Carnival Corp Ltd. 10-Q

Item 1. Financial Statements . CARNIVAL CORPORATION & PLC CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) (in millions, except per share data) Three Months Ended February 29/28, 2024 2023 Revenues Passenger ticket $ 3,617 $ 2,870 Onboard and other 1,790 1,563 5,406 4,432 Operating Expenses Commissions, transportation and other 819 655 Onboard and other 550 484 Payroll and related 623 582 Fuel 505 535 Food 346 311 Other operating 862 743 Cruise and tour operating expenses 3,705 3,311 Selling and administrative 813 712 Depreciation and amortization 613 582 5,131 4,604 Operating Income (Loss) 276 ( 172 ) Nonoperating Income (Expense) Interest income 33 56 Interest expense, net of capitalized interest ( 471 ) ( 539 ) Debt extinguishment and modification costs ( 33 ) — Other income (expense), net ( 18 ) ( 30 ) ( 489 ) ( 514 ) Income (Loss) Before Income Taxes ( 214 ) ( 686 ) Income Tax Benefit (Expense), Net — ( 7 ) Net Income (Loss) $ ( 214 ) $ ( 693 ) Earnings Per Share Basic $ ( 0.17 ) $ ( 0.55 ) Diluted $ ( 0.17 ) $ ( 0.55 ) The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents CARNIVAL CORPORATION & PLC CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (in millions) Three Months Ended February 29/28, 2024 2023 Net Income (Loss) $ ( 214 ) $ ( 693 ) Items Included in Other Comprehensive Income (Loss) Change in foreign currency translation adjustment — ( 3 ) Other 1 14 Other Comprehensive Income (Loss) 1 11 Total Comprehensive Income (Loss) $ ( 213 ) $ ( 682 ) The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents CARNIVAL CORPORATION & PLC CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in millions, except par values) February 29, 2024 November 30, 2023 ASSETS Current Assets Cash and cash equivalents $ 2,242 $ 2,415 Trade and other receivables, net 644 556 Inventories 531 528 Prepaid expenses and other 1,067 1,767 Total current assets 4,484 5,266 Property and Equipment, Net 41,515 40,116 Operating Lease Right-of-Use Assets, Net 1,238 1,265 Goodwill 579 579 Other Intangibles 1,168 1,169 Other Assets 777 725 $ 49,761 $ 49,120 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Current portion of long-term debt $ 2,195 $ 2,089 Current portion of operating lease liabilities 138 149 Accounts payable 1,103 1,168 Accrued liabilities and other 2,318 2,003 Customer deposits 6,642 6,072 Total current liabilities 12,396 11,481 Long-Term Debt 28,544 28,483 Long-Term Operating Lease Liabilities 1,138 1,170 Other Long-Term Liabilities 1,001 1,105 Contingencies and Commitments Shareholders’ Equity Carnival Corporation common stock, $ 0.01 par value; 1,960 shares authorized; 1,253 shares issued at 2024 and 1,250 shares issued at 2023 13 12 Carnival plc ordinary shares, $ 1.66 par value; 217 shares issued at 2024 and 2023 361 361 Additional paid-in capital 16,679 16,712 Retained earnings (accumulated deficit) ( 29 ) 185 Accumulated other comprehensive income (loss) (“AOCI”) ( 1,938 ) ( 1,939 ) Treasury stock, 130 shares at 2024 and 2023 of Carnival Corporation and 73 shares at 2024 and 2023 of Carnival plc, at cost ( 8,404 ) ( 8,449 ) Total shareholders’ equity 6,682 6,882 $ 49,761 $ 49,120 The accompanying notes are an integral part of these consolidated financial statements. 6 Table of Contents CARNIVAL CORPORATION & PLC CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in millions) Three Months Ended February 29/28, 2024 2023 OPERATING ACTIVITIES Net income (loss) $ ( 214 ) $ ( 693 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Depreciation and amortization 613 582 (Gain) loss on debt extinguishment 33 — (Income) loss from equity-method investments 3 11 Share-based compensation 11 9 Amortization of discounts and debt issue costs 36 44 Noncash lease expense 34 35 Other 16 7 531 ( 4 ) Changes in operating assets and liabilities Receivables ( 106 ) ( 121 ) Inventories ( 7 ) ( 19 ) Prepaid expenses and other assets 634 ( 57 ) Accounts payable ( 11 ) ( 35 ) Accrued liabilities and other 108 28 Customer deposits 619 596 Net cash provided by (used in) operating activities 1,768 388 INVESTING ACTIVITIES Purchases of property and equipment ( 2,138 ) ( 1,075 ) Proceeds from sales of ships — 23 Other ( 25 ) 8 Net cash provided by (used in) investing activities ( 2,163 ) ( 1,044 ) FINANCING ACTIVITIES Principal repayments of long-term debt ( 1,390 ) ( 679 ) Debt issuance costs ( 77 ) ( 40 ) Debt extinguishment costs ( 31 ) — Proceeds from issuance of long-term debt 1,735 830 Other — ( 1 ) Net cash provided by (used in) financing activities 237 111 Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 3 ) ( 2 ) Net increase (decrease) in cash, cash equivalents and restricted cash ( 162 ) ( 546 ) Cash, cash equivalents and restricted cash at beginning of period 2,436 6,037 Cash, cash equivalents and restricted cash at end of period $ 2,274 $ 5,491 The accompanying notes are an integral part of these consolidated financial statements. 