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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, 2000
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 1-9610
CARNIVAL CORPORATION
(Exact name of registrant as specified in its charter)
Republic of Panama 59-1562976
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3655 N.W. 87th Avenue, Miami, Florida 33178-2428
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 599-2600
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
Common Stock New York Stock
($.01 par value) Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in any definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant is approximately $10,054,000,000 based upon the closing market
price on February 20, 2001 of a share of Common Stock on the New York Stock
Exchange as reported by the Wall Street Journal.
At February 20, 2001, the Registrant had outstanding 584,714,214 shares
of its Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
The information described below and contained in the Registrant's 2000
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 2001
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") and Costa, 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 a 25% equity interest in
Airtours plc ("Airtours"), an integrated leisure travel group of companies
which also operates cruise ships which target the contemporary cruise sector
under the brand name of Sun Cruises.
A summary of the cruise operations of the Company and Airtours is as
follows:
PRIMARY
CRUISE NUMBER PASSENGER GEOGRAPHIC
BRAND OF SHIPS CAPACITY(1) MARKET
Wholly Owned Cruise
Operations:
Carnival 15 30,020 North America
Holland America 10 13,348 North America
Costa (2) 7 9,200 Europe
Cunard 2 2,458 Worldwide
Seabourn 6 1,614 North America
Windstar 4 756 North America
44 57,396
Airtours:
Sun Cruises 4 4,352 Europe
48 61,748
(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) Since June 1997, the Company has owned 50% of Costa. On September 29,
2000, the Company completed the acquisition of the remaining 50% interest in
Costa from Airtours. See Note 3 to the Company's Consolidated Financial
Statements in Exhibit 13 to this Annual Report on Form 10-K.
The Company has signed agreements with three shipyards providing for
the construction of 16 additional cruise ships. A summary of the Company's
ships under contract for construction is as follows:
EXPECTED
SERVICE PASSENGER
SHIP DATE(1) CAPACITY
Carnival:
Carnival Spirit 4/01 2,124
Carnival Pride 1/02 2,124
Carnival Legend 9/02 2,124
Carnival Conquest 12/02 2,974
Carnival Glory 8/03 2,974
Carnival Miracle 4/04 2,124
Carnival Valor 11/04 2,974
Total Carnival 17,418
Holland America:
Newbuild 11/02 1,848
Newbuild 8/03 1,848
Newbuild 2/04 1,848
Newbuild 10/04 1,848
Newbuild 6/05 1,848
Total Holland America 9,240
Costa:
Newbuild 7/03 2,112
Newbuild 1/04 2,720
Newbuild 12/04 2,720
Total Costa 7,552
Cunard:
Queen Mary 2 12/03 2,620
Total Cunard 2,620
Total 36,830
(1) The expected service date is the date the ship is expected to begin
revenue generating activities.
In addition to its cruise operations, the Company operated a tour
business, through Holland America Line-Westours Inc. ("Holland America
Tours"), which markets sightseeing tours both separately and as a part of its
cruise/tour packages. Holland America Tours operated 14 hotels in Alaska and
the Canadian Yukon, two luxury dayboats offering tours to the glaciers of
Alaska and the Yukon River, over 300 motor coaches used for sightseeing and
charters in the states of Washington and Alaska and 13 private domed rail
cars which are run on the Alaska Railroad between Anchorage and Fairbanks.
B. Risk Factors
The Risk Factors noted below and elsewhere in this Annual Report on Form
10-K are important factors, among others, that could cause actual results to
differ from expected or historic results. It is not possible to predict or
identify all such factors. Consequently, the reader should not consider any
such list to be a complete statement of all potential risks or uncertainties.
See Part I, Item 4. - Special Note Regarding Forward - Looking Statements.
(1) A change of the Company's tax status under the Internal Revenue
Code, as amended (the "Code"), may have adverse effects on the Company's
income and its shareholders.
Carnival Corporation is a foreign corporation engaged in a trade or
business in the United States ("U.S."), and its ship-owning subsidiaries are
foreign corporations that, in many cases, depending upon the itineraries of
their ships, receive income from sources within the U.S. Management
believes, to the best of its knowledge, that, pursuant to Section 883 of the
Code, Carnival Corporation's income and the income of its ship-owning
subsidiaries, in each case derived from or incidental to the international
operation of a ship or ships, is currently exempt from U.S. income tax.
Management believes that substantially all of Carnival Corporation's income
and the income of its ship-owning subsidiaries (with the exception of the
U.S. source income from the transportation, hotel and tour business of
Holland America Tours) is derived from or incidental to the international
operation of a ship or ships within the meaning of Section 883 of the Code.
Management believes that Carnival Corporation and its ship-owning
subsidiaries currently qualify for the Section 883 exemption since it and
each of its subsidiaries are incorporated in a qualifying jurisdiction and
Carnival Corporation's Common Stock is primarily and regularly traded on an
established securities market in the U.S. To date, however, no final U.S.
Treasury regulations or other definitive interpretations of the relevant
portions of Section 883 have been promulgated, although regulations have been
proposed (see below for a discussion of the proposed regulations under
Section 883). Such regulations or official interpretations could differ
materially from management's interpretation of this Code provision and, even
in the absence of such regulations or official interpretations, the Internal
Revenue Service might successfully challenge such interpretation. In
addition, the provisions of Section 883 are subject to change at any time by
legislation. Moreover, changes could occur in the future with respect to the
identity, residence, or holdings of Carnival Corporation's direct or indirect
shareholders that could affect it and its subsidiaries' eligibility for the
Section 883 exemption. Accordingly, there can be no assurance that Carnival
Corporation and its subsidiaries are, and will in the future be, exempt from
U.S. income tax on U.S.-source shipping income. If Carnival Corporation and
its ship-owning subsidiaries were not entitled to the benefit of Section 883
of the Code, the Company would be subject to U.S. taxation on a portion of
its income.
(2) Failure to comply with the proposed tax regulations could have a
negative impact on the Company's net income and stock price.
On February 8, 2000, the U.S. Treasury Department issued proposed
Treasury Regulations to Section 883 of the Code 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 U.S. federal income taxation provided that the
corporation can satisfy certain ownership requirements, including, among
other things, that its stock is publicly traded. A publicly traded
corporation will satisfy this requirement if more than 50% of its stock is
owned by persons who each own less than 5% of the value of the outstanding
shares of the corporation's capital stock. Management believes to its best
knowledge, after due investigation, that Carnival Corporation currently
qualifies as a publicly traded corporation under these proposed regulations.
However, because various members of the Arison family and certain trusts
established for their benefit own approximately 47% of Carnival Corporation's
Common Stock, there is the potential that another shareholder could acquire
5% or more of its Common Stock which could jeopardize Carnival Corporation's
qualification as a publicly traded corporation. If, in the future, Carnival
Corporation were to fail to qualify as a publicly traded corporation, it
would be subject to U.S. income tax on its income associated with its cruise
operations in the U.S. In such event, Carnival Corporation's net income and
stock price would be negatively impacted.
As a precautionary matter, Carnival Corporation amended its Second
Amended and Restated Articles of Incorporation to ensure that it will
continue to qualify as a publicly traded corporation under the proposed
regulations. This amendment provides that no one person or group of related
persons (other than certain members of the Arison family and certain trusts
established for their benefit) may own (or be deemed to own by virtue of the
attribution provisions of the Code) more than 4.9% of Carnival Corporation's
Common Stock, whether measured by vote, value or number. Shares of Carnival
Corporation's Common Stock acquired in violation of this provision will be
transferred to a trust and, at the direction of its Board of Directors, sold
to a person whose shareholding does not violate such provision of its Second
Amended and Restated Articles of Incorporation. These transfer restrictions
may also have the effect of delaying or preventing a change in Carnival
Corporation's control or other transactions in which the shareholders might
receive a premium for their shares of Common Stock over the then prevailing
market price or which such shareholders might believe to be otherwise in
their best interest.
(3) A group of principal shareholders effectively controls the Company
and has the power to cause or prevent a change of control.
A group of shareholders, comprising certain members of the Arison
family, including Micky Arison, the Company's chairman and chief executive
officer, and trusts established for their benefit, beneficially own a total
of approximately 47% of Carnival Corporation's outstanding Common Stock. As
a result, this group of shareholders has the power to substantially influence
the election of directors and the Company's affairs and policies, without the
consent of its other shareholders. In addition, this group has the power to
prevent or cause a change in control.
(4) Carnival Corporation is not a U.S. corporation and its shareholders
may be subject to the uncertainties of a foreign legal system in
protecting their interests.
Carnival Corporation's corporate affairs are governed by its Second
Amended and Restated Articles of Incorporation and By-Laws and by the
corporate laws of Panama. Thus, Carnival Corporation's public shareholders
may have more difficulty in protecting their interests in the face of actions
by the management, directors or controlling shareholders than would
shareholders of a corporation incorporated in a U.S. jurisdiction.
(5) Incidents involving cruise ships could adversely affect the cruise
industry's and/or the Company's future sales and profitability.
The operation of cruise ships involves the risk of accidents and other
incidents which may bring into question passenger safety and adversely affect
future industry performance. While the Company makes passenger safety a high
priority in the design and operation of its ships, accidents and other
incidents involving cruise ships could adversely affect the Company's future
sales and profitability.
(6) Environmental and health and safety legislation could increase
operating costs.
Some environmental groups have lobbied for more stringent regulation of
cruise ships. Some groups also have generated negative publicity about the
cruise industry and its environmental impact. The U.S. Environmental
Protection Agency is considering new laws and rules to manage cruise ship
waste. Stricter environmental and health and safety regulations could
increase the cost of compliance and adversely affect the cruise industry.
In addition, the grant of permits to cruise lines to enter Glacier Bay
National Park in Alaska is the subject of litigation. See Part I, Item 1.
Business, C. Cruise Ship Segment-Wholly Owned Cruise Operations, Governmental
Regulations.
(7) Overcapacity within the cruise business could have a negative
impact on the Company's net revenue yields.
Cruising capacity has grown in recent years and management expects it to
continue to increase over the next five years as all of the major cruise
companies are expected to introduce new ships into service. In order to
utilize new capacity, the cruise industry must increase its share of the
overall vacation market. Any future imbalances between cruise industry
supply and demand could have a negative impact on the Company's net revenue
yields, which would also have a negative impact on net income.
(8) Demand for cruises and other vacation products may not keep pace
with supply and, as a result, the Company's net revenue yields may
be adversely affected.
Demand for cruises and other vacation products may be affected by a
number of factors. For example, the Company's sales are dependent on the
underlying economic strength of the countries in which it operates. Adverse
economic conditions can reduce the level of disposable income of consumers
available for vacations. In addition, armed conflicts or political
instability in areas where the Company's ships cruise can adversely affect
demand for its cruises to those areas. Finally, adverse incidents involving
cruise ships and adverse media publicity concerning the cruise industry in
general can impact demand. Any reduction in demand may have a negative
impact on the Company's net revenue yields, which would also have a negative
impact on net income.
(9) The Company faces significant competition from both cruise lines
and other vacation operators.
The Company operates in the vacation market. The Company competes for
consumer disposable leisure-time dollars with both other cruise operators and
a wide array of other vacation operators, including numerous land-based
resorts and hotels and sightseeing destinations located throughout the world.
The primary methods of competition among these operators are on the basis of
pricing, product (i.e. the nature of the overall vacation experience), and
itineraries/locations. The Company's principal cruise competitors include
Royal Caribbean Cruise Ltd., which owns Royal Caribbean International and
Celebrity Cruises, P&O Princess Cruises plc, which owns Princess Cruises, P&O
Cruises and Aida Cruises, and Norwegian Cruise Line and Orient Lines, which
are both owned by Star Cruises plc. In the event that the Company does not
compete effectively with other cruise companies and other vacation operators,
its market share could decrease and its net revenue yields could be adversely
affected.
(10) Higher fuel prices could raise the Company's costs.
The cost of fuel is subject to many economic and political factors which
are beyond the Company's control. An increase in fuel prices could
adversely affect the Company's financial statements because the Company may
not be able to increase the prices on its cruise vacations to recover any
increased costs.
(11) Conducting business internationally may result in increased costs.
The Company operates its business internationally and plans to continue
to develop its international presence, especially in Europe. Operating
internationally exposes the Company to a number of risks. Examples include
currency fluctuations, interest rate movements, increases in duties and
taxes, political uncertainty, and changes in laws and policies affecting
cruising, vacation or maritime businesses or the governing operations of
foreign-based companies. If the Company is unable to address these risks
adequately, its financial statements could be adversely affected.
(12) Delays or faults in ship construction could reduce the Company's
future profitability.
Cruise ships are large and complicated vessels and building them
involves risks similar to those encountered in similar sophisticated
construction projects, including delays in delivery and faulty construction.
Delays or faults in ship construction may result in delays or cancellations
of scheduled cruises, necessitate unscheduled repairs to and drydocking of
the ship and increase the Company's shipbuilding costs and/or expenses.
Industrial action, insolvency of shipyards or other events could also delay
or indefinitely postpone the delivery of new ships. These events, in turn,
could, to the extent they are not covered by contractual provisions or
insurance, adversely affect the Company's financial results.
(13) Inability of qualified shipyards to build the Company's ships
could reduce the Company's future profitability.
Management believes that there are a limited number of shipyards in the
world capable of the quality construction of large passenger cruise ships.
The Company currently has contracts, with three of these shipyards for the
construction of 16 ships to enter service over the next five years (see Part
I, Item 1. Business, C. 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, C.
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. These events, in
turn could adversely affect the Company's financial statements.
C. Cruise Ship Segment - Wholly Owned Cruise Operations
The multiple-night cruise industry, which is a small part of the overall
vacation market, is a global business. Management estimates that the global
cruise industry carried in excess of nine million passengers in 2000. The
principal cruise sectors in the world, categorized by source of passengers,
are North America, Europe, Asia/Pacific and South America. The Company
sources its passengers principally from North America and, to a lesser
extent, from Europe. A small percentage of the Company's passengers are
sourced from Asia/Pacific and South America. See Note 10, "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 U.S. and foreign assets and revenues.
As previously mentioned, from June 1997 to September 29, 2000, Carnival
Corporation owned a 50% direct interest in Costa and, accordingly, Costa was
classified by Carnival Corporation as an affiliated cruise operation.
Costa's results of operation from June 1997 to September 2000 were included
in affiliated operations in the Company's statements of operations. On
September 29, 2000, the remaining 50% of Costa was purchased and, therefore,
the Company now owns 100% of Costa. At November 30, 2000, Costa's balance
sheet has been consolidated with Carnival Corporation and its other wholly
owned subsidiaries. Commencing in fiscal 2001, Costa's results of operations
will be fully consolidated in the same manner as Carnival Corporation's other
wholly owned subsidiaries. Accordingly, reference to the "Company" in this
Annual Report on Form 10-K include Carnival Corporation and its consolidated
subsidiaries, including Costa, unless Costa is specifically excluded.
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 hotels and sightseeing
destinations. According to Cruise Lines International Association ("CLIA"),
an industry trade group, in 1970 approximately 500,000 North American sourced
passengers took cruises of two consecutive nights or more. CLIA estimates
that this number reached 6.66 million passengers in 2000, an average compound
annual growth rate of 9.0% since 1970. Also, according to CLIA, by the end of
2000 the number of ships in service totaled 164 with an aggregate capacity of
approximately 165,000 lower berths. CLIA estimates that the number of
passengers sourced from North America increased from 5.89 million in 1999 to
6.66 million in 2000 or 13.1%.
CLIA estimates that the number of North American sourced cruise
passengers will grow to approximately 7.4 million in 2001. CLIA projections
indicate that by the end of 2001, 2002, 2003 and 2004, North America will be
served by 181, 191, 199 and 206 vessels, respectively, having an aggregate
capacity of approximately 187,000, 207,000, 226,000 and 241,000 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 sourced cruise passengers will increase over
the next several years.
CLIA's estimate of North American sourced cruise passengers and
passenger berths is as follows:
NORTH AMERICAN NORTH AMERICAN
CRUISE PASSENGER
YEAR PASSENGERS(1) BERTHS(2)
2000 6,660,000(est.) 165,000
1999 5,890,000 149,000
1998 5,432,000 138,000
1997 5,051,000 118,000
1996 4,659,000 110,000
(1) Source: CLIA estimates based on passengers carried for at least two
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 an overnight stay in a hotel. CLIA
estimates that only 12% of the North American population has ever taken a
cruise for at least two consecutive nights.
European Cruise Industry
The cruise industry in Europe is much smaller than the North American
industry. Industry-wide European sourced cruise passengers carried in 2000
are estimated to be approximately two million as compared to approximately
6.7 million passengers sourced from North America. From 1990 to 2000, the
number of cruise passengers sourced from the European market has been growing
faster than its North American counterpart and, based on management's
estimates, less than 1% of European travelers took a cruise in 2000. The
number of cruise ships being marketed to European customers has increased in
2000 compared to 1999 and, management believes that several additional new or
existing ships will be introduced into the European marketplace over the next
few years.
Demographics for the European cruise market appear favorable, as Europe
has a population larger than that of North America, there is a low level of
market penetration by the cruise industry and European consumers tend to take
longer vacations. The rate at which European vacationers take a cruise has
been growing at a 15% compounded annual growth rate for the period from 1994
through 1999.
Passengers and Berths
The Company's Wholly Owned Cruise Operations, excluding Costa, had
worldwide cruise passengers and passenger berths as follows:
CRUISE PASSENGER
YEAR PASSENGERS BERTHS(1)
2000 2,669,000 48,196
1999 2,366,000 43,810
1998 2,045,000 39,466
1997 1,945,000 31,078
1996 1,764,000 30,837
(1) Information presented is as of the end of the Company's fiscal year and
excludes Costa.
The Company's passenger capacity has grown from 30,837 at November 30,
1996 to 48,196 at November 30, 2000, excluding Costa. During 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. During 2000 gross capacity increased by
4,386 berths, excluding the acquisition of Costa, primarily due to the
delivery of the Carnival Victory, the Zaandam and the Amsterdam partially
offset by the 1,214 berth decrease due to the sale of the Nieuw Amsterdam. At
November 30, 2000, the acquisition of Costa added 9,200 passenger berths to
the Company's Wholly Owned Cruise Operations.
