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, 1997
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.
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. [ X ].
The aggregate market value of the voting stock held by non-affiliates
of the Registrant is approximately $8,841,000,000 based upon the closing
market price on February 24, 1998 of a share of Class A Common Stock on the
New York Stock Exchange as reported by the Wall Street Journal.
At February 24, 1998, the Registrant had outstanding 297,388,986
shares of its Class A Common Stock, $.01 par value and zero shares of its
Class B Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
The information described below and contained in the Registrant's 1997
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 Stock 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 8. Financial Statements and Supplementary Data
The information described below and contained in the Registrant's 1998
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, including its wholly
owned subsidiaries (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 products, serving the contemporary cruise market through Carnival
Cruise Lines ("Carnival"), the premium cruise market through Holland
America Line ("HAL") and the luxury cruise market through Windstar Cruises
(collectively the "Wholly Owned Cruise Operations"). The Company also
directly or indirectly owns equity interests in Seabourn Cruise Line
("Seabourn"), Costa Crociere S.p.A. ("Costa"), and Airtours plc
("Airtours"), an integrated leisure travel group of companies which also
operates cruise ships (collectively the "Affiliated Cruise Operations").
Seabourn targets the luxury market and Costa and Airtours' Sun Cruises
target the contemporary market.
The following table summarizes the cruise operations of the Company:
Percentage Primary
Cruise Owned by Number Passenger Geographic
Brand the Company of Ships Capacity(1) Market
Wholly Owned Cruise
Operations:
Carnival Cruise Lines 100% 11 20,332 North America
Holland America Line 100% 8 10,302 North America
Windstar Cruises 100% 3 444 North America
22 31,078
Affiliated Cruise
Operations:
Costa Crociere 50%(2) 7 7,710 Europe
Seabourn Cruise Line 50% 3 612 North America
Airtours' Sun Cruises 28% 3 2,924 Europe
13 11,246
35 42,324
(1) 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.
(2) The 50% of Costa not owned by the Company is owned by Airtours. The
Company, including the Company's interest in Airtours, indirectly owns 64%
of Costa.
Historically, the Company's cruise products have been marketed
primarily in North America. Beginning in 1996, the Company took steps to
expand its markets into Europe through the acquisition of its interest in
Airtours in 1996 and Costa in June 1997. Airtours is the largest air
inclusive tour operator in the world, sells packaged tours in the British,
Belgian, French, Dutch, Scandinavian and North American markets and
operates three cruise ships under the Sun Cruises name. Costa, which is
headquartered in Italy, sells the majority of its cruises in Southern
Europe, primarily Italy, France and Spain. The cruise markets in Europe
are much smaller than the North American market. European cruise
passengers carried in 1997 are estimated to be approximately 1.2 million
compared to approximately 5 million from North America.
The Company has signed agreements with various shipyards providing for
the construction of additional cruise ships. The following table reflects
a summary of new ship agreements for the Company's Wholly Owned Cruise
Operations:
EXPECTED
SERVICE PASSENGER
VESSEL DATE(1) CAPACITY
Carnival Cruise Lines:
Elation 3/98 2,040
Paradise 12/98 2,040
Carnival Triumph 7/99 2,766
Carnival Victory 8/00 2,766
CCL Newbuild 12/00 2,100
CCL Newbuild 2001 2,100(2)
CCL Newbuild 2002 2,100(2)
Total Carnival Cruise Line 15,912
Holland America Line:
Volendam 6/99 1,440
Zaandam 12/99 1,440
HAL Newbuild 9/00 1,380
Total Holland America Line 4,260
Windstar Cruises:
Wind Surf 5/98 312(3)
Total 20,484
(1) The expected service date is the date the vessel is expected to begin
revenue generating activities.
(2) The Company has an option for the construction of the vessel. The
option price is denominated in German Marks and has not been fixed into
U.S. Dollars. No assurance can be given that the option to construct the
vessel will be exercised.
(3) The Wind Surf is the existing Club Med I which the Company is
acquiring from Club Mediterranee, S.A. and Services et Transports.
As a result of this shipbuilding program, the Company currently
expects, assuming none of the Company's existing fleet is retired, its
passenger capacity for its Wholly Owned Cruise Operations will increase by
52% to 47,362 by the end of 2000.
During 1997, the Company announced that it was in negotiations with
shipyards to build a new class of ships for each of its Carnival Cruise
Lines, Holland America Line and Costa brands which are expected to cost
approximately $2 billion. In this regard, in January 1998, the Company
announced that the first of these orders had been placed by Costa to
construct a 2,100 passenger, 82,000 gross registered ton vessel for
approximately 700 billion Lira (approximately U.S. $390 million). In
February 1998, the Company announced other agreements to construct a new
class of vessel for its Carnival Cruise Line brand. The agreements for
this new class of vessel for the Carnival Cruise Lines brand, which are
included in the table above, include a contract to purchase one vessel in
2000 and options to acquire an additional vessel in each of 2001 and 2002.
Additional orders of a new class of vessel for Holland America Line are
expected to be finalized in 1998.
In addition to its cruise operations, the Company operates a tour
business, through Holland America Line-Westours Inc. ("Holland America
Westours"), which markets sightseeing tours both separately and as a part
of HAL cruise/tour packages. Holland America Westours operates 14 hotels
in Alaska and the Canadian Yukon, two luxury day-boats 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 in the
Canadian Rockies and 13 private domed rail cars which are run on the
Alaskan railroad between Anchorage and Fairbanks.
B. Cruise Ship Segment - Wholly Owned Cruise Operations
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
sight-seeing destinations. According to Cruise Lines International
Association ("CLIA"), an industry trade group, in 1970 approximately
500,000 North American passengers took cruises for three consecutive nights
or more. CLIA estimates that this number reached 5 million passengers in
1997, an average compound annual growth rate of 8.9% since 1970. Also,
according to CLIA, by the end of 1997 the number of ships in service
totaled 136 with an aggregate capacity of approximately 119,000 berths.
CLIA estimates that the number of passengers carried in North America
increased from 4.6 million in 1996 to 5.0 million in 1997 or approximately
8.7%.
