Carnival Corp & plc Second Quarter Results
CARNIVAL CORPORATION & PLC REPORTS SECOND QUARTER EARNINGS
Carnival Corporation & plc today reported its results of operations for the
second quarter ended May 31, 2014. The results of Carnival Corporation and
Carnival plc have been consolidated and include results on a U.S. GAAP and
non-U.S. GAAP basis.
2Q Highlights
* 2Q revenues were $3.6b, compared to $3.5b in the prior year
* 2Q net revenue yields decreased 2.2% (constant dollars) compared to the
prior year, which was better than March guidance, down 3 to 4%
* 2Q net cruise costs excluding fuel per available lower berth day (“ALBDâ€)
increased 1.2% (constant dollars) compared to the prior year, which was
better than March guidance, up 2.5 to 3.5%
* 2Q fuel consumption per ALBD decreased 6% compared to the prior year
* 2Q non-GAAP (diluted) earnings per share of $0.10, compared to $0.07 for
the prior year
2014 Outlook
* At this time, cumulative advance bookings for the remainder of 2014 are
slightly ahead of the prior year at higher prices
* Net revenue yields are expected to be down slightly on a constant dollar
basis (flat to up slightly in current dollars) for full year 2014 compared
to the prior year
* Net cruise costs excluding fuel per ALBD are expected to be flat to up
slightly for full year 2014 compared to the prior year (constant dollars),
which is better than March guidance
* Full year 2014 non-GAAP earnings per share (diluted) expected to be in the
range of $1.60 to $1.75, compared to $1.58 for 2013
* 3Q 2014 non-GAAP earnings per share (diluted) expected to be in the range
of $1.38 to $1.44, compared to $1.38 in 3Q 2013
President and Chief Executive Officer Arnold Donald commenting on these results:
“We benefited from effective marketing initiatives, which combined with a
gradually improving economic environment, led to revenue yield improvement for our
continental European brands in the quarter compared to the prior year and is expected
to continue through the remainder of the year. In addition, we achieved a six percent
improvement in fuel consumption.â€
“Collectively our brands are gaining momentum in our efforts to drive higher ticket
prices and we continue to expect sequential improvement in revenue yields, despite a
more competitive environment in the Caribbean this summer. We remain focused on further
understanding our guests and refining the exceptional customer experience we provide. We
have also made significant strides in our efforts to identify opportunities for cross-brand
operational efficiencies. This work is still in the early stages, but we are making
progress and beginning to see encouraging signs. We believe we have reached a positive
inflection point for our company as we return to earnings growth in 2014 and work hard
to ensure that growth accelerates in the years to come.â€
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 2014 second quarter results. 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 company in the world, with a portfolio
of cruise brands in North America, Europe, Australia and Asia, comprised of Carnival
Cruise Lines, Holland America Line, Princess Cruises, Seabourn, AIDA Cruises, Costa
Cruises, Cunard, Ibero Cruises, P&O Cruises (Australia) and P&O Cruises (UK).
Together, these brands operate 101 ships totaling 212,000 lower berths with seven new
ships scheduled to be delivered between 2014 and 2016. Carnival Corporation & plc also
operates Holland America Princess Alaska 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.
Carnival Corporation & plc Reports Second Quarter Earnings
MIAMI, June 24, 2014 -- Carnival Corporation & plc (NYSE/LSE: CCL;
NYSE: CUK) announced non-GAAP net income of $80 million, or $0.10 diluted EPS
for the second quarter of 2014 compared to non-GAAP net income for the second
quarter of 2013 of $57 million, or $0.07 diluted EPS. For the second quarter of
2014, U.S. GAAP net income, which included a net gain on vessel transactions of
$15 million and net unrealized gains on fuel derivatives of $11 million, was
$106 million, or $0.14 diluted EPS. For the second quarter of 2013, U.S. GAAP
net income, which included a gain on a ship sale of $15 million and unrealized
losses on fuel derivatives of $31 million, was $41 million, or $0.05 diluted
EPS. Revenues for the second quarter of 2014 were $3.6 billion, compared with
$3.5 billion the prior year.
