[NOTIFY] 72731,737
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DCD.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1995February 29, 1996
OR
[ ] TRANSITION]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 1-9610
CARNIVAL CORPORATION
(Exact name of registrant as specified in its charter)
Republic of Panama 59-1562976
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3655 N.W. 87th Avenue, Miami, Florida 33178-2428
(Address of principal executive offices)
(zip code)
(305) 599-2600
(Registrants telephone number, including area code)
None.
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No__
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of October 9, 1995.April 8, 1996.
Class A Common Stock, $.01 par value: 229,830,658229,965,560 shares
Class B Common Stock, $.01 par value: 54,957,142 shares
CARNIVAL CORPORATION
I N D E X
Page
Part I. Financial Information
Item 1: Financial Statements
Consolidated Balance Sheets -
August 31, 1995February 29, 1996 and November 30, 19941995 1
Consolidated Statements of Operations -
Nine and Three Months Ended August 31,February 29, 1996
and February 28, 1995
and August 31, 1994 2
Consolidated Statements of Cash Flows -
NineThree Months Ended August 31,February 29, 1996
and February 28, 1995
and August 31, 1994 3
Notes to Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information
Item 1: Legal Proceedings 1311
Item 5: Other Information 11
Item 6: Exhibits and Reports on Form 8-K 1311
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
August 31,February 29, November 30,
ASSETS 1996 1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 88,107291,694 $ 54,10553,365
Short-term investments 60,153 70,11526,603 50,395
Accounts receivable 32,601 20,78930,280 33,080
Consumable inventories, at average cost 49,783 45,12249,542 48,820
Prepaid expenses and other 57,916 50,31872,906 70,718
Total current assets 288,560 240,449471,025 256,378
PROPERTY AND EQUIPMENT--at cost, less
accumulated depreciation and
amortization 3,394,516 3,071,4313,637,223 3,414,823
OTHER ASSETS
Goodwill, less accumulated amortization of
$46,546$50,037 in 1996 and $48,292 in 1995 and $41,310 in 1994 228,317 233,553224,826 226,571
Long-term notes receivable 78,302 76,87667,936 78,907
Investments in affiliates and other assets 45,200 47,514
$4,034,895 $3,669,823141,956 128,808
$4,542,966 $4,105,487
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 72,18572,767 $ 84,64472,752
Accounts payable 105,493 86,75090,040 90,237
Accrued liabilities 162,393 114,868117,780 113,483
Customer deposits 301,639 257,505343,945 292,606
Dividends payable 21,358 21,19025,636 25,632
Total current liabilities 663,068 564,957650,168 594,710
LONG-TERM DEBT 957,408 1,046,9041,364,393 1,035,031
CONVERTIBLE NOTES 115,000 115,000
OTHER LONG-TERM LIABILITIES 15,499 14,02817,095 15,873
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY
Class A Common Stock; $.01 par value;one vote per
share; 399,500 shares authorized; 229,815229,959 and
227,575229,839 shares issued and outstanding 2,300 2,298 2,276
Class B Common Stock; $.01 par value;five votes per
share; 201,000 shares authorized;
54,957 shares issued and outstanding 550 550
Paid-in-capital 594,452 544,947597,197 594,811
Retained earnings 1,693,544 1,390,5891,803,569 1,752,140
Less-other (6,924) (9,428)(7,306) (4,926)
Total shareholders' equity 2,283,920 1,928,934
$4,034,895 $3,669,8232,396,310 2,344,873
$4,542,966 $4,105,487
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Nine Months Three Months Ended
August 31, Ended August 31,February 29, 1996 February 28, 1995 1994 1995 1994
REVENUES $1,545,244 $1,395,452 $ 672,598 $ 600,796$448,788 $419,820
COSTS AND EXPENSES
Operating expenses 865,311 790,663 352,135 314,545263,696 247,229
Selling and administrative 187,880 161,530 63,634 53,50171,282 64,175
Depreciation and amortization 94,753 80,539 32,709 27,823
1,147,944 1,032,732 448,478 395,86932,835 31,504
367,813 342,908
OPERATING INCOME 397,300 362,720 224,120 204,92780,975 76,912
NONOPERATING INCOME (EXPENSE)
Interest income 10,311 6,208 3,405 2,4897,845 1,999
Interest expense, net of
capitalized interest (48,583) (36,738) (15,268) (11,892)(16,038) (17,551)
Other income (expense) 18,931 (9,269) 13,742 (9,334)757 1,362
Income tax expense (11,096) (11,208) (16,457) (17,414)
(30,437) (51,007) (14,578) (36,151)benefit 3,526 4,830
(3,910) (9,360)
NET INCOME $ 366,86377,065 $ 311,713 $ 209,542 $ 168,77667,552
EARNINGS PER SHARE $1.29 $1.10$.27 $ .74 $ .60.24
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
NineThree Months Ended
August 31,February 29, 1996 February 28, 1995 1994
OPERATING ACTIVITIES:
Net income $366,863 $311,713$ 77,065 $ 67,552
Adjustments:
Depreciation and amortization 94,753 80,539
Vesting of stock plan shares 1,309 1,05832,835 31,504
Other 3,726 1,8362,854 2,009
Changes in operating assets and liabilities:
