REG - Carnival PLC - 3rd Quarter Results <Origin Href="QuoteRef">CCL.L</Origin> - Part 3
29/09/2017 17:36
- Part 3: For the preceding part double click ID:nRSc3242Sb
542 527
Gross cruise costs 3,470 3,450 3,006
Less cruise costs included above
Commissions, transportation and other (699 ) (695 ) (646 )
Onboard and other (184 ) (184 ) (171 )
(Losses) gains on ship sales and impairments (304 ) (294 ) -
Restructuring expenses (3 ) (3 ) -
Other - - (18 )
Net cruise costs 2,280 2,274 2,171
Less fuel (307 ) (307 ) (265 )
Net cruise costs excluding fuel $ 1,973 $ 1,967 $ 1,906
ALBDs 21,120,155 21,120,155 20,572,112
Gross cruise costs per ALBD $ 164.32 $ 163.32 $ 146.18
% increase vs. 2016 12.4 % 11.7 %
Net cruise costs excluding fuel per ALBD $ 93.39 $ 93.08 $ 92.63
% increase vs. 2016 0.8 % 0.5 %
Three Months Ended August 31,
2017 2017 2016
Constant
Currency
Net cruise costs excluding fuel $ 1,973 $ 1,960 $ 1,906
ALBDs 21,120,155 21,120,155 20,572,112
Net cruise costs excluding fuel per ALBD $ 93.39 $ 92.78 $ 92.63
% increase vs. 2016 0.8 % 0.2 %
Adjusted fully diluted earnings per share was computed as follows (in millions, except per share data):
Three Months Ended
August 31,
2017 2016
Net income
U.S. GAAP net income $ 1,329 $ 1,424
Unrealized (gains) losses on fuel derivatives, net (65 ) (25 )
Losses (gains) on ship sales and impairments 392 -
Restructuring expenses 3 -
Other - 18
Adjusted net income $ 1,659 $ 1,417
Weighted-average shares outstanding 726 739
Earnings per share
U.S. GAAP earnings per share $ 1.83 $ 1.93
Unrealized (gains) losses on fuel derivatives, net (0.09 ) (0.03 )
Losses (gains) on ship sales and impairments 0.55 -
Restructuring expenses - -
Other - 0.02
Adjusted earnings per share $ 2.29 $ 1.92
Net cruise revenues increased by $346 million, or 8.4%, to $4.5 billion in 2017 from $4.1 billion in 2016.
The increase was driven by:
• $214 million - 5.1% increase in constant currency net revenue yields
• $110 million - 2.7% capacity increase in ALBDs
• $21 million - foreign currency impacts (including both the foreign currency translational and transactional
impacts)
The 5.1% increase in net revenue yields on a constant currency basis was due to a 5.6% increase in net passenger ticket
revenue yields and a 3.2% increase in net onboard and other revenue yields.
The 5.6% increase in net passenger ticket revenue yields was driven primarily by price improvements in our Caribbean,
European and Alaska programs for our North America segment and European and Caribbean programs for our EAA segment,
partially offset by decreases in our China programs. This 5.6% increase in net passenger ticket revenue yields was
comprised of a 7.3% increase from our North America segment and a 2.6% increase from our EAA segment.
The 3.2% increase in net onboard and other revenue yields was caused by similar increases in our North America and EAA
segments.
Gross cruise revenues increased by $412 million, or 8.3%, to $5.4 billion in 2017 from $4.9 billion in 2016 for largely the
same reasons as discussed above.
Net cruise costs excluding fuel increased by $67 million, or 3.5%, to $2.0 billion in 2017 from $1.9 billion in 2016.
The increase was driven by:
• $51 million - 2.7% capacity increase in ALBDs
• $13 million - foreign currency impacts (including both the foreign currency translational and transactional
impacts)
Net cruise costs excluding fuel per ALBD increased by 0.2%.
Fuel costs increased by $42 million, or 16%, to $307 million in 2017 from $265 million in 2016. This increase was driven by
higher fuel prices, which accounted for $35 million.