CLIA estimates that the number of cruise passengers will grow to
approximately 5.3 million in 1998. CLIA projections (updated for recently
announced shipbuilding contracts) indicate that by the end of 1998, 1999
and 2000 North America will be served by 144, 151 and 157 vessels,
respectively, having an aggregate capacity of approximately 132,000,
147,000 and 160,000 berths, respectively. CLIA estimates of new ship
introductions are based on scheduled ship deliveries and could increase.
The lead time for design, construction and delivery of a typical cruise
ship is approximately two to three years. In addition, CLIA's estimates of
capacity do not include assumptions related to unannounced ship withdrawals
due to age or changes in itineraries and, as a result, could indicate a
higher percentage growth in capacity than will actually occur.
Nonetheless, net capacity in the North American cruise market will most
likely increase over the next several years.
The following table sets forth the North American industry and Company
growth over the past five years based on passengers carried for at least
three consecutive nights:
WHOLLY OWNED CRUISE
NORTH AMERICAN OPERATIONS
CRUISE PASSENGERS
YEAR PASSENGERS* CARRIED
(Calendar) (Fiscal)
1997 5,000,000(est) 1,945,000
1996 4,659,000 1,764,000
1995 4,378,000 1,543,000
1994 4,448,000 1,354,000
1993 4,480,000 1,154,000
*Source: CLIA.
From 1993 through 1997, the Company's average compound annual growth
rate in number of passengers carried was 13.9% versus the industry average
of 2.8%.
The Company's passenger capacity has grown from 21,626 at November 30,
1993 to 31,078 at November 30, 1997. During 1994, net capacity increased
by 2,369 berths due to the delivery of the Fascination and Ryndam, net of
the 937 decrease in berths related to the sale of the Carnivale. In 1995,
with the delivery of the Imagination, capacity increased by 2,040 berths.
During 1996, net capacity increased by 4,802 berths due to delivery of the
Inspiration, the Veendam and the Carnival Destiny, net of the 1,146
decrease in passenger capacity related to the sale of the Festivale. In
1997 net capacity increased 241 berths due to the delivery of the Rotterdam
VI net of the 1,075 decrease in passenger capacity due to the sale of the
Rotterdam V.
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 8% of the North American population has
ever taken a cruise.
Cruise Ships and Itineraries
Under the Carnival Cruise Lines name, the Company serves the
contemporary market with eleven ships (the "Carnival Ships"). All of the
Carnival Ships were designed by and built for Carnival, including ten
SuperLiners which are among the largest in the cruise industry. Nine of
the Carnival Ships operate in the Caribbean during all or a portion of the
year and two Carnival Ships call on ports in the Mexican Riviera year
round. One Carnival Ship also offers cruises to Alaska, the Hawaiian
Islands and the Panama Canal. See "Sales and Marketing".
Through its subsidiary, HAL, the Company operates eleven ships
offering premium or luxury specialty vacations. Eight of these ships, the
Rotterdam, the Nieuw Amsterdam, the Noordam, the Westerdam, the Statendam,
the Maasdam, the Ryndam and the Veendam, 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").
The HAL Ships offer premium cruises of various lengths in the
Caribbean, Alaska, Panama Canal, Europe, the Mediterranean, Hawaii, South
Pacific, South America and the Orient. Cruise lengths vary from one to 102
days, with a large proportion of cruises being seven or ten days in length.
Periodically, the HAL Ships make longer grand cruises or operate on special
itineraries. For example, in 1997, the Rotterdam made a 102-day world
cruise, and the Nieuw Amsterdam made a 62 day grand Orient 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 early spring and in Alaska during
late spring to early fall. In order to offer a unique destination and
compete with other cruise lines more effectively while operating in the
Caribbean, in December 1997 Holland America Line introduced into its
Caribbean itineraries a private island, Half Moon Cay. Half Moon Cay is a
2400 acre island acquired by Holland America Line in December 1996.
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, chapel, ice cream shop as well as a food pavilion with open-air
dining shelters and a bandstand.
The three Windstar Ships currently operate in the Caribbean, the
Mediterranean and Costa Rica.
The following table presents summary information concerning the
Company's ships. Areas of operation reflect 1997 itineraries and are
subject to change.
YEAR 1997
FIRST IN GROSS LENGTH PRIMARY
YEAR COMPANY PAX REGISTERED & AREAS OF
NAME REGISTRY BUILT SERVICE CAP(1) TONS WIDTH OPERATION
Carnival Cruise Lines:
Carnival Destiny Panama 1996 1997 2,642 101,350 893/116 Caribbean
Inspiration Panama 1996 1996 2,040 70,367 855/104 Caribbean
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 Alaska,
Caribbean
Total Carnival Ships Capacity......... 20,332
Holland America Line:
Rotterdam Netherlands 1997 1997 1,316 62,000 780/106 Alaska(2),
Worldwide
Veendam Bahamas 1996 1996 1,266 55,451 720/101 Alaska,
Caribbean
Ryndam Netherlands 1994 1994 1,266 55,451 720/101 Alaska,
Caribbean
Maasdam Netherlands 1993 1993 1,266 55,451 720/101 Europe,
Panama Canal
Statendam Netherlands 1993 1993 1,266 55,451 720/101 Alaska,
Caribbean
Westerdam Netherlands 1986 1988 1,494 53,872 798/95 Canada,
Caribbean
Noordam Netherlands 1984 1984 1,214 33,930 704/89 Alaska,
Caribbean
Nieuw Amsterdam Netherlands 1983 1983 1,214 33,930 704/89 Alaska,
Caribbean
Total HAL Ships Capacity.............. 10,302
Windstar Cruises:
Wind Spirit Bahamas 1988 1988 148 5,736 440/52Caribbean,
Mediterranean
Wind Song Bahamas 1987 1987 148 5,703 440/52Costa Rica,
Tahiti
Wind Star Bahamas 1986 1986 148 5,703 440/52Caribbean,
Mediterranean
Total Windstar Ships Capacity........ 444
Total Capacity.......................... 31,078
(1) 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.
(2) In the summer of 1997, the Rotterdam V's area of operation was
Alaska. In the summer of 1998, the Rotterdam VI's itinerary will be in
Europe.
