Half-yearly Report
JUNE 27, 2008
RELEASE OF CARNIVAL CORPORATION & PLC QUARTERLY REPORT ON FORM 10-Q AND
CARNIVAL PLC HALF-YEARLY FINANCIAL REPORT
------------------------------------------
Carnival Corporation & plc announced its second quarter and six month results of
operations in its earnings release issued on June 19, 2008. Carnival Corporation & plc is
hereby announcing that today it has filed a joint Quarterly Report on Form 10-Q with the U.S.
Securities and Exchange Commission ("SEC") containing the Carnival Corporation & plc 2008
second quarter and six month interim financial statements, which results remain unchanged from
those previously announced on June 19, 2008.
The information included in the attached Schedules A and B is extracted from the Form 10-Q
and has been prepared in accordance with SEC rules and regulations. Schedules A and B contain
the unaudited consolidated financial statements for Carnival Corporation & plc as of and for
the three and six months ended May 31, 2008, together with management's discussion and analysis
of financial condition and results of operations related thereto. These Carnival Corporation &
plc consolidated financial statements have been prepared in accordance with generally accepted
accounting principles in the United States of America ("U.S. GAAP"). Within the Carnival
Corporation and Carnival plc dual listed company structure the directors consider the most
appropriate presentation of Carnival plc's results and financial position is by reference to
the U.S. GAAP financial statements of Carnival Corporation & plc.
In addition, the directors are today presenting in the attached Schedule C the unaudited
interim group financial information for Carnival plc standalone as of and for the six months
ended May 31, 2008. The Carnival plc group standalone financial information excludes the
results of Carnival Corporation and is prepared under International Financial Reporting
Standards as adopted in the European Union ("IFRS"). Together these three schedules are
presented as Carnival plc's half-yearly financial report, in accordance with the requirements
of the UK Disclosure and Transparency Rules.
MEDIA CONTACTS INVESTOR RELATIONS CONTACT
US US/UK
Carnival Corporation & plc Carnival Corporation & plc
Tim Gallagher Beth Roberts
+1 305 599 2600, ext. 16000 +1 305 406 4832
UK
Brunswick
Richard Jacques/Clare Barclay
+44 (0)20 7404 5959
The joint Quarterly Report on Form 10-Q (including the portion extracted for this
announcement) is available for viewing on the SEC website at www.sec.gov under Carnival
Corporation or Carnival plc or the Carnival Corporation & plc website at www.carnivalcorp.com
or www.carnivalplc.com. A copy of the joint Quarterly Report on Form 10-Q will be available
shortly at the UKLA Document Viewing Facility of the Financial Services Authority at 25 The
North Colonnade, London E14 5HS, United Kingdom.
Carnival Corporation & plc is the largest cruise vacation group in the world, with a
portfolio of cruise brands in North America, Europe and Australia, comprised of Carnival Cruise
Lines, Holland America Line, Princess Cruises, The Yachts of Seabourn, AIDA Cruises, Costa
Cruises, Cunard Line, Ibero Cruises, Ocean Village, P&O Cruises and P&O Cruises Australia.
Together, these brands operate 87 ships totaling more than 164,000 lower berths with 19
new ships scheduled to be delivered between June 2008 and June 2012. Carnival Corporation &
plc also operates Holland America Tours and Princess Tours, the leading tour companies in
Alaska and the Canadian Yukon. Traded on both the New York and London Stock Exchanges,
Carnival Corporation & plc is the only group in the world to be included in both the S&P 500
and the FTSE 100 indices.
Additional information can be obtained via Carnival Corporation & plc's website at
www.carnivalcorp.com or www.carnivalplc.com or by writing to Carnival plc at Carnival House, 5
Gainsford Street, London SE1 2NE, United Kingdom.
SCHEDULE A
CARNIVAL CORPORATION & PLC - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS UNDER U.S. GAAP
Cautionary Note Concerning Factors That May Affect Future Results
Some of the statements contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this joint Quarterly Report on Form 10-Q
are "forward-looking statements" that involve risks, uncertainties and assumptions with respect
to us, including some statements concerning future results, outlook, plans, goals and other
events which have not yet occurred. These statements are intended to qualify for the safe
harbors from liability provided by Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. We have tried, whenever possible, to identify these
statements by using words like "will," "may," "believe," "expect," "anticipate," "forecast,"
"future," "intend," "plan," and "estimate" and similar expressions.
Because forward-looking statements involve risks and uncertainties, there are many factors
that could cause our actual results, performance or achievements to differ materially from those
expressed or implied in this joint Quarterly Report on Form 10-Q. Forward-looking statements
include those statements which may impact the forecasting of our earnings per share, net revenue
yields, booking levels, pricing, occupancy, operating, financing and/or tax costs, fuel costs,
costs per available lower berth day ("ALBD"), estimates of ship depreciable lives and residual
values, outlook or business prospects. These factors include, but are not limited to, the
following:
- general economic and business conditions, including fuel price increases, and
perceptions of these conditions that may adversely impact the levels of our potential
vacationers' discretionary income and this group's confidence in the U.S. and other
economies and, consequently reduce our cruise brands' net revenue yields;
- the international political climate, armed conflicts and terrorist attacks and threats
thereof, and other world events, and their impacts on the demand for our cruises;
- availability and pricing of air travel services, especially as a result of the
significant increases in air travel costs, and its impact on the demand for our
cruises;
- conditions in the cruise and land-based vacation industries, including competition
from other cruise ship operators and providers of other vacation alternatives and
over capacity offered by cruise ship and land-based vacation alternatives;
- accidents, adverse weather conditions or natural disasters, such as hurricanes and
earthquakes and other incidents (including machinery and equipment failures or
improper operation thereof) which could cause the alteration of itineraries or
cancellation of a cruise or series of cruises, and the impact of the spread of
contagious diseases, all of which could affect the health, safety, security and/or
vacation satisfaction of our guests;
- adverse publicity concerning the cruise industry in general, or us in particular,
could impact the demand for our cruises;
- lack of acceptance of new itineraries, products and services by our guests;
- changing consumer preferences, which may, among other things, adversely impact the
demand for cruises;
- the impact of changes in and compliance with laws and regulations relating to
environmental, health, safety, security, tax and other regulatory regimes under which
we operate;
- the impact of increased global fuel demand, a weakening U.S. dollar, fuel supply
disruptions and/or other events on our ships' fuel and other expenses;
- the impact on our future fuel expenses of implementing proposed International Maritime
Organization regulations which, if approved, would require the use of higher priced
low sulfur fuels in certain cruising areas, which could adversely impact the cruise
industry;
- the impact of changes in operating and financing costs, including changes in foreign
currency exchange rates and interest rates and food, insurance, payroll and security
costs;
- our ability to implement our shipbuilding programs and ship refurbishments and
repairs, including purchasing ships for our North American cruise brands from European
shipyards on terms that are favorable or consistent with our expectations;
- our ability to implement our brand strategies and to continue to operate and expand
our business internationally;
- whether our future operating cash flow will be sufficient to fund future obligations,
and whether we will be able to obtain financing, if necessary, on terms that are
favorable or consistent with our expectations;
- our ability to attract and retain qualified shipboard crew and maintain good
relations with employee unions;
- continuing financial viability of our travel agent distribution system and air
service providers;
- the impact of our self-insuring against various risks or our inability to obtain
insurance for certain risks at reasonable rates;
- disruptions and other impairments to our information technology networks;
- lack of continued availability of attractive port destinations; and
- risks associated with the DLC structure, including the uncertainty of its tax status.
Forward-looking statements should not be relied upon as a prediction of actual results.
Subject to any continuing obligations under applicable law or any relevant listing rules, we
expressly disclaim any obligation to disseminate, after the date of this joint Quarterly Report
on Form 10-Q, any updates or revisions to any such forward-looking statements to reflect any
change in expectations or events, conditions or circumstances on which any such statements are
based.
Outlook for Remainder of Fiscal 2008
As of June 19, 2008, we said that we expected our diluted earnings per share for the third
quarter and full year of 2008 would be in the range of $1.56 to $1.58 and $2.70 to $2.80,
respectively. Our guidance was based on the then current spot prices for fuel price of $670 per
metric ton and $594 per metric ton for the 2008 third quarter and full year, respectively. In
addition, this guidance was also based on 2008 third quarter and full year currency exchange
rates of $1.55 and $1.53 to the euro, respectively, and $1.96 and $1.97 to sterling,
respectively.
