Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations .
Cautionary Note Concerning Factors That May Affect Future Results
Some of the statements, estimates or projections contained in this Quarterly Report on Form 10-Q are “forward-looking statements” that involve risks, uncertainties and assumptions with respect to us, including some statements concerning future results, operations, outlooks, plans, goals, reputation, cash flows, liquidity and other events which have not yet occurred. These statements are intended to qualify for the safe harbors from liability provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts are statements that could be deemed forward-looking. These statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate and the beliefs and assumptions of our management. We have tried, whenever possible, to identify these statements by using words like “will,” “may,” “could,” “should,” “would,” “believe,” “depends,” “expect,” “goal,” “aspiration,” “anticipate,” “forecast,” “project,” “future,” “intend,” “plan,” “estimate,” “target,” “indicate,” “outlook,” and similar expressions of future intent or the negative of such terms.
Because forward-looking statements involve risks and uncertainties, there are many factors that could cause our actual results, performance or achievements to differ materially from those expressed or implied by our forward-looking statements. 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. These factors include, but are not limited to, the following:
• 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-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 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.
• The loss of key team members, our inability to recruit or retain qualified shoreside and shipboard team members and increased labor costs could have an adverse effect on our business and results of operations.
• Increases in fuel prices, changes in the types of fuel consumed and availability of fuel supply may adversely impact our scheduled itineraries and costs.
• We rely on supply chain vendors who are integral to the operations of our businesses. These vendors and service providers may be unable to deliver on their commitments, which could negatively impact our business.
• Fluctuations in foreign currency exchange rates may adversely impact our financial results.
• Overcapacity and competition in the cruise and land-based vacation industry may negatively impact our cruise sales, pricing and destination options.
• Inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments may adversely impact our business operations and the satisfaction of our guests.
• 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. Additionally, many of these risks and uncertainties are currently, and in the future may continue to be, amplified by our substantial debt
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balance incurred during the pause of our guest cruise operations. There may be additional risks that we consider immaterial or which are unknown.
Forward-looking statements should not be relied upon as a prediction of actual results. Subject to any continuing obligations under applicable law or any relevant stock exchange rules, we expressly disclaim any obligation to disseminate, after the date of this document, any updates or revisions to any such forward-looking statements to reflect any change in expectations or events, conditions or circumstances on which any such statements are based.
Forward-looking and other statements in this document may also address our sustainability progress, plans, and goals (including climate change and environmental-related matters). In addition, historical, current, and forward-looking sustainability- and climate-related statements may be based on standards and tools for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions and predictions that are subject to change in the future and may not be generally shared.
New Accounting Pronouncements
Refer to Note 1 - “ General, Accounting Pronouncements ” of the consolidated financial statements for additional discussion regarding Accounting Pronouncements .
Critical Accounting Estimates
For a discussion of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that is included in the Form 10-K.
Seasonality
Our passenger ticket revenues are seasonal. Demand for cruises has been greatest during our third quarter, which includes the Northern Hemisphere summer months. This higher demand during the third quarter results in higher ticket prices and occupancy levels and, accordingly, the largest share of our operating income is typically earned during this period. 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 operating income is generated from May through September in conjunction with Alaska’s cruise season.
Known Trends and Uncertainties
• 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.