__________________________
Cruise Ship Construction
The Company has signed agreements with various shipyards providing for
the construction of additional cruise ships. The following table reflects
a summary of new ship agreements for the Company's Wholly Owned Cruise
Operations:
EXPECTED
SERVICE PAX ESTIMATED
REMAINING
VESSEL DATE(1) SHIPYARD CAP(2) TONS COST TO BE
PAID
(In millions)
Carnival Cruise Lines
Elation 3/98 Masa-Yards 2,040 70,367 $ 300 $ 245
Paradise 12/98 Masa-Yards 2,040 70,367 300 280
Carnival Triumph 7/99 Fincantieri(3) 2,766 101,000 410 352
Carnival Victory 8/00 Fincantieri 2,766 101,000 440 435
CCL Newbuild 12/00 Masa-Yards 2,100 82,000 375 375
CCL Newbuild 2001 Masa-Yards(4) 2,100 82,000 375 375
CCL Newbuild 2002 Masa-Yards(4) 2,100 82,000 375 375
Total Carnival Ships Capacity 15,912 2,575 2,437
Holland America Line
Volendam 6/99 Fincantieri(3) 1,440 63,000 300 274
Zaandam 12/99 Fincantieri(3) 1,440 63,000 300 286
HAL Newbuild 9/00 Fincantieri(3) 1,380 61,000 300 300
Total HAL Ships Capacity 4,260 900 860
Windstar Cruises
Wind Surf 5/98 Purchase(5) 312 14,745 45 40
Total 20,484 $3,520 $3,337
(1) The expected service date is the date the vessel is expected to begin
revenue generating activities.
(2) In accordance with cruise industry practice, passenger capacity is
calculated based on two passengers per cabin even though some cabins can
accommodate three or four passengers.
(3) The construction contracts with such shipyards are denominated in
Italian Lire. Contracts have been fixed into U.S. Dollars through the
utilization of forward currency contracts.
(4) The Company has an option for the construction of the vessel. The
option price is denominated in German Marks and has not been fixed into
U.S. Dollars. No assurance can be given that the option to construct the
vessel will be exercised.
(5) The Wind Surf is the existing Club Med I which the Company is
acquiring from Club Mediterranee, S.A. and Services et Transports.
During 1997, the Company announced that it was in negotiations with
shipyards to build a new class of ships for each of its Carnival Cruise
Lines, Holland America Line and Costa brands which are expected to cost
approximately $2 billion. In this regard, in January 1998, the Company
announced that the first of these orders had been placed by Costa to
construct a 2,100 passenger, 82,000 gross registered ton vessel for
approximately 700 billion Lira (approximately U.S. $390 million). In
February 1998, the Company announced other agreements to construct a new
class of vessel for its Carnival Cruise Line brand. The agreements for
this new class of vessel for the Carnival Cruise Lines brand, which are
included in the table above, include a contract to purchase one vessel in
2000 and options to acquire an additional vessel in each of 2001 and 2002.
Additional orders of a new class of vessel for Holland America Line are
expected to be finalized in 1998.
Cruise Pricing
Each of the company's cruise brands publishes brochures with prices for
the upcoming seasons. Brochure prices vary by cruise line and within
cruise lines by category of cabin and in some cases by ship itinerary.
Brochure prices are regularly discounted through the Company's early
booking discount program and other promotions. The cruise price includes
all meals and entertainment onboard and use of, or admission to, 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.
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, spa services 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. Most onboard activities
are managed by the Company while certain other activities are managed 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 excursions at each ship's ports of call. They include
bus and taxi sight-seeing excursions, local boat and beach parties, and
nightclub and casino visits. On the Carnival Ships and Windstar Ships,
such shore excursions are primarily operated by independent tour operators.
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-cruise 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,
1997 1996 1995
Number of Passengers 1,945,000 1,764,000 1,543,000
Occupancy Percentage* 108.3% 107.6% 105.0%
- -----------------------------------------
*In accordance with cruise 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, 1996 and November 30, 1997:
OCCUPANCY
QUARTER ENDING PERCENTAGE
February 29, 1996 107.1
May 31, 1996 107.2
August 31, 1996 114.5
November 30, 1996 101.1
February 28, 1997 106.4
May 31, 1997 108.0
August 31, 1997 114.3
November 30, 1997 104.2
Sales and Marketing
The Company's products are positioned to appeal to the contemporary,
premium and luxury-specialty segments. The luxury-specialty segment, which
is not as large as the other segments, is served by cruises with per diems
of $300 or higher. The premium segment typically is served by cruises that
last for 7 to 14 days or more at per diems of $250 or higher, and appeal
principally to more affluent customers. The contemporary segment, on the
other hand, is served typically by cruises that 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
brand is attributable in large part to its early recognition of this market
segmentation and its efforts to reach and promote the expansion of the
contemporary segment.
Carnival Cruise Lines
Carnival believes that its success is due in large part to its unique
product positioning within the industry. Carnival markets the Carnival
Ship cruises not only as alternatives to competitors' cruises, but 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 high quality food.
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. 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 in particular. Substantially all of Carnival's
cruise bookings are made through travel agents, which arrangement is
encouraged as a matter of policy. In fiscal 1997, Carnival took
reservations from about 30,000 of approximately 48,000 travel agencies in
the United States and Canada. Travel agents receive a standard commission
of 10% 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 1997, no controlled group of travel agencies
accounted for more than 10% 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 business development managers
and 30 in-house service representatives to motivate independent travel
agents and promote its cruises. Carnival believes it has one of the
largest sales forces 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. In addition, through Leisure Shopper and Cruise Director, travel
agents have the ability to make reservations through computer terminals
directly into Carnival's computerized reservations system.
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 70 days before
the sailing date for 7-day cruises.
Holland America Line (HAL) and Windstar
The HAL and Windstar Ships cater to the premium and luxury-specialty
markets, 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 1997,
HAL took reservations from about 20,000 of approximately 48,000 travel
agencies in the United States and Canada. Travel agents receive a standard
commission of between 10% and 15%, depending upon the specific cruise
product sold, with the potential for override commissions based upon sales
volume. During 1997, no controlled group of travel agencies accounted for
more than 10% 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 ensure 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"),
television and radio. HAL engages in substantial promotional efforts
designed to motivate and educate retail travel agents about its products.
