MIAMI, Oct. 8, 2020 /PRNewswire/ -- Carnival Corporation
& plc (NYSE/LSE: CCL; NYSE: CUK) provides a business
update.
Carnival Corporation & plc President and Chief Executive
Officer Arnold Donald noted, "We
have come full circle from initiating a suspension in the early
days of the pandemic, to transitioning the fleet into a pause
status, right sizing our organization and, now, embarking on the
phased resumption of guest operations, underway in two of our world
leading cruise brands, Costa in Italy and AIDA in Germany. We have accelerated the sale of less
efficient ships, enabling us to capitalize on pent up demand on
reduced capacity and structurally lower our cost base, while
retaining our most cash generating assets. We are taking aggressive
actions managing the balance sheet and reducing capacity to
position us to weather this disruption and also emerge a leaner,
more efficient company, reinforcing our industry leading
position."
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 last month, with Costa Cruises ("Costa")
successful voyages on two of its ships, Costa Deliziosa and
Costa Diadema. The company is continuing the limited
resumption of its guest cruise operations with sailings on
additional Costa ships shortly, as well as with sailings on AIDA
Cruises ("AIDA") which are anticipated to begin next week. 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.
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 Registro Italiano Navale ("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 the
ships that resumed operations, 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.
The company is encouraged that the Centers for Disease Control's
("CDC") No Sail Order was extended by only one month to
October 31, 2020, the same date as
the industry's end of voluntary suspension of passenger operations.
For many months, cruise lines have worked with experts worldwide to
develop unprecedented public health protocols and are hopeful these
measures will lead to a gradual, phased resumption of cruising by
the end of the year. There is constant dialogue ongoing in
the United States for a potential
cruise restart and the company is hopeful that the industry is in a
position to collaborate with the CDC and administration to resume
cruising from the United States
this year.
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, ten
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, including Enchanted Princess which was delivered last
week. 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 nine cruise ships and two 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 per ship 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 September 20, 2020, cumulative advanced bookings
for the second half of 2021 capacity currently available for sale
are at the higher end of the historical range. 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 September 20, 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 60 percent of bookings taken during the three weeks
ended September 20, 2020 were
new bookings as opposed to FCC re-bookings, despite minimal
advertising or marketing.
Recently, Yield Optimization and Demand Analytics ("YODA"), the
company's cutting-edge dynamic price recommendations and inventory
management program, was selected as a finalist for an Operations
Research award called the Franz Edelman. As a company focused on
creating memorable experiences for its guests, it's quite an
achievement to be recognized as a finalist to this award alongside
companies like Intel, IBM, and Walmart.
Increasing Liquidity
Carnival Corporation & plc Chief Financial Officer and Chief
Accounting Officer David Bernstein
noted, "As of the end of the Third Quarter, we had 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. In
addition, with the re-launch of our fleet, we saw a good
opportunity to improve our balance sheet with an equity offering.
So last month we announced an at-the-market or ATM equity offering
program. However, 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 $12.5 billion through a series
of financing transactions, including the following transactions
since May 31, 2020:
- 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 99.2 million shares
of Carnival Corporation's 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.
- In September 2020 we entered into
an equity distribution agreement with sales agents pursuant to
which we may, from time to time, offer and sell shares of Carnival
Corporation's common stock having an aggregate offering price of up
to $1.0 billion through the sales
agents (the "ATM Offering"). As of October
2, 2020, we sold 23 million shares for net proceeds of
$352 million under the ATM
Offering.
- In September 2020, we borrowed
$610 million under an export credit
facility.
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), interest expense and committed capital
expenditures (net of unfunded export credit facilities) and also
excludes scheduled debt maturities as well as other cash collateral
to be provided. 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. As of August
31, 2020, the company's scheduled debt maturities are as
follows:
(in
billions)
|
4Q
2020
|
|
1Q
2021
|
|
2Q
2021
|
|
3Q
2021
|
|
4Q
2021
|
|
Principal Payments
(a)
|
$
|
1.0
|
|
$
|
0.5
|
|
$
|
0.3
|
(b)
|
$
|
0.6
|
|
$
|
0.2
|
(b)
|
|
(a)
|
Excluding the
revolving facility. As of August 31, 2020, borrowings under the
Revolving Facility were $3.0 billion, which were drawn in March
2020 for an initial term of six months. The maturities for these
borrowings were extended in September 2020 for an additional six
months through March 2021. We may re-borrow such amounts subject to
satisfaction of the conditions in the revolving facility
agreement.
|
(b)
|
The company has
principal balance of $0.5 billion and $0.8 billion of debt
outstanding as of August 31, 2020, 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.
|
Financial Statements
Refer to the Form 10-Q dated October 8,
2020 for the company's third quarter 2020 consolidated
financial statements.
Conference Call
The company has scheduled
a conference call with analysts at 10:00
a.m. EDT (3:00 p.m. BST) today
to provide a business update. This call can be listened to live,
and additional information can be obtained, via Carnival
Corporation & plc's website at www.carnivalcorp.com and
www.carnivalplc.com.
Carnival Corporation & plc is one of the world's
largest leisure travel companies with a portfolio of nine of the
world's leading cruise lines. With operations in North
America, Australia, Europe and Asia, its portfolio features – Carnival Cruise
Line, Princess Cruises, Holland America Line, P&O
Cruises (Australia),
Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK)
and Cunard.
Additional information can be found on www.carnivalcorp.com,
www.carnivalsustainability.com, www.carnival.com, www.princess.com,
www.hollandamerica.com, www.pocruises.com.au, www.seabourn.com,
www.costacruise.com, www.aida.de, www.pocruises.com and
www.cunard.com.
Cautionary Note Concerning Factors That May Affect Future
Results
Carnival Corporation and Carnival plc and their respective
subsidiaries are referred to collectively in this document as
"Carnival Corporation & plc," "our," "us" and "we." Some of the
statements, estimates or projections contained in this document are
"forward-looking statements" that involve risks, uncertainties and
assumptions with respect to us, including some statements
concerning future results, operations, outlooks, plans, goals,
reputation, cash flows, liquidity and other events which have not
yet occurred. These statements are intended to qualify for the safe
harbors from liability provided by Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
All statements other than statements of historical facts are
statements that could be deemed forward-looking. These statements
are based on current expectations, estimates, forecasts and
projections about our business and the industry in which we operate
and the beliefs and assumptions of our management. We have tried,
whenever possible, to identify these statements by using words like
"will," "may," "could," "should," "would," "believe," "depends,"
"expect," "goal," "anticipate," "forecast," "project," "future,"
"intend," "plan," "estimate," "target," "indicate," "outlook," and
similar expressions of future intent or the negative of such
terms.
Forward-looking statements include those statements that relate
to our outlook and financial position including, but not limited
to, statements regarding:
• Net revenue
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
results of operations
|
• Net cruise
costs, excluding fuel per available lower berth day
|
Because forward-looking statements involve risks and
uncertainties, there are many factors that could cause our actual
results, performance or achievements to differ materially from
those expressed or implied by our forward-looking statements. This
note contains important cautionary statements of the known factors
that we consider could materially affect the accuracy of our
forward looking statements and adversely affect our business,
results of operations and financial position. Additionally, many of
these risks and uncertainties are currently amplified by and will
continue to be amplified by, or in the future may be amplified by,
the COVID-19 outbreak. It is not possible to predict or identify
all such risks. There may be additional risks that we consider
immaterial or which are unknown. These factors include, but are not
limited to, the following:
- COVID-19 has had, and is expected to continue to have, a
significant impact on our financial condition and operations, which
impacts our ability to obtain acceptable financing to fund
resulting reductions in cash from operations. The current, and
uncertain future, impact of the COVID-19 outbreak, including its
effect on the ability or desire of people to travel (including on
cruises), is expected to continue to impact our results,
operations, outlooks, plans, goals, growth, reputation, litigation,
cash flows, liquidity, and stock price
- As a result of the COVID-19 outbreak, we 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.
View original
content:http://www.prnewswire.com/news-releases/carnival-corporation--plc-provides-a-business-update-301148245.html
SOURCE Carnival Corporation & plc