Carnival Corporation & plc President and CEO Arnold Donald noted that second
quarter earnings were significantly better than anticipated in the company's
March guidance due to better than expected net revenue yields for most of the
company's cruise brands, as well as lower than expected net cruise costs.
Donald noted, "We benefited from effective marketing initiatives, which
combined with a gradually improving economic environment, led to revenue yield
improvement for our continental European brands in the quarter compared to the
prior year and is expected to continue through the remainder of the year. In
addition, we achieved a six percent improvement in fuel consumption."
Donald also noted that during the second quarter Princess Cruises' new Regal
Princess debuted in Europe, boasting a wide variety of stunning features
including The SeaWalk, a glass-bottomed walkway extending beyond the edge of
the vessel, 128 feet above the sea. Additionally, Princess launched its first
homeport cruise program from China in May with the start of a four-month series
of voyages from Shanghai on Sapphire Princess. Also in May, Costa Cruises
announced that it will position Costa Serena in China next year, bringing the
company's total to four ships based in the world's fastest growing cruise
market. The company believes it is the largest provider of cruise vacations
home-ported in China.
Key metrics for the second quarter 2014 compared to the prior year were as
follows:
* On a constant dollar basis, net revenue yields (net revenue per available
lower berth day or "ALBD") decreased 2.2 percent for 2Q 2014, which was
better than the company's guidance of down 3 to 4 percent. Gross revenue
yields decreased 0.5 percent in current dollars.
* Net cruise costs excluding fuel per ALBD increased 1.2 percent in constant
dollars, primarily due to higher dry-dock costs, as well as advertising and
promotion expenses. Costs were better than March guidance, up 2.5 to 3.5
percent. Gross cruise costs including fuel per ALBD in current dollars
decreased 0.9 percent.
* Fuel prices declined 3.7 percent to $657 per metric ton for 2Q 2014 from
$683 per metric ton in 2Q 2013 but were higher than March guidance of $649
per metric ton.
* Fuel consumption per ALBD decreased 6 percent in 2Q 2014 compared to the
prior year.
2014 Outlook
Since March, fleetwide booking volumes for the next three quarters are running
slightly behind last year at higher prices. At this time, cumulative advance
bookings for the remainder of 2014 are slightly ahead of the prior year at
higher prices.
Donald noted, "Collectively our brands are gaining momentum in our efforts to
drive higher ticket prices and we continue to expect sequential improvement in
revenue yields, despite a more competitive environment in the Caribbean this
summer. We remain focused on further understanding our guests and refining the
exceptional customer experience we provide. We have also made significant
strides in our efforts to identify opportunities for cross-brand operational
efficiencies. This work is still in the early stages, but we are making
progress and beginning to see encouraging signs. We believe we have reached a
positive inflection point for our company as we return to earnings growth in
2014 and work hard to ensure that growth accelerates in the years to come."
Total revenues are expected to be higher for the full year 2014 compared to the
prior year. The company continues to expect full year 2014 net revenue yields
on a constant dollar basis to be down slightly compared to the prior year (flat
to up slightly on a current dollar basis). The company now expects full year
2014 net cruise costs excluding fuel per ALBD to be flat to up slightly
compared to the prior year on a constant dollar basis, which is better than had
been anticipated in the March guidance. However, changes in fuel prices and
currency exchange rates have reduced full year 2014 forecasted earnings by
$0.06 per share compared to March guidance.
Taking the above factors into consideration, the company has increased its full
year 2014 non-GAAP diluted earnings per share guidance to be in the range of
$1.60 to $1.75, compared to 2013 non-GAAP diluted earnings of $1.58 per share.
Third Quarter 2014 Outlook
Third quarter constant dollar net revenue yields are expected to be flat to
down 1 percent compared to the prior year due primarily to a significant
industry capacity increase in the Caribbean. 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 compared to the prior year.
Based on the above factors, the company expects non-GAAP diluted earnings for
the third quarter 2014 to be in the range of $1.38 to $1.44 per share versus
2013 non-GAAP earnings of $1.38 per share.
