UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 2005
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 Commission file number: 1-15136
Carnival Corporation Carnival plc
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Republic of Panama England and Wales
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
59-1562976 98-0357772
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
3655 N.W. 87th Avenue Carnival House, 5 Gainsford Street,
Miami, Florida 33178-2428 London SE1 2NE, United Kingdom
(Address of principal (Address of principal
executive offices) executive offices)
(Zip Code) (Zip Code)
(305) 599-2600 011 44 20 7940 5381
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
None None
(Former name, former address (Former name, former address
and former fiscal year, if and former fiscal year, if
changed since last report.) changed since last report.)
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|
Indicate by check mark whether the registrants are shell companies (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
At September 30, 2005 Carnival At September 30, 2005, Carnival plc had
Corporation had outstanding outstanding 212,356,919 Ordinary Shares
637,116,766 shares of Common $1.66 par value, one Special Voting
Stock, $.01 par value. Share, GBP 1.00 par value and 637,116,766
Trust Shares of beneficial interest in
the P&O Princess Special Voting Trust.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in millions, except per share data)
Nine Months Three Months
Ended August 31, Ended August 31,
---------------- ----------------
2005 2004 2005 2004
---- ---- ---- ----
Revenues
Cruise
Passenger tickets $6,432 $5,663 $2,692 $2,444
Onboard and other 1,783 1,555 666 584
Other 305 267 247 222
------ ------ ------ ------
8,520 7,485 3,605 3,250
------ ------ ------ ------
Costs and Expenses
Operating
Cruise
Commissions, transportation
and other 1,297 1,227 483 467
Onboard and other 307 270 116 92
Payroll and related 861 739 303 253
Food 465 412 160 149
Other ship operating 1,542 1,285 570 473
Other 212 183 158 140
------ ------ ------ ------
Total 4,684 4,116 1,790 1,574
Selling and administrative 973 944 298 306
Depreciation and amortization 672 599 226 210
------ ------ ------ ------
6,329 5,659 2,314 2,090
------ ------ ------ ------
Operating Income 2,191 1,826 1,291 1,160
------ ------ ------ ------
Nonoperating (Expense) Income
Interest income 19 12 10 3
Interest expense, net of
capitalized interest (250) (212) (82) (76)
Other expense, net (13) (9) (23) (2)
------ ------ ------ ------
(244) (209) (95) (75)
------ ------ ------ ------
Income Before Income Taxes 1,947 1,617 1,196 1,085
Income Tax Expense, Net (43) (56) (45) (60)
------ ------ ------ ------
Net Income $1,904 $1,561 $1,151 $1,025
====== ====== ====== ======
Earnings Per Share
Basic $ 2.36 $ 1.95 $ 1.43 $ 1.28
====== ====== ====== ======
Diluted $ 2.27 $ 1.88 $ 1.36 $ 1.22
====== ====== ====== ======
Dividends Per Share $ 0.55 $0.375 $ 0.20 $0.125
====== ====== ====== ======
The accompanying notes are an integral part of these consolidated financial
statements.
1
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
August 31, November 30,
ASSETS 2005 2004
---- ----
Current Assets
Cash and cash equivalents $ 1,139 $ 643
Short-term investments 234 17
Accounts receivable, net 434 409
Inventories 253 240
Prepaid expenses and other 352 419
------- -------
Total current assets 2,412 1,728
------- -------
Property and Equipment, Net 21,434 20,823
Goodwill 3,243 3,321
Trademarks 1,283 1,306
Other Assets 394 458
------- -------
$28,766 $27,636
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 230 $ 381
Current portion of long-term debt 1,077 681
Convertible debt subject to current put option 600
Accounts payable 682 631
Accrued liabilities and other 740 868
Customer deposits 2,102 1,873
------- -------
Total current liabilities 4,831 5,034
------- -------
Long-Term Debt 6,274 6,291
Other Long-Term Liabilities and Deferred Income 571 551
Contingencies (Note 4)
Shareholders' Equity
Common stock of Carnival Corporation; $.01 par
value; 1,960 shares authorized; 638 shares at 2005
and 634 shares at 2004 issued 6 6
Ordinary shares of Carnival plc; $1.66 par value;
226 shares authorized; 212 shares at 2005 and
2004 issued 353 353
Additional paid-in capital 7,454 7,311
Retained earnings 10,081 8,623
Unearned stock compensation (16) (16)
Accumulated other comprehensive income 270 541
Treasury stock; 42 shares of Carnival plc at cost (1,058) (1,058)
------- -------
Total shareholders' equity 17,090 15,760
------- -------
$28,766 $27,636
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
2
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Nine Months Ended August 31,
----------------------------
2005 2004
---- ----
OPERATING ACTIVITIES
Net income $1,904 $1,561
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 672 599
Investment write-down 22
Accretion of original issue discount 16 16
Other 11 12
Changes in operating assets and liabilities
Receivables (117) (33)
Inventories (16) (55)
Prepaid expenses and other (37) (27)
Accounts payable 68 90
Accrued and other liabilities 15 115
Customer deposits 254 344
------ ------
Net cash provided by operating activities 2,792 2,622
------ ------
INVESTING ACTIVITIES
Additions to property and equipment (1,632) (2,865)
Sales of short-term investments 648 933
Purchases of short-term investments (865) (659)
Proceeds from retirement of property and equipment 77
Other, net 5 (15)
------ ------
Net cash used in investing activities (1,844) (2,529)
------ ------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 1,151 843
Principal repayments of long-term debt (1,068) (887)
Payments of short-term borrowings, net (133) (46)
Dividends paid (402) (300)
Proceeds from exercise of stock options 52 111
Purchase of treasury stock (30)
Other (7) (5)
------ ------
Net cash used in financing activities (437) (284)
------ ------
Effect of exchange rate changes on cash and cash
equivalents (15) (11)
------ ------
Net increase (decrease) in cash and
cash equivalents 496 (202)
Cash and cash equivalents at beginning of period 643 610
------ ------
Cash and cash equivalents at end of period $1,139 $ 408
====== ======
The accompanying notes are an integral part of these consolidated financial
statements.
3
CARNIVAL CORPORATION & PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - Basis of Presentation
Carnival Corporation is incorporated in Panama, and Carnival plc is
incorporated in England and Wales. Together with their consolidated subsidiaries
they are referred to collectively in these consolidated financial statements and
elsewhere in this joint Quarterly Report on Form 10-Q as "Carnival Corporation &
plc," "our," "us," and "we."
