REG - Carnival PLC - Final Results
26/01/2024 16:00
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RNS Number : 1105B Carnival PLC 26 January 2024
January 26, 2024
RELEASE OF CARNIVAL CORPORATION & PLC JOINT ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED NOVEMBER 30, 2023.
Carnival Corporation & plc announced its fourth quarter results of
operations in its earnings release issued on December 21, 2023. Carnival
Corporation & plc is hereby announcing that today it has filed its joint
Annual Report on Form 10-K ("Form 10-K") with the U.S. Securities and Exchange
Commission ("SEC") containing the Carnival Corporation & plc 2023 annual
consolidated financial statements, which reported results are unchanged from
those previously announced on December 21, 2023.
The information included in the Form 10-K (Schedule A) has been prepared in
accordance with SEC rules and regulations. The Carnival Corporation & plc
consolidated financial statements contained in the Form 10-K have been
prepared in accordance with generally accepted accounting principles in the
United States of America ("U.S. GAAP").
Schedule A contains information on Carnival Corporation and Carnival plc's
sales and purchases of their equity securities and use of proceeds from such
sales, Carnival Corporation & plc's management's discussion and analysis
of financial conditions and results of operation, and the Carnival
Corporation & plc consolidated financial statements as of and for the year
ended November 30, 2023.
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 consolidated financial statements.
MEDIA
CONTACT
INVESTOR RELATIONS CONTACT
Jody
Venturoni Beth
Roberts
001 469 797
6380
001 305 406 4832
The Form 10-K is available for viewing on the SEC website at www.sec.gov under
Carnival Corporation or Carnival plc or the Carnival Corporation & plc
website at www.carnivalcorp.com or www.carnivalplc.com. A copy of the Form
10-K has been submitted to the National Storage Mechanism and will shortly be
available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. Additional
information can be obtained via Carnival Corporation & plc's website
listed above or by writing to Carnival plc at Carnival House, 100 Harbour
Parade, Southampton, SO15 1ST, United Kingdom.
Carnival Corporation & plc is the largest global cruise company, and among
the largest leisure travel companies, with a portfolio of world-class cruise
lines - 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
Market for Registrants' Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
A. Market Information
Carnival Corporation common stock, together with paired trust shares of
beneficial interest in the P&O Princess Special Voting Trust, which holds
a Special Voting Share of Carnival plc, is traded on the NYSE under the symbol
"CCL." Carnival plc ordinary shares trade on the London Stock Exchange under
the symbol "CCL." Carnival plc American Depositary Shares ("ADSs"), each one
of which represents one Carnival plc ordinary share, are traded on the NYSE
under the symbol "CUK." The depositary for the ADSs is JPMorgan Chase Bank,
N.A.
B. Holders
As of January 11, 2024, there were 2,699 holders of record of Carnival
Corporation common stock and 28,977 holders of record of Carnival plc ordinary
shares and 414 holders of record of Carnival plc ADSs.
C. Dividends
We do not expect to pay dividends on Carnival Corporation common stock and
Carnival plc ordinary shares for at least the next few years.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
2023 Executive Overview
We consistently set records and achieved other significant milestones during
this past year, including:
• Full year revenues hit an all-time high of $21.6 billion.
• For the first time since the resumption of guest cruise
operations, net income was positive during the third quarter, generating $1.07
billion.
• We entered 2024 with our best booked position on record, for
both price and occupancy.
• Total customer deposits for each quarter throughout 2023
consistently surpassed the previous quarterly records.
• We reduced our debt balance by $4.6 billion from its peak in the
first quarter of 2023 and ended the year with $5.4 billion of liquidity.
The strengthening demand environment across all our brands contributed to our
revenue growth as we drove improvements in ticket prices while closing the
double-digit occupancy gap from the start of the year and reaching historical
occupancy levels for the second half of 2023.
We believe our advertising investments and other demand generation efforts
during the past 18 months have successfully elevated awareness and
consideration for our brands, leading to record booking levels and revenue
results. In addition, these efforts enabled us to attract more new-to cruise
and more new-to brand guests compared to 2019. We are building momentum in
closing the value gap to land-based alternatives, capturing over 3.5 million
new-to cruise guests in 2023 and remain well-positioned to take share from
land-based alternatives.
We continue to take actions to further stimulate demand and maintain our
momentum through 2024 and beyond. We are focused on ongoing improvements
across the commercial space as we further rollout advancements to our yield
management tools and lead generation techniques, continue to invest in sales
and sales support, and build on already strong relationships with our trade
partners. This is complemented by our strategy to pull forward the sale of
onboard items through bundled product offerings and pre-cruise sales.
We are also not losing sight of our expense base, as we have worked to
mitigate the impacts of a high inflation environment by leveraging our scale
through cost optimization initiatives. We have made investments that we expect
to increase our cost efficiencies in the future, including successfully
installing SpaceX's Starlink, next generation internet across our fleet, which
is expected to drive more than a 20% reduction in cost per megabit in 2024. In
addition, we expect it will increase our bandwidth pipeline, resulting in both
improved guest experience and higher onboard revenues. We also launched
Maritime Asset Strategy Transformation ("MAST"), a centralized system
developed to optimize equipment and machinery management across our brands and
our fleet.
During 2023, we continued to work aggressively to reduce our environmental
footprint and fuel consumption. Our deep commitment resulted in
industry-leading fuel efficiency and a more than 10% reduction in absolute GHG
emissions compared to our peak year of 2011, despite capacity growth of 30%
over the same period. We also exceeded our shore power capability goal and our
fleet now has twice as many ships ready to plug into shore power as there are
ports currently able to provide it.
As a result of our fleet optimization efforts, our fleet is now one year
younger than prior to pausing our guest cruise operations four years ago.
During 2023 alone we benefited from the introduction of three fantastic new
ships including Carnival Celebration and Arvia, leveraging the scale of our
popular and exceptionally efficient series of excel-class ships, and Seabourn
Pursuit, our second luxury expedition ship. In addition, Carnival Cruise Line
welcomed Carnival Venezia, which was transferred from Costa, becoming the
first ship as part of Carnival's Fun Italian Style™ platform. We will
continue to optimize our brand portfolio by transferring Costa Firenze to
Carnival Cruise Line in 2024.
We also made meaningful progress in other strategic asset projects. We began
construction on Celebration Key in Grand Bahama, which will be the largest and
closest exclusive destination in our portfolio. While not expected to open
until summer 2025, we have begun generating consumer awareness and excitement
around this fantastic upcoming destination. We also started the process for a
significant upsize in guest traffic at Half Moon Cay, our exclusive and
beautiful pristine island destination in The Bahamas, with the creation of a
pier-side berth that can accommodate our largest vessels. In addition, we
commenced work with our Grand Bahama Shipyard partners on the construction of
two floating docks, one of which will have the largest lifting capacity in the
world. Together, these strategic investments are expected to significantly
benefit us by helping to reduce travel time, further reducing our fuel
consumption and preserving ship revenue days.
Our significantly improved 2023 cash from operations enabled us to notably
reduce the substantial debt balance incurred during the pause of guest cruise
operations. In 2023, we made sizeable debt prepayments and ended the year with
over $5 billion of liquidity. Looking forward, we expect to continue to
strategically refinance and prepay debt, leveraging our improving operating
cash flow and the return of substantially all of the remaining credit card
reserves during the first quarter of 2024.
In addition, with nearly two-thirds of 2024 on the books already, we are well
positioned to achieve another year of record revenues. This, combined with
excess liquidity, is expected to enable us to continue actively managing down
debt and reducing interest expense, leaving us on our path back to achieving
investment grade credit ratings and higher return on invested capital.
This has been a truly remarkable year, and we have come a long way in an
incredibly short amount of time. We delivered unforgettable happiness to over
12 million guests this year and look forward to continuing to provide our
guests with extraordinary cruise vacations in 2024, while honoring the
integrity of every ocean we sail, place we visit and life we touch.
New Accounting Pronouncements
Refer to our consolidated financial statements for further information on
Accounting Pronouncements.
Critical Accounting Estimates
Our critical accounting estimates are those we believe require our most
significant judgments about the effect of matters that are inherently
uncertain. A discussion of our critical accounting estimates, the underlying
judgments and uncertainties used to make them and the likelihood that
materially different estimates would be reported under different conditions or
using different assumptions is as follows:
Liquidity and Other Uncertainties
We make several critical accounting estimates with respect to our liquidity.
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:
• Expected increases in revenue in 2024 as compared to 2023
• Expected prepayment of debt
• Continued stabilization of inflationary pressures on costs
compared to 2023
• Fuel prices at or around November 2023 year-end prices
In addition, we make certain assumptions about new ship deliveries,
improvements on existing ships as well as other capital expenditures, removals
of existing ships, and consider the future export credit financings that are
associated with the new ship deliveries.
We have a substantial debt balance incurred during the pause in guest cruise
operations and require a significant amount of liquidity or cash provided by
operating activities to service our debt. We will continue to pursue various
opportunities to refinance future debt maturities to extend maturity dates and
reduce interest expense by repaying some of our existing indebtedness.
Ship Accounting
We make several critical accounting estimates with respect to our ship
accounting including ship improvement costs, estimated useful lives and
residual values.
We account for ship improvement costs, including replacements of certain
significant components and parts, by capitalizing those costs that we believe
add value to our ships and have a useful life greater than one year and
depreciating those improvements over their estimated remaining useful life.
The costs of repairs and maintenance, including those incurred when a ship is
taken out-of-service for scheduled maintenance, and minor improvement costs
and expenses, are charged to expense as incurred. If we change our assumptions
in making our determinations as to whether improvements to a ship add value,
the amounts we expense each year as repair and maintenance expense could
increase, which would be partially offset by a decrease in depreciation
expense, resulting from a reduction in capitalized costs.
In addition, the specifically identified or estimated cost and accumulated
depreciation of previously capitalized ship components are written-off upon
retirement, which may result in a loss on disposal that is also included in
other operating expenses. We do not have cost segregation studies performed to
specifically componentize our ships. In addition, since we do not separately
componentize our ships, we do not identify and track depreciation of original
ship components. Therefore, we typically have to estimate the net book value
of components that are retired, based primarily upon their replacement cost,
their age and their original estimated useful lives. Given the large size and
complexity of our ships, ship accounting estimates require considerable
judgment and are inherently uncertain.
In order to compute our ships' depreciation expense, we apply judgment to
determine their useful lives as well as their residual values. We have
estimated our ships' useful lives at 30 years and residual values at 15% of
our original ship cost. Our ships' useful life and residual value estimates
take into consideration the estimated weighted-average useful lives of the
ships' major component systems, such as hull, superstructure, main electric,
engines and cabins. We also take into consideration the impact of
technological changes, historical useful lives of similarly-built ships,
long-term cruise and vacation market conditions and regulatory changes,
including those related to the environment and climate change. We determine
the residual value of our ships based on our long-term estimates of their
resale value at the end of their useful lives to us but before the end of
their physical and economic lives to others, historical resale values of our
and other cruise ships as well as our expectations of the long-term viability
of the secondary cruise ship market. We review estimated useful lives and
residual values for reasonableness whenever events or circumstances
significantly change. Since the pause of our guest cruise operations, we have
disposed of ships for amounts significantly below their book values.
Management has estimated that this trend will normalize in the coming years.
The IMO recently adopted its 2023 Strategy on Reduction of GHG Emissions from
Ships that would require international shipping to reduce total GHG emissions
on a well-to-wake basis to net zero by or around 2050. In addition, the
framework introduces checkpoints in 2030 and 2040 that seek reductions in the
total GHG emissions from international shipping by at least 20% and 70%,
respectively, compared to 2008. The EU has also proposed several regulations
that will likely impact the cost of fossil fuels and has recently adopted the
inclusion of maritime shipping in the EU's Emission Trading System. We have
established Climate Action Goals, which include a GHG intensity reduction goal
of 20% by 2030 from the 2019 baseline and pursuing net zero emissions by 2050.
Given a 30-year estimated useful life for our ships, our most recently
delivered vessels' lives will extend beyond this 2050 date. Fossil fuels are
currently the only viable option for our industry and it is not clear when
alternative fuels or other technologies will be commercially viable. To
provide a path to net zero emissions, alternative low GHG emission fuels will
be necessary for the maritime industry; however, there are significant supply
challenges that must be resolved before viability is reached. We are closely
monitoring technology developments and partnering with key organizations on
research and development to support our sustainability goals and aspirations.
Our fleet's engines are capable of being modified for use with certain
alternative fuels and we have completed tests on the use of marine biofuel
blends on certain ships in our fleet. In addition, and in support of our
Climate Action Goals, we invest in technologies, including the use of LNG
powered cruise ships, the installation of Advanced Air Quality Systems on
board our ships to aid in the reduction of sulfur emissions, the use of shore
power, enabling ships to use shoreside electric power where available while in
port and various other efficiency related upgrades intended to reduce our
emissions. It is uncertain how recently adopted, proposed and possible future
regulatory changes related to the environment and climate change and our
pursuit of net zero emissions by 2050, may impact our ships' useful lives and
residual values and the impact is dependent on future regulatory actions and
technological advances. As of November 30, 2023, management concluded that
there were no changes in our ship useful lives and residual value estimates.
If materially different conditions existed, or if we materially changed our
assumptions of ship useful lives and residual values, then our depreciation
expense, loss on retirement of ship components and net book value of our ships
would be materially different. Our 2023 ship depreciation expense would have
increased by approximately:
• $49 million assuming we had reduced our estimated 30-year ship
useful life estimate by one year at the time we took delivery or acquired each
of our ships
• $245 million assuming we had estimated our ships to have no
residual value
We believe that the estimates we made for ship accounting purposes are
reasonable and our methods are consistently applied in all material respects
and result in depreciation expense that is based on a rational and systematic
method to equitably allocate the costs of our ships to the periods during
which we use them.
Valuation of Ships
Impairment reviews of our ships require us to make significant estimates. We
evaluate ship asset impairments at the individual ship level which is the
lowest level for which identifiable cash flows are largely independent of the
cash flows of other assets and liabilities. We review our ships for impairment
whenever events or circumstances indicate that the carrying value of a ship
may not be recoverable. If estimated future cash flows are less than the
carrying value of a ship, an impairment charge is recognized to the extent its
carrying value exceeds its estimated fair value. Where estimated future cash
flows are used to estimate the recoverable value of a ship, the cash flows
include estimated regulatory costs, including those related to proposed
regulations, which are likely to impact costs and capital expenditures,
including those expected to meet our 2030 Climate Action Goals.
The estimation of a ship's fair value includes numerous assumptions that are
subject to various risks and uncertainties. The principal assumption used in
determining the fair value of these ships was the estimated sales proceeds.
We determined the fair value of these ships based on their respective
estimated selling values, for those ships expected to be disposed of, or
estimated discounted future cash flows and comparable market transactions.
Refer to our consolidated financial statements for additional discussion of
our property and equipment policy and ship impairment reviews.
We believe that we have made reasonable estimates.
