TIDMCCL
RNS Number : 2270O
Carnival PLC
29 September 2023
September 29, 2023
RELEASE OF CARNIVAL CORPORATION & PLC QUARTERLY REPORT ON
FORM 10-Q
FOR THE THIRD QUARTER OF 2023
Carnival Corporation & plc is hereby announcing that today
it has released its three and nine months results of operations in
its earnings release and filed its joint Quarterly Report on Form
10-Q ("Form 10-Q") with the U.S. Securities and Exchange Commission
("SEC") containing the Carnival Corporation & plc unaudited
consolidated financial statements as of and for the three and nine
months ended August 31, 2023.
The information included in the Form 10-Q (Schedule A) has been
prepared in accordance with SEC rules and regulations. The Carnival
Corporation & plc unaudited consolidated financial statements
contained in the Form 10-Q have been prepared in accordance with
generally accepted accounting principles in the United States of
America ("U.S. GAAP").
Schedule A contains the Carnival Corporation & plc Form 10-Q
which includes unaudited consolidated financial statements as of
and for the three and nine months ended August 31, 2023,
management's discussion and analysis ("MD&A") of financial
conditions and results of operations, and information on Carnival
Corporation and Carnival plc's sales and purchases of their equity
securities and use of proceeds from such sales.
The Directors consider that within the Carnival Corporation and
Carnival plc dual listed company arrangement, the most appropriate
presentation of Carnival plc's results and financial position is by
reference to the Carnival Corporation & plc U.S. GAAP unaudited
consolidated financial statements.
MEDIA CONTACT INVESTOR RELATIONS CONTACT
Jody Venturoni Beth Roberts
001 469 797 6380 001 305 406 4832
The Form 10-Q 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 Form 10-Q has been submitted to
the National Storage Mechanism and will shortly be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. Additional
information can be obtained via Carnival Corporation & plc's
website listed above or by writing to Carnival plc at Carnival
House, 100 Harbour Parade, Southampton, SO15 1ST, United
Kingdom.
Carnival Corporation & plc is the largest global cruise
company, and among the largest leisure travel companies, with a
portfolio of world-class cruise lines - AIDA Cruises, Carnival
Cruise Line, Costa Cruises, Cunard, Holland America Line, P&O
Cruises (Australia), P&O Cruises (UK), Princess Cruises, and
Seabourn.
Additional information can be found on www.carnivalcorp.com ,
www.aida.de , www.carnival.com , www.costacruise.com ,
www.cunard.com , www.hollandamerica.com, www.pocruises.com.au ,
www.pocruises.com , www.princess.com and www.seabourn.com . For
more information on Carnival Corporation's industry-leading
sustainability initiatives, visit www.carnivalsustainability.com
.
SCHEDULE A
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(in millions, except per share data)
Three Months
Ended Nine Months Ended
August 31, August 31,
--------------- -------------------
2023 2022 2023 2022
------ ------- -------- ---------
Revenues
Passenger ticket $4,546 $2,595 $10,557 $4,753
Onboard and other 2,308 1,711 5,640 3,577
------ ------- -------- ---------
6,854 4,305 16,197 8,329
------ ------- -------- ---------
Operating Expenses
Commissions, transportation and other 823 565 2,097 1,141
Onboard and other 752 537 1,785 1,060
Payroll and related 585 563 1,768 1,601
Fuel 468 668 1,492 1,577
Food 364 259 1,000 586
Ship and other impairments - - - 8
Other operating 928 787 2,546 2,118
------ ------- -------- ---------
Cruise and tour operating expenses 3,921 3,379 10,688 8,092
Selling and administrative 713 625 2,162 1,774
Depreciation and amortization 596 581 1,774 1,707
5,230 4,585 14,624 11,573
------ ------- -------- ---------
Operating Income (Loss) 1,624 (279) 1,572 (3,244)
------ ------- -------- ---------
Nonoperating Income (Expense)
Interest income 59 24 183 34
Interest expense, net of capitalized
interest (518) (422) (1,600) (1,161)
Debt extinguishment and modification
costs (81) - (112) -
Other income (expense), net (19) (81) (67) (108)
------ ------- -------- ---------
(559) (479) (1,595) (1,235)
------ ------- -------- ---------
Income (Loss) Before Income Taxes 1,065 (759) (23) (4,478)
Income Tax Benefit (Expense), Net 9 (11) (3) (17)
------ ------- -------- ---------
Net Income (Loss) $1,074 $(770) $(26) $(4,495)
====== ======= ======== =========
Earnings Per Share
Basic $0.85 $(0.65) $(0.02) $(3.89)
====== ======= ======== =========
Diluted $0.79 $(0.65) $(0.02) $(3.89)
====== ======= ======== =========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in millions)
Three Months Nine Months
Ended Ended
August 31, August 31,
---------------- ---------------
2023 2022 2023 2022
------ -------- ----- --------
Net Income (Loss) $1,074 $(770) $(26) $(4,495)
------ -------- ----- --------
Items Included in Other Comprehensive Income
(Loss)
Change in foreign currency translation adjustment (17) (283) 82 (529)
Other 24 1 4 6
------ -------- ----- --------
Other Comprehensive Income (Loss) 7 (282) 86 (523)
------ -------- ----- --------
Total Comprehensive Income (Loss) $1,081 $(1,052) $60 $(5,018)
====== ======== ===== ========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
August November
31, 30, 2022
2023
------- ---------
ASSETS
Current Assets
Cash and cash equivalents $2,842 $4,029
Restricted cash 18 1,988
Trade and other receivables, net 485 395
Inventories 483 428
Prepaid expenses and other 855 652
------- ---------
Total current assets 4,683 7,492
------- ---------
Property and Equipment, Net 39,952 38,687
Operating Lease Right-of-Use Assets, Net 1,277 1,274
Goodwill 579 579
Other Intangibles 1,168 1,156
Other Assets 2,098 2,515
------- ---------
$49,756 $51,703
======= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $- $200
Current portion of long-term debt 1,780 2,393
Current portion of operating lease liabilities 153 146
Accounts payable 1,103 1,050
Accrued liabilities and other 2,017 1,942
Customer deposits 5,955 4,874
------- ---------
Total current liabilities 11,008 10,605
------- ---------
Long-Term Debt 29,516 31,953
Long-Term Operating Lease Liabilities 1,180 1,189
Other Long-Term Liabilities 1,091 891
Contingencies and Commitments
Shareholders' Equity
Carnival Corporation common stock, $0.01 par value;
1,960 shares authorized; 1,250 shares at 2023 and
1,244 shares at 2022 issued 12 12
Carnival plc ordinary shares, $1.66 par value; 217
shares at 2023 and 2022 issued 361 361
Additional paid-in capital 16,699 16,872
Retained earnings 233 269
Accumulated other comprehensive income (loss) ("AOCI") (1,896) (1,982)
Treasury stock, 130 shares at 2023 and 2022 of Carnival
Corporation and 73 shares at 2023 and 72 shares at
2022 of Carnival plc, at cost (8,449) (8,468)
------- ---------
Total shareholders' equity 6,960 7,065
------- ---------
$49,756 $51,703
======= =========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Nine Months
Ended
August 31,
-----------------
2023 2022
------- --------
OPERATING ACTIVITIES
Net income (loss) $(26) $(4,495)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization 1,774 1,707
Impairments 19 8
(Gain) loss on debt extinguishment 99 -
(Income) loss from equity-method investments 16 -
Share-based compensation 43 79
Amortization of discounts and debt issue costs 126 131
Noncash lease expense 109 103
Gain on sales of ships (54) (6)
Other 39 36
------- --------
2,145 (2,438)
Changes in operating assets and liabilities
Receivables (99) (134)
Inventories (43) (87)
Prepaid expenses and other assets 74 (716)
Accounts payable 31 176
Accrued liabilities and other 155 262
Customer deposits 1,097 1,383
------- --------
Net cash provided by (used in) operating activities 3,359 (1,553)
------- --------
INVESTING ACTIVITIES
Purchases of property and equipment (2,609) (3,759)
Proceeds from sales of ships 260 55
Purchase of short-term investments - (315)
Proceeds from maturity of short-term investments - 515
Other 28 37
------- --------
Net cash provided by (used in) investing activities (2,322) (3,467)
------- --------
FINANCING ACTIVITIES
Repayments of short-term borrowings (200) (114)
Principal repayments of long-term debt (6,828) (1,073)
Debt issuance costs (116) (116)
Debt extinguishment costs (67) -
Proceeds from issuance of long-term debt 2,961 3,334
Proceeds from issuance of common stock 5 1,180
Proceeds from issuance of common stock under the Stock
Swap Program 22 89
Purchase of treasury stock under the Stock Swap Program (20) (82)
Other 14 -
------- --------
Net cash provided by (used in) financing activities (4,229) 3,217
------- --------
Effect of exchange rate changes on cash, cash equivalents
and restricted cash 25 (67)
------- --------
Net increase (decrease) in cash, cash equivalents and
restricted cash (3,166) (1,870)
Cash, cash equivalents and restricted cash at beginning
of period 6,037 8,976
------- --------
Cash, cash equivalents and restricted cash at end of period $2,870 $7,107
======= ========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(in millions)
Three Months Ended
-------------------------------------------------------------------------------
Retained
Additional earnings Total
Common Ordinary paid-in (accumulated Treasury shareholders'
stock shares capital deficit) AOCI stock equity
------ -------- ---------- ------------- -------- -------- --------------
At May 31, 2023 $12 $361 $16,684 $(841) $(1,903) $(8,449) $5,865
Net income (loss) - - - 1,074 - - 1,074
Other comprehensive
income
(loss) - - - - 7 - 7
Share-based
compensation
and other - - 15 - - - 15
------ -------- ---------- ------------- -------- -------- --------------
At August 31, 2023 $12 $361 $16,699 $233 $(1,896) $(8,449) $6,960
====== ======== ========== ============= ======== ======== ==============
At May 31, 2022 $11 $361 $15,457 $2,649 $(1,742) $(8,476) $8,260
Net income (loss) - - - (770) - - (770)
Other comprehensive
income
(loss) - - - - (282) - (282)
Issuances of common
stock,
net 1 - 1,148 - - - 1,149
Issuance of treasury
shares for vested
share-based
awards - - - (12) - 12 -
Share-based
compensation
and other - - 22 - - - 22
------ -------- ---------- ------------- -------- -------- --------------
At August 31, 2022 $12 $361 $16,626 $1,868 $(2,024) $(8,464) $8,379
====== ======== ========== ============= ======== ======== ==============
Nine Months Ended
---------------------------------------------------------------------------
Additional Total
Common Ordinary paid-in Retained Treasury shareholders'
stock shares capital earnings AOCI stock equity
------ -------- ---------- --------- -------- -------- --------------
At November 30, 2022 $12 $361 $16,872 $269 $(1,982) $(8,468) $7,065
Change in accounting
principle (a) - - (229) (10) - - (239)
Net income (loss) - - - (26) - - (26)
Other comprehensive income
(loss) - - - - 86 - 86
Issuances of common stock,
net - - 5 - - - 5
Conversion of Convertible
Notes - - 3 - - - 3
Purchases and issuances
under the Stock Swap
program, net - - 22 - - (20) 2
Issuance of treasury
shares for vested
share-based
awards - - (41) - - 41 -
Share-based compensation
and other - - 67 - - (2) 65
------ -------- ---------- --------- -------- -------- --------------
At August 31, 2023 $12 $361 $16,699 $233 $(1,896) $(8,449) $6,960
====== ======== ========== ========= ======== ======== ==============
At November 30, 2021 $11 $361 $15,292 $6,448 $(1,501) $(8,466) $12,144
Net income (loss) - - - (4,495) - - (4,495)
Other comprehensive income
(loss) - - - - (523) - (523)
Issuances of common stock,
net 1 - 1,178 - - - 1,180
Purchases and issuances
under the Stock Swap
program, net - - 89 - - (82) 8
Issuance of treasury
shares for vested
share-based
awards - - - (84) - 84 -
Share-based compensation
and other - - 67 (1) - - 66
------ -------- ---------- --------- -------- -------- --------------
At August 31, 2022 $12 $361 $16,626 $1,868 $(2,024) $(8,464) $8,379
====== ======== ========== ========= ======== ======== ==============
The accompanying notes are an integral part of these
consolidated financial statements.