Carnival Corporation and Carnival plc (formerly known as P&O Princess
Cruises plc or "P&O Princess") operates as a dual listed company ("DLC"),
whereby the businesses of Carnival Corporation and Carnival plc are combined
through a number of contracts and through amendments to Carnival Corporation's
articles of incorporation and by-laws and to Carnival plc's memorandum of
association and articles of association. The two companies have retained their
separate legal identities, however, they operate as if they were a single
economic enterprise.
The accompanying consolidated balance sheet at August 31, 2005, the
consolidated statements of operations for the nine and three months ended August
31, 2005 and 2004 and the consolidated statements of cash flows for the nine
months ended August 31, 2005 and 2004 are unaudited and, in the opinion of our
management, contain all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation. Our interim consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and the related notes included in the Carnival Corporation
& plc 2004 joint Annual Report on Form 10-K. Our operations are seasonal and
results for interim periods are not necessarily indicative of the results for
the entire year.
Reclassifications have been made to prior period amounts to conform to the
current period presentation, including reflecting the gross purchases and sales
of variable rate securities as investing activities in our 2004 Consolidated
Statement of Cash Flows rather than as a component of cash and cash equivalents.
Accordingly, we decreased our August 31, 2004 cash and cash equivalents by $186
million to $408 from $594 million and increased short-term investments by a like
amount.
NOTE 2 - Stock-Based Compensation
Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," as amended, we elected to use the
intrinsic value method of accounting for our employee and director stock-based
compensation awards instead of the fair value method. Accordingly, we have not
recognized compensation expense for our noncompensatory employee and director
stock option awards. Our pro forma net income and pro forma earnings per share,
had we elected to adopt the fair value approach of SFAS No. 123, which charges
earnings for the estimated fair value of stock options, would have been as
follows (in millions, except per share amounts):
4
Nine Months Three Months
Ended August 31, Ended August 31,
---------------- ----------------
2005 2004 2005 2004
---- ---- ---- ----
Net income, as reported $1,904 $1,561 $1,151 $1,025
Stock-based compensation
expense included in
net income, as reported 8 9 3 4
Total stock-based compensation
expense determined under
the fair value-based method
for all awards (57) (43) (20) (12)
------ ------ ------ ------
Pro forma net income for basic
earnings per share 1,855 1,527 1,134 1,017
Interest on dilutive convertible notes 37 36 12 12
------ ------ ------ ------
Pro forma net income for diluted
earnings per share $1,892 $1,563 $1,146 $1,029
====== ====== ====== ======
Earnings per share
Basic
As reported $ 2.36 $ 1.95 $ 1.43 $ 1.28
====== ====== ====== ======
Pro forma $ 2.30 $ 1.91 $ 1.41 $ 1.27
====== ====== ====== ======
Diluted
As reported $ 2.27 $ 1.88 $ 1.36 $ 1.22
====== ====== ====== ======
Pro forma $ 2.22 $ 1.85 $ 1.35 $ 1.21
====== ====== ====== ======
In December 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123 (revised 2004), "Share-Based Payment Statement 123(R)," which will
require us to recognize compensation costs in our financial statements in an
amount equal to the fair value of share-based payments granted to employees and
directors. This statement is effective for us in the first quarter of fiscal
2006. We have not yet determined which of the alternative transition methods we
will use upon adoption of this new statement. However, based on preliminary
estimates, if we were to elect to adopt this statement on December 1, 2005, our
additional full year 2006 share-based compensation expense is estimated to be in
the range of approximately $65 million to $70 million.
NOTE 3 - Debt
In February 2005, Carnival plc extended its 600 million euro ($734 million
U.S. dollars at the August 31, 2005 exchange rate) unsecured multi-currency
revolving credit facility for 364 days, and reduced this facility's commitment
fee on the undrawn portion from nine basis points ("BPS") to 7.5 BPS.
Accordingly, this facility now expires in March 2006.
In March 2005, Carnival plc entered into a five-year unsecured
multi-currency term loan facility, bearing interest at euribor/GBP libor plus
32.5 BPS. Under this facility, we borrowed 368 million euros ($450 million U.S.
dollars at the August 31, 2005 exchange rate) to repay a 368 million euro note,
which bore interest at euribor plus 60 BPS, prior to its October 2008 maturity
date. We also borrowed 165 million sterling under this facility ($296 million
U.S. dollars at the August 31, 2005 exchange rate), which we used to pay a
portion of P&O Cruises' purchase price for the Arcadia. Finally, we entered into
interest rate swap agreements to fix the interest rates on these euro and
sterling borrowings at 3.50% and 5.40%, respectively.
At November 30, 2004, our 2% convertible notes were classified as a
current liability, since the noteholders had the right to require us to
repurchase them on April 15, 2005. However, substantially all of the noteholders
did not exercise their rights. Accordingly, subsequent to April 15, 2005 we have
classified our 2% convertible notes as long-term debt, since the next date that
the noteholders can require us to repurchase them is on April 15, 2008.
5
During the nine months ended August 31, 2005, $112 million of our
Zero-Coupon Notes were converted at their accreted value into 3.4 million shares
of Carnival Corporation common stock, of which 0.6 million were issued from
treasury stock.
In July 2005, we borrowed $328 million under an unsecured term loan
facility, to pay a portion of the Carnival Liberty purchase price. This facility
bears interest at 4.51% and is repayable in semi-annual installments through
July 2017. In addition, we entered into a foreign currency contract, which
effectively converted this U.S. dollar debt to euro debt.
Finally, in the third quarter of 2005 we obtained two unsecured term loan
financing facilities, bearing interest at 4.51% and 4.75%, which provide us with
the option to borrow up to an aggregate of $732 million for a portion of two
ships' purchase prices. These ships are expected to be delivered in 2006 and
2007. These facilities are repayable semi-annually over a 12 year period.
However, we have the option to terminate these facilities up until 60 days prior
to the ships' delivery dates.
NOTE 4 - Contingencies
Litigation
On March 7, 2005, a lawsuit was filed against Carnival Corporation in the
U.S. District Court for the Southern District of Florida on behalf of some
current and former crew members alleging that Carnival Cruise Lines failed to
pay the plaintiffs' overtime and minimum wages. The suit seeks payment of (i)
the overtime wages alleged to be owed, (ii) penalty wages under U.S. law and
(iii) interest. On August 5, 2005, the Court dismissed the lawsuit. The
plaintiffs filed an appeal to the Eleventh Circuit U.S. Court of Appeals on
August 18, 2005, which is currently pending. The ultimate outcome of this matter
cannot be determined at this time.
