TIDMCCL
RNS Number : 1601O
Carnival PLC
27 January 2023
January 27, 2023
RELEASE OF CARNIVAL CORPORATION & PLC JOINT ANNUAL REPORT ON
FORM 10-K
FOR THE YEARED NOVEMBER 30, 2022.
Carnival Corporation & plc announced its fourth quarter
results of operations in its earnings release issued on December
21, 2022. Carnival Corporation & plc is hereby announcing that
today it has filed its joint Annual Report on Form 10-K ( " Form
10-K " ) with the U.S. Securities and Exchange Commission ( " SEC "
) containing the Carnival Corporation & plc 2022 annual
consolidated financial statements, which reported results are
unchanged from those previously announced on December 21, 2022.
The information included in the Form 10-K (Schedule A) has been
prepared in accordance with SEC rules and regulations. The Carnival
Corporation & plc consolidated financial statements contained
in the Form 10-K have been prepared in accordance with generally
accepted accounting principles in the United States of America ( "
U.S. GAAP " ).
Schedule A contains the Carnival Corporation & plc
consolidated financial statements as of and for the year ended
November 30, 2022, management's discussion and analysis of
financial conditions and results of operations, and information on
Carnival Corporation and Carnival plc's sales and purchases of
their equity securities and use of proceeds from such sales.
The Directors consider that within the Carnival Corporation and
Carnival plc dual listed company arrangement, the most appropriate
presentation of Carnival plc's results and financial position is by
reference to the Carnival Corporation & plc U.S. GAAP unaudited
consolidated financial statements.
MEDIA CONTACT INVESTOR RELATIONS CONTACT
Jody Venturoni Beth Roberts
001 469 797 6380 001 305 406 4832
The Form 10-K 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-K has been submitted to
the National Storage Mechanism and will shortly be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. Additional
information can be obtained via Carnival Corporation & plc's
website listed above or by writing to Carnival plc at Carnival
House, 100 Harbour Parade, Southampton, SO15 1ST, United
Kingdom.
Carnival Corporation & plc is the largest global cruise
company and among the largest leisure travel companies with a
portfolio of world-class cruise lines. With operations in North
America, Australia, Europe and Asia, its portfolio features - AIDA
Cruises, Carnival Cruise Line, Costa Cruises, Cunard, Holland
America Line, Princess Cruises, P&O Cruises (Australia),
P&O Cruises (UK) and Seabourn. Additional information can be
found on www.carnivalcorp.com , www.carnivalsustainability.com ,
www.carnival.com , www.princess.com , www.hollandamerica.com ,
www.pocruises.com.au , www.seabourn.com , www.costacruise.com ,
www.aida.de , www.pocruises.com and www.cunard.com.
SCHEDULE A
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in millions, except per share data)
Years Ended November 30,
-----------------------------
2022 2021 2020
-------- -------- ---------
Revenues
Passenger ticket $7,022 $1,000 $3,684
Onboard and other 5,147 908 1,910
-------- -------- ---------
12,168 1,908 5,595
Operating Costs and Expenses
Commissions, transportation and other 1,630 269 1,139
Onboard and other 1,528 272 605
Payroll and related 2,181 1,309 1,780
Fuel 2,157 680 823
Food 863 187 413
Ship and other impairments 440 591 1,967
Other operating 2,958 1,346 1,518
-------- -------- ---------
11,757 4,655 8,245
Selling and administrative 2,515 1,885 1,878
Depreciation and amortization 2,275 2,233 2,241
Goodwill impairments - 226 2,096
-------- -------- ---------
16,547 8,997 14,460
-------- -------- ---------
Operating Income (Loss) (4,379) (7,089) (8,865)
-------- -------- ---------
Nonoperating Income (Expense)
Interest income 74 12 18
Interest expense, net of capitalized interest (1,609) (1,601) (895)
Gain (loss) on debt extinguishment, net (1) (670) (459)
Other income (expense), net (165) (173) (52)
-------- -------- ---------
(1,701) (2,433) (1,388)
-------- -------- ---------
Income (Loss) Before Income Taxes (6,080) (9,522) (10,253)
Income Tax Benefit (Expense), Net (14) 21 17
-------- -------- ---------
Net Income (Loss) $(6,093) $(9,501) $(10,236)
======== ======== =========
Earnings Per Share
Basic $(5.16) $(8.46) $(13.20)
======== ======== =========
Diluted $(5.16) $(8.46) $(13.20)
======== ======== =========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
Years Ended November 30,
-----------------------------
2022 2021 2020
-------- -------- ---------
Net Income (Loss) $(6,093) $(9,501) $(10,236)
-------- -------- ---------
Items Included in Other Comprehensive Income
(Loss)
Change in foreign currency translation adjustment (503) (118) 578
Other 22 53 51
-------- -------- ---------
Other Comprehensive Income (Loss) (481) (65) 630
-------- -------- ---------
Total Comprehensive Income (Loss) $(6,574) $(9,567) $(9,606)
======== ======== =========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(in millions, except par values)
November 30,
2022 2021
------- -------
ASSETS
Current Assets
Cash and cash equivalents $4,029 $8,939
Restricted cash 1,988 14
Short-term investments - 200
Trade and other receivables, net 395 246
Inventories 428 356
Prepaid expenses and other 652 379
------- -------
Total current assets 7,492 10,133
------- -------
Property and Equipment, Net 38,687 38,107
Operating Lease Right-of-Use Assets 1,274 1,333
Goodwill 579 579
Other Intangibles 1,156 1,181
Other Assets 2,515 2,011
------- -------
$51,703 $53,344
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $200 $2,790
Current portion of long-term debt 2,393 1,927
Current portion of operating lease liabilities 146 142
Accounts payable 1,050 797
Accrued liabilities and other 1,942 1,641
Customer deposits 4,874 3,112
------- -------
Total current liabilities 10,605 10,408
------- -------
Long-Term Debt 31,953 28,509
Long-Term Operating Lease Liabilities 1,189 1,239
Other Long-Term Liabilities 891 1,043
Commitments and Contingencies
Shareholders' Equity
Carnival Corporation common stock, $0.01 par value;
1,960 shares authorized; 1,244 shares at 2022 and
1,116 shares at 2021 issued 12 11
Carnival plc ordinary shares, $1.66 par value; 217
shares at 2022 and 2021 issued 361 361
Additional paid-in capital 16,872 15,292
Retained earnings 269 6,448
Accumulated other comprehensive income (loss) ("AOCI") (1,982) (1,501)
Treasury stock, 130 shares at 2022 and 2021 of Carnival
Corporation and 72 shares at 2022 and 67 shares at
2021 of Carnival plc, at cost (8,468) (8,466)
------- -------
Total shareholders' equity 7,065 12,144
------- -------
$51,703 $53,344
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Years Ended November 30,
-----------------------------
2022 2021 2020
-------- -------- ---------
OPERATING ACTIVITIES
Net income (loss) $(6,093) $(9,501) $(10,236)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities
Depreciation and amortization 2,275 2,233 2,241
Impairments 470 834 4,063
(Gain) loss on debt extinguishment 1 668 459
(Income) loss from equity-method investments 38 129 20
Share-based compensation 101 121 105
Amortization of discounts and debt issue
costs 171 172 119
Noncash lease expense 148 140 172
Other, net 57 137 (56)
-------- -------- ---------
(2,832) (5,067) (3,114)
Changes in operating assets and liabilities
Receivables (171) (7) 125
Inventories (95) (63) 77
Prepaid expenses and other (874) (1,070) (209)
Accounts payable 283 206 (165)
Accrued liabilities and other 341 601 (311)
Customer deposits 1,679 1,291 (2,703)
-------- -------- ---------
Net cash provided by (used in) operating
activities (1,670) (4,109) (6,301)
-------- -------- ---------
INVESTING ACTIVITIES
Purchases of property and equipment (4,940) (3,607) (3,620)
Proceeds from sales of ships and other 70 351 334
Purchase of minority interest (1) (90) (81)
Purchase of short-term investments (315) (2,873) -
Proceeds from maturity of short-term investments 515 2,673 -
Other, net (96) 3 127
-------- -------- ---------
Net cash provided by (used in) investing
activities (4,767) (3,543) (3,240)
-------- -------- ---------
FINANCING ACTIVITIES
Proceeds from (repayments of) short-term
borrowings, net (2,590) (293) 2,852
Principal repayments of long-term debt (2,075) (5,956) (1,621)
Premium paid on extinguishment of debt (1) (545) -
Proceeds from issuance of long-term debt 7,209 13,042 15,020
Dividends paid - - (689)
Purchases of common stock - - (12)
Issuance of common stock, net 1,180 1,009 3,249
Issuance of common stock under the Stock
Swap Program 95 206 -
Purchase of treasury stock under the Stock
Swap Program (87) (188) -
Debt issue costs and other, net (154) (327) (150)
-------- -------- ---------
Net cash provided by (used in) financing
activities 3,577 6,949 18,650
-------- -------- ---------
Effect of exchange rate changes on cash,
cash equivalents and restricted cash (79) (13) 53
-------- -------- ---------
Net increase (decrease) in cash, cash equivalents
and restricted cash (2,940) (715) 9,161
Cash, cash equivalents and restricted cash
at beginning of year 8,976 9,692 530
-------- -------- ---------
Cash, cash equivalents and restricted cash
at end of year $6,037 $8,976 $9,692
======== ======== =========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in millions)
Additional Total
Common Ordinary paid-in Retained Treasury shareholders'
stock shares capital earnings AOCI stock equity
------ -------- ---------- --------- -------- -------- --------------
At November 30, 2019 $7 $358 $8,807 $26,653 $(2,066) $(8,394) $25,365
Net income (loss) - - - (10,236) - - (10,236)
Other comprehensive income
(loss) - - - - 630 - 630
Cash dividends declared - - - (342) - - (342)
Issuances of common stock,
net 2 - 3,247 - - - 3,249
Issuance and repurchase
of Convertible Notes
(net settled through
a registered direct
offering) 2 - 1,798 - - - 1,799
Purchases of treasury
stock under the
Repurchase
Program and other - 2 97 - - (10) 89
------ -------- ---------- --------- -------- -------- --------------
At November 30, 2020 11 361 13,948 16,075 (1,436) (8,404) 20,555
Net income (loss) - - - (9,501) - - (9,501)
Other comprehensive income
(loss) - - - - (65) - (65)
Issuance of common stock,
net - - 1,009 - - - 1,009
Conversion of Convertible
Notes - - 15 - - - 15
Purchases and issuances
under the Stock Swap
program - - 206 - - (188) 19
Issuance of treasury
shares for vested
share-based
awards - - - (126) - 126 -
Share-based compensation
and other - - 113 - - - 113
------ -------- ---------- --------- -------- -------- --------------
At November 30, 2021 11 361 15,292 6,448 (1,501) (8,466) 12,144
Net income (loss) - - - (6,093) - - (6,093)
Other comprehensive income
(loss) - - - - (481) - (481)
Issuances of common
stock, net 1 - 1,178 - - - 1,180
Issuance of Convertible
Notes - - 229 - - - 229
Purchases and issuances
under the Stock Swap
program, net - - 95 - - (87) 8
Issuance of treasury
shares for vested
share-based
awards - - - (85) - 85 -
Share-based compensation
and other - - 79 (1) - - 78
------ -------- ---------- --------- -------- -------- --------------
At November 30, 2022 $12 $361 $16,872 $269 $(1,982) $(8,468) $7,065
====== ======== ========== ========= ======== ======== ==============
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - General
Description of Business
Carnival Corporation was incorporated in Panama in 1974 and
Carnival plc was incorporated in England and Wales in 2000.
Together with their consolidated subsidiaries, they are referred to
collectively in these consolidated financial statements and
elsewhere in this 2022 Annual Report as "Carnival Corporation &
plc," "our," "us" and "we." The consolidated financial statements
include the accounts of Carnival Corporation and Carnival plc and
their respective subsidiaries.
We are the largest global cruise company and among the largest
leisure travel companies with a portfolio of world-class cruise
lines. With operations in North America, Australia, Europe and
Asia, our portfolio features - AIDA Cruises, Carnival Cruise Line,
Costa Cruises, Cunard, Holland America Line, Princess Cruises,
P&O Cruises (Australia), P&O Cruises (UK) 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.
Given the DLC arrangement, we believe that providing separate
financial statements for each of Carnival Corporation and Carnival
plc would not present a true and fair view of the economic
realities of their operations. Accordingly, separate financial
statements for Carnival Corporation and Carnival plc have not been
presented.
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.
Based on the evolving nature of COVID-19 and our ongoing
collaboration with local and national public health authorities, we
have responsibly relaxed our related protocols, including greatly
reducing or eliminating testing requirements and vaccination
protocols to more closely align with the broader travel industry
and strengthening our competitiveness.
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, particularly with the responsible
relaxation of COVID-19 related protocols aligning towards
land-based vacation alternatives and strengthening our
competitiveness
-- Expected improvement in occupancy on a year-over-year basis
returning to historical levels in the summer of 2023
-- Stabilization of fuel prices around November 2022 year-end prices
-- Continued stabilization of inflationary pressures on costs,
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 almost 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 5 - "Debt"), accelerating the removal of certain
ships from the fleet, and during the pause, reducing capital
expenditures and operating expenses. As of November 30, 2022, 97%
of our capacity has resumed guest cruise operations and is serving
guests.
Based on these actions and our assumptions, and considering our
$8.6 billion of liquidity including cash, restricted cash from the
2028 Senior Priority Notes which became unrestricted in December
2022 and borrowings available under our $1.7 billion, EUR1.0
billion and GBP0.2 billion multi-currency revolving credit facility
(the "Revolving Facility") at November 30, 2022, 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 raise
additional capital to fund obligations associated with future debt
maturities and/or to extend the maturity dates associated with our
existing indebtedness including our Revolving Facility and obtain
relevant financial covenant amendments or waivers, if needed.
Actions to raise capital may include issuances of debt, convertible
debt or equity in private or public transactions or entering into
new and extended credit facilities.
NOTE 2 - Summary of Significant Accounting Policies
Basis of Presentation
We consolidate entities over which we have control, as typically
evidenced by a voting control of greater than 50% or for which we
are the primary beneficiary, whereby we have the power to direct
the most significant activities and the obligation to absorb
significant losses or receive significant benefits from the entity.
We do not separately present our noncontrolling interests in the
consolidated financial statements since the amounts are immaterial.
For affiliates we do not control but where significant influence
over financial and operating policies exists, as typically
evidenced by a voting control of 20% to 50%, the investment is
accounted for using the equity method.
For 2021, we reclassified $14 million from prepaid expenses and
other to restricted cash to conform to the current year
presentation.
Preparation of Financial Statements
The preparation of our 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 in our consolidated financial statements. 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. Actual results may differ from the estimates used in
preparing our consolidated financial statements. All material
intercompany balances and transactions are eliminated in
consolidation.
Cash and Cash Equivalents
Cash and cash equivalents include investments with maturities of
three months or less at acquisition which are stated at cost and
present insignificant risk of changes in value.
Restricted Cash
Restricted cash is classified as short-term or long-term based
on the expected timing of our ability to access or use the amounts.
The long-term portion is included within other assets.
Substantially all restricted cash as of November 30, 2022 relates
to the net proceeds from the issuance of our 2028 Senior Priority
Notes, which became unrestricted in December 2022.
Short-term Investments
Short-term investments include investments with maturities of
three to 12 months which are stated at cost and present
insignificant risk of changes in value.
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.
Inventories
Inventories consist substantially of food, beverages, hotel
supplies, fuel and retail merchandise, which are all carried at the
lower of cost or net realizable value. Cost is determined using the
weighted-average or first-in, first-out methods.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation and any impairment charges. We capitalize interest as
part of the cost of capital projects incurred during construction.
Depreciation is computed using the straight-line method over our
estimated useful lives of the assets to a residual value, as a
percentage of original cost, as follows:
Residual
Years Values
------------------------ --------
Ships 30 15%
Ship improvements 3 -30 0%
Buildings and improvements 10 -40 0%
Computer hardware and software 2 -12 0%
Transportation equipment and other 3 -20 0%
Shorter of the remaining
Leasehold improvements, including port lease term or related
facilities asset life (3-30) 0%
The cost of ships under construction includes progress payments
for the construction of new ships, as well as design and
engineering fees, capitalized interest, construction oversight
costs and various owner supplied items. Any liquidated damages
received from shipyards are recorded as reductions to the cost
basis of the ship.
We have a capital program for the improvement of our ships and
for asset replacements to enhance the effectiveness and efficiency
of our operations; to comply with, or exceed, all relevant legal
and statutory requirements related to health, environment, safety,
security and sustainability; and to gain strategic benefits or
provide improved product innovations to our guests. We account for
ship improvement costs, including replacements of certain
significant components and parts, by capitalizing those costs we
believe add value to our ships and have a useful life greater than
one year and depreciating those improvements over their estimated
remaining useful life. The costs of repairs and maintenance,
including those incurred when a ship is taken out-of-service for
scheduled maintenance, and minor improvement costs and expenses,
are charged to expense as incurred.
