[NOTIFY] 72731,737
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 1-9610
CARNIVAL CORPORATION
(Exact name of registrant as specified in its charter)
Republic of Panama 59-1562976
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3655 N.W. 87th Avenue, Miami, Florida 33178-2428
(Address of principal executive offices)
(zip code)
(305) 599-2600
(Registrant's telephone number, including area code)
None.
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No__
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of April 7, 1997.
Class A Common Stock, $.01 par value: 242,104,352 shares
Class B Common Stock, $.01 par value: 54,957,142 shares
CARNIVAL CORPORATION
I N D E X
Page
Part I. Financial Information
Item 1: Financial Statements
Consolidated Balance Sheets -
February 28, 1997 and November 30, 1996 1
Consolidated Statements of Operations -
Three Months Ended February 28, 1997
and February 29, 1996 2
Consolidated Statements of Cash Flows -
Three Months Ended February 28, 1997
and February 29, 1996 3
Notes to Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. Other Information
Item 1: Legal Proceedings 15
Item 5: Other Information 15
Item 6: Exhibits and Reports on Form 8-K 15
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
February 28, November 30,
ASSETS 1997 1996
CURRENT ASSETS
Cash and cash equivalents $ 88,928 $ 111,629
Short-term investments 12,443 12,486
Accounts receivable 42,860 38,109
Consumable inventories, at average cost 53,667 53,281
Prepaid expenses and other 84,853 75,428
Total current assets 282,751 290,933
PROPERTY AND EQUIPMENT, NET 4,122,496 4,099,038
OTHER ASSETS
Investments in and advances to affiliates 405,123 430,330
Goodwill, less accumulated amortization of
$57,020 in 1997 and $55,274 in 1996 217,843 219,589
Other assets 58,812 61,998
$5,087,025 $5,101,888
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 66,368 $ 66,369
Accounts payable 110,021 84,748
Accrued liabilities 116,570 126,511
Customer deposits 404,462 352,698
Dividends payable 32,674 32,416
Total current liabilities 730,095 662,742
LONG-TERM DEBT 1,116,235 1,277,529
CONVERTIBLE NOTES 39,103
DEFERRED INCOME AND OTHER LONG-TERM LIABILITIES 91,385 91,630
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Class A Common Stock; $.01 par value; one vote
per share; 399,500 shares authorized; 242,091
and 239,733 shares issued and outstanding 2,421 2,397
Class B Common Stock; $.01 par value; five votes
per share; 100,500 shares authorized; 54,957
shares issued and outstanding 550 550
Paid-in-capital 862,093 819,610
Retained earnings 2,260,467 2,207,781
Other 23,779 546
Total shareholders' equity 3,149,310 3,030,884
$5,087,025 $5,101,888
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended,
February 28, 1997 February 29, 1996
REVENUES $521,082 $448,788
COSTS AND EXPENSES
Operating expenses 296,938 263,696
Selling and administrative 79,503 71,282
Depreciation and amortization 40,697 32,835
417,138 367,813
OPERATING INCOME BEFORE LOSS
FROM AFFILIATED OPERATIONS 103,944 80,975
LOSS FROM AFFILIATED
OPERATIONS (8,982) (3)
OPERATING INCOME 94,962 80,972
NONOPERATING INCOME (EXPENSE)
Interest income 1,817 7,845
Interest expense, net of
capitalized interest (17,090) (16,038)
Other income 1,646 760
Income tax benefit 4,025 3,526
(9,602) (3,907)
NET INCOME $ 85,360 $ 77,065
EARNINGS PER SHARE $.29 $.27
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended,
February 28, 1997 February 29, 1996
OPERATING ACTIVITIES
Net income $ 85,360 $ 77,065
Adjustments
Depreciation and amortization 40,697 32,835
Equity in loss from affiliates and
dividends received 15,857 3
Other 240 2,854
Changes in operating assets and liabilities
(Increase) decrease in receivables (4,776) 2,666
Increase in consumable inventories (386) (722)
Increase in prepaid and other (9,488) (2,226)
Increase (decrease) in accounts payable 25,273 (197)
(Decrease) increase in accrued liabilities (9,941) 4,297
Increase in customer deposits 51,764 51,339
Net cash provided from operations 194,600 167,914
INVESTING ACTIVITIES
Decrease in short-term investments, net 43 21,026
Additions to property and equipment, net (62,346) (253,452)
Repayment of advances to affiliates 32,135 794
Decrease (increase) in other
non-current assets 3,186 (2,974)
Net cash used for investing activities (26,982) (234,606)
FINANCING ACTIVITIES
Principal payments of long-term debt (182,853) (115,555)
Dividends paid (32,416) (25,632)
Proceeds from long-term debt 21,546 444,922
Issuance of common stock 3,404 1,286
Net cash (used for) provided from
financing activities (190,319) 305,021
Net (decrease) increase in cash and
cash equivalents (22,701) 238,329
Cash and cash equivalents at beginning
of period 111,629 53,365
Cash and cash equivalents at end
of period $ 88,928 $291,694
Supplemental disclosure of non-cash transactions
Conversion of 4-1/2% Convertible Notes into
Common Stock $39,085
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS FOR PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The financial statements included herein have been prepared by Carnival
Corporation without audit pursuant to the rules and regulations of the
Securities and Exchange Commission.
