SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 29, 2003
Carnival Corporation Carnival plc
-------------------- ------------
(Exact name of registrant (Exact name of registrant
as specified in its charter) as specified in its charter)
Republic of Panama England and Wales
--------------------------- ----------------------------
(State or other jurisdiction (State or other jurisdiction
of incorporation) of incorporation)
1-9610 1-15136
---------------------------- ----------------------------
(Commission File Number) (Commission File Number)
59-1562976 None
--------------------------- ----------------------------
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
3655 N.W. 87th Avenue Carnival House,
5 Gainsford Street,
Miami, Florida 33178-2428, London SE1 2NE, England
------------------------------- ------------------------------
(Address of principal executive (Address of principal executive
offices) offices)
(zip code) (zip code)
(305) 599-2600 011 44 20 7805 1200
-------------------------------- --------------------------------
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
11-12 Charles II Street
None London, SW1Y 4QU, England
------------------------------- --------------------------------
(Former name and former address, (Former name and former address,
if changed since last report) if changed since last report)
Item 5. Other Events and Regulation FD Disclosure.
Attached hereto as Exhibit 99.1 is the Carnival Corporation and
Carnival plc (formerly known as P&O Princess Cruises plc) combined 2003
first fiscal quarter unaudited pro forma financial information, that gives
pro forma effect to the dual listed company ("DLC") transaction, completed
on April 17, 2003, between such companies, which implemented Carnival
Corporation & plc's DLC structure. This pro forma information has been
presented in accordance with Article ll of the Securities and Exchange
Commission's ("SEC") Regulation S-X, and is being filed solely in order to
comply with the SEC's pro forma financial reporting requirements.
Carnival Corporation & plc recently became aware that on April 23,
2003, Festival Crociere S.p.A. commenced an action against the European
Commission (the "Commission") in the European Court of First Instance in
Luxembourg seeking to annul the Commission's antitrust approval of the DLC
transaction. Carnival Corporation and Carnival plc intend to seek leave to
intervene in the Festival action and to contest such action vigorously. A
successful third party challenge of an unconditional Commission clearance
decision would be unprecedented, and based on a review of the law and the
factual circumstances of the DLC transaction, as well as the Commission's
review of the DLC transaction and its prior review of the proposed merger,
Carnival Corporation & plc believe that the Festival action will not have a
material adverse effect on the companies or the DLC transaction.
Cautionary Note Concerning Factors That May Affect Future Results
Some of the statements contained in this Current Report on Form 8-K
are "forward-looking statements" that involve risks, uncertainties and
assumptions with respect to Carnival Corporation, Carnival plc and Carnival
Corporation & plc, including some statements concerning future results,
plans, goals and other events which have not yet occurred. You can find
many, but not all, of these statements by looking for words like "will,"
"may," "believes," "expects," "anticipates," "forecast," "future,"
"intends," "plans," and "estimates" and for similar expressions. Because
forward-looking statements, including those which may impact the
forecasting of net revenue yields, booking levels, pricing, occupancy,
operating, financing and tax costs, estimates of ship depreciable lives and
residual values or business prospects, involve risks and uncertainties,
there are many factors that could cause Carnival Corporation's, Carnival
plc's and Carnival Corporation & plc's actual results, performance or
achievements to differ materially from those expressed or implied in this
Current Report on Form 8-K. These factors include, but are not limited to,
the following: achievement of expected benefits from the DLC transaction;
risks associated with the DLC structure; liquidity and index inclusion as a
result of the implementation of the DLC structure, including a possible
mandatory exchange of Carnival plc shares that may occur under Carnival
plc's constituent documents; risks associated with the uncertainty of the
tax status of the DLC structure; general economic and business conditions,
which may impact levels of disposable income of consumers and the net
revenue yields for cruise brands of Carnival Corporation & plc; conditions
in the cruise and land-based vacation industries, including competition
