CARNIVAL CORPORATION Cautionary Note Concerning Factors That May Affect Future Results
Some of the statements, estimates or projections contained in this document are
"forward-looking statements" that involve risks, uncertainties and assumptions
with respect to us, including some statements concerning future results,
operations, outlooks, plans, goals, reputation, cash flows, liquidity and other
events which have not yet occurred. These statements are intended to qualify for
the safe harbors from liability provided by Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical facts are statements that could
be deemed forward-looking. These statements are based on current expectations,
estimates, forecasts and projections about our business and the industry in
which we operate and the beliefs and assumptions of our management. We have
tried, whenever possible, to identify these statements by using words like
"will," "may," "could," "should," "would," "believe," "depends," "expect,"
"goal," "aspiration," "anticipate," "forecast," "project," "future," "intend,"
"plan," "estimate," "target," "indicate," "outlook," and similar expressions of
future intent or the negative of such terms.
Forward-looking statements include those statements that relate to our outlook
and financial position including, but not limited to, statements regarding:
•Pricing •Goodwill, ship and trademark fair values
•Booking levels •Liquidity and credit ratings
•Occupancy •Adjusted earnings per share
•Interest, tax and fuel expenses •Return to guest cruise operations
•Currency exchange rates •Impact of the COVID-19 coronavirus global
pandemic on our financialcondition and results •Estimates of ship depreciable lives and residual of operations values
Because forward-looking statements involve risks and uncertainties, there are many factors that could cause our actual results, performance or achievements to differ materially from those expressed or implied by our forward-looking statements. This note contains important cautionary statements of the known factors that we consider could materially affect the accuracy of our forward-looking statements and adversely affect our business, results of operations and financial position. Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, COVID-19. It is not possible to predict or identify all such risks. There may be additional risks that we consider immaterial or which are unknown. These factors include, but are not limited to, the following: •COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations. The current, and uncertain future, impact of COVID-19, including its effect on the ability or desire of people to travel (including on cruises), is expected to continue to impact our results, operations, outlooks, plans, goals, reputation, litigation, cash flows, liquidity, and stock price. •Events and conditions around the world, including war and other military actions, such as the current invasion ofUkraine , heightened inflation and other general concerns impacting the ability or desire of people to travel have and may lead to a decline in demand for cruises, impact our operating costs and profitability. •Incidents concerning our ships, guests or the cruise vacation industry have in the past and may, in the future, impact the satisfaction of our guests and crew and lead to reputational damage. •Changes in and non-compliance with laws and regulations under which we operate, such as those relating to health, environment, safety and security, data privacy and protection, anti-corruption, economic sanctions, trade protection and tax have in the past and may, in the future, lead to litigation, enforcement actions, fines, penalties and reputational damage. •Factors associated with climate change, including evolving and increasing regulations, increasing global concern about climate change and the shift in climate conscious consumerism and stakeholder scrutiny, and increasing frequency and/or severity of adverse weather conditions could adversely affect our business. •Inability to meet or achieve our sustainability related goals, aspirations, initiatives, and our public statements and disclosures regarding them, may expose us to risks that may adversely impact our business. •Breaches in data security and lapses in data privacy as well as disruptions and other damages to our principal offices, information technology operations and system networks and failure to keep pace with developments in technology may adversely impact our business operations, the satisfaction of our guests and crew and may lead to reputational damage. •The loss of key employees, our inability to recruit or retain qualified shoreside and shipboard employees and increased labor costs could have an adverse effect on our business and results of operations. •Increases in fuel prices, changes in the types of fuel consumed and availability of fuel supply may adversely impact our scheduled itineraries and costs. 23 -------------------------------------------------------------------------------- Table of Contents •We rely on supply chain vendors who are integral to the operations of our businesses. These vendors and service providers are also affected by COVID-19 and may be unable to deliver on their commitments which could impact our business. •Fluctuations in foreign currency exchange rates may adversely impact our financial results. •Overcapacity and competition in the cruise and land-based vacation industry may lead to a decline in our cruise sales, pricing and destination options. •Inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments may adversely impact our business operations and the satisfaction of our guests.
The ordering of the risk factors set forth above is not intended to reflect our indication of priority or likelihood.
Forward-looking statements should not be relied upon as a prediction of actual results. Subject to any continuing obligations under applicable law or any relevant stock exchange rules, we expressly disclaim any obligation to disseminate, after the date of this document, any updates or revisions to any such forward-looking statements to reflect any change in expectations or events, conditions or circumstances on which any such statements are based. Forward-looking and other statements in this document may also address our sustainability progress, plans and goals (including climate change and environmental-related matters). In addition, historical, current and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
New Accounting Pronouncements
Refer to Note 1 - "General, Accounting Pronouncements" of the consolidated financial statements for additional discussion regarding accounting pronouncements.
