01—Abstract
Summary
Summary of the 10-Q filed April 9, 2019. Cited figures are marked; the original filing is the authoritative source.
Carnival Corporation & plc reported a net income of $336 milliona 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 billionb. 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 billionc. 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.
02—Key points
Key Highlights
- Net income decreased to $336 million from $391 million in the prior year's comparable quarter, representing a year-over-year decline.
- Total 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.
- Operating 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.
- Onboard and other revenues saw a substantial 35% increase, contributing significantly to overall revenue growth, partly due to ASC 606 adoption and higher guest spending.
- The 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.
- Earnings per diluted share decreased to $0.48 from $0.54 in the prior year's comparable quarter.
- The North America & Australia (NAA) segment showed stronger operating income growth compared to the Europe & Asia (EA) segment.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2019, Carnival Corp kept $0.07.
- Revenue$4.67B100.0%
- Cost of revenue−$3.14B67.2%
- Gross profit$1.53B32.8%
- Operating costs−$1.15B24.5%
- Operating income$386.0M8.3%
- Interest, other & tax−$50.0M1.1%
- Net income$336.0M7.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed April 9, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $4.67B$4.23B | +10.4% |
| Cost of Revenue | $3.14B$2.71B | +16.0% |
| Gross Profit | $1.53B$1.52B | +0.5% |
| SG&A Expenses | $629.00M$616.00M | +2.1% |
| Operating Expenses | $4.29B$3.81B | +12.4% |
| Operating Income | $386.00M$419.00M | −7.9% |
| Interest Expense | $51.00M$48.00M | +6.3% |
| Net Income | $336.00M$391.00M | −14.1% |
| EPS (Basic) | $0.48$0.54 | −11.1% |
| EPS (Diluted) | $0.48$0.54 | −11.1% |
| Shares Outstanding (Basic) | 693.00M717.00M | −3.3% |
| Shares Outstanding (Diluted) | 695.00M719.00M | −3.3% |
05—Questions
Frequently Asked Questions
What caused the decrease in net income compared to the prior year?
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.
How did the adoption of ASC 606 impact the financial statements?
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.
What is the company's liquidity situation and outlook?
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.
How has the company's capacity and fleet expansion progressed?
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).
06—Continue