These benefits of tax law cannot be counted on to boost income in future years. In fact, CCL has no provision for deferred taxes in the 10K.It doesn't matter that much, CCL doesn't pay federal income tax. I've got their annual numbers punched into my spreadsheet from '94 and they haven't shown more than a 3 - 4 percentage points difference between operating and net margins and the gap has closed to within 1% in the last few years.From the '02 10-KWe are a foreign corporation engaged in a trade or business in theU.S., and our ship-owning subsidiaries are foreign corporations that, inmany cases, depending upon the itineraries of their ships, receive incomefrom sources within the U.S. To the best of our knowledge, we believethat, under Section 883 of the Code and applicable income tax treaties,income and the income of our ship-owning subsidiaries, in each case derived from or incidental to the international operation of a ship or ships, is currently exempt from U.S. federal income tax. We believe thatsubstantially all of our income, and the income of our ship-owningsubsidiaries, with the exception of the U.S. source income from thetransportation, hotel and tour business of Tours, is derived from orincidental to the international operation of a ship or ships within themeaning of Section 883 and applicable income tax treaties.I first looked at CCL over a year ago. Their numbers are fairly decent, I'm estimating ROIC in the low to mid teens, but that is using a 0% - 1% tax rate. If they were to lose their tax exempt status, the return on capital isn't attractive at all. CCL's leverage is a bit higher than I'd like but that is a reflection on the industry more than the company. Cruise ships are capital intensive and there's not much that can be done to mitigate that. As you noted their working capital management is better than the average company. BTW, I haven't been following this FC project, did anyone address the Arison family interest in CCL (approximately 47% according to the '02 10-K)?I just noticed it when I was looking up the income tax exemption. There's some unusual provisions regarding ownership outside of the Arison family. Looks like a poison pill but its dressed up as a device to protect their tax and publicly traded status. My problem with it is that it seems to only protect the Arison family. Marv
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