IncreaseDecrease (increase) in receivables (11,995) (8,602)2,666 (7,854)
Increase in consumable inventories (4,661) (5,476)
(Increase) decrease(722) (649)
Increase in prepaid and other (7,877) 1,226
Increase(2,226) (11,662)
Decrease in accounts payable 18,743 18,609(197) (1,577)
Increase (decrease) in accrued liabilities 17,637 23,5204,297 (6,247)
Increase in customer deposits 44,134 42,75551,339 24,197
Net cash provided from operations 522,632 467,178167,911 97,273
INVESTING ACTIVITIES:
Decrease in short-term investments 9,962 16,25021,026 6,195
Additions to property and equipment, net (382,435) (405,555)
Decrease (increase)net(253,452) (54,002)
Increase in other non-current assets 888 (3,063)
Proceeds from the sale of discontinued operation - 20,000(2,177) (2,332)
Net cash used for investing activities (371,585) (372,368)activities(234,603) (50,139)
FINANCING ACTIVITIES:
Principal payments of long-term debt (341,166) (371,215)(115,555) (67,003)
Dividends paid (63,740) (59,299)(25,632) (21,190)
Proceeds from long-term debt 239,188 393,693444,922 36,000
Issuance of common stock 48,673 2,121
Repayment of debt of discontinued operation - (25,000)1,286 664
Net cash used forprovided from (used for)
financing activities (117,045) (59,700)305,021 (51,529)
Net increase (decrease) in cash and
cash equivalents 34,002 35,110238,329 (4,395)
Cash and cash equivalents at beginning
of period 53,365 54,105 60,243
Cash and cash equivalents at end of periodperiod$291,694 $ 88,107 $ 95,35349,710
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS FOR PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The financial statements included herein have been prepared by Carnival
Corporation (the "Company") without audit pursuant to the rules and regulations of the
Securities and Exchange Commission.
The accompanying consolidated balance sheet at August 31, 1995,February 29, 1996, the
consolidated statements of operations for the nine and three months ended August
31, 1995 and 1994 and cash flows for the ninethree months ended
August 31,February 29, 1996 and February 28, 1995 and
1994 are unaudited and, in the opinion of
management, contain all adjustments, consisting of only normal recurring
accruals, necessary for a fair presentation. The Company's operations of Carnival
Corporation and its subsidiaries (the "Company") are seasonal and results for
interim periods are not necessarily indicative of the results for the entire
year.
The accompanying financial statements include the consolidated balance sheets
and statements of operations and cash flows of the Company and its
subsidiaries. All material intercompany transactions and accounts have been
eliminated in consolidation.
On December 14, 1994, a two-for-one stock split was effected whereby one
additional common share, par value $.01, was issued for each share outstanding
to shareholders of record on November 30, 1994. All share and per share data
appearing in the consolidated financial statements and notes thereto has been
retroactively adjusted for this stock split.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Vessels $3,465,356 $3,147,026$3,730,520 $3,467,731
Vessels under construction 254,142 207,128
3,719,498 3,354,154257,969 289,661
3,988,489 3,757,392
Land, buildings and improvements 127,917 95,294146,002 132,183
Transportation and other equipment 165,181 152,649184,391 174,903
Total property and equipment 4,012,596 3,602,0974,318,882 4,064,478
Less - accumulated depreciation and
amortization (618,080) (530,666)
$3,394,516 $3,071,431(681,659) (649,655)
$3,637,223 $3,414,823
Interest costs associated with the construction of vessels and buildings,
until they are placed in service, are capitalized and amounted to $13.4$5.9 million
and $16.0$3.8 million for the ninethree months ended August 31,February 29, 1996 and February 28,
1995, and August 31, 1994, respectively.
NOTE 3 - LONG-TERM DEBT
Long-term debt consists of the following:
Unsecured $750 Million Revolving Credit Facility Due 19992000 $ 84,000520,000 $ 238,000185,000
Mortgages and other loans payable bearing interest
at rates ranging from 8% to 9.9%, secured by
vessels, maturing through 1999 232,208 287,642198,667 208,078
Unsecured 5.75% Notes Due March 15, 1998 200,000 200,000
Unsecured 6.15% Notes Due October 1, 2003 124,944 124,939124,948 124,946
Unsecured 7.20% Debentures Due October 1, 2023 124,865 124,862124,868 124,867
Unsecured 7.70% Notes Due July 15, 2004 99,899 99,89099,904 99,902
Unsecured 7.05% Notes Due May 15, 2005 99,80699,816 99,811
Other loans payable 63,871 56,215
1,029,593 1,131,54868,957 65,179
1,437,160 1,107,783
Less portion due within one year (72,185) (84,644)
$ 957,408 $1,046,904(72,767) (72,752)
$1,364,393 $1,035,031
Property and equipment with a net book value of $881 million at August 31,
1995 is pledged as collateral against the mortgage indebtedness.