(a) We adopted the provisions of Debt - Debt with Conversion and
Other Options and Derivative and Hedging - Contracts in Entity's
Own Equity on December 1, 2022.
CARNIVAL CORPORATION & PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NO TE 1 - General
The 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."
Liquidity
As of August 31, 2023, we had $5.7 billion of liquidity
including cash and cash equivalents and borrowings available under
our $1.7 billion, EUR1.0 billion and GBP0.2 billion multi-currency
revolving credit facility (the "Revolving Facility"). We believe
that we have sufficient liquidity to fund our obligations and
expect to remain in compliance with our financial covenants for at
least the next twelve months from the issuance of these financial
statements. Refer to Note 3 - "Debt" for additional details
regarding the applicable financial covenants.
We will continue to pursue various opportunities to refinance
future debt maturities to reduce interest expense and/or to extend
the maturity dates associated with our existing indebtedness and
obtain relevant financial covenant amendments or waivers, if
needed.
Basis of Presentation
The Consolidated Statements of Income (Loss), the Consolidated
Statements of Comprehensive Income (Loss), the Consolidated
Statements of Cash Flows and the Consolidated Statements of
Shareholders' Equity for the three and nine months ended August 31,
2023 and 2022, and the Consolidated Balance Sheet at August 31,
2023 are unaudited and, in the opinion of our management, contain
all adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement. 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 2022 joint Annual Report on Form
10-K ("Form 10-K") filed with the U.S. Securities and Exchange
Commission on January 27, 2023. Our operations are seasonal and
results for interim periods are not necessarily indicative of the
results for the entire year.
Use of Estimates and Risks and Uncertainty
The preparation of our interim consolidated financial statements
in conformity with accounting principles generally accepted in the
United States of America ("U.S. GAAP") requires management to make
estimates and assumptions that affect the amounts reported and
disclosed. The full extent to which the effects of the pandemic,
inflation, higher fuel prices, higher taxes, higher interest rates
and fluctuations in foreign currency rates will directly or
indirectly impact our business, operations, results of operations
and financial condition, including our valuation of goodwill and
trademarks, impairment of ships and collectability of trade and
notes receivables, will depend on future developments that are
uncertain. We have made reasonable estimates and judgments of such
items within our financial statements and there may be changes to
those estimates in future periods.
Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB")
issued guidance, Reference Rate Reform: Facilitation of the Effects
of Reference Rate Reform on Financial Reporting, which provides
temporary optional expedients and exceptions to accounting guidance
on contract modifications and hedge accounting to ease entities'
financial reporting burdens as the market transitions from the
London Interbank Offered Rate ("LIBOR") and other interbank offered
rates to alternative reference rates. In December 2022, the FASB
deferred the date through which this guidance can be applied from
December 31, 2022 to December 31, 2024. We adopted this new
guidance during 2022 and applied it prospectively to contract
modifications related to a change in reference rate. As of August
31, 2023, all of our outstanding debt and derivative instruments
referenced to U.S. dollar LIBOR were transitioned to Term Secured
Overnight Financing Rate ("SOFR"). The adoption of this guidance
did not have a material impact on our consolidated financial
statements.
The FASB issued guidance, Debt - Debt with Conversion and Other
Options and Derivative and Hedging - Contracts in Entity's Own
Equity, which simplifies the accounting for convertible
instruments. This guidance eliminates certain models that require
separate accounting for embedded conversion features, in certain
cases. Additionally, among other changes, the guidance eliminates
certain of the conditions for equity classification for contracts
in an entity's own equity. The guidance also requires entities to
use the if-converted method for all convertible instruments in the
diluted earnings per share calculation and include the effect of
share settlement for instruments that may be settled in cash or
shares, except for certain liability-classified share-based payment
awards. On December 1, 2022, we adopted this guidance using the
modified retrospective approach to recognize our convertible notes
as single unit liability instruments, as they do not qualify as
derivatives under ASC 815, Derivatives and Hedging, and were not
issued at a substantial premium. Accordingly, upon adoption we
recorded a $239 million increase to debt, primarily as a result of
the reversal of the remaining non-cash convertible debt discount,
as well as a reduction of $229 million to additional paid
in capital. The cumulative effect of the adoption of this
guidance resulted in a $10 million decrease to retained
earnings.
In September 2022, the FASB issued guidance,
Liabilities-Supplier Finance Programs - Disclosure of Supplier
Finance Program Obligations. This guidance requires that a buyer in
a supplier finance program disclose sufficient information about
the program to allow a user of financial statements to understand
the program's nature, activity during the period, changes from
period to period, and potential magnitude. This guidance is
expected to improve financial reporting by requiring new
disclosures about the programs, thereby allowing financial
statement users to better consider the effect of the programs on an
entity's working capital, liquidity, and cash flows. This guidance
is required to be adopted by us in the first quarter of 2024,
except for the amendment on roll forward information which is
required to be adopted by us for the financial year commencing on
December 1, 2024. We are currently evaluating the impact of the new
guidance on the disclosures to our consolidated financial
statements.
NOTE 2 - Revenue and Expense Recognition
Guest cruise deposits and advance onboard purchases are
initially included in customer deposits when received. Customer
deposits are subsequently recognized as cruise revenues, together
with revenues from onboard and other activities, and all associated
direct costs and expenses of a voyage are recognized as cruise
costs and expenses, upon completion of voyages with durations of
ten nights or less and on a pro rata basis for voyages in excess of
ten nights. The impact of recognizing these shorter duration cruise
revenues and costs and expenses on a completed voyage basis versus
on a pro rata basis is not material. Certain of our product
offerings are bundled and we allocate the value of the bundled
services and goods between passenger ticket revenues and onboard
and other revenues based upon the estimated standalone selling
prices of those goods and services. Guest cancellation fees, when
applicable, are recognized in passenger ticket revenues at the time
of cancellation.
Our sales to guests of air and other transportation to and from
airports near the home ports of our ships are included in passenger
ticket revenues, and the related costs of purchasing these services
are included in transportation costs. The proceeds that we collect
from the sales of third-party shore excursions are included in
onboard and other revenues and the related costs are included in
onboard and other costs. The amounts collected on behalf of our
onboard concessionaires, net of the amounts remitted to them, are
included in onboard and other revenues as concession revenues. All
of these amounts are recognized on a completed voyage or pro rata
basis as discussed above.
Passenger ticket revenues include fees, taxes and charges
collected by us from our guests. The fees, taxes and charges that
vary with guest head counts and are directly imposed on a
revenue-producing arrangement are expensed in commissions,
transportation and other costs when the corresponding revenues are
recognized. For the three and nine months ended August 31, fees,
taxes, and charges included in commissions, transportation and
other costs were $211 million and $555 million in 2023 and $141
million and $305 million in 2022. The remaining portion of fees,
taxes and charges are expensed in other operating expenses when the
corresponding revenues are recognized.
Revenues and expenses from our hotel and transportation
operations, which are included in our Tour and Other segment, are
recognized at the time the services are performed.
Customer Deposits
Our payment terms generally require an initial deposit to
confirm a reservation, with the balance due prior to the voyage.
Cash received from guests in advance of the cruise is recorded in
customer deposits and in other long-term liabilities on our
Consolidated Balance Sheets. These amounts include refundable
deposits. In certain situations, we have provided flexibility to
guests by allowing guests to rebook at a future date, receive
future cruise credits ("FCCs") or elect to receive refunds in cash.
We have at times issued enhanced FCCs. Enhanced FCCs provide the
guest with an additional credit value above the original cash
deposit received, and the enhanced value is recognized as a
discount applied to the future cruise in the period used. We record
a liability for unexpired FCCs to the extent we have received and
not refunded cash from guests for cancelled bookings. We had total
customer deposits of $6.3 billion as of August 31, 2023 and $5.1
billion as of November 30, 2022, which includes approximately $160
million of unredeemed FCCs as of August 31, 2023, of which
approximately $114 million are refundable. Given the lack of
comparable historical experience of FCC redemptions, we are unable
to estimate the amount of FCCs that will be used in future periods
or that may be refunded. Refunds payable to guests who have elected
cash refunds are recorded in accounts payable. During the nine
months ended August 31, 2023 and 2022, we recognized revenues of
$3.9 billion and $1.7 billion related to our customer deposits as
of November 30, 2022 and 2021. Our customer deposits balance
changes due to the seasonal nature of cash collections, the
recognition of revenue, refunds of customer deposits and foreign
currency changes.
Trade and Other Receivables
Although we generally require full payment from our customers
prior to or concurrently with their cruise, we grant credit terms
to a relatively small portion of our revenue source. We have
receivables from credit card merchants and travel agents for cruise
ticket purchases and onboard revenue. These receivables are
included within trade and other receivables, net and are less
allowances for expected credit losses. We have agreements with a
number of credit card processors that transact customer deposits
related to our cruise vacations. Certain of these agreements allow
the credit card processors to request, under certain circumstances,
that we provide a reserve fund in cash. These reserve funds are
included in other assets.
Contract Costs
We recognize incremental travel agent commissions and credit and
debit card fees incurred as a result of obtaining the ticket
contract as assets when paid prior to the start of a voyage. We
record these amounts within prepaid expenses and other and
subsequently recognize these amounts as commissions, transportation
and other at the time of revenue recognition or at the time of
voyage cancellation. We had incremental costs of obtaining
contracts with customers recognized as assets of $272 million as of
August 31, 2023 and $218 million as of November 30, 2022.
