Carnival Corp & plc Second Quarter Results

CARNIVAL CORPORATION & PLC REPORTS SECOND QUARTER EARNINGS Carnival Corporation & plc today reported its results of operations for thesecond quarter ended May 31, 2014. The results of Carnival Corporation andCarnival plc have been consolidated and include results on a U.S. GAAP andnon-U.S. GAAP basis. 2Q Highlights * 2Q revenues were $3.6b, compared to $3.5b in the prior year * 2Q net revenue yields decreased 2.2% (constant dollars) compared to the prior year, which was better than March guidance, down 3 to 4% * 2Q net cruise costs excluding fuel per available lower berth day (“ALBD”) increased 1.2% (constant dollars) compared to the prior year, which was better than March guidance, up 2.5 to 3.5% * 2Q fuel consumption per ALBD decreased 6% compared to the prior year * 2Q non-GAAP (diluted) earnings per share of $0.10, compared to $0.07 for the prior year 2014 Outlook * At this time, cumulative advance bookings for the remainder of 2014 are slightly ahead of the prior year at higher prices * Net revenue yields are expected to be down slightly on a constant dollar basis (flat to up slightly in current dollars) for full year 2014 compared to the prior year * Net cruise costs excluding fuel per ALBD are expected to be flat to up slightly for full year 2014 compared to the prior year (constant dollars), which is better than March guidance * Full year 2014 non-GAAP earnings per share (diluted) expected to be in the range of $1.60 to $1.75, compared to $1.58 for 2013 * 3Q 2014 non-GAAP earnings per share (diluted) expected to be in the range of $1.38 to $1.44, compared to $1.38 in 3Q 2013 President and Chief Executive Officer Arnold Donald commenting on these results: “We benefited from effective marketing initiatives, which combined with agradually improving economic environment, led to revenue yield improvement for ourcontinental European brands in the quarter compared to the prior year and is expectedto continue through the remainder of the year. In addition, we achieved a six percentimprovement in fuel consumption.” “Collectively our brands are gaining momentum in our efforts to drive higher ticketprices and we continue to expect sequential improvement in revenue yields, despite amore competitive environment in the Caribbean this summer. We remain focused on furtherunderstanding our guests and refining the exceptional customer experience we provide. Wehave also made significant strides in our efforts to identify opportunities for cross-brandoperational efficiencies. This work is still in the early stages, but we are makingprogress and beginning to see encouraging signs. We believe we have reached a positiveinflection point for our company as we return to earnings growth in 2014 and work hardto ensure that growth accelerates in the years to come.” Conference callThe company has scheduled a conference call with analysts at 3:00 p.m. BST(10:00 a.m. EDT) today to discuss its 2014 second quarter results. This call can belistened to live, and additional information can be obtained, via Carnival Corporation &plc’s Web site at www.carnivalcorp.com and www.carnivalplc.com. Carnival Corporation & plcCarnival Corporation & plc is the largest cruise company in the world, with a portfolioof cruise brands in North America, Europe, Australia and Asia, comprised of CarnivalCruise Lines, Holland America Line, Princess Cruises, Seabourn, AIDA Cruises, CostaCruises, Cunard, Ibero Cruises, P&O Cruises (Australia) and P&O Cruises (UK). Together, these brands operate 101 ships totaling 212,000 lower berths with seven newships scheduled to be delivered between 2014 and 2016. Carnival Corporation & plc alsooperates Holland America Princess Alaska Tours, the leading tour companies in Alaskaand the Canadian Yukon. Traded on both the New York and London Stock Exchanges, CarnivalCorporation & plc is the only group in the world to be included in both the S&P 500 andthe FTSE 100 indices. Carnival Corporation & plc Reports Second Quarter Earnings MIAMI, June 24, 2014 -- Carnival Corporation & plc (NYSE/LSE: CCL;NYSE: CUK) announced non-GAAP net income of $80 million, or $0.10 diluted EPSfor the second quarter of 2014 compared to non-GAAP net income for the secondquarter of 2013 of $57 million, or $0.07 diluted EPS. For the second quarter of2014, U.S. GAAP net income, which included a net gain on vessel transactions of$15 million and net unrealized gains on fuel derivatives of $11 million, was$106 million, or $0.14 diluted EPS. For the second