HAL employs approximately 45 field sales representatives, 23 inside sales
representatives and 16 sales and service representatives to support the
field sales force. 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. In addition,
through Leisure Shopper and Cruise Director, travel agents have the ability
to make reservations directly into HAL's reservations system. HAL's
cruises generally are booked several months in advance of the sailing date.
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
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 market positioning is
embodied in the phrase "180 degrees from ordinary".
Seasonality
The Company's different businesses experience varying degrees of
seasonality. The Company's revenue from the sale of passenger tickets for
Carnival Cruise Lines (Carnival") ships is moderately seasonal.
Historically, demand for Carnival cruises has been greater during the
periods from late June through August and lower during the fall months.
HAL cruise revenues are more seasonal than Carnival's cruise revenues.
Demand for HAL cruises is strongest during the summer months when HAL ships
operate in Alaska and Europe for which HAL obtains higher pricing. Demand
for HAL cruises is lower during the winter months when HAL ships sail in
more competitive markets.
Competition
In addition to competing with each other, 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.
As described under Part I, Item 1. Business, B. Cruise Ship Segment,
Industry, the North American cruise industry had an aggregate of 136 ships
and 119,000 berths at the end of 1997. From the end of 1997 through the
end of 2000, the Company currently estimates 21 new ships will be
introduced into the North American market with a capacity of approximately
41,000 berths. These estimates of new ship introductions are based on
scheduled ship deliveries and the actual number of ships could increase.
The lead time for design, construction and delivery of a typical cruise
ship is approximately two to three years. In addition, these estimates of
capacity do not include assumptions related to unannounced ship withdrawals
due to age or changes in itineraries and, as a result, could indicate a
higher percentage growth in capacity than will actually occur. Nonetheless,
net capacity in the North American cruise market will most likely increase
over the next several years and thus may increase the levels of competition
within the industry.
The Company, including all of its cruise products, is the largest
cruise company in the world based on passengers carried, revenues generated
and available capacity. The primary methods of competition among cruise
lines are in the areas of cruise pricing, cruise product and cruise
destination. A discussion of each of the Company's cruise products and its
primary cruise competition is included below.
The Carnival Ships compete with cruise ships operated by six different
cruise lines which operate year round from Florida, California and Puerto
Rico with similar itineraries and with ten other cruise lines operating
seasonally from ports in Florida, California and Puerto Rico, including
cruise ships operated by HAL. Competition for cruise passengers is
substantial. Ships operated by Royal Caribbean International and Norwegian
Cruise Line sail regularly from Miami and Celebrity Cruises sails regularly
from Ft. Lauderdale on itineraries similar to those of the Carnival Ships.
Carnival competes year round with ships operated by Royal Caribbean
International embarking from Los Angeles to the west coast of Mexico.
Cruise lines such as Norwegian Cruise Line, Royal Caribbean International
and Princess Cruises offer voyages competing with Carnival from San Juan to
the Caribbean.
In Alaska, HAL and Carnival compete directly with cruise ships
operated by ten different cruise lines with the largest competitors being
Princess Cruises and Royal Caribbean International. Over the past several
years, there has been a steady increase in the available capacity among all
cruise lines operating in Alaska. In the Caribbean, HAL competes with
cruise ships operated by 16 different cruise lines, its primary competitors
being Princess Cruises, Royal Caribbean International, Celebrity Cruises
and Norwegian Cruise Line, as well as the Carnival Ships.
The ships of Windstar Cruises compete primarily with small luxury
boutique hotels and resorts worldwide. Within the cruise industry
Windstar's primary competitors include: Radisson Seven Seas, Cunard's Sea
Goddesses, and to a lesser extent Silver Sea Cruises.
During 1997, Royal Caribbean International acquired Celebrity Cruises
and became a larger competitor. In addition, in 1998 the Walt Disney Co.
is entering the cruise market with the introduction of the first of two
cruise ships.
Governmental Regulation
The Ecstasy, Fantasy, Celebration and Tropicale are Liberian flagged
ships and the balance of the Carnival Ships are registered in Panama. The
Ryndam, Maasdam, Statendam, Westerdam, Noordam, Nieuw Amsterdam and the
Rotterdam are registered in the Netherlands, while the Veendam is flagged
in the Bahamas. The Windstar Ships are registered in the Bahamas. The
ships that sail in United States waters 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 nonperformance. 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, which is periodically renewed, to operate its cruise
ships in Glacier Bay National Park. 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.
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 operations of ships and for pollution
prevention. The ISM Code will become mandatory for passenger vessel
operators, such as the Company, on July 1, 1998. All of the Company's
Wholly Owned Cruise Operations have obtained the required certificates
demonstrating compliance with the ISM Code and, the Company believes that
all of its Affiliated Cruise Operations will obtain the required
certificates demonstrating compliance with the ISM Code before July 1,
1998.
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. In 1995, the FMC introduced proposals to increase
the coverage requirements under the FMC regulations. These proposed
changes to the regulations are viewed favorably by the Company and, if
enacted, are not expected to have a material effect on the Company.
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, 1997, see Note 10
"Segment Information" to the Company's Consolidated Financial Statements in
Exhibit 13 incorporated by reference into this Annual Report on Form 10-K.
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 1997, as part of an integrated travel program to
destinations in Alaska, the tour service group offered 35 different tour
programs varying in length from 9 to 18 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.
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 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 249 passengers.
A fleet of over 300 motor coaches using the trade name Gray Line
operates 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.
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, 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, Denali Park, 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 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, all located throughout Alaska, provide a total of 1,463 rooms,
bringing the total number of hotel rooms to 2,048.
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. Most of
HAL's 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 1997 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
The Baranof Juneau 193 year-round
Westmark Cape Fox Ketchikan 72 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
Eleven of the hotels are owned by a HAL subsidiary. The remaining
three hotels, Westmark Anchorage, Westmark Cape Fox and Westmark Shee
Atika, are operated by Westmark under arrangements involving third parties
such as management agreements and leases.
