What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-09-29 compared with 2023-06-28 · 54 added, 51 removed, 207 unchanged (34% of the section changed)

27 unchanged sentences

These factors include, but are not limited to, the following:

• Events and conditions around the world, including war and other military actions, such as the invasion of Ukraine, inflation, higher fuel prices, higher interest rates and other general concerns impacting the ability or desire of people to travel have led, and may in the future lead, to a decline in demand for cruises, impacting our operating costs and profitability.

• Events and conditions around the world, including war and other military actions, such as the war in Ukraine, inflation, higher fuel prices, higher taxes, higher interest rates and other general concerns impacting the ability or desire of people to travel have led, and may in the future lead, to a decline in demand for cruises as well as negative impacts to our operating costs and profitability.

• Pandemics have in the past and may in the future have a significant negative impact on our financial condition and operations.

26 unchanged sentences

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.

The seasonality of our results also increases due to ships being taken out-of-service for maintenance, which we schedule during non-peak demand periods.

Our results are also impacted by ships being taken out-of-service for planned maintenance, which we schedule during non-peak seasons.

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

Known Trends and Uncertainties

• We believe the increased cost of fuel and other related costs are reasonably likely to continue to impact our profitability in both the short and long-ter m.

• We believe inflation and higher interest rates are reasonably likely to continue to impact our profitability.

• We believe 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-ter m.

• We believe inflation and interest rates are reasonably likely to continue to impact our profitability.

• We believe a potential global minimum tax as well as any other changes in domestic and international tax rules and regulations could have a material impact on our effective tax rate.

• 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 have a material negative impact on our future financial results.

2 unchanged sentences

Three Months Ended

May 31, Six Months Ended

August 31, Nine Months Ended

2023 2022 2023 2022

23 unchanged sentences

Three Months Ended

May 31, Six Months Ended

August 31, Nine Months Ended

(in millions) 2023 2022 Change 2023 2022 Change

18 unchanged sentences

Interest expense, net of capitalized interest (518) (422) (96) (1,600) (1,161) (439)

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

Debt extinguishment and modification costs (81) — (81) (112) — (112)

Other income (expense), net (19) (81) 62 (67) (108) 41

2 unchanged sentences

Three Months Ended

May 31, Six Months Ended

August 31, Nine Months Ended

(in millions) 2023 2022 Change 2023 2022 Change

8 unchanged sentences

Three Months Ended

May 31, Six Months Ended

August 31, Nine Months Ended

(in millions) 2023 2022 Change 2023 2022 Change

7 unchanged sentences

Operating Income (Loss) $ 569 $ (62) $ 631 $ 376 $ (1,196) $ 1,572

The effects of the pause in guest cruise operations in March 2020 and subsequent resumption of our guest cruise operations, inflation, higher fuel prices, higher interest rates and fluctuations in foreign currency rates are collectively having a material negative impact on all aspects of our business, including our results of operations, liquidity and financial position.

We have a substantial debt balance and require a significant amount of cash to service our debt and sustain our operations.

Our ability to generate cash will be affected by our ability to successfully implement our business strategy, which includes increasing our occupancy levels and pricing of our cruises, as well as general macroeconomic, financial, geopolitical, competitive, regulatory and other factors beyond our control.

As a result of the pause in our guest cruise operations, we have a substantial debt balance 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.

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

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

Cruise passenger ticket revenues made up 66% of our total revenues in 2023 while onboard and other revenues made up 34%.

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.

Revenues in 2023 increased by $2.5 billion to $6.9 billion from $4.3 billion in 2022 due to the increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022.

Our full fleet was serving guests as of August 31, 2023 , compared to 93% as of August 31, 2022 .

ALBDs increased to 23.7 million in 2023 as compared to 21.0 million in 2022.

1 unchanged sentence

Cruise passenger ticket revenues made up 65% of our NAA segment’s total revenues in 2023 while onboard and other cruise revenues made up 35%.

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.

NAA segment revenues in 2023 increased by $1.7 billion to $4.6 billion from $2.9 billion in 2022 due to the 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 August 31, 2023, compared to 95% as of August 31, 2022 .

ALBDs increased to 14.6 million in 2023 as compared to 12.6 million in 2022.

2 unchanged sentences

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 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.

Europe segment revenues in 2023 increased by $0.8 billion to $2.1 billion from $1.3 billion in 2022 due to the 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 August 31, 2023 , compared to 92% as of August 31, 2022 .

ALBDs increased to 9.1 million in 2023 as compared to 8.5 million in 2022.

4 unchanged sentences

Fuel costs decreased by $199 million to $468 million in 2023 from $668 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.