quarter of 2013, U.S. GAAPnet income, which included a gain on a ship sale of $15 million and unrealizedlosses on fuel derivatives of $31 million, was $41 million, or $0.05 dilutedEPS. Revenues for the second quarter of 2014 were $3.6 billion, compared with$3.5 billion the prior year. Carnival Corporation & plc President and CEO Arnold Donald noted that secondquarter earnings were significantly better than anticipated in the company'sMarch guidance due to better than expected net revenue yields for most of thecompany's cruise brands, as well as lower than expected net cruise costs. Donald noted, "We benefited from effective marketing initiatives, whichcombined with a gradually improving economic environment, led to revenue yieldimprovement for our continental European brands in the quarter compared to theprior year and is expected to continue through the remainder of the year. Inaddition, we achieved a six percent improvement in fuel consumption." Donald also noted that during the second quarter Princess Cruises' new RegalPrincess debuted in Europe, boasting a wide variety of stunning featuresincluding The SeaWalk, a glass-bottomed walkway extending beyond the edge ofthe vessel, 128 feet above the sea. Additionally, Princess launched its firsthomeport cruise program from China in May with the start of a four-month seriesof voyages from Shanghai on Sapphire Princess. Also in May, Costa Cruisesannounced that it will position Costa Serena in China next year, bringing thecompany's total to four ships based in the world's fastest growing cruisemarket. The company believes it is the largest provider of cruise vacationshome-ported in China. Key metrics for the second quarter 2014 compared to the prior year were asfollows: * On a constant dollar basis, net revenue yields (net revenue per available lower berth day or "ALBD") decreased 2.2 percent for 2Q 2014, which was better than the company's guidance of down 3 to 4 percent. Gross revenue yields decreased 0.5 percent in current dollars. * Net cruise costs excluding fuel per ALBD increased 1.2 percent in constant dollars, primarily due to higher dry-dock costs, as well as advertising and promotion expenses. Costs were better than March guidance, up 2.5 to 3.5 percent. Gross cruise costs including fuel per ALBD in current dollars decreased 0.9 percent. * Fuel prices declined 3.7 percent to $657 per metric ton for 2Q 2014 from $683 per metric ton in 2Q 2013 but were higher than March guidance of $649 per metric ton. * Fuel consumption per ALBD decreased 6 percent in 2Q 2014 compared to the prior year. 2014 Outlook Since March, fleetwide booking volumes for the next three quarters are runningslightly behind last year at higher prices. At this time, cumulative advancebookings for the remainder of 2014 are slightly ahead of the prior year athigher prices. Donald noted, "Collectively our brands are gaining momentum in our efforts todrive higher ticket prices and we continue to expect sequential improvement inrevenue yields, despite a more competitive environment in the Caribbean thissummer. We remain focused on further understanding our guests and refining theexceptional customer experience we provide. We have also made significantstrides in our efforts to identify opportunities for cross-brand operationalefficiencies. This work is still in the early stages, but we are makingprogress and beginning to see encouraging signs. We believe we have reached apositive inflection point for our company as we return to earnings growth in2014 and work hard to ensure that growth accelerates in the years to come." Total revenues are expected to be higher for the full year 2014 compared to theprior year. The company continues to expect full year 2014 net revenue yieldson a constant dollar basis to be down slightly compared to the prior year (flatto up slightly on a current dollar basis). The company now expects full year2014 net cruise costs excluding fuel per ALBD to be flat to up slightlycompared to the prior year on a constant dollar basis, which is better than hadbeen anticipated in the March guidance. However, changes in fuel prices andcurrency exchange rates have reduced full year 2014 forecasted earnings by$0.06 per share compared to March guidance. Taking the above factors into consideration, the company has increased its fullyear 2014 non-GAAP diluted earnings per share guidance to be in the range of$1.60 to $1.75, compared to 2013 non-GAAP diluted earnings of $1.58 per share. Third Quarter 2014 Outlook Third quarter constant