from other cruise ship operators and providers of other vacation
alternatives and increases in capacity offered by cruise ship and land-
based vacation alternatives; the impact of operating internationally; the
international political and economic climate, the recent military action in
Iraq, other armed conflicts, terrorist attacks, availability of air service
and other world events and adverse publicity and their impact on the demand
for cruises; accidents and other incidents at sea affecting the health,
safety, security and vacation satisfaction of passengers; the ability of
Carnival Corporation & plc to implement its shipbuilding programs and brand
strategies and to continue to expand its businesses worldwide; the ability
of Carnival Corporation & plc to attract and retain shipboard crew and
maintain good relations with employee unions; the ability to obtain
financing on terms that are favorable or consistent with Carnival
Corporation & plc's expectations; the impact of changes in operating and
financing costs, including changes in foreign currency and interest rates
and fuel, food, insurance and security costs; changes in the tax,
environmental, health, safety, security and other regulatory regimes under
which Carnival Corporation & plc operates; continued availability of
attractive port destinations; the ability to successfully implement cost
improvement plans and to integrate business acquisitions; continuing
financial viability of Carnival Corporation & plc travel agent distribution
system; weather patterns or natural disasters; and the ability of a small
group of shareholders effectively to control the outcome of shareholder
voting.
Forward-looking statements should not be relied upon as a prediction
of actual results. Subject to any continuing obligations under applicable
law or any relevant listing rules, Carnival Corporation & plc expressly
disclaims any obligation to disseminate, after the date of this Current
Report on Form 8-K, any updates or revisions to any such forward-looking
statements to reflect any change in expectations or events, conditions or
circumstances on which any such statements are based.
Item 7. Financial Statements, Proforma Financial Information and Exhibits.
Carnival Corporation & plc's 2003 first fiscal quarter unaudited pro
forma financial information, that gives pro forma effect to the DLC
transaction, is included in Exhibit 99.1 and is hereby incorporated by
reference.
SIGNATURES
Pursuant to the requirements 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 hereunto duly authorized.
CARNIVAL CORPORATION CARNIVAL PLC
By: /s/Gerald R. Cahill By: /s/Gerald R. Cahill
Name: Gerald R. Cahill Name: Gerald R. Cahill
Title: Senior Vice President-Finance Title: Senior Vice President-Finance
and Chief Financial and and Chief Financial and
Accounting Officer Accounting Officer
Date: May 29, 2003 Date: May 29, 2003
Exhibit List
Exhibit Description
------- -----------
99.1 Carnival Corporation & plc's 2003 first fiscal quarter unaudited pro
forma financial information.
Exhibit 99.1
UNAUDITED PRO FORMA FINANCIAL INFORMATION OF CARNIVAL CORPORATION & PLC
The following unaudited pro forma financial information gives pro
forma effect to the dual listed company ("DLC") transaction between
Carnival Corporation ("Carnival") and Carnival plc (formerly known as P&O
Princess Cruises plc), which was completed on April 17, 2003 and
implemented Carnival & Carnival plc's dual structure, after giving effect
to the pro forma adjustments described in the accompanying notes. Both
aforementioned companies are collectively referred to as Carnival
Corporation & plc. We have prepared the unaudited pro forma financial
information from, and you should read it in conjunction with the 2003
first quarter historical consolidated financial statements, including the
related notes, of Carnival and Carnival plc that are included in
Carnival's February 28, 2003 Quarterly Report on Form 10-Q and Carnival
Corporation & plc's joint Current Report on Form 8-K, dated May 19, 2003.
The unaudited pro forma financial information has been prepared in
accordance with generally accepted accounting principles in the United
States of America ("U.S. GAAP") and in accordance with Carnival's
accounting policies under U.S. GAAP. U.S. GAAP differs in certain
respects from generally accepted accounting principles in the United
Kingdom ("UK GAAP"), and Carnival's accounting policies under U.S. GAAP
differ in certain respects from Carnival plc's accounting policies under
UK GAAP and U.S. GAAP. The notes to the Carnival plc audited consolidated
financial statements for the year ended December 31, 2002 included in the
Carnival plc 2002 Annual Report on Form 20-F describe the material
differences between U.S. GAAP and UK GAAP as they relate to Carnival plc.
