XIII. XIV. Training
Our cruise brands are committed to providing appropriate hotel and marine-related training to ensure that our shipboard crew, including officers, have the knowledge and skills to properly perform their jobs. We provide a diverse range of shoreside and shipboard training for our hotel staff before and after they join our ships to further enhance their skills. Specifically, we provide bar,beverage, entertainment, guest service, housekeeping, leadership, management and restaurant training. Depending on the brand, we will also provide our hotel staff with in-depth English, German, and Italian or Mandarin language training. All our hotel staff also undergo extensive safety training and, depending on their position, will pursue advanced safety certifications. We partner closely with manning agencies to help provide this training in Manila, Philippines; Jakarta, Indonesia; and Mumbai, India.
Our goal is to be a leader in delivering high quality professional maritime training. In 2016, we expandedtraining, as evidenced by our training operations with the opening of the Arison Maritime Center. The centerpiece of the campus is the Center for Simulator Maritime Training (“CSMART”). The CSMART Academy features the most advanced bridge and engine room simulator technology and equipment available with the capacity to provide annual professional training for all our bridge and engineering officers. CSMART participants receive a maritime training experience that fosters critical thinking, problem solving, ethical decision making and skill development. In 2017, CSMART launchedoffers an environmental officer training program and began offering additional environmental courses for bridge and engineering officers to further enhance our training on social responsibility and environmental awareness and protection. During 2018,2019, we provided training to nearly 6,8007,500 bridge and engineering officers at CSMART. We also offer environmental training for identified shoreside personnel at our various shoreside locations around the globe.
XIV.
XV. Information Technology
With the increasing size and sophistication of cruise ships, the technologies employed to createenhance guest experiences and operate ships have grown ever more complex and integrated. Our global information technology model is designed to contribute to exceeding expectations of our guests, crew, shoreside employees and other stakeholders. This model is focused on supporting exceptional guest experiences while increasingly leveraging common technologies to drive process efficiency and effectiveness across our portfolio of brands. In order to achieve our goals, we are focusing on applications, connectivity, cybersecurity, data privacy, infrastructure, modernization and innovation. In response to the increasing threat of continuallycontinuously evolving cybersecurity risks, we are striving to provide protection of guest, employee, company and other data and develop best practices that focus on people, process and technology to combat threats and malicious activity. In addition, weWe have established a data privacy committee that continues to furtheroversee our focus on data minimization, tokenization, protection, and proper handling of privatepersonal data. In light of numerous jurisdictional data privacy laws and regulations, we are implementing data privacy and protection standards across the corporation. Additionally, we are continuing to improve our information technology infrastructure to enhance effective compliance with laws and regulations.
All of our brands are actively collaborating on our global information technology solutions, standards and processes across our shoreside and shipboard environment.environments. By aligning technology planning, infrastructure, security, privacy and applications, we continue to maximize the business value of our information technology investments by eliminating redundancies and driving synergies across the brands while identifying and leveraging best practices and establishing common standards.
XV. XVI. Innovation
We have successfully delivered innovation to our guests for more than four decades. Our continuous innovation with ship design allows our guests to enjoy carefully crafted experiences while effortlessly en-route to their next port-of-call. Our leading port development has opened newdestination developments provide numerous locations and experiences to our guests.
Our innovation pursuit is focused on creating amazing guest experiences and leveraging our enterprise scale. This focus has driven the creation of our newly developed “Experience Platform”. The guest centric experience platform leverages multiple proprietary technologies that work together to power guest experiences.
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• | OceanMedallionTM - a revolutionary wearable device that enables a highly personalized vacation experience that works in conjunction with a portfolio of digital experiences all focused on simplifying guest access to experiences and facilitating a more immersive vacation |
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• | xiOTxIOTTM - an invisible network of interactive intelligent sensors and embedded devices mounted throughout the ship, home ports and destinations that uses a guest-centric, Internet of Things approach to enable a seamless guest experience
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In 2018, we openedTo date, five Princess Cruises ships have been converted to Medallion Class, leveraging the third ofOceanMedallion and the xIOT platform.
We operate three state-of-the-art Fleet Operations Centers (“FOC”) with advanced ship to shore communications technology. We continue to develop, implement and utilize cutting-edge proprietary technology at these centers to enhance our ability to monitor ship nautical and technical performance in real time, including fuel consumption,
engine performance and air emissions. The centers allow for improved communications between the ship and shore, and immediate support to our ships for route planning, maritime safety and risk management.
In 2018, we completed the roll-out ofWe continue to enhance our state-of-the-art revenue management system across sixtools and capabilities including future expansion to additional brands. Additionally, we introduced several new mobile applications, including Carnival Cruise Line’s Hub App, Costa’s MyCosta and AIDA’s myAIDA. AIDA also completed the fleet-wide roll out of Seamless check-in, enabling an embarkation process of just thirty seconds per guest. We also continue to simplify our guest facing booking platforms with a focus on the pre-cruise and e-commerce experiences.
We are committed to reducing our environmental footprint. Among other initiatives, after more than a year of testing food waste digester technology, we have begun a multi-year plan to install food waste digesters on most of our fleet. This technology is an aerobic bio-digester that will enable our ships to process and dispose of nearly all food waste, further reducing our environmental footprint.
XVI.
XVII. Supply Chain
We incur expenses for goods and services to deliver exceptional cruise experiences to our guests. In addition, we incur significant capital expenditures for materials to support the refurbishment and enhancements of our vessels as well as to build new ships. We approach our spend strategically and look for suppliers who demonstrate the ability to help us leverage our scale in terms of cost, quality, service, innovation and innovation.sustainability. We are focused on the creation of strategic partnerships and will streamline our supplier base, where it is prudent. Our largest capital investments are for the construction of new ships. We have agreements in place for the construction of 2117 cruise ships with four shipyards.
XVII. XVIII. Insurance
We maintain insurance to cover a number of risks associated with owning and operating our vessels and other non-ship related risks. All such insurance policies are subject to coverage limits, exclusions and deductible levels. Insurance premiums are dependent on our own loss experience and the general premium requirements of our insurers. We maintain certain levels of deductibles for substantially all the below-mentioned coverages. We may increase our deductibles to mitigate future premium increases. We do not carry coverage related to loss of earnings or revenues from our ships or other operations.
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b. | Protection and Indemnity (“P&I”) Coverages |
Liabilities, costs and expenses for illness and injury to crew, guest injury, pollution and other third party claims in connection with our cruise activities are covered by our P&I clubs, which are mutual indemnity associations owned by ship owners.
We are members of three P&I clubs, Gard, Steamship Mutual and UK Club, which are part of a worldwide group of 13 P&I clubs, known as the International Group of P&I Clubs (the “IG”). The IG insures directly, and through broad and established reinsurance markets, a large portion of the world’s shipping fleets. Coverage is subject to the P&I clubs’ rules and the limits of coverage are determined by the IG.
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c. | Hull and Machinery Insurance |
We maintain insurance on the hull and machinery of each of our ships for reasonable amounts as determined by management. The coverage for hull and machinery is provided by large and well-established international marine insurers. Insurers 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 routinely inspected and certified to be in class by an IACS member.
We maintainuse a combination of insurance and self-insurance to cover war risk insurance for legal liability to crew, guests and other third parties as well as loss or damage to our vessels arising from war or war-like actions, including terrorist incidents. Items excluded from this coverage are claims arising from chemical, nuclear and biological attacks.actions. Our primary war risk insurance coverage is provided by international marine insurers and our excess war risk insurance is provided by our three P&I clubs. Under the terms of our war risk insurance coverage, which are typical for war risk policies in the marine industry, insurers can give us seven days’ notice that the insurance policies will be cancelled.canceled. However, the policies can be reinstated at different premium rates. This gives insurers the ability to increase our premiums following events that they determine have increased their risk.
We maintain property insurance covering our shoreside assets and casualty insurance covering liabilities to third parties arising from our hotel and transportation business, shore excursion operations and shoreside operations, including our port and related commercial facilities. We also maintain worker’s compensation, director’s and officer’s liability and other insurance coverages.
XVIII. XIX. Port Destinations and Private Islands
In select geographies around the world we operate a portfolio of leading port destinations and private islands to grow demand and create relative scarcity. This enables us to offer exceptional guest experiences by creating a wide variety of high quality destinations around the world that are uniquely tailored to our guests’ preferences. In addition, to secure preferential berth access to third party ports, we coordinate across brands to negotiate berthing agreements and to secure preferred access through shared agreements and commitments.
XIX.
XX. Governmental Regulations
a. Maritime Regulations
1. General
Our ships are regulated by numerous international, national, state and local laws, regulations, treaties and other legal requirements, as well as voluntary agreements, that govern health, environmental, safety and security matters in relation to our guests, crew and ships. These requirements change regularly, sometimes on a daily basis, depending on the itineraries of our ships and the ports and countries visited. If we violate or fail to comply with any of these laws, regulations, treaties and other requirements we could be fined or otherwise sanctioned by regulators. We are committed to complying with, or exceeding, all relevant maritime requirements.
The primary regulatory bodies that establish maritime laws and requirements applicable to our ships include:
The International Maritime Organization (“IMO”): All of our ships, and the maritime industry as a whole, are subject to the maritime safety, security and environmental regulations established by the IMO, a specialized agency of the United Nations. The IMO’s principal sets of requirements are mandated through its International Convention for the Safety of Life at Sea (“SOLAS”) and its International Convention for the Prevention of Pollution from Ships (“MARPOL”).
Flag States: Our ships are registered, or flagged, in The Bahamas, Bermuda, Italy, Malta, the Netherlands, Panama and the UK, which are also referred to as Flag States. Our ships are regulated by these Flag States through international conventions that govern, among other things, health, environmental, safety and security matters in relation to our guests, crew and ships. Representatives of each Flag State conduct periodic inspections, surveys and audits to verify compliance with these requirements.
Ship classification societies: Class certification is one of the necessary documents required for our cruise ships to be flagged in a specific country, obtain liability insurance and legally operate as passenger cruise ships. Our ships are subject to periodic class surveys, including dry-dock inspections, by ship classification societies to verify that our ships have been maintained in accordance with the rules of the classification societies and that recommended repairs have been satisfactorily completed. Dry-dock frequency is a statutory requirement mandated by SOLAS. Our ships dry-dock once or twice every five years, depending on the age of the ship.
National, regional state and localother authorities: We are subject to the decrees, directives, regulations and requirements of the European Union (“EU”), the U.S., U.S. statesother individual countries and hundreds of other authorities including international ports that our ships visit every year.