dollar net revenue yields are expected to be flat todown 1 percent compared to the prior year due primarily to a significantindustry capacity increase in the Caribbean. Net cruise costs excluding fuelper ALBD for the third quarter are expected to be 1 to 2 percent higher on aconstant dollar basis compared to the prior year. Based on the above factors, the company expects non-GAAP diluted earnings forthe third quarter 2014 to be in the range of $1.38 to $1.44 per share versus2013 non-GAAP earnings of $1.38 per share. Selected Key Forecast Metrics Third Quarter 2014 Current Constant Dollars DollarsYear over year change: Net revenue yields 1 to 2 % 0 to (1) %Net cruise costs excl. fuel / ALBD 3 to 4 % 1 to 2 % Full Year Third Quarter 2014 2014 Fuel price per metric ton 665 673Fuel consumption (metric tons inthousands) 3,210 805 Currency: Euro $1.37 to €1 $1.36 to €1 Sterling $1.68 to £1 $1.70 to £1 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 2014 second quarter results. This call can belistened to live, and additional information can be obtained, via CarnivalCorporation & plc's Web site at http://www.carnivalcorp.com/ andhttp://www.carnivalplc.com/. Carnival Corporation & plc is the largest cruise company in the world, with aportfolio of cruise brands in North America, Europe, Australia and Asia,comprised of Carnival Cruise Lines, Holland America Line, Princess Cruises,Seabourn, AIDA Cruises, Costa Cruises, Cunard, Ibero Cruises, P&O Cruises(Australia) and P&O Cruises (UK). Together, these brands operate 101 ships totaling 212,000 lower berths withseven new ships scheduled to be delivered between 2014 and 2016. CarnivalCorporation & plc also operates Holland America Princess Alaska Tours, theleading tour companies in Alaska and the Canadian Yukon. Traded on both the NewYork and London Stock Exchanges, Carnival Corporation & plc is the only groupin the world to be included in both the S&P 500 and the FTSE 100 indices. Cautionary Note Concerning Factors That May Affect Future Results Carnival Corporation and Carnival plc and their respective subsidiaries arereferred to collectively in this release as "Carnival Corporation & plc,""our," "us" and "we." Some of the statements, estimates or projectionscontained in this release are "forward-looking statements" that involve risks,uncertainties and assumptions with respect to us, including some statementsconcerning future results, outlooks, plans, goals and other events which havenot yet occurred. These statements are intended to qualify for the safe harborsfrom liability provided by Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934. All statements other thanstatements of historical facts are statements that could be deemedforward-looking statements. These statements are based on current expectations,estimates, forecasts and projections about our business and the industry inwhich we operate and the beliefs and assumptions of our management. We havetried, 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 orthe negative of such terms. Forward-looking statements include those statements that may impact, amongother things, the forecasting of our non-GAAP earnings per share; net revenueyields; booking levels; pricing; occupancy; operating, financing and tax costs,including fuel expenses; net cruise costs per available lower berth day;estimates of ship depreciable lives and residual values; liquidity; goodwilland trademark fair values and outlook. Because forward-looking statementsinvolve risks and uncertainties, there are many factors that could cause ouractual results, performance or achievements to differ materially from thoseexpressed or implied in this release. These factors include, but are notlimited to, the following: * general economic and business conditions; * increases in fuel prices; * incidents, the spread of contagious diseases and threats thereof, adverse weather conditions or other natural disasters and other incidents affecting the health, safety, security and satisfaction of guests and crew; * the international political climate, armed conflicts, terrorist and pirate attacks, vessel seizures, and threats thereof, and other world events affecting the safety and security of travel; * negative publicity concerning the cruise industry in general or us in particular, including any adverse environmental impacts of cruising; * litigation, enforcement actions, fines or penalties; * economic, market and political factors that are beyond our control, which could increase our operating, financing