10-QPeriod: Q2 FY2006

CARNIVAL CORP Quarterly Report for Q2 Ended May 31, 2006

Filed June 30, 2006For Securities:CCL

Summary

Carnival Corporation & plc reported solid financial results for the six months ended May 31, 2006, with net income of $631 million, a decrease from $736 million in the prior year period, primarily due to increased fuel costs and the adoption of new accounting standards for share-based compensation. Revenues increased year-over-year, driven by both higher passenger volumes and improved net revenue yields, demonstrating the company's pricing power and ability to grow its top line. Despite increased operating costs, particularly fuel, the company's strong operational performance and strategic capital allocation, including significant investments in new shipbuilding and shareholder returns through dividends and share repurchases, highlight its financial resilience. Management provided a positive outlook for the remainder of fiscal year 2006, projecting diluted earnings per share between $2.65 and $2.75, signaling continued growth and profitability.

Key Highlights

  • 1Net income for the six months ended May 31, 2006, was $631 million, compared to $736 million in the same period of 2005.
  • 2Total revenues for the six months ended May 31, 2006, increased to $5.125 billion from $4.914 billion in the prior year period.
  • 3Net cruise revenues increased by 5.1% to $4.06 billion for the six months ended May 31, 2006.
  • 4Net cruise costs increased by 10.3% to $2.77 billion for the six months ended May 31, 2006, significantly impacted by a 51.5% rise in fuel costs.
  • 5The company paid $404 million in dividends and purchased $473 million of treasury stock during the six months ended May 31, 2006, demonstrating a commitment to shareholder returns.
  • 6Carnival changed its accounting method for dry-dock costs from deferral to direct expense, impacting reported expenses and net income for the periods presented.
  • 7The company anticipates full-year 2006 diluted earnings per share to be between $2.65 and $2.75.

Frequently Asked Questions

The decrease in net income was primarily driven by a significant increase in fuel costs, which rose by 51.5% per metric ton, and the adoption of new accounting standards for share-based compensation (SFAS No. 123(R)), which increased expenses.

Total revenues increased by 4.3% to $5.125 billion for the six months ended May 31, 2006, compared to $4.914 billion in the same period of 2005. This growth was fueled by a 3.8% increase in available lower berths (ALBDs) and a 1.3% increase in net revenue yields.

Carnival elected to change its method of accounting for dry-dock costs from the deferral method to the direct expense method. This change, adopted in accordance with SFAS No. 154, has been retrospectively applied to all prior periods presented, impacting the comparability of financial statements.

Management projected diluted earnings per share for the full year 2006 to be between $2.65 and $2.75, based on expected fuel prices and currency exchange rates at that time.