TIDMCCL
RNS Number : 2855E
Carnival PLC
28 June 2023
June 28, 2023
RELEASE OF CARNIVAL CORPORATION & PLC JOINT QUARTERLY REPORT
ON FORM 10-Q FOR THE SECOND QUARTER OF 2023 AND CARNIVAL PLC GROUP
HALF-YEARLY FINANCIAL REPORT
Carnival Corporation & plc announced its second quarter
results of operations in its earnings release issued on June 26,
2023. Carnival Corporation & plc is hereby announcing that
today it has 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 six
months ended May 31, 2023.
In addition, the Directors are today presenting in the attached
Schedule A, the unaudited interim condensed financial statements
for the Carnival plc Group ("Interim Financial Statements") as of
and for the six months ended May 31, 2023. The Interim Financial
Statements exclude the consolidated results of Carnival Corporation
and are prepared under International Financial Reporting Standards
as adopted by the United Kingdom.
Schedule B contains the Carnival Corporation & plc Form 10-Q
which includes unaudited consolidated financial statements as of
and for the three and six months ended May 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 information included in the
Form 10-Q (Schedule B) 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").
The Directors consider that within the Carnival Corporation and
Carnival plc dual listed company ("DLC") 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 ("DLC Financial
Statements").
These schedules (A & B) are presented together as Carnival
plc's Group half-yearly financial report ("Interim Financial
Report") in accordance with the requirements of the UK Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority.
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 and the Interim
Financial Statements have 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
CARNIVAL PLC
INTERIM CONDENSED GROUP STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(in millions, except per share data)
Six Months Ended
May 31,
Notes 2023 2022
-------- --------
Revenues
Passenger ticket $2,495 $835
Onboard and other 896 337
-------- --------
8 3,391 1,172
-------- --------
Operating Costs and Expenses
Commissions, transportation and other 604 233
Onboard and other 213 93
Payroll and related 503 435
Fuel 446 316
Food 228 86
Other operating 863 490
-------- --------
Cruise and tour operating expenses 2,856 1,653
Selling and administrative 8 495 398
Depreciation and amortisation 8 367 396
3,718 2,447
-------- --------
Operating Income (Loss) (327) (1,276)
-------- --------
Nonoperating Income (Expense)
Interest income 6 -
Income (loss) from investments in associates (25) 5
Interest expense, net of capitalised
interest (178) (65)
Other income (expense), net (26) 62
-------- --------
(224) 1
-------- --------
Income (Loss) Before Income Taxes (550) (1,275)
Income Tax Benefit (Expense), Net (12) (6)
-------- --------
Net Income (Loss) $(563) $(1,280)
======== ========
Earnings (Loss) Per Share
Basic $(3.02) $(6.90)
======== ========
Diluted $(3.02) $(6.90)
======== ========
The accompanying notes are an integral part of these Interim Financial
Statements.
These Interim Financial Statements only present the Carnival plc
consolidated IFRS Interim Financial Statements and, accordingly,
do not include the consolidated IFRS results of Carnival Corporation.
Within the DLC arrangement the most appropriate presentation of
Carnival plc's results and financial position is considered to be
by reference to the DLC Financial Statements.
CARNIVAL PLC
INTERIM CONDENSED GROUP STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)
(UNAUDITED)
(in millions)
Six Months Ended May
31,
2023 2022
--------- -----------
Net Income (Loss) $(563) $(1,280)
--------- -----------
Other Comprehensive Income (Loss)
Items that will not be reclassified through
the Statements of Income (Loss)
Remeasurements of post-employment benefit obligations (11) 6
--------- -----------
Items that may be reclassified through the
Statements of Income (Loss)
Changes in foreign currency translation adjustment 127 (358)
Net gains on hedges of net investments in foreign
operations and other - 89
--------- -----------
127 (269)
--------- -----------
Other Comprehensive Income (Loss) 116 (263)
--------- -----------
Total Comprehensive Income (Loss) $(447) $(1,543)
========= ===========
The accompanying notes are an integral part of these Interim
Financial Statements.
These Interim Financial Statements only present the Carnival plc
consolidated IFRS Interim Financial Statements and, accordingly,
do not include the consolidated IFRS results of Carnival Corporation.
Within the DLC arrangement the most appropriate presentation of Carnival
plc's results and financial position is considered to be by reference
to the DLC Financial Statements.
CARNIVAL PLC
INTERIM CONDENSED GROUP BALANCE SHEETS
(UNAUDITED)
(in millions)
May 31,
November
Notes 2023 30, 2022
-------- ---------
ASSETS
Current Assets
Cash and cash equivalents $582 $251
Trade and other receivables, net 230 202
Inventories 175 193
Prepaid expenses and other 187 215
-------- ---------
Total current assets 1,174 862
-------- ---------
Property and Equipment, Net 3 12,386 13,469
Right-of-Use Assets 562 283
Investments in Associates 121 144
Other Assets 4 712 775
-------- ---------
$14,955 $15,532
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt 5 $1,078 $1,329
Current portion of lease liabilities 80 33
Accounts payable 411 471
Accrued liabilities and other 550 526
Customer deposits 2 1,866 1,589
Amount owed to the Carnival Corporation
group 3,876 5,624
-------- ---------
Total current liabilities 7,861 9,571
-------- ---------
Long-Term Debt 5 6,661 6,361
Long-Term Lease Liabilities 492 256
Contingencies 7 82 84
Other Long-Term Liabilities 239 200
Shareholders' Equity
Share capital 361 361
Share premium 9 1,143 143
Retained earnings 560 1,175
Other reserves (2,444) (2,619)
-------- ---------
Total shareholders' (deficit) equity (380) (940)
-------- ---------
$14,955 $15,532
======== =========
The accompanying notes are an integral part of these Interim
Financial Statements.
These Interim Financial Statements only present the Carnival plc
consolidated IFRS Interim Financial Statements and, accordingly,
do not include the consolidated IFRS results of Carnival Corporation.
Within the DLC arrangement the most appropriate presentation of Carnival
plc's results and financial position is considered to be by reference
to the DLC Financial Statements.
CARNIVAL PLC
INTERIM CONDENSED GROUP STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Six Months Ended
May 31,
2023 2022
-------- --------
OPERATING ACTIVITIES
Income (Loss) before income taxes $(550) $(1,275)
Adjustments to reconcile income (loss) before income
taxes to net cash provided by (used in) operating
activities
Depreciation and amortisation 367 396
Share-based compensation 6 10
Interest expense, net 180 74
(Income) loss from investments in associates 25 (5)
Other, net 6 5
-------- --------
34 (794)
Changes in operating assets and liabilities
Receivables (29) (34)
Inventories 23 (39)
Prepaid expenses and other 79 (109)
Accounts payable (67) 57
Accrued liabilities, other and contingencies (29) 52
Customer deposits 251 377
-------- --------
Cash provided by (used in) operations before interest
and income taxes 262 (490)
Interest received 6 -
Interest paid (105) (58)
Income tax benefit received (paid), net 1 7
-------- --------
Net cash provided by (used in) operating activities 164 (541)
-------- --------
INVESTING ACTIVITIES
Purchases of property and equipment (997) (1,985)
Proceeds from sales of ships 32 40
Other, net - (5)
-------- --------
Net cash provided by (used in) investing activities (965) (1,949)
-------- --------
FINANCING ACTIVITIES
Changes in amounts owed to the Carnival Corporation
group, net 1,406 614
Principal repayments of long-term debt (1,027) (250)
Proceeds from issuance of long-term debt 830 2,347
Finance lease principal payments (40) (18)
Debt issuance cost and other, net (34) (101)
-------- --------
Net cash provided by (used in) financing activities 1,135 2,591
-------- --------
Effect of exchange rate changes on cash and cash
equivalents (4) (33)
-------- --------
Net increase (decrease) in cash and cash equivalents 330 68
Cash and cash equivalents at beginning of period 251 434
-------- --------
Cash and cash equivalents at end of period $582 $502
======== ========
The accompanying notes are an integral part of these Interim
Financial Statements.
These Interim Financial Statements only present the Carnival plc
consolidated IFRS Interim Financial Statements and, accordingly,
do not include the consolidated IFRS results of Carnival Corporation.
Within the DLC arrangement the most appropriate presentation of Carnival
plc's results and financial position is considered to be by reference
to the DLC Financial Statements.
CARNIVAL PLC
INTERIM CONDENSED GROUP STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
(UNAUDITED)
(in millions)
Reserves
----------------------------------------------------------
Total
Cash shareholders
Share Share Retained Translation flow Treasury Other Merger (deficit)'
capital premium earnings reserve hedges shares reserves reserve Total equity
------- ------- -------- ----------- ------ -------- -------- ------- -------- ------------
At November
30, 2021 $361 $143 $4,092 $(2,049) $11 $(1,818) $105 $1,503 $(2,249) $2,347
Comprehensive
income (loss)
Net income
(loss) - - (1,280) - - - - - - (1,280)
Changes in
foreign
currency
translation
adjustment - - - (358) - - - - (358) (358)
Net gains on
cash flow
derivative
hedges - - - - 7 - - - 7 7
Net gains on
hedges of net
investments
in foreign
operations - - - 82 - - - - 82 82
Remeasurements
of
post-employment
benefit
obligations - - 6 - - - - - - 6
------- ------- -------- ----------- ------ -------- -------- ------- -------- ------------
Total
comprehensive
income - - (1,274) (276) 7 - - - (269) (1,543)
Issuance of
treasury shares
for vested
share-based
awards - - (72) - - 72 - - 72 -
Other, net - - (1) (3) 3 - 7 - 7 7
------- ------- -------- ----------- ------ -------- -------- ------- -------- ------------
At May 31,
2022 $361 $143 $2,745 $(2,328) $20 $(1,746) $112 $1,503 $(2,439) $810
======= ======= ======== =========== ====== ======== ======== ======= ======== ============
At November
30, 2022 $361 $143 $1,175 $(2,526) $22 $(1,734) $116 $1,503 $(2,619) $(940)
Comprehensive
income (loss)
Net income
(loss) - - (563) - - - - - - (563)
Changes in
foreign
currency
translation
adjustment - - - 127 - - - - 127 127
Remeasurements
of
post-employment
benefit
obligations - - (11) - - - - - - (11)
------- ------- -------- ----------- ------ -------- -------- ------- -------- ------------
Total
comprehensive
income (loss) - - (574) 127 - - - - 127 (447)
Issuance of
ordinary share
capital - 1,000 - - - - - - - 1,000
Issuance of
treasury shares
for vested
share-based
awards - - (41) - - 41 - - 41 -
Other, net - - - - - (1) 8 - 7 7
------- ------- -------- ----------- ------ -------- -------- ------- -------- ------------
At May 31,
2023 $361 $1,143 $560 $(2,399) $22 $(1,694) $124 $1,503 $(2,444) $(380)
======= ======= ======== =========== ====== ======== ======== ======= ======== ============
The accompanying notes are an integral part of these Interim
Financial Statements.