Port regulatory authorities (Port State Control): Our ships are also subject to inspection by the port regulatory authorities, which are also referred to as Port State Control, in the various countries that they visit. Such inspections include verification of compliance with the maritime safety, security, environmental, customs, immigration, health and labor requirements applicable to each port, as well as with regional, national and international requirements. Many countries have joined together to form regional port regulatoryPort State Control authorities.
As members of the Cruise LineLines International Association (“CLIA”), we helped to develop and have implemented policies that are intended to enhance shipboard safety and environmental protection throughout the cruise industry. In some cases this calls for implementing best
practices, which are in excess of existing legal requirements. Further details on these and other policies can be found on www.cruising.org.
Our BODsBoards of Directors have HESS Committees, which were comprised of fourfive independent directors during 2018.as of November 30, 2019. The principal function of the HESS Committees is to assist the boards in fulfilling their responsibility to supervise and monitor our health, environment, safety, security and sustainability related policies, programs and initiatives at sea and ashore and compliance with related legal and regulatory requirements. The HESS Committees and our management team review all significant relevant risks or exposures and associated mitigating actions.
We are committed to implementing appropriate measures to manage identified risks effectively. We have a Chief Maritime Officer to oversee our global maritime operations, including maritime quality assurance and policy, maritime affairs, environmental compliance,
shipbuilding, ship refits and research and development. In addition, we have a Chief Ethics and Compliance Officer who is responsible for promoting ethics and compliance – with a focus on safety and environmental protection.
To help ensure that we are compliant with legal and regulatory requirements and that these areas of our business operate in an efficient and effective manner we:
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• | Provide regular health, environmental, safety and security support, training, guidance and information to guests, employees and others working on our behalf |
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• | Develop and implement effective and verifiable management systems to fulfill our health, environmental, safety, security and sustainability commitments |
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• | Perform regular shoreside and shipboard audits and take appropriate action when deficiencies are identified |
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• | Report and investigate health, environmental, safety and security incidents and take appropriate action to prevent recurrence |
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• | Identify those employees responsible for managing health, environment, safety, security and sustainability programs and ensure that there are clear lines of accountability |
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• | Identify the aspects of our business that impact the environment and continue to take appropriate action to minimize that impact |
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• | Monitor an anonymous hotline and the related responses accordingly to allegations and concerns |
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• | Review and improve policies and procedures designed to prevent, detect, respond and correct various regulatory violations and other misconduct |
Provide regular health, environmental, safety and security support, training, guidance and information to guests, employees and others working on our behalf
Develop and implement effective and verifiable management systems to fulfill our health, environmental, safety, security and sustainability commitments
Perform regular shoreside and shipboard audits and take appropriate action when deficiencies are identified
Report and investigate all health, environmental, safety and security incidents and take appropriate action to prevent recurrence
Identify those employees responsible for managing health, safety, environment, security and sustainability programs and ensure that there are clear lines of accountability
Identify the aspects of our business that impact the environment and continue to take appropriate action to minimize that impact
2. Maritime Safety Regulations
The IMO has adopted safety standards as part of SOLAS. To help ensure guest and crew safety, SOLAS establishes requirements for the following:
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• Vessel design and structural features | • Life-saving and other equipment |
• Construction and materials | • Fire protection and detection |
• Refurbishment standards | • Safe management and operation |
• Radio communications | • Musters |
All of our crew undergo regular safety training that meets or exceeds all international maritime regulations, including SOLAS requirements, which are periodically revised.
SOLAS requires implementation of the International Safety Management Code (“ISM Code”), which provides an international standard for the safe management and operation of ships and for pollution prevention. The ISM Code is mandatory for passenger vessel operators. Under the ISM Code, vessel operators are required to:
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• | Develop and implement a Safety Management System (“SMS”) that includes, among other things, the adoption of safety and environmental protection policies setting forth instructions and procedures for operating vessels safely and describing procedures for responding to emergencies and protecting the environment |
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• | Obtain a Document of Compliance (“DOC”) for the vessel operator, as well as a Safety Management Certificate (“SMC”) for each vessel they operate. These documents are issued by the vessel’s Flag State and evidence compliance with the ISM Code and the SMS |
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• | Verify or renew DOCs and SMCs periodically in accordance with the ISM Code |
Develop a Safety Management System (“SMS”) that includes, among other things, the adoption of safety and environmental protection policies setting forth instructions and procedures for operating vessels safely and describing procedures for responding to emergencies and protecting the environment
Obtain a Document of Compliance (“DOC”) for the vessel operator, as well as a Safety Management Certificate (“SMC”) for each vessel they operate. These documents are issued by the vessel’s Flag State and evidence compliance with the SMS
Verify or renew DOCs and SMCs periodically in accordance with the ISM Code
We have implemented and continue to enhance policies and procedures that demonstrate our commitment to the safety of our guests and crew. These policies and proceduresinitiatives include the following:
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• | Training of our bridge, engineering and environmental officers in maritime related best practices at our CSMART Academy, the Center for Simulator Maritime Training located within our Arison Maritime Center in Almere, Netherlands |
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• | Further standardization of our detailed bridge and engine resource management procedures on all of our ships |
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• | Expansion of our existing oversight function to monitor bridge and engine room operations through state of the art fleet operations centers in Miami, Seattle and Hamburg |
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• | Identifying and standardizing best-practice policies and procedures in health, environmental, safety and security disciplines across the entire organization including on all our ships |
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• | Further enhancement of our processes for auditing our HESS performance throughout our operations |
Training of our bridge, engineering and environmental officers in maritime related best practices at our new CSMART Academy, the Center for Simulator Maritime Training located within our Arison Maritime Center in Almere, Netherlands
Further standardization of our detailed bridge and engine resource management procedures on all of our ships
Expansion of our existing oversight function to monitor bridge and engine room operations through state of the art fleet operations centers in Miami, Seattle and Hamburg
Identifying and standardizing best-practice policies and procedures in health, environment, safety and security disciplines across the entire organization including on all our ships
Further enhancement of our processes for auditing our HESS performance throughout our operations
3. Maritime Security Regulations
Our ships are subject to numerous security requirements. These requirements include the International Ship and Port Facility Security Code, which is part of SOLAS, the U.S. Maritime Transportation Security Act of 2002, which addresses U.S. port and waterway security and the U.S. Cruise Vessel Security and Safety Act of 2010, which applies to all of our ships that embark or disembark passengers in the U.S. These regulations include requirements as to the following:
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• | Implementation of specific security measures, including onboard installation of a ship security alert system |
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• | Assessment of vessel security |
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• | Efforts to identify and deter security threats |
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• | Training, drills and exercises |
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• | Security plans that may include guest, vehicle and baggage screening procedures, security patrols, establishment of restricted areas, personnel identification procedures, access control measures and installation of surveillance equipment |
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• | Establishment of procedures and policies for reporting and managing allegations of crimes |
Implementation of specific security measures, including onboard installation of a ship security alert system
Assessment of vessel security
Efforts to identify and deter security threats
Training, drills and exercises
Security plans that may include guest, vehicle and baggage screening procedures, security patrols, establishment of restricted areas, personnel identification procedures, access control measures and installation of surveillance equipment
Establishment of procedures and policies for reporting and managing allegations of crimes
4. Maritime Environmental Regulations
We are subject to numerous international, national, state and local environmental laws, regulations and treaties that govern air emissions, waste discharges, water management, and disposal, and the storage, handling, use and disposal of hazardous substances such as chemicals, solvents and paints.
As a means of managing and improving our environmental performance and compliance, we adhere to standards set by ISO (International Organization for Standardization), an international standard-setting body, which produces worldwide industrial and commercial standards. The environmental management system of our company and ships is certified in accordance with ISO 14001, the environmental management standard that was developed to help organizations manage the environmental impacts of their processes, products and services. ISO 14001 defines an approach to setting and achieving environmental objectives and targets, within a structured management framework.
i. International Regulations
The principal international convention governing marine pollution prevention and response is MARPOL.
a. Preventing and Minimizing Pollution
MARPOL includes six annexes, four annexesof which are applicable to our cruise ships, containing requirements designed to prevent and minimize both accidental and operational pollution by oil, sewage, garbage and air emissions and sets forth specific requirements related to vessel operations, equipment, recordkeeping and reporting that are designed to prevent and minimize pollution. All of our ships must carry an International Oil Pollution Prevention Certificate, an International Sewage Pollution Prevention Certificate, an International Air Pollution Prevention Certificate and a Garbage Management Plan. The ship’s Flag State issues these certificates, which evidence their compliance with the MARPOL regulations regarding prevention of pollution by oil, sewage, garbage and air emissions. Certain jurisdictions have not adopted all of these MARPOL annexes but have established various national, regional or local laws and regulations that apply to these areas.
As noted above, MARPOL governs the prevention of pollution by oil from operational measures, as well as from accidental discharges. MARPOL requires that discharges of machinery space bilge water pass through pollution prevention equipment that separates oil from the water and monitors the discharged water to ensure that the effluent does not exceed 15 parts per million oil content andcontent. During 2019, we have voluntarily committed tocompleted the upgrade the oilof oily water separation equipment to the latest MARPOL standards as set forth by the IMO onboard all of our ships by early 2019.ships. Our ships must have oily water separators with oil content monitors installed and must maintain a record of certain engine room operations in an Oil Record Book. In addition, we have voluntarily installed redundant systems on all of our ships that monitor processed bilge water througha second time prior to discharge to help
ensure that it contains no more than 15 parts
per million oil content. This system also provides additional controls to prevent improper bilge water discharges. MARPOL also requires that our ships have Shipboard Oil Pollution Emergency Plans.
MARPOL also governs the discharge of sewage from ships and contains regulations regarding the ships’ equipment and systems for the control of sewage discharge, the provision of facilities at ports and terminals for the reception of sewage and requirements for survey and certification.
MARPOL also governs the discharge of garbage from ships and requires the implementation of Garbage Management Plan and the maintenance of a Garbage Record Book.
Furthermore, MARPOL addresses air emissions from vessels, establishes requirements for the prevention of air pollution from ships to reduce emissions of sulfur oxides (“SOx”), nitrogen oxides (“NOx”) and particulate matter. It also contains restrictions on the use of ozone depleting substances (“ODS”) and requires the recording of ODS use, equipment containing ODS and the emission of ODS.
b. Sulfur Emissions
MARPOL also addresses air emissions from vessels in both auxiliary and main propulsion diesel engines on ships and further specifies requirements for Emission Control Areas (“ECAs”) with stricter limitations on sulfur emissions in these areas. Since 2015, ships operating in a number of regions throughout the worldECAs have been required to use fuel with a sulfur content of no more than 0.1% or 0.5% (depending on the ECA), or to use alternative emission reduction methods, such as advanced air quality systems. Additional localAdvanced Air Quality Systems. Local and regional ECAsemissions control areas have come into force since 2015.2015, such as in China.
