What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-03-28 compared with 2021-09-30 · 90 added, 167 removed, 111 unchanged (70% of the section changed)

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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,” “anticipate,” “forecast,” “project,” “future,” “intend,” “plan,” “estimate,” “target,” “indicate,” “outlook,” and similar expressions of future intent or the negative of such terms.

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:

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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, the COVID-19 outbreak.

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.

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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, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from operations.

The current, and uncertain future, impact of the COVID-19 outbreak, 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.

• World events impacting the ability or desire of people to travel have and may continue to lead to a decline in demand for cruises.

• Incidents concerning our ships, guests or the cruise vacation industry as well as adverse weather conditions and other natural disasters have in the past and may, in the future, impact the satisfaction of our guests and crew and lead to reputational damage.

• 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 of Ukraine, and other general concerns impacting the ability or desire of people to travel have and may lead to a decline in demand for cruises.

• 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.

• 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, including the recent ransomware incidents, 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.

• Ability to recruit, develop and retain qualified shipboard personnel who live away from home for extended periods of time may adversely impact our business operations, guest services and satisfaction.

• 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.

• 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.

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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.

Recent Developments

Resumption of Guest Cruise Operations

As of August 31, 2021, eight of our nine brands have resumed guest cruise operations as part of our gradual return to service, with 35% of our capacity operating with guests on board.

We have already announced plans to resume guest cruise operations with 50 ships, or 61% of our capacity, by November 30, 2021 and 71 ships, or 75% of our capacity, by June 2022, with more announcements forthcoming for the remaining ships.

Consistent with our planned gradual resumption of guest cruise operations, we continue to expect to have our full fleet back in operation in the spring of 2022.

Update on Refinancing

Refer to "Liquidity, Financial Condition and Capital Resources."

Refer to "Risk factors" - " COVID-19 has had, and is expected to continue to have, a significant impact on our financial

condition and operations, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from

The current, and uncertain future, impact of the COVID-19 outbreak, 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.

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

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Our passenger ticket revenues are seasonal.

Historically, demand for cruises has been greatest during our third quarter, which includes the Northern Hemisphere summer months, although 2021 will continue to be adversely impacted by COVID-19.

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 earned during this period.

This historical trend has been disrupted by the pause and gradual resumption of guest cruise operations.

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 of Holland America Princess Alaska Tours’ revenue and net income (loss) is generated from May through September in conjunction with Alaska’s cruise season.

During 2021, the Alaska cruise season has been and will continue to be adversely impacted by the effects of COVID-19.

Known Trends and Uncertainties

We believe the increasing cost of fuel, liquefied natural gas (LNG) and other related costs are reasonably likely to impact our profitability in both the short and long-ter m.

This effect is increased in the shorter term by the current invasion of Ukraine, including its effect on the price of fuel.

In addition, 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, if enacted.

The full impact of climate change to our business is not yet known.

Statistical Information

Three Months Ended

August 31, Nine Months Ended

2021 2020 2021 2020

Available Lower Berth Days ("ALBDs") (in thousands) (a) 3,788 (c) 4,405 (c)

Occupancy percentage (b) 54.2 % (c) 50.4 % (c)

Passenger Cruise Days (“PCDs”) (in thousands) (a) 7,229 27

Available Lower Berth Days (“ALBDs”) (in thousands) (b) 13,322 173

Occupancy percentage (c) 54 % 16 %

Passengers carried (in thousands) 1,011 5

Fuel consumption in metric tons (in thousands) 566 262

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GBP $ 1.35 $ 1.36

RMB $ 0.15 $ 0.14 $ 0.15 $ 0.14

(a) ALBD is a standard 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.

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.

(b) In accordance with cruise industry practice, occupancy is calculated using a denominator of ALBDs, which assumes two passengers per cabin even though some cabins can accommodate three or more passengers.

(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.

(c) As a result of pause in guest cruise operations in 2020, prior year data for these metrics was not meaningful and was not included in the table.

