FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 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)
Registrant's telephone number, including area code (305) 599-2600
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
Common Stock New York Stock
($.01 par value) Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in any definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant is approximately $11,919,000 based upon the closing
market price on February 14, 2000 of a share of Common Stock on the New
York Stock Exchange as reported by the Wall Street Journal.
At February 14, 2000, the Registrant had outstanding 617,254,814 shares of
its Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
The information described below and contained in the Registrant's 1999
annual report to shareholders to be furnished to the Commission pursuant to Rule
14a-3(b) of the Exchange Act is shown in Exhibit 13 and is incorporated by
reference into this Annual Report on Form 10-K.
Part and Item of the Form 10-K
Part II
Item 5(a) and (b). Market for the Registrant's Common Equity and Related
Stockholder Matters - Market Information and Holders
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
Item 8. Financial Statements and Supplementary Data
The information described below and contained in the Registrant's 2000
definitive Proxy Statement, to be filed with the Commission is incorporated
therein by reference into this Annual Report on Form 10-K.
Part and Item of the Form 10-K
Part III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART I
Item 1. Business
A. General
Carnival Corporation was incorporated under the laws of the Republic of
Panama in November 1974. Carnival Corporation, including its consolidated
subsidiaries (referred to collectively as the "Company"), is the world's largest
multiple-night cruise company based on the number of passengers carried,
revenues generated and available capacity. The Company offers a broad range of
cruise brands serving the contemporary cruise sector of the vacation market
through Carnival Cruise Lines ("Carnival"), the premium cruise sector through
Holland America Line ("Holland America") and the luxury cruise sector through
Cunard Line ("Cunard"), Seabourn Cruise Line ("Seabourn") and Windstar Cruises
("Windstar") (collectively the "Wholly Owned Cruise Operations"). The Company
also owns equity interests in Costa Crociere S.p.A. ("Costa"), an Italian cruise
company, and Airtours plc ("Airtours"), an integrated leisure travel group of
companies which also operates cruise ships (collectively the "Affiliated Cruise
Operations"). Costa and Airtours' Sun Cruises target the contemporary cruise
sector.
A summary of the cruise operations of the Company and its affiliates is as
follows:
<TABLE>
<CAPTION>
PERCENTAGE
OWNED BY PRIMARY
CRUISE CARNIVAL NUMBER PASSENGER GEOGRAPHIC
BRAND CORPORATION OF SHIPS CAPACITY(1) MARKET
<S> <C> <C> <C> <C>
Wholly Owned Cruise
Operations:
Carnival 100% 14 27,254 North America
Holland America 100% 9 11,742 North America
Cunard (2) 100% 2 2,444 Worldwide
Seabourn (2) 100% 6 1,614 North America
Windstar 100% 4 756 North America
35 43,810
Affiliated Cruise
Operations:
Costa 50%(3) 6 7,103 Europe
Airtours' Sun Cruises 26% 4 4,322 Europe
10 11,425
45 55,235
</TABLE>
(1) In accordance with cruise industry practice, all passenger capacities
indicated within this Annual Report on Form 10-K are calculated based on two
passengers per cabin even though some cabins can accommodate three or four
passengers.
(2) In November 1999, the Company acquired the 32% minority interest of Cunard
Line Limited, which owns and operates the Cunard and Seabourn cruise brands, for
$203.5 million. See Note 12 to the Company's Consolidated Financial Statements
in Exhibit 13 to this Annual Report on Form 10-K.
(3) The 50% equity interest of Costa not owned by the Company is owned by
Airtours. Including the Company's interest in Airtours, it beneficially owns 63%
of Costa.
The Company has signed agreements with two shipyards providing for the
construction of additional cruise ships. A summary of new ship agreements for
the Company's Wholly Owned Cruise Operations is as follows:
<TABLE>
<CAPTION>
EXPECTED
SERVICE PASSENGER
VESSEL DATE(1) CAPACITY
Carnival:
<S> <C> <C>
Carnival Victory 9/00 2,758
Carnival Spirit 4/01 2,120
Carnival Pride 1/02 2,120
Carnival Legend 8/02 2,120
Carnival Conquest 12/02 2,758
Carnival Glory 8/03 2,758
Total Carnival 14,634
Holland America:
Zaandam 5/00 1,440
Amsterdam 11/00 1,380
Newbuild 10/02 1,820
Newbuild 8/03 1,820
Newbuild 01/04 1,820
Newbuild 09/04 1,820
Total Holland America 10,100
Total (2) 24,734
</TABLE>
(1) The expected service date is the date the vessel is expected to begin
revenue generating activities.
(2) The Company also has one option for the construction of an additional
vessel with a passenger capacity of 1,820. No assurance can be given that
this option to construct the vessel will be exercised.
In addition to its cruise operations, the Company operates a tour business,
through Holland America Line-Westours Inc. ("Holland America Westours"), which
markets sightseeing tours both separately and as a part of Holland America
Westours cruise/tour packages. Holland America Westours operates 14 hotels in
Alaska and the Canadian Yukon, two luxury dayboats offering tours to the
glaciers of Alaska and the Yukon River, over 280 motor coaches used for
sightseeing and charters in the states of Washington and Alaska and in the
Canadian Rockies and 13 private domed rail cars which are run on the Alaska
Railroad between Anchorage and Fairbanks.
B. Cruise Ship Segment - Wholly Owned Cruise Operations
North American Cruise Industry
The passenger cruise industry as it exists today began in approximately
1970. Over time, the industry has evolved from a trans-ocean carrier service
into a vacation alternative to land-based resorts and sightseeing destinations.
According to Cruise Lines International Association ("CLIA"), an industry trade
group, in 1970 approximately 500,000 North American passengers took cruises of
three consecutive nights or more. CLIA estimates that this number reached 5.9
million passengers in 1999, an average compound annual growth rate of 8.9% since
1970. Also, according to CLIA, by the end of 1999 the number of ships in service
totaled 145 with an aggregate capacity of approximately 148,000 lower berths.
CLIA estimates that the number of passengers carried in North America increased
from 5.4 million in 1998 to 5.9 million in 1999 or 8.6%.
CLIA estimates that the number of cruise passengers will grow to
approximately 6.3 million in 2000. CLIA projections indicate that by the end of
2000, 2001, 2002 and 2003, North America will be served by 156, 168,176 and 181
vessels, respectively, having an aggregate capacity of approximately 164,000,
181,000, 198,000 and 209,000 lower berths, respectively. CLIA's estimates of new
ship introductions are based on scheduled ship deliveries and could change. The
lead time for design, construction and delivery of a typical large cruise ship
is approximately two to three years. Additionally, CLIA's estimates of capacity
do not include assumptions related to unannounced ship withdrawals due to age or
changes in itineraries and, accordingly, could indicate a higher percentage
growth in capacity than will actually occur. Nonetheless, management believes
net capacity serving North American cruise passengers will increase over the
next several years.
CLIA's estimate of North American cruise passengers and passenger berths is as
follows:
<TABLE>
<CAPTION>
NORTH AMERICAN NORTH AMERICAN
CRUISE PASSENGER
YEAR PASSENGERS(1) BERTHS(2)
<S> <C> <C>
1999 5,900,000(est) 148,000
1998 5,432,000 138,000
1997 5,051,000 118,000
1996 4,659,000 110,000
1995 4,378,000 105,000
</TABLE>
(1) Source: CLIA estimates based on passengers carried for at least three
consecutive nights for the calendar year.
(2) Information presented is as of the end of the year.
In spite of the cruise industry's growth since 1970, management believes
cruises only represent approximately 2% of the applicable North American
vacation market, defined as persons who travel for leisure purposes on trips of
three nights or longer involving at least three night's stay in a hotel. Only an
estimated 11% of the North American population has ever taken a cruise.
Passengers and Berths
The Company's Wholly Owned Cruise Operations had worldwide cruise
passengers and passenger berths as follows:
<TABLE>
<CAPTION>
CRUISE PASSENGER
YEAR PASSENGERS BERTHS(1)
<S> <C> <C>
1999 2,366,000 43,810
1998 2,045,000 39,466
1997 1,945,000 31,078
1996 1,764,000 30,837
1995 1,543,000 26,035
</TABLE>
(1) Information presented is as of the end of the Company's fiscal year.
The Company's passenger capacity has grown from 26,035 at November 30, 1995
to 43,810 at November 30, 1999. During 1996, gross capacity increased by 5,960
berths due to delivery of the Inspiration, the Veendam and the Carnival Destiny
which was partially offset by the 1,146 berth decrease due to the sale of the
Festivale, for a total net increase of 4,802. In 1997 gross capacity increased
1,316 berths due to the delivery of the Rotterdam VI which was offset by the
1,075 berth decrease due to the sale of the Rotterdam V for a total net increase
of 241. During 1998, with the delivery of the Elation and the Paradise, the
purchase of the Wind Surf, the acquisition of Cunard and the consolidation of
Seabourn, capacity increased by 8,388 berths. In 1999 capacity increased by
4,344 berths primarily due to the delivery of the Carnival Triumph and the
Volendam.
Cruise Ships and Itineraries
Under the Carnival name, the Company serves the contemporary sector of the
vacation market with 14 ships (the "Carnival Ships"). All of the Carnival Ships
were designed by and built for Carnival, including two of the world's largest,
the Carnival Destiny and the Carnival Triumph. Ten of the Carnival Ships operate
in the Caribbean during all or a portion of the year and two Carnival Ships call
on ports on the Mexican Riviera year round. Carnival Ships also offer cruises to
Alaska, Canada, the Hawaiian Islands, the Bahamas and the Panama Canal.
Through its wholly owned subsidiary, HAL Antillen, N.V. ("HAL"), the
Company operates nine ships serving the premium sector of the vacation market
under the Holland America name (the "Holland America Ships"). HAL also operates
four sailing ships in the luxury cruise sector under the Windstar name (the
"Windstar Ships").
The Holland America Ships offer premium cruises of various lengths in
Alaska, the Caribbean, Panama Canal, Europe, Hawaii, South America and other
worldwide itineraries. Cruise lengths vary from seven to 98 days, with a large
proportion of cruises being seven or ten days in length. Periodically, the
Holland America Ships make longer cruises or operate on special itineraries. For
example, in 1999, the Rotterdam made a 98-day world cruise and the Nieuw
Amsterdam made a series of 14-day South China Sea Explorer cruises. Holland
America will continue to offer these special or longer itineraries in order to
increase travel opportunities for its customers and strengthen its cruise
offerings in view of the fleet expansion. The majority of the Holland America
Ships operate in the Caribbean during fall to spring and in Alaska and Europe
during spring to fall. In order to offer a unique destination , to compete more
effectively with land based vacation alternatives, and to compete with other
cruise lines more effectively while operating in the Caribbean, in December 1997
Holland America introduced into its Caribbean itineraries a private island, Half
Moon Cay. Half Moon Cay is a 2400-acre island acquired by Holland America in
December 1996. Facilities were constructed on the island on 45 acres along a
crescent-shaped white sand beach. The remainder of the island remains
undeveloped. The facilities on Half Moon Cay include bars, shops, restrooms, a
post office, a chapel and an ice cream shop, as well as a food pavilion with
open-air dining shelters and a bandstand.
The four Windstar Ships currently operate in the Caribbean, Europe and
Central America and offer a casual, yet luxurious, cruise experience on board
these modern sail ships.
Under the Cunard brand, the Company operates two ships which offer classic
"Old World" cruising and recreate the golden age of ocean liner travel with a
British style and essence serving the luxury sector of the vacation market.
Cunard's flagship, the Queen Elizabeth 2 ("QE2"), offers the only remaining
scheduled transatlantic ocean liner service between the U.S. and Britain. Both
ships offer cruises to worldwide destinations, with many of the cruises ranging
between 10 and 21 days in length. Periodically, the Cunard ships offer extended
cruises, such as a 104-day world cruise or Cape Town Line Voyages between
Southampton, England and Cape Town, South Africa.
The six Seabourn Ships offer a choice of three distinct styles of luxury
cruises aboard intimately sized ships. Seabourn is marketed as the "world's
most celebrated cruise line" because of its intense focus on personalized
service and extraordinary cuisine. These ships concentrate their operations in
the Caribbean, Mediterranean, Baltic and Western Europe with cruises in the
seven to 14 day range and also make extended cruises to various other worldwide
destinations, including South America, Australia, the South Pacific and
Southeast Asia.
Summary information concerning the Company's ships is as
follows (primary areas of operation reflect 1999 itineraries and
are subject to change in future years).
<TABLE>
<CAPTION>
APPROXIMATE
GROSS PRIMARY
YEAR PAX REGISTERED AREAS OF
NAME REGISTRY BUILT CAP TONS OPERATION
<S> <C> <C> <C> <C> <C>
Carnival:
Carnival Triumph Panama 1999 2,758 102,000 Caribbean,
Eastern Canada
Paradise Panama 1998 2,052 70,000 Caribbean
Elation Panama 1998 2,052 70,000 Mexican Riviera
Carnival Destiny Panama 1996 2,642 101,000 Caribbean
Inspiration Panama 1996 2,052 70,000 Caribbean
Imagination Panama 1995 2,052 70,000 Caribbean
Fascination Panama 1994 2,052 70,000 Caribbean
Sensation Panama 1993 2,052 70,000 Caribbean
Ecstasy Liberia 1991 2,052 70,000 Caribbean
Fantasy Liberia 1990 2,056 70,000 Bahamas
Celebration Liberia 1987 1,486 47,000 Caribbean
Jubilee Panama 1986 1,486 47,000 Alaska, Hawaii,
Mexican Riviera,
Panama Canal
Holiday Panama 1985 1,448 46,000 Mexican Riviera
Tropicale Liberia 1982 1,014 37,000 Caribbean
Total Carnival Ships Capacity..... 27,254
Holland America:
Volendam Netherlands 1999 1,440 63,000 Caribbean (1)
Rotterdam Netherlands 1997 1,316 62,000 Europe,
Worldwide
Veendam Bahamas 1996 1,266 55,000 Alaska,
Caribbean
Ryndam Netherlands 1994 1,266 55,000 Alaska, Caribbean
Maasdam Netherlands 1993 1,266 55,000 Eastern Canada,
Europe,
Panama Canal
Statendam Netherlands 1993 1,266 55,000 Alaska, Hawaii,
Caribbean, Mexico
Westerdam Netherlands 1986 1,494 54,000 Alaska, Caribbean
Noordam Netherlands 1984 1,214 34,000 Alaska, Caribbean,
South America
Nieuw Amsterdam (2) Netherlands 1983 1,214 34,000 Alaska, Caribbean,
Asia/Pacific
Total Holland America
Ships Capacity................... 11,742
Windstar Cruises:
Wind Surf Bahamas 1990 312 14,750 Caribbean, Europe
Wind Spirit Bahamas 1988 148 5,700 Caribbean, Europe
Wind Song Bahamas 1987 148 5,700 Central America,
Europe
Wind Star Bahamas 1986 148 5,700 Caribbean,
Central America
Total Windstar Ships Capacity..... 756
APPROXIMATE
GROSS PRIMARY
YEAR PAX REGISTERED AREAS OF
NAME REGISTRY BUILT CAP TONS OPERATION
Cunard:
Caronia England 1973 666 24,500 Caribbean, Europe,
Pacific
Queen Elizabeth 2 England 1969 1,778 70,000 Transatlantic,
Worldwide
Total Cunard Ships Capacity....... 2,444
Seabourn:
Seabourn Legend Norway 1992 208 10,000 Caribbean, Europe
Seabourn Spirit Norway 1989 208 10,000 Asia, Europe
Seabourn Pride Norway 1988 208 10,000 South America,
Europe, Caribbean
Seabourn Sun Bahamas 1988 758 38,000 Caribbean, Europe,
Pacific
Seabourn Goddess II Bahamas 1985 116 4,250 Asia, Caribbean,
Europe
Seabourn Goddess I Bahamas 1984 116 4,250 Caribbean, Europe
Total Seabourn Ships Capacity..... 1,614
Total Capacity....................... 43,810
</TABLE>
(1) The Volendam was in service for only 18 days during fiscal
1999. During fiscal 2000, the primary areas of operations are
expected to be Alaska and the Caribbean.
(2) In late 2000, this ship is contracted to be sold to a third
party.
__________________________
Cruise Ship Construction
The Company has signed agreements with two shipyards providing for the
construction of additional cruise ships. A summary of new ship agreements for
the Company's Wholly Owned Cruise Operations is as follows:
APPROXIMATE
<TABLE>
<CAPTION>
EXPECTED GROSS ESTIMATED
SERVICE PAX REGISTERED TOTAL
VESSEL DATE(1) SHIPYARD CAP TONS COST(2)
<S> <C> <C> <C> <C> <C>
(In millions)
Carnival
Carnival Victory 9/00 Fincantieri 2,758 101,000 450
Carnival Spirit 4/01 Masa-Yards 2,120 84,000 375
Carnival Pride 1/02 Masa-Yards (3) 2,120 84,000 375
Carnival Legend 8/02 Masa-Yards (3) 2,120 84,000 375
Carnival Conquest 12/02 Fincantieri 2,758 101,000 450
Carnival Glory 8/03 Fincantieri 2,758 101,000 450
Total Carnival Ships 14,634 2,475
Holland America
Zaandam 5/00 Fincantieri(4) 1,440 63,000 300
Amsterdam 11/00 Fincantieri 1,380 62,000 300
Newbuild 10/02 Fincantieri(4) 1,820 84,000 400
Newbuild 8/03 Fincantieri(4) 1,820 84,000 400
Newbuild 1/04 Fincantieri(4) 1,820 84,000 400
Newbuild 9/04 Fincantieri(4) 1,820 84,000 400
Total Holland America Ships 10,100 2,200
Total (5) 24,734 $4,675
</TABLE>
(1) No assurance can be made that the vessels under construction will be
introduced into service by the expected service date.
(2) Estimated total cost of the completed vessel includes the contract price
with the shipyard, design and engineering fees, capitalized interest, various
owner supplied items and construction oversight costs.
(3) These construction contracts are denominated in German Deutsche Marks and
have been fixed into U.S. dollars through the utilization of forward foreign
currency contracts.
(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.
(5) The Company has one option for the construction of an additional 84,000
gross registered ton vessel for Holland America, with a passenger capacity of
1,820 to be delivered in 2005. The estimated total vessel cost of approximately
$400 million is denominated in Italian Lira. No assurance can be given that the
option to construct the vessel will be exercised.
Cruise Pricing
Each of the Company's cruise brands publishes brochures with prices for the
upcoming seasons. Brochure prices vary by cruise line, by category of cabin, by
ship and itinerary. Brochure prices are regularly discounted through the
Company's early booking discount program and other promotions. The cruise price
includes all meals and entertainment on board and use of, or admission to, a
wide variety of activities and facilities, such as a fully equipped casino,
nightclubs, theatrical shows, movies, parties, a discotheque, a health club and
swimming pools, on each ship.
Onboard and Other Revenues
The Company derives revenues from certain onboard activities and services
including casino gaming, bar sales, gift shop sales, entertainment arcades,
shore tours, art auctions, photography, spa services and promotional advertising
by merchants located in ports of call.
The casinos, which contain slot machines and gaming tables including
blackjack, and in most cases craps, roulette and stud poker, are generally open
only when the ships are at sea in international waters. The Company also earns
revenue from the sale of alcoholic and other beverages. Onboard activities are
either performed directly by the Company or by independent concessionaires, from
which the Company collects a percentage of revenues.
The Company receives additional revenue from the sale to its passengers of
shore excursions at each ship's ports of call. They include bus and taxi
sightseeing excursions, local boat and beach parties, and nightclub and casino
visits. On the Carnival, Windstar, Cunard and Seabourn Ships, such shore
excursions are primarily operated by independent tour operators. On the Holland
America Ships, shore excursions are operated by Holland America Westours and
independent parties.
In conjunction with its cruise vacations on its ships, all of the Company's
cruise brands sell pre-cruise and post-cruise land packages. Carnival packages
generally include one, two or three-night vacations at nearby attractions, such
as Universal Studios and Walt Disney World in Orlando, Florida, or in proximity
to other vacation destinations in Central and South Florida, Los Angeles,
California and San Juan, Puerto Rico. Holland America packages outside of Alaska
generally include one, two or three-night vacations, including stays in unique
European port cities or near attractions in Central and South Florida. Cunard
and Seabourn packages include numerous luxury and/or exotic pre and post-cruise
land programs, such as world class golf programs, wine tastings and tours of the
Galapagos Islands and the Hidden Kingdoms of Nepal.
In conjunction with its Alaskan cruise vacations on its Holland America and
Carnival Ships, the Company sells pre and post-cruise land packages which are
more fully described in Part I, Item 1. Business, C. Tour Segment.
Passengers and Occupancy
The aggregate number of passengers carried and occupancy percentage for the
Company's ships is as follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
1999 1998 1997
<S> <C> <C> <C>
Passengers carried 2,366,000 2,045,000 1,945,000
Occupancy percentage (1)(2) 104.3% 106.3% 108.3%
</TABLE>
(1) In accordance with cruise industry practice, occupancy percentage is
calculated based on two passengers per cabin even though some cabins can
accommodate three or four passengers. The percentages in excess of 100% indicate
that more than two passengers occupied some cabins.
(2) The Company acquired a majority interest in Cunard Line Limited on May
28, 1998. Since that date Cunard Line Limited's occupancy percentages have been
included in the Company's total occupancy. Cunard Line Limited's ships
generally sail with lower occupancy percentages than the Company's other brands.
The actual occupancy percentage for all cruises on the Company's ships
during each quarter of fiscal 1998 and 1999 was as follows:
<TABLE>
<CAPTION>
OCCUPANCY
QUARTERS ENDED PERCENTAGE
<S> <C>
February 28, 1998 105.9
May 31, 1998 105.4
August 31, 1998 111.5
November 30, 1998 102.1
February 28, 1999 100.9
May 31, 1999 99.9
August 31, 1999 112.3
November 30, 1999 103.6
</TABLE>
Sales and Marketing
The Company's brands are positioned to appeal to each of the three major
sectors of the vacation market (contemporary, premium and luxury). The
contemporary sector is served typically by cruises that are seven days or
shorter in length, are priced at per diems of $200 or less, and feature a casual
ambiance. The Company believes that the success and growth of the Carnival brand
is attributable in large part to its early recognition of these sectors of the
vacation market and its efforts to reach and promote the expansion of the
contemporary sector. The premium sector typically is served by cruises that last
for seven to 14 days or more at per diems of $250 or higher, and appeal
principally to more affluent customers. The luxury sector, which is not as large
as the other sectors, is served by cruises with per diems of $300 or higher.
During 1998, the Company created a marketing association called the
"World's Leading Cruise LinesSM" for its family of six cruise brands, including
Costa, in order to both educate the consumer about the overall breadth of the
Company's cruise brands, as well as to increase the effectiveness and efficiency
of marketing the brands. This initiative is meant to supplement the existing
marketing programs of each individual brand.
The Company's various cruise lines employ over 350 personnel, excluding
reservation agents, in the sales and sales support area who, among other things,
focus on motivating, training and supporting the retail travel agent community
which sells substantially all of the Company's cruises. Travel agents generally
receive a standard commission of 10% plus the potential of additional
commissions based on sales volume. Commission rates on cruise vacations are
usually higher than commission rates earned by travel agents on sales of airline
tickets and hotel rooms. Moreover, since cruise vacations are substantially
all-inclusive, sales of the Company's cruise vacations generally yield higher
commissions to travel agents than commissions earned on selling airline tickets
and hotel rooms. During fiscal 1999, no controlled group of travel agencies
accounted for more than 10% of the Company's consolidated revenues.
Historically, the Company's cruise brands have been marketed primarily in
North America. The Company began to globalize its cruise business by expanding
into Europe through the acquisition of its interest in Airtours in April 1996,
Costa in June 1997 and Cunard in May 1998. The cruise sectors in Europe are
much smaller than the North American sectors. Industry wide European cruise
passengers carried in 1999 are estimated to be approximately 1.4 million
compared to approximately 5.9 million from North America. See Note 9, "Segment
Information," to the Company's Consolidated Financial Statements in Exhibit 13
to this Annual Report on Form 10-K for additional information regarding the
Company's foreign revenues.
Carnival
Carnival believes that its success is due in large part to its unique brand
positioning within the vacation industry. Carnival markets the Carnival Ship
cruises not only as alternatives to competitors' cruises, but as vacation
alternatives to land-based resorts and sightseeing destinations. Carnival seeks
to attract passengers from the broad vacation market, including those who have
never been on a cruise ship before and who might not otherwise consider a cruise
as a vacation alternative. Carnival's strategy has been to emphasize the cruise
experience itself rather than particular destinations, as well as the advantages
of a prepaid, all-inclusive vacation package. Carnival markets the Carnival Ship
cruises as the "Fun Shipsr" experience, which includes a wide variety of
shipboard activities and entertainment, such as full-scale casinos and
nightclubs, an atmosphere of pampered service and high quality food.
As mentioned above, the Company markets the Carnival Ships as the "Fun
Shipsr" and uses, among others, the themes "Carnival's Got the Funr" and "The
Most Popular Cruise Line in the World!r". Carnival advertises nationally
directly to consumers on network and cable television and through extensive
print and radio media. Carnival believes its advertising generates interest in
cruise vacations generally and results in a higher degree of consumer awareness
of the "Fun Shipsr" concept and the "Carnivalr" name in particular.
Substantially all of Carnival's cruise bookings are made through travel agents.
In fiscal 1999, Carnival took reservations from about 29,000 of approximately
49,000 travel agency locations known to the Company in the United States and
Canada. Travel agents generally receive a standard commission of 10% plus the
potential of additional commissions based on sales volume.
Carnival engages in substantial promotional efforts designed to motivate
and educate retail travel agents about its "Fun Shipsr" cruise vacations.
Carnival employs approximately 120 business development managers and 50 in-house
service representatives to motivate independent travel agents and to promote its
cruises as an alternative to land-based vacations or other cruise lines.
Carnival believes it has one of the largest sales forces in the industry.
To facilitate access and to simplify the reservation process, Carnival
employs approximately 750 reservation agents to take bookings from independent
travel agents. Carnival's fully automated reservation system allows its
reservation agents to respond quickly to book staterooms on its ships.
Additionally, through Leisure Shopper, Cruise Director or Carnival's internet
booking engine, travel agents and consumers have the ability to make
reservations through their own computer terminals directly into Carnival's
computerized reservations system.