In May 1995, the Company issued $100 million of unsecured 7.05% Notes Due May
15, 2005 under a shelf registration statement.
In July 1992, the Company issued $115 million of 4-1/2% Convertible
Subordinated Notes Due July 1, 1997.1997 (the "Convertible Notes"). The notesConvertible
Notes are convertible into 57.55 shares of the Company's Class A Common Stock
per $1,000 of notes. As of August
31, 1995February 29, 1996 the notesConvertible Notes are
convertible into a total of approximately 6.6 million shares of Class A Common
Stock. The notesConvertible Notes are redeemable in whole or in part at the
Company's option on or after July 3, 1996.
NOTE 4 - SHAREHOLDERS' EQUITY
The following represents an analysis of the changes in shareholders' equity
for the ninethree months ended August 31, 1995:February 29, 1996:
COMMON STOCK
$.01 PAR VALUE PAID-IN RETAINED
CLASS A CLASS B CAPITAL EARNINGS OTHER TOTAL
(in thousands)
Balance November 30, 1994 $2,2761995 $2,298 $550 $544,947 $1,390,589 $(9,428) $1,928,934$594,811 $1,752,140 $(4,926) $2,344,873
Net income for the period 366,863 366,86377,065 77,065
Cash dividends (63,908) (63,908)
Issuance of common stock 21 46,488 46,509(25,636) (25,636)
Changes in securities
valuation allowance 1,195 1,195(2,766) (2,766)
Issuance of stock to
employees under
stock plans 1 3,017 3,0182 2,386 2,388
Vested portion of common
stock under restricted
stock plan 1,309 1,309386 386
Balance August 31, 1995 $2,298February
29, 1996 $2,300 $550 $594,452 $1,693,544 $(6,924) $2,283,920$597,197 $1,803,569 $(7,306) $2,396,310
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Capital Expenditures
The following table provides a description of ships currently under contract
for construction (in millions of dollars):
Expected Number Estimated
Delivery Contract of Lower Total
Ship Name Operating Unit Date Denomination Berths Cost
Inspiration Carnival Cruise Lines 3/96 U. S. Dollar 2,040 $ 270
Veendam Holland America Line 6/4/96 Italian Lira 1,266 $ 225
Carnival Destiny Carnival Cruise Lines 9/10/96 Italian Lira 2,640 400
To Be NamedRotterdam VI Holland America Line 9/97 Italian Lira 1,320 235
To Be NamedElation Carnival Cruise Lines 2/98 U. S. Dollar 2,040 300
To Be NamedParadise Carnival Cruise Lines 11/98 U. S. Dollar 2,040 300
To Be NamedCarnival Triumph Carnival Cruise Lines 12/98 Italian Lira 2,640 415
13,986 $2,14511,946 $1,875
Contracts denominated in foreign currencies have been fixed into U.S. Dollars
through the utilization of forward currency contracts. In connection with the
vessels under contract for construction described above, the Company has paid $254$258 million
through August 31, 1995February 29, 1996 and anticipates paying $437$482 million during the twelve
month period ended August 31, 1996February 28, 1997 and approximately $1.5$1.1 billion beyond
August 31, 1996.February 28, 1997. In connection with the delivery of Carnival's Imagination was delivered in June 1995 and
began service July 1, 1995.
Litigation
On September 19, 1995, a purported class action suit was filed againstInspiration,
the Company paid $219 million in the United States District Court in the Southern Districtfirst fiscal quarter of Florida.
The suit alleges that1996.
Litigation
During 1995, the Company has violatedreceived $40 million in cash and other consideration
from the Florida Deceptive and Unfair
Trade Practices Act by overcharging passengers for port charges. The suit seeks
declaratory reliefsettlement of litigation with Metra Oy, the former parent company of
Wartsila Marine Industries Incorporated ("Wartsila"), related to enjoinlosses suffered
in connection with the Company from further alleged overcharges and
seeks compensatory damages in an unspecified amount. The action is presently in
the early stages and it is not possible at this time to determine the outcomeconstruction of three of the litigation. ManagementCompany's cruise ships. The
Company is continuing to pursue claims in bankruptcy proceedings in Finland to
recover additional damages suffered in connection with the construction of the
Company intends to vigorously defend the
litigation.
The United States Attorney for the District of Alaska has commenced an
investigation to determine if a Holland America Line ("HAL") vessel discharged
bilgewater, alleged to have contained oil or oily mixtures, at various locations
allegedly within United States territorial waters at various times during the
summer and early fall of 1994. It is unknown whether any proceedings will be
initiated and, if so, what violations will be alleged. To date, no penalties
have been sought or proposed. Management does not believe that the amount of
potential penalties will have a material impact on the Company.three ships.