These Interim Financial Statements only present the Carnival plc
consolidated IFRS Interim Financial Statements and, accordingly,
do not include the consolidated IFRS results of Carnival Corporation.
Within the DLC arrangement the most appropriate presentation of Carnival
plc's results and financial position is considered to be by reference
to the DLC Financial Statements.
CARNIVAL PLC
NOTES TO INTERIM CONDENSED GROUP FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - General
Description of Business
Carnival plc was incorporated in England and Wales in 2000 and
is domiciled in the UK with its headquarters located at Carnival
House, 100 Harbour Parade, Southampton, Hampshire, SO15 1ST, UK
(registration number 04039524). Carnival plc and its subsidiaries
and associates are referred to collectively in these Interim
Financial Statements as the "Group," "our," "us" and "we".
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.
DLC Arrangement
Carnival Corporation and Carnival plc operate a dual listed
company ("DLC") arrangement, whereby the businesses of Carnival
Corporation and Carnival plc are combined through a number of
contracts and provisions in Carnival Corporation's Articles of
Incorporation and By-Laws and Carnival plc's Articles of
Association. The two companies operate as a single economic
enterprise with a single senior management team and identical
Boards of Directors, but each has retained its separate legal
identity. Each company's shares are publicly traded on the New York
Stock Exchange ("NYSE") for Carnival Corporation and the London
Stock Exchange for Carnival plc. The Carnival plc American
Depositary Shares are traded on the NYSE.
The constitutional documents of each company provide that, on
most matters, the holders of the common equity of both companies
effectively vote as a single body. The Equalization and Governance
Agreement between Carnival Corporation and Carnival plc provides
for the equalization of dividends and liquidation distributions
based on an equalization ratio and contains provisions relating to
the governance of the DLC arrangement. Because the equalization
ratio is 1 to 1, one share of Carnival Corporation common stock and
one Carnival plc ordinary share are generally entitled to the same
distributions.
Under deeds of guarantee executed in connection with the DLC
arrangement, as well as stand-alone guarantees executed since that
time, each of Carnival Corporation and Carnival plc have
effectively cross guaranteed all indebtedness and certain other
monetary obligations of each other. Once the written demand is
made, the holders of indebtedness or other obligations may
immediately commence an action against the relevant guarantor.
Under the terms of the DLC arrangement, Carnival Corporation and
Carnival plc are permitted to transfer assets between the
companies, make loans to or investments in each other and otherwise
enter into intercompany transactions. In addition, the cash flows
and assets of one company are required to be used to pay the
obligations of the other company, if necessary.
The Boards of Directors consider that, within the DLC
arrangement, the most appropriate presentation of Carnival plc's
results and financial position is by reference to the U.S.
generally accepted accounting principles ("U.S. GAAP") DLC
Financial Statements because all significant financial and
operating decisions affecting the DLC companies are made on a joint
basis to optimize the consolidated performance as a single economic
entity. Accordingly, the DLC Financial Statements for the three and
six months ended May 31, 2023 are provided to shareholders as
supplementary information, which are included in Schedule B, but do
not form part of these Carnival plc interim financial
statements.
Basis of Preparation
The Carnival plc Interim financial statements are presented in
U.S. dollars unless otherwise noted. They are prepared on the
historical cost basis, except for certain financial assets and
liabilities (including derivative instruments) that are stated at
fair value. These Interim Financial Statements are required to
satisfy reporting requirements of the United Kingdom's Financial
Conduct Authority ("FCA") and do not include the consolidated
results and financial position of Carnival Corporation and its
subsidiaries. These Interim Financial Statements have been prepared
in accordance with the Disclosure Guidance and Transparency Rules
of the FCA and with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the UK ("IAS 34"). The Interim
Financial Statements should be read in conjunction with the audited
annual financial statements for the year ended November 30, 2022,
which were prepared in accordance with UK-adopted International
Financial Reporting Standards ("IFRS").
Status of Financial Statements
Our Interim Financial Statements for the six months ended May
31, 2023 have not been audited or reviewed by the auditors.
Our Interim Financial Statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006 Act. Statutory accounts for the year ended November 30, 2022
were approved by the Board of Directors on January 26, 2023 and
delivered to the Registrar of Companies. The report of the auditors
on those accounts was (i) unqualified, (ii) did not contain a
material uncertainty related to going concern and (iii) did not
contain any statement under section 498 of the 2006 Act.
Liquidity and Management's Plans
In the face of the global impact of COVID-19, Carnival
Corporation & plc paused its guest cruise operations in March
2020 and began resuming guest cruise operations in 2021. As of May
31, 2023, our return to guest cruise operations was complete.
As part of Carnival Corporation & plc's liquidity
management, we rely on estimates of Carnival Corporation &
plc's future liquidity, which includes numerous assumptions that
are subject to various risks and uncertainties. The principal
assumptions used to estimate Carnival Corporation & plc's
future liquidity consist of:
-- Carnival Corporation & plc's continued cruise operations
and expected timing of cash collections for cruise bookings
-- Expected increases in revenue in 2023 on a per passenger basis compared to 2019
-- Expected improvement in occupancy on a year-over-year basis
-- Stabilization of fuel prices around or below November 2022 year-end prices
-- Continued stabilization of inflationary pressures on costs
compared to 2022, moderated by a larger-more efficient fleet as
compared to 2019
In addition, Carnival Corporation & plc makes certain
assumptions about new ship deliveries, improvements and removals,
and considers the future export credit financings that are
associated with the new ship deliveries.
Carnival Corporation & plc has a substantial debt balance as
a result of the pause in guest cruise operations and requires a
significant amount of liquidity or cash provided by operating
activities to service its debt. In addition, the continued effects
of the pandemic, inflation, higher fuel prices, higher interest
rates and fluctuations in foreign currency rates are collectively
having a material negative impact on Carnival Corporation &
plc's financial results. The full extent of the collective impact
of these items is uncertain and may be amplified by our substantial
debt balance. Carnival Corporation & plc believes it has made
reasonable estimates and judgments of the impact of these events
within its consolidated financial statements and there may be
changes to those estimates in future periods.
For the past three years Carnival Corporation & plc has
taken appropriate actions to manage its liquidity, including
completing various capital market transactions, obtaining relevant
financial covenant amendments or waivers (see Note 5 - "Debt"),
accelerating the removal of certain ships from the fleet, and
during the pause, reducing capital expenditures and operating
expenses.
Based on these actions and Carnival Corporation & plc's
assumptions, and considering its $7.3 billion of liquidity
including cash and cash equivalents and borrowings available under
Carnival Corporation & plc's $1.6 billion, EUR1.0 billion and
GBP0.2 billion multi-currency revolving credit facility (the
"Revolving Facility") at May 31, 2023, we believe that we have
sufficient liquidity to fund Carnival Corporation & plc's
obligations and expect to remain in compliance with its financial
covenants for at least the next twelve months from the issuance of
these financial statements. In light of these circumstances, the
Boards of Directors of the Group have a reasonable expectation that
Carnival Corporation & plc has adequate resources to continue
its operational existence and continue to adopt the going concern
basis of preparing the Carnival plc Interim Financial Statements.
Refer to Schedule B of this release for additional discussion.
Carnival Corporation & plc will continue to pursue various
opportunities to refinance future debt maturities and/or to extend
the maturity dates associated with its existing indebtedness and
obtain relevant financial covenant amendments or waivers, if
needed.
Use of Estimates and Risks and Uncertainty
The preparation of our Interim Financial Statements in
conformity with IFRS as adopted in the UK requires management to
make judgements, estimates and assumptions that affect the
application of policies and reported and disclosed amounts in these
financial statements. The estimates and underlying assumptions are
based on historical experience and various other factors that we
believe to be reasonable under the circumstances and form the basis
of making judgments about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from the estimates used in preparing these Interim
Financial Statements.
Significant accounting estimates, assumptions and judgements are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the
revision affects only that period or in the period of the revision
and future periods if the revision affects both current and future
periods. For a detailed discussion of our significant accounting
estimates, assumptions and judgements refer to Note 2 - Significant
Accounting Policies included in our 2022 Carnival plc Annual
Report.
Accounting Pronouncements
The International Accounting Standards Board ("IASB") issued
amendments to the standards, IFRS 9 Financial Instruments, IAS 39
Financial Instruments: Recognition and Measurement, IFRS 7
Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and
IFRS 16 Leases, that address issues that might affect financial
reporting when an existing interest rate benchmark is replaced with
an alternative interest rate. The changes relate to the
modification of financial assets, financial liabilities and lease
liabilities, specific hedge accounting requirements, and disclosure
requirements applying IFRS 7 Financial Instruments: Disclosures to
accompany the amendments regarding modifications and hedge
accounting. The amendments require that, for financial instruments
measured using amortised cost measurement (that is, financial
instruments classified as amortised cost), changes to the basis for
determining the contractual cash flows required by interest rate
benchmark reform are reflected by adjusting their effective
interest rate. No immediate gain or loss is recognised. These
expedients are only applicable to changes that are required by
interest rate benchmark reform, which is the case if, and only if,
the change is necessary as a direct consequence of interest rate
benchmark reform and the new basis for determining the contractual
cash flows is economically equivalent to the previous basis (that
is, the basis immediately preceding the change). Where some or all
of a change in the basis for determining the contractual cash flows
of a financial liability does not meet the above criteria, the
above practical expedient is first applied to the changes required
by interest rate benchmark reform, including updating the
instrument's effective interest rate. Any additional changes are
accounted for in the normal way (that is, assessed for modification
or derecognition, with the resulting modification gain / loss
recognised immediately in profit or loss where the instrument is
not derecognised). We adopted this new guidance during 2022 and
applied it prospectively to contract modifications related to a
change in reference rate. The adoption of this guidance did not
have a material impact on our consolidated financial statements.
