TIDMCCL
RNS Number : 6674U
Carnival PLC
29 March 2023
March 29, 2023
RELEASE OF CARNIVAL CORPORATION & PLC QUARTERLY REPORT ON
FORM 10-Q
FOR THE FIRST QUARTER OF 2023
Carnival Corporation & plc announced its first quarter
results of operations in its earnings release issued on March 27,
2023. Carnival Corporation & plc is hereby announcing that
today it has filed its joint Quarterly Report on Form 10-Q ("Form
10-Q") with the U.S. Securities and Exchange Commission ("SEC")
containing the Carnival Corporation & plc unaudited
consolidated financial statements as of and for the three months
ended February 28, 2023.
The information included in the Form 10-Q (Schedule A) has been
prepared in accordance with SEC rules and regulations. The Carnival
Corporation & plc unaudited consolidated financial statements
contained in the Form 10-Q have been prepared in accordance with
generally accepted accounting principles in the United States of
America ("U.S. GAAP").
Schedule A contains the Carnival Corporation & plc unaudited
consolidated financial statements as of and for the three months
ended February 28, 2023, management's discussion and analysis
("MD&A") of financial conditions and results of operations, and
information on Carnival Corporation and Carnival plc's sales and
purchases of their equity securities and use of proceeds from such
sales.
The Directors consider that within the Carnival Corporation and
Carnival plc dual listed company arrangement, the most appropriate
presentation of Carnival plc's results and financial position is by
reference to the Carnival Corporation & plc U.S. GAAP unaudited
consolidated financial statements.
MEDIA CONTACT INVESTOR RELATIONS CONTACT
Jody Venturoni Beth Roberts
001 469 797 6380 001 305 406 4832
The Form 10-Q is available for viewing on the SEC website at
www.sec.gov under Carnival Corporation or Carnival plc or the
Carnival Corporation & plc website at www.carnivalcorp.com or
www.carnivalplc.com. A copy of the Form 10-Q has been submitted to
the National Storage Mechanism and will shortly be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. Additional
information can be obtained via Carnival Corporation & plc's
website listed above or by writing to Carnival plc at Carnival
House, 100 Harbour Parade, Southampton, SO15 1ST, United
Kingdom.
Carnival Corporation & plc is the largest global cruise
company, and among the largest leisure travel companies, with a
portfolio of world-class cruise lines - AIDA Cruises, Carnival
Cruise Line, Costa Cruises, Cunard, Holland America Line, P&O
Cruises (Australia), P&O Cruises (UK), Princess Cruises, and
Seabourn.
Additional information can be found on www.carnivalcorp.com ,
www.aida.de , www.carnival.com , www.costacruise.com ,
www.cunard.com , www.hollandamerica.com , www.pocruises.com.au ,
www.pocruises.com , www.princess.com and www.seabourn.com . For
more information on Carnival Corporation's industry-leading
sustainability initiatives, visit www.carnivalsustainability.com
.
SCHEDULE A
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(in millions, except per share data)
Three Months
Ended February
28,
2023 2022
------- --------
Revenues
Passenger ticket $2,870 $873
Onboard and other 1,563 750
------- --------
4,432 1,623
------- --------
Operating Expenses
Commissions, transportation and other 655 251
Onboard and other 484 209
Payroll and related 582 506
Fuel 535 365
Food 311 136
Ship and other impairments - 8
Other operating 743 557
------- --------
Cruise and tour operating expenses 3,311 2,030
Selling and administrative 712 530
Depreciation and amortization 582 554
4,604 3,114
------- --------
Operating Income (Loss) (172) (1,491)
------- --------
Nonoperating Income (Expense)
Interest income 56 3
Interest expense, net of capitalized interest (539) (368)
Other income (expense), net (30) (32)
------- --------
(514) (397)
------- --------
Income (Loss) Before Income Taxes (686) (1,888)
Income Tax Benefit (Expense), Net (7) (3)
------- --------
Net Income (Loss) $(693) $(1,891)
======= ========
Earnings Per Share
Basic $(0.55) $(1.66)
======= ========
Diluted $(0.55) $(1.66)
======= ========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in millions)
Three Months
Ended February
28,
-----------------
2023 2022
------- --------
Net Income (Loss) $(693) $(1,891)
------- --------
Items Included in Other Comprehensive Income (Loss)
Change in foreign currency translation adjustment (3) 13
Other 14 2
------- --------
Other Comprehensive Income (Loss) 11 16
------- --------
Total Comprehensive Income (Loss) $(682) $(1,876)
======= ========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
February November
28, 30, 2022
2023
--------- ---------
ASSETS
Current Assets
Cash and cash equivalents $5,455 $4,029
Restricted cash 15 1,988
Trade and other receivables, net 514 395
Inventories 448 428
Prepaid expenses and other 710 652
--------- ---------
Total current assets 7,144 7,492
--------- ---------
Property and Equipment, Net 39,359 38,687
Operating Lease Right-of-Use Assets 1,246 1,274
Goodwill 579 579
Other Intangibles 1,158 1,156
Other Assets 2,501 2,515
--------- ---------
$51,985 $51,703
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $200 $200
Current portion of long-term debt 2,264 2,393
Current portion of operating lease liabilities 156 146
Accounts payable 1,022 1,050
Accrued liabilities and other 1,951 1,942
Customer deposits 5,495 4,874
--------- ---------
Total current liabilities 11,088 10,605
--------- ---------
Long-Term Debt 32,672 31,953
Long-Term Operating Lease Liabilities 1,148 1,189
Other Long-Term Liabilities 908 891
Contingencies and Commitments
Shareholders' Equity
Carnival Corporation common stock, $0.01 par value;
1,960 shares authorized; 1,246 shares at 2023 and
1,244 shares at 2022 issued 12 12
Carnival plc ordinary shares, $1.66 par value; 217
shares at 2023 and 2022 issued 361 361
Additional paid-in capital 16,635 16,872
Retained earnings (accumulated deficit) (434) 269
Accumulated other comprehensive income (loss) ("AOCI") (1,972) (1,982)
Treasury stock, 130 shares at 2023 and 2022 of Carnival
Corporation and 71 shares at 2023 and 72 shares at
2022 of Carnival plc, at cost (8,433) (8,468)
--------- ---------
Total shareholders' equity 6,170 7,065
--------- ---------
$51,985 $51,703
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Three Months
Ended
February 28,
-----------------
2023 2022
------- --------
OPERATING ACTIVITIES
Net income (loss) $(693) $(1,891)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization 582 554
Impairments - 8
(Income) loss from equity-method investments 11 11
Share-based compensation 9 26
Amortization of discounts and debt issue costs 44 46
Noncash lease expense 35 34
Other, net 7 5
------- --------
(4) (1,207)
Changes in operating assets and liabilities
Receivables (121) (22)
Inventories (19) (37)
Prepaid expenses and other (57) (44)
Accounts payable (35) (24)
Accrued liabilities and other 28 (65)
Customer deposits 596 187
------- --------
Net cash provided by (used in) operating activities 388 (1,212)
------- --------
INVESTING ACTIVITIES
Purchases of property and equipment (1,075) (2,730)
Proceeds from sales of ships 23 18
Purchase of short-term investments - (315)
Other, net 8 (6)
------- --------
Net cash provided by (used in) investing activities (1,044) (3,032)
------- --------
FINANCING ACTIVITIES
Proceeds from (repayments of) short-term borrowings, net - (48)
Principal repayments of long-term debt (679) (503)
Proceeds from issuance of long-term debt 830 2,347
Issuance of common stock, net - 15
Issuance of common stock under the Stock Swap Program - 27
Purchase of treasury stock under the Stock Swap Program - (23)
Debt issue costs and other, net (40) (86)
------- --------
Net cash provided by (used in) financing activities 111 1,728
------- --------
Effect of exchange rate changes on cash, cash equivalents
and restricted cash (2) (8)
------- --------
Net increase (decrease) in cash, cash equivalents and
restricted cash (546) (2,524)
Cash, cash equivalents and restricted cash at beginning
of period 6,037 8,976
------- --------
Cash, cash equivalents and restricted cash at end of period $5,491 $6,452
======= ========
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(in millions)
Three Months Ended
-------------------------------------------------------------------------------
Retained
Additional earnings Total
Common Ordinary paid-in (accumulated Treasury shareholders'
stock shares capital deficit) AOCI stock equity
------ -------- ---------- ------------- -------- -------- --------------
At November 30, 2021 $11 $361 $15,292 $6,448 $(1,501) $(8,466) $12,144
Net income (loss) - - - (1,891) - - (1,891)
Other comprehensive
income
(loss) - - - - 16 - 16
Issuances of common
stock,
net - - 15 - - - 15
Purchases and
issuances
under the Stock Swap
program, net - - 27 - - (25) 2
Issuance of treasury
shares for vested
share-based
awards - - - (63) - 63 -
Share-based
compensation
and other - - 26 - - - 26
------ -------- ---------- ------------- -------- -------- --------------
At February 28, 2022 $11 $361 $15,360 $4,493 $(1,486) $(8,428) $10,311
====== ======== ========== ============= ======== ======== ==============
At November 30, 2022 $12 $361 $16,872 $269 $(1,982) $(8,468) $7,065
Change in accounting
principle (a) - - (229) (10) - - (239)
Net income (loss) - - - (693) - - (693)
Other comprehensive
income
(loss) - - - - 11 - 11
Issuance of treasury
shares for vested
share-based
awards - - (36) - - 36 -
Share-based
compensation
and other - - 28 - - (1) 27
------ -------- ---------- ------------- -------- -------- --------------
At February 28, 2023 $12 $361 $16,635 $(434) $(1,972) $(8,433) $6,170
====== ======== ========== ============= ======== ======== ==============
The accompanying notes are an integral part of these
consolidated financial statements.