Critical Accounting Estimates
For a discussion of our critical accounting estimates, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" that is included in the Form 10-K.
Seasonality
Our passenger ticket revenues are seasonal. Historically, demand for cruises has been greatest during our third quarter, which includes the Northern Hemisphere summer months. This higher demand during the third quarter results in higher ticket prices and occupancy levels and, accordingly, the largest share of our operating income is typically earned during this period. This historical trend was disrupted in 2020 by the pause and in 2021 by the ongoing resumption of guest cruise operations. In addition, substantially all ofHolland America Princess Alaska Tours' revenue and net income (loss) is generated from May through September in conjunction withAlaska's cruise season.
Known Trends and Uncertainties
•We believe the increased cost of fuel, liquefied natural gas ("LNG") and other
related costs are reasonably likely to continue to impact our profitability in
both the short and long-term.
•We expect inflation and supply chain challenges to continue to weigh on our
operating costs, and they are reasonably likely to continue to impact our
profitability.
•We believe the increasing global focus on climate change, including the
reduction of carbon emissions and new and evolving regulatory requirements, is
reasonably likely to materially impact our future costs, capital expenditures
and revenues and/or the relationship between them. The full impact of climate
change to our business is not yet known.
•In addition, as is the case with the travel and leisure sector generally, we
are experiencing some challenges with onboard staffing which have resulted in
occupancy constraints on certain voyages and are reasonably likely to impact our
profitability in the short-term.
•We expect a net loss for the third quarter of 2022. For the full year 2022, we
continue to expect a net loss.
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Statistical Information
Three Months Ended Six Months Ended
May 31, May 31,
2022 2021 2022 2021
Passenger Cruise Days ("PCDs") (in
thousands) (a) 11,434 138 18,663 166
Available Lower Berth Days ("ALBDs") (in
thousands) (b) 16,666 444 29,989 617
Occupancy percentage (c) 69 % 31 % 62 % 27 %
Passengers carried (in thousands) 1,652 27 2,663 32
Fuel consumption in metric tons (in
thousands) 632 246 1,198 508
Fuel consumption in metric tons per
thousand ALBDs 37.9 (d) 40.0 (d)
Fuel cost per metric ton consumed $ 869 $ 467 $ 765 $ 428
Currencies (USD to 1)
AUD $ 0.73 $ 0.77 $ 0.72 $ 0.77
CAD $ 0.79 $ 0.81 $ 0.79 $ 0.80
EUR $ 1.08 $ 1.20 $ 1.11 $ 1.21
GBP $ 1.29 $ 1.39 $ 1.32 $ 1.38 The ongoing resumption of guest cruise operations is continuing to have a material impact on all aspects of our business, including the above statistical information.
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 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.
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Results of Operations
Consolidated
Six Months Ended
Three Months Ended May 31, May 31,
(in millions) 2022 2021 Change 2022 2021 Change
Revenues
Passenger ticket $ 1,285 $ 20 $ 1,265 $ 2,158 $ 23 $ 2,135
Onboard and other 1,116 29 1,086 1,866 52 1,814
2,401 50 2,351 4,024 75 3,949Operating Costs and Expenses
Commissions, transportation and other 325 22 303 576 37 539
Onboard and other 314 15 300 523 22 501
Payroll and related 533 241 291 1,038 460 579
Fuel 545 113 432 910 216 694
Food 191 17 175 327 28 299
Ship and other impairments - 49 (49) 8 49 (42)
Other operating 774 224 551 1,331 404 927
2,683 681 2,002 4,713 1,216 3,497
Selling and administrative 619 417 201 1,149 879 269
Depreciation and amortization 572 567 5 1,126 1,119 7
3,874 1,665 2,209 6,988 3,214 3,774
Operating Income (Loss) (1,473) (1,616) 142 (2,964) (3,139) 175
Nonoperating Income (Expense)
Interest income 6 4 2 9 7 2
Interest expense, net of capitalized
interest (370) (437) 67 (738) (835) 97
Gains (losses) on debt extinguishment,
net - 2 (2) - 4 (4)
Other income (expense), net 6 (13) 19 (26) (75) 49
(358) (444) 86 (755) (900) 144
Income (Loss) Before Income Taxes
$ 228 $ (3,719) $ (4,039) $ 319 NAA Six Months Ended Three Months Ended May 31, May 31, (in millions) 2022 2021 Change 2022 2021 Change Revenues Passenger ticket$ 862 $ 2 $ 860 $ 1,447 $ 1 $ 1,446 Onboard and other 804 7 798 1,345 18 1,327 1,666 9 1,657 2,792 19 2,773 Operating Costs and Expenses 1,768 365 1,403 3,055 680 2,375 Selling and administrative 366 233 133 710 453 257 Depreciation and amortization 353 341 12 687 676 12 2,487 939 1,548 4,453 1,809 2,644 Operating Income (Loss)$ (821) $ (930) $ 109 $ (1,661) $ (1,790) $ 129 26
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EA
Six Months Ended
Three Months Ended May 31, May 31,