During the six months ended May 31, 2023, we repaid all floating
rate borrowings referenced to U.S. Dollar LIBOR. As of May 31,
2023, we did not have any outstanding debt referenced to interest
rate benchmarks being replaced as a result of the reform.
The IASB has issued amendments to the standard, IAS 1,
Presentation of Financial Statements - Classification of
Liabilities as Current or Non-current, providing a more general
approach to the classification of liabilities based on the
contractual agreements in place at the reporting date. These
amendments are required to be adopted by us for the financial year
commencing on December 1, 2024 and must be applied retrospectively.
We do not expect the adoption of this guidance to have a material
impact on our consolidated financial statements.
The IASB issued amendments to IFRS 16, Leases - Lease Liability
in a Sale and Leaseback. The amendments require a seller-lessee to
subsequently measure lease liabilities arising from a sale and
leaseback transaction in a way that does not result in recognition
of a gain or loss that relates to the right of use that it retains,
including situations where the lease payments are variable payments
that do not depend on an index or rate. On December 1, 2022, we
adopted this guidance to measure and recognize right-of-use assets
and lease liabilities as a result of qualified sale and leaseback
transactions and the adoption of the standard had no impact on our
consolidated financial statements.
The IASB has issued amendments to the standards, IAS 7 Statement
of Cash Flows and IFRS 7 Financial Instruments: Disclosures titled
Supplier Finance Arrangements. These amendments require that an
entity disclose information about its supplier finance arrangements
that enables users of financial statements to assess the effects of
those arrangements on the entity's liabilities and cash flows and
the entity's exposure to liquidity risk. These amendments are
required to be adopted by us for the financial year commencing on
December 1, 2024. We are currently evaluating the impact of these
amendments 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.
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. 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. These amounts include refundable deposits. We had total
customer deposits of $2.0 billion as of May 31, 2023 and $1.7
billion as of November 30, 2022, which includes approximately $26
million of unredeemed FCCs as of May 31, 2023. During the six
months ended May 31, 2023 and 2022, we recognized revenues of $1.3
billion and $0.4 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. 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 $59 million as of
May 31, 2023 and November 30, 2022.
NOTE 3 - Property and Equipment
(in millions)
At November 30, 2022 $13,469
Additions 1,003
Disposals (2,207)
Depreciation (316)
Exchange movements 437
-------
At May 31, 2023 $12,386
=======
We review our long-lived assets for impairment whenever events
or circumstances indicate potential impairment. During the six
months ended May 31, 2023, we did not identify any triggers
indicating possible impairment and therefore, did not record any
impairments.
Refer to Note 1 - "General, Use of Estimates and Risks and
Uncertainty" for additional discussion.
Ship Sales
During the six months ended May 31, 2023, we completed the sales
of two Europe segment ships which collectively represent a
passenger-capacity reduction of 3,970 berths for our Europe
segment.
Refer to Note 9 - "Related Party Transactions" for additional
details on ship sales to Carnival Corporation group.
NOTE 4 - Other Assets
May 31, 2023 November 30,
(in millions) 2022
Credit card reserves $250 $296
Long-term deposits 237 229
VAT receivables 93 98
Debt issuance costs 28 38
Pension assets 9 19
Other long-term assets and other receivables 95 95
------------ ------------
$712 $775
============ ============
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. As of May 31, 2023 and November 30, 2022, we had
$250 million and $296 million in reserve funds related to our
customer deposits provided to satisfy these requirements which are
included within other assets. Additionally, as of May 31, 2023 and
November 30, 2022, we had $237 million and $229 million in
compensating deposits we are required to maintain. Subsequent to
May 31, 2023, we provided $380 million in restricted cash deposits
which will be included within other assets. We continue to expect
to provide reserve funds and restricted cash deposits under these
agreements.
NOTE 5 - Debt
Export Credit Facility Borrowings
During the six months ended May 31, 2023, we borrowed $0.8
billion under an export credit facility due in semi-annual
installments through 2035 and paid down $0.3 billion of floating
rate unsecured borrowings mostly with 2023 and 2024 maturities. As
of May 31, 2023, the net book value of the Carnival plc vessels
subject to negative pledges was $4.2 billion.
Revolving Credit Facilities
As of May 31, 2023 Carnival Corporation did not have short-term
borrowings. As of November 30, 2022, Carnival Corporation's
short-term borrowings consisted of $0.2 billion. Carnival plc had
no short-term borrowings under Carnival Corporation & plc's
Revolving Facility as of May 31, 2023 and November 30, 2022.
Carnival Corporation & plc may continue to re-borrow or
otherwise utilize available amounts under the Revolving Facility
through August 2024, subject to satisfaction of the conditions in
the facility. As of May 31, 2023 and November 30, 2022, Carnival
Corporation and Carnival plc had a total of $2.9 billion and $2.6
billion available for borrowing under the Revolving Facility. The
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. Carnival Corporation & plc is required to pay a
commitment fee on any unutilized portion.
New Revolving Facility
In February 2023, Carnival Holdings (Bermuda) II Limited
("Carnival Holdings II"), a subsidiary of Carnival Corporation,
entered into a $2.1 billion multi-currency revolving facility ("New
Revolving Facility"). The New Revolving Facility may be utilized
beginning on August 6, 2024, and will replace the existing
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.
In connection with the New Revolving Facility, Carnival plc will
contribute one unencumbered vessel (which must be completed no
later than February 28, 2024) to Carnival Holdings II. The vessel
will continue to be operated under one of the Carnival plc brands.
Carnival Holdings II does not guarantee our other outstanding
debt.
Covenant Compliance
As of May 31, 2023, Carnival Corporation & plc's 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 unsecured loans and the 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 the remaining unsecured
loans that contain this covenant, Carnival Corporation & plc
entered into letter agreements to waive compliance with the
covenant through the May 31, 2024 testing date.
For substantially all of the 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 unsecured loans and export credit facilities,
maintain minimum issued capital and consolidated reserves (as
defined in the agreements) of $5.0 billion
-- Limit its debt to capital (as defined in the agreements)
percentage to a percentage not to exceed 75% until the May 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 the New Revolving Facility, minimum liquidity of $1.5
billion; provided, that if any commitments maturing on June 30,
2025 under the existing first-lien term loan facility are
outstanding on the March 31, 2025 testing date, the 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 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 May 31, 2023, Carnival Corporation & plc was in
compliance with the applicable covenants under its 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 its outstanding debt and derivative
contract payables could become due, and its 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.
Carnival Corporation or Carnival plc and certain of our
subsidiaries have guaranteed substantially all of our
indebtedness.
NOTE 6 - Ship Commitments
At May 31, 2023, we had one ship under contract for
construction. The estimated total future commitments, including the
contract prices with the shipyards, design and engineering fees,
capitalised interest, construction oversight costs and various
owner supplied items are as follows:
(in millions) May 31, 2023
------------
Year
Remainder of 2023 $35
2024 611
Thereafter -
------------
$646
============
NOTE 7 - Contingencies
Provisions
The Group's contingencies include estimated liabilities for
crew, guest and other third-party claims. The liabilities
associated with crew illnesses and crew and guest injury claims,
including all legal costs, are estimated based on the specific
merits of the individual claims or actuarially estimated based on
historical claims experience, loss development factors and other
assumptions.
The changes in our contingencies were as follows:
(in millions) Claims Reserves
---------------
November 30, 2022 $113
Additional provisions 15
Paid losses (10)
Reversals (12)
Exchange movements 3
---------------
May 31, 2023 $109
===============
(in millions) May 31, 2023
------------
Provisions
Current $27
Non-current 82
------------
$109
============
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 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.
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 May 31, 2023, nine 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 May 31, 2023, seven 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 intent 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 Carnival Corporation &
plc 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. Carnival Corporation & plc is
working with these agencies to reach a resolution of this matter.
Carnival Corporation & plc believes the ultimate outcome will
not have a material impact on its consolidated financial
statements.
On June 20, 2022, Princess Cruise Lines, Ltd, a subsidiary of
Carnival Corporation, 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 Cruise Lines, Ltd and the Captain of
the vessel. 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.
NOTE 8 - Segment Information
As previously discussed, within the DLC arrangement the most
appropriate presentation of Carnival plc's results and financial
position is by reference to the DLC Financial Statements. The
operating segments are reported on the same basis as the internally
reported information that is provided to the 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 the segments. Carnival
Corporation & plc has four reportable segments comprised of (1)
North America and Australia cruise operations ("NAA"), (2) Europe
cruise operations, (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. The Cruise Support segment includes Carnival
Corporation & plc's portfolio of leading port destinations and
other services, all of which are operated for the benefit of its
cruise brands. The Tour and Other segment represents the hotel and
transportation operations of Holland America Princess Alaska Tours
and other operations.
Beginning in the first quarter of 2023, we renamed the EA
segment given that China has not reopened to international cruise
travel. As a result, we have significantly reduced operations in
Asia and leveraged the mobility of our cruise ships and our brand
portfolio to build alternate deployments. In 2019, our most recent
full year of guest cruise operations, China accounted for 7% of our
guests.
Six Months Ended May 31,
--------------------------------------------------------------------------
Operating Selling Depreciation Operating
costs and and and income
(in millions) Revenues expenses administrative amortisation (loss)
--------- ---------- ---------------- -------------- ---------
2023
NAA $6,434 $4,471 $875 $738 $351
Europe 2,759 2,179 436 338 (193)
Cruise Support 106 55 124 90 (162)
Tour and Other 44 64 14 13 (47)
--------- ---------- ---------------- -------------- ---------
Carnival Corporation &
plc
- U.S. GAAP 9,343 6,768 1,448 1,179 (52)
Carnival Corporation -
U.S. GAAP (a) (5,952) (3,849) (948) (823) (332)
Carnival plc - U.S. GAAP
vs IFRS differences (b) - (63) (5) 11 57
--------- ---------- ---------------- -------------- ---------
Carnival plc - IFRS $3,391 $2,856 $495 $367 $(327)
========= ========== ================ ============== =========
2022
NAA $2,792 $3,055 $710 $687 $(1,661)
Europe 1,123 1,546 352 359 (1,134)
Cruise Support 73 54 75 68 (126)
Tour and Other 37 57 12 11 (44)
--------- ---------- ---------------- -------------- ---------
Carnival Corporation &
plc
- U.S. GAAP 4,024 4,713 1,149 1,126 (2,964)
Carnival Corporation -
U.S. GAAP (a) (2,852) (3,045) (744) (728) 1,665
Carnival plc - U.S. GAAP
vs IFRS differences (b) - (15) (7) (2) 23
--------- ---------- ---------------- -------------- ---------
Carnival plc - IFRS $1,172 $1,653 $398 $396 $(1,276)
========= ========== ================ ============== =========
(a) Carnival Corporation consists primarily of cruise brands
that do not form part of the Group; however, these brands are
included in Carnival Corporation & plc and thus represent
substantially all of the reconciling items.
