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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended FEBRUARY 28, 1995
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
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(Exact name of registrant as specified in its charter)
REPUBLIC OF PANAMA 59-1562976
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3655 N.W. 87TH AVENUE, MIAMI, FLORIDA 33178-2428
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(Address of principal executive offices)
(zip code)
(305) 599-2600
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(Registrants telephone number, including area code)
NONE.
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(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 March 17, 1995.
CLASS A COMMON STOCK, $.01 PAR VALUE: 227,658,902 SHARES
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CLASS B COMMON STOCK, $.01 PAR VALUE: 54,957,142 SHARES
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CARNIVAL CORPORATION
I N D E X
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PAGE
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PART I. FINANCIAL INFORMATION
ITEM 1: Financial Statements
Consolidated Balance Sheets -
February 28, 1995 and November 30, 1994 1
Consolidated Statements of Operations -
Three Months Ended February 28, 1995
and February 28, 1994 2
Consolidated Statements of Cash Flows -
Three Months Ended February 28, 1995
and February 28, 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 6: Exhibits and Reports on Form 8-K 10
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PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
February 28, November 30,
ASSETS 1995 1994
---- ----
CURRENT ASSETS
Cash and cash equivalents $ 49,710 $ 54,105
Short-term investments 63,920 70,115
Accounts receivable 28,440 20,789
Consumable inventories, at average cost 45,771 45,122
Prepaid expenses and other 61,980 50,318
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Total current assets 249,821 240,449
PROPERTY AND EQUIPMENT--at cost, less
accumulated depreciation and amortization 3,095,674 3,071,431
OTHER ASSETS
Goodwill, less accumulated amortization of $43,055 in
1995 and $41,310 in 1994 231,808 233,553
Long-term notes receivable 77,223 76,876
Investments in affiliates and other assets 49,499 47,514
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$3,704,025 $3,669,823
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 87,186 $ 84,644
Accounts payable 85,173 86,750
Accrued liabilities 108,621 114,868
Customer deposits 281,702 257,505
Dividends payable 21,196 21,190
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Total current liabilities 583,878 564,957
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LONG-TERM DEBT 1,013,365 1,046,904
CONVERTIBLE NOTES 115,000 115,000
OTHER LONG-TERM LIABILITIES 14,023 14,028
COMMITMENTS AND CONTINGENCIES (NOTE 5)
SHAREHOLDERS' EQUITY
Class A Common Stock; $.01 par value; one vote per share;
399,500 shares authorized; 227,658 and 227,575 shares
issued and outstanding 2,277 2,276
Class B Common Stock; $.01 par value; five votes per share;
100,500 shares authorized; 54,957 shares issued and
outstanding 550 550
Paid-in-capital 546,464 544,947
Retained earnings 1,436,945 1,390,589
Less-other (8,477) (9,428)
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Total shareholders' equity 1,977,759 1,928,934
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$3,704,025 $3,669,823
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The accompanying notes are an integral part of these financial statements.
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CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended February 28,
--------------------------------
1995 1994
---- ----
REVENUES $419,820 $385,256
COSTS AND EXPENSES
Operating expenses 247,229 230,271
Selling and administrative 64,175 56,476
Depreciation and amortization 31,504 26,496
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342,908 313,243
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OPERATING INCOME 76,912 72,013
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OTHER INCOME (EXPENSE)
Interest income 1,999 1,989
Interest expense, net of capitalized interest (17,551) (13,137)
Other income (expense) 1,362 (99)
Income tax benefit 4,830 4,285
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(9,360) (6,962)
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NET INCOME $ 67,552 $ 65,051
========== ==========
EARNINGS PER SHARE $.24 $.23
========== ==========
The accompanying notes are an integral part of these financial statements.
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CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended February 28,
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1995 1994
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OPERATING ACTIVITIES:
Net income $ 67,552 $ 65,051
ADJUSTMENTS:
Depreciation and amortization 31,504 26,496
Other 2,009 6,567
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Increase in receivables (7,854) (5,293)
Increase in consumable inventories (649) (1,441)
Increase in prepaid and other (11,662) (4,888)
(Decrease) increase in accounts payable (1,577) 7,902
Decrease in accrued liabilities (6,247) (6,099)
Increase in customer deposits 24,197 26,854
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Net cash provided from operations 97,273 115,149
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INVESTING ACTIVITIES:
Decrease in short-term investments 6,195 2,760
Additions to property and equipment, net (54,002) (80,690)
(Increase) decrease in other non-current assets (2,332) 1,674
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Net cash used for investing activities
(50,139) (76,256)
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FINANCING ACTIVITIES:
Principal payments of long-term debt (67,003) (49,919)
Dividends paid (21,190) (19,764)
Proceeds from long-term debt 36,000 10,012
Issuance of common stock 664 946
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Net cash used for financing activities (51,529) (58,725)
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Net decrease in cash and cash equivalents (4,395) (19,832)
Cash and cash equivalents at beginning of period 54,105 60,243
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Cash and cash equivalents at end of period $ 49,710 $ 40,411
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest (net of amount capitalized) $ 11,801 $ 8,440
========= =========
The accompanying notes are an integral part of these financial statements.
