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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 2003
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 Commission File Number: 1-15136
Carnival Corporation Carnival plc
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Republic of Panama England and Wales
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
59-1562976 none
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
3655 N.W. 87th Avenue Carnival House, 5 Gainsford Street,
Miami, Florida 33178-2428 London SE1 2NE, United Kingdom
(Address of principal (Address of principal
executive offices) executive offices)
(Zip code) (Zip code)
(305) 599-2600 011 44 20 7940 5381
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
Securities registered pursuant Securities registered pursuant
to Section 12(b) of the Act: to Section 12(b) of the Act:
Name of exchange on Name of exchange on
Title of each class which registered Title of each class which registered
- ------------------- ---------------- ------------------- ----------------
Common Stock New York Stock Ordinary Shares each represented New York Stock
($.01 par value) Exchange, Inc. by American Depositary Shares Exchange, Inc.
($1.66 stated value), Special
Voting Share, GBP 1.00
par value and Trust Shares of
beneficial interest in the P&O
Special Voting Trust
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrants (1) have 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) have 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 registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Indicate by check mark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Act). Yes |X| No |_|
The aggregate market value of the The aggregate market value of the
voting and non-voting common equity voting and non-voting common equity
held by non-affiliates computed by held by non-affiliates computed by
reference to the price at which the reference to the price at which the
common equity was last sold was common equity was last sold was $4.7
$12.4 billion as of the last billion as of the last business day
business day of the registrant's of the registrant's most recently
most recently completed second completed second fiscal quarter.
fiscal quarter.
At February 16, 2004, Carnival At February 16, 2004, Carnival plc
Corporation had outstanding had outstanding 211,011,492 Ordinary
631,469,622 shares of its Common Shares $1.66 stated value, one
Stock, $.01 par value. Special Voting Share, GBP 1.00 par
value and 631,469,622 Trust Shares
of beneficial interest in the P&O
Special Voting Trust
DOCUMENTS INCORPORATED BY REFERENCE
The information described below and contained in the Registrants' 2003
annual report to shareholders to be furnished to the Commission pursuant to Rule
14a-3(b) of the Exchange Act is shown in Exhibit 13 and is incorporated by
reference into this Annual Report on Form 10-K.
Part and Item of the Form 10-K
Part II
Item 5(a) and (b). Market for Registrants' Common Equity and Related
Stockholder Matters - Market Information and Holders
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Portions of the Registrants' 2004 definitive proxy statement, to be filed
with the Commission, are incorporated by reference into this joint Annual Report
on Form 10-K under the items described below.
Part and Item of the Form 10-K
Part II
Item 5(d). Market for Registrants' Common Equity and Related
Stockholders Matters - Securities Authorized for Issuance
Under Equity Compensation Plans
Part III
Item 10. Directors and Executive Officers of the Registrants
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions
Item 14. Principal Accountant Fees and Services
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PART I
Item 1. Business
A. General
Carnival Corporation is a Panamanian corporation and Carnival plc
(formerly known as P&O Princess Cruises plc) is incorporated in England and
Wales. Together with their consolidated subsidiaries they are referred to
collectively in this joint Annual Report on Form 10-K as Carnival Corporation &
plc, "our," "us," and "we."
On April 17, 2003, Carnival Corporation and Carnival plc completed a dual
listed company ("DLC") transaction, which implemented Carnival Corporation &
plc's DLC structure. The DLC transaction combined the businesses of Carnival
Corporation and Carnival plc through a number of contracts and amendments to
Carnival Corporation's articles of incorporation and by-laws and to Carnival
plc's memorandum of association and articles of association. Carnival
Corporation and Carnival plc are both public companies, with separate stock
exchange listings and their own shareholders. The two companies have a single
executive management team and identical boards of directors and are operated as
if they were a single economic enterprise. See Note 3, "DLC Transaction" to our
Consolidated Financial Statements in Exhibit 13 to this joint Annual Report on
Form 10-K.
We are the largest global cruise company and one of the largest vacation
companies in the world. We have a portfolio of 12 of the world's most widely
recognized cruise brands and are the leading provider of cruises to all major
destinations outside the Far East. See Part I, Item 1. Business C. Cruise
Operations for further information.
As of February 15, 2004, a summary of the number of cruise ships we
operate, by brand, their passenger capacity and the primary areas in which they
are marketed is as follows:
Cruise Number Passenger Primary
Brands of Cruise Ships Capacity (a) Market
------ --------------- ------------ ------
Carnival Cruise
Lines ("CCL") 20 43,446 North America
Princess Cruises
("Princess") 11 19,880 North America
Holland America Line 12 16,320 North America
Costa Cruises ("Costa") 10 15,570 Europe
P&O Cruises 4 7,724 United Kingdom
AIDA 4 5,314 Germany
Cunard Line ("Cunard") 3 5,078 United Kingdom/North America
Ocean Village 1 1,602 United Kingdom
P&O Cruises Australia 1 1,200 Australia
Swan Hellenic 1 678 United Kingdom
Seabourn Cruise Line
("Seabourn") 3 624 North America
Windstar Cruises ("Windstar") 3 604 North America
-- -------
73 118,040
== =======
(a) In accordance with cruise industry practice, passenger capacity is
calculated based on two passengers per cabin even though some cabins can
accommodate three or more passengers.
As of February 15, 2004, we had signed agreement with two shipyards
providing for the construction of 10 additional cruise ships scheduled for
delivery during the next two and a half years and one letter of intent for an
additional 3,004-passenger vessel for expected delivery to Costa in the summer
2006. This will increase our passenger capacity by 28,894 lower berths, or
24.5%, compared to February 15, 2004. We have announced that two of our ships,
the 1,214-passenger Noordam and the 668-passenger Caronia are scheduled to
withdraw from our fleet in November 2004. However, it is possible that some more
of our older ships may be sold or retired during the next three to four years,
thus reducing the size of our fleet over this period. See Note 8, "Commitments"
to our Consolidated Financial Statements in Exhibit 13 to this joint Annual
Report on Form 10-K for additional information regarding our ship commitments.
3
In addition to our cruise operations, we operate two tour companies under
the brand names Holland America Tours and Princess Tours, which primarily
complement their respective cruise operations and own substantially all the
assets noted below. These tour companies are the leading cruise/tour operators
in the State of Alaska and the Canadian Yukon and currently, market and operate:
- - 17 hotels or lodges in Alaska and the Canadian Yukon, with approximately
2,714 guest rooms;
- - over 500 motorcoaches used for sightseeing and charters in the States of
Washington and Alaska and in British Columbia, Canada and the Canadian
Yukon;
- - over 20 domed rail cars which are run on the Alaska Railroad between
Anchorage and Fairbanks;
- - two luxury dayboats offering tours to the glaciers of Alaska and the Yukon
River; and
- - sightseeing packages, or individual components of such packages, sold
either separately or as part of our cruise/tour packages to our Alaska
bound cruise passengers and to other vacationers.
B. Risk Factors
You should carefully consider the specific risk factors set forth below,
as well as the other information contained or incorporated by reference in this
joint Annual Report on Form 10-K, as these are important factors, among others,
that could cause our actual results to differ from our expected or historical
results. Some of the statements in this section and elsewhere in this joint
Annual Report on Form 10-K are "forward-looking statements." For a discussion of
those statements and of other factors to consider see the "Cautionary Note
Concerning Factors That May Affect Future Results" below.
(1) We may lose business to competitors throughout the vacation market.
We operate in the vacation market, and cruising is one of many
alternatives for people choosing a vacation. We therefore risk losing business
not only to other cruise lines, but also to other vacation operators that
provide other leisure options, including hotels, resorts and package holidays
and tours.
We face significant competition from other cruise lines, both on the basis
of cruise pricing and also in terms of the nature of ships and services we offer
to cruise passengers. Our principal competitors include the companies listed in
this joint Annual Report on Form 10-K under the caption, "Cruise Operations -
Competition."
In the event that we do not compete effectively with other vacation
alternatives and cruise companies, our results of operations and financial
condition could be adversely affected.
(2) The international political and economic climate and other world
events affecting safety and security could adversely affect the
demand for cruises and could harm our future sales and
profitability.
Demand for cruises and other vacation options has been, and is expected to
continue to be, affected by the public's attitude towards the safety of travel,
the international political climate and the political climate of destination
countries. Events such as the terrorist attacks in the United States on
September 11, 2001 and the threat of additional attacks, concerns of an outbreak
of additional hostilities and national government travel advisories, together
with the resulting political instability and concerns over safety and security
aspects of traveling, have had a significant adverse impact on demand and
pricing in the travel and vacation industry and may continue to do so in the
future. Demand for cruises is also likely to be increasingly dependent on the
underlying economic strength of the countries from which cruise companies source
their passengers. Economic or political changes that reduce disposable income or
consumer confidence in the countries from which we will source our passengers
may affect demand for vacations, including cruise vacations, which are a
discretionary purchase. Decreases in demand could lead to price discounting
which, in turn, could reduce the profitability of our business.
(3) Overcapacity within the cruise and land-based vacation industry
could have a negative impact on net revenue yields, increase
operating costs, resulting in ship, goodwill and/or trademark asset
impairments and could adversely affect profitability.
4
Cruising capacity has grown in recent years and we expect it to continue
to increase over the next two and a half years as all of the major cruise
vacation companies are expected to introduce new ships. Over the past few years,
our net revenue yields have been negatively impacted as a result of a variety of
factors, including capacity increases (see "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in Exhibit 13 to this joint
Annual Report on Form 10-K.) In order to utilize new capacity, the cruise
vacation industry will probably need to increase its share of the overall
vacation market. The overall vacation market is also facing increases in
land-based vacation capacity, which also will impact us. Failure of the cruise
vacation industry to increase its share of the overall vacation market is one of
a number of factors that could have a negative impact on our net revenue yields.
Should net revenue yields be negatively impacted, our results of operations and
financial condition could be adversely affected, including the impairment of the
value of our ships, goodwill and/or trademark assets. In addition, increased
cruise capacity could impact our ability to retain and attract qualified crew at
competitive costs and, therefore, increase our shipboard employee costs.
(4) Our future operating cash flow may not be sufficient to fund future
obligations, and we may not be able to obtain additional financing,
if necessary, at a cost that is favorable or that meets our
expectations.
Our forecasted cash flow from future operations may be adversely affected
by various factors, including, but not limited to, declines in customer demand,
increased competition, overcapacity, the deterioration in general economic and
business conditions, terrorist attacks, ship incidents, adverse publicity and
increases in fuel prices, as well as other factors noted under these risk
factors and under the "Cautionary Note Concerning Factors That May Affect Future
Results" section below. To the extent that we are required, or choose, to fund
future cash requirements, including future shipbuilding commitments, from
sources other than cash flow from operations, cash on hand and current external
sources of liquidity, including committed financings, we will have to secure
such financing from banks or through the offering of debt and/or equity
securities in the public or private markets.
Our access to financing will depend on, among other things, the
maintenance of strong long-term credit ratings. Carnival Corporation and
Carnival plc's senior, unsecured long-term debt ratings are "A3" by Moody's,
"A-" by Standard & Poor's and "A-" by Fitch Ratings. Carnival Corporation's
short-term corporate credit ratings are "Prime-2" by Moody's, "A-2" by Standard
& Poor's and "F2" by Fitch Ratings.
(5) Accidents and other incidents or adverse publicity concerning the
cruise industry or us could affect our reputation and harm our
future sales and profitability.
The operation of cruise ships involves the risk of accidents, passenger
and crew illnesses, mechanical failures and other incidents at sea or while in
port, which may bring into question passenger safety, health, security and
vacation satisfaction and thereby adversely affect future industry performance.
Incidents involving passenger cruise ships could occur and could adversely
affect future sales and profitability. In addition, adverse publicity concerning
the vacation industry in general or the cruise industry or us in particular
could impact demand and, consequently, have an adverse affect on our
profitability.
(6) Our operating, financing and tax costs are subject to many economic
and political factors that are beyond our control, which could
result in increases in our operating, financing and tax costs.
Some of our operating costs, including fuel, food, insurance, payroll and
security costs, are subject to increases because of market forces, economic
instability or political instability or decisions beyond our control. In
addition, interest rates, currency fluctuations and our ability to obtain debt
or equity financing are dependent on many economic and political factors.
Actions by U.S. and non-U.S. taxing jurisdictions could also cause an increase
in our costs. Increases in operating, financing and tax costs could adversely
affect our results because we may not be able to recover these increased costs
through price increases of our cruise vacations.
(7) Environmental legislation and regulations could affect operations
and increase our operating costs.
Some environmental groups have lobbied for more stringent regulation of
cruise ships. Some groups have also generated negative publicity about the
cruise industry and its environmental impact. The U.S. Environmental Protection
Agency is considering new laws and
5
rules to manage cruise ship waste. In addition, various state regulatory
agencies in Alaska, California, Florida and elsewhere are also considering new
regulations, which could adversely impact the cruise industry.
Alaskan authorities are currently investigating an incident that occurred
in August 2002 onboard Holland America's Ryndam involving a wastewater discharge
from the ship. As a result of this incident, various Ryndam ship officers and
crew have received grand jury subpoenas from the Office of the U.S. Attorney in
Anchorage, Alaska, requesting that they appear before the grand jury. If the
investigation results in charges being filed, a judgement could include, among
other forms of relief, fines and debarment from federal contracting, which would
prohibit Holland America Line's operations in Alaska's Glacier Bay National Park
and Preserve during the period of debarment. See Part 1, Item 3. Legal
Proceedings and Note 9, "Contingencies - Litigation" to our Consolidated
Financial Statements in Exhibit 13 to this joint Annual Report on Form 10-K.
In addition, pursuant to a settlement with the U.S. government in April
2002, Carnival Corporation pled guilty to certain environmental violations.
Carnival Corporation was sentenced under a plea agreement pursuant to which
Carnival Corporation paid fines in fiscal 2002 totaling $18 million to the U.S.
government and other parties. Carnival Corporation was also placed on probation
for a term of five years. Under the terms of the probation, any future violation
of environmental laws by Carnival Corporation may be deemed a violation of
probation. In addition, Carnival Corporation was required as a special term of
probation to develop, implement and enforce a worldwide environmental compliance
program, which probation is also applicable to Carnival plc. We have implemented
the environmental compliance program at Carnival Corporation and are in the
process of implementing it at Carnival plc and expect to incur approximately $5
million in additional 2004 annual environmental compliance costs compared to
2003 as a result of the program.
Our costs of complying with current and future environmental laws and
regulations, or liabilities arising from past or future releases of, or exposure
to, hazardous substances or to vessel discharges, could increase the cost of
compliance or otherwise materially adversely affect our business, results of
operations and/or financial condition.
(8) New regulation of health, safety, security and other regulatory
issues could increase our operating costs and adversely affect net
income.
We are subject to various international, national, state and local health,
safety and security laws, regulations and treaties. The International Maritime
Organization, sometimes referred to as the IMO, which operates under the United
Nations, has adopted safety standards as part of the International Convention
for Safety of Life at Sea, sometimes referred to as SOLAS, which is applicable
to all of our ships. Generally SOLAS establishes vessel design, structural
features, materials, construction and life saving equipment requirements to
improve passenger safety and security.
In addition, ships that call on U.S. ports are subject to inspection by
the U.S. Coast Guard for compliance with SOLAS and by the U.S. Public Health
Service for sanitary standards. Our ships are also subject to similar
inspections pursuant to the laws and regulations of various other countries our
ships visit. Finally, the U.S. Congress recently enacted the Maritime
Transportation Security Act of 2002 which implemented a number of security
measures at U.S. ports, including measures that relate to foreign flagged
vessels calling at U.S. ports.
We believe that health, safety, security and other regulatory issues will
continue to be areas of focus by relevant government authorities both in the
U.S. and elsewhere. Resulting legislation or regulations, or changes in existing
legislation or regulations, could impact our operations and would likely subject
us to increasing compliance costs in the future.
(9) Delays in ship construction and problems encountered at shipyards
could reduce our profitability.
The construction of cruise ships is a complex process and involves risks
similar to those encountered in other sophisticated construction projects,
including delays in completion and delivery. In addition, industrial actions and
insolvency or financial problems of the shipyards building our ships could also
delay or prevent the delivery of our ships under construction. These events
could adversely affect our profitability. However, the impact from a delay in
delivery could be mitigated by contractual provisions and refund guarantees
obtained by us.
6
In addition, as of February 15, 2004, we have entered into forward foreign
currency contracts to fix the cost in U.S. dollars of five of our foreign
currency denominated shipbuilding contracts. If the shipyard with which we have
contracted is unable to perform under the related contract, the foreign currency
forward contract related to the shipyard's shipbuilding contract would still
have to be honored. This might require us to realize a loss on an existing
contract without having the ability to have an offsetting gain on our foreign
currency denominated shipbuilding contract, thus resulting in an adverse effect
on our financial results.