(in millions) 2022 2021 Change 2022 2021 Change
Revenues
Passenger ticket $ 490 $ 19 $ 472 $ 832 $ 22 $ 810
Onboard and other 175 15 161 291 19 271
666 33 633 1,123 41 1,082
Operating Costs and Expenses 848 298 550 1,546 496 1,050
Selling and administrative 175 131 45 352 239 113
Depreciation and amortization 179 186 (8) 359 370 (11)
1,202 615 587 2,257 1,105 1,152
Operating Income (Loss) $ (536) $ (582) $ 46 $ (1,134) $ (1,064) $ (70)
We paused our guest cruise operations in March 2020 . As of May 31, 2022 , 86% of
our capacity was in guest cruise operation, compared to 6% as of May 31, 2021 .
Our NAA segment had 90% of its capacity in guest cruise operations as of May 31,
2022 and no ships operating with guests onboard as of May 31, 2021 . Our EA
segment had 81% of its capacity in guest cruise operations as of May 31, 2022 ,
compared to 16% as of May 31, 2021 when it had five ships operating with guests
onboard.
The COVID-19 global pandemic and its ongoing effects, inflation and higher fuel
prices are collectively having a material negative impact on all aspects of our
business, including our results of operations, liquidity and financial position.
The full extent of these impacts are uncertain.
Three Months Ended
Revenues
Consolidated
Cruise passenger ticket revenues made up 54% of our total revenues for the three months endedMay 31, 2022 while onboard and other revenues made up 46%. Revenues for the three months endedMay 31, 2022 increased by$2.4 billion as compared to the three months endedMay 31, 2021 due to the ongoing resumption of guest cruise operations and the significant increase of ships in service. ALBDs increased to 16.7 million for the three months endedMay 31, 2022 as compared to 0.4 million for the three months endedMay 31, 2021 . Occupancy for the three months endedMay 31, 2022 was 69% compared to 31% for the three months endedMay 31, 2021 . NAA Segment Cruise passenger ticket revenues made up 52% of our NAA segment's total revenues for the three months endedMay 31, 2022 while onboard and other cruise revenues made up 48%. NAA segment revenues for the three months endedMay 31, 2022 increased by$1.7 billion as compared to the three months endedMay 31, 2021 due to the ongoing resumption of guest cruise operations and the significant increase of ships in service. ALBDs increased to 10.1 million for the three months endedMay 31, 2022 as compared to 0.0 million for the three months endedMay 31, 2021 . Occupancy for the three months endedMay 31, 2022 was 79%.
EA Segment
Cruise passenger ticket revenues made up 74% of our EA segment's total revenues for the three months endedMay 31, 2022 while onboard and other cruise revenues made up 26%. EA segment revenues for the three months endedMay 31, 2022 increased by$0.6 billion as compared to the three months endedMay 31, 2021 due to the ongoing resumption of guest cruise operations and the significant increase of ships in service. ALBDs increased to 6.6 million for the three months endedMay 31, 2022 as compared to 0.4 million for the three months endedMay 31, 2021 . Occupancy for the three months endedMay 31, 2022 was 53% compared to 31% for the three months endedMay 31, 2021 . 27 --------------------------------------------------------------------------------
Table of Contents Operating Costs and Expenses Consolidated Operating costs and expenses increased by$2.0 billion to$2.7 billion for the three months endedMay 31, 2022 from$0.7 billion for the three months endedMay 31, 2021 . These increases were driven by our ongoing resumption of guest cruise operations and restart related expenses, including the cost of returning ships to guest cruise operations and returning crew members to our ships, higher number of dry-dock days, the cost of maintaining enhanced health and safety protocols, inflation and supply chain disruptions. We anticipate that some of these costs and expenses will end in 2022. Fuel costs increased by$432 million to$545 million for the three months endedMay 31, 2022 from$113 million for the three months endedMay 31, 2021 . This increase was caused by higher fuel consumption of 386 thousand metric tons, due to the resumption of guest cruise operations, and an increase in fuel prices of$402 per metric ton consumed for the three months endedMay 31, 2022 compared to the three months endedMay 31, 2021 . Selling and administrative expenses increased by$201 million to$619 million for the three months endedMay 31, 2022 from$417 million for the three months endedMay 31, 2021 . This increase was caused by increased advertising and promotional spend incurred as part of our ongoing resumption of guest cruise operations and higher administrative expenses. There were no ship impairment charges for the three months endedMay 31, 2022 . We recognized a ship impairment charge of$49 million for the three months endedMay 31, 2021 .