The accompanying consolidated balance sheet at February 28, 1997, and the
consolidated statements of operations and cash flows for the three months
ended February 28, 1997 and February 29, 1996 are unaudited and, in the
opinion of management, contain all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation. The operations of
Carnival Corporation and its subsidiaries (the "Company") are seasonal and
results for interim periods are not necessarily indicative of the results for
the entire year.
The accompanying financial statements include the consolidated balance
sheets and statements of operations and cash flows of the Company and its
subsidiaries. All material intercompany transactions and accounts have been
eliminated in consolidation. Certain amounts in prior periods have been
reclassified to conform with the current period's presentation.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
Vessels $4,269,334 $4,269,403
Vessels under construction 175,550 163,178
4,444,884 4,432,581
Land, buildings and improvements 180,066 170,466
Transportation and other equipment 241,808 204,776
Total property and equipment 4,866,758 4,807,823
Less - accumulated depreciation and
amortization (744,262) (708,785)
$4,122,496 $4,099,038
Interest costs associated with the construction of vessels and buildings,
until they are placed in service, are capitalized and amounted to $3.5 million
and $5.9 million for the three months ended February 28, 1997 and February 29,
1996, respectively.
NOTE 3 - LONG-TERM DEBT AND CONVERTIBLE NOTES
Long-term debt consisted of the following:
February 28, November 30,
1997 1996
(in thousands)
5.34% to 5.38% Commercial Paper
Due from March 1997 to April 1997 $ 321,155 $ 307,298
Unsecured 5.75% Notes Due March 15, 1998 200,000 200,000
$200 Million Multi-currency Revolving
Credit Facility Due 2001 166,000
Mortgages and other loans payable bearing interest
at rates ranging from 8% to 9.9%, secured by
vessels, maturing through 1999 130,865 140,277
Unsecured 6.15% Notes Due October 1, 2003 124,955 124,953
Unsecured 7.20% Debentures Due October 1, 2023 124,873 124,871
Unsecured 7.70% Notes Due July 15, 2004 99,916 99,913
Unsecured 7.05% Notes Due May 15, 2005 99,836 99,831
Other loans payable 81,003 80,755
1,182,603 1,343,898
Less portion due within one year (66,368) (66,369)
$1,116,235 $1,277,529
The Company initiated a commercial paper program in October 1996 which is
supported by the one billion dollar unsecured revolving credit facility due
2001 (the "U.S. Dollar Revolver"). In January 1997, the Company extended its
commercial paper program to include as support its $200 Million Multi-currency
Revolving Credit Facility Due 2001 (the "Multi-currency Revolving Credit
Facility"). Both revolving credit facilities bear interest at a maximum of
LIBOR plus 14 basis points ("BPS") and provide for a facility fee of six BPS
on the total facility. Any funds outstanding under the commercial paper
programs reduce the amount available under the U.S. Dollar Revolver or the
Multi-currency Revolving Credit Facility. As of February 28, 1997, the
Company had $321.2 million outstanding under its commercial paper programs and
$878.8 million available for borrowing under the U.S. Dollar Revolver and
Multi-currency Revolving Credit Facility.