(10) The lack of attractive port destinations for our cruise ships could
reduce our net revenue yields and net income.
We believe that attractive port destinations, including ports that are not
overly congested with tourists, are major reasons why our customers choose a
cruise versus an alternative vacation option. The availability of ports,
including the specific port facility at which our guests will embark and
disembark, is affected by a number of factors including, but not limited to,
existing capacity constraints, security concerns, adverse weather conditions and
natural disasters, financial limitations on port development, local governmental
regulations and local community concerns about both port development and other
adverse impacts on their communities from additional tourists. The inability to
continue to maintain and increase our ports of call could adversely affect our
net revenue yields and net income.
(11) The structure of the DLC transaction involves risks not associated
with the more common ways of combining the operations of two
companies and these risks may have an adverse effect on the economic
performance of the companies and/or their respective share prices.
The DLC structure is a relatively uncommon way of combining the management
and operations of two companies and it involves different issues and risks from
those associated with the other more common ways of effecting a business
combination, such as a merger or exchange offer to create a wholly owned
subsidiary. In the DLC transaction, the combination was effected primarily by
means of contracts between Carnival Corporation and Carnival plc and not by
operation of a statute or court order. The legal effect of these contractual
rights may be different from the legal effect of a merger or amalgamation under
statute or court order and there may be difficulties in enforcing these
contractual rights. Shareholders and creditors of either company might challenge
the validity of the contracts or their lack of standing to enforce rights under
these contracts, and courts may interpret or enforce these contracts in a manner
inconsistent with the express provisions and intentions we included in such
contracts. In addition, shareholders and creditors of other companies might
successfully challenge other DLC structures and establish legal precedents that
could increase the risk of a successful challenge to the DLC transaction. We are
maintaining two separate public companies and comply with both Panamanian
corporate law and English company laws and different securities and other
regulatory and stock exchange requirements in the UK and the U.S. This structure
requires more administrative time and cost than was the case for each company
individually, which may have an adverse effect on our operating efficiency.
(12) Changes under the Internal Revenue Code, applicable U.S. income tax
treaties, and the uncertainty of the DLC structure under the
Internal Revenue Code may adversely affect the U.S. federal income
taxation of our U.S. source shipping income. In addition, changes in
the UK, Italian, German and Australian income tax laws or
regulations could also adversely affect our net income.
We believe that substantially all of the U.S. source shipping income of
each of Carnival Corporation and Carnival plc qualifies for exemption from U.S.
federal income tax, either under:
- Section 883 of the Internal Revenue Code;
- as appropriate in the case of Carnival plc and its UK resident
subsidiaries, the U.S.-UK Income Tax Treaty that entered into force
on April 25, 1980, which is referred to below as the "old U.S.-UK
treaty", and, when applicable, the new U.S.-UK Income Tax Treaty
that entered into force on March 31, 2003, which is referred to
below as the "new U.S.-UK treaty"; or
- other applicable U.S. income tax treaties,
and should continue to so qualify now that the DLC transaction has been
completed. There
7
is, however, no existing U.S. federal income tax authority that directly
addresses the tax consequences of implementation of a dual listed company
structure such as the DLC structure for purposes of Section 883 or any other
provision of the Internal Revenue Code or any income tax treaty and,
consequently, the matters discussed above are not free from doubt.
Under recently finalized regulations, the scope of income that is
considered shipping income under Section 883 has been narrowed but, because the
regulations are new, the scope of income that will not qualify for exemption
under Section 883 is not clear. The provisions of Section 883 and the
Regulations under Section 883 are subject to change at any time. Moreover,
changes could occur in the future with respect to the trading volume or trading
frequency of Carnival Corporation shares and/or Carnival plc shares on their
respective exchanges or with respect to the identity, residence, or holdings of
Carnival Corporation's and/or Carnival plc's direct or indirect shareholders
that could affect the eligibility of Carnival Corporation and its subsidiaries
and/or certain members of the group consisting of Carnival plc, its subsidiaries
and its subsidiary undertakings, which are otherwise eligible for the benefits
of Section 883 to qualify for the benefits of the Section 883 exemption.
Accordingly, it is possible that Carnival Corporation and its ship-owning or
operating subsidiaries and/or certain members of the group consisting of
Carnival plc, its subsidiaries and its subsidiary undertakings whose tax
exemption is based on Section 883 may lose this exemption. If any such
corporation were not entitled to the benefits of Section 883, it would become
subject to U.S. federal income taxation on a portion of its income, which would
reduce the net profits of such corporation.
Carnival plc's UK, German and Australian operations are entered into the
UK tonnage tax regime, whereby UK corporation tax is payable based on shipping
profits calculated by reference to the net tonnage of qualifying vessels. Costa
is subject to Italian tax law, which exempts a large portion of its shipping
income from Italian income tax. If these countries tax laws or regulations were
to change in a manner adverse to these operations, our net income could be
adversely affected.
See Part I, Item 1. Business, H. Taxation for additional information.
(13) A small group of shareholders collectively owned, as of February 15,
2004, approximately 32% of the total combined voting power of our
outstanding shares and may be able to effectively control the
outcome of shareholder voting.
A group of shareholders, consisting of some members of the Arison family,
including Micky Arison, and trusts established for their benefit, beneficially
owned, approximately 42% of the outstanding common stock of Carnival
Corporation, which shares represented sufficient shares entitled to constitute a
quorum at shareholder meetings and to cast approximately 32% of the total
combined voting power of Carnival Corporation & plc. Depending upon the nature
and extent of the shareholder vote, this group of shareholders may have the
power to effectively control, or at least to influence substantially, the
outcome of shareholder votes and, therefore, the corporate actions requiring
such votes.
(14) Carnival Corporation and Carnival plc are not U.S. corporations, and
our shareholders may be subject to the uncertainties of a foreign legal system
in protecting their interests.
Carnival Corporation's corporate affairs are governed by its third amended
and restated articles of incorporation and amended and restated by-laws and by
the corporate laws of Panama. Carnival plc is governed by its Articles of
Association and Memorandum of Association and is organized under laws of England
and Wales. The corporate laws of Panama and England and Wales may differ in some
respects from the corporate laws in the U.S.
(15) Provisions in Carnival Corporation's constitutional documents may
prevent or discourage takeovers and business combinations that our shareholders
might consider in their best interests.
Carnival Corporation's amended articles of incorporation and by-laws
contain provisions that may delay, defer, prevent or render more difficult a
takeover attempt that our shareholders consider to be in their best interests.
For instance, these provisions may prevent our shareholders from receiving a
premium to the market price of our shares offered by a bidder in a takeover
context. Even in the absence of a takeover attempt, the existence of these
provisions may adversely affect the prevailing market price of our shares if
they are viewed as discouraging takeover attempts in the future.
Specifically, Carnival Corporation's articles of incorporation contain
provisions that prevent third parties, other than the Arison family and trusts
established for their
8
benefit, from acquiring beneficial ownership of more than 4.9 percent of its
outstanding shares without the consent of our board of directors and provide for
the lapse of rights, and sale, of any shares acquired in excess of that limit.
The effect of these provisions may preclude third parties from seeking to
acquire a controlling interest in us in transactions that shareholders might
consider to be in their best interests and may prevent them from receiving a
premium above market price for their shares. For a description of the reasons
for the provisions see Part I, Item 1. Business, I. - Taxation- Application of
Section 883 of the Internal Revenue Code.
Cautionary Note Concerning Factors That May Affect Future Results
Some of the statements contained in this joint Annual Report on Form 10-K
are "forward-looking statements" that involve risks, uncertainties and
assumptions with respect to us, including certain statements concerning future
results, outlook, plans, goals and other events which have not yet occurred.
These statements are intended to qualify for the safe harbors from liability
provided by Section 27A of the U.S. Securities Act of 1933, as amended, and
Section 21E of the U.S. Securities Exchange Act of 1934, as amended. You can
find many but not all, of these statements by looking for words like "will,"
"may," "believes," "expects," "anticipates," "forecast," "future," "intends,"
"plans," and "estimates" and for similar expressions.
Because forward-looking statements involve risks and uncertainties, there
are many factors that could cause our actual results, performance or
achievements to differ materially from those expressed or implied in this joint
Annual Report on Form 10-K. Forward-looking statements include those statements
which may impact the forecasting of our earnings per share, net revenue yields,
booking levels, pricing, occupancy, operating, financing and tax costs, cost per
available lower berth day, estimates of ship depreciable lives and residual
values, outlook or business prospects.
Our risks are identified in "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Cautionary Note Concerning
Factors That May Affect Future Results" in Exhibit 13 to this joint Annual
Report on Form 10-K and in other risks as detailed in the section above entitled
"Risk Factors." These sections contain important cautionary statements and a
discussion of many of the factors that could materially affect the accuracy of
our forward-looking statements and/or adversely affect our business, results of
operations and financial position.
Forward-looking statements should not be relied upon as a prediction of
actual results. Subject to any continuing obligations under applicable law or
any relevant listing rules, we expressly disclaim any obligation to disseminate,
after the date of this joint Annual Report on Form 10-K, any updates or
revisions to any such forward-looking statements to reflect any change in
expectations or events, conditions or circumstances on which any such statements
are based.
C. Cruise Operations
The multi-night cruise industry is a small part of the overall global
vacation market. We estimate that the global cruise industry carried more than
10 million passengers in 2003. The principal sources for cruise passengers are
North America, Europe, Asia/South Pacific including Australia, and South
America. We source our passengers principally from North America, the largest
cruise sector in the world and, to a lesser extent, from Europe. A small
percentage of our passengers are sourced from South America and Asia/South
Pacific. See Note 13, "Segment Information" to our Consolidated Financial
Statements in Exhibit 13 to this joint Annual Report on Form 10-K for additional
information regarding our U.S. and foreign assets and revenues.
Industry Background
The cruise industry is still growing and continues to remain only a small
percentage of the wider global holiday market in which cruise vacation operators
compete for disposable income normally spent by consumers on vacations. In the
U. S., for example, only approximately 15 percent of the population has ever
cruised. In addition, cruising in North America has grown by 8.6 percent
annually since 1997, increasingly drawing consumers from other vacation
alternatives. In Europe, where employees generally enjoy two to three times more
vacation days than North Americans, cruise vacations have on average grown 9.9
percent per year since 1997. In addition, the number of Europeans who have
selected cruising as their holiday alternative has risen by 60.5 percent since
1997.
Outside North America, the principal sources of passengers for the
industry, excluding
9
the Far East, are the UK, Italy, Germany, France, Australia, Spain, Switzerland
and Brazil. In all of these areas, cruising represents a smaller proportion of
the overall vacation market than it does in North America but, based on industry
data, is generally experiencing higher growth rates.
Cruising offers a broad range of products to suit vacationing customers of
many ages, backgrounds and interests. Cruise brands can be broadly divided into
the contemporary, premium and luxury segments. We have significant product
offerings in each of these segments. The contemporary segment is the largest
segment and typically includes cruises that last seven days or less, have a more
casual ambience and are less expensive than premium or luxury cruises. The
premium segment is smaller than the contemporary segment and typically includes
cruises that last from seven to 14 days. Premium cruises emphasize quality,
comfort, style and more destination-focused itineraries and the average pricing
on these cruises is typically higher than those in the contemporary segment. The
luxury segment is the smallest segment and is typically characterized by smaller
vessel size, very high standards of accommodation and service, and generally
with higher prices than the premium segment. Notwithstanding these marketing
segment classifications, there is overlap and competition among cruise segments.
We are a provider of cruise vacations in most of the largest vacation
markets in the world: North America, the UK, Germany, southern Europe and South
America. Our mission is "to deliver exceptional vacation experiences through the
world's best-known cruise brands that cater to a variety of different lifestyles
and budgets, all at an outstanding value unrivalled on land or at sea." A brief
description of the principal vacation regions in which we operate and our brands
that serve these regions is as follows:
North America
The largest cruise vacation market in the world is North America, where
cruising has developed into a mainstream alternative to land-based resort and
sightseeing vacations. According to G. P. Wild (International) Ltd. ("G. P.
Wild"), approximately 7.6 million North American sourced cruise passengers took
cruise vacations for two consecutive nights or more in 2002. This sector has
grown significantly in recent years as new capacity has been introduced.
The principal itineraries visited by North American cruise passengers in
2003 were the Caribbean, Bahamas, Mexico and Alaska. In addition, North American
cruise passengers visited Europe, the Mediterranean, Bermuda, New England and
Canada, the Panama Canal and other exotic locations, including South America,
Africa, the South Pacific, the Orient and India.
Based on the number of ships that are currently on order worldwide and
scheduled for delivery between 2004 and 2006, we expect that the net capacity
serving North American consumers will increase significantly, most notably in
2004. Our projections indicate that by the end of 2004, 2005 and 2006, North
America will be served by 153, 156 and 160 ships, respectively, having an
aggregate passenger capacity of approximately 192,000, 198,000 and 209,000 lower
berths, respectively. At the end of 2003, North America was served by 146 ships,
having an aggregate passenger capacity of approximately 173,000 lower berths.
These figures include some ships that are expected to be marketed in North
America and elsewhere. Our estimates of capacity do not include assumptions
related to unannounced ship withdrawals due to factors such as the age of ships
or changes in the location from where ships' passengers are predominantly
sourced and, accordingly, could indicate a higher percentage growth in North
American capacity than will actually occur. Nonetheless, we expect that net
capacity serving North American-sourced cruise passengers will increase over the
next several years.
We serve the North American cruise sector principally through our CCL,
Princess, Holland America Line, Cunard, Seabourn and Windstar brands.
CCL has 20 ships operating in the contemporary sector, with two additional
ships expected to begin service in fiscal 2005. CCL is the number one cruise
brand in North America, and is well-known as the "Fun Ships", which we believe
captures the essence of the brand. CCL carries the largest number of North
American cruise passengers and has increasingly been offering new homeport
locations to stimulate demand by enabling its guests to lower the price of their
cruise vacation, by reducing or eliminating the cost of travel to the port. All
the CCL ships were designed by and built for CCL, including five that are among
the world's largest, the Carnival Glory, the Carnival Conquest, the Carnival
Victory, the Carnival Triumph and the Carnival Destiny. In addition, CCL's four
"Spirit" class ships, the Carnival Spirit, the Carnival Pride, the Carnival
Legend and the Carnival Miracle have 80% outside cabins, with 80% of those
outside cabins having balconies.
10
Eighteen of the CCL ships operate to destinations in the Bahamas or the
Caribbean during all or a portion of the year and two CCL ships call on ports on
the Mexican Riviera year round. CCL ships also offer cruises to Alaska, Bermuda,
Canada, New England, the Hawaiian Islands and the Panama Canal, with most
cruises ranging from three to seven days.
As of February 15, 2004, Princess, whose brand name was made famous by the
"Love Boat" television show, was operating 11 ships in the contemporary/premium
sector, with three additional ships expected to begin service in fiscal 2004 and
one new ship scheduled for delivery in fiscal 2006. Most cruises range from
seven to 14 days in length, with some up to 30 days, and destinations include
Alaska, Europe, the Caribbean, the Panama Canal, Mexican Riviera, the South
Pacific, South America, Hawaiian Islands, Asia and Canada/New England. Princess
also operates a private destination port-of-call known as Princess Cay on the
Bahamian Island of Eleuthera, which features retail outlets, water sports, beach
and sports facilities, restaurants, bars and other amenities. Princess' fleet
was designed with Personal Choice in mind, with numerous options and features,
including intimately designed spaces, spacious staterooms and Princess'
trademark private balconies.
In 2004, Holland America Line's fleet of 13, five-star, premium ships will
offer nearly 500 sailings from 15 North American home ports, including new
departures from Norfolk, Virginia; Baltimore, Maryland; and Boston,
Massachusetts. Recent additions to the fleet include the 1,848-passenger sister
ships, ms Zuiderdam and ms Oosterdam. In April 2004, the third ship in that
series, ms Westerdam is expected to join the fleet. The fleet will visit all
seven continents in 2004, while increasing the number of cruises to popular
destinations such as Alaska, the Caribbean, Europe and Canada/New England.
Cruise lengths vary from seven to over 100 days. Most Holland America Line
sailings in the Caribbean visit a private island destination known as Half Moon
Cay, a private island owned by Holland America Line.
