CCL - sets out their primary revenues and expenses - 2016 Annual Report

[Tampa Girl]

Here is the only section where I found differing analysis by brand names - please can someone translate what this means -" annual goodwill impairment reviews". (pp 27-28 - CCL 2016 Annual Report)

 

What does this mean?

 

 

The determination of our reporting unit goodwill and trademark fair values includes numerous assumptions thatare subject to various risks and uncertainties. We believe that we have made reasonable estimates and judgments.If there is a change in the conditions or circumstances influencing fair values in the future, then we may need torecognize an impairment charge.

 

I picked this up from the 1/29/2009, CCL 10-K. The last sentence in particular is instructive Hope it helps.

 

 

"Asset ImpairmentThe impairment reviews of our ships and goodwill and trademarks, which has 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 fair value includes numerous uncertainties, unless a viable actively traded market exists for the asset or for a comparable reporting unit, which is usually not the case for cruise ships, cruise lines and trademarks. For example, in determining fair values of ships utilizing discounted forecasted cash flows, significant judgments are made concerning, among other things, future net revenue yields, net cruise costs per ALBD, interest and discount rates, cruise itineraries, technological changes, consumer demand, governmental regulations and the effects of competition. In addition, third party appraisers are sometimes used to help determine fair values of ships and cruise lines and some of their valuation methodologies are also subject to similar types of uncertainties. Also, the determination of fair values of cruise line reporting units using a price earnings multiple approach requires significant judgments, such as determining reasonable multiples. Finally, determining trademark fair values also requires significant judgments in determining both the estimated trademark cash flows, and the appropriate discount and royalty rates to be applied to those cash flows to determine their fair value. We believe that we have made reasonable estimates and judgments in determining whether our ships, goodwill and trademarks have been impaired. However, if there is a material change in the assumptions used in our determination of fair value or if there is a material change in the conditions or circumstances influencing fair value, we could be required to recognize a material impairment charge."

The last sentence, in particular, is instructive. Hope it helps.

[RDC1]

I have been reading the Annual Report but have not yet found the page which shows Holland America's bottom line. Can you point me to a page from which one could make an educated opinion?

 

The individual lines are not broken out in the numbers in the annual report. You can find some comments about the individual lines but not the numbers.

 

The best insight comes from comparing CCL, RCL and NCLH

Edited May 1, 2017 by RDC1

[RDC1]

I picked this up from the 1/29/2009, CCL 10-K. The last sentence in particular is instructive Hope it helps.

 

 

"Asset ImpairmentThe impairment reviews of our ships and goodwill and trademarks, which has 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 fair value includes numerous uncertainties, unless a viable actively traded market exists for the asset or for a comparable reporting unit, which is usually not the case for cruise ships, cruise lines and trademarks. For example, in determining fair values of ships utilizing discounted forecasted cash flows, significant judgments are made concerning, among other things, future net revenue yields, net cruise costs per ALBD, interest and discount rates, cruise itineraries, technological changes, consumer demand, governmental regulations and the effects of competition. In addition, third party appraisers are sometimes used to help determine fair values of ships and cruise lines and some of their valuation methodologies are also subject to similar types of uncertainties. Also, the determination of fair values of cruise line reporting units using a price earnings multiple approach requires significant judgments, such as determining reasonable multiples. Finally, determining trademark fair values also requires significant judgments in determining both the estimated trademark cash flows, and the appropriate discount and royalty rates to be applied to those cash flows to determine their fair value. We believe that we have made reasonable estimates and judgments in determining whether our ships, goodwill and trademarks have been impaired. However, if there is a material change in the assumptions used in our determination of fair value or if there is a material change in the conditions or circumstances influencing fair value, we could be required to recognize a material impairment charge."

The last sentence, in particular, is instructive. Hope it helps.