During December 1996, the remaining outstanding amount of the Company's
4-1/2% Convertible Subordinated Notes Due July 1, 1997 were converted into
approximately 2.2 million shares of the Company's Class A Common Stock.
NOTE 4 - SHAREHOLDERS' EQUITY
The following represents an analysis of the changes in shareholders' equity
for the three months ended February 28, 1997:
COMMON STOCK
$.01 PAR VALUE PAID-IN RETAINED
CLASS A CLASS B CAPITAL EARNINGS OTHER TOTAL
(in thousands)
Balance November 30,1996 $2,397 $550 $819,610 $2,207,781 $ 546 $3,030,884
Net income for the period 85,360 85,360
Cash dividends (32,674) (32,674)
Changes in securities
valuation allowance 162 162
Foreign currency
translation adjustment 22,785 22,785
Issuance of common stock
upon conversion of
Convertible Notes 23 39,755 39,778
Issuance of stock to
employees under stock
plans 1 2,728 (100) 2,629
Vested portion of common
stock under restricted
stock plan 386 386
Balance February 28, 1997 $2,421 $550 $862,093 $2,260,467 $23,779 $3,149,310
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Capital Expenditures
The following table provides a description of ships currently under contract
for construction (in millions of dollars):
Expected Number Estimated Remaining
Service Contract of Lower Total Cost to Be
Vessel Date Denomination Berths Cost Paid
Holland America Line:
Rotterdam VI 10/97 Lire 1,320 $ 270 $ 197
HAL Newbuild 3/99 Lire 1,440 300 285
HAL Newbuild 10/99 Lire 1,440 300 285
Carnival Cruise Lines:
Elation 3/98 U. S. Dollar 2,040 300 278
Paradise 12/98 U. S. Dollar 2,040 300 283
Carnival Triumph 7/99 Lire 2,640 400 370
Carnival Victory 8/00 U. S. Dollar 2,640 430 426
13,560 $2,300 $2,124
Contracts denominated in foreign currencies have been fixed into U.S.
Dollars through the utilization of forward currency contracts. In connection
with the vessels under construction described above, the Company has paid $176
million through February 28, 1997 and anticipates paying approximately $600
million during the twelve month period ending February 28, 1998 and
approximately $1.5 billion beyond February 28, 1998.
Litigation
In April 1996 and October 1996, four complaints were filed in the Circuit
Court of the Eleventh Judicial Circuit, Dade County, Florida, against the
Company (the "Florida Actions"). In April 1996, a complaint was filed in the
Superior Court of Washington for King County against Holland America Westours
(the "Washington Action"). In November 1996, a complaint was filed against the
Company in the 18th Judicial District Court, Parish of Iberville, Louisiana
(the "Louisiana Action"). In March 1997, a complaint was filed against the
Company in the Chancery Court for Tennessee for Dyer County (the "Tennessee
Action"). These actions (collectively the "Port Charges Complaints"), brought
on behalf of purported classes of persons who traveled on a Company ship and
paid port charges to the Company, allege that statements made by the Company in
advertising and promotional materials concerning port charges were false and
misleading.
The Florida Actions allege claims of negligent misrepresentation, unjust
enrichment, violation of the Florida Deceptive and Unfair Trade Practices Act,
fraud, negligence, breach of fiduciary duties, breach of implied covenants of
good faith and fair dealing, fraudulent misrepresentations and/or omission,
restitution, conversion, money had and received, resulting trust and
constructive trust. The Washington Action alleges claims of negligent
misrepresentation, unjust enrichment and violation of the Washington Consumer
Protection Act. The Louisiana Action alleges violation of the Louisiana Unfair
Trade Practices and Consumer Protection Law, fraud and breach of express
contractual obligations. The Company has removed the Louisiana Action to
federal court, and a hearing on the Company's motion to dismiss is currently
scheduled for August 1997. The Tennessee Action alleges violation of the
Tennessee Consumer Protection Act.
