CARNIVAL PLC - Half-yearly Report

Jun 30, 2009 (PR Newswire Europe via COMTEX) -- CUK | Quote | Chart | News | PowerRating -- e>JUNE 30, 2009 RELEASE OF CARNIVAL CORPORATION & PLC QUARTERLY REPORT ON FORM 10-Q AND CARNIVAL PLC HALF-YEARLY FINANCIAL REPORT ----------------------------------------- Carnival Corporation & plc announced its second quarter and six month results of operations in its earnings release issued on June 18, 2009. Carnival Corporation & plc is hereby announcing that today it has filed a joint Quarterly Report on Form 10-Q with the U.S. Securities and Exchange Commission ("SEC") containing the Carnival Corporation & plc 2009 second quarter and six month interim financial statements, which results remain unchanged from those previously announced on June 18, 2009. The information included in the attached Schedules A, B and C is extracted from the Form 10-Q and has been prepared in accordance with SEC rules and regulations. Schedules A and B contain the unaudited consolidated financial statements for Carnival Corporation & plc as of and for the three and six months ended May 31, 2009, together with management's discussion and analysis of Carnival Corporation & plc's financial condition and results of operations related thereto. These Carnival Corporation & plc consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). Within the Carnival Corporation and Carnival plc dual listed company structure the directors consider the most appropriate presentation of Carnival plc's results and financial position is by reference to the U.S. GAAP financial statements of Carnival Corporation & plc. Schedule C contains information on Carnival Corporation and Carnival plc's sales and purchases of their equity securities and use of proceeds from such sales. In addition, the directors are today presenting in the attached Schedule D the unaudited interim financial information for the Carnival plc Group as of and for the six months ended May 31, 2009. The Carnival plc Group standalone financial information excludes the results of Carnival Corporation and is prepared under International Financial Reporting Standards as adopted in the European Union ("IFRS"). Together all these schedules are presented as Carnival plc's half-yearly financial report, in accordance with the requirements of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority ("FSA"). MEDIA CONTACTS INVESTOR RELATIONS CONTACT US US/UK Carnival Corporation & plc Carnival Corporation & plc Tim Gallagher Beth Roberts +1 305 599 2600, ext. 16000 +1 305 406 4832 The joint Quarterly Report on Form 10-Q (including the portion extracted for this announcement) is available for viewing on the SEC website at www.sec.gov under Carnival Corporation or Carnival plc or the Carnival Corporation & plc website at www.carnivalcorp.com or www.carnivalplc.com. A copy of the joint Quarterly Report on Form 10-Q will be available shortly at the UK Listing Authority ("UKLA") Document Viewing Facility of the FSA at 25 The North Colonnade, London E14 5HS, United Kingdom. Carnival Corporation & plc is the largest cruise vacation group in the world, with a portfolio of cruise brands in North America, Europe and Australia, comprised of Carnival Cruise Lines, Holland America Line, Princess Cruises, The Yachts of Seabourn, AIDA Cruises, Costa Cruises, Cunard Line, Ibero Cruises, Ocean Village, P&O Cruises and P&O Cruises Australia. Together, these brands operate 92 ships totaling approximately 177,000 lower berths with 13 new ships scheduled to be delivered between September 2009 and June 2012. Carnival Corporation & plc also operates Holland America Tours and Princess 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 obtained via Carnival Corporation & plc's website at www.carnivalcorp.com or www.carnivalplc.com or by writing to Carnival plc at Carnival House, 5 Gainsford Street, London SE1 2NE, United Kingdom. SCHEDULE A CARNIVAL CORPORATION & PLC - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS UNDER U.S. GAAP Cautionary Note Concerning Factors That May Affect Future Results Some of the statements, estimates or projections contained in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this joint Quarterly Report on Form 10-Q 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. We have tried, whenever possible, to identify these statements by using words like "will," "may," "could," "should," "would," "believe," "expect," "anticipate," "forecast," "future," "intend," "plan," "estimate" and similar expressions of future intent or the negative of such terms. 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 joint Quarterly Report on Form 10-Q. Forward-looking statements include those statements which may impact, among other things, the forecasting of our earnings per share, net revenue yields, booking levels, pricing, occupancy, operating, financing and/or tax costs, fuel expenses, costs per available lower berth day ("ALBD"), estimates of ship depreciable lives and residual values, liquidity, goodwill and trademark fair values, outlook or business prospects. These factors include, but are not limited to, the following: - general economic and business conditions, including fuel price increases, high unemployment rates, and declines in the securities, real estate and other markets, and perceptions of these conditions may adversely impact the levels of our potential vacationers' discretionary income and net worth and this group's confidence in their country's economy; - fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against the euro and sterling; - the international political climate, armed conflicts, terrorist and pirate attacks and threats thereof, and other world events affecting the safety and security of travel; - conditions in the cruise and land-based vacation industries, including competition from other cruise ship operators and providers of other vacation alternatives and overcapacity