REG - Carnival PLC - 3rd Quarter Results
30/09/2024 16:45
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RNS Number : 3114G Carnival PLC 30 September 2024
September 30, 2024
RELEASE OF CARNIVAL CORPORATION & PLC QUARTERLY REPORT ON FORM 10-Q
FOR THE THIRD QUARTER OF 2024
Carnival Corporation & plc announced its three and nine months results of
operations in its earnings release issued on September 30, 2024. Carnival
Corporation & plc is hereby announcing that today it has filed its joint
Quarterly Report on Form 10-Q ("Form 10-Q") with the U.S. Securities and
Exchange Commission ("SEC") containing the Carnival Corporation & plc
unaudited consolidated financial statements as of and for the three and nine
months ended August 31, 2024.
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 and nine months ended August 31,
2024, 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 August 31, Nine Months Ended
August 31,
2024 2023 2024 2023
Revenues
Passenger ticket $5,239 $4,546 $12,609 $10,557
Onboard and other 2,657 2,308 6,474 5,640
7,896 6,854 19,083 16,197
Operating Expenses
Commissions, transportation and other 958 823 2,510 2,097
Onboard and other 866 752 2,043 1,785
Payroll and related 575 585 1,812 1,768
Fuel 515 468 1,546 1,492
Food 393 364 1,099 1,000
Other operating 995 928 2,796 2,546
Cruise and tour operating expenses 4,303 3,921 11,805 10,688
Selling and administrative 763 713 2,366 2,162
Depreciation and amortization 651 596 1,898 1,774
5,718 5,230 16,070 14,624
Operating Income 2,178 1,624 3,013 1,572
Nonoperating Income (Expense)
Interest income 19 59 77 183
Interest expense, net of capitalized interest (431) (518) (1,352) (1,600)
Debt extinguishment and modification costs (13) (81) (78) (112)
Other income (expense), net (10) (19) (35) (67)
(435) (559) (1,388) (1,595)
Income (Loss) Before Income Taxes 1,743 1,065 1,626 (23)
Income Tax Benefit (Expense), Net (8) 9 (13) (3)
Net Income (Loss) $1,735 $1,074 $1,613 $(26)
Earnings Per Share
Basic $1.37 $0.85 $1.27 $(0.02)
Diluted $1.26 $0.79 $1.21 $(0.02)
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 August 31, Nine Months Ended
August 31,
2024 2023 2024 2023
Net Income (Loss) $1,735 $1,074 $1,613 $(26)
Items Included in Other Comprehensive Income (Loss)
Change in foreign currency translation adjustment 64 (17) 71 82
Other (38) 24 (26) 4
Other Comprehensive Income (Loss) 26 7 45 86
Total Comprehensive Income (Loss) $1,761 $1,081 $1,658 $60
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
August 31, November 30, 2023
2024
ASSETS
Current Assets
Cash and cash equivalents $1,522 $2,415
Trade and other receivables, net 632 556
Inventories 492 528
Prepaid expenses and other 980 1,767
Total current assets 3,626 5,266
Property and Equipment, Net 42,380 40,116
Operating Lease Right-of-Use Assets, Net 1,383 1,265
Goodwill 579 579
Other Intangibles 1,173 1,169
Other Assets 665 725
$49,805 $49,120
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $2,214 $2,089
Current portion of operating lease liabilities 159 149
Accounts payable 1,062 1,168
Accrued liabilities and other 2,393 2,003
Customer deposits 6,436 6,072
Total current liabilities 12,265 11,481
Long-Term Debt 26,642 28,483
Long-Term Operating Lease Liabilities 1,258 1,170
Other Long-Term Liabilities 1,042 1,105
Contingencies and Commitments
Shareholders' Equity
Carnival Corporation common stock, $0.01 par value; 1,960 shares authorized; 13 12
1,253 shares issued at 2024 and 1,250 shares issued at 2023
Carnival plc ordinary shares, $1.66 par value; 217 shares issued at 2024 and 361 361
2023
Additional paid-in capital 16,723 16,712
Retained earnings 1,798 185
Accumulated other comprehensive income (loss) ("AOCI") (1,894) (1,939)
Treasury stock, 130 shares at 2024 and 2023 of Carnival Corporation and 73 (8,404) (8,449)
shares at 2024 and 2023 of Carnival plc, at cost
Total shareholders' equity 8,597 6,882
$49,805 $49,120
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Nine Months Ended August 31,
2024 2023
OPERATING ACTIVITIES
Net income (loss) $1,613 $(26)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities
Depreciation and amortization 1,898 1,774
Impairments 2 19
(Gain) loss on debt extinguishment 75 99
(Income) loss from equity-method investments (3) 16
Share-based compensation 47 43
Amortization of discounts and debt issue costs 107 126
Noncash lease expense 105 109
Gain on sales of ships (8) (54)
Other 92 39
3,928 2,145
Changes in operating assets and liabilities
Receivables (72) (99)
Inventories 33 (43)
Prepaid expenses and other assets 509 74
Accounts payable (58) 31
Accrued liabilities and other 245 155
Customer deposits 427 1,097
Net cash provided by (used in) operating activities 5,012 3,359
INVESTING ACTIVITIES
Purchases of property and equipment (4,034) (2,609)
Proceeds from sales of ships 16 260
Other 57 28
Net cash provided by (used in) investing activities (3,961) (2,322)
FINANCING ACTIVITIES
Repayments of short-term borrowings - (200)
Principal repayments of long-term debt (4,839) (6,828)
Debt issuance costs (122) (116)
Debt extinguishment costs (41) (67)
Proceeds from issuance of long-term debt 3,048 2,961
Proceeds from issuance of common stock - 5
Proceeds from issuance of common stock under the Stock Swap Program - 22
Purchase of treasury stock under the Stock Swap Program - (20)
Other 1 14
Net cash provided by (used in) financing activities (1,953) (4,229)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 10 25
Net increase (decrease) in cash, cash equivalents and restricted cash (893) (3,166)
Cash, cash equivalents and restricted cash at beginning of period 2,436 6,037
Cash, cash equivalents and restricted cash at end of period $1,543 $2,870
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 stock
capital (accumulated deficit)
At May 31, 2024 $13 $361 $16,701 $62 $(1,919) $(8,404) $6,814
Net income (loss) - - - 1,735 - - 1,735
Other comprehensive income (loss) - - - - 26 - 26
Share-based compensation and other - - 22 - - - 22
At August 31, 2024 $13 $361 $16,723 $1,798 $(1,894) $(8,404) $8,597
At May 31, 2023 $12 $361 $16,684 $(841) $(1,903) $(8,449) $5,865
Net income (loss) - - - 1,074 - - 1,074
Other comprehensive income (loss) - - - - 7 - 7
Share-based compensation and other - - 15 - - - 15
At August 31, 2023 $12 $361 $16,699 $233 $(1,896) $(8,449) $6,960
Nine Months Ended
Common Ordinary Additional Retained AOCI Treasury Total shareholders' equity
stock shares paid-in earnings stock
capital
At November 30, 2023 $12 $361 $16,712 $185 $(1,939) $(8,449) $6,882
Net income (loss) - - - 1,613 - - 1,613
Other comprehensive income (loss) - - - - 45 - 45
Issuance of treasury shares for vested share-based awards - - (47) - - 47 -
Share-based compensation and other - - 59 - - (2) 57
At August 31, 2024 $13 $361 $16,723 $1,798 $(1,894) $(8,404) $8,597
At November 30, 2022 $12 $361 $16,872 $269 $(1,982) $(8,468) $7,065
Change in accounting principle (a) - - (229) (10) - - (239)
Net income (loss) - - - (26) - - (26)
Other comprehensive income (loss) - - - - 86 - 86
Issuances of common stock, net - - 5 - - - 5
Conversion of Convertible Notes - - 3 - - - 3
Purchases and issuances under the Stock Swap program, net - - 22 - - (20) 2
Issuance of treasury shares for vested share-based awards - - (41) - - 41 -
Share-based compensation and other - - 67 - - (2) 65
At August 31, 2023 $12 $361 $16,699 $233 $(1,896) $(8,449) $6,960
(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.
The accompanying notes are an integral part of these consolidated financial
statements.
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."
