10-Q 1 ccl-20220228.htm 10-Q ccl-20220228
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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 February 28, 2022
OR
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
ccl-20220228_g1.jpg
Carnival plc
(Exact name of registrant as
specified in its charter)
(Exact name of registrant as
specified in its charter)
Republic of Panama
England and Wales
(State or other jurisdiction of
incorporation or organization)
(State or other jurisdiction of
incorporation or organization)
59-156297698-0357772
(I.R.S. Employer Identification No.)(I.R.S. Employer Identification No.)
3655 N.W. 87th AvenueCarnival House, 100 Harbour Parade
Miami,Florida33178-2428SouthamptonSO15 1STUnited Kingdom
(Address of principal
executive offices)
(Zip Code)
(Address of principal
executive offices)
(Zip Code)
(305)599-260001144 23 8065 5000
(Registrant’s telephone number,
including area code)
(Registrant’s telephone number,
including area code)
NoneNone
(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 classTrading 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 TrustCUK
New York Stock Exchange, Inc.
1.875% Senior Notes due 2022CUK22New York Stock Exchange LLC
1.000% Senior Notes due 2029CUK29New 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
1


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 March 21, 2022, Carnival Corporation had outstanding 989,700,876 shares of Common Stock, $0.01 par value.
At March 21, 2022, Carnival plc had outstanding 185,724,456 Ordinary Shares $1.66 par value, one Special Voting Share, GBP 1.00 par value and 989,700,876 Trust Shares of beneficial interest in the P&O Princess Special Voting Trust.

2

CARNIVAL CORPORATION & PLC

3

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 February 28,
 20222021
Revenues
  Passenger ticket$873 $3 
Onboard and other750 23 
1,623 26 
Operating Costs and Expenses
  Commissions, transportation and other251 15 
  Onboard and other209 7 
  Payroll and related506 218 
  Fuel365 103 
  Food136 11 
  Ship and other impairments8  
  Other operating557181 
2,030 535 
Selling and administrative530 462 
Depreciation and amortization554 552 
3,114 1,549 
Operating Income (Loss)(1,491)(1,524)
Nonoperating Income (Expense)
 Interest income3 3 
 Interest expense, net of capitalized interest(368)(398)
 Gains (losses) on debt extinguishment, net 2 
 Other income (expense), net(32)(62)
(397)(455)
Income (Loss) Before Income Taxes(1,888)(1,979)
Income Tax Benefit (Expense), Net(3)6 
Net Income (Loss)$(1,891)$(1,973)
Earnings Per Share
Basic$(1.66)$(1.80)
Diluted$(1.66)$(1.80)

The accompanying notes are an integral part of these consolidated financial statements.
4

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in millions)
 
 Three Months Ended February 28,
 20222021
Net Income (Loss)$(1,891)$(1,973)
Items Included in Other Comprehensive Income (Loss)
Change in foreign currency translation adjustment13 199 
Other2 4 
Other Comprehensive Income (Loss)16 203 
Total Comprehensive Income (Loss)$(1,876)$(1,770)
The accompanying notes are an integral part of these consolidated financial statements.

5

CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
 
 February 28,
2022
November 30, 2021
ASSETS
Current Assets
Cash and cash equivalents$6,414 $8,939 
Short-term investments515 200 
Trade and other receivables, net267 246 
Inventories392 356 
Prepaid expenses and other470 392 
  Total current assets8,057 10,133 
Property and Equipment, Net40,183 38,107 
Operating Lease Right-of-Use Assets 1,278 1,333 
Goodwill579 579 
Other Intangibles 1,181 1,181 
Other Assets2,002 2,011 
$53,281 $53,344 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term borrowings$2,741 $2,790 
Current portion of long-term debt2,272 1,927 
Current portion of operating lease liabilities 139 142 
Accounts payable772 797 
Accrued liabilities and other1,627 1,641 
Customer deposits3,367 3,112 
  Total current liabilities10,920 10,408 
Long-Term Debt29,887 28,509 
Long-Term Operating Lease Liabilities
1,190 1,239 
Other Long-Term Liabilities973 1,043 
Contingencies and Commitments
Shareholders’ Equity
Common stock of Carnival Corporation, $0.01 par value; 1,960 shares authorized; 1,120 shares at 2022 and 1,116 shares at 2021 issued
11 11 
Ordinary shares of Carnival plc, $1.66 par value; 217 shares at 2022 and 2021 issued
361 361 
Additional paid-in capital15,360 15,292 
Retained earnings4,493 6,448 
Accumulated other comprehensive income (loss) (“AOCI”)(1,486)(1,501)
Treasury stock, 130 shares at 2022 and 2021 of Carnival Corporation and 68 shares at 2022 and 67 shares at 2021 of Carnival plc, at cost
(8,428)(8,466)
  Total shareholders’ equity10,311 12,144 
$53,281 $53,344 
The accompanying notes are an integral part of these consolidated financial statements.
6

