Back to GetFilings.com
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2000
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)
Registrant's telephone number, including area code (305) 599-2600
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
Common Stock New York Stock
($.01 par value) Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in any definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant is approximately $10,054,000,000 based upon the closing market
price on February 20, 2001 of a share of Common Stock on the New York Stock
Exchange as reported by the Wall Street Journal.
At February 20, 2001, the Registrant had outstanding 584,714,214 shares
of its Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
The information described below and contained in the Registrant's 2000
annual report to shareholders to be furnished to the Commission pursuant to
Rule 14a-3(b) of the Exchange Act is shown in Exhibit 13 and is incorporated
by reference into this Annual Report on Form 10-K.
Part and Item of the Form 10-K
Part II
Item 5(a) and (b). Market for the Registrant's Common Equity and Related
Stockholder Matters - Market Information and Holders
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
Item 8. Financial Statements and Supplementary Data
The information described below and contained in the Registrant's 2001
definitive Proxy Statement, to be filed with the Commission is incorporated
therein by reference into this Annual Report on Form 10-K.
Part and Item of the Form 10-K
Part III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART I
Item 1. Business
A. General
Carnival Corporation was incorporated under the laws of the Republic of
Panama in November 1974. Carnival Corporation, including its consolidated
subsidiaries (referred to collectively as the "Company"), is the world's
largest multiple-night cruise company based on the number of passengers
carried, revenues generated and available capacity. The Company offers a
broad range of cruise brands serving the contemporary cruise sector of the
vacation market through Carnival Cruise Lines ("Carnival") and Costa, the
premium cruise sector through Holland America Line ("Holland America") and
the luxury cruise sector through Cunard Line ("Cunard"), Seabourn Cruise Line
("Seabourn") and Windstar Cruises ("Windstar") (collectively the "Wholly
Owned Cruise Operations"). The Company also owns a 25% equity interest in
Airtours plc ("Airtours"), an integrated leisure travel group of companies
which also operates cruise ships which target the contemporary cruise sector
under the brand name of Sun Cruises.
A summary of the cruise operations of the Company and Airtours is as
follows:
PRIMARY
CRUISE NUMBER PASSENGER GEOGRAPHIC
BRAND OF SHIPS CAPACITY(1) MARKET
Wholly Owned Cruise
Operations:
Carnival 15 30,020 North America
Holland America 10 13,348 North America
Costa (2) 7 9,200 Europe
Cunard 2 2,458 Worldwide
Seabourn 6 1,614 North America
Windstar 4 756 North America
44 57,396
Airtours:
Sun Cruises 4 4,352 Europe
48 61,748
(1) In accordance with cruise industry practice, all passenger capacities
indicated within this Annual Report on Form 10-K are calculated based on two
passengers per cabin even though some cabins can accommodate three or four
passengers.
(2) Since June 1997, the Company has owned 50% of Costa. On September 29,
2000, the Company completed the acquisition of the remaining 50% interest in
Costa from Airtours. See Note 3 to the Company's Consolidated Financial
Statements in Exhibit 13 to this Annual Report on Form 10-K.
The Company has signed agreements with three shipyards providing for
the construction of 16 additional cruise ships. A summary of the Company's
ships under contract for construction is as follows:
EXPECTED
SERVICE PASSENGER
SHIP DATE(1) CAPACITY
Carnival:
Carnival Spirit 4/01 2,124
Carnival Pride 1/02 2,124
Carnival Legend 9/02 2,124
Carnival Conquest 12/02 2,974
Carnival Glory 8/03 2,974
Carnival Miracle 4/04 2,124
Carnival Valor 11/04 2,974
Total Carnival 17,418
Holland America:
Newbuild 11/02 1,848
Newbuild 8/03 1,848
Newbuild 2/04 1,848
Newbuild 10/04 1,848
Newbuild 6/05 1,848
Total Holland America 9,240
Costa:
Newbuild 7/03 2,112
Newbuild 1/04 2,720
Newbuild 12/04 2,720
Total Costa 7,552
Cunard:
Queen Mary 2 12/03 2,620
Total Cunard 2,620
Total 36,830
(1) The expected service date is the date the ship is expected to begin
revenue generating activities.
In addition to its cruise operations, the Company operated a tour
business, through Holland America Line-Westours Inc. ("Holland America
Tours"), which markets sightseeing tours both separately and as a part of its
cruise/tour packages. Holland America Tours operated 14 hotels in Alaska and
the Canadian Yukon, two luxury dayboats offering tours to the glaciers of
Alaska and the Yukon River, over 300 motor coaches used for sightseeing and
charters in the states of Washington and Alaska and 13 private domed rail
cars which are run on the Alaska Railroad between Anchorage and Fairbanks.
B. Risk Factors
The Risk Factors noted below and elsewhere in this Annual Report on Form
10-K are important factors, among others, that could cause actual results to
differ from expected or historic results. It is not possible to predict or
identify all such factors. Consequently, the reader should not consider any
such list to be a complete statement of all potential risks or uncertainties.
See Part I, Item 4. - Special Note Regarding Forward - Looking Statements.
(1) A change of the Company's tax status under the Internal Revenue
Code, as amended (the "Code"), may have adverse effects on the Company's
income and its shareholders.
Carnival Corporation is a foreign corporation engaged in a trade or
business in the United States ("U.S."), and its ship-owning subsidiaries are
foreign corporations that, in many cases, depending upon the itineraries of
their ships, receive income from sources within the U.S. Management
believes, to the best of its knowledge, that, pursuant to Section 883 of the
Code, Carnival Corporation's income and the income of its ship-owning
subsidiaries, in each case derived from or incidental to the international
operation of a ship or ships, is currently exempt from U.S. income tax.
Management believes that substantially all of Carnival Corporation's income
and the income of its ship-owning subsidiaries (with the exception of the
U.S. source income from the transportation, hotel and tour business of
Holland America Tours) is derived from or incidental to the international
operation of a ship or ships within the meaning of Section 883 of the Code.
Management believes that Carnival Corporation and its ship-owning
subsidiaries currently qualify for the Section 883 exemption since it and
each of its subsidiaries are incorporated in a qualifying jurisdiction and
Carnival Corporation's Common Stock is primarily and regularly traded on an
established securities market in the U.S. To date, however, no final U.S.
Treasury regulations or other definitive interpretations of the relevant
portions of Section 883 have been promulgated, although regulations have been
proposed (see below for a discussion of the proposed regulations under
Section 883). Such regulations or official interpretations could differ
materially from management's interpretation of this Code provision and, even
in the absence of such regulations or official interpretations, the Internal
Revenue Service might successfully challenge such interpretation. In
addition, the provisions of Section 883 are subject to change at any time by
legislation. Moreover, changes could occur in the future with respect to the
identity, residence, or holdings of Carnival Corporation's direct or indirect
shareholders that could affect it and its subsidiaries' eligibility for the
Section 883 exemption. Accordingly, there can be no assurance that Carnival
Corporation and its subsidiaries are, and will in the future be, exempt from
U.S. income tax on U.S.-source shipping income. If Carnival Corporation and
its ship-owning subsidiaries were not entitled to the benefit of Section 883
of the Code, the Company would be subject to U.S. taxation on a portion of
its income.
(2) Failure to comply with the proposed tax regulations could have a
negative impact on the Company's net income and stock price.
On February 8, 2000, the U.S. Treasury Department issued proposed
Treasury Regulations to Section 883 of the Code relating to income derived by
foreign corporations from the international operation of ships or aircraft.
The proposed regulations provide, in general, that a foreign corporation
organized in a qualified foreign country and engaged in the international
operation of ships or aircraft shall exclude qualified income from gross
income for purposes of U.S. federal income taxation provided that the
corporation can satisfy certain ownership requirements, including, among
other things, that its stock is publicly traded. A publicly traded
corporation will satisfy this requirement if more than 50% of its stock is
owned by persons who each own less than 5% of the value of the outstanding
shares of the corporation's capital stock. Management believes to its best
knowledge, after due investigation, that Carnival Corporation currently
qualifies as a publicly traded corporation under these proposed regulations.
However, because various members of the Arison family and certain trusts
established for their benefit own approximately 47% of Carnival Corporation's
Common Stock, there is the potential that another shareholder could acquire
5% or more of its Common Stock which could jeopardize Carnival Corporation's
qualification as a publicly traded corporation. If, in the future, Carnival
Corporation were to fail to qualify as a publicly traded corporation, it
would be subject to U.S. income tax on its income associated with its cruise
operations in the U.S. In such event, Carnival Corporation's net income and
stock price would be negatively impacted.
As a precautionary matter, Carnival Corporation amended its Second
Amended and Restated Articles of Incorporation to ensure that it will
continue to qualify as a publicly traded corporation under the proposed
regulations. This amendment provides that no one person or group of related
persons (other than certain members of the Arison family and certain trusts
established for their benefit) may own (or be deemed to own by virtue of the
attribution provisions of the Code) more than 4.9% of Carnival Corporation's
Common Stock, whether measured by vote, value or number. Shares of Carnival
Corporation's Common Stock acquired in violation of this provision will be
transferred to a trust and, at the direction of its Board of Directors, sold
to a person whose shareholding does not violate such provision of its Second
Amended and Restated Articles of Incorporation. These transfer restrictions
may also have the effect of delaying or preventing a change in Carnival
Corporation's control or other transactions in which the shareholders might
receive a premium for their shares of Common Stock over the then prevailing
market price or which such shareholders might believe to be otherwise in
their best interest.
(3) A group of principal shareholders effectively controls the Company
and has the power to cause or prevent a change of control.
A group of shareholders, comprising certain members of the Arison
family, including Micky Arison, the Company's chairman and chief executive
officer, and trusts established for their benefit, beneficially own a total
of approximately 47% of Carnival Corporation's outstanding Common Stock. As
a result, this group of shareholders has the power to substantially influence
the election of directors and the Company's affairs and policies, without the
consent of its other shareholders. In addition, this group has the power to
prevent or cause a change in control.
(4) Carnival Corporation is not a U.S. corporation and its shareholders
may be subject to the uncertainties of a foreign legal system in
protecting their interests.
Carnival Corporation's corporate affairs are governed by its Second
Amended and Restated Articles of Incorporation and By-Laws and by the
corporate laws of Panama. Thus, Carnival Corporation's public shareholders
may have more difficulty in protecting their interests in the face of actions
by the management, directors or controlling shareholders than would
shareholders of a corporation incorporated in a U.S. jurisdiction.
(5) Incidents involving cruise ships could adversely affect the cruise
industry's and/or the Company's future sales and profitability.
The operation of cruise ships involves the risk of accidents and other
incidents which may bring into question passenger safety and adversely affect
future industry performance. While the Company makes passenger safety a high
priority in the design and operation of its ships, accidents and other
incidents involving cruise ships could adversely affect the Company's future
sales and profitability.
(6) Environmental and health and safety legislation could increase
operating costs.
Some environmental groups have lobbied for more stringent regulation of
cruise ships. Some groups also have generated negative publicity about the
cruise industry and its environmental impact. The U.S. Environmental
Protection Agency is considering new laws and rules to manage cruise ship
waste. Stricter environmental and health and safety regulations could
increase the cost of compliance and adversely affect the cruise industry.
In addition, the grant of permits to cruise lines to enter Glacier Bay
National Park in Alaska is the subject of litigation. See Part I, Item 1.