Basis of Presentation
The accompanying consolidated financial statements are unaudited and, in the
opinion of our management, contain all adjustments, consisting of only normal
recurring adjustments, necessary for a fair statement. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America ("GAAP") have been condensed or omitted as permitted by such
Securities and Exchange Commission rules and regulations. The preparation of
our interim consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported
and disclosed. 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. Our operations are seasonal and results for interim periods
are not necessarily indicative of the results for the entire year.
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 2023 joint Annual Report on
Form 10-K ("Form 10-K") filed with the U.S. Securities and Exchange Commission
("SEC") on January 26, 2024.
For 2023, we reclassified $11 million from restricted cash to prepaid
expenses and other in the Consolidated Balance Sheets to conform to the
current year presentation.
Accounting Pronouncements
In September 2022, the Financial Accounting Standards Board ("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. On
December 1, 2023, we adopted this guidance using the retrospective method for
each period presented. The adoption of this guidance had no impact on our
consolidated financial statements and disclosures.
In November 2023, the FASB issued guidance, Segment Reporting - Improvements
to Reportable Segment Disclosures. This guidance requires annual and interim
disclosure of significant segment expenses that are provided to the chief
operating decision maker ("CODM") as well as interim disclosures for all
reportable segments' profit or loss and assets. This guidance also requires
disclosure of the title and position of the CODM and an explanation of how the
CODM uses the reported measures of segment profit or loss in assessing segment
performance and deciding how to allocate resources. This guidance is required
to be adopted by us in 2025. We are currently evaluating the impact this
guidance will have on our consolidated financial statements and disclosures.
In December 2023, the FASB issued guidance, Income Taxes - Improvements to
Income Tax Disclosures. This guidance requires disaggregation of rate
reconciliation categories and income taxes paid by jurisdiction, as well as
other amendments relating to income tax disclosures. This guidance is required
to be adopted by us in 2026. We are currently evaluating the impact this
guidance will have on our consolidated financial statements and disclosures.
Regulatory Updates
We became subject to the EU Emissions Trading Scheme ("ETS") on January 1,
2024, which includes a three-year phase-in period. The ETS regulates emissions
through a "cap and trade" principle, where a cap is set on the total amount of
certain emissions that can be emitted and requires us to procure emission
allowances for certain emissions inside EU waters (as defined in the ETS). We
record emission allowances at cost within prepaid expenses and other or other
assets, based on the timing of when they are required to be surrendered. We
record expense for emissions inside EU waters within fuel expense in the
period incurred. As of August 31, 2024, the cost of allowances purchased was
$49 million. For the three and nine months ended August 31, 2024, expense for
ETS emissions were not material.
Brand Realignment
In June 2024, we announced that we will sunset the P&O Cruises (Australia)
brand and fold the Australia operations into Carnival Cruise Line in March
2025. We do not anticipate this realignment to have a material impact on 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 these services are included in prepaid expenses and other
when paid prior to the start of a voyage and are subsequently recognized in
transportation costs at the time of revenue recognition. The cost of prepaid
air and other transportation costs at August 31, 2024 and November 30, 2023
were $235 million and $253 million. 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 are
expensed in commissions, transportation and other costs when the corresponding
revenues are recognized. The remaining portion of fees, taxes and charges are
generally 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 record
a liability for FCCs to the extent we have received and not refunded cash from
guests for cancelled bookings. We had total customer deposits of $6.8 billion
as of August 31, 2024 and $6.4 billion as of November 30, 2023, which
includes approximately $61 million of unredeemed FCCs as of August 31, 2024,
of which approximately $35 million are refundable. At November 30, 2023, we
had approximately $134 million of unredeemed FCCs, of which $111 million
were refundable. During the nine months ended August 31, 2024 and 2023, we
recognized revenues of $5.1 billion and $3.9 billion related to our customer
deposits as of November 30, 2023 and 2022. Our customer deposits balance
changes due to the seasonal nature of cash collections, which typically
results from higher ticket prices and occupancy levels during the third
quarter, the recognition of revenue, refunds of customer deposits and foreign
currency changes.
Trade and Other Receivables
Although we generally require full payment from our customers prior to or
concurrently with their cruise, we grant credit terms to a relatively small
portion of our revenue source. We have receivables from credit card merchants
and travel agents for cruise ticket purchases and onboard revenue. These
receivables are included within trade and other receivables, net and are less
allowances for expected credit losses.
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 $326 million as of August 31, 2024 and
$294 million as of November 30, 2023.
NOTE 3 - Debt
August 31, November 30,
(in millions) Maturity Rate (a) (b) 2024 2023
Secured Subsidiary Guaranteed
Notes
Notes Jun 2027 7.9% $192 $192
Notes (c) Aug 2027 9.9% - 623
Notes Aug 2028 4.0% 2,406 2,406
Notes Aug 2029 7.0% 500 500
Loans
EUR floating rate (c) Jun 2025 EURIBOR + 3.8% - 851
Floating rate Aug 2027 - Oct 2028 SOFR + 2.8% (d) 2,449 3,567
Total Secured Subsidiary Guaranteed 5,547 8,138
Senior Priority Subsidiary Guaranteed
Notes May 2028 10.4% 2,030 2,030
Unsecured Subsidiary Guaranteed
Notes
Convertible Notes Oct 2024 5.8% 426 426
Notes Mar 2026 7.6% 1,351 1,351
EUR Notes (c) Mar 2026 7.6% - 550
Notes (c) Mar 2027 5.8% 2,722 3,100
Convertible Notes Dec 2027 5.8% 1,131 1,131
Notes May 2029 6.0% 2,000 2,000
EUR Notes Jan 2030 5.8% 554 -
Notes Jun 2030 10.5% 1,000 1,000
Loans
EUR floating rate (e) (f) Apr 2025 - Mar 2026 EURIBOR + 2.4 - 3.3% 545 678
Export Credit Facilities
Floating rate Dec 2031 SOFR + 1.2% (g) 514 583
Fixed rate Aug 2027 - Dec 2032 2.4 - 3.4% 2,484 2,756
EUR floating rate Mar 2025 - Nov 2034 EURIBOR + 0.2 - 0.8% 2,818 3,086
EUR fixed rate Feb 2031 - Sep 2037 1.1 - 4.0% 5,658 3,652
Total Unsecured Subsidiary Guaranteed 21,203 20,312
Unsecured Notes (No Subsidiary Guarantee)
Notes Jan 2028 6.7% 200 200
EUR Notes Oct 2029 1.0% 665 659
Total Unsecured Notes (No Subsidiary Guarantee) 865 859
Total Debt 29,644 31,339
Less: unamortized debt issuance costs and discounts (788) (768)
Total Debt, net of unamortized debt issuance costs and discounts 28,856 30,572
Less: current portion of long-term debt (2,214) (2,089)
Long-Term Debt $26,642 $28,483
(a) The reference rates, together with any applicable credit adjustment
spread, for substantially all of our variable debt have 0.0% to 0.75% floors.
(b) The above debt table excludes the impact of any outstanding derivative
contracts.
(c) See "Debt Prepayments" below.
(d) As part of the repricing of our senior secured term loans, we amended
the loans' margin from 3.0% - 3.4% (inclusive of credit adjustment spread) to
2.8%. See "Repricing of senior secured term loans" below.
(e) The maturity of the principal amount of $216 million was extended from
April 2024 to April 2025.
(f) Subsequent to August 31, 2024, we prepaid $323 million of the
outstanding principal amount of our euro floating rate loan originally
scheduled to mature in 2026.
(g) Includes applicable credit adjustment spread.