Selected Key Forecast Metrics
Third Quarter 2014
Current Constant
Dollars Dollars
Year over year change:
Net revenue yields 1 to 2 % 0 to (1) %
Net cruise costs excl. fuel / ALBD 3 to 4 % 1 to 2 %
Full Year Third Quarter
2014 2014
Fuel price per metric ton 665 673
Fuel consumption (metric tons in
thousands) 3,210 805
Currency: Euro $1.37 to €1 $1.36 to €1
Sterling $1.68 to £1 $1.70 to £1
Conference Call
The company has scheduled a conference call with analysts at 10:00 a.m. EDT (3:
00 p.m. BST) today to discuss its 2014 second quarter results. This call can be
listened to live, and additional information can be obtained, via Carnival
Corporation & plc's Web site at http://www.carnivalcorp.com/ and
http://www.carnivalplc.com/.
Carnival Corporation & plc is the largest cruise company in the world, with a
portfolio of cruise brands in North America, Europe, Australia and Asia,
comprised of Carnival Cruise Lines, Holland America Line, Princess Cruises,
Seabourn, AIDA Cruises, Costa Cruises, Cunard, Ibero Cruises, P&O Cruises
(Australia) and P&O Cruises (UK).
Together, these brands operate 101 ships totaling 212,000 lower berths with
seven new ships scheduled to be delivered between 2014 and 2016. Carnival
Corporation & plc also operates Holland America Princess Alaska 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.
Cautionary Note Concerning Factors That May Affect Future Results
Carnival Corporation and Carnival plc and their respective subsidiaries are
referred to collectively in this release as "Carnival Corporation & plc,"
"our," "us" and "we." Some of the statements, estimates or projections
contained in this release are "forward-looking statements" that involve risks,
uncertainties and assumptions with respect to us, 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. All statements other than
statements of historical facts are statements that could be deemed
forward-looking statements. These statements are based on current expectations,
estimates, forecasts and projections about our business and the industry in
which we operate and the beliefs and assumptions of our management. We have
tried, whenever possible, to identify these statements by using words like
"will," "may," "could," "should," "would," "believe," "depends," "expect,"
"goal," "anticipate," "forecast," "project," "future," "intend," "plan,"
"estimate," "target," "indicate" and similar expressions of future intent or
the negative of such terms.
Forward-looking statements include those statements that may impact, among
other things, the forecasting of our non-GAAP earnings per share; net revenue
yields; booking levels; pricing; occupancy; operating, financing and tax costs,
including fuel expenses; net cruise costs per available lower berth day;
estimates of ship depreciable lives and residual values; liquidity; goodwill
and trademark fair values and outlook. 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 release. These factors include, but are not
limited to, the following:
* general economic and business conditions;
* increases in fuel prices;
* incidents, the spread of contagious diseases and threats thereof, adverse
weather conditions or other natural disasters and other incidents affecting
the health, safety, security and satisfaction of guests and crew;
* the international political climate, armed conflicts, terrorist and pirate
attacks, vessel seizures, and threats thereof, and other world events
affecting the safety and security of travel;
* negative publicity concerning the cruise industry in general or us in
particular, including any adverse environmental impacts of cruising;
* litigation, enforcement actions, fines or penalties;
* economic, market and political factors that are beyond our control, which
could increase our operating, financing and other costs;
* changes in and compliance with laws and regulations relating to the
protection of persons with disabilities, employment, environment, health,
safety, security, tax and other regulations under which we operate;
* our inability to implement our shipbuilding programs and ship repairs,
maintenance and refurbishments on terms that are favorable or consistent
with our expectations;
* increases to our repairs and maintenance expenses and refurbishment costs
as our fleet ages;
* lack of continuing availability of attractive, convenient and safe port
destinations on terms that are favorable or consistent with our
expectations;
* continuing financial viability of our travel agent distribution system, air
service providers and other key vendors in our supply chain and reductions
in the availability of, and increases in the prices for, the services and
products provided by these vendors;
* disruptions and other damages to our information technology and other
networks and operations, and breaches in data security;
* failure to keep pace with developments in technology;
* competition from and overcapacity in the cruise ship and land-based
vacation industry;
* loss of key personnel or our ability to recruit or retain qualified
personnel;
* union disputes and other employee relation issues;
* disruptions in the global financial markets or other events may negatively
affect the ability of our counterparties and others to perform their
obligations to us;
* the continued strength of our cruise brands and our ability to implement
our brand strategies;
* our international operations are subject to additional risks not generally
applicable to our U.S. operations;
* geographic regions in which we try to expand our business may be slow to
develop and ultimately not develop how we expect;
* our decisions to self-insure against various risks or our inability to
obtain insurance for certain risks at reasonable rates;
* fluctuations in foreign currency exchange rates;
* whether our future operating cash flow will be sufficient to fund future
obligations and whether we will be able to obtain financing, if necessary,
in sufficient amounts and on terms that are favorable or consistent with
our expectations;
* risks associated with the dual listed company arrangement and
* uncertainties of a foreign legal system as Carnival Corporation and
Carnival plc are not U.S. corporations.
