MIAMI, June 18, 2020 /PRNewswire/ -- Carnival
Corporation & plc (the "company") disclosed summary preliminary
financial information for the quarter ended May 31, 2020.
SECOND QUARTER 2020 SUMMARY PRELIMINARY INFORMATION
- U.S. GAAP net loss of $(4.4) billion, or $(6.07) diluted EPS, for the second quarter of
2020, which includes $2.0 billion of
non-cash impairment charges.
- Second quarter 2020 adjusted net loss of $(2.4) billion, or $(3.30) adjusted EPS.
- Total revenues for the second quarter of 2020 were
$0.7 billion, lower than $4.8 billion in the prior year.
- The company's guest cruise operations have been in a pause
for a majority of the second quarter. In addition, the company is
unable to definitively predict when it will return to normal
operations. As a result, the company is currently unable to provide
an earnings forecast. The pause in guest operations is continuing
to have material negative impacts on all aspects of the company's
business. The longer the pause in guest operations continues the
greater the impact on the company's liquidity and financial
position. The company expects a net loss on both a U.S. GAAP and
adjusted basis for the second half of 2020.
- Cash burn rate in the second quarter 2020 was generally in
line with the previously disclosed expectation.
- Second quarter 2020 ended with $7.6
billion of available liquidity, and the company expects to
further enhance future liquidity, including through refinancing
scheduled debt maturities. In addition, the company has
$8.8 billion of committed export
credit facilities that are available to fund ship deliveries
originally planned through 2023.
- Total customer deposits balance at May 31, 2020 was $2.9
billion, including $475
million related to cruises during the second half of
2020.
PREPARATION FOR THE RESUMPTION OF GUEST OPERATIONS
The company expects to resume guest operations, after
collaboration with both government and health authorities, in a
phased manner, with specific ships and brands returning to service
over time to provide its guests with enjoyable vacation
experiences. The company anticipates that initial sailings will be
from a select number of easily accessible homeports. 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.
In connection with its capacity optimization strategy, the
company intends to accelerate the removal of ships in fiscal 2020
which were previously expected to be sold over the ensuing years.
The company already has preliminary agreements for the disposal of
6 ships which are expected to leave the fleet in the next 90 days
and is currently working toward additional agreements.
Health and Safety Protocols
In preparation for the resumption of its cruises, and consistent
with its commitment to provide its guests with a safe and healthy
environment, the company is proactively consulting and working in
close cooperation with various medical policy experts and public
health authorities to develop enhanced procedures and protocols for
health and safety onboard its ships. The company appreciates the
excellent working relationship with the health authorities of
federal states and local port authorities in Germany, as well as the Italian Coast Guard,
Italian Ministry of Transportation, Italian Ministry of Health and
others around the world. A comprehensive restart protocol may
include areas such as medical care, screening, testing, mitigation
and sanitization addressing arrival and departure at cruise
terminals, the boarding and disembarkation process, onboard
experiences and shore excursions.
Update on Bookings
The company's brands have announced various incentives and
flexibility for certain booking payments on select sailings to
support guest confidence in making new bookings. These incentives
vary by brand and sailing and include onboard credits and reduced
or refundable deposits. In addition, the company is providing
flexibility to guests with bookings on sailings cancelled due to
the pause by allowing guests to receive enhanced future cruise
credits ("FCC") 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 May 31,
2020, approximately half of guests affected have requested
cash refunds. Despite substantially reduced marketing and selling
spend, the company is seeing growing demand from new bookings for
2021. For the six weeks ending May 31,
2020, approximately two-thirds of 2021 bookings were new
bookings. The remaining 2021 booking volumes resulted from guests
applying their FCCs to specific future cruises.
As of May 31, 2020, the current
portion of customer deposits was $2.6
billion with $121 million
relating to third quarter sailings and $353
million relating to fourth quarter sailings. The company
expects any decline in the customer deposits balance in the second
half of 2020, all of which is expected to occur in the third
quarter, to be significantly less than the decline in the second
quarter of 2020.
As of May 31, 2020, cumulative
advanced bookings for the full year of 2021 capacity currently
available for sale are within historical ranges at prices that are
down in the low to mid-single digits range including the negative
yield impact of FCCs and onboard credits applied, on a comparable
basis. For the full year of 2021, booking volumes for the six weeks
ending May 31, 2020, were running
meaningfully behind the prior year. However, the company saw an
improvement in booking volumes for the six weeks ending
May 31, 2020 compared to the prior
six weeks.
COVID-19 RESPONSE
In the face of the impact of the COVID-19 global pandemic, the
company paused its guest cruise operations in mid-March. In
response to this unprecedented situation, the company acted to
ensure the health and safety of guests and shipboard team members,
optimize the pause in guest operations and maximize its liquidity
position.