In 2002, two actions (collectively, the "Facsimile Complaints") were filed
against Carnival Corporation on behalf of purported classes of persons who
received unsolicited advertisements via facsimile, alleging that Carnival
Corporation and other defendants distributed unsolicited advertisements via
facsimile in contravention of the U.S. Telephone Consumer Protection Act. The
plaintiffs seek to enjoin the sending of unsolicited facsimile advertisements
and statutory damages. The advertisements referred to in the Facsimile
Complaints that reference a Carnival Cruise Lines product were not sent by
Carnival Corporation, but rather were distributed by a professional faxing
company at the behest of third party travel agencies. We do not advertise
directly to the traveling public through the use of facsimile transmission. The
ultimate outcomes of the Facsimile Complaints cannot be determined at this time.
However, we believe that we have meritorious defenses and we intend to
vigorously defend against these actions.
Costa Cruises ("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
a 79 million euro denominated contract for the conversion and lengthening of the
ship in November 2000. Costa also gave notice of termination of the contract in
January 2001. It is expected that the arbitration tribunal's decision will be
made in 2006 at the earliest. In the event that an award is given in favor of
Cammell Laird, the amount of damages, which Costa would have to pay, if any, is
not currently determinable. The ultimate outcome of this matter cannot be
determined at this time.
In April 2003, Festival Crociere S.p.A. ("Festival") commenced an action
against the European Commission (the "Commission") in the Court of First
Instance of the European Communities in Luxembourg seeking to annul the
Commission's antitrust approval of the DLC transaction (the "Festival Action").
We have been granted leave to intervene in the Festival Action and filed a
Statement in Intervention with the court. Festival was declared bankrupt in May
2004, and Festival did not submit observations on our Statement in Intervention.
A date for an oral hearing will be set in due course, unless Festival withdraws
its action. A successful third party
6
challenge of an unconditional Commission clearance decision would be
unprecedented, and based on a review of the law and the factual circumstances of
the DLC transaction, as well as the Commission's approval decision in relation
to the DLC transaction, we believe that the Festival Action will not have a
material adverse effect on the companies or the DLC transaction. However, the
ultimate outcome of this matter cannot be determined at this time.
In May 2005, a class action lawsuit was filed against Carnival Corporation
in the United States District Court for the Southern District of Florida
alleging breach of the implied covenant of good faith and fair dealing and a
violation of The Florida Deceptive and Unfair Trade Practices Act for profits
made by Carnival Cruise Lines on shore excursions provided by third party shore
excursion operators. The suit seeks certification as a class action on behalf of
all Carnival Cruise Line passengers from May 5, 2001 to the present who have
taken shore excursions, and seeks payment of damages and injunctive relief. We
are not yet able to estimate the potential impact of this claim, and the
ultimate outcome of this matter cannot be determined at this time. However, we
believe that we have meritorious defenses and we intend to vigorously defend
against this action.
In the normal course of our business, various other claims and lawsuits
have been filed or are pending against us. Most of these claims and lawsuits are
covered by insurance and, accordingly, the maximum amount of our liability, net
of any insurance recoverables, is typically limited to our self-insurance
retention levels. However, the ultimate outcome of these claims and lawsuits
cannot be determined at this time.
Contingent Obligations
At August 31, 2005, Carnival Corporation had contingent obligations
totaling approximately $1.1 billion to participants in lease out and lease back
type transactions for three of its ships. At the inception of the leases, the
entire amount of the contingent obligations was paid by Carnival Corporation to
major financial institutions to enable them to directly pay these obligations.
Accordingly, these obligations were considered extinguished, and neither the
funds nor the contingent obligations have been included on our balance sheets.
Carnival Corporation would only be required to make any payments under these
contingent obligations in the remote event of nonperformance by these financial
institutions, all of which have long-term credit ratings of AA or higher. In
addition, Carnival Corporation obtained a direct guarantee from another AA+
rated financial institution for $302 million of the above noted contingent
obligations, thereby further reducing the already remote exposure to this
portion of the contingent obligations. If the major financial institutions'
credit ratings fall below AA-, Carnival Corporation would be required to move a
majority of the funds from these financial institutions to other highly-rated
financial institutions. If Carnival Corporation's credit rating falls below BBB,
it would be required to provide a standby letter of credit for $86 million, or
alternatively provide mortgages in the aggregate amount of $86 million on two of
its ships.
In the unlikely event that Carnival Corporation were to terminate the
three lease agreements early or default on its obligations, it would, as of
August 31, 2005, have to pay a total of $171 million in stipulated damages. As
of August 31, 2005, $179 million of standby letters of credit have been issued
by a major financial institution in order to provide further security for the
payment of these contingent stipulated damages. Between 2017 and 2022, we have
the right to exercise options that would terminate these transactions at no cost
to us.
Some of the debt agreements that we enter into include indemnification
provisions that obligate us to make payments to the counterparty if certain
events occur. These contingencies generally relate to changes in taxes, changes
in laws that increase lender capital costs and other similar costs. The
indemnification clauses are often standard contractual terms and were entered
into in the normal course of business. There are no stated or notional amounts
included in the indemnification clauses and we are not able to estimate the
maximum potential amount of future payments, if any, under these indemnification
clauses. We have not been required to make any material
7
payments under such indemnification clauses in the past and, under current
circumstances, we do not believe a request for material future indemnification
payments is probable.
NOTE 5 - Comprehensive Income
Comprehensive income was as follows (in millions):
Nine Months Three Months
Ended August 31, Ended August 31,
---------------- ----------------
2005 2004 2005 2004
---- ---- ---- ----
Net income $1,904 $1,561 $1,151 $1,025
Items included in accumulated
other comprehensive income
Foreign currency translation adjustment (273) 135 (96) (40)
Changes related to cash flow
derivative hedges 2 (3) 8 4
------ ------ ------ ------
Total comprehensive income $1,633 $1,693 $1,063 $ 989
====== ====== ====== ======
NOTE 6 - Segment Information
Our cruise segment includes all of our cruise brands, which have been
aggregated as a single reportable segment based on the similarity of their
economic and other characteristics, including products and services they
provide. Our other segment primarily represents the transportation, hotel and
tour operations of Holland America Tours and Princess Tours, and the business to
business travel agency operations of P&O Travel Ltd.