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
 Three Months Ended February 28,
 20222021
OPERATING ACTIVITIES
Net income (loss)$(1,891)$(1,973)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization554 552 
Impairments8 17 
(Gain) loss on debt extinguishment (2)
(Income) loss from equity-method investments11 8 
Share-based compensation26 40 
Amortization of discounts and debt issue costs46 42 
Noncash lease expense34 36 
Other, net5 44 
(1,207)(1,236)
Changes in operating assets and liabilities
Receivables(22)6 
Inventories(37)(1)
Prepaid expenses and other(44)(263)
Accounts payable(24)(128)
Accrued liabilities and other(65)167 
Customer deposits187 (49)
Net cash provided by (used in) operating activities(1,212)(1,503)
INVESTING ACTIVITIES
Purchases of property and equipment(2,730)(1,774)
Proceeds from sales of ships and other18 9 
Purchase of short-term investments(315)(1,840)
Derivative settlements and other, net(6)17 
Net cash provided by (used in) investing activities(3,032)(3,589)
FINANCING ACTIVITIES
Proceeds from (repayments of) short-term borrowings, net(48) 
Principal repayments of long-term debt(503)(668)
Proceeds from issuance of long-term debt2,347 4,980 
Issuance of common stock, net15 997 
Issuance of common stock under the Stock Swap Program27  
Purchase of treasury stock under the Stock Swap Program(23) 
Debt issue costs and other, net(86)(93)
Net cash provided by (used in) financing activities1,728 5,216 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(8)14 
Net increase (decrease) in cash, cash equivalents and restricted cash(2,524)138 
Cash, cash equivalents and restricted cash at beginning of period8,976 9,692 
Cash, cash equivalents and restricted cash at end of period$6,452 $9,829 

The accompanying notes are an integral part of these consolidated financial statements.
7

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
(in millions)
Common
stock
Ordinary
shares
Additional
paid-in
capital
Retained
earnings
AOCITreasury
stock
Total shareholders’ equity
At November 30, 2020$11 $361 $13,948 $16,075 $(1,436)$(8,404)$20,555 
Net income (loss)— — — (1,973)— — (1,973)
Other comprehensive income (loss)— — — — 203 — 203 
Issuance of common stock, net— — 996 — — — 997 
Share-based compensation and other— — 32 — — — 32 
At February 28, 2021$11 $361 $14,977 $14,102 $(1,233)$(8,404)$19,813 
At November 30, 2021$11 $361 $15,292 $6,448 $(1,501)$(8,466)$12,144 
Net income (loss)— — — (1,891)— — (1,891)
Other comprehensive income (loss)— — — — 16 — 16 
Issuances of common stock, net— 15 15 
Purchases and issuances under the Stock Swap program, net— — 27 — — (25)2 
Issuance of treasury shares for vested share-based awards— — — (63)63  
Share-based compensation and other— 26 — — 26 
At February 28, 2022$11 $361 $15,360 $4,493 $(1,486)$(8,428)$10,311 
The accompanying notes are an integral part of these consolidated financial statements.

8

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 February 28, 2022, 71% of our capacity had resumed guest cruise operations as part of our ongoing return to service. The extent of the effects of COVID-19 on our business are uncertain and will depend on future developments, including, but not limited to, the duration and continued severity of COVID-19 and the length of time it takes to return the company to profitability. The ongoing resumption of our guest cruise operations and the increased uncertainty given the current invasion of Ukraine, including its effect on the price of fuel, are collectively having a material negative impact on our business, including our liquidity, financial position and results of operations.