NOTE 3 - Debt
August November
31, 30,
------- --------
(in millions) Maturity Rate (a) (b) 2023 2022
------------ --------------- ------- --------
Secured Subsidiary
Guaranteed
------------------------------
Notes
Notes Feb 2026 10.5% $- $775
EUR Notes Feb 2026 10.1% - 439
Notes Jun 2027 7.9% 192 192
Notes Aug 2027 9.9% 870 900
Notes Aug 2028 4.0% 2,406 2,406
Notes Aug 2029 7.0% 500 -
Loans
EUR floating rate Jun 2025 EURIBOR + 3.8% 844 808
Jun 2025 - SOFR + 3.0 -
Floating rate Oct 2028 3.3% 3,576 4,101
------- --------
Total Secured Subsidiary Guaranteed 8,388 9,621
------- --------
Senior Priority Subsidiary
Guaranteed
------------------------------ ------- --------
Notes May 2028 10.4% 2,030 2,030
------- --------
Unsecured Subsidiary
Guaranteed
------------------------------
Revolver
Facility (c) (c) - 200
Notes
Convertible Notes Apr 2023 5.8% - 96
Convertible Notes Oct 2024 5.8% 426 426
Notes Mar 2026 7.6% 1,362 1,450
EUR Notes Mar 2026 7.6% 544 517
Notes Mar 2027 5.8% 3,260 3,500
Convertible Notes Dec 2027 5.8% 1,131 1,131
Notes May 2029 6.0% 2,000 2,000
Notes Jun 2030 10.5% 1,000 1,000
Loans
Jul 2024 -
Floating rate Sep 2024 LIBOR + 3.8% - 590
GBP floating rate Feb 2025 SONIA + 0.9% - 419
Apr 2024 - EURIBOR + 2.4
EUR floating rate (d) Mar 2026 - 4.0% 716 827
Export Credit Facilities
Floating rate Dec 2031 SOFR + 0.8% (e) 583 1,246
Aug 2027 -
Fixed rate Dec 2032 2.4 - 3.4% 2,870 3,143
May 2024 - EURIBOR + 0.2
EUR floating rate Nov 2034 - 0.8% 3,165 3,882
Feb 2031 -
EUR fixed rate Jul 2037 1.1 - 3.4% 3,640 2,592
------- --------
Total Unsecured Subsidiary Guaranteed 20,698 23,019
------- --------
Unsecured Notes (No Subsidiary
Guarantee)
-------------------------------------------
Notes Oct 2023 7.2% 125 125
Notes Jan 2028 6.7% 200 200
EUR Notes Oct 2029 1.0% 653 620
------- --------
Total Unsecured Notes (No Subsidiary
Guarantee) 978 945
------- --------
Total Debt 32,093 35,615
Less: unamortized debt
issuance costs and discounts (797) (1,069)
------- --------
Total Debt, net of
unamortized debt issuance
costs and discounts 31,296 34,546
------- --------
Less: short-term borrowings - (200)
Less: current portion
of long-term debt (1,780) (2,393)
------- --------
Long-Term Debt $29,516 $31,953
======= ========
(a) The reference rates, together with any applicable credit
adjustment spread, for substantially all of our variable debt have
0.0% to 0.75% floors. During 2023, we amended certain of our
variable debt instruments to change the reference rate from LIBOR
to SOFR.
(b) The above debt table excludes the impact of any outstanding
derivative contracts. The interest rates on some of our debt
fluctuate based on the applicable rating of senior unsecured
long-term securities of Carnival Corporation or Carnival plc.
(c) See "Short-Term Borrowings" below.
(d) In March 2023, we entered into an amendment of a EUR
floating rate loan to extend maturity through April 2024.
(e) The interest rate for the unsecured floating rate export
credit facility for the current interest period is referenced to
LIBOR.
Carnival Corporation and/or Carnival plc is the primary obligor
of all our outstanding debt excluding the following:
-- $0.5 billion under a term loan facility of Costa Crociere
S.p.A. ("Costa"), a subsidiary of Carnival plc
-- $2.0 billion of senior priority notes (the "2028 Senior
Priority Notes") issued by Carnival Holdings (Bermuda) Limited
("Carnival Holdings"), a subsidiary of Carnival Corporation
-- $0.2 billion under an export credit facility of Sun Princess
Limited, a subsidiary of Carnival Corporation
-- $0.1 billion under an export credit facility of Sun Princess
II Limited, a subsidiary of Carnival Corporation
In addition, Carnival Holdings (Bermuda) II Limited ("Carnival
Holdings II") will be the primary obligor under a $2.1 billion
multi-currency revolving facility ("New Revolving Facility") when
the New Revolving Facility replaces our Revolving Facility upon its
maturity in August 2024. See "New Revolving Facility."
All of our outstanding debt is issued or guaranteed by
substantially the same entities with the exception of the
following:
-- Up to $250 million of the Costa term loan facility, which is
guaranteed by certain subsidiaries of Carnival plc and Costa that
do not guarantee our other outstanding debt
-- Our 2028 Senior Priority Notes, issued by Carnival Holdings,
which does not guarantee our other outstanding debt
-- The export credit facilities of Sun Princess Limited and Sun
Princess II Limited, which do not guarantee our other outstanding
debt
As of August 31, 2023, the scheduled maturities of our debt are
as follows:
(in millions)
Year Principal Payments
4Q 2023 $462
2024 2,046
2025 2,211
2026 3,194
2027 6,690
Thereafter 17,490
------------------
Total $32,093
==================
Short-Term Borrowings
As of August 31, 2023, we did not have short-term borrowings. As
of November 30, 2022, our short-term borrowings consisted of $0.2
billion under our Revolving Facility. We may continue to borrow or
otherwise utilize available amounts under the Revolving Facility
through August 2024, subject to satisfaction of the conditions in
the facility. We had $2.9 billion available for borrowing under our
Revolving Facility as of August 31, 2023. The Revolving Facility
bears interest at a rate of term SOFR, in relation to any loan in
U.S. dollars, EURIBOR, in relation to any loan in euros or daily
compounding SONIA, in relation to any loan in sterling, plus a
margin based on the long-term credit ratings of Carnival
Corporation and also includes an emissions linked margin adjustment
whereby, after the initial applicable margin is set per the margin
pricing grid, the margin may be adjusted based on performance in
achieving certain agreed annual carbon emissions goals. We are
required to pay a commitment fee on any unutilized portion.
New Revolving Facility
In February 2023, Carnival Holdings II entered into the New
Revolving Facility. The New Revolving Facility may be utilized
beginning on August 6, 2024, and will replace our Revolving
Facility upon its maturity in August 2024. The termination date of
the New Revolving Facility is August 6, 2025, subject to two,
mutual one-year extension options. The new facility also contains
an accordion feature, allowing for additional commitments, up to an
aggregate of $2.9 billion, which are the aggregate commitments
under our Revolving Facility.
Borrowings under the New Revolving Facility will bear interest
at a rate of term SOFR, in relation to any loan in U.S. dollars,
EURIBOR, in relation to any loan in euros or daily compounding
SONIA, in relation to any loan in sterling, plus a margin based on
the long-term credit ratings of Carnival Corporation. The New
Revolving Facility also includes an emissions linked margin
adjustment whereby, after the initial applicable margin is set per
the margin pricing grid, the margin may be adjusted based on
performance in achieving certain agreed annual carbon emissions
goals. In addition, we are required to pay certain fees on the
aggregate unused commitments under the New Revolving Facility and
the Revolving Facility.
In connection with the New Revolving Facility, Carnival
Corporation, Carnival plc and its subsidiaries will contribute
three unencumbered vessels (net book value of $3.0 billion as of
August 31, 2023) to Carnival Holdings II (which must be completed
no later than February 28, 2024). Each of the vessels will continue
to be operated under one of the Carnival Corporation & plc
brands. Carnival Holdings II does not guarantee our other
outstanding debt.
Term Loan Refinancing
In August 2023, we issued $500 million aggregate principal
amount of 7.0% first-priority senior secured notes due on August
15, 2029 (the "2029 Senior Secured Notes") and borrowed an
aggregate principal amount of $1.3 billion under a new senior
secured first lien term loan B facility, which bears interest at a
rate per annum equal to SOFR (with a 0.75% floor) plus 3.0% and
matures on August 8, 2027 (the "New Secured Term Loan Facility").
We used the proceeds from these borrowings to prepay borrowings
outstanding under our existing first-priority senior secured term
loan facility maturing in 2025. The 2029 Senior Secured Notes and
borrowings under the New Secured Term Loan Facility are fully and
unconditionally guaranteed, jointly and severally, on a
first-priority senior secured basis by Carnival plc and certain of
our subsidiaries that also guarantee our existing first- and
second-priority secured indebtedness, certain of our unsecured
notes and our convertible notes. The 2029 Senior Secured Notes and
borrowings under the New Secured Term Loan Facility are included
within the total Secured Subsidiary Guaranteed balance in the debt
table above.
Redemptions and Retirements
During the three months ended August 31, 2023, we redeemed the
outstanding principal amount of $775 million of our 10.5%
second-priority senior secured notes due in 2026 and the
outstanding principal amount of $465 million of our 10.1%
second-priority senior secured EUR notes due in 2026, and retired
$30 million aggregate principal amount of our 9.9% second-priority
senior secured notes due in 2027. Our second-priority senior
secured notes are included within the total Secured Subsidiary
Guaranteed balance in the debt table above. In addition, we retired
$240 million aggregate principal amount of our 5.8% unsecured notes
due in 2027, $88 million aggregate principal amount of our 7.6%
unsecured notes due in 2026 and $750 million of our unsecured loans
maturing from 2024 through 2025. Our unsecured notes and loans are
included within the total Unsecured Subsidiary Guaranteed balance
in the debt table above.
Export Credit Facility Borrowings
During the nine months ended August 31, 2023, we borrowed $1.1
billion under export credit facilities due in semi-annual
installments through 2037. In addition, we paid down $1.0 billion
of floating rate unsecured borrowings mostly with 2023 and 2024
maturities. As of August 31, 2023, the net book value of the
vessels subject to negative pledges was $15.7 billion.
Collateral and Priority Pool
As of August 31, 2023, the net book value of our ships and ship
improvements, excluding ships under construction, is $37.3 billion.
Our secured debt is secured on either a first or second-priority
basis, depending on the instrument, by certain collateral, which
includes vessels and certain assets related to those vessels and
material intellectual property (combined net book value of
approximately $23.2 billion, including $21.6 billion related to
vessels and certain assets related to those vessels) as of August
31, 2023 and certain other assets.
As of August 31, 2023, $8.2 billion in net book value of our
ships and ship improvements relate to the priority pool vessels
included in the priority pool of 12 unencumbered vessels (the
"Senior Priority Notes Subject Vessels") for our 2028 Senior
Priority Notes. As of August 31, 2023, there was no change in the
identity of the Senior Priority Notes Subject Vessels.