Cruise Ships and Itineraries
Carnival primarily serves the contemporary sector of the North American
vacation market with 15 ships (the "Carnival Ships"). All of the Carnival
Ships were designed by and built for Carnival, including three of the world's
largest, the Carnival Victory, the Carnival Triumph and the Carnival Destiny.
Twelve 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, New England, the
Hawaiian Islands, the Bahamas and the Panama Canal.
Through its wholly owned subsidiary, HAL Antillen, N.V. ("HAL"), the
Company operates ten ships primarily serving the premium sector of the North
American vacation market under the Holland America name (the "Holland America
Ships"). HAL also operates four sailing ships in a niche of 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, the Hawaiian Islands, South
America and other worldwide itineraries. Cruise lengths vary from seven to 99
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 in order to increase travel opportunities for its
customers and strengthen its cruise offerings. For example, in 2001, Holland
America offered a 99-day world cruise. 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 certain of its Caribbean
itineraries a private island destination known as Half Moon Cay. Half Moon
Cay is a 2,400-acre island owned by Holland America. 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. These ships primarily serve a niche segment of the
luxury sector of the North America vacation market.
Passengers can enjoy their voyage by "Cruising Italian Style" on board
any of the seven Costa ships (the "Costa Ships"), which primarily operate in
Europe during the spring to fall months and the Caribbean and South America
during the fall to spring. Costa is the number one cruise line in Europe
based on passengers carried and capacity and its ships primarily serve the
contemporary sector of the European vacation market. The Costa Ships call on
73 European ports with 34 different itineraries and to various other ports in
the Caribbean and South America. During 2000, Costa introduced the 2,112
passenger capacity Costa Atlantica which has garnered rave reviews in Europe.
Under the Cunard brand, the Company operates two ships (the "Cunard
Ships") which offer classic "Old World" cruising and recreate the golden age
of ocean liner travel with a British style and essence primarily serving the
luxury sector of the worldwide vacation market. Cunard's flagship, the Queen
Elizabeth 2 ("QE2"), offers the only remaining scheduled transatlantic ocean
liner service between the U.S. and Great Britain. Both of Cunard's ships
offer cruises to worldwide destinations, with many of the cruises ranging
between six and 18 days in length. The Cunard ships also offer extended
cruises, such as a world cruise.
The six Seabourn ships (the "Seabourn Ships") offer a choice of three
distinct styles of luxury cruises aboard intimately sized ships. Seabourn
ships primarily serve the luxury sector of the North American vacation market
and offer an intense focus on personalized service and quality cuisine. These
ships concentrate their operations in the Caribbean and Europe with cruises
in the seven to 14 day range. Periodically, the Seabourn Ships make longer
cruises or operate on special itineraries 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.
APPROXIMATE
GROSS
YEAR PAX REGISTERED
SHIP REGISTRY BUILT CAP TONS
Carnival:
Carnival Victory Panama 2000 2,758 102,000
Carnival Triumph Bahamas 1999 2,758 102,000
Paradise Panama 1998 2,052 70,000
Elation Panama 1998 2,052 70,000
Carnival Destiny Bahamas 1996 2,642 101,000
Inspiration Bahamas 1996 2,052 70,000
Imagination Bahamas 1995 2,052 70,000
Fascination Bahamas 1994 2,052 70,000
Sensation Bahamas 1993 2,052 70,000
Ecstasy Panama 1991 2,052 70,000
Fantasy Panama 1990 2,056 70,000
Celebration Panama 1987 1,486 47,000
Jubilee Bahamas 1986 1,486 47,000
Holiday Bahamas 1985 1,448 46,000
Tropicale (1) Panama 1982 1,022 37,000
Total Carnival Ships Capacity......... 30,020
Holland America:
Zaandam Netherlands 2000 1,440 63,000
Amsterdam Netherlands 2000 1,380 62,000
Volendam Netherlands 1999 1,440 63,000
Rotterdam Netherlands 1997 1,316 62,000
Veendam Bahamas 1996 1,266 55,000
Ryndam Netherlands 1994 1,266 55,000
Maasdam Netherlands 1993 1,266 55,000
Statendam Netherlands 1993 1,266 55,000
Westerdam Netherlands 1986 1,494 54,000
Noordam Netherlands 1984 1,214 34,000
Total Holland America
Ships Capacity....................... 13,348
Costa (1):
Costa Atlantica Italy 2000 2,112 86,000
Costa Victoria Italy 1996 1,928 76,000
Costa Romantica Italy 1993 1,344 53,000
Costa Allegra Italy 1992 806 30,000
Costa Classica Italy 1991 1,302 53,000
Costa Marina Italy 1990 762 25,500
Costa Riviera Italy 1963 946 30,400
Total Costa Ships Capacity.............. 9,200
Cunard:
Caronia England 1973 668 24,500
QE 2 England 1969 1,790 70,000
Total Cunard Ships Capacity............ 2,458
Seabourn:
Seabourn Legend Norway 1992 208 10,000
Seabourn Spirit Norway 1989 208 10,000
Seabourn Pride Norway 1988 208 10,000
Seabourn Sun Bahamas 1988 758 38,000
Seabourn Goddess II Bahamas 1985 116 4,250
Seabourn Goddess I Bahamas 1984 116 4,250
Total Seabourn Ships Capacity.......... 1,614
Windstar Cruises:
Wind Surf Bahamas 1990 312 14,750
Wind Spirit Bahamas 1988 148 5,700
Wind Song Bahamas 1987 148 5,700
Wind Star Bahamas 1986 148 5,700
Total Windstar Ships Capacity.......... 756
Total Capacity........................... 57,396
(1) In February, 2001 the Tropicale was transferred from Carnival to Costa
and is scheduled to begin operating in the European market during the summer
of 2001, after it undergoes a major refit.
__________________________
Cruise Ship Construction
The Company has signed agreements with three shipyards providing for the
construction of 16 additional cruise ships. A summary of the Company's ships
under contract for construction is as follows:
APPROXIMATE
EXPECTED GROSS ESTIMATED
SERVICE PAX REGISTERED TOTAL
SHIP DATE(1) SHIPYARD CAP TONS COST(2)
(In millions)
Carnival
Carnival Spirit 4/01 Masa-Yards 2,124 88,500 $ 375
Carnival Pride 1/02 Masa-Yards (3) 2,124 88,500 375
Carnival Legend 9/02 Masa-Yards (3) 2,124 88,500 375
Carnival Conquest 12/02 Fincantieri 2,974 110,000 500
Carnival Glory 8/03 Fincantieri 2,974 110,000 500
Carnival Miracle 4/04 Masa-Yards (3) 2,124 88,500 375
Carnival Valor 11/04 Fincantieri(3) 2,974 110,000 500
Total Carnival Ships 17,418 3,000
Holland America
Newbuild 11/02 Fincantieri(3) 1,848 84,000 410
Newbuild 8/03 Fincantieri(3) 1,848 84,000 410
Newbuild 2/04 Fincantieri(3) 1,848 84,000 410
Newbuild 10/04 Fincantieri(3) 1,848 84,000 410
Newbuild 6/05 Fincantieri(3) 1,848 84,000 410
Total Holland America Ships 9,240 2,050
Costa
Newbuild 7/03 Masa-Yards (4) 2,112 86,000 330
Newbuild 1/04 Fincantieri(5) 2,720 101,000 380
Newbuild 12/04 Fincantieri(5) 2,720 101,000 380
Total Costa Ships 7,552 1,090
Cunard
Queen Mary 2 12/03 Chantiers de
l'Atlantique (3) 2,620 150,000 780
Total Cunard 2,620 780
Total 36,830 $6,920
(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 ship 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 either German marks,
Italian lira or euros and have been fixed into U.S. dollars through the
utilization of forward foreign currency contracts.
(4) This construction contract is denominated in German marks which has a
fixed exchange rate with Costa's functional currency, which is the Italian
lira. The estimated total cost has been translated into U.S. dollars using
the November 30, 2000 exchange rate.
(5) These construction contracts are denominated in Italian lira and the
estimated total costs have been translated into U.S. dollars using the
November 30, 2000 exchange rate.
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, by season and by itinerary. Brochure prices are regularly
discounted through the Company's early booking discount programs and other
promotions. The cruise ticket price includes accommodations, meals and most
onboard entertainment, such as the use of, or admission to, a wide variety of
activities and facilities, including 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, photo sales, 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 tours at each ship's ports of call. They include, among other
things, bus and taxi sightseeing and adventure excursions, local boat and
beach parties, and nightclub and casino visits. On the Carnival, Costa,
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 Tours 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, Galveston, Texas, New Orleans, Louisiana, 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. Costa's packages generally include one or two-night vacations in
well-known European cities or at vacation destinations in central or south
Florida. Cunard and Seabourn packages include numerous luxury and/or exotic
pre and post-cruise land programs, such as world class golf programs, London
and Paris luxury holidays and tours of the Galapagos Islands and the
Treasures of Bangkok.
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, D. Tour Segment.
Passengers and Occupancy
The aggregate number of passengers carried and occupancy percentage for
the Company's ships, excluding Costa, is as follows:
YEARS ENDED NOVEMBER 30,
2000 1999 1998
Passengers carried 2,669,000 2,366,000 2,045,000
Occupancy percentage (1)(2) 105.4% 104.3% 106.3%
(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,
excluding Costa, during each quarter of fiscal 1999 and 2000 was as follows:
OCCUPANCY
QUARTERS ENDED PERCENTAGE
February 28, 1999 100.9
May 31, 1999 99.9
August 31, 1999 112.3
November 30, 1999 103.6
February 29, 2000 103.4
May 31, 2000 102.3
August 31, 2000 112.4
November 30, 2000 103.4
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 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. During 2000, the Company launched "VIP", or Vacation
Interchange Privileges, a loyalty program that provides special
considerations to repeat guests aboard any of these six brands. In addition,
the Company partnered with Starwood Preferred guests, the world's leading
hotel loyalty program, adding cruising from any of the Company's six brands
to the list of award options available to their customers.
The Company's various cruise lines employ over 750 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 2000, no controlled
group of travel agencies accounted for more than 10% of the Company's
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. In 2000, management
positioned the Company to better take advantage of this expanding market
segment by acquiring the balance of Costa. This strategic acquisition
solidified the Company's ownership of a cruise line that management believes
is as recognizable in Southern Europe and South America as Carnival is in
North America. The Company intends to leverage Costa's European leadership
position by furthering the Company's ship development commitment to the Costa
brand. In this way, the Company will expand Europe's largest multiple-night
cruise ship fleet, which should continue to position the Company to gain a
greater foothold in the growing European cruise business.
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.
During 2000, Carnival re-launched www.carnival.com, Carnival's consumer web
site which primarily serves as a marketing and research tool for its current
and potential customers.
Substantially all of Carnival's cruise bookings are made through travel
agents. In fiscal 2000, 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. In addition, Carnival markets and sells its cruises to tour operators
and through travel agents located in numerous other countries, including the
United Kingdom, Argentina, Germany, Mexico and Venezuela.
Carnival engages in substantial promotional efforts designed to motivate
and educate retail travel agents about its "Fun Shipsr" cruise vacations.
Carnival employs approximately 230 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.
During 2000, Carnival forged new marketing alliances and initiatives
that are meant to expand its reach to first-time and existing cruise guests.
Carnival partnered with Fairfield Communities, one of the nation's leading
vacation ownership operators, to introduce cruising to their customers. In
addition, Carnival opened three Carnival Vacation Stores whose primary
purpose is to provide Carnival cruise information to potential customers.
These Carnival owned and operated stores are kiosks located in major
metropolitan shopping centers in Texas.
To facilitate access and to simplify the reservation process, Carnival
employs approximately 900 reservation agents primarily 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 to more effectively manage overall net revenue yields
(net revenue per available berth). Carnival's payment terms require that a
passenger pay a deposit of between $100 to $300, depending on the cruise
duration, to confirm their reservation with the balance due not later than 45
days before the sailing date for three, four and five day cruises and 70 or
75 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. Management 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 2000, Holland America took reservations from about 23,000
of approximately 49,000 travel agency locations known to the Company in the
United States and Canada. In addition, Holland America and Windstar markets
and sells its cruises to tour operators and through travel agents located in
numerous countries including the United Kingdom and Australia. 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. In 2000, Holland
America and Windstar enhanced their web sites at www.hollandamerica.com and
www.windstarcruises.com, thus enriching the consumers web-based research
experience.
Holland America's marketing communication strategy is primarily composed
of newspaper and magazine advertising, large scale brochure distribution,
direct mail solicitations to past passengers and others, 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, 26 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 290 reservation agents
primarily 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".
Costa
Since June 1997, the Company has owned 50% of Costa. On September 29,
2000, the Company completed the acquisition of the remaining 50% interest in
Costa from Airtours. See Note 3 "Acquisition," to the Company's Consolidated
Financial Statements in Exhibit 13 of this Annual Report on Form 10-K.
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 with a majority of its cruises
sold in Europe, primarily in Italy, France, Germany and Spain. Approximately
86% of Costa's revenues are generated by non-U.S. tour operators and travel
agents. Costa has sales offices in Argentina, Brazil, England, France,
Germany, Italy, Spain, Switzerland and the United States, and employs over
300 personnel in the sales and sales support area, excluding reservation
agents. Costa sales offices focus much of their effort at motivating and
educating travel agents. These efforts include, among other things,
newspaper, television, radio and magazine advertising, direct mail
solicitation and brochure distribution. In addition, through the use of the
internet, at web sites specifically designed for the country and guest that
Costa is targeting, the consumers are educated about cruising and Costa
(www.costacruises.com). To facilitate access to Costa and to simplify the
reservation process for the Costa Ships, Costa employs approximately 120
reservation agents primarily to take bookings from travel agents.
Management believes that Costa distinguishes itself from other brands
by offering a distinctly Italian style of cruising. Costa believes its
advertising generates interest in cruise vacations generally and results in a
higher degree of awareness to "Cruising Italian Style SM". In addition, Costa
is very experienced at providing cruises to guests with different
nationalities and languages besides Italian, thereby enabling it to
effectively market and sell its cruises throughout Europe, South America and
the U.S.
Cunard and Seabourn
The Company owns 100% of Cunard Line Limited, which owns Cunard and
Seabourn. Currently eight ships are operated under these two 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 one of the most celebrated cruise lines in the world.
Seabourn and Cunard currently market and sell their products through
their sales offices in Miami, England, Germany and Australia. Approximately
44% of Cunard Line Limited's revenues are generated by non-U.S. tour
operators and travel agents. Marketing efforts are devoted primarily to i)
travel agent support and awareness, ii) direct mail solicitation of past
passengers, iii) targeted print media campaigns and brochure distribution
and iv) the education of consumers at the Cunard and Seabourn web sites
located at www.cunardline.com and www.seabourn.com.
Substantially all of Seabourn's and Cunard's bookings are made through
travel agents. In fiscal 2000, Seabourn and Cunard took reservations from
about 11,000 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,
16 inside sales representatives and 28 sales and service representatives to
support its field sales force. They also employ approximately 80 Cruise Sales
Consultants primarily to take bookings, substantially all of which come from
travel agents.
Seasonality
The Company's revenue from the sale of passenger tickets is moderately
seasonally. Historically, demand for cruises has been greatest during the
summer months. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - General," in Exhibit 13 of this Annual
Report on Form 10-K.
Competition
The Company competes both with other cruise lines and with a wide array
of other land-based vacation alternatives for the consumers' disposable
leisure time dollars. The Company's cruise lines also compete, in some
cases, against each other.
The Company's primary competitors in the contemporary and/or premium
cruise sectors for North American sourced passengers are Royal Caribbean
Cruises Ltd., which owns Royal Caribbean International and Celebrity Cruises,
Princess Cruises, owned by P&O Princess Cruises plc ("P&O"), Norwegian Cruise
Line and Orient Lines, both owned by Star Cruises plc, and Disney Cruise
Line.
The Company's primary competitors for European sourced passengers are
Royal Olympic Cruise Line and its parent, Louis Cruise Line, Festival
Cruises, Mediterranean Shipping Cruises and P&O Cruises and Aida Cruises,
both owned by P&O.
The Cunard, Seabourn and Windstar ships' compete for passengers
primarily from North America and/or Europe and the primary unaffiliated
competitors within the luxury cruise sector include Crystal Cruises, Radisson
Seven Seas Cruise Line, Renaissance Cruises and Silversea Cruises, as well as
the higher priced cabins on certain of the cruise lines which serve the
premium sector.
As mentioned above, the Company also competes with land-based vacation
alternatives throughout the world including, among others, resorts and hotels
located in Las Vegas, Nevada, Orlando, Florida, various Caribbean, Bahamian
and Hawaiian Island destination resorts and numerous sightseeing destinations
throughout Europe.
See "Risk Factors" for an additional discussion of the Company's
competition.
Governmental Regulations
The Company's ships are registered in the Bahamas, England, Italy,
Netherlands, Norway or Panama, as more fully described under Part I, Item 1.
Business, C. Cruise Ships and Itineraries and, accordingly, are regulated by
these jurisdictions and by the International Conventions that these
jurisdictions have ratified or adhere to. In addition, the directives and
regulations of the European Union are applicable to some aspects of the
Company's ship operations.
In addition, 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 cruise operations and
Airtours' Sun Cruises have obtained the required certificates demonstrating
compliance with the ISM Code and are regularly inspected and controlled by
the national authorities, as well as the international authorities acting
under the provisions of the international agreements related to Port State
Control (i.e. the process by which a nation exercises authority over foreign
ships when the ships are in the waters subject to its jurisdiction).
The Company's ships that call on United States ports are subject to
inspection by the United States Coast Guard for compliance with the SOLAS
Convention and by the United States Public Health Service for sanitary
standards. The Company's ships are also subject to similar inspections
pursuant to the laws and regulations of various other countries its ships
call on.
In addition to other regulations, the Company's ships that call on U.S.
ports are regulated by the Federal Maritime Commission ("FMC"). Public Law
89-777 which is administered by the FMC requires most cruise line operators
to establish financial responsibility for nonperformance of transportation.
The FMC's regulations require that a cruise line demonstrate its financial
responsibility through a guaranty, escrow arrangement, surety bond, insurance
or self-insurance. Currently, the amount required must equal 110% of the
cruise line's highest amount of customer deposits over a two-year period up
to a maximum coverage level of $15 million. In addition, other jurisdictions,
including the United Kingdom and Germany, require the establishment of
financial responsibility for passengers from their jurisdictions.
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.
