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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 May 31, 2002
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__
At July 8, 2002, the Registrant had 586,668,953 shares of its common
stock, $.01 par value, outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CARNIVAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except par value)
May 31, November 30,
2002 2001
ASSETS
Current Assets
Cash and cash equivalents $ 1,297,102 $ 1,421,300
Short-term investments 203,380 36,784
Accounts receivable, net 112,011 90,763
Inventories 89,163 91,996
Prepaid expenses and other 158,151 113,798
Fair value of hedged firm commitments 128,191 204,347
Total current assets 1,987,998 1,958,988
Property and Equipment, Net 8,879,609 8,390,230
Goodwill, Net 665,710 651,814
Other Assets 222,685 188,915
Fair Value of Hedged Firm Commitments 300,407 373,605
$12,056,409 $11,563,552
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 24,936 $ 21,764
Accounts payable 276,948 269,467
Accrued liabilities 250,077 298,032
Customer deposits 922,671 627,698
Dividends payable 61,592 61,548
Fair value of derivative contracts 127,581 201,731
Total current liabilities 1,663,805 1,480,240
Long-Term Debt 3,090,338 2,954,854
Deferred Income and Other Long-Term Liabilities 165,393 157,998
Fair Value of Derivative Contracts 302,281 379,683
Commitments and Contingencies (Notes 4 and 5)
Shareholders' Equity
Common stock; $.01 par value; 960,000 shares
authorized; 586,594 shares issued and
outstanding at May 31, 2002 (620,019
shares issued at November 30, 2001) 5,866 6,200
Additional paid-in capital 1,085,808 1,805,248
Retained earnings 5,756,972 5,556,296
Unearned stock compensation (12,718) (12,398)
Accumulated other comprehensive loss (1,336) (36,932)
Treasury stock; 33,848 shares at cost (727,637)
Total shareholders' equity 6,834,592 6,590,777
$12,056,409 $11,563,552
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except earnings per share)
Six Months Three Months
Ended May 31, Ended May 31,
2002 2001 2002 2001
Revenues $1,894,933 $2,086,731 $989,157 $1,079,125
Costs and Expenses
Operating 1,051,620 1,201,454 533,455 601,334
Selling and administrative 294,747 310,455 142,702 154,564
Depreciation and amortization 182,343 183,950 92,589 92,359
1,528,710 1,695,859 768,746 848,257
Operating Income Before
Loss From Affiliated
Operations 366,223 390,872 220,411 230,868
Loss From Affiliated
Operations, Net (44,024) (22,961)
Operating Income 366,223 346,848 220,411 207,907
Nonoperating (Expense) Income
Interest income 14,415 9,778 7,752 6,000
Interest expense, net of
capitalized interest (57,467) (62,110) (28,011) (30,238)
Other (expense) income, net (7,129) 12,326 (12,087) 380
Income tax benefit, net 7,799 8,071 6,136 2,914
(42,382) (31,935) (26,210) (20,944)
Net Income $ 323,841 $ 314,913 $194,201 $ 186,963
Earnings Per Share
Basic $.55 $.54 $.33 $.32
Diluted $.55 $.54 $.33 $.32
The accompanying notes are an integral part of these consolidated financial statements.
CARNIVAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Six Months Ended May 31,
2002 2001
OPERATING ACTIVITIES
Net income $ 323,841 $ 314,913
Operating items not requiring cash:
Depreciation and amortization 182,343 183,950
Loss from affiliated operations and
dividends received, net 56,910
Other 18,862 (4,316)
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables (17,020) (18,595)
Inventories 3,323 (178)
Prepaid expenses and other (42,268) (8,860)
Increase (decrease) in:
Accounts payable 2,490 (17,830)
Accrued and other liabilities (59,125) (23,501)
Customer deposits 294,367 157,786
Net cash provided by operating
activities 706,813 640,279
INVESTING ACTIVITIES
Additions to property and equipment, net (594,355) (591,527)
Purchase of short-term investments, net (159,888)
Other, net (18,929) 32,454
Net cash used in investing activities (773,172) (559,073)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 77,739 1,962,694
Principal repayments of long-term debt (10,743) (1,443,563)
Dividends paid (123,120) (122,766)
Proceeds from issuance of common stock 4,966 2,895
Debt issuance costs (191) (11,481)
Net cash (used in) provided by financing
activities (51,349) 387,779
Effect of exchange rate changes on cash
and cash equivalents (6,490) 8,323
Net (decrease) increase in cash and
cash equivalents (124,198) 477,308
Cash and cash equivalents at beginning
of period 1,421,300 189,282
Cash and cash equivalents at end of period $1,297,102 $ 666,590
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - Basis of Presentation
The accompanying financial statements have been prepared, without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Carnival Corporation and its consolidated subsidiaries are
referred to collectively in these consolidated financial statements and
elsewhere in this Form 10-Q as "we", "our" and "us".
The accompanying consolidated balance sheet at May 31, 2002 and the
consolidated statements of operations and cash flows for the six and three
months ended May 31, 2002 and 2001 are unaudited and, in the opinion of our
management, contain all adjustments, consisting of only normal recurring
accruals, necessary for a fair presentation.
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 with the current period
presentation.
NOTE 2 - Property and Equipment
Property and equipment consisted of the following (in thousands):
May 31, November 30,
2002 2001
Ships $ 9,410,430 $ 8,892,412
Ships under construction 711,414 592,781
10,121,844 9,485,193
Land, buildings and improvements 273,889 264,294
Transportation equipment and other 371,980 349,188
Total property and equipment 10,767,713 10,098,675
Less accumulated depreciation and
amortization (1,888,104) (1,708,445)
$ 8,879,609 $ 8,390,230
Capitalized interest, primarily on our ships under construction, amounted
to $16 million and $15 million for the six months ended May 31, 2002 and 2001,
respectively, and $8 million for each of the three months ended May 31, 2002
and 2001.
NOTE 3 - Long-Term Debt
Long-term debt consisted of the following (in thousands):
May 31, November 30,
2002 (a) 2001 (a)
Euro floating rate note, secured by one ship,
bearing interest at euribor plus 0.5%
(4.0% and 4.8% at May 31, 2002 and November 30,
2001, respectively), due through 2008 $ 122,476 $ 125,770
Unsecured fixed rate notes, bearing interest
at rates ranging from 6.15% to
7.7%, due through 2028(b) 848,839 848,779
Unsecured floating rate euro notes, bearing
interest at rates ranging from euribor plus 0.35%
to euribor plus 0.53% (3.6% to 3.9% and
3.9% to 4.9% at May 31, 2002 and
November 30, 2001, respectively),
due 2005 and 2006 720,340 604,068
Unsecured fixed rate euro notes, bearing interest
at 5.57%, due in 2006 (b) 280,941 266,223
Unsecured 2% convertible notes, due in 2021 600,000 600,000
Unsecured zero-coupon convertible notes, net of
discount, with a face value of $1.05 billion,
due in 2021 511,445 501,945
Other 31,233 29,833
3,115,274 2,976,618
Less portion due within one year (24,936) (21,764)
$3,090,338 $2,954,854
(a) All borrowings are in U.S. dollars unless otherwise noted. Euro
denominated notes have been translated to U.S. dollars at the period end
exchange rate.
(b) These notes are not redeemable prior to maturity.
Our unsecured 2% convertible notes ("2% Notes") and our zero-coupon
convertible notes ("Zero-Coupon Notes") are convertible into 15.3 million
shares and 17.4 million shares, respectively, of our common stock. Our 2%
Notes are convertible at a conversion price of $39.14 per share, subject to
adjustment, during any fiscal quarter for which the closing price of our
common stock is greater than $43.05 per share for a defined duration of time.
Our Zero-Coupon Notes have a 3.75% yield to maturity and are convertible
during any fiscal quarter for which the closing price of our common stock
reaches certain targeted levels for a defined duration of time. These levels
commenced at a low of $31.94 per share for the first quarter of fiscal 2002
and increase at an annual rate of 3.75% thereafter, until maturity. The
conditions for conversion of our 2% Notes or Zero-Coupon Notes were not met
for the first or second quarters of fiscal 2002. Upon conversion of the above
notes we may choose to deliver common stock, cash or a combination of cash and
common stock with a total value equal to the value of the consideration
otherwise deliverable.
NOTE 4 - Commitments
Ship Commitments
A description of our ships under contract for construction at May 31,
2002 was as follows (in millions, except passenger capacity):
Expected Estimated
Service Passenger Total
Ship Date(a) Shipyard Capacity(b) Cost(c)
Carnival Cruise
Lines ("Carnival")
Carnival Legend 8/02 Masa-Yards(d) 2,124 $ 375
Carnival Conquest 11/02 Fincantieri 2,974 500
Carnival Glory 7/03 Fincantieri 2,974 500
Carnival Miracle 4/04 Masa-Yards(d) 2,124 375
Carnival Valor 11/04 Fincantieri(d) 2,974 500
Total Carnival 13,170 2,250
Holland America
Zuiderdam 12/02 Fincantieri(d) 1,848 410
Oosterdam 7/03 Fincantieri(d) 1,848 410
Westerdam 5/04 Fincantieri(d) 1,848 410
Newbuild 11/05 Fincantieri(d) 1,848 410
Newbuild 6/06 Fincantieri 1,848 400
Total Holland America 9,240 2,040
Costa Cruises ("Costa")
Costa Mediterranea 6/03 Masa-Yards (e) 2,114 355
Costa Fortuna 12/03 Fincantieri(e) 2,720 415
Costa Magica 11/04 Fincantieri(e) 2,720 415
Total Costa 7,554 1,185
Cunard Line ("Cunard")
Queen Mary 2 1/04 Chantiers de
l'Atlantique(d) 2,620 780
Newbuild 2/05 Fincantieri(d) 1,968 410
Total Cunard 4,588 1,190
Total 34,552 $6,665
(a) The expected service date is the date the ship is currently expected to
begin its first revenue generating cruise.
(b) In accordance with cruise industry practice, passenger capacity is
calculated based on two passengers per cabin even though some cabins can
accommodate three or more passengers.
(c) Estimated total cost of the completed ship includes the contract price
with the shipyard, design and engineering fees, capitalized interest,
various owner supplied items and construction oversight costs.
(d) These construction contracts are denominated in euros and have been
fixed into U.S. dollars through the utilization of forward foreign currency
contracts. At May 31, 2002, the $418 million of unrealized losses from
these forward contracts has been recorded as fair value of derivative
contract liabilities on our May 31, 2002 balance sheet and are also included
in the above estimated total cost of these construction contracts.
(e) These construction contracts are denominated in euros, which is Costa's
functional currency. The estimated total costs have been translated into
U.S. dollars using the May 31, 2002 exchange rate.
In connection with our ships under contract for construction, we have
paid $711 million through May 31, 2002 and anticipate paying approximately
$1.6 billion during the twelve months ending May 31, 2003 and approximately
$4.4 billion thereafter.
Travel Vouchers
Pursuant to Carnival's and Holland America's settlement of litigation,
travel vouchers with face values of $10 to $55 were required to be issued to
qualified past passengers. Approximately $123 million of these travel
vouchers are available to be used for future travel prior to their expiration,
principally in fiscal 2005. We will account for the redemption of these
travel vouchers as a reduction to our future revenues as they are used.
Proposed Acquisition of P&O Princess Cruises plc ("P&O")
We have made a pre-conditional offer to acquire P&O, the world's third
largest cruise company, for 0.3004 shares of our common stock for each P&O
share of common stock. At March 31, 2002, there were approximately 693
million shares of P&O stock outstanding. In addition, should we acquire P&O,
we will assume or refinance P&O's outstanding net debt, which was
approximately $1.7 billion as of March 31, 2002. There will be a partial cash
alternative of 250 pence per P&O share, which currently represents
approximately $2.7 billion of the purchase price, subject to our obtaining
satisfactory financing. The partial cash alternative will reduce the portion
of our offer that will be paid in shares of our common stock. As of the date
we made our pre-conditional offer, P&O and Royal Caribbean Cruises Ltd.