For the hotels that operate year-round, the occupancy percentage for
1997 was 55.9%, and for the hotels that operate only during the summer
months, the occupancy percentage for 1997 was 71.4%.
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 State, Canada 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, HAL seeks to maximize its motor coach charter activity such as
operating charter tours to ski resorts in Washington and Canada.
Sales and Marketing
Holland America Westours has its own marketing staff devoted to a)
travel agent support and awareness, b) direct mail solicitation of past
passengers, c) use of consumer magazine and newspaper advertising to
develop prospects and enhance awareness and d) distribution of brochures.
The Westours marketing message leverages the company's 51 years of Alaska
tourism leadership and its extensive array of hotel and transportation
assets to create a brand preference for Holland America Westours. To the
prospective vacationer the company endeavors to convince them that
"Westours is Alaska".
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 139 motor coaches and three hotels) and Alaska
Sightseeing/Trav-Alaska (which owns approximately 40 motor coaches). The
primary competitor in Washington is Gazelle (with approximately 18 motor
coaches).
Westmark Hotels compete with various hotels throughout Alaska, 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 Department of Transportation, the
British Columbia Motor Carrier Commission and the Alaska Department of
Transportation. Certain of HAL's tours involve federal properties 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, 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 expenditures to ensure 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, 1997, see Note 10
"Segment Information" to the Company's Consolidated Financial Statements in
Exhibit 13 incorporated by reference into this Annual Report on Form 10-K.
D. Employees
The Company's Carnival operations have approximately 1,670 full-time
and 310 part-time employees engaged in shoreside operations. Carnival also
employs approximately 350 officers and 8,140 crew and staff on the Carnival
Ships.
The Company's HAL operations have approximately 3,200 employees
engaged in shoreside, tour and hotel operations, of which approximately
1,500 employees hold part-time/seasonal positions. HAL also employs
approximately 250 officers and 4,180 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 certain employees in its
hotel, motorcoach and ship operations.
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.
The Company believes that there are five shipyards in the world
currently capable of constructing quality passenger cruise ships. The
Company currently has contracts with two of these shipyards for the
construction of eight ships to enter service over the next three years (see
Part I, Item 1. Business, B. Cruise Ship Segment - Wholly Owned Cruise
Operations - Cruise Ship Construction). Some of the Company's competitors
also have contracts to construct several new cruise ships (see Part I, Item
1. Business, B. Cruise Ship Segment - Wholly Owned Cruise Operations -
Competition). If the Company elects to build additional ships in the
future, there is no assurance that any of the four 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. In addition, there
is no assurance that ships under contract for construction will be
delivered on schedule.
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 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 provided by international markets,
including underwriters at Lloyds. The Company, as currently 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 - Wholly Owned Cruise Operations -
Governmental 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 Holland
America Westours.
G. Investments in Affiliates
Seabourn Cruise Line
In April 1992, the Company acquired 25% of the capital stock of
Seabourn. As part of the transaction, the Company also made a subordinated
secured ten-year loan of $15 million to Seabourn and a $10 million
convertible loan to Seabourn. In December 1995, the $10 million
convertible loan was converted by the Company into an additional 25% equity
interest in Seabourn. Seabourn operates three ultra-luxury ships, which
have an aggregate capacity of 612 passengers and have itineraries in the
Caribbean, the Baltic, the Mediterranean, the Far East and other world-wide
destinations. The Seabourn cruises are primarily marketed in North
America.
Airtours plc
In April 1996, the Company acquired a 28% interest in Airtours for
approximately $307 million. Airtours is the largest air inclusive tour
operator in the world and is publicly traded on the London Stock Exchange.
Airtours provides air inclusive packaged holidays to the British, Belgian,
French, Dutch, Scandinavian and North American markets. Airtours provides
holidays to approximately 7 million people per year and owns or operates 37
hotels, three cruise ships and 37 aircraft. The three cruise ships are
operated under the Sun Cruises brand. During 1997, Airtours acquired two
tour operators - Sun International in Belgium and Suntrips in Northern
California, and a 50% interest in Costa Crociere S.p.A., a cruise company
discussed below.
Costa Crociere S.p.A.
In June 1997, the Company and Airtours completed a joint offer to
acquire the equity securities of Costa, an Italian cruise company. With
the completion of the offer, the Company and Airtours each own 50% of Il
Ponte, S.p.A. ("Il Ponte"), a holding company which was purchased from the
Costa family. As a result of the acquisition, Il Ponte owns approximately
100% of Costa. The cost of the Company's acquisition of its interest was
approximately $141 million, of which approximately $103 million was paid by
Il Ponte and the balance was paid by the Company. The $103 million paid by
Il Ponte was funded through Il Ponte debt which is guaranteed by the
Company.
Costa is headquartered in Italy and is Europe's largest cruise line.
Costa is primarily targeted to the contemporary market. Costa's ships'
primary itineraries include the Mediterranean, Northern Europe, the
Caribbean and South America. The major market for Costa cruises is
Southern Europe with the majority of Costa's cruises being sold in Italy,
Spain and France.
The itineraries of Costa's ships during the summer months consist
primarily of various locations in the Mediterranean and Northern Europe.
During the winter months, the vessels operate primarily in the Caribbean
and South America.
Costa operates seven ships which have an aggregate capacity of 7,710
passengers. In January 1998, Costa signed an agreement to construct an
eighth ship with a capacity of approximately 2,100 passenger for
approximately 700 billion Lire (see "Cruise Ship Construction").
Joint Venture with Hyundai Merchant Marine Co. Ltd.
In September 1996, the Company and Hyundai Merchant Marine Co. Ltd.
("HMM") signed an agreement to form a 50/50 joint venture to develop the
Asian cruise vacation market (the "Joint Venture"). The Company and HMM
each contributed $4.8 million as the initial capital of the Joint Venture.
In addition, in November 1996 the Company sold Carnival Cruise Lines'
cruise ship Tropicale to the Joint Venture for approximately $95.5 million
cash. The Company then chartered the vessel from the Joint Venture until
the Joint Venture would be ready to begin cruise operations in the Asian
market in or around the spring of 1998.
