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Carnival Corporation F2Q10 (Qtr End 05/31/10) Earnings Call Transcript

Carnival Corporation F2Q10 (Qtr End 05/31/10) Earnings Call Transcript

Carnival Corporation (CCL)

F2Q10 (Qtr End 05/31/10) Earnings Call Transcript

June 22, 2010 10:00 am ET


Howard Frank – Vice Chairman and COO

David Bernstein – SVP and CFO

Micky Arison – Chairman and CEO

Beth Roberts – VP, IR


Felicia Hendrix – Barclays Capital

Robin Farley – UBS

Rick Lyall – John W. Bristol

David Leibowitz – Horizon Asset Management

Assia Georgieva – Infinity Research

Greg Badishkanian – Citigroup

Tim Conder – Wells Fargo Securities

Harry Curtis – Lazard Capital Markets

Brian Egger – Affiliated Research

Janet Brashear – Sanford Bernstein

Kevin Milota – JP Morgan

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Ian Rennardson – Bank of America

Sharon Zackfia – William Blair & Co.



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» Carnival Corporation F1Q10 (Qtr End 02/28/10) Earnings Call Transcript
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Ladies and gentlemen, thank you for standing by. Welcome to the Carnival Corporation second quarter earnings call. (Operator instructions) As a reminder this conference is being recorded, Tuesday, June 22, 2010.

I would now like to turn the conference over to Howard Frank, Vice Chairman and Chief Operating Officer. Please go ahead, sir.

Howard Frank

Thank you Sarah. Good morning everyone. With me here in Miami is David Bernstein, our Chief Financial Officer and Senior VP of Finance; Beth Roberts, our Vice President of Investor Relations; and Micky Arison, our Chairman and CEO.

I'm going to turn the first part of this all over to David, and he will take you through the color during the second quarter and talk about costs going forward. David.

David Bernstein

Thank you, Howard. I will begin the conference call by reading the forward-looking statement. During this conference call, we will make certain forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and assumptions, which may cause the actual results, performances or achievements of Carnival to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. For further information, please see Carnival’s earnings press release and its filings with the Securities and Exchange Commission.

For the second quarter our earnings per share was $0.32. The second quarter came in above the midpoint of our March guidance by $0.04 per share, despite a $0.02 impact from the volcanic ash and the Chilean earthquake disruption.

Net revenue yields in local currency came in at 2%, and the higher end of our March guidance, which was worth $0.02 per share, even with these disruptions which impacted yields by half a point. In addition, our ongoing cost reductions were better than forecasted and were also worth $0.02 per share.

Now let us take a look at our second quarter operating results versus the prior year, our capacity increased 8% for the second quarter of 2010 with the majority of the increase going to our European brands. Our European brands grew 13% while our North American brands grew 4%. As I previously mentioned, overall net revenue yields in local currency increased 2% in the second quarter of 2010 versus the prior year.

Now let’s take a look at the two components of net revenue yields. For net ticket yields we saw a yield increase of 1.6% in local currency. Our North American brands were up 3.8% driven by increases in Europe, Alaska and other exotic itineraries. Our European brands experienced 1.2% lower local currency ticket yields, which were in line with our expectation. Similar to the first quarter the declines were driven by challenging winter season in the Brazilian market, with significant increases this past winter. If you exclude the five ships that Costa Nibura [ph] had in Brazil in the month of March, the European brands net ticket revenue yields in local currency was flat. We were pleased with this performance given the economic uncertainty and the significantly higher capacity for our continental European brands.

For net onboard and other yields, we reported a yield increase of 3.1% in local currency. The increase occurred on both sides of the Atlantic. Our North American brands were up 4.6%, and our European brands were up 3.2% in local currency. This was clearly better than had expected in our March guidance. Keep in mind that the second quarter actual is again easy comps as the second quarter last year was at the low point for on board and other revenue yields. As a result of our second quarter performance, the operating companies have raised their forecast for onboard and other revenue yield slightly for the back half of the year.

On the March call, I indicated that excluding a couple of one-time first-quarter items, our expectations for the full year was flat given that the first quarter was flat. However, given the increase in the second quarter, our June guidance for the full year, also excluding the same one-time items in the first quarter, is an increase of approximately 1%.

In summary, we were very encouraged by the 2% increase in net revenue yields in the second quarter, which was the first time we saw positive revenue yields since late 2008. As Howard will discuss later, we expect greater improvements in yields the reminder of the year.

On the cost side, cruise costs per available lower berth day, excluding fuel and in local currency, were down 4.9% versus the prior year. The decline was driven by fewer dry docks, economies of scale relating to double-digit growth at certain of our brands, benefits from cost reduction programs, a low inflationary environment, and the timing of certain SG&A expenses. However, the strength of our revenue and cost performance in the second quarter of 2010 were once again masked by rising fuel prices. Fuel prices this quarter were 64% higher than last year, costing us $162 million or $0.20 per share. One final note on cost, as a result of our ongoing efforts to reduce fuel consumption, our fuel consumption per ALB day declined 3.3% in the second quarter, continuing our multiple year savings trend.

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