The drivers in changes in costs and expenses for our NAA and EA segments are the same as those described for our consolidated results.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest decreased by$67 million to$370 million for the three months endedMay 31, 2022 from$437 million for the three months endedMay 31, 2021 . The decrease was caused by a lower average interest rate as a result of completed refinancing efforts and was partially offset by a higher average debt balance for the three months endedMay 31, 2022 compared to the three months endedMay 31, 2021 .
Six Months Ended
Revenues
Consolidated
Cruise passenger ticket revenues made up 54% of our total revenues for the six months endedMay 31, 2022 while onboard and other revenues made up 46%. Revenues for the six months endedMay 31, 2022 increased by$3.9 billion as compared to the six months endedMay 31, 2021 due to the ongoing resumption of guest cruise operations and the significant increase of ships in service. ALBDs increased to 30.0 million for the six months endedMay 31, 2022 as compared to 0.6 million for the six months endedMay 31, 2021 . Occupancy for the six months endedMay 31, 2022 was 62% compared to 27% for the six months endedMay 31, 2021 .
NAA Segment
Cruise passenger ticket revenues made up 52% of our NAA segment's total revenues for the six months endedMay 31, 2022 while onboard and other cruise revenues made up 48%. NAA segment revenues for the six months endedMay 31, 2022 increased by$2.8 billion as compared to the six months endedMay 31, 2021 due to the ongoing resumption of guest cruise operations and the significant increase of ships in service. ALBDs increased to 18.8 million for the six months endedMay 31, 2022 as compared to 0.0 million for the six months endedMay 31, 2021 . Occupancy for the six months endedMay 31, 2022 was 70%.
EA Segment
Cruise passenger ticket revenues made up 74% of our EA segment's total revenues for the six months endedMay 31, 2022 while onboard and other cruise revenues made up 26%. EA segment revenues for the six months endedMay 31, 2022 increased by$1.1 billion as compared to the six months endedMay 31, 2021 due to the ongoing resumption of guest cruise operations and the significant increase of ships in service. ALBDs increased to 11.2 million for the six months endedMay 31, 2022 as 28 -------------------------------------------------------------------------------- Table of Contents compared to 0.6 million for the six months endedMay 31, 2021 . Occupancy for the six months endedMay 31, 2022 was 50% compared to 27% for the six months endedMay 31, 2021 .
Operating Costs and Expenses
Consolidated
Operating costs and expenses increased by$3.5 billion to$4.7 billion for the six months endedMay 31, 2022 from$1.2 billion for the six months endedMay 31, 2021 . These increases were driven by our ongoing resumption of guest cruise operations and restart related expenses, including the cost of returning ships to guest cruise operations and returning crew members to our ships, higher number of dry-dock days, the cost of maintaining enhanced health and safety protocols, inflation and supply chain disruptions. We anticipate that some of these costs and expenses will end in 2022. Fuel costs increased by$694 million to$910 million for the six months endedMay 31, 2022 from$216 million for the six months endedMay 31, 2021 . The increase was caused by higher fuel consumption of 690 thousand metric tons, due to the resumption of guest cruise operations, and an increase in fuel prices of$336 per metric ton consumed for the six months endedMay 31, 2022 compared to the six months endedMay 31, 2021 . Selling and administrative expenses increased by$0.3 billion to$1.1 billion for the six months endedMay 31, 2022 from$0.9 billion for the six months endedMay 31, 2021 . The increase was principally driven by higher advertising and promotional spend incurred as part of our ongoing resumption of guest cruise operations.
