CARNIVAL CORPORATION MIAMI, Sept. 23, 2014 /PRNewswire/ -- Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) announced non-GAAP net income of $1.2 billion, or $1.58 diluted EPS for the third quarter of 2014 compared to non-GAAP net income for the third quarter of 2013 of $1.1 billion, or $1.38 diluted EPS. For the third quarter of 2014, U.S. GAAP net income, which included net unrealized gains on fuel derivatives of $15 million, was $1.2 billion, or $1.60 diluted EPS. For the third quarter of 2013, U.S. GAAP net income, which included impairments net of unrealized gains on fuel derivatives of $139 million, was $934 million, or $1.20 diluted EPS. Revenues for the third quarter of 2014 were $4.9 billion, compared with $4.7 billion the prior year.
Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted, "Strong close-in demand and higher onboard spending helped drive significantly better than expected third quarter results and 15 percent year-over-year earnings improvement. Our Asia operations performed particularly well during the quarter, driven by a double-digit yield increase in our China program, further solidifying our industry leading presence in this important emerging cruise market. Our continental European operations also enjoyed strong yield and profit improvement in the quarter, reflecting continued progress for the Costa brand. In addition, our summer Caribbean product successfully attracted nearly 20 percent more guests than the prior year, reinforcing the popularity of the world's largest cruising region," Donald added.
Key metrics for the third quarter 2014 compared to the prior year were as follows:
-- On a constant dollar basis, net revenue yields (net revenue per
available lower berth day or "ALBD") increased 1.8 percent for 3Q 2014,
better than June guidance of flat to down 1 percent. Gross revenue
yields increased 2.5 percent in current dollars.
-- Net cruise costs excluding fuel per ALBD increased 0.5 percent in
constant dollars, better than June guidance of up 1 to 2 percent due to
the timing of certain expenses. Gross cruise costs including fuel per
ALBD in current dollars decreased 5.8 percent.
-- Fuel prices declined 3.5 percent to $650 per metric ton for 3Q 2014 from
$674 per metric ton in 3Q 2013 and were less than June guidance of $673
per metric ton.
-- Fuel consumption per ALBD decreased over 3 percent in 3Q 2014 compared
to the prior year.
During the third quarter, YouGov's BrandIndex ranked Carnival Cruise Lines the most-improved U.S. brand in consumer perception in its mid-year 2014 Buzz Rankings Report. A number of initiatives introduced by Carnival Cruise Lines, such as the Great Vacation Guarantee, Carnival LIVE Concert Series, Camp Ocean and Seuss at Sea, appear to be resonating with consumers. In addition, Princess Cruises recently announced an agreement with Italian shipbuilder Fincantieri to construct a new 3,600-berth vessel, which will enter service in 2017 based on the highly popular design platform introduced by sister ships Royal Princess and Regal Princess. In keeping with the company's strategy for measured capacity growth, this is the only newbuild scheduled to be delivered in 2017.
In June, Seabourn signed a multi-year agreement with UNESCO (United Nations Educational Scientific and Cultural Organization) to support the organization's mission of safeguarding unique cultural and natural features around the world. That announcement came on the heels of a five year agreement to support The Nature Conservancy's global marine protection priorities. These programs, combined with the company's commitment to install exhaust gas cleaning technology on more than 70 ships, are among many initiatives underway to support the preservation of marine, environmental and cultural resources around the globe.
Outlook
Based on the strength of third quarter net revenue yields and current booking trends, the company has increased its expectations for full year 2014 net revenue yields on a constant dollar basis to be in line with the prior year, from its previous guidance of down slightly. Excluding fuel, the company expects full year net cruise costs per ALBD to be slightly higher compared to the prior year on a constant dollar basis. Taking the above factors into consideration, the company has increased its forecast for full year 2014 non-GAAP diluted earnings per share to be in the range of $1.84 to $1.88, better than both June guidance of $1.60 to $1.75 and 2013 non-GAAP diluted earnings per share of $1.58.
