10-QPeriod: Q2 FY2016

CARNIVAL CORP Quarterly Report for Q2 Ended May 31, 2016

Filed July 1, 2016For Securities:CCL

Summary

Carnival Corporation & plc reported strong financial results for the second quarter and first half of fiscal year 2016, driven by increased revenues and a significant reduction in operating costs, primarily due to lower fuel prices. For the three months ended May 31, 2016, revenues rose by 3.1% year-over-year, reaching $3.7 billion, while net income more than doubled to $605 million from $222 million in the prior year's quarter. Diluted Earnings Per Share (EPS) improved to $0.80 from $0.29. The company also saw substantial improvements in its six-month performance. Revenues for the six months ended May 31, 2016, increased by 3.5% to $7.357 billion, and net income more than doubled to $747 million from $271 million in the same period of 2015, with diluted EPS rising to $0.98 from $0.35. This improved profitability was largely attributable to a 6.1% decrease in consolidated operating costs and expenses for the quarter, aided by a 41% reduction in fuel costs. The company also demonstrated effective management of its capacity, with a 2.0% increase in Available Lower Berth Days (ALBDs) and improved occupancy rates.

Financial Highlights

51 data points
Beta

Revenue

$3.71B

39.1% Gross Margin

Net Income

$605.00M

16.3% Net Margin

EPS (Diluted)

$0.80

Total Assets

$39.85B

Cash & Equivalents

$519.00M

Free Cash Flow

$247.00M

Financial Statements
Beta
Revenue$3.71B
Cost of Revenue$2.26B
Gross Profit$1.45B
SG&A Expenses$532.00M
Operating Expenses$3.23B
Operating Income$478.00M
Interest Expense$57.00M
Net Income$605.00M
EPS (Basic)$0.81
EPS (Diluted)$0.80
Shares Outstanding (Basic)751.00M
Shares Outstanding (Diluted)753.00M

Key Highlights

  • 1Revenue for the three months ended May 31, 2016, increased by 3.1% to $3.7 billion compared to the prior year period.
  • 2Net income for the quarter more than doubled to $605 million, up from $222 million in the same period of 2015.
  • 3Diluted Earnings Per Share (EPS) for the quarter improved significantly to $0.80 from $0.29 year-over-year.
  • 4Total operating costs and expenses decreased by 6.1% to $2.26 billion for the quarter, primarily due to a substantial reduction in fuel costs.
  • 5For the six months ended May 31, 2016, net income reached $747 million, a significant increase from $271 million in the prior year.
  • 6The company's capacity, measured by ALBDs, increased by 2.0% for the quarter, accompanied by a rise in occupancy percentage to 104.1%.
  • 7Carnival Corporation & plc maintained a strong liquidity position, with $10.7 billion in liquidity at May 31, 2016.

Frequently Asked Questions

The primary drivers for Carnival Corporation's improved financial performance in the second quarter of 2016 were an increase in total revenues, a significant decrease in operating costs and expenses (notably lower fuel prices), and improved occupancy and capacity utilization.

Lower fuel prices had a substantial positive impact on Carnival Corporation's results. For the three months ended May 31, 2016, fuel costs decreased by $136 million, or 41%, compared to the same period in 2015. This reduction in fuel expenses directly contributed to higher operating income and net income.

Carnival Corporation & plc expected its adjusted diluted earnings per share for the 2016 third quarter to be in the range of $1.83 to $1.87 and for the full 2016 year to be between $3.25 and $3.35. This guidance was based on specific assumptions regarding fuel costs and currency exchange rates.

The company aims to grow profitably while maintaining a strong balance sheet and investment grade credit ratings. They plan to use operating cash flows to fund capital investments and return free cash flows to shareholders. At May 31, 2016, Carnival had $10.7 billion in liquidity, comprised of cash, available borrowing under credit facilities, and committed future financings, indicating a strong ability to meet financial obligations.