On February 23, 2001, a three judge panel of the Ninth U.S. Circuit
Court of Appeals overturned a decision of the U.S. District Court for the
District of Alaska and ordered the District Court to enjoin a 1996 decision
by the National Park Service ("NPS") that had authorized additional cruise
ship entry permits for Glacier Bay National Park. The Court of Appeals held
that the NPS should have prepared an environmental impact statement prior to
increasing the number of permits. As a consequence of the 1996 NPS decision,
Holland America had been able to obtain additional entry permits for the
2000-2004 period. Other cruise lines had also received additional entry
permits. At this time it is not clear whether the court injunction will
affect the 2001 Alaska cruise season since the District Court was given
discretion as to whether or not to defer issuing the injunction until after
the 2001 season. In addition, the decision can still be appealed by the NPS
to the full Ninth Circuit Court of Appeals and/or the U.S. Supreme Court.
Holland America will also be clarifying with the NPS as to exactly how many
permits may be impacted. However, most Holland America permits will not be
withdrawn as a result of this decision since they were in effect prior to the
1996 NPS decision. In addition, attractive alternative destinations in
Alaska can be substituted for Glacier Bay. Accordingly, management believes
that if any permits are withdrawn, the impact on the Company's financial
statements will not be material.
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. 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. See "Risk Factors" for a discussion of other regulations which
impact the Company.
Financial Information
For financial information about the Company cruise and affiliated
operations segments with respect to each of the three years in the period
ended November 30, 2000, see Note 10, "Segment Information," to the Company's
Consolidated Financial Statements in Exhibit 13 of this Annual Report on Form
10-K.
D. 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 Tours name. Tour operations are based in Alaska and Washington State.
Since a substantial portion of Holland America Tours' business is derived
from the sale of tour packages in Alaska during the summer tour season, tour
operations are highly seasonal.
Holland America Tours
Holland America Tours is an indirect wholly owned subsidiary of HAL.
The group of companies which together comprise the tour operations perform
three independent yet interrelated functions. During 2000, 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 300 motor coaches operate in Alaska and Washington.
These motor coaches are used for extended trips, city sightseeing tours and
charter hire. Additionally, Holland America Tours operates express 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 Tours owns or
leases motor coach maintenance shops in Seattle, Washington, and in Juneau,
Fairbanks, Anchorage, Skagway and Ketchikan, Alaska. Holland America Tours
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.
Westmark Hotels
Holland America Tours owns and/or operated 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 Tours 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 Tours
subsidiaries and Westmark operates two under management agreements.
For the seven hotels that operate year-round, the occupancy percentage
for fiscal 2000 was 56.9% (55.4% for fiscal 1999), and for the seven hotels
that operate only during the summer months, the occupancy percentage for
fiscal 2000 was 70.9% (71.4% for fiscal 1999).
Sales and Marketing
Holland America Tours 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 Holland America Tours marketing message leverages the company's 54 years
of Alaska tourism leadership and its extensive array of hotel and
transportation assets to create a brand preference for Holland America Tours.
To the prospective vacationer the company endeavors to convince them that
"Holland America Tours is Alaska".
Holland America Tours are marketed both separately and as part of
cruise/tour packages. Although most Holland America Tours cruise/tours
include a Holland America cruise as the cruise segment, other cruise lines
also market Holland America 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 Tours,
utilizing sales desks in major hotels. General marketing for the hotels is
done through various media in Alaska, Canada and the contiguous U.S. 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.
Seasonality
Holland America Tours 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 Tours are conducted in
Washington State 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 Tours seeks to
maximize its motor coach charter activity, such as operating charter tours to
ski resorts in Washington.
Competition
Holland America Tours competes with independent tour operators and motor
coach charter operators in Washington and Alaska. The primary competitors in
Alaska are Princess Tours (with approximately 160 motor coaches and three
hotels) and Alaska Sightseeing/Trav-Alaska (with approximately 13 motor
coaches) and, commencing in 2001, Royal Caribbean Tours. 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 Tours 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 activities of Holland America Tours involve federal
properties and may require concession permits 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 Tours 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 Tours 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, 2000, see Note
10, "Segment Information," to the Company's Consolidated Financial Statements
in Exhibit 13 of this Annual Report on Form 10-K.
E. Employees
The Company's operations have approximately 5,200 full-time and 2,300
part-time/seasonal employees engaged in shoreside operations. The Company
also employs approximately 1,900 officers and 24,000 crew and staff on its 44
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.
F. Suppliers
The Company's largest purchases are for airfare, advertising, fuel, food
and beverages and hotel and restaurant supplies and products and for ship
construction. Although the Company chooses to use a limited number of
suppliers for most of its food and beverages, and hotel and restaurant
supplies and products, 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. The
Company purchases fuel from a limited number of sources located at certain of
its ports of call (See Management's Discussion and Analysis of Financial
Condition and Results of Operations - Exposure to Bunker Fuel Prices in
Exhibit 13 to this Annual Report on Form 10-K.). See Part I., Item 1.,
Business, B. Risk Factors - for a discussion of the limited number of
qualified shipyards available to build the Company's future ships.
G. 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")
and the United Kingdom Mutual Steamship Assurance Association (Bermuda)
Limited (the "UKMSAA"). 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 ship
in amounts equal to the approximate market value of each ship. The Company
maintains war risk insurance on each ship which includes legal liability to
crew and passengers, including terrorist risks for which coverage would be
excluded under SSOPIA, SMUAL and UKMSAA. 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
four $15 million performance bonds for all of the Company's ships which
embark passengers in U.S. ports, 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 of Holland America Tours and other activities.
H. Investment in Affiliate
Airtours plc
The Company has a 25% interest in Airtours. Airtours is one of the
largest air-inclusive integrated leisure travel companies in the world and
its common stock is publicly traded on the London Stock Exchange. Airtours
primarily provides air inclusive packaged holidays to the United Kingdom,
German, Ireland, North American and Scandinavian markets. Airtours provided
holidays to approximately 15 million people in fiscal 2000 and owns or
operates 2,600 travel shops and 48 telesales centers, 93 hotel and resort
properties, four cruise ships and 52 aircraft. The four cruise ships are
operated under the Sun Cruises brand. In 1997, Airtours acquired a 50%
interest in Costa which it sold to the Company in fiscal 2000. During 2000,
Airtours acquired the remaining 64% of its German tour operator, FTI, which
it did not already own. In addition, during 2000, Airtours acquired Travel
Services International ("TSI"). 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.
Seasonality
The Company's equity in the earnings of Airtours is recorded on a two-
month lag basis using the equity method of accounting. Airtours' revenues are
very seasonal due primarily to the nature of the European leisure travel
industry. Typically, Airtours' quarters ending June 30 and September 30
experience higher revenues, with revenues in the quarter ending September 30
being their highest.
I. Trademarks
The Company owns numerous trademarks, which it believes are widely
recognized throughout the world and have considerable value.
Item 2. Properties
The Company's cruise ships and private island, Half Moon Cay, are
described in Section C of Item 1 under the heading Cruise Ship Segment -
Cruise Ships and Itineraries. The properties associated with Holland America
Tours tour operations are described in Section D 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's principal shoreside operations and its headquarters are located
at 300 Elliott Avenue West in Seattle, Washington in approximately 128,000
square feet of leased office space. Costa's principal shoreside operations
and its headquarters are located in Genoa, Italy in approximately 125,000
square feet of owned and leased space. Cunard Line Limited's principal
shoreside operations and its headquarters are located 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, shoreside operations and
headquarter facilities are well maintained and in good condition.
Item 3. Legal Proceedings
Several actions (collectively the "Passenger Complaints") were filed
against Carnival, one action has been filed against Holland America Tours and
one action has been filed against Costa on behalf of purported classes of
persons who paid port charges to Carnival, Holland America or Costa, 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 Miami-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 December 21, 2000,
Carnival entered into a settlement agreement for the Passenger Complaints
filed against it. The settlement has been preliminarily approved by the
trial court. Under the settlement agreement, Carnival would issue travel
vouchers with a face value of $25-$55 to certain of its passengers who sailed
between April 19, 1992 and June 4, 1997. The vouchers will also provide
class members with a cash redemption option of up to 20% of the face value.
Pursuant to the settlement, Carnival will pay the plaintiffs' legal fees, as
awarded by the court, up to a specified amount. The notices to class members
were mailed by Carnival on February 16, 2001. Class members have until April
10, 2001 to elect out of the class. A final settlement hearing is currently
scheduled for May 2001 when it is anticipated that the court will issue final
approval of the settlement. Thereafter, assuming the settlement is approved,
the vouchers will be mailed.
In April 1996, a Passenger Complaint was filed against Holland America
Tours in the Superior court in King County, Washington, by Francine Pickett
and others on behalf of a purported nationwide class. In April 1998 Holland
America Tours entered into a settlement agreement which was approved by the
court. However, one member of the settlement class appealed the agreement.
In August, 2000, the Washington court of appeals refused to approve the
settlement that had been reached by Holland America Tours in its Passenger
Complaint and instead remanded the case to the trial court. The court of
appeals ruled that the trial court had erred in refusing to certify a class.
The court of appeals then reasoned that had the trial court certified a
class, the terms of the settlement would likely have been different. The
court of appeals also made other rulings that could be adverse to Holland
America Tours on remand. Holland America Tours has filed a petition for
discretionary review by the Washington Supreme Court, the ultimate outcome of
which cannot currently be determined.
In September 1996, a Passenger Complaint was filed against Costa in the
Circuit Court for the Eleventh Judicial Circuit in Miami-Dade County,
Florida, by Mr. & Mrs. Latman on behalf of a purported nationwide class.
These proceedings, including Costa's appeal to the Florida Supreme Court of
the Third District Court of Appeals's order to the trial court to certify the
class, have been stayed pending the outcome of ongoing settlement
negotiations
In August 1996, Nelsons Travel Associates filed an action against
Carnival and Holland America Tours 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. This action alleged 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. On December 5, 2000,
at the plaintiff's request, the court dismissed this action.
Several actions (collectively the "ADA Complaints") have been filed
against Carnival, Holland America Tours, Cunard and Costa alleging that they
violated the Americans with Disabilities Act of 1990 by failing to make
certain of its cruise ships accessible to individuals with disabilities. The
plaintiffs seek injunctive relief to require modifications to certain vessels
to increase accessibility to disabled passengers and fees and costs. The
California case also seek statutory damages under California state law, which
include punitive damages, attorneys' fees and costs. The status of each
pending ADA Complaint is as follows:
On December 17, 1998, an ADA Complaint was filed against Carnival by
Access Now, Inc. and Edward S. Resnick in the U.S. District Court for the
Southern District of Florida. In January 2001, Carnival reached an agreement
in principle with the plaintiffs to settle this action. Pursuant to the
agreement, Carnival will make certain modifications to its existing 15 ships
with an option to include future ships into the settlement agreement.
On July 27, 1998, an ADA Complaint was filed against Carnival by Bernard
Walker and Christina Adams in the U.S. District Court for the Northern
District of California. This proceeding concerns only one Carnival ship, the
Holiday. The proceedings relating to the California ADA Complaint were
consolidated for settlement purposes with the ADA Complaint described in the
preceding paragraph. As a result of mediation, Carnival has entered into a
settlement agreement with the plaintiffs. Carnival has agreed to certain
modifications to the ship, payment of damages to the individual plaintiffs
and attorneys' fees. The settlement is subject to certification of the case
by the trial court as a class action proceeding and approval by the U.S.
Departments of Justice and Transportation. Management believes the estimated
total cost of the settlement, including modifications, will not be material
to the Company's financial statements.
On August 29, 2000, an ADA Complaint was filed against Cunard by Access
Now, Inc. and Edward S. Resnick in the U.S. District Court for the Southern
District of Florida. Cunard filed an answer to the complaint on November 10,
2000. Given the settlement reached in the case against Carnival, the
plaintiff has agreed to dismiss the ADA Complaint against Cunard without
prejudice.
On August 28, 2000, Access Now, Inc. and Edward S. Resnick also filed
complaints in the U.S. District Court for the Southern District of Florida
against Holland America Tours and Costa. These complaints seek modifications
to their vessels to increase accessibility to disabled passengers. These
cases have been transferred before the same judge. Holland America Tours and
Costa have filed motions to dismiss the action. The court has asked the
parties for additional briefs on the issue of whether the Department of
Justice and Department of Transportation should also brief the issues raised
in the motions to dismiss.
Several actions as previously reported, have been filed against Carnival
and four of its officers by a purported class of persons who purchased the
Company's Common Stock between February 25, 1999 and February 16, 2000
alleging that statements made the Company in public fillings relating to
compliance with applicable safety regulations were in violation of Section
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The
complaints also allege violations by the individual defendants as controlling
persons under Section 20(a) of the Securities Exchange Act of 1934. In
November, 2000, the plaintiffs filed a consolidated amended complaint (the
"Stock Purchaser Complaint"). The complaint seeks certification of a class
action, an award or unspecified compensatory damages, attorneys' fees and
costs and expert fees. On February 5, 2001, Carnival filed a motion to
dismiss the Stock Purchaser Complaint.
On August 22, 2000, the Company received a subpoena from a grand jury
sitting in the U.S. District Court for the Southern District of Florida. The
subpoena requests that the Company produce documents and records concerning
environmental matters. The Company continues to respond to the subpoena.
On November 22, 2000, Costa instituted arbitration proceedings in Italy
to confirm the validity of its decision not to deliver its ship, the Costa
Classica, to the shipyard of Cammell Laird Holdings PLC ("Cammell Laird")
under an approximate $75 million contract for the conversion and lengthening
of the ship. Cammell Laird joined the arbitration proceeding on January 9,
2001 to present its counter demands. On January 9, 2001, Costa gave Cammell
Laird notice of termination of the contract and Cammell Laird replied with
its notice of termination of the contract on February 2, 2001. It is
expected that the award of the arbitration tribunal's decision will be made
within two years.
On February 23, 2001, Holland America Line, Inc. ("HAL, Inc."), a
subsidiary of HAL, received a subpoena from a grand jury sitting in the U.S.
District Court for the District of Alaska. The subpoena requests that HAL,
Inc. produce documents and records relating to the air emissions from Holland
America ships in Alaska. HAL, Inc. intends to respond to the subpoena.
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.
NAME AGE POSITION
Micky Arison 51 Chairman of the Board of Directors
and Chief Executive Officer
Gerald R. Cahill 49 Senior Vice President-Finance and Chief
Financial Officer
Robert H. Dickinson 58 President and Chief Operating Officer
of Carnival and Director
Kenneth D. Dubbin 47 Vice President-Corporate Development
Howard S. Frank 59 Vice Chairman of the Board of Directors
and Chief Operating Officer
Ian J. Gaunt 49 Senior Vice President - International
A. Kirk Lanterman 69 Chairman of the Board of Directors,
President, and Chief Executive Officer of
Holland America Line-Westours Inc.
and Director
Lowell Zemnick 57 Vice President and Treasurer
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.
Gerald R. Cahill 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.
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 passenger revenue 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; cruise and
other vacation industry competition; changes in tax laws and regulations; the
ability of the Company to implement its shipbuilding program and to continue
to expand its business outside the North American market; changes in foreign
currency exchange rates, food and fuel commodity prices and interest rates;
delivery of new vessels on schedule and at the contracted price; weather
patterns; unscheduled ship repairs and drydocking; incidents involving cruise
ships; impact of pending or threatened litigation; the ability of
unconsolidated affiliates to successfully implement their business strategies
and changes in laws and regulations applicable to the Company.
The Company does not assume the obligation to update any forward-looking
statements. One should carefully evaluate such statements in light of
factors described in the Company's filings with the Securities and Exchange
Commission, especially on Forms 10-K, 10-Q and 8-K, if any. In Item 1. of
the Company's Annual Report on Form 10-K for the year ended November 30, 2000
and above, the Company discusses various important factors, among others,
that could cause actual results to differ from expected or historic results.
The Company notes these factors for investors as permitted by the Private
Securities Litigation Reform Act of 1995. One should understand that it is
not possible to predict or identify all such factors. Consequently, the
reader should not consider any such list to be a complete statement of all
potential risks or uncertainties.
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
Carnival Corporation declared cash dividends on all of its Common Stock
in the amount of $.09 per share in each of the first three quarters of fiscal
1999 and $.105 for each subsequent quarter through and including the first
quarter of fiscal 2001. Payment of future dividends on the Common Stock will
depend upon, among other factors, the Company's earnings, financial condition
and capital requirements. Carnival Corporation 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.
The Republic of Panama does not currently have tax treaties with any
other country. Under current law management believes that distributions to
Carnival Corporation's U.S. shareholders are not subject to taxation under
the laws of the Republic of Panama. Dividends paid by Carnival Corporation
will be taxable as ordinary income for U.S. federal income tax purposes to
the extent of Carnival Corporation'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 26, 2001 and the Selected Quarterly
Financial Data (Unaudited), are 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 is 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, 2000.
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 26th day of February, 2001.
CARNIVAL CORPORATION
By /s/ Micky Arison
Micky Arison
Chairman of the Board of
Directors and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Micky Arison Chairman of the Board of February 26, 2001
Micky Arison Directors and Chief Executive
Officer
/s/ Howard S. Frank Vice Chairman of the Board of February 26, 2001
Howard S. Frank Directors and Chief Operating
Officer
/s/ Gerald R. Cahill Senior Vice President-Finance February 26, 2001
Gerald R. Cahill and Chief Financial and
Accounting Officer
/s/ Shari Arison Director February 26, 2001
Shari Arison
/s/ Maks L. Birnbach Director February 26, 2001
Maks L. Birnbach
/s/ Richard G. Capen, Jr.Director February 26, 2001
Richard G. Capen, Jr.
/s/ Robert H. Dickinson Director February 26, 2001
Robert H. Dickinson
/s/ Arnold W. Donald Director February 26, 2001
Arnold Donald
/s/ James M. Dubin Director February 26, 2001
James M. Dubin
/s/ A. Kirk Lanterman Director February 26, 2001
A. Kirk Lanterman
/s/ Modesto A. Maidique Director February 26, 2001
Modesto A. Maidique
/s/ Stuart Subotnick Director February 26, 2001
Stuart Subotnick
/s/ Sherwood M. Weiser Director February 26, 2001
Sherwood M. Weiser
/s/ Meshulam Zonis Director February 26, 2001
Meshulam Zonis
/s/ Uzi Zucker Director February 26, 2001
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)
3.3-Certificate of Amendment of Articles of Incorporation of the Company.
