Carnival Corp Q2 Earnings and Revenues

[787cruiser]

https://finance.yahoo.com/news/carnival-ccl-q2-earnings-revenues-152800541.html

 

Some record numbers being posted by Carnival and debt is starting to decrease but my question is (and for those without a financial mind) how is Carnival still posting a loss? is it as simple as the debt/interest repayments?

[tidecat]

Depreciation represents the decline in value of assets (ships, equipment, etc.) that were already purchased. That cash was out the door as long as 39 years ago, but Carnival recognizes an expense for it today. For a capital-intensive business like a cruise line, this can be substantial.

 

EBITDA adds back depreciation (and amortization, which is similar to depreciation, just for non-physical assets) in an attempt to approximate operating cash flow. Interest and taxes are still real cash outflows, but generally having positive EBITDA means a company is making money from its operations - especially for a business like a cruise line that has little to no accounts receivable (money owed to them for prior sales).

 

I'm not sure what Carnival's depreciation method is, but it may also be front-loaded, in which case Mardi Gras, Celebration, Panorama, AIDAnova, AIDAcosma, Discovery Princess, Sky Princess, Costa Toscana, and Costa Smeralda should account for the majority of depreciation expense.

 

[john91498]

The long term debt is what is killing carnival.

[jsglow]

Importantly, CCL reported positive 'free cash flow' for the first time since the restart.  In layman's terms, that means that the cigar box is filling rather than emptying.  Accounting is simply numbers; positive cash flow remains king.  And with that positive generation came the first opportunity to pay down debt.  You'll see that they early retired roughly $1 million without my going back to re-read the announcement.  The signs are very encouraging but it will take a number of years to regain financial health.

[Lee Cruiser]

11 minutes ago, jsglow said:

You'll see that they early retired roughly $1 million without my going back to re-read the announcement.  The signs are very encouraging but it will take a number of years to regain financial health.

I didn't read it again either, but I'm thinking it was $1 billion in debt that was retired

[Lee Cruiser]

6 hours ago, 787cruiser said:

is it as simple as the debt/interest repayments?

Yes, a large part of it is interest on $30 billion of debt.  You are probably talking in terms of more than $100 million a month.

Edited June 27, 2023 by Lee Cruiser

[jsglow]

23 minutes ago, Lee Cruiser said:

I didn't read it again either, but I'm thinking it was $1 billion in debt that was retired

You're right! I'm not used to writing numbers that big. 👍

[tidecat]

1 hour ago, jsglow said:

Importantly, CCL reported positive 'free cash flow' for the first time since the restart.  In layman's terms, that means that the cigar box is filling rather than emptying.  Accounting is simply numbers; positive cash flow remains king.  And with that positive generation came the first opportunity to pay down debt.  You'll see that they early retired roughly $1 million without my going back to re-read the announcement.  The signs are very encouraging but it will take a number of years to regain financial health.

They didn't pay down $1 Million; it was $1.8 Billion. Most of that was variable rate debt as well, which reduces their exposure to the possibility of rising interest rates.

 

[jsglow]

9 hours ago, tidecat said:

They didn't pay down $1 Million; it was $1.8 Billion. Most of that was variable rate debt as well, which reduces their exposure to the possibility of rising interest rates.

 

As I acknowledged the typo one post bf your response. 👍