Carnival Corporation and/or Carnival plc is the primary obligor of all our
outstanding debt excluding the following:
• $3.0 billion under an undrawn $1.9 billion, €0.9 billion
and £0.1 billion multi-currency revolving facility ("Revolving Facility") of
Carnival Holdings (Bermuda) II Limited ("Carnival Holdings II"), a subsidiary
of Carnival Corporation
• $2.0 billion of senior priority notes (the "2028 Senior
Priority Notes"), issued by Carnival Holdings (Bermuda) Limited ("Carnival
Holdings"), a subsidiary of Carnival Corporation
• $0.3 billion under a term loan facility of Costa Crociere
S.p.A. ("Costa"), a subsidiary of Carnival plc
• $0.9 billion under an export credit facility of Sun Princess
Limited, a subsidiary of Carnival Corporation
• $0.1 billion under an export credit facility of Sun Princess II
Limited, a subsidiary of Carnival Corporation
All of our outstanding debt is issued or guaranteed by substantially the same
entities with the exception of the following:
• Up to $250 million of the Costa term loan facility, which is
guaranteed by certain subsidiaries of Carnival plc and Costa that do not
guarantee our other outstanding debt
• Our 2028 Senior Priority Notes, issued by Carnival Holdings,
which does not guarantee our other outstanding debt
• The export credit facilities of Sun Princess Limited and Sun
Princess II Limited, which do not guarantee our other outstanding debt
• The Revolving Facility of Carnival Holdings II, which does not
guarantee our other outstanding debt
As of August 31, 2024, the scheduled maturities of our debt are as follows:
(in millions)
Year Principal Payments
Remainder of 2024 (a) $737
2025 (a) 1,777
2026 (a) 2,815
2027 4,931
2028 8,762
Thereafter 10,622
Total $29,644
(a) Subsequent to August 31, 2024, we prepaid the outstanding principal
amount of our euro floating rate loan with $46 million of principal payments
originally scheduled in 2024, $185 million in 2025 and $92 million in 2026.
Revolving Facility
As of August 31, 2024, Carnival Holdings II had $3.0 billion available for
borrowing under our Revolving Facility. Carnival Holdings II may continue to
borrow or otherwise utilize available amounts under the Revolving Facility
through August 2027, subject to satisfaction of the conditions in the
facility.
Repricing of Senior Secured Term Loans
In April 2024, we entered into amendments with the lender syndicate to reprice
$1.7 billion of our first-priority senior secured term loan facility maturing
in 2028 and $1.0 billion of our first-priority senior secured term loan
facility maturing in 2027, which are included within the total Secured
Subsidiary Guaranteed Loans balance in the debt table above.
2030 Senior Unsecured Notes
In April 2024, we issued $535 million aggregate principal amount of 5.8%
senior unsecured notes due 2030. We used the net proceeds from the issuance,
together with cash on hand, to redeem the outstanding principal amount of the
7.6% senior unsecured notes due 2026.
Debt Prepayments
During the nine months ended August 31, 2024, we made prepayments for the
following debt instruments:
• Euro-denominated tranche of our first-priority senior secured
term loan facility maturing in 2025
• First-priority senior secured term loan facilities maturing in
2027 and 2028
• 9.9% second-priority secured notes due 2027
• 7.6% senior unsecured notes due 2026
• 5.8% senior unsecured notes due 2027
The aggregate amount of these prepayments was $3.5 billion.
Export Credit Facility Borrowings
During the nine months ended August 31, 2024, we borrowed $2.3 billion under
export credit facilities due in semi-annual installments through 2036. As of
August 31, 2024, the net book value of the vessels subject to negative pledges
was $18.9 billion.
Convertible Notes
On July 1, 2024, our 5.8% convertible senior notes due 2024 (the "2024
Convertible Notes") became convertible, at the option of its holders, at any
time prior to the close of business on September 27, 2024. Pursuant to the
terms of the indenture governing the 2024 Convertible Notes, we have
irrevocably elected to settle any conversions of the 2024 Convertible Notes
during this period in shares of Carnival Corporation common stock. As of
September 27, 2024, holders of substantially all of the $426 million of
outstanding 2024 Convertible Notes have elected to convert to shares of common
stock.
Collateral and Priority Pool
As of August 31, 2024, the net book value of our ships and ship improvements,
excluding ships under construction, is $40.0 billion. Our secured debt is
secured on a first-priority basis by certain collateral, which includes
vessels and certain assets related to those vessels and material intellectual
property (combined net book value of approximately $22.8 billion, including
$21.2 billion related to vessels and certain assets related to those vessels)
as of August 31, 2024 and certain other assets.
As of August 31, 2024, $8.0 billion in net book value of our ships and ship
improvements relate to the priority pool vessels included in the priority pool
of 12 unencumbered vessels (the "Senior Priority Notes Subject Vessels") for
our 2028 Senior Priority Notes and $2.8 billion in net book value of our ship
and ship improvements relate to the priority pool vessels included in the
priority pool of three unencumbered vessels (the "Revolving Facility Subject
Vessels") for our Revolving Facility. As of August 31, 2024, there was no
change in the identity of the Senior Priority Notes Subject Vessels or the
Revolving Facility Subject Vessels.
Covenant Compliance
As of August 31, 2024, 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) as follows:
◦ For certain of our unsecured loans and our Revolving Facility,
at a ratio of not less than 2.0 to 1.0 for each testing date until May 31,
2025, at a ratio of not less than 2.5 to 1.0 for the August 31, 2025 and
November 30, 2025 testing dates, and at a ratio of not less than 3.0 to 1.0
for the February 28, 2026 testing date onwards and as applicable through their
respective maturity dates.
◦ For our export credit facilities, at a ratio of not less than
2.0 to 1.0 for each testing date until May 31, 2025, at a ratio of not less
than 2.5 to 1.0 for the August 31, 2025 and November 30, 2025 testing dates,
and at a ratio of not less than 3.0 to 1.0 for the February 28, 2026 testing
date onwards.
• For certain of our unsecured loans and export credit facilities,
maintain minimum issued capital and consolidated reserves (as defined in the
agreements) of $5.0 billion.
• Limit our debt to capital (as defined in the agreements)
percentage to a percentage not to exceed 65%.
• Maintain minimum liquidity of $1.5 billion.
• Adhere to certain restrictive covenants through August 2027
(subject to such covenants terminating if the Company reaches an investment
grade credit rating in accordance with the agreement governing the Revolving
Facility).
• Limit the amounts of our secured assets as well as secured and
other indebtedness.
At August 31, 2024, 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. We have insurance coverage for
certain of these claims and actions, or any settlement of these claims and
actions, 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. On March 21, 2022, the court
granted summary judgment in favor of Havana Docks Corporation as to liability.
On December 30, 2022, the court entered judgment against Carnival Corporation
in the amount of $110 million plus $4 million in fees and costs. We have
filed an appeal. Oral argument was held on May 17, 2024.
As of August 31, 2024, two purported class actions brought against us by
former guests in the Federal Court in Australia and in Italy remain pending,
as previously disclosed. These actions include 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 our ships. On October 24, 2023, the court in the
Australian matter held that we were liable for negligence and for breach of
consumer protection warranties as it relates to the lead plaintiff. The court
ruled that the lead plaintiff was not entitled to any pain and suffering or
emotional distress damages on the negligence claim and awarded medical costs.
In relation to the consumer protection warranties claim, the court found that
distress and disappointment damages amounted to no more than the refund
already provided to guests and therefore made no further award. Further
proceedings will determine the applicability of this ruling to the remaining
class participants. We continue to take actions to defend against the above
claims. We believe the ultimate outcome of these matters will not have a
material impact on our consolidated financial statements.
Regulatory or Governmental Inquiries and Investigations
We have been, and may continue to be, impacted by breaches in data security
and lapses in data privacy, which occur from time to time. These can vary in
scope and range from inadvertent events to malicious motivated attacks.
We have incurred legal and other costs in connection with cyber incidents that
have impacted us. The penalties and settlements paid in connection with cyber
incidents over recent 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 attacks, incidents or litigation 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.
Under the European Union Treaty, the European Commission is required to
approve on a periodic basis certain economic benefits that are provided under
Italian law, with the last approval granted through December 31, 2023. One of
our subsidiaries continues to receive and recognize these benefits. The
Italian Government has requested approval for these benefits to continue to be
applied after December 31, 2023. The timing of the European Commission's
decision is uncertain and could take more than a year. If the European
Commission were to deny a portion or all of the benefits, the Italian
Government may be required to retroactively disallow these benefits and seek
reimbursement from us which would result in a reversal of the recognition of
such benefits, which depending on the timing of resolution, could 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 capped 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 August 31, 2024 we were not required to maintain any reserve funds or
compensating deposits. As of November 30, 2023, we had $844 million in
reserve funds and $158 million in compensating deposits we were required to
maintain, which were included within other assets.
Ship Commitments
As of August 31, 2024, our new ship growth capital commitments were
$0.2 billion for the remainder of 2024 and $0.9 billion, $0.4 billion, $1.4
billion, $1.3 billion and $4.9 billion for the years ending November 30,
2025, 2026, 2027, 2028 and thereafter.