and other costs; * changes in and compliance with laws and regulations relating to the protection of persons with disabilities, employment, environment, health, safety, security, tax and other regulations under which we operate; * our inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments on terms that are favorable or consistent with our expectations; * increases to our repairs and maintenance expenses and refurbishment costs as our fleet ages; * lack of continuing availability of attractive, convenient and safe port destinations on terms that are favorable or consistent with our expectations; * 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; * disruptions and other damages to our information technology and other networks and operations, and breaches in data security; * failure to keep pace with developments in technology; * competition from and overcapacity in the cruise ship and land-based vacation industry; * loss of key personnel or our ability to recruit or retain qualified personnel; * union disputes and other employee relation issues; * disruptions in the global financial markets or other events may negatively affect the ability of our counterparties and others to perform their obligations to us; * the continued strength of our cruise brands and our ability to implement our brand strategies; * our international operations are subject to additional risks not generally applicable to our U.S. operations; * geographic regions in which we try to expand our business may be slow to develop and ultimately not develop how we expect; * our decisions to self-insure against various risks or our inability to obtain insurance for certain risks at reasonable rates; * fluctuations in foreign currency exchange rates; * whether our future operating cash flow will be sufficient to fund future obligations and whether we will be able to obtain financing, if necessary, in sufficient amounts and on terms that are favorable or consistent with our expectations; * risks associated with the dual listed company arrangement and * uncertainties of a foreign legal system as Carnival Corporation and Carnival plc are not U.S. corporations. Forward-looking statements should not be relied upon as a prediction of actualresults. Subject to any continuing obligations under applicable law or anyrelevant stock exchange rules, we expressly disclaim any obligation todisseminate, after the date of this release, any updates or revisions to anysuch forward-looking statements to reflect any change in expectations orevents, 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 Six Months Ended May 31, May 31, 2014 2013 2014 2013 Revenues Cruise Passenger tickets $ 2,698 $ 2,613 $ 5,425 $ 5,353 Onboard and other 905 839 1,755 1,683 Tour and other 30 27 38 36 3,633 3,479 7,218 7,072 Operating Costs and Expenses Cruise Commissions, transportation and other 520 506 1,141 1,123 Onboard and other 115 115 228 242 Fuel 527 555 1,050 1,115 Payroll and related 485 454 965 914 Food 251 238 496 481 Other ship operating 635 603 1,226 1,182 Tour and other 32 16 46 30 2,565 2,487 5,152 5,087 Selling and administrative 504 449 1,025 908 Depreciation and amortization 409 391 814 780 3,478 3,327 6,991 6,775 Operating Income 155 152 227 297 Nonoperating (Expense) Income Interest income 2 3 4 5 Interest expense, net of capitalized interest (72) (78) (143) (161) Gains (losses) on fuel derivatives, net 11 (31) (6) (59) Other income (expense), net 11 (5) 11 (2) (48) (111) (134) (217) Income Before Income Taxes 107 41 93 80 Income Tax Expense, Net (1) - (2) (2) Net Income $ 106 $ 41 $ 91 $ 78 Earnings Per Share Basic $ 0.14 $ 0.05 $ 0.12 $ 0.10 Diluted $ 0.14 $ 0.05 $ 0.12 $ 0.10 Non-GAAP Earnings Per Share-Diluted (a) $ 0.10 $ 0.07 $ 0.11 $ 0.16 Dividends Declared Per Share $ 0.25 $ 0.25 $ 0.50 $ 0.50 Weighted-Average Shares Outstanding - Basic 776 775 776 775Weighted-Average Shares Outstanding - Diluted 778 777 778 777 (a) See the U.S. GAAP net income to non-GAAP net income reconciliation in the Non-GAAPFinancial Measures included herein. CARNIVAL CORPORATION & PLC CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in millions, except par values) May 31, November 30, 2014 2013 ASSETS Current Assets Cash and cash equivalents $ 343 $ 462 Trade and other receivables, net 288 405 Insurance recoverables 299 381 Inventories 383 374 Prepaid expenses and other 312 315 Total current assets 1,625 1,937 Property and Equipment, Net 33,515 32,905 Goodwill 3,226 3,210 Other Intangibles 1,298 1,292 Other Assets 862 