In one of the Florida Actions, Sutton v. Carnival, the plaintiffs seek
damages "in excess of fifteen thousand dollars, (but less than $50,000 per
individual class member)" for each of eight separate grounds for relief. The
Tennessee Action seeks actual damages on behalf of each class member in an
amount less than $20,000, and also seeks treble damages, attorneys' fees and
costs. The remaining Port Charges Complaints seek unspecified compensatory
damages on behalf of the purported class (or, alternatively, refunds of port
charges allegedly in excess of certain charges levied by governmental
authorities), attorneys' fees, costs, punitive damages and injunctive relief.
In June and August 1996, respectively, two complaints were filed against
both the Company and Holland America Westours in the Superior Court for the
State of California, Los Angeles County (the "California Actions") and in
January 1997, a complaint was filed against the Company in the Fourth Judicial
District Court, Hennepin County, Minnesota (the "Minnesota Action"). These
actions (collectively the "Travel Agent Complaints"), brought on behalf of
purported classes of all travel agencies who during the past four years
(California Actions) or the past six years (Minnesota Action) booked a cruise
with the Company, contain allegations that the Company's advertising practices
regarding port charges resulted in an improper and concealed form of commission
bypass. The Travel Agent Complaints allege claims of breach of contract,
negligent misrepresentation, unjust enrichment, unlawful business practices and
common law fraud and seek unspecified compensatory damages (or alternatively,
the payment by the Company of usual and customary commissions on port charges
in excess of certain charges levied by government authorities), an accounting,
attorneys' fees and costs, punitive damages and injunctive relief.
In March 1997, the Company filed a motion to dismiss the Minnesota Action
on the grounds that the plaintiff lacked standing, and had failed to state a
valid claim for relief. In response to that motion, plaintiff stipulated to
withdraw the case and the Court has signed an order dismissing the action with
prejudice.
The Port Charges Complaints and the California Travel Agent Complaints are
in preliminary stages and it is not now possible to determine the ultimate
outcome of the lawsuits. Management believes that the Company has substantial
and meritorious defenses to the claims and intends to vigorously defend the
lawsuits. Management understands that purported class action lawsuits similar
to the Port Charges Complaints and the Travel Agent Complaints have been filed
against five other cruise lines.
In February 1997, Carnival Cruise Lines and certain other cruise lines
entered into an Assurance of Voluntary Compliance (the "Assurance") with the
Florida Attorney General's Office, which ended the Attorney General's
investigation into cruise industry practices concerning port charges. Under
the Assurance, Carnival Cruise Lines agreed that on or after June 1, 1997, it
would not charge customers fees or charges for cruise tickets in addition to
the advertised cruise price, other than fees or charges imposed by government
or quasi-governmental authority (as that term is defined in the Assurance).
Carnival Cruise Lines also agreed to pay $100,000 in attorneys' fees, costs and
investigative fees to the Attorney General's Office. In April 1997, Holland
America Westours also entered into the Assurance with the Attorney General.
In the normal course of business, various other claims and lawsuits have
been filed or are pending against the Company. The majority of these claims
and lawsuits are covered by insurance. Management believes the outcome of any
such suits which are not covered by insurance would not have a material adverse
effect on the Company's financial condition or results of operations.
NOTE 6 - RECENT EVENTS
In December 1996, the Company and Airtours signed a letter of intent to
acquire up to 100% of the outstanding equity securities of Costa Crociere,
S.p.A. ("Costa") an Italian cruise company listed on the Milan stock exchange.
In March 1997, the Company and Airtours entered into definitive agreements with
the controlling shareholders (the "Syndicate") of Costa. Under the definitive
agreements, the Company and Airtours intend to jointly acquire 100% of the
issued share capital of Costa through the purchase of Il Ponte S.p.A. ("Il
Ponte"), whose principal asset is 30.7% of the ordinary shares of Costa, and
through a tender offer to acquire all shares in Costa not owned by Il Ponte
(the "Offer"). Irrevocable undertakings have been received from the Syndicate
to accept the Offer in respect of an additional 26.2% interest in Costa held by
the Syndicate (other than through Il Ponte). These agreements represent
commitments in respect of 56.9% of the issued ordinary share capital of Costa.