A significant portion of Carnival's cruises are generally booked several
months in advance of the sailing date. This lead-time allows Carnival to adjust
its prices, if necessary, in relation to demand for available cabins, as
indicated by the level of advance bookings. Carnival's SuperSaver fares are
designed to encourage potential passengers to book cruise reservations earlier,
which helps the Company to more effectively manage overall net revenue yields
(net revenue per available berth). Carnival's payment terms require that a
passenger pay approximately 20% of the cruise price within seven days of the
reservation date and the balance not later than 45 days before the sailing date
for three, four and five day cruises and 70 days before the sailing date for
seven-day and longer cruises.
Holland America and Windstar
The Holland America and Windstar Ships cater to the premium and luxury
sectors, respectively. The Company believes that the hallmarks of the Holland
America experience are beautiful ships and gracious, attentive service. Holland
America communicates this difference as "A Tradition of Excellencer", a
reference to its long-standing reputation for "world class" service and cruise
itineraries.
Substantially all of Holland America's bookings are made through travel
agents. In fiscal 1999, Holland America took reservations from about 20,000 of
approximately 49,000 travel agency locations known to the Company in the United
States and Canada. Travel agents generally receive a standard commission of 10%
plus the potential of additional commissions based on sales volume.
Holland America has focused much of its sales effort at creating an
excellent relationship with the travel agency community. This is related to its
marketing philosophy that travel agents have a large impact on the consumer
vacation selection process and will recommend Holland America more often because
of its excellent reputation for service to both consumers and independent travel
agents. Holland America solicits continuous feedback from consumers and the
independent travel agents making bookings with Holland America to ensure they
are receiving excellent service.
Holland America's marketing communication strategy is primarily composed of
newspaper and magazine advertising, large scale brochure distribution, direct
mail solicitations to past passengers (referred to as "alumni"), network and
cable television and radio spots. Holland America engages in substantial
promotional efforts designed to motivate and educate retail travel agents about
its products. Holland America employs approximately 54 field sales
representatives, 23 inside sales representatives and 18 sales and service
representatives to support the field sales force. To facilitate access to
Holland America and to simplify the reservation process for the Holland America
Ships, Holland America employs approximately 260 reservation agents to take
bookings from travel agents. Additionally, through Leisure Shopper and Cruise
Director, travel agents have the ability to make reservations directly into
Holland America's reservations system. Holland America's cruises generally are
booked several months in advance of the sailing date.
Windstar has its own marketing and reservations staff. Field sales
representatives for both Holland America and Carnival also act as field sales
representatives for Windstar. Marketing efforts are devoted primarily to i)
travel agent support and awareness, ii) direct mail solicitation of past
passengers and iii) distribution of brochures. The marketing features the
distinctive nature of the graceful, modern sail ships and the distinctive
"casually elegant" experience on "intimate itineraries" (apart from the normal
cruise experience). Windstar's cruise sector positioning is embodied in the
phrase "180 degrees from ordinaryr".
Cunard and Seabourn
During the period from December 1995 through May 1998, the Company owned a
50% equity interest in Seabourn Cruise Line Limited. Simultaneously with the
Company's acquisition of the assets of Cunard in May 1998, Cunard and Seabourn
were combined to form Cunard Line Limited, in which the Company owned a 68%
equity interest. In November 1999 the Company acquired the remaining 32%
minority interest of Cunard Line Limited. Cunard Line Limited currently
operates eight ships in its Cunard and Seabourn brands.
The Cunard brand currently operates two ships in the luxury cruise sector.
Cunard's most visible asset is the QE2. The QE2 is the only active passenger
ship of its size built specifically for navigating ocean waters and currently
offering transatlantic cruises, and thus enjoys a unique standing among modern
passenger ships. Since being acquired by the Company, Cunard has redefined
itself as the brand that offers classic "Old World" cruising with a British
essence.
The Seabourn brand currently operates six ships, offering ultra-luxury
cruising with an intense focus on service and cuisine. It is the exceptionally
high level of service which management believes enables Seabourn to be marketed
as the "Best of the Best" in luxury worldwide cruising.
Seabourn and Cunard currently market and sell their products through one
combined sales and marketing organization. This combined organization has sales
offices in Miami, England, Germany and Australia. Approximately 40% of Cunard
Line Limited's revenues are generated from outside the U.S. Marketing efforts
are devoted primarily to i) travel agent support and awareness, ii) direct mail
solicitation of past passengers and iii) targeted print media campaigns and
brochure distribution. Cunard Line Limited has consolidated and streamlined its
entire organization, including its sales and marketing activities and
implemented a group sales reservation desk to support its emphasis on developing
its base of group business.
Substantially all of Seabourn's and Cunard's bookings are made through
travel agents. In fiscal 1999, Seabourn and Cunard took reservations from about
7,000 of approximately 49,000 travel agency locations known to the Company in
the United States and Canada. Travel agents generally receive a standard
commission of 10% plus the potential of additional commissions based on sales
volume.
Cunard and Seabourn employ approximately 41 field sales representatives, 18
inside sales representatives and 41 sales and service representatives to support
its field sales force. They also employ approximately 93 Cruise Sales
Consultants to take bookings, substantially all of which come from travel
agents.
During late 1999, Cunard refurbished the Royal Viking Sun and transferred
it along with the Sea Goddess I and II ships to the Seabourn brand. The ships
were renamed the Seabourn Sun, Seabourn Goddess I and Seabourn Goddess II,
respectively. Management believes these ships more appropriately fit within the
Seabourn brand. Additionally, after a major refurbishment in late 1999,
Cunard's Vistafjord was renamed the "Caronia", the name once used by two of
Cunard's former "Old World" ships. The QE2 has also undergone a major
refurbishment in late 1999. Management has revised cruising itineraries and
schedules for the year 2000 in order to more appropriately coordinate individual
ship itineraries with their new branding strategies.
Seasonality
The Company's revenue from the sale of passenger tickets is moderately
seasonal. Historically, demand for cruises has been greatest during the summer
months.
Competition
In addition to competing with each other, cruise lines compete for consumer
disposable leisure time dollars with other vacation alternatives such as
land-based resort hotels and sightseeing destinations, and consumer demand for
such activities is typically influenced by general economic conditions.
As described under Part I, Item 1. Business, B. Cruise Ship Segment, North
American Cruise Industry, the North American cruise industry had an aggregate of
145 ships and 148,000 lower berths at the end of 1999. From the end of 1999
through the end of 2003, CLIA currently estimates that 36 new ships will be
introduced into the North American industry with a capacity of approximately
61,000 lower berths. These estimates of new ship introductions are based on
scheduled ship deliveries and the actual number of ships could change. The lead
time for design, construction and delivery of a typical large cruise ship is
approximately two to three years. Additionally, these estimates of capacity do
not include assumptions related to unannounced ship withdrawals due to age or
changes in itineraries and, accordingly, could indicate a higher percentage
growth in capacity than will actually occur. Nonetheless, management believes
net capacity serving North American cruise passengers will increase over the
next several years, and thus may increase the levels of competition within the
industry.
The Company is the largest cruise company in the world based on passengers
carried, revenues generated and available capacity. The primary methods of
competition among cruise lines and with other land-based vacation alternatives
are in the areas of cruise pricing, cruise product (i.e. the nature of the
overall vacation experience) and cruise itineraries. Each of the Company's
cruise brands and its primary cruise competition is discussed below.
The Carnival Ships compete with cruise ships operated by five different
cruise lines which operate year round from Florida, California or Puerto Rico
with similar itineraries and with nine other cruise lines operating seasonally
from ports in Florida, California, Puerto Rico or New York, including cruise
ships operated by Holland America and Costa. Competition for cruise passengers
is substantial. Ships operated by Royal Caribbean International and Norwegian
Cruise Line sail regularly from Miami and ships operated by Celebrity Cruises,
owned by Royal Caribbean Cruises Ltd., and Princess Cruises sail regularly from
Ft. Lauderdale on itineraries similar to those of the Carnival Ships. Carnival
competes year round with ships operated by Royal Caribbean International
embarking from Los Angeles to the West Coast of Mexico. Cruise lines such as
Norwegian Cruise Line, Royal Caribbean International and Princess Cruises offer
voyages competing with Carnival from San Juan to the Caribbean. The Walt Disney
Co. entered the cruise market with the introduction of a new cruise ship in both
1998 and 1999. The Disney ships compete primarily with Carnival in the Caribbean
and Bahamian marketplaces.
In Alaska, Holland America and Carnival compete directly with cruise ships
operated by six different cruise lines with the largest competitors being
Princess Cruises, Royal Caribbean International and Celebrity Cruises. Over the
past several years, there has been a steady increase in the available capacity
among cruise lines operating in Alaska. In the Caribbean, Holland America
competes with cruise ships operated by 14 different cruise lines, its primary
competitors being Princess Cruises, Royal Caribbean International, Celebrity
Cruises and Norwegian Cruise Line, as well as Carnival and Costa.
In Europe, Holland America competes directly with both large and small
cruise lines with its primary competitors being Celebrity Cruises, Costa,
Norwegian Cruise Line, Orient Lines, Princess Cruises and Royal Caribbean
International.
The Cunard, Seabourn and Windstar ships' primary unaffiliated competitors
within the luxury cruise sector include Crystal Cruises, Radisson Seven Seas and
Silversea Cruises, as well as the higher priced cabins on certain of the cruise
lines which serve the premium sector.
Governmental Regulations
The Company's ships are registered in the Bahamas, England, Liberia,
Netherlands, Norway or Panama, as more fully described under Part I, Item 1.
Business, B. Cruise Ships and Itineraries and, accordingly, are regulated by
these jurisdictions. The Company's ships that call on United States ports are
subject to inspection by the United States Coast Guard for compliance with the
Convention for the Safety of Life at Sea and by the United States Public Health
Service for sanitary standards. The Company is also regulated by the Federal
Maritime Commission ("FMC") which, among other things, certifies the Company on
the basis of its ability to meet obligations to passengers for refunds in case
of nonperformance. The Company believes it is in compliance with all material
regulations applicable to its ships and has all the necessary licenses to
conduct its business. In connection with a significant portion of its Alaska
cruise operations, Holland America relies on concession permits from the
National Park Service, which are periodically renewed, to operate its cruise
ships in Glacier Bay National Park. There can be no assurance that these permits
will continue to be renewed or that regulations relating to the renewal of such
permits, including preference rights, will remain unchanged in the future.
The International Maritime Organization (the "IMO"), which operates under
the United Nations, has adopted safety standards as part of the "Safety of Life
at Sea" ("SOLAS") Convention, generally applicable to all passenger ships
carrying 36 or more passengers. Generally, SOLAS establishes vessel design,
structural features, materials, construction and life saving equipment
requirements to improve passenger safety. The current SOLAS requirements are
being phased in through 2010.
In 1993, SOLAS was amended to adopt the "International Safety Management
Code" (the "ISM Code"). The ISM Code provides an international standard for the
safe management and operation of ships and for pollution prevention. The ISM
Code became mandatory for passenger vessel operators, such as the Company, on
July 1, 1998. All of the Company's Wholly Owned Cruise Operations and Affiliated
Cruise Operations have obtained the required certificates demonstrating
compliance with the ISM Code.
Public Law 89-777 administered by the FMC requires most cruise line
operators to establish financial responsibility for nonperformance of
transportation. The FMC's regulations require that a cruise line demonstrate its
financial responsibility through a guaranty, escrow arrangement, surety bond,
insurance or self-insurance. Currently, the amount required must equal 110% of
the cruise line's highest amount of customer deposits over a two-year period up
to a maximum coverage level of $15 million.
On February 8, 2000, the United States Treasury Department issued proposed
Treasury Regulations to Section 883 of the Internal Revenue Code ("Section 883")
relating to income derived by foreign corporations from the international
operation of ships or aircraft. The proposed regulations provide, in general,
that a foreign corporation organized in a qualified foreign country and engaged
in the international operation of ships or aircraft shall exclude qualified
income from gross income for purposes of federal income taxation provided that
the corporation can satisfy certain ownership requirements, including, among
other things, that its stock is publicly traded. A corporation's stock that is
publicly traded will satisfy this requirement if more than 50% of its stock is
owned by persons who each own less than 5% of the corporation's stock.
To the best of the Company's knowledge it currently qualifies as a publicly
traded corporation under these proposed rules and, if the proposed rules were in
force, substantially all of the Company's income (with the exception of the
United States source income from the transportation, hotel and tour business of
Holland America Westours) would continue to be exempt from United States federal
income taxes.
In order to ensure that the Company continues to be publicly traded under
the proposed Section 883 regulations, the Company will recommend to its
shareholders at its annual meeting that the Company's articles of incorporation
be amended to prohibit any person, other than an existing 5% shareholder, from
acquiring shares that would give such person in the aggregate more than 4.9% of
the value of the shares of the Company.
From time to time, various other regulatory and legislative changes have
been or may be proposed that could have an affect on the cruise industry in
general.
Financial Information
For financial information about the Company's cruise ship segment with
respect to each of the three years in the period ended November 30, 1999, see
Note 9, "Segment Information," to the Company's Consolidated Financial
Statements in Exhibit 13 of this Annual Report on Form 10-K.
C. Tour Segment
In addition to its cruise business, the Company markets sightseeing tours
both separately and as a part of cruise/tour packages under the Holland America
Westours and Gray Line names. Tour operations are based in Alaska, Washington
State and western Canada. Since a substantial portion of Holland America
Westours' business is derived from the sale of tour packages in Alaska during
the summer tour season, tour operations are highly seasonal.
Holland America Westours
Holland America Westours is an indirect wholly owned subsidiary of HAL, a
wholly owned subsidiary of the Company. The group of companies which together
comprise the tour operations perform three independent yet interrelated
functions. During 1999, as part of an integrated travel program to destinations
in Alaska, the tour service group offered 39 different tour programs varying in
length from 8 to 21 days. The transportation group and hotel group supports the
tour service group by supplying facilities needed to conduct tours. Facilities
include dayboats, motor coaches, rail cars and hotels.
Two luxury dayboats perform an important role in the integrated Alaska
travel program offering tours to the glaciers of Alaska and the Yukon River. The
Yukon Queen II cruises the Yukon River between Dawson City, Yukon Territory and
Eagle, Alaska and the Ptarmigan operates on Portage Lake in Alaska. The two
dayboats have a combined capacity of 304 passengers.
A fleet of over 280 motor coaches using the trade name Gray Line operates
in Alaska, Washington and western Canada. These motor coaches are used for
extended trips, city sightseeing tours and charter hire. Holland America
Westours conducts its tours both as part of a cruise/tour package and as
individual sightseeing products sold under the Gray Line name. Additionally,
Holland America Westours operates express Gray Line motor coach service between
downtown Seattle and the Seattle-Tacoma International Airport.
Thirteen private domed rail cars, which are called "McKinley Explorers",
run on the Alaska Railroad between Anchorage and Fairbanks, stopping at Denali
National Park.
In connection with its tour operations, Holland America Westours owns or
leases motor coach maintenance shops in Seattle, Washington, and in Juneau,
Fairbanks, Anchorage, Skagway and Ketchikan, Alaska. Holland America Westours
also owns or leases service offices at Anchorage, Denali Park, Fairbanks,
Juneau, Ketchikan and Skagway in Alaska, at Whitehorse in the Yukon Territory,
in Seattle, Washington, Vancouver, British Columbia and Victoria, British
Columbia. Certain real property facilities on federal land are used in Holland
America Westours' tour operations pursuant to permits from the applicable
federal agencies.
Westmark Hotels
Holland America Westours owns and/or operates 14 hotels in Alaska and the
Canadian Yukon under the name Westmark Hotels. Four of the hotels are located in
Canada's Yukon Territory and offer a combined total of 585 rooms. The remaining
10 hotels, located throughout Alaska, provide a total of 1,455 rooms, bringing
the total number of hotel rooms to 2,040.
The hotels play an important role in Holland America Westours tour programs
during the summer months when they provide accommodations to the tour
passengers. The hotels located in the larger metropolitan areas remain open
during the entire year, acting during the winter season as centers for local
community activities while continuing to accommodate the traveling public. Most
of the Westmark hotels include dining, lounge and conference or meeting room
facilities. Certain hotels have gift shops and other tourist services on the
premises.
Twelve of the hotels are wholly owned by Holland America Westours
subsidiaries and Westmark operates two under management agreements.
For the seven hotels that operate year-round, the occupancy percentage for
fiscal 1999 was 55.4% (57.4% for fiscal 1998), and for the seven hotels that
operate only during the summer months, the occupancy percentage for fiscal 1999
was 71.4% (71.6% for fiscal 1998).
Sales and Marketing
Holland America Westours has its own marketing staff devoted to i) travel
agent support and awareness, ii) direct mail solicitation of past customers,
iii) use of consumer magazine and newspaper advertising to develop prospects and
enhance awareness and iv) distribution of brochures. Additionally, television
and radio spots are used to market its tour and cruise packages. The Westours
marketing message leverages the company's 53 years of Alaska tourism leadership
and its extensive array of hotel and transportation assets to create a brand
preference for Holland America Westours. To the prospective vacationer the
company endeavors to convince them that "Westours is Alaska".
Holland America Westours tours are marketed both separately and as part of
cruise/tour packages. Although most Holland America Westours cruise/tours
include a Holland America cruise as the cruise segment, other cruise lines also
market Holland America Westours tours as a part of their cruise/tour packages
and sightseeing excursions. Tours sold separately are marketed through
independent travel agents and also directly by Holland America Westours,
utilizing sales desks in major hotels. General marketing for the hotels is done
through various media in Alaska, Canada and the contiguous United States. Travel
agents, particularly in Alaska, are solicited, and displays are used in airports
in Seattle, Washington, Portland, Oregon and various Alaskan cities. Room rates
at Westmark Hotels are on the upper end of the scale for hotels in Alaska and
the Canadian Yukon.
Concessions
Certain tours in Alaska are conducted on federal property requiring
concession permits from the applicable federal agencies, such as the National
Park Service and the United States Forest Service.
Seasonality
Holland America Westours tour revenues are highly seasonal with a large
majority generated during the late spring and summer months in connection with
the Alaska cruise season. Holland America Westours tours are conducted in
Washington State, western Canada and Alaska. The Alaska tours coincide to a
great extent with the Alaska cruise season, May through September. Washington
tours are conducted year-round although demand is greatest during the summer
months. During periods in which tour demand is low Holland America Westours
seeks to maximize its motor coach charter activity, such as operating charter
tours to ski resorts in Washington and western Canada.
Competition
Holland America Westours competes with independent tour operators and motor
coach charter operators in Washington, Alaska and the Canadian Rockies. The
primary competitors in Alaska and the Canadian Rockies are Princess Tours (with
approximately 160 motor coaches and three hotels) and Alaska
Sightseeing/Trav-Alaska (with approximately 13 motor coaches). The primary
competitor in Washington is Gazelle (with approximately 15 motor coaches).
Westmark Hotels compete with various hotels throughout Alaska, many of
which charge prices below those charged by Westmark Hotels. Dining facilities in
the hotels also compete with the many restaurants in the same geographic areas.
Government Regulations
Holland America Westours motor coach operations are subject to regulation
both at the federal and state levels, including primarily the U.S. Department of
Transportation, the Washington Utilities and Transportation Commission, the
British Columbia Motor Carrier Commission and the Alaska Department of
Transportation. Certain of Holland America Westours tours involve federal
properties and are subject to regulation by various federal agencies, such as
the National Park Service and the U.S. Forest Service.
In connection with the operation of its beverage facilities in the Westmark
Hotels, Holland America Westours is required to comply with state, county and/or
city ordinances regulating the sale and consumption of alcoholic beverages.
Violations of these ordinances could result in fines, suspensions or revocation
of such licenses and preclude the sale of any alcoholic beverages by the hotel
involved.
In the operation of its hotels, Holland America Westours is required to
comply with applicable building and fire codes. Changes in these codes have in
the past and may in the future require expenditures to ensure continuing
compliance, such as the installation of sprinkler systems.
From time to time, various other regulatory and legislative changes have
been or may be proposed that could have an effect on the tour industry in
general.
Financial Information
For financial information about the Company's tour segment with respect to
each of the three years in the period ended November 30, 1999, see Note 9,
"Segment Information," to the Company's Consolidated Financial Statements in
Exhibit 13 of this Annual Report on Form 10-K.
D. Employees
The Company's operations have approximately 4,300 full-time and 2,100 part-
time/seasonal employees engaged in shoreside operations. The Company also
employs approximately 1,200 officers and 18,000 crew and staff on its ships. Due
to the seasonality of its Alaska and Canadian operations, HAL and its
subsidiaries increase their work force during the summer months, employing
additional full-time and part-time personnel which have been included above. The
Company has entered into agreements with unions covering certain employees in
its hotel, motorcoach and ship operations. The Company considers its employee
and union relations generally to be good.
E. Suppliers
The Company's largest purchases are for airfare, advertising, fuel, food
and beverages and hotel and restaurant supplies and products. Although the
Company chooses to use a limited number of suppliers for most of its food,
beverages and hotel and restaurant supplies, most of these purchases are
available from numerous sources at competitive prices. The use of a limited
number of suppliers enables the Company to, among other things, obtain volume
discounts.
Management believes that there are currently eight shipyards in the world
capable of the quality construction of large passenger cruise ships. The Company
currently has contracts, with two of these shipyards for the construction of
twelve ships to enter service over the next five years (see Part I, Item 1.
Business, B. Cruise Ship Segment - Wholly Owned Cruise Operations - Cruise Ship
Construction). The Company's primary competitors also have contracts to
construct new cruise ships (see Part I, Item 1. Business, B. Cruise Ship Segment
- - Wholly Owned Cruise Operations - Competition). If the Company elects to build
additional ships in the future, which it expects to do, there is no assurance
that any of these shipyards will have the available capacity to build additional
new ships for the Company at the times desired by the Company or that the
shipyards will agree to build additional ships at a cost acceptable to the
Company. Additionally, there is no assurance that ships under contract for
construction will be delivered.
F. Insurance
The Company maintains insurance covering legal liabilities related to crew,
passengers and other third parties on its ships in operation through The
Standard Steamship Owners Protection & Indemnity Association Limited (the
"SSOPIA") and Steamship Mutual Underwriting Association Ltd. (the "SMUAL"). The
amount and terms of this insurance is governed by the rules of the foregoing
protection and indemnity associations.
The Company maintains insurance on the hull and machinery of each vessel in
amounts equal to the approximate market value of each vessel. The Company
maintains war risk insurance on each vessel which includes legal liability to
crew and passengers, including terrorist risks for which coverage would be
excluded under SSOPIA and SMUAL. The coverage for hull and machinery and war
risks is provided by international markets, including underwriters at Lloyds.
The Company, as currently required by the FMC, maintains at all times three $15
million performance bonds for all of the Company's ships, to cover passenger
ticket liabilities in the event of a canceled or interrupted cruise. The
Company also maintains other performance bonds as required by various foreign
authorities who regulate certain of the Company's operations in their
jurisdictions.
The Company maintains certain levels of self-insurance for the above
mentioned risks through the use of substantial deductibles. The Company does not
typically carry coverage related to loss of earnings or revenues for its cruise
or tour operations.
The Company also maintains various other insurance policies to protect the
assets and earnings arising from the operations of Holland America Westours and
other activities.
G. Investments in Affiliates
Airtours plc
In April 1996, the Company acquired a 28% interest in Airtours for
approximately $307 million. In 1998, the Company's interest in Airtours was
reduced to approximately 26% as a result of the conversion of Airtours
preference shares into Airtours common stock and the issuance of Airtours common
stock in conjunction with two of its acquisitions. Airtours is one of the
largest air inclusive tour operator in the world and is publicly traded on the
London Stock Exchange. Airtours provides air inclusive packaged holidays to the
United Kingdom, Austrian, Belgian, Holland, French, German, Polish,
Scandinavian, Swiss and North American markets. Airtours provided holidays to
approximately ten million people in fiscal 1999 and owns or operates over 1,000
retail travel shops, 46 resort properties, four cruise ships, 42 aircraft and
develops and markets vacation ownership resorts in the Canary Islands and
Orlando, Florida. The four cruise ships are operated under the Sun Cruises brand
and an additional 962 passenger capacity ship is chartered, for summer cruises
only, under the Direct Cruises brand. In 1997, Airtours acquired a 50% interest
in Costa, as discussed below. During 1999, Airtours or its 36% owned German tour
operator, FTi, made several acquisitions, including a 40% interest in Berge &
Meer, a German tour operator which packages and distributes air-inclusive tours
directly to the public through call centers, the internet and the mail, and a
100% interest in the Travel World Group of United Kingdom retail outlets.
Airtours also acquired additional tour operations based in Holland and
Scandinavia. In December 1998 and November 1999, Airtours successfully completed
an approximate $500 million convertible debenture offering and a $335 million
non-equity preference share offering, respectively, which are providing Airtours
with additional capital to fund its operations and/or future acquisitions, as
required. If this convertible debt is converted into Airtours common stock, the
Company's interest in Airtours would be reduced to approximately 23%.
On February 21, 2000, Airtours and Travel Services International ("TSI")
entered into an agreement whereby Airtours would commence a $26 per share
recommended cash tender offer for all of TSI's outstanding common stock. Such
offer would value TSI at approximately $385 million. TSI is a major distributor
of leisure travel products in the U.S. market with leading positions in the
distribution of cruise, auto rental, alumni holidays and hotel bookings.
Costa Crociere S.p.A.
In June 1997, the Company and Airtours completed a joint offer to acquire
the equity securities of Costa, an Italian cruise company. The Company and
Airtours each own 50% of Il Ponte, S.p.A. ("Il Ponte"), a holding company, which
was purchased from the Costa family. As a result of the acquisition, Il Ponte
owns approximately 100% of Costa. The cost of the Company's acquisition of its
50% direct interest was approximately $141 million, of which approximately $103
million was paid by Il Ponte and the balance was paid by the Company. The $103
million paid by Il Ponte was funded through Il Ponte debt, which was guaranteed
by the Company.
Costa is headquartered in Genoa, Italy and is Europe's largest cruise line
based on number of passengers carried and available capacity. Costa is primarily
targeted to the contemporary sector and has sales offices in Argentina, Brazil,
England, Florida, France, Germany, Italy, Spain and Switzerland, and employs
over 200 personnel in the sales and sales support area, excluding reservation
agents. Costa's ships' primary itineraries include Europe, the Caribbean and
South America. The major market for Costa cruises is Southern Europe with the
majority of Costa's cruises being sold in Italy, Spain and France.
The itineraries of Costa's ships during the summer months consist primarily
of various locations in Europe. During the winter months, the vessels operate
primarily in the Caribbean and South America. See Part I, Item 1. Business, B.
Cruise Ship Segment for a discussion of competition and certain government
regulations, which affect Costa.
