10-QPeriod: Q1 FY2007

CARNIVAL CORP Quarterly Report for Q1 Ended Feb 28, 2007

Filed March 30, 2007For Securities:CCL

Summary

Carnival Corporation & plc reported solid financial results for the three months ended February 28, 2007. Net income increased by 12.7% year-over-year to $283 million, translating to diluted earnings per share of $0.35, up from $0.31 in the prior year's comparable period. This growth was driven by a 9.3% increase in gross revenues, reaching $2.68 billion, primarily due to higher passenger ticket sales and increased onboard spending. The company's capacity, measured in ALBDs, also grew by 7.4%, contributing to revenue expansion. Despite increased operating expenses and a slight rise in net interest expense, Carnival Corporation & plc demonstrated effective cost management. Net cruise costs per ALBD saw a modest increase of 1.3% (or a 1.3% decrease on a constant dollar basis), indicating controlled cost per available capacity unit. The company maintained a strong liquidity position with $4.91 billion in available liquidity, comprised of cash, investments, and credit facilities, which is expected to be sufficient for its ongoing capital projects, debt service, and dividend payments.

Key Highlights

  • 1Net income rose 12.7% to $283 million for the first quarter of fiscal year 2007 compared to the same period in 2006.
  • 2Diluted earnings per share increased to $0.35 from $0.31, showing improved profitability on a per-share basis.
  • 3Gross revenues grew by 9.3% to $2.68 billion, driven by higher passenger ticket sales and increased onboard spending.
  • 4The company's capacity, measured by ALBDs, increased by 7.4%, supporting revenue growth.
  • 5Net cruise costs per ALBD increased by 1.3%, but on a constant dollar basis, they decreased by 1.3%, indicating effective cost management.
  • 6Carnival Corporation & plc maintained a robust liquidity position with $4.91 billion available.
  • 7The company declared a dividend of $0.275 per share, an increase from $0.25 in the prior year.

Frequently Asked Questions

Revenue growth was primarily driven by a combination of increased passenger capacity (ALBDs grew 7.4%) and higher net revenue yields, which saw a 0.3% increase. This yield improvement was attributed to a weaker U.S. dollar relative to the euro and sterling and higher onboard spending. Gross cruise revenues increased by 9.3%.

While net cruise costs per ALBD increased by 1.3%, this was largely due to currency fluctuations and increased ship damage costs. Notably, on a constant dollar basis, net cruise costs per ALBD decreased by 1.3%. The company also benefited from lower dry-dock costs and a decrease in fuel costs per metric ton. Despite these pressures, the overall increase in gross cruise costs (10.5%) was managed effectively relative to revenue growth.

Carnival Corporation & plc maintains a strong liquidity position with $4.91 billion available, including cash, short-term investments, and committed credit facilities. Management believes this liquidity, coupled with expected cash flow from operations, will be sufficient to fund capital projects, debt obligations, and dividend payments for the remainder of fiscal 2007. The company also has the option to secure additional financing if needed.

The filing mentions ongoing litigation, including a class action complaint against Holland America Line regarding shore excursions and vendor payments, and a lawsuit alleging copyright infringement of musical works. While the company believes it has meritorious defenses and intends to vigorously defend these matters, the ultimate outcome and financial impact are currently indeterminable. There are also contingent obligations related to ship leases, though these are considered remote and mitigated by creditworthy financial institutions.