(b) The U.S. GAAP vs IFRS accounting differences primarily
relate to differences in the carrying value of ships, lease
accounting, pension accounting and differences in depreciation
expense due to differences in the carrying value of ships.
Revenue by geographic areas, which are based on where our guests
are sourced, were as follows:
Six Months Ended,
(in millions) May 31, 2023 May 31, 2022
------------ ------------
Europe $2,358 $1,063
North America 167 53
Australia 542 18
Other 324 38
------------ ------------
$3,391 $1,172
============ ============
NOTE 9 - Related Party Transactions
During 2023, Carnival Corporation purchased one ordinary share
of Carnival plc for $1 billion, which is non-voting while it is
owned by Carnival Corporation. This is a non cash transaction where
the amount owed from Carnival Corporation was offset against the
amount owed by Carnival plc to the Carnival Corporation group. All
amounts owed to the Carnival Corporation group are unsecured,
repayable on demand and considered short-term in nature.
During 2023, we sold two ships to Carnival Holdings (Bermuda)
Limited, a subsidiary of Carnival Corporation, for $1.5 billion.
These two ships were leased back to Carnival plc. Additionally in
2023, we completed the sale of one ship to Carnival Corporation,
which represents a passenger-capacity reduction of 4,200 berths for
$678 million and plan to sell another ship to Carnival Corporation
in 2024 both in connection with Carnival Fun Italian Style(TM). The
sales price for these transactions equaled book value. The amounts
owed from the Carnival Corporation group in connection with these
non cash transactions reduced the payable owed by Carnival plc to
the Carnival Corporation group.
During the six months ended May 31, 2023 and 2022, Holland
America Line and Princess Cruises purchased land tours from us
totaling $15 million and $10 million. In addition, during the six
months ended May 31, 2023 and 2022 we sold pre- and post-cruise
vacations, shore excursions and transportation services to the
Carnival Corporation group.
During 2023 , the Group had ship charter agreements with
Princess Cruises and Carnival Cruise Line for ships operating in
Australia and Asia. The total charter and management expenses for
the six months ended May 31, 2023 were $243 million which was
included in other operating expenses. There were no ship charter
agreements for the six months ended May 31, 2022.
During the six months ended May 31, 2023, Carnival plc continued
to provide a guarantee to the Merchant Navy Officers Pension Fund
for certain employees who have transferred from Carnival plc to a
subsidiary of Carnival Corporation.
Carnival Corporation and its subsidiary, Carnival Investments
Limited owned 42.9 million, or 19.7% at May 31, 2023 and 40.6
million or 18.7% at November 30, 2022 of Carnival plc's ordinary
shares, which are non-voting while they are owned by Carnival
Corporation and its subsidiary.
Carnival Corporation & plc has a program that allows it 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"). Under the Stock Swap Program,
Carnival Corporation & plc 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.
Within the DLC arrangement, there are instances where the Group
provides services to Carnival Corporation and also where Carnival
Corporation provides services to the Group.
NOTE 10 - 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. The seasonality of our results
also increases due to ships being taken out-of-service for
maintenance, which we schedule during non-peak demand periods. 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.
NOTE 11 - Fair Value Measurements and Derivative Instruments,
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.
Under deeds of guarantee executed in connection with the DLC
arrangement, as well as stand-alone guarantees
executed since that time, each of Carnival Corporation and
Carnival plc have effectively cross guaranteed all
indebtedness and certain other monetary obligations of each
other. The fair value of cross guarantees within the DLC
arrangement were not significant at May 31, 2023 or November 30,
2022, and are not expected to result in any material loss.
Financial Instruments that are not Measured at Fair Value
May 31, 2023 November 30,
2022
Carrying Fair Carrying Fair
(in millions) Value Value Value Value
Liabilities
Fixed rate debt (a) $4,583 $2,712 $3,781 $2,020
Floating rate debt (a) 3,471 2,594 4,204 3,087
-------- ------ -------- ------
Total 8,054 5,306 7,985 5,107
-------- ------ -------- ------
Less: unamortized debt issuance costs and
discounts (332) (310)
Plus: debt modification loss 17 15
-------- --------
Total Debt $7,739 $7,690
======== ========
(a) The debt amounts above do not include the impact of interest
rate swaps. The fair values of our publicly-traded notes were based
on their unadjusted quoted market prices. 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
The Group has euro 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 $69 million at May 31, 2023 ($89
million at November 30, 2022) of EURIBOR-based floating rate euro
debt to fixed rate euro debt. As of May 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. The fair values of these derivatives, as of
May 31, 2023 and November 30, 2022 was $1 million and the
associated gains and losses recognized in other comprehensive
income (loss) and in net income (loss) were not material. The
amount of estimated cash flow hedges' unrealized gains and losses
that are expected to be reclassified to earnings in the next twelve
months is not material. These derivatives are considered Level 2
instruments. There are no credit risk related contingent features
in our derivative agreements.
NOTE 12 - Principal Risks and Uncertainties
The principal risks and uncertainties affecting our business
activities are included in Item 4. Risk Management and/or
Mitigation of Principal and Emerging Risks within our 2022 Annual
Report. There have been no changes to our identified principal or
emerging risks since the issuance of our 2022 Annual Report. Our
principal risks and uncertainties are summarized below. The
ordering and lettering of our risks is not intended to reflect any
Company indication of priority or likelihood.
Operating Risk Factors
a. Events and conditions around the world, including war and
other military actions, such as the invasion of Ukraine, inflation,
higher fuel prices, 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, impacting our operating costs and profitability.
b. Pandemics have in the past and may in the future have a
significant negative impact on our financial condition and
operations.
c. 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.
d. 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.
e. 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.
f. 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.
g. 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.
h. 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.
i. Increases in fuel prices, changes in the types of fuel
consumed and availability of fuel supply may adversely impact our
scheduled itineraries and costs.
j. 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.
k. Fluctuations in foreign currency exchange rates may adversely impact our financial results.
l. Overcapacity and competition in the cruise and land-based
vacation industry may negatively impact our cruise sales, pricing
and destination options.
m. Inability to implement our shipbuilding programs and ship
repairs, maintenance and refurbishments may adversely impact our
business operations and the satisfaction of our guests.
Debt Related Risk Factors
a. 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.
b. Our substantial debt could adversely affect our financial health and operating flexibility.
c. Despite our leverage, we may incur more debt, subject to
certain restrictions, which could adversely affect our business and
prevent us from fulfilling our obligations with respect to our
debt.
d. We are subject to maintenance covenants, as well as
restrictive debt covenants, that may limit our ability to finance
future operations and capital needs and pursue business
opportunities and activities. We are also subject to financial
covenants that could lead to an acceleration of the indebtedness of
our debt facilities if we fail to comply. If we fail to comply with
any of these covenants, it could have a material adverse effect on
our business.
e. Our variable rate indebtedness exposes us to interest rate
volatility, which could cause our debt service obligations to
increase significantly.
f. The covenants in certain of our export credit facilities may
require us to secure those facilities in the future.
NOTE 13 - Responsibility Statement
The Directors confirm that to the best of their knowledge the
Interim Financial Statements included as Schedule A to this release
have been prepared in accordance with IAS 34 as adopted by the UK,
and that the half-yearly financial report includes a fair review of
the information required by DTR 4.2.7R and DTR 4.2.8R of the
Disclosure Guidance and Transparency Rules of the FCA.
The Directors of Carnival plc are listed in the Carnival plc
Annual Report for the year ended November 30, 2022. No new
Directors have been appointed during the six months ended May 31,
2023. A list of current Directors is maintained and is available
for inspection on the Group's website at www.carnivalplc.com .