Assuming full acceptance of the Offer, and completion of the acquisition of Il
Ponte, the total cost of the Costa acquisition would be approximately $300
million cash with the Company and Airtours each contributing 50%.
Closing of the transaction is subject to regulatory approvals and the
successful completion of the Offer. The Offer for the ordinary shares is
conditioned upon the receipt of acceptances from 90% of the ordinary shares and
75% of the total fully diluted capital of Costa with these acceptance levels
including the Costa securities held by Il Ponte and the Syndicate. No
assurance can be given that the foregoing conditions will be satisfied, that
the minimum acceptance will be received or that the transaction will be
successfully completed.
NOTE 7 - RECENT PRONOUNCEMENTS
In January 1997 the Financial Accounting Standards Board issued Statement
of Financial Standard ("SFAS") No. 128, "Earnings Per Share" which requires
dual presentation of basic and fully diluted earnings per share. The adoption
of SFAS No. 128 is not expected to have a material effect on the Company's
earnings per share computation.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements under this caption, "Management's Discussion and Analysis
of Financial Condition and Results of Operations", constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). See "PART II. OTHER INFORMATION, ITEM 5(a) Forward-Looking
Statements".
General
The Company earns its cruise revenues primarily from (i) the sale of
passenger tickets, which include accommodations, meals, most shipboard
activities and in many cases airfare, and (ii) the sale of goods and services
on board its cruise ships, such as casino gaming, liquor sales, gift shop sales
and other related services. The Company also derives revenues from the tour and
related operations of HAL Antillen N.V. ("HAL").
The following table presents selected segment and statistical information
for the periods indicated:
Three Months Ended
February 28, 1997 February 29, 1996
(in thousands, except selected statistical information)
REVENUES:
Cruise $514,022 $441,687
Tour 7,195 7,239
Intersegment revenues (135) (138)
$521,082 $448,788
OPERATING EXPENSES:
Cruise $287,717 $254,687
Tour 9,356 9,147
Intersegment expenses (135) (138)
$296,938 $263,696
OPERATING INCOME:
Cruise 116,057 $ 90,824
Tour (10,729) (9,145)
Income (loss) from affiliates
and corporate expenses (10,366) (707)
$ 94,962 $ 80,972
SELECTED STATISTICAL INFORMATION:
Passengers Carried 455,000 408,000
Passenger Cruise Days 2,818,000 2,454,000
Occupancy Percentage 106.4% 107.1%
The following table presents operations data expressed as a percentage of
total revenues for the periods indicated:
Three Months Ended
February 28, 1997 February 29, 1996
REVENUES 100% 100%
COSTS AND EXPENSES:
Operating expenses 57 59
Selling and administrative 15 16
Depreciation and amortization 8 7
OPERATING INCOME BEFORE
LOSS FROM AFFILIATED
OPERATIONS 20 18
Loss from affiliated
operations (2)
OPERATING INCOME 18 18
NONOPERATING INCOME (EXPENSE) (2) (1)
NET INCOME 16% 17%
The Company's different businesses experience varying degrees of
seasonality. The Company's revenue from the sale of passenger tickets for
Carnival Cruise Lines' ("Carnival") ships is moderately seasonal.
Historically, demand for Carnival cruises has been greatest during the period
from late June through August and lower during the fall months. HAL cruise
revenues are more seasonal than Carnival's cruise revenues. Demand for HAL
cruises is strongest during the summer months when HAL ships operate in Alaska
and Europe for which HAL obtains higher pricing. Demand for HAL cruises is
lower during the winter months when HAL ships sail in the more competitive
markets. The Company's tour revenues are extremely seasonal with a large
majority of tour revenues generated during the late spring and summer months in
conjunction with the Alaska cruise season.
In April 1996 the Company made an investment in Airtours plc ("Airtours")
which it records using the equity basis of accounting. Starting with the
Company's quarter ended August 31, 1996, the Company's portion of Airtours'
operating results are being recorded by the Company on a two month lag basis.
