What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-06-28 compared with 2023-03-29 · 79 added, 36 removed, 179 unchanged (39% of the section changed)

18 unchanged sentences

• Adjusted cruise costs per ALBD

• Estimates of ship depreciable lives and residual values

• Investment grade leverage metrics

• Adjusted cruise costs excluding fuel per ALBD

• Estimates of ship depreciable lives and residual values

• Adjusted return on invested capital

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.

13 unchanged sentences

• We rely on supply chain vendors who are integral to the operations of our businesses.

These vendors and service providers are also affected by COVID-19 and may be unable to deliver on their commitments which could negatively impact our business.

These vendors and service providers may be unable to deliver on their commitments, which could negatively impact our business.

• Fluctuations in foreign currency exchange rates may adversely impact our financial results.

25 unchanged sentences

Three Months Ended

May 31, Six Months Ended

2023 2022 2023 2022

Passenger Cruise Days (“PCDs”) (in millions) (a)

21.8 11.4 42.0 18.7

Available Lower Berth Days (“ALBDs”) (in millions) (b)

22.3 16.7 44.3 30.0

Occupancy percentage (c) 98 % 69 % 95 % 62 %

Passengers carried (in millions)

3.0 1.7 5.7 2.7

Fuel consumption in metric tons (in millions)

0.7 0.6 1.5 1.2

Fuel consumption in metric tons per thousand ALBDs 32.5 37.9 33.0 40.0

12 unchanged sentences

Results of Operations

Three Months Ended February 28,

(in millions) 2023 2022 Change

Three Months Ended

May 31, Six Months Ended

(in millions) 2023 2022 Change 2023 2022 Change

Passenger ticket $ 3,141 $ 1,285 $ 1,856 $ 6,011 $ 2,158 $ 3,853

17 unchanged sentences

Interest expense, net of capitalized interest (542) (370) (172) (1,082) (738) (343)

Gain (loss) on debt extinguishment, net (31) — (31) (31) — (31)

Other income (expense), net (17) 6 (23) (47) (26) (21)

1 unchanged sentence

Income (Loss) Before Income Taxes $ (402) $ (1,831) $ 1,430 $ (1,087) $ (3,719) $ 2,632

Three Months Ended February 28,

(in millions) 2023 2022 Change

Three Months Ended

May 31, Six Months Ended

(in millions) 2023 2022 Change 2023 2022 Change

Passenger ticket $ 2,041 $ 862 $ 1,180 $ 3,933 $ 1,447 $ 2,486

6 unchanged sentences

Operating Income (Loss) $ 265 $ (821) $ 1,086 $ 351 $ (1,661) $ 2,012

Three Months Ended February 28,

(in millions) 2023 2022 Change

Three Months Ended

May 31, Six Months Ended

(in millions) 2023 2022 Change 2023 2022 Change

Passenger ticket $ 1,112 $ 490 $ 622 $ 2,104 $ 832 $ 1,273

10 unchanged sentences

The full extent of these impacts is uncertain and may be amplified by our substantial debt balance.

Three Months Ended February 28, 2023 (“2023”) Compared to Three Months Ended February 28, 2022 (“2022”)

Three Months Ended May 31, 2023 (“2023”) Compared to Three Months Ended May 31, 2022 (“2022”)

Cruise passenger ticket revenues made up 64% of our total revenues in 2023 while onboard and other revenues made up 36%.

Revenues in 2023 increased by $2.8 billion to $4.4 billion from $1.6 billion in 2022 due to the ongoing resumption of guest cruise operations, including the significant increase of ships in service and higher occupancy.

As of February 28, 2023, 96 % of our capacity was serving guests, compared to 71% as of February 28, 2022.

Revenues in 2023 increased by $2.5 billion to $4.9 billion from $2.4 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022.

Our full fleet was serving guests as of May 31, 2023, compared to 86% as of May 31, 2022.

ALBDs increased to 22.3 million in 2023 as compared to 16.7 million in 2022.

1 unchanged sentence

Cruise passenger ticket revenues made up 61% of our NAA segment’s total revenues in 2023 while onboard and other cruise revenues made up 39%.

NAA segment revenues in 2023 increased by $2.0 billion to $3.1 billion from $1.1 billion in 2022 due to the ongoing resumption of guest cruise operations, including the significant increase of ships in service and higher occupancy.

Our NAA segment’s full fleet was serving guests as of February 28, 2023, compared to 69% as of February 28, 2022.

NAA segment revenues in 2023 increased by $1.7 billion to $3.4 billion from $1.7 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022.

Our NAA segment’s full fleet was serving guests as of May 31, 2023, compared to 90% as of May 31, 2022.

ALBDs increased to 13.7 million in 2023 as compared to 10.1 million in 2022.

2 unchanged sentences

Cruise passenger ticket revenues made up 76% of our Europe segment’s total revenues in 2023 while onboard and other cruise revenues made up 24%.