In addition, specifically identified or estimated cost and
accumulated depreciation of previously capitalized ship components
are written-off upon retirement, which may result in a loss on
disposal that is also included in other operating expenses.
We have estimated our ships' useful lives at 30 years and
residual values at 15% of our original ship cost. Our ship useful
life and residual value estimates take into consideration the
estimated weighted-average useful lives of the ships' major
component systems, such as hull, superstructure, main electric,
engines and cabins. We also take into consideration the impact of
technological changes, historical useful lives of similarly-built
ships, long-term cruise and vacation market conditions and
regulatory changes, including those related to the environment and
climate change. We determine the residual value of our ships based
on our long-term estimates of their resale value at the end of
their useful life to us but before the end of their physical and
economic lives to others, historical resale values of our and other
cruise ships as well as our expectations of the long-term viability
of the secondary cruise ship market. We review estimated useful
lives and residual values for reasonableness whenever events or
circumstances significantly change.
We evaluate ship asset impairments at the individual ship level
which is the lowest level for which identifiable cash flows are
largely independent of the cash flows of other assets and
liabilities. We review our ships for impairment whenever events or
circumstances indicate that the carrying value of a ship may not be
recoverable. If estimated future cash flows are less than the
carrying value of a ship, an impairment charge is recognized to the
extent its carrying value exceeds its estimated fair value.
Leases
Substantially all of our leases for which we are the lessee are
operating leases of port facilities and real estate and are
included within operating lease right-of-use assets, long-term
operating lease liabilities and current portion of operating lease
liabilities in our Consolidated Balance Sheets.
We have port facilities and real estate lease agreements with
lease and non-lease components, and in such cases, we account for
the components as a single lease component.
We do not recognize lease assets and lease liabilities for any
leases with an original term of less than one year. For some of our
port facilities and real estate lease agreements, we have the
option to extend our current lease term by 1 to 10 years.
Generally, we do not include renewal options as a component of our
present value calculation as we are not reasonably certain that we
will exercise the options.
As most of our leases do not have a readily determinable
implicit rate, we estimate the incremental borrowing rate ("IBR")
to determine the present value of lease payments. We apply judgment
in estimating the IBR including considering the term of the lease,
the currency in which the lease is denominated, and the impact of
collateral and our credit risk on the rate.
We amortize our lease assets on a straight-line basis over the
lease term.
Goodwill and Other Intangibles
Goodwill represents the excess of the purchase price over the
fair value of identifiable net assets acquired in a business
acquisition. We review our goodwill for impairment as of July 31
every year, or more frequently if events or circumstances dictate.
All of our goodwill has been allocated to our reporting units. The
impairment review for goodwill allows us to first assess
qualitative factors to determine whether it is necessary to perform
the more detailed quantitative goodwill impairment test. We would
perform the quantitative test if our qualitative assessment
determined it is more-likely-than-not that a reporting unit's
estimated fair value is less than its carrying amount. We may also
elect to bypass the qualitative assessment and proceed directly to
the quantitative test for any reporting unit. When performing the
quantitative test, if the estimated fair value of the reporting
unit exceeds its carrying value, no further analysis is required.
However, if the estimated fair value of the reporting unit is less
than the carrying value, goodwill is written down based on the
difference between the reporting unit's carrying amount and its
fair value, limited to the amount of goodwill allocated to the
reporting unit. Judgment is required in estimating the fair value
of our reporting unit.
Trademarks represent substantially all of our other intangibles.
Trademarks are estimated to have an indefinite useful life and are
not amortizable but are reviewed for impairment at least annually
and as events or circumstances dictate. The impairment review for
trademarks also allows us to first assess qualitative factors to
determine whether it is necessary to perform a more detailed
quantitative trademark impairment test. We would perform the
quantitative test if our qualitative assessment determined it was
more-likely-than-not that the trademarks are impaired. We may also
elect to bypass the qualitative assessment and proceed directly to
the quantitative test. Our trademarks would be considered impaired
if their carrying value exceeds their estimated fair value.
Equity Method Investments
Equity method investments are initially recognized at cost and
are included in other assets in the Consolidated Balance Sheets.
Our proportionate interest in their results is included in other
income (expense), net in the Consolidated Statements of Income.
Debt and Debt Issuance Costs
Debt is recorded at initial fair value, which normally reflects
the proceeds received by us, net of debt issuance costs. Debt is
subsequently stated at amortized cost. Debt issuance costs are
generally amortized to interest expense using the straight-line
method, which approximates the effective interest method, over the
term of the debt. Debt issue discounts and premiums are generally
amortized to interest expense using the effective interest rate
method over the term of the debt.
Derivatives and Other Financial Instruments
We have in the past and may in the future utilize derivative and
non-derivative financial instruments, such as foreign currency
forwards, options and swaps, foreign currency debt obligations and
foreign currency cash balances, to manage our exposure to
fluctuations in certain foreign currency exchange rates. We use
interest rate swaps primarily to manage our interest rate exposure
to achieve a desired proportion of fixed and floating rate debt.
Our policy is to not use financial instruments for trading or other
speculative purposes.
All derivatives are recorded at fair value. If a derivative is
designated as a cash flow hedge, then the change in the fair value
of the derivative is recognized as a component of AOCI until the
underlying hedged item is recognized in earnings or the forecasted
transaction is no longer probable. If a derivative or a
non-derivative financial instrument is designated as a hedge of our
net investment in a foreign operation, then changes in the
effective portion of the fair value of the financial instrument are
recognized as a component of AOCI to offset the change in the
translated value of the designated portion of net investment being
hedged until the investment is sold or substantially liquidated,
while the impact attributable to components excluded from the
assessment of hedge effectiveness is recorded in interest expense,
net of capitalized interest, on a systematic and rational basis.
For derivatives that do not qualify for hedge accounting treatment,
the change in fair value is recognized in earnings.
We classify the fair value of all our derivative contracts as
either current or long-term, depending on the maturity date of the
derivative contract. The cash flows from derivatives treated as
cash flow hedges are classified in our Consolidated Statements of
Cash Flows in the same category as the item being hedged.
Derivative valuations are based on observable inputs such as
interest rates and commodity price curves, forward currency
exchange rates, credit spreads, maturity dates, volatilities, and
cross currency basis spreads. We use the income approach to value
derivatives for foreign currency options and forwards, interest
rate swaps and cross currency swaps using observable market data
for all significant inputs and standard valuation techniques to
convert future amounts to a single present value amount, assuming
that participants are motivated but not compelled to transact.
Foreign Currency Translation and Transactions
These financial statements are presented in U.S. dollars. Each
foreign entity determines its functional currency by reference to
its primary economic environment. Our most significant foreign
entities utilize the U.S. dollar, Euro, Sterling or the Australian
dollar as their functional currencies. We translate the assets and
liabilities of our foreign entities that have functional currencies
other than the U.S. dollar at exchange rates in effect at the
balance sheet date. Revenues and expenses of these foreign entities
are translated at the average rate for the period. Equity is
translated at historical rates and the resulting foreign currency
translation adjustments are included as a component of AOCI, which
is a separate component of shareholders' equity. Therefore, the
U.S. dollar value of the non-equity translated items in our
consolidated financial statements will fluctuate from period to
period, depending on the changing value of the U.S. dollar versus
these currencies.
We execute transactions in a number of different currencies. At
the date that the transaction is recognized, each asset, liability,
revenue, expense, gain or loss arising from the transaction is
measured and recorded in the functional currency of the recording
entity using the exchange rate in effect at that date. At each
balance sheet date, recorded monetary balances denominated in a
currency other than the functional currency are adjusted using the
exchange rate at the balance sheet date, with gains or losses
recorded in other income or other expense, unless such monetary
balances have been designated as hedges of net investments in our
foreign entities. The net gains or losses resulting from foreign
currency transactions were not material in 2022, 2021 and 2020. In
addition, the unrealized gains or losses on our long-term
intercompany receivables and payables which are denominated in a
non-functional currency and which are not expected to be repaid in
the foreseeable future are recorded as foreign currency translation
adjustments included as a component of AOCI.
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. These fees, taxes and charges included in commissions,
transportation and other costs were $438 million in 2022, $73
million in 2021 and $215 million in 2020. 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 $5.1 billion and $3.5 billion as of November
30, 2022 and 2021, which includes approximately $210 million of
unredeemed FCCs as of November 30, 2022. 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 number
of FCCs that will not be used in future periods. Refunds payable to
guests who have elected cash refunds are recorded in accounts
payable. During 2022 and 2021, we recognized revenues of $1.9
billion and $0.1 billion related to our customer deposits as of
November 30, 2021 and 2020. Historically, 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.
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 $218 million and
$55 million as of November 30, 2022 and 2021.
Insurance
We use a combination of insurance and self-insurance to cover a
number of risks including illness and injury to crew, guest
injuries, pollution, other third-party claims in connection with
our cruise activities, damage to hull and machinery for each of our
ships, war risks, workers' compensation, directors' and officers'
liability, property damage and general liability for shoreside
third-party claims. We recognize insurance recoverables from
third-party insurers up to the amount of recorded losses at the
time the recovery is probable and upon settlement for amounts in
excess of the recorded losses. All of our insurance policies are
subject to coverage limits, exclusions and deductible levels. 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.
Selling and Administrative Expenses
Selling expenses include a broad range of advertising, marketing
and promotional expenses. Advertising is charged to expense as
incurred, except for media production costs, which are expensed
upon the first airing of the advertisement. Selling expenses
totaled $744 million in 2022, $340 million in 2021 and $348 million
in 2020. Administrative expenses represent the costs of our
shoreside support, reservations and other administrative functions,
and include salaries and related benefits, professional fees and
building occupancy costs, which are typically expensed as
incurred.
Share-Based Compensation
We recognize compensation expense for all share-based
compensation awards using the fair value method. For time-based
share awards, we recognize compensation cost ratably using the
straight-line attribution method over the expected vesting period
or to the retirement eligibility date, if earlier than the vesting
period. For performance-based share awards, we estimate
compensation cost based on the probability of the performance
condition being achieved and recognize expense ratably using the
straight-line attribution method over the expected vesting period.
If all or a portion of the performance condition is not expected to
be met, the appropriate amount of previously recognized
compensation expense is reversed and future compensation expense is
adjusted accordingly. For market-based share awards, we recognize
compensation cost ratably using the straight-line attribution
method over the expected vesting period. If the target market
conditions are not expected to be met, compensation expense will
still be recognized. We account for forfeitures as they occur.
Earnings Per Share
Basic earnings per share is computed by dividing net income
(loss) by the weighted-average number of shares outstanding during
each period. Diluted earnings per share is computed by dividing net
income (loss) by the weighted-average number of shares and common
stock equivalents outstanding during each period. For earnings per
share purposes, Carnival Corporation common stock and Carnival plc
ordinary shares are considered a single class of shares since they
have equivalent rights.
Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB")
issued Accounting Standard Update ("ASU") No. 2020-04, Reference
Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting ("ASU No. 2020-04"), 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. ASU 2020-04
is effective upon issuance. In December 2022, the FASB deferred the
date for which this guidance can be applied from December 31, 2022
to December 31, 2024. The use of LIBOR was phased out at the end of
2021, although the phase-out of U.S. dollar LIBOR for existing
agreements has been delayed until June 2023. We continue to monitor
developments related to the LIBOR transition and identification of
an alternative, market-accepted rate.
In December 2021, we amended our GBP350 million long-term debt
agreement which referenced the British Pound sterling ("GBP") LIBOR
to the Sterling Overnight Index Average ("SONIA") and applied the
practical expedient. This amendment did not have a material impact
on our consolidated financial statements. As of November 30, 2022,
approximately $5.8 billion of our outstanding indebtedness bears
interest at floating rates referenced to U.S. dollar LIBOR with
maturity dates extending beyond June 30, 2023. We are currently
evaluating our contracts referenced to U.S. dollar LIBOR and
working with our creditors on updating credit agreements as
necessary to include language regarding the successor or alternate
rate to LIBOR. We do not expect the adoption of this standard to
have a material impact on our consolidated financial statements
during the LIBOR transition period.
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. We will adopt this guidance in the first quarter of 2023
using the modified retrospective approach. We do not expect the
adoption of this guidance to have a material impact on our
consolidated financial statements.
In September 2022, the FASB issued ASU No. 2022-04,
Liabilities-Supplier Finance Programs (Subtopic 405-50) -
Disclosure of Supplier Finance Program Obligations. This ASU
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 ASU 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 ASU is effective for fiscal years beginning after December 15,
2022, except for the amendment on roll forward information which is
effective for fiscal years beginning after December 15, 2023. We
are currently evaluating the impact of the new guidance on the
disclosures to our consolidated financial statements.
NOTE 3 - Property and Equipment
November 30,
------------------
(in millions) 2022 2021
-------- --------
Ships and ship improvements $52,908 $50,501
Ships under construction 785 1,536
Other property and equipment 3,970 3,928
-------- --------
Total property and equipment 57,663 55,965
Less accumulated depreciation (18,976) (17,858)
-------- --------
$38,687 $38,107
======== ========
Capitalized interest amounted to $48 million in 2022, $83
million in 2021 and $66 million in 2020.
Sales of Ships
During 2022, we entered into an agreement to sell one EA segment
ship and completed the sales of two NAA segment ships and one EA
segment ship, all of which collectively represents a
passenger-capacity reduction of 4,110 berths for our EA segment and
4,110 berths for our NAA segment. Additionally, in December 2022,
we entered into an agreement to sell one EA segment ship, which
represents a passenger-capacity reduction of 1,270 berths.
Refer to Note 10 - "Fair Value Measurements, Derivative
Instruments and Hedging Activities and Financial Risks,
Nonfinancial Instruments that are Measured at Fair Value on a
Nonrecurring Basis, Impairment of Ships" for additional
discussion.
NOTE 4 - Equity Method Investments
We have a minority interest in Grand Bahama Shipyard Ltd.
("Grand Bahama"), a ship repair and maintenance facility. Grand
Bahama provided services to us of $12 million in 2022, $11 million
in 2021 and $38 million in 2020. As of November 30, 2022, our
investment in Grand Bahama was $43 million, consisting of $10
million in equity and a loan of $33 million. As of November 30,
2021, our investment in Grand Bahama was $47 million, consisting of
$14 million in equity and a loan of $33 million.
We have a minority interest in the White Pass & Yukon Route
("White Pass") that includes port, railroad and retail operations
in Skagway, Alaska. White Pass provided an immaterial amount of
services to us in 2022, 2021 and 2020. As a result of the effects
of the pause and subsequent resumption of our guest cruise
operations on the 2022 and 2021 Alaska seasons, we evaluated
whether our investment in White Pass was other than temporarily
impaired and performed impairment assessments. As a result of our
assessments, we recognized impairment charges for 2022 and 2021 of
$30 million and $17 million in other income (expense), net. As of
November 30, 2022, our investment in White Pass was $50 million,
consisting of $18 million in equity and a loan of $32 million. As
of November 30, 2021, our investment in White Pass was $76 million,
consisting of $49 million in equity and a loan of $27 million.
We have a minority interest in CSSC Carnival Cruise Shipping
Limited ("CSSC-Carnival"), a China-based cruise company which will
operate its own fleet designed to serve the Chinese market. We
provided an immaterial amount of services to CSSC-Carnival during
both 2022 and 2021 and we paid CSSC-Carnival a total of $55 million
for the lease of ships during 2021. As of November 30, 2022 and
2021, our investment in CSSC-Carnival was $70 million and $119
million. During 2020, we sold to CSSC-Carnival a controlling
interest in an entity with full ownership of two EA segment ships
and recognized a related gain of $107 million, included in other
operating expenses in our Consolidated Statements of Income (Loss).
During 2021, we sold to CSSC-Carnival our remaining $283 million
investment in the minority interest of the same entity. During 2022
we did not make any capital contributions to CSSC-Carnival. During
2021 we made capital contributions to CSSC-Carnival in the amount
of $90 million.
