REG-Carnival PLC: Carnival Corp & plc First Quarter Results <Origin Href="QuoteRef">CCL.L</Origin> - Part 1
28/03/2017 14:20
CARNIVAL CORPORATION & PLC REPORTS FIRST QUARTER EARNINGS
Carnival Corporation & plc today reported its results for the first quarter
ended February 28, 2017. The results of Carnival Corporation and Carnival
plc have been consolidated and include results on a U.S. GAAP and adjusted
basis.
1Q Highlights
* 1Q U.S. GAAP net income of $352 million, or $0.48 diluted EPS, compared to
$142 million, or $0.18 diluted EPS for the prior year
* 1Q adjusted net income of $279 million, or $0.38 EPS, compared to adjusted
net income of $301 million, or $0.39 EPS for the prior year (adjusted net
income excludes unrealized gains and losses on fuel derivatives and other
items totaling $73 million in gains for 1Q 2017 and $159 million of losses for
1Q 2016)
* 1Q net revenue yields in constant currency increased 3.8% compared to prior
year, better than December guidance of up 1.5 to 2.5%
* 1Q net cruise costs excluding fuel per available lower berth day
(“ALBD”) in constant currency increased 3.2% from prior year, compared to
December guidance of up 1.5 to 2.5%, due to the timing of certain expenses
* Changes in fuel prices (including realized fuel derivatives) and currency
exchange rates decreased earnings by $0.13 per share
Outlook
* At this time, cumulative advance bookings for the remainder of 2017 are well
ahead of the prior year at considerably higher prices
* FY 2017 net revenue yields in constant currency are expected to be up
approximately 3.0% compared to the prior year
* FY 2017 net cruise costs excluding fuel per ALBD in constant currency are
expected to be up approximately 1.0% compared to the prior year
* FY 2017 adjusted EPS is expected to be in the range of $3.50 to $3.70,
compared to FY 2016 adjusted EPS of $3.45
* 2Q 2017 adjusted EPS is expected to be in the range of $0.43 to $0.47,
compared to $0.49 in 2Q 2016 due to unfavorable changes in fuel prices
(including realized fuel derivatives) and currency exchange rates
President and Chief Executive Officer Arnold Donald commenting on these
results:
“We are off to a good start delivering another quarter of operational
improvement on top of a very strong first quarter last year. Our performance
was driven by increased demand, particularly for our core Caribbean
itineraries, leading to higher year-over-year ticket prices which enabled us
to overcome the significant negative impact of both fuel and currency to
exceed the high end of our guidance range.”
“Wave season, our peak booking period, was strong leaving us well positioned
with bookings at considerably higher prices and with less inventory remaining
for sale in 2017 compared to the prior year, resulting in increased earnings
guidance. We are clearly benefiting from our efforts to increase cruise
consideration through guest experience innovations, creative marketing, and
public relations programs. We are reaching consumers through multiple touch
points and laying the foundation for continued earnings improvement and
sustained double digit returns on invested capital.”
Carnival Corporation & plc Reports First Quarter Earnings
MIAMI, March 28, 2017 -- Carnival Corporation & plc (NYSE/LSE: CCL; NYSE:
CUK) announced U.S. GAAP net income of $352 million, or $0.48 diluted EPS, for
the first quarter of 2017 compared to U.S. GAAP net income for the first
quarter of 2016 of $142 million, or $0.18 diluted EPS. First quarter 2017
adjusted net income of $279 million, or $0.38 adjusted EPS, compared to
adjusted net income of $301 million, or $0.39 adjusted EPS, for the first
quarter of 2016. Adjusted net income excludes unrealized gains and losses on
fuel derivatives and other net charges, totaling $73 million in gains for the
first quarter 2017 and $159 million of losses for the first quarter 2016.
Revenues for the first quarter of 2017 of $3.8 billion were higher than the
$3.7 billion in the prior year.
Carnival Corporation & plc President and Chief Executive Officer Arnold Donald
noted, "We are off to a good start delivering another quarter of operational
improvement on top of a very strong first quarter last year. Our performance
was driven by increased demand, particularly for our core Caribbean
itineraries, leading to higher year-over-year ticket prices which enabled us
to overcome the significant negative impact of both fuel and currency to
exceed the high end of our guidance range."
Key information for the first quarter 2017 compared to the prior year:
* Gross revenue yields (revenue per available lower berth day or "ALBD")
increased 0.1 percent. In constant currency, net revenue yields increased 3.8
percent for 1Q 2017, better than December guidance of up 1.5 to 2.5 percent.
* Gross cruise costs including fuel per ALBD increased 2.9 percent. In
constant currency, net cruise costs excluding fuel per ALBD increased 3.2
percent, compared to December guidance of up 1.5 to 2.5 percent, due to the
timing of certain expenses.