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 stock exchange rules, we 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 INCOME
(UNAUDITED)
(in millions, except per share data)
Three Months Ended Six Months Ended
May 31, May 31,
2014 2013 2014 2013
Revenues
Cruise
Passenger tickets $ 2,698 $ 2,613 $ 5,425 $ 5,353
Onboard and other 905 839 1,755 1,683
Tour and other 30 27 38 36
3,633 3,479 7,218 7,072
Operating Costs and Expenses
Cruise
Commissions, transportation and other 520 506 1,141 1,123
Onboard and other 115 115 228 242
Fuel 527 555 1,050 1,115
Payroll and related 485 454 965 914
Food 251 238 496 481
Other ship operating 635 603 1,226 1,182
Tour and other 32 16 46 30
2,565 2,487 5,152 5,087
Selling and administrative 504 449 1,025 908
Depreciation and amortization 409 391 814 780
3,478 3,327 6,991 6,775
Operating Income 155 152 227 297
Nonoperating (Expense) Income
Interest income 2 3 4 5
Interest expense, net of capitalized interest (72) (78) (143) (161)
Gains (losses) on fuel derivatives, net 11 (31) (6) (59)
Other income (expense), net 11 (5) 11 (2)
(48) (111) (134) (217)
Income Before Income Taxes 107 41 93 80
Income Tax Expense, Net (1) - (2) (2)
Net Income $ 106 $ 41 $ 91 $ 78
Earnings Per Share
Basic $ 0.14 $ 0.05 $ 0.12 $ 0.10
Diluted $ 0.14 $ 0.05 $ 0.12 $ 0.10
Non-GAAP Earnings Per Share-Diluted (a) $ 0.10 $ 0.07 $ 0.11 $ 0.16
Dividends Declared Per Share $ 0.25 $ 0.25 $ 0.50 $ 0.50
Weighted-Average Shares Outstanding - Basic 776 775 776 775
Weighted-Average Shares Outstanding - Diluted 778 777 778 777
(a) See the U.S. GAAP net income to non-GAAP net income reconciliation in the Non-GAAP
Financial Measures included herein.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
May 31, November 30,
2014 2013
ASSETS
Current Assets
Cash and cash equivalents $ 343 $ 462
Trade and other receivables, net 288 405
Insurance recoverables 299 381
Inventories 383 374
Prepaid expenses and other 312 315
Total current assets 1,625 1,937
Property and Equipment, Net 33,515 32,905
Goodwill 3,226 3,210
Other Intangibles 1,298 1,292
Other Assets 862 760
$ 40,526 $ 40,104
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 508 $ 60
Current portion of long-term debt 1,048 1,408
Accounts payable 627 639
Claims reserve 384 456
Accrued liabilities and other 1,136 1,126
Customer deposit 3,698 3,031
Total current liabilities 7,401 6,720
Long-Term Debt 7,880 8,092
Other Long-Term Liabilities 880 736
Shareholders' Equity
Common stock of Carnival Corporation,
$0.01 par value; 1,960 shares authorized;
652 shares at 2014 and 651 shares at 2013
issued 7 7
Ordinary shares of Carnival plc, $1.66
par value; 216 shares at 2014 and 2013
issued 358 358
Additional paid-in capital 8,345 8,325
Retained earnings 18,485 18,782
Accumulated other comprehensive income 243 161
Treasury stock, 59 shares at 2014 and
2013 of Carnival Corporation and 32
shares at 2014 and 2013 of Carnival
plc, at cost (3,073) (3,077)
Total shareholders' equity 24,365 24,556
$ 40,526 $ 40,104
CARNIVAL CORPORATION & PLC
OTHER INFORMATION
Three Months Ended Six Months Ended
May 31, May 31,
2014 2013 2014 2013
STATISTICAL INFORMATION