Ensuring the Health and Safety of Guests and Team
Members
During this period the company has taken and will continue to
take the following actions:
- Returned over 260,000 guests to their homes, coordinating with
a large number of countries around the globe. The company chartered
aircraft, utilized commercial flights and even used its ships to
sail home guests who could not fly
- Working around the clock with various local governmental
authorities to repatriate shipboard team members as quickly as
possible. 49 cruise ships have traveled more than 400,000 nautical
miles and the company has chartered hundreds of planes to
repatriate approximately 60,000 of its shipboard team members to
more than 130 countries around the globe. The company expects
substantially all of the approximately 21,000 remaining shipboard
team members to be able to return home by the end of June. The safe
manning team members will remain on the company's ships
- For those shipboard team members experiencing extended stays
onboard, the company is focusing on their physical and mental
health. The company is providing most shipboard team members with
single occupancy cabin accommodations, many with a window or
balcony. Shipboard team members have access to fresh air and other
areas of the ship, movies and internet, and available
counseling
Optimizing the Pause in Guest Operations
The company estimates that its ongoing ship operating and
administrative expenses will be approximately $250 million per month once all ships are in
paused status. The company continues to seek ways to further reduce
this monthly requirement.
Reduced Operating Expenses
The company has taken significant actions to reduce operating
expenses during the pause in guest operations:
- While maintaining safety, environmental protection and
compliance, the company significantly reduced ship operating
expenses, including crew payroll, food, fuel, insurance and port
charges by transitioning ships into paused status, either at anchor
or in port and staffed at a safe manning level
- Currently 62 of the company's ships are in their final expected
pause location. The company expects substantially all of its ships
to reach their full pause status during the third quarter
- Significantly reduced marketing and selling expenses
- Implemented a combination of layoffs, furloughs, reduced work
weeks and salary and benefit reductions across the company,
including senior management
- Instituted a hiring freeze across the organization,
significantly reduced consultant and contractor roles
Reduced Capital Expenditures
The company has reduced capital expenditures and estimates
$300 million of non-newbuild capital
expenditures during the second half of 2020, which largely consists
of previously committed expenditures.
The company previously had four ships scheduled to be delivered
between May and October of 2020. The company believes COVID-19 has
impacted shipyard operations and will result in delivery delays of
the ships this year and is working with the shipyards on revised
timing. The company has committed future financing, comprised of
ship export credit facilities, associated with these newbuilds.
Maximizing Liquidity
The company has taken and continues to take actions to improve
its liquidity including:
- Completed offerings of $6.6
billion through the issuance of first-priority senior
secured notes, senior convertible notes and Carnival Corporation
common stock
- Fully drew down its $3.0 billion
multi-currency revolving credit facility
- Qualified for a government commercial paper program providing
over $700 million of liquidity
- Early settled outstanding derivatives, receiving proceeds of
$220 million
- Extended a $166 million euro-denominated bank loan,
originally maturing in 2020, to March
2021
- Certain export credit agencies have offered 12-month debt
amortization and a financial covenant holiday ("Debt Holiday"). The
Debt Holiday amendments that have been finalized to date will defer
$300 million of principal repayments
otherwise due through May 2021 with
repayments made over the following four years. The company has also
obtained financial covenant waivers for these loans for an initial
term through March 2021 and waivers
of the interest coverage financial covenant for certain of its bank
loans through November 2021. The
company is working to arrange additional financial covenant waivers
and additional debt holiday agreements deferring principal
repayments of approximately $300
million through March 2021
- Suspended the payment of dividends on, and the repurchase of,
Carnival Corporation common stock and Carnival plc ordinary
shares
- The company is also working on potential sales of non-ship
assets
As of May 31, 2020, the company
has a total of $7.6 billion of
available liquidity. In addition, the company has $8.8 billion of committed export credit
facilities that are available to fund ship deliveries originally
planned through 2023.
Cash Burn Rate
During the pause in guest operations, the monthly average cash
burn rate for the second half of 2020 is estimated to be
approximately $650 million. This rate
includes ongoing ship operating and administrative expenses,
committed capital expenditures (net of committed export credit
facilities), interest expense and excludes changes in customer
deposits and scheduled debt maturities. In addition to the
refinancings discussed above and the in-process Debt Holiday
arrangements, the company also expects to refinance approximately
$2.4 billion of debt maturities
coming due over the next twelve months, half of which matures in
the second half of 2020.