("RCL") were parties to a series of agreements that would result in a
combination of P&O and RCL in a dual listed company structure. P&O's Board of
Directors has recommended the combination with RCL to its shareholders.
However, P&O shareholders did not follow their Board of Directors'
recommendation and voted to adjourn their scheduled meeting to vote on the RCL
merger. Both the combination with RCL and our offer are subject to certain
conditions, including regulatory clearances. We are currently providing
information to both the European Union ("EU") and U.S. regulators and expect
to learn the results of the EU review by August 2002 and the result of the
U.S. review following thereafter. We expect to incur approximately $30
million related to the possible P&O acquisition by September 2002, which will
be capitalized as part of the cost of the acquisition if we are successful or
will be written off to expense if we are not successful in concluding the
acquisition. No assurance can be given that we will be successful in acquiring
P&O.
NOTE 5 - Contingencies
Litigation
Several actions have been filed against Costa, Cunard and Holland America
Tours ("Tours") alleging that they violated the Americans with Disabilities
Act by failing to make certain cruise ships accessible to individuals with
disabilities (collectively the "ADA Complaints"). Plaintiffs seek injunctive
relief and fees and costs. These actions are proceeding.
Several actions filed in the U.S. District Court for the Southern
District of Florida against us and four of our executive officers on behalf
of a purported class of purchasers of our common stock were consolidated into
one action in Florida (the "Stock Purchase Complaint"). The plaintiffs have
claimed that statements we made in public filings violated federal securities
laws and seek unspecified compensatory damages and attorney and expert fees
and costs. Our motion to dismiss is currently pending before the court.
The ultimate outcomes of the pending ADA and Stock Purchase Complaints
cannot be determined at this time. We believe that we and our executive
officers have meritorious defenses to these claims and, accordingly, we intend
to vigorously defend against these actions.
In February 2001, Holland America Line-USA, Inc. ("HAL, Inc."), our
wholly-owned subsidiary, received a grand jury subpoena requesting that it
produce documents and records relating to the air emissions from Holland
America ships in Alaska. HAL, Inc. responded to the subpoena. The ultimate
outcome of this matter cannot be determined at this time.
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.
Costa has also given notice of termination of the contract. It is expected
that the arbitration tribunal's decision will be made at the earliest by mid-
2003. In the event that an award is given in favor or Cammell Laird, the
amount of damages, which Costa will have to pay, if any, is not currently
determinable. The ultimate outcome of this matter cannot be determined at
this time.
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 under our insurance programs. We believe the ultimate outcome of
any such actions, which are not covered by insurance, are not expected to have
a material adverse effect on our financial statements.
Contingent Obligations
At May 31, 2002, we had contingent obligations totaling $755 million to
participants in lease out and lease back type transactions for three of our
ships. At the inception of the leases, the entire amount of the contingent
obligations was paid by us 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. We 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 AAA or AA. If their credit ratings fall below AA-, then we
would be required to move a majority of the funds from these financial
institutions to other highly-rated financial institutions. If our credit
rating falls below BBB, then we would be required to provide a letter of
credit for an additional $89 million, or alternatively provide mortgages in
the aggregate amount of $89 million on two of our ships.
In the unlikely event that we were to terminate the three lease
agreements early or default on our obligations, we would currently have to pay
a total of $180 million in stipulated damages. At May 31, 2002, $148 million
of 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. An additional $40 million of letters of credit would be
required to be issued if our credit rating falls below A-. Between 2017 and
2022, we have the right to exercise options that would terminate these
transactions at no cost to us. As a result of these three transactions, we
have received $67 million, which was recorded as deferred income on our
balance sheets and is being amortized to nonoperating income through 2022.
In the event we were to default under our $1.4 billion revolving credit
facility, we would be required to post cash collateral to support the letters
of credit discussed above.
NOTE 6 - Shareholders' Equity
Our Articles of Incorporation authorize our Board of Directors, at their
discretion, to issue up to 40 million shares of our preferred stock. At May
31, 2002 and November 30, 2001, no preferred stock had been issued.
During the six months ended May 31, 2002 and 2001, we declared cash
dividends of $.21 per share each period, or an aggregate of $123 million for
each period.
In April 2002, we retired 33.8 million shares of our Treasury stock.
NOTE 7 - Comprehensive Income
Comprehensive income was as follows (in thousands):
Six Months Three Months
Ended May 31, Ended May 31,
2002 2001 2002 2001
Net income $323,841 $314,913 $194,201 $186,963
Foreign currency translation
adjustment, net 24,745 (16,964) 32,901 (18,861)
Changes in securities valuation
allowance 6,280 8,133 3,847 6,957
Changes related to cash flow
derivative hedges, net 4,571 (831) (8) (4,246)
Transition adjustment for cash
flow derivative hedges (4,214)
Total comprehensive income $359,437 $301,037 $230,941 $170,813
NOTE 8 - Segment Information
Our cruise segment includes six cruise brands, which have been aggregated
as a single operating segment based on the similarity of their economic and
other characteristics. Cruise revenues are comprised of sales of passenger
cruise tickets, including, in some cases, air transportation to and from the
cruise ships, and revenues from certain onboard activities and other services.
The tour segment represents the transportation, hotel and tour operations of
Tours.
Cruise revenues included intersegment revenues, which primarily represent
billings to the tour segment for the cruise portion of a tour when a cruise
is sold as a part of a tour package. In addition, cruise and tour operating
expenses included a cost allocation of corporate and other expenses.
Selected segment information was as follows (in thousands):
Six Months Ended Six Months Ended
May 31, 2002 May 31, 2001
Operating Operating
income income
Revenues (loss) Revenues (loss)
Cruise $1,867,861 $392,344 $2,054,591 $415,592
Tour 33,495 (20,379) 38,758 (18,161)
Affiliated operations (44,024)
Intersegment elimination (6,423) (6,618)
Corporate (5,742) (6,559)
$1,894,933 $366,223 $2,086,731 $346,848
Three Months Ended Three Months Ended
May 31, 2002 May 31, 2001
Operating Operating
income income
Revenues (loss) Revenues (loss)
Cruise $967,354 $232,477 $1,054,200 $241,236
Tour 27,788 (9,208) 31,070 (7,682)
Affiliated operations (22,961)
Intersegment elimination (5,985) (6,145)
Corporate (2,858) (2,686)
$989,157 $220,411 $1,079,125 $207,907
NOTE 9 - Earnings Per Share
Our basic and diluted earnings per share were computed as follows (in
thousands, except per share data):
Six Months Three Months
Ended May 31, Ended May 31,
2002 2001 2002 2001
Net income $323,841 $314,913 $194,201 $186,963
Weighted average common shares
outstanding 586,395 584,001 586,520 584,150
Dilutive effect of stock plans 1,799 2,381 2,259 2,238
Dilutive weighted average shares
outstanding 588,194 586,382 588,779 586,388
Basic earning per share $ .55 $ .54 $ .33 $ .32
Diluted earnings per share $ .55 $ .54 $ .33 $ .32
Our diluted earnings per share computation for the six and three months
ended May 31, 2002 and 2001 did not include 32.7 million shares and 15.3
million shares, respectively, of our common stock issuable upon conversion of
our 2% Notes and Zero-Coupon Notes, as this common stock was not issuable
under the contingent conversion provisions of these debt instruments.
NOTE 10 - Accounting Changes
Effective December 1, 2001, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 141 requires business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method. SFAS No. 141 also further clarifies the criteria for
recognition of intangible assets separately from goodwill. Our adoption of
this standard did not have any effect on our accounting for prior business
combinations.
SFAS No. 142 requires companies to stop amortizing goodwill and requires
an annual, or when events or circumstances dictate a more frequent, impairment
review of goodwill. Accordingly, as of December 1, 2001, we no longer
amortize our goodwill, all of which has been allocated to our cruise segment.
We completed the transitional impairment test of our existing goodwill as of
December 1, 2001 and determined that such goodwill was not impaired. There
has been no change to our goodwill carrying amount since November 30, 2001,
other than the change resulting from using a different foreign currency
translation rate at May 31, 2002 compared to November 30, 2001. If goodwill
amortization had not been recorded for the six and three months ended May 31,
2001, then our adjusted net income would have been $325 million and $192
million, respectively. In addition, basic adjusted earnings per share for the
six and three months ended May 31, 2001 would have been $0.56 per share and
$0.33 per share, respectively and diluted adjusted earnings per share for the
six and three months ended May 31, 2001 would have been $0.55 and $0.33 per
share, respectively.
NOTE 11 - Recent Accounting Pronouncement
In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets" was issued. SFAS No. 144 requires (i) the recognition
and measurement of the impairment of long-lived assets to be held and used and
(ii) the measurement of long-lived assets to be held for sale. SFAS No. 144
is effective for us in fiscal 2003. We have not completed our review of SFAS
No. 144.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Cautionary Note Concerning Factors That May Affect Future Results
Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations", and elsewhere in this Form 10-
Q constitute "forward-looking statements" within the meaning of the U.S.
Private Securities Litigation Reform Act of 1995. We have tried, wherever
possible, to identify such statements by using words such as "anticipate,"
"believe," "expect," "forecast," "future," "intend," and words and terms of
similar substance in connection with any discussion of future operating or
financial performance. These forward-looking statements, including those
which may impact the forecasting of our net revenue yields, booking levels,
pricing, occupancy or business prospects, involve known and unknown risks,
uncertainties and other factors, which may cause our actual results,
performances or achievements to be materially different from any future
results, performances or achievements expressed or implied by such forward-
looking statements. Such factors include, among others, the following:
- general economic and business conditions which may impact levels of
disposable income of consumers and the net revenue yields for our
cruise products,
- consumer demand for cruises and other vacation options,
- other vacation industry competition,
- effects on consumer demand of armed conflicts, political instability,
terrorism, adverse media publicity and the availability of air service,
- shifts in consumer booking patterns,
- increases in vacation industry capacity, including cruise capacity,
- continued availability of attractive port destinations,
- changes in tax laws and regulations,
- changes and disruptions in financial and equity markets,
- our financial and contractual counterparties' ability to perform,
- our ability to implement our brand strategy,
- our ability to implement our shipbuilding program and to continue to
expand worldwide,
- our ability to attract and retain shipboard crew,
- changes in foreign currency and interest rates and increases in
security expenses, food, fuel and insurance prices,
- delivery of new ships on schedule and at the contracted prices,
- weather patterns or natural disasters,
- unscheduled ship repairs and drydocking,
- incidents involving cruise ships,
- impact of pending or threatened litigation,
- our ability to successfully implement cost improvement plans,
- the continuing financial viability and/or consolidation of our travel
agent distribution system,
- our ability to successfully integrate business acquisitions, and
- changes in laws and regulations applicable to us.
These risks may not be exhaustive. We operate in a continually changing
business environment, and new risks emerge from time to time. We cannot
predict such risks nor can we assess the impact, if any, of such risks on our
business or the extent to which any risk, or combination of risks may cause
actual results to differ from those projected in any forward-looking
statements. Accordingly, forward-looking statements should not be relied upon
as a prediction of actual results. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Results of Operations
We earn our cruise revenues primarily from the following:
- the sale of passenger cruise tickets, which includes accommodations,
meals, and most onboard activities,
- the sale of air transportation to and from our cruise ships, and
- the sale of goods and services on board our cruise ships, such as
casino gaming, bar sales, gift shop and photo sales, shore excursions
and spa services.
We also derive revenues from the hotel, tour and transportation
operations of Tours.