Airtours' earnings are seasonal due to the nature of the European leisure
travel industry. Demand for Airtours vacations is highest during the summer
months when Europeans typically take extended vacations. During the last two
fiscal years, Airtours' third and fourth fiscal quarters, ending June 30 and
September 30, respectively, have been profitable, with the fourth quarter being
its most profitable quarter. During this same period, Airtours experienced
seasonal losses in its first and second fiscal quarters ending on December 31
and March 31, respectively.
Three Months Ended February 28, 1997 Compared
To Three Months Ended February 29, 1996
Revenues
The increase in total revenues of $72.3 million, or 16.1%, from the first
quarter of 1996 to the first quarter of 1997 was due to an increase in cruise
revenues. The increase in cruise revenues was primarily the result of a 15.6%
increase in capacity for the period resulting from the addition of Carnival
Cruise Lines' cruise ships Inspiration and Carnival Destiny in March and
November 1996, respectively, and Holland America Line's cruise ship Veendam in
May 1996, partially offset by the removal from service from the Carnival Cruise
Lines fleet of the Festivale in April 1996. Occupancy rates were down .7% and
gross revenue per passenger cruise day was up 1.3% resulting in an increase of
.7% in gross yield (total revenue per lower berth day). Gross revenue per
passenger cruise day increased primarily due to higher pricing associated with
the Carnival Destiny as well as the other cruise products. This higher pricing
was partially offset by the effect resulting from a reduction in the percentage
of passengers electing the Company's air program. When a passenger elects to
purchase his/her own air transportation, rather than use the Company's air
program, both the Company's cruise revenues and operating expenses decrease by
approximately the same amount.
Average capacity is expected to increase approximately 14.7%, 10.3% and
7.3% during the second, third and fourth fiscal quarters of 1997, respectively,
as compared with the same periods in 1996. Average capacity is expected to
increase approximately 11.9% during the fiscal year ending November 30, 1997 as
compared with the fiscal year ended November 30, 1996. The increases in
capacity are primarily as a result of the introduction into service of the
Inspiration in March 1996, the Veendam in May 1996, the Carnival Destiny in
November 1996, and the Rotterdam VI in October 1997. The existing Rotterdam V
is scheduled to discontinue service in September 1997.
Costs and Expenses
Operating expenses increased $33.2 million, or 12.6%, from the first
quarter of 1996 to the first quarter of 1997. Cruise operating costs increased
by $33.0 million, or 13.0%, to $287.7 million in the first quarter of 1997 from
$254.7 million in the first quarter of 1996, primarily due to additional costs
associated with the increased capacity.
Selling and administrative costs increased $8.2 million, or 11.5%,
primarily due to an increase in advertising expense during the first quarter of
1997 as compared with the same quarter of 1996 mainly resulting from the
increase in capacity.
Depreciation and amortization increased by $7.9 million, or 23.9%, to
$40.7 million in the first quarter of 1997 from $32.8 million in the first
quarter of 1996 primarily due to the addition of the Inspiration, the Veendam
and the Carnival Destiny.
Affiliated Operations
During the first quarter of 1997, the Company recorded $9.0 million of
losses from affiliated operations. Approximately $6 million of such losses
were attributable to the Company's 29.5% interest in Airtours, acquired in
April 1996. Airtours' earnings are seasonal, historically incurring losses
during their first two fiscal quarters and profits during their last two fiscal
quarters. See "General" above for a further discussion of Airtours'
seasonality. Had the Company owned its interest in Airtours during the first
fiscal quarter of 1996, the Company's earnings for that period, excluding the
cost of capital, would have been reduced by $7.7 million.
Nonoperating Income (Expense)
Interest income decreased $6.0 million in 1997 primarily due to a decrease
in cash balances and notes receivable. Cash balances were unusually high in
1996, because of United Kingdom regulatory requirements which caused the
Company to deposit funds in escrow approximately three months prior to
acquiring an interest in Airtours. Notes receivable decreased due to the sale
by the Company in the second quarter of 1996 of its holding of 13% senior
secured notes due 2003 of Kloster Cruise Limited. Gross interest expense
(excluding capitalized interest) decreased $1.3 million as a result of lower
debt balances. Capitalized interest decreased $2.3 million due to lower levels
of investments in ship construction projects during the first quarter of 1997
as compared with the same period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
The Company's business provided $194.6 million of net cash from operations
during the three months ended February 28, 1997, an increase of 15.9% compared
to the corresponding period in 1996.