760 $ 40,526 $ 40,104 LIABILITIES AND SHAREHOLDERS' EQUITYCurrent Liabilities Short-term borrowings $ 508 $ 60 Current portion of long-term debt 1,048 1,408 Accounts payable 627 639 Claims reserve 384 456 Accrued liabilities and other 1,136 1,126 Customer deposit 3,698 3,031 Total current liabilities 7,401 6,720 Long-Term Debt 7,880 8,092 Other Long-Term Liabilities 880 736 Shareholders' Equity Common stock of Carnival Corporation, $0.01 par value; 1,960 shares authorized; 652 shares at 2014 and 651 shares at 2013 issued 7 7 Ordinary shares of Carnival plc, $1.66 par value; 216 shares at 2014 and 2013 issued 358 358 Additional paid-in capital 8,345 8,325 Retained earnings 18,485 18,782 Accumulated other comprehensive income 243 161 Treasury stock, 59 shares at 2014 and 2013 of Carnival Corporation and 32 shares at 2014 and 2013 of Carnival plc, at cost (3,073) (3,077) Total shareholders' equity 24,365 24,556 $ 40,526 $ 40,104 CARNIVAL CORPORATION & PLC OTHER INFORMATION Three Months Ended Six Months Ended May 31, May 31, 2014 2013 2014 2013STATISTICAL INFORMATION ALBDs (in thousands) (a) 18,872 17,993 37,158 35,972 Occupancy percentage (b) 102.2% 103.3% 102.6% 103.7% Passengers carried (in thousands) 2,551 2,364 4,960 4,669 Fuel consumption in metric tons (in thousands) 802 814 1,603 1,640 Fuel consumption in metric tons per ALBD 0.043 0.045 0.043 0.046 Fuel cost per metric ton consumed $ 657 $ 683 $ 655 $ 680 Currencies U.S. dollar to €1 $ 1.38 $ 1.30 $ 1.37 $ 1.31 U.S. dollar to £1 $ 1.67 $ 1.52 $ 1.66 $ 1.55 U.S. dollar to Australian dollar $ 0.92 $ 1.02 $ 0.91 $ 1.03 CASH FLOW INFORMATION Cash from operations $ 1,196 $ 1,157 $ 1,673 $ 1,556 Capital expenditures $ 976 $ 1,206 $ 1,329 $ 1,447 Dividends paid $ 194 $ 195 $ 388 $ 777 (a) ALBDs is a standard measure of passenger capacity for the period, which weuse to perform rate and capacity variance analyses to determine the mainnon-capacity driven factors that cause our cruise revenues and expenses tovary. ALBDs assume that each cabin we offer for sale accommodates twopassengers and is computed by multiplying passenger capacity byrevenue-producing ship operating days in the period. (b) In accordance with cruise industry practice, occupancy is calculated usinga denominator of ALBDs, which assumes two passengers per cabin even though somecabins 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 grossand net cruise revenues, without rounding, by ALBDs as follows (dollarsin millions, except yields) (a)(b): Three Months Ended May 31, Six Months Ended May 31, 2014 2014 Constant Constant 2014 Dollar 2013 2014 Dollar 2013 Passenger ticket revenues $ 2,698 $ 2,630 $ 2,613 $ 5,425 $ 5,332 $ 5,353Onboard and other revenues 905 891 839 1,755 1,740 1,683Gross cruise revenues 3,603 3,521 3,452 7,180 7,072 7,036Less cruise costs Commissions, transportation and other (520) (505) (506) (1,141) (1,116) (1,123) Onboard and other (115) (112) (115) (228) (225) (242) (635) (617) (621) (1,369) (1,341) (1,365) Net passenger ticket revenues 2,178 2,125 2,107 4,284 4,216 4,230Net onboard and other revenues 790 779 724 1,527 1,515 1,441Net cruise revenues $ 2,968 $ 2,904 $ 2,831 $ 5,811 $ 5,731 $ 5,671 ALBDs 18,872,035 18,872,035 17,993,002 37,158,340 37,158,340 35,972,237 Gross revenue yields $ 190.92 $ 186.57 $ 191.84 $ 193.23 $ 190.33 $ 195.59% decrease vs. 2013 (0.5)% (2.7)% (1.2)% (2.7)% Net revenue yields $ 157.27 $ 153.87 $ 157.33 $ 156.39 $ 154.23 $ 157.64% decrease vs. 2013 0.0% (2.2)% (0.8)% (2.2)% Net passenger ticketrevenue yields $ 115.40 $ 112.59 $ 117.09 $ 115.29 $ 113.47 $ 117.58% decrease vs. 2013 (1.4)% (3.8)% (1.9)% (3.5)% Net onboard and otherrevenue yields $ 41.87 $ 41.28 $ 40.24 $ 41.10 $ 40.76 $ 40.06% increase vs. 2013 4.1% 2.6% 2.6% 1.7% Consolidated gross and net cruise costs and net cruise costs excluding fuel perALBD were computed by dividing the gross and net cruise costs and net cruisecosts excluding fuel, without rounding, by ALBDs as follows (dollars in millions,except costs per ALBD) (a) (b): Three Months Ended May 31, Six Months Ended May 31, 2014 2014 Constant Constant 2014 Dollar 2013 2014 Dollar 2013 Cruise operating expenses $ 2,533 $ 2,488 $ 2,471 $ 5,106 $ 5,044 $ 5,057Cruise selling andadministrative expenses 502 492 447 1,021 1,008 904Gross cruise costs 3,035 2,980 2,918 6,127 6,052 5,961Less cruise costs included above Commissions, transportation and other (520) (505) (506) (1,141) (1,116) (1,123) Onboard and other (115) (112) (115) (228) (225) (242) Gains (losses) on ship sales and ship