At this time, cumulative advance bookings for the first half of 2015 are ahead of the prior year at higher prices. Over the last quarter, fleetwide booking volumes for the first half of 2015 have been running ahead of the prior year at higher prices.
"The sustained improvement in booking trends as we have progressed through the year combined with yield increases in the second half of 2014 builds confidence that we will see continued yield growth in 2015 and beyond," said Donald. He also noted that new product initiatives and innovative marketing campaigns implemented across the brands over the past year are driving the improvement in consumer demand and pricing trends.
For fiscal 2015, net cruise costs excluding fuel per ALBD are expected to increase approximately three percent due primarily to a significantly higher level of dry-dock days scheduled next year to install new air emissions technology as well as other technology designed to improve fuel efficiency. The company expects the exhaust gas cleaning system or scrubber technology will be installed on approximately 70 percent of its fleet by 2016, thus enabling the company to meet the 2015 stricter air emissions standards as well as mitigate escalating fuel costs that will result from the new requirements. The company anticipates the new regulations will result in higher fuel costs in 2015 of approximately $0.10 per share with that increase expected to be reduced by half in 2016 and mostly offset in 2017 based on the system roll-out. Also, in 2016, the company will revert back to a more normalized dry-dock schedule, which will offset approximately half of the increase in 2015 net cruise costs excluding fuel.
"Our implementation of the air emissions technology is a sound investment in our company's future and more importantly it will benefit the environment for years to come," said Donald. "These technology investments are laying a solid foundation towards sustainable earnings improvement. Combined with our other strategic initiatives designed to foster revenue growth and contain costs, we are gaining momentum towards our goal of achieving double digit returns on investment over time," Donald added.
Fourth Quarter 2014 Outlook
Fourth quarter constant dollar net revenue yields are expected to be up 1.5 to 2.5 percent compared to the prior year. Net cruise costs excluding fuel per ALBD for the fourth quarter are expected to be lower by 1.0 to 2.0 percent on a constant dollar basis compared to the prior year.
Based on the above factors, the company expects non-GAAP diluted earnings for the fourth quarter 2014 to be in the range of $0.15 to $0.19 per share versus 2013 non-GAAP earnings of $0.04 per share.
Selected Key Forecast Metrics
Fourth Quarter
2014
---------------
Year over year change: Current Constant
Dollars Dollars
------- -------
Net revenue yields 0.5 to 1.5 to 2.5
1.5 % %
Net cruise costs excl. (2.0) to (1.0) to
fuel /ALBD (3.0)% (2.0)%
Full Year 2014 Fourth Quarter 2014
-------------- -------------------
Fuel price per metric ton $650 $635
Fuel consumption (metric tons
in thousands) 3,200 800
Currency: Euro $1.35 to EUR1 $1.30 to EUR1
Sterling $1.66 to BPS1 $1.63 to BPS1
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 2014 third quarter results. 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 company in the world, with a portfolio of cruise brands in North America, Europe, Australia and Asia, comprised of Carnival Cruise Lines, Holland America Line, Princess Cruises, Seabourn, AIDA Cruises, Costa Cruises, Cunard, Ibero Cruises, P&O Cruises (Australia) and P&O Cruises (UK).
Together, these brands operate 101 ships totaling 212,000 lower berths with eight new ships scheduled to be delivered between 2014 and 2017. Carnival Corporation & plc also operates Holland America Princess Alaska 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. Additional information can be found on www.carnival.com, www.hollandamerica.com, www.princess.com, www.seabourn.com, www.aida.de, www.costacruise.com, www.cunard.com, www.iberocruceros.com, www.pocruises.com.au and www.pocruises.com.