We paused our guest cruise operations in mid-March 2020 and were in a pause for a majority of 2020.

In 2021, we began the gradual resumption of guest cruise operations which is continuing to have a material impact on all aspects of our business.

Results of Operations

Three Months Ended

August 31, % increase (decrease) Nine Months Ended August 31, % increase (decrease)

(in millions) 2021 2020 Change 2021 2020 Change

February 28, % increase (decrease)

(in millions) 2022 2021 Change

Passenger ticket $ 873 $ 3 $ 870 31,952 %

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Depreciation and amortization 554 552 2 — %

Goodwill impairment — — — 100 % — 2,096 (2,096) (100) %

3,114 1,549 1,565 101 %

Operating Income (Loss) (1,491) (1,524) 32 (2) %

Nonoperating Income (Expense)

Interest income 3 3 — 1 %

Interest expense, net of capitalized interest (368) (398) 30 (7) %

Gains (losses) on debt extinguishment, net — 2 (2) (100) %

Other income (expense), net (32) (62) 30 (49) %

(397) (455) 58 (13) %

Income (Loss) Before Income Taxes $ (1,888) $ (1,979) $ 91 (5) %

Three Months Ended

August 31, % increase (decrease) Nine Months Ended August 31, % increase (decrease)

(in millions) 2021 2020 Change 2021 2020 Change

February 28, % increase (decrease)

(in millions) 2022 2021 Change

Passenger ticket $ 586 $ — $ 586 100 %

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Depreciation and amortization 334 334 — — %

Goodwill impairment — — — — % — 1,319 (1,319) (100) %

1,966 870 1,096 126 %

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Three Months Ended

August 31, % increase (decrease) Nine Months Ended August 31, % increase (decrease)

(in millions) 2021 2020 Change 2021 2020 Change

February 28, % increase (decrease)

(in millions) 2022 2021 Change

Passenger ticket $ 341 $ 3 $ 338 10,721 %

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Depreciation and amortization 181 184 (3) (2) %

Goodwill impairment — — — — % — 777 (777) (100) %

1,055 490 565 115 %

Operating Income (Loss) $ (598) $ (482) $ (116) 24 %

We paused our guest cruise operations in mid-March 2020.

As of August 31, 2021, eight of our nine brands have resumed guest cruise operations as part of our gradual return to service.

The gradual resumption of guest cruise operations is continuing to have a material impact on all aspects of our business, including our liquidity, financial position and results of operations .

The full extent of the impact will be determined by our gradual return to service and the length of time COVID-19 influences travel decisions.

As of August 31, 2021, 35% of our capacity was operating with guests on board.

As a result of the gradual resumption of our guest cruise operations, revenues for the three months ended August 31, 2021 have increased compared to the three months ended August 31, 2020, which was a period of full pause in guest cruise operations.

Revenues for the nine months ended August 31, 2021 have decreased compared to the nine months ended August 31, 2020 as a result of the pause in guest operations beginning in the second quarter of 2020.

Occupancy in the third quarter of 2021 was 54%, which is considerably lower than our historical levels .

We continue to expect a net loss on both a U.S.

GAAP and adjusted basis for the fourth quarter of 2021 and the full year ending November 30, 2021 .

As we continue our return to service, we expect to continue incurring incremental restart related spend including the cost of returning ships to guest cruise operations, returning crew members to our ships and maintaining enhanced health and safety protocols.

During 2020, while maintaining compliance, environmental protection and safety, we significantly reduced ship operating expenses, including cruise payroll and related expenses, food, fuel, insurance and port charges by transitioning ships into paused status, either at anchor or in port, and staffed at a safe manning level.

There were no goodwill impairment charges for the three and nine months ended August 31, 2021 and for the three months ended August 31, 2020.

For the nine months ended August 31, 2020, we recognized goodwill impairment charges of $2.1 billion.

We recognized ship impairment charges of $0.5 billion and $0.8 billion for the three months ended August 31, 2021 and 2020, respectively and $0.5 billion and $1.7 billion for the nine months ended August 31, 2021 and 2020, respectively.