$238 million of this decrease was caused by lower fuel prices and changes in fuel mix of $322 per metric ton consumed in 2023 compared to 2022, partially offset by higher fuel consumption due to the resumption of guest cruise operations.

Selling and administrative expenses increased by $89 million to $713 million in 2023 from $625 million in 2022.

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

The increase was principally driven by increases in 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.

2 unchanged sentences

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”)

Debt extinguishment and modification costs were $81 million in 2023 as a result of debt transactions during the quarter, where there were none in 2022.

Nine Months Ended August 31, 2023 (“2023”) Compared to Nine Months Ended August 31, 2022 (“2022”)

Cruise passenger ticket revenues made up 65% of our total revenues in 2023 while onboard and other revenues made up 35%.

Revenues in 2023 increased by $7.9 billion to $16.2 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.

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

Our full fleet was serving guests as of August 31, 2023 , compared to 93% as of August 31, 2022 .

ALBDs increased to 68.1 million in 2023 as compared to 51.0 million in 2022.

2 unchanged sentences

NAA segment revenues in 2023 increased by $5.3 billion to $11.0 billion from $5.7 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.

Our NAA segment’s full fleet was serving guests as of August 31, 2023, compared to 95% as of August 31, 2022 .

ALBDs increased to 42.2 million in 2023 as compared to 31.4 million in 2022.

3 unchanged sentences

Europe segment revenues in 2023 increased by $2.4 billion to $4.8 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 Europe segment’s full fleet was serving guests as of May 31, 2023 , compared to 81% as of May 31, 2022.

Our Europe segment’s full fleet was serving guests as of August 31, 2023 , compared to 92% as of August 31, 2022 .

ALBDs increased to 25.9 million in 2023 as compared to 19.6 million in 2022.

3 unchanged sentences

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 $0.4 billion to $2.2 billion in 2023 from $1.8 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.

The 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)

1 unchanged sentence

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

Debt extinguishment and modification costs were $112 million in 2023 as a result of debt transactions during the period, where there were none in 2022.

Liquidity, Financial Condition and Capital Resources

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 $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.

As of August 31, 2023, we had $5.7 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 to reduce interest expense 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 $6.3 billion as of August 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 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 as well as 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 until the 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 $6.9 billion and $4.9 billion of customer deposits as of May 31, 2023 and November 30, 2022, respectively.

Included within our working capital are $6.0 billion and $4.9 billion of customer deposits as of August 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.

1 unchanged sentence

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.

Refer to Note 1 - “General, ” of the consolidated financial statements for additional discussion regarding our liquidity.

Sources and Uses of Cash

Operating Activities

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.

Our business provided $3.4 billion of net cash flows from operating activities during the nine months ended August 31, 2023, an increase of $4.9 billion, compared to $1.6 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 six months ended May 31, 2023, net cash used in investing activities was $1.5 billion.

During the nine months ended August 31, 2023, net cash used in investing activities was $2.3 billion.

This was driven by:

2 unchanged sentences

• Proceeds from sales of ships of $260 million

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

During the nine months ended August 31, 2022, net cash used in investing activities was $3.5 billion.

This was driven by:

5 unchanged sentences

Financing Activities

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

During the nine months ended August 31, 2023, net cash used in financing activities of $4.2 billion was driven by:

• Repayments of $200 million of short term-borrowings

• Repayments of $6.8 billion of long-term debt

• Issuances of $1.0 billion of long-term debt

• Payments of $94 million related to debt issuance costs

• 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:

• Debt issuance costs of $116 million

• Debt extinguishment costs of $67 million

• Issuances of $3.0 billion of long-term debt

• Repayments of $0.7 billion of long-term debt

• Payments of $110 million related to debt issuance costs

• 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 the nine months ended August 31, 2022, net cash provided by financing activities of $3.2 billion was caused by:

• Net repayments of short-term borrowings of $114 million

• Purchases of $82 million of Carnival plc ordinary shares and issuances of $89 million of Carnival Corporation common stock under our Stock Swap Program

• Repayments of $1.1 billion of long-term debt

• Debt issuance costs of $116 million

• Issuances of $3.3 billion of long-term debt

• Net proceeds of $1.2 billion from the public offering of Carnival Corporation common stock

• Proceeds from issuance of $89 million of Carnival Corporation common stock and purchases of $82 million of Carnival plc ordinary shares under our Stock Swap Program

Funding Sources

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.

As of August 31, 2023, we had $5.7 billion of liquidity including $2.8 billion of cash and cash equivalents and $2.9 billion of borrowings available under our Revolving Facility, which matures in August 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.

4 unchanged sentences

(in billions) 2023 2024 2025

Future export credit facilities at May 31, 2023

Future export credit facilities at August 31, 2023

$ — $ 2.2 $ 0.7

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

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

At August 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