NOTE 5 - Debt
November 30,
----------------------------- ----------------
(in millions) Maturity Rate (a) (b) 2022 2021
------------- -------------- ------- -------
Secured Debt
----------------------------
Notes
Notes Feb 2026 10.5% $775 $775
EUR Notes Feb 2026 10.1% 439 481
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 fixed rate Nov 2022 5.5% - 6.2% - 98
Nov 2022 -
EUR floating rate Jun 2025 EURIBOR + 3.8% 808 951
June 2025 - LIBOR + 3.0 -
Floating rate Oct 2028 3.3% 4,101 4,137
------- -------
Total Secured Debt 9,621 9,939
------- -------
Unsecured Debt
----------------------------
Revolver
Facility (c) LIBOR + 0.7% 200 2,790
Notes
EUR Notes Nov 2022 1.9% - 622
Convertible Notes Apr 2023 5.8% 96 522
Notes Oct 2023 7.2% 125 125
Convertible Notes Oct 2024 5.8% 426 -
Notes Mar 2026 7.6% 1,450 1,450
EUR Notes Mar 2026 7.6% 517 566
Notes Mar 2027 5.8% 3,500 3,500
Convertible Notes Dec 2027 5.8% 1,131 -
Notes Jan 2028 6.7% 200 200
Senior Priority Notes May 2028 10.4% 2,030 -
Notes May 2029 6.0% 2,000 2,000
EUR Notes Oct 2029 1.0% 620 679
Notes Jun 2030 10.5% 1,000 -
Loans
Feb 2023 - LIBOR + 3.8 -
Floating rate Sep 2024 4.5% 590 590
SONIA + 0.9%
GBP floating rate Feb 2025 (d) 419 467
Dec 2021 - EURIBOR + 1.8
EUR floating rate Mar 2026 - 2.4% 827 1,375
Export Credit Facilities
Feb 2022 - LIBOR + 0.8 -
Floating rate Dec 2031 1.5% 1,246 1,363
Aug 2027 -
Fixed rate Dec 2032 2.4 - 3.4% 3,143 3,488
Feb 2031 -
EUR fixed rate Jan 2034 1.1 - 1.6% 2,592 1,551
Feb 2022 - EURIBOR + 0.2
EUR floating rate Nov 2034 - 1.6% 3,882 2,742
------- -------
Total Unsecured Debt 25,994 24,031
Total Debt 35,615 33,970
Less: unamortized debt
issuance costs and
discounts (1,069) (744)
------- -------
Total Debt, net of unamortized
debt issuance costs and discounts 34,546 33,226
------- -------
Less: short-term borrowings (200) (2,790)
Less: current portion
of long-term debt (2,393) (1,927)
------- -------
Long-Term Debt $31,953 $28,509
======= =======
(a) The reference rates for substantially all of our LIBOR and
EURIBOR based variable debt have 0.0% to 0.75% floors.
(b) The above debt tables do not include the impact of our
interest rate swaps and as of November 30, 2021, it also excludes
the impact of our foreign currency swaps. As of November 30, 2022,
we had no foreign currency swaps. The interest rates on some of our
debt, including our Revolving Facility, fluctuate based on the
applicable rating of senior unsecured long-term securities of
Carnival Corporation or Carnival plc.
(c) Amounts outstanding under our Revolving Facility were drawn
in 2020 for an initial six-month term. 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 $2.6 billion available for borrowing under our
Revolving Facility as of November 30, 2022. 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.
(d) As of November 30, 2022 the interest rate for the GBP
unsecured loan was linked to SONIA and subject to a credit
adjustment spread ranging from 0.03% to 0.28%. The referenced SONIA
rate with the credit adjustment spread is subject to a 0% floor. As
of November 30, 2021, this loan was referenced to GBP LIBOR.
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, and $2.0 billion of 2028 Senior
Priority Notes (as defined below), issued by Carnival Holdings
(Bermuda) Limited ("Carnival Holdings"), a subsidiary of Carnival
Corporation. All our outstanding debt is issued or guaranteed by
substantially the same entities with the exception of 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, and our 2028 Senior Priority
Notes, which are issued by Carnival Holdings, which does not
guarantee our other outstanding debt.
The scheduled maturities of our debt are as follows:
(in millions)
Year Principal Payments
------------------
2023 $2,396
2024 (a) 2,645
2025 4,385
2026 4,507
2027 5,662
Thereafter 16,020
------------------
Total $35,615
==================
(a) Includes borrowings of $0.2 billion under our Revolving
Facility. Amounts outstanding under our Revolving Facility were
drawn in 2020 for an initial six-month term. 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 $2.6 billion available for
borrowing under our Revolving Facility as of November 30, 2022.
Short-Term Borrowings
As of November 30, 2022 and November 30, 2021, our short-term
borrowings consisted of $0.2 billion and $2.8 billion under our
Revolving Facility.
Secured Debt
Repricing of 2025 Secured Term Loan
In June 2021, we entered into an amendment to reprice our $2.8
billion 2025 Secured Term Loan (the "2025 Secured Term Loan"). The
amended U.S. dollar tranche bears interest at a rate per annum
equal to LIBOR (with a 0.75% floor) plus 3.0%. The amended euro
tranche bears interest at a rate per annum equal to EURIBOR (with a
0% floor) plus 3.75%.
2028 Senior Secured Notes
In July 2021, we issued $2.4 billion aggregate principal amount
of 4.0% first-priority senior secured notes due in 2028 (the "2028
Senior Secured Notes"). We used the net proceeds from the issuance
to purchase $2.0 billion aggregate principal amount of the 2023
Senior Secured Notes and to pay accrued interest on such notes and
related fees and expenses. The 2028 Senior Secured Notes mature on
August 1, 2028.
2028 Senior Secured Term Loan
In October 2021, we borrowed an aggregate principal amount of
$2.3 billion under a new term loan. We used the net proceeds from
this borrowing to redeem the $2.0 billion outstanding aggregate
principal amount of the 2023 Senior Secured Notes and to pay
accrued interest on such notes and related fees and expenses.
Borrowings under the new term loan bear interest at a rate per
annum equal to LIBOR (with a 0.75% floor) plus 3.25% and mature on
October 18, 2028.
Unsecured Debt
2028 Senior Priority Notes
In October 2022, Carnival Holdings issued an aggregate principal
amount of $2.0 billion senior priority notes that mature on May 1,
2028 (the "2028 Senior Priority Notes"). The 2028 Senior Priority
Notes bear interest at a rate of 10.4% per year and are callable
beginning May 1, 2025. In connection with the offering of the 2028
Senior Priority Notes, Carnival Corporation, Carnival plc and their
respective subsidiaries contributed 12 unencumbered vessels (the
"Subject Vessels") to Carnival Holdings, with each of the Subject
Vessels continuing to be operated under one of Carnival
Corporation's, Carnival plc's or one of their respective
subsidiaries' brands. As of November 30, 2022, the Subject Vessels
had an aggregate net book value of approximately $8.3 billion. As
of November 30, 2022, there was no change in the identity of the
Subject Vessels. See "Collateral and Priority Pool" below.
2027 Senior Unsecured Notes
In February 2021, we issued an aggregate principal amount of
$3.5 billion senior unsecured notes that mature on March 1, 2027
(the "2027 Senior Unsecured Notes"). The 2027 Senior Unsecured
Notes bear interest at a rate of 5.8% per year.
2029 Senior Unsecured Notes
In November 2021, we issued an aggregate principal amount of
$2.0 billion senior unsecured notes that mature on May 1, 2029 (the
"2029 Senior Unsecured Notes"), intended to refinance various 2022
and other debt maturities. The 2029 Senior Unsecured Notes bear
interest at a rate of 6.0% per year and are callable beginning
November 1, 2024.
2030 Senior Unsecured Notes
In May 2022, we issued an aggregate principal amount of $1.0
billion senior unsecured notes that mature on June 1, 2030 (the
"2030 Senior Unsecured Notes"). The 2030 Senior Unsecured Notes
bear interest at a rate of 10.5% per year and are callable
beginning June 1, 2025.
Export Credit Facility Borrowings
During the year ended November 30, 2022, we borrowed $3.1
billion under export credit facilities due in semi-annual
installments through 2034. As of November 30, 2022, the net book
value of the vessels subject to negative pledges was $14.2
billion.
Debt Holidays
In 2021, we amended substantially all of our export credit
facilities to defer approximately $1.0 billion of principal
payments that would otherwise have been due over a period
commencing April 1, 2021 until May 31, 2022, with repayments to be
made over the following five years. The cumulative deferred
principal amount of the debt holiday amendments, inclusive of the
amendments entered into in 2020, is approximately $1.2 billion as
of November 30, 2022. In addition, these amendments aligned the
financial covenants of all our export credit facilities with our
other facilities.
Convertible Notes
In 2020, we issued $2.0 billion aggregate principal amount of
5.8% convertible senior notes due 2023 (the "2023 Convertible
Notes"). The 2023 Convertible Notes mature on April 1, 2023, unless
earlier repurchased or redeemed by us or earlier converted in
accordance with their terms prior to the maturity date. Since April
2020, we repurchased, exchanged and converted a portion of the 2023
Convertible Notes which resulted in a decrease of the principal
amount of the 2023 Convertible Notes to $0.1 billion.
In August 2022, we issued $339 million aggregate principal
amount of 5.8% convertible senior notes due 2024 (the "2024
Convertible Notes") pursuant to privately-negotiated non-cash
exchange agreements with certain holders of the 2023 Convertible
Notes, pursuant to which such holders agreed to exchange their 2023
Convertible Notes for an equal amount of 2024 Convertible Notes. In
November 2022, we issued an additional $87 million aggregate
principal amount of the 2024 Convertible Notes pursuant to
privately-negotiated non-cash exchange agreements with certain
holders of the 2023 Convertible Notes, pursuant to which such
holders agreed to exchange their 2023 Convertible Notes for an
equal amount of additional 2024 Convertible Notes. The 2024
Convertible Notes mature on October 1, 2024, unless earlier
repurchased or redeemed by us or earlier converted in accordance
with their terms prior to the maturity date.
In November 2022, we issued $1.1 billion aggregate principal
amount of 5.8% convertible senior notes due 2027 (the "2027
Convertible Notes" and, together with the 2023 Convertible Notes
and the 2024 Convertible Notes, the "Convertible Notes"). The 2027
Convertible Notes mature on December 1, 2027, unless earlier
repurchased or redeemed by us or earlier converted in accordance
with their terms prior to the maturity date.
The Convertible Notes are convertible by holders, subject to the
conditions described within the respective indentures that govern
the Convertible Notes, into cash, shares of Carnival Corporation
common stock, or a combination thereof, at our election. The 2023
Convertible Notes and the 2024 Convertible Notes each have an
initial conversion rate of 100 shares of Carnival Corporation
common stock per $1,000 principal amount of notes, equivalent to an
initial conversion price of $10 per share of common stock. The 2027
Convertible Notes have an initial conversion rate of approximately
75 shares of Carnival Corporation common stock per $1,000 principal
amount of notes, equivalent to an initial conversion price of
approximately $13.39 per share of common stock. The initial
conversion price of the Convertible Notes is subject to certain
anti-dilutive adjustments and may also increase if such Convertible
Notes are converted in connection with a tax redemption or certain
corporate events as described within the respective indentures that
govern the Convertible Notes. The 2024 Convertible Notes were
convertible from the date of issuance of the 2024 Convertible Notes
until August 31, 2022, and thereafter may become convertible if
certain conditions are met. As of November 30, 2022, there were no
conditions satisfied which would allow the holders of the 2023
Convertible Notes, the 2024 Convertible Notes or the 2027
Convertible Notes to convert and therefore the Convertible Notes
were not convertible as of such date. Refer to Note 15 -
"Supplemental Cash Flow Information" for additional detail on
transactions related to the Convertible Notes.
The 2023 Convertible Notes were redeemable, in whole but not in
part, at any time on or prior to December 31, 2022 at a redemption
price equal to 100% of the principal amount thereof, plus accrued
and unpaid interest to the redemption date, if we or any guarantor
would have to pay any additional amounts on the 2023 Convertible
Notes due to a change in tax laws, regulations or rulings or a
change in the official application, administration or
interpretation thereof. We may redeem the 2024 Convertible Notes,
in whole but not in part, at any time on or prior to June 30, 2024
at a redemption price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to the redemption date,
if we or any guarantor would have to pay any additional amounts on
the 2024 Convertible Notes due to a change in tax laws, regulations
or rulings or a change in the official application, administration
or interpretation thereof. We may redeem the 2027 Convertible
Notes, in whole but not in part, at any time on or prior to the
40th scheduled trading day immediately before the maturity date at
a redemption price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest to the redemption date, if we or
any guarantor would have to pay any additional amounts on the 2027
Convertible Notes due to a change in tax laws, regulations or
rulings or a change in the official
application, administration or interpretation thereof.
On or after December 5, 2025 and on or before the 40th scheduled
trading day immediately before the maturity date, we may redeem for
cash all or part of the 2027 Convertible Notes, at our option, if
the last reported sale price of Carnival Corporation's common stock
exceeds 130% of the conversion price then in effect for at least 20
trading days (whether or not consecutive), including the trading
day immediately preceding the date on which we provide notice of
redemption, during the 30 consecutive trading day period ending on,
and including, the trading day immediately preceding the date on
which we provide notice of redemption. The redemption price will
equal 100% of the principal amount of the 2027 Convertible Notes
being redeemed, plus accrued and unpaid interest to, but excluding,
the redemption date.
We account for the Convertible Notes as separate liability and
equity components. We determine the carrying amount of the
liability component as the present value of its cash flows. The
carrying amount of the equity component representing the conversion
option is calculated by deducting the carrying value of the
liability component from the initial proceeds of the Convertible
Notes.
The carrying amount of the equity component was $229 million on
the date of issuance of the 2027 Convertible Notes and $286 million
on the date of issuance of the 2023 Convertible Notes. The carrying
amount of the equity component for the 2023 Convertible Notes was
reduced to zero in conjunction with the partial repurchase in
August 2020 because at the time of repurchase, the fair value of
the equity component for the portion of the 2023 Convertible Notes
that was repurchased, exceeded the total amount of the equity
component recorded at the time the 2023 Convertible Notes were
issued. The fair value of the conversion option remained unchanged
after the exchange of the portion of the 2023 Convertible Notes for
the 2024 Convertible Notes and, as a result, there was no
adjustment to the carrying amount of the equity component.
The debt discount, which represents the excess of the principal
amount of the Convertible Notes over the carrying amount of the
liability component on the date of issuance of the Convertible
Notes, is capitalized and amortized to interest expense under the
effective interest rate method over the term of the respective
Convertible Notes. Following the exchange of the portion of the
2023 Convertible Notes for the 2024 Convertible Notes, the
remaining unamortized discount was allocated between the 2023
Convertible Notes and the 2024 Convertible Notes and is amortized
to interest expense over each respective term using the effective
interest rate method.
The net carrying value of the liability component of the
Convertible Notes was as follows:
November 30,
--------------
(in millions) 2022 2021
-------- ----
Principal $1,653 $522
Less: Unamortized debt discount (274) (45)
-------- ----
$1,380 $478
======== ====
As of November 30, 2022, the if-converted value on available
shares of 137 million for the Convertible Notes was below par.
Collateral and Priority Pool
As of November 30, 2022, the net book value of our ships and
ship improvements, excluding ships under construction, is $36.2
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 $23.6 billion, including $22.0 billion
related to vessels and certain assets related to those vessels) as
of November 30, 2022 and certain other assets.
In addition, as of December 9, 2022, $8.3 billion in net book
value of our ships and ship improvements have been transferred to
Carnival Holdings. These vessels are included in the Vessel
Priority Pool of Subject Vessels for our 2028 Senior Priority
Notes.
Covenant Compliance
As of November 30, 2022, our 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") at the end of each fiscal
quarter from August 31, 2023, at a ratio of not less than 2.0 to
1.0 for the August 31, 2023 testing date, 2.5 to 1.0 for the
November 30, 2023 testing date, and 3.0 to 1.0 for the February 29,
2024 testing date onwards, or through their respective maturity
dates.
-- 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 from the November 30, 2021 testing date until the May
31, 2023 testing date, to a percentage not to exceed 75%, following
which it will be tested at levels which decline ratably to 65% from
the May 31, 2024 testing date onwards
-- Maintain minimum liquidity of $1.5 billion through November 30, 2026
-- Adhere to certain restrictive covenants through November 30, 2024
-- Limit the amounts of our secured assets as well as secured and other indebtedness
During 2022, we entered into letter agreements to waive
compliance with the Interest Coverage Covenant under our Revolving
Facility and $11.8 billion of $12.1 billion of our unsecured loans
and export credit facilities which contain this covenant through
the February 29, 2024 testing date.
Subsequent to November 30, 2022 and as of January 12, 2023, we
entered into further letter agreements to waive compliance with the
Interest Coverage Covenant under the remaining $0.3 billion of our
unsecured loans and export credit facilities which contain the
covenant through the February 29, 2024 testing date and our
Revolving Facility through the May 31, 2024 testing date. We will
be required to comply beginning with the next testing date of May
31, 2024 or August 31, 2024, as applicable.
At November 30, 2022, 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.
Carnival Corporation or Carnival plc and certain of our
subsidiaries have guaranteed substantially all of our
indebtedness.