For segment information related to our revenues, operating income and
affiliated operations segment see Note 8 in the accompanying financial
statements. Operations data expressed as a percentage of revenues and
selected statistical information was as follows:
Six Months Three Months
Ended May 31, Ended May 31,
2002 2001 2002 2001
Revenues 100% 100% 100% 100%
Costs and Expenses
Operating 55 58 54 56
Selling and administrative 16 15 15 14
Depreciation and amortization 10 9 9 9
Operating Income Before Loss
from Affiliated Operations 19 18 22 21
Loss from Affiliated
Operations, Net (2) (2)
Operating Income 19 16 22 19
Nonoperating Expense (2) (1) (2) (2)
Net Income 17% 15% 20% 17%
Selected Statistical Information
(in thousands)
Passengers carried 1,603 1,602 831 816
Available lower berth days 10,319 10,095 5,258 5,151
Occupancy percentage 102.3% 103.9% 101.9% 103.9%
General
Our cruise and tour operations experience varying degrees of seasonality.
Our revenue from the sale of passenger tickets for our cruise operations is
moderately seasonal. Historically, demand for cruises has been greatest
during the summer months. Tour's revenues are highly seasonal, with a vast
majority of its revenues generated during the late spring and summer months
in conjunction with the Alaska cruise season.
Our average cruise passenger capacity is currently expected to increase
by 2.8% and 8.2% in the third and fourth quarters of fiscal 2002,
respectively, as compared to the same periods of fiscal 2001. Substantially
all of our fiscal 2002 capacity increase will be in Carnival and Costa.
The year over year percentage increase in our average passenger capacity
resulting from the delivery of ships under contract for construction for
fiscal 2003 and 2004 is currently expected to be approximately 17% each year.
For a discussion of our critical accounting policies see "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
which is included in our Annual Report on Form 10-K for fiscal 2001.
Outlook for Remainder of Fiscal 2002
Booking levels during the 2002 second quarter were substantially ahead
of those for the 2001 second quarter. Since late May, booking levels have
been approximately equal to last year's levels. Pricing on those bookings has
largely recovered from the significantly discounted levels last fall and are
now running only slightly below levels for the comparable period last year.
On a cumulative basis, advance bookings and average prices for the balance
of fiscal 2002 remain below last year's levels, primarily as a result of the
dramatic slowdown in 2002 bookings last fall and the shift toward closer-to-
sailing booking patterns. Based on bookings to date, we currently expect the
trend in sequential net revenue yield improvement to continue through the
remainder of the year, with our net revenue yields expected to be down 3
percent to 5 percent in the third quarter of fiscal 2002 compared to those in
the third quarter of fiscal 2001 and up slightly in the fourth quarter
compared to those in the same period last year.
In addition, if future 2002 fuel prices remain at the same levels as the
end of the 2002 second quarter, then we estimate that our fuel costs will
increase by approximately $15 million for the last six months of fiscal 2002
versus the comparable period in fiscal 2001.
Six Months Ended May 31, 2002 ("2002") Compared
To Six Months Ended May 31, 2001 ("2001")
Revenues
Revenues decreased $192 million, or 9.2%, in 2002 compared to 2001.
Cruise revenues decreased by $187 million, or 9.1%, to $1.87 billion in 2002
from $2.05 billion in 2001. Our cruise revenues change resulted from a 9.8%
decrease in our gross revenue per passenger cruise day and a 1.3% decrease in
our occupancy rate, partially offset by a 2.2% increase in our passenger
capacity. This decrease in gross revenue per passenger cruise day and
occupancies was primarily caused by the impact of the September 11 events,
which resulted in lower cruise ticket prices and occupancies. There was also
a significant reduction in the number of guests purchasing air travel from us
in 2002 compared to 2001. When a guest elects to provide his or her own
transportation, rather than purchasing air transportation from us, both our
cruise revenues and operating expenses decrease by approximately the same
amount. Net revenue yield (net revenue per available berth day after
deducting the cost of air transportation, travel agent commissions and other
direct costs of sales) was down 6.3 percent, compared to 2001.
Costs and Expenses
Operating expenses decreased $150 million, or 12.5%, in 2002 compared to
2001. Cruise operating costs decreased by $147 million, or 12.6%, to $1.02
billion in 2002 from $1.17 billion in 2001. Approximately $76 million of this
decrease was due to reduced air travel costs since fewer guests purchased air
transportation through us. Also, commission expenses were $34 million less
than last year primarily because of lower cruise revenues. Excluding air
travel costs, travel agent commissions and other direct costs of sales, cruise
operating expenses per available berth day decreased 6.1% due to lower fuel
costs of $14 million, on a capacity adjusted basis, and decreases in other
operating costs, partially as a result of the temporary cost reduction
initiatives we undertook after the events of September 11, 2001.
Selling and administrative expenses decreased $16 million, or 5.1%, to
$295 million in 2002 from $310 million in 2001. Selling and administrative
expenses decreased in 2002 primarily from a 7.2% decrease in our cruise
selling and administrative expenses per available berth day, net of additional
expenses associated with our 2.2% increase in passenger capacity. A portion
of the reduction in costs per available berth day resulted from temporary cost
containment actions taken after September 11, including the timing of
advertising expenditures.
Depreciation and amortization decreased by $2 million, or 1%, to $182
million in 2002 from $184 million in 2001. The elimination of $10 million of
goodwill amortization upon our adoption of SFAS No. 142 on December 1, 2001
(see Note 10) reduced depreciation and amortization this year, but that was
offset by increased depreciation primarily from the expansion of our fleet and
ship improvement expenditures.
Affiliated Operations
During 2001, we recorded $44 million of losses from affiliated operations
for our portion of Airtours' losses. On June 1, 2001 we sold our investment
in Airtours and, accordingly, we ceased recording Airtours' results as of the
end of our second quarter of 2001.
Nonoperating (Expense) Income
Interest expense decreased by $3 million, which was comprised of a $17
million reduction in interest expense due to lower average borrowing rates
partially offset by a $14 million increase in interest expense due to our
increased level of average borrowings. Interest income increased by $5
million, which was comprised of a $22 million increase in interest income from
our higher average invested cash balances partially offset by a $17 million
reduction in interest income due to lower average interest rates.
Other expense in 2002 includes a $9 million loss, including related
expenses, resulting from the sale of Holland America's former Nieuw Amsterdam,
and $4 million of direct costs associated with cancelled cruises, partially
offset by $4 million of income related to the termination of an overfunded
pension plan.
Three Months Ended May 31, 2002 ("2002") Compared
To three months ended May 31, 2001 ("2001")
Revenues
Revenues decreased $90 million, or 8.3%, in 2002 compared to 2001. Cruise
revenues decreased by $87 million, or 8.2%, to $967 million in 2002 from $1.05
billion in 2001. Our cruise revenues change resulted from a 9.7% decrease in
our gross revenue per passenger cruise day and a 0.6% decrease in our
occupancy rate, partially offset by a 2.1% increase in our passenger capacity.
This decrease in gross revenue per passenger cruise day and occupancies was
primarily caused by the impact of the September 11 events, which resulted in
lower cruise ticket prices and occupancies. There was also a significant
reduction in the number of guests purchasing air travel from us. Net revenue
yield was down 5.3 percent, compared to 2001.
Costs and Expenses
Operating expenses decreased $68 million, or 11.3%, in 2002 compared to
2001. Cruise operating costs decreased by $67 million, or 11.6%, to $512
million in 2002 from $579 million in 2001. Approximately $37 million of this
decrease was due to reduced air travel costs since fewer guests purchased air
transportation through us. Also, commission expenses were $18 million less
then last year primarily because of lower cruise revenues. Excluding air
travel costs, travel agent commissions and other direct costs of sales, cruise
operating expenses per available berth day decreased 4.2% due to decreases in
other operating costs, partially as a result of the temporary cost reduction
initiatives we undertook after the events of September 11, 2001.
Selling and administrative ("S&A") expenses decreased $12 million, or
7.7%, to $143 million in 2002 from $155 million in 2001. Selling and
administrative expenses decreased in 2002 primarily from a 9.3% decrease in
our cruise selling and administrative expenses per available berth day, net
of additional expenses associated with our 2.1% increase in passenger
capacity. A substantial portion of the reduction in S&A costs per available
berth day was due to the timing of advertising expenditures.
Depreciation and amortization was the same in 2002 and 2001. The 2002
quarter primarily includes the elimination of $5 million of goodwill
amortization upon our adoption of SFAS No. 142 on December 1, 2001 (see Note
10), offset by an increase due primarily to the expansion of our fleet and
ship improvement expenditures.
Affiliated Operations
During 2001, we recorded $23 million of losses from affiliated operations
for our portion of Airtours' losses.
Nonoperating (Expense) Income
Interest expense decreased by $2 million, which was comprised of a $9
million reduction in interest expense due to lower average borrowing rates
partially offset by a $7 million increase in interest expense due to our
increased level of average borrowings. Interest income increased by $2
million, which was comprised of a $9 million increase in interest income from
our higher average invested cash balances partially offset by a $7 million
reduction in interest income due to lower average interest rates.
Other expense in 2002 includes a $9 million loss, including related
expenses, resulting from the sale of Holland America's former Nieuw Amsterdam,
and $4 million of direct costs associated with cancelled cruises.
The $3 million increase in our income tax benefit, net, in 2002 compared
to 2001 was primarily as a result of the income tax benefit to be received by
Costa as a result of a new Italian investment tax law, which allows Costa to
receive an income tax benefit resulting from its investment in new ships made
during fiscal 2002.
Liquidity and Capital Resources
Sources and Uses of Cash
Our business provided $707 million of net cash from operations during the
six months ended May 31, 2002, an increase of $67 million, or 10.4%, compared
to the six months ended May 31, 2001, due primarily to an increase in
customers' advance ticket deposits.
During the six months ended May 31, 2002, our net expenditures for
capital projects were $594 million, of which $479 million was spent for our
ongoing shipbuilding program. The $115 million of nonshipbuilding capital
expenditures consisted primarily of ship refurbishments, information
technology assets, Tour assets and other.
During the six months ended May 31, 2002, we borrowed $78 million under
Costa's euro denominated revolving credit facility primarily for Costa's
short-term working capital needs, and made $11 million of principal
repayments, primarily on Costa's secured debt. We also paid cash dividends
of $123 million in the first six months of fiscal 2002.
Future Commitments and Funding Sources
Our contractual cash obligations, with initial or remaining terms in
excess of one year, remained generally unchanged at May 31, 2002 compared to
November 30, 2001, except for shipbuilding payments of $479 million made in
the first six months of fiscal 2002.
As of May 31, 2002, we had noncancelable contracts for the delivery of
fifteen new ships over the next four years. Our remaining obligations related
to these ships under contract for construction is to pay approximately $1.6
billion during the twelve months ending May 31, 2003 and approximately $4.4
billion thereafter.
At May 31, 2002, we had $3.1 billion of long-term debt, of which $25
million is due during the twelve months ending May 31, 2003. See Notes 3 and
4 in the accompanying financial statements for more information regarding our
debt and commitments.
At May 31, 2002, we had liquidity of $3 billion, which consisted of $1.5
billion of cash, cash equivalents and short-term investments, and $1.5 billion
available for borrowing under our revolving credit facilities obtained through
a group of banks, which have strong long-term credit ratings. Our revolving
credit facilities mature in 2006. A key to the cost of, and our access to,
other forms of liquidity is the maintenance of our strong long-term credit
ratings. Credit rating agencies review credit ratings on a periodic basis and
may revise a company's credit rating. A lower credit rating would increase
our cost of borrowing and could restrict our access to the commercial paper
and other capital markets. In that case, unless there was a material adverse
change in our business, we could draw on our revolving credit facilities or
seek other sources of financing. A downgrade in our credit ratings would not
accelerate the scheduled principal repayments on our existing long-term debt.
