Net income for the nine months ended August 31, 2002 was $824.6 million ($1.40 Diluted EPS) on revenues of $3.33 billion, compared to net income of $809.9 million ($1.38 Diluted EPS) on revenues of $3.58 billion for the same period in 2001.
Earnings for the third quarter of 2002 included a $34 million income tax benefit from the company`s Costa Cruise operation resulting from a new Italian investment tax law. This was partially offset by a provision of $20 million related to a vessel write-down. In addition, there was a $13 million reduction in earnings in the third quarter of 2002 resulting from canceled cruises during the quarter.
Cruise revenues for the third quarter of 2002 were 1.4 percent lower than last year primarily because of a significant decline in the number of guests purchasing air transportation from the company and lower cruise ticket prices. This was partially offset by an increase in cruise capacity of 2.2 percent. Net revenue yield (net revenue per available berth day after deducting the cost of air transportation and travel agent commissions) was down less than 1 percent compared to the previous year`s third quarter. This was considerably better than the company`s earlier forecast of down 3 to 5 percent primarily due to the strengthening of the euro relative to the U.S. dollar and stronger than expected pricing on close-to-sailing bookings during the quarter.
Also impacting earnings for the third quarter was a 2.7 percent increase in the company`s cost per available berth day (excluding the cost of air transportation and travel agent commissions). This increase in cost per berth day was primarily due to the strengthening of the euro relative to the U.S. dollar, higher fuel costs, higher advertising expenditures, and the effect of the canceled cruises.
Commenting on the third quarter results, Carnival Corporation Chairman and CEO Micky Arison said he was pleased that the company was continuing to improve its performance since the events of September 11. In spite of the continuing economic uncertainties, political unrest and lingering effects of September 11, we have experienced sequential yield improvement and expect that trend to continue with net revenue yield comparisons turning positive in the fourth quarter, Arison said. He noted that the net revenue yield decline during the third quarter of less than 1 percent was a significant improvement from the 5.3 percent decline reported for the second quarter of this year.
During the third quarter of 2002, Carnival Cruise Lines announced that it had reached an agreement with the Fincantieri shipyard for the construction of a new 110,000-ton, 2,974-passenger Conquest-class vessel, which is to be built at an approximate cost of $450-460 million for delivery in late fall 2005. Arison noted that this was the second cruise ship order by Carnival since September 11, which demonstrates the company`s continued belief in the long-term fundamentals of its business. In addition, he pointed out that the company`s strong cash flows and balance sheet enable it to continue to expand its cruise fleet, even during these uncertain times.
In August 2002, Carnival Cruise Lines launched the new 2,124-passenger Carnival Legend from Harwich, England, which has just completed a high-profile European introduction. Next week, the Carnival Legend begins a series of two-, three- and 11-day cruises from New York. After a pair of six-day Bermuda cruises from Philadelphia and Baltimore, the ship will launch eight-day Caribbean sailings from Fort Lauderdale, Fla., on November 10. Following these voyages, Carnival Legend will return to New York for a unique eight-day Caribbean cruise program from May 13 to October 12, 2003.
Looking to the fourth quarter of 2002, Arison noted that the tone of bookings continues to provide confidence that fourth quarter net revenue yields will increase over last year. The booking curve continues to be unusually close to the sailing date as it has throughout 2002, making it more difficult to forecast net revenue yields. However, as expected, fourth quarter bookings during the last two months have run considerably higher than last year`s levels although pricing for the fourth quarter is slightly below the prior year. Because of the expected higher occupancy levels for the fourth quarter, we now forecast net revenue yields to be up between 1 to 3 percent, Arison explained.
Also during the fourth quarter of 2002, both Carnival Cruise Lines and Holland America will introduce new classes of vessels to their fleets. Carnival`s largest passenger ship ever constructed, the 2,974-passenger Carnival Conquest, is scheduled to enter service from New Orleans in mid-November 2002. In addition, Holland America will also launch the 85,000- ton Zuiderdam, the first ship in its new Vista-class series, in December 2002 from Fort Lauderdale. This 1,848-passenger vessel represents a 28 percent increase in passenger capacity over the 1,440-passenger Volendam, the largest ship currently in Holland America`s fleet, and offers more than 85 percent of its cabins with ocean views, of which 80 percent have balconies.
Separately, Carnival is continuing to cooperate with the Federal Trade Commission in its ongoing investigation, now nearing completion, with regard to Carnival`s pending pre-conditional offer for P&O Cruises.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