The International Maritime Organization’s Marine Environment Protection CommitteeOrganization has agreed to implementadopted a global 0.5% sulfur cap for marine fuel beginning in 2020. The EU Parliament and Council have also set a 2020 implementation date for their 0.5% sulfur content fuel requirement (the “EU Sulfur Directive”). The options to comply with both the global 0.5% sulfur cap and the EU Sulfur Directive include installation of Advanced Air Quality Systems, or the use of low sulfur fuel, installation of advanced air quality systems, or the use of alternative fuels, which maywill likely increase our fuel costs.
We have been installing advanced air quality systemsAdvanced Air Quality Systems on our ships. These effortsships, which are aiding in partially mitigating much of the financial impact from the ECAECAs and global 0.5% sulfur requirements. Given the installation schedule,Beginning in 2020, we expect to use a greater percentage mix of low sulfur fuel, in 2020, which maywill likely increase our fuel costs.
c. Other Ship Emission Abatement Methods
In the long-term, the cost impacts of meeting progressively lower sulfur emissionfuel requirements may be further mitigated by the favorable impact of future changes in the supply and demand balance for marine and other types of fuel, future developments of and investments in improved sulfur emission abatement technologies, the use of alternative lower cost and lower emission fuels and our continued efforts to improve the overall fuel efficiency across our fleet. Since 2007, we have achieved approximately 30%32% cumulative reduction in unit fuel consumption by focusing on more efficient itineraries, a wide variety of ships’ system hardware and software, energy-efficiency upgrades (including hull coatings, air conditioning and engine performance improvement)improvements, fresh water savers and LED lighting), creating collaborative energy-savings groups across operating lines and ship’sships’ staff energy use awareness and training.
As part of our emission abatement program, we have continued our work with several local port authorities to utilize cruise ship shore power connections and have equipped 47 ships with the capabilityability to utilize shore power technology. This technology enables our ships to use power from the local electricity provider rather than running their engines while in port to power their onboard services, thus reducing our ship air emissions.
Similarly, in an effort to extend our commitment to sustainability and to play a leading role in matters of environmental protection in the cruise industry, we are expanding our investment in the use of low carbon fuels, in particular, LNG:
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• | AIDAprima and AIDAperla werethe first cruise ships in the world equipped with dual-fuel engines that can use LNG for their energy supply while in ports on Northern European and other itineraries |
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• | AIDAnova is the first cruise ship in the world with the ability to use LNG to generate 100 percent of its power both in port and on the open sea. We have 10 more next generation LNG cruise ships on order, including Costa Smeralda, Iona and Mardi Gras, entering the fleet in December 2019, May 2020 and October 2020. These innovative ships generate significantly less exhaust emissions than traditionally powered ships and greatly reduce our impact on the environment |
AIDAprima and AIDAperla are the first cruise ships in the world that regularly use dual-fuel engines for an energy supply with LNG while in ports on Northern European and other itineraries
AIDAnova will be the first cruise ship in the world with the ability to use LNG to generate 100 percent of its power both in port and on the open sea. We have 11 next generation LNG cruise ships on order, including AIDAnova, entering the fleet in December 2018. These innovative ships will reduce exhaust emissions to help protect the environment
d. Greenhouse Gas Emissions (“GHG”)
In 2013, the IMO approved measures to improve energy efficiency and reduce emissions of GHGs from international shipping by adopting technical and operational measures for all ships. The technical measures apply to the design of new vessels, and the operational reduction measures apply to all vessels. Operational reduction measures have been implemented through a variety of means, including a Ship Energy Efficiency Management Plan, improved voyage planning and more frequent propeller and hull cleanings. We have established objectives within the ISO 14001 environmental management system for each of our brands to further reduce fuel consumption rates and the resulting GHG emissions.
In 2016, the IMO approved the implementation of a mandatory data collection system (“DCS”) for fuel oil consumption. This amendment will requireThe DCS requires ships of 5,000 gross tons and above to provide fuel oil consumption data to their respective flag State at the end of each calendar year, formally beginning in 2019. Flag States will then validate the data and transfer it to an IMO database. The IMO will produce ana summary annual report with anonymous data. In early 2018, the IMO also committedset aspirations to achieve several shipping industry GHG emission reduction goals with 2030 and 2050 target dates.
e. Ballast Water
In 2017, MARPOL began to governthe IMO’s Ballast Water Management Convention entered into force, which governs the discharge of ballast water from ships through the MARPOL Ballast Water Management Convention. However,ships. Subsequent amendments were made to the regulation that effectively extendextended the implementation date for installation of ballast water management systems for existing ships by about two years.years, though other requirements went into effect immediately, including requirements for ballast water exchange, record keeping, and maintaining an approved Ballast Water Management Plan. Ballast water is seawaterwater used to stabilize ships at sea and maintain safe operating conditions throughout a voyage. Ballast water can carry a multitude of marine species. The Convention is designed to regulate the treatment of ballast water prior to discharging overboard in order to avoid the transfer of marine species to new environments.environments, as well as establish other ballast water management practices for monitoring and environmental protection.
ii. U.S. Federal and State Regulations
The Act to Prevent Pollution from Ships authorizes the implementation ofimplements several MARPOL Annexes in the U.S. and imposes numerous requirements on our ships, as discussed above. Administrative, civil and criminal penalties may be assessed for violations.
The Oil Pollution Act of 1990 (“OPA 90”) established a comprehensive federal liability regime, as well as prevention and response requirements, relating to discharges of oil in U.S. waters. The major requirements include demonstrating financial responsibility up to the liability limits set by OPA 90 and having oil spill response plans in place. We have Certificates of Financial Responsibility (“COFR”) that demonstrate our ability to meet the maximum amountliability limits of OPA 90 related liability thatbased on the gross tonnage of our ships could be subject to for removal costs and damages, such as from an oil spill orspill. The COFR also covers a release of a hazardous substance. It is possible, however, for our liability limits to be broken, which could expose us to unlimited liability. Under OPA 90, owners or operators of vessels operating in U.S. waters must file Vessel Response Plans with the U.S. Coast Guard and must operate and conduct any response action in compliance with these plans. As OPA 90 expressly allows coastal states to impose liabilities and requirements beyond those imposed under federal law, many U.S. states have enacted laws more stringent than OPA 90. Some of these state laws impose unlimited liability for oil spills and contain more stringent financial responsibility and contingency planning requirements. Most coastal states have also enacted environmental regulations that impose strict liability for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance, similar to OPA 90.
The Clean Water Act (“CWA”) provides the U.S. Environmental Protection Agency (“EPA”) with the authority to regulate incidental discharges from commercial vessels’ incidentalvessels, including discharges of ballast water, bilge water, gray water, anti-fouling paints and other substances during normal operations within the U.S. three mile territorial sea and inland waters. Pursuant to the CWA authority, the U.S. National Pollutant Discharge Elimination System was designed to minimize pollution within U.S. territorial waters. For our affected ships, all of the incidental discharge requirements are laid outset forth in EPA’s Vessel General Permit (“VGP”) for discharges incidental to the normal operations of vessels. The VGP establishes effluent limits for 27 specific discharges incidental to the normal operation of a vessel.vessel, many of which apply to our cruise ships. In addition to the requirements associated with these dischargedischarges and vessel specificmore stringent vessel-specific requirements, the VGP includes requirements for inspections,
monitoring, reporting and record-keeping. The United States government recently passedIn December 2018, the Vessel Incidental Discharge Act (VIDA), an act that will was signed into law and was intended to clarify and streamline discharge requirements for the waste streamsincidental discharges covered by the VGP and addedVGP. More specifically, a new Clean Water Act Sectionsection was added to the CWA called “Uniform National Standards for Discharges Incidental to Normal Operation of Vessels.” Once fully implemented, VIDA will eventually eliminatereplace the VGP; however, while the standards and regulations are being developed, which is expected to take at least until the end of 2022, the 2013 VGP has been administratively extended. Thereextended and will remain in effect. Because the new standards are in the early stages of development, there is uncertainty over what to expect with VIDA, including what discharge limits may apply to the limits to which VIDA will applyvarious covered incidental discharges and the mechanism through which state-specific standards wouldmay be implemented.
We are subject to the requirements of the U.S. Resource Conservation and Recovery Act for the transportation and disposal of both hazardous and non-hazardous solid wastes that are generated by our ships. In general, vessel owners are required to determine if their wastes are hazardous and, when landing waste ashore, comply with certain standards for the proper management of hazardous wastes, andincluding the use of hazardous waste manifests for shipments to approved disposal facilities.
The U.S. National Invasive Species Act (“NISA”) was enacted in 1996 in response to growing reports of harmful organisms being released into U.S. waters through ballast water taken on by vessels in foreign waters. The U.S. Coast Guard adopted regulations under NISA that impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering U.S. waters. TheseDepending on a vessel’s compliance date for installation of a U.S. Coast Guard type-approved ballast water management system, these requirements canmay now be met by performing mid-ocean ballast exchange, by retaining ballast water onboard the vessel or by using environmentally sounda ballast water treatment methodsmanagement system authorized or approved by the U.S. Coast Guard. In the near future, ballast exchange will no longer be permissible. These U.S. Coast Guard regulations, however, will ultimately be replaced with the new regulatory regime being developed under VIDA, which is expected to contain similar requirements.
Most U.S. states that border navigable waterways or sea coasts have also enacted environmental regulations that impose strict liability for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance.
The state of Alaska has enacted legislation that prohibits certain discharges in designated Alaskan waters and sets effluent limits on others.others, which are applicable to cruise ships. Further, the state of Alaska requires that certain discharges be reported and monitored to verify compliance with the standards established by the legislation. Environmental regimes in Alaska are more stringent than the U.S. federal requirements with regard to discharges from vessels. The legislation also provides that repeat violators of the regulations could be prohibited from operating in Alaskan waters. The state of California also has environmental requirements significantly more stringent than federal requirements for water discharges and air emissions.
iii. EU Regulations
The EU has adopted a broad range of substantial environmental measures aimed at improving the quality of the environment for European citizens. To support the implementation and enforcement of European environmental legislation, the EU has adopted directives on environmental liability and enforcement and a recommendation providing for minimum criteria for environmental inspections.
The European Commission’s (“EC”) strategy is to reduce atmospheric emissions from ships. The EC strategy seeks to implement SOx Emission Control Areas set out in MARPOL, as discussed above.
The EC has also implemented regulations aimed at reducing GHG emissions from maritime shipping through a Monitoring, Reporting and Verification (“MRV”) regulation, which beganinvolves collecting emissions data in 2018 from ships over 5,000 gross tons to monitor and report their carbon emissions on all voyages to, from and between European Union ports.
