10-QPeriod: Q1 FY2016

CARNIVAL CORP Quarterly Report for Q1 Ended Feb 29, 2016

Filed March 31, 2016For Securities:CCL

Summary

Carnival Corporation & plc reported improved financial performance for the three months ended February 29, 2016, compared to the same period in the prior year. Revenues increased by 3.3% to $3.65 billion, driven by higher passenger ticket revenues and onboard spending, supported by a 3.8% increase in capacity (ALBDs). This growth was observed across both North America and EAA brands, with the EAA segment showing a particularly strong rebound in operating income due to increased capacity and pricing improvements. Despite a revenue increase, the company's net income saw a significant jump from $49 million to $142 million, primarily due to a substantial reduction in losses from fuel derivatives, which fell from $169 million to $236 million. This, coupled with lower overall operating costs and expenses primarily attributed to reduced fuel prices, led to a significant improvement in profitability. The company also reaffirmed its full-year 2016 earnings guidance and highlighted strong liquidity, demonstrating a positive outlook.

Financial Highlights

51 data points
Beta

Revenue

$3.65B

38.6% Gross Margin

Net Income

$142.00M

3.9% Net Margin

EPS (Diluted)

$0.18

Total Assets

$38.45B

Cash & Equivalents

$778.00M

Free Cash Flow

$468.00M

Financial Statements
Beta
Revenue$3.65B
Cost of Revenue$2.24B
Gross Profit$1.41B
SG&A Expenses$551.00M
Operating Expenses$3.22B
Operating Income$434.00M
Interest Expense$52.00M
Net Income$142.00M
EPS (Basic)$0.18
EPS (Diluted)$0.18
Shares Outstanding (Basic)766.00M
Shares Outstanding (Diluted)769.00M

Key Highlights

  • 1Total revenues increased by 3.3% to $3.65 billion, driven by a 3.8% increase in capacity (ALBDs) and higher passenger ticket and onboard revenues.
  • 2Net income significantly improved, rising from $49 million to $142 million, largely due to a reduction in losses from fuel derivatives.
  • 3Operating income grew substantially by 63% to $434 million, with the EAA segment experiencing a 265% increase.
  • 4Fuel costs decreased by 41% to $187 million due to lower fuel prices, a key driver in the reduction of overall operating expenses.
  • 5The company generated $798 million in net cash from operating activities, a slight increase from the prior year.
  • 6Carnival Corporation repurchased $916 million of its common stock during the quarter, signaling a commitment to returning capital to shareholders.
  • 7The company reaffirmed its full-year 2016 adjusted diluted earnings per share guidance of $3.20 to $3.40.

Frequently Asked Questions

The primary driver of the significant increase in net income was the substantial reduction in losses related to fuel derivatives, which decreased from $169 million in the prior year period to $236 million in the current period. Additionally, lower fuel prices directly reduced operating costs.

Capacity, measured by available lower berth days (ALBDs), increased by 3.8%. This, combined with improved pricing and onboard spending, led to a 3.3% increase in total revenues to $3.65 billion. Both North America and EAA brands contributed to this revenue growth.

Carnival Corporation & plc reaffirmed its full-year 2016 adjusted diluted earnings per share guidance to be in the range of $3.20 to $3.40. The company also provided guidance for the second quarter of 2016, expecting adjusted diluted earnings per share between $0.34 and $0.38.

The company utilizes a fuel derivatives program, primarily consisting of zero cost collars on Brent crude oil, to mitigate a portion of the risk associated with fuel price increases. The decline in actual fuel prices significantly benefited the company's results in this period.