impairment, net 15 14 - 15 14 (2) Net cruise costs 2,415 2,377 2,297 4,773 4,725 4,594Less fuel (527) (527) (555) (1,050) (1,050) (1,115)Net cruise costsexcluding fuel $ 1,888 $ 1,850 $ 1,742 $ 3,723 $ 3,675 $ 3,479 ALBDs 18,872,035 18,872,035 17,993,002 37,158,340 37,158,340 35,972,237 Gross cruise costsper ALBD $ 160.80 $ 157.90 $ 162.19 $ 164.89 $ 162.86 $ 165.71% decrease vs. 2013 (0.9)% (2.6)% (0.5)% (1.7)% Net cruise costs perALBD $ 127.95 $ 125.94 $ 127.68 $ 128.45 $ 127.14 $ 127.71 % increase (decrease)vs. 2013 0.2% (1.4)% 0.6% (0.4)% Net cruise costs excludingfuel per ALBD $ 100.00 $ 97.99 $ 96.81 $ 100.18 $ 98.86 $ 96.72% increase vs. 2013 3.3% 1.2% 3.6% 2.2% (See next page for Notes to Non-GAAP Financial Measures.) CARNIVAL CORPORATION & PLC NON-GAAP FINANCIAL MEASURES (CONTINUED) Non-GAAP fully diluted earnings per share was computed as follows (in millions,except per share data) (b): Three Months Ended Six Months Ended May 31, May 31, 2014 2013 2014 2013Net income - dilutedU.S. GAAP net income $ 106 $ 41 $ 91 $ 78 (Gains) on ship sales and ship impairment, net (c) (15) (15) (15) (13) Unrealized (gains) losses on fuel derivatives, net (d) (11) 31 7 59Non-GAAP net income $ 80 $ 57 $ 83 $ 124 Weighted-average shares outstanding - diluted 778 777 778 777 Earnings per share - diluted U.S. GAAP earnings per share $ 0.14 $ 0.05 $ 0.12 $ 0.10 (Gains) on ship sales and ship impairment, net (c) (0.02) (0.02) (0.02) (0.02) Unrealized (gains) losses on fuel derivatives, net (d) (0.02) 0.04 0.01 0.08 Non-GAAP earnings per share $ 0.10 $ 0.07 $ 0.11 $ 0.16 Notes to Non-GAAP Financial Measures (a) We use net cruise revenues per ALBD ("net revenue yields"), net cruisecosts per ALBD and net cruise costs excluding fuel per ALBD as significantnon-GAAP financial measures of our cruise segments' financial performance.These measures enable us to separate the impact of predictable capacity changesfrom the more unpredictable rate changes that affect our business and gains andlosses on ship sales and ship impairments, net that are not part of our coreoperating business. We believe these non-GAAP measures provide usefulinformation to investors and expanded insight to measure our revenue and costperformance as a supplement to our U.S. generally accepted accountingprinciples ("U.S. GAAP") consolidated financial statements. Net revenue yields are commonly used in the cruise industry to measure acompany's cruise segment revenue performance and for revenue managementpurposes. We use "net cruise revenues" rather than "gross cruise revenues" tocalculate net revenue yields. We believe that net cruise revenues is a moremeaningful measure in determining revenue yield than gross cruise revenuesbecause it reflects the cruise revenues earned net of our most significantvariable costs, which are travel agent commissions, cost of air and othertransportation, certain other costs that are directly associated with onboardand other revenues and credit card fees. Substantially all of our remainingcruise costs are largely fixed, except for the impact of changing prices andfood expenses, once our ship capacity levels have been determined. Net passenger ticket revenues reflect gross passenger ticket revenues, net ofcommissions, transportation and other costs. Net onboard and other revenuesreflect gross onboard and other revenues, net of onboard and other cruisecosts. Net passenger ticket revenue yields and net onboard and other revenueyields are computed by dividing net passenger ticket revenues and net onboardand other revenues by ALBDs. Net cruise costs per ALBD and net cruise costs excluding fuel per ALBD are themost significant measures we use to monitor our ability to control our cruisesegments' costs rather than gross cruise costs per ALBD. We exclude the samevariable costs that are included in the calculation of net cruise revenues tocalculate net cruise costs with and without fuel to avoid duplicating thesevariable costs in our non-GAAP financial measures. In addition, we excludegains and losses on ship sales and ship impairments, net from our calculationof net cruise costs with and without fuel as they are not considered part ofour core operating business and are not included in our non-GAAP net income andnon-GAAP earnings per share. As such, we changed our previously reported netcruise costs per ALBD and net cruise costs excluding fuel per ALBD for the sixmonths ended May 31, 2013 from $127.76 to $127.71 and from $96.77 to $96.72,respectively, to exclude losses on ship sales, net