Under U.S. GAAP the DLC transaction has been accounted for using the
purchase method of accounting in accordance with Statement of Financial
Accounting Standards No. 141 "Business Combinations." The business
combination adjustments include preliminary estimates of the fair value of
the identifiable assets and liabilities acquired. Following the
completion of the DLC transaction, adjustments will be made to these
preliminary estimates to reflect their estimated fair value as of the
completion date. In accordance with the purchase method of accounting,
the Carnival plc U.S. GAAP accounting policies are being reviewed and will
be conformed to Carnival's accounting policies.
The unaudited pro forma statement of operations for the three months
ended February 28, 2003 has been prepared as if the DLC transaction had
occurred on December 1, 2001. The unaudited pro forma balance sheet as of
February 28, 2003 has been prepared as if the DLC transaction had occurred
on that date. The historical financial information for Carnival plc used
in the unaudited pro forma financial information of Carnival Corporation &
plc is as at and for the three months ended March 31, 2003.
The following unaudited pro forma financial information
-is presented for illustrative purposes only and, because of its
nature, may not give a true picture of the results and the financial
position of Carnival Corporation & plc;
-does not purport to represent what the results of operations actually
would have been if the DLC transaction had occurred on December 1,
2001 or what those results will be for any future periods. The pro
forma adjustments are based upon currently available information;
-does not reflect the results of business operations or trading since
February 28, 2003 for Carnival and March 31, 2003 for Carnival plc;
and
-has not been adjusted to reflect any net transaction benefits.
Unaudited Pro Forma Statement of Operations
For the Three Months Ended February 28, 2003
(U.S. dollars in millions, except per share data)
Pro forma adjustments
Pro forma
Carnival Accounting Business Carnival
(U.S. Carnival plc policy combination Corporation &
GAAP) (U.S. GAAP)(1) adjustments adjustments plc (U.S. GAAP)
Revenues 1,031.1 639.0 (0.8)(a) 1,669.3
Costs and Expenses
Operating (615.2) (444.1) (3.5)(b) (1,062.6)
0.2 (a)
Selling and administrative (177.1) (120.2) 3.3 (c) 6.2 (k) (287.8)
Depreciation and amortization (106.5) (50.3) (156.8)
(898.8) (614.6) 6.2 (1,507.2)
Operating Income 132.3 24.4 (0.8) 6.2 162.1
Nonoperating (Expense) Income
Net interest expense (25.1) (18.5) (0.2)(f) (43.8)
Other income, net 14.7 14.7
(10.4) (18.5) (0.2) (29.1)
Income Before Income Taxes 121.9 5.9 (0.8) 6.0 133.0
Income Tax Benefit (Expense), Net 5.0 (1.1) 0.7 (g) 4.6
Net Income 126.9 4.8 (0.8) 6.7 137.6
Earnings Per Share(n)
Basic 0.22 0.17
Diluted 0.22 0.17
(1) Carnival plc information is for the three months ended March 31, 2003.
See accompanying notes to unaudited pro forma financial information of Carnival Corporation & plc in
accordance with U.S. GAAP.