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:

Ongoing resumption of guest cruise operations, with each brand’s full fleet expected to be back in guest cruise operations for its respective summer season where we historically generate the largest share of our operating income
Expected sustained increase in revenue per passenger cruise day through a combination of both passenger ticket and onboard revenue as compared to 2019
Expected improvement in occupancy throughout 2022 until we return to historical occupancy levels in 2023
Expected continued spend to maintain enhanced health and safety protocols and to support the ongoing resumption of guest cruise operations, including completing the return of crew members to our ships
Fuel prices
Maintaining collateral and reserves at reasonable levels

In addition, we make certain assumptions about new ship deliveries, improvements and removals, and consider the future export credit financings that are associated with the new 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 and subsequent ongoing resumption 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 and the current invasion of Ukraine are uncertain. We have made reasonable estimates and judgments of the impact of these events within our consolidated financial statements and there may be changes to those estimates in future periods. We have taken actions to improve our liquidity, including completing various capital market transactions, capital expenditure and operating expense reductions and accelerating the removal of certain ships from our fleet. In addition, we expect to continue to pursue refinancing opportunities to reduce interest expense and extend maturities and if appropriate, obtain relevant financial covenant amendments.

Based on these actions and our assumptions regarding the impact of COVID-19, considering our $7.2 billion of liquidity including cash, short-term investments and borrowings available under our revolving facility at February 28, 2022, as well as our continued ongoing return to service, 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), the Consolidated Statements of Cash Flows and the Consolidated Statements of Shareholders’ Equity for the three months ended February 28, 2022 and 2021, and the Consolidated Balance Sheet at February 28, 2022 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 2021 joint Annual Report on Form 10-K (“Form 10-K”) filed with the U.S. Securities and Exchange Commission on January 27, 2022.
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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 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 months ended February 28, 2022 and 2021, fees, taxes, and charges included in commissions, transportation and other costs were $68 million and $41 million. 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.

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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 have provided flexibility to guests with bookings on sailings cancelled due to itinerary disruptions by allowing guests to rebook at a future date, receive enhanced future cruise credits (“FCC”) or elect to receive refunds in cash. Enhanced FCCs provide the guest with an additional credit value above the original cash deposit received, and the enhanced value is recognized as a discount applied to the future cruise in the period used. We have paid refunds of customer deposits with respect to a portion of cancelled cruises. The amount of any future cash refunds may depend on future cruise cancellations and guest rebookings. We record a liability for unexpired FCCs to the extent we have received and not refunded cash from guests for cancelled bookings. We had total customer deposits of $3.7 billion as of February 28, 2022 and $3.5 billion as of November 30, 2021. Refunds payable to guests who have elected cash refunds are recorded in accounts payable. During the three months ended February 28, 2022 and 2021, we recognized revenues of $1.0 billion and an immaterial amount related to our customer deposits as of November 30, 2021 and 2020. Historically, our customer deposits balance changes due to the seasonal nature of cash collections, the recognition of revenue, refunds 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. 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. These reserve funds are included in other assets.

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 had contract assets of $70 million as of February 28, 2022 and $55 million as of November 30, 2021.

NOTE 3 – Debt

Short-Term Borrowings

As of February 28, 2022 and November 30, 2021, our short-term borrowings consisted of $2.7 billion and $2.8 billion under our $1.7 billion, €1.0 billion and £0.2 billion revolving credit facility (the “Revolving Facility”).

Export Credit Facility Borrowings

During the first quarter of 2022, we borrowed $2.3 billion under export credit facilities due in semi-annual installments through 2034.

Covenant Compliance

As of February 28, 2022, our Revolving Facility, unsecured loans and export credit facilities contain certain covenants, the most restrictive of which require us to:

Maintain minimum interest coverage (adjusted EBITDA to consolidated net interest charges) 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 29, 2024 testing date onwards, or through their respective maturity dates
Maintain minimum shareholders’ equity of $5.0 billion
Limit our debt to capital (as defined) percentage from the November 30, 2021 testing date until the May 31, 2023 testing date, to a percentage 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 $1.5 billion through November 30, 2026
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Adhere to certain restrictive covenants through November 30, 2024
Limit the amounts of our secured assets as well as secured and other indebtedness

At February 28, 2022, 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.