(2a)
3.4-Form of By-laws of the Company.(3)
4.1-Agreement of the Company dated February 26, 2001 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 20, 2000 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
July 17, 2000. (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-Arnold W. Donald Director's Agreement
10.14-Meshulam Zonis Director's Agreement
10.15-Maks L. Birnbach Director's Agreement.(17)
10.16-Stuart Subotnick Director's Agreement.(18)
10.17-Sherwood M. Weiser Director's Agreement.(19)
10.18-Uzi Zucker Director's Agreement. (20)
10.19-James M. Dubin Director's Agreement.(21)
10.20-Modesto M. Maidique Director's Agreement.(22)
10.21-Richard G. Capen Director's Agreement.(23)
10.22-Shari Arison Dorsman Director's Agreement.(24)
10.23-Executive Long-term Compensation Agreement dated January 11, 1999,
between the Company and Micky Arison. (25)
10.24-Executive Long-term Compensation Agreement dated January 11, 1999,
between the Company and Howard S. Frank. (26)
10.25-HAL Antillen N.V. and subsidiaries Key Management Incentive Plan. (27)
10.26-1994 Transaction-Extension Agreement, dated January 18, 2000, between
Carnival Corporation, Sherwood Weiser and others. (28)
10.27-Amended and Restated 1994 Security and Pledge Agreement, dated January
18, 2000, between Carnival Corporation and Sherwood Weiser. (29)
10.28-Security and Pledge Agreement, dated January 18, 2000, between
Carnival Corporation and Sherwood Weiser. (30)
10.29-Stock Purchase Agreement, dated January 18, 2000, between Carnival
Corporation, Sherwood Weiser and others. (31)
10.30-Carnival Corporation Supplemental Executive Retirement Plan. (32)
10.31 Amendment to the Carnival Corporation Supplemental Executive
Retirement Plan.
10.32- Amendment to the Carnival Corporation "Fun Ship" Nonqualified Savings
Plan. (33)
10.33- Amendment to the Carnival Corporation Nonqualified Retirement Plan
for Highly Compensated Employees.
10.34- Amendment to the Carnival Corporation "Fun Ship" Nonqualified Savings
Plan.
10.35- Retirement Agreement between the Company and Meshulam Zonis.
12.0-Ratio of Earnings to Fixed Charges.
13.0-Portions of 2000 Annual Report incorporated by reference into 2000
Annual Report on Form 10-K.
21-Subsidiaries of the Company.
23.0-Consent of PricewaterhouseCoopers LLP.
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.
(2a) Incorporated by reference to Exhibit 3.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended May 31, 2000 (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 10.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended August 31, 2000 (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 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.
(18)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.
(19)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.
(20)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.
(21)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.
(22)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.
(23)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.
(24)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.
(25)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.
(26)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.
(27)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.
(28)Incorporated by reference to Exhibit No. 10.28 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(29) Incorporated by reference to Exhibit No. 10.29 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(30) Incorporated by reference to Exhibit No. 10.30 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(31) Incorporated by reference to Exhibit No. 10.31 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(32) Incorporated by reference to Exhibit No. 10.32 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(33) Incorporated by reference to Exhibit No. 10.33 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
EXHIBIT 4.1
February 26, 2001
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, 2000.
Very truly yours,
CARNIVAL CORPORATION
/s/ Arnaldo Perez
Arnaldo Perez
General Counsel
Exhibit 10.1
Retirement and Consulting Agreement
AGREEMENT made this 20th day of November, 2000 between CARNIVAL CORPORATION,
having its principal place of business at 3655 Northwest 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 West 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 (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 $130,414,
an annual compensation of $1,564,968.
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 ($23,474,520) 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 employment rights or benefits of the Companies.
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 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 1999 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
this 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
HOLLAND AMERICA LINE-WESTOURS
INC.
By: /s/ Larry Calkins
Its: V.P. - Finance
/s/ Alton Kirk Lanterman
Signature
Alton Kirk Lanterman
Print Full Name
Exhibit 10.13
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of the 8th day of January, 2001,
between Carnival Corporation, a Panamanian corporation (the "Company"),
and Arnold W. Donald (the "Director").
The Company, in order to induce the Director to serve the Company's
board of directors, wishes to indemnify the Director against certain
expenses and liabilities.
Accordingly, the parties agree as follows:
In the event that the Director is made a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was director of the Company, the Company
shall indemnify the Director against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding to the
fullest extent and in the manner set forth in and permitted by the General
Corporation Law of the Republic of Panama and any other applicable law, as
from time to time in effect. Such right of indemnification shall not be
deemed exclusive of any other rights to which such director or officer may
be entitled apart from the foregoing provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement to be executed by a duly authorized officer, as of the date
first above written.
CARNIVAL CORPORATION
By: /s/Howard S. Frank
Howard S. Frank, Vice Chairman
and Chief Operating Officer
By: /s/Arnold W. Donald
Arnold W. Donald
Exhibit 10.14
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of the 8th day of January, 2001,
between Carnival Corporation, a Panamanian corporation (the "Company"),
and Meshulam Zonis (the "Director").
The Company, in order to induce the Director to serve the Company's
board of directors, wishes to indemnify the Director against certain
expenses and liabilities.
Accordingly, the parties agree as follows:
In the event that the Director is made a party or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was director of the Company, the Company
shall indemnify the Director against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding to the
fullest extent and in the manner set forth in and permitted by the General
Corporation Law of the Republic of Panama and any other applicable law, as
from time to time in effect. Such right of indemnification shall not be
deemed exclusive of any other rights to which such director or officer may
be entitled apart from the foregoing provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement to be executed by a duly authorized officer, as of the date
first above written.
CARNIVAL CORPORATION
By: /s/ Howard S. Frank
Howard S. Frank, Vice Chairman
and Chief Operating Officer
By: /s/ Meshulam Zonis
Meshulam Zonis
Exhibit 10.31
AMENDMENT TO
THE CARNIVAL CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Carnival Corporation Supplemental Executive Retirement Plan (the
"Plan") is hereby amended, effective January 1, 2001, as follows:
(1) Section 5.1.A of the Plan is amended to read as follows:
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 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 Participant may elect that payment of Benefit shall be made in
one of the aforementioned forms or may elect that a portion of his
Benefit be paid in one form and the remaining portion of his
Benefit be paid in another.
(2) Section 5.1.B of the Plan is amended to read as follows:
B. 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.
If a Participant has elected two forms of payment under Section
5.1A, the Participant may separately elect the timing of payment
of each of those forms under this Section 5.1B.
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.
Exhibit 10.33
AMENDMENT TO
THE CARNIVAL CORPORATION NONQUALIFIED RETIREMENT PLAN
FOR HIGHLY COMPENSATED EMPLOYEES
The Carnival Corporation Nonqualified Retirement Plan for Highly
Compensated Employees (the "Plan") is hereby amended, effective December 1,
2000, as follows:
(1) Section 2.1 of the Plan is amended to read as follows:
2.1 Participation - the Retirement Committee will determine
which Employees are Eligible Employees. In any event, no Employee shall be
an Eligible Employee prior to satisfying one Year of Service and attainment
of age 21. Eligible Employees shall enter the Plan on the January 1 or July
1 closest to satisfaction of the one Year of Service and age requirements.
Notwithstanding the foregoing, effective January 1, 1998, for purposes of
Articles 2 and 3 and for determining a Participant's Benefit Accrual Years
of Service and Vesting Years of Service, no individual who elected to
participate in The "Fun ShipSM" Nonqualified Savings Plan shall continue
active participation in the Plan.
(2) Section 7.1 of the Plan is amended to read as follows:
7.1 Preretirement Death Benefit.
(a) Upon the death of a Participant who (i) has a Vested Interest,
(ii) has not yet had an Annuity Starting Date and (iii) is survived by a
spouse (with whom he has been married for at least twelve months), the
Participant's spouse shall be entitled to receive a Preretirement Death
Benefit as defined under Section 7.2(a).
(b) Upon the death of a Participant who (i) has a Vested Interest,
(ii) has not yet had an Annuity Starting Date, and (iii) is not
survived by a spouse (with whom he has been married for at least
twelve months), the Participant's Beneficiary shall be entitled to
receive a Preretirement Death Benefit as defined under Section 7.2(b).
(3) Section 7.2 of the Plan is amended to read as follows:
7.2 Form of Preretirement Death Benefit.
(a) Subject to the following sentences, the Participant's
Preretirement Death Benefit under Section 7.1(a) shall be paid to the
Participant's spouse in accordance with the Participant's most recent
distribution election under Section 6.1, or if no such election is in place,
then in the form of an Qualified Preretirement Survivor Annuity. If the
Actuarial Equivalent present value of the Participant's Preretirement Death
Benefit as of the Annuity Starting Date exceeds the amount defined in
Section 6.2 (the "Minimum Amount"), the Participant's spouse may elect
(during the period beginning on the day the Participant dies and ending on
the day distribution of benefits commences) to receive a Preretirement Death
Benefit which is the Actuarial Equivalent of the full amount otherwise
payable as a Qualified Preretirement Survivor Annuity in the form of a
single cash distribution. If the Actuarial Equivalent present value of a
Participant's Qualified Preretirement Survivor Annuity as of the Annuity
Starting Date does not exceed the Minimum Amount, the method of distribution
to the Participant's spouse of the Preretirement Death Benefit shall be as a
single cash distribution which is the Actuarial Equivalent of the full
amount payable.
(b) Single Participant Death Benefit. A Participant's Preretirement
Death Benefit under Section 7.1(b) shall be paid to his Beneficiary in
accordance with the Participant's most recent distribution election under
Section 6.1, or if no such election is in place, in the form of single cash
distribution. The single cash distribution shall be equal to the Actuarial
Equivalent present value of fifty percent (50%) of a Life with 5-Year
Certain Benefit payable at the Participant's Normal Retirement Date.
(4) Section 7.3 of the Plan is amended to read as follows:
7.3 Timing of Distribution; Annuity Starting Date. Notwithstanding
the remainder of this Section 7.3, no distributions shall be made to the
Participant's spouse prior to January 1, 1994.
(a) Distribution of a Participant's Preretirement Death Benefit under
Section 7.1(a) shall commence as of the Annuity Starting Date of the
Participant's spouse. The Annuity Starting Date of the Participant's spouse
shall be the earliest of (a) in the case of a Participant who dies on or
after his Early Retirement Date, the first day of the month coincident with
or next following the Participant's death, (b) in the case of a Participant
who dies after attaining age 55 with less than 15 Vesting Years of Service
and the Actuarial Equivalent present value of the Participant's
Preretirement Death Benefit exceeds the Minimum Amount, the first day of the
month coincident with or next following the Participant's Normal Retirement
Date had the Participant lived, (c) in the case of a Participant who dies
before attaining age 55 but after earning 15 or more years of Vesting Years
of Service and the Actuarial Equivalent present value of the Participant's
Preretirement Death Benefit exceeds the Minimum Amount, the first day of the
month coincident with or next following the Participant's Early Retirement
Date had the Participant lived, (d) in the case of a Participant who dies
before attaining age 55 with less than 15 years of service and the Actuarial
Equivalent present value of the Participant's Preretirement Death Benefit
exceeds the Minimum Amount, the first day of the month coincident with or
next following the Participant's Normal Retirement Date had the Participant
lived, or (e) in the case of a Participant who dies before his or her Early
Retirement Date and the Actuarial Equivalent present value of his or her
Preretirement Death Benefit does not exceed the Minimum Amount, the first
day of the month coincident with or next following the Participant's death.
(b) Distribution of a Participant's Preretirement Death Benefit under
Section 7.1(b) shall be paid to his Beneficiary as soon as
administratively practicable following the Participant's death.
Exhibit 10.34
AMENDMENT TO
THE CARNIVAL CORPORATION
"FUN SHIPsm" NONQUALIFIED SAVINGS PLAN
The Carnival Corporation "Fun Shipsm" Nonqualified Savings Plan (the
"Plan") is hereby amended, effective January 1, 2001, as follows unless
otherwise indicated:
Section 3.1 is amended to read as follows:
3.1 Determination of Eligible Employee Status: The Retirement Committee or
delegate will determine which Employees are Eligible Employees. An Employee
who is determined to be an Eligible Employee shall thereafter become a
Participant in accordance with Section 3.2.
Section 3.2 is amended to read as follows:
3.2 Commencement of Participation: Each Eligible Employee shall be
provided an opportunity to designate the percentage of his Compensation to
be deferred under Section 4.1 and to irrevocably designate the percentage or
dollar amount of his annual Bonus to be deferred under Section 4.4 ("Bonus
Deferral"). Any such Eligible Employee who makes such a designation shall
become a Participant on the first day of the payroll period that coincides
with or immediately follows the first day of the calendar quarter subsequent
to the Retirement Committee's determination of Eligible Employee status
under Section 3.1, provided the Eligible Employee is employed as of such
date. Effective January 1, 2001, any such Eligible Employee who makes such
a designation shall become a Participant on the first day of the payroll
period coincident with or immediately subsequent to the Retirement
Committee's determination of Eligible Employee status under Section 3.1,
provided the Eligible Employee is employed as of such date. Any such
designation must be made in the manner authorized by the Retirement
Committee and must be accompanied by:
(a) an authorization for the Eligible Employee's Employer to make
regular payroll deductions to cover the amount of such deferrals elected
pursuant to Section 4.1;
(b) an irrevocable authorization to defer receipt of a percentage or
a dollar amount of future Bonus amounts as elected under Section 4.4.
(c) an investment election with respect to any Employee Deferral
Contributions, Bonus Deferrals, Matching Contributions or vested Profit-
Sharing Contributions under Section 6.3;
(d) a designation of Beneficiary; and
(e) a designation as to the form and timing of the distribution of
the vested portion of his Participant Account.
Notwithstanding the foregoing, an Eligible Employee's failure to designate a
contribution percentage or a bonus deferral percentage or bonus deferral
amount under the first sentence of this Section 4.2 shall not affect his
status as a Participant for purposes of an allocation of a Profit-Sharing
Contribution in accordance with the requirements of Section 5.3. However,
such an Eligible Employee must make a designation under subsection (c), (d)
and (e) above as a condition of becoming a Participant for purposes of
Section 5.3 and Article 7.
Further, notwithstanding the foregoing, in advance of the December 1
preceding each Plan Year, the Committee shall designate those Employees who
are, or are expected to be, participants in The Carnival Corporation "Fun
ShipSM" Savings Plan for such Plan Year and who shall be an Eligible Employee
under this Plan solely for purposes of making Bonus Deferrals pursuant to
Section 4.4. Any such Eligible Employee shall not be eligible to authorize
Employee Deferral Contributions pursuant to Section 4.1 for such Plan Year
and shall not be eligible to receive an allocation of any Profit-Sharing
Contribution under Section 5.3 for such Plan Year.
Section 4.2 is amended to read as follows:
4.2 Changes in Contributions: Effective January 1, 2001, a Participant
may change his contribution percentage election under Section 4.1 at any
time by applying to make such change in the manner prescribed by the
Committee. Any change in contribution percentage election under this
Section 4.2 shall become effective as of the first day of the payroll period
coincident with or immediately following the date the Participant applies to
make such change.
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 (effective October
1, 2000, including telephonic or electronic notice). 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 10.35
RETIREMENT AGREEMENT
THIS RETIREMENT AGREEMENT ("AGREEMENT") entered into as of this 29th day
of December, 2000, by and between CARNIVAL CORPORATION, a corporation organized
under the laws of the Republic of Panama (hereinafter called the
"Corporation"), and MESHULAM ZONIS, residing in the County of Dade, State of
Florida (hereinafter called the "Employee").
W I T N E S S E T H :
WHEREAS, the Corporation has derived substantial profits and benefits as
a result of the Employee's employment; and
WHEREAS, the Corporation wishes to reward Employee for his full-time
employment with the Corporation; and
WHEREAS, the Employee, has previously entered into an "Amended
Agreement" with Carnival Cruise Lines, Inc. on July 21, 1987; and
WHEREAS, the Corporation and the Employee desire, by entering into this
Agreement to supplement that Amended Agreement as it relates to certain
benefits to be provided to Employee on account of his retirement from the
Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. RESIGNATION. As of December 29, 2000, Employee hereby resigns from
his position with the Corporation.
2. STOCK OPTION PLAN. Any options granted to Executive pursuant to the
Amended and Restated Carnival Corporation 1992 Stock Option Plan shall become
exercisable, in whole or in part, at the time or times provided when originally
granted, notwithstanding Employee's termination of employment with the
Corporation. Any provision of the 1992 Stock Option Plan providing for a
change in the exercisability of options granted to Executive due to termination
of employment shall be null and void with respect to such options.
3. MEDICAL INSURANCE. Employee and his spouse shall be eligible for
the Corporation's health care program for executive employees as is currently
provided, for the remainder of Employee and his spouse's life.
4. AIRLINE AND CRUISE PRIVILEGES. Employee shall have airline and
cruise privileges in accordance with the policies and procedures, including
appropriate tax treatment, as is currently available to senior executives of
the Corporation.
5. CONSULTING SERVICES. Employee shall receive $54,000 per year for
five (5) years after his Resignation for consulting services rendered to the
Corporation in his capacity as an independent contractor.
6. DEATH BENEFITS. If the Employee should die, his spouse may
exercise any remaining options in accordance with the terms of the 1992 Stock
Option Plan. In addition, Employee's spouse will continue to receive health
benefits under the Corporation's executive health plan for the remainder of her
life.
7. FORFEITURES OF BENEFITS. Notwithstanding anything herein contained
to the contrary, all rights under the Agreement of the Employee, his designated
beneficiary, personal representatives or any other person to receive payment
thereof shall be forfeited if any of the following events shall occur:
A) the Employee shall engage in any conduct or activity which,
in the sole opinion of the Corporation, is inimical to the best interests of
the Corporation;
B) the Employee shall engage in competition, as more particularly
described in paragraph 8 hereof; or
C) after the Employee ceases to be employed by the Corporation,
he shall fail or refuse to provide advice and counsel to the Corporation as and
when reasonably requested to do so.
