[NOTIFY] 72731,737
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the quarterly period ended August 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 1-9610
CARNIVAL CORPORATION
(Exact name of registrant as specified in its charter)
Republic of Panama 59-1562976
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3655 N.W. 87th Avenue, Miami, Florida 33178-2428
(Address of principal executive offices)
(zip code)
(305) 599-2600
(Registrant's telephone number, including area code)
None.
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No__
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of October 9, 1996.
Class A Common Stock, $.01 par value: 239,375,608 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, 1996 and November 30, 1995 1
Consolidated Statements of Operations -
Nine and Three Months Ended August 31, 1996
and August 31, 1995 2
Consolidated Statements of Cash Flows -
Nine Months Ended August 31, 1996
and August 31, 1995 3
Notes to Consolidated Financial Statements 4
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information
Item 1: Legal Proceedings 15
Item 5: Other Information 15
Item 6: Exhibits and Reports on Form 8-K 15
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
August 31, November 30,
ASSETS 1996 1995
CURRENT ASSETS
Cash and cash equivalents $ 85,751 $ 53,365
Short-term investments 18,922 50,395
Accounts receivable 41,008 33,080
Consumable inventories, at average cost 51,267 48,820
Prepaid expenses and other 66,747 70,718
Total current assets 263,695 256,378
PROPERTY AND EQUIPMENT--at cost, less
accumulated depreciation and
amortization 3,783,549 3,414,823
OTHER ASSETS
Goodwill, less accumulated amortization of
$53,528 in 1996 and $48,292 in 1995 221,335 226,571
Investments in affiliates 391,238 51,794
Long-term notes receivable 28,294 66,488
Other assets 14,985 89,433
$4,703,096 $4,105,487
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 72,525 $ 72,752
Accounts payable 136,305 90,237
Accrued liabilities 142,485 113,483
Customer deposits 311,765 292,606
Dividends payable 26,488 25,632
Total current liabilities 689,568 594,710
LONG-TERM DEBT 1,014,339 1,035,031
CONVERTIBLE NOTES 45,180 115,000
OTHER LONG-TERM LIABILITIES 16,790 15,873
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY
Class A Common Stock; $.01 par value;
one vote per share; 399,500 shares
authorized; 239,348 and 229,839 shares
issued and outstanding 2,393 2,298
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 812,808 594,811
Retained earnings 2,125,374 1,752,140
Less-other (3,906) (4,926)
Total shareholders' equity 2,937,219 2,344,873
$4,703,096 $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,
1996 1995 1996 1995
REVENUES $1,737,613 $1,545,244 $ 771,989 $672,598
COSTS AND EXPENSES
Operating expenses 962,435 865,311 396,195 352,135
Selling and administrative 209,221 187,880 68,978 63,634
Depreciation and amortization 107,597 94,753 39,661 32,709
1,279,253 1,147,944 504,834 448,478
OPERATING INCOME BEFORE INCOME
FROM AFFILIATED OPERATIONS 458,360 397,300 267,155 224,120
INCOME FROM AFFILIATED
OPERATIONS 12,956 12,793
OPERATING INCOME 471,316 397,300 279,948 224,120
NONOPERATING INCOME (EXPENSE)
Interest income 17,280 10,311 2,176 3,405
Interest expense, net of
capitalized interest (49,889) (48,583) (16,673) (15,268)
Other income 23,778 18,931 18,709 13,742
Income tax expense (11,006) (11,096) (16,029) (16,457)
(19,837) (30,437) (11,817) (14,578)
NET INCOME $ 451,479 $ 366,863 $ 268,131 $ 209,542
EARNINGS PER SHARE $1.56 $1.29 $.92 $.74
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended August 31,
1996 1995
OPERATING ACTIVITIES:
Net income $451,479 $366,863
Adjustments:
Depreciation and amortization 107,597 94,753
Equity in income from affiliates in excess of
dividends and other cash payments received (9,719)
Loss on sale of Crystal Palace notes receivable 15,835
Vesting of stock plan shares 2,260 1,309
Other 1,690 3,726
Changes in operating assets and liabilities:
Increase in receivables (8,511) (11,995)
Increase in consumable inventories (2,447) (4,661)
Decrease (increase) in prepaid and other 3,829 (7,877)
Increase in accounts payable 46,068 18,743
Increase in accrued liabilities 29,002 17,637
Increase in customer deposits 19,159 44,134
Net cash provided from operations 656,242 522,632
INVESTING ACTIVITIES:
Decrease in short-term investments, net 31,335 9,962
Additions to property and equipment, net (514,154) (401,861)
Proceeds from litigation settlements
applied to cost of ships 43,050 19,426
(Additions to) reductions in investments
in affiliates (185,554) 12,443
Decrease (increase) in long-term notes
receivable 22,359 (13,213)
Decrease in other non-current assets 74,448 1,658
Net cash used for investing activities (528,516) (371,585)
FINANCING ACTIVITIES:
Principal payments of long-term debt (683,953) (341,166)
Proceeds from long-term debt 663,003 239,188
Dividends paid (77,389) (63,740)
Issuance of common stock 2,999 48,673
Net cash used for financing activities (95,340) (117,045)
Net increase in cash and
cash equivalents 32,386 34,002
Cash and cash equivalents at beginning
of period 53,365 54,105
Cash and cash equivalents at end of period $ 85,751 $ 88,107
Supplemental disclosure of non-cash transactions:
Issuance of Class A Common Stock in
connection with investment in Airtours plc $144,171 $ -
Conversion of 4-1/2% Convertible Notes into
Common Stock $ 70,113 -
The accompanying notes are an integral part of these financial statements.
CARNIVAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS FOR PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The financial statements included herein have been prepared by Carnival
Corporation without audit pursuant to the rules and regulations of the
Securities and Exchange Commission.
The accompanying consolidated balance sheet at August 31, 1996, and the
consolidated statements of operations and cash flows for the nine and three
months ended August 31,1996 and August 31, 1995 are unaudited and, in the
opinion of management, contain all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation. The operations of
Carnival Corporation and its subsidiaries (the "Company") are seasonal and
results for interim periods are not necessarily indicative of the results for
the entire year.
The accompanying financial statements include the consolidated balance
sheets and statements of operations and cash flows of the Company and its
subsidiaries. All material intercompany transactions and accounts have been
eliminated in consolidation. Certain amounts in prior periods have been
reclassified to conform with the current period's presentation.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
August 31, November 30,
1996 1995
(in thousands)
Vessels $3,922,468 $3,467,731
Vessels under construction 240,328 289,661
4,162,796 3,757,392
Land, buildings and improvements 176,473 132,183
Transportation and other equipment 190,166 174,903
Total property and equipment 4,529,435 4,064,478
Less - accumulated depreciation and
amortization (745,886) (649,655)
$3,783,549 $3,414,823
Interest costs associated with the construction of vessels and buildings,
until they are placed in service, are capitalized and amounted to $18.7
million and $13.4 million for the nine months ended August 31, 1996 and
August 31, 1995, respectively and $4.9 million and $5.2 million for the three
months ended August 31, 1996 and August 31, 1995, respectively.
NOTE 3 - INVESTMENTS IN AFFILIATES
The Company's investment in affiliated companies, which are not majority
owned or controlled by the Company, are accounted for using the equity
method. Starting in the third quarter of 1996, the Company began reporting
equity in income from affiliated operations as a separate line in the
statement of operations due to its increasing significance primarily due to
the Airtours plc acquisition. The Company's percentage share of the
affiliated companies net income as well as any interest income or royalty fee
income is recorded as "Income from Affiliated Operations" in the accompanying
statement of operations. The Company's investments and advances to
affiliates are reported as "Investment in Affiliates" in the accompanying
balance sheets.
In April 1996, the Company acquired a 29.5% equity interest in Airtours plc
("Airtours"), a large publicly traded integrated tour company headquartered
in the United Kingdom, for approximately $307 million. The Company entered
into an unsecured five year $200 million multi-currency revolving credit
facility ("Multi-currency Revolving Credit Facility") and funded
approximately $163 million of the acquisition cost through this facility. To
fund the remaining purchase price, the Company issued 5,301,186 shares of its
Class A common stock valued at approximately $144 million. The Company is
recording its equity in Airtours' results of operations on a two month lag
basis.