7 Table of Contents CARNIVAL CORPORATION & PLC CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED) (in millions) Three Months Ended Common stock Ordinary shares Additional paid-in capital Retained earnings (accumulated deficit) AOCI Treasury stock Total shareholders’ equity At November 30, 2023 $ 12 $ 361 $ 16,712 $ 185 $ ( 1,939 ) $ ( 8,449 ) $ 6,882 Net income (loss) — — — ( 214 ) — — ( 214 ) Other comprehensive income (loss) — — — — 1 — 1 Issuance of treasury shares for vested share-based awards — — ( 47 ) — — 47 — Share-based compensation and other — — 14 — — ( 2 ) 13 At February 29, 2024 $ 13 $ 361 $ 16,679 $ ( 29 ) $ ( 1,938 ) $ ( 8,404 ) $ 6,682 At November 30, 2022 $ 12 $ 361 $ 16,872 $ 269 $ ( 1,982 ) $ ( 8,468 ) $ 7,065 Change in accounting principle (a) — — ( 229 ) ( 10 ) — — ( 239 ) Net income (loss) — — — ( 693 ) — — ( 693 ) Other comprehensive income (loss) — — — — 11 — 11 Issuance of treasury shares for vested share-based awards — — ( 36 ) — — 36 — Share-based compensation and other — — 28 — — ( 1 ) 27 At February 28, 2023 $ 12 $ 361 $ 16,635 $ ( 434 ) $ ( 1,972 ) $ ( 8,433 ) $ 6,170 (a) We adopted the provisions of Debt - Debt with Conversion and Other Options and Derivative and Hedging - Contracts in Entity’s Own Equity on December 1, 2022. The accompanying notes are an integral part of these consolidated financial statements. 8 Table of Contents CARNIVAL CORPORATION & PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 – General The consolidated financial statements include the accounts of Carnival Corporation and Carnival plc and their respective subsidiaries. Together with their consolidated subsidiaries, they are referred to collectively in these consolidated financial statements and elsewhere in this joint Quarterly Report on Form 10-Q as “Carnival Corporation & plc,” “our,” “us” and “we.” Basis of Presentation The Consolidated Statements of Income (Loss), the Consolidated Statements of Comprehensive Income (Loss), the Consolidated Statements of Cash Flows and the Consolidated Statements of Shareholders’ Equity for the three months ended February 29/28, 2024 and 2023, and the Consolidated Balance Sheet at February 29, 2024 are unaudited and, in the opinion of our management, contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted as permitted by such Securities and Exchange Commission rules and regulations. The preparation of our interim consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported and disclosed. We have made reasonable estimates and judgments of such items within our financial statements and there may be changes to those estimates in future periods. Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire year. Our interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Carnival Corporation & plc 2023 joint Annual Report on Form 10-K (“Form 10-K”) filed with the U.S. Securities and Exchange Commission on January 26, 2024. For 2023, we reclassified $ 11 million from restricted cash to prepaid expenses and other in the Consolidated Balance Sheets and $ 40 million from other financing activities to debt issuance costs in the Consolidated Statements of Cash Flows to conform to the current year presentation. Accounting Pronouncements In September 2022, the Financial Accounting Standards Board (“FASB”) issued guidance, Liabilities-Supplier Finance Programs - Disclosure of Supplier Finance Program Obligations . This guidance requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. On December 1, 2023, we adopted this guidance using the retrospective method for each period presented. The adoption of this guidance had no impact on our consolidated financial statements and disclosures. In November 2023, the FASB issued guidance, Improvements to Reportable Segment Disclosures . This guidance requires annual and interim disclosure of significant segment expenses that are provided to the chief operating decision maker (“CODM”) as well as interim disclosures for all reportable segments’ profit or loss and assets. This guidance also requires disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. This guidance is required to be adopted by us in 2025. We are currently evaluating the impact this guidance will have on our consolidated financial statements and disclosures. Regulatory Update We became subject to the EU Emissions Trading Scheme (“ETS”) on January 1, 2024, which includes a three-year phase-in period. The ETS regulates emissions through a “cap and trade” principle, where a cap is set on the total amount of certain emissions that can be emitted and requires us to procure emission allowances for certain emissions inside EU waters (as defined in the ETS). We record emission allowances at cost within prepaid expenses and other or other assets, based on the timing of when they are required to be surrendered. We record expense for emissions inside EU waters within fuel expense in the period incurred. As of February 29, 2024, the cost of allowances purchased and the related expenses were not material. 9 Table of Contents NOTE 2 – Revenue and Expense Recognition Guest cruise deposits and advance onboard purchases are initially included in customer deposits when received. Customer deposits are subsequently recognized as cruise revenues, together with revenues from onboard and other activities, and all associated direct costs and expenses of a voyage are recognized as cruise costs and expenses, upon completion of voyages with durations of ten nights or less and on a pro rata basis for voyages in excess of ten nights. The impact of recognizing these shorter duration cruise revenues and costs and expenses on a completed voyage basis versus on a pro rata basis is not material. Certain of our product offerings are bundled and we allocate the value of the bundled services and goods between passenger ticket revenues and onboard and other revenues based upon the estimated standalone selling prices of those goods and services. Guest cancellation fees, when applicable, are recognized in passenger ticket revenues at the time of cancellation. Our sales to guests of air and other transportation