Basically boilerplate. Basically all it means is that there are uncertainties related to asset valuation and the company has to have sound methodologies in place to review the value of those assets. Especially considering that they are relatively illiquid assets (not easily sold into a known market with easily calculated value)

[OlsSalt]

One group of brand was identified as exceeding ... XYZ

One group of brands we identified as significantly exceeding .... XYZ (including HAL)

 

This was an obvious difference noted between these two brand groups. Which one was performing better than the other based upon that choice of wording. That is what I don't understand.

 

Was the HAL brand preforming significantly better or worse, than the other brand cluster.

 

Thanks for the help translating this into layman terms. My initial search was trigged by another poster claiming insiders said the HAL brand was significantly under-perfroming. I naturally wondered what could validate that anonymous comment.

[sfaaa]

The bottom line for me after reading the 2016 Annual Report is that Carnival Corporation is a well run Company.

 

Wall Street agrees with your assessment.

[RDC1]

One group of brand was identified as exceeding ... XYZ

One group of brands we identified as significantly exceeding .... XYZ (including HAL)

 

This was an obvious difference noted between these two brand groups. Which one was performing better than the other based upon that choice of wording. That is what I don't understand.

 

Was the HAL brand preforming significantly better or worse, than the other brand cluster.

 

Thanks for the help translating this into layman terms. My initial search was trigged by another poster claiming insiders said the HAL brand was significantly under-perfroming. I naturally wondered what could validate that anonymous comment.

 

You wont find anything to directly confirm anything about an individual brand. I would not be surprised if HAL was under performing in some categories because of its average ship size. The ships HAL has are smaller then used by other competing lines (I would put HAL's competition as Celebrity, Princess, and maybe MSC) . That means that HAL is starting out with less cost effective ships. One could do a sampling of fares and compare them to other lines to get an idea if they have enough pricing power to offset the ship factor. Based upon what I have seen I would expect that HAL has a lower net margin and lower occupancy number then CCL has over all. However, I also feel that it fills a key slot in CCL's overall brand structure and as such they are willing to absorb the impact of those factors. By belling bundled with CCLs other brands it get substantial economies of scale in purchasing and shore operations. Those economies allow it to do fairly will as a part of CCL, whereas it is probably not competitive if it were a stand alone company (the whole reason CCL was able to absorb them a few years ago).

[OlsSalt]

You wont find anything to directly confirm anything about an individual brand. I would not be surprised if HAL was under performing in some categories because of its average ship size. The ships HAL has are smaller then used by other competing lines (I would put HAL's competition as Celebrity, Princess, and maybe MSC) . That means that HAL is starting out with less cost effective ships. One could do a sampling of fares and compare them to other lines to get an idea if they have enough pricing power to offset the ship factor. Based upon what I have seen I would expect that HAL has a lower net margin and lower occupancy number then CCL has over all. However, I also feel that it fills a key slot in CCL's overall brand structure and as such they are willing to absorb the impact of those factors. By belling bundled with CCLs other brands it get substantial economies of scale in purchasing and shore operations. Those economies allow it to do fairly will as a part of CCL, whereas it is probably not competitive if it were a stand alone company (the whole reason CCL was able to absorb them a few years ago).

 

 

At least the Annual Report did break down the various brands and put them into two differently described clusters and used differing qualitative descriptions for the two clusters of brands. My problem is I don't know enough to know what follows the words one was exceeding and one was significantly exceeding .....some bench mark that CCL was analyzing.

 

In my quoted section, CCL also noted nothing in these analysis reports alarmed them to do any further analysis - on to Step Two of this exercise.

 

Did this one group, the HAL group along with Costa and P&O (Aus), have significantly exceeding ..values or losses in this particular benchmark ... after this corporation analysis?

 

So CCL does present specific about the performance these two brand clusters they analyzed, which they described in differing terms. I just cannot figure out what that underlying analysis found.

 

Whatever it is good, bad or indifferent, Costa and P&O (Aus) are in the same boat with HAL.