We paused our guest cruise operations in March 2020.

As of February 28, 2022 , eight of our nine brands had resumed guest cruise operations as part of our ongoing return to service.

The ongoing resumption of guest cruise operations and the increased uncertainty given the current invasion of Ukraine, including its effect on the price of fuel, are collectively having a material negative impact on all aspects of our business, including our liquidity, financial position and results of operations.

The full extent of the impact will be determined by our ongoing return to service and the length of time COVID-19 influences travel decisions.

As of February 28, 2022 , 71% of our capacity had resumed guest cruise operations and ALBDs increased to 13 million compared to February 28, 2021 when we had no ships operating with guests onboard.

Revenues for the three months ended February 28, 2022 increased by $1.6 billion from the three months ended February 28, 2021, due to the resumption of guest cruise operations and the significant increase of ships returning to service.

Occupancy for the three months ended February 28, 2022 was 54%.

Operating costs and expenses increased by $1.5 billion to $2.0 billion in 2022 from $0.5 billion in 2021.

This was driven by our ongoing resumption of 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 and inflation.

We anticipate that many of these costs and expenses will end in 2022 and will not reoccur in 2023.

Fuel costs increased by $262 million to $365 million in 2022 from $103 million in 2021.

The increase was caused by higher fuel consumption of 304 thousand metric tons, due to the resumption of guest cruise operations, and an increase in fuel prices of $256 per metric ton consumed in 2022 compared to 2021.

We recognized ship impairment charges of $8 million for the three months ended February 28, 2022.

There were no ship impairment charges for the three months ended February 28, 2021.

We continue to expect a net loss for the second quarter of 2022.

However, we expect a profit for the third quarter of 2022.

For the full year 2022, we expect a net loss.

Nonoperating Income (Expense)

Interest expense, net of capitalized interest, increased by $107 million to $418 million for the three months ended August 31, 2021 from $310 million for the three months ended August 31, 2020.

Interest expense, net of capitalized interest, increased by $0.7 billion to $1.3 billion for the nine months ended August 31, 2021 from $0.5 billion for the nine months ended August 31, 2020.

These increases were caused by additional debt borrowings with higher interest rates since the pause in guest cruise operations.

Loss on debt extinguishment increased by $156 million to $376 million for the three months ended August 31, 2021 from $220 million for the three months ended August 31, 2020.

Loss on debt extinguishment increased by $153 million to $372 million for the nine months ended August 31, 2021 from $220 million for the nine months ended August 31, 2020.

These increases were caused by the repurchase of $2.0 billion of the aggregate principal of the 2023 Senior Secured Notes.

Key Performance Non-GAAP Financial Indicators

The table below reconciles Adjusted net income (loss) and Adjusted EBITDA to Net income (loss) and Adjusted earnings per share to Earnings per share for the periods presented:

Three Months Ended

August 31, Nine Months Ended

(in millions, except per share data) 2021 2020 2021 2020

Net income (loss)

GAAP net income (loss) $ (2,836) $ (2,858) $ (6,881) $ (8,014)

(Gains) losses on ship sales and impairments 472 937 510 3,819

(Gains) losses on debt extinguishment, net 376 220 372 220

Restructuring expenses 2 3 5 42

Other — — 17 3

Adjusted net income (loss) $ (1,986) $ (1,699) $ (5,976) $ (3,930)

Interest expense, net of capitalized interest 418 310 1,253 547

Interest income (3) (3) (10) (15)

Income tax expense, net (23) (2) (17) (2)

Depreciation and amortization 562 551 1,681 1,698

Adjusted EBITDA $ (1,033) $ (844) $ (3,069) $ (1,702)

Weighted-average shares outstanding 1,133 775 1,120 727

Earnings per share

GAAP diluted earnings per share $ (2.50) $ (3.69) $ (6.14) $ (11.03)

(Gains) losses on ship sales and impairments 0.42 1.21 0.46 5.26

(Gains) losses on debt extinguishment, net 0.33 0.28 0.33 0.30

Restructuring expenses — — — 0.06

Other — — 0.02 —

Adjusted earnings per share $ (1.75) $ (2.19) $ (5.34) $ (5.41)

Explanations of Non-GAAP Financial Measures

We use adjusted net income (loss) and adjusted earnings per share as non-GAAP financial measures of our cruise segments’ and the company’s financial performance.