to be consistent with ourtreatment of these types of charges. We have not provided estimates of future gross revenue yields or future grosscruise costs per ALBD because the quantitative reconciliations of forecastedgross cruise revenues to forecasted net cruise revenues or forecasted grosscruise costs to forecasted net cruise costs would include a significant amountof uncertainty in projecting the costs deducted to arrive at these measures. Assuch, management does not believe that this reconciling information would bemeaningful. In addition, because our Europe, Australia & Asia ("EAA") cruise brands utilizethe euro, sterling and Australian dollar to measure their results and financialcondition, the translation of those operations to our U.S. dollar reportingcurrency results in decreases in reported U.S. dollar revenues and expenses ifthe U.S. dollar strengthens against these foreign currencies and increases inreported U.S. dollar revenues and expenses if the U.S. dollar weakens againstthese foreign currencies. Accordingly, we also monitor and report thesenon-GAAP financial measures assuming the 2014 periods currency exchange rateshave remained constant with the 2013 period rates, or on a "constant dollarbasis," in order to remove the impact of changes in exchange rates on thetranslation of our EAA brands. We believe that this is a useful measure sinceit facilitates a comparative view of the changes in our business in afluctuating currency exchange rate environment. (b) Our consolidated financial statements are prepared in accordance with U.S.GAAP. The presentation of our non-GAAP financial information is not intended tobe considered in isolation or as a substitute for, or superior to, thefinancial information prepared in accordance with U.S. GAAP. There are nospecific rules for determining our non-GAAP current and constant dollarfinancial measures and, accordingly, they are susceptible to varyingcalculations, and it is possible that they may not be exactly comparable to thelike-kind information presented by other companies, which is a potential riskassociated with using these measures to compare us to other companies. (c) We believe that the gains on ship sales and ship impairment, net recognizedin the three and six months ended May 31, 2014 and 2013 are not part of ourcore operating business and, therefore, are not an indication of our futureearnings performance. As such, we believe it is more meaningful for gains andlosses on ship sales and ship impairments, net to be excluded from our netincome and earnings per share and, accordingly, we present non-GAAP net incomeand non-GAAP earnings per share excluding these items. Accordingly, we changedour previously reported non-GAAP net income for the three months and six monthsended May 31, 2013 from $72 million to $57 million and from $137 million to$124 million, respectively. Additionally, we also changed our previouslyreported non-GAAP earnings per share for the three and six months ended May 31,2013 from $0.09 to $0.07 and from $0.18 to $0.16, respectively. These changeswere made to exclude gains on ship sales, net to be consistent with ourtreatment of these types of charges. (d) Under U.S. GAAP, the realized and unrealized gains and losses on fuelderivatives not qualifying as fuel hedges are recognized currently in earnings.We believe that unrealized gains and losses on fuel derivatives are not anindication of our earnings performance since they relate to future periods andmay not ultimately be realized in our future earnings. Therefore, we believe itis more meaningful for the unrealized gains and losses on fuel derivatives tobe excluded from our net income and earnings per share and, accordingly, wepresent non-GAAP net income and non-GAAP earnings per share excluding theseunrealized gains and losses. We have not included in our earnings guidance the impact of unrealized gainsand losses on fuel derivatives because these unrealized amounts involve asignificant amount of uncertainty, and we do not believe they are an indicationof our future earnings performance. Accordingly, our earnings guidance ispresented on a non-GAAP basis only. As a result, we did not present areconciliation between forecasted non-GAAP diluted earnings per share guidanceand forecasted U.S. GAAP diluted earnings per share guidance, since we do notbelieve that the reconciliation information would be meaningful. SOURCE Carnival Corporation & plc CONTACT: MEDIA, Roger Frizzell 1 305 406 7862 or INVESTOR RELATIONS, BethRoberts 1 305 406 4832