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[NOTIFY] 72731,737
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, 1995
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission file number 1-9610
CARNIVAL CORPORATION
(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
Class A Common Stock New York Stock
($.01 par value) Exchange, Inc.
4-1/2% Convertible New York Stock
Subordinated Notes due July 1, 1997 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 $2,893,000,000 based upon the closing market
price on January 17, 1996 of a share of Class A Common Stock on the New York
Stock Exchange as reported by the Wall Street Journal.
At January 17, 1996, the Registrant had outstanding 229,898,013 shares
of its Class A Common Stock, $.01 par value and 54,957,142 shares of its
Class B Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
The information described below and contained in the Registrant's 1995
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 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 andHolders.
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
The information described below and contained in the Registrant's 1996
definitive Proxy Statement, to be filed with the Commission is incorporated
by reference into this 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 and subsidiaries (the
"Company") is the world's largest multiple-night cruise company based on the
number of passengers carried and revenues generated. The Company offers a
broad range of cruise products, offering contemporary cruises through
Carnival Cruise Lines ("Carnival" - a division of Carnival Corporation),
premium cruises through Holland America Line and luxury cruises through
Windstar Cruises and the Company's joint venture, Seabourn Cruise Line. As
of January 1996, the ten Carnival ships have an aggregate capacity of 16,796*
passengers with itineraries in the Caribbean and Mexican Riviera. As of
January 1996, the seven Holland America Line ships have an aggregate capacity
of 8,795 passengers with itineraries in the Caribbean and Alaska and through
the Panama Canal, as well as other worldwide itineraries. The three Windstar
ships, as of January 1996, have an aggregate capacity of 444 passengers with
itineraries in the Caribbean, the South Pacific, and the Mediterranean.
During 1995, Seabourn Cruise Line operated two 204 passenger cruise ships
with itineraries in the Caribbean, the Baltic, the Mediterranean and the Far
East. In January 1996, Seabourn entered into an agreement to acquire a third
204 passenger ship which will begin operation during 1996. In April 1995,
the Company sold its 49% equity interest in Epirotiki Line, a Greek cruise
operator, for $25 million.
The Company has signed agreements with a Finnish shipyard providing for
the construction of three additional 2,040-berth SuperLiners for Carnival
with delivery now expected in February 1996, March 1998 and November 1998.
Two additional 2,640-berth cruise vessels are under contract for construction
for Carnival from an Italian shipyard now scheduled for delivery in September
1996 and December 1998. The Company also has agreements with the same
Italian shipyard for one 1,266-berth cruise ship and one 1,320-berth cruise
ship for Holland America Line with delivery expected in April 1996 and
September 1997, respectively. In December 1995, the Company entered into an
agreement to charter the 1,146 passenger Carnival cruise ship, Festivale, to
Dolphin Cruise Line effective April 28,1996.
The Company also operates a tour business: Holland America Westours.
Holland America Westours markets sight-seeing tours both separately and as
part of Holland America Line cruise/tour packages. Holland America Westours
operates 16 hotels in Alaska and the Canadian Yukon, three luxury day-boats
offering tours to the glaciers of Alaska and the Yukon River, over 290 motor
coaches used for sight-seeing and charters in the states of Washington and
Alaska and in the Canadian Rockies and ten private domed rail cars which are
run on the Alaskan railroad between Anchorage and Fairbanks.
The Company and Airtours Plc, a United Kingdom public company in the
tour business, have been in discussions with regard to future cooperation
which could lead to the Company acquiring a stake of less than 30 percent of
the equity of Airtours Plc through a purchase of newly issued shares and a
partial offer to all existing shareholders. No assurance can be given that
any agreement will be reached.
* In accordance with industry practice all capacities indicated within this
document are calculated based on two passengers per cabin even though some
cabins can accommodate three or four passengers.
B. Cruise Ship Segment
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 sight-seeing
destinations. According to Cruise Lines International Association ("CLIA"),
an industry trade group, approximately 500,000 North American passengers took
cruises in 1970 for three consecutive nights or more. CLIA estimates that
this number reached 4.5 million passengers in 1993, an average compound
annual growth rate of 10% since 1970. Also, according to CLIA, by the end of
1993 the number of ships in service totaled 139 with an aggregate capacity of
approximately 104,000 berths.
CLIA estimates that the number of passengers carried in North America
declined from 4.5 million in 1993 to 4.3 million in 1995. The Company
nevertheless has been able to increase the number of passengers it carried by
approximately 200,000 in each of the past two years. The number of berths in
the industry remained effectively flat totaling 105,000 berths on 126 ships
at the end of 1995. CLIA estimates that the number of cruise passengers
will grow to 4.7 million in 1996. CLIA also projects that by the end of
1996, North America will be served by 133 vessels having an aggregate
capacity of approximately 116,000 berths.
The following table sets forth the industry and Company growth over the
past five years based on passengers carried for at least three consecutive
nights:
NORTH AMERICAN COMPANY CRUISE
CRUISE PASSENGERS
YEAR PASSENGERS* CARRIED
(Calendar) (Fiscal)
1995 4,300,000(est) 1,543,000
1994 4,448,000 1,354,000
1993 4,480,000 1,154,000
1992 4,136,000 1,153,000
1991 3,979,000 1,100,000
- ------------------------------
*Source: CLIA.
- ------------------------------
From 1991 through 1995, the Company's average compound annual growth
rate in number of passengers carried was 8.8% versus the industry average of
2.0%.
The Company's passenger capacity has grown from 17,973 at November 30,
1991 to 26,035 at November 30, 1995. The delivery of the Statendam,
Sensation and Maasdam in 1993 increased capacity an additional 4,572 berths,
more than offsetting a decrease of 906 berths related to the sale of the
Mardi Gras. During 1994, net capacity increased by 2,369 berths due to the
delivery of the Fascination and Ryndam, net of the sale of the 937 berth
FiestaMarina. In 1995, with the delivery of the Imagination, capacity
increased 2,040 berths.
In spite of the cruise industry's growth since 1970, the Company
believes cruises represent only 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 at least one night's stay in a
hotel. Only an estimated 7% of the North American population has ever
cruised.
Cruise Ships and Itineraries
Under the Carnival Cruise Lines name, the Company operates ten ships
(collectively, the "Carnival Ships") which offer contemporary cruises. Nine
of the Carnival Ships were designed by and built for Carnival, including
eight SuperLiners which are among the largest in the cruise industry. The
tenth vessel, the Festivale, which was not built for Carnival, will be
chartered to Dolphin Cruise Line effective April 28, 1996. During 1995,
eight of the Carnival Ships operated in the Caribbean and two Carnival Ships
called on ports in the Mexican Riviera. During 1996 one of the Carnival
Ships, the Tropicale, will begin operating in Alaska during the summer season
and Carnival will also offer cruises through the Panama Canal and to the
Hawaiian Islands.
Through its subsidiary, HAL Antillen N.V. ("HAL"), the Company operates
ten cruise ships offering premium or luxury cruises. Seven of these ships,
the Rotterdam, the Nieuw Amsterdam, the Noordam, the Westerdam, the
Statendam, the Maasdam and the Ryndam are operated under the Holland America
Line name (the "HAL Ships"). The remaining three ships, the Wind Star, the
Wind Song and the Wind Spirit, are operated under the Windstar Cruises name
(the "Windstar Ships"). Six of the HAL Ships were designed by and built for
HAL. The three Windstar Ships were built for Windstar Sail Cruises, Ltd. (
"WSCL") between 1986 and 1988.