Cautionary Note Concerning Factors That May Affect Future Results
Carnival Corporation and Carnival plc and their respective subsidiaries are referred to collectively in this release as "Carnival Corporation & plc," "our," "us" and "we." Some of the statements, estimates or projections contained in this release 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" and similar expressions of future intent or the negative of such terms.
Forward-looking statements include those statements that may impact, among other things, the forecasting of our non-GAAP earnings per share; net revenue yields; booking levels; pricing; occupancy; operating, financing and tax costs, including fuel expenses; net cruise costs per available lower berth day; estimates of ship depreciable lives and residual values; liquidity; goodwill, ship and trademark fair values and outlook. 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 in this release. These factors include, but are not limited to, the following:
-- general economic and business conditions;
-- increases in fuel prices;
-- incidents, the spread of contagious diseases and threats thereof,
adverse weather conditions or other natural disasters and other
incidents affecting the health, safety, security and satisfaction of
guests and crew;
-- the international political climate, armed conflicts, terrorist and
pirate attacks, vessel seizures, and threats thereof, and other world
events affecting the safety and security of travel;
-- negative publicity concerning the cruise industry in general or us in
particular, including any adverse environmental impacts of cruising;
-- litigation, enforcement actions, fines or penalties;
-- economic, market and political factors that are beyond our control,
which could increase our operating, financing and other costs;
-- changes in and compliance with laws and regulations relating to the
protection of persons with disabilities, employment, environment,
health, safety, security, tax and other regulations under which we
operate;
-- our inability to implement our shipbuilding programs and ship repairs,
maintenance and refurbishments on terms that are favorable or consistent
with our expectations;
-- increases to our repairs and maintenance expenses and refurbishment
costs as our fleet ages;
-- lack of continuing availability of attractive, convenient and safe port
destinations on terms that are favorable or consistent with our
expectations;
-- continuing financial viability of our travel agent distribution system,
air service providers and other key vendors in our supply chain and
reductions in the availability of, and increases in the prices for, the
services and products provided by these vendors;
-- disruptions and other damages to our information technology and other
networks and operations, and breaches in data security;
-- failure to keep pace with developments in technology;
-- competition from and overcapacity in the cruise ship and land-based
vacation industry;
-- loss of key personnel or our ability to recruit or retain qualified
personnel;
-- union disputes and other employee relation issues;
-- disruptions in the global financial markets or other events that may
negatively affect the ability of our counterparties and others to
perform their obligations to us;
-- the continued strength of our cruise brands and our ability to implement
our brand strategies;
-- additional risks to our international operations not generally
applicable to our U.S. operations;
-- geographic regions in which we try to expand our business may be slow to
develop and ultimately not develop how we expect;
-- our decisions to self-insure against various risks or our inability to
obtain insurance for certain risks at reasonable rates;
-- fluctuations in foreign currency exchange rates;
-- whether our future operating cash flow will be sufficient to fund future
obligations and whether we will be able to obtain financing, if
necessary, in sufficient amounts and on terms that are favorable or
consistent with our expectations;
-- risks associated with the dual listed company arrangement and
-- uncertainties of a foreign legal system as Carnival Corporation and
Carnival plc are not U.S. corporations.