NOTE 5 - Fair Value Measurements, Derivative Instruments and Hedging
Activities and Financial Risks
Fair Value Measurements
Fair value is defined as the amount that would be received for selling an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date and is measured using inputs in one of
the following three categories:
• Level 1 measurements are based on unadjusted quoted prices in
active markets for identical assets or liabilities that we have the ability to
access. Valuation of these items does not entail a significant amount of
judgment.
• Level 2 measurements are based on quoted prices for similar
assets or liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active or market data
other than quoted prices that are observable for the assets or liabilities.
• Level 3 measurements are based on unobservable data that are
supported by little or no market activity and are significant to the fair
value of the assets or liabilities.
Considerable judgment may be required in interpreting market data used to
develop the estimates of fair value. Accordingly, certain estimates of fair
value presented herein are not necessarily indicative of the amounts that
could be realized in a current or future market exchange.
Financial Instruments that are not Measured at Fair Value on a Recurring
Basis
August 31, 2024 November 30, 2023
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) $23,318 $- $23,483 $- $22,575 $- $21,503 $-
Floating rate debt (a) 6,327 - 6,183 - 8,764 - 8,225 -
Total $29,644 $- $29,666 $- $31,339 $- $29,728 $-
(a) The debt amounts above do not include the impact of
interest rate swaps or debt issuance costs and discounts. The fair values of
our publicly-traded notes were based on their unadjusted quoted market prices
in markets that are not sufficiently active to be Level 1 and, accordingly,
are considered Level 2. The fair values of our other debt were estimated based
on current market interest rates being applied to this debt.
Financial Instruments that are Measured at Fair Value on a Recurring Basis
August 31, 2024 November 30, 2023
(in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets
Cash equivalents (a) $379 $- $- $1,021 $- $-
Derivative financial instruments - 3 - - 22 -
Total $379 $3 $- $1,021 $22 $-
Liabilities
Derivative financial instruments $- $19 $- $- $28 $-
Total $- $19 $- $- $28 $-
(a) Consists of money market funds and cash investments with
original maturities of less than 90 days.
Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring
Basis
Valuation of Goodwill and Trademarks
As of July 31, 2024, we performed our annual goodwill and trademark impairment
reviews and determined there was no impairment for goodwill or trademarks.
As of August 31, 2024 and November 30, 2023, goodwill for our North America
and Australia ("NAA") segment was $579 million.
Trademarks
(in millions) NAA Europe Total
Segment Segment
November 30, 2023 $927 $237 $1,164
Exchange movements - 6 6
August 31, 2024 $927 $244 $1,171
Derivative Instruments and Hedging Activities
(in millions) Balance Sheet Location August 31, 2024 November 30, 2023
Derivative assets
Derivatives designated as hedging instruments
Interest rate swaps (a) Prepaid expenses and other $3 $-
Other assets - 22
Derivatives not designated as hedging instruments
Interest rate swaps (a) Prepaid expenses and other - 1
Total derivative assets $3 $22
Derivative liabilities
Derivatives designated as hedging instruments
Cross currency swaps (b) Other long-term liabilities $- $12
Interest rate swaps (a) Accrued liabilities and other 1 -
Other long-term liabilities 19 16
Total derivative liabilities $19 $28
(a) We have interest rate swaps whereby we receive floating
interest rate payments in exchange for making fixed interest rate payments.
These interest rate swap agreements effectively changed $22 million at August
31, 2024 and $46 million at November 30, 2023 of EURIBOR-based floating rate
euro debt to fixed rate euro debt, and $2.0 billion at August 31, 2024 of
SOFR-based variable rate debt to fixed rate debt. As of August 31, 2024 and
November 30, 2023, the EURIBOR-based interest rate swaps settle through 2025
and were not designated as cash flow hedges; the SOFR-based interest rate
swaps settle through 2027 and were designated as cash flow hedges. Subsequent
to August 31, 2024, we terminated a portion of our SOFR-based interest rate
swaps with a notional amount of $1.0 billion.
(b) At November 30, 2023, we had a cross currency swap with a
notional amount of $670 million that was designated as a hedge of our net
investment in foreign operations with euro-denominated functional currencies.
This cross currency swap was terminated in January 2024.
Our derivative contracts include rights of offset with our counterparties. As
of August 31, 2024 and November 30, 2023, there was no netting for our
derivative assets and liabilities. The amounts that were not offset in the
balance sheet were not material.
The effect of our derivatives qualifying and designated as hedging instruments
recognized in other comprehensive income (loss) and in net income (loss) was
as follows:
Three Months Ended Nine Months Ended
August 31, August 31,
(in millions) 2024 2023 2024 2023
Gains (losses) recognized in AOCI:
Cross currency swaps - net investment hedges - included component $- $(10) $- $(1)
Cross currency swaps - net investment hedges - excluded component $- $1 $- $(3)
Interest rate swaps - cash flow hedges $(33) $25 $(1) $6
(Gains) losses reclassified from AOCI - cash flow hedges:
Interest rate swaps - Interest expense, net of capitalized interest $(5) $(12) $(25) $(22)
Foreign currency zero cost collars - Depreciation and amortization $- $- $(1) $(1)
Gains (losses) recognized on derivative instruments (amount excluded from
effectiveness testing - net investment hedges)
Cross currency swaps - Interest expense, net of capitalized interest $- $3 $2 $7
The amount of gains and losses on derivatives not designated as hedging
instruments recognized in earnings during the three and nine months ended
August 31, 2024 and estimated cash flow hedges' unrealized gains and losses
that are expected to be reclassified to earnings in the next twelve months are
not material.
Financial Risks
Fuel Price Risks
We manage our exposure to fuel price risk by managing our consumption of fuel.
Substantially all of our exposure to market risk for changes in fuel prices
relates to the consumption of fuel on our ships. We manage fuel consumption
through fleet optimization, energy efficiency, itinerary efficiency and new
technologies and alternative fuels.
Foreign Currency Exchange Rate Risks
Overall Strategy
We manage our exposure to fluctuations in foreign currency exchange rates
through our normal operating and financing activities, including netting
certain exposures to take advantage of any natural offsets and, when
considered appropriate, through the use of derivative and non-derivative
financial instruments. Our primary focus is to monitor our exposure to, and
manage, the economic foreign currency exchange risks faced by our operations
and realized if we exchange one currency for another. We consider hedging
certain of our ship commitments and net investments in foreign operations. The
financial impacts of our hedging instruments generally offset the changes in
the underlying exposures being hedged.
Operational Currency Risks
Our operations primarily utilize the U.S. dollar, Euro, Sterling or the
Australian dollar as their functional currencies. Our operations also have
revenue and expenses denominated in non-functional currencies. Movements in
foreign currency exchange rates affect our financial statements.
Investment Currency Risks
We consider our investments in foreign operations to be denominated in stable
currencies and of a long-term nature. We have euro-denominated debt which
provides an economic offset for our operations with euro functional currency.
In addition, we have in the past and may in the future utilize derivative
financial instruments, such as cross currency swaps, to manage our exposure to
investment currency risks.
Newbuild Currency Risks
Our shipbuilding contracts are typically denominated in euros. Our decision to
hedge a non-functional currency ship commitment for our cruise brands is made
on a case-by-case basis, considering the amount and duration of the exposure,
market volatility, economic trends, our overall expected net cash flows by
currency and other offsetting risks.
At August 31, 2024, our remaining newbuild currency exchange rate risk relates
to euro-denominated newbuild contract payments for non-euro functional
currency brands, which represent a total unhedged commitment of $9.1 billion
for newbuilds scheduled to be delivered through 2033.
The cost of shipbuilding orders that we may place in the future that are
denominated in a different currency than our cruise brands' functional
currency will be affected by foreign currency exchange rate
fluctuations. These foreign currency exchange rate fluctuations may affect
our decision to order new cruise ships.
Interest Rate Risks
We manage our exposure to fluctuations in interest rates through our debt
portfolio management and investment strategies. We evaluate our debt
portfolio to determine whether to make periodic adjustments to the mix of
fixed and floating rate debt through the use of interest rate swaps and the
issuance of new debt.