(a) We adopted the provisions of Debt - Debt with Conversion and
Other Options and Derivative and Hedging - Contracts in Entity's
Own Equity on December 1, 2022.
CARNIVAL CORPORATION & PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NO TE 1 - General
The consolidated financial statements include the accounts of
Carnival Corporation and Carnival plc and their respective
subsidiaries. Together with their consolidated subsidiaries, they
are referred to collectively in these consolidated financial
statements and elsewhere in this joint Quarterly Report on Form
10-Q as "Carnival Corporation & plc," "our," "us" and "we."
Liquidity and Management's Plans
In the face of the global impact of COVID-19, we paused our
guest cruise operations in March 2020 and began resuming guest
cruise operations in 2021.
As part of our liquidity management, we rely on estimates of our
future liquidity, which includes numerous assumptions that are
subject to various risks and uncertainties. The principal
assumptions used to estimate our future liquidity consist of:
-- Our continued cruise operations and expected timing of cash collections for cruise bookings
-- Expected increases in revenue in 2023 on a per passenger basis compared to 2019
-- Expected improvement in occupancy on a year-over-year basis
returning to historical levels in the summer of 2023
-- Stabilization of fuel prices around or below November 2022 year-end prices
-- Continued stabilization of inflationary pressures on costs
compared to 2022, moderated by a larger-more efficient fleet as
compared to 2019
In addition, we make certain assumptions about new ship
deliveries, improvements and removals, and consider the future
export credit financings that are associated with the new ship
deliveries.
We have a substantial debt balance as a result of the pause in
guest cruise operations and require a significant amount of
liquidity or cash provided by operating activities to service our
debt. In addition, the continued effects of the pandemic,
inflation, higher fuel prices, higher interest rates and
fluctuations in foreign currency rates are collectively having a
material negative impact on our financial results. The full extent
of the collective impact of these items is uncertain and may be
amplified by our substantial debt balance. We believe we have made
reasonable estimates and judgments of the impact of these events
within our consolidated financial statements and there may be
changes to those estimates in future periods.
For the past three years we have taken appropriate actions to
manage our liquidity, including completing various capital market
transactions, obtaining relevant financial covenant amendments or
waivers (see Note 3 - "Debt"), accelerating the removal of certain
ships from the fleet, and during the pause, reducing capital
expenditures and operating expenses. As of February 28, 2023, our
return to guest cruise operations was essentially complete.
Based on these actions and our assumptions, and considering our
$8.1 billion of liquidity including cash and cash equivalents and
borrowings available under our $1.7 billion, EUR1.0 billion and
GBP0.2 billion multi-currency revolving credit facility (the
"Revolving Facility") at February 28, 2023, we believe that we have
sufficient liquidity to fund our obligations and expect to remain
in compliance with our financial covenants for at least the next
twelve months from the issuance of these financial statements.
We will continue to pursue various opportunities to refinance
future debt maturities and/or to extend the maturity dates
associated with our existing indebtedness and obtain relevant
financial covenant amendments or waivers, if needed.
Basis of Presentation
The Consolidated Statements of Income (Loss), the Consolidated
Statements of Comprehensive Income (Loss), the Consolidated
Statements of Cash Flows and the Consolidated Statements of
Shareholders' Equity for the three months ended February 28, 2023
and 2022, and the Consolidated Balance Sheet at February 28, 2023
are unaudited and, in the opinion of our management, contain all
adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement. Our interim consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements and the related notes included in
the Carnival Corporation & plc 2022 joint Annual Report on Form
10-K ("Form 10-K") filed with the U.S. Securities and Exchange
Commission on January 27, 2023. Our operations are seasonal and
results for interim periods are not necessarily indicative of the
results for the entire year.
Use of Estimates and Risks and Uncertainty
The preparation of our interim consolidated financial statements
in conformity with accounting principles generally accepted in the
United States of America ("U.S. GAAP") requires management to make
estimates and assumptions that affect the amounts reported and
disclosed. The full extent to which the effects of the pandemic,
inflation, higher fuel prices, higher interest rates and
fluctuations in foreign currency rates will directly or indirectly
impact our business, operations, results of operations and
financial condition, including our valuation of goodwill and
trademarks, impairment of ships and collectability of trade and
notes receivables, will depend on future developments that are
uncertain. We have made reasonable estimates and judgments of such
items within our financial statements and there may be changes to
those estimates in future periods.
Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB")
issued guidance, Reference Rate Reform: Facilitation of the Effects
of Reference Rate Reform on Financial Reporting, which provides
temporary optional expedients and exceptions to accounting guidance
on contract modifications and hedge accounting to ease entities'
financial reporting burdens as the market transitions from the
London Interbank Offered Rate ("LIBOR") and other interbank offered
rates to alternative reference rates. In December 2022, the FASB
deferred the date through which this guidance can be applied from
December 31, 2022 to December 31, 2024. 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.
As of February 28, 2023, 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. On December 1, 2022, we adopted this guidance using the
modified retrospective approach to recognize our convertible notes
as single unit liability instruments, as they do not qualify as
derivatives under ASC 815 and were not issued at a substantial
premium. Accordingly, upon adoption we recorded a $239 million
increase to debt, primarily as a result of the reversal of the
remaining non-cash convertible debt discount, as well as a
reduction of $229 million to additional paid in capital. The
cumulative effect of the adoption of this guidance resulted in a
$10 million decrease to retained earnings.
In September 2022, the FASB issued guidance,
Liabilities-Supplier Finance Programs - Disclosure of Supplier
Finance Program Obligations. This guidance requires that a buyer in
a supplier finance program disclose sufficient information about
the program to allow a user of financial statements to understand
the program's nature, activity during the period, changes from
period to period, and potential magnitude. This guidance is
expected to improve financial reporting by requiring new
disclosures about the programs, thereby allowing financial
statement users to better consider the effect of the programs on an
entity's working capital, liquidity, and cash flows. This guidance
is 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 2 - Revenue and Expense Recognition
Guest cruise deposits and advance onboard purchases are
initially included in customer deposits when received. Customer
deposits are subsequently recognized as cruise revenues, together
with revenues from onboard and other activities, and all associated
direct costs and expenses of a voyage are recognized as cruise
costs and expenses, upon completion of voyages with durations of
ten nights or less and on a pro rata basis for voyages in excess of
ten nights. The impact of recognizing these shorter duration cruise
revenues and costs and expenses on a completed voyage basis versus
on a pro rata basis is not material. Certain of our product
offerings are bundled and we allocate the value of the bundled
services and goods between passenger ticket revenues and onboard
and other revenues based upon the estimated standalone selling
prices of those goods and services. Guest cancellation fees, when
applicable, are recognized in passenger ticket revenues at the time
of cancellation.