8. In consideration of the benefits payable hereunder, the Employee
shall not engage in competition with the Corporation, whether as an employee,
independent contractor, more than Five Percent (5%) shareholder, partner or
joint venturer, whether directly or indirectly, during the period beginning
with the Employee's termination of employment and continuing until a date five
(5) years after the last date at which Deferred Compensation Benefits are
payable under the Amended Agreement, in the cruise line, commercial shipping
or other business engaged in at that time by the Corporation, to the extent
such competition does or may affect the markets or areas where the Corporation
conducts business. The Employee acknowledges that, due to the highly
competitive nature of the Corporation's business, even though the Employee
should expend substantial time and possess a high degree of skill, the
impartation of substantial knowledge from the Corporation to the Employee would
render serious and irreparable injury to the Corporation in the event of
competition by the Employee in the leisure vacation industry, particularly with
regard to the cruise, hotel, resort and gambling areas of said industry.
Accordingly, the Employee also acknowledges that cessation of these benefits
may not be a sufficient remedy of the Corporation and that the Corporation
shall be additionally entitled to immediate injunctive relief to prevent the
further competition of the Employee.
9. If the Corporation shall find that the Employee or any other person
to whom any benefit is due under this Agreement is unable to care for his
affairs because of illness or accident, any benefit due (unless a prior claim
therefore shall have been made by a duly appointed guardian, committee or other
legal representative) may be provided to the spouse, a child, a parent or a
brother or sister, or to any person deemed by the Corporation to have incurred
expenses for the Employee, or such other person otherwise entitled to payment,
in such manner and proportions as the Corporation may determine. Any such
payment shall be a complete discharge of the liabilities of the Corporation
under this Agreement.
10. The Corporation shall have the full power and authority to
interpret, construe and administer this Agreement; and the Corporation's
interpretations and constructions thereof and actions thereunder, shall be
binding and conclusive on all persons for all purposes. No officer or director
of the Corporation shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration of this
Agreement unless such action or omission is attributable to his own willful
misconduct or lack of good faith.
11. Nothing contained herein shall in any way affect or interfere with
the right of the Employee to share or participate in any retirement plan of the
Corporation or any profit-sharing, bonus or similar plan or benefit described
in the Amended Agreement, in which he may be entitled to share or participate
as an officer or employee of the Corporation.
12. RELEASE OF CLAIMS. In exchange for the benefits described herein,
Employee does hereby waive and does hereby release, knowingly and willingly,
the Corporation, its subsidiaries, successors and predecessors, its employees,
agents, directors and officers, past and present, from any and all claims of
any nature whatsoever Employee has arising out of Employee's employment and/or
the termination of Employee's employment, known or unknown, including but not
limited to any claims Employee may have under federal, state or local
employment, labor, contract, tort or anti-discrimination laws, statutes and
case law and specifically claims arising under the federal Age Discrimination
in Employment Act, the Civil Rights Acts of 1866 and 1964, as amended, the
Americans with Disabilities Act, Executive Order 11246, the Employee Retirement
Income Security Act, the Family and Medical Leave Act, the Rehabilitation Act
of 1973, the Fair Labor Standards Act, the Labor-Management Relations Act, the
Equal Pay Act, the Worker Adjustment Retraining and Notification Act, Smokers'
Right Law, and any and all other state, local or county ordinances, statutes
or regulations including claims for attorneys' fees, provided, however, that
this release does not apply to claims for benefits arising out of obligations
expressly undertaken in this Agreement and does not apply to claims arising out
of any act or omission occurring after the date Employee signs this Agreement.
Employee acknowledges and understands that this paragraph is intended to
prevent Employee from making any claims against the Corporation regarding any
matter or incident up to the date Employee executes this Agreement. Employee
agrees and covenants not to sue and not to bring an action against the
Corporation or its future parent corporations, its past, present and future
divisions, subsidiaries, affiliates and related companies and their successors
and assigns and all past, present and future directors, officers, employees and
agents of these entities, personally and as directors, officers, employees and
agents, before any court or other forum.
13. This Agreement will cause any prior written or oral commitment or
understanding between the Corporation and the Employee pertaining to the
benefits described herein to be and become null and void.
14. This Agreement and all interpretations, determinations and
administrations shall be made on behalf of the Corporation by its Compensation
Committee.
15. This Agreement shall be binding upon and inure to the benefit of
the Corporation, its successors and assigns, and the Employee, his heirs,
designated beneficiaries and personal representatives.
16. This Agreement shall be construed in accordance with and governed
by the laws of the State of Florida.
17. The restrictive covenant contained herein, which prohibits the
Employee from engaging in any business in competition with the Corporation,
shall survive (a) this Agreement, (b) any Termination of the employment of the
Employee, and (c) the dates on which benefits are to be paid to the Employee
for a period of five (5) years from and after the later of either the date of
Termination or the last payment of benefits hereunder.
18. ACKNOWLEDGEMENTS AND CERTIFICATIONS
Employee, acknowledges and certifies that Employee:
(a) has read and understands all of the terms of this Agreement
and does not rely on any representation or statement,
written or oral, not set forth in this Agreement;
(b) recognizes that certain of the benefits described herein
may be taxable to him;
(c) has had a reasonable period of time to consider this
Agreement;
(d) is signing this Agreement knowingly and voluntarily;
(e) has been advised to consult with an attorney before signing
this Agreement;
(f) has the right to consider the terms of this Agreement for
21 days and if Employee takes fewer than 21 days to
review this Agreement, Employee hereby waives any and all
rights to the balance of the 21-day review period; and
(g) has the right to revoke this Agreement within seven days
after signing it. If Employee revokes this Agreement
during this seven-day period, it becomes null and void in
its entirety.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year set forth above.
CARNIVAL CORPORATION
By:/s/ Howard S. Frank
Howard S. Frank
Its:Vice Chairman of the Board of Directors and Chief Operating Officer
Attest: /s/ Irma M. Tharp
(CORPORATE SEAL)
Signed, sealed & delivered
in the presence of:
/s/ Dorothy A. Best
/s/ Carolyn Piper
/s/ Meshulam Zonis
MESHULAM ZONIS ("Employee")
EXHIBIT 12
CARNIVAL CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
YEARS ENDED NOVEMBER 30,
2000 1999 1998 1997 1996
Net Income $ 965,458 $1,027,240 $835,885 $666,050 $566,302
Income tax expense 1,094 2,778 3,815 6,233 9,045
Income before
income taxes 966,552 1,030,018 839,700 672,283 575,347
Adjustment to Earnings:
Minority interest 14,014 11,102
Income from affiliates in
excess of dividends
received (21,362) (60,671) (63,059) (46,569) (43,224)
Earnings as adjusted 945,190 983,361 787,743 625,714 532,123
Fixed Charges:
Interest expense 41,372 46,956 57,772 55,898 64,092
Interest portion of
rent expense (1) 3,509 3,405 3,480 3,528 3,093
Capitalized interest 41,110 40,908 35,130 16,846 25,799
Total fixed charges 85,991 91,269 96,382 76,272 92,984
Fixed charges not affecting
earnings:
Capitalized interest (41,110) (40,908) (35,130) (16,846) (25,799)
Earnings before fixed
Charges $ 990,071 $1,033,722 $848,995 $685,140 $599,308
Ratio of earnings to
fixed charges 11.5 x 11.3 x 8.8 x 9.0 x 6.4 x
___________________
(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)
ASSETS NOVEMBER 30,
2000 1999
Current Assets
Cash and cash equivalents $ 189,282 $ 521,771
Accounts receivable, net 95,361 62,887
Consumable inventories 100,451 84,019
Prepaid expenses and other 164,388 122,959
Total current assets 549,482 791,636
Property and Equipment, Net 8,001,318 6,410,527
Investments in and Advances to Affiliates 437,391 586,922
Goodwill, less Accumulated Amortization of
$99,670 and $85,272 701,385 462,340
Other Assets 141,744 34,930
$9,831,320 $8,286,355
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 248,219 $ 206,267
Accounts payable 332,694 195,879
Accrued liabilities 302,585 262,170
Customer deposits 770,425 675,816
Dividends payable 61,371 64,781
Total current liabilities 1,715,294 1,404,913
Long-Term Debt 2,099,077 867,515
Deferred Income and Other Long-Term Liabilities 146,332 82,680
Commitments and Contingencies (Notes 2 and 9)
Shareholders' Equity
Common Stock; $.01 par value; 960,000 shares
authorized; 617,568 and 616,966 shares issued 6,176 6,170
Additional paid-in capital 1,772,897 1,757,408
Retained earnings 4,884,023 4,176,498
Unearned stock compensation (12,283) (9,945)
Accumulated other comprehensive (loss) income (75,059) 1,116
Treasury Stock; 33,087 shares at cost (705,137)
Total shareholders' equity 5,870,617 5,931,247
$9,831,320 $8,286,355
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
YEARS ENDED NOVEMBER 30,
2000 1999 1998
Revenues $3,778,542 $3,497,470 $3,009,306
Costs and Expenses
Operating expenses 2,058,342 1,862,636 1,619,377
Selling and administrative 487,403 447,235 369,469
Depreciation and amortization 287,667 243,658 200,668
2,833,412 2,553,529 2,189,514
Operating Income Before Income From
Affiliated Operations 945,130 943,941 819,792
Income From Affiliated Operations, Net 37,828 75,758 76,732
Operating Income 982,958 1,019,699 896,524
Nonoperating Income (Expense)
Interest income 16,506 41,932 10,257
Interest expense, net of
capitalized interest (41,372) (46,956) (57,772)
Other income, net 8,460 29,357 1,793
Income tax expense (1,094) (2,778) (3,815)
Minority interest (14,014) (11,102)
(17,500) 7,541 (60,639)
Net Income $ 965,458 $1,027,240 $ 835,885
Earnings Per Share:
Basic $1.61 $1.68 $1.40
Diluted $1.60 $1.66 $1.40
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
YEARS ENDED NOVEMBER 30,
2000 1999 1998
OPERATING ACTIVITIES
Net income $965,458 $1,027,240 $835,885
Adjustments to reconcile net income to
net cash provided from operating activities:
Depreciation and amortization 287,667 243,658 200,668
Income from affiliated operations in excess
of dividends received (21,362) (60,671) (63,059)
Minority interest 14,014 11,102
Other (14,689) 4,007 (8,428)
Changes in operating assets and liabilities,
excluding businesses acquired and consolidated:
(Increase) decrease in:
Receivables (15,132) (3,271) 137
Consumable inventories (8,205) (8,570) (3,913)
Prepaid expenses and other (21,972) (9,465) (15,369)
Increase (decrease) in:
Accounts payable 58,133 27,333 18,758
Accrued liabilities (5,977) 58,016 42,401
Customer deposits 55,614 37,433 73,658
Net cash provided from
operating activities 1,279,535 1,329,724 1,091,840
INVESTING ACTIVITIES
Additions to property and equipment, net (1,003,348) (872,984)(1,150,413)
Proceeds from sale of assets 51,350 47,028
Acquisition of consolidated subsidiaries, net (383,640) (54,715) (242,868)
Other, net 43,611 17,319 25,200
Net cash used for investing activities (1,292,027) (910,380)(1,321,053)
FINANCING ACTIVITIES
Proceeds from long-term debt 1,020,091 7,772 1,404,395
Purchase of Treasury Stock (705,137)
Principal payments of long-term debt (388,429) (564,838)(1,006,586)
Dividends paid (254,333) (219,179) (178,458)
Proceeds from issuance of Common Stock, net 7,811 741,575 11,399
Other (176) (4,253)
Net cash (used for) provided from
financing activities (319,997) (34,846) 226,497
Net (decrease) increase in cash and
cash equivalents (332,489) 384,498 (2,716)
Cash and cash equivalents at beginning
of year 521,771 137,273 139,989
Cash and cash equivalents at end of year $ 189,282 $ 521,771 $ 137,273
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Unearned Accumulated Total
Compre- Additional stock other share-
hensive Common paid-in- Retained compen- comprehensive Treasury holders'
income Stock capital earnings sation (loss)income Stock equity
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
Comprehensive
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
Comprehensive
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
Comprehensive income:
Net income $ 965,458 965,458 965,458
Changes in
securities
valuation
allowance (2,232) (2,232) (2,232)
Foreign
currency
translation
adjustment (73,943) (73,943) (73,943)
Total
Comprehensive
income $ 889,283
Cash dividends (250,923) (250,923)
Issuance of
stock under
stock plans 6 15,489 (5,977) 9,518
Amortization
of unearned
stock
compensation 3,639 3,639
Effect of
Conforming
Costa's
fiscal year (7,010) (7,010)
Purchase of
Treasury Stock (705,137) (705,137)
Balances at
November 30,
2000 $6,176 $1,772,897 $4,884,023 $(12,283) $(75,059) $(705,137) $5,870,617
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 six cruise
lines under the brand names Carnival Cruise Lines ("Carnival"), Costa, Cunard
Line ("Cunard"), Holland America Line ("Holland America"), Seabourn Cruise
Line ("Seabourn") and Windstar Cruises ("Windstar") and a tour business,
Holland America Tours. Carnival operates fifteen cruise ships primarily in
the Caribbean and the Mexican Riviera. Holland America operates ten cruise
ships primarily in Alaska, the Caribbean and Europe. Costa operates seven
cruise ships primarily in Europe, the Caribbean and South America (see Note
3). Cunard and Seabourn operates two and six luxury cruise ships,
respectively, to worldwide destinations and Windstar operates four luxury,
sail-powered ships primarily in the Caribbean, Europe and Central America.
Holland America Tours markets sightseeing tours both separately and as a part
of its cruise/tour packages. Holland America Tours operates 14 hotels in
Alaska and the Canadian Yukon, two luxury dayboats offering tours to the
glaciers of Alaska and the Yukon River, over 300 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 25% interest in Airtours plc ("Airtours"), a publicly
traded air-inclusive integrated leisure travel company headquartered in
England. Airtours provided holidays for approximately 15 million people in
2000 primarily from the United Kingdom, Germany, Ireland, North America and
Scandinavia and owns or operates 2,600 travel shops and 48 telesales centers,
52 aircraft, four cruise ships and 93 hotel and resort properties.
Preparation of Financial Statements
The preparation of the consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America
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, accounts and
unrealized profits and losses on transactions within the consolidated group
and with affiliates have been eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Carnival Corporation consolidates subsidiaries over which it has
control, as typically evidenced by a direct ownership interest of greater
than 50%. For affiliates where significant influence over financial and
operating policies exists, as typically evidenced by a direct ownership
interest from 20% to 50%, the investment is accounted for using the equity
method.
Cash and Cash Equivalents
Cash and cash equivalents include investments with original maturities
of three months or less and are stated at cost. At November 30, 2000 and
1999, cash and cash equivalents included $157 million and $502 million of
investments, respectively, primarily comprised of time deposits and
investment grade commercial paper, respectively.
Consumable Inventories
Consumable inventories consist primarily of provisions, spare parts,
supplies and fuel carried at the lower of cost (weighted-average) or market.
Property and Equipment
Property and equipment is stated at cost. Depreciation and amortization
was computed using the straight-line method over estimated average useful
lives as follows:
Years
Ships 11-30
Buildings and improvements 10-40
Transportation equipment and other 2-20
Leasehold improvements Shorter of lease term
or related asset life
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 operating expenses generally over one year.
The Company capitalizes interest on ships and other capital projects
during the construction period.
Investments in Affiliates
In the event of the issuance of stock by an affiliate, the Company
generally recognizes a gain or loss (see Note 5). At November 30, 2000 and
1999, the costs in excess of the net assets acquired of affiliates
("goodwill") was $195 million and $232 million, respectively. Goodwill is
being amortized using the straight-line method, principally over 40 years and
is recorded in "Income from Affiliated Operations, Net" in the accompanying
statements of operations.
Goodwill
Goodwill of $275 million resulting from the acquisition of HAL Antillen,
N.V., the parent company of Holland America, Windstar and Holland America
Tours, $272 million resulting from the acquisitions of Cunard and Seabourn
and $254 million resulting from the fiscal 2000 acquisition of Costa, is
being amortized using the straight-line method over 40 years.
Derivative Instruments
The Company utilizes derivative instruments, principally forward
contracts and swaps, to enhance its ability to manage certain risks related
to foreign currency exchange rates and interest rates which exist as part of
its ongoing business operations.
The Company's most significant contracts to buy foreign currency are
forward contracts entered into to fix the cost in U.S. dollars of certain of
its foreign currency denominated shipbuilding commitments (see Note 9).
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 ship.
From time to time the Company uses interest rate swap agreements to
manage interest rate exposure and to achieve a desired proportion of variable
and fixed rate debt. The fair value of the swaps is not reflected in the
financial statements and any amounts paid or received on hedges related to
debt will be included in interest expense.
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 the Company beginning December 1,
2000. Based on existing operations, the adoption of SFAS No. 133 will not
have a significant impact on the Company's results of operations or cash
flows, however, on December 1, 2000, the Company's assets and liabilities
will each increase by approximately $540 million. This increase in assets and
liabilities primarily represents the recording of offsetting unrealized gains
and losses on the Company's shipbuilding commitments and related forward
foreign currency contracts, respectively.
Revenue and Expense Recognition
Guest 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 revenues, together
with revenues 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. 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 $181 million in fiscal 2000, $178
million in fiscal 1999 and $142 million in fiscal 1998. At November 30, 2000
and 1999, $23 million and $22 million, respectively, of advertising related
costs were included in prepaid expenses and other in the accompanying balance
sheets.
Foreign Currency Translations and Transactions
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. Translation adjustments resulting
from this process are reported in accumulated other comprehensive income
(loss) within shareholders' equity. Revenues and expenses of these foreign
subsidiaries and affiliates are translated at weighted average exchange rates
for the period. 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 Tours) 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.
Additionally, certain of the Company's foreign subsidiaries are subject
to foreign income taxes, however, such amounts have not been significant.
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.
Stock-Based Compensation
The Company accounts for employee stock-based compensation using the
intrinsic value method and discloses certain fair value pro forma information
with respect to its employee stock-based compensation activities (see Note
11).
Concentrations of Credit Risk
As part of its ongoing control procedures, the Company monitors
concentrations of credit risk associated with financial institutions with
which it conducts business. Credit risk, including counterparty
nonperformance under derivative instruments, is considered minimal as the
Company only deals with large well-established financial institutions. The
Company also monitors the creditworthiness of its customers to which it
grants credit terms in the normal course of business. Concentrations of
credit risk associated with these receivables are considered minimal due to
the Company's diverse customer base and bad debts have been minimal. The
Company does not normally require collateral or other security to support
normal credit sales.
