10-QPeriod: Q3 FY2017

CARNIVAL CORP Quarterly Report for Q3 Ended Aug 31, 2017

Filed September 29, 2017For Securities:CCL

Summary

Carnival Corporation & plc's third quarter 2017 results show a decline in net income and operating income compared to the prior year, largely driven by significant ship and trademark impairment charges totaling $89 million related to a strategic realignment in Australia. While revenues saw a healthy increase of 8.8% for the quarter, driven by higher ticket prices and a 2.7% capacity increase, operating expenses rose substantially, particularly due to the aforementioned impairment charges and increased fuel costs. Despite the profit dip, the company demonstrated strong operational execution with increased net revenue yields and higher passenger volumes. Management's outlook for the full year 2017 remained positive, with adjusted earnings per share guidance in the range of $3.64 to $3.70. The company continues to invest in its fleet, with significant capital expenditures planned for new shipbuilding and improvements. Liquidity remains strong, supported by operating cash flows and committed future financing.

Financial Highlights

51 data points
Beta

Revenue

$5.51B

45.4% Gross Margin

Net Income

$1.33B

24.1% Net Margin

EPS (Diluted)

$1.83

Total Assets

$40.64B

Cash & Equivalents

$489.00M

Free Cash Flow

$1.01B

Financial Statements
Beta
Revenue$5.51B
Cost of Revenue$3.01B
Gross Profit$2.50B
SG&A Expenses$547.00M
Operating Expenses$4.12B
Operating Income$1.39B
Interest Expense$49.00M
Net Income$1.33B
EPS (Basic)$1.84
EPS (Diluted)$1.83
Shares Outstanding (Basic)723.00M
Shares Outstanding (Diluted)726.00M

Key Highlights

  • 1Total revenues increased by 8.8% to $5.5 billion for the third quarter of 2017, driven by higher passenger ticket revenues and onboard spending.
  • 2Significant impairment charges of $89 million (goodwill and trademark) and $304 million (ships) impacted the third quarter results, primarily due to a strategic business realignment in Australia.
  • 3Operating income decreased by 11% to $1.4 billion for the third quarter, largely due to the impairment charges and increased operating expenses.
  • 4Net income for the third quarter decreased to $1.33 billion from $1.42 billion in the prior year.
  • 5Net revenue yields increased by 5.5% in the third quarter compared to the prior year, indicating improved pricing and demand.
  • 6Capacity, measured by Available Lower Berth Days (ALBDs), increased by 2.7% in the third quarter.
  • 7The company's liquidity remained strong, with $13.5 billion in liquidity as of August 31, 2017, comprising cash, available credit facilities, and committed future financings.

Frequently Asked Questions

The decrease was primarily driven by significant impairment charges totaling $89 million for goodwill and trademarks, and $304 million for ships. These charges resulted from a strategic decision to realign business operations in Australia.

Revenue showed strong growth, increasing by 8.8% to $5.5 billion. This was fueled by an 8.8% rise in passenger ticket revenue, driven by price improvements and a 2.7% increase in capacity (ALBDs), alongside a 6.7% increase in onboard and other revenues due to higher guest spending.

Carnival provided guidance for full-year 2017 adjusted earnings per share in the range of $3.64 to $3.70, indicating continued confidence in its operational performance despite the recent impairment charges.

Carnival continues to invest significantly in its future, with total annual capital expenditures projected to be $3.1 billion in 2017, $4.1 billion in 2018, and $5.0 billion in 2019, primarily for new shipbuilding and ship improvements. This investment is expected to support capacity growth in the coming years.