Selected segment information for our cruise and other segments was as
follows (in millions):
Nine Months Ended August 31,
-------------------------------------------------------
Selling Depreciation
Operating and admin- and Operating
2005 Revenues expenses istrative amortization income
-------- -------- --------- ------------ ------
Cruise $8,215 $4,472 $932 $650 $2,161
Other 406 313 41 22 30
Intersegment elimination (101) (101)
------ ------ ---- ---- ------
$8,520 $4,684 $973 $672 $2,191
====== ====== ==== ==== ======
2004
Cruise $7,218 $3,933 $902 $583 $1,800
Other 355 271 42 16 26
Intersegment elimination (88) (88)
------ ------ ---- ---- ------
$7,485 $4,116 $944 $599 $1,826
====== ====== ==== ==== ======
Three Months Ended August 31,
-------------------------------------------------------
Selling Depreciation
Operating and admin- and Operating
2005 Revenues expenses istrative amortization income
-------- -------- --------- ------------ ------
Cruise $3,358 $1,632 $286 $218 $1,222
Other 333 244 12 8 69
Intersegment elimination (86) (86)
------ ------ ---- ---- ------
$3,605 $1,790 $298 $226 $1,291
====== ====== ==== ==== ======
2004
Cruise $3,028 $1,434 $292 $204 $1,098
Other 301 219 14 6 62
Intersegment elimination (79) (79)
------ ------ ---- ---- ------
$3,250 $1,574 $306 $210 $1,160
====== ====== ==== ==== ======
8
Note 7 - Merchant Navy Officers Pension Fund ("MNOPF")
P&O Cruises, Princess Cruises and Cunard Line participate in an
industry-wide British MNOPF, which is a defined benefit multiemployer pension
plan that is available to certain of their British shipboard officers. As of
August 31, 2005, the New Section of the MNOPF was estimated by the MNOPF actuary
to have a funding deficit of approximately 234 million sterling, or $420
million.
Substantially all of any MNOPF deficit liability which we may have relates
to P&O Cruises and Princess Cruises obligations, which existed prior to the DLC
transaction. The amount of our share of the fund's ultimate deficit could vary
considerably if different pension assumptions and/or estimates were used.
Therefore, we expense our portion of any deficit as amounts are invoiced by the
fund's trustee.
In August 2005, we received an invoice from the fund for what the trustee
calculated to be our share of the entire MNOPF liability. Accordingly, we
recorded the full invoiced liability of $23 million in payroll and related
expense in our 2005 third quarter. It is possible that the fund's trustee may
invoice us for additional amounts in the future for various reasons, including
if they believe the fund requires further funding.
NOTE 8 - Earnings Per Share
Our basic and diluted earnings per share were computed as follows (in
millions, except per share data):
Nine Months Three Months
----------- ------------
Ended August 31, Ended August 31,
---------------- ----------------
2005 2004 2005 2004
---- ---- ---- ----
Net income $1,904 $1,561 $1,151 $1,025
Interest on dilutive convertible notes 37 36 12 12
------ ------ ------ ------
Net income for diluted earnings per share $1,941 $1,597 $1,163 $1,037
====== ====== ====== ======
Weighted-average common and ordinary
shares outstanding 805 802 806 803
Dilutive effect of convertible notes 43 44 43 43
Dilutive effect of stock plans 6 4 5 5
------ ------ ------ ------
Diluted weighted-average shares
outstanding 854 850 854 851
====== ====== ====== ======
Basic earnings per share $ 2.36 $ 1.95 $ 1.43 $ 1.28
====== ====== ====== ======
Diluted earnings per share $ 2.27 $ 1.88 $ 1.36 $ 1.22
====== ====== ====== ======
Options to purchase 2.2 million (3.8 million in 2004) and 2.2 million (1.3
million in 2004) shares for the nine and three months ended August 31, 2005 and
2004, respectively, were excluded from our diluted earnings per share
computation since the effect of including them was anti-dilutive.
NOTE 9 - Italian Tonnage Tax
During the 2005 third quarter, Costa elected to enter into the Italian
Tonnage Tax regime, effective for its 2005 fiscal year and for the following
nine years. This regime will tax Costa's and AIDA's shipping profits, as
defined, calculated by reference to the net tonnage of its qualifying vessels.
However, income not considered to be shipping profits for Tonnage Tax purposes
will be taxed under Costa's and AIDA's current tax regime for its Italian
registered ships, which results in a tax of approximately 6.6% on these
non-tonnage tax profits. As a result of the adoption of the Italian Tonnage Tax
regime, Costa's and AIDA's Italian income tax expense for the 2005 nine month
period was $4 million compared to $13 million in 2004 under the prior tax
regime.
9
NOTE 10 - Investment
During the 2005 third quarter, we recorded a $22 million write-down of a
non-cruise investment, which has been recorded as a nonoperating other expense
in the accompanying Consolidated Statement of Operations.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Cautionary Note Concerning Factors That May Affect Future Results
Some of the statements contained in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
joint Quarterly Report on Form 10-Q are "forward-looking statements" that
involve risks, uncertainties and assumptions with respect to us, including some
statements concerning future results, outlook, plans, goals and other events
which have not yet occurred. These statements are intended to qualify for the
safe harbors from liability provided by Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. You can find many,
but not all, of these statements by looking for words like "will," "may,"
"believes," "expects," "anticipates," "forecast," "future," "intends," "plans,"
and "estimates" and for similar expressions.
Because forward-looking statements involve risks and uncertainties, there
are many factors that could cause our actual results, performance or
achievements to differ materially from those expressed or implied in this joint
Quarterly Report on Form 10-Q. Forward-looking statements include those
statements which may impact the forecasting of our earnings per share, net
revenue yields, booking levels, pricing, occupancy, operating, financing and/or
tax costs, costs per available lower berth day ("ALBD"), estimates of ship
depreciable lives and residual values, outlook or business prospects. These
factors include, but are not limited to, the following:
- risks associated with the DLC structure, including the uncertainty of its
tax status;
- general economic and business conditions, which may impact levels of
disposable income of consumers and net revenue yields for our cruise
brands;
- conditions in the cruise and land-based vacation industries, including
competition from other cruise ship operators and providers of other
vacation alternatives and increases in capacity offered by cruise ship and
land-based vacation alternatives;
- risks associated with operating internationally;
- the international political and economic climate, armed conflicts,
terrorist attacks and threats thereof, availability of air service, other
world events and adverse publicity, and their impact on the demand for
cruises;
- accidents and other incidents affecting the health, safety, security and
vacation satisfaction of passengers, including machinery and equipment
failures, which could cause the alteration of itineraries or cancellation
of a cruise or series of cruises;
- changing public and consumer tastes and preferences, which may, among
other things, adversely impact the demand for cruises;
- our ability to implement our shipbuilding programs and brand strategies
and to continue to expand our business worldwide;
- our ability to attract and retain qualified shipboard crew and maintain
good relations with employee unions;
- our ability to obtain financing on terms that are favorable or consistent
with our expectations;
- the impact of changes in operating and financing costs, including changes
in foreign currency and interest rates and fuel, food, payroll, insurance
and security costs;
- changes in the tax, environmental, health, safety, security and other
regulatory regimes under which we operate;
- continued availability of attractive port destinations;
- our ability to successfully implement cost improvement plans;
- continuing financial viability of our travel agent distribution system and
air service providers; and
- unusual weather patterns or natural disasters, such as hurricanes and
earthquakes.