5. Maritime Health Regulations
We are committed to providing a healthy environment for all of our guests and crew. We collaborate with public health inspection programs throughout the world, such as the Centers for Disease Control and Prevention (“CDC”) in the U.S. (“CDC”) and the SHIPSAN Project in the EU to ensure that development of these programs leads to enhanced health and hygiene onboard our ships. Through our collaborative efforts, we work with the authorities to develop and revise guidelines, review plans and conduct on-site inspections for all newbuilds and significant ship renovations. In addition, we continue to maintain our ships by meeting, and often exceeding, applicable public health guidelines and requirements, complying with inspections, reporting communicable illnesses and conducting regular crew training and guest education programs.
6. Maritime Labor Regulations
The International Labor Organization (“ILO”) develops and oversees international labor standards and includes a broad range of requirements, such as the definition of a seafarer, minimum age of seafarers, medical certificates, recruitment practices, training, repatriation, food, recreational facilities, health and welfare, hours of work and rest, accommodations, wages and entitlements.
The International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, as amended, establishes additional minimum standards relating to training, including security training, certification and watchkeeping for our seafarers.
b. Consumer Financial ResponsibilityOther Governmental Regulations
In most major countries where we source our guests, we are required to establish financial responsibility, such as obtaining a guarantee from financially stable financial institutions and insurance companies, to satisfy liability in cases of our non-performance of obligations to our guests. The amount of financial responsibility varies by jurisdiction based on the amount mandated by the applicable local regulatory agencies or association.
In Australia and most of Europe, we may be obligated to honor our guests’ cruise payments made by them to their travel agents and tour operators regardless of whether we receive these payments.
We are also subject to many other laws and regulations which require our compliance, including those addressing antitrust, anti-money laundering, data privacy, securities, sanctions, bribery and corruption, as well as human resources related matters.
XX. XXI. Taxation
A summary of our principal taxes and exemptions in the jurisdictions where our significant operations are located is as follows:
We are primarily foreign corporations engaged in the business of operating cruise ships in international transportation. We also own and operate, among other businesses, the U.S. hotel and transportation business of Holland America Princess Alaska Tours through U.S. corporations.
Our North American cruise ship businesses and certain ship-owning subsidiaries are engaged in a trade or business within the U.S. Depending on its itinerary, any particular ship may generate income from sources within the U.S. We believe that our U.S. source income and the income of our ship-owning subsidiaries, to the extent derived from, or incidental to, the international operation of a ship or ships, is currently exempt from U.S. federal income and branch profit taxes.
Our domestic U.S. operations, principally the hotel and transportation business of Holland America Princess Alaska Tours, are subject to federal and state income taxation in the U.S.
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1. | Application of Section 883 of the Internal Revenue Code |
In general, under Section 883 of the Internal Revenue Code, certain non-U.S. corporations (such as our North American cruise ship businesses) are not subject to U.S. federal income tax or branch profits tax on U.S. source income derived from, or incidental to, the international operation of a ship or ships. Applicable U.S. Treasury 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. in respect of each category of shipping income for which an exemption is being claimed under Section 883 (an “equivalent exemption jurisdiction”) and (ii)
the foreign corporation meets a defined publicly-traded corporation stock ownership test (the “publicly-traded test”). Subsidiaries of foreign corporations that are organized in an equivalent exemption jurisdiction and meet the publicly-traded test also benefit from Section 883. We believe that Panama is an equivalent exemption jurisdiction and that Carnival Corporation currently satisfies the publicly-traded test under the regulations. Accordingly, substantially all of Carnival Corporation’s income is exempt from U.S. federal income and branch profit taxes.
Regulations under Section 883 list certain activities that the Internal Revenue Service (“IRS”) does not consider to be incidental to the international operation of ships and, therefore, the income attributable to such activities, to the extent such income is U.S. source, does not qualify for the Section 883 exemption. Among the activities identified as not incidental are income from the sale of air transportation, transfers, shore excursions and pre- and post-cruise land packages to the extent earned from sources within the U.S.
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2. | Exemption Under Applicable Income Tax Treaties |
We believe that the U.S. source transportation income earned by Carnival plc and its subsidiaries currently qualifies for exemption from U.S. federal income tax under applicable bilateral U.S. income tax treaties.
Carnival Corporation and Carnival plc and certain of their subsidiaries are subject to various U.S. state income taxes generally imposed on each state’s portion of the U.S. source income subject to U.S. federal income taxes. However, the state of Alaska imposes an income tax on its allocated portion of the total income of our companies doing business in Alaska and certain of their subsidiaries.
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b. | UK and Australian Income Tax |
Cunard, P&O Cruises (UK) and P&O Cruises (Australia) are divisions of Carnival plc and have elected to enter the UK tonnage tax under a rolling ten-year term and, accordingly, reapply every year. Companies to which the tonnage tax regime applies pay corporation taxes on profits calculated by reference to the net tonnage of qualifying ships. UK corporation tax is not chargeable under the normal UK tax rules on these brands’ relevant shipping income. Relevant shipping income includes income from the operation of qualifying ships and from shipping related activities.
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. Companies within UK tonnage tax are also subject to a seafarer training requirement.
Our UK non-shipping activities that do not qualify under the UK tonnage tax regime remain subject to normal UK corporation tax. Dividends received from subsidiaries of Carnival plc doing business outside the UK are generally exempt from UK corporation tax.
P&O Cruises (Australia) and all of the other cruise ships operated internationally by Carnival plc for the cruise segment of the Australian vacation region are exempt from Australian corporation tax by virtue of the UK/Australian income tax treaty.
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c. | Italian and German Income Tax |
In early 2015, Costa and AIDA re-elected to enter the Italian tonnage tax regime through 2024 and can reapply for an additional ten-year period beginning in early 2025. Companies to which the tonnage tax regime applies pay corporation taxes on shipping profits calculated by reference to the net tonnage of qualifying ships.
Most of Costa’s and AIDA’s earnings that are not eligible for taxation under the Italian tonnage tax regime will be taxed at an effective tax rate of 4.8%. in 2019 and 2018.
Substantially all of AIDA’s earnings are exempt from German income taxes by virtue of the Germany/Italy income tax treaty.
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d. | Asian Countries Income and Other Taxes |
Substantially all of our brands’ income from their international operations in Asian countries is exempt from income tax by virtue of relevant income tax treaties. In addition, the income is exempt from indirect taxes in China under relevant income tax treaties and other circulars.
In addition to or in place of income taxes, virtually all jurisdictions where our ships call impose taxes, fees and other charges based on guest counts, ship tonnage, passenger capacity or some other measure.
XXI. XXII. Trademarks and Other Intellectual Property
We own, use and/or have registered or licensed numerous trademarks, patents and patent pending designs and technology, copyrights and domain names, which have considerable value and some of which are widely recognized throughout the world. These intangible assets enable us to distinguish our cruise products and services, ships and programs from those of our competitors. We own or license the trademarks for the trade names of our cruise brands, each of which we believe is a widely-recognized brand in the cruise industry, as well as our ship names and a wide variety of cruise products and services.
XXII. XXIII. Competition
We compete with land-based vacation alternatives throughout the world, such as hotels, resorts (including all-inclusive resorts), theme parks, organized tours, casinos, vacation ownership properties, and other internet-based alternative lodging sites. Based on the most recent G.P. Wild Cruise Industry Statistical Review, we, along with our principal cruise competitors Royal Caribbean Cruises Ltd., Norwegian Cruise Line Holdings, Ltd. and MSC Cruises, carry approximately 84%83% of all global cruise guests.
D. Website Access to Carnival Corporation & plc SEC Reports
We use our websites as channels of distribution of company information. Our Form 10-K, joint Quarterly Reports on Form 10-Q, joint Current Reports on Form 8-K, joint Proxy Statement related to our annual shareholders meeting, Section 16 filings and all amendments to those reports are available free of charge at www.carnivalcorp.com and www.carnivalplc.com and on the SEC’s website at www.sec.gov as soon as reasonably practicable after we have electronically filed or furnished these reports with the SEC. In addition, you may automatically receive email alerts and other information when you enroll your email address by visiting the Investor Services section of our websites. The content of any website referred to in this document is not incorporated by reference into this document.
E. Industry and Market Data
This document includes market share and industry data and forecasts that we obtained from industry publications, third-party surveys and internal company surveys. Industry publications, including those from CLIA, G.P. Wild, and surveys and forecasts, including those from ASTA, generally state that the information contained therein has been obtained from sources believed to be reliable. CLIA is a non-profit marketing and training organization formed in 1975 to promote cruising and offer support and training for the travel agent community in North America. CLIA participates in the regulatory and policy development process while supporting measures that foster a safe, secure and healthy cruise ship environment. In addition, CLIA facilitates strategic relationships between cruise industry suppliers and organizations, cruise lines, ports and shipyards and provides a forum for interaction with governmental agencies. All CLIA information, obtained from the CLIA website www.cruising.org, relates to the CLIA member cruise lines. In 2018,2019, CLIA represents over 50 cruise brands that operate more than 95% of cruise industry capacity. G.P Wild is an authoritative source of cruise industry statistics and publishes a number of reports and industry reviews. All G.P. Wild information is obtained from their annual Cruise Industry Statistical Review. All other references to third party information are publicly available at nominal or no cost. We use the most currently available industry and market data to support statements as to our market positions. Although we believe that the industry publications and third-party sources are reliable, we have not independently verified any of the data. Similarly, while we believe our internal estimates with respect to our industry are reliable, they have not been verified by any independent sources. While we are not aware of any misstatements regarding any industry data presented herein, our estimates, in particular as they relate to market share and our general expectations, involve risks and uncertainties and are subject to change based on various factors, including those discussed under Part I, Item 1A. Risk Factors and Exhibit 13, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Form 10-K.
3. Internal Control and Risk Assessment.
Item 1A. Risk Factors.
You should carefully consider the specificfollowing discussion of significant factors, events and uncertainties that make an investment in the Company’s securities risky and provide important information for the understanding of the “forward-looking” statements discussed in this Form 10-K and elsewhere. These risk factors set forth below and theshould be read in conjunction with other information contained or incorporated by reference in this document, asForm 10-K.
The events and consequences discussed in these risk factors could have a material adverse effect on the Company’s business, financial condition, operating results and stock price. These risk factors do not identify all risks that the Company faces; operations could also be affected by factors, events, or uncertainties that are important factorsnot presently known to the Company or that could cause our actual results, performance or achievementsthe Company currently does not consider to differ materially from our expected or historical results.present significant risks to its operations. In addition, the current global economic climate amplifies many of these risks. Some of the statements in this item and elsewhere in this document 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” section below.