As a premium category cruise leader, Holland America Line is investing
$225 million in the Signature of Excellence initiative to provide product and
service enhancements to its fleet. The enhancements will focus on five areas
central to the Holland America Line guest experience: spacious, elegant ships
and accommodations; sophisticated five-star dining, gracious, unobtrusive
service; extensive enrichment programs and activities; and compelling worldwide
itineraries. Enhancements, and in some cases construction build-outs, have been
started and are expected to be substantially completed by the end of 2005.
Windstar Cruises operates three motor-sail yachts known for their casually
elegant atmosphere. In 2004, Windstar Cruises will offer sailings in the
Caribbean, Europe and Tahiti. Renowned for offering a luxury cruise experience
that is "180 Degrees from Ordinary," a high-percentage of return guests attests
to the appeal of Windstar's casual ambiance of resort-style attire, innovative
cuisine and wine selections, open restaurant-style seating, attentive service,
exotic destinations and complimentary water sports.
The three Seabourn ships (the "Yachts of Seabourn") focus on personalized
service and quality cuisine aboard their intimately sized all-suite ships. The
Yachts of Seabourn serve the luxury sector and are primarily marketed in North
America. These ships concentrate their operations around Europe, Asia and the
Americas with cruises generally in the seven to 14 day range.
Europe
We estimate that Europe is the largest leisure travel vacation market, but
cruising in Europe has achieved a much lower penetration rate than in North
America. According to G. P. Wild approximately 2.3 million European-sourced
passengers took cruise vacations in 2002 compared to approximately 7.6 million
North American sourced-passengers. The number of European cruise passengers
increased by a compound annual growth rate of approximately 9.9% between 1997
and 2002. We believe that cruising represents less than 2% of the European
vacation market. Therefore, we believe that the European market represents a
significant growth opportunity for us and we expect that a number of new or
existing ships will be introduced into Europe over the next several years.
Our projections indicate that by the end of 2004, 2005 and 2006, Europe
will be served by 117, 118 and 119 ships, respectively, having an aggregate
passenger capacity of approximately 91,000, 93,000 and 96,000 lower berths,
respectively. At the end of 2003, Europe was served by 112 ships, having an
aggregate passenger capacity of approximately 86,000 lower berths.
11
UK
The UK is the single largest country from which cruise passengers are
sourced in Europe. According to G. P. Wild, approximately 0.8 million UK
passengers took cruises in 2002. Cruising was relatively underdeveloped as a
vacation option for the UK consumers until the mid-1990s, but since then the UK
has been one of the fastest growing regions in the world. The number of UK
cruise passengers increased by a compound annual growth rate of approximately
9.7% between 1997 and 2002. The main destination for UK cruise passengers is the
Mediterranean. Other popular destinations for UK cruise passengers include the
Caribbean, the Atlantic Islands, including the Canary Islands and the Azores,
and Scandinavia.
We serve the UK cruise sector principally through our P&O Cruises, Ocean
Village, Cunard, and Swan Hellenic brands, although our larger North American
brands and Costa also source passengers from the UK.
P&O Cruises is the largest cruise operator and best known cruise brand in
the UK, with four premium sector ships, with an average age of five years at
November 30, 2003. These ships cruise to over 180 destinations in more than 75
countries, with most cruises ranging from 12 to 16 days. These ships, which are
relatively new compared to the ships that are more typically marketed in the UK,
have enabled P&O Cruises to continue to offer a more modern style of cruising to
UK cruise passengers and increase their appeal to younger and family passengers,
while retaining older and more traditional British customers. The ships have a
wide choice of dining and entertainment options and offer a welcoming
atmosphere, with an emphasis on the attributes of "Britishness,"
"professionalism," and "style." P&O Cruises offers cruises to the Mediterranean,
the Atlantic Islands, the Baltic, the Norwegian Fjords, the Caribbean and around
the world voyages.
Under the Cunard brand, which is one of the most widely recognized brands
in the UK, we operate three ships in the premium/luxury sectors, which are
primarily marketed in the UK, North America, Germany and Australia. Cunard's new
flagship, the Queen Mary 2 was delivered in December 2003 and is the largest
ocean liner in the world. She is taking over the northern transatlantic crossing
route, which was previously operated by the Queen Elizabeth 2 ("QE2"), Cunard's
former flagship. The QE2 will continue her world cruises before being based in
Southampton, England, primarily to serve the UK region. Cunard's third ship, the
Caronia, is also homeported in Southampton, England, and will continue to
service the UK region until its charter ends in November 2004. Cunard expects to
take delivery of its next new ship, the Queen Victoria, in 2005. Cunard's ships
offer cruises to worldwide destinations, with many of the cruises ranging
generally between six and 26 days.
The Ocean Village brand was launched in spring 2003 and consists of one
ship serving the UK contemporary sector. This brand targets a young and active
customer base and its cruise product emphasizes informality, health and
well-being. The Ocean Village ship offers one or two week cruises, together with
cruise and stay holidays, and operates out of Palma, Majorca in the
Mediterranean during the summer season and from Barbados in the Caribbean during
the winter season.
Swan Hellenic's Minerva II operates a program of premium discovery
cruises. The product is intended to appeal to passengers seeking to discover
more about the destinations they are visiting. In the summer season, the
itineraries are focused in the Mediterranean, the Black Sea, the Baltic and
around Great Britain. Winter cruise destinations alternate between Central and
South America and the Far East.
Southern Europe
The main regions in southern Europe for sourcing cruise passengers are
Italy, France and Spain. Together, these countries generated approximately 0.8
million cruise passengers in 2002. Cruising in Italy, France and Spain exhibited
a compound annual growth rate in the number of passengers carried of
approximately 14.7% between 1997 and 2002. We believe that these regions are
also relatively underdeveloped for the cruise industry. We intend to increase
our penetration in southern Europe through Costa, the largest and one of the
most recognized cruise brands marketed in Europe.
Costa's ten contemporary ships operate in Europe during the spring to
fall. During the fall to spring, Costa repositions most of its ships to the
Caribbean and South America. Costa serves the contemporary sector and is the
number one cruise line in continental Europe based on passengers carried and
capacity of its ships, principally serving customers in Italy, France, Germany
and Spain. Costa expects to take delivery of two new ships, one in 2004 and one
in 2006. The Costa ships call on 120 European ports with 44 different
12
itineraries and to various other ports in the Caribbean and South America, with
most cruises ranging from seven to 14 days.
Germany
Germany is one of the largest sources for cruise passengers in continental
Europe with approximately 0.4 million cruise passengers in 2002. Germany
exhibited a compound annual growth rate in the number of cruise passengers
carried of approximately 8.6% between 1997 and 2002. We believe that Germany is
also an underdeveloped region for the cruise industry. The main destinations
visited by German cruise passengers are the Mediterranean and the Caribbean.
Other popular destinations for German cruise passengers include Scandinavia and
the Atlantic Islands.
We serve the German market through our Aida brand and a Costa ship, the
Costa Marina, which has been dedicated exclusively to the German market since
2002.
Aida is the best-known cruise brand in the fast-growing German cruise
industry, and offers a "club cruising" style that has an emphasis on lifestyle,
informality, friendliness and activity. Spa areas and high quality but informal
dining options characterize the experience onboard the vessels. Aida's four
contemporary ships primarily offer seven day trips that allow guests to easily
book back-to-back cruise vacations. During the summer the ships sail in the
Mediterranean and Baltic Sea, calling on approximately 70 ports, while
itineraries for the winter include the Caribbean, Asia and the Atlantic Islands.
Australia
Cruising in Australia is relatively well established but still developing.
We estimate that approximately 155 thousand Australians took cruise vacations in
2002. We expect to serve this region primarily through P&O Cruises Australia,
which is the leading cruise line in Australia.
P&O Cruises Australia is a cruise brand that caters specifically to
Australians. Its contemporary product, the Pacific Sky, offers seven to 14 day
cruises from Sydney to Vanuatu, New Caledonia, Fiji, and New Zealand. The
Pacific Sky is the only ship deployed full-time in Australia by the major cruise
lines. The Pacific Princess operates for half the year as part of P&O Cruises
Australia and offers a premium cruise product from Sydney to French New
Caledonia and elsewhere in the South Pacific.
In the fall of 2004, the 1,486-passenger Carnival Jubilee will be
transferred to P&O Cruises Australia and renamed the Pacific Sun, thereby more
than doubling this line's dedicated year-round passenger capacity.
South America
Cruise vacations have been marketed in South America for many years,
although cruising as a vacation alternative remains in an early stage of
development in the region. Cruises from South America typically occur during the
southern hemisphere summer months of November through March, and are primarily
seven to nine days in duration. Our presence is primarily represented through
the Costa brand, which currently operates two vessels in this region, Costa
Allegra and Costa Tropicale, offering approximately 1,828 lower berths.
Ship Information
Summary information of our ships as of February 15, 2004 is as follows:
CALENDAR
YEAR PASSENGER
BRAND AND SHIP REGISTRY DELIVERED CAPACITY
-------------- -------- --------- --------
CCL
Carnival Miracle Panama 2004 2,124
Carnival Glory Panama 2003 2,974
Carnival Conquest Panama 2002 2,974
Carnival Legend Panama 2002 2,124
Carnival Pride Panama 2001 2,124
13
CALENDAR
YEAR PASSENGER
BRAND AND SHIP REGISTRY DELIVERED CAPACITY
-------------- -------- --------- --------
Carnival Spirit Panama 2001 2,124
Carnival Victory Panama 2000 2,758
Carnival Triumph Bahamas 1999 2,758
Paradise Panama 1998 2,052
Elation Panama 1998 2,052
Carnival Destiny Bahamas 1996 2,642
Inspiration Bahamas 1996 2,052
Imagination Bahamas 1995 2,052
Fascination Bahamas 1994 2,052
Sensation Bahamas 1993 2,052
Ecstasy Panama 1991 2,052
Fantasy Panama 1990 2,056
Celebration Panama 1987 1,486
Jubilee (1) Bahamas 1986 1,486
Holiday Bahamas 1985 1,452
------
Total CCL 43,446
------
Princess
Island Princess Bermuda 2003 1,970
Coral Princess Bermuda 2002 1,974
Star Princess Bermuda 2002 2,598
Golden Princess Bermuda 2001 2,598
Tahitian Princess Gibraltar 1999 668
Pacific Princess (2) Gibraltar 1999 668
Grand Princess Bermuda 1998 2,592
Dawn Princess UK 1997 1,998
Sun Princess UK 1995 2,022
Regal Princess UK 1991 1,596
Royal Princess UK 1984 1,196
------
Total Princess 19,880
------
Holland America Line
Oosterdam Netherlands 2003 1,848
Zuiderdam Netherlands 2002 1,848
Zaandam Netherlands 2000 1,440
Amsterdam Netherlands 2000 1,380
Volendam Netherlands 1999 1,440
Rotterdam Netherlands 1997 1,316
Veendam Bahamas 1996 1,266
Ryndam Netherlands 1994 1,258
Maasdam Netherlands 1993 1,258
Statendam Netherlands 1993 1,258
Prinsendam Netherlands 1988 794
Noordam(3) Netherlands 1984 1,214
------
Total Holland America Line 16,320
------
Costa
Costa Fortuna Italy 2003 2,702
Costa Mediterranea Italy 2003 2,114
Costa Atlantica Italy 2000 2,114
Costa Victoria Italy 1996 1,928
Costa Romantica Italy 1993 1,344
Costa Allegra Italy 1992 806
Costa Classica Italy 1991 1,302
Costa Marina Italy 1990 762
Costa Europa Italy 1986 1,476
Costa Tropicale Italy 1982 1,022
------
Total Costa 15,570
------
P&O Cruises
Oceana UK 2000 2,016
Aurora UK 2000 1,870
Adonia UK 1998 2,016
Oriana UK 1995 1,822
------
Total P&O Cruises 7,724
------
14
CALENDAR
YEAR PASSENGER
BRAND AND SHIP REGISTRY DELIVERED CAPACITY
-------------- -------- --------- --------
AIDA
AIDAaura UK 2003 1,266
AIDAvita UK 2002 1,266
AIDAcara UK 1996 1,186
A'ROSA Blu (4) UK 1990 1,596
-----
Total AIDA 5,314
-----
Cunard
Queen Mary 2 UK 2003 2,620
Caronia (5) UK 1973 668
QE2 UK 1969 1,790
------
Total Cunard 5,078
------
Ocean Village
Ocean Village UK 1989 1,602
P&O Cruises Australia
Pacific Sky UK 1984 1,200
Swan Hellenic
Minerva II(6) Republic of the
Marshall Islands 2001 678
Seabourn
Seabourn Legend Bahamas 1992 208
Seabourn Spirit Bahamas 1989 208
Seabourn Pride Bahamas 1988 208
-------
Total Seabourn 624
-------
Windstar
Wind Surf Bahamas 1990 308
Wind Spirit Bahamas 1988 148
Wind Star Bahamas 1986 148
-------
Total Windstar 604
-------
Total 118,040
=======
(1) The Jubilee is expected to transfer to P&O Cruises Australia in the fall
of 2004 and be renamed the Pacific Sun.
(2) The Pacific Princess, which is only included in Princess' capacity,
operates on a split deployment between Princess and P&O Cruises Australia.
(3) The Noordam was recently bareboat chartered under a long-term agreement,
but will continue to be operated by Holland America Line through November
12, 2004.
(4) The A'ROSA Blu is transferring to AIDA in the spring of 2004 and will be
renamed the AIDAblu. The A'ROSA brand name and its three river boats,
which are not included above, were sold for their net book value in
December 2003 to an entity controlled by a former director of P&O Princess
Cruises plc.
(5) The Caronia was sold in May 2003 and is being chartered back for use by
Cunard until November 2004.
(6) The Minerva II is operated by Swan Hellenic pursuant to a bareboat charter
agreement that expires in 2006.
Characteristics of the Cruise Vacation Industry
Strong Growth
Cruise vacations have experienced significant growth in recent years. The
number of new cruise ships currently on order from shipyards indicates that the
growth in cruise capacity is set to continue for a number of years, most notably
in 2004. In order to fill up this new capacity, continued growth in demand
across the industry, particularly in North America, will be required. Given the
historical growth rate of cruising and the relative low penetration levels in
major vacation regions, we believe that there are significant areas for growth.
However, for the past few years there has been pressure on cruise pricing, which
we believe is ultimately the result of, among other things, various adverse
international geopolitical and economic conditions and events, such as
terrorism, higher
15
unemployment, the Iraqi war, and the risk of other armed conflicts, adverse
publicity, increases in new cruise ship capacity, ship incidents, and
competition from cruise ship and other vacation alternatives.
Wide Appeal of Cruising
Cruising appeals to a broad demographic range. Industry surveys estimate
that the principal passengers for cruising in North America (defined as
households with income of $40,000 or more headed by a person who is at least 25
years old) now comprise approximately 128 million people. About half of these
individuals have expressed an interest in taking a cruise as a vacation
alternative. According to a survey by G.P. Wild, approximately 72 percent of
cruise passengers are over the age of forty. The growth of this segment of the
population is expected to increase by 30 percent between 2000 and 2010 based on
a study by The World Bank. Accordingly, we believe the cruise industry is
well-positioned to take advantage of these favorable demographic trends.
Relatively Low Penetration Levels
North America has the highest cruising penetration rates per capita.
Nevertheless, the Cruise Lines International Association, or CLIA, a leading
trade group, estimates that only approximately 15% of the U.S. population has
ever taken a cruise. In the UK, where there has been significant expansion in
the number of cruise passengers carried over the last five years, cruising
penetration levels per capita are only approximately three-fifths of those of
North America. In the principal vacation regions in continental Europe, cruising
penetration levels per capita are approximately one-fifth of those in North
America. Elsewhere in the world cruising is at an early stage of development and
has far lower penetration rates.
Satisfaction Rates
Cruise passengers tend to rate their overall satisfaction with a
cruise-based vacation higher than comparable land-based hotel and resort
vacations. We believe that a substantial number of cruise passengers think the
value of their cruise vacation experience is as good as, or better than, the
value of other comparable vacation alternatives.
Passengers, Capacity and Occupancy
Our cruise operations had worldwide cruise passengers, passenger capacity
and occupancy as follows (1):
FISCAL CRUISE PASSENGER
YEAR PASSENGERS CAPACITY OCCUPANCY(2)
---- ---------- --------- ------------
1999 2,366,000 43,810 104.3%
2000 2,669,000 48,196 105.4%
2001 3,385,000 58,346 104.7%
2002 3,549,000 67,282 105.2%
2003 5,156,000 113,296 103.4%
(1) Information presented is as of the end of our fiscal year for passenger
capacity. Costa's information is only included subsequent to 2000 and
Carnival plc's information is only included since April 17, 2003, the
period subsequent to the DLC transaction.
