Carnival Corporation & plc Reports Second Quarter Earnings

MIAMI, June 19 /PRNewswire-FirstCall/ -- Carnival Corporation & plc
(NYSE/LSE: CCL; NYSE: CUK) reported net income of $390 million, or $0.49
diluted EPS, on revenues of $3.4 billion for its second quarter ended May 31,
2008. Net income for the second quarter of 2007 was $390 million, or $0.48
diluted EPS, on revenues of $2.9 billion.
Carnival Corporation & plc Chairman and CEO Micky Arison said that second
quarter results were better than the guidance provided in March 2008 due
primarily to stronger than expected revenue yields and lower than expected
cruise costs.
"Our North American and European brands continue to perform well in the
current difficult economic environment and we were pleased with our second
quarter results. We enjoyed strong revenue growth supported by solid cost
controls, however higher fuel prices cost the company $158 million, or $0.19
per share, during the quarter," Arison said.
Key metrics for the second quarter of 2008 compared to the prior year were
as follows:
-- Net revenue yield (revenue per available lower berth day) for Q2 2008
increased 7.3 percent (3.7 percent on a constant dollar basis). Gross revenue
yields increased 7.6 percent.
-- Excluding fuel, net cruise cost per available lower berth day ("ALBD")
for Q2 2008 decreased 1.1 percent on a constant dollar basis primarily due to
lower selling and administrative costs.
-- Including fuel, net cruise costs per ALBD increased 10.8 percent (7.2
percent on a constant dollar basis). Gross cruise costs per ALBD increased
10.3 percent.
-- Fuel price increased 59 percent to $530 per metric ton for Q2 2008 from
$333 per metric ton, and was in line with the company's March 2008 guidance of
$528 per metric ton.
During the second quarter, the company successfully introduced AIDA
Cruises' 2,050-passenger AIDAbella in Germany and P&O Cruises' 3,076-passenger
Ventura in the UK, as part of its planned strategy of expansion in the
European marketplace.
Outlook
Occupancy levels for advance bookings for the next twelve months are in
line with the prior year, with ticket prices for these bookings at higher
levels.
"Despite the current difficult economic environment, our booking trends
continue to be solid. Consumers continue to plan leisure travel but appear
more cost conscious placing greater emphasis on finding more economical
options. A cruise vacation is an attractive alternative for those seeking the
most value for their vacation dollar," said Arison. "However, the impact of
skyrocketing fuel prices on our operating results has overshadowed the revenue
yield improvement we have experienced."
Primarily as a result of changes in currency exchange rates, the company
now forecasts a 4.5 to 5.5 percent improvement in net revenue yields for the
full year 2008 compared to 2007, versus March 2008 guidance of an increase of
5.5 to 6.5 percent. On a constant dollar basis, the company continues to
expect net revenue yields to increase 2.0 to 3.0 percent, although lower in
the range than the previous guidance due primarily to slightly lower
expectations for both cruise ticket and onboard revenues for the remainder of
2008.
The company continues to expect net cruise costs excluding fuel for the
full year 2008 to be down slightly on a constant dollar basis, although it
expects a modest increase in cruise costs for the remainder of the year
compared to the previous guidance. However, based on current spot prices for
fuel, forecasted fuel costs have increased $224 million, or $0.27 per share,
since the previous March guidance. For the full year 2008 fuel expense is now
forecast to increase by $752 million compared to 2007, which reduces full year
2008 earnings by $0.92 per share. Taking all the above factors into
consideration, the company now forecasts full year 2008 earnings per share to
be in the range of $2.70 to $2.80 compared to its previous guidance of $3.00
to $3.20.
Third Quarter 2008
For the third quarter of 2008, net revenue yields are expected to increase
approximately 4.0 percent (approximately 1.0 percent on a constant dollar
basis). Net cruise costs excluding fuel for the third quarter 2008 are
expected to be up modestly on a constant dollar basis. Based on current spot
prices for fuel, third quarter 2008 fuel expense is expected to increase by
$241 million compared to 2007, which reduces earnings by $0.30 per share. As a
result, the company expects earnings for the third quarter of 2008 to be in
the range of $1.56 to $1.58 per share, down from $1.67 per share in 2007.
During the third quarter, the company will add two new ships to its fleet.
Holland America Line's 2,104-passenger Eurodam was successfully delivered June
16, 2008, and will be named by Her Royal Majesty Queen Beatrix of Holland on
July 1, 2008; and Carnival Cruise Lines' 3,006-passenger Carnival Splendor
will be delivered on June 30, 2008. Both of these vessels will operate
European itineraries this summer, which is proving to be a popular way for
North American guests to visit Europe while paying in U.S. dollars thus
minimizing the impact of unfavorable currency exchange.

