Carnival Corporation & plc (CCL) 10-Q 1 Jul 10 2010 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	6 Months Ended May. 31, 2010	Jun. 25, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-05-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q2
Trading Symbol	CCL
Entity Registrant Name	CARNIVAL CORP
Entity Central Index Key	0000815097
Current Fiscal Year End Date	--11-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		612,219,385
CARNIVAL PLC
Trading Symbol	CUK
Entity Registrant Name	CARNIVAL PLC
Entity Central Index Key	0001125259
Current Fiscal Year End Date	--11-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		213,669,942

CARNIVAL CORPORATION & PLC CONS

CARNIVAL CORPORATION & PLC CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data	3 Months Ended May. 31, 2010	3 Months Ended May. 31, 2009	6 Months Ended May. 31, 2010	6 Months Ended May. 31, 2009
Cruise
Passenger tickets	$2,427	$2,242	$4,785	$4,461
Onboard and other	737	673	1,466	1,307
Tour and other	31	33	39	44
Revenues, Total	3,195	2,948	6,290	5,812
Cruise
Commissions, transportation and other	440	440	937	954
Onboard and other	106	110	219	214
Payroll and related	383	366	774	718
Fuel	416	243	813	451
Food	212	203	424	401
Other ship operating	504	488	978	946
Tour and other	32	35	47	51
Total	2,093	1,885	4,192	3,735
Selling and administrative	404	393	800	785
Depreciation and amortization	349	317	694	628
Costs and Expenses, Total	2,846	2,595	5,686	5,148
Operating Income	349	353	604	664
Nonoperating (Expense) Income
Interest income	3	2	7	6
Interest expense, net of capitalized interest	(99)	(90)	(195)	(186)
Other (expense) income, net	(2)	5	(5)	24
Nonoperating Income (Expense), Total	(98)	(83)	(193)	(156)
Income Before Income Taxes	251	270	411	508
Income Tax Benefit (Expense), Net	1	(6)	16	16
Net Income	$252	$264	$427	$524
Earnings Per Share
Basic	0.32	0.34	0.54	0.67
Diluted	0.32	0.33	0.54	0.66
Dividends Declared Per Share	0.1		0.2

1_CARNIVAL CORPORATION & PLC CO

CARNIVAL CORPORATION & PLC CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	6 Months Ended May. 31, 2010	12 Months Ended Nov. 30, 2009
Current Assets
Cash and cash equivalents	$594	$538
Trade and other receivables, net	455	362
Inventories	297	320
Prepaid expenses and other	240	298
Total current assets	1,586	1,518
Property and Equipment, Net	29,317	29,870
Goodwill	3,214	3,451
Trademarks	1,289	1,346
Other Assets	623	650
Assets, Total	36,029	36,835
Current Liabilities
Short-term borrowings	808	135
Current portion of long-term debt	676	815
Convertible debt subject to current put option	595
Accounts payable	548	568
Accrued liabilities and other	928	874
Customer deposits	3,208	2,575
Total current liabilities	6,763	4,967
Long-Term Debt	7,681	9,097
Other Long-Term Liabilities and Deferred Income	721	732
Contingencies (Note 3)
Shareholders' Equity
Common stock of Carnival Corporation, $0.01 par value; 1,960 shares authorized; 645 shares at 2010 and 644 shares at 2009 issued	6	6
Ordinary shares of Carnival plc, $1.66 par value; 214 shares at 2010 and 213 shares at 2009 issued	355	354
Additional paid-in capital	8,059	7,920
Retained earnings	15,830	15,561
Accumulated other comprehensive (loss) income	(1,029)	462
Treasury stock, 32 shares at 2010 and 24 shares at 2009 of Carnival Corporation and 38 shares at 2010 and 46 shares at 2009 of Carnival plc, at cost	(2,357)	(2,264)
Total shareholders' equity	20,864	22,039
Liabilities and Stockholders' Equity, Total	$36,029	$36,835

2_CARNIVAL CORPORATION & PLC CO

CARNIVAL CORPORATION & PLC CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Share data in Millions, except Per Share data	May. 31, 2010	Nov. 30, 2009
Common stock of Carnival Corporation, par value	0.01	0.01
Common stock of Carnival Corporation, shares authorized	1,960	1,960
Common stock of Carnival Corporation, issued	645	644
Ordinary shares of Carnival plc, par value	1.66	1.66
Ordinary shares of Carnival plc, issued	214	213
Treasury stock, shares of Carnival Corporation	32	24
Treasury stock, shares of Carnival plc	38	46