Covenant Compliance
Our Revolving Facility, New Revolving Facility, unsecured loans
and export credit facilities contain certain covenants listed
below:
-- Maintain minimum interest coverage (adjusted EBITDA to
consolidated net interest charges, as defined in the agreements)
(the "Interest Coverage Covenant") as follows:
For certain of our unsecured loans and our New Revolving
Facility, from the end of each fiscal quarter from August 31, 2024,
at a ratio of not less than 2.0 to 1.0 for each testing date
occurring from August 31, 2024 until May 31, 2025, at a ratio of
not less than 2.5 to 1.0 for the August 31, 2025 and November 30,
2025 testing dates, and at a ratio of not less than 3.0 to 1.0 for
the February 28, 2026 testing date onwards and as applicable
through their respective maturity dates. In addition, for our
remaining unsecured loans that contain this covenant, we entered
into letter agreements to waive compliance with the covenant
through the May 31, 2024 testing date.
For our export credit facilities, from the end of each fiscal
quarter from May 31, 2024, at a ratio of not less than 2.0 to 1.0
for each testing date occurring from May 31, 2024 until May 31,
2025, at a ratio of not less than 2.5 to 1.0 for the August 31,
2025 and November 30, 2025 testing dates, and at a ratio of not
less than 3.0 to 1.0 for the February 28, 2026 testing date
onwards
-- For certain of our unsecured loans and export credit
facilities, maintain minimum issued capital and consolidated
reserves (as defined in the agreements) of $5.0 billion
-- Limit our debt to capital (as defined in the agreements)
percentage to a percentage not to exceed 72.5% until the August 31,
2023 testing date, following which it will be tested at levels
which decline ratably to 65% from the May 31, 2024 testing date
onwards
-- Maintain minimum liquidity as follows:
For our New Revolving Facility, minimum liquidity of $1.5
billion; provided, that if any commitments maturing on June 30,
2025 under our existing first-priority senior secured term loan
facility are outstanding on the March 31, 2025 testing date, our
minimum liquidity on such testing date cannot be less than the
greater of (i) the aggregate outstanding amount of such first-lien
term loan facility commitments and (ii) $1.5 billion
For our other unsecured loans and export credit facilities that
contain this covenant, $1.5 billion through November 30, 2026
-- Adhere to certain restrictive covenants through August 2025
-- Limit the amounts of our secured assets as well as secured and other indebtedness
At August 31, 2023, we were in compliance with the applicable
covenants under our debt agreements. Generally, if an event of
default under any debt agreement occurs, then, pursuant to cross
default and/or cross-acceleration clauses therein, substantially
all of our outstanding debt and derivative contract payables could
become due, and our debt and derivative contracts could be
terminated. Any financial covenant amendment may lead to increased
costs, increased interest rates, additional restrictive covenants
and other available lender protections that would be
applicable.
NOTE 4 - Contingencies and Commitments
Litigation
We are routinely involved in legal proceedings, claims,
disputes, regulatory matters and governmental inspections or
investigations arising in the ordinary course of or incidental to
our business, including those noted below. Additionally, as a
result of the impact of COVID-19, litigation claims, enforcement
actions, regulatory actions and investigations, including, but not
limited to, those arising from personal injury and loss of life,
have been and may, in the future, be asserted against us. We expect
many of these claims and actions, or any settlement of these claims
and actions, to be covered by insurance and historically the
maximum amount of our liability, net of any insurance recoverables,
has been limited to our self-insurance retention levels.
We record provisions in the consolidated financial statements
for pending litigation when we determine that an unfavorable
outcome is probable and the amount of the loss can be reasonably
estimated.
Legal proceedings and government investigations are subject to
inherent uncertainties, and unfavorable rulings or other events
could occur. Unfavorable resolutions could involve substantial
monetary damages. In addition, in matters for which conduct
remedies are sought, unfavorable resolutions could include an
injunction or other order prohibiting us from selling one or more
products at all or in particular ways, precluding particular
business practices or requiring other remedies. An unfavorable
outcome might result in a material adverse impact on our business,
results of operations, financial position or liquidity.
As previously disclosed, on May 2, 2019, the Havana Docks
Corporation filed a lawsuit against Carnival Corporation in the
U.S. District Court for the Southern District of Florida under
Title III of the Cuban Liberty and Democratic Solidarity Act, also
known as the Helms-Burton Act, alleging that Carnival Corporation
"trafficked" in confiscated Cuban property when certain ships
docked at certain ports in Cuba, and that this alleged
"trafficking" entitles the plaintiffs to treble damages. The
hearings on motions for summary judgment were concluded on January
18, 2022. On March 21, 2022, the court granted summary judgment in
favor of Havana Docks Corporation as to liability. On August 31,
2022, the court determined that the trebling provision of the
Helms-Burton statute applies to damages and interest and
accordingly, we adjusted our estimated liability for this matter.
On December 30, 2022, the court entered judgment against Carnival
in the amount of $110 million plus $4 million in fees and costs. We
have filed a notice of appeal and on June 30, 2023, we filed our
opening appellate brief.
As previously disclosed, on April 8, 2020, DeCurtis LLC
("DeCurtis"), a former vendor, filed an action against Carnival
Corporation in the U.S. District Court for the Middle District of
Florida seeking declaratory relief that DeCurtis is not infringing
on several of Carnival Corporation's patents in relation to its
OCEAN Medallion systems and technology. On April 10, 2020, Carnival
Corporation filed an action against DeCurtis in the U.S. District
Court for the Southern District of Florida for breach of contract,
trade secrets violations and patent infringement. These two cases
were consolidated in the Southern District of Florida. On March 10,
2023, the jury returned a verdict finding that DeCurtis had
breached its contract with Carnival Corporation and infringed on
the Carnival Corporation patent. The jury awarded Carnival
Corporation a total of $21 million in damages. On April 30, 2023,
DeCurtis filed for bankruptcy protection in the United States
Bankruptcy Court for the District of Delaware. Carnival Corporation
is defending its interests in the bankruptcy matter.
COVID-19 Actions
We have been named in a number of individual actions related to
COVID-19. These actions include tort claims based on a variety of
theories, including negligence and failure to warn. The plaintiffs
in these actions allege a variety of injuries: some plaintiffs
confined their claim to emotional distress, while others allege
injuries arising from testing positive for COVID-19. A smaller
number of actions include wrongful death claims. Substantially all
of these individual actions have now been dismissed or settled for
immaterial amounts.
As of August 31, 2023, 11 purported class actions have been
brought by former guests in several U.S. federal courts, the
Federal Court in Australia, and in Italy. These actions include
tort claims based on a variety of theories, including negligence,
gross negligence and failure to warn, physical injuries and severe
emotional distress associated with being exposed to and/or
contracting COVID-19 onboard. As of August 31, 2023, nine of these
class actions have either been settled individually for immaterial
amounts or had their class allegations dismissed by the courts and
only the Australian and Italian matters remain. We believe the
ultimate outcome of these matters will not have a material impact
on our consolidated financial statements.
All COVID-19 matters seek monetary damages and most seek
additional punitive damages in unspecified amounts.
We continue to take actions to defend against the above
claims.
Regulatory or Governmental Inquiries and Investigations
We have been, and may continue to be, impacted by breaches in
data security and lapses in data privacy, which occur from time to
time. These can vary in scope and range from inadvertent events to
malicious motivated attacks.
We have incurred legal and other costs in connection with cyber
incidents that have impacted us. The penalties and settlements paid
in connection with cyber incidents over the last three years were
not material. While these incidents did not have a material adverse
effect on our business, results of operations, financial position
or liquidity, no assurances can be given about the future and we
may be subject to future litigation, attacks or incidents that
could have such a material adverse effect.
On March 14, 2022, the U.S. Department of Justice and the U.S.
Environmental Protection Agency notified us of potential civil
penalties and injunctive relief for alleged Clean Water Act
violations by owned and operated vessels covered by the 2013 Vessel
General Permit. We are working with these agencies to reach a
resolution of this matter. We believe the ultimate outcome will not
have a material impact on our consolidated financial
statements.
Other Contingent Obligations
Some of the debt contracts we enter into include indemnification
provisions obligating us to make payments to the counterparty if
certain events occur. These contingencies generally relate to
changes in taxes or changes in laws which increase the lender's
costs. 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 agreements with a number of credit card processors that
transact customer deposits related to our cruise vacations. Certain
of these agreements allow the credit card processors to request,
under certain circumstances, that we provide a reserve fund in
cash. Although the agreements vary, these requirements may
generally be satisfied either through a withheld percentage of
customer payments or providing cash funds directly to the credit
card processor. We continue to expect to provide reserve funds
under these agreements. During the third quarter, $912 million of
previously provided reserve funds related to our customer deposits
to satisfy these requirements were returned to us.
As of August 31, 2023 and November 30, 2022, we had $1.3 billion
and $1.7 billion in reserve funds. Additionally, as of August 31,
2023 and November 30, 2022, we had $242 million and $229 million in
compensating deposits we are required to maintain and $30 million
of cash collateral in escrow. These balances are included within
other assets. In addition, during the third quarter we provided
$413 million in restricted cash deposits which became unrestricted
in August 2023.
Ship Commitments
As of August 31, 2023, we expect the timing of our new ship
growth capital commitments to be as follows:
(in millions)
Year
Remainder of 2023 $267
2024 2,422
2025 957
Thereafter -
------
$3,645
======
NOTE 5 - Fair Value Measurements, Derivative Instruments and
Hedging Activities and Financial Risks
Fair Value Measurements
Fair value is defined as the amount that would be received for
selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date and
is measured using inputs in one of the following three
categories:
-- Level 1 measurements are based on unadjusted quoted prices in
active markets for identical assets or liabilities that we have the
ability to access. Valuation of these items does not entail a
significant amount of judgment.
-- 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.
Considerable judgment may be required in interpreting market
data used to develop the estimates of fair value. Accordingly,
certain estimates of fair value presented herein are not
necessarily indicative of the amounts that could be realized in a
current or future market exchange.
Financial Instruments that are not Measured at Fair Value on a
Recurring Basis
August 31, 2023 November 30, 2022
Fair Value Fair Value
-------- --------------------- -------- ---------------------
Carrying Level Level Level Carrying Level Level Level
(in millions) Value 1 2 3 Value 1 2 3
-------- ----- ------- ----- -------- ----- ------- -----
Liabilities
Fixed rate debt (a) $23,208 $- $21,581 $- $23,542 $- $18,620 $-
Floating rate debt (a) 8,885 - 7,899 - 12,074 - 10,036 -
-------- ----- ------- ----- -------- ----- ------- -----
Total $32,093 $- $29,481 $- $35,615 $- $28,656 $-
======== ===== ======= ===== ======== ===== ======= =====
(a) The debt amounts above do not include the impact of interest
rate swaps or debt issuance costs and discounts. The fair values of
our publicly-traded notes were based on their unadjusted quoted
market prices in markets that are not sufficiently active to be
Level 1 and, accordingly, are considered Level 2. The fair values
of our other debt were estimated based on current market interest
rates being applied to this debt.
