Carnival Corp & plc Second Quarter Earnings
CARNIVAL CORPORATION & PLC REPORTS
SECOND QUARTER EARNINGS
Carnival Corporation & plc today reports earnings for the second quarter
ended May 31, 2010. The earnings of Carnival Corporation and Carnival plc have
been consolidated, and this statement includes consolidated results on a U.S.
GAAP basis.
Q2 Highlights
- Q2 revenues increased by $247m to $3.2b versus $2.9b in the prior
year, driven by an 8% increase in passenger capacity
- Q2 net revenue yields in constant dollars increased 2.0% (up 2.4%
in current dollars) compared to the prior year, which was at the higher
end of the company's March guidance, up 1 to 2%
- Excluding fuel, constant dollar net cruise costs per available
lower berth day ("ALBD") declined 4.9%, which was better than March
guidance, down 3.5 to 4.5%
- Fuel price increased 64% to $498 per metric ton versus $304 per
metric ton in the prior year and reduced earnings by $0.20 per share
- Q2 earnings per share (diluted) of $0.32, compared to $0.33
for the prior year
2010 Outlook
- Since March, booking volumes for the second half of the year have
been running slightly ahead of the prior year at higher prices
- Net revenue yields for full year are expected to increase 2 to 3%
on a constant dollar basis, in line with March guidance
- Net cruise costs excluding fuel per ALBD for the full year are
expected to be down 2.5 to 3.5% on a constant dollar basis compared with
the prior year, which is slightly better than March guidance
- Since March guidance, unfavorable changes in currency exchange
rates have reduced earnings by $97m, which has essentially been offset
by a $41m benefit from a decline in the spot price for fuel and lower
forecasted costs for the remainder of the year
- Forecasted fuel costs for the full year are expected to increase
$440m compared to 2009, costing an additional $0.55 per share
- Full year earnings per share (diluted) expected to be in the
range of $2.25 to $2.35, compared to $2.24 for 2009
- Q3 earnings per share (diluted) expected to be in the range of
$1.43 to $1.47 compared to $1.33 in Q3 2009
Chairman and Chief Executive Officer Micky Arison commenting
on these results:
"We were encouraged to see revenue yields turn positive for
the first time since late 2008. Improving revenue yields combined with an 8
percent capacity increase and ongoing cost control efforts offset
significantly higher fuel prices."
"Considering recent global economic concerns and other world
events our advance bookings are holding up reasonably well and remain in line
with our expectations. We believe this will lead to earnings growth in both
the third and fourth quarters. The summer season, which is our strongest and
most important quarter of the year, is shaping up particularly well."
Analyst conference call
The company has scheduled a conference call with analysts at
3:00 p.m. BST (10:00 a.m. EDT) today to discuss its 2010 second quarter
earnings. This call can be listened to live, and additional information can
be obtained, via Carnival Corporation & plc's Web site at
www.carnivalcorp.com and www.carnivalplc.com.
Carnival Corporation & plc
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 96 ships totaling more than
187,000 lower berths with 11 new ships scheduled to be delivered between now
and May 2014. Carnival Corporation & plc also operates Holland America
Princess Alaska Tours, the leading tour company 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.
CARNIVAL CORPORATION & PLC REPORTS
SECOND QUARTER EARNINGS
MIAMI (June 22, 2010) - Carnival Corporation & plc (NYSE/LSE:
CCL; NYSE: CUK) reported net income of $252 million, or $0.32 diluted EPS, on
revenues of $3.2 billion for its second quarter ended May 31, 2010. Net
income for the second quarter of 2009 was $264 million, or $0.33 diluted EPS,
on revenues of $2.9 billion.
Carnival Corporation & plc Chairman and CEO Micky Arison
indicated that operating results for the second quarter 2010 exceeded the
company's March guidance as a result of better than expected net revenue
yields and cost reductions.
Commenting on the second quarter, Arison said, "We were encouraged to see
revenue yields turn positive for the first time since late 2008. Improving
revenue yields combined with an 8 percent capacity increase and ongoing cost
control efforts offset significantly higher fuel prices." Increased fuel
prices negatively impacted earnings by $0.20 per share during the quarter.