Costa operates six ships, which are currently registered in Liberia, which
have an aggregate passenger capacity of 7,103 passengers. In January 1998, Costa
signed an agreement to construct a seventh ship, the Costa Atlantica, which is
expected to enter service in July 2000, with a passenger capacity of 2,112 at a
cost of approximately 700 billion Lira. In 2001, the Costa Classica will be
lengthened to increase its passenger capacity to 2000 from 1,302, and it is
expected that the Costa Romantica will be lengthened in 2002 to increase its
passenger capacity to 2000 from 1,350. No assurance can be given that a contract
will be entered into to lengthen the Costa Romantica.
Seasonality
The Company's equity in the earnings of Airtours and Il Ponte are recorded
on a two-month lag basis using the equity method of accounting. 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 their highest.
H. Trademarks
The Company owns numerous trademarks, which it believes are widely
recognized throughout the world and have considerable value.
I. Recent Development
In late February 2000, the Company and Fairfield Communities, Inc.
announced their decision to end a previously announced strategic merger of the
two companies. See Note 14 to the Company's Consolidated Financial Statements
in Exhibit 13 to this Annual Report on Form 10-K.
Item 2. Properties
The Company's cruise ships and private island, Half Moon Cay, are described
in Section B of Item 1 under the heading Cruise Ship Segment - Cruise Ships and
Itineraries. The properties associated with Holland America Westours tour
operations are described in Section C of Item 1 under the heading Tour Segment.
Carnival's principal shoreside operations and the Company's corporate
headquarters are located at 3655 N.W. 87th Avenue, Miami, Florida. These
Company-owned facilities include approximately 456,000 square feet of office
space. HAL headquarters are at 300 Elliott Avenue West in Seattle, Washington in
approximately 128,000 square feet of leased office space. Cunard Line Limited
headquarters are at 6100 Blue Lagoon Drive in Miami, Florida in approximately
51,000 square feet of leased office space.
The Company's cruise ships, tour properties and shoreside operations
facilities are well maintained and in good condition.
Item 3. Legal Proceedings
Several actions (collectively, the "Passenger Complaints"), as previously
reported, have been filed against Carnival 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, alleging that statements made in
advertising and promotional materials concerning port charges were false and
misleading. The Passenger Complaints allege violations of the various state
consumer protection acts and claims of fraud, conversion, breach of fiduciary
duties and unjust enrichment. Plaintiffs seek compensatory damages or,
alternatively, refunds of portions of port charges paid, attorneys' fees, costs,
prejudgment interest, punitive damages and injunctive and declaratory relief.
The status of each pending Passenger Complaint is as follows:
In 1996, four Passenger Complaints were filed against Carnival in the
Circuit Court for the Eleventh Judicial Circuit in Dade County, Florida, by
Michelle Hackbarth, Larry Katz, Michelle A. Sutton, Pedro Rene Mier, and others,
respectively, on behalf of purported nationwide classes. In May 1998, the court
consolidated all four actions. On March 8, 1999, the trial court denied
plaintiff's motion for class certification, and plaintiffs have appealed the
trial court's decision. On February 2, 2000, the Third District Court of Appeal
of Florida reversed the trial court's denial of class certification and remanded
the case for further proceedings. The Company has filed a motion for rehearing
and for clarification of the Third District Court of Appeal's decision. In
addition, plaintiff's filed a motion to enforce a purported oral settlement
agreement they alleged was reached with Carnival. In January 2000, the trial
court denied the plaintiffs' motion to enforce the purported oral settlement
agreement. The plaintiff's have appealed the trial court's decision.
In April 1997, a Passenger Complaint was filed against Carnival in the
Court of Common Pleas, Montgomery County, Ohio, by Cathy J. Miller and others,
on behalf of a purported statewide class. Carnival's motion to dismiss on
inconvenient forum grounds is under consideration.
In March 1998, a Passenger Complaint was filed against Carnival in the
Circuit Court for the 20th Judicial Circuit in St. Clair County, Illinois, by
John R. Birdsell and others on behalf of a purported nationwide class. The
complaint also names, as co-defendants, Norwegian Cruise Line, Royal Caribbean
Cruise Lines and Princess Cruise Lines. The court overruled Carnival's objection
to the court's exercise of personal jurisdiction and denied its motion to
dismiss on grounds of improper forum. Carnival has appealed the decision denying
its motion to dismiss on grounds of improper forum, and its appeal has been
fully briefed and argued and is now pending with the state appellate court.
Proceedings in the trial court, including plaintiffs' motion to certify a class,
have been stayed pending the resolution of Carnival's appeal.
In April 1996, a Passenger Complaint was filed against Holland America
Westours in the Superior Court in King County, Washington, by Francine Pickett
and others on behalf of a purported nationwide class. The court denied both
Holland America Westours' motion to dismiss and the plaintiffs' motion for class
certification. Thereafter Holland America Westours entered into a settlement
agreement for this action, the only Passenger Complaint filed against it. The
settlement agreement was approved by the court on September 28, 1998, however
one member of the settlement class has appealed the agreement. The appeal has
been briefed and argued before the Washington Court of Appeals. The decision is
expected shortly. A further appeal could be taken by either party to the
Washington Supreme Court which could result in the settlement being delayed for
an additional 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. In 1998,
the Company established a liability for the estimated distribution costs of the
settlement notices and plaintiffs' legal costs.
Several complaints have been filed against Carnival and/or Holland America
Westours (collectively the "Travel Agent Complaints") on behalf of purported
classes of travel agencies who had booked a cruise with Carnival or Holland
America, claiming that advertising practices regarding port charges resulted in
an improper commission bypass. These actions allege violations of state consumer
protection laws, claims of breach of contract, negligent misrepresentation,
unjust enrichment, unlawful business practices and common law fraud, and they
seek unspecified compensatory damages (or alternatively, the payment of usual
and customary commissions on port charges paid by passengers in excess of
certain charges levied by government authorities), an accounting, attorneys'
fees and costs, punitive damages and injunctive relief. The status of each
pending Travel Agent Complaint is as follows:
In August 1997, a Travel Agent Complaint was filed against Carnival in the
Circuit Court for the Eleventh Judicial Circuit in Dade County, Florida, by
N.G.L. Travel Associates, on behalf of a purported nationwide class of travel
agencies who booked cruises with Carnival. The court dismissed the action with
prejudice in January 1999, and plaintiff has appealed. The appeal has been
fully briefed and argued, and is now pending with the state appellate court.
In September 1997, a Travel Agent Complaint was filed against Holland
America Westours in the Superior Court of the State of Washington for King
County by N.G.L. Travel Associates on behalf of a purported nationwide class of
travel agencies who booked cruises with Holland America. Holland America
Westours filed summary judgment motions as to all of the claims. The motions
were granted as to every claim except for one alleging a breach of contract
under the Sales Agreement between Holland America Westours and GEM, the travel
agent consortium of which N.G.L. Travel Associates was a member. The court has
also certified a class of travel agents that includes all agencies that were
members in 1996 of the GEM group. Consequently, if this matter proceeds to
trial, it will be limited to the issue of whether Holland America Westours is
obligated to pay commissions as to 1996 bookings by these GEM agencies. The
trial is presently scheduled for March 2000.
In August 1996, a Travel Agent Complaint was filed against Carnival and
Holland America Westours in the Superior Court in Los Angeles, County,
California, by Nelsons Travel Associates, on behalf of purported nationwide
classes of travel agencies who booked cruises with Carnival and Holland America.
Upon Carnival's and Holland America Westours' motions to dismiss or stay the
action on the grounds of inconvenient forum, the court stayed the action,
pending resolution of the Florida and Washington actions.
It is not now possible to determine the ultimate outcome of the pending
Passenger and Travel Agent Complaints if such claims should proceed to trial.
Management believes it has meritorious defenses to the claims. Management
understands that purported class actions similar to the Passenger and Travel
Agent Complaints have been filed against several other cruise lines.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
Pursuant to General Instruction G(3), the information regarding executive
officers of the Company called for by Item 401(b) of Regulation S-K is hereby
included in Part I of this Annual Report on Form 10-K.
The following table sets forth the name, age and title of each executive
officer. Titles listed relate to positions within the Company unless otherwise
noted.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Micky Arison 50 Chairman of the Board of Directors
and Chief Executive Officer
Gerald R. Cahill 48 Senior Vice President-Finance and Chief
Financial Officer
Robert H. Dickinson 57 President and Chief Operating Officer
of Carnival and Director
Kenneth D. Dubbin 46 Vice President-Corporate Development
Howard S. Frank 58 Vice Chairman of the Board of Directors
and Chief Operating Officer
Ian J. Gaunt 48 Senior Vice President - International
A. Kirk Lanterman 68 Chairman of the Board of Directors, President,
and Chief Executive Officer of
Holland America Line-Westours Inc.
and Director
Lowell Zemnick 56 Vice President and Treasurer
Meshulam Zonis 66 Senior Vice President-Operations of
Carnival and Director
</TABLE>
Business Experience of Officers
Micky Arison has been Chief Executive Officer since 1979 and Chairman of
the Board of Directors since 1990. He was President from 1979 to May 1993 and
has also been a director since June 1987. Prior to 1979, he served Carnival for
successive two-year periods as sales agent, reservations manager and as Vice
President in charge of passenger traffic. He is the son of Ted Arison, Carnival
Corporation's founder.
Gerald R. Cahill is a Certified Public Accountant and has been Senior Vice
President-Finance, Chief Financial Officer and Chief Accounting Officer since
January 1998. From September 1994 to January 1998 he was Vice President-Finance.
He was the Chief Financial Officer from 1988 to 1992 and the Chief Operating
Officer from 1992 to 1994 of Safecard Services, Inc. From 1979 to 1988 he held
financial positions at Resorts International Inc. and, prior to that, spent six
years with PricewaterhouseCoopers LLP.
Robert H. Dickinson has been President and Chief Operating Officer of
Carnival since May 1993. From 1979 to May 1993, he was Senior Vice President-
Sales and Marketing of Carnival. He has also been a director since June 1987.
Kenneth D. Dubbin has been Vice President-Corporate Development since May
1999. From 1988 to April 1999 he was Vice President and Treasurer of Royal
Caribbean Cruises Ltd.
Howard S. Frank has been Vice Chairman of the Board of Directors since
October 1993, Chief Operating Officer since January 1998 and a director since
1992. From July 1989 to January 1998 he was Chief Financial Officer and Chief
Accounting Officer and from July 1989 to October 1993 he was Senior Vice
President-Finance. From July 1975 through June 1989 he was a partner with
PricewaterhouseCoopers LLP.
Ian J. Gaunt is an English Solicitor and has been Senior Vice President-
International since May 1999. He was a partner of the London based international
law firm of Sinclair, Roche and Temperley from 1982 through April 1999 where he
represented the Company as special external legal counsel since 1981.
A. Kirk Lanterman is a Certified Public Accountant and has been a director
since April 1992. He has been Chairman of the Board of Directors, President and
Chief Executive Officer of Holland America Line-Westours Inc. ("HALW") since
August 1999. From March 1997 to August 1999, he was Chairman of the Board of
Directors and Chief Executive Officer of HALW. From December 1989 to March
1997, he was President and Chief Executive Officer of HALW. From 1983 to 1989
he was President and Chief Operating Officer of HALW. From 1979 to 1983, he was
President of Westours, Inc. which merged with Holland America Line in 1983.
Lowell Zemnick is a Certified Public Accountant and has been a Vice
President since 1980 and Treasurer since September 1990. He was the Chief
Financial Officer of Carnival from 1980 to September 1990 and was the Chief
Financial Officer of Carnival Corporation from May 1987 through June 1989.
Meshulam Zonis has been Senior Vice President-Operations of Carnival since
1979. He has also been a director since June 1987. From 1974 through 1979 he was
Vice President-Operations of Carnival.
Special Note Regarding Forward-Looking Statements
Certain statements under the headings "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business" and elsewhere
in this Annual Report on Form 10-K, 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.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
A. Market Information
The information required by Item 201(a) of Regulation S-K, Market
Information, is shown in Exhibit 13 and is incorporated by reference into this
Annual Report on Form 10-K.
B. Holders
The information required by Item 201(b) of Regulation S-K, Holders of
Common Stock, is shown in Exhibit 13 and is incorporated by reference into this
Annual Report on Form 10-K.
C. Dividends
The Company declared cash dividends on all of its Common Stock in the
amount of $.075 per share in each of the first three quarters of fiscal 1998,
$.09 in the fourth quarter of fiscal 1998, $.09 in each of the first three
quarters of fiscal 1999, and $.105 in the fourth quarter of fiscal 1999 and
first quarter of fiscal 2000. Payment of future dividends on the Common Stock
will depend upon, among other factors, the Company's earnings, financial
condition and capital requirements. The Company may also declare special
dividends to all stockholders in the event that members of the Arison family and
certain related entities are required to pay additional income taxes by reason
of their ownership of the Common Stock because of an income tax audit of the
Company.
While no tax treaty currently exists between the Republic of Panama and the
United States, under current law the Company believes that distributions to its
shareholders are not subject to taxation under the laws of the Republic of
Panama. Dividends paid by the Company will be taxable as ordinary income for
United States federal income tax purposes to the extent of the Company's current
or accumulated earnings and profits, but generally will not qualify for any
dividends-received deduction.
The payment and amount of any dividend is within the discretion of the
Board of Directors, and it is possible that the amount of any dividend may vary
from the levels discussed above.
Item 6. Selected Financial Data
The information required by Item 6, Selected Financial Data, is shown in
Exhibit 13 and is incorporated by reference into this Annual Report on Form 10-
K.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, is shown in Exhibit 13 and is
incorporated by reference into this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by Item 7A, Quantitative and Qualitative
Disclosures About Market Risk, is shown in Exhibit 13 and is incorporated by
reference into this Annual Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data
The financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated January 24, 2000, is shown in Exhibit 13 and is
incorporated by reference into this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Items 10, 11, 12 and 13. Directors and Executive Officers of the
Registrant, Executive Compensation, Security Ownership of Certain
Beneficial Owners and Management, and Certain Relationships and
Related Transactions
The information required by Items 10, 11, 12 and 13 is incorporated herein
by reference to the Registrant's definitive Proxy Statement to be filed with the
Commission not later than 120 days after the close of the fiscal year except
that the information concerning the Registrant's executive officers called for
by Item 401(b) of Regulation S-K has been included in Part I of this Annual
Report on Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1)(2) Financial Statements and Schedules:
The financial statements shown in Exhibit 13 are hereby incorporated herein
by reference.
(3) Exhibits:
The exhibits listed on the accompanying Exhibit Index are filed or
incorporated by reference as part of this Annual Report on Form 10-K and such
Exhibit Index is hereby incorporated herein by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended November
30, 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Miami,
and the State of Florida on this 23 day of February, 2000.
CARNIVAL CORPORATION
By /s/ Micky Arison
Micky Arison
Chairman of the Board of
Directors and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Micky Arison Chairman of the Board of February 23, 2000
Micky Arison Directors and Chief Executive
Officer
/s/ Howard S. Frank Vice Chairman of the Board of February 23, 2000
Howard S. Frank Directors and Chief Operating
Officer
/s/ Gerald R. Cahill Senior Vice President-Finance February 23, 2000
Gerald R. Cahill and Chief Financial and
Accounting Officer
/s/ Shari Arison Director February 23, 2000
Shari Arison
/s/ Maks L. Birnbach Director February 23, 2000
Maks L. Birnbach
/s/ Atle Brynestad Director February 23, 2000
Atle Brynestad
/s/ Richard G. Capen, Jr.Director February 23, 2000
Richard G. Capen, Jr.
/s/ David Crossland Director February 23, 2000
David Crossland
/s/ Robert H. Dickinson Director February 23, 2000
Robert H. Dickinson
/s/ James M. Dubin Director February 23, 2000
James M. Dubin
/s/ A. Kirk Lanterman Director February 23, 2000
A. Kirk Lanterman
/s/ Modesto A. Maidique Director February 23, 2000
Modesto A. Maidique
/s/ William S. Ruben Director February 23, 2000
William S. Ruben
/s/ Stuart Subotnick Director February 23, 2000
Stuart Subotnick
/s/ Sherwood M. Weiser Director February 23, 2000
Sherwood M. Weiser
/s/ Meshulam Zonis Director February 23, 2000
Meshulam Zonis
/s/ Uzi Zucker Director February 23, 2000
Uzi Zucker
INDEX TO EXHIBITS
Page No. in
Sequential
Numbering
System
Exhibits
3.1-Second Amended and Restated Articles of Incorporation of the Company. (1)
3.2-Amendment to Second Amended and Restated Articles of Incorporation of the
Company. (2)
3.2-Form of By-laws of the Company.(3)
4.1-Agreement of the Company dated February 23, 2000 to furnish certain debt
instruments to the Securities and Exchange Commission.
4.2-Revolving Credit Agreement dated as of July 1, 1993, Amended and Restated
as of December 17, 1996, by and among Carnival Corporation, Citibank, N.A. and
various other lenders.(4)
4.3-Form of Indenture, dated March 1, 1993, between Carnival Cruise Lines, Inc.
and First Trust National Association, as Trustee, relating to the Debt
Securities, including form of Debt Security.(5)
10.1-Retirement and Consulting Agreement dated November 26, 1999 between Alton
Kirk Lanterman, Carnival Corporation and Holland America Line-Westours Inc.
10.2-Executive Long-term Compensation Agreement dated January 16, 1998 between
Robert H. Dickinson and Carnival Corporation. (6)
10.3-1994 Carnival Cruise Lines Key Management Incentive Plan as amended on
April 12, 1999. (7)
10.4-Amended and Restated Carnival Corporation 1992 Stock Option Plan. (8)
10.5-Carnival Cruise Lines, Inc. 1993 Restricted Stock Plan adopted on January
15, 1993 and as amended January 5, 1998 and December 21, 1998. (9)
10.6-Carnival Corporation "Fun Ship" Nonqualified Savings Plan. (10)
10.7 -Amendments to The Carnival Corporation Nonqualified Retirement Plan for
Highly Compensated. (11)
10.8-Carnival Cruise Lines, Inc. Non-Qualified Retirement Plan.(12)
10.9-1993 Outside Directors' Stock Option Plan as amended on April 6, 1998. (13)
10.10-Form of Deferred Compensation Agreement between the Company and Meshulam
Zonis.(14)
10.11-Consulting Agreement/Registration Rights Agreement dated June 14, 1991,
between the Company and Ted Arison.(15)
10.12-First Amendment to Consulting Agreement/Registration Rights Agreement.(16)
10.13-Atle Brynestad Indemnification Agreement. (17)
10.14-Shareholders' Agreement dated February 21, 1996 between Carnival
Corporation and David Crossland.(18)
10.15-Maks L. Birnbach Director's Agreement.(19)
10.16-William S. Ruben Director's Agreement.(20)
10.17-Stuart Subotnick Director's Agreement.(21)
10.18-Sherwood M. Weiser Director's Agreement.(22)
10.19-Uzi Zucker Director's Agreement. (23)
10.20-David Crossland Director's Agreement.(24)
10.21-James M. Dubin Director's Agreement.(25)
10.22-Modesto M. Maidique Director's Agreement.(26)
10.23-Richard G. Capen Director's Agreement.(27)
10.24-Shari Arison Dorsman Director's Agreement.(28)
10.25-Executive Long-term Compensation Agreement dated January 11, 1999, between
the Company and Micky Arison. (29)
10.26-Executive Long-term Compensation Agreement dated January 11, 1999, between
the Company and Howard S. Frank. (30)
10.27-HAL Antillen N.V. and subsidiaries Key Management Incentive Plan. (31)
10.28-1994 Transaction-Extension Agreement, dated January 18, 2000, between
Carnival Corporation, Sherwood Weiser and others.
10.29-Amended and Restated 1994 Security and Pledge Agreement, dated January 18,
2000, between Carnival Corporation and Sherwood Weiser.
10.30-Security and Pledge Agreement, dated January 18, 2000, between Carnival
Corporation and Sherwood Weiser.
10.31-Stock Purchase Agreement, dated January 18, 2000, between Carnival
Corporation, Sherwood Weiser and others.
10.32-Carnival Corporation Supplemental Executive Retirement Plan.
10.33- Amendment to the Carnival Corporation "Fun Ship" Nonqualified Savings
Plan.
12.0-Ratio of Earnings to Fixed Charges.
13.0-Portions of 1999 Annual Report incorporated by reference into 1999 Annual
Report on Form 10-K.
21-Subsidiaries of the Company.
23.0-Consent of PricewaterhouseCoopers LLP.
27.0-Financial Data Schedule (for SEC use only).
Sequential
Numbering
System
Exhibits
(1)Incorporated by reference to Exhibit No. 3 to the registrant's registration
statement on Form S-3 (File No. 333-68999), filed with the Securities and
Exchange Commission.
(2) Incorporated by reference to Exhibit 3.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1999 (Commission File No.
1-9610), filed with the Securities and Exchange Commission.
(3)Incorporated by reference to Exhibit No. 3.2 to the registrant's registration
statement on Form S-1 (File No. 33-14844), filed with the Securities and
Exchange Commission.
(4)Incorporated by reference to Exhibit No. 4.1 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(5)Incorporated by reference to Exhibit No. 4 to the registrant's registration
statement on Form S-3 (File No. 33-53136), filed with the Securities and
Exchange Commission.
(6)Incorporated by reference to Exhibit No. 10.2 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1997 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(7) Incorporated by reference to Exhibit 10.2 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1999 (Commission File No.
1-9610), filed with the Securities and Exchange Commission.
(8)Incorporated by reference to Exhibit No. 10.4 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1997 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(9)Incorporated by reference to Exhibit No. 10.5 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1998 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(10)Incorporated by reference to Exhibit No. 10.6 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1997 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(11)Incorporated by reference to Exhibit No. 10.7 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1997 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(12)Incorporated by reference to Exhibit No. 10.4 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1990 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(13)Incorporated by reference to Exhibit 10.5 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1999 (Commission File No.
1-9610), filed with the Securities and Exchange Commission.
(14)Incorporated by reference to Exhibit No. 10.17 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(15)Incorporated by reference to Exhibit No. 4.3 to post-effective amendment no.
1 on Form S-3 to the registrant's registration statement on Form S-1 (File No.
33-24747), filed with the Securities and Exchange Commission.
(16)Incorporated by reference to Exhibit No. 10.40 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1992 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(17)Incorporated by reference to Exhibit 10.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1999 (Commission File No.
1-9610), filed with the Securities and Exchange Commission.
(18)Incorporated by reference to Exhibit 10.4 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1996 (Commission File No.
1-9610), filed with the Securities and Exchange Commission.
(19)Incorporated by reference to Exhibit No. 28.1 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1990 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(20)Incorporated by reference to Exhibit No. 28.2 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(21)Incorporated by reference to Exhibit No. 28.3 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(22)Incorporated by reference to Exhibit No. 28.4 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(23)Incorporated by reference to Exhibit No. 28.5 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(24)Incorporated by reference to Exhibit No. 10.4 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(25)Incorporated by reference to Exhibit No. 10.5 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(26)Incorporated by reference to Exhibit No. 10.6 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(27)Incorporated by reference to Exhibit No. 10.7 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(28)Incorporated by reference to Exhibit No. 10.8 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(29)Incorporated by reference to Exhibit No. 10.36 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1998 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(30)Incorporated by reference to Exhibit No. 10.37 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1998 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(31)Incorporated by reference to Exhibit 10.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1999 (Commission File No.
1-9610), filed with the Securities and Exchange Commission.
</TABLE>
EXHIBIT 4.1
February 23, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, DC 20549
RE: Carnival Corporation
Commission File No. 1-9610
Gentlemen:
Pursuant to Item 601 (b) (4) (iii) of Regulation S-K promulgated under the
Securities Exchange Act of 1934, as amended, Carnival Corporation (the
"Company") hereby agrees to furnish copies of certain long-term debt instruments
to the Securities and Exchange Commission upon the request of the Commission,
and, in accordance with such regulation, such instruments are not being filed as
part of the Annual Report on Form 10-K of the Company for its fiscal year ended
November 30, 1999.
Very truly yours,
CARNIVAL CORPORATION
/s/ Arnaldo Perez
Arnaldo Perez
General Counsel
EXHIBIT 10.1
RETIREMENT AND CONSULTING AGREEMENT
AGREEMENT made this 26th day of November, 1999 between CARNIVAL
CORPORATION, having its principal place of business at 3655 N.W. 87th Avenue,
Miami, Florida 33178, and its wholly owned subsidiary, Holland America Line-
Westours Inc., having its principal place of business at 300 Elliott Avenue
West, Seattle, Washington 98119 (collectively, the "Companies") and Alton Kirk
Lanterman, ("Lanterman"), residing at 714 W. Galer Street, Seattle, Washington,
98119.
RECITALS
A. Lanterman has served as Chairman or President and Chief Executive
Officer of Holland America Line-Westours Inc. ("HAL") since January
1989, and has performed exemplary service during said years.
B. The Companies desire to compensate Lanterman for such exemplary
service by way of retirement pay.
C. The Companies desire to retain Lanterman's consulting services
following such retirement on the terms set forth in this Agreement.
IN CONSIDERATION of past services as related above and the consulting
services related below, it is agreed as follows:
1. Compensation For Past Services and Consulting Services
1.1 For a period of fifteen (15) years following the date of
retirement by Lanterman from active services with the Companies
(the "Retirement Date"), the Companies shall pay to Lanterman, in
monthly installments of $120,198, an annual compensation of
$1,442,376.
1.2 In the event of Lanterman's death prior to the Retirement Date,
or prior to the fifteenth anniversary of the Retirement Date, the
unpaid balance of this total compensation ($21,635,640) shall be
paid in full to Lanterman's estate within 30 days of his death.
The unpaid balance shall be its then present value calculated by
utilization of an interest rate of 8.5% per year.
2. Consulting Services
Commencing on the Retirement Date and for a period of fifteen (15) years,
Lanterman agrees to perform consulting services for the Companies in regard to
the business operations of HAL upon the specific written request of the
Companies. Such services shall be provided during normal business hours, on
such dates, for such time and at such locations as shall be agreeable to
Lanterman. Such services shall not require more than five (5) hours in any
calendar month, unless expressly consented to by Lanterman, whose consent may be
withheld for any reason whatsoever. The Companies will reimburse Lanterman for
any out-of-pocket expenses incurred by him in the performance of said services.
3. Independent Contractor
Lanterman acknowledges that commencing on the Retirement Date, he will
be solely an independent contractor and consultant. He further acknowledges
that he will not consider himself to be an employee of the Companies, and will
not be entitled to any of the Companies employment rights or benefits.
