CUK Carnival Plc

Selected Key Metrics

Full Year 2017

Second Quarter 2017

Current

Dollars

Constant

Currency

Current

Dollars

Constant

Currency

Net revenue yields

Approx 1.5%

Approx 3.0%

0.5 to 1.5%

2.5 to 3.5%

Net cruise costs excl. fuel / ALBD

Approx flat

Approx 1.0%

(0.5) to 0.5%

1.5 to 2.5%

    Full Year 2017

Second Quarter 2017

Fuel price per metric ton

$362

$359

Fuel consumption (metric tons in thousands)

3,310

840

Currency:     Euro

$1.07 to €1

$1.08 to €1

                     Sterling

$1.25 to £1

$1.25 to £1

                     Australian dollar

$0.76 to A$1

$0.76 to A$1

Three Months Ended
February 28/29,

2017

2016

Net income (in millions)

$

352

$

142

Adjusted net income (in millions) (a)

$

279

$

301

Earnings per share-diluted

$

0.48

$

0.18

Adjusted earnings per share-diluted (a)

$

0.38

$

0.39

(a)

See the net income to adjusted net income and EPS to adjusted EPS reconciliations in the Non-GAAP Financial Measures included herein.

•      Net revenue yields

•      Net cruise costs, excluding fuel per available lower berth day

•      Booking levels

•      Estimates of ship depreciable lives and residual values

•      Pricing and occupancy

•      Goodwill, ship and trademark fair values

•      Interest, tax and fuel expenses

•      Liquidity

•      Currency exchange rates

•      Adjusted earnings per share

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

(in millions, except per share data)

Three Months Ended
February 28/29,

2017

2016

Revenues

Cruise

Passenger tickets

$

2,804

$

2,718

Onboard and other

978

923

Tour and other

9

10

3,791

3,651

Operating Costs and Expenses

Cruise

Commissions, transportation and other

569

582

Onboard and other

125

117

Payroll and related

519

492

Fuel

297

187

Food

251

247

Other ship operating

661

604

Tour and other

13

14

2,435

2,243

Selling and administrative

549

551

Depreciation and amortization

439

423

3,423

3,217

Operating Income

368

434

Nonoperating Income (Expense)

Interest income

2

2

Interest expense, net of capitalized interest

(51)

(52)

Gains (losses) on fuel derivatives, net (a)

27

(236)

Other income (expense), net

8

(5)

(14)

(291)

Income Before Income Taxes

354

143

Income Tax Expense, Net

(2)

(1)

Net Income

$

352

$

142

Earnings Per Share

Basic

$

0.48

$

0.18

Diluted

$

0.48

$

0.18

Dividends Declared Per Share

$

0.35

$

0.30

Weighted-Average Shares Outstanding - Basic

725

766

Weighted-Average Shares Outstanding - Diluted

728

769

(a)  

During the three months ended February 28/29, 2017 and 2016, our gains (losses) on fuel derivatives, net include net unrealized gains (losses) of $72 million and $(145) million and realized (losses) of $(45) million and $(91) million, respectively.

CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(in millions, except par values)

February 28,
 2017

November 30,
 2016

ASSETS

Current Assets

Cash and cash equivalents

$

437

$

603

Trade and other receivables, net

307

298

Inventories

361

322

Prepaid expenses and other

492

466

Total current assets

1,597

1,689

Property and Equipment, Net

32,328

32,429

Goodwill

2,911

2,910

Other Intangibles

1,279

1,275

Other Assets

588

578

(a)

$

38,703

$

38,881

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities

Short-term borrowings

$

169

$

457

Current portion of long-term debt

1,127

640

Accounts payable

669

713

Accrued liabilities and other

1,766

1,740

Customer deposits

3,734

3,522

Total current liabilities

7,465

7,072

Long-Term Debt

7,796

8,302

(a)

Other Long-Term Liabilities

782

910

Shareholders' Equity

Common stock of Carnival Corporation, $0.01 par value; 1,960 shares authorized; 655 shares at 2017 and 654 shares at 2016 issued