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 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 INCOME
(UNAUDITED)
(in millions, except per share data)
Three Months Ended Nine Months Ended
August 31, August 31,
---------- ----------
2014 2013 2014 2013
---- ---- ---- ----
Revenues
Cruise
Passenger tickets $3,719 $3,598 $9,144 $8,951
Onboard and other 1,084 987 2,839 2,670
Tour and other 144 141 182 177
--- --- --- ---
4,947 4,726 12,165 11,798
----- ----- ------ ------
Operating Costs and Expenses
Cruise
Commissions, transportation and other 638 654 1,779 1,777
Onboard and other 165 144 392 385
Fuel 518 544 1,569 1,659
Payroll and related 485 464 1,450 1,378
Food 265 259 761 740
Other ship operating 599 769 1,825 1,951
Tour and other 84 83 130 113
--- --- --- ---
2,754 2,917 7,906 8,003
Selling and administrative 481 439 1,507 1,347
Depreciation and amortization 414 406 1,227 1,186
Ibero trademark impairment charges - 13 - 13
--- --- --- ---
3,649 3,775 10,640 10,549
----- ----- ------ ------
Operating Income 1,298 951 1,525 1,249
----- --- ----- -----
Nonoperating (Expense) Income
Interest income 2 2 6 7
Interest expense, net of capitalized interest (69) (76) (213) (237)
Gains on fuel derivatives, net 15 64 10 5
Other income (expense), net 1 (6) 12 (9)
--- --- --- ---
(51) (16) (185) (234)
--- --- ---- ----
Income Before Income Taxes 1,247 935 1,340 1,015
Income Tax Expense, Net - (1) (2) (3)
--- --- --- ---
Net Income $1,247 $934 $1,338 $1,012
====== ==== ====== ======
Earnings Per Share
Basic $1.61 $1.20 $1.72 $1.31
===== ===== ===== =====
Diluted $1.60 $1.20 $1.72 $1.30
===== ===== ===== =====
Non-GAAP Earnings Per Share-Diluted (a) $1.58 $1.38 $1.69 $1.54
===== ===== ===== =====
Dividends Declared Per Share $0.25 $0.25 $0.75 $0.75
===== ===== ===== =====
Weighted-Average Shares Outstanding - Basic 776 775 776 775
=== === === ===
Weighted-Average Shares Outstanding - Diluted 778 777 778 777
=== === === ===
(a) See the U.S. GAAP net income to non-GAAP net income reconciliation in the Non-GAAP Financial Measures included herein.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
August 31, November 30,
2014 2013
---- ----
ASSETS
Current Assets
Cash and cash equivalents $436 $462
Trade and other receivables, net 355 405
Insurance recoverables 123 381
Inventories 358 374
Prepaid expenses and other 330 315
--- ---
Total current assets 1,602 1,937
----- -----
Property and Equipment, Net 33,073 32,905
Goodwill 3,199 3,210
Other Intangibles 1,292 1,292
Other Assets 831 760
--- ---
$39,997 $40,104
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $146 $60
Current portion of long-term debt 1,754 1,408
Accounts payable 610 639
Claims reserve 225 456
Accrued liabilities and other 1,191 1,126
Customer deposits 3,130 3,031
----- -----
Total current liabilities 7,056 6,720
----- -----
Long-Term Debt 6,967 8,092
Other Long-Term Liabilities 817 736
Shareholders' Equity
Common stock of Carnival Corporation, $0.01 par value; 1,960 shares
authorized; 652 shares at 2014 and 651 shares at 2013 issued 7 7
Ordinary shares of Carnival plc, $1.66 par value; 216 shares at 2014
and 2013 issued 358 358
Additional paid-in capital 8,369 8,325
Retained earnings 19,538 18,782
Accumulated other comprehensive (loss) income (28) 161
Treasury stock, 59 shares at 2014 and 2013 of Carnival Corporation
and 32 shares at 2014 and 2013 of Carnival plc, at cost (3,087) (3,077)
------ ------
Total shareholders' equity 25,157 24,556
------ ------
$39,997 $40,104
======= =======
CARNIVAL CORPORATION & PLC
OTHER INFORMATION
Three Months Ended Nine Months Ended
August 31, August 31,
---------- ----------
2014 2013 2014 2013
---- ---- ---- ----
STATISTICAL INFORMATION
ALBDs (in thousands) (a) 19,671 19,248 56,830 55,220
Occupancy percentage (b) 109.1% 110.7% 104.8% 106.1%
Passengers carried (in thousands) 2,983 2,881 7,943 7,550
Fuel consumption in metric tons (in thousands) 797 807 2,400 2,447
Fuel consumption in metric tons per ALBD 0.041 0.042 0.042 0.044
Fuel cost per metric ton consumed $650 $674 $654 $678
Currencies
U.S. dollar to EUR1 $1.35 $1.32 $1.36 $1.32
U.S. dollar to BPS1 $1.69 $1.54 $1.67 $1.55
U.S. dollar to Australian dollar $0.94 $0.92 $0.92 $1.00
CASH FLOW INFORMATION
Cash from operations $1,120 $803 $2,793 $2,359
Capital expenditures $348 $364 $1,677 $1,812
Dividends paid $194 $193 $582 $970
(a) ALBDs is a standard measure of
passenger capacity for the period,
which we use to perform rate and
capacity variance analyses to
determine the main non-capacity
driven factors that cause our cruise
revenues and expenses to vary. ALBDs
assume that each cabin we offer for
sale accommodates two passengers and
is computed by multiplying passenger
capacity by revenue-producing ship
operating days in the period.