4. Confidentiality
Lanterman will keep in strictest confidence, both during the term of
this Agreement and subsequent to termination of this Agreement, and will not
during the term of this Agreement or thereafter disclose or divulge to any
person, firm or corporation, or use directly or indirectly, for his own benefit
or the benefit of others, any confidential information of the Companies,
including, without limitation, any trade secrets respecting the business or
affairs of the Companies which he may acquire or develop in connection with or
as a result of the performance of his services hereunder. In the event of an
actual or threatened breach by Lanterman of the provisions of this paragraph,
the Companies shall be entitled to injunctive relief restraining Lanterman from
the breach or threatened breach as its sole remedy. The Companies hereby waive
their rights for damages, whether consequential or otherwise.
5. Enforceable
The provisions of this Agreement shall be enforceable notwithstanding
the existence of any claim or cause of action of Lanterman against the
Companies, or the Companies against Lanterman, whether predicated on this
Agreement or otherwise.
6. Applicable Law
This Agreement shall be construed in accordance with the laws of the
State of Washington, and venue for any litigation concerning an alleged breach
of this Agreement shall be in King County, Washington, and the prevailing party
shall be entitled to reasonable attorney's fees and costs incurred.
7. Entire Agreement
This Agreement contains the entire agreement of the parties relating
to the subject matter hereof. A similar agreement of November 1998 shall become
null and void upon the execution of this Agreement. Any notice to be given
under this Agreement shall be sufficient if it is in writing and is sent by
certified or registered mail to Lanterman or to the Companies to the attention
of the President, or otherwise as directed by the Companies, from time to time,
at the addresses as they appear in the opening paragraph of the Agreement.
8. Waiver
The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
IN WITNESS WHEREOF, the Companies and Lanterman have duly executed this
agreement as of the day and year first above written.
CARNIVAL CORPORATION
By: /s/ Howard S. Frank
Its: Vice Chairman and COO
HOLLAND AMERICA LINE-
WESTOURS INC.
By: /s/ Larry D. Calkins
Its: Vice President -
Finance
/s/ Alton Kirk Lanterman
Signature
Alton Kirk Lanterman
Print Full Name
EXHIBIT 10.28
1994 TRANSACTION - EXTENSION AGREEMENT
This 1994 Transaction - Extension Agreement, dated as of January 18, 2000
(the "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 Panamanian 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 certain promissory
notes (collectively, the "CCL Notes") made by the Shareholders in favor of CCL
(Schedule B attached hereto sets forth the outstanding principal amount on 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 on June 15, 1998 and on February 17,
1999 (as amended, the "Stock Purchase Agreement"), among CCL and the
Shareholders;
WHEREAS, CCL has agreed to (i) terminate the CCL Notes and accept in
substitution therefore, renewal promissory notes (the "Renewal Promissory
Notes") in the amounts set forth on Schedule B, (ii) amend and restate those
certain Security and Pledge Agreements, dated as of November 30, 1994, as
amended (collectively as amended, 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, (iii) extend the
Shareholders' put option, as set forth in the Stock Purchase Agreement, in
conformity with the term of the Renewal Promissory Notes and (iv) contribute the
Renewal Promissory Notes and the Pledge Agreements to that certain Carnival
Corporation Blind Trust dated of even date herewith among CCL, the Shareholders
and First Union, as trustee, whereby the trustee would be obligated to enforce
all of CCL's rights under the Renewal Promissory Notes and the Pledge
Agreements.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
1. Renewal Promissory Notes. CCL hereby agrees effective as of the date
hereof, that the CCL Notes shall be terminated and of no further force and
effect and the Shareholders shall execute Renewal Promissory Notes in the form
attached hereto as Exhibit A in the amounts set forth on Schedule B hereof. At
the Closing (as defined below), CCL shall tender to the Shareholders the CCL
Notes so that same shall be simultaneously destroyed.
2. Amendment of Shareholders' Put Option. Article IV of the Stock
Purchase Agreement is hereby amended to extend the period of exercise of the
Shareholders' put option with respect to the Shares to January ___, 2008.
Additionally, notwithstanding anything to the contrary contained herein or in
the Stock Purchase Agreement, the Shareholders ' put option may only be
exercised provided that (i) any and all licensing and approval of the Louisiana
Gaming and Control Board required by the laws, rules and regulations of the
State of Louisiana pertaining to licensed gaming activities and any other
applicable foreign, federal or state authorities has been obtained, and (ii)
such transaction is in compliance with all applicable maritime laws (including
the Jones Act).
3. Closing. 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 date hereof, or at such other place and time as may be mutually agreed by
the parties.
4. 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.
5. 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 agreement, obligations and
conditions required to be complied with or satisfied by CCL under this
Agreement, and has taken all necessary action to authorize the execution,
delivery and performance of this Agreement.
(b) This Agreement has been duly and validly authorized, executed and
delivered by CCL and constitutes a valid and binding agreement of CCL,
enforceable against CCL in accordance with its terms, subject to applicable
principles of equity, bankruptcy, reorganization, insolvency or other laws
affecting the enforcement of creditors' rights generally.
6. 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 construed and enforced in
accordance with the laws of the State of Florida, without reference to the
conflict of laws principles thereof; provided that the exercise of all rights
and remedies by any of the parties is subject to any applicable Louisiana Gaming
Control Law, and the rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, each Shareholder and CCL has executed or caused this
Agreement to be executed on the date first above written.
*
____________________
Sherwood M. Weiser
*
____________________
Donald E. Lefton
*
____________________
Thomas Hewitt
*
____________________
Peter Sibley
*
____________________
W. Peter Temling
*
____________________
Robert Sturges
CARNIVAL CORPORATION
By:/s/ Gerald R. Cahill
Name: Gerald R. Cahill
Title: Chief Financial Officer
* Executed by Power of Attorney
By:/s/ W. Peter Temling
W. Peter Temling
<TABLE>
<CAPTION>
Schedule A
Name of Shareholder Number of Shares
<S> <C>
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
Name of Shareholder Principal Amount Outstanding
Sherwood Weiser $ 4,966,497
Donald Lefton 4,966,497
Thomas Hewitt 1,840,334
Peter Sibley 1,840,334
Robert Sturges 736,136
Peter Temling 736,136
Total $15,085,934
</TABLE>
EXHIBIT 10.29
AMENDED AND RESTATED 1994
SECURITY AND PLEDGE AGREEMENT
THIS AMENDED AND RESTATED 1994 SECURITY AND PLEDGE AGREEMENT (the
"Agreement"), dated as of the 18th day of January, 2000 by and between Sherwood
M. Weiser (hereinafter called "Debtor), and Carnival Corporation, a Panamanian
corporation (the "Secured Party), as the holder of the Note (as defined below).
Upon execution of this Agreement, the Secured Party shall simultaneously
contribute this Agreement and the Collateral (as defined below) to that certain
Carnival Corporation Blind Trust, dated of even date herewith, a copy of which
is attached hereto, pursuant to which, among other things, the Trustee of such
Trust shall exclusively make all decisions and take all actions necessary with
regard to any and all rights of the Secured Party under this Agreement.
1. Security Interest. For value received, Debtor hereby sells, transfers,
conveys, sets over, delivers, bargains, pledges, assigns and grants to Secured
Party, upon the terms and conditions of this Agreement, a security interest in
and to any and all present or future rights of Debtor in and to all of the
following rights, interests and property (all of the following being herein
sometimes called the "Collateral"):
(a) 859,248 shares (the "Shares") of the common stock, par value $.005
per share, of CRC Holdings, Inc. ("CRC");
(b) All rights, powers, privileges and preferences pertaining to the
Shares and any stock rights, rights to subscribe, cash distributions, dividends,
stock dividends, liquidating dividends, new securities (whether certificated or
uncertificated) and other property to which the Debtor may become entitled by
reason of the ownership of any Securities (as defined below) pledged and
assigned hereunder from time to time; and
(c) All Proceeds of any of the foregoing Collateral described above in
this Section 1.
All capitalized terms used but not otherwise defined in this Agreement shall
have the respective meanings given them in the Florida Uniform Commercial Code.
As used in this Agreement the term "Securities" means any notes, stocks,
treasury stocks, bonds, debentures, evidences of indebtedness, warrants,
partnership interests, stock options, beneficial interests in trusts or equity
interests of any nature whatsoever in any legal entity or, in general, any
interest or instrument commonly known as a "security," or any warrant or right
to subscribe to or purchase any of the foregoing; and the term "issuer" means,
with respect to any Securities, the legal entity in which such Securities
evidence an ownership or beneficial interest. The Secured Party understands and
agrees that notwithstanding anything to the contrary contained herein, the
Secured Party may not take ownership in any manner in any of the foregoing
Collateral described above in Section 1 without first obtaining any and all
licensing and approval of the Louisiana Gaming and Control Board required by the
laws, rules and regulations of the State of Louisiana pertaining to licensed
gaming activities and any other applicable foreign, federal or state
authorities.
2. 1994 Stock Purchase Agreement. This Agreement amends and restates the
Security and Pledge Agreement, dated November 30, 1994, as amended, between
Debtor and Secured Party which was executed and delivered pursuant to the terms,
obligations and requirements of the Stock Purchase Agreement, dated November 30,
1994, as amended on June 15, 1998 and February 17, 1999 (as amended, the "1994
Stock Purchase Agreement"), pursuant to which Secured Party sold shares of
common stock of CHC International, Inc., the predecessor of CRC, to Debtor. The
security interests herein granted ("Security Interests") shall secure full
payment and performance of: (a) that certain Renewal Promissory Note of even
date herewith in the principal amount of $4,966,497, made by Debtor and payable
to the order of Secured Party (such note and any notes given in modification,
renewal, extension or substitution thereof being herein sometimes collectively
referred to as the "Notes" and individually as the "Note"); and (b) the due and
punctual observance and performance of each and every agreement, covenant and
condition on Debtor's part to be observed or performed under this Agreement and
the Note (all of which debts, duties, liabilities and obligations hereinbefore
described and covered by this Agreement and the Note are hereinafter referred to
as the "Obligation").
3. Priority. Debtor represents and warrants that the Security Interests
are first and prior security interests in and to all of the Collateral.
4. Representations, Warranties and Covenants. The Debtor hereby
represents and warrants to Secured Party and covenants for the benefit of
Secured Party as follows:
(a) Debtor is the sole legal and equitable owner of the Shares free
from any adverse claim, lien, security interest, encumbrance or other right,
title or interest of any person, except for the security interest created
hereby. Debtor has the right and power to grant an interest in the Collateral
to Secured Party without the consent of any other person, and Debtor shall at
his expense defend the Collateral against all claims and demands of all persons
at any time claiming the Collateral or any interest therein adverse to Secured
Party. So long as any Obligation to the Secured Party pursuant to the Note is
outstanding, Debtor will not without the prior written consent of Secured Party
grant to any person a security interest in any of the Collateral or permit any
lien or encumbrance to attach to any of the Collateral, or suffer or permit any
levy or attachment to be made on any part of the Collateral, or permit any
financing statement to reflect an interest in any part of the Collateral, except
that of Secured Party, to be on file with respect thereto.
(b) Debtor has delivered to Secured Party all stock certificates
evidencing the Shares pledged and assigned under this Agreement, together with
duly executed stock powers in blank and all other assignments or endorsements
reasonably requested by Secured Party.
(c) If new or additional Securities are issued to Debtor (as a stock
dividend, stock split, or pursuant to any reclassification or recapitalization
of the capital of any issuer of Securities pledged and assigned hereunder, or
the reorganization or merger, acquisition or consolidation of any such issuer or
otherwise) with respect to the Collateral, then the same shall be deemed an
increment to the Collateral and under pledge and assignment to Secured Party
hereunder. If evidenced by a stock certificate, bond, warrant, debenture,
certificate, or other instrument or writing, then such Securities shall (to the
extent acquired or received by or placed under Debtor's control) be held in
trust for and promptly delivered to Secured Party, together with duly executed
stock powers in blank and any other assignments or endorsements as Secured Party
may request. If any such Securities are uncertificated, then Debtor shall
immediately upon acquisition of such Securities cause Secured Party to be
registered as the transferee thereof on the books of the depository, custodian
bank, clearing corporation, brokerage house, issuer or otherwise, as may be
requested by Secured Party.
(d) Without the prior consent of Secured Party, Debtor shall not
sell, transfer, assign, convey, lease or otherwise dispose of any part of the
Collateral, nor enter into any contract or agreement to do so. Debtor will not
compromise, release, surrender or waive any rights of any nature whatsoever in
respect of any of the Collateral without Secured Party's prior written consent.
5. Debtor's Obligations. So long as the Note is outstanding, Debtor
covenants and agrees with Secured Party (a) not to permit any material part of
the Collateral to be levied upon under any legal process; (b) not to dispose of
any of the Collateral without the prior written consent of Secured Party; (c) to
comply with all applicable federal, state and local statutes, laws, rules and
regulations, the noncompliance with which would have a material and adverse
effect on the value of the Collateral; and (d) to pay all taxes accruing after
the Closing Date which constitute, or may constitute, a lien against the
Collateral, prior to the date when penalties or interest would attach to such
taxes; provided, that Debtor may contest any such tax claim if done diligently
and in good faith.
6. Event of Default. As used herein, the term "Event of Default" shall
include any or all of the following if same exist on the 10th day after written
notice by Secured Party to Debtor which describes such default:
(a) The assignment, voluntary or involuntary conveyance of legal or
beneficial interest, mortgage, pledge or grant of a security interest in any of
the Collateral; or
(b) The filing or issuance of a notice of any lien, warrant for
distraint or notice of levy for taxes or assessment against the Collateral
(except for those which are being contested in good faith and for which adequate
reserves have been created); or
(c) Nonpayment of any installment of principal or interest upon the
date same shall be due and payable under the terms of the Note; or
(d) The adjudication of Debtor as bankrupt, or the taking of any
voluntary action by Debtor or any involuntary action against Debtor seeking an
adjudication of Debtor as bankrupt, or seeking relief by or against Debtor under
any provision of the Bankruptcy Code.
7.Remedies. Upon the occurrence and during the continuation of an Event of
Default as defined herein, in addition to any and all other rights and remedies
which Secured Party may then have hereunder or under the Note, under the Uniform
Commercial Code of the State of Florida or of any other pertinent jurisdiction
(the "Code"), or otherwise, Secured Party may, at its option: (a) reduce its
claim to judgment or foreclosure or otherwise enforce the Security Interests, in
whole or in part, by any available judicial procedure; (b) sell, or otherwise
dispose of, at the office of Secured Party, or elsewhere, all or any part of the
Collateral, and any such sale or other disposition may be as a unit or in
parcels, by public or private proceedings, and by way of one or more contracts
(it being agreed that the sale of any part of the Collateral shall not exhaust
the Secured Party's power of sale, but sales may be made from time to time, and
at any time, until all of the Collateral has been sold or until the Obligation
has been paid and performed in full); (c) at its discretion, retain the
Collateral in satisfaction of the Obligation whenever the circumstances are such
that Secured Party is entitled to do so under the Code or otherwise; and (d)
exercise any and all other rights, remedies and privileges it may have under the
Note and the other documents defining the Obligation. Provided that an Event of
Default has not occurred, Debtor shall retain all voting rights with respect to
the Shares and all cash dividends declared with respect to such Shares. The
Secured Party understands and agrees that notwithstanding anything to the
contrary contained herein, the Secured Party may not take ownership in any
manner in any of the Collateral without first obtaining any and all licensing
and approval of the Louisiana Gaming and Control Board required by the laws,
rules and regulations of the State of Louisiana pertaining to licensed gaming
activities and any other applicable foreign, federal of state authority. In the
event that Louisiana Regulatory Approval is not obtained, the parties
acknowledge that they shall have no recourse against the Louisiana Gaming
Control Board, the Attorney General of the State of Louisiana, the Department of
Safety and Corrections, Office of State Police, and their members and employees,
except as provided under applicable Louisiana law, including the Louisiana
Gaming Control Law, and the rules and regulations promulgated thereunder.
8. Application of Proceeds by Secured Party. Any and all proceeds ever
received by Secured Party from any sale or other disposition of the Collateral,
or any part thereof, or the exercise of any other remedy pursuant hereto shall
be applied by Secured Party to the Obligation in such order and manner as
Secured Party, in its sole discretion, may deem appropriate, notwithstanding any
directions or instructions to the contrary by Debtor; provided that the proceeds
and/or accounts shall be applied toward satisfaction of the Obligation.
9. Notice of Sale. Reasonable notification of the time and place of any
public sale of the Collateral, or reasonable notification of the time after
which any private sale or other intended disposition of the Collateral is to be
made, shall be sent to Debtor and to any other persons entitled under the Code
to notice; provided, that if any of the Collateral threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Secured Party
may sell, pledge, assign or otherwise dispose of the Collateral without
notification, advertisement or other notice of any kind. It is agreed that
notice sent or given no less than ten (10) calendar days prior to the taking of
the action to which the notice relates is reasonable notification and notice for
the purpose of this paragraph.
10. Delivery of Notices. Any notice or demand required to be given
hereunder shall be in writing and shall be deemed to have been duly given and
received, if given by hand, when a writing containing such notice is received by
the entity or person to whom addressed or, is given by mail, two (2) business
days after a certified or registered letter containing such notice, with postage
prepaid, is deposited in the United States mails, addressed to:
If to Secured Party:
Carnival Corporation
3655 N.W. 87th Avenue
Miami, Florida 33178
Attention: Chief Financial Officer
If to Debtor:
c/o CRC Holdings, Inc.
3250 Mary Street
Miami, Florida 33133
Attention: Chief Financial Officer
Any such address may be changed from time to time by serving notice to the other
party as above provided. A business day shall mean a day of the week which is
not a Saturday or Sunday or a holiday recognized by national banking
associations.
11. Binding Effect. This Agreement shall be binding upon Debtor, his
heirs, successors, assigns, executors, administrators, and personal or legal
representatives, and shall inure to the benefit of Secured Party, its successors
and assigns.
12. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Florida, provided that the exercise of
all rights and remedies by any of the parties is subject to any applicable
Louisiana Gaming Control Law, and the rules and regulations promulgated
thereunder.
13. Severability. In the event that any one or more of the provisions
contained in this Agreement are held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement.
EXECUTED as of the day and year first herein set forth.
SECURED PARTY:
CARNIVAL CORPORATION
By: /s/ Gerald R. Cahill
Name: Gerald R. Cahill
Title:Chief Financial Officer
DEBTOR:
*
______________________
Sherwood M. Weiser
* Executed By Power of Attorney
By: /s/ W. Peter Temling
W. Peter Temling
EXHIBIT 10.30
SECURITY AND PLEDGE AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), dated as of the 18th day of
January, 2000 by and between Sherwood M. Weiser (hereinafter called "Debtor),
and Carnival Corporation, a Panamanian corporation (the "Secured Party), as the
holder of the Note (as defined below). Upon execution of this Agreement, the
Secured Party shall simultaneously contribute this Agreement and the Collateral
(as defined below) to that certain Carnival Corporation Blind Trust, dated of
even date herewith, a copy of which is attached hereto, pursuant to which, among
other things, the Trustee of such Trust shall exclusively make all decisions and
take all actions necessary with regard to any and all rights of the Secured
Party under this Agreement.
1. Security Interest. For value received, Debtor hereby transfers,
conveys, sets over, delivers, bargains, pledges, assigns and grants to Secured
Party, upon the terms and conditions of this Agreement, a security interest in
and to any and all present or future rights of Debtor in and to all of the
following rights, interests and property (all of the following being herein
sometimes called the "Collateral"):
(a) 803,785 shares (the "Shares") of the common stock, par value $.005
per share, of CRC Holdings, Inc. ("CRC") which have been contemporaneously
sold by Secured Party to Debtor pursuant to the Purchase Agreement (as
defined below);
(b) All rights, powers, privileges and preferences pertaining to the
Shares and any stock rights, rights to subscribe, cash distributions,
dividends, stock dividends, liquidating dividends, new securities (whether
certificated or uncertificated) and other property to which the Debtor may
become entitled by reason of the ownership of any Securities (as defined
below) pledged and assigned hereunder from time to time; and
(c) All Proceeds of any of the foregoing Collateral described above in
this Section 1.
All capitalized terms used but not otherwise defined in this Agreement shall
have the respective meanings given them in the Florida Uniform Commercial Code.
As used in this Agreement the term "Securities" means any notes, stocks,
treasury stocks, bonds, debentures, evidences of indebtedness, warrants,
partnership interests, stock options, beneficial interests in trusts or equity
interests of any nature whatsoever in any legal entity or, in general, any
interest or instrument commonly known as a "security," or any warrant or right
to subscribe to or purchase any of the foregoing; and the term "issuer" means,
with respect to any Securities, the legal entity in which such Securities
evidence an ownership or beneficial interest. The Secured Party understands and
agrees that notwithstanding anything to the contrary contained herein, the
Secured Party may not take ownership in any manner in any of the foregoing
Collateral described above in Section 1 without first obtaining any and all
licensing and approval of the Louisiana Gaming and Control Board required by the
laws, rules and regulations of the State of Louisiana pertaining to licensed
gaming activities and any other applicable foreign, federal or state
authorities.
2. Stock Purchase Agreement. This Agreement is being executed and
delivered pursuant to the terms, obligations and requirements of the Stock
Purchase Agreement (the "Purchase Agreement"), dated of even date herewith,
pursuant to which Secured Party has sold the Shares to Debtor. The security
interests herein granted ("Security Interests") shall secure full payment and
performance of: (a) that certain Promissory Note of even date herewith in the
principal amount of $3,965,780, made by Debtor and payable to the order of
Secured Party (such note and any notes given in modification, renewal, extension
or substitution thereof being herein sometimes collectively referred to as the
"Notes" and individually as the "Note"); and (b) the due and punctual observance
and performance of each and every agreement, covenant and condition on Debtor's
part to be observed or performed under this Agreement and the Note (all of which
debts, duties, liabilities and obligations hereinbefore described and covered by
this Agreement and the Note are hereinafter referred to as the "Obligation").
3. Priority. Debtor represents and warrants that the Security Interests
are first and prior security interests in and to all of the Collateral.
4. Representations, Warranties and Covenants. The Debtor hereby represents
and warrants to Secured Party and covenants for the benefit of Secured Party as
follows:
(a) Debtor is the sole legal and equitable owner of the Shares free from
any adverse claim, lien, security interest, encumbrance or other right,
title or interest of any person, except for the security interest created
hereby. Debtor has the right and power to grant an interest in the
Collateral to Secured Party without the consent of any other person, and
Debtor shall at his expense defend the Collateral against all claims and
demands of all persons at any time claiming the Collateral or any interest
therein adverse to Secured Party. So long as any Obligation to the Secured
Party pursuant to the Note is outstanding, Debtor will not without the
prior written consent of Secured Party grant to any person a security
interest in any of the Collateral or permit any lien or encumbrance to
attach to any of the Collateral, or suffer or permit any levy or attachment
to be made on any part of the Collateral, or permit any financing statement
to reflect an interest in any part of the Collateral, except that of
Secured Party, to be on file with respect thereto.
(b) Debtor has delivered to Secured Party all stock certificates
evidencing the Shares pledged and assigned under this Agreement, together
with duly executed stock powers in blank and all other assignments or
endorsements reasonably requested by Secured Party.
(c) If new or additional Securities are issued to Debtor (as a stock
dividend, stock split, or pursuant to any reclassification or
recapitalization of the capital of any issuer of Securities pledged and
assigned hereunder, or the reorganization or merger, acquisition or
consolidation of any such issuer or otherwise) with respect to the
Collateral, then the same shall be deemed an increment to the Collateral
and under pledge and assignment to Secured Party hereunder. If evidenced
by a stock certificate, bond, warrant, debenture, certificate, or other
instrument or writing, then such Securities shall (to the extent acquired
or received by or placed under Debtor's control) be held in trust for and
promptly delivered to Secured Party, together with duly executed stock
powers in blank and any other assignments or endorsements as Secured Party
may request. If any such Securities are uncertificated, then Debtor shall
immediately upon acquisition of such Securities cause Secured Party to be
registered as the transferee thereof on the books of the depository,
custodian bank, clearing corporation, brokerage house, issuer or otherwise,
as may be requested by Secured Party.
(d) Without the prior consent of Secured Party, Debtor shall not sell,
transfer, assign, convey, lease or otherwise dispose of any part of the
Collateral, nor enter into any contract or agreement to do so. Debtor will
not compromise, release, surrender or waive any rights of any nature
whatsoever in respect of any of the Collateral without Secured Party's
prior written consent.
5. Debtor's Obligations. So long as the Note is outstanding, Debtor
covenants and agrees with Secured Party (a) not to permit any material part of
the Collateral to be levied upon under any legal process; (b) not to dispose of
any of the Collateral without the prior written consent of Secured Party; (c) to
comply with all applicable federal, state and local statutes, laws, rules and
regulations, the noncompliance with which would have a material and adverse
effect on the value of the Collateral; and (d) to pay all taxes accruing after
the Closing Date which constitute, or may constitute, a lien against the
Collateral, prior to the date when penalties or interest would attach to such
taxes; provided, that Debtor may contest any such tax claim if done diligently
and in good faith.
6. Event of Default. As used herein, the term "Event of Default" shall
include any or all of the following if same exist on the 10th day after written
notice by Secured Party to Debtor which describes such default:
(a) The assignment, voluntary or involuntary conveyance of legal or
beneficial interest, mortgage, pledge or grant of a security interest in any of
the Collateral; or
(b) The filing or issuance of a notice of any lien, warrant for distraint
or notice of levy for taxes or assessment against the Collateral (except for
those which are being contested in good faith and for which adequate reserves
have been created); or
(c) Nonpayment of any installment of principal or interest upon the date
same shall be due and payable under the terms of the Note; or
(d) The adjudication of Debtor as bankrupt, or the taking of any
voluntary action by Debtor or any involuntary action against Debtor seeking an
adjudication of Debtor as bankrupt, or seeking relief by or against Debtor under
any provision of the Bankruptcy Code.