NOTE 4 - LONG-TERM DEBT AND CONVERTIBLE NOTES
Long-term debt consists of the following:
August 31, November 30,
1996 1995
(in thousands)
$750 Million Unsecured Revolving Credit
Facility Due 2000 $ 25,000 $ 185,000
Multi-currency Revolving Credit Facility Due 2001 166,000 -
Mortgages and other loans payable bearing interest
at rates ranging from 8% to 9.9%, secured by
vessels, maturing through 1999 164,888 208,078
Unsecured 5.75% Notes Due March 15, 1998 200,000 200,000
Unsecured 6.15% Notes Due October 1, 2003 124,951 124,946
Unsecured 7.20% Debentures Due October 1, 2023 124,870 124,867
Unsecured 7.70% Notes Due July 15, 2004 99,910 99,902
Unsecured 7.05% Notes Due May 15, 2005 99,826 99,811
Other loans payable 81,419 65,179
1,086,864 1,107,783
Less portion due within one year (72,525) (72,752)
$1,014,339 $1,035,031
The Multi-currency Revolving Credit Facility bears interest at LIBOR plus
17 basis points ("BPS"), and provides for a facility fee of 6 BPS on the
total facility. As of August 31, 1996, the Company had an undrawn balance of
$34 million under the facility. As of the same date, the Company also had
$725 million available for borrowing under its $750 Million Unsecured
Revolving Credit Facility. The Company also has an additional $250 million
available under a short-term revolving credit facility. All three credit
lines are available to be used for general corporate purposes.
In July 1992, the Company issued $115 million of 4-1/2% Convertible
Subordinated Notes Due July 1, 1997 (the "Convertible Notes"). The
Convertible Notes are convertible into 57.55 shares of the Company's Class A
Common Stock per $1,000 of notes. During the third quarter ended August 31,
1996 approximately $70 million face amount of the Convertible Notes converted
into approximately four million shares of the Company's Class A Common Stock.
The Convertible Notes remaining outstanding at August 31, 1996 are
convertible into a total of approximately 2.6 million shares of Class A
Common Stock. The Convertible Notes became redeemable in whole or in part at
the Company's option on July 3, 1996.
NOTE 5 - SHAREHOLDERS' EQUITY
The following represents an analysis of the changes in shareholders' equity
for the nine months ended August 31, 1996:
COMMON STOCK
$.01 PAR VALUE PAID-IN RETAINED
CLASS A CLASS B CAPITAL EARNINGS OTHER TOTAL
(in thousands)
Balance November 30,1995 $2,298 $550 $594,811 $1,752,140 $(4,926) $2,344,873
Net income for the period 451,479 451,479
Cash dividends (78,245)
(78,245)
Changes in securities
valuation allowance (139)
(139)
Issuance of common stock
related to Airtours
acquisition 53 144,118 144,171
Issuance of common stock
upon conversion of 4-1/2%
Convertible Subordinated
Notes 40 70,073 70,113
Issuance of stock to
employees under stock
plans 2 3,806 3,808
Vested portion of common
stock under restricted
stock plan 1,159 1,159
Balance August 31, 1996 $2,393 $550 $812,808 $2,125,374 $(3,906) $2,937,219
NOTE 6 - 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
Service Contract of Lower Total
Ship Name Operating Unit Date Denomination Berths Cost
Carnival Destiny Carnival Cruise Lines 11/96 Lire 2,640 $ 430
Rotterdam VI Holland America Line 10/97 Lire 1,320 235
Elation Carnival Cruise Lines 3/98 U. S. Dollar 2,040 300
Paradise Carnival Cruise Lines 12/98 U. S. Dollar 2,040 300
HAL Newbuild Holland America Line 2/99 Lire 1,440 300
Carnival Triumph Carnival Cruise Lines 7/99 Lire 2,640 415
HAL Newbuild Holland America Line 9/99 Lire 1,440 300
13,560 $2,280
The Company pays for the majority of the cost of the vessels upon delivery
from the shipyards which, on the average, occurs approximately six weeks
prior to the introduction of the vessel into service.
Contracts denominated in foreign currencies have been fixed into U.S.
Dollars through the utilization of forward currency contracts. In connection
with the vessels under construction described above, the Company has paid
$240 million through August 31, 1996 and anticipates paying approximately
$374 million during the twelve month period ended August 31, 1997 and
approximately $1.7 billion beyond August 31, 1997.
Litigation
Wartsila Marine Industries Incorporated ("Wartsila") operated a Finnish
shipyard and had contracted to build three ships for the Company in the late
1980's. Wartsila filed for bankruptcy in 1989 without completing
construction of the vessels, causing the Company to incur incremental costs
to complete the ships and to lose profits because of the delay in their
delivery. During 1995, the Company received $40 million in cash from the
settlement of litigation with Metra Oy, the former parent company of
Wartsila, related to losses suffered in connection with the construction of
three of the Company's cruise ships. Of the $40 million received, $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 cost basis of certain
ships which had been the subject of the Company's lawsuit against Metra Oy.
On June 25, 1996, the Company reached an agreement with the trustees of
Wartsila and creditors for the bankruptcy which resulted in a cash payment of
approximately $80 million. Of the $80 million received, $5 million was used
to pay certain costs, $32 million was recorded as other income and $43
million was used to reduce the cost basis of certain ships which had been
affected by the bankruptcy.