NOTE 6 - Commitments
As of November 30, 2022, we expect the timing of our new ship
growth capital commitments to be as follows:
(in millions)
Year
2023 $1,755
2024 2,400 (a)
2025 895 (a)
Thereafter -
------
$5,050
======
(a) As of November 30, 2022, includes a ship subject to
financing. Subsequent to November 30, 2022, we obtained financing
for the 2024 and 2025 ship deliveries, such that these commitments
are no longer subject to financing.
NOTE 7 - Contingencies
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, two lawsuits were filed
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. In the matter filed by Havana Docks Corporation,
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.
The court held a status conference on September 22, 2022, at which
time it was determined that a jury trial is no longer necessary. On
December 30, 2022, the court entered judgment against Carnival in
the amount of $110 million plus $4 million in fees and costs. We
intend to appeal. In the matter filed by Javier Bengochea on
December 20, 2021, the court issued an order inviting an amicus
brief from the U.S. government on several issues involved in the
appeal. The U.S. government filed its brief and the court ordered
the parties to respond. On May 6, 2022 we filed our response brief.
On November 23, 2022, the Eleventh Circuit entered an order
affirming the dismissal of the case in our favor. We believe that
any final liability which may arise as a result of these actions is
unlikely to have a material impact on our consolidated financial
statements.
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 raises
certain monopolization claims under The Sherman Antitrust Act of
1890, unfair competition and tortious interference, and seeks
declaratory judgment that certain Carnival Corporation patents are
unenforceable. DeCurtis seeks damages, including its fees and
costs, and seeks 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 seeks damages, including its fees and costs,
as well as an order permanently enjoining DeCurtis from engaging in
such activities. These two cases have now been consolidated in the
Southern District of Florida. On April 25, 2022, we moved for
summary judgment on our breach of contract claims and on all of
DeCurtis's claims. DeCurtis also filed a motion for summary
judgment on certain portions of our claims. Both motions for
summary judgment were fully briefed. On July 28, 2022, the court
adopted the Magistrate Judge's report and recommendation granting
our opening claim construction brief and denying DeCurtis's motion
for summary judgment regarding the invalidity of various patent
claims. On November 11, 2022, the Magistrate Judge entered a Report
and Recommendation which recommended that the Court enter an order
denying our motion for summary judgment and granting in part and
denying in part DeCurtis's motion for summary judgment. Both
parties have filed objections to the Report and Recommendation. The
court has set the trial date for February 27, 2023. We believe the
ultimate outcome will not have a material impact on our
consolidated financial statements.
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 November 30, 2022, 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 November 30, 2022, 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.
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.
As previously disclosed, on June 24, 2022, we finalized a
settlement with the New York Department of Financial Services ("NY
DFS") in connection with previously disclosed cybersecurity events,
pursuant to which we have paid an amount that did not have a
material impact on our consolidated financial statements. In
addition, as previously disclosed, we finalized a settlement with
the State Attorneys General from 46 states in connection with the
same cybersecurity events, pursuant to which we have paid an amount
that did not have a material impact on our consolidated financial
statements. All previously disclosed cyber incidents have now been
resolved.
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 November 30, 2022 and 2021, we had $1.7
billion and $1.1 billion in reserve funds related to our customer
deposits provided to satisfy these requirements which are included
within other assets. We continue to expect to provide reserve funds
under these agreements. Additionally, as of November 30, 2022 and
2021, we had $30 million of cash collateral in escrow which is
included within other assets.
NOTE 8 - Taxation
A summary of our principal taxes and exemptions in the
jurisdictions where our significant operations are located is as
follows:
U.S. Income Tax
We are primarily foreign corporations engaged in the business of
operating cruise ships in international transportation. We also own
and operate, among other businesses, the U.S. hotel and
transportation business of Holland America Princess Alaska Tours
through U.S. corporations.
Our North American cruise ship businesses and certain
ship-owning subsidiaries are engaged in a trade or business within
the U.S. Depending on its itinerary, any particular ship may
generate income from sources within the U.S. We believe that our
U.S. source income and the income of our ship-owning subsidiaries,
to the extent derived from, or incidental to, the international
operation of a ship or ships, is currently exempt from U.S. federal
income and branch profit taxes.
Our domestic U.S. operations, principally the hotel and
transportation business of Holland America Princess Alaska Tours,
are subject to federal and state income taxation in the U.S.
In general, under Section 883 of the Internal Revenue Code,
certain non-U.S. corporations (such as our North American cruise
ship businesses) are not subject to U.S. federal income tax or
branch profits tax on U.S. source income derived from, or
incidental to, the international operation of a ship or ships.
Applicable U.S. Treasury regulations provide in general that a
foreign corporation will qualify for the benefits of Section 883
if, in relevant part, (i) the foreign country in which the foreign
corporation is organized grants an equivalent exemption to
corporations organized in the U.S. in respect of each category of
shipping income for which an exemption is being claimed under
Section 883 (an "equivalent exemption jurisdiction") and (ii) the
foreign corporation meets a defined publicly-traded corporation
stock ownership test (the "publicly-traded test"). Subsidiaries of
foreign corporations that are organized in an equivalent exemption
jurisdiction and meet the publicly-traded test also benefit from
Section 883. We believe that Panama is an equivalent exemption
jurisdiction and that Carnival Corporation currently satisfies the
publicly-traded test under the regulations. Accordingly,
substantially all of Carnival Corporation's income is exempt from
U.S. federal income and branch profit taxes.
Regulations under Section 883 list certain activities that the
IRS does not consider to be incidental to the international
operation of ships and, therefore, the income attributable to such
activities, to the extent such income is U.S. source, does not
qualify for the Section 883 exemption. Among the activities
identified as not incidental are income from the sale of air
transportation, transfers, shore excursions and pre- and
post-cruise land packages to the extent earned from sources within
the U.S.
We believe that the U.S. source transportation income earned by
Carnival plc and its subsidiaries currently qualifies for exemption
from U.S. federal income tax under applicable bilateral U.S. income
tax treaties.
Carnival Corporation, Carnival plc and certain subsidiaries are
subject to various U.S. state income taxes generally imposed on
each state's portion of the U.S. source income subject to U.S.
federal income taxes. However, the state of Alaska imposes an
income tax on its allocated portion of the total income of our
companies doing business in Alaska and certain of their
subsidiaries.
UK and Australian Income Tax
Cunard, P&O Cruises (UK) and P&O Cruises (Australia) are
divisions of Carnival plc and have elected to enter UK tonnage tax
under a rolling ten-year term and, accordingly, reapply every year.
Companies to which the tonnage tax regime applies pay corporation
taxes on profits calculated by reference to the net tonnage of
qualifying ships. UK corporation tax is not chargeable under the
normal UK tax rules on these brands' relevant shipping income.
Relevant shipping income includes income from the operation of
qualifying ships and from shipping related activities.
For a company to be eligible for the regime, it must be subject
to UK corporation tax and, among other matters, operate qualifying
ships that are strategically and commercially managed in the UK.
Companies within UK tonnage tax are also subject to a seafarer
training requirement.
Our UK non-shipping activities that do not qualify under the UK
tonnage tax regime remain subject to normal UK corporation tax.
P&O Cruises (Australia) and all of the other cruise ships
operated internationally by Carnival plc for the cruise segment of
the Australian vacation region are exempt from Australian
corporation tax by virtue of the UK/Australian income tax
treaty.
Italian and German Income Tax
In 2015, Costa and AIDA re-elected to enter the Italian tonnage
tax regime through 2024 and can reapply for an additional ten-year
period beginning in early 2025. Companies to which the tonnage tax
regime applies pay corporation taxes on shipping profits calculated
by reference to the net tonnage of qualifying ships.
Most of Costa's and AIDA's earnings that are not eligible for
taxation under the Italian tonnage tax regime will be taxed at an
effective tax rate of 4.8% in 2022 and 2021.
Substantially all of AIDA's earnings are exempt from German
income taxes by virtue of the Germany/Italy income tax treaty.
Other
We recognize income tax provisions for uncertain tax positions,
based solely on their technical merits, when it is more likely than
not to be sustained upon examination by the relevant tax authority.
The tax benefit to be recognized is measured as the largest amount
of benefit that is greater than 50% likely of being realized upon
ultimate resolution. Based on all known facts and circumstances and
current tax law, we believe that the total amount of our uncertain
income tax position liabilities and related accrued interest are
not material to our financial position. All interest expense
related to income tax liabilities is included in income tax
expense.
In addition to or in place of income taxes, virtually all
jurisdictions where our ships call impose taxes, fees and other
charges based on guest counts, ship tonnage, passenger capacity or
some other measure, and these taxes, fees and other charges are
included in commissions, transportation and other costs and other
operating expenses.
NOTE 9 - Shareholders' Equity
Carnival Corporation's Articles of Incorporation authorize its
Boards of Directors, at its discretion, to issue up to 40 million
shares of preferred stock. At November 30, 2022 and 2021, no
Carnival Corporation preferred stock or Carnival plc preference
shares had been issued.
Share Repurchase Program
Under a share repurchase program effective 2004, we had been
authorized to repurchase Carnival Corporation common stock and
Carnival plc ordinary shares (the "Repurchase Program"). On June
15, 2020, to enhance our liquidity and comply with restrictions in
our recent financing transactions, the Boards of Directors
terminated the Repurchase Program.
Carnival Corporation Carnival plc
------------------------------------- ----------------------------------
Dollar Amount Dollar Amount
Number of Shares Paid for Shares Number of Shares Paid for Shares
(in millions) Repurchased Repurchased Repurchased Repurchased
----------------- ----------------- ---------------- ----------------
2020 - $- 0.2 $10
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 (the "Stock Swap
Program").
During 2022 and 2021 under the Stock Swap Program, we sold 6.0
million and 8.9 million shares of Carnival Corporation common stock
and repurchased the same amount of Carnival plc ordinary shares
resulting in net proceeds of $8 million and $19 million, which were
used for general corporate purposes. During 2020, there were no
sales or repurchases under the Stock Swap Program.
Maximum Number
of Carnival plc
Total Number Average Price Ordinary Shares
of Shares of Paid per Share That May Yet Be
Carnival plc of Carnival Purchased Under
(in millions, except per Ordinary Shares plc Ordinary the Carnival Corporation
share data) Purchased (a) Share Stock Swap Program
------------------------- ---------------- --------------- -------------------------
2022 6.0 $14.52 3.6
2021 8.9 $20.99 9.5
(a) No ordinary shares of Carnival plc were purchased outside of
publicly announced plans or programs.
Public Equity Offerings
In April 2020, we completed a public offering of 71.9 million
shares of Carnival Corporation common stock at a price per share of
$8.00, resulting in net proceeds of $556 million.
In October 2020, we completed our $1.0 billion "at-the-market"
("ATM") equity offering program that was announced on September 15,
2020, pursuant to which we sold 67.1 million shares of Carnival
Corporation common stock.
In November 2020, we completed our $1.5 billion ATM equity
offering program that was announced on November 10, 2020, pursuant
to which we sold 94.5 million shares of Carnival Corporation common
stock.
In February 2021, we completed a public offering of 40.5 million
shares of Carnival Corporation common stock at a price per share of
$25.10, resulting in net proceeds of $996 million.
In August 2022, we completed a public offering of 117.5 million
shares of Carnival Corporation common stock at a price per share of
$9.95, resulting in net proceeds of $1.2 billion.
Other
Outside of the Stock Swap Program and the public equity
offerings described above, in 2022 and 2021 we sold 1.6 million and
0.6 million shares of Carnival Corporation common stock at an
average price per share of $19.27 and $21.32, resulting in net
proceeds of $30 million and $13 million.
Accumulated Other Comprehensive Income (Loss)
AOCI
----------------------------
November 30,
----------------------------
(in millions) 2022 2021 2020
-------- -------- --------
Cumulative foreign currency translation adjustments,
net $(2,004) $(1,501) $(1,382)
Unrecognized pension expenses (31) (45) (95)
Net gains on cash flow derivative hedges and
other 53 44 41
-------- -------- --------
$(1,982) $(1,501) $(1,436)
======== ======== ========
During 2022, 2021 and 2020, there were $1 million, $7 million
and $3 million of unrecognized pension expenses that were
reclassified out of accumulated other comprehensive loss and were
included within payroll and related expenses and selling and
administrative expenses.
Dividends
To enhance our liquidity, as well as comply with the dividend
restrictions contained in our debt agreements, in 2020 we suspended
the payment of dividends on Carnival Corporation common stock and
Carnival plc ordinary shares. We declared quarterly cash dividends
on all of our common stock and ordinary shares as follows:
Quarters Ended
----------------------------------------
(in millions, except per share February August November
data) 29 May 31 31 30
-------- ------ ------ --------
2020
Dividends declared per share $0.50 $- $- $-
Dividends declared $342 $- $- $-
NOTE 10 - 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
November 30, 2022 November 30, 2021
------------------------------- -------------------------------
Fair Value Fair Value
--------------------- ---------------------
Carrying Level Level Level Carrying Level Level Level
(in millions) Value 1 2 3 Value 1 2 3
Liabilities
Fixed rate debt (a) $23,542 $- $18,620 $- $19,555 $- $19,013 $-
Floating rate debt
(a) 12,074 - 10,036 - 14,415 - 13,451 -
-------- ----- ------- ----- -------- ----- ------- -----
Total $35,615 $- $28,656 $- $33,970 $- $32,463 $-
======== ===== ======= ===== ======== ===== ======= =====
(a) The debt amounts above do not include the impact of interest
rate swaps or debt issuance costs. 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
November 30, 2022 November 30, 2021
--------------------- ---------------------
(in millions) Level Level Level Level Level Level
1 2 3 1 2 3
------- ----- ----- ------- ----- -----
Assets
Cash and cash equivalents $4,029 $- $- $8,939 $- $-
Restricted cash 1,988 - - 38 - -
Short-term investments (a) - - - 200 - -
Derivative financial instruments - 1 - - 1 -
------- ----- ----- ------- ----- -----
Total $6,016 $1 $- $9,177 $1 $-
======= ===== ===== ======= ===== =====
Liabilities
Derivative financial instruments $- $- $- $- $13 $-
------- ----- ----- ------- ----- -----
Total $- $- $- $- $13 $-
======= ===== ===== ======= ===== =====
(a) Short-term investments consist of marketable securities with
original maturities of between three and twelve months.
Nonfinancial Instruments that are Measured at Fair Value on a
Nonrecurring Basis
Valuation of Goodwill and Trademarks
As of July 31, 2022, we performed our annual goodwill and
trademark impairment reviews and determined there was no impairment
for goodwill and trademarks at our annual test date.
During 2021 and as a result of the continued resumption of guest
cruise operations, ongoing impacts of COVID-19 and its effect on
our expected future operating cash flows, including changes in
estimates related to the timing of our full return to guest cruise
operations and improved profitability, we performed interim
discounted cash flow analyses for our EA segment reporting units
and determined their estimated fair values no longer exceeded their
carrying values. As a result, we recognized goodwill impairment
charges of $226 million and accordingly have no remaining goodwill
for those reporting units.
During 2020, we performed interim discounted cash flow analyses
for certain reporting units with goodwill as of February 29, 2020
and for all reporting units with goodwill or trademarks as of May
31, 2020 and recognized goodwill impairment charges of $2.1
billion.
As of July 31, 2020, we performed our annual goodwill and
trademark impairment reviews and we determined there was no
incremental impairment for goodwill or trademarks.
The determination of the fair value of our reporting units'
goodwill and trademarks includes numerous estimates and underlying
assumptions that are subject to various risks and uncertainties.
The effect of the pause and subsequent resumption of guest cruise
operations has created additional uncertainty in forecasting the
operating results and future cash flows used in our impairment
analyses. We believe that we have made reasonable estimates and
judgments.
The assumptions, all of which are considered Level 3 inputs,
used in our 2021 cash flow analyses and which resulted in goodwill
impairments for all but one reporting unit consisted of:
-- The timing and pace of our full return to guest cruise operations
-- Weighted-average cost of capital of market participants,
adjusted for the risk attributable to the geographic regions in
which these cruise brands operate ("WACC")
The assumptions, all of which are considered Level 3 inputs,
used in our 2020 cash flow analyses consisted of:
-- The timing of our return to service, changes in market
conditions and port or other restrictions
-- Forecasted revenues net of our most significant variable
costs, which are travel agent commissions, costs of air and other
transportation, and certain other costs that are directly
associated with onboard and other revenues including credit and
debit card fees
-- The allocation of new ships and the timing of the transfer or
sale of ships amongst brands, as well as the estimated proceeds
from ship sales
-- WACC
The estimated fair value of the reporting unit with remaining
goodwill and of our trademarks significantly exceeded their
carrying value as of the date of the most recent impairment test.