The year-over-year percentage increase in our ALBD capacity for the third and fourth
quarters of fiscal 2008 and fiscal years ended 2009, 2010, 2011 and 2012, resulting primarily
from new ships entering service, is currently expected to be 8.8%, 8.8%, 5.2%, 8.3%, 5.5% and
3.7%, respectively. The above percentages exclude any other future ship orders, acquisitions,
retirements or sales, however the fourth quarter does include the withdrawal from service of the
Queen Elizabeth 2 ("QE2") in November 2008.
Seasonality and Critical Accounting Estimates
Our revenues from the sale of passenger tickets are seasonal. Historically, demand for
cruises has been greatest during our third fiscal quarter, which includes the Northern
Hemisphere summer months, and holidays. This higher demand during the third quarter and
holidays results in higher net revenue yields and, accordingly, the largest share of our net
income is earned during these periods. The seasonality of our results is increased due to ships
being taken out of service for maintenance, which we typically schedule during non-peak demand
periods. In addition, substantially all of Holland America Tours' and Princess Tours' revenues
and net income are generated from May through September in conjunction with the Alaska cruise
season.
For a discussion of our critical accounting estimates, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which is included in Carnival
Corporation & plc's 2007 joint Annual Report on Form 10-K.
Selected Cruise Information
Selected cruise information was as follows:
Three Months Six Months
Ended May 31, Ended May 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Passengers carried (in thousands) 1,985 1,832 3,896 3,581
----- ----- ----- -----
Occupancy percentage (a) 104.8% 103.7% 104.5% 103.9%
----- ----- ----- -----
Fuel cost per metric ton (b) $ 530 $ 333 $ 514 $ 317
----- ----- ----- -----
(a) In accordance with cruise industry practice, occupancy is calculated using a
denominator of two passengers per cabin even though some cabins can accommodate three
or more passengers. Percentages in excess of 100% indicate that on average more than
two passengers occupied some cabins.
(b) Fuel cost per metric ton is calculated by dividing the cost of our fuel by the
number of metric tons consumed.
Three Months Ended May 31, 2008 ("2008) Compared to the Three Months Ended May 31, 2007 ("2007")
Revenues
Our total revenues increased $478 million, or 16.5%, from $2.9 billion in 2007 to $3.4
billion in 2008. Approximately $238 million of this increase was capacity driven by our 8.3%
increase in ALBDs (see "Key Performance Non-GAAP Financial Indicators") and the remaining
increase of $240 million was primarily due to increases in cruise ticket pricing, including the
implementation of our fuel supplements, and the impact of the weaker U.S. dollar against the
euro and sterling compared to 2007. Our capacity increased 2.7% for our North American cruise
brands and 23.2% for our European cruise brands in 2008 compared to 2007, as we continue to
implement our planned strategy of expanding in the European cruise marketplace.
Onboard and other revenues included concessionaire revenues of $220 million in 2008 and
$198 million in 2007. Onboard and other revenues increased in 2008 compared to 2007, primarily
because of the 8.3% increase in ALBDs.
Costs and Expenses
Operating costs increased $396 million, or 22.5%, from $1.8 billion in 2007 to $2.2 billion
in 2008. Approximately $143 million of this increase was capacity driven by our 8.3% increase
in ALBDs, and the remaining increase of $253 million was primarily due to increased fuel costs
and the weaker U.S. dollar against the euro and sterling compared to 2007. Selling and
administration expenses increased $19 million, or 4.7%, from $406 million in 2007 to $425
million in 2008, primarily due to the 8.3% increase in ALBDs, partially offset by savings
achieved through economies of scale and cost control measures undertaken during this difficult
economic environment.
Depreciation and amortization expense increased $40 million, or 14.7%, from $272 million in
2007 to $312 million in 2008, largely due to the 8.3% increase in ALBDs through the addition of
new ships, the weaker U.S. dollar compared to the euro and sterling and additional ship
improvement expenditures.
Our total costs and expenses rose from 84.2% in 2007, as a percentage of revenues, to 85.7%
in 2008.
Operating Income
Our operating income increased $23 million, or 5.0%, from $459 million in 2007 to $482
million in 2008. Our operating income increase was primarily due to our increased fleet
capacity, commonly represented by changes in ALBDs, which are highly predictable, and improved
cruise ticket pricing, partially offset by the effect of higher fuel costs.
Nonoperating (Expense) Income
Net interest expense, excluding capitalized interest, increased $17 million to $105 million
in 2008 from $88 million in 2007. This increase was primarily due to a $19 million increase in
interest expense from a higher level of average borrowings, a $6 million decrease in interest
income primarily due to a lower average level of invested cash, partially offset by a $8 million
decrease from lower average interest rates on average borrowings. Capitalized interest
increased $3 million during 2008 compared to 2007 and is attributable to our higher levels of
investment in ships under construction.
Income Taxes
Income tax expense increased $15 million to $6 million in 2008 from a $9 million income tax
benefit in 2007 primarily because of nonrecurring benefits realized in 2007 related to the
transfer of a ship and the reversal of previously recorded deferred tax valuation allowances,
which were no longer required. During both the second quarter of 2008 and 2007, we have
recorded tax benefits generated by the seasonal losses of our Alaska tour operation.
Key Performance Non-GAAP Financial Indicators
ALBDs is a standard measure of passenger capacity for the period, which we use to perform
rate and capacity variance analyses to determine what are the main non-capacity driven factors
that cause our cruise revenues and expenses to vary. ALBDs assume that each cabin we offer for
sale accommodates two passengers and is computed by multiplying passenger capacity by revenue-
producing ship operating days in the period.
We use net cruise revenues per ALBD ("net revenue yields") and net cruise costs per ALBD as
significant non-GAAP financial measures of our cruise segment financial performance. These
measurers enable us to separate the impact of predictable capacity changes from the more
unpredictable rate changes that affect our business. We believe these non-GAAP measures provide
a better gauge to measure our revenue and cost performance instead of the standard U.S. GAAP-
based financial measures. There are no specific rules for determining our non-GAAP financial
measures and, accordingly, it is possible that they may not be exactly comparable to the like-
kind information presented by other cruise companies, which is a potential risk associated with
using them to compare us to other cruise companies.
Net revenue yields are commonly used in the cruise industry to measure a company's cruise
segment revenue performance and for revenue management purposes. We use "net cruise revenues"
rather than "gross cruise revenues" to calculate net revenue yields. We believe that net cruise
revenues is a more meaningful measure in determining revenue yield than gross cruise revenues
because it reflects the cruise revenues earned net of our most significant variable costs, which
are travel agent commissions, cost of air transportation and certain other variable direct costs
associated with onboard and other revenues. Substantially all of our remaining cruise costs are
largely fixed once our ship capacity levels have been determined, except for the impact of
changing prices.
Net cruise costs per ALBD is the most significant measure we use to monitor our ability to
control our cruise segment costs rather than gross cruise costs per ALBD. We exclude the same
variable costs that are included in the calculation of net cruise revenues to calculate net
cruise costs to avoid duplicating these variable costs in these two non-GAAP financial measures.
In addition, because a significant portion of our operations utilize the euro or sterling
to measure their results and financial condition, the translation of those operations to our
U.S. dollar reporting currency results in increases in reported U.S. dollar revenues and
expenses if the U.S. dollar weakens against these foreign currencies, and decreases in reported
U.S. dollar revenues and expenses if the U.S. dollar strengthens against these foreign
currencies. Accordingly, we also monitor and report our two non-GAAP financial measures
assuming the current period currency exchange rates have remained constant with the prior year's
comparable period rates, or on a "constant dollar basis," in order to remove the impact of
changes in exchange rates on our non-U.S. dollar cruise operations. We believe that this is a
useful measure since it facilitates a comparative view of the growth of our business in a
fluctuating currency exchange rate environment.
