Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .
2023 Executive Overview
We consistently set records and achieved other significant milestones during this past year, including:
• Full year revenues hit an all-time high of $21.6 billion.
• For the first time since the resumption of guest cruise operations, net income was positive during the third quarter, generating $1.07 billion.
• We entered 2024 with our best booked position on record, for both price and occupancy.
• Total customer deposits for each quarter throughout 2023 consistently surpassed the previous quarterly records.
• We reduced our debt balance by $4.6 billion from its peak in the first quarter of 2023 and ended the year with $5.4 billion of liquidity.
The strengthening demand environment across all our brands contributed to our revenue growth as we drove improvements in ticket prices while closing the double-digit occupancy gap from the start of the year and reaching historical occupancy levels for the second half of 2023.
We believe our advertising investments and other demand generation efforts during the past 18 months have successfully elevated awareness and consideration for our brands, leading to record booking levels and revenue results. In addition, these efforts enabled us to attract more new-to cruise and more new-to brand guests compared to 2019. We are building momentum in closing the value gap to land-based alternatives, capturing over 3.5 million new-to cruise guests in 2023 and remain well-positioned to take share from land-based alternatives.
We continue to take actions to further stimulate demand and maintain our momentum through 2024 and beyond. We are focused on ongoing improvements across the commercial space as we further rollout advancements to our yield management tools and lead generation techniques, continue to invest in sales and sales support, and build on already strong relationships with our trade partners. This is complemented by our strategy to pull forward the sale of onboard items through bundled product offerings and pre-cruise sales.
We are also not losing sight of our expense base, as we have worked to mitigate the impacts of a high inflation environment by leveraging our scale through cost optimization initiatives. We have made investments that we expect to increase our cost efficiencies in the future, including successfully installing SpaceX's Starlink, next generation internet across our fleet, which is expected to drive more than a 20% reduction in cost per megabit in 2024. In addition, we expect it will increase our bandwidth pipeline, resulting in both improved guest experience and higher onboard revenues. We also launched Maritime Asset Strategy Transformation (“MAST”), a centralized system developed to optimize equipment and machinery management across our brands and our fleet.
During 2023, we continued to work aggressively to reduce our environmental footprint and fuel consumption. Our deep commitment resulted in industry-leading fuel efficiency and a more than 10% reduction in absolute GHG emissions compared to our peak year of 2011, despite capacity growth of 30% over the same period. We also exceeded our shore power capability goal and our fleet now has twice as many ships ready to plug into shore power as there are ports currently able to provide it.
As a result of our fleet optimization efforts, our fleet is now one year younger than prior to pausing our guest cruise operations four years ago. During 2023 alone we benefited from the introduction of three fantastic new ships including Carnival Celebration and Arvia, leveraging the scale of our popular and exceptionally efficient series of excel-class ships, and Seabourn Pursuit , our second luxury expedition ship. In addition, Carnival Cruise Line welcomed Carnival Venezia, which was transferred from Costa, becoming the first ship as part of Carnival’s Fun Italian Style™ platform. We will continue to optimize our brand portfolio by transferring Costa Firenze to Carnival Cruise Line in 2024.
We also made meaningful progress in other strategic asset projects. We began construction on Celebration Key in Grand Bahama, which will be the largest and closest exclusive destination in our portfolio. While not expected to open until summer 2025, we have begun generating consumer awareness and excitement around this fantastic upcoming destination. We also started the process for a significant upsize in guest traffic at Half Moon Cay, our exclusive and beautiful pristine island destination in The Bahamas, with the creation of a pier-side berth that can accommodate our largest vessels. In addition, we commenced work with our Grand Bahama Shipyard partners on the construction of two floating docks, one of which will have the largest lifting capacity in the world. Together, these strategic investments are expected to significantly benefit us by helping to reduce travel time, further reducing our fuel consumption and preserving ship revenue days.