Gross cruise costs increased by $464 million, or 15%, to $3.5 billion in 2017 from $3.0 billion in 2016 for largely the
same reasons as discussed above and the impairment of ships, which accounted for $$304 million.
Nine Months Ended August 31, 2017 ("2017") Compared to Nine Months Ended August 31, 2016 ("2016")
Revenues
Consolidated
Cruise passenger ticket revenues made up 74% of our 2017 total revenues. Cruise passenger ticket revenues increased by $597
million, or 6.5%, to $9.8 billion in 2017 from $9.2 billion in 2016.
This increase was caused by:
• $411 million - increase in cruise ticket revenues, driven primarily by price improvements in our Caribbean,
European and Alaska programs for our North America segment and European and Caribbean programs for our EAA segment,
partially offset by decreases in our China programs
• $307 million - 3.3% capacity increase in ALBDs
These increases were partially offset by:
• $129 million - foreign currency translational impact from a stronger U.S. dollar against the functional currencies
of our foreign operations ("foreign currency translational impact")
• $32 million - decrease in air transportation revenues from guests who purchased their tickets from us
The remaining 26% of 2017 total revenues were substantially all comprised of onboard and other cruise revenues, which
increased by $190 million, or 6.2%, to $3.2 billion in 2017 from $3.0 billion in 2016.
This increase was caused by:
• $102 million - higher onboard spending by our guests
• $102 million - 3.3% capacity increase in ALBDs
These increases were partially offset by the foreign currency translational impact, which accounted for $25 million.
Concession revenues, which are included in onboard and other revenues, increased by $14 million, or 1.8%, to $802 million
in 2017 from $788 million in 2016.
North America Segment
Cruise passenger ticket revenues made up 73% of our North America segment's 2017 total revenues. Cruise passenger ticket
revenues increased by $551 million, or 9.9%, to $6.1 billion in 2017 from $5.6 billion in 2016.
This increase was driven by:
• $261 million - increase in cruise ticket revenues, driven primarily by price improvements in the Caribbean,
European and Alaska programs
• $238 million - 4.2% capacity increase in ALBDs
• $39 million - slight increase in occupancy
The remaining 27% of our North America segment's 2017 total revenues were comprised of onboard and other cruise revenues,
which increased by $167 million, or 7.9%, to $2.3 billion in 2017 from $2.1 billion in 2016.
The increase was driven by:
• $90 million - 4.2% capacity increase in ALBDs
• $64 million - higher onboard spending by our guests
Concession revenues, which are included in onboard and other revenues, increased by $21 million, or 4.0%, to $557 million
in 2017 from $536 million in 2016.
EAA Segment
Cruise passenger ticket revenues made up 81% of our EAA segment's 2017 total revenues. Cruise passenger ticket revenues
increased by $31 million, or 0.8%, and remained at $3.7 billion in both 2017 and 2016.
This increase was caused by:
• $128 million - increase in cruise ticket revenues, driven primarily by price improvements in the Caribbean and
European programs, partially offset by decreases in the China programs
• $72 million - 2.0% capacity increase in ALBDs
These increases were partially offset by:
• $129 million - foreign currency translational impact
• $29 million - slight decrease in occupancy driven primarily by the China programs
• $23 million - decrease in air transportation revenues from guests who purchased their tickets from us
The remaining 19% of our EAA segment's 2017 total revenues were comprised of onboard and other cruise revenues, which
increased by $30 million, or 3.7%, to $843 million in 2017 from $813 million in 2016. This increase was caused by $40
million of higher onboard spending by our guests, partially offset by a foreign currency translational impact of $25
million.
Concession revenues, which are included in onboard and other revenues, decreased by $7 million, or 2.7%, to $245 million in
2017 from and $252 million in 2016.
Costs and Expenses
Consolidated
Operating costs and expenses increased by $820 million, or 12%, to $7.9 billion in 2017 from $7.1 billion in 2016.