Pursuant to the Western Hemisphere Travel Initiative, U.S. citizens will
be required to carry a passport for travel to or from certain countries/areas
that were previously exempt. The regulations will require all U.S. citizens that
enter the U.S.
11
by air or sea by December 31, 2006 to have a passport, and those citizens
entering at land border crossings will have to have a passport by December 31,
2007.
Forward-looking statements should not be relied upon as a prediction of
actual results. Subject to any continuing obligations under applicable law or
any relevant listing rules, we expressly disclaim any obligation to disseminate,
after the date of this joint Quarterly Report on Form 10-Q, any updates or
revisions to any such forward-looking statements to reflect any change in
expectations or events, conditions or circumstances on which any such statements
are based.
Key Performance Indicators and Critical Accounting Estimates
We use net cruise revenues per ALBD ("net revenue yields") and net cruise
costs per ALBD as significant non-GAAP financial measures of our cruise segment
financial performance. We believe that net revenue yields are commonly used in
the cruise industry to measure a company's cruise segment revenue performance.
This measure is also used for revenue management purposes. In calculating net
revenue yields, we use "net cruise revenues" rather than "gross cruise
revenues." We believe that net cruise revenues is a more meaningful measure in
determining revenue yield than gross cruise revenues because it reflects the
cruise revenues earned by us net of our most significant variable costs, which
are travel agent commissions, cost of air transportation and certain other
variable direct costs associated with onboard revenues. Substantially all of our
remaining cruise costs are largely fixed once our ship capacity levels have been
determined.
Net cruise costs per ALBD is the most significant measure we use to
monitor our ability to control our cruise segment costs rather than gross cruise
costs per ALBD. In calculating net cruise costs, we exclude the same variable
costs as described above, which are included in the calculation of net cruise
revenues. This is done to avoid duplicating these variable costs in these two
non-GAAP financial measures.
In addition, because a significant portion of our operations utilize the
euro or sterling to measure their results and financial condition, the
translation of those operations to our U.S. dollar reporting currency results in
increases in reported U.S. dollar revenues and expenses if the U.S. dollar
weakens against these foreign currencies, and decreases in reported U.S. dollar
revenues and expenses if the U.S. dollar strengthens against these foreign
currencies. Accordingly, we also monitor our two non-GAAP financial measures
assuming the 2005 exchange rates have remained constant with the 2004 comparable
period rates, or on a "constant dollar basis," in order to remove the impact of
changes in exchange rates on our non-U.S. cruise operations. We believe that
this is a useful measure indicating the actual growth of our operations in a
fluctuating exchange rate environment. On a constant dollar basis, net cruise
revenues and net cruise costs would be $6.56 billion and $3.76 billion for the
nine month period ended August 31, 2005. In addition to our two non-GAAP
financial measures discussed above, our non-U.S. cruise operations' depreciation
and net interest expense were impacted by the changes in exchange rates for the
nine months ended August 31, 2005 compared to August 31, 2004. The impact of
changes in exchange rates on our non-U.S. cruise operations was not significant
for the three months ended August 31, 2005 compared to August 31, 2004.
For a discussion of our critical accounting estimates, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations," which
is included in Carnival Corporation & plc's 2004 joint Annual Report on Form
10-K.
Forward Outlook
On September 19, 2005, we indicated that we expected diluted earnings per
share for the fourth quarter of 2005 would be in the range of $0.39 to $0.41.
We have not changed our September 19 fourth quarter and full year
guidance, as we have not yet updated our internal operating forecast, however,
the following events have occurred subsequent to September 19. The forward fuel
curve for our fuel prices for the 2005 fourth quarter has increased from
12
approximately $308 per ton as of September 19 to $324 per ton. If actual fuel
prices for the fourth quarter of 2005 ultimately turn out to average $324 per
ton, then our diluted earnings per share would be reduced by $0.01 for the 2005
fourth quarter. In addition, the U.S. dollar has strengthened relative to both
the euro and sterling and Hurricane Rita adversely impacted two of our Caribbean
cruises. Assuming the exchange rates for the U.S. dollar remain at the current
levels, the combined effect of the exchange rates and the hurricane would reduce
our diluted earnings per share for the 2005 fourth quarter by approximately
$0.01.
The year-over-year percentage increase in our ALBD capacity, resulting
substantially all from new ships entering service, is 9.1% in the fourth quarter
of 2005 as compared to the same quarter in 2004.
Seasonality
Our revenue from the sale of passenger tickets is seasonal. Historically,
demand for cruises has been greatest during our third fiscal quarter, which
includes the Northern Hemisphere summer months. This higher demand during the
third quarter results in higher net revenue yields and, accordingly, the largest
share of our net income is earned during this period. Substantially all of
Holland America Tours' and Princess Tours' revenues and net income are generated
from May through September in conjunction with the Alaska cruise season.