In the normal course of business, various other claims and lawsuits have been
filed or are pending against the Company. The majority of these claims and
lawsuits are covered by insurance. Management believes the outcome of any such
suits which are not covered by insurance would not have a material adverse
effect on the Company's financial condition or results of operations.
NOTE 6 - RECENT EVENTS
In April 1996, the Company acquired a 29.54% equity interest in Airtours plc
("Airtours") , a large United Kingdom, publicly traded tour company, for
approximately $300 million. The Company entered into a five year $200 million
multi-currency revolving credit facility and will fund approximately $157
million of the acquisition cost through the facility. In addition, the Company
will issue 5,301,186 shares of Class A common stock valued at approximately $143
million to fund the remaining purchase price. This transaction will be accounted
for by the Company using the equity method of accounting. The Company will
begin reporting its share of Airtours operating results in its quarter ending
August 31, in which it will record Airtours operating results for its quarter
ending June 30.
In February 1996, the Company sold an option to NCL Holding AS to purchase
$101 million principal amount of 13 percent senior secured notes due 2003 of
Kloster Cruise Limited (the "Kloster Bonds") that are owned by the Company. The
option, which if exercised would result in a small gain to the Company, expires
on May 31, 1996.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements under this caption, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", constitute
"forward-looking statements" under the Private Securities Litigation Reform
Act of 1995 (the "Reform Act"). See Part II Other Information Item
5(a),"Forward-Looking Statements."
General
The Company earns its revenues primarily from (i) the sale of passenger
tickets, which includesinclude accommodations, meals, airfaremost shipboard activities and
substantially all
shipboard activities,in many cases airfare, and (ii) the sale of goods and services on board its
cruise ships, such as casino gaming, liquor sales, gift shop sales and other
related services. Collectively, such revenues are referred to herein as "Cruise
revenues". The Company also derives revenues from the tour operations
which
comprises a tour business, 16 hotels, four luxury day-boats, over 290 motor
coaches and ten private domed rail carsof HAL Antillen N.V. ("Tour revenues"HAL").
The following table presents selected segment and statistical information
for the periods indicated:
Nine Months Ended August 31, Three Months Ended
August 31,February 29, 1996 February 28, 1995 1994 1995 1994
(in thousands)
REVENUES:
Cruise $1,368,806 $1,233,558 $530,199 $470,703$441,687 $412,645
Tour 217,700 203,342 178,852 166,2757,239 7,291
Intersegment revenues (41,262) (41,448) (36,453) (36,182)
$1,545,244 $1,395,452 $672,598 $600,796(138) (116)
$448,788 $419,820
OPERATING EXPENSES:
Cruise $ 742,902 $ 676,534 $261,584 $231,623$254,687 $237,499
Tour 163,671 155,577 127,004 119,1049,147 9,846
Intersegment expenses (41,262) (41,448) (36,453) (36,182)
$ 865,311 $ 790,663 $352,135 $314,545(138) (116)
$263,696 $247,229
OPERATING INCOME:
Cruise $ 368,13490,120 $ 337,748 $182,645 $166,55487,207
Tour 29,166 24,972 41,475 38,373(9,145) (10,295)
$ 397,30080,975 $ 362,720 $224,120 $204,92776,912
SELECTED STATISTICAL INFORMATION:
Passengers Carried 1,138,775 1,026,966 442,068 394,475408 343
Passenger Cruise Days 6,825,026 6,109,029 2,549,285 2,264,2042,454 2,107
Occupancy Percentage 105.1% 105.0% 114.6% 113.4%107.1% 99.9%
The following table sets forth statements of operations data expressed as a
percentage of total revenues:
Nine Months Three Months Ended
August 31, Ended August 31,February 29, 1996 February 28,
1995 1994 1995 1994
REVENUES 100% 100% 100% 100%
COSTS AND EXPENSES:
Operating expenses 56 57 52 5259 59
Selling and administrative 12 11 10 916 15
Depreciation and amortization 6 6 5 57 8
OPERATING INCOME 26 26 33 3418 18
NONOPERATING INCOME (EXPENSE) (1) (2) (4) (2) (6)
NET INCOME 24% 22% 31% 28%17% 16%
The Company's different businesses experience varying degrees of
seasonality. The Company's revenue from the sale of passenger tickets for
Carnival Cruise Lines' ("Carnival") ships is moderately seasonal.
Historically, demand for Carnival cruises has been greatergreatest during the periodsperiod
from late December through
April and late June through August. Holland America Line ("HAL")August and lower during the fall months. HAL cruise
revenues are more seasonal than Carnival's cruise revenues. Demand for HAL
cruises is strongest during the summer months when HAL ships operate in
Alaska.Alaska and Europe for which HAL obtains higher pricing. Demand for HAL
cruises is lower during the winter months when HAL ships sail in the more
competitive Caribbean market.markets. The Company's tour revenues are extremely seasonal with
a large majority of tour revenues generated during the late spring and
summer months in conjunction with the Alaska cruise season.