Concentrations of Credit Risk
As part of our ongoing control procedures, we monitor concentrations of credit
risk associated with financial and other institutions with which we conduct
significant business. We seek to manage these credit risk exposures,
including counterparty nonperformance primarily associated with our cash and
cash equivalents, investments, notes receivables, reserve funds related to
customer deposits, future financing facilities, contingent obligations,
derivative instruments, insurance contracts and new ship progress payment
guarantees, by:
• Conducting business with well-established financial
institutions, insurance companies and export credit agencies
• Diversifying our counterparties
• Having guidelines regarding credit ratings and investment
maturities that we follow to help safeguard liquidity and minimize risk
• Generally requiring collateral and/or guarantees to support
notes receivable on significant asset sales and new ship progress payments to
shipyards
We also monitor the creditworthiness of travel agencies and tour operators in
Australia and Europe and credit and debit card providers to which we extend
credit in the normal course of our business. Our credit exposure also
includes contingent obligations related to cash payments received directly by
travel agents and tour operators for cash collected by them on cruise sales in
Australia and most of Europe where we are obligated to honor our guests'
cruise payments made by them to their travel agents and tour operators
regardless of whether we have received these payments.
Concentrations of credit risk associated with trade receivables and other
receivables, charter-hire agreements and contingent obligations are not
considered to be material, principally due to the large number of unrelated
accounts, the nature of these contingent obligations and their short
maturities. Normally, we have not required collateral or other security to
support normal credit sales and have not experienced significant credit
losses.
NOTE 6 - Segment Information
The chief operating decision maker, who is the President, Chief Executive
Officer and Chief Climate Officer of Carnival Corporation and Carnival plc
assesses performance and makes decisions to allocate resources for Carnival
Corporation & plc based upon review of the results across all of our
segments. The operating segments within each of our reportable segments have
been aggregated based on the similarity of their economic and other
characteristics, including geographic guest sourcing. Our four reportable
segments are comprised of (1) NAA cruise operations, (2) Europe cruise
operations ("Europe"), (3) Cruise Support and (4) Tour and Other.
Our Cruise Support segment includes our portfolio of leading port destinations
and exclusive islands as well as other services, all of which are operated for
the benefit of our cruise brands. Our Tour and Other segment represents the
hotel and transportation operations of Holland America Princess Alaska Tours
and other operations.
Three Months Ended August 31,
(in millions) Revenues Operating Selling Depreciation Operating
expenses and and income (loss)
administrative amortization
2024
NAA $5,322 $3,000 $455 $424 $1,442
Europe 2,331 1,166 223 173 770
Cruise Support 62 37 81 48 (104)
Tour and Other 181 100 5 6 70
$7,896 $4,303 $763 $651 $2,178
2023
NAA $4,566 $2,661 $420 $377 $1,107
Europe 2,060 1,124 199 168 569
Cruise Support 56 30 87 47 (109)
Tour and Other 172 105 7 3 56
$6,854 $3,921 $713 $596 $1,624
Nine Months Ended August 31,
(in millions) Revenues Operating Selling Depreciation Operating
expenses and and income (loss)
administrative amortization
2024
NAA $12,880 $7,983 $1,421 $1,237 $2,239
Europe 5,797 3,552 687 501 1,058
Cruise Support 184 112 243 142 (313)
Tour and Other 222 159 15 18 30
$19,083 $11,805 $2,366 $1,898 $3,013
2023
NAA $11,000 $7,132 $1,295 $1,115 $1,458
Europe 4,819 3,303 634 506 376
Cruise Support 162 85 211 137 (271)
Tour and Other 216 169 21 17 9
$16,197 $10,688 $2,162 $1,774 $1,572
Revenue by geographic areas, which are based on where our guests are sourced,
were as follows:
Three Months Ended Nine Months Ended
August 31, August 31,
(in millions) 2024 2023 2024 2023
North America $4,975 $4,253 $11,638 $9,937
Europe 2,406 2,165 5,605 4,798
Australia 288 238 1,069 883
Other 226 198 771 578
$7,896 $6,854 $19,083 $16,197
NOTE 7 - Earnings Per Share
Three Months Ended Nine Months Ended
August 31, August 31,
(in millions, except per share data) 2024 2023 2024 2023
Net income (loss) $1,735 $1,074 $1,613 $(26)
Interest expense on dilutive convertible notes 25 24 73 -
Net income (loss) for diluted earnings per share $1,760 $1,098 $1,686 $(26)
Weighted-average shares outstanding 1,267 1,263 1,266 1,262
Dilutive effect of equity awards 5 6 5 -
Dilutive effect of convertible notes 127 127 127 -
Diluted weighted-average shares outstanding 1,399 1,396 1,398 1,262
Basic earnings per share $1.37 $0.85 $1.27 $(0.02)
Diluted earnings per share $1.26 $0.79 $1.21 $(0.02)
Antidilutive shares excluded from diluted earnings per share computations were
as follows:
Three Months Ended Nine Months Ended
August 31, August 31,
(in millions) 2024 2023 2024 2023
Equity awards - - - 3
Convertible Notes - - - 131
Total antidilutive securities - - - 134
NOTE 8 - Supplemental Cash Flow Information
(in millions) August 31, 2024 November 30, 2023
Cash and cash equivalents (Consolidated Balance Sheets) $1,522 $2,415
Restricted cash (included in prepaid expenses and other and other assets) 21 21
Total cash, cash equivalents and restricted cash (Consolidated Statements $1,543 $2,436
of Cash Flows)
NOTE 9 - Property and Equipment
Ship Sales
During the three months ended August 31, 2024, we entered into an agreement to
sell one NAA segment ship, which represents a passenger-capacity reduction of
2,000 berths. We will continue to operate the NAA segment ship under a
bareboat charter agreement through February 2025.
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 Quarterly
Report on Form 10-Q 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.
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. These factors include, but are not limited
to, the following:
• Events and conditions around the world, including geopolitical
uncertainty, war and other military actions, 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 as well as negative impacts to our operating costs and
profitability.
• Pandemics have in the past and may in the future have a
significant negative impact on our financial condition and operations.
• Incidents concerning our ships, guests or the cruise industry
have in the past and may, in the future, negatively impact the satisfaction of
our guests and crew and lead to reputational damage.
• Changes in and non-compliance with laws and regulations under
which we operate, such as those relating to health, environment, safety and
security, data privacy and protection, anti-money laundering, anti-corruption,
economic sanctions, trade protection, labor and employment, and tax may be
costly and 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 targets, goals, aspirations,
initiatives, and our public statements and disclosures regarding them,
including those that are related to sustainability matters, may expose us to
risks that may adversely impact our business.
• Breaches in data security and lapses in data privacy as well as
disruptions and other damages to our principal offices, information technology
operations and system networks and failure to keep pace with developments in
technology may adversely impact our business operations, the satisfaction of
our guests and crew and may lead to reputational damage.
• The loss of key team members, our inability to recruit or retain
qualified shoreside and shipboard team members and increased labor costs could
have an adverse effect on our business and results of operations.
• Increases in fuel prices, changes in the types of fuel consumed
and availability of fuel supply may adversely impact our scheduled itineraries
and costs.
• We rely on supply chain vendors who are integral to the
operations of our businesses. These vendors and service providers may be
unable to deliver on their commitments, which could negatively impact our
business.
• Fluctuations in foreign currency exchange rates may adversely
impact our financial results.
• Overcapacity and competition in the cruise and land-based
vacation industry may negatively impact our cruise sales, pricing and
destination options.
• Inability to implement our shipbuilding programs and ship
repairs, maintenance and refurbishments may adversely impact our business
operations and the satisfaction of our guests.
• 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.
• Our substantial debt could adversely affect our financial health
and operating flexibility.
The ordering of the risk factors set forth above is not intended to reflect
our indication of priority or likelihood. Additionally, many of these risks
and uncertainties are currently, and in the future may continue to be,
amplified by our substantial debt balance incurred during the pause of our
guest cruise operations. There may be additional risks that we consider
immaterial or which are unknown.
Forward-looking statements should not be relied upon as a prediction of actual
results. Subject to any continuing obligations under applicable law or any
relevant stock exchange rules, we expressly disclaim any obligation to
disseminate, after the date of this document, any updates or revisions to any
such forward-looking statements to reflect any change in expectations or
events, conditions or circumstances on which any such statements are based.
