10-QPeriod: Q2 FY2015

CARNIVAL CORP Quarterly Report for Q2 Ended May 31, 2015

Filed July 1, 2015For Securities:CCL

Summary

Carnival Corporation & PLC reported improved financial results for the six months ended May 31, 2015, compared to the same period in 2014. Net income more than tripled to $271 million from $78 million, driven by a significant decrease in operating costs and expenses, primarily due to lower fuel prices and favorable foreign currency impacts. Revenue performance showed a slight decrease in cruise passenger ticket revenues due to unfavorable currency translation effects, but this was partially offset by increased onboard spending and higher ticket pricing in certain itineraries. The company is strategically managing its capacity and continues to invest in new shipbuilding programs. Despite a reported working capital deficit, Carnival highlighted its strong balance sheet, liquidity, and ability to access financing. Investors should note the significant impact of foreign currency fluctuations and fuel prices on both revenues and costs. The company provided guidance for the third quarter and full year 2015, indicating expected earnings per share within a certain range. The company also outlined significant long-term newbuild contracts, demonstrating a commitment to fleet expansion and modernization.

Financial Highlights

49 data points
Beta

Net Income

$222.00M

EPS (Diluted)

$0.29

Total Assets

$38.61B

Cash & Equivalents

$298.00M

Free Cash Flow

$1.08B

Financial Statements
Beta
Cost of Revenue$2.40B
SG&A Expenses$491.00M
Operating Expenses$3.30B
Operating Income$289.00M
Interest Expense$57.00M
Net Income$222.00M
EPS (Basic)$0.29
EPS (Diluted)$0.29
Shares Outstanding (Basic)778.00M
Shares Outstanding (Diluted)780.00M

Key Highlights

  • 1Net income for the six months ended May 31, 2015, surged to $271 million, a substantial increase from $78 million in the prior year's period.
  • 2Consolidated operating costs and expenses decreased by $425 million, or 8.2%, primarily driven by a significant reduction in fuel prices ($394 million lower) and favorable currency impacts ($259 million).
  • 3Consolidated cruise passenger ticket revenues saw a slight decrease of 3.0% to $5.3 billion, largely due to foreign currency translation impacts from a stronger U.S. dollar.
  • 4Onboard and other cruise revenues increased by 3.5% to $1.8 billion, driven by higher onboard spending by guests.
  • 5The company's North America segment showed strong operating income growth, increasing by $378 million to $493 million.
  • 6Carnival announced a significant long-term commitment to add nine new cruise ships to its fleet between 2019 and 2022, subject to financing.
  • 7Liquidity remains strong, with $4.9 billion available at May 31, 2015, including cash, cash equivalents, and undrawn credit facilities.

Frequently Asked Questions

The primary driver for the improved net income was a significant decrease in operating costs and expenses, largely attributable to substantially lower fuel prices and favorable foreign currency translation impacts, which more than offset a slight decrease in cruise passenger ticket revenues.

A stronger U.S. dollar against foreign currencies, particularly the euro and Australian dollar, negatively impacted revenues by $349 million for the six-month period, causing a decrease in reported foreign currency-denominated revenues. However, this strong dollar also provided cost savings of $259 million on operating expenses.

Carnival has entered into strategic Memorandums of Agreement to add nine new cruise ships to its fleet between 2019 and 2022, demonstrating a commitment to measured capacity growth and fleet modernization. This expansion is subject to obtaining satisfactory financing.

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. However, hedge accounting is not applied to these derivatives.