Selected Key Forecast Metrics
-----------------------------

Full Year 2008 Third Quarter 2008

Current Constant Current Constant
Dollars Dollars Dollars Dollars
Change in:
Net revenue yields 4.5 to 5.5% 2.0 to 3.0% 4.0% 1.0%
Net cruise cost
per ALBD 11.0 to 12.0% 8.5 to 9.5% 18.0% 15.0%

Full Year 2008 Third Quarter 2008

Fuel price per metric ton $594 $670
Fuel consumption (metric
tons in thousands) 3,240 819
Currency
Euro $1.53 to 1 euro $1.55 to 1 euro
Sterling $1.97 to 1 pound $1.96 to 1 pound

The company has scheduled a conference call with analysts at 10:00 a.m.
EDT (3:00 p.m. BST) today to discuss its 2008 second quarter earnings. This
call can be listened to live, and additional information can be obtained, via
Carnival Corporation & plc's Web site at www.carnivalcorp.com and
www.carnivalplc.com.
Carnival Corporation & plc is the largest cruise vacation group in the
world, with a portfolio of cruise brands in North America, Europe and
Australia, comprised of Carnival Cruise Lines, Holland America Line, Princess
Cruises, The Yachts of Seabourn, AIDA Cruises, Costa Cruises, Cunard Line,
Ibero Cruises, Ocean Village, P&O Cruises and P&O Cruises Australia.
Together, these brands operate 87 ships totaling more than 164,000 lower
berths with 19 new ships scheduled to be delivered between June 2008 and June
2012. Carnival Corporation & plc also operates Holland America Tours and
Princess Tours, the leading tour companies in Alaska and the Canadian Yukon.
Traded on both the New York and London Stock Exchanges, Carnival Corporation &
plc is the only group in the world to be included in both the S&P 500 and the
FTSE 100 indices.
Cautionary note concerning factors that may affect future results
Some of the statements contained in this earnings release are "forward-
looking statements" that involve risks, uncertainties and assumptions with
respect to Carnival Corporation & plc, including some statements concerning
future results, outlook, plans, goals and other events which have not yet
occurred. These statements are intended to qualify for the safe harbors from
liability provided by Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. We have tried, whenever possible,
to identify these statements by using words like "will," "may," "believe,"
"expect," "anticipate," "forecast," "future," "intend," "plan," and "estimate"
and similar expressions. Because forward-looking statements involve risks and
uncertainties, there are many factors that could cause Carnival Corporation &
plc's actual results, performance or achievements to differ materially from
those expressed or implied in this earnings release. Forward-looking
statements include those statements which may impact the forecasting of
Carnival Corporation and plc's earnings per share, net revenue yields, booking
levels, pricing, occupancy, operating, financing and/or tax costs, fuel costs,
costs per available lower berth day, estimates of ship depreciable lives and
residual values, outlook or business prospects. These factors include, but are
not limited to, the following: general economic and business conditions and
perceptions of these conditions that may adversely impact the levels of
Carnival Corporation & plc's potential vacationers' discretionary income and
this group's confidence in the U.S. and other economies and, consequently
reduce Carnival Corporation & plc's cruise brands' net revenue yields; the
international political climate, armed conflicts and terrorist attacks and
threats thereof, availability and pricing of air services and other world
events, and their impact on the demand for Carnival Corporation & plc cruises;
conditions in the cruise and land-based vacation industries, including
competition from other cruise ship operators and providers of other vacation
alternatives and over capacity offered by cruise ship and land-based vacation
alternatives; accidents, adverse weather conditions or natural disasters,
such as hurricanes and earthquakes and other incidents (including machinery