In September 1997, the Joint Venture was dissolved and the Company
repurchased the Tropicale from the Joint Venture for $93 million.
Seasonality
The Company's equity in the earnings of Costa and Airtours are
recorded on a two month lag basis using the equity basis of accounting.
Costa's and Airtours' earnings are seasonal due to the seasonal nature of
the European leisure travel industry and the Mediterranean cruise season.
During the last several years, Airtours' and Costa's quarters ending June
30 and September 30 have been profitable, with the quarter ending September
30 being their most profitable quarter. During this same period, Airtours
and Costa experienced seasonal losses in their quarters ending December 31
and March 31.
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 the Company's corporate
headquarters are located at 3655 N.W. 87th Avenue, Miami, Florida. These
facilities include approximately 456,000 square feet of office space. HAL
headquarters are at 300 Elliott Avenue West in Seattle, Washington in
leased space in an office building. The lease is for approximately 128,000
square feet.
The Company's cruise ships, tour properties and shoreside operations
facilities are well maintained and in good condition.
Item 3. Legal Proceedings
Several actions (collectively the "Passenger Complaints") have been
filed against the Company or Holland America Westours on behalf of
purported classes of persons who paid port charges to the Company or
Holland America Westours, alleging that statements made in advertising and
promotional materials concerning port charges were false and misleading.
Four such actions are pending against the Company in the Circuit Court for
Miami-Dade County, Florida, and others are pending against the Company in
state or federal courts in Tennessee, Arizona, Ohio, Kentucky, Michigan,
Georgia, and Alabama. One such action was filed against Holland America
Westours in the Superior Court in King County, Washington. The Florida,
Tennessee, Alabama and Washington actions have been brought on behalf of
purported nationwide classes; the others on behalf of purported statewide
classes. 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 Company's motion to dismiss amended complaints in the Florida
actions was granted in part and denied in part. In each of the other
actions, the Company filed motions to dismiss or transfer on the grounds of
inconvenient forum. The Kentucky, Arizona and Tennessee Courts granted the
Company's motions dismissing those actions, and the plaintiffs in both
cases intend to appeal. The Company's motions are still under judicial
consideration in each of the other actions. Holland America Westours'
motion to dismiss the Washington action was denied, as was the plaintiffs'
motion for class certification.
In June and August 1996, two complaints were filed against the Company
and Holland America Westours, respectively, in California Superior Court
(collectively the "Travel Agent Complaints") on behalf of purported classes
of travel agencies who during the past four years booked a cruise with the
Company or Holland America Westours, claiming that advertising practices
regarding port charges resulted in an improper commission bypass. These
actions allege 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. The
court granted the motions of the Company and Holland America Westours to
dismiss one of the California actions and stay the second such action on
grounds of forum non conveniens. The plaintiff in the dismissed California
action filed a complaint in Florida similar to the one it had filed in
California. The Company has moved to dismiss this complaint.
The pending Passenger and Travel Agent Complaints are in preliminary
stages and it is not now possible to determine the ultimate outcome of the
lawsuits. Management believes that the Company has substantial and
meritorious defenses to the claims. Management understands that purported
class actions similar to the Passenger and Travel Agent Complaints have
been filed against several other cruise lines.
The United States Attorney for the District of Alaska is conducting an
investigation to determine if a Holland America Line vessel discharged
bilge water, alleged to have contained oil or oily water mixtures, at
various locations allegedly within the United States territorial waters at
various times during the summer and early fall of 1994. Holland America is
continuing its efforts to resolve this matter. If a resolution is not
reached, a significant possibility exists that the U.S. government would
commence proceedings against Holland America alleging improper record
keeping practices and an improper discharge of oily water into the U.S.
territorial waters. It is not possible to predict the outcome of those
proceedings. Management does not believe, however, that the amount of
potential penalties will have a material impact upon the Company.
In the normal course of business, various other claims and
lawsuits have been filed or are pending against the Company. The majority
of these claims and lawsuits are covered by insurance. Management believes
the outcome of any such suits which are not covered by insurance would not
have a material adverse effect on the Company's financial condition or
results of operations.
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 1 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 Carnival
Corporation unless otherwise noted.
NAME AGE POSITION
Micky Arison 48 Chairman of the Board and Chief Executive
Officer
Gerald R. Cahill 46 Senior Vice President-Finance and Chief
Financial Officer
Pamela C. Conover 41 Vice President-Strategic Planning
Robert H. Dickinson 55 President and Chief Operating Officer
of Carnival and Director
Howard S. Frank 56 Vice-Chairman, Chief Operating Officer
and Director
A. Kirk Lanterman 66 Chairman of the Board and Chief Executive
Officer of Holland America Line-
Westours Inc. and Director
Peter T. McHugh 50 President and Chief Operating Officer
of Holland America Line-Westours Inc.
Roderick K. McLeod 57 Senior Vice President-Marketing
Lowell Zemnick 54 Vice President and Treasurer
Meshulam Zonis 64 Senior Vice President-Operations of
Carnival and Director
Business Experience of Officers
Micky Arison, age 48, 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.
Gerald R. Cahill, age 46, is a Certified Public Accountant and 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 Price
Waterhouse LLP.
Pamela C. Conover, age 41, has been Vice President-Strategic Planning
since May 1995. She was the Chief Executive Officer of Epirotiki Cruise
Line from May 1994 through April 1995. From 1985 through 1994 she worked
as a Vice President of Citibank N.A. New York and subsequently as a
Managing Director of Citicorp Securities Inc.
Robert H. Dickinson, age 55, 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 56, has been Vice-Chairman of the Board 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 Price Waterhouse LLP. He is also a member of the Board of
Directors of Pan Am Corporation.
A. Kirk Lanterman, age 66, is a Certified Public Accountant and has
been Chairman of the Board 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.
Peter T. McHugh, age 50, has been President and Chief Operating
Officer of Holland America Line Westours Inc. since March 1997. From
January 1996 to March 1997 he was Executive Vice President of Holland
America Line Westours, Inc. From January 1992 to December 1995 he was
Chief Executive Officer and Responsible Officer of Pan American World
Airways.
