Carnival Corporation & plc announced non-GAAP net income of $1.2 billion, or $1.53 diluted earnings per share, for the third quarter of 2012. Reported U.S. GAAP net income, which includes unrealized gains on fuel derivatives of $136 million, was $1.3 billion, or $1.71 diluted earnings per share. Net income for the third quarter of 2011 was $1.3 billion, or $1.69 diluted earnings per share. Revenues for the third quarter of 2012 were $4.7 billion compared to $5.1 billion for the prior year.
Carnival Corporation & plc Chairman and CEO Micky Arison noted that third quarter non-GAAP earnings were better than anticipated in the company's June guidance due primarily to a combination of higher than expected revenue yields and lower than expected costs, partly due to the timing of certain expenses.
Commenting on the third quarter, Arison said, "The significant efforts of our brand management teams were successful in partially mitigating the decline in cruise ticket prices. Onboard revenue yields (constant dollars excluding Costa) improved three percent during the quarter. Our brand managements' continued focus on cost containment contributed to a three percent reduction in cruise costs (constant dollars excluding fuel) as well as a six percent reduction in fuel consumption on a unit basis."
Arison also noted that the company repurchased two million shares valued at $67 million during the third quarter, demonstrating a continued commitment to returning excess free cash flow to shareholders.
Key metrics for the third quarter 2012 compared to the prior year were as follows:
• Changes in currency exchange rates for 3Q 2012 compared to the prior year have reduced both net revenue yields and net cruise costs excluding fuel per available lower berth day, "ALBD" by almost 4 percent each and cost the company $0.09 per share.
• On a constant dollar basis net revenue yields (net revenue per ALBD) decreased 5.3 percent for 3Q 2012, which was better than June guidance of down 6 to 7 percent. Excluding Costa, constant dollar net revenue yields decreased 2.1 percent for 3Q 2012, which was also better than June guidance of down 3 to 4 percent. Gross revenue yields decreased 9.2 percent in current dollars driven by unfavorable currency exchange rates compared to the prior year.
• Net cruise costs per ALBD excluding fuel decreased 3 percent in constant dollars, better than June guidance of down 0.5 to 1.5 percent, partly due to the timing of certain expenses. Gross cruise costs per ALBD including fuel decreased 8.2 percent in current dollars driven by unfavorable currency exchange rates compared to the prior year.
• Fuel prices decreased almost 4 percent to $659 per metric ton for 3Q 2012 from $686 per metric ton in 3Q 2011. However, fuel prices were higher than June guidance costing an additional $18 million, net of realized losses on fuel derivatives.
Arison indicated that in keeping with the company's previously stated strategy of introducing two to three new ships per year, the company has seven new ships scheduled for delivery between 2013 and 2016, some of which will replace existing capacity reductions from possible sales of older ships.
Arison also noted that the company expects to direct capacity growth toward the continued development of emerging cruise markets.
The company has almost tripled its guest sourcing from emerging cruise markets in the past five years. For 2013, the company will capitalize on the increasing popularity of cruising in Asia with the deployment of a second Costa ship in China and the launch of a new Princess Cruises program for the Japanese market.
Arison stated, "Looking forward, we remain committed to a measured pace of newbuilds and achieving a strategic balance of supply and demand in established markets." Arison added, "Our lower capital commitments should result in significant excess free cash flow in the coming years which we intend to return to shareholders."
Since June, fleetwide booking volumes and pricing trends for the remainder of fiscal 2012 and first half of 2013 have continued to strengthen. For the last six weeks, booking volumes excluding Costa have increased 9 percent versus the prior year at prices in line with last year's levels. Over the same period, booking volumes for Costa have also increased 9 percent albeit at lower prices.
For the remainder of the year and first half of 2013, cumulative advance bookings excluding Costa are still behind the prior year at slightly lower prices. For Costa, cumulative advance bookings have shown considerable improvement but are still five occupancy points behind the prior year at lower prices over the same period.
Arison commented, "The pace of booking volumes remains healthy enabling us to continue to catch up on occupancy levels, while pricing has gradually improved. Both of these trends leave us well positioned for a recovery in cruise ticket prices beginning in the second quarter of 2013."
Excluding Costa, the company forecasts full year 2012 net revenue yields, on a constant dollar basis, to be flat to down slightly which is slightly better than previous guidance. Including Costa, the company expects a decline in net revenue yields of 3 percent compared to its previous guidance of down 3 to 4 percent (constant dollars) for the full year 2012.
Full year 2012 revenue yields for the North American brands are expected to be slightly higher than the prior year. Full year 2012 revenue yields for the European brands, excluding Costa, are expected to be lower than the prior year. The company continues to expect net cruise costs excluding fuel per ALBD for the full year 2012 to be down slightly compared with the prior year on a constant dollar basis.
For full year 2012, higher net revenue yield expectations and improvement in costs compared to June guidance have been offset by $0.13 per share of higher fuel prices and unfavorable changes in currency exchange rates. Taking all the above factors into consideration, the company forecasts full year 2012 non-GAAP diluted earnings per share to be in the range of $1.83 to $1.87, in line with the midpoint of the June guidance range of $1.80 to $1.90 per share.
Fourth quarter constant dollar net revenue yields excluding Costa, are expected to decrease 3 to 4 percent (including Costa, expected to decrease 5 to 6 percent) compared to the prior year. Net cruise costs excluding fuel per ALBD for the fourth quarter are expected to be down 2 to 3 percent on a constant dollar basis compared to the prior year. In addition, changes in currency exchange rates and fuel prices are expected to reduce fourth quarter earnings by $0.08 per share compared to the prior year.
Based on the above factors, the company expects non-GAAP diluted earnings for the fourth quarter 2012 to be in the range of $0.07 to $0.11 per share versus 2011 non-GAAP earnings of $0.28 per share.