Our sales to guests of air and other transportation to and from
airports near the home ports of our ships are included in passenger
ticket revenues, and the related costs of purchasing these services
are included in transportation costs. The proceeds that we collect
from the sales of third-party shore excursions are included in
onboard and other revenues and the related costs are included in
onboard and other costs. The amounts collected on behalf of our
onboard concessionaires, net of the amounts remitted to them, are
included in onboard and other revenues as concession revenues. All
of these amounts are recognized on a completed voyage or pro rata
basis as discussed above.
Passenger ticket revenues include fees, taxes and charges
collected by us from our guests. The fees, taxes and charges that
vary with guest head counts and are directly imposed on a
revenue-producing arrangement are expensed in commissions,
transportation and other costs when the corresponding revenues are
recognized. For the three months ended February 28, 2023 and 2022,
fees, taxes, and charges included in commissions, transportation
and other costs were $172 million and $68 million. 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 $5.7 billion as of February 28, 2023 and $5.1
billion as of November 30, 2022, which includes approximately $174
million of unredeemed FCCs as of February 28, 2023, of which
approximately $124 million are refundable. Given the uncertainty of
travel demand caused by COVID-19 and lack of comparable historical
experience of FCC redemptions, we are unable to estimate the amount
of FCCs that will be used in future periods or that may be
refunded. Refunds payable to guests who have elected cash refunds
are recorded in accounts payable. During the three months ended
February 28, 2023 and 2022, we recognized revenues of $2.8 billion
and $1.0 billion related to our customer deposits as of November
30, 2022 and 2021. Our customer deposits balance changes due to the
seasonal nature of cash collections, the recognition of revenue,
refunds of customer deposits and foreign currency changes.
Trade and Other Receivables
Although we generally require full payment from our customers
prior to or concurrently with their cruise, we grant credit terms
to a relatively small portion of our revenue source. We have
receivables from credit card merchants and travel agents for cruise
ticket purchases and onboard revenue. These receivables are
included within trade and other receivables, net. We have
agreements with a number of credit card processors that transact
customer deposits related to our cruise vacations. Certain of these
agreements allow the credit card processors to request, under
certain circumstances, that we provide a reserve fund in cash.
These reserve funds are included in other assets.
Contract Costs
We recognize incremental travel agent commissions and credit and
debit card fees incurred as a result of obtaining the ticket
contract as assets when paid prior to the start of a voyage. We
record these amounts within prepaid expenses and other and
subsequently recognize these amounts as commissions, transportation
and other at the time of revenue recognition or at the time of
voyage cancellation. We had incremental costs of obtaining
contracts with customers recognized as assets o f $228 million as
of February 28, 2023 and $218 million as of November 30, 2022.
NOTE 3 - Debt
February November
28, 30,
-------- --------
(in millions) Maturity Rate (a) (b) 2023 2022
------------- -------------- -------- --------
Secured Subsidiary
Guaranteed
-----------------------------------
Notes
Notes Feb 2026 10.5% $775 $775
EUR Notes Feb 2026 10.1% 448 439
Notes Jun 2027 7.9% 192 192
Notes Aug 2027 9.9% 900 900
Notes Aug 2028 4.0% 2,406 2,406
Loans
EUR floating rate Jun 2025 EURIBOR + 3.8% 823 808
Jun 2025 - LIBOR + 3.0 -
Floating rate Oct 2028 3.3% 4,091 4,101
-------- --------
Total Secured Subsidiary Guaranteed 9,634 9,621
-------- --------
Senior Priority Subsidiary
Guaranteed
----------------------------------- -------- --------
Notes May 2028 10.4% 2,030 2,030
-------- --------
Unsecured Subsidiary
Guaranteed
-----------------------------------
Revolver
Facility (c) LIBOR + 0.7% 200 200
Notes
Convertible Notes Apr 2023 5.8% 96 96
Convertible Notes Oct 2024 5.8% 426 426
Notes Mar 2026 7.6% 1,450 1,450
EUR Notes Mar 2026 7.6% 527 517
Notes Mar 2027 5.8% 3,500 3,500
Convertible Notes Dec 2027 5.8% 1,131 1,131
Notes May 2029 6.0% 2,000 2,000
Notes Jun 2030 10.5% 1,000 1,000
Loans
Jul 2024 -
Floating rate Sep 2024 LIBOR + 3.8% 300 590
SONIA + 0.9%
GBP floating rate Feb 2025 (d) 418 419
Apr 2023 - EURIBOR + 1.8
EUR floating rate Mar 2026 - 2.4% 844 827
Export Credit Facilities
Oct 2024 - LIBOR + 0.8 -
Floating rate Dec 2031 1.5% 1,172 1,246
Aug 2027 -
Fixed rate Dec 2032 2.4 - 3.4% 3,064 3,143
Mar 2023 - EURIBOR + 0.2
EUR floating rate Nov 2034 - 1.6% 3,841 3,882
Feb 2031 -
EUR fixed rate Dec 2034 1.1 - 3.1% 3,372 2,592
-------- --------
Total Unsecured Subsidiary Guaranteed 23,342 23,019
-------- --------
Unsecured Notes (No Subsidiary
Guarantee)
-------------------------------------------------
Notes Oct 2023 7.2% 125 125
Notes Jan 2028 6.7% 200 200
EUR Notes Oct 2029 1.0% 633 620
-------- --------
Total Unsecured Notes (No Subsidiary
Guarantee) 958 945
-------- --------
Total Debt 35,963 35,615
Less: unamortized debt
issuance costs and discounts (828) (1,069)
-------- --------
Total Debt, net of
unamortized debt issuance
costs and discounts 35,135 34,546
-------- --------
Less: short-term borrowings (200) (200)
Less: current portion
of long-term debt (2,264) (2,393)
-------- --------
Long-Term Debt $32,672 $31,953
======== ========
(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 table excludes the impact of our interest
rate swaps and as of February 28, 2023, 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. See "Short-Term Borrowings"
below.
(d) The interest rate for the GBP unsecured loan is 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.
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 senior priority notes (the "2028
Senior Priority Notes") 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 the
following:
-- Up to $250 million of the Costa term loan facility, which is
guaranteed by certain subsidiaries of Carnival plc and Costa that
do not guarantee our other outstanding debt
-- Our 2028 Senior Priority Notes, issued by Carnival Holdings,
which does not guarantee our other outstanding debt
As of February 28, 2023, the scheduled maturities of our debt
are as follows:
(in millions)
Year Principal Payments
------------------
2Q 2023 (a) $785
3Q 2023 465
4Q 2023 529
2024 (a) (b) 2,734
2025 4,488
2026 4,611
2027 5,742
Thereafter 16,611
------------------
Total $35,963
==================
(a) Subsequent to February 28, 2023, we extended the maturity of
$211 million of principal payments from second quarter 2023 to
2024.
(b) Includes borrowings of $0.2 billion under our Revolving Facility.
Short-Term Borrowings
As of February 28, 2023 and November 30, 2022, our short-term
borrowings consisted of $0.2 billion under our Revolving Facility.
We may continue to re-borrow or otherwise utilize available amounts
under the Revolving Facility through August 2024, subject to
satisfaction of the conditions in the facility. We had $2.6 billion
available for borrowing under our Revolving Facility as of February
28, 2023. The Revolving Facility also includes an emissions linked
margin adjustment whereby, after the initial applicable margin is
set per the margin pricing grid, the margin may be adjusted based
on performance in achieving certain agreed annual carbon emissions
goals. We are required to pay a commitment fee on any unutilized
portion.
New Revolving Facility
In February 2023, Carnival Holdings (Bermuda) II Limited
("Carnival Holdings II") entered into a $2.1 billion multi-currency
revolving facility ("New Revolving Facility"). The New Revolving
Facility may be utilized beginning on August 6, 2024, and will
replace the existing Revolving Facility upon its maturity in August
2024. The termination date of the New Revolving Facility is August
6, 2025, subject to two, mutual one-year extension options. The new
facility also contains an accordion feature, allowing for
additional commitments, up to an aggregate of $2.9 billion, which
are the aggregate commitments under our Revolving Facility.