to and from airports near the home ports of our ships are included in passenger ticket revenues, and the related costs of these services are included in prepaid expenses and other when paid prior to the start of a voyage and are subsequently recognized in transportation costs at the time of revenue recognition. The cost of prepaid air and other transportation costs at February 29, 2024 and November 30, 2023 were $ 273 million and $ 253 million. The proceeds that we collect from the sales of third-party shore excursions are included in onboard and other revenues and the related costs are included in onboard and other costs. The amounts collected on behalf of our onboard concessionaires, net of the amounts remitted to them, are included in onboard and other revenues as concession revenues. All of these amounts are recognized on a completed voyage or pro rata basis as discussed above. Passenger ticket revenues include fees, taxes and charges collected by us from our guests. The fees, taxes and charges that vary with guest head counts are expensed in commissions, transportation and other costs when the corresponding revenues are recognized. The remaining portion of fees, taxes and charges are generally expensed in other operating expenses when the corresponding revenues are recognized. Revenues and expenses from our hotel and transportation operations, which are included in our Tour and Other segment, are recognized at the time the services are performed. Customer Deposits Our payment terms generally require an initial deposit to confirm a reservation, with the balance due prior to the voyage. Cash received from guests in advance of the cruise is recorded in customer deposits and in other long-term liabilities on our Consolidated Balance Sheets. These amounts include refundable deposits. In certain situations, we have provided flexibility to guests by allowing guests to rebook at a future date, receive future cruise credits (“FCCs”) or elect to receive refunds in cash. We record a liability for FCCs to the extent we have received and not refunded cash from guests for cancelled bookings. We had total customer deposits of $ 7.0 billion as of February 29, 2024 and $ 6.4 billion as of November 30, 2023, which includes approximately $ 110 million of unredeemed FCCs as of February 29, 2024, of which approximately $ 88 million are refundable. At February 28, 2023, we had approximately $ 174 million of unredeemed FCCs, of which $ 124 million were refundable. During the three months ended February 29/28, 2024 and 2023, we recognized revenues of $ 3.5 billion and $ 2.8 billion related to our customer deposits as of November 30, 2023 and 2022. Our customer deposits balance changes due to the seasonal nature of cash collections, which typically results from higher ticket prices and occupancy levels during the third quarter, the recognition of revenue, refunds of customer deposits and foreign currency changes. Trade and Other Receivables Although we generally require full payment from our customers prior to or concurrently with their cruise, we grant credit terms to a relatively small portion of our revenue source. We have receivables from credit card merchants and travel agents for cruise ticket purchases and onboard revenue. These receivables are included within trade and other receivables, net and are less allowances for expected credit losses. 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 capped reserve fund in cash. Contract Costs We recognize incremental travel agent commissions and credit and debit card fees incurred as a result of obtaining the ticket contract as assets when paid prior to the start of a voyage. We record these amounts within prepaid expenses and other and subsequently recognize these amounts as commissions, transportation and other at the time of revenue recognition or at the time of voyage cancellation. We had incremental costs of obtaining contracts with customers recognized as assets of $ 328 million as of February 29, 2024 and $ 294 million as of November 30, 2023 . 10 Table of Contents NOTE 3 – Debt February 29, November 30, (in millions) Maturity Rate (a) (b) 2024 2023 Secured Subsidiary Guaranteed Notes Notes Jun 2027 7.9 % $ 192 $ 192 Notes (c) Aug 2027 9.9 % — 623 Notes Aug 2028 4.0 % 2,406 2,406 Notes Aug 2029 7.0 % 500 500 Loans EUR floating rate (d) Jun 2025 EURIBOR + 3.8 % 837 851 Floating rate Aug 2027 - Oct 2028 SOFR + 3.0 - 3.4 % (e) 3,558 3,567 Total Secured Subsidiary Guaranteed 7,493 8,138 Senior Priority Subsidiary Guaranteed Notes May 2028 10.4 % 2,030 2,030 Unsecured Subsidiary Guaranteed Notes Convertible Notes Oct 2024 5.8 % 426 426 Notes Mar 2026 7.6 % 1,351 1,351 EUR Notes Mar 2026 7.6 % 542 550 Notes (c) Mar 2027 5.8 % 2,725 3,100 Convertible Notes Dec 2027 5.8 % 1,131 1,131 Notes May 2029 6.0 % 2,000 2,000 Notes Jun 2030 10.5 % 1,000 1,000 Loans EUR floating rate Apr 2024 - Mar 2026 EURIBOR + 2.4 - 4.0 % 624 678 Export Credit Facilities Floating rate Dec 2031 SOFR + 1.2 % (e) 549 583 Fixed rate Aug 2027 - Dec 2032 2.4 - 3.4 % 2,677 2,756 EUR floating rate May 2024 - Nov 2034 EURIBOR + 0.2 - 0.8 % 2,957 3,086 EUR fixed rate Feb 2031 - Jul 2037 1.1 - 4.0 % 5,197 3,652 Total Unsecured Subsidiary Guaranteed 21,179 20,312 Unsecured Notes (No Subsidiary Guarantee) Notes Jan 2028 6.7 % 200 200 EUR Notes Oct 2029 1.0 % 651 659 Total Unsecured Notes (No Subsidiary Guarantee) 851 859 Total Debt 31,552 31,339 Less: unamortized debt issuance costs and discounts ( 813 ) ( 768 ) Total Debt, net of unamortized debt issuance