Gross and net revenue yields were computed by dividing the gross or net revenues, without
rounding, by ALBDs as follows:
Three Months Ended May 31,
-----------------------------------
2008 2008 2007
---- ---- ----
Constant
Dollar
(in millions, except ALBDs and yields)
Cruise revenues
Passenger tickets $2,588 $2,495 $2,181
Onboard and other 743 723 678
------ ------ ------
Gross cruise revenues 3,331 3,218 2,859
Less cruise costs
Commissions, transportation and other (525) (504) (439)
Onboard and other (121) (117) (109)
------ ------ ------
Net cruise revenues $2,685 $2,597 $2,311
------ ------ ------
ALBDs 14,480,881 14,480,881 13,369,111
---------- ---------- ----------
Gross revenue yields $230.04 $222.24 $213.87
------- ------- -------
Net revenue yields $185.45 $179.33 $172.90
------- ------- -------
Gross and net cruise costs per ALBD were computed by dividing the gross or net cruise
costs, without rounding, by ALBDs as follows:
Three Months Ended May 31,
--------------------------------------------
2008 2008 2007
---- ---- ----
Constant
Dollar
(in millions, except ALBDs and costs per ALBD)
Cruise operating expenses $2,115 $2,045 $1,720
Cruise selling and administrative expenses 416 401 398
------ ------ ------
Gross cruise costs 2,531 2,446 2,118
Less cruise costs included in net cruise
revenues
Commissions, transportation and other (525) (504) (439)
Onboard and other (121) (117) (109)
------ ------ ------
Net cruise costs $1,885 $1,825 $1,570
------ ------ ------
ALBDs 14,480,881 14,480,881 13,369,111
---------- ---------- ----------
Gross cruise costs per ALBD $174.79 $168.91 $158.46
------- ------- -------
Net cruise costs per ALBD $130.20 $126.01 $117.50
------- ------- -------
Net cruise revenues increased $374 million, or 16.2%, to $2.7 billion in 2008 from $2.3
billion in 2007. The 8.3% increase in ALBDs between 2008 and 2007 accounted for $192 million of
the increase, and the remaining $182 million was from increased net revenue yields, which
increased 7.3% in 2008 compared to 2007 (gross revenue yields also increased by 7.6%). Net
revenue yields increased in 2008 primarily due to higher ticket prices, the weaker U.S. dollar
relative to the euro and sterling and, to a lesser degree, the 1.1% point increase in our
occupancy, which was primarily driven by our North American brands. Net revenue yields as
measured on a constant dollar basis increased 3.7% in 2008 compared to 2007, which was comprised
of a 5.5% increase in passenger ticket yields, partially offset by a 1.8% decrease in onboard
and other revenue yields, which was largely the result of the significant increase in our
European brands' capacity as they typically have lower onboard and other revenue yields. Gross
cruise revenues increased $472 million, or 16.5%, to $3.3 billion in 2008 from $2.9 billion in
2007 for largely the same reasons as discussed above for net cruise revenues.
Net cruise costs increased $315 million, or 20.1%, to $1.9 billion in 2008 from $1.6
billion in 2007. The 8.3% increase in ALBDs between 2008 and 2007 accounted for $131 million of
the increase. The balance of $184 million was from increased net cruise costs per ALBD, which
increased 10.8% in 2008 compared to 2007 (gross cruise costs per ALBD increased 10.3%). This
10.8% increase was primarily due to a 59% per metric ton increase in fuel cost to $530 per
metric ton in 2008, which resulted in an increase in fuel expense of $158 million compared to
2007, a weaker U.S. dollar relative to the euro and sterling and a $10 million increase in dry-
dock expenses in 2008 compared to 2007. Net cruise costs per ALBD as measured on a constant
dollar basis increased 7.2% in 2008 compared to 2007. On a constant dollar basis, net cruise
costs per ALBD, excluding fuel and dry-dock costs decreased 1.6%, compared to 2007 primarily due
to lower selling and administrative expenses, due largely to savings achieved through economies
of scale and cost control measures. Gross cruise costs increased $413 million, or 19.5%, in
2008 to $2.5 billion from $2.1 billion in 2007 for largely the same reasons as discussed above
for net cruise costs.
Six Months Ended May 31, 2008 ("2008") Compared to the six Months Ended May 31, 2007 ("2007")
Revenues
Our total revenues increased $942 million, or 16.9%, from $5.6 billion in 2007 to $6.5
billion in 2008. Approximately $519 million of this increase was capacity driven by our 9.4%
increase in ALBDs and the remaining increase of $423 million was primarily due to increases in
cruise ticket pricing and the impact of the weaker U.S. dollar against the euro and sterling
compared to 2007. Our capacity increased 4.2% for our North American cruise brands and 21.9%
for our European cruise brands in 2008 compared to 2007.
Onboard and other revenues included concessionaire revenues of $406 million in 2008 and
$362 million in 2007. Onboard and other revenues increased in 2008 compared to 2007, primarily
because of the 9.4% increase in ALBDs.
Costs and Expenses
Operating costs increased $819 million, or 23.7%, from $3.5 billion in 2007 to $4.3 billion
in 2008. Approximately $318 million of this increase was capacity driven by our 9.4% increase
in ALBDs and the remaining increase of $501 million was primarily due to increased fuel costs
and the weaker U.S. dollar against the euro and sterling compared to 2007. Selling and
administration expenses increased $60 million, or 7.6%, from $790 million in 2007 to $850
million in 2008, primarily due to the 9.4% increase in ALBDs, partially offset by savings
achieved through economies of scale and cost control measures.
Depreciation and amortization expense increased $81 million, or 15.2%, from $532 million in
2007 to $613 million in 2008, largely due to the 9.4% increase in ALBDs through the addition of
new ships, the weaker U.S. dollar compared to the euro and sterling and additional ship
improvement expenditures.
Our total costs and expenses rose from 85.5% in 2007, as a percentage of revenues, to 87.8%
in 2008.
Operating Income
Our operating income decreased $18 million, or 2.2%, from $812 million in 2007 to $794
million in 2008. Our operating income decrease was primarily due to effect of higher fuel
costs, partially offset by our increased fleet capacity and improved cruise ticket pricing.
Nonoperating (Expense) Income
Net interest expense, excluding capitalized interest, increased $33 million to $206 million
in 2008 from $173 million in 2007. This increase was primarily due to a $42 million increase in
interest expense from a higher level of average borrowings, a $5 million decrease in interest
income primarily due to a lower average level of invested cash, partially offset by a $14
million decrease from lower average interest rates on average borrowings. Capitalized interest
increased $5 million during 2008 compared to 2007 primarily due to higher average levels of
investment in ship construction projects.
Income Taxes
Income tax benefit decreased $9 million to $4 million in 2008 from $13 million in 2007
primarily because 2007 included the reversal of previously recorded deferred tax valuation
allowances, which were no longer required and larger seasonal tax benefits from our Alaska tour
operation.
Key Performance Non-GAAP Financial Indicators
Gross and net revenue yields were computed by dividing the gross or net revenues, without
rounding, by ALBDs as follows:
Six Months Ended May 31,
-----------------------------------
2008 2008 2007
---- ---- ----
Constant
Dollar
(in millions, except ALBDs and yields)
Cruise revenues
Passenger tickets $5,026 $4,861 $4,231
Onboard and other 1,445 1,410 1,304
------ ------ ------
Gross cruise revenues 6,471 6,271 5,535
Less cruise costs
Commissions, transportation and other (1,083) (1,042) (910)
Onboard and other (246) (240) (220)
------ ------ ------
Net cruise revenues $5,142 $4,989 $4,405
------ ------ ------
ALBDs 28,642,170 28,642,170 26,187,929
---------- ---------- ----------
Gross revenue yields $225.92 $218.94 $211.35
------- ------- -------
Net revenue yields $179.52 $174.19 $168.21
------- ------- -------
Gross and net cruise costs per ALBD were computed by dividing the gross or net cruise
costs, without rounding, by ALBDs as follows:
Six Months Ended May 31,
--------------------------------------------
2008 2008 2007
---- ---- ----
Constant
Dollar
(in millions, except ALBDs and costs per ALBD)
Cruise operating expenses $4,211 $4,081 $3,394
Cruise selling and administrative expenses 833 807 774
------ ------ ------
Gross cruise costs 5,044 4,888 4,168
Less cruise costs included in net cruise
Revenues
Commissions, transportation and other (1,083) (1,042) (910)
Onboard and other (246) (240) (220)
------ ------ ------
Net cruise costs $3,715 $3,606 $3,038
------ ------ ------
ALBDs 28,642,170 28,642,170 26,187,929
---------- ---------- ----------
Gross cruise costs per ALBD $176.12 $170.64 $159.17
------- ------- -------
Net cruise costs per ALBD $129.72 $125.89 $116.03
------- ------- -------
Net cruise revenues increased $737 million, or 16.7%, to $5.1 billion in 2008 from $4.4
billion in 2007. The 9.4% increase in ALBDs between 2008 and 2007 accounted for $413 million of
the increase, and the remaining $324 million was from increased net revenue yields, which
increased 6.7% in 2008 compared to 2007 (gross revenue yields also increased by 6.9%). Net
revenue yields increased in 2008 primarily due to higher ticket prices, the weaker U.S. dollar
relative to the euro and sterling and, to a lesser degree, the 0.6% point increase in our
occupancy. Net revenue yields as measured on a constant dollar basis increased 3.6% in 2008
compared to 2007, which was comprised of a 5.1% increase in passenger ticket yields, partially
offset by a 1.3% decrease in onboard and other yields, which was largely the result of the
significant increase in our European brands' capacity as they typically have lower onboard and
other revenue yields. Gross cruise revenues increased $936 million, or 16.9%, to $6.5 billion
in 2008 from $5.5 billion in 2007 for largely the same reasons as discussed below for net cruise
revenues.