Europe segment revenues in 2023 increased by $0.8 billion to $1.3 billion from $0.5 billion in 2022 due to the ongoing resumption of guest cruise operations, including the significant increase of ships in service and higher occupancy.

Our Europe segment had 93% of its capacity serving guests as of February 28, 2023 , compared to 73% as of February 28, 2022.

Europe segment revenues in 2023 increased by $0.8 billion to $1.5 billion from $0.7 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022.

Our Europe segment’s full fleet was serving guests as of May 31, 2023 , compared to 81% as of May 31, 2022.

ALBDs increased to 8.5 million in 2023 as compared to 6.6 million in 2022.

2 unchanged sentences

Operating costs and expenses increased by $0.8 billion to $3.5 billion in 2023 from $2.7 billion in 2022.

These increases were driven by our resumption of guest cruise operations and an increase in ships in service.

Fuel costs increased by $170 million to $535 million in 2023 from $365 million in 2022.

$110 million of this increase was driven by higher fuel consumption of 0.2 million metric tons, due to the resumption of guest cruise operations, and $60 million was driven by a combination of increases in fuel prices and changes in fuel mix of $81 per metric ton consumed in 2023 compared to 2022.

These increases were driven by our resumption of guest cruise operations, an increase in ships in service and considerably higher occupancy.

Fuel costs decreased by $56 million to $489 million in 2023 from $545 million in 2022.

$137 million of this decrease was caused by a decrease in fuel prices and changes in fuel mix of $189 per metric ton consumed in 2023 compared to 2022, partially offset by $80 million from higher fuel consumption of 0.1 million metric tons, due to the resumption of guest cruise operations.

Selling and administrative expenses increased by $118 million to $736 million in 2023 from $619 million in 2022.

The increase was caused by increased administrative expenses and advertising costs incurred as part of our resumption of guest cruise operations.

The increase was caused by higher administrative expenses and advertising costs incurred as part of our resumption of guest cruise operations.

The drivers in changes in costs and expenses for our NAA and Europe segments are the same as those described for our consolidated results.

1 unchanged sentence

Interest expense, net of capitalized interest, increased by $172 million to $542 million in 2023 from $370 million in 2022.

The increase was caused by a higher average interest rate and a higher average debt balance in 2023 compared to 2022.

The increase was caused by a higher average interest rate in 2023 compared to 2022.

Six Months Ended May 31, 2023 (“2023”) Compared to Six Months Ended May 31, 2022 (“2022”)

Cruise passenger ticket revenues made up 64% of our total revenues in 2023 while onboard and other revenues made up 36%.

Revenues in 2023 increased by $5.3 billion to $9.3 billion from $4.0 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022.

Our full fleet was serving guests as of May 31, 2023 , compared to 86% as of May 31, 2022.

ALBDs increased to 44.3 million in 2023 as compared to 30.0 million in 2022.

Occupancy for 2023 was 95% compared to 62% in 2022.

Cruise passenger ticket revenues made up 61% of our NAA segment’s total revenues in 2023 while onboard and other cruise revenues made up 39%.

NAA segment revenues in 2023 increased by $3.6 billion to $6.4 billion from $2.8 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022.

Our NAA segment’s full fleet was serving guests as of May 31, 2023, compared to 90% as of May 31, 2022.

ALBDs increased to 27.6 million in 2023 as compared to 18.8 million in 2022.

Occupancy for 2023 was 100% compared to 70% in 2022.

Europe Segment

Cruise passenger ticket revenues made up 76% of our Europe segment’s total revenues in 2023 while onboard and other cruise revenues made up 24%.

Europe segment revenues in 2023 increased by $1.6 billion to $2.8 billion from $1.1 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022.

Our Europe segment’s full fleet was serving guests as of May 31, 2023 , compared to 81% as of May 31, 2022.

ALBDs increased to 16.7 million in 2023 as compared to 11.2 million in 2022.

Occupancy for 2023 was 85% compared to 50% in 2022.

Operating Cost and Expenses

Operating costs and expenses increased by $2.1 billion to $6.8 billion in 2023 from $4.7 billion in 2022.

These increases were driven by our resumption of guest cruise operations, an increase in ships in service and considerably higher occupancy.

Fuel costs increased by $0.1 billion to $1.0 billion in 2023 from $0.9 billion in 2022.

$0.2 billion of this increase was caused by higher fuel consumption of 0.3 million metric tons, due to the resumption of guest cruise operations, partially offset by $0.1 billion from a decrease in fuel prices and changes in fuel mix of $60 per metric ton consumed in 2023 compared to 2022.

Selling and administrative expenses increased by $0.3 billion to $1.4 billion in 2023 from $1.1 billion in 2022.

The increase was caused by higher administrative expenses and advertising costs incurred as part of our resumption of guest cruise operations.

The drivers in changes in costs and expenses for our NAA and Europe segments are the same as those described for our consolidated results.