7. Remedies. Upon the occurrence and during the continuation of an Event
of Default as defined herein, in addition to any and all other rights and
remedies which Secured Party may then have hereunder or under the Note, under
the Uniform Commercial Code of the State of Florida or of any other pertinent
jurisdiction (the "Code"), or otherwise, Secured Party may, at its option: (a)
reduce its claim to judgment or foreclosure or otherwise enforce the Security
Interests, in whole or in part, by any available judicial procedure; (b) sell,
or otherwise dispose of, at the office of Secured Party, or elsewhere, all or
any part of the Collateral, and any such sale or other disposition may be as a
unit or in parcels, by public or private proceedings, and by way of one or more
contracts (it being agreed that the sale of any part of the Collateral shall not
exhaust the Secured Party's power of sale, but sales may be made from time to
time, and at any time, until all of the Collateral has been sold or until the
Obligation has been paid and performed in full ); (c) at its discretion, retain
the Collateral in satisfaction of the Obligation whenever the circumstances are
such that Secured Party is entitled to do so under the Code or otherwise; and
(d) exercise any and all other rights, remedies and privileges it may have under
the Note and the other documents defining the Obligation. Provided that an
Event of Default has not occurred, Debtor shall retain all voting rights with
respect to the Shares and all cash dividends declared with respect to such
Shares. The Secured Party understands and agrees that notwithstanding anything
to the contrary contained herein, the Secured Party may not take ownership in
any manner in any of the Collateral without first obtaining any and all
licensing and approval of the Louisiana Gaming and Control Board required by the
laws, rules and regulations of the State of Louisiana pertaining to licensed
gaming activities and any other applicable foreign, federal of state authority.
In the event that Louisiana Regulatory Approval is not obtained, the parties
acknowledge that they shall have no recourse against the Louisiana Gaming
Control Board, the Attorney General of the State of Louisiana, the Department of
Safety and Corrections, Office of State Police, and their members and employees,
except as provided under applicable Louisiana law, including the Louisiana
Gaming Control Law, and the rules and regulations promulgated thereunder.
8. Application of Proceeds by Secured Party. Any and all proceeds ever
received by Secured Party from any sale or other disposition of the Collateral,
or any part thereof, or the exercise of any other remedy pursuant hereto shall
be applied by Secured Party to the Obligation in such order and manner as
Secured Party, in its sole discretion, may deem appropriate, notwithstanding any
directions or instructions to the contrary by Debtor; provided that the proceeds
and/or accounts shall be applied toward satisfaction of the Obligation.
9. Notice of Sale. Reasonable notification of the time and place of any
public sale of the Collateral, or reasonable notification of the time after
which any private sale or other intended disposition of the Collateral is to be
made, shall be sent to Debtor and to any other persons entitled under the Code
to notice; provided, that if any of the Collateral threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Secured Party
may sell, pledge, assign or otherwise dispose of the Collateral without
notification, advertisement or other notice of any kind. It is agreed that
notice sent or given no less than ten (10) calendar days prior to the taking of
the action to which the notice relates is reasonable notification and notice for
the purpose of this paragraph.
10. Delivery of Notices. Any notice or demand required to be given
hereunder shall be in writing and shall be deemed to have been duly given and
received, if given by hand, when a writing containing such notice is received by
the entity or person to whom addressed or, is given by mail, two (2) business
days after a certified or registered letter containing such notice, with postage
prepaid, is deposited in the United States mails, addressed to:
If to Secured Party:
Carnival Corporation
3655 N.W. 87th Avenue
Miami, Florida 33178
Attention: Chief Financial Officer
If to Debtor:
c/o CRC Holdings, Inc.
3250 Mary Street
Miami, Florida 33133
Attention: Chief Financial Officer
Any such address may be changed from time to time by serving notice to the other
party as above provided. A business day shall mean a day of the week which is
not a Saturday or Sunday or a holiday recognized by national banking
associations.
11. Binding Effect. This Agreement shall be binding upon Debtor, his
heirs, successors, assigns, executors, administrators, and personal or legal
representatives, and shall inure to the benefit of Secured Party, its successors
and assigns.
12. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Florida, provided that the exercise of
all rights and remedies by any of the parties is subject to any applicable
Louisiana Gaming Control Law, and the rules and regulations promulgated
thereunder.
13. Severability. In the event that any one or more of the provisions
contained in this Agreement are held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement.
EXECUTED as of the day and year first herein set forth.
SECURED PARTY:
CARNIVAL CORPORATION
By:/s/ Gerald R. Cahill
Gerald R. Cahill
DEBTOR:
*
__________________
Sherwood M. Weiser
* Executed by Power of Attorney
By:/s/ W. Peter Temling
W. Peter Temling
EXHIBIT 10.31
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 18th day of January, 2000, by and among, (i) Carnival Corporation, a
Panamanian corporation ("CCL"), and (ii) Sherwood M. Weiser ("Weiser"), Donald
E. Lefton ("Lefton"), Thomas F. Hewitt ("Hewitt"), Peter L. Sibley ("Sibley"),
W. Peter Temling ("Temling") and Robert B. Sturges ("Sturges") (Weiser, Lefton,
Hewitt, Sibley, Temling and Sturges are sometimes collectively referred to
herein as the "Buyers" and individually as a "Buyer").
Recitals
A. CCL currently owns 2,490,000 shares (the "Purchased Shares") of common
stock, $.005 par value per share (the "CRC Common Stock"), of CRC Holdings, Inc.
("CRC").
B. Subject to approval by the Louisiana Gaming Control Board, CCL desires to
sell to Buyers, and Buyers desire to purchase from CCL, the Purchased Shares.
Agreement
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree as follows:
ARTICLE I - SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares.
(a) On the terms and subject to the conditions of this Agreement, CCL hereby
sells, conveys, assigns, transfers and delivers to Buyers, and Buyers hereby
purchase from CCL, the Purchased Shares for an aggregate purchase price of
$12,285,564, as follows:
<TABLE>
<CAPTION>
Number of
Buyer Purchased Shares Purchase Price
<S> <C> <C>
Weiser 803,785 3,965,780
Lefton 803,785 3,965,780
Hewitt 298,001 1,470,582
Sibley 298,001 1,470,582
Sturges 125,290 617,964
Temling 161,138 794,876
2,490,000 $12,285,564
</TABLE>
(b) To effect the transfers contemplated by Section 1.1(a), CCL is hereby
causing to be delivered to each Buyer, against payment therefor in accordance
with Section 1.2 hereof, stock certificates representing the number of Purchased
Shares set forth opposite such Buyer's name under the column "Number of
Purchased Shares" in Section 1.1(a).
1.2 Purchase Price; Payment for Shares; Notice.
(a) The aggregate purchase price of $12,285,564 (the "Purchase Price") for
the shares of Common Stock being purchased by Buyers hereunder is hereby being
paid by each Buyer's delivery to CCL of (a) such Buyer's promissory note in the
aggregate principal amount equal to the amount set forth opposite such Buyer's
name under the column "Purchase Price" in Section 1.1(a), such note in the form
attached hereto as Exhibit A (each a "Note" and collectively, the "Notes") and
(b) a security and pledge agreement in the form attached hereto as Exhibit B
(each a "Security Agreement").
(b) As the Notes provide for possible acceleration of the maturity date of
such Notes in the event that Weiser or Lefton sell any shares of CRC Common
Stock, Weiser and Lefton hereby agree to provide CCL prior written notice of any
such proposed sale. Weiser and Lefton hereby further agree that they will not
sell any shares of CRC Common Stock unless the purchaser(s) of such shares
agree(s) to buy an equal percentage of the Purchased Shares at the same price
and upon the same terms.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF CCL
CCL hereby represents and warrants to Buyers that:
2.1 Corporate Existence and Qualification. CCL is a corporation duly
organized, validly existing and in good standing under the laws of Panama; has
the corporate power to own, manage, lease and hold its properties and to carry
on its business as and where such properties are presently located and such
business is presently conducted; and is duly qualified to do business as a
foreign corporation in each jurisdiction where the failure to be so qualified
would have a material adverse effect on its business, financial condition or
results of operations.
2.2 Authority, Approval and Enforceability. This Agreement has been duly
executed and delivered by CCL and CCL has all requisite corporate power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby, and to perform its obligations hereunder. This Agreement
constitutes the legal, valid and binding obligation of CCL, enforceable in
accordance with its terms, except as such enforcement may be limited by general
equitable principles or by applicable bankruptcy, insolvency, moratorium, or
similar laws and judicial decisions from time to time in effect which affect
creditors' rights generally.
2.3 Ownership and Delivery of Shares. CCL owns all of the Purchased Shares
free and clear of any and all pledges, security interests, liens, charges,
proxies, calls or other encumbrances of any nature whatsoever. CCL's delivery
of a certificate or certificates representing the Purchased Shares to Buyers
pursuant to this Agreement, against payment therefor pursuant to Section 1.2
hereof, transfers valid title to such Purchased Shares to Buyers, free and clear
of any and all pledges, security interests, liens, charges, proxies, calls or
other encumbrances of any nature whatsoever. There are no outstanding options,
warrants, calls, subscriptions, agreements or commitments of any character,
except this Agreement, to which CCL is a party obligating it to sell any
Purchased Shares or which restrict the transfer of any such shares held by it.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF BUYERS
Each of the Buyers hereby severally represents and warrants to CCL that:
3.1 Authority, Approval and Enforceability. This Agreement has been duly
executed and delivered by such Buyer. Such Buyer has all requisite power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby, and to perform his obligations hereunder. This Agreement
and such Buyer's Note and Security Agreement constitute the legal, valid and
binding obligation of such Buyer, enforceable in accordance with their
respective terms, except as such enforcement may be limited by general equitable
principles or by applicable bankruptcy, insolvency, moratorium or similar laws
and judicial decisions from time to time in effect which affect creditors'
rights generally.
3.2 Investment Representations.
(a) Such Buyer is acquiring the Purchased Shares to be acquired by him
pursuant to this Agreement for his own account and not with a view to, or for
sale in connection with, a "distribution," as such term is used in Section 2(11)
of the Securities Act of 1933, as amended (the "Securities Act").
(b) Such Buyer is an "accredited investor," as that term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act.
(c) Such Buyer understands that the sale of shares of CRC Common Stock under
this Agreement has not been registered under the Securities Act or applicable
state securities laws.
(d) Such Buyer understands that the certificates representing shares of CRC
Common Stock being sold by CCL pursuant to this Agreement bear a "restricted
transfer" legend substantially as follows:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or any
applicable state law. They may not be offered for sale,
sold, transferred or pledged without (1) registration under
the Securities Act of 1933 and any applicable state law, or
(2) at holder's expense, an opinion (satisfactory to the
Company) of counsel (satisfactory to the Company) that
registration is not required."
(e) Such Buyer acknowledges that all matters relating to CRC, the Agreement
and such Buyer's investment in the CRC Common Stock have been explained to the
satisfaction of such Buyer and that such Buyer understands the speculative
nature and risks involved in this investment.
(f) Such Buyer can bear the economic risks inherent in its investments in the
CRC Common Stock.
(g) Such Buyer has been afforded the opportunity to ask questions of, and
receive answers from CRC and has had access to all information deemed material
to an investment decision with respect to his acquisition of the Common Stock.
3.3 Representations. Such Buyer is acquiring the CRC Common Stock without
having been furnished any representations or warranties of any kind whatsoever
with respect to CRC's business and financial condition. Without limiting the
generality of the foregoing, such Buyer acknowledges that neither CCL, CRC nor
any other person has provided, and such Buyer is not relying in any way upon,
any representations regarding projections or future performance of CRC.
ARTICLE IV - REPURCHASE SUBJECT TO REGULATORY APPROVAL
4.1 Sale and Purchase. Provided that (i) any and all licensing and
approval of the Louisiana Gaming and Control Board required by the laws, rules
and regulations of the State of Louisiana pertaining to licensed gaming
activities and any other applicable foreign, federal or state authorities has
been obtained ("Louisiana Regulatory Approval"), and (ii) the following
transaction is in compliance with all applicable maritime laws (including the
Jones Act), then during the period that any of the Notes are outstanding, upon
written notice from either Weiser, on behalf of the Buyers, or CCL to the Buyers
(the "Repurchase Notice"), CCL shall repurchase from Buyers and the Buyers shall
sell to CCL, on the date and in the manner set forth in this Article IV, any of
the Purchased Shares then held by Buyers, at the Purchase Price per share of
Common Stock paid by Buyers hereunder, together with an amount necessary so that
the aggregate purchase price to be paid by CCL pursuant to this Article IV
returns to each Buyer his purchase price per share and also provides such Buyer
with a rate of return thereon of 6.10% per annum, in each case from the Closing
Date until the date the Purchased Shares are acquired by CCL pursuant to this
Article IV. Each of the Buyers agree that Weiser shall have the sole right to
deliver or receive the Repurchase Notice on behalf of the Buyers.
Notwithstanding anything to the contrary contained herein, the repurchase of the
Purchased Shares is subject to Louisiana Regulatory Approval. In the event that
Louisiana Regulatory Approval is not obtained, the parties acknowledge that they
shall have no recourse against the Louisiana Gaming Control Board, the Attorney
General of the State of Louisiana, the Department of Safety and Corrections,
Office of State Police, and their members and employees, except as provided
under applicable Louisiana law, including the Louisiana Gaming Control Law, and
the rules and regulations promulgated thereunder.
4.2 Terms of Payment of Purchase Price. CCL shall pay to Buyers the
purchase price for all Purchased Shares acquired pursuant to this Article IV in
cash; provided, however, that CCL shall have the right to reduce, deduct or
otherwise offset against each payment otherwise due to a Buyer hereunder any and
all amounts owed to CCL by such Buyer, including principal and accrued interest
owed to CCL pursuant to the Note delivered by such Buyer pursuant to this
Agreement.
4.3 Closing. The consummation of any transfer under this Article IV shall
take place on the later of (i) the 10 th business day after the Repurchase
Notice is received by CCL or Weiser, as the case may be, or (ii) receipt of
Louisiana Regulatory Approval. The closing shall occur at the principal office
of CRC, and the closing procedures shall be consistent with the provisions of
this Article IV.
4.4 Tender Requirements at Closing. At the closing, the Buyers shall
present to CCL share certificates for all Purchased Shares to be acquired by CCL
pursuant to this Article IV, such share certificates to be in proper form for
transfer. Such shares shall be transferred free of all liens and encumbrances
or adverse claims of any kind of character. CCL, upon receipt of proper tenders
from Buyers, shall tender payment in accordance with the terms provided in this
Article IV.
ARTICLE V - MISCELLANEOUS
5.1 Further Assurances. Following the Closing, the parties shall execute
and deliver such documents, and take such action, as shall be reasonably
requested by any other party hereto to carry out the transactions contemplated
by this Agreement.
5.2 Publicity. Neither of the parties hereto shall issue or make, or cause
to have issued or made, any public release or announcement concerning this
Agreement or the transactions contemplated hereby, without the advance approval
in writing of the form and substance thereof by the other party hereto, which
approval shall not be unreasonably withheld, except as required by law.
5.3 Notices. Any notice, request, instruction, correspondence or other
document to be given hereunder by any party hereto to another (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed by registered or certified mail, postage prepaid and return receipt
requested, or by telecopier, or by a reputable overnight courier, as follows:
If to CCL:
Carnival Corporation
3655 N.W. 87th Avenue
Miami, Florida 33178
Attention: Chief Financial Officer
If to any Buyer:
c/o CRC Holdings, Inc.
3250 Mary Street, 5th Floor
Miami, Florida 33133
Attention: Chief Financial Officer
5.4 Governing Law. The provisions of this Agreement and the documents
delivered pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Florida; provided that the exercise of all rights and
remedies by any of the parties is subject to any applicable Louisiana Gaming
Control Law, and the rules and regulations promulgated thereunder.
5.5 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules attached hereto, constitutes the entire
agreement between and among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as set forth specifically
herein or contemplated hereby. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (regardless of whether similar), nor shall any such waiver constitute a
continuing waiver unless otherwise expressly provided.
5.6 Binding Effect and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective permitted
successors and assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any person or entity other than the parties hereto and
their respective permitted successors and assigns, any rights, benefits or
obligations hereunder.
5.7 Multiple Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
EXECUTED as of the date first written above.
CARNIVAL CORPORATION
By: /s/ Gerald R. Cahill
Gerald R. Cahill
*
Sherwood M. Weiser
*
Donald E. Lefton
*
Thomas F. Hewitt
*
Peter L. Sibley
*
W. Peter Temling
*
Robert B. Sturges
* Executed By Power of Attorney
By:/s/ W. Peter Temling
W. Peter Temling
EXHIBIT 10.32
CARNIVAL CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective Date: December 1, 1999
WHEREAS, Carnival Corporation ("Company") desires to establish the Carnival
Corporation Supplemental Executive Retirement Plan ("Plan") for the purpose of
providing to a select group of management or highly compensated employees
("Eligible Employees") certain supplemental retirement benefits, effective
December 1, 1999;
NOW, THEREFORE, to effectuate its intentions, the Company hereby adopts this
Plan effective as of the first day of December 1, 1999.
SECTION 1
DEFINITIONS
For purposes of the Plan, the following words and phrases shall have the
following meanings unless a different meaning is plainly required by the
context.
1.1 Account means a recordkeeping source from which Plan benefits are
determined.
1.2 Administrator or Plan Administrator means the Company.
1.3 Beneficiary means the person, persons, trust or other entity a Participant
designates by written revocable designation filed with the Company to
receive payments in the event of his death.
1.4 Board means the Company's Board of Directors or a committee thereof.
1.5 Code means the Internal Revenue Code of 1986, as amended.
1.6 Company means Carnival Corporation and any successor thereto, and for
purposes of determining eligibility to participate in the Plan, any
affiliated company which is a member of a controlled group of corporations
within the meaning of section 1563(a) of the Code with Carnival Corporation
which adopts this Plan with the consent of the Company.
1.7 Compensation means an Eligible Employee's compensation from the Company,
including salary, bonus, amounts deferred under the Carnival Corporation
"FunShip" Nonqualified Savings Plan, and any incentive pay without regard
to limitations under Section 401(a)(17) of the Internal Revenue Code.
Compensation shall not include income attributable to taxable or nontaxable
fringe benefits or any income that arises in connection with any equity
based compensation program offered by the Company.
1.8 Effective Date means December 1, 1999.
1.9 Eligible Employee means each person determined under Section 2 as eligible
to participate in the Plan.
1.10 Participant means
A. An Eligible Employee who participates under the Plan in accordance with
Sections 2.1 and 3.1.
B. Each other Eligible Employee or former Eligible Employee for whom an
Account is maintained.
1.11 Plan means the Carnival Corporation Supplemental Executive Retirement Plan
as described in this instrument, and the same as may be amended from time
to time.
1.12 Plan Year means the twelve (12) consecutive month period beginning on each
January 1 and ending on the following December 31.
1.13 Retirement Plan means the Carnival Corporation Nonqualified Retirement
Plan.
1.14 Termination of Employment means the termination of the Participant's
services for any reason.
1.15 Year of Service means the completion of twelve consecutive months of
service with the Company and shall include all service with the Company
prior to the Effective Date of the Plan and any additional service credited
under the Retirement Plan.
SECTION 2
PARTICIPATION IN THE PLAN
2.1 Eligibility to Participate. Robert H. Dickinson and Howard S. Frank, and
any other person designated by the Board shall participate in the Plan.
However, eligibility to participate in the Plan is preconditioned upon
waiving any benefit under the Company's Deferred Compensation Agreement.
It is the intention of the Company that this Plan constitute a "top hat"
plan and therefore only those persons who are determined to be within a
select group of management or highly compensated shall be entitled to
participate in the Plan.
2.2 Procedure For and Effect of Admission. Each Eligible Employee shall
complete such forms and provide such data as reasonably required by the
Company including Beneficiary designation forms and payment of benefit
forms. By becoming a Participant, an Eligible Employee shall be deemed
conclusively to have assented to the provisions of this Plan and all
amendments hereto.
2.3 Cessation of Participation. A Participant shall cease to be an active
participant on the earlier of:
A. the date on which the Plan terminates, or
B. the date on which he ceases to be an Eligible Employee.
A former active participant will be deemed a Participant for all purposes
except with respect to the right to receive "an additional benefit," as long
as he retains a Plan Account.
SECTION 3
PLAN BENEFITS
3.1 Plan Benefits. The annual benefit under this Plan to which an eligible
Participant or his or her Beneficiary shall be entitled shall be determined
as follows:
(A) 50% of final pay ("final pay" shall mean a Participant's highest
Compensation in any twelve month period within the last sixty months) reduced
proportionately for each Year of Service less than 25.
minus
(B) The amount of benefits payable to the Participant under the Company's
Retirement Plan;
minus
(C) The Participant's Primary Social Security Amount (as defined in
the Retirement Plan) at the social security retirement age (determined without
regard to such Participant's election to receive social security benefits
prior to social security retirement age).
3.2 Early Retirement. A Participant may retire before a participant reaches
age 65, and receive benefits pursuant to Section 3.1, upon the attainment
of age 55 and the completion of at least 15 Years of Service. Such benefit
shall be reduced by 3% for each year (1/4% for each month) that the
Participant retires before age 65.
SECTION 4
MAINTENANCE OF
PARTICIPANT ACCOUNTS
4.1 Establishment of Accounts. The Administrator shall establish and maintain
a separate bookkeeping Account in the name of each Participant solely for
purposes of determining the accrued benefit of each Participant.
4.2 Relationship of the Parties. To the extent a Participant or any person
acquires a right to receive payments from the Company under this Plan, such
right shall be no greater than the right of any unsecured creditor of the
Company. Neither this Plan nor any action taken pursuant to the terms of
this Plan shall be considered to create a fiduciary relationship between
the Company and the Participants or any other persons or to require the
establishment of a trust in which the assets are beyond the claims of any
unsecured creditor of the Company. Notwithstanding Section 4.3 below, the
Company may, at its discretion, make contributions to a rabbi trust that
will be used to pay benefits under the Plan as they become due and owing.
4.3 No Requirement to Fund. This Plan is not funded in any way or form. It is
the Company's intention that this Plan be an unfunded plan maintained
primarily for the purpose of providing deferred compensation for a select
group of management or highly compensated persons within the meaning of
Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
SECTION 5
BENEFITS
5.1 Payment of Benefit. Subject to the approval of the Company, each
Participant shall elect the form and timing of their distribution.
A.Form of Payment Except as provided in Section 3.2, a Participant or his or
her Beneficiary may elect that the payment of Benefits to which a Participant
or his or her Beneficiary shall be entitled under this Plan shall be made in
one of the following forms:
1.Life with 5-Year Certain Benefit -- an annuity for the life of the
Participant, but if the Participant dies within 5 years of the date
distribution of Benefits began, the annuity is payable to the
Participant's Beneficiary for the remainder of that 5-year period;
2.Life with 10-Year Certain Benefit -- an annuity for the life of the
Participant, but if the Participant dies within 10 years of the date
distribution of Benefits began, the annuity is payable to the
Participant's Beneficiary for the remainder of that 10-year period;
3.Qualified Joint and Survivor Annuity -- an annuity for the life of
the Participant with a survivor annuity for the life of the
Participant's spouse, where the survivor annuity is either 50% or 100%
of the amount payable during the joint lives of the Participant and
the Participant's spouse;
4.Single cash distribution of the full amount payable - the actuarial
equivalent present value of the Participant's Vested Interest payable
at his Normal Retirement Date.
The value of such Benefit shall be determined using the same actuarial
factors as provided for in the Retirement Plan.
A.Timing of Payment: The Participant's election shall indicate that
payment shall be made (in the case of a lump sum election) or shall
commence (in the case of an installment election):
1.as soon as administratively practicable following the Participant's
Termination of Employment;
2.as soon as administratively practicable following the calendar year
of the Participant's Termination of Employment;
3.in the month following the earlier of (A) the Participant's
attainment of age 55 and 15 Years of Service, or (B) the Participant's
attainment of age 65; or
4.in a specific month and year.
Notwithstanding the foregoing, if a Participant elects his distribution to
be made or commenced in accordance with paragraph (3) above, and such date
falls before the Participant's Termination of Employment, the Participant's
distribution shall be made or commenced in accordance with paragraph (1)
above. Notwithstanding the foregoing, subject to the approval of the
Company, a Participant may change his form and timing election applicable
to his benefit, provided that such request to change is made at least
twelve (12) consecutive months prior to the date on which such distribution
would have otherwise been made on or commenced. If a Participant dies
before commencement of distribution of Participant's Benefits under the
Plan, such Benefits shall be paid in a lump sum to the Participant's
Beneficiary, using the same actuarial assumptions as in the Retirement
Plan. If a Participant dies after commencement of distribution of his or
her Benefits under the Plan, the Participant's Benefits shall be paid to
the Participant's Beneficiary in accordance with the Participant's
election.
5.2 Beneficiary Designation
A. Each Participant may designate a Beneficiary to receive the benefits
payable in the event of the Participant's death, and designate a
successor Beneficiary to receive any benefits payable in the event of
the death of any other Beneficiary.
B. A Participant may change a Beneficiary designation at any time. All
Beneficiary designations and changes shall be made on an appropriate
form as designated by the Plan Administrator and filed with the Plan
Administrator.
C. If no person shall be designated by the Participant, or if the
designated Beneficiary shall not survive the Participant, payment of
the Participant's Account shall be made to the Participant's estate.
5.3 Tax Withholding. To the extent required by the law in effect at the time
benefits are distributed pursuant to this Section 5, the Company shall
withhold any taxes required by the federal or any state or local government
from payments made hereunder.
SECTION 6
ADMINISTRATION
6.1 Appointment of Administrator. The Company shall serve as the
Administrator.
6.2 Administrator's Responsibilities. The Administrator is responsible for the
day to day administration of the Plan. The Administrator may appoint other
persons or entities to perform any of its fiduciary functions.
6.3 Records and Accounts. The Administrator shall maintain or shall cause to
be maintained accurate and detailed records and accounts of Participants
and of their rights under the Plan.
6.4 Liability. The Company shall not be liable to any person for any action
taken or omitted in connection with the administration of this Plan unless
attributable to the fraud or willful misconduct on the part of a director,
officer or agent of the Company.
6.5 Payment of Expenses. All expenses incurred in the operation or
administration of this Plan shall be paid by Company.
6.6 Substitute Payee. If a Participant or Beneficiary entitled to receive any
benefits hereunder is in his minority, or is, in the judgment of the
Company, legally, physically, or mentally incapable of personally receiving
and receipting any distribution, the Company may make distributions to a
legally appointed guardian or to such other person or institution as, in
the judgment of the Company, is then maintaining or has custody of the
payee.
SECTION 7
CLAIMS PROCEDURE
7.1 Claims Procedures. The Administrator shall establish a claims procedure
and shall afford a reasonable opportunity to any Participant whose claim
for benefits has been denied for a full and fair review of the decision
denying such claim. The claims procedure shall provide for a notice of
denial of a claim to be received by a claimant within a reasonable period,
not to exceed ninety (90) days, following the filing of a claim. The
notice shall provide the reason for the denial, references to the Plan
provisions on which the denial is based, a description of additional
information necessary to perfect a claim and the steps required to submit a
claim for review. The period to request a review must be for at least
sixty (60) days after a receipt of notice of denial of a claim. A decision
on review shall be made within sixty (60) days after the Plan's receipt of
a request for a review unless special circumstances require a longer period
in which case the Plan shall have an additional sixty (60) days. The final
decision shall be in writing and shall include specific reasons for the
decision and references to Plan provisions.