Refer to Note 2 - "Summary of Significant Accounting Policies,
Preparation of Financial Statements" for additional discussion.
Goodwill
------------------------------
(in millions) NAA Segment EA Segment Total
----------- ---------- -----
At November 30, 2020 $579 $228 $807
Impairment charges - (226) (226)
Exchange movements - (2) (2)
----------- ---------- -----
At November 30, 2021 579 - 579
Impairment charges - - -
----------- ---------- -----
At November 30, 2022 $579 $- $579
=========== ========== =====
Trademarks
-------------------------------
(in millions) NAA Segment EA Segment Total
----------- ---------- ------
At November 30, 2020 $927 $253 $1,180
Exchange movements - (5) (5)
----------- ---------- ------
At November 30, 2021 927 248 1,175
Exchange movements - (24) (24)
----------- ---------- ------
At November 30, 2022 $927 $224 $1,151
=========== ========== ======
Impairment of Ships
We review our long-lived assets for impairment whenever events
or circumstances indicate potential impairment. As a result of the
continued effects of COVID-19 on our business and certain Asia
markets which remain closed to cruising (particularly China), and
our updated expectations for our deployment, we determined that two
ships had net carrying values that exceeded their respective
estimated undiscounted future cash flows. We then estimated the
fair value of these ships, based on their estimated selling values,
and recognized ship impairment charges as summarized in the table
below.
We performed undiscounted cash flow analyses on certain ships
throughout 2021 and 2020 and determined that certain ships had net
carrying values that exceeded their estimated undiscounted future
cash flows and fair values, and, as a result, we recognized ship
impairment charges during 2021 and 2020.
We believe we have made reasonable estimates and judgments as
part of our assessments. A change in the principal judgments or
estimates may result in a need to perform additional impairment
reviews.
In 2022, the principal assumption used in determining the fair
value of these ships were the estimated sales proceeds, which are
considered a Level 3 input. In 2021, the principal assumptions used
in determining the fair value of these ships were the timing of the
sale of ships and estimated proceeds, which are considered Level 3
inputs.
In 2020, the principal assumptions used in determining the fair
value of these ships consisted of:
-- Timing of the respective ship's return to service, changes in
market conditions and port or other restrictions
-- Forecasted ship revenues net of our most significant variable
costs, which are travel agent commissions, costs of air and other
transportation and certain other costs that are directly associated
with onboard and other revenues, including credit and debit card
fees
-- Timing of the sale of ships and estimated proceeds
The impairment charges summarized in the table below are
included in ship and other impairments in our Consolidated
Statements of Income (Loss).
November 30,
(in millions) 2022 2021 2020
NAA Segment $8 $273 $1,474
EA Segment 421 318 319
---- ---- ------
Total ship impairments $428 $591 $1,794
==== ==== ======
Refer to Note 2 - "Summary of Significant Accounting Policies,
Preparation of Financial Statements" for additional discussion.
Derivative Instruments and Hedging Activities
November 30,
--------------
Balance Sheet
(in millions) Location 2022 2021
--------------------- ------ ------
Derivative assets
Derivatives designated as hedging
instruments
Prepaid expenses
Cross currency swaps (a) and other $- $1
Prepaid expenses
Interest rate swaps (b) and other 1 -
Other assets 1 -
------ ------
Total derivative assets $1 $1
====== ======
Derivative liabilities
Derivatives designated as hedging
instruments
Other long-term
Cross currency swaps (a) liabilities $- $8
Accrued liabilities
Interest rate swaps (b) and other - 3
Other long-term
liabilities - 2
------ ------
Total derivative liabilities $- $13
====== ======
(a) At November 30, 2022, we had no cross-currency swaps. At
November 30, 2021, we had a cross currency swap totaling $201
million that was designated as a hedge of our net investment in
foreign operations with a euro-denominated functional currency.
(b) We have interest rate swaps designated as cash flow hedges
whereby we receive floating interest rate payments in exchange for
making fixed interest rate payments. These interest rate swap
agreements effectively changed $89 million at November 30, 2022 and
$160 million at November 30, 2021 of EURIBOR-based floating rate
euro debt to fixed rate euro debt. At November 30, 2022, these
interest rate swaps settle through 2025.
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.
November 30, 2022
------------------------------------------------------------------------------
Gross Amounts Total Net Gross Amounts
Offset in Amounts Presented not Offset
the Balance in the Balance in the Balance
(in millions) Gross Amounts Sheet Sheet Sheet Net Amounts
------------- ------------- ------------------ --------------- -----------
Assets $1 $- $1 $- $1
Liabilities $- $- $- $- $-
November 30, 2021
------------------------------------------------------------------------------
Gross Amounts Total Net Gross Amounts
Offset in Amounts Presented not Offset
the Balance in the Balance in the Balance
(in millions) Gross Amounts Sheet Sheet Sheet Net Amounts
------------- ------------- ------------------ --------------- -----------
Assets $1 $- $1 $- $1
Liabilities $13 $- $13 $- $13
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:
November 30,
-----------------
(in millions) 2022 2021 2020
----- ---- ----
Gains (losses) recognized in AOCI:
Cross currency swaps - net investment hedges
- included component $72 $(1) $131
Cross currency swaps - net investment hedges
- excluded component $(26) $(6) $(1)
Foreign currency zero cost collars - cash
flow hedges $- $- $1
Foreign currency forwards - cash flow hedges $- $- $53
Interest rate swaps - cash flow hedges $11 $5 $6
Gains (losses) reclassified from AOCI -
cash flow hedges:
Interest rate swaps - Interest expense,
net of capitalized interest $(2) $(5) $(6)
Foreign currency zero cost collars - Depreciation
and amortization $2 $2 $1
Gains (losses) recognized on derivative
instruments (amount excluded from effectiveness
testing - net investment hedges)
Cross currency swaps - Interest expense,
net of capitalized interest $5 $- $12
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.
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 November
30, 2022, we have designated $419 million of our
sterling-denominated debt as non-derivative hedges of our net
investments in foreign operations. In 2022, we recognized $48
million of gains on these non-derivative 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 November 30, 2022, our remaining newbuild currency exchange
rate risk primarily relates to euro-denominated newbuild contract
payments for non-euro functional currency brands, which represent a
total unhedged commitment of $4.4 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' 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 equivalents,
investments, notes receivables, reserve funds related to customer
deposits, future financing facilities, contingent obligations,
derivative instruments, insurance contracts, long-term ship
charters 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, long-term ship
charters and new ship progress payments to shipyards
At November 30, 2022, our exposures under derivative instruments
were not material. 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. 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. Historically, we have not experienced
significant credit losses, including counterparty nonperformance;
however, because of the continued effects the pandemic is having on
economies, we have experienced, and may continue to experience, an
increase in credit losses.
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.
NOTE 11 - Leases
The components of expense were as follows:
November 30,
--------------------
(in millions) 2022 2021 2020
----- ------ -----
Operating lease expense $192 $203 $203
Variable lease expense (a) (b) $(39) $(100) $(61)
(a) Variable lease expense represents increases or reductions to
costs associated with our multi-year preferential berthing
agreements which vary based on the number of passengers. These
costs are recorded within Commissions, transportation and other in
our Consolidated Statements of Income (Loss). Variable and
short-term lease costs related to operating leases, other than the
port facilities, were not material to our consolidated financial
statements.
(b) Several of our preferential berthing agreements have force
majeure provisions which were in effect during the pause in guest
cruise operations due to COVID-19.
The cash outflow for leases was materially consistent with the
lease expense recognized during 2022.
During 2022, we obtained $111 million of right-of-use assets in
exchange for new operating lease liabilities.
Weighted average of the remaining lease terms and weighted
average discount rates are as follows:
November 30, November 30,
2022 2021
------------ ------------
Weighted average remaining lease term
- operating leases (in years) 13 12
Weighted average discount rate - operating
leases 5.2% 3.8%
As of November 30, 2022, maturities of operating lease
liabilities were as follows:
(in millions)
Year
2023 $198
2024 199
2025 180
2026 167
2027 144
Thereafter 965
------
Total lease payments 1,853
Less: Present value discount (518)
------
Present value of lease liabilities $1,335
======
For time charter arrangements where we are the lessor and for
transactions with cruise guests related to the use of cabins, we do
not separate lease and non-lease components. As the non-lease
components are the predominant components in the agreements, we
account for these transactions under the Revenue Recognition
guidance.
NOTE 12 - 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)
EA cruise operations, (3) Cruise Support and (4) Tour and
Other.
The operating segments within each of our NAA and EA 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.
As of and for the years ended November 30,
-------------------------------------------------------------------------------------------------------
Operating Selling Depreciation Operating
costs and and income Capital Total
(in millions) Revenues and expenses administrative amortization (loss) expenditures assets
-------- ------------- -------------- ------------ --------- ------------- -------
2022
NAA $8,281 $7,526 $1,517 $1,408 $(2,170) $2,568 $27,413
EA 3,531 3,925 745 692 (1,830) 2,213 15,317
Cruise
Support 171 120 225 140 (315) 155 8,461
Tour and
Other 185 187 27 36 (64) 4 512
-------- ------------- -------------- ------------ --------- ------------- -------
$12,168 $11,757 $2,515 $2,275 $(4,379) $4,940 $51,703
======== ============= ============== ============ ========= ============= =======
2021
NAA $1,108 $2,730 $953 $1,352 $(3,928) $2,397 $25,606
EA 712 1,807 568 728 (2,617) (a) 515 16,088
Cruise
Support 42 55 335 129 (477) 660 11,014
Tour and
Other 46 63 27 23 (67) 35 637
-------- ------------- -------------- ------------ --------- ------------- -------
$1,908 $4,655 $1,885 $2,233 $(7,089) $3,607 $53,344
======== ============= ============== ============ ========= ============= =======
2020
NAA $3,627 $5,623 $1,066 $1,413 $(5,794) (b) $1,430 $25,257
EA 1,790 2,548 523 672 (2,729) (c) 2,036 16,505
Cruise
Support 68 (10) 262 128 (313) 144 11,135
Tour and
Other 110 84 27 28 (29) 11 696
-------- ------------- -------------- ------------ --------- ------------- -------
$5,595 $8,245 $1,878 $2,241 $(8,865) $3,620 $53,593
======== ============= ============== ============ ========= ============= =======
(a) Includes $226 million of goodwill impairment charges.
(b) Includes $1.3 billion of goodwill impairment charges.
(c) Includes $777 million of goodwill impairment charges.
Revenue by geographic areas, which are based on where our guests
are sourced, were as follows:
Years Ended November 30,
----------------------------
(in millions) 2022 2021 2020
--------- -------- -------
North America $7,866 $1,066 $3,084
Europe 3,918 811 1,643
Australia and Asia 312 18 687
Other 72 14 180
--------- -------- -------
$12,168 $1,908 $5,595
========= ======== =======
Substantially all of our long-lived assets consist of our ships
and move between geographic areas.
NOTE 13 - Compensation Plans and Post-Employment Benefits
Equity Plans
We issue our share-based compensation awards, which at November
30, 2022 included time-based share awards (restricted stock awards
and restricted stock units), performance-based share awards and
market-based share awards (collectively "equity awards"), under the
Carnival Corporation and Carnival plc stock plans. Equity awards
are principally granted to management level employees and members
of our Boards of Directors. The plans are administered by the
Compensation Committees which are made up of independent directors
who determine which employees are eligible to participate, the
monetary value or number of shares for which equity awards are to
be granted and the amounts that may be exercised or sold within a
specified term. We had an aggregate of 16.7 million shares
available for future grant at November 30, 2022. We fulfill our
equity award obligations using shares purchased in the open market
or with unissued or treasury shares. Our equity awards generally
vest over a three-year period, subject to earlier vesting under
certain conditions.
Weighted-Average
Grant Date
Fair
Shares Value
----------- ----------------
Outstanding at November 30, 2019 2,491,376 $59.97
Granted 9,971,331 $20.72
Vested (1,641,570) $30.68
Forfeited (480,361) $50.96
-----------
Outstanding at November 30, 2020 10,340,776 $26.61
Granted 4,453,572 $20.65
Vested (6,618,083) $21.31
Forfeited (729,073) $35.81
-----------
Outstanding at November 30, 2021 7,447,192 $26.85
Granted 3,117,638 $17.53
Vested (3,503,118) $24.36
Forfeited (681,197) $36.20
-----------
Outstanding at November 30, 2022 6,380,515 $22.67
===========
As of November 30, 2022, there was $52 million of total
unrecognized compensation cost related to equity awards, which is
expected to be recognized over a weighted-average period of 1.5
years.
Single-employer Defined Benefit Pension Plans
We maintain several single-employer defined benefit pension
plans, which cover certain of our shipboard and shoreside
employees. The U.S. and UK shoreside employee plans are closed to
new membership and are funded at or above the level required by
U.S. or UK regulations. The remaining defined benefit plans are
primarily unfunded. These plans provide pension benefits primarily
based on employee compensation and years of service.
UK Plan (a) All Other Plans
-----------------
(in millions) 2022 2021 2022 2021
------- ---- -------- -------
Change in projected benefit obligation:
Projected benefit obligation as
of December 1 $298 $303 $263 $280
Past service cost - - 18 10
Interest cost 5 4 5 4
Benefits paid (12) (10) (15) (5)
Actuarial (gain) loss on plans'
liabilities (88) (7) (49) (8)
Plan curtailments, settlements
and other (6) 7 1 (19)
------- ---- -------- -------
Projected benefit obligation as
of November 30 198 298 223 263
------- ---- -------- -------
Change in plan assets:
Fair value of plan assets as of
December 1 355 325 12 17
Return (loss) on plans' assets (116) 31 (1) -
Employer contributions 2 1 12 17
Benefits paid (12) (10) (12) (5)
Plan settlements (5) - (1) (17)
Administrative expenses (2) 8 - -
Fair value of plan assets as of
November 30 222 355 10 12
------- ---- -------- -------
Funded status as of November
30 $24 $56 $(213) $(250)
======= ==== ======== =======
(a) The P&O Princess Cruises (UK) Pension Scheme ("UK
Plan")
The amounts recognized in the Consolidated Balance Sheets for
these plans were as follows:
UK Plan All Other Plans
-------------- -----------------
November 30, November 30,
-----------------
(in millions) 2022 2021 2022 2021
------ ------ -------- -------
Other assets $24 $56 $- $-
Accrued liabilities and other $- $- $25 $23
Other long-term liabilities $- $- $188 $227
The accumulated benefit obligation for all defined benefit
pension plans was $386 million and $553 million at November 30,
2022 and 2021, respectively.
Amounts for pension plans with accumulated benefit obligations
in excess of fair value of plan assets are as follows:
November 30,
(in millions) 2022 2021
------ ------
Projected benefit obligation $223 $263
Accumulated benefit obligation $218 $254
Fair value of plan assets $10 $12
The net benefit cost recognized in the Consolidated Statements
of Income (Loss) were as follows:
UK Plan All Other Plans
---------------- -------------------
November 30, November 30,
-------------------
(in millions) 2022 2021 2020 2022 2021 2020
---- ---- ---- ----- ----- -----
Service cost $- $- $- $18 $10 $20
Interest cost 5 4 5 5 4 6
Expected return on plan
assets (6) (6) (8) - - (1)
Amortization of prior
service cost - - - - - -
Amortization of net loss
(gain) - - - 3 4 4
Settlement loss recognized - - - 1 5 1
---- ---- ---- ----- ----- -----
Net periodic benefit
cost $(1) $(1) $(3) $26 $22 $32
==== ==== ==== ===== ===== =====
The components of net periodic benefit cost other than the
service cost component are included in other income (expense), net
in the Consolidated Statements of Income (Loss).
Weighted average assumptions used to determine the projected
benefit obligation are as follows:
UK Plan All Other Plans
-----------------
2022 2021 2022 2021
---- ---- -------- -------
Discount rate 4.3% 1.6% 5.4% 2.6%
Rate of compensation increase 2.9% 2.7% 3.0% 3.0%
Weighted average assumptions used to determine net pension
income are as follows:
UK Plan All Other Plans
-------------------
2022 2021 2020 2022 2021 2020
---- ---- ---- ----- ----- -----
Discount rate 1.6% 1.6% 1.9% 3.2% 2.3% 2.9%
Expected return on assets -% 1.9% 3.0% 2.3% 2.3% 3.0%
Rate of compensation
increase 2.7% 2.3% 2.9% 3.0% 3.0% 2.7%
The discount rate used to determine the UK Plan's projected
benefit obligation was determined as the single equivalent rate
based on applying a yield curve determined from AA credit rated
bonds at the balance sheet date to the cash flows making up the
pension plan's obligations. The discount rate used to determine the
UK Plan's future net periodic benefit cost was determined as the
equivalent rate based on applying each individual spot rate from a
yield curve determined from AA credit rated bonds at the balance
sheet date for each year's cash flow. The UK Plan's expected
long-term return on plan assets is consistent with the long-term
investment return target provided to the UK Plan's fiduciary
manager (U.K. government fixed interest bonds (gilts) plus 1.0% and
was 4.3% per annum as of November 30, 2022.