By order of the Board
/s/ Micky Arison /s/ Josh Weinstein
Micky Arison Josh Weinstein
President, Chief Executive Officer, Chief Climate
Chair of the Board of Directors Officer and Director
June 28, 2023 June 28, 2023
SCHEDULE B
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 Six Months Ended
May 31, May 31,
----------------- ------------------
2023 2022 2023 2022
------- -------- -------- --------
Revenues
Passenger ticket $3,141 $1,285 $6,011 $2,158
Onboard and other 1,770 1,116 3,332 1,866
------- -------- -------- --------
4,911 2,401 9,343 4,024
------- -------- -------- --------
Operating Expenses
Commissions, transportation and other 619 325 1,274 576
Onboard and other 549 314 1,033 523
Payroll and related 601 533 1,183 1,038
Fuel 489 545 1,024 910
Food 325 191 636 327
Ship and other impairments - - - 8
Other operating 875 774 1,619 1,331
------- -------- -------- --------
Cruise and tour operating expenses 3,457 2,683 6,768 4,713
Selling and administrative 736 619 1,448 1,149
Depreciation and amortization 597 572 1,179 1,126
4,791 3,874 9,394 6,988
------- -------- -------- --------
Operating Income (Loss) 120 (1,473) (52) (2,964)
------- -------- -------- --------
Nonoperating Income (Expense)
Interest income 69 6 124 9
Interest expense, net of capitalized
interest (542) (370) (1,082) (738)
Gain (loss) on debt extinguishment,
net (31) - (31) -
Other income (expense), net (17) 6 (47) (26)
------- -------- -------- --------
(522) (358) (1,036) (755)
------- -------- -------- --------
Income (Loss) Before Income Taxes (402) (1,831) (1,087) (3,719)
Income Tax Benefit (Expense), Net (5) (3) (13) (6)
------- -------- -------- --------
Net Income (Loss) $(407) $(1,834) $(1,100) $(3,726)
======= ======== ======== ========
Earnings Per Share
Basic $(0.32) $(1.61) $(0.87) $(3.27)
======= ======== ======== ========
Diluted $(0.32) $(1.61) $(0.87) $(3.27)
======= ======== ======== ========
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 Six Months
Ended Ended
May 31, May 31,
---------------- ------------------
2023 2022 2023 2022
------ -------- -------- --------
Net Income (Loss) $(407) $(1,834) $(1,100) $(3,726)
------ -------- -------- --------
Items Included in Other Comprehensive Income
(Loss)
Change in foreign currency translation adjustment 102 (260) 99 (246)
Other (33) 3 (19) 5
------ -------- -------- --------
Other Comprehensive Income (Loss) 69 (257) 79 (241)
------ -------- -------- --------
Total Comprehensive Income (Loss) $(338) $(2,091) $(1,021) $(3,967)
====== ======== ======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
May 31, November
30, 2022
2023
-------- ---------
ASSETS
Current Assets
Cash and cash equivalents $4,468 $4,029
Restricted cash 18 1,988
Trade and other receivables, net 449 395
Inventories 438 428
Prepaid expenses and other 833 652
-------- ---------
Total current assets 6,206 7,492
-------- ---------
Property and Equipment, Net 39,584 38,687
Operating Lease Right-of-Use Assets 1,310 1,274
Goodwill 579 579
Other Intangibles 1,163 1,156
Other Assets 3,030 2,515
-------- ---------
$51,873 $51,703
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $- $200
Current portion of long-term debt 1,789 2,393
Current portion of operating lease liabilities 161 146
Accounts payable 1,042 1,050
Accrued liabilities and other 1,951 1,942
Customer deposits 6,892 4,874
-------- ---------
Total current liabilities 11,835 10,605
-------- ---------
Long-Term Debt 31,921 31,953
Long-Term Operating Lease Liabilities 1,208 1,189
Other Long-Term Liabilities 1,044 891
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 16,684 16,872
Retained earnings (accumulated deficit) (841) 269
Accumulated other comprehensive income (loss) ("AOCI") (1,903) (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 5,865 7,065
-------- ---------
$51,873 $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)
Six Months Ended
May 31,
------------------
2023 2022
-------- --------
OPERATING ACTIVITIES
Net income (loss) $(1,100) $(3,726)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization 1,179 1,126
Impairments - 8
(Gain) loss on debt extinguishment 31 -
(Income) loss from equity-method investments 27 (4)
Share-based compensation 31 54
Amortization of discounts and debt issue costs 85 87
Noncash lease expense 72 68
(Gain) loss on ship sales and other, net (9) 12
-------- --------
316 (2,376)
Changes in operating assets and liabilities
Receivables (55) (120)
Inventories (6) (79)
Prepaid expenses and other assets (805) (395)
Accounts payable (23) 139
Accrued liabilities and other 69 12
Customer deposits 2,029 1,611
-------- --------
Net cash provided by (used in) operating activities 1,525 (1,209)
-------- --------
INVESTING ACTIVITIES
Purchases of property and equipment (1,772) (3,221)
Proceeds from sales of ships 255 55
Purchase of short-term investments - (315)
Proceeds from maturity of short-term investments - 364
Other, net 8 10
-------- --------
Net cash provided by (used in) investing activities (1,509) (3,107)
-------- --------
FINANCING ACTIVITIES
Repayments of short-term borrowings (200) (114)
Principal repayments of long-term debt (2,294) (684)
Proceeds from issuance of long-term debt 1,016 3,334
Issuance of common stock, net 5 30
Issuance of common stock under the Stock Swap Program 22 89
Purchase of treasury stock under the Stock Swap Program (20) (82)
Debt issue costs and other, net (81) (111)
-------- --------
Net cash provided by (used in) financing activities (1,552) 2,463
-------- --------
Effect of exchange rate changes on cash, cash equivalents
and restricted cash 6 (35)
-------- --------
Net increase (decrease) in cash, cash equivalents and
restricted cash (1,530) (1,888)
Cash, cash equivalents and restricted cash at beginning
of period 6,037 8,976
-------- --------
Cash, cash equivalents and restricted cash at end of period $4,507 $7,089
======== ========
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 February 28, 2022 $11 $361 $15,360 $4,493 $(1,486) $(8,428) $10,311
Net income (loss) - - - (1,834) - - (1,834)
Other comprehensive
income
(loss) - - - - (257) - (257)
Issuances of common
stock,
net - - 15 - - - 15
Purchases and
issuances
under the Stock Swap
program, net - - 62 - - (57) 6
Issuance of treasury
shares for vested
share-based
awards - - - (9) - 9 -
Share-based
compensation
and other - - 19 (1) - - 19
------ -------- ---------- ------------- -------- -------- --------------
At May 31, 2022 $11 $361 $15,457 $2,649 $(1,742) $(8,476) $8,260
====== ======== ========== ============= ======== ======== ==============
At February 28, 2023 $12 $361 $16,635 $(434) $(1,972) $(8,433) $6,170
Net income (loss) - - - (407) - - (407)
Other comprehensive
income
(loss) - - - - 69 - 69
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 - - (5) - - 5 -
Share-based
compensation
and other - - 24 - - (1) 23
------ -------- ---------- ------------- -------- -------- --------------
At May 31, 2023 $12 $361 $16,684 $(841) $(1,903) $(8,449) $5,865
====== ======== ========== ============= ======== ======== ==============
Six Months Ended
-------------------------------------------------------------------------------
Retained
Additional earnings Total
Common Ordinary paid-in (accumulated Treasury shareholders'
stock shares capital deficit) AOCI stock equity
------ -------- ---------- ------------- -------- -------- --------------
At November 30, 2021 $11 $361 $15,292 $6,448 $(1,501) $(8,466) $12,144
Net income (loss) - - - (3,726) - - (3,726)
Other comprehensive
income
(loss) - - - - (241) - (241)
Issuances of common
stock,
net - - 30 - - - 30
Purchases and
issuances
under the Stock Swap
program, net - - 89 - - (82) 8
Issuance of treasury
shares for vested
share-based
awards - - - (72) - 72 -
Share-based
compensation
and other - - 45 (1) - - 45
------ -------- ---------- ------------- -------- -------- --------------
At May 31, 2022 $11 $361 $15,457 $2,649 $(1,742) $(8,476) $8,260
====== ======== ========== ============= ======== ======== ==============
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) - - - (1,100) - - (1,100)
Other comprehensive
income
(loss) - - - - 79 - 79
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 - - 52 - - (2) 50
------ -------- ---------- ------------- -------- -------- --------------
At May 31, 2023 $12 $361 $16,684 $(841) $(1,903) $(8,449) $5,865
====== ======== ========== ============= ======== ======== ==============
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 and Management's Plans
In the face of the global impact of COVID-19, we paused our
guest cruise operations in March 2020 and began resuming guest
cruise operations in 2021. As of May 31, 2023, our return to guest
cruise operations was complete.
As part of our liquidity management, we rely on estimates of our
future liquidity, which includes numerous assumptions that are
subject to various risks and uncertainties. The principal
assumptions used to estimate our future liquidity consist of:
-- Our continued cruise operations and expected timing of cash collections for cruise bookings
-- Expected increases in revenue in 2023 on a per passenger basis compared to 2019
-- Expected improvement in occupancy on a year-over-year basis
-- Stabilization of fuel prices around or below November 2022 year-end prices
-- Continued stabilization of inflationary pressures on costs
compared to 2022, moderated by a larger-more efficient fleet as
compared to 2019
In addition, we make certain assumptions about new ship
deliveries, improvements and removals, and consider the future
export credit financings that are associated with the new ship
deliveries.
We have a substantial debt balance as a result of the pause in
guest cruise operations and require a significant amount of
liquidity or cash provided by operating activities to service our
debt. In addition, the continued effects of the pandemic,
inflation, higher fuel prices, higher interest rates and
fluctuations in foreign currency rates are collectively having a
material negative impact on our financial results. The full extent
of the collective impact of these items is uncertain and may be
amplified by our substantial debt balance. We believe we have made
reasonable estimates and judgments of the impact of these events
within our consolidated financial statements and there may be
changes to those estimates in future periods.
For the past three years we have taken appropriate actions to
manage our liquidity, including completing various capital market
transactions, obtaining relevant financial covenant amendments or
waivers (see Note 3 - "Debt"), accelerating the removal of certain
ships from the fleet, and during the pause, reducing capital
expenditures and operating expenses.
Based on these actions and our assumptions, and considering our
$7.3 billion of liquidity including cash and cash equivalents and
borrowings available under our $1.6 billion, EUR1.0 billion and
GBP0.2 billion multi-currency revolving credit facility (the
"Revolving Facility") at May 31, 2023, 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.
We will continue to pursue various opportunities to refinance
future debt maturities 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 six months ended May 31,
2023 and 2022, and the Consolidated Balance Sheet at May 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 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. The adoption
of this guidance did not have a material impact on our consolidated
financial statements. We expect that all of our outstanding debt
and derivative instruments referenced to U.S. dollar LIBOR will be
transitioned to Term Secured Overnight Financing Rate ("SOFR") by
June 30, 2023.
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 six months ended May 31, fees, taxes,
and charges included in commissions, transportation and other costs
were $173 million and $344 million in 2023 and $96 million and $164
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 $7.2 billion as of May 31, 2023 and $5.1
billion as of November 30, 2022, which includes approximately $162
million of unredeemed FCCs as of May 31, 2023, of which
approximately $119 million are refundable. Given the uncertainty of
travel demand caused by COVID-19 and 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 six months ended May
31, 2023 and 2022, we recognized revenues of $3.6 billion and $1.4
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. 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 $322 million as of
May 31, 2023 and $218 million as of November 30, 2022.