These non-GAAP financial measures are provided along with U.S.

GAAP net income (loss) and U.S.

GAAP diluted earnings per share.

We believe that gains and losses on ship sales, impairment charges, gains and losses on debt extinguishments, restructuring costs, and other gains and losses are not part of our core operating business and are not an indication of our future earnings performance.

Therefore, we believe it is more meaningful for these items to be excluded from our net income (loss) and earnings per share and, accordingly, we present adjusted net income (loss) and adjusted earnings per share excluding these items.

Adjusted EBITDA is a non-GAAP measure, and we believe that the presentation of Adjusted EBITDA provides additional information to investors about our operating profitability adjusted for certain non-cash items and other gains and expenses that we believe are not part of our core operating business and are not an indication of our future earnings performance.

Further, we believe that the presentation of Adjusted EBITDA provides additional information to investors about our ability to operate our business in compliance with the restrictions set forth in our debt agreements.

We define Adjusted EBITDA as adjusted net income (loss) adjusted for (i) interest, (ii) taxes and (iii) depreciation and amortization.

There are material limitations to using Adjusted EBITDA.

Adjusted EBITDA does not take into account certain significant items that directly affect our net income (loss).

These limitations are best addressed by considering the economic effects of the excluded items independently, and by considering Adjusted EBITDA in conjunction with net income (loss) as calculated in accordance with U.S.

The presentation of our non-GAAP financial information is not intended to be considered in isolation from, as a substitute for, or superior to the financial information prepared in accordance with U.S.

It is possible that our non-GAAP financial

measures may not be exactly comparable to the like-kind information presented by other companies, which is a potential risk associated with using these measures to compare us to other companies.

Interest expense, net of capitalized interest, decreased by $30 million to $368 million in 2022 from $398 million in 2021.

The decrease was caused by a lower average interest rate for the three months ended February 28, 2022 compared to the three months ended February 28, 2021 as a result of completed refinancing efforts.

Liquidity, Financial Condition and Capital Resources

As of August 31, 2021, we had $7.8 billion of liquidity including cash and short-term investments.

We have taken significant actions to preserve cash and obtain additional financing to increase our liquidity.

In addition, we expect to continue to pursue additional refinancing opportunities to reduce interest expense and extend maturities.

S ince December 2020, we have completed the following:

Liquidity Actions:

• In December 2020, we borrowed $1.5 billion under export credit facilities due in semi-annual installments through 2033.

• In February 2021, we issued an aggregate principal amount of $3.5 billion senior unsecured notes that mature on March 1, 2027.

The 2027 Senior Unsecured Notes bear interest at a rate of 5.8% per year.

• In February 2021, we completed a public offering of 40.5 million shares of Carnival Corporation’s common stock at a price per share of $25.10, resulting in net proceeds of $996 million.

• In June 2021, we entered into an amendment to reprice our $2.8 billion 2025 Secured Term Loan (the “2025 Secured Term Loan”).

The amended U.S.

dollar tranche bears interest at a rate per annum equal to LIBOR (with a 0.75% floor) plus 3%.

The amended euro tranche bears interest at a rate per annum equal to EURIBOR (with a 0% floor) plus 3.75%.

• In July 2021, we issued $2.4 billion aggregate principal amount of 4% first-priority senior secured notes due in 2028 (the “2028 Senior Secured Notes”).

We used the net proceeds from the issuance to purchase $2.0 billion aggregate principal amount of the 2023 Senior Secured Notes.

The 2028 Senior Secured Notes mature on August 1, 2028.