Net cruise costs increased $677 million, or 22.3%, to $3.7 billion in 2008 from $3.0
billion in 2007. The 9.4% increase in ALBDs between 2008 and 2007 accounted for $285 million of
the increase. The balance of $392 million was from increased net cruise costs per ALBD, which
increased 11.8% in 2008 compared to 2007 (gross cruise costs per ALBD increased 10.6%). This
11.8% increase was primarily due to a $197 per metric ton increase in fuel cost to $514 per
metric ton in 2008, which resulted in an increase in fuel expense of $313 million compared to
2007, a weaker U.S. dollar relative to the euro and sterling and a $31 million increase in dry-
dock expenses in 2008 compared to 2007. Net cruise costs per ALBD as measured on a constant
dollar basis increased 8.5% in 2008 compared to 2007. On a constant dollar basis, net cruise
costs per ALBD, excluding fuel and dry-dock costs decreased 0.7%, compared to 2007 due largely
to lower selling and administrative expenses, achieved primarily through economies of scale and
cost control measures. Gross cruise costs increased $876 million, or 21.0%, in 2008 to $5.0
billion from $4.2 billion in 2007 for largely the same reasons as discussed below for net cruise
costs.
Liquidity and Capital Resources
Sources and Uses of Cash
Our business provided $1.8 billion of net cash from operations during the six months ended
May 31, 2008, a decrease of $277 million, or 13.2%, compared to fiscal 2007. At May 31, 2008
and 2007, we had working capital deficits of $4.9 billion and $5.6 billion, respectively. Our
May 31, 2008 deficit included $3.6 billion of customer deposits, which represent the passenger
revenues we collect in advance of sailing and, accordingly, is substantially all a deferred
revenue item rather than an actual current cash liability. We use our long-term ship assets to
realize a portion of this deferred revenue in addition to consuming current assets. In
addition, our May 31, 2008 working capital deficit included $1.8 billion of current debt
obligations, which included $230 million of convertible debt subject to a put option, which at
our option, can be settled by the issuance of common stock, and thus not impact our liquidity,
if necessary. After excluding these customer deposits and current debt obligations from our
working capital deficit balance, our adjusted working capital is $456 million. We continue to
generate substantial cash from operations and have an A- stable credit rating, considerable
financial flexibility to refinance our current debt and thereby providing us with the ability to
maintain such a substantial working capital deficit, as well as the substantial flexibility to
meet our operating, investing and financing needs. As explained above, our business model
allows us to operate with significant working capital deficits and, accordingly, we believe
these working capital deficits will continue to exist in the future.
During the six months ended May 31, 2008, our net expenditures for capital projects were
$1.6 billion, of which $1.3 billion was spent for our ongoing new shipbuilding program,
including $926 million for the final delivery payments for the Ventura and AIDAbella. In
addition to our new shipbuilding program, we had capital expenditures of $207 million for ship
improvements and refurbishments and $69 million for Alaska tour assets, cruise port facility
developments, information technology and other assets. Also during the six months ended May 31,
2008, we received a $41 million final payment on the 2003 sale of Holland America Line's Nieuw
Amsterdam to Louis Cruise Line.
During the six months ended May 31, 2008, we borrowed $3.8 billion of long-term debt,
primarily under our long-term revolving credit facility ("Facility") and a ship financing
facility, and we repaid $3.4 billion of long-term debt, which primarily included $2.6 billion
under the Facility, $302 million of our 1.75% Notes, and $308 million upon maturity of our 4.4%
and 6.15% fixed rate notes. Finally, we paid cash dividends of $630 million and purchased $84
million of Carnival Corporation common stock and Carnival plc ordinary shares in open market
transactions during the six months ended May 31, 2008.
Commitments and Funding Sources
Our contractual cash obligations as of May 31, 2008 have changed compared to November 30,
2007, including new ship orders placed in December 2007, primarily as a result of our debt and
ship delivery payments as noted above. In addition, $860 million of Carnival Corporation
convertible debt that was currently due under put options at November 30, 2007 was not put to us
and, accordingly, this debt is now classified as long-term at May 31, 2008. As noted above,
there is still $230 million of convertible debt remaining due currently, which has a put option
in October 2008 and, accordingly, is classified as a current liability at May 31, 2008, however
we have the option to repay in cash, common stock or a combination thereof.
At May 31, 2008, we had liquidity of $5.3 billion, which consisted of $988 million of cash
and cash equivalents, $500 million available for borrowing under our Facility, $1.5 billion
under our short-term revolving credit facilities, and $2.3 billion under committed ship
financing facilities. Substantially all of our Facility matures in 2012. In addition, in June
2008, we terminated $500 million of our $1.5 billion short-term revolving credit facilities,
thus reducing our May 31, 2008 liquidity by such amount. Finally, in June 2007 we entered into
an agreement to sell Cunard Line's QE2 for delivery to the buyer in November 2008 for $100
million. A key to our access to liquidity is the maintenance of our strong credit ratings.
Based primarily on our historical results, current financial condition and forecasts, we
believe that our existing liquidity and cash flow from future operations will be sufficient to
fund the majority of our expected capital projects (including shipbuilding commitments), debt
service requirements, convertible debt redemptions, dividend payments, working capital and other
firm commitments over the next several years. In addition, we believe that we will be able to
secure the necessary financings from banks or through the offering of debt and/or equity
securities in the public or private markets or take other actions to fund our remaining future
cash requirements. However, our cash flow from future operations, as well as our credit
ratings, may be adversely affected by various factors including, but not limited to, those
factors noted under "Cautionary Note Concerning Factors That May Affect Future Results."
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
During the six months ended May 31, 2008, we entered into foreign currency forwards and
options that are designated as cash flow hedges of the remaining Carnival Dream shipyard
euro payments to lock-in a blended exchange rate of at most $1.584 to the euro and,
accordingly, we will have a maximum payment of $723 million for these remaining shipyard
payments. However, as a result of the currency options, which are for 50% of these
remaining payments, we will benefit if the dollar exchange rate strengthens below $1.584 to
the euro.
In addition, we had fair value forward purchase hedges for $532 million that were
settled in March 2008 at the time we took delivery of Ventura.
At May 31, 2008, 50%, 38% and 12% (53%, 37% and 10% at November 30, 2007) of our debt
was U.S. dollar, euro and sterling-denominated, respectively, including the effect of
foreign currency swaps.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements, including guarantee
contracts, retained or contingent interests, certain derivative instruments and variable
interest entities, that either have, or are reasonably likely to have, a current or future
material effect on our financial statements.