3_CARNIVAL CORPORATION & PLC CO

CARNIVAL CORPORATION & PLC CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	6 Months Ended May. 31, 2010	6 Months Ended May. 31, 2009
OPERATING ACTIVITIES
Net income	$427	$524
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	694	628
Share-based compensation	23	32
Other	(24)	4
Changes in operating assets and liabilities
Receivables	(122)	12
Inventories	2	17
Prepaid expenses and other	3	(22)
Accounts payable	31	11
Accrued and other liabilities	(5)	(35)
Customer deposits	765	270
Net cash provided by operating activities	1,794	1,441
INVESTING ACTIVITIES
Additions to property and equipment	(2,168)	(1,956)
Other, net	74	(6)
Net cash used in investing activities	(2,094)	(1,962)
FINANCING ACTIVITIES
Proceeds from (repayments of) short-term borrowings, net	702	(255)
Principal repayments of revolvers	(323)	(1,004)
Proceeds from revolvers	89	1,060
Principal repayments of other long-term debt	(796)	(216)
Proceeds from issuance of other long-term debt	806	987
Dividends paid	(79)	(314)
Purchases of treasury stock	(305)	(9)
Sales of treasury stock	317	10
Proceeds from settlement of foreign currency swaps		113
Other, net	14	(38)
Net cash provided by financing activities	425	334
Effect of exchange rate changes on cash and cash equivalents	(69)	22
Net increase (decrease) in cash and cash equivalents	56	(165)
Cash and cash equivalents at beginning of period	538	650
Cash and cash equivalents at end of period	$594	$485

Basis of Presentation

Basis of Presentation
	6 Months Ended May. 31, 2010
Basis of Presentation	NOTE 1 Basis of Presentation Carnival Corporation is incorporated in Panama, and Carnival plc is incorporated in England and Wales.Carnival Corporation and Carnival plc operate a dual listed company (DLC), whereby the businesses of Carnival Corporation and Carnival plc are combined through a number of contracts and through provisions in Carnival Corporations Articles of Incorporation and By-Laws and Carnival plcs Articles of Association.The two companies operate as if they are a single economic enterprise, but each has retained its separate legal identity. The accompanying consolidated financial statements include the accounts of Carnival Corporation and Carnival plc and their respective subsidiaries.Together with their consolidated subsidiaries they are referred to collectively in these consolidated financial statements and elsewhere in this joint Quarterly Report on Form 10-Q as Carnival Corporation plc, our, us, and we. The accompanying Consolidated Balance Sheet at May31, 2010 and the Consolidated Statements of Operations for the three and six months ended May31, 2010 and 2009 and the Consolidated Statements of Cash Flows for the six months ended May31, 2010 and 2009 are unaudited and, in the opinion of our management, contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation.In our accompanying 2009 Consolidated Statement of Cash Flows we have revised our presentation of proceeds from, and principal repayments of, our principal revolving credit facility to reflect the cash flows in connection with the underlying borrowings and repayments under this revolver.This revision had no impact on the net proceeds from, and principal repayments of, this revolver or on our net cash used in financing activities.Our interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Carnival Corporation plc 2009 joint Annual Report on Form 10-K.Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire year. On December1, 2009, we adopted a new accounting pronouncement on a retrospective basis that requires the issuer of certain convertible debt instruments that may be settled in cash, or other assets, on conversion to separately account for the debt and equity components in a manner that reflects the issuers non-convertible debt borrowing rate. The impact of adopting this pronouncement had no effect on our previously reported diluted earnings per share. However, at November30, 2009 we recorded an adjustment to reduce retained earnings and increase additional paid-in capital by $209 million.

Debt

Debt
	6 Months Ended May. 31, 2010
Debt	NOTE 2 Debt At May31, 2010, unsecured short-term borrowings consisted of $798 million of commercial paper and $10 million of euro-denominated bank loans with an aggregate weighted-average interest rate of 0.4%. In January 2010, we repaid a $100 million unsecured floating rate bank loan prior to its 2012 maturity date. In February 2010, we borrowed $371 million under an unsecured euro-denominated export credit facility, the proceeds of which were used to pay for a portion of AIDAblus purchase price.This facility bears interest at EURIBOR plus 50 basis points (bps) and is due in semi-annual installments through 2022. In February 2010, we borrowed $132 million under an unsecured euro-denominated bank loan, which bears interest at EURIBOR plus 200 bps and is due in February 2014. In April 2010, we obtained a commitment for two unsecured export credit ship financings. Each financing will provide us with the ability to borrow up to $496 million, currently denominated in euros, for a portion of the purchase price of the new Princess Cruises (Princess) ship. The first Princess ship is expected to enter service in May 2013 and the second in May 2014. Each financing, if drawn, will have a fixed interest rate of 4.87%, although we have the option to switch the interest rate to LIBOR plus 120 bps up until 60 days prior to the ship delivery dates. Each financing will be due in semi-annual installments over 12 years from the date of funding. In May 2010, Costa Crociere, one of our Italian subsidiaries, borrowed $246 million under an unsecured euro-denominated export credit facility, which bears interest at 3.75% and is due in semi-annual installments through 2025. In May 2010, we repaid $412 million of an unsecured floating rate euro-denominated export credit facility that was borrowed to pay for a portion of Costa Pacificas purchase price prior to its maturity dates through 2019. At May31, 2010, our 2% Convertible notes were classified as current liabilities, since we may be required to repurchase all or a portion of these notes at the option of the noteholders on April15, 2011.