Contingencies
We periodically assess the potential liabilities related to any lawsuits or
claims brought against us, as well as for other known unasserted claims,
including environmental, legal, regulatory and guest and crew matters. While
it is typically very difficult to determine the timing and ultimate outcome of
these matters, we use our best judgment to determine the appropriate amounts
to record in our consolidated financial statements.
We accrue a liability and establish a reserve when we believe a loss is
probable and the amount of the loss can be reasonably estimated. In assessing
probable losses, we make estimates of the amount of probable insurance
recoveries, if any, which are recorded as assets where appropriate. Such
accruals and reserves are typically based on developments to date,
management's estimates of the outcomes of these matters, our experience in
contesting, litigating and settling other similar matters, historical claims
experience, actuarially determined estimates of liabilities and any related
insurance coverage.
Given the inherent uncertainty related to the eventual outcome of these
matters and potential insurance recoveries, it is possible that all or some of
these matters may be resolved for amounts materially different from any
provisions or disclosures that we may have made. In addition, as new
information becomes available, we may need to reassess the amount of asset or
liability that needs to be accrued related to our contingencies. All such
changes in our estimates could materially impact our results of operations and
financial position.
Refer to our consolidated financial statements for additional discussion of
contingencies.
Known Trends and Uncertainties
• We believe the volatility in the cost of fuel and increases in
other related costs are reasonably likely to continue to impact our
profitability in both the short and long-term.
• We believe inflation and interest rates are reasonably likely to
continue 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 GHG 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 Emission Trading Scheme
("ETS") on January 1, 2024, which includes a three-year phase-in period. We
estimate the impact in 2024 to be approximately $51 million based on a
European Union Allowance cost of $75 per metric ton of emissions. Refer to
XIX. Governmental Regulations.
• We believe that the instability in the Red Sea region currently
impacting shipping could have an impact on our results of operations.
Results of Operations
We have historically earned substantially all of our cruise revenues from the
following:
• Sales of passenger cruise tickets and, in some cases, the sale of air
and other transportation to and from airports near our ships' home ports and
cancellation fees. We also collect fees, taxes and other charges from our
guests. The cruise ticket price typically includes the following:
• Accommodations
• Most meals, including snacks at numerous venues
• Access to amenities such as swimming pools, water slides, water
parks, whirlpools, a health club and sun decks
• Child care and supervised youth programs
• Entertainment, such as theatrical and comedy shows, live music
and nightclubs
• Visits to multiple destinations
• Sales of onboard goods and services not included in the cruise ticket
price. This generally includes the following:
• Beverage sales • Internet and communication services
• Casino gaming • Full service spas
• Shore excursions • Specialty restaurants
• Retail sales • Art sales
• Photo sales • Laundry and dry cleaning services
These goods and services are provided either directly by us or by independent
concessionaires, from which we receive either a percentage of their revenues
or a fee. Concession revenues do not have direct expenses because the costs
and services incurred for concession revenues are borne by our
concessionaires. In 2023, we earned 34% of our cruise revenues from onboard
and other revenue goods and services.
We earn our tour and other revenues from our hotel and transportation
operations and other revenues.
We incur cruise operating expenses for the following:
• The costs of passenger cruise bookings, which include travel agent
commissions, cost of air and other transportation, port fees, taxes, and
charges that directly vary with guest head counts and credit and debit card
fees
• Onboard and other cruise costs, which include the costs of beverage
sales, costs of shore excursions, costs of retail sales, internet and
communication costs, credit and debit card fees, other onboard costs, costs of
cruise vacation protection programs and pre- and post-cruise land packages
• Payroll and related costs, which include the costs of officers and crew
in bridge, engineering and hotel operations. Substantially all costs
associated with our shoreside personnel are included in selling and
administrative expenses
• Fuel costs, which include fuel delivery costs
• Food costs, which include both our guest and crew food costs
• Other ship operating expenses, which include port costs that do not vary
with guest head counts; repairs and maintenance, including minor improvements
and dry-dock expenses; hotel costs; entertainment; gains and losses on ship
sales; ship impairments; freight and logistics; insurance premiums and all
other ship operating expenses
We incur tour and other costs and expenses for our hotel and transportation
operations and other expenses.
Statistical Information
Years Ended November 30,
2023 2022 2021
Passenger Cruise Days ("PCDs") (in millions) (a) 91.4 54.6 8.2
Available Lower Berth Days ("ALBDs") (in millions) (b) 91.3 72.5 14.6
Occupancy percentage (c) 100% 75% 56%
Passengers carried (in millions) 12.5 7.7 1.2
Fuel consumption in metric tons (in millions) 2.9 2.6 1.3
Fuel consumption in metric tons per thousand ALBDs 32.1 36.1 (d)
Fuel cost per metric ton consumed $701 $830 $515
Currencies (USD to 1)
AUD $0.66 $0.70 $0.75
CAD $0.74 $0.77 $0.80
EUR $1.08 $1.06 $1.19
GBP $1.24 $1.25 $1.38
Notes to Statistical Information
(a) PCD represents the number of cruise passengers on a voyage multiplied
by the number of revenue-producing ship operating days for that voyage.
(b) ALBD is a standard measure of passenger capacity for the period that
we use to approximate rate and capacity variances, based on consistently
applied formulas that we use to perform analyses to determine the main
non-capacity driven factors that cause our cruise revenues and expenses to
vary. ALBDs assume that each cabin we offer for sale accommodates two
passengers and is computed by multiplying passenger capacity by
revenue-producing ship operating days in the period.
(c) Occupancy, in accordance with cruise industry practice, is calculated
using a numerator of PCDs and a denominator of ALBDs, which assumes two
passengers per cabin even though some cabins can accommodate three or more
passengers. Percentages in excess of 100% indicate that on average more than
two passengers occupied some cabins.
(d) Fuel consumption in metric tons per thousand ALBDs for 2021 is not
meaningful.
2023 Compared to 2022
The discussion below compares the results of operations for the year ended
November 30, 2023 to the year ended November 30, 2022. You should read this
discussion in conjunction with the consolidated financial statements and the
notes thereto included elsewhere in this annual report. For a comparison of
the Company's results of operations for the year ended November 30, 2022 to
the year ended November 30, 2021, see "Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
Annual Report on Form 10-K for the year ended November 30, 2022, which was
filed with the U.S. Securities and Exchange Commission on January 27, 2023.
Results of Operations
Consolidated
Years Ended November 30,
(in millions) 2023 2022 Change
Revenues
Passenger ticket $14,067 $7,022 $7,045
Onboard and other 7,526 5,147 2,380
21,593 12,168 9,425
Operating Expenses
Commissions, transportation and other 2,761 1,630 1,131
Onboard and other 2,375 1,528 847
Payroll and related 2,373 2,181 192
Fuel 2,047 2,157 (110)
Food 1,335 863 472
Ship and other impairments - 440 (440)
Other operating 3,426 2,958 467
Cruise and tour operating expenses 14,317 11,757 2,560
Selling and administrative 2,950 2,515 435
Depreciation and amortization 2,370 2,275 95
19,637 16,547 3,090
Operating Income (Loss) 1,956 (4,379) 6,335
Nonoperating Income (Expense)
Interest income 233 74 159
Interest expense, net of capitalized interest (2,066) (1,609) (457)
Gains (losses) on debt extinguishment, net (111) (1) (110)
Other income (expense), net (75) (165) 90
(2,018) (1,701) (317)
Income (Loss) Before Income Taxes $(62) $(6,080) $6,018
NAA
Years Ended November 30,
(in millions) 2023 2022 Change
Revenues
Passenger ticket $9,122 $4,692 $4,430
Onboard and other 5,466 3,589 1,877
14,588 8,281 6,307
Operating Expenses 9,587 7,526 2,061
Selling and administrative 1,753 1,517 236
Depreciation and amortization 1,495 1,408 88
12,836 10,451 2,385
Operating Income (Loss) $1,752 $(2,170) $3,922
Europe
Years Ended November 30,
(in millions) 2023 2022 Change
Revenues
Passenger ticket $5,004 $2,660 $2,344
Onboard and other 1,531 872 659
6,535 3,531 3,003
Operating Expenses 4,398 3,925 474
Selling and administrative 876 745 131
Depreciation and amortization 668 692 (24)
5,942 5,361 581
Operating Income (Loss) $593 $(1,830) $2,423
During the pause in our guest cruise operations, we incurred substantial debt
and require a significant amount of cash to service our debt. Our ability to
generate cash will be affected by general macroeconomic, financial,
geopolitical, competitive, regulatory and other factors beyond our control.
The full extent of these impacts is uncertain and may be amplified by our
substantial debt balance.
Revenues
Consolidated
Cruise passenger ticket revenues made up 65% of our total revenues in 2023
while onboard and other revenues made up 35%. Revenues for the year ended
November 30, 2023 increased by $9.4 billion to $21.6 billion from $12.2
billion in 2022 due to the significant increase of ships in service and
considerably higher occupancy levels in 2023 as compared to 2022. ALBDs
increased to 91.3 million in 2023 as compared to 72.5 million in 2022.
Occupancy for 2023 was 100%, compared to 75% in 2022.
NAA Segment
Cruise passenger ticket revenues made up 63% of our NAA segment's total
revenues in 2023 while onboard and other cruise revenues made up 37%. NAA
segment revenues for 2023 increased by $6.3 billion to $14.6 billion from
$8.3 billion in 2022 due to the significant increase of ships in service and
considerably higher occupancy levels in 2023 as compared to 2022. ALBDs
increased to 56.4 million in 2023 as compared to 44.3 million in 2022.
Occupancy for 2023 was 103% compared to 82% 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 for 2023 increased by $3.0 billion to $6.5 billion from $3.5
billion in 2022 due to the significant increase of ships in service and
considerably higher occupancy levels in 2023 as compared to 2022. ALBDs
increased to 34.9 million in 2023 as compared to 28.2 million in 2022.
Occupancy for 2023 was 95% compared to 65% in 2022.
Operating Expenses
Consolidated
Operating expenses increased by $2.6 billion to $14.3 billion in 2023 from
$11.8 billion in 2022. These increases were driven by our resumption of guest
cruise operations, an increase of ships in service and considerably higher
occupancy levels.
Fuel costs decreased by $0.1 billion to $2.0 billion in 2023 from $2.2 billion
in 2022. $0.4 billion of this decrease was caused by lower fuel prices and
changes in fuel mix of $129 per metric ton consumed in 2023 compared to 2022,
partially offset by higher fuel consumption due to the resumption of guest
cruise operations.
We did not recognize ship and other impairment charges in 2023 compared to
$440 million recognized in 2022.
Selling and administrative expenses increased by $0.4 billion to $2.9 billion
in 2023 from $2.5 billion in 2022. This increase was caused by increases in
advertising costs and administrative expenses incurred as part of our
resumption of guest cruise operations, which includes an increase in incentive
compensation reflecting expected improvements in the company's current and
long-term performance.
The drivers in changes in costs and expenses for our NAA and Europe segments
are the same as those described for our consolidated results.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, increased by $0.5 billion to
$2.1 billion in 2023 from $1.6 billion in 2022. The increase was caused by a
higher average interest rate in 2023 compared to 2022, partially offset by a
decrease in total debt.
Debt extinguishment and modification costs were $111 million in 2023 as a
result of debt transactions during the year compared to $1 million in 2022.
Liquidity, Financial Condition and Capital Resources
As of November 30, 2023, we had $5.4 billion of liquidity including $2.4
billion of cash and cash equivalents and $3.0 billion of borrowings available
under our Revolving Facility, which matures in August 2024. In February 2023,
Carnival Holdings II entered into the $2.1 billion New Revolving Facility,
which may be utilized beginning in August 2024, at which date it will replace
our Revolving Facility. We will continue to pursue various opportunities to
refinance future debt maturities to extend maturity dates and reduce interest
expense by repaying some of our existing indebtedness. Refer to Note 5 -
"Debt" of the consolidated financial statements and Funding Sources below for
additional details.
We had a working capital deficit of $6.2 billion as of November 30, 2023
compared to a working capital deficit of $3.1 billion as of November 30, 2022.
The increase in working capital deficit was caused by a decrease in cash and
cash equivalents and restricted cash and an increase in customer deposits,
partially offset by an increase in prepaid expenses and a decrease in
short-term borrowings and the current portion of long-term debt. 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 $6.1 billion and $4.9 billion of customer deposits as
of November 30, 2023 and 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.
Sources and Uses of Cash
Operating Activities
Our business provided $4.3 billion of net cash flows from operating activities
during 2023, an increase of $6.0 billion, compared to $1.7 billion used in
2022. This was caused by a decrease in the net loss compared to the same
period in 2022 and other working capital changes.
Investing Activities
During 2023, net cash used in investing activities was $2.8 billion. This was
driven by:
• Capital expenditures of $1.9 billion for our ongoing new
shipbuilding program
• Capital expenditures of $1.4 billion for ship improvements and
replacements, information technology and buildings and improvements
• Proceeds from sales of ships and other of $340 million
During 2022, net cash used in investing activities was $4.8 billion. This was
driven by:
• Capital expenditures of $3.9 billion for our ongoing new
shipbuilding program
• Capital expenditures of $1.1 billion for ship improvements and
replacements, information technology and buildings and improvements
• Proceeds from sales of ships and other of $70 million
• Purchases of short-term investments of $315 million
• Proceeds from maturity of short-term investments of $515 million
Financing Activities
During 2023, net cash used in financing activities of $5.1 billion was driven
by:
• Repayments of $200 million of short-term borrowings
• Repayments of $5.9 billion of long-term debt and refinancing of
$1.8 billion of long-term debt to extend maturities
• Issuances of $3.0 billion of long-term debt
• Debt issuance costs of $131 million
• Debt extinguishment costs of $79 million
• 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
During 2022, net cash provided by financing activities of $3.6 billion was
caused by:
• Net repayments of short-term borrowings of $2.6 billion
• Repayments of $2.1 billion of long-term debt
• Debt issuance costs of $153 million
• Issuances of $7.2 billion of long-term debt
• Net proceeds of $1.2 billion from the public offering of
Carnival Corporation common stock
• Proceeds from issuance of $95 million of Carnival Corporation
common stock and purchases of $87 million of Carnival plc ordinary shares
under our Stock Swap Program
For the Company's cash flow activities for the fiscal year ended November 30,
2021, see "Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Company's Annual Report on Form 10-K for the
year ended November 30, 2022, which was filed with the U.S. Securities and
Exchange Commission on January 27, 2023.
Material Cash Requirements
Payments Due by
(in millions) 2024 2025 2026 2027 2028 Total
Debt (a) $3,883 $3,844 $4,628 $7,487 $9,755 $29,597
Newbuild capital expenditures (b) 2,437 958 - - - 3,395
Total $6,320 $4,802 $4,628 $7,487 $9,755 $32,992
(a) Includes principal as well as estimated interest payments and does not
include the impact of any future possible refinancings. Excludes undrawn
export credits.
(b) As of November 30, 2023, we have committed undrawn export credit
facilities of $3.0 billion which fund a portion of our newbuild contractual
commitments.
