What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-03-27 compared with 2023-09-29 · 132 added, 157 removed, 104 unchanged (74% of the section changed)

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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, and in the future may continue to be, amplified by our substantial debt balance as a result of the pause of our guest cruise operations.

Additionally, many of these risks and uncertainties are currently, and in the future may continue to be, amplified by our substantial debt balance incurred during the pause of our guest cruise operations.

There may be additional risks that we consider immaterial or which are unknown.

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 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.

• Events and conditions around the world, including geopolitical uncertainty, war and other military actions, 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 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.

• Incidents concerning our ships, guests or the cruise industry have in the past and may, in the future, negatively 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, labor and employment, and tax have in the past and may, in the future, lead to litigation, enforcement actions, fines, penalties and 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-money laundering, anti-corruption, economic sanctions, trade protection, labor and employment, and tax may be costly and have in the past and may, in the future, lead to litigation, enforcement actions, fines, penalties and reputational damage.

• Factors associated with climate change, including evolving and increasing regulations, increasing global concern about climate change and the shift in climate conscious consumerism and stakeholder scrutiny, and increasing frequency and/or severity of adverse weather conditions could adversely affect our business.

• Inability to meet or achieve our sustainability related goals, aspirations, initiatives, and our public statements and disclosures regarding them, may expose us to risks that may adversely impact our business.

• Inability to meet or achieve our targets, goals, aspirations, initiatives, and our public statements and disclosures regarding them, including those that are related to sustainability matters, 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.

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• Inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments may adversely impact our business operations and the satisfaction of our guests.

• Failure to successfully implement our business strategy following our resumption of guest cruise operations would negatively impact the occupancy levels and pricing of our cruises and could have a material adverse effect on our business.

• We require a significant amount of cash to service our debt and sustain our operations.

Our ability to generate cash depends on many factors, including those beyond our control, and we may not be able to generate cash required to service our debt and sustain our operations.

• Our substantial debt could adversely affect our financial health and operating flexibility.

The ordering of the risk factors set forth above is not intended to reflect our indication of priority or likelihood.

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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.

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

Known Trends and Uncertainties

• 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.

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

• We believe the volatility in the price of fuel and foreign currency exchange rates are reasonably likely 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 greenhouse gas 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 ETS on January 1, 2024, which includes a three-year phase-in period.

The impact in 2024 will be approximately $50 million.

Statistical Information

Three Months Ended

August 31, Nine Months Ended

2023 2022 2023 2022

February 29/28,

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

25.8 17.7 67.8 36.4

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

23.7 21.0 68.1 51.0

Occupancy percentage (c) 109 % 84 % 100 % 71 %

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

Occupancy percentage (d) 102 % 91 %

Passengers carried (in millions)

3.6 2.6 9.3 5.2

Fuel consumption in metric tons (in millions)

0.7 0.7 2.2 1.9

Fuel consumption in metric tons per thousand ALBDs 31.8 33.4

Fuel cost per metric ton consumed $ 636 $ 958 $ 681 $ 836

Fuel cost per metric ton consumed (excluding European Union Allowance (“EUA”)) $ 686 $ 730

EUA cost per metric ton of emissions $ 81 $ —

EUA expense (in millions)

Currencies (USD to 1)

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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.

(c) For the three months ended February 29, 2024 compared to the three months ended February 28, 2023, we had a 4.2% capacity increase in ALBDs comprised of a 3.1% capacity increase in our NAA segment and a 6.1% capacity increase in our Europe segment.

Our NAA segment’s capacity increase was caused by the impacts from:

• One Carnival Cruise Line 4,090-passenger capacity ship transferred from Costa Cruises and entered into service in May 2023

• One Seabourn 260-passenger capacity ship that entered into service in July 2023

• One Carnival Cruise Line 5,360-passenger capacity ship that entered into service in December 2023

• One Princess Cruises 4,310-passenger capacity ship that entered into service in February 2024

The increase in our NAA segment’s capacity was partially offset by more ship dry-dock days in 2024 compared to 2023.