NineThree Months Ended August 31, 1995February 29, 1996 Compared
To NineThree Months Ended August 31, 1994February 28, 1995
Revenues
The increase in total revenues of $149.8 million from the first nine monthsquarter of 19941995 to the first
nine monthsquarter of 19951996 was comprised primarily of a $135.2$29.0 million, or 11.0%7.0%, increase in cruise
revenues for the period.revenues. The increase in cruise revenues was primarily the result of a 11.7%an
8.7% increase in capacity for the period resulting from the addition of
Carnival's cruise ship Fascination in July
1994, HAL's Ryndam in October 1994, and Carnival's Imagination in July 1995,
partially offset by the discontinuation of the FiestaMarina division1995. Occupancy rates were up 7%
and pricing was down 7% resulting in September 1994. Also affecting cruise revenues werenet yield (total net revenue per lower
gross passenger per
diems. The gross passenger per diems decreased primarily due to a reduction in
the percentage of passengers electing the Company's air program. When a
passenger elects to purchase his/her own air transportation, rather than use the
Company's air program, both the Company's cruise revenues and operating expenses
decrease by approximately the same amount. The occupancy rates remained atberth) remaining essentially the same levels. Also affecting cruise revenues in 1995 and 1994
were lost revenues caused by the shipboard incidents described under
"Nonoperating Income (Expense)" below.
Capacity as well as passenger cruise days (one passenger sailing for a period
of one dayunchanged.
Average capacity is one passenger day) are expected to increase 14.5% during the next fiscalsecond quarter of
1996 as compared towith the same period in 19941995 as a result of the additiondelivery of
the Ryndam in October 1994 and
the Imagination in July 1995.
Revenues fromJune 1995 and the Company's Tour operations increased $14.4 million, or 7.1%,Inspiration in February 1996. During
the second half of fiscal 1996, average capacity is expected to $217.7 million inincrease
13.4% as compared with the second half of fiscal 1995 from $203.3 million in 1994. The increase was
primarily theas a result of an increasethe
delivery of the vessels mentioned above as well as the Veendam in the tour and transportation revenues
generated by the company's tour business and Gray Line of Alaska tour and
motorcoach operations.April 1996.
See "PART II. ITEM 5. OTHER INFORMATION - Forward Looking Statements".
Costs and Expenses
Operating expenses increased $74.6$16.5 million, or 9.4%6.7%, from the first nine
monthsquarter
of 19941995 to the first nine monthsquarter of 1995.1996. Cruise operating costs increased by
$66.4$17.2 million, or 9.8%7.2%, to $742.9$254.7 million in the first nine monthsquarter of 19951996 from
$676.5$237.5 million in the first nine monthsquarter of 1994,1995, primarily due to additional
costs associated with the increased capacity in the first nine months
of 1995. Tour operating expenses increased $8.1 million, or 5.2%, from the
first nine months of 1994 to the first nine months of 1995 primarily due to an
increase in tour passengers.capacity.
Selling and administrative costs increased $26.4$7.1 million, or 16.3%11.1%,
primarily due to a 26.6%an increase in advertising expenses and an increase in
payroll and related costs during the first nine monthsquarter of 19951996 as compared with
the same periodquarter of 1994.1995.
Depreciation and amortization increased by $14.2$1.3 million, or 17.6%4.2%, to $94.8$32.8
million in the first nine monthsquarter of 19951996 from $80.5$31.5 million in the first nine
monthsquarter
of 19941995 primarily due to the addition of the Ryndam, the Fascination and the Imagination.
Nonoperating Income (Expense)
Total nonoperating expense (net of nonoperating income) decreased to $30.4$3.9
million for the first nine monthsquarter of 19951996 from $51.0$9.4 million in the first nine
monthsquarter
of 1994.1995. Interest income increased $4.1$5.8 million primarily due to earnings on
the recognition ofKloster Bonds and an increase in cash balances. Cash balances increased
due to United Kingdom regulatory requirements applicable to the Company's
tender offer to acquire an interest income on notes received from the sale of Carnival's
Crystal Palace Hotel and Casino and higher investment balances. Interest
expense increased to $61.9 millionin Airtours (see Note 6 in the
first nine months of 1995 from $52.7accompanying financial statements for more information related to the
Airtours acquisition). Gross interest expense (excluding capitalized
interest) increased $.6 million in the first nine months of 1994 primarily as a result of increased debt
levels and higher interest rates on variable rate debt. The increased debt
levels were the result of expenditures madeadditional borrowings required
in connection with the ongoing
construction and deliveryacquisition of new cruise ships. CapitalizedAirtours. This increase was partially
offset by a reduction in interest decreased
to $13.4 million in the first nine months of 1995 from $16.0 million in the
first nine months of 1994expense due to lower average debt balances
for other corporate purposes. Capitalized interest increased $2.1 million due
to higher investment levels of investments in vessels under construction.