Funding Sources
As of November 30, 2023, we had $5.4 billion of liquidity including $2.4
billion of cash and cash equivalents and $3.0 billion of borrowings available
under our Revolving Facility, which matures in August 2024. In February 2023,
Carnival Holdings II entered into the $2.1 billion New Revolving Facility,
which may be utilized beginning in August 2024, at which date it will replace
our Revolving Facility. Refer to Note 5 - "Debt" of the consolidated financial
statements for additional discussion. In addition, we had $3.0 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) 2024 2025
Future export credit facilities at November 30, 2023 $2.3 $0.7
Our export credit facilities contain various financial covenants as described
in Note 5 - "Debt." At November 30, 2023, we were in compliance with the
applicable covenants under our debt agreements.
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.
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 2023, under the Stock Swap Program, we sold 2.3 million
shares of Carnival Corporation common stock and repurchased the same amount of
Carnival plc ordinary shares, resulting in net proceeds of $2 million which
were used for general corporate purposes. In addition, during 2023 we sold
0.5 million shares of Carnival Corporation common stock at an average price
per share of $9.83, resulting in net proceeds of $5 million. During 2022, we
sold 6.0 million shares of Carnival Corporation's common stock and
repurchased the same amount of Carnival plc ordinary shares, resulting in net
proceeds of $8 million which were used for general corporate purposes. In
addition, during 2022 we sold 1.6 million shares of Carnival Corporation
common stock at an average price per share of $19.27, resulting in net
proceeds of $30 million. During 2021, we sold $8.9 million shares of
Carnival Corporation's common stock and repurchased the same amount of
Carnival plc ordinary shares, resulting in net proceeds of $19 million. In
addition, during 2021 we sold 0.6 million shares of Carnival Corporation
common stock at an average price per share of $21.32, resulting in net
proceeds of $13 million.
Quantitative and Qualitative Disclosures About Market Risk.
For a discussion of our hedging strategies and market risks, see the
discussion below and the consolidated financial statements.
Fuel Price Risks
Substantially all our exposure to market risk for changes in fuel prices
relates to the consumption of fuel on our ships.
Foreign Currency Exchange Rate Risks
Operational Currency Risks
Our operations primarily utilize the U.S. dollar, Euro, Sterling or the
Australian dollar as their functional currencies. Our operations also have
revenue and expenses denominated in non-functional currencies. Movements in
foreign currency exchange rates will affect our financial statements.
Investment Currency Risks
The foreign currency exchange rates were as follows:
November 30,
USD to 1: 2023 2022
AUD $0.66 $0.66
CAD $0.74 $0.74
EUR $1.10 $1.03
GBP $1.27 $1.20
If the November 30, 2022 currency exchange rates had been used to translate
our November 30, 2023 non-U.S. dollar functional currency operations' assets
and liabilities (instead of the November 30, 2023 U.S. dollar exchange rates),
our total assets would have been lower by $1.0 billion and our total
liabilities would have been lower by $0.5 billion.
As of November 30, 2023, we have a cross currency swap totaling $670 million
which settles through 2024. This cross-currency swap is designated as a hedge
of our net investments in foreign operations, which has a euro-denominated
functional currency, thus partially offsetting the foreign currency exchange
rate risk. Based on a 10% change in the U.S. dollar to euro exchange rate as
of November 30, 2023, we estimate that the fair value of this cross-currency
swap and offsetting change in U.S. dollar value of our net investments would
change by $66 million.
Newbuild Currency Risks
At November 30, 2023, our remaining newbuild currency exchange rate risk
primarily relates to euro-denominated newbuild contract payments, which
represent a total unhedged commitment of $3.0 billion and relate to newbuilds
scheduled to be delivered through 2025 to non-euro functional currency brands.
The functional currency cost of each of these ships will increase or decrease
based on changes in the exchange rates until the unhedged payments are made
under the shipbuilding contract. We may enter into additional foreign currency
derivatives to mitigate some of this foreign currency exchange rate risk.
Based on a 1% change in euro to U.S. dollar exchange rates as of November 30,
2023, the remaining unhedged cost of these ships would have a corresponding
change of $30 million.
Interest Rate Risks
The composition of our debt, interest rate swaps and cross currency swaps was
as follows:
November 30, 2023
Fixed rate 62%
EUR fixed rate 18%
Floating rate 5%
EUR floating rate 15%
At November 30, 2023, we had interest rate swaps that have effectively changed
$46 million of EURIBOR-based floating rate euro debt to fixed rate euro debt.
We also had interest rate swap agreements which effectively changed $2.5
billion at November 30, 2023 of SOFR-based floating rate USD debt to fixed
rate USD debt. Based on a 100 basis point change in the market interest rates,
our annual interest expense on floating rate debt, including the effect of our
interest rate swaps, will change by approximately $60 million.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in millions, except per share data)
Years Ended November 30,
2023 2022 2021
Revenues
Passenger ticket $14,067 $7,022 $1,000
Onboard and other 7,526 5,147 908
21,593 12,168 1,908
Operating Expenses
Commissions, transportation and other 2,761 1,630 269
Onboard and other 2,375 1,528 272
Payroll and related 2,373 2,181 1,309
Fuel 2,047 2,157 680
Food 1,335 863 187
Ship and other impairments - 440 591
Other operating 3,426 2,958 1,346
Cruise and tour operating expenses 14,317 11,757 4,655
Selling and administrative 2,950 2,515 1,885
Depreciation and amortization 2,370 2,275 2,233
Goodwill impairments - - 226
19,637 16,547 8,997
Operating Income (Loss) 1,956 (4,379) (7,089)
Nonoperating Income (Expense)
Interest income 233 74 12
Interest expense, net of capitalized interest (2,066) (1,609) (1,601)
Debt extinguishment and modification costs (111) (1) (670)
Other income (expense), net (75) (165) (173)
(2,018) (1,701) (2,433)
Income (Loss) Before Income Taxes (62) (6,080) (9,522)
Income Tax Benefit (Expense), Net (13) (14) 21
Net Income (Loss) $(74) $(6,093) $(9,501)
Earnings Per Share
Basic $(0.06) $(5.16) $(8.46)
Diluted $(0.06) $(5.16) $(8.46)
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
Years Ended November 30,
2023 2022 2021
Net Income (Loss) $(74) $(6,093) $(9,501)
Items Included in Other Comprehensive Income (Loss)
Change in foreign currency translation adjustment 52 (503) (118)
Other (8) 22 53
Other Comprehensive Income (Loss) 44 (481) (65)
Total Comprehensive Income (Loss) $(30) $(6,574) $(9,567)
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(in millions, except par values)
November 30,
2023 2022
ASSETS
Current Assets
Cash and cash equivalents $2,415 $4,029
Restricted cash 11 1,988
Trade and other receivables, net 556 395
Inventories 528 428
Prepaid expenses and other 1,757 652
Total current assets 5,266 7,492
Property and Equipment, Net 40,116 38,687
Operating Lease Right-of-Use Assets, Net 1,265 1,274
Goodwill 579 579
Other Intangibles 1,169 1,156
Other Assets 725 2,515
$49,120 $51,703
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $- $200
Current portion of long-term debt 2,089 2,393
Current portion of operating lease liabilities 149 146
Accounts payable 1,168 1,050
Accrued liabilities and other 2,003 1,942
Customer deposits 6,072 4,874
Total current liabilities 11,481 10,605
Long-Term Debt 28,483 31,953
Long-Term Operating Lease Liabilities 1,170 1,189
Other Long-Term Liabilities 1,105 891
Contingencies and Commitments
Shareholders' Equity
Carnival Corporation common stock, $0.01 par value; 1,960 shares authorized; 12 12
1,250 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 16,712 16,872
Retained earnings 185 269
Accumulated other comprehensive income (loss) ("AOCI") (1,939) (1,982)
Treasury stock, 130 shares at 2023 and 2022 of Carnival Corporation and 73 (8,449) (8,468)
shares at 2023 and 72 shares at 2022 of Carnival plc, at cost
Total shareholders' equity 6,882 7,065
$49,120 $51,703
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Years Ended November 30,
2023 2022 2021
OPERATING ACTIVITIES
Net income (loss) $(74) $(6,093) $(9,501)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities
Depreciation and amortization 2,370 2,275 2,233
Impairments 21 470 834
(Gain) loss on debt extinguishment 98 1 668
(Income) loss from equity-method investments 13 38 129
Share-based compensation 53 101 121
Amortization of discounts and debt issue costs 161 171 172
Noncash lease expense 145 148 140
(Gain) loss on sales of ships (88) (7) (11)
Other 56 65 149
2,756 (2,832) (5,067)
Changes in operating assets and liabilities
Receivables (180) (171) (7)
Inventories (85) (95) (63)
Prepaid expenses and other assets 397 (874) (1,070)
Accounts payable 77 283 206
Accrued liabilities and other 147 341 601
Customer deposits 1,169 1,679 1,291
Net cash provided by (used in) operating activities 4,281 (1,670) (4,109)
INVESTING ACTIVITIES
Purchases of property and equipment (3,284) (4,940) (3,607)
Proceeds from sales of ships and other property and equipment 340 70 351
Purchase of minority interest - (1) (90)
Purchase of short-term investments - (315) (2,873)
Proceeds from maturity of short-term investments - 515 2,673
Other 134 (96) 3
Net cash provided by (used in) investing activities (2,810) (4,767) (3,543)
FINANCING ACTIVITIES
Repayments of short-term borrowings (200) (2,590) (293)
Principal repayments of long-term debt (7,660) (2,075) (5,956)
Debt issuance costs (131) (153) (319)
Debt extinguishment costs (79) (1) (545)
Proceeds from issuance of long-term debt 2,961 7,209 13,042
Proceeds from issuance of common stock 5 1,180 1,009
Proceeds from issuance of common stock under the Stock Swap Program 22 95 206
Purchase of treasury stock under the Stock Swap Program (20) (87) (188)
Other 13 (1) (7)
Net cash provided by (used in) financing activities (5,089) 3,577 6,949
Effect of exchange rate changes on cash, cash equivalents and restricted cash 17 (79) (13)
Net increase (decrease) in cash, cash equivalents and restricted cash (3,601) (2,940) (715)
Cash, cash equivalents and restricted cash at beginning of year 6,037 8,976 9,692
Cash, cash equivalents and restricted cash at end of year $2,436 $6,037 $8,976
The accompanying notes are an integral part of these consolidated financial
statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in millions)
Common Ordinary Additional Retained AOCI Treasury Total
stock shares paid-in earnings stock shareholders'
capital equity
At November 30, 2020 $11 $361 $13,948 $16,075 $(1,436) $(8,404) $20,555
Net income (loss) - - - (9,501) - - (9,501)
Other comprehensive income (loss) - - - - (65) - (65)
Issuances of common stock, net - - 1,009 - - - 1,009
Conversion of Convertible Notes - - 15 - - - 15
Purchases and issuances under the Stock Swap program, net - - 206 - - (188) 19
Issuance of treasury shares for vested share-based awards - - - (126) - 126 -
Share-based compensation and - - 113 - - - 113
other
At November 30, 2021 11 361 15,292 6,448 (1,501) (8,466) 12,144
Net income (loss) - - - (6,093) - - (6,093)
Other comprehensive income (loss) - - - - (481) - (481)
Issuances of common stock, net 1 - 1,178 - - - 1,180
Issuance of Convertible Notes - - 229 - - - 229
Purchases and issuances under the Stock Swap program, net - - 95 - - (87) 8
Issuance of treasury shares for vested share-based awards - - - (85) - 85 -
Share-based compensation and - - 79 (1) - - 78
other
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) - - - (74) - - (74)
Other comprehensive income (loss) - - - - 44 - 44
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 - - 79 - - (2) 78
other
At November 30, 2023 $12 $361 $16,712 $185 $(1,939) $(8,449) $6,882
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
NOTE 1 - General
Description of Business
Carnival Corporation was incorporated in Panama in 1974 and Carnival plc was
incorporated in England and Wales in 2000. Together with their consolidated
subsidiaries, they are referred to collectively in these consolidated
financial statements and elsewhere in this 2023 Annual Report as "Carnival
Corporation & plc," "our," "us" and "we." The consolidated financial
statements include the accounts of Carnival Corporation and Carnival plc and
their respective subsidiaries.
We are the largest global cruise company, and among the largest leisure travel
companies, with a portfolio of world-class cruise lines - AIDA Cruises,
Carnival Cruise Line, Costa Cruises, Cunard, Holland America Line, P&O
Cruises (Australia), P&O Cruises (UK), Princess Cruises, and Seabourn.
DLC Arrangement
Carnival Corporation and Carnival plc operate a dual listed company ("DLC")
arrangement, whereby the businesses of Carnival Corporation and Carnival plc
are combined through a number of contracts and provisions in Carnival
Corporation's Articles of Incorporation and By-Laws and Carnival plc's
Articles of Association. The two companies operate as a single economic
enterprise with a single senior management team and identical Boards of
Directors, but each has retained its separate legal identity. Each company's
shares are publicly traded on the New York Stock Exchange ("NYSE") for
Carnival Corporation and the London Stock Exchange for Carnival plc. The
Carnival plc American Depositary Shares are traded on the NYSE.
The constitutional documents of each company provide that, on most matters,
the holders of the common equity of both companies effectively vote as a
single body. The Equalization and Governance Agreement between Carnival
Corporation and Carnival plc provides for the equalization of dividends and
liquidation distributions based on an equalization ratio and contains
provisions relating to the governance of the DLC arrangement. Because the
equalization ratio is 1 to 1, one share of Carnival Corporation common stock
and one Carnival plc ordinary share are generally entitled to the same
distributions.
Under deeds of guarantee executed in connection with the DLC arrangement, as
well as stand-alone guarantees executed since that time, each of Carnival
Corporation and Carnival plc have effectively cross guaranteed all
indebtedness and certain other monetary obligations of each other. Once the
written demand is made, the holders of indebtedness or other obligations may
immediately commence an action against the relevant guarantor.
Under the terms of the DLC arrangement, Carnival Corporation and Carnival plc
are permitted to transfer assets between the companies, make loans to or
investments in each other and otherwise enter into intercompany transactions.
In addition, the cash flows and assets of one company are required to be used
to pay the obligations of the other company, if necessary.
Given the DLC arrangement, we believe that providing separate financial
statements for each of Carnival Corporation and Carnival plc would not present
a true and fair view of the economic realities of their operations.
Accordingly, separate financial statements for Carnival Corporation and
Carnival plc have not been presented.
NOTE 2 - Summary of Significant Accounting Policies
Basis of Presentation
We consolidate entities over which we have control, as typically evidenced by
a voting control of greater than 50% or for which we are the primary
beneficiary, whereby we have the power to direct the most significant
activities and the obligation to absorb significant losses or receive
significant benefits from the entity. We do not separately present our
noncontrolling interests in the consolidated financial statements since the
amounts are immaterial. For affiliates we do not control but where significant
influence over financial and operating policies exists, as typically evidenced
by a voting control of 20% to 50%, the investment is accounted for using the
equity method.