Roderick K. McLeod, age 57, has been Senior Vice President-Marketing
since July 1997. From June 1996 to July 1997, he was Senior Vice President
Marketing with the Miami Heat. From October 1988 to June 1996 he worked
with Royal Caribbean Cruises Ltd. and was Executive Vice President of
Sales, Marketing & Passenger Services. From August 1986 to October 1988 he
was the President & Chief Operating Officer of Norwegian Cruise Line.
Lowell Zemnick, age 54, is a Certified Public Accountant and has been
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.
Meshulam Zonis, age 64, has been Senior Vice President-Operations of
Carnival since 1979. He has also been a director since June 1987. From
1974 through 1979, he was Vice President-Operations of Carnival.
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 Form 10-K 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,
performance or achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions which may impact levels
of disposable income of consumers and pricing and passenger yields for the
Company's cruise products; increases in cruise industry capacity; changes
in tax laws and regulations (see "Taxation of the Company"); the ability of
the Company to implement its shipbuilding program and to expand its
business outside the North American market where it has less experience;
delivery of new vessels on schedule and at the contracted price; weather
patterns; unscheduled ship repairs and drydocking; incidents involving
cruise vessels at sea; and changes in laws and government regulations
applicable to the Company (including the implementation of the "Safety of
Life at Sea Convention" and changes in FMC surety and guaranty
arrangements).
PART II
Item 5. Market for the Registrant's Common Stock 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
The Company declared cash dividends on its Class A and Class B Common
Stock (the "Common Stock") of $.09 per share in each of the first three
quarters of fiscal 1996, $.11 in the fourth quarter of fiscal 1996, $.11 in
each of the first three quarters of fiscal 1997, and $.15 in the fourth
quarter of fiscal 1997 and first quarter of fiscal 1998. Payment of future
quarterly dividends on the Common Stock will depend, among other factors,
upon the Company's earnings, financial condition and capital requirements.
The Company may also declare special dividends to all stockholders in the
event that members of the Arison family and certain related entities (the
"Arison Group") 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.
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.
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.
D. Taxation of the Company
Non U.S. companies are exempt from U.S. corporate income tax on U.S.
source income from international passenger cruise operations if (i) their
countries of incorporation exempt shipping operations of U.S. persons from
income tax (the "Incorporation Test") and (ii) they meet either the "CFC
Test" or the "Publicly Traded Test". The Company and its subsidiaries
involved in the cruise ship operations meet the Incorporation Test because
they are incorporated in countries which provide the required exemption to
U.S. persons involved in shipping operations. A company meets the CFC Test
if it is a controlled foreign corporation ("CFC"). A CFC is defined by the
Internal Revenue Code as a foreign corporation more than 50% of the vote or
value of whose stock is owned by U.S. persons, each of whom owns or is
considered to own 10% or more of the corporation's vote on any day during
its fiscal year. Through July 15, 1997, the date upon which all of the
Class B Common Stock of the Company (the "Class B Common Stock") was
converted to Class A Common Stock (the "Conversion Date"), all of the
outstanding shares of Class B Common Stock of the Company, which
represented more than 50% of the total combined voting power of all classes
of stock, were owned by The Micky Arison 1994 "B" Trust (the "B Trust"), a
U.S. Trust whose primary beneficiary is Micky Arison, the Company's
Chairman of the Board. The B Trust is a "United States Person".
Accordingly, the Company believes that it will meet the CFC Test for its
1997 taxable year, but will not meet such test in its 1998 taxable year and
subsequent taxable years.
A corporation meets the Publicly Traded Test if the stock of the
corporation (or the direct or indirect corporate parent thereof) is
"primarily and regularly traded on an established securities market" in the
United States. Although no Treasury regulations have been promulgated that
explain when stock is primarily and regularly traded for purposes of this
exemption, Treasury regulations have been promulgated interpreting a
similar phrase under another section, Section 884. Under the Section 884
regulations, stock is considered primarily and regularly traded if: (i) 80%
(by vote and value) of the stock of the corporation is listed on an
established securities market in the United States where more shares are
traded than in any other country, (ii) trades of such stock are effected on
such market, other than in de minimis quantities, on at least 60 days
during the taxable year, (iii) the aggregate number of shares so traded is
equal to 10% or more of the average number of shares outstanding during the
taxable year, and (iv) the company is not "closely held". The Company
believes that it will meet the foregoing requirements for the portion of
its taxable year beginning after the Conversion Date and for future taxable
years. Since the Conversion Date, the Company has had only one class of
stock outstanding, the Class A Common Stock, which is listed on the New
York Stock Exchange, where more shares trade than in any other country.
Trades of such Class A Common Stock have been effected in more than de
minimis quantities on every business day since the Company's initial public
offering, and the annual volume of such trades has significantly exceeded
10% of the average number of shares outstanding. Moreover, the Company
believes that any stock traded on the NYSE is considered as traded on a
qualifying exchange and, to the Company's knowledge, it is not closely held
because no person other than the Arison Group owns more than 5% of its
stock, and the Arison Group holds less than 50% of the outstanding shares.
Accordingly, the Company believes that virtually all of its income
(with the exception of its United States source income from the operations
of the transportation, hotel and tour business of Holland America Line) is
exempt from United States federal income taxes. There is, however, no
authority that addresses the treatment of a corporation that meets the test
for CFC for only part of its taxable year. Similarly, there is no
authority that addresses the treatment of a corporation that meets the
Publicly Traded Test for only a part of its taxable year. If the Company
or its subsidiaries were found to meet neither the CFC Test nor the
Publicly Traded Test, much of their income would become subject to taxation
by the United States at higher than normal corporate tax rates.
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, 1997, 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 19, 1998, is shown in Exhibit 13 and is hereby
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 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 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, 1997.
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, 1998.
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 February 26, 1998
Micky Arison Executive Officer and Director
/s/ Howard S. Frank Vice-Chairman, Chief Operating February 26, 1998
Howard S. Frank Officer and Director
/s/ Gerald R. Cahill Senior Vice President-Finance February 26, 1998
Gerald R. Cahill and Chief Financial and
Accounting Officer
/s/ Maks L. Birnbach Director February 26, 1998
Maks L. Birnbach
/s/ Richard G. Capen, Jr.Director February 26, 1998
Richard G. Capen, Jr.