(2) In accordance with cruise industry practice, occupancy is calculated using
a denominator of two passengers per cabin even though some cabins can
accommodate three or more passengers. The percentages in excess of 100%
indicate that more than two passengers occupied some cabins.
The occupancy level on our ships during each quarter indicated below was
as follows (1):
Quarters Ended Occupancy
-------------- ---------
February 28, 2002 102.8%
May 31, 2002 101.9%
August 31, 2002 113.7%
November 30, 2002 102.1%
February 28, 2003 102.8%
May 31, 2003 98.5%
August 31, 2003 109.8%
November 30, 2003 101.1%
(1) Carnival plc occupancy is only included since April 17, 2003.
16
Our passenger capacity has grown from 43,810 berths at November 30, 1999,
not including Carnival plc, to 113,296 berths at November 30, 2003. During 2000,
Carnival Corporation's capacity increased by 4,386 berths, primarily due to the
deliveries of the Carnival Victory and Holland America Line's Zaandam and
Amsterdam, partially offset by the 1,214 berth decrease due to the sale of
Holland America Line's Nieuw Amsterdam. During 2001, Carnival Corporation's
capacity increased by 10,150 berths, primarily due to the acquisition and
consolidation of Costa's 9,200 berths and the delivery of the Carnival Spirit,
partially offset by the removal from service of the 946 berth Costa Riviera and
the 232 berth decrease due to the sale of the Seabourn Goddess I and II. During
2002, Carnival Corporation's capacity increased by 8,936 berths primarily due to
the deliveries of the Carnival Pride, Carnival Legend, Carnival Conquest and
Holland America Line's Zuiderdam, partially offset by the removal from service
of the 148 berth Wind Song. In 2003, our capacity increased by 46,014 berths
primarily due to 34,428 berths from the DLC transaction with Carnival plc and
11,608 berths from the introduction of the Carnival Glory, Island Princess,
Costa's Mediterranea and Fortuna and Holland America Line's Oosterdam.
Subsequent to November 30, 2003, the Carnival Miracle and Cunard's Queen Mary 2
were delivered, which added 4,744 berths to our capacity.
Cruise Ship Construction and Cruise Port Facility Development
As of February 15, 2004, we have signed agreements with two shipyards
providing for the construction of 10 additional cruise ships scheduled for
delivery during the next two and a half years and one letter of intent for an
additional 3,004-passenger vessel for expected delivery to Costa in the summer
2006. See Note 8, "Commitments" to our Consolidated Financial Statements in
Exhibit 13 to this joint Annual Report on Form 10-K.
Primarily in cooperation with private or public entities, we are engaged
in the development of new or enhanced cruise port facilities. These facilities
are expected to provide our passengers with an improved holiday experience. Our
involvement typically includes providing cruise port facility development and
management expertise and assistance with financing. During 2003, we were
primarily involved in the development of cruise port facilities in Long Beach,
California and Savona, Italy, which opened in 2003, Galveston, Texas, and San
Juan, Puerto Rico. In addition, we are in the process of negotiating for the
development of several other port facilities to service our North American and
European guests, including, but not limited to, facilities in Barcelona, Spain,
Brooklyn, New York and the Turks & Caicos Islands. No assurance can be given
that any of these cruise port facilities that are still being developed will be
completed.
Cruise Pricing and Payment Terms
Each of our cruise brands publishes brochures with prices for the upcoming
seasons. Brochure prices vary by cruise line, by category of cabin, by ship, by
season and by itinerary. Brochure prices are regularly discounted through our
early booking discount programs and other promotions. The cruise ticket price
typically includes accommodations, meals and most onboard entertainment, such as
the use of, or admission to, a wide variety of activities and facilities,
including fully equipped casino, nightclubs, theatrical shows, movies, parties,
a disco, a jogging track, a health club, swimming pools, whirlpools and saunas.
Our North American brands' payment terms require that a passenger pay a deposit
to confirm their reservations with the balance due well before the departure
date, while some of our European brands provide certain of their travel agents
and tour operators with credit terms, even though these parties typically
require the passenger to pay for the entire cruise before sailing.
Historically, some of our advance bookings were taken from several months
in advance of the sailing date, for contemporary brands, to more than a year in
advance of sailing, for our luxury brands. This lead-time provided us with more
time to manage our prices, in relation to demand for available cabins, with the
goal of achieving higher overall net revenue yields. In addition, some of our
fares, such as CCL's Supersaver fares, Princess's Loveboat Savers plan and
Holland America Line's Early Savings and Alumni Savings fares, are designed to
encourage potential passengers to book cruise reservations earlier.
Commencing after September 11, 2001, our brands, as well as others in the
travel and leisure industry, have generally experienced a closer-to-vacation
booking pattern than was experienced prior to September 11, 2001. Generally,
this trend continued during 2003 and it is possible that this closer-to-vacation
booking trend will continue in the future.
17
Although we prefer to have a longer booking curve, in response to this trend our
revenue management personnel have adjusted our cabin inventories and pricing
programs to deal with these changing booking patterns in order to optimize our
net revenue yields.
When a passenger elects to purchase air transportation from us, both our
cruise revenues and operating expenses generally increase by approximately the
same amount. Air transportation prices can vary by gateway and destination. Over
the last several years, we have generally experienced a lower number of guests
purchasing air transportation from us, which we believe is partially a result of
having opened additional embarkation points closer to our guests homes, as well
as the availability of frequent flyer programs and lower priced air tickets.
Onboard and Other Revenues
We derive revenues from other onboard activities and services not included
in the cruise ticket price including, but not limited to, casino gaming, bar
sales, gift shop sales, entertainment arcades, shore excursions, art auctions,
photo sales, spa services, bingo games and lottery tickets, video diaries,
snorkel equipment rentals, internet and telephone usage, vacation protection
programs and promotional advertising by merchants located in our ports of call.
Our casinos, which contain slot machines and gaming tables including
blackjack, and in most cases craps and roulette, are generally open only when
our ships are at sea in international waters. We also earn revenue from the sale
of alcoholic and other beverages. Onboard activities are either performed
directly by us or by independent concessionaires, from which we collect a
percentage of their revenues or a fee.
We receive additional revenues from the sale to our passengers of shore
excursions at each ship's ports of call. These excursions include, among other
things, general sightseeing and adventure outings and local boat and beach
parties. For the Princess and Holland America Line ships and other of our brands
operating to destinations in Alaska, shore excursions are operated by Princess
Tours and Holland America Tours, as well as locally-owned operations. For shore
excursions in other locations we typically utilize locally-owned operations.
In conjunction with our cruise vacations, all of our cruise brands also
sell pre- and post-cruise land packages. Packages offered in conjunction with
ports of call in the U.S. would generally include one to four-night vacations at
nearby attractions or other vacation destinations, such as Universal Studios and
Walt Disney World in Orlando, Florida, Busch Gardens in Tampa, Florida, or
individual/multiple city tours of Boston, Massachusetts, New York City,
Washington, D.C. and/or Las Vegas, Nevada. Packages offered in Europe generally
include up to four-night vacations, including stays in well-known European
cities, such as Athens, Greece, Copenhagen, Denmark, London, England, Paris,
France and Rome, Italy.
In conjunction with our Alaska cruise vacations, principally on our
Princess, Holland America and CCL ships, we sell pre- and post-cruise land
packages, utilizing, to a large extent, our transportation and hotel assets.
Sales Relationships and Marketing Activities
We are a customer service-driven company and continue to invest in our
service organization to assist travel agents and guests. We believe that our
support systems and infrastructure are among the strongest in the vacation
industry.
We sell our cruises mainly through travel agents. Our individual cruise
brands' relationships with their travel agents is generally independent of each
of our other brands. These travel agent relationships are not exclusive and most
travel agents also sell cruises and other vacations provided by our competitors.
Our policy towards travel agents is to train and motivate them to support our
products with competitive sales and pricing policies and joint marketing
programs. We also use a wide variety of marketing techniques, including
websites, seminars and videos, to familiarize the agents with our cruise brands
and products. As with our brands' travel agent relationships, each of our brands
marketing programs are generally independent of each of our other brands. In
each of our principal markets, we have familiarized the travel agency community
with our cruise brands and products.
Travel agents generally receive standard commissions of 10 percent, plus
the potential of additional commissions based on sales volume. During fiscal
2003, no controlled group of travel agencies accounted for more than 10% of our
revenues.
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Our investment in customer service has been focused on the development of
systems and employees. We have improved our systems within the reservations,
quality assurance, and customer relationship management functions, emphasizing
the continued support of the travel agency community, while simultaneously
developing greater contact and interactivity with our customer base. We have
individual websites for each of our brands, which provide access to information
about our products to internet users throughout the world, and in most cases
provide booking engines to our travel partners. We also support booking
capabilities through major airline computer reservation systems, including
SABRE, Galileo, Amadeus and Worldspan.
We have pursued comprehensive marketing campaigns to market our brands to
vacationers. The principal media used are magazine and newspaper advertisements
and promotional campaigns. Certain of our brands also use significant amounts of
television advertising.
In 1998, we created the "World's Leading Cruise Lines" marketing alliance
for our family of North American cruise brands and Costa in order both to
educate the consumer about the overall breadth of our cruise brands, as well as
to increase the effectiveness and efficiency of marketing our brands. During
2000, we launched "VIP", or Vacation Interchange Privileges, a loyalty program
that provides special considerations to repeat guests aboard certain of our
brands.
Seasonality
Our revenue from the sale of passenger tickets is seasonal, with our third
quarter being the strongest. Historically, demand for cruises has been greatest
during our third fiscal quarter, which includes the North American summer
months. The consolidation of Carnival plc has caused our quarterly results to be
slightly more seasonal than we had previously experienced, as their business is
more seasonal. This higher demand during the third quarter results in higher net
revenue yields and, accordingly, the largest share of our net income is earned
during this period.
Competition
We compete with land-based vacation alternatives throughout the world,
including, among others, resorts, hotels, theme parks and vacation ownership
properties located in Las Vegas, Nevada, Orlando, Florida, various Caribbean,
Mexican, Bahamian and Hawaiian Island destination resorts and numerous other
vacation destinations throughout Europe and the rest of the world.
Our primary cruise competitors in the contemporary and/or premium cruise
segments for North American sourced passengers are Royal Caribbean Cruises Ltd.,
which owns Royal Caribbean International and Celebrity Cruises, Star Cruises
plc, which owns Norwegian Cruise Line and Orient Lines, and Disney Cruise Line.
Our primary cruise competitors for European sourced passengers are
MyTravel's Sun Cruises, Fred Olsen, Saga and Thomson in the UK; Festival
Cruises, Hapag-Lloyd, Peter Deilmann, Phoenix Reisen and Transocean Cruises in
Germany; and Mediterranean Shipping Cruises, Louis Cruise Line, Festival Cruises
and Spanish Cruise Line in southern Europe. We also compete for passengers
throughout Europe with Norwegian Cruise Line, Orient Lines, Royal Caribbean
International and Celebrity Cruises.
Our primary competitors in the luxury cruise segment for our Cunard,
Seabourn and Windstar brands include Crystal Cruises, Radisson Seven Seas Cruise
Line and Silversea Cruises.
Our brands also compete with similar or overlapping product offerings
across all of our segments.
Governmental Regulations
Maritime Regulations
Our ships are regulated by various international, national, state and
local laws, regulations and treaties in force in the jurisdictions in which our
ships operate. In addition, our ships are registered in the Bahamas, Bermuda,
Gibraltar, Italy, the Marshall Islands, the Netherlands, Panama and the UK, as
more fully described under Part I, Item 1. Business, C. Cruise Segment - Cruise
Operations and, accordingly, are regulated by these
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jurisdictions and by the international conventions governing the safety of our
ships and guests that these jurisdictions have ratified or adhere to. Each
country of registry conducts periodic inspections to verify compliance with
these regulations as discussed more fully below. In addition, the directives and
regulations of the European Union are applicable to some aspects of our ship
operations.
Specifically, the IMO, which operates under the United Nations, has
adopted safety standards as part of the SOLAS Convention, which is applicable to
all of our ships. Generally SOLAS establishes vessel design, structural
features, materials, construction and life saving equipment requirements to
improve passenger safety and security. The SOLAS requirements are revised from
time to time, with the most recent modifications being phased in through 2010.
In 1993, SOLAS was amended to adopt the International Safety Management
Code, referred to as the ISM Code. The ISM Code provides an international
standard for the safe management and operation of ships and for pollution
prevention. The ISM Code became mandatory for passenger vessel operators, such
as ourselves, on July 1, 1998. All of our operations and ships have obtained the
required certificates demonstrating compliance with the ISM Code and are
regularly inspected and controlled by the national authorities, as well as the
international authorities acting under the provisions of the international
agreements related to Port State Control-- the process by which a nation
exercises authority over foreign ships when the ships are in the waters subject
to its jurisdiction.
Our ships are subject to a program of periodic inspection by ship
classification societies who conduct annual, intermediate, dry-docking and class
renewal surveys. Classification societies conduct these surveys not only to
ensure that our ships are in compliance with international conventions adopted
by the flag state and domestic rules and regulations, but also to verify that
our ships have been maintained in accordance with the rules of the society and
recommended repairs have been satisfactorily completed.
Our ships that call on U.S. ports are subject to inspection by the U.S.
Coast Guard for compliance with the SOLAS Convention and by the U.S. Public
Health Service for sanitary standards. Our ships are also subject to similar
inspections pursuant to the laws and regulations of various other countries our
ships visit.
Finally, our ships that call on U.S. ports are also subject to new
security regulations implementing The Maritime Transportation Security Act of
2002, referred to as MTSA, and the International Ship and Port Facility Security
Code, or ISPS, under the auspices of SOLAS. The U.S. Coast Guard issued a series
of final rules on October 22, 2003, implementing U.S. requirements under both
the MTSA and ISPS. Among other things, the regulations require certain vessel
owners to implement security measures, conduct vessel security assessments, and
develop security plans. Under these requirements, our ships will prepare and
submit security plans to the appropriate flag-state and will be issued an
International Ship Security Certificate, or ISSC. Effective July 1, 2004, the
ISSC and our ships' security measures will be reviewed by the U.S. Coast Guard
during the Port State Control examinations. In addition, the regulations
establish Area Maritime Security requirements for geographic port areas that
provide authority for the U.S. Coast Guard to implement operational and physical
security measures on a port area basis.
We believe that health, safety and security issues will continue to be an
area of focus by relevant government authorities, both in the U.S., the European
Union and elsewhere. Resulting legislation or regulations, or changes in
existing legislation or regulations, could impact our operations and would
likely subject us to increasing compliance costs in the future.
Permits for Glacier Bay, Alaska
In connection with certain of our Alaska cruise operations, Holland
America Line, Princess Cruises and CCL rely on concession permits from the U.S.
National Park Service to operate their cruise ships in Glacier Bay National Park
and Preserve. Such permits must be periodically renewed and there can be no
assurance that they will continue to be renewed or that regulations relating to
the renewal of such permits, including preference or historical rights, will
remain unchanged in the future. See Part 1, Item 3. Legal Proceedings and Note
9, "Contingencies-Litigation" to our Consolidated Financial Statements in
Exhibit 13 to this joint Annual Report on Form 10-K.
Any loss of rights or reduction of permits is not expected to impact us
materially because we could still apply for permits to replace our preferential
or historical permits and additional attractive alternative destinations in
Alaska can be substituted for Glacier Bay.
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Alaska Environmental Regulations
The State of Alaska enacted legislation in 2001 that establishes standards
for wastewater discharge from cruise ships operating within Alaskan waters. The
legislation requires that certain information be gathered with respect to solid
waste and other marine discharges. The legislation also provides that repeat
violators of the regulations could be prohibited from operating in Alaskan
waters. The standards require treatment of wastewater and provide for
restrictions on discharges.
Other Environmental, Health and Safety Matters
We are subject to various international, national, state and local
environmental protection and health and safety laws, regulations and treaties
that govern, among other things, air emissions, employee health and safety,
waste discharge, water management and disposal, and storage, handling, use and
disposal of hazardous substances, such as chemicals, solvents, paints and
asbestos. We are committed to helping to conserve the natural environment, not
only because of the existing regulations, but because a pristine environment is
one of the key elements that bring our guests on board our ships.
In particular, in the U.S., the Oil Pollution Act of 1990 ("OPA") provides
for strict liability for water pollution, such as oil pollution or threatened
oil pollution incidents in the 200-mile exclusive economic zone of the U.S.,
subject to monetary limits. These monetary limits do not apply, however, where
the discharge or violation of applicable regulation is caused by gross
negligence or willful misconduct of a responsible party. Pursuant to the OPA, in
order for us to operate in U.S. waters, we are also required to obtain
Certificates of Financial Responsibility from the U.S. Coast Guard for each of
our ships. These certificates demonstrate our ability to meet removal costs and
damages related to water pollution, such as for an oil spill or a release of a
hazardous substance, up to our ship's statutory liability limit.
