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What’s wrong with this picture? 1997 ANNUAL REPORT [you’re not in it!] COMPANY profile Carnival Corporation (Carnival), the world’s largest and most profitable cruise company, owns Carnival Cruise Lines, Holland America Line and Windstar Cruises. The company also has interests in three other cruise lines: Seabourn Cruise Line, Costa Cruises and Airtours’ Sun Cruises. Combined, these lines operate 35 cruise ships that sail to exciting destinations around the world. Carnival also maintains interests in tour companies, through which it offers air transportation and operates hotels, motor coaches, rail cars and excursion vessels in select markets. CRUISE OPERATIONS TOUR OPERATIONS Carnival Cruise Lines Holland America Line Holland America Westours Windstar Cruises Costa Cruises (50%) Seabourn Cruise Line (50%) Airtours’ Sun Cruises (28%) Airtours (28%) Corporate Overview Carnival Corporation has a unique ability to provide customers with a wide range of vacation choices that appeal to any taste, interest, budget or lifestyle. With a mission to surpass customer expectations, Carnival offers leisure travelers vacation experiences equal or superior to those at the world’s most popular travel destinations. Windstar Cruises Costa Cruises Windstar Cruises is one Costa Crociere S.p.A. of the world’s highest rated (Costa Cruises) is Europe’s cruise lines. A leader in the largest, most modern and “luxury” sail/cruise market, most profitable cruise line. Windstar offers travelers Based in Italy, Costa offers five-star accommodations customers on its seven and service aboard three ships a multi-ethnic, multi- computer-controlled sailing cultural and multi-lingual Holland America Line vessels. A fourth luxury ambiance, whatever their vessel, Wind Surf, is slated destination. Carnival and Holland America Line is for a Spring 1998 introduction. Airtours each owns a the highest rated major Windstar cruises to the 50 percent interest in Costa. cruise line in the world. Mediterranean, the Caribbean The leader in the “premium” and Central America. cruise market, Holland America operates a five-star fleet of eight ships, including the new Rotterdam. Primary Holland America destinations include Alaska, Carnival Cruise Lines the Caribbean, the Panama Holland America Westours Seabourn Cruise Line Airtours Canal and Europe. Carnival Cruise Lines is Holland America Seabourn Cruise Line Airtours plc is a leading the largest, most popular Westours is the largest is the world’s most cele- European tour/cruise operator and most profitable cruise cruise/tour operator in Alaska brated cruise line, with a and the world’s largest line in the world. The leader and the Canadian Yukon. A long record of awards and air-inclusive leisure travel in the “contemporary” cruise subsidiary of Holland America achievements. The leader company. Based in the market, Carnival operates Line, Westours markets in the “ultra-luxury” market, United Kingdom, Airtours 11 “Fun Ships®,” including sightseeing packages to Seabourn offers exceptional is a leader in the British the world’s largest, Carnival Holland America and other service, value and style and Scandinavian holiday Destiny. Carnival ships sail cruise lines’ passengers aboard three all-suite ships. markets, meeting the needs to the Bahamas, the Carib- and to the public. Westours Seabourn vessels cruise to of five million vacationers bean, Mexico, the Panama owns and/or manages 14 destinations around the world. annually. Sun Cruises, a Canal, Alaska and Hawaii. hotels, more than 300 motor Carnival owns a 50 percent European cruise operation, coaches, 13 private rail cars interest in Seabourn. is an Airtours subsidiary. and two luxury day vessels. Carnival owns a 28 percent interest in Airtours. FINANCIAL highlights In millions of dollars, except Earnings Per Share 1997 1996 1995 Total Revenues $2,447 $2,213 $1,998 Net Income $ 666 $ 566 $ 451 Earnings Per Share $ 2.23 $ 1.95 $ 1.59 Return on Equity 20.1% 21.1% 21.1% Cash From Operations $ 878 $ 742 $ 587 Total Assets $5,427 $5,102 $4,105 NET INCOME CASH FROM OPERATIONS In Millions of Dollars In Millions of Dollars $700 $900 560 720 TOTAL REVENUES 420 TOTAL ASSETS 540 In Millions of Dollars In Millions of Dollars $2,500 280 $5,500 360 2,000 140 4,900 180 1,500 0 4,300 0 ’93 ’94 ’95 ’96 ’97 ’93 ’94 ’95 ’96 ’97 1,000 3,700 500 3,100 0 2,500 ’93 ’94 ’95 ’96 ’97 ’93 ’94 ’95 ’96 ’97 1 AT THE helm A View from the Bridge Fiscal 1997 was the 13th consecutive year of earnings growth at Carnival Corporation and yet another record year as the company marked its 25th anniversary. Net income rose to $666.1 million, or $2.23 per share, an increase of 17.6 percent compared with 1996 net income of $566.3 million, or $1.95 per share. Revenues increased 10.6 percent to $2.45 billion compared with 1996 revenues of $2.21 billion. This excellent financial performance reflected continued strong