Forward-looking and other statements in this document may also address our
sustainability progress, plans, and goals (including climate change and
environmental-related matters). In addition, historical, current, and
forward-looking sustainability- and climate-related statements may be based on
standards and tools for measuring progress that are still developing, internal
controls and processes that continue to evolve, and assumptions and
predictions that are subject to change in the future and may not be generally
shared.
New Accounting Pronouncements
Refer to Note 1 - "General, Accounting Pronouncements" of the consolidated
financial statements for additional discussion regarding Accounting
Pronouncements.
Critical Accounting Estimates
For a discussion of our critical accounting estimates, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
is included in the Form 10-K.
Seasonality
Our passenger ticket revenues are seasonal. Demand for cruises has been
greatest during our third quarter, which includes the Northern Hemisphere
summer months. This higher demand during the third quarter results in higher
ticket prices and occupancy levels and, accordingly, the largest share of our
operating income is typically earned during this period. Our results are also
impacted by ships being taken out-of-service for planned maintenance, which we
schedule during non-peak seasons. In addition, substantially all of Holland
America Princess Alaska Tours' revenue and operating income is generated from
May through September in conjunction with Alaska's cruise season.
Known Trends and Uncertainties
• We believe the volatility in the price of fuel and foreign
currency exchange rates are reasonably likely to impact our profitability.
• We believe a global minimum tax could affect us in 2026, with
the potential for a one-year deferral. Prior to any mitigating actions, we
believe the annual impact could be approximately $200 million. We continue to
evaluate the impact of these rules and are currently evaluating a variety of
mitigating actions to minimize the impact. The application of the rules
continues to evolve, and its outcome may alter our tax obligations in certain
countries in which we operate.
• We believe the increasing global focus on climate change,
including the reduction of greenhouse gas emissions and new and evolving
regulatory requirements, is reasonably likely to have a material negative
impact on our future financial results. We became subject to the EU ETS on
January 1, 2024, which includes a three-year phase-in period. The impact in
2024 will be approximately $50 million.
Statistical Information
Three Months Ended Nine Months Ended
August 31,
August 31,
2024 2023 2024 2023
Passenger Cruise Days ("PCDs") (in millions) (a) 28.1 25.8 76.0 67.8
Available Lower Berth Days ("ALBDs") (in millions) (b) (c) 25.2 23.7 71.7 68.1
Occupancy percentage (d) 112% 109% 106% 100%
Passengers carried (in millions) 3.9 3.6 10.3 9.3
Fuel consumption in metric tons (in millions) 0.7 0.7 2.2 2.2
Fuel consumption in metric tons per thousand ALBDs 29.5 31.1 31.0 32.3
Fuel cost per metric ton consumed (excluding European Union Allowance) $670 $636 $680 $681
Currencies (USD to 1)
AUD $0.67 $0.66 $0.66 $0.67
CAD $0.73 $0.75 $0.74 $0.74
EUR $1.09 $1.09 $1.08 $1.08
GBP $1.28 $1.27 $1.27 $1.24
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) For the three months ended August 31, 2024 compared to the three
months ended August 31, 2023, we had a 6.2% capacity increase in ALBDs
comprised of a 10% capacity increase in our NAA segment and a 0.7% capacity
decrease in our Europe segment.
Our NAA segment's capacity increase was caused by the following:
• Seabourn 260-passenger capacity ship that entered into service
in July 2023
• Carnival Cruise Line 5,360-passenger capacity ship that entered
into service in December 2023
• Princess Cruises 4,310-passenger capacity ship that entered into
service in February 2024
• Carnival Cruise Line 4,130-passenger capacity ship that was
transferred from Costa Cruises and entered into service in April 2024
Our Europe segment's capacity decrease was caused by the following:
• AIDA Cruises 1,270-passenger capacity ship removed from service
in November 2023
• Costa Cruises 4,240-passenger capacity ship that was transferred
to Carnival Cruise Line in April 2024
The decrease in our Europe segment's capacity was partially offset by a Cunard
2,960-passenger capacity ship that entered into service in May 2024.
For the nine months ended August 31, 2024 compared to the nine months ended
August 31, 2023, we had a 5.3% capacity increase in ALBDs comprised of a 8.2%
capacity increase in our NAA segment and a 0.5% capacity increase in our
Europe segment.
Our NAA segment's capacity increase was caused by the following:
• Carnival Cruise Line 4,090-passenger capacity ship that was
transferred from Costa Cruises and entered into service in May 2023
• Seabourn 260-passenger capacity ship that entered into service
in July 2023
• Carnival Cruise Line 5,360-passenger capacity ship that entered
into service in December 2023
• Princess Cruises 4,310-passenger capacity ship that entered into
service in February 2024
• Carnival Cruise Line 4,130-passenger capacity ship that was
transferred from Costa Cruises and entered into service in April 2024
Our Europe segment's capacity increase was caused by the following:
• The return to service of two ships as part of the completion of
our return to guest cruise operations
• P&O Cruises (UK) 5,280-passenger capacity ship that entered
into service in December 2022
• Cunard 2,960-passenger capacity ship that entered into service
in May 2024
The increase in our Europe segment's capacity was partially offset by the
following:
• Costa Cruises 4,090-passenger capacity ship transferred to
Carnival Cruise Line in March 2023
• AIDA Cruises 1,270-passenger capacity ship removed from service
in November 2023
• Costa Cruises 4,240-passenger capacity ship that was transferred
to Carnival Cruise Line in February 2024
• The Red Sea rerouting as certain ships repositioned without
guests
(d) 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.
Three Months Ended August 31, 2024 ("2024") Compared to Three Months Ended
August 31, 2023 ("2023")
Revenues
Consolidated
Passenger ticket revenues made up 66% of our 2024 total revenues. Passenger
ticket revenues increased by $693 million, or 15%, to $5.2 billion in 2024
from $4.5 billion in 2023.
This increase was caused by:
• $333 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
• $299 million - 6.2% capacity increase in ALBDs
• $114 million - 2.9 percentage point increase in occupancy
These increases were partially offset by decreases of $45 million in air
transportation revenue and other passenger revenue.
The remaining 34% of 2024 total revenues was comprised of onboard and other
revenues, which increased by $349 million, or 15%, to $2.7 billion in 2024
from $2.3 billion in 2023.
This increase was driven by:
• $164 million - 6.2% capacity increase in ALBDs
• $95 million - higher onboard spending by our guests
• $43 million - 2.9 percentage point increase in occupancy
• $23 million - increase in other revenues primarily due to
pre-and post-cruise land package revenues
NAA Segment
Passenger ticket revenues made up 65% of our NAA segment's 2024 total
revenues. Passenger ticket revenues increased by $480 million, or 16%, to
$3.4 billion in 2024 from $3.0 billion in 2023.
This increase was caused by:
• $310 million - 10% capacity increase in ALBDs
• $184 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
• $39 million - 1.5 percentage point increase in occupancy
These increases were partially offset by decreases of $53 million in air
transportation revenue and other passenger revenue.
The remaining 35% of our NAA segment's 2024 total revenues were comprised of
onboard and other revenues, which increased by $275 million, or 17%, to $1.9
billion in 2024 from $1.6 billion in 2023.
This increase was caused by:
• $168 million - 10% capacity increase in ALBDs
• $66 million - higher onboard spending by our guests
• $21 million - 1.5 percentage point increase in occupancy
• $21 million - increase in other revenues primarily due to
pre-and post-cruise land package revenues
Europe Segment
Passenger ticket revenues made up 78% of our Europe segment's 2024 total
revenues. Passenger ticket revenues increased by $221 million, or 14%, to
$1.8 billion in 2024 from $1.6 billion in 2023.
This increase was caused by:
• $148 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
• $75 million - 5.0 percentage point increase in occupancy
The remaining 22% of our Europe segment's 2024 total revenues were comprised
of onboard and other revenues, which increased by $50 million, or 11%, to $515
million in 2024 from $465 million in 2023.
This increase was caused by:
• $29 million - higher onboard spending by our guests
• $22 million - 5.0 percentage point increase in occupancy
Costs and Expenses
Consolidated
Operating expenses increased by $383 million, or 9.8%, to $4.3 billion in
2024 from $3.9 billion in 2023.