This increase was caused by:
• $304 million - impairment of ships, resulting primarily from our decision to strategically realign our business in
Australia
• $254 million - higher fuel prices
• $231 million - 3.3% capacity increase in ALBD
• $55 million - higher port expenses
• $39 million - higher cruise payroll and related expenses
• $26 million - higher commissions, transportation and other
These increases were partially offset by the foreign currency translational impact, which accounted for $85 million.
Selling and administrative expenses increased by $36 million, or 2.2%, and remained at $1.6 billion in both 2017 and 2016.
Depreciation and amortization expenses increased by $65 million, or 5.0%, to $1.4 billion in 2017 from $1.3 billion in
2016.
Goodwill and trademark impairment charges of $89 million include a goodwill impairment charge of $38 million and a
trademark impairment charge of $50 million during the third quarter of 2017, resulting from our decision to strategically
realign our business in Australia.
North America Segment
Operating costs and expenses increased by $402 million, or 9.5%, to $4.7 billion in 2017 from $4.3 billion in 2016.
This increase was caused by:
• $181 million - 4.2% capacity increase in ALBDs
• $160 million - higher fuel prices
• $50 million - higher commissions, transportation and other
• $27 million - higher port expenses
These increases were partially offset by lower dry-dock expenses and repair and maintenance expenses, which accounted for
$41 million.
Selling and administrative expenses increased by $48 million, or 5.4%, to $945 million in 2017 from $897 million in 2016.
Depreciation and amortization expenses increased by $54 million, or 6.8%, to $845 million in 2017 from $791 million in
2016.
EAA Segment
Operating costs and expenses increased by $416 million, or 16%, to $3.1 billion in 2017 from $2.7 billion in 2016.
This increase was caused by:
• $304 million - impairment of ships, resulting primarily from our decision to strategically realign our business in
Australia
• $94 million - higher fuel prices
• $53 million - 2.0% capacity increase in ALBDs
• $31 million - higher dry-dock expenses and repair and maintenance expenses
• $27 million - higher port expenses
These increases were partially offset by:
• $85 million - foreign currency translational impact
• $29 million - decrease in air transportation costs related to the decrease in revenues from guests who purchased
their tickets from us
Selling and administrative expenses decreased by $1 million, or 0.2% to $512 million in 2017 from $513 million in 2016.
Depreciation and amortization expenses increased by $9 million, or 2.0%, to $459 million in 2017 from $450 million in
2016.
Goodwill and trademark impairment charges of $89 million include a goodwill impairment charge of $38 million and a
trademark impairment charge of $50 million during the third quarter of 2017, resulting from our decision to strategically
realign our business in Australia.
Operating Income
Our consolidated operating income decreased by $213 million, or 8.6%, to $2.3 billion in 2017 from $2.5 billion in 2016.
Our North America segment's operating income increased by $214 million, or 12%, to $2.0 billion in 2017 from $1.8 billion
in 2016, and our EAA segment's operating income decreased by $452 million, or 54%, to $385 million in 2017 from $837
million in 2016. These changes were primarily due to the reasons discussed above.