Our significantly improved 2023 cash from operations enabled us to notably reduce the substantial debt balance incurred during the pause of guest cruise operations. In 2023, we made sizeable debt prepayments and ended the year with over $5 billion of liquidity. Looking forward, we expect to continue to strategically refinance and prepay debt, leveraging our improving operating cash flow and the return of substantially all of the remaining credit card reserves during the first quarter of 2024.
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In addition, with nearly two-thirds of 2024 on the books already, we are well positioned to achieve another year of record revenues. This, combined with excess liquidity, is expected to enable us to continue actively managing down debt and reducing interest expense, leaving us on our path back to achieving investment grade credit ratings and higher return on invested capital.
This has been a truly remarkable year, and we have come a long way in an incredibly short amount of time. We delivered unforgettable happiness to over 12 million guests this year and look forward to continuing to provide our guests with extraordinary cruise vacations in 2024, while honoring the integrity of every ocean we sail, place we visit and life we touch.
New Accounting Pronouncements
Refer to our consolidated financial statements for further information on Accounting Pronouncements .
Critical Accounting Estimates
Our critical accounting estimates are those we believe require our most significant judgments about the effect of matters that are inherently uncertain. A discussion of our critical accounting estimates, the underlying judgments and uncertainties used to make them and the likelihood that materially different estimates would be reported under different conditions or using different assumptions is as follows:
Liquidity and Other Uncertainties
We make several critical accounting estimates with respect to our liquidity.
As part of our liquidity management, we rely on estimates of our future liquidity, which includes numerous assumptions that are subject to various risks and uncertainties. The principal assumptions used to estimate our future liquidity consist of:
• Expected increases in revenue in 2024 as compared to 2023
• Expected prepayment of debt
• Continued stabilization of inflationary pressures on costs compared to 2023
• Fuel prices at or around November 2023 year-end prices
In addition, we make certain assumptions about new ship deliveries, improvements on existing ships as well as other capital expenditures, removals of existing ships, and consider the future export credit financings that are associated with the new ship deliveries.
We have a substantial debt balance incurred during the pause in guest cruise operations and require a significant amount of liquidity or cash provided by operating activities to service our debt. We will continue to pursue various opportunities to refinance future debt maturities to extend maturity dates and reduce interest expense by repaying some of our existing indebtedness .
Ship Accounting
We make several critical accounting estimates with respect to our ship accounting including ship improvement costs, estimated useful lives and residual values.
We account for ship improvement costs, including replacements of certain significant components and parts, by capitalizing those costs that we believe add value to our ships and have a useful life greater than one year and depreciating those improvements over their estimated remaining useful life. The costs of repairs and maintenance, including those incurred when a ship is taken out-of-service for scheduled maintenance, and minor improvement costs and expenses, are charged to expense as incurred. If we change our assumptions in making our determinations as to whether improvements to a ship add value, the amounts we expense each year as repair and maintenance expense could increase, which would be partially offset by a decrease in depreciation expense, resulting from a reduction in capitalized costs.
In addition, the specifically identified or estimated cost and accumulated depreciation of previously capitalized ship components are written-off upon retirement, which may result in a loss on disposal that is also included in other operating expenses. We do not have cost segregation studies performed to specifically componentize our ships. In addition, since we do not separately componentize our ships, we do not identify and track depreciation of original ship components. Therefore, we typically have to estimate the net book value of components that are retired, based primarily upon their replacement cost, their age and their original estimated useful lives. Given the large size and complexity of our ships, ship accounting estimates require considerable judgment and are inherently uncertain.