ALBDs (in thousands) (a) 18,872 17,993 37,158 35,972
Occupancy percentage (b) 102.2% 103.3% 102.6% 103.7%
Passengers carried (in thousands) 2,551 2,364 4,960 4,669
Fuel consumption in metric tons (in thousands) 802 814 1,603 1,640
Fuel consumption in metric tons per ALBD 0.043 0.045 0.043 0.046
Fuel cost per metric ton consumed $ 657 $ 683 $ 655 $ 680
Currencies
U.S. dollar to €1 $ 1.38 $ 1.30 $ 1.37 $ 1.31
U.S. dollar to £1 $ 1.67 $ 1.52 $ 1.66 $ 1.55
U.S. dollar to Australian dollar $ 0.92 $ 1.02 $ 0.91 $ 1.03
CASH FLOW INFORMATION
Cash from operations $ 1,196 $ 1,157 $ 1,673 $ 1,556
Capital expenditures $ 976 $ 1,206 $ 1,329 $ 1,447
Dividends paid $ 194 $ 195 $ 388 $ 777
(a) 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.
(b) In accordance with cruise industry practice, occupancy is calculated using
a denominator of ALBDs, which assumes 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.
CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES
Consolidated gross and net revenue yields were computed by dividing the gross
and net cruise revenues, without rounding, by ALBDs as follows (dollars
in millions, except yields) (a)(b):
Three Months Ended May 31, Six Months Ended May 31,
2014 2014
Constant Constant
2014 Dollar 2013 2014 Dollar 2013
Passenger ticket revenues $ 2,698 $ 2,630 $ 2,613 $ 5,425 $ 5,332 $ 5,353
Onboard and other revenues 905 891 839 1,755 1,740 1,683
Gross cruise revenues 3,603 3,521 3,452 7,180 7,072 7,036
Less cruise costs
Commissions, transportation
and other (520) (505) (506) (1,141) (1,116) (1,123)
Onboard and other (115) (112) (115) (228) (225) (242)
(635) (617) (621) (1,369) (1,341) (1,365)
Net passenger ticket revenues 2,178 2,125 2,107 4,284 4,216 4,230
Net onboard and other revenues 790 779 724 1,527 1,515 1,441
Net cruise revenues $ 2,968 $ 2,904 $ 2,831 $ 5,811 $ 5,731 $ 5,671
ALBDs 18,872,035 18,872,035 17,993,002 37,158,340 37,158,340 35,972,237
Gross revenue yields $ 190.92 $ 186.57 $ 191.84 $ 193.23 $ 190.33 $ 195.59
% decrease vs. 2013 (0.5)% (2.7)% (1.2)% (2.7)%
Net revenue yields $ 157.27 $ 153.87 $ 157.33 $ 156.39 $ 154.23 $ 157.64
% decrease vs. 2013 0.0% (2.2)% (0.8)% (2.2)%
Net passenger ticket
revenue yields $ 115.40 $ 112.59 $ 117.09 $ 115.29 $ 113.47 $ 117.58
% decrease vs. 2013 (1.4)% (3.8)% (1.9)% (3.5)%
Net onboard and other
revenue yields $ 41.87 $ 41.28 $ 40.24 $ 41.10 $ 40.76 $ 40.06
% increase vs. 2013 4.1% 2.6% 2.6% 1.7%
Consolidated gross and net cruise costs and net cruise costs excluding fuel per
ALBD were computed by dividing the gross and net cruise costs and net cruise
costs excluding fuel, without rounding, by ALBDs as follows (dollars in millions,
except costs per ALBD) (a) (b):
Three Months Ended May 31, Six Months Ended May 31,
2014 2014
Constant Constant
2014 Dollar 2013 2014 Dollar 2013
Cruise operating expenses $ 2,533 $ 2,488 $ 2,471 $ 5,106 $ 5,044 $ 5,057
Cruise selling and
administrative expenses 502 492 447 1,021 1,008 904
Gross cruise costs 3,035 2,980 2,918 6,127 6,052 5,961
Less cruise costs included above
Commissions, transportation
and other (520) (505) (506) (1,141) (1,116) (1,123)
Onboard and other (115) (112) (115) (228) (225) (242)
Gains (losses) on ship