offered by cruise ship and land-based vacation alternatives; - accidents, the spread of contagious diseases, adverse weather conditions or natural disasters, such as hurricanes and earthquakes, and other incidents (including, but not limited to, ship fires and machinery and equipment failures or improper operation thereof), which could cause, among other things, individual or multiple port closures, injury, death, alteration of cruise itineraries or cancellation of a cruise or series of cruises or tours; - adverse publicity concerning the cruise industry in general, or us in particular; - lack of acceptance of new itineraries, products and services by our guests; - changing consumer preferences; - changes in and compliance with laws and regulations relating to employment, environmental, health, safety, security, tax and other regulatory regimes under which we operate; - increases in global fuel demand and pricing, fuel supply disruptions and/or other events on our fuel and other expenses, liquidity and credit ratings; - increases in our future fuel expenses from implementing approved International Maritime Organization regulations, which require the use of higher priced low sulfur fuels in certain cruising areas; - changes in operating and financing costs, including changes in interest rates, food, insurance, payroll and security costs; - our ability to implement our shipbuilding programs and ship maintenance, repairs and refurbishments, including ordering additional ships for our cruise brands from European shipyards on terms that are favorable or consistent with our expectations; - our ability to implement our brand strategies and to continue to operate and expand our business internationally; - 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; - our ability to attract and retain qualified shipboard crew and maintain good relations with employee unions; - continuing financial viability of our travel agent distribution system, air service providers and cruise shipyards and their subcontractors; - availability and pricing of air travel services, especially as a result of significant increases in air travel costs; - changes in the global credit markets on our counterparty risks, including those associated with our cash equivalents, committed financing facilities, contingent obligations, derivative instruments, insurance contracts and new ship progress payment guarantees; - our decisions to self-insure against various risks or our inability to obtain insurance for certain risks at reasonable rates; - disruptions and other damages to our information technology networks; - lack of continued availability of attractive, convenient and safe port destinations; and - risks associated with the DLC structure, including the uncertainty of its tax status 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 listing rules, we expressly disclaim any obligation to disseminate, after the date of this joint Quarterly Report on Form 10-Q, 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. Outlook for the Remainder of Fiscal 2009 As of June 18, 2009, we said that we expected our diluted earnings per share for the third quarter and full year of 2009 would be in the range of $1.15 to $1.19 and $2.00 to $2.10, respectively. Our guidance was based on fuel prices per metric ton of $406 and $353 for the third quarter and full year of 2009, respectively. In addition, this guidance was also based on currency exchange rates of $1.39 to the euro and $1.61 to sterling for the third quarter and $1.37 to the euro and $1.54 to sterling for the full year of 2009. The above forward-looking statements involve risks and uncertainties. Various factors could cause our actual results to differ materially from those expressed above including, but not limited to, economic conditions, foreign currency exchange rates, fuel expenses, weather, regulatory changes, geopolitical and other factors that could impact consumer demand or costs and expenses. You should read the above forward-looking statement together with the discussion of these and other risks under "Cautionary Note Concerning Factors That May Affect Future Results." Critical Accounting Estimates Impairment reviews of our ships and goodwill and trademarks, which have been allocated to our cruise line reporting units, require us to make significant estimates to determine the fair values of these assets or reporting units. The determination of these fair values includes numerous uncertainties. Since early November 2008, our stock market capitalization has been lower than our shareholders' equity or book value for a significant period of time. However, our brands have continued to generate substantial cash flow from their operations, and we expect that they will continue to do so for the remainder of 2009 and in future years. Furthermore, given the relatively small difference between our stock price and our book value per share, we believe that a reasonable potential buyer would offer a control premium for our business franchise that would adequately cover the difference between our trading prices and our book value. Accordingly, we do not believe there have been any events or circumstances that would require us to perform interim goodwill and/or trademark impairment reviews. However, due to the ongoing uncertainty in market conditions, which may negatively impact the performance of our reporting units, we will continue to monitor and evaluate the carrying values of our goodwill and trademarks. If market and economic conditions or our units' business performance deteriorates significantly then we would perform interim impairment reviews. Any such impairment reviews could result in recognition of a goodwill and/or trademark impairment charge in 2009 or thereafter. We will be performing our 2009 annual goodwill and trademark impairment reviews as of July 31, 2009. For a further discussion of our critical accounting