The HAL Ships offer premium cruises of various lengths, primarily in the
Caribbean, Alaska, Panama Canal, Europe, the Mediterranean, Hawaii, Mexico,
South Pacific, South America and the Orient. Cruise lengths vary from 3 to
98 days, with a large proportion being seven or ten days in length.
Periodically, the HAL Ships make longer grand cruises or operate on
short-term special itineraries. For example, in 1995, the Rotterdam made an
85-day world cruise, and a 34-day Grand South Pacific voyage. HAL will
continue to offer these special and longer itineraries in order to increase
travel opportunities for its customers and strengthen its cruise offerings in
view of the fleet expansion. The majority of the HAL Ships operate in the
Caribbean during fall to late spring and in Alaska during late spring to
early fall. The three Windstar Ships currently operate in the Caribbean, the
Mediterranean and the South Pacific.
The following table presents summary information concerning the
Company's ships. Areas of operation are based on 1995 itineraries and are
subject to change.
YEAR
FIRST IN GROSS LENGTH
PRIMARY
COMPANY PAX REGISTERED AND AREAS
OF
NAME REGISTRY BUILT SERVICE CAP* TONS WIDTH
OPERATION
Carnival Cruise Lines
Imagination Panama 1995 1995 2,040 70,367 855/104 Caribbean
Fascination Panama 1994 1994 2,040 70,367 855/104 Caribbean
Sensation Panama 1993 1993 2,040 70,367 855/104 Caribbean
Ecstasy Liberia 1991 1991 2,040 70,367 855/104 Caribbean
Fantasy Liberia 1990 1990 2,044 70,367 855/104 Bahamas
Celebration Liberia 1987 1987 1,486 47,262 738/92 Caribbean
Jubilee Panama 1986 1986 1,486 47,262 738/92 Mexican Riviera
Holiday Panama 1985 1985 1,452 46,052 727/92 Mexican Riviera
Tropicale Liberia 1982 1982 1,022 36,674 660/85 Caribbean
Festivale Bahamas 1961 1978 1,146 38,175 760/90 Caribbean
Total Carnival Ships Capacity.........16,796
Holland America Line
Ryndam Bahamas 1994 1994 1,266 55,451 720/101 Alaska,
Caribbean
Maasdam Bahamas 1993 1993 1,266 55,451 720/101 Europe,
Caribbean
Statendam Bahamas 1993 1993 1,266 55,451 720/101 Alaska,
Caribbean
Westerdam Bahamas 1986 1988 1,494 53,872 798/95 Canada,
Caribbean
Noordam Netherlands 1984 1984 1,214 33,930 704/89 Alaska,
Antilles("N.A.") Caribbean
Nieuw Amsterdam N.A. 1983 1983 1,214 33,930 704/89 Alaska,
Caribbean
Rotterdam N.A. 1959 1959 1,075 37,783 749/94 Alaska,
Hawaii
Total HAL Ships Capacity............. 8,795
Windstar Cruises
Wind Spirit Bahamas 1988 1988 148 5,736 440/52 Caribbean,
Mediterranean
Wind Song Bahamas 1987 1987 148 5,703 440/52 South Pacific
Wind Star Bahamas 1986 1986 148 5,703 440/52 Caribbean,
Mediterranean
Total Windstar Ships Capacity........ 444
Total Capacity..........................26,035
________________________________________
* In accordance with industry practice passenger capacity is calculated based
on two passengers per cabin even though some cabins can accommodate three or
four passengers.
Cruise Ship Constructions
The Company is currently constructing five cruise ships to be operated
under the Carnival name and two cruise ships to be operated under the Holland
America Line name. The following table presents summary information
concerning ships under construction:
LENGTH
EXPECTED PAX AND APPROXIMATE
VESSEL DELIVERY SHIPYARD CAP TONS WIDTH COST
(000's)
Carnival Cruise Lines
Inspiration February 1996 Masa-Yards 2,040 70,367 855/104 $ 270,000
Carnival Destiny September 1996 Fincantieri 2,640 101,000 886/116 400,000(1)
To Be Named February 1998 Masa-Yards 2,040 70,367 855/104 300,000
To Be Named November 1998 Masa-Yards 2,040 70,367 855/104 300,000
To Be Named December 1998 Fincantieri 2,640 101,000 886/116 415,000(1)
Total Carnival Ships Capacity 11,400 1,685,000
Holland America Line
Veendam April 1996 Fincantieri 1,266 55,451 720/101 225,000(1)
To Be Named September 1997 Fincantieri 1,320 62,000 780/106 235,000(1)
Total HAL Ships Capacity 2,586 460,000
Total 13,986 $2,145,000
(1) Contracts denominated in a foreign currency and have been fixed into U.S.
Dollars through the use of forward currency contracts.
Other Cruise Activities
The Company has a 50% equity interest in a joint venture company
("Seabourn") which in April 1992 acquired the cruise operations of K/S
Seabourn Cruise Line. The Company also has a subordinated secured ten-year
loan of $15 million to Seabourn. During 1995, Seabourn operated two
ultra-luxury ships, which have an aggregate capacity of 408 passengers and
have itineraries in the Caribbean, the Baltic, the Mediterranean and the Far
East. In January 1996, Seabourn entered into an agreement to acquire a third
ship with a capacity of 204 which will begin operation during 1996.
Cruise Tariffs
Unless otherwise noted herein, brochure prices include round trip
airfare from over 175 cities in the United States and Canada. If a
passenger chooses not to have the Company provide air transportation, the
ticket price is reduced. Brochure prices vary depending on size and location
of cabin, the time of year that the voyage takes place, and when the booking
is made. The cruise brochure price includes a wide variety of activities and
facilities, such as a fully equipped casino, nightclubs, theatrical shows,
movies, parties, a discotheque, a health club and swimming pools on each
ship. The brochure price also includes numerous dining opportunities daily.
Brochure pricing information below is per person based on double
occupancy:
AREA OF OPERATION CRUISE LENGTH PRICE RANGE
Carnival Cruise Lines
Caribbean 3-day $ 559--1,179
4-day 659--1,339
7-day 1,399--2,439
Mexico 3-day 559--1,179
4-day 659--1,339
7-day 1,399--2,439
Holland America Line (1)
Alaska 7-day $ 1,120--6,875
Caribbean 7-day 1,212--5,775
10-day 2,032--5,940
Europe 10- to 12-day 3,240--13,345
Panama Canal 10- to 22-day 2,185--14,840
Windstar Cruises (1)
Caribbean 7-day $ 2,995--3,195
Mediterranean 7- to 16-day 3,895--6,695
South Pacific 7-day 2,995--3,195
- -----------------------------------------------------
(1) Prices represent cruise only
- -----------------------------------------------------
Brochure prices are regularly discounted through the Company's early
booking discount program and other promotions.
On-Board and Other Revenues
The Company derives revenues from certain on-board activities and
services including casino gaming, liquor sales, gift shop sales, shore tours,
photography and promotional advertising by merchants located in ports of
call.
The casinos, which contain slot machines and gaming tables including
blackjack, 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. Certain onboard activities
are managed by independent concessionaires from which the Company collects a
percentage of revenues, while certain others are managed by the Company.
The Company receives additional revenue from the sale to its passengers
of shore excursions at each ship's ports of call. On the Carnival Ships,
such shore excursions are operated by independent tour operators and include
bus and taxi sight-seeing excursions, local boat and beach parties, and
nightclub and casino visits. On the HAL Ships, shore excursions are operated
by Holland America Westours and independent parties.
