10-QPeriod: Q2 FY2011

CARNIVAL CORP Quarterly Report for Q2 Ended May 31, 2011

Filed July 1, 2011For Securities:CCL

Summary

Carnival Corporation & plc reported financial results for the second quarter ended May 31, 2011. Total revenues for the quarter increased by 11.2% to $3.6 billion, driven by a 5.0% increase in capacity (ALBDs), a weaker U.S. dollar against key foreign currencies, and improved cruise ticket pricing. Despite revenue growth, net income for the quarter decreased to $206 million from $252 million in the prior year, largely due to a significant increase in fuel costs and higher operating expenses related to capacity expansion. For the six months ended May 31, 2011, total revenues also saw a healthy increase of 9.3% to $7.0 billion. However, net income declined to $358 million compared to $427 million in the same period last year. This decline was primarily attributed to a substantial rise in fuel costs and other operating expenses, coupled with the non-recurrence of a gain from a ship sale in the prior year. The company continues to manage its liquidity effectively, with substantial cash from operations and access to committed financings, despite a reported working capital deficit primarily driven by significant customer deposits. Investors should note the significant increase in fuel costs, which heavily impacted profitability. The company is expanding capacity with new ships and benefiting from a weaker U.S. dollar, which aids international revenue translation. However, geopolitical events in the Middle East/North Africa and Japan necessitated deployment changes, impacting pricing and shore excursion revenues. The outlook for the full year 2011 projected earnings per share between $2.40 and $2.50.

Financial Highlights

50 data points
Beta

Net Income

$206.00M

EPS (Diluted)

$0.26

Total Assets

$39.76B

Cash & Equivalents

$557.00M

Free Cash Flow

-$61.00M

Financial Statements
Beta
Cost of Revenue$2.52B
SG&A Expenses$440.00M
Operating Expenses$3.34B
Operating Income$279.00M
Interest Expense$91.00M
Net Income$206.00M
EPS (Basic)$0.26
EPS (Diluted)$0.26
Shares Outstanding (Basic)791.00M
Shares Outstanding (Diluted)793.00M

Key Highlights

  • 1Total revenues for the second quarter increased 11.2% to $3.6 billion, driven by capacity growth, a weaker USD, and improved pricing.
  • 2Net income for the quarter decreased 18.3% to $206 million compared to $252 million in the prior year, primarily due to higher fuel costs and operating expenses.
  • 3For the six months ended May 31, 2011, total revenues grew 9.3% to $7.0 billion, while net income decreased 16.6% to $358 million.
  • 4Fuel costs significantly increased, up 39.2% for the quarter and 26.6% for the six-month period, impacting profitability.
  • 5Capacity (ALBDs) increased by 5.0% for the quarter and 5.0% for the six-month period, primarily due to new ships entering service.
  • 6The company maintained a strong liquidity position with $5.6 billion in liquidity at May 31, 2011, comprising cash, available borrowings, and committed ship financings.
  • 7Geopolitical events and natural disasters in MENA and Japan led to deployment changes, affecting pricing and revenue in certain regions.

Frequently Asked Questions

Carnival reported total revenues of $3.6 billion for the second quarter ended May 31, 2011, an increase of 11.2% compared to the prior year. However, net income decreased by 18.3% to $206 million, down from $252 million in the same period of 2010. This decline was largely driven by higher fuel costs and increased operating expenses.

Fuel costs saw a significant increase, rising 39.2% in the second quarter. The company also expanded its capacity by 5.0% with new ships. While this capacity growth contributed to higher revenues, the elevated fuel prices and other operating expenses associated with this expansion significantly impacted profitability.

Carnival expected its fully diluted earnings per share for the full 2011 fiscal year to be in the range of $2.40 to $2.50. This guidance was based on specific assumptions for fuel prices and currency exchange rates, which are subject to daily fluctuations.

The company reported strong liquidity of $5.6 billion at May 31, 2011, including cash and cash equivalents, available credit facilities, and committed ship financings. Carnival believes its existing liquidity and cash flow from operations will be sufficient to fund its capital projects, debt obligations, and working capital needs over the next several years.