The ordering and lettering of the risk factors set forth below is not intended to reflect any Company indication of priority or likelihood.
a. Adverse worldWorld events impacting the ability or desire of people to travel may lead to a decline in demand for cruises
We may be impacted by the public’s concerns regarding the health, safety and security of travel, including government travel advisories and travel restrictions, political instability and civil unrest, and other general concerns. Additionally, we may be impacted by heightened regulations around customs and border control, travel bans to and from certain geographical areas, government policies increasing the difficulty of travel and limitations on issuing international travel visas. We may also be impacted by adverse changes in the perceived or actual economic climate, such as global or regional recessions, higher unemployment and underemployment rates and declines in income levels. In 2019,Furthermore, uncertainties resulting from the UK’s expected exit from the European Union may impact our business.
b. Incidents concerning our ships, guests or the cruise vacation industry as well as adverse weather conditions and other natural disasters may impact the satisfaction of our guests and crew and lead to reputational damage
Our operations involve the risk of incidents and media coverage thereof. Such incidents include, but are not limited to, the improper operation or maintenance of ships, motorcoaches and trains; guest and crew illnesses; mechanical failures, fires and collisions; repair delays, groundings and navigational errors; oil spills and other maritime and environmental issues as well as other incidents at sea or while in port or on land which may cause guest and crew discomfort, injury, or death. Although our commitment to the safety and comfort of our guests and crew is paramount to the success of our business, our ships have been involved in accidents and other incidents in the past and we may experience similar or other incidents in the future. Our ability to attract and retain guests and crew, depends in part, upon the perception and reputation of our company.
Our cruise ships, hotels, land tours, port and related commercial facilities and shore excursions may be impacted by adverse weather patterns or other natural disasters, such as hurricanes, earthquakes, floods, fires, tornados,tornadoes, tsunamis, typhoons and volcanic eruptions. It is possible that we could be forced to alter itineraries or cancel a cruise or a series of cruises or tours due to these or other types of disruptions. Changes in climate may increase the frequency and intensity of adverse weather patterns, make certain destinations less desirable or impact our business in other ways. In addition, these and any other events which impact the travel industry more generally may negatively impact our guests’ or crew’s ability or desire to travel to or from our ships and/or interrupt the supply of critical goods and services.
c. Changes in and non-compliance with laws and regulations under which we operate, such as those relating to health, environment, safety and security, data privacy and protection, anti-corruption, economic sanctions, trade protection and tax may lead to litigation, enforcement actions, fines, penalties, and reputational damage
We are subject to numerous international, national, state and local laws, regulations, treaties and other legal requirements that govern health, environmental, safety and security matters in relation to our guests, crew and ships. These requirements change regularly, sometimes on a daily basis, depending on the itineraries of our ships and the ports and countries visited. If we violate or fail to comply with any of these laws, regulations, treaties and other requirements we could be, and have previously been, fined or otherwise sanctioned by regulators. In addition, there is increased global focus on climate change, which may lead to
additional regulatory requirements. We are subject to a court-ordered environmental compliance plan supervised by the U.S. District Court for the Southern District of Florida, which is operative until at least April 2022 and subjects our operations to additional review and other obligations. Failure to comply with the requirements of this environmental compliance plan or other special conditions of probation could result in fines, which the court has imposed in the past, and restrictions on our operations.
We are subject to laws and requirements related to the treatment and protection of sensitive data in the jurisdictions where we operate. Various governments, agencies and regulatory organizations have enacted or are considering new rules and regulations. In the course of doing business, we collect guest, employee, company and other third-party data, including personally identifiable information and other sensitive data.
Our operations subject us to potential liability under anti-corruption laws and regulations. We may also be affected by economic sanctions, trade protection laws, policies and other regulatory requirements affecting trade and investment.
We are also subject to compliance with tax laws, regulations and treaties in the jurisdictions in which we are incorporated or operate. These tax laws, regulations and treaties are subject to change at any time, which may result in substantially higher tax liabilities. Additionally, the relevant authorities’ interpretation of tax laws, regulations and treaties could differ materially from ours.
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d. | Breaches in data security and lapses in data privacy as well as disruptions and other damages to our principal offices, information technology operations and system networks and failure to keep pace with developments in technology may adversely impact our business operations, the satisfaction of our guests and crew and lead to reputational damage |
We may be impacted by breaches in data security and lapses in data privacy, which occur from time to time. These can vary in scope and intent from economically driven attacks to malicious attacks targeting our key operating systems with the intent to disrupt or compromise our shoreside and shipboard operations. Like many companies, we have been and continue to be subject to unauthorized access or use of digital systems and networks through human error or for purposes of misappropriating assets or obtaining sensitive financial, medical or other personal or business information.
Our principal offices, information technology operations and system networks may be impacted by actual or threatened natural disasters (for example, hurricanes, earthquakes, floods, fires, tornados,tornadoes, tsunamis, typhoons and volcanic eruptions) or other disruptive events. Our maritime and/or shoreside operations, including our ability to manage our inventory of cabins held for sale and set pricing, control costs, and serve our guests, depends on the reliability of our information technology operations and system networks as well as our ability to refine and update to more advanced systems and technologies.
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e. | Ability to recruit, develop and retain qualified shipboard personnel who live away from home for extended periods of time may adversely impact our business operations, guest services and satisfaction |
We hire a significant number of qualified shipboard personnel each year and, thus, our ability to adequately recruit, develop and retain these individuals is critical to our success. Incidents involving cruise ships and the related adverse media publicity, adverse economic conditions that negatively affect our profitability and increasing demand as a result of our and the industry’s projected growth could negatively impact our ability to recruit, develop and retain sufficient qualified shipboard personnel.
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f. | Increases in fuel prices, changes in the types of fuel consumed and availability of fuel supply may adversely impact our scheduled itineraries and costs |
We may be impacted, and have been impacted in the past, by economic, market and political conditions around the world, such as fuel demand, regulatory requirements, supply disruptions and related infrastructure needs, which make it difficult to predict the future price and availability of fuel. Future increases in the global price of fuel would increase the cost of our cruise ship operations as well as some of our other expenses, such as crew travel, freight and commodity prices. Increases in airfares, which could result from increases in the price of fuel, would increase our guests’ overall vacation costs as many of our guests depend on airlines to transport them to or from the airports near the ports where our cruises embark and disembark.
As a result of changes in regulations, we expect to consume a larger percentage of low sulfur fuel in 2020, which will likely increase our fuel costs. Additionally, certain of our ships are designed to use LNG as atheir primary fuel source. At this time, the marine LNG distribution infrastructure is in the early stages of development with a limited number of suppliers and purchasing is usually made through long-term contracts. We may experience difficulties in operating and maintaining new LNG-based engine technology.suppliers.
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g. | Fluctuations in foreign currency exchange rates may adversely impact our financial results |
We earn revenues, pay expenses, purchase and own assets and incur liabilities in currencies other than the U.S. dollar. Additionally, our shipbuilding contracts are typically denominated in euros. Movements in foreign currency exchange rates will affect our financial results.
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h. | Overcapacity and competition in the cruise and land-based vacation industry may lead to a decline in our cruise sales, pricing and pricing destination options |
We may be impacted by increases in capacity in the cruise and land-based vacation industry, which may result in capacity growth beyond demand, either globally or for a region, or for a particular itinerary. We face competition from other cruise brands on the basis of overall experience, destinations, types and sizes of ships and cabins, travel agent preferences and value. In addition, we compete with land-based vacation alternatives throughout the world on the basis of overall experience, destinations and value.
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i. | Geographic regions in which we try to expand our business may be slow to develop or ultimately not develop how we expect |
As we continue to expand our global presence, it requires, among other things, significant levels of management resources, capital and other investments. For example, we may be required to localize our cruise products and services to conform to local cultures, standards, policies and regulations. As a result, it may be more difficult for us to replicate our successful core business models and we may not be able to recover our investments in these markets. In addition, we cannot be certain that these markets, such as China, will ultimately develop as we expect.
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j. | Inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments may adversely impact our business operations and the satisfaction of our guests |
We may be impacted by unforeseen events, such as work stoppages, insolvencies, “force majeure” events or other financial difficulties experienced by shipyards, their subcontractors and our suppliers. This may result in less shipyard availability resulting in delays or preventing the delivery of our ships under construction and/or the completion of the repair, maintenance, or refurbishment of our existing ships. This may lead to potential delays or cancellations of cruises. In addition, the prices of various commodities that are used in the construction of ships and for repair, maintenance and refurbishment of existing ships, such as steel, are subject to volatility.
Cautionary Note Concerning Factors That May Affect Future Results
Some of the statements, estimates or projections contained in this document are “forward-looking statements” that involve risks, uncertainties and assumptions with respect to us, including some statements concerning future results, outlooks, 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 Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts are statements that could be deemed forward-looking. These statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate and the beliefs and assumptions of our management. We have tried, whenever possible, to identify these statements by using words like “will,” “may,” “could,” “should,” “would,” “believe,” “depends,” “expect,” “goal,” “anticipate,” “forecast,” “project,” “future,” “intend,” “plan,” “estimate,” “target,” “indicate,” “outlook,” and similar expressions of future intent or the negative of such terms.
Forward-looking statements include those statements that relate to our outlook and financial position including, but not limited to, statements regarding:
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• Net revenue yields | • Net cruise costs, excluding fuel per available lower berth day |
• Booking levels | • Estimates of ship depreciable lives and residual values |
• Pricing and occupancy | • Goodwill, ship and trademark fair values |
• Interest, tax and fuel expenses | • Liquidity |
• Currency exchange rates | • Adjusted earnings per share |
Certain of the risks we are exposed to are identified in this Item 1A. “Risk Factors.” This item contains important cautionary statements and a discussion of the known factors that we consider could materially affect the accuracy of our forward-looking
statements and adversely affect our business, results of operations and financial position. It is not possible to predict or identify all such risks. There may be additional risks that we consider immaterial or which are unknown.