Nonoperating Income (Expense)
Losses on fuel derivatives, net were comprised of the following (in millions):
Nine Months Ended August 31,
2017 2016
Unrealized gains on fuel derivatives, net $ 134 $ 121
Realized losses on fuel derivatives, net (153 ) (223 )
Losses on fuel derivatives, net $ (19 ) $ (102 )
Key Performance Non-GAAP Financial Indicators
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):
Nine Months Ended August 31,
2017 2017 2016
Constant
Dollar
Passenger ticket revenues $ 9,814 $ 9,942 $ 9,217
Onboard and other revenues 3,237 3,262 3,047
Gross cruise revenues 13,051 13,204 12,264
Less cruise costs
Commissions, transportation and other (1,781 ) (1,809 ) (1,723 )
Onboard and other (438 ) (442 ) (411 )
(2,219 ) (2,251 ) (2,134 )
Net passenger ticket revenues 8,033 8,133 7,494
Net onboard and other revenues 2,799 2,820 2,636
Net cruise revenues $ 10,832 $ 10,953 $ 10,130
ALBDs 61,540,974 61,540,974 59,555,384
Gross revenue yields $ 212.07 $ 214.57 $ 205.94
% increase vs. 2016 3.0 % 4.2 %
Net revenue yields $ 176.01 $ 177.99 $ 170.10
% increase vs. 2016 3.5 % 4.6 %
Net passenger ticket revenue yields $ 130.52 $ 132.17 $ 125.84
% increase vs. 2016 3.7 % 5.0 %
Net onboard and other revenue yields $ 45.49 $ 45.83 $ 44.26
% increase vs. 2016 2.8 % 3.5 %
Nine Months Ended August 31,
2017 2017ConstantCurrency 2016
Net passenger ticket revenues $ 8,033 $ 8,140 $ 7,494
Net onboard and other revenues 2,799 2,811 2,636
Net cruise revenues $ 10,832 $ 10,951 $ 10,130
ALBDs 61,540,974 61,540,974 59,555,384
Net revenue yields $ 176.01 $ 177.95 $ 170.10
% increase vs. 2016 3.5 % 4.6 %
Net passenger ticket revenue yields $ 130.52 $ 132.28 $ 125.84
% increase vs. 2016 3.7 % 5.1 %
Net onboard and other revenue yields $ 45.49 $ 45.67 $ 44.26
% increase vs. 2016 2.8 % 3.2 %
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):
Nine Months Ended August 31,
2017 2017 2016
Constant
Dollar
Cruise operating expenses $ 7,752 $ 7,837 $ 6,939
Cruise selling and administrative expenses 1,637 1,658 1,606
Gross cruise costs 9,389 9,495 8,545
Less cruise costs included above
Commissions, transportation and other (1,781 ) (1,809 ) (1,723 )
Onboard and other (438 ) (442 ) (411 )
(Losses) gains on ship sales and impairments (300 ) (290 ) 2
Restructuring expenses (3 ) (3 ) (2 )
Other - - (39 )
Net cruise costs 6,867 6,951 6,372
Less fuel (914 ) (914 ) (648 )
Net cruise costs excluding fuel $ 5,953 $ 6,037 $ 5,724
ALBDs 61,540,974 61,540,974 59,555,384
Gross cruise costs per ALBD $ 152.56 $ 154.29 $ 143.50
% increase vs. 2016 6.3 % 7.5 %
Net cruise costs excluding fuel per ALBD $ 96.72 $ 98.09 $ 96.10
% increase vs. 2016 0.6 % 2.1 %
Nine Months Ended August 31,
2017 2017 2016
Constant
Currency
Net cruise costs excluding fuel $ 5,953 $ 6,011 $ 5,724
ALBDs 61,540,974 61,540,974 59,555,384
Net cruise costs excluding fuel per ALBD $ 96.72 $ 97.67 $ 96.10
% increase vs. 2016 0.6 % 1.6 %
Adjusted fully diluted earnings per share was computed as follows (in millions, except per share data):
Nine Months Ended
August 31,
2017 2016
Net income
U.S. GAAP net income $ 2,060 $ 2,171
Unrealized (gains) losses on fuel derivatives, net (134 ) (121 )
Losses (gains) on ship sales and impairments 389 (2 )
Restructuring expenses 3 2
Other - 39
Adjusted net income $ 2,318 $ 2,089
Weighted-average shares outstanding 727 754
Earnings per share
U.S. GAAP earnings per share $ 2.84 $ 2.88
Unrealized (gains) losses on fuel derivatives, net (0.18 ) (0.16 )
Losses (gains) on ship sales and impairments 0.53 -
Restructuring expenses - -
Other - 0.05
Adjusted earnings per share $ 3.19 $ 2.77
Net cruise revenues increased by $702 million, or 6.9%, to $10.8 billion in 2017 from $10.1 billion in 2016.
