Carnival Corporation & plc Reports Third Quarter Earnings Which Marks The Company's Strongest Quarterly Non-GAAP Performance On Record

CARNIVAL CORPORATION & PLC

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in millions, except per share data)

       Three Months Ended

                 Nine Months Ended

                August 31,         

                      August 31,                       

2015

2014

2015

2014

Revenues

     Cruise

          Passenger tickets

$   3,631

$   3,719

$     8,891

$     9,144

          Onboard and other

1,102

1,084

2,918

2,839

     Tour and other

150

144

194

182

4,883

4,947

12,003

12,165

Operating Costs and Expenses

     Cruise

           Commissions, transportation and other

603

638

1,671

1,779

           Onboard and other

170

165

395

392

           Payroll and related

453

485

1,388

1,450

           Fuel

345

518

996

1,569

           Food

255

265

737

761

           Other ship operating

582

605

(a)

1,913

1,842

(a)

     Tour and other

82

84

129

130

2,490

2,760

7,229

7,923

     Selling and administrative

484

481

1,504

1,507

     Depreciation and amortization

399

414

1,206

1,229

(a)

3,373

3,655

9,939

10,659

Operating Income

1,510

1,292

2,064

1,506

Nonoperating (Expense) Income

     Interest income

2

2

6

6

     Interest expense, net of capitalized interest

(53)

(69)

(167)

(213)

     (Losses) gains on fuel derivatives, net (b)

(197)

15

(378)

10

     Other (expense) income, net

(12)

1

3

12

(260)

(51)

(536)

(185)

Income Before Income Taxes

1,250

1,241

1,528

1,321

Income Tax Expense, Net

(34)

-

(41)

(2)

Net Income

$   1,216

$   1,241

$     1,487

$     1,319

Earnings Per Share

     Basic

$     1.56

$     1.60

$        1.91

$       1.70

     Diluted

$     1.56

$     1.60

$        1.91

$       1.70

Non-GAAP Earnings Per Share-Diluted (c) 

$     1.75

$     1.58

$        2.20

$       1.67

Dividends Declared Per Share

$     0.30

$     0.25

$        0.80

$       0.75

Weighted-Average Shares Outstanding – Basic

778

776

778

776

Weighted-Average Shares Outstanding – Diluted

781

778

781

778

(a)   

(b)  

During the three months ended August 31, 2015 and 2014, our losses on fuel derivatives, net include net unrealized (losses) gains of $(137) million and $15 million and realized (losses) gains of $(60) million and $1 million, respectively. During the nine months ended August 31, 2015 and 2014, our losses on fuel derivatives, net include net unrealized (losses) gains of $(215) million and $8 million and realized (losses) gains of $(163) million and $2 million, respectively.

(c)   

See the U.S. GAAP net income to non-GAAP net income reconciliations in the Non-GAAP Financial Measures included herein.

CARNIVAL CORPORATION & PLC

OTHER INFORMATION

       Three Months Ended

   Nine Months Ended

                 August 31,         

            August 31,      

2015

2014

2015

2014

STATISTICAL INFORMATION

   ALBDs (in thousands) (a)

19,795

19,671

57,686

56,830

   Occupancy percentage (b)

110.9%

109.1%

105.6%

104.8%

   Passengers carried (in thousands)

3,068

2,983

8,138

7,943

   Fuel consumption in metric tons (in thousands)

786

797

2,379

2,400

   Fuel consumption in metric tons per ALBD

0.040

0.041

0.041

0.042

   Fuel cost per metric ton consumed

$         439

$         650

$       418

$       654

   Currencies

           U.S. dollar to Euro

$        1.11

$        1.35

$      1.13

$      1.36

           U.S. dollar to Sterling

$        1.56

$        1.69

$      1.54

$      1.67

           U.S. dollar to Australian dollar

$        0.75

$        0.94

$      0.78

$      0.92

           U.S. dollar to Canadian dollar

$        0.78

$        0.93

$    0.80

$     0.92

CASH FLOW INFORMATION

Cash from operations

$      1,281

$      1,120

$     3,567

$   2,793

Capital expenditures

$         324

$         348

$     1,704

$   1,677

Dividends paid

$         195

$         194

$       584

$      582

(a)   

ALBD is a standard measure of passenger capacity for the period that we use to approximate rate and capacity variances, based on consistently applied formulas that we use to perform 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,

2015

2015
Constant
Dollar

2014

2015

2015
Constant
Dollar

2014

Passenger ticket revenues

$        3,631

$      3,869

$        3,719

$       8,891

$        9,478

$       9,144

Onboard and other revenues

1,102

1,154

1,084

2,918

3,051

2,839

Gross cruise revenues

4,733

5,023

4,803

11,809

12,529

11,983

Less cruise costs

   Commissions, transportation and other

(603)

(646)

(638)

(1,671)

(1,808)

(1,779)

   Onboard and other

(170)

(177)

(165)

(395)

(413)

(392)

(773)

(823)

(803)

(2,066)

(2,221)

(2,171)