estimates, see "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is included in Carnival Corporation & plc's 2008 joint Annual Report on Form 10-K. Seasonality and Expected Capacity Growth Our revenues from the sale of passenger tickets are seasonal. Historically, demand for cruises has been greatest during our third fiscal quarter, which includes the Northern Hemisphere summer months. This higher demand during the third quarter results in higher net revenue yields and, accordingly, the largest share of our net income is earned during this period. The seasonality of our results is increased due to ships being taken out of service for maintenance, which we typically schedule during non-peak demand periods. In addition, substantially all of Holland America Tours' and Princess Tours' revenues and net income are generated from May through September in conjunction with the Alaska cruise season. The year-over-year percentage increase in our ALBD capacity for the third and fourth quarters of 2009 is currently expected to be 5.5% and 7.6%, respectively. Our annual ALBD capacity increase for fiscal 2009, 2010, 2011 and 2012 is currently expected to be 5.4%, 7.2%, 5.8% and 3.9%, respectively. The above percentage increases result primarily from new ships entering service and exclude any other future ship orders, acquisitions, retirements or sales. Selected Cruise and Other Information Selected cruise and other information was as follows: Three Months Six Months Ended May 31, Ended May 31, ------------ ------------ 2009 2008 2009 2008 ---- ---- ---- ---- Passengers carried (in thousands) 2,029 1,985 3,898 3,896 ----- ----- ----- ----- Occupancy percentage(a) 103.3% 104.8% 103.6% 104.5% ----- ----- ----- ----- Fuel consumption (metric tons in thousands) 799 803 1,552 1,588 --- --- ----- ----- Fuel cost per metric ton(b) $ 304 $ 530 $ 291 $ 514 ----- ----- ----- ----- Currency U.S. dollar to Euro 1 $1.33 $1.56 $1.33 $1.51 ----- ----- ----- ----- U.S. dollar to GBP1 $1.48 $1.98 $1.47 $1.98 ----- ----- ----- ----- (a) In accordance with cruise industry practice, occupancy is calculated using a denominator of 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. (b) Fuel cost per metric ton is calculated by dividing the cost of our fuel by the number of metric tons consumed. Three Months Ended May 31, 2009 ("2009") Compared to the Three Months Ended May 31, 2008 ("2008") Revenues Our total revenues decreased $430 million, or 12.7%, from $3.4 billion in 2008 to $2.9 billion in 2009. This was caused by a $611 million revenue decrease that was primarily due to the adverse impact of the economic downturn on our cruise ticket pricing and onboard and other revenues, as well as a stronger U.S. dollar against the euro and sterling compared to 2008. In addition, the U.S. Centers for Disease Control and Prevention's ("CDC") recommendations against non-essential travel to Mexico as a result of the H1N1 flu virus also adversely impacted our revenues because we had to alter several of our cruise ships' itineraries. This revenue decrease was partially offset by our 5.9% capacity increase in ALBDs (see "Key Performance Non- GAAP Financial Indicators"). Our capacity increased 4.2% for our North American cruise brands and 8.0% for our European cruise brands in 2009 compared to 2008, as we continue to implement our strategy of expanding in the European cruise marketplace. Onboard and other revenues included concessionaire revenues of $199 million in 2009 and $220 million in 2008. Onboard and other revenues decreased $70 million in 2009 compared to 2008, primarily because there was lower onboard spending for all of the major onboard revenue- producing activities, as well as the impact of the stronger U.S. dollar against the euro and sterling compared to 2008, partially offset by our 5.9% increase in ALBDs. Costs and Expenses Operating costs decreased $274 million, or 12.7%, from $2.2 billion in 2008 to $1.9 billion in 2009. This decrease was primarily due to $180 million of lower fuel prices, the impact of the stronger U.S. dollar against the euro and sterling, decreased commissions primarily as a result of our lower ticket revenues and lower fuel consumption as a result of our fuel saving initiatives compared to 2008. This decrease was partially offset as a result of increased capacity driven by our 5.9% increase in ALBDs and a $24 million increase in dry-dock expenses due to more ships being in dry-dock. Selling and administration expenses decreased $32 million, or 7.5%, from $425 million in 2008 to $393 million in 2009. The decrease was primarily currency driven, and was partially offset by our 5.9% increase in ALBDs. Depreciation and amortization expense increased $5 million, or 1.6%, from $312 million in 2008 to $317 million in 2009, primarily due to the 5.9% increase in ALBDs through the addition of new ships and additional ship improvement expenditures, partially offset by the impact of the stronger U.S. dollar against the euro and sterling. Our total costs and expenses as a percentage of revenues increased from 85.7% in 2008 to 88.0% in 2009. Operating Income Our operating income decreased $129 million from $482 million in 2008 to $353 million in 2009 primarily because of the reasons discussed above. Nonoperating (Expense) Income Net interest expense, excluding capitalized interest, decreased $8 million to $97 million in 2009 from $105 million in 2008. On a constant dollar basis, this decrease was primarily due to a $12 million decrease in interest expense from lower average interest rates on average borrowings, partially offset by $9 million of lower interest income due to a lower average level of invested cash and lower average interest rates on invested balances. In addition, interest expense decreased by $6 million as a result of the stronger U.S. dollar against the euro and sterling compared to 2008. Key Performance Non-GAAP Financial Indicators ALBDs is a standard