This increase was driven by:
• $270 million - 6.2% capacity increase in ALBDs
• $81 million - higher commissions, transportation costs, and
other expenses driven by higher commission on increased ticket pricing and an
increase in the number of guests
• $48 million - higher onboard and other cost of sales driven by
higher onboard revenues
These increases were partially offset by a $23 million change in pension
valuation.
Selling and administrative expenses increased by $50 million, or 7.0%, to
$763 million in 2024 from $713 million in 2023.
Depreciation and amortization expenses increased by $55 million, or 9.3%, to
$651 million in 2024 from $596 million in 2023.
NAA Segment
Operating expenses increased by $339 million, or 13%, to $3.0 billion in 2024
from $2.7 billion in 2023.
This increase was caused by:
• $278 million - 10% capacity increase in ALBDs
• $44 million - higher commissions, transportation costs, and
other expenses driven by higher commission on increased ticket pricing and an
increase in the number of guests
• $31 million - higher onboard and other cost of sales driven by
higher onboard revenues
Selling and administrative expenses increased by $35 million, or 8.3%, to
$455 million in 2024 from $420 million in 2023.
Depreciation and amortization expenses increased by $47 million, or 12%, to
$424 million in 2024 from $377 million in 2023. This increase was driven by
a 10% capacity increase in ALBDs, representing $39 million.
Europe Segment
Operating expenses increased by $42 million or 3.7%, to $1.2 billion in 2024
from $1.1 billion 2023.
This increase was driven by:
• $36 million - higher commissions, transportation costs, and
other expenses driven by higher commission on increased ticket pricing and an
increase in the number of guests.
• $17 million - higher onboard and other cost of sales driven by
higher onboard revenues
These increases were partially offset by a $23 million change in pension
valuation.
Selling and administrative expenses increased by $24 million, or 12%, to $223
million in 2024 from $199 million in 2023. This increase was driven by higher
compensation expense, increased investment in advertising and higher
information technology expense.
Depreciation and amortization expenses increased by $4 million, or 2.6%, to
$173 million in 2024 from $168 million in 2023.
Operating Income
Our consolidated operating income increased by $554 million to $2.2 billion in
2024 from $1.6 billion in 2023. Our NAA segment's operating income increased
by $335 million to $1.4 billion in 2024 from $1.1 billion in 2023, and our
Europe segment's operating income increased by $201 million to $770 million in
2024 from $569 million in 2023. These changes were primarily due to the
reasons discussed above.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, decreased by $87 million, or
17%, to $431 million in 2024 from $518 million in 2023. The decrease was
caused by a decrease in total debt and lower average interest rates.
Debt extinguishment and modification costs decreased by $68 million, or 84%,
to $13 million in 2024 from $81 million in 2023 as a result of debt
transactions occurring during the respective periods.
Nine Months Ended August 31, 2024 ("2024") Compared to Nine Months Ended
August 31, 2023 ("2023")
Revenues
Consolidated
Passenger ticket revenues made up 66% of our 2024 total revenues. Passenger
ticket revenues increased by $2.1 billion, or 19%, to $12.6 billion in 2024
from $10.6 billion in 2023.
This increase was caused by:
• $810 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
• $666 million - 6.4 percentage point increase in occupancy
• $586 million - 5.3% capacity increase in ALBDs
• $36 million - net favorable foreign currency translational
impact
The remaining 34% of 2024 total revenues was comprised of onboard and other
revenues, which increased by $834 million, or 15%, to $6.5 billion in 2024
from $5.6 billion in 2023.
This increase was driven by:
• $343 million - 5.3% capacity increase in ALBDs
• $267 million - 6.4 percentage point increase in occupancy
• $161 million - higher onboard spending by our guests
NAA Segment
Passenger ticket revenues made up 64% of our NAA segment's 2024 total
revenues. Passenger ticket revenues increased by $1.3 billion, or 19%, to
$8.2 billion in 2024 from $6.9 billion in 2023.
This increase was caused by:
• $567 million - 8.2% capacity increase in ALBDs
• $566 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
• $223 million - 3.4 percentage point increase in occupancy
The remaining 36% of our NAA segment's 2024 total revenues were comprised of
onboard and other revenues, which increased by $595 million, or 15%, to $4.7
billion in 2024 from $4.1 billion in 2023.
This increase was driven by:
• $338 million - 8.2% capacity increase in ALBDs
• $133 million - 3.4 percentage point increase in occupancy
• $117 million - higher onboard spending by our guests
Europe Segment
Passenger ticket revenues made up 77% of our Europe segment's 2024 total
revenues. Passenger ticket revenues increased by $784 million, or 21%, to
$4.5 billion in 2024 from $3.7 billion in 2023.
This increase was driven by:
• $442 million - 11 percentage point increase in occupancy
• $244 million - increase in passenger ticket revenues driven by
continued strength in demand, which drove ticket prices higher
• $40 million - net favorable foreign currency translational
impact
The remaining 23% of our Europe segment's 2024 total revenues were comprised
of onboard and other revenues, which increased by $194 million, or 17%, to
$1.3 billion in 2024 from $1.1 billion in 2023.
This increase was driven by:
• $134 million - 11 percentage point increase in occupancy
• $44 million - higher onboard spending by our guests
Costs and Expenses
Consolidated
Operating expenses increased by $1.1 billion, or 10%, to $11.8 billion in
2024 from $10.7 billion in 2023.
This increase was caused by:
• $603 million - 5.3% capacity increase in ALBDs
• $298 million - higher commissions, transportation costs, and
other expenses driven by higher commission on increased ticket pricing and an
increase in the number of guests
• $130 million - 6.4 percentage point increase in occupancy
• $126 million - higher onboard and other cost of sales driven by
higher onboard revenues
• $41 million - nonrecurrence of a gain on sale of one NAA segment
ship in 2023
• $33 million - higher port expenses
• $29 million - net unfavorable foreign currency translational
impact
These increases were partially offset by:
• $32 million - lower fuel price and consumption
• $23 million - change in pension valuation
Selling and administrative expenses increased by $205 million, or 9.5%, to
$2.4 billion in 2024 from $2.2 billion in 2023.
Depreciation and amortization expenses increased by $123 million, or 7.0%, to
$1.9 billion in 2024 from $1.8 billion in 2023.
NAA Segment
Operating expenses increased by $851 million, or 12%, to $8.0 billion in 2024
from $7.1 billion in 2023.
This increase was caused by:
• $587 million - 8.2% capacity increase in ALBDs
• $148 million - higher commissions, transportation costs, and
other expenses driven by higher commission on increased ticket pricing and an
increase in the number of guests
• $77 million - higher onboard and other cost of sales driven by
higher onboard revenues
• $43 million - 3.4 percentage point increase in occupancy
• $41 million - nonrecurrence of a gain on sale of one NAA segment
ship in 2023
• $30 million - higher repair and maintenance expenses (including
dry-dock expenses)
These increases were partially offset by $39 million of lower fuel price and
consumption.
Selling and administrative expenses increased by $126 million, or 10%, to $1.4
billion in 2024 from $1.3 billion in 2023. This increase was driven by higher
compensation expense, increased investment in advertising and higher
information technology expense.
Depreciation and amortization expenses increased by $122 million, or 11%, to
$1.2 billion in 2024 from $1.1 billion in 2023.
This increase was caused by:
• $92 million - 8.2% capacity increase in ALBDs
• $31 million - fleet enhancements and investments in shoreside
assets
Europe Segment
Operating expenses increased by $249 million, or 7.5%, to $3.6 billion in 2024
from $3.3 billion in 2023.
This increase was caused by:
• $150 million - higher commissions, transportation costs, and
other expenses driven by an increase in the number of guests
• $86 million - 11 percentage point increase in occupancy
• $49 million - higher onboard and other cost of sales driven by
higher onboard revenues
• $32 million - net unfavorable foreign currency translational
impact
These increases were partially offset by:
• $23 million - lower repair and maintenance expenses (including
dry-dock expenses)
• $23 million - change in pension valuation
Selling and administrative expenses increased by $52 million, or 8.3%, to $687
million in 2024 from $634 million in 2023.
Depreciation and amortization expenses decreased by $5 million, or 1.1%, to
$501 million in 2024 from $506 million in 2023.