In that regard, the proposed acquisition of P&O, if consummated, may result
in a ratings downgrade, although we currently believe our senior unsecured
long-term debt would retain long-term investment grade debt ratings.
Our $1.4 billion revolving credit facility and other of our loan
agreements contain covenants that require us, among other things, to maintain
debt service coverage and limit our debt to tangible capital ratio. At May
31, 2002 we were in compliance with all our debt covenants.
We believe that our existing liquidity, as well as our forecasted cash
flow from future operations, will be sufficient to fund most of our capital
projects, debt service requirements, dividend payments, working capital and
other firm commitments, excluding the cash portion of our offer to acquire
P&O. Our forecasted cash flow from future operations may be adversely
affected by various 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 financing from banks or through the offering of debt
and/or equity securities in the public or private markets. Specifically, if
the P&O acquisition is consummated, we intend to finance approximately $2.7
billion in cash through the issuance of long-term debt or equity securities
or a combination of debt and equity. 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, including financing for
the cash portion of our proposed acquisition of P&O.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
As previously reported in our Annual Report on Form 10-K for fiscal 2001,
we received a grand jury subpoena signed by an Assistant U.S. Attorney in the
Southern District of Florida in August 2000. The subpoena demanded the
production of documents concerning environmental practices of ships operated
by us and compliance with environmental laws and regulations. On April 19,
2002, we pleaded guilty to six felony counts concerning violations of Title
18, United State Code, Section 1001(a)(3). The violations related to Oil
Record Books that did not correctly disclose matters relating to the discharge
of oily bilge water. We were sentenced in accordance with a plea agreement
pursuant to which we paid $9 million in fines and $9 million to parties named
in the plea agreement in the form of community service, which amounts were
charged to nonoperating expense in fiscal 2001. We have been placed on
probation for a term of five years and, among other things, are required to
develop, implement and enforce a worldwide environmental compliance plan.
Accordingly, the fleet-wide investigation by the U.S. Attorney for the
Southern District of Florida of us and our officers and employees has been
concluded.
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of our shareholders was held on April 15, 2002 ("the
Annual Meeting"). Holders of our common stock were entitled to elect fourteen
directors. On all matters which came before the Annual Meeting, holders of
our common stock were entitled to one vote for each share held. Proxies for
541,136,355 of the 586,364,315 shares of common stock entitled to vote were
received in connection with the Annual Meeting.
The following table sets forth the names of the fourteen persons elected
at the Annual Meeting to serve as directors until our next annual meeting of
shareholders and the number of votes cast for, against or withheld with
respect to each person.
NAME OF DIRECTOR FOR AGAINST WITHHELD
Micky Arison 531,740,639 -0- 9,395,716
Shari Arison 510,945,457 -0- 30,190,898
Maks L. Birnbach 531,861,295 -0- 9,275,060
Richard G. Capen, Jr. 533,815,568 -0- 7,320,787
Robert H. Dickinson 531,687,288 -0- 9,449,067
Arnold W. Donald 533,816,800 -0- 7,319,555
James M. Dubin 531,949,461 -0- 9,186,894
Howard S. Frank 531,792,808 -0- 9,343,547
A. Kirk Lanterman 531,721,806 -0- 9,414,549
Modesto A. Maidique 518,275,654 -0- 22,860,701
Stuart Subotnick 515,346,652 -0- 25,789,703
Sherwood M. Weiser 514,654,592 -0- 26,481,763
Meshulam Zonis 534,805,085 -0- 6,331,270
Uzi Zucker 531,210,894 -0- 9,925,461
The following table sets forth certain additional matters which were
submitted to our shareholders for approval at the Annual Meeting and the
tabulation of the votes with respect to each such matter.
BROKER
MATTER FOR AGAINST WITHHELD NONVOTES
Approval of our
2002 Stock Option Plan 336,414,948 168,444,089 2,054,210 34,223,108
Approval of Pricewaterhouse-
Coopers LLP as our
independent certified
public accountants
for fiscal 2002 527,620,642 11,415,266 2,100,447 -0-
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit
10.1 Carnival Corporation 2002 Stock Option Plan
10.2 Succession Agreement to Registration Rights Agreement dated June
14, 1991, between Carnival Corporation and Ted Arison
10.3 Service Agreement Letter dated May 28, 2002 between Costa Crociere,
S.p.A. and Pier Luigi Foschi
12 Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K
We filed current reports on Form 8-K on March 21, 2002 (Items 5. and 7.),
April 22, 2002 (Items 5. and 7.) and on May 2, 2002 (Item 5.).
SIGNATURES
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
Date: July 11, 2002 BY /s/ Howard S. Frank
Howard S. Frank
Vice Chairman of the Board of
Directors and Chief
Operating Officer
Date: July 11, 2002 BY /s/ Gerald R. Cahill
Gerald R. Cahill
Senior Vice President-Finance
and Chief Financial and
Accounting Officer
Exhibit 10.1
CARNIVAL CORPORATION
2002 STOCK OPTION PLAN
(Effective as of January 14, 2002)
1. Purpose
The purpose of the Plan is to provide a means through which the Company and
its Affiliates may attract able persons to enter and remain in the employ of
the Company and its Affiliates and to provide a means whereby employees,
directors and consultants of the Company and its Affiliates can acquire and
maintain Common Stock ownership, thereby strengthening their commitment to
the welfare of the Company and its Affiliates and promoting an identity of
interest between stockholders and these persons.
The Plan provides for granting Incentive Stock Options and Nonqualified
Stock Options.
2. Definitions
The following definitions shall be applicable throughout the Plan.
(a) "Affiliate" means (i) any entity that directly or
indirectly is controlled by, controls or is under common control with the
Company, and (ii) any entity in which the Company has a significant equity
interest, in either case as determined by the Committee.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means the Company or an Affiliate having "cause"
to terminate a Participant's employment or service, as defined in any
existing employment, consulting or any other agreement between the
Participant and the Company or an Affiliate or, in the absence of such an
employment, consulting or other agreement, upon (i) the determination by the
Committee that the Participant has ceased to perform his duties to the
Company or an Affiliate (other than as a result of his incapacity due to
physical or mental illness or injury), which failure amounts to an
intentional and extended neglect of his duties to such party, (ii) the
Committee's determination that the Participant has engaged or is about to
engage in willful misconduct or conduct which causes or may reasonably be
expected to cause substantial damage to the Company or an Affiliate,
(iii) the Participant having been convicted of, or pleaded guilty or no
contest to, a felony or a crime involving moral turpitude or (iv) the
failure of the Participant to follow the lawful instructions of the Board or
any of his superiors.
(d) "Change of Control means, unless in the case of a
particular Option the applicable Stock Option Agreement states otherwise or
contains a different definition of "Change of Control," the occurrence of
any of the following:
(i) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more (on a fully diluted basis) of either (A) the
then outstanding shares of common stock of the Company, taking into account
as outstanding for this purpose such common stock issuable upon the exercise
of options or warrants, the conversion of convertible stock or debt, and the
exercise of any similar right to acquire such common stock (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this Agreement, the following
acquisitions shall not constitute a Change of Control: (I) any acquisition
by the Company or any Affiliate, (II) any acquisition by any employee
benefit plan sponsored or maintained by the Company or any Affiliate, (III)
any acquisition by Marilyn B. Arison, Micky Arison, Shari Arison, Michael
Arison or their spouses or lineal descendents, any trust established for the
benefit of any of the aforementioned Arison family members, or any Person
directly or indirectly controlling, controlled by or under common control
with any of the aforementioned Arison family members or any trust
established for the benefit of any of the aforementioned Arison family
members or any charitable trust or non-profit entity established by any
person or entity described in this clause (III), (IV) any acquisition by
any Person which complies with clauses (A), (B) and (C) of subsection (v) of
this Section 2(d), or (V) in respect of an Option held by a particular
Participant, any acquisition by the Participant or any "affiliate" (within
the meaning of 17 C.F.R. 230.405) of the Participant (persons described in
clauses (I), (II), (III) (IV) and (V) being referred to hereafter as
"Excluded Persons");
(ii) Individuals who, on the date hereof,
constitute the Board (the "Incumbent Directors") cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date hereof, whose election or
nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named
as a nominee for director, without written objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
initially elected or nominated as a director of the Company as a result of
an actual or threatened election contest with respect to directors or as a
result of any other actual or threatened solicitation of proxies or consents
by or on behalf of any person other than the Board shall be deemed to be an
Incumbent Director;
(iii) the dissolution or liquidation of the Company;
(iv) the sale of all or substantially all of the
business or assets of the Company; or
(v) the consummation of a merger, consolidation,
statutory share exchange or similar form of corporate transaction
involving the Company that requires the approval of the Company's
stockholders, whether for such transaction or the issuance of
securities in the transaction (a "Business Combination"), unless
immediately following such Business Combination: (A) more than 50% of
the total voting power of (x) the corporation resulting from such
Business Combination (the "Surviving Company"), or (y) if applicable,
the ultimate parent corporation that directly or indirectly has
beneficial ownership of sufficient voting securities eligible to elect
a majority of the directors of the Surviving Company (the "Parent
Company"), is represented by the Outstanding Company Voting Securities
that were outstanding immediately prior to such Business Combination
(or, if applicable, is represented by shares into which the Outstanding
Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of the Company's
Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no Person (other than any Excluded Person),
is or becomes the beneficial owner, directly or indirectly, of 50% or
more of the total voting power of the outstanding voting securities
eligible to elect directors of the Parent Company (or, if there is no
Parent Company, the Surviving Company) and (C) at least a majority of
the members of the board of directors of the Parent Company (or, if
there is no Parent Company, the Surviving Company) following the
consummation of the Business Combination were Board members at the time
of the Board's approval of the execution of the initial agreement
providing for such Business Combination.
(e) "Code" means the Internal Revenue Code of 1986, as
amended. Reference in the Plan to any section of the Code shall be deemed
to include any amendments or successor provisions to such section and any
regulations under such section.
(f) "Committee" means a committee of at least two people as
the Board may appoint to administer the Plan or, if no such committee has
been appointed by the Board, the Board. Unless the Board is acting as the
Committee or the Board determines otherwise, each member of the Committee
shall, at the time he takes any action with respect to a Option under the
Plan, be an Eligible Director. However, the mere fact that a Committee
member shall fail to qualify as an Eligible Director shall not invalidate
any Option granted by the Committee which Option is otherwise validly
granted under the Plan.
(g) "Common Stock" means the common stock, par value $0.01
per share, of the Company.
(h) "Company" means Carnival Corporation.
(i) "Date of Grant" means the date on which the granting of
an Option is authorized, or such other date as may be specified in such
authorization or, if there is no such date, the date indicated on the
applicable Stock Option Agreement.
(j) "Disability" means, unless in the case of a particular
Option, the applicable Option Agreement states otherwise, entitled to
receive benefits under the long-term disability plan of the Company or an
Affiliate, as may be applicable to the Participant in question, or, in the
absence of such a plan, the complete and permanent inability by reason of
illness or accident to perform the duties of the occupation at which a
Participant was employed or served when such disability commenced, as
determined by the Committee based upon medical evidence acceptable to it.
(k) "Effective Date" means January 14, 2002.
(l) "Eligible Director" means a person who is (i) a "non-
employee director" within the meaning of Rule 16b-3 under the Exchange Act,
or a person meeting any similar requirement under any successor rule or
regulation and (ii) an "outside director" within the meaning of Section
162(m) of the Code, and the Treasury Regulations promulgated thereunder;
provided, however, that clause (ii) shall apply only with respect to grants
of Options with respect to which the Company's tax deduction could be
limited by Section 162(m) of the Code if such clause did not apply.