Amounts recognized in AOCI are as follows:
UK Plan All Other Plans
-------------- -----------------
November 30, November 30,
-----------------
2022 2021 2022 2021
------ ------ -------- -------
Actuarial losses (gains) recognized
in the current year $35 $- $(48) $(7)
Amortization and settlements included
in net periodic benefit cost $- $- $(1) $(12)
We anticipate making contributions of $26 million to the plans
during 2023. Estimated future benefit payments to be made during
each of the next five fiscal years and in the aggregate during the
succeeding five fiscal years are as follows:
(in millions) UK Plan All Other Plans
------- ---------------
2023 $6 $26
2024 6 25
2025 7 26
2026 7 26
2027 7 27
2028-2032 43 151
------- ---------------
$76 $280
======= ===============
Our investment strategy for our pension plan assets is to
maintain a diversified portfolio of asset classes to produce a
sufficient level of diversification and investment return over the
long term. The investment policy for each plan specifies the type
of investment vehicles appropriate for the plan, asset allocation
guidelines, criteria for selection of investment managers and
procedures to monitor overall investment performance, as well as
investment manager performance. As of November 30, 2022 and 2021,
respectively, the All Other Plans were unfunded.
The fair values of the plan assets of the UK Plan by investment
class are as follows:
November 30,
2022 2021
------ ------
Equities $53 $62
U.K. government fixed interest bonds (gilts) $169 $283
Multiemployer Defined Benefit Pension Plans
We participate in two multiemployer defined benefit pension
plans in the UK, the British Merchant Navy Officers Pension Fund
(registration number 10005645) ("MNOPF"), which is divided into two
sections, the "New Section" and the "Old Section," and the British
Merchant Navy Ratings Pension Fund (registration number 10005646)
("MNRPF"). Collectively, we refer to these as "the multiemployer
plans." The multiemployer plans are maintained for the benefit of
the employees of the participating employers who make contributions
to the plans. The risks of participating in these multiemployer
plans are different from single-employer plans, including:
-- Contributions made by employers, including us, may be used to
provide benefits to employees of other participating employers
-- If any of the participating employers were to withdraw from
the multiemployer plans or fail to make their required
contributions, any unfunded obligations would be the responsibility
of the remaining participating employers.
We are contractually obligated to make all required
contributions as determined by the plans' trustees. All of our
multiemployer plans are closed to new membership and future benefit
accrual. The MNOPF Old Section is fully funded.
We expense our portion of the MNOPF New Section deficit as
amounts are invoiced by, and become due and payable to, the
trustees. We accrue and expense our portion of the MNRPF deficit
based on our estimated probable obligation from the most recent
actuarial review. Total expense for the multiemployer plans was $2
million in 2022, $28 million in 2021 and $2 million in 2020.
Based on the most recent valuation at March 31, 2021 of the
MNOPF New Section, it was determined that this plan was 102%
funded. In 2022, 2021 and 2020, our contributions to the MNOPF New
Section did not exceed 5% of total contributions to the fund. Based
on the most recent valuation at March 31, 2020 of the MNRPF, it was
determined that this plan was 93% funded. In 2022, 2021 and 2020,
our contributions to the MNRPF did not exceed 5% of total
contributions to the fund. It is possible that we will be required
to fund and expense additional amounts for the multiemployer plans
in the future; however, such amounts are not expected to be
material to our consolidated financial statements.
Defined Contribution Plans
We have several defined contribution plans available to most of
our employees. We contribute to these plans based on employee
contributions, salary levels and length of service. Total expense
for these plans was $40 million in 2022, $35 million in 2021 and
$24 million in 2020.
NOTE 14 - Earnings Per Share
Years Ended November 30,
-----------------------------
(in millions, except per share data) 2022 2021 2020
-------- -------- ---------
Net income (loss) for basic and diluted
earnings per share $(6,093) $(9,501) $(10,236)
======== ======== =========
Weighted-average shares outstanding 1,180 1,123 775
Dilutive effect of equity plans - - -
-------- -------- ---------
Diluted weighted-average shares outstanding 1,180 1,123 775
======== ======== =========
Basic earnings per share $(5.16) $(8.46) $(13.20)
======== ======== =========
Diluted earnings per share $(5.16) $(8.46) $(13.20)
======== ======== =========
Antidilutive shares excluded from diluted earnings per share
computations were as follows:
November 30,
----------------
(in millions) 2022 2021 2020
---- ---- ----
Equity awards 1 3 1
Convertible Notes 55 53 103
---- ---- ----
Total antidilutive securities 56 56 104
==== ==== ====
NOTE 15 - Supplemental Cash Flow Information
November 30,
--------------
(in millions) 2022 2021
------ ------
Cash and cash equivalents (Consolidated
Balance Sheets) $4,029 $8,939
Restricted cash (Consolidated Balance Sheets) 1,988 14
Restricted cash (included in other assets) 20 24
------ ------
Total cash, cash equivalents and restricted
cash (Consolidated Statements of Cash Flows) $6,037 $8,976
====== ======
Cash paid for interest, net of capitalized interest, was $1.4
billion in 2022, $1.3 billion in 2021 and $0.6 billion in 2020.
Cash benefit received (paid) for income taxes, net was not material
in 2022, 2021 and 2020. In addition, non-cash purchases of property
and equipment included in accrued liabilities and other was $100
million in 2022, $127 million in 2021 and $114 million in 2020.
Substantially all restricted cash as of November 30, 2022
relates to the net proceeds from the issuance of our 2028 Senior
Priority Notes. Under the indenture governing these notes, the net
proceeds are contractually restricted subject to the satisfaction
of certain conditions. These conditions were satisfied in December
2022 when we completed the transfer of the Subject Vessels to
Carnival Holdings, at which time these amounts became
unrestricted.
In August 2022, we issued $339 million aggregate principal
amount of 2024 Convertible Notes pursuant to privately-negotiated
non-cash exchange agreements with certain holders of the 2023
Convertible Notes, pursuant to which such holders agreed to
exchange their 2023 Convertible Notes for an equal amount of 2024
Convertible Notes. In November 2022, we issued an additional $87
million aggregate principal amount of the 2024 Convertible Notes
pursuant to privately-negotiated non-cash exchange agreements with
certain holders of the 2023 Convertible Notes, pursuant to which
such holders agreed to exchange their 2023 Convertible Notes for an
equal amount of additional 2024 Convertible Notes. In addition, in
August and November 2020, in connection with the repurchase of the
2023 Convertible Notes, as part of registered direct offerings of
Carnival Corporation common stock used to repurchase a portion of
the 2023 Convertible Notes, as an administrative convenience, we
permitted the purchasers of 151.2 million shares of Carnival
Corporation common stock to offset the purchase price payable to us
against our obligation to pay the purchase price for $1.3 billion
aggregate principal amount of the 2023 Convertible Notes held by
them, which is reflected as a non-cash transaction for the year
ended November 30, 2020.
Refer to Note 5 - "Debt" for additional detail relating to our
2028 Senior Priority Notes and the 2024 Convertible Notes.
For the years ended November 30, 2022 and 2021, we did not have
borrowings or repayments of commercial paper with original
maturities greater than three months. For the year ended November
30, 2020, we had borrowings of $525 million and repayments of $526
million of commercial paper with original maturities greater than
three months.
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:
* Liquidity and credit ratings
* Pricing
* Adjusted earnings per share
* Booking levels
* Adjusted EBITDA
* Occupancy
* Adjusted Net Income (Loss)
* Interest, tax and fuel expenses
* Currency exchange rates
* Estimates of ship depreciable lives and residual
* Goodwill, ship and trademark fair values 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
are also affected by COVID-19 and 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.
2022 Executive Overview
During 2022, we completed a monumental 18-month journey marking
our full return to guest cruise operations. Over the past 18 months
we have:
-- Returned 90 ships to service
-- Re-boarded over 100,000 team members to our ships
-- Restarted our unmatched portfolio of eight private island and port destinations
-- Restarted our unrivaled land-based footprint in Alaska and the Yukon
-- Welcomed back nearly nine million guests
Throughout 2022, we progressed on an upward trajectory as we
continued to close the gap to 2019, our most recent full year of
guest cruise operations, and believe we are gaining momentum on our
return to profitability.
-- For our cruise segments, revenue per passenger cruise day
("PCD") for the fourth quarter of 2022 increased 0.5% compared to a
strong 2019, overcoming the dilutive impact of future cruise
credits ("FCCs") and fluctuations in foreign currency. This was
better than the third quarter of 2022 which decreased 4.1% compared
to 2019.
-- Occupancy in the fourth quarter of 2022 was 19 percentage
points below 2019 levels, this was better than the first quarter of
2022 which was 50 percentage points below 2019 levels. We achieved
this on growing capacity as we returned another 35% of our fleet to
service in 2022, reaching 99% of our 2019 capacity levels during
the fourth quarter.
-- Revenue in the fourth quarter of 2022 was $3.8 billion, which
was 80% of 2019 levels. This was better than the third quarter of
2022 which was 66% of 2019 levels, an improvement of 14 percentage
points.
The uneven reopening of cruise travel around the world following
the effects of COVID-19 and the impact the invasion of Ukraine has
had on European countries have had a material impact on our results
of operations. While all of our brands are on an upward trajectory,
the pace of the recovery has trailed for those brands most heavily
exposed to these factors as the impacts have weighed on consumer
confidence in those regions resulting in greater uncertainty and
closer-in booking patterns. To mitigate these impacts, we have made
strategic deployment decisions to increase our closer-to-home and
shorter duration itineraries to help reduce the friction of air
travel, lower the overall cost of our vacations and facilitate a
closer-in booking environment. We believe these decisions have
positioned us well to attract more new-to-cruise guests and make us
even more of a value proposition compared to land-based
alternatives. Additionally, based on the evolving nature of
COVID-19 and our ongoing collaboration with local and national
public health authorities, our brands responsibly relaxed their
COVID-19 related protocols aligning towards land-based vacation
alternatives and strengthening our competitiveness.
To help support our growth, drive overall revenue generation,
elevate awareness and consideration and enhance demand for both the
near- and long-term, we have significantly increased our
advertising activities, including a nearly 20% increase in our
investment during the fourth quarter of 2022 compared to the fourth
quarter of 2019. Our brands are utilizing pricing philosophies to
maximize revenue and are sharing best practices across brands.
Having been in pause status for nearly two years, we are also
rebuilding demand by providing our guests with extraordinary cruise
vacations, which we believe will increase the likelihood of our
guests recommending our cruise vacations. In addition, we have a
renewed focus on our travel agent partner relationships and a
growing sales force. While building back demand and enhancing our
revenue management tools and strategies, we are working to optimize
the combination of occupancy levels with ticket and onboard prices
to deliver revenue growth in the near-term while maintaining price
integrity for the long-term. We are also not losing sight of our
expense base as we have worked through our restart and continue to
absorb and mitigate the impacts of the high inflationary
environment we have all been living in.
During 2022, we continued to focus on minimizing our
environmental impact and achieved a 2% reduction in carbon
intensity compared to 2019 (11% reduction for ships in guest cruise
operations), a 30% reduction in food waste compared to 2019 and
used 290 million fewer single use items compared to 2018. We
announced the rollout of Service Power Packages, global fleet
upgrades which will improve energy and fuel efficiency and support
our sustainability goals and announced the expansion of Air
Lubrication Systems, which are expected to generate savings in fuel
consumption and reductions in carbon emissions. Additionally, AIDA
Cruises and Holland America Line achieved milestones in their
decarbonization strategies piloting the use of a blend of marine
biofuel. These investments, along with the company's fleet
optimization and itinerary reviews, are expected to drive a 15%
reduction in fuel consumption per ALBD in 2023, along with a 15%
reduction in carbon emissions per ALBD on an annualized basis, both
as compared to 2019.
Our fleet optimization efforts included welcoming stunning new
flagships for six of our brands including Carnival Celebration,
AIDAcosma, Costa Toscana, Discovery Princess and Arvia, as well as
our first luxury expedition ship, Seabourn Venture. All of these
ships were purpose-built to generate higher returns. In addition,
we announced the removal of additional ships from our fleet,
bringing the cumulative number of smaller-less efficient ships to
be removed from our fleet since the pause to 26. Once completed,
these efforts will result in nearly a quarter of our fleet
consisting of newly delivered, larger-more efficient ships. We also
announced Carnival Fun Italian Style(TM), a new concept for
Carnival Cruise Line's North American guests which will debut in
the spring of 2023 with Costa Venezia followed by Costa Firenze in
the spring of 2024. Additionally during 2022, Costa Luminosa was
transferred to Carnival Cruise Line and began guest operations as
Carnival Luminosa.
During 2022, we reduced our capital expenditures by over $500
million as compared to our previous guidance. We have
re-prioritized our expected spend to reflect the current
environment, while maintaining our commitment to seek excellence in
compliance, environmental protection, and in looking after the
safety, health and well-being of every life we touch. In addition,
we broke ground on a new exclusive destination in Grand Bahama Port
for our Carnival Cruise Line brand, which will be an important
addition to our current existing private islands and unique port
destinations which had 6 million visits from our guests in
2022.
Going forward, we are committed to using our expected cash
provided by operating activities to strengthen the balance sheet
over time and expect to be disciplined and rigorous in making
newbuild decisions. We have just four larger ships on order through
2025, plus our second Seabourn luxury expedition ship to be
delivered in 2023. This is our lowest order book in decades.
Overall, we remain focused on driving revenue growth and
accelerating our return to strong profitability. We believe that
over time, this revenue generation and our more focused capital
expenditure profile will support significant free cash flow, and
propel us on the path to deleveraging, investment grade credit
ratings and higher return on invested capital. This has been a
truly remarkable year and we have come a long way in an incredibly
short amount of time. We look forward to continuing to deliver
unforgettable happiness to our guests by providing extraordinary
cruise vacations in 2023, while honoring the integrity of every
ocean we sail, place we visit and life we touch.
New Accounting Pronouncements
Refer to our consolidated financial statements for further
information on Accounting Pronouncements.
Critical Accounting Estimates
Our critical accounting estimates are those we believe require
our most significant judgments about the effect of matters that are
inherently uncertain. A discussion of our critical accounting
estimates, the underlying judgments and uncertainties used to make
them and the likelihood that materially different estimates would
be reported under different conditions or using different
assumptions is as follows:
Liquidity and Other Uncertainties
We make several critical accounting estimates with respect to
our liquidity.
Based on the evolving nature of COVID-19 and our ongoing
collaboration with local and national public health authorities, we
have responsibly relaxed our related protocols, including greatly
reducing or eliminating testing requirements and vaccination
protocols to more closely align with the broader travel industry
and strengthening our competitiveness.
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, particularly with the responsible
relaxation of COVID-19 related protocols aligning towards
land-based vacation alternatives and strengthening our
competitiveness
-- Expected improvement in occupancy on a year-over-year basis
returning to historical levels in the summer of 2023
-- Stabilization of fuel prices around November 2022 year-end prices
-- Continued stabilization of inflationary pressures on costs,
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 from 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 business. 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 almost three years, we have taken appropriate actions to
manage our liquidity, including completing various capital market
transactions, obtaining relevant financial covenant amendments or
waivers, accelerating the removal of certain ships from the fleet,
and during the pause reducing capital expenditures and operating
expenses. As of November 30, 2022, 97% of our capacity has resumed
guest cruise operations and is serving guests.
We will continue to pursue various opportunities to raise
additional capital to fund obligations associated with future debt
maturities and/or to extend the maturity dates associated with our
existing indebtedness including our Revolving Facility and obtain
relevant financial covenant amendments or waivers, if needed.
Actions to raise capital may include issuances of debt, convertible
debt or equity in private or public transactions or entering into
new and extended credit facilities.
Ship Accounting
We make several critical accounting estimates with respect to
our ship accounting including ship improvement costs, estimated
useful lives and residual values.
We account for ship improvement costs, including replacements of
certain significant components and parts, by capitalizing those
costs we believe add value to our ships and have a useful life
greater than one year and depreciating those improvements over
their estimated remaining useful life. The costs of repairs and
maintenance, including those incurred when a ship is taken
out-of-service for scheduled maintenance, and minor improvement
costs and expenses, are charged to expense as incurred. If we
change our assumptions in making our determinations as to whether
improvements to a ship add value, the amounts we expense each year
as repair and maintenance expense could increase, which would be
partially offset by a decrease in depreciation expense, resulting
from a reduction in capitalized costs.