SCHEDULE B
CARNIVAL CORPORATION & PLC - U.S. GAAP CONSOLIDATED FINANCIAL STATEMENTS
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in millions, except per share data)
Three Months Six Months
Ended May 31, Ended May 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Revenues
Cruise
Passenger tickets $2,588 $2,181 $5,026 $4,231
Onboard and other 743 678 1,445 1,304
Other 47 41 59 53
------ ------ ------ ------
3,378 2,900 6,530 5,588
------ ------ ------ ------
Costs and Expenses
Operating
Cruise
Commissions, transportation and other 525 439 1,083 910
Onboard and other 121 109 246 220
Fuel 425 254 817 474
Payroll and related 365 321 725 632
Food 210 181 417 356
Other ship operating 469 416 923 802
Other 44 43 62 60
------ ------ ------ ------
Total 2,159 1,763 4,273 3,454
Selling and administrative 425 406 850 790
Depreciation and amortization 312 272 613 532
------ ------ ------ ------
2,896 2,441 5,736 4,776
------ ------ ------ ------
Operating Income 482 459 794 812
------ ------ ------ ------
Nonoperating (Expense) Income
Interest income 12 17 22 27
Interest expense, net of capitalized interest (102) (94) (200) (178)
Other income (expense), net 4 (1) 6 (1)
------ ------ ------ ------
(86) (78) (172) (152)
------ ------ ------ ------
Income Before Income Taxes 396 381 622 660
Income Tax (Expense) Benefit, Net (6) 9 4 13
------ ------ ------ ------
Net Income $ 390 $ 390 $ 626 $ 673
------ ------ ------ ------
Earnings Per Share
Basic $ 0.50 $ 0.49 $ 0.80 $ 0.85
------ ------ ------ ------
Diluted $ 0.49 $ 0.48 $ 0.78 $ 0.83
------ ------ ------ ------
Dividends Per Share $ 0.40 $ 0.35 $ 0.80 $0.625
------ ------ ------ ------
The accompanying notes are an integral part of these consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
May 31, November 30, May 31,
2008 2007 2007
---- ---- ----
ASSETS
Current Assets
Cash and cash equivalents $ 988 $ 943 $ 1,859
Short-term investments 8 17 214
Trade and other receivables, net 542 436 401
Inventories 349 331 282
Prepaid expenses and other 292 249 263
------- ------- -------
Total current assets 2,179 1,976 3,019
------- ------- -------
Property and Equipment, Net 27,666 26,639 25,019
Goodwill 3,614 3,610 3,331
Trademarks 1,393 1,393 1,328
Other Assets 620 563 490
------- ------- -------
$35,472 $34,181 $33,187
------- ------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 145 $ 115 $ 1,075
Current portion of long-term debt 1,386 1,028 1,457
Convertible debt subject to current put options 230 1,396 1,170
Accounts payable 454 561 498
Accrued liabilities and other 1,269 1,353 1,209
Customer deposits 3,605 2,807 3,200
------- ------- -------
Total current liabilities 7,089 7,260 8,609
------- ------- -------
Long-Term Debt 7,689 6,313 5,425
Other Long-Term Liabilities and Deferred Income 764 645 574
Contingencies (Note 3)
Shareholders' Equity
Common stock of Carnival Corporation; $0.01 par
value; 1,960 shares authorized; 643 at 2008
and November 2007 and 642 shares at May 2007
issued 6 6 6
Ordinary shares of Carnival plc; $1.66 par
value; 226 shares authorized; 213 shares at
2008 and 2007 issued 354 354 354
Additional paid-in capital 7,653 7,599 7,556
Retained earnings 12,907 12,921 11,778
Accumulated other comprehensive income 1,306 1,296 772
Treasury stock; 19 shares at 2008 and November
2007 and 18 shares at May 2007 of Carnival
Corporation and 51 shares at 2008, 50 shares
at November 2007 and 42 shares at May 2007
of Carnival plc, at cost (2,296) (2,213) (1,887)
------- ------- -------
Total shareholders' equity 19,930 19,963 18,579
------- ------- -------
$35,472 $34,181 $33,187
------- ------- -------
The accompanying notes are an integral part of these consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Six Months Ended May 31,
-----------------------
2008 2007
---- ----
OPERATING ACTIVITIES
Net income $ 626 $ 673
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 613 532
Share-based compensation 30 32
Other 4 7
Changes in operating assets and liabilities
Receivables (116) (130)
Inventories (16) (19)
Prepaid expenses and other (66) (21)
Accounts payable (111) 67
Accrued and other liabilities 40 74
Customer deposits 811 876
------- -------
Net cash provided by operating activities 1,815 2,091
------- -------
INVESTING ACTIVITIES
Additions to property and equipment (1,593) (2,130)
Purchases of short-term investments (2) (899)
Sales of short-term investments 10 706
Proceeds from the sale of assets and businesses, net 41 138
Other, net (34) (69)
------- -------
Net cash used in investing activities (1,578) (2,254)
------- -------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 3,847 1,058
Principal repayments of long-term debt (3,370) (440)
Dividends paid (630) (435)
Purchases of treasury stock (84)
Proceeds from exercise of stock options 14 40
Proceeds from short-term borrowings, net 8 628
Other (9) (5)
------- -------
Net cash (used for) provided by financing activities (224) 846
------- -------
Effect of exchange rate changes on cash and cash equivalents 32 13
------- -------
Net increase in cash and cash equivalents 45 696
Cash and cash equivalents at beginning of period 943 1,163
------- -------
Cash and cash equivalents at end of period $ 988 $ 1,859
------- -------
The accompanying notes are an integral part of these consolidated financial statements.
CARNIVAL CORPORATION & PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - Basis of Presentation
Carnival Corporation is incorporated in Panama, and Carnival plc is incorporated in England
and Wales. Carnival Corporation and Carnival plc operate a dual listed company ("DLC"), whereby
the businesses of Carnival Corporation and Carnival plc are combined through a number of
contracts and through provisions in Carnival Corporation's articles of incorporation and by-laws
and Carnival plc's memorandum of association and articles of association. The two companies
operate as if they are a single economic enterprise, but each has retained its separate legal
identity.
The accompanying consolidated financial statements include the accounts of Carnival
Corporation and Carnival plc and their respective subsidiaries. Together with their
consolidated subsidiaries they are referred to collectively in these consolidated financial
statements and elsewhere in this joint Quarterly Report on Form 10-Q as "Carnival Corporation &
plc," "our," "us," and "we."
The accompanying consolidated balance sheets at May 31, 2008 and 2007, the consolidated
statements of operations for the three and six months ended May 31, 2008 and 2007 and the
consolidated statements of cash flows for the six months ended May 31, 2008 and 2007 are
unaudited and, in the opinion of our management, contain all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation. Our interim consolidated
financial statements should be read in conjunction with the audited consolidated financial
statements and the related notes included in the Carnival Corporation & plc 2007 joint Annual
Report on Form 10-K. Our operations are seasonal and results for interim periods are not
necessarily indicative of the results for the entire year.
NOTE 2 - Debt
At May 31, 2008, unsecured short-term borrowings consisted of euro and U.S. dollar-
denominated bank loans of $93 million and $52 million, respectively, with an aggregate weighted-
average interest rate of 3.3%.
On April 25, 2008, we amended the terms of Carnival Corporation's 1.75% convertible notes
(the "1.75% Notes) to give the holders another put option, which, if exercised, requires us to
repurchase all or a portion of the outstanding 1.75% Notes on October 29, 2009 at their
accreted value, and suspends our right to redeem the 1.75% Notes until October 29, 2009. The
$8 million estimated fair value of this new put option is being amortized to interest expense
over its eighteen-month term using the straight-line method, which approximates the effective
interest rate method. In addition, we amended the terms of the 1.75% Notes to include an
additional semi-annual cash interest payment of 0.5% per annum through October 29, 2009 and
certain other covenants and agreements for the benefit of the holders of this debt. On April
30, 2008, as a result of certain holders exercising their April 29, 2008 put option, we
repurchased $302 million of the outstanding 1.75% Notes at their accreted value, plus accrued
interest, leaving $273 million of the 1.75% Notes outstanding at their accreted value. At May
31, 2008, the 1.75% Notes have a 4.6% yield through October 29, 2009.
At May 31, 2008, our 1.75% Notes and 2% convertible notes ("2% Notes") were both
classified as long-term liabilities, since the next time we may be required to redeem these
notes at the option of the holders is on October 29, 2009 and April 15, 2011, respectively. In
addition, the Carnival Corporation common stock trigger prices of $40.29 and $43.05, which are
required to be met in order to allow the conversion of the Carnival Corporation zero-coupon
convertible notes and 2% Notes, respectively, were not met for the defined duration of time in
the first and second quarter of fiscal 2008 and, accordingly, these notes were not convertible
during the second quarter of fiscal 2008 and are not convertible during the third quarter of
fiscal 2008. The 1.75% Notes Carnival Corporation common stock trigger price of $63.73 has not
been met since their issuance.
In March 2008, our Ibero Cruises brand entered into two 364-day loan facilities
aggregating $170 million, which are guaranteed by Carnival Corporation and Carnival plc. This
Ibero Cruises debt, along with another $607 million of other short-term debt, has been
classified as long-term debt at May 31, 2008, as we have the intent and ability to refinance
this debt on a long-term basis.
In March 2008 we also entered into a $500 million seven-year term loan facility, which was
fully drawn in June, 2008 and used in part to finance a portion of the purchase price of
Holland America Line's Eurodam. This facility has a fixed interest rate of 4.41%, although the
lenders have a one-time option to switch the borrowing rate to LIBOR plus 0.55% on the loan's
third anniversary date.
During the 2008 second quarter, we also borrowed $523 million under an unsecured term loan
facility, the proceeds of which were effectively used to pay a portion of P&O UK's Ventura
purchase price. This facility bears interest at 4.38% and is repayable in semi-annual
installments through 2020.