and equipment failures or improper operation thereof) which could cause the
alteration of itineraries or cancellation of a cruise or series of cruises,
and the impact of the spread of contagious diseases, all of which could affect
the health, safety, security and/or vacation satisfaction of Carnival
Corporation & plc guests; adverse publicity concerning the cruise industry in
general, or Carnival Corporation & plc in particular, could impact the demand
for Carnival Corporation & plc's cruises; lack of acceptance of new
itineraries, products and services by Carnival Corporation & plc's guests;
changing consumer preferences, which may, among other things, adversely impact
the demand for cruises; the impact of changes in and compliance with laws and
regulations relating to environmental, health, safety, security, tax and other
regulatory regimes under which Carnival Corporation & plc operate; the impact
of increased global fuel demand, a weakening U.S. dollar, fuel supply
disruptions and/or other events on Carnival Corporation & plc ships' fuel and
other expenses; the impact on Carnival Corporation & plc future fuel expenses
of implementing proposed International Maritime Organization regulations
which, if approved, would require the use of higher priced low sulfur fuels in
certain cruising areas, which could adversely impact the cruise industry; the
impact of changes in operating and financing costs, including changes in
foreign currency exchange rates and interest rates and food, insurance,
payroll and security costs; the ability of Carnival Corporation & plc to
implement its shipbuilding programs, including purchasing ships for our North
American cruise brands from European shipyards on terms that are favorable or
consistent with Carnival Corporation & plc's expectations; Carnival
Corporation & plc's ability to implement its brand strategies and to continue
to operate and expand its business internationally; Carnival Corporation &
plc's future operating cash flow may not be sufficient to fund future
obligations and Carnival Corporation & plc may not be able to obtain
financing, if necessary, on terms that are favorable or consistent with its
expectations; Carnival Corporation & plc's ability to attract and retain
qualified shipboard crew and maintain good relations with employee unions;
continuing financial viability of Carnival Corporation & plc's travel agent
distribution system and air service providers; the impact of Carnival
Corporation & plc self-insuring against various risks and its inability to
obtain insurance for certain risks at reasonable rates; disruptions and other
impairments to Carnival Corporation & plc's information technology networks;
lack of continued availability of attractive port destinations; risks
associated with the DLC structure, including the uncertainty of its tax
status; and Carnival Corporation & plc's ability to successfully implement
cost reduction plans. Forward-looking statements should not be relied upon as
a prediction of actual results. Subject to any continuing obligations under
applicable law or any relevant listing rules, Carnival Corporation & plc
expressly disclaim any obligation to disseminate, after the date of this
release, any updates or revisions to any such forward-looking statements to
reflect any change in expectations or events, conditions or circumstances on
which any such statements are based.

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Six Months Ended
May 31, May 31,
-------------------- --------------------
2008 2007 2008 2007
---- ---- ---- ----
(in millions, except per share data)

Revenues
Cruise
Passenger tickets $2,588 $2,181 $5,026 $4,231
Onboard and other 743 678 1,445 1,304
Other 47 41 59 53
------ ------ ------ ------
3,378 2,900 6,530 5,588
------ ------ ------ ------
Costs and Expenses
Operating
Cruise
Commissions,
transportation and
other 525 439 1,083 910
Onboard and other 121 109 246 220
Fuel 425 254 817 474
Payroll and related 365 321 725 632
Food 210 181 417 356
Other ship operating 469 416 923 802

Other 44 43 62 60
------ ------ ------ ------
Total 2,159 1,763 4,273 3,454
Selling and administrative 425 406 850 790

Depreciation and amortization 312 272 613 532
------ ------ ------ ------
2,896 2,441 5,736 4,776
------ ------ ------ ------

Operating Income 482 459 794 812
------ ------ ------ ------

Nonoperating (Expense) Income
Interest income 12 17 22 27
Interest expense, net of
capitalized interest (102) (94) (200) (178)
Other income (expense), net 4 (1) 6 (1)
------ ------ ------ ------
(86) (78) (172) (152)
------ ------ ------ ------

Income Before Income Taxes 396 381 622 660

Income Tax (Expense) Benefit,
Net (6) 9 4 13
------ ------ ------ ------

Net Income $390 $390 $ 626 $673
====== ====== ====== ======

Earnings Per Share
Basic $0.50 $0.49 $0.80 $0.85
====== ====== ====== ======
Diluted $0.49 $0.48 $0.78 $0.83
====== ====== ====== ======

Dividends Per Share $0.40 $0.35 $0.80 $0.625
====== ====== ====== ======

Weighted-Average Shares
Outstanding - Basic 786 794 786 794
====== ====== ====== ======
Weighted-Average Shares
Outstanding - Diluted 819 829 819 829
====== ====== ====== ======

CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS

May 31, November 30, May 31,
2008 2007 2007
---- ---- ----
(in millions, except par values)

ASSETS
Current Assets
Cash and cash equivalents $988 $943 $1,859
Short-term investments 8 17 214
Trade and other receivables, net 542 436 401
Inventories 349 331 282
Prepaid expenses and other 292 249 263
------- ------- -------
Total current assets 2,179 1,976 3,019
------- ------- -------

Property and Equipment, Net 27,666 26,639 25,019

Goodwill 3,614 3,610 3,331

Trademarks 1,393 1,393 1,328

Other Assets 620 563 490
------- ------- -------
$35,472 $34,181 $33,187
======= ======= =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $145 $115 $1,075
Current portion of long-term debt 1,386 1,028 1,457
Convertible debt subject to current
put options 230 1,396 1,170
Accounts payable 454 561 498
Accrued liabilities and other 1,269 1,353 1,209
Customer deposits 3,605 2,807 3,200
------- ------- -------
Total current liabilities 7,089 7,260 8,609
------- ------- -------

Long-Term Debt 7,689 6,313 5,425

Other Long-Term Liabilities and Deferred
Income 764 645 574

Shareholders' Equity
Common stock of Carnival Corporation;
$0.01 par value; 1,960 shares
authorized; 643 at 2008 and November
2007 and 642 shares at May 2007 issued 6 6 6
Ordinary shares of Carnival plc; $1.66
par value; 226 shares authorized; 213
shares at 2008 and 2007 issued 354 354 354
Additional paid-in capital 7,653 7,599 7,556
Retained earnings 12,907 12,921 11,778
Accumulated other comprehensive income 1,306 1,296 772
Treasury stock; 19 shares at 2008 and
November 2007 and 18 shares at
May 2007 of Carnival Corporation and
51 shares at 2008, 50 shares at
November 2007 and 42 shares at May
2007 of Carnival plc, at cost (2,296) (2,213) (1,887)
------- ------- -------
Total shareholders' equity 19,930 19,963 18,579
------- ------- -------
$35,472 $34,181 $33,187
======= ======= =======

CARNIVAL CORPORATION & PLC
SELECTED INFORMATION

Three Months Ended Six Months Ended
May 31, May 31,
-------------------- --------------------
2008 2007 2008 2007
---- ---- ---- ----
(in millions, except statistical information)

STATISTICAL INFORMATION
Passengers carried
(in thousands) 1,985 1,832 3,896 3,581
Occupancy percentage 104.8% 103.7% 104.5% 103.9%
Fuel cost per metric ton (a) $530 $333 $514 $317

CASH FLOW INFORMATION
Cash from operations $1,442 $1,494 $1,815 $2,091
Capital expenditures $1,335 $1,493 $1,593 $2,130
Dividends paid $ 314 $218 $ 630 $435

SEGMENT INFORMATION
Revenues
Cruise $3,331 $2,859 $6,471 $5,535
Other 65 55 79 69
Intersegment elimination (18) (14) (20) (16)
------ ------ ------ ------
$3,378 $2,900 $6,530 $5,588
====== ====== ====== ======

Operating expenses
Cruise $2,115 $1,720 $4,211 $3,394
Other 62 57 82 76
Intersegment elimination (18) (14) (20) (16)
------ ------ ------ ------
$2,159 $1,763 $4,273 $3,454
====== ====== ====== ======

Selling and administrative
expenses
Cruise $416 $398 $833 $774
Other 9 8 17 16
------ ------ ------ ------
$425 $406 $850 $790
====== ====== ====== ======
Depreciation and
amortization
Cruise $303 $263 $595 $514
Other 9 9 18 18
------ ------ ------ ------
$312 $272 $613 $532
====== ====== ====== ======

Operating income (loss)
Cruise $497 $478 $832 $853
Other (15) (19) (38) (41)
------ ------ ------ ------
$482 $459 $794 $812
====== ====== ====== ======

(a) Fuel cost per metric ton is calculated by dividing the cost of our
fuel by the number of metric tons consumed.

CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES

Gross and net revenue yields were computed by dividing the gross or net
revenues, without rounding, by ALBDs as follows:
Three Months Ended Six Months Ended
May 31, May 31,
-------------------- --------------------
2008 2007 2008 2007
---- ---- ---- ----
(in millions, except ALBDs and yields)

Cruise revenues
Passenger tickets $2,588 $2,181 $5,026 $4,231
Onboard and other 743 678 1,445 1,304
---------- ---------- ---------- ----------
Gross cruise revenues 3,331 2,859 6,471 5,535
Less cruise costs
Commissions,
transportation and
other (525) (439) (1,083) (910)
Onboard and other (121) (109) (246) (220)
---------- ---------- ---------- ----------
Net cruise revenues (a) $2,685 $2,311 $5,142 $4,405
========== ========== ========== ==========

ALBDs (b) 14,480,881 13,369,111 28,642,170 26,187,929
========== ========== ========== ==========

Gross revenue yields (a) $230.04 $213.87 $225.92 $211.35
========== ========== ========== ==========

Net revenue yields (a) $185.45 $172.90 $179.52 $168.21
========== ========== ========== ==========

Gross and net cruise costs per ALBD were computed by dividing the gross or
net cruise costs, without rounding, by ALBDs as follows:
Three Months Ended Six Months Ended
May 31, May 31,
-------------------- --------------------
2008 2007 2008 2007
---- ---- ---- ----
(in millions, except ALBDs and costs per ALBD)

Cruise operating expenses $2,115 $1,720 $4,211 $3,394
Cruise selling and
administrative expenses 416 398 833 774
---------- ---------- ---------- ----------
Gross cruise costs 2,531 2,118 5,044 4,168
Less cruise costs included
in net cruise revenues
Commissions,
transportation and
other (525) (439) (1,083) (910)
Onboard and other (121) (109) (246) (220)
---------- ---------- ---------- ----------
Net cruise costs (a) $1,885 $1,570 $3,715 $3,038
========== ========== ========== ==========

ALBDs (b) 14,480,881 13,369,111 28,642,170 26,187,929
========== ========== ========== ==========

Gross cruise costs per
ALBD (a) $174.79 $158.46 $176.12 $159.17
========== ========== ========== ==========

Net cruise costs per
ALBD (a) $130.20 $117.50 $129.72 $116.03
========== ========== ========== ==========