In April 1996, a complaint was filed in the Circuit Court of the Eleventh
Judicial Circuit against Carnival Corporation and a complaint was filed in
the Superior Court of Washington against Holland America Line - Westours
Inc., a wholly-owned subsidiary of Carnival Corporation (the "Port Charges
Complaints"). The Port Charges Complaints, brought on behalf of a purported
class of all persons who traveled on a Company ship within the past four
years and paid "Port Charges" to the Company, allege that statements made by
the Company in advertising and promotional materials concerning Port Charges
were false and misleading. The Port Charges Complaints allege claims of
negligent misrepresentation and unjust enrichment and violations of the
Washington Consumer Protection Act and seek unspecified compensatory damages
on behalf of the purported class (or, alternatively, refunds of Port Charges
allegedly in excess of certain charges levied by governmental authorities),
attorney's fees and costs and punitive damages and injunctive relief. Two
other complaints containing allegations similar to those set forth in the
Port Charges Complaints have been filed in the Circuit Court of the Eleventh
Judicial Circuit against the Company since the filing of the Port Charges
Complaints.
In June and August 1996, respectively, two complaints were filed against
the Company and Holland America Line-Westours, Inc. in the Superior Court for
the State of California for the County of Los Angeles (the "Travel Agent
Complaints"). The Travel Agent Complaints, brought on behalf of a class of
all travel agencies who during the past four years booked a cruise with the
Company, contain allegations that the Company's advertising practices
regarding port charges resulted in an improper and concealed form of
commission bypass. The Travel Agent Complaints allege claims of breach of
contract, negligent misrepresentation, unjust enrichment, unlawful business
practices and common law fraud and seek unspecified compensatory damages (or
alternatively, the payment by the Company of usual and customary commissions
on port charges in excess of certain charges levied by government
authorities), attorneys' fees and costs, punitive damages and injunctive
relief.
The Port Charges Complaints and the Travel Agent Complaints are in their
early stages and it is not now possible to determine the ultimate outcome of
the lawsuits. Management of the Company believes that the Company has
substantial and meritorious defenses to the claims and intends to vigorously
defend the lawsuits. Management understands that purported class action
lawsuits similar to the Port Charges Complaints and the Travel Agent
Complaints have been filed against five other cruise lines.
In 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 7 - RECENT EVENTS
In September, the Company and Hyundai Merchant Marine ("HMM") signed an
agreement to form a 50/50 joint venture to develop the Asian cruise vacation
market. The Company and HMM will each contribute $10 million as the initial
capital of the joint venture which intends to create a cruise product
specifically tailored to the desires and tastes of the growing middle-class
market of Asian vacation travelers. In addition, the Company signed an
agreement with the joint venture to sell Carnival Cruise Lines' cruise ship
Tropicale to the joint venture, subject to financing arrangements and the
charter back of the vessel to the Company. The charter agreement between the
Company and the joint venture will allow the Company to operate the Tropicale
until the joint venture is ready to begin cruise operations in the Asian
market in approximately the spring of 1998. The launch of the joint venture
is subject to the conclusion of certain ancillary agreements which are
expected to be completed in the near future.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements under this caption, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", constitute
"forward-looking statements" under the Private Securities Litigation Reform
Act of 1995 (the "Reform Act"). See "PART II. OTHER INFORMATION, ITEM 5(a)
Forward-Looking Statements".
General
The Company earns its cruise revenues primarily from (i) the sale of
passenger tickets, which include accommodations, meals, most shipboard
activities and in many cases airfare, and (ii) the sale of goods and services
on board its cruise ships, such as casino gaming, liquor sales, gift shop
sales and other related services. The Company also derives revenues from the
tour and related operations of HAL Antillen N.V. ("HAL").
