TIDMCCL
June 18, 2020
CARNIVAL CORPORATION & PLC REPORTS SUMMARY SECOND QUARTER RESULTS AND OTHER
MATTERS
Carnival Corporation & plc (the "company") is disclosing summary preliminary
financial information for the quarter ended May 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 May 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
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 * Adjusted earnings per share
expenses
* Currency exchange rates * Impact of the COVID-19 coronavirus global
pandemic on our financial condition and
* Net cruise costs, results of operations
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 Six Months Ended
May 31, May 31,
(in millions, except per share data) 2020 2019 2020 2019
Net income (loss)
U.S. GAAP net income (loss) $ (4,374) $ 451 $ (5,155) $ 787
(Gains) losses on ship sales and 1,953 (16) 2,882 (14)
impairments
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 $ (6.07) $ 0.65 $ (7.34) $ 1.13
share
(Gains) losses on ship sales and 2.71 (0.02) 4.10 (0.02)
impairments
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.
END
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