(b) In accordance with cruise industry
practice, occupancy is calculated
using a denominator of ALBDs, which
assumes two passengers per cabin
even though some cabins can
accommodate three or more
passengers. Percentages in excess of
100% indicate that on average more
than two passengers occupied some
cabins.
CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES
Consolidated gross and net revenue yields were computed by dividing the gross and net cruise revenues by ALBDs as follows (dollars in millions, except yields) (a)(b):
Three Months Ended August 31, Nine Months Ended August 31,
----------------------------- ----------------------------
2014 2014
Constant Constant
2014 Dollar 2013 2014 Dollar 2013
---- ------ ---- ---- ------ ----
Passenger ticket revenues $3,719 $3,659 $3,598 $9,144 $8,992 $8,951
Onboard and other revenues 1,084 1,072 987 2,839 2,812 2,670
----- ----- --- ----- ----- -----
Gross cruise revenues 4,803 4,731 4,585 11,983 11,804 11,621
----- ----- ----- ------ ------ ------
Less cruise costs
Commissions, transportation and other (638) (628) (654) (1,779) (1,745) (1,777)
Onboard and other (165) (163) (144) (392) (388) (385)
---- ---- ---- ---- ---- ----
(803) (791) (798) (2,171) (2,133) (2,162)
---- ---- ---- ------ ------ ------
Net passenger ticket revenues 3,081 3,031 2,944 7,365 7,247 7,174
Net onboard and other revenues 919 909 843 2,447 2,424 2,285
--- --- --- ----- ----- -----
Net cruise revenues $4,000 $3,940 $3,787 $9,812 $9,671 $9,459
====== ====== ====== ====== ====== ======
ALBDs 19,671,265 19,671,265 19,248,129 56,829,605 56,829,605 55,220,366
========== ========== ========== ========== ========== ==========
Gross revenue yields $244.14 $240.52 $238.20 $210.85 $207.70 $210.44
% increase (decrease) vs. 2013 2.5% 1.0% 0.2% (1.3)%
Net revenue yields $203.35 $200.30 $196.79 $172.65 $170.17 $171.28
% increase (decrease) vs. 2013 3.3% 1.8% 0.8% (0.6)%
Net passenger ticket revenue yields $156.62 $154.08 $152.96 $129.6 $127.53 $129.91
% increase (decrease) vs. 2013 2.4% 0.7% (0.2)% (1.8)%
Net onboard and other revenue yields $46.74 $46.23 $43.83 $43.05 $42.65 $41.37
% increase vs. 2013 6.6% 5.5% 4.1% 3.1%
------------------- --- --- --- ---
Consolidated gross and net cruise costs and net cruise costs excluding fuel per ALBD were computed by dividing the gross and net cruise costs and net cruise costs excluding fuel by ALBDs as follows (dollars in millions, except costs per ALBD) (a) (b):
Three Months Ended August 31, Nine Months Ended August 31,
----------------------------- ----------------------------
2014 2014
Constant Constant
2014 Dollar 2013 2014 Dollar 2013
---- ------ ---- ---- ------ ----
Cruise operating expenses $2,670 $2,637 $2,834 $7,776 $7,681 $7,890
Cruise selling and administrative expenses 479 473 436 1,501 1,481 1,341
--- --- --- ----- ----- -----
Gross cruise costs 3,149 3,110 3,270 9,277 9,162 9,231
Less cruise costs included above
Commissions, transportation and other (638) (628) (654) (1,779) (1,745) (1,777)
