September 19, 2006
Carnival reports record quarter
"Robust demand for cruise vacations continued into our seasonally strong summer period. Significant improvements in pricing, particularly for our North American brands, more than compensated for increases in fuel costs, resulting in higher profits and another record third quarter," said Carnival Corporation & plc Chairman and CEO Micky Arison reporting record net income of $1.15 billion, or $1.36 diluted EPS, on revenues of $3.61 billion for its third quarter ended August 31, 2005.
During the quarter, Carnival's cruise brands carried 1,953,493 passengers compared with 1,849,447 in the same quarter last year. Occupancy, as a percentage of lower berths, was 110.9% compared with 110.2%.
Net income for the third quarter of 2004 was $1.03 billion, or $1.22 diluted EPS, on revenues of $3.25 billion. Third quarter 2005 earnings were reduced by two unusual charges totaling $45 million ($0.05 per share) -- a $23 million charge to operating expense related to a billing from the British Merchant Navy Officers Pension Fund ("MNOPF") and a $22 million investment write-down charged to nonoperating expense. The MNOPF billing represents the fund's estimate of Carnival's share of the fund's total unfunded pension liabilities, and substantially all relates to service by British officers for P&O Princess prior to its acquisition by Carnival Corporation.
Net income for the nine months ended August 31, 2005 was $1.90 billion, or $2.27 diluted EPS, on revenues of $8.52 billion, compared to net income of $1.56 billion, or $1.88 diluted EPS, on revenues of $7.49 billion for the same period in 2004.
Third quarter revenues increased by 11 percent driven by both a 5.2 percent increase in cruise capacity and a significant growth in cruise net revenue yields (revenue per available berth day). Net revenue yields for the third quarter of 2005 increased 6.2 percent compared to the prior year, primarily due to higher cruise ticket prices and onboard revenues, and, to a lesser extent, higher occupancy. Gross revenue yields increased 5.4 percent.
Net cruise costs per available lower berth day ("ALBD") for the third quarter of 2005 increased 7.4 percent compared to last year. The increase was primarily due to a 36 percent increase in fuel prices and the $23 million MNOPF contribution. Gross cruise costs per ALBD increased 5.6 percent. Excluding higher fuel costs and the MNOPF contribution, the company's 2005 third quarter net cruise cost per ALBD increased 1.4 percent compared to the same period last year, mostly due to higher dry-dock amortization expense.
Carnival Corporation & plc Chairman and CEO Micky Arison said that he was happy with the company's results for the quarter. "Robust demand for cruise vacations continued into our seasonally strong summer period. Significant improvements in pricing, particularly for our North American brands, more than compensated for increases in fuel costs, resulting in higher profits and another record third quarter," Arison said.
Regarding the fourth quarter of 2005, Arison noted that Hurricane Katrina, which caused extensive devastation to Gulf Coast areas, will also have some impact on the company's fourth quarter results. Hurricane Katrina resulted in the cancellation of one voyage, the shortening of two other voyages, changes in homeports for two ships and other disruptions and related costs.
"The people of the Gulf Coast region have suffered horribly as a result of this storm and we have tried to help in some small way by chartering three ships to the U.S. government to be used in the recovery effort," Arison said.
"I am especially proud that Carnival Cruise Lines' Ecstasy and Sensation, which since early last week have been docked in New Orleans, are serving as housing for first responders and other relief workers. Many of these people, particularly the police officers and fire fighters now housed aboard, have been living in terrible conditions, as they themselves were victimized by this hurricane and suffered tremendous personal losses. They continue to endure unbelievable hardships as they endeavor to perform their daily duties. We are very pleased that our ships are making a difference in their lives and contributing to the recovery of New Orleans. There are many people in our organization, both ashore and afloat, who have been working around the clock to make sure that this effort is successful and I thank them for that," Arison said.
Arison said that a third vessel, the Holiday, is docked in Mobile, Ala., where it is initially providing housing for evacuees from both Alabama and Mississippi.
Despite these events, recent bookings remain strong, says Carnival.
Advance booking levels for the fourth quarter are slightly ahead of last year at this time, on a capacity adjusted basis, with average pricing above last year. As a result, the company continues to expect that net revenue yields for the fourth quarter of 2005 will increase approximately 4.5 to 5.5 percent, compared to last year's fourth quarter.
Net cruise costs per ALBD in the fourth quarter of 2005 are expected to increase between 4 to 5 percent, compared to 2004, because of higher fuel costs. The company's cost guidance for fuel is based on recent forward prices for the balance of the year, which is 44 percent higher than the average prices for the fourth quarter of 2004. Excluding fuel, the company's cost guidance for the fourth quarter of 2005 is for costs per ALBD to be down slightly.
Based on these estimates, the company expects diluted earnings per share for the fourth quarter of 2005 to be in the range of $0.39 to $0.41.
Arison also noted that the company is currently on track to post an approximate 20 percent increase in earnings per share for the year 2005.
"That's quite a remarkable accomplishment considering that fuel price increases are estimated to cost the company an additional $170 million, or $0.20 a share, in 2005," he said.
Looking to early 2006, Arison said that both booking levels, on a capacity adjusted basis, and pricing for the first half of 2006 are ahead of the comparable period in 2005.
"Given booking trends to date and a continuing strong demand for travel, we are optimistic that we will be able to achieve continued growth in revenue yields in 2006," Arison said.
However, he also indicated that fuel costs could continue to impact 2006 earnings. If fuel prices follow the current forward curve for all of 2006, fuel costs would be higher by approximately $200 million, or $0.23 per share, over 2005.