01—Abstract
Summary
Summary of the 10-Q filed July 2, 2012. Cited figures are marked; the original filing is the authoritative source.
Carnival Corporation & plc reported mixed financial results for the second quarter and first six months of fiscal year 2012, ending May 31, 2012.
For the second quarter, the company reported net income of $14 milliona ($0.02 per diluted share), a significant decrease from $206 million ($0.26 per diluted share) in the prior year. This decline was primarily attributed to unrealized losses on fuel derivatives and the ongoing impact of the Costa Concordia incident. Despite a decrease in cruise ticket revenues due to a stronger U.S. dollar and lower occupancy, onboard and other revenues saw a slight increase.
For the first six months of fiscal year 2012, the company reported a net loss of $125 millionb ($0.16 per diluted share), a stark contrast to a net income of $358 million ($0.45 per diluted share) in the same period last year. This loss was exacerbated by substantial impairment charges related to Ibero goodwill and trademarks, in addition to the impact of fuel derivative losses and the Costa Concordia incident.
While capacity increased year-over-year, revenue growth was muted by currency headwinds and challenges in the European market. The company is actively managing its liquidity, with significant cash on hand and available credit facilities, and anticipates that its operating cash flow will be sufficient to fund its capital expenditure program and debt obligations.
02—Key points
Key Highlights
- Net income for the three months ended May 31, 2012, was $14 million, a substantial decrease from $206 million in the prior year, impacted by fuel derivative losses and the Costa Concordia incident.
- For the six months ended May 31, 2012, the company reported a net loss of $125 million, compared to a net income of $358 million in the same period last year, largely due to impairment charges and fuel derivative impacts.
- Consolidated revenues for the three months ended May 31, 2012, were $3.538 billion, a slight decrease from $3.620 billion in the prior year, impacted by currency headwinds and lower occupancy.
- Consolidated revenues for the six months ended May 31, 2012, were $7.120 billion, an increase from $7.039 billion in the prior year, driven by increased capacity and onboard spending, partially offset by currency impacts.
- Operating costs and expenses for the three months ended May 31, 2012, remained flat at $2.478 billion compared to the prior year, despite increased fuel prices and capacity, due to currency impacts and insurance proceeds.
- Operating costs and expenses for the six months ended May 31, 2012, increased to $6.949 billion from $6.525 billion in the prior year, primarily due to higher fuel prices and impairment charges.
- The company ended the quarter with $900 million in cash and cash equivalents, and maintained strong liquidity with $5.9 billion available through cash, credit facilities, and committed ship financings.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2012filed July 2, 2012Financial Statements
Q2 FY2012 against Q2 FY2011
| Line item | Q2 FY2012Q2 FY2011 | Change |
|---|---|---|
| Cost of Revenue | $2.48B$2.52B | −1.7% |
| SG&A Expenses | $431.00M$440.00M | −2.0% |
| Operating Expenses | $3.29B$3.34B | −1.7% |
| Operating Income | $253.00M$279.00M | −9.3% |
| Interest Expense | $87.00M$91.00M | −4.4% |
| Net Income | $14.00M$206.00M | −93.2% |
| EPS (Basic) | $0.02$0.26 | −92.3% |
| EPS (Diluted) | $0.02$0.26 | −92.3% |
| Shares Outstanding (Basic) | 779.00M791.00M | −1.5% |
| Shares Outstanding (Diluted) | 779.00M793.00M | −1.8% |
05—Questions
Frequently Asked Questions
What were the primary drivers for the significant decrease in net income during the second quarter of fiscal year 2012?
The primary drivers for the significant decrease in net income were unrealized losses on fuel derivatives totaling $145 million and the ongoing financial impact and incident-related expenses stemming from the Costa Concordia disaster. These factors, combined with a stronger U.S. dollar impacting revenues and lower occupancy rates, contributed to the decline compared to the prior year.
How did the Costa Concordia incident affect the company's financial results in this period?
The Costa Concordia incident resulted in significant write-offs, insurance proceeds, and incident-related expenses. While the company received $508 million in insurance proceeds for the ship's total loss, it also incurred $30 million in unrecoverable incident-related expenses and significant legal and regulatory actions. These events impacted operating costs and required the presentation of short-term insurance recoverables and claims reserves on the balance sheet.
What is the company's outlook for the remainder of fiscal year 2012?
Carnival provided guidance for the third quarter and full year 2012, expecting non-GAAP fully diluted EPS in the ranges of $1.42 to $1.46 for the third quarter and $1.80 to $1.90 for the full year. This outlook is based on assumptions for fuel prices and currency exchange rates, and the company believes the Costa Concordia incident will not have a significant long-term impact on its business.
How is Carnival managing its exposure to fuel price volatility?
Carnival utilizes a fuel derivatives program to mitigate a portion of its economic risk associated with potential fuel price increases. During the first six months of fiscal year 2012, the company entered into additional zero-cost collar fuel derivatives on Brent crude oil. However, it is important to note that changes in Brent prices may not perfectly correlate with the actual marine fuel used on its ships, and hedge accounting is not applied to these derivatives.
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