Borrowings under the New Revolving Facility will bear interest
at a rate of term SOFR, in relation to any loan in U.S. dollars,
EURIBOR, in relation to any loan in euros or daily compounding
SONIA, in relation to any loan in sterling, plus a margin based on
the long-term credit ratings of Carnival Corporation. The New
Revolving Facility also includes an emissions linked margin
adjustment whereby, after the initial applicable margin is set per
the margin pricing grid, the margin may be adjusted based on
performance in achieving certain agreed annual carbon emissions
goals. In addition, we are required to pay certain fees on the
aggregate unused commitments under the New Revolving Facility and
the Revolving Facility.
In connection with the New Revolving Facility, Carnival
Corporation, Carnival plc and its subsidiaries will contribute
three unencumbered vessels (net book value of $2.9 billion as of
February 28, 2023) to Carnival Holdings II (which must be completed
no later than February 28, 2024). Each of the vessels will continue
to be operated under one of the Carnival Corporation & plc
brands. Carnival Holdings II does not guarantee our other
outstanding debt.
Export Credit Facility Borrowings
During the three months ended February 28, 2023, we borrowed
$0.8 billion under an export credit facility due in semi-annual
installments through 2034. As of February 28, 2023, the net book
value of the vessels subject to negative pledges was $15.3
billion.
Collateral and Priority Pool
As of February 28, 2023, the net book value of our ships and
ship improvements, excluding ships under construction, is $37.2
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 $23.5 billion, including $21.8 billion
related to vessels and certain assets related to those vessels) as
of February 28, 2023 and certain other assets.
As of February 28, 2023, $8.3 billion in net book value of our
ships and ship improvements have been contributed to Carnival
Holdings and included in the vessel priority pool of 12
unencumbered vessels (the "Senior Priority Notes Subject Vessels")
for our 2028 Senior Priority Notes. As of February 28, 2023, there
was no change in the identity of the Senior Priority Notes Subject
Vessels.
Covenant Compliance
As of February 28, 2023, 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
As of March 13, 2023, we entered into letter agreements to waive
compliance with the Interest Coverage Covenant through the May 31,
2024 testing date under our Revolving Facility and unsecured loans
that contain the covenant. In addition, we entered into amendments
for substantially all of our export credit facilities to maintain a
minimum interest coverage ratio of not less than 2.0 to 1.0 for the
May 31, 2024 testing date. We also entered into amendments for
certain of our unsecured loans with an aggregate principal amount
of $150 million to maintain a minimum interest coverage ratio of
not less than 2.0 to 1.0 for the August 31, 2024 testing date.
At February 28, 2023, we were in compliance with the applicable
covenants under our debt agreements. Generally, if an event of
default under any debt agreement occurs, then, pursuant to cross
default and/or cross-acceleration clauses therein, substantially
all of our outstanding debt and derivative contract payables could
become due, and our debt and derivative contracts could be
terminated. Any financial covenant amendment may lead to increased
costs, increased interest rates, additional restrictive covenants
and other available lender protections that would be
applicable.
NOTE 4 - Contingencies and Commitments
Litigation
We are routinely involved in legal proceedings, claims,
disputes, regulatory matters and governmental inspections or
investigations arising in the ordinary course of or incidental to
our business, including those noted below. Additionally, as a
result of the impact of COVID-19, litigation claims, enforcement
actions, regulatory actions and investigations, including, but not
limited to, those arising from personal injury and loss of life,
have been and may, in the future, be asserted against us. We expect
many of these claims and actions, or any settlement of these claims
and actions, to be covered by insurance and historically the
maximum amount of our liability, net of any insurance recoverables,
has been limited to our self-insurance retention levels.
We record provisions in the consolidated financial statements
for pending litigation when we determine that an unfavorable
outcome is probable and the amount of the loss can be reasonably
estimated.
Legal proceedings and government investigations are subject to
inherent uncertainties, and unfavorable rulings or other events
could occur. Unfavorable resolutions could involve substantial
monetary damages. In addition, in matters for which conduct
remedies are sought, unfavorable resolutions could include an
injunction or other order prohibiting us from selling one or more
products at all or in particular ways, precluding particular
business practices or requiring other remedies. An unfavorable
outcome might result in a material adverse impact on our business,
results of operations, financial position or liquidity.
As previously disclosed, on May 2, 2019, the Havana Docks
Corporation filed a lawsuit against Carnival Corporation in the
U.S. District Court for the Southern District of Florida under
Title III of the Cuban Liberty and Democratic Solidarity Act, also
known as the Helms-Burton Act, alleging that Carnival Corporation
"trafficked" in confiscated Cuban property when certain ships
docked at certain ports in Cuba, and that this alleged
"trafficking" entitles the plaintiffs to treble damages. The
hearings on motions for summary judgment were concluded on January
18, 2022. On March 21, 2022, the court granted summary judgment in
favor of Havana Docks Corporation as to liability. On August 31,
2022, the court determined that the trebling provision of the
Helms-Burton statute applies to damages and interest and
accordingly, we adjusted our estimated liability for this matter.
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
have filed a notice of appeal.
As previously disclosed, on April 8, 2020, DeCurtis LLC
("DeCurtis"), a former vendor, filed an action against Carnival
Corporation in the U.S. District Court for the Middle District of
Florida seeking declaratory relief that DeCurtis is not infringing
on several of Carnival Corporation's patents in relation to its
OCEAN Medallion systems and technology. The action also 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 were consolidated in the Southern
District of Florida. On February 8, 2023, the Court granted summary
judgment in Carnival's favor on DeCurtis' antitrust, unfair
competition, and tortious interference claims. The trial began on
February 27, 2023, with the patent issues narrowed to certain
claims of one Carnival patent. On March 10, 2023, the jury returned
a verdict finding that DeCurtis had breached its contract with
Carnival and infringed the asserted claims of the Carnival patent.
The jury also found that the same claims of the challenged patent
were valid. The jury awarded Carnival a total of $21 million in
damages.
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 February 28, 2023, 11 purported class actions have been
brought by former guests in several U.S. federal courts, the
Federal Court in Australia, and in Italy. These actions include
tort claims based on a variety of theories, including negligence,
gross negligence and failure to warn, physical injuries and severe
emotional distress associated with being exposed to and/or
contracting COVID-19 onboard. As of February 28, 2023, nine of
these class actions have either been settled individually for
immaterial amounts or had their class allegations dismissed by the
courts and only the Australian and Italian matters remain.
All COVID-19 matters seek monetary damages and most seek
additional punitive damages in unspecified amounts.
We continue to take actions to defend against the above
claims.
Regulatory or Governmental Inquiries and Investigations
We have been, and may continue to be, impacted by breaches in
data security and lapses in data privacy, which occur from time to
time. These can vary in scope and intent from inadvertent events to
malicious motivated attacks.
We have incurred legal and other costs in connection with cyber
incidents that have impacted us. The penalties and settlements paid
in connection with cyber incidents over the last three years were
not material. While these incidents did not have a material adverse
effect on our business, results of operations, financial position
or liquidity, no assurances can be given about the future and we
may be subject to future litigation, attacks or incidents that
could have such a material adverse effect.
On March 14, 2022, the U.S. Department of Justice and the U.S.
Environmental Protection Agency notified us of potential civil
penalties and injunctive relief for alleged Clean Water Act
violations by owned and operated vessels covered by the 2013 Vessel
General Permit. We are working with these agencies to reach a
resolution of this matter. We believe the ultimate outcome will not
have a material impact on our consolidated financial
statements.
Other Contingent Obligations
Some of the debt contracts we enter into include indemnification
provisions obligating us to make payments to the counterparty if
certain events occur. These contingencies generally relate to
changes in taxes or changes in laws which increase the lender's
costs. There are no stated or notional amounts included in the
indemnification clauses, and we are not able to estimate the
maximum potential amount of future payments, if any, under these
indemnification clauses.