Finally, in the second quarter of 2008 we obtained two unsecured term loan financing
facilities, each bearing a fixed interest rate of 4.21%, which provide us with the ability to
borrow up to an aggregate of $796 million for a portion of two ships' purchase prices. These
ships are expected to be delivered in June 2008 and October 2008. These facilities are
repayable semi-annually over a 12 year period. However, we have the option to terminate the
second mentioned facility up until 60 days prior to the ship delivery date.
NOTE 3 - Contingencies
Litigation
The Office of the Attorney General of Florida ("Attorney General") is conducting an
investigation to determine whether there is or has been a violation of Florida antitrust laws in
connection with the setting by us and other unaffiliated cruise lines of certain fuel
supplements. We are providing our full cooperation to the Attorney General's office. At this
time, we are unable to determine the ultimate outcome of this review on our financial
statements.
In January 2006, a lawsuit was filed against Carnival Corporation and its subsidiaries and
affiliates, and other unaffiliated cruise lines in New York on behalf of a purported class of
owners of intellectual property rights to musical plays and other works performed in the U.S.
The plaintiffs claim infringement of copyrights to Broadway, off Broadway and other plays. The
suit seeks payment of (i) damages, (ii) disgorgement of alleged profits and (iii) an injunction
against future infringement. In the event that an award is given in favor of the plaintiffs, the
amount of damages, if any, which Carnival Corporation and its subsidiaries and affiliates would
have to pay is not currently determinable. The ultimate outcome of this matter cannot be
determined at this time. However, we intend to vigorously defend this matter.
In the normal course of our business, various other claims and lawsuits have been filed or
are pending against us. Most of these claims and lawsuits are covered by insurance and,
accordingly, the maximum amount of our liability, net of any insurance recoverables, is
typically limited to our self-insurance retention levels. However, the ultimate outcome of
these claims and lawsuits which are not covered by insurance cannot be determined at this time.
Contingent Obligations
At May 31, 2008, Carnival Corporation had estimated contingent obligations totaling
approximately $1.1 billion, excluding stipulated damages as discussed below, to participants in
lease out and lease back type transactions for three of its ships. At the inception of the
leases, the entire net present value of these contingent obligations was paid by Carnival
Corporation to major financial institutions to enable them to directly pay these obligations.
Accordingly, these obligations are considered extinguished, and neither the funds nor the
contingent obligations have been included on our balance sheets.
We estimate that Carnival Corporation would be required to make payments for approximately
$172 million and $884 million of these contingent obligations in the remote event of
nonperformance by these major financial institutions, which have long-term credit ratings of AA-
and AA/AAA, respectively. In addition, Carnival Corporation obtained direct guarantees for an
estimated $102 million and $170 million from AAA and AA- rated financial institutions,
respectively, to support a portion of the estimated $172 million and $884 million of contingent
obligations, respectively, thereby further reducing the exposure to this portion of the
contingent obligations.
In certain cases, if the credit ratings of the major financial institutions who are
directly paying the contingent obligations fall below AA- then Carnival Corporation will be
required to replace these financial institutions with other financial institutions whose credit
ratings are AA or meet other specified credit requirements. If such an event was to occur, we
would incur costs that we estimate would not be material to our financial statements. However,
in the event we could not find replacement institutions for all these obligations, we believe
our liability would not exceed our $162 million of estimated stipulated damages. During the 2008
second quarter, some of the financial institutions involved with two of these transactions had
their credit ratings downgraded from AA to AA-, with a negative outlook. If Carnival
Corporation's credit rating, which is A-, falls below BBB, it would be required to provide a
standby letter of credit for $70 million, or alternatively provide mortgages in the aggregate
amount of $70 million on two of its ships.
In addition, in the event that Carnival Corporation were to terminate the three lease
agreements early or default on its obligations, including any failure to replace the financial
institutions referred to above, we estimate that it would, as of May 31, 2008, have to pay a
total of $162 million in stipulated damages. We estimate that approximately $124 million of
these stipulated damages relate to transactions that involve the AA- rated institutions. As of
May 31, 2008, $165 million of standby letters of credit have been issued by a major financial
institution in order to provide further security for the payment of these contingent stipulated
damages. In addition, we have a $170 million back-up letter of credit issued under a loan
facility in support of these standby letters of credit. Between 2017 and 2022, we have the
right to exercise options that would terminate these three lease transactions at no cost to us.
Some of the debt agreements that we enter into include indemnification provisions that
obligate us to make payments to the counterparty if certain events occur. These contingencies
generally relate to changes in taxes, changes in laws that increase lender capital costs and
other similar costs. The indemnification clauses are often standard contractual terms and were
entered into in the normal course of business. There are no stated or notional amounts included
in the indemnification clauses and we are not able to estimate the maximum potential amount of
future payments, if any, under these indemnification clauses. We have not been required to make
any material payments under such indemnification clauses in the past and, under current
circumstances, we do not believe a request for material future indemnification payments is
probable.
NOTE 4 - Comprehensive Income
Comprehensive income was as follows (in millions):
Three Months Six Months
Ended May 31, Ended May 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Net income $390 $390 $626 $673
Items included in accumulated other comprehensive
income
Foreign currency translation adjustment 88 100 11 113
Changes related to cash flow derivative hedges (3) (1) 2 (2)
Unrealized gain (loss) on marketable security 2 (3)
---- ---- ---- ----
Total comprehensive income $477 $489 $636 $784
---- ---- ---- ----
NOTE 5 - Segment Information
Our cruise segment includes all of our cruise brands, which have been aggregated as a
single reportable segment based on the similarity of their economic and other characteristics,
including the products and services they provide. Substantially all of our other segment
represents the hotel, tour and transportation operations of Holland America Tours and Princess
Tours.
Selected segment information for our cruise and other segments was as follows (in
millions):
Three Months Ended May 31,
--------------------------------------------------------------
Selling Depreciation
Operating and admin- and Operating
Revenues expenses istrative amortization income (loss)
-------- -------- --------- ------------ -------------
2008
Cruise $3,331 $2,115 $416 $303 $497
Other 65 62 9 9 (15)
Intersegment elimination (18) (18)
------ ------ ---- ---- ----
$3,378 $2,159 $425 $312 $482
------ ------ ---- ---- ----
2007
Cruise $2,859 $1,720 $398 $263 $478
Other 55 57 8 9 (19)
Intersegment elimination (14) (14)
------ ------ ---- ---- ----
$2,900 $1,763 $406 $272 $459
------ ------ ---- ---- ----
Six Months Ended May 31,
--------------------------------------------------------------
Selling Depreciation
Operating and admin- and Operating
Revenues expenses istrative amortization income (loss)
-------- -------- --------- ------------ -------------
2008
Cruise $6,471 $4,211 $833 $595 $832
Other 79 82 17 18 (38)
Intersegment elimination (20) (20)
------ ------ ---- ---- ----
$6,530 $4,273 $850 $613 $794
------ ------ ---- ---- ----
2007
Cruise $5,535 $3,394 $774 $514 $853
Other 69 76 16 18 (41)
Intersegment elimination (16) (16)
------ ------ ---- ---- ----
$5,588 $3,454 $790 $532 $812
------ ------ ---- ---- ----
NOTE 6 - Earnings Per Share
Our basic and diluted earnings per share were computed as follows (in millions, except per
share data):
Three Months Six Months
Ended May 31, Ended May 31,
------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Net income $ 390 $ 390 $ 626 $ 673
Interest on dilutive convertible notes 9 9 17 17
----- ----- ----- -----
Net income for diluted earnings per share $ 399 $ 399 $ 643 $ 690
----- ----- ----- -----
Weighted-average common and ordinary shares
outstanding 786 794 786 794
Dilutive effect of convertible notes 31 33 31 33
Dilutive effect of stock plans 2 2 2 2
----- ----- ----- -----
Diluted weighted-average shares outstanding 819 829 819 829
----- ----- ----- -----
Basic earnings per share $0.50 $0.49 $0.80 $0.85
----- ----- ----- -----
Diluted earnings per share $0.49 $0.48 $0.78 $0.83
----- ----- ----- -----
Options to purchase 12.0 million shares for both the three and six months ended May 31,
2008, and 8.5 million shares and 6.9 million shares for the three and six months ended May 31,
2007, respectively, were excluded from our diluted earnings per share computations since the
effect of including them was anti-dilutive.