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In order to compute our ships’ depreciation expense, we apply judgment to determine their useful lives as well as their residual values. We have estimated our ships’ useful lives at 30 years and residual values at 15% of our original ship cost. Our ships’ useful life and residual value estimates take into consideration the estimated weighted-average useful lives of the ships’ major component systems, such as hull, superstructure, main electric, engines and cabins. We also take into consideration the impact of technological changes, historical useful lives of similarly-built ships, long-term cruise and vacation market conditions and regulatory changes, including those related to the environment and climate change. We determine the residual value of our ships based on our long-term estimates of their resale value at the end of their useful lives to us but before the end of their physical and economic lives to others, historical resale values of our and other cruise ships as well as our expectations of the long-term viability of the secondary cruise ship market. We review estimated useful lives and residual values for reasonableness whenever events or circumstances significantly change. Since the pause of our guest cruise operations, we have disposed of ships for amounts significantly below their book values. Management has estimated that this trend will normalize in the coming years.
The IMO recently adopted its 2023 Strategy on Reduction of GHG Emissions from Ships that would require international shipping to reduce total GHG emissions on a well-to-wake basis to net zero by or around 2050. In addition, the framework introduces checkpoints in 2030 and 2040 that seek reductions in the total GHG emissions from international shipping by at least 20% and 70%, respectively, compared to 2008. The EU has also proposed several regulations that will likely impact the cost of fossil fuels and has recently adopted the inclusion of maritime shipping in the EU’s Emission Trading System. We have established Climate Action Goals, which include a GHG intensity reduction goal of 20% by 2030 from the 2019 baseline and pursuing net zero emissions by 2050 . Given a 30-year estimated useful life for our ships, our most recently delivered vessels’ lives will extend beyond this 2050 date. Fossil fuels are currently the only viable option for our industry and it is not clear when alternative fuels or other technologies will be commercially viable. To provide a path to net zero emissions, alternative low GHG emission fuels will be necessary for the maritime industry; however, there are significant supply challenges that must be resolved before viability is reached. We are closely monitoring technology developments and partnering with key organizations on research and development to support our sustainability goals and aspirations. Our fleet’s engines are capable of being modified for use with certain alternative fuels and we have completed tests on the use of marine biofuel blends on certain ships in our fleet. In addition, and in support of our Climate Action Goals, we invest in technologies, including the use of LNG powered cruise ships, the installation of Advanced Air Quality Systems on board our ships to aid in the reduction of sulfur emissions, the use of shore power, enabling ships to use shoreside electric power where available while in port and various other efficiency related upgrades intended to reduce our emissions. It is uncertain how recently adopted, proposed and possible future regulatory changes related to the environment and climate change and our pursuit of net zero emissions by 2050, may impact our ships’ useful lives and residual values and the impact is dependent on future regulatory actions and technological advances. As of November 30, 2023, management concluded that there were no changes in our ship useful lives and residual value estimates.
If materially different conditions existed, or if we materially changed our assumptions of ship useful lives and residual values, then our depreciation expense, loss on retirement of ship components and net book value of our ships would be materially different. Our 2023 ship depreciation expense would have increased by approximately:
• $49 million assuming we had reduced our estimated 30-year ship useful life estimate by one year at the time we took delivery or acquired each of our ships
• $245 million assuming we had estimated our ships to have no residual value
We believe that the estimates we made for ship accounting purposes are reasonable and our methods are consistently applied in all material respects and result in depreciation expense that is based on a rational and systematic method to equitably allocate the costs of our ships to the periods during which we use them.
Valuation of Ships
Impairment reviews of our ships require us to make significant estimates. We evaluate ship asset impairments at the individual ship level which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. We review our ships for impairment whenever events or circumstances indicate that the carrying value of a ship may not be recoverable. If estimated future cash flows are less than the carrying value of a ship, an impairment charge is recognized to the extent its carrying value exceeds its estimated fair value. Where estimated future cash flows are used to estimate the recoverable value of a ship, the cash flows include estimated regulatory costs, including those related to proposed regulations, which are likely to impact costs and capital expenditures, including those expected to meet our 2030 Climate Action Goals.
The estimation of a ship’s fair value includes numerous assumptions that are subject to various risks and uncertainties. The principal assumption used in determining the fair value of these ships was the estimated sales proceeds.
