10-QPeriod: Q3 FY2006

CARNIVAL CORP Quarterly Report for Q3 Ended Aug 31, 2006

Filed September 29, 2006For Securities:CCL

Summary

Carnival Corporation & plc reported solid financial results for the nine and three months ended August 31, 2006. Revenues showed an increase, driven by both higher passenger ticket sales and onboard spending. While operating expenses, particularly fuel costs, also rose, the company managed to maintain healthy operating income. Net income for the nine months decreased slightly year-over-year, but the three-month period saw an increase, indicating a positive trend for the quarter. The company's balance sheet reflects significant investments in property and equipment, largely due to its new shipbuilding program, and a manageable debt load. Liquidity remains strong with substantial cash on hand and available credit facilities, positioning the company to fund ongoing operations and future growth initiatives. Key financial metrics like net revenue yields and net cruise costs per ALBD showed improvement, demonstrating effective revenue management and cost control, despite the inflationary pressure from fuel. The company also provided an outlook for the fourth quarter of 2006 and early 2007, noting a slight dip in booking levels for the first quarter of 2007, particularly in the Caribbean, which is being offset by strength in European markets. Overall, Carnival Corporation & plc appears to be navigating a dynamic economic environment effectively, leveraging its scale and brand diversification to deliver consistent performance.

Key Highlights

  • 1Revenues increased for both the nine-month and three-month periods, driven by higher passenger ticket sales and onboard spending.
  • 2Net income for the three months ended August 31, 2006, increased to $1.232 billion from $1.181 billion in the prior year's comparable period.
  • 3The company's net cruise revenues increased by 5.6% for the nine months and 6.3% for the three months compared to the prior year.
  • 4Net cruise costs increased, significantly impacted by a substantial rise in fuel costs, which rose by 43% for the nine-month period.
  • 5The company experienced a slight decrease in net income for the nine-month period, from $1.917 billion to $1.863 billion, mainly due to higher operating expenses.
  • 6Diluted earnings per share for the nine months were $2.25, a slight decrease from $2.29 in the prior year, while the three-month period showed an increase to $1.49 from $1.40.
  • 7Carnival Corporation & plc has significant ongoing capital expenditures for its new shipbuilding program, with $1.82 billion invested in new ships during the nine-month period.

Frequently Asked Questions

Carnival Corporation & plc demonstrated revenue growth in both the nine-month and three-month periods ended August 31, 2006, compared to the prior year. While net income for the nine-month period saw a slight decline, the three-month period showed a notable increase, indicating a positive operational trend for the quarter. Key performance indicators like net revenue yields improved, demonstrating effective management of top-line performance and pricing power.

The primary driver of increased costs is the significant rise in fuel prices, which saw a 43% increase per metric ton for the nine-month period compared to the prior year, leading to a substantial $211 million increase in expense. Additionally, share-based compensation expenses have increased due to the adoption of SFAS No. 123(R).

The company is actively investing in its future through a substantial new shipbuilding program, with significant capital expenditures directed towards new vessels. Despite these investments, Carnival Corporation & plc maintains strong liquidity with $3.24 billion in liquidity at August 31, 2006, comprising cash, cash equivalents, short-term investments, and available credit facilities. The company believes its existing liquidity and projected cash flow will be sufficient to meet its financial obligations.

The company anticipates that overall booking levels for the first quarter of 2007 are modestly down compared to the same period last year, particularly in the Caribbean, which is experiencing sluggish demand. European brands are performing ahead of last year. The outlook for net revenue yields in the first quarter of 2007 is expected to be flat to slightly down on a constant-dollar basis due to Caribbean softness. Key concerns include general economic conditions, competition, international political climate, operational risks, and potential increases in operating and financing costs.