Contingencies

Contingencies
	6 Months Ended May. 31, 2010
Contingencies	NOTE 3 Contingencies Litigation In the normal course of our business, various claims and lawsuits have been filed or are pending against us.Most of these claims and lawsuits are covered by insurance and, accordingly, the maximum amount of our liability, net of any insurance recoverables, is typically limited to our self-insurance retention levels.However, the ultimate outcome of these claims and lawsuits which are not covered by insurance cannot be determined at this time. Contingent Obligations Lease Out and Lease Back Type (LILO) Transactions At May31, 2010, Carnival Corporation had estimated contingent obligations totaling $542 million, excluding termination payments as discussed below, to participants in LILO transactions for two of its ships.At the inception of these leases, the aggregate of the net present value of these obligations was paid by Carnival Corporation to a group of major financial institutions, who agreed to act as payment undertakers and directly pay these obligations.Accordingly, these contingent obligations are considered extinguished, and neither the funds nor the contingent obligations have been included in our accompanying Consolidated Balance Sheets. In the event that Carnival Corporation were to default on its contingent obligations and assuming performance by all other participants, we estimate that we would, as of May31, 2010, be responsible for a termination payment of approximately $105 million.In 2017, we have the right to exercise options that would terminate these two LILO transactions at no cost to us. In certain cases, if the credit ratings of the financial institutions who are directly paying the contingent obligations fall below AA-, then Carnival Corporation will be required to replace these financial institutions with other financial institutions whose credit ratings are at least AA or meet other specified credit requirements.In such circumstances we would incur additional costs, although we estimate that they would be immaterial to our financial statements.All of the financial institution payment undertakers subject to this AA- credit rating threshold have credit ratings of AAA.If Carnival Corporations credit rating, which is BBB+, falls below BBB, it will be required to provide a standby letter of credit for $61 million, or, alternatively, provide mortgages for this aggregate amount on these two ships. Contingent Obligations Indemnifications Some of the debt agreements that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur.These contingencies generally relate to changes in taxes and changes in laws that increase lender capital costs and other similar costs.The indemnification clauses are often standard contractual terms and were entered into in the normal course of business.There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses.We have not been required to make any material payments under such indemnification clauses in the past and, under current

Comprehensive

Comprehensive (Loss) Income
	6 Months Ended May. 31, 2010
Comprehensive (Loss) Income	NOTE 4 Comprehensive (Loss) Income Comprehensive (loss) income was as follows (in millions): ThreeMonthsEnded May31, Six MonthsEnded May31, 2010 2009 2010 2009 Net income $ 252 $ 264 $ 427 $ 524 Items included in other comprehensive (loss) income Foreign currency translation adjustment (690 ) 892 (1,391 ) 672 Other (66 ) 62 (100 ) 58 Other comprehensive (loss) income (756 ) 954 (1,491 ) 730 Total comprehensive (loss) income $ (504 ) $ 1,218 $ (1,064 ) $ 1,254