We determined the fair value of these ships based on their respective estimated selling values, for those ships expected to be disposed of, or estimated discounted future cash flows and comparable market transactions. Refer to our consolidated financial statements for additional discussion of our property and equipment policy and ship impairment reviews.
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We believe that we have made reasonable estimates.
Contingencies
We periodically assess the potential liabilities related to any lawsuits or claims brought against us, as well as for other known unasserted claims, including environmental, legal, regulatory and guest and crew matters. While it is typically very difficult to determine the timing and ultimate outcome of these matters, we use our best judgment to determine the appropriate amounts to record in our consolidated financial statements.
We accrue a liability and establish a reserve when we believe a loss is probable and the amount of the loss can be reasonably estimated. In assessing probable losses, we make estimates of the amount of probable insurance recoveries, if any, which are recorded as assets where appropriate. Such accruals and reserves are typically based on developments to date, management’s estimates of the outcomes of these matters, our experience in contesting, litigating and settling other similar matters, historical claims experience, actuarially determined estimates of liabilities and any related insurance coverage.
Given the inherent uncertainty related to the eventual outcome of these matters and potential insurance recoveries, it is possible that all or some of these matters may be resolved for amounts materially different from any provisions or disclosures that we may have made. In addition, as new information becomes available, we may need to reassess the amount of asset or liability that needs to be accrued related to our contingencies. All such changes in our estimates could materially impact our results of operations and financial position.
Refer to our consolidated financial statements for additional discussion of contingencies.
Known Trends and Uncertainties
• We believe the volatility in the cost of fuel and increases in other related costs are reasonably likely to continue to impact our profitability in both the short and long-term.
• We believe inflation and interest rates are reasonably likely to continue to impact our profitability.
• We believe a global minimum tax could affect us in 2026, with the potential for a one-year deferral. Prior to any mitigating actions, we believe the annual impact could be approximately $200 million. We continue to evaluate the impact of these rules and are currently evaluating a variety of mitigating actions to minimize the impact. The application of the rules continues to evolve, and its outcome may alter our tax obligations in certain countries in which we operate.
• We believe the increasing global focus on climate change, including the reduction of GHG emissions and new and evolving regulatory requirements, is reasonably likely to have a material negative impact on our future financial results. We became subject to the EU Emission Trading Scheme (“ETS”) on January 1, 2024, which includes a three-year phase-in period. We estimate the impact in 2024 to be approximately $51 million based on a European Union Allowance cost of $75 per metric ton of emissions. Refer to XIX. Governmental Regulations.
• We believe that the instability in the Red Sea region currently impacting shipping could have an impact on our results of operations.
Results of Operations
We have historically earned substantially all of our cruise revenues from the following:
• Sales of passenger cruise tickets and, in some cases, the sale of air and other transportation to and from airports near our ships’ home ports and cancellation fees. We also collect fees, taxes and other charges from our guests. The cruise ticket price typically includes the following:
• Accommodations
• Most meals, including snacks at numerous venues
• Access to amenities such as swimming pools, water slides, water parks, whirlpools, a health club and sun decks
• Child care and supervised youth programs
• Entertainment, such as theatrical and comedy shows, live music and nightclubs
• Visits to multiple destinations
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• Sales of onboard goods and services not included in the cruise ticket price. This generally includes the following:
• Beverage sales
• Internet and communication services
• Casino gaming
• Full service spas
• Shore excursions
• Specialty restaurants
• Retail sales
• Art sales
• Photo sales
• Laundry and dry cleaning services
These goods and services are provided either directly by us or by independent concessionaires, from which we receive either a percentage of their revenues or a fee. Concession revenues do not have direct expenses because the costs and services incurred for concession revenues are borne by our concessionaires. In 2023, we earned 34% of our cruise revenues from onboard and other revenue goods and services.
We earn our tour and other revenues from our hotel and transportation operations and other revenues.