* Changes in fuel prices (including realized fuel derivatives) and currency
exchange rates decreased earnings by $0.13 per share.
Highlights during the first quarter included the January announcement at the
Consumer Electronics Show in Las Vegas, Nevada of a potential breakthrough
guest experience innovation the Ocean Platform -- featuring Ocean Medallion.
The experience will debut on Princess Cruises' Regal Princess in November 2017
followed by additional Princess ships in 2018.
Fleet enhancement milestones included the official debut of Seabourn Cruises'
newest ship, Seabourn Encore, with its naming ceremony in Singapore.
International recording artist and world's best-selling soprano Sarah
Brightman presided over the naming ceremony as godmother of the stunning new
600-guest ship. Additionally, the company signed a memorandum of agreement
with Italian shipbuilder Fincantieri to build two new cruise ships. The first
is designated for Holland America Line to be delivered in 2021 with the second
for Princess Cruises in 2022.
Also during the quarter, following the Corporation's historic sailings from
the U.S. to Cuba through its Fathom brand, Carnival Cruise Line received
approval to begin operating cruises to Cuba. Carnival Paradise will be the
largest cruise ship to sail to Cuba from the U.S. when it begins calling in
Havana in June 2017.
2017 Outlook
At this time, cumulative advance bookings for the remainder of 2017 are well
ahead of the prior year at considerably higher prices. During the quarter,
both booking volumes and pricing for the remainder of 2017 have been running
ahead of last year.
Donald commented, "Wave season, our peak booking period, was strong leaving us
well positioned with bookings at considerably higher prices and with less
inventory remaining for sale in 2017 compared to the prior year, resulting in
increased earnings guidance. We are clearly benefiting from our efforts to
increase cruise consideration through guest experience innovations, creative
marketing, and public relations programs. We are reaching consumers through
multiple touch points and laying the foundation for continued earnings
improvement and sustained double digit returns on invested capital."
The company expects full year 2017 net revenue yields in constant currency to
be up approximately 3 percent compared to the prior year, better than December
guidance of up approximately 2.5 percent. The company continues to expect full
year net cruise costs excluding fuel per ALBD in constant currency to be up
approximately 1 percent compared to the prior year. Changes in fuel prices
(including realized fuel derivatives) and currency exchange rates compared to
the prior year are expected to decrease earnings by $0.35 per share.
Taking the above factors into consideration, the company expects full year
2017 adjusted earnings per share to be in the range of $3.50 to $3.70 compared
to December guidance of $3.30 to $3.60 and 2016 adjusted earnings per share of
$3.45.
Second Quarter 2017 Outlook
Second quarter constant currency net revenue yields are expected to be up
approximately 2.5 to 3.5 percent compared to the prior year. Net cruise costs
excluding fuel per ALBD in constant currency for the second quarter of 2017
are expected to be higher by approximately 1.5 to 2.5 percent compared to the
prior year. Changes in fuel prices (including realized fuel derivatives) and
currency exchange rates compared to the prior year are expected to decrease
earnings by $0.12 per share. Based on the above factors, the company expects
adjusted earnings per share for the second quarter 2017 to be in the range of
$0.43 to $0.47 versus 2016 adjusted earnings per share of $0.49.
Selected Key Metrics
Full Year 2017 Second Quarter 2017
Year over year change: 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.
Conference Call
The company has scheduled a conference call with analysts at 10:00 a.m. EDT
(3:00 p.m. BST) today to discuss its 2017 first quarter results. This call can
be listened to live, and additional information can be obtained, via Carnival
Corporation& plc's Web site at http://www.carnivalcorp.com/ and
http://www.carnivalplc.com/.
Carnival Corporation & plc is among the largest, most profitable and
financially strong leisure travel companies in the world. With a portfolio of
10 cruise brands in North America, Europe, Australia and Asia, comprised of
Carnival Cruise Line, Fathom, Holland America Line, Princess Cruises,
Seabourn, AIDA Cruises, Costa Cruises, Cunard, P&O Cruises (Australia)
and P&O Cruises (UK).
Together, these brands operate 102 ships visiting over 700 ports around the
world and totaling 226,000 lower berths with 19 new ships scheduled to be
delivered between 2017 and 2022. Carnival Corporation & plc also operates
Holland America Princess Alaska Tours, the leading tour companies in
Alaska and the Canadian Yukon. Traded on both the New York and London Stock
Exchanges, Carnival Corporation & plc is the only group in the world to be
included in both the S&P 500 and the FTSE 100 indices.
Additional information can be found on http://www.carnival.com/,
http://www.fathom.org/, http://www.hollandamerica.com/,
http://www.princess.com/, http://www.seabourn.com/, http://www.aida.de/,
http://www.costacruise.com/, http://www.cunard.com/,
http://www.pocruises.com.au/ and http://www.pocruises.com/.