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 stock exchange rules, we expressly disclaim any obligation to disseminate, after the date of this document, 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.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
As of November 30, 2018,2019, the Carnival Corporation and Carnival plc headquarters and our larger shoreside locations are as follows:
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Location | | Square Footage (in thousands) | | Own/Lease | | Principal Operations |
Miami, FL, U.S.A. | | 463/61 | | Own/Lease | | Carnival Corporation and Carnival Cruise Line |
Genoa, Italy | | 246/66 | | Own/Lease | | Costa and AIDA |
Santa Clarita, CA, U.S.A. | | 311 | | Lease | | Princess Cruises, Holland America Line and Seabourn |
Almere, Netherlands | | 253 | | Own | | Arison Maritime Center |
Rostock, Germany | | 224 | | Own | | Costa and AIDA |
Seattle, WA, U.S.A. | | 175 | | Lease | | Princess Cruises, Holland America Line and Seabourn |
Southampton, England | | 150 | | Lease | | Carnival plc, P&O Cruises (UK) and Cunard |
Hamburg, Germany | | 146150 | | Lease | | Costa and AIDA |
Sydney, NSW, Australia | | 37 | | Lease | | Princess Cruises and P&O Cruises (Australia) |
Shanghai, China | | 32 | | Lease | | Costa |
Information about our cruise ships, including the number each of our cruise brands operate, as well as information regarding our cruise ships under construction may be found under Part I. Item 1. Business. C. “Our Global Cruise Business.” In addition, we own, lease or have controlling interests in port destinations, private islands, hotels, and lodges.
Item 3. Legal Proceedings.
As part of the previously disclosed settlement approved by the U.S. District Court of the Southern District of Florida in June 2019, Carnival Corporation paid a financial penalty, and is subject to ongoing oversight, environmental goals and certain reporting requirements, as well as a restructuring of its compliance function, relating to the violation of probation conditions for a plea agreement entered into by Princess Cruises and the U.S. Department of Justice in 2016. We may be subject to further conditions and penalties in the event of future environmental incidents.
As previously disclosed, on May 15, 2018, the Marseilles, France Public Prosecutor alleged that Carnival plc and the captain of P&O Cruises’ Azura breached the French Environmental Code governing the sulfur content of fuel used during the vessel’s passage through French territorial waters on March 28 and 29, 2018.waters. On November 26, 2018, the Tribunal de Grande Instance imposed a fine, costs and damages against Carnival plc and the captain for an aggregate of €118,000. On November 12, 2019, in response to our application to the court of appeal, a verdict overturning the original conviction was handed down. The prosecution has appealed to the French Supreme Court. We continue to believe that we have a meritorious defense to this claim and are appealing this judgment. We also believe that the ultimate outcome of the proceedings will not have a material impact on our consolidated financial statements.
As previously disclosed, on August 24, 2018, a proposed class-action lawsuit was filed by James Wolfe and others against Carnival Corporation relating to the marketing and sales of Carnival Cruise Line’s Vacation Protection product. On January 3, 2019, the United States District Court for the Southern District of Florida granted Carnival Corporation’s motion to stay proceedings and compel arbitration. We believe we have meritorious defenses to the claim and that any liability which may arise as a result of this action will not have a material impact on our consolidated financial statements.
As previously disclosed, on August 28, 2018, P&O Cruises (Australia) notified the Maritime Accident Investigation Branch and the Australian Maritime Safety Authority of an inadvertent discharge of liquid food waste mixed into grey water off of Pacific Explorer while it was inside the Great Barrier Reef Marine Park on August 26, 2018. We believe the ultimate outcome of any investigation and any penalty will not have a material impact on our consolidated financial statements.
Item 4. Mine Safety Disclosures.
None.
Executive Officers of the Registrants
The table below sets forth the name, age, years of service and title of each of our executive officers. Titles listed relate to positions within Carnival Corporation and Carnival plc unless otherwise noted.
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Age | | Years of Service (a) | | Title |
Micky Arison | 69 | | 47 | | Chairman of the Boards of Directors |
David Bernstein | 61 | | 20 | | Chief Financial Officer and Chief Accounting Officer |
Arnold W. Donald | 64 | | 18 | | President and Chief Executive Officer and Director |
Stein Kruse | 60 | | 19 | | Group Chief Executive Officer of Holland America Group and Carnival UK |
Arnaldo Perez | 58 | | 26 | | General Counsel and Secretary |
Michael Thamm | 55 | | 25 | | Group Chief Executive Officer of Costa Group and Carnival Asia |
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(a) | Years of service with us or Carnival plc predecessor companies. |
Business Experience of Executive Officers
Micky Arison has been Chairman of the Boards of Directors since 1990 andOn October 23, 2019, a Director since 1987. Hecomplaint was Chief Executive Officer from 1979 to 2013.
David Bernstein has been Chief Financial Officer since 2007 and Chief Accounting Officer since 2016. From 2003 to 2007, he was Treasurer.
Arnold W. Donald has been President and Chief Executive Officer since 2013. He has beenfiled by a Director since 2001.
Stein Kruse has been the Group Chief Executive Officer of Holland America Group and Carnival UK since 2017. He was Chief Executive Officer of Holland America Group from 2013 to 2017. From 2004 to 2013, he was President and Chief Executive Officer of Holland America Line.
Arnaldo Perez has been General Counsel and Secretary since 1995.
Michael Thamm has been Group Chief Executive Officer of Costa Group since 2012 and of Carnival Asia since 2017.
PART II
Item 5. Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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 Form 10-K.
B. Holders
The information required by Item 201(b) of Regulation S-K, Holders, is shown in Exhibit 13 and is incorporated by reference into this Form 10-K.
C. Dividends
All dividends for both Carnival Corporation and Carnival plc are declared in U.S. dollars. If declared, holders of Carnival Corporation common stock and Carnival plc American Depository Shares receive a dividend payable in U.S. dollars. The dividends payable for Carnival plc ordinary shares are payable in sterling, unless the shareholders elect to receive the dividends in U.S. dollars. Dividends payable in sterling will be converted from U.S. dollars into sterling at the U.S. dollar to sterling
exchange rate quoted by the Bank of England in London at 12:00 p.m. on the next combined U.S. and UK business day that follows the quarter end.
The payment and amount of any future dividend is within the discretion of the Boards of Directors. Our dividends were and will be based on a number of factors, including our earnings, liquidity position, financial condition, booking trends, capital requirements, credit ratings and the availability and cost of obtaining new debt. We cannot be certain that Carnival Corporation and Carnival plc will continue their dividend in the future, and if so, the amount and timing of such future dividends are not determinable and may be different than prior declarations.
D. Securities Authorized for Issuance under Equity Compensation Plans
The information required by Item 201(d) of Regulation S-K is incorporated by reference to Part III. Item 12 of this Form 10-K.
E. Performance Graph
The information required by Item 201(e) of Regulation S-K, Performance Graph, is shown in Exhibit 13 and is incorporated by reference into this Form 10-K.
F. Issuer Purchases of Equity Securities; Use of Proceeds from Registered Securities
I. Repurchase Program
Under a share repurchase program effective 2004, we are authorized to repurchase Carnival Corporation common stock and Carnival plc ordinary shares (the “Repurchase Program”). Effective April 10 and August 27, 2018, the company approved modifications of the general authorization under the Repurchase Program, which replenished the remaining authorized repurchases at the time of the approvals to $1.0 billion. The Repurchase Program does not have an expiration date and may be discontinued by our Boards of Directors at any time.
During the three months ended November 30, 2018, repurchases of Carnival Corporation common stock pursuant to the Repurchase Program were as follows:
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Period | | Total Number of Shares of Carnival Corporation Common Stock Purchased (in millions) | | Average Price Paid per Share of Carnival Corporation Common Stock | | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Repurchase Program (in millions) |
September 1, 2018 through September 30, 2018 | | — |
| | $ | — |
| | $ | 919 |
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October 1, 2018 through October 31, 2018 | | — |
| | $ | 55.20 |
| | $ | 767 |
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November 1, 2018 through November 30, 2018 | | — |
| | $ | — |
| | $ | 726 |
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| | — |
| | $ | 55.20 |
| | |
During the three months ended November 30, 2018, repurchases of Carnival plc ordinary shares pursuant to the Repurchase Program were as follows:
|
| | | | | | | | | | | |
Period | | Total Number of Shares of Carnival plc Purchased (in millions) | | Average Price Paid per Share of Carnival plc | | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Repurchase Program (in millions) |
September 1, 2018 through September 30, 2018 | | 1.1 |
| | $ | 62.13 |
| | $ | 919 |
|
October 1, 2018 through October 31, 2018 | | 2.7 |
| | $ | 56.69 |
| | $ | 767 |
|
November 1, 2018 through November 30, 2018 | | 0.7 |
| | $ | 58.08 |
| | $ | 726 |
|
| | 4.5 |
| | $ | 58.24 |
| | |
No shares of Carnival Corporation common stock or Carnival plc ordinary shares were purchased outside of publicly announced plans or programs.
II. Stock Swap Programs
In addition to the Repurchase Program, we have programs that allow us to obtain an economic benefit when either Carnival Corporation common stock is trading at a premium to the price of Carnival plc ordinary shares or Carnival plc ordinary shares are trading at a premium to Carnival Corporation common stock (the “Stock Swap Programs”). For example:
In the event Carnival Corporation common stock trades at a premium to Carnival plc ordinary shares, we may elect to sell shares of Carnival Corporation common stock, at prevailing market prices in ordinary brokers’ transactions and repurchase an equivalent number of Carnival plc ordinary shares in the UK market.
In the event Carnival plc ordinary shares trade at a premium to Carnival Corporation common stock, we may elect to sell ordinary shares of Carnival plc, at prevailing market prices in ordinary brokers’ transactions and repurchase an equivalent number of shares of Carnival Corporation common stock in the U.S. market.
Under the Stock Swap Programs effective 2008, the Boards of Directors have made the following authorizations:
In January 2017, to sell up to 22.0 million of Carnival Corporation common stock in the U.S. market and repurchase up to 22.0 million of Carnival plc ordinary shares in the UK market.
In 2016, to sell up to 26.9 million of existing sharespurported shareholder of Carnival plc in the UK marketNew York Supreme Court, New York County, purporting to allege derivative claims on Carnival plc’s behalf for breach of fiduciary duty and repurchase up to 26.9 million shares of Carnival Corporation common stock incorporate waste against the U.S. market.
Any sales of Carnival Corporation shares and Carnival plc ordinary shares have been or will be registered under the Securities Act of 1933. During the three months ended November 30, 2018, no Carnival Corporation common stock or Carnival plc ordinary shares were sold or repurchased under the Stock Swap Programs.
III. Carnival plc Shareholder Approvals
Carnival plc ordinary share repurchases under both the Repurchase Program and the Stock Swap Programs require annual shareholder approval. The existing shareholder approval is limited to a maximum of 20.9 million ordinary shares and is valid until the earlier of the conclusionmembers of the Carnival plc 2019 annual general meeting or October 11, 2019.Board of Directors (the “Board”). The allegations relate to the criminal proceedings by the U.S. Department of Justice against Princess Cruise Lines, Ltd., which we previously disclosed. Plaintiff seeks declaratory judgment that the Board breached their duties to Carnival plc, monetary damages and restitution to Carnival plc, punitive damages from the Board to Carnival plc, and an award of Plaintiff’s attorney’s fees and costs. The defendants have not yet responded to the complaint.