13
Selected Information and Non-GAAP Financial Measures
Selected information was as follows:
Nine Months Three Months
Ended August 31, Ended August 31,
---------------- ----------------
2005 2004 2005 2004
---- ---- ---- ----
Passengers carried (in thousands) 5,260 4,762 1,953 1,849
===== ===== ===== =====
Occupancy percentage 106.6% 105.2% 110.9% 110.2%
===== ===== ===== =====
Gross and net revenue yields were computed by dividing the gross or net
revenues, without rounding, by ALBDs as follows:
Nine Months Three Months
Ended August 31, Ended August 31,
---------------- ----------------
2005 2004 2005 2004
---- ---- ---- ----
(in millions, except ALBDs and yields)
Cruise revenues
Passenger tickets $ 6,432 $ 5,663 $ 2,692 $ 2,444
Onboard and other 1,783 1,555 666 584
---------- ---------- ---------- ----------
Gross cruise revenues 8,215 7,218 3,358 3,028
Less cruise costs
Commissions, transportation
and other (1,297) (1,227) (483) (467)
Onboard and other (307) (270) (116) (92)
---------- ---------- ---------- ----------
Net cruise revenues $ 6,611 $ 5,721 $ 2,759 $ 2,469
========== ========== ========== ==========
ALBDs 35,595,494 32,867,217 12,297,220 11,684,117
========== ========== ========== ==========
Gross revenue yields $ 230.78 $ 219.61 $ 273.07 $ 259.18
========== ========== ========== ==========
Net revenue yields $ 185.71 $ 174.05 $ 224.35 $ 211.29
========== ========== ========== ==========
Gross and net cruise costs per ALBD were computed by dividing the gross or
net cruise costs, without rounding, by ALBDs as follows:
Nine Months Three Months
Ended August 31, Ended August 31,
---------------- ----------------
2005 2004 2005 2004
---- ---- ---- ----
(in millions, except ALBDs and costs per ALBD)
Cruise operating expenses $ 4,472 $ 3,933 $ 1,632 $ 1,434
Cruise selling and
administrative expenses 932 902 286 292
---------- ---------- ---------- ----------
Gross cruise costs 5,404 4,835 1,918 1,726
Less cruise costs included in net
cruise revenues
Commissions, transportation
and other (1,297) (1,227) (483) (467)
Onboard and other (307) (270) (116) (92)
---------- ---------- ---------- ----------
Net cruise costs $ 3,800 $ 3,338 $ 1,319 $ 1,167
========== ========== ========== ==========
ALBDs 35,595,494 32,867,217 12,297,220 11,684,117
========== ========== ========== ==========
Gross cruise costs per ALBD $ 151.83 $ 147.12 $ 155.92 $ 147.67
========== ========== ========== ==========
Net cruise costs per ALBD $ 106.77 $ 101.56 $ 107.21 $ 99.79
========== ========== ========== ==========
14
Nine Months Ended August 31, 2005 ("2005") Compared to the Nine Months Ended
August 31, 2004 ("2004")
Revenues
Net cruise revenues increased $890 million, or 15.6%, to $6.61 billion in
2005 from $5.72 billion in 2004. The 8.3% increase in ALBDs between 2004 and
2005 accounted for $475 million of the increase, and the remaining $415 million
was from increased net revenue yields, which increased 6.7% in 2005 compared to
2004 (gross revenue yields increased by 5.1%). Net revenue yields increased in
2005 primarily from higher cruise ticket prices, a 1.3% increase in occupancy,
higher onboard revenues and the weaker U.S. dollar relative to the euro and
sterling. Net revenue yields, as measured on a constant dollar basis increased
5.9% in 2005. Gross cruise revenues increased $997 million, or 13.8%, in 2005 to
$8.22 billion from $7.22 billion in 2004 primarily for the same reasons net
cruise revenues increased. Both ALBDs and revenue yields were reduced by the
combined impact of the cancellation of P&O Cruises Aurora's 2005 world cruise
and P&O Cruises Australia's Pacific Sky cruises, both caused by mechanical
difficulties.
Onboard and other revenues included concession revenues of $219 million in
2005 and $193 million in 2004. Onboard and other revenues increased in 2005
compared to 2004 primarily because of the 8.3% increase in ALBDs and increased
passenger spending on our ships.
Other non-cruise revenues increased $51 million, or 14.4%, to $406 million
in 2005 from $355 million in 2004 primarily due to the increase in the number of
cruise/tours sold.
Costs and Expenses
Net cruise costs increased $462 million, or 13.8%, to $3.80 billion in
2005 from $3.34 billion in 2004. The 8.3% increase in ALBDs between 2004 and
2005 accounted for $277 million of the increase, and the remaining $185 million
was from increased net cruise costs per ALBD, which increased 5.1% in 2005
compared to 2004 (gross cruise costs per ALBD increased 3.2%). Net cruise costs
per ALBD increased primarily due to a 27% increase in 2005 fuel prices, higher
dry-dock amortization expense, a $23 million MNOPF contribution and a weaker
U.S. dollar relative to the euro and the sterling in 2005. This increase was
partially offset by the non-recurrence in 2005 of promotional costs related to
the introduction of Cunard's Queen Mary 2 in 2004, reduced costs in 2005 from
the relocation of Cunard's shoreside operations and economies of scale in 2005
associated with the 8.3% ALBD increase. Net cruise costs per ALBD as measured on
a constant dollar basis compared to 2004 increased 4.1% in 2005, and increased
only 0.6%, excluding fuel costs and the MNOPF contribution. Gross cruise costs
increased $569 million, or 11.8%, in 2005 to $5.40 billion from $4.84 billion in
2004, which was a lower percentage increase than net cruise costs primarily
because of the lower proportion of passengers who purchased air transportation
from us in 2005.
Depreciation and amortization expense increased by $73 million, or 12.2%,
to $672 million in 2005 from $599 million in 2004 largely due to the 8.3%
increase in ALBDs through the addition of new ships, ship improvement
expenditures and the impact of a weaker U.S. dollar.
Nonoperating (Expense) Income
Net interest expense, excluding capitalized interest, increased $25
million to $246 million in 2005 from $221 million in 2004. This increase was
primarily due to a $19 million increase in interest expense from higher average
borrowing rates and a $6 million increase in interest expense due to higher
average borrowings.
Other expense in 2005 included a $22 million expense for the write-down of
a non-cruise investment, which was recorded in the third quarter, partially
offset by $7 million of income from the settlement of litigation associated with
the DLC transaction.
15
Income Taxes
Income tax expense decreased $13 million from 2004 to $43 million in 2005
primarily because of Costa's reduced income taxes as a result of electing to
enter the Italian Tonnage Tax regime in the 2005 third quarter (see Note 9).