Carnival Corporation or Carnival plc and certain of our subsidiaries have guaranteed substantially all of our indebtedness.

As of February 28, 2022, the scheduled maturities of our debt are as follows:
(in millions)
YearPrincipal Payments
2Q 2022$182 
3Q 2022409 
4Q 2022982 
20232,898 
2024 (a)4,825 
20254,522 
20264,598 
Thereafter17,304 
Total$35,721 

(a)Includes borrowings of $2.7 billion under our Revolving Facility. Amounts outstanding under our Revolving Facility were drawn in 2020 for an initial six-month term. We may continue to re-borrow or otherwise utilize available amounts under the Revolving Facility through August 2024, subject to satisfaction of the conditions in the facility. We had $0.3 billion available for borrowing under our Revolving Facility as of February 28, 2022. The Revolving 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 unutilized portion.

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 Corporation “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. In the matter filed by Havana Docks
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Corporation, the hearings on motions for summary judgment were concluded on January 18, 2022. On March 21, 2022, the court granted summary judgment in favor of Havana Docks Corporation as to liability. The amount of damages will be determined at the trial currently scheduled for May 23, 2022. We are assessing our options, including appealing this order. In the matter filed by Javier Bengochea, on October 4, 2021, the U.S. Court of Appeals for the Eleventh Circuit Court heard oral arguments and on December 20, 2021, the court issued an order inviting an amicus brief from the U.S. government on several issues involved in the appeal. We continue to believe we have a meritorious defense to these actions and we believe that any final liability which may arise as a result of these actions is unlikely to have a material impact on our consolidated financial statements.

As previously disclosed, on April 8, 2020, DeCurtis LLC (“DeCurtis”), a former vendor, filed an action against Carnival Corporation in the U.S. District Court for the Middle District of Florida seeking declaratory relief that DeCurtis is not infringing on several of Carnival Corporation’s patents in relation to its OCEAN Medallion systems and technology. The action also raises certain monopolization claims under The Sherman Antitrust Act of 1890, unfair competition and tortious interference, and seeks declaratory judgment that certain Carnival Corporation patents are unenforceable. DeCurtis seeks damages, including its fees and costs, and seeks declarations that it is not infringing and/or that Carnival Corporation’s patents are unenforceable. On April 10, 2020, Carnival Corporation filed an action against DeCurtis in the Southern District of Florida for breach of contract, trade secrets violations and patent infringement. Carnival Corporation seeks damages, including its fees and costs, as well as an order permanently enjoining DeCurtis from engaging in such activities. These two cases have now been consolidated in the Southern District of Florida. The parties’ motions to dismiss in both actions have been granted in part and denied in part. Answers have been filed by both parties. We believe the ultimate outcome will not have a material impact on our consolidated financial statements.

COVID-19 Actions

Private Actions

We have been named in a number of individual actions related to COVID-19. Private parties have brought approximately 73 individual lawsuits as of February 28, 2022 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. As of February 28, 2022, 63 of these individual actions have now been dismissed or settled and ten remain. These actions were settled for immaterial amounts.

Additionally, as of February 28, 2022, 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. As of February 28, 2022, nine of these class actions have either been settled individually or had their class allegations dismissed by the courts and one remains. These actions were settled for immaterial amounts.

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

As previously disclosed, on December 15, 2020, a consolidated class action with 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, alleging violations of Sections 10(b) and 20(a) of the U.S. Securities and Exchange Act of 1934 by making misrepresentations and omissions related to Carnival Corporation’s COVID-19 knowledge and response. Plaintiffs seek to recover unspecified damages and equitable relief for the alleged misstatements and omissions. The plaintiffs filed a second amended complaint on July 2, 2021 and on August 6, 2021, we filed a motion to dismiss, which has now been fully briefed.

We continue to take 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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Other Regulatory or Governmental Inquiries and Investigations

We have been, 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 responded to a cybersecurity event in May 2019 related to our email accounts, and 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 relevant law enforcement and regulators of these incidents.

For the May 2019 and August 2020 events, the investigation, communication and reporting phases are complete. We determined that, for each event, an unauthorized third-party gained access to certain email accounts, which contained personal information relating to some guests, employees and crew for some of our operations.
For the December 2020 event, the investigation, communication and reporting phases are complete. Regulators were notified, and several, including the primary regulatory authority in the European Union, have closed their files on this matter.