Accounting Changes
In fiscal 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 fiscal 1998, the
Company adopted SOP 98-5 and, accordingly, expensed $8.7 million of
previously deferred start-up costs. The $8.7 million represented the
cumulative effect from the Company changing this policy, which amount was
included in other nonoperating expenses in the fiscal 1998 statement of
operations.
In fiscal 1999, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which is presented in the accompanying statements of
shareholders' equity. Comprehensive income consists of net income and other
comprehensive income, the latter includes unrealized gains and losses on
available for sale securities and foreign currency translation adjustments.
In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information" which superceded SFAS No.
14, "Financial Reporting for Segments of a Business Enterprise". The
adoption of SFAS No. 131 did not affect the Company's results of operations
or financial position but does affect the disclosure of segment information
(see Note 10).
Reclassifications
Certain reclassifications have been made to the prior year amounts to
conform to the current year presentation.
NOTE 3 - ACQUISITION
Since June 1997, the Company has owned 50% of Costa. On September 29,
2000, the Company completed the acquisition of the remaining 50% interest in
Costa from Airtours at a cost of approximately $510 million. Substantially
all of the purchase price was funded by euro denominated borrowings of
approximately $161 million under the Company's existing $200 million multi-
currency revolver and $342 million from a short-term bridge loan. The Company
accounted for this transaction using the purchase accounting method. Goodwill
derived from this transaction is being amortized using the straight-line
method over 40 years.
Prior to the fiscal 2000 acquisition, the Company accounted for its 50%
interest in Costa using the equity method and recorded its portion of Costa's
operating results as earnings from affiliated operations on a two-month lag
basis. For September, October and November, 2000, the Company continued to
record its 50% interest in Costa's operating results for the months of July,
August and September, 2000, respectively, using the equity method. As of
November 30, 2000, the Company changed how it reports Costa's operating
results from a two-month lag basis to reporting on Costa's current month's
results. At that time, Costa's operating results for the months of October
and November 2000 were recorded as a direct adjustment to retained earnings
in the Company's November 30, 2000 consolidated balance sheet and the
Company's November 30, 2000 consolidated balance sheet includes Costa's
November 30, 2000 balance sheet (see Note 5). The impact of conforming
Costa's fiscal year on the Company's fiscal 2000 revenues, operating income
and net income was not material. Commencing in fiscal 2001, Costa's results
of operations will be consolidated on a current month basis in the same
manner as the Company's other wholly-owned subsidiaries.
Had the above transaction occurred on December 1, 1998, the Company's
unaudited consolidated revenues for fiscal 2000 and 1999 would have been
approximately $4.3 and $4.1 billion, respectively. The impact on the
Company's unaudited consolidated net income and earnings per share for fiscal
2000 and 1999 would have been immaterial.
The impact on the Company's assets and liabilities related to this
acquisition was as follows (in millions):
Fair value of acquired assets $ 915,437
Debt assumed (310,259)
Other liabilities assumed (94,354)
Cash paid for acquisition 510,824
Cash acquired and consolidated (130,539)
Net cash paid as reflected in the
2000 Statement of Cash Flows $ 380,285
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
November 30,
2000 1999
Ships $8,420,552 $6,543,592
Ships under construction 320,480 506,477
8,741,032 7,050,069
Land, buildings and improvements 279,095 235,333
Transportation equipment and other 465,536 395,008
Total property and equipment 9,485,663 7,680,410
Less accumulated depreciation and amortization (1,484,345) (1,269,883)
$8,001,318 $6,410,527
Capitalized interest, primarily on ships under construction, amounted to
$41.1 million in fiscal 2000, $40.9 million in fiscal 1999 and $35.1 million
in fiscal 1998. Ships under construction include progress payments for the
construction of the ship, as well as design and engineering fees, capitalized
interest, construction oversight costs and various owner supplied items. At
November 30, 2000, property and equipment with a net book value of $955
million was pledged as collateral pursuant to certain notes and a contingent
obligation (see Notes 6 and 9).
NOTE 5 - INVESTMENTS IN AND ADVANCES TO AFFILIATES
At November 30, 2000 and 1999, the market value of the Company's
investment in Airtours, based on the closing price of Airtours' common stock
on the London Stock Exchange, was $361 million and $837 million,
respectively, as compared with the carrying value of the Company's investment
in Airtours of $415 million and $439 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 fiscal 1998, Airtours issued, in connection with acquisitions,
approximately 20.7 million shares of its common stock at per share amounts in
excess of the Company's carrying value per share. As a result of these
transactions, in fiscal 1998, the Company recognized a net gain of $14.8
million, which was included in other nonoperating income.
Dividends received from affiliates were $16.5 million, $15.1 million and
$13.7 million in fiscal 2000, 1999 and 1998, respectively.
Financial information for affiliated companies accounted for using the equity
method was as follows (in thousands):
Balance Sheet Data As of End of Fiscal Years
2000(a) 1999
Current assets $2,270,185 $2,310,485
Long-term assets $1,985,707 $2,332,871
Current liabilities $1,852,595 $1,802,385
Long-term liabilities $1,532,981 $1,741,010
Shareholders' equity $ 870,316 $1,099,961
(a) Excludes Costa as it was included in the Company's consolidated balance
sheet at November 30, 2000.
Income Statement Data(b) Fiscal Years Ended
2000 1999 1998
Revenues $6,669,052 $5,963,425 $5,282,230
Gross margin $1,345,593 $1,265,614 $1,128,305
Net income $ 19,770 $ 255,146 $ 264,936
(b) Includes Costa for all periods.
Segment information for the Company's affiliated operations was provided
in accordance with SFAS No. 131 as follows (in thousands)(b):
Fiscal Years Ended
2000 1999 1998
Operating income $ 5,114 $359,953 $374,560
Depreciation and amortization $ 152,123 $133,302 $100,532
Capital expenditures $ 650,098 $356,267 $184,395
(b) Includes Costa for all periods.
NOTE 6 - LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
November 30,
2000 1999
Commercial paper $ 342,846 $
$200 million multi-currency revolving
credit facility drawn in euros,
bearing interest at 5.3% at
November 30, 2000 (a) 160,862
Unsecured Debentures and Notes, bearing interest
at rates ranging from 5.65% to 7.7%, due
through 2028 848,657 1,048,456
Unsecured euro note, bearing interest
at euribor plus 0.25% (5.2% at
November 30, 2000), due December 2000 (a) 338,676
Euro notes, secured by two ships,
bearing interest at euribor plus
0.5% (5.5% at November 30, 2000),
due through 2008 (a) 329,994 5,000
Unsecured euro notes, bearing interest
at rates ranging from euribor plus
.185% to euribor plus 1.0% (5.4% to 6.1%
at November 30, 2000), due 2001 and 2005 (a) 287,034
Other 39,227 20,326
2,347,296 1,073,782
Less portion due within one year (248,219) (206,267)
$2,099,077 $ 867,515
(a) Euro denominated notes have been translated to U.S. dollars at the period
end exchange rate.
At November 30, 2000, the outstanding commercial paper bears interest at
approximately 6.6% and was due on 2001. 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 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
unsecured multi-currency revolving credit facility due January 2002. Both
revolving credit facilities bear interest at libor/euribor plus 14 basis
points ("BPS"), based on the Company's debt rating, 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, 2000, the Company had $696 million available for
borrowing under these facilities. These facilities and other debt agreements
contain covenants that require the Company, among other things, to maintain
minimum debt service coverage and limit debt to capital ratios. At November
30, 2000, the Company was in compliance with all of its debt covenants.
The unsecured Debentures and Notes are not redeemable prior to maturity.
During fiscal 2000, the Company repaid its 5.65% unsecured Notes in the
amount of $200 million.
On December 13, 2000, the Company repaid the $338.7 million unsecured
euro note from the proceeds of a five-year unsecured euro note of
approximately $250 million and another borrowing.
At November 30, 2000, the scheduled annual maturities of the Company's
long-term debt was summarized as follows (in thousands):
Fiscal
2001 $ 248,219
2002 620,508
2003 145,403
2004 139,740
2005 280,891
Thereafter 912,535
$2,347,296
NOTE 7 - SHAREHOLDERS' EQUITY
The Company's Articles of Incorporation authorizes the Board of
Directors, at its discretion, to issue up to 40 million shares of Preferred
Stock. The Preferred Stock is issuable in series which may vary as to certain
rights and preferences at the discretion of the Board of Directors and has a
$.01 par value. At November 30, 2000 and 1999, no Preferred Stock had been
issued.
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.
In February 2000, the Board of Directors authorized the repurchase of up
to $1 billion of the Company's Common Stock. As of November 30, 2000, the
Company had repurchased 33.1 million shares of its Common Stock at a cost of
$705.1 million.
At November 30, 2000, there were approximately 15.2 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 fiscal 2000, the Company declared cash
dividends aggregating $0.42 per share for the year.
The Company does not expect to incur income taxes on future distributions
of undistributed earnings of foreign subsidiaries or foreign affiliates and,
accordingly, no deferred income taxes have been provided for the distribution
of these earnings. At November 30, 2000 and 1999, accumulated other
comprehensive income (loss) within shareholders' equity included cumulative
foreign currency translation adjustments which (decreased) or increased
shareholders' equity by $(67.9) million and $6.0 million, respectively.
On February 8, 2000, the U. S. Treasury Department issued proposed
Treasury Regulations to Section 883 of the 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 value of the
outstanding shares 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 U. S. source income from the transportation, hotel and tour
business of Holland America Tours) would continue to be exempt from U. S.
federal income taxes.
In order to ensure that the Company continues to be publicly traded
under the proposed Section 883 regulations, the Company amended its Articles
of Incorporation in April 2000 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 outstanding shares of the
Company.
NOTE 8 - FINANCIAL INSTRUMENTS
The Company estimates the fair 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 fair value and, accordingly, amounts are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. Financial instruments are not held for trading or
other speculative purposes.
Cash and Cash Equivalents
The carrying amounts of cash and cash equivalents approximate their fair
values due to the short-term maturities of these instruments.
Other Assets
At November 30, 2000 and 1999, long-term other assets included
marketable securities held in a "Rabbi Trust" for certain of the Company's
non-qualified benefit plans and long-term receivables. These assets had both
carrying and fair values of approximately $135.0 million and $28.3 million at
November 30, 2000 and 1999, respectively. Fair value was estimated based on
quoted market prices or expected future discounted cash flows.
Long-term Debt
At November 30, 2000 and 1999, the fair value of the Company's long-term
debt, including the current portion, was approximately $2.27 billion and
$1.02 billion, respectively, which was approximately $76 million and $53
million less 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 primarily to the Company's issuance of fixed rate debt
obligations at interest rates that are below market rates in existence at the
measurement dates. The fair value of the Company's unsecured Debentures and
Notes was estimated based on the quoted market price for the same or similar
issues. The fair value of the Company's other long-term debt was estimated
based on the market rates available to the Company for similar debt.
Foreign Currency Contracts
The Company enters into forward foreign currency contracts to reduce its
exposures relating to exchange 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 generally be offset by gains or
losses on the underlying hedged foreign currency transactions. The fair value
of the Company's forward hedging instruments discussed below was estimated
based on prices quoted by financial institutions for these instruments.
Several of the Company's contracts for the construction of cruise ships
are denominated in either Italian lira, German marks or euros. The Company is
a party to forward foreign currency contracts with a notional amount of $3.7
billion and $1.86 billion at November 30, 2000 and 1999, respectively, to fix
the price of these ships into U.S. dollars (see Note 9). At November 30, 2000
and 1999, these forward contracts had an estimated fair value of
approximately $3.2 billion and $1.8 billion, respectively.
Interest Rate Swaps
Costa has interest rate swap agreements in place to pay fixed interest
rates in exchange for floating interest rate payments on substantially all of
its debt. At November 30, 2000, these swaps had a notional amount and an
estimated unrealized loss of $766 million and $2.8 million, respectively, and
a weighted average remaining life of approximately 2.3 years. The fair value
of interest rate swap agreements was estimated based on quoted market rates
for similar financial instruments. There were no interest rate swap
agreements outstanding at November 30, 1999.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Ship Commitments
A description of ships under contract for construction at November 30,
2000 was as follows (in millions, except passenger capacity data):
Expected Estimated
Service Passenger Total
Ship Date(1) Shipyard Capacity(2) Cost(3)
Carnival
Carnival Spirit 4/01 Masa-Yards 2,124 $ 375
Carnival Pride 1/02 Masa-Yards (4) 2,124 375
Carnival Legend 9/02 Masa-Yards (4) 2,124 375
Carnival Conquest 12/02 Fincantieri 2,974 500
Carnival Glory 8/03 Fincantieri 2,974 500
Carnival Miracle 4/04 Masa-Yards (4) 2,124 375
Carnival Valor 11/04 Fincantieri(4) 2,974 500
Total Carnival 17,418 3,000
Holland America
Newbuild 11/02 Fincantieri(4) 1,848 410
Newbuild 8/03 Fincantieri(4) 1,848 410
Newbuild 2/04 Fincantieri(4) 1,848 410
Newbuild 10/04 Fincantieri(4) 1,848 410
Newbuild 6/05 Fincantieri(4) 1,848 410
Total Holland America 9,240 2,050
Costa
Newbuild 7/03 Masa-Yards (5) 2,112 330
Newbuild 1/04 Fincantieri(6) 2,720 380
Newbuild 12/04 Fincantieri(6) 2,720 380
Total Costa 7,552 1,090
Cunard
Queen Mary 2 12/03 Chantiers de
l'Atlantique(4) 2,620 780
Total Cunard 2,620 780
Total 36,830 $6,920
(1) The expected service date is the date the ship is expected to begin
revenue generating activities.
(2) In accordance with cruise industry practice, passenger capacity is
calculated based on two passengers per cabin even though some cabins can
accommodate three or four passengers.
(3) Estimated total cost of the completed ship includes the contract price
with the shipyard, design and engineering fees, capitalized interest, various
owner supplied items and construction oversight costs.
(4) These construction contracts are denominated in either German marks,
Italian lira or euros and have been fixed into U.S. dollars through the
utilization of forward foreign currency contracts.
(5) This construction contract is denominated in German marks which has a
fixed exchange rate with Costa's functional currency, which is the Italian
lira. The estimated total costs has been translated into U.S. dollars using
the November 30, 2000 exchange rate.
(6) These construction contracts are denominated in Italian lira. The
estimated total cost has been translated into U.S. dollars using the November
30, 2000 exchange rate.
In connection with the ships under contract for construction, the
Company has paid approximately $320 million through November 30, 2000 and
anticipates paying the remaining estimated total cost as follows (in
millions):
Fiscal
2001 $ 643
2002 1,734
2003 1,488
2004 2,389
2005 346
$6,600
Litigation
Several actions (collectively the "Passenger Complaints") have been
filed against the Company on behalf of purported classes of persons who paid
port charges to Carnival, Holland America and Costa, 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.
Certain of the Passenger Complaints filed against Carnival have been
dismissed. The remaining actions have been consolidated into one action in
Florida. Carnival recently entered into an agreement to settle this
remaining action. The settlement must be approved by the trial court. Under
the settlement agreement, Carnival would issue travel vouchers with a face
value of $25-$55 depending on specified criteria, to certain of its
passengers who sailed between April 1992 and June 1997. The vouchers also
provide class members a cash redemption option of up to 20% of the face value
which must be exercised within 60 days. Pursuant to the settlement, Carnival
will pay the plaintiffs' legal fees, as awarded by the court, up to a
specified amount. During the fourth quarter of fiscal 2000, the Company
recorded a charge for the amount of the estimated cash redemptions and
settlement costs in the amount of approximately $21 million.
Holland America Tours has entered into a settlement agreement for the
one Passenger Complaint filed against it. The settlement agreement was
approved by the trial court on September 28, 1998. Under the settlement
agreement, Holland America would 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 would
pay a portion of the plaintiffs' legal fees.
One member of the settlement class appealed the trial court's approval
of the settlement. In August 2000, the court of appeals refused to approve
the settlement and remanded the case to the trial court. Holland America
Tours has filed a petition for discretionary review by the Washington Supreme
Court, the ultimate outcome of which cannot currently be determined.
If the Passenger Complaint settlements are implemented as described
above, the amount and timing of the travel vouchers to be redeemed for travel
and the effects of the travel voucher redemption on revenues are not
reasonably determinable. Accordingly, the Company will account for the non-
cash redemption of the vouchers as a reduction of future revenues.
Several actions have been filed against Carnival, Holland America Tours,
Cunard and Costa alleging that they violated the Americans with Disabilities
Act ("ADA") by failing to make certain of their cruise ships accessible to
individuals with disabilities (collectively the "ADA Complaints").
Plaintiffs seek injunctive relief and fees and costs. Certain of the
plaintiffs also seek statutory damages, including punitive damages. On
January 19, 2001, Carnival reached an agreement in principle with the
plaintiffs to settle its major ADA Complaint. Pursuant to the agreement,
Carnival will make certain modifications to its existing 15 ships.
Management believes that the estimated total cost of the modifications will
not be material to the Company's financial statements. The remaining actions
are in progress and are proceeding.
Several actions filed against the Company and four of its officers on
behalf of a purported class of purchasers of Common Stock of the Company were
consolidated into one action in Florida (the "Stock Purchase Complaint").
The plaintiffs are claiming that statements made by the Company in public
filings violate federal securities laws and seek unspecified compensatory
damages, attorneys' fees and costs and expert fees. This action is in
progress and is proceeding.
It is not now possible to determine the ultimate outcome of the pending
Passenger, ADA and Stock Purchase Complaints, if such claims should proceed
to trial. Management believes that the Company and these officers, as
applicable, have meritorious defenses to these claims and, accordingly, the
parties intend to vigorously defend against all such claims.
In August 2000, the Company received a grand jury subpoena requesting
that the Company produce documents and records concerning environmental
matters. The Company continues to respond to the subpoena.
Costa has instituted arbitration proceedings in Italy to confirm the
validity of its decision not to deliver its ship, the Costa Classica, to the
shipyard of Cammell Laird Holdings PLC ("Cammell Laird") under an
approximate $75 million contract for the conversion and lengthening of the
ship. Consequently, Costa has given notice of termination of the contract.