We have agreements with a number of credit card processors that
transact customer deposits related to our cruise vacations. Certain
of these agreements allow the credit card processors to request,
under certain circumstances, that we provide a reserve fund in
cash. Although the agreements vary, these requirements may
generally be satisfied either through a withheld percentage of
customer payments or providing cash funds directly to the credit
card processor. As of February 28, 2023 and November 30, 2022, we
had $1.7 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 February 28, 2023 and
November 30, 2022, we had $229 million in compensating deposits we
are required to maintain and $30 million of cash collateral in
escrow which is included within other assets.
Ship Commitments
As of February 28, 2023, we expect the timing of our new ship
growth capital commitments to be as follows:
(in millions)
Year
Remainder of 2023 $895
2024 2,448
2025 915
Thereafter -
------
$4,258
======
NOTE 5 - Fair Value Measurements, Derivative Instruments and
Hedging Activities and Financial Risks
Fair Value Measurements
Fair value is defined as the amount that would be received for
selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date and
is measured using inputs in one of the following three
categories:
-- Level 1 measurements are based on unadjusted quoted prices in
active markets for identical assets or liabilities that we have the
ability to access. Valuation of these items does not entail a
significant amount of judgment.
-- Level 2 measurements are based on quoted prices for similar
assets or liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not
active or market data other than quoted prices that are observable
for the assets or liabilities.
-- Level 3 measurements are based on unobservable data that are
supported by little or no market activity and are significant to
the fair value of the assets or liabilities.
Considerable judgment may be required in interpreting market
data used to develop the estimates of fair value. Accordingly,
certain estimates of fair value presented herein are not
necessarily indicative of the amounts that could be realized in a
current or future market exchange.
Financial Instruments that are not Measured at Fair Value on a
Recurring Basis
February 28, 2023 November 30, 2022
Fair Value Fair Value
-------- --------------------- -------- ---------------------
Carrying Level Level Level Carrying Level Level Level
(in millions) Value 1 2 3 Value 1 2 3
-------- ----- ------- ----- -------- ----- ------- -----
Liabilities
Fixed rate debt (a) $24,275 $- $20,162 $- $23,542 $- $18,620 $-
Floating rate debt (a) 11,688 - 10,007 - 12,074 - 10,036 -
-------- ----- ------- ----- -------- ----- ------- -----
Total $35,963 $- $30,169 $- $35,615 $- $28,656 $-
======== ===== ======= ===== ======== ===== ======= =====
(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
February 28, 2023 November 30, 2022
Level Level Level Level Level Level
(in millions) 1 2 3 1 2 3
------- ----- ----- ------- ----- -----
Assets
Cash and cash equivalents $5,455 $- $- $4,029 $- $-
Restricted cash 35 - - 1,988 - -
Derivative financial instruments - 31 - - 1 -
------- ----- ----- ------- ----- -----
Total $5,491 $31 $- $6,016 $1 $-
======= ===== ===== ======= ===== =====
Liabilities
Derivative financial instruments $- $18 $- $- $- $-
------- ----- ----- ------- ----- -----
Total $- $18 $- $- $- $-
======= ===== ===== ======= ===== =====
The restricted cash amount at February 28, 2023 includes $20
million, which is included in other assets.
Nonfinancial Instruments that are Measured at Fair Value on a
Nonrecurring Basis
Valuation of Goodwill and Trademarks
As of February 28, 2023 and November 30, 2022, goodwill for our
North America and Australia ("NAA") segment was $579 million.
Trademarks
NAA Europe
(in millions) Segment Segment Total
-------- -------- ------
November 30, 2022 $927 $224 $1,151
Exchange movements - 2 2
-------- -------- ------
February 28, 2023 $927 $225 $1,152
======== ======== ======
Derivative Instruments and Hedging Activities
February 28, November 30,
(in millions) Balance Sheet Location 2023 2022
----------------------- ------------ ------------
Derivative assets
Derivatives designated as
hedging instruments
Prepaid expenses
Cross currency swaps (a) and other $6 $-
Prepaid expenses
Interest rate swaps (b) and other 25 1
Other assets 1 1
------------ ------------
Total derivative assets $31 $1
============ ============
Derivative liabilities
Derivatives designated as
hedging instruments
Other long-term
Interest rate swaps (b) liabilities 18 -
------------ ------------
Total derivative liabilities $18 $-
============ ============
(a) At February 28, 2023, we had a cross currency swap totaling
$643 million that is designated as a hedge of our net investment in
foreign operations with euro-denominated functional currencies. At
February 28, 2023, this cross currency swap settles through
2024.
(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 $91 million at February 28, 2023 and
$89 million at November 30, 2022 of EURIBOR-based floating rate
euro debt to fixed rate euro debt. During the three months ended
February 28, 2023 we entered into interest rate swap agreements
which effectively changed $2.5 billion at February 28, 2023 of
LIBOR-based floating rate USD debt to fixed rate USD debt. At
February 28, 2023, these interest rate swaps settle through
2027.
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.
February 28, 2023
Gross Amounts Total Net Amounts Gross Amounts
Offset in Presented in not Offset
Gross the Balance the Balance in the Balance
(in millions) Amounts Sheet Sheet Sheet Net Amounts
-------- ------------- ----------------- --------------- -----------
Assets $31 $- $31 $- $31
Liabilities $18 $- $18 $- $18
November 30, 2022
------------------------------------------------------------------------
Gross Amounts Total Net Amounts Gross Amounts
Offset in Presented in not Offset
Gross the Balance the Balance in the Balance
(in millions) Amounts Sheet Sheet Sheet Net Amounts
-------- ------------- ----------------- --------------- -----------
Assets $1 $- $1 $- $1
Liabilities $- $- $- $- $-
The effect of our derivatives qualifying and designated as
hedging instruments recognized in other comprehensive income (loss)
and in net income (loss) was as follows:
Three Months
Ended February
28,
-----------------
(in millions) 2023 2022
-------- -------
Gains (losses) recognized in AOCI:
Cross currency swaps - net investment hedges - included
component $15 $5
Cross currency swaps - net investment hedges - excluded
component $(4) $(8)
Interest rate swaps - cash flow hedges $14 $3
Gains (losses) reclassified from AOCI - cash flow hedges:
Interest rate swaps - Interest expense, net of capitalized
interest $1 $(1)
Foreign currency zero cost collars - Depreciation and
amortization $- $1
Gains (losses) recognized on derivative instruments (amount
excluded from effectiveness testing - net investment
hedges)
Cross currency swaps - Interest expense, net of capitalized
interest $1 $1
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 February
28, 2023, we have designated $418 million of our
sterling-denominated debt as non-derivative hedges of our net
investments in foreign operations and also had a cross currency
swap with a notional amount of $643 million, which is designated as
a hedge of our net investments in foreign operations. For the three
months ended February 28, 2023, we recognized $11 million of gains
on these net investment hedges in the cumulative translation
adjustment section of other comprehensive income (loss). We also
have euro-denominated debt which provides an economic offset for
our operations with euro functional currency.
Newbuild Currency Risks
Our shipbuilding contracts are typically denominated in euros.
Our decision to hedge a non-functional currency ship commitment for
our cruise brands is made on a case-by-case basis, considering the
amount and duration of the exposure, market volatility, economic
trends, our overall expected net cash flows by currency and other
offsetting risks.
At February 28, 2023, 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 $3.7 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 and cash
equivalents, investments, notes receivables, reserve funds related
to customer deposits, future financing facilities, contingent
obligations, derivative instruments, insurance contracts and new
ship progress payment guarantees, by:
-- Conducting business with well-established financial
institutions, insurance companies and export credit agencies
-- Diversifying our counterparties
-- Having guidelines regarding credit ratings and investment
maturities that we follow to help safeguard liquidity and minimize
risk
-- Generally requiring collateral and/or guarantees to support
notes receivable on significant asset sales and new ship progress
payments to shipyards
We also monitor the creditworthiness of travel agencies and tour
operators in Australia and Europe and credit and debit card
providers to which we extend credit in the normal course of our
business. Our credit exposure also includes contingent obligations
related to cash payments received directly by travel agents and
tour operators for cash collected by them on cruise sales in
Australia and most of Europe where we are obligated to honor our
guests' cruise payments made by them to their travel agents and
tour operators regardless of whether we have received these
payments.