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Statistical Information
Three Months Ended
May 31, Six Months Ended
May 31,
2024 2023 2024 2023
Passenger Cruise Days (“PCDs”) (in millions) (a)
24.3 21.8 47.8 42.0
Available Lower Berth Days (“ALBDs”) (in millions) (b) (c)
23.5 22.3 46.5 44.3
Occupancy percentage (d) 104 % 98 % 103 % 95 %
Passengers carried (in millions)
3.3 3.0 6.3 5.7
Fuel consumption in metric tons (in millions)
0.7 0.7 1.5 1.5
Fuel consumption in metric tons per thousand ALBDs 31.9 32.5 31.8 33.0
Fuel cost per metric ton consumed (excluding European Union Allowance) $ 684 $ 677 $ 685 $ 704
Currencies (USD to 1)
AUD $ 0.66 $ 0.67 $ 0.66 $ 0.68
CAD $ 0.73 $ 0.74 $ 0.74 $ 0.74
EUR $ 1.08 $ 1.08 $ 1.08 $ 1.08
GBP $ 1.26 $ 1.23 $ 1.26 $ 1.23
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) For the three months ended May 31, 2024 compared to the three months ended May 31, 2023, we had a 5.4% capacity increase in ALBDs comprised of a 11% capacity increase in our NAA segment and a 3.6% capacity decrease in our Europe segment.
Our NAA segment’s capacity increase was caused by the following:
• Carnival Cruise Line 4,090-passenger capacity ship that was transferred from Costa Cruises and entered into service in May 2023
• Seabourn 260-passenger capacity ship that entered into service in July 2023
• Carnival Cruise Line 5,360-passenger capacity ship that entered into service in December 2023
• Princess Cruises 4,310-passenger capacity ship that entered into service in February 2024
• Carnival Cruise Line 4,130-passenger capacity ship that was transferred from Costa Cruises and entered into service in April 2024
Our Europe segment’s capacity decrease was caused by the following:
• Costa Cruises 4,090-passenger capacity ship that was transferred to Carnival Cruise Line in March 2023
• AIDA Cruises 1,270-passenger capacity ship removed from service in November 2023
• Costa Cruises 4,240-passenger capacity ship that was transferred to Carnival Cruise Line in February 2024
• The Red Sea rerouting as certain ships repositioned without guests
The decrease in our Europe segment’s capacity was partially offset by the following:
• The return to service of two ships as part of the completion of our return to guest cruise operations
• Cunard 2,960-passenger capacity ship that entered into service in May 2024
For the six months ended May 31, 2024 compared to the six months ended May 31, 2023, we had a 4.8% capacity increase in ALBDs comprised of a 7.1% capacity increase in our NAA segment and a 1.2% capacity increase in our Europe segment.
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Our NAA segment’s capacity increase was caused by the following:
• Carnival Cruise Line 4,090-passenger capacity ship that was transferred from Costa Cruises and entered into service in May 2023
• Seabourn 260-passenger capacity ship that entered into service in July 2023
• Carnival Cruise Line 5,360-passenger capacity ship that entered into service in December 2023
• Princess Cruises 4,310-passenger capacity ship that entered into service in February 2024
• Carnival Cruise Line 4,130-passenger capacity ship that was transferred from Costa Cruises and entered into service in April 2024
Our Europe segment’s capacity increase was caused by the following:
• The return to service of two ships as part of the completion of our return to guest cruise operations
• P&O Cruises (UK) 5,280-passenger capacity ship that entered into service in December 2022
• Cunard 2,960-passenger capacity ship that entered into service in May 2024
The increase in our Europe segment’s capacity was partially offset by the following:
• Costa Cruises 4,090-passenger capacity ship that was transferred to Carnival Cruise Line in March 2023
• AIDA Cruises 1,270-passenger capacity ship removed from service in November 2023
• Costa Cruises 4,240-passenger capacity ship that was transferred to Carnival Cruise Line in February 2024
• The Red Sea rerouting as certain ships repositioned without guests
(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.
Three Months Ended May 31, 2024 (“2024”) Compared to Three Months Ended May 31, 2023 (“2023”)
Revenues
Consolidated
Passenger ticket revenues made up 65% of our 2024 total revenues. Passenger ticket revenues increased by $613 million, or 20%, to $3.8 billion in 2024 from $3.1 billion in 2023.
This increase was caused by:
• $253 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher
• $185 million - 5.4% capacity increase in ALBDs
• $176 million - 5.6 percentage point increase in occupancy
The remaining 35% of 2024 total revenues was comprised of onboard and other revenues, which increased by $257 million, or 15%, to $2.0 billion in 2024 from $1.8 billion in 2023.