Unaudited Pro Forma Balance Sheet
As of February 28, 2003
(U.S. dollars and shares in millions)
Pro forma adjustments
Pro forma
Carnival Accounting Business Carnival
(U.S. Carnival plc policy combination Corporation &
GAAP) (U.S. GAAP)(1) adjustments adjustments plc (U.S. GAAP)
Assets
Current Assets
Cash and cash equivalents 732.9 147.9 880.8
Short-term investments 37.6 37.6
Accounts receivable, net 110.1 118.1 5.5 (a) 233.7
Inventories 95.4 87.8 183.2
Prepaid expenses and other 178.7 183.0 (20.1) (b) (65.3)(g) 396.8
21.2 (c) 99.3 (l)
Fair value of derivative contracts 58.3 8.9 67.2
Fair value of hedged firm commitments 9.7 29.4 (29.4)(e) 9.7
Total current assets 1,222.7 575.1 6.6 4.6 1,809.0
Property and Equipment, Net 10,238.8 5,630.7 15,869.5
Goodwill and Intangible Assets, Net 706.5 77.6 (77.6)(j) 3,577.2
2,870.7 (d)
Other Assets 314.8 30.0 (17.6)(f) 293.2
(34.0)(d-ii)
Fair Value of Hedged Firm Commitments 10.3 1.2 (1.2)(e) 10.3
Fair Value of Derivative Contracts 75.0 75.0
12,493.1 6,389.6 6.6 2,744.9 21,634.2
Liabilities and Shareholders' Equity
Current Liabilities
Short-term borrowings 70.0 70.0
Current portion of long-term debt 156.8 79.9 236.7
Accounts payable 304.9 55.7 360.6
Accrued liabilities 277.5 398.0 1.7 (a) 23.1 (k) 726.3
26.0 (d-ii)
Customer deposits 729.0 447.5 16.3 (a) 1,192.8
Dividends payable 61.6 61.6
Fair value of derivative contracts 10.9 31.4 42.3
Fair value of hedged firm commitments 52.6 2.4 (2.4)(e) 52.6
Total current liabilities 1,663.3 1,014.9 18.0 46.7 2,742.9
Long-Term Debt 3,083.6 2,625.9 3.6 (f) 5,713.1
Deferred Income and Other Long-
Term Liabilities 190.0 15.8 99.3 (h) 314.1
9.0 (i)
Fair Value of Derivative Contracts 19.2 3.1 22.3
Fair Value of Hedged Firm Commitments 40.4 (40.4)(e)
Shareholders' Equity 7,537.0 2,689.5 (11.4)(d-iii) 2,626.7 (m) 12,841.8
Common stock; 960 shares, 750
shares and 2,185 shares authorized;
587.0 shares, 693.1 shares and 795.2
shares issued and outstanding for
Carnival, Carnival plc and Pro forma
Carnival Corporation & plc,
respectively _
12,493.1 6,389.6 6.6 2,744.9 21,634.2
(1) Carnival plc information is as of March 31, 2003.
See accompanying notes to unaudited pro forma financial information of Carnival Corporation & plc in
accordance with U.S. GAAP.
Notes to the unaudited pro forma financial information of Carnival
Corporation & plc in accordance with U.S. GAAP
1. Basis of Presentation
The unaudited pro forma financial information has been prepared on
the basis that the DLC transaction has been accounted for using the
purchase method of accounting under U.S. GAAP with Carnival as the
acquirer. The pro forma financial information is based upon the U.S. GAAP
accounting policies of Carnival.
The historical financial information in relation to Carnival as at
and for the three months ended February 28, 2003 has been derived from the
financial information on Carnival that is included in Carnival's February
28, 2003 Quarterly Report on Form 10-Q.
The historical financial information in relation to Carnival plc as
at and for the three months ended March 31, 2003 has been derived from the
financial information on Carnival plc that is included in Carnival
Corporation & plc's joint Current Report on Form 8-K, dated May 19, 2003,
after making certain adjustments. The adjustments, which are set out in
note 2, relate to the conversion of financial information on Carnival
plc's accounting policies under UK GAAP to Carnival plc's accounting
policies under U.S. GAAP.
2. Conversion of Carnival plc's Financial Information to U.S. GAAP
This note provides details of the adjustments required to convert
Carnival plc's previously reported financial information as at and for the
three months ended March 31, 2003 that was prepared in accordance with
Carnival plc's accounting policies under UK GAAP to information in
accordance with U.S. GAAP. Further details of the types of adjustments
are set out in Carnival plc's financial statements for the year ended
December 31, 2002 that are included in its Annual Report on Form 20-F.