In conjunction with its cruise vacations on the Carnival Ships, the
Company sells pre- and post-cruise land packages. Such packages generally
include one, two or three-night vacations at locations such as Walt Disney
World in Orlando, Florida or resorts in the South Florida and the San Juan
Puerto Rico areas.
In conjunction with its cruise vacations on the HAL Ships, HAL sells
pre-cruise and post-cruise land packages which are more fully described
below. (See "Item 1. Business - Tour Segment")
Passengers
The following table sets forth the aggregate number of passengers carried
and percentage occupancy for the Company's ships for the periods indicated:
FISCAL YEAR ENDED NOVEMBER 30,
1995 1994 1993
Number of Passengers 1,543,000 1,354,000 1,154,000
Occupancy Percentage* 105.0% 104.0% 105.3%
- -----------------------------------------
*In accordance with industry practice, total capacity is calculated
based on two passengers per cabin even though some cabins can accommodate
three or four passengers. Occupancy percentages in excess of 100% indicate
that more than two passengers occupied some cabins.
- -----------------------------------------
The following table sets forth the actual occupancy percentage for all
cruises on the Company's ships during each quarter for the fiscal years ended
November 30, 1994 and November 30, 1995:
OCCUPANCY
QUARTER ENDING PERCENTAGE
February 28, 1994 100.2%
May 31, 1994 101.2
August 31, 1994 113.4
November 30, 1994 100.9
February 28, 1995 99.9
May 31, 1995 100.3
August 31, 1995 114.6
November 30, 1995 104.6
Sales and Marketing
The Company markets the Carnival Ships as the "Fun Ships " and uses the
themes "Carnival's Got the Fun " and "The Most Popular Cruise Line in the
World ", among others.
Carnival advertises nationally directly to consumers on network
television and through extensive print media featuring its spokesperson,
Kathie Lee Gifford. Carnival believes its advertising generates interest in
cruise vacations generally and results in a higher degree of consumer
awareness of the "Fun Ships " concept and the "Carnival " name.
Substantially all of Carnival's cruise bookings are made through travel
agents, which arrangement is encouraged as a matter of policy. In fiscal
1995, Carnival took reservations from about 29,000 of approximately 45,000
travel agencies in the United States and Canada. Travel agents receive a
standard commission of 10% (15% in the State of Florida), plus the potential
of an additional commission based on sales volume. Moreover, because cruise
vacations are substantially all-inclusive, sales of Carnival cruise vacations
yield a significantly higher commission to travel agents than selling air
tickets and hotel rooms. During fiscal 1995, no one travel agency accounted
for more than 2% of Carnival's revenues.
Carnival engages in substantial promotional efforts designed to motivate
and educate retail travel agents about its "Fun Ships " cruise vacations.
Carnival employs approximately 90 field sales representatives and 30 in-house
service representatives to motivate independent travel agents and promote its
cruises. Carnival believes it has the largest sales force in the industry.
To facilitate access and to simplify the reservation process, Carnival
employs approximately 360 reservation agents to take bookings from
independent travel agents. Carnival's fully-automated reservation system
allows its reservation agents to respond quickly to book cabins on its ships.
Carnival has a policy of pricing comparable cabins (based on size, location
and length of voyage) on its various ships at the same rate ("common
rating"). Such common rate includes round-trip airfare, which means that any
passenger can fly from any one of over 140 cities in the United States and
Canada to ports of embarkation for the same price. Through common rating,
Carnival is able to offer customers a wider variety of voyages for the same
price, which the Company believes improves occupancy on all its cruises.
However, discounts from brochure prices may vary depending upon the ship,
itinerary, time of year and demand for each cruise.
Carnival's cruises generally are substantially 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,
introduced several years ago, are designed to encourage potential passengers
to book cruise reservations earlier, which helps the Company to more
effectively manage yields (pricing and occupancy). Carnival's payment terms
require that a passenger pay approximately 15% of the cruise price within 7
days of the reservation date and the balance not later than 45 days before
the sailing date for 3- and 4-day cruises and 60 days before the sailing date
for 7-day cruises.
Carnival believes that its success is due in large part to its unique
product positioning within the industry. Carnival markets the Carnival Ship
cruises as vacation alternatives to land-based resorts and sight-seeing
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 Ships " experience, which includes a wide variety of shipboard
activities and entertainment, such as full-scale casinos and nightclubs, an
atmosphere of pampered service and unlimited food.
The Company's products are positioned to offer contemporary, premium and
luxury cruises. Luxury cruises typically will have per diems of $300 or
higher. Premium cruises typically last 7 to 14 days or more at per diems of
$250 or higher. Contemporary cruises typically are 7 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
cruises is attributable to its longstanding efforts to promote contemporary
cruise products.
The HAL and Windstar Ships offer premium and luxury cruises,
respectively. The Company believes that the hallmarks of the HAL experience
are beautiful ships and gracious attentive service. HAL communicates this
difference as "A Tradition of Excellence ", a reference to its long standing
reputation as a first class and grand cruise line.
Substantially all of HAL's bookings are made through travel agents,
which arrangement HAL encourages as a matter of policy. In fiscal 1995, HAL
took reservations from about 20,000 of approximately 45,000 travel agencies
in the U.S. and Canada. Travel agents receive a standard commission of
between 10% and 15%, depending on the specific cruise product sold, with the
potential for override commissions based upon sales volume. During 1995, no
one travel agency accounted for more than 1% of HAL's total revenue.
HAL has focused much of its sales effort at creating an excellent
relationship with the travel agency community. This is related to the HAL
marketing philosophy that travel agents have a large impact on the consumer
cruise selection process and will recommend HAL more often because of its
excellent reputation for service to both consumers and independent travel
agents. HAL solicits continuous feedback from consumers and the independent
travel agents making bookings with HAL to insure they are receiving excellent
service.
HAL's marketing communication strategy is primarily composed of
newspaper and magazine advertising, large scale brochure distribution and
direct mail solicitations to past passengers (referred to as "alumni") and
television. HAL engages in substantial promotional efforts designed to
motivate and educate retail travel agents about its products. HAL employs
approximately 50 field sales representatives, 15 teleaccount sales
representatives and 15 sales and service representatives to support the field
sales force. Carnival's approximately 90 field sales representatives also
promote HAL products. To facilitate access to HAL and to simplify the
reservation process for the HAL ships, HAL employs approximately 260
reservation agents to take bookings from travel agents. HAL's cruises
generally are booked several months in advance of the sailing date. The
Company also solicits current and former passengers of the Carnival Ships to
take future cruises on the HAL and Windstar Ships.
Windstar Cruises has its own marketing and reservations staff. Field
sales representatives for both HAL and Carnival act as field sales
representatives for Windstar. Marketing efforts are primarily devoted to a)
travel agent support and awareness, b) direct mail solicitation of past
passengers, and c) distribution of brochures.
Windstar's marketing efforts feature the distinctive nature of its
graceful, modern sail ships and the distinctive "casually elegant" experience
on "intimate itineraries" (apart from the normal cruise experience).
Windstar's philosophy is embodied in the phrase "180 degrees from ordinary".
Seasonality
The Company's revenue from the sale of passenger tickets for the
Carnival Ships is moderately seasonal. Historically, demand for Carnival
cruises has been greater during the periods from late December through April
and late June through August. Demand traditionally is lower during the
period from September through mid-December and during May. To allow for
full availability during peak periods, drydocking maintenance is usually
performed in September, October and early December. HAL cruise revenues are
more seasonal than Carnival's cruise revenues. Demand for HAL cruises is
strongest during the summer months when HAL ships operate in Alaska and
Europe and HAL obtains higher prices for these summer products. Demand for
HAL cruises is lower during the winter months when HAL ships sail in more
competitive markets.