costs and discounts 30,739 30,572 Less: current portion of long-term debt ( 2,195 ) ( 2,089 ) Long-Term Debt $ 28,544 $ 28,483 11 Table of Contents (a) The reference rates, together with any applicable credit adjustment spread, for substantially all of our variable debt have 0.0 % to 0.75 % floors. (b) The above debt table excludes the impact of any outstanding derivative contracts. (c) See “Extinguishments” below. (d) Subsequent to February 29, 2024, we prepaid $ 837 million of principal payments for our Euro floating rate loan originally scheduled to mature in 2025. (e) Includes applicable credit adjustment spread. Carnival Corporation and/or Carnival plc is the primary obligor of all our outstanding debt excluding the following: • $ 2.0 billion of senior priority notes (the “2028 Senior Priority Notes”), issued by Carnival Holdings (Bermuda) Limited (“Carnival Holdings”), a subsidiary of Carnival Corporation • $ 0.4 billion under a term loan facility of Costa Crociere S.p.A. (“Costa”), a subsidiary of Carnival plc • $ 0.9 billion under an export credit facility of Sun Princess Limited, a subsidiary of Carnival Corporation • $ 0.1 billion under an export credit facility of Sun Princess II Limited, a subsidiary of Carnival Corporation In addition, Carnival Holdings (Bermuda) II Limited (“Carnival Holdings II”) will be the primary obligor under a $ 2.5 billion multi-currency revolving facility (“New Revolving Facility”) when the New Revolving Facility replaces our Revolving Facility upon its maturity in August 2024. See “Revolving Facilities.” All of our outstanding debt is issued or guaranteed by substantially the same entities with the exception of the following: • Up to $ 250 million of the Costa term loan facility, which is guaranteed by certain subsidiaries of Carnival plc and Costa that do not guarantee our other outstanding debt • Our 2028 Senior Priority Notes, issued by Carnival Holdings, which does not guarantee our other outstanding debt • The export credit facilities of Sun Princess Limited and Sun Princess II Limited, which do not guarantee our other outstanding debt As of February 29, 2024, the scheduled maturities of our debt are as follows: (in millions) Year Principal Payments Remainder of 2024 $ 1,719 2025 (a) 2,350 2026 3,323 2027 5,457 2028 9,115 Thereafter 9,588 Total $ 31,552 (a) Subsequent to February 29, 2024, we prepaid $ 837 million of our euro floating rate loan originally scheduled to mature in 2025. Revolving Facilities We had $ 3.0 billion available for borrowing under our Revolving Facility as of February 29, 2024. We may continue to borrow or otherwise utilize available amounts under the Revolving Facility through August 2024, subject to satisfaction of the conditions in the facility. Carnival Holdings II has a $ 2.5 billion New Revolving Facility which may be utilized from August 2024 through August 2027, replacing our Revolving Facility upon its maturity in August 2024. The New Revolving Facility was extended from 2025 to 2027 and contains an accordion feature, which Carnival Holdings II partially exercised in February 2024 to increase commitments from $ 2.1 billion to $ 2.5 billion. The accordion feature allows for further additional commitments not to exceed the aggregate commitments under our Revolving Facility. Extinguishments During the three months ended February 29, 2024, we extinguished an aggregate principal amount of $ 998 million of our 5.8 % senior notes and 9.9 % second-priority secured notes due 2027. 12 Table of Contents Export Credit Facility Borrowings During the three months ended February 29, 2024, we borrowed $ 1.7 billion under export credit facilities due in semi-annual installments through 2036. As of February 29, 2024, the net book value of the vessels subject to negative pledges was $ 18.1 billion. Collateral and Priority Pool As of February 29, 2024, the net book value of our ships and ship improvements, excluding ships under construction, is $ 39.3 billion. Our secured debt is secured on a first-priority basis by certain collateral, which includes vessels and certain assets related to those vessels and material intellectual property (combined net book value of approximately $ 23.0 billion, including $ 21.3 billion related to vessels and certain assets related to those vessels) as of February 29, 2024 and certain other assets. As of February 29, 2024, $ 8.1 billion in net book value of our ships and ship improvements relate to the priority pool vessels included in the priority pool of 12 unencumbered vessels (the “Senior Priority Notes Subject Vessels”) for our 2028 Senior Priority Notes and $ 2.9 billion in net book value of our ship and ship improvements relate to the priority pool vessels included in the priority pool of three unencumbered vessels (the “New Revolving Facility Vessels”) for our New Revolving Facility. As of February 29, 2024, there was no change in the identity of the Senior Priority Notes Subject Vessels or the New Revolving Facility Vessels. Covenant Compliance As of March 26, 2024, our Revolving Facility, New Revolving Facility, unsecured loans and export credit facilities contain certain covenants listed below: • Maintain minimum interest coverage (adjusted EBITDA to consolidated net interest charges, as defined in the agreements) (the “Interest Coverage Covenant”) as follows: ◦ For certain of our unsecured loans and our New Revolving Facility, from the end of each fiscal quarter from August 31, 2024, at a ratio of not less than 2.0 to 1.0 for each testing date