The following table presents selected segment and statistical information
for the periods indicated:
Nine Months Three Months
Ended August 31, Ended August 31,
1996 1995 1996 1995
(in thousands, except selected statistical information)
REVENUES:
Cruise $1,549,004 $1,368,806 $617,985 $530,199
Tour 238,550 217,700 197,772 178,852
Intersegment revenues (49,941) (41,262) (43,768) (36,453)
$1,737,613 $1,545,244 $771,989 $672,598
OPERATING EXPENSES:
Cruise $ 827,894 $742,902 $295,199 $261,584
Tour 184,482 163,671 144,764 127,004
Intersegment expenses (49,941) (41,262) (43,768) (36,453)
$ 962,435 $865,311 $396,195 $352,135
OPERATING INCOME BEFORE INCOME
FROM AFFILIATED OPERATIONS:
Cruise $432,260 $368,134 $227,511 $182,645
Tour 26,100 29,166 39,644 41,475
$458,360 $397,300 $267,155 $224,120
SELECTED STATISTICAL INFORMATION:
Passengers Carried 1,350,686 1,138,775 507,243 442,068
Passenger Cruise Days 8,087,977 6,825,026 2,987,080 2,549,285
Occupancy Percentage 109.7% 105.1% 114.5% 114.6%
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,
1996 1995 1996 1995
REVENUES 100% 100% 100% 100%
COSTS AND EXPENSES:
Operating expenses 56 56 51 52
Selling and administrative 12 12 9 10
Depreciation and amortization 6 6 5 5
OPERATING INCOME BEFORE
EARNINGS FROM AFFILIATED
OPERATIONS 26 26 35 33
Earnings from Affiliated
Operations 1 - 1 -
OPERATING INCOME 27 26 36 33
NONOPERATING INCOME (EXPENSE) (1) (2) (1) (2)
NET INCOME 26% 24% 35% 31%
The Company's different businesses experience varying degrees of
seasonality. The Company's revenue from the sale of passenger tickets for
Carnival Cruise Lines' ("Carnival") ships is moderately seasonal.
Historically, demand for Carnival cruises has been greatest during the period
from late June through August and lower during the fall months. HAL cruise
revenues are more seasonal than Carnival's cruise revenues. Demand for HAL
cruises is strongest during the summer months when HAL ships operate in
Alaska and Europe for which HAL obtains higher pricing. Demand for HAL
cruises is lower during the winter months when HAL ships sail in the more
competitive markets. The Company's tour revenues are extremely seasonal with
a large majority of tour revenues generated during the late spring and
summer months in conjunction with the Alaska cruise season.
In April 1996 the Company made an investment in Airtours plc which it
records using the equity basis of accounting. Starting with the Company's
quarter ending August 31, 1996, the Company's portion of Airtours' operating
results are being recorded by the Company on a two month lag basis.
Airtours' earnings are seasonal due to the seasonal nature of the European
leisure travel industry. During the last two fiscal years, Airtours' third
and fourth fiscal quarters, ending June 30 and September 30, respectively,
have been profitable, with the fourth quarter being its most profitable
quarter. During this same period, Airtours experienced seasonal losses in
its first and second fiscal quarters ending on December 31 and March 31,
respectively.
Average capacity is expected to increase 8.2% during the fourth fiscal
quarter of 1996 as compared with the same period in 1995 as a result of the
introduction into service of the Inspiration in March 1996 and the Veendam in
May 1996. See "PART II. ITEM 5. OTHER INFORMATION - Forward Looking
Statements".
Nine Months Ended August 31, 1996 Compared
To Nine Months Ended August 31, 1995
Revenues
The increase in total revenues of $192.4 million, or 12.4%, from the first
nine months of 1995 to the first nine months of 1996 was primarily comprised
of a $180.2 million, or 13.2%, increase in cruise revenues. The increase in
cruise revenues was primarily the result of a 13.5% increase in capacity for
the period resulting from the addition of the Carnival Cruise Lines' cruise
ships Imagination in July 1995 and Inspiration in March 1996 and Holland
America Line's cruise ship Veendam in May 1996. Occupancy rates were up 4.4%
and gross pricing was down 4.5% resulting in a decrease of .3% in gross yield
(total revenue per lower berth). Net yields, i.e., net revenue per lower
berth (net revenue is total revenues less travel agent commissions, airfare
costs and other less significant cruise costs), increased 1.1% during the
first nine months of the year due to improved occupancy rates. Also
affecting cruise revenues during 1995 were lost revenues caused by the
shipboard incident described under "Nonoperating Income (Expense)" below.
Revenues from the Company's Tour operations increased $20.9 million, or
9.6%, to $238.6 million in 1996 from $217.7 million in 1995. The increase
was primarily the result of an increase in tour and transportation revenues
due to an increase in the number of tour passengers.
Costs and Expenses
Operating expenses increased $97.1 million, or 11.2%, from the first nine
months of 1995 to the first nine months of 1996. Cruise operating costs
increased by $85.0 million, or 11.4%, to $827.9 million in the first nine
months of 1996 from $742.9 million in the first nine months of 1995,
primarily due to additional costs associated with the increased capacity.
Tour operating expenses increased $20.8 million, or 12.7%, from the first
nine months of 1995 to the first nine months of 1996 primarily due to an
increase in the number of tour passengers.