SECTION 8
AMENDMENT AND TERMINATION
8.1 Plan Amendment. The Plan may be amended or otherwise modified by the
Board, in whole or in part, provided that no amendment or modification
shall divest any Participant of any amount previously earned under Section
3.1.
8.2 Termination of the Plan. The Board reserves the right to terminate the
Plan at any time in whole or in part. In the event of any such
termination, the Company shall pay a benefit to the Participant or the
Beneficiary of any deceased Participant, in lieu of other benefits
hereunder, equal to the value of the Participant's Account in the form and
at the benefit commencement date elected by the Participant pursuant to
section 5.1 of the Plan.
SECTION 9
MISCELLANEOUS
9.1 Supplemental Benefits. Unless otherwise stated herein, the benefits
provided for the Participants under this Plan are in addition to benefits
provided by any other plan or program of the Company and, except as
otherwise expressly provided herein, the benefits of this Plan shall
supplement and shall not supersede any plan or agreement between the
Company and any Participant or any provisions contained herein.
9.2 Governing Law. The Plan shall be governed and construed under the laws of
the State of Florida.
9.3 Spendthrift Provision. No benefit under the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or change, and any such action shall be void for all purposes
of the Plan. No benefit shall in any manner be subject to the debts,
contracts, liabilities, engagements or torts of any person, nor shall it be
subject to attachments or other legal process for or against any person,
except to such extent as may be required by law.
9.4 Binding Terms. The terms of this Plan shall be binding upon and inure to
the benefit of the parties hereto, their respective heirs, executors,
administrators and successors.
9.5 Headings. All headings preceding the text of the several Sections hereof
are inserted solely for reference and shall not constitute a part of this
Plan, nor affect its meaning, construction or effect.
9.6 Rule of Interpretation. Where appropriate, words in the masculine gender
shall include the feminine gender and vice versa.
9.7 Limitation of Rights. Neither the establishment of this Plan, nor any
modification thereof, nor the creation of an account, nor the payment of
any benefits shall be construed as giving:
A. any Participant, Beneficiary, or any other person whomsoever, any
legal or equitable right against the Company unless such right shall
be specifically provided for in the Plan or conferred by affirmative
action of the Administrator in accordance with the terms and
provisions of the Plan; or
B. any Participant the right to be retained in the service of the
Company, and all Participants and other agents shall remain subject to
termination to the same extent as if the Plan had never been adopted.
9.8 Severability. Should any provision of the Plan or any regulations adopted
thereunder be deemed or held to be unlawful or invalid for any reason, such
fact shall not adversely affect the other provisions or regulations unless
such invalidity shall render impossible or impractical the functioning of
the Plan and, in such case, the appropriate parties shall adopt a new
provision or regulation to take the place of the one held illegal or
invalid.
EXHIBIT 10.33
AMENDMENT TO
THE CARNIVAL CORPORATION
"FUN SHIPsm" NONQUALIFIED SAVINGS PLAN
The Carnival Corporation "Fun Shipsm " Nonqualifed Savings Plan (the
"Plan") is hereby amended, effective January 1, 2000, as follows:
(1) A new Section 2.14(f) is added to the Plan to read as follows:
(f) If a Participant transfers directly from an Affiliated Company to
any company in which the Company holds an equity interest (but that is not
an Affiliated Company), service with such company shall be counted solely
for purposes of determining a Participant's vested interest in Matching and
Profit-Sharing Contributions under Article 5 of the Plan. Service with
such company shall not be credited if it occurs prior to the date the
individual became a Participant in the Plan or after the Participant works
at any entity in which the Company does not hold an equity interest.
(2) Section 6.3 is amended to read as follows:
6.3 Establishment of Investment Funds: The Retirement Committee will
establish one or more Investment Funds (such as those described in Appendix
A) which will be maintained for the purpose of determining the investment
return to be credited to each Participant's Account. The Retirement
Committee may change the number, identity or composition of the Investment
Funds from time to time. Each Participant will indicate the Investment
Funds based on which amounts allocated in accordance with Articles 4 and 5
are to be adjusted. Each Participant's Account will be increased or
decreased by the net amount of investment earnings or losses that it would
have achieved had it actually been invested in the deemed investments. The
Company is not required to purchase or hold any of the deemed investments.
Investment Fund elections must be made in a minimum of 1% increments and at
such times and in such manner as the Retirement Committee will specify. An
active or inactive Participant periodically may change his election as to
his deemed investments with respect to Employee Deferral Contributions,
Bonus Deferrals, Matching Contributions or Profit-Sharing Contributions in
such manner as the Retirement Committee may specify. If a Participant
fails to make an Investment Fund election, the amount in the Participant's
Account will be deemed to have been invested in a money market fund or any
other fund as determined by the Retirement Committee.
EXHIBIT 12
CARNIVAL CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Income $1,027,240 $835,885 $666,050 $566,302 $451,091
Income tax expense 2,778 3,815 6,233 9,045 9,374
Income before
income taxes 1,030,018 839,700 672,283 575,347 460,465
Adjustment to Earnings:
Minority interest 14,014 11,102
Income from affiliates in
excess of dividends
received (60,671) (63,059) (46,569) (43,224) 0
Earnings as adjusted 983,361 787,743 625,714 532,123 460,465
Fixed Charges:
Interest expense 46,956 57,772 55,898 64,092 63,080
Interest portion of
rent expense (1) 3,405 3,480 3,528 3,093 2,529
Capitalized interest 40,908 35,130 16,846 25,799 18,762
Total fixed charges 91,269 96,382 76,272 92,984 84,371
Fixed charges not affecting
earnings:
Capitalized interest (40,908) (35,130) (16,846) (25,799) (18,762)
Earnings before fixed
Charges $1,033,722 $848,995 $685,140 $599,308 $526,074
Ratio of earnings to
fixed charges 11.3 x 8.8 x 9.0 x 6.4 x 6.2 x
</TABLE>
___________________
(1) Represents one-third of rent expense, which management believes to be
representative of the interest portion of rent expense.
EXHIBIT 13
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
<TABLE>
<CAPTION>
ASSETS NOVEMBER 30,
1999 1998
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 521,771 $ 137,273
Short-term investments 22,800 5,956
Accounts receivable, net 62,887 60,837
Consumable inventories, at average cost 84,019 75,449
Prepaid expenses and other 100,159 90,764
Total current assets 791,636 370,279
Property and Equipment, Net 6,410,527 5,768,114
Investments in and Advances to Affiliates 586,922 546,693
Goodwill, less Accumulated Amortization of
$85,272 and $72,255 462,340 437,464
Other Assets 34,930 56,773
$8,286,355 $7,179,323
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 206,267 $ 67,626
Accounts payable 195,879 168,546
Accrued liabilities 262,170 206,968
Customer deposits 675,816 638,383
Dividends payable 64,781 53,590
Total current liabilities 1,404,913 1,135,113
Long-Term Debt 867,515 1,563,014
Deferred Income and Other Long-Term Liabilities 82,680 63,036
Commitments and Contingencies (Notes 2, 8 and 14)
Minority Interest 132,684
Shareholders' Equity
Common Stock; $.01 par value; 960,000 shares
authorized; 616,966 and 595,448 shares issued
and outstanding 6,170 5,955
Additional paid-in capital 1,757,408 880,488
Retained earnings 4,176,498 3,379,628
Unearned stock compensation (9,945) (5,294)
Accumulated other comprehensive income 1,116 24,699
Total shareholders' equity 5,931,247 4,285,476
$8,286,355 $7,179,323
</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>
YEARS ENDED NOVEMBER 30,
1999 1998 1997
<S> <C> <C> <C>
Revenues $3,497,470 $3,009,306 $2,447,468
Costs and Expenses
Operating expenses 1,862,636 1,619,377 1,322,669
Selling and administrative 447,235 369,469 296,533
Depreciation and amortization 243,658 200,668 167,287
2,553,529 2,189,514 1,786,489
Operating Income Before Income From
Affiliated Operations 943,941 819,792 660,979
Income From Affiliated Operations, Net 75,758 76,732 53,091
Operating Income 1,019,699 896,524 714,070
Nonoperating Income (Expense)
Interest income 41,932 10,257 8,675
Interest expense, net of
capitalized interest (46,956) (57,772) (55,898)
Other income, net 29,357 1,793 5,436
Income tax expense (2,778) (3,815) (6,233)
Minority interest (14,014) (11,102)
7,541 (60,639) (48,020)
Net Income $1,027,240 $ 835,885 $ 666,050
Earnings Per Share:
Basic $1.68 $1.40 $1.12
Diluted $1.66 $1.40 $1.12
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
1999 1998 1997
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $1,027,240 $ 835,885 $666,050
Adjustments to reconcile net income to
net cash provided from operating activities:
Depreciation and amortization 243,658 200,668 167,287
Income from affiliates in excess of
dividends received (60,671) (63,059) (46,569)
Minority interest 14,014 11,102
Other 4,007 (8,428) 2,540
Changes in operating assets and liabilities,
excluding businesses acquired and consolidated:
(Increase) decrease in:
Receivables (3,271) 137 (21,229)
Consumable inventories (8,570) (3,913) (1,689)
Prepaid expenses and other (9,465) (15,369) 903
Increase in:
Accounts payable 27,333 18,758 22,035
Accrued liabilities 58,016 42,401 20,042
Customer deposits 37,433 73,658 68,210
Net cash provided from operating
activities 1,329,724 1,091,840 877,580
INVESTING ACTIVITIES
Additions to property and equipment, net (872,984) (1,150,413) (497,657)
Proceeds from sale of assets 47,028 17,041
Acquisition of consolidated subsidiaries, net (54,715) (242,868)
Purchase of equity interests in affiliates (1,365) (38,378)
(Increase) decrease in short-term
investments, net (11,890) 4,052 2,748
Other (additions to) reductions in
investments in and advances to
affiliates, net (310) (380) 39,540
Other, net 30,884 21,528 21,805
Net cash used for investing activities (910,380) (1,321,053) (454,901)
FINANCING ACTIVITIES
Proceeds from issuance of Common Stock, net 741,575 11,399 5,162
Principal payments of long-term debt (564,838) (1,006,586) (424,391)
Dividends paid (219,179) (178,458) (130,456)
Proceeds from long-term debt 7,772 1,404,395 155,366
Other (176) (4,253)
Net cash (used for) provided from
financing activities (34,846) 226,497 (394,319)
Net increase (decrease) in cash and
cash equivalents 384,498 (2,716) 28,360
Cash and cash equivalents at beginning
of year 137,273 139,989 111,629
Cash and cash equivalents at end of year $521,771 $137,273 $139,989
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Accumulated
Unearned other Total
Compre- Common Stock Additional stock compre- share-
hensive $.01 Par Value paid-in- Retained compen- hensive holders'
income Class A Class B capital earnings sation income equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
November 30, 1996 $2,397 $550 $819,610 $2,207,781 $(2,489) $3,035 $3,030,884
Comprehensive
income:
Net income $666,050 666,050 666,050
Changes in
securities
valuation
allowance 355 355 355
Foreign currency
translation
adjustment 3,592 3,592 3,592
Total com-
prehensive
income $669,997
Cash dividends (142,618) (142,618)
Issuance of
stock upon
conversion of
convertible notes 23 39,755 39,778
Conversion of
Class B Common Stock
into Class A
Common Stock 550 (550)
Issuance of stock
under stock plans 2 6,732 (947) 5,787
Amortization of
unearned stock
compensation 1,270 1,270
Balances at
November 30, 1997, as
previously reported 2,972 866,097 2,731,213 (2,166) 6,982 3,605,098
Two-for-one stock
split effective
June 12, 1998 2,972 (2,972)
Balances at
November 30, 1997,
as adjusted 5,944 863,125 2,731,213 (2,166) 6,982 3,605,098
Comprehensive
income:
Net income $835,885 835,885 835,885
Changes in
securities
valuation
allowance 270 270 270
Foreign currency
translation
adjustment 17,447 17,447 17,447
Total com-
prehensive
income $853,602
Cash dividends (187,470) (187,470)
Issuance of stock
under stock plans 11 17,363 (4,651) 12,723
Amortization of
unearned stock
compensation 1,523 1,523
Balances at
November 30, 1998 5,955 880,488 3,379,628 (5,294) 24,699 4,285,476
Comprehensive
income:
Net income $1,027,240 1,027,240 1,027,240
Changes in
securities
valuation
allowance (4,374) (4,374) (4,374)
Foreign currency
translation
adjustment (19,209) (19,209) (19,209)
Total com-
prehensive
income $1,003,657
Cash dividends (230,370) (230,370)
Issuance of stock
in public
offering, net 170 725,062 725,232
Issuance of stock
to acquire minority
interest in Cunard
Line Limited 32 127,037 127,069
Issuance of stock under
stock plans 13 24,821 (7,326) 17,508
Amortization of
unearned stock
compensation 2,675 2,675
Balances at
November 30, 1999 $6,170 $1,757,408 $4,176,498 $(9,945)$1,116 $5,931,247
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
Description of Business
Carnival Corporation, a Panamanian corporation, and its consolidated
subsidiaries (referred to collectively as the "Company") operate five cruise
lines under the brand names Carnival Cruise Lines ("Carnival"), Cunard Line
("Cunard"), Holland America Line ("Holland America"), Seabourn Cruise Line
("Seabourn") and Windstar Cruises ("Windstar") and a tour business, Holland
America Westours. Carnival operates fourteen cruise ships cruising primarily in
the Caribbean and the Mexican Riviera. Holland America operates nine cruise
ships cruising primarily in Alaska, the Caribbean and Europe and Windstar
operates four luxury, sail-powered vessels which call on more exotic locations
inaccessible to larger ships, primarily in the Caribbean, Europe and Central
America. Cunard and Seabourn operate two and six luxury cruise vessels,
respectively, to worldwide destinations. Holland America Line-Westours Inc.
markets sightseeing tours both separately and as a part of Holland America
Westours cruise/tour packages. Holland America Westours operates 14 hotels in
Alaska and the Canadian Yukon, two luxury dayboats offering tours to the
glaciers of Alaska and the Yukon River, over 280 motor coaches used for
sightseeing and charters in the states of Washington and Alaska and in the
Canadian Rockies and 13 private domed rail cars which are run on the Alaska
Railroad between Anchorage and Fairbanks.
The Company has a 50% direct equity interest in Il Ponte S.p.A. ("Il
Ponte"), the parent company of Costa Crociere, S.p.A. ("Costa"), an
Italian cruise company. Additionally, the Company has a 26% interest in
Airtours plc ("Airtours"), a publicly traded air-inclusive integrated
leisure travel company headquartered in England. Costa operates six cruise
ships (an additional ship is scheduled to begin operations in July 2000)
in Europe, the Caribbean and South America and its cruises are marketed
primarily to Europeans. Airtours provided holidays for approximately ten
million people in 1999 primarily from the United Kingdom, Germany,
Scandinavia, Western Europe and North America and owns or operates over
1,000 retail travel shops, 42 aircraft, four cruise ships, 46 resort
properties and develops and markets two vacation ownership resorts.
Airtours also owns the other 50% of Il Ponte not owned by the Company.
Preparation of Financial Statements
The preparation of the consolidated financial statements in accordance with
generally accepted accounting principles, requires management to make estimates
and assumptions that affect the amounts reported in the Company's financial
statements. Actual results could differ from these estimates. All material
intercompany transactions and accounts have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents and Short-Term Investments
Cash and cash equivalents include investments with original maturities of
three months or less and are stated at cost. At November 30, 1999 and 1998, cash
and cash equivalents include $502 million and $111 million of investments,
respectively, primarily comprised of investment grade commercial paper.
Short-term investments are comprised of marketable equity and debt
securities which are categorized as available for sale and, accordingly, are
stated at their fair values. Unrealized gains and losses are included as a
component of accumulated other comprehensive income within shareholders' equity
until realized.
Property and Equipment
Property and equipment is stated at cost. Depreciation and amortization is
computed using the straight-line method over estimated average useful lives as
follows:
<TABLE>
<CAPTION>
Years
<S> <C>
Vessels 11-30
Buildings and improvements 10-40
Equipment 2-20
Leasehold improvements Shorter of the lease term
or related asset life
</TABLE>
The Company capitalizes interest on vessels and other capital projects
during the construction period. Interest is capitalized using rates equivalent
to the Company's weighted average borrowing rate.
The Company reviews its long-lived assets, identifiable intangibles and
goodwill and reserves for their impairment, based generally upon estimated
future undiscounted cash flows, whenever events or changes in circumstances
indicate the carrying amount of these assets may not be fully recoverable.
Costs associated with drydocking are capitalized as prepaid expenses and
charged to expense generally over the lesser of 12 months or the period to the
next scheduled drydock.
Investments in and Advances to Affiliates
The Company accounts for its investments based on its ability to exercise
influence over the financial and operating policies of the investee. The Company
consolidates affiliates in which it has control, as typically evidenced by a
direct ownership interest of greater than 50%. For affiliates where significant
influence exists, as typically evidenced by a direct ownership interest from 20%
to 50%, the investment is accounted for using the equity method. When the
Company does not have significant influence, as typically evidenced by a direct
ownership interest of less than 20%, or where the ability to exercise control or
significant influence is temporary, the investment is accounted for using the
cost method.
The Company's percentage share of the affiliated companies' net income
(loss), net of amortization of goodwill, as well as any related interest income
or fee income from those affiliates, is recorded as "Income from Affiliated
Operations, Net" in the accompanying statements of operations. The Company's
investments in and advances to affiliates are reported as "Investments in and
Advances to Affiliates" in the accompanying balance sheets. In the event of the
issuance of stock by an affiliate, the Company generally recognizes a gain or
loss (see Note 4). At November 30, 1999 and 1998, the costs in excess of the net
assets acquired of affiliates ("goodwill") was $232 million and $241 million,
respectively, and it is being amortized using the straight-line method over
periods ranging from 30 to 40 years.
Goodwill
Goodwill of $275 million resulting from the acquisition of HAL Antillen,
N.V. ("HAL"), the parent company of Holland America, Windstar and Holland
America Westours, and $272 million ($235 million at November 30,1998) resulting
from the acquisition of Cunard and consolidation of Seabourn is being amortized
using the straight-line method over 40 years.
Foreign Currency Contracts
The Company's significant contracts to buy foreign currency are forward
contracts entered into to hedge foreign currency fluctuations of firm
commitments related to the construction of cruise ships. These off-balance sheet
contracts are not held for trading or speculative purposes. Changes in the
market value and any discounts or premiums on these forward foreign currency
contracts are recorded at maturity, which coincides with the dates when the
related foreign currency payments are to be made, with any resulting gain or
loss included in the cost of the vessel.
In June 1998, Statement of Financial Accounting Standards ("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 all fiscal quarters of fiscal years beginning after
June 15, 2000 (December 1, 2000 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.
Revenue and Expense Recognition
Customer cruise deposits represent unearned revenues and are initially
recorded as customer deposit liabilities on the balance sheet when received.
Customer deposits are subsequently recognized as cruise revenue, together with
revenue from shipboard activities and all associated direct costs of a voyage,
generally upon completion of voyages with durations of ten days or less and on a
pro rata basis for voyages in excess of ten days. Certain revenues and expenses
from pro rata voyages are estimated. Revenues and expenses from tour and related
services are recognized at the time the services are performed or expenses are
incurred.
Advertising Costs
Substantially all of the Company's advertising costs are charged to expense
as incurred, except costs which result in tangible assets, such as brochures,
which are recorded as prepaid expenses and charged to expense as consumed.
Advertising expense totaled $178 million in 1999, $142 million in 1998, and $112
million in 1997. At November 30, 1999 and 1998, $21.7 million and $18.8 million,
respectively, of advertising related costs, principally brochures, were included
in prepaid expenses and other in the accompanying balance sheets.
Foreign Currency Transactions and Translations
For foreign subsidiaries and affiliates using the local currency as their
functional currency, assets and liabilities are translated at exchange rates in
effect at the balance sheet dates and income and expenses are translated at
average exchange rates. The effects of these translation adjustments are
reported in accumulated other comprehensive income within shareholders' equity.
Exchange gains and losses arising from transactions denominated in a currency
other than the functional currency of the entity involved are included in income
currently.
Income Taxes
Management believes that substantially all of the Company's income (with
the exception of its United States ("U.S.") source income from the
transportation, hotel and tour businesses of Holland America Westours) is exempt
from U.S. federal income taxes. If the Company was found not to meet certain
tests of the Internal Revenue Code, as amended, (the "Code") or if the Code were
to be changed in a manner adverse to the Company, a portion of the Company's
income would become subject to taxation by the U.S. at higher than normal
corporate tax rates.
Earnings Per Share
In 1998, the Company adopted SFAS No. 128, "Earnings Per Share" which
requires the dual presentation of basic and diluted earnings per share. Basic
earnings per share is computed by dividing net income by the weighted average
number of shares of common stock outstanding during each period. Diluted
earnings per share is computed by dividing net income, as adjusted, by the
weighted average number of shares of common stock, common stock equivalents and
other potentially dilutive securities outstanding during each period. In
accordance with the provisions of SFAS No. 128, and as a result of the 1998
stock split, the Company has retroactively restated prior years' earnings per
share (see Notes 6 and 11).
Stock-Based Compensation
The Company accounts for stock-based compensation using the intrinsic value
method and discloses certain fair market value pro forma information with
respect to its stock-based compensation activities (see Note 10).
Accounting Changes
In April 1998, Statement of Position 98-5 - "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5") was issued. SOP 98-5 requires that all start-
up or pre-operating costs be expensed as incurred. In 1998, the Company adopted
SOP 98-5 and, accordingly, expensed $8.7 million of previously deferred start-up
costs. The $8.7 million represents the cumulative effect from the Company
changing this policy, which amount was included in other nonoperating expenses
in the 1998 statement of operations.
In 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." Comprehensive income consists of net income and other comprehensive
income, the latter includes unrealized gains and losses on available for sale
securities and foreign exchange translation adjustments and is presented in the
accompanying statements of shareholders' equity. The adoption of SFAS No. 130
had no effect on shareholders' equity. Prior year financial statements have
been reclassified to conform to the SFAS No. 130 requirements.
In 1999, the Company adopted SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 supercedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," replacing the
industry segment approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making decisions and assessing performance as the source for determining the
Company's reportable segments. The adoption of SFAS No. 131 did not affect the
Company's results of operations or financial position but did affect the
disclosure of segment information(see Note 9).
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
November 30,
1999 1998
<S> <C> <C>
Vessels $6,543,592 $5,754,218
Vessels under construction 506,477 526,529
7,050,069 6,280,747
Land, buildings and improvements 235,333 217,597
Transportation and other equipment 395,008 322,069
Total property and equipment 7,680,410 6,820,413
Less accumulated depreciation and amortization (1,269,883) (1,052,299)
$6,410,527 $5,768,114
</TABLE>
Capitalized interest, primarily on vessels under construction, amounted to
$40.9 million in 1999, $35.1 million in 1998 and $16.8 million in 1997.
NOTE 4 - INVESTMENTS IN AND ADVANCES TO AFFILIATES
In June 1997, the Company and Airtours completed a joint offer to acquire
the equity securities of Costa. The Company and Airtours each own 50% of Il
Ponte, a holding company which currently owns approximately 100% of Costa. The
cost of the Company's 50% direct interest in Costa was approximately $141
million, of which approximately $103 million was paid by Il Ponte and the
balance was paid by the Company. The $103 million paid by Il Ponte was funded
through Il Ponte debt, which is guaranteed by the Company (see Note 8). The
Company is recording its interest in Il Ponte's consolidated results of
operations on a two-month lag basis using the equity method. It is not
practicable to estimate the fair value of Il Ponte as it is not a publicly
traded entity.
In April 1996, the Company acquired a 28% interest in Airtours for
approximately $307 million. At November 30, 1999 and 1998, the market value of
the Company's investment in Airtours, based on the closing price of Airtours'
stock on the London Stock Exchange, was approximately $837 million and $835
million, respectively, as compared with the carrying value of the Company's
investment in Airtours of $439 million and $432 million, respectively. The
Company is recording its interest in Airtours' consolidated results of
operations on a two-month lag basis using the equity method. In 1998, the
Company's interest in Airtours was reduced to approximately 26% as a result of
the conversion of Airtours' preference shares into Airtours' common stock and
the issuance of Airtours' common stock in conjunction with two of its
acquisitions, as discussed below.
In July and September 1998, Airtours issued approximately 18.5 million and
2.2 million shares of its common stock at $7.02 per share and $6.00 per share,
respectively, in connection with acquisitions. These amounts were in excess of
the Company's carrying value per share. The issuance of these shares reduced
the Company's ownership of Airtours to approximately 26%. As a result of these
transactions, the Company recognized a net gain of $14.8 million, which is
included in other nonoperating income in the 1998 statement of operations.
Dividends received from affiliates were $15.1 million, $13.7 million and
$11.4 million in fiscal 1999, 1998 and 1997, respectively.
Financial information for affiliated companies accounted for using the
equity method is as follows (in thousands):
<TABLE>
<CAPTION>
Balance Sheet Data: As of End of Fiscal Years
1999 1998
<S> <C> <C>
Current assets $2,310,485 $1,722,616
Long-term assets $2,332,871 $2,115,373
Current liabilities $1,802,385 $1,560,228
Long-term liabilities $1,741,010 $1,325,220
Shareholders' equity $1,099,961 $ 952,541
Income Statement Data: Fiscal Years Ended
1999 1998 1997
Revenues $5,963,425 $5,282,230 $3,965,223
Gross margin $1,265,614 $1,128,305 $ 702,162
Net income $ 255,146 $ 264,936 $ 174,354
Segment information for the Company's affiliate operations is provided in
accordance with SFAS No. 131 as follows (in thousands):
Fiscal Years Ended
1999 1998 1997
Operating income $359,953 $374,560 $269,425
Depreciation and amortization $133,302 $100,532 $ 61,936
Capital expenditures $356,267 $184,395 $145,667
</TABLE>
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
November 30,
1999 1998
<S> <C> <C>
Commercial paper $ $ 368,710
Unsecured 5.65% Notes Due October 15, 2000 199,920 199,833
Unsecured 6.15% Notes Due April 15, 2008 199,564 199,512
Unsecured 6.65% Debentures Due January 15, 2028 199,274 199,249
Unsecured 6.15% Notes Due October 1, 2003 124,974 124,967
Unsecured 7.2% Debentures Due October 1, 2023 124,886 124,881
Unsecured 7.7% Notes Due July 15, 2004 99,947 99,936
Unsecured 7.05% Notes Due May 15, 2005 99,891 99,871
Notes payable secured by vessels 5,000 174,198
Other loans payable 20,326 39,483
1,073,782 1,630,640
Less portion due within one year (206,267) (67,626)
$ 867,515 $1,563,014
</TABLE>
Since the commercial paper is backed by the long-term revolving credit
facilities described below, balances outstanding under the commercial paper
programs were classified as long-term in the 1998 balance sheet.