Other income increased to $18.9 million in the first nine months of 1995
primarily as a result of a $14.4 million gain from the settlement of litigation
with Metra Oy and a gain on the sale of the Company's entire interest in
Epirotiki Cruise Line. The gains were partially offset by the loss from the
Celebration incident discussed below and certain other less significant non-
related, non-recurring items. The Company received $40 million from the
settlement of litigation with Metra Oy in July 1995. Of this amount, $6.2
million was used to pay related legal fees, $14.4 million was recorded as other
income and $19.4 million was used to reduce the Company's cost basis of certain
ships which had been the subject of the Company's lawsuit against Metra Oy.
In June 1995, a fire, which was quickly extinguished, broke out in the engine
control room on Carnival's Celebration. There were no injuries to passengers or
crew, however, there was damage to one of the vessel's electrical control
panels. The time necessary to complete repairs to the Celebration as a result
of this incident reduced the availability of the ship and partially offset the
capacity increases in the third quarter of 1995 discussed above under
"Revenues". Costs associated with repairs to the ship, passenger handling and
various other expenses, net of estimated insurance recoveries, amounted to $3.0
million and were included in other expenses. In addition, the Company estimates
the loss of revenue, net of related variable expenses, from the Celebration
being out of service reduced operating income and net income by an additional
$7.3 million in the third quarter of 1995.
Other expenses of $9.3 million in 1994 were the result of two events which
occurred during the third quarter of 1994. In September 1994, the Company
discontinued its FiestaMarina division because of lower than expected passenger
occupancy levels which resulted in a charge of $3.2 million to other expenses.
In August 1994, HAL's Nieuw Amsterdam ran aground in Alaska resulting in the
cancellation of three one-week cruises. Costs associated with repairs to the
ship, passenger handling and various other expenses, net of estimated insurance
recoveries, amounted to $6.4 million and were included in other expenses. In
addition, the Company estimates the loss of revenue, net of related variable
expenses, from the Nieuw Amsterdam being out of service during that three-week
period, reduced operating income and net income by an additional $4.5 million in
the third quarter of 1994.
Three Months Ended August 31, 1995 Compared
To Three Months Ended August 31, 1994
Revenues
The increase in total revenues of $71.8 million from the third quarter of
1994 to the third quarter of 1995 was comprised primarily of a $59.5 million, or
12.6%, increase in cruise revenues for the period. The increase in cruise
revenues was primarily the result of an 11.4% increase in capacity for the
period resulting from the addition of Carnival's cruise ship Fascination in July
1994, HAL's Ryndam in October 1994, and Carnival's Imagination in July 1995,
partially offset by the discontinuation of the FiestaMarina division in
September 1994. Also affecting cruise revenues were slightly higher occupancy
rates while gross passenger per diems remained at the prior year's level.
Cruise revenues in 1995 and 1994 were also affected by lost revenues caused by
the shipboard incidents described in "Nonoperating Income (Expense)" above.
Revenues from the Company's Tour operations increased $12.6 million, or 7.6%,
to $178.9 million in 1995 from $166.3 million in 1994. The increase was
primarily the result of an increase in tour and transportation revenues.
Costs and Expenses
Operating expenses increased $37.6 million, or 12.0%, from the third quarter
of 1994 to the third quarter of 1995. Cruise operating costs increased by $30.0
million, or 12.9%, to $261.6 million in the third quarter of 1995 from $231.6
million in the third quarter of 1994, primarily due to additional costs
associated with the increased capacity in the third quarter of 1995. Tour
operating expenses increased $7.9 million, or 6.6%, to $127.0 million in the
third quarter of 1995 from $119.1 million in the third quarter of 1994 primarily
due to an increase in the number of tour passengers.
Selling and administrative costs increased $10.1 million, or 18.9%, primarily
due to a 20.2% increase in advertising expenses and an increase in payroll and
related costs during the third quarter of 1995 as compared with the same quarter
of 1994.
Depreciation and amortization increased by $4.9 million, or 17.6%, to $32.7
million in the third quarter of 1995 from $27.8 million in the third quarter of
1994 primarily due to the addition of the Ryndam, the Fascination and the
Imagination.
Nonoperating Income (Expense)
Total nonoperating expense (net of nonoperating income) decreased to $14.6
million for the third quarter of 1995 from $36.2 million in the third quarter of
1994. Interest income increased $.9 million primarily due to the recognition of
interest income related to notes from the sale of Carnival's Crystal Palace
Hotel and Casino and increased investment levels. Interest expense increased to
$20.5 million in the third quarter of 1995 from $18.3 million in the third
quarter of 1994 primarily as a result of increased debt levels and higher
interest rates on variable rate debt. The increased debt levels were the result
of expenditures made in connection with the ongoing construction and delivery of
new cruise ships. Capitalized interest decreased to $5.2 million in the third
quarter of 1995 from $6.4 million in the third quarter of 1994 due to lower
levels of advance payments for vessels under construction. Other income
increased to $13.7 million in the third quarter of 1995 primarily as a result of
a $14.4 million gain from the settlement of litigation with Metra Oy less the
loss from the Celebration incident discussed above and certain other non-
related, non-recurring items. Other expense of $9.3 million in 1994 was the
result of a $3.2 million charge related to the discontinuation of the
FiestaMarina division and a $6.4 million charge related to the grounding of the
Nieuw Amsterdam discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
The Company's business provided $522.6$167.9 million of net cash from operations
during the ninethree months ended August 31, 1995,February 29, 1996, an increase of 11.9%72.6%
compared to the corresponding period in 1994.1995. The increase between periods
was primarily the result of changes in working capital accounts, primarily
customer deposits, and an increase in net income.