(i) Profit and loss accounts
For the three months ended March 31, 2003
Carnival plc U.S. GAAP Carnival plc
UK GAAP adjustments U.S. GAAP
(U.S. dollars in millions)
Revenues 639.0 639.0
Costs and Expenses
Operating (444.1) (444.1)
Selling and administrative (103.4) (16.8) (120.2)
Depreciation and amortization (51.5) 1.2 (50.3)
(599.0) (15.6) (614.6)
Operating Income 40.0 (15.6) 24.4
Nonoperating (Expense) Income
Net interest expense (22.3) 3.8 (18.5)
(22.3) 3.8 (18.5)
Income Before Income Taxes 17.7 (11.8) 5.9
Income Tax Expense, Net (0.4) (0.7) (1.1)
Net Income 17.3 (12.5) 4.8
(ii) Net assets
As of March 31, 2003
Carnival plc U.S. GAAP Carnival plc
UK GAAP adjustments U.S. GAAP
(U.S. dollars in millions)
Assets
Current Assets
Cash and cash equivalents 147.9 147.9
Accounts receivable, net 118.1 118.1
Inventories 87.8 87.8
Prepaid expenses and other 217.3 (34.3) 183.0
Fair value of derivative
contracts 8.9 8.9
Fair value of hedged firm
Commitments 29.4 29.4
Total current assets 571.1 4.0 575.1
Property and Equipment, Net 5,641.5 (10.8) 5,630.7
Goodwill and Intangible Assets,
Net 131.6 (54.0) 77.6
Other Assets 32.9 (2.9) 30.0
Fair Value of Hedged Firm
Commitments 1.2 1.2
Fair Value of Derivative
Contracts 75.0 75.0
6,377.1 12.5 6,389.6
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term
debt 72.9 7.0 79.9
Accounts payable 55.7 55.7
Accrued liabilities 398.0 398.0
Customer deposits 447.5 447.5
Fair value of derivative
contracts 31.4 31.4
Fair value of hedged firm
commitments 2.4 2.4
Total current liabilities 974.1 40.8 1,014.9
Long-Term Debt 2,589.4 36.5 2,625.9
Deferred Income and Other
Long-Term Liabilities 15.8 15.8
Fair Value of Derivative
Contracts 3.1 3.1
Fair Value of Hedged Firm
Commitments 40.4 40.4
Shareholders' Equity 2,813.6 (124.1) 2,689.5
6,377.1 12.5 6,389.6
3. Accounting Policy Adjustments
The pro forma financial information has been prepared in accordance
with the accounting policies of Carnival under U.S. GAAP, which differ in
certain respects from the U.S. GAAP accounting policies of Carnival plc as
noted below. Subsequent to completion of the DLC transaction, Carnival
Corporation & plc has commenced a detailed review of Carnival plc's
accounting policies and financial statement classifications. As a result
of this detailed review, it may become necessary to make certain
reclassifications to Carnival Corporation & plc's financial statements to
conform the Carnival plc financial statements to the Carnival accounting
polices and classifications. Although management does not expect that
this detailed review will result in material changes to accounting
policies or classifications, other than as noted below, no such assurance
can be given at this time.
(a) Cruise revenues and expenses
Carnival plc's accounting policy is initially to record deposits
received on sales of cruises as deferred income and recognize them,
together with revenues from onboard activities and all
associated direct costs of a voyage, on a pro rata basis at the time
of the voyage. Carnival's accounting policy is to recognize these
items generally upon completion of voyages with durations of ten days
or less, and on a pro rata basis for voyages in excess of ten days.
For the three months ended and as of February 28, 2003 adjustments of
$(0.6) million (affecting revenues by $(0.8) million and operating
expenses by $0.2 million) and $(12.5) million (the latter affecting
accounts receivable by $5.5 million, accrued liabilities by ($1.7)
million and customer deposits by ($16.3) million) have been made to
conform Carnival plc's policy to Carnival's policy.