(m) "Eligible Person" means any (i) individual regularly
employed by the Company or an Affiliate who satisfies all of the
requirements of Section 6; provided, however, that no such employee covered
by a collective bargaining agreement shall be an Eligible Person unless and
to the extent that such eligibility is set forth in such collective
bargaining agreement or in an agreement or instrument relating thereto; (ii)
director of the Company or an Affiliate or (iii) consultant or advisor to
the Company or an Affiliate who may be offered securities pursuant to Form
S-8 (which, as of the Effective Date, includes only those who (A) are
natural persons and (B) provide bona fide services to the Company other than
in connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market
for the Company's securities).
(n) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(o) "Fair Market Value", on a given date means (i) if the
Stock is listed on a national securities exchange, the average of the
highest and lowest sale prices reported as having occurred on the primary
exchange with which the Stock is listed and traded on such date, or, if
there is no such sale on that date, then on the last preceding date on which
such a sale was reported; (ii) if the Stock is not listed on any national
securities exchange but is quoted in the National Market System of the
National Association of Securities Dealers Automated Quotation System
("NASDAQ") on a last sale basis, the average between the high bid price and
low ask price reported on the date prior to such date, or, if there is no
such sale on that date, then on the last preceding date on which a sale was
reported; or (iii) if the Stock is not listed on a national securities
exchange nor quoted in the NASDAQ on a last sale basis, the amount
determined by the Committee to be the fair market value based upon a good
faith attempt to value the Stock accurately and computed in accordance with
applicable regulations of the Internal Revenue Service.
(p) "Incentive Stock Option" means an Option granted by the
Committee to a Participant under the Plan which is designated by the
Committee as an incentive stock option as described in Section 422 of the
Code and which otherwise meets the requirements set forth herein.
(q) "Mature Shares" means shares of Stock owned by a
Participant which are not subject to any pledge or other security interest
and have either been held by the Participant for six months, previously
acquired by the Participant on the open market or meet such other
requirements as the Committee may determine necessary in order to avoid an
accounting earnings charge on account of the use of such shares to pay the
Option Price or satisfy a withholding obligation in respect of an Option.
(r) "Nonqualified Stock Option" means an Option granted by
the Committee to a Participant under the Plan which is not designated by the
Committee as an Incentive Stock Option.
(s) "Normal Termination" means termination of employment or
service with the Company and all Affiliates (i) on account of death or
Disability, (ii) by the Company or an Affiliate without Cause or (iii) by a
Participant for any reason other than Retirement.
(t) "Option" means an award granted under Section 7.
(u) "Option Period" means the period described in Section 7(c).
(v) "Option Price" means the exercise price for an Option as
described in Section 7(a).
(w) "Participant" means an Eligible Person who has been
selected by the Committee to participate in the Plan and to receive an
Option pursuant to Section 6.
(x) "Plan" means this Carnival Company 2002 Stock Option
Plan.
(y) "Securities Act" means the Securities Act of 1933, as
amended.
(z) "Retirement" means a termination of employment with the
Company and all Affiliates by a Participant on or after the earlier of (i)
age 65 with at least five years of employment with the Company and/or its
Affiliates or (ii) age 55 with at least 15 years of employment with the
Company and/or its Affiliates.
(aa) "Stock" means the Common Stock or such other authorized
shares of stock of the Company as the Committee may from time to time
authorize for use under the Plan.
(bb) "Stock Option Agreement" means any agreement between the
Company and a Participant who has been granted an Option pursuant to Section
7 which defines the rights and obligations of the parties thereto.
(cc) "Subsidiary" means any subsidiary of the Company as
defined in Section 424(f) of the Code.
3. Effective Date, Duration and Shareholder Approval
The Plan is effective as of the Effective Date; provided that the validity
and exercisability of any and all Options is contingent upon approval of the
Plan by the shareholders of the Company in a manner intended to comply with
the shareholder approval requirements of Section 162(m) of the Code, and the
validity and exercisability of any and all Options intended to be Incentive
Stock Options granted pursuant to the Plan is contingent upon approval of
the Plan by the shareholders of the Company in a manner intended to comply
with the shareholder approval requirements of Section 422(b)(i) of the Code.
The expiration date of the Plan, on and after which no Options may be
granted hereunder, shall be the tenth anniversary of the Effective Date;
provided, however, that the administration of the Plan shall continue in
effect until all matters relating to Options previously granted have been
settled.
4. Administration
The Committee shall administer the Plan. The majority of the members
of the Committee shall constitute a quorum. The acts of a majority of the
members present at any meeting at which a quorum is present or acts approved
in writing by a majority of the Committee shall be deemed the acts of the
Committee.
Subject to the provisions of the Plan and applicable law, the Committee
shall have the power, in addition to other express powers and authorizations
conferred on the Committee by the Plan, to: (i) designate Participants;
(ii) determine the type or types of Options to be granted to a Participant;
(iii) determine the number of shares of Stock to be covered by, or with
respect to which payments, rights, or other matters are to be calculated in
connection with, Options; (iv) determine the terms and conditions of any
Options; (v) determine whether, to what extent, and under what circumstances
Options may be settled or exercised in cash, Stock, other securities, other
Options or other property, or canceled, forfeited or suspended and the
method or methods by which Options may be settled, exercised, canceled,
forfeited or suspended; (vi) determine whether, to what extent, and under
what circumstances the delivery of cash, Stock, other securities, other
Options, other property and other amounts payable with respect to an Option
shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (vii) interpret, administer reconcile any
inconsistency, correct any default and/or supply any omission in the Plan
and any instrument or agreement relating to, or Option granted under, the
Plan; (viii) establish, amend, suspend, or waive such rules and regulations
and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other determination and take
any other action specified under the Plan or that the Committee deems
necessary or desirable for the administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to
the Plan or any Option or any documents evidencing Options shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive and binding upon all parties, including, without
limitation, the Company, any Affiliate, any Participant, any holder or
beneficiary of any Option, and any shareholder.
5. Grant of Options; Shares Subject to the Plan
The Committee may, from time to time, grant Options to one or more Eligible
Persons; provided, however, that:
(a) Subject to Section 9, the aggregate number of shares of
Stock in respect of which Options may be granted under the Plan shall not
exceed 40,000,000.
(b) Shares of Stock shall be deemed to have been used in
settlement of Options whether they are actually delivered. In the event any
Option shall be surrendered, terminate, expire, or be forfeited, the number
of shares of Stock no longer subject thereto shall thereupon be released and
shall thereafter be available for new grants under the Plan;
(c) Stock delivered by the Company in settlement of Options
may be authorized and unissued Stock or Stock held in the treasury of the
Company or purchased on the open market or by private purchase; and
(d) Subject to Section 9, no person may be granted Options
under the Plan during any calendar year with respect to more than 2,000,000
shares of Stock; provided that such number shall be adjusted pursuant to
Section 9, and shares otherwise counted against such number, only in a
manner which will not cause the Options granted under the Plan to fail to
qualify as "performance-based compensation" under Section 162(m) of the
Code.
(e) Without limiting the generality of the preceding
provisions of this Section 5, the Committee may, but solely with the
Participant's consent, agree to cancel any Option under the Plan and issue a
new Option in substitution therefor upon such terms as the Committee may in
its sole discretion determine, provided that the substituted Option
satisfies all applicable Plan requirements as of the date such new Option is
made.
6. Eligibility
Participation shall be limited to Eligible Persons who have received written
notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan.
7. Terms of Options
The Committee is authorized to grant one or more Incentive Stock Options or
Nonqualified Stock Options to any Eligible Person; provided, however, that
no Incentive Stock Options shall be granted to any Eligible Person who is
not an employee of the Company or a Subsidiary. Each Option so granted
shall be subject to the following conditions, or to such other conditions as
may be reflected in the applicable Stock Option Agreement.
(a) Option Price. The Option Price per share of Stock for
each Option shall be set by the Committee at the time of grant but shall not
be less than (i) in the case of an Incentive Stock Option, and subject to
Section 7(f), the Fair Market Value of a share of Stock at the Date of
Grant, and (ii) in the case of a Non-Qualified Stock Option, 85% of the Fair
Market Value of a share of Stock on the Date of Grant.
(b) Manner of Exercise and Form of Payment. No shares of
Stock shall be delivered pursuant to any exercise of an Option until payment
in full of the Option Price therefor is received by the Company. Options
which have become exercisable may be exercised by delivery of written notice
of exercise to the Company accompanied by payment of the Option Price. The
Option Price shall be payable in cash and/or shares of Stock valued at the
Fair Market Value at the time the Option is exercised (including by means of
attestation of ownership of a sufficient number of shares of Stock in lieu
of actual delivery of such shares to the Company), provided that such shares
of Stock are Mature Shares, or, in the discretion of the Committee, either
(i) in other property having a fair market value on the date of exercise
equal to the Option Price, (ii) by delivering to the Committee a copy of
irrevocable instructions to a stockbroker to deliver promptly to the Company
an amount of loan proceeds, or proceeds of the sale of the Stock subject to
the Option, sufficient to pay the Option Price or (iii) by such other method
as the Committee may allow.
(c) Vesting, Option Period and Expiration. Options shall
vest and become exercisable in such manner and on such date or dates
determined by the Committee and shall expire after such period, not to
exceed ten years, as may be determined by the Committee (the "Option
Period"); provided, however, that notwithstanding any vesting dates set by
the Committee, the Committee may, in its sole discretion, accelerate the
exercisability of any Option, which acceleration shall not affect the terms
and conditions of such Option other than with respect to exercisability. If
an Option is exercisable in installments, such installments or portions
thereof which become exercisable shall remain exercisable until the Option
expires.
Unless otherwise stated in the applicable Stock Option
Agreement, an Option shall expire earlier than the end of the Option Period
in the following circumstances:
(i) If prior to the end of the Option Period, the
Participant shall undergo a Normal Termination, the Option shall expire
on the earlier of the last day of the Option Period or the date that is
three months after the date of such Normal Termination; provided,
however, that any Participant whose employment with the Company or any
Affiliate is terminated and who is subsequently rehired by the Company
or any Affiliate prior to the expiration of the Option shall not be
considered to have undergone a termination. In the event of a Normal
Termination, the Option shall remain exercisable by the Participant
until its expiration, only to the extent the Option was exercisable at
the time of such Normal Termination.
(ii) If the Participant dies or is terminated on account
of Disability prior to the end of the Option Period and while still in
the employ or service of the Company or an Affiliate, or dies following
a Normal Termination but prior to the expiration of an Option, the
Option shall expire on the earlier of the last day of the Option Period
or the date that is one year after the date of death or termination on
account of Disability of the Participant, as applicable. In such
event, the Option shall remain exercisable by the Participant's
beneficiary determined in accordance with Section 8(p) until its
expiration, only to the extent the Option was exercisable by the
Participant at the time of death.
(iii) If the Participant ceases employment or
service with the Company and Affiliates due to a termination by the
Company or an Affiliate for Cause, the Option shall expire immediately
upon such cessation of employment or service.
Unless stated otherwise in an applicable Stock Option
Agreement, if the Participant terminates by reason of Retirement prior to
the end of the Option Period, the Option shall (i) expire at the end of the
Option Period and (ii) continue vesting in accordance with the vesting
schedule set forth in the Stock Option Agreement, without regard to any
requirement in such vesting schedule that the Participant remain employed
with the Company or an Affiliate as a condition to vesting.
(d) Other Terms and Conditions. Except as specifically
provided otherwise in a Stock Option Agreement, each Option granted under
the Plan shall be subject to the following terms and conditions:
(i) Each Option or portion thereof that is exercisable
shall be exercisable for the full amount or for any part thereof.
(ii) Each share of Stock purchased through the exercise
of an Option shall be paid for in full at the time of the exercise.
Each Option shall cease to be exercisable, as to any share of Stock,
when the Participant purchases the share or when the Option expires.