Preparation of Financial Statements
The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
("U.S. GAAP") requires management to make estimates and assumptions that
affect the amounts reported and disclosed in our consolidated financial
statements. The full extent to which the effects of inflation, higher fuel
prices, higher taxes, higher interest rates and fluctuations in foreign
currency rates will directly or indirectly impact our business, operations,
results of operations and financial condition, including our valuation of
goodwill and trademarks, impairment of ships and collectability of trade and
notes receivables, will depend on future developments that are uncertain. We
have made reasonable estimates and judgments of such items within our
financial statements and there may be changes to those estimates in future
periods. Actual results may differ from the estimates used in preparing our
consolidated financial statements. All material intercompany balances and
transactions are eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents include investments with maturities of three months
or less at acquisition which are stated at cost and present insignificant risk
of changes in value.
Restricted Cash
We consider cash to be restricted when withdrawal or general use is legally
restricted. Restricted cash is classified as current or non-current based on
the expected timing of our ability to access or use the amounts. The
non-current portion is included within other assets.
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. We have agreements with a number of
credit card processors that transact customer deposits related to our cruise
vacations. Certain of these agreements allow the credit card processors to
request, under certain circumstances, that we provide a reserve fund in cash.
These reserve funds are included in other assets.
Inventories
Inventories consist substantially of food, beverages, hotel supplies, fuel and
retail merchandise, which are all carried at the lower of cost or net
realizable value. Cost is determined using the weighted-average or first-in,
first-out methods and applied consistently between major categories of
inventory.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
any impairment charges. We capitalize interest as part of the cost of capital
projects incurred during construction. Depreciation is computed using the
straight-line method over our estimated useful lives of the assets to a
residual value, as a percentage of original cost, as follows:
Years Residual
Values
Ships 30 15%
Ship improvements 3-30 0%
Buildings and improvements 10-40 0%
Computer hardware and software 2-12 0%
Transportation equipment and other 3-20 0%
Leasehold improvements, including port facilities Shorter of the remaining lease term or related asset life (3-30) 0%
The cost of ships under construction includes progress payments for the
construction of new ships, as well as design and engineering fees, capitalized
interest, construction oversight costs and various owner supplied items. Any
liquidated damages received from shipyards are recorded as reductions to the
cost basis of the ship.
We have a capital program for the improvement of our ships and for asset
replacements to enhance the effectiveness and efficiency of our operations; to
comply with, or exceed, all relevant legal and statutory requirements related
to health, environment, safety, security and sustainability; and to gain
strategic benefits or provide improved product innovations to our guests. We
account for ship improvement costs, including replacements of certain
significant components and parts, by capitalizing those costs we believe add
value to our ships and have a useful life greater than one year and
depreciating those improvements over their estimated remaining useful life.
The costs of repairs and maintenance, including those incurred when a ship is
taken out-of-service for scheduled maintenance, and minor improvement costs
and expenses, are charged to expense as incurred.
In addition, specifically identified or estimated cost and accumulated
depreciation of previously capitalized ship components are written-off upon
retirement, which may result in a loss on disposal that is also included in
other operating expenses.
We have estimated our ships' useful lives at 30 years and residual values at
15% of our original ship cost. Our ships' useful life and residual value
estimates take into consideration the estimated weighted-average useful lives
of the ships' major component systems, such as hull, superstructure, main
electric, engines and cabins. We also take into consideration the impact of
technological changes, historical useful lives of similarly-built ships,
long-term cruise and vacation market conditions and regulatory changes,
including those related to the environment and climate change. We determine
the residual value of our ships based on our long-term estimates of their
resale value at the end of their useful lives to us but before the end of
their physical and economic lives to others, historical resale values of our
and other cruise ships as well as our expectations of the long-term viability
of the secondary cruise ship market. We review estimated useful lives and
residual values for reasonableness whenever events or circumstances
significantly change.
We evaluate ship asset impairments at the individual ship level which is the
lowest level for which identifiable cash flows are largely independent of the
cash flows of other assets and liabilities. We review our ships for impairment
whenever events or circumstances indicate that the carrying value of a ship
may not be recoverable. If estimated future cash flows are less than the
carrying value of a ship, an impairment charge is recognized to the extent its
carrying value exceeds its estimated fair value.
Leases
Substantially all of our leases for which we are the lessee are operating
leases of port facilities and real estate and are included within operating
lease right-of-use assets, long-term operating lease liabilities and current
portion of operating lease liabilities in our Consolidated Balance Sheets.
We have port facilities and real estate lease agreements with lease and
non-lease components, and in such cases, we account for the components as a
single lease component.
We do not recognize lease assets and lease liabilities for any leases with an
original term of less than one year. For some of our port facilities and real
estate lease agreements, we have the option to extend our current lease term
by 1 to 10 years. Generally, we do not include renewal options as a component
of our present value calculation as we are not reasonably certain that we will
exercise the options.
As most of our leases do not have a readily determinable implicit rate, we
estimate the incremental borrowing rate ("IBR") to determine the present value
of lease payments. We apply judgment in estimating the IBR including
considering the term of the lease, the currency in which the lease is
denominated, and the impact of collateral and our credit risk on the rate.
We amortize our lease assets on a straight-line basis over the lease term.
Goodwill and Other Intangibles
Goodwill represents the excess of the purchase price over the fair value of
identifiable net assets acquired in a business acquisition. We review our
goodwill for impairment as of July 31 every year, or more frequently if events
or circumstances dictate. All of our goodwill has been allocated to our
reporting units. The impairment review for goodwill allows us to first assess
qualitative factors to determine whether it is necessary to perform a more
detailed quantitative goodwill impairment test. We would perform the
quantitative test if our qualitative assessment determined it is
more-likely-than-not that a reporting unit's estimated fair value is less than
its carrying amount. We may also elect to bypass the qualitative assessment
and proceed directly to the quantitative test for any reporting unit. When
performing the quantitative test, if the estimated fair value of the reporting
unit exceeds its carrying value, no further analysis is required. However, if
the estimated fair value of the reporting unit is less than the carrying
value, goodwill is written down based on the difference between the reporting
unit's carrying amount and its fair value, limited to the amount of goodwill
allocated to the reporting unit. Judgment is required in estimating the fair
value of our reporting unit.
Trademarks represent substantially all of our other intangibles. Trademarks
are estimated to have an indefinite useful life and are not amortizable but
are reviewed for impairment at least annually and as events or circumstances
dictate. The impairment review for trademarks also allows us to first assess
qualitative factors to determine whether it is necessary to perform a more
detailed quantitative trademark impairment test. We would perform the
quantitative test if our qualitative assessment determined it was
more-likely-than-not that the trademarks are impaired. We may also elect to
bypass the qualitative assessment and proceed directly to the quantitative
test. Our trademarks would be considered impaired if their carrying value
exceeds their estimated fair value.
Equity Method Investments
Equity method investments are initially recognized at cost and are included in
other assets in the Consolidated Balance Sheets. Our proportionate interest in
their results is included in other income (expense), net in the Consolidated
Statements of Income (Loss).
Debt and Debt Issuance Costs
Debt is recorded at initial fair value, which normally reflects the proceeds
received by us, net of debt issuance costs. Debt is subsequently stated at
amortized cost. Debt issuance costs, discounts and premiums are generally
amortized to interest expense using the straight-line method, which
approximates the effective interest method, over the term of the debt.
Derivatives and Other Financial Instruments
We have in the past and may in the future utilize derivative and
non-derivative financial instruments, such as foreign currency forwards,
options and swaps, foreign currency debt obligations and foreign currency cash
balances, to manage our exposure to fluctuations in certain foreign currency
exchange rates. We use interest rate swaps primarily to manage our interest
rate exposure to achieve a desired proportion of fixed and floating rate
debt. Our policy is to not use financial instruments for trading or other
speculative purposes.
All derivatives are recorded at fair value. If a derivative is designated as a
cash flow hedge, then the change in the fair value of the derivative is
recognized as a component of AOCI until the underlying hedged item is
recognized in earnings or the forecasted transaction is no longer
probable. If a derivative or a non-derivative financial instrument is
designated as a hedge of our net investment in a foreign operation, then
changes in the effective portion of the fair value of the financial instrument
are recognized as a component of AOCI to offset the change in the translated
value of the designated portion of net investment being hedged until the
investment is sold or substantially liquidated, while the impact attributable
to components excluded from the assessment of hedge effectiveness is recorded
in interest expense, net of capitalized interest, on a systematic and rational
basis. For derivatives that do not qualify for hedge accounting treatment, the
change in fair value is recognized in earnings.
We classify the fair value of all our derivative contracts as either current
or long-term, depending on the maturity date of the derivative contract. The
cash flows from derivatives treated as cash flow hedges are classified in our
Consolidated Statements of Cash Flows in the same category as the item being
hedged.
Derivative valuations are based on observable inputs such as interest rates
and commodity price curves, forward currency exchange rates, credit spreads,
maturity dates, volatilities, and cross currency basis spreads. We use the
income approach to value derivatives for foreign currency options and
forwards, interest rate swaps and cross currency swaps using observable market
data for all significant inputs and standard valuation techniques to convert
future amounts to a single present value amount, assuming that participants
are motivated but not compelled to transact.
Foreign Currency Translation and Transactions
These financial statements are presented in U.S. dollars. Each foreign entity
determines its functional currency by reference to its primary economic
environment. Our most significant foreign entities utilize the U.S. dollar,
Euro, Sterling or the Australian dollar as their functional currencies. We
translate the assets and liabilities of our foreign entities that have
functional currencies other than the U.S. dollar at exchange rates in effect
at the balance sheet date. Revenues and expenses of these foreign entities are
translated at the average rate for the period. Equity is translated at
historical rates and the resulting foreign currency translation adjustments
are included as a component of AOCI, which is a separate component of
shareholders' equity. Therefore, the U.S. dollar value of the non-equity
translated items in our consolidated financial statements will fluctuate from
period to period, depending on the changing value of the U.S. dollar versus
these currencies.
We execute transactions in a number of different currencies. At the date that
the transaction is recognized, each asset, liability, revenue, expense, gain
or loss arising from the transaction is measured and recorded in the
functional currency of the recording entity using the exchange rate in effect
at that date. At each balance sheet date, recorded monetary balances
denominated in a currency other than the functional currency are adjusted
using the exchange rate at the balance sheet date, with gains or losses
recorded in other income or other expense, unless such monetary balances have
been designated as hedges of net investments in our foreign entities. The net
gains or losses resulting from foreign currency transactions were not material
in 2023, 2022 and 2021. In addition, the unrealized gains or losses on our
long-term intercompany receivables and payables which are denominated in a
non-functional currency and which are not expected to be repaid in the
foreseeable future are recorded as foreign currency translation adjustments
included as a component of AOCI.
Revenue and Expense Recognition
Guest cruise deposits and advance onboard purchases are initially included in
customer deposits when received. Customer deposits are subsequently recognized
as cruise revenues, together with revenues from onboard and other activities,
and all associated direct costs and expenses of a voyage are recognized as
cruise costs and expenses, upon completion of voyages with durations of ten
nights or less and on a pro rata basis for voyages in excess of ten nights.
The impact of recognizing these shorter duration cruise revenues and costs and
expenses on a completed voyage basis versus on a pro rata basis is not
material. Certain of our product offerings are bundled and we allocate the
value of the bundled services and goods between passenger ticket revenues and
onboard and other revenues based upon the estimated standalone selling prices
of those goods and services. Guest cancellation fees, when applicable, are
recognized in passenger ticket revenues at the time of cancellation.
Our sales to guests of air and other transportation to and from airports near
the home ports of our ships are included in passenger ticket revenues, and the
related costs of purchasing these services are included in transportation
costs. The proceeds that we collect from the sales of third-party shore
excursions are included in onboard and other revenues and the related costs
are included in onboard and other costs. The amounts collected on behalf of
our onboard concessionaires, net of the amounts remitted to them, are included
in onboard and other revenues as concession revenues. All of these amounts are
recognized on a completed voyage or pro rata basis as discussed above.
Passenger ticket revenues include fees, taxes and charges collected by us from
our guests. The fees, taxes and charges that vary with guest head counts and
are directly imposed on a revenue-producing arrangement are expensed in
commissions, transportation and other costs when the corresponding revenues
are recognized. These fees, taxes and charges included in commissions,
transportation and other costs were $730 million in 2023, $438 million in 2022
and $73 million in 2021. 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 FCCs to the extent we have received and not refunded
cash from guests for cancelled bookings. We had total customer deposits of
$6.4 billion and $5.1 billion as of November 30, 2023 and 2022, which
includes approximately $134 million of unredeemed FCCs as of November 30,
2023, of which approximately $111 million are refundable. At November 30,
2022, we had approximately $210 million of unredeemed FCCs. During 2023 and
2022, we recognized revenues of $4.1 billion and $1.9 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, 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.
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 $294 million and $218 million as of
November 30, 2023 and 2022.
Insurance
We use a combination of insurance and self-insurance to cover a number of
risks including illness and injury to crew, guest injuries, pollution, other
third-party claims in connection with our cruise activities, damage to hull
and machinery for each of our ships, war risks, workers' compensation,
directors' and officers' liability, property damage and general liability for
shoreside third-party claims. We recognize insurance recoverables from
third-party insurers up to the amount of recorded losses at the time the
recovery is probable and upon settlement for amounts in excess of the recorded
losses. All of our insurance policies are subject to coverage limits,
exclusions and deductible levels. The liabilities associated with crew
illnesses and crew and guest injury claims, including all legal costs, are
estimated based on the specific merits of the individual claims or actuarially
estimated based on historical claims experience, loss development factors and
other assumptions.
Selling and Administrative Expenses
Selling expenses include a broad range of advertising, marketing and
promotional expenses. Advertising is charged to expense as incurred, except
for media production costs, which are expensed upon the first airing of the
advertisement. Selling expenses totaled $851 million in 2023, $744 million in
2022 and $340 million in 2021. Administrative expenses represent the costs of
our shoreside support, reservations and other administrative functions, and
include salaries and related benefits, professional fees and building
occupancy costs, which are typically expensed as incurred.
Share-Based Compensation
We recognize compensation expense for all share-based compensation awards
using the fair value method. For time-based share awards, we recognize
compensation cost ratably using the straight-line attribution method over the
expected vesting period or to the retirement eligibility date, if earlier than
the vesting period. For performance-based share awards, we estimate
compensation cost based on the probability of the performance condition being
achieved and recognize expense ratably using the straight-line attribution
method over the expected vesting period. If all or a portion of the
performance condition is not expected to be met, the appropriate amount of
previously recognized compensation expense is reversed and future compensation
expense is adjusted accordingly. We account for forfeitures as they occur.
