10-QPeriod: Q1 FY2008

CARNIVAL CORP Quarterly Report for Q1 Ended Feb 29, 2008

Filed March 28, 2008For Securities:CCL

Summary

Carnival Corporation & plc reported net income of $236 million for the three months ended February 29, 2008, a decrease from $283 million in the same period of the prior year. Diluted earnings per share also declined to $0.30 from $0.35. Despite the earnings dip, total revenues saw a significant increase, driven by higher passenger ticket sales and onboard spending, with net cruise revenues rising 17.3%. This revenue growth was largely offset by a substantial increase in costs and expenses, particularly fuel, which more than doubled, and higher net cruise costs per available lower berth day (ALBD). The company's liquidity remains strong, with $4.9 billion available, including cash and equivalents, and committed credit facilities. Carnival is actively managing its fleet, with a shipbuilding program and planned withdrawals of older vessels. However, investors should note the ongoing investigation into fuel supplement programs by the Florida Attorney General and related class action lawsuits, which could pose future risks.

Key Highlights

  • 1Net income decreased to $236 million for the quarter ended February 29, 2008, down from $283 million in the prior year's quarter.
  • 2Diluted earnings per share fell to $0.30 from $0.35 year-over-year.
  • 3Gross cruise revenues increased by 17.3% to $3.1 billion, reflecting strong passenger demand and higher ticket prices.
  • 4Fuel costs per metric ton surged to $499 from $301 in the prior year, significantly impacting operating expenses.
  • 5Net cruise costs per ALBD increased by 12.9%, primarily due to higher fuel costs and dry-dock expenses.
  • 6The company maintained strong liquidity with $4.9 billion available as of February 29, 2008.
  • 7Carnival is facing an investigation by the Florida Attorney General and class action lawsuits related to fuel supplement programs, with uncertain outcomes.

Frequently Asked Questions

The decrease in net income and EPS was primarily driven by a significant increase in costs and expenses. Notably, fuel costs per metric ton more than doubled, and overall net cruise costs per ALBD rose by 12.9%. While revenues grew due to higher ticket prices and increased passenger volume, these gains were outpaced by rising operational expenditures.

Carnival had previously guided for diluted earnings per share between $0.42 to $0.44 for the second quarter and $3.00 to $3.20 for the full year 2008, based on then-current fuel prices and exchange rates. The company continues to expect year-over-year capacity increases from new ships entering service.

Key risks include ongoing investigations and lawsuits related to fuel supplement programs, which could lead to legal costs or penalties. Additionally, fluctuating fuel prices, economic downturns impacting discretionary spending, international political events, and increased competition are significant factors that could affect future financial performance.

Carnival is actively managing its fleet with a shipbuilding program that includes new vessel additions. They also plan to withdraw older ships, such as the 'Pacific Star' and the 'Queen Elizabeth 2' (QE2), from service to optimize capacity and operations.