Business, C. Cruise Ship Segment-Wholly Owned Cruise Operations, Governmental
Regulations.
(7) Overcapacity within the cruise business could have a negative
impact on the Company's net revenue yields.
Cruising capacity has grown in recent years and management expects it to
continue to increase over the next five years as all of the major cruise
companies are expected to introduce new ships into service. In order to
utilize new capacity, the cruise industry must increase its share of the
overall vacation market. Any future imbalances between cruise industry
supply and demand could have a negative impact on the Company's net revenue
yields, which would also have a negative impact on net income.
(8) Demand for cruises and other vacation products may not keep pace
with supply and, as a result, the Company's net revenue yields may
be adversely affected.
Demand for cruises and other vacation products may be affected by a
number of factors. For example, the Company's sales are dependent on the
underlying economic strength of the countries in which it operates. Adverse
economic conditions can reduce the level of disposable income of consumers
available for vacations. In addition, armed conflicts or political
instability in areas where the Company's ships cruise can adversely affect
demand for its cruises to those areas. Finally, adverse incidents involving
cruise ships and adverse media publicity concerning the cruise industry in
general can impact demand. Any reduction in demand may have a negative
impact on the Company's net revenue yields, which would also have a negative
impact on net income.
(9) The Company faces significant competition from both cruise lines
and other vacation operators.
The Company operates in the vacation market. The Company competes for
consumer disposable leisure-time dollars with both other cruise operators and
a wide array of other vacation operators, including numerous land-based
resorts and hotels and sightseeing destinations located throughout the world.
The primary methods of competition among these operators are on the basis of
pricing, product (i.e. the nature of the overall vacation experience), and
itineraries/locations. The Company's principal cruise competitors include
Royal Caribbean Cruise Ltd., which owns Royal Caribbean International and
Celebrity Cruises, P&O Princess Cruises plc, which owns Princess Cruises, P&O
Cruises and Aida Cruises, and Norwegian Cruise Line and Orient Lines, which
are both owned by Star Cruises plc. In the event that the Company does not
compete effectively with other cruise companies and other vacation operators,
its market share could decrease and its net revenue yields could be adversely
affected.
(10) Higher fuel prices could raise the Company's costs.
The cost of fuel is subject to many economic and political factors which
are beyond the Company's control. An increase in fuel prices could
adversely affect the Company's financial statements because the Company may
not be able to increase the prices on its cruise vacations to recover any
increased costs.
(11) Conducting business internationally may result in increased costs.
The Company operates its business internationally and plans to continue
to develop its international presence, especially in Europe. Operating
internationally exposes the Company to a number of risks. Examples include
currency fluctuations, interest rate movements, increases in duties and
taxes, political uncertainty, and changes in laws and policies affecting
cruising, vacation or maritime businesses or the governing operations of
foreign-based companies. If the Company is unable to address these risks
adequately, its financial statements could be adversely affected.
(12) Delays or faults in ship construction could reduce the Company's
future profitability.
Cruise ships are large and complicated vessels and building them
involves risks similar to those encountered in similar sophisticated
construction projects, including delays in delivery and faulty construction.
Delays or faults in ship construction may result in delays or cancellations
of scheduled cruises, necessitate unscheduled repairs to and drydocking of
the ship and increase the Company's shipbuilding costs and/or expenses.
Industrial action, insolvency of shipyards or other events could also delay
or indefinitely postpone the delivery of new ships. These events, in turn,
could, to the extent they are not covered by contractual provisions or
insurance, adversely affect the Company's financial results.
(13) Inability of qualified shipyards to build the Company's ships
could reduce the Company's future profitability.
Management believes that there are a limited number of shipyards in the
world capable of the quality construction of large passenger cruise ships.
The Company currently has contracts, with three of these shipyards for the
construction of 16 ships to enter service over the next five years (see Part
I, Item 1. Business, C. Cruise Ship Segment - Wholly Owned Cruise Operations
- - Cruise Ship Construction). The Company's primary competitors also have
contracts to construct new cruise ships (see Part I, Item 1. Business, C.
Cruise Ship Segment - Wholly Owned Cruise Operations - Competition). If the
Company elects to build additional ships in the future, which it expects to
do, there is no assurance that any of these shipyards will have the available
capacity to build additional new ships for the Company at the times desired
by the Company or that the shipyards will agree to build additional ships at
a cost acceptable to the Company. Additionally, there is no assurance that
ships under contract for construction will be delivered. These events, in
turn could adversely affect the Company's financial statements.
C. Cruise Ship Segment - Wholly Owned Cruise Operations
The multiple-night cruise industry, which is a small part of the overall
vacation market, is a global business. Management estimates that the global
cruise industry carried in excess of nine million passengers in 2000. The
principal cruise sectors in the world, categorized by source of passengers,
are North America, Europe, Asia/Pacific and South America. The Company
sources its passengers principally from North America and, to a lesser
extent, from Europe. A small percentage of the Company's passengers are
sourced from Asia/Pacific and South America. See Note 10, "Segment
Information," to the Company's Consolidated Financial Statements in Exhibit
13 to this Annual Report on Form 10-K for additional information regarding
the Company's U.S. and foreign assets and revenues.
As previously mentioned, from June 1997 to September 29, 2000, Carnival
Corporation owned a 50% direct interest in Costa and, accordingly, Costa was
classified by Carnival Corporation as an affiliated cruise operation.
Costa's results of operation from June 1997 to September 2000 were included
in affiliated operations in the Company's statements of operations. On
September 29, 2000, the remaining 50% of Costa was purchased and, therefore,
the Company now owns 100% of Costa. At November 30, 2000, Costa's balance
sheet has been consolidated with Carnival Corporation and its other wholly
owned subsidiaries. Commencing in fiscal 2001, Costa's results of operations
will be fully consolidated in the same manner as Carnival Corporation's other
wholly owned subsidiaries. Accordingly, reference to the "Company" in this
Annual Report on Form 10-K include Carnival Corporation and its consolidated
subsidiaries, including Costa, unless Costa is specifically excluded.
North American Cruise Industry
The passenger cruise industry as it exists today began in approximately
1970. Over time, the industry has evolved from a trans-ocean carrier service
into a vacation alternative to land-based resorts and hotels and sightseeing
destinations. According to Cruise Lines International Association ("CLIA"),
an industry trade group, in 1970 approximately 500,000 North American sourced
passengers took cruises of two consecutive nights or more. CLIA estimates
that this number reached 6.66 million passengers in 2000, an average compound
annual growth rate of 9.0% since 1970. Also, according to CLIA, by the end of
2000 the number of ships in service totaled 164 with an aggregate capacity of
approximately 165,000 lower berths. CLIA estimates that the number of
passengers sourced from North America increased from 5.89 million in 1999 to
6.66 million in 2000 or 13.1%.
CLIA estimates that the number of North American sourced cruise
passengers will grow to approximately 7.4 million in 2001. CLIA projections
indicate that by the end of 2001, 2002, 2003 and 2004, North America will be
served by 181, 191, 199 and 206 vessels, respectively, having an aggregate
capacity of approximately 187,000, 207,000, 226,000 and 241,000 lower berths,
respectively. CLIA's estimates of new ship introductions are based on
scheduled ship deliveries and could change. The lead-time for design,
construction and delivery of a typical large cruise ship is approximately two
to three years. Additionally, CLIA's estimates of capacity do not include
assumptions related to unannounced ship withdrawals due to age or changes in
itineraries and, accordingly, could indicate a higher percentage growth in
capacity than will actually occur. Nonetheless, management believes net
capacity serving North American sourced cruise passengers will increase over
the next several years.
CLIA's estimate of North American sourced cruise passengers and
passenger berths is as follows:
NORTH AMERICAN NORTH AMERICAN
CRUISE PASSENGER
YEAR PASSENGERS(1) BERTHS(2)
2000 6,660,000(est.) 165,000
1999 5,890,000 149,000
1998 5,432,000 138,000
1997 5,051,000 118,000
1996 4,659,000 110,000
(1) Source: CLIA estimates based on passengers carried for at least two
consecutive nights for the calendar year.
(2) Information presented is as of the end of the year.
In spite of the cruise industry's growth since 1970, management believes
cruises only represent approximately 2% of the applicable North American
vacation market, defined as persons who travel for leisure purposes on trips
of three nights or longer involving an overnight stay in a hotel. CLIA
estimates that only 12% of the North American population has ever taken a
cruise for at least two consecutive nights.
European Cruise Industry
The cruise industry in Europe is much smaller than the North American
industry. Industry-wide European sourced cruise passengers carried in 2000
are estimated to be approximately two million as compared to approximately
6.7 million passengers sourced from North America. From 1990 to 2000, the
number of cruise passengers sourced from the European market has been growing
faster than its North American counterpart and, based on management's
estimates, less than 1% of European travelers took a cruise in 2000. The
number of cruise ships being marketed to European customers has increased in
2000 compared to 1999 and, management believes that several additional new or
existing ships will be introduced into the European marketplace over the next
few years.
Demographics for the European cruise market appear favorable, as Europe
has a population larger than that of North America, there is a low level of
market penetration by the cruise industry and European consumers tend to take
longer vacations. The rate at which European vacationers take a cruise has
been growing at a 15% compounded annual growth rate for the period from 1994
through 1999.
Passengers and Berths
The Company's Wholly Owned Cruise Operations, excluding Costa, had
worldwide cruise passengers and passenger berths as follows:
CRUISE PASSENGER
YEAR PASSENGERS BERTHS(1)
2000 2,669,000 48,196
1999 2,366,000 43,810
1998 2,045,000 39,466
1997 1,945,000 31,078
1996 1,764,000 30,837
(1) Information presented is as of the end of the Company's fiscal year and
excludes Costa.
The Company's passenger capacity has grown from 30,837 at November 30,
1996 to 48,196 at November 30, 2000, excluding Costa. During 1997 gross
capacity increased 1,316 berths due to the delivery of the Rotterdam VI which
was offset by the 1,075 berth decrease due to the sale of the Rotterdam V for
a total net increase of 241. During 1998, with the delivery of the Elation
and the Paradise, the purchase of the Wind Surf, the acquisition of Cunard
and the consolidation of Seabourn, capacity increased by 8,388 berths. In
1999 capacity increased by 4,344 berths primarily due to the delivery of the
Carnival Triumph and the Volendam. During 2000 gross capacity increased by
4,386 berths, excluding the acquisition of Costa, primarily due to the
delivery of the Carnival Victory, the Zaandam and the Amsterdam partially
offset by the 1,214 berth decrease due to the sale of the Nieuw Amsterdam. At
November 30, 2000, the acquisition of Costa added 9,200 passenger berths to
the Company's Wholly Owned Cruise Operations.
Cruise Ships and Itineraries
Carnival primarily serves the contemporary sector of the North American
vacation market with 15 ships (the "Carnival Ships"). All of the Carnival
Ships were designed by and built for Carnival, including three of the world's
largest, the Carnival Victory, the Carnival Triumph and the Carnival Destiny.
Twelve of the Carnival Ships operate in the Caribbean during all or a portion
of the year and two Carnival Ships call on ports on the Mexican Riviera year
round. Carnival Ships also offer cruises to Alaska, Canada, New England, the
Hawaiian Islands, the Bahamas and the Panama Canal.
Through its wholly owned subsidiary, HAL Antillen, N.V. ("HAL"), the
Company operates ten ships primarily serving the premium sector of the North
American vacation market under the Holland America name (the "Holland America
Ships"). HAL also operates four sailing ships in a niche of the luxury cruise
sector under the Windstar name (the "Windstar Ships").