occurring from August 31, 2024 until May 31, 2025, at a ratio of not less than 2.5 to 1.0 for the August 31, 2025 and November 30, 2025 testing dates, and at a ratio of not less than 3.0 to 1.0 for the February 28, 2026 testing date onwards and as applicable through their respective maturity dates. ◦ For our export credit facilities, from the end of each fiscal quarter from May 31, 2024, at a ratio of not less than 2.0 to 1.0 for each testing date occurring from May 31, 2024 until May 31, 2025, at a ratio of not less than 2.5 to 1.0 for the August 31, 2025 and November 30, 2025 testing dates, and at a ratio of not less than 3.0 to 1.0 for the February 28, 2026 testing date onwards. • For certain of our unsecured loans and export credit facilities, maintain minimum issued capital and consolidated reserves (as defined in the agreements) of $ 5.0 billion. • Limit our debt to capital (as defined in the agreements) percentage to a percentage not to exceed 67.5 % for the February 29, 2024 testing date, following which it will be tested at 65 % from the May 31, 2024 testing date onwards. • Maintain minimum liquidity of $ 1.5 billion. • Adhere to certain restrictive covenants through August 2027 (subject to such covenants terminating if the Company reaches an investment grade credit rating in accordance with the agreement governing the New Revolving Facility). • Limit the amounts of our secured assets as well as secured and other indebtedness. At February 29, 2024 , we were in compliance with the applicable covenants under our debt agreements. Generally, if an event of default under any debt agreement occurs, then, pursuant to cross-default and/or cross-acceleration clauses therein, substantially all of our outstanding debt and derivative contract payables could become due, and our debt and derivative contracts could be terminated. Any financial covenant amendment may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable. 13 Table of Contents NOTE 4 – Contingencies and Commitments Litigation We are routinely involved in legal proceedings, claims, disputes, regulatory matters and governmental inspections or investigations arising in the ordinary course of or incidental to our business, including those noted below. Additionally, as a result of the impact of COVID-19, litigation claims, enforcement actions, regulatory actions and investigations, including, but not limited to, those arising from personal injury and loss of life, have been and may, in the future, be asserted against us. We expect many of these claims and actions, or any settlement of these claims and actions, to be covered by insurance and historically the maximum amount of our liability, net of any insurance recoverables, has been limited to our self-insurance retention levels. We record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. Legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could involve substantial monetary damages. In addition, in matters for which conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices or requiring other remedies. An unfavorable outcome might result in a material adverse impact on our business, results of operations, financial position or liquidity. As previously disclosed, on May 2, 2019, the Havana Docks Corporation filed a lawsuit against Carnival Corporation in the U.S. District Court for the Southern District of Florida under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act, alleging that Carnival Corporation “trafficked” in confiscated Cuban property when certain ships docked at certain ports in Cuba, and that this alleged “trafficking” entitles the plaintiffs to treble damages. On March 21, 2022, the court granted summary judgment in favor of Havana Docks Corporation as to liability. On December 30, 2022, the court entered judgment against Carnival Corporation in the amount of $ 110 million plus $ 4 million in fees and costs. We have filed an appeal. Oral argument has been scheduled for May 17, 2024. COVID-19 Actions We have been named in a number of individual actions related to COVID-19. These actions include tort claims based on a variety of theories, including negligence and failure to warn. The plaintiffs in these actions allege a variety of injuries: some plaintiffs confined their claim to emotional distress, while others allege injuries arising from testing positive for COVID-19. A smaller number of actions include wrongful death claims. Substantially all of these individual actions have now been dismissed or settled for immaterial amounts. As of February 29, 2024, two purported class actions brought against us by former guests in the Federal Court in Australia and in Italy remain pending. These actions include claims based on a variety of theories, including negligence, gross negligence and failure to warn, physical injuries and severe emotional distress associated with being exposed to and/or contracting COVID-19 onboard our ships. On October 24, 2023, the court in the Australian matter held that we were liable for negligence and for breach of consumer protection warranties as it relates to the lead plaintiff. The court ruled that the lead plaintiff was not entitled to any pain and suffering or emotional distress damages on the negligence claim and awarded medical costs. In relation to the consumer protection warranties claim, the court found that distress and disappointment damages amounted to no more than the refund already provided to guests and therefore made no further award. Further proceedings will determine the applicability