In addition, most U.S. states that border a navigable waterway or seacoast
have enacted environmental pollution laws that impose strict liability on a
person for removal costs and damages resulting from a discharge of oil or a
release of a hazardous substance. These laws may be more stringent than U.S.
federal law.
Furthermore, many countries have ratified and adopted IMO Conventions
which, among other things, impose liability for pollution damage subject to
defenses and to monetary limits, which monetary limits do not apply where the
spill is caused by the owner's actual fault or by the owner's intentional or
reckless conduct. In jurisdictions that have not adopted the IMO Conventions,
various national, regional or local laws and regulations have been established
to address oil pollution.
If we violate or fail to comply with environmental laws, regulations or
treaties, we could be fined or otherwise sanctioned by regulators. We have made,
and will continue to make, capital and other expenditures to comply with
environmental laws and regulations. See Note 9, "Contingencies - Litigation" to
our Consolidated Financial Statements in Exhibit 13 to this joint Annual Report
on Form 10-K for additional information related to Holland America's
environmental contingencies.
From time to time, environmental and other regulators consider more
stringent regulations which may affect our operations and increase our
compliance costs. As evidenced from the preceding paragraphs, the cruise
industry is affected by a substantial amount of environmental rules and
regulations. We believe that the impact of cruise ships on the global
environment will continue to be an area of focus by the relevant authorities
and, accordingly, this will likely subject us to increasing compliance costs in
the future.
See Part 1, Item 1. Business, B. Risk Factors for additional discussion of
our environmental risks.
Consumer Regulations
Our ships that call on U.S. ports are regulated by the Federal Maritime
Commission, referred to as the FMC. Public Law 89-777, which is administered by
the FMC, requires most cruise line operators to establish financial
responsibility for their liability to passengers for non-performance of
transportation, as well as casualty and personal injury. The FMC's regulations
require that a cruise line demonstrate its financial responsibility for
non-performance of transportation through a guarantee, escrow arrangement,
surety bond or insurance. Currently, the amount required must equal 110% of the
cruise line's highest
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amount of customer deposits over a two year period, up to a maximum coverage
level of $15 million. The FMC has proposed various changes to the financial
responsibility regulations for non-performance of transportation, including a
proposal to increase significantly the amount of financial responsibility
required to be maintained by cruise lines, which would increase our compliance
costs. See Part 1, Item 1. Business, F. Insurance - Other Insurance below for
additional discussion.
In the UK, we are required to bond and obtain licenses from various
organizations in connection with the conduct of our business and our ability to
meet liability in the event of non-performance of obligations to consumers.
These organizations include the Passenger Shipping Association and the Civil
Aviation Authority. See Part 1, Item 1. Business, F. Insurance-Other Insurance
below for additional discussion.
We are also required by German law to obtain a guarantee from a reputable
insurance company to ensure that in case of insolvency, our customers will be
refunded any monies they have paid on account of a booking and, in addition,
that they will be repatriated without additional cost if insolvency occurs after
a cruise starts. In addition, in Australia, we are a member of the Travel
Compensation Fund which provides compensation, as a last resort, to consumers
who suffer losses in their dealings with travel agents. Finally, other
jurisdictions, including Argentina and Brazil, require the establishment of
financial responsibility for passengers from their jurisdictions.
We believe we have all the necessary licenses to conduct our business.
From time to time, various other regulatory and legislative changes may be
proposed or adopted that could have an effect on the cruise industry in general
and our business in particular. See Part I, Item 1. Business, B. Risk Factors
for a discussion of other regulations which impact us.
Financial Information
For financial information about our cruise reporting segment with respect
to each of the three years in the period ended November 30, 2003, see Note 13,
"Segment Information" to our Consolidated Financial Statements in Exhibit 13 to
this Annual Report on Form 10-K.
D. Employees
Our operations have approximately 8,500 full-time and 2,500
part-time/seasonal employees engaged in shoreside operations. We also employ
approximately 55,000 officers, crew and staff on our 73 ships. Due to the highly
seasonal nature of our Alaska and Canadian operations, Holland America Tours and
Princess Tours increase their work force during the late spring and summer
months in connection with the Alaska cruise season, employing additional
seasonal personnel, which have been included above. We have entered into
agreements with unions covering certain employees in our hotel, motor coach and
ship operations. We consider our employee and union relations generally to be
good.
We source our shipboard officers primarily from Italy, Holland, the UK,
Norway and Germany. The remaining crew positions are manned by persons from
around the world. We utilize various manning agencies in many countries and
regions to help secure our shipboard employees.
E. Suppliers
Our largest purchases are for airfare, travel agency commissions,
advertising, fuel, food and beverages, hotel and restaurant supplies and
products, repairs and maintenance and dry-docking, port charges, communication
services and for the construction of our ships. Although we utilize a limited
number of suppliers for most of our food and beverages, and hotel and restaurant
supplies and products, most of these purchases are available from numerous
sources at competitive prices. The use of a limited number of suppliers enables
us to, among other things, obtain volume discounts. We purchase fuel and port
related services, at some of our ports of call from a limited number of
suppliers. In addition, we perform our major dry-dock and ship improvement work
at dry-dock facilities in the Bahamas, British Columbia, Canada, the Caribbean,
Europe and the U.S. We believe there are sufficient dry-dock facilities to meet
our anticipated requirements. Finally, as of February 15, 2004, we have
agreements, and a letter of intent, with two shipyards for the construction of
11 additional cruise ships.
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F. Insurance
General
We maintain insurance to cover a number of risks associated with owning
and operating vessels in international trade. All such insurance policies are
subject to limitations, exclusions and deductible levels. Since September 11,
2001, we have experienced insurance premium increases and may continue to incur
increases in our premiums depending on our own loss experience and the general
premium requirements of our underwriters. No assurance can be given that
affordable and viable direct and reinsurance markets will be available to us in
the future. We maintain certain levels of self-insurance for the below-mentioned
risks through the use of substantial deductibles, which may increase in the
future to mitigate premium increases. We do not carry coverage related to loss
of earnings or revenues for our ships.
Protection and Indemnity ("P&I") Coverage
Third-party liabilities in connection with our cruise activities are
covered by entry in a P&I club. P&I coverage is available through mutual
indemnity associations, known as clubs, that are owned by shipowners. Our
vessels are entered into three P&I clubs as follows: The West of England
Shipowners Mutual Insurance Association (Luxembourg), Steamship Mutual
Underwriting Association Ltd. and the United Kingdom Mutual Steamship Assurance
Association (Bermuda) Limited. The P&I clubs in which we participate are part of
a worldwide network of P&I clubs, known as the International Group of P&I
Associations (the "IG"). The IG insures directly, and through reinsurance
markets, a large portion of the world's shipping fleets. Coverage is subject to
the club's rules and the limit of coverage is determined by the IG. Our vessel
coverages include legal, statutory or pre-approved contract liabilities and
other expenses related to crew, passengers and other third parties on our ships
in operation. This coverage also includes shipwreck removal, pollution and
damage to third party property.
Hull and Machinery Insurance
We maintain insurance on the hull and machinery of each of our ships in
amounts equal to the approximate estimated market value of each ship. The
coverage for hull and machinery is provided by international marine insurance
carriers. Most insurance underwriters make it a condition for insurance coverage
that a ship be certified as "in class" by a classification society that is a
member of the International Association of Classification Societies ("IACS").
All of our ships are currently certified as in class with an IACS member. These
certifications have either been issued or endorsed within the last twelve
months.
War Risk Insurance
Subject to certain limitations, we maintain war risk insurance on all of
our ships for our legal liability to crew, passengers and other third parties,
including terrorist risks. This coverage is provided by international marine
insurance carriers. Due primarily to its high cost, we only carry war risk
insurance coverage for physical damage to our ships, which includes terrorist
risks, for 29 of our ships. As is typical for war risk policies in the marine
industry, under the terms of the policy, underwriters can give seven days notice
to the insured that the liability and physical damage policies can be cancelled
and reinstated at different premium rates. This gives underwriters the ability
to increase our premiums following events that they deem increase their risk. As
a result of the September 11, 2001 attacks and other events, our war risk
insurance premiums have increased substantially. No assurance can be given that
affordable and viable direct and reinsurance markets will be available to us in
the future for war risk insurance.
Other Insurance
We, as currently required by the FMC, maintain at all times three $15
million performance bonds for ships operated by CCL, Holland America Line, and
Cunard Line Limited, which embark passengers in U.S. ports, to cover passenger
ticket liabilities in the event of a cancelled or interrupted cruise. Costa, P&O
Cruises and Princess maintain insurance as required by the FMC to cover their
ticket liabilities in the event of a cancelled or interrupted cruise. We also
maintain other performance bonds as required by various foreign authorities that
regulate certain of our operations in their jurisdictions. Specifically, Costa,
Cunard and P&O Cruises are required by the UK Passenger Shipping Association and
the UK Civil Aviation Authority to provide performance bonds totaling
approximately $120 million and $60 million to cover their cruise and air ticket
passenger
23
deposit liabilities, respectively.
We maintain standard property and casualty insurance policies to cover
shoreside assets and liabilities to third parties, including our tour business
assets, as well as appropriate workers' compensation policies. We also maintain
business interruption insurance for certain Princess shoreside operations, which
are subject to deductibles.
The Athens Convention
Current conventions generally in force applying to passenger ships are the
Athens Convention relating to the Carriage of Passengers and their Luggage by
Sea (1974), the 1976 Protocol to the Athens Convention and the Convention on
Limitation of Liability for Maritime Claims (1976). The U.S. has not ratified
any Athens Convention Protocol. However, vessels flying the flag of a country
that has ratified it may contractually enforce the 1976 Athens Convention
Protocol for cruises that do not call at a U.S. port.
The IMO Diplomatic Conference agreed to a new protocol to the Athens
Convention on November 1, 2002. The new protocol, which has not yet been
ratified, substantially increases the minimum level of compulsory insurance
which must be maintained by passenger ship operators and provides a direct
action provision, which will allow claimants to proceed directly against
insurers. This new protocol requires passenger ship operators to maintain
insurance or some other form of financial security, such as a guarantee from a
bank, to cover the limits of strict liability under the Convention with regards
to the death or personal injury of passengers. Most of the countries in the
European Union, where many of our vessels operate, supported the new protocol
and are likely to ratify it in the future. However, the timing of such
ratification, if obtained at all, is unknown. No assurance can be given that
affordable and viable direct and reinsurance markets will be available to
provide the level of coverage required under the new protocol. We also expect
insurance costs may increase once the new protocol is ratified.
G. Trademarks and Other Intellectual Property
We own and have registered numerous trademarks and have also registered
various domain names, which we believe are widely recognized throughout the
world and have considerable value. These trademarks include the names of our
cruise lines, each of which we believe is a widely-recognized brand name in the
cruise vacation industry, as well as "World's Leading Cruise Lines". We have a
license to use the P&O name, the P&O flag and other relevant trademarks and
domain names in relation to cruises and related activities. Finally, we also
have a license to use the "Love Boat" name and related marks. See Note 2
"Trademarks" and Note 3 "DLC Transaction" to our Consolidated Financial
Statements in Exhibit 13 to this joint Annual Report on Form 10-K.
H. Taxation
U.S. Federal Income Tax
We are a foreign corporation engaged in a trade or business in the U.S.,
and our ship-owning subsidiaries are foreign corporations that, in many cases,
depending upon the itineraries of their ships, receive income from sources
within the U.S. for U.S. federal income tax purposes. To the best of our
knowledge, we believe that, under Section 883 of the Internal Revenue Code and
applicable income tax treaties, our income and the income of our ship-owning
subsidiaries, in each case derived from or incidental to the international
operation of a ship or ships, is currently exempt from U.S. federal income tax.
We believe that substantially all of our income, and the income of our
ship-owning subsidiaries, with the exception of our U.S. source income from the
transportation, hotel and tour businesses of Holland America Tours and Princess
Tours, and the items listed in the regulations under Section 883 that the
Internal Revenue Service does not consider to be incidental to ship operations
as described in Note 10 "Income and Other Taxes" to our Consolidated Financial
Statements included in Exhibit 13 to this joint Annual Report on Form 10-K, is
derived from or incidental to the international operation of a ship or ships
within the meaning of Section 883 and applicable income tax treaties.
The following summary of the application of the principal U.S. federal
income tax laws to us is based upon existing U.S. federal income tax law,
including the Internal Revenue Code, proposed, temporary and final U.S. treasury
regulations, certain current income tax treaties, administrative pronouncements
and judicial decisions, as currently in effect, all of which are subject to
change, possibly with retroactive effect.
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Application of Section 883 of the Internal Revenue Code
In general, under Section 883, certain non-U.S. corporations are not
subject to U.S. federal income tax or branch profits tax on certain U.S. source
income derived from the international operation of a ship or ships. We believe
that Carnival Corporation and many of its ship-owning subsidiaries currently
qualify for the Section 883 exemption since each is organized in a qualifying
jurisdiction and Carnival Corporation's common stock is primarily and regularly
traded on an established securities market in the U.S. Any official
interpretations could differ materially from our interpretation of this Internal
Revenue Code provision, and its recently enacted final regulations, and, even in
the absence of differing official interpretations, the Internal Revenue Service
might successfully challenge our interpretation. In addition, the provisions of
Section 883 are subject to change at any time by legislation. Moreover, changes
could occur in the future with respect to the trading volume or trading
frequency of Carnival Corporation shares or with respect to the identity,
residence, or holdings of Carnival Corporation's direct or indirect shareholders
that could affect Carnival Corporation's and its subsidiaries eligibility for
the Section 883 exemption. Accordingly, although we believe it is unlikely, it
is possible that Carnival Corporation and its ship-owning or operating
subsidiaries' whose tax exemption is based on Section 883 could lose this
exemption. If Carnival Corporation and/or its ship-owning or operating
subsidiaries were not entitled to the benefit of Section 883, Carnival
Corporation and/or its ship-owning or operating subsidiaries would be subject to
U.S. federal income taxation on a portion of our income, which would reduce our
net income.
In 2003, the U.S. Treasury Department issued final treasury regulations
under Section 883 relating to income derived by foreign corporations from the
international operation of ships and aircraft. The final regulations provide, in
general, that a foreign corporation will qualify for the benefits of Section 883
if, in relevant part, (i) the foreign country in which the foreign corporation
is organized grants an equivalent exemption to corporations organized in the
U.S. and (ii) either (a) more than 50% of the value of the corporation's stock
is owned, directly or indirectly, by individuals who are residents of that
country or of another foreign country that grants an equivalent exemption to
corporations organized in the U.S., referred to as the "stock ownership test"
(such individuals are referred to as "Qualified Shareholders") or (b) the
foreign corporation meets the publicly-traded test described below. In addition,
to the extent a foreign corporation's shares are owned by a direct or indirect
parent corporation which itself meets the publicly-traded test, then in
analyzing the stock ownership test with respect to such subsidiary, stock owned
directly or indirectly by such parent corporation will be deemed owned by
individuals resident in the country of incorporation of such parent corporation.
A company whose shares are considered to be "primarily and regularly
traded on an established securities market" in the U.S. or another qualifying
jurisdiction will meet the publicly-traded test (the "publicly-traded test").
Pursuant to the final treasury regulations issued under Section 883, stock will
be considered "primarily traded" on one or more established securities markets
if, with respect to each class of stock of the particular corporation, the
number of shares in each such class that are traded during a taxable year on any
such market exceeds the number of shares in each such class traded during that
year on any other established securities market. Stock of a corporation will
generally be considered "regularly traded" on one or more established securities
markets under the proposed regulations if (i) one or more classes of stock of
the corporation that, in the aggregate, represent more than 50% of the total
combined voting power of all classes of stock of such corporation entitled to
vote and of the total value of the stock of such corporation are listed on such
market; and (ii) with respect to each class relied on to meet the more than 50%
requirement in (i) above, (x) trades in each such class are effected, other than
in de minimis quantities, on such market on at least 60 days during the taxable
year, and (y) the aggregate number of shares in each such class of the stock
that are traded on such market during the taxable year is at least 10% of the
average number of shares of the stock outstanding in that class during the
taxable year. A class of stock that otherwise meets the requirements outlined in
the preceding sentence is not treated as meeting such requirements for a taxable
year if, at any time during the taxable year, one or more persons who own,
actually or constructively, at least 5% of the vote and value of the outstanding
shares of the class of stock, own, in the aggregate, 50% or more of the vote and
value of the outstanding shares of the class of stock (the "5% Override Rule").