Financial Instruments that are Measured at Fair Value on a
Recurring Basis
August 31, 2023 November 30, 2022
Level Level Level Level Level Level
(in millions) 1 2 3 1 2 3
------ ----- ----- ------- ----- -----
Assets
Cash equivalents (a) $1,505 $- $- $2,589 $- $-
Restricted cash (b) 28 - - 1,988 - -
Derivative financial instruments - 27 - - 1 -
------ ----- ----- ------- ----- -----
Total $1,533 $27 $- $4,576 $1 $-
====== ===== ===== ======= ===== =====
Liabilities
Derivative financial instruments $- $26 $- $- $- $-
------ ----- ----- ------- ----- -----
Total $- $26 $- $- $- $-
====== ===== ===== ======= ===== =====
(a) Consists of money market funds and cash investments with
original maturities of less than 90 days.
(b) The restricted cash amount at August 31, 2023 includes $10
million, which is included in other assets.
Nonfinancial Instruments that are Measured at Fair Value on a
Nonrecurring Basis
Valuation of Goodwill and Trademarks
As of July 31, 2023, we performed our annual goodwill and
trademark impairment reviews and determined there was no impairment
for goodwill or trademarks.
As of August 31, 2023 and November 30, 2022, goodwill for our
North America and Australia ("NAA") segment was $579 million.
Trademarks
NAA Europe
(in millions) Segment Segment Total
-------- -------- ------
November 30, 2022 $927 $224 $1,151
Exchange movements - 12 12
-------- -------- ------
August 31, 2023 $927 $236 $1,163
======== ======== ======
Derivative Instruments and Hedging Activities
Balance Sheet August 31, November 30,
(in millions) Location 2023 2022
----------------- ---------- ------------
Derivative assets
Derivatives designated as hedging
instruments
Prepaid expenses
Interest rate swaps (a) and other $25 $1
Other assets - 1
Derivatives not designated
as hedging instruments
Prepaid expenses
Interest rate swaps (a) and other 1 -
Total derivative assets $27 $1
========== ============
Derivative liabilities
Derivatives designated as hedging
instruments
Cross currency swaps (b) Other long-term
liabilities $9 $-
Other long-term
Interest rate swaps (a) liabilities 16 -
---------- ------------
Total derivative liabilities $26 $-
========== ============
(a) We have interest rate swaps whereby we receive EURIBOR-based
floating interest rate payments in exchange for making fixed
interest rate payments. These interest rate swap agreements
effectively changed $70 million at August 31, 2023 and $89 million
at November 30, 2022 of EURIBOR-based floating rate euro debt to
fixed rate euro debt. As of August 31, 2023, these EURIBOR-based
interest rate swaps were not designated as cash flow hedges. As of
November 30, 2022, one of these swaps was designated as a cash flow
hedge. During the nine months ended August 31, 2023 we entered into
interest rate swap agreements which effectively changed $2.5
billion at August 31, 2023 of variable rate debt to fixed rate
debt. At August 31, 2023, these interest rate swaps settle through
2027 and are designated as cash flow hedges.
(b) At August 31, 2023, we had a cross currency swap totaling
$663 million that is designated as a hedge of our net investment in
foreign operations with euro-denominated functional currencies. At
August 31, 2023, this cross currency swap settles through 2024.
Our derivative contracts include rights of offset with our
counterparties. As of August 31, 2023 and November 30, 2022, there
was no netting for our derivative assets and liabilities. The
amounts that were not offset in the balance sheet were not
material.
The effect of our derivatives qualifying and designated as
hedging instruments recognized in other comprehensive income (loss)
and in net income (loss) was as follows:
Three Months Nine Months
Ended Ended
August 31, August 31,
-------------- -------------
(in millions) 2023 2022 2023 2022
------- ----- ----- ------
Gains (losses) recognized in AOCI:
Cross currency swaps - net investment
hedges - included component $(10) $40 $(1) $72
Cross currency swaps - net investment
hedges - excluded component $1 $(7) $(3) $(26)
Interest rate swaps - cash flow hedges $25 $1 $6 $10
Gains (losses) reclassified from AOCI
- cash flow hedges:
Interest rate swaps - Interest expense,
net of capitalized interest $12 $- $22 $(1)
Foreign currency zero cost collars - Depreciation
and amortization $- $1 $1 $2
Gains (losses) recognized on derivative
instruments (amount excluded from effectiveness
testing - net investment hedges)
Cross currency swaps - Interest expense,
net of capitalized interest $3 $2 $7 $5
The amount of gains and losses on derivatives not designated as
hedging instruments recognized in earnings during the three and
nine months ended August 31, 2023 and estimated cash flow hedges'
unrealized gains and losses that are expected to be reclassified to
earnings in the next twelve months are not material.
Financial Risks
Fuel Price Risks
We manage our exposure to fuel price risk by managing our
consumption of fuel. Substantially all of our exposure to market
risk for changes in fuel prices relates to the consumption of fuel
on our ships. We manage fuel consumption through fleet
optimization, improving our existing fleet's energy efficiency,
designing more energy-efficient itineraries and investing in new
technologies, including alternative fuels .
Foreign Currency Exchange Rate Risks
Overall Strategy
We manage our exposure to fluctuations in foreign currency
exchange rates through our normal operating and financing
activities, including netting certain exposures to take advantage
of any natural offsets and, when considered appropriate, through
the use of derivative and non-derivative financial instruments. Our
primary focus is to monitor our exposure to, and manage, the
economic foreign currency exchange risks faced by our operations
and realized if we exchange one currency for another. We consider
hedging certain of our ship commitments and net investments in
foreign operations. The financial impacts of our hedging
instruments generally offset the changes in the underlying
exposures being hedged.
Operational Currency Risks
Our operations primarily utilize the U.S. dollar, Euro, Sterling
or the Australian dollar as their functional currencies. Our
operations also have revenue and expenses denominated in
non-functional currencies. Movements in foreign currency exchange
rates affect our financial statements.
Investment Currency Risks
We consider our investments in foreign operations to be
denominated in stable currencies and of a long-term nature. We
partially mitigate the currency exposure of our investments in
foreign operations by designating a portion of our foreign currency
debt and derivatives as hedges of these investments. As of August
31, 2023, we had a cross currency swap with a notional amount of
$663 million, which is designated as a hedge of our net investments
in foreign operations. During 2023, we also had
sterling-denominated debt designated as a non-derivative hedge of
our net investment in foreign operations. The $450 million
principal balance of this sterling-denominated debt was repaid in
July 2023. For the three and nine months ended August 31, 2023, we
recognized $29 million and $38 million of losses on these net
investment hedges in the cumulative translation adjustment section
of other comprehensive income (loss). We also have euro-denominated
debt which provides an economic offset for our operations with euro
functional currency.
Newbuild Currency Risks
Our shipbuilding contracts are typically denominated in euros.
Our decision to hedge a non-functional currency ship commitment for
our cruise brands is made on a case-by-case basis, considering the
amount and duration of the exposure, market volatility, economic
trends, our overall expected net cash flows by currency and other
offsetting risks.
At August 31, 2023, our remaining newbuild currency exchange
rate risk relates to euro-denominated newbuild contract payments
for non-euro functional currency brands, which represent a total
unhedged commitment of $3.2 billion for newbuilds scheduled to be
delivered through 2025.
The cost of shipbuilding orders that we may place in the future
that are denominated in a different currency than our cruise
brands' functional currency will be affected by foreign currency
exchange rate fluctuations. These foreign currency exchange rate
fluctuations may affect our decision to order new cruise ships.
Interest Rate Risks
We manage our exposure to fluctuations in interest rates through
our debt portfolio management and investment strategies. We
evaluate our debt portfolio to determine whether to make periodic
adjustments to the mix of fixed and floating rate debt through the
use of interest rate swaps and the issuance of new debt.
Concentrations of Credit Risk
As part of our ongoing control procedures, we monitor
concentrations of credit risk associated with financial and other
institutions with which we conduct significant business. We seek to
manage these credit risk exposures, including counterparty
nonperformance primarily associated with our cash and cash
equivalents, investments, notes receivables, reserve funds related
to customer deposits, future financing facilities, contingent
obligations, derivative instruments, insurance contracts and new
ship progress payment guarantees, by:
-- Conducting business with well-established financial
institutions, insurance companies and export credit agencies
-- Diversifying our counterparties
-- Having guidelines regarding credit ratings and investment
maturities that we follow to help safeguard liquidity and minimize
risk
-- Generally requiring collateral and/or guarantees to support
notes receivable on significant asset sales and new ship progress
payments to shipyards
We also monitor the creditworthiness of travel agencies and tour
operators in Australia and Europe and credit and debit card
providers to which we extend credit in the normal course of our
business. Our credit exposure also includes contingent obligations
related to cash payments received directly by travel agents and
tour operators for cash collected by them on cruise sales in
Australia and most of Europe where we are obligated to honor our
guests' cruise payments made by them to their travel agents and
tour operators regardless of whether we have received these
payments.
Concentrations of credit risk associated with trade receivables
and other receivables, charter-hire agreements and contingent
obligations are not considered to be material, principally due to
the large number of unrelated accounts, the nature of these
contingent obligations and their short maturities. Normally, we
have not required collateral or other security to support normal
credit sales and have not experienced significant credit
losses.
NOTE 6 - Segment Information
Our operating segments are reported on the same basis as the
internally reported information that is provided to our chief
operating decision maker ("CODM"), who is the President, Chief
Executive Officer and Chief Climate Officer of Carnival Corporation
and Carnival plc. The CODM assesses performance and makes decisions
to allocate resources for Carnival Corporation & plc based upon
review of the results across all of our segments. Our four
reportable segments are comprised of (1) NAA cruise operations, (2)
Europe cruise operations ("Europe"), (3) Cruise Support and (4)
Tour and Other.
The operating segments within each of our NAA and Europe
reportable segments have been aggregated based on the similarity of
their economic and other characteristics, including geographic
guest sourcing. Our Cruise Support segment includes our portfolio
of leading port destinations and other services, all of which are
operated for the benefit of our cruise brands. Our Tour and Other
segment represents the hotel and transportation operations of
Holland America Princess Alaska Tours and other operations.
Three Months Ended August 31,
-----------------------------------------------------------------------
Operating Selling Depreciation Operating
costs and and and income
(in millions) Revenues expenses administrative amortization (loss)
-------- ---------- --------------- ------------- ---------
2023
NAA $4,566 $2,661 $420 $377 $1,107
Europe (a) 2,060 1,124 199 168 569
Cruise Support 56 30 87 47 (109)
Tour and Other 172 105 7 3 56
-------- ---------- --------------- ------------- ---------
$6,854 $3,921 $713 $596 $1,624
======== ========== =============== ============= =========
2022
NAA $2,880 $2,280 $368 $358 $(126)
Europe (a) 1,266 983 173 172 (62)
Cruise Support 41 21 78 36 (94)
Tour and Other 118 94 6 15 3
-------- ---------- --------------- ------------- ---------
$4,305 $3,379 $625 $581 $(279)
======== ========== =============== ============= =========
Nine Months Ended August 31,
-----------------------------------------------------------------------
Operating Selling Depreciation Operating
costs and and and income
(in millions) Revenues expenses administrative amortization (loss)
-------- ---------- --------------- ------------- ---------
2023
NAA $11,000 $7,132 $1,295 $1,115 $1,458
Europe (a) 4,819 3,303 634 506 376
Cruise Support 162 85 211 137 (271)
Tour and Other 216 169 21 17 9
-------- ---------- --------------- ------------- ---------
$16,197 $10,688 $2,162 $1,774 $1,572
======== ========== =============== ============= =========
2022
NAA $5,672 $5,335 $1,078 $1,046 $(1,787)
Europe (a) 2,389 2,529 524 531 (1,196)
Cruise Support 114 76 154 104 (220)
Tour and Other 154 151 17 26 (40)
-------- ---------- --------------- ------------- ---------
$8,329 $8,092 $1,774 $1,707 $(3,244)
======== ========== =============== ============= =========
(a) Beginning in the first quarter of 2023, we renamed the
Europe and Asia segment to Europe segment.