Onboard and other (165) (163) (144) (392) (388) (385)
(Losses) gains on ship sales and ship - - (176) 15 14 (178)
impairments, net
Net cruise costs 2,346 2,319 2,296 7,121 7,043 6,891
Less fuel (518) (518) (544) (1,569) (1,569) (1,659)
---- ---- ---- ------ ------ ------
Net cruise costs excluding fuel $1,828 $1,801 $1,752 $5,552 $5,474 $5,232
====== ====== ====== ====== ====== ======
ALBDs 19,671,265 19,671,265 19,248,129 56,829,605 56,829,605 55,220,366
========== ========== ========== ========== ========== ==========
Gross cruise costs per ALBD $160.11 $158.08 $169.89 $163.24 $161.21 $167.17
% decrease vs. 2013 (5.8)% (7.0)% (2.4)% (3.6)%
Net cruise costs per ALBD $119.32 $117.86 $119.34 $125.29 $123.93 $124.79
% (decrease) increase vs. 2013 0.0% (1.2)% 0.4% (0.7)%
Net cruise costs excluding fuel per ALBD $92.97 $91.51 $91.09 $97.69 $96.32 $94.76
% increase vs. 2013 2.1% 0.5% 3.1% 1.6%
------------------- --- --- --- ---
(See next page for Notes to
Non-GAAP Financial Measures.)
CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES (CONTINUED)
Non-GAAP fully diluted earnings per share was computed as follows (in millions, except per share data) (b):
Three Months Ended Nine Months Ended
August 31, August 31,
---------- -----------
2014 2013 2014 2013
---- ---- ---- ----
Net income - diluted
U.S. GAAP net income $1,247 $934 $1,338 $1,012
Losses (gains) on ship sales and ship impairments, net (c) - 176 (15) 163
Trademark and other impairment charges (d) - 27 - 27
Unrealized gains on fuel derivatives, net (e) (15) (64) (8) (5)
--- --- --- ---
Non-GAAP net income $1,232 $1,073 $1,315 $1,197
====== ====== ====== ======
Weighted-average shares outstanding - diluted 778 777 778 777
=== === === ===
Earnings per share - diluted
U.S. GAAP earnings per share $1.60 $1.20 $1.72 $1.30
Losses (gains) on ship sales and ship impairments, net (c) - 0.23 (0.02) 0.21
Trademark and other impairment charges (d) - 0.03 - 0.03
Unrealized gains on fuel derivatives, net (e) (0.02) (0.08) (0.01) -
----- ----- ----- ---
Non-GAAP earnings per share $1.58 $1.38 $1.69 $1.54
===== ===== ===== =====
Notes to Non-GAAP Financial Measures
(a) We use net cruise revenues per ALBD
("net revenue yields"), net cruise
costs per ALBD and net cruise
costs excluding fuel per ALBD as
significant non-GAAP financial
measures of our cruise segments'
financial performance. These
measures enable us to separate the
impact of predictable capacity
changes from the more
unpredictable rate changes that
affect our business and gains and
losses on ship sales and ship
impairments, net that are not part
of our core operating 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. generally accepted accounting
principles ("U.S. GAAP")
consolidated financial statements.
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 card fees.
Substantially all of our remaining
cruise costs are largely fixed,
except for the impact of changing
prices and food expenses, once our
ship capacity levels have been
determined.