Net passenger ticket revenues

3,028

3,223

3,081

7,220

7,670

7,365

Net onboard and other revenues

932

977

919

2,523

2,638

2,447

Net cruise revenues

$        3,960

$       4,200

$        4,000

$       9,743

$      10,308

$       9,812

ALBDs

19,794,882

19,794,882

19,671,265

57,685,594

57,685,594

56,829,605

Gross revenue yields

$      239.10

$     253.73

$      244.14

$     204.72

$     217.20

$     210.85

% (decrease) increase vs. 2014

(2.1)%

3.9%

(2.9)%

3.0%

Net revenue yields

$     200.04

$     212.17

$       203.35

$     168.91

$     178.69

$     172.65

% (decrease) increase vs. 2014

(1.6)%

4.3%

(2.2)%

3.5%

Net passenger ticket revenue yields

$      152.96

$     162.81

$      156.62

$     125.17

$      132.96

$     129.60

% (decrease) increase vs. 2014

(2.3)%

4.0%

(3.4)%

2.6%

Net onboard and other revenue yields

$        47.09

$       49.36

$        46.74

$       43.74

$        45.73

$       43.05

% increase vs. 2014

0.8%

5.6%

1.6%

6.2%

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, 

2015

2015
Constant
Dollar

2014

2015

2015
Constant
Dollar

2014

Cruise operating expenses

$        2,408

$      2,536

$        2,676

$       7,100

$        7,487

$       7,793

Cruise selling and administrative expenses

482

511

479

1,497

1,584

1,501

Gross cruise costs

2,890

3,047

3,155

8,597

9,071

9,294

Less cruise costs included above

      Commissions, transportation and other

(603)

(646)

(638)

(1,671)

(1,808)

(1,779)

      Onboard and other

(170)

(177)

(165)

(395)

(413)

(392)

     Restructuring expenses

(14)

(17)

-

(21)

(26)

-

      Gains on ship sales and ship                        impairment, net                               

2

2

-

6

6

15

Net cruise costs

2,105

2,209

2,352

6,516

6,830

7,138

Less fuel

(345)

(345)

(518)

(996)

(996)

(1,569)

Net cruise costs excluding fuel

$        1,760

$       1,864

$        1,834

$        5,520

$        5,834

$        5,569

ALBDs

19,794,882

19,794,882

19,671,265

57,685,594

57,685,594

56,829,605

Gross cruise costs per ALBD

$      145.95

$     153.92

$      160.38

$      149.03

$      157.26

$      163.53

% decrease vs. 2014

(9.0)%

(4.0)%

(8.9)%

(3.8)%

Net cruise costs per ALBD

$      106.28

$     111.60

$      119.59

$     112.96

$      118.41

$     125.59

% decrease  vs. 2014

(11.1)%

(6.7)%

(10.1)%

(5.7)%

Net cruise costs excluding fuel per ALBD

$        88.84

$       94.16

$        93.23

$       95.70

$      101.15

$       97.98

% (decrease) increase vs. 2014

(4.7)%

1.0%

(2.3)%

3.2%

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,     

2015

2014

2015

2014

Net income – diluted

    U.S. GAAP net income

$  1,216

$ 1,241

$ 1,487

$ 1,319

    Restructuring expenses (c)

14

-

21

-

    Gains on ship sales and ship impairment, net (c)

(2)

-

(6)

(15)

    Unrealized losses (gains) on fuel derivatives, net (d)

137

(15)

215

(8)

    Non-GAAP net income

$  1,365

$ 1,226

$ 1,717

$ 1,296

Weighted-average shares outstanding – diluted

781

778

781

778

Earnings per share – diluted

    U.S. GAAP earnings per share

$     1.56

$   1.60

$    1.91

$   1.70

    Restructuring expenses (c)

0.02

-

0.03

-

    Gains on ship sales and ship impairment, net (c)

-

-

(0.01)

(0.02)

    Unrealized losses (gains) on fuel derivatives, net (d)

0.17

(0.02)

0.27

(0.01)

    Non-GAAP earnings per share

$     1.75

$   1.58

$    2.20

(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; gains and losses on ship sales and ship impairments, net; and restructuring expenses 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. 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 and debit 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 and restructuring expenses from our calculation of net cruise costs with and without fuel as they are not considered part of our core operating business.

As a result of our revision of 2014 cruise ship operating expenses, our previously reported results changed as follows (in millions, except per ALBD data):

Three Months Ended
August 31, 2014

Nine Months Ended
 August 31, 2014

As Previously Reported

As Revised

As Previously Reported

As  Revised

Gross cruise costs per ALBD

$160.11

$160.38

$163.24

$163.53

Net cruise costs per ALBD

$119.32

$119.59

$125.29

$125.59

Net cruise costs excluding fuel per ALBD

$92.97

$93.23

$97.69

$97.98

U.S. GAAP net income

$1,247

$1,241

$1,338

$1,319

Non-GAAP net income

$1,232

$1,226

$1,315

$1,296

 CARNIVAL CORPORATION & PLC

    NON-GAAP FINANCIAL MEASURES (CONTINUED)

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.

In addition, because our Europe, Australia & Asia ("EAA") cruise brands utilize the euro, sterling and Australian dollar as their functional currency 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 2015 periods' currency exchange rates have remained constant with the 2014 periods' 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. 

Although our constant dollar basis measure removes the foreign currency translational impact as discussed above, it does not remove the foreign currency transactional impact from changes in exchange rates on our brands' revenues and expenses that are denominated in a currency other than their functional currency. Historically the foreign currency transactional impact had not been significant when measuring the periodic changes in our results of operations. However, given the continuing expansion of our global business and the heightened volatility in foreign currency exchange rates, we believe the foreign currency transactional impact is more significant in measuring our 2015 results compared to 2014, than in previous years. Together, the foreign currency translational and transactional impacts discussed above are referred to as on the "constant currency basis."

(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 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 on ship sales and ship impairment, net and restructuring expenses recognized in the three and nine months ended August 31, 2015 and 2014 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 on ship sales and ship impairment, net and restructuring expenses 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)  

   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 realized gains and losses on fuel derivatives by applying current Brent prices to the derivatives that settle in the forecast period.