of this ruling to the remaining class participants. Additionally, on December 6, 2023, the High Court of Australia ruled on appeal that United States and United Kingdom passengers were properly included in the class, regardless of the ticket contract terms applicable to those passengers. We believe the ultimate outcome of these matters will not have a material impact on our consolidated financial statements. All COVID-19 matters seek monetary damages and most seek additional punitive damages in unspecified amounts. We continue to take actions to defend against the above claims. Regulatory or Governmental Inquiries and Investigations We have been, and may continue to be, impacted by breaches in data security and lapses in data privacy, which occur from time to time. These can vary in scope and range from inadvertent events to malicious motivated attacks. 14 Table of Contents We have incurred legal and other costs in connection with cyber incidents that have impacted us. The penalties and settlements paid in connection with cyber incidents over recent years were not material. While these incidents did not have a material adverse effect on our business, results of operations, financial position or liquidity, no assurances can be given about the future and we may be subject to future attacks, incidents or litigation that could have such a material adverse effect. On March 14, 2022, the U.S. Department of Justice and the U.S. Environmental Protection Agency notified us of potential civil penalties and injunctive relief for alleged Clean Water Act violations by owned and operated vessels covered by the 2013 Vessel General Permit. We are working with these agencies to reach a resolution of this matter. We believe the ultimate outcome will not have a material impact on our consolidated financial statements. Other Contingent Obligations Some of the debt contracts we enter into include indemnification provisions obligating us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes or changes in laws which increase the lender’s costs. There are no stated or notional amounts included in the indemnification clauses, and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses. 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 capped reserve fund in cash. Although the agreements vary, these requirements may generally be satisfied either through a withheld percentage of customer payments or providing cash funds directly to the credit card processor. As of February 29, 2024 and November 30, 2023 , we had $ 25 million and $ 844 million in reserve funds. Additionally, as of February 29, 2024 and November 30, 2023 , we had $ 158 million in compensating deposits we are required to maintain. These balances are included within other assets as of February 29, 2024. Ship Commitments As of February 29, 2024, and including commitments entered into subsequent to February 29, 2024 (contingent on financing which is expected to be completed in 2024), our new ship growth capital commitments were $ 0.8 billion for the remainder of 2024 and $ 0.9 billion, $ 0.3 billion, $ 1.2 billion and $ 1.0 billion for the years ending November 30, 2025, 2026, 2027 and 2028. NOTE 5 – Fair Value Measurements, Derivative Instruments and Hedging Activities and Financial Risks Fair Value Measurements Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured using inputs in one of the following three categories: • Level 1 measurements are based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment. • Level 2 measurements are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or market data other than quoted prices that are observable for the assets or liabilities. • Level 3 measurements are based on unobservable data that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, certain estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized in a current or future market exchange. 15 Table of Contents Financial Instruments that are not Measured at Fair Value on a Recurring Basis February 29, 2024 November 30, 2023 Carrying Value Fair Value Carrying Value Fair Value (in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Liabilities Fixed rate debt (a) $ 23,027 $ — $ 22,733 $ — $ 22,575 $ — $ 21,503 $ — Floating rate debt (a) 8,525 — 8,289 — 8,764 — 8,225 — Total $ 31,552 $ — $ 31,022 $ — $ 31,339 $ — $ 29,728 $ — (a) The debt amounts above do not include the impact of interest rate swaps or debt issuance costs and discounts. The fair values of our publicly-traded notes were based on their unadjusted quoted market prices in markets that are not sufficiently active to be Level 1 and, accordingly, are considered Level 2. The fair values of our other debt were estimated based on current market interest rates being applied to this debt. Financial Instruments that are Measured at Fair Value on a Recurring Basis February 29, 2024 November 30, 2023 (in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Cash equivalents (a) $ 983 $ — $ — $ 1,021 $ — $ — Derivative financial instruments — 22 — — 22 — Total $ 983 $ 22 $ — $ 1,021 $ 22 $ — Liabilities Derivative financial instruments $ — $ 10 $ — $ — $ 28 $ — Total $ — $ 10 $ — $ — $ 28 $ — (a) Consists of money market funds and cash investments with original maturities of less than 90 days. Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis Valuation of Goodwill and Trademarks As of February 29, 2024 and November 30, 2023 , goodwill for our North America and Australia (“NAA”) segment was $ 579 million. Trademarks (in millions) NAA Segment Europe Segment Total November 30, 2023 $ 927 $ 237 $ 1,164 Exchange movements — ( 1 ) ( 1 ) February 29, 2024 $ 927 $ 236 $ 1,163 16 Table of Contents Derivative Instruments and Hedging Activities (in millions) Balance Sheet Location February 29, 2024 November 30, 2023 Derivative assets Derivatives designated as hedging instruments Interest rate swaps (a) Other assets $ 21 $ 22 Derivatives not designated as hedging instruments Interest rate swaps (a) Prepaid expenses and other 1 1 Total derivative assets $ 22 $ 22 Derivative liabilities Derivatives designated as hedging instruments Cross currency swaps (b) Other long-term liabilities $ — $ 12 Interest rate swaps (a) Other long-term liabilities 10 16 Total derivative liabilities $ 10 $ 28 (a) We have interest rate swaps whereby we receive floating interest rate payments in exchange for making fixed interest rate payments. These interest rate swap agreements effectively changed $ 46 million at February 29, 2024 and November 30, 2023 of EURIBOR-based floating rate euro debt to fixed rate euro debt, and $ 2.5 billion at February 29, 2024 of SOFR-based variable rate debt to fixed rate debt. As of February 29, 2024 and November 30, 2023 , the EURIBOR-based interest rate swaps settle through 2025 and were not designated as cash flow hedges; the SOFR-based interest rate swaps settle through 2027 and were designated as cash flow hedges. (b) At November 30, 2023 , we had a cross currency swap with a notional amount of $ 670 million that was designated as a hedge of our net investment in foreign operations with euro-denominated functional currencies. This cross currency swap was terminated in January 2024. Our derivative contracts include rights of offset with our counterparties. As of February 29, 2024 and November 30, 2023 , there was no netting for our derivative assets and liabilities. The amounts that were not offset in the balance sheet were not material. The effect of our derivatives qualifying and designated as hedging instruments recognized in other comprehensive income (loss) and in net income (loss) was as follows: Three Months Ended February 29/28, (in millions) 2024 2023 Gains (losses) recognized in AOCI: Cross currency swaps – net investment hedges - included component $ — $ 15 Cross currency swaps – net investment hedges - excluded component $ — $ ( 4 ) Interest rate swaps – cash flow hedges $ 13 $ 14 (Gains) losses reclassified from AOCI – cash flow hedges: Interest rate swaps – Interest expense, net of capitalized interest $ ( 11 ) $ ( 1 ) Gains (losses) recognized on derivative instruments (amount excluded from effectiveness testing – net investment hedges) Cross currency swaps – Interest expense, net of capitalized interest $ 2 $ 1 The amount of gains and losses on derivatives not designated as hedging instruments recognized in earnings during the three months ended February 29, 2024 and estimated cash flow hedges’ unrealized gains and losses that are expected to be reclassified to earnings in the next twelve months are not material. Financial Risks Fuel Price Risks We manage our exposure to fuel price risk by managing our consumption of fuel. Substantially all of our exposure to market risk for changes in fuel prices relates to the consumption of fuel on our ships. We manage fuel consumption through fleet optimization, energy efficiency, itinerary efficiency and new technologies and alternative fuels. 17 Table of Contents Foreign Currency Exchange Rate Risks Overall Strategy We manage our exposure to fluctuations in foreign currency exchange rates through our normal operating and financing activities, including netting certain exposures to take advantage of any natural offsets and, when considered appropriate, through the use of derivative and non-derivative financial instruments. Our primary focus is to monitor our exposure to, and manage, the economic foreign currency exchange risks faced by our operations and realized if we exchange one currency for another. We consider hedging certain of our ship commitments and net investments in foreign operations. The financial impacts of our hedging instruments generally offset the changes in the underlying exposures being hedged. Operational Currency Risks Our operations primarily utilize the U.S. dollar, Euro, Sterling or the Australian dollar as their functional currencies. Our operations also have revenue and expenses denominated in non-functional currencies. Movements in foreign currency exchange rates affect our financial statements. Investment Currency Risks We consider our investments in foreign operations to be denominated in stable currencies and of a long-term nature. We have euro-denominated debt which provides an economic offset for our operations with euro functional currency. In addition, we have in the past and may in the future utilize derivative financial instruments, such as cross currency swaps, to manage our exposure to investment currency risks. Newbuild Currency Risks Our shipbuilding contracts are typically denominated in euros. Our decision to hedge a non-functional currency ship commitment for our cruise brands is made on a case-by-case basis, considering the amount and duration of the exposure, market volatility, economic trends, our overall expected net cash flows by currency and other offsetting risks. At February 29, 2024, our remaining newbuild currency exchange rate risk relates to euro-denominated newbuild contract payments for non-euro functional currency brands, which represent a total unhedged commitment of $ 2.8 billion