10-QPeriod: Q3 FY2013

CARNIVAL CORP Quarterly Report for Q3 Ended Aug 31, 2013

Filed October 3, 2013For Securities:CCL

Summary

Carnival Corporation & plc reported its financial results for the third quarter and nine months ended August 31, 2013. For the third quarter, the company saw a slight increase in revenues driven by capacity expansion and a weaker US dollar against the Euro, though this was partially offset by a decrease in cruise ticket pricing. However, operating costs and expenses saw a significant increase, largely due to a $176 million impairment charge related to two smaller Costa ships, alongside higher capacity-driven costs and increased repair and maintenance expenses. This led to a considerable decrease in operating income for the quarter compared to the prior year. For the nine-month period, revenues remained relatively flat, but operating costs and expenses also increased, impacted by ship impairments and higher operational costs. Despite these challenges, the company highlighted efforts to manage fuel price risks through derivatives and maintain a strong liquidity position.

Financial Highlights

51 data points
Beta

Net Income

$934.00M

EPS (Diluted)

$1.20

Total Assets

$40.39B

Cash & Equivalents

$981.00M

Free Cash Flow

$438.00M

Financial Statements
Beta
Cost of Revenue$2.92B
SG&A Expenses$439.00M
Operating Expenses$3.77B
Operating Income$951.00M
Interest Expense$76.00M
Net Income$934.00M
EPS (Basic)$1.20
EPS (Diluted)$1.20
Shares Outstanding (Basic)775.00M
Shares Outstanding (Diluted)777.00M

Key Highlights

  • 1Total revenues for the three months ended August 31, 2013, were $4,726 million, a slight increase of 1.0% from $4,684 million in the prior year period.
  • 2Net income for the three months ended August 31, 2013, decreased significantly to $934 million from $1,330 million in the same period last year.
  • 3Diluted earnings per share for the quarter were $1.20, down from $1.71 in the prior year quarter.
  • 4Operating costs and expenses for the three months increased by 12.3% to $2,917 million, primarily due to a $176 million impairment charge for two Costa ships and increased capacity-driven expenses.
  • 5The company reported a working capital deficit of $4.9 billion at August 31, 2013, which was partially offset by significant customer deposits, leading to an adjusted working capital of $352 million.
  • 6Cash provided by operating activities for the nine months ended August 31, 2013, was $2,359 million, a decrease from $2,476 million in the prior year period.
  • 7Capital expenditures for the nine months were $1.8 billion, primarily for new shipbuilding and ship improvements.

Frequently Asked Questions

The primary driver for the decrease in net income was a significant increase in operating costs and expenses. This included a substantial $176 million impairment charge related to two smaller Costa ships, along with higher capacity-driven expenses and increased repair and maintenance costs.

Total revenues saw a slight increase of 1.0% to $4,726 million. This growth was supported by a 3.4% increase in capacity (ALBDs) and a weaker US dollar against the Euro. However, this was partially offset by a decrease in cruise ticket pricing.

As of August 31, 2013, the company reported liquidity of $6.7 billion, comprising cash and cash equivalents, available borrowing under revolving credit facilities, and committed export credit ship financings. Despite a working capital deficit, management believes its cash flows and liquidity are sufficient to meet its obligations.

Carnival utilizes a fuel derivatives program, primarily consisting of zero cost collars on Brent crude oil, to mitigate a portion of the risk from potential fuel price increases. These derivatives are intended to act as economic hedges, though hedge accounting is not applied.