The increase was caused by:
• $485 million - 4.6% increase in constant currency net revenue yields
• $338 million - 3.3% capacity increase in ALBDs
These increases were partially offset by foreign currency impacts (including both the foreign currency translational and
transactional impacts), which accounted for $122 million.
The 4.6% increase in net revenue yields on a constant currency basis was due to a 5.1% increase in net passenger ticket
revenue yields and a 3.2% increase in net onboard and other revenue yields.
The 5.1% increase in net passenger ticket revenue yields was driven primarily by price improvements in our Caribbean,
European and Alaska programs for our North America segment and European and Caribbean programs for our EAA segment,
partially offset by decreases in our China programs. This 5.1% increase in net passenger ticket revenue yields was
comprised of a 5.6% increase from our North America segment and a 3.6% increase from our EAA segment.
The 3.2% increase in net onboard and other revenue yields was caused by similar increases in our North America and EAA
segments.
Gross cruise revenues increased by $787 million, or 6.4%, to $13.1 billion in 2017 from $12.3 billion in 2016 for largely
the same reasons as discussed above.
Net cruise costs excluding fuel increased by $229 million, or 4.0%, to $6.0 billion in 2017 from $5.7 billion in 2016.
The increase was caused by:
• $191 million - 3.3% capacity increase in ALBDs
• $100 million - 1.6% increase in constant currency net cruise costs excluding fuel
These increases were partially offset by:
• $62 million - Foreign currency impacts (including both the foreign currency translational and transactional
impacts)
Net cruise costs excluding fuel impairment per ALBD increased by 1.6%.
Fuel costs increased by $266 million, or 41%, to $914 million in 2017 from $648 million in 2016. This was driven by higher
fuel prices, which accounted for $254 million.
Gross cruise costs increased by $844 million, or 9.9%, to $9.4 billion in 2017 from $8.5 billion in 2016 for largely the
same reasons as discussed above and the impairment of ships, which accounted for $$304 million.
Liquidity, Financial Condition and Capital Resources
Our primary financial goals are to profitably grow our cruise business and increase our return on invested capital
("ROIC"), reaching double digit returns, while maintaining a strong balance sheet and strong investment grade credit
ratings. We define ROIC as the twelve month adjusted earnings before interest divided by the monthly average of debt plus
equity minus construction-in-progress. Our ability to generate significant operating cash flow allows us to internally fund
our capital investments. We are committed to returning free cash flow to our shareholders in the form of dividends and/or
share repurchases. As we continue to profitably grow our cruise business, we plan to increase our debt level in a manner
consistent with maintaining our strong credit metrics. This will allow us to return both free cash flow and incremental
debt proceeds to our shareholders in the form of dividends and/or share repurchases. Other objectives of our capital
structure policy are to maintain a sufficient level of liquidity with our available cash and cash equivalents and committed
financings for immediate and future liquidity needs, and a reasonable debt maturity profile.
Based on our historical results, projections and financial condition, we believe that our future operating cash flows and
liquidity will be sufficient to fund all of our expected capital projects including shipbuilding commitments, ship
improvements, debt service requirements, working capital needs and other firm commitments over the next several years. We
believe that our ability to generate significant operating cash flows and our strong balance sheet as evidenced by our
investment grade credit ratings provide us with the ability, in most financial credit market environments, to obtain debt
financing.
We had a working capital deficit of $6.3 billion as of August 31, 2017 compared to a working capital deficit of $5.4
billion as of November 30, 2016. The increase in working capital deficit was mainly due to the increase in customer
deposits and our net current portion of our borrowings. We operate with a substantial working capital deficit. This deficit
is mainly attributable to the fact that, under our business model, substantially all of our passenger ticket receipts are
collected in advance of the applicable sailing date. These advance passenger receipts remain a current liability until the
sailing date. The cash generated from these advance receipts is used interchangeably with cash on hand from other sources,
such as our borrowings and other cash from operations. The cash received as advanced receipts can be used to fund operating
expenses, pay down our debt, invest in long term investments or any other use of cash. Included within our working capital
deficit are $4.0 billion and $3.5 billion of customer deposits as of August 31, 2017 and November 30, 2016, respectively.
