Carnival Cruises 2003 Annual Report Download - page 38

35Carnival Corporation & plc
Costs and Expenses
Total cruise operating expenses increased $1.40 bil-
lion, or 63.1%, to $3.62 billion in 2003 from $2.22 bil-
lion in 2002. Approximately $1.02 billion of our increase
was due to the consolidation of Carnival plc, and the
remaining $380 million (a 17.1% increase over 2002)
of the increase was from Carnival Corporation. Carnival
Corporation’s increase was primarily a result of the
impact of the 17.3% increase in its standalone ALBD
capacity in 2003 compared to 2002. In addition, higher
fuel prices added approximately $44 million to the Carnival
Corporation standalone expenses in 2003 compared to
2002. Finally, the increase in each of the individual cruise
operating expense line items was primarily a result of
the same factors as discussed above. Pro forma cruise
operating expenses increased $655 million, or 18.4%,
to $4.2 billion in 2003 from $3.57 billion in 2002 prima-
rily as a result of the 17.5% increase in pro forma
ALBD capacity and higher fuel costs.
Other non-cruise operating expenses increased $135
million, or 93.1%, to $280 million in 2003 from $145 mil-
lion in 2002 due to the consolidation of Princess Tours
and P&O Travel Ltd.
Cruise selling and administrative expenses increased
$319 million, or 55.3%, to $896 million in 2003 from
$577 million in 2002. Approximately $247 million of our
increase was due to the consolidation of Carnival plc
and the remaining $72 million (a 12.5% increase over
2002) of the increase was from Carnival Corporation,
which was primarily due to the 17.3% increase in
standalone ALBD capacity. Pro forma cruise selling and
administrative expenses, excluding Carnival plc nonre-
curring DLC transaction expenses, increased $142 mil-
lion, or 15.6%, to $1.05 billion from $912 million in
2002, primarily as a result of the 17.5% increase in pro
forma ALBD capacity, partially offset by the benefits of
scale and synergy savings from the DLC transaction.
Pro forma gross cruise costs per ALBD increased by
0.2% (reported increased 3.9%) in 2003 compared to
2002. Pro forma net cruise costs per ALBD increased
2.9% (reported increased 4.0%) in 2003 compared to
2002. Pro forma gross and net cruise costs per ALBD
in 2003 compared to 2002 were higher largely because
of higher fuel costs. Finally, our pro forma net cruise
costs were unfavorably affected by the weakening of
the dollar against the euro and sterling.
Depreciation and amortization increased by $203 mil-
lion, or 53.1%, to $585 million in 2003 from $382 million
in 2002. A large portion of this increase was from the
consolidation of Carnival plc, which accounted for
approximately $126 million of the increase. The
majority of the remaining increase was a result of the
expansion of the Carnival Corporation fleet and ship
improvement expenditures. Pro forma depreciation
and amortization expense increased by $120 million,
or 22.5%, to $654 million from $534 million largely due
to the expansion of the combined fleet and ship
improvement expenditures.
Nonoperating (Expense) Income
Interest expense, net of interest income and exclud-
ing capitalized interest, increased to $217 million in
2003 from $118 million in 2002, or $99 million, which
increase was comprised primarily of a $125 million
increase in interest expense from our increased level
of average borrowings, partially offset by a $31 million
decrease in interest expense due to lower average bor-
rowing rates. The higher average debt balances were
primarily a result of our consolidation of Carnival plc’s
debt (see Note 7 in the accompanying financial state-
ments) and new ship deliveries. Capitalized interest
increased $10 million during 2003 compared to 2002
due primarily to higher average levels of investments
in ship construction projects.
Other income was $8 million in 2003, which included
$19 million from net insurance proceeds, $10 million as
a result of Windstar’s Wind Song casualty loss and $9
million as a reimbursement of expenses incurred in
prior years, partially offset by $13 million related to a
DLC-related litigation matter.
Income Taxes
The income tax provision of $29 million in 2003 was
primarily due to the consolidation of Carnival plc’s U.S.
based Princess Tours and Costa’s Italian taxable income.
Fiscal 2002 (“2002”) Compared to Fiscal 2001 (“2001”)
Revenues
Cruise revenues decreased $127 million, or 2.9%,
to $4.24 billion in 2002 from $4.37 billion in 2001. Our
cruise revenue change resulted from a 7.0% decrease
in our gross revenue per passenger cruise day, partially
offset by a 3.6% increase in passenger capacity and a
0.5% increase in our occupancy rate. This decrease in
our gross revenue per passenger cruise day was prima-
rily caused by a significant decline in the number of
guests purchasing air transportation from us in 2002
compared to 2001. When a guest elects to provide his
or her own transportation, rather than purchasing air
transportation from us, both our cruise revenues and
operating expenses decrease by approximately the
same amount. Also adding to the reduction in gross
revenue per passenger cruise day was the adverse
impact of the September 11, 2001 events, which
resulted in lower cruise ticket prices. Net revenue
yield was down 2.7% (gross revenue yield was
down 6.3%) in 2002 compared to 2001.