However, the 5% Override Rule does not apply (a) where the foreign corporation
establishes that Qualified Shareholders own sufficient shares of the
closely-held block of stock to preclude non-Qualified Shareholders of the
closely-held block of stock from owning 50% or more of the total value of the
class of stock for more than half of the taxable year; or (b) to certain
investment companies provided that no person owns, directly or
25
through attribution, both 5% or more of the value of the outstanding interests
in such investment company and 5% or more of the value of the shares of the
class of stock of the foreign corporation.
We believe that Carnival Corporation currently qualifies as a publicly
traded corporation under the final regulations and substantially all of its
income, with the exception of our U.S. source income from the transportation,
hotel and tour businesses of Holland America Tours and Princess Tours and the
items listed in the regulations under Section 883 that the IRS does not consider
to be incidental to ship operations as described in Note 10 of our financial
statements, will continue to be exempt from U.S. federal income taxes. However,
because various members of the Arison family and trusts established for their
benefit currently own approximately 42% of Carnival Corporation shares, there is
the potential that another shareholder could acquire 5% or more of its shares,
which could jeopardize Carnival Corporation's qualification as a publicly traded
corporation. If, in the future, Carnival Corporation were to fail to qualify as
a publicly traded corporation, it and all of its ship-owning or operating
subsidiaries would be subject to U.S. federal income tax on their income
associated with their cruise operations in the U.S. In such event, the net
income of Carnival Corporation's ship-owning or operating subsidiaries would be
materially reduced, which would likely have a significant negative impact on our
stock price.
As a precautionary matter, Carnival Corporation amended its Articles of
Incorporation to ensure that it will continue to qualify as a publicly traded
corporation under the final regulations. This amendment provides that no one
person or group of related persons, other than certain members of the Arison
family and trusts established for their benefit, may own or be deemed to own by
virtue of the attribution provisions of the Internal Revenue Code more than 4.9%
of Carnival Corporation shares, whether measured by vote, value or number of
shares. Any Carnival Corporation shares acquired in violation of this provision
will be transferred to a trust and, at the direction of its board of directors,
sold to a person whose shareholding does not violate that provision. No profit
for the purported transferee may be realized from any such sale. In addition,
under specified circumstances, the trust may transfer the common stock at a loss
to the purported transferee. Because certain of Carnival Corporation notes are
convertible into its shares, the transfer of these notes are subject to similar
restrictions. These transfer restrictions may also have the effect of delaying
or preventing a change in control or other transactions in which the
shareholders might receive a premium for Carnival Corporation shares over the
then prevailing market price or which the shareholders might believe to be
otherwise in their best interest.
Exemption Under Applicable Income Tax Treaties
We believe that the income of some of Carnival Corporation's ship-owning
subsidiaries and the U.S. source shipping income from Carnival plc and its UK
resident subsidiaries currently qualifies for exemption from U.S. federal income
tax under applicable bilateral U.S. income tax treaties. These treaties may be
abrogated by either applicable country, replaced or modified with new agreements
that treat shipping income differently than under the agreements currently in
force. If any of our subsidiaries that currently claim exemption from U.S.
income taxation on their U.S. source shipping income under an applicable treaty
do not qualify for benefits under the existing treaties, or if the existing
treaties are abrogated, replaced or materially modified in a manner adverse to
our interests and, with respect to U.S. federal income tax only, if any such
subsidiary does not qualify for Section 883 exemption, such ship-owning or
operating subsidiary may be subject to U.S. federal income taxation on a portion
of its income, which would reduce our net income.
Taxation in the Absence of an Exemption under Section 883 or any
Applicable U.S. Income Tax Treaty
Shipping income that is attributable to transportation of passengers which
begins or ends in the U.S. is considered to be 50% derived from U.S. sources.
Shipping income that is attributable to transportation of passengers which
begins and ends in foreign countries is considered 100% derived from foreign
sources and not subject to U.S. federal income tax. Shipping income that is
attributable to the transportation of passengers which begins and ends in the
U.S. without stopping at an intermediate foreign port is considered to be 100%
derived from U.S. sources.
The legislative history of the transportation income source rules suggests
that a cruise that begins and ends in a U.S. port, but that calls on more than
one foreign port, will derive U.S. source income only from the first and last
legs of the cruise. Because
26
there are no regulations or other Internal Revenue Service interpretations of
these rules, the applicability of the transportation income source rules in the
aforesaid manner is not free from doubt.
In the absence of an exemption under Section 883 or any applicable U.S.
income tax treaty, as appropriate, we and/or our subsidiaries would be subject
to either the net income and branch profits tax regimes of Section 882 and
Section 884 of the Internal Revenue Code (the "net tax regime") or the four
percent of gross income tax regime of Section 887 of the Internal Revenue Code
(the "four percent tax regime").
The net tax regime is only applicable where the relevant foreign
corporation has, or is considered to have, a fixed place of business in the U.S.
that is involved in the earning of U.S. source shipping income and substantially
all of this shipping income is attributable to regularly scheduled
transportation. Under the net tax regime, U.S. source shipping income, net of
applicable deductions, would be subject to a corporate tax of up to 35% and the
net after-tax income would be potentially subject to a further branch tax of
30%. In addition, interest paid by the corporations, if any, would generally be
subject to a 30% branch interest tax.
Under the four percent tax regime, which should be the tax regime
applicable to vessel owning subsidiaries, the U.S. source shipping income of
each of the vessel owning subsidiaries would be subject to a four percent tax
imposed on a gross basis, without benefit of deductions. Under the four percent
tax regime, the maximum effective rate of tax on the gross shipping income of
these subsidiaries attributable to transportation that either begins or ends in
the U.S. would not exceed two percent.
UK Tonnage Tax
Carnival plc and all its ship owning subsidiaries, except for
substantially all of Princess' operations, are a tax resident of the UK. The UK
ship owning/operating companies are subject to UK tax and are entered into the
UK tonnage tax regime. Companies to which the tonnage tax regime applies pay
corporation tax on profit calculated by reference to the net tonnage of
qualifying vessels. UK corporation tax is not chargeable under normal UK tax
rules on such companies' relevant shipping profits. An election for the tonnage
tax regime to apply takes effect for ten years and can be renewed on a rolling
basis. For a company to be eligible for the regime, it must be subject to UK
corporation tax and, among other matters, operate qualifying ships that are
strategically and commercially managed in the UK. There is also a seafarer
training requirement to which the tonnage tax companies are subject.
Relevant shipping profits which are excluded from normal corporation tax
include income which is defined as relevant shipping income. Relevant shipping
income includes income from the operation of qualifying ships and broadly from
shipping related activities. It also includes dividends from foreign companies
which are subject to a tax on profits in their country of residence or elsewhere
and the activities of which broadly would qualify in full for the UK tonnage tax
regime if they were UK resident. In addition, more than 50 percent of the voting
power in the foreign company must be held by one or more companies resident in
an EU member state.
Our UK non-shipping activities that do not qualify under the UK tonnage
tax regime, which are not forecast to be significant, remain subject to normal
UK corporation tax.
Italian Income Tax
Our Costa cruise operations are subject to Italian income tax. However, as
a result of income tax exemptions allowed Italian flagged vessels, Costa's
Italian cruise operations are subject to an effective tax rate of approximately
six percent. In 2003, the Italian government passed a law permitting the
establishment of an elective new tonnage tax regime similar to the UK regime
described above. Rules providing some of the details in the planned system are
expected to be issued in 2004. Complete regulations, if approved by the European
Union, will result in the establishment of a tonnage tax system. Based upon the
information currently available, Costa's vessels would qualify for this system,
and we would expect a reduction in Italian income taxation of Costa's vessel
operations. If approved by the European Union and implemented in Italy in 2004,
it may be possible for Costa to elect to enter the tonnage tax system starting
from 2005. In the absence of complete and final regulations it is impossible for
Costa to determine if election into the system will be beneficial.
27
German and Australian Income Tax
The German and Australian brands of Carnival plc are divisions of a UK
company. The profits from these activities are subject to UK tonnage tax as
discussed above. The majority of these operations profits are exempt from German
and Australian corporation taxes by virtue of the UK/Germany and UK/Australian
double tax treaties. Part of the German profits in 2003 arose from river cruises
and other activities, which do not constitute international shipping. To this
extent, these profits were subject to German taxation, however, the river cruise
business was sold in December 2003.
Equalization Payments
Carnival Corporation and Carnival plc do not anticipate that any material
amounts of equalization payments are likely to be made between them in
accordance with the Equalization and Governance Agreement for the foreseeable
future. However, if it becomes necessary to make equalization payments, any such
payments received in the UK are likely to be taxable. Further, the treatment
from a U.S. federal income tax perspective of such equalization payments is not
without doubt. The payment is to be grossed up in respect of any tax thereon. On
the basis that payments will not be material, any tax cost should not be
significant. See Note 3, "DLC Transaction" to our Consolidated Financial
Statements in Exhibit 13 to this joint Annual Report on Form 10-K.
I. Website Access to Reports
We make available, free of charge, access to our joint Annual Report on
Form 10-K, joint Quarterly Reports on Form 10-Q, joint Current Reports on Form
8-K and all amendments to those reports as soon as reasonably practicable after
such reports are electronically filed with or furnished to the SEC through our
home pages at www.carnivalcorp.com and www.carnivalplc.com.
Item 2. Properties
The Carnival Corporation and Carnival plc corporate headquarters and our
operating units' principal shoreside operations and headquarters are as follows:
Entity Location Square Footage Own/Lease
------ -------- -------------- ---------
Carnival Corporation and CCL Miami, FL U.S.A. 456,000 Own
Carnival plc and Carnival
Corporation's UK Sales and
Technical Services London, England 8,000 Lease
AIDA Rostock and
Frankfurt, Germany 60,500 Lease
Costa Genoa, Italy 149,000 Own/Lease
Cunard and Seabourn Miami, FL U.S.A.
and Southampton, England 74,000 Lease
Holland America Line, Windstar
and Princess Tours Seattle, WA U.S.A. 179,000 Lease
P&O Cruises, Ocean Village and
Swan Hellenic Southampton, England 90,000 Lease
P&O Cruises Australia Sydney, Australia 10,500 Lease
Princess Santa Clarita, CA U.S.A. 282,000 Lease
We also lease office space in Colorado Springs, Colorado and Miramar,
Florida for an additional CCL reservation center and for additional CCL sales
personnel, respectively. In addition, we lease office space in Hollywood,
Florida for Costa's South Florida sales office and in Pompano Beach, Florida for
certain of Princess' art framing and warehousing operations.
Our cruise ships, Holland America Tours' and Princess Tours' properties,
shoreside operations and headquarter facilities are all well maintained and in
good condition. We evaluate our needs periodically and obtain additional
facilities when deemed necessary. We believe that our facilities are adequate
for our current needs.
Our existing cruise ships and Holland America Line's and Princess' private
islands, Half Moon Cay and Princess Cay, which is owned through a joint venture,
are described in Part I, Item 1. Business, C. Cruise Segment. The properties
associated with Holland America Tours and Princess Tours operations are briefly
described in Part I, Item 1. Business, A. General.
28
Item 3. Legal Proceedings
Several actions (collectively, the "ADA Complaints") have been filed
against Costa, Cunard and Holland America Tours alleging that they violated the
Americans with Disabilities Act by failing to make certain cruise ships
accessible to individuals with disabilities. The plaintiffs seek injunctive
relief to require modifications to certain vessels to increase accessibility to
disabled passengers and fees and costs. The status of each pending ADA Complaint
is as follows:
On August 28, 2000, Access Now, Inc. and Edward S. Resnick filed ADA
Complaints in the U.S. District Court for the Southern District of
Florida against Costa and Holland America Tours. These complaints
seek modifications to vessels to increase accessibility to disabled
passengers. These cases have been transferred before the same judge.
Costa and the plaintiffs agreed to settle this action pursuant to an
agreement that Costa will make certain modifications to four of its
ships, with an option to include other ships into the settlement
agreement. On March 7, 2003, Costa and the plaintiffs jointly filed
a motion for class certification, fairness hearing, stay and for
court approval of the settlement. A hearing on the joint motion has
not yet been scheduled.
Holland America Tours and the plaintiffs have entered into a
settlement agreement pursuant to which Holland America Tours will
make certain modifications to eleven of its ships, with an option to
include other ships into the settlement agreement. On April 29,
2003, Holland America Tours jointly filed a motion for class
certification, fairness hearing, stay and for court approval of the
settlement. A hearing on the joint motion has not yet been
scheduled.
On August 29, 2000, an ADA Complaint also was filed against Cunard
by Access Now, Inc. and Edward S. Resnick in the U.S. District Court
for the Southern District of Florida. Cunard filed an answer to the
complaint on November 10, 2000. Given the settlement reached in the
case against CCL, the plaintiff has agreed to dismiss the ADA
Complaint against Cunard without prejudice pending settlement
negotiations which are ongoing.
On November 22, 2000, Costa instituted arbitration proceedings in Italy to
confirm the validity of its decision not to deliver its ship, the Costa
Classica, to the shipyard of Cammell Laird Holdings PLC ("Cammell Laird") under
a 79 million euro denominated contract for the conversion and lengthening of the
ship. Cammell Laird joined the arbitration proceeding on January 9, 2001 to
present its counter demands. On January 9, 2001, Costa gave Cammell Laird notice
of termination of the contract and Cammell Laird replied with its notice of
termination of the contract on February 2, 2001. It is expected that the
arbitration tribunal's decision will be made in late-2004 at the earliest.
Two actions (collectively, the "Facsimile Complaints") were filed against
Carnival Corporation on behalf of purported classes of persons who received
unsolicited advertisements via facsimile, alleging that Carnival Corporation and
other defendants distributed unsolicited advertisements via facsimile in
contravention of the U.S. Telephone Consumer Protection Act. The plaintiffs seek
to enjoin the sending of unsolicited facsimile advertisements and statutory
damages in the amount of five hundred dollars ($500) per facsimile, or in the
alternative, fifteen hundred dollars ($1,500) per facsimile if the conduct was
willful or knowing. The advertisements referred to in the Facsimile Complaints
were not sent by Carnival Corporation, but rather were distributed by a
professional faxing company at the behest of travel agencies that referenced a
CCL product. We do not advertise directly to the traveling public through the
use of facsimile transmission. The status of each Facsimile Complaint is as
follows:
On April 15, 2002, a Facsimile Complaint was filed against us in the
Circuit Court of Greene County, Alabama by Mary Pelt. We filed an
answer on June 3, 2002. Discovery is ongoing. A hearing on class
certification issues has been scheduled for May 7, 2004.
On May 14, 2002, a Facsimile Complaint was filed against Carnival
Corporation and other defendants (including Club Resort
International d/b/a Vacation Getaway Travel, Inc., Dollar Thrifty
Automotive Group, Inc., Thrifty, Inc. and Thrifty Rent-A-Car
Systems, Inc., Choicepoint, Inc., First Western Bank, and Bankcard
USA Merchant Services, Inc.) in the Circuit Court of Jefferson
County, Alabama, Bessemer Division by Clem & Kornis, L.L.C., The
Firm of Compassion, P.C., Collins
29
Chiropractic Center, Forstmann & Cutchen, L.L.P. and others. On July
26, 2002, Carnival Corporation filed a motion to dismiss or, in the
alternative, to separate Carnival Corporation as a defendant. This
action has been stayed pending a resolution of the Greene County
action referred to above.
On August 17, 2002, an incident occurred in Juneau, Alaska onboard Holland
America Line's Ryndam involving a wastewater discharge from the ship. As a
result of this incident, various Ryndam ship officers and crew have received
grand jury subpoenas from the Office of the U.S. Attorney in Anchorage, Alaska
requesting that they appear before a grand jury. One of these subpoenas also
requests the production of Holland America Line documents, which Holland America
Line has produced. Holland America Line is also complying with a subpoena for
additional documents. If the investigation results in charges being filed, a
judgment could include, among other forms of relief, fines and debarment from
federal contracting, which would prohibit operations in Glacier Bay National
Park and Preserve during the period of debarment. The State of Alaska is
separately investigating this incident.
During 2003, eight of Holland America Line's eleven ships offered Alaska
cruises during May through September. Of those cruises, 79% included Glacier Bay
National Park and Preserve on their itinerary. If Holland America Line were to
lose its Glacier Bay permits we would not expect the impact on our financial
statements to be material to us since we believe there are additional attractive
alternative destinations in Alaska that can be substituted for Glacier Bay.
On February 23, 2001, Holland America Line-USA, Inc. ("HAL-USA"), a
wholly-owned subsidiary, received a subpoena from a grand jury sitting in the
U.S. District Court for the District of Alaska. The subpoena requests that
HAL-USA produce documents and records relating to the air emissions from Holland
America Line ships in Alaska. HAL-USA responded to the subpoena.