Competition
Cruise lines compete for consumer disposable leisure time dollars with
other vacation alternatives such as land-based resort hotels and sight-seeing
destinations, and public demand for such activities is influenced by general
economic conditions.
Cruise ships operated by six other cruise lines offer year round
itineraries year round which are similar to those offered by the Carnival
Ships sailing from ports in Florida, California and Puerto Rico. Cruise
ships operated by an additional ten other cruise lines offer similar
itineraries from these ports on a seasonal basis. The HAL Ships are among
those which seasonally offer similar itineraries from these ports. Ships
operated by Royal Caribbean Cruise Line and Norwegian Cruise Line sail
regularly from Miami on itineraries quite similar to those of the Carnival
Ships. Ships operated by Royal Caribbean Cruise Line and Princess Cruises
embark from Los Angeles to the west coast of Mexico. Cruise lines such as
Norwegian Cruise Line, Royal Caribbean Cruise Line, Costa Cruise Lines,
Cunard and Princess Cruises offer voyages from San Juan to the Caribbean.
In Alaska, cruise ships operated by ten other cruise lines offer
itineraries similar to those offered by HAL. The largest of these cruise
lines in Princess Cruises.
In the Caribbean, cruise ships operated by 16 different cruise lines
offer itineraries similar to those offered by HAL. After Carnival, the
largest of these cruise lines are Princess Cruises, Royal Caribbean Cruise
Line, and Norwegian Cruise Line.
Governmental Regulation
The Ecstasy, Fantasy, Celebration and Tropicale are Liberian flagged
ships, the Festivale is a Bahamian flagged ship, and the balance of the
Carnival Ships are registered in Panama. The Ryndam, Maasdam, Statendam and
Westerdam are registered in the Bahamas, while the balance of the HAL Ships
are flagged in the Netherlands Antilles. The Windstar Ships are registered
in the Bahamas. The ships are subject to inspection by the United States
Coast Guard for compliance with the Convention for the Safety of Life at Sea
and by the United States Public Health Service for sanitary standards. The
Company is also regulated by the Federal Maritime Commission, which, among
other things, certifies ships on the basis of the ability of the Company to
meet obligations to passengers for refunds in case of non-performance. The
Company believes it is in compliance with all material regulations applicable
to its ships and has all licenses necessary to the conduct of its business.
In connection with a significant portion of its Alaska cruise operations, HAL
relies on a concession permit from the National Park Service to operate its
cruise ships in Glacier Bay National Park, which is periodically renewed.
There can be no assurance that the 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.
The International Maritime Organization has adopted safety standards as
part of the "Safety of Life at Sea" ("SOLAS") Convention, applicable
generally to all passenger ships carrying 36 or more passengers. Generally,
SOLAS imposes enhanced vessel structural requirements designed to improve
passenger safety. The SOLAS requirements are phased in through the year
2010. However, certain stringent SOLAS fire safety requirements must be
implemented by 1997. Only two of the Company's vessels, Carnival's
Festivale, and HAL's Rotterdam are expected to be significantly affected by
the SOLAS 1997 requirements. The decision regarding the additional SOLAS
related investments for these two ships is expected to be made during 1996.
Public Law 89-777 administered by the Federal Maritime Commission
("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, subject to a sliding scale. The FMC has proposed
elimination of the $15 million ceiling and revising the existing sliding
scale to require coverage for 110% of customer deposits up to $25 million and
additional coverage of either (i) 90% of amounts exceeding $25 million or
(ii) 75% of customer deposits in excess of $25 million and less than $50
million and 50% coverage of amounts in excess of $50 million. The FMC is
also considering elimination of the self-insurance provisions. The proposed
new regulations are viewed favorably by the Company and are not expected to
have a material effect on the Company. The FMC has received public comments
regarding the proposed regulations and may take final action at any time.
From time to time, various other regulatory and legislative changes have
been or may in the future be proposed that could have an effect on the cruise
industry in general.
Financial Information
For financial information about the Company's cruise ship segment with
respect to the three fiscal years ended November 30, 1995, see Note 10
"Segment Information" to the Company's Consolidated Financial Statements as
of November 30, 1995 in Exhibit 13 incorporated by reference into this
document.
C. Tour Segment
In addition to its cruise business, HAL markets sight-seeing tours
separately and as a part of cruise/tour packages under the Holland America
Westours name. Tour operations are based in Alaska, Washington State and
western Canada. Since a substantial portion of Holland America Westours'
business is derived from the sale of tour packages in Alaska during the
summer tour season, tour operations are highly seasonal.
Holland America Westours
Holland America Line-Westours Inc. ("Holland America Westours") is a
wholly-owned subsidiary of HAL. The group of subsidiaries which together
comprise the tour operations perform three independent yet interrelated
functions. During 1995, as part of an integrated travel program to
destinations in Alaska and the Canadian Rockies, the tour service group
offered 51 different tour programs varying in length from 7 to 19 days. The
transportation group and hotel group support the tour service group by
supplying facilities needed to conduct tours. Facilities include dayboats,
motor coaches, rail cars and hotels.
Three luxury dayboats perform an important role in the integrated Alaska
travel program offering tours to the glaciers and fjords of Alaska and the
Yukon River. The Fairweather cruises the Lynn Canal in Southeast Alaska, the
Yukon Queen cruises the Yukon River between Dawson City, Yukon Territory and
Eagle, Alaska and the Ptarmigan operates on Portage Lake in Alaska. The
three dayboats have a combined capacity of 489 passengers.
A fleet of over 290 motor coaches using the trade name Gray Line operate
in Alaska, Washington and western Canada. These motor coaches are used for
extended trips, city sight-seeing tours and charter hire. HAL conducts its
tours both as part of a cruise/tour package and as individual sight-seeing
products sold under the Gray Line name. In addition, HAL operates express
Gray Line motor coach service between downtown Seattle and the Seattle-Tacoma
International Airport.
Ten 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, HAL owns or leases motor coach
maintenance shops in Seattle, and at Juneau, Fairbanks, Anchorage, Skagway
and Ketchikan in Alaska. HAL also owns or leases service offices at
Anchorage, Fairbanks, Juneau, Ketchikan and Skagway in Alaska, at Whitehorse
in the Yukon Territory, in Seattle and at Vancouver in British Columbia.
Certain real property facilities on federal land are used in HAL's tour
operations pursuant to permits from the applicable federal agencies.
Westmark Hotels
HAL owns and/or operates 16 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 12
hotels, all located throughout Alaska, provide a total of 1,649 rooms,
bringing the total number of hotel rooms to 2,234.
The hotels play an important role in HAL's tour program 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. HAL hotels
include dining, lounge and conference or meeting room facilities. Certain
hotels have gift shops and other tourist services on the premises.
The hotels are summarized in the following table:
OPEN DURING
HOTEL NAME LOCATION ROOMS 1995 SEASON
Alaska Hotels:
Westmark Anchorage Anchorage 198 year-round
Westmark Inn Anchorage 90 seasonal
Westmark Inn Fairbanks 173 seasonal
Westmark Fairbanks Fairbanks 238 year-round
Westmark Juneau Juneau 105 year-round
The Baranof Juneau 193 year-round
Westmark Cape Fox Ketchikan 72 year-round
Westmark Kodiak Kodiak 81 year-round
Westmark Shee Atika Sitka 101 year-round
Westmark Inn Skagway Skagway 209 seasonal
Westmark Tok Tok 92 seasonal
Westmark Valdez Valdez 97 year-round
Canadian Hotels (Yukon Territory):
Westmark Inn Beaver Creek 174 seasonal
Westmark Klondike Inn Whitehorse 99 seasonal
Westmark Whitehorse Whitehorse 181 year-round
Westmark Inn Dawson 131 seasonal
Thirteen of the hotels are owned by a HAL subsidiary. The remaining
three hotels, Westmark Anchorage, Westmark Cape Fox and Westmark Shee Atika
are operated under arrangements involving third parties such as management
agreements and leases.