(iii) Subject to Section 8(h), Options shall not be
transferable by the Participant except by will or the laws of descent
and distribution and shall be exercisable during the Participant's
lifetime only by him.
(iv) Each Option shall vest and become exercisable by
the Participant in accordance with the vesting schedule established by
the Committee and set forth in the Stock Option Agreement.
(v) At the time of any exercise of an Option, the
Committee may, in its sole discretion, require a Participant to deliver
to the Committee a written representation that the shares to be
acquired upon such exercise are to be acquired for investment and not
for resale or with a view to the distribution thereof. Upon such a
request by the Committee, delivery of such representation prior to the
delivery of any shares issued upon exercise of an Option shall be a
condition precedent to the right of the Participant or such other
person to purchase any shares. In the event certificates for Stock are
delivered under the Plan with respect to which such investment
representation has been obtained, the Committee may cause a legend or
legends to be placed on such certificates to make appropriate reference
to such representation and to restrict transfer in the absence of
compliance with applicable federal or state securities laws.
(vi) Each Participant awarded an Incentive Stock Option
under the Plan shall notify the Company in writing immediately after
the date he makes a disqualifying disposition of any Stock acquired
pursuant to the exercise of such Incentive Stock Option. A
disqualifying disposition is any disposition (including any sale) of
such Stock before the later of (a) two years after the Date of Grant of
the Incentive Stock Option or (b) one year after the date the
Participant acquired the Stock by exercising the Incentive Stock
Option.
(vii) Except as specifically provided otherwise in a
Stock Option Agreement, any Participant who is classified as a
"shipboard employee," and who has not otherwise evidenced a specific
intent to permanently terminate his employment with the Company and all
Affiliates (as reasonably determined by the Committee) shall not be
considered to have terminated employment with the Company and all
Affiliates until a six-month period has expired from his signing off of
a ship without physically signing on to another ship.
(e) Incentive Stock Option Grants to 10% Stockholders.
Notwithstanding anything to the contrary in this Section 7, if an Incentive
Stock Option is granted to a Participant who owns stock representing more
than ten percent of the voting power of all classes of stock of the Company
or of a Subsidiary, the Option Period shall not exceed five years from the
Date of Grant of such Option and the Option Price shall be at least 110
percent of the Fair Market Value (on the Date of Grant) of the Stock subject
to the Option.
(f) $100,000 Per Year Limitation for Incentive Stock
Options. To the extent the aggregate Fair Market Value (determined as of
the Date of Grant) of Stock for which Incentive Stock Options are
exercisable for the first time by any Participant during any calendar year
(under all plans of the Company) exceeds $100,000, such excess Incentive
Stock Options shall be treated as Nonqualified Stock Options.
(g) Voluntary Surrender. The Committee may permit the
voluntary surrender of all or any portion of any Nonqualified Stock Option
granted under the Plan to be conditioned upon the granting to the
Participant of a new option for the same or a different number of shares as
the option surrendered or require such voluntary surrender as a condition
precedent to a grant of a new Option to such Participant. Such new Option
shall be exercisable at an Option Price, during an Option Period, and in
accordance with any other terms or conditions specified by the Committee at
the time the new Option is granted, all determined in accordance with the
provisions of the Plan without regard to the Option Price, Option Period, or
any other terms and conditions of the Nonqualified Stock Option surrendered.
8. General
(a) Additional Provisions of an Option. Options granted to
a Participant under the Plan also may be subject to such other provisions
(whether or not applicable to the benefit awarded to any other Participant)
as the Committee determines appropriate including, without limitation,
provisions to assist the Participant in financing the purchase of Stock upon
the exercise of options, provisions for the forfeiture of or restrictions on
resale or other disposition of shares of Stock acquired under any Option,
provisions giving the Company the right to repurchase shares of Stock
acquired under any Option in the event the Participant elects to dispose of
such shares, provisions allowing the Participant to elect to defer the
receipt of shares of Stock upon the exercise of Options for a specified time
or until a specified event, and provisions to comply with Federal and state
securities laws and Federal and state tax withholding requirements. Any
such provisions shall be reflected in the applicable Stock Option Agreement.
(b) Privileges of Stock Ownership. Except as otherwise
specifically provided in the Plan, no person shall be entitled to the
privileges of ownership in respect of shares of Stock which are subject to
Options hereunder until such shares have been issued to that person.
(c) Government and Other Regulations. The obligation of the
Company to issue shares of Stock upon the exercise of Options shall be
subject to all applicable laws, rules, and regulations, and to such
approvals by governmental agencies as may be required. Notwithstanding any
terms or conditions of any Option to the contrary, the Company shall be
under no obligation to offer to sell or to sell and shall be prohibited from
offering to sell or selling any shares of Stock pursuant to an Option unless
such shares have been properly registered for sale pursuant to the
Securities Act with the Securities and Exchange Commission or unless the
Company has received an opinion of counsel, satisfactory to the Company,
that such shares may be offered or sold without such registration pursuant
to an available exemption therefrom and the terms and conditions of such
exemption have been fully complied with. The Company shall be under no
obligation to register for sale under the Securities Act any of the shares
of Stock to be offered or sold under the Plan. If the shares of Stock
offered for sale or sold under the Plan are offered or sold pursuant to an
exemption from registration under the Securities Act, the Company may
restrict the transfer of such shares and may legend the Stock certificates
representing such shares in such manner as it deems advisable to ensure the
availability of any such exemption.
(d) Tax Withholding.
(i) A Participant may be required to pay to the Company
or any Affiliate and the Company or any Affiliate shall have the right and
is hereby authorized to withhold from any Stock or other property
deliverable under any Option or from any compensation or other amounts owing
to a Participant the amount (in cash, Stock or other property) of any
required tax withholding and payroll taxes in respect of an Option, its
exercise, or any payment or transfer under an Option or under the Plan and
to take such other action as may be necessary in the opinion of the Company
to satisfy all obligations for the payment of such taxes.
(ii) Without limiting the generality of clause (i)
above, the Committee may, in its sole discretion, permit a Participant to
satisfy, in whole or in part, the foregoing withholding liability (but no
more than the minimum required withholding liability) by (A) delivery of
shares of Stock owned by the Participant (which shares must be Mature
Shares) with a Fair Market Value equal to such withholding liability or (B)
having the Company withhold from the number of shares of Stock otherwise
issuable pursuant to the exercise of the Option a number of shares with a
Fair Market Value equal to such withholding liability.
(e) Claim to Options and Employment Rights. No employee of
the Company or an Affiliate, or other person, shall have any claim or right
to be granted an Option under the Plan or, having been selected for the
grant of an Option, to be selected for a grant of any other Option. Neither
the Plan nor any action taken hereunder shall be construed as giving any
Participant any right to be retained in the employ or service of the Company
or an Affiliate.
(f) No Liability of Committee Members. No member of the
Committee shall be personally liable by reason of any contract or other
instrument executed by such member or on his behalf in his capacity as a
member of the Committee nor for any mistake of judgment made in good faith,
and the Company shall indemnify and hold harmless each member of the
Committee and each other employee, officer or director of the Company to
whom any duty or power relating to the administration or interpretation of
the Plan may be allocated or delegated, against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement
of a claim) arising out of any act or omission to act in connection with the
Plan unless arising out of such person's own fraud or willful bad faith;
provided, however, that approval of the Board shall be required for the
payment of any amount in settlement of a claim against any such person. The
foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
(g) Governing Law. The Plan shall be governed by and
construed in accordance with the internal laws of the State of Florida
without regard to the principles of conflicts of law thereof, or principals
of conflicts of laws of any other jurisdiction which could cause the
application of the laws of any jurisdiction other than the State of Florida.
(h) Nontransferability.
(i) Each Option shall be exercisable only by a
Participant during the Participant's lifetime, or, if permissible under
applicable law, by the Participant's legal guardian or representative. No
Option may be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by a Participant otherwise than by will or by the
laws of descent and distribution and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void
and unenforceable against the Company or an Affiliate; provided that the
designation of a beneficiary shall not constitute an assignment, alienation,
pledge, attachment, sale, transfer or encumbrance.
(ii) Notwithstanding the foregoing, the Committee may,
in its sole discretion, permit Nonqualified Stock Options to be transferred
by a Participant, without consideration, subject to such rules as the
Committee may adopt consistent with any applicable Stock Option Agreement to
preserve the purposes of the Plan, to:
(A) any person who is a "family member" of the Participant,
as such term is used in the instructions to Form S-8
(collectively, the "Immediate Family Members");
(B) a trust solely for the benefit of the Participant and
his Immediate Family Members;
(C) a partnership or limited liability company whose only
partners or shareholders are the Participant and his
Immediate Family Members; or
(D) any other transferee as may be approved either (a) by
the Board or the Committee in its sole discretion, or (b) as provided
in the applicable Stock Option Agreement;
(each transferee described in clauses (A), (B), (C) and (D) above is
hereinafter referred to as a "Permitted Transferee"); provided that the
Participant gives the Committee advance written notice describing the terms
and conditions of the proposed transfer and the Committee notifies the
Participant in writing that such a transfer would comply with the
requirements of the Plan.
(iii) The terms of any Option transferred in accordance
with the immediately preceding sentence shall apply to the Permitted
Transferee and any reference in the Plan, or in any applicable Stock Option
Agreement, to a Participant shall be deemed to refer to the Permitted
Transferee, except that (A) Permitted Transferees shall not be entitled to
transfer any Options, other than by will or the laws of descent and
distribution; (B) Permitted Transferees shall not be entitled to exercise
any transferred Options unless there shall be in effect a registration
statement on an appropriate form covering the shares to be acquired pursuant
to the exercise of such Option if the Committee determines, consistent with
any applicable Stock Option Agreement, that such a registration statement is
necessary or appropriate, (C) the Committee or the Company shall not be
required to provide any notice to a Permitted Transferee, whether or not
such notice is or would otherwise have been required to be given to the
Participant under the Plan or otherwise, and (D) the consequences of
termination of the Participant's employment by, or services to, the Company
or an Affiliate under the terms of the Plan and the applicable Stock Option
Agreement shall continue to be applied with respect to the Participant,
following which the Options shall be exercisable by the Permitted Transferee
only to the extent, and for the periods, specified in the Plan and the
applicable Stock Option Agreement.
(i) Reliance on Reports. Each member of the Committee and
each member of the Board shall be fully justified in relying, acting or
failing to act, and shall not be liable for having so relied, acted or
failed to act in good faith, upon any report made by the independent public
accountant of the Company and Affiliates and upon any other information
furnished in connection with the Plan by any person or persons other than
himself.
(j) Relationship to Other Benefits. No payment under the
Plan shall be taken into account in determining any benefits under any
pension, retirement, profit sharing, group insurance or other benefit plan
of the Company or any Affiliate except as otherwise specifically provided in
such other plan.
(k) Expenses. The expenses of administering the Plan shall
be borne by the Company and Affiliates.
(l) Pronouns. Masculine pronouns and other words of
masculine gender shall refer to both men and women.
(m) Titles and Headings. The titles and headings of the
sections in the Plan are for convenience of reference only, and in the event
of any conflict, the text of the Plan, rather than such titles or headings
shall control.
(n) Termination of Employment. For all purposes herein, a
person who transfers from employment or service with the Company to
employment or service with an Affiliate or vice versa shall not be deemed to
have terminated employment or service with the Company or such Affiliate.
(o) Severability. If any provision of the Plan or any Stock
Option Agreement is or becomes or is deemed to be invalid, illegal, or
unenforceable in any jurisdiction or as to any person or Option, or would
disqualify the Plan or any Option under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
the applicable laws, or if it cannot be construed or deemed amended without,
in the determination of the Committee, materially altering the intent of the
Plan or the Option, such provision shall be stricken as to such
jurisdiction, person or Option and the remainder of the Plan and any such
Option shall remain in full force and effect.
(p) Beneficiary Designation. Each Participant may designate
one or more beneficiaries by delivering a signed written designation thereof
to the Committee. Upon the death of a Participant, his beneficiaries shall
be entitled to the Options granted to such Participant under the terms of
this Plan. A Participant may change his beneficiary designation at any time
by delivering a new designation in accordance with the first sentence of
this paragraph. Any designation shall become effective only upon its
receipt by the Committee. In the absence of an effective beneficiary
designation in accordance with this Section 8(p), a Participant's
beneficiary shall be his estate. After receipt of Options as described in
this paragraph, beneficiaries will only be able to exercise such Options in
accordance with Section 7(c)(ii) of this Plan.
9. Changes in Capital Structure
Options granted under the Plan and any Stock Option Agreements, the
maximum number of shares of Stock subject to all Options and Incentive Stock
Options stated in Section 5(a) and the maximum number of shares of Stock
with respect to which any one person may be granted Options during any
period stated in Section 5(d) shall be subject to adjustment or
substitution, as determined by the Committee in its sole discretion, as to
the number, price or kind of a share of Stock or other consideration subject
to such Options or as otherwise determined by the Committee to be equitable
(i) in the event of changes in the outstanding Stock or in the capital
structure of the Company by reason of stock or extraordinary cash dividends,
stock splits, reverse stock splits, recapitalization, reorganizations,
mergers, consolidations, combinations, exchanges, or other relevant changes
in capitalization occurring after the Date of Grant of any such Option or
(ii) in the event of any change in applicable laws or any change in
circumstances which results in or would result in any substantial dilution
or enlargement of the rights granted to, or available for, Participants, or
which otherwise warrants equitable adjustment because it interferes with the
intended operation of the Plan. Any adjustment in Incentive Stock Options
under this Section 9 shall be made only to the extent not constituting a
"modification" within the meaning of Section 424(h)(3) of the Code, and any
adjustments under this Section 9 shall be made in a manner which does not
adversely affect the exemption provided pursuant to Rule 16b-3 under the
Exchange Act. Further, with respect to Options intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, such
adjustments or substitutions shall be made only to the extent that the
Committee determines that such adjustments or substitutions may be made
without causing the Company to be denied a tax deduction on account of
Section 162(m) of the Code. The Company shall give each Participant notice
of an adjustment hereunder and, upon notice, such adjustment shall be
conclusive and binding for all purposes.
Notwithstanding the above, in the event of any of the following:
A. The Company is merged or consolidated with another corporation or
entity and, in connection therewith, consideration is received by
shareholders of the Company in a form other than stock or other equity
interests of the surviving entity;
B. All or substantially all of the assets of the Company are acquired by
another person;
C. The reorganization or liquidation of the Company; or
D. The Company shall enter into a written agreement to undergo an event
described in clauses A, B or C above,
then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Options and pay to
the holders thereof, in cash or stock, or any combination thereof, the value
of such Options based upon the price per share of Stock received or to be
received by other shareholders of the Company in the event. The terms of
this Section 9 may be varied by the Committee in any particular Stock Option
Agreement.
10. Effect of Change of Control
Except to the extent reflected in a particular Stock Option Agreement:
(a) In the event of a Change of Control, notwithstanding any
provision of the Plan to the contrary, all Options shall become immediately
exercisable with respect to 100 percent of the shares subject to such
Option.
(b) In addition, in the event of a Change of Control, the
Committee may in its discretion and upon at least 10 days' advance notice to
the affected persons, cancel any outstanding Options and pay to the holders
thereof, in cash or stock, or any combination thereof, the value of such
Options based upon the price per share of Stock received or to be received
by other shareholders of the Company in the event.
(c) The obligations of the Company under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to substantially all of the
assets and business of the Company. The Company agrees that it will make
appropriate provisions for the preservation of Participants' rights under
the Plan in any agreement or plan which it may enter into or adopt to effect
any such merger, consolidation, reorganization or transfer of assets.
11. Nonexclusivity of the Plan
Neither the adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under this Plan,
and such arrangements may be either applicable generally or only in specific
cases.
12. Amendments and Termination
(a) Amendment and Termination of the Plan. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or any portion thereof at
any time; provided that no such amendment, alteration, suspension,
discontinuation or termination shall be made without shareholder
approval if such approval is necessary to comply with any tax or
regulatory requirement applicable to the Plan (including as necessary
to prevent the Company from being denied a tax deduction on account of
Section 162(m) of the Code); and provided further that any such
amendment, alteration, suspension, discontinuance or termination that
would impair the rights of any Participant or any holder or beneficiary
of any Option theretofore granted shall not to that extent be effective
without the consent of the affected Participant, holder or beneficiary.
(b) Amendment of Stock Option Agreements. The Committee may waive any
conditions or rights under, amend any terms of, or alter, suspend,
discontinue, cancel or terminate, any Option theretofore granted or the
associated Stock Option Agreement, prospectively or retroactively;
provided that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would impair the
rights of any Participant in respect of any Option theretofore granted
shall not to that extent be effective without the consent of the
affected Participant.
* * *
As adopted by the Board of Directors of Carnival Corporation as of
January 14, 2002 and approved by the Shareholders on April 15, 2002.
Exhibit 10.2
SUCCESSION AGREEMENT
SUCCESSION AGREEMENT (this "Agreement"), dated as of May 28, 2002,
among Carnival Corporation, a Panamanian corporation (the "Company"), the
Royal Bank of Scotland Trust Company (Jersey) Limited, as Trustee for The
Ted Arison 1992 Irrevocable Trust for Lin Number Two, a trust organized
under the laws of Jersey (the "1992 Trust"), Cititrust (Jersey) Limited, as
Trustee for The Ted Arison 1994 Irrevocable Trust for Shari No. 1, a trust
organized under the laws of Jersey (the "1994 Trust"), Morgan Trust Company
of the Bahamas Limited, as Trustee for the 1997 Irrevocable Trust for Micky
Arison, a trust organized under the laws of the Bahamas (the "1997 Trust"),
and JMD Delaware, Inc. as trustee for The Michael Arison 1999 Irrevocable
Delaware Trust, a trust organized under the laws of Delaware (the "1999
Trust" and, together with the 1992 Trust, the 1994 Trust and the 1997 Trust,
the "Family Trusts").
WHEREAS, the Company's predecessor, Carnival Cruise Lines, Inc., and
Mr. Theodore Arison ("Arison") entered into a Registration Rights Agreement,
dated as of June 14, 1991, as amended from time to time (as amended to date,
the "Registration Agreement"), in order to, among other things, provide
Arison with certain registration rights with respect to shares of the
Company's Common Stock, par value $0.01 per share (the "Common Stock"),
owned by Arison as of June 14, 1991;
WHEREAS, the Common Stock has been split twice on a two-for-one basis,
on November 30, 1994 and June 12, 1998;
WHEREAS, Arison died on October 1, 1999, leaving a last Will dated July
8, 1999 (the "Will"), pursuant to which Arison bequeathed (i) 46,145,830
shares of Common Stock to the 1992 Trust, (ii) 46,701,809 shares of Common
Stock to the 1994 Trust, (iii)17,538,393 shares of Common Stock to the 1997
Trust and (iv) 1,000,000 shares of Common Stock to the 1999 Trust;
WHEREAS, the parties wish to confirm the succession of the Family Trusts to
the registration rights that were granted to Arison under the Registration
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the covenants
and agreements contained herein and such other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:
Section 1. Certain Definitions. Capitalized terms used herein but not
otherwise defined herein shall have the meanings ascribed to them in the
Registration Agreement. All references to "Class A Common Stock" in the
Registration Agreement shall be deemed to be references to Common Stock.
Section 2. Rights and Obligations under the Registration Agreement.
2.1 The Company agrees that the Family Trusts shall
succeed to all the rights of Arison under the Registration Agreement (as
amended hereby) and shall be entitled to exercise the rights granted to
Arison under the Registration Agreement (as amended hereby) and that the
shares of Common Stock held by the Family Trusts shall constitute Arison
Shares under the Registration Agreement (as amended hereby). Each of the
Family Trusts agrees, severally and not jointly, to be bound by the terms of
the Registration Agreement (as amended hereby) applicable to Arison with
respect to the shares of Common Stock held by it.
2.2 Any reduction, pursuant to Section 2 or 3(b) of
Part II of the Registration Agreement, in the number of shares of Common
Stock requested to be registered by the Family Trusts that are to be
included in an offering shall be made on a pro rata basis based on the
number of shares of Common Stock requested to be registered by each Family
Trust for inclusion in such offering.
Section 3. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS
OF ANY PRINCIPLES OF CONFLICTS OF LAWS THEREOF THAT MIGHT INDICATE THE
APPLICABILITY OF THE LAWS OF ANY OTHER JURISDICTION.
Section 4. Registration Agreement and Entire Agreement. Except as set
forth herein, the Registration Agreement shall remain in full force and
effect. This Agreement and the Registration Agreement constitute the entire
agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of
this Agreement and Registration Agreement.
Section 5. Assignment. Neither this Agreement or the Registration
Agreement nor any of the rights, interests or obligations under this
Agreement or the Registration Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by any Family Trust
without the prior written consent of the Company, and any such assignment or
delegation that is not consented to shall be null and void. Notwithstanding
the foregoing, (i) if any Family Trust transfers any shares of Common Stock
to any member of the Arison family (including, without limitation, the wife
of Arison, any of Arison's children or stepchildren or any of their
descendants) (the "Arison Family"), any entity controlled by one or more
members of the Arison Family, any trust whose beneficiaries include one or
more members of the Arison Family or any charitable organization or (ii) if
any Family Trust transfers more than 500,000 shares of the Common Stock held
by such Family Trust to any other person in a private transaction, then such
Family Trust may transfer and assign all of its rights, interests and
obligations under the Registration Agreement (as amended hereby) with
respect to such shares of Common Stock to such transferee without the
consent of the Company. Subject to the provisions of this Section 5, this
Agreement and the Registration Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective
successors and assigns, including, without limitation, any person to whom
any shares of Common Stock covered by the Registration Agreement (as amended
hereby) are sold, transferred or assigned.
Section 6. Amendments and Waivers. The provisions of this Agreement may
not be amended, changed or modified, except by an agreement in writing
signed by the parties hereto. The provisions of this Agreement may not be
waived or discharged, except by an agreement in writing signed by the
parties against whom enforcement of any waiver or discharge is sought.
Section 7. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which, when so executed and
delivered, shall be deemed to be an original, but all such counterparts
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CARNIVAL CORPORATION
By: /s/Howard S. Frank
Name: Howard S. Frank
Title: Vice Chairman & COO
THE COMMON SEAL of
ROYAL BANK OF SCOTLAND
TRUST COMPANY (JERSEY)
LIMITED
as affixed in the presence of:
/s/David Ballingall
Director
/s/David Neuschaffer
Director
THE COMMON SEAL of
CITITRUST (JERSEY) LIMITED
was affixed in the presence of:
/s/Anthony Daly
Director
/s/Paul Sewell
Director
THE COMMON SEAL of
MORGAN TRUST COMPANY
OF THE BAHAMAS
was affixed in the presence of:
/s/Terry K. Marr
Vice President
/s/Lisa Knowles
Vice President
THE MICHAEL ARISON 999
IRREVOCABLE DELAWARE TRUST
By: JMD DELAWARE, INC.
By: /s/James M. Dubin
Name: James M. Dubin
Title: President
Exhibit 10.3
Pier Luigi Foschi
c/o Costa Crociere S.p.A.
Via XII Ottobre, 2
16150 Genoa
Italy
28 May, 2002
Dear Mr. Foschi,
According to our mutual understanding, we hereby confirm the terms and
conditions of your contract related to your appointment as Chairman of the
Board (Presidente del Consiglio di Amministrazione) and Managing Director
(Amministratore Delegato) of Costa Crociere S.p.A. (the "Company").