Selling and administrative costs increased $21.3 million, or 11.4%, mainly
due to an increase in advertising expenses and an increase in payroll and
related costs associated with the increase in capacity during the first nine
months of 1996 as compared with the same period of 1995.
Depreciation and amortization increased by $12.8 million, or 13.6%, to
$107.6 million in the first nine months of 1996 from $94.8 million in the
first nine months of 1995 primarily due to the addition of the Imagination,
Inspiration and the Veendam.
Affiliated Operations
During April 1996, the Company acquired a 29.5% interest in Airtours, plc
("Airtours") and is recording its share of Airtours earnings on a two month
lag basis. During the Company's quarter ended August 31, 1996, the Company's
share of earnings for Airtours was recorded for Airtours' quarter ended June
30, 1996. The Company also began reporting its equity in income of certain
other affiliates.
Nonoperating Income (Expense)
Total nonoperating expense (net of nonoperating income) decreased to $19.8
million for the first nine months of 1996 from $30.4 million in the first
nine months of 1995. Interest income increased $7.0 million primarily due to
the Company's holding of 13 percent senior secured notes (which were redeemed
in April 1996) of Norwegian Cruise Line, Ltd. and, to a lesser degree,
increases in cash balances. Cash balances, up to the closing of the Airtours
transaction in April 1996, increased due to United Kingdom regulatory
requirements applicable to the Company's tender offer to acquire its interest
in Airtours (see Note 3 in the accompanying financial statements for more
information related to the Airtours acquisition). Gross interest expense
(excluding capitalized interest) increased $6.6 million primarily as a result
of additional borrowings required in connection with the acquisition of
Airtours. Capitalized interest increased $5.3 million due to higher
investment levels in vessels under construction.
Other income increased to $23.8 million in the first nine months of 1996
primarily as a result of a $32.0 million gain from settlement of bankruptcy
claims against Wartsila (See PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL
STATEMENTS Note 6 - Litigation) less a loss on the sale of the notes
receivable generated from the sale of Carnival's Crystal Palace Hotel and
Casino of $15.8 million. Other income of $18.9 million in the first nine
months of 1995 included a $14.4 million gain from the settlement of
litigation with Metra Oy (See PART I. FINANCIAL INFORMATION ITEM 1.
FINANCIAL STATEMENTS Note 6 - Litigation) and a gain on the sale of the
Company's entire interest in Epirotiki Cruise Line less a loss of $3.0
million from the fire on Carnival Cruise Lines' Celebration as well as other
non-related, non-recurring items. In addition, the Company estimated the
loss of revenue, net of related variable expense, from the Celebration being
out of service due to the fire, reduced operating income and net income by an
additional $7.3 million in the third quarter of 1995.
Three Months Ended August 31, 1996 Compared
To Three Months Ended August 31, 1995
Revenues
The increase in total revenues from the third quarter of 1995 to the third
quarter of 1996 was comprised principally of a $87.8 million, or 16.6%,
increase in cruise revenues. The increase in cruise revenues was primarily
the result of a 17.3% increase in capacity for the period resulting from the
addition of Carnival Cruise Lines' cruise ships Imagination in July 1995 and
Inspiration in March 1996 and Holland America Line's cruise ship Veendam in
May 1996. Occupancy rates were essentially unchanged and gross pricing was
down slightly resulting in a small decrease in gross yield (total revenue per
lower berth). Net yields, i.e. net revenue per lower berth (net revenue is
total revenues less travel agent commissions, airfare costs and other less
significant cruise costs), increased slightly due to an improvement in net
pricing. Also affecting cruise revenues during 1995 were lost revenues
caused by the shipboard incident described under "Nonoperating Income
(Expense)" above.
Revenues from the Company's tour operations increased $18.9 million, or
10.6%, to $197.8 million in 1996 from $178.9 million in 1995. The increase
was primarily the result of an increase in the number of tour passengers.
Costs and Expenses
Operating expenses increased $44.1 million, or 12.5%, from the third
quarter of 1995 to the third quarter of 1996. Cruise operating costs
increased by $33.6 million, or 12.9%, to $295.2 million in the third quarter
of 1996 from $261.6 million in the third quarter of 1995, primarily due to
additional costs associated with the increased capacity.
Tour operating expenses increased $17.8 million, or 14.0%, to $144.8
million in the third quarter of 1996 from $127.0 million in the third quarter
of 1995 primarily due to the increase in the number of tour passengers.