Concentrations of credit risk associated with trade receivables
and other receivables, charter-hire agreements and contingent
obligations are not considered to be material, principally due to
the large number of unrelated accounts, the nature of these
contingent obligations and their short maturities. Normally, we
have not required collateral or other security to support normal
credit sales. 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.
NOTE 6 - Segment Information
Our operating segments are reported on the same basis as the
internally reported information that is provided to our chief
operating decision maker ("CODM"), who is the President, Chief
Executive Officer and Chief Climate Officer of Carnival Corporation
and Carnival plc. The CODM assesses performance and makes decisions
to allocate resources for Carnival Corporation & plc based upon
review of the results across all of our segments. Our four
reportable segments are comprised of (1) NAA cruise operations, (2)
Europe cruise operations, (3) Cruise Support and (4) Tour and
Other.
The operating segments within each of our NAA and Europe
reportable segments have been aggregated based on the similarity of
their economic and other characteristics, including geographic
guest sourcing. Our Cruise Support segment includes our portfolio
of leading port destinations and other services, all of which are
operated for the benefit of our cruise brands. Our Tour and Other
segment represents the hotel and transportation operations of
Holland America Princess Alaska Tours and other operations.
We have renamed the EA segment given that China has not reopened
to international cruise travel. As a result, we have significantly
reduced operations in Asia and leveraged the mobility of our cruise
ships and our brand portfolio to build alternate deployments. In
2019, our most recent full year of guest cruise operations, China
accounted for 7% of our guests.
Three Months Ended February 28,
-----------------------------------------------------------------------
Operating Selling Depreciation Operating
costs and and and income
(in millions) Revenues expenses administrative amortization (loss)
-------- ---------- --------------- ------------- ---------
2023
NAA $3,078 $2,189 $440 $363 $86
Europe 1,294 1,078 213 169 (166)
Cruise Support 51 25 53 42 (69)
Tour and Other 9 18 5 7 (21)
-------- ---------- --------------- ------------- ---------
$4,432 $3,311 $712 $582 $(172)
======== ========== =============== ============= =========
2022
NAA $1,126 $1,288 $344 $334 $(840)
Europe 457 698 176 181 (598)
Cruise Support 33 28 5 33 (34)
Tour and Other 8 17 6 5 (20)
-------- ---------- --------------- ------------- ---------
$1,623 $2,030 $530 $554 $(1,491)
======== ========== =============== ============= =========
Revenue by geographic areas, which are based on where our guests
are sourced, were as follows:
Three Months Ended
February 28,
(in millions) 2023 2022
--------- ---------
North America $2,696 $1,119
Europe 1,187 479
Australia 338 8
Other 211 18
--------- ---------
$4,432 $1,623
========= =========
NOTE 7 - Earnings Per Share
Three Months Ended
February 28,
--------------------
(in millions, except per share data) 2023 2022
--------- ---------
Net income (loss) for basic and diluted earnings per
share $(693) $(1,891)
========= =========
Weighted-average shares outstanding 1,260 1,137
Dilutive effect of equity plans - -
--------- ---------
Diluted weighted-average shares outstanding 1,260 1,137
========= =========
Basic earnings per share $(0.55) $(1.66)
========= =========
Diluted earnings per share $(0.55) $(1.66)
========= =========
Antidilutive shares excluded from diluted earnings per share
computations were as follows:
Three Months Ended
February 28,
(in millions) 2023 2022
--------- ---------
Equity awards 1 3
Convertible Notes 137 52
--------- ---------
Total antidilutive securities 138 55
========= =========
NOTE 8 - Supplemental Cash Flow Information
February 28, November 30,
(in millions) 2023 2022
------------ ------------
Cash and cash equivalents (Consolidated
Balance Sheets) $5,455 $4,029
Restricted cash (Consolidated Balance Sheets) 15 1,988
Restricted cash (included in other assets) 20 20
------------ ------------
Total cash, cash equivalents and restricted
cash (Consolidated Statements of Cash Flows) $5,491 $6,037
============ ============
NOTE 9 - Property and Equipment
Ship Sales
During the three months ended February 28, 2023 we completed the
sale of one Europe segment ship and entered into an agreement to
sell one Europe segment ship, which was subsequently completed in
March 2023. These ship sales collectively represent a
passenger-capacity reduction of 3,970 berths for our Europe
segment. Additionally, in March 2023 we sold one NAA segment ship,
which represents a passenger-capacity reduction of 460 berths. The
net book value of the ships sold subsequent to quarter end was $186
million and will result in gains on the sales. We will continue to
operate the NAA segment ship under a bareboat charter agreement
through September 2024.
NOTE 10 - Shareholders' Equity
We have a program that allows us to realize a net cash benefit
when Carnival Corporation common stock is trading at a premium to
the price of Carnival plc ordinary shares (the "Stock Swap
Program").
During the three months ended February 28, 2023 under the Stock
Swap Program, there were no sales or repurchases. During the three
months ended February 28, 2022 under the Stock Swap Program, we
sold 1.3 million shares of Carnival Corporation common stock and
repurchased the same amount of Carnival plc ordinary shares
resulting in net proceeds of $2 million, which were used for
general corporate purposes.
During the three months ended February 28, 2023, there were no
sales of Carnival Corporation common stock. During the three months
ended February 28, 2022, we sold 0.8 million shares of Carnival
Corporation common stock at an average price per share of $20.18,
resulting in net proceeds of $15 million.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Cautionary Note Concerning Factors That May Affect Future
Results
Some of the statements, estimates or projections contained in
this document are "forward-looking statements" that involve risks,
uncertainties and assumptions with respect to us, including some
statements concerning future results, operations, outlooks, plans,
goals, reputation, cash flows, liquidity and other events which
have not yet occurred. These statements are intended to qualify for
the safe harbors from liability provided by Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934, as amended. All statements other than statements of
historical facts are statements that could be deemed
forward-looking. These statements are based on current
expectations, estimates, forecasts and projections about our
business and the industry in which we operate and the beliefs and
assumptions of our management. We have tried, whenever possible, to
identify these statements by using words like "will," "may,"
"could," "should," "would," "believe," "depends," "expect," "goal,"
"aspiration," "anticipate," "forecast," "project," "future,"
"intend," "plan," "estimate," "target," "indicate," "outlook," and
similar expressions of future intent or the negative of such
terms.
Forward-looking statements include those statements that relate
to our outlook and financial position including, but not limited
to, statements regarding:
* Adjusted net income (loss)
* Pricing
* Adjusted EBITDA
* Booking levels
* Adjusted earnings per share
* Occupancy
* Adjusted free cash flow
* Interest, tax and fuel expenses
* Net per diems
* Currency exchange rates
* Net yields
* Goodwill, ship and trademark fair values
* Adjusted cruise costs per ALBD
* Liquidity and credit ratings
* Estimates of ship depreciable lives and residual * Adjusted cruise costs excluding fuel per ALBD
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.
New Accounting Pronouncements
Refer to Note 1 - "General, Accounting Pronouncements" of the
consolidated financial statements for additional discussion
regarding Accounting Pronouncements.
Critical Accounting Estimates
For a discussion of our critical accounting estimates, see
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" that is included in the Form 10-K.
Seasonality
Our passenger ticket revenues are seasonal. Demand for cruises
has been greatest during our third quarter, which includes the
Northern Hemisphere summer months. This higher demand during the
third quarter results in higher ticket prices and occupancy levels
and, accordingly, the largest share of our operating income is
typically earned during this period. The seasonality of our results
also increases due to ships being taken out-of-service for
maintenance, which we schedule during non-peak demand periods. In
addition, substantially all of Holland America Princess Alaska
Tours' revenue and net income (loss) is generated from May through
September in conjunction with Alaska's cruise season.
Known Trends and Uncertainties
-- We believe the increased cost of fuel and other related costs
are reasonably likely to continue to impact our profitability in
both the short and long-term.
-- We believe inflation and higher interest rates are reasonably
likely to continue to impact our profitability.
-- We believe the increasing global focus on climate change,
including the reduction of carbon emissions and new and evolving
regulatory requirements, is reasonably likely to have a material
negative impact on our future financial results. The full impact of
climate change to our business is not yet known.