It is expected that the arbitration tribunal's decision will be made within
two years. In the event that an award is given in favor of Cammell Laird the
amount of damages which Costa will have to pay, if any, is not currently
determinable. In addition, it is not currently possible to determine the
ultimate outcome of this matter, however, management believes that the
arbitration proceeding will result in a favorable outcome for the Company.
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 statements.
Contingent Obligations
The Company has certain contingent obligations, including letters of
credit, to participants in lease out and lease back type transactions for
three ships which, at November 30, 2000, totaled approximately $775 million.
Only in the remote event of nonperformance by certain major financial
institutions, all of which have long-term credit ratings of AAA or AA, would
the Company be required to make any payments under these contingent
obligations. After 18-21 years, as applicable, the Company has the right to
exercise purchase options that would terminate these transactions. As a
result of these three transactions, the Company has received a total of
approximately $67 million (net) which was recorded as deferred income on the
balance sheets and is being amortized to nonoperating income over
approximately 18-21 years.
Operating Leases
Rent expense for all operating leases, primarily for office and
warehouse space, for fiscal 2000, 1999 and 1998 was approximately $10 million
each year. At November 30, 2000, minimum annual rentals for all operating
leases, with initial or remaining terms in excess of one year, were as
follows (in thousands):
Fiscal
2001 $ 8,500
2002 7,300
2003 6,000
2004 5,700
2005 5,700
Thereafter 26,800
$60,000
Other
At November 30, 2000, the Company had a commitment through 2013,
cancelable under certain remote circumstances, to pay a minimum amount for
its annual usage of certain port facilities as follows (in thousands):
Fiscal
2001 $ 9,400
2002 9,300
2003 11,500
2004 11,500
2005 12,500
Thereafter 113,500
$167,700
NOTE 10 - SEGMENT INFORMATION
The Company's cruise segment included five cruise brands (six, including
Costa, as of November 30, 2000) which have been aggregated as a single
operating segment based on the similarity of their economic and other
characteristics. Cruise revenues are comprised of sales of passenger cruise
tickets, including, in some cases, air transportation to and from the cruise
ships, and revenues from certain onboard activities and other related
services. The tour segment represents the operations of Holland America
Tours.
The significant accounting policies of the segments are the same as
those described in Note 1 - "Summary of Significant Accounting Policies."
Cruise revenues included intersegment revenues which primarily represent
billings to the tour segment for the cruise portion of a tour when a cruise
is sold as a part of a tour package. In addition, cruise and tour operating
expenses included a cost allocation of certain corporate expenses.
Information for the cruise and tour segments for fiscal 2000, 1999 and 1998
was as follows (in thousands):
Operating Depreciation
income and Capital Segment
Revenues (loss) amortization expenditures assets
2000
Cruise $3,578,372 $ 961,806 $276,483 $ 972,270 $9,093,646(a)
Tour 259,662 7,664 10,825 30,129 199,722
Affiliated
Operations 37,828(a) 437,391
Reconciling
items (b) (59,492) (24,340) 359 949 100,561
$3,778,542 $ 982,958 $287,667 $1,003,348 $9,831,320
1999
Cruise $3,286,701 $ 947,452 $232,942 $ 837,126 $6,938,411
Tour 271,828 10,403 10,716 24,416 185,591
Affiliated
operations 75,758(a) 586,922
Reconciling
items (b) (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
Affiliated
operations 76,732(a) 546,693
Reconciling
items (b) (63,041) (11,698) 1,832 8,742 130,891
$3,009,306 $896,524 $200,668 $1,150,413 $7,179,323
(a) The November 30, 2000 cruise segment assets included Costa, while
Costa's results of operations were presented in the affiliated operations
segment for all periods(see Notes 3 and 5).
(b) Revenues consisted of intersegment revenues. Operating loss represented
corporate
expenses not allocated to segments. Capital expenditures represented
corporate capital expenditures. Segment assets included cash, cash
equivalents, short-term investments
and other corporate assets.
See Note 5 for affiliated operations segment information which were not
included in the Company's consolidated operations.
Foreign revenues for the Company's cruise brands, excluding Costa,
represent sales generated from outside the U.S. primarily by foreign tour
operators and foreign travel agencies. The majority of these foreign
revenues are from Canada, United Kingdom, Germany and Australia. Foreign
assets represent assets which are located outside of the U.S. and included,
among other things, all of the Company's ships. Revenues and year-end asset
information by geographic area was as follows (in thousands):
2000 1999 1998
Revenues
United States $3,180,667 $2,934,492 $2,545,709
Foreign 597,875 562,978 463,597
$3,778,542 $3,497,470 $3,009,306
Assets
United States $ 680,897 $1,063,963 $ 643,509
Foreign 9,150,423 7,222,392 6,535,814
$9,831,320 $8,286,355 $7,179,323
NOTE 11 - 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 fiscal 2000, 1999 and 1998 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 have
vested evenly over five years and have a ten year term and director options
have vested immediately and have a five or ten year term. At November 30,
2000, options for 1,338,781 shares were available for future grants. A
summary of the status of options in the stock option plans was as follows:
Weighted
Average Exercise Price Number of Options
Per Share Years Ended November 30,
2000 1999 1998 2000 1999 1998
Outstanding options-
beginning of year $22.70 $14.95 $11.88 6,517,168 5,987,574 5,502,580
Options granted $35.92 $44.54 $27.34 2,910,575 1,641,400 1,157,344
Options exercised $13.43 $11.01 $10.53 (244,850) (956,706) (652,350)
Options canceled $35.91 $26.55 $22.86 (342,100) (155,100) (20,000)
Outstanding options-
end of year $26.80 $22.70 $14.95 8,840,793 6,517,168 5,987,574
Options exercisable -
end of year $15.82 $12.64 $10.91 4,042,452 3,601,993 3,405,630
Information with respect to stock options outstanding and stock options
exercisable at November 30, 2000 was as follows:
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Average Average Average
Exercise Remaining Exercise Exercise
Price Range Shares Life (Years) Price Shares Price
$ 1.94-$ 2.25 37,480 (1) $ 2.06 37,480 $ 2.06
$ 6.94-$10.31 244,900 1.9 $ 7.51 244,900 $ 7.51
$10.59-$15.00 2,767,700 4.4 $11.30 2,743,700 $11.28
$16.28-$21.91 1,457,469 8.2 $19.54 337,938 $19.37
$24.63-$26.41 840,694 7.1 $26.39 305,854 $26.41
$34.03-$41.34 234,000 8.1 $36.49 61,600 $37.32
$43.56-$48.56 3,258,550 8.7 $44.35 310,980 $45.56
Total 8,840,793 6.9 $26.80 4,042,452 $15.82
(1) These stock options do not have an expiration date.
Pursuant to SFAS No. 123, the Company has elected to use the intrinsic
value method of accounting for employee stock-based compensation awards.
Accordingly, the Company has not recognized compensation expense for its
noncompensatory employee stock option awards. The Company's pro forma net
income and earnings per share for fiscal 2000, 1999 and 1998 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 would not be
materially different from reported net income and earnings per share.
The weighted average fair values of the Company's options granted during
fiscal 2000, 1999 and 1998 were $13.31, $15.15 and $7.61 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 2000, 1999 and 1998, respectively;
expected dividend yields of 1.17%, 0.80%, and 1.62%; expected volatility of
28.9%, 26.3%, and 20.5%; risk free interest rates of 6.4%, 4.8% and 5.3%; and
expected option life of six years for all periods.
Restricted Stock Plans
The Company has restricted stock plans under which three 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 2000, 1999 and 1998, 150,000 shares of
Common Stock were issued each year which were valued at $5.5 million, $6.8
million and $4.4 million, respectively. Unearned stock compensation was
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, 2000 and 1999 there were 313,094
shares and 263,765 shares, respectively, issued under the plans which remain
to be vested.
Management Incentive Plans
Most shoreside managerial employees of the Company 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 2000, 1999 and
1998, 35,820, 49,734 and 61,214 shares of Common Stock with a quoted market
value of $1.7 million, $1.7 million and $1.6 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 two non-qualified defined benefit plans. One of
these plans was established in fiscal 1999 and is available to Carnival's
shipboard employees and the other was established in fiscal 2000 and is
available to two executive officers of the Company. 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 $5.2 million, $3.6 million and $1.9 million for fiscal
2000, 1999 and 1998, 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 2000, 1999 and 1998 was $6.8 million, $6.1
million and $5.3 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 the Company. 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 2000, 1999 and 1998, the Company issued
171,886, 144,911 and 175,971 shares, respectively, at a weighted average
share price of $26.36, $36.67 and $24.45, respectively, under this plan.
NOTE 12 - EARNINGS PER SHARE
Earnings per share were computed as follows (in thousands, except per
share data):
Years Ended November 30,
2000 1999 1998
Basic:
Net income $965,458 $1,027,240 $835,885
Average common shares outstanding 599,665 612,484 595,037
Earnings per share $1.61 $1.68 $1.40
Diluted:
Net income $965,458 $1,027,240 $835,885
Effect on net income of assumed
issuance of affiliate securities (3,299)
Net income available assuming dilution $965,458 $1,023,941 $835,885
Average common shares outstanding 599,665 612,484 595,037
Effect of dilutive securities-
shares issuable under various
stock option plans 2,247 3,516 3,411
Average shares outstanding
assuming dilution 601,912 616,000 598,448
Earnings per share $1.60 $1.66 $1.40
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION
YEARS ENDED NOVEMBER 30,
2000 1999 1998
(in thousands)
Cash paid (received) for:
Interest (net of amount capitalized) $40,431 $ 49,836 $ 54,572
Income taxes $ (800) $ 3,841 $ 5,144
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 $ 7,250 $ 8,991 $ 5,975
Note received upon the
sale of the Nieuw Amsterdam $84,500
NOTE 14 - RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission (SEC) released
Staff Accounting Bulletin (SAB) 101, Revenue Recognition in Financial
Statements to provide guidance on the recognition, presentation and
disclosure of revenues in financial statements. In June 2000, the SEC issued
SAB 101B, which delays the Company's implementation date of SAB 101 until not
later than September 1, 2001. The Company has completed its review and
believes that its current revenue recognition policies are in conformity, in
all material respects, with this SAB and does not expect that its adoption
will have a material impact on its financial statements.
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, 2000 and 1999, and
the results of their operations and their cash flows for each of the three
years in the period ended November 30, 2000 in conformity with accounting
principles generally accepted in the United States of America. 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 of America, 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 our opinion.
/s/PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Miami, Florida
January 26, 2001
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 cruise tickets, which includes accommodations, meals and most
onboard activities, (ii) the sale of air transportation to and from the
cruise ships and (iii) the sale of goods and services on board its cruise
ships, such as casino gaming, bar sales, gift shop sales and other related
services. The Company also derives revenues from the tour and related
operations of Holland America Tours.
For segment information related to the Company's revenues, operating
income and other financial information see Note 10 in the accompanying
financial statements. Operations data expressed as a percentage of total
revenues and selected statistical information for the periods indicated was
as follows:
YEARS ENDED NOVEMBER 30,
2000 1999 1998
Revenues 100% 100% 100%
Costs and Expenses
Operating expenses 54 53 54
Selling and administrative 13 13 12
Depreciation and amortization 8 7 7
Operating Income Before Income
From Affiliated Operations 25 27 27
Income From Affiliated Operations, Net 1 2 3
Operating Income 26 29 30
Nonoperating Expense (2)
Net Income 26% 29% 28%
Selected Statistical Information
(in thousands):
Passengers carried 2,669 2,366 2,045
Passenger cruise days (1) 16,750 14,947 13,009
Occupancy percentage (2) 105.4% 104.3% 106.3%
(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 Company's cruise, tour and affiliated operations experience varying
degrees of seasonality. The Company's revenue from the sale of passenger
tickets for its cruise operations is moderately seasonal. Historically,
demand for cruises has been greatest during the summer months. The Company's
tour revenues are highly seasonal with a vast majority of tour revenues
generated during the late spring and summer months in conjunction with the
Alaska cruise season. Airtours, the Company's 25% owned equity affiliate, has
revenues which are very seasonal due primarily to the nature of the European
leisure travel industry. Typically, Airtours' quarters ending June 30 and
September 30 experience higher revenues, with revenues in the quarter ending
September 30 being the highest.
Through fiscal 2000, the Company recorded its share of Airtours and
Costa's operating results in earnings from affiliated operations on a two-
month lag basis. Beginning in fiscal 2001, all of Costa's results of
operations will be consolidated into the Company's financial statements on a
current month basis, thus eliminating the two-month lag in reporting Costa's
results of operations. This change in the timing of reporting periods, as
well as Costa's greater seasonality, will increase the seasonality of the
Company's quarterly results of operations, most significantly between the
Company's third and fourth fiscal quarters. Costa's seasonally strong summer
results of operations will be recorded in the Company's third quarter in
fiscal 2001 versus in the fourth quarter in fiscal 2000. See Note 3 in the
accompanying financial statements.
Average passenger capacity for the Company's cruise brands, excluding
Costa, is expected to increase approximately 9.7% during fiscal 2001 as
compared to fiscal 2000. This increase is primarily a result of the
introduction into service of the Carnival Victory in August 2000, and Holland
America's Zaandam and Amsterdam in May 2000 and October 2000, respectively,
and the expected introduction into service of the Carnival Spirit in April
2001, partially offset by the withdrawal from service of Holland America's
Nieuw Amsterdam in October 2000. The consolidation of Costa in fiscal 2001
will increase the Company's consolidated capacity by an additional 20.7%,
although the impact on the Company's net income will be much less, as a
majority of Costa's net income was included in affiliated operations in prior
years.
The year over year percentage increase in the Company's average
passenger capacity resulting from the delivery of ships currently under
contract for construction for fiscal 2002 and 2003 is expected to approximate
7.1% and 14.0%, respectively.
FISCAL 2000 ("2000") COMPARED TO FISCAL 1999 ("1999")
Revenues
Revenues increased $281 million, or 8% in 2000 compared to 1999,
entirely due to an 8.9% increase in cruise revenues. The cruise revenue
change resulted from an increase of approximately 10.8% in passenger capacity
and a 1.2% increase in occupancy rates, partially offset by a 3.2% decrease
in gross revenue per passenger cruise day. The increase in passenger
capacity resulted primarily from the introduction into service of the
Carnival Triumph and Carnival Victory in July 1999 and August 2000,
respectively, and Holland America's Volendam and Zaandam in November 1999 and
May 2000, respectively. This capacity increase was partially offset by
several ships being out of service for unscheduled drydocks, including
several due to manufacturer's design flaws, and the sale of the Nieuw
Amsterdam in October 2000. The decrease in gross revenue per passenger cruise
day was primarily due to pressure on cruise ticket prices throughout the
year, with the exception of the Millennium cruises. This pressure on cruise
ticket pricing was caused by a number of factors including, but not limited
to, relatively softer demand and a fall-off in pre- and post Millennium
bookings. Also, when a passenger elects to provide his or her own
transportation, rather than purchasing air transportation from the Company,
both the Company's cruise revenues and operating expenses decrease by
approximately the same amount. During 2000, there was a reduction in the
percentage of passengers electing to use the Company's air program and,
accordingly, this caused a reduction in gross revenue per passenger cruise
day, as well as a reduction in operating expenses.
Costs and Expenses
Operating expenses increased $195.7 million, or 10.5% in 2000 compared
to 1999. Cruise operating costs increased by $201.2 million, or 11.8%, to
$1.9 billion in 2000 from $1.7 billion in 1999. Cruise operating costs
increased in 2000 primarily due to additional costs associated with the
increased passenger capacity, increases in fuel costs, and increases in
operational costs primarily related to the Company's Millennium cruises and
port costs. Commencing in the fourth quarter of 1999, the Company began to
incur significantly higher fuel costs due to a very large increase in the
price of bunker fuel which continued to increase as the year progressed. The
increases in the price of fuel increased the Company's consolidated operating
expenses by approximately $51 million for 2000 compared to 1999. Cruise
operating costs as a percentage of cruise revenues were 53.4% and 52% in 2000
and 1999, respectively.
Selling and administrative expenses increased $40.2 million, or 9.0% to
$487.4 million in 2000 from $447.2 million in 1999, primarily due to an
increase in payroll and related costs. Selling and administrative expenses
as a percentage of revenues were 12.9% and 12.8% during 2000 and 1999,
respectively.
Depreciation and amortization increased by $44.0 million, or 18.1% to
$287.7 million in 2000 from $243.7 million in 1999, primarily due to the
additional depreciation associated with the increase in the size of the fleet
and ship refurbishment expenditures.
Affiliated Operations
During 2000, the Company recorded $37.8 million of income from
affiliated operations as compared with $75.8 million of income in 1999. The
Company's portion of Airtours' losses in 2000 was $41.2 million as compared
to income of $36.2 million in 1999. The Company recorded income of $76.7
million and $39.9 million during 2000 and 1999, respectively, related to its
interest in Costa. The Company's results from affiliated operations included
net nonrecurring charges totaling $5 million, consisting of a $43 million
charge for the Company's equity interest in restructuring and other
nonrecurring net charges recorded by Airtours, partially offset by a $38
million income tax benefit resulting from Costa's change in tax status upon
registration of its ships within the Italian International Ship Registry and
the reversal of certain Costa tax liabilities.
See the "General" section for a discussion of Airtours' and Costa's
seasonality. See Notes 3 and 5 in the accompanying financial statements for
more information regarding the acquisition of Costa and the Company's
affiliated operations.
Nonoperating Income (Expense)
Interest income decreased $25.4 million in 2000 to $16.5 million from
$41.9 million in 1999 due primarily to lower average investment balances
primarily resulting from the purchase of Treasury Stock, partially offset by
higher interest rates.
Gross interest expense (excluding capitalized interest) decreased
slightly to $82.5 million in 2000 from $87.9 million in 1999 primarily as a
result of lower average outstanding debt balances, partially offset by a
higher weighted average borrowing cost.
Other income in 2000 of $8.5 million primarily includes $21.4 million
of compensation received from the shipyard, net of certain related expenses,
a $10.6 million gain on a forward foreign currency contract purchased to fix
the acquisition price of Costa, partially offset by, among other things, a
$21 million port litigation charge (see Note 9 in the accompanying financial
statements). The payments from the shipyard represent reimbursements for
expenses incurred and lost profits due to ship construction or design issues
which caused either delays in ship delivery or drydocks to correct the
problems.