operating results at each of Carnival Corporation’s wholly owned cruise lines: Carnival Cruise Lines, Micky Arison the leader in the contemporary cruise market; Holland America Line, the leader in the Chairman and Chief Executive Officer premium cruise market; and Windstar Cruises, a leader in the luxury sail/cruise market. The results also evidenced solid achievements at other travel operations in which Carni- “FISCAL 1997 WAS YET val holds a significant equity interest: Seabourn Cruise Line, the leader in the ultra-lux- ANOTHER RECORD YEAR AS ury cruise market; Airtours plc, the world’s largest air-inclusive leisure travel company; and Costa Cruises, Europe’s largest cruise line. THE COMPANY MARKED Channel Markers Carnival Corporation made swift progress past a number of ITS 25TH ANNIVERSARY.” important markers in fiscal 1997. Carnival Destiny, the world’s largest cruise ship, was a resounding success in its inaugural year, contributing considerably to the company’s revenue and earnings growth. The success of Carnival Destiny and of the new, state-of-the-art Rotterdam, INVESTMENT RETURN – CARNIVAL VS. S&P 500 $1600 1300 Carnival Destiny’s tiered 1000 outdoor entertainment area 700 has four pools, seven whirlpools, two swim-up bars, a separate 400 two-level children’s area and a ■ Carnival Corporation ■ S&P 500 200-foot waterslide. It’s also a 100 88 89 92 96 90 91 93 94 95 97 great place to enjoy lunch. If $100 were invested in Carnival Corporation stock at the beginning of fiscal 1988, it would be worth approximately $1,500 at the end of fiscal 1997. 2 What’s 101,353 gross registered tons and will make you forget about work for a week? [Carnival Destiny] [Interesting Culture] What do romantic Italy, Jamaican reggae and kiwi yogurt have in common? AT THE helm which joined the Holland America fleet in November 1997, prompted Carnival to enter negotiations to develop a new class of ships. These “newbuilding” contracts will add as “CARNIVAL ENTERS FISCAL many as six ships to the six already under contract, creating a new class of vessels for Car- 1998 POISED TO CAPITALIZE nival Cruise Lines, Holland America Line and Costa Cruises. In an expansion of its strategy to extend its reach into Europe, Carnival and its ON THE POTENTIAL U.K.-based tour partner, Airtours, jointly acquired Europe’s largest cruise line, Costa GROWTH OF THE VARIOUS Cruises, in June 1997. This, combined with Carnival’s 1996 strategic alliance with Air- tours, has strengthened the company’s position in the growing European cruise market. CRUISE MARKETS.” Smooth Sailing Ahead With a stronger franchise than ever, Carnival enters fiscal 1998 poised to capitalize on the potential growth of the various cruise markets. The company has well-known, differentiated brands with broad appeal. It is a leader in every market in which it competes. It has one of the most modern fleets in the industry. It already carries one of every three North American cruise passengers and has the most ambitious shipbuilding plan in the industry’s history. It has a solid and growing foothold in the burgeoning European market. It is the most highly regarded cruise company in the world by travel agents, who are the key distributors of its products. The company’s position today is a powerful testament to its disciplined growth strategy, superb sales and marketing capabilities and excellent management team. At Carnival’s helm is seasoned industry veteran Micky Arison, chairman and chief executive officer. In an interview for this report, we asked Micky for his views on Carnival’s success—and how he and his team will sustain that success in the future. Here’s what he had to say: The Costa Classica in romantic Venice. Full-size replicas of the terra-cotta warriors of In the first three quarters of 1997, there was Xian are included in the art passenger growth in all cruise categories—from short cruises of up to five days to cruises longer than 18 days. collection on Holland America’s flagship, the new Rotterdam. 5 INTERVIEW with the Chairman Micky, 1997 was another record year at Carnival. What was your most important accomplishment? “CONSUMERS ARE I think our key achievement in 1997 was to maneuver Carnival into a far more BECOMING INCREASINGLY powerful global competitive position. Along with our partner, Airtours, we acquired Europe’s leading cruise line, Costa Cruises, giving Carnival a leadership position in the AWARE THAT CRUISING growing European cruise market. We also entered negotiations to boost new ship orders, OFFERS TREMENDOUS which will bring our projected total “newbuilding” commitment to approximately $4 bil- lion. This will allow us to increase capacity that will drive future revenues and enable us VALUE COMPARED WITH to take advantage of growing global consumer interest in cruising. Throughout, we main- tained our focus on disciplined cost controls, with a goal of improving margins both LAND-BASED VACATIONS.” short- and long-term.