Earnings Per Share
Basic earnings per share is computed by dividing net income (loss) by the
weighted-average number of shares outstanding during each period. Diluted
earnings per share is computed by dividing net income by the weighted-average
number of shares and common stock equivalents outstanding during each period
including the dilutive effect of our Convertible Notes using the if-converted
method. For earnings per share purposes, Carnival Corporation common stock and
Carnival plc ordinary shares are considered a single class of shares since
they have equivalent rights.
Accounting Pronouncements
The FASB issued guidance, Debt - Debt with Conversion and Other Options and
Derivative and Hedging - Contracts in Entity's Own Equity, which simplifies
the accounting for convertible instruments. This guidance eliminates certain
models that require separate accounting for embedded conversion features, in
certain cases. Additionally, among other changes, the guidance eliminates
certain of the conditions for equity classification for contracts in an
entity's own equity. The guidance also requires entities to use the
if-converted method for all convertible instruments in the diluted earnings
per share calculation and include the effect of share settlement for
instruments that may be settled in cash or shares, except for certain
liability-classified share-based payment awards. On December 1, 2022, we
adopted this guidance using the modified retrospective approach to recognize
our convertible notes as single unit liability instruments, as they do not
qualify as derivatives under ASC 815, Derivatives and Hedging, and were not
issued at a substantial premium. Accordingly, upon adoption we recorded a
$239 million increase to debt, primarily as a result of the reversal of the
remaining non-cash convertible debt discount, as well as a reduction of
$229 million to additional paid in capital. The cumulative effect of the
adoption of this guidance resulted in a $10 million decrease to retained
earnings.
In September 2022, the FASB issued guidance, Liabilities-Supplier Finance
Programs - Disclosure of Supplier Finance Program Obligations. This guidance
requires that a buyer in a supplier finance program disclose sufficient
information about the program to allow a user of financial statements to
understand the program's nature, activity during the period, changes from
period to period, and potential magnitude. This guidance is expected to
improve financial reporting by requiring new disclosures about the programs,
thereby allowing financial statement users to better consider the effect of
the programs on an entity's working capital, liquidity, and cash flows. This
guidance is required to be adopted by us in the first quarter of 2024, except
for the amendment on roll forward information which is required to be adopted
by us for the financial year commencing on December 1, 2024. We are currently
evaluating the impact of the new guidance on the disclosures to our
consolidated financial statements.
In November 2023, the FASB issued guidance, 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 segment's
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 expected to improve
financial reporting by providing additional information about a public
company's significant segment expenses and more timely and detailed segment
information reporting throughout the fiscal period. This guidance is required
to be adopted by us in the first quarter of 2025. We are currently evaluating
the impact of the new guidance on the disclosures to our consolidated
financial statements.
NOTE 3 - Property and Equipment
November 30,
(in millions) 2023 2022
Ships and ship improvements $55,026 $52,908
Ships under construction 1,284 785
Other property and equipment 4,213 3,970
Total property and equipment 60,523 57,663
Less accumulated depreciation (20,407) (18,976)
$40,116 $38,687
Capitalized interest amounted to $64 million in 2023, $48 million in 2022 and
$83 million in 2021.
Sales of Ships
During 2023, we completed the sale of three Europe segment ships and one NAA
segment ship, which represents a passenger-capacity reduction of 5,240 berths
for our Europe segment and 460 berths for our NAA segment. We will continue to
operate the NAA segment ship under a bareboat charter agreement through
September 2024.
Refer to Note 10 - "Fair Value Measurements, Derivative Instruments and
Hedging Activities and Financial Risks, Nonfinancial Instruments that are
Measured at Fair Value on a Nonrecurring Basis, Impairment of Ships" for
additional discussion.
NOTE 4 - Equity Method Investments
We have a 40% noncontrolling interest in Grand Bahama Shipyard Ltd. ("Grand
Bahama"), a ship repair and maintenance facility. Grand Bahama provided an
immaterial amount of services to us in 2023, 2022 and 2021. As of November 30,
2023, our investment in Grand Bahama was $43 million, consisting of
$25 million in equity and a loan of $18 million. As of November 30, 2022,
our investment in Grand Bahama was $43 million, consisting of $10 million in
equity and a loan of $33 million.
In September 2023, we acquired a 50% noncontrolling interest in Floating Docks
S. de RL. ("Floating Docks"), an entity that will purchase two floating
drydocks and will then lease them to Grand Bahama. As of November 30, 2023,
our investment in Floating Docks consisted of a loan of $21 million.
Additionally, we have provided payment guarantees of $46 million on behalf of
Floating Docks.
We have a 45% noncontrolling interest in the White Pass & Yukon Route
("White Pass") that includes port, railroad and retail operations in Skagway,
Alaska. White Pass provided an immaterial amount of services to us in 2023,
2022 and 2021. As a result of the effects of the pause and subsequent
resumption of our guest cruise operations on the 2022 and 2021 Alaska seasons,
we evaluated whether our investment in White Pass was other than temporarily
impaired and performed impairment assessments. As a result of our assessments,
we recognized impairment charges for 2022 and 2021 of $30 million and
$17 million in other income (expense), net. As of November 30, 2023, our
investment in White Pass was $53 million, consisting of $21 million in equity
and a loan of $32 million. As of November 30, 2022, our investment in White
Pass was $50 million, consisting of $18 million in equity and a loan of
$32 million.
During 2023, we completed the exit of our noncontrolling interest in Adora
Cruises Limited, formerly CSSC Carnival Cruise Shipping Limited, a China-based
cruise company ("Adora Cruises"), and recognized losses on exit of $21 million
within other income (expense). As of November 30, 2022, our investment in
Adora Cruises was $70 million. We provided an immaterial amount of services
to Adora Cruises during 2023, 2022 and 2021 and we paid Adora Cruises a total
of $55 million for the lease of ships during 2021. During 2021 we made
capital contributions to Adora Cruises in the amount of $90 million.
NOTE 5 - Debt
November 30,
(in millions) Maturity Rate (a) (b) 2023 2022
Secured Subsidiary Guaranteed
Notes
Notes Feb 2026 10.5% $- $775
EUR Notes Feb 2026 10.1% - 439
Notes Jun 2027 7.9% 192 192
Notes Aug 2027 9.9% 623 900
Notes Aug 2028 4.0% 2,406 2,406
Notes Aug 2029 7.0% 500 -
Loans
EUR floating rate Jun 2025 EURIBOR + 3.8% 851 808
Floating rate Jun 2025 - Oct 2028 SOFR + 3.0 - 3.3% 3,567 4,101
Total Secured Subsidiary Guaranteed 8,138 9,621
Senior Priority Subsidiary Guaranteed
Notes May 2028 10.4% 2,030 2,030
Unsecured Subsidiary Guaranteed
Revolver
Facility (c) (c) - 200
Notes
Convertible Notes Apr 2023 5.8% - 96
Convertible Notes Oct 2024 5.8% 426 426
Notes Mar 2026 7.6% 1,351 1,450
EUR Notes Mar 2026 7.6% 550 517
Notes Mar 2027 5.8% 3,100 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% - 590
GBP floating rate Feb 2025 SONIA + 0.9% - 419
EUR floating rate (d) Apr 2024 - Mar 2026 EURIBOR + 2.4 - 4.0% 678 827
Export Credit Facilities
Floating rate Dec 2031 SOFR + 0.8% (e) 583 1,246
Fixed rate Aug 2027 - Dec 2032 2.4 - 3.4% 2,756 3,143
EUR floating rate May 2024 - Nov 2034 EURIBOR + 0.2 - 0.8% 3,086 3,882
EUR fixed rate Feb 2031 - Jul 2037 1.1 - 3.4% 3,652 2,592
Total Unsecured Subsidiary Guaranteed 20,312 23,019
Unsecured Notes (No Subsidiary Guarantee)
Notes Oct 2023 7.2% - 125
Notes Jan 2028 6.7% 200 200
EUR Notes Oct 2029 1.0% 659 620
Total Unsecured Notes (No Subsidiary Guarantee) 859 945
Total Debt 31,339 35,615
Less: unamortized debt issuance costs and discounts (768) (1,069)
Total Debt, net of unamortized debt issuance costs and discounts 30,572 34,546
Less: short-term borrowings - (200)
Less: current portion of long-term debt (2,089) (2,393)
Long-Term Debt $28,483 $31,953
(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.
During 2023, we amended certain of our variable debt instruments to change the
reference rate from LIBOR to SOFR. These amendments did not modify the amounts
and timing of interest payments, other than for the change in reference rates,
and did not have a material impact on our consolidated financial statements.
(b) The above debt table excludes the impact of any outstanding derivative
contracts. The interest rates on some of our debt fluctuate based on the
applicable rating of senior unsecured long-term securities of Carnival
Corporation or Carnival plc.
(c) See "Short-Term Borrowings" below.
(d) In March 2023, we entered into an amendment of a EUR floating rate
loan to extend maturity through April 2024.
(e) The interest rate for the unsecured floating rate export credit
facility for the current interest period is referenced to LIBOR.
Carnival Corporation and/or Carnival plc is the primary obligor of all our
outstanding debt excluding the following:
• $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
• $0.5 billion under a term loan facility of Costa Crociere
S.p.A. ("Costa"), a subsidiary of Carnival plc
• $0.2 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
In addition, Carnival Holdings (Bermuda) II Limited ("Carnival Holdings II")
will be the primary obligor under a $2.1 billion multi-currency revolving
facility ("New Revolving Facility") when the New Revolving Facility replaces
our Revolving Facility upon its maturity in August 2024. See "New Revolving
Facility."
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, which 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
As of November 30, 2023, the scheduled maturities of our debt are as follows:
(in millions)
Year Principal Payments
2024 $2,089
2025 2,229
2026 3,197
2027 (a) 6,288
2028 8,979
Thereafter 8,557
Total $31,339
(a) Subsequent to November 30, 2023, we retired $52 million of the
outstanding principal amount of our 9.9% second-priority secured notes due
2027. In addition, on January 22, 2024, we issued a notice of redemption for
the entire outstanding principal amount of $571 million to be redeemed on
February 1, 2024 at a price equal to 104.938% of the principal amount to be
redeemed plus accrued and unpaid interest to, but excluding, the redemption
date.
Short-Term Borrowings
As of November 30, 2023, we did not have short-term borrowings. As of November
30, 2022, our short-term borrowings consisted of $200 million under our
Revolving Facility. We may continue to borrow or otherwise utilize available
amounts under the Revolving Facility through August 2024, subject to
satisfaction of the conditions in the facility. We had $3.0 billion available
for borrowing under our Revolving Facility as of November 30, 2023. The
Revolving Facility bears 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 and 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 GHG emissions goals. We are
required to pay a commitment fee on any unutilized portion of the Revolving
Facility.
New Revolving Facility
In February 2023, Carnival Holdings II entered into the $2.1 billion New
Revolving Facility which may be utilized beginning on August 6, 2024,
replacing our Revolving Facility upon its maturity in August 2024. The
termination date of the New Revolving Facility is August 6, 2025, subject to
two, mutual one-year extension options. The new facility also contains an
accordion feature, allowing for additional commitments not to exceed 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 GHG 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 contributed three unencumbered vessels with a net
book value of $2.9 billion on the date of contribution (the "New Revolving
Facility Subject Vessels") to Carnival Holdings II with each of the vessels
continuing to be operated under one of the Carnival Corporation & plc
brands. Carnival Holdings II does not guarantee our other outstanding debt.
Term Loan Refinancing
In August 2023, we issued $500 million aggregate principal amount of 7.0%
first-priority senior secured notes due on August 15, 2029 (the "2029 Senior
Secured Notes") and borrowed an aggregate principal amount of $1.3 billion
under a new senior secured first lien term loan B facility, which bears
interest at a rate per annum equal to SOFR (with a 0.75% floor) plus 3.0% and
matures on August 8, 2027 (the "New Secured Term Loan Facility"). We used the
proceeds from these borrowings to prepay borrowings outstanding under our
existing first-priority senior secured term loan facility maturing in 2025.
The 2029 Senior Secured Notes and borrowings under the New Secured Term Loan
Facility are fully and unconditionally guaranteed, jointly and severally, on a
first-priority senior secured basis by Carnival plc and certain of our
subsidiaries that also guarantee our existing first- and second-priority
secured indebtedness, certain of our unsecured notes and our convertible
notes. The 2029 Senior Secured Notes and borrowings under the New Secured Term
Loan Facility are included within the total Secured Subsidiary Guaranteed
balance in the debt table above.
Redemptions and Retirements
During 2023, we redeemed and retired an aggregate principal amount of
$2.8 billion of our outstanding long-term debt with original maturities
ranging from 2024 through 2027.
Export Credit Facility Borrowings
During 2023, we borrowed $1.2 billion under export credit facilities due in
semi-annual installments through 2037. In addition, we paid down $1.0 billion
of floating rate unsecured borrowings mostly with 2023 and 2024 maturities. As
of November 30, 2023, the net book value of the vessels subject to negative
pledges was $15.6 billion.
Convertible Notes
In 2020, we issued $2.0 billion aggregate principal amount of 5.8%
convertible senior notes due 2023 (the "2023 Convertible Notes"). Since April
2020, we repurchased, exchanged and converted a portion of the 2023
Convertible Notes and repaid the remaining principal balance at maturity in
April 2023.
In August 2022, we issued $339 million aggregate principal amount of 5.8%
convertible senior notes due 2024 (the "2024 Convertible Notes") pursuant to
privately-negotiated non-cash exchange agreements with certain holders of the
2023 Convertible Notes, pursuant to which such holders agreed to exchange
their 2023 Convertible Notes for an equal amount of 2024 Convertible Notes. In
November 2022, we issued an additional $87 million aggregate principal amount
of the 2024 Convertible Notes pursuant to privately-negotiated non-cash
exchange agreements with certain holders of the 2023 Convertible Notes,
pursuant to which such holders agreed to exchange their 2023 Convertible Notes
for an equal amount of additional 2024 Convertible Notes. The 2024 Convertible
Notes mature on October 1, 2024, unless earlier repurchased or redeemed by us
or earlier converted in accordance with their terms prior to the maturity
date.
In November 2022, we issued $1.1 billion aggregate principal amount of 5.8%
convertible senior notes due 2027 (the "2027 Convertible Notes" and, together
with the 2024 Convertible Notes, the "Convertible Notes"). The 2027
Convertible Notes mature on December 1, 2027, unless earlier repurchased or
redeemed by us or earlier converted in accordance with their terms prior to
the maturity date.
The Convertible Notes are convertible by holders, subject to the conditions
described within the respective indentures that govern the Convertible Notes,
into cash, shares of Carnival Corporation common stock, or a combination
thereof, at our election. The 2024 Convertible Notes have an initial
conversion rate of 100 shares of Carnival Corporation common stock per $1,000
principal amount of notes, equivalent to an initial conversion price of $10
per share of common stock. The 2027 Convertible Notes have an initial
conversion rate of approximately 75 shares of Carnival Corporation common
stock per $1,000 principal amount of notes, equivalent to an initial
conversion price of approximately $13.39 per share of common stock. The
initial conversion price of the Convertible Notes is subject to certain
anti-dilutive adjustments and may also increase if such Convertible Notes are
converted in connection with a tax redemption or certain corporate events as
described within the respective indentures that govern the Convertible Notes.