In addition, we have a relatively low-level of accounts receivable and limited investment in inventories. We generate
substantial cash flows from operations and our business model has historically allowed us to maintain this working capital
deficit and still meet our operating, investing and financing needs. We expect that we will continue to have working
capital deficits in the future.
Sources and Uses of Cash
Operating Activities
Our business provided $4.3 billion of net cash from operations during the nine months ended August 31, 2017, an increase of
$188 million, or 5%, compared to $4.1 billion for the same period in 2016. This increase was caused by an increase in our
revenues less expenses settled in cash and an increase in customer deposits.
Investing Activities
During the nine months ended August 31, 2017, net cash used in investing activities was $2.4 billion. This was
substantially due to:
• Capital expenditures of $1.2 billion for our ongoing new shipbuilding program
• Capital expenditures of $1.1 billion for ship improvements and replacements, information technology, buildings and
improvements and other assets
• Payments of $157 million of fuel derivative settlements
During the nine months ended August 31, 2016, net cash used in investing activities was $2.6 billion. This was comprised
of:
• Capital expenditures of $1.5 billion for our ongoing new shipbuilding program
• Capital expenditures of $914 million for ship improvements and replacements, information technology, buildings and
improvements and other assets
• Payments of $231 million of fuel derivative settlements
• Return of collateral of $22 million from one of our fuel derivative counterparties
Financing Activities
During the nine months ended August 31, 2017, net cash used in financing activities of $2.0 billion was substantially due
to the following:
• Repayments of short-term borrowings of $335 million in connection with our availability of, and needs for, cash at
various times throughout the period
• Repayments of $1.0 billion of long-term debt
• Issuances of $100 million of long-term debt under a term loan
• Proceeds of $367 million of long-term debt under an export credit facility
• Payments of cash dividends of $797 million
• Purchases of $305 million of Carnival Corporation common stock and Carnival plc ordinary shares in open market
transactions under our Repurchase Program
During the nine months ended August 31, 2016, net cash used in financing activities of $2.4 billion was substantially due
to the following:
• Net proceeds from short-term borrowings of $301 million in connection with our availability of, and needs for, cash
at various times throughout the period
• Repayments of $971 million of long-term debt
• Issuances of $555 million of euro-denominated publicly-traded notes, which net proceeds are being used for general
corporate purposes
• Proceeds of $379 million of long-term debt under an export credit facility
• Proceeds of $110 million of long-term debt under euro-denominated bank loans
• Payments of cash dividends of $721 million
• Purchases of $2.1 billion of shares of Carnival Corporation common stock in open market transactions of which $2.1
billion were repurchased under our Repurchase Program and $39 million were repurchased under our Stock Swap Programs
• Sales of $40 million of treasury stock under our Stock Swap Programs
Future Commitments and Funding Sources
Our total annual capital expenditures consist of ships under contract for construction entered into through September 26,
2017, and estimated improvements to existing ships and shoreside assets and are expected to be (in billions):
2017 2018 2019 2020 2021 2022
Total annual capital expenditures $ 3.1 $ 4.1 $ 5.0 $ 4.7 $ 3.8 $ 3.6
The year-over-year percentage increases in our annual capacity are expected to result primarily from contracted new ships
as of September 26, 2017, entering service and are currently expected to be:
2017 2018 2019 2020 2021 2022
Annual capacity increase (a) 2.8 % 2.2 % 5.4 % 7.4 % 7.5 % 3.9 %
(a) These percentage increases include only contracted ship orders, sales and other dispositions.