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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 February 28, 1995, the
consolidated statements of operations and cash flows for the three months ended
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 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, 1995, 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 have been
retroactively adjusted for this stock split.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
FEBRUARY 28, NOVEMBER 30,
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1995 1994
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(in thousands)
Vessels $3,150,285 $3,147,026
Vessels under construction 227,717 207,128
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3,378,002 3,354,154
Land, buildings and improvements 121,693 95,294
Transportation and other equipment 156,203 152,649
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Total property and equipment 3,655,898 3,602,097
Less - accumulated depreciation and amortization (560,224) (530,666)
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$3,095,674 $3,071,431
========== ==========
Interest costs associated with the construction of vessels and buildings,
until they are placed in service, are capitalized and amounted to $3.8 million
and $4.3 million for the three months ended February 28, 1995 and February 28,
1994, respectively.
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NOTE 3 - LONG-TERM DEBT
Long-term debt consists of the following:
FEBRUARY 28, NOVEMBER 30,
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1995 1994
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(in thousands)
Mortgages and other loans payable bearing interest at rates ranging
from 8% to 9.9%, secured by vessels, maturing through 1999 $ 271,825 $ 287,642
Unsecured Revolving Credit Facility Due 1999 215,000 238,000
Unsecured 5.75% Notes Due March 15, 1998 200,000 200,000
Unsecured 6.15% Notes Due October 1, 2003 124,941 124,939
Unsecured 7.20% Debentures Due October 1, 2023 124,863 124,862
Unsecured 7.70% Notes Due July 15, 2004 99,893 99,890
Unsecured Medium Term Notes bearing interest at rates ranging
from 5.95% to 7.0%, due from 1999 to 2004 30,000 30,000
Other loans payable 34,029 26,215
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1,100,551 1,131,548
Less portion due within one year (87,186) (84,644)
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$1,013,365 $1,046,904
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Property and equipment with a net book value of $997 million at February
28, 1995 is pledged as collateral against the mortgage indebtedness.
In July 1992, the Company issued $115 million of 4-1/2% Convertible
Subordinated Notes Due July 1, 1997. The notes are convertible into 57.55
shares of the Company's Class A Common Stock per $1,000 of notes. As of
February 28, 1995 the notes are convertible into 6.6 million shares of Class A
Common Stock.
NOTE 4 - SHAREHOLDERS' EQUITY
The following represents an analysis of the changes in shareholders' equity
for the three months ended February 28, 1995:
COMMON STOCK
$.01 PAR VALUE PAID-IN RETAINED
CLASS A CLASS B CAPITAL EARNINGS OTHER TOTAL
------- ------- ------- -------- ----- -----
(in thousands)
BALANCE, NOVEMBER 30, 1994 $2,276 $550 $544,947 $1,390,589 $ (9,428) $1,928,934
Net income for the period 67,552 67,552
Cash dividends (21,196) (21,196)
Changes in securities valuation
allowance 514 514
Issuance of stock to employees
under stock plans 1 1,517 1,518
Vested portion of common
stock under restricted stock plan 437 437
------ ---- -------- ---------- ------- ----------
BALANCE, FEBRUARY 28, 1995 $2,277 $550 $546,464 $1,436,945 $(8,477) $1,977,759
====== ==== ======== ========== ======= ==========
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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
--------- -------------- ---- ------------ ------ ----
Imagination Carnival Cruise Lines 6/95 Finnish Markka 2,040 $ 330
Inspiration Carnival Cruise Lines 3/96 U. S. Dollar 2,040 270
Veendam Holland America Line 6/96 Italian Lira 1,266 225
Destiny Carnival Cruise Lines 9/96 Italian Lira 2,640 400
To Be Named Holland America Line 9/97 Italian Lira 1,320 235
To Be Named Carnival Cruise Lines 2/98 U. S. Dollar 2,040 300
To Be Named Carnival Cruise Lines 11/98 U. S. Dollar 2,040 300
To Be Named Carnival Cruise Lines 12/98 Italian Lira 2,640 415
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16,026 $2,475
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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 $228 million through February 28, 1995 and anticipates paying $374
million during the twelve month period ended February 29, 1996 and
approximately $1.8 billion beyond February 29, 1996.