• In July 2021, we borrowed $544 million under an export credit facility due in semi-annual installments through 2033.

• We amended substantially all of our drawn export credit facilities to defer approximately $1.0 billion of principal payments that would otherwise have been due over a one year period commencing April 1, 2021 until March 31, 2022, with repayments to be made over the following five years.

Of these amendments, the deferral of an aggregate principal amount of $0.7 billion became effective as of August 31, 2021, and an aggregate principal amount of $0.3 billion became effective after August 31, 2021.

Covenant Updates:

• As of September 14, 2021, we have entered into amendments aligning the financial covenants of substantially all our drawn export credit facilities, with the exception of $0.4 billion, with our other facilities.

Refer to Note 3 - "Debt" of the consolidated financial statements for additional details.

Certain of our debt instruments contain provisions that may limit our ability to incur or guarantee additional indebtedness.

We expect our monthly average cash burn rate for the fourth quarter to be higher than the prior quarters of 2021, due to the timing of incremental restart expenditures.

Our monthly average cash burn rate includes revenues earned on voyages, ongoing ship operating and administrative expenses, restart spend, working capital changes (excluding changes in customer deposits), interest expense and capital expenditures (net of export credit facilities), and excludes scheduled debt maturities as well as other cash collateral to be provided.

We had a working capital deficit of $0.6 billion as of August 31, 2021 compared to working capital of $1.9 billion as of November 30, 2020.

The decrease in working capital was driven by a decrease in cash and short-term investments.

As of February 28, 2022, we had $7.2 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 refinancing opportunities to reduce interest rates and extend maturities as well as entering into supplemental agreements to align our covenant compliance requirements.

We had a working capital deficit of $2.9 billion as of February 28, 2022 compared to working capital deficit of $0.3 billion as of November 30, 2021.

The increase in working capital deficit was substantially all due to a decrease in cash.

Historically, during our normal operations, we operate with a substantial working capital deficit.

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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 $2.7 billion and $1.9 billion of customer deposits as of August 31, 2021 and November 30, 2020, respectively.

We have paid and expect to continue to pay cash refunds of customer deposits with respect to a portion of cancelled cruises.

The amount of cash refunds to be paid may depend on the level of guest acceptance of FCCs and future cruise cancellations.

We record a liability for FCCs only to the extent we have received cash from guests with bookings on cancelled sailings.

Included within our working capital are $3.4 billion and $3.1 billion of customer deposits as of February 28, 2022 and November 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.

In addition, we have a relatively low-level of accounts receivable and limited investment in inventories.

We expect that we will have working capital deficits in the future once we return to normal guest cruise operations.

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Operating Activities

Our business used $3.7 billion of net cash flows in operating activities during the nine months ended August 31, 2021, a decrease of $0.9 billion, compared to $4.6 billion of net cash used for the same period in 2020.

Our business used $1.2 billion of net cash flows in operating activities during the three months ended February 28, 2022, a decrease of $0.3 billion, compared to $1.5 billion of net cash flows used for the same period in 2021.

Investing Activities

During the nine months ended August 31, 2021, net cash used in investing activities was $3.5 billion.

During the three months ended February 28, 2022, net cash used in investing activities was $3.0 billion.

This was driven by the following:

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• Proceeds from sale of ships and other of $18 million

• Purchases of short-term investments of $2.7 billion

• Proceeds from maturity of short-term investments of $2.0 billion

During the nine months ended August 31, 2020, net cash used in investing activities was $1.5 billion.

• Purchases of short-term investments of $315 million

During the three months ended February 28, 2021, net cash used in investing activities was $3.6 billion.