Cautionary Note Concerning Factors That May Affect Future Results
Carnival Corporation and Carnival plc and their respective subsidiaries are
referred to collectively in this release as "Carnival Corporation & plc,"
"our," "us" and "we." Some of the statements, estimates or projections
contained in this release are "forward-looking statements" that involve risks,
uncertainties and assumptions with respect to us, including some statements
concerning future results, outlooks, plans, goals and other events which have
not yet occurred. These statements are intended to qualify for the safe
harbors from liability provided by Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. All statements other
than statements of historical facts are statements that could be deemed
forward-looking. These statements are based on current expectations,
estimates, forecasts and projections about our business and the industry in
which we operate and the beliefs and assumptions of our management. We have
tried, whenever possible, to identify these statements by using words like
"will," "may," "could," "should," "would," "believe," "depends," "expect,"
"goal," "anticipate," "forecast," "project," "future," "intend," "plan,"
"estimate," "target," "indicate" and similar expressions of future intent or
the negative of such terms.
Forward-looking statements include those statements that may impact our
outlook including, but not limited to, the forecasting of our:
• 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
Because forward-looking statements involve risks and uncertainties, there are
many factors that could cause our actual results, performance or achievements
to differ materially from those expressed or implied in this release. This
note contains important cautionary statements of the known factors that we
consider could materially affect the accuracy of our forward-looking
statements and adversely affect our business, results of operations and
financial position. It is not possible to predict or identify all such risks.
There may be additional risks that we consider immaterial or which are
unknown. These factors include, but are not limited to, the following:
* Incidents, such as ship incidents, security incidents, the spread of
contagious diseases and threats thereof, adverse weather conditions or other
natural disasters and the related adverse publicity affecting our reputation
and the health, safety, security and satisfaction of guests and crew
* Economic conditions and adverse world events affecting the safety and
security of travel, such as civil unrest, armed conflicts and terrorist
attacks
* Changes in and compliance with laws and regulations relating to environment,
health, safety, security, tax and anti-corruption under which we operate
* Disruptions and other damages to our information technology and other
networks and operations, and breaches in data security
* Ability to recruit, develop and retain qualified personnel
* Increases in fuel prices
* Fluctuations in foreign currency exchange rates
* Misallocation of capital among our ship, joint venture and other strategic
investments
* Future operating cash flow may not be sufficient to fund future obligations
and we may be unable to obtain financing
* Overcapacity in the cruise ship and land-based vacation industry
* Deterioration of our cruise brands' strengths and our inability to implement
our strategies
* Continuing financial viability of our travel agent distribution system, air
service providers and other key vendors in our supply chain and reductions in
the availability of, and increases in the prices for, the services and
products provided by these vendors
* Inability to implement our shipbuilding programs and ship repairs,
maintenance and refurbishments on terms that are favorable or consistent with
our expectations and increases to our repairs and maintenance expenses and
refurbishment costs as our fleet ages
* Failure to keep pace with developments in technology
* Geographic regions in which we try to expand our business may be slow to
develop and ultimately not develop how we expect and our international
operations are subject to additional risks not generally applicable to our
U.S. operations
* Competition from the cruise ship and land-based vacation industry
* Economic, market and political factors that are beyond our control
* Litigation, enforcement actions, fines or penalties
* Lack of continuing availability of attractive, convenient and safe port
destinations on terms that are favorable or consistent with our expectations
* Union disputes and other employee relationship issues
* Decisions to self-insure against various risks or the inability to obtain
insurance for certain risks at reasonable rates
* Reliance on third-party providers of various services integral to the
operations of our business
* Business activities that involve our co-investment with third parties
* Disruptions in the global financial markets or other events that may
negatively affect the ability of our counterparties and others to perform
their obligations to us
* Our shareholders may be subject to the uncertainties of a foreign legal
system since Carnival Corporation and Carnival plc are not U.S. corporations
* Small group of shareholders may be able to effectively control the outcome
of shareholder voting
* Provisions in Carnival Corporation's and Carnival plc's constitutional
documents may prevent or discourage takeovers and business combinations that
our shareholders might consider to be in their best interests
* The DLC arrangement involves risks not associated with the more common ways
of combining the operations of two companies
The ordering of the risk factors set forth above is not intended to reflect
our indication of priority or likelihood.
Forward-looking statements should not be relied upon as a prediction of actual
results. Subject to any continuing obligations under applicable law or any
relevant stock exchange rules, we expressly disclaim any obligation to
disseminate, after the date of this release, any updates or revisions to any
such forward-looking statements to reflect any change in expectations or
events, conditions or circumstances on which any such statements are based.
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, November 30,
2017 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)
Total shareholders' equity 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 2016
Constant
Dollar
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 2016
Constant
Currency
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 2016
Constant
Dollar
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 2016
Constant
Currency
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
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