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Carnival Corporation reports fourth quarter and record full year earnings per share

Carnival Corporation reported net income of $191.3 million ($0.33 Diluted EPS) on revenues of $1.04 billion for its fourth quarter ended…

Carnival Corporation reported net income of $191.3 million ($0.33 Diluted EPS) on revenues of $1.04 billion for its fourth quarter ended November 30, 2002, compared to net income of $116.3 million ($0.20 Diluted EPS) on revenues of $959.1 million for the same quarter in 2001. Earnings for the fourth quarter of 2002 included a $17 million income tax benefit from the company’s Costa Cruises operation resulting from a new Italian investment incentive law, which was partially offset by a $5 million reduction in earnings from cancelled cruises. Earnings for the fourth quarter of 2001 included an impairment charge of $39 million, partially offset by an income tax benefit at Costa of $6 million.



Net income for the year ended November 30, 2002 was $1.02 billion ($1.73 Diluted EPS) on revenues of $4.37 billion, compared to net income of $926.2 million ($1.58 Diluted EPS) on revenues of $4.54 billion for the same period in 2001.

Revenues for the fourth quarter of 2002 were 8.0 percent higher than last year primarily because of an increase in cruise capacity of 7.9 percent and an increase in net revenue yield, which was partially offset by a significant decline in the number of guests purchasing air transportation from the company. Net revenue yield (net revenue per available berth day after deducting the cost of air transportation and travel agent commissions) increased by 2.6 percent compared to the 2001 fourth quarter.



Also impacting fourth quarter earnings was a 0.7 percent increase in the company’s cost per available berth day (excluding the cost of air transportation and travel agent commissions) primarily due to higher fuel costs. Excluding fuel costs, fourth quarter cost per available berth day declined 0.9 percent year over year.



Commenting on fourth quarter 2002 results, Carnival Corporation Chairman and CEO Micky Arison said he was encouraged that this was the fourth consecutive quarter of year over year earnings growth since the events of September 11. While 2002 was a challenging year for all leisure companies, we were able to report record earnings per share of $1.73, reflecting the company’s resiliency in withstanding worldwide geopolitical events, Arison said.



During the fourth quarter of 2002, Carnival Cruise Lines launched the new 2,974-passenger Carnival Conquest from New Orleans, the largest cruise ship ever constructed by Carnival, which is based year-round at that port. Carnival’s new 2,124-passenger Carnival Legend, which entered service in August 2002, began an eight-day Caribbean cruise program on Nov. 10 from Fort Lauderdale, Fla. Also in November, Holland America Line took delivery of the 1,848-passenger Zuiderdam, the first ship in its new Vista-class series, which offers about 85 percent of its cabins with ocean views, of which approximately 80 percent have balconies.



Looking to 2003, Arison noted advance booking occupancy levels and prices, on a cumulative basis, for fiscal 2003 are up slightly compared to last year’s levels at this time. However, booking levels have slowed recently, which may have been partially caused by the recent media attention focused on stomach flu on cruise ships. Historically, widespread adverse media coverage on cruise industry issues has had a temporary negative effect on booking trends.



The expected increase in capacity in the first quarter of 2003 has been reduced from 15.5 percent to 14.9 percent due to cancelled cruises. Based on bookings to date, the company expects that net revenue yield for the first quarter of 2003 will be up approximately 1 to 3 percent compared to last year. In addition, operating cost per available berth day in the first quarter of 2003 is expected to increase approximately 4 to 6 percent year over year based primarily on significantly higher fuel costs and a significant increase in marketing costs associated with an expected 17.5 percent capacity increase in 2003. Both Carnival Cruise Lines’ and Holland America Line’s new advertising campaigns will appear in the first quarter of 2003. For the full year 2003, cost per available berth day is expected to continue at this higher level through the first half of the year and is projected to be flat to down slightly for the second half of the year as compared to 2002.



Separately, on October 4, 2002, the Federal Trade Commission announced the clearance of the proposed combination of Carnival and P&O Princess. Following this announcement, P&O Princess entered into talks with Carnival, and Carnival subsequently announced the terms of a pre-conditional proposal to enter into a dual listed company (DLC) structure with P&O Princess. The pre-conditions to this proposal include the recommendation of the board of P&O Princess by no later than January 10, 2003. If the P&O Princess board recommends the proposal, the DLC transaction would be subject to approval by both Carnival and P&O Princess shareholders and would be expected to close in late first quarter or early second quarter of 2003.

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Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.

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