The 2024 Convertible Notes were convertible from the date of issuance of the
2024 Convertible Notes until August 31, 2022, and thereafter may become
convertible if certain conditions are met. As of November 30, 2023, there were
no conditions satisfied which would allow the holders of the 2024 Convertible
Notes or the 2027 Convertible Notes to convert and therefore the Convertible
Notes were not convertible as of such date. Refer to Note 15 - "Supplemental
Cash Flow Information" for additional detail on transactions related to the
Convertible Notes.
We may redeem the 2024 Convertible Notes, in whole but not in part, at any
time on or prior to June 30, 2024 at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest to the redemption
date, if we or any guarantor would have to pay any additional amounts on the
2024 Convertible Notes due to a change in tax laws, regulations or rulings or
a change in the official application, administration or interpretation
thereof. We may redeem the 2027 Convertible Notes, in whole but not in part,
at any time on or prior to the 40th scheduled trading day immediately before
the maturity date at a redemption price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to the redemption date, if we or any
guarantor would have to pay any additional amounts on the 2027 Convertible
Notes due to a change in tax laws, regulations or rulings or a change in the
official application, administration or interpretation thereof.
On or after December 5, 2025 and on or before the 40th scheduled trading day
immediately before the maturity date, we may redeem for cash all or part of
the 2027 Convertible Notes, at our option, if the last reported sale price of
Carnival Corporation's common stock exceeds 130% of the conversion price then
in effect for at least 20 trading days (whether or not consecutive), including
the trading day immediately preceding the date on which we provide notice of
redemption, during the 30 consecutive trading day period ending on, and
including, the trading day immediately preceding the date on which we provide
notice of redemption. The redemption price will equal 100% of the principal
amount of the 2027 Convertible Notes being redeemed, plus accrued and unpaid
interest to, but excluding, the redemption date.
The net carrying value of the Convertible Notes was as follows:
November 30,
(in millions) 2023 2022
Principal $1,557 $1,653
Less: Unamortized debt discount and debt issue costs (27) (275)
$1,530 $1,378
The interest expense recognized related to the Convertible Notes was as
follows:
November 30,
(in millions) 2023 2022 2021
Contractual interest expense $91 $32 $31
Amortization of debt discount and debt issue costs 9 29 29
$100 $61 $60
As of November 30, 2023, the if-converted value above par was $356 million on
127.1 million available shares for the Convertible Notes.
Collateral and Priority Pool
As of November 30, 2023, the net book value of our ships and ship
improvements, excluding ships under construction, is $37.1 billion. Our
secured debt is secured on either a first or second-priority basis, depending
on the instrument, by certain collateral, which includes vessels and certain
assets related to those vessels and material intellectual property (combined
net book value of approximately $23.2 billion, including $21.5 billion
related to vessels and certain assets related to those vessels) as of November
30, 2023 and certain other assets.
As of November 30, 2023, $8.1 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. As of November 30, 2023, there was no change
in the identity of the Senior Priority Notes Subject Vessels.
Covenant Compliance
Our Revolving Facility, New Revolving Facility, unsecured loans and export
credit facilities contain certain covenants listed below:
• Maintain minimum interest coverage (adjusted EBITDA to
consolidated net interest charges, as defined in the agreements) (the
"Interest Coverage Covenant") as follows:
◦ For certain of our unsecured loans and our New Revolving
Facility, from the end of each fiscal quarter from August 31, 2024, at a ratio
of not less than 2.0 to 1.0 for each testing date occurring from August 31,
2024 until May 31, 2025, at a ratio of not less than 2.5 to 1.0 for the August
31, 2025 and November 30, 2025 testing dates, and at a ratio of not less than
3.0 to 1.0 for the February 28, 2026 testing date onwards and as applicable
through their respective maturity dates
◦ For our export credit facilities, from the end of each fiscal
quarter from May 31, 2024, at a ratio of not less than 2.0 to 1.0 for each
testing date occurring from May 31, 2024 until May 31, 2025, at a ratio of not
less than 2.5 to 1.0 for the August 31, 2025 and November 30, 2025 testing
dates, and at a ratio of not less than 3.0 to 1.0 for the February 28, 2026
testing date onwards
• For certain of our unsecured loans and export credit facilities,
maintain minimum issued capital and consolidated reserves (as defined in the
agreements) of $5.0 billion
• Limit our debt to capital (as defined in the agreements)
percentage to a percentage not to exceed 70% for the November 30, 2023 testing
date, following which it will be tested at levels which decline ratably to 65%
from the May 31, 2024 testing date onwards
• Maintain minimum liquidity as follows:
◦ For our New Revolving Facility, minimum liquidity of
$1.5 billion; provided, that if any commitments maturing on June 30, 2025
under our existing first-priority senior secured term loan facility are
outstanding on the March 31, 2025 testing date, our minimum liquidity on such
testing date cannot be less than the greater of (i) the aggregate outstanding
amount of such first-lien term loan facility commitments and (ii) $1.5 billion
◦ For our other unsecured loans and export credit facilities that
contain this covenant, $1.5 billion through November 30, 2026
• Adhere to certain restrictive covenants through August 2025
• Limit the amounts of our secured assets as well as secured and
other indebtedness
At November 30, 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.
As of November 30, 2023, we had $5.4 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 Facility.
Additionally, our $2.1 billion New Revolving Facility may be utilized
beginning in August 2024, at which date it will replace our Revolving
Facility. 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 to extend maturity dates and reduce interest expense by repaying
some of our existing indebtedness and obtain relevant financial covenant
amendments or waivers, if needed.
NOTE 6 - Contingencies
Litigation
We are routinely involved in legal proceedings, claims, disputes, regulatory
matters and governmental inspections or investigations arising in the ordinary
course of or incidental to our business, including those noted below.
Additionally, as a result of the impact of COVID-19, litigation claims,
enforcement actions, regulatory actions and investigations, including, but not
limited to, those arising from personal injury and loss of life, have been and
may, in the future, be asserted against us. We expect many of these claims and
actions, or any settlement of these claims and actions, to be covered by
insurance and historically the maximum amount of our liability, net of any
insurance recoverables, has been limited to our self-insurance retention
levels.
We record provisions in the consolidated financial statements for pending
litigation when we determine that an unfavorable outcome is probable and the
amount of the loss can be reasonably estimated.
Legal proceedings and government investigations are subject to inherent
uncertainties, and unfavorable rulings or other events could occur.
Unfavorable resolutions could involve substantial monetary damages. In
addition, in matters for which conduct remedies are sought, unfavorable
resolutions could include an injunction or other order prohibiting us from
selling one or more products at all or in particular ways, precluding
particular business practices or requiring other remedies. An unfavorable
outcome might result in a material adverse impact on our business, results of
operations, financial position or liquidity.
As previously disclosed, on May 2, 2019, the Havana Docks Corporation filed a
lawsuit against Carnival Corporation in the U.S. District Court for the
Southern District of Florida under Title III of the Cuban Liberty and
Democratic Solidarity Act, also known as the Helms-Burton Act, alleging that
Carnival Corporation "trafficked" in confiscated Cuban property when certain
ships docked at certain ports in Cuba, and that this alleged "trafficking"
entitles the plaintiffs to treble damages. The hearings on motions for summary
judgment were concluded on January 18, 2022. On March 21, 2022, the court
granted summary judgment in favor of Havana Docks Corporation as to liability.
On August 31, 2022, the court determined that the trebling provision of the
Helms-Burton statute applies to damages and interest and accordingly, we
adjusted our estimated liability for this matter. On December 30, 2022, the
court entered judgment against Carnival in the amount of $110 million plus
$4 million in fees and costs. We have filed an appeal and as of November 20,
2023, the matter was fully briefed.
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. 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. These two cases were consolidated
in the Southern District of Florida. On March 10, 2023, the jury returned a
verdict finding that DeCurtis had breached its contract with Carnival
Corporation and infringed on the Carnival Corporation patent. The jury awarded
Carnival Corporation a total of $21 million in damages. On April 30, 2023,
DeCurtis filed for bankruptcy protection in the United States Bankruptcy Court
for the District of Delaware. Carnival Corporation is defending its interests
in the bankruptcy matter.
COVID-19 Actions
We have been named in a number of individual actions related to COVID-19.
These actions include tort claims based on a variety of theories, including
negligence and failure to warn. The plaintiffs in these actions allege a
variety of injuries: some plaintiffs confined their claim to emotional
distress, while others allege injuries arising from testing positive for
COVID-19. A smaller number of actions include wrongful death claims.
Substantially all of these individual actions have now been dismissed or
settled for immaterial amounts.
As of November 30, 2023, two purported class actions brought against us by
former guests in the Federal Court in Australia and in Italy remain pending.
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. Additionally, on December 6, 2023, the High Court of
Australia ruled on appeal that United States and United Kingdom passengers
were properly included in the class, regardless of the ticket contract terms
applicable to those passengers. We believe the ultimate outcome of these
matters will not have a material impact on our consolidated financial
statements.
All COVID-19 matters seek monetary damages and most seek additional punitive
damages in unspecified amounts.
We continue to take actions to defend against the above claims.
Regulatory or Governmental Inquiries and Investigations
We have been, and may continue to be, impacted by breaches in data security
and lapses in data privacy, which occur from time to time. These can vary in
scope and 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 the last three years were not material. While these incidents
did not have a material adverse effect on our business, results of operations,
financial position or liquidity, no assurances can be given about the future
and we may be subject to future litigation, attacks or incidents that could
have such a material adverse effect.
On March 14, 2022, the U.S. Department of Justice and the U.S. Environmental
Protection Agency notified us of potential civil penalties and injunctive
relief for alleged Clean Water Act violations by owned and operated vessels
covered by the 2013 Vessel General Permit. We are working with these agencies
to reach a resolution of this matter. We believe the ultimate outcome will not
have a material impact on our consolidated financial statements.
Other Contingent Obligations
Some of the debt contracts we enter into include indemnification provisions
obligating us to make payments to the counterparty if certain events occur.
These contingencies generally relate to changes in taxes or changes in laws
which increase the lender's costs. There are no stated or notional amounts
included in the indemnification clauses, and we are not able to estimate the
maximum potential amount of future payments, if any, under these
indemnification clauses.
We have agreements with a number of credit card processors that transact
customer deposits related to our cruise vacations. Certain of these agreements
allow the credit card processors to request, under certain circumstances, that
we provide a reserve fund in cash. Although the agreements vary, these
requirements may generally be satisfied either through a withheld percentage
of customer payments or providing cash funds directly to the credit card
processor.
As of November 30, 2023 and November 30, 2022, we had $844 million and
$1.7 billion in reserve funds. Additionally, as of November 30, 2023 and
November 30, 2022, we had $108 million and $229 million in compensating
deposits we are required to maintain and $50 million of cash collateral in
escrow. Of these balances, $819 million is included within prepaid expenses
and other and $183 million is included within other assets as of November 30,
2023. In November 2023, we amended our agreement with one of our credit card
processors, following which substantially all of the remaining credit card
reserves were returned during the first quarter of 2024.
NOTE 7 - Commitments
As of November 30, 2023, we expect the timing of our new ship growth capital
commitments to be as follows:
(in millions)
Year
2024 $2,437
2025 958
Thereafter -
$3,395
NOTE 8 - Taxation
A summary of our principal taxes and exemptions in the jurisdictions where our
significant operations are located is as follows:
U.S. Income Tax
We are primarily foreign corporations engaged in the business of operating
cruise ships in international transportation. We also own and operate, among
other businesses, the U.S. hotel and transportation business of Holland
America Princess Alaska Tours through U.S. corporations.
Our North American cruise ship businesses and certain ship-owning subsidiaries
are engaged in a trade or business within the U.S. Depending on its
itinerary, any particular ship may generate income from sources within the
U.S. We believe that our U.S. source income and the income of our ship-owning
subsidiaries, to the extent derived from, or incidental to, the international
operation of a ship or ships, is currently exempt from U.S. federal income and
branch profit taxes.
Our domestic U.S. operations, principally the hotel and transportation
business of Holland America Princess Alaska Tours, are subject to federal and
state income taxation in the U.S.
We do not believe we were a passive foreign investment company ("PFIC"),
within the meaning of Section 1297 of the Internal Revenue Code, for the 2023
taxable year and do not currently expect to be a PFIC in the 2024 taxable
year.
In general, under Section 883 of the Internal Revenue Code, certain non-U.S.
corporations (such as our North American cruise ship businesses) are not
subject to U.S. federal income tax or branch profits tax on U.S. source income
derived from, or incidental to, the international operation of a ship or
ships. Applicable U.S. Treasury regulations provide in general that a foreign
corporation will qualify for the benefits of Section 883 if, in relevant part,
(i) the foreign country in which the foreign corporation is organized grants
an equivalent exemption to corporations organized in the U.S. in respect of
each category of shipping income for which an exemption is being claimed under
Section 883 (an "equivalent exemption jurisdiction") and (ii) the foreign
corporation meets a defined publicly-traded corporation stock ownership test
(the "publicly-traded test"). Subsidiaries of foreign corporations that are
organized in an equivalent exemption jurisdiction and meet the publicly-traded
test also benefit from Section 883. We believe that Panama is an equivalent
exemption jurisdiction and that Carnival Corporation currently satisfies the
publicly-traded test under the regulations. Accordingly, substantially all of
Carnival Corporation's income is exempt from U.S. federal income and branch
profit taxes.
Regulations under Section 883 list certain activities that the Internal
Revenue Service ("IRS") does not consider to be incidental to the
international operation of ships and, therefore, the income attributable to
such activities, to the extent such income is U.S. source, does not qualify
for the Section 883 exemption. Among the activities identified as not
incidental are income from the sale of air transportation, transfers, shore
excursions and pre- and post-cruise land packages to the extent earned from
sources within the U.S.
We believe that the U.S. source transportation income earned by Carnival plc
and its subsidiaries currently qualifies for exemption from U.S. federal
income tax under applicable bilateral U.S. income tax treaties.
Carnival Corporation, Carnival plc and certain subsidiaries are subject to
various U.S. state income taxes generally imposed on each state's portion of
the U.S. source income subject to U.S. federal income taxes. However, the
state of Alaska imposes an income tax on its allocated portion of the total
income of our companies doing business in Alaska and certain of their
subsidiaries.
UK and Australian Income Tax
Cunard, P&O Cruises (UK) and P&O Cruises (Australia) are divisions of
Carnival plc and have elected to enter UK tonnage tax regime under a rolling
ten-year term and, accordingly, reapply every year. Companies to which the
tonnage tax regime applies pay corporation taxes on profits calculated by
reference to the net tonnage of qualifying ships. UK corporation tax is not
chargeable under the normal UK tax rules on these brands' relevant shipping
income. Relevant shipping income includes income from the operation of
qualifying ships and from shipping related activities.
