Corporation or
other action by the Corporation, then the vote cast by the Purported Record
Transferee shall not be rescinded. The purported owner of the Excess Shares
will be deemed to have given an irrevocable proxy to the Excess Share Trustee to
vote the Excess Shares for the benefit of the Charitable Beneficiary.
Notwithstanding the provisions of these Articles, until the Corporation has
received notification that Excess Shares have been transferred into an Excess
Share Trust, the Corporation shall be entitled to rely on its share transfer and
other stockholder records for purposes of preparing lists of shareholders
entitled to vote at meetings, determining the validity and authority of proxies
and otherwise conducting votes of shareholders.
(e) Restrictions On Transfer; Designation of Excess Share Trust
Beneficiary.
Excess Shares shall be transferable only as provided in this Section 5(e).
At the direction of the Board of the Directors, the Excess Share Trustee shall
transfer the Excess Shares held in the Excess Share Trust to a Person or Persons
(including, without limitation, the Corporation under Section 5(f) below) whose
ownership of such Shares shall not violate the Ownership Limit or otherwise
cause the Corporation to become "closely held" within the meaning of Section 883
of the Code within 180 days after the later of (i) the date of the Transfer or
other event which resulted in Excess Shares and (ii) the date the Board of
Directors determines in good faith that a Transfer or other event resulting in
Excess Shares has occurred, if the Corporation does not receive a notice of such
Transfer or other event pursuant to Section 4(e) hereof. If such a transfer is
made, the interest of the Charitable Beneficiary shall terminate, the
designation of such Shares as Excess Shares shall thereupon cease and a payment
shall be made to the Purported Beneficial Transferee, Purported Beneficial
Holder and/or the Charitable Trustee as described below. If the Excess Shares
resulted from a purported Transfer, the Purported Beneficial Transferee shall
receive a payment from the Excess Share Trustee that reflects a price per share
for such Excess Shares equal to the lesser of (A) the price per share received
by the Excess Share Trustee and (B) (x) the price per share such Purported
Beneficial Transferee paid for the Shares in the purported Transfer that
resulted in the Excess Shares, or (y) if the Purported Beneficial Transferee did
not give value for such Excess Shares (through a gift, devise or other similar
event) a price per share equal to the Market Price of the Shares on the date of
the purported Transfer that resulted in the Excess Shares. If the Excess Shares
resulted from an event other than a purported Transfer, the Purported Beneficial
Holder shall receive a payment from the Excess Share Trustee that reflects a
price per share of Excess Shares equal to the lesser of (A) the price per share
received by the Excess Share Trustee and (B) the Market Price of the Shares on
the date of the event that resulted in Excess Shares. Prior to any transfer of
any interest in the Excess Share Trust, the Corporation must have waived in
writing its purchase rights, if any, under Section 5(f) hereof. Any funds
received by the Excess Share Trustee in excess of the funds payable to the
Purported Beneficial Holder or the Purported Beneficial Transferor shall be paid
to the Charitable Beneficiary. The Corporation shall pay the costs and expenses
of the Excess Share Trustee.
Notwithstanding the foregoing, if the provisions of this Section 5(e) are
determined to be void or invalid by virtue of any legal decision, statute, rule
or regulation, then the Purported Beneficial Transferee or Purported Beneficial
Holder of any shares of Excess Shares may be deemed, at the option of the
Corporation, to have acted as an agent on behalf of the Corporation, in
acquiring or holding such Excess Shares and to hold such Excess Shares on behalf
of the Corporation.
(f) Purchase Right in Excess Shares.