The Holland America Ships offer premium cruises of various lengths in
Alaska, the Caribbean, Panama Canal, Europe, the Hawaiian Islands, South
America and other worldwide itineraries. Cruise lengths vary from seven to 99
days, with a large proportion of cruises being seven or ten days in length.
Periodically, the Holland America Ships make longer cruises or operate on
special itineraries in order to increase travel opportunities for its
customers and strengthen its cruise offerings. For example, in 2001, Holland
America offered a 99-day world cruise. The majority of the Holland America
Ships operate in the Caribbean during fall to spring and in Alaska and Europe
during spring to fall. In order to offer a unique destination, to compete
more effectively with land based vacation alternatives, and to compete with
other cruise lines more effectively while operating in the Caribbean, in
December 1997 Holland America introduced into certain of its Caribbean
itineraries a private island destination known as Half Moon Cay. Half Moon
Cay is a 2,400-acre island owned by Holland America. Facilities were
constructed on the island on 45 acres along a crescent-shaped white sand
beach. The remainder of the island remains undeveloped. The facilities on
Half Moon Cay include bars, shops, restrooms, a post office, a chapel and an
ice cream shop, as well as a food pavilion with open-air dining shelters and
a bandstand.
The four Windstar Ships currently operate in the Caribbean, Europe and
Central America and offer a casual, yet luxurious, cruise experience on board
these modern sail ships. These ships primarily serve a niche segment of the
luxury sector of the North America vacation market.
Passengers can enjoy their voyage by "Cruising Italian Style" on board
any of the seven Costa ships (the "Costa Ships"), which primarily operate in
Europe during the spring to fall months and the Caribbean and South America
during the fall to spring. Costa is the number one cruise line in Europe
based on passengers carried and capacity and its ships primarily serve the
contemporary sector of the European vacation market. The Costa Ships call on
73 European ports with 34 different itineraries and to various other ports in
the Caribbean and South America. During 2000, Costa introduced the 2,112
passenger capacity Costa Atlantica which has garnered rave reviews in Europe.
Under the Cunard brand, the Company operates two ships (the "Cunard
Ships") which offer classic "Old World" cruising and recreate the golden age
of ocean liner travel with a British style and essence primarily serving the
luxury sector of the worldwide vacation market. Cunard's flagship, the Queen
Elizabeth 2 ("QE2"), offers the only remaining scheduled transatlantic ocean
liner service between the U.S. and Great Britain. Both of Cunard's ships
offer cruises to worldwide destinations, with many of the cruises ranging
between six and 18 days in length. The Cunard ships also offer extended
cruises, such as a world cruise.
The six Seabourn ships (the "Seabourn Ships") offer a choice of three
distinct styles of luxury cruises aboard intimately sized ships. Seabourn
ships primarily serve the luxury sector of the North American vacation market
and offer an intense focus on personalized service and quality cuisine. These
ships concentrate their operations in the Caribbean and Europe with cruises
in the seven to 14 day range. Periodically, the Seabourn Ships make longer
cruises or operate on special itineraries and also make extended cruises to
various other worldwide destinations, including South America, Australia, the
South Pacific and Southeast Asia.
Summary information concerning the Company's ships is as follows.
APPROXIMATE
GROSS
YEAR PAX REGISTERED
SHIP REGISTRY BUILT CAP TONS
Carnival:
Carnival Victory Panama 2000 2,758 102,000
Carnival Triumph Bahamas 1999 2,758 102,000
Paradise Panama 1998 2,052 70,000
Elation Panama 1998 2,052 70,000
Carnival Destiny Bahamas 1996 2,642 101,000
Inspiration Bahamas 1996 2,052 70,000
Imagination Bahamas 1995 2,052 70,000
Fascination Bahamas 1994 2,052 70,000
Sensation Bahamas 1993 2,052 70,000
Ecstasy Panama 1991 2,052 70,000
Fantasy Panama 1990 2,056 70,000
Celebration Panama 1987 1,486 47,000
Jubilee Bahamas 1986 1,486 47,000
Holiday Bahamas 1985 1,448 46,000
Tropicale (1) Panama 1982 1,022 37,000
Total Carnival Ships Capacity......... 30,020
Holland America:
Zaandam Netherlands 2000 1,440 63,000
Amsterdam Netherlands 2000 1,380 62,000
Volendam Netherlands 1999 1,440 63,000
Rotterdam Netherlands 1997 1,316 62,000
Veendam Bahamas 1996 1,266 55,000
Ryndam Netherlands 1994 1,266 55,000
Maasdam Netherlands 1993 1,266 55,000
Statendam Netherlands 1993 1,266 55,000
Westerdam Netherlands 1986 1,494 54,000
Noordam Netherlands 1984 1,214 34,000
Total Holland America
Ships Capacity....................... 13,348
Costa (1):
Costa Atlantica Italy 2000 2,112 86,000
Costa Victoria Italy 1996 1,928 76,000
Costa Romantica Italy 1993 1,344 53,000
Costa Allegra Italy 1992 806 30,000
Costa Classica Italy 1991 1,302 53,000
Costa Marina Italy 1990 762 25,500
Costa Riviera Italy 1963 946 30,400
Total Costa Ships Capacity.............. 9,200
Cunard:
Caronia England 1973 668 24,500
QE 2 England 1969 1,790 70,000
Total Cunard Ships Capacity............ 2,458
Seabourn:
Seabourn Legend Norway 1992 208 10,000
Seabourn Spirit Norway 1989 208 10,000
Seabourn Pride Norway 1988 208 10,000
Seabourn Sun Bahamas 1988 758 38,000
Seabourn Goddess II Bahamas 1985 116 4,250
Seabourn Goddess I Bahamas 1984 116 4,250
Total Seabourn Ships Capacity.......... 1,614
Windstar Cruises:
Wind Surf Bahamas 1990 312 14,750
Wind Spirit Bahamas 1988 148 5,700
Wind Song Bahamas 1987 148 5,700
Wind Star Bahamas 1986 148 5,700
Total Windstar Ships Capacity.......... 756
Total Capacity........................... 57,396
(1) In February, 2001 the Tropicale was transferred from Carnival to Costa
and is scheduled to begin operating in the European market during the summer
of 2001, after it undergoes a major refit.
__________________________
Cruise Ship Construction
The Company has signed agreements with three shipyards providing for the
construction of 16 additional cruise ships. A summary of the Company's ships
under contract for construction is as follows:
APPROXIMATE
EXPECTED GROSS ESTIMATED
SERVICE PAX REGISTERED TOTAL
SHIP DATE(1) SHIPYARD CAP TONS COST(2)
(In millions)
Carnival
Carnival Spirit 4/01 Masa-Yards 2,124 88,500 $ 375
Carnival Pride 1/02 Masa-Yards (3) 2,124 88,500 375
Carnival Legend 9/02 Masa-Yards (3) 2,124 88,500 375
Carnival Conquest 12/02 Fincantieri 2,974 110,000 500
Carnival Glory 8/03 Fincantieri 2,974 110,000 500
Carnival Miracle 4/04 Masa-Yards (3) 2,124 88,500 375
Carnival Valor 11/04 Fincantieri(3) 2,974 110,000 500
Total Carnival Ships 17,418 3,000
Holland America
Newbuild 11/02 Fincantieri(3) 1,848 84,000 410
Newbuild 8/03 Fincantieri(3) 1,848 84,000 410
Newbuild 2/04 Fincantieri(3) 1,848 84,000 410
Newbuild 10/04 Fincantieri(3) 1,848 84,000 410
Newbuild 6/05 Fincantieri(3) 1,848 84,000 410
Total Holland America Ships 9,240 2,050
Costa
Newbuild 7/03 Masa-Yards (4) 2,112 86,000 330
Newbuild 1/04 Fincantieri(5) 2,720 101,000 380
Newbuild 12/04 Fincantieri(5) 2,720 101,000 380
Total Costa Ships 7,552 1,090
Cunard
Queen Mary 2 12/03 Chantiers de
l'Atlantique (3) 2,620 150,000 780
Total Cunard 2,620 780
Total 36,830 $6,920
(1) No assurance can be made that the vessels under construction will be
introduced into service by the expected service date.
(2) 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.
(3) These construction contracts are denominated in either German marks,
Italian lira or euros and have been fixed into U.S. dollars through the
utilization of forward foreign currency contracts.
(4) This construction contract is denominated in German marks which has a
fixed exchange rate with Costa's functional currency, which is the Italian
lira. The estimated total cost has been translated into U.S. dollars using
the November 30, 2000 exchange rate.
(5) These construction contracts are denominated in Italian lira and the
estimated total costs have been translated into U.S. dollars using the
November 30, 2000 exchange rate.
Cruise Pricing
Each of the Company's cruise brands publishes brochures with prices for
the upcoming seasons. Brochure prices vary by cruise line, by category of
cabin, by ship, by season and by itinerary. Brochure prices are regularly
discounted through the Company's early booking discount programs and other
promotions. The cruise ticket price includes accommodations, meals and most
onboard entertainment, such as the use of, or admission to, a wide variety of
activities and facilities, including a fully equipped casino, nightclubs,
theatrical shows, movies, parties, a discotheque, a health club and swimming
pools, on each ship.
Onboard and Other Revenues
The Company derives revenues from certain onboard activities and
services including casino gaming, bar sales, gift shop sales, entertainment
arcades, shore tours, art auctions, photo sales, spa services and promotional
advertising by merchants located in ports of call.
The casinos, which contain slot machines and gaming tables including
blackjack, and in most cases craps, roulette and stud poker, are generally
open only when the ships are at sea in international waters. The Company also
earns revenue from the sale of alcoholic and other beverages. Onboard
activities are either performed directly by the Company or by independent
concessionaires, from which the Company collects a percentage of revenues.
The Company receives additional revenue from the sale to its passengers
of shore tours at each ship's ports of call. They include, among other
things, bus and taxi sightseeing and adventure excursions, local boat and
beach parties, and nightclub and casino visits. On the Carnival, Costa,
Windstar, Cunard and Seabourn Ships, such shore excursions are primarily
operated by independent tour operators. On the Holland America Ships, shore
excursions are operated by Holland America Tours and independent parties.
In conjunction with its cruise vacations on its ships, all of the
Company's cruise brands sell pre-cruise and post-cruise land packages.
Carnival packages generally include one, two or three-night vacations at
nearby attractions, such as Universal Studios and Walt Disney World in
Orlando, Florida, or in proximity to other vacation destinations in Central
and South Florida, Galveston, Texas, New Orleans, Louisiana, Los Angeles,
California and San Juan, Puerto Rico. Holland America packages outside of
Alaska generally include one, two or three-night vacations, including stays
in unique European port cities or near attractions in Central and South
Florida. Costa's packages generally include one or two-night vacations in
well-known European cities or at vacation destinations in central or south
Florida. Cunard and Seabourn packages include numerous luxury and/or exotic
pre and post-cruise land programs, such as world class golf programs, London
and Paris luxury holidays and tours of the Galapagos Islands and the
Treasures of Bangkok.
In conjunction with its Alaskan cruise vacations on its Holland America
and Carnival Ships, the Company sells pre and post-cruise land packages which
are more fully described in Part I, Item 1. Business, D. Tour Segment.