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 have paused our guest
cruise operations, and if we are unable to re-commence normal
operations in the near-term, and further extend covenant waivers
for certain agreements for which waivers do not currently cover
periods after March 2021 (if needed),
we may be out of compliance with a maintenance covenant in certain
of our debt facilities
- World events impacting the ability or desire of people to
travel may lead to a decline in demand for cruises
- Incidents concerning our ships, guests or the cruise vacation
industry as well as adverse weather conditions and other natural
disasters may impact the satisfaction of our guests and crew and
lead to reputational damage
- Changes in and non-compliance with laws and regulations under
which we operate, such as those relating to health, environment,
safety and security, data privacy and protection, anti-corruption,
economic sanctions, trade protection and tax may lead to
litigation, enforcement actions, fines, penalties, and reputational
damage
- Breaches in data security and lapses in data privacy as well as
disruptions and other damages to our principal offices, information
technology operations and system networks and failure to keep pace
with developments in technology may adversely impact our business
operations, the satisfaction of our guests and crew and lead to
reputational damage
- Ability to recruit, develop and retain qualified shipboard
personnel who live away from home for extended periods of time may
adversely impact our business operations, guest services and
satisfaction
- Increases in fuel prices, changes in the types of fuel consumed
and availability of fuel supply may adversely impact our scheduled
itineraries and costs
- Fluctuations in foreign currency exchange rates may adversely
impact our financial results
- Overcapacity and competition in the cruise and land-based
vacation industry may lead to a decline in our cruise sales,
pricing and destination options
- Geographic regions in which we try to expand our business may
be slow to develop or ultimately not develop how we expect
- Inability to implement our shipbuilding programs and ship
repairs, maintenance and refurbishments may adversely impact our
business operations and the satisfaction of our guests
The ordering of the risk factors set forth above is not intended
to reflect our indication of priority or likelihood.
Forward-looking statements should not be relied upon as a
prediction of actual results. Subject to any continuing obligations
under applicable law or any relevant stock exchange rules, we
expressly disclaim any obligation to disseminate, after the date of
this document, any updates or revisions to any such forward-looking
statements to reflect any change in expectations or events,
conditions or circumstances on which any such statements are
based.
The financial information for the quarter ended May 31, 2020 is based on the company's internal
management accounts and reporting as of and for the 2020 second
quarter, as compared to the company's reviewed results for, or
financial metrics derived from, the company's 2019 second quarter.
The company has not yet completed its financial statement review
procedures for the 2020 second quarter and the foregoing
preliminary financial and other data for the 2020 second quarter
has been prepared by, and is the responsibility of, management
based on currently available information. The preliminary results
of operations are subject to revision as it prepares its financial
statements and disclosure for the 2020 second quarter, and such
revisions may be significant. In connection with its quarterly
closing and review process for the fiscal quarter with its
independent auditors, the company may identify items that would
require it to make adjustments to the preliminary results of
operations set forth above. As a result, the final results and
other disclosures for the 2020 second quarter may differ materially
from this preliminary data. This preliminary financial data should
not be viewed as a substitute for all financial statements prepared
in accordance with U.S. GAAP.
CARNIVAL
CORPORATION & PLC
NON-GAAP FINANCIAL
MEASURES
|
|
|
Three Months
Ended
May
31,
|
|
Six Months
Ended
May
31,
|
(in millions,
except per share data)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income
(loss)
|
|
|
|
|
|
|
|
U.S. GAAP net income
(loss)
|
$
|
(4,374)
|
|
|
$
|
451
|
|
|
$
|
(5,155)
|
|
|
$
|
787
|
|
(Gains) losses on ship sales
and impairments
|
1,953
|
|
|
(16)
|
|
|
2,882
|
|
|
(14)
|
|
Restructuring
expenses
|
39
|
|
|
—
|
|
|
39
|
|
|
—
|
|
Other
|
—
|
|
|
22
|
|
|
3
|
|
|
22
|
|
Adjusted net income
(loss)
|
$
|
(2,382)
|
|
|
$
|
457
|
|
|
$
|
(2,231)
|
|
|
$
|
795
|
|
Weighted-average
shares outstanding
|
721
|
|
|
693
|
|
|
702
|
|
|
694
|
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
U.S. GAAP diluted
earnings per share
|
$
|
(6.07)
|
|
|
$
|
0.65
|
|
|
$
|
(7.34)
|
|
|
$
|
1.13
|
|
(Gains) losses on ship sales
and impairments
|
2.71
|
|
|
(0.02)
|
|
|
4.10
|
|
|
(0.02)
|
|
Restructuring
expenses
|
0.05
|
|
|
—
|
|
|
0.06
|
|
|
—
|
|
Other
|
—
|
|
|
0.03
|
|
|
—
|
|
|
0.03
|
|
Adjusted earnings per
share
|
$
|
(3.30)
|
|
|
$
|
0.66
|
|
|
$
|
(3.18)
|
|
|
$
|
1.15
|
|
|
|
|
|
|
|
|
|
Explanations of Non-GAAP Financial
Measures
Non-GAAP Financial Measures
We use adjusted net income and adjusted earnings per share as
non-GAAP financial measures of our cruise segments' and the
company's financial performance. These non-GAAP financial measures
are provided along with U.S. GAAP net income (loss) and U.S. GAAP
diluted earnings per share.
We believe that gains and losses on ship sales, impairment
charges, restructuring costs and other gains and 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 these items to be excluded from our net income
(loss) and earnings per share and, accordingly, we present adjusted
net income and adjusted earnings per share excluding these
items.
The presentation of our non-GAAP financial information is not
intended to be considered in isolation from, as substitute for, or
superior to the financial information prepared in accordance with
U.S. GAAP. It is possible that our non-GAAP financial measures may
not be exactly comparable to the like-kind information presented by
other companies, which is a potential risk associated with using
these measures to compare us to other companies.
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SOURCE Carnival Corporation & plc