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 passenger
ticket revenue yields and net
onboard and other revenue yields
are computed by dividing net
passenger ticket revenues and net
onboard and other revenues by
ALBDs.
Net cruise costs per ALBD and net
cruise costs excluding fuel per
ALBD are the most significant
measures 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 to calculate net
cruise costs with and without fuel
to avoid duplicating these
variable costs in our non-GAAP
financial measures. In addition,
we exclude gains and losses on
ship sales and ship impairments,
net from our calculation of net
cruise costs with and without fuel
as they are not considered part of
our core operating business.
We have not provided estimates of
future gross revenue yields or
future gross cruise costs per ALBD
because the quantitative
reconciliations of forecasted
gross cruise revenues to
forecasted net cruise revenues or
forecasted gross cruise costs to
forecasted net cruise costs would
include a significant amount of
uncertainty in projecting the
costs deducted to arrive at these
measures. As such, management
does not believe that this
reconciling information would be
meaningful.
CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES (CONTINUED)
In addition, because our Europe,
Australia & Asia ("EAA") cruise
brands utilize the euro, sterling
and Australian dollar to measure
their results and financial
condition, the translation of
those operations to our U.S.
dollar reporting currency results
in decreases in reported U.S.
dollar revenues and expenses if
the U.S. dollar strengthens
against these foreign currencies
and increases in reported U.S.
dollar revenues and expenses if
the U.S. dollar weakens against
these foreign currencies.
Accordingly, we also monitor and
report these non-GAAP financial
measures assuming the 2014 periods
currency exchange rates have
remained constant with the 2013
period rates, or on a "constant
dollar basis," in order to remove
the impact of changes in exchange
rates on the translation of our
EAA brands. We believe that this
is a useful measure since it
facilitates a comparative view of
the changes in our business in a
fluctuating currency exchange rate
environment.
(b) Our consolidated financial
statements are prepared in
accordance with U.S. GAAP. The
presentation of our non-GAAP
financial information is not
intended to be considered in
isolation from, as a substitute
for, or superior to the financial
information prepared in accordance
with U.S. GAAP. There are no
specific rules for determining our
non-GAAP current and constant
dollar financial measures and,
accordingly, they are susceptible
to varying calculations, and it is
possible that they 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.
(c) We believe that the gains and
losses on ship sales and ship
impairments, net recognized in the
three and nine months ended August
31, 2014 and 2013 are not part of
our core operating business and,
therefore, are not an indication
of our future earnings
performance. As such, we believe
it is more meaningful for gains
and losses on ship sales and ship
impairments, net to be excluded
from our net income and earnings
per share and, accordingly, we
present non-GAAP net income and
non-GAAP earnings per share
excluding these items.
(d) We believe that the trademark and
other impairment charges
recognized in the three and nine
months ended August 31, 2013 are
special charges and, therefore,
are also not an indication of our
future earnings performance. As
such, we also believe it is more
meaningful for these impairment
charges to be excluded from our
net income and earnings per share
and, accordingly, we present non-
GAAP net income and non-GAAP
earnings per share excluding these
impairment charges.
(e) 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 non-GAAP net income and
non-GAAP earnings per share
excluding these unrealized gains
and losses.
We have not included in our
earnings guidance the impact of
unrealized gains and losses on
fuel derivatives because these
unrealized amounts involve a
significant amount of uncertainty,
and we do not believe they are an
indication of our future earnings
performance. Accordingly, our
earnings guidance is presented on
a non-GAAP basis only. As a
result, we did not present a
reconciliation between forecasted
non-GAAP diluted earnings per
share guidance and forecasted U.S.
GAAP diluted earnings per share
guidance, since we do not believe
that the reconciliation
information would be meaningful.
However, we do forecast gains and
losses on fuel derivatives by
applying Brent crude oil prices to
the derivatives that settle in the
forecast period.
SOURCE Carnival Corporation & plc