This increase was driven by:
• $132 million - 5.4% capacity increase in ALBDs
• $70 million - 5.6 percentage point increase in occupancy
• $47 million - higher onboard spending by our guests
NAA Segment
Passenger ticket revenues made up 62% of our NAA segment’s 2024 total revenues. Passenger ticket revenues increased by $429 million, or 21%, to $2.5 billion in 2024 from $2.0 billion in 2023.
This increase was driven by:
• $225 million - 11% capacity increase in ALBDs
• $157 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher
• $44 million - 2.2 percentage point increase in occupancy
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The remaining 38% of our NAA segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $200 million, or 15%, to $1.5 billion in 2024 compared to $1.3 billion in 2023.
This increase was caused by:
• $145 million - 11% capacity increase in ALBDs
• $37 million - higher onboard spending by our guests
• $28 million - 2.2 percentage point increase in occupancy
Europe Segment
Passenger ticket revenues made up 77% of our Europe segment’s 2024 total revenues. Passenger ticket revenues increased by $190 million, or 17%, to $1.3 billion in 2024 compared to $1.1 billion in 2023.
This increase was driven by:
• $133 million - 11 percentage point increase in occupancy
• $96 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher
These increases were partially offset by a 3.6% capacity decrease in ALBDs, representing $40 million.
The remaining 23% of our Europe segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $42 million, or 12%, to $395 million in 2024 from $353 million in 2023. This increase was caused by an 11 percentage point increase in occupancy.
Costs and Expenses
Consolidated
Operating costs and expenses increased by $340 million, or 10%, to $3.8 billion in 2024 from $3.5 billion in 2023.
This increase was caused by:
• $212 million - 5.4% capacity increase in ALBDs
• $82 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests
• $41 million - nonrecurrence of a gain on sale of one NAA segment ship in 2023
• $37 million - 5.6 percentage point increase in occupancy
• $30 million - higher onboard and other cost of sales driven by higher onboard revenues
These increases were partially offset by:
• $32 million - lower repair and maintenance expenses (including dry-dock expenses)
• $30 million - decrease in various other costs
NAA Segment
Operating costs and expenses increased by $299 million, or 13%, to $2.6 billion in 2024 from $2.3 billion in 2023.
This increase was driven by:
• $251 million - 11% capacity increase in ALBDs
• $52 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests
• $41 million - nonrecurrence of a gain on sale of one NAA segment ship in 2023
These increases were partially offset by:
• $24 million - lower repair and maintenance expenses (including dry-dock expenses)
• $21 million - decrease in various other costs
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Europe Segment
Operating costs and expenses were $1.1 billion in 2024 and 2023. The changes in operating costs and expenses for the Europe segment were not material.
Operating Income (Loss)
Our consolidated operating income (loss) increased by $440 million to $560 million in 2024 from $120 million in 2023. Our NAA segment’s operating income (loss) increased by $260 million to $525 million in 2024 from $265 million in 2023, and our Europe segment’s operating income (loss) increased by $195 million to $168 million in 2024 from $(27) million in 2023. These changes were primarily due to the reasons discussed above.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, decreased by $93 million, or 17%, to $450 million in 2024 from $542 million in 2023. The decrease was substantially all due to a decrease in total debt and lower interest rates.
Six Months Ended May 31, 2024 (“2024”) Compared to Six Months Ended May 31, 2023 (“2023”)
Revenues
Consolidated
Passenger ticket revenues made up 66% of our 2024 total revenues. Passenger ticket revenues increased by $1.4 billion, or 23%, to $7.4 billion in 2024 from $6.0 billion in 2023.
This increase was caused by:
• $525 million - 8.2 percentage point increase in occupancy
• $502 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher
• $302 million - 4.8% capacity increase in ALBDs
• $35 million - net favorable foreign currency translational impact
The remaining 34% of 2024 total revenues was comprised of onboard and other revenues, which increased by $484 million, or 15%, to $3.8 billion in 2024 from $3.3 billion in 2023.
