10-QPeriod: Q1 FY2002

CARNIVAL CORP Quarterly Report for Q1 Ended Feb 28, 2002

Filed April 11, 2002For Securities:CCL

Summary

Carnival Corporation's Q1 2002 report shows a slight increase in net income to $129.6 million, or $0.22 per diluted share, compared to $127.9 million, or $0.22 per diluted share, in the prior year. Despite a 10.1% decrease in revenues to $905.8 million, primarily due to a 10% drop in gross revenue per passenger cruise day and a lower occupancy rate following the September 11th events, the company managed to improve its operating income. This was achieved through significant cost-saving measures, including reductions in operating expenses and selling and administrative costs, partly driven by temporary cost containment actions implemented post-September 11th. The company is actively managing its fleet expansion, with significant capital expenditures on new ships. Liquidity remains strong with $2.7 billion in cash, cash equivalents, short-term investments, and available credit facilities. However, the company is pursuing the acquisition of P&O Princess Cruises, which, if successful, will require substantial financing, potentially through debt or equity, and carries the risk of a credit rating downgrade. Investors should monitor the progress and outcome of the P&O acquisition and its impact on the company's financial structure and creditworthiness.

Key Highlights

  • 1Net income increased slightly to $129.6 million ($0.22 EPS diluted) from $127.9 million ($0.22 EPS diluted) year-over-year.
  • 2Total revenues declined by 10.1% to $905.8 million, impacted by a 10% decrease in gross revenue per passenger cruise day and lower occupancy rates post-September 11th.
  • 3Operating expenses were reduced by 13.7% ($82 million) due to lower fuel costs, commission savings, and temporary cost containment initiatives.
  • 4Capital expenditures for new shipbuilding programs remain substantial, with $443 million invested in the quarter.
  • 5Liquidity is robust, with $2.7 billion in cash, cash equivalents, short-term investments, and available credit facilities.
  • 6The company is pursuing a significant acquisition of P&O Princess Cruises, which involves a complex financing structure and potential credit rating implications.
  • 7Despite strong operational cash flow, future funding for capital projects and the potential P&O acquisition remains a key focus.

Frequently Asked Questions

The events of September 11th had a significant impact, leading to a 10% decrease in gross revenue per passenger cruise day and a lower occupancy rate. This resulted in a 10.1% decline in total revenues compared to the prior year. However, Carnival implemented cost-saving measures, including reduced operating and administrative expenses, which helped to mitigate the revenue decline and resulted in a slight increase in net income.

Carnival is committed to expanding its fleet, with significant capital expenditures allocated to new shipbuilding programs. In this quarter, the company invested $443 million in capital projects, with $389 million directed towards shipbuilding. Carnival has non-cancelable contracts for fourteen new ships to be delivered over the next four years, with substantial remaining obligations of approximately $1.3 billion within the next twelve months and $4.3 billion thereafter.

Carnival has made a pre-conditional offer to acquire P&O Princess Cruises. The transaction is complex, involving a potential mix of stock and cash, and is subject to regulatory approvals and financing. If consummated, it will require significant financing, estimated at approximately $2.4 billion in cash, which Carnival intends to secure through long-term debt or equity. The acquisition also carries the risk of a credit rating downgrade, although Carnival believes its senior unsecured long-term debt would likely retain investment-grade status.

Carnival maintains strong liquidity, with $2.7 billion in cash, cash equivalents, short-term investments, and $1.5 billion available under revolving credit facilities. The company expects its operating cash flow to be sufficient for most of its capital projects, debt service, and dividend payments, excluding the cash portion of the P&O acquisition. If additional financing is required, particularly for the P&O deal, Carnival believes it can secure funds through bank financing or public/private debt and equity markets.