(b) Dry-docking
Carnival plc's accounting policy is to capitalize dry-docking costs
and amortize them to operating expense using the straight-line method
through the date of the next scheduled dry- dock, which typically is
over two to three years. Carnival's dry-dock accounting policy is the
same as Carnival plc's except that the capitalized dry-dock costs are
amortized to expense generally over one year. For the three months
ended and as of February 28, 2003 adjustments of $(3.5) million and
$(20.1) million have been made to conform Carnival plc's policy to
Carnival's policy.
(c) Marketing and promotion costs
Carnival plc's accounting policy under U.S. GAAP is to expense all
marketing and promotion costs as incurred. Carnival expenses all such
costs as incurred except for brochures and media production costs,
which are recorded as prepaid expenses and charged to expense as the
brochures are consumed or upon the first airing of the advertisement,
respectively. For the three months ended and as of February 28, 2003
adjustments of $3.3 million and $21.2 million have been made to
conform Carnival plc's policy to Carnival's policy.
4. Business Combination Adjustments
(d) Purchase consideration and related goodwill and intangible assets are
as follows:
(U.S.$m) Notes
Purchase consideration 5,304.8 (i)
Costs of acquisition 60.0 (ii)
Total purchase consideration 5,364.8
Less fair value of net assets acquired (2,494.1) (iii)
Excess of purchase consideration over net assets
Acquired 2,870.7 (iv)
(i) The purchase consideration is based upon the average of the quoted
closing market price of Carnival's shares beginning two days before
and ending two days after January 8, 2003, the date its DLC
transaction offer announcement was agreed to by the Carnival plc
board. In addition, the number of Carnival plc shares is adjusted
for the share reorganization of 3.3289 existing Carnival plc shares
for one new Carnival plc share, including Carnival plc stock
options and awards, which vested in full on completion of the DLC
transaction. A Carnival share price of $25.31 and the number of
Carnival plc shares in issue of 209.6 million, after adjusting for
the share reorganization, have been used for purposes of this pro
forma presentation.
(ii) Represents Carnival's estimated direct costs of carrying out the DLC
transaction, of which $34.0 million has been incurred by Carnival
and is included in other assets. An adjustment has been made to
remove this $34.0 million from other assets as it has been included
in the purchase consideration upon completion of the DLC
transaction. Of the total $60.0 million of acquisition costs, $26.0
million had not been incurred as of February 28, 2003 and,
accordingly, an adjustment has been made to increase accrued
liabilities for this amount.
(iii) Based upon preliminary estimates of the fair value of the
identifiable assets acquired and liabilities assumed given current
information. Following the completion date of the DLC transaction,
adjustments will be made to these preliminary estimates to reflect
their estimated fair values as of the completion date. We have
engaged an independent appraiser who has not yet completed their
valuation work, which is being performed to assist us in
establishing the fair value of Carnival plc's ships and amortizable
and non-amortizable intangible assets and liabilities. However,
based on the information currently available, it is not expected
that the amount of separately identifiable amortizable intangible
assets will be material to the Carnival Corporation & plc financial
statements. No assurance can be given that the preliminary fair
value estimates included in this pro forma financial information
will not be materially changed as a result of these valuations.