We incur cruise operating expenses for the following:
• The costs of passenger cruise bookings, which include travel agent commissions, cost of air and other transportation, port fees, taxes, and charges that directly vary with guest head counts and credit and debit card fees
• Onboard and other cruise costs, which include the costs of beverage sales, costs of shore excursions, costs of retail sales, internet and communication costs, credit and debit card fees, other onboard costs, costs of cruise vacation protection programs and pre- and post-cruise land packages
• Payroll and related costs, which include the costs of officers and crew in bridge, engineering and hotel operations. Substantially all costs associated with our shoreside personnel are included in selling and administrative expenses
• Fuel costs, which include fuel delivery costs
• Food costs, which include both our guest and crew food costs
• Other ship operating expenses, which include port costs that do not vary with guest head counts; repairs and maintenance, including minor improvements and dry-dock expenses; hotel costs; entertainment; gains and losses on ship sales; ship impairments; freight and logistics; insurance premiums and all other ship operating expenses
We incur tour and other costs and expenses for our hotel and transportation operations and other expenses.
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Statistical Information
Years Ended November 30,
2023 2022 2021
Passenger Cruise Days (“PCDs”) (in millions) (a)
91.4 54.6 8.2
Available Lower Berth Days (“ALBDs”) (in millions) (b)
91.3 72.5 14.6
Occupancy percentage (c)
100 % 75 % 56 %
Passengers carried (in millions)
12.5 7.7 1.2
Fuel consumption in metric tons (in millions)
2.9 2.6 1.3
Fuel consumption in metric tons per thousand ALBDs 32.1 36.1 (d)
Fuel cost per metric ton consumed $ 701 $ 830 $ 515
Currencies (USD to 1)
AUD $ 0.66 $ 0.70 $ 0.75
CAD $ 0.74 $ 0.77 $ 0.80
EUR $ 1.08 $ 1.06 $ 1.19
GBP $ 1.24 $ 1.25 $ 1.38
Notes to Statistical Information
(a) PCD represents the number of cruise passengers on a voyage multiplied by the number of revenue-producing ship operating days for that voyage.
(b) ALBD is a standard measure of passenger capacity for the period that we use to approximate rate and capacity variances, based on consistently applied formulas that we use to perform analyses to determine the main non-capacity driven factors that cause our cruise revenues and expenses to vary. ALBDs assume that each cabin we offer for sale accommodates two passengers and is computed by multiplying passenger capacity by revenue-producing ship operating days in the period.
(c) Occupancy, in accordance with cruise industry practice, is calculated using a numerator of PCDs and a denominator of ALBDs, which assumes two passengers per cabin even though some cabins can accommodate three or more passengers. Percentages in excess of 100% indicate that on average more than two passengers occupied some cabins.
(d) Fuel consumption in metric tons per thousand ALBDs for 2021 is not meaningful.
2023 Compared to 2022
The discussion below compares the results of operations for the year ended November 30, 2023 to the year ended November 30, 2022. You should read this discussion in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this annual report. For a comparison of the Company’s results of operations for the year ended November 30, 2022 to the year ended November 30, 2021, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended November 30, 2022, which was filed with the U.S. Securities and Exchange Commission on January 27, 2023.
