REG - Carnival PLC - 1st Quarter Results
29/03/2023 16:45
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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 28, November 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; 12 12
1,246 shares at 2023 and 1,244 shares at 2022 issued
Carnival plc ordinary shares, $1.66 par value; 217 shares at 2023 and 2022 361 361
issued
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 (8,433) (8,468)
shares at 2023 and 72 shares at 2022 of Carnival plc, at cost
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
Common Ordinary Additional Retained AOCI Treasury Total shareholders' equity
stock shares paid-in earnings (accumulated deficit) stock
capital
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)
NOTE 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, €1.0 billion and £0.2 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 of $228 million as of February 28, 2023 and
$218 million as of November 30, 2022.
NOTE 3 - Debt
February 28, November 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
Floating rate Jun 2025 - Oct 2028 LIBOR + 3.0 - 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
Floating rate Jul 2024 - Sep 2024 LIBOR + 3.8% 300 590
GBP floating rate Feb 2025 SONIA + 0.9% (d) 418 419
EUR floating rate Apr 2023 - Mar 2026 EURIBOR + 1.8 - 2.4% 844 827
Export Credit Facilities
Floating rate Oct 2024 - Dec 2031 LIBOR + 0.8 - 1.5% 1,172 1,246
Fixed rate Aug 2027 - Dec 2032 2.4 - 3.4% 3,064 3,143
EUR floating rate Mar 2023 - Nov 2034 EURIBOR + 0.2 - 1.6% 3,841 3,882
EUR fixed rate Feb 2031 - 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
Carrying Fair Value Carrying Fair Value
Value Value
(in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 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
(in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 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
(in millions) NAA Europe Total
Segment Segment
November 30, 2022 $927 $224 $1,151
Exchange movements - 2 2
February 28, 2023 $927 $225 $1,152
Derivative Instruments and Hedging Activities
(in millions) Balance Sheet Location February 28, 2023 November 30, 2022
Derivative assets
Derivatives designated as hedging instruments
Cross currency swaps (a) Prepaid expenses and other $6 $-
Interest rate swaps (b) Prepaid expenses and other 25 1
Other assets 1 1
Total derivative assets $31 $1
Derivative liabilities
Derivatives designated as hedging instruments
Interest rate swaps (b) Other long-term 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
(in millions) Gross Amounts Gross Amounts Offset in the Balance Sheet Total Net Amounts Presented in the Balance Sheet Gross Amounts not Offset in the Balance Sheet Net Amounts
Assets $31 $- $31 $- $31
Liabilities $18 $- $18 $- $18
November 30, 2022
(in millions) Gross Amounts Gross Amounts Offset in the Balance Sheet Total Net Amounts Presented in the Balance Sheet Gross Amounts not Offset in the Balance 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,
(in millions) Revenues Operating costs and Selling Depreciation Operating
expenses and and income (loss)
administrative amortization
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
(in millions) February 28, 2023 November 30, 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 $5,491 $6,037
Cash Flows)
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:
• Pricing • Adjusted net income (loss)
• Booking levels • Adjusted EBITDA
• Occupancy • Adjusted earnings per share
• Interest, tax and fuel expenses • Adjusted free cash flow
• Currency exchange rates • Net per diems
• Goodwill, ship and trademark fair values • Net yields
• Liquidity and credit ratings • Adjusted cruise costs per ALBD
• Estimates of ship depreciable lives and residual values • Adjusted cruise costs excluding fuel per ALBD
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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