FISCAL 1999 ("1999")COMPARED TO FISCAL 1998 ("1998")
Revenues
Revenues increased $488 million, or 16.2% in 1999 compared to 1998,
entirely due to a 17.5% increase in cruise revenues. The cruise revenue
change resulted from an increase of approximately 17.2% in passenger capacity
and a 2.6% increase in gross 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 1999. Both the increase in gross revenue per passenger cruise day
and the decrease in occupancy rates was primarily due to Cunard Line
Limited's higher gross revenue per passenger cruise day and lower occupancy
rates than the Company's other brands and, to a lesser extent, an increase in
gross revenue per passenger cruise day for the Carnival and Holland America
brands.
As a result of the 1999 military conflict in the Balkans, the second
half of the Company's 1999 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% in 1999 compared
to 1998. 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 1999, the Company began to
incur significantly higher fuel costs due to a very large increase in the
price of bunker fuel. 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% to
$447.2 million in 1999 from $369.5 million in 1998, 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%
during 1999 and 1998, 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 in 1999, or
8.1%, to $36.2 million in 1998. The Company recorded income of $39.9 million
during both 1999 and 1998 related to its interest in Costa.
Nonoperating Income (Expense)
Interest income increased $31.7 million in 1999 to $41.9 million from
$10.3 million in 1998 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 7 in the accompanying
financial statements).
Gross interest expense (excluding capitalized interest) decreased
slightly to $87.9 million in 1999 from $92.9 million in 1998 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 nonrecurring
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 Cunard
minority interest expense will be recorded by the Company.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
The Company's business provided approximately $1.3 billion of net cash
from operations during fiscal 2000 and fiscal 1999.
During fiscal 2000, the Company's net expenditures for capital projects
were approximately $1 billion, of which $885 million was spent in connection
with its ongoing shipbuilding program. The shipbuilding expenditures included
the final payments on the Carnival Victory and Holland America's Zaandam,
which were delivered to the Company in July and April 2000, respectively.
The nonshipbuilding capital expenditures consisted primarily of ship
refurbishments, information technology assets, tour assets, and other.
During fiscal 2000, the Company had net borrowings of $342.8 million
under its commercial paper programs and made principal payments related to
other debt totaling $210.7 million pursuant to various notes payable,
including $200 million for the payment of unsecured 5.65% Notes in October
2000. Also on September 29, 2000, the Company incurred approximately $510
million in debt related to the acquisition of the remaining 50% interest of
Costa. In addition, the Company consolidated approximately $620 million of
Costa debt which is included in the November 30, 2000 balance sheet (see Note
3 in the accompanying financial statements). Finally, the Company paid cash
dividends of $254.3 million in fiscal 2000.
In February 2000, the Company's Board of Directors authorized the
repurchase of up to $1 billion of the Company's Common Stock. During fiscal
2000, the Company repurchased 33.1 million shares of its Common Stock at a
cost of $705.1 million. Given the Company's recent purchase of Costa and
management's desire to maintain a strong balance sheet and strong liquidity,
the Company does not anticipate repurchasing additional shares of its Common
Stock in the near future.
Future Commitments and Funding Sources
As of November 30, 2000, the Company had contracts for the delivery of
sixteen new ships over the next five years. The Company's remaining
obligations related to these ships under contract for construction is to pay
approximately $643 million during fiscal 2001 and approximately $6.0 billion
thereafter.
At November 30, 2000, the Company had $2.3 billion of long-term debt of
which $248.2 million is due in fiscal 2001, substantially all of which is
Costa debt. See Notes 6 and 9 in the accompanying financial statements for
more information regarding the Company's debts and commitments.
As a normal part of the Company's business, depending on market
conditions, pricing and the Company's overall growth strategy, the Company
considers opportunities to enter into contracts for the building of
additional ships and also considers potential acquisitions and strategic
alliances.
The Company expects that future cash from operations will be the
Company's principal funding source for capital projects, debt service
requirements, dividend payments and working capital. In addition, as of
November 30, 2000, the Company had $189.3 million of cash and cash
equivalents and $696 million 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. In that regard, management expects to refinance approximately $285
million of the Company's Costa acquisition debt in the first half of 2001, as
well as $220 million of Costa's debt which is due in November 2001.
OTHER MATTERS
Market Risks
The Company is principally exposed to market risks from fluctuations in
foreign currency exchange rates, bunker fuel prices, interest rates and
equity and food commodity prices. The Company seeks to minimize these risks
through its regular operating and financing activities, its long-term
investment and debt portfolio strategies 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.
Exposure to Foreign Currency Exchange Rates
The Company's primary foreign currency exchange risk was related to its
outstanding commitments under ship construction contracts denominated in a
foreign currency. These commitments are affected by fluctuations in the value
of the U.S. dollar as compared to certain European currencies. Foreign
currency forward contracts are generally used to manage this risk (see Notes
2 and 9 in the accompanying financial statements). Accordingly, increases and
decreases in the fair value of these foreign currency forward contracts
offset changes in the U.S. dollar value of the net underlying foreign
currency denominated ship construction commitments, thus resulting in the
elimination of such risk.
At November 30, 2000, the Company's foreign currency forward contracts
which hedge its shipbuilding activities had notional amounts and maturity
dates of $397 million, $816 million, $1.0 billion, $1.2 billion and $291
million in 2001, 2002, 2003, 2004 and 2005, respectively. The fair value of
these contracts was $3.2 billion at November 30, 2000. 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 $320 million which would be offset by
a decrease or increase of $320 million in the U.S. dollar value of the
related foreign currency ship construction commitments resulting in no net
dollar impact to the Company.
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 European shipyards may be at higher prices relative to the
U.S. dollar.
Additionally, the Company's investments in foreign subsidiaries and
affiliates subjects it to foreign currency exchange rate risk. Management
considers its investments in foreign subsidiaries and affiliates to be
denominated in relatively stable currencies and/or of a long-term nature and,
accordingly, does not typically manage its related foreign currency exchange
rate risk through the use of derivative financial instruments. However, in
paying the Costa acquisition price, management utilized debt denominated in
the functional currency of Costa to reduce a portion of this risk.
Finally, the Company sells certain of its cruises and incurs certain
cruise-related expenses in foreign currencies which subjects the Company to
foreign currency exchange risk. The Company does not expect that the impact
of fluctuations in the foreign currency exchange rate on its foreign currency
denominated cruise revenues and expenses to materially affect its results of
operations due primarily to the natural hedges which are expected to exist
within the Company's operations and the relative stability of the foreign
currencies. However, management will continue to monitor such items to
determine if any actions, such as the issuance of additional foreign currency
denominated debt or other financial instruments, would be warranted to reduce
such risk.
Exposure to Bunker Fuel Prices
Cruise ship expenses are impacted by changes in bunker fuel prices.
Bunker fuel consumed over the past three fiscal years ranged from
approximately 2.2 percent in fiscal 1998 to 4.0 percent in fiscal 2000 of the
Company's gross cruise revenues. 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, in fiscal 2000, the
Company entered into fuel swap agreements intended to hedge this price risk
for a minor portion of its fiscal 2001 consumption. Management is continuing
to monitor this market risk, and may, in the future, decide to increase its
use of financial instruments to reduce this risk.
Based upon a 10% hypothetical increase or decrease in the November 30,
2000 bunker fuel price, the Company estimates that its fiscal 2001 bunker
fuel cost would increase or decrease by approximately $17 million compared to
fiscal 2000.
Exposure to Interest Rates
In order to limit its exposure to interest rate fluctuations, the Company
has entered into a substantial amount of fixed rate debt instruments. Also,
its Costa subsidiary currently utilizes variable to fixed interest rate swap
agreements to fix substantially all of its interest costs over the short-
term. The differential in interest rates to be paid or received under these
swap agreements will be recognized in income as part of interest expense over
the life of the contracts. The Company continuously evaluates its debt
portfolio, including interest rate swap agreements, and makes periodic
adjustments to the mix of floating rate and fixed rate debt based on its view
of interest rate movements.
At November 30, 2000, the Company's long-term debt had a carrying value
of $2.35 billion. The Company also had interest rate swaps on debt with a
notional amount of $766 million and a weighted average remaining life of
approximately 2.3 years. The fair value of this debt at November 30, 2000 was
$2.27 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 $42 million.
This hypothetical amount is determined by considering the impact of the
hypothetical interest rates on the Company's existing debt and interest rate
swaps. 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 and a large portion of its variable rate debt is subject to
interest rate swaps which effectively fix the interest rate in the short-
term, it is most likely management would be unable to take any significant
steps in the short-term to mitigate its exposure in the event of a
significant decrease in market interest rates.
Exposure to Equity and Food Commodity Prices
The Company has equity price risk related to its investment in Airtours
and commodity price risk related to its food purchases. The Company does not
typically manage these risks through the use of derivative financial
instruments since it considers its investment in Airtours to be of a long-
term nature and does not expect changes in food commodity prices to be
material. However, management will continue to monitor these risks to
determine if any actions would be necessary to reduce such risks.
Euro Conversion
On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies
("legacy currencies") and one common currency - the euro. The euro trades
on currency exchanges and may be used in business transactions. Beginning in
January 2002, new euro-denominated bills and coins will be used, and legacy
currencies will be withdrawn from circulation. The Company's operating
subsidiaries affected by the euro conversion have developed plans to address
the systems and business issues affected by the euro currency conversion.
These issues include, among others, (i) the need to adapt computer and other
business systems and equipment to accommodate euro-denominated transactions,
and (ii) the competitive impact of cross-border price transparency, which may
affect pricing strategies. The Company does not expect this conversion to
have a material impact on its financial statements.
SELECTED FINANCIAL DATA
The selected financial data presented below for the fiscal years 1996
through 2000 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.
Years Ended November 30,
2000 1999 1998 1997 1996
(in thousands, except per share data)
Income Statement and Other
Data:
Revenues $3,778,542 $3,497,470 $3,009,306 $2,447,468 $2,212,572
Operating income
before income from
affiliated operations $ 945,130 $ 943,941 $ 819,792 $ 660,979 $ 551,461
Operating income $ 982,958 $1,019,699 $ 896,524 $ 714,070 $ 597,428
Net income $ 965,458 $1,027,240 $ 835,885 $ 666,050 $ 566,302
Earnings per share (1):
Basic $ 1.61 $ 1.68 $ 1.40 $ 1.12 $ .98
Diluted $ 1.60 $ 1.66 $ 1.40 $ 1.12 $ .96
Dividends declared
per share (1) $ .420 $ .375 $ .315 $ .240 $ .190
Passenger cruise days 16,750 14,947 13,009 11,908 10,583
Occupancy percentage (2) 105.4% 104.3% 106.3% 108.3% 107.6%
As of November 30,
2000 1999 1998 1997 1996
(in thousands)
Balance Sheet Data:
Total assets $9,831,320 $8,286,355 $7,179,323 $5,426,775 $5,101,888
Long-term debt $2,099,077 $ 867,515 $1,563,014 $1,015,294 $1,316,632
Total shareholders'
equity $5,870,617 $5,931,247 $4,285,476 $3,605,098 $3,030,884
(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 Company's Common Stock is traded on the New York Stock Exchange. The
high and low Common Stock sales prices for the periods indicated were as
follows:
High Low
Fiscal 2000:
First Quarter $50.563 $27.625
Second Quarter $28.813 $21.875
Third Quarter $27.313 $18.625
Fourth Quarter $25.750 $19.688
Fiscal 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
As of January 25, 2001, there were approximately 4,763 holders of record
of the Company's Common Stock. While no tax treaty currently exists between
the Republic of Panama and the U. S., 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 2000 were as follows:
Quarters Ended
February 29, May 31, August 31, November 30,
(in thousands, except per share data)
Revenues $824,878 $875,127 $1,228,211 $850,326
Gross profit $359,438 $378,006 $ 613,487 $369,269
Operating income before
income from affiliated
operations $170,955 $188,891 $ 418,910 $166,374
Operating income $159,518 $194,419 $ 420,458 $208,563
Net income $171,517(1) $203,956(1)(2)$ 396,190 $193,795(3)
Earnings per share:
Basic $ .28 $ .34 $ .67 $ .33(3)
Diluted $ .28 $ .34 $ .67 $ .33(3)
Dividends declared
per share $ .105 $ .105 $ .105 $ .105
(1) Includes $8.5 million and $6.6 million in the February 29 and May 31
quarters, respectively, of net compensation received from the shipyard
relating to the delayed delivery of Holland America Line's Zaandam.
(2) Includes $13.1 million of nonrecurring gains related to the reversal of
certain of Costa's tax liabilities.
(3) Includes nonrecurring charges totaling $24 million, or $.04 per share,
consisting of (a) a $42 million charge for the Company's equity interest in
restructuring and other nonrecurring charges recorded by Airtours and (b) a
$21 million port litigation charge, partially offset by (c) a $12 million
gain on a forward foreign currency contract purchased to hedge the
acquisition price of Costa and (d) a $27 million deferred income tax benefit
resulting from Costa's change in tax status upon registration of its ships
within the Italian International Ship Registry. In addition, includes
approximately $7 million of net compensation received from a shipyard for
reimbursements related to Holland America Line's Rotterdam VI.
Quarterly financial results for fiscal 1999 were as follows:
Quarters Ended
February 28, May 31, August 31, November 30,
(in thousands, except per share data)
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(1) $251,044(1)
Earnings per share:
Basic $ .26 $ .33 $ .68 $ .41
Diluted $ .26 $ .33 $ .67 $ .40
Dividends declared
per share $ .09 $ .09 $ .09 $ .105
(1) Includes $5.1 million and $15.1 million in the August 31 and November 30
quarters, respectively, of net compensation received from the shipyard
related to the delayed delivery of the Carnival Triumph and Holland America
Line's Volendam, respectively.
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 2000 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 the passenger revenue 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; cruise and other
vacation industry competition; changes in tax laws and regulations; the
ability of the Company to implement its shipbuilding program and to
continue to expand its business outside the North American market;
changes in foreign currency exchange rates, food and fuel commodity
prices and interest rates; delivery of new ships on schedule and at the
contracted price; weather patterns; unscheduled ship repairs and
drydocking; incidents involving cruise ships; impact of pending or
threatened litigation; the ability of unconsolidated affiliates to
successfully implement their business strategies and changes in laws and
regulations applicable to the Company.
EXHIBIT 21
LIST OF SUBSIDIARIES AND AFFILIATES OF CARNIVAL CORPORATION
Jurisdiction of Incorporation
Name of Subsidiary or Organization
(14) Airtours plc (25.11% interest) United Kingdom
(9) Alaska Overland, Inc. Alaska
(5) Alaska Travel Center, Inc. Washington
(8) Anchorage Hotel Associates California
CRC Holding, Inc. Florida
Carnival Barbados Ltd. Barbados
(20) Carnival Celebration, Inc. Texas
(21) Carnival Cruise Terminals Mexico, S.A. de C.V. Mexico
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
CC US. Ventures, Inc. Delaware
(23) Compagnie Francaise de Croisieres, S.A. France
Celebration Cruises Inc. Liberia
(10) Costa Crociere S.p.A. Italy
(23) Costa Cruceros, S.A. Argentina
(23) Costa Cruceros, S.L. Spain
(23) Costa Cruise Lines, N.V. Netherlands Antilles
(23) Costa Cruise Lines (UK) Limited United Kingdom
(23) Costa Cruzieros Agencia Maritima E
Turismo, Ltda. Brazil
(24) Costa Finance, S.A. Luxembourg
(25) Costa International, B.V. Amsterdam
(26) Costa Kreuzfahrten, GmbH Germany
(26) Costa Kreuzfahrten GmbH Switzerland
(13) Cozumel Cruise Terminal, S.A. de C.V. Mexico
Crowne Plaza Holdings, Inc. Florida
(26) Cruise Ships Catering & Services
International, N.V. Netherlands Antilles
(27) Cruise Ships Catering & Services, S.A.M. Morocco
(28) Cruise Ships Catering & Services Caribbean, N.V. Netherlands Antilles
(13) Cruise Terminal Services, S.A. de C.V. Mexico
(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
(28) European Cruise Shops Limited Barbados
(5) Evergreen Trails, Inc. Washington
(25) Family Cruises of Italy, S.r.l. Italy
Futura Cruises Inc. Panama
Gemward Limited Ireland
(22) Gibs, Inc. Delaware
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
(31) HAL Nederland N.V. Netherlands Antilles
(5) Holland America Line Paymaster Corporation Washington
(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)(30)Il Ponte S.p.A. Italy
(5) Leisure Corporation Alaska
(26) Milestone, N.V. Netherlands Antilles
(25) Nuova Darsena, S.r.l. Italy
(29) Operadora Catalina, S.A. Dominican Republic
(23) Prestige Cruises, N.V. Netherlands Antilles
(29) Prestige Cruises Management, S.A.M. Monaco
(3) Quattro Mari S.r.l. Italy
(16) Sea Vacations Limited United Kingdom
(11) Sea Vacations UK Limited United Kingdom
(6) Trailways Tours, Inc. Washington
Trident Insurance Company Limited Bermuda
Triumph Bre, S. de R.L. Panama
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 Netherlands, B.V. Netherlands Antilles
(1) Windstar Sail Cruises Limited Bahamas
(5) Worldwide Shore Services Inc. Washington
(28) Zerbone Catering of Italy, N.V. Netherlands Antilles
____________
(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) Subsidiary of Carnival Cruise Terminals Mexico, S.A. de C.V.
(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
(20) Subsidiary of Carnival Barbados Ltd.
(21) Subsidiary of Carnival Investments (UK) Limited
(22) Subsidiary of CC U.S. Ventures, Inc.
(23) Subsidiary of Costa International, B.V.
(24) Subsidiary of HAL Buitenland B.V. and Carnival Corporation
(25) Subsidiary of Costa Crociere, S.p.A.
(26) Subsidiary of Costa International, B.V.
(27) Subsidiary of Cruise Ships Catering & Services International, N.V.
(28) Subsidiary of Cruise Ships Catering & Services, S.A.M.
(29) Subsidiary of Prestige Cruises, N.V.
(30) Subsidiary of Quattro Mari S.r.l.
(31) Subsidiary of Wind Surf Limited
EXHIBIT 23
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-3 (No. 33-63563, No. 333-43269, No. 333-68999 and No.
333-72729) and Registration Statements on Forms 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 26, 2001 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
Miami, Florida
February 26, 2001