measure of passenger capacity for the period, which we use to perform rate and capacity variance 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. We use net cruise revenues per ALBD ("net revenue yields") and net cruise costs per ALBD as significant non-GAAP financial measures of our cruise segment financial performance. These measures enable us to separate the impact of predictable capacity changes from the more unpredictable rate changes that affect our business. We believe these non-GAAP measures provide a better gauge to measure our revenue and cost performance instead of the standard U.S. GAAP- based financial measures. There are no specific rules for determining our non-GAAP financial measures and, accordingly, it is possible that they may not be exactly comparable to the like- kind information presented by other cruise companies, which is a potential risk associated with using them to compare us to other cruise 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 transportation and certain other variable direct costs associated with onboard and other revenues. Substantially all of our remaining cruise costs are largely fixed, except for the impact of changing prices, once our ship capacity levels have been determined. Net cruise costs per ALBD is the most significant measure we use to monitor our ability to control our cruise segment costs rather than gross cruise costs per ALBD. We exclude the same variable costs that are included in the calculation of net cruise revenues to calculate net cruise costs to avoid duplicating these variable costs in these two non-GAAP financial measures. In addition, because a significant portion of our operations utilize the euro or sterling to measure their results and financial condition, the translation of those operations to our U.S. dollar reporting currency results in decreases in reported U.S. dollar revenues and expenses if the U.S. dollar strengthens against these foreign currencies, and increases in reported U.S. dollar revenues and expenses if the U.S. dollar weakens against these foreign currencies. Accordingly, we also monitor and report our two non-GAAP financial measures assuming the current period currency exchange rates have remained constant with the prior year's comparable period rates, or on a "constant dollar basis," in order to remove the impact of changes in exchange rates on our non-U.S. dollar cruise operations. We believe that this is a useful measure since it facilitates a comparative view of the growth of our business in a fluctuating currency exchange rate environment. Gross and net revenue yields were computed by dividing the gross or net revenues, without rounding, by ALBDs as follows: Three Months Ended May 31, ------------------------------------ 2009 Constant 2009 Dollar 2008 ---- ------ ---- (in millions, except ALBDs and yields) Cruise revenues Passenger tickets $2,242 $2,461 $2,588 Onboard and other 673 718 743 ------ ------ ------ Gross cruise revenues 2,915 3,179 3,331 Less cruise costs Commissions, transportation and other (440) (495) (525) Onboard and other (110) (120) (121) ------ ------ ------ Net cruise revenues $2,365 $2,564 $2,685 ------ ------ ------ ALBDs 15,329,812 15,329,812 14,480,881 ---------- ---------- ---------- Gross revenue yields $190.19 $207.36 $230.04 ------- ------- ------- Net revenue yields $154.24 $167.22 $185.45 ------- ------- ------- Gross and net cruise costs per ALBD were computed by dividing the gross or net cruise costs, without rounding, by ALBDs as follows: Three Months Ended May 31, ------------------------------------ 2009 Constant 2009 Dollar 2008 ---- ------ ---- (in millions, except ALBDs and costs per ALBD) Cruise operating expenses $1,850 $2,001 $2,115 Cruise selling and administrative expenses 386 418 416 ------ ------ ------ Gross cruise costs 2,236 2,419 2,531 Less cruise costs included in net cruise revenues Commissions, transportation and other (440) (495) (525) Onboard and other (110) (120) (121) ------ ------ ------ Net cruise costs $1,686 $1,804 $1,885 ------ ------ ------ ALBDs 15,329,812 15,329,812 14,480,881 ---------- ---------- ---------- Gross cruise costs per ALBD $145.90 $157.81 $174.79 ------- ------- ------- Net cruise costs per ALBD $109.95 $117.68 $130.20 ------- ------- ------- Net cruise revenues decreased $320 million, or 11.9%, to $2.4 billion in 2009 from $2.7 billion in 2008. This was caused by a $478 million, or 16.8%, decrease in net revenue yields in 2009 compared to 2008 (gross revenue yields decreased by 17.3%). This decrease was partially offset by a 5.9% increase in ALBDs between 2009 and 2008 that accounted for $158 million. The net revenue yield decrease in 2009 was primarily due to the adverse impact of the economic downturn on our cruise ticket pricing and onboard and other revenues, as well as the impact of a stronger U.S. dollar against the euro and sterling compared to 2008. In addition, the CDC's recommendations against non-essential travel to Mexico as a result of the H1N1 flu virus also adversely impacted our net revenue yields as previously discussed. Net revenue yields as measured on a constant dollar basis decreased 9.8% in 2009 compared to 2008, which was comprised of a 10.0% decrease in passenger ticket yields and a 9.4% decrease in onboard and other revenue yields. Gross cruise revenues decreased $416 million, or 12.5%, to $2.9 billion in 2009 from $3.3 billion in 2008 for largely the same reasons as discussed above for net cruise revenues. Net cruise costs decreased $199 million, or 10.6%, to $1.7 billion in 2009 from $1.9 billion in 2008. This was caused by a $310 million decrease in net cruise costs per ALBD, which decreased 15.6% in 2009 compared to 2008 (gross cruise costs per ALBD decreased 16.5%). This decrease was partially offset by the 5.9% increase in ALBDs between 2009 and 2008 that accounted for $111 million. The 15.6% decrease in net cruise costs per ALBD was