Key metrics for the second quarter of 2010 compared to the prior year were
as follows:
- On a constant dollar basis net revenue yields (net revenue per
available lower berth day) increased 2.0 percent for 2Q 2010, which was
at the higher end of the company's March guidance, up 1 to 2 percent.
Net revenue yields in current dollars increased 2.4 percent due to
favourable currency exchange rates. Gross revenue yields increased only
0.4 percent in current dollars driven by lower air transportation
revenue.
- Excluding fuel, net cruise cost per available lower berth day ("ALBD")
declined 4.9 percent in constant dollars, which was better than
March guidance, down 3.5 to 4.5 percent.
- Including fuel, net cruise costs per ALBD increased 4.2 percent on a
constant dollar basis (increased 4.9 percent in current dollars). Gross
cruise costs per ALBD increased 1.6 percent in current dollars.
- Fuel prices increased 64 percent to $498 per metric ton for 2Q 2010
from $304 per metric ton in 2Q 2009 but was lower than March guidance
of $511 per metric ton.
Continuing with its strategic growth initiatives, the company
took delivery of two new ships during the second quarter - P&O Cruises'
3,100-passenger Azura and The Yachts of Seabourn's 450-passenger Seabourn
Sojourn. In addition, contracts were finalized with Fincantieri for the
construction of two Princess Cruises' 3,600-passenger ships for delivery in
May 2013 and 2014.
2010 Outlook
Since March, booking volumes for the second half of the year
have been running slightly ahead of the prior year at higher prices. At this
time, cumulative advance bookings for both quarters are at higher prices
(constant dollars) with occupancies for the third quarter in line with the
prior year and for the fourth quarter slightly behind last year.
Arison noted, "Considering recent global economic concerns and other
world events our advance bookings are holding up reasonably well and remain
in line with our expectations. We believe this will lead to earnings growth
in both the third and fourth quarters. The summer season, which is our
strongest and most important quarter of the year, is shaping up particularly
well."
The company continues to expect full year net revenue yields,
on a constant dollar basis, to increase 2 to 3 percent, in line with its
March guidance. However, currency exchange rates have moved significantly
since March guidance was provided. As a result, the company now expects net
revenue yields on a current dollar basis to be approximately flat for the
full year 2010 compared to 2009.
The company expects net cruise costs excluding fuel per ALBD
for the full year 2010 to be down 2.5 to 3.5 percent on a constant dollar
basis which is slightly better than its March guidance. Since March guidance,
unfavorable changes in currency exchange rates have reduced earnings by $97
million. This has essentially been offset by a $41 million benefit from a
decline in the spot price for fuel and lower forecasted costs for the
remainder of the year.
Consequently, the company continues to forecast full year 2010
fully diluted earnings per share to be in the range of $2.25 to $2.35,
compared to 2009 earnings of $2.24 per share. Based on the current spot price
for fuel, fuel costs for all of 2010 are expected to increase $440 million
compared to 2009, costing an additional $0.55 per share.
Third Quarter 2010
Third quarter constant dollar net revenue yields are expected
to increase 5 to 6 percent (flat to up 1 percent on a current dollar basis)
compared to the prior year. Net cruise costs excluding fuel per ALBD for the
third quarter are expected to be 1 to 2 percent higher on a constant dollar
basis (down 2 to 3 percent on a current dollar basis). Fuel costs for the
third quarter are expected to increase $74 million compared to the prior
year, costing an additional $0.09 per share.
Based on the above factors and using current fuel prices and
currency exchange rates, the company expects earnings for the third quarter
of 2010 to be in the range of $1.43 to $1.47 per share, compared to $1.33 per
share in 2009.
During the second half of the year two new ships will debut in
Europe- Holland America Line's 2,106-passenger Nieuw Amsterdam, and Cunard
Line's 2,092-passenger Queen Elizabeth- furthering the company's strategy to
expand its global presence. These vessels will be the fifth and sixth ships
the company will introduce in 2010.
