Carnival Management Discusses Q4 2010 Results - Earnings Call Transcript
Carnival Corporation (CCL)
Q4 2010 Earnings Call
December 21, 2010 10:00 AM ET
Executives
Howard Frank – Vice Chairman and COO
David Bernstein – Senior Vice President, Finance and CFO
Beth Roberts – Vice President, Investor Relations
Micky Arison – Chairman and CEO
Analysts
Felicia Hendrix – Barclays
Janet Brashear – Sanford C. Bernstein
Assia Georgieva – Infiniti Research
Robin Farley – UBS
Steve Wieczynski – Stifel Nicolaus
Harry Curtis – Nomura
Kevin Milota – JP Morgan
Tim Conder – Wells Fargo
Ian Rennardson – Banc of America-Merrill Lynch
Tim Ramskill – Credit Suisse
Wyn Ellis – Numis Securities
Greg Badishkanian – Citi
Rachael Rothman – Susquehanna
Rick Lyall – John W. Bristol
Presentation
Operator
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Ladies and gentlemen, thank you very much for standing by. And welcome to the Carnival Corporation Fourth Quarter Earnings Conference Call. During this presentation all participants are in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions)
As a reminder, today’s conference is being recorded on Tuesday, December 21, 2010. It’s now my pleasure to turn the conference over to Howard Frank, Vice Chairman and Chief Operating Officer at Carnival Corporation. Please go ahead, sir.
Howard Frank
Thank you, [Parma], and good morning, everyone. This is Howard Frank and with me here this morning in Miami is David Bernstein, our Senior Vice President of Finance and Chief Financial Officer; Beth Roberts, our Vice President of Investor Relations; and Micky Arison, our Chairman and Chief Operating Officer.
I’m going to comment on the outlook but before I -- 2011 outlook, but before I do that I am going to turn it over to David Bernstein to take you through the fourth quarter color and the cost outlook for 2011.
David Bernstein
Thank you, Howard. Before I begin, please note that some of the remarks in this conference call will be forward-looking. I will refer you to the cautionary language in today’s press release. Also, all of my references to revenue and costs will be in local currency unless otherwise noted as this is a much better indicator of business trends.
For the fourth quarter our EPS was $0.31. The fourth quarter came in below the midpoint of our September guidance by $0.03 per share. The shortfall was caused by the previously announced $0.07 reduction in our fourth quarter EPS as a result of the voyage disruption, and it not been for the voyage disruption we would have exceeded the midpoint of our guidance by $0.04 driven by higher revenue yields and favorable currency impacts each worth about $0.02 per, excuse me, per share.
Now let’s look at our fourth quarter operating results versus the prior year. Our capacity increased 5% with substantially all of the increase coming from our European brands. Our European brands grew 10% while our North American brands only grew 1%.
Our net revenue yields increased 3.9% in the fourth quarter driven by a net ticket yield increase of 4.6%. Yields on both sides of the Atlantic improved each growing over 4%. Our North American brands saw very nice yield increases in all itineraries except the Caribbean which was flat on higher capacity.
Our European brands net ticket yields improved sequentially each quarter throughout the year and were better than we had expected in the fourth quarter. We were pleased with this performance given the uncertain economic environment, their 10% capacity increase and the fact that the European brands held up so well last year giving them more difficult prior year comparisons.
For net onboard and other yields we saw 2% increase, which was in line with our expectations with increases on both sides of the Atlantic. So in summary, we were very encouraged by the fact that we saw growth on both sides of the Atlantic in both net ticket and net onboard and other revenue yields.
On the cost side, net cruise costs per available lower berth day excluding fuel were up 1.6% versus the prior year. However, if you exclude the voyage disruption net cruise costs would have been down 1%.
Fuel costs this quarter was 6% higher than last year and that cost us about $0.03 per share, while the stronger dollar resulted in lower recorded costs, overall the stronger dollar also translated into $0.03 lower EPS.
So in summary, our EPS improved $0.07 this quarter driven by higher revenue yields despite the fuel, currency and voyage disruptions which had a combined negative impact of $0.13 per share.
Looking back at the full-year 2010, our EPS was $2.47 which was $0.27 better than the midpoint of our original guidance that we gave one year ago of $2.10 to $2.30 per share. The $0.27 improvement was primarily driven by the 2 points of additional revenue yield and the 1.5 points of additional lower net cruise costs per ALBD. This was partially offset by the combined negative impact from currency and fuel of $0.25.
In the end the economies on both sides of the Atlantic improved more than we had anticipated for 2010 driving revenue yields higher in both net ticket and net onboard and other.
As Micky indicated in the press release, our cash from operations reached $3.8 billion, about $0.5 billion more than we expected last year at this time and more than enough to fund our expansion program which peaked this year with six ships at a capital investment of $3.6 billion.
Before I turn to the 2011 outlook, I would like to update you on how our operations will be segmented in future SEC filings beginning with our 2010 10-K, which will be filed at the end of January.
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