At August 31, 2017, we had liquidity of $13.5 billion. Our liquidity consisted of $157 million of cash and cash
equivalents, which excludes $332 million of cash used for current operations, $2.8 billion available for borrowing under
our revolving credit facilities, net of our outstanding commercial paper borrowings, and $10.6 billion under our committed
future financings, which are comprised of ship export credit facilities. These commitments are from numerous large and
well-established banks and export credit agencies, which we believe will honor their contractual agreements with us. The
committed future financing will be available as follows (in millions):
2018 2019 2020 2021 2022
Availability of committed future financing at August 31, 2017 $ 2,099 $ 2,692 $ 3,049 $ 1,811 $ 938
At August 31, 2017, all of our revolving credit facilities are scheduled to mature in 2021, except for $300 million that
matures in 2020.
Substantially all of our debt agreements contain financial covenants as described in Note 6 - "Unsecured Debt" in the
annual consolidated financial statements, which are included within our Form 10-K. At August 31, 2017, we were in
compliance with our debt covenants. In addition, based on our forecasted operating results, financial condition and cash
flows, we expect to be in compliance with our debt covenants for the foreseeable future. Generally, if an event of default
under any debt agreement occurs, then pursuant to cross-default acceleration clauses, substantially all of our outstanding
debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interests,
certain derivative instruments and variable interest entities that either have, or are reasonably likely to have, a current
or future material effect on our consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
For a discussion of our hedging strategies and market risks, see the discussion below and Note 4 - "Fair Value
Measurements, Derivative Instruments and Hedging Activities" in our consolidated financial statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations within our Form 10-K.
Operational Currency Risks
We have foreign operations that have functional currencies other than the U.S. dollar, which result in foreign currency
translational impacts. We execute transactions in a number of currencies other than their functional currencies, which
result in foreign currency transactional impacts. Based on a 10% change in all currency exchange rates that were used in
our September 26, 2017 guidance, we estimate that our adjusted diluted earnings per share September 26, 2017 guidance would
change by the following:
• $0.05 per share for the fourth quarter of 2017
Interest Rate Risks
The composition of our debt, including the effect of foreign currency swaps and interest rate swaps, was as follows:
August 31, 2017 November 30, 2016
Fixed rate 29 % 28 %
Euro fixed rate 39 % 35 %
Floating rate 6 % 14 %
Euro floating rate 22 % 23 %
GBP floating rate 4 - %
Fuel Price Risks
Based on a 10% change in fuel prices versus the current spot price that was used to calculate fuel expense in our September
26, 2017 guidance, we estimate that our adjusted diluted earnings per share September 26, 2017 guidance would change by the
following:
• $0.05 per share for the fourth quarter of 2017
Based on a 10% change in Brent prices versus the current spot price that was used to calculate realized gains (losses) on
fuel derivatives in our September 26, 2017 guidance, we estimate that our adjusted diluted earnings per share September 26,
2017 guidance would change by the following:
• $0.02 per share for the fourth quarter of 2017
At August 31, 2017, the unrealized losses on our outstanding fuel derivative contracts were $187 million.
Item 4. Controls and Procedures.
A. Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed
by us in the reports that we file or submit under the Securities Exchange Act of 1934, is recorded, processed, summarized
and reported, within the time periods specified in the U.S. Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is
accumulated and communicated to our management, including our principal executive and principal financial officers, or
persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Our President and Chief Executive Officer and our Chief Financial Officer and Chief Accounting Officer have evaluated our
disclosure controls and procedures and have concluded, as of August 31, 2017, that they are effective at a reasonable level
of assurance, as described above.
B. Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended August 31, 2017 that
have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On May 19, 2017, Holland America Line and Princess Cruises notified the National Oceanic and Atmospheric Administration
("NOAA") regarding discharges made by certain vessels in the recently expanded area of the National Marine Sanctuary in the
Farallones Islands. NOAA continues to conduct an investigation. We believe the ultimate outcome will not have a material
impact on our consolidated financial statements.
Item 1A. Risk Factors.