primarily the result of a 43% decrease in fuel price to $304 per metric ton in 2009, which resulted in a decrease in fuel expense of $180 million, the stronger U.S. dollar against the euro and sterling and $27 million of fuel consumption savings compared to 2008. Net cruise costs per ALBD as measured on a constant dollar basis decreased 9.6% in 2009 compared to 2008. On a constant dollar basis, net cruise costs per ALBD excluding fuel increased 1.0% compared to 2008 primarily due to the $24 million increase in dry-docking expenses. Gross cruise costs decreased $295 million, or 11.7%, in 2009 to $2.2 billion from $2.5 billion in 2008 for largely the same reasons as discussed above for net cruise costs. Six Months Ended May 31, 2009 ("2009") Compared to the Six Months Ended May 31, 2008 ("2008") Revenues Our total revenues decreased $718 million, or 11.0%, from $6.5 billion in 2008 to $5.8 billion in 2009. This was caused by a $969 million revenue decrease that was primarily due to the adverse impact of the economic downturn on our cruise ticket pricing and onboard and other revenues, as well as the impact of a stronger U.S. dollar against the euro and sterling compared to 2008. This revenue decrease was partially offset by our 4.1% capacity increase in ALBDs (see "Key Performance Non-GAAP Financial Indicators"). Our capacity increased 3.1% for our North American cruise brands and 7.1% for our European cruise brands in 2009 compared to 2008, as we continue to implement our strategy of expanding in the European cruise marketplace. Onboard and other revenues included concessionaire revenues of $375 million in 2009 and $406 million in 2008. Onboard and other revenues decreased $138 million in 2009 compared to 2008, primarily because there was lower onboard spending for all of the major onboard revenue- producing activities, as well as the impact of the stronger U.S. dollar against the euro and sterling compared to 2008, partially offset by our 4.1% increase in ALBDs. Costs and Expenses Operating costs decreased $538 million, or 12.6%, from $4.3 billion in 2008 to $3.7 billion in 2009. This decrease was primarily due to $347 million of lower fuel prices, the impact of the stronger U.S. dollar against the euro and sterling and decreased commissions primarily as a result of our lower ticket revenues and lower fuel consumption as a result of fuel saving initiatives compared to 2008. This decrease was partially offset as a result of increased capacity driven by our 4.1% increase in ALBDs and a $50 million increase in dry-dock expenses. Selling and administration expenses decreased $65 million, or 7.6%, from $850 million in 2008 to $785 million in 2009. The decrease was primarily currency driven, and was partially offset by our 4.1% increase in ALBDs. Depreciation and amortization expense increased $15 million, or 2.4%, from $613 million in 2008 to $628 million in 2009, primarily due to the 4.1% increase in ALBDs through the addition of new ships and additional ship improvement expenditures, partially offset by the currency impact. Our total costs and expenses as a percentage of revenues increased from 87.8% in 2008 to 88.6% in 2009. Operating Income Our operating income decreased $130 million from $794 million in 2008 to $664 million in 2009 primarily because of the reasons discussed above. Nonoperating (Expense) Income Net interest expense, excluding capitalized interest, decreased $7 million to $199 million in 2009 from $206 million in 2008. On a constant dollar basis, there was a $15 million increase in net interest expense because of lower interest income due to a lower average level of invested cash and lower average interest rates on invested balances and a $13 million increase from a higher level of average borrowings, partially offset by a $25 million decrease in interest expense from lower average interest rates on average borrowings. In addition, interest expense decreased by $10 million as a result of the stronger U.S. dollar against the euro and sterling compared to 2008. Other income, net increased $18 million to $24 million in 2009 from $6 million in 2008, primarily because of the $15 million gain recognized upon the unwinding of one of our LILO transactions. Income Taxes Income tax benefit increased $12 million to $16 million in 2009 from $4 million in 2008, primarily because of the reversal of uncertain income tax position liabilities, which were no longer required. During 2009 and 2008 we have recorded tax benefits generated by the seasonal losses of our Alaska tour operation. Key Performance Non-GAAP Financial Indicators Gross and net revenue yields were computed by dividing the gross or net revenues, without rounding, by ALBDs as follows: Six Months Ended May 31, ------------------------------------ 2009 Constant 2009 Dollar 2008 ---- ------ ---- (in millions, except ALBDs and yields) Cruise revenues Passenger tickets $4,461 $4,861 $5,026 Onboard and other 1,307 1,384 1,445 ------ ------ ------ Gross cruise revenues 5,768 6,245 6,471 Less cruise costs Commissions, transportation and other (954) (1,068) (1,083) Onboard and other (214) (231) (246) ------ ------ ------ Net cruise revenues $4,600 $4,946 $5,142 ------ ------ ------ ALBDs 29,822,062 29,822,062 28,642,170 ---------- ---------- ---------- Gross revenue yields $193.42 $209.42 $225.92 ------- ------- ------- Net revenue yields $154.25 $165.86 $179.52 ------- ------- ------- Gross and net cruise costs per ALBD were computed by dividing the gross or net cruise costs, without rounding, by ALBDs as follows: Six Months Ended May 31, -------------------------------------------- 2009 Constant 2009 Dollar 2008 ---- ------ ---- (in millions, except ALBDs and costs per ALBD) Cruise operating expenses $3,684 $3,973 $4,211 Cruise selling and administrative expenses 770 830 833 ------ ------ ------ Gross cruise costs 4,454 4,803 5,044 Less cruise costs included in net cruise revenues