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 have completed their investigation of a data security event announced in March 2020, and the Company is currently negotiating a settlement with the relevant State Attorneys General.

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.

We are subject to a court-ordered environmental compliance plan supervised by the U.S. District Court for the Southern District of Florida, which is operative until mid-April 2022 and subjects our operations to additional review and other obligations. Failure to comply with the requirements of this environmental compliance plan or other special conditions of probation could result in fines, which the court has imposed in the past, including during the three months ended February 28, 2022 as reported in the Form 10-K, and restrictions on our operations.

On March 14, 2022, the United States Department of Justice and the United States Environmental Protection Agency notified Carnival Corporation & plc of potential civil penalties and injunctive relief for alleged Clean Water Act violations by owned and operated vessels covered by the 2013 Vessel General Permit. Carnival Corporation & plc is working with these agencies to reach a resolution of this matter. We do not expect this matter to have a material effect on our financial results.

Other Contingent Obligations
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.
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 February 28, 2022 and November 30, 2021, we had $1.1 billion in reserve funds related to our customer deposits withheld to satisfy these requirements which are included within other assets. We continue to expect to provide reserve funds under these agreements. Additionally, as of February 28, 2022 and November 30, 2021, we had $30 million of cash collateral in escrow which is included within other assets.

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Ship Commitments

As of February 28, 2022, we expect the timing of our new ship growth capital commitments to be as follows:
(in millions)
Year
Remainder of 2022$1,875 
20232,562 
20241,659 
2025984 
2026 
Thereafter 
$7,080 

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 
 February 28, 2022November 30, 2021
 Carrying
Value
Fair ValueCarrying
Value
Fair Value
(in millions)Level 1Level 2Level 3Level 1Level 2Level 3
Liabilities
Fixed rate debt (a)$20,899 $ $19,845 $ $19,555 $ $19,013 $ 
Floating rate debt (a)14,822  13,562  14,415  13,451  
Total$35,721 $ $33,407 $ $33,970 $ $32,463 $ 
 
(a)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
 February 28, 2022November 30, 2021
(in millions)Level 1Level 2Level 3Level 1Level 2Level 3
Assets
Cash and cash equivalents$6,414 $— $— $8,939 $— $— 
Short-term investments (a)515 — — 200 — — 
Derivative financial instruments— 5 — — 1 — 
Total$6,929 $5 $— $9,139 $1 $— 
Liabilities
Derivative financial instruments$— $18 $— $— $13 $— 
Total$— $18 $— $— $13 $— 

(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 
The determination of the fair value of our reporting units’ goodwill and trademarks includes numerous estimates and underlying assumptions that are subject to various risks and uncertainties.

Goodwill
(in millions)NAA
Segment (a)
EA
Segment (b)
Total
November 30, 2021$579 $— $579 
Exchange movements — — 
February 28, 2022$579 $— $579 

(a)North America and Australia (NAA”)
(b)Europe and Asia (EA”)

Trademarks
(in millions)NAA
Segment
EA
Segment
Total
November 30, 2021$927 $248 $1,175 
Exchange movements$ — — 
February 28, 2022$927 $248 $1,175 

Impairment of Ships

We review our long-lived assets for impairment whenever events or circumstances indicate potential impairment. As a result of the continued effect of COVID-19 on our business, and our updated expectations of the estimated selling values for certain of our ships, we determined that a ship had a net carrying value that exceeded its estimated discounted future cash flows. We compared the estimated selling value to the net carrying value and, as a result, recognized ship impairment charges as summarized in the table below. The principal assumption used in our cash flow analyses was the timing of the sale and its proceeds, which is considered a Level 3 input. We believe that we have made reasonable estimates and judgments as part of our assessment. A change in the principal assumptions, which influences the determination of fair value, may result in a need to perform additional impairment reviews.

The impairment charges summarized in the table below are included in ship and other impairments in our Consolidated Statements of Income (Loss).

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(in millions)February 28, 2022
NAA Segment$8 
EA Segment 
Total ship impairments$8 

We did not recognize any ship impairment charges for the three months ended February 28, 2021.

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 LocationFebruary 28, 2022November 30, 2021
Derivative assets
Derivatives designated as hedging instruments
Cross currency swaps (a)Prepaid expenses and other$5 $1 
Total derivative assets$5 $1 
Derivative liabilities
Derivatives designated as hedging instruments
Cross currency swaps (a)Other long-term liabilities$14 $8 
Interest rate swaps (b)Accrued liabilities and other2 3 
Other long-term liabilities1 2 
Total derivative liabilities$18 $13 
 
(a)At February 28, 2022, we had cross currency swaps totaling $598 million that are designated as hedges of our net investment in foreign operations with euro-denominated functional currencies. At February 28, 2022, these cross currency swaps settle through 2028.
(b)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 $147 million at February 28, 2022 and $160 million at November 30, 2021 of EURIBOR-based floating rate euro debt to fixed rate euro debt. At February 28, 2022, 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.
February 28, 2022
(in millions)Gross Amounts Gross Amounts Offset in the Balance SheetTotal Net Amounts Presented in the Balance SheetGross Amounts not Offset in the Balance SheetNet Amounts
Assets$5 $ $5 $ $5 
Liabilities$18 $ $18 $ $18 
November 30, 2021
(in millions)Gross AmountsGross Amounts Offset in the Balance SheetTotal Net Amounts Presented in the Balance SheetGross Amounts not Offset in the Balance SheetNet Amounts
Assets$1 $ $1 $ $1 
Liabilities$13 $ $13 $ $13 
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 February 28,
(in millions)20222021
Gains (losses) recognized in AOCI:
Cross currency swaps - net investment hedges - included component$5 $ 
Cross currency swaps - net investment hedges - excluded component$(8)$ 
Interest rate swaps - cash flow hedges$3 $1 
Gains (losses) reclassified from AOCI - cash flow hedges:
Interest rate swaps - Interest expense, net of capitalized interest$(1)$(1)
Foreign currency zero cost collars - Depreciation and amortization$1 $1 
Gains (losses) recognized on derivative instruments (amount excluded from effectiveness testing – net investment hedges)
Cross currency swaps - Interest expense, net of capitalized interest$1 $ 

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 consider hedging certain of our ship commitments and net investments in foreign operations. The financial impacts of our hedging instruments 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, Euro, Sterling or the Australian dollar 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 February 28, 2022, we have designated $469 million of our sterling-denominated debt as non-derivative hedges of our net investments in foreign operations. For the three months ended February 28, 2022, we recognized $2 million of losses on these non-derivative net investment hedges in the cumulative translation adjustment section of other comprehensive income (loss). We also have euro-denominated debt, including the effect of cross currency swaps, 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.
At February 28, 2022, 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 $6.1 billion for newbuilds scheduled to be delivered through 2025.
The cost of shipbuilding orders that we may place in the future that are 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, reserve funds related to customer deposits, 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 February 28, 2022, 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, Chief Executive Officer and Chief Climate 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.
Three Months Ended February 28,
(in millions)RevenuesOperating costs and
expenses
Selling
and
administrative
Depreciation
and
amortization
Operating
income (loss)
2022
NAA$1,126 $1,288 $344 $334 $(840)
EA457 698 176 181 (598)
Cruise Support33 28 5 33 (34)
Tour and Other8 17 6 5 (20)
$1,623 $2,030 $530 $554 $(1,491)
2021
NAA$10 $316 $220 $334 $(859)
EA8 198 108 184 (482)
Cruise Support 8 129 28 (164)
Tour and Other7 13 6 6 (18)
$26 $535 $462 $552 $(1,524)

Revenue by geographic areas, which are based on where our guests are sourced, were as follows:
(in millions)Three Months Ended February 28, 2022
North America$1,119 
Europe479 
Australia and Asia8 
Other18 
$1,623 

As a result of the pause in our guest cruise operations, revenue data for the three months ended February 28, 2021 is not included in the table.