In addition, the specifically identified or estimated cost and
accumulated depreciation of previously capitalized ship components
are written-off upon retirement, which may result in a loss on
disposal that is also included in other operating expenses. We do
not have cost segregation studies performed to specifically
componentize our ships. In addition, since we do not separately
componentize our ships, we do not identify and track depreciation
of original ship components. Therefore, we typically have to
estimate the net book value of components that are retired, based
primarily upon their replacement cost, their age and their original
estimated useful lives. Given the large size and complexity of our
ships, ship accounting estimates require considerable judgment and
are inherently uncertain.
In order to compute our ships' depreciation expense, we apply
judgment to determine their useful lives as well as their residual
values. We have estimated our ships' useful lives at 30 years and
residual values at 15% of our original ship cost. Our ship useful
life and residual value estimates take into consideration the
estimated weighted-average useful lives of the ships' major
component systems, such as hull, superstructure, main electric,
engines and cabins. We also take into consideration the impact of
technological changes, historical useful lives of similarly-built
ships, long-term cruise and vacation market conditions and
regulatory changes, including those related to the environment and
climate change. We determine the residual value of our ships based
on our long-term estimates of their resale value at the end of
their useful life to us but before the end of their physical and
economic lives to others, historical resale values of our and other
cruise ships as well as our expectations of the long-term viability
of the secondary cruise ship market. We review estimated useful
lives and residual values for reasonableness whenever events or
circumstances significantly change. Since the pause of our guest
cruise operations, we have disposed of ships for amounts
significantly below their book value. Management has estimated that
this trend will normalize in the coming years.
The IMO is currently considering various proposals which build
on existing regulations and aim to further reduce GHG emissions
within the global shipping industry. In addition, the EU has
proposed several regulations that will likely impact the cost of
fossil fuels, including the recently agreed inclusion of maritime
shipping in the EU's Emission Trading System which is in the
process of being adopted. We have established Climate Action Goals,
which include a carbon intensity reduction goal of 20% by 2030 from
the 2019 baseline and aspire to achieve net carbon-neutral ship
operations by 2050. Given a 30-year estimated useful life for our
ships, our most recently delivered vessels' lives will extend
beyond this 2050 date. Fossil fuels are currently the only viable
option for our industry and it is not clear when alternative fuels
or other technologies will be commercially viable. While
alternative fuels may provide a path to decarbonization for the
maritime industry, there are significant supply challenges that
must be resolved before viability is reached. We are closely
monitoring technology developments and partnering with key
organizations on research and development to support our
sustainability goals and aspirations. Our fleet's engines are
capable of being modified for use with certain alternative fuels
and we have begun to test the use of marine biofuel blends on
certain ships in our fleet. In addition, and in support of our
Climate Action Goals, we invest in technologies, including the use
of LNG powered cruise ships, the installation of Advanced Air
Quality Systems on board our ships to aid in the reduction of
sulfur emissions, the use of shore power, enabling ships to use
shoreside electric power where available while in port and various
other efficiency related upgrades intended to reduce our emissions.
It is uncertain how proposed and possible regulatory changes
related to the environment and climate change and our 2050
aspirations, may impact our ships' useful lives and residual values
and the impact is dependent on
future regulatory actions and technological advances. As of
November 30, 2022, management concluded that there were no changes
in our ship useful lives and residual value estimates.
If materially different conditions existed, or if we materially
changed our assumptions of ship useful lives and residual values,
then our depreciation expense, loss on retirement of ship
components and net book value of our ships would be materially
different. Our 2022 ship depreciation expense would have increased
by approximately:
-- $47 million assuming we had reduced our estimated 30-year
ship useful life estimate by one year at the time we took delivery
or acquired each of our ships
-- $237 million assuming we had estimated our ships to have no residual value
We believe that the estimates we made for ship accounting
purposes are reasonable and our methods are consistently applied in
all material respects and result in depreciation expense that is
based on a rational and systematic method to equitably allocate the
costs of our ships to the periods during which we use them.
Valuation of Ships
Impairment reviews of our ships require us to make significant
estimates. We evaluate ship asset impairments at the individual
ship level which is the lowest level for which identifiable cash
flows are largely independent of the cash flows of other assets and
liabilities. We review our ships for impairment whenever events or
circumstances indicate that the carrying value of a ship may not be
recoverable. If estimated future cash flows are less than the
carrying value of a ship, an impairment charge is recognized to the
extent its carrying value exceeds its estimated fair value. Where
estimated future cash flows are used to estimate the recoverable
value of a ship, the cash flows include estimated capital
expenditures, including those expected to meet our 2030 Climate
Action Goals.
The estimation of a ship's fair value includes numerous
assumptions that are subject to various risks and uncertainties.
The principal assumption used in determining the fair value of
these ships was the estimated sales proceeds.
We determined the fair value of these ships based on their
respective estimated selling values, for those ships expected to be
disposed of, or estimated discounted future cash flows and
comparable market transactions. Refer to our consolidated financial
statements for additional discussion of our property and equipment
policy, ship impairment reviews and ship impairment charges
recognized during 2022.
We believe that we have made reasonable estimates.
Valuation of Goodwill
Impairment reviews of our goodwill require us to make
significant estimates.
We review our goodwill for impairment at the reporting unit
level as of July 31 every year, or more frequently if events or
circumstances dictate. If the estimated fair value of any of our
reporting units is less than the reporting unit's carrying value,
goodwill is written down based on the difference between the
reporting unit's carrying amount and its estimated fair value,
limited to the amount of goodwill allocated to the reporting
unit.
The estimation of our reporting unit fair value includes
numerous assumptions that are subject to various risks and
uncertainties. COVID-19 and its ongoing effects, inflation, higher
fuel prices and higher interest rates have created additional
uncertainty in our impairment analyses. The estimated fair value of
our reporting unit with goodwill significantly exceeded its
carrying value as of the date of its most recent quantitative test.
Refer to our consolidated financial statements for additional
discussion of our goodwill accounting policy and impairment
reviews.
We believe that we have made reasonable estimates.
Contingencies
We periodically assess the potential liabilities related to any
lawsuits or claims brought against us, as well as for other known
unasserted claims, including environmental, legal, regulatory and
guest and crew matters. While it is typically very difficult to
determine the timing and ultimate outcome of these matters, we use
our best judgment to determine the appropriate amounts to record in
our consolidated financial statements.
We accrue a liability and establish a reserve when we believe a
loss is probable and the amount of the loss can be reasonably
estimated. In assessing probable losses, we make estimates of the
amount of probable insurance recoveries, if any, which are recorded
as assets where appropriate. Such accruals and reserves are
typically based on developments to date, management's estimates of
the outcomes of these matters, our experience in contesting,
litigating and settling other similar matters, historical claims
experience, actuarially determined estimates of liabilities and any
related insurance coverage.
Given the inherent uncertainty related to the eventual outcome
of these matters and potential insurance recoveries, it is possible
that all or some of these matters may be resolved for amounts
materially different from any provisions or disclosures that we may
have made. In addition, as new information becomes available, we
may need to reassess the amount of asset or liability that needs to
be accrued related to our contingencies. All such changes in our
estimates could materially impact our results of operations and
financial position.
Refer to our consolidated financial statements for additional
discussion of contingencies.
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.
Results of Operations
We have historically earned substantially all of our cruise
revenues from the following:
-- Sales of passenger cruise tickets and, in some cases, the
sale of air and other transportation to and from airports near our
ships' home ports and cancellation fees. We also collect fees,
taxes and other charges from our guests. The cruise ticket price
typically includes the following:
-- Accommodations
-- Most meals, including snacks at numerous venues
-- Access to amenities such as swimming pools, water slides,
water parks, whirlpools, a health club and sun decks
-- Child care and supervised youth programs
-- Entertainment, such as theatrical and comedy shows, live
music and nightclubs
-- Visits to multiple destinations
-- Sales of onboard goods and services not included in the
cruise ticket price. This generally includes the following:
-- Beverage sales -- Internet and communication
services
-- Casino gaming -- Full service spas
-- Shore excursions -- Specialty restaurants
-- Retail sales -- Art sales
-- Photo sales -- Laundry and dry cleaning
services
These goods and services are provided either directly by us or
by independent concessionaires, from which we receive either a
percentage of their revenues or a fee. Concession revenues do not
have direct expenses because the costs and services incurred for
concession revenues are borne by our concessionaires. In 2022, we
earned 42% of our cruise revenues from onboard and other revenue
goods and services. In 2019, our most recent full year of guest
cruise operations, we earned 30% of our cruise revenues from
onboard and other revenues.
We earn our tour and other revenues from our hotel and
transportation operations and other revenues.
We incur cruise operating costs and expenses for the
following:
-- The costs of passenger cruise bookings, which include travel
agent commissions, cost of air and other transportation, port fees,
taxes, and charges that directly vary with guest head counts and
credit and debit card fees
-- Onboard and other cruise costs, which include the costs of
beverage sales, costs of shore excursions, costs of retail sales,
internet and communication costs, credit and debit card fees, other
onboard costs, costs of cruise vacation protection programs and
pre- and post-cruise land packages
-- Payroll and related costs, which include the costs of
officers and crew in bridge, engineering and hotel operations.
Substantially all costs associated with our shoreside personnel are
included in selling and administrative expenses
-- Fuel costs, which include fuel delivery costs
-- Food costs, which include both our guest and crew food
costs
-- Other ship operating expenses, which include port costs that
do not vary with guest head counts; repairs and maintenance,
including minor improvements and dry-dock expenses; hotel costs;
entertainment; gains and losses on ship sales; ship impairments;
freight and logistics; insurance premiums and all other ship
operating expenses
We incur tour and other costs and expenses for our hotel and
transportation operations and other expenses.
Statistical Information
Years Ended November 30,
----------------------------
2022 2021 2020
-------- -------- --------
PCDs (in millions) (a) 54.6 8.2 26.5
ALBDs (in millions) (b) 72.5 14.6 26.1
Occupancy percentage (c) 75% 56% 101%
Passengers carried (in millions) 7.7 1.2 3.5
Fuel consumption in metric tons (in millions) 2.6 1.3 1.9
Fuel consumption in metric tons per thousand 36.1 (d) (d)
ALBDs
Fuel cost per metric ton consumed $830 $515 $430
Currencies (USD to 1)
AUD $0.70 $0.75 $0.68
CAD $0.77 $0.80 $0.74
EUR $1.06 $1.19 $1.13
GBP $1.25 $1.38 $1.28
The resumption of guest cruise operations has impacted the
comparability of all aspects of our business.
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.
(d) Fuel consumption in metric tons per thousand ALBDs for 2021 and 2020 are not meaningful.
2022 Compared to 2021
Results of Operations
Consolidated
Years Ended November
30,
(in millions) 2022 2021 Change
---------- ---------- ------
Revenues
Passenger ticket $7,022 $1,000 $6,022
Onboard and other 5,147 908 4,239
---------- ---------- ------
12,168 1,908 10,260
---------- ---------- ------
Operating Costs and Expenses
Commissions, transportation and other 1,630 269 1,360
Onboard and other 1,528 272 1,256
Payroll and related 2,181 1,309 871
Fuel 2,157 680 1,477
Food 863 187 676
Ship and other impairments 440 591 (151)
Other operating 2,958 1,346 1,612
---------- ---------- ------
11,757 4,655 7,103
Selling and administrative 2,515 1,885 630
Depreciation and amortization 2,275 2,233 43
Goodwill impairment - 226 (226)
---------- ---------- ------
16,547 8,997 7,550
---------- ---------- ------
Operating Income (Loss) (4,379) (7,089) 2,710
---------- ---------- ------
Nonoperating Income (Expense)
Interest income 74 12 62
Interest expense, net of capitalized interest (1,609) (1,601) (8)
Gains (losses) on debt extinguishment, net (1) (670) 670
Other income (expense), net (165) (173) 8
---------- ---------- ------
(1,701) (2,433) 732
---------- ---------- ------
Income (Loss) Before Income Taxes $(6,080) $(9,522) $3,443
========== ========== ======
NAA
Years Ended November
30,
(in millions) 2022 2021 Change
---------- ---------- ------
Revenues
Passenger ticket $4,692 $555 $4,137
Onboard and other 3,589 553 3,036
---------- ---------- ------
8,281 1,108 7,173
---------- ---------- ------
Operating Costs and Expenses 7,526 2,730 4,796
Selling and administrative 1,517 953 564
Depreciation and amortization 1,408 1,352 55
10,451 5,036 5,415
---------- ---------- ------
Operating Income (Loss) $(2,170) $(3,928) $1,758
========== ========== ======
EA
Years Ended November
30,
(in millions) 2022 2021 Change
---------- ---------- ------
Revenues
Passenger ticket $2,660 $491 $2,169
Onboard and other 872 221 651
---------- ---------- ------
3,531 712 2,820
---------- ---------- ------
Operating Costs and Expenses 3,925 1,807 2,118
Selling and administrative 745 568 177
Depreciation and amortization 692 728 (37)
Goodwill impairment - 226 (226)
---------- ---------- ------
5,361 3,329 2,032
---------- ---------- ------
Operating Income (Loss) $(1,830) $(2,617) $787
========== ========== ======
In the face of the global impact of COVID-19, we paused our
guest cruise operations in mid-March 2020 and began resuming guest
cruise operations in 2021. As of November 30, 2022, 97% of our
capacity was serving guests compared to 61% as of November 30,
2021. Our NAA segment's full fleet was serving guests as of
November 30, 2022 compared to 60% of its capacity as of November
30, 2021. Our EA segment had 93% of its capacity serving guests as
of November 30, 2022, compared to 63% as of November 30, 2021.
The effects of the pause 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, and 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.
Revenues
Consolidated
Cruise passenger ticket revenues made up 58% of our total
revenues in 2022 while onboard and other revenues made up 42%.
Revenues for the year ended November 30, 2022 increased by $10.3
billion to $12.2 billion from $1.9 billion in 2021 due to the
ongoing resumption of guest cruise operations and the significant
increase of ships in service. ALBDs increased to 72.5 million in
2022 as compared to 14.6 million in 2021. Occupancy for 2022 was
75%, compared to 56% in 2021.
NAA Segment
Cruise passenger ticket revenues made up 57% of our NAA
segment's total revenues in 2022 while onboard and other cruise
revenues made up 43%. NAA segment revenues for 2022 increased by
$7.2 billion to $8.3 billion from $1.1 billion in 2021 due to the
ongoing resumption of guest cruise operations and the significant
increase of ships in service. ALBDs increased to 44.3 million in
2022 as compared to 7.2 million in 2021. Occupancy for 2022 was 82%
compared to 63% in 2021.
EA Segment
Cruise passenger ticket revenues made up 75% of our EA segment's
total revenues in 2022 while onboard and other cruise revenues made
up 25%. EA segment revenues for 2022 increased by $2.8 billion to
$3.5 billion from $0.7 billion in 2021 due to the ongoing
resumption of guest cruise operations and the significant increase
of ships in service. ALBDs increased to 28.2 million in 2022 as
compared to 7.4 million in 2021. Occupancy for 2022 was 65%
compared to 50% in 2021.
Operating Cost and Expenses
Consolidated
Operating costs and expenses increased by $7.1 billion to $11.8
billion in 2022 from $4.7 billion in 2021. These increases were
driven by our resumption of guest cruise operations and restart
related expenses, including the cost of returning ships to guest
cruise operations and returning crew members to our ships, the cost
of maintaining enhanced health and safety protocols and
inflation.
Fuel costs increased by $1.5 billion to $2.2 billion in 2022
from $0.7 billion in 2021. $0.7 billion of this increase was driven
by higher fuel consumption of 1.3 million metric tons, due to the
resumption of guest cruise operations, and $0.8 billion was driven
by an increase in fuel prices and changes in fuel mix of $315 per
metric ton consumed in 2022 compared to 2021.
We recognized ship and other impairment charges of $440 million
in 2022 compared to $591 million in 2021.
Selling and administrative expenses increased by $0.6 billion to
$2.5 billion in 2022 from $1.9 billion in 2021. This increase was
primarily driven by increased advertising and promotional spend to
continue to build demand while the remainder was driven by higher
administrative expenses incurred as part of our resumption of guest
cruise operations.
There were no goodwill impairment charges recognized in 2022 and
$226 million of goodwill impairment charges recognized in 2021.
The drivers in changes in costs and expenses for our NAA and EA
segments are the same as those described for our consolidated
results.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, was $1.6 billion
in 2022 and 2021.
Losses on debt extinguishment, net decreased to $1 million in
2022 from $670 million in 2021.