Commissions, transportation and other (954) (1,068) (1,083) Onboard and other (214) (231) (246) ------ ------ ------ Net cruise costs $3,286 $3,504 $3,715 ------ ------ ------ ALBDs 29,822,062 29,822,062 28,642,170 ---------- ---------- ---------- Gross cruise costs per ALBD $149.36 $161.07 $176.12 ------- ------- ------- Net cruise costs per ALBD $110.18 $117.51 $129.72 ------- ------- ------- Net cruise revenues decreased $542 million, or 10.5%, to $4.6 billion in 2009 from $5.1 billion in 2008. This was caused by a $754 million, or 14.1%, decrease in net revenue yields in 2009 compared to 2008 (gross revenue yields decreased by 14.4%). This decrease was partially offset by a 4.1% increase in ALBDs between 2009 and 2008 that accounted for $212 million. The net revenue yield decrease in 2009 was primarily due to the adverse impact of the economic downturn on our cruise ticket pricing and onboard and other revenues, as well as the impact of a stronger U.S. dollar against the euro and sterling compared to 2008. Net revenue yields as measured on a constant dollar basis decreased 7.6% in 2009 compared to 2008, which was comprised of a 7.6% decrease in both passenger ticket and onboard and other revenue yields. Gross cruise revenues decreased $703 million, or 10.9%, to $5.8 billion in 2009 from $6.5 billion in 2008 for largely the same reasons as discussed above for net cruise revenues. Net cruise costs decreased $429 million, or 11.5%, to $3.3 billion in 2009 from $3.7 billion in 2008. This was caused by a $583 million decrease in net cruise costs per ALBD, which decreased 15.1% in 2009 compared to 2008 (gross cruise costs per ALBD decreased 15.2%). This decrease was partially offset by the 4.1% increase in ALBDs between 2009 and 2008 that accounted for $154 million. The 15.1% decrease in net cruise costs per ALBD was primarily the result of a 43% decrease in fuel price to $291 per metric ton in 2009, which resulted in a decrease in fuel expense of $347 million compared to 2008, the stronger U.S. dollar against the euro and sterling and $53 million of fuel consumption savings compared to 2008. Net cruise costs per ALBD as measured on a constant dollar basis decreased 9.4% in 2009 compared to 2008. On a constant dollar basis, net cruise costs per ALBD excluding fuel increased 1.2% compared to 2008 primarily due to the increase in dry-docking expenses. Gross cruise costs decreased $590 million, or 11.7%, in 2009 to $4.5 billion from $5.0 billion in 2008 for largely the same reasons as discussed above for net cruise costs. Liquidity and Capital Resources As discussed under Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2008 joint Annual Report on Form 10-K, we believe preserving cash and liquidity at this time is a prudent step which will strengthen our balance sheet and enhance our financial flexibility. Accordingly in October 2008, the Board of Directors voted to suspend our quarterly dividend beginning March 2009. We intend to maintain the dividend suspension throughout 2009, but will re-evaluate our dividend policy based on circumstances prevailing during the remainder of the year. Our cash from operations and committed financing facilities for 2009 along with our available cash and cash equivalent balances are forecasted to be sufficient to fund our expected 2009 cash requirements. Therefore, we do not believe we will be required to obtain additional new debt during the remainder of 2009; however, we may choose to do so opportunistically in order to meet our expected 2010 liquidity needs. Our immediate objective is to ensure we have sufficient liquidity available with a high degree of certainty throughout 2009 despite current market conditions. Our overall strategy is to maintain an acceptable level of liquidity with our available cash and cash equivalents and committed credit facilities for immediate and future liquidity needs, and a reasonable debt maturity profile that is spread out over a number of years. To date, although our costs of borrowing have increased in certain cases and the availability of funding is not as widespread as it has been in the past, we continue to successfully put in place committed credit facilities at attractive interest rates. Since the start of the year we have completed more than $2.8 billion in financing, thus improving our liquidity to the levels discussed below. Given the decision by our Board of Directors to suspend the quarterly dividend and our current financial position, we do not expect that the current state of the financial markets will have a significant adverse impact on our ability to maintain an acceptable level of liquidity during the remainder of 2009 and throughout 2010. Sources and Uses of Cash Our business provided $1.4 billion of net cash from operations during the six months ended May 31, 2009, a decrease of $374 million, or 20.6%, compared to fiscal 2008. This decrease was primarily driven by a $541 million period-over-period decrease in the change in our customer deposit balances between the year-end and the end of the second quarter, partially offset by changes in other working capital expenditures. The decrease in customer deposits resulted primarily from guests booking cruises and paying their deposits closer to the sailing dates and cruises being purchased for lower ticket prices compared to the comparable prior period when guests booked their cruises and paid their deposits further in advance of the sailing dates and cruises were purchased for higher ticket prices. At May 31, 2009 and 2008, we had working capital deficits of $4.6 billion and $4.9 billion, respectively. Our May 31, 2009 deficit included $2.9 billion of customer deposits, which represent the passenger revenues we collect in advance of sailing dates and, accordingly, is substantially more of a deferred revenue item rather than an actual current cash liability. We use our long-term ship assets to realize a portion of this deferred