Selected Key Forecast Metrics
-----------------------------
Full Year 2010
Current Constant
Dollars Dollars
Change in:
Net revenue yields (0.5) to 0.5% 2.0 to 3.0%
Net cruise cost / ALBD 1.0 to 2.0% 2.5 to 3.5%
Net cruise cost excl. fuel / ALBD (4.0) to (5.0)% (2.5) to (3.5)%
Third Quarter 2010
Current Constant
Dollars Dollars
Change in:
Net revenue yields 0.0 to 1.0% 5.0 to 6.0%
Net cruise cost / ALBD 1.0 to 2.0% 4.5 to 5.5%
Net cruise cost excl. fuel / ALBD (2.0) to (3.0)% 1.0 to 2.0%
Full Year 2010 Third Quarter 2010
Fuel price/metric ton $495 $493
Fuel consumption (metric tons in
thousands) 3,344 843
Currency
Euro $1.29 to EUR1 $1.24 to EUR1
Sterling $1.51 to BPS1 $1.48 to BPS1
The company has scheduled a conference call with analysts at
10:00 a.m. EDT (3:00 p.m. BST) today to discuss its 2010 second quarter
earnings. This call can be listened to live, and additional information can
be obtained, via Carnival Corporation & plc's Web site at
www.carnivalcorp.com and www.carnivalplc.com.
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 96 ships totaling more than 187,000 lower
berths with 11 new ships scheduled to be delivered between now and May 2014.
Carnival Corporation & plc also operates Holland America Princess Alaska
Tours, the leading tour company 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.
Cautionary Note Concerning Factors That May Affect Future Results
Some of the statements, estimates or projections contained in this
earnings release are "forward-looking statements" that involve risks,
uncertainties and assumptions with respect to Carnival Corporation & plc,
including some statements concerning future results, outlooks, 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," "could," "should," "would," "believe," "expect,"
"anticipate," "forecast," "future," "intend," "plan," "estimate" and similar
expressions of future intent or the negative of such terms. Because
forward-looking statements involve risks and uncertainties, there are many
factors that could cause Carnival Corporation & plc's actual results,
performance or achievements to differ materially from those expressed or
implied in this earnings release. Forward-looking statements include those
statements which may impact, among other things, the forecasting of Carnival
Corporation & plc's earnings per share, net revenue yields, booking levels,
pricing, occupancy, operating, financing and tax costs, fuel expenses, costs
per available lower berth day, estimates of ship depreciable lives and
residual values, liquidity, goodwill and trademark fair values and outlook.
These factors include, but are not limited to, the following: general
economic and business conditions, including fuel price increases, high
unemployment rates, and declines in the securities, real estate and other
markets, and perceptions of these conditions, may adversely impact the levels
of Carnival Corporation & plc's potential vacationers' discretionary income
and net worth and this group's confidence in their country's economy;
fluctuations in foreign currency exchange rates, particularly the movement of
the U.S. dollar against the euro, sterling and the Australian and Canadian
dollars; the international political climate, armed conflicts, terrorist and
pirate attacks and threats thereof, and other world events affecting the
safety and security of travel; competition from and overcapacity in both the
cruise ship and land-based vacation industries; lack of acceptance of new
itineraries, products and services by Carnival Corporation & plc's guests;
changing consumer preferences; Carnival Corporation & plc's ability to
attract and retain qualified shipboard crew and maintain good relations with
employee unions; accidents, the spread of contagious diseases and threats
thereof, adverse weather conditions or natural disasters, such as hurricanes,
earthquakes and volcanic ash, and other incidents (including, but not limited
to, ship fires and machinery and equipment failures or improper operation
thereof), which could cause, among other things, individual or multiple port
closures, injury, death, damage to property and equipment, oil spills,
alteration of cruise itineraries or cancellation of a cruise or series of