In April 1996, a purported class action complaint was filed by Milton and
Nora Barton and others against Princess in the Los Angeles County Superior Court
alleging that Princess inappropriately assessed its passengers with certain port
charges in addition to their cruise fare. This case was settled for $89,750 in
early 2004.
On April 23, 2003, Festival Crociere S.p.A. commenced an action against
the European Commission (the "Commission") in the Court of First Instance of the
European Communities in Luxembourg seeking to annul the Commission's antitrust
approval of the DLC transaction (the "Festival Action"). We have been granted
leave to intervene in the Festival Action and intend to contest such action
vigorously. A successful third party challenge of an unconditional Commission
clearance decision would be unprecedented, and based on a review of the law and
the factual circumstances of the DLC transaction, as well as the Commission's
approval decision in relation to the DLC transaction, we believe that the
Festival Action will not have a material adverse effect on the companies or the
DLC transaction.
Several actions filed in the U.S. District Court for the Southern District
of Florida against us and four of our executive officers on behalf of a
purported class of persons who purchased our common stock were consolidated into
one action in Florida (the "Stock Purchaser Complaint"). The plaintiffs claimed
that statements we made in public filings violated federal securities laws and
sought unspecified compensatory damages and attorney and expert fees and costs.
A magistrate judge recommended that our motion to dismiss the Stock Purchaser
Complaint be granted and that the plaintiffs' amended complaint be dismissed
without prejudice. The parties executed a formal settlement agreement resolving
the dispute for a $3.4 million settlement amount, which includes plaintiff's
attorneys fees. A substantial portion of the settlement amount was covered by
insurance. In January 2004, the court approved the fairness of the proposed
settlement.
We are also involved from time to time in routine legal matters and other
claims incidental to our business. Most of these matters are covered by
insurance. We are not able to estimate the impact or the ultimate outcome of any
such actions, which are not covered by insurance.
Item 4. Submission of Matters to a Vote of Security Holders
None.
30
Executive Officers of the Registrants
Pursuant to General Instruction G(3), the information regarding our
executive officers called for by Item 401(b) of Regulation S-K is hereby
included in Part I of this joint Annual Report on Form 10-K.
The following table sets forth the name, age and title of each of our
executive officers. Titles listed relate to positions within Carnival
Corporation and Carnival plc unless otherwise noted. All the Carnival plc
positions were effective as of April 17, 2003, except as noted below.
NAME AGE POSITION
---- --- --------
Richard D. Ames 56 Senior Vice President - Management Advisory
Services
Micky Arison 54 Chairman of the Board of Directors
and Chief Executive Officer
Alan Buckelew 55 President of Princess
Gerald R. Cahill 52 Executive Vice President and Chief
Financial and Accounting Officer
Pamela C. Conover 47 President and Chief Operating Officer of
Cunard Line Limited
Robert H. Dickinson 61 President and Chief Executive Officer
of CCL and Director
Kenneth D. Dubbin 50 Vice President-Corporate Development
Pier Luigi Foschi 57 Chairman and Chief Executive Officer of Costa
Crociere, S.p.A. and Director
Howard S. Frank 62 Vice Chairman of the Board of Directors
and Chief Operating Officer
Ian J. Gaunt 52 Senior Vice President - International
Stein Kruse 45 President and Chief Operating Officer of
Holland America Line Inc.
A. Kirk Lanterman 72 Chairman of the Board of
Directors and Chief Executive Officer of
Holland America Line Inc. and Director
Arnaldo Perez 44 Senior Vice President, General Counsel
and Secretary
Peter G. Ratcliffe 55 Chief Executive Officer of P&O Princess
Cruises International Ltd. and Director
Business Experience of Executive Officers
Richard D. Ames has been Senior Vice President-Management Advisory
Services ("MAS") since March 2002. From January 1992 to February 2002 he was
Vice President-Audit Services, now known as MAS.
Micky Arison has been Chairman of the Board of Directors since October
1990 and a director since June 1987. He has been Chief Executive Officer since
1979.
Alan Buckelew has been President and Chief Financial Officer of Princess
since February 2004. From October 2000 to February 2004, he was Executive Vice
President and Chief Financial Officer. He was Senior Vice President, Corporate
Services of Princess from September 1998 to October 2000.
Gerald R. Cahill has been Executive Vice President and Chief Financial and
Accounting Officer since December 2003. From January 1998 to November 2003 he
was Senior Vice President-Finance, Chief Financial and Accounting Officer.
Pamela C. Conover has been President and Chief Operating Officer of Cunard
Line Limited since February 2001. She was Chief Operating Officer of Cunard Line
Limited from June 1998 to January 2001.
Robert H. Dickinson has been a director since June 1987. Mr. Dickinson has
been President and Chief Executive Officer of CCL since May 2003. He was
President and Chief Operating Officer of CCL from May 1993 to May 2003.
Kenneth D. Dubbin has been Vice President-Corporate Development since May
1999. From 1990 to 1999, he was Vice President and Treasurer of Royal Caribbean.
31
Pier Luigi Foschi has been a director since April 2003. He has been Chief
Executive Officer of Costa Crociere, S.p.A. since October 1997 and Chairman of
its Board since January 2000.
Howard S. Frank has been Vice Chairman of the Board of Directors since
October 1993, Chief Operating Officer since January 1998 and a director since
April 1992.
Ian J. Gaunt is an English Solicitor and has been Senior Vice
President-International since May 1999. He was a partner of the London-based
international law firm of Sinclair, Roche and Temperley from 1982 through April
1999 where he represented Carnival Corporation as special external legal counsel
since 1981.
Stein Kruse has been President and Chief Operating Officer of Holland
America Line Inc. ("HAL") since November 2003. From September 1999 to October
2003, he was Senior Vice President, Fleet Operations for HAL. From June 1997 to
August 1999 he was Senior Vice President and Chief Financial Officer for "K"
Line America, Inc.
A. Kirk Lanterman has been a director since April 1992. He has been
Chairman of the Board of Directors and Chief Executive Officer of HAL since
November 2003. From August 1999 to November 2003, he was Chairman of the Board,
President and Chief Executive Officer of HAL. From March 1997 to August 1999, he
was Chairman of the Board of Directors and Chief Executive Officer of HAL.
Arnaldo Perez has been Senior Vice President, General Counsel and
Secretary since March 2002. From August 1995 to February 2002 he was Vice
President, General Counsel and Secretary.
Peter G. Ratcliffe has been a director since April 2003 and a director of
Carnival plc since October 2000. He was Carnival plc's Chief Executive Officer,
until April 2003. He is Chief Executive Officer of P&O Princess Cruises
International Ltd, a subsidiary of Carnival plc. He was previously an executive
director of The Peninsular and Oriental Steam Navigation Company and head of its
cruise division, having served as President of Princess since 1993 and its Chief
Operating Officer since 1989.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
A. Market Information
The information required by Item 201(a) of Regulation S-K, Market
Information, is shown in Exhibit 13 and is incorporated by reference into this
joint 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
joint Annual Report on Form 10-K.
C. Dividends
We declared cash dividends on all of Carnival Corporation's common stock
in the amount of $0.105 per share in each of the first three fiscal quarters of
2003 and in each of the fiscal quarters of 2002. During the last quarter of
fiscal 2003 and in the first quarter of fiscal 2004, Carnival Corporation's cash
dividends per share increased to $0.125 per share. Carnival plc paid cash
dividends on all its ordinary shares in the amount of $0.10 per share, as
adjusted for the .3004 equalization ratio, for each of the four calendar
quarters in 2002 and the first quarter in calendar 2003. Carnival plc dividends
were for the same amount per share as Carnival Corporation's dividends for all
quarters beginning in the second quarter of fiscal 2003.
Payment of future dividends on Carnival Corporation common stock and
Carnival plc ordinary shares will depend upon, among other factors, our
earnings, financial condition and capital requirements. Each company may also
declare special dividends to all stockholders in the event that members of the
Arison family and trusts established for their benefit are required to pay
additional income taxes by reason of their ownership of Carnival Corporation's
common stock because of a Carnival Corporation income tax audit. The payment and
amount of any dividend is within the discretion of the Boards of Directors, and
32
it is possible that the timing and amount of any dividend may vary from the
levels discussed above.
Item 6. Selected Financial Data
The information required by Item 6, Selected Financial Data, is shown in
Exhibit 13 and is incorporated by reference into this joint Annual Report on
Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations, is shown in Exhibit 13 and is
incorporated by reference into this joint Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by Item 7A, Quantitative and Qualitative
Disclosures About Market Risk, is shown in Exhibit 13 and is incorporated by
reference into this joint Annual Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data
The financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated January 29, 2004, and the Selected Quarterly
Financial Data (Unaudited), are shown in Exhibit 13 and are incorporated by
reference into this joint Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable, as previously disclosed.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable
assurance that information required to be disclosed by us in the reports that we
file or submit, is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Our Chief Executive Officer, Chief Operating Officer and Chief Financial
and Accounting Officer have evaluated our disclosure controls and procedures and
have concluded, as of November 30, 2003, that they are effective as described
above.
Changes in Internal Controls
There were no significant changes in our internal controls or other
factors that could significantly affect these controls subsequent to the date of
their evaluation and there were no corrective actions with regard to significant
deficiencies and material weaknesses.
It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system will be met. In addition, the design of any control
system is based in part upon certain assumptions about the likelihood of future
events. Because of these and other inherent limitations of control systems,
there is only reasonable assurance that our controls will succeed in achieving
their goals under all potential future conditions.
PART III
Items 10, 11, 12, 13 and 14. Directors and Executive Officers of the
Registrants, Executive Compensation, Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters, Certain
Relationships and Related Transactions and Principal Accountant Fees and
Services
The information required by Items 10, 11, 12, 13 and 14 is incorporated
herein by
33
reference to the Carnival Corporation and Carnival plc joint 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 Carnival
Corporation and Carnival plc executive officers called for by Item 401(b) of
Regulation S-K is included in Part I of this joint Annual Report on Form 10-K.
We have adopted a code of ethics that applies to our chief executive
officer, chief operating officer and senior financial officers, including the
principal financial and accounting officer, controller and other persons
performing similar functions. This code of ethics is posted on our websites,
which are located at www.carnivalcorp.com and www.carnivalplc.com. We intend to
satisfy the disclosure requirement under Item 10 of Form 8-K regarding an
amendment to, or waiver from, a provision of this code of ethics by posting such
information on our websites, at the addresses specified above. Information
contained in our websites, whether currently posted or posted in the future, is
not part of this document or the documents incorporated by reference in this
document.
PART IV
Item 15. 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 incorporated herein by
reference.
(3) Exhibits
The exhibits listed on the accompanying Index to Exhibits are filed or
incorporated by reference as part of this joint Annual Report on Form 10-K and
such Index to Exhibits is hereby incorporated herein by reference.
(b) Reports on Form 8-K
We filed a Current Report on Form 8-K on November 6, 2003 (Items 5 and 7).
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARNIVAL CORPORATION CARNIVAL PLC
/s/ Micky Arison /s/ Micky Arison
- --------------------------------- ---------------------------------
Micky Arison Micky Arison
Chairman of the Board of Chairman of the Board of
Directors and Chief Executive Officer Directors and Chief Executive Officer
February 24, 2004 February 24, 2004
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
registrants and in the capacities and on the dates indicated.
CARNIVAL CORPORATION CARNIVAL PLC
/s/ Micky Arison /s/ Micky Arison
- --------------------------------- ---------------------------------
Micky Arison Micky Arison
Chairman of the Board of Chairman of the Board of
Directors and Chief Executive Officer Directors and Chief Executive Officer
February 24, 2004 February 24, 2004
/s/ Howard S. Frank /s/ Howard S. Frank
- --------------------------------- ---------------------------------
Howard S. Frank Howard S. Frank
Vice Chairman of the Board of Vice Chairman of the Board of
Directors and Chief Operating Officer Directors and Chief Operating Officer
February 24, 2004 February 24, 2004
/s/ Gerald R. Cahill /s/ Gerald R. Cahill
- --------------------------------- ---------------------------------
Gerald R. Cahill Gerald R. Cahill
Executive Vice President Executive Vice President
and Chief Financial and and Chief Financial and
Accounting Officer Accounting Officer
February 24, 2004 February 24, 2004
/s/ Richard G. Capen, Jr. /s/ Richard G. Capen, Jr.
- --------------------------------- ---------------------------------
Richard G. Capen, Jr. Richard G. Capen, Jr.
Director Director
February 24, 2004 February 24, 2004
/s/ Robert H. Dickinson /s/ Robert H. Dickinson
- --------------------------------- ---------------------------------
Robert H. Dickinson Robert H. Dickinson
Director Director
February 24, 2004 February 24, 2004
/s/ Arnold W. Donald /s/ Arnold W. Donald
- --------------------------------- ---------------------------------
Arnold W. Donald Arnold W. Donald
Director Director
February 24, 2004 February 24, 2004
/s/ Pier Luigi Foschi /s/ Pier Luigi Foschi
- --------------------------------- ---------------------------------
Pier Luigi Foschi Pier Luigi Foschi
Director Director
February 24, 2004 February 24, 2004
/s/ Baroness Hogg /s/ Baroness Hogg
- --------------------------------- ---------------------------------
Baroness Hogg Baroness Hogg
Director Director
February 24, 2004 February 24, 2004
/s/ A. Kirk Lanterman /s/ A. Kirk Lanterman
- --------------------------------- ---------------------------------
A. Kirk Lanterman A. Kirk Lanterman
Director Director
February 24, 2004 February 24, 2004
35
/s/ Modesto A. Maidique /s/ Modesto A. Maidique
- --------------------------------- ---------------------------------
Modesto A. Maidique Modesto A. Maidique
Director Director
February 24, 2004 February 24, 2004
/s/ John P. McNulty /s/ John P. McNulty
- --------------------------------- ---------------------------------
John P. McNulty John P. McNulty
Director Director
February 24, 2004 February 24, 2004
/s/ Sir John Parker /s/ Sir John Parker
- --------------------------------- ---------------------------------
Sir John Parker Sir John Parker
Director Director
February 24, 2004 February 24, 2004
/s/ Peter G. Ratcliffe /s/ Peter G. Ratcliffe
- --------------------------------- ---------------------------------
Peter G. Ratcliffe Peter G. Ratcliffe
Director Director
February 24, 2004 February 24, 2004
/s/ Stuart Subotnick /s/ Stuart Subotnick
- --------------------------------- ---------------------------------
Stuart Subotnick Stuart Subotnick
Director Director
February 24, 2004 February 24, 2004
/s/ Uzi Zucker /s/ Uzi Zucker
- --------------------------------- ---------------------------------
Uzi Zucker Uzi Zucker
Director Director
February 24, 2004 February 24, 2004
36
INDEX TO EXHIBITS
Page No. in
Sequential
Numbering
System
Exhibits
- --------
3.1-Third Amended and Restated Articles of Incorporation of Carnival
Corporation, incorporated by reference to Exhibit No. 3.1 to the joint Current
Report on Form 8-K of Carnival Corporation and Carnival plc.
3.2-Amended and Restated By-laws of Carnival Corporation, incorporated by
reference to Exhibit No. 3.2 to the joint Current Report on Form 8-K of Carnival
Corporation and Carnival plc.
3.3-Articles of Association of Carnival plc, incorporated by reference to
Exhibit No. 3.3 to the joint Current Report on Form 8-K of Carnival Corporation
and Carnival plc.
3.4-Memorandum of Association of Carnival plc, incorporated by reference to
Exhibit No. 3.4 to the joint Current Report on Form 8-K of Carnival Corporation
and Carnival plc.
4.1-Agreement of Carnival Corporation and Carnival plc dated February 19, 2004
to furnish certain debt instruments to the Securities and Exchange Commission.
4.2-Carnival Corporation Deed between Carnival Corporation and P&O Princess
Cruises plc for the benefit of the P&O Princess Shareholders dated April 17,
2003, incorporated by reference to Exhibit No. 4.1 to our joint Quarterly Report
on Form 10-Q for the quarter ended August 31, 2003.
4.3-Equalization and Governance Agreement dated April 17, 2003 between Carnival
Corporation and P&O Princess Cruises plc, incorporated by reference to Exhibit
No. 4.2 to our joint Quarterly Report on Form 10-Q of Carnival Corporation and
Carnival plc for the quarter ended August 31, 2003.
4.4-Carnival Corporation Deed of Guarantee, between Carnival Corporation and
Carnival plc, dated as of April 17, 2003, incorporated by reference to Exhibit
4.3 to the joint registration statement on Form S-4 of Carnival Corporation and
Carnival plc.