Statistical Information
Three Months Ended
February 28,
--------------------
2023 2022
--------- ---------
Passenger Cruise Days ("PCDs") (in millions) (a) 20.2 7.2
Available Lower Berth Days ("ALBDs") (in millions)
(b) 22.1 13.3
Occupancy percentage (c) 91% 54%
Passengers carried (in millions) 2.7 1.0
Fuel consumption in metric tons (in millions) 0.7 0.6
Fuel consumption in metric tons per thousand ALBDs 33.4 42.5
Fuel cost per metric ton consumed $730 $648
Currencies (USD to 1)
AUD $0.69 $0.72
CAD $0.74 $0.79
EUR $1.07 $1.13
GBP $1.22 $1.35
Notes to Statistical Information
(a) PCD represents the number of cruise passengers on a voyage
multiplied by the number of revenue-producing ship operating days
for that voyage.
(b) ALBD is a standard measure of passenger capacity for the
period that we use to approximate rate and capacity variances,
based on consistently applied formulas that we use to perform
analyses to determine the main non-capacity driven factors that
cause our cruise revenues and expenses to vary. ALBDs assume that
each cabin we offer for sale accommodates two passengers and is
computed by multiplying passenger capacity by revenue-producing
ship operating days in the period.
(c) Occupancy, in accordance with cruise industry practice, is
calculated using a numerator of PCDs and a denominator of ALBDs,
which assumes two passengers per cabin even though some cabins can
accommodate three or more passengers. Percentages in excess of 100%
indicate that on average more than two passengers occupied some
cabins.
Results of Operations
Consolidated
Three Months
Ended February
28,
-----------------
(in millions) 2023 2022 Change
------- -------- ------
Revenues
Passenger ticket $2,870 $873 $1,997
Onboard and other 1,563 750 812
------- -------- ------
4,432 1,623 2,809
------- -------- ------
Operating Costs and Expenses
Commissions, transportation and other 655 251 404
Onboard and other 484 209 275
Payroll and related 582 506 77
Fuel 535 365 170
Food 311 136 175
Ship and other impairments - 8 (8)
Other operating 743 557 187
------- -------- ------
Cruise and tour operating expenses 3,311 2,030 1,280
Selling and administrative 712 530 182
Depreciation and amortization 582 554 28
4,604 3,114 1,490
------- -------- ------
Operating Income (Loss) (172) (1,491) 1,320
------- -------- ------
Nonoperating Income (Expense)
Interest income 56 3 52
Interest expense, net of capitalized interest (539) (368) (171)
Other income (expense), net (30) (32) 2
------- -------- ------
(514) (397) (117)
------- -------- ------
Income (Loss) Before Income Taxes $(686) $(1,888) $1,203
======= ======== ======
NAA
Three Months
Ended February
28,
-----------------
(in millions) 2023 2022 Change
-------- ------- ------
Revenues
Passenger ticket $1,892 $586 $1,306
Onboard and other 1,187 540 647
-------- ------- ------
3,078 1,126 1,953
-------- ------- ------
Operating Costs and Expenses 2,189 1,288 901
Selling and administrative 440 344 96
Depreciation and amortization 363 334 29
2,993 1,966 1,027
-------- ------- ------
Operating Income (Loss) $86 $(840) $926
======== ======= ======
Europe
Three Months
Ended February
28,
-----------------
(in millions) 2023 2022 Change
-------- ------- ------
Revenues
Passenger ticket $992 $341 $650
Onboard and other 302 116 187
-------- ------- ------
1,294 457 837
-------- ------- ------
Operating Costs and Expenses 1,078 698 380
Selling and administrative 213 176 37
Depreciation and amortization 169 181 (12)
1,460 1,055 406
-------- ------- ------
Operating Income (Loss) $(166) $(598) $431
======== ======= ======
The effects of the pause in guest cruise operations in March
2020 and subsequent resumption of our guest cruise operations,
inflation, higher fuel prices, higher interest rates and
fluctuations in foreign currency rates are collectively having a
material negative impact on all aspects of our business, including
our results of operations, liquidity and financial position. We
have a substantial debt balance and require a significant amount of
cash to service our debt and sustain our operations. Our ability to
generate cash will be affected by our ability to successfully
implement our business strategy, which includes increasing our
occupancy levels and pricing of our cruises, as well as general
macroeconomic, financial, geopolitical, competitive, regulatory and
other factors beyond our control. The full extent of these impacts
is uncertain and may be amplified by our substantial debt
balance.
Three Months Ended February 28, 2023 ("2023") Compared to Three
Months Ended February 28, 2022 ("2022")
Revenues
Consolidated
Cruise passenger ticket revenues made up 65% of our total
revenues in 2023 while onboard and other revenues made up 35%.
Revenues in 2023 increased by $2.8 billion to $4.4 billion from
$1.6 billion in 2022 due to the ongoing resumption of guest cruise
operations, including the significant increase of ships in service
and higher occupancy. As of February 28, 2023, 96% of our capacity
was serving guests, compared to 71% as of February 28, 2022. ALBDs
increased to 22.1 million in 2023 as compared to 13.3 million in
2022. Occupancy for 2023 was 91% compared to 54% in 2022.
NAA Segment
Cruise passenger ticket revenues made up 61% of our NAA
segment's total revenues in 2023 while onboard and other cruise
revenues made up 39%. NAA segment revenues in 2023 increased by
$2.0 billion to $3.1 billion from $1.1 billion in 2022 due to the
ongoing resumption of guest cruise operations, including the
significant increase of ships in service and higher occupancy. Our
NAA segment's full fleet was serving guests as of February 28,
2023, compared to 69% as of February 28, 2022. ALBDs increased to
13.9 million in 2023 as compared to 8.7 million in 2022. Occupancy
for 2023 was 98% compared to 59% in 2022.
Europe Segment
Cruise passenger ticket revenues made up 77% of our Europe
segment's total revenues in 2023 while onboard and other cruise
revenues made up 23%. Europe segment revenues in 2023 increased by
$0.8 billion to $1.3 billion from $0.5 billion in 2022 due to the
ongoing resumption of guest cruise operations, including the
significant increase of ships in service and higher occupancy. Our
Europe segment had 93% of its capacity serving guests as of
February 28, 2023, compared to 73% as of February 28, 2022. ALBDs
increased to 8.2 million in 2023 as compared to 4.6 million in
2022. Occupancy for 2023 was 80% compared to 45% in 2022.
Operating Cost and Expenses
Consolidated
Operating costs and expenses increased by $1.3 billion to $3.3
billion in 2023 from $2.0 billion in 2022. These increases were
driven by our resumption of guest cruise operations and an increase
in ships in service.
Fuel costs increased by $170 million to $535 million in 2023
from $365 million in 2022. $110 million of this increase was driven
by higher fuel consumption of 0.2 million metric tons, due to the
resumption of guest cruise operations, and $60 million was driven
by a combination of increases in fuel prices and changes in fuel
mix of $81 per metric ton consumed in 2023 compared to 2022.
Selling and administrative expenses increased by $182 million to
$712 million in 2023 from $530 million in 2022. The increase was
caused by increased administrative expenses and advertising costs
incurred as part of our resumption of guest cruise operations.
The drivers in changes in costs and expenses for our NAA and
Europe segments are the same as those described for our
consolidated results.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, increased by $171
million to $539 million in 2023 from $368 million in 2022. The
increase was caused by a higher average interest rate and a higher
average debt balance in 2023 compared to 2022.
Liquidity, Financial Condition and Capital Resources
As of February 28, 2023, we had $8.1 billion of liquidity
including cash and cash equivalents and borrowings available under
our Revolving Facility. We will continue to pursue various
opportunities to refinance future debt maturities and/or to extend
the maturity dates associated with our existing indebtedness and
obtain relevant financial covenant amendments or waivers, if
needed.
We had a working capital deficit of $3.9 billion as of February
28, 2023 compared to working capital deficit of $3.1 billion as of
November 30, 2022. The increase in working capital deficit was
caused by an increase in customer deposits and an overall decrease
in cash and cash equivalents and restricted cash. We operate with a
substantial working capital deficit. This deficit is mainly
attributable to the fact that, under our business model,
substantially all of our passenger ticket receipts are collected in
advance of the applicable sailing date. These advance passenger
receipts generally remain a current liability until the sailing
date. The cash generated from these advance receipts is used
interchangeably with cash on hand from other sources, such as our
borrowings and other cash from operations. The cash received as
advanced receipts can be used to fund operating expenses, pay down
our debt, make long-term investments or any other use of cash.
