10-QPeriod: Q1 FY2019

CARNIVAL CORP Quarterly Report for Q1 Ended Feb 28, 2019

Filed April 9, 2019For Securities:CCL

Summary

Carnival Corporation & plc reported a net income of $336 million for the three months ended February 28, 2019, a decrease from $391 million in the same period of the prior year. This decline was primarily driven by increased operating costs and expenses, which rose by 16% to $3.1 billion. A significant portion of this increase ($323 million) is attributed to the adoption of new revenue accounting guidance (ASC 606), which changed the presentation of certain revenues and costs to a gross basis. Despite the decrease in net income, the company saw an increase in total revenues to $4.67 billion from $4.23 billion year-over-year. This revenue growth was bolstered by a 4.1% increase in Available Lower Berth Days (ALBDs) and higher onboard and other cruise revenues, which surged by 35% to $1.45 billion. The company also highlighted its strong liquidity position, with $13.5 billion in liquidity as of February 28, 2019, supported by significant committed future financings for its ongoing new shipbuilding program.

Financial Highlights

52 data points
Beta

Revenue

$4.67B

32.8% Gross Margin

Net Income

$336.00M

7.2% Net Margin

EPS (Diluted)

$0.48

Total Assets

$43.93B

Cash & Equivalents

$649.00M

Free Cash Flow

-$1.01B

Financial Statements
Beta
Revenue$4.67B
Cost of Revenue$3.14B
Gross Profit$1.53B
SG&A Expenses$629.00M
Operating Expenses$4.29B
Operating Income$386.00M
Interest Expense$51.00M
Net Income$336.00M
EPS (Basic)$0.48
EPS (Diluted)$0.48
Shares Outstanding (Basic)693.00M
Shares Outstanding (Diluted)695.00M

Key Highlights

  • 1Net income decreased to $336 million from $391 million in the prior year's comparable quarter, representing a year-over-year decline.
  • 2Total revenues increased by 10.3% to $4.67 billion, driven by a 4.1% increase in capacity (ALBDs) and a significant 35% rise in onboard and other revenues.
  • 3Operating costs and expenses rose by 16% to $3.14 billion, largely due to the adoption of new revenue recognition standards (ASC 606) that shifted certain revenues and expenses to a gross presentation.
  • 4Onboard and other revenues saw a substantial 35% increase, contributing significantly to overall revenue growth, partly due to ASC 606 adoption and higher guest spending.
  • 5The company maintained a strong liquidity position with $13.5 billion available, including cash, credit facilities, and committed future financings, supporting its capital expenditure plans for new ships.
  • 6Earnings per diluted share decreased to $0.48 from $0.54 in the prior year's comparable quarter.
  • 7The North America & Australia (NAA) segment showed stronger operating income growth compared to the Europe & Asia (EA) segment.

Frequently Asked Questions

The decrease in net income from $391 million to $336 million was primarily due to a significant increase in operating costs and expenses, which rose by 16% to $3.14 billion. A substantial portion of this increase, $323 million, is attributed to the adoption of new revenue recognition accounting standards (ASC 606), which changed how certain onboard and other revenues and associated costs are presented, moving them to a gross basis.

The adoption of ASC 606, effective December 1, 2018, resulted in a change in presentation for certain revenues and expenses, most notably shore excursions and other onboard revenues and costs, which are now presented on a gross basis. This change increased both reported revenues and operating costs and expenses. The adoption also led to a cumulative effect adjustment of $24 million to retained earnings related to loyalty programs.

Carnival Corporation & plc reported strong liquidity with $13.5 billion available as of February 28, 2019. This includes cash and cash equivalents, revolving credit facilities, and significant committed future financings ($11.0 billion) primarily from export credit facilities to support its new shipbuilding program. The company anticipates its future operating cash flows and liquidity will be sufficient to cover capital expenditures, debt maturities, and dividend payments.

The company experienced a 4.1% increase in Available Lower Berth Days (ALBDs) for the three months ended February 28, 2019, compared to the prior year. This increase was driven by the addition of new ships to its fleet, including contributions from Carnival Cruise Line, Seabourn, Holland America Line, and AIDA. The company has a significant capital expenditure forecast for new ship growth and anticipates substantial capacity increases in the coming years (2019-2022).