For the hotels that operate year-round, the occupancy percentage for
1995 was 58.9%, and for the hotels that operate only during the summer
months, the occupancy percentage for 1995 was 76.7%.
Seasonality
The Company's tour revenues are extremely seasonal with a large majority
generated during the late spring and summer months in connection with the
Alaska cruise season. Holland America Westours' tours are conducted in
Washington, Alaska and the Canadian Rockies. The Alaska and Canadian Rockies
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, HAL seeks to maximize its motor coach charter activity such as operating
charter tours to ski resorts in Washington and Canada.
Sales and Marketing
HAL tours are marketed both separately and as part of cruise-tour
packages. Although most HAL cruise-tours include a HAL cruise as the cruise
segment, other cruise lines also market HAL tours as a part of their cruise
tour packages and sight-seeing excursions. Tours sold separately are
marketed through independent travel agents and also directly by HAL,
utilizing sales desks in major hotels. General marketing for the hotels is
done through various media in Alaska, Canada and the continental United
States. Travel agents, particularly in Alaska, are solicited, and displays
are used in airports in Seattle, Washington, Portland, Oregon and various
Alaskan cities. Rates at Westmark Hotels are on the upper end of the scale
for hotels in Alaska and the Canadian Yukon.
Concessions
Certain tours in Alaska are conducted on federal property requiring
concession permits from the applicable federal agencies such as the National
Park Service or the United States Forest Service.
Competition
Holland America Westours competes with independent tour operators and
motor coach charter operators in Washington, Alaska and the Canadian Rockies.
The primary competitors in Alaska are Princess Tours (which owns
approximately 130 motor coaches and three hotels) and Alaska
Sightseeing/Trav-Alaska (which owns approximately 43 motor coaches). The
primary competitor in Washington is Gazelle (with approximately 18 motor
coaches). The primary competitors in the Canadian Rockies are Tauck Tours,
Princess Tours and Brewster Transportation.
Westmark Hotels compete with various hotels throughout Alaska, including
the Super 8 national motel chain, many of which charge prices below those
charged by HAL. Dining facilities in the hotels also compete with the many
restaurants in the same geographic areas.
Government Regulation
HAL's 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 Transportation
Commission. Certain of HAL's tours involve federal properties and are
subject to regulation by various federal agencies such as the National Park
Service, the Federal Maritime Administration and the U.S. Forest Service.
In connection with the operation of its beverage facilities in the
Westmark Hotels, HAL 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, HAL is required to comply with
applicable building and fire codes. Changes in these codes have in the past
and may in the future, require substantial capital expenditures to insure
continuing compliance such as the installation of sprinkler systems.
Financial Information
For financial information about the Company's tour segment with respect
to the three fiscal years ended November 30, 1995, see Note 10 "Segment
Information" to the Company's Consolidated Financial Statements as of
November 30, 1995 in Exhibit 13 incorporated by reference into this document.
D. Employees
The Company's Carnival operations have approximately 1,300 full-time and
250 part-time employees engaged in shoreside operations. Carnival also
employs approximately 360 officers and approximately 7,200 crew and staff on
the Carnival Ships.
The Company's HAL operations have approximately 2,900 employees engaged
in shoreside, tour and hotel operations, of which approximately 1,500
employees hold part-time/seasonal positions. HAL also employs approximately
220 officers and approximately 3,300 crew and staff on the HAL Ships and
Windstar Ships. Due to the seasonality of its Alaska and Canadian
operations, HAL tends to increase its work force during the summer months,
employing significant additional full-time and part-time personnel. HAL has
entered into agreements with unions covering employees in certain of its
hotels and certain of its tour and ship employees.
The Company considers its employee relations generally to be good.
E. Suppliers
The Company's largest purchases are for airfare, advertising, fuel, food
and related items, hotel supplies and products related to passenger
accommodation. Although the Company chooses to use a limited number of
suppliers for most of its food and fuel purchases, most of the necessary
supplies are available from numerous sources at competitive prices. The use
of a limited number of suppliers enables the Company to obtain volume
discounts.
F. Insurance
The Company maintains insurance covering legal liabilities related to
crew, passengers and other third parties on the Carnival Ships and the HAL
Ships in operation through The Standard Steamship Owners Protection &
Indemnity Association (Bermuda) Limited (the "SSOPIA") and the Steamship
Mutual Underwriting Association Ltd. (the "SMUAL"). The amount and terms of
these insurances are governed by the rules of the foregoing associations.
The Company currently maintains insurance on the hull and machinery of
each vessel in amounts equal to the approximate market value of each vessel.
The Company maintains war risk insurance on each vessel which includes legal
liability to crew and passengers including terrorist risks for which coverage
would be excluded from SSOPIA or SMUAL. The coverage for hull and machinery
and war risks is effected with international markets, including underwriters
at Lloyds. The Company, as required by the FMC, maintains at all times two
$15 million performance bonds for the Carnival Ships, and the HAL and
Windstar Ships, respectively, to cover passenger ticket liabilities in the
event of a canceled or interrupted cruise. See "CRUISE SHIP SEGMENT -
Government Regulation" for a discussion of changes to the performance bond
requirements proposed by the FMC.
The Company maintains certain levels of self insurance for liabilities
and hull and machinery through the use of substantial deductibles. Such
deductibles may be increased in the future. The Company does not carry
coverage related to loss of earnings or revenues for its cruise operations.
The Company also maintains various insurance policies to protect the
assets, earnings and liabilities arising from the operation of HAL Westours.
Item 2. Properties
The Company's cruise ships are described in Section B of Item 1 under
the heading "Cruise Ship Segment". The properties associated with HAL's tour
operations are described in Section C of Item 1 under the heading "Tour
Segment".
Carnival's shoreside operations and corporate headquarters are located
at 3655 N.W. 87th Avenue, Miami, Florida, and consists of approximately
231,000 square feet of office space which the Company purchased in December
1994. In order to provide space for the future growth of Carnival and to
consolidate existing personnel, approximately 225,000 square feet of office
space is being constructed next to the existing facility with an estimated
completion date of July 1996. Carnival is also leasing approximately 60,000
square feet of office space at 5225 N.W. 87th Avenue, Miami, Florida until
the new facility is completed.
HAL headquarters are at 300 Elliott Avenue West in Seattle, Washington
in leased space in an office building. The lease is for approximately
120,000 square feet.
Item 3. Legal Proceedings
A purported class action suit was filed against the Company on September
19, 1995 and was subsequently dismissed by the court on jurisdictional
grounds on December 15,1995. The suit alleged that the Company had violated
the Florida Deceptive and Unfair Trade Practices Act by overcharging
passengers for port charges. The plaintiffs refiled their suit in the same
court on December 27, 1995 and modified the complaint to add various federal
law claims and a state fraud claim. The suit seeks declaratory relief to
enjoin the Company from further alleged overcharges and seeks compensatory
and punitive damages in an unspecified amount. The action is presently in
its early stages and it is not possible at this time to determine the outcome
of the litigation. Management of the Company intends to vigorously defend
the lawsuit.