7

7

Ordinary shares of Carnival plc, $1.66 par value; 217 shares at 2017 and 2016 issued

358

358

Additional paid-in capital

8,660

8,632

Retained earnings

21,939

21,843

Accumulated other comprehensive loss

(2,440)

(2,454)

Treasury stock, 118 shares at 2017 and 2016 of Carnival Corporation and 28 shares at 2017 and 27 shares at 2016 of Carnival plc, at cost

(5,864)

(5,789)

22,660

22,597

$

38,703

$

38,881

(a) 

On December 1, 2016, we adopted the Financial Accounting Standards Board's Interest - Imputation of Interest and reclassified $55 million from Other Assets to Long-Term Debt on our November 30, 2016 Consolidated Balance Sheet.

CARNIVAL CORPORATION & PLC
OTHER INFORMATION

Three Months Ended
February 28/29,

2017

2016

STATISTICAL INFORMATION

   ALBDs (in thousands) (a)

20,024

19,290

   Occupancy percentage (b)

104.6

%

104.0

%

   Passengers carried (in thousands)

2,769

2,559

   Fuel consumption in metric tons (in thousands)

818

816

   Fuel consumption in metric tons per thousand ALBDs

40.9

42.3

   Fuel cost per metric ton consumed

$

362

$

229

   Currencies

      U.S. dollar to euro

$

1.06

$

1.10

      U.S. dollar to sterling

$

1.24

$

1.45

      U.S. dollar to Australian dollar

$

0.75

$

0.71

CASH FLOW INFORMATION (in millions)

Cash from operations

$

932

$

798

Capital expenditures

$

412

$

330

Dividends paid

$

254

$

232

Notes to Statistical Information

(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):

Three Months Ended February 28/29,

2017

2017
Constant
Dollar

2016

Passenger ticket revenues

$

2,804

$

2,881

$

2,718

Onboard and other revenues

978

993

923

Gross cruise revenues

3,782

3,874

3,641

Less cruise costs

     Commissions, transportation and other

(569)

(587)

(582)

     Onboard and other

(125)

(127)

(117)

(694)

(714)

(699)

Net passenger ticket revenues

2,235

2,294

2,136

Net onboard and other revenues

853

866

806

Net cruise revenues

$

3,088

$

3,160

$

2,942

ALBDs

20,024,045

20,024,045

19,289,910

Gross revenue yields

$

188.87

$

193.44

$

188.77

% increase vs. 2016

0.1

%

2.5

%

 Net revenue yields

$

154.22

$

157.75

$

152.50

 % increase vs. 2016

1.1

%

3.4

%

    Net passenger ticket revenue yields

$

111.60

$

114.53

$

110.71

     % increase vs. 2016

0.8

%

3.4

%

     Net onboard and other revenue yields

$

42.62

$

43.22

$

41.78

     % increase vs. 2016

2.0

%

3.4

%

Three Months Ended February 28/29,

2017

2017
Constant
Currency

2016

Net passenger ticket revenues

$

2,235

$

2,308

$

2,136

Net onboard and other revenues

853

861

806

Net cruise revenues

$

3,088

$

3,169

$

2,942

ALBDs

20,024,045

20,024,045

19,289,910

 Net revenue yields

$

154.22

$

158.25

$

152.50

 % increase vs. 2016

1.1

%

3.8

%

    Net passenger ticket revenue yields

$

111.60

$

115.26

$

110.71

    % increase vs. 2016

0.8

%

4.1

%

    Net onboard and other revenue yields

$

42.62

$

42.99

$

41.78

    % increase vs. 2016

2.0

%

2.9

%

(See Notes to Non-GAAP Financial Measures.)

CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES (CONTINUED)

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):

Three Months Ended February 28/29,

2017

2017
Constant
Dollar

2016

Cruise operating expenses

$

2,422

$

2,478

$

2,229

Cruise selling and administrative expenses

546

558

549

Gross cruise costs

2,968

3,036

2,778

Less cruise costs included above

     Commissions, transportation and other

(569)

(587)

(582)

     Onboard and other

(125)

(127)

(117)

     Gain on ship sale (c)

—

—

2

     Restructuring expenses (c)

—

—

—

     Other (c)

1

1

(16)

Net cruise costs

2,275

2,323

2,065

Less fuel

(297)

(297)

(187)

Net cruise costs excluding fuel

$

1,978

$

2,026

$

1,878

ALBDs

20,024,045

20,024,045

19,289,910

Gross cruise costs per ALBD

$

148.24

$

151.60

$

144.02

% increase vs. 2016

2.9

%

5.3

%

Net cruise costs excluding fuel per ALBD

$

98.81

$

101.13

$

97.35

% increase vs. 2016

1.5

%

3.9

%

Three Months Ended February 28/29,

2017

2017
Constant
Currency

2016

Net cruise costs excluding fuel

$

1,978

$

2,012

$

1,878

ALBDs

20,024,045

20,024,045

19,289,910

Net cruise costs excluding fuel per ALBD

$

98.81

$

100.47

$

97.35

% increase vs. 2016

1.5

%

3.2

%

(See Notes to Non-GAAP Financial Measures.)

CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES (CONTINUED)

Adjusted fully diluted earnings per share was computed as follows (in millions, except per share data) (a):

Three Months Ended
February 28/29,

2017

2016

Net income

     U.S. GAAP net income

$

352

$

142

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

(72)

145

     Gain on ship sale (c)

—

(2)

     Restructuring expenses (c)

—

—

     Other (c)

(1)

16

     Adjusted net income

$

279

$

301

Weighted-average shares outstanding

728

769

Earnings per share

     U.S. GAAP earnings per share

$

0.48

$

0.18

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

(0.10)

0.19

     Gain on ship sale (c)

—

—

     Restructuring expenses (c)

—

—

     Other (c)

—

0.02

     Adjusted earnings per share

$

0.38

$

0.39

Notes to Non-GAAP Financial Measures

(a)  

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.   

We believe that gains and losses on ship sales and ship impairments and restructuring and certain other expenses are not part of our core operating business and, therefore, are not an indication of our future earnings performance. As such, we exclude these items from non-GAAP measures. 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.

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.

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 Europe. Australia & Asia ("EAA") segment and Cruise Support segment operations utilize the euro, sterling and Australian dollar as their functional currencies to measure their results and financial condition. This subjects us to foreign currency translational risk. Our North America, EAA and Cruise Support segment operations also have revenues and expenses that are in a currency other than their functional currency. This subjects 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 2017 periods' currency exchange rates have remained constant with the 2016 periods' rates. These metrics facilitate a comparative view for the changes in our business in an environment with fluctuating exchange rates.

Constant dollar reporting is a non-GAAP financial measure that removes only the impact of changes in exchange rates on the translation of our EAA segment and Cruise Support segment operations.

Constant currency reporting is a non-GAAP financial measure that removes the impact of changes in exchange rates on the translation of our EAA segment and Cruise Support segment 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 for our North America, EAA and Cruise Support segments.

Examples:

• The translation of our EAA segment 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.

• Our North American segment operations have a U.S. dollar functional currency but also have revenue and expense transactions in currencies other than the U.S. dollar. If the U.S. dollar strengthens against these other currencies, it reduces the U.S. dollar revenues and expenses.  If the U.S. dollar weakens against these other currencies, it increases the U.S. dollar revenues and expenses.  

• Our EAA segment operations have euro, sterling and Australian dollar functional currencies but also have revenue and expense transactions in currencies other than their functional currency. If their functional currency strengthens against these other currencies, it reduces the functional currency revenues and expenses. If the functional currency weakens against these other currencies, it increases the functional currency revenues and expenses.

(b) 

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.

(c)  

We believe that gains and losses on ship sales and ship impairments and 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 and ship impairments 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.