The risk factors that affect our business and financial results are discussed in "Item 1A. Risk Factors," included in the
Form 10-K, and there has been no material change to these risk factors since the Form 10-K filing. We wish to caution the
reader that the risk factors discussed in "Item 1A. Risk Factors," included in the Form 10-K, and those described elsewhere
in this report or other Securities and Exchange Commission filings, could cause future results to differ materially from
those stated in any forward-looking statements. Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
SCHEDULE C
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
A. Repurchase Program
Under a share repurchase program effective 2004, we are authorized to repurchase Carnival Corporation common stock and
Carnival plc ordinary shares (the "Repurchase Program"). On April 6, 2017, the Boards of Directors approved a modification
of the general authorization under the Repurchase Program, which replenished the remaining authorized repurchases at the
time of the approval to $1.0 billion. The Repurchase Program does not have an expiration date and may be discontinued by
our Boards of Directors at any time.
No shares of Carnival plc ordinary shares were repurchased pursuant to the Repurchase Program during the three months ended
August 31, 2017. During this period, repurchases of Carnival Corporation common stock pursuant to the Repurchase Program
were as follows:
Period Total Number of Shares of Carnival Corporation Common Stock Purchased Average Price Paid per Share of Carnival Corporation Common Stock Maximum Dollar Value of Shares That May Yet Be Purchased Under the Repurchase Program
(in millions) (in millions)
June 1, 2017 through June 30, 2017 0.2 $ 65.80 $ 975
July 1, 2017 through July 31, 2017 1.0 $ 66.56 $ 909
August 1, 2017 through August 31, 2017 1.2 $ 68.14 $ 830
Total 2.4 $ 67.27
No shares of Carnival Corporation common stock and Carnival plc ordinary shares were purchased outside of publicly
announced plans or programs.
B. Stock Swap Programs
In addition to the Repurchase Program, we also have programs that allow us to obtain an economic benefit when either
Carnival Corporation common stock is trading at a premium to the price of Carnival plc ordinary shares or Carnival plc
ordinary shares are trading at a premium to Carnival Corporation common stock (the "Stock Swap Programs"). For example:
• In the event that Carnival Corporation common stock trades at a premium to Carnival plc ordinary shares, we may
elect to sell shares of Carnival Corporation common stock through a sales agent, at prevailing market prices in ordinary
brokers' transactions, and use the sale proceeds to repurchase Carnival plc ordinary shares in the UK market on an
equivalent basis.
• In the event that Carnival plc ordinary shares trade at a premium to Carnival Corporation common stock, we may
elect to sell ordinary shares of Carnival plc, with such sales made by Carnival Corporation or Carnival Investments Limited
("CIL") through its sales agent, at prevailing market prices in ordinary brokers' transactions, and use the sale proceeds
to repurchase shares of Carnival Corporation common stock in the U.S. market on an equivalent basis.
Any realized economic benefit under the Stock Swap Programs is used for general corporate purposes, which could include
repurchasing additional stock under the Repurchase Program.
Under the Stock Swap Programs effective 2008, the Boards of Directors have made the following authorizations:
• In January 2017, to sell up to 22.0 million shares of Carnival Corporation common stock in the U.S. market and
repurchase up to 22.0 million of Carnival plc ordinary shares in the UK market. We had 22.0 million shares remaining under
this authorization at August 31, 2017.
• In February 2016, to sell up to 26.9 million of existing Carnival plc ordinary shares in the UK market and
repurchase up to 26.9 million shares of Carnival Corporation common stock in the U.S. market. We had 26.0 million shares
remaining under this authorization at August 31, 2017.
Any sales of Carnival Corporation shares and Carnival plc ordinary shares have been or will be registered under the
Securities Act of 1933. During the three months ended August 31, 2017, no Carnival Corporation common stock or Carnival plc
ordinary shares were sold or repurchased under the Stock Swap Programs.
C. Carnival plc Shareholder Approvals
Carnival plc ordinary share repurchases under both the Repurchase Program and the Stock Swap Programs require annual
shareholder approval. The existing shareholder approval is limited to a maximum of 21.6 million ordinary shares and is
valid until the earlier of the conclusion of the Carnival plc 2018 annual general meeting or July 4, 2018.
This information is provided by RNS
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