Included within our working capital are $5.5 billion and $4.9
billion of customer deposits as of February 28, 2023 and November
30, 2022, respectively. We have agreements with a number of credit
card processors that transact customer deposits related to our
cruise vacations. Certain of these agreements allow the credit card
processors to request, under certain circumstances, that we provide
a reserve fund in cash. In addition, we have a relatively low level
of accounts receivable and limited investment in inventories.
Refer to Note 1 - "General, Liquidity and Management's Plans" of
the consolidated financial statements for additional discussion
regarding our liquidity.
Sources and Uses of Cash
Operating Activities
Our business provided $0.4 billion of net cash flows in
operating activities during the three months ended February 28,
2023, an increase of $1.6 billion, compared to $1.2 billion used
for the same period in 2022. This was driven by a decrease in the
net loss compared to the same period in 2022 and an increase in
customer deposits.
Investing Activities
During the three months ended February 28, 2023, net cash used
in investing activities was $1.0 billion. This was driven by:
-- Capital expenditures of $0.8 billion for our ongoing new shipbuilding program
-- Capital expenditures of $243 million for ship improvements
and replacements, information technology and buildings and
improvements
-- Proceeds from sale of ships of $23 million
During the three months ended February 28, 2022, net cash used
in investing activities was $3.0 billion. This was driven by:
-- Capital expenditures of $2.5 billion for our ongoing new shipbuilding program
-- Capital expenditures of $221 million for ship improvements
and replacements, information technology and buildings and
improvements
-- Proceeds from sale of ships and other of $18 million
-- Purchases of short-term investments of $315 million
Financing Activities
During the three months ended February 28, 2023, net cash
provided by financing activities of $0.1 billion was caused by:
-- Issuances of $0.8 billion of long-term debt
-- Repayments of $0.7 billion of long-term debt
-- Payments of $40 million related to debt issuance costs
During the three months ended February 28, 2022, net cash
provided by financing activities of $1.7 billion was caused by:
-- Issuances of $2.3 billion of long-term debt
-- Repayments of $503 million of long-term debt
-- Payments of $85 million related to debt issuance costs
-- Net repayments of short-term borrowings of $48 million
-- Purchases of $23 million of Carnival plc ordinary shares and
issuances of $27 million of Carnival Corporation common stock under
our Stock Swap Program
Funding Sources
As of February 28, 2023, we had $8.1 billion of liquidity
including $5.5 billion of cash and cash equivalents and $2.6
billion of borrowings available under our Revolving Facility, which
matures in 2024. In February 2023, Carnival Holdings II entered
into the New Revolving Facility, which may be utilized beginning in
August 2024, at which date it will replace our existing Revolving
Facility. Refer to Note 3 - "Debt" of the consolidated financial
statements for additional discussion. In addition, we had $3.2
billion of undrawn export credit facilities to fund ship deliveries
planned through 2025. We plan to use existing liquidity and future
cash flows from operations to fund our cash requirements including
capital expenditures not funded by our export credit facilities. We
seek to manage our credit risk exposures, including counterparty
nonperformance associated with our cash and cash equivalents, and
future financing facilities by conducting business with
well-established financial institutions, and export credit agencies
and diversifying our counterparties.
(in billions) 2023 2024 2025
---- ------ ----
Future export credit facilities at February 28,
2023 $316 $2,165 $716
Our export credit facilities contain various financial covenants
as described in Note 3 - "Debt". At February 28, 2023, we were in
compliance with the applicable covenants under our debt
agreements.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements,
including guarantee contracts, retained or contingent interests,
certain derivative instruments and variable interest entities that
either have, or are reasonably likely to have, a current or future
material effect on our consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.
For a discussion of our hedging strategies and market risks, see
the discussion below and Note 10 - "Fair Value Measurements,
Derivative Instruments and Hedging Activities and Financial Risks"
in our consolidated financial statements and Management's
Discussion and Analysis of Financial Condition and Results of
Operations within our Form 10-K.
Interest Rate Risks
The composition of our debt, interest rate swaps and cross
currency swaps, was as follows:
February 28,
2023
------------
Fixed rate 59%
EUR fixed rate 16%
Floating rate 9%
EUR floating rate 15%
GBP floating rate 1%
Item 4. Controls and Procedures.
A. Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide
reasonable assurance that information required to be disclosed by
us in the reports that we file or submit under the Securities
Exchange Act of 1934, is recorded, processed, summarized and
reported, within the time periods specified in the U.S. Securities
and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us
in our reports that we file or submit under the Securities Exchange
Act of 1934 is accumulated and communicated to our management,
including our principal executive and principal financial officers,
or persons performing similar functions, as appropriate, to allow
timely decisions regarding required disclosure.
Our President, Chief Executive Officer and Chief Climate Officer
and our Chief Financial Officer and Chief Accounting Officer have
evaluated our disclosure controls and procedures and have
concluded, as of February 28, 2023, that they are effective at a
reasonable level of assurance, as described above.
B. Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over
financial reporting during the quarter ended February 28, 2023 that
have materially affected or are reasonably likely to materially
affect our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The legal proceedings described in Note 4 - "Contingencies and
Commitments" of our consolidated financial statements, including
those described under "COVID-19 Actions" and "Regulatory or
Governmental Inquiries and Investigations," are incorporated in
this "Legal Proceedings" section by reference. Additionally, SEC
rules require disclosure of certain environmental matters when a
governmental authority is a party to the proceedings and such
proceedings involve potential monetary sanctions that we believe
may exceed $1 million.
On June 20, 2022, Princess Cruises notified the Australian
Maritime Safety Authorization ("AMSA") and the flag state, Bermuda,
regarding approximately six cubic meters of comminuted food waste
(liquid biodigester effluent) inadvertently discharged by Coral
Princess inside the Great Barrier Reef Marine Park. On June 23,
2022, the UK P&I Club N.V. provided a letter of undertaking for
approximately $1.9 million (being the estimated maximum combined
penalty). We believe the ultimate outcome will not have a material
impact on our consolidated financial statements.
Item 1A. Risk Factors.
The risk factors in this Form 10-Q below should be carefully
considered, including the risk factors discussed in "Risk Factors"
and other risks discussed in our Form 10-K. These risks could
materially and adversely affect our results, operations, outlooks,
plans, goals, growth, reputation, cash flows, liquidity, and stock
price. Our business also could be affected by risks that we are not
presently aware of or that we currently consider immaterial to our
operations.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
A. Stock Swap Program
We have a program that allows us to realize a net cash benefit
when Carnival Corporation common stock is trading at a premium to
the price of Carnival plc ordinary shares . Under the Stock Swap
Program, we may elect to offer and sell shares of Carnival
Corporation common stock at prevailing market prices in ordinary
brokers' transactions and repurchase an equivalent number of
Carnival plc ordinary shares in the UK market.
Under the Stock Swap Program effective as of June 2021, the
Board of Directors authorized the sale of up to $500 million shares
of Carnival Corporation common stock in the U.S. market and the
purchase of Carnival plc ordinary shares on at least an equivalent
basis.
We may in the future implement a program to allow us to obtain a
net cash benefit when Carnival plc ordinary shares are trading at a
premium to the price of Carnival Corporation common stock.
Any sales of Carnival Corporation common stock and Carnival plc
ordinary shares have been or will be registered under the
Securities Act of 1933, as amended. During the three months ended
February 28, 2023, there were no sales or repurchases under the
Stock Swap Program. Since the beginning of the Stock Swap Program,
first authorized in June 2021, we have sold 14.9 million shares of
Carnival Corporation common stock and repurchased the same amount
of Carnival plc ordinary shares, resulting in net proceeds of $27
million. No ordinary shares of Carnival plc were purchased outside
of publicly announced plans or programs.
B. Repurchases
No shares of Carnival Corporation common stock and Carnival plc
ordinary shares were purchased outside of publicly announced plans
or programs.
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END
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