*******
1. FUNCTIONS AND POWERS
1.1 You shall act as Chairman and Managing Director of the Company with the
powers contemplated by the by-laws of the Company and granted by means
of the resolution of the Board of Directors of the Company dated March
26, 2002.
1.2 In your capacity as Managing Director, and in accordance with the powers
granted by the Board of Directors of the Company, you shall be entrusted
with the managerial control of the Company; you shall report to the Board
of Directors of the Company on all major matters and/or matters which are
outside the scope of your powers.
2. DUTIES
2.1 You shall undertake to accept and hold the above mentioned offices, with
the connected powers granted to you, and to perform your functions, as
set out above:
a) in compliance with the Company's by-laws;
b) for the achievement of the business targets which shall be set
out by the Company's Board of Directors;
c) in compliance with the Italian Laws in force.
2.2 While performing your functions you shall comply with the business plan
and the business guidelines adopted by the Company's Board of Directors.
3. COMPENSATION
3.1 The Company will pay for your services and for the obligations undertaken
by you herein a base yearly compensation of EURO 657,000.00
(sixhundredfiftyseventhousand), of which EURO 54,000.00
(fiftyfourthousand) represent compensation of your office as Chairman as
established by the Shareholders' Meeting resolution of March 26, 2002,
gross of the applicable withholding tax and social security contributions
to be paid in 12 installments of equal amount in arrears on the last
business day of each month during the term of this Agreement, to the
extent you are still in office as Chairman and Managing Director of the
Company. The Board of Directors of the Company, at its discretion, may
increase your base compensation and the non-compete consideration payable
to you under paragraph 4.3 below on a year-over-year basis
3.2 In addition, you will be entitled to payment of a performance-related
bonus pursuant to the terms and conditions which are described in
Enclosure 1 attached hereto.
3.3 You will be entitled to use a company car, also for private purposes. The
fringe-benefit value of such car will be calculated pursuant to the
criteria set forth by the law currently in force. All maintenance, fuel
and insurance costs will be borne by the Company.
3.4 The Company will grant in your favor insurance policies covering the risk
of death, illness and permanent disability in case of injuries at work
as well as injuries in general.
3.5 The Company will provide you with an accommodation in Genoa or nearby,
according to the terms and conditions to be agreed upon by the parties.
4. NON-COMPETITION
4.1 During the term of this Agreement and thereafter, you hereby undertake
(a) not to operate - either directly or indirectly - as principal,
agent, owner, director, employee, partner or advisor in favor of
companies in competition with the Company, which carry out the ownership,
management and commercial operations of cruise vessels, and not to
acquire a shareholding in the aforesaid companies, except for
participations not exceeding 2% in listed companies (b) not to endeavor
to entice away from the Company or any of its subsidiaries, any person,
firm, company or organization (i) who or which in the preceding 12 months
shall have been a supplier of goods or services to the Company or any of
its subsidiaries, and (ii) with whom or which you had, during the course
of performance of your office of director, direct dealings or personal
contact, so as to harm the goodwill or, or so as to the compete with, the
Company or any of its subsidiaries.
Such obligations shall be effective for a period of 3 years as of the
expiration or the termination of this Agreement for whatsoever reason.
4.2 This obligation must be referred to the territory of Italy, France and
Spain and the parties acknowledge that the above mentioned territorial
extension is based upon (i) the multinational character of the Company,
and (ii) on the fact that the business activity of the Company is carried
out not only in Italy but also throughout Europe.
4.3 As specific consideration for this non competition obligation, you
will be paid during the term of this Agreement an annual gross amount
equal to Euro 115,000 (onehundredfifteenthousand), payable in 12
installments of equal amount in arrears on the last business day of
each month during the term of this Agreement, to the extent you are
still in office as Chairman and Managing Director of the Company.
4.4 In the event you do not comply with the obligation of this non
competition clause, you undertake to pay to the Company, as a penalty,
a sum of Euro 230,000 (two hundred thirty thousand) plus any additional
damages suffered by the Company.
5. CONFIDENTIALITY AND NON SOLICITATION
5.1 You hereby undertake:
a) during the term of this Agreement and thereafter, not to use,
disclose or disseminate, either directly or indirectly, to any other
person, organization or entity or otherwise employ in any manner
whatsoever any privileged information in any way acquired in the
performance of your office of director. In particular, you shall not
disclose any technical or financial information, design, process,
procedure, formula or improvement that is valuable and not generally
known to the Company's competitors. Such information shall include,
without limitation, all information and documentation, whether or not
subject to copyright, pertaining to product development, methods of
operation, cost and pricing structures, marketing information,
corporate strategy, product source and customer information, and
other private, confidential business matters relating to the Company
or any of its affiliates and/or subsidiaries;
b) not to induce, during the term of this Agreement any employee of the
Company or any of its affiliates and/or subsidiaries to resign in
order to enter into an employment or independent contractor
relationships in favor of third parties engaged in the same business
of the Company.
6. DURATION
6.1 Subject to paragraph 7.1 below, this Agreement shall have a duration
effective from May 1, 2002 until the date of approval by the
shareholders' meeting of the Company financial statements for fiscal
year ending on November 30, 2004, provided that the provisions of
articles 4, 5 and 7 shall survive the termination of this Agreement to
the extent provided therein.
7. TERMINATION
7.1 The Company shall be entitled to terminate this Agreement at any time
without notice, without prejudice to the right to seek damages under
applicable law, in case you:
(a) are in breach of any of the obligations set forth in articles 1,
2, 4 and 5;
(b) shall at any time be incapacitated or prevented by illness,
injury, accident or other circumstances beyond your control from
discharging in full your duties hereunder for a period exceeding 12 months
in any 24 consecutive calendar months;
(c) are revoked as director of the Company for cause.
7.2 On the date of termination of this Agreement (and without prejudice to
the rights or remedies of either party in respect of such termination or
rights or remedies accrued as at such date of termination) you shall
promptly:
(a) resign (if you have not already done so) from all offices held by
you in the Company or its subsidiaries;
(b) return to the Company all lists of customers or contacts,
correspondence, documents, credit cards and other property belonging to
the Company, or any of its affiliates and/or subsidiaries, which may be in
your possession or under your control.
7.3 Should this Agreement be terminated by the Company for reasons other than
those indicated under Article 7.1 above you shall be entitled to receive
the following termination payments (indennita di fine mandato):
(i) A gross indemnity equal to 3 times the yearly fee under Article
3.1 and 4.3 and bonus under Article 3.2, owed to you by the Company
with respect to the last fiscal year of the Company closed prior to
any such termination if the termination occurs within 18 months
from the effective date of this Agreement;
(ii) A gross indemnity equal to 1.5 times the yearly fee under Article
3.1 and 4.3 and bonus under Article 3.2, owed to you by the Company
with respect to the last fiscal year of the Company closed prior to
any such termination if the termination occurs after 18 months from
the effective date of this Agreement and prior to its expiration.
7.4 Should this Agreement be terminated by you as a result of a direct or
indirect change of control of the Company, you shall be entitled to
receive a gross termination payment (indennita di fine mandato) equal to
3 times the yearly fee under Article 3.1 and 4.3 and bonus under Article
3.2, owed to you by the Company with respect to the last fiscal year of
the Company closed prior to any such termination provided, however, that
the right to such payment will not arise if you enter into an alternative
contractual arrangement with the Company or the new controlling group of
the Company.
7.5 Should you resign with cause from the office of Director provided
herein prior to the expiration of the term on this Agreement for reasons
other than change of control of the Company, you shall be entitled to
receive a penalty equal to 50% of the yearly fee under Article 3.1 and
4.3 and of the bonus under Article 3.2, owed to you by the Company with
respect to the last fiscal year of the Company closed prior to any such
termination without being entitled to seek any further damages
whatsoever.
8. MODIFICATIONS
This agreement may not be modified, altered or amended except by a new
written agreement between the parties.
9. APPLICABLE LAW AND JURISDICTION
This agreement shall be governed by the laws of the Republic of Italy.
To the extent permitted under applicable law, any possible dispute
arising from this agreement shall be settled by the courts of Genoa.
* * *
We kindly ask you to send us a copy of the agreement duly signed by you
for acceptance.
Sincerely yours,
/s/Howard S Frank
(Howard S. Frank)
Director
Genoa 28 May, 2002
For acceptance
/s/Pier Luigi Foschi
Pier Luigi Foschi
ENCLOSURE 1
1. The bonus calculation uses the 2001 bonus as the "base year" bonus, which
is 440,000 (fourhundredfortythousand) Euros. Such base bonus will be
payable irrespective of the net income results.
2. Your bonus calculation is based on a year-over-year percentage increase in
consolidated net income for the Company (calculated pursuant to U.S. GAAP)
beginning in 2002. The Company consolidated net income would be adjusted
to exclude non-recurring gains/losses, such as the "Tremonti Law" tax gain,
loss/gain on ship disposals, etc. The percentage increase in earnings year-
over-year will be applied to your base year bonus; for example, if 2002 net
income is 10% higher than 2001 net income, your annual bonus will be 10%
higher than your base year. So, in this case, your bonus would be 440,000
(fourhundredfortythousand) Euros plus 44,000 (fortyfourthousand) Euros,
for a total of 484,000 (fourhundredeightyfourthousand) Euros.
3. The bonus increase will be limited to a cumulative 15% per year on a
compounded basis over the three years. Taking the above example, if, in the
second year the Company consolidated net income increases by 25% from the
prior year, you will be entitled to a bonus increase in Year 2 which will
bring your bonus to a 15% per year increase for a two-year period on a
compounded basis. This would calculate as follows:
Base Year 440,000 (fourhundredfortythousand) Euros x 15% in Year 1 x 15%
in Year 2 = 582,000 (fivehundredeightytwothousand) Euros in Year 2, plus an
additional 22,000 Euros to "true up" for Year 1, or a total of 604,000
(sixhundredfourthousand) Euros payable in Year 2
4. Conversely, if the Company consolidated net income for 2002 increased by
25% and for 2003 increased by 10%, you would receive a bonus on a 15%
compounded basis per year, since the aggregate increase in earnings was 35%
for the two years.
5. If consolidated net income of the Company is lower than the prior year, the
bonus would be reduced by the percentage in net decrease, but no lower than
base bonus. Also, no retroactive adjustment will be made to the prior
year's bonus as a result of the decrease in consolidated net income. For
example, if consolidated net income was increased by 15% in Year1, but was
down 10% in Year 2, the Year 2 bonus would be calculated as follows:
440,000 (fourhudredfortythousand) Euros X 115% in Year 1 would be 506,000
(fivehundredsixthousand) Euros; 506,000 (fivehundredsixthousand) Euros less
10% for Year 2 would be 445,000 (fourhundredfortyfivethousand) Euros for
Year 2 bonus. Although earnings for the two-year period have increased 5%
cumulatively, no retroactive adjustment would be made to the Year 1 bonus.
EXHIBIT 12
CARNIVAL CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
Six Months Ended May 31,
2002 2001
Net income $323,841 $314,913
Income tax benefit, net (7,799) (8,071)
Income before income tax benefit, net 316,042 306,842
Adjustment to earnings:
Loss from affiliate operations
and dividends received, net 56,910
Earnings, as adjusted 316,042 363,752
Fixed charges:
Interest expense, net 57,467 62,110
Interest portion of rent expense(1) 2,342 2,028
Capitalized interest 16,059 14,524
Total fixed charges 75,868 78,662
Fixed charges not affecting earnings:
Capitalized interest (16,059) (14,524)
Earnings before fixed charges $375,851 $427,890
Ratio of earnings to fixed charges 5.0x 5.4x
(1) Represents one-third of rent expense, which we believe to be
representative of the interest portion of rent expense.