LITIGATION
In 1986 a lawsuit was filed in Federal District Court by the American
Association of Cruise Passengers ("AACP") against the Company, Holland America
Line-Westours, Inc. and ten other cruise lines and an association of travel
agents seeking treble and punitive damages, alleging violation of federal and
state antitrust laws and interference with business expectancies under state
common law. The amount of damages sought is not specified in the complaint and
has not been revealed in discovery to date. AACP has asserted that the
defendants have agreed with each other to boycott AACP because of AACP's
practice of rebating travel agency commissions to passengers and advertising
discounts on such cruise lines' advertised fares. In March 1995, the Federal
District Court dismissed this suit for the second time against both Carnival
Cruise Lines and Holland America Line on jurisdictional grounds. Plaintiff may
appeal again or file its claim in state court. In either case, the Company
will vigorously oppose. The Company does not believe that the outcome of this
lawsuit will have a material adverse affect on the Company's financial
condition or results of operations.
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.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company earns its revenues primarily from (i) the sale of passenger
tickets, which includes accommodations, meals, airfare and substantially all
shipboard activities, 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 tour operations ("Tour
revenues").
The following table presents selected segment and statistical information
for the periods indicated:
THREE MONTHS ENDED FEBRUARY 28,
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1995 1994
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(in thousands)
REVENUES:
Cruise $ 412,645 $ 378,505
Tour 7,291 6,921
Intersegment revenues (116) (170)
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$ 419,820 $ 385,256
========= =========
OPERATING EXPENSES:
Cruise $ 237,499 $ 221,548
Tour 9,846 8,893
Intersegment expenses (116) (170)
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$ 247,229 $ 230,271
========= =========
OPERATING INCOME:
Cruise $ 87,207 $ 81,192
Tour (10,295) (9,179)
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$ 76,912 $ 72,013
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SELECTED STATISTICAL INFORMATION:
Passengers Carried 343 315
Passenger Cruise Days 2,107 1,916
Occupancy Percentage 99.9% 100.2%
The following table sets forth statements of operations data expressed as a
percentage of total revenues:
THREE MONTHS ENDED FEBRUARY 28,
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1995 1994
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REVENUES 100% 100%
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COSTS AND EXPENSES:
Operating expenses 59 60
Selling and administrative 15 14
Depreciation and amortization 8 7
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OPERATING INCOME 18 19
OTHER INCOME (EXPENSE) (2) (2)
--- ---
NET INCOME 16% 17%
=== ===
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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 greater during the periods
from late December through April and late June through August. Holland America
Line ("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. Demand for HAL cruises is lower during the winter months
when HAL ships sail in the more competitive Caribbean market. 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.
THREE MONTHS ENDED FEBRUARY 28, 1995 COMPARED
TO THREE MONTHS ENDED FEBRUARY 28, 1994
REVENUES
The increase in total revenues of $34.6 million from the first quarter of
1994 to the first quarter of 1995 was comprised primarily of a $34.1 million,
or 9.0%, increase in cruise revenues for the period. The increase in cruise
revenues was primarily the result of a 10.3% increase in capacity for the
period resulting from the addition of HAL's cruise ship Ryndam in October 1994
and Carnival's Fascination in July 1994. Also affecting cruise revenues were
slightly lower gross passenger yields and occupancy rates. The reduced
occupancy rates reflect lower occupancy levels for Holland America Line in the
Caribbean partially offset by higher occupancy levels for Carnival Cruise
Lines.
Passenger cruise days (one passenger sailing for a period of one day is one
passenger day) are expected to increase during the next fiscal quarter as
compared to the same period in 1994 as a result of additional capacity provided
from the delivery of the Fascination in July 1994 and the Ryndam in September
1994. With the delivery of the Imagination in June 1995, the Company's
capacity will also increase for the second half of 1995.
COSTS AND EXPENSES
Operating expenses increased $17.0 million, or 7.4%, from the first quarter
of 1994 to the first quarter of 1995. Cruise operating costs increased by
$16.0 million, or 7.2%, to $237.5 million in the first quarter of 1995 from
$221.5 million in the first quarter of 1994, primarily due to additional costs
associated with the increased capacity in the first quarter of 1995. Tour
operating expenses increased $1.0 million, or 10.7%, from the first quarter of
1994 to the first quarter of 1995 primarily due to an increase in operating
costs in the transportation division.