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Results of Operations
Consolidated
Years Ended November 30,
(in millions) 2023 2022 Change
Revenues
Passenger ticket $ 14,067 $ 7,022 $ 7,045
Onboard and other 7,526 5,147 2,380
21,593 12,168 9,425
Operating Expenses
Commissions, transportation and other 2,761 1,630 1,131
Onboard and other 2,375 1,528 847
Payroll and related 2,373 2,181 192
Fuel 2,047 2,157 (110)
Food 1,335 863 472
Ship and other impairments — 440 (440)
Other operating 3,426 2,958 467
Cruise and tour operating expenses 14,317 11,757 2,560
Selling and administrative 2,950 2,515 435
Depreciation and amortization 2,370 2,275 95
19,637 16,547 3,090
Operating Income (Loss) 1,956 (4,379) 6,335
Nonoperating Income (Expense)
Interest income 233 74 159
Interest expense, net of capitalized interest (2,066) (1,609) (457)
Gains (losses) on debt extinguishment, net (111) (1) (110)
Other income (expense), net (75) (165) 90
(2,018) (1,701) (317)
Income (Loss) Before Income Taxes $ (62) $ (6,080) $ 6,018
NAA
Years Ended November 30,
(in millions) 2023 2022 Change
Revenues
Passenger ticket $ 9,122 $ 4,692 $ 4,430
Onboard and other 5,466 3,589 1,877
14,588 8,281 6,307
Operating Expenses 9,587 7,526 2,061
Selling and administrative 1,753 1,517 236
Depreciation and amortization 1,495 1,408 88
12,836 10,451 2,385
Operating Income (Loss) $ 1,752 $ (2,170) $ 3,922
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Europe
Years Ended November 30,
(in millions) 2023 2022 Change
Revenues
Passenger ticket $ 5,004 $ 2,660 $ 2,344
Onboard and other 1,531 872 659
6,535 3,531 3,003
Operating Expenses 4,398 3,925 474
Selling and administrative 876 745 131
Depreciation and amortization 668 692 (24)
5,942 5,361 581
Operating Income (Loss) $ 593 $ (1,830) $ 2,423
During the pause in our guest cruise operations, we incurred substantial debt and require a significant amount of cash to service our debt. Our ability to generate cash will be affected by general macroeconomic, financial, geopolitical, competitive, regulatory and other factors beyond our control. The full extent of these impacts is uncertain and may be amplified by our substantial debt balance.
Revenues
Consolidated
Cruise passenger ticket revenues made up 65% of our total revenues in 2023 while onboard and other revenues made up 35%. Revenues for the year ended November 30, 2023 increased by $9.4 billion to $21.6 billion from $12.2 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022. ALBDs increased to 91.3 million in 2023 as compared to 72.5 million in 2022. Occupancy for 2023 was 100%, compared to 75% in 2022.
NAA Segment
Cruise passenger ticket revenues made up 63% of our NAA segment’s total revenues in 2023 while onboard and other cruise revenues made up 37%. NAA segment revenues for 2023 increased by $6.3 billion to $14.6 billion from $8.3 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022. ALBDs increased to 56.4 million in 2023 as compared to 44.3 million in 2022. Occupancy for 2023 was 103% compared to 82% in 2022.
Europe Segment
Cruise passenger ticket revenues made up 77% of our Europe segment’s total revenues in 2023 while onboard and other cruise revenues made up 23%. Europe segment revenues for 2023 increased by $3.0 billion to $6.5 billion from $3.5 billion in 2022 due to the significant increase of ships in service and considerably higher occupancy levels in 2023 as compared to 2022. ALBDs increased to 34.9 million in 2023 as compared to 28.2 million in 2022. Occupancy for 2023 was 95% compared to 65% in 2022.
Operating Expenses
Consolidated
Operating expenses increased by $2.6 billion to $14.3 billion in 2023 from $11.8 billion in 2022. These increases were driven by our resumption of guest cruise operations, an increase of ships in service and considerably higher occupancy levels.
Fuel costs decreased by $0.1 billion to $2.0 billion in 2023 from $2.2 billion in 2022. $0.4 billion of this decrease was caused by lower fuel prices and changes in fuel mix of $129 per metric ton consumed in 2023 compared to 2022, partially offset by higher fuel consumption due to the resumption of guest cruise operations.
We did not recognize ship and other impairment charges in 2023 compared to $440 million recognized in 2022.
Selling and administrative expenses increased by $0.4 billion to $2.9 billion in 2023 from $2.5 billion in 2022. This increase was
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caused by increases in advertising costs and administrative expenses incurred as part of our resumption of guest cruise operations, which includes an increase in incentive compensation reflecting expected improvements in the company’s current and long-term performance.
