TIDMCCL
RNS Number : 2065B
Carnival PLC
28 January 2020
January 28, 2020
RELEASE OF CARNIVAL CORPORATION & PLC ANNUAL REPORT ON FORM
10-K FOR THE YEARED NOVEMBER 30, 2019
Carnival Corporation & plc announced its fourth quarter and
annual results of operations in its earnings release issued on
December 20, 2019. Carnival Corporation & plc is hereby
announcing that today it has filed its joint Annual Report on Form
10-K ("Form 10-K") with the U.S. Securities and Exchange Commission
("SEC") containing the Carnival Corporation & plc 2019 annual
consolidated financial statements, which reported results are
unchanged from those previously announced on December 20, 2019.
The information included in the attached Schedules A, B and C is
extracted from the Form 10-K and has been prepared in accordance
with SEC rules and regulations. The Carnival Corporation & plc
consolidated financial statements contained in the Form 10-K have
been prepared in accordance with generally accepted accounting
principles in the United States of America ("U.S. GAAP").
-- Schedule A contains the Carnival Corporation & plc
consolidated financial statements as of and for the year ended
November 30, 2019
-- Schedule B contains management's discussion and analysis
("MD&A") of financial conditions and results of operations
-- Schedule C contains information on Carnival Corporation and
Carnival plc's sales and purchases of their equity securities and
use of proceeds from such sales
The Directors consider that within the Carnival Corporation and
Carnival plc dual listed company arrangement, the most appropriate
presentation of Carnival plc's results and financial position is by
reference to the Carnival Corporation & plc U.S. GAAP
consolidated financial statements.
All these schedules (A, B and C) are presented together as
Carnival plc's annual report in accordance with the requirements of
the UK Disclosure and Transparency Rules.
MEDIA CONTACT INVESTOR RELATIONS CONTACT
Roger Frizzell Beth Roberts
001 305 406 7862 001 305 406 4832
The Form 10-K, including the portions extracted for this
announcement, is available for viewing on the SEC website at
www.sec.gov under Carnival Corporation or Carnival plc or the
Carnival Corporation & plc website at www.carnivalcorp.com or
www.carnivalplc.com. A copy of the Form 10-K has been submitted to
the National Storage Mechanism and will shortly be available for
inspection at www.morningstar.co.uk/uk/nsm. Additional information
can be obtained via Carnival Corporation & plc's website listed
above or by writing to Carnival plc at Carnival House, 100 Harbour
Parade, Southampton, SO15 1ST, United Kingdom.
Carnival Corporation & plc is the world's largest leisure
travel company and among the most profitable and financially strong
in the cruise and vacation industries, 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, Seabourn, P&O
Cruises (Australia), Costa Cruises, AIDA Cruises, P&O Cruises
(UK) and Cunard.
Together, the corporation's cruise lines operate 105 ships with
254,000 lower berths visiting over 700 ports around the world, with
16 new ships scheduled to be delivered through 2025. Carnival
Corporation & plc also operates Holland America Princess Alaska
Tours, the leading tour company in Alaska and the Canadian Yukon.
Traded on both the New York and London Stock Exchanges, Carnival
Corporation & plc is the only group in the world to be included
in both the S&P 500 and the FTSE 100 indices.
With a long history of innovation and providing guests with
extraordinary vacation experiences, Carnival Corporation has
received thousands of industry awards - including recognition by
the Consumer Technology Association(TM) as a CES(R) 2019 Innovation
Awards Honoree for Ocean Medallion(TM). A revolutionary wearable
device that contains a proprietary blend of communication
technologies, Ocean Medallion enables the world's first interactive
guest experience platform transforming vacation travel on a large
scale into a highly personalized level of customized service. The
prestigious CES Innovation Awards honor outstanding design and
engineering in consumer technology products.
Additional information can be found on www.carnival.com,
www.princess.com, www.hollandamerica.com, www.seabourn.com,
www.pocruises.com.au, www.costacruise.com, www.aida.de,
www.pocruises.com, and www.cunard.com.
SCHEDULE A
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
Years Ended November 30,
2019 2018 2017
----------- -------- ----------
Revenues
Cruise
Passenger ticket $ 14,104 $13,930 $12,944
Onboard and other 6,331 4,679 4,330
Tour and other 390 272 236
---------- ------- -------
20,825 18,881 17,510
---------- ------- -------
Operating Costs and Expenses
Cruise
Commissions, transportation and other 2,720 2,590 2,359
Onboard and other 2,101 638 587
Payroll and related 2,249 2,190 2,107
Fuel 1,562 1,619 1,244
Food 1,083 1,066 1,031
Other ship operating 2,925 2,807 3,010
Tour and other 268 180 163
12,909 11,089 10,501
Selling and administrative 2,480 2,450 2,265
Depreciation and amortization 2,160 2,017 1,846
Goodwill and trademark impairment - - 89
---------- ------- -------
17,549 15,556 14,701
---------- ------- -------
Operating Income 3,276 3,325 2,809
---------- ------- -------
Nonoperating Income (Expense)
Interest income 23 14 9
Interest expense, net of capitalized interest (206) (194) (198)
Gains on fuel derivatives, net - 59 35
Other income (expense), net (32) 3 11
(215) (118) (143)
Income Before Income Taxes 3,060 3,207 2,666
Income Tax Expense, Net (71) (54) (60)
----------
Net Income $ 2,990 $ 3,152 $ 2,606
====== ====== ======
Earnings Per Share
Basic $ 4.34 $ 4.45 $ 3.61
====== ====== ======
Diluted $ 4.32 $ 4.44 $ 3.59
====== ====== ======
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Years Ended November 30,
2019 2018 2017
------------ ---------
Net Income $ 2,990 $ 3,152 $ 2,606
------- ------ ------
Items Included in Other Comprehensive Income
(Loss)
Change in foreign currency translation
adjustment (86) (199) 590
Other (31) 32 82
Other Comprehensive Income (Loss) (117) (167) 672
Total Comprehensive Income $ 2,873 $ 2,986 $ 3,278
======= ====== ======
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(in millions, except par values)
November 30,
2019 2018
-------- ----------
ASSETS
Current Assets
Cash and cash equivalents $ 518 $ 982
Trade and other receivables, net 444 358
Inventories 427 450
Prepaid expenses and other 671 436
------- -------
Total current assets 2,059 2,225
------- -------
Property and Equipment, Net 38,131 35,336
Goodwill 2,912 2,925
Other Intangibles 1,174 1,176
Other Assets 783 738
$45,058 $42,401
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 231 $ 848
Current portion of long-term debt 1,596 1,578
Accounts payable 756 730
Accrued liabilities and other 1,809 1,654
Customer deposits 4,735 4,395
------- -------
Total current liabilities 9,127 9,204
------- -------
Long-Term Debt 9,675 7,897
Other Long-Term Liabilities 890 856
Commitments and Contingencies
Shareholders' Equity
Common stock of Carnival Corporation, $0.01 par
value; 1,960 shares authorized; 657 shares at 2019
and 656 shares at 2018 issued 7 7
Ordinary shares of Carnival plc, $1.66 par value;
217 shares at 2019 and 2018 issued 358 358
Additional paid-in capital 8,807 8,756
Retained earnings 26,653 25,066
Accumulated other comprehensive income (loss) ("AOCI") (2,066) (1,949)
Treasury stock, 130 shares at 2019 and 129 shares
at 2018 of Carnival Corporation and 60 shares at
2019 and 48 shares at 2018 of Carnival plc, at cost (8,394) (7,795)
-------
Total shareholders' equity 25,365 24,443
------- -------
$45,058 $42,401
====== ======
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Years Ended November 30,
2019 2018 2017
OPERATING ACTIVITIES
Net income $ 2,990 $ 3,152 $2,606
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Depreciation and amortization 2,160 2,017 1,846
Impairments 26 16 392
Gains on fuel derivatives, net - (59) (35)
Share-based compensation 46 65 63
Other, net 43 (6) 51
5,265 5,186 4,923
Changes in operating assets and liabilities
Receivables (114) (58) 6
Inventories 79 (67) (49)
Prepaid expenses and other (254) 74 (13)
Accounts payable 34 (24) 21
Accrued and other liabilities 80 (100) 73
Customer deposits 387 539 361
---------- --------- ------
Net cash provided by (used in) operating
activities 5,475 5,549 5,322
---------- --------- ------
INVESTING ACTIVITIES
Purchases of property and equipment (5,429) (3,749) (2,944)
Proceeds from sales of ships 26 389 -
Payments of fuel derivative settlements (6) (39) (203)
Other, net 132 (114) 25
---------- --------- ------
Net cash provided by (used in) investing
activities (5,277) (3,514) (3,122)
---------- --------- ------
FINANCING ACTIVITIES
Proceeds from (repayments of) short-term
borrowings, net (605) 417 (29)
Principal repayments of long-term debt (1,651) (1,556) (1,227)
Proceeds from issuance of long-term debt 3,674 2,542 467
Dividends paid (1,387) (1,355) (1,087)
Purchases of treasury stock (603) (1,468) (552)
Other, net (82) (39) (24)
---------- --------- ------
Net cash provided by (used in) financing
activities (655) (1,460) (2,452)
---------- --------- ------
Effect of exchange rate changes on cash,
cash equivalents and restricted cash (9) (1) 11
---------- --------- ------
Net increase (decrease) in cash, cash
equivalents and restricted cash (465) 574 (241)
Cash, cash equivalents and restricted cash
at beginning of year 996 422 662
---------- --------- ------
Cash, cash equivalents and restricted
cash at end of year $ 530 $ 996 $ 422
====== ===== =====
The accompanying notes are an integral part of these
consolidated financial statements.
CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in millions)
Additional Total
Common Ordinary paid-in Retained Treasury shareholders'
stock shares capital earnings AOCI stock equity
--------- ----------- ------------- ----------- -------- ----------- ------------------
At November 30,
2016 $ 7 $ 358 $ 8,632 $ 21,843 $(2,454) $ (5,789) $ 22,597
Change in
accounting
principle (a) - - 2 (2) - - -
Net income - - - 2,606 - - 2,606
Other
comprehensive
income (loss) - - - - 672 - 672
Cash dividends
declared - - - (1,155) - - (1,155)
Purchases of
treasury
stock under
the
Repurchase
Program and
other - - 56 - - (560) (504)
--------- ----------- ------------- ---------- ------- ---------- ------------ ---
At November 30,
2017 7 358 8,690 23,292 (1,782) (6,349) 24,216
Net income - - - 3,152 - - 3,152
Other
comprehensive
income (loss) - - - - (167) - (167)
Cash dividends
declared - - - (1,378) - - (1,378)
Purchases of
treasury
stock under
the
Repurchase
Program and
other - - 66 - - (1,446) (1,380)
--------- ----------- ------------- ---------- ------- ---------- ------------ ---
At November 30,
2018 7 358 8,756 25,066 (1,949) (7,795) 24,443
Change in
accounting
principle (b) - - - (24) - - (24)
Net income - - - 2,990 - - 2,990
Other
comprehensive
income (loss) - - - - (117) - (117)
Cash dividends
declared - - - (1,379) - - (1,379)
Purchases of
treasury
stock under
the
Repurchase
Program and
other - - 51 - - (599) (548)
----------
At November 30,
2019 $ 7 $ 358 $ 8,807 $ 26,653 $(2,066) $ (8,394) $ 25,365
=== ==== === ====== === ======== ====== ====== ====== === ======= ====
The accompanying notes are an integral part of these
consolidated financial statements.
(a) We elected to early adopt the provisions of Compensation -
Stock Compensation - Improvements to Employee Share-Based Payment
Accounting on December 1, 2016.
(b) We adopted the provisions of Revenue from Contracts with
Customers and Derivatives and Hedging on December 1, 2018.
CARNIVAL CORPORATION & PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - General
Description of Business
Carnival Corporation was incorporated in Panama in 1972 and
Carnival plc was incorporated in England and Wales in 2000.
Together with their consolidated subsidiaries, they are referred to
collectively in these consolidated financial statements and
elsewhere in this 2019 Annual Report as "Carnival Corporation &
plc," "our," "us" and "we." The consolidated financial statements
include the accounts of Carnival Corporation and Carnival plc and
their respective subsidiaries.
We are the world's largest leisure travel company and among the
most profitable and financially strong in the cruise and vacation
industries. We are also the largest cruise company, carrying nearly
45 percent of global cruise guests, and a leading provider of
vacations to all major cruise destinations throughout the world.
With operations in North America, Australia, Europe and Asia, we
operate a portfolio of leading global, regional and national cruise
brands that sell tailored cruise products, services and vacation
experiences on 104 cruise ships to the world's most desirable
destinations.
DLC Arrangement
Carnival Corporation and Carnival plc operate a dual listed
company ("DLC") arrangement, whereby the businesses of Carnival
Corporation and Carnival plc are combined through a number of
contracts and provisions in Carnival Corporation's Articles of
Incorporation and By-Laws and Carnival plc's Articles of
Association. The two companies operate as a single economic
enterprise with a single senior executive management team and
identical Boards of Directors, but each has retained its separate
legal identity. Each company's shares are publicly traded; on the
New York Stock Exchange ("NYSE") for Carnival Corporation and the
London Stock Exchange ("LSE") for Carnival plc. The Carnival plc
American Depository Shares are traded on the NYSE.
The constitutional documents of each company provide that, on
most matters, the holders of the common equity of both companies
effectively vote as a single body. The Equalization and Governance
Agreement between Carnival Corporation and Carnival plc provides
for the equalization of dividends and liquidation distributions
based on an equalization ratio and contains provisions relating to
the governance of the DLC arrangement. Because the equalization
ratio is 1 to 1, one share of Carnival Corporation common stock and
one Carnival plc ordinary share are generally entitled to the same
distributions.
Under deeds of guarantee executed in connection with the DLC
arrangement, as well as stand-alone guarantees executed since that
time, each of Carnival Corporation and Carnival plc have
effectively cross guaranteed all indebtedness and certain other
monetary obligations of each other. Once the written demand is
made, the holders of indebtedness or other obligations may
immediately commence an action against the relevant guarantor.
Under the terms of the DLC arrangement, Carnival Corporation and
Carnival plc are permitted to transfer assets between the
companies, make loans to or investments in each other and otherwise
enter into intercompany transactions. In addition, the cash flows
and assets of one company are required to be used to pay the
obligations of the other company, if necessary.
Given the DLC arrangement, we believe that providing separate
financial statements for each of Carnival Corporation and Carnival
plc would not present a true and fair view of the economic
realities of their operations. Accordingly, separate financial
statements for Carnival Corporation and Carnival plc have not been
presented.
NOTE 2 - Summary of Significant Accounting Policies
Basis of Presentation
We consolidate entities over which we have control, as typically
evidenced by a voting control of greater than 50% or for which we
are the primary beneficiary, whereby we have the power to direct
the most significant activities and the obligation to absorb
significant losses or receive significant benefits from the entity.
We do not separately present our noncontrolling interests in the
consolidated financial statements since the amounts are immaterial.
For affiliates we do not control but where significant influence
over financial and operating policies exists, as typically
evidenced by a voting control of 20% to 50%, the investment is
accounted for using the equity method.
Preparation of Financial Statements
The preparation of our consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America ("U.S. GAAP") requires management to make
estimates and assumptions that affect the amounts reported and
disclosed in our consolidated financial statements. Actual results
may differ from the estimates used in preparing our consolidated
financial statements. All significant intercompany balances and
transactions are eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents include investments with maturities of
three months or less at acquisition, which are stated at cost and
present insignificant risk of changes in value.
Inventories
Inventories consist substantially of food, beverages, hotel
supplies, fuel and retail merchandise, which are all carried at the
lower of cost or net realizable value. Cost is determined using the
weighted-average or first-in, first-out methods.
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation and any impairment charges. Depreciation is computed
using the straight-line method over our estimates of useful lives
and residual values, as a percentage of original cost, as
follows:
Residual
Years Values
------------------------- ----------
Ships 30 15%
Ship improvements 3-30 0%
Buildings and improvements 10-40 0% or 10%
Computer hardware and software 2-12 0% or 10%
Transportation equipment and other 3-20 0% or 10%
Shorter of the remaining
Leasehold improvements, including port lease term or related
facilities asset life (3-30) 0%
The cost of ships under construction include progress payments
for the construction of new ships, as well as design and
engineering fees, capitalized interest, construction oversight
costs and various owner supplied items. We account for ship
improvement costs, including replacements of certain significant
components and parts, by capitalizing those costs we believe add
value to our ships and have a useful life greater than one year and
depreciating those improvements over their estimated remaining
useful life. We have a capital program for the improvement of our
ships and for asset replacements in order to enhance the
effectiveness and efficiency of our operations; to comply with, or
exceed all relevant legal and statutory requirements related to
health, environment, safety, security and sustainability; and to
gain strategic benefits or provide improved product innovations to
our guests.
We capitalize interest as part of the cost of capital projects
during their construction period. The specifically identified or
estimated cost and accumulated depreciation of previously
capitalized ship components are written-off upon retirement, which
may result in a loss on disposal that is also included in other
ship operating expenses. Liquidated damages received from shipyards
as a result of late ship delivery are recorded as reductions to the
cost basis of the ship.
The costs of repairs and maintenance, including minor
improvement costs and expenses related to dry-docks, are charged to
expense as incurred and included in other ship operating expenses.
Dry-dock expenses primarily represent planned major maintenance
activities that are incurred when a ship is taken out-of-service
for scheduled maintenance.
We review our long-lived assets for impairment whenever events
or circumstances indicate that the carrying amounts of these assets
may not be recoverable. Upon the occurrence of a triggering event,
the assessment of possible impairment is based on our ability to
recover the carrying value of our asset from the asset's estimated
undiscounted future cash flows. If these estimated undiscounted
future cash flows are less than the carrying value of the asset, an
impairment charge is recognized for the excess, if any, of the
asset's carrying value over its estimated fair value. The lowest
level for which we maintain identifiable cash flows that are
independent of the cash flows of other assets and liabilities is at
the individual ship level. A significant amount of judgment is
required in estimating the future cash flows and fair values of our
cruise ships.
Goodwill and Other Intangibles
Goodwill represents the excess of the purchase price over the
fair value of identifiable net assets acquired in a business
acquisition. We review our goodwill for impairment as of July 31
every year, or more frequently if events or circumstances dictate.
All of our goodwill has been allocated to our reporting units. The
impairment review for goodwill allows us to first assess
qualitative factors to determine whether it is necessary to perform
the more detailed quantitative goodwill impairment test. We would
perform the quantitative test if our qualitative assessment
determined it is more-likely-than-not that a reporting unit's
estimated fair value is less than its carrying amount. We may also
elect to bypass the qualitative assessment and proceed directly to
the quantitative test for any reporting unit. When performing the
quantitative test, if the estimated fair value of the reporting
unit exceeds its carrying value, no further analysis is required.
However, if the estimated fair value of the reporting unit is less
than the carrying value, goodwill is written down based on the
difference between the reporting unit's carrying amount and its
fair value, limited to the amount of goodwill allocated to the
reporting unit.
Trademarks represent substantially all of our other intangibles.
Trademarks are estimated to have an indefinite useful life and are
not amortizable but are reviewed for impairment at least annually
and as events or circumstances dictate. The impairment review for
trademarks also allows us to first assess qualitative factors to
determine whether it is necessary to perform a more detailed
quantitative trademark impairment test. We would perform the
quantitative test if our qualitative assessment determined it was
more-likely-than-not that the trademarks are impaired. We may also
elect to bypass the qualitative assessment and proceed directly to
the quantitative test. Our trademarks would be considered impaired
if their carrying value exceeds their estimated fair value.
A significant amount of judgment is required in estimating the
fair values of our reporting units.
Derivatives and Other Financial Instruments
We utilize derivative and non-derivative financial instruments,
such as foreign currency forwards, options and swaps, foreign
currency debt obligations and foreign currency cash balances, to
manage our exposure to fluctuations in certain foreign currency
exchange rates. We use interest rate swaps primarily to manage our
interest rate exposure to achieve a desired proportion of fixed and
floating rate debt. Our policy is to not use financial instruments
for trading or other speculative purposes.
All derivatives are recorded at fair value. If a derivative is
designated as a cash flow hedge, then the change in the fair value
of the derivative is recognized as a component of AOCI until the
underlying hedged item is recognized in earnings or the forecasted
transaction is no longer probable. If a derivative or a
non-derivative financial instrument is designated as a hedge of our
net investment in a foreign operation, then changes in the
effective portion of the fair value of the financial instrument are
recognized as a component of AOCI to offset the change in the
translated value of the designated portion of net investment being
hedged until the investment is sold or substantially liquidated,
while the impact attributable to components excluded from the
assessment of hedge effectiveness is recorded in interest expense,
net of capitalized interest, on a systematic and rational basis.
For derivatives that do not qualify for hedge accounting treatment,
the change in fair value is recognized in earnings.
We classify the fair value of all our derivative contracts as
either current or long-term, depending on the maturity date of the
derivative contract. The cash flows from derivatives treated as
cash flow hedges are classified in our Consolidated Statements of
Cash Flows in the same category as the item being hedged. Our cash
flows related to fuel derivatives are classified within investing
activities.
Derivative valuations are based on observable inputs such as
interest rates and commodity price curves, forward currency
exchange rates, credit spreads, maturity dates, volatilities, and
cross currency basis spreads. We use the income approach to value
derivatives for foreign currency options and forwards, interest
rate swaps and cross currency swaps using observable market data
for all significant inputs and standard valuation techniques to
convert future amounts to a single present value amount, assuming
that participants are motivated but not compelled to transact.
Foreign Currency Translation and Transactions
Each foreign entity determines its functional currency by
reference to its primary economic environment. We translate the
assets and liabilities of our foreign entities that have functional
currencies other than the U.S. dollar at exchange rates in effect
at the balance sheet date. Revenues and expenses of these foreign
entities are translated at weighted-average exchange rates for the
period. Equity is translated at historical rates and the resulting
foreign currency translation adjustments are included as a
component of AOCI, which is a separate component of shareholders'
equity. Therefore, the U.S. dollar value of the non-equity
translated items in our consolidated financial statements will
fluctuate from period to period, depending on the changing value of
the U.S. dollar versus these currencies.
We execute transactions in a number of different currencies. At
the date that the transaction is recognized, each asset, liability,
revenue, expense, gain or loss arising from the transaction is
measured and recorded in the functional currency of the recording
entity using the exchange rate in effect at that date. At each
balance sheet date, recorded monetary balances denominated in a
currency other than the functional currency are adjusted using the
exchange rate at the balance sheet date, with gains or losses
recorded in other income or other expense, unless such monetary
balances have been designated as hedges of net investments in our
foreign entities. The net gains or losses resulting from foreign
currency transactions were insignificant in 2019, 2018 and 2017. In
addition, the unrealized gains or losses on our long-term
intercompany receivables and payables which are denominated in a
non-functional currency and which are not expected to be repaid in
the foreseeable future are recorded as foreign currency translation
adjustments included as a component of AOCI.
Revenue and Expense Recognition
Guest cruise deposits represent unearned revenues and are
initially included in customer deposit liabilities 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 significant. Certain
of our product offerings are bundled and we allocate the value of
the bundled services and goods between passenger ticket revenues,
onboard and other revenues and tour and other revenues based upon
the estimated standalone selling prices of those goods and
services.
Future travel discount vouchers are included as a reduction of
cruise passenger ticket revenues when such vouchers are utilized.
Guest cancellation fees are recognized in cruise passenger ticket
revenues at the time of cancellation.
Our sale to guests of air and other transportation to and from
airports near the home ports of our ships are included in cruise
passenger ticket revenues, and the related cost of purchasing these
services are included in cruise transportation costs. 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 cruise revenues as
concession revenues. All of these amounts are recognized on a
completed voyage or pro rata basis as discussed above.
Cruise passenger ticket revenues include fees, taxes and charges
collected by us from our guests. A portion of these fees, taxes and
charges vary with guest head counts and are directly imposed on a
revenue-producing arrangement. This portion of the fees, taxes and
charges is expensed in commissions, transportation and other costs
when the corresponding revenues are
recognized. These fees, taxes and charges included in
commissions, transportation and other costs were $659 million in
2019, $615 million in 2018 and $579 million in 2017. The remaining
portion of fees, taxes and charges are expensed in other ship
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. Revenues from
the long-term leasing of ships, which are also included in our Tour
and Other segment, are recognized ratably over the term of the
agreement.
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. We had customer deposits of $4.9 billion in 2019 and $4.7
billion in 2018. During 2019, we recognized in revenues
substantially all of our customer deposits as of December 1, 2018.
Our customer deposits balance changes due to the seasonal nature of
cash collections, the recognition of revenue and foreign currency
translation.
Contract 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 also have
receivables from credit card merchants for cruise ticket purchases
and onboard revenue. These receivables are included within trade
and other receivables, net.
Contract Assets
Contract assets are amounts paid prior to the start of a voyage,
which we record as an asset within prepaid expenses and other and
which are subsequently recognized as commissions, transportation
and other at the time of revenue recognition. We have contract
assets of $154 million and $151 million as of November 30, 2019 and
December 1, 2018.
Insurance
We use a combination of insurance and self-insurance to cover a
number of risks including illness and injury to crew, guest
injuries, pollution, other third-party claims in connection with
our cruise activities, damage to hull and machinery for each of our
ships, war risks, workers' compensation, directors' and officers'
liability, property damage and general liability for shoreside
third-party claims. We recognize insurance recoverables from
third-party insurers up to the amount of recorded losses at the
time the recovery is probable and upon settlement for amounts in
excess of the recorded losses. All of our insurance policies are
subject to coverage limits, exclusions and deductible levels. The
liabilities associated with crew illnesses and crew and guest
injury claims, including all legal costs, are estimated based on
the specific merits of the individual claims or actuarially
estimated based on historical claims experience, loss development
factors and other assumptions.
Selling and Administrative Expenses
Selling expenses include a broad range of advertising, marketing
and promotional expenses. Advertising is charged to expense as
incurred, except for media production costs, which are expensed
upon the first airing of the advertisement. Selling expenses
totaled $728 million in 2019, $673 million in 2018 and $645 million
in 2017. Administrative expenses represent the costs of our
shoreside ship support, reservations and other administrative
functions, and include salaries and related benefits, professional
fees and building occupancy costs, which are typically expensed as
incurred.
Share-Based Compensation
We recognize compensation expense for all share-based
compensation awards using the fair value method. For time-based
share awards, we recognize compensation cost ratably using the
straight-line attribution method over the expected vesting period
or to the retirement eligibility date, if earlier than the vesting
period. For performance-based share awards, we estimate
compensation cost based on the probability of the performance
condition being achieved and recognize expense ratably using the
straight-line attribution method over the expected vesting period.
If all or a portion of the performance condition is not expected to
be met, the appropriate amount of previously recognized
compensation expense is reversed and future compensation expense is
adjusted accordingly. For market-based share awards, we recognize
compensation cost ratably using the straight-line attribution
method over the expected vesting period. If the target market
conditions are not expected to be met, compensation expense will
still be recognized. We account for forfeitures as they occur.
Earnings Per Share
Basic earnings per share is computed by dividing net income by
the weighted-average number of shares outstanding during each
period. Diluted earnings per share is computed by dividing net
income by the weighted-average number of shares and common stock
equivalents outstanding during each period. For earnings per share
purposes, Carnival Corporation common stock and Carnival plc
ordinary shares are considered a single class of shares since they
have equivalent rights.
Accounting Pronouncements
The Financial Accounting Standards Board (the "FASB") issued
guidance, Revenue from Contracts with Customers ("ASC 606"), which
requires an entity to recognize the amount of revenue to which it
expects to be entitled for the transfer of promised goods or
services to customers. On December 1, 2018, we adopted this
guidance using the modified retrospective method for all contracts
as of the adoption date. Results for reporting periods beginning
after December 1, 2018 are presented under ASC 606, while prior
period amounts are not adjusted and continue to be reported in
accordance with our historical accounting under ASC 605.
The impact of the adoption of ASC 606 on our consolidated
financial statements primarily relates to the gross presentation of
prepaid travel agent commissions (Consolidated Balance Sheet),
shore excursions and other onboard revenues and costs (Consolidated
Statement of Income) which were historically presented net. As of
December 1, 2018, we recorded a cumulative effect adjustment of $24
million to retained earnings related to the accounting for our
loyalty programs.
The following tables summarize the impacts of ASC 606 adoption
on our consolidated financial statements:
Year ended November 30, 2019
Prior to adoption
(in millions) of ASC 606 Adjustments As Reported
---------------------- -------------- ----------------
Consolidated Statement
of Income
Onboard and other (Revenues) $ 4,899 $ 1,432 $ 6,331
Revenues (Total) $ 19,393 $ 1,432 $ 20,825
Onboard and other (Operating
Costs and Expenses) $ 669 $ 1,432 $ 2,101
Operating Costs and Expenses
(Total) $ 16,117 $ 1,432 $ 17,549
Operating Income $ 3,276 $ - $ 3,276
Net Income $ 2,990 $ - $ 2,990
At November 30, 2019
Prior to adoption
(in millions) of ASC 606 Adjustments As Reported
---------------------- -------------- ----------------
Consolidated Balance Sheet
Prepaid expenses and other $ 517 $ 154 $ 671
Total current assets $ 1,905 $ 154 $ 2,059
Customer deposits $ 4,581 $ 154 $ 4,735
Total current liabilities $ 8,973 $ 154 $ 9,127
Year ended November 30, 2019
Prior to adoption
(in millions) of ASC 606 Adjustments As Reported
---------------------- -------------- ----------------
Consolidated Statement
of Cash Flows
Prepaid expenses and other $ (100) $ (154) $ (254)
Customer deposits $ 233 $ 154 $ 387
Net cash provided by operating
activities $ 5,475 $ - $ 5,475
The FASB issued amended guidance, Business Combinations -
Clarifying the Definition of a Business, which assists entities
with evaluating whether transactions should be accounted for as
acquisitions (or disposals) of assets or businesses. On December 1,
2018, we adopted this guidance using the prospective transition
method. The adoption of this guidance had no impact on our
consolidated financial statements.
The FASB issued amended guidance, Statement of Cash Flows -
Classification of Certain Cash Receipts and Cash Payments, which
clarifies how certain cash receipts and cash payments are presented
and classified in the statement of cash flows. The amendments are
aimed at reducing the existing diversity in practice. On December
1, 2018, 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.
The FASB issued amended guidance, Statement of Cash Flows -
Restricted Cash. On December 1, 2018, we adopted this guidance
using the retrospective method for each period presented. As a
result, we now present restricted cash with cash and cash
equivalents in the statement of cash flows. The reclassification of
restricted cash balances from investing activities to changes in
cash, cash equivalents and restricted cash was not material for the
periods presented.
The FASB issued amended guidance, Service Concession
Arrangements, which clarifies that the grantor in a service
arrangement should be considered the customer of the operating
entity in all cases. On December 1, 2018, we adopted this guidance
using the modified retrospective method. The adoption of this
guidance had no impact on our consolidated financial
statements.
The FASB issued amended guidance, Derivatives and Hedging, which
targeted improvements to accounting for hedging activities such as
hedging strategies, effectiveness assessments and recognition of
derivative gains or losses. On December 1, 2018, we early adopted
this guidance using the modified retrospective approach, which did
not have a material impact on our financial statements.
The FASB issued guidance, Leases, which requires an entity to
recognize both assets and liabilities arising from financing and
operating leases, with the exception of short-term leases, along
with additional qualitative and quantitative disclosures. This
guidance is required to be adopted by us in the first quarter of
2020 and must be applied using a modified retrospective approach
which allows entities to either apply the new lease standard to the
beginning of the earliest period presented or only to the
consolidated financial statements in the period of adoption without
restating prior periods. We have elected to apply the new guidance
at the date of adoption without restating prior periods.
We have implemented a new lease accounting system and are
executing changes to our internal controls to address the
collection, recording, and accounting for leases in accordance with
the new guidance. While we are substantially complete with the
process of quantifying the impacts that will result from applying
the new guidance, our assessment will be finalized during the first
quarter of 2020. Based on our currently contracted commitments and
our assessment to date, the initial adoption of this guidance is
expected to increase both our total assets and total liabilities by
approximately $1.4 billion to $1.6 billion, reflecting the lease
rights and obligations arising from our lease arrangements. We do
not expect this guidance to have a significant impact to our
consolidated statements of income, consolidated statements of
comprehensive income, consolidated statements of cash flows or the
compliance with debt-covenants under our current agreements.
The FASB issued amended guidance, Intangibles - Goodwill and
Other - Internal-Use Software, which requires a customer in a cloud
computing arrangement that is a service contract to follow the
internal-use software guidance to determine which implementation
costs to capitalize as assets or expense as incurred. The expense
related to deferred implementation costs is required to be
presented in the same income statement line item as the related
hosting fees. Additionally, the payments for deferred
implementation costs are required to be presented in the same line
item in the statement of cash flows as payments for the related
hosting fees. This guidance is required to be adopted by us in the
first quarter of 2021, early adoption is permitted. We have elected
the prospective adoption method. We are currently evaluating the
impact this guidance will have on our consolidated financial
statements.
NOTE 3 - Property and Equipment
November 30,
(in millions) 2019 2018
-------- ----------
Ships and ship improvements $50,446 $46,957
Ships under construction 2,492 2,004
Other property and equipment 3,843 3,661
------- -------
Total property and equipment 56,781 52,622
Less accumulated depreciation (18,650) (17,286)
------- -------
$38,131 $35,336
====== ======
Capitalized interest amounted to $39 million in 2019, $36
million in 2018 and $28 million in 2017.
Sales of Ships
In March 2019, we sold and transferred an NAA segment
1,680-passenger capacity ship.
In April 2019, we sold and transferred an NAA segment
1,260-passenger capacity ship.
In July 2019, we transferred an NAA segment 840-passenger
capacity ship.
In August 2019, we transferred an EA segment 1,880-passenger
capacity ship.
In November 2019, we entered into an agreement to sell an NAA
segment 1,600-passenger capacity ship. The ship will be transferred
to the buyer in 2021.
In November 2019, we entered into an agreement to sell an NAA
segment 1,260-passenger capacity ship. The ship will be transferred
to the buyer in 2021.
NOTE 4 - Other Assets
We have a minority interest in Grand Bahama Shipyard Ltd.
("Grand Bahama"), a ship repair and maintenance facility. Grand
Bahama provided services to us of $62 million in 2019, $89 million
in 2018 and $97 million in 2017. As of November 30, 2019, our
investment in Grand Bahama was $54 million, consisting of $15
million in equity and a loan of $39 million. As of November 30,
2018, our investment in Grand Bahama was $64 million, consisting of
$24 million in equity and a loan of $40 million.
We have a minority interest in the White Pass & Yukon Route
("White Pass") that includes port, railroad and retail operations
in Skagway, Alaska. White Pass has provided services to us of $22
million in 2019, and $8 million in 2018. As of November 30, 2019,
our investment in White Pass was $102 million, consisting of $84
million in equity and a loan of $18 million. As of November 30,
2018, our investment in White Pass was $131 million, consisting of
$81 million in equity and a loan of $50 million.
We have a minority interest in CSSC Carnival Cruise Shipping
Limited ("CSSC-Carnival"), a China-based cruise company which will
operate its own fleet designed to serve the Chinese market. As of
November 30, 2019 and 2018, our investment in CSSC-Carnival was $48
million and $49 million. In December 2019, we sold a controlling
interest in an entity with full ownership of two EA segment ships
to CSSC-Carnival for $251 million. We will continue to operate both
EA segment ships under bareboat charter agreements into 2021.
Following a relocation of one of our Executive Officers, we over
withheld taxes for the years 2015 to 2017. While the Executive
Officer has filed for a refund of the overage from the tax
authorities, we cannot be certain as to the timing nor likelihood
of a full refund. We have reimbursed the Executive Officer for the
amount over withheld by us in the amount of EUR4 million. In
return, we are entitled to any refund received in relation to the
over withheld taxes from the tax authorities. We have also paid a
portion of the Executive Officer's professional services fees
incurred related to this matter.
NOTE 5 - Unsecured Debt
November 30, 2019 November 30,
Interest Maturities
(in millions) Rates Through 2019 2018
--------- ----------- ------- ---------
Long-Term Debt
Export Credit Facilities
2.4% to
Fixed rate 4.4% 2031 $3,485 $1,819
1.1% to
EUR fixed rate 4.5% 2031 699 189
2.4% to
Floating rate 2.7% 2022 174 240
0.0% to
EUR floating rate 0.6% 2027 1,040 1,297
Bank Loans
0.5% to
EUR fixed rate 3.9% 2021 221 257
Floating rate 3.1% 2025 300 495
0.0% to
EUR floating rate 0.7% 2023 1,596 1,193
1.3% to
GBP floating rate 1.7% 2023 854 - 848
Publicly-Traded Notes
4.0% to
Fixed rate 7.2% 2028 1,217 1,217
1.0% to
EUR fixed rate 1.9% 2029 1,816 1,989
Short-Term Borrowings
EUR floating rate commercial paper (0.3)% 2020 231 621
EUR fixed rate bank loans -% - - 227
------ ------
Total Debt 11,634 10,394
Less: Unamortized debt issuance costs (131) (71)
------ ------
Total Debt, net of unamortized
debt issuance costs 11,503 10,323
------ ------
Less: Short-term borrowings (231) (848)
Less: Current portion of long-term
debt (1,596) (1,578)
------ ------
Long-Term Debt $9,675 $7,897
===== =====
The debt table does not include the impact of our foreign
currency and interest rate swaps. The interest rates on some of our
debt, and in the case of our revolving credit facility, fluctuate
based on the applicable rating of senior unsecured long-term
securities of Carnival Corporation or Carnival plc. For the twelve
months ended November 30, 2019 we did not have borrowings or
repayments of commercial paper with original maturities greater
than three months. For the twelve months ended November 30, 2018
and 2017, we had borrowings of $2 million and $111 million and
repayments of $2 million and $364 million of commercial paper with
original maturities greater than three months.
Interest-bearing debt is recorded at initial fair value, which
normally reflects the proceeds received by us, net of debt issuance
costs, and is subsequently stated at amortized cost. Debt issuance
costs are generally amortized to interest expense using the
straight-line method, which approximates the effective interest
method, over the term of the debt. In addition, all debt issue
discounts and premiums are amortized to interest expense using the
effective interest rate method over the term of the notes.
Substantially all of our fixed rate debt can be called or
prepaid by incurring additional costs. In addition, substantially
all of our debt agreements contain one or more financial covenants
that require us to:
-- Maintain minimum debt service coverage
-- Maintain minimum shareholders' equity
-- Limit our debt to capital ratio
-- Limit the amounts of our secured assets as well as secured and other indebtedness
Generally, if an event of default under any debt agreement
occurs, then pursuant to cross default acceleration clauses,
substantially all of our outstanding debt and derivative contract
payables could become due, and all debt and derivative contracts
could be terminated. At November 30, 2019, we were in compliance
with all of our debt covenants.
The scheduled annual maturities of our debt were as follows:
(in millions)
November 30,
Fiscal 2019
-----------------
2020 $ 1,827
2021 1,915
2022 1,352
2023 2,234
2024 680
Thereafter 3,627
---------------
$ 11,634
===========
Committed Ship Financings
We have unsecured euro and U.S. dollar long-term export credit
committed ship financings. These commitments, if drawn at the time
of ship delivery, are generally repayable semi-annually over 12
years. We have the option to cancel each one at specified dates
prior to the underlying ship's delivery date.
Revolving Credit Facility
At November 30, 2019, we had a $3.0 billion ($1.7 billion,
EUR1.0 billion and GBP150 million) multi-currency revolving credit
facility that expires in 2024 (the "Facility"). A total of $2.8
billion of this capacity was available for drawing, which is net of
outstanding commercial paper. We have options to extend the
Facility through 2026 subject to the approval of each bank in the
Facility. The Facility currently bears interest at LIBOR/EURIBOR
plus a margin of 22.5 basis points ("bps"). The margin varies based
on changes to Carnival Corporation's long-term credit ratings. The
Facility also includes an emissions linked margin adjustment
whereby, after the initial applicable margin is set per the margin
pricing grid, the margin may be adjusted based on performance in
achieving certain agreed annual carbon emissions goals. We are
required to pay a commitment fee on any undrawn portion.
NOTE 6 - Commitments
Fiscal
(in millions) 2020 2021 2022 2023 2024 Thereafter Total
------ ------ ------ ------ ------- ------------- ---------
New ship growth
capital $4,811 $3,622 $3,035 $2,011 $ 49 $ 1,003 $14,531
Port facilities
leases 145 140 121 137 131 1,218 1,892
Other operating
leases 74 56 40 36 36 190 432
Other long-term
commitments 267 202 75 22 15 25 607
------ ------ ------ ------ ------- ------------- -------
$5,297 $4,020 $3,272 $2,206 $ 231 $ 2,436 $17,463
===== ===== ===== ===== === ========= ======
NOTE 7 - Contingencies
Litigation
On May 2, 2019, two lawsuits were filed 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. The complaint
filed by Havana Docks Corporation alleges it holds an interest in
the Havana Cruise Port Terminal and the complaint filed by Javier
Garcia-Bengochea alleges that he holds an interest in the Port of
Santiago, Cuba, both of which were expropriated by the Cuban
Government. The complaints further allege that Carnival Cruise Line
"trafficked" in those properties by embarking and disembarking
passengers at these facilities. The plaintiffs seek all available
statutory remedies, including the value of the expropriated
property, plus interest, treble damages, attorneys' fees and costs.
The court denied our motion to dismiss the complaint filed by
Javier Garcia-Bengochea, on August 26, 2019. While on August 28,
2019, the court denied our motion to dismiss the complaint filed by
Havana Docks Corporation, later on January 6, 2020, it dismissed
virtually identical cases brought by Havana Docks Corporation
against other cruise lines, on the grounds raised in our motion to
dismiss. In doing so, the court explicitly reversed its position on
the issue and acknowledged the conflict with our case. Therefore,
on January 6, 2020, we asked the court to formally dismiss the
Havana Docks Corporation complaint.
We believe we have meritorious defenses to the claims and we
intend to vigorously defend against them. We do not believe that it
is likely that the outcome of these matters will be material, but
litigation is inherently unpredictable and there can be no
assurances that the final outcome of the case might not be material
to our operating results or financial condition.
Additionally, in the normal course of our business, various
claims and lawsuits have been filed or are pending against us. Most
of these claims and lawsuits, or any settlement of claims and
lawsuits, are covered by insurance and the maximum amount of our
liability, net of any insurance recoverables, is typically limited
to our self-insurance retention levels. We believe the ultimate
outcome of these claims, lawsuits and settlements, as applicable,
each and in the aggregate, will not have a material impact on our
consolidated financial statements.
Contingent Obligations - Indemnifications
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 our lenders'
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.
NOTE 8 - Taxation
A summary of our principal taxes and exemptions in the
jurisdictions where our significant operations are located is as
follows:
U.S. Income Tax
We are primarily foreign corporations engaged in the business of
operating cruise ships in international transportation. We also own
and operate, among other businesses, the U.S. hotel and
transportation business of Holland America Princess Alaska Tours
through U.S. corporations.
Our North American cruise ship businesses and certain
ship-owning subsidiaries are engaged in a trade or business within
the U.S. Depending on its itinerary, any particular ship may
generate income from sources within the U.S. We believe that our
U.S. source income and the income of our ship-owning subsidiaries,
to the extent derived from, or incidental to, the international
operation of a ship or ships, is currently exempt from U.S. federal
income and branch profit taxes.
Our domestic U.S. operations, principally the hotel and
transportation business of Holland America Princess Alaska Tours,
are subject to federal and state income taxation in the U.S.
In general, under Section 883 of the Internal Revenue Code,
certain non-U.S. corporations (such as our North American cruise
ship businesses) are not subject to U.S. federal income tax or
branch profits tax on U.S. source income derived from, or
incidental to, the international operation of a ship or ships.
Applicable U.S. Treasury regulations provide in general that a
foreign corporation will qualify for the benefits of Section 883
if, in relevant part, (i) the foreign country in which the foreign
corporation is organized grants an equivalent exemption to
corporations organized in the U.S. in respect of each category of
shipping income for which an exemption is being claimed under
Section 883 (an "equivalent exemption jurisdiction") and (ii) the
foreign corporation meets a defined publicly-traded corporation
stock ownership test (the "publicly-traded test"). Subsidiaries of
foreign corporations that are organized in an equivalent exemption
jurisdiction and meet the publicly-traded test also benefit from
Section 883. We believe that Panama is an equivalent exemption
jurisdiction and that Carnival Corporation currently satisfies the
publicly-traded test under the regulations. Accordingly,
substantially all of Carnival Corporation's income is exempt from
U.S. federal income and branch profit taxes.
Regulations under Section 883 list certain activities that the
IRS does not consider to be incidental to the international
operation of ships and, therefore, the income attributable to such
activities, to the extent such income is U.S. source, does not
qualify for the Section 883 exemption. Among the activities
identified as not incidental are income from the sale of air
transportation, transfers, shore excursions and pre- and
post-cruise land packages to the extent earned from sources within
the U.S.
We believe that the U.S. source transportation income earned by
Carnival plc and its subsidiaries currently qualifies for exemption
from U.S. federal income tax under applicable bilateral U.S. income
tax treaties.
Carnival Corporation and Carnival plc and certain of their
subsidiaries are subject to various U.S. state income taxes
generally imposed on each state's portion of the U.S. source income
subject to U.S. federal income taxes. However, the state of Alaska
imposes an income tax on its allocated portion of the total income
of our companies doing business in Alaska and certain of their
subsidiaries.
UK and Australian Income Tax
Cunard, P&O Cruises (UK) and P&O Cruises (Australia) are
divisions of Carnival plc and have elected to enter the UK tonnage
tax under a rolling ten-year term and, accordingly, reapply every
year. Companies to which the tonnage tax regime applies pay
corporation taxes on profits calculated by reference to the net
tonnage of qualifying ships. UK corporation tax is not chargeable
under the normal UK tax rules on these brands' relevant shipping
income. Relevant shipping income includes income from the operation
of qualifying ships and from shipping related activities.
For a company to be eligible for the regime, it must be subject
to UK corporation tax and, among other matters, operate qualifying
ships that are strategically and commercially managed in the UK.
Companies within UK tonnage tax are also subject to a seafarer
training requirement.
Our UK non-shipping activities that do not qualify under the UK
tonnage tax regime remain subject to normal UK corporation tax.
Dividends received from subsidiaries of Carnival plc doing business
outside the UK are generally exempt from UK corporation tax.
P&O Cruises (Australia) and all of the other cruise ships
operated internationally by Carnival plc for the cruise segment of
the Australian vacation region are exempt from Australian
corporation tax by virtue of the UK/Australian income tax
treaty.
Italian and German Income Tax
In early 2015, Costa and AIDA re-elected to enter the Italian
tonnage tax regime through 2024 and can reapply for an additional
ten-year period beginning in early 2025. Companies to which the
tonnage tax regime applies pay corporation taxes on shipping
profits calculated by reference to the net tonnage of qualifying
ships.
Most of Costa's and AIDA's earnings that are not eligible for
taxation under the Italian tonnage tax regime will be taxed at an
effective tax rate of 4.8% in 2019 and 2018.
Substantially all of AIDA's earnings are exempt from German
income taxes by virtue of the Germany/Italy income tax treaty.
Asian Countries Income Taxes
Substantially all of our brands' income from their international
operations in Asian countries is exempt from income tax by virtue
of relevant income tax treaties.
Other
We recognize income tax provisions for uncertain tax positions,
based solely on their technical merits, when it is more likely than
not to be sustained upon examination by the relevant tax authority.
The tax benefit to be recognized is measured as the largest amount
of benefit that is greater than 50% likely of being realized upon
ultimate resolution. Based on all known facts and circumstances and
current tax law, we believe that the total amount of our uncertain
income tax position liabilities and related accrued interest are
not significant to our financial position. All interest expense
related to income tax liabilities is included in income tax
expense.
We do not expect to incur income taxes on future distributions
of undistributed earnings of foreign subsidiaries and, accordingly,
no deferred income taxes have been provided for the distribution of
these earnings. In addition to or in place of income taxes,
virtually all jurisdictions where our ships call impose taxes, fees
and other charges based on guest counts, ship tonnage, passenger
capacity or some other measure, and these taxes, fees and other
charges are included in commissions, transportation and other costs
and other ship operating expenses.
NOTE 9 - Shareholders' Equity
Under a share repurchase program effective 2004, we are
authorized to repurchase Carnival Corporation common stock and
Carnival plc ordinary shares (the "Repurchase Program"). Effective
August 27, 2018, the company approved modifications of the general
authorization under the Repurchase Program, which replenished the
remaining authorized repurchases at the time of the approvals to
$1.0 billion. The Repurchase Program does not have an expiration
date and may be discontinued by our Boards of Directors at any
time.
Carnival Corporation Carnival plc
Dollar Amount Dollar Amount
Number of Shares Paid for Shares Number of Shares Paid for Shares
(in millions) Repurchased Repurchased Repurchased Repurchased
----------------- ------------------- ----------------- ---------------------
2019 0.6 $ 26 12.2 $ 569
2018 7.8 $ 476 16.3 $ 985
2017 3.3 $ 223 5.6 $ 335
AOCI
--------------------
November 30,
(in millions) 2019 2018
-------- ----------
Cumulative foreign currency translation adjustments,
net $(1,961) $(1,875)
Unrecognized pension expenses (88) (56)
Net losses on cash flow derivative hedges (18) (19)
------- -------
$(2,066) $(1,949)
====== ======
During 2019, 2018 and 2017, there were $5 million, $5 million
and $18 million of unrecognized pension expenses that were
reclassified out of accumulated other comprehensive loss and were
included within payroll and related expenses and selling and
administrative expenses.
We declared quarterly cash dividends on all of our common stock
and ordinary shares as follows:
Quarters Ended
(in millions, except per share February November
data) 28 May 31 August 31 30
----------- --------- ------------ -------------
2019
Dividends declared per share $ 0.50 $ 0.50 $ 0.50 $ 0.50
Dividends declared $ 345 $ 346 $ 342 $ 346
2018
Dividends declared per share $ 0.45 $ 0.50 $ 0.50 $ 0.50
Dividends declared $ 322 $ 357 $ 350 $ 349
2017
Dividends declared per share $ 0.35 $ 0.40 $ 0.40 $ 0.45
Dividends declared $ 251 $ 291 $ 289 $ 324
Carnival Corporation's Articles of Incorporation authorize its
Board of Directors, at its discretion, to issue up to 40 million
shares of preferred stock. At November 30, 2019 and 2018, no
Carnival Corporation preferred stock or Carnival plc preference
shares had been issued.
NOTE 10 - Fair Value Measurements, Derivative Instruments and
Hedging Activities and Financial Risk
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.
Financial Instruments that are not Measured at Fair Value on a
Recurring Basis
November 30, 2019 November 30, 2018
Fair Value Fair Value
---
Carrying Level Level Level Carrying Level Level Level
(in millions) Value 1 2 3 Value 1 2 3
----------- -------- ------- -------- ----------- -------- ------- ----------
Assets
Long-term
other
assets
(a) $ 181 $ - $ 31 $ 149 $ 127 $ - $ 30 $ 95
------- --- --- ------ ---- --- ------ --- --- ------ --- ---
Total $ 181 $ - $ 31 $ 149 $ 127 $ - $ 30 $ 95
======= === === ====== ==== === ====== === === ====== === ===
Liabilities
Fixed rate
debt
(b) $ 7,438 $ - $ 7,782 $ - $ 5,699 $ - $ 5,799 $ -
Floating
rate debt
(b) 4,195 - 4,248 - 4,695 - 4,727 -
----------- -------- ------- ----------- -------- -------
Total $ 11,634 $ - $12,030 $ - $ 10,394 $ - $10,526 $ -
======= === === ====== ==== === ====== === === ====== === ===
(a) Long-term other assets are comprised of notes receivables,
which include loans on ship sales. The fair values of our Level 2
notes receivables were based on estimated future cash flows
discounted at appropriate market interest rates. The fair values of
our Level 3 notes receivable were estimated using risk-adjusted
discount rates.
(b) The debt amounts above do not include the impact of interest
rate swaps or debt issuance costs. 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
November 30, 2019 November 30, 2018
(in millions) Level Level Level Level Level Level
1 2 3 1 2 3
------------- -------- -------- ------------- -------- ----------
Assets
Cash and cash
equivalents $ 518 $ - $ - $ 982 $ - $ -
Restricted cash 13 - - 14 - -
Derivative financial
instruments - 58 - - - -
Total $ 530 $ 58 $ - $ 996 $ - $ -
==== ======= === === === === ==== ======= === === === ===
Liabilities
Derivative financial
instruments $ - $ 25 $ - $ - $ 29 $ -
---- ------- --- --- ---- ------- --- ---
Total $ - $ 25 $ - $ - $ 29 $ -
==== ======= === === === === ==== ======= === === === ===
Nonfinancial Instruments that are Measured at Fair Value on a
Nonrecurring Basis
Valuation of Goodwill and Trademarks
As of July 31, 2019 and 2018, we performed our annual goodwill
and trademark impairment reviews and we determined there was no
impairment for goodwill or trademarks.
As of November 30, 2019, we performed an additional goodwill
impairment review for our Costa reporting unit, $435 million of
goodwill recorded, and we determined there was no impairment for
goodwill.
During 2017, we made a decision to strategically realign our
business in Australia, which includes reducing capacity in P&O
Cruises (Australia). We performed discounted cash flow analyses and
determined that the estimated fair values of the P&O Cruises
(Australia) reporting unit and its trademark no longer exceeded
their carrying values. We recognized a goodwill impairment charge
of $38 million and a trademark impairment charge of $50 million for
the year ended November 30, 2017.
The determination of our reporting unit goodwill fair values
includes numerous assumptions that are subject to various risks and
uncertainties. The principal assumptions used in our goodwill
impairment reviews consist of:
-- Changes in conditions or strategy, including decisions about
the allocation of new ships amongst brands and transfer of ships
between brands
-- Forecasted future operating results, including net revenue yields and fuel expenses
-- Weighted-average cost of capital of market participants,
adjusted for the risk attributable to the geographic regions in
which these cruise brands operate
We believe that we have made reasonable estimates and judgments.
A change in the conditions, circumstances or strategy, including
decisions about the allocation of new ships amongst brands and the
transfer of ships between brands (influencing fair values in the
future), may result in a need to recognize an additional impairment
charge.
Goodwill
(in millions) NAA Segment EA Segment Total
-------------- ------------- ---------
At November 30, 2017 $ 1,898 $ 1,069 $2,967
Foreign currency translation adjustment - (42) (42)
------------ ------
At November 30, 2018 1,898 1,027 2,925
Foreign currency translation adjustment - (13) (13)
-------------- ------------ ------
At November 30, 2019 $ 1,898 $ 1,014 $2,912
========== ======== =====
Trademarks
(in millions) NAA Segment EA Segment Total
-------------- --------------- ---------
At November 30, 2017 $ 928 $ 251 $1,179
Foreign currency translation adjustment - (10) (10)
-------------- ----------- ------
At November 30, 2018 927 242 1,169
Foreign currency translation adjustment - (2) (2)
-------------- ----------- ------
At November 30, 2019 $ 927 $ 240 $1,167
=== ========= === ====== =====
Impairments of Ships
We review our long-lived assets for impairment whenever events
or circumstances indicate potential impairment. Primarily as a
result of our decision during 2017 to strategically realign our
business in Australia, which included reducing capacity in P&O
Cruises (Australia), we performed undiscounted cash flow analyses
on certain ships as of July 31, 2017. Based on these undiscounted
cash flow analyses, we determined that some of these ships had net
carrying values that exceeded their estimated undiscounted future
cash flows. We estimated the July 31, 2017 fair values of these
ships based on their discounted cash flows and comparable market
transactions. We then compared these estimated fair values to the
net carrying values and, as a result, we recognized $162 million
and $142 million of ship impairment charges in the NAA and EA
segments, respectively, for the year end November 30, 2017. The
impairment is included in other ship operating expenses in our
consolidated statements of income.
The principal assumptions used in our analyses consisted of
changes in strategy, including decisions about itineraries and the
transfer of ships between brands, forecasted future operating
results, including net revenue yields and fuel expenses and
estimated ship sale timing and proceeds. All principal assumptions
are considered Level 3 inputs.
Derivative Instruments and Hedging Activities
November 30,
(in millions) Balance Sheet Location 2019 2018
------------------------ ----------- ---------
Derivative assets
Derivatives designated as hedging
instruments
Prepaid expenses
Cross currency swaps (a) and other $ 32 $ -
Other assets 25
----------- ---------
Total derivative assets $ 58 $ -
==== ===== ===
Derivative liabilities
Derivatives designated as hedging
instruments
Accrued liabilities
Cross currency swaps (a) and other $ 1 $ 5
Other long-term
liabilities 9 -
Foreign currency zero cost collars Accrued liabilities
(b) and other 1 -
Accrued liabilities
Interest rate swaps (c) and other 6 8
Other long-term
liabilities 9 11
25 23
----------- -------
Derivatives not designated as hedging
instruments
Accrued liabilities
Fuel and other - 6
----------- -------
Total derivative liabilities $ 25 $ 29
==== ===== ===
(a) At November 30, 2019 and 2018, we had cross currency swaps
totaling $1.9 billion and $156 million, respectively, that are
designated as hedges of our net investments in foreign operations
with a euro-denominated functional currency. At November 30, 2019,
these cross currency swaps settle through 2031.
(b) At November 30, 2019, we had foreign currency derivatives
consisting of foreign currency zero cost collars that are
designated as foreign currency cash flow hedges for a portion of
our euro-denominated shipbuilding payments. See "Newbuild Currency
Risks" below for additional information regarding these
derivatives.
(c) We have interest rate swaps designated as cash flow hedges
whereby we receive floating interest rate payments in exchange for
making fixed interest rate payments. These interest rate swap
agreements effectively changed $300 million at November 30, 2019
and $385 million at November 30, 2018 of EURIBOR-based floating
rate euro debt to fixed rate euro debt. At November 30, 2019, these
interest rate swaps settle through 2025.
Our derivative contracts include rights of offset with our
counterparties. We have elected to net certain of our derivative
assets and liabilities within counterparties.
November 30, 2019
Total Net
Gross Amounts Amounts Gross Amounts
Offset in Presented not Offset
the Balance in the Balance in the Balance
(in millions) Gross Amounts Sheet Sheet Sheet Net Amounts
-------------- ---------------- --------------- ------------------- ---------------
Assets $ 58 $ - $ 58 $ (4) $ 54
Liabilities $ 25 $ - $ 25 $ (4) $ 21
November 30, 2018
Total Net
Gross Amounts Amounts Gross Amounts
Offset in Presented not Offset
the Balance in the Balance in the Balance
(in millions) Gross Amounts Sheet Sheet Sheet Net Amounts
Assets $ - $ - $ - $ - $ -
Liabilities $ 29 $ - $ 29 $ - $ 29
The effect of our derivatives qualifying and designated as
hedging instruments recognized in other comprehensive income (loss)
and in income was as follows:
November 30,
(in millions) 2019 2018 2017
------- ----- -------
Gains (losses) recognized in AOCI:
Cross currency swaps - net investment hedges $ 43 $ 18 $(31)
Foreign currency zero cost collars - cash
flow hedges $ (1) $(12) $ 45
Interest rate swaps - cash flow hedges $ 3 $ 6 $ 8
Gains (losses) reclassified from AOCI -
cash flow hedges:
Interest rate swaps - Interest expense,
net of capitalized interest $ (7) $(10) $(11)
Foreign currency zero cost collars - Depreciation
and amortization $ 1 $ 1 $ 1
Gains (losses) recognized on derivative
instruments (amount excluded from effectiveness
testing - net investment hedges)
Cross currency swaps - Interest expense,
net of capitalized interest $ 23 $ - $ -
At November 30, 2019 and 2018, no collateral was required to be
posted to or received from our fuel derivative counterparties.
The amount of estimated cash flow hedges' unrealized gains and
losses that are expected to be reclassified to earnings in the next
twelve months is not significant.
Financial Risk
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 ship maintenance
practices, modifying our itineraries and implementing innovative
technologies. We are also adding new, more fuel efficient ships to
our fleet and are strategically disposing of smaller, less fuel
efficient ships.
November 30,
(in millions) 2018 2017
------------ -------
Unrealized gains on fuel derivatives, net $ 94 $227
Realized losses on fuel derivatives, net (35) (192)
Gains (losses) on fuel derivatives, net $ 59 $ 35
=== === ===
There were no unrealized or realized gains or losses on fuel
derivatives for the period ended November 30, 2019.
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 currently
only hedge certain of our ship commitments and net investments in
foreign operations. The financial impacts of the hedging
instruments we do employ generally offset the changes in the
underlying exposures being hedged.
Operational Currency Risks
Our operations primarily utilize the U.S. dollar, Australian
dollar, euro or sterling as their functional currencies. Our
operations also have revenue and expenses denominated in
non-functional currencies. Movements in foreign currency exchange
rates will affect our financial statements.
Investment Currency Risks
We consider our investments in foreign operations to be
denominated in stable currencies and are of a long-term nature. We
partially mitigate the currency exposure of our investments in
foreign operations by designating a portion of our foreign currency
debt and derivatives as hedges of these investments. As of November
30, 2019, we have designated $854 million of our
sterling-denominated debt as non-derivative hedges of our net
investments in foreign operations and in 2019, we recognized $6
million of losses on these non-derivative net investment hedges in
the cumulative translation adjustment section of other
comprehensive income. We also have $7.5 billion of euro-denominated
debt, including the effect of cross currency swaps, which provides
an economic offset for our operations with euro functional
currency.
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. We use foreign currency derivative contracts to
manage foreign currency exchange rate risk for some of our ship
construction payments. At November 30, 2019, for the following
newbuilds, we had foreign currency zero cost collars for a portion
of our euro-denominated shipyard payments. These collars are
designated as cash flow hedges.
Entered Weighted-Average Weighted- Average
Into Matures in Floor Rate Ceiling Rate
--------- ------------- ------------------- ----------------------
Enchanted Princess 2019 June 2020 $ 1.04 $ 1.28
Mardi Gras 2019 August 2020 $ 1.04 $ 1.28
If the spot rate is between the ceiling and floor rates on the
date of maturity, then we would not owe or receive any payments
under these collars.
At November 30, 2019, our remaining newbuild currency exchange
rate risk primarily relates to euro-denominated newbuild contract
payments to non-euro functional currency brands, which represent a
total unhedged commitment of $7.3 billion for newbuilds scheduled
to be delivered from 2020 through 2025.
The cost of shipbuilding orders that we may place in the future
that is denominated in a different currency than our cruise brands'
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, issuance of new debt, amendment of
existing debt or early retirement of existing 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
minimize these credit risk exposures, including counterparty
nonperformance primarily associated with our cash equivalents,
investments, notes receivables, committed financing facilities,
contingent obligations, derivative instruments, insurance
contracts, long-term ship charters 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, long-term ship
charters and new ship progress payments to shipyards
We believe the risk of nonperformance by any of our significant
counterparties is remote. At November 30, 2019, our exposures under
foreign currency contracts and interest rate swap agreements were
not material. We also monitor the creditworthiness of travel
agencies and tour operators in Asia, Australia and Europe, which
includes charter-hire agreements in Asia 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, 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. We have not experienced significant
credit losses on our trade receivables, notes receivables,
charter-hire agreements and contingent obligations. We do not
normally require collateral or other security to support normal
credit sales.
NOTE 11 - Segment Information
Our operating segments are reported on the same basis as the
internally reported information that is provided to our chief
operating decision maker ("CODM"), who is the President and Chief
Executive Officer of Carnival Corporation and Carnival plc. The
CODM assesses performance and makes decisions to allocate resources
for Carnival Corporation & plc based upon review of the results
across all of our segments. Our four reportable segments are
comprised of (1) NAA cruise operations, (2) EA cruise operations,
(3) Cruise Support and (4) Tour and Other.
The operating segments within each of our NAA and EA reportable
segments have been aggregated based on the similarity of their
economic and other characteristics. Our Cruise Support segment
includes our portfolio of leading port destinations and 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.
As of and for the years ended November 30,
Operating
costs Selling Depreciation Operating
and and and income Capital Total
(in millions) Revenues expenses administrative amortization (loss) expenditures assets
----------- ------------ ----------------- --------------- -------------- --------------- ---------
2019
NAA $ 13,612 $ 8,370 $ 1,427 $ 1,364 $ 2,451 $ 2,781 $27,102
EA 6,650 4,146 744 645 1,115 2,462 15,473
Cruise Support 173 125 281 115 (347) 143 1,861
Tour and Other 390 268 28 36 56 43 623
$ 20,825 $ 12,909 $ 2,480 $ 2,160 $ 3,276 $ 5,429 $45,058
======= ======== ===== ========== ==== ========= ====== ==== ========= ======
2018
NAA $ 12,236 $ 7,180 $ 1,403 $ 1,264 $ 2,389 $ 2,614 $25,613
EA 6,243 3,676 751 611 1,205 945 13,825
Cruise Support 129 53 268 103 (296) 38 2,303
Tour and Other 272 180 28 39 26 152 660
$ 18,881 $ 11,089 $ 2,450 $ 2,017 $ 3,325 $ 3,749 $42,401
======= ======== ===== ========== ==== ========= ====== ==== ========= ======
2017
NAA $ 11,442 $ 6,704 $ 1,337 $ 1,195 $ 2,117 (a) $ 1,715 $24,430
EA 5,703 3,568 667 561 907 793 14,149
Cruise Support 129 66 246 53 (235) 431 1,739
Tour and Other 236 163 15 37 20 5 459
$ 17,510 $ 10,501 $ 2,265 $ 1,846 $ 2,809 $ 2,944 $40,778
======= ======== ===== ========== ==== ========= ====== ==== ========= ======
(a) Includes $89 million of impairment charges related to NAA's goodwill and trademarks.
Revenues by geographic areas, which are based on where our
guests are sourced, were as follows:
Years Ended November 30,
(in millions) 2019 2018 2017
----------- -------- ----------
North America $ 11,502 $ 10,066 $ 9,195
Europe 6,318 5,957 5,414
Australia and Asia 2,632 2,530 2,604
Other 373 327 297
----------- -------- --------
$ 20,825 $ 18,881 $ 17,510
======= ======= =======
Substantially all of our long-lived assets consist of our ships
and move between geographic areas.
NOTE 12 - Compensation Plans
Equity Plans
We issue our share-based compensation awards, which at November
30, 2019 included time-based share awards (restricted stock awards
and restricted stock units), performance-based share awards and
market-based share awards (collectively "equity awards"), under the
Carnival Corporation and Carnival plc stock plans. Equity awards
are principally granted to management level employees and members
of our Boards of Directors. The plans are administered by the
Compensation Committee which is made up of independent directors
who determine which employees are eligible to participate, the
monetary value or number of shares for which equity awards are to
be granted and the amounts that may be exercised or sold within a
specified term. We had an aggregate of 11.8 million shares
available for future grant at November 30, 2019. We fulfill our
equity award obligations using shares purchased in the open market
or with unissued or treasury shares. Our equity awards generally
vest over a three-year period, subject to earlier vesting under
certain conditions.
Weighted-Average
Grant Date
Fair
Shares Value
----------- ---------------------
Outstanding at November 30, 2016 3,413,125 $ 48.03
Granted 1,116,314 $ 54.79
Vested (1,466,690) $ 38.95
Forfeited (112,781) $ 51.72
----------
Outstanding at November 30, 2017 2,949,968 $ 51.82
Granted 951,906 $ 66.68
Vested (1,419,218) $ 45.45
Forfeited (202,139) $ 56.57
----------
Outstanding at November 30, 2018 2,280,517 $ 61.57
Granted 1,357,177 $ 52.17
Vested (960,693) $ 53.49
Forfeited (185,625) $ 56.13
----------
Outstanding at November 30, 2019 2,491,376 $ 59.97
==========
As of November 30, 2019, there was $57 million of total
unrecognized compensation cost related to equity awards, which is
expected to be recognized over a weighted-average period of 1.4
years.
Defined Benefit Pension Plans
We have several single-employer defined benefit pension plans,
which cover some of our shipboard and shoreside employees. The U.S.
and UK shoreside employee plans are closed to new membership and
are funded at or above the level required by U.S. or UK
regulations. The remaining defined benefit plans are primarily
unfunded. In determining all of our plans' benefit obligations at
November 30, 2019 and 2018, we assumed a weighted-average discount
rate of 2.4% for 2019 and 3.4% for 2018.
In addition, we participate in two multiemployer defined benefit
pension plans in the UK, the British Merchant Navy Officers Pension
Fund (registration number 10005645) ("MNOPF"), which is divided
into two sections, the "New Section" and the "Old Section" and the
British Merchant Navy Ratings Pension Fund (registration number
10005646) ("MNRPF"). Collectively, we refer to these as "the
multiemployer plans." The multiemployer plans are maintained for
the benefit of the employees of the participating employers who
make contributions to the plans. However, contributions made by
employers, including us, may be used to provide benefits to
employees of other participating employers, and if any of the
participating employers withdraw from the multiemployer plans or
fail to make their required contributions, any unfunded obligations
would be the responsibility of the remaining participating
employers. We are contractually obligated to make all required
contributions as determined by the plans' trustees. All of our
multiemployer plans are closed to new membership and future benefit
accrual. The MNOPF Old Section is fully funded.
We expense our portion of the MNOPF New Section deficit as
amounts are invoiced by, and become due and payable to, the
trustees. We accrue and expense our portion of the MNRPF deficit
based on our estimated probable obligation from the most recent
actuarial review. Total expense for all defined benefit pension
plans, including the multiemployer plans, was $34 million in 2019,
$36 million in 2018 and $53 million in 2017.
Based on the most recent valuation at March 31, 2018 of the
MNOPF New Section, it was determined that this plan was 98% funded.
In 2019, 2018 and 2017, our contributions to the MNOPF New Section
did not exceed 5% of total contributions to the fund. Based on the
most recent valuation at March 31, 2019 of the MNRPF, it was
determined that this plan was 88% funded. In 2019, 2018 and 2017
our contributions to the MNRPF did not exceed 5% of total
contributions to the fund. It is possible that we will be required
to fund and expense additional amounts for the multiemployer plans
in the future; however, such amounts are not expected to be
material to our consolidated financial statements.
Defined Contribution Plans
We have several defined contribution plans available to most of
our employees. We contribute to these plans based on employee
contributions, salary levels and length of service. Total expense
for these plans was $41 million in 2019, $39 million in 2018 and
$37 million in 2017.
NOTE 13 - Earnings Per Share
Years Ended November 30,
(in millions, except per share data) 2019 2018 2017
----------- ----------- ---------
Net income for basic and diluted earnings
per share $ 2,990 $ 3,152 $ 2,606
======= ======= ======
Weighted-average shares outstanding 690 709 722
Dilutive effect of equity plans 2 2 3
----------- ----------- -------
Diluted weighted-average shares outstanding 692 710 725
=========== =========== =======
Basic earnings per share $ 4.34 $ 4.45 $ 3.61
======= ======= ======
Diluted earnings per share $ 4.32 $ 4.44 $ 3.59
======= ======= ======
NOTE 14 - Supplemental Cash Flow Information
November 30, November 30,
(in millions) 2019 2018
--------------- -----------------
Cash and cash equivalents (Consolidated
Balance Sheets) $ 518 $ 982
Restricted cash included in prepaid expenses
and other and other assets 13 14
Total cash, cash equivalents and restricted
cash (Consolidated Statements of Cash Flows) $ 530 $ 996
==== ========= ==== =========
Cash paid for interest, net of capitalized interest, was $171
million in 2019, $182 million in 2018 and $191 million in 2017. In
addition, cash paid for income taxes, net of recoveries, was $46
million in 2019, $58 million in 2018 and $43 million in 2017.
During 2019, 2018, and 2017, we issued notes receivable upon
sale of ships of $104 million, $35 million and $45 million.
SCHEDULE B
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 document are "forward-looking statements" that involve risks,
uncertainties and assumptions with respect to us, including some
statements concerning future results, outlooks, plans, goals 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 yields * Net cruise costs, excluding fuel per available lower
berth day
* Booking levels * Estimates of ship depreciable lives and residual
values
* Goodwill, ship and trademark fair values
* Pricing and occupancy
* Liquidity
* Interest, tax and fuel expenses
* Adjusted earnings per share
* Currency exchange rates
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. 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:
-- World events impacting the ability or desire of people to
travel may lead to a decline in demand for cruises
-- Incidents concerning our ships, guest 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.
2019 Executive Overview
Key information for 2019 compared to the prior year (see "Key
Performance Non-GAAP Financial Indicators" for definitions and
reconciliations):
-- Net income of $3.0 billion or $4.32 diluted earnings per
share, compared to net income of $3.2 billion or $4.44 diluted
earnings per share in 2018.
-- Record adjusted net income of $3.0 billion, or $4.40 adjusted
diluted earnings per share, compared to adjusted net income of $3.0
billion or $4.26 adjusted diluted earnings per share in 2018.
Adjusted net income excludes net charges of $52 million for 2019
and net gains of $123 million for 2018.
-- Record total revenues were $20.8 billion, higher than $18.9 billion in 2018.
Gross cruise revenues of $20.4 billion, higher than $18.6
billion in 2018.
In constant currency, net cruise revenues of $16.0 billion,
higher than $15.4 billion in 2018, an increase of 4.0%.
-- Gross revenue yields increased 5.4%. In constant currency,
net revenue yields decreased 0.2%, comprised of a 1.0% decrease in
net passenger ticket revenue yields and a 2.0% increase in net
onboard and other revenue yields.
-- Gross cruise costs including fuel per ALBD increased 8.6%.
Net cruise costs excluding fuel per ALBD in constant currency
decreased 0.3%.
-- Changes in fuel prices and currency exchange rates decreased earnings by $0.01 per share.
After five years of strong adjusted earnings growth for our
company, 2019 brought with it more than our fair share of
challenges including the abrupt regulatory change preventing travel
to Cuba, geopolitical events in the Arabian Gulf, Hurricane Dorian,
a costly unscheduled dry-dock, and multiple shipyard delays, all of
which necessitated the cancellation of cruises and in many
instances resulted in shorter booking windows negatively impacting
yields. The impact from these events was compounded by an
unanticipated decline in consumer attitude affecting leisure travel
broadly in our Continental European source markets. As a global
company with nearly 50 percent of our guests sourced from outside
the U.S., we are subject to uneven economies around the world. We
have a large percentage of our portfolio weighted in regions that
are currently challenged. We have already taken actions to adapt to
what is proving to be a persistent challenge. These actions include
changing itineraries to optimize our performance and implementing
an action plan to accelerate demand and right-size capacity sourced
from Southern Europe.
Our 150,000 team members collectively worked to offset numerous
headwinds and delivered memorable cruise experiences for our 13
million guests as well as achieved our highest full year adjusted
diluted earnings per share for our shareholders. Although earnings
growth was broadly in line with capacity growth, we believe our
business is inherently capable of, and we are working to ensure we
are, doing even better.
Globally, we are taking actions to further stimulate demand and
increase our cost efficiencies. We have conducted an analysis of
our marketing activities and spend and have identified areas of
opportunity to increase marketing impressions to generate demand
and support future yield growth. In 2019, we increased investments
in media spend to support our brands and destinations around the
world. We have also been successful in increasing our analytical
rigor in marketing and media spend to drive demand generation and
to better balance brand support activities with price and promotion
efforts.
From a guest experience perspective, we continue to deliver with
both our guest experience scores and net promoter scores toward the
top end of prior ranges. In addition, we have made several
investments to continue to further enhance the guest
experience.
-- Our newbuild schedule peaks in 2020 with six new ships
entering service across six distinct markets: Carnival Panorama for
the West Coast of the U.S., Carnival Cruise Line's Mardi Gras for
the East Coast of the U.S., Enchanted Princess, the second new ship
delivered with Ocean Medallion, Costa Smeralda for Continental
Europe, Costa Firenze for China and P&O Cruises' Iona for the
UK.
-- We continue to roll out our most popular features on our existing fleet, with significant re-imaginations like the recently introduced Carnival Sunrise, to be joined by Carnival Radiance in mid-2020.
-- In the Princess fleet, the Ocean Medallion roll out continues
with five ships already completed and six more to be completed in
2020.
-- The expansion of app-based technology across our other brands
continues, including pre-cruise purchases.
-- We have two major destination developments underway, on Grand
Bahama Island and a second destination on Half Moon Cay,
complementing the six destinations we had already developed and are
operating in the Caribbean.
We are elevating the guest experience without increasing
operating costs on a per available lower berth day ("ALBD") basis.
Through our global sourcing, we achieved over $125 million of cost
savings in 2019, bringing the cumulative total to over $480 million
since 2014.
Our highest responsibility and top priorities are excellence in
safety, environmental protection and compliance. Our reputation and
success depends on having sustainable and transparent operations.
We continue to lead the industry in the development of
environmentally friendly fuel solutions.
-- We achieved a four percent reduction in per unit fuel
consumption in 2019. We expect another four percent in 2020 which
will bring the cumulative reduction in fuel consumption per ALBD to
35 percent since 2007.
-- In 2019 we delivered AIDAnova, the first cruise ship with the
ability to be solely powered by LNG, the most environmentally
friendly fossil fuel. We have 10 more next generation LNG cruise
ships on order, including Carnival Cruise Line's Mardi Gras, Costa
Smeralda and P&O Cruises' Iona, entering the fleet during
2020.
-- We announced a ground breaking pilot on AIDAPerla, the first
lithium-ion battery storage system to power a cruise ship's
propulsion and operation for limited periods of time. Also, as
early as 2021, AIDA Cruises will be the world's first cruise
company to test the use of fuel cells on a large passenger ship.
The fuel cells will be powered by hydrogen derived from
methanol.
These will compliment other industry leading technologies we
have already deployed to reduce carbon emissions including cold
ironing (or shore power), which we have the capability for on over
40 percent of our fleet, and Advanced Air Quality Systems deployed
on nearly 80 percent of our fleet. The investments we have made in
Advanced Air Quality Systems will also help to mitigate increased
costs in the wake of IMO 2020.
We are also focused on other areas concerning the environment
including the roll out of additional Advanced Waste Water
Purification Systems and food bio-digesters. We have also made
considerable progress on our goal to significantly reduce single
use plastics. In addition, we joined the Getting to Zero Coalition,
an alliance of organizations across the maritime, energy,
infrastructure and finance sectors committed to accelerating the
decarbonization of the international shipping industry.
Sustainability efforts remain at the forefront of our strategic
goals.
We are continuing to work to improve our performance in fiscal
2020 and beyond. With annual cash from operations of $5.5 billion,
our balance sheet is strong, as are our brands. We continue to
generate value for our shareholders, returning over $2.0 billion
during 2019, $1.4 billion through our quarterly dividend and
approximately $600 million through our share repurchase program.
Although there are multiple external impacts outside of our
control, we are aggressively managing those levers we do control or
can strongly influence which include demand, supply and controlling
costs. We are investing to stimulate demand through advertising,
marketing and public relations efforts to maintain price
discipline. We are working to moderate capacity additions and at
the same time accelerate capacity leaving the fleet. We are
leveraging our scale to achieve efficiencies and to fund
investments without a significant net increase in costs. In the
best interest of long-term shareholders, we are making disciplined
decisions to optimize our performance in the short-term while
leaving us best positioned to capture the full benefit of global
travel and tourism growth over the long-term.
New Accounting Pronouncements
Refer to our consolidated financial statements for further
information on Accounting Pronouncements.
Critical Accounting Estimates
Our critical accounting estimates are those we believe require
our most significant judgments about the effect of matters that are
inherently uncertain. A discussion of our critical accounting
estimates, the underlying judgments and uncertainties used to make
them and the likelihood that materially different estimates would
be reported under different conditions or using different
assumptions is as follows:
Ship Accounting
We make several critical accounting estimates with respect to
our ship accounting.
We account for ship improvement costs, including replacements of
certain significant components and parts, by capitalizing those
costs we believe add value to our ships and have a useful life
greater than one year and depreciating those improvements over
their estimated remaining useful life. The costs of repairs and
maintenance, including minor improvement costs and expenses related
to dry-docks, are charged to expense as incurred. If we change our
assumptions in making our determinations as to whether improvements
to a ship add value, the amounts we expense each year as repair and
maintenance expense could increase, which would be partially offset
by a decrease in depreciation expense, resulting from a reduction
in capitalized costs.
In order to compute our ships' depreciation expense, we estimate
their useful lives as well as their residual values. We estimate
the useful life of our ships and ship improvements based on the
expected period over which the assets will be of economic benefit
to us, including the impact of marketing and technical
obsolescence, competition, physical deterioration, historical
useful lives of similarly-built ships, regulatory constraints and
maintenance requirements. In addition, we consider estimates of the
weighted-average useful lives of the ships' major component
systems, such as the hull, cabins, main electric, superstructure
and engines. Taking all of this into consideration, we have
estimated our new ships' useful lives at 30 years.
We determine the residual value of our ships based on our
long-term estimates of their resale value at the end of their
useful life to us but before the end of their physical and economic
lives to others, historical resale values of our and other cruise
ships and viability of the secondary cruise ship market. We have
estimated our residual values at 15% of our original ship cost.
Given the large size and complexity of our ships, ship
accounting estimates require considerable judgment and are
inherently uncertain. We do not have cost segregation studies
performed to specifically componentize our ships. In addition,
since we do not separately componentize our ships, we do not
identify and track depreciation of original ship components.
Therefore, we typically have to estimate the net book value of
components that are retired, based primarily upon their replacement
cost, their age and their original estimated useful lives.
If materially different conditions existed, or if we materially
changed our assumptions of ship useful lives and residual values,
our depreciation expense, loss on retirement of ship components and
net book value of our ships would be materially different. Our 2019
ship depreciation expense would have increased by approximately $44
million assuming we had reduced our estimated 30-year ship useful
life estimate by one year at the time we took delivery or acquired
each of our ships. In addition, our 2019 ship depreciation expense
would have increased by approximately $228 million assuming we had
estimated our ships to have no residual value.
We believe that the estimates we made for ship accounting
purposes are reasonable and our methods are consistently applied in
all material respects and result in depreciation expense that is
based on a rational and systematic method to equitably allocate the
costs of our ships to the periods during which we use them.
Valuation of Ships
Impairment reviews of our ships require us to make significant
estimates.
We evaluate ship asset impairments at the individual ship level
which is the lowest level for which identifiable cash flows are
largely independent of the cash flows of other assets and
liabilities. We review our ships for impairment whenever events or
circumstances indicate that the carrying value of a ship may not be
recoverable. If estimated future cash flows are less than the
carrying value of a ship, an impairment charge is recognized to the
extent its carrying value exceeds fair value.
The estimation of a ship's fair value includes numerous
assumptions that are subject to various risks and uncertainties.
The principal assumptions used in our ship impairment reviews
consist of:
-- Changes in strategy, including decisions about itineraries
and the transfer of ships between brands
-- Forecasted future operating results, including net revenue yields and fuel expenses
-- Estimated ship sale timing and proceeds
Refer to our consolidated financial statements for additional
discussion of our property and equipment policy and ship impairment
reviews.
We believe that we have made reasonable estimates and
judgments.
Valuation of Goodwill
Impairment reviews of our goodwill require us to make
significant estimates.
We review our goodwill for impairment at the reporting unit
level as of July 31 every year, or more frequently if events or
circumstances dictate. If the estimated fair value of any of our
reporting units is less than the reporting unit's carrying value,
goodwill is written down based on the difference between the
reporting unit's carrying amount and its estimated fair value,
limited to the amount of goodwill allocated to the reporting
unit.
The estimation of our reporting unit fair value includes
numerous assumptions that are subject to various risks and
uncertainties. The principal assumptions used in our goodwill
impairment reviews consist of:
-- Changes in conditions or strategy, including decisions about
the allocation of new ships amongst brands and transfer of ships
between brands
-- Forecasted future operating results, including net revenue yields and fuel expenses
-- Weighted-average cost of capital of market participants,
adjusted for the risk attributable to the geographic regions in
which these cruise brands operate
Refer to our consolidated financial statements for additional
discussion of our goodwill accounting policy and impairment
reviews.
We believe that we have made reasonable estimates and
judgments.
Contingencies
We periodically assess the potential liabilities related to any
lawsuits or claims brought against us, as well as for other known
unasserted claims, including environmental, legal, regulatory and
guest and crew matters. While it is typically very difficult to
determine the timing and ultimate outcome of these matters, we use
our best judgment to determine the appropriate amounts to record in
our consolidated financial statements.
We accrue a liability and establish a reserve when we believe a
loss is probable and the amount of the loss can be reasonably
estimated. In assessing probable losses, we make estimates of the
amount of probable insurance recoveries, if any, which are recorded
as assets where appropriate. Such accruals and reserves are
typically based on developments to date, management's estimates of
the outcomes of these matters, our experience in contesting,
litigating and settling other similar matters, historical claims
experience, actuarially determined estimates of liabilities and any
related insurance coverages.
Given the inherent uncertainty related to the eventual outcome
of these matters and potential insurance recoveries, it is possible
that all or some of these matters may be resolved for amounts
materially different from any provisions or disclosures that we may
have made. In addition, as new information becomes available, we
may need to reassess the amount of asset or liability that needs to
be accrued related to our contingencies. All such changes in our
estimates could materially impact our results of operations and
financial position.
Refer to our consolidated financial statements for additional
discussion of contingencies.
Results of Operations
We earn substantially all of our cruise revenues from the
following:
-- Sales of passenger cruise tickets and, in some cases, the
sale of air and other transportation to and from airports near our
ships' home ports and cancellation fees. We also collect fees,
taxes and other charges from our guests. The cruise ticket price
typically includes the following:
--Accommodations
--Most meals, including snacks at numerous venues
--Access to amenities such as swimming pools, water slides,
water parks, whirlpools, a health club and sun decks
--Supervised youth programs
--Entertainment, such as theatrical and comedy shows, live music
and nightclubs
--Visits to multiple destinations
-- Sales of onboard goods and services not included in the
cruise ticket price. This generally includes the following:
-- Beverage sales -- Internet and communication
services
-- Casino gaming -- Full service spas
-- Shore excursions -- Specialty restaurants
-- Retail sales -- Art sales
-- Photo sales -- Laundry and dry cleaning
services
These goods and services are provided either directly by us or
by independent concessionaires, from which we receive either a
percentage of their revenues or a fee. Concession revenues do not
have direct expenses because the costs and services incurred for
concession revenues are borne by our concessionaires.
We earn our tour and other revenues from our hotel and
transportation operations, long-term leasing of ships and other
revenues.
We incur cruise operating costs and expenses for the
following:
-- The costs of passenger cruise bookings, which include travel
agent commissions, cost of air and other transportation, port fees,
taxes, and charges that directly vary with guest head counts and
credit and debit card fees
-- Onboard and other cruise costs, which include the costs of
beverage sales, costs of shore excursions, costs of retail sales,
communication costs, credit and debit card fees, other onboard
costs, costs of cruise vacation protection programs and pre- and
post-cruise land packages
-- Payroll and related costs, which include the costs of
officers and crew in bridge, engineering and hotel operations.
Substantially all costs associated with our shoreside personnel are
included in selling and administrative expenses
-- Fuel costs, which include fuel delivery costs
-- Food costs, which include both our guest and crew food
costs
-- Other ship operating expenses, which include port costs that
do not vary with guest head counts; repairs and maintenance,
including minor improvements and dry-dock expenses; hotel costs;
entertainment; gains and losses on ship sales; ship impairments;
freight and logistics; insurance premiums and all other ship
operating expenses
We incur tour and other costs and expenses for our hotel and
transportation operations, long-term leasing of ships and other
expenses.
Statistical Information
Years Ended November 30,
2019 2018 2017
--------------- ------------ ------------
ALBDs (in thousands) (a) (b) 87,424 83,872 82,303
Occupancy percentage (c) 106.8% 106.9% 105.9%
Passengers carried (in thousands) 12,866 12,407 12,130
Fuel consumption in metric tons (in thousands) 3,312 3,296 3,286
Fuel consumption in metric tons per thousand
ALBDs 37.9 39.3 39.9
Fuel cost per metric ton consumed $ 472 $ 491 $ 378
Currencies (USD to 1)
AUD $ 0.70 $ 0.75 $ 0.77
CAD $ 0.75 $ 0.78 $ 0.77
EUR $ 1.12 $ 1.18 $ 1.12
GBP $ 1.27 $ 1.34 $ 1.28
RMB $ 0.14 $ 0.15 $ 0.15
(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 2019 compared to 2018, we had a 4.2% capacity increase in
ALBDs comprised of a 1.8% capacity increase in our NAA segment and
a 8.6% capacity increase in our EA segment.
Our NAA segment's capacity increase was caused by:
-- Partial period impact from one Carnival Cruise Line
3,960-passenger capacity ship that entered into service in April
2018
-- Partial period impact from one Seabourn 600-passenger
capacity ship that entered into service in May 2018
-- Partial period impact from one Holland America Line
2,670-passenger capacity ship that entered into service in December
2018
-- Partial period impact from one Princess Cruises
3,660-passenger capacity ship that entered into service in October
2019
These increases were partially offset by:
-- Partial period impact from one P&O Cruises (Australia)
1,680-passenger capacity ship removed in March 2019
-- Partial period impact from one P&O Cruises (Australia)
1,260-passenger capacity ship removed in April 2019
-- Partial period impact from one Holland America Line
840-passenger capacity ship removed in July 2019
Our EA segment's capacity increase was caused by:
-- Partial period impact from one AIDA 5,230-passenger capacity
ship that entered into service in December 2018
-- Partial period impact from one Costa 4,200-passenger capacity
ship that entered into service in March 2019
These increases were partially offset by:
-- Partial period impact from one P&O Cruises (UK)
700-passenger capacity ship removed from service in March 2018
-- Partial period impact from one Costa 1,300-passenger capacity
ship removed from service in April 2018
-- Partial period impact from one P&O Cruises (UK)
1,880-passenger capacity ship removed from service in August
2019
In 2018 compared to 2017, we had a 1.9% capacity increase in
ALBDs comprised of a 2.9% capacity increase in our NAA segment and
a 0.2% capacity increase in our EA segment.
Our NAA segment's capacity increase was caused by:
-- Partial period impact from one Princess Cruises
3,560-passenger capacity ship that entered into service in April
2017
-- Partial period impact from one Carnival Cruise Line
3,960-passenger capacity ship that entered into service in April
2018
-- Partial period impact from one Seabourn 600-passenger
capacity ship that entered into service in May 2018
These increases were partially offset by the partial period
impact from one P&O Cruises (Australia) 1,550-passenger
capacity ship removed from service in April 2017.
Our EA segment's capacity increase was caused by:
-- Partial period impact from one AIDA 3,290-passenger capacity
ship that entered into service in June 2017
This increase was partially offset by:
-- Partial period impact from one P&O Cruises (UK)
700-passenger capacity ship removed from service in March 2018
-- Partial period impact from one Costa 1,300-passenger capacity
ship removed from service in April 2018.
(c) 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.
2019 Compared to 2018
Revenues
Consolidated
Cruise passenger ticket revenues made up 68% of our 2019 total
revenues. Cruise passenger ticket revenues increased by $174
million, or 1.2%, to $14.1 billion in 2019 from $13.9 billion in
2018.
This increase was caused by:
-- $607 million - 4.2% capacity increase in ALBDs
-- $113 million - increase in air transportation revenues
These increases were partially offset by:
-- $305 million - net unfavorable foreign currency translational impact
-- $240 million - decrease in cruise ticket revenues, driven
primarily by sourcing in Continental Europe, our Alaska programs
and net unfavorable foreign currency transactional impact,
partially offset by price improvements in the Caribbean
program.
Onboard and other cruise revenues made up 30% of our 2019 total
revenues. Onboard and other cruise revenues increased by $1.7
billion, or 35%, to $6.3 billion in 2019 from $4.7 billion in
2018.
This increase was caused by:
-- $1.4 billion - related to the gross presentation of shore
excursions and other onboard revenues as a result of the adoption
of new revenue accounting guidance
-- $200 million - 4.2% capacity increase in ALBDs
-- $124 million - higher onboard spending by our guests
These increases were partially offset by net unfavorable foreign
currency translational impact of $89 million.
Tour and other revenues made up 1.9% of our 2019 total revenues.
Tour and other revenues increased by $118 million, or 43%, to $390
million in 2019 from $272 million in 2018.
This increase was driven by the sale of Advanced Air Quality
Systems to third parties, which accounted for $117 million.
Concession revenues, which are included in onboard and other
revenues, increased by $24 million, or 2.1%, to $1.2 billion in
2019 from $1.1 billion in 2018.
NAA Segment
Cruise passenger ticket revenues made up 66% of our NAA
segment's 2019 total revenues. Cruise passenger ticket revenues
increased by $159 million, or 1.8% to $9.0 billion in 2019 from
$8.8 billion in 2018.
This increase was caused by:
-- $152 million - 1.8% capacity increase in ALBDs
-- $57 million - increase in air transportation revenues
These increases were partially offset by net unfavorable foreign
currency translational impact of $20 million.
The remaining 34% of our NAA segment's 2019 total revenues were
comprised of onboard and other cruise revenues, which increased by
$1.2 billion, or 36%, to $4.6 billion in 2019 from $3.4 billion in
2018.
This increase was caused by:
-- $1.1 billion - related to the gross presentation of shore
excursions and other onboard revenues as a result of the adoption
of new revenue accounting guidance
-- $58 million - 1.8% capacity increase in ALBDs
-- $39 million - higher onboard spending by our guests
Concession revenues, which are included in onboard and other
revenues, increased by $14 million, or 1.7%, to $821 million in
2019 from $807 million in 2018.
EA Segment
Cruise passenger ticket revenues made up 78% of our EA segment's
2019 total revenues. Cruise passenger ticket revenues increased by
$68 million, or 1.3%, to $5.2 billion in 2019 from $5.1 billion in
2018.
This increase was caused by:
-- $451 million - 8.6% capacity increase in ALBDs
-- $50 million - increase in air transportation revenues
These increases were partially offset by
-- $285 million - net unfavorable foreign currency translational impact
-- $159 million - decrease in cruise ticket revenues, driven
primarily by sourcing in Continental Europe
The remaining 22% of our EA segment's 2019 total revenues were
comprised of onboard and other cruise revenues, which increased by
$339 million, or 31%, to $1.4 billion in 2019 from $1.1 billion in
2018.
This increase was caused by:
-- $268 million - related to the gross presentation of shore
excursions and other onboard revenues as a result of the adoption
of new revenue accounting guidance
-- $96 million - 8.6% capacity increase in ALBDs
-- $51 million - higher onboard spending by our guests
These increases were partially offset by net unfavorable foreign
currency translational impact of $79 million.
Concession revenues, which are included in onboard and other
revenues, increased by $10 million, or 3.0%, to $337 million in
2019 from $328 million in 2018.
Costs and Expenses
Consolidated
Operating costs and expenses increased by $1.8 billion or 16%,
to $12.9 billion in 2019 from $11.1 billion in 2018.
This increase was caused by:
-- $1.4 billion - related to the gross presentation of shore
excursions and other onboard revenues as a result of the adoption
of new revenue accounting guidance
-- $464 million - 4.2% capacity increase in ALBDs
-- $88 million - increase in tour and other costs
-- $87 million - higher commissions, transportation and other expenses
-- $67 million - increase in various other ship operating costs
-- $35 million - gains on ship sales in 2018, net of gains on ship sales in 2019
These increases were partially offset by:
-- $221 million - net favorable foreign currency translational impact
-- $63 million - lower fuel prices
-- $62 million - improved fuel consumption per ALBD
-- $46 million - lower dry-dock expenses and repair and maintenance expenses
Selling and administrative expenses increased by $30 million, or
1.2%, to $2.5 billion in 2019 compared to $2.5 billion in 2018.
Depreciation and amortization expenses increased by $143
million, or 7.1%, to $2.2 billion in 2019 from $2.0 billion in
2018.
NAA Segment
Operating costs and expenses increased by $1.2 billion, or 17%,
to $8.4 billion in 2019 from $7.2 billion in 2018.
This increase was caused by:
-- $1.1 billion - related to the gross presentation of shore
excursions and other onboard revenues as a result of the adoption
of new revenue accounting guidance
-- $124 million - 1.8% capacity increase in ALBDs
-- $59 million - higher commissions, transportation and other
These increases were partially offset by:
-- $58 million - lower fuel prices
-- $40 million - lower cruise payroll and related expenses
Selling and administrative expenses increased by $24 million, or
1.7%, to $1.4 billion in 2019 compared to $1.4 billion in 2018.
Depreciation and amortization expenses increased by $100
million, or 7.9%, to $1.4 billion in 2019 from $1.3 billion in
2018.
EA Segment
Operating costs and expenses increased by $470 million, or 13%,
to $4.1 billion in 2019 from 3.7 billion in 2018.
This increase was caused by:
-- $307 million - 8.6% capacity increase in ALBDs
-- $268 million - related to the gross presentation of shore
excursions and other onboard revenues as a result of the adoption
of new revenue accounting guidance
-- $46 million - gains on ship sales in 2018, net of gains on ship sales in 2019
-- $39 million - increase in various other ship operating costs
-- $36 million - higher commissions, transportation and other
-- $28 million - higher cruise payroll and related expenses
These increases were partially offset by:
-- $203 million - net favorable foreign currency translational impact
-- $38 million - improved fuel consumption per ALBD
-- $21 million - lower dry-dock expenses and repair and maintenance expenses
Selling and administrative expenses decreased by $7 million, or
1.0%, to $744 million in 2019 from $751 million in 2018.
Depreciation and amortization expenses increased by $34 million,
or 5.5%, to $645 million in 2019 from $611 million in 2018.
Operating Income
Our consolidated operating income decreased by $49 million, or
1.5%, to $3.3 billion in 2019 compared to $3.3 billion in 2018. Our
NAA segment's operating income increased by $62 million, or 2.6%,
to $2.5 billion in 2019 from $2.4 billion in 2018, and our EA
segment's operating income decreased by $90 million, or 7.5%, to
$1.1 billion in 2019 from $1.2 billion in 2018. These changes were
primarily due to the reasons discussed above.
Nonoperating Income (Expense)
Year Ended November
(in millions) 30, 2018
------------------------
Unrealized gains on fuel derivatives, net $ 94
Realized losses on fuel derivatives, net (35)
Gains on fuel derivatives, net $ 59
===== ========== =====
There were no unrealized or realized gains or losses on fuel
derivatives in 2019.
Explanations of Non-GAAP Financial Measures
Non-GAAP Financial Measures
We use net cruise revenues per ALBD ("net revenue yields"), net
cruise costs excluding fuel per ALBD, 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 gross
cruise revenues per ALBD ("gross revenue yields"), gross cruise
costs per ALBD and U.S. GAAP net income and U.S. GAAP earnings per
share.
Net revenue yields and net cruise costs excluding fuel per ALBD
enable us to separate the impact of predictable capacity or ALBD
changes from price and other changes that affect our business. We
believe these non-GAAP measures provide useful information to
investors and expanded insight to measure our revenue and cost
performance as a supplement to our U.S. GAAP consolidated financial
statements.
Under U.S. GAAP, the realized and unrealized gains and losses on
fuel derivatives not qualifying as fuel hedges are recognized
currently in earnings. We believe that unrealized gains and losses
on fuel derivatives are not an indication of our earnings
performance since they relate to future periods and may not
ultimately be realized in our future earnings. Therefore, we
believe it is more meaningful for the unrealized gains and losses
on fuel derivatives to be excluded from our net income and earnings
per share and, accordingly, we present adjusted net income and
adjusted earnings per share excluding these unrealized gains and
losses.
We believe that gains and losses on ship sales, impairment
charges, restructuring and other expenses 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 gains
and losses on ship sales, impairment charges, and restructuring and
other non-core gains and charges to be excluded from our net income
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.
Net revenue yields are commonly used in the cruise industry to
measure a company's cruise segment revenue performance and for
revenue management purposes. We use "net cruise revenues" rather
than "gross cruise revenues" to calculate net revenue yields. We
believe that net cruise revenues is a more meaningful measure in
determining revenue yield than gross cruise revenues because it
reflects the cruise revenues earned net of our most significant
variable costs, which are travel agent commissions, cost of air and
other transportation, certain other costs that are directly
associated with onboard and other revenues and credit and debit
card fees.
Net passenger ticket revenues reflect gross passenger ticket
revenues, net of commissions, transportation and other costs.
Net onboard and other revenues reflect gross onboard and other
revenues, net of onboard and other cruise costs.
Net cruise costs excluding fuel per ALBD is the measure we use
to monitor our ability to control our cruise segments' costs rather
than gross cruise costs per ALBD. We exclude the same variable
costs that are included in the calculation of net cruise revenues
as well as fuel expense to calculate net cruise costs without fuel
to avoid duplicating these variable costs in our non-GAAP financial
measures. Substantially all of our net cruise costs excluding fuel
are largely fixed, except for the impact of changing prices once
the number of ALBDs has been determined.
Reconciliation of Forecasted Data
We have not provided a reconciliation of forecasted gross cruise
revenues to forecasted net cruise revenues or forecasted gross
cruise costs to forecasted net cruise costs without fuel or
forecasted U.S. GAAP net income to forecasted adjusted net income
or forecasted U.S. GAAP earnings per share to forecasted adjusted
earnings per share because preparation of meaningful U.S. GAAP
forecasts of gross cruise revenues, gross cruise costs, net income
and earnings per share would require unreasonable effort. We are
unable to predict, without unreasonable effort, the future movement
of foreign exchange rates and fuel prices. We are unable to
determine the future impact of gains or losses on ships sales,
restructuring expenses and other non-core gains and charges.
Constant Dollar and Constant Currency
Our operations primarily utilize the U.S. dollar, Australian
dollar, euro and sterling as functional currencies to measure
results and financial condition. Functional currencies other than
the U.S. dollar subject us to foreign currency translational risk.
Our operations also have revenues and expenses that are in
currencies other than their functional currency, which subject us
to foreign currency transactional risk.
We report net revenue yields, net passenger revenue yields, net
onboard and other revenue yields and net cruise costs excluding
fuel per ALBD on a "constant dollar" and "constant currency" basis
assuming the 2019 and 2018 periods' currency exchange rates have
remained constant with the 2018 and 2017 periods' rates. These
metrics facilitate a comparative view for the changes in our
business in an environment with fluctuating exchange rates.
Constant dollar reporting removes only the impact of changes in
exchange rates on the translation of our operations.
Constant currency reporting removes the impact of changes in
exchange rates on the translation of our operations (as in constant
dollar) plus the transactional impact of changes in exchange rates
from revenues and expenses that are denominated in a currency other
than the functional currency.
Examples:
-- The translation of our operations with functional currencies
other than U.S. dollar to our U.S. dollar reporting currency
results in decreases in reported U.S. dollar revenues and expenses
if the U.S. dollar strengthens against these foreign currencies and
increases in reported U.S. dollar revenues and expenses if the U.S.
dollar weakens against these foreign currencies.
-- Our operations have revenue and expense transactions in
currencies other than their functional currency. If their
functional currency strengthens against these other currencies, it
reduces the functional currency revenues and expenses. If the
functional currency weakens against these other currencies, it
increases the functional currency revenues and expenses.
Consolidated gross and net revenue yields were computed by
dividing the gross and net cruise revenues by ALBDs as follows:
Years Ended November 30,
(dollars in millions,
except 2019 Constant 2018 Constant
yields) 2019 Dollar 2018 Dollar 2017
---------------- ---------------- ---------------- ---------------- ---------------
Passenger ticket
revenues $ 14,104 $ 14,409 $ 13,930 $ 13,684 $ 12,944
Onboard and other
revenues 6,331 6,420 4,679 4,627 4,330
Gross cruise revenues 20,435 20,828 18,609 18,311 17,274
Less cruise costs
Commissions,
transportation
and other (2,720) (2,786) (2,590) (2,526) (2,359)
Onboard and other (2,101) (2,128) (638) (630) (587)
------------ ------------
(4,822) (4,914) (3,228) (3,156) (2,946)
------------ ------------ ------------ ------------ ------------
Net passenger ticket
revenues 11,384 11,623 11,340 11,158 10,585
Net onboard and other
revenues 4,230 4,292 4,041 3,997 3,744
Net cruise revenues $ 15,613 $ 15,915 $ 15,381 $ 15,155 $ 14,329
======== ======== ======== ======== ========
ALBDs 87,424,190 87,424,190 83,872,441 83,872,441 82,302,887
------------ ------------ ------------ ------------ ------------
Gross revenue yields $ 233.74 $ 238.25 $ 221.87 $ 218.32 $ 209.88
% increase (decrease) 5.4% 7.4% 5.7% 4.0%
Net revenue yields $ 178.59 $ 182.04 $ 183.38 $ 180.69 $ 174.10
% increase (decrease) (2.6)% (0.7)% 5.3% 3.8%
Net passenger ticket
revenue
yields $ 130.21 $ 132.95 $ 135.21 $ 133.03 $ 128.62
% increase
(decrease) (3.7)% (1.7)% 5.1% 3.4%
Net onboard and
other revenue
yields $ 48.38 $ 49.09 $ 48.17 $ 47.65 $ 45.48
% increase
(decrease) 0.4% 1.9% 5.9% 4.8%
----------------------- ------------ ------------ ------------ ------------ ---------------
Years Ended November 30,
(dollars in millions,
except 2019 Constant 2018 Constant
yields) 2019 Currency 2018 Currency 2017
---------------- ---------------- ---------------- ---------------- --------------
Net passenger ticket
revenues $ 11,384 $ 11,702 $ 11,340 $ 11,137 $ 10,585
Net onboard and other
revenues 4,230 4,294 4,041 4,008 3,744
------------ ------------
Net cruise revenues $ 15,613 $ 15,996 $ 15,381 $ 15,145 $ 14,329
======== ======== ======== ======== ========
ALBDs 87,424,190 87,424,190 83,872,441 83,872,441 82,302,887
------------ ------------ ------------ ------------ ------------
Net revenue yields $ 178.59 $ 182.98 $ 183.38 $ 180.57 $ 174.10
% increase (decrease) (2.6)% (0.2)% 5.3% 3.7%
Net passenger ticket
revenue
yields $ 130.21 $ 133.86 $ 135.21 $ 132.79 $ 128.62
% increase
(decrease) (3.7)% (1.0)% 5.1% 3.2%
Net onboard and
other revenue
yields $ 48.38 $ 49.12 $ 48.17 $ 47.78 $ 45.48
% increase
(decrease) 0.4% 2.0% 5.9% 5.1%
----------------------- ------------ ------------ ------------ ------------ --------------
Consolidated gross and net cruise costs and net cruise costs
excluding fuel per ALBD were computed by dividing the gross and net
cruise costs and net cruise costs excluding fuel by ALBDs as
follows:
Years Ended November 30,
(dollars in millions,
except 2019 Constant 2018 Constant
costs per ALBD) 2019 Dollar 2018 Dollar 2017
---------------- ---------------- ---------------- ---------------- ---------------
Cruise operating
expenses $ 12,641 $ 12,862 $ 10,910 $ 10,740 $ 10,338
Cruise selling and
administrative
expenses 2,452 2,496 2,422 2,385 2,250
------------ ------------ ------------ ------------ ------------
Gross cruise costs 15,093 15,359 13,332 13,125 12,588
Less cruise costs
included
above
Commissions,
transportation
and other (2,720) (2,786) (2,590) (2,526) (2,359)
Onboard and other (2,101) (2,128) (638) (630) (587)
Gains (losses) on
ship sales
and impairments 16 17 38 34 (298)
Restructuring
expenses (10) (10) (1) (1) (3)
Other (43) (43) (2) (2) -
------------ ------------ ------------ ------------ ------------
Net cruise costs 10,234 10,409 10,139 10,000 9,341
Less fuel (1,562) (1,562) (1,619) (1,619) (1,244)
------------ ------------ ------------ ------------ ------------
Net cruise costs
excluding
fuel $ 8,672 $ 8,847 $ 8,521 $ 8,382 $ 8,097
======== ======== ======== ======== ========
ALBDs 87,424,190 87,424,190 83,872,441 83,872,441 82,302,887
------------ ------------ ------------ ------------ ------------
Gross cruise costs per
ALBD $ 172.64 $ 175.68 $ 158.96 $ 156.49 $ 152.94
% increase (decrease) 8.6% 10.5% 3.9% 2.3%
Net cruise costs
excluding
fuel per ALBD $ 99.20 $ 101.20 $ 101.59 $ 99.93 $ 98.37
% increase (decrease) (2.4)% (0.4)% 3.3% 1.6%
----------------------- ------------ ------------ ------------ ------------ ---------------
Years Ended November 30,
(dollars in millions,
except 2019 Constant 2018 Constant
costs per ALBD) 2019 Currency 2018 Currency 2017
---------------- ----------------- ---------------- ---------------- --------------
Net cruise costs
excluding
fuel $ 8,672 $ 8,858 $ 8,521 $ 8,385 $ 8,097
=== ======= === ======== ======== === ======= === =======
ALBDs 87,424,190 87,424,190 83,872,441 83,872,441 82,302,887
------------ ------------- ------------ ------------ ------------
Net cruise costs
excluding
fuel per ALBD $ 99.20 $ 101.32 $ 101.59 $ 99.98 $ 98.37
% increase (decrease) (2.4)% (0.3)% 3.3% 1.6%
----------------------- ------------ ------------- ------------ ------------ --------------
Years Ended November 30,
(dollars in millions, except per share data) 2019 2018 2017
-------------- ---------- ---------
Net income
U.S. GAAP net income $ 2,990 $ 3,152 $2,606
Unrealized (gains) losses on fuel derivatives,
net - (94) (227)
(Gains) losses on ship sales and impairments (6) (38) 387
Restructuring expenses 10 1 3
Other 47 8 -
---------- --------- ------
Adjusted net income $ 3,041 $ 3,029 $2,770
====== ===== =====
Weighted-average shares outstanding 692 710 725
---------- --------- ------
Earnings per share
U.S. GAAP earnings per share $ 4.32 $ 4.44 $ 3.59
Unrealized (gains) losses on fuel derivatives,
net - (0.13) (0.31)
(Gains) losses on ship sales and impairments (0.01) (0.05) 0.53
Restructuring expenses 0.01 - -
Other 0.07 0.01 -
Adjusted earnings per share $ 4.40 $ 4.26 $ 3.82
====== ===== =====
Net cruise revenues increased by $232 million, or 1.5%, to $15.6
billion in 2019 from $15.4 billion in 2018.
The increase was caused by a 4.2% capacity increase in ALBDs of
$668 million.
This increase was partially offset by:
-- $383 million - foreign currency impacts (including both
foreign currency translational and transactional impacts)
-- $52 million - 0.2% decrease in constant currency net revenue yields
The 0.2% decrease in net revenue yields on a constant currency
basis was due to a 1.0% decrease in net passenger ticket revenue
yields partially offset by a 2.0% increase in net onboard and other
revenue yields.
The 1.0% decrease in net passenger ticket revenue yields was
driven by sourcing in Continental Europe and our Alaska programs,
partially offset by price improvements in the Caribbean program.
This 1.0% decrease in net passenger ticket revenue yields was
comprised of a 0.7% increase from our NAA segment and a 2.7%
decrease from our EA segment.
The 2.0% increase in net onboard and other revenue yields was
comprised of a 1.0% increase from our NAA segment and a 3.1%
increase from our EA segment.
Net cruise costs excluding fuel increased by $151 million, or
1.8%, to $8.7 billion in 2019 from $8.5 billion in 2018.
The increase was caused by a 4.2% capacity increase in ALBDs of
$359 million.
This increase was partially offset by:
-- $186 million - foreign currency impacts (including both
foreign currency translational and transactional impacts)
-- $22 million - 0.3% decrease in constant currency net cruise costs excluding fuel
Fuel costs decreased by $57 million, or 3.5%, to $1.6 billion in
2019 compared to $1.6 billion in 2018.
This decrease was caused by:
-- $63 million - lower fuel prices
-- $62 million - lower fuel consumption per ALBD
These decreases were partially offset by a 4.2% capacity
increase in ALBDs of $68 million.
2018 Compared to 2017
Revenues
Consolidated
Cruise passenger ticket revenues made up 74% of our 2018 total
revenues. Cruise passenger ticket revenues increased by $986
million, or 7.6%, to $13.9 billion in 2018 from $12.9 billion in
2017.
This increase was caused by:
-- $264 million - increase in cruise ticket revenues, driven
primarily by price improvements in our European, Australian, China
and various other programs and net favorable foreign currency
transactional impacts
-- $247 million - 1.9% capacity increase in ALBDs
-- $246 million - foreign currency translational impact from a
weaker U.S. dollar against the functional currencies of our foreign
operations ("foreign currency translational impact")
-- $119 million - increase in occupancy
-- $81 million - increase in air transportation revenues
-- $29 million - increase in other passenger revenue
Onboard and other cruise revenues made up 25% of our 2018 total
revenues. Onboard and other cruise revenues increased by $349
million, or 8.1%, to $4.7 billion in 2018 from $4.3 billion in
2017.
This increase was caused by:
-- $132 million - higher onboard spending by our guests
-- $83 million - 1.9% capacity increase in ALBDs
-- $52 million - foreign currency translational impact
-- $42 million - increase in other revenues
-- $40 million - increase in occupancy
Tour and other revenues made up 1.4% of our 2018 total revenues.
Tour and other revenues increased by $36 million, or 15%, to $272
million in 2018 from $236 million in 2017.
Concession revenues, which are included in onboard and other
revenues, increased by $83 million, or 7.9%, to $1.1 billion in
2018 from $1.1 billion in 2017.
NAA Segment
Cruise passenger ticket revenues made up 72% of our NAA
segment's 2018 total revenues. Cruise passenger ticket revenues
increased by $562 million, or 6.8% to $8.8 billion in 2018 from
$8.3 billion in 2017.
This increase was driven by:
-- $239 million - 2.9% capacity increase in ALBDs
-- $229 million - increase in cruise ticket revenues, driven
primarily by price improvements in the European, Australian and
China programs and net favorable foreign currency transactional
impacts
-- $70 million - increase in air transportation revenues
-- $21 million - increase in occupancy
The remaining 28% of our NAA segment's 2018 total revenues were
comprised of onboard and other cruise revenues, which increased by
$232 million, or 7.3%, to $3.4 billion in 2018 from $3.2 billion in
2017.
This increase was driven by:
-- $100 million - higher onboard spending by our guests
-- $92 million - 2.9% capacity increase in ALBDs
-- $35 million - increase in other revenues
Concession revenues, which are included in onboard and other
revenues, increased by $57 million, or 7.5%, to $807 million in
2018 from $751 million in 2017.
EA Segment
Cruise passenger ticket revenues made up 82% of our EA segment's
2018 total revenues. Cruise passenger ticket revenues increased by
$442 million, or 9.4%, to $5.1 billion in 2018 from $4.7 billion in
2017.
This increase was driven by:
-- $251 million - foreign currency translational impact
-- $96 million - increase in occupancy
-- $69 million - increase in cruise ticket revenues, driven
primarily by price improvements in the European, China and various
other programs, partially offset by decrease in the Caribbean
programs and net unfavorable foreign currency transactional
impacts
The remaining 18% of our EA segment's 2018 total revenues were
comprised of onboard and other cruise revenues, which increased by
$98 million, or 9.7%, to $1.1 billion in 2018 from $1.0 billion in
2017.
This increase was driven by:
-- $55 million - foreign currency translational impact
-- $21 million - increase in occupancy
Concession revenues, which are included in onboard and other
revenues, increased by $26 million, or 8.7%, to $328 million in
2018 from $301 million in 2017.
Costs and Expenses
Consolidated
Operating costs and expenses increased by $588 million or 5.6%,
to $11.1 billion in 2018 from $10.5 billion in 2017.
This increase was caused by:
-- $371 million - higher fuel prices
-- $197 million - 1.9% capacity increase in ALBDs
-- $169 million - foreign currency translational impact
-- $100 million - higher commissions, transportation and other expenses
-- $37 million - increase in occupancy
-- $27 million - higher onboard and other expenses
-- $21 million - higher dry-dock expenses and repair and maintenance expenses
These increases were partially offset by:
-- $304 million - ship impairments in 2017
-- $51 million - gains on ship sales in 2018
-- $20 million - improved fuel consumption
Selling and administrative expenses increased by $185 million,
or 8.2%, to $2.5 billion in 2018 from $2.3 billion in 2017.
Depreciation and amortization expenses increased by $171
million, or 9.3%, to $2.0 billion in 2018 from $1.8 billion in
2017.
Goodwill and trademark impairment charges of $89 million include
a goodwill impairment charge of $38 million and a trademark
impairment charge of $50 million during 2017.
NAA Segment
Operating costs and expenses increased by $476 million, or 7.1%,
to $7.2 billion in 2018 from $6.7 billion in 2017.
This increase was caused by:
-- $253 million - higher fuel prices
-- $194 million - 2.9% capacity increase in ALBDs
-- $102 million - higher commissions, transportation and other
-- $31 million - higher dry-dock expenses and repair and maintenance expenses
-- $30 million - higher port expenses
-- $24 million - higher cruise payroll and related expenses
-- $24 million - higher onboard and other expenses
These increases were partially offset by impairment of ships of
$162 million recorded in 2017.
Selling and administrative expenses increased by $66 million, or
4.9%, to $1.4 billion in 2018 from $1.3 billion in 2017.
Depreciation and amortization expenses increased by $70 million,
or 5.8%, to $1.3 billion in 2018 from $1.2 billion in 2017.
Goodwill and trademark impairment charges of $89 million include
a goodwill impairment charge of $38 million and a trademark
impairment charge of $50 million during 2017.
EA Segment
Operating costs and expenses increased by $108 million, or 3.0%,
to $3.7 billion in 2018 from 3.6 billion in 2017.
This increase was caused by:
-- $174 million - foreign currency translational impact
-- $117 million - higher fuel prices
-- $29 million - increase in occupancy
These increases were partially offset by:
-- $141 million - ship impairments in 2017
-- $39 million - gains on ship sales in 2018
-- $21 million - lower cruise payroll and related expenses
Selling and administrative expenses increased by $84 million, or
13%, to $751 million in 2018 from $667 million in 2017.
This increase was driven by:
-- $39 million - foreign currency translational impact
-- $27 million - higher administrative expenses
Depreciation and amortization expenses increased by $50 million,
or 9.0%, to $611 million in 2018 from $561 million in 2017.
Operating Income
Our consolidated operating income increased by $516 million, or
18%, to $3.3 billion in 2018 from $2.8 billion in 2017. Our NAA
segment's operating income increased by $272 million, or 13%, to
$2.4 billion in 2018 from $2.1 billion in 2017, and our EA
segment's operating income increased by $298 million, or 33%, to
$1.2 billion in 2018 from $0.9 billion in 2017. These changes were
primarily due to the reasons discussed above.
Nonoperating Income (Expense)
Years Ended November
30,
(in millions) 2018 2017
--------------- --------------
Unrealized gains on fuel derivatives $ 94 $ 227
Realized losses on fuel derivatives, net (35) (192)
Gains on fuel derivatives, net $ 59 $ 35
===== ==== ======
Non-GAAP Financial Measures
Net cruise revenues increased by $1.1 billion, or 7.3%, to $15.4
billion in 2018 from $14.3 billion in 2017.
The increase was caused by:
-- $545 million - 3.7% increase in constant currency net revenue yields
-- $271 million - 1.9% capacity increase in ALBDs
-- $236 million - foreign currency impacts (including both
foreign currency translational and transactional impacts)
The 3.7% increase in net revenue yields on a constant currency
basis was due to a 3.2% increase in net passenger ticket revenue
yields and a 5.1% increase in net onboard and other revenue
yields.
The 3.2% increase in net passenger ticket revenue yields was
driven primarily by price improvements in our European, Australian,
China and various other programs. This 3.2% increase in net
passenger ticket revenue yields was comprised of a 2.4% increase
from our NAA segment and a 4.8% increase from our EA segment.
The 5.1% increase in net onboard and other revenue yields was
caused by similar increases in our NAA and EA segments.
Net cruise costs excluding fuel increased by $425 million, or
5.2%, to $8.5 billion in 2018 from $8.1 billion in 2017.
The increase was caused by:
-- $155 million - 1.9% capacity increase in ALBDs
-- $135 million - foreign currency impacts (including both
foreign currency translational and transactional impacts)
-- $134 million - 1.6% increase in constant currency net cruise costs excluding fuel
Fuel costs increased by $374 million, or 30%, to $1.6 billion in
2018 from $1.2 billion in 2017. This was driven by higher fuel
prices, which accounted for $370 million.
Liquidity, Financial Condition and Capital Resources
Our primary financial goals are to profitably grow our cruise
business and grow ROIC over time, while maintaining a strong
balance sheet and investment grade credit ratings. (We define ROIC
as the twelve-month adjusted earnings before interest divided by
the monthly average of debt plus equity minus
construction-in-progress.) Our ability to generate significant
operating cash flow allows us to internally fund our capital
improvements, debt maturities and dividend payments. We have $9.5
billion of committed export credit facilities available to fund the
vast majority of our new ship growth capital. Other objectives of
our capital structure policy are to maintain a sufficient level of
liquidity through our available cash and cash equivalents and
committed financings for immediate and future liquidity needs and
to maintain a reasonable debt maturity profile.
Based on our historical results, projections and financial
condition, we believe that our future operating cash flows and
liquidity will be sufficient to fund all of our expected capital
improvements, new ship growth capital, debt maturities and dividend
payments over the next several years. We believe that our ability
to generate significant operating cash flows and our strong balance
sheet, as evidenced by our strong investment grade credit ratings,
provide us with the ability, in most financial credit market
environments, to obtain debt financing.
We had a working capital deficit of $7.1 billion as of November
30, 2019 compared to a working capital deficit of $7.0 billion as
of November 30, 2018. The increase in working capital deficit was
caused by a decrease in cash and cash equivalents and an increase
in customer deposits partially offset by a decrease in short-term
debt. We operate with a substantial working capital deficit. This
deficit is mainly attributable to the fact that, under our business
model, substantially all of our passenger ticket receipts are
collected in advance of the applicable sailing date. These advance
passenger receipts remain a current liability 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 deficit are $4.7 billion and
$4.4 billion of customer deposits as of November 30, 2019 and 2018,
respectively. In addition, we have a relatively low-level of
accounts receivable and limited investment in inventories. We
generate substantial cash flows from operations and our business
model has historically allowed us to maintain this working capital
deficit and still meet our operating, investing and financing
needs. We expect that we will continue to have working
capital deficits in the future.
Sources and Uses of Cash
Operating Activities
Our business provided $5.5 billion of net cash from operations
during 2019, a decrease of $73 million, or (1.3)%, compared to $5.5
billion in 2018. This decrease was driven by a lower year over year
growth in customer deposits. During 2018, our business provided
$5.5 billion of net cash from operations, an increase of $227
million, or 4.3%, compared to $5.3 billion in 2017. This increase
was driven by an increase in customer deposits.
Investing Activities
During 2019, net cash used in investing activities was $5.3
billion. This was caused by:
-- Capital expenditures of $3.8 billion for our ongoing new shipbuilding program
-- Capital expenditures of $1.7 billion for ship improvements
and replacements, information technology and buildings and
improvements
-- Proceeds from sales of ships of $26 million
During 2018, net cash used in investing activities was $3.5
billion. This was caused by:
-- Capital expenditures of $2.1 billion for our ongoing new shipbuilding program
-- Capital expenditures of $1.7 billion for ship improvements
and replacements, information technology and buildings and
improvements
-- Proceeds from sales of ships of $389 million
-- Purchase of minority interest of $135 million
-- Payments of $39 million of fuel derivative settlements
During 2017, net cash used in investing activities was $3.1
billion. This was caused by:
-- Capital expenditures of $1.4 billion for our ongoing new shipbuilding program
-- Capital expenditures of $1.5 billion for ship improvements
and replacements, information technology and buildings and
improvements
-- Payments of $203 million of fuel derivative settlements
Financing Activities
During 2019, net cash used in financing activities of $655
million was substantially all due to the following:
-- Net repayments from short-term borrowings of $605 million in
connection with our availability of, and needs for, cash at various
times throughout the period
-- Repayments of $1.7 billion of long-term debt
-- Issuances of $3.7 billion of long-term debt
-- Payments of cash dividends of $1.4 billion
-- Purchases of $603 million of Carnival Corporation common
stock and Carnival plc ordinary shares in open market transactions
under our Repurchase Program
During 2018, net cash used in financing activities of $1.5
billion was substantially all due to the following:
-- Net proceeds of short-term borrowings of $417 million in
connection with our availability of, and needs for, cash at various
times throughout the period
-- Repayments of $1.6 billion of long-term debt
-- Issuances of $2.5 billion of long-term debt
-- Payments of cash dividends of $1.4 billion
-- Purchases of $1.5 billion of Carnival Corporation common
stock and Carnival plc ordinary shares in open market transactions
under our Repurchase Program
During 2017, net cash used in financing activities of $2.5
billion was substantially all due to the following:
-- Net repayments from short-term borrowings of $29 million in
connection with our availability of, and needs for, cash at various
times throughout the period
-- Repayments of $1.2 billion of long-term debt
-- Issuances of $100 million of long-term debt under a term loan
-- Proceeds of $367 million of long-term debt under an export credit facility
-- Payments of cash dividends of $1.1 billion
-- Purchases of $552 million of Carnival Corporation common
stock and Carnival plc ordinary shares in open market transactions
under our Repurchase Program
Future Commitments
Payments Due by
(in millions) 2020 2021 2022 2023 2024 Thereafter Total
------ ------ ------ ------ ------ ------------- ---------
Debt (a) $2,065 $2,102 $1,518 $2,370 $ 791 $ 3,950 $12,796
Other long-term
liabilities
reflected on
the balance
sheet (b) - 124 82 61 93 234 594
New ship growth
capital 4,811 3,622 3,035 2,011 49 1,003 14,531
Port facilities
leases 145 140 121 137 131 1,218 1,892
Other operating
leases 74 56 40 36 36 190 432
Other long-term
commitments 267 202 75 22 15 25 607
Short-term
purchase
obligations 403 - - - - - 403
------
Total
Contractual
Cash
Obligations $7,765 $6,246 $4,873 $4,637 $1,116 $ 6,620 $31,256
===== ===== ===== ===== ===== ========= ======
(a) Includes principal as well as estimated interest payments.
(b) Represents cash outflows for certain of our long-term
liabilities which can be reasonably estimated. The primary outflows
are for estimates of our compensation plans' obligations, crew and
guest claims and certain deferred income taxes. Customer deposits
and certain other deferred income taxes have been excluded from the
table because they do not require a cash settlement in the
future.
Capital Expenditure and Capacity Forecast
Our annual capital expenditure forecast consists of contracted
new ship growth capital, estimated payments for planned new ship
growth capital and capital improvements.
(in billions) 2020 2021 2022
------- ------- ---------
Annual capital expenditure forecast $ 7.0 $ 5.7 $ 5.2
Our annual capacity forecast consists of contracted new ships
and announced dispositions.
2020 2021 2022
------- ------- -------
Annual capacity forecast 6.6% 4.9% 5.2%
Share Repurchase Program
Under a share repurchase program effective 2004, we are
authorized to repurchase Carnival Corporation common stock and
Carnival plc ordinary shares (the "Repurchase Program"). Effective
August 27, 2018, the company approved modifications of the general
authorization under the Repurchase Program, which replenished the
remaining authorized repurchases at the time of the approvals to
$1.0 billion. The Repurchase Program does not have an expiration
date and may be discontinued by our Boards of Directors at any
time.
Funding Sources
At November 30, 2019, we had liquidity of $12.5 billion. Our
liquidity consisted of $182 million of cash and cash equivalents,
which excludes $336 million of cash used for current operations,
$2.8 billion available for borrowing under our revolving credit
facility, net of our outstanding commercial paper borrowing, and
$9.5 billion under our committed future financings, which are
comprised of ship export credit facilities. These commitments are
from numerous large and well-established banks and export credit
agencies, which we believe will honor their contractual agreements
with us.
(in billions) 2020 2021 2022 2023
------- ------- -------
Availability of committed future financing
at November 30, 2019 $ 3.6 $ 2.7 $ 2.3 $ 0.9
At November 30, 2019, our revolving credit facility is scheduled
to mature in 2024.
Substantially all of our debt agreements contain financial
covenants as described in the consolidated financial statements. At
November 30, 2019, we were in compliance with our debt covenants.
In addition, based on, among other things, our forecasted operating
results, financial condition and cash flows, we expect to be in
compliance with our debt covenants for the foreseeable future.
Generally, if an event of default under any debt agreement occurs,
then pursuant to cross default acceleration clauses, substantially
all of our outstanding debt and derivative contract payables could
become due, and all debt and derivative contracts could be
terminated.
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.
Quantitative and Qualitative Disclosures About Market Risk
For a discussion of our hedging strategies and market risks, see
the discussion below and the consolidated financial statements.
Fuel Price Risks
Substantially all our exposure to market risk for changes in
fuel prices relates to the consumption of fuel on our ships. We
have been installing Advanced Air Quality Systems on our ships,
which are aiding in partially mitigating the financial impact from
the ECAs and global 0.5% sulfur requirements. Beginning in 2020, we
expect to use a greater percentage mix of low sulfur fuel, 40% to
45% compared to 21% in 2019, which will likely increase our fuel
costs.
Based on a 10% change in each of the fuel prices versus the
current spot price that was used to calculate fuel expense in our
December 20, 2019 guidance, we estimate that our adjusted diluted
earnings per share would change by the following:
Heavy Fuel Oil ("HFO") impact:
-- $0.08 per share on an annualized basis for 2020
-- $0.02 per share for the first quarter of 2020
Marine Gasoil ("MGO") impact:
-- $0.12 per share on an annualized basis for 2020
-- $0.03 per share for the first quarter of 2020
Foreign Currency Exchange Rate Risks
Operational Currency Risks
Our operations primarily utilize the U.S. dollar, Australian
dollar, euro or sterling as their functional currencies. Our
operations also have revenue and expenses denominated in
non-functional currencies. Movements in foreign currency exchange
rates will affect our financial statements.
Based on a 10% change in all currency exchange rates that were
used in our December 20, 2019 guidance, we estimate that our
adjusted diluted earnings per share guidance would change by the
following:
-- $0.21 per share on an annualized basis for 2020
-- $0.02 per share for the first quarter of 2020
Investment Currency Risks
The foreign currency exchange rates were as follows:
November 30,
USD to 1: 2019 2018
--------- --------
AUD $ 0.68 $ 0.73
CAD $ 0.75 $ 0.75
EUR $ 1.10 $ 1.14
GBP $ 1.29 $ 1.28
RMB $ 0.14 $ 0.14
If the November 30, 2018 currency exchange rates had been used
to translate our November 30, 2019 non-U.S. dollar functional
currency operations' assets and liabilities (instead of the
November 30, 2019 U.S. dollar exchange rates), our total assets
would have been higher by $382 million and our total liabilities
would have been higher by $266 million.
As of November 30, 2019, we had cross currency swaps totaling of
$1.9 billion which settle through 2031. These cross currency swaps
are designated as hedges of our net investments in foreign
operations, which have a euro-denominated functional currency, thus
partially offsetting the foreign currency exchange rate risk. Based
on a 10% change in the U.S. dollar to euro exchange rate as of
November 30, 2019, we estimate that the fair value of these cross
currency swaps and offsetting change in U.S. dollar value of our
net investments would change by $196 million.
Newbuild Currency Risks
At November 30, 2019, our remaining newbuild currency exchange
rate risk primarily relates to euro-denominated newbuild contract
payments, which represent a total unhedged commitment of $7.3
billion and relates to newbuilds scheduled to be delivered from
2020 through 2025 to non-euro functional currency brands. The
functional currency cost of each of these ships will increase or
decrease based on changes in the exchange rates until the unhedged
payments are made under the shipbuilding contract. We may enter
into additional foreign currency derivatives to mitigate some of
this foreign currency exchange rate risk. Based on a 10% change in
euro to U.S. dollar exchange rates as of November 30, 2019, the
remaining unhedged cost of these ships would have a corresponding
change of $728 million.
Interest Rate Risks
The composition of our debt, including the effect of cross
currency swaps and interest rate swaps, was as follows:
November 30,
2019
---------------
Fixed rate 24%
EUR fixed rate 43%
Floating rate 4%
EUR floating rate 22%
GBP floating rate 7%
At November 30, 2019, we had interest rate swaps that have
effectively changed $300 million of EURIBOR-based floating rate
euro debt to fixed rate euro debt. Based on a 10% change in the
November 30, 2019 market interest rates, our annual interest
expense on floating rate debt, including the effect of our interest
rate swaps, would change by an insignificant amount. Substantially
all of our fixed rate debt can be called or prepaid by incurring
additional costs.
Fiscal Year 2020 Coronavirus Risk
In response to the ongoing coronavirus outbreak, China has
implemented travel restrictions. As a result, we have suspended
cruise operations from Chinese ports between January 25th and
February 4th, canceling nine cruises. We also expect that travel
restrictions will result in cancellations from Chinese fly-cruise
guests booked on cruises embarking in ports outside China. We
estimate that this will impact our financial performance by $0.03
to $0.04 per share. If the travel restrictions in China continue
until the end of February, we estimate that this will further
impact our financial performance by an additional $0.05 to $0.06
per share. Five percent of our capacity was scheduled to be
deployed in China in fiscal year 2020. If these travel restrictions
continue for an extended period of time, they could have a material
impact on our financial performance.
SELECTED FINANCIAL DATA
The selected consolidated financial data presented below for
2015 through 2019 and as of the end of each such year, except for
the statistical data, are derived from our consolidated financial
statements and should be read in conjunction with those
consolidated financial statements and the related notes.
Years Ended November 30,
(in millions, except per share,
per ton and currency data) 2019 2018 2017 2016 2015
----------- ----------- ----------- ----------- -----------
Statements of Income Data
Revenues $20,825 $18,881 $17,510 $16,389 $15,714
Operating income $ 3,276 $ 3,325 $ 2,809 $ 3,071 $ 2,574
Net income $ 2,990 $ 3,152 $ 2,606 $ 2,779 $ 1,757
Earnings per share
Basic $ 4.34 $ 4.45 $ 3.61 $ 3.73 $ 2.26
Diluted $ 4.32 $ 4.44 $ 3.59 $ 3.72 $ 2.26
Adjusted net income $ 3,041 $ 3,029 $ 2,770 $ 2,580 $ 2,106
Adjusted earnings per share -
diluted $ 4.40 $ 4.26 $ 3.82 $ 3.45 $ 2.70
Dividends declared per share $ 2.00 $ 1.95 $ 1.60 $ 1.35 $ 1.10
Statistical Data
ALBDs (in thousands) 87,424 83,872 82,303 80,002 77,307
Occupancy percentage 106.8% 106.9% 105.9% 105.9% 104.8%
Passengers carried (in thousands) 12,866 12,407 12,130 11,520 10,840
Fuel consumption in metric tons
(in thousands) 3,312 3,296 3,286 3,233 3,181
Fuel consumption in metric tons
per thousand ALBDs 37.9 39.3 39.9 40.4 41.2
Fuel cost per metric ton consumed $ 472 $ 491 $ 378 $ 283 $ 393
Currencies (USD to 1)
AUD $ 0.70 $ 0.75 $ 0.77 $ 0.74 $ 0.76
CAD $ 0.75 $ 0.78 $ 0.77 $ 0.75 $ 0.79
EUR $ 1.12 $ 1.18 $ 1.12 $ 1.11 $ 1.12
GBP $ 1.27 $ 1.34 $ 1.28 $ 1.37 $ 1.54
RMB $ 0.14 $ 0.15 $ 0.15 $ 0.15 $ 0.16
As of November 30,
(in millions) 2019 2018 2017 2016 2015
----------- ----------- ----------- ----------- -----------
Balance Sheet
Total assets (a) $45,058 $42,401 $40,778 $38,881 $39,237
Total debt (a) $11,503 $10,323 $ 9,195 $ 9,399 $ 8,787
(a) Total assets and total debt for the year 2015 has not been
updated to reflect the changes as a result of adopting ASU 2015-03
- Debt Issuance Cost
Years Ended November 30,
(in millions, except for per share data): 2019 2018 2017 2016 2015
------- ------- ------- ------- ---------
Net income
U.S. GAAP net income $2,990 $3,152 $2,606 $2,779 $1,757
Unrealized (gains) losses on fuel
derivatives,
net - (94) (227) (236) 332
(Gains) losses on ship sales and
impairments (6) (38) 387 (2) (8)
Restructuring expenses 10 1 3 2 25
Other 47 8 - 37 -
Adjusted net income $3,041 $3,029 $2,770 $2,580 $2,106
===== ===== ===== ===== =====
Weighted-average shares outstanding 692 710 725 747 779
====== ====== ====== ====== ======
Earnings per share
U.S. GAAP earnings per share $ 4.32 $ 4.44 $ 3.59 $ 3.72 $ 2.26
Unrealized (gains) losses on fuel
derivatives,
net - (0.13) (0.31) (0.32) 0.42
(Gains) losses on ship sales and
impairments (0.01) (0.05) 0.53 - (0.01)
Restructuring expenses 0.01 - - - 0.03
Other 0.07 0.01 - 0.05 -
Adjusted earnings per share $ 4.40 $ 4.26 $ 3.82 $ 3.45 $ 2.70
===== ===== ===== ===== =====
COMMON STOCK AND ORDINARY SHARES
Carnival Corporation's common stock, together with paired trust
shares of beneficial interest in the P&O Princess Special
Voting Trust, which holds a Special Voting Share of Carnival plc,
is traded on the NYSE under the symbol "CCL." Carnival plc's
ordinary shares trade on the London Stock Exchange under the symbol
"CCL." Carnival plc's American Depositary Shares ("ADSs"), each one
of which represents one Carnival plc ordinary share, are traded on
the NYSE under the symbol "CUK." The depositary for the ADSs is
JPMorgan Chase Bank, N.A.
As of January 16, 2020, there were 2,916 holders of record of
Carnival Corporation common stock and 29,693 holders of record of
Carnival plc ordinary shares and 136 holders of record of Carnival
plc ADSs. The past performance of our share prices cannot be relied
on as a guide to their future performance.
All dividends for both Carnival Corporation and Carnival plc are
declared in U.S. dollars. If declared, holders of Carnival
Corporation common stock and Carnival plc ADSs receive a dividend
payable in U.S. dollars. The dividends payable for Carnival plc
ordinary shares are payable in sterling, unless the shareholders
elect to receive the dividends in U.S. dollars. Dividends payable
in sterling will be converted from U.S. dollars into sterling at
the U.S. dollar to sterling exchange rate quoted by Bloomberg in
London at 12:00 p.m. on the next combined U.S. and UK business day
that follows the quarter end.
The payment and amount of any future dividend is within the
discretion of the Boards of Directors. Our dividends were and will
be based on a number of factors, including our earnings, liquidity
position, financial condition, booking trends, capital
requirements, credit ratings and the availability and cost of
obtaining new debt. We cannot be certain that Carnival Corporation
and Carnival plc will continue their dividend in the future, and if
so, the amount and timing of such future dividends are not
determinable and may be different than prior declarations.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Our revenues from the sale of passenger tickets are seasonal.
Historically, 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 earned during this period. The seasonality
of our results also increases due to ships being taken
out-of-service for maintenance, which we schedule during non-peak
demand periods. In addition, substantially all of Holland America
Princess Alaska Tours' revenue and net income is generated from May
through September in conjunction with the Alaska cruise season. The
quarterly data below, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the unaudited
interim periods.
2019 Quarters Ended
(in millions, except per share February August November
data) 28 May 31 31 30
------------ --------- ---------
Revenues $ 4,673 $ 4,838 $ 6,533 $ 4,781
Operating income $ 386 $ 515 $ 1,890 $ 484
Net income $ 336 $ 451 $ 1,780 $ 423
Earnings per share
Basic $ 0.48 $ 0.65 $ 2.58 $ 0.62
Diluted $ 0.48 $ 0.65 $ 2.58 $ 0.61
Adjusted net income (a) $ 338 $ 457 $ 1,819 $ 427
Adjusted earnings per share - diluted
(a) $ 0.49 $ 0.66 $ 2.63 $ 0.62
Dividends declared per share $ 0.50 $ 0.50 $ 0.50 $ 0.50
(a) Adjusted net income and adjusted fully diluted earnings per
share were computed as follows:
2019 Quarters Ended
February August November
(in millions, except per share data) 28 May 31 31 30
----------- ---------- ---------- -------------
Net income
U.S. GAAP net income $ 336 $ 451 $ 1,780 $ 423
Unrealized (gains) losses on fuel
derivatives, net - - - -
(Gains) losses on ship sales and
impairments 2 (16) 14 (5)
Restructuring expenses - - - 10
Other - 22 25 -
----------
Adjusted net income $ 338 $ 457 $ 1,819 $ 427
======= ===== ====== ======
Weighted-average shares outstanding 695 693 691 688
=========== ========= ========== ==========
Earnings per share
U.S. GAAP earnings per share $ 0.48 $ 0.65 $ 2.58 $ 0.61
Unrealized (gains) losses on fuel
derivatives, net - - - -
(Gains) losses on ship sales and
impairments - (0.02) 0.02 (0.01)
Restructuring expenses - - - 0.01
Other - 0.03 0.04 -
---------- ----------
Adjusted earnings per share $ 0.49 $ 0.66 $ 2.63 $ 0.62
======= ===== ====== ======
2018 Quarters Ended
February August November
(in millions, except per share data) 28 May 31 31 30
------------ --------- ---------
Revenues $ 4,232 $ 4,357 $ 5,836 $ 4,456
Operating income $ 419 $ 559 $ 1,794 $ 552
Net income $ 391 $ 561 $ 1,707 $ 494
Earnings per share
Basic $ 0.54 $ 0.79 $ 2.42 $ 0.71
Diluted $ 0.54 $ 0.78 $ 2.41 $ 0.71
Adjusted net income (a) $ 375 $ 489 $ 1,673 $ 492
Adjusted earnings per share - diluted
(a) $ 0.52 $ 0.68 $ 2.36 $ 0.70
Dividends declared per share $ 0.45 $ 0.50 $ 0.50 $ 0.50
(a) Adjusted net income and adjusted fully diluted earnings per
share were computed as follows:
2018 Quarters Ended
February August November
(in millions, except per share data) 28 May 31 31 30
----------- ---------- ---------- -------------
Net income
U.S. GAAP net income $ 391 $ 561 $ 1,707 $ 494
Unrealized losses (gains) on fuel
derivatives, net (32) (50) (8) (4)
(Gains) losses on ship sales and
impairments 16 (28) (27) -
Restructuring expenses - - - 1
Other - 6 - 1
---------- --------- ---------
Adjusted net income $ 375 $ 489 $ 1,673 $ 492
====== ===== ===== ======
Weighted-average shares outstanding 719 715 707 699
========== ========= ========= ==========
Earnings per share
U.S. GAAP earnings per share $ 0.54 $ 0.78 $ 2.41 $ 0.71
Unrealized (gains) losses on fuel
derivatives, net (0.05) (0.07) (0.01) (0.01)
(Gains) losses on ship sales and
impairments 0.02 (0.04) (0.04) -
Restructuring expenses - - - -
Other - 0.01 - -
---------- --------- ---------
Adjusted earnings per share $ 0.52 $ 0.68 $ 2.36 $ 0.70
====== ===== ===== ======
SCHEDULE C
Issuer Purchases of Equity Securities; Use of Proceeds from
Registered Securities
I. Repurchase Program
Under a share repurchase program effective 2004, we are
authorized to repurchase Carnival Corporation common stock and
Carnival plc ordinary shares (the "Repurchase Program"). Effective
August 27, 2018, the company approved modifications of the general
authorization under the Repurchase Program, which replenished the
remaining authorized repurchases at the time of the approvals to
$1.0 billion. The Repurchase Program does not have an expiration
date and may be discontinued by our Boards of Directors at any
time.
During the three months ended November 30, 2019, no shares of
Carnival Corporation common stock were repurchased pursuant to the
Repurchase Program.
During the three months ended November 30, 2019, repurchases of
Carnival plc ordinary shares pursuant to the Repurchase Program
were as follows:
Maximum Dollar
Value of Shares
Total Number That May Yet
of Shares of Average Price Be Purchased
Carnival plc Paid per Share Under the Repurchase
Purchased (in of Carnival Program (in
Period millions) plc millions)
----------------------------------- --------------- ------------------ --------------------------
September 1, 2019 through
September 30, 2019 0.5 $ 41.68 $ 237
October 1, 2019 through October
31, 2019 1.7 $ 39.45 $ 172
November 1, 2019 through November
30, 2019 1.0 $ 41.35 $ 132
--- -------------
3.2 $ 40.41
===============
No shares of Carnival Corporation common stock or Carnival plc
ordinary shares were purchased outside of publicly announced plans
or programs.
II. Carnival plc Shareholder Approvals
Carnival plc ordinary share repurchases under the Repurchase
Program require annual shareholder approval. The existing
shareholder approval is limited to a maximum of 19.2 million
ordinary shares and is valid until the earlier of the conclusion of
the Carnival plc 2020 annual general meeting or July 15, 2020.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR QVLFLBFLLBBX
(END) Dow Jones Newswires
January 28, 2020 11:28 ET (16:28 GMT)
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