The United States Attorney for the District of Alaska has commenced an
investigation to determine if a Holland America Line vessel discharged bilge
water, alleged to have contained oil or oily mixtures, at various locations
allegedly within United States territorial waters at various times during the
summer and early fall of 1994. It is unknown whether any proceedings will be
initiated and, if so, what violations will be alleged. To date, no penalties
have been sought or imposed. Management does not believe that the amount of
potential penalties will have a material impact on the Company.
During 1995, the Company received $40 million in cash and other
compensation from the settlement of litigation with Metra Oy, the former
parent company of Wartsila Marine Industries ("Wartsila"), related to losses
suffered in connection with the construction of three of the Company's cruise
ships. Of the $40 million, $6.2 million was used to pay related legal fees,
$14.4 million was recorded as other income and $19.4 million was used to
reduce the Company's cost basis of certain ships. The Company is continuing
to pursue claims in the bankruptcy proceedings in Finland to recover damages
suffered in connection with the construction of the three ships.
The Company is routinely involved in liability and other claims typical
of the cruise ship, hotel and tour businesses. After the application of
deductibles, a substantial portion of these claims are fully covered by
insurance. The Company is also involved from time to time in commercial,
regulatory and employment related disputes and claims. In the opinion of
management, such claims, if decided adversely, individually or in the
aggregate, would not have a material adverse effect upon the Company's
financial condition or results of operations.
Item 4. Submission of Matters to a Vote or 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 1 of this report.
The following table sets forth the name, age and title of each executive
officer. Titles listed relate to positions within Carnival Corporation
unless otherwise noted.
NAME AGE POSITION
Micky Arison 46 Chairman of the Board and Chief
Executive Officer
Gerald R. Cahill 44 Vice President--Finance
Robert H. Dickinson 53 President and Chief Operating Officer
of Carnival and Director
Howard S. Frank 54 Vice-Chairman, Chief Financial Officer
and Director
A. Kirk Lanterman 64 President and Chief Executive Officer of
Holland America Line-Westours Inc. and
Director
Lowell Zemnick 52 Vice President and Treasurer
Meshulam Zonis 62 Senior Vice President--Operations of
Carnival and Director
Business Experience of Officers
Micky Arison, age 46, has been Chief Executive Officer since 1979 and
Chairman of the Board 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. He is the son of Ted Arison,
Carnival Corporation's founder. He served on the Board of Directors of
Ensign Bank, FSB until August 30, 1990. On that date, the Office of Thrift
Supervision appointed the Resolution Trust Corporation receiver of Ensign
Bank.
Gerald R. Cahill, age 44, is a Certified Public Accountant and has been
Vice President-Finance since September 1994. Mr. Cahill 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 Price Waterhouse LLP.
Robert H. Dickinson, age 53, 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.
Howard S. Frank, age 54, has been Vice-Chairman of the Board since
October 1993 and has been Chief Financial Officer and Chief Accounting
Officer since July 1, 1989 and a Director since 1992. From July 1989 to
October 1993 he was Senior Vice President-Finance. From July 1975 through
June 1989, he was a partner with Price Waterhouse LLP.
A. Kirk Lanterman, age 64, is a Certified Public Accountant and has been
President and Chief Executive Officer of Holland America Line-Westours Inc.
since January 1989 and a Director since 1992. From 1983 to January 1989, he
was President and Chief Operating Officer of Holland America Line-Westours
Inc. From 1979 to 1983, he was President of Westours which merged in 1983
with Holland America Line.
Lowell Zemnick, age 52, is a Certified Public Accountant and has been
Vice President since 1980 and Treasurer since September 1990. Mr. Zemnick
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.
Meshulam Zonis, age 62, has been Senior Vice President--Operations of
Carnival since 1979. He has also been a director since June 1987. From 1974
through 1979, Mr. Zonis was Vice President--Operations of Carnival.
PART II
Item 5.Market for the Registrant's Common Equity and Related
Stockholders 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
Any dividend declared by the Board of Directors on the Company's Common
Stock will be paid concurrently at the same rate on the Class A Common Stock
and the Class B Common Stock. For its Class A Common Stock and Class B
Common Stock (collectively, the "Common Stock"), the Company declared cash
dividends of $.07 per share in each of the first three quarters of fiscal
1994, $.075 in the fourth quarter of fiscal 1994 and in the first three
quarters of fiscal 1995, and $.09 in the fourth quarter of fiscal 1995 and
first quarter of fiscal 1996. Payment of future quarterly dividends on the
Common Stock will depend, among other factors, upon the Company's earnings,
financial condition and capital requirements and certain tax considerations
of certain members of the Arison family and trusts for the benefit of Mr. Ted
Arison's children (the "Principal Shareholders"), some of whom are required
to include a portion of the Company's earnings in their taxable income,
whether or not the earnings are distributed (see "D. Taxation of the
Company"). The Company may also declare special dividends to all
stockholders in the event that the Principal Shareholders are required to pay
additional income taxes by reason of their ownership of the Common Stock,
either because of an income tax audit of the Company or the Principal
Shareholders or because of certain actions by the Company (such as a failure
by the Company to maintain its investment in shipping assets at a certain
level) that would trigger adverse tax consequences to the Principal
Shareholders under the special tax rules applicable to them.
While no tax treaty currently exists between the Republic of Panama and
the United States, under current law the Company believes that distributions
to its shareholders are not subject to taxation under the laws of the
Republic of Panama. Dividends paid by the Company will be taxable as
ordinary income for United States Federal income tax purposes to the extent
of the Company's current or accumulated earnings and profits, but generally
will not qualify for any dividends-received deduction.
Certain loan documents entered into by certain of HAL's subsidiaries
restrict the level of dividend payments by HAL's subsidiaries to HAL.
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. If the law regarding the taxation of
the Company's income to the Principal Shareholders were to change so that the
amount of tax payable by the Principal Shareholders were increased or
reduced, the amount of dividends paid by the Company might be more or less
than is currently contemplated.
D. Taxation of the Company
The following discussion summarizes the expected United States Federal
income taxation of the Company's current operations. State and local taxes
are not discussed. The discussion is based upon currently existing
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
existing and proposed regulations thereunder and current administrative
rulings and court decisions. All of the foregoing are subject to change and
any such change could affect the continuing validity of this discussion. In
connection with the foregoing, investors should be aware that the Tax Reform
Act of 1986 (hereinafter, the "1986 Tax Act") changed significantly the
United States Federal income tax rules applicable to the Company and certain
holders of its stock (including the Principal U.S. Shareholders). Although
the relevant provisions of the 1986 Tax Act are discussed herein, they have
not yet been the subject of extensive administrative or judicial
interpretation.
United States
Carnival Corporation is a Panamanian corporation, and its material
subsidiaries (other than subsidiaries engaged in the bus, hotel and tour
business of Holland America Line) are Panamanian, Liberian, Netherlands
Antilles, British Virgin Islands, and Bahamian corporations. Accordingly,
the Company's income from sources outside of the United States ("foreign
source income") generally is not subject to United States tax. Moreover, the
Company anticipates that, under current law, all or virtually all of its
income from sources within the United States ("United States Source Income")
that constitutes Shipping Income (as defined below) will be exempt from
United States corporate income taxation for as long as Carnival Corporation
and its subsidiaries meet the requirements of Section 883 of the Code.