NOTE 3 - Debt
November
May 31, 30,
------- --------
(in millions) Maturity Rate (a) (b) 2023 2022
------------- -------------- ------- --------
Secured Subsidiary
Guaranteed
------------------------------------
Notes
Notes Feb 2026 10.5% $775 $775
EUR Notes Feb 2026 10.1% 455 439
Notes Jun 2027 7.9% 192 192
Notes Aug 2027 9.9% 900 900
Notes Aug 2028 4.0% 2,406 2,406
Loans
EUR floating rate Jun 2025 EURIBOR + 3.8% 833 808
Jun 2025 - LIBOR + 3.0 -
Floating rate Oct 2028 3.3% 4,080 4,101
------- --------
Total Secured Subsidiary Guaranteed 9,640 9,621
------- --------
Senior Priority Subsidiary
Guaranteed
------------------------------------ ------- --------
Notes May 2028 10.4% 2,030 2,030
------- --------
Unsecured Subsidiary
Guaranteed
------------------------------------
Revolver
Facility (c) LIBOR + 0.7% - 200
Notes
Convertible Notes Apr 2023 5.8% - 96
Convertible Notes Oct 2024 5.8% 426 426
Notes Mar 2026 7.6% 1,450 1,450
EUR Notes Mar 2026 7.6% 535 517
Notes Mar 2027 5.8% 3,500 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% 300 590
SONIA + 0.9%
GBP floating rate Feb 2025 (d) 432 419
Apr 2024 - EURIBOR + 2.4
EUR floating rate (e) Mar 2026 - 4.0% 749 827
Export Credit Facilities
Floating rate Dec 2031 LIBOR + 0.8 617 1,246
Aug 2027 -
Fixed rate Dec 2032 2.4 - 3.4% 2,950 3,143
May 2024 - EURIBOR + 0.2
EUR floating rate Nov 2034 - 0.8% 3,201 3,882
Feb 2031 -
EUR fixed rate Jan 2036 1.1 - 3.4% 3,582 2,592
------- --------
Total Unsecured Subsidiary Guaranteed 21,874 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% 642 620
------- --------
Total Unsecured Notes (No Subsidiary
Guarantee) 967 945
------- --------
Total Debt 34,511 35,615
Less: unamortized debt
issuance costs and discounts (802) (1,069)
------- --------
Total Debt, net of
unamortized debt issuance
costs and discounts 33,710 34,546
------- --------
Less: short-term borrowings - (200)
Less: current portion
of long-term debt (1,789) (2,393)
------- --------
Long-Term Debt $31,921 $31,953
======= ========
-- The reference rates for substantially all of our LIBOR and
EURIBOR based variable debt have 0.0% to 0.75% floors.
-- 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.
-- See "Short-Term Borrowings" below.
-- The interest rate for the GBP unsecured loan is subject to a
credit adjustment spread ranging from 0.03% to 0.28%. The
referenced Sterling Overnight Index Average ("SONIA") rate with the
credit adjustment spread is subject to a 0% floor.
-- In March 2023, we entered into an amendment of a EUR floating
rate loan to extend maturity through April 2024.
Carnival Corporation and/or Carnival plc is the primary obligor
of all our outstanding debt excluding $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, and $0.2 billion under an export credit facility of
Sun Princess Limited, a subsidiary of Carnival Corporation.
All 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 facility of Sun Princess Limited, which
does not guarantee our other outstanding debt
As of May 31, 2023, the scheduled maturities of our debt are as
follows:
(in millions)
Year Principal Payments
------------------
3Q 2023 $394
4Q 2023 431
2024 (a) 2,420
2025 4,297
2026 4,466
2027 5,700
Thereafter 16,803
------------------
Total $34,511
==================
Subsequent to May 31, 2023, we pre-paid $300 million of 2024
debt maturities.
Short-Term Borrowings
As of May 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 re-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 May 31, 2023. The 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. We are required to pay a
commitment fee on any unutilized portion.
New Revolving Facility
In February 2023, Carnival Holdings (Bermuda) II Limited
("Carnival Holdings II") entered into a $2.1 billion multi-currency
revolving facility ("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
May 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.
Export Credit Facility Borrowings
During the six months ended May 31, 2023, we borrowed $0.8
billion under an export credit facility due in semi-annual
installments through 2035 and $0.2 billion under an export credit
facility due in semi-annual installments starting in July 2024
through 2036. In addition, we paid down $1.0 billion of floating
rate unsecured borrowings mostly with 2023 and 2024 maturities. As
of May 31, 2023, the net book value of the vessels subject to
negative pledges was $15.4 billion.
Collateral and Priority Pool
As of May 31, 2023, the net book value of our ships and ship
improvements, excluding ships under construction, is $37.1 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 $23.3 billion, including $21.7 billion related to
vessels and certain assets related to those vessels) as of May 31,
2023 and certain other assets.
As of May 31, 2023, $8.3 billion in net book value of our ships
and ship improvements have been contributed to Carnival Holdings
and included in the vessel priority pool of 12 unencumbered vessels
(the "Senior Priority Notes Subject Vessels") for our 2028 Senior
Priority Notes. As of May 31, 2023, there was no change in the
identity of the Senior Priority Notes Subject Vessels.
Covenant Compliance
As of May 31, 2023, 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:
o 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.
o For substantially all of 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 75% until the May 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:
o 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-lien 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
o 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 May 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.
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. The action also raised
certain monopolization claims under The Sherman Antitrust Act of
1890, unfair competition and tortious interference, and sought
declaratory judgment that certain Carnival Corporation patents are
unenforceable. DeCurtis sought damages, including its fees and
costs, and declarations that it is not infringing and/or that
Carnival Corporation's patents are unenforceable. 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.
Carnival Corporation sought damages, including its fees and costs,
as well as an order permanently enjoining DeCurtis from engaging in
such activities. These two cases were consolidated in the Southern
District of Florida. On February 8, 2023, the Court granted summary
judgment in Carnival Corporation's favor on DeCurtis' antitrust,
unfair competition, and tortious interference claims. The trial
began on February 27, 2023, with the patent issues narrowed to
certain claims of one Carnival Corporation patent. 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 Chapter 11 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 May 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 May 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 intent 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. As of May 31, 2023 and November 30, 2022, we had
$2.2 billion and $1.7 billion in reserve funds related to our
customer deposits provided to satisfy these requirements which are
included within other assets. Additionally, as of May 31, 2023 and
November 30, 2022, we had $237 million and $229 million in
compensating deposits we are required to maintain and $30 million
of cash collateral in escrow which is included within other assets.
Subsequent to May 31, 2023, we provided $380 million in restricted
cash deposits which will be included within other assets. We
continue to expect to provide reserve funds and restricted cash
deposits under these agreements.
Ship Commitments
As of May 31, 2023, we expect the timing of our new ship growth
capital commitments to be as follows:
(in millions)
Year
Remainder of 2023 $691
2024 2,416
2025 944
Thereafter -
------
$4,051
======
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
May 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) $24,298 $- $21,005 $- $23,542 $- $18,620 $-
Floating rate debt (a) 10,213 - 8,812 - 12,074 - 10,036 -
-------- ----- ------- ----- -------- ----- ------- -----
Total $34,511 $- $29,817 $- $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
May 31, 2023 November 30, 2022
Level Level Level Level Level Level
(in millions) 1 2 3 1 2 3
------ ----- ----- ------- ----- -----
Assets
Cash and cash equivalents $4,468 $- $- $4,029 $- $-
Restricted cash 38 - - 1,988 - -
Derivative financial instruments - 21 - - 1 -
------ ----- ----- ------- ----- -----
Total $4,507 $21 $- $6,016 $1 $-
====== ===== ===== ======= ===== =====
Liabilities
Derivative financial instruments $- $41 $- $- $- $-
------ ----- ----- ------- ----- -----
Total $- $41 $- $- $- $-
====== ===== ===== ======= ===== =====
The restricted cash amount at May 31, 2023 includes $20 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 May 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 - 8 8
-------- -------- ------
May 31, 2023 $927 $231 $1,158
======== ======== ======
Derivative Instruments and Hedging Activities
Balance Sheet November 30,
(in millions) Location May 31, 2023 2022
----------------- ------------ ------------
Derivative assets
Derivatives designated as hedging
instruments
Prepaid expenses
Cross currency swaps (a) and other $- $-
Prepaid expenses
Interest rate swaps (b) and other 19 1
Other assets - 1
Derivatives not designated
as hedging instruments
Prepaid expenses
Interest rate swaps (b) and other 1 -
Total derivative assets $21 $1
============ ============
Derivative liabilities
Derivatives designated as hedging
instruments
Other long-term
Interest rate swaps (b) liabilities 41 -
------------ ------------
Total derivative liabilities $41 $-
============ ============
(a) At May 31, 2023, we had a cross currency swap totaling $653
million that is designated as a hedge of our net investment in
foreign operations with euro-denominated functional currencies. At
May 31, 2023, this cross currency swap settles through 2024.
(b) 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 $69 million at May 31, 2023 and $89 million at
November 30, 2022 of EURIBOR-based floating rate euro debt to fixed
rate euro debt. As of May 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 six months ended May 31, 2023 we entered into interest
rate swap agreements which effectively changed $2.5 billion at May
31, 2023 of LIBOR-based floating rate USD debt to fixed rate USD
debt. At May 31, 2023, these interest rate swaps settle through
2027 and are designated as cash flow hedges.
Our derivative contracts include rights of offset with our
counterparties. We have elected to net certain of our derivative
assets and liabilities within counterparties, when applicable.
May 31, 2023
Gross Amounts Total Net Amounts Gross Amounts
Offset in Presented in not Offset
Gross the Balance the Balance in the Balance
(in millions) Amounts Sheet Sheet Sheet Net Amounts
-------- ------------- ----------------- --------------- -----------
Assets $21 $- $21 $- $21
Liabilities $41 $- $41 $- $41
November 30, 2022
------------------------------------------------------------------------
Gross Amounts Total Net Amounts Gross Amounts
Offset in Presented in not Offset
Gross the Balance the Balance in the Balance
(in millions) Amounts Sheet Sheet Sheet Net Amounts
-------- ------------- ----------------- --------------- -----------
Assets $1 $- $1 $- $1
Liabilities $- $- $- $- $-
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
Ended Six Months Ended
May 31, May 31,
-------------- ------------------
(in millions) 2023 2022 2023 2022
------ ------ -------- --------
Gains (losses) recognized in AOCI:
Cross currency swaps - net investment
hedges - included component $(5) $27 $9 $33
Cross currency swaps - net investment
hedges - excluded component $- $(11) $(4) $(20)
Interest rate swaps - cash flow hedges $(33) $6 $(19) $9
Gains (losses) reclassified from AOCI
- cash flow hedges:
Interest rate swaps - Interest expense,
net of capitalized interest $9 $(1) $10 $(1)
Foreign currency zero cost collars - Depreciation
and amortization $- $1 $1 $1
Gains (losses) recognized on derivative
instruments (amount excluded from effectiveness
testing - net investment hedges)
Cross currency swaps - Interest expense,
net of capitalized interest $3 $3 $4 $4
The amount of gains and losses on derivatives not designated as
hedging instruments recognized in earnings during the three and six
months ended May 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 ship maintenance
practices, modifying our itineraries and implementing innovative
technologies.