During the ninethree months ended August 31, 1995,February 29, 1996, the Company made cash
expenditures ofexpended
approximately $382$253.5 million on capital projects, of which $346.5$229.9 million was
spent in connection with its ongoing shipbuilding program and $28$11.6 million
was spent on the purchase and expansion of the Company's existing
corporate headquarters facilityshore side operations facilities
located in Miami, Florida. The remainder was spent on vessel refurbishments,
tour assets and other equipment. Amounts expended on the shipbuilding
program included a final paymentpayments of $235$219 million upon delivery of the Imagination in June 1995.
In April 1995, the Company received $47 million of net proceeds from the sale
of 2.1 million shares of Class A Common Stock by the Company pursuantrelated to the underwriters exercise of an overallotment optionInspiration which
was delivered in a secondary offering by
certain shareholders of the Company. Also, during the nine months ended August
31 1995, the Company issued $100 million of 7.05% Notes Due May 15, 2005February 1996 and received approximately $99.2 millionentered revenue producing service in cash proceeds net of underwriting fees
and other costs and borrowed $128 million under the $750 million revolving
credit facility due 1999 (the "$750 Million Revolving Credit Facility").late
March 1996.
The Company made scheduled principal payments totallingtotaling approximately $55$9.4
million under various individual vessel mortgage loans and repaid $282$105.0
million of the outstanding balance on the $750 Million Revolving Credit
Facility Due 2000 (the "$750 Million Revolver") during the ninethree months ended
August 31, 1995.February 29, 1996. The Company borrowed $440.0 million under the $750 Million
Revolver during the same three months in connection with the final payment of
the Inspiration and for the Airtours investment described above.
During the ninethree months ended August 31, 1995,February 29, 1996, the Company declared and
paid cash dividends of approximately $64$25.6 million.
Future Commitments
The Company has contracts for the delivery of sevensix new vessels over the next
four years. The Company will pay approximately $437$482 million during the twelve
month period ending August 31, 1996February 28, 1997 relating to the construction and
delivery of those new cruise ships and approximately $1.5$1.1 billion beyond
August 31, 1996.February 28, 1997. See Note 5 in the accompanying financial statements for
more information related to commitments for the construction of cruise ships.
In addition, the Company has $1.1$1.6 billion of long-term debt and convertible
notes of which $72$72.8 million is due during the twelve month period ending
August 31, 1996.February 28, 1997. See Note 3 in the accompanying financial statements for
more information regarding the Company's debt. Also, see "PART II. ITEM 5.
OTHER INFORMATION - Forward Looking Statements".
Funding Sources
Cash from operations is expected to be the Company's principal source of
capital to fund its debt service requirements and ship construction costs.
In addition, the Company may fund a portion of the construction cost of new
ships from borrowings under theits $750 Million Revolving Credit FacilityRevolver and/or through the
issuance of long-term debt in the public or private markets. OneAs of February
29, 1996, the
Company's subsidiaries also has a $25 million line of credit. The Company had $666$230 million available for borrowing under theits $750
Million Revolving Credit
Facility asRevolver and an additional $250 million available under a short-term
revolving credit facility to be used for general corporate purposes.
In April 1996, the Company acquired a 29.54% equity interest in Airtours
plc ("Airtours") , a large United Kingdom, publicly traded tour company, for
approximately $300 million. The Company entered into a five year $200
million multi-currency revolving credit facility and will fund approximately
$157 million of August 31, 1995.the acquisition cost through the facility. In addition, the
Company will issue 5,301,186 shares of Class A common stock valued at
approximately $143 million to fund the remaining purchase price.
To the extent that the Company should require or choose to fund future
capital commitments from sources other than operating cash or from borrowings
under the $750 Million Revolving Credit Facility,its revolving credit facilities, the Company 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. See "PART II.
ITEM 5. OTHER INFORMATION - Forward Looking Statements". In this regard, the
Company has filed two Registration Statements on Form S-3 (the "Shelf
Registration") relating to a shelf offering of up to $500 million aggregate
principal amount of debt or equity securities. Through August 1995,February 29, 1996,
the Company has issued $100$230 million of unsecured notes due July 2004 bearing interest at
7.7% per annum, $30 million of five to ten-year notes bearing interest at rates
ranging from 5.95% to 7% per annum, and $100 million of unsecured notes due May
15, 2005 bearing interest at 7.05% per annum.debt securities under the shelf. A
balance of $270 million aggregate principal amount of debt or equity
securities remains available for issuance under the Shelf Registration.