sales and ship impairment,
net 15 14 - 15 14 (2)
Net cruise costs 2,415 2,377 2,297 4,773 4,725 4,594
Less fuel (527) (527) (555) (1,050) (1,050) (1,115)
Net cruise costs
excluding fuel $ 1,888 $ 1,850 $ 1,742 $ 3,723 $ 3,675 $ 3,479
ALBDs 18,872,035 18,872,035 17,993,002 37,158,340 37,158,340 35,972,237
Gross cruise costs
per ALBD $ 160.80 $ 157.90 $ 162.19 $ 164.89 $ 162.86 $ 165.71
% decrease vs. 2013 (0.9)% (2.6)% (0.5)% (1.7)%
Net cruise costs per
ALBD $ 127.95 $ 125.94 $ 127.68 $ 128.45 $ 127.14 $ 127.71
% increase (decrease)
vs. 2013 0.2% (1.4)% 0.6% (0.4)%
Net cruise costs excluding
fuel per ALBD $ 100.00 $ 97.99 $ 96.81 $ 100.18 $ 98.86 $ 96.72
% increase vs. 2013 3.3% 1.2% 3.6% 2.2%
(See next page for Notes to Non-GAAP Financial Measures.)
CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES (CONTINUED)
Non-GAAP fully diluted earnings per share was computed as follows (in millions,
except per share data) (b):
Three Months Ended Six Months Ended
May 31, May 31,
2014 2013 2014 2013
Net income - diluted
U.S. GAAP net income $ 106 $ 41 $ 91 $ 78
(Gains) on ship sales and ship impairment, net (c) (15) (15) (15) (13)
Unrealized (gains) losses on fuel derivatives, net (d) (11) 31 7 59
Non-GAAP net income $ 80 $ 57 $ 83 $ 124
Weighted-average shares outstanding - diluted 778 777 778 777
Earnings per share - diluted
U.S. GAAP earnings per share $ 0.14 $ 0.05 $ 0.12 $ 0.10
(Gains) on ship sales and ship impairment, net (c) (0.02) (0.02) (0.02) (0.02)
Unrealized (gains) losses on fuel derivatives, net (d) (0.02) 0.04 0.01 0.08
Non-GAAP earnings per share $ 0.10 $ 0.07 $ 0.11 $ 0.16
Notes to Non-GAAP Financial Measures
(a) We use net cruise revenues per ALBD ("net revenue yields"), net cruise
costs per ALBD and net cruise costs excluding fuel per ALBD as significant
non-GAAP financial measures of our cruise segments' financial performance.
These measures enable us to separate the impact of predictable capacity changes
from the more unpredictable rate changes that affect our business and gains and
losses on ship sales and ship impairments, net that are not part of our core
operating business. We believe these non-GAAP measures provide useful
information to investors and expanded insight to measure our revenue and cost
performance as a supplement to our U.S. generally accepted accounting
principles ("U.S. GAAP") consolidated financial statements.
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 and other
transportation, certain other costs that are directly associated with onboard
and other revenues and credit card fees. Substantially all of our remaining
cruise costs are largely fixed, except for the impact of changing prices and
food expenses, once our ship capacity levels have been determined.
Net passenger ticket revenues reflect gross passenger ticket revenues, net of
commissions, transportation and other costs. Net onboard and other revenues
reflect gross onboard and other revenues, net of onboard and other cruise
costs. Net passenger ticket revenue yields and net onboard and other revenue
yields are computed by dividing net passenger ticket revenues and net onboard
and other revenues by ALBDs.
