Carnival Cruises 2003 Annual Report Download - page 39

36 Carnival Corporation & plc
Included in onboard and other revenues were con-
cession revenues of $154 million in 2002 and $136 mil-
lion in 2001.
Other revenues, which consisted of Holland America
Tours decreased $53 million, or 23.1%, to $176 million in
2002 from $229 million in 2001 principally due to a lower
number of Alaska and Canadian Yukon cruise/tours sold.
This revenue decrease was primarily as a result of one
less ship offering land tours to its guests in 2002 com-
pared to 2001 and increased competition. In addition,
three isolated cancellations of Holland America Alaska
cruises in 2002 resulting primarily from mechanical mal-
functions also contributed to this decrease in revenues.
Costs and Expenses
Total cruise operating costs decreased by $125 mil-
lion, or 5.3%, to $2.22 billion in 2002 from $2.35 billion
in 2001. Approximately $116 million of this decrease
was due to reduced air travel and related costs prima-
rily due to fewer guests purchasing air transportation
through us, and $41 million was primarily due to lower
commissions because of lower cruise revenues. This
decrease was partially offset by an increase in fuel and
other cruise operating expenses, which was largely due
to costs associated with our 3.6% increase in passen-
ger capacity. Net cruise operating costs per ALBD
decreased 2.4% (gross cruise operating costs per
ALBD decreased 7.8%), partially as a result of the cost
reduction initiatives we undertook after the events of
September 11, 2001.
Other operating expenses, which consisted of Holland
America Tours, decreased $41 million, or 22.0%, to $145
million in 2002 from $186 million in 2001 principally due
to the reduction in the number of cruise/tours sold.
Selling and administrative expenses decreased $10
million, or 1.6%, to $609 million in 2002 from $619 mil-
lion in 2001. Selling and administrative expenses
decreased in 2002 primarily because of our 4.7%
decrease in cruise selling and administrative costs per
ALBD, partially offset by additional expenses associated
with our 3.6% increase in passenger capacity. Our costs
per ALBD decreased partially because of the cost con-
tainment actions taken after September 11, 2001.
Depreciation and amortization increased by $10 mil-
lion, or 2.7%, to $382 million in 2002 from $372 million
in 2001. Depreciation and amortization in 2002 com-
pared to 2001 increased by $30 million primarily as a
result of the expansion of our fleet and ship improve-
ment expenditures, partially offset by the elimination of
$20 million of annual goodwill amortization upon our
adoption of SFAS No. 142 on December 1, 2001 (see
Note 2 in the accompanying financial statements).
See Notes 5 and 6 in the accompanying financial
statements for a discussion of the 2002 and 2001
impairment charge and 2001 affiliated operations.
Nonoperating (Expense) Income
Interest income decreased by $2 million in 2002
compared to 2001, which was comprised of a $25 mil-
lion reduction in interest income due to lower average
interest rates, partially offset by a $23 million increase
in interest income from our higher average invested
cash balances. Interest expense was the same in 2002
and in 2001, which was comprised of a $22 million
increase in interest expense due to our increased level
of average borrowings, offset by a $22 million reduc-
tion in interest expense due to lower average borrow-
ing rates. The higher level of average borrowings in
2002 were due primarily from the issuance of our con-
vertible notes in April and October 2001. Capitalized
interest increased $10 million during 2002 compared to
2001 due primarily to higher average levels of invest-
ments in ship construction projects.
Other expense in 2002 of $4 million consisted prima-
rily of a $8 million loss, including related expenses,
resulting from the sale of Holland America Line’s for-
mer Nieuw Amsterdam, partially offset by $4 million of
income related to the termination of an over funded
pension plan.
Income Taxes
The income tax benefit of $57 million recognized in
2002 was substantially all due to an Italian investment
incentive law, which allowed Costa to receive an income
tax benefit of $51 million based on contractual expendi-
tures during 2002 on the construction of a new ship.
Liquidity and Capital Resources
Sources and Uses of Cash
Our business provided $1.93 billion of net cash from
operations during fiscal 2003, an increase of $464 mil-
lion, or 31.6%, compared to fiscal 2002, due primarily
to the consolidation of Carnival plc. We continue to
generate substantial cash from operations and remain
in a strong financial position.
During fiscal 2003, our net expenditures for capital
projects were $2.52 billion, of which $2.25 billion was
spent for our ongoing new shipbuilding program. The
remaining capital expenditures consisted primarily of
$133 million for ship improvements and refurbishments,
and $130 million for Alaska tour assets, cruise port facil-
ity developments and information technology assets.
During fiscal 2003, we borrowed net proceeds of
$1.08 billion primarily to finance a portion of our ship
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (continued)