Revenue by geographic areas, which are based on where our guests
are sourced, were as follows:
Three Months
Ended Nine Months Ended
August 31, August 31,
(in millions) 2023 2022 2023 2022
------ ------ ---------- -------
North America $4,253 $2,753 $9,937 $5,491
Europe 2,165 1,456 4,798 2,676
Australia 238 56 883 60
Other 198 40 578 101
------ ------ ---------- -------
$6,854 $4,305 $16,197 $8,329
====== ====== ========== =======
NOTE 7 - Earnings Per Share
Three Months Ended Nine Months Ended
August 31, August 31,
-------------------- -------------------
(in millions, except per share data) 2023 2022 2023 2022
--------- --------- -------- ---------
Net income (loss) $1,074 $(770) $(26) $(4,495)
Interest expense on dilutive convertible
notes 24 - - -
--------- --------- -------- ---------
Net income (loss) for diluted earnings
per share $1,098 $(770) $(26) $(4,495)
========= ========= ======== =========
Weighted-average shares outstanding 1,263 1,185 1,262 1,154
Dilutive effect of equity awards 6 - - -
Dilutive effect of convertible notes 127 - - -
--------- --------- -------- ---------
Diluted weighted-average shares outstanding 1,396 1,185 1,262 1,154
========= ========= ======== =========
Basic earnings per share $0.85 $(0.65) $(0.02) $(3.89)
========= ========= ======== =========
Diluted earnings per share $0.79 $(0.65) $(0.02) $(3.89)
========= ========= ======== =========
Antidilutive shares excluded from diluted earnings per share
computations were as follows:
Three Months Ended Nine Months Ended
August 31, August 31,
-------------------
(in millions) 2023 2022 2023 2022
--------- --------- --------- --------
Equity awards - - 3 1
Convertible Notes - 52 131 52
--------- --------- --------- --------
Total antidilutive securities - 52 134 54
========= ========= ========= ========
NOTE 8 - Supplemental Cash Flow Information
August 31, November 30,
(in millions) 2023 2022
---------- ------------
Cash and cash equivalents (Consolidated
Balance Sheets) $2,842 $4,029
Restricted cash (Consolidated Balance Sheets) 18 1,988
Restricted cash (included in other assets) 10 20
---------- ------------
Total cash, cash equivalents and restricted
cash (Consolidated Statements of Cash Flows) $2,870 $6,037
========== ============
NOTE 9 - Property and Equipment
Ship Sales
During 2023, we completed the sale of two Europe segment ships
and one NAA segment ship, which represents a passenger-capacity
reduction of 3,970 berths for our Europe segment and 460 berths for
our NAA segment. We will continue to operate the NAA segment ship
under a bareboat charter agreement through September 2024. In
addition, we entered into an agreement to sell one Europe segment
ship which represents a passenger-capacity reduction of 1,270
berths.
NOTE 10 - Equity Method Investments
In July 2023, we entered into an agreement with our JV partner
to exit our noncontrolling interest in Adora Cruises Limited
("Adora Cruises"), formerly CSSC Carnival Cruise Shipping Limited,
a China-based cruise company. The transaction was completed in
September 2023. During the third quarter, we recognized an
impairment in our investment in Adora Cruises of $19 million, which
is recorded within other income (expense).
NOTE 11 - Shareholders' Equity
We have a program that allows us to realize a net cash benefit
when Carnival Corporation common stock is trading at a premium to
the price of Carnival plc ordinary shares (the "Stock Swap
Program").
During the three months ended August 31, 2023 and 2022, there
were no sales or repurchases under the Stock Swap Program. During
the nine months ended August 31, 2023 and 2022, we sold 2.3 million
and 5.2 million shares of Carnival Corporation common stock and
repurchased the same amount of Carnival plc ordinary shares under
the Stock Swap Program, resulting in net proceeds of $2 million and
$8 million, which were used for general corporate purposes.
In addition, during the three months ended August 31, 2023 and
2022, there were no sales of Carnival Corporation common stock.
During the nine months ended August 31, 2023 and 2022, we sold 0.5
million and 1.6 million shares of Carnival Corporation common stock
at an average price per share of $9.83 and $19.27, resulting in net
proceeds of $5 million and $30 million.
Public Equity Offerings
During the three months ended August 31, 2022, we completed a
public equity offering of 117.5 million shares of Carnival
Corporation common stock at a price per share of $9.95, resulting
in net proceeds of $1.2 billion.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Cautionary Note Concerning Factors That May Affect Future
Results
Some of the statements, estimates or projections contained in
this document are "forward-looking statements" that involve risks,
uncertainties and assumptions with respect to us, including some
statements concerning future results, operations, outlooks, plans,
goals, reputation, cash flows, liquidity 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, as amended. All statements other than statements of
historical facts are statements that could be deemed
forward-looking. These statements are based on current
expectations, estimates, forecasts and projections about our
business and the industry in which we operate and the beliefs and
assumptions of our management. We have tried, whenever possible, to
identify these statements by using words like "will," "may,"
"could," "should," "would," "believe," "depends," "expect," "goal,"
"aspiration," "anticipate," "forecast," "project," "future,"
"intend," "plan," "estimate," "target," "indicate," "outlook," and
similar expressions of future intent or the negative of such
terms.
Forward-looking statements include those statements that relate
to our outlook and financial position including, but not limited
to, statements regarding:
* Adjusted net income (loss)
* Pricing
* Adjusted EBITDA
* Booking levels
* Adjusted earnings per share
* Occupancy
* Adjusted free cash flow
* Interest, tax and fuel expenses
* Net per diems
* Currency exchange rates
* Net yields
* Goodwill, ship and trademark fair values
* Adjusted cruise costs per ALBD
* Liquidity and credit ratings
* Investment grade leverage metrics * Adjusted cruise costs excluding fuel per ALBD
* Adjusted return on invested capital
* Estimates of ship depreciable lives and residual
values
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 by our forward-looking statements. This
note contains important cautionary statements of the known factors
that we consider could materially affect the accuracy of our
forward-looking statements and adversely affect our business,
results of operations and financial position. Additionally, many of
these risks and uncertainties are currently, and in the future may
continue to be, amplified by our substantial debt balance as a
result of the pause of our guest cruise operations. There may be
additional risks that we consider immaterial or which are unknown.
These factors include, but are not limited to, the following:
-- Events and conditions around the world, including war and
other military actions, such as the war in Ukraine, inflation,
higher fuel prices, higher taxes, higher interest rates and other
general concerns impacting the ability or desire of people to
travel have led, and may in the future lead, to a decline in demand
for cruises as well as negative impacts to our operating costs and
profitability.
-- Pandemics have in the past and may in the future have a
significant negative impact on our financial condition and
operations.
-- Incidents concerning our ships, guests or the cruise industry
have in the past and may, in the future, negatively impact the
satisfaction of our guests and crew and lead to reputational
damage.
-- Changes in and non-compliance with laws and regulations under
which we operate, such as those relating to health, environment,
safety and security, data privacy and protection, anti-corruption,
economic sanctions, trade protection, labor and employment, and tax
have in the past and may, in the future, lead to litigation,
enforcement actions, fines, penalties and reputational damage.
-- Factors associated with climate change, including evolving
and increasing regulations, increasing global concern about climate
change and the shift in climate conscious consumerism and
stakeholder scrutiny, and increasing frequency and/or severity of
adverse weather conditions could adversely affect our business.
-- Inability to meet or achieve our sustainability related
goals, aspirations, initiatives, and our public statements and
disclosures regarding them, may expose us to risks that may
adversely impact our business.
-- Breaches in data security and lapses in data privacy as well
as disruptions and other damages to our principal offices,
information technology operations and system networks and failure
to keep pace with developments in technology may adversely impact
our business operations, the satisfaction of our guests and crew
and may lead to reputational damage.
-- The loss of key team members, our inability to recruit or
retain qualified shoreside and shipboard team members and increased
labor costs could have an adverse effect on our business and
results of operations.
-- Increases in fuel prices, changes in the types of fuel
consumed and availability of fuel supply may adversely impact our
scheduled itineraries and costs.
-- We rely on supply chain vendors who are integral to the
operations of our businesses. These vendors and service providers
may be unable to deliver on their commitments, which could
negatively impact our business.
-- Fluctuations in foreign currency exchange rates may adversely impact our financial results.
-- Overcapacity and competition in the cruise and land-based
vacation industry may negatively impact our cruise sales, pricing
and destination options.
-- Inability to implement our shipbuilding programs and ship
repairs, maintenance and refurbishments may adversely impact our
business operations and the satisfaction of our guests.
-- Failure to successfully implement our business strategy
following our resumption of guest cruise operations would
negatively impact the occupancy levels and pricing of our cruises
and could have a material adverse effect on our business. We
require a significant amount of cash to service our debt and
sustain our operations. Our ability to generate cash depends on
many factors, including those beyond our control, and we may not be
able to generate cash required to service our debt and sustain our
operations.
The ordering of the risk factors set forth above is not intended
to reflect our indication of priority or likelihood.
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 stock exchange rules, we
expressly disclaim any obligation to disseminate, after the date of
this document, 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.
Forward-looking and other statements in this document may also
address our sustainability progress, plans and goals (including
climate change and environmental-related matters). In addition,
historical, current and forward-looking sustainability- and
climate-related statements may be based on standards and tools for
measuring progress that are still developing, internal controls and
processes that continue to evolve, and assumptions and predictions
that are subject to change in the future and may not be generally
shared.
New Accounting Pronouncements
Refer to Note 1 - "General, Accounting Pronouncements" of the
consolidated financial statements for additional discussion
regarding Accounting Pronouncements.
Critical Accounting Estimates
For a discussion of our critical accounting estimates, see
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" that is included in the Form 10-K.
Seasonality
Our passenger ticket revenues are seasonal. Demand for cruises
has been greatest during our third quarter, which includes the
Northern Hemisphere summer months. This higher demand during the
third quarter results in higher ticket prices and occupancy levels
and, accordingly, the largest share of our operating income is
typically earned during this period. Our results are also impacted
by ships being taken out-of-service for planned maintenance, which
we schedule during non-peak seasons. In addition, substantially all
of Holland America Princess Alaska Tours' revenue and net income
(loss) is generated from May through September in conjunction with
Alaska's cruise season.