Item 4. Mine Safety Disclosures.
None.
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 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 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 Management’s Discussion and Analysis of Financial Condition and Results of Operations in Exhibit 13 and is incorporated by reference into this Form 10-K.
Item 8. Financial Statements and Supplementary Data.
The financial statements, together with the report thereon of PricewaterhouseCoopers LLP, dated January 28, 2019,2020, and the Selected Quarterly Financial Data (Unaudited) are shown in Exhibit 13 and are incorporated by reference into this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
A. 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 under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported, within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Our President and Chief Executive Officer and our Chief Financial Officer and Chief Accounting Officer have evaluated our disclosure controls and procedures and have concluded, as of November 30, 2018,2019, that they are effective as described above.
B. Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer and Chief Accounting Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 Internal Control – Integrated Framework (the “COSO
“COSO Framework”). Based on this evaluation under the COSO Framework, our management concluded that our internal control over financial reporting was effective as of November 30, 2018.2019.
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited our consolidated financial statements incorporated in this Form 10-K, has also audited the effectiveness of our internal control over financial reporting as of November 30, 20182019 as stated in their report, which is shown in Exhibit 13 and is incorporated by reference into this Form 10-K.
C. Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended November 30, 20182019 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Item 9B. Other Information.
None.On January 27, 2020, Debra Kelly-Ennis resigned from her position as a Director of Carnival Corporation and Carnival plc, including her role as a member of our HESS Committees effective that same day. Her resignation was not the result of any disagreement between her and the company.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors
Information regarding our directors, as required by Item 10, is incorporated herein by reference from the Carnival Corporation and Carnival plc joint definitive Proxy Statement to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the close of the 2019 fiscal year.
Information About Our Executive Officers
The table below sets forth the name, age, years of service and title of each of our executive officers. Titles listed relate to positions within Carnival Corporation and Carnival plc unless otherwise noted.
|
| | | | | |
|
Age | | Years of Service (a) | | Title |
Micky Arison | 70 | | 48 | | Chairman of the Boards of Directors |
David Bernstein | 62 | | 21 | | Chief Financial Officer and Chief Accounting Officer |
Arnold W. Donald | 65 | | 19 | | President and Chief Executive Officer and Director |
Stein Kruse | 61 | | 20 | | Group Chief Executive Officer of Holland America Group and Carnival UK |
Arnaldo Perez | 59 | | 27 | | General Counsel and Secretary |
Michael Thamm | 56 | | 26 | | Group Chief Executive Officer of Costa Group and Carnival Asia |
| |
(a) | Years of service with us or Carnival plc predecessor companies. |
Business Experience of Executive Officers
Micky Arison has been Chairman of the Boards of Directors since 1990 and a Director since 1987. He was Chief Executive Officer from 1979 to 2013.
David Bernstein has been Chief Financial Officer since 2007 and Chief Accounting Officer since 2016.
Arnold W. Donald has been President and Chief Executive Officer since 2013. He has been a Director since 2001.
Stein Kruse has been the Group Chief Executive Officer of Holland America Group and Carnival UK since 2017. He was Chief Executive Officer of Holland America Group from 2013 to 2017.
Arnaldo Perez has been General Counsel and Secretary since 1995.
Michael Thamm has been Group Chief Executive Officer of Costa Group since 2012 and of Carnival Asia since 2017.
Corporate Governance
We have adopted a Code of Business Conduct and Ethics that applies to our President and Chief Executive Officer and senior financial officers, including the Chief Financial Officer and Chief Accounting Officer and other persons performing similar functions. Our Code of Business Conduct and Ethics applies to all our other employees and to our directors as well. This Code of Business Conduct and Ethics is posted on our website, which is located at www.carnivalcorp.com and www.carnivalplc.com. We intend to satisfy the disclosure requirement under Item 5.05 of the Form 8-K regarding any amendments to, or waivers from, provisions of this Code of Business Conduct and Ethics by posting such information on our website, at the addresses specified above.
The additional information required by Item 10 is incorporated herein by reference from the Carnival Corporation and Carnival plc joint definitive Proxy Statement to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the close of the 20182019 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 Form 10-K.year.
Item 11. Executive Compensation.
The information required by Item 11 is incorporated herein by reference from the Carnival Corporation and Carnival plc joint definitive Proxy Statement to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the close of the 20182019 fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
A. Securities Authorized for Issuance under Equity Compensation Plans
I. Carnival Corporation
Set forth below is a table that summarizes compensation plans (including individual compensation arrangements) under which Carnival Corporation equity securities are authorized for issuance as of November 30, 2018.2019.
| | Plan category | | Number of securities to be issued upon exercise of warrants and rights (in millions) | | Weighted-average exercise price of outstanding warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) (in millions) | | | Number of securities to be issued upon exercise of warrants and rights (in millions) | | Weighted-average exercise price of outstanding warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) (in millions) | |
| | (1) | | | | | (1) | | | |
Equity compensation plans approved by security holders | | 2.0 |
| (a) | - | | 8.6 |
| (b) | | 2.3 |
| (a) | - | | 7.1 |
| (b) |
Equity compensation plans not approved by security holders | | — |
| |
- | | — |
| | | — |
| |
- | | — |
| |
| | 2.0 |
| | - | | 8.6 |
| | | 2.3 |
| | - | | 7.1 |
| |
| |
(a) | Represents 2.02.3 million of restricted share units outstanding under the Carnival Corporation 2011 Stock Plan. |
| |
(b) | Includes Carnival Corporation common stock available for issuance as of November 30, 20182019 as follows: 2.01.9 million under the Carnival Corporation Employee Stock Purchase Plan, which includes 43,37644,873 shares subject to purchase during the current purchase period and 6.65.2 million under the Carnival Corporation 2011 Stock Plan. |
II. Carnival plc
Set forth below is a table that summarizes compensation plans (including individual compensation arrangements) under which Carnival plc equity securities are authorized for issuance as of November 30, 2018.2019.
| |
Plan category | | Number of securities to be issued upon exercise of warrants and rights (in millions) | | Weighted-average exercise price of outstanding warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) (in millions) | | Number of securities to be issued upon exercise of warrants and rights (in millions) | | Weighted-average exercise price of outstanding warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) (in millions) |
| | (1) | | | | (1) | | |
Equity compensation plans approved by security holders | | 0.6 |
| (a) | - | | 6.9 |
| | 0.6 |
| (a) | - | | 6.6 |
|
Equity compensation plans not approved by security holders | | — |
| |
- | | — |
| | — |
| |
- | | — |
|
| | 0.6 |
| | - | | 6.9 |
| | 0.6 |
| | - | | 6.6 |
|
| |
(a) | Represents 0.6 million restricted share units outstanding under the Carnival plc 2014 Employee Share Plan. |
The additional information required by Item 12 is incorporated herein by reference to the Carnival Corporation and Carnival plc joint definitive Proxy Statement to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the close of the 20182019 fiscal year.
Items 13 and 14.Certain Relationships and Related Transactions, and Director Independence and Principal Accountant Fees and Services.
The information required by Items 13 and 14 is incorporated herein by reference from the Carnival Corporation and Carnival plc joint definitive Proxy Statement to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the close of the 20182019 fiscal year.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) (1) Financial Statements
The financial statements shown in Exhibit 13 are incorporated herein by reference into this Form 10-K.
(2) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instruction or are inapplicable and, therefore, have been omitted.
(3) Exhibits
The exhibits listed below on the Index to Exhibits are filed or incorporated by reference as part of this Form 10-K.