Section 883 of the Code provides that income of a foreign corporation derived
from the international operation, or from the rental on a full or bareboat
basis, of ships ("Shipping Income") is exempt from United States taxation if
(1) the foreign country in which the foreign corporation is organized grants
an equivalent exemption to citizens of the United States and to corporations
organized in the United States (an "equivalent exemption jurisdiction") and
(2) the foreign corporation is a controlled foreign corporation ("CFC") as
defined in Section 957(a) of the Code (the "CFC Test"). The Company believes
that substantially all of its United States Source Income other than Holland
America Line's income from its bus, hotel and tour operations, currently
qualifies as Shipping Income, and that Panama, the Netherlands Antilles, the
British Virgin Islands, the Bahamas, and Liberia are equivalent exemption
jurisdictions. (Holland America Line's income from its hotel and tour
operations, is not Shipping Income, and, accordingly, is subject to United
States corporate income tax). If, however, Panamanian, Netherlands Antilles,
British Virgin Islands, Bahamian or Liberian law were to change adversely,
the Company would consider taking appropriate steps (including
reincorporating in another jurisdiction) so as to remain eligible for the
exemption from United States Federal income tax provided by Section 883 of
the Code.
A foreign corporation is a CFC when stock representing more than 50% of
such corporation's voting power or equity value is owned (or considered as
owned) on any day of its fiscal year by United States persons who each own
(or are considered as owning) stock representing 10% or more of the
corporation's voting power ("Ten Percent Shareholders"). Stock of the
Company representing more than 50% of the total combined voting power of all
classes of stock is owned by the Micky Arison 1994 "B" Trust (the "B
Trust"),which is a "United States Person", and thus the Company meets the
definition of a CFC. The B Trust is a U.S. trust whose primary beneficiary
is Micky Arison, the Company's Chairman of the Board. Accordingly, at the
corporate level, the Company expects that virtually all of its income (with
the exception of its United States source income from the operation of
transportation, hotel and tour business of HAL) will remain exempt from
United States Income taxes. The B Trust has entered into an agreement with
the Company that is designed to ensure, except under certain limited
circumstances, that stock possessing more than 50% of the Company's voting
power will be held by Ten Percent Shareholders until at least July 1, 1997.
Because the Company is a CFC, a pro rata share of the shipping earnings of
the Company, as well as certain other amounts, is includable in the taxable
income of any "Ten Percent Shareholder", as defined above.
A substantial portion of the Company's income will, as discussed below,
be treated as United States Source Income. If the Company were to fail to
meet the requirements of Section 883 of the Code with respect to any of its
United States Source Income (or if Section 883 of the Code were repealed),
some or all of the Company's Shipping Income that is United States Source
Income would become subject to a significant United States tax burden. Any
such United States Source Income that is considered to be "effectively
connected" with the conduct of a United States trade or business would be
subject not only to general United States Federal corporate income tax, but
also to a 30% "branch level" tax on effectively connected earnings and
profits (generally, adjusted taxable income reduced by taxes and adjusted for
the amount of the Company's earnings treated as reinvested in the Company's
United States business). Any such United States Source Income that is not
considered to be effectively connected with a United States trade or business
will instead be subject to a 4% tax on United States source gross
transportation income (or, possibly, to a 30% tax if any such income were
considered to be 100% United States Source Income under the rules described
below, which, as discussed below, the Company does not believe to be the case
with respect to any significant portion of its Shipping Income). The Company
believes that at least a significant portion of its United States Source
Income would probably be considered to be effectively connected with a United
States trade or business for this purpose.
Under amendments to the Code enacted as part of the 1986 Tax Act, the
Company's United States Source Income will include 50% of all transportation
income (including income derived from, or in connection with, the use or
hiring, or leasing for use of a cruise ship, or the performance of services
directly related to such use) attributable to transportation that begins or
ends in the United States, and 100% of such transportation income with
respect to transportation which begins and ends in the United States. The
legislative history of these rules suggests that a cruise which begins and
ends in United States ports, but which calls on one or more foreign ports
(including ports in possessions of the United States), will be treated as
transportation that begins or ends in the United States, rather than as
transportation that begins and ends in the United States, thus resulting in
no more (and, with respect to a cruise that calls on more than one foreign
port, possibly less) than 50% United States Source Income. There are,
however, no regulations or other authoritative interpretations of these new
rules, and, accordingly, the matter is not entirely free from doubt.
Under a provision of the Technical and Miscellaneous Revenue Act of
1988, Section 883 of the Code applies only to income derived from the
international operation of ships. The legislative history of that provision
indicates that Section 883 of the Code does not apply to Shipping Income that
is treated as 100% United States Source Income under the source of income
rules discussed in the preceding paragraph since it does not constitute
income from the international operation of a ship because it results from
transportation that is considered to begin and end in the United States;
accordingly, any such income may well be subject to United States corporate
tax unless another exception was applicable. As discussed in the preceding
paragraph, although the matter is not entirely free from doubt, the Company
does not believe that any significant portion of its Shipping Income from its
current operations is 100% United States Source Income under the applicable
provisions of the Code. Accordingly, the Company does not believe that the
1988 legislation significantly increases its United States corporate tax with
respect to its current operations.
Other Jurisdictions
The Company anticipates that its income will not be subject to
significant taxation under the laws of the Republic of Panama, Liberia, the
Netherlands Antilles, the British Virgin Islands or the Bahamas.
Item 6. Selected Financial Data
The information required by Item 6, selected financial data for the five
years ended November 30, 1995, 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 Operation, 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 Price
Waterhouse LLP dated January 18, 1996, is shown in Exhibit 13 and is hereby
incorporated by reference into this Annual Report on Form 10-K.
Item 9. Disagreements 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 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 has been included in Part I of this
report.
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 report and such Exhibit Index is
hereby incorporated herein by reference.
(b) No reports on Form 8-K were filed during the three months ended
November 30, 1995.
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 22nd day of January 1996.
CARNIVAL CORPORATION
By /s/ Micky Arison
Micky Arison
Chairman of the Board 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, Chief January 22, 1996
Micky Arison Executive Officer and Director
/s/ Howard S. Frank Vice-Chairman, Chief Financial January 22, 1996
Howard S. Frank and Accounting Officer and Director
/s/Maks L. Birnbach Director January 21, 1996
Maks L. Birnbach
/s/ Richard G. Capen Director January 23, 1996
Richard G. Capen, Jr.
/s/ Robert H. Dickinson Director January 22, 1996
Robert H. Dickinson
____________________ Director January__, 1996
Shari Arison Dorsman
/s/ James Dubin Director January 22, 1996
James Dubin
/s/ A. Kirk Lanterman Director January 22, 1996
A. Kirk Lanterman
/s/ Modesto Maidique Director January 23, 1996
Modesto Maidique
____________________ Director January__, 1996
William S. Ruben
____________________ Director January__, 1996
Stuart Subotnick
/s/Sherwood M. Weiser Director January 22, 1996
Sherwood M. Weiser
/s/ Meshulam Zonis Director January 22, 1996
Meshulam Zonis
/s/Uzi Zucker Director January 22, 1996
Uzi Zucker
/TABLE
INDEX TO EXHIBITS
Page No. in
Sequential
Numbering
System
Exhibits
3.1-Form of Amended and Restated Articles of Incorporation of the
Company.(1)
3.2-Form of By-laws of the Company.(2)
4.1-Revolving Credit Agreement dated July 1, 1993 between the Company and
Citibank N.A. and certain banks named therein as Amended and Restated as of
December 5, 1995.
4.2-Revolving Credit Agreement dated as of December 5, 1995 between the
Company and Citibank N.A. and certain banks named therein.