Known Trends and Uncertainties
-- We believe the cost of fuel and increases in other related
costs are reasonably likely to continue to impact our profitability
in both the short and long-term.
-- We believe inflation and interest rates are reasonably likely
to continue to impact our profitability.
-- We believe a potential global minimum tax as well as any
other changes in domestic and international tax rules and
regulations could have a material impact on our effective tax
rate.
-- We believe the increasing global focus on climate change,
including the reduction of carbon emissions and new and evolving
regulatory requirements, is reasonably likely to have a material
negative impact on our future financial results. The full impact of
climate change to our business is not yet known.
Statistical Information
Three Months Ended Nine Months Ended
August 31, August 31,
-------------------- -------------------
2023 2022 2023 2022
--------- --------- --------- --------
Passenger Cruise Days ("PCDs") (in
millions) (a) 25.8 17.7 67.8 36.4
Available Lower Berth Days ("ALBDs")
(in millions) (b) 23.7 21.0 68.1 51.0
Occupancy percentage (c) 109% 84% 100% 71%
Passengers carried (in millions) 3.6 2.6 9.3 5.2
Fuel consumption in metric tons
(in millions) 0.7 0.7 2.2 1.9
Fuel consumption in metric tons
per thousand ALBDs 31.1 33.4 32.3 37.2
Fuel cost per metric ton consumed $636 $958 $681 $836
Currencies (USD to 1)
AUD $0.66 $0.70 $0.67 $0.71
CAD $0.75 $0.78 $0.74 $0.78
EUR $1.09 $1.03 $1.08 $1.08
GBP $1.27 $1.21 $1.24 $1.28
Notes to Statistical Information
(a) PCD represents the number of cruise passengers on a voyage
multiplied by the number of revenue-producing ship operating days
for that voyage.
(b) ALBD is a standard measure of passenger capacity for the
period that we use to approximate rate and capacity variances,
based on consistently applied formulas that we use to perform
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.
(c) Occupancy, in accordance with cruise industry practice, is
calculated using a numerator of PCDs and a denominator of ALBDs,
which assumes 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.
Results of Operations
Consolidated
Three Months Nine Months
Ended Ended
August 31, August 31,
-------------- -----------------
(in millions) 2023 2022 Change 2023 2022 Change
------ ------ ------ ------- -------- ------
Revenues
Passenger ticket $4,546 $2,595 $1,951 $10,557 $4,753 $5,804
Onboard and other 2,308 1,711 597 5,640 3,577 2,063
------ ------ ------ ------- -------- ------
6,854 4,305 2,548 16,197 8,329 7,868
------ ------ ------ ------- -------- ------
Operating Costs and Expenses
Commissions, transportation
and other 823 565 258 2,097 1,141 956
Onboard and other 752 537 215 1,785 1,060 725
Payroll and related 585 563 22 1,768 1,601 167
Fuel 468 668 (199) 1,492 1,577 (86)
Food 364 259 105 1,000 586 414
Ship and other impairments - - - - 8 (8)
Other operating 928 787 141 2,546 2,118 428
------ ------ ------ ------- -------- ------
Cruise and tour operating expenses 3,921 3,379 542 10,688 8,092 2,596
Selling and administrative 713 625 89 2,162 1,774 388
Depreciation and amortization 596 581 15 1,774 1,707 67
5,230 4,585 645 14,624 11,573 3,052
------ ------ ------ ------- -------- ------
Operating Income (Loss) 1,624 (279) 1,903 1,572 (3,244) 4,816
------ ------ ------ ------- -------- ------
Nonoperating Income (Expense)
Interest income 59 24 35 183 34 150
Interest expense, net of capitalized
interest (518) (422) (96) (1,600) (1,161) (439)
Debt extinguishment and modification
costs (81) - (81) (112) - (112)
Other income (expense), net (19) (81) 62 (67) (108) 41
------ ------ ------ ------- -------- ------
(559) (479) (80) (1,595) (1,235) (360)
------ ------ ------ ------- -------- ------
Income (Loss) Before Income
Taxes $1,065 $(759) $1,823 $(23) $(4,478) $4,456
====== ====== ====== ======= ======== ======
NAA
Three Months Nine Months
Ended Ended
August 31, August 31,
-------------- ----------------
(in millions) 2023 2022 Change 2023 2022 Change
------ ------ ------ ------ -------- ------
Revenues
Passenger ticket $2,963 $1,716 $1,247 $6,896 $3,163 $3,733
Onboard and other 1,603 1,164 439 4,104 2,509 1,595
------ ------ ------ ------ -------- ------
4,566 2,880 1,686 11,000 5,672 5,328
------ ------ ------ ------ -------- ------
Operating Costs and Expenses 2,661 2,280 381 7,132 5,335 1,797
Selling and administrative 420 368 52 1,295 1,078 217
Depreciation and amortization 377 358 19 1,115 1,046 69
3,459 3,007 452 9,542 7,460 2,083
------ ------ ------ ------ -------- ------
Operating Income (Loss) $1,107 $(126) $1,233 $1,458 $(1,787) $3,245
====== ====== ====== ====== ======== ======
Europe
Three Months Nine Months
Ended Ended
August 31, August 31,
-------------- ----------------
(in millions) 2023 2022 Change 2023 2022 Change
------- ----- ------ ------ -------- ------
Revenues
Passenger ticket $1,595 $972 $623 $3,699 $1,804 $1,895
Onboard and other 465 294 171 1,120 585 535
------- ----- ------ ------ -------- ------
2,060 1,266 794 4,819 2,389 2,430
------- ----- ------ ------ -------- ------
Operating Costs and Expenses 1,124 983 141 3,303 2,529 774
Selling and administrative 199 173 26 634 524 110
Depreciation and amortization 168 172 (4) 506 531 (25)
1,491 1,328 163 4,443 3,585 859
------- ----- ------ ------ -------- ------
Operating Income (Loss) $569 $(62) $631 $376 $(1,196) $1,572
======= ===== ====== ====== ======== ======
As a result of the pause in our guest cruise operations, we have
a substantial debt balance and require a significant amount of cash
to service our debt. Our ability to generate cash will be affected
by general macroeconomic, financial, geopolitical, competitive,
regulatory and other factors beyond our control. The full extent of
these impacts is uncertain and may be amplified by our substantial
debt balance.
Three Months Ended August 31, 2023 ("2023") Compared to Three
Months Ended August 31, 2022 ("2022")
Revenues
Consolidated
Cruise passenger ticket revenues made up 66% of our total
revenues in 2023 while onboard and other revenues made up 34%.
Revenues in 2023 increased by $2.5 billion to $6.9 billion from
$4.3 billion in 2022 due to the increase of ships in service and
considerably higher occupancy levels in 2023 as compared to 2022.
Our full fleet was serving guests as of August 31, 2023, compared
to 93% as of August 31, 2022. ALBDs increased to 23.7 million in
2023 as compared to 21.0 million in 2022. Occupancy for 2023 was
109% compared to 84% in 2022.
NAA Segment
Cruise passenger ticket revenues made up 65% of our NAA
segment's total revenues in 2023 while onboard and other cruise
revenues made up 35%. NAA segment revenues in 2023 increased by
$1.7 billion to $4.6 billion from $2.9 billion in 2022 due to the
increase of ships in service and considerably higher occupancy
levels in 2023 as compared to 2022. Our NAA segment's full fleet
was serving guests as of August 31, 2023, compared to 95% as of
August 31, 2022. ALBDs increased to 14.6 million in 2023 as
compared to 12.6 million in 2022. Occupancy for 2023 was 111%
compared to 92% in 2022.
Europe Segment
Cruise passenger ticket revenues made up 77% of our Europe
segment's total revenues in 2023 while onboard and other cruise
revenues made up 23%. Europe segment revenues in 2023 increased by
$0.8 billion to $2.1 billion from $1.3 billion in 2022 due to the
increase of ships in service and considerably higher occupancy
levels in 2023 as compared to 2022. Our Europe segment's full fleet
was serving guests as of August 31, 2023, compared to 92% as of
August 31, 2022. ALBDs increased to 9.1 million in 2023 as compared
to 8.5 million in 2022. Occupancy for 2023 was 106% compared to 73%
in 2022.
Operating Cost and Expenses
Consolidated
Operating costs and expenses increased by $0.5 billion to $3.9
billion in 2023 from $3.4 billion in 2022. These increases were
driven by our resumption of guest cruise operations, an increase in
ships in service and considerably higher occupancy.
Fuel costs decreased by $199 million to $468 million in 2023
from $668 million in 2022. $238 million of this decrease was caused
by lower fuel prices and changes in fuel mix of $322 per metric ton
consumed in 2023 compared to 2022, partially offset by higher fuel
consumption due to the resumption of guest cruise operations.
Selling and administrative expenses increased by $89 million to
$713 million in 2023 from $625 million in 2022. The increase was
principally driven by increases in administrative expenses incurred
as part of our resumption of guest cruise operations, which
includes an increase in incentive compensation reflecting expected
improvements in the company's current and long-term
performance.
The drivers in changes in costs and expenses for our NAA and
Europe segments are the same as those described for our
consolidated results.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, increased by $96
million to $518 million in 2023 from $422 million in 2022. The
increase was caused by a higher average interest rate in 2023
compared to 2022.
Debt extinguishment and modification costs were $81 million in
2023 as a result of debt transactions during the quarter, where
there were none in 2022.
Nine Months Ended August 31, 2023 ("2023") Compared to Nine
Months Ended August 31, 2022 ("2022")
Revenues
Consolidated
Cruise passenger ticket revenues made up 65% of our total
revenues in 2023 while onboard and other revenues made up 35%.
Revenues in 2023 increased by $7.9 billion to $16.2 billion from
$8.3 billion in 2022 due to the significant increase of ships in
service and considerably higher occupancy levels in 2023 as
compared to 2022. Our full fleet was serving guests as of August
31, 2023, compared to 93% as of August 31, 2022. ALBDs increased to
68.1 million in 2023 as compared to 51.0 million in 2022. Occupancy
for 2023 was 100% compared to 71% in 2022.
NAA Segment
Cruise passenger ticket revenues made up 63% of our NAA
segment's total revenues in 2023 while onboard and other cruise
revenues made up 37%. NAA segment revenues in 2023 increased by
$5.3 billion to $11.0 billion from $5.7 billion in 2022 due to the
significant increase of ships in service and considerably higher
occupancy levels in 2023 as compared to 2022. Our NAA segment's
full fleet was serving guests as of August 31, 2023, compared to
95% as of August 31, 2022. ALBDs increased to 42.2 million in 2023
as compared to 31.4 million in 2022. Occupancy for 2023 was 104%
compared to 78% in 2022.
Europe Segment
Cruise passenger ticket revenues made up 77% of our Europe
segment's total revenues in 2023 while onboard and other cruise
revenues made up 23%. Europe segment revenues in 2023 increased by
$2.4 billion to $4.8 billion from $2.4 billion in 2022 due to the
significant increase of ships in service and considerably higher
occupancy levels in 2023 as compared to 2022. Our Europe segment's
full fleet was serving guests as of August 31, 2023, compared to
92% as of August 31, 2022. ALBDs increased to 25.9 million in 2023
as compared to 19.6 million in 2022. Occupancy for 2023 was 93%
compared to 60% in 2022.