NOTE 7 - Recent Accounting Pronouncements
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation
No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 clarifies, among other
things, the accounting for uncertain income tax positions by prescribing a minimum probability
threshold that a tax position must meet before a financial statement income tax benefit is
recognized. The minimum threshold is defined as a tax position that, based solely on its
technical merits, is more likely than not to be sustained upon examination by the relevant
taxing authority. The tax benefit to be recognized is measured as the largest amount of benefit
that is greater than fifty percent likely of being realized upon ultimate resolution. FIN 48
must be applied to all existing tax positions upon adoption. The cumulative effect of applying
FIN 48 at adoption is required to be reported separately as an adjustment to the opening balance
of retained earnings in the year of adoption. Our adoption of FIN 48 on December 1, 2007 did not
have a material impact on our opening retained earnings. In addition, based on all known facts
and circumstances and current tax law, we believe that the total amount of our uncertain income
tax position liabilities and related accrued interest are not material to our May 31, 2008
financial position.
In September 2006, the FASB issued Statement of Financial Accounting Standards ("SFAS") No.
157, "Fair Value Measurements." SFAS No. 157 defines fair value, establishes a framework for
measuring fair value and expands disclosure requirements about fair value measurements. In
February 2008, the FASB released a FASB Staff Position, which delayed the effective date of SFAS
No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring basis. SFAS
No. 157 was first effective for us on December 1, 2007. The adoption of SFAS No. 157 on our
financial assets and liabilities, which are principally comprised of cash equivalents and
derivatives, did not have a significant impact on their fair value measurements or require
expanded disclosures since the fair value of those financial assets and liabilities outstanding
during the three and six months ended May 31, 2008 were not material.
In May 2008, the FASB issued Financial Accounting Standards Board Staff Position Accounting
Principles Board 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash
upon Conversion (Including Partial Cash Settlement)" ("APB 14-1"). APB 14-1 requires the issuer
of certain convertible debt instruments that may be settled in cash, or other assets, on
conversion to separately account for the debt and equity components in a manner that reflects
the issuer's non-convertible debt borrowing rate. APB 14-1 will be adopted by us in the first
quarter of fiscal 2010 on a retrospective basis. We believe that the impact of adopting APB 14-
1 will not have a material effect on previously reported diluted earnings per share, however,
our net income will be reduced. We are still in the process of determining the amount of such
reduction.
SCHEDULE C
CARNIVAL PLC - INTERIM FINANCIAL INFORMATION
SUMMARISED GROUP INCOME STATEMENTS (UNAUDITED)
Six Months Ended May 31,
2008 2007
---- ----
US$ millions, except per share data
Revenues
Cruise
Passenger tickets 2,323.2 1,682.1
Onboard and other 466.6 361.5
Land tours and other 60.9 50.0
------- -------
Total Revenues (note 3) 2,850.7 2,093.6
------- -------
Costs and Expenses
Operating
Cruise
Commissions, transportation and other 619.0 433.8
Onboard and other 99.6 87.3
Payroll and related 270.8 213.1
Fuel 303.7 159.7
Food 157.6 114.6
Other ship operating 439.9 329.8
Other 70.3 62.2
------- -------
Total 1,960.9 1,400.5
Selling and administrative 350.0 302.9
Depreciation and amortisation 247.6 191.1
------- -------
2,558.5 1,894.5
------- -------
Operating Income (note 3) 292.2 199.1
Interest income 15.6 15.8
Interest expense, net of capitalized interest (106.9) (76.1)
Other income, net (note 4) 25.6 0.5
------- -------
Income Before Income Taxes 226.5 139.3
Income Tax Benefit, Net 12.6 21.3
------- -------
Net Income 239.1 160.6
------- -------
Earnings Per Share (in U.S. dollars)
Basic 1.15 0.75
Diluted 1.15 0.75
Dividends Per Share 0.80 0.625
Weighted Average Number of Shares
in Issue (in millions)
Basic 213.1 213.0
Diluted 213.3 213.3
See accompanying notes to the interim financial information. This interim financial
information only presents the consolidated IFRS results of Carnival plc, and does not include
the consolidated results of Carnival Corporation.
Within the DLC structure the most appropriate presentation of Carnival plc's results and
financial position is considered to be by reference to the U.S. GAAP consolidated financial
statements of Carnival Corporation & plc, which are included in the attached Schedule B (see
note 1). For information, we set out below the U.S. GAAP consolidated earnings per share
included within the Carnival Corporation & plc consolidated financial statements for the six
months ended May 31, 2008 and 2007 (in U.S. dollars):
DLC Basic earnings per share 2008: 0.80 2007: 0.85
DLC Diluted earnings per share 2008: 0.78 2007: 0.83
CARNIVAL PLC - INTERIM FINANCIAL INFORMATION
SUMMARISED GROUP BALANCE SHEETS (UNAUDITED)
May 31, 2008 Nov 30, 2007 May 31, 2007
------------ ------------ ------------
US$ millions
ASSETS
Current Assets
Cash and cash equivalents (note 8) 457.9 823.5 953.9
Trade and other receivables, net 396.9 337.1 290.8
Amount owed from Carnival Corporation - 70.1 -
Inventories 140.0 131.6 109.2
Prepaid expenses and other 149.6 125.3 136.1
-------- -------- --------
Total current assets 1,144.4 1,487.6 1,490.0
Non-current Assets
Property and Equipment, Net (note 6) 11,993.0 10,776.7 9,023.0
Goodwill and Other Intangibles 1,061.0 1,029.5 754.4
Other Assets 193.8 153.8 113.4
-------- -------- --------
Total Assets 14,392.2 13,447.6 11,380.8
-------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt (note 8) 1,086.8 650.1 1,177.1
Amount owed to Carnival Corporation 433.2 - 94.5
Accounts payable 212.8 275.5 227.7
Accrued liabilities and other 484.7 534.8 398.5
Customer deposits 1,175.6 1,019.1 865.3
-------- -------- --------
Total current liabilities 3,393.1 2,479.5 2,763.1
Non-Current Liabilities
Long-Term Debt (note 8) 3,885.0 4,016.8 2,817.7
Other Long-Term Liabilities 191.4 153.5 201.8
-------- -------- --------
7,469.5 6,649.8 5,782.6
Shareholders' Equity
Ordinary shares 354.0 353.9 353.8
Share premium 94.8 94.6 93.4
Retained earnings 4,229.8 4,147.9 3,485.1
Other reserves 2,193.6 2,147.8 1,665.9
-------- -------- --------
Total Shareholders' Equity 6,872.2 6,744.2 5,598.2
Minority Interest 50.5 53.6 -
-------- -------- --------
Total Equity 6,922.7 6,797.8 5,598.2
-------- -------- --------
14,392.2 13,447.6 11,380.8
-------- -------- --------
See accompanying notes to the interim financial information. This interim financial
information only presents the consolidated IFRS results of Carnival plc, and does not include
the consolidated results of Carnival Corporation.
Within the DLC structure the most appropriate presentation of Carnival plc's results and
financial position is considered to be by reference to the U.S. GAAP consolidated financial
statements of Carnival Corporation & plc, which are included in the attached Schedule B (see
note 1).
CARNIVAL PLC - INTERIM FINANCIAL INFORMATION
SUMMARISED GROUP STATEMENTS OF CASH FLOW (UNAUDITED)
Six Months Ended May 31,
2008 2007
---- ----
US$ millions
Cash Flows from Operating Activities
Cash generated from operations before
interest and taxes 599.2 550.7
Interest paid, net (66.9) (36.9)
Income taxes paid, net (1.5) (3.5)
------- -------
Net Cash provided by Operating Activities 530.8 510.3
------- -------
Cash Flows from Investing Activities
Additions to property and equipment (1,215.5) (1,041.1)
Proceeds from sale of fixed assets - 71.1
------- -------
Net Cash used in Investing Activities (1,215.5) (970.0)
------- -------
Cash Flows from Financing Activities
Dividends paid to shareholders (170.0) (115.9)
Issue of ordinary share capital 0.3 1.6
Net increase in borrowings 433.3 484.7
------- -------
Net Cash provided by Financing Activities 263.6 370.4
------- -------
Net Cash Flows in the Period (421.1) (89.3)
------- -------
See accompanying notes to the interim financial information. This interim financial
information only presents the consolidated IFRS results of Carnival plc, and does not include
the consolidated results of Carnival Corporation.
Within the DLC structure the most appropriate presentation of Carnival plc's results and
financial position is considered to be by reference to the U.S. GAAP consolidated financial
statements of Carnival Corporation & plc, which are included in the attached Schedule B (see
note 1).
