10-QPeriod: Q3 FY2008

CARNIVAL CORP Quarterly Report for Q3 Ended Aug 31, 2008

Filed September 26, 2008For Securities:CCL

Summary

Carnival Corporation & plc reported solid revenue growth for the nine months ended August 31, 2008, with total revenues increasing by 14.5% year-over-year to $11.3 billion. This growth was driven by both increased fleet capacity (9.2% rise in ALBDs) and higher cruise ticket pricing, including fuel supplements and favorable currency exchange rates. Despite revenue growth, net income for the nine months decreased slightly to $1.96 billion from $2.05 billion in the prior year. This was largely attributable to a significant increase in operating costs, most notably a 67.7% surge in fuel costs per metric ton, which drove up net cruise costs per ALBD by 12.8%. While the company continues to invest heavily in new ships, its liquidity position remains robust, supported by strong operating cash flow and available credit facilities, indicating the company's ability to meet its financial obligations and capital expenditure plans.

Financial Highlights

46 data points
Beta

Revenue

$4.81B

45.3% Gross Margin

Net Income

$1.33B

27.7% Net Margin

EPS (Diluted)

$1.65

Total Assets

$35.28B

Cash & Equivalents

$792.00M

Free Cash Flow

$156.00M

Financial Statements
Beta
Revenue$4.81B
Cost of Revenue$2.63B
Gross Profit$2.18B
SG&A Expenses$372.00M
Operating Expenses$3.33B
Operating Income$1.49B
Interest Expense$108.00M
Net Income$1.33B
EPS (Basic)$1.70
EPS (Diluted)$1.65

Key Highlights

  • 1Total revenues for the nine months ended August 31, 2008, increased by 14.5% to $11.3 billion, driven by capacity growth and higher ticket pricing.
  • 2Net income for the nine months decreased slightly to $1.96 billion from $2.05 billion in the prior year, impacted by increased operating costs.
  • 3Fuel costs per metric ton saw a substantial increase of 67.7% for the nine-month period, significantly impacting overall expenses.
  • 4The company's fleet capacity, measured by ALBDs, increased by 9.2% for the nine-month period.
  • 5Carnival reported a strong operating cash flow of $2.9 billion for the nine-month period, demonstrating ongoing operational strength.
  • 6Total assets grew to $35.3 billion, primarily due to significant investments in property and equipment for new ships.
  • 7Despite a notable increase in long-term debt to $8.3 billion, the company maintained sufficient liquidity and credit ratings to fund its operations and expansion plans.

Frequently Asked Questions

Carnival's revenue growth was primarily driven by a combination of increased fleet capacity, evidenced by a 9.2% rise in Available Lower Berth Days (ALBDs) for the nine-month period, and higher cruise ticket pricing, which included the implementation of fuel supplements. Favorable currency exchange rates, particularly the weaker U.S. dollar against the euro, also contributed positively to revenue.

Despite strong revenue growth, net income for the nine months ended August 31, 2008, decreased due to a significant increase in operating costs. The most substantial contributor to this was the sharp rise in fuel costs, which increased by 67.7% per metric ton. This, along with the impact of a weaker U.S. dollar against the euro on operating expenses, led to a 12.8% increase in net cruise costs per ALBD, ultimately pressuring profitability.

Carnival has managed its increased long-term debt, which rose to $8.3 billion, by utilizing a combination of new debt issuances and repayments, alongside strong operating cash flow. The company reported $2.9 billion in net cash from operations for the nine-month period. Furthermore, Carnival maintained substantial liquidity, totaling $3.9 billion at August 31, 2008, comprising cash, available borrowing under credit facilities, and committed ship financing. The company believes its liquidity and cash flow are sufficient to meet its financial obligations and capital expenditure plans, supported by its credit rating.

The filing highlights potential risks including general economic conditions, international political climate, competition, adverse weather, and changes in regulations. Notably, there are ongoing investigations and lawsuits, including an antitrust investigation by the Florida Attorney General regarding fuel supplements and a copyright infringement lawsuit concerning onboard performances. Additionally, contingent obligations related to lease-out and lease-back transactions and potential credit rating downgrades of financial institutions involved are disclosed, though management believes these are unlikely to have a material adverse impact.