Operating Cost and Expenses
Consolidated
Operating costs and expenses increased by $2.6 billion to $10.7
billion in 2023 from $8.1 billion in 2022. These increases were
driven by our resumption of guest cruise operations, an increase in
ships in service and considerably higher occupancy.
Selling and administrative expenses increased by $0.4 billion to
$2.2 billion in 2023 from $1.8 billion in 2022. The increase was
caused by increases in advertising costs and administrative
expenses incurred as part of our resumption of guest cruise
operations, which includes an increase in incentive compensation
reflecting expected improvements in the company's current and
long-term performance.
The drivers in changes in costs and expenses for our NAA and
Europe segments are the same as those described for our
consolidated results.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, increased by $0.4
billion to $1.6 billion in 2023 from $1.2 billion in 2022. The
increase was caused by a higher average interest rate in 2023
compared to 2022.
Debt extinguishment and modification costs were $112 million in
2023 as a result of debt transactions during the period, where
there were none in 2022.
Liquidity, Financial Condition and Capital Resources
As of August 31, 2023, we had $5.7 billion of liquidity
including cash and cash equivalents and borrowings available under
our Revolving Facility. We will continue to pursue various
opportunities to refinance future debt maturities to reduce
interest expense and/or to extend the maturity dates associated
with our existing indebtedness and obtain relevant financial
covenant amendments or waivers, if needed.
We had a working capital deficit of $6.3 billion as of August
31, 2023 compared to a working capital deficit of $3.1 billion as
of November 30, 2022. The increase in working capital deficit was
caused by a decrease in cash and cash equivalents and restricted
cash and an increase in customer deposits, partially offset by an
increase in prepaid expenses and a decrease in short-term
borrowings as well as the current portion of long-term debt. We
operate with a substantial working capital deficit. This deficit is
mainly attributable to the fact that, under our business model,
substantially all of our passenger ticket receipts are collected in
advance of the applicable sailing date. These advance passenger
receipts generally remain a current liability on our balance sheet
until the sailing date. The cash generated from these advance
receipts is used interchangeably with cash on hand from other
sources, such as our borrowings and other cash from operations. The
cash received as advanced receipts can be used to fund operating
expenses, pay down our debt, make long-term investments or any
other use of cash. Included within our working capital are $6.0
billion and $4.9 billion of customer deposits as of August 31, 2023
and November 30, 2022, respectively. We have agreements with a
number of credit card processors that transact customer deposits
related to our cruise vacations. Certain of these agreements allow
the credit card processors to request, under certain circumstances,
that we provide a reserve fund in cash. In addition, we have a
relatively low level of accounts receivable and limited investment
in inventories.
Refer to Note 1 - "General," of the consolidated financial
statements for additional discussion regarding our liquidity.
Sources and Uses of Cash
Operating Activities
Our business provided $3.4 billion of net cash flows from
operating activities during the nine months ended August 31, 2023,
an increase of $4.9 billion, compared to $1.6 billion used for the
same period in 2022. This was driven by a decrease in the net loss
compared to the same period in 2022 and other working capital
changes.
Investing Activities
During the nine months ended August 31, 2023, net cash used in
investing activities was $2.3 billion. This was driven by:
-- Capital expenditures of $1.6 billion for our ongoing new shipbuilding program
-- Capital expenditures of $991 million for ship improvements
and replacements, information technology and buildings and
improvements
-- Proceeds from sales of ships of $260 million
During the nine months ended August 31, 2022, net cash used in
investing activities was $3.5 billion. This was driven by:
-- Capital expenditures of $3.0 billion for our ongoing new shipbuilding program
-- Capital expenditures of $776 million for ship improvements
and replacements, information technology and buildings and
improvements
-- Proceeds from sale of ships and other of $55 million
-- Purchases of short-term investments of $315 million
-- Proceeds from maturity of short-term investments of $515 million
Financing Activities
During the nine months ended August 31, 2023, net cash used in
financing activities of $4.2 billion was driven by:
-- Repayments of $200 million of short term-borrowings
-- Repayments of $6.8 billion of long-term debt
-- Debt issuance costs of $116 million
-- Debt extinguishment costs of $67 million
-- Issuances of $3.0 billion of long-term debt
-- Proceeds from issuance of $22 million of Carnival Corporation
common stock and purchases of $20 million of Carnival plc ordinary
shares under our Stock Swap Program
During the nine months ended August 31, 2022, net cash provided
by financing activities of $3.2 billion was caused by:
-- Net repayments of short-term borrowings of $114 million
-- Repayments of $1.1 billion of long-term debt
-- Debt issuance costs of $116 million
-- Issuances of $3.3 billion of long-term debt
-- Net proceeds of $1.2 billion from the public offering of Carnival Corporation common stock
-- Proceeds from issuance of $89 million of Carnival Corporation
common stock and purchases of $82 million of Carnival plc ordinary
shares under our Stock Swap Program
Funding Sources
As of August 31, 2023, we had $5.7 billion of liquidity
including $2.8 billion of cash and cash equivalents and $2.9
billion of borrowings available under our Revolving Facility, which
matures in August 2024. In February 2023, Carnival Holdings II
entered into the New Revolving Facility, which may be utilized
beginning in August 2024, at which date it will replace our
Revolving Facility. Refer to Note 3 - "Debt" of the consolidated
financial statements for additional discussion. In addition, we had
$3.0 billion of undrawn export credit facilities to fund ship
deliveries planned through 2025. We plan to use existing liquidity
and future cash flows from operations to fund our cash requirements
including capital expenditures not funded by our export credit
facilities. We seek to manage our credit risk exposures, including
counterparty nonperformance associated with our cash and cash
equivalents, and future financing facilities by conducting business
with well-established financial institutions, and export credit
agencies and diversifying our counterparties.
(in billions) 2023 2024 2025
---- ---- ----
Future export credit facilities at August 31, 2023 $- $2.2 $0.7
Our export credit facilities contain various financial covenants
as described in Note 3 - "Debt". At August 31, 2023, we were in
compliance with the applicable covenants under our debt
agreements.
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 consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
For a discussion of our hedging strategies and market risks, see
the discussion below and Note 10 - "Fair Value Measurements,
Derivative Instruments and Hedging Activities and Financial Risks"
in our consolidated financial statements and Management's
Discussion and Analysis of Financial Condition and Results of
Operations within our Form 10-K. There have been no material
changes to our exposure to market risks since the date of our 2022
Form 10-K.
Interest Rate Risks
The composition of our debt, interest rate swaps and cross
currency swaps, was as follows:
August 31,
2023
----------
Fixed rate 63%
EUR fixed rate 17%
Floating rate 5%
EUR floating rate 15%
Item 4. Controls and Procedures.
A. Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide
reasonable assurance that information required to be disclosed by
us in the reports that we file or submit under the Securities
Exchange Act of 1934, is recorded, processed, summarized and
reported, within the time periods specified in the U.S. Securities
and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us
in our reports that we file or submit under the Securities Exchange
Act of 1934 is accumulated and communicated to our management,
including our principal executive and principal financial officers,
or persons performing similar functions, as appropriate, to allow
timely decisions regarding required disclosure.
Our President, Chief Executive Officer and Chief Climate Officer
and our Chief Financial Officer and Chief Accounting Officer have
evaluated our disclosure controls and procedures and have
concluded, as of August 31, 2023, that they are effective to
provide a reasonable level of assurance, as described above.
B. Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over
financial reporting during the quarter ended August 31, 2023 that
have materially affected or are reasonably likely to materially
affect our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The legal proceedings described in Note 4 - "Contingencies and
Commitments" of our consolidated financial statements, including
those described under "COVID-19 Actions" and "Regulatory or
Governmental Inquiries and Investigations," are incorporated in
this "Legal Proceedings" section by reference. Additionally, SEC
rules require disclosure of certain environmental matters when a
governmental authority is a party to the proceedings and such
proceedings involve potential monetary sanctions that we believe
may exceed $1 million.
On June 20, 2022, Princess Cruises notified the Australian
Maritime Safety Authorization ("AMSA") and the flag state, Bermuda,
regarding approximately six cubic meters of comminuted food waste
(liquid biodigester effluent) inadvertently discharged by Coral
Princess inside the Great Barrier Reef Marine Park. On June 23,
2022, the UK P&I Club N.V. provided a letter of undertaking for
approximately $1.9 million (being the estimated maximum combined
penalty). On May 31, 2023, we received a summons from the Australia
Federal Prosecution Service indicating that formal charges are
being pursued against Princess Cruises and the Captain of the
vessel. We believe the ultimate outcome will not have a material
impact on our consolidated financial statements.
Item 1A. Risk Factors.
The risk factors in this Form 10-Q should be carefully
considered, including the risk factors discussed in "Risk Factors"
and other risks discussed in our Form 10-K. These risks could
materially and adversely affect our results, operations, outlooks,
plans, goals, growth, reputation, cash flows, liquidity, and stock
price. Our business also could be affected by risks that we are not
presently aware of or that we currently consider immaterial to our
operations.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
A. Stock Swap Program
Our Stock Swap Program allows us to realize a net cash benefit
when Carnival Corporation common stock is trading at a premium to
the price of Carnival plc ordinary shares. Under the Stock Swap
Program, we may elect to offer and sell shares of Carnival
Corporation common stock at prevailing market prices in ordinary
brokers' transactions and repurchase an equivalent number of
Carnival plc ordinary shares in the UK market.
Under the Stock Swap Program effective as of June 2021, the
Board of Directors authorized the sale of up to $500 million shares
of Carnival Corporation common stock in the U.S. market and the
purchase of Carnival plc ordinary shares on at least an equivalent
basis.
We may in the future implement a program to allow us to obtain a
net cash benefit when Carnival plc ordinary shares are trading at a
premium to the price of Carnival Corporation common stock.
Any sales of Carnival Corporation common stock and Carnival plc
ordinary shares have been or will be registered under the
Securities Act of 1933, as amended. During the three months ended
August 31, 2023, there were no sales or repurchases under the Stock
Swap Program. Since the beginning of the Stock Swap Program, first
authorized in June 2021, we have sold 17.2 million shares of
Carnival Corporation common stock and repurchased the same amount
of Carnival plc ordinary shares, resulting in net proceeds of $29
million. No shares of Carnival Corporation common stock or Carnival
plc ordinary shares were repurchased during the three months ended
August 31, 2023 outside of the Stock Swap Program.
Item 5. Other Information.
C. Trading Plans
During the quarter ended August 31, 2023, no director or Section
16 officer adopted or terminated any Rule 10b5-1 trading
arrangements or non-Rule 10b5-1 trading arrangements (in each case,
as defined in Item 408(a) of Regulation S-K).
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END
QRTUKASROBUKUAR
(END) Dow Jones Newswires
September 29, 2023 10:29 ET (14:29 GMT)
Carnival (LSE:0EV1)
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