Three Months Ended August 31, 2005 ("2005") Compared to the Three Months Ended
August 31, 2004 ("2004")
Revenues
Net cruise revenues increased $290 million, or 11.7%, to $2.76 billion in
2005 from $2.47 billion in 2004. The 5.2% increase in ALBDs between 2004 and
2005 accounted for $129 million of the increase, and the remaining $161 million
was from increased net revenue yields, which increased 6.2% in 2005 compared to
2004 (gross revenue yields increased by 5.4%). Net revenue yields increased in
2005 primarily from higher cruise ticket prices, higher onboard revenues and, to
a lesser extent, a 0.6% increase in occupancy. Gross cruise revenues increased
$330 million, or 10.9%, in 2005 to $3.36 billion from $3.03 billion in 2004
primarily for the same reasons net cruise revenues increased.
Onboard and other revenues included concession revenues of $81 million in
2005 and $72 million in 2004. Onboard and other revenues increased in 2005
compared to 2004 primarily because of the 5.2% increase in ALBDs and increased
passenger spending on our ships.
Other non-cruise revenues increased $32 million, or 10.6%, to $333 million
in 2005 from $301 million in 2004 primarily due to the increase in the number of
cruise/tours sold.
Costs and Expenses
Net cruise costs increased $152 million, or 13.0%, to $1.32 billion in
2005 from $1.17 billion in 2004. The 5.2% increase in ALBDs between 2004 and
2005 accounted for $61 million of the increase, and the remaining $91 million
was from increased net cruise costs per ALBD, which increased 7.4% in 2005
compared to 2004 (gross cruise costs per ALBD increased 5.6%). Net cruise costs
per ALBD increased primarily due to a 36% increase in 2005 fuel prices, the $23
million MNOPF contribution and, to a lesser extent, higher dry-dock amortization
expense in 2005. This increase was partially offset by a reduction in
promotional spending in 2005, reduced costs in 2005 from the relocation of
Cunard's shoreside operations and economies of scale in 2005 associated with the
5.2% ALBD increase. Excluding fuel costs and the MNOPF contribution, net cruise
costs per ALBD increased 1.4% compared to 2004. Gross cruise costs increased
$192 million, or 11.1%, in 2005 to $1.92 billion from $1.73 billion in 2004,
which was a lower percentage increase than net cruise costs primarily because of
the lower proportion of passengers who purchased air transportation from us in
2005.
Depreciation and amortization expense increased by $16 million, or 7.6%,
to $226 million in 2005 from $210 million in 2004 largely due to the 5.2%
increase in ALBDs through the addition of new ships and ship improvement
expenditures.
Income Taxes
Income tax expense decreased $15 million from 2004 to $45 million in 2005
primarily because of Costa's reduced income taxes as a result of electing to
enter the Italian Tonnage Tax regime (see Note 9).
16
Liquidity and Capital Resources
Sources and Uses of Cash
Our business provided $2.79 billion of net cash from operations during the
nine months ended August 31, 2005, an increase of $170 million over $2.62
billion in 2004. We continue to generate substantial cash from operations and
remain in a strong financial position.
During the nine months ended August 31, 2005, our net expenditures for
capital projects were $1.63 billion, of which $1.29 billion was spent for our
ongoing new shipbuilding program, including the final delivery payments for the
Carnival Valor, Carnival Liberty and P&O Cruises' Arcadia. The remaining capital
expenditures consisted primarily of $225 million for ship improvements and
refurbishments, and $112 million for Alaska tour assets, cruise port facility
developments and information technology assets. During the nine months ended
August 31, 2004, our net expenditures for capital projects were $2.87 billion
primarily because we took delivery of six new ships.
During the nine months ended August 31, 2005 we borrowed $1.15 billion, of
which a portion was used to pay part of the Arcadia and Carnival Liberty
purchase prices and to refinance debt as noted below. During the same nine month
period, we made $581 million of debt repayments, which included the final
payment on our capitalized lease obligations of $110 million, $100 million
repayment of our 7.05% fixed rate notes and $253 million in repayment of Costa
indebtedness. In addition, we refinanced $487 million of euro debt to reduce our
borrowing rate. We also paid cash dividends of $402 million and purchased $30
million of treasury stock during the nine months ended August 31, 2005.
Future Commitments and Funding Sources
Our contractual cash obligations remained generally unchanged at August
31, 2005 compared to November 30, 2004, except for changes to our debt as noted
above, and changes to our ship construction commitments as follows:
- We made the final payments of approximately $1.17 billion related to
the Carnival Valor, Carnival Liberty and P&O Cruises' Arcadia, which
were delivered in December 2004, July 2005 and March 2005,
respectively.
- In January 2005, Costa Cruises entered into a new ship construction
contract with Fincantieri for a 3,000 passenger ship, which has an
estimated all-in cost of 475 million euros ($581 million U.S.
dollars at the August 31, 2005 exchange rate) and is expected to
enter service in June 2007.
- In July 2005, we entered into a new ship construction contract with
Meyer Werft for a 2,030 passenger ship for our AIDA Cruises brand,
which has an estimated all-in cost of 315 million euros ($385
million U.S. dollars at the August 31, 2005 exchange rate) and is
expected to enter service in April 2008.
During 2004, the Boards of Directors authorized the repurchase of up to an
aggregate of $1 billion of Carnival Corporation common stock and/or Carnival plc
ordinary shares commencing in 2005 subject to certain repurchase restrictions on
Carnival plc shares. Through October 6, 2005, we repurchased 3.3 million
shares for $163 million.
Excluding any future ship orders, the year over year percentage increase
in Carnival Corporation & plc's ALBD capacity for 2006, 2007, 2008 and 2009,
resulting substantially all from new ships entering service, is currently
expected to be 5.5%, 8.1%, 7.6% and 2.8%, respectively.
At August 31, 2005, we had liquidity of $4.55 billion, which consisted of
$1.37 billion of cash, cash equivalents and short-term investments, $2.45
billion available for borrowing under our revolving credit facilities and $732
million under our unsecured term loan facilities. Our revolving credit
facilities mature in March 2006 through June 2006. A key to our access to
liquidity is the maintenance of our strong credit ratings.