For a company to be eligible for the regime, it must be subject to UK
corporation tax and, among other matters, operate qualifying ships that are
strategically and commercially managed in the UK. Companies within UK tonnage
tax are also subject to a seafarer training requirement.
Our UK non-shipping activities that do not qualify under the UK tonnage tax
regime remain subject to normal UK corporation tax.
P&O Cruises (Australia) and all of the other cruise ships operated
internationally by Carnival plc for the cruise segment of the Australian
vacation region are exempt from Australian corporation tax by virtue of the
UK/Australian income tax treaty.
Italian and German Income Tax
In 2015, Costa and AIDA re-elected to enter the Italian tonnage tax regime
through 2024 and can reapply for an additional 10-year period beginning in
early 2025. Companies to which the tonnage tax regime applies pay corporation
taxes on shipping profits calculated by reference to the net tonnage of
qualifying ships.
Most of Costa's and AIDA's earnings that are not eligible for taxation under
the Italian tonnage tax regime will be taxed at an effective tax rate of 4.8%
in 2023 and 2022.
Substantially all of AIDA's earnings are exempt from German income taxes by
virtue of the Germany/Italy income tax treaty.
Other
In addition to or in place of income taxes, virtually all jurisdictions where
our ships call impose taxes, fees and other charges based on guest counts,
ship tonnage, passenger capacity or some other measure.
NOTE 9 - Shareholders' Equity
Carnival Corporation's Articles of Incorporation authorize its Boards of
Directors, at its discretion, to issue up to 40 million shares of preferred
stock. At November 30, 2023 and 2022, no Carnival Corporation preferred stock
or Carnival plc preference shares had been issued.
Stock Swap Program
We have a program that allows us to realize a net cash benefit when Carnival
Corporation common stock is trading at a premium to the price of Carnival plc
ordinary shares (the "Stock Swap Program").
During 2023, 2022 and 2021 under the Stock Swap Program, we sold 2.3 million,
6.0 million and 8.9 million shares of Carnival Corporation common stock and
repurchased the same amount of Carnival plc ordinary shares resulting in net
proceeds of $2 million, $8 million and $19 million, which were used for
general corporate purposes.
(in millions, except per share data) Total Number of Shares of Carnival plc Ordinary Shares Purchased (a) Average Price Paid per Share of Carnival plc Ordinary Share Maximum Number of Carnival plc Ordinary Shares That May Yet Be Purchased Under
the Carnival Corporation Stock Swap Program
2023 2.3 $8.70 1.4
2022 6.0 $14.52 3.6
2021 8.9 $20.99 9.5
(a) No ordinary shares of Carnival plc were purchased outside of publicly
announced plans or programs.
Public Equity Offerings
In February 2021, we completed a public offering of 40.5 million shares of
Carnival Corporation common stock at a price per share of $25.10, resulting in
net proceeds of $996 million.
In August 2022, we completed a public offering of 117.5 million shares of
Carnival Corporation common stock at a price per share of $9.95, resulting in
net proceeds of $1.2 billion.
Other
In addition, in 2023, 2022 and 2021 we sold 0.5 million, 1.6 million and
0.6 million shares of Carnival Corporation common stock at an average price
per share of $9.83, $19.27 and $21.32, resulting in net proceeds of $5
million, $30 million and $13 million.
Accumulated Other Comprehensive Income (Loss)
AOCI
November 30,
(in millions) 2023 2022 2021
Cumulative foreign currency translation adjustments, net $(1,952) $(2,004) $(1,501)
Unrecognized pension expenses (34) (31) (45)
Net gains on cash flow derivative hedges and other 48 53 44
$(1,939) $(1,982) $(1,501)
During 2023, 2022 and 2021, we had an immaterial amount of unrecognized
pension expenses that were reclassified out of accumulated other comprehensive
loss and were included within payroll and related expenses and selling and
administrative expenses.
NOTE 10 - Fair Value Measurements, Derivative Instruments and Hedging
Activities and Financial Risks
Fair Value Measurements
Fair value is defined as the amount that would be received for selling an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date and is measured using inputs in one of
the following three categories:
• Level 1 measurements are based on unadjusted quoted prices in
active markets for identical assets or liabilities that we have the ability to
access. Valuation of these items does not entail a significant amount of
judgment.
• Level 2 measurements are based on quoted prices for similar
assets or liabilities in active markets, quoted prices for identical or
similar assets or liabilities in markets that are not active or market data
other than quoted prices that are observable for the assets or liabilities.
• Level 3 measurements are based on unobservable data that are
supported by little or no market activity and are significant to the fair
value of the assets or liabilities.
Considerable judgment may be required in interpreting market data used to
develop the estimates of fair value. Accordingly, certain estimates of fair
value presented herein are not necessarily indicative of the amounts that
could be realized in a current or future market exchange.
Financial Instruments that are not Measured at Fair Value on a Recurring Basis
November 30, 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) $22,575 $- $21,503 $- $23,542 $- $18,620 $-
Floating rate debt (a) 8,764 - 8,225 - 12,074 - 10,036 -
Total $31,339 $- $29,728 $- $35,615 $- $28,656 $-
(a) The debt amounts above do not include the impact of interest rate
swaps or debt issuance costs and discounts. The fair values of our
publicly-traded notes were based on their unadjusted quoted market prices in
markets that are not sufficiently active to be Level 1 and, accordingly, are
considered Level 2. The fair values of our other debt were estimated based on
current market interest rates being applied to this debt.
Financial Instruments that are Measured at Fair Value on a Recurring Basis
November 30, 2023 November 30, 2022
(in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets
Cash equivalents (a) $1,021 $- $- $2,589 $- $-
Restricted cash (b) 21 - - 1,988 - -
Derivative financial instruments - 22 - - 1 -
Total $1,042 $22 $- $4,576 $1 $-
Liabilities
Derivative financial instruments $- $28 $- $- $- $-
Total $- $28 $- $- $- $-
(a) Consists of money market funds and cash investments with original
maturities of less than 90 days.
(b) This amount includes $10 million, which is included in other assets on
our Consolidated Balance Sheets at November 30, 2023.
Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring
Basis
Valuation of Goodwill and Trademarks
As of July 31, 2023, we performed our annual goodwill and trademark impairment
reviews and determined there was no impairment for goodwill or trademarks.
During 2021, as a result of the ongoing impacts of COVID-19 and its effect on
our expected future operating cash flows, including changes in estimates
related to the timing of our full return to guest cruise operations and
improved profitability, we performed interim discounted cash flow analyses for
our Europe segment reporting units and determined their estimated fair values
no longer exceeded their carrying values. As a result, we recognized goodwill
impairment charges of $226 million and accordingly have no remaining goodwill
for those reporting units.
The determination of the fair value of our reporting units' goodwill and
trademarks includes numerous estimates and underlying assumptions that are
subject to various risks and uncertainties. We believe that we have made
reasonable estimates and judgments.
The assumptions, all of which are considered Level 3 inputs, used in our 2021
cash flow analyses and which resulted in goodwill impairments for all but one
reporting unit consisted of:
• The timing and pace of our full return to guest cruise
operations
• Weighted-average cost of capital of market participants,
adjusted for the risk attributable to the geographic regions in which these
cruise brands operate ("WACC")
The estimated fair value of the reporting unit with remaining goodwill and of
our trademarks significantly exceeded their carrying value as of the date of
the most recent impairment test.
As of November 30, 2023 and November 30, 2022, goodwill for our North America
and Australia ("NAA") segment was $579 million.
Trademarks
(in millions) NAA Europe Segment Total
Segment
At November 30, 2021 $927 $248 $1,175
Exchange movements - (24) (24)
At November 30, 2022 927 224 1,151
Exchange movements - 14 14
At November 30, 2023 $927 $237 $1,164
Impairment of Ships
In 2022, as a result of the continued effects of COVID-19 on our business and
certain Asia markets which remained closed to cruising (particularly China),
and our updated expectations for our deployment, we determined that two ships
had net carrying values that exceeded their respective estimated undiscounted
future cash flows. We then estimated the fair value of these ships, based on
their estimated selling values, and recognized ship impairment charges as
summarized in the table below. The principal assumption used in determining
the fair value of these ships were the estimated sales proceeds, which are
considered a Level 3 input.
In 2021, we performed undiscounted cash flow analyses on certain ships
throughout the year and determined that certain ships had net carrying values
that exceeded their estimated undiscounted future cash flows and fair values,
and, as a result, we recognized ship impairment charges during 2021 as
summarized in the table below. The principal assumptions used in determining
the fair value of these ships were the timing of the sale of ships and
estimated proceeds, which are considered Level 3 inputs.
We believe we have made reasonable estimates and judgments as part of our
assessments. A change in the principal judgments or estimates may result in a
need to perform additional impairment reviews.
The impairment charges summarized in the table below are included in ship and
other impairments in our Consolidated Statements of Income (Loss).
November 30,
(in millions) 2023 2022 2021
NAA Segment $- $8 $273
Europe Segment - 421 318
Total ship impairments $- $428 $591
Refer to Note 2 - "Summary of Significant Accounting Policies, Preparation of
Financial Statements" for additional discussion.
Derivative Instruments and Hedging Activities
November 30,
(in millions) Balance Sheet Location 2023 2022
Derivative assets
Derivatives designated as hedging instruments
Interest rate swaps (a) Prepaid expenses and other $- $1
Other assets 22 1
Derivatives not designated as hedging instruments
Interest rate swaps (a) Prepaid expenses and other 1 -
Total derivative assets $22 $1
Derivative liabilities
Derivatives designated as hedging instruments
Cross currency swaps (b) Other long-term liabilities $12 $-
Interest rate swaps (a) Other long-term liabilities 16 -
Total derivative liabilities $28 $-
(a) We have interest rate swaps whereby we receive EURIBOR-based floating
interest rate payments in exchange for making fixed interest rate payments.
These interest rate swap agreements effectively changed $46 million at
November 30, 2023 and $89 million at November 30, 2022 of EURIBOR-based
floating rate euro debt to fixed rate euro debt. As of November 30, 2023,
these EURIBOR-based interest rate swaps were not designated as cash flow
hedges. As of November 30, 2022, one of these swaps was designated as a cash
flow hedge. During 2023, we entered into interest rate swap agreements which
effectively changed $2.5 billion at November 30, 2023 of variable rate debt
to fixed rate debt. At November 30, 2023, these interest rate swaps settle
through 2027 and are designated as cash flow hedges.
(b) At November 30, 2023, we had a cross currency swap totaling
$670 million that is designated as a hedge of our net investment in foreign
operations with euro-denominated functional currencies. At November 30, 2023,
this cross currency swap settles through 2024. At November 30, 2022, we had no
cross-currency swaps.
Our derivative contracts include rights of offset with our counterparties. As
of November 30, 2023 and 2022, 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:
November 30,
(in millions) 2023 2022 2021
Gains (losses) recognized in AOCI:
Cross currency swaps - net investment hedges - included component $(4) $72 $(1)
Cross currency swaps - net investment hedges - excluded component $(4) $(26) $(6)
Interest rate swaps - cash flow hedges $32 $11 $5
(Gains) losses reclassified from AOCI - cash flow hedges:
Interest rate swaps - Interest expense, net of capitalized interest $(34) $2 $5
Foreign currency zero cost collars - Depreciation and amortization $(2) $(2) $(2)
Gains (losses) recognized on derivative instruments (amount excluded from
effectiveness testing - net investment hedges)
Cross currency swaps - Interest expense, net of capitalized interest $11 $5 $-
The amount of gains and losses on derivatives not designated as hedging
instruments recognized in earnings during the year ended November 30, 2023 and
estimated cash flow hedges' unrealized gains and losses that are expected to
be reclassified to earnings in the next twelve months are not material.
Financial Risks
Fuel Price Risks
We manage our exposure to fuel price risk by managing our consumption of fuel.
Substantially all of our exposure to market risk for changes in fuel prices
relates to the consumption of fuel on our ships. We manage fuel consumption
through 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 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.
During 2023, we had sterling-denominated debt designated as a non-derivative
hedge of our net investment in foreign operations. The debt was repaid in July
2023. During 2023, 2022 and 2021, we recognized $(33) million, $48 million
and $(21) million of gains (losses) on this net investment hedge in the
cumulative translation adjustment section of other comprehensive income
(loss). As of November 30, 2023, we had a cross currency swap with a notional
amount of $670 million, which is designated as a hedge of our net investments
in foreign operations. We also have euro-denominated debt which provides an
economic offset for our operations with euro functional currency.
Newbuild Currency Risks
Our shipbuilding contracts are typically denominated in euros. Our decision to
hedge a non-functional currency ship commitment for our cruise brands is made
on a case-by-case basis, considering the amount and duration of the exposure,
market volatility, economic trends, our overall expected net cash flows by
currency and other offsetting risks.
At November 30, 2023, our remaining newbuild currency exchange rate risk
relates to euro-denominated newbuild contract payments for non-euro functional
currency brands, which represent a total unhedged commitment of $3.0 billion
for newbuilds scheduled to be delivered through 2025.
The cost of shipbuilding orders that we may place in the future that are
denominated in a different currency than our cruise brands' functional
currency will be affected by foreign currency exchange rate
fluctuations. These foreign currency exchange rate fluctuations may affect
our decision to order new cruise ships.
Interest Rate Risks
We manage our exposure to fluctuations in interest rates through our debt
portfolio management and investment strategies. We evaluate our debt
portfolio to determine whether to make periodic adjustments to the mix of
fixed and floating rate debt through the use of interest rate swaps and the
issuance of new debt.
Concentrations of Credit Risk
As part of our ongoing control procedures, we monitor concentrations of credit
risk associated with financial and other institutions with which we conduct
significant business. We seek to manage these credit risk exposures,
including counterparty nonperformance primarily associated with our cash and
cash equivalents, investments, notes receivables, reserve funds related to
customer deposits, future financing facilities, contingent obligations,
derivative instruments, insurance contracts and new ship progress payment
guarantees, by:
• Conducting business with well-established financial
institutions, insurance companies and export credit agencies
• Diversifying our counterparties
• Having guidelines regarding credit ratings and investment
maturities that we follow to help safeguard liquidity and minimize risk
• Generally requiring collateral and/or guarantees to support
notes receivable on significant asset sales and new ship progress payments to
shipyards
We also monitor the creditworthiness of travel agencies and tour operators in
Australia and Europe and credit and debit card providers to which we extend
credit in the normal course of our business. Our credit exposure also
includes contingent obligations related to cash payments received directly by
travel agents and tour operators for cash collected by them on cruise sales in
Australia and most of Europe where we are obligated to honor our guests'
cruise payments made by them to their travel agents and tour operators
regardless of whether we have received these payments.
Concentrations of credit risk associated with trade receivables and other
receivables, charter-hire agreements and contingent obligations are not
considered to be material, principally due to the large number of unrelated
accounts, the nature of these contingent obligations and their short
maturities. Normally, we have not required collateral or other security to
support normal credit sales and have not experienced significant credit
losses.