NOTES TO NON-GAAP FINANCIAL MEASURES

(a) We use net cruise revenues per ALBD ("net revenue yields") and net
cruise costs per ALBD as significant non-GAAP financial measures of our cruise
segment financial performance. We believe that net revenue yields are
commonly used in the cruise industry to measure a company's cruise segment
revenue performance. This measure is also used for revenue management
purposes. In calculating net revenue yields, we use "net cruise revenues"
rather than "gross cruise revenues." We believe that net cruise revenues is a
more meaningful measure in determining revenue yield than gross cruise
revenues because it reflects the cruise revenues earned by us net of our most
significant variable costs, which are travel agent commissions, cost of air
transportation and certain other variable direct costs associated with onboard
and other revenues. Substantially all of our remaining cruise costs are
largely fixed once our ship capacity levels have been determined, except for
the impact of changing prices.
Net cruise costs per ALBD is the most significant measure we use to
monitor our ability to control our cruise segment costs rather than gross
cruise costs per ALBD. In calculating net cruise costs, we exclude the same
variable costs that are included in the calculation of net cruise revenues.
This is done to avoid duplicating these variable costs in these two non-GAAP
financial measures.
We have not provided estimates of future gross revenue yields or future
gross cruise costs per ALBD because the reconciliations of forecasted net
cruise revenues to forecasted gross cruise revenues or forecasted net cruise
costs to forecasted cruise operating expenses would require us to forecast,
with reasonable accuracy, the amount of air and other transportation costs
that our forecasted cruise passengers would elect to purchase from us (the
"air/sea mix"). Since the forecasting of future air/sea mix involves several
significant variables that are relatively difficult to forecast and the
revenues from the sale of air and other transportation approximate the costs
of providing that transportation, management focuses primarily on forecasts of
net cruise revenues and costs rather than gross cruise revenues and costs.
This does not impact, in any material respect, our ability to forecast our
future results, as any variation in the air/sea mix has no material impact on
our forecasted net cruise revenues or forecasted net cruise costs. As such,
management does not believe that this reconciling information would be
meaningful.
In addition, because a significant portion of Carnival Corporation & plc's
operations utilize the euro or sterling to measure their results and financial
condition, the translation of those operations to our U.S. dollar reporting
currency results in increases in reported U.S. dollar revenues and expenses if
the U.S. dollar weakens against these foreign currencies, and decreases in
reported U.S. dollar revenues and expenses if the U.S. dollar strengthens
against these foreign currencies. Accordingly, we also monitor these two non-
GAAP financial measures assuming the current period currency exchange rates
have remained constant with the prior year's comparable period rates, or on a
"constant dollar basis," in order to remove the impact of changes in exchange
rates on our non-U.S. dollar cruise operations. We believe that this is a
useful measure because it provides a comparative view of the growth of our
business in a fluctuating currency exchange rate environment.
On a constant dollar basis, net cruise revenues and net cruise costs would
be $2.6 billion and $1.8 billion for the three months ended May 31, 2008 and
$5.0 billion and $3.6 billion for the six months ended May 31, 2008,
respectively. On a constant dollar basis, gross cruise revenues and gross
cruise costs would be $3.2 billion and $2.4 billion for the three months ended
May 31, 2008 and $6.3 billion and $4.9 billion for the six months ended May
31, 2008, respectively. In addition, our non-U.S. dollar cruise operations'
depreciation and net interest expense were impacted by the changes in exchange
rates for the three and six months ended May 31, 2008, compared to the prior
year's comparable periods.
(b) ALBDs is a standard measure of passenger capacity for the period. It
assumes that each cabin we offer for sale accommodates two passengers. ALBDs
are computed by multiplying passenger capacity by revenue-producing ship
operating days in the period.
SOURCE Carnival Corporation

Media, US: Tim Gallagher of Carnival Corporation & plc, +1-305-599-2600, ext.
16000, or UK: Richard Jacques or Clare Barclay, both of Brunswick Group, 44
(0) 20 7404 5959, for Carnival Corporation & plc; or Investors, US & UK: Beth
Roberts of Carnival Corporation & plc, +1-305-406-4832