Carnival Corporation & plc Provides a Business Update
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
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,
Costa is the first cruise company to earn the Biosafety Trust Certification from
The company is encouraged that the
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
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
Total customer deposits balance at
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
Increasing Liquidity
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
- Borrowed an aggregate principal amount of
$2.8 billion in two tranches under a first priority senior secured term loan facility onJune 30, 2020 . - Issued
$1.3 billion aggregate principal amount of second priority senior secured notes in two tranches onJuly 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 onAugust 10, 2020 . - Issued
$900 million aggregate principal amount of second priority senior secured notes onAugust 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 ofCarnival Corporation's common stock having an aggregate offering price of up to$1.0 billion through the sales agents (the "ATM Offering"). As ofOctober 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
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
The company's monthly average cash burn rate for the third quarter 2020 was
The company estimates non-newbuild capital expenditures during the fourth quarter of 2020 to be approximately
(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 |
(b) |
The company has principal balance of |
Financial Statements
Refer to the Form 10-Q dated
Conference Call
The company has scheduled a conference call with analysts at
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
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 |
• |
• 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 ofMay 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.
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