Fair value adjustments are detailed in the notes and the table
below:
Accounting
policy
Carnival plc adjustments Fair value Pro forma
(U.S. GAAP) (Note 3) adjustments fair value
(U.S. dollars in millions)
Carnival plc fair value of
net assets acquired
Assets
Current Assets
Cash and cash equivalents 147.9 147.9
Accounts receivable, net 118.1 5.5 (a) 123.6
Inventories 87.8 87.8
Prepaid expenses and other 183.0 (20.1)(b) (65.3) (g) 218.1
21.2 (c) 99.3 (l)
Fair value of derivative
contracts 8.9 8.9
Fair value of hedged firm
Commitments 29.4 (29.4) (e)_______
Total current assets 575.1 6.6 4.6 586.3
Property and Equipment, Net 5,630.7 5,630.7
Goodwill and Intangible
Assets, Net 77.6 (77.6) (j)
Other Assets 30.0 (17.6) (f) 12.4
Fair Value of Hedge Firm
Commitments 1.2 (1.2) (e)
Fair Value of Derivative
Contracts 75.0 75.0
6,389.6 6.6 (91.8) 6,304.4
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term
debt 79.9 79.9
Accounts payable 55.7 55.7
Accrued liabilities 398.0 1.7 (a) 23.1 (k) 422.8
Customer deposits 447.5 16.3 (a) 463.8
Fair value of derivative
contracts 31.4 31.4
Fair value of hedged firm
Commitments 2.4 (2.4)(e) _
Total current liabilities1,014.9 18.0 20.7 1,053.6
Long-Term Debt 2,625.9 3.6 (f) 2,629.5
Other Long-Term Liabilities 15.8 99.3 (h) 124.1
9.0 (i)
Fair Value of Derivative
Contracts 3.1 3.1
Fair Value of Hedged Firm
Commitments 40.4 (40.4)(e)
Shareholders' Equity 2,689.5 (11.4)* (184.0)** 2,494.1
6,389.6 6.6 (91.8) 6,304.4
(*) Represents the net shareholders' equity decrease due to accounting
policy adjustments.
(**) Represents the net shareholders' equity decrease due to fair value
adjustments.
(iv) The excess of purchase consideration over net assets acquired is
primarily estimated to include the value attributed to Carnival plc's
trademarks, brand names and goodwill. Management believes that these
trademarks and brand names have indefinite lives and, accordingly,
based on SFAS No. 142, "Goodwill and Other Intangible Assets", no
adjustment for pro forma amortization is required. It is not possible
at this time to reasonably estimate the separate amounts attributable
to identifiable intangible assets or goodwill since the measurement
of these assets requires the expertise of an independent appraiser
who has not yet completed their valuation work. Accordingly, the
entire amount of the excess of the purchase consideration has
currently been allocated to goodwill, but is expected to be allocated
between goodwill and other identifiable intangible assets such as
brand names and trademarks, subsequent to the completion of the DLC
transaction based primarily on the appraiser's valuation. However,
since it is expected that the material intangibles that will be
identified and valued will have indefinite lives, no material impact
on the pro forma statement of operations is expected as a result of
this presentation on the Carnival Corporation & plc balance sheet, as
neither goodwill nor these indefinite lived intangibles are allowed
to be amortized.
(e) A net adjustment of $(12.2) million has been made against the fair
value of hedged firm commitments. These adjustments relate to
contractual commitments for ships which were ordered, and hedged, at
a time when the euro exchange rate was different, and hence, these
contracts could be replaced today at a euro price that would convert
to a different U.S. dollar cost at current exchange rates.
Otherwise, the book value, including prepaid dry-dock costs, and fair
value of ships in use and under construction are preliminarily
estimated to be the same in all material respects. However, we are
having an independent appraisal performed of all the Carnival plc
cruise ships, so it is possible that the fair value of some of
Carnival plc's cruise ships could be less than or greater than their
carrying value.
(f) An adjustment of $3.6 million has been made to the book value of
Carnival plc long-term debt to reflect current interest rates, giving
effect to a change in credit ratings. The fair value of this debt is
based upon quoted market prices or the discounted present value of
future amounts payable on the debt. The fair value adjustment is
amortized over the remaining term of the debt as applicable, which
results in a pro forma increase of $0.2 million in interest expense
for the three months ended March 31, 2003. In addition, an
adjustment has been made to write-off the book value of Carnival
plc's historical deferred financing costs of $17.6 million related to
its existing borrowings as such costs have been considered in
determining the fair value of Carnival plc's debt.