This increase was driven by:
• $218 million - 8.2 percentage point increase in occupancy
• $184 million - 4.8% capacity increase in ALBDs
• $67 million - higher onboard spending by our guests
NAA Segment
Passenger ticket revenues made up 63% of our NAA segment’s 2024 total revenues. Passenger ticket revenues increased by $804 million, or 20%, to $4.7 billion in 2024 from $3.9 billion in 2023.
This increase was caused by:
• $378 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher
• $277 million - 7.1% capacity increase in ALBDs
• $168 million - 4.3 percentage point increase in occupancy
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The remaining 37% of our NAA segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $320 million, or 13%, to $2.8 billion in 2024 compared to $2.5 billion in 2023.
This increase was caused by:
• $176 million - 7.1% capacity increase in ALBDs
• $107 million - 4.3 percentage point increase in occupancy
• $50 million - higher onboard spending by our guests
Europe Segment
Passenger ticket revenues made up 77% of our Europe segment’s 2024 total revenues. Passenger ticket revenues increased by $563 million, or 27%, to $2.7 billion in 2024 compared to $2.1 billion in 2023.
This increase was driven by:
• $357 million - 14 percentage point increase in occupancy
• $123 million - increase in passenger ticket revenues driven by continued strength in demand, which drove ticket prices higher
• $39 million - net favorable foreign currency translational impact
• $24 million - 1.2% capacity increase in ALBDs
The remaining 23% of our Europe segment’s 2024 total revenues were comprised of onboard and other revenues, which increased by $144 million, or 22%, to $799 million in 2024 from $655 million in 2023.
This increase was driven by:
• $111 million - 14 percentage point increase in occupancy
• $17 million - higher onboard spending by our guests
Costs and Expenses
Consolidated
Operating costs and expenses increased by $735 million, or 11%, to $7.5 billion in 2024 from $6.8 billion in 2023.
This increase was caused by:
• $340 million - 4.8% capacity increase in ALBDs
• $212 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests
• $109 million - 8.2 percentage point increase in occupancy
• $75 million - higher onboard and other cost of sales driven by higher onboard revenues
• $41 million - nonrecurrence of a gain on sale of one NAA segment ship in 2023
• $29 million - net unfavorable foreign currency translational impact
These increases were partially offset by $47 million of lower fuel price and consumption.
Selling and administrative expenses increased by $154 million, or 11%, to $1.6 billion in 2024 from $1.4 billion in 2023. This increase was caused by an increase in advertising costs and administrative expenses, which includes an increase in compensation costs.
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NAA Segment
Operating costs and expenses increased by $512 million, or 11%, to $5.0 billion in 2024 from $4.5 billion in 2023.
This increase was caused by:
• $315 million - 7.1% capacity increase in ALBDs
• $100 million - higher commissions, transportation costs, and other expenses driven by higher commission on increased ticket pricing and an increase in the number of guests
• $42 million - higher onboard and other cost of sales driven by higher onboard revenues
• $41 million - nonrecurrence of a gain on sale of one NAA segment ship in 2023
• $35 million - 4.3 percentage point increase in occupancy
• $22 million - higher repair and maintenance expenses (including dry-dock expenses)
These increases were partially offset by $38 million of lower fuel price and consumption.
Selling and administrative expenses increased by $91 million, or 10%, to $966 million in 2024 from $875 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
Operating costs and expenses increased by $207 million, or 10%, to $2.4 billion in 2024 from $2.2 billion in 2023.
This increase was caused by:
• $113 million - higher commissions, transportation costs, and other expenses driven by an increase in the number of guests
• $73 million - 14 percentage point increase in occupancy
• $33 million - net unfavorable foreign currency translational impact
• $32 million - higher onboard and other cost of sales driven by higher onboard revenues
• $25 million - 1.2% capacity increase in ALBDs
These increases were partially offset by:
• $29 million - lower various other costs
• $23 million - lower repair and maintenance expenses (including dry-dock expenses).