The drivers in changes in costs and expenses for our NAA and Europe segments are the same as those described for our consolidated results.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, increased by $0.5 billion to $2.1 billion in 2023 from $1.6 billion in 2022. The increase was caused by a higher average interest rate in 2023 compared to 2022, partially offset by a decrease in total debt.
Debt extinguishment and modification costs were $111 million in 2023 as a result of debt transactions during the year compared to $1 million in 2022.
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Liquidity, Financial Condition and Capital Resources
As of November 30, 2023, we had $5.4 billion of liquidity including $2.4 billion of cash and cash equivalents and $3.0 billion of borrowings available under our Revolving Facility, which matures in August 2024. In February 2023, Carnival Holdings II entered into the $2.1 billion New Revolving Facility, which may be utilized beginning in August 2024, at which date it will replace our Revolving Facility. We will continue to pursue various opportunities to refinance future debt maturities to extend maturity dates and reduce interest expense by repaying some of our existing indebtedness. Refer to Note 5 - “Debt” of the consolidated financial statements and Funding Sources below for additional details.
We had a working capital deficit of $6.2 billion as of November 30, 2023 compared to a working capital deficit of $3.1 billion as of November 30, 2022. The increase in working capital deficit was caused by a decrease in cash and cash equivalents and restricted cash and an increase in customer deposits, partially offset by an increase in prepaid expenses and a decrease in short-term borrowings and the current portion of long-term debt. We operate with a substantial working capital deficit. This deficit is mainly attributable to the fact that, under our business model, substantially all of our passenger ticket receipts are collected in advance of the applicable sailing date. These advance passenger receipts generally remain a current liability on our balance sheet until the sailing date. The cash generated from these advance receipts is used interchangeably with cash on hand from other sources, such as our borrowings and other cash from operations. The cash received as advanced receipts can be used to fund operating expenses, pay down our debt, make long-term investments or any other use of cash. Included within our working capital are $6.1 billion and $4.9 billion of customer deposits as of November 30, 2023 and 2022, respectively. We have agreements with a number of credit card processors that transact customer deposits related to our cruise vacations. Certain of these agreements allow the credit card processors to request, under certain circumstances, that we provide a reserve fund in cash. In addition, we have a relatively low level of accounts receivable and limited investment in inventories.
Sources and Uses of Cash
Operating Activities
Our business provided $4.3 billion of net cash flows from operating activities during 2023, an increase of $6.0 billion, compared to $1.7 billion used in 2022. This was caused by a decrease in the net loss compared to the same period in 2022 and other working capital changes.
Investing Activities
During 2023, net cash used in investing activities was $2.8 billion. This was driven by:
• Capital expenditures of $1.9 billion for our ongoing new shipbuilding program
• Capital expenditures of $1.4 billion for ship improvements and replacements, information technology and buildings and improvements
• Proceeds from sales of ships and other of $340 million
During 2022, net cash used in investing activities was $4.8 billion. This was driven by:
• Capital expenditures of $3.9 billion for our ongoing new shipbuilding program
• Capital expenditures of $1.1 billion for ship improvements and replacements, information technology and buildings and improvements
• Proceeds from sales of ships and other of $70 million
• Purchases of short-term investments of $315 million
• Proceeds from maturity of short-term investments of $515 million
Financing Activities
During 2023, net cash used in financing activities of $5.1 billion was driven by:
• Repayments of $200 million of short-term borrowings
• Repayments of $5.9 billion of long-term debt and refinancing of $1.8 billion of long-term debt to extend maturities
• Issuances of $3.0 billion of long-term debt
• Debt issuance costs of $131 million
• Debt extinguishment costs of $79 million
• Proceeds from issuance of $22 million of Carnival Corporation common stock and purchases of $20 million of Carnival plc ordinary shares under our Stock Swap Program
During 2022, net cash provided by financing activities of $3.6 billion was caused by:
• Net repayments of short-term borrowings of $2.6 billion
• Repayments of $2.1 billion of long-term debt
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• Debt issuance costs of $153 million
• Issuances of $7.2 billion of long-term debt
• Net proceeds of $1.2 billion from the public offering of Carnival Corporation common stock
• Proceeds from issuance of $95 million of Carnival Corporation common stock and purchases of $87 million of Carnival plc ordinary shares under our Stock Swap Program
For the Company’s cash flow activities for the fiscal year ended November 30, 2021, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended November 30, 2022, which was filed with the U.S. Securities and Exchange Commission on January 27, 2023.