Our Europe segment’s capacity increase was caused by the impacts from:

• The return to service of two ships as part of the completion of our return to guest cruise operations

• One P&O Cruises (UK) 5,280-passenger capacity ship that entered into service in December 2022

The increase in our Europe segment’s capacity was partially offset by the impacts from:

• One Costa Cruises 4,090-passenger capacity ship that was transferred to Carnival Cruise Line in March 2023

• One AIDA Cruises 1,270-passenger capacity ship removed from service in November 2023

• One Costa Cruises 4,240-passenger capacity ship that was transferred to Carnival Cruise Line in February 2024 and is scheduled to enter service in April 2024

(d) 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.

Results of Operations

Three Months Ended

August 31, Nine Months Ended

(in millions) 2023 2022 Change 2023 2022 Change

Passenger ticket $ 4,546 $ 2,595 $ 1,951 $ 10,557 $ 4,753 $ 5,804

Onboard and other 2,308 1,711 597 5,640 3,577 2,063

6,854 4,305 2,548 16,197 8,329 7,868

Operating Costs and Expenses

Commissions, transportation and other 823 565 258 2,097 1,141 956

Onboard and other 752 537 215 1,785 1,060 725

Payroll and related 585 563 22 1,768 1,601 167

Fuel 468 668 (199) 1,492 1,577 (86)

Food 364 259 105 1,000 586 414

Ship and other impairments — — — — 8 (8)

Other operating 928 787 141 2,546 2,118 428

Cruise and tour operating expenses 3,921 3,379 542 10,688 8,092 2,596

Selling and administrative 713 625 89 2,162 1,774 388

Depreciation and amortization 596 581 15 1,774 1,707 67

5,230 4,585 645 14,624 11,573 3,052

Operating Income (Loss) 1,624 (279) 1,903 1,572 (3,244) 4,816

Nonoperating Income (Expense)

Interest income 59 24 35 183 34 150

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

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

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

(559) (479) (80) (1,595) (1,235) (360)

Income (Loss) Before Income Taxes $ 1,065 $ (759) $ 1,823 $ (23) $ (4,478) $ 4,456

Three Months Ended

August 31, Nine Months Ended

(in millions) 2023 2022 Change 2023 2022 Change

Passenger ticket $ 2,963 $ 1,716 $ 1,247 $ 6,896 $ 3,163 $ 3,733

Onboard and other 1,603 1,164 439 4,104 2,509 1,595

4,566 2,880 1,686 11,000 5,672 5,328

Operating Costs and Expenses 2,661 2,280 381 7,132 5,335 1,797

Selling and administrative 420 368 52 1,295 1,078 217

Depreciation and amortization 377 358 19 1,115 1,046 69

3,459 3,007 452 9,542 7,460 2,083

Operating Income (Loss) $ 1,107 $ (126) $ 1,233 $ 1,458 $ (1,787) $ 3,245

Three Months Ended

August 31, Nine Months Ended

(in millions) 2023 2022 Change 2023 2022 Change

Passenger ticket $ 1,595 $ 972 $ 623 $ 3,699 $ 1,804 $ 1,895

Onboard and other 465 294 171 1,120 585 535

2,060 1,266 794 4,819 2,389 2,430

Operating Costs and Expenses 1,124 983 141 3,303 2,529 774

Selling and administrative 199 173 26 634 524 110

Depreciation and amortization 168 172 (4) 506 531 (25)

1,491 1,328 163 4,443 3,585 859

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

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 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 $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.

Occupancy for 2023 was 109% compared to 84% in 2022.

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 $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.

Occupancy for 2023 was 111% compared to 92% in 2022.

Three Months Ended February 29, 2024 (“2024”) Compared to Three Months Ended February 28, 2023 (“2023”)

Passenger ticket revenues made up 67% of our 2024 total revenues.

Passenger ticket revenues increased by $747 million, or 26%, to $3.6 billion in 2024 from $2.9 billion in 2023.

This increase was caused by:

• $352 million - 12% increase in occupancy

• $252 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher

• $120 million - 4.2% capacity increase in ALBDs

• $32 million - net favorable foreign currency translational impact

The remaining 33% of 2024 total revenues was comprised of onboard and other revenues, which increased by $227 million, or 15%, to $1.8 billion in 2024 from $1.6 billion in 2023.

This increase was principally due to:

• $147 million - 12% increase in occupancy

• $56 million - 4.2% capacity increase in ALBDs

Passenger ticket revenues made up 63% of our NAA segment’s 2024 total revenues.

Passenger ticket revenues increased by $376 million, or 20%, to $2.3 billion in 2024 from $1.9 billion in 2023.