revenue in addition to consuming current assets. In addition, our May 31, 2009 working capital deficit included $2.0 billion of current debt obligations, which included $513 million outstanding under our main revolving credit facility. This facility, substantially all of which matures in 2012, is available to provide long-term rollover financing of our current debt. After excluding customer deposits and current debt obligations from our May 31, 2009 working capital deficit balance, our non-GAAP adjusted working capital is $181 million. As explained above, our business model allows us to operate with a significant working capital deficit and, accordingly, we believe we will continue to have a working capital deficit for the foreseeable future. During the six months ended May 31, 2009, our net expenditures for capital projects were $2.0 billion, of which $1.6 billion was spent for our ongoing new shipbuilding program, including $1.2 billion for the final delivery payments for Costa Luminosa, AIDAluna and Costa Pacifica. In addition to our new shipbuilding program, we had capital expenditures of $238 million for ship improvements and replacements and $92 million for cruise port facility developments, information technology and other assets. During the six months ended May 31, 2009, we borrowed and repaid $2.4 billion and $2.3 billion, respectively, under our main revolving credit facility in connection with our needs for cash at various times throughout the period. In addition, during the six months ended May 31, 2009, we borrowed $987 million of new other long-term debt, primarily under our export credit financing facilities, and we repaid $216 million of other long-term debt primarily for scheduled payments under our export credit facilities. We also repaid $255 million during the six months ended May 31, 2009 under our short-term borrowing facilities. Finally, we paid cash dividends of $314 million and received $113 million upon the settlement of foreign currency swaps. Commitments and Funding Sources Our contractual cash obligations as of May 31, 2009 have changed compared to November 30, 2008, primarily as a result of our debt and ship progress and delivery payments as noted above. In October 2008, the Board of Directors voted to suspend our quarterly dividend beginning March 2009. We intend to maintain the dividend suspension throughout 2009, but will re-evaluate our dividend policy based on circumstances prevailing during the remainder of the year. At May 31, 2009, as adjusted for financing agreements entered into in June 2009, we had liquidity of $4.8 billion. Our liquidity consisted of $232 million of cash and cash equivalents, excluding cash on hand of $253 million used for current operations, $1.7 billion available for borrowing under our revolving credit facilities, $200 million of undrawn term loan facilities and $2.6 billion under a committed European Investment Bank ("EIB") financing facility and committed export credit financing facilities. Of this $2.6 billion of committed EIB and export credit facilities, $941 million, $654 million, $620 million and $413 million is expected to be funded in 2009, 2010, 2011 and 2012, respectively. Substantially all of our revolving credit facilities mature in 2012. We rely on, and have banking relationships with, numerous banks that have credit ratings of A or above, which we believe will assist us in attempting to access multiple sources of funding in the event that some lenders are unwilling or unable to lend to us. However, we believe that our revolving credit facilities and committed ship financings will be honored as required pursuant to their contractual terms. Substantially all of our debt agreements contain one or more financial covenants as described in Note 5 to the financial statements in our 2008 joint Annual Report on Form 10-K. Generally, if an event of default under any debt agreement occurs, then pursuant to cross default acceleration clauses, substantially all of our outstanding debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated. As of May 31, 2009, we believe we had met all of our debt covenants. In addition, based on our forecasted operating results, financial condition and cash flows for fiscal 2009, we expect to be in compliance with our debt covenants during fiscal 2009. However, our forecasted cash flow from operations and access to the capital markets can be adversely impacted by numerous factors outside our control including, but not limited to, those noted under "Cautionary Note Concerning Factors That May Affect Future Results." We continue to generate substantial cash from operations and have strong investment grade credit ratings of A3 from Moody's Investors Service and BBB+ from Standard & Poor's Rating Services ("S&P"), which provide us with flexibility in most financial credit market environments to obtain debt, as necessary. Our S&P A- credit rating was downgraded to BBB+ and assigned a negative outlook on March 26, 2009, which reflects S&P's continuing concerns that the weakened state of the economy and the pullback in consumer spending will pressure our ability to sustain our BBB+ credit rating. This downgrade by S&P will result in a slight increase in our future borrowing costs. In addition, a further downgrade by S&P to BBB would result in a further increase in our borrowing costs on a prospective basis, but we do not believe it would have a material adverse impact on our financial results, our ability to obtain committed credit facilities or issue debt, or our ability to refinance our current debt or secure additional debt for future cash requirements. Based primarily on our historical results, current financial condition and forecasts, we believe that our existing liquidity and cash flow from future operations will be sufficient to fund the majority of our expected capital projects (including shipbuilding commitments), debt service requirements, convertible