During the three months ended February 28, 1997, the Company expended
approximately $62.3 million on capital projects, of which $13 million was spent
in connection with its ongoing shipbuilding program. The remainder was spent
on the acquisition of a private island in the Caribbean, to be used as a
destination for the HAL ships, transportation equipment, vessel refurbishments,
tour assets and other equipment.
The Company made scheduled principal payments totaling approximately $9.4
million under various individual vessel mortgage loans during the three months
ended February 28, 1997. During this same period, the Company made net
repayments of $155 million under its commercial paper programs.
Future Commitments
The Company has contracts for the delivery of seven new vessels over the
next four years. The Company will pay approximately $600 million during the
twelve month period ending February 28, 1998 relating to the construction and
delivery of those new cruise ships and approximately $1.5 billion beyond
February 28, 1998. In addition, the Company has $1.2 billion of long-term debt
of which $66.4 million is due during the twelve month period ending February
28, 1998. See Note 3 in the accompanying financial statements for more
information regarding the Company's debt. The Company also enters into forward
foreign currency contracts and interest rate swap agreements to hedge the
impact of foreign currency and interest rate fluctuations.
The Company and Airtours signed a letter of intent and entered into
definitive agreements with the controlling shareholders of Costa to acquire up
to 100% of the outstanding equity securities of Costa, an Italian cruise
company listed on the Milan stock exchange. The total cost of the Costa
acquisition, assuming all of the outstanding equity securities are tendered,
would be approximately $300 million in cash with the Company and Airtours each
contributing 50%. Closing of the transaction is subject to regulatory
approvals and the successful completion of the tender offer. The tender offer
for the ordinary shares is conditioned upon the receipt of acceptances from 90%
of the ordinary shares and 75% of the total fully diluted capital of Costa. No
assurance can be given that the foregoing conditions will be satisfied, that
the minimum acceptance will be received or that the transaction will be
successfully completed.
Funding Sources
Cash from operations is expected to be the Company's principal source of
capital to fund its debt service requirements, ship construction costs and
potential Costa acquisition. In addition, the Company may fund a portion of
the construction cost of new ships or the proposed investment in Costa from
borrowings under its U.S. Dollar Revolver or commercial paper programs and/or
through the issuance of long-term debt in the public or private markets. As of
February 28, 1997, the Company had $838.7 million available for borrowing under
its U.S. Dollar Revolver and $40.1 million available under the $200 Million
Multi-currency Revolver.
To the extent that the Company should require or choose to fund future
capital commitments from sources other than operating cash or from borrowings
under its revolving credit facilities and/or commercial paper programs, the
Company believes that it will be able to secure such financing from banks or
through the offering of short-term or long-term debt and/or equity securities
in the public or private markets. In this regard, the Company has filed two
Registration Statements on Form S-3 (the "Shelf Registration") relating to a
shelf offering of up to $500 million aggregate principal amount of debt or
equity securities. At February 28, 1997, a balance of $270 million aggregate
principal amount of debt or equity securities remains available for issuance
under the Shelf Registration.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The discussion of legal proceedings set forth in "PART I. FINANCIAL
INFORMATION, Item 1. FINANCIAL STATEMENTS, NOTE 5 - Commitments and
Contingencies" contained herein and "PART I. ITEM 3. LEGAL PROCEEDINGS" in the
Company's Annual Report on Form 10-K for the fiscal year ended November 30,
1996 is incorporated by reference into this Item.