cruises or tours; adverse publicity concerning the cruise industry in
general, or Carnival Corporation & plc in particular, including any adverse
impact that cruising may have on the marine environment; changes in and
compliance with laws and regulations relating to the protection of disabled
persons, employment, environmental, health, safety, security, tax and other
regulatory regimes under which Carnival Corporation & plc operate; increases
in global fuel demand and pricing, fuel supply disruptions and other events
impacting on Carnival Corporation & plc's fuel and other expenses, liquidity
and credit ratings; increases in Carnival Corporation & plc's future fuel
expenses from implementing approved International Maritime Organization
regulations, which require the use of higher priced low sulfur fuels in
certain cruising areas, including the U.S. and Canadian Emissions Control
Area, which will change the specification and increase the price of fuel that
ships will be required to use within these areas; changes in financing and
operating costs, including changes in interest rates and food, payroll and
security costs; the ability of Carnival Corporation & plc to implement its
shipbuilding programs and ship maintenance, repairs and refurbishments,
including ordering additional ships for its cruise brands from shipyards, on
terms that are favorable or consistent with Carnival Corporation & plc's
expectations; the continued strength of Carnival Corporation & plc's cruise
brands and its ability to implement its brand strategies; additional risks
associated with Carnival Corporation & plc's international operations not
generally applicable to its U.S. operations; the pace of development in
geographic regions in which Carnival Corporation & plc tries to expand its
business; whether Carnival Corporation & plc's future operating cash flow
will be sufficient to fund future obligations and whether it will be able to
obtain financing, if necessary, in sufficient amounts and on terms that are
favorable or consistent with its expectations; Carnival Corporation & plc
counterparties' ability to perform; continuing financial viability of
Carnival Corporation & plc's travel agent distribution system, air service
providers and other key vendors and reductions in the availability of and
increases in the pricing for the services and products provided by these
vendors; Carnival Corporation & plc's decisions to self-insure against
various risks or its inability to obtain insurance for certain risks at
reasonable rates; disruptions and other damages to Carnival Corporation &
plc's information technology networks and operations; lack of continuing
availability of attractive, convenient and safe port destinations; and risks
associated with the dual listed company structure. 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,
Carnival Corporation & plc expressly disclaim any obligation to disseminate,
after the date of this release, 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.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
May 31,
-------
2010 2009
---- ----
(in millions, except per share data)
Revenues
Cruise
Passenger tickets $2,427 $2,242
Onboard and other 737 673
Tour and other 31 33
--- ---
3,195 2,948
----- -----
Costs and Expenses
Operating
Cruise
Commissions, transportation
and other 440 440
Onboard and other 106 110
Payroll and related 383 366
Fuel 416 243
Food 212 203
Other ship operating 504 488
Tour and other 32 35
--- ---
Total 2,093 1,885
Selling and administrative 404 393
Depreciation and amortization 349 317
--- ---
2,846 2,595
----- -----
Operating Income 349 353
--- ---
Nonoperating (Expense) Income
Interest income 3 2
Interest expense, net of
capitalized interest (99) (90)
Other (expense) income, net (2) 5
--- ---
(98) (83)
--- ---
Income Before Income Taxes 251 270
Income Tax Benefit (Expense), Net 1 (6)
--- ---
Net Income $252 $264
==== ====
Earnings Per Share
Basic $0.32 $0.34
===== =====
Diluted $0.32 $0.33
===== =====
Dividends Declared Per Share $0.10
=====
Weighted-Average Shares Outstanding - Basic 788 787
=== ===
Weighted-Average Shares Outstanding - Diluted 806 804
=== ===
Six Months Ended
May 31,
-------
2010 2009
