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Carnival Corporation & plc announced non-GAAP net income of $13 million, or $0.02 diluted earnings per share for the first quarter of 2012. Reported U.S. GAAP net loss was $139 million, or $0.18 diluted loss per share, which includes a non-cash write down for Ibero Cruises’ goodwill and trademark assets of $173 million and net unrealized gains on fuel derivatives of $21 million. Net income for the first quarter of 2011 was $152 million, or $0.19 diluted EPS. Revenues for the first quarter of 2012 increased to $3.6 billion from $3.4 billion for the prior year.
First quarter 2012 results reflect Costa Concordia incident expenses of $29 million, including a $10 million insurance deductible related to third party personal injury liabilities. During the first quarter of 2012, the company also recorded an insurance recoverable of $515 million (euro 384 million), which offset the write off of the net carrying value of Costa Concordia as the ship has been deemed to be a constructive total loss.
Carnival Corporation & plc Chairman and CEO Micky Arison noted, “All of us at Carnival Corporation & plc are deeply saddened by the Costa Concordia tragedy. Our hearts go out to everyone affected, particularly the families of the deceased and missing. The global cruise industry has an outstanding safety record and every one of our brands is committed to the well-being of our guests and crew. Immediately following the Costa Concordia accident we ordered a thorough review, with the help of industry-leading experts, to understand what happened as well as to conduct an extensive audit of all safety and emergency response procedures across all of our cruise lines. We will work tirelessly to understand what went wrong, and make sure it never happens again.”
2012 Outlook
The company’s expectations for 2012 will be affected by the direct and indirect financial consequences of the Costa Concordia incident. At this time, cumulative advance bookings, excluding Costa, for the remainder of 2012 are approximately 3 occupancy points behind the prior year with prices slightly higher than last year’s levels (constant dollars). Since the date of the Costa Concordia incident in mid-January through February 26, fleetwide booking volumes, excluding Costa, have shown improving trends but are still running high single digits behind the prior year at slightly lower prices. There has been less impact on the company’s North American brands than European brands. Booking volumes for Costa during the same period are running significantly behind the prior year at lower prices, however, Costa has curtailed virtually all of its marketing activities during this period.
Looking forward, Arison stated, “Our base of business for 2012 is solid and booking volumes have gradually improved, which we believe is a testament to consumer confidence in the cruise industry’s long-standing record of exceptional safety. Despite the slowdown in bookings, all of our North American brands are still expecting a modest yield improvement in 2012 while our European brands, excluding Costa, are expecting to have slightly lower yields due in part to the slowing European economies. Overall, based on current pricing trends, any consumers holding out for deeper than normal discounts may be disappointed.” Arison also noted that the company’s cash flow remains strong and is expected to approach $3.3 billion in 2012 (including net insurance proceeds), which is sufficient to fund this year’s capital expenditure requirements and expected dividend distributions without the need for additional financing.
Excluding Costa, the company forecasts full year 2012 net revenue yields, on a constant dollar basis, to be in line with the prior year. Including Costa, the company forecasts a decline in net revenue yields (constant dollars) of 2 to 4 percent. In order to maintain an orderly market, Costa has adopted a strategy of minimizing discounting and, if necessary, operating at reduced occupancy levels. Consequently, much of Costa’s anticipated yield decline is expected to result from lower occupancy levels.
The company continues to expect net cruise costs excluding fuel per ALBD for the full year 2012 to be in line with the prior year on a constant dollar basis. Based on the current spot prices for fuel, fuel costs for the full year 2012 are expected to increase $407 million compared to 2011, costing an additional $0.52 per share. At current exchange rates, full year 2012 net income is expected to be reduced by $57 million or $0.07 per share compared to 2011.
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 $1.40 to $1.70, compared to 2011 non-GAAP earnings of $2.42 per share and the December guidance range of $2.55 to $2.85 per share.
Compared to its December guidance, the company has reduced the midpoint of its earnings expectations by $1.15 per share, of which $0.65 results from a decline in earnings for the Costa brand. The balance is due to reduced expectations for the remainder of the company, comprised of a $0.40 impact due to changes in fuel prices and currency exchange rates and $0.10 from earnings (excluding fuel and currency).
Arison stated, “Our company is resilient and we will continue to work through this challenging period. We have every confidence that we will restore consumer faith in the Costa brand and the excellent reputation Costa’s management team has built for the organization which has a deep-rooted Italian heritage spanning more than 60 years. Carnival Corporation & plc expects to carry nearly 10 million guests on its global fleet this year and the long-term fundamentals of our business remain strong as consumers continue to place tremendous importance on quality and value when making vacation decisions. Based on our solid operating cash flow, strong balance sheet and high investment grade credit ratings we are well positioned for the future and remain confident in our long-term outlook.”
Second Quarter 2012 Outlook
Second quarter constant dollar net revenue yields, excluding Costa, are expected to be flat to down slightly (decrease 2.5 to 3.5 percent compared to the prior year, including Costa). Net cruise costs excluding fuel per ALBD for the second quarter are expected to be flat to down 1.0 percent on a constant dollar basis compared to the prior year. Fuel costs for the second quarter are expected to increase $85 million compared to the prior year, costing an additional $0.11 per share.
Based on the above factors, the company expects non-GAAP diluted earnings for the second quarter 2012 to be in the range of $0.05 to $0.09 per share versus 2011 non-GAAP earnings of $0.26 per share.
During the second quarter, the company will take delivery of all three of its new ships for 2012, Costa Cruises’ 2,984-passenger Costa Fascinosa, AIDA Cruises’ 2,194-passenger AIDAmar and Carnival Cruise Lines’ 3,690-passenger Carnival Breeze.
Tatiana is the news co-ordinator for TravelDailyNews Media Network (traveldailynews.gr, traveldailynews.com and traveldailynews.asia). Her role includes to monitor the hundrends of news sources of TravelDailyNews Media Network and skim the most important according to our strategy. She holds a Bachelor degree in Communication & Mass Media from Panteion University of Political & Social Studies of Athens and she has been editor and editor-in-chief in various economic magazines and newspapers.
