10-QPeriod: Q2 FY2001

CARNIVAL CORP Quarterly Report for Q2 Ended May 31, 2001

Filed July 13, 2001For Securities:CCL

Summary

Carnival Corporation's second-quarter 2001 10-Q filing reveals a mixed financial performance. While consolidated revenues saw a significant increase driven by the full consolidation of Costa Cruises and growth in other brands, net income for both the three-month and six-month periods ended May 31, 2001, decreased compared to the prior year. This decline is attributed to increased operating and administrative expenses, a substantial rise in net interest expense, and losses from affiliated operations, particularly from Airtours. The company is actively managing its fleet expansion, with substantial investments in new ships under construction. Liquidity remains strong, supported by operating cash flows, significant debt issuances including convertible debentures, and newly secured revolving credit facilities. However, investors should note the ongoing legal proceedings, including significant settlements for passenger complaints and ADA compliance, as well as environmental investigations, which represent potential future costs and uncertainties. The sale of Airtours is expected to impact second-half 2001 earnings negatively in the short term, though it is not anticipated to be dilutive annually.

Key Highlights

  • 1Consolidated revenues increased by 22.7% for the six months ended May 31, 2001, compared to the prior year, driven by the full consolidation of Costa Cruises and increased capacity across other brands.
  • 2Net income decreased for both the three-month period (to $186.96 million from $203.96 million) and the six-month period (to $314.91 million from $375.47 million) ended May 31, 2001, compared to the prior year.
  • 3Operating expenses and selling & administrative expenses saw significant increases, partly due to the consolidation of Costa Cruises, but also reflecting increased capacity and costs from other brands.
  • 4Net interest expense significantly increased due to higher average outstanding debt balances, influenced by debt issuances and prior year treasury stock purchases.
  • 5The company has substantial future commitments for new ship construction, with over $6.1 billion remaining on order as of May 31, 2001.
  • 6Carnival secured significant financing, including a new $1.4 billion multi-currency revolving credit facility, and raised $600 million through convertible debentures.
  • 7The company is engaged in several material legal proceedings, including settlements for passenger complaints and ADA compliance, and is responding to environmental investigations.

Frequently Asked Questions

The primary driver for the consolidated revenue increase was the full consolidation of Costa Cruises' operations into Carnival's financial statements starting in fiscal year 2001. Additionally, increased passenger capacity and occupancy rates across Carnival's other cruise brands also contributed significantly.

The decrease in net income was due to several factors, including higher operating and selling & administrative expenses, a substantial increase in net interest expense due to larger debt balances, and losses from affiliated operations, particularly from Airtours. The consolidation of Costa also brought its operational costs and expenses into Carnival's results.

Carnival Corporation has substantial long-term debt and significant future commitments for new ship construction, with over $6.1 billion in obligations remaining. To manage its liquidity, the company has secured a new $1.4 billion revolving credit facility and has also issued $600 million in convertible debentures. These, along with operating cash flows and proceeds from asset sales, are intended to fund capital projects, debt service, and working capital needs.

Yes, Carnival is involved in several material legal proceedings. These include ongoing litigation and settlements related to passenger complaints regarding port charges and alleged violations of the Americans with Disabilities Act (ADA). The company is also responding to grand jury subpoenas regarding environmental matters. While some settlements have been reached, these matters represent potential future costs and uncertainties.