Carnival Cruises 2004 Annual Report Download - page 42

Carnival Corporation & plc 39
season and Cunard’s $10 million of relocation costs,
resulting from combining the Cunard back-office opera-
tions into Princess’ operations. Net cruise costs per
ALBD as measured on a constant dollar basis compared
to pro forma 2003 declined 0.5% in 2004. The decrease
in constant dollar net cruise costs was primarily the
result of the economies of scale associated with the
pro forma 17.2% ALBD increase and synergy savings
from the integration efforts following the DLC transac-
tion. Gross cruise costs increased $1.20 billion, or 23%,
in 2004 to $6.48 billion from $5.23 billion in pro forma
2003 primarily for the same reasons as net cruise costs.
Net cruise costs increased $1.28 billion, or 39%, to
$4.55 billion in 2004 from $3.27 billion in reported 2003.
The increase in ALBD’s between reported 2003 and
2004 accounted for $1.05 billion of the increase, and
the remaining $230 million was from increased net
cruise costs per ALBD, which increased 5.2% in 2004
compared to reported 2003 (gross cruise costs per
ALBD increased 8.5%). Net cruise costs per ALBD
increased primarily for the same reasons as noted
above. Gross cruise costs increased $1.96 billion, or
43%, in 2004 to $6.48 billion from $4.52 billion in
reported 2003 primarily for the same reasons as net
cruise costs and a higher proportion of P&O Princess
brands’ customers who purchased air from us.
Other non-cruise operating expense increased $24
million, or 8.5%, to $308 million in 2004 from $284 mil-
lion in pro forma 2003 (an increase of $32 million, or
11.6%, from $276 million in reported 2003) primarily
due to the increased volume of cruise/tours sold in 2004.
Depreciation and amortization expense increased by
$159 million, or 24.3%, to $812 million in 2004 from
$653 million in pro forma 2003 largely due to the pro
forma 17.2% expansion of the combined fleet and ship
improvement expenditures, as well as the impact of
a weaker U.S. dollar. Depreciation and amortization
increased by $227 million, or 38.8%, to $812 million in
2004 from $585 million in reported 2003. This increase
was primarily due to the same factors as noted above
and the result of the consolidation of P&O Princess.
Nonoperating (Expense) Income
Net interest expense, excluding capitalized interest,
increased to $292 million in 2004 from $217 million in
reported 2003, or $75 million, which increase consisted
primarily of a $102 million increase in interest expense
from our increased level of average borrowings and
a weaker U.S. dollar, partially offset by a $27 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 the former P&O
Princess debt and new ship deliveries.
Income Taxes
Income tax expense increased $18 million from
reported 2003 to $47 million in 2004 primarily because
of the increase in Costa’s Italian taxable income and
other taxes relating to our operations.
Pro Forma 2003 (“Pro Forma 2003”)
Compared to Pro Forma 2002 (“Pro Forma
2002”) and Reported Results 2003 (“Reported
2003”) Compared to Reported Results 2002
(“Reported 2002”)
Revenues
Net cruise revenues increased $703 million, or 14%,
to $5.83 billion in pro forma 2003 from $5.12 billion in
pro forma 2002. The 17.5% increase in pro forma ALBD’s
accounted for $895 million of the increase, which was
partially offset by a $192 million reduction from lower
net revenue yields, which declined 3.2% in pro forma
2003 compared to pro forma 2002 (gross revenue yields
decreased 3.8%). Net revenue yields decreased largely
because of lower cruise ticket prices, and to a lesser
extent, lower occupancy levels. Our revenue yields in
2003 were adversely affected by consumer concerns
about travel during the period leading up to the war with
Iraq and its eventual outbreak, the uncertain world econ-
omy and the increase in cruise industry capacity. This
was partially offset by the weaker U.S. dollar. Gross cruise
revenues increased $848 million, or 13%, in pro forma
2003 to $7.33 billion from $6.48 billion in pro forma 2002
primarily for the same reasons as net cruise revenues.
Net cruise revenues increased $1.74 billion, or 50%,
to $5.21 billion in reported 2003 from $3.47 billion in
reported 2002. The 55.4% increase in reported ALBD’s,
which only included P&O Princess since April 17, 2003,
accounted for $1.92 billion of the increase, which was
partially offset by $185 million from lower net revenue
yields, which declined 3.4% in reported 2003 compared
to reported 2002 (gross revenue yields decreased 2.1%).
Net revenue yields decreased primarily for the same
reasons as noted above. Gross cruise revenues increased
$2.22 billion, or 52%, in reported 2003 to $6.46 billion
from $4.24 billion in reported 2002 primarily for the same
reasons as net cruise revenues.
Onboard and other revenues included concession
revenues of $201 million in pro forma 2003, $156 million
in pro forma 2002, $192 million in reported 2003 and
$147 million in reported 2002.