CARNIVAL PLC - INTERIM FINANCIAL INFORMATION
STATEMENTS OF CHANGES IN TOTAL EQUITY (UNAUDITED)
Six Months Ended May 31,
2008 2007
---- ----
US$ millions
Net income 239.1 160.6
Exchange movements 58.6 84.9
Net (loss) gain on hedges (9.8) 0.6
------- -------
Total recognised income 287.9 246.1
Dividends (note 5) (170.1) (131.9)
Issue of shares 0.3 1.6
Share-based payments 6.8 7.6
------- -------
124.9 123.4
Total equity at beginning of the period 6,797.8 5,474.8
------- -------
Total equity at end of the period 6,922.7 5,598.2
------- -------
Net income (loss) is attributable to:
Shareholders of Carnival plc 245.2 160.6
Minority interest (6.1) -
------- -------
239.1 160.6
------- -------
See accompanying notes to the interim financial information. This interim financial
information only presents the consolidated IFRS results of Carnival plc, and does not include
the consolidated results of Carnival Corporation.
Within the DLC structure the most appropriate presentation of Carnival plc's results and
financial position is considered to be by reference to the U.S. GAAP consolidated financial
statements of Carnival Corporation & plc, which are included in the attached Schedule B (see
note 1).
CARNIVAL PLC - INTERIM FINANCIAL INFORMATION
NOTES TO THE INTERIM FINANCIAL INFORMATION
Note 1. Basis of preparation
The interim financial information has been prepared on the basis of the accounting
policies and methods of computation adopted and disclosed in Carnival plc's and subsidiaries'
("Group's") consolidated statutory financial statements for the year ended November 30, 2007
and was approved by the Board of Directors on June 26, 2008. This interim financial
information has been prepared in accordance with the Disclosure and Transparency Rules of the
Financial Services Authority and with International Accounting Standard 34 "Interim Financial
Reporting" ("IAS 34").
Carnival Corporation and Carnival plc operate a dual listed company ("DLC"), whereby the
businesses of Carnival Corporation and Carnival plc are combined through a number of contracts
and through provisions in Carnival Corporation's articles of incorporation and by-laws and
Carnival plc's memorandum of association and articles of association. The two companies
operate as if they are a single economic enterprise, but each has retained its separate legal
identity. Each company's shares are publicly traded; on the New York Stock Exchange ("NYSE")
for Carnival Corporation and the London Stock Exchange for Carnival plc. In addition, Carnival
plc American Depository Shares are traded on the NYSE. The contracts governing the DLC
structure provide that Carnival Corporation and Carnival plc each continue to have separate
boards of directors, but the boards and senior executive management of both companies are
identical. Under the contracts governing the DLC the Carnival Corporation & plc consolidated
earnings accrue equally to each unit of Carnival Corporation stock and each Carnival plc share.
The standalone Carnival plc consolidated IFRS interim financial information is required to
satisfy reporting requirements of the UKLA. However, the directors consider that within the
DLC arrangement the most appropriate presentation of Carnival plc's results and financial
position is by reference to the U.S. GAAP consolidated financial statements of Carnival
Corporation & plc, on the basis that all significant financial and operating decisions
affecting the DLC companies are taken on the basis of U.S. GAAP information and consequences.
Accordingly, the Carnival Corporation & plc U.S. GAAP financial statements and management
commentary for the three and six months ended May 31, 2008 have been included in Schedules A
and B to this announcement, and are incorporated into the Carnival plc consolidated IFRS
interim financial information as additional disclosure.
Note 2. Status of financial information
The standalone Carnival plc IFRS interim financial information for the six months ended
May 31, 2008 has not been audited or reviewed by the auditors.
The standalone Carnival plc IFRS interim financial information does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. The statutory accounts
for the year ended November 30, 2007 have been delivered to the Registrar of Companies. The
auditors' report on those statutory accounts was unqualified and did not contain a statement
under Section 237(2) or (3) of the Companies Act 1985.
Note 3. Segmental analysis
Six Months Ended May 31,
2008 2007
---- ----
U.S.$m U.S.$m
Revenues
Cruise 2,789.8 2,043.6
Land tours and other 60.9 50.0
------- -------
Total 2,850.7 2,093.6
------- -------
Operating income (loss)
Cruise 331.9 240.6
Land tours and other (39.7) (41.5)
------- -------
Total 292.2 199.1
------- -------
Note 4. Other income
Other income during the six months ended May 31, 2008 includes a foreign exchange gain of
$21m arising on euro bank deposits held by Carnival plc to satisfy Carnival Corporation
contracted ship delivery payments during 2008.
Note 5. Dividends
Six Months Ended May 31,
2008 2007
---- ----
U.S.$m U.S.$m
First interim $0.40 per share (2007 $0.275) 85.2 58.6
Second interim $0.40 per share (2007 $0.35) 84.9 73.3
------- -------
170.1 131.9
------- -------
Note 6. Property and equipment
During the six months ended May 31, 2008, the Group took delivery of two new ships and
made a number of stage payments for ships under construction. In addition, the Grand
Celebration was purchased from Carnival Cruise Lines and underwent a substantial refit as part
of her redeployment within the Spanish cruise market (see note 9).
Note 7. Ship commitments
Ship capital commitments include contract payments to the shipyards, design and
engineering fees, construction oversight costs, various owner supplied items and capitalised
interest. At May 31, 2008, the Group had outstanding capital commitments for future new ship
deliveries of $7.7bn.
Note 8. Net debt
Other
Nov 30, Cash non-cash Exchange May 31,
2007 flows movements movements 2008
---- ----- --------- --------- ----
U.S.$m U.S.$m U.S.$m U.S.$m U.S.$m
Cash and cash equivalents 823.5 (421.1) - 55.5 457.9
Short-term debt (650.1) (313.2) (105.2) (18.3) (1,086.8)
Amount owed from (to) Carnival
Corporation 70.1 10.5 (523.2) 9.4 (433.2)
Long-term debt (4,016.8) (130.6) 374.3 (111.9) (3,885.0)
------- ------- ------- ------- -------
(3,773.3) (854.4) (254.1) (65.3) (4,947.1)
------- ------- ------- ------- -------
Note 9. Related parties
Other than the transactions described below there have been no significant changes to the
type and incidence of Carnival plc's related party transactions, as disclosed in the Carnival
plc consolidated and company IFRS financial statements for the year ended November 30, 2007.
During April 2008 a subsidiary of Ibero Cruises, our 75% owned Spanish cruise brand,
acquired the Grand Celebration from Carnival Cruise Lines for $157.5m (€102m).
During April 2008 Carnival plc assigned or transferred $307.2m of debt and $310.7m (€200m)
of time deposits to Carnival Corporation. The net consideration for the assignment of debt and
transfer of deposits was recorded in the intercompany balance with Carnival Corporation.
As a consequence of the above noted transactions and the normal trading activities between
the two sides of the DLC, the net balance outstanding between the Carnival plc Group and the
Carnival Corporation Group changed from a net receivable of $70.1m at November 30, 2007 to a
net payable of $433.2m at May 31, 2008.
Key management personnel
During the 2008 interim period, there were no material transactions or balances between
the Group and its key management personnel or members of their close family, other than
remuneration.
Note 10. Risks and Uncertainties
The principal risks and uncertainties affecting the business activities of the Group are
disclosed within Schedule A and remain broadly the same as those at November 30, 2007. In
addition Item 1A, "Risk Factors", of the Carnival Corporation & plc joint Annual Report on Form
10-K for the year ended November 30, 2007 includes further detail concerning the risks and
uncertainties that could affect the Group.
Note 11. Responsibility Statement
The directors confirm that to the best of their knowledge the condensed set of financial
statements included as Schedule C to this release has been prepared in accordance with IAS 34
as adopted by the European Union, and that the consolidated Carnival Corporation & plc
information included in Schedules A and B, including management's discussion and analysis of
financial condition and results of operations, includes a fair review of the information
required by DTR 4.2.7 R and DTR 4.2.8 R.
The directors of Carnival plc are listed in the Annual Report for November 30, 2007 with
the exception of Baroness Hogg who resigned from the board on April 22, 2008. A list of
current directors is maintained and is available for inspection at Carnival plc's registered
office located at Carnival House, 5 Gainsford Street, London SE1 2NE, United Kingdom.
By order of the Board
Micky Arison Howard S. Frank
Chairman Vice Chairman
June 26, 2008 June 26, 2008
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