Segment Information

Segment Information
	6 Months Ended May. 31, 2010
Segment Information	NOTE 5 Segment Information Our cruise segment includes all of our cruise brands, which have been aggregated as a single reportable segment based on the similarity of their economic and other characteristics, including the products and services they provide.Our tour and other segment represents the hotel, tour and transportation operations of Holland America Princess Alaska Tours and our ship charter operations to an unaffiliated entity, that currently operates two of our ships under its brand. Selected segment information for our cruise and tour and other segments was as follows (in millions): Three Months Ended May31, Revenues Operating expenses Selling andadmin- istrative Depreciation and amortization Operating income (loss) 2010 Cruise $ 3,164 $ 2,061 $ 396 $ 339 $ 368 Tour and other 45 46 8 10 (19 ) Intersegment elimination (14 ) (14 ) $ 3,195 $ 2,093 $ 404 $ 349 $ 349 2009 Cruise $ 2,915 $ 1,850 $ 386 $ 308 $ 371 Tour and other 48 50 7 9 (18 ) Intersegment elimination (15 ) (15 ) $ 2,948 $ 1,885 $ 393 $ 317 $ 353 Six Months Ended May31, Revenues Operating expenses Selling andadmin- istrative Depreciation and amortization Operating income (loss) 2010 Cruise $ 6,251 $ 4,145 $ 785 $ 676 $ 645 Tour and other 54 62 15 18 (41 ) Intersegment elimination (15 ) (15 ) $ 6,290 $ 4,192 $ 800 $ 694 $ 604 2009 Cruise $ 5,768 $ 3,684 $ 770 $ 610 $ 704 Tour and other 61 68 15 18 (40 ) Intersegment elimination (17 ) (17 ) $ 5,812 $ 3,735 $ 785 $ 628 $ 664

Earnings Per Share

Earnings Per Share
	6 Months Ended May. 31, 2010
Earnings Per Share	NOTE 6 Earnings Per Share Our basic and diluted earnings per share were computed as follows (in millions, except per share data): Three Months Ended May31, Six Months Ended May31, 2010 2009 2010 2009 Net income $ 252 $ 264 $ 427 $ 524 Interest on dilutive convertible notes 3 3 6 6 Net income for diluted earnings per share $ 255 $ 267 $ 433 $ 530 Weighted-average common and ordinary shares outstanding 788 787 788 787 Dilutive effect of convertible notes 15 15 15 15 Dilutive effect of equity plans 3 2 3 2 Diluted weighted-average shares outstanding 806 804 806 804 Basic earnings per share $ 0.32 $ 0.34 $ 0.54 $ 0.67 Diluted earnings per share $ 0.32 $ 0.33 $ 0.54 $ 0.66 Anti-dilutive shares excluded from diluted earnings per share computations Stock options 8.8 14.8 8.9 14.8 1.75% Convertible notes 5.1 5.1

Fair Value Measurements, Deriva

Fair Value Measurements, Derivative Instruments and Hedging Activities
	6 Months Ended May. 31, 2010
Fair Value Measurements, Derivative Instruments and Hedging Activities	NOTE 7 Fair Value Measurements, Derivative Instruments and Hedging Activities Fair Value Measurements U.S. accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value.The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.The three levels of inputs used to measure fair value are as follows: Level 1 measurements are based on quoted prices in active markets for identical assets or liabilities that we have the ability to access. Level 2 measurements are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or market data other than quoted prices that are observable for the assets or liabilities. Level 3 measurements are based on unobservable data that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure.Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect those that we believe market participants would use in pricing the asset or liability at the measurement date. Financial Instruments that ARE NOT measured at Fair Value on a Recurring Basis The estimated carrying and fair values of our financial instrument assets and (liabilities) that are not measured at fair value on a recurring basis were as follows (in millions): May31, 2010 November30, 2009 Carrying Value FairValue Carrying Value FairValue Cash and cash equivalents(a) $ 368 $ 368 $ 324 $ 324 Long-term other assets(b) $ 157 $ 155 $ 187 $ 181 Debt, non-convertible(c) $ (9,156 ) $ (8,909 ) $ (9,443 ) $ (9,376 ) Publicly-traded convertible notes(d) $ (604 ) $ (653 ) $ (604 ) $ (627 ) (a) Cash and cash equivalents are comprised of cash on hand and time deposits and, due to their short maturities, the carrying values approximate their fair values. (b) At May31, 2010 and November30, 2009, substantially all of our long-term other assets were comprised of notes and other receivables.The fair values of notes and other receivables were based on estimated future cash flows discounted at appropriate market interest rates. (c) The net difference between the fair value of our non-convertible debt and its carrying value was due to the market interest rates in existence at the respective measurement dates being higher than the current interest rates on these debt obligations, including the impact of changes in our credit ratings.The fair values of our publicly-traded notes were

Shareholders' Equity

Shareholders' Equity
	6 Months Ended May. 31, 2010
Shareholders' Equity	NOTE 8 Shareholders Equity During the six months ended May31, 2010, we sold 8.1million Carnival plc ordinary shares held as treasury stock for $317 million of net proceeds, substantially all of which was used to fund the repurchase of 8.1million shares of Carnival Corporation common stock.In these UK offerings, we sold Carnival plc ordinary shares held in treasury, only to the extent we were able to purchase shares of Carnival Corporation in the U.S. on at least an equivalent basis under our Stock Swap program.