ITEM 5: Other Information
(a) Forward-Looking Statements
Certain statements in this Form 10-Q and in the future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases, and in oral statements made by or with the approval of an authorized
executive officer constitute "forward-looking statements" within the meaning
of the Reform Act. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors, which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions which may impact levels of disposable
income of consumers and pricing and passenger yields for the Company's cruise
products; increases in cruise industry capacity in the Caribbean and Alaska;
changes in tax laws and regulations (especially any change affecting the
Company's status as a "controlled foreign corporation" as defined in Section
957(a) of the Internal Revenue Code of 1986, as amended) (see "Market for the
Registrant's Common Equity and Related Stockholders' Matters - Taxation of the
Company" in the Company's Annual Report on Form 10-K for the year ended
November 30, 1996); the ability of the Company to implement its shipbuilding
program and to expand its business outside the North American market where it
has less experience; delivery of new vessels on schedule and at the contracted
price; weather patterns in the Caribbean; unscheduled ship repairs and
drydocking; incidents involving cruise vessels at sea; and changes in laws and
government regulations applicable to the Company (including the implementation
of the "Safety of Life at Sea Convention" and changes in Federal Maritime
Commission surety and guaranty arrangements).
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement Regarding Computation of Per Share Earnings
12 Ratio of Earnings to Fixed Charges
23 Consent of Price Waterhouse LLP
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARNIVAL CORPORATION
Dated: April 10, 1997 BY/s/ Micky Arison
Micky Arison
Chairman of the Board and Chief
Executive Officer
Dated: April 10, 1997 BY/s/ Howard S. Frank
Howard S. Frank
Vice-Chairman, Chief Financial and
Accounting Officer
INDEX TO EXHIBITS
Page No. in
Sequential
Numbering
System
Exhibits
11 Statement regarding computation of per share earnings
12 Ratio of Earnings to Fixed Charges
23 Consent of Price Waterhouse LLP
27 Financial Data Schedule
EXHIBIT 11
CARNIVAL CORPORATION
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share data)
Three Months Ended
February 28, 1997 February 29, 1996
Net income $ 85,360 $ 77,065
Adjustments to net income for
the purpose of computing fully
diluted earnings per share:
Interest reduction from
assumed conversion of 4.5%
Convertible Subordinated
Notes 1,386
Adjusted net income $ 85,360 $ 78,451
Weighted average shares
outstanding 297,688 285,389
Adjustments to weighted
average shares outstanding for the
purpose of computing fully diluted
earnings per share:
Additional shares issuable upon
assumed conversion of 4.5%
Convertible Subordinated
Notes 6,618
Adjusted weighted average
shares outstanding 297,688 292,007
Earnings per share:
Primary $.29 $.27
Fully Diluted* $.29 $.27
*In accordance with Accounting Principles Board Opinion No. 15, the Company
does not present fully diluted EPS in its financial statements because the
Company's convertible securities are anti-dilutive or result in a less than 3%
dilution for the periods presented.
EXHIBIT 12
CARNIVAL CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
Three Months Ended
February 28, 1997 February 29, 1996
Net income $ 85,360 $ 77,065
Income tax benefit (4,025) (3,526)
Income before income tax benefit 81,335 73,539
Adjustment to earnings:
Equity in loss of affiliates
and dividends received 15,857 3
Earnings as adjusted 97,192 73,542
Fixed Charges:
Interest expense, net 17,090 16,038
Interest portion of rental expense (1) 376 360
Capitalized interest 3,539 5,936
Total fixed charges 21,005 22,334
Fixed charges not affecting earnings:
Capitalized interest (3,539) (5,936)
Earnings before fixed charges $114,658 $ 89,940
Ratio of earnings to fixed charges 5.5 x 4.0 x
________________________
(1) Represents one-third of rental expense, which Company management believes
to be representative of the interest portion of rental expense.
EXHIBIT 23
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Forms S-3 (No. 33-50947,
No. 33-53136, No. 33-63563 and No.33-48756) and on Forms S-8 (No. 33-26898, No.
33-45288, No. 33-45287, No. 33-51195, and No. 33-53099) of Carnival Corporation
of our report dated January 15, 1997 appearing on page 37 of the Annual Report
to Shareholders which is incorporated in this Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
April 10, 1997
5
1,000
3-MOS
NOV-30-1997
FEB-28-1997
88,928
12,443
42,860
0
53,667
282,751
4,866,758
744,262
5,087,025
730,095
1,116,235
2,971
0
0
3,146,339
5,087,025
0
521,082
0
296,938
0
0
20,629
81,335
(4,025)
85,360
0
0
0
85,360
0.29
0.29