17
Based primarily on our historical results, current financial condition and
future forecasts, we believe that our existing liquidity and cash flow from
future operations will be sufficient to fund most of our expected capital
projects, debt service requirements, dividend payments, working capital and
other firm commitments. However, our forecasted cash flow from future
operations, as well as our credit ratings, may be adversely affected by various
factors, including, but not limited to, those factors noted under "Cautionary
Note Concerning Factors That May Affect Future Results." To the extent that we
are required, or choose, to fund future cash requirements, including our future
shipbuilding commitments, from sources other than as discussed above, we believe
that we 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. No assurance
can be given that our future operating cash flow will be sufficient to fund
future obligations or that we will be able to obtain additional financing, if
necessary.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements, including
guarantee contracts, retained or contingent interests, certain derivative
instruments and variable interest entities, that either have, or are reasonably
likely to have, a current or future material effect on our financial statements.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable
assurance that information required to be disclosed by us in the reports that we
file or submit, is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Our Chief Executive Officer, Chief Operating Officer and Chief Financial
and Accounting Officer have evaluated our disclosure controls and procedures and
have concluded, as of August 31, 2005, that they were effective as described
above.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial
reporting during our quarter ended August 31, 2005 that have materially affected
or are reasonably likely to materially affect our internal control over
financial reporting.
It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system will be met. In addition, the design of any control
system is based in part upon certain assumptions about the likelihood of future
events. Because of these and other inherent limitations of control systems,
there is only reasonable assurance that our controls will succeed in achieving
their goals under all potential future conditions.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On March 7, 2005, a lawsuit was filed against Carnival Corporation on
behalf of some current and former crewmembers alleging that Carnival Cruise
Lines failed to pay the plaintiffs' overtime and minimum wages. On August 5,
2005, the Court dismissed the lawsuit. The plaintiffs filed an appeal to the
Eleventh Circuit U.S. Court of Appeals on August 18, 2005, which is currently
pending.
In May 2005, a class action lawsuit was filed against Carnival Corporation
in the United States District Court for the Southern District of Florida
alleging breach of the implied covenant of good faith and fair dealing and a
violation of The Florida Deceptive and Unfair Trade Practices Act for profits
made by Carnival Cruise Lines on
18
shore excursions provided by third party shore excursion operators. The suit
seeks certification as a class action on behalf of all Carnival Cruise Line
passengers from May 5, 2001 to the present who have taken shore excursions, and
seeks payment of damages and injunctive relief.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During 2004, the Boards of Directors authorized the repurchase of up to an
aggregate of $1 billion of Carnival Corporation common stock and/or Carnival plc
ordinary shares commencing in 2005 subject to certain repurchase restrictions on
Carnival plc shares. At August 31, and October 6, 2005, the remaining
availability pursuant to our share repurchase program was $970 million and $837
million, respectively. During the 2005 third quarter there were no repurchases
of Carnival Corporation common stock and/or Carnival plc ordinary shares.
During the nine months ended August 31, 2005, $112 million of our
Zero-Coupon Notes were converted at their accreted value into 3.4 million shares
of Carnival Corporation common stock, of which 0.6 million were issued from
treasury stock.
Each share of common stock issued is paired with a trust share of
beneficial interest in the P&O Princess Special Voting Trust, which holds a
Special Voting Share issued by Carnival plc in connection with the DLC
transaction completed in April 2003. The issuance was exempt from registration
under the Securities Act pursuant to Section 3(a)(9) of the Securities Act.
Item 6. Exhibits.
3.1 Third Amended and Restated Articles of Incorporation of Carnival
Corporation, incorporated by reference to Exhibit No. 3.1 to the
joint Current Report on Form 8-K of Carnival Corporation and
Carnival plc filed on April 17, 2003.
3.2 Amended and Restated By-laws of Carnival Corporation, incorporated
by reference to Exhibit No. 3.2 to the joint Current Report on Form
8-K of Carnival Corporation and Carnival plc filed on April 17,
2003.
3.3 Articles of Association of Carnival plc, incorporated by reference
to Exhibit No. 3.3 to the joint Current Report on Form 8-K of
Carnival Corporation and Carnival plc filed on April 17, 2003.
3.4 Memorandum of Association of Carnival plc, incorporated by reference
to Exhibit No. 3.4 to the joint Current Report on Form 8-K of
Carnival Corporation and Carnival plc filed on April 17, 2003.
10.1 Carnival Corporation & plc Non-Executive Board of Director Cruise
Benefit Policy.
10.2 Amended and Restated Carnival plc 2005 Employee Share Plan.
10.3 Carnival Cruise Lines Management Incentive Plan.
10.4 Agreement with Pier Luigi Foschi.
10.5 Form of Non-qualified Stock Option Agreement for the Amended and
Restated Carnival Corporation 2001 Outside Director Stock Plan.
10.6 Form of Restricted Stock Award Agreement for the Amended and
Restated Carnival Corporation 2001 Outside Director Stock Plan.
10.7 Form of Restricted Stock Unit Award Agreement for the Amended and
Restated Carnival Corporation 2001 Outside Director Stock Plan.
10.8 Form of Share Option Certificate for the Amended and Restated
Carnival plc 2005 Employee Share Plan.
19
12 Ratio of Earnings to Fixed Charges.
31.1 Certification of Chief Executive Officer of Carnival Corporation
pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Operating Officer of Carnival Corporation
pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.3 Certification of Executive Vice President and Chief Financial and
Accounting Officer of Carnival Corporation pursuant to Rule
13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
31.4 Certification of Chief Executive Officer of Carnival plc pursuant to
Rule 13a-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.5 Certification of Chief Operating Officer of Carnival plc pursuant to
Rule 13a-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.6 Certification of Executive Vice President and Chief Financial and
Accounting Officer of Carnival plc pursuant to Rule 13a-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer of Carnival Corporation
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Operating Officer of Carnival Corporation
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.3 Certification of Executive Vice President and Chief Financial and
Accounting Officer of Carnival Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.4 Certification of Chief Executive Officer of Carnival plc pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.5 Certification of Chief Operating Officer of Carnival plc pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.6 Certification of Executive Vice President and Chief Financial and
Accounting Officer of Carnival plc pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARNIVAL CORPORATION CARNIVAL PLC
By:/s/ Micky Arison By:/s/ Micky Arison
---------------- ----------------
Micky Arison Micky Arison
Chairman of the Board of Directors Chairman of the Board of Directors
and Chief Executive Officer and Chief Executive Officer
By:/s/ Howard S. Frank By:/s/ Howard S. Frank
------------------- -------------------
Howard S. Frank Howard S. Frank
Vice Chairman of the Board of Vice Chairman of the Board of
Directors and Chief Operating Officer Directors and Chief Operating Officer
By:/s/ Gerald R. Cahill By:/s/ Gerald R. Cahill
-------------------- --------------------
Gerald R. Cahill Gerald R. Cahill
Executive Vice President Executive Vice President
and Chief Financial and and Chief Financial and
Accounting Officer Accounting Officer
Dated: October 7, 2005 Dated: October 7, 2005
21