Excess Shares shall be deemed to have been offered for sale by the Excess
Share Trustee to the Corporation, or its designee, at a price per Excess Share
equal to (i) in the case of Excess Shares resulting from a purported Transfer,
the lesser of (A) the price per share of the Shares in the transaction that
created such Excess Shares (or, in the case of devise, gift or other similar
event, the Market Price of the Shares on the date of such devise, gift or other
similar event), or (B) the lowest Market Price of the class of Shares which
resulted in the Excess Shares at any time after the date such Shares were
designated as Excess Shares and prior to the date the Corporation, or its
designee, accepts such offer or (ii) in the case of Excess Shares resulting from
an event other than a purported Transfer, the lesser of (A) the Market Price of
the Shares on the date of such event or (B) the lowest Market Price for Shares
which resulted in the Excess Shares at any time from the date of the event
resulting in such Excess Shares and prior to the date the Corporation, or its
designee, accepts such offer. The Corporation shall have the right to accept
such offer for a period of ninety (90) days after the later of (i) the date of
the Transfer or other event which resulted in such Excess Shares and (ii) the
date the Board of Directors determines in good faith that a Transfer or other
event resulting in Excess Shares has occurred, if the Corporation does not
receive a notice of such Transfer or other event pursuant to Section 4(e)
hereof.
(g) Underwritten Offerings.
The Ownership Limit shall not apply to the acquisition of Shares or rights,
options or warrants for, or securities convertible into, Shares by an
underwriter in a public offering or placement agent in a private offering,
provided that the underwriter makes a timely distribution of such Shares or
rights, options or warrants for, or securities convertible into, Shares.
(h) Enforcement.
The Corporation is authorized specifically to seek equitable relief,
including injunctive relief, to enforce the provisions of these Articles.
(i) Non-Waiver.
No delay or failure on the part of the Corporation or the Board of
Directors in exercising any right hereunder shall operate as a waiver of any
right of the Corporation or the Board of Directors, as the case may be,
except to the extent specifically waived in writing.
(j) No Trust Business.
Notwithstanding anything to the contrary included in these Articles, the
creation and continued existence of the Excess Share Trust may not be regarded
as constituting the exercise by the Excess Share Trustee of trust business in
Panama in violation of the trust laws of Panama."
Signed in Miami Florida, on the 18th day of the month of April 2000.
BY /s/ M. MICKY ARISON BY /S/ ARNALDO PEREZ
M. MICKY ARISON ARNALDO PEREZ
President Secretary
C E R T I F I C A T I O N
CARNIVAL CORPORATION
We, the undersigned, M. MICKY ARISON and ARNALDO PEREZ, President and
Secretary, respectively, of CARNIVAL CORPORATION hereby certify that we have
been duly authorized to execute the foregoing Certificate of Amendment of the
Articles of CARNIVAL CORPORATION by resolution adopted by the holders or the
proxies of the majority of the issued and outstanding shares with the right to
vote at a shareholders meeting duly held at Miami, Florida, on the 10th April
2000, pursuant to notice, and we further certify that ARIAS, FABREGA & FABREGA
have been authorized and directed to have a copy of this Certificate of
Amendment protocolized by a Notary Public and to take all actions necessary in
order to record at the Office of the Public Registry of Panama a copy of the
Public Instrument that protocolizes this Certificate of Amendment.
Signed in Miami, Florida, on the 18th day of the month of April, 2000.
BY /s/ M. MICKY ARISON BY /S/ ARNALDO PEREZ
M. MICKY ARISON ARNALDO PEREZ
President Secretary
EXHIBIT 12
CARNIVAL CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
<TABLE>
<CAPTION>
Six Months Ended May 31,
2000 1999
<S> <C> <C>
Net income $375,473 $361,103
Income tax benefit (7,291) (7,645)
Income before income tax benefit 368,182 353,458
Adjustment to Earnings:
Minority interest 1,642
Dividends received less loss
from affiliate operations, net 19,019 19,017
Earnings as adjusted 387,201 374,117
Fixed Charges:
Interest expense, net 15,460 26,880
Interest portion of rent expense(1) 1,672 1,683
Capitalized interest 21,532 19,915
Total fixed charges 38,664 48,478
Fixed charges not affecting earnings:
Capitalized interest (21,532) (19,915)
Earnings before fixed charges $404,333 $402,680
Ratio of earnings to fixed charges 10.5x 8.3x
</TABLE>
(1) Represents one-third of rent expense, which management believes
to be representative of the interest portion of rent expense.