Operating Income (Loss)
Our consolidated operating income (loss) increased by $887 million to $836 million in 2024 from $(52) million in 2023. Our NAA segment’s operating income (loss) increased by $446 million to $797 million in 2024 from $351 million in 2023, and our Europe segment’s operating income (loss) increased by $481 million to $288 million in 2024 from $(193) million in 2023. These changes were primarily due to the reasons discussed above.
Nonoperating Income (Expense)
Interest expense, net of capitalized interest, decreased by $161 million, or 15%, to $0.9 billion in 2024 from $1.1 billion in 2023. The decrease was substantially all due to a decrease in total debt.
Debt extinguishment and modification costs increased by $35 million, or 112%, to $66 million in 2024 from $31 million in 2023 as a result of debt transactions occurring during the respective periods.
Liquidity, Financial Condition and Capital Resources
As of May 31, 2024, we had $4.6 billion of liquidity including $1.6 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.
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We had a working capital deficit of $9.6 billion as of May 31, 2024 compared to a working capital deficit of $6.2 billion as of November 30, 2023. The increase in working capital deficit was substantially all due to an increase in customer deposits, a decrease in cash and cash equivalents and a decrease in prepaid expenses and other. 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 $7.9 billion and $6.1 billion of customer deposits as of May 31, 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 capped 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 $3.8 billion of net cash flows from operating activities during the six months ended May 31, 2024, an increase of $2.3 billion, compared to $1.5 billion provided for the same period in 2023. This was caused by an increase in cash provided by the release of substantially all credit card reserves (included in the change in prepaid expenses and other assets), a decrease in the net loss compared to the same period in 2023 and other working capital changes.
Investing Activities
During the six months ended May 31, 2024, net cash used in investing activities was $3.4 billion. This was caused by capital expenditures of $3.5 billion primarily attributable to the delivery of a 5,360 and a 4,310-passenger capacity NAA segment ships and one 2,960-passenger capacity Europe segment ship.
During the six months ended May 31, 2023, net cash used in investing activities was $1.5 billion. This was driven by:
• Capital expenditures of $1.8 billion primarily attributable to the delivery of one 5,280-passenger capacity Europe segment ship
• Proceeds from sales of one 2,700-passenger capacity Europe segment ship, one 1,270-passenger capacity Europe segment ship and one 460-passenger capacity NAA segment ship totaling $255 million
Financing Activities
During the six months ended May 31, 2024, net cash used in financing activities of $1.2 billion was caused by:
• Repayments of $4.1 billion of long-term debt
• Debt issuance costs of $117 million
• Debt extinguishment costs of $41 million
• Issuances of $3.0 billion of long-term debt
During the six months ended May 31, 2023, net cash used in financing activities of $1.6 billion was driven by:
• Repayments of $0.2 billion of short-term borrowings
• Repayments of $2.3 billion of long-term debt
• Issuances of $1.0 billion of long-term debt
• Payments of $94 million related to debt issuance costs
• Purchases of $20 million of Carnival plc ordinary shares and issuances of $22 million of Carnival Corporation common stock under our Stock Swap Program
Funding Sources
As of May 31, 2024, we had $4.6 billion of liquidity including $1.6 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. In addition, we had $2.2 billion of undrawn export credit facilities to fund ship deliveries planned through 2027. 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
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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
2026
2027
Future export credit facilities at May 31, 2024
$ — $ 0.7 $ — $ 1.4
Our export credit facilities contain various financial covenants as described in Note 3 - “Debt”. At May 31, 2024 , we were in compliance with the applicable covenants under our debt agreements.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interests, certain derivative instruments and variable interest entities that either have, or are reasonably likely to have, a current or future material effect on our consolidated financial statements.