Selling and administrative costs increased $7.7 million, or 13.6%,
primarily due to a 23% increase in advertising expenses during the first
quarter of 1995 as compared with the same quarter of 1994.
Depreciation and amortization increased by $5.0 million, or 18.9%, to
$31.5 million in the first quarter of 1995 from $26.5 million in the first
quarter of 1994 primarily due to the addition of the Ryndam and the
Fascination.
OTHER INCOME (EXPENSE)
Total other expense (net of other income) of $9.4 million increased in the
first quarter of 1995 from $7.0 million in the first quarter of 1994. Interest
income remained essentially unchanged. Interest expense increased to $21.4
million in the first quarter of 1995 from $17.4 million in the first quarter of
1994 as a result of increased debt levels and higher interest rates on floating
rate debt. The higher debt levels were the result of expenditures made in
connection with the ongoing construction of cruise ships. Capitalized interest
decreased to $3.8 million in the first quarter of 1995 from $4.3 million in the
first quarter of 1994 due to lower levels of investments in vessels under
construction. Other income increased to $1.4 million in the first quarter of
1995 as a result of a gain received from an investment.
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LIQUIDITY AND CAPITAL RESOURCES
SOURCES AND USES OF CASH
The Company's business provided $97.3 million of net cash from operations
during the three months ended February 28, 1995, a decrease of 15.5% compared
to the corresponding period in 1994. The decrease between periods was
primarily the result of timing differences in cash receipts and payments
related to operating assets and liabilities.
During the three months ended February 28, 1995, the Company made cash
expenditures of approximately $54 million on capital projects of which $23
million was spent on the purchase of the Company's existing corporate
headquarters facility located in Miami, Florida and $21 million was spent in
connection with its ongoing shipbuilding program. The remainder was spent on
vessel refurbishments, tour assets and other equipment.
The Company also made scheduled principal payments totalling approximately
$16 million under various individual vessel mortgage loans and a net repayment
of $23 million on the $750 million revolving credit facility due 1999 (the
"$750 Million Revolving Credit Facility") during the three months ended
February 28, 1995.
During the three months ended February 28, 1995, the Company declared and
paid cash dividends of approximately $21 million.
FUTURE COMMITMENTS
The Company has contracted to take delivery of eight new vessels over the
next five years. The Imagination is scheduled for delivery in fiscal 1995.
The Company will pay approximately $374 million during the twelve month period
ending February 29, 1996 relating to the construction of cruise ships and
approximately $1.8 billion beyond February 29, 1996. See Note 5 in the
accompanying financial statements for more information related to commitments
for the construction of cruise ships. The Company is currently expanding its
existing corporate headquarters to accommodate growth in its Carnival Cruise
Lines product at an estimated cost of approximately $33 million. In addition,
the Company has $1.1 billion of long-term debt of which $87 million is due
during the twelve month period ending February 29, 1996. See Note 3 in the
accompanying financial statements for more information regarding the Company's
debt.
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 the $750 Million Revolving Credit Facility and/or through
the issuance of long-term debt in the public or private markets. One of the
Company's subsidiaries also has a $25 million line of credit. At February 28,
1995, approximately $535 million was available for borrowing by the Company
under the $750 Million Revolving Credit Facility.
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, 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. 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. In July 1994, the
Company issued $100 million of unsecured notes due July 2004 bearing interest
at 7.7% per annum under the Shelf Registration. The Company has also commenced
an ongoing $100 million medium term note program under the Shelf Registration
pursuant to which the Company may from time to time issue notes with
maturities from nine months to 50 years from the date of issue. Under the
medium term note program, the Company has issued $30 million of five to
ten-year notes bearing interest at rates ranging from 5.95% to 7% per annum. A
balance of $370 million aggregate principal amount of debt or equity securities
remains available for issuance under the Shelf Registration.
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PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Amended and Restated Articles of Incorporation of the Company.
11 Statement regarding computation of per share earnings.
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
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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: March 23, 1995 BY /s/ Micky Arison
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Micky Arison
Chairman of the Board and Chief
Executive Officer
Dated: March 23, 1995 BY /s/ Howard S. Frank
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Howard S. Frank
Vice-Chairman , Chief Financial and
Accounting Officer
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INDEX TO EXHIBITS
Page No. in
Sequential
Numbering
System
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Exhibits
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4.1 Amended and Restated Articles of Incorporation of the Company.
11 Statement regarding computation of per share earnings.
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule (for SEC use only)