This was driven by the following:

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• Capital expenditures of $81 million for ship improvements and replacements, information technology and buildings and improvements

• Proceeds from sale of ships of $271 million

• Proceeds of $220 million from the settlement of outstanding derivatives

• Purchases of short-term investments of $1.8 billion

Financing Activities

During the nine months ended August 31, 2021, net cash provided by financing activities of $4.9 billion was caused by the following:

• Issuances of $7.9 billion of long-term debt, including net proceeds of $3.4 billion from the issuance of the 2027 Senior Unsecured Notes, net proceeds of $2.4 billion from the issuance of the 2028 Senior Secured Notes, and net proceeds of $2.1 billion borrowed under export credit facilities to fund ship deliveries

• Repayments of $3.5 billion of long-term debt, including $2.0 billion repurchase of the 2023 Senior Secured Notes

• Premium payments of $286 million related to the repurchase of the 2023 Senior Secured Notes

• Net proceeds of $1.0 billion from Carnival Corporation common stock

• Purchases of $94 million of Carnival plc ordinary shares and issuances of $105 million of Carnival Corporation common stock under our Stock Swap Program

During the three months ended February 28, 2022, net cash provided by financing activities of $1.7 billion was caused by the following:

• Issuances of $2.3 billion of long-term debt

• Repayments of $0.5 billion of long-term debt

• Payments of $85 million related to debt issuance costs

During the nine months ended August 31, 2020, net cash provided by financing activities of $13.7 billion was caused by the following:

• Net proceeds from short-term borrowings of $3.1 billion in connection with our availability of, and needs for, cash at various times throughout the period, including proceeds of $3.0 billion from the Revolving Facility

• Repayments of $896 million of long-term debt, including the $222 million that was cash settled to repurchase a portion of the Convertible Notes

• Issuances of $11.5 billion of long-term debt, including net proceeds of $3.9 billion from the issuance of the 2023 Senior Secured Notes, net proceeds of $2.6 billion from the issuance of the 2025 Secured Term Loan, net proceeds of $2.0 billion from the issuance of Convertible Notes, net proceeds of $1.2 billion from the issuance of the 2026 Senior Secured Notes and net proceeds of $0.9 billion from the issuance of the 2027 Senior Secured Notes.

• Payments of cash dividends of $689 million

• Purchases of $12 million of Carnival plc ordinary shares in open market transactions under our Repurchase Program

• Net repayments of short-term borrowings of $48 million

• Purchases of $23 million of Carnival plc ordinary shares and issuances of $27 million of Carnival Corporation common stock under our Stock Swap Program

During the three months ended February 28, 2021, net cash provided by financing activities of $5.2 billion was caused by the following:

• Repayments of $668 million 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 of Carnival Corporation common stock

• Net proceeds of $222 million from a registered direct offering of Carnival Corporation common stock used to repurchase a portion of the Convertible Notes

Funding Sources

As of August 31, 2021, we had $7.8 billion of liquidity including cash and short-term investments.

In addition, we had $5.8 billion of export credit facilities to fund ship deliveries planned through 2024.

As of February 28, 2022, we had $7.2 billion of liquidity including cash, short-term investments and borrowings available under our revolving facility.

In addition, we had $3.3 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.

(in billions) 2022 2023 2024

Future export credit facilities at August 31, 2021 (a)

Future export credit facilities at February 28, 2022

$ 0.9 $ 1.8 $ 0.6

(a) Under the terms of these export credit facilities, we are required to comply with the Interest Coverage Covenant and the Debt to Capital Covenant, among others.

We entered into supplemental agreements to waive compliance with the Interest Coverage Covenant and the Debt to Capital Covenant for our unfunded export credit facilities through August 31, 2022 or November 30, 2022, as applicable.

We will be required to comply with such covenants beginning with the next testing date of November 30, 2022 or February 28, 2023, as applicable.

Many of our debt agreements contain various other financial covenants, including those described in Note 3 - “Debt” and in Note 5 - “Debt” in the annual consolidated financial statements, which are included within our Form 10-K.

At August 31, 2021, we were in compliance with the applicable covenants under our debt agreements.

Our export credit facilities contain various financial covenants as described in Note 3 - “Debt”.

At February 28, 2022 , we were in compliance with the applicable covenants under our debt agreements.

Off-Balance Sheet Arrangements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis