Carnival Corporation & plc Provides A Business Update And Additional Financial Information For The Second Quarter
MIAMI, July 10, 2020 /PRNewswire/ -- Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) provides a business update and additional financial information for the second quarter ended May 31, 2020.
Business Update
In the face of the global impact of COVID-19, the company paused its guest cruise operations in mid-March. The company expects to resume guest operations, with ongoing collaboration from both government and health authorities, in a phased manner. Specific brands and ships are expected to return to service over time to provide guests with unmatched joyful vacations in a manner consistent with the company's highest priorities, which are compliance, environmental protection and the health, safety and well-being of its guests, crew and the communities its ships visit.
AIDA to resume cruise operations
AIDA previously announced it will resume guest cruise operations from ports in Germany beginning August 2020 with three of its ships, making it the first of the company's nine cruise brands to resume guest cruise operations. AIDA will introduce additional safety and protective measures which will include pre-boarding health questionnaires and temperature checks for both guests and crew, physical distancing guidelines, routing systems on arrival, departure and onboard, increased mitigation and sanitation efforts in all cabins and public areas, as well as closely managing capacities at onboard experiences. These enhanced measures have been developed with advice from medical experts and align with the current guidance from the World Health Organization ("WHO") and the German Robert Koch Institute ("RKI"), as well as other governmental and health authorities.
Capacity reduced by ship delivery deferrals and 13 expected ship dispositions
The company expects future capacity to be moderated by the phased re-entry of its ships, the removal of capacity from its fleet and delays in new ship deliveries. As previously announced, the company intends to accelerate the removal of ships in fiscal 2020 which were previously expected to be sold over the ensuing years. The company sold one ship during June 2020 and has agreements for the disposal of five ships and preliminary agreements for an additional three ships, all of which are expected to leave the fleet in the next 90 days. These agreements are in addition to the sale of four ships, which were announced prior to fiscal 2020. In total, the 13 ships expected to leave the fleet represent a nearly nine percent reduction in current capacity. The company currently expects only five of the nine ships originally scheduled for delivery in fiscal 2020 and fiscal 2021 will be delivered prior to the end of fiscal year 2021. In addition, the company expects later deliveries of ships originally scheduled for fiscal 2022 and 2023.
Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted, "We have been transitioning the fleet into a prolonged pause and right sizing our shoreside operations. We have already reduced operating costs by over $7 billion on an annualized basis and reduced capital expenditures also by more than $5 billion over the next 18 months. We have secured over $10 billion of additional liquidity to sustain another full year with additional flexibility remaining. We have aggressively shed assets while actively deferring new ship deliveries. We are working hard to resume operations while serving the best interests of public health with our way forward informed through consultation with medical experts and scientists from around the world."
Donald added, "We will emerge a leaner, more efficient company to optimize cash generation, pay down debt and position us to return to investment grade credit over time providing strong returns to our shareholders."
Maximizing Liquidity
Successfully raised over $10 billion through a series of financing transactions
Since the pause in guest operations, the company has taken significant actions to preserve cash and secure additional financing to maximize its liquidity. While maintaining compliance, environmental protection and safety, the company significantly reduced ship operating expenses by transitioning ships into paused status. The company also reduced its administrative expenses, non-newbuild capital expenditures by $1.3 billion for 2020 and expects to reduce its newbuild capital expenditures by over $600 million for 2020, (net of export credit facilities). Additionally, since March, the company has raised over $10 billion through a series of financing transactions, including transactions that have occurred in the last three weeks, as follows:
-- Borrowed an aggregate principal amount of $2.8 billion in two tranches
under a first priority senior secured term loan facility on June 30,
2020
-- Negotiated Debt Holiday amendments, deferring certain principal
repayments otherwise due through March 2021. (Certain export credit
agencies have offered a 12-month debt amortization and financial
covenant holiday ("Debt Holiday"))
In addition, the company has $8.8 billion of committed export credit facilities that are available to fund ship deliveries originally planned through 2023.
Carnival Corporation & plc Chief Financial Officer and Chief Accounting Officer David Bernstein noted, "Quickly recognizing the financial situation, we took swift action to improve our liquidity by reducing expenses and leveraging our strong balance sheet to complete several capital transactions".
During the pause in guest operations, the monthly average cash burn rate for the second half of 2020 is estimated to be approximately $650 million. This rate includes approximately $250 million of ongoing ship operating and administrative expenses, working capital changes (excluding changes in customer deposits and reserves for credit card processors), interest expense and committed capital expenditures (net of committed export credit facilities) and also excludes scheduled debt maturities. The company continues to explore opportunities to further reduce its monthly cash burn rate.
The pause in guest operations is continuing to have material negative impacts on all aspects of the company's business. The longer the full or partial pause in guest operations continues, the greater the impact on the company's liquidity and financial position. The company continues to expect a net loss on both a U.S. GAAP and adjusted basis for the second half of 2020.
Update on Bookings
Demand continues for 2021 sailings
The company's brands have announced various incentives and flexibility for certain booking payments on select sailings to support guest confidence in making new bookings. These incentives vary by brand and sailing and include onboard credits and reduced or refundable deposits. In addition, the company is providing flexibility to guests with bookings on sailings cancelled due to the pause by offering guests the flexibility of enhanced future cruise credits ("FCC") or an election for a refund in cash. Enhanced FCCs increase the value of the guest's original booking or provide incremental onboard credits. As of June 21, 2020, approximately half of guests affected have requested cash refunds. Despite substantially reduced marketing and selling spend, the company continues to see demand from new bookings for 2021. For the most recent booking period, the first three weeks in June 2020, almost 60 percent of 2021 bookings were new bookings. The remaining 2021 booking volumes resulted from guests applying their FCCs to specific future cruises.
As of June 21, 2020, cumulative advanced bookings for the full year of 2021 capacity currently available for sale remain within historical ranges at prices that are down in the low to mid-single digits range, on a comparable basis, including the negative yield impact of FCCs and onboard credits applied.
As of May 31, 2020, the current portion of customer deposits was $2.6 billion, the majority of which are FCCs. $121 million of the company's customer deposit balance relates to third quarter sailings and $353 million relates to fourth quarter sailings. The company continues to expect any decline in the customer deposits balance in the second half of 2020, all of which is expected to occur in the third quarter, to be significantly less than the decline in the second quarter of 2020.
Protecting the Health and Safety of Guests and Team Members
Throughout the pause in its guest cruise operations, the company has acted to protect the health and safety of guests and shipboard team members. The company returned over 260,000 guests to their homes, coordinating with a large number of countries around the globe. In addition, the company worked around the clock with various local governmental authorities, utilized its ships and chartered hundreds of planes to repatriate shipboard team members as quickly as possible. The company is extremely pleased with its ability to successfully repatriate approximately 77,000 of its shipboard team members to more than 130 countries around the globe, which is substantially all of its onboard workforce other than the safe manning team members who will remain on the ships, and thanks the numerous governments who worked closely with the company during the repatriation process.
Donald commented, "I could not be more proud of how collectively our team has handled this. We looked after our guests, each other and the over 700 places we go each year. Thanks to our crew for continuing to exceed guest expectations through challenging circumstances and our shoreside operations for working 24/7 to enhance our liquidity and to repatriate our guests and our crew. Also, thanks to our loyal guests, travel partners, shareholders and other stakeholders for their support during this challenging time."
Active consultation with science and medical experts
Throughout the pause in guest cruise operations, the company has been consulting and assembling the best minds in medical science, public health and infectious disease. These individuals include a robust line-up of world renowned medical, epidemiology and public health experts to provide the company with the latest science and medical evidence to inform practical, adaptable and science-based solutions for detection, prevention and mitigation of COVID-19.
In coordination with the World Travel and Tourism Council, the company is hosting an online Global Scientific Summit on COVID-19 on July 28, a forum which is open to the public and free of charge. Speakers and panelists include the company's expert advisors, representing a diverse range of science, research and business backgrounds, including amongst others, members of Scientists to Stop COVID-19, who have volunteered to participate. The company is grateful to bring together a select group of science and medical experts who will bring such relevant insight into COVID-19. To register for the Summit, please go to CovidScienceSummit.com.
Conference Call
The company has scheduled a conference call with analysts at 10:00 a.m. EDT (3:00 p.m. BST) today to provide a business update and discuss its 2020 second quarter results. This call can be listened to live, and additional information can be obtained, via Carnival Corporation & plc's website at www.carnivalcorp.com and www.carnivalplc.com.
Carnival Corporation & plc is one of the world's largest leisure travel companies with a portfolio of nine of the world's leading cruise lines. With operations in North America, Australia, Europe and Asia, its portfolio features - Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK) and Cunard.
Additional information can be found on www.carnivalcorp.com, www.carnivalsustainability.com, www.carnival.com, www.princess.com, www.hollandamerica.com, www.pocruises.com.au, www.seabourn.com, www.costacruise.com, www.aida.de, www.pocruises.com and www.cunard.com.
Cautionary Note Concerning Factors That May Affect Future Results
Carnival Corporation and Carnival plc and their respective subsidiaries are referred to collectively in this document as "Carnival Corporation & plc," "our," "us" and "we." Some of the statements, estimates or projections contained in this document 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. 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," "anticipate," "forecast," "project," "future," "intend," "plan," "estimate," "target," "indicate," "outlook," and similar expressions of future intent or the negative of such terms.
Forward-looking statements include those statements that relate to our outlook and financial position including, but not limited to, statements regarding:
-- Net revenue -- Estimates of ship depreciable lives and residual
yields values
-- Booking
levels -- Goodwill, ship and trademark fair values
-- Pricing and
occupancy
-- Liquidity
-- Interest,
tax and fuel
expenses
-- Adjusted earnings per share
-- Currency -- Impact of the COVID-19 coronavirus global
exchange pandemic on our financial condition and results
rates of operations
-- Net cruise
costs,
excluding
fuel per
available
lower berth
day
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. Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the COVID-19 outbreak. It is not possible to predict or identify all such risks. There may be additional risks that we consider immaterial or which are unknown. These factors include, but are not limited to, the following:
-- COVID-19 has had, and is expected to continue to have, a significant
impact on our financial condition and operations, which impacts our
ability to obtain acceptable financing to fund resulting reductions in
cash from operations. The current, and uncertain future, impact of the
COVID-19 outbreak, including its effect on the ability or desire of
people to travel (including on cruises), is expected to continue to
impact our results, operations, outlooks, plans, goals, growth,
reputation, litigation, cash flows, liquidity, and stock price
-- As a result of the COVID-19 outbreak, we have paused our guest cruise
operations, and if we are unable to re-commence normal operations in the
near-term, we may be out of compliance with a maintenance covenant in
certain of our debt facilities as of May 31, 2021
-- World events impacting the ability or desire of people to travel may
lead to a decline in demand for cruises
-- Incidents concerning our ships, guests or the cruise vacation industry
as well as adverse weather conditions and other natural disasters may
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 and tax may lead to litigation, enforcement
actions, fines, penalties, and reputational damage
-- 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 lead to reputational damage
-- Ability to recruit, develop and retain qualified shipboard personnel who
live away from home for extended periods of time may adversely impact
our business operations, guest services and satisfaction
-- Increases in fuel prices, changes in the types of fuel consumed and
availability of fuel supply may adversely impact our scheduled
itineraries and costs
-- Fluctuations in foreign currency exchange rates may adversely impact our
financial results
-- Overcapacity and competition in the cruise and land-based vacation
industry may lead to a decline in our cruise sales, pricing and
destination options
-- Geographic regions in which we try to expand our business may be slow to
develop or ultimately not develop how we expect
-- Inability to implement our shipbuilding programs and ship repairs,
maintenance and refurbishments may adversely impact our business
operations and the satisfaction of our guests
The ordering of the risk factors set forth above is not intended to reflect our indication of priority or likelihood.
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.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(in millions, except per share data)
Three Months Ended Six Months Ended
May 31, May 31,
2020 2019 2020 2019
Revenues
Passenger ticket $
446 $
3,257 $
3,680 $
6,456
Onboard and other (a) 294 1,580 1,849 3,054
740 4,838 5,529 9,511
Operating Costs and Expenses
Commissions,
transportation and other 297 613 1,064 1,322
Onboard and other 114 485 585 952
Payroll and related 705 566 1,315 1,123
Fuel 201 423 598 804
Food 108 269 385 538
Ship and other impairments 589 919
Other operating (b) 471 803 1,142 1,562
2,484 3,159 6,007 6,301
Selling and administrative 492 621 1,170 1,250
Depreciation and
amortization 577 542 1,147 1,059
Goodwill impairment (c) 1,364 2,096
4,918 4,323 10,420 8,609
Operating Income (Loss) (4,177) 515 (4,891) 902
Nonoperating Income (Expense)
Interest income 6 5 11 9
Interest expense, net of
capitalized interest (182) (54) (237) (105)
Other income (expense),
net (32) (7) (39) (9)
(208) (56) (265) (105)
Income (Loss) Before
Income Taxes (4,385) 459 (5,155) 797
Income Tax Benefit
(Expense), Net 11 (8) (10)
Net Income (Loss) $
(4,374) $
451 $
(5,155) $
787
Earnings Per Share
Basic $
(6.07) $
0.65 $
(7.34) $
1.14
Diluted $
(6.07) $
0.65 $
(7.34) $
1.13
Dividends Declared Per
Share
$ $
0.50 $
0.50 $
1.00
Weighted-Average Shares
Outstanding - Basic 721 691 702 692
Weighted-Average Shares
Outstanding - Diluted 721 693 702 694
(a) Includes $24 million and $71
million of tour and other
revenues during the three
months ended May 31, 2020 and
2019, respectively. Includes
$76 million and $99 million of
tour and other revenues during
the six months ended May 31,
2020 and 2019, respectively.
(b) Includes $28 million and $61
million of tour and other costs
and expenses during the three
months ended May 31, 2020 and
2019, respectively. Includes
$47 million and $90 million of
tour and other costs and
expenses during the six months
ended May 31, 2020 and 2019,
respectively.
(c) Includes noncash impairment
charges for goodwill of $1.0
billion in our North America
and Australia ("NAA") segment
and $345 million in our Europe
and Asia ("EA") segment during
the three months ended May 31,
2020. Includes noncash
impairment charges for goodwill
of $1.3 billion in our NAA
segment and $777 million in our
EA segment during the six
months ended May 31, 2020.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
May 31, November 30,
2020 2019
ASSETS
Current Assets
Cash and cash equivalents $
6,881 $
518
Trade and other receivables, net 604 444
Inventories 362 427
Prepaid expenses and other 374 671
Total current assets 8,222 2,059
Property and Equipment, Net 37,139 38,131
Operating Lease Right-of-Use Assets
(a) 1,413
Goodwill 790 2,912
Other Intangibles 1,168 1,174
Other Assets 1,086 783
$
49,817 $
45,058
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $
3,562 $
231
Current portion of long-term debt 2,373 1,596
Current portion of operating lease
liabilities (a) 153
Accounts payable 1,809 756
Accrued liabilities and other 1,343 1,809
Customer deposits 2,618 4,735
Total current liabilities 11,858 9,127
Long-Term Debt 14,870 9,675
Long-Term Operating Lease Liabilities
(a) 1,292
Other Long-Term Liabilities 956 890
Shareholders' Equity
Common stock of Carnival Corporation,
$0.01 par value; 1,960 shares
authorized; 731 shares at 2020 and
657 shares at 2019 issued 7 7
Ordinary shares of Carnival plc, $1.66
par value; 217 shares at 2020 and
2019 issued 360 358
Additional paid-in capital 9,683 8,807
Retained earnings 21,155 26,653
Accumulated other comprehensive income
(loss) (1,962) (2,066)
Treasury stock, 130 shares at 2020 and
2019 of Carnival Corporation and 60
shares at 2020 and 2019 of Carnival
plc, at cost (8,404) (8,394)
Total shareholders' equity 20,840 25,365
$
49,817 $
45,058
(a) We adopted the provisions
of Leases on December 1,
2019.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
Six Months Ended
May 31,
2020 2019
OPERATING ACTIVITIES
Net income (loss) $
(5,155) $
787
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities
Depreciation and
amortization 1,147 1,059
Impairments 3,015 2
Share-based compensation 38 27
Gain on ship sales and
other, net 56 7
(900) 1,883
Changes in operating assets and
liabilities
Receivables (202) (50)
Inventories 58 5
Prepaid expenses and other 171 (302)
Accounts payable 1,052 68
Accrued liabilities and
other 3 48
Customer deposits (1,987) 1,516
Net cash provided by (used
in) operating activities (1,804) 3,169
INVESTING ACTIVITIES
Purchases of property and
equipment (1,668) (3,021)
Proceeds from sales of
ships 236 6
Payments of fuel
derivative settlements - (6)
Purchase of minority
interest (81)
Derivative settlements and
other, net 257 103
Net cash provided by (used
in) investing activities (1,256) (2,918)
FINANCING ACTIVITIES
Proceeds from (repayments
of) short-term
borrowings, net 3,333 (357)
Principal repayments of
long-term debt (383) (338)
Proceeds from issuance of
long-term debt 6,674 1,722
Dividends paid (689) (694)
Purchases of treasury
stock (12) (316)
Issuance of common stock,
net 558 2
Other, net (56) (45)
Net cash provided by (used
in) financing activities 9,425 (26)
Effect of exchange rate
changes on cash, cash
equivalents and
restricted cash 1 (5)
Net increase (decrease) in
cash, cash equivalents
and restricted cash 6,366 220
Cash, cash equivalents and
restricted cash at
beginning of period 530 996
Cash, cash equivalents and
restricted cash at end of
period $
6,896 $
1,215
CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES
Three Months Ended Six Months Ended
May 31, May 31,
(in millions,
except per share
data) 2020 2019 2020 2019
Net income (loss)
U.S. GAAP net
income (loss) $
(4,374) $
451 $
(5,155) $
787
(Gains) losses on
ship sales and
impairments 1,953 (16) 2,882 (14)
Restructuring
expenses 39 39
Other - 22 3 22
Adjusted net income
(loss) $
(2,382) $
457 $
(2,231) $
795
Weighted-average
shares outstanding 721 693 702 694
Earnings per share
U.S. GAAP diluted
earnings per share $
(6.07) $
0.65 $
(7.34) $
1.13
(Gains) losses on
ship sales and
impairments 2.71 (0.02) 4.10 (0.02)
Restructuring
expenses 0.05 0.06
Other - 0.03 0.03
Adjusted earnings
per share $
(3.30) $
0.66 $
(3.18) $
1.15
Explanations of Non-GAAP Financial Measures
Non-GAAP Financial Measures
We use adjusted net income and adjusted earnings per share as non-GAAP financial measures of our cruise segments' and the company's financial performance. These non-GAAP financial measures are provided along with U.S. GAAP net income (loss) and U.S. GAAP diluted earnings per share.
We believe that gains and losses on ship sales, impairment charges, restructuring costs and other gains and losses are not part of our core operating business and are not an indication of our future earnings performance. Therefore, we believe it is more meaningful for these items to be excluded from our net income (loss) and earnings per share and, accordingly, we present adjusted net income and adjusted earnings per share excluding these items.
The presentation of our non-GAAP financial information is not intended to be considered in isolation from, as substitute for, or superior to the financial information prepared in accordance with U.S. GAAP. It is possible that our non-GAAP financial measures may not be exactly comparable to the like-kind information presented by other companies, which is a potential risk associated with using these measures to compare us to other companies.
CARNIVAL CORPORATION & PLC
STATISTICAL INFORMATION
Three Months Ended Six Months Ended
May 31, May 31,
2020 2019 2020 2019
ALBDs (in thousands) (a) 3,621 21,645 25,598 42,944
Occupancy percentage (b) 96.1 105.3 103.1 105.0
% % % %
Passengers carried (in
thousands) 426 3,101 3,489 6,038
Fuel consumption in metric
tons (in thousands) 482 835 1,314 1,664
Fuel cost per metric ton
consumed $
418 $
507 $
455 $
483
Currencies (USD to 1)
AUD $
0.63 $
0.70 $
0.66 $
0.71
CAD $
0.72 $
0.75 $
0.74 $
0.75
EUR $
1.09 $
1.12 $
1.10 $
1.13
GBP $
1.24 $
1.30 $
1.27 $
1.29
RMB $
0.14 $
0.15 $
0.14 $
0.15
We paused our guest operations in mid-March 2020 and have been in a pause for a majority of the second quarter. The pause in guest operations is continuing to have material negative impacts on all aspects of our business, including the above statistical information.
Notes to Statistical Information
(a) 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.
(b) In accordance with cruise industry
practice, occupancy is calculated
using 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.
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SOURCE Carnival Corporation & plc
