Carnival Corporation (CCL)
Q4 2008 Earnings Call Transcript
December 18, 2008; 10:00 a.m. ET

Executives

Howard Frank - Vice Chairman and Chief Operating Officer
David Bernstein - Senior Vice President and Chief Financial Officer
Micky Arison - Chairman and Chief Executive Officer
Beth Roberts - Vice President of Investor Relations

Analysts

Richard Lyall - John W. Bristol & Co.
Robin Farley - UBS
Timothy Conder – Wachovia Capital Markets
Steve Kent – Goldman, Sachs & Co.
Steve Wieczynski - Stifel Nicolaus & Co.
John Jeris - Boston Company Asset Management, LLC
Assia Georgieva - Infinity Research
David Leibowitz – Horizon Asset Management
Nick Keyano – Olson & Co.
Dominique Mielle - Canyon Capital Advisors
Sharon Zackfia - William Blair & Co.

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Carnival Corporation fourth quarter earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. At that time, if you have a question, please press the “1” followed by the “4” on your telephone. If at any time during the conference you need to reach an operator, please press “*0”. As a reminder, this conference is being recorded Thursday, December 18, 2008.

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

Howard Frank

Thank you Alex. Good morning everyone. This is Howard Frank and with me this morning is Micky Arison, Chairman, and CEO of Carnival along with David Bernstein, who is our Chief Financial Officer and Senior VP of Finance and Beth Roberts, who is our VP of Investor Relations.

I will turn the call over to David who will take you through some of the color for the 2008 year in the fourth quarter and then David will turn it back to me and I’ll give you some views on our current outlook for the business going into 2009. David.

David Bernstein

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

For the fourth quarter, our earnings per share was $0.47, which came in above the midpoint of our September guidance by $0.10 per share. This was driven by lower fuel prices worth $0.06, stronger than expected revenue yields on close-in bookings worth $0.02 and various other items worth $0.02. The gain on the sale of the QE2 was in our previous guidance; however the stronger dollar versus the sterling increased the gain.

Looking at our fourth quarter operating results versus the prior year, our capacity increased 8.1% for the fourth quarter with the majority of the increase going to our European brands. Our European brands grew over 16%, while our North American brands grew 4.6%. Overall, net revenue yields in local currency increased 2% in the fourth quarter versus the prior year.

Now, let’s look at the two components of net revenue yields. For net cruise ticket yields, we saw an increase of 3.2% in local currency. Our North American brands were up 4.4% driven by the Caribbean, Mexico and other exotic itinerary. Our European brands, experienced 1.3% lower local currency ticket yields.

Given the 21% capacity increase for our European brands this year and the increasing competition from other companies in the European marketplace, we were expecting to see overall flattish yields, which is exactly where we wound up excluding Ibero. As to Ibero, they did experience soft pricing in the fourth quarter, as they did in the third quarter, which resulted from the difficult economic environment in Spain.

P&O Cruises Australia with its reconfigured fleet, adding Pacific Dawn in November of ’07 and delivering the Pacific Star to Pullman Tours in March of ’08, achieved a healthy yield increase for the fourth quarter versus the prior year, which supports our decision to grow the brands by redeploying the Ocean Village ships over the next two years.

For net onboard and other yields, we reported a yield decline of 1.8% in local currency; however, mix accounts for 0.8% of the decline, as our European brands, which have always had lower onboard spending are growing faster than our North American brands. We saw yield declines in about half of our brands around the world, a trend which we anticipated in our previous guidance.