Nonoperating Income (Expense)

Interest expense, net of capitalized interest, increased by $0.3 billion to $1.1 billion in 2023 from $0.7 billion in 2022.

The increase was caused by a higher average interest rate in 2023 compared to 2022.

Liquidity, Financial Condition and Capital Resources

As of February 28, 2023, we had $8.1 billion of liquidity including cash and cash equivalents and borrowings available under our Revolving Facility.

As of May 31, 2023, we had $7.3 billion of liquidity including cash and cash equivalents and borrowings available under our Revolving Facility.

We will continue to pursue various opportunities to refinance future debt maturities and/or to extend the maturity dates associated with our existing indebtedness and obtain relevant financial covenant amendments or waivers, if needed.

We had a working capital deficit of $3.9 billion as of February 28, 2023 compared to working capital deficit of $3.1 billion as of November 30, 2022.

We had a working capital deficit of $5.6 billion as of May 31, 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 an increase in customer deposits and an overall decrease in cash and cash equivalents and restricted cash.

4 unchanged sentences

The cash received as advanced receipts can be used to fund operating expenses, pay down our debt, make long-term investments or any other use of cash.

Included within our working capital are $5.5 billion and $4.9 billion of customer deposits as of February 28, 2023 and November 30, 2022, respectively.

Included within our working capital are $6.9 billion and $4.9 billion of customer deposits as of May 31, 2023 and November 30, 2022, respectively.

We have agreements with a number of credit card processors that transact customer deposits related to our cruise vacations.

4 unchanged sentences

Operating Activities

Our business provided $0.4 billion of net cash flows in operating activities during the three months ended February 28, 2023, an increase of $1.6 billion, compared to $1.2 billion used for the same period in 2022.

This was driven by a decrease in the net loss compared to the same period in 2022 and an increase in customer deposits.

Our business provided $1.5 billion of net cash flows from operating activities during the six months ended May 31, 2023, an increase of $2.7 billion, compared to $1.2 billion used for the same period in 2022.

This was driven by a decrease in the net loss compared to the same period in 2022 and other working capital changes.

Investing Activities

During the three months ended February 28, 2023, net cash used in investing activities was $1.0 billion.

During the six months ended May 31, 2023, net cash used in investing activities was $1.5 billion.

This was driven by:

1 unchanged sentence

• Capital expenditures of $649 million for ship improvements and replacements, information technology and buildings and improvements

• Proceeds from sale of ships of $23 million

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

• Proceeds from sales of ships of $255 million

During the six months ended May 31, 2022, net cash used in investing activities was $3.1 billion.

This was driven by:

3 unchanged sentences

• Purchases of short-term investments of $315 million

• Proceeds from maturity of short-term investments of $364 million

Financing Activities

During the three months ended February 28, 2023, net cash provided by financing activities of $0.1 billion was caused by:

• Issuances of $0.8 billion of long-term debt

During the six months ended May 31, 2023, net cash used in financing activities of $1.6 billion was driven by:

• Repayments of $0.2 billion of short term-borrowings

• Repayments of $2.3 billion of long-term debt

• Issuances of $1.0 billion of long-term debt

• Payments of $94 million related to debt issuance costs

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

• Purchases of $20 million of Carnival plc ordinary shares and issuances of $22 million of Carnival Corporation common stock under our Stock Swap Program

During the six months ended May 31, 2022, net cash provided by financing activities of $2.5 billion was caused by:

• Issuances of $3.3 billion of long-term debt

• Repayments of $503 million of long-term debt

• Repayments of $0.7 billion of long-term debt

• Payments of $110 million related to debt issuance costs

2 unchanged sentences

Funding Sources

As of February 28, 2023, we had $8.1 billion of liquidity including $5.5 billion of cash and cash equivalents and $2.6 billion of borrowings available under our Revolving Facility, which matures in 2024.

In February 2023, Carnival Holdings II entered into the New Revolving Facility, which may be utilized beginning in August 2024, at which date it will replace our existing Revolving Facility.

As of May 31, 2023, we had $7.3 billion of liquidity including $4.5 billion of cash and cash equivalents and $2.9 billion of borrowings available under our Revolving Facility, which matures in 2024.

In February 2023, Carnival Holdings II entered into the New Revolving Facility, which may be utilized beginning in August 2024, at which date it will replace our Revolving Facility.

Refer to Note 3 - “Debt” of the consolidated financial statements for additional discussion.

3 unchanged sentences

(in billions) 2023 2024 2025

Future export credit facilities at February 28, 2023

Future export credit facilities at May 31, 2023

$ 0.1 $ 2.2 $ 0.7

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

At February 28, 2023 , we were in compliance with the applicable covenants under our debt agreements.

At May 31, 2023 , we were in compliance with the applicable covenants under our debt agreements.

Off-Balance Sheet Arrangements

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis