Carnival Regulatory News (CCL)

Carnival PLC - Carnival Corp & plc Third Quarter Results

PR Newswire

London, September 27

Carnival Corporation & plc Reports Record Third Quarter Results And Authorizes Replenishment Of $1 Billion Share Repurchase Program

Record third quarter revenues and earnings

MIAMI, Sept. 27, 2018 /PRNewswire/ -- Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) announced U.S. GAAP net income of $1.7 billion, or $2.41 diluted EPS, for the third quarter of 2018, higher than U.S. GAAP net income for the third quarter of 2017 of $1.3 billion, or $1.83 diluted EPS. Third quarter 2018 adjusted net income of $1.7 billion, or $2.36 adjusted EPS, was higher than adjusted net income of $1.7 billion, or $2.29 adjusted EPS, for the third quarter of 2017. Adjusted net income excludes unrealized gains and losses on fuel derivatives and other net charges, totaling $34 million in net gains for the third quarter of 2018 and unrealized gains on fuel derivatives of $65 million and impairments and other net charges of $395 million for the third quarter of 2017. Revenues for the third quarter of 2018 were $5.8 billion, higher than the $5.5 billion in the prior year.

Also in the third quarter, the company authorized the replenishment of its $1.0 billion share repurchase program covering both Carnival Corporation common stock traded on the New York Stock Exchange and Carnival plc ordinary shares traded on the London Stock Exchange. Repurchases will take place in the open market or privately negotiated transactions in accordance with applicable laws, rules and regulations. The share repurchases are subject to prevailing market conditions and other considerations and may continue during any closed periods. All shares repurchased will initially be held in treasury.

Carnival Corporation & plc President and Chief Executive Officer Arnold Donald stated, "Strong execution delivered the highest quarterly performance in our company's history, overcoming fuel and currency headwinds. At the same time, our strong cash flow and balance sheet enabled us to accelerate our opportunistic share repurchase program, investing almost $750 million in Carnival stock since the beginning of the third quarter, bringing the total investment to $4.4 billion in just three years, and leading to the second replenishment of our $1.0 billion repurchase program this year alone."

Key information for the third quarter of 2018 compared to the third quarter of 2017:

Highlights from the third quarter include the signing of an agreement between Princess Cruises and Italian shipbuilder Fincantieri S.p.A to build two new liquefied natural gas ("LNG") cruise ships that will be delivered in 2023 and 2025, bringing the total to 11 LNG cruise ships on order. P&O Cruises (Australia) announced the sale of Pacific Jewel, which will leave the fleet in March 2019; Holland America Line announced the sale of Prinsendam,  which will leave the fleet in July 2019; and P&O Cruises (UK) announced the sale of Oriana,which will leave the fleet in August 2019, bringing the total to four ships leaving the fleet in 2019. Seabourn received approval to begin sailing to Cuba from Miami and San Juan, becoming our third cruise brand currently approved to sail to Cuba. The company released its 2017 Sustainability Report and achieved its goal to reduce its carbon footprint by 25 percent three years ahead of schedule.

2018 Outlook

Based on the third quarter results and booking strength for the fourth quarter of 2018, the company now expects full year 2018 net revenue yields in constant currency to be up approximately 3.5 percent compared to the prior year, better than June guidance of up approximately 3.0 percent. The company expects full year net cruise costs excluding fuel per ALBD in constant currency compared to the prior year to be up approximately 1.5 percent, versus June guidance of approximately 1.0 percent, primarily due to the accounting treatment for ships sold during the quarter. Changes in fuel prices (including realized fuel derivatives) and currency exchange rates are expected to decrease earnings by $0.06 per share compared to June guidance and $0.18 per share compared to the prior year.

Taking the above factors into consideration, the company expects full year 2018 adjusted earnings per share to be in the range of $4.21 to $4.25 compared to 2017 adjusted earnings per share of $3.82.

Donald commented, "We are on track to achieve double digit return on invested capital in 2018 as we deliver upon our strategy to create demand in excess of measured capacity growth, all while containing costs and leveraging our industry leading scale. Going forward, we remain on a path toward continued growth in earnings and returns, driven to a greater degree by capacity increases as we add more efficient ships, replacing less efficient capacity. We believe the plans we have put in place will maximize returns to shareholders over time as we continue to execute in an industry that is both under-penetrated and capacity constrained."

Donald added, "At the same time, we remain committed to returning cash to shareholders as evidenced by the growth in our recurring dividend, currently distributing $1.4 billion annually, accompanied by our recently replenished share repurchase program."

Fourth Quarter 2018 Outlook

Fourth quarter constant currency net revenue yields are expected to be up approximately 1.5 to 2.5 percent compared to fourth quarter 2017. Net cruise costs excluding fuel per ALBD in constant currency for the fourth quarter are expected to decrease by approximately 1.0 to 2.0 percent compared to fourth quarter 2017. Changes in fuel prices (including realized derivatives) and currency exchange rates are expected to decrease earnings by $0.11 per share compared to the prior year. Based on the above factors, the company expects adjusted earnings per share for the fourth quarter 2018 to be in the range of $0.65 to $0.69 versus 2017 adjusted earnings per share of $0.63.

First Half of 2019

At this time, cumulative advanced bookings for the first half of 2019 are ahead of the prior year at prices that are in line with the prior year. Since June, booking volumes for the first half of next year have been running significantly higher than the prior year at lower prices compared to the prior year. More recently, during the first half of September, booking volumes for the first half of next year have also been running significantly higher than the prior year but at higher prices compared to the prior year. Based on these booking trends, the company expects continued net revenue yield improvement for the first half of 2019, albeit with increases less than the net revenue yield guidance for the fourth quarter of 2018, primarily due to comparisons to a very strong prior year.

Selected Key Metrics

Conference Call

The company has scheduled a conference call with analysts at 10:00 a.m. EDT (3:00 p.m. BST) today to discuss its 2018 third quarter results. This call can be listened to live, and additional information can be obtained, via Carnival Corporation & plc's website at www.carnivalcorp.com and www.carnivalplc.com.

Carnival Corporation & plc is the world's largest leisure travel company and among the most profitable and financially strong in the cruise and vacation industries, with a portfolio of 10 dynamic brands that include nine of the world's leading cruise lines. With operations in North America, Australia, Europe and Asia, its portfolio features Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, P&O Cruises (Australia), Costa Cruises, AIDA Cruises, P&O Cruises (UK) and Cunard, as well as Fathom, the corporation's immersion and enrichment experience brand.

Together, the corporation's cruise lines operate 103 ships with 234,000 lower berths visiting over 700 ports around the world, with 22 new ships scheduled to be delivered between 2018 and 2025. Carnival Corporation & plc also operates Holland America Princess Alaska Tours, the leading tour company 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.

In 2017, Fast Company recognized Carnival Corporation as being among the "Top 10 Most Innovative Companies" in both the design and travel categories. Fast Company specifically recognized Carnival Corporation for its work in developing Ocean Medallion™, a high-tech wearable device that enables the world's first interactive guest experience platform capable of transforming vacation travel into a highly personalized and elevated level of customized service.

Additional information can be found on www.carnival.com, www.princess.com, www.hollandamerica.com, www.seabourn.com, www.pocruises.com.au, www.costacruise.com, www.aida.de, www.pocruises.com, www.cunard.com, and www.fathom.org.

Cautionary Note Concerning Factors That May Affect Future Results

Carnival Corporation and Carnival plc and their respective subsidiaries are referred to collectively in this document as "Carnival Corporation & plc," "our," "us" and "we." Some of the statements, estimates or projections contained in this document are "forward-looking statements" that involve risks, uncertainties and assumptions with respect to us, including some statements concerning future results, outlooks, 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. All statements other than statements of historical facts are statements that could be deemed forward-looking. These statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate and the beliefs and assumptions of our management. We have tried, whenever possible, to identify these statements by using words like "will," "may," "could," "should," "would," "believe," "depends," "expect," "goal," "anticipate," "forecast," "project," "future," "intend," "plan," "estimate," "target," "indicate," "outlook," and similar expressions of future intent or the negative of such terms.

Forward-looking statements include those statements that relate to our outlook and financial position including, but not limited to, statements regarding:

Because forward-looking statements involve risks and uncertainties, there are many factors that could cause our actual results, performance or achievements to differ materially from those expressed or implied by our forward-looking statements. This note contains important cautionary statements of the known factors that we consider could materially affect the accuracy of our forward-looking statements and adversely affect our business, results of operations and financial position. It is not possible to predict or identify all such risks. There may be additional risks that we consider immaterial or which are unknown. These factors include, but are not limited to, the following:

The ordering of the risk factors set forth above is not intended to reflect our indication of priority or likelihood.

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 stock exchange rules, we expressly disclaim any obligation to disseminate, after the date of this document, 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.

Notes to Statistical Information

Explanations of Non-GAAP Financial Measures

Non-GAAP Financial Measures

We use net cruise revenues per ALBD ("net revenue yields"), net cruise costs excluding fuel per ALBD, adjusted net income and adjusted earnings per share as non-GAAP financial measures of our cruise segments' and the company's financial performance. These non-GAAP financial measures are provided along with U.S. GAAP gross cruise revenues per ALBD ("gross revenue yields"), gross cruise costs per ALBD and U.S. GAAP net income and U.S. GAAP earnings per share. 