/s/ David Crossland Director February 26, 1998
David Crossland
/s/ Robert H. Dickinson Director February 26, 1998
Robert H. Dickinson
/s/ Shari Arison Dorsman Director February 26, 1998
Shari Arison Dorsman
/s/ James M. Dubin Director February 26, 1998
James M. Dubin
/s/ A. Kirk Lanterman Director February 26, 1998
A. Kirk Lanterman
/s/ Modesto Maidique Director February 26, 1998
Modesto Maidique
/s/ William S. Ruben Director February 26, 1998
William S. Ruben
/s/ Stuart Subotnick Director February 26, 1998
Stuart Subotnick
/s/ Sherwood M. Weiser Director February 26, 1998
Sherwood M. Weiser
/s/ Meshulam Zonis Director February 26, 1998
Meshulam Zonis
/s/ Uzi Zucker Director February 26, 1998
Uzi Zucker
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-Agreement of the Company dated February 25, 1997 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.(3)
4.3-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)
4.4-Form of Subordinated Indenture between Carnival Corporation and the
Subordinated Trustee relating to the Subordinated Securities.(5)
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. (6)
4.6-Letter Agreement dated July 11, 1989 between the Company and the Ted
Arison Irrevocable Trust.(7)
10.1-Retirement and Consulting Agreement dated November 10, 1997 between A.
Kirk Lanterman and Carnival Corporation.
10.2-Executive Long-term Compensation Agreement dated January 16, 1998
between Robert H. Dickinson and Carnival Corporation.
10.3-1994 Carnival Cruise Line Key Management Incentive Plan as amended on
January 5, 1998.
10.4-Amended and Restated Carnival Corporation 1992 Stock Option Plan.
10.5-1993 Carnival Cruise Lines, Inc. Restricted Stock Plan as amended
January 5, 1998.
10.6-Carnival Corporation "Fun Ship" Nonqualified Savings Plan.
10.7 -Amendments to The Carnival Corporation Nonqualified Retirement Plan
for Highly Compensated.
10.8-Amendments to The Carnival Corporation Qualified Retirement Plan.
10.9-Amendment to Consulting Agreement Dated August 5, 1996 between the
Company and Arison Investments Ltd.(8)
10.10-Carnival Corporation Automatic Dividend Reinvestment Plan.(9)
10.11-Carnival Cruise Lines, Inc. Stock Option Plan.(10)
10.12-Carnival Cruise Lines, Inc. Restricted Stock Plan.(11)
10.13-Carnival Cruise Lines, Inc. Retirement Plan.(12)
10.14-Carnival Cruise Lines, Inc. Non-Qualified Retirement Plan.(13)
10.15-Carnival Cruise Lines, Inc. Key Management Incentive Plan.(14)
10.16-1993 Outside Directors' Stock Option Plan.(15)
10.17-Holland America Line-Westours Inc. 1994-1996 Key Management Incentive
Plan.(16)
10.18-Form of Deferred Compensation Agreement between the Company and each
of Harvey Levinson, Meshulam Zonis and Robert H. Dickinson.(17)
10.19-Consulting Agreement/Registration Rights Agreement dated June 14,
1991, between the Company and Ted Arison.(18)
10.20-Indemnity Agreement between the Company and Ted Arison.(19)
10.21-First Amendment to Consulting Agreement/Registration Rights
Agreement.(20)
10.22-Consulting Agreement dated July 31, 1992, between the Company and
Arison Investments Ltd.(21)
10.23-Organization agreement dated February 25, 1994 between the Company
and the principals of The Continental Companies.(22)
10.24-Stock Purchase Agreement between Carnival Corporation and CHC
International.(23)
10.25-Stock Purchase Agreement between Carnival Corporation, Sherwood
Weiser and others.(24)
10.26-Shareholders' Agreement dated February 21, 1996 between Carnival
Corporation and David Crossland.(25)
10.27-Subscription Agreement dated February 21, 1996 between Carnival
Corporation and Airtours plc.(26)
10.28-Maks L. Birnbach Director's Agreement.(27)
10.29-William S. Ruben Director's Agreement.(28)
10.30-Stuart Subotnick Director's Agreement.(29)
10.31-Sherwood M. Weiser Director's Agreement.(30)
10.32-Uzi Zucker Director's Agreement (31)
10.33-David Crossland Director's Agreement.(32)
10.34-James M. Dubin Director's Agreement.(33)
10.35-Modesto M. Maidique Director's Agreement.(34)
10.36-Richard G. Capen Director's Agreement.(35)
10.37-Shari Arison Dorsman Director's Agreement.(36)
11.0-Statement regarding computation of per share earnings.
12.0-Ratio of Earnings to Fixed Charges
13.0-Portions of 1997 Annual Report incorporated by reference into 1997
Annual Report on Form 10-K
21-Subsidiaries of the Company.(37)
23.0-Consent of Price Waterhouse
27.0-Financial Data Schedule (for SEC use only)
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. 4.1 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.
(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 No. 4.2 on Form S-3 to the
registrant's registration statement on Form S-3 (File No. 333-43269),
filed with the Securities and Exchange Commission.
(6)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.
(7)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.
(8)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, 1996 (Commission
File No. 1-9610), 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, 1996 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(10)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.
(11)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.
(12)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.
(13)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.
(14)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.
(15)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.
(16)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.
(17)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.
(18)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.
(19)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.
(20)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.
(21)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.
(22)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.
(23)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.
(24)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.
(25)Incorporated by reference to Exhibit 10.4 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1996 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(26)Incorporated by reference to Exhibit 10.5 to the registrant's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1996 (Commission
File No. 1-9610), filed with the Securities and Exchange Commission.
(27)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.
(28)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.
(29)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.
(30)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.
(31)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.
(32)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, 1996
(Commission File No. 1-9610), filed with the Securities and Exchange
Commission.
(33)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.
(34)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.
(35)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.
(36)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.
(37)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.