(g) An adjustment of $65.3 million has been made to the book value of
other tax assets to reflect recoverable value to Carnival Corporation
& plc and to reverse $0.7 million of Carnival plc's tax expense.
(h) An adjustment of $99.3 million has been made to record the estimated
fair value of Carnival plc's pension plan liabilities. Of this
adjustment, $85.0 million relates to the Merchant Navy Officers
Pension Fund and is calculated based upon, among other things,
Carnival plc's current share of total employer contributions. The
remaining $14.3 million relates to the estimated excess of the
Carnival plc Cruises Pension Plan's projected benefit obligations
over the fair value of this plan's assets.
(i) An adjustment of $9.0 million has been made to record the fair value
of the Carnival plc export financing commitments related to new ship
construction.
(j) An adjustment of $77.6 million has been made to eliminate Carnival
plc's historical goodwill related to prior business acquisitions.
(k) Carnival plc expects to incur and expense approximately $146.3
million of costs related to its terminated Royal Caribbean
transaction and the completion of the DLC transaction with Carnival,
including costs incurred to register Carnival plc ordinary shares
with the U.S. Securities and Exchange Commission. Under U.S. GAAP,
$117.0 million was expensed prior to January 1, 2003 and $6.2 million
was expensed in the three months ended March 31, 2003. An adjustment
has been made to reverse this $6.2 million in the pro forma statement
of operations for the three months ended March 31, 2003 since
Carnival and Carnival plc believe that the Royal Caribbean and
Carnival costs are non recurring charges directly attributable in all
material respects to the DLC transaction. Of the total $146.3
million of Carnival plc's costs, $23.1 million has not been incurred
as of March 31, 2003 and an adjustment has been made to increase
accrued liabilities for this amount.
(l) An adjustment of $99.3 million has been made to record the fair
value of Carnival plc's contractual commitments to receive probable
and estimable liquidated damages and/or business interruption
insurance proceeds related to the delayed deliveries of the Diamond
Princess and the Island Princess. The Diamond Princess was initially
scheduled for delivery in May 2003, but has been delayed as a result
of a fire in October 2002. The Island Princess was also initially
scheduled for delivery in May 2003, but was delayed by the shipyard in
January 2003 and is currently expected to be delivered in June 2003.
(m) The shareholders' equity adjustment of $2,626.7 million represents the
net equity increase due to the application of business combination
adjustments as detailed below:
US$m Notes
Excess of purchase consideration over net
assets acquired 2,870.7 4(d)
Reduction in Carnival plc shareholders'
funds for fair value adjustments (184.0) 4(d-iii)
Costs of acquisition (60.0) 4(d-ii)
Shareholders' equity adjustment 2,626.7
(n) The pro forma weighted average number of shares has been calculated
as if the DLC transaction had occurred on December 1, 2001 and after
adjusting for the Carnival plc share reorganization of 3.3289
existing Carnival plc shares for one new Carnival plc share.
Based upon the weighted average number of shares outstanding of 697.3
million (697.3 million diluted), or 209.5 million (209.5 million
diluted) after the Carnival plc share reorganization, for Carnival plc
and 586.9 million (587.8 million diluted) for Carnival for the three
months ended March 31, 2003 and February 28, 2003, respectively, the
pro forma weighted average number of shares for Carnival Corporation &
plc is calculated as 796.4 million (797.3 million diluted).
The pro forma earnings per share amounts have been calculated using
the pro forma weighted average number of shares, calculated as
described above, and the pro forma earnings for Carnival Corporation &
plc.
(o) Certain restructuring and integration expenses are expected to be
recorded subsequent to completion of the DLC transaction. The amount
of these charges has not yet been determined, although they have been
preliminarily estimated to be approximately $30 million, as they will
be the subject of a detailed plan of restructuring and integration to
be completed subsequent to the completion of the DLC transaction. A
portion of these charges may subsequently be determined to be part of
the purchase consideration. These charges are not reflected in the
unaudited pro forma financial information because they are not
expected to have a continuing impact on the results.
6