Material Cash Requirements
Payments Due by
(in millions) 2024 2025 2026 2027 2028 Total
Debt (a) $ 3,883 $ 3,844 $ 4,628 $ 7,487 $ 9,755 $ 29,597
Newbuild capital expenditures (b) 2,437 958 — — — 3,395
Total $ 6,320 $ 4,802 $ 4,628 $ 7,487 $ 9,755 $ 32,992
(a) Includes principal as well as estimated interest payments and does not include the impact of any future possible refinancings. Excludes undrawn export credits.
(b) As of November 30, 2023, we have committed undrawn export credit facilities of $3.0 billion which fund a portion of our newbuild contractual commitments.
Funding Sources
As of November 30, 2023, we had $5.4 billion of liquidity including $2.4 billion of cash and cash equivalents and $3.0 billion of borrowings available under our Revolving Facility, which matures in August 2024. In February 2023, Carnival Holdings II entered into the $2.1 billion New Revolving Facility, which may be utilized beginning in August 2024, at which date it will replace our Revolving Facility. Refer to Note 5 - “Debt” of the consolidated financial statements for additional discussion. In addition, we had $3.0 billion of undrawn export credit facilities to fund ship deliveries planned through 2025. We plan to use existing liquidity and future cash flows from operations to fund our cash requirements including capital expenditures not funded by our export credit facilities. We seek to manage our credit risk exposures, including counterparty nonperformance associated with our cash and cash equivalents, and future financing facilities by conducting business with well-established financial institutions, and export credit agencies and diversifying our counterparties.
(in billions) 2024 2025
Future export credit facilities at November 30, 2023
$ 2.3 $ 0.7
Our export credit facilities contain various financial covenants as described in Note 5 - “Debt.” At November 30, 2023, we were in compliance with the applicable covenants under our debt agreements.
Stock Swap Program
Our Stock Swap Program allows us to realize a net cash benefit when Carnival Corporation common stock is trading at a premium to the price of Carnival plc ordinary shares. Under the Stock Swap Program, we may elect to offer and sell shares of Carnival Corporation common stock at prevailing market prices in ordinary brokers’ transactions and repurchase an equivalent number of Carnival plc ordinary shares in the UK market.
Any sales of Carnival Corporation common stock and Carnival plc ordinary shares have been or will be registered under the Securities Act of 1933, as amended. During 2023, under the Stock Swap Program, we sold 2.3 million shares of Carnival Corporation common stock and repurchased the same amount of Carnival plc ordinary shares, resulting in net proceeds of $2 million which were used for general corporate purposes. In addition, during 2023 we sold 0.5 million shares of Carnival Corporation common stock at an average price per share of $9.83, resulting in net proceeds of $5 million. During 2022, we sold 6.0 million shares of Carnival Corporation’s common stock and repurchased the same amount of Carnival plc ordinary shares, resulting in net proceeds of $8 million which were used for general corporate purposes. In addition, during 2022 we sold 1.6 million shares of Carnival Corporation common stock at an average price per share of $19.27, resulting in net proceeds of $30 million. During 2021, we sold $8.9 million shares of Carnival Corporation’s common stock and repurchased the same
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amount of Carnival plc ordinary shares, resulting in net proceeds of $19 million. In addition, during 2021 we sold 0.6 million shares of Carnival Corporation common stock at an average price per share of $21.32, resulting in net proceeds of $13 million.
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