Passengers and Occupancy
The aggregate number of passengers carried and occupancy percentage for
the Company's ships, excluding Costa, is as follows:
YEARS ENDED NOVEMBER 30,
2000 1999 1998
Passengers carried 2,669,000 2,366,000 2,045,000
Occupancy percentage (1)(2) 105.4% 104.3% 106.3%
(1) In accordance with cruise industry practice, occupancy percentage is
calculated based on two passengers per cabin even though some cabins can
accommodate three or four passengers. The percentages in excess of 100%
indicate that more than two passengers occupied some cabins.
(2) The Company acquired a majority interest in Cunard Line Limited on
May 28, 1998. Since that date Cunard Line Limited's occupancy percentages
have been included in the Company's total occupancy. Cunard Line Limited's
ships generally sail with lower occupancy percentages than the Company's
other brands.
The actual occupancy percentage for all cruises on the Company's ships,
excluding Costa, during each quarter of fiscal 1999 and 2000 was as follows:
OCCUPANCY
QUARTERS ENDED PERCENTAGE
February 28, 1999 100.9
May 31, 1999 99.9
August 31, 1999 112.3
November 30, 1999 103.6
February 29, 2000 103.4
May 31, 2000 102.3
August 31, 2000 112.4
November 30, 2000 103.4
Sales and Marketing
The Company's brands are positioned to appeal to each of the three major
sectors of the vacation market (contemporary, premium and luxury). The
contemporary sector is served typically by cruises that are seven days or
shorter in length, are priced at per diems of $200 or less, and feature a
casual ambiance. The Company believes that the success and growth of the
Carnival brand is attributable in large part to its early recognition of
these sectors of the vacation market and its efforts to reach and promote the
expansion of the contemporary sector. The premium sector typically is served
by cruises that last for seven to 14 days or more at per diems of $250 or
higher, and appeal principally to more affluent customers. The luxury sector,
which is not as large as the other sectors, is served by cruises with per
diems of $300 or higher.
During 1998, the Company created a marketing association called the
"World's Leading Cruise LinesSM" for its family of six cruise brands in order
to both educate the consumer about the overall breadth of the Company's
cruise brands, as well as to increase the effectiveness and efficiency of
marketing the brands. During 2000, the Company launched "VIP", or Vacation
Interchange Privileges, a loyalty program that provides special
considerations to repeat guests aboard any of these six brands. In addition,
the Company partnered with Starwood Preferred guests, the world's leading
hotel loyalty program, adding cruising from any of the Company's six brands
to the list of award options available to their customers.
The Company's various cruise lines employ over 750 personnel, excluding
reservation agents, in the sales and sales support area who, among other
things, focus on motivating, training and supporting the retail travel agent
community which sells substantially all of the Company's cruises. Travel
agents generally receive a standard commission of 10% plus the potential of
additional commissions based on sales volume. Commission rates on cruise
vacations are usually higher than commission rates earned by travel agents on
sales of airline tickets and hotel rooms. Moreover, since cruise vacations
are substantially all-inclusive, sales of the Company's cruise vacations
generally yield higher commissions to travel agents than commissions earned
on selling airline tickets and hotel rooms. During fiscal 2000, no controlled
group of travel agencies accounted for more than 10% of the Company's
revenues.
Historically, the Company's cruise brands have been marketed primarily
in North America. The Company began to globalize its cruise business by
expanding into Europe through the acquisition of its interest in Airtours in
April 1996, Costa in June 1997 and Cunard in May 1998. In 2000, management
positioned the Company to better take advantage of this expanding market
segment by acquiring the balance of Costa. This strategic acquisition
solidified the Company's ownership of a cruise line that management believes
is as recognizable in Southern Europe and South America as Carnival is in
North America. The Company intends to leverage Costa's European leadership
position by furthering the Company's ship development commitment to the Costa
brand. In this way, the Company will expand Europe's largest multiple-night
cruise ship fleet, which should continue to position the Company to gain a
greater foothold in the growing European cruise business.
Carnival
Carnival believes that its success is due in large part to its unique
brand positioning within the vacation industry. Carnival markets the Carnival
Ship cruises not only as alternatives to competitors' cruises, but as
vacation alternatives to land-based resorts and sightseeing destinations.
Carnival seeks to attract passengers from the broad vacation market,
including those who have never been on a cruise ship before and who might not
otherwise consider a cruise as a vacation alternative. Carnival's strategy
has been to emphasize the cruise experience itself rather than particular
destinations, as well as the advantages of a prepaid, all-inclusive vacation
package. Carnival markets the Carnival Ship cruises as the "Fun Shipsr"
experience, which includes a wide variety of shipboard activities and
entertainment, such as full-scale casinos and nightclubs, an atmosphere of
pampered service and high quality food.
As mentioned above, the Company markets the Carnival Ships as the "Fun
Shipsr" and uses, among others, the themes "Carnival's Got the Funr" and "The
Most Popular Cruise Line in the World!r". Carnival advertises nationally
directly to consumers on network and cable television and through extensive
print and radio media. Carnival believes its advertising generates interest
in cruise vacations generally and results in a higher degree of consumer
awareness of the "Fun Shipsr" concept and the "Carnivalr" name in particular.
During 2000, Carnival re-launched www.carnival.com, Carnival's consumer web
site which primarily serves as a marketing and research tool for its current
and potential customers.
Substantially all of Carnival's cruise bookings are made through travel
agents. In fiscal 2000, Carnival took reservations from about 29,000 of
approximately 49,000 travel agency locations known to the Company in the
United States and Canada. Travel agents generally receive a standard
commission of 10% plus the potential of additional commissions based on sales
volume. In addition, Carnival markets and sells its cruises to tour operators
and through travel agents located in numerous other countries, including the
United Kingdom, Argentina, Germany, Mexico and Venezuela.
Carnival engages in substantial promotional efforts designed to motivate
and educate retail travel agents about its "Fun Shipsr" cruise vacations.
Carnival employs approximately 230 business development managers and 50 in-
house service representatives to motivate independent travel agents and to
promote its cruises as an alternative to land-based vacations or other cruise
lines. Carnival believes it has one of the largest sales forces in the
industry.
During 2000, Carnival forged new marketing alliances and initiatives
that are meant to expand its reach to first-time and existing cruise guests.
Carnival partnered with Fairfield Communities, one of the nation's leading
vacation ownership operators, to introduce cruising to their customers. In
addition, Carnival opened three Carnival Vacation Stores whose primary
purpose is to provide Carnival cruise information to potential customers.
These Carnival owned and operated stores are kiosks located in major
metropolitan shopping centers in Texas.
To facilitate access and to simplify the reservation process, Carnival
employs approximately 900 reservation agents primarily to take bookings from
independent travel agents. Carnival's fully automated reservation system
allows its reservation agents to respond quickly to book staterooms on its
ships. Additionally, through Leisure Shopper, Cruise Director or Carnival's
internet booking engine, travel agents and consumers have the ability to make
reservations through their own computer terminals directly into Carnival's
computerized reservations system.
A significant portion of Carnival's cruises are generally booked several
months in advance of the sailing date. This lead-time allows Carnival to
adjust its prices, if necessary, in relation to demand for available cabins,
as indicated by the level of advance bookings. Carnival's SuperSaver fares
are designed to encourage potential passengers to book cruise reservations
earlier, which helps to more effectively manage overall net revenue yields
(net revenue per available berth). Carnival's payment terms require that a
passenger pay a deposit of between $100 to $300, depending on the cruise
duration, to confirm their reservation with the balance due not later than 45
days before the sailing date for three, four and five day cruises and 70 or
75 days before the sailing date for seven-day and longer cruises.
Holland America and Windstar
The Holland America and Windstar Ships cater to the premium and luxury
sectors, respectively. Management believes that the hallmarks of the Holland
America experience are beautiful ships and gracious, attentive service.
Holland America communicates this difference as "A Tradition of Excellencer",
a reference to its long-standing reputation for "world class" service and
cruise itineraries.
Substantially all of Holland America's bookings are made through travel
agents. In fiscal 2000, Holland America took reservations from about 23,000
of approximately 49,000 travel agency locations known to the Company in the
United States and Canada. In addition, Holland America and Windstar markets
and sells its cruises to tour operators and through travel agents located in
numerous countries including the United Kingdom and Australia. Travel agents
generally receive a standard commission of 10% plus the potential of
additional commissions based on sales volume.
Holland America has focused much of its sales effort at creating an
excellent relationship with the travel agency community. This is related to
its marketing philosophy that travel agents have a large impact on the
consumer vacation selection process and will recommend Holland America more
often because of its excellent reputation for service to both consumers and
independent travel agents. Holland America solicits continuous feedback from
consumers and the independent travel agents making bookings with Holland
America to ensure they are receiving excellent service. In 2000, Holland
America and Windstar enhanced their web sites at www.hollandamerica.com and
www.windstarcruises.com, thus enriching the consumers web-based research
experience.
Holland America's marketing communication strategy is primarily composed
of newspaper and magazine advertising, large scale brochure distribution,
direct mail solicitations to past passengers and others, network and cable
television and radio spots. Holland America engages in substantial
promotional efforts designed to motivate and educate retail travel agents
about its products. Holland America employs approximately 54 field sales
representatives, 26 inside sales representatives and 18 sales and service
representatives to support the field sales force. To facilitate access to
Holland America and to simplify the reservation process for the Holland
America Ships, Holland America employs approximately 290 reservation agents
primarily to take bookings from travel agents. Additionally, through Leisure
Shopper and Cruise Director, travel agents have the ability to make
reservations directly into Holland America's reservations system. Holland
America's cruises generally are booked several months in advance of the
sailing date.
Windstar has its own marketing and reservations staff. Field sales
representatives for both Holland America and Carnival also act as field sales
representatives for Windstar. Marketing efforts are devoted primarily to i)
travel agent support and awareness, ii) direct mail solicitation of past
passengers and iii) distribution of brochures. The marketing features the
distinctive nature of the graceful, modern sail ships and the distinctive
"casually elegant" experience on "intimate itineraries" (apart from the
normal cruise experience). Windstar's cruise sector positioning is embodied
in the phrase "180 degrees from ordinaryr".
Costa
Since June 1997, the Company has owned 50% of Costa. On September 29,
2000, the Company completed the acquisition of the remaining 50% interest in
Costa from Airtours. See Note 3 "Acquisition," to the Company's Consolidated
Financial Statements in Exhibit 13 of this Annual Report on Form 10-K.
Costa is headquartered in Genoa, Italy and is Europe's largest cruise
line based on number of passengers carried and available capacity. Costa is
primarily targeted to the contemporary sector with a majority of its cruises
sold in Europe, primarily in Italy, France, Germany and Spain. Approximately
86% of Costa's revenues are generated by non-U.S. tour operators and travel
agents. Costa has sales offices in Argentina, Brazil, England, France,
Germany, Italy, Spain, Switzerland and the United States, and employs over
300 personnel in the sales and sales support area, excluding reservation
agents. Costa sales offices focus much of their effort at motivating and
educating travel agents. These efforts include, among other things,
newspaper, television, radio and magazine advertising, direct mail
solicitation and brochure distribution. In addition, through the use of the
internet, at web sites specifically designed for the country and guest that
Costa is targeting, the consumers are educated about cruising and Costa
(www.costacruises.com). To facilitate access to Costa and to simplify the
reservation process for the Costa Ships, Costa employs approximately 120
reservation agents primarily to take bookings from travel agents.
Management believes that Costa distinguishes itself from other brands
by offering a distinctly Italian style of cruising. Costa believes its
advertising generates interest in cruise vacations generally and results in a
higher degree of awareness to "Cruising Italian Style SM". In addition, Costa
is very experienced at providing cruises to guests with different
nationalities and languages besides Italian, thereby enabling it to
effectively market and sell its cruises throughout Europe, South America and
the U.S.
Cunard and Seabourn
The Company owns 100% of Cunard Line Limited, which owns Cunard and
Seabourn. Currently eight ships are operated under these two brands.
The Cunard brand currently operates two ships in the luxury cruise
sector. Cunard's most visible asset is the QE2. The QE2 is the only active
passenger ship of its size built specifically for navigating ocean waters and
currently offering transatlantic cruises, and thus enjoys a unique standing
among modern passenger ships. Since being acquired by the Company, Cunard has
redefined itself as the brand that offers classic "Old World" cruising with a
British essence.
The Seabourn brand currently operates six ships, offering ultra-luxury
cruising with an intense focus on service and cuisine. It is the
exceptionally high level of service which management believes enables
Seabourn to be one of the most celebrated cruise lines in the world.
Seabourn and Cunard currently market and sell their products through
their sales offices in Miami, England, Germany and Australia. Approximately
44% of Cunard Line Limited's revenues are generated by non-U.S. tour
operators and travel agents. Marketing efforts are devoted primarily to i)
travel agent support and awareness, ii) direct mail solicitation of past
passengers, iii) targeted print media campaigns and brochure distribution
and iv) the education of consumers at the Cunard and Seabourn web sites
located at www.cunardline.com and www.seabourn.com.
Substantially all of Seabourn's and Cunard's bookings are made through
travel agents. In fiscal 2000, Seabourn and Cunard took reservations from
about 11,000 of approximately 49,000 travel agency locations known to the
Company in the United States and Canada. Travel agents generally receive a
standard commission of 10% plus the potential of additional commissions based
on sales volume.
Cunard and Seabourn employ approximately 41 field sales representatives,
16 inside sales representatives and 28 sales and service representatives to
support its field sales force. They also employ approximately 80 Cruise Sales
Consultants primarily to take bookings, substantially all of which come from
travel agents.
Seasonality
The Company's revenue from the sale of passenger tickets is moderately
seasonally. Historically, demand for cruises has been greatest during the
summer months. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - General," in Exhibit 13 of this Annual
Report on Form 10-K.
Competition
The Company competes both with other cruise lines and with a wide array
of other land-based vacation alternatives for the consumers' disposable
leisure time dollars. The Company's cruise lines also compete, in some
cases, against each other.
The Company's primary competitors in the contemporary and/or premium
cruise sectors for North American sourced passengers are Royal Caribbean
Cruises Ltd., which owns Royal Caribbean International and Celebrity Cruises,
Princess Cruises, owned by P&O Princess Cruises plc ("P&O"), Norwegian Cruise
Line and Orient Lines, both owned by Star Cruises plc, and Disney Cruise
Line.
The Company's primary competitors for European sourced passengers are
Royal Olympic Cruise Line and its parent, Louis Cruise Line, Festival
Cruises, Mediterranean Shipping Cruises and P&O Cruises and Aida Cruises,
both owned by P&O.
The Cunard, Seabourn and Windstar ships' compete for passengers
primarily from North America and/or Europe and the primary unaffiliated
competitors within the luxury cruise sector include Crystal Cruises, Radisson
Seven Seas Cruise Line, Renaissance Cruises and Silversea Cruises, as well as
the higher priced cabins on certain of the cruise lines which serve the
premium sector.
As mentioned above, the Company also competes with land-based vacation
alternatives throughout the world including, among others, resorts and hotels
located in Las Vegas, Nevada, Orlando, Florida, various Caribbean, Bahamian
and Hawaiian Island destination resorts and numerous sightseeing destinations
throughout Europe.
See "Risk Factors" for an additional discussion of the Company's
competition.
Governmental Regulations
The Company's ships are registered in the Bahamas, England, Italy,
Netherlands, Norway or Panama, as more fully described under Part I, Item 1.
Business, C. Cruise Ships and Itineraries and, accordingly, are regulated by
these jurisdictions and by the International Conventions that these
jurisdictions have ratified or adhere to. In addition, the directives and
regulations of the European Union are applicable to some aspects of the
Company's ship operations.
In addition, the International Maritime Organization (the "IMO"), which
operates under the United Nations, has adopted safety standards as part of
the "Safety of Life at Sea" ("SOLAS") Convention, generally applicable to all
passenger ships carrying 36 or more passengers. Generally, SOLAS establishes
vessel design, structural features, materials, construction and life saving
equipment requirements to improve passenger safety. The current SOLAS
requirements are being phased in through 2010.
In 1993, SOLAS was amended to adopt the "International Safety Management
Code" (the "ISM Code"). The ISM Code provides an international standard for
the safe management and operation of ships and for pollution prevention. The
ISM Code became mandatory for passenger vessel operators, such as the
Company, on July 1, 1998. All of the Company's cruise operations and
Airtours' Sun Cruises have obtained the required certificates demonstrating
compliance with the ISM Code and are regularly inspected and controlled by
the national authorities, as well as the international authorities acting
under the provisions of the international agreements related to Port State
Control (i.e. the process by which a nation exercises authority over foreign
ships when the ships are in the waters subject to its jurisdiction).
The Company's ships that call on United States ports are subject to
inspection by the United States Coast Guard for compliance with the SOLAS
Convention and by the United States Public Health Service for sanitary
standards. The Company's ships are also subject to similar inspections
pursuant to the laws and regulations of various other countries its ships
call on.
In addition to other regulations, the Company's ships that call on U.S.
ports are regulated by the Federal Maritime Commission ("FMC"). Public Law
89-777 which is administered by the FMC requires most cruise line operators
to establish financial responsibility for nonperformance of transportation.
The FMC's regulations require that a cruise line demonstrate its financial
responsibility through a guaranty, escrow arrangement, surety bond, insurance
or self-insurance. Currently, the amount required must equal 110% of the
cruise line's highest amount of customer deposits over a two-year period up
to a maximum coverage level of $15 million. In addition, other jurisdictions,
including the United Kingdom and Germany, require the establishment of
financial responsibility for passengers from their jurisdictions.
In connection with a significant portion of its Alaska cruise
operations, Holland America relies on concession permits from the National
Park Service, which are periodically renewed, to operate its cruise ships in
Glacier Bay National Park. There can be no assurance that these permits will
continue to be renewed or that regulations relating to the renewal of such
permits, including preference rights, will remain unchanged in the future.
On February 23, 2001, a three judge panel of the Ninth U.S. Circuit
Court of Appeals overturned a decision of the U.S. District Court for the
District of Alaska and ordered the District Court to enjoin a 1996 decision
by the National Park Service ("NPS") that had authorized additional cruise
ship entry permits for Glacier Bay National Park. The Court of Appeals held
that the NPS should have prepared an environmental impact statement prior to
increasing the number of permits. As a consequence of the 1996 NPS decision,
Holland America had been able to obtain additional entry permits for the
2000-2004 period. Other cruise lines had also received additional entry
permits. At this time it is not clear whether the court injunction will
affect the 2001 Alaska cruise season since the District Court was given
discretion as to whether or not to defer issuing the injunction until after
the 2001 season. In addition, the decision can still be appealed by the NPS
to the full Ninth Circuit Court of Appeals and/or the U.S. Supreme Court.
Holland America will also be clarifying with the NPS as to exactly how many
permits may be impacted. However, most Holland America permits will not be
withdrawn as a result of this decision since they were in effect prior to the
1996 NPS decision. In addition, attractive alternative destinations in
Alaska can be substituted for Glacier Bay. Accordingly, management believes
that if any permits are withdrawn, the impact on the Company's financial
statements will not be material.
The Company believes it is in compliance with all material regulations
applicable to its ships and has all the necessary licenses to conduct its
business. From time to time, various other regulatory and legislative changes
have been or may be proposed that could have an affect on the cruise industry
in general. See "Risk Factors" for a discussion of other regulations which
impact the Company.
Financial Information
For financial information about the Company cruise and affiliated
operations segments with respect to each of the three years in the period
ended November 30, 2000, see Note 10, "Segment Information," to the Company's
Consolidated Financial Statements in Exhibit 13 of this Annual Report on Form
10-K.
D. Tour Segment
In addition to its cruise business, the Company markets sightseeing
tours both separately and as a part of cruise/tour packages under the Holland
America Tours name. Tour operations are based in Alaska and Washington State.
Since a substantial portion of Holland America Tours' business is derived
from the sale of tour packages in Alaska during the summer tour season, tour
operations are highly seasonal.
Holland America Tours
Holland America Tours is an indirect wholly owned subsidiary of HAL.
The group of companies which together comprise the tour operations perform
three independent yet interrelated functions. During 2000, as part of an
integrated travel program to destinations in Alaska, the tour service group
offered 39 different tour programs varying in length from 8 to 21 days. The
transportation group and hotel group supports the tour service group by
supplying facilities needed to conduct tours. Facilities include dayboats,
motor coaches, rail cars and hotels.
Two luxury dayboats perform an important role in the integrated Alaska
travel program offering tours to the glaciers of Alaska and the Yukon River.
The Yukon Queen II cruises the Yukon River between Dawson City, Yukon
Territory and Eagle, Alaska and the Ptarmigan operates on Portage Lake in
Alaska. The two dayboats have a combined capacity of 304 passengers.
A fleet of over 300 motor coaches operate in Alaska and Washington.
These motor coaches are used for extended trips, city sightseeing tours and
charter hire. Additionally, Holland America Tours operates express motor
coach service between downtown Seattle and the Seattle-Tacoma International
Airport.
Thirteen private domed rail cars, which are called "McKinley Explorers",
run on the Alaska Railroad between Anchorage and Fairbanks, stopping at
Denali National Park.
In connection with its tour operations, Holland America Tours owns or
leases motor coach maintenance shops in Seattle, Washington, and in Juneau,
Fairbanks, Anchorage, Skagway and Ketchikan, Alaska. Holland America Tours
also owns or leases service offices at Anchorage, Denali Park, Fairbanks,
Juneau, Ketchikan and Skagway in Alaska, at Whitehorse in the Yukon
Territory, in Seattle, Washington, Vancouver, British Columbia and Victoria,
British Columbia.
Westmark Hotels
Holland America Tours owns and/or operated 14 hotels in Alaska and the
Canadian Yukon under the name Westmark Hotels. Four of the hotels are located
in Canada's Yukon Territory and offer a combined total of 585 rooms. The
remaining 10 hotels, located throughout Alaska, provide a total of 1,455
rooms, bringing the total number of hotel rooms to 2,040.
The hotels play an important role in Holland America Tours tour programs
during the summer months when they provide accommodations to the tour
passengers. The hotels located in the larger metropolitan areas remain open
during the entire year, acting during the winter season as centers for local
community activities while continuing to accommodate the traveling public.
Most of the Westmark hotels include dining, lounge and conference or meeting
room facilities. Certain hotels have gift shops and other tourist services on
the premises.
Twelve of the hotels are wholly owned by Holland America Tours
subsidiaries and Westmark operates two under management agreements.
For the seven hotels that operate year-round, the occupancy percentage
for fiscal 2000 was 56.9% (55.4% for fiscal 1999), and for the seven hotels
that operate only during the summer months, the occupancy percentage for
fiscal 2000 was 70.9% (71.4% for fiscal 1999).
Sales and Marketing
Holland America Tours has its own marketing staff devoted to i) travel
agent support and awareness, ii) direct mail solicitation of past customers,
iii) use of consumer magazine and newspaper advertising to develop prospects
and enhance awareness and iv) distribution of brochures. Additionally,
television and radio spots are used to market its tour and cruise packages.
The Holland America Tours marketing message leverages the company's 54 years
of Alaska tourism leadership and its extensive array of hotel and
transportation assets to create a brand preference for Holland America Tours.
To the prospective vacationer the company endeavors to convince them that
"Holland America Tours is Alaska".
Holland America Tours are marketed both separately and as part of
cruise/tour packages. Although most Holland America Tours cruise/tours
include a Holland America cruise as the cruise segment, other cruise lines
also market Holland America Tours as a part of their cruise/tour packages and
sightseeing excursions. Tours sold separately are marketed through
independent travel agents and also directly by Holland America Tours,
utilizing sales desks in major hotels. General marketing for the hotels is
done through various media in Alaska, Canada and the contiguous U.S. Travel
agents, particularly in Alaska, are solicited, and displays are used in
airports in Seattle, Washington, Portland, Oregon and various Alaskan cities.
Room rates at Westmark Hotels are on the upper end of the scale for hotels in
Alaska and the Canadian Yukon.
Seasonality
Holland America Tours tour revenues are highly seasonal with a large
majority generated during the late spring and summer months in connection
with the Alaska cruise season. Holland America Tours are conducted in
Washington State and Alaska. The Alaska tours coincide to a great extent with
the Alaska cruise season, May through September. Washington tours are
conducted year-round although demand is greatest during the summer months.
During periods in which tour demand is low Holland America Tours seeks to
maximize its motor coach charter activity, such as operating charter tours to
ski resorts in Washington.
Competition
Holland America Tours competes with independent tour operators and motor
coach charter operators in Washington and Alaska. The primary competitors in
Alaska are Princess Tours (with approximately 160 motor coaches and three
hotels) and Alaska Sightseeing/Trav-Alaska (with approximately 13 motor
coaches) and, commencing in 2001, Royal Caribbean Tours. The primary
competitor in Washington is Gazelle (with approximately 15 motor coaches).
Westmark Hotels compete with various hotels throughout Alaska, many of
which charge prices below those charged by Westmark Hotels. Dining facilities
in the hotels also compete with the many restaurants in the same geographic
areas.
Government Regulations
Holland America Tours motor coach operations are subject to regulation
both at the federal and state levels, including primarily the U.S. Department
of Transportation, the Washington Utilities and Transportation Commission,
the British Columbia Motor Carrier Commission and the Alaska Department of
Transportation. Certain activities of Holland America Tours involve federal
properties and may require concession permits and are subject to regulation
by various federal agencies, such as the National Park Service and the U.S.
Forest Service.
In connection with the operation of its beverage facilities in the
Westmark Hotels, Holland America Tours is required to comply with state,
county and/or city ordinances regulating the sale and consumption of
alcoholic beverages. Violations of these ordinances could result in fines,
suspensions or revocation of such licenses and preclude the sale of any
alcoholic beverages by the hotel involved.
In the operation of its hotels, Holland America Tours is required to
comply with applicable building and fire codes. Changes in these codes have
in the past and may in the future require expenditures to ensure continuing
compliance, such as the installation of sprinkler systems.
From time to time, various other regulatory and legislative changes have
been or may be proposed that could have an effect on the tour industry in
general.
Financial Information
For financial information about the Company's tour segment with respect
to each of the three years in the period ended November 30, 2000, see Note
10, "Segment Information," to the Company's Consolidated Financial Statements
in Exhibit 13 of this Annual Report on Form 10-K.
E. Employees
The Company's operations have approximately 5,200 full-time and 2,300
part-time/seasonal employees engaged in shoreside operations. The Company
also employs approximately 1,900 officers and 24,000 crew and staff on its 44
ships. Due to the seasonality of its Alaska and Canadian operations, HAL and
its subsidiaries increase their work force during the summer months,
employing additional full-time and part-time personnel which have been
included above. The Company has entered into agreements with unions covering
certain employees in its hotel, motorcoach and ship operations. The Company
considers its employee and union relations generally to be good.
F. Suppliers
The Company's largest purchases are for airfare, advertising, fuel, food
and beverages and hotel and restaurant supplies and products and for ship
construction. Although the Company chooses to use a limited number of
suppliers for most of its food and beverages, and hotel and restaurant
supplies and products, most of these purchases are available from numerous
sources at competitive prices. The use of a limited number of suppliers
enables the Company to, among other things, obtain volume discounts. The
Company purchases fuel from a limited number of sources located at certain of
its ports of call (See Management's Discussion and Analysis of Financial
Condition and Results of Operations - Exposure to Bunker Fuel Prices in
Exhibit 13 to this Annual Report on Form 10-K.). See Part I., Item 1.,
Business, B. Risk Factors - for a discussion of the limited number of
qualified shipyards available to build the Company's future ships.
G. Insurance
The Company maintains insurance covering legal liabilities related to
crew, passengers and other third parties on its ships in operation through
The Standard Steamship Owners Protection & Indemnity Association Limited (the
"SSOPIA") and Steamship Mutual Underwriting Association Ltd. (the "SMUAL")
and the United Kingdom Mutual Steamship Assurance Association (Bermuda)
Limited (the "UKMSAA"). The amount and terms of this insurance is governed by
the rules of the foregoing protection and indemnity associations.
The Company maintains insurance on the hull and machinery of each ship
in amounts equal to the approximate market value of each ship. The Company
maintains war risk insurance on each ship which includes legal liability to
crew and passengers, including terrorist risks for which coverage would be
excluded under SSOPIA, SMUAL and UKMSAA. The coverage for hull and machinery
and war risks is provided by international markets, including underwriters at
Lloyds. The Company, as currently required by the FMC, maintains at all times
four $15 million performance bonds for all of the Company's ships which
embark passengers in U.S. ports, to cover passenger ticket liabilities in the
event of a canceled or interrupted cruise. The Company also maintains other
performance bonds as required by various foreign authorities who regulate
certain of the Company's operations in their jurisdictions.
The Company maintains certain levels of self-insurance for the above
mentioned risks through the use of substantial deductibles. The Company does
not typically carry coverage related to loss of earnings or revenues for its
cruise or tour operations.
The Company also maintains various other insurance policies to protect
the assets of Holland America Tours and other activities.
H. Investment in Affiliate
Airtours plc
The Company has a 25% interest in Airtours. Airtours is one of the
largest air-inclusive integrated leisure travel companies in the world and
its common stock is publicly traded on the London Stock Exchange. Airtours
primarily provides air inclusive packaged holidays to the United Kingdom,
German, Ireland, North American and Scandinavian markets. Airtours provided
holidays to approximately 15 million people in fiscal 2000 and owns or
operates 2,600 travel shops and 48 telesales centers, 93 hotel and resort
properties, four cruise ships and 52 aircraft. The four cruise ships are
operated under the Sun Cruises brand. In 1997, Airtours acquired a 50%
interest in Costa which it sold to the Company in fiscal 2000. During 2000,
Airtours acquired the remaining 64% of its German tour operator, FTI, which
it did not already own. In addition, during 2000, Airtours acquired Travel
Services International ("TSI"). TSI is a major distributor of leisure travel
products in the U.S. market with leading positions in the distribution of
cruise, auto rental, alumni holidays and hotel bookings.
Seasonality
The Company's equity in the earnings of Airtours is recorded on a two-
month lag basis using the equity method of accounting. Airtours' revenues are
very seasonal due primarily to the nature of the European leisure travel
industry. Typically, Airtours' quarters ending June 30 and September 30
experience higher revenues, with revenues in the quarter ending September 30
being their highest.
I. Trademarks
The Company owns numerous trademarks, which it believes are widely
recognized throughout the world and have considerable value.
Item 2. Properties
The Company's cruise ships and private island, Half Moon Cay, are
described in Section C of Item 1 under the heading Cruise Ship Segment -
Cruise Ships and Itineraries. The properties associated with Holland America
Tours tour operations are described in Section D of Item 1 under the heading
Tour Segment.
Carnival's principal shoreside operations and the Company's corporate
headquarters are located at 3655 N.W. 87th Avenue, Miami, Florida. These
Company-owned facilities include approximately 456,000 square feet of office
space. HAL's principal shoreside operations and its headquarters are located
at 300 Elliott Avenue West in Seattle, Washington in approximately 128,000
square feet of leased office space. Costa's principal shoreside operations
and its headquarters are located in Genoa, Italy in approximately 125,000
square feet of owned and leased space. Cunard Line Limited's principal
shoreside operations and its headquarters are located at 6100 Blue Lagoon
Drive in Miami, Florida in approximately 51,000 square feet of leased office
space.
The Company's cruise ships, tour properties, shoreside operations and
headquarter facilities are well maintained and in good condition.
Item 3. Legal Proceedings
Several actions (collectively the "Passenger Complaints") were filed
against Carnival, one action has been filed against Holland America Tours and
one action has been filed against Costa on behalf of purported classes of
persons who paid port charges to Carnival, Holland America or Costa, alleging
that statements made in advertising and promotional materials concerning port
charges were false and misleading. The Passenger Complaints allege
violations of the various state consumer protection acts and claims of fraud,
conversion, breach of fiduciary duties and unjust enrichment. Plaintiffs
seek compensatory damages, or alternatively, refunds of portions of port
charges paid, attorneys' fees, costs, prejudgment interest, punitive damages
and injunctive and declaratory relief. The status of each pending Passenger
Complaint is as follows:
In 1996, four Passenger Complaints were filed against Carnival in the
Circuit Court for the Eleventh Judicial Circuit in Miami-Dade County,
Florida, by Michelle Hackbarth, Larry Katz, Michelle A. Sutton, Pedro Rene
Mier, and others, respectively, on behalf of purported nationwide classes.
In May 1998, the court consolidated all four actions. On December 21, 2000,
Carnival entered into a settlement agreement for the Passenger Complaints
filed against it. The settlement has been preliminarily approved by the
trial court. Under the settlement agreement, Carnival would issue travel
vouchers with a face value of $25-$55 to certain of its passengers who sailed
between April 19, 1992 and June 4, 1997. The vouchers will also provide
class members with a cash redemption option of up to 20% of the face value.
Pursuant to the settlement, Carnival will pay the plaintiffs' legal fees, as
awarded by the court, up to a specified amount. The notices to class members
were mailed by Carnival on February 16, 2001. Class members have until April
10, 2001 to elect out of the class. A final settlement hearing is currently
scheduled for May 2001 when it is anticipated that the court will issue final
approval of the settlement. Thereafter, assuming the settlement is approved,
the vouchers will be mailed.
In April 1996, a Passenger Complaint was filed against Holland America
Tours in the Superior court in King County, Washington, by Francine Pickett
and others on behalf of a purported nationwide class. In April 1998 Holland
America Tours entered into a settlement agreement which was approved by the
court. However, one member of the settlement class appealed the agreement.
In August, 2000, the Washington court of appeals refused to approve the
settlement that had been reached by Holland America Tours in its Passenger
Complaint and instead remanded the case to the trial court. The court of
appeals ruled that the trial court had erred in refusing to certify a class.