This increase was caused by:

• $216 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher

• $123 million - 6.5% increase in occupancy

• $59 million - 3.1% capacity increase in ALBDs

The remaining 37% of our NAA segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $120 million, or 10%, to $1.3 billion in 2024 compared to $1.2 billion in 2023.

This increase was substantially all due to:

• $77 million - 6.5% increase in occupancy

• $37 million - 3.1% capacity increase in ALBDs

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 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.

Occupancy for 2023 was 106% compared to 73% in 2022.

Operating Cost and Expenses

Operating costs and expenses increased by $0.5 billion to $3.9 billion in 2023 from $3.4 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 decreased by $199 million to $468 million in 2023 from $668 million in 2022.

$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 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.

Nonoperating Income (Expense)

Interest expense, net of capitalized interest, increased by $96 million to $518 million in 2023 from $422 million in 2022.

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

Occupancy for 2023 was 100% compared to 71% in 2022.

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 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 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.

Occupancy for 2023 was 104% compared to 78% in 2022.

Passenger ticket revenues made up 77% of our Europe segment’s 2024 total revenues.

Passenger ticket revenues increased by $373 million, or 38%, to $1.4 billion in 2024 compared to $1.0 billion in 2023.

This increase was substantially all due to:

• $230 million - 23% increase in occupancy

• $61 million - 6.1% capacity increase in ALBDs

• $36 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher

• $34 million - net favorable foreign currency translational impact

The remaining 23% of our Europe segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $102 million, or 34%, to $404 million in 2024 from $302 million in 2023.

This increase was principally due to:

• $70 million - 23% increase in occupancy

• $19 million - 6.1% capacity increase in ALBDs

Costs and Expenses

Operating costs and expenses increased by $394 million, or 12%, to $3.7 billion in 2024 from $3.3 billion in 2023.

This increase was driven by:

• $134 million - 4.2% capacity increase in ALBDs

• $126 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests

• $72 million - 12% increase in occupancy

• $43 million - higher onboard and other cost of sales driven by higher onboard revenues

• $30 million - higher repair and maintenance expenses (including dry-dock expenses)

• $25 million - net unfavorable foreign currency translational impact

• $25 million - higher port expenses

These increases were partially offset by $52 million of lower fuel expenses.

Selling and administrative expenses increased by $101 million, or 14%, to $813 million in 2024 from $712 million in 2023.

This increase was caused by an increase in advertising costs and administrative expenses, which includes an increase in compensation costs.

Operating costs and expenses increased by $213 million, or 9.7%, to $2.4 billion in 2024 from $2.2 billion in 2023.

This increase was driven by:

• $68 million - 3.1% capacity increase in ALBDs

• $47 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests

• $44 million - higher repair and maintenance expenses (including dry-dock expenses)

• $26 million - higher onboard and other cost of sales driven by higher onboard revenues

• $26 million - 6.5% increase in occupancy

• $20 million - higher port expenses

These increases were partially offset by $30 million of lower fuel expenses.

Selling and administrative expenses increased by $62 million, or 14%, to $502 million in 2024 from $440 million in 2023.

This increase was caused by an increase in advertising costs and administrative expenses, which includes an increase in compensation costs.

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 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 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.

Occupancy for 2023 was 93% compared to 60% in 2022.

Operating Cost and Expenses

Operating costs and expenses increased by $2.6 billion to $10.7 billion in 2023 from $8.1 billion in 2022.

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

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 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.

Operating costs and expenses increased by $173 million, or 16%, to $1.3 billion in 2024 from $1.1 billion in 2023.

This increase was caused by:

• $79 million - higher commissions, transportation costs, and other expenses driven by an increase in the number of guests

• $66 million - 6.1% capacity increase in ALBDs

• $45 million - 23% increase in occupancy

• $27 million - net unfavorable foreign currency translational impact

• $17 million - higher onboard and other cost of sales driven by higher onboard revenues

These increases were partially offset by:

• $22 million - lower fuel expenses

• $14 million - lower repair and maintenance expenses (including dry-dock expenses)

Selling and administrative expenses increased by $21 million, or 10%, to $234 million in 2024 from $213 million in 2023.

This increase was caused by an increase in advertising costs and administrative expenses, which includes an increase in compensation costs.