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 May 31,
2023, we have designated $432 million of our sterling-denominated
debt as non-derivative hedges of our net investments in foreign
operations and also had a cross currency swap with a notional
amount of $653 million, which is designated as a hedge of our net
investments in foreign operations. For the three and six months
ended May 31, 2023, we recognized $20 million and $9 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 May 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 $3.5 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. We have not experienced significant credit losses,
including counterparty nonperformance on our trade receivables and
contingent obligations.
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, (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.
Beginning in the first quarter of 2023, we renamed the EA
segment given that China has not reopened to international cruise
travel. As a result, we have significantly reduced operations in
Asia and leveraged the mobility of our cruise ships and our brand
portfolio to build alternate deployments. In 2019, our most recent
full year of guest cruise operations, China accounted for 7% of our
guests.
Three Months Ended May 31,
-----------------------------------------------------------------------
Operating Selling Depreciation Operating
costs and and and income
(in millions) Revenues expenses administrative amortization (loss)
-------- ---------- --------------- ------------- ---------
2023
NAA $3,355 $2,282 $435 $374 $265
Europe 1,465 1,101 222 169 (27)
Cruise Support 55 29 71 48 (93)
Tour and Other 35 45 8 7 (25)
-------- ---------- --------------- ------------- ---------
$4,911 $3,457 $736 $597 $120
======== ========== =============== ============= =========
2022
NAA $1,666 $1,768 $366 $353 $(821)
Europe 666 848 175 179 (536)
Cruise Support 40 26 71 35 (92)
Tour and Other 29 41 6 6 (24)
-------- ---------- --------------- ------------- ---------
$2,401 $2,683 $619 $572 $(1,473)
======== ========== =============== ============= =========
Six Months Ended May 31,
-----------------------------------------------------------------------
Operating Selling Depreciation Operating
costs and and and income
(in millions) Revenues expenses administrative amortization (loss)
-------- ---------- --------------- ------------- ---------
2023
NAA $6,434 $4,471 $875 $738 $351
Europe 2,759 2,179 436 338 (193)
Cruise Support 106 55 124 90 (162)
Tour and Other 44 64 14 13 (47)
-------- ---------- --------------- ------------- ---------
$9,343 $6,768 $1,448 $1,179 $(52)
======== ========== =============== ============= =========
2022
NAA $2,792 $3,055 $710 $687 $(1,661)
Europe 1,123 1,546 352 359 (1,134)
Cruise Support 73 54 75 68 (126)
Tour and Other 37 57 12 11 (44)
-------- ---------- --------------- ------------- ---------
$4,024 $4,713 $1,149 $1,126 $(2,964)
======== ========== =============== ============= =========
Revenue by geographic areas, which are based on where our guests
are sourced, were as follows:
Three Months
Ended Six Months Ended
May 31, May 31,
(in millions) 2023 2022 2023 2022
------ ------ -------- --------
North America $2,988 $1,620 $5,684 $2,738
Europe 1,446 741 2,633 1,220
Australia 307 4 645 4
Other 169 35 380 61
------ ------ -------- --------
$4,911 $2,401 $9,343 $4,024
====== ====== ======== ========
NOTE 7 - Earnings Per Share
Three Months Ended Six Months Ended
May 31, May 31,
-------------------- ------------------
(in millions, except per share data) 2023 2022 2023 2022
--------- --------- -------- --------
Net income (loss) for basic and diluted
earnings per share $(407) $(1,834) $(1,100) $(3,726)
========= ========= ======== ========
Weighted-average shares outstanding 1,263 1,140 1,261 1,139
Dilutive effect of equity plans - - - -
--------- --------- -------- --------
Diluted weighted-average shares outstanding 1,263 1,140 1,261 1,139
========= ========= ======== ========
Basic earnings per share $(0.32) $(1.61) $(0.87) $(3.27)
========= ========= ======== ========
Diluted earnings per share $(0.32) $(1.61) $(0.87) $(3.27)
========= ========= ======== ========
Antidilutive shares excluded from diluted earnings per share
computations were as follows:
Three Months Ended Six Months Ended
May 31, May 31,
(in millions) 2023 2022 2023 2022
--------- --------- -------- --------
Equity awards 1 1 1 2
Convertible Notes 130 52 134 52
--------- --------- -------- --------
Total antidilutive securities 131 53 134 54
========= ========= ======== ========
NOTE 8 - Supplemental Cash Flow Information
November 30,
(in millions) May 31, 2023 2022
------------ ------------
Cash and cash equivalents (Consolidated
Balance Sheets) $4,468 $4,029
Restricted cash (Consolidated Balance Sheets) 18 1,988
Restricted cash (included in other assets) 20 20
------------ ------------
Total cash, cash equivalents and restricted
cash (Consolidated Statements of Cash Flows) $4,507 $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.
NOTE 10 - 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 and six months ended May 31, 2023 under the
Stock Swap Program, we sold 2.3 million shares of Carnival
Corporation common stock and repurchased the same amount of
Carnival plc ordinary shares resulting in net proceeds of $2
million, which were used for general corporate purposes. During the
three and six months ended May 31, 2022 under the Stock Swap
Program, we sold 3.9 million and 5.2 million shares of Carnival
Corporation common stock and repurchased the same amount of
Carnival plc ordinary shares resulting in net proceeds of $6
million and $8 million, which were used for general corporate
purposes.
In addition, during the three and six months ended May 31, 2023,
we sold 0.5 million shares of Carnival Corporation common stock at
an average price per share of $9.83, resulting in net proceeds of
$5 million. During the three and six months ended May 31, 2022, we
sold 0.8 million and 1.6 million shares of Carnival Corporation
common stock at an average price per share of $18.54 and $19.27,
resulting in net proceeds of $15 million and $30 million.
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 invasion of Ukraine, inflation,
higher fuel prices, 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, impacting 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. The seasonality of our results
also increases due to ships being taken out-of-service for
maintenance, which we schedule during non-peak demand periods. 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 increased cost of fuel and other related costs
are reasonably likely to continue to impact our profitability in
both the short and long-term.
-- We believe inflation and higher interest rates are reasonably
likely to continue to impact our profitability.
-- 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 Six Months Ended
May 31, May 31,
-------------------- ------------------
2023 2022 2023 2022
--------- --------- -------- --------
Passenger Cruise Days ("PCDs") (in
millions) (a) 21.8 11.4 42.0 18.7
Available Lower Berth Days ("ALBDs")
(in millions) (b) 22.3 16.7 44.3 30.0
Occupancy percentage (c) 98% 69% 95% 62%
Passengers carried (in millions) 3.0 1.7 5.7 2.7
Fuel consumption in metric tons
(in millions) 0.7 0.6 1.5 1.2
Fuel consumption in metric tons
per thousand ALBDs 32.5 37.9 33.0 40.0
Fuel cost per metric ton consumed $677 $869 $704 $765
Currencies (USD to 1)
AUD $0.67 $0.73 $0.68 $0.72
CAD $0.74 $0.79 $0.74 $0.79
EUR $1.08 $1.08 $1.08 $1.11
GBP $1.23 $1.29 $1.23 $1.32
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 Six Months
Ended Ended
May 31, May 31,
---------------- ------------------
(in millions) 2023 2022 Change 2023 2022 Change
------ -------- ------ -------- -------- ------
Revenues
Passenger ticket $3,141 $1,285 $1,856 $6,011 $2,158 $3,853
Onboard and other 1,770 1,116 654 3,332 1,866 1,466
------ -------- ------ -------- -------- ------
4,911 2,401 2,510 9,343 4,024 5,319
------ -------- ------ -------- -------- ------
Operating Costs and Expenses
Commissions, transportation
and other 619 325 294 1,274 576 698
Onboard and other 549 314 235 1,033 523 510
Payroll and related 601 533 68 1,183 1,038 145
Fuel 489 545 (56) 1,024 910 114
Food 325 191 134 636 327 309
Ship and other impairments - - - - 8 (8)
Other operating 875 774 101 1,619 1,331 287
------ -------- ------ -------- -------- ------
Cruise and tour operating expenses 3,457 2,683 774 6,768 4,713 2,055
Selling and administrative 736 619 118 1,448 1,149 299
Depreciation and amortization 597 572 25 1,179 1,126 52
4,791 3,874 917 9,394 6,988 2,406
------ -------- ------ -------- -------- ------
Operating Income (Loss) 120 (1,473) 1,593 (52) (2,964) 2,913
------ -------- ------ -------- -------- ------
Nonoperating Income (Expense)
Interest income 69 6 62 124 9 115
Interest expense, net of capitalized
interest (542) (370) (172) (1,082) (738) (343)
Gain (loss) on debt extinguishment,
net (31) - (31) (31) - (31)
Other income (expense), net (17) 6 (23) (47) (26) (21)
------ -------- ------ -------- -------- ------
(522) (358) (164) (1,036) (755) (281)
------ -------- ------ -------- -------- ------
Income (Loss) Before Income
Taxes $(402) $(1,831) $1,430 $(1,087) $(3,719) $2,632
====== ======== ====== ======== ======== ======
NAA
Three Months Six Months
Ended Ended
May 31, May 31,
-------------- ----------------
(in millions) 2023 2022 Change 2023 2022 Change
------ ------ ------ ------ -------- ------
Revenues
Passenger ticket $2,041 $862 $1,180 $3,933 $1,447 $2,486
Onboard and other 1,314 804 510 2,501 1,345 1,156
------ ------ ------ ------ -------- ------
3,355 1,666 1,689 6,434 2,792 3,642
------ ------ ------ ------ -------- ------
Operating Costs and Expenses 2,282 1,768 514 4,471 3,055 1,415
Selling and administrative 435 366 68 875 710 165
Depreciation and amortization 374 353 21 738 687 50
3,091 2,487 603 6,083 4,453 1,630
------ ------ ------ ------ -------- ------
Operating Income (Loss) $265 $(821) $1,086 $351 $(1,661) $2,012
====== ====== ====== ====== ======== ======
Europe
Three Months Six Months
Ended Ended
May 31, May 31,
-------------- ----------------
(in millions) 2023 2022 Change 2023 2022 Change
------ ------ ------ ------ -------- ------
Revenues
Passenger ticket $1,112 $490 $622 $2,104 $832 $1,273
Onboard and other 353 175 178 655 291 364
------ ------ ------ ------ -------- ------
1,465 666 800 2,759 1,123 1,637
------ ------ ------ ------ -------- ------
Operating Costs and Expenses 1,101 848 252 2,179 1,546 633
Selling and administrative 222 175 47 436 352 84
Depreciation and amortization 169 179 (10) 338 359 (21)
1,492 1,202 290 2,952 2,257 696
------ ------ ------ ------ -------- ------
Operating Income (Loss) $(27) $(536) $510 $(193) $(1,134) $941
====== ====== ====== ====== ======== ======
The effects of the pause in guest cruise operations in March
2020 and subsequent resumption of our guest cruise operations,
inflation, higher fuel prices, higher interest rates and
fluctuations in foreign currency rates are collectively having a
material negative impact on all aspects of our business, including
our results of operations, liquidity and financial position. We
have a substantial debt balance and require a significant amount of
cash to service our debt and sustain our operations. Our ability to
generate cash will be affected by our ability to successfully
implement our business strategy, which includes increasing our
occupancy levels and pricing of our cruises, as well as 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 May 31, 2023 ("2023") Compared to Three
Months Ended May 31, 2022 ("2022")
Revenues
Consolidated
Cruise passenger ticket revenues made up 64% of our total
revenues in 2023 while onboard and other revenues made up 36%.