Net cruise costs per ALBD and net cruise costs excluding fuel per ALBD are the
most significant measures we use to monitor our ability to control our cruise
segments' 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 with and without fuel to avoid duplicating these
variable costs in our non-GAAP financial measures. In addition, we exclude
gains and losses on ship sales and ship impairments, net from our calculation
of net cruise costs with and without fuel as they are not considered part of
our core operating business and are not included in our non-GAAP net income and
non-GAAP earnings per share. As such, we changed our previously reported net
cruise costs per ALBD and net cruise costs excluding fuel per ALBD for the six
months ended May 31, 2013 from $127.76 to $127.71 and from $96.77 to $96.72,
respectively, to exclude losses on ship sales, net to be consistent with our
treatment of these types of charges.
We have not provided estimates of future gross revenue yields or future gross
cruise costs per ALBD because the quantitative reconciliations of forecasted
gross cruise revenues to forecasted net cruise revenues or forecasted gross
cruise costs to forecasted net cruise costs would include a significant amount
of uncertainty in projecting the costs deducted to arrive at these measures. As
such, management does not believe that this reconciling information would be
meaningful.
In addition, because our Europe, Australia & Asia ("EAA") cruise brands utilize
the euro, sterling and Australian dollar 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 these
non-GAAP financial measures assuming the 2014 periods currency exchange rates
have remained constant with the 2013 period rates, or on a "constant dollar
basis," in order to remove the impact of changes in exchange rates on the
translation of our EAA brands. We believe that this is a useful measure since
it facilitates a comparative view of the changes in our business in a
fluctuating currency exchange rate environment.
(b) Our consolidated financial statements are prepared in accordance with U.S.
GAAP. The presentation of our non-GAAP financial information is not intended to
be considered in isolation or as a substitute for, or superior to, the
financial information prepared in accordance with U.S. GAAP. There are no
specific rules for determining our non-GAAP current and constant dollar
financial measures and, accordingly, they are susceptible to varying
calculations, and it is possible that they may not be exactly comparable to the
like-kind information presented by other companies, which is a potential risk
associated with using these measures to compare us to other companies.
(c) We believe that the gains on ship sales and ship impairment, net recognized
in the three and six months ended May 31, 2014 and 2013 are not part of our
core operating business and, therefore, are not an indication of our future
earnings performance. As such, we believe it is more meaningful for gains and
losses on ship sales and ship impairments, net to be excluded from our net
income and earnings per share and, accordingly, we present non-GAAP net income
and non-GAAP earnings per share excluding these items. Accordingly, we changed
our previously reported non-GAAP net income for the three months and six months
ended May 31, 2013 from $72 million to $57 million and from $137 million to
$124 million, respectively. Additionally, we also changed our previously
reported non-GAAP earnings per share for the three and six months ended May 31,
2013 from $0.09 to $0.07 and from $0.18 to $0.16, respectively. These changes
were made to exclude gains on ship sales, net to be consistent with our
treatment of these types of charges.
(d) Under U.S. GAAP, the realized and unrealized gains and losses on fuel
derivatives not qualifying as fuel hedges are recognized currently in earnings.
We believe that unrealized gains and losses on fuel derivatives are not an
indication of our earnings performance since they relate to future periods and
may not ultimately be realized in our future earnings. Therefore, we believe it
is more meaningful for the unrealized gains and losses on fuel derivatives to
be excluded from our net income and earnings per share and, accordingly, we
present non-GAAP net income and non-GAAP earnings per share excluding these
unrealized gains and losses.
We have not included in our earnings guidance the impact of unrealized gains
and losses on fuel derivatives because these unrealized amounts involve a
significant amount of uncertainty, and we do not believe they are an indication
of our future earnings performance. Accordingly, our earnings guidance is
presented on a non-GAAP basis only. As a result, we did not present a
reconciliation between forecasted non-GAAP diluted earnings per share guidance
and forecasted U.S. GAAP diluted earnings per share guidance, since we do not
believe that the reconciliation information would be meaningful.
SOURCE Carnival Corporation & plc
CONTACT: MEDIA, Roger Frizzell 1 305 406 7862 or INVESTOR RELATIONS, Beth
Roberts 1 305 406 4832
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