TIDMCCL
September 15, 2020
CARNIVAL CORPORATION & PLC REPORTS SUMMARY THIRD QUARTER RESULTS AND OTHER
MATTERS
Carnival Corporation & plc (the "company") is disclosing summary preliminary
financial information for the quarter ended August 31, 2020, on Form 8-K with
the U.S. Securities and Exchange Commission ("SEC").
* Schedule A contains Carnival Corporation & plc's summary preliminary
financial information for the quarter ended August 31, 2020
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.
MEDIA CONTACT
INVESTOR RELATIONS CONTACT
Roger
Frizzell
Beth Roberts
001 305 406
7862
001 305 406 4832
The Form 8-K 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.
Carnival Corporation & plc is one of the world's largest leisure travel
companies with a portfolio of nine of the world's leading cruise lines. With
operations in North America, Australia, Europe and Asia, its portfolio features
- Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises
(Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK) and
Cunard.
Additional information can be found on www.carnivalcorp.com,
www.carnivalsustainability.com, www.carnival.com, www.princess.com,
www.hollandamerica.com, www.pocruises.com.au, www.seabourn.com,
www.costacruise.com, www.aida.de, www.pocruises.com and www.cunard.com.
SCHEDULE A
THIRD QUARTER 2020 SUMMARY PRELIMINARY FINANCIAL INFORMATION
* U.S. GAAP net loss of $(2.9) billion for the third quarter of 2020, which
includes $0.9 billion of non-cash impairment charges.
* Third quarter 2020 adjusted net loss of $(1.7) billion.
* Cash burn rate in the third quarter 2020 and the expected rate for the
fourth quarter are both in line with the previously disclosed expectation.
* Third quarter 2020 ended with $8.2 billion of cash and cash equivalents.
The company expects to further enhance future liquidity, opportunistically.
* Costa successfully resumed guest cruise operations on September 6, 2020.
* AIDA has announced plans to restart guest cruise operations during the fall
2020.
* A total of 18 less efficient ships have left or are expected to leave the
fleet, representing approximately 12 percent of pre-pause capacity and only
three percent of operating income in 2019.
* Cumulative advanced bookings for the second half of 2021 capacity currently
available for sale are at the higher end of the historical range, despite
minimal advertising or marketing.
Carnival Corporation & plc President and Chief Executive Officer Arnold Donald
noted, "Just six months after we paused cruise operations across our global
fleet, this past weekend, we successfully completed our first seven day cruise
on our Italian brand Costa. Soon a second of our nine World's Leading Cruise
Lines' brands will resume guest operations, our German sourced brand AIDA. Our
business relies solely on leisure travel which we believe has historically
proven to be far more resilient than business travel and cannot be easily
replaced with video conferencing and other means of technology. Our portfolio
includes many regional brands which clearly position us well for a staggered
return to service in the current environment.
We continue to take aggressive action to emerge a leaner more efficient
company. We are accelerating the exit of 18 less efficient ships from our
fleet. This will generate a 12% reduction in capacity and a structurally lower
cost base, while retaining the most cash generative assets in our portfolio.
With two thirds of our guests repeat cruisers each year, we believe the
reduction in capacity leaves us well positioned to take advantage of the proven
resiliency of, and the pent up demand for cruise travel - as evidenced by our
being at the higher end of historical booking curves for the second half of
2021.
We will emerge with a more efficient fleet, with a stretched out newbuild order
book and having paused new ship orders, leaving us with no deliveries in 2024
and only one delivery in 2025, allowing us to pay down debt and create
increasing value for our shareholders."
Resumption of Guest Operations
In the face of the global impact of COVID-19, the company paused its guest
cruise operations in mid-March. The company resumed limited guest operations on
September 6, 2020, with Costa Cruises' ("Costa") successful voyage visiting
five destinations in Italy. The company plans to continue the limited
resumption of its guest cruise operations with additional Costa ships over
September and October, as well as with AIDA Cruises' ("AIDA") during the fall
2020. These brands are beginning the company's anticipated gradual, phased-in
resumption of guest cruise operations. The initial cruises will continue to
take place with adjusted passenger capacity and enhanced health protocols
developed with government and health authorities, and guidance from our roster
of medical and scientific experts.
Other brands and ships are expected to return to service over time to provide
guests with unmatched joyful vacations in a manner consistent with the
company's highest priorities, which are compliance, environmental protection
and the health, safety and well-being of its guests, crew, shoreside employees
and the people in the communities its ships visit. Many of the company's brands
source the majority of their guests from the geographical region in which they
operate. In the current environment, the company believes this will benefit it
in resuming guest cruise operations.