Net revenue yields and net cruise costs excluding fuel per ALBD enable us to separate the impact of predictable capacity or ALBD changes from price and other changes that affect our business. We believe these non-GAAP measures provide useful information to investors and expanded insight to measure our revenue and cost performance as a supplement to our U.S. GAAP consolidated financial statements.

Under U.S. GAAP, the realized and unrealized gains and losses on fuel derivatives not qualifying as fuel hedges are recognized currently in earnings. We believe that unrealized gains and losses on fuel derivatives are not an indication of our earnings performance since they relate to future periods and may not ultimately be realized in our future earnings. Therefore, we believe it is more meaningful for the unrealized gains and losses on fuel derivatives to be excluded from our net income and earnings per share and, accordingly, we present adjusted net income and adjusted earnings per share excluding these unrealized gains and losses.

We believe that gains and losses on ship sales, impairment charges, restructuring and other expenses are not part of our core operating business and are not an indication of our future earnings performance. Therefore, we believe it is more meaningful for gains and losses on ship sales, impairment charges, and restructuring and other non-core gains and charges to be excluded from our net income and earnings per share and, accordingly, we present adjusted net income and adjusted earnings per share excluding these items.

The presentation of our non-GAAP financial information is not intended to be considered in isolation from, as substitute for, or superior to the financial information prepared in accordance with U.S. GAAP. It is possible that our non-GAAP financial measures may not be exactly comparable to the like-kind information presented by other companies, which is a potential risk associated with using these measures to compare us to other companies.

Net revenue yields are commonly used in the cruise industry to measure a company's cruise segment revenue performance and for revenue management purposes. We use "net cruise revenues" rather than "gross cruise revenues" to calculate net revenue yields. 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 net of our most significant variable costs, which are travel agent commissions, cost of air and other transportation, certain other costs that are directly associated with onboard and other revenues and credit and debit card fees. 

Net passenger ticket revenues reflect gross passenger ticket revenues, net of commissions, transportation and other costs.

Net onboard and other revenues reflect gross onboard and other revenues, net of onboard and other cruise costs.

Net cruise costs excluding fuel per ALBD is the measure we use to monitor our ability to control our cruise segments' costs rather than gross cruise costs per ALBD. We exclude the same variable costs that are included in the calculation of net cruise revenues as well as fuel expense to calculate net cruise costs without fuel to avoid duplicating these variable costs in our non-GAAP financial measures. Substantially all of our net cruise costs excluding fuel are largely fixed, except for the impact of changing prices, once the number of ALBDs has been determined.

Reconciliation of Forecasted Data

We have not provided a reconciliation of forecasted gross cruise revenues to forecasted net cruise revenues or forecasted gross cruise costs to forecasted net cruise costs without fuel or forecasted U.S. GAAP net income to forecasted adjusted net income or forecasted U.S. GAAP earnings per share to forecasted adjusted earnings per share because preparation of meaningful U.S. GAAP forecasts of gross cruise revenues, gross cruise costs, net income and earnings per share would require unreasonable effort. We are unable to predict, without unreasonable effort, the future movement of foreign exchange rates and fuel prices. While we forecast realized gains and losses on fuel derivatives by applying current Brent prices to the derivatives that settle in the forecast period, we do not forecast the impact of unrealized gains and losses on fuel derivatives because we do not believe they are an indication of our future earnings performance. We are unable to determine the future impact of gains or losses on ships sales, restructuring expenses and other non-core gains and charges.

Constant Dollar and Constant Currency

Our operations primarily utilize the U.S. dollar, Australian dollar, euro and sterling as functional currencies to measure results and financial condition. Functional currencies other than the U.S. dollar subject us to foreign currency translational risk. Our operations also have revenues and expenses that are in currencies other than their functional currency, which subject us to foreign currency transactional risk.

We report net revenue yields, net passenger revenue yields, net onboard and other revenue yields and net cruise costs excluding fuel per ALBD on a "constant dollar" and "constant currency" basis assuming the 2018 periods' currency exchange rates have remained constant with the 2017 periods' rates. These metrics facilitate a comparative view for the changes in our business in an environment with fluctuating exchange rates.

Constant dollar reporting removes only the impact of changes in exchange rates on the translation of our operations.

Constant currency reporting removes the impact of changes in exchange rates on the translation of our operations (as in constant dollar) plus the transactional impact of changes in exchange rates from revenues and expenses that are denominated in a currency other than the functional currency.

Examples:

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