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGSItem 1. Legal Proceedings
On September 19, 1995, a purported class action suit was filed against the
Company in the United States District Court in the Southern District of Florida.
The suit allegesalleged that the Company has violated the Florida Deceptive and Unfair
Trade Practices Act by overcharging passengers for port charges. On April 2,
1996, the United States District Court for the Southern District of Florida
dismissed the suit. The suit seeks
declaratory reliefwas dismissed with prejudice as to
enjointhe plaintiffs' federal law claim and without prejudice as to state law
claims which may be refiled in state court.
ITEM 5: Other Information
(a) Forward-Looking Statements
Certain statements in this Form 10-Q and in the future filings by the
Company from further alleged overchargeswith the Securities and seeks compensatory damages in an unspecified amount. The action is presentlyExchange Commission, in the early stagesCompany's press
releases, and it is not possible at this time to determinein oral statements made by or with the outcomeapproval of an
authorized executive officer constitute "forward-looking statements" within
the meaning of the litigation. ManagementReform Act. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of the Company intends to vigorously defendbe materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among
others, the litigation.
The United States Attorneyfollowing: general economic and business conditions which may
impact levels of disposable income of consumers and pricing and passenger
yields for the DistrictCompany's cruise products; increases in cruise industry
capacity in the Caribbean and Alaska; changes in tax laws and
regulations(especially any change affecting the Company's status as a
"controlled foreign corporation" as defined in Section 957(a) of Alaskathe Internal
Revenue Code of 1986, as amended) (see "Markets for the Registrant's Common
Equity and Related Stockholders' Matters - Taxation of the Company" in the
Company's Annual Report on Form 10-K for the year ended November 30, 1995);
the ability of the Company to implement its shipbuilding program and to
expand its business outside the North American market where it has commenced an
investigationless
experience; weather patterns in the Caribbean; unscheduled ship repairs and
drydocking; incidents involving cruise vessels at sea; and changes in laws
and government regulations applicable to determine if a HAL vessel discharged bilgewater, alleged to
have contained oil or oily mixtures,the Company (including the
implementation of the "Safety of Life at various locations allegedly within
United States territorial waters at various times during the summerSea Convention" and early
fall of 1994. It is unknown whether any proceedings will be initiatedchanges in
Federal Maritime Commission surety and if
so, what violations will be alleged. To date, no penalties have been sought or
proposed. Management does not believe that the amount of potential penalties
will have a material impact on the Company.guaranty arrangements).
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Revolving credit facility dated April 1, 1996 between Carnival
Corporation, Nationsbanc Capital Markets, Inc., and Nationsbank, N.A.
10.1 Letter agreement dated March 27, 1996 between Carnival Corporation and
CHC Casinos Canada Limited
10.2 Letter dated February 21, 1996 to Carnival Corporation and CS First
Boston Limited from David Crossland
10.3 Letter dated February 21, 1996 to Carnival Corporation and CS First
Boston Limited from Thomas Trickett
10.4 Shareholders' agreement dated February 21, 1996 between Carnival
Corporation and David Crossland
10.5 Subscription agreement between Carnival Corporation and Airtours plc
dated February 21, 1996
11 Statement regarding computation of per share earnings
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K
Current reportNone
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on Form 8-K (File No. 1-9610) filed withits behalf by the
Commission
on July 19, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARNIVAL CORPORATION
Dated: October 12, 1995 BY /s/ Micky Arison
Micky Arison
Chairman of the Board and Chief
Executive Officer
Dated: October 12, 1995undersigned thereunto duly authorized.
CARNIVAL CORPORATION
Dated: April 10, 1996 BY /s/ Micky Arison
Micky Arison
Chairman of the Board and Chief
Executive Officer
Dated: April 10, 1996 BY /s/ Howard S. Frank
Howard S. Frank
Vice-Chairman, Chief Financial and
Accounting Officer
INDEX TO EXHIBITS
Page No. in
Sequential
Numbering
System
Exhibits
4.1 Revolving credit facility dated April 1, 1996 between Carnival
Corporation, Nationsbanc Capital Markets, Inc., and Nationsbank, N.A.
10.1 Letter agreement dated March 27, 1996 between Carnival Corporation and
CHC Casinos Canada Limited
10.2 Letter dated February 21, 1996 to Carnival Corporation and CS First
Boston Limited from David Crossland
10.3 Letter dated February 21, 1996 to Carnival Corporation and CS First
Boston Limited from Thomas Trickett
10.4 Shareholders' agreement dated February 21, 1996 between Carnival
Corporation and David Crossland
10.5 Subscription agreement between Carnival Corporation and Airtours plc
dated February 21, 1996
11 Statement regarding computation of per share earnings
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule