SEC Filing | Carnival Corporation & plc

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ccl-20210531

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-9610 Commission file number: 001-15136

Carnival Corporation

https://cdn.kscope.io/7cec2c654bbcddcb68c59b2b626a2e7c-ccl-20210531_g1.jpg

Carnival plc

(Exact name of registrant as
specified in its charter)

Republic of Panama

England and Wales

(State or other jurisdiction of
incorporation or organization)

59-1562976

98-0357772

(I.R.S. Employer Identification No.)

3655 N.W. 87th Avenue

Carnival House, 100 Harbour Parade

Miami,

Florida

33178-2428

Southampton

SO15 1ST

United Kingdom

(Address of principal
executive offices)
(Zip Code)


(305)	599-2600	011	44 23 8065 5000
(Registrant’s telephone number, including area code)		(Registrant’s telephone number, including area code)

None		None
(Former name, former address and former fiscal year, if changed since last report)		(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.01 par value)	CCL	New York Stock Exchange, Inc.
Ordinary Shares each represented by American Depository Shares ($1.66 par value), Special Voting Share, GBP 1.00 par value and Trust Shares of beneficial interest in the P&O Princess Special Voting Trust	CUK	New York Stock Exchange, Inc.
1.875% Senior Notes due 2022	CUK22	New York Stock Exchange LLC
1.000% Senior Notes due 2029	CUK29	New York Stock Exchange LLC

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, smaller reporting companies, or emerging growth companies. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filers

☑

Accelerated filers

☐

Non-accelerated filers

☐

Smaller reporting companies

☐

Emerging growth companies

☐

If emerging growth companies, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑


At June 18, 2021, Carnival Corporation had outstanding 973,824,517 shares of Common Stock, $0.01 par value.						At June 18, 2021, Carnival plc had outstanding 184,132,549 Ordinary Shares $1.66 par value, one Special Voting Share, GBP 1.00 par value and 973,824,517 Trust Shares of beneficial interest in the P&O Princess Special Voting Trust.

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CARNIVAL CORPORATION & PLC

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART II - OTHER INFORMATION

Item 1.

Item 1A.

Item 6.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CARNIVAL CORPORATION & PLC

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(UNAUDITED)

(in millions, except per share data)


	Three Months Ended May 31,				Six Months Ended May 31,
	2021		2020		2021		2020
Revenues
Passenger ticket	$	20	$	446	$	23	$	3,680
Onboard and other	29		294		52		1,849
	50		740		75		5,529
Operating Costs and Expenses
Commissions, transportation and other	22		297		37		1,064
Onboard and other	15		114		22		585
Payroll and related	241		705		460		1,315
Fuel	113		201		216		598
Food	17		108		28		385
Ship and other impairments	49		589		49		919
Other operating	224		471		404		1,142
	681		2,484		1,216		6,007
Selling and administrative	417		492		879		1,170
Depreciation and amortization	567		577		1,119		1,147
Goodwill impairments	—		1,364		—		2,096
	1,665		4,918		3,214		10,420
Operating Income (Loss)	(1,616)		(4,177)		(3,139)		(4,891)
Nonoperating Income (Expense)
Interest income	4		6		7		11
Interest expense, net of capitalized interest	(437)		(182)		(835)		(237)

Other income (expense), net	(11)		(32)		(71)		(39)
	(444)		(208)		(900)		(265)
Income (Loss) Before Income Taxes	(2,060)		(4,385)		(4,039)		(5,155)
Income Tax Benefit (Expense), Net	(12)		11		(6)		—
Net Income (Loss)	$	(2,072)	$	(4,374)	$	(4,045)	$	(5,155)
Earnings Per Share
Basic	$	(1.83)	$	(6.07)	$	(3.63)	$	(7.34)
Diluted	$	(1.83)	$	(6.07)	$	(3.63)	$	(7.34)

The accompanying notes are an integral part of these consolidated financial statements.

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CARNIVAL CORPORATION & PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in millions)


	Three Months Ended May 31,				Six Months Ended May 31,
	2021		2020		2021		2020
Net Income (Loss)	$	(2,072)	$	(4,374)	$	(4,045)	$	(5,155)
Items Included in Other Comprehensive Income (Loss)
Change in foreign currency translation adjustment	104		23		303		48
Other	3		43		7		56
Other Comprehensive Income (Loss)	107		65		310		103
Total Comprehensive Income (Loss)	$	(1,965)	$	(4,309)	$	(3,735)	$	(5,052)

The accompanying notes are an integral part of these consolidated financial statements.

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CARNIVAL CORPORATION & PLC

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in millions, except par values)


	May 31, 2021		November 30, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	7,067	$	9,513
Short-term investments	2,204		—
Trade and other receivables, net	218		273
Inventories	308		335
Prepaid expenses and other	400		443
Total current assets	10,198		10,563
Property and Equipment, Net	39,499		38,073
Operating Lease Right-of-Use Assets	1,415		1,370
Goodwill	818		807
Other Intangibles	1,198		1,186
Other Assets	1,936		1,594
	$	55,064	$	53,593
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term borrowings	$	3,099	$	3,084
Current portion of long-term debt	1,708		1,742
Current portion of operating lease liabilities	142		151
Accounts payable	499		624
Accrued liabilities and other	1,314		1,144
Customer deposits	1,992		1,940
Total current liabilities	8,754		8,686
Long-Term Debt	25,968		22,130
Long-Term Operating Lease Liabilities	1,317		1,273
Other Long-Term Liabilities	1,149		949
Contingencies and Commitments
Shareholders’ Equity
Common stock of Carnival Corporation, $0.01 par value; 1,960 shares authorized; 1,104 shares at 2021 and 1,060 shares at 2020 issued	11		11
Ordinary shares of Carnival plc, $1.66 par value; 217 shares at 2021 and 2020 issued	361		361
Additional paid-in capital	15,005		13,948
Retained earnings	12,030		16,075
Accumulated other comprehensive income (loss) (“AOCI”)	(1,126)		(1,436)
Treasury stock, 130 shares at 2021 and 2020 of Carnival Corporation and 59 shares at 2021 and 60 shares at 2020 of Carnival plc, at cost	(8,404)		(8,404)
Total shareholders’ equity	17,876		20,555
	$	55,064	$	53,593

The accompanying notes are an integral part of these consolidated financial statements.

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CARNIVAL CORPORATION & PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in millions)


	Six Months Ended May 31,
	2021		2020
OPERATING ACTIVITIES
Net income (loss)	$	(4,045)	$	(5,155)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization	1,119		1,147
Impairments	66		3,015

Share-based compensation	66		38
Amortization of discounts and debt issue costs	83		33
Noncash lease expense	71		99
(Gain) loss on ship sales and other, net	80		(76)
	(2,559)		(900)
Changes in operating assets and liabilities
Receivables	31		(202)
Inventories	—		58
Prepaid expenses and other	(696)		171
Accounts payable	(119)		1,052
Accrued liabilities and other	236		3
Customer deposits	245		(1,987)
Net cash provided by (used in) operating activities	(2,862)		(1,804)
INVESTING ACTIVITIES
Purchases of property and equipment	(2,157)		(1,668)
Proceeds from sales of ships and other	324		236
Purchase of minority interest	(90)		(81)
Purchase of short-term investments	(2,671)		—
Proceeds from maturity of short-term investments	467		—
Derivative settlements and other, net	(27)		257
Net cash provided by (used in) investing activities	(4,155)		(1,256)
FINANCING ACTIVITIES
Proceeds from (repayments of) short-term borrowings, net	17		3,333
Principal repayments of long-term debt	(1,365)		(383)
Proceeds from issuance of long-term debt	4,980		6,674
Dividends paid	—		(689)
Purchases of treasury stock	—		(12)
Issuance of common stock, net	996		558
Debt issue costs and other, net	(104)		(56)
Net cash provided by (used in) financing activities	4,523		9,425
Effect of exchange rate changes on cash, cash equivalents and restricted cash	19		1
Net increase (decrease) in cash, cash equivalents and restricted cash	(2,474)		6,366
Cash, cash equivalents and restricted cash at beginning of period	9,692		530
Cash, cash equivalents and restricted cash at end of period	$	7,218	$	6,896

The accompanying notes are an integral part of these consolidated financial statements.

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CARNIVAL CORPORATION & PLC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(in millions)


	Three Months Ended
	Common stock		Ordinary shares		Additional paid-in capital		Retained earnings		AOCI		Treasury stock		Total shareholders’ equity
At February 29, 2020	$	7	$	358	$	8,829	$	25,527	$	(2,028)	$	(8,404)	$	24,290
Net income (loss)	—		—		—		(4,374)		—		—		(4,374)
Other comprehensive income (loss)	—		—		—		—		65		—		65
Issuance of common stock through underwritten public offering (net of offering expenses and underwriters’ discount)	1		—		555		—		—		—		556
Equity component of Convertible Senior Notes	—		—		286		—		—		—		286
Purchases of treasury stock under the Repurchase Program and other	—		2		12		2		—		—		16
At May 31, 2020	$	7	$	360	$	9,683	$	21,155	$	(1,962)	$	(8,404)	$	20,840

At February 28, 2021	$	11	$	361	$	14,977	$	14,102	$	(1,233)	$	(8,404)	$	19,813
Net income (loss)	—		—		—		(2,072)		—		—		(2,072)
Other comprehensive income (loss)	—		—		—		—		107		—		107
Other	—		—		28		—		—		—		28
At May 31, 2021	$	11	$	361	$	15,005	$	12,030	$	(1,126)	$	(8,404)	$	17,876


	Six Months Ended
	Common stock		Ordinary shares		Additional paid-in capital		Retained earnings		AOCI		Treasury stock		Total shareholders’ equity
At November 30, 2019	$	7	$	358	$	8,807	$	26,653	$	(2,066)	$	(8,394)	$	25,365
Net income (loss)	—		—		—		(5,155)		—		—		(5,155)
Other comprehensive income (loss)	—		—		—		—		103		—		103
Cash dividends declared ($0.50 per share)	—		—		—		(342)		—		—		(342)
Issuance of common stock through underwritten public offering (net of offering expenses and underwriters’ discount)	1		—		555		—		—		—		556
Equity component of Convertible Senior Notes	—		—		286		—		—		—		286
Purchases of treasury stock under the Repurchase Program and other	—		2		35		—		—		(10)		27
At May 31, 2020	$	7	$	360	$	9,683	$	21,155	$	(1,962)	$	(8,404)	$	20,840

At November 30, 2020	$	11	$	361	$	13,948	$	16,075	$	(1,436)	$	(8,404)	$	20,555
Net income (loss)	—		—		—		(4,045)		—		—		(4,045)
Other comprehensive income (loss)	—		—		—		—		310		—		310
Issuance of common stock, net	—		—		996		—		—		—		997
Other	—		—		60		—		—		—		60


At May 31, 2021	$	11	$	361	$	15,005	$	12,030	$	(1,126)	$	(8,404)	$	17,876

The accompanying notes are an integral part of these consolidated financial statements.

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CARNIVAL CORPORATION & PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – General

The consolidated financial statements include the accounts of Carnival Corporation and Carnival plc and their respective subsidiaries. Together with their consolidated subsidiaries, they are referred to collectively in these consolidated financial statements and elsewhere in this joint Quarterly Report on Form 10-Q as “Carnival Corporation & plc,” “our,” “us” and “we.”

Liquidity and Management’s Plans

In the face of the global impact of COVID-19, we paused our guest cruise operations in mid-March 2020. As of May 31, 2021, five of our ships were operating with guests onboard. Eight of our nine brands either have resumed or are announced to resume guest operations by November 30, 2021, as part of our phased return to service. Significant events affecting travel, including COVID-19 and our phased resumption of guest cruise operations, have had and continue to have an impact on booking patterns. The full extent of the impact will be determined by our phased return to service and the length of time COVID-19 influences travel decisions. We believe that the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have, a material negative impact on our financial results and liquidity.

The estimation of our future liquidity requirements includes numerous assumptions that are subject to various risks and uncertainties. The principal assumptions used to estimate our future liquidity requirements consist of:

•Expected continued phased resumption of guest cruise operations

•Expected lower than comparable historical occupancy levels during the resumption of guest cruise operations

•Expected incremental spend for the resumption of guest cruise operations, for bringing our ships out of pause status, returning crew members to our ships and implementing enhanced health and safety protocols

In addition, we make certain assumptions about new ship deliveries, improvements and disposals, and consider the future export credit financings that are associated with the ship deliveries.

We cannot make assurances that our assumptions used to estimate our liquidity requirements may not change because we have never previously experienced a complete cessation of our guest cruise operations, and as a consequence, our ability to be predictive is uncertain. In addition, the magnitude and duration of the global pandemic are uncertain. We have made reasonable estimates and judgments of the impact of COVID-19 within our consolidated financial statements and there may be changes to those estimates in future periods. We continue to expect a net loss on both a U.S. GAAP and adjusted basis for the third quarter of 2021 and the full year ending November 30, 2021. We have taken actions to improve our liquidity, including completing various capital market transactions, capital expenditure and operating expense reductions, accelerating the removal of certain ships from our fleet and expect to continue to pursue refinancing opportunities to reduce interest expense and extend maturities.

Based on these actions and our assumptions regarding the impact of COVID-19, and considering our $9.3 billion of cash and short-term investments at May 31, 2021, we have concluded that we have sufficient liquidity to satisfy our obligations for at least the next twelve months.

Basis of Presentation

The Consolidated Statements of Income (Loss), the Consolidated Statements of Comprehensive Income (Loss) and the Consolidated Statements of Shareholders’ Equity for the three and six months ended May 31, 2021 and 2020, Consolidated Statements of Cash Flows for the six months ended May 31, 2021 and 2020, and the Consolidated Balance Sheet at May 31, 2021 are unaudited and, in the opinion of our management, contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement. Our interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Carnival Corporation & plc 2020 joint Annual Report on Form 10-K (“Form 10-K”) filed with the U.S. Securities and Exchange Commission on January 26, 2021.

COVID-19 and the Use of Estimates and Risks and Uncertainty

The preparation of our interim consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported and disclosed. The full extent to which the effects of COVID-19 will directly or indirectly impact our business, operations, results of operations and financial condition, including our valuation of goodwill and trademarks, impairment of ships, collectability of trade and notes receivables as well as provisions for pending litigation, will depend on future

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developments that are highly uncertain. We have made reasonable estimates and judgments of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods.

Accounting Pronouncements

The Financial Accounting Standards Board issued guidance, Debt - Debt with Conversion and Other Options and Derivative and Hedging - Contracts in Entity's Own Equity, which simplifies the accounting for convertible instruments. This guidance eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is required to be adopted by us in the first quarter of 2023 and must be applied using either a modified or full retrospective approach. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

NOTE 2 – Revenue and Expense Recognition

Guest cruise deposits are initially included in customer deposit liabilities when received. Customer deposits are subsequently recognized as cruise revenues, together with revenues from onboard and other activities, and all associated direct costs and expenses of a voyage are recognized as cruise costs and expenses, upon completion of voyages with durations of ten nights or less and on a pro rata basis for voyages in excess of ten nights. The impact of recognizing these shorter duration cruise revenues and costs and expenses on a completed voyage basis versus on a pro rata basis is not material. Certain of our product offerings are bundled and we allocate the value of the bundled services and goods between passenger ticket revenues and onboard and other revenues based upon the estimated standalone selling prices of those goods and services. Guest cancellation fees, when applicable, are recognized in passenger ticket revenues at the time of cancellation.

Our sales to guests of air and other transportation to and from airports near the home ports of our ships are included in passenger ticket revenues, and the related costs of purchasing these services are included in transportation costs. The proceeds that we collect from the sales of third-party shore excursions are included in onboard and other revenues and the related costs are included in onboard and other costs. The amounts collected on behalf of our onboard concessionaires, net of the amounts remitted to them, are included in onboard and other revenues as concession revenues. All of these amounts are recognized on a completed voyage or pro rata basis as discussed above.

Passenger ticket revenues include fees, taxes and charges collected by us from our guests. A portion of these fees, taxes and charges vary with guest head counts and are directly imposed on a revenue-producing arrangement. This portion of the fees, taxes and charges is expensed in commissions, transportation and other costs when the corresponding revenues are recognized. For the three and six months ended May 31, fees, taxes, and charges included in commissions, transportation and other costs were not significant in 2021 and were $41 million and $215 million in 2020. The remaining portion of fees, taxes and charges are expensed in other operating expenses when the corresponding revenues are recognized.

Revenues and expenses from our hotel and transportation operations, which are included in our Tour and Other segment, are recognized at the time the services are performed. Revenues from the long-term leasing of ships, which are also included in our Tour and Other segment, are recognized ratably over the term of the agreement.

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Customer Deposits

Our payment terms generally require an initial deposit to confirm a reservation, with the balance due prior to the voyage. Cash received from guests in advance of the cruise is recorded in customer deposits and in other long-term liabilities on our Consolidated Balance Sheets. These amounts include refundable deposits. We are providing flexibility to guests with bookings on sailings cancelled due to the pause in cruise operations by allowing guests to receive enhanced future cruise credits (“FCC”) or elect to receive refunds in cash. We have paid and expect to continue to pay cash refunds of customer deposits with respect to a portion of these cancelled cruises. The amount of cash refunds to be paid may depend on the level of guest acceptance of FCCs and future cruise cancellations. We record a liability for FCCs to the extent we have received cash from guests with bookings on cancelled sailings. We had customer deposits of $2.5 billion as of May 31, 2021 and $2.2 billion as of November 30, 2020. As of May 31, 2021, the current portion of customer deposits was $2.0 billion. This amount includes deposits related to cancelled cruises prior to the election of a cash refund by guests. Refunds payable to guests who have elected cash refunds are recorded in accounts payable. Due to the uncertainty associated with the duration and extent of COVID-19, we are unable to estimate the amount of the May 31, 2021 customer deposits that will be recognized in earnings compared to amounts that will be refunded to customers or issued as a credit for future travel. During the six months ended May 31, 2021 and 2020, we recognized revenues of an immaterial amount and $3.5 billion, respectively, related to our customer deposits as of November 30, 2020 and 2019. Historically, our customer deposits balance changes due to the seasonal nature of cash collections, the recognition of revenue, refund of customer deposits and foreign currency translation.

Contract Receivables

Although we generally require full payment from our customers prior to or concurrently with their cruise, we grant credit terms to a relatively small portion of our revenue source. We also have receivables from credit card merchants for cruise ticket purchases and onboard revenue. These receivables are included within trade and other receivables, net.

Contract Assets

Contract assets are amounts paid prior to the start of a voyage, which we record as an asset within prepaid expenses and other and which are subsequently recognized as commissions, transportation and other at the time of revenue recognition or at the time of voyage cancellation. We have contract assets of an immaterial amount as of May 31, 2021 and November 30, 2020.

NOTE 3 – Debt

Export Credit Facility Borrowings

In December 2020, we borrowed $1.5 billion under export credit facilities due in semi-annual installments through 2033.

2027 Senior Unsecured Notes

In February 2021, we issued an aggregate principal amount of $3.5 billion senior unsecured notes that mature on March 1, 2027 (the “2027 Senior Unsecured Notes”). The 2027 Senior Unsecured Notes bear interest at a rate of 5.8% per year. The 2027 Senior Unsecured Notes are guaranteed by Carnival plc and the same subsidiaries of Carnival Corporation & plc that guarantee the 2023 Secured Notes, 2026 Secured Notes, 2027 Senior Secured Notes and 2026 Senior Unsecured Notes, and are unsecured. The indenture governing the 2027 Senior Unsecured Notes contains covenants that are substantially similar to the covenants in the indentures governing the 2026 Senior Unsecured Notes and, except for the unsecured nature of the 2027 Senior Unsecured Notes, the indentures governing the 2023 Secured Notes, 2026 Secured Notes and 2027 Secured Notes and the credit agreement governing the 2025 Secured Term Loan. These covenants are subject to a number of important limitations and exceptions.

Covenant Compliance

Our export credit facilities contain one or more covenants that require us to:

•Maintain minimum interest coverage (EBITDA to consolidated net interest charges for the most recently ended four fiscal quarters) (the “Interest Coverage Covenant”) of not less than 3.0 to 1.0 at the end of each fiscal quarter

•Maintain minimum shareholders’ equity of $5.0 billion

•Limit our debt to capital percentage (the “Debt to Capital Covenant”) to 65% at the end of each fiscal quarter

•Limit the amounts of our secured assets as well as secured and other indebtedness

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We entered into supplemental agreements to waive compliance with the Interest Coverage Covenant and the Debt to Capital Covenant under our export credit facilities through August 31, 2022 or November 30, 2022, as applicable. We will be required to comply beginning with the next testing date of November 30, 2022 or February 28, 2023, as applicable.

During the first quarter of 2021 we entered into supplemental agreements with respect to our $3.1 billion ($1.7 billion, €1.0 billion and £150 million) multi-currency revolving credit facility (the “Revolving Credit Facility”) and many of our bank loans. These agreements now contain one or more covenants that require us to:

•Maintain the Interest Coverage Covenant at the end of each fiscal quarter from February 28, 2023, at a ratio of not less than 2.0 to 1.0 for the February 28, 2023 and May 31, 2023 testing dates, 2.5 to 1.0 for the August 31, 2023 and November 30, 2023 testing dates, and 3.0 to 1.0 for the February 28, 2024 testing date onwards, or through their respective maturity dates.

•Maintain minimum shareholders’ equity of $5.0 billion.

•Maintain the Debt to Capital Covenant at the end of each fiscal quarter before the November 30, 2021 testing date at a percentage not to exceed 65%. From the November 30, 2021 testing date until the May 31, 2023 testing date, the Debt to Capital Covenant is not to exceed 75%, following which it will be tested at levels which decline ratably to 65% from the May 31, 2024 testing date onwards.

•Maintain minimum liquidity of $1.0 billion through November 30, 2022.

•Adhere to certain restrictive covenants through November 30, 2024.

•Restrict the granting of guarantees and security interests for certain of our outstanding debt through November 30, 2024.

At May 31, 2021, we were in compliance with the applicable covenants under our debt agreements.

Generally, if an event of default under any debt agreement occurs, then, pursuant to cross default acceleration clauses, substantially all of our outstanding debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated. Any financial covenant amendment may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable.

As of May 31, 2021, the scheduled maturities of our debt are as follows:


(in millions)
Year	Principal Payments
2021 3Q	$	259
2021 4Q	328
2022	2,782
2023	6,373
2024 (a)	4,571
2025	3,994
Thereafter	13,168
Total	$	31,475

(a)Includes the $3.1 billion Revolving Credit Facility. The Revolving Credit Facility was fully drawn in 2020 for six month terms. The maturities for these borrowings are currently extended through September 2021. We may re-borrow such amounts through August 2024 subject to satisfaction of the conditions in the facility. The Revolving Credit Facility also includes an emissions linked margin adjustment whereby, after the initial applicable margin is set per the margin pricing grid, the margin may be adjusted based on performance in achieving certain agreed annual carbon emissions goals. We are required to pay a commitment fee on any undrawn portion.

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NOTE 4 – Contingencies and Commitments

Litigation

We are routinely involved in legal proceedings, claims, disputes, regulatory matters and governmental inspections or investigations arising in the ordinary course of or incidental to our business, including those noted below. Additionally, as a result of the impact of COVID-19, litigation claims, enforcement actions, regulatory actions and investigations, including, but not limited to, those arising from personal injury and loss of life, have been and may, in the future, be asserted against us. We expect many of these claims and actions, or any settlement of these claims and actions, to be covered by insurance and historically the maximum amount of our liability, net of any insurance recoverables, has been limited to our self-insurance retention levels.

We record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.

Legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could involve substantial monetary damages. In addition, in matters for which conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices or requiring other remedies. An unfavorable outcome might result in a material adverse impact on our business, results of operations, financial position or liquidity.

As previously disclosed, on May 2, 2019, two lawsuits were filed against Carnival Corporation in the U.S. District Court for the Southern District of Florida under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act, alleging that Carnival “trafficked” in confiscated Cuban property when certain ships docked at certain ports in Cuba, and that this alleged “trafficking” entitles the plaintiffs to treble damages (the “Cuba matters”). On July 9, 2020, the court granted our motion for judgment on the pleadings in the Cuba matter filed by Javier Garcia Bengochea, and dismissed the plaintiff’s action with prejudice. On August 6, 2020, Bengochea filed a notice of appeal. On January 21, 2021, the court continued the trial date in the second Cuba matter to January 31, 2022. We continue to believe we have a meritorious defense to these actions and we believe that any liability which may arise as a result of these actions will not have a material impact on our consolidated financial statements.

Contingent Obligations – Indemnifications

Some of the debt contracts we enter into include indemnification provisions obligating us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes or changes in laws which increase the lender’s costs. There are no stated or notional amounts included in the indemnification clauses, and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses.

Other Contingencies

We have agreements with a number of credit card processors that transact customer deposits related to our cruise vacations. Certain of these agreements allow the credit card processors to request under certain circumstances that we provide a reserve fund in cash. Although the agreements vary, these requirements may generally be satisfied either through a withheld percentage of customer payments or providing cash funds directly to the credit card processor. As of May 31, 2021 and November 30, 2020, we had $939 million and $423 million, respectively, in reserve funds relating to our customer deposits to satisfy these requirements which are included within other assets. We expect a portion of new customer deposits to be withheld under these agreements. Additionally, as of May 31, 2021 and November 30, 2020 we had $166 million of cash collateral in escrow, of which $136 million is included within prepaid expenses and other.

We have and may continue to be impacted by breaches in data security and lapses in data privacy, which occur from time to time. These can vary in scope and intent from inadvertent events to malicious motivated attacks.

We detected ransomware attacks in August 2020 and December 2020 which resulted in unauthorized access to our information technology systems. We engaged a major cybersecurity firm to investigate these matters and notified law enforcement and regulators of these incidents. For the August 2020 event, the investigation phase is complete, as are the communication and reporting phases. We determined that the unauthorized third-party gained access to certain personal information relating to some guests, employees and crew for some of our operations. For the December 2020 event, the investigation and remediation phases are in process and regulators have been notified.

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We have been contacted by various regulatory agencies regarding these and other cyber incidents. The New York Department of Financial Services (“NY DFS”) has notified us of their intent to commence proceedings seeking penalties if settlement cannot be reached in advance of litigation. To date, we have not been able to reach an agreement with NY DFS. In addition, State Attorneys General from a number of states are currently investigating a data security event announced in March 2020 and have indicated an intent to seek a negotiated settlement.

We continue to work with regulators regarding cyber incidents we have experienced. We have incurred legal and other costs in connection with cyber incidents that have impacted us. While at this time we do not believe that these incidents will have a material adverse effect on our business, operations or financial results, no assurances can be given about the future and we may be subject to future litigation, attacks or incidents that could have such a material adverse effect.

COVID-19 Actions

Private Actions

We have been named in a number of individual actions related to COVID-19. Private parties have brought approximately 72 lawsuits as of June 21, 2021 in several U.S. federal and state courts as well as in France, Italy and Brazil. These actions include tort claims based on a variety of theories, including negligence and failure to warn. The plaintiffs in these actions allege a variety of injuries: some plaintiffs confined their claim to emotional distress, while others allege injuries arising from testing positive for COVID-19. A smaller number of actions include wrongful death claims.

Additionally, as of June 21, 2021, ten purported class actions have been brought by former guests from Ruby Princess, Diamond Princess, Grand Princess, Coral Princess, Costa Luminosa or Zaandam in several U.S. federal courts and in the Federal Court of Australia. These actions include tort claims based on a variety of theories, including negligence, gross negligence and failure to warn, physical injuries and severe emotional distress associated with being exposed to and/or contracting COVID-19 onboard.

All COVID-19 actions seek monetary damages and most seek additional punitive damages in unspecified amounts.

As previously disclosed, a consolidated class action complaint with new lead plaintiffs, the New England Carpenters Pension and Guaranteed Annuity Fund and the Massachusetts Laborers' Pension and Annuity Fund, was filed in the U.S. District Court for the Southern District of Florida on December 15, 2020 on behalf of all purchasers of Carnival Corporation common stock and/or Carnival plc American Depositary Shares, and sellers of put options and purchasers of call options on those securities, between September 16, 2019 and March 31, 2020, alleging violations of Sections 10(b) and 20(a) of the U.S. Securities and Exchange Act of 1934. On May 28, 2021, the court dismissed the complaint without prejudice. Plaintiff's current deadline to file a second amended complaint is July 2, 2021.

We continue to take proper actions to defend against the above claims.

Governmental Inquiries and Investigations

Federal and non-U.S. governmental agencies and officials are investigating or otherwise seeking information, testimony and/or documents, regarding COVID-19 incidents and related matters. We are investigating these matters internally and are cooperating with all requests. The investigations could result in the imposition of civil and criminal penalties in the future.

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Ship Commitments

As of May 31, 2021, we expect the timing of our new ship growth capital commitments to be as follows:


(in millions) Year
Remainder of 2021	$	1,263
2022	4,709
2023	2,517
2024	1,725
2025	1,017
Thereafter	—
	$	11,231

NOTE 5 – Fair Value Measurements, Derivative Instruments and Hedging Activities and Financial Risks

Fair Value Measurements

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured using inputs in one of the following three categories:

•Level 1 measurements are based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment.

•Level 2 measurements are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or market data other than quoted prices that are observable for the assets or liabilities.

•Level 3 measurements are based on unobservable data that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, certain estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized in a current or future market exchange.

Financial Instruments that are not Measured at Fair Value on a Recurring Basis


	May 31, 2021								November 30, 2020
	Carrying Value		Fair Value						Carrying Value		Fair Value
(in millions)			Level 1		Level 2		Level 3				Level 1		Level 2		Level 3
Assets
Long-term other assets (a)	$	43	$	—	$	26	$	19	$	45	$	—	$	17	$	18
Total	$	43	$	—	$	26	$	19	$	45	$	—	$	17	$	18
Liabilities
Fixed rate debt (b)	$	19,087	$	—	$	20,880	$	—	$	15,547	$	—	$	16,258	$	—
Floating rate debt (b)	12,389		—		11,872		—		12,034		—		11,412		—
Total	$	31,475	$	—	$	32,751	$	—	$	27,581	$	—	$	27,670	$	—

(a)Long-term other assets are comprised of notes receivable. The fair values of our Level 2 notes receivable were based on estimated future cash flows discounted at appropriate market interest rates. The fair values of our Level 3 notes receivable were estimated using risk-adjusted discount rates.

(b)The debt amounts above do not include the impact of interest rate swaps or debt issuance costs. The fair values of our publicly-traded notes were based on their unadjusted quoted market prices in markets that are not sufficiently active to be Level 1 and, accordingly, are considered Level 2. The fair values of our other debt were estimated based on current market interest rates being applied to this debt.

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Financial Instruments that are Measured at Fair Value on a Recurring Basis


	May 31, 2021						November 30, 2020
(in millions)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	7,067	$	—	$	—	$	9,513	$	—	$	—
Restricted cash	150		—		—		179		—		—

Short-term investments (a)	2,204		—		—		—		—		—

Total	$	9,422	$	—	$	—	$	9,692	$	—	$	—
Liabilities
Derivative financial instruments	$	—	$	8	$	—	$	—	$	10	$	—
Total	$	—	$	8	$	—	$	—	$	10	$	—

(a)Short term investments consist of marketable securities with original maturities of between three and twelve months.

Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis

Valuation of Goodwill and Trademarks

As a result of the phased resumption of guest cruise operations and its effect on our expected future operating cash flows, we performed interim discounted cash flow analyses for certain reporting units with goodwill as of May 31, 2021, and determined there was no impairment. For the three and six months ended May 31, 2020, we recognized goodwill impairment charges of $1.4 billion and $2.1 billion, respectively. We also performed trademark impairment reviews and determined there was no impairment to our trademarks.

The determination of the fair value of our reporting units’ goodwill and trademarks includes numerous assumptions that are subject to various risks and uncertainties. The effect of COVID-19 and the phased resumption have created some uncertainty in forecasting the operating results and future cash flows used in our impairment analyses. We believe that we have made reasonable estimates and judgments. A change in the conditions, circumstances or strategy (including decisions about the allocation of new ships amongst brands and the transfer of ships between brands), which influence determinations of fair value, may result in a need to recognize an additional impairment charge. The principal assumptions, all of which are considered Level 3 inputs, used in our cash flow analyses consisted of:

•The timing of our return to service, changes in market conditions and port or other restrictions

•Forecasted revenues net of our most significant variable costs, which are travel agent commissions, costs of air and other transportation, and certain other costs that are directly associated with onboard and other revenues including credit and debit card fees

•The allocation of new ships and the timing of the transfer or sale of ships amongst brands, as well as the estimated proceeds from ship sales

•Weighted-average cost of capital of market participants, adjusted for the risk attributable to the geographic regions in which these cruise brands operate

Refer to Note 1 - “General, COVID-19 and the Use of Estimates and Risks and Uncertainty” for additional discussion.

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	Goodwill
(in millions)	NAA Segment (a)		EA Segment (b)		Total
November 30, 2020	$	579	$	228	$	807
Foreign currency translation adjustment	—		11		11
May 31, 2021	$	579	$	239	$	818

(a)North America and Australia (“NAA”)

(b)Europe and Asia (“EA”)


	Trademarks
(in millions)	NAA Segment		EA Segment		Total
November 30, 2020	$	927	$	253	$	1,180
Foreign currency translation adjustment	—		12		12
May 31, 2021	$	927	$	265	$	1,192

Impairment of Ships

We review our long-lived assets for impairment whenever events or circumstances indicate potential impairment. As a result of the effect of COVID-19 on our business, we determined that one ship, which we expect to dispose of, had a net carrying value that exceeded its estimated undiscounted future cash flows as of May 31, 2021. We determined the fair value of this ship based on its estimated selling value. We believe that we have made reasonable estimates and judgments. A change in the principal assumptions, which influences the determination of fair value, may result in a need to perform additional impairment reviews. The principal assumptions, all of which are considered Level 3 inputs, used in our 2020 cash flow analyses consisted of:

•Timing of the respective ship's return to service, changes in market conditions and port or other restrictions

•Forecasted ship revenues net of our most significant variable costs, which are travel agent commissions, costs of air and other transportation and certain other costs that are directly associated with onboard and other revenues, including credit and debit card fees

•Timing of the sale of ships and estimated proceeds

We recognized a ship impairment charge of $49 million in our EA segment for both the three and six months ended May 31, 2021. For the three months ended May 31, 2020, we recognized $348 million and $150 million of ship impairment charges in our NAA and EA segments respectively, and $520 million and $308 million of ship impairment charges in our NAA and EA segments, respectively for the six months ended May 31, 2020. These impairments are included in other operating expenses of our Consolidated Statements of Income (Loss).

Refer to Note 1 - “General, COVID-19 and the Use of Estimates and Risks and Uncertainty” for additional discussion.

Derivative Instruments and Hedging Activities


(in millions)	Balance Sheet Location	May 31, 2021		November 30, 2020






Derivative liabilities
Derivatives designated as hedging instruments




Interest rate swaps (a)	Accrued liabilities and other	$	4	$	5
	Other long-term liabilities	4		5
Total derivative liabilities		$	8	$	10

(a)We have interest rate swaps designated as cash flow hedges whereby we receive floating interest rate payments in exchange for making fixed interest rate payments. These interest rate swap agreements effectively changed $212 million at May 31, 2021 and $248 million at November 30, 2020 of EURIBOR-based floating rate euro debt to fixed rate euro debt. At May 31, 2021, these interest rate swaps settle through 2025.

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Our derivative contracts include rights of offset with our counterparties. We have elected to net certain of our derivative assets and liabilities within counterparties.


	May 31, 2021
(in millions)	Gross Amounts		Gross Amounts Offset in the Balance Sheet		Total Net Amounts Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet		Net Amounts
Assets	$	—	$	—	$	—	$	—	$	—
Liabilities	$	8	$	—	$	8	$	—	$	8

	November 30, 2020
(in millions)	Gross Amounts		Gross Amounts Offset in the Balance Sheet		Total Net Amounts Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet		Net Amounts
Assets	$	—	$	—	$	—	$	—	$	—
Liabilities	$	10	$	—	$	10	$	—	$	10

The effect of our derivatives qualifying and designated as hedging instruments recognized in other comprehensive income (loss) and in net income (loss) was as follows:


	Three Months Ended May 31,				Six Months Ended May 31,
(in millions)	2021		2020		2021		2020
Gains (losses) recognized in AOCI:
Cross currency swaps - net investment hedges - included component	$	—	$	133	$	—	$	131
Cross currency swaps - net investment hedges - excluded component	$	—	$	(43)	$	—	$	(1)
Foreign currency zero cost collars - cash flow hedges	$	—	$	1	$	—	$	(1)
Foreign currency forwards - cash flow hedges	$	—	$	38	$	—	$	53
Interest rate swaps - cash flow hedges	$	1	$	4	$	2	$	4
Gains (losses) reclassified from AOCI - cash flow hedges:
Interest rate swaps - Interest expense, net of capitalized interest	$	(1)	$	(1)	$	(3)	$	(3)
Foreign currency zero cost collars - Depreciation and amortization	$	—	$	—	$	1	$	—
Gains (losses) recognized on derivative instruments (amount excluded from effectiveness testing – net investment hedges)
Cross currency swaps - Interest expense, net of capitalized interest	$	—	$	2	$	—	$	12

The amount of estimated cash flow hedges’ unrealized gains and losses that are expected to be reclassified to earnings in the next twelve months is not material.

Financial Risks

Fuel Price Risks

We manage our exposure to fuel price risk by managing our consumption of fuel. Substantially all of our exposure to market risk for changes in fuel prices relates to the consumption of fuel on our ships. We manage fuel consumption through ship maintenance practices, modifying our itineraries and implementing innovative technologies.

Foreign Currency Exchange Rate Risks

Overall Strategy

We manage our exposure to fluctuations in foreign currency exchange rates through our normal operating and financing activities, including netting certain exposures to take advantage of any natural offsets and, when considered appropriate, through the use of derivative and non-derivative financial instruments. Our primary focus is to monitor our exposure to, and manage, the economic foreign currency exchange risks faced by our operations and realized if we exchange one currency for another. We currently only hedge certain of our ship commitments and net investments in foreign operations. The financial impacts of the hedging instruments we do employ generally offset the changes in the underlying exposures being hedged.

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Operational Currency Risks

Our operations primarily utilize the U.S. dollar, Australian dollar, euro or sterling as their functional currencies. Our operations also have revenue and expenses denominated in non-functional currencies. Movements in foreign currency exchange rates affect our financial statements.

Investment Currency Risks

We consider our investments in foreign operations to be denominated in stable currencies and of a long-term nature. We partially mitigate the currency exposure of our investments in foreign operations by designating a portion of our foreign currency debt and derivatives as hedges of these investments. As of May 31, 2021, we have designated $497 million of our sterling-denominated debt as non-derivative hedges of our net investments in foreign operations. For the three and six months ended May 31, 2021, we recognized $8 million and $50 million of losses on these non-derivative net investment hedges in the cumulative translation adjustment section of other comprehensive income (loss). We also have $9 billion of euro-denominated debt, which provides an economic offset for our operations with euro functional currency.

Newbuild Currency Risks

Our shipbuilding contracts are typically denominated in euros. Our decision to hedge a non-functional currency ship commitment for our cruise brands is made on a case-by-case basis, considering the amount and duration of the exposure, market volatility, economic trends, our overall expected net cash flows by currency and other offsetting risks. We use foreign currency derivative contracts to manage foreign currency exchange rate risk for some of our ship construction payments.

At May 31, 2021, our remaining newbuild currency exchange rate risk primarily relates to euro-denominated newbuild contract payments to non-euro functional currency brands, which represent a total unhedged commitment of $6.8 billion for newbuilds scheduled to be delivered through 2025.

The cost of shipbuilding orders that we may place in the future that is denominated in a different currency than our cruise brands’ will be affected by foreign currency exchange rate fluctuations. These foreign currency exchange rate fluctuations may affect our decision to order new cruise ships.

Interest Rate Risks

We manage our exposure to fluctuations in interest rates through our debt portfolio management and investment strategies. We evaluate our debt portfolio to determine whether to make periodic adjustments to the mix of fixed and floating rate debt through the use of interest rate swaps and the issuance of new debt.

Concentrations of Credit Risk

As part of our ongoing control procedures, we monitor concentrations of credit risk associated with financial and other institutions with which we conduct significant business. We seek to manage these credit risk exposures, including counterparty nonperformance primarily associated with our cash equivalents, investments, notes receivables, future financing facilities, contingent obligations, derivative instruments, insurance contracts, long-term ship charters and new ship progress payment guarantees, by:

•Conducting business with well-established financial institutions, insurance companies and export credit agencies

•Diversifying our counterparties

•Having guidelines regarding credit ratings and investment maturities that we follow to help safeguard liquidity and minimize risk

•Generally requiring collateral and/or guarantees to support notes receivable on significant asset sales, long-term ship charters and new ship progress payments to shipyards

At May 31, 2021, our exposures under derivative instruments were not material. We also monitor the creditworthiness of travel agencies and tour operators in Asia, Australia and Europe, which includes charter-hire agreements in Asia and credit and debit card providers to which we extend credit in the normal course of our business. Concentrations of credit risk associated with trade receivables and other receivables, charter-hire agreements and contingent obligations are not considered to be material, principally due to the large number of unrelated accounts, the nature of these contingent obligations and their short maturities. Normally, we have not required collateral or other security to support normal credit sales. Historically, we have not experienced significant credit losses, including counterparty nonperformance, however, because of the impact COVID-19 is having on economies, we have experienced, and may continue to experience, an increase in credit losses.

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Our credit exposure also includes contingent obligations related to cash payments received directly by travel agents and tour operators for cash collected by them on cruise sales in Australia and most of Europe where we are obligated to honor our guests’ cruise payments made by them to their travel agents and tour operators regardless of whether we have received these payments.

NOTE 6 – Segment Information

Our operating segments are reported on the same basis as the internally reported information that is provided to our chief operating decision maker (“CODM”), who is the President and Chief Executive Officer of Carnival Corporation and Carnival plc. The CODM assesses performance and makes decisions to allocate resources for Carnival Corporation & plc based upon review of the results across all of our segments. Our four reportable segments are comprised of (1) NAA cruise operations, (2) EA cruise operations, (3) Cruise Support and (4) Tour and Other.

The operating segments within each of our NAA and EA reportable segments have been aggregated based on the similarity of their economic and other characteristics, including geographic guest sourcing. Our Cruise Support segment includes our portfolio of leading port destinations and other services, all of which are operated for the benefit of our cruise brands. Our Tour and Other segment represents the hotel and transportation operations of Holland America Princess Alaska Tours and other operations.

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	Three Months Ended May 31,
(in millions)	Revenues		Operating costs and expenses		Selling and administrative		Depreciation and amortization		Operating income (loss)
2021
NAA	$	9	$	365	$	233	$	341	$	(930)
EA	33		298		131		186		(582)
Cruise Support	—		7		43		33		(82)
Tour and Other	7		12		11		6		(21)
	$	50	$	681	$