NOTE 11 - Leases
The components of expense were as follows:
November 30,
(in millions) 2023 2022 2021
Operating lease expense $213 $192 $203
Variable lease expense (a) (b) $116 $(39) $(100)
(a) Variable lease expense represents increases or reductions to costs
associated with our multi-year preferential berthing agreements which vary
based on the number of passengers. These costs are recorded within
Commissions, transportation and other in our Consolidated Statements of Income
(Loss). Variable and short-term lease costs related to operating leases, other
than the port facilities, were not material to our consolidated financial
statements.
(b) Several of our preferential berthing agreements have force majeure
provisions which were in effect during the pause in guest cruise operations
due to COVID-19.
The cash outflow for leases was materially consistent with the lease expense
recognized during 2023.
During 2023, we obtained $108 million of right-of-use assets in exchange for
new operating lease liabilities.
Weighted average of the remaining lease terms and weighted average discount
rates are as follows:
November 30, 2023 November 30, 2022
Weighted average remaining lease term - operating leases (in years) 12 13
Weighted average discount rate - operating leases 5.9% 5.2%
As of November 30, 2023, maturities of operating lease liabilities were as
follows:
(in millions)
Year
2024 $206
2025 200
2026 188
2027 173
2028 152
Thereafter 967
Total lease payments 1,885
Less: Present value discount (566)
Present value of lease liabilities $1,319
For time charter arrangements where we are the lessor and for transactions
with cruise guests related to the use of cabins, we do not separate lease and
non-lease components. As the non-lease components are the predominant
components in the agreements, we account for these transactions under the
Revenue Recognition guidance.
NOTE 12 - Segment Information
Our operating segments are reported on the same basis as the internally
reported information that is provided to our chief operating decision maker,
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
("Europe"), (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 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.
As of and for the years ended November 30,
(in millions) Revenues Operating expenses Selling and administrative Depreciation and amortization Operating income (loss) Capital expenditures Total assets
2023
NAA $14,588 $9,587 $1,753 $1,495 $1,752 $1,932 $28,547
Europe (a) 6,535 4,398 876 668 593 1,161 16,524
Cruise Support 206 127 294 184 (399) 179 3,667
Tour and Other 265 205 27 23 11 12 382
$21,593 $14,317 $2,950 $2,370 $1,956 $3,284 $49,120
2022
NAA $8,281 $7,526 $1,517 $1,408 $(2,170) $2,568 $27,413
Europe (a) 3,531 3,925 745 692 (1,830) 2,213 15,317
Cruise Support 171 120 225 140 (315) 155 8,461
Tour and Other 185 187 27 36 (64) 4 512
$12,168 $11,757 $2,515 $2,275 $(4,379) $4,940 $51,703
2021
NAA $1,108 $2,730 $953 $1,352 $(3,928) $2,397 $25,606
Europe (a) 712 1,807 568 728 (2,617) (b) 515 16,088
Cruise Support 42 55 335 129 (477) 660 11,014
Tour and Other 46 63 27 23 (67) 35 637
$1,908 $4,655 $1,885 $2,233 $(7,089) $3,607 $53,344
(a) Beginning in the first quarter of 2023, we renamed the Europe and Asia
segment to Europe segment.
(b) Includes $226 million of goodwill impairment charges.
Revenue by geographic areas, which are based on where our guests are sourced,
were as follows:
Years Ended November 30,
(in millions) 2023 2022 2021
North America $13,112 $7,866 $1,066
Europe 6,565 3,918 811
Australia 1,181 252 -
Other 735 132 31
$21,593 $12,168 $1,908
Substantially all of our long-lived assets consist of our ships and move
between geographic areas.
NOTE 13 - Compensation Plans and Post-Employment Benefits
Equity Plans
We issue our share-based compensation awards, which at November 30, 2023
included time-based share awards (restricted stock awards and restricted stock
units) and performance-based share awards (collectively "equity awards"),
under the Carnival Corporation and Carnival plc stock plans. Equity awards are
principally granted to management level employees and members of our Boards of
Directors. The plans are administered by the Compensation Committees which are
made up of independent directors who determine which employees are eligible to
participate, the monetary value or number of shares for which equity awards
are to be granted and the amounts that may be exercised or sold within a
specified term. We had an aggregate of 31.7 million shares available for
future grant at November 30, 2023. We fulfill our equity award obligations
using shares purchased in the open market or with unissued or treasury shares.
Our equity awards generally vest over a three-year period, subject to earlier
vesting under certain conditions.
Shares Weighted-Average
Grant Date Fair
Value
Outstanding at November 30, 2022 6,380,515 $22.67
Granted 7,846,092 $9.64
Vested (3,195,202) $26.22
Forfeited (741,777) $25.22
Outstanding at November 30, 2023 10,289,628 $11.45
As of November 30, 2023, there was $59 million of total unrecognized
compensation cost related to equity awards, which is expected to be recognized
over a weighted-average period of 1.6 years.
Single-employer Defined Benefit Pension Plans
We maintain several single-employer defined benefit pension plans, which cover
certain shipboard and shoreside employees. The U.S. and UK shoreside employee
plans are closed to new membership and are funded at or above the level
required by U.S. or UK regulations. The remaining defined benefit plans are
primarily unfunded. These plans provide pension benefits primarily based on
employee compensation and years of service.
UK Plan (a) All Other Plans
(in millions) 2023 2022 2023 2022
Change in projected benefit obligation:
Projected benefit obligation as of December 1 $198 $298 $223 $263
Past service cost 1 - 18 18
Interest cost 8 5 11 5
Benefits paid (6) (12) (20) (15)
Actuarial (gain) loss on plans' liabilities (19) (88) (4) (49)
Plan curtailments, settlements and other - (6) (1) 1
Administrative expenses (1) - - -
Projected benefit obligation as of November 30 181 198 226 223
Change in plan assets:
Fair value of plan assets as of December 1 222 355 10 12
Return (loss) on plans' assets (20) (116) - (1)
Employer contributions 1 2 20 12
Benefits paid (6) (12) (20) (12)
Plan settlements - (5) (1) (1)
Administrative expenses (1) (2) - -
Fair value of plan assets as of November 30 196 222 9 10
Funded status as of November 30 $15 $24 $(218) $(213)
(a) The P&O Princess Cruises (UK) Pension Scheme ("UK Plan")
The amounts recognized in the Consolidated Balance Sheets for these plans were
as follows:
UK Plan All Other Plans
November 30, November 30,
(in millions) 2023 2022 2023 2022
Other assets $15 $24 $- $-
Accrued liabilities and other $- $- $29 $25
Other long-term liabilities $- $- $188 $188
The accumulated benefit obligation for all defined benefit pension plans was
$220 million and $386 million at November 30, 2023 and 2022, respectively.
Amounts for pension plans with accumulated benefit obligations in excess of
fair value of plan assets are as follows:
November 30,
(in millions) 2023 2022
Projected benefit obligation $226 $223
Accumulated benefit obligation $220 $218
Fair value of plan assets $9 $10
The net benefit cost recognized in the Consolidated Statements of Income
(Loss) were as follows:
UK Plan All Other Plans
November 30, November 30,
(in millions) 2023 2022 2021 2023 2022 2021
Service cost $1 $- $- $18 $18 $10
Interest cost 8 5 4 11 5 4
Expected return on plan assets (8) (6) (6) - - -
Amortization of prior service cost - - - - - -
Amortization of net loss (gain) - - - - 3 4
Settlement loss recognized - - - 1 1 5
Net periodic benefit cost $1 $(1) $(1) $30 $26 $22
The components of net periodic benefit cost other than the service cost
component are included in other income (expense), net in the Consolidated
Statements of Income (Loss).
Weighted average assumptions used to determine the projected benefit
obligation are as follows:
UK Plan All Other Plans
2023 2022 2023 2022
Discount rate 5.2% 4.3% 5.7% 5.4%
Rate of compensation increase 2.9% 2.9% 3.0% 3.0%
Weighted average assumptions used to determine net pension income are as
follows:
UK Plan All Other Plans
2023 2022 2021 2023 2022 2021
Discount rate 4.3% 1.6% 1.6% 5.4% 3.2% 2.3%
Expected return on assets 4.3% -% 1.9% 3.5% 2.3% 2.3%
Rate of compensation increase 2.9% 2.7% 2.3% 3.0% 3.0% 3.0%
The discount rate used to determine the UK Plan's projected benefit obligation
was determined as the single equivalent rate based on applying a yield curve
determined from AA credit rated bonds at the balance sheet date to the cash
flows making up the pension plan's obligations. The discount rate used to
determine the UK Plan's future net periodic benefit cost was determined as the
equivalent rate based on applying each individual spot rate from a yield curve
determined from AA credit rated bonds at the balance sheet date for each
year's cash flow. The UK Plan's expected long-term return on plan assets is
consistent with the long-term investment return target provided to the UK
Plan's fiduciary manager (U.K. government fixed interest bonds (gilts) plus
1.0% and was 5.6% per annum as of November 30, 2023.
Amounts recognized in AOCI are as follows:
UK Plan All Other Plans
November 30, November 30,
2023 2022 2023 2022
Actuarial losses (gains) recognized in the current year $9 $35 $(4) $(48)
Amortization and settlements included in net periodic benefit cost $(1) $- $(1) $(1)
We anticipate making contributions of $29 million to the plans during 2024.
Estimated future benefit payments to be made during each of the next five
fiscal years and in the aggregate during the succeeding five fiscal years are
as follows:
(in millions) UK Plan All Other Plans
2024 $7 $30
2025 7 29
2026 7 28
2027 7 27
2028 8 28
2029-2033 47 138
$83 $280
Our investment strategy for our pension plan assets is to maintain a
diversified portfolio of asset classes to produce a sufficient level of
diversification and investment return over the long term. The investment
policy for each plan specifies the type of investment vehicles appropriate for
the plan, asset allocation guidelines, criteria for selection of investment
managers and procedures to monitor overall investment performance, as well as
investment manager performance. As of November 30, 2023 and 2022,
respectively, the All Other Plans were unfunded.
The fair values of the plan assets of the UK Plan by investment class are as
follows:
November 30,
2023 2022
Equities $47 $53
U.K. government fixed interest bonds (gilts) $149 $169
Multiemployer Defined Benefit Pension Plans
We participate in two multiemployer defined benefit pension plans in the UK,
the British Merchant Navy Officers Pension Fund (registration number 10005645)
("MNOPF"), which is divided into two sections, the "New Section" and the "Old
Section," and the British Merchant Navy Ratings Pension Fund (registration
number 10005646) ("MNRPF"). Collectively, we refer to these as "the
multiemployer plans." The multiemployer plans are maintained for the benefit
of the employees of the participating employers who make contributions to the
plans. The risks of participating in these multiemployer plans are different
from single-employer plans, including:
• Contributions made by employers, including us, may be used to
provide benefits to employees of other participating employers
• If any of the participating employers were to withdraw from the
multiemployer plans or fail to make their required contributions, any unfunded
obligations would be the responsibility of the remaining participating
employers.
We are contractually obligated to make all required contributions as
determined by the plans' trustees. All of our multiemployer plans are closed
to new membership and future benefit accrual.
The MNOPF Old Section is fully funded and covered by a third party insurer,
with no further Carnival funding obligations. We expense our portion of the
MNOPF New Section deficit as amounts are invoiced by, and become due and
payable to, the trustees. We accrue and expense our portion of the MNRPF
deficit based on our estimated probable obligation from the most recent
actuarial review. Total expense for the multiemployer plans was $1 million in
2023, $2 million in 2022 and $28 million in 2021.
Based on the most recent triennial valuation at March 31, 2021 of the MNOPF
New Section, it was determined that this plan was 102% funded. In 2023, 2022
and 2021, our contributions to the MNOPF New Section did not exceed 5% of
total contributions to the fund. Based on the most recent triennial valuation
at March 31, 2020 of the MNRPF, it was determined that this plan was 93%
funded. In 2023, 2022 and 2021, our contributions to the MNRPF did not exceed
5% of total contributions to the fund. It is possible that we will be required
to fund and expense additional amounts for the multiemployer plans in the
future; however, such amounts are not expected to be material to our
consolidated financial statements.
Defined Contribution Plans
We have several defined contribution plans available to most of our employees.
We contribute to these plans based on employee contributions, salary levels
and length of service. Total expense for these plans was $48 million in 2023,
$40 million in 2022 and $35 million in 2021.
NOTE 14 - Earnings Per Share
Years Ended November 30,
(in millions, except per share data) 2023 2022 2021
Net income (loss) for basic and diluted earnings per share $(74) $(6,093) $(9,501)
Weighted-average shares outstanding 1,262 1,180 1,123
Diluted weighted-average shares outstanding 1,262 1,180 1,123
Basic earnings per share $(0.06) $(5.16) $(8.46)
Diluted earnings per share $(0.06) $(5.16) $(8.46)
Antidilutive shares excluded from diluted earnings per share computations were
as follows:
November 30,
(in millions) 2023 2022 2021
Equity awards 4 1 3
Convertible Notes 130 55 53
Total antidilutive securities 134 56 56
NOTE 15 - Supplemental Cash Flow Information
November 30,
(in millions) 2023 2022 2021
Cash and cash equivalents (Consolidated Balance Sheets) $2,415 $4,029 $8,939
Restricted cash (Consolidated Balance Sheets) 11 1,988 14
Restricted cash (included in other assets) 10 20 24
Total cash, cash equivalents and restricted cash (Consolidated Statements of $2,436 $6,037 $8,976
Cash Flows)
Cash paid for interest, net of capitalized interest, was $2.0 billion in
2023, $1.4 billion in 2022 and $1.3 billion in 2021. Cash benefit received
(paid) for income taxes, net was not material in 2023, 2022 and 2021. In
addition, non-cash purchases of property and equipment included in accrued
liabilities and other was $307 million in 2023, $100 million in 2022 and
$127 million in 2021.
Substantially all restricted cash as of November 30, 2022 related to the net
proceeds from the issuance of our 2028 Senior Priority Notes. The contractual
restrictions on these proceeds were satisfied in December 2022 at which time
these amounts became unrestricted.
In August 2022, we issued $339 million aggregate principal amount of 2024
Convertible Notes pursuant to privately-negotiated non-cash exchange
agreements with certain holders of the 2023 Convertible Notes, pursuant to
which such holders agreed to exchange their 2023 Convertible Notes for an
equal amount of 2024 Convertible Notes. In November 2022, we issued an
additional $87 million aggregate principal amount of the 2024 Convertible
Notes pursuant to privately-negotiated non-cash exchange agreements with
certain holders of the 2023 Convertible Notes, pursuant to which such holders
agreed to exchange their 2023 Convertible Notes for an equal amount of
additional 2024 Convertible Notes.
Refer to Note 5 - "Debt" for additional detail relating to our 2028 Senior
Priority Notes and the 2024 Convertible Notes.
For the years ended November 30, 2023, 2022 and 2021, we did not have
borrowings or repayments of commercial paper with original maturities greater
than three months.
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. END FR EQLFLZFLXBBERecent news on Carnival
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