The court of appeals then reasoned that had the trial court certified a
class, the terms of the settlement would likely have been different. The
court of appeals also made other rulings that could be adverse to Holland
America Tours on remand. Holland America Tours has filed a petition for
discretionary review by the Washington Supreme Court, the ultimate outcome of
which cannot currently be determined.
In September 1996, a Passenger Complaint was filed against Costa in the
Circuit Court for the Eleventh Judicial Circuit in Miami-Dade County,
Florida, by Mr. & Mrs. Latman on behalf of a purported nationwide class.
These proceedings, including Costa's appeal to the Florida Supreme Court of
the Third District Court of Appeals's order to the trial court to certify the
class, have been stayed pending the outcome of ongoing settlement
negotiations
In August 1996, Nelsons Travel Associates filed an action against
Carnival and Holland America Tours on behalf of purported classes of travel
agencies who had booked a cruise with Carnival or Holland America, claiming
that advertising practices regarding port charges resulted in an improper
commission bypass. This action alleged violations of state consumer
protection laws, claims of breach of contract, negligent misrepresentation,
unjust enrichment, unlawful business practices and common law fraud, and they
seek unspecified compensatory damages (or alternatively, the payment of usual
and customary commissions on port charges paid by passengers in excess of
certain charges levied by government authorities), an accounting, attorneys'
fees and costs, punitive damages and injunctive relief. On December 5, 2000,
at the plaintiff's request, the court dismissed this action.
Several actions (collectively the "ADA Complaints") have been filed
against Carnival, Holland America Tours, Cunard and Costa alleging that they
violated the Americans with Disabilities Act of 1990 by failing to make
certain of its cruise ships accessible to individuals with disabilities. The
plaintiffs seek injunctive relief to require modifications to certain vessels
to increase accessibility to disabled passengers and fees and costs. The
California case also seek statutory damages under California state law, which
include punitive damages, attorneys' fees and costs. The status of each
pending ADA Complaint is as follows:
On December 17, 1998, an ADA Complaint was filed against Carnival by
Access Now, Inc. and Edward S. Resnick in the U.S. District Court for the
Southern District of Florida. In January 2001, Carnival reached an agreement
in principle with the plaintiffs to settle this action. Pursuant to the
agreement, Carnival will make certain modifications to its existing 15 ships
with an option to include future ships into the settlement agreement.
On July 27, 1998, an ADA Complaint was filed against Carnival by Bernard
Walker and Christina Adams in the U.S. District Court for the Northern
District of California. This proceeding concerns only one Carnival ship, the
Holiday. The proceedings relating to the California ADA Complaint were
consolidated for settlement purposes with the ADA Complaint described in the
preceding paragraph. As a result of mediation, Carnival has entered into a
settlement agreement with the plaintiffs. Carnival has agreed to certain
modifications to the ship, payment of damages to the individual plaintiffs
and attorneys' fees. The settlement is subject to certification of the case
by the trial court as a class action proceeding and approval by the U.S.
Departments of Justice and Transportation. Management believes the estimated
total cost of the settlement, including modifications, will not be material
to the Company's financial statements.
On August 29, 2000, an ADA Complaint was filed against Cunard by Access
Now, Inc. and Edward S. Resnick in the U.S. District Court for the Southern
District of Florida. Cunard filed an answer to the complaint on November 10,
2000. Given the settlement reached in the case against Carnival, the
plaintiff has agreed to dismiss the ADA Complaint against Cunard without
prejudice.
On August 28, 2000, Access Now, Inc. and Edward S. Resnick also filed
complaints in the U.S. District Court for the Southern District of Florida
against Holland America Tours and Costa. These complaints seek modifications
to their vessels to increase accessibility to disabled passengers. These
cases have been transferred before the same judge. Holland America Tours and
Costa have filed motions to dismiss the action. The court has asked the
parties for additional briefs on the issue of whether the Department of
Justice and Department of Transportation should also brief the issues raised
in the motions to dismiss.
Several actions as previously reported, have been filed against Carnival
and four of its officers by a purported class of persons who purchased the
Company's Common Stock between February 25, 1999 and February 16, 2000
alleging that statements made the Company in public fillings relating to
compliance with applicable safety regulations were in violation of Section
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The
complaints also allege violations by the individual defendants as controlling
persons under Section 20(a) of the Securities Exchange Act of 1934. In
November, 2000, the plaintiffs filed a consolidated amended complaint (the
"Stock Purchaser Complaint"). The complaint seeks certification of a class
action, an award or unspecified compensatory damages, attorneys' fees and
costs and expert fees. On February 5, 2001, Carnival filed a motion to
dismiss the Stock Purchaser Complaint.
On August 22, 2000, the Company received a subpoena from a grand jury
sitting in the U.S. District Court for the Southern District of Florida. The
subpoena requests that the Company produce documents and records concerning
environmental matters. The Company continues to respond to the subpoena.
On November 22, 2000, Costa 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 an approximate $75 million contract for the conversion and lengthening
of the ship. Cammell Laird joined the arbitration proceeding on January 9,
2001 to present its counter demands. On January 9, 2001, Costa gave Cammell
Laird notice of termination of the contract and Cammell Laird replied with
its notice of termination of the contract on February 2, 2001. It is
expected that the award of the arbitration tribunal's decision will be made
within two years.
On February 23, 2001, Holland America Line, Inc. ("HAL, Inc."), a
subsidiary of HAL, received a subpoena from a grand jury sitting in the U.S.
District Court for the District of Alaska. The subpoena requests that HAL,
Inc. produce documents and records relating to the air emissions from Holland
America ships in Alaska. HAL, Inc. intends to respond to the subpoena.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
Pursuant to General Instruction G(3), the information regarding
executive officers of the Company called for by Item 401(b) of Regulation S-K
is hereby included in Part I of this Annual Report on Form 10-K.
The following table sets forth the name, age and title of each executive
officer. Titles listed relate to positions within the Company unless
otherwise noted.
NAME AGE POSITION
Micky Arison 51 Chairman of the Board of Directors
and Chief Executive Officer
Gerald R. Cahill 49 Senior Vice President-Finance and Chief
Financial Officer
Robert H. Dickinson 58 President and Chief Operating Officer
of Carnival and Director
Kenneth D. Dubbin 47 Vice President-Corporate Development
Howard S. Frank 59 Vice Chairman of the Board of Directors
and Chief Operating Officer
Ian J. Gaunt 49 Senior Vice President - International
A. Kirk Lanterman 69 Chairman of the Board of Directors,
President, and Chief Executive Officer of
Holland America Line-Westours Inc.
and Director
Lowell Zemnick 57 Vice President and Treasurer
Business Experience of Officers
Micky Arison has been Chief Executive Officer since 1979 and Chairman of
the Board of Directors since 1990. He was President from 1979 to May 1993 and
has also been a director since June 1987. Prior to 1979, he served Carnival
for successive two-year periods as sales agent, reservations manager and as
Vice President in charge of passenger traffic.
Gerald R. Cahill has been Senior Vice President-Finance, Chief Financial
Officer and Chief Accounting Officer since January 1998. From September 1994
to January 1998 he was Vice President-Finance. He was the Chief Financial
Officer from 1988 to 1992 and the Chief Operating Officer from 1992 to 1994
of Safecard Services, Inc. From 1979 to 1988 he held financial positions at
Resorts International Inc. and, prior to that, spent six years with
PricewaterhouseCoopers LLP.
Robert H. Dickinson has been President and Chief Operating Officer of
Carnival since May 1993. From 1979 to May 1993, he was Senior Vice President-
Sales and Marketing of Carnival. He has also been a director since June 1987.
Kenneth D. Dubbin has been Vice President-Corporate Development since
May 1999. From 1988 to April 1999 he was Vice President and Treasurer of
Royal Caribbean Cruises Ltd.
Howard S. Frank has been Vice Chairman of the Board of Directors since
October 1993, Chief Operating Officer since January 1998 and a director since
1992. From July 1989 to January 1998 he was Chief Financial Officer and Chief
Accounting Officer and from July 1989 to October 1993 he was Senior Vice
President-Finance. From July 1975 through June 1989 he was a partner with
PricewaterhouseCoopers LLP.
Ian J. Gaunt is an English Solicitor and has been Senior Vice President-
International since May 1999. He was a partner of the London based
international law firm of Sinclair, Roche and Temperley from 1982 through
April 1999 where he represented the Company as special external legal counsel
since 1981.
A. Kirk Lanterman is a Certified Public Accountant and has been a
director since April 1992. He has been Chairman of the Board of Directors,
President and Chief Executive Officer of Holland America Line-Westours Inc.
("HALW") since August 1999. From March 1997 to August 1999, he was Chairman
of the Board of Directors and Chief Executive Officer of HALW. From December
1989 to March 1997, he was President and Chief Executive Officer of HALW.
From 1983 to 1989 he was President and Chief Operating Officer of HALW. From
1979 to 1983, he was President of Westours, Inc. which merged with Holland
America Line in 1983.
Lowell Zemnick is a Certified Public Accountant and has been a Vice
President since 1980 and Treasurer since September 1990. He was the Chief
Financial Officer of Carnival from 1980 to September 1990 and was the Chief
Financial Officer of Carnival Corporation from May 1987 through June 1989.
Special Note Regarding Forward-Looking Statements
Certain statements under the headings "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business" and
elsewhere in this Annual Report on Form 10-K, in the Company's press
releases, and in oral statements and presentations made by or with the
approval of an authorized executive officer of the Company constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors, which may cause the
actual results, performances or achievements of the Company 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 passenger revenue yields for
the Company's cruise products; consumer demand for cruises, including the
effects on consumer demand of armed conflicts, political instability or
adverse media publicity; increases in cruise industry capacity; cruise and
other vacation industry competition; changes in tax laws and regulations; the
ability of the Company to implement its shipbuilding program and to continue
to expand its business outside the North American market; changes in foreign
currency exchange rates, food and fuel commodity prices and interest rates;
delivery of new vessels on schedule and at the contracted price; weather
patterns; unscheduled ship repairs and drydocking; incidents involving cruise
ships; impact of pending or threatened litigation; the ability of
unconsolidated affiliates to successfully implement their business strategies
and changes in laws and regulations applicable to the Company.
The Company does not assume the obligation to update any forward-looking
statements. One should carefully evaluate such statements in light of
factors described in the Company's filings with the Securities and Exchange
Commission, especially on Forms 10-K, 10-Q and 8-K, if any. In Item 1. of
the Company's Annual Report on Form 10-K for the year ended November 30, 2000
and above, the Company discusses various important factors, among others,
that could cause actual results to differ from expected or historic results.
The Company notes these factors for investors as permitted by the Private
Securities Litigation Reform Act of 1995. One should understand that it is
not possible to predict or identify all such factors. Consequently, the
reader should not consider any such list to be a complete statement of all
potential risks or uncertainties.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
A. Market Information
The information required by Item 201(a) of Regulation S-K, Market
Information, is shown in Exhibit 13 and is incorporated by reference into
this Annual Report on Form 10-K.
B. Holders
The information required by Item 201(b) of Regulation S-K, Holders of
Common Stock, is shown in Exhibit 13 and is incorporated by reference into
this Annual Report on Form 10-K.