We recognized a ship impairment charge of
The drivers in changes in costs and expenses for our NAA and EA segments are the same as those described for our consolidated results.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, decreased by$97 million to$738 million for the six months endedMay 31, 2022 from$835 million for the six months endedMay 31, 2021 . The decrease was caused by a lower average interest rate as a result of completed refinancing efforts and was partially offset by a higher average debt balance for the six months endedMay 31, 2022 compared to the six months endedMay 31, 2021 .
Liquidity, Financial Condition and Capital Resources
As ofMay 31, 2022 , we had$7.5 billion of liquidity including cash, short-term investments and borrowings available under our Revolving Facility. During 2022, we will continue to be focused on pursuing various capital market opportunities to extend maturities and if appropriate, obtain relevant financial covenant amendments. We had a working capital deficit of$4.8 billion as ofMay 31, 2022 compared to working capital deficit of$0.3 billion as ofNovember 30, 2021 . The increase in working capital deficit was caused by a decrease in cash and cash equivalents, an increase in customer deposits and an increase in current portion of long-term debt. Historically, during our normal operations, we operate with a substantial working capital deficit. This deficit is mainly attributable to the fact that, under our business model, substantially all of our passenger ticket receipts are collected in advance of the applicable sailing date. These advance passenger receipts generally remain a current liability until the sailing date. The cash generated from these advance receipts is used interchangeably with cash on hand from other sources, such as our borrowings and other cash from operations. The cash received as advanced receipts can be used to fund operating expenses, pay down our debt, make long-term investments or any other use of cash. Included within our working capital are$4.8 billion and$3.1 billion of customer deposits as ofMay 31, 2022 andNovember 30, 2021 , respectively. We have paid refunds of customer deposits with respect to a portion of cancelled cruises. The amount of any future cash refunds may depend on future cruise cancellations and guest rebookings. We have agreements with a number of credit card processors that transact customer deposits related to our cruise vacations. Certain of these agreements allow the credit card processors to request, under certain circumstances, that we provide a reserve fund in cash. In addition, we have a relatively low-level of accounts receivable and limited investment in inventories.
Refer to Note 1 - "General, Liquidity and Management's Plans" of the consolidated financial statements for additional discussion regarding our liquidity.
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Sources and Uses of Cash
Operating Activities
Our business used $1.2 billion of net cash flows in operating activities during
the six months ended May 31, 2022 , a decrease of $1.7 billion , compared to $2.9
billion of net cash flows used for the same period in 2021. This decrease was
due to an increase in cash inflows from customer deposits during the six months
ended May 31, 2022 compared to the same period in 2021.
Investing Activities
During the six months ended
•Capital expenditures of$2.6 billion for our ongoing new shipbuilding program •Capital expenditures of$581 million for ship improvements and replacements, information technology and buildings and improvements •Proceeds from sale of ships and other of$55 million •Purchases of short-term investments of$315 million •Proceeds from maturity of short-term investments of$364 million
During the six months ended
•Capital expenditures of$2.0 billion for our ongoing new shipbuilding program •Capital expenditures of$168 million for ship improvements and replacements, information technology and buildings and improvements •Proceeds from sale of ships and other of$324 million •Purchases of short-term investments of$2.7 billion •Proceeds from maturity of short-term investments of$467 million Financing Activities
During the six months ended
•Issuances of$3.3 billion of long-term debt •Repayments of$0.7 billion of long-term debt •Payments of$110 million related to debt issuance costs •Net repayments of short-term borrowings of$114 million •Purchases of$82 million of Carnival plc ordinary shares and issuances of$89 million ofCarnival Corporation common stock under our Stock Swap Program During the six months endedMay 31, 2021 , net cash provided by financing activities of$4.5 billion was caused by the following: •Repayments of$1.4 billion of long-term debt •Issuances of$5.0 billion of long-term debt, including net proceeds of$3.4 billion from the issuance of the 2027 Senior Unsecured Notes •Net proceeds of$996 million from our public offering ofCarnival Corporation common stock Funding Sources As ofMay 31, 2022 , we had$7.5 billion of liquidity including cash, short-term investments and borrowings available under our revolving facility. In addition, we had$3.1 billion of undrawn export credit facilities to fund ship deliveries planned through 2024. We plan to use future cash flows from operations to fund our cash requirements including capital expenditures not funded by our export credit facilities. 30
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(in billions) 2022 2023
2024
Future export credit facilities at
Our export credit facilities contain various financial covenants as described in
Note 3 - "Debt". At
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interests, certain derivative instruments and variable interest entities that either have, or are reasonably likely to have, a current or future material effect on our consolidated financial statements.
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