Costa and AIDA
Costa successfully restarted guest cruise operations with one initial ship,
Costa Deliziosa, sailing from Italian Ports on September 6, 2020, and is
expected to be followed by an additional ship, Costa Diadema, departing from
Genoa beginning September 19, 2020. After the September restart with these two
ships exclusively for Italian guests, Costa expects to gradually increase the
number of ships that will resume operations, offering cruises for residents in
Europe. AIDA expects to resume its guest cruise operations during the fall 2020
with sailings in the Canary Islands and the western Mediterranean.
Health and Safety Protocols
Working with global and national health authorities and medical experts, Costa
and AIDA have a comprehensive set of health and hygiene protocols to help
facilitate a safe and healthy return to cruise vacations. Both brands are
providing guests with detailed information about enhanced protocols, which are
modeled after shoreside health and mitigation guidelines as provided by each
brand's respective country, and approved by the flag state, Italy. Protocols
will be updated based on evolving scientific and medical knowledge related to
mitigation strategies.
Costa is the first cruise company to earn the Biosafety Trust Certification
from RINA. The certification process examined all aspects of life onboard and
ashore and assessed the compliance of the system with procedures aimed at the
prevention and control of infections. Costa's comprehensive set of measures and
procedures implemented on Costa Deliziosa cover key areas such as crew health
and safety, the booking process, guest activities, entertainment and dining,
and medical care on board, as well as pre-boarding, embarkation and
disembarkation operations, which includes testing for all guests prior to
embarkation.
More broadly, as the understanding of COVID-19 continues to evolve, the company
has been working with a number of world-leading public health, epidemiological
and policy experts to support its ongoing efforts with enhanced protocols and
procedures for the return of cruise vacations. These advisors will continue to
provide guidance based on the latest scientific evidence and best practices for
protection and mitigation.
Optimizing the Future Fleet
The company expects future capacity to be moderated by the phased re-entry of
its ships, the removal of capacity from its fleet and delays in new ship
deliveries. Since the pause in guest operations, the company has accelerated
the removal of ships in fiscal 2020 which were previously expected to be sold
over the ensuing years. The company now expects to dispose of 18 ships, eight
of which have already left the fleet. In total, the 18 ships represent
approximately 12 percent of pre-pause capacity and only three percent of
operating income in 2019. The sale of less efficient ships will result in
future operating expense efficiencies of approximately two percent per
available lower berth day ("ALBD") and a reduction in fuel consumption of
approximately one percent per ALBD. The company expects only two of the four
ships originally scheduled for delivery in 2020, following the start of the
pause, to be delivered prior to the end of fiscal 2020. The company currently
expects only five of the nine ships originally scheduled for delivery in fiscal
2020 and 2021 to be delivered prior to the end of fiscal year 2021. The company
currently expects 9 cruise ships and 2 smaller expedition ships of the 13 ships
originally scheduled for delivery prior to the end of fiscal year 2022 to be
delivered by then.
Based on the actions taken to date and the scheduled newbuild deliveries
through 2022, the company's fleet will be more efficient with a roughly 13
percent larger average berth size and an average age of 12 years in 2022 versus
13 years, in each case as compared to 2019.
Update on Bookings
While the company believes bookings in the first half of 2021 reflect
expectations of the phased resumption of its guest cruise operations and
anticipated itinerary changes, as of August 31, 2020, cumulative advanced
bookings for the second half of 2021 capacity currently available for sale are
at the higher end of the historical range and similar to where booking
positions were in 2018 for the second half of 2019. The company believes this
demonstrates the long-term potential demand for cruising. Pricing on these
bookings are lower by mid-single digits versus the second half of 2019, on a
comparable basis, reflecting the effect of future cruise credits ("FCC") from
previously cancelled cruises being applied. The company continues to take
bookings for both 2021 and 2022.
The company is providing flexibility to guests with bookings on sailings
cancelled by allowing guests to receive enhanced FCCs or elect to receive
refunds in cash. Enhanced FCCs increase the value of the guest's original
booking or provide incremental onboard credits. As of August 31, 2020,
approximately 45 percent of guests affected by the company's schedule changes
have received enhanced FCCs and approximately 55 percent have requested
refunds.
Total customer deposits balance at August 31, 2020, was $2.4 billion, the
majority of which are FCCs, compared to total customer deposits balance of $2.9
billion at May 31, 2020. The decline in customer deposits is consistent with
previous expectations. As of August 31, 2020, the current portion of customer
deposits was $2.1 billion with $0.1 billion relating to fourth quarter
sailings. Approximately 55 percent of bookings taken during the quarter ending
August 31, 2020 were new bookings, as opposed to FCC re-bookings, despite
minimal advertising or marketing.
Increasing Liquidity
Carnival Corporation & plc Chief Financial Officer and Chief Accounting Officer
David Bernstein noted, "We have over $8 billion of available cash and
additional financing alternatives to opportunistically further improve our
liquidity profile. We have recently begun to optimize our capital structure
with the early extinguishment of debt on favorable economic terms and the
extension of debt maturities. Once we fully resume guest cruise operations, we
expect our cash flow potential will build a path to further strengthen our
balance sheet and return us to an investment grade credit rating over time."
Due to the pause in guest operations, the company has taken significant actions
to preserve cash and secure additional financing to increase its liquidity.
Since March, the company has raised nearly $12 billion through a series of
financing transactions, including the following transactions that occurred
during the third quarter:
* Borrowed an aggregate principal amount of $2.8 billion in two tranches
under a first priority senior secured term loan facility on June 30, 2020
* Issued $1.3 billion aggregate principal amount of second priority senior
secured notes in two tranches on July 20, 2020
* Entered into Debt Holiday amendments, deferring certain principal
repayments otherwise due through March 2021. (Certain export credit
agencies have offered a 12-month debt amortization and financial covenant
holiday ("Debt Holiday"))
* Completed a registered direct offering of 99 million shares of its common
stock and used the proceeds to repurchase $886 million of its 5.75%
Convertible Senior Notes due 2023 on August 10, 2020
* Issued $900 million aggregate principal amount of second priority senior
secured notes on August 18, 2020
As of August 31, 2020, the company has a total of $8.2 billion of cash and cash
equivalents.
Currently, the company is unable to predict when the entire fleet will return
to normal operations, and as a result, unable to provide an earnings forecast.
The pause in guest operations continues to have a material negative impact on
all aspects of the company's business, including the company's liquidity,
financial position and results of operations. The company expects a net loss on
both a U.S. GAAP and adjusted basis for the quarter and year ending November
30, 2020.
The company's monthly average cash burn rate for the third quarter 2020 was
$770 million, which was in line with the anticipated monthly cash burn rate.
The company expects the monthly average cash burn rate for the fourth quarter
of 2020 to be approximately $530 million. This results in an average monthly
burn rate for the second half of the year of $650 million as previously
disclosed. This rate includes approximately $250 million of ongoing ship
operating and administrative expenses, working capital changes (excluding
changes in customer deposits and reserves for credit card processors), interest
expense and committed capital expenditures (net of committed export credit
facilities) and also excludes scheduled debt maturities. The company continues
to explore opportunities to further reduce its monthly cash burn rate.
The company estimates non-newbuild capital expenditures during the fourth
quarter of 2020 to be approximately $130 million. The company's scheduled debt
maturities are as follows:
(in billions) 4Q 2020 1Q 2021 2Q 2021 3Q 2021 4Q 2021
Principal $ 1.0 $ 0.5 $ 0.3 (b) $ 0.6 $ 0.2 (b)
Payments (a)
a. Excluding the Revolving Facility. As of May 31, 2020, borrowings under the
Revolving Facility were $3.0 billion, which were drawn in March 2020 for an
initial term of six months. We may re-borrow such amounts subject to
satisfaction of the conditions in the Revolving Facility Agreement. The
company has principal balance of $0.5 billion and $0.8 billion of debt,
otherwise due through 2032, for which covenant waivers expire during the
second quarter 2021 and fourth quarter 2021, respectively. The company is
working on extending these covenant waivers. If the covenant waiver
extensions are not received, the company would be required to prepay the
outstanding principal balance.
Cautionary Note Concerning Factors That May Affect Future Results
Carnival Corporation and Carnival plc and their respective subsidiaries are
referred to collectively in this document as "Carnival Corporation & plc,"
"our," "us" and "we." Some of the statements, estimates or projections
contained in this document are "forward-looking statements" that involve risks,
uncertainties and assumptions with respect to us, including some statements
concerning future results, operations, outlooks, plans, goals, reputation, cash
flows, liquidity and other events which have not yet occurred. These statements
are intended to qualify for the safe harbors from liability provided by Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. All statements other than statements of historical facts are
statements that could be deemed forward-looking. These statements are based on
current expectations, estimates, forecasts and projections about our business
and the industry in which we operate and the beliefs and assumptions of our
management. We have tried, whenever possible, to identify these statements by
using words like "will," "may," "could," "should," "would," "believe,"
"depends," "expect," "goal," "anticipate," "forecast," "project," "future,"
"intend," "plan," "estimate," "target," "indicate," "outlook," and similar
expressions of future intent or the negative of such terms.
Forward-looking statements include those statements that relate to our outlook
and financial position including, but not limited to, statements regarding:
* Net revenue yields * Estimates of ship depreciable lives and
residual values
* Booking levels * Goodwill, ship and trademark fair values
* Pricing and occupancy * Liquidity
* Interest, tax and fuel expenses * Adjusted earnings per share
* Currency exchange rates * Impact of the COVID-19 coronavirus global
pandemic on our financial condition and
* Net cruise costs, excluding fuel results of operations
per available lower berth day
Because forward-looking statements involve risks and uncertainties, there are
many factors that could cause our actual results, performance or achievements
to differ materially from those expressed or implied by our forward-looking
statements. This note contains important cautionary statements of the known
factors that we consider could materially affect the accuracy of our forward
looking statements and adversely affect our business, results of operations and
financial position. Additionally, many of these risks and uncertainties are
currently amplified by and will continue to be amplified by, or in the future
may be amplified by, the COVID-19 outbreak. It is not possible to predict or
identify all such risks. There may be additional risks that we consider
immaterial or which are unknown. These factors include, but are not limited to,
the following:
* COVID-19 has had, and is expected to continue to have, a significant impact
on our financial condition and operations, which impacts our ability to
obtain acceptable financing to fund resulting reductions in cash from
operations. The current, and uncertain future, impact of the COVID-19
outbreak, including its effect on the ability or desire of people to travel
(including on cruises), is expected to continue to impact our results,
operations, outlooks, plans, goals, growth, reputation, litigation, cash
flows, liquidity, and stock price
* As a result of the COVID-19 outbreak, we may be out of compliance with a
maintenance covenant in certain of our debt facilities, for which we have
waivers for the period through March 31, 2021 with the next testing date of
May 31, 2021
* World events impacting the ability or desire of people to travel may lead
to a decline in demand for cruises
* Incidents concerning our ships, guests or the cruise vacation industry as
well as adverse weather conditions and other natural disasters may impact
the satisfaction of our guests and crew and lead to reputational damage
* Changes in and non-compliance with laws and regulations under which we
operate, such as those relating to health, environment, safety and
security, data privacy and protection, anti-corruption, economic sanctions,
trade protection and tax may lead to litigation, enforcement actions,
fines, penalties, and reputational damage
* Breaches in data security and lapses in data privacy as well as disruptions
and other damages to our principal offices, information technology
operations and system networks, including the recent ransomware incident,
and failure to keep pace with developments in technology may adversely
impact our business operations, the satisfaction of our guests and crew and
lead to reputational damage
* Ability to recruit, develop and retain qualified shipboard personnel who
live away from home for extended periods of time may adversely impact our
business operations, guest services and satisfaction
* Increases in fuel prices, changes in the types of fuel consumed and
availability of fuel supply may adversely impact our scheduled itineraries
and costs
* Fluctuations in foreign currency exchange rates may adversely impact our
financial results
* Overcapacity and competition in the cruise and land-based vacation industry
may lead to a decline in our cruise sales, pricing and destination options
* Geographic regions in which we try to expand our business may be slow to
develop or ultimately not develop how we expect
* Inability to implement our shipbuilding programs and ship repairs,
maintenance and refurbishments may adversely impact our business operations
and the satisfaction of our guests
The ordering of the risk factors set forth above is not intended to reflect our
indication of priority or likelihood.
Forward-looking statements should not be relied upon as a prediction of actual
results. Subject to any continuing obligations under applicable law or any
relevant stock exchange rules, we expressly disclaim any obligation to
disseminate, after the date of this document, any updates or revisions to any
such forward-looking statements to reflect any change in expectations or
events, conditions or circumstances on which any such statements are based.
CARNIVAL CORPORATION & PLC
NON-GAAP FINANCIAL MEASURES
Three Months Ended Nine Months Ended
August 31, August 31,
(in millions) 2020 2019 2020 2019
Net income (loss)
U.S. GAAP net income (loss) $ (2,858) $ 1,780 $ (8,014) $ 2,567
(Gains) losses on ship sales and 937 14 3,819 -
impairments
Restructuring expenses 3 - 42 -
Other 220 25 223 47
Adjusted net income (loss) $ (1,699) $ 1,819 $ (3,930) $ 2,614
Explanations of Non-GAAP Financial Measures
Non-GAAP Financial Measures
We use adjusted net income as a non-GAAP financial measure of our cruise
segments' and the company's financial performance. This non-GAAP financial
measure is provided along with U.S. GAAP net income (loss).
We believe that gains and losses on ship sales, impairment charges,
restructuring costs and other gains and losses are not part of our core
operating business and are not an indication of our future earnings
performance. Therefore, we believe it is more meaningful for these items to be
excluded from our net income (loss), and accordingly, we present adjusted net
income 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.
END
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