---- ----
(in millions, except per share data)
Revenues
Cruise
Passenger tickets $4,785 $4,461
Onboard and other 1,466 1,307
Tour and other 39 44
--- ---
6,290 5,812
----- -----
Costs and Expenses
Operating
Cruise
Commissions, transportation
and other 937 954
Onboard and other 219 214
Payroll and related 774 718
Fuel 813 451
Food 424 401
Other ship operating 978 946
Tour and other 47 51
--- ---
Total 4,192 3,735
Selling and administrative 800 785
Depreciation and amortization 694 628
--- ---
5,686 5,148
----- -----
Operating Income 604 664
--- ---
Nonoperating (Expense) Income
Interest income 7 6
Interest expense, net of
capitalized interest (195) (186)
Other (expense) income, net (5) 24
--- ---
(193) (156)
---- ----
Income Before Income Taxes 411 508
Income Tax Benefit (Expense), Net 16 16
--- ---
Net Income $427 $524
==== ====
Earnings Per Share
Basic $0.54 $0.67
===== =====
Diluted $0.54 $0.66
===== =====
Dividends Declared Per Share $0.20
=====
Weighted-Average Shares Outstanding - Basic 788 787
=== ===
Weighted-Average Shares Outstanding - Diluted 806 804
=== ===
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
May 31, November 30,
2010 2009
---- ----
(in millions, except par values)
ASSETS
Current Assets
Cash and cash equivalents $594 $538
Trade and other receivables, net 455 362
Inventories 297 320
Prepaid expenses and other 240 298
--- ---
Total current assets 1,586 1,518
----- -----
Property and Equipment, Net 29,317 29,870
Goodwill 3,214 3,451
Trademarks 1,289 1,346
Other Assets 623 650
--- ---
$36,029 $36,835
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $808 $135
Current portion of long-term debt 676 815
Convertible debt subject to current
debt option 595
Accounts payable 548 568
Accrued liabilities and other 928 874
Customer deposits 3,208 2,575
----- -----
Total current liabilities 6,763 4,967
----- -----
Long-Term Debt 7,681 9,097
Other Long-Term Liabilities and
Deferred Income 721 732
Shareholders' Equity
Common stock of Carnival Corporation;
$0.01 par value; 1,960 shares
authorized; 645 shares at 2010 and
644 shares at 2009 issued 6 6
Ordinary shares of Carnival plc; $1.66
par value; 214 shares at 2010 and 213
shares at 2009 issued 355 354
Additional paid-in capital 8,059 7,920
Retained earnings 15,830 15,561
Accumulated other comprehensive (loss)
income (1,029) 462
Treasury stock; 32 shares at 2010 and
24 shares at 2009 of Carnival
Corporation and 38 shares at 2010 and
46 shares at 2009 of Carnival plc, at
cost (2,357) (2,264)
------ ------
Total shareholders' equity 20,864 22,039
------ ------
$36,029 $36,835
======= =======
CARNIVAL CORPORATION & PLC
SELECTED INFORMATION
Three Months Ended Six Months Ended
May 31, May 31,
------- -------
2010 2009 2010 2009
---- ---- ---- ----
(in millions, except statistical information)
STATISTICAL INFORMATION
Passengers
carried (in
thousands) 2,222 2,029 4,271 3,898
Occupancy
percentage 103.8% 103.3% 103.7% 103.6%
Fuel
consumption
(metric tons
in thousands) 835 799 1,635 1,552
Fuel cost per
metric ton (a) $498 $304 $497 $291
Currency
U.S. dollar to
EUR1 $1.32 $1.33 $1.36 $1.33
U.S. dollar to
BPS1 $1.50 $1.48 $1.55 $1.47
CASH FLOW INFORMATION
Cash from
operations $1,398 $1,136 $1,794 $1,441
Capital
expenditures $999 $1,650 $2,168 $1,956
Dividends paid $79 $79 $314
SEGMENT INFORMATION
Revenues
Cruise $3,164 $2,915 $6,251 $5,768
Tour and other 45 48 54 61
Intersegment
elimination (14) (15) (15) (17)
--- --- --- ---
$3,195 $2,948 $6,290 $5,812
====== ====== ====== ======
Operating
expenses
Cruise $2,061 $1,850 $4,145 $3,684
Tour and other 46 50 62 68
Intersegment
elimination (14) (15) (15) (17)
--- --- --- ---
$2,093 $1,885 $4,192 $3,735
====== ====== ====== ======
Selling and
administrative
expenses
Cruise $396 $386 $785 $770
Tour and other 8 7 15 15
--- --- --- ---
$404 $393 $800 $785
==== ==== ==== ====
Depreciation and
amortization
Cruise $339 $308 $676 $610
Tour and other 10 9 18 18
--- --- --- ---
$349 $317 $694 $628
==== ==== ==== ====
Operating
income (loss)
Cruise $368 $371 $645 $704
Tour and other (19) (18) (41) (40)
--- --- --- ---
$349 $353 $604 $664
==== ==== ==== ====
(a) Fuel cost per metric ton is calculated by dividing the cost of fuel
by the number of metric tons consumed.
CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES
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,
-------
2010 2009
---- ----
(in millions, except ALBDs and yields)
Cruise revenues
Passenger tickets $2,427 $2,242
Onboard and other 737 673
--- ---
Gross cruise revenues 3,164 2,915
Less cruise costs
Commissions, transportation
and other (440) (440)
Onboard and other (106) (110)
---- ----
Net cruise revenues (a) $2,618 $2,365
====== ======
ALBDs (b) 16,575,242 15,329,812
========== ==========
Gross revenue yields (a) $190.90 $190.19
======= =======
Net revenue yields (a) $157.97 $154.24
======= =======
Six Months Ended
May 31,
-------
2010 2009
---- ----
(in millions, except ALBDs and yields)
Cruise revenues
Passenger tickets $4,785 $4,461
Onboard and other 1,466 1,307
----- -----
Gross cruise revenues 6,251 5,768
Less cruise costs
Commissions, transportation
and other (937) (954)
Onboard and other (219) (214)
---- ----
Net cruise revenues (a) $5,095 $4,600
====== ======
ALBDs (b) 32,465,324 29,822,062
========== ==========
Gross revenue yields (a) $192.53 $193.42
======= =======
Net revenue yields (a) $156.91 $154.25
======= =======
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,
-------
2010 2009
---- ----
(in millions, except ALBDs and costs per ALBD)
Cruise operating expenses $2,061 $1,850
Cruise selling and
administrative expenses 396 386
--- ---
Gross cruise costs 2,457 2,236
Less cruise costs included
in net cruise revenues
Commissions, transportation
and other (440) (440)
Onboard and other (106) (110)
---- ----
Net cruise costs (a) $1,911 $1,686
====== ======
ALBDs (b) 16,575,242 15,329,812
========== ==========
Gross cruise costs per ALBD (a) $148.22 $145.90
======= =======
Net cruise costs per ALBD (a) $115.29 $109.95
======= =======
Six Months Ended
May 31,
-------
2010 2009
---- ----
(in millions, except ALBDs and costs per ALBD)
Cruise operating expenses $4,145 $3,684
Cruise selling and
administrative expenses 785 770
--- ---
Gross cruise costs included 4,930 4,454
Less cruise costs
in net cruise revenues
Commissions, transportation
and other (937) (954)
Onboard and other (219) (214)
---- ----
Net cruise costs (a) $3,774 $3,286
====== ======
ALBDs (b) 32,465,324 29,822,062
========== ==========
Gross cruise costs per ALBD (a) $151.87 $149.36
======= =======
Net cruise costs per ALBD (a) $116.25 $110.18
======= =======
NOTES TO NON-GAAP FINANCIAL MEASURES
(a) 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 measures
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 these measures 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, except for the impact of changing prices, once our
ship capacity levels have been determined.
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.
We have not provided estimates of future gross revenue yields or
future gross cruise costs per ALBD because the reconciliations of
forecasted net cruise revenues to forecasted gross cruise revenues or
forecasted net cruise costs to forecasted cruise operating expenses
would require us to forecast, with reasonable accuracy, the amount of
air and other transportation costs that our forecasted cruise
passengers would elect to purchase from us (the "air/sea mix").
Since the forecasting of future air/sea mix involves several
significant variables that are relatively difficult to forecast and
the revenues from the sale of air and other transportation
approximate the costs of providing that transportation, management
focuses primarily on forecasts of net cruise revenues and costs
rather than gross cruise revenues and costs. This does not impact,
in any material respect, our ability to forecast our future results,
as any variation in the air/sea mix has no material impact on our
forecasted net cruise revenues or forecasted net cruise costs. As
such, management does not believe that this reconciling information
would be meaningful.
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 decreases in reported U.S. dollar
revenues and expenses if the U.S. dollar strengthens against these
foreign currencies and increases in reported U.S. dollar revenues and
expenses if the U.S. dollar weakens against these foreign currencies.
Accordingly, we also monitor and report our two non-GAAP financial
measures assuming the 2010 periods' currency exchange rates have
remained constant with the 2009 periods' 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.
On a constant dollar basis, net cruise revenues and net cruise costs
would be $2.6 billion and $1.9 billion for the three months ended May
31, 2010 and $5.0 billion and $3.7 billion for the six months ended
May 31, 2010, respectively. On a constant dollar basis, gross cruise
revenues and gross cruise costs would be $3.1 billion and $2.4
billion for the three months ended May 31, 2010 and $6.1 billion and
$4.8 billion for the six months ended May 31, 2010, respectively. In
addition, our non-U.S. dollar cruise operations' depreciation and
net interest expense were impacted by the changes in exchange rates
for the three and six months ended May 31, 2010, compared to the
prior year's comparable period.
(b) ALBDs is a standard measure of passenger capacity for the period,
which we use to perform rate and capacity variance analyses to
determine 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.
MEDIA CONTACT INVESTOR RELATIONS CONTACT
Tim Gallagher Beth Roberts
1 305 599 2600, ext. 16000 1 305 406 4832
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