Revenues in 2023 increased by $2.5 billion to $4.9 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 full fleet was serving guests as of May 31,
2023, compared to 86% as of May 31, 2022. ALBDs increased to 22.3
million in 2023 as compared to 16.7 million in 2022. Occupancy for
2023 was 98% compared to 69% in 2022.
NAA Segment
Cruise passenger ticket revenues made up 61% of our NAA
segment's total revenues in 2023 while onboard and other cruise
revenues made up 39%. NAA segment revenues in 2023 increased by
$1.7 billion to $3.4 billion from $1.7 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 May 31, 2023, compared to 90%
as of May 31, 2022. ALBDs increased to 13.7 million in 2023 as
compared to 10.1 million in 2022. Occupancy for 2023 was 102%
compared to 79% in 2022.
Europe Segment
Cruise passenger ticket revenues made up 76% of our Europe
segment's total revenues in 2023 while onboard and other cruise
revenues made up 24%. Europe segment revenues in 2023 increased by
$0.8 billion to $1.5 billion from $0.7 billion in 2022 due to the
significant increase of ships in service and considerably higher
occupancy levels in 2023 as compared to 2022. Our Europe segment's
full fleet was serving guests as of May 31, 2023, compared to 81%
as of May 31, 2022. ALBDs increased to 8.5 million in 2023 as
compared to 6.6 million in 2022. Occupancy for 2023 was 91%
compared to 53% in 2022.
Operating Cost and Expenses
Consolidated
Operating costs and expenses increased by $0.8 billion to $3.5
billion in 2023 from $2.7 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 $56 million to $489 million in 2023 from
$545 million in 2022. $137 million of this decrease was caused by a
decrease in fuel prices and changes in fuel mix of $189 per metric
ton consumed in 2023 compared to 2022, partially offset by $80
million from higher fuel consumption of 0.1 million metric tons,
due to the resumption of guest cruise operations.
Selling and administrative expenses increased by $118 million to
$736 million in 2023 from $619 million in 2022. The increase was
caused by higher administrative expenses and advertising costs
incurred as part of our resumption of guest cruise operations.
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 $172
million to $542 million in 2023 from $370 million in 2022. The
increase was caused by a higher average interest rate in 2023
compared to 2022.
Six Months Ended May 31, 2023 ("2023") Compared to Six Months
Ended May 31, 2022 ("2022")
Revenues
Consolidated
Cruise passenger ticket revenues made up 64% of our total
revenues in 2023 while onboard and other revenues made up 36%.
Revenues in 2023 increased by $5.3 billion to $9.3 billion from
$4.0 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 May 31,
2023, compared to 86% as of May 31, 2022. ALBDs increased to 44.3
million in 2023 as compared to 30.0 million in 2022. Occupancy for
2023 was 95% compared to 62% in 2022.
NAA Segment
Cruise passenger ticket revenues made up 61% of our NAA
segment's total revenues in 2023 while onboard and other cruise
revenues made up 39%. NAA segment revenues in 2023 increased by
$3.6 billion to $6.4 billion from $2.8 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 May 31, 2023, compared to 90%
as of May 31, 2022. ALBDs increased to 27.6 million in 2023 as
compared to 18.8 million in 2022. Occupancy for 2023 was 100%
compared to 70% in 2022.
Europe Segment
Cruise passenger ticket revenues made up 76% of our Europe
segment's total revenues in 2023 while onboard and other cruise
revenues made up 24%. Europe segment revenues in 2023 increased by
$1.6 billion to $2.8 billion from $1.1 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 May 31, 2023, compared to 81%
as of May 31, 2022. ALBDs increased to 16.7 million in 2023 as
compared to 11.2 million in 2022. Occupancy for 2023 was 85%
compared to 50% in 2022.
Operating Cost and Expenses
Consolidated
Operating costs and expenses increased by $2.1 billion to $6.8
billion in 2023 from $4.7 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 increased by $0.1 billion to $1.0 billion in 2023
from $0.9 billion in 2022. $0.2 billion of this increase was caused
by higher fuel consumption of 0.3 million metric tons, due to the
resumption of guest cruise operations, partially offset by $0.1
billion from a decrease in fuel prices and changes in fuel mix of
$60 per metric ton consumed in 2023 compared to 2022.
Selling and administrative expenses increased by $0.3 billion to
$1.4 billion in 2023 from $1.1 billion in 2022. The increase was
caused by higher administrative expenses and advertising costs
incurred as part of our resumption of guest cruise operations.
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 $0.3
billion to $1.1 billion in 2023 from $0.7 billion in 2022. The
increase was caused by a higher average interest rate in 2023
compared to 2022.
Liquidity, Financial Condition and Capital Resources
As of May 31, 2023, we had $7.3 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 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 $5.6 billion as of May 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 an increase in customer deposits and an overall decrease
in cash and cash equivalents and restricted cash. 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 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 $6.9 billion and $4.9
billion of customer deposits as of May 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, Liquidity and Management's Plans" of
the consolidated financial statements for additional discussion
regarding our liquidity.
Sources and Uses of Cash
Operating Activities
Our business provided $1.5 billion of net cash flows from
operating activities during the six months ended May 31, 2023, an
increase of $2.7 billion, compared to $1.2 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 six months ended May 31, 2023, net cash used in
investing activities was $1.5 billion. This was driven by:
-- Capital expenditures of $1.1 billion for our ongoing new shipbuilding program
-- Capital expenditures of $649 million for ship improvements
and replacements, information technology and buildings and
improvements
-- Proceeds from sales of ships of $255 million
During the six months ended May 31, 2022, net cash used in
investing activities was $3.1 billion. This was driven by:
-- Capital expenditures of $2.6 billion for our ongoing new shipbuilding program
-- Capital expenditures of $581 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 $364 million
Financing Activities
During the six months ended May 31, 2023, net cash used in
financing activities of $1.6 billion was driven by:
-- Repayments of $0.2 billion of short term-borrowings
-- Repayments of $2.3 billion of long-term debt
-- Issuances of $1.0 billion of long-term debt
-- Payments of $94 million related to debt issuance costs
-- Purchases of $20 million of Carnival plc ordinary shares and
issuances of $22 million of Carnival Corporation common stock under
our Stock Swap Program
During the six months ended May 31, 2022, net cash provided by
financing activities of $2.5 billion was caused by:
-- Issuances of $3.3 billion of long-term debt
-- Repayments of $0.7 billion of long-term debt
-- Payments of $110 million related to debt issuance costs
-- Net repayments of short-term borrowings of $114 million
-- Purchases of $82 million of Carnival plc ordinary shares and
issuances of $89 million of Carnival Corporation common stock under
our Stock Swap Program
Funding Sources
As of May 31, 2023, we had $7.3 billion of liquidity including
$4.5 billion of cash and cash equivalents and $2.9 billion of
borrowings available under our Revolving Facility, which matures in
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 $3.1 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 May 31, 2023 $0.1 $2.2 $0.7
Our export credit facilities contain various financial covenants
as described in Note 3 - "Debt". At May 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.
Interest Rate Risks
The composition of our debt, interest rate swaps and cross
currency swaps, was as follows:
May 31, 2023
------------
Fixed rate 61%
EUR fixed rate 17%
Floating rate 7%
EUR floating rate 14%
GBP floating rate 1%
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 May 31, 2023, that they are effective at 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 May 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 below 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
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 . 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
May 31, 2023 under the Stock Swap Program, we sold 2.3 million
shares of Carnival Corporation common stock and repurchased the
same amount of Carnival plc ordinary shares resulting in net
proceeds of $2 million, which were used for general corporate
purposes. In addition, during the three months ended May 31, 2023,
we sold 0.5 million shares of Carnival Corporation common stock at
an average price per share of $9.83, resulting in net proceeds of
$5 million. 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
May 31, 2023 outside of the Stock Swap Program.
Maximum Number
of Carnival plc
Total Number Ordinary Shares
of Shares of Average Price That May Yet Be
Carnival plc Paid per Share Purchased Under
Ordinary Shares of Carnival the Carnival Corporation
Purchased (a) plc Ordinary Stock Swap Program
Period (in millions) Share (in millions)
---------------------------- ---------------- --------------- -------------------------
March 1, 2023 through March
31, 2023 - $- 3.7
April 1, 2023 through April
30, 2023 1.6 $8.60 2.2
May 1, 2023 through May
31, 2023 0.8 $8.92 1.4
---------------- ---------------
Total 2.3 $8.70
================ ===============
(a) No ordinary shares of Carnival plc were purchased outside of
publicly announced plans or programs.
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END
IR PPUCAQUPWGAR
(END) Dow Jones Newswires
June 28, 2023 12:10 ET (16:10 GMT)
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