4.3-Indenture entered into by the Registrant and First Trust National
Association, as Trustee, relating to the 4-1/2% Convertible Subordinated
Notes Due July 1, 1997 and the Form of Notes.(3)
4.4-Form of Indenture dated as of 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.(4)
4.5-Second Amended and Restated Shareholder Agreement dated September 26,
1994 by and among Carnival Corporation, Ted Arison, TAMMS Investment Company,
The Ted Arison Family Holding Trust No. 4, The Micky Arison "B" Trust, and
T.A. Limited. (5)
4.6-Letter Agreement dated July 11, 1989 between the Company and the Ted
Arison Irrevocable Trust.(6)
4.7-Agreement of the Company dated January 24, 1996 to furnish certain debt
instruments to the Securities and Exchange Commission.
10.1-Carnival Cruise Lines, Inc. Stock Option Plan.(7)
10.2-Carnival Cruise Lines, Inc. Restricted Stock Plan.(8)
10.3-Carnival Cruise Lines, Inc. Retirement Plan.(9)
10.4-Carnival Cruise Lines, Inc. Non-Qualified Retirement Plan.(10)
10.5-Carnival Cruise Lines, Inc. Key Management Incentive Plan.(11)
10.6-1993 Outside Directors' Stock Option Plan.(12)
10.7-1993 Carnival Cruise Lines, Inc. Restricted Stock Plan.(13)
10.8-Holland America Line-Westours Inc. 1994-1996 Key Management Incentive
Plan.
10.9-Amended and Restated Carnival Corporation 1992 Stock Option Plan.(14)
10.10-1994 Carnival Cruise Line Key Management Incentive Plan.(15)
10.11-Form of Deferred Compensation Agreement between the Company and each of
Harvey Levinson, Meshulam Zonis and Robert H. Dickinson.(16)
10.12-Stock Compensation Agreement dated February 1, 1991, between the
Company and Robert H. Dickinson.(17)
10.13-Consulting and Retirement Agreement between A. Kirk Lanterman and
Holland America Line-Westours, Inc.(18)
10.14-Consulting Agreement/Registration Rights Agreement dated June 14, 1991,
between the Company and Ted Arison.(19)
10.15-Indemnity Agreement between the Company and Ted Arison.(20)
10.16-First Amendment to Consulting Agreement/Registration Rights
Agreement.(21)
10.17-Consulting Agreement dated July 31, 1992, between the Company and
Arison Investments Ltd.(22)
10.18-Assignment and Assumption Agreement dated March 20, 1995 among Ted
Arison, Cititrust (Jersey) Limited, Royal Bank of Scotland Trust Company
(Jersey) Limited and the Company.
10.19-Shipbuilding Agreement dated January 12, 1993 between Futura Cruises,
Inc. and Fincantieri - Cantieri Navali Italiani S.p.A.*(23)
10.20-Shipbuilding Agreement dated December 23, 1993 between Kvaerner
Masa-Yards, Inc. and the Company.*(24)
10.21-Shipbuilding Agreement dated December 10, 1993 between Wind Surf
Limited and Fincantieri-Cantieri Navali Italiani S.p.A.*(25)
10.22-Shipbuilding Agreement dated January 14, 1995 between Utopia Cruises,
Inc. and Fincantieri-Cantieri Navali Italiani S.p.A.*(26)
10.23-Shipbuilding Agreement dated January 14, 1995 between Wind Surf Limited
and Fincantieri-Cantieri Navali Italiani S.p.A.*(27)
10.24-Shipbuilding Agreement dated December 7, 1994 between Carnival
Corporation and Kvaerner Masa-Yards, Inc.*(28)
10.25-Shipbuilding Agreement dated January 12, 1995 between Carnival
Corporation and Kvaerner Masa-Yards, Inc.*(29)
10.26-Shipbuilding Agreement dated March 25, 1992 between Carnival
Corporation and Kvaerner Masa-Yards, Inc.*(30)
10.27-Organization agreement dated February 25, 1994 between the Company and
the principals of The Continental Companies.(31)
10.28-Stock Purchase Agreement between Carnival Corporation and CHC
International.(32)
10.29-Stock Purchase Agreement between Carnival Corporation, Sherwood Weiser
and others.(33)
11.0-Statement regarding computation of per share earnings.
12.0-Ratio of Earnings to Fixed Charges
13.0-Portions of 1995 Annual Report incorporated by reference into 1995
Annual Report on Form 10-K
21-Subsidiaries of the Company.(34)
23.0-Consent of Price Waterhouse
27.0-Financial Data Schedule (for SEC use only)
28.1-Maks L. Birnbach Director's Agreement.(35)
28.2-William S. Ruben Director's Agreement.(36)
28.3-Stuart Subotnick Director's Agreement.(37)
28.4-Sherwood M. Weiser Director's Agreement.(38)
28.5-Uzi Zucker Director's Agreement.(39)
* Portions of documents omitted pursuant to an order for confidential
treatment pursuant to Rule 24b-2 under the Securities Act of 1934, as
amended.
Sequential
Numbering
System
Exhibits
(1)Incorporated by reference to Exhibit No. 4.1 to the registrant's
Quarterly Report on Form 10-Q for the Quarter Ended February 28, 1995 (File
No. 1-9610), filed with the Securities and Exchange Commission.
(2)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.
(3)Incorporated by reference to Exhibit No. 4(a) and Exhibit No. 4(b) to the
registrant's Report on Form 8-K as filed with the Securities and Exchange
Commission on July 6, 1992.
(4)Incorporated by reference to Exhibit No. 4 on Form S-3 to the registrant's
registration statement on Form S-3 (File No. 33-53136), filed with the
Securities and Exchange Commission.
(5)Incorporated by reference to Exhibit 4.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended August 31, 1994 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(6)Incorporated by reference to Exhibit No. 4.10 to the registrant's
registration statement on Form S-1 (File No. 33-31795), filed with the
Securities and Exchange Commission.
(7)Incorporated by reference to Exhibit No. 10.1 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(8)Incorporated by reference to Exhibit No. 10.2 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(9)Incorporated by reference to Exhibit No. 10.3 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.
(10)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.
(11)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, 1993 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(12)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, 1993 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(13)Incorporated by reference to Exhibit No. 10.41 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.
(14)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, 1994
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(15)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, 1994
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(16)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.
(17)Incorporated by reference to Exhibit No. 10.43 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1991 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(18)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, 1994
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(19)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.
(20)Incorporated by reference to Exhibit No. 10.18 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. 10.40 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.
(22)Incorporated by reference to Exhibit No. 10.39 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.
(23)Incorporated by reference to Exhibit No. 10.42 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.
(24)Incorporated by reference to Exhibit No. 10.39 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1993 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(25)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, 1993 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(26)Incorporated by reference to Exhibit No. 10.23 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1994
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(27)Incorporated by reference to Exhibit No. 10.24 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1994
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(28)Incorporated by reference to Exhibit No. 10.25 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1994
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(29)Incorporated by reference to Exhibit No. 10.26 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1994
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(30)Incorporated by reference to Exhibit No. 10.27 to the registrant's
Annual Report on Form 10-K for the fiscal year ended November 30, 1994
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(31)Incorporated by reference to Exhibit 10.1 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1994 (Commission File
No. 1-9610), filed with the Securities and Exchange Commission.
(32)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, 1994
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(33)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, 1994
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(34)Incorporated by reference to Exhibit No. 21 to the registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1994 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(35)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.
(36)Incorporated by reference to Exhibit No. 28.2 to the registrant's
registration statement on Form S-1 (File No. 33-14844), filed with the
Securities and Exchange Commission.
(37)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.
(38)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.
(39)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.