2021 Compared to 2020
Results of Operations
Consolidated
Years Ended November
30,
---------------------- -----------
% increase
(in millions) 2021 2020 Change (decrease)
---------- ---------- -------- -----------
Revenues
Passenger ticket $1,000 $3,684 $(2,684) (73)%
Onboard and other 908 1,910 (1,003) (52)%
---------- ---------- -------- -----------
1,908 5,595 (3,687) (66)%
---------- ---------- -------- -----------
Operating Costs and Expenses
Commissions, transportation and other 269 1,139 (870) (76)%
Onboard and other 272 605 (334) (55)%
Payroll and related 1,309 1,780 (471) (26)%
Fuel 680 823 (142) (17)%
Food 187 413 (226) (55)%
Ship and other impairments 591 1,967 (1,376) (70)%
Other operating 1,346 1,518 (172) (11)%
---------- ---------- -------- -----------
4,655 8,245 (3,590) (44)%
Selling and administrative 1,885 1,878 6 -%
Depreciation and amortization 2,233 2,241 (8) -%
Goodwill impairment 226 2,096 (1,870) (89)%
---------- ---------- -------- -----------
8,997 14,460 (5,462) (38)%
---------- ---------- -------- -----------
Operating Income (Loss) $(7,089) $(8,865) $1,776 (20)%
========== ========== ======== ===========
NAA
Years Ended November
30,
---------------------- -----------
% increase
(in millions) 2021 2020 Change (decrease)
---------- ---------- -------- -----------
Revenues
Passenger ticket $555 $2,334 $(1,779) (76)%
Onboard and other 553 1,293 (740) (57)%
---------- ---------- -------- -----------
1,108 3,627 (2,519) (69)%
---------- ---------- -------- -----------
Operating Costs and Expenses 2,730 5,623 (2,893) (51)%
Selling and administrative 953 1,066 (113) (11)%
Depreciation and amortization 1,352 1,413 (60) (4)%
Goodwill impairment - 1,319 (1,319) 100%
---------- ---------- -------- -----------
5,036 9,422 (4,386) (47)%
---------- ---------- -------- -----------
Operating Income (Loss) $(3,928) $(5,794) $1,867 (32)%
========== ========== ======== ===========
EA
Years Ended November
30,
---------------------- -----------
% increase
(in millions) 2021 2020 Change (decrease)
---------- ---------- ------- -----------
Revenues
Passenger ticket $491 $1,388 $(897) (65)%
Onboard and other 221 402 (181) (45)%
---------- ---------- ------- -----------
712 1,790 (1,078) (60)%
---------- ---------- ------- -----------
Operating Costs and Expenses 1,807 2,548 (741) (29)%
Selling and administrative 568 523 46 9%
Depreciation and amortization 728 672 56 8%
Goodwill impairment 226 777 (551) (71)%
---------- ---------- ------- -----------
3,329 4,519 (1,190) (26)%
---------- ---------- ------- -----------
Operating Income (Loss) $(2,617) $(2,729) $112 (4)%
========== ========== ======= ===========
We paused our guest cruise operations in March 2020 with minimal
cruise related revenue recognized during the remainder of 2020. In
addition, we incurred incremental COVID-19 related costs associated
with repatriating guests and crew members, enhancing health
protocols and sanitizing our ships, restructuring costs and
defending lawsuits. As of November 30, 2021, eight of our nine
brands had resumed guest cruise operations as part of our gradual
return to service. The gradual resumption of guest cruise
operations continued to have a material impact on all aspects of
our business, including our liquidity, financial position and
results of operations. The full extent of the impact will be
determined by our gradual return to service and the length of time
COVID-19 influences travel decisions.
As of November 30, 2021, 61% of our capacity was operating with
guests on board, which is an increase from November 30, 2020 where
we had one ship in service. Revenues for the year ended November
30, 2021 decreased $3.7 billion, or 66%, to $1.9 billion from $5.6
billion in 2020 as a result of the pause in guest cruise operations
beginning March 2020 and the gradual resumption in guest cruise
operations in 2021. Occupancy for 2021 was 56%, compared to 101% in
2020, due to the gradual resumption of guest cruise operations.
During 2021 we incurred, incremental restart-related spend
including the cost of returning ships to guest cruise operations
and returning crew members to our ships as well as the incremental
costs of maintaining enhanced health and safety protocols as we
continue our gradual return to service. During 2020, while
maintaining compliance, environmental protection and safety, we
significantly reduced ship operating expenses, including cruise
payroll and related expenses, food, fuel, insurance and port
charges by transitioning ships into paused status, either at anchor
or in port, and staffed at a safe manning level.
We recognized goodwill impairment charges of $0.2 billion and
$2.1 billion for the years ended November 30, 2021 and 2020.
We recognized ship impairment charges of $0.6 billion and $1.8
billion as of November 30, 2021 and 2020.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, increased by $0.7
billion to $1.6 billion in 2021 from $0.9 billion in 2020. The
increase was caused by our higher average debt balance in 2021
compared to 2020.
Loss on debt extinguishment increased by $212 million to $670
million in 2021 from $459 million in 2020. The increase was caused
by the repurchase of $4.0 billion of the aggregate principal of the
2023 Senior Secured Notes.
Liquidity, Financial Condition and Capital Resources
As of November 30, 2022, we had $8.6 billion of liquidity
including cash, restricted cash from the 2028 Senior Priority Notes
which became unrestricted in December 2022 and borrowings available
under our Revolving Facility. We will continue to pursue various
opportunities to raise additional capital to fund obligations
associated with future debt maturities and/or to extend the
maturity dates associated with our existing indebtedness including
our Revolving Facility and obtain relevant financial covenant
amendments or waivers, if needed. Actions to raise capital may
include issuances of debt, convertible debt or equity in private or
public transactions or entering into new and extended credit
facilities.
Since December 2021, we have completed the following:
-- In December 2021, we borrowed $1.7 billion under export
credit facilities due in semi-annual installments through 2034.
-- In January 2022, we borrowed $637 million under an export
credit facility due in semi-annual installments through 2034.
-- In May 2022, we issued an aggregate principal amount of $1.0
billion senior unsecured notes that mature on June 1, 2030. The
2030 Senior Unsecured Notes bear interest at a rate of 10.5% per
year.
-- In August 2022, we completed a public offering of 117.5
million shares of Carnival Corporation common stock at a price per
share of $9.95, resulting in net proceeds of $1.2 billion.
-- In August 2022, we issued $339 million aggregate principal
amount of the 2024 Convertible Notes in a privately negotiated
non-cash exchange for existing convertible notes.
-- In October 2022, we issued an aggregate principal amount of
$2.0 billion senior priority notes that mature on May 1, 2028. The
2028 Senior Priority Notes bear interest at a rate of 10.4% per
year.
-- In November 2022, we issued an additional $87 million
aggregate principal amount of the 2024 Convertible Notes in a
privately negotiated non-cash exchange for existing convertible
notes.
-- In November 2022, we issued $1.1 billion aggregate principal
amount of the 2027 Convertible Notes.
-- In November 2022, we borrowed $799 million under an export
credit facility due in semi-annual installments through 2034.
Refer to Note 5 - "Debt" of the consolidated financial
statements and "Funding Sources" below for additional details.
Certain of our debt instruments contain provisions that may
limit our ability to incur or guarantee additional
indebtedness.
We had a working capital deficit of $3.1 billion as of November
30, 2022 compared to a working capital deficit of $0.3 billion as
of November 30, 2021 . The increase in working capital deficit was
caused by a decrease in cash and cash equivalents, a decrease in
short-term investments, an increase in customer deposits and an
increase in current portion of long-term debt, and was partially
offset by an increase in restricted cash and a decrease in
short-term borrowings. 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 $4.9 billion and $3.1 billion of customer deposits as
of November 30, 2022 and 2021, 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.
Sources and Uses of Cash
Operating Activities
Our business used $1.7 billion of net cash flows in operating
activities during 2022, a decrease of $2.4 billion, compared to
$4.1 billion used in 2021. This was due to a decrease in the net
loss compared to the same period in 2021 and other working capital
changes. During 2021, our business used $4.1 billion of net cash
from operations, a decrease of $2.2 billion, compared to $6.3
billion provided in 2020.
Investing Activities
During 2022, net cash used in investing activities was $4.8
billion. This was driven by:
-- Capital expenditures of $3.9 billion for our ongoing new shipbuilding program
-- Capital expenditures of $1.1 billion for ship improvements
and replacements, information technology and buildings and
improvements
-- Proceeds from sales of ships and other of $70 million
-- Purchases of short-term investments of $315 million
-- Proceeds from maturity of short-term investments of $515 million
During 2021, net cash used in investing activities was $3.5
billion. This was caused by:
-- Capital expenditures of $3.0 billion for our ongoing new shipbuilding program
-- Capital expenditures of $602 million for ship improvements
and replacements, information technology and buildings and
improvements
-- Proceeds from sales of ships and other of $351 million
-- Purchases of short-term investments of $2.9 billion
-- Proceeds from maturity of short-term investments of $2.7 billion
During 2020, net cash used in investing activities was $3.2
billion. This was caused by:
-- Capital expenditures of $2.8 billion for our ongoing new shipbuilding program
-- Capital expenditures of $868 million for ship improvements
and replacements, information technology and buildings and
improvements
-- Proceeds from sales of ships of $334 million
-- Proceeds of $220 million from the settlement of outstanding derivatives
Financing Activities
During 2022, net cash provided by financing activities of $3.6
billion was caused by:
-- Issuances of $7.2 billion of long-term debt
-- Repayments of $2.1 billion of long-term debt
-- Payments of $153 million related to debt issuance costs
-- Net repayments of short-term borrowings of $2.6 billion
-- Net proceeds of $1.2 billion from the public offering of Carnival Corporation common stock
-- Purchases of $87 million of Carnival plc ordinary shares and
issuances of $95 million of Carnival Corporation common stock under
our Stock Swap Program
During 2021, net cash provided by financing activities of $6.9
billion was caused by:
-- Issuances of $13.0 billion of long-term debt
-- Repayments of $6.0 billion of long-term debt
-- Premium payments of $545 million related to the extinguishment of debt
-- Net proceeds of $1.0 billion from Carnival Corporation common stock
-- Purchases of $188 million of Carnival plc ordinary shares and
issuances of $206 million of Carnival Corporation common stock
under our Stock Swap Program
-- Payments of $319 million related to debt issuance costs
During 2020, net cash provided in financing activities of $18.6
billion was caused by:
-- Net proceeds of short-term borrowings of $2.9 billion in
connection with our availability of, and needs for, cash at various
times throughout the period, including proceeds of $3.1 billion
from the Revolving Facility
-- Repayments of $1.6 billion of long-term debt
-- Issuances of $15.0 billion of long-term debt
-- Payments of cash dividends of $689 million
-- Net proceeds of $3.0 billion from our public offerings of Carnival Corporation common stock
-- Net proceeds of $222 million from a registered direct
offering of Carnival Corporation common stock used to repurchase a
portion of the 2023 Convertible Notes
Material Cash Requirements
Payments Due by
-------------------------------------------
(in millions) 2023 2024 2025 2026 2027 Total
------ ------ ------ ------ ------ -------
Debt (a) $4,344 $4,564 (c) $6,082 $5,875 $6,755 $27,620
Newbuild capital expenditures (b) 1,755 2,400 895 - - 5,050
------ ------ ------ ------ ------ -------
Total $6,099 $6,964 $6,977 $5,875 $6,755 $32,670
====== ====== ====== ====== ====== =======
(a) Includes principal as well as estimated interest payments
and does not include the impact of any future possible
refinancings. Excludes undrawn export credits.
(b) As of November 30, 2022, we have committed undrawn export
credit facilities of $2.2 billion which fund a portion of our
Newbuild contractual commitments. Subsequent to November 30, 2022,
we obtained additional committed undrawn export credit facilities
related to ship deliveries scheduled in 2024 and 2025.
(c) Includes $0.2 billion of borrowings under the Revolving
Facility as of November 30, 2022 which mature in 2024.
Funding Sources
As of November 30, 2022, we had $8.6 billion of liquidity
including cash, restricted cash from the 2028 Senior Priority Notes
which became unrestricted in December 2022 and borrowings available
under our Revolving Facility. In addition, we had $2.2 billion of
undrawn export credit facilities to fund ship deliveries planned
through 2024. Refer to Note 1 - "General" for further details on
our liquidity risk and how we plan to fund our cash requirements
.
(in billions) 2023 2024
---- ----
Future export credit facilities at November 30, 2022 $0.8 $1.4
Subsequent to November 30, 2022, we obtained additional undrawn
export credit facilities related to ship deliveries scheduled in
2024 and 2025.
Our export credit facilities contain various financial covenants
as described in Note 5 - "Debt". At November 30, 2022, we were in
compliance with the applicable covenants under our debt
agreements.
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.
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 2022, under the Stock
Swap Program, we sold 6.0 million shares of Carnival Corporation
common stock and repurchased the same amount of Carnival plc
ordinary shares, resulting in net proceeds of $8 million which were
used for general corporate purposes. During 2021, we sold 8.9
million shares of Carnival Corporation's common stock and
repurchased the same amount of Carnival plc ordinary shares,
resulting in net proceeds of $19 million. During 2020, there were
no sales or repurchases under the Stock Swap Program.
Quantitative and Qualitative Disclosures About Market Risk
For a discussion of our hedging strategies and market risks, see
the discussion below and the consolidated financial statements.
Fuel Price Risks
Substantially all our exposure to market risk for changes in
fuel prices relates to the consumption of fuel on our ships. We
have installed Advanced Air Quality Systems on most of our ships,
which has aided in the mitigation of the financial impact from the
ECAs and global 0.5% sulfur requirements. The blended spot price
included in our selected forecast information within our Business
Update from December 2022 was $673 per metric ton, and we expect
our total fuel consumption for 2023 to be 2.9 million metric tons.
If fuel prices changed by 10%, our 2023 total expected fuel cost
would change by $185 million.
Foreign Currency Exchange Rate Risks
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 will affect our financial statements.
Investment Currency Risks
The foreign currency exchange rates were as follows:
November 30,
USD to 1: 2022 2021
------ ------
AUD $0.66 $0.71
CAD $0.74 $0.78
EUR $1.03 $1.13
GBP $1.20 $1.33
If the November 30, 2021 currency exchange rates had been used
to translate our November 30, 2022 non-U.S. dollar functional
currency operations' assets and liabilities (instead of the
November 30, 2022 U.S. dollar exchange rates), our total assets
would have been higher by $1.6 billion and our total liabilities
would have been higher by $1.1 billion.
Newbuild Currency Risks
At November 30, 2022, our remaining newbuild currency exchange
rate risk primarily relates to euro-denominated newbuild contract
payments, which represent a total unhedged commitment of $4.4
billion and relate to newbuilds scheduled to be delivered through
2025 to non-euro functional currency brands. The functional
currency cost of each of these ships will increase or decrease
based on changes in the exchange rates until the unhedged payments
are made under the shipbuilding contract. We may enter into
additional foreign currency derivatives to mitigate some of this
foreign currency exchange rate risk. Based on a 10% change in euro
to U.S. dollar exchange rates as of November 30, 2022, the
remaining unhedged cost of these ships would have a corresponding
change of $445 million.
Interest Rate Risks
The composition of our debt and interest rate swaps was as
follows:
November 30, 2022
-----------------
Fixed rate 54%
EUR fixed rate 12%
Floating rate 17%
EUR floating rate 15%
GBP floating rate 1%
At November 30, 2022, we had interest rate swaps that have
effectively changed $89 million of EURIBOR-based floating rate euro
debt to fixed rate euro debt. Based on a 10% change in the November
30, 2022 market interest rates, our 2022 interest expense on
floating rate debt, including the effect of our interest rate
swaps, would have changed by $48 million.
COMMON STOCK AND ORDINARY SHARES
Carnival Corporation common stock, together with paired trust
shares of beneficial interest in the P&O Princess Special
Voting Trust, which holds a Special Voting Share of Carnival plc,
is traded on the NYSE under the symbol "CCL." Carnival plc ordinary
shares trade on the London Stock Exchange under the symbol "CCL."
Carnival plc American Depositary Shares ("ADSs"), each one of which
represents one Carnival plc ordinary share, are traded on the NYSE
under the symbol "CUK." The depositary for the ADSs is JPMorgan
Chase Bank, N.A.
As of January 12, 2023, there were 2,956 holders of record of
Carnival Corporation common stock and 29,362 holders of record of
Carnival plc ordinary shares and 46,628,217 holders of record of
Carnival plc ADSs. The past performance of our share prices cannot
be relied on as a guide to their future performance.
On March 30, 2020, we suspended the payment of dividends on
Carnival Corporation common stock and Carnival plc ordinary
shares.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR QDLFLXFLEBBB
(END) Dow Jones Newswires
January 27, 2023 12:27 ET (17:27 GMT)
Carnival (LSE:CCL)
Historical Stock Chart
Von Mär 2024 bis Apr 2024
Carnival (LSE:CCL)
Historical Stock Chart
Von Apr 2023 bis Apr 2024