Operating Income
Our consolidated operating income increased by $1.4 billion to $3.0 billion in
2024 from $1.6 billion in 2023. Our NAA segment's operating income increased
by $781 million to $2.2 billion in 2024 from $1.5 billion in 2023, and our
Europe segment's operating income increased by $682 million to $1.1 billion in
2024 from $0.4 billion in 2023. These changes were primarily due to the
reasons discussed above.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, decreased by $248 million, or
16%, to $1.4 billion in 2024 from $1.6 billion in 2023. The decrease was
substantially all due to a decrease in total debt and lower average interest
rates.
Debt extinguishment and modification costs decreased by $33 million, or 30%,
to $78 million in 2024 from $112 million in 2023 as a result of debt
transactions occurring during the respective periods.
Liquidity, Financial Condition and Capital Resources
As of August 31, 2024, we had $4.5 billion of liquidity including
$1.5 billion of cash and cash equivalents and $3.0 billion of borrowings
available under our Revolving Facility. We will continue to pursue various
opportunities to repay portions of our existing indebtedness and refinance
future debt maturities to extend maturity dates and reduce interest expense.
Refer to Note 3 - "Debt" of the consolidated financial statements and Funding
Sources below for additional details.
We had a working capital deficit of $8.6 billion as of August 31, 2024
compared to a working capital deficit of $6.2 billion as of November 30,
2023. The increase in working capital deficit was caused by an increase in
customer deposits, an increase in accrued liabilities and other, a decrease in
cash and cash equivalents and a decrease in prepaid expenses and other. We
operate with a substantial working capital deficit. This deficit is mainly
attributable to the fact that, under our business model, substantially all of
our passenger ticket receipts are collected in advance of the applicable
sailing date. These advance passenger receipts generally remain a current
liability on our balance sheet until the sailing date. The cash generated from
these advance receipts is used interchangeably with cash on hand from other
sources, such as our borrowings and other cash from operations. The cash
received as advanced receipts can be used to fund operating expenses, pay down
our debt, make long-term investments or any other use of cash. Included within
our working capital are $6.4 billion and $6.1 billion of customer deposits as
of August 31, 2024 and November 30, 2023, 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
capped reserve fund in cash. In addition, we have a relatively low level of
accounts receivable and limited investment in inventories.
Sources and Uses of Cash
Operating Activities
Our business provided $5.0 billion of net cash flows from operating activities
during the nine months ended August 31, 2024, an increase of $1.7 billion,
compared to $3.4 billion provided for the same period in 2023. This was
caused by an increase in cash provided by the release of $0.8 billion in
credit card reserve funds (included in the change in prepaid expenses and
other assets) and our net income position of $1.6 billion in 2024 compared to
our net loss position of $26 million for the same period in 2023, partially
offset by a decrease in other working capital changes.
Investing Activities
During the nine months ended August 31, 2024, net cash used in investing
activities was $4.0 billion. This was caused by capital expenditures of
$4.0 billion primarily attributable to the delivery of a 5,360 and a
4,310-passenger capacity NAA segment ships and one 2,960-passenger capacity
Europe segment ship.
During the nine months ended August 31, 2023, net cash used in investing
activities was $2.3 billion. This was driven by:
• Capital expenditures of $2.6 billion primarily attributable to
the delivery of one 5,280-passenger capacity Europe segment ship and one
260-passenger capacity NAA segment ship
• Proceeds from sales of ships of $260 million relating to one
2,700-passenger capacity Europe segment ship, one 1,270-passenger capacity
Europe segment ship and one 460-passenger capacity NAA segment ship
Financing Activities
During the nine months ended August 31, 2024, net cash used in financing
activities of $2.0 billion was driven by:
• Repayments of $4.8 billion of long-term debt
• Debt issuance costs of $122 million
• Debt extinguishment costs of $41 million
• Issuances of $3.0 billion of long-term debt
During the nine months ended August 31, 2023, net cash used in financing
activities of $4.2 billion was driven by:
• Repayments of $200 million of short-term borrowings
• Repayments of $6.8 billion of long-term debt
• Debt issuance costs of $116 million
• Debt extinguishment costs of $67 million
• Issuances of $3.0 billion of long-term debt
• Proceeds from issuance of $22 million of Carnival Corporation
common stock and purchases of $20 million of Carnival plc ordinary shares
under our Stock Swap Program
Funding Sources
As of August 31, 2024, we had $4.5 billion of liquidity including
$1.5 billion of cash and cash equivalents and $3.0 billion of borrowings
available under our Revolving Facility. Refer to Note 3 - "Debt" of the
consolidated financial statements for additional discussion. In addition, we
had $3.4 billion of undrawn export credit facilities to fund ship deliveries
planned through 2028. 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) 2024 2025 2026 2027 2028
Future export credit facilities at August 31, 2024 $- $0.8 $- $1.3 $1.3
Our export credit facilities contain various financial covenants as described
in Note 3 - "Debt". At August 31, 2024, we were in compliance with the
applicable covenants under our debt agreements.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements, including guarantee
contracts, retained or contingent interests, certain derivative instruments
and variable interest entities that either have, or are reasonably likely to
have, a current or future material effect on our consolidated financial
statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
For a discussion of our hedging strategies and market risks, see the
discussion below and Note 10 - "Fair Value Measurements, Derivative
Instruments and Hedging Activities and Financial Risks" in our consolidated
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations within our Form 10-K. There have been no
material changes to our exposure to market risks since the date of our 2023
Form 10-K.
Interest Rate Risks
The composition of our debt, interest rate swaps and cross currency swaps, was
as follows:
August 31, 2024
Fixed rate 62%
EUR fixed rate 23%
Floating rate 3%
EUR floating rate 11%
Item 4. Controls and Procedures.
A. Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable
assurance that information required to be disclosed by us in the reports that
we file or submit under the Securities Exchange Act of 1934, is recorded,
processed, summarized and reported, within the time periods specified in the
U.S. Securities and Exchange Commission's rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us in our
reports that we file or submit under the Securities Exchange Act of 1934 is
accumulated and communicated to our management, including our principal
executive and principal financial officers, or persons performing similar
functions, as appropriate, to allow timely decisions regarding required
disclosure.
Our President, Chief Executive Officer and Chief Climate Officer and our Chief
Financial Officer and Chief Accounting Officer have evaluated our disclosure
controls and procedures and have concluded, as of August 31, 2024, that they
are effective to provide a reasonable level of assurance, as described above.
B. Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting
during the quarter ended August 31, 2024 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
"Regulatory or Governmental Inquiries and Investigations," are incorporated in
this "Legal Proceedings" section by reference.
Item 1A. Risk Factors.
The risk factors that affect our business and financial results are discussed
in "Item 1A. Risk Factors," included in the Form 10-K, and there has been no
material change to these risk factors since the Form 10-K filing. These risks
should be carefully considered, and could materially and adversely affect our
results, operations, outlooks, plans, goals, growth, reputation, cash flows,
liquidity, and stock price. Our business also could be affected by risks that
we are not presently aware of or that we currently consider immaterial to our
operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
A. Stock Swap Program
Our Stock Swap Program allows us to realize a net cash benefit when Carnival
Corporation common stock is trading at a premium to the price of Carnival plc
ordinary shares. Under the Stock Swap Program, we may elect to offer and sell
shares of Carnival Corporation common stock at prevailing market prices in
ordinary brokers' transactions and repurchase an equivalent number of Carnival
plc ordinary shares in the UK market.
Under the Stock Swap Program effective June 2021, the Boards of Directors
authorized the sale of up to $500 million of shares of Carnival Corporation
common stock in the U.S. market and the repurchase of an equivalent number of
Carnival plc ordinary shares.
We may in the future implement a program to allow us to realize 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. Since the beginning of the Stock Swap Program, first authorized in
June 2021, we have sold 17.2 million shares of Carnival Corporation common
stock and repurchased the same amount of Carnival plc ordinary shares,
resulting in net proceeds of $29 million. During the three months ended
August 31, 2024, there were no sales or repurchases under the Stock Swap
Program. During the three months ended August 31, 2024, no shares of Carnival
Corporation common stock or Carnival plc ordinary shares were repurchased.
Item 5. Other Information.
C. Trading Plans
During the quarter ended August 31, 2024, no director or Section 16 officer
adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1
trading arrangements (in each case, as defined in Item 408(a) of Regulation
S-K).
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