Selling and administrative costs increased $5.3 million, or 8.4%, primarily
due to an increase in advertising expense and increases in payroll and
related costs during the third quarter of 1996 as compared with the same
quarter of 1995 mainly resulting from the increase in capacity.
Depreciation and amortization increased by $7.0 million, or 21.3%, to $39.7
million in the third quarter of 1996 from $32.7 million in the third quarter
of 1995 primarily due to the addition of the Imagination, the Inspiration and
the Veendam.
Nonoperating Income (Expense)
Total nonoperating expense (net of nonoperating income) decreased to $11.8
million for the third quarter of 1996 from $14.6 million in the third quarter
of 1995. Interest income decreased $1.2 million primarily due to a decrease
in cash balances and notes receivable. Gross interest expense (excluding
capitalized interest) increased $1.1 million as a result of additional
borrowings required in connection with the acquisition of Airtours and the
delivery of the Inspiration and Veendam. This increase was partially offset
by a decrease in interest expense due to a lower average borrowing rate.
Other income, net of other expense, increased to $18.7 million in the third
quarter of 1996 primarily as a result of a $32.0 million gain on settlement
of litigation related to the Wartsila bankruptcy (See PART I. FINANCIAL
INFORMATION ITEM 1. FINANCIAL STATEMENTS Note 6 - Litigation), less a loss
on the sale of the notes receivable from the sale of the Crystal Palace of
$15.8 million. Other income of $13.7 million in the third quarter of 1995
included a $14.4 million gain from the settlement of litigation with Metra Oy
(See PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Note 6 -
Litigation) less the loss from the Celebration fire discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
The Company's business provided $656.2 million of net cash from operations
during the nine months ended August 31, 1996, an increase of 25.6% compared
to the corresponding period in 1995. The increase between periods was
primarily the result of an increase in net income and changes in working
capital accounts.
During the nine months ended August 31, 1996, the Company expended
approximately $514 million on capital projects, of which $447 million was
spent in connection with its ongoing shipbuilding program and $36 million was
spent on the expansion of the Company's shore 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 final payments related to Carnival Cruise Lines'
Inspiration which entered service in March 1996 and Holland America Line's
Veendam which entered service in May 1996.
In April 1996, the Company closed on its acquisition of a 29.5% interest in
Airtours. The Company paid approximately $163 million in cash and funded the
remaining purchase price of approximately $144 million through the issuance
of 5,301,186 shares of the Company's Class A Common Stock. See below for a
discussion regarding the funding of the cash portion of the acquisition.
The Company made scheduled principal payments totaling approximately $43
million under various individual vessel mortgage loans during the nine months
ended August 31, 1996. During this same period, the Company borrowed and
repaid $475 million under the $750 Million Revolver primarily for the final
payments on the Inspiration and the Veendam. The Company also repaid an
additional $160 million of the $750 Million Revolver balance during the nine
months ended August 31, 1996.
The Company also borrowed $168 million under a $200 Million Multi-currency
Revolving Credit Facility Due 2001 (the "$200 Million Multi-currency
Revolver") which was used largely for the Airtours investment described
above. Additionally, approximately $70 million of the Company's $115 million
of convertible subordinated notes payable were converted into approximately
four million shares of the Company's common stock during the nine months
ended August 31, 1996.
During the nine months ended August 31, 1996, the Company declared and paid
cash dividends of approximately $77 million.
Future Commitments
The Company has contracts for the delivery of seven new vessels over the
next three years. The Company will pay approximately $374 million during the
twelve month period ending August 31, 1997 relating to the construction and
delivery of those new cruise ships and approximately $1.7 billion beyond
August 31, 1997. In addition, the Company has $1.1 billion of long-term debt
and convertible notes of which $73 million is due during the twelve month
period ending August 31, 1997. See Note 4 in the accompanying financial
statements for more information regarding the Company's debt. Also, see
"PART II. OTHER INFORMATION, ITEM 5(a) Forward-Looking Statements". The
Company also enters into forward foreign currency contracts and interest rate
swap agreements to hedge the impact of foreign currency and interest rate
fluctuations.
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 its revolving credit facilities and/or through
the issuance of long-term debt in the public or private markets. As of
August 31, 1996, the Company had $725 million available for borrowing under
its $750 Million Revolver, $34 million available under the $200 Million
Multi-currency Revolver and an additional $250 million available under a
short-term 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 its revolving credit facilities, the Company believes that it will be
able to secure such financing from banks or through the offering of short-term
or long-term debt and/or equity securities in the public or private
markets. See "PART II. OTHER INFORMATION, ITEM 5(a) 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 31, 1996, the Company has issued $230 million of
debt securities under the Shelf Registration. A balance of $270 million
aggregate principal amount of debt or equity securities remains available for
issuance under the Shelf Registration. In addition, the Company intends on
initiating a $1 billion commercial paper program that is supported by the
$750 Million Revolver and the $250 million short-term revolving credit
facility.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The discussion of legal proceedings set forth in "PART I. FINANCIAL
INFORMATION, Item 1. FINANCIAL STATEMENTS, NOTE 6 - Commitments and
Contingencies is incorporated by reference into this Item.