|
| | | | | | | | |
INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| | | | | | | |
Articles of incorporation and by-laws | | | | | | | |
| | | | | | | | |
3.1 | | 8-K | | 3.1 | | 4/17/03 | | |
| | | | | | | | |
3.2 | | 8-K | | 3.1 | | 4/20/09 | | |
| | | | | | | | |
3.3 | | 8-K | | 3.3 | | 4/20/09 | | |
| | | | | | | | |
Instruments defining the rights of security holders, including indenture | | | | | | |
| | | | | | | | |
4.1 | | | | | | | | X |
| | | | | | | | |
4.2 | | 10-Q | | 4.1 | | 10/15/03 | | |
| | | | | | | | |
4.3 | | 10-Q | | 4.2 | | 10/15/03 | | |
| | | | | | | | |
4.4 | | S-4 | | 4.3 | | 5/30/03 | | |
| | | | | | | | |
4.5 | | S-3 & F-3 | | 4.10 | | 6/19/03 | | |
| | | | | | | | |
4.6 | | S-3 & F-3 | | 4.16 | | 6/19/03 | | |
| | | | | | | | |
4.7 | | 8-K | | 4.1 | | 4/17/03 | | |
| | | | | | | | |
4.8 | | 8-K | | 4.2 | | 4/17/03 | | |
| | | | | | | | |
4.9 | | 8-K | | 4.3 | | 4/17/03 | | |
|
| | | | | | | | |
INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| | | | | | | | |
4.10 | | Post Amend- ment to Form F-6 | | 99-a | | 4/15/03 | | |
| | | | | | | | |
4.11 | | S-3 | | 4.1 | | 7/2/09 | | |
Material contracts | | | | | | | |
| | | | | | | | |
10.1* | | 10-Q | | 10.1 | | 9/28/07 | | |
| | | | | | | | |
10.2 | | 10-Q | | 10.1 | | 10/3/14 | | |
| | | | | | | | |
10.3* | |
10-Q | | 10.1 | | 6/27/08 | | |
| | | | | | | | |
10.4* | | 10-Q | | 10.2 | | 6/27/08 | | |
| | | | | | | | |
10.5 | | 10-Q | | 10.2 | | 7/12/02 | | |
| | | | | | | | |
10.6* | | 10-K | | 10.23 | | 1/30/17 | | |
| | | | | | | | |
10.7* | | 10-Q | | 10.2 | | 10/3/14 | | |
| | | | | | | | |
10.8* | | 10-K | | 10.39 | | 1/30/17 | | |
| | | | | | | | |
10.9* | | 10-Q | | 10.1 | | 7/1/15 | | |
| | | | | | | | |
10.10* | | 10-Q | | 10.2 | | 7/1/15 | | |
| | | | | | | | |
10.11* | | 10-Q | | 10.3 | | 7/1/15 | | |
|
| | | | | | | | |
INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| | | | | | | | |
4.10 | | Post Amend- ment to Form F-6 | | 99-a | | 4/15/03 | | |
| | | | | | | | |
4.11 | | S-3 | | 4.1 | | 7/2/09 | | |
| | | | | | | | |
4.12 | | | | | | | | X |
| | | | | | | | |
4.13 | | | | | | | | X |
| | | | | | | | |
4.14 | | | | | | | | X |
| | | | | | | | |
4.15 | | | | | | | | X |
Material contracts | | | | | | | |
| | | | | | | | |
10.1* | | 10-Q | | 10.1 | | 9/28/07 | | |
| | | | | | | | |
10.2 | | 10-Q | | 10.1 | | 10/3/14 | | |
| | | | | | | | |
10.3* | |
10-Q | | 10.1 | | 6/27/08 | | |
| | | | | | | | |
10.4* | | 10-Q | | 10.2 | | 6/27/08 | | |
| | | | | | | | |
10.5 | | 10-Q | | 10.2 | | 7/12/02 | | |
| | | | | | | | |
10.6* | | 10-K | | 10.23 | | 1/30/17 | | |
| | | | | | | | |
10.7* | | 10-Q | | 10.2 | | 10/3/14 | | |
| | | | | | | | |
|
| | | | | | | | |
INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
10.8* | | 10-K | | 10.39 | | 1/30/17 | | |
| | | | | | | | |
10.9* | | 10-Q | | 10.1 | | 7/1/15 | | |
| | | | | | | | |
10.10* | | 10-Q | | 10.2 | | 7/1/15 | | |
| | | | | | | | |
10.11* | | 10-Q | | 10.3 | | 7/1/15 | | |
| | | | | | | | |
10.12* | Amendment to Facilities Agreement dated May 18, 2016 among Carnival Corporation, Carnival plc and certain of Carnival Corporation and Carnival plc subsidiaries, Bank of America Merrill Lynch International Limited, as facilities agent, and KfW IPEX-Bank GmbH, Bayerische Landesbank, New York Branch and DZ BANK AG, Deutsche Zentral Genossenschaftsbank, Frankfurt am Main, New York Branch, as new lenders. | 10-Q | | 10.1 | | 7/1/16 | | |
| | | | | | | | |
10.13* | | 10-Q | | 10.3 | | 7/1/16 | | |
| | | | | | | | |
10.14* | | 10-Q | | 10.4 | | 7/1/16 | | |
| | | | | | | | |
10.15* | | 8-K | | 99.1 | | 10/21/16 | | |
| | | | | | | | |
10.16* | | 10-Q | | 10.1 | | 3/30/17 | | |
| | | | | | | | |
10.17* | | 10-Q | | 10.2 | | 3/30/17 | | |
| | | | | | | | |
10.18* | | 10-Q | | 10.3 | | 3/30/17 | | |
| | | | | | | | |
10.19* | | 8-K | | 10.1 | | 4/27/17 | | |
| | | | | | | | |
10.20* | | 10-Q | | 10.2 | | 6/30/17 | | |
| | | | | | | | |
10.21* | | 10-Q | | 10.3 | | 6/30/17 | | |
| | | | | | | | |
10.22* | | 10-Q | | 10.4 | | 6/30/17 | | |
| | | | | | | | |
10.23* | | 10-Q | | 10.1 | | 3/22/18 | | |
| | | | | | | | |
|
| | | | | | | | |
INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
10.21* | | 10-Q | | 10.3 | | 6/30/17 | | |
| | | | | | | | |
10.22* | | 10-Q | | 10.4 | | 6/30/17 | | |
| | | | | | | | |
10.23* | | 10-Q | | 10.1 | | 3/22/18 | | |
| | | | | | | | |
10.24* | | 10-Q | | 10.2 | | 3/22/18 | | |
| | | | | | | | |
10.25* | | 10-Q | | 10.3 | | 3/22/18 | | |
| | | | | | | | |
10.26* | | 10-Q | | 10.4 | | 3/22/18 | | |
| | | | | | | | |
10.27* | | 10-Q | | 10.1 | | 6/25/18 | | |
| | | | | | | | |
10.28* | | 10-Q | | 10.2 | | 6/25/18 | | |
| | | | | | | | |
10.29* | | 10-Q | | 10.1 | | 4/9/19 | | |
| | | | | | | | |
10.30* | | 10-Q | | 10.2 | | 4/9/19 | | |
| | | | | | | | |
10.31* | | 10-Q | | 10.3 | | 4/9/19 | | |
| | | | | | | | |
10.32* | | 10-Q | | 10.4 | | 4/9/19 | | |
| | | | | | | | |
10.33* | | 10-Q | | 10.5 | | 4/9/19 | | |
| | | | | | | | |
10.34* | | 10-Q | | 10.1 | | 6/24/19 | | |
| | | | | | | | |
|
| | | | | | | | |
INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
10.35* | | 10-Q | | 10.2 | | 6/24/19 | | |
| | | | | | | | |
10.36* | | 10-Q | | 10.3 | | 6/24/19 | | |
| | | | | | | | |
10.37* | | 10-Q | | 10.1 | | 9/26/19 | | |
Annual report to security holders | | | | | | | |
| | | | | | | | |
13 | | | | | | | | X |
| | | | | | | | |
Subsidiaries of the registrants | | | | | | | |
| | | | | | | | |
21 | | | | | | | | X |
| | | | | | | |
Consents of experts and counsel | | | | | | | |
| | | | | | | | |
23 | | | | | | | | X |
| | | | | | | | |
Power of attorney | | | | | |
| | | | | | |
24 | | | | | | X |
| | | | | | |
Rule 13a-14(a)/15d-14(a) certifications | | | | | |
| | | | | | |
31.1 | | | | | | X |
| | | | | |
31.2 | | | | | | X |
| | | | | | |
31.3 | | | | | | X |
| | | | | | |
|
| | | | | | | | |
INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
31.3 | | | | | | X |
| | | | | | |
31.4 | | | | | | X |
| | | | | |
Section 1350 certifications | | | | | |
| | | | | | |
32.1** | | | | | | X |
| | | | | | |
32.2** | | | | | | X |
| | | | | | |
32.3** | | | | | | X |
| | | | | | |
32.4** | | | | | | X |
| | | | | |
Interactive data file | | | | | |
101 | The consolidated financial statements from Carnival Corporation & plc’s Form 10-K for the year ended November 30, 2018,2019, as filed with the SEC on January 28, 2019 formatted in Inline XBRL, are as follows: | | | | | |
| (i) the Consolidated Statements of Income for the years ended November 30, 2019, 2018 2017 and 2016;2017; | | | | | X |
| (ii) the Consolidated Statements of Comprehensive Income for the years ended November 30, 2019, 2018 2017 and 2016;2017; | | | | | X |
| (iii) the Consolidated Balance Sheets at November 30, 20182019 and 2017;2018; | | | | | X |
| (iv) the Consolidated Statements of Cash Flows for the years ended November 30, 2019, 2018 2017 and 2016;2017; | | | | | X |
| (v) the Consolidated Statements of Shareholders’ Equity for the years ended November 30, 2019, 2018 2017 and 20162017 and | | | | | X |
| (vi) the notes to the consolidated financial statements, tagged in summary and detail. | | | | | X |
| | | | | | | | |
104 | The cover page from Carnival Corporation & plc’s Form 10-K for the year ended November 30, 2019, as filed with the Securities and Exchange Commission on January 28, 2019, formatted in Inline XBRL (included as Exhibit 101) | | | | | |
*Indicates a management contract or compensation plan or arrangement.
**These items are furnished and not filed.
***Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K
Item 16. Form 10-K Summary.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| |
CARNIVAL CORPORATION | CARNIVAL PLC |
/s/ Arnold W. Donald | /s/ Arnold W. Donald |
President and Chief Executive Officer and | President and Chief Executive Officer and |
Director | Director |
January 28, 20192020 | January 28, 20192020 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of each of the registrants and in the capacities and on the dates indicated.
|
| |
CARNIVAL CORPORATION | CARNIVAL PLC |
/s/ Arnold W. Donald | /s/ Arnold W. Donald |
President and Chief Executive Officer and | President and Chief Executive Officer and |
Director | Director |
January 28, 20192020 | January 28, 20192020 |
| |
/s/ David Bernstein | /s/ David Bernstein |
David Bernstein | David Bernstein |
Chief Financial Officer and Chief Accounting Officer | Chief Financial Officer and Chief Accounting Officer |
January 28, 20192020 | January 28, 20192020 |
| |
/s/*Micky Arison | /s/*Micky Arison |
Micky Arison | Micky Arison |
Chairman of the Board of | Chairman of the Board of |
Directors | Directors |
January 28, 20192020 | January 28, 20192020 |
| |
/s/*Sir Jonathon Band | /s/*Sir Jonathon Band |
Sir Jonathon Band | Sir Jonathon Band |
Director | Director |
January 28, 20192020 | January 28, 20192020 |
| |
/s/*Jason Glen Cahilly | /s/*Jason Glen Cahilly |
Jason Glen Cahilly | Jason Glen Cahilly |
Director | Director |
January 28, 20192020 | January 28, 20192020 |
| |
/s/*Helen Deeble | /s/*Helen Deeble |
Helen Deeble | Helen Deeble |
Director | Director |
January 28, 20192020 | January 28, 20192020 |
| |
| |
| |
| |
|
| |
/s/*Richard J. Glasier | /s/*Richard J. Glasier |
Richard J. Glasier | Richard J. Glasier |
Director | Director |
January 28, 20192020 | January 28, 2019 |
| |
/s/*Debra Kelly-Ennis | /s/*Debra Kelly-Ennis |
Debra Kelly-Ennis | Debra Kelly-Ennis |
Director | Director |
January 28, 2019 | January 28, 20192020 |
| |
/s/*Katie Lahey | /s/*Katie Lahey |
Katie Lahey | Katie Lahey |
Director | Director |
January 28, 20192020 | January 28, 20192020 |
| |
/s/*Sir John Parker | /s/*Sir John Parker |
Sir John Parker | Sir John Parker |
Director | Director |
January 28, 20192020 | January 28, 20192020 |
| |
/s/*Stuart Subotnick | /s/*Stuart Subotnick |
Stuart Subotnick | Stuart Subotnick |
Director | Director |
January 28, 20192020 | January 28, 20192020 |
| |
/s/*Laura Weil | /s/*Laura Weil |
Laura Weil | Laura Weil |
Director | Director |
January 28, 20192020 | January 28, 20192020 |
| |
/s/*Randall J. Weisenburger | /s/*Randall J. Weisenburger |
Randall J. Weisenburger | Randall J. Weisenburger |
Director | Director |
January 28, 20192020 | January 28, 20192020 |
| |
*By: /s/ Arnaldo Perez | *By: /s/ Arnaldo Perez |
Arnaldo Perez | Arnaldo Perez |
(Attorney-in-fact) | (Attorney-in-fact) |
January 28, 20192020 | January 28, 20192020 |