Operating Income (Loss)

Our consolidated operating income (loss) increased by $447 million to $276 million in 2024 from $(172) million in 2023.

Our NAA segment’s operating income (loss) increased by $187 million to $272 million in 2024 from $86 million in 2023, and our Europe segment’s operating income (loss) increased by $286 million to $119 million in 2024 from $(166) million in 2023.

These changes were primarily due to the reasons discussed above.

Nonoperating Income (Expense)

Interest expense, net of capitalized interest, increased by $0.4 billion to $1.6 billion in 2023 from $1.2 billion in 2022.

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.

Interest expense, net of capitalized interest, decreased by $68 million, or 13%, to $471 million in 2024 from $539 million in 2023.

The decrease was caused by a decrease in total debt.

Debt extinguishment costs were $33 million in 2024 as a result of debt transactions occurring during the current period.

Liquidity, Financial Condition and Capital Resources

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.

As of February 29, 2024, we had $5.2 billion of liquidity including $2.2 billion of cash and cash equivalents and $3.0 billion of borrowings available under our Revolving Facility, which matures in August 2024, at which point it will be replaced by the $2.5 billion New Revolving Facility available through August 2027.

We will continue to pursue various opportunities to repay portions of our existing indebtedness and refinance future debt maturities to extend maturity dates and reduce interest expense.

Refer to Note 3 - “Debt” of the consolidated financial statements and Funding Sources below for additional details.

We had a working capital deficit of $7.9 billion as of February 29, 2024 compared to a working capital deficit of $6.2 billion as of November 30, 2023.

The increase in working capital deficit was primarily due to an increase in customer deposits and the current portion of long-term debt as well as a decrease in prepaid expenses and other.

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 $6.0 billion and $4.9 billion of customer deposits as of August 31, 2023 and November 30, 2022, respectively.

Included within our working capital are $6.6 billion and $6.1 billion of customer deposits as of February 29, 2024 and November 30, 2023, 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.

Certain of these agreements allow the credit card processors to request, under certain circumstances, that we provide a capped reserve fund in cash.

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

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

Sources and Uses of Cash

Operating Activities

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.

Our business provided $1.8 billion of net cash flows from operating activities during the three months ended February 29, 2024, an increase of $1.4 billion, compared to $0.4 billion provided for the same period in 2023.

This was driven by an increase in net cash provided by operating activities and an increase in cash provided by the release of substantially all credit card reserves (included in the change in prepaid expenses and other assets).

Investing Activities

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

During the three months ended February 29, 2024, net cash used in investing activities was $2.2 billion.

This was driven by:

• Capital expenditures of $1.7 billion for our ongoing new shipbuilding program

• Capital expenditures of $991 million for ship improvements and replacements, information technology and buildings and improvements

• Proceeds from sales of ships of $260 million

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

• Capital expenditures of $0.4 billion for ship improvements and replacements, information technology and buildings and improvements

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

This was driven by:

• Capital expenditures of $0.8 billion for our ongoing new shipbuilding program

• Capital expenditures of $776 million for ship improvements and replacements, information technology and buildings and improvements

• Proceeds from sale of ships and other of $55 million

• Purchases of short-term investments of $315 million

• Proceeds from maturity of short-term investments of $515 million

• Capital expenditures of $0.2 billion for ship improvements and replacements, information technology and buildings and improvements

• Proceeds from sale of ships of $23 million

Financing Activities

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

During the three months ended February 29, 2024, net cash provided by financing activities of $0.2 billion was caused by:

• Repayments of $1.4 billion of long-term debt

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• Issuances of $1.7 billion of long-term debt

• 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

• Repayments of $1.1 billion of long-term debt

• Debt issuance costs of $116 million

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

• 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

• Repayments of $0.7 billion of long-term debt

• Payments of $40 million related to debt issuance costs

Funding Sources

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.

As of February 29, 2024, we had $5.2 billion of liquidity including $2.2 billion of cash and cash equivalents and $3.0 billion of borrowings available under our Revolving Facility, which matures in August 2024, at which point it will be replaced by the New Revolving Facility available through August 2027.

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

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(in billions)

Future export credit facilities at August 31, 2023

Future export credit facilities at February 29, 2024

$ 0.6 $ 0.7 $ — $ 1.4

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

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

At February 29, 2024 , 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