ITEM 5: Other Information
(a) Forward-Looking Statements
Certain statements in this Form 10-Q and in the future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases, and in oral statements made by or with the approval of an
authorized executive officer constitute "forward-looking statements" within
the meaning of the Reform Act. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among
others, the following: general economic and business conditions which may
impact levels of disposable income of consumers and pricing and passenger
yields for the Company's cruise products; increases in cruise industry
capacity in the Caribbean and Alaska; changes in tax laws and
regulations(especially any change affecting the Company's status as a
"controlled foreign corporation" as defined in Section 957(a) of the Internal
Revenue Code of 1986, as amended) (see "Market for the Registrant's Common
Equity and Related Stockholders' Matters - Taxation of the Company" in the
Company's Annual Report on Form 10-K for the year ended November 30, 1995);
the ability of the Company to implement its shipbuilding program and to
expand its business outside the North American market where it has less
experience; weather patterns in the Caribbean; unscheduled ship repairs and
drydocking; delivery of new vessels on schedule and at the contracted price,
incidents involving cruise vessels at sea; and changes in laws and government
regulations applicable to the Company (including the implementation of the
"Safety of Life at Sea Convention" and changes in Federal Maritime Commission
surety and guaranty arrangements).
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement Regarding Computation of Per Share Earnings
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARNIVAL CORPORATION
Dated: October 10, 1996 BY/s/ Micky Arison
Micky Arison
Chairman of the Board and Chief
Executive Officer
Dated: October 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
11 Statement regarding computation of per share earnings
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
EXHIBIT 11
CARNIVAL CORPORATION
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share data)
Nine Months Three Months
Ended August 31, Ended August 31,
1996 1995 1996 1995
Net income $451,479 $366,863 $268,131 $209,542
Adjustments to net income for
the purpose of computing fully
diluted earnings per share:
Interest reduction from
assumed conversion of 4.5%
Convertible Subordinated
Notes 4,100 4,155 1,328 1,385
Adjusted net income $455,579 $371,018 $269,459 $210,927
Weighted average shares
outstanding 288,524 283,921 291,171 285,027
Adjustments to weighted
average shares outstanding for the
purpose of computing fully diluted
earnings per share:
Additional shares issuable upon
assumed conversion of 4.5%
Convertible Subordinated
Notes 6,542 6,618 6,388 6,618
Adjusted weighted average
shares outstanding 295,066 290,539 297,559 291,645
Earnings per share:
Primary $1.56 $1.29 $.92 $0.74
Fully Diluted* $1.54 $1.28 $.91 $0.72
*In accordance with Accounting Principles Board Opinion No. 15, the Company
does not present fully diluted EPS in its financial statements because the
Company's convertible securities are anti-dilutive or result in a less than
3% dilution for the periods presented.
EXHIBIT 12
CARNIVAL CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
Nine Months Ended August 31,
1996 1995
Net Income $451,479 $366,863
Income tax expense 11,006 11,096
Income before income tax expense 462,485 377,959
Fixed Charges:
Interest expense, net 49,889 48,583
Interest portion of rental expense (1) 1,626 1,266
Capitalized interest 18,679 13,359
Total Fixed Charges 70,194 63,208
Fixed Charges Not Currently Affecting Income:
Capitalized interest 18,679 13,359
Earnings before fixed charges $514,000 $427,808
Ratio of earnings to fixed charges 7.3x 6.8x
________________________
(1) Represents one-third of rental expense, which Company management believes
to be representative of the interest portion of rental expense.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5
1,000
9-MOS
NOV-30-1996
AUG-31-1996
85,751
18,922
41,008
0
51,267
263,695
4,529,435
745,886
4,703,096
689,568
1,059,519
2,943
0
0
2,934,276
4,703,096
0
1,737,613
0
962,435
0
0
68,568
462,485
11,006
451,479
0
0
0
451,479
1.56
1.54
This schedule contains summary financial information extracted from Carnival
Corporation's August 31, 1996 Form 10-Q and is qualified in its entirety by
reference to such financial statements.