for newbuilds scheduled to be delivered through 2027. The cost of shipbuilding orders that we may place in the future that are denominated in a different currency than our cruise brands’ functional currency will be affected by foreign currency exchange rate fluctuations. These foreign currency exchange rate fluctuations may affect our decision to order new cruise ships. Interest Rate Risks We manage our exposure to fluctuations in interest rates through our debt portfolio management and investment strategies. We evaluate our debt portfolio to determine whether to make periodic adjustments to the mix of fixed and floating rate debt through the use of interest rate swaps and the issuance of new debt. Concentrations of Credit Risk As part of our ongoing control procedures, we monitor concentrations of credit risk associated with financial and other institutions with which we conduct significant business. We seek to manage these credit risk exposures, including counterparty nonperformance primarily associated with our cash and cash equivalents, investments, notes receivables, reserve funds related to customer deposits, future financing facilities, contingent obligations, derivative instruments, insurance contracts and new ship progress payment guarantees, by: • Conducting business with well-established financial institutions, insurance companies and export credit agencies • Diversifying our counterparties • Having guidelines regarding credit ratings and investment maturities that we follow to help safeguard liquidity and minimize risk • Generally requiring collateral and/or guarantees to support notes receivable on significant asset sales and new ship progress payments to shipyards 18 Table of Contents We also monitor the creditworthiness of travel agencies and tour operators in Australia and Europe and credit and debit card providers to which we extend credit in the normal course of our business. Our credit exposure also includes contingent obligations related to cash payments received directly by travel agents and tour operators for cash collected by them on cruise sales in Australia and most of Europe where we are obligated to honor our guests’ cruise payments made by them to their travel agents and tour operators regardless of whether we have received these payments. Concentrations of credit risk associated with trade receivables and other receivables, charter-hire agreements and contingent obligations are not considered to be material, principally due to the large number of unrelated accounts, the nature of these contingent obligations and their short maturities. Normally, we have not required collateral or other security to support normal credit sales and have not experienced significant credit losses. NOTE 6 – Segment Information The chief operating decision maker, who is the President, Chief Executive Officer and Chief Climate Officer of Carnival Corporation and Carnival plc assesses performance and makes decisions to allocate resources for Carnival Corporation & plc based upon review of the results across all of our segments. The operating segments within each of our reportable segments have been aggregated based on the similarity of their economic and other characteristics, including geographic guest sourcing. Our four reportable segments are comprised of (1) NAA cruise operations, (2) Europe cruise operations (“Europe”), (3) Cruise Support and (4) Tour and Other. Our Cruise Support segment includes our portfolio of leading port destinations and exclusive islands as well as other services, all of which are operated for the benefit of our cruise brands. Our Tour and Other segment represents the hotel and transportation operations of Holland America Princess Alaska Tours and other operations. Three Months Ended February 29/28, (in millions) Revenues Operating costs and expenses Selling and administrative Depreciation and amortization Operating income (loss) 2024 NAA $ 3,574 $ 2,402 $ 502 $ 398 $ 272 Europe 1,769 1,251 234 164 119 Cruise Support 59 36 73 45 ( 95 ) Tour and Other 4 15 4 6 ( 21 ) $ 5,406 $ 3,705 $ 813 $ 613 $ 276 2023 NAA $ 3,078 $ 2,189 $ 440 $ 363 $ 86 Europe 1,294 1,078 213 169 ( 166 ) Cruise Support 51 25 53 42 ( 69 ) Tour and Other 9 18 5 7 ( 21 ) $ 4,432 $ 3,311 $ 712 $ 582 $ ( 172 ) Revenue by geographic areas, which are based on where our guests are sourced, were as follows: Three Months Ended February 29/28, (in millions) 2024 2023 North America $ 3,121 $ 2,696 Europe 1,567 1,187 Australia 425 338 Other 293 211 $ 5,406 $ 4,432 19 Table of Contents NOTE 7 – Earnings Per Share Three Months Ended February 29/28, (in millions, except per share data) 2024 2023 Net income (loss) for basic and diluted earnings per share $ ( 214 ) $ ( 693 ) Weighted-average shares outstanding 1,264 1,260 Diluted weighted-average shares outstanding 1,264 1,260 Basic earnings per share $ ( 0.17 ) $ ( 0.55 ) Diluted earnings per share $ ( 0.17 ) $ ( 0.55 ) Antidilutive shares excluded from diluted earnings per share computations were as follows: Three Months Ended February 29/28, (in millions) 2024 2023 Equity awards 6 1 Convertible Notes 127 137 Total antidilutive securities 133 138 NOTE 8 – Supplemental Cash Flow Information (in millions) February 29, 2024 November 30, 2023 Cash and cash equivalents (Consolidated Balance Sheets) $ 2,242 $ 2,415 Restricted cash (included in prepaid expenses and other and other assets) 32 21 Total cash, cash equivalents and restricted cash (Consolidated Statements of Cash Flows) $ 2,274 $ 2,436 20 Table of Contents