4.5-Carnival plc (formerly P&O Princess Cruises plc) Deed of Guarantee between
Carnival Corporation and Carnival plc, dated as of April 17, 2003, incorporated
by reference to Exhibit 4.10 to the joint registration statement on Form S-3 and
F-3 of Carnival Corporation, Carnival plc and POPCIL.
4.6-P&O Princess Cruises International Limited ("POPCIL") Deed of Guarantee
among POPCIL, Carnival Corporation and Carnival plc, dated as of June 19, 2003,
incorporated by reference to Exhibit No. 4.11 to the joint Carnival Corporation,
Carnival plc and POPCIL Registration Statement filed on June 19, 2003.
4.7-Specimen Common Stock Certificate, incorporated by reference to Exhibit 4.16
to the joint registration statement on Form S-3 and F-3 of Carnival Corporation,
Carnival plc and POPCIL.
4.8-Pairing Agreement, dated as of April 17, 2003, between Carnival Corporation,
The Law Debenture Trust Corporation (Cayman) Limited, as trustee, and SunTrust
Bank, as transfer agent, incorporated by reference to the joint Current Report
on Form 8-K of Carnival Corporation and Carnival plc filed on April 17, 2003.
4.9-Voting Trust Deed, dated as of April 17, 2003, between Carnival Corporation
and The Law Debenture Trust Corporation (Cayman) Limited, as trustee,
incorporated by reference to the joint Current Report on Form 8-K of Carnival
Corporation and Carnival plc filed on April 17, 2003.
4.10-SVE Special Voting Deed, dated as of April 17, 2003 between Carnival
Corporation, DLS SVC Limited, P&O Princess Cruises plc, The Law Debenture Trust
Corporation (Cayman) Limited, as trustee, and The Law Debenture Trust
Corporation, P.L.C., incorporated by reference to the joint Current Report on
Form 8-K of Carnival Corporation and Carnival plc filed on April 17, 2003.
37
4.11-Form of deposit agreement among P&O Princess Cruises plc, Morgan Guaranty
Trust Company of New York, as depositary, and holders and beneficial owners from
time to time of ADRs issued thereunder, incorporated by reference to P&O
Princess' registration statement on Form 20-F.
4.12-Indenture, dated as of April 25, 2001, between Carnival Corporation and
U.S. Bank Trust National Association, as trustee, relating to unsecured and
unsubordinated debt securities, incorporated by reference to Exhibit No. 4.5 to
Carnival Corporation registration statement on Form S-3.
4.13-Form of Indenture, dated March 1, 1993, between Carnival Cruise Lines, Inc.
and First Trust National Association, as Trustee, relating to the Debt
Securities, including form of Debt Security, incorporated by reference to
Exhibit No. 4 to Carnival Corporation registration statement on Form S-3.
4.14-Second Supplemental Indenture, dated December 1, 2003, between Carnival plc
and Carnival Corporation to The Bank of New York, as Trustee, relating to 7.30%
Notes due 2007 and 7.875% debentures due 2027.
10.1-Retirement and Consulting Agreement dated November 28, 2003 between Alton
Kirk Lanterman, Carnival Corporation, Holland America Line Inc., and others.
10.2 Amendment to the Amended and Restated Carnival Corporation 1992 Stock
Option Plan.
10.3-Amendment and Restatement Agreement dated November 17, 2003, by and among
Carnival Corporation, Carnival plc, JPMorgan Chase Bank as successor to The
Chase Manhattan Bank, and various other lenders.
10.4-Amended and Restated Carnival Corporation 1992 Stock Option Plan,
incorporated by reference to Exhibit No. 10.4 to our Annual Report on Form 10-K
for the year ended November 30, 1997.
10.5-Carnival Cruise Lines, Inc. 1993 Restricted Stock Plan adopted on January
15, 1993 and as amended January 5, 1998 and December 21, 1998, incorporated by
reference to Exhibit No. 10.5 to our Annual Report on Form 10-K for the year
ended November 30, 1998.
10.6-Carnival Corporation "Fun Ship" Nonqualified Savings Plan, incorporated by
reference to Exhibit No. 10.6 to our Annual Report on Form 10-K for the year
ended November 30, 1997.
10.7-Amendments to The Carnival Corporation Nonqualified Retirement Plan for
Highly Compensated Employees, incorporated by reference to Exhibit No. 10.7 to
our Annual Report on Form 10-K for the year ended November 30, 1997.
10.8-Carnival Cruise Lines, Inc. Non-Qualified Retirement Plan, incorporated by
reference to Exhibit No. 10.4 to our Annual Report on Form 10-K for the year
ended November 30, 1990.
10.9-Executive Long-term Compensation Agreement dated as of January 16, 1998
between Robert H. Dickinson and Carnival Corporation, incorporated by reference
to Exhibit No. 10.2 to our Annual Report on Form 10-K for the year ended
November 30, 1997.
10.10-Consulting Agreement/Registration Rights Agreement dated June 14, 1991,
between Carnival Corporation and Ted Arison, incorporated by reference to
Exhibit No. 4.3 to post-effective amendment no. 1 on Form S-3 to Carnival
Corporation's registration statement on Form S-1.
10.11-First Amendment to Consulting Agreement/Registration Rights Agreement,
incorporated by reference to Exhibit No. 10.40 to Carnival Corporation's Annual
Report on Form 10-K for the year ended November 30, 1992.
10.12-Director's Appointment Letter between Peter G. Ratcliffe and Carnival plc,
incorporated by reference to Exhibit No. 10.23 to our joint Quarterly Report on
Form 10-Q for the quarter ended May 31, 2003.
10.13-Director Appointment letter between Baroness Sarah Hogg and Carnival
Corporation, dated April 17, 2003, incorporated by reference to Exhibit No.
10.17 to our joint Quarterly Report on Form 10-Q for the quarter ended May 31,
2003.
38
10.14-Director's Appointment Letter between Baroness Sarah Hogg and Carnival
plc, incorporated by reference to Exhibit No. 10.16 to our joint Quarterly
Report on Form 10-Q for the quarter ended May 31, 2003.
10.15-Director's Appointment letter between Sir John Parker and Carnival plc,
incorporated by reference to Exhibit No. 10.21 to our joint Quarterly Report on
Form 10-Q for the quarter ended May 31, 2003.
10.16-Director Appointment letter between John McNulty and Carnival Corporation,
dated June 25, 2003, incorporated by reference to Exhibit No. 10.2 to our joint
Quarterly Report on Form 10-Q for the quarter ended August 31, 2003.
10.17-Executive Long-term Compensation Agreement dated January 11, 1999, between
Carnival Corporation and Micky Arison, incorporated by reference to Exhibit No.
10.36 to Carnival Corporation's Annual Report on Form 10-K for the year ended
November 30, 1998.
10.18-Executive Long-term Compensation Agreement dated January 11, 1999, between
Carnival Corporation and Howard S. Frank, incorporated by reference to Exhibit
No. 10.37 to Carnival Corporation's Annual Report on Form 10-K for the year
ended November 30, 1998.
10.19-Carnival Corporation Supplemental Executive Retirement Plan, incorporated
by reference to Exhibit No. 10.32 to Carnival Corporation's Annual Report on
Form 10-K for the year ended November 30, 1999.
10.20-Amendment to the Carnival Corporation Supplemental Executive Retirement
Plan, incorporated by reference to Exhibit No. 10.31 to Carnival Corporation's
Annual Report on Form 10-K for the year ended November 30, 2000.
10.21-Amendment to the Carnival Corporation "Fun Ship" Nonqualified Savings
Plan, incorporated by reference to Exhibit No. 10.33 to Carnival Corporation's
Annual Report on Form 10-K for the year ended November 30, 1999.
10.22-Amendment to the Carnival Corporation Nonqualified Retirement Plan for
Highly Compensated Employees, incorporated by reference to Exhibit No. 10.33 to
Carnival Corporation's Annual Report on Form 10-K for the year ended November
30, 2000.
10.23-Amendment to the Carnival Corporation "Fun Ship" Nonqualified Savings
Plan, incorporated by reference to Exhibit No. 10.34 to Carnival Corporation's
Annual Report on Form 10-K for the year ended November 30, 2000.
10.24-Amendment to the Carnival Corporation "Fun Ship" Nonqualified Savings
Plan, incorporated by reference to Exhibit No. 10.37 to Carnival Corporation's
Annual Report on Form 10-K for the year ended November 30, 2001.
10.25-Amendment to the Carnival Corporation Nonqualified Retirement Plan for
Highly Compensated Employees, incorporated by reference to Exhibit No. 10.38 to
Carnival Corporation's Annual Report on Form 10-K for the year ended November
30, 2001.
10.26-2001 Outside Director Stock Option Plan, incorporated by reference to
Exhibit No. 10.9 to Carnival Corporation's Annual Report on Form 10-K for the
year ended November 30, 2001.
10.27-Amended and Restated Carnival Corporation 2002 Stock Plan, incorporated by
reference to Exhibit 10.1 to the joint Quarterly Report on Form 10-Q for the
quarter ended May 31, 2003.
10.28-Service Agreement Letter dated May 28, 2002 between Costa Crociere, S.p.A.
and Pier Luigi Foschi, incorporated by reference to Exhibit No. 10.2 to Carnival
Corporation's Quarterly Report on Form 10-Q for the quarter ended May 31, 2002.
10.29-Succession Agreement to Registration Rights Agreement dated June 14, 1991,
between Carnival Corporation and Ted Arison, incorporated by reference to
Exhibit No. 10.3 to Carnival Corporation's Quarterly Report on Form 10-Q for the
quarter ended May 31, 2002.
10.30-Employment Agreement dated as of April 17, 2003 by and between P&O
Princess Cruises International, Ltd. and Peter Ratcliffe, incorporated by
reference to Exhibit 10.2 to the joint Quarterly Report on Form 10-Q for the
quarter ended May 31, 2003.
10.31-Registration Rights Agreement, dated as of April 29, 2003, by and among
Carnival
39
Corporation, Carnival plc and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, incorporated by reference to Exhibit 4.14 to the joint
registration statement on Form S-3 and F-3 of Carnival Corporation, Carnival plc
and POPCIL.
10.32-Indemnification Agreement between Micky M. Arison and Carnival
Corporation, dated April 17, 2003, incorporated by reference to Exhibit 10.5 to
the joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.33-Indemnification Agreement between Richard G. Capen, Jr. and Carnival
Corporation, dated April 17, 2003, incorporated by reference to Exhibit 10.7 to
the joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.34-Indemnification Agreement between Robert H. Dickinson and Carnival
Corporation, dated April 17, 2003, incorporated by reference to Exhibit 10.9 to
the joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.35-Indemnification Agreement between Arnold W. Donald and Carnival
Corporation, dated April 17, 2003, incorporated by reference to Exhibit 10.11 to
the joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.36-Indemnification Agreement between Pier Luigi Foschi and Carnival
Corporation, dated April 17, 2003, incorporated by reference to Exhibit 10.13 to
the joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.37-Indemnification Agreement between Howard S. Frank and Carnival
Corporation, dated April 17, 2003, incorporated by reference to Exhibit 10.15 to
the joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.38-Indemnification Agreement between A. Kirk Lanterman and Carnival
Corporation, dated April 17, 2003, incorporated by reference to Exhibit 10.18 to
the joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.39-Indemnification Agreement between Dr. Modesto A. Maidique and Carnival
Corporation, dated April 17, 2003, incorporated by reference to Exhibit 10.20 to
the joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.40-Indemnification Agreement between Peter G. Ratcliffe and Carnival
Corporation, dated April 17, 2003, incorporated by reference to Exhibit 10.24 to
the joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.41-Indemnification Agreement between Stuart S. Subotnick and Carnival
Corporation, dated April 17, 2003, incorporated by reference to Exhibit 10.26 to
the joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.42-Indemnification Agreement between Uzi Zucker and Carnival Corporation,
dated April 17, 2003, incorporated by reference to Exhibit 10.28 to the joint
Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.43-Director Appointment letter between Micky M. Arison and Carnival plc,
dated April 14, 2003, incorporated by reference to Exhibit 10.4 to the joint
Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.44-Director's Appointment Letter between Richard G. Capen and Carnival plc,
incorporated by reference to Exhibit No. 10.6 to our joint Quarterly Report on
Form 10-Q for the quarter ended May 31, 2003.
10.45-Director Appointment letter between Robert H. Dickinson and Carnival plc,
dated April 14, 2003, incorporated by reference to Exhibit 10.8 to the joint
Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.46-Director's Appointment Letter between Arnold W. Donald and Carnival plc,
incorporated by reference to Exhibit No. 10.10 to our joint Quarterly Report on
Form 10-Q for the quarter ended May 31, 2003.
10.47-Director's Appointment Letter between Pier Luigi Foschi and Carnival plc,
incorporated by reference to Exhibit No. 10.12 to our joint Quarterly Report on
Form 10-Q for the quarter ended May 31, 2003.
10.48-Director Appointment letter between Howard S. Frank and Carnival plc,
dated April 14,
40
2003, incorporated by reference to Exhibit 10.14 to the joint Quarterly Report
on Form 10-Q for the quarter ended May 31, 2003.
10.49-Director's Appointment Letter between Modesto A. Maidique and Carnival
plc, incorporated by reference to Exhibit No. 10.19 to our joint Quarterly
Report on Form 10-Q for the quarter ended May 31, 2003.
10.50-Director Appointment letter between Sir John Parker and Carnival
Corporation, dated April 14, 2003, incorporated by reference to Exhibit 10.22 to
the joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2003.
10.51-Director's Appointment Letter between Stuart Subotnick and Carnival plc,
incorporated by reference to Exhibit No. 10.25 to our joint Quarterly Report on
Form 10-Q for the quarter ended May 31, 2003.
10.52-Director's Appointment Letter between Uzi Zucker and Carnival plc,
incorporated by reference to Exhibit No. 10.27 to our joint Quarterly Report on
Form 10-Q .
10.53-Director Appointment letter between John McNulty and Carnival plc, dated
June 25, 2003, incorporated by reference to Exhibit No. 10.1 to our joint
Quarterly Report on Form 10-Q for the quarter ended August 31, 2003.
10.54-Amendment of the Carnival Corporation "Fun Ship" Nonqualified Savings
Plan, incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on
Form 10-Q for the quarter ended February 28, 2003.
10.55-Amendment of the Carnival Corporation Nonqualified Retirement Plan For
Highly Compensated Employees, incorporated by reference to Exhibit No. 10.2 to
our Quarterly Report on Form 10-Q for the quarter ended February 28, 2003.
10.56-The P&O Princess Cruises Executive Share Option Plan, incorporated by
reference to Exhibit 4.9 to P&O Princess' Annual Report on Form 20-F for the
year ended December 30, 2001.
10.57-The P&O Princess Cruises Deferred Bonus and Co-Investment Matching Plan,
incorporated by reference to Exhibit 4.10 to P&O Princess' Annual Report on Form
20-F for the year ending December 30, 2001.
10.58-1994 Carnival Cruise Lines Key Management Incentive Plan as amended on
July 17, 2000, incorporated by reference to Exhibit No. 10.1 to our Quarterly
Report on Form 10-Q for the quarter ended August 31, 2000.
12-Ratio of Earnings to Fixed Charges.
13-Portions of 2003 Annual Report incorporated by reference into 2003 joint
Annual Report on Form 10-K.
21-Significant Subsidiaries of Carnival Corporation and Carnival plc.
23-Consent of PricewaterhouseCoopers LLP.
31.1-Certification of Chief Executive Officer of Carnival Corporation pursuant
to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2-Certification of Chief Operating Officer of Carnival Corporation pursuant
to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.3-Certification of Executive Vice President and Chief Financial and
Accounting Officer of Carnival Corporation pursuant to Rule 13a-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4-Certification of Chief Executive Officer of Carnival plc pursuant to Rule
13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.5-Certification of Chief Operating Officer of Carnival plc pursuant to Rule
13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.6-Certification of Executive Vice President and Chief Financial and
Accounting Officer of Carnival plc pursuant to Rule 13a-14(a), as adopted
pursuant to Section 302 of the
41
Sarbanes-Oxley Act of 2002.
32.1-Certification of Chief Executive Officer of Carnival Corporation pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2-Certification of Chief Operating Officer of Carnival Corporation pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.3-Certification of Executive Vice President and Chief Financial and
Accounting Officer of Carnival Corporation pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.4-Certification of Chief Executive Officer of Carnival plc pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
32.5-Certification of Chief Operating Officer of Carnival plc pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
32.6-Certification of Executive Vice President and Chief Financial and
Accounting Officer of Carnival plc pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
42