The Company's commercial paper programs are supported by a $1 billion
unsecured revolving credit facility due December 2001 and a $200 million
multi-currency revolving credit facility due January 2002. Both revolving credit
facilities bear interest at LIBOR plus 14 basis points ("BPS") and provide for a
facility fee of six BPS on each facility. Any funds outstanding under the
commercial paper programs reduce the aggregate amount available under these
facilities. At November 30, 1999, the Company had $1.2 billion available for
borrowing under these facilities. These facilities contain covenants that
require the Company, among other things, to maintain minimum debt service
coverage and limit debt to capital ratios. At November 30, 1999, the Company was
in compliance with all of its debt covenants.
In late November 1999, the Company prepaid approximately $124 million of
Cunard's notes payable, which were secured by vessels.
At November 30, 1999, the scheduled annual maturities of the Company's
long-term debt are summarized as follows (in thousands):
Fiscal
<TABLE>
<CAPTION>
<S> <C>
2000 $ 206,267
2001 5,497
2002 527
2003 125,968
2004 105,448
Thereafter 630,075
$1,073,782
</TABLE>
NOTE 6 - SHAREHOLDERS' EQUITY
On July 15, 1997, the Micky Arison 1994 "B" Trust (the "B Trust"), a U.S.
trust whose primary beneficiary is Micky Arison, the Company's Chairman of the
Board, exercised its right to convert all of the 109,914,284 shares of Class B
Common Stock held by it into an equal number of shares of Class A Common Stock.
Prior to July 1, 1997, the B Trust had been restricted from converting such
shares under a shareholders agreement with the Company. Prior to the conversion
of the Class B Common Stock, the B Trust was the controlling shareholder of the
Company.
On April 13, 1998, the Company's shareholders approved amendments to the
Company's Articles of Incorporation which (1) eliminated the Class B Common
Stock and designated a single class of Common Stock, (2) increased the number of
authorized shares of Common Stock to 960 million, and (3) authorized the Board
of Directors, at its discretion, to issue up to 40 million shares of Preferred
Stock. The Preferred Stock is issuable in series which may vary as to certain
rights and preferences and has a $.01 par value. At November 30, 1999 and 1998,
no Preferred Stock had been issued.
On April 13, 1998, the Board of Directors approved a two-for-one split of
the Company's Common Stock. The additional shares were distributed on June 12,
1998 to shareholders of record on May 29, 1998. All share and per share data
presented herein has been retroactively restated to give effect to this stock
split.
In December 1998, the Company issued 17 million shares of its Common Stock
in a public offering and received net proceeds of approximately $725 million.
The Company issued the stock concurrent with the addition of the Company's
Common Stock to the S&P 500 Composite Index.
At November 30, 1999, there were approximately 15.8 million shares of
Common Stock reserved for issuance pursuant to the Company's stock option,
employee stock purchase, management incentive, dividend reinvestment and
restricted stock plans.
During 1999, the Company declared cash dividends aggregating $0.375
per share for the year. In October 1999, the Board of Directors increased
the quarterly dividends from $0.09 per share to $0.105 per share.
At November 30, 1999 and 1998, retained earnings included
undistributed earnings of affiliates (accounted for using the equity
method) of approximately $198 million and $138 million, respectively. The
Company does not expect that additional income taxes will be incurred on
future distributions of such earnings and, accordingly, no deferred income
taxes have been provided for the distribution of these earnings. At
November 30, 1999 and 1998, accumulated other comprehensive income within
shareholders' equity included cumulative foreign currency translation
adjustments which increased shareholders' equity by $6.0 million and $25.2
million, respectively.
NOTE 7 - FINANCIAL INSTRUMENTS
The Company estimates the fair market value of financial instruments
through the use of public market prices, quotes from financial
institutions and other available information. Considerable judgment is
required in interpreting data to develop estimates of market value and,
accordingly, amounts are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.
Certain Short-Term Financial Instruments
The carrying amounts of cash, cash equivalents and accrued liabilities
approximate their fair values due to the short-term maturities of these
instruments.
Other Assets
At November 30, 1999 and 1998, long-term other assets include marketable
securities held in a "Rabbi Trust" for certain of the Company's non-qualified
benefit plans, long-term receivables and other restricted securities. These
assets have carrying values of $28.3 million and $48.7 million and have fair
values of $28.3 million and $40 million at November 30, 1999 and 1998,
respectively. Fair value is estimated based on quoted market prices or expected
future discounted cash flows.
Long-term Debt
At November 30, 1999 and 1998, the fair value of the Company's long-
term debt, including the current portion, was approximately $1.021 billion
and $1.647 billion, respectively, which was approximately $53 million less
than and $16 million more than the carrying values on those respective
dates. The difference between the fair value of the long-term debt and the
carrying value was due to the Company's issuance of fixed rate debt
obligations at interest rates that are above or below market rates in
existence at the measurement dates. The fair value of the Company's long-
term debt is estimated based on the quoted market price for the same or
similar issues. The Company is prohibited from redeeming substantially all
of its long-term debt before its maturity.
Foreign Currency Contracts
The Company enters into forward foreign currency contracts to reduce
its exposures relating to rate changes in foreign currency. These
contracts are subject to gain or loss from changes in foreign currency
rates, however, any realized gain or loss will be offset by gains or
losses on the underlying hedged foreign currency transactions. Certain
exposures to credit losses related to counterparty nonperformance exist,
however, the Company does not anticipate nonperformance by the
counterparties as they are large, well-established financial institutions.
The fair values of the Company's forward hedging instruments discussed
below are estimated based on prices quoted by financial institutions for
these instruments.
Several of the Company's contracts for the construction of cruise vessels
are denominated in either Italian Lira or German Deutsche Marks. The Company is
a party to forward foreign currency contracts with notional amounts of $1.86
billion and $745 million at November 30, 1999 and 1998, respectively, to fix the
price of these vessels into U.S. dollars (see Note 8). At November 30, 1999 and
1998, these forward contracts had an estimated fair value of approximately $1.81
billion and $815 million, respectively.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Capital Expenditures
A description of ships under contract for construction at November 30, 1999
is as follows (in millions, except passenger capacity data):
<TABLE>
<CAPTION>
Expected Estimated
Service Passenger Total
Vessel Date(1) Shipyard Capacity(2) Cost(3)
<S> <C> <C> <C> <C>
Carnival
Carnival Victory 9/00 Fincantieri 2,758 $ 450
Carnival Spirit 4/01 Masa-Yards 2,120 375
Carnival Pride 1/02 Masa-Yards (4) 2,120 375
Carnival Legend 8/02 Masa Yards (4) 2,120 375
Carnival Conquest 12/02 Fincantieri 2,758 450
Carnival Glory 8/03 Fincantieri 2,758 450
Total Carnival 14,634 2,475
Holland America
Zaandam 5/00 Fincantieri(5) 1,440 300
Amsterdam 11/00 Fincantieri 1,380 300
Newbuild 10/02 Fincantieri(5) 1,820 400
Newbuild 8/03 Fincantieri(5) 1,820 400
Total Holland America 6,460 1,400
Total 21,094 $3,875
</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 of the completed vessel 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 Deutsche 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 $506 million through November 30, 1999 and anticipates
paying the remaining estimated total cost as follows (in millions):
<TABLE>
<CAPTION>
Fiscal
<S> <C>
2000 $ 764
2001 756
2002 1,129
2003 720
$3,369
</TABLE>
Litigation
Several actions (collectively the "Passenger Complaints") have been filed
against 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, 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. 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, 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 if such claims should proceed to trial.
Management believes it has meritorious defenses to the claims. Management
understands that purported class actions similar to the Passenger and Travel
Agent Complaints have been filed against several other cruise lines.
In the normal course of business, various other claims and lawsuits have
been filed or are pending against the Company. The majority of these claims and
lawsuits are covered by insurance. Management believes the outcome of any such
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.
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 November 30, 1999, total
approximately $358 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 $22 million (net) in both
August and December 1998 which is recorded as deferred income on the balance
sheets and is being amortized to nonoperating income over approximately 18
years.
Operating Leases
Rent expense for all operating leases, primarily office and warehouse
space, for fiscal 1999, 1998 and 1997 was approximately $10.2 million, $10.4
million and $10.6 million, respectively. At November 30, 1999, minimum annual
rentals for all operating leases, with initial or remaining terms in excess of
one year, were as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal
<S> <C>
2000 $ 9,601
2001 7,444
2002 6,066
2003 5,044
2004 4,621
Thereafter 24,032
$56,808
</TABLE>
Guarantees of Debt
At November 30, 1999, the Company has guaranteed approximately $107 million
of debt, including $88.6 million of Il Ponte's acquisition indebtedness for the
Company's interest in Costa.
Other
At November 30, 1999, the Company has a commitment through 2013,
cancellable under certain remote circumstances, to pay a minimum amount for its
annual usage of certain port facilities as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal
<S> <C>
2000 $ 8,853
2001 9,402
2002 9,315
2003 11,548
2004 11,528
Thereafter 125,937
$176,583
</TABLE>
The Company has contracted for the sale in October 2000 of one of Holland
America's ships, the Nieuw Amsterdam, for $114.5 million in cash and notes.
This sale is expected to result in a minimal gain in fiscal 2000.
NOTE 9 - SEGMENT INFORMATION
In 1999, the Company adopted SFAS No. 131. The Company's cruise segment
operates 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 on
board activities and other related services. The tour segment represents the
operations of Holland America Westours.
The significant accounting policies of the segments are the same as
those described in Note 1 - "Summary of Significant Accounting Policies."
Segment data includes intersegment revenues, as well as a cost allocation
of certain corporate expenses to each segment. Intersegment revenues
primarily represent charges for the cruise portion of a tour when a cruise
is sold as a part of a tour package. Information about the cruise and
tour segments for fiscal 1999, 1998 and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
Operating Depreciation
income and Capital Segment
Revenues (loss) amortization expenditures assets
1999
<S> <C> <C> <C> <C> <C>
Cruise $3,286,701 $ 947,452 $232,942 $ 836,351 $6,938,411
Tour 271,828 10,403 10,716 25,191 185,591
Affiliate
operations 75,758 586,922
Reconciling
items (a) (61,059) (13,914) 11,442 575,431
$3,497,470 $1,019,699 $243,658 $ 872,984 $8,286,355
1998
Cruise $2,797,856 $822,242 $189,345 $1,113,191 $6,327,599
Tour 274,491 9,248 9,491 28,480 174,140
Affiliate
operations 76,732 546,693
Reconciling
items (a) (63,041) (11,698) 1,832 8,742 130,891
$3,009,306 $896,524 $200,668 $1,150,413 $7,179,323
1997
Cruise $2,257,567 $656,009 $157,454 $ 414,963 $4,617,583
Tour 242,646 13,262 8,862 42,507 163,941
Affiliate
operations 53,091 479,329
Reconciling
items (a) (52,745) (8,292) 971 40,187 165,922
$2,447,468 $714,070 $167,287 $ 497,657 $5,426,775
</TABLE>
(a) Revenues consist of intersegment revenues. Operating loss represents
corporate expenses not allocated to segments. Capital expenditures represent
corporate capital expenditures. Segment assets include cash, cash equivalents,
short-term investments and other corporate assets.
See Note 4 for affiliate operations segment information which is not
included in the Company's consolidated operations.
Foreign revenues represent sales made by the Company's consolidated cruise
lines, which were generated from outside the U.S. Foreign assets represent
assets which are located outside of the U.S. and include, among other things,
all of the Company's vessels. Revenues and asset information by geographic area
is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Revenues
Domestic $3,077,499 $2,667,289 $2,234,063
Foreign 419,971 342,017 213,405
$3,497,470 $3,009,306 $2,447,468
Assets
Domestic $1,249,798 $ 801,759 $ 762,994
Foreign 7,036,557 6,377,564 4,663,781
$8,286,355 $7,179,323 $5,426,775
</TABLE>
NOTE 10 - BENEFIT PLANS
Stock Option Plans
The Company has stock option plans for certain employees and members of
the Board of Directors. The plans are administered by a committee of three
directors of the Company (the "Committee") which determines who is eligible to
participate, the number of shares for which options are to be granted and the
amounts that may be exercised within a specified term. The option exercise
price is generally established by the Committee at 100% of the fair market
value of the Common Stock on the date the option is granted. Substantially all
options granted during 1999, 1998 and 1997 were granted at an exercise price
per share equal to the fair market value of the Company's Common Stock on the
date of grant. Employee options generally vest evenly over five years and have
a ten year term and director options vest immediately and have a five or ten
year term. At November 30, 1999, options for 3,900,756 shares were available
for future grants. A summary of the status of options in the stock option plans
is as follows:
<TABLE>
<CAPTION>
Weighted
Average Exercise Price Number of Options
Per Share Years Ended November 30,
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Outstanding options-
beginning of year $14.95 $11.88 $10.38 5,987,574 5,502,580 4,871,880
Options granted $44.54 $27.34 $19.55 1,641,400 1,157,344 858,000
Options exercised $11.01 $10.53 $ 8.83 (956,706) (652,350) (222,500)
Options canceled $26.55 $22.86 $ 8.00 (155,100) (20,000) (4,800)
Outstanding options-
end of year $22.70 $14.95 $11.88 6,517,168 5,987,574 5,502,580
Options exercisable -
end of year $12.64 $10.91 $10.34 3,601,993 3,405,630 3,117,380
</TABLE>
Information with respect to stock options outstanding and stock
options exercisable at November 30, 1999 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Average Average Average
Exercise Remaining Exercise Exercise
Price Range Shares Life (Years) Price Shares Price
<S> <C> <C> <C> <C> <C>
$ 1.94-$ 2.25 37,480 (1) $ 2.06 37,480 $ 2.06
$ 6.94-$10.22 283,850 2.8 $ 7.46 279,050 $ 7.42
$10.59-$15.00 2,906,500 5.4 $11.30 2,822,500 $11.27
$16.28-$21.91 673,944 7.1 $19.28 254,269 $19.67
$24.94-$26.41 905,494 8.1 $26.41 148,694 $26.41
$34.91-$41.34 192,000 8.9 $37.04 20,000 $38.62
$44.03-$48.56 1,517,900 9.0 $45.41 40,000 $46.88
Total 6,517,168 6.8 $22.70 3,601,993 $12.64
</TABLE>
(1) These stock options do not have an expiration date.
During fiscal 1998, the Company adopted SFAS No. 123 and pursuant to
its provisions elected to continue using the intrinsic-value method of
accounting for stock-based awards. Accordingly, the Company has not
recognized compensation expense for its noncompensatory stock option
awards. The following table reflects the Company's historical net income
and earnings per share and pro forma net income and earnings per share
for fiscal 1999, 1998 and 1997 had the Company elected to adopt the fair
value approach (which charges earnings for the estimated fair value of
stock options) of SFAS No. 123 (in thousands, except per share data):
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net income:
As reported $1,027,240 $835,885 $666,050
Pro forma $1,019,058 $831,153 $664,324
Earnings per share:
As reported:
Basic $1.68 $1.40 $1.12
Diluted $1.66 $1.40 $1.12
Pro forma:
Basic $1.66 $1.40 $1.12
Diluted $1.65 $1.39 $1.12
</TABLE>
These pro forma amounts may not be representative of the effect on pro
forma net income in future years, since the estimated fair value of stock
options is amortized over the vesting period, pro forma compensation expense
related to grants made prior to 1996 is not considered and additional options
may be granted in future years.
The weighted average fair values of the Company's options granted during
fiscal 1999, 1998 and 1997 were $15.15, $7.61 and $5.79 per share,
respectively, at the dates of grant. The fair values of options were estimated
using the Black-Scholes option pricing model with the following weighted
average assumptions for fiscal 1999, 1998 and 1997, respectively; expected
dividend yields of 0.80%, 1.62%, and 1.78%; expected volatility of 26.3%,
20.5%, and 22.7%; risk free interest rates of 4.8%, 5.3% and 6.2%; and expected
option life of six years for all periods.
Restricted Stock Plans
The Company has restricted stock plans under which four key employees are
granted restricted shares of the Company's Common Stock. Shares are awarded in
the name of each of the participants, who have all the rights of other Common
Stock shareholders, subject to certain restriction and forfeiture provisions.
During fiscal 1999, 1998 and 1997, 150,000, 150,000 and 46,574 shares of Common
Stock valued at $6.8 million, $4.4 million and $.9 million, respectively, were
issued. Unearned stock compensation is recorded in stockholders' equity at the
date of award based on the quoted market price of the shares on the date of
grant and is amortized to expense over the vesting period. As of November 30,
1999 and 1998 there were 385,283 shares and 321,038 shares, respectively,
issued under the plans which remain to be vested.
Management Incentive Plans
Most shoreside managerial employees of Carnival and HAL participate in
management incentive plans. Certain of the participating employees receive a
portion of their incentive compensation award in Common Stock of the Company,
instead of the entire amount being paid in cash. During fiscal 1999, 1998 and
1997, 49,734, 61,214 and 85,430 shares of Common Stock with a quoted market
value of $1.7 million, $1.6 million and $1.3 million, respectively, were issued
under these plans.
Defined Benefit Pension Plans
The Company has two defined benefit pension plans (qualified and non-
qualified) that are available to certain full-time Carnival and corporate
shoreside employees who were employed with the Company prior to January 1,
1998. These plans were closed to new participants on January 1, 1998. In
addition, the Company has one non-qualified defined benefit plan, established
in 1998, which is available to certain of Carnival's shipboard employees. The
Company's funding policy for the qualified defined benefit plan is to annually
contribute at least the minimum amount required under the applicable labor
regulations. The non-qualified plans are unfunded. Pension expense for the
defined benefit pension plans was $3.6 million, $1.9 million and $2.5 million
for fiscal 1999, 1998 and 1997, respectively.
Defined Contribution Plans
The Company has various defined contribution plans, available to
substantially all U.S. and Canadian employees, and certain United Kingdom and
Carnival shipboard employees. The Company contributes to these plans based on
employee contributions, salary levels and length of service. Total expense
relating to these plans in fiscal 1999, 1998 and 1997 was $6.1 million, $5.3
million and $2.5 million, respectively.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan which is authorized to
issue up to 4,000,000 shares of Common Stock to substantially all employees of
Carnival Corporation and its wholly owned subsidiaries. The purchase price is
derived from a formula based on 85% of the fair market value of the Common
Stock during the six-month purchase period, as defined. During fiscal 1999,
1998 and 1997, the Company issued 144,911, 175,971 and 173,776 shares,
respectively, at a weighted average share price of $36.67, $24.45 and $14.52,
respectively, under this plan.
NOTE 11 - EARNINGS PER SHARE
Earnings per share have been computed as follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
Years Ended November 30,
1999 1998 1997
<S> <C> <C> <C>
Basic:
Net income $1,027,240 $835,885 $666,050
Average common shares outstanding 612,484 595,037 594,076
Earnings per share $1.68 $1.40 $1.12
Diluted:
Net income $1,027,240 $835,885 $666,050
Effect on net income of assumed
issuance of affiliate securities (3,299) (356)
Interest expense related to
convertible notes 38
Net income available assuming dilution $1,023,941 $835,885 $665,732
Average common shares outstanding 612,484 595,037 594,076
Effect of dilutive securities:
Additional shares issuable upon:
Assumed conversion of
convertible notes 128
Various stock plans 3,516 3,411 2,344
Average shares outstanding
assuming dilution 616,000 598,448 596,548
Earnings per share $1.66 $1.40 $1.12
</TABLE>
NOTE 12 - 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 accounted for the acquisition using the purchase accounting method.
Simultaneous with the acquisition, Seabourn Cruise Line Limited ("Seabourn
Ltd."), a luxury cruise line in which the Company owned a 50% interest, was
combined with Cunard. The Company owned 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 Ltd. was accounted for using the equity method (see Notes 2
and 4). During fiscal 1999 the seller of Cunard adjusted the above Cunard
purchase price which resulted in a cash payment to Cunard of approximately $30
million.
Had the above transactions occurred on December 1, 1997, the Company's
unaudited consolidated revenues for fiscal 1998 would have been approximately
$3.23 billion. The impact on the Company's fiscal 1998 unaudited net income and
earnings per share would have been immaterial.
On November 15, 1999, the Company exercised its purchase option and
acquired the remaining 32% minority interest in Cunard Line Limited for
approximately 3.2 million shares of its Common Stock and $76.5 million in cash.
Had this transaction occurred on December 1, 1997, the impact on the Company's
fiscal 1999 and 1998 unaudited net income and earnings per share would have been
immaterial. The Company also accounted for this transaction using the purchase
method.
The preliminary impact on the Company's assets and liabilities related to
the 1998 acquisition of Cunard and consolidation of Seabourn was as follows (in
millions):
<TABLE>
<CAPTION>
<S> <C>
Fair value of Cunard assets $553
Seabourn assets consolidated 191
Debt assumed (157)
Other liabilities assumed (199)
Minority interest (122)
Cash paid for acquisition 266
Other adjustments (14)
252
Cash of acquired companies (9)
Net cash paid as reflected
in the 1998 Statement of Cash Flows $243
</TABLE>
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
Cash paid for:
Interest (net of amount capitalized) $ 49,836 $ 54,572 $ 56,967
Income taxes $ 3,841 $ 5,144 $ 5,755
Noncash investing and financing activities:
Common Stock issued for acquisition of
Cunard Line Limited minority interest $127,069
Common Stock issued under various
stock plans $ 8,991 $ 5,975 $ 2,247
Common Stock issued upon conversion
of convertible notes $ 39,085
Sale of Rotterdam V $ 31,208
</TABLE>
Note 14 - SUBSEQUENT EVENTS (UNAUDITED)
On January 23, 2000, the Company entered into a letter of intent to acquire
Fairfield Communities, Inc. ("FCI"), one of the largest vacation ownership
companies in North America. The agreement calls for each share of FCI common
stock to be converted into .3164 shares of Carnival Common Stock. FCI has
approximately 48.5 million shares outstanding on a fully diluted basis. It is
intended that the transaction will be accounted for as a pooling-of-interests.
Completion of the transaction is conditioned upon the receipt of all regulatory
and government approvals, FCI stockholder approval and other customary
conditions, including the completion of satisfactory due diligence and
definitive documentation. No assurance can be given that the foregoing
conditions will be satisfied or that the transaction will be consummated.
On February 2, 2000, the Company entered into an agreement to acquire a 40
percent interest in Arrasas Limited ("Arrasas"), a wholly owned subsidiary of
Star Cruises PLC ("Star"). Arrasas was formed by Star to pursue the acquisition
of NCL Holding ASA ("NCL"), the parent company of Norwegian Cruise Line and
Orient Lines. The cost of this 40 percent interest is anticipated to be
approximately equal to 40 percent of the price paid by Arrasas to acquire the
NCL shares. If Arrasas is successful in acquiring 100% of NCL, the cost of the
Company's investment in Arrasas would be approximately $470 million. The Company
has agreed to loan to Arrasas its pro rata portion of the NCL purchase price,
which is expected to be funded in February 2000. The non-interest bearing loan
will mature on the earlier of the Company's purchase of the Arrasas shares or
termination of the agreement. The purchase by the Company of the Arrasas shares
is conditioned upon the receipt of all regulatory and government approvals. The
agreement may be terminated by either party if such approvals are not obtained
by December 31, 2000 or by the Company if it shall determine that it will be
unable to obtain such approvals. No assurance can be given that the foregoing
conditions will be satisfied or that the transaction will be consummated.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Carnival Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, cash flows and shareholders'
equity present fairly, in all material respects, the financial position of
Carnival Corporation and its subsidiaries at November 30, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended November 30, 1999 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Miami, Florida
January 24, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company earns its cruise revenues primarily from (i) the sale of
passenger tickets, which includes accommodations, meals and most shipboard
activities, (ii) the sale of air transportation to and from the cruise 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,
operating income and other financial information, see Note 9 in the accompanying
financial statements. Operations data expressed as a percentage of total
revenues and selected statistical information for the periods indicated is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
1999 1998 1997
<S> <C> <C> <C>
Revenues 100% 100% 100%
Costs and Expenses:
Operating expenses 53 54 54
Selling and administrative 13 12 12
Depreciation and amortization 7 7 7
Operating Income Before Income
From Affiliated Operations 27 27 27
Income From Affiliated Operations, Net 2 3 2
Operating Income 29 30 29
Nonoperating Expense (2) (2)
Net Income 29% 28% 27%
Selected Statistical Information
(in thousands):
Passengers carried 2,366 2,045 1,945
Passenger cruise days (1) 14,947 13,009 11,908
Occupancy percentage (2) 104.3% 106.3% 108.3%
</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.
(2) The Company acquired a majority interest in Cunard Line Limited on May 28,
1998. Since that date, Cunard's revenues and operating results have been
included in the Company's operating results. Cunard's ships generally sail with
lower occupancy percentages than the Company's other brands.
GENERAL
The growth in the Company's revenues during the last three fiscal years has
primarily been a function of the expansion of its fleet capacity and its ability
to obtain higher net revenue yields (net revenue per available berth) than in
previous years.
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 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 is expected to be approximately 11.6% during fiscal
2000 as compared to fiscal 1999. This increase is primarily a result of the
introduction into service of the Carnival Triumph in July 1999 and Holland
America's Volendam in November 1999 and the expected introduction into service
of the Carnival Victory in September 2000 and Holland America's Zaandam in May
2000, partially offset by the expected withdrawal from service of Holland
America's Nieuw Amsterdam 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 10.2%
and 7.0%, respectively. The Nieuw Amsterdam has been contracted for sale and is
scheduled for closing in October 2000.
The Company and Airtours, a publicly traded leisure travel company in which
the Company holds an approximate 26% interest, each own a 50% interest in Il
Ponte, the parent company of Costa, an Italian cruise company. The Company
records its interest in Airtours and Il Ponte using the equity method of
accounting and records its portion of Airtours' and Il Ponte's consolidated
operating results on a two-month lag basis. 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.