C. Dividends
Carnival Corporation declared cash dividends on all of its Common Stock
in the amount of $.09 per share in each of the first three quarters of fiscal
1999 and $.105 for each subsequent quarter through and including the first
quarter of fiscal 2001. Payment of future dividends on the Common Stock will
depend upon, among other factors, the Company's earnings, financial condition
and capital requirements. Carnival Corporation may also declare special
dividends to all stockholders in the event that members of the Arison family
and certain related entities are required to pay additional income taxes by
reason of their ownership of the Common Stock because of an income tax audit
of the Company.
The Republic of Panama does not currently have tax treaties with any
other country. Under current law management believes that distributions to
Carnival Corporation's U.S. shareholders are not subject to taxation under
the laws of the Republic of Panama. Dividends paid by Carnival Corporation
will be taxable as ordinary income for U.S. federal income tax purposes to
the extent of Carnival Corporation's current or accumulated earnings and
profits, but generally will not qualify for any dividends-received deduction.
The payment and amount of any dividend is within the discretion of the
Board of Directors, and it is possible that the amount of any dividend may
vary from the levels discussed above.
Item 6. Selected Financial Data
The information required by Item 6, Selected Financial Data, is shown in
Exhibit 13 and is incorporated by reference into this Annual Report on Form
10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations, is shown in Exhibit 13 and
is incorporated by reference into this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by Item 7A, Quantitative and Qualitative
Disclosures About Market Risk, is shown in Exhibit 13 and is incorporated by
reference into this Annual Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data
The financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated January 26, 2001 and the Selected Quarterly
Financial Data (Unaudited), are shown in Exhibit 13 and is incorporated by
reference into this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Items 10, 11, 12 and 13. Directors and Executive Officers of the
Registrant, Executive Compensation, Security Ownership of Certain
Beneficial Owners and Management, and Certain Relationships and
Related Transactions
The information required by Items 10, 11, 12 and 13 is incorporated
herein by reference to the Registrant's definitive Proxy Statement to be
filed with the Commission not later than 120 days after the close of the
fiscal year except that the information concerning the Registrant's executive
officers called for by Item 401(b) of Regulation S-K is included in Part I of
this Annual Report on Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1)(2) Financial Statements and Schedules:
The financial statements shown in Exhibit 13 are hereby incorporated
herein by reference.
(3) Exhibits:
The exhibits listed on the accompanying Exhibit Index are filed or
incorporated by reference as part of this Annual Report on Form 10-K and such
Exhibit Index is hereby incorporated herein by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended November
30, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Miami, and the State of Florida on this 26th day of February, 2001.
CARNIVAL CORPORATION
By /s/ Micky Arison
Micky Arison
Chairman of the Board of
Directors and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Micky Arison Chairman of the Board of February 26, 2001
Micky Arison Directors and Chief Executive
Officer
/s/ Howard S. Frank Vice Chairman of the Board of February 26, 2001
Howard S. Frank Directors and Chief Operating
Officer
/s/ Gerald R. Cahill Senior Vice President-Finance February 26, 2001
Gerald R. Cahill and Chief Financial and
Accounting Officer
/s/ Shari Arison Director February 26, 2001
Shari Arison
/s/ Maks L. Birnbach Director February 26, 2001
Maks L. Birnbach
/s/ Richard G. Capen, Jr.Director February 26, 2001
Richard G. Capen, Jr.
/s/ Robert H. Dickinson Director February 26, 2001
Robert H. Dickinson
/s/ Arnold W. Donald Director February 26, 2001
Arnold Donald
/s/ James M. Dubin Director February 26, 2001
James M. Dubin
/s/ A. Kirk Lanterman Director February 26, 2001
A. Kirk Lanterman
/s/ Modesto A. Maidique Director February 26, 2001
Modesto A. Maidique
/s/ Stuart Subotnick Director February 26, 2001
Stuart Subotnick
/s/ Sherwood M. Weiser Director February 26, 2001
Sherwood M. Weiser
/s/ Meshulam Zonis Director February 26, 2001
Meshulam Zonis
/s/ Uzi Zucker Director February 26, 2001
Uzi Zucker
INDEX TO EXHIBITS
Page No. in
Sequential
Numbering
System
Exhibits
3.1-Second Amended and Restated Articles of Incorporation of the Company.
(1)
3.2-Amendment to Second Amended and Restated Articles of Incorporation of
the Company. (2)
3.3-Certificate of Amendment of Articles of Incorporation of the Company.
(2a)
3.4-Form of By-laws of the Company.(3)
4.1-Agreement of the Company dated February 26, 2001 to furnish certain
debt instruments to the Securities and Exchange Commission.
4.2-Revolving Credit Agreement dated as of July 1, 1993, Amended and
Restated as of December 17, 1996, by and among Carnival Corporation,
Citibank, N.A. and various other lenders.(4)
4.3-Form of Indenture, dated March 1, 1993, between Carnival Cruise Lines,
Inc. and First Trust National Association, as Trustee, relating to the Debt
Securities, including form of Debt Security.(5)
10.1-Retirement and Consulting Agreement dated November 20, 2000 between
Alton Kirk Lanterman, Carnival Corporation and Holland America Line-Westours
Inc.
10.2-Executive Long-term Compensation Agreement dated January 16, 1998
between Robert H. Dickinson and Carnival Corporation. (6)
10.3-1994 Carnival Cruise Lines Key Management Incentive Plan as amended on
July 17, 2000. (7)
10.4-Amended and Restated Carnival Corporation 1992 Stock Option Plan. (8)
10.5-Carnival Cruise Lines, Inc. 1993 Restricted Stock Plan adopted on
January 15, 1993 and as amended January 5, 1998 and December 21, 1998. (9)
10.6-Carnival Corporation "Fun Ship" Nonqualified Savings Plan. (10)
10.7 -Amendments to The Carnival Corporation Nonqualified Retirement Plan
for Highly Compensated. (11)
10.8-Carnival Cruise Lines, Inc. Non-Qualified Retirement Plan.(12)
10.9-1993 Outside Directors' Stock Option Plan as amended on April 6, 1998.
(13)
10.10-Form of Deferred Compensation Agreement between the Company and
Meshulam Zonis.(14)
10.11-Consulting Agreement/Registration Rights Agreement dated June 14,
1991, between the Company and Ted Arison.(15)
10.12-First Amendment to Consulting Agreement/Registration Rights
Agreement.(16)
10.13-Arnold W. Donald Director's Agreement
10.14-Meshulam Zonis Director's Agreement
10.15-Maks L. Birnbach Director's Agreement.(17)
10.16-Stuart Subotnick Director's Agreement.(18)
10.17-Sherwood M. Weiser Director's Agreement.(19)
10.18-Uzi Zucker Director's Agreement. (20)
10.19-James M. Dubin Director's Agreement.(21)
10.20-Modesto M. Maidique Director's Agreement.(22)
10.21-Richard G. Capen Director's Agreement.(23)
10.22-Shari Arison Dorsman Director's Agreement.(24)
10.23-Executive Long-term Compensation Agreement dated January 11, 1999,
between the Company and Micky Arison. (25)
10.24-Executive Long-term Compensation Agreement dated January 11, 1999,
between the Company and Howard S. Frank. (26)
10.25-HAL Antillen N.V. and subsidiaries Key Management Incentive Plan. (27)
10.26-1994 Transaction-Extension Agreement, dated January 18, 2000, between
Carnival Corporation, Sherwood Weiser and others. (28)
10.27-Amended and Restated 1994 Security and Pledge Agreement, dated January
18, 2000, between Carnival Corporation and Sherwood Weiser. (29)
10.28-Security and Pledge Agreement, dated January 18, 2000, between
Carnival Corporation and Sherwood Weiser. (30)
10.29-Stock Purchase Agreement, dated January 18, 2000, between Carnival
Corporation, Sherwood Weiser and others. (31)
10.30-Carnival Corporation Supplemental Executive Retirement Plan. (32)
10.31 Amendment to the Carnival Corporation Supplemental Executive
Retirement Plan.
10.32- Amendment to the Carnival Corporation "Fun Ship" Nonqualified Savings
Plan. (33)
10.33- Amendment to the Carnival Corporation Nonqualified Retirement Plan
for Highly Compensated Employees.
10.34- Amendment to the Carnival Corporation "Fun Ship" Nonqualified Savings
Plan.
10.35- Retirement Agreement between the Company and Meshulam Zonis.
12.0-Ratio of Earnings to Fixed Charges.
13.0-Portions of 2000 Annual Report incorporated by reference into 2000
Annual Report on Form 10-K.
21-Subsidiaries of the Company.
23.0-Consent of PricewaterhouseCoopers LLP.
Sequential
Numbering
System
Exhibits
(1)Incorporated by reference to Exhibit No. 3 to the registrant's
registration statement on Form S-3 (File No. 333-68999), filed with the
Securities and Exchange Commission.
(2) Incorporated by reference to Exhibit 3.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1999 (Commission File No.
1-9610), filed with the Securities and Exchange Commission.
(2a) Incorporated by reference to Exhibit 3.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended May 31, 2000 (Commission File No.
1-9610), filed with the Securities and Exchange Commission.
(3)Incorporated by reference to Exhibit No. 3.2 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(4)Incorporated by reference to Exhibit No. 4.1 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(5)Incorporated by reference to Exhibit No. 4 to the registrant's
registration statement on Form S-3 (File No. 33-53136), filed with the
Securities and Exchange Commission.
(6)Incorporated by reference to Exhibit No. 10.2 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1997 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(7) Incorporated by reference to Exhibit 10.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended August 31, 2000 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(8)Incorporated by reference to Exhibit No. 10.4 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1997 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(9)Incorporated by reference to Exhibit No. 10.5 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1998 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(10)Incorporated by reference to Exhibit No. 10.6 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1997 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(11)Incorporated by reference to Exhibit No. 10.7 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1997 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(12)Incorporated by reference to Exhibit No. 10.4 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1990 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(13)Incorporated by reference to Exhibit 10.5 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1999 (Commission File No.
1-9610), filed with the Securities and Exchange Commission.
(14)Incorporated by reference to Exhibit No. 10.17 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(15)Incorporated by reference to Exhibit No. 4.3 to post-effective amendment
no. 1 on Form S-3 to the registrant's registration statement on Form S-1
(File No. 33-24747), filed with the Securities and Exchange Commission.
(16)Incorporated by reference to Exhibit No. 10.40 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1992
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(17)Incorporated by reference to Exhibit No. 28.1 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1990 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(18)Incorporated by reference to Exhibit No. 28.3 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(19)Incorporated by reference to Exhibit No. 28.4 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(20)Incorporated by reference to Exhibit No. 28.5 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(21)Incorporated by reference to Exhibit No. 10.5 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(22)Incorporated by reference to Exhibit No. 10.6 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(23)Incorporated by reference to Exhibit No. 10.7 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(24)Incorporated by reference to Exhibit No. 10.8 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1996 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(25)Incorporated by reference to Exhibit No. 10.36 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1998
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(26)Incorporated by reference to Exhibit No. 10.37 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1998
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(27)Incorporated by reference to Exhibit 10.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1999 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(28)Incorporated by reference to Exhibit No. 10.28 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(29) Incorporated by reference to Exhibit No. 10.29 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(30) Incorporated by reference to Exhibit No. 10.30 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(31) Incorporated by reference to Exhibit No. 10.31 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(32) Incorporated by reference to Exhibit No. 10.32 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(33) Incorporated by reference to Exhibit No. 10.33 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1999
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.