debt redemptions, working capital and other firm commitments over the next several years. In addition, we believe that in most financial credit market environments we will be able to secure necessary financings from financial institutions or through the offering of debt and/or equity securities in the public or private markets or take other actions to fund these remaining future cash requirements. Item 3. Quantitative and Qualitative Disclosures About Market Risk. We previously had designated foreign currency cash flow swaps that effectively converted $398 million of U.S. dollar fixed interest rate debt into sterling fixed interest rate debt. The changes in fair value are included as a component of AOCI. In December 2008, we settled these foreign currency swaps and thus re-aligned the debt with the parent company's U.S. dollar functional currency. During the six months ended May 31, 2009, we entered into a foreign currency forward that is designated as a fair value hedge of the remaining Seabourn Odyssey euro-denominated shipyard payment at a rate of $1.27 to the euro, or $194 million. At May 31, 2009, 57%, 40% and 3% (62%, 30% and 8% at November 30, 2008) of our debt was U.S. dollar, euro and sterling-denominated, respectively, including the effect of foreign currency swaps. Off-Balance Sheet Arrangements We are not a party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interests, certain derivative instruments and variable interest entities, that either have, or are reasonably likely to have, a current or future material effect on our financial statements. SCHEDULE B CARNIVAL CORPORATION & PLC - U.S. GAAP CONSOLIDATED FINANCIAL STATEMENTS CARNIVAL CORPORATION & PLC CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in millions, except per share data) Three Months Six Months Ended May 31, Ended May 31, ------------ ------------ 2009 2008 2009 2008 ---- ---- ---- ---- Revenues Cruise Passenger tickets $2,242 $2,588 $4,461 $5,026 Onboard and other 673 743 1,307 1,445 Other 33 47 44 59 ------ ------ ------ ------ 2,948 3,378 5,812 6,530 ------ ------ ------ ------ Costs and Expenses Operating Cruise Commissions, transportation and other 440 525 954 1,083 Onboard and other 110 121 214 246 Payroll and related 366 365 718 725 Fuel 243 425 451 817 Food 203 210 401 417 Other ship operating 488 469 946 923 Other 35 44 51 62 ------ ------ ------ ------ Total 1,885 2,159 3,735 4,273 Selling and administrative 393 425 785 850 Depreciation and amortization 317 312 628 613 ------ ------ ------ ------ 2,595 2,896 5,148 5,736 ------ ------ ------ ------ Operating Income 353 482 664 794 ------ ------ ------ ------ Nonoperating (Expense) Income Interest income 2 12 6 22 Interest expense, net of capitalized interest (90) (102) (186) (200) Other income, net 5 4 24 6 ------ ------ ------ ------ (83) (86) (156) (172) ------ ------ ------ ------ Income Before Income Taxes 270 396 508 622 Income Tax (Expense) Benefit, Net (6) (6) 16 4 ------ ------ ------ ------ Net Income $ 264 $ 390 $ 524 $ 626 ------ ------ ------ ------ Earnings Per Share Basic $ 0.34 $ 0.50 $ 0.67 $ 0.80 ------ ------ ------ ------ Diluted $ 0.33 $ 0.49 $ 0.66 $ 0.78 ------ ------ ------ ------ Dividends Declared Per Share $ 0.40 $ 0.80 ------ ------ The accompanying notes are an integral part of these consolidated financial statements. CARNIVAL CORPORATION & PLC CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in millions, except par values) May 31, November 30, May 31, 2009 2008 2008 ---- ---- ---- ASSETS Current Assets Cash and cash equivalents $ 485 $ 650 $ 988 Trade and other receivables, net 424 418 542 Inventories 308 315 349 Prepaid expenses and other 317 267 300 ------- ------- ------- Total current assets 1,534 1,650 2,179 ------- ------- ------- Property and Equipment, Net 28,663 26,457 27,666 Goodwill 3,388 3,266 3,614 Trademarks 1,328 1,294 1,393 Other Assets 632 733 620 ------- ------- ------- $35,545 $33,400 $35,472 ------- ------- ------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term borrowings $ 161 $ 256 $ 145 Current portion of long-term debt 1,525 1,081 1,386 Convertible debt subject to current put options 276 271 230 Accounts payable 543 512 454 Accrued liabilities and other 810 1,142 1,269 Customer deposits 2,852 2,519 3,605 ------- ------- ------- Total current liabilities 6,167 5,781 7,089 ------- ------- ------- Long-Term Debt 8,317 7,735 7,689 Other Long-Term Liabilities and Deferred Income 676 786 764 Contingencies (Note 3) Shareholders' Equity Common stock of Carnival Corporation; $0.01 par value; 1,960 shares authorized; 644 shares at 2009 and 643 shares at 2008 issued 6 6 6 Ordinary shares of Carnival plc; $1.66 par value; 226 shares authorized; 213 shares at 2009 and 2008 issued 354 354 354 Additional paid-in capital 7,699 7,677 7,653 Retained earnings 14,504 13,980 12,907 Accumulated other comprehensive income (loss) 107 (623) 1,306 Treasury stock; 18 shares at 2009 and 19 shares at 2008 of Carnival Corporation and 52 shares at 2009 and November 2008 and 51 shares at May 2008 of Carnival plc, at cost (2,285) (2,296) (2,296) ------- ------- ------- Total shareholders' equity 20,385 19,098 19,930 ------- ------- ------- $35,545 $33,400 $35,472 ------- ------- ------- The accompanying notes are an integral part of these consolidated financial statements. CARNIVAL CORPORATION & PLC CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in millions) Six Months Ended May 31, ----------------------- 2009 2008 ---- ---- OPERATING ACTIVITIES Net income $ 524 $ 626 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 628 613 Share-based compensation 32 30 Other 4 4 Changes in operating assets and liabilities Receivables 12 (116) Inventories 17 (16) Prepaid expenses and other (22) (66) Accounts payable 11 (111) Accrued liabilities and other (35) 40 Customer deposits 270 811 ------ ------

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