FISCAL 1999 COMPARED TO FISCAL 1998
Revenues
The increase in total revenues of $488 million, or 16.2%, was
entirely due to a 17.5% increase in cruise revenues. The cruise revenue
changes resulted from an increase of approximately 17.2% in passenger
capacity and a 2.6% increase in total revenue per passenger cruise day,
partially offset by a 2.3% decrease in occupancy rates. The increase in
passenger capacity resulted from the acquisition of Cunard Line Limited in
late May 1998, which increased 1999 capacity by 5.6%, and the balance of
the increase resulted primarily from the introduction into service of
Carnival's Elation and Paradise in March and November 1998, respectively,
and the Carnival Triumph in July 1999, as well as Carnival's Ecstasy being
in service throughout fiscal 1999 (see 1998 Nonoperating Income
(Expense)). Both the increase in revenue per passenger cruise day and the
decrease in occupancy rates was primarily due to Cunard Line Limited's
higher revenue per passenger cruise day and lower occupancy rates than the
Company's other brands and, to a lesser extent, an increase in revenue per
passenger cruise day for the Carnival and Holland America brands.
As a result of the 1999 military conflict in the Balkans, the Company's
second half Mediterranean cruise revenues were negatively impacted. Although
management lessened this impact by, among other things, changing the itineraries
of certain of its Mediterranean cruises, offering additional incentives and
increasing advertising expenditures, the 1999 Mediterranean cruise results were
still lower than originally expected.
Costs and Expenses
Operating expenses increased $243.3 million, or 15.0%. Cruise operating
costs increased by $250.2 million, or 17.1%, to $1.71 billion in 1999 from $1.46
billion in 1998. Cruise operating costs increased in 1999 primarily due to
additional costs associated with the increased passenger capacity and increases
in airfare and fuel costs. Airfare costs increased primarily due to a higher
rate per air passenger partially offset by a lower percentage of passengers
electing the Company's air program. 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. Assuming fiscal 2000 fuel prices
remain at the same levels as the end of the fiscal 1999 fourth quarter, the
Company's fuel costs will increase in fiscal 2000 by approximately $30 million
versus fiscal 1999 due to the higher fuel prices. Cruise operating costs as a
percentage of cruise revenues were 52% and 52.1% in 1999 and 1998, respectively.
Selling and administrative expenses increased $77.8 million, or 21.0%,
primarily due to an increase in advertising and payroll and related costs.
Selling and administrative expenses as a percentage of revenues were 12.8% and
12.3%, respectively.
Cunard Line Limited's cruise operating costs and selling and administrative
expenses as a percentage of revenues are higher than the Company's other brands.
Accordingly, the Company's expense ratios are higher in 1999 due to the
inclusion of Cunard Line Limited's expenses since the third quarter of 1998.
Depreciation and amortization increased by $43.0 million, or 21.4%, to
$243.7 million in 1999 from $200.7 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 $75.8 million of income from affiliated
operations as compared with $76.7 million of income in 1998. The Company's
portion of Airtours' income decreased $3.2 million, or 8.1%, to $36.2 million.
The Company recorded income of $39.9 million during both 1999 and 1998 related
to its interest in Il Ponte. The affiliated operations for 1998 include
seasonal losses from the first half of 1998 from Seabourn after which its
results are included in the Company's consolidated results.
See the "General" section for a discussion of Airtours' and Costa's
seasonality. See Note 4 in the accompanying financial statements for more
information regarding the Company's affiliated operations.
Nonoperating Income (Expense)
Interest income increased $31.7 million in 1999 due primarily to 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 6 in
the accompanying financial statements).
Gross interest expense (excluding capitalized interest) decreased slightly
to $87.9 million from $92.9 million primarily as a result of lower average
outstanding debt balances. Capitalized interest increased $5.8 million during
1999 as compared with 1998 due primarily to higher levels of investments in ship
construction projects.
Other income in 1999 of $29.4 million primarily relates to $21.4 million of
compensation received from the shipyard related to the late deliveries of the
Volendam and Carnival Triumph, net of certain related expenses, collection of
$4.5 million of insurance proceeds, recognition of $2.3 million of ship lease
transaction income and $13.6 million of other non-recurring gains. In addition,
other income was partially reduced for, among other things, an $8.8 million
expense for the writedown of the Company's investment in Wyndham International
common stock and $3.2 million of expenses related to the small engine room fire
on the Carnival ship Tropicale.
Minority interest was $14.0 million in 1999 compared with $11.1 million in 1998
which represents the minority shareholders' interest in Cunard Line Limited's
net income. On November 15,1999, the Company acquired the remaining minority
interest in Cunard at which point no further minority interest expense will be
incurred by the Company.
FISCAL 1998 COMPARED TO FISCAL 1997
Revenues
The increase in total revenues of $561.8 million, or 23.0%, was due
primarily to an increase in cruise revenues of $540.3 million, or 23.9%.
Approximately $281.9 million of the cruise revenue increase is due to the
acquisition and consolidation of Cunard and Seabourn and $258.4 million is due
to increased cruise revenues from Carnival, Holland America and Windstar. The
increase from Carnival, Holland America and Windstar resulted from an increase
of approximately 7.0% in total revenue per passenger cruise day and a 4.8%
increase in passenger capacity, offset slightly by a .6% decrease in occupancy
rates. Total revenue per passenger cruise day increased primarily due to strong
demand for the Company's cruise brands and the introduction of Holland America's
new Rotterdam VI in November 1997, which obtained higher pricing. Passenger
capacity increased due to the addition of Carnival's Elation in March 1998 and
Windstar's Wind Surf in May 1998, partially offset by the Ecstasy being out of
service for two months during 1998 (see Nonoperating Income (Expense)). Tour
revenues increased $31.8 million, or 13.1% to $274.5 million in 1998 from $242.6
million in 1997 due primarily to an increase in the number of tours sold.
Cost and Expenses
Operating expenses increased $296.7 million, or 22.4%. Cruise operating
costs increased by $274.2 million, or 23.1% in 1998. Approximately $177.5
million of the cruise operating costs increase is due to the acquisition and
consolidation of Cunard and Seabourn. Excluding Cunard and Seabourn, cruise
operating costs as a percentage of cruise revenues were 50.9% and 52.5% in 1998
and 1997, respectively. Cruise operating costs, excluding Cunard and Seabourn,
increased primarily as a result of increases in passenger capacity and airfare
costs, partially offset by lower fuel costs. Airfare costs increased due to a
higher rate per air passenger as well as a higher percentage of passengers
electing the Company's air program. Tour operating expenses increased $32.8
million, or 17.2% primarily due to the increase in tour volume and higher
expenses incurred primarily as a result of increased tour content.
Selling and administrative expenses increased $72.9 million, or 24.6%, of
which $46.8 million, or 15.8%, was due to the acquisition and consolidation of
Cunard and Seabourn. Excluding Cunard and Seabourn, selling and administrative
expenses as a percentage of revenues were 11.8% and 12.1% in 1998 and 1997,
respectively. Selling and administrative expenses, excluding Cunard and
Seabourn, increased primarily as a result of increases in advertising and
payroll and related costs.
Depreciation and amortization increased by $33.4 million, or 20.0%, to
$200.7 million in 1998 from $167.3 million in 1997 primarily due to the
additional depreciation associated with the increase in the size of the fleet
and the acquisition and consolidation of Cunard and Seabourn.
Affiliated Operations
During 1998, the Company recorded $76.7 million of income from
affiliated operations as compared with $53.1 million of income in 1997.
The Company's portion of Airtours' income increased $3.7 million to $39.4
million in 1998. The Company recorded income of $39.9 million and $15.5
million during 1998 and 1997, respectively, related to its interest in Il
Ponte. The Company did not record earnings from its investment in Il Ponte
in the first nine months of 1997 since Il Ponte was acquired in June 1997
and its consolidated operating results are recorded on a two-month lag
basis.
Nonoperating Income (Expense)
Gross interest expense (excluding capitalized interest) increased $20.2
million in 1998 primarily as a result of higher average outstanding debt
balances, arising from the acquisition and consolidation of Cunard and Seabourn
as well as investments in new vessel projects. Capitalized interest increased
$18.3 million due primarily to higher levels of investments in ship construction
projects during fiscal 1998 as compared with fiscal 1997.
Included in other income in 1998 were gains of $8.4 and $14.8 million
resulting from the closing of the sale of CHC International Inc.'s hotel
management division and Airtours' issuances of its common stock, respectively.
Additionally, other expense includes $8.7 million of previously deferred start-
up costs, which were expensed in 1998 and represent the cumulative effect from
the Company changing its policy in connection with its early adoption of SOP 98-
5 (see Notes 2 and 4 in the accompanying financial statements).
In July 1998, a fire occurred on Carnival Cruise Lines' Ecstasy which
damaged the ship's aft section. The time necessary to complete repairs to the
Ecstasy resulted in the ship being out of service for approximately two months
during 1998. The Ecstasy fire resulted in a reduction in earnings of
approximately $19.3 million in 1998. This reduction was comprised of lost
revenue, net of related variable expenses, of $12.0 million, and costs
associated with repairs to the ship, passenger handling and various other costs,
net of estimated insurance recoveries, of $7.3 million. The costs of $7.3
million were included in other expenses.
Minority interest was $11.1 million which represents the minority
shareholders' interest in Cunard Line Limited's net income since its acquisition
and consolidation by the Company on May 28, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash
The Company's business provided $1.33 billion of net cash from operations
during fiscal 1999, an increase of 21.8% compared to fiscal 1998. The increase
was primarily due to higher net income.
In December 1998, the Company issued 17 million shares of its Common Stock
in a public offering and received net proceeds of approximately $725 million.
The Company issued the stock concurrent with the addition of the Company's
Common Stock to the S&P 500 Composite Index.
Uses of Cash
During fiscal 1999, the Company made net expenditures of approximately $873
million on capital projects, of which $695 million was spent in connection with
its ongoing shipbuilding program. The shipbuilding expenditures included the
final payments on the Carnival Triumph and Holland America's Volendam, which
were delivered to the Company in July and October, respectively. The
nonshipbuilding capital expenditures consisted primarily of computer and
transportation equipment, vessel refurbishments, tour assets and other
equipment.
The Company paid $76.5 million related to the acquisition of the minority
interest in Cunard (see Note 12 in the accompanying financial statements).
The Company had net repayments of $368.7 million under its commercial paper
programs and made scheduled principal payments totaling $67.6 million pursuant
to various notes payable. Additionally in late November 1999, the Company
prepaid approximately $124 million of Cunard's notes payable (see Note 5 in the
accompanying financial statements). Finally, the Company paid cash dividends of
$219.2 million in fiscal 1999.
Future Commitments
As of February 4, 2000, the Company, excluding Costa, has contracts for the
delivery of twelve new vessels over the next five years. The Company's remaining
obligation under these contracts is to pay approximately $800 million during
fiscal 2000 relating to the construction and delivery of these new ships and
approximately $3.4 billion thereafter.
In addition to these ship construction contracts, the Company has entered
into one shipbuilding option and is also in various stages of negotiation with
shipbuilding yards for additional ships. No assurance can be given that this
option or these negotiations will result in additional ship construction
contracts.
At November 30, 1999, the Company had $1.07 billion of long-term debt of
which $206 million is due in fiscal 2000. See Notes 5, 8 and 14 in the
accompanying financial statements for more information regarding the Company's
debts and commitments.
Funding Sources
At November 30, 1999, the Company had approximately $545 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, ship construction costs and its investment in
Arrasas (see Note 14). Additionally, the Company may also fund a portion of
these cash requirements from borrowings under its revolving credit facilities or
commercial paper programs. At November 30, 1999, 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.
OTHER MATTERS
Year 2000
The Year 2000 computer issue was primarily the result of computer programs
using a two-digit format, as opposed to four digits, to indicate the year. Such
programs would have been unable to interpret dates beyond the year 1999, which
could have caused a system failure or other computer errors and a disruption in
the operation of such systems. The Company dedicated significant resources to
fix this problem before the end of 1999, and it has successfully transitioned
from 1999 to 2000 without any significant issue arising in its business
processes. The Company does not believe any subsequent Year 2000 computer
issues will have a significant impact on its business.
The total aggregate expenditures to address Year 2000 issues were
approximately $16 million, of which $8 million has been charged to expense and
$8 million has been capitalized related to the accelerated replacement of non-
compliant systems due to Year 2000 issues.
Market Risks
The Company is principally exposed to market risks from fluctuations in
interest rates, foreign currency exchange rates and fuel and equity prices. The
Company seeks to minimize these risks through its regular operating and
financing activities, its long-term investment strategy and, when considered
appropriate, through the use of derivative financial instruments. The Company's
policy is to not use financial instruments for trading or other speculative
purposes.
In order to limit its exposure to interest rate fluctuations, the Company
has entered into fixed rate debt instruments for substantially all of its long-
term debt. The Company's primary foreign currency exchange risk relates to its
outstanding obligations under its foreign currency denominated shipbuilding
contracts. The Company manages this risk through the use of foreign currency
forward contracts (see Notes 2 and 7 in the accompanying financial statements).
Additionally, the Company's investments in foreign affiliates subjects it
to foreign currency exchange rate and equity price risks. Management considers
its investments in foreign affiliates to be denominated in relatively stable
currencies and of a long-term nature and, accordingly, does not typically manage
its related foreign currency exchange rate and equity price risks through the
use of financial instruments.
Cruise ship expenses are impacted by changes in bunker fuel prices. Bunker
fuel consumed over the past five fiscal years represented approximately four to
five percent of the Company's operating expenses. The Company endeavors to
acquire bunker fuel at the lowest possible prevailing prices given, among other
things, its substantial buying power and ability to refuel certain of its ships
at ports which offer competitive price advantages.
The Company has typically not used financial instruments to hedge its
exposure to the bunker fuel price market risk. However, management is
continuing to monitor this market risk, and may, in the future, decide to use
financial instruments to reduce this risk. See costs and expenses for fiscal
1999 compared to fiscal 1998 for further discussion.
Other market risk exposures to the Company relate to food commodity prices
and the selling of certain of its cruises and incurring certain cruise-related
expenses in foreign currencies. The Company does not expect changes in food
commodity prices and foreign currency denominated cruise revenue and expenses to
materially affect its operating results, however, management monitors such items
to determine if any actions, including the use of financial instruments, would
be warranted to reduce such market risk exposures.
Exposure to Interest Rates
At November 30, 1999, the Company's long-term debt had a carrying value of
$1.074 billion. The fair value of this debt at November 30, 1999 was $1.021
billion. Based upon a hypothetical 10% decrease or increase in the period end
market interest rate, the fair value of this liability would increase or
decrease by approximately $43 million.
This hypothetical amount is determined by considering the impact of the
hypothetical interest rates on the Company's existing debt. This analysis does
not consider the effects of the changes in the level of overall economic
activity that could exist in such environments. Furthermore, since substantially
all of the Company's fixed rate debt cannot be prepaid, it is most likely
management would be unable to take any significant steps to mitigate its
exposure in the event of a significant decrease in market interest rates.
Exposure to Exchange Rates
As a result of the Company having outstanding obligations under ship
construction contracts denominated in a foreign currency, it is affected by
fluctuations in the value of the U.S. dollar as compared to certain European
currencies. Foreign currency forward contracts are used to hedge against this
risk. Accordingly, increases and decreases in the fair value of these foreign
currency forward contracts are offset by changes in the U.S. dollar value of the
net underlying foreign currency denominated ship construction obligations.
At November 30, 1999, the Company's foreign currency forward
contracts which hedge its shipbuilding activities had notional amounts and
maturity dates of $232 million, $360 million, $662 million, $315 million
and $292 million in 2000, 2001, 2002, 2003 and 2004, respectively. The
fair value of these contracts was $1.8 billion at November 30, 1999. Based
upon a 10% strengthening or weakening of the U.S. dollar compared to the
Euro, assuming no changes in comparative interest rates, the estimated
fair value of these contracts would decrease or increase by $181 million
which would be offset by a decrease or increase of $181 million in the
U.S. dollar value of the related foreign currency ship construction
obligations.
The cost of shipbuilding orders which the Company may place in the future
may be affected by foreign currency exchange rate fluctuations. Should the U.S.
dollar weaken relative to the Euro, future orders for new ship construction in
certain European shipyards may be at higher prices.
SELECTED FINANCIAL DATA
The selected financial data presented below for the fiscal years 1995
through 1999 and as of the end of each such fiscal year are derived from the
financial statements of the Company and should be read in conjunction with such
financial statements and the related notes.
<TABLE>
<CAPTION>
Years Ended November 30,
1999 1998 1997 1996 1995
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues $3,497,470 $3,009,306 $2,447,468 $2,212,572 $1,998,150
Operating income
before income from
affiliated operations $ 943,941 $ 819,792 $ 660,979 $ 551,461 $ 490,038
Operating income $1,019,699 $ 896,524 $ 714,070 $ 597,428 $ 490,038
Net income $1,027,240 $ 835,885 $ 666,050 $ 566,302 $ 451,091
Earnings per share (1):
Basic $ 1.68 $ 1.40 $ 1.12 $ .98 $ .79
Diluted $ 1.66 $ 1.40 $ 1.12 $ .96 $ .79
Dividends declared
per share (1) $ .375 $ .315 $ .240 $ .190 $ .158
Passenger cruise days 14,947 13,009 11,908 10,583 9,201
Occupancy percentage (2) 104.3% 106.3% 108.3% 107.6% 105.0%
As of November 30,
1999 1998 1997 1996 1995
(in thousands)
Balance Sheet Data:
Total assets $8,286,355 $7,179,323 $5,426,775 $5,101,888 $4,105,487
Long-term debt and
convertible notes $ 867,515 $1,563,014 $1,015,294 $1,316,632 $1,150,031
Total shareholders'
equity $5,931,247 $4,285,476 $3,605,098 $3,030,884 $2,344,873
</TABLE>
(1) All per share amounts have been adjusted to reflect a two-for-one stock
split effective June 12, 1998.
(2) In accordance with cruise industry practice, occupancy percentage is
calculated based upon two passengers per cabin even though some cabins can
accommodate three or four passengers. The percentages in excess of 100%
indicate that more than two passengers occupied some cabins.
MARKET PRICE FOR COMMON STOCK
The following table sets forth for the periods indicated the high and low
Common Stock sales prices, as adjusted for the June 12, 1998 two-for-one stock
split, on the New York Stock Exchange:
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
Fiscal Year ended November 30, 1999:
First Quarter $49.125 $34.875
Second Quarter $53.500 $38.500
Third Quarter $50.500 $39.750
Fourth Quarter $51.875 $38.125
Fiscal Year ended November 30, 1998:
First Quarter $29.500 $24.938
Second Quarter $38.250 $29.531
Third Quarter $42.625 $28.438
Fourth Quarter $35.438 $19.000
</TABLE>
As of January 19, 2000, there were approximately 4,579 holders of record
of the Company's Common Stock. While no tax treaty currently exists between
the Republic of Panama and the United States, under current law, the Company
believes that distributions to its shareholders are not subject to taxation
under the laws of the Republic of Panama.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial results for fiscal 1999 were as follows:
<TABLE>
<CAPTION>
Quarters Ended
February 28, May 31, August 31, November 30,
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $748,258 $796,149 $1,161,821 $791,242
Gross profit $332,155 $363,723 $ 589,408 $349,548
Operating income before
income from affiliated
operations $163,481 $199,295 $ 416,408 $164,757
Operating income $157,564 $198,113 $ 427,184 $236,838
Net income $157,761 $203,342 $ 415,093 $251,044
Earnings per share:
Basic $ .26 $ .33 $ .68 $ .41
Diluted $ .26 $ .33 $ .67 $ .40
Dividends declared per share $ .09 $ .09 $ .09 $ .105
</TABLE>
Quarterly financial results for fiscal 1998 were as follows:
<TABLE>
<CAPTION>
Quarters Ended
February 28, May 31, August 31, November 30,
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $557,838 $661,358 $1,061,539 $728,571
Gross profit $250,243 $299,002 $ 521,196 $319,488
Operating income before
income from affiliated
operations $128,401 $167,794 $ 365,007 $158,590
Operating income $117,720 $165,441 $ 378,849 $234,514
Net income $109,914 $160,596 $ 344,752 $220,623
Earnings per share (1):
Basic $ .18 $ .27 $ .58 $ .37
Diluted $ .18 $ .27 $ .58 $ .37
Dividends declared
per share (1) $ .075 $ .075 $ .075 $ .09
</TABLE>
(1) Adjusted for the June 12, 1998 two-for-one stock split.
FORWARD-LOOKING STATEMENTS
Certain statements in the Shareholders' Letter and under the headings
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and elsewhere in this Annual Report constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may cause
the actual results, performances or achievements of the Company to be
materially different from any future results, performances or achievements
expressed or implied by such forward-looking statements. Such factors
include, among others, the following: general economic and business
conditions which may impact levels of disposable income of consumers and
pricing and passenger yields for the Company's cruise products; consumer
demand for cruises 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.
EXHIBIT 21
LIST OF SUBSIDIARIES AND AFFILIATES OF CARNIVAL CORPORATION
<TABLE>
<CAPTION>
Jurisdiction of Incorporation
Name of Subsidiary or Organization
<S> <C>
(14) Airtours plc (25.81% interest) United Kingdom
(9) Alaska Overland, Inc. Alaska
(5) Alaska Travel Center, Inc. Washington
Carnival Investments Limited Bahamas
(15) Carnival Investments (UK) Limited United Kingdom
(15) Carnival Operations (UK) Limited United Kingdom
(16) Carnival Services (UK) Limited United Kingdom
Carnival (UK) plc United Kingdom
Celebration Cruises Inc. Liberia
Consorcio H (49% interest) Mexico
(10) Costa Crociere S.p.A. Italy
Crowne Plaza Holdings, Inc. Florida
(18) Cunard Celtic Hotel Services Limited Hong Kong
(19) Cunard Celtic Limited Hong Kong
(12) Cunard Fleet Management Services Limited Bahamas
Cunard Line Limited Bermuda
(12) Cunard Line Limited AS Norway
(12) Cunard Seabourn Air Limited United Kingdom
(17) Cunard Seabourn Limited (UK) United Kingdom
(5) Evergreen Trails, Inc. Washington
Futura Cruises Inc. Panama
Gemward Limited Ireland
Golden Falcon International S.A. Panama
HAL Antillen N.V. Netherlands Antilles
(1) HAL Beheer B.V. Netherlands
(1) HAL Buitenland B.V. Netherlands
(1) HAL Cruises Limited Bahamas
(1) HAL Marine N.V. Netherlands Antilles
(1) HAL Maritime Ltd. Netherlands Antilles
(1) HAL Nautical N.V. Netherlands Antilles
(1) HAL Nederland N.V. Netherlands Antilles
(1) HAL Properties Limited Bahamas
(1) HAL Services B.V. Holland
(3) Holland America Line Inc. Delaware
(1) Holland America Line N.V. Netherlands Antilles
(4) Holland America Line-Westours Inc. Washington
(3)(13)Il Ponte S.p.A. (50.0% interest) Italy
(5) Leisure Corporation Alaska
(16) Sea Vacations Limited United Kingdom
(11) Sea Vacations UK Limited United Kingdom
(6) Trailways Tours, Inc. Washington
Trident Insurance Company Limited Bermuda
Utopia Cruises Inc. Panama
(5)(7) Westmark Hotels of Canada Limited Canada
(5) Westmark Hotels, Inc. Alaska
(8) Westmark Kodiak Inc. Alaska
(8) Westmark Third Avenue Inc. Alaska
(5) Westours Motor Coaches, Inc. Alaska
(5) White Pass & Yukon Motorcoaches Inc. Alaska
(2) Wind Spirit Limited Bahamas
(2) Wind Star Limited Bahamas
(1) Wind Surf Limited Bahamas
(1) Windstar Sail Cruises Limited Bahamas
(5) Worldwide Shore Services Inc. Washington
____________
(1) Subsidiary of HAL Antillen N.V.
(2) Subsidiary of Windstar Sail Cruises Limited
(3) Subsidiary of HAL Buitenland B.V.
(4) Subsidiary of Holland America Line Inc.
(5) Subsidiary of Holland America Line-Westours Inc.
(6) Subsidiary of Evergreen Trails, Inc.
(7) Holland America Line-Westours Inc. owns all of the common stock and
noncumulative redeemable preferred stock, while Westmark Hotels, Inc. owns
all of the redeemable preferred Class B stock and the redeemable preferred
Class C stock
(8) Subsidiary of Westmark Hotels, Inc.
(9) Subsidiary of Westours Motor Coaches, Inc.
(10) Subsidiary of Il Ponte S.p.A.
(11) Subsidiary of Sea Vacations Limited
(12) Subsidiary of Cunard Line Limited
(13) Owned 50% by Airtours plc
(14) Airtours plc is an affiliate of Carnival Investments (UK) Limited
(15) Subsidiary of Carnival (UK) plc
(16) Subsidiary of Carnival Operations (UK) Limited
(17) Subsidiary of Cunard Seabourn Air Limited
(18) Subsidiary of Cunard Celtic Limited
(19) Subsidiary of Cunard Fleet Management Services Limited
</TABLE>
EXHIBIT 23
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (No. 33-63563, No. 333-43269, No. 333-68999 and No. 333-
72729) and Registration Statements on Form S-8 (No. 33-45287, No. 33-45288, No.
33-51195, No. 33-53099 and No. 333-43885) and Registration Statement on Form S-1
(No. 33-14844) of Carnival Corporation of our report dated January 24, 2000
relating to the financial statements, which appears in the Annual Report to
Shareholders, which is incorporated in this Annual Report on Form 10-K.
/s/PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
February 23, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> NOV-30-1999
<CASH> 521,771
<SECURITIES> 22,800
<RECEIVABLES> 62,887
<ALLOWANCES> 0
<INVENTORY> 84,019
<CURRENT-ASSETS> 791,636
<PP&E> 7,680,410
<DEPRECIATION> 1,269,883
<TOTAL-ASSETS> 8,286,355
<CURRENT-LIABILITIES> 1,404,913
<BONDS> 867,515
<COMMON> 6,170
0
0
<OTHER-SE> 5,925,077
<TOTAL-LIABILITY-AND-EQUITY> 8,286,355
<SALES> 0
<TOTAL-REVENUES> 3,497,470
<CGS> 0
<TOTAL-COSTS> 1,862,636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,956
<INCOME-PRETAX> 1,044,032
<INCOME-TAX> (2,778)
<INCOME-CONTINUING> 1,027,240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,027,240
<EPS-BASIC> 1.68
<EPS-DILUTED> 1.66
</TABLE>