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NOTE 7 – Earnings Per Share 
 Three Months Ended
February 28,
(in millions, except per share data)20222021
Net income (loss) for basic and diluted earnings per share$(1,891)$(1,973)
Weighted-average shares outstanding1,137 1,095 
Dilutive effect of equity plans  
Diluted weighted-average shares outstanding1,137 1,095 
Basic earnings per share$(1.66)$(1.80)
Diluted earnings per share$(1.66)$(1.80)

Antidilutive shares excluded from diluted earnings per share computations were as follows:
Three Months Ended
February 28,
(in millions)20222021
Equity awards3 3 
Convertible Notes52 54 
Total antidilutive securities55 56 

NOTE 8 – Supplemental Cash Flow Information
(in millions)February 28, 2022November 30, 2021
Cash and cash equivalents (Consolidated Balance Sheets)$6,414 $8,939 
Restricted cash included in prepaid expenses and other and other assets39 38 
Total cash, cash equivalents and restricted cash (Consolidated Statements of Cash Flows)$6,452 $8,976 

For the three months ended February 28, 2022 and 2021, we did not have borrowings or repayments of commercial paper with original maturities greater than three months.

NOTE 9 – Property and Equipment

Ship Sales

During 2022, we entered into agreements to sell two NAA segment ships and completed the sale of one EA segment ship, which represent a passenger-capacity reduction of 4,110 for our NAA segment and 1,410 for our EA segment.

Refer to Note 5 - “Fair Value Measurements, Derivative Instruments and Hedging Activities and Financial Risks, Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis, Impairment of Ships” for additional discussion.

NOTE 10 – Shareholders’ Equity

We have a program that allows us to realize a net cash benefit when Carnival Corporation common stock is trading at a premium to the price of Carnival plc ordinary shares (the “Stock Swap Program”).

During the three months ended February 28, 2022, under the Stock Swap Program, we sold 1.3 million of Carnival Corporation’s common stock and repurchased the same amount of Carnival plc ordinary shares, resulting in net proceeds of $2 million, which were used for general corporate purposes. During the three months ended February 28, 2021, there were no sales or repurchases under the Stock Swap Program.

Additionally, during the three months ended February 28, 2022, we sold 0.8 million shares of Carnival Corporation common stock at an average price per share of $20.18, resulting in net proceeds of $15 million.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Concerning Factors That May Affect Future Results

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, as amended. 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,” “aspiration,” “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:
Pricing
Goodwill, ship and trademark fair values
Booking levels
Liquidity and credit ratings
Occupancy
Adjusted earnings per share
Interest, tax and fuel expenses
Return to guest cruise operations
Currency exchange rates
Impact of the COVID-19 coronavirus global pandemic on our financial condition and results of operations
Estimates of ship depreciable lives and residual values
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, COVID-19. 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. The current, and uncertain future, impact of COVID-19, 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, reputation, litigation, cash flows, liquidity, and stock price.
Events and conditions around the world, including war and other military actions, such as the current invasion of Ukraine, and other general concerns impacting the ability or desire of people to travel have and may lead to a decline in demand for cruises.
Incidents concerning our ships, guests or the cruise vacation industry have in the past and may, in the future, 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 have in the past and may, in the future, lead to litigation, enforcement actions, fines, penalties and reputational damage.
Factors associated with climate change, including evolving and increasing regulations, increasing global concern about climate change and the shift in climate conscious consumerism and stakeholder scrutiny, and increasing frequency and/or severity of adverse weather conditions could adversely affect our business.
Inability to meet or achieve our sustainability related goals, aspirations, initiatives, and our public statements and disclosures regarding them, may expose us to risks that may adversely impact our business.
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 may lead to reputational damage.
The loss of key employees, our inability to recruit or retain qualified shoreside and shipboard employees and increased labor costs could have an adverse effect on our business and results of operations.
Increases in fuel prices, changes in the types of fuel consumed and availability of fuel supply may adversely impact our scheduled itineraries and costs.
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We rely on supply chain vendors who are integral to the operations of our businesses. These vendors and service providers are also affected by COVID-19 and may be unable to deliver on their commitments which could impact our business.
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.
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. Forward-looking and other statements in this document may also address our sustainability progress, plans, and goals (including climate change and environmental-related matters). In addition, historical, current, and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.

New Accounting Pronouncements

Refer to Note 1 - General, Accounting Pronouncements of the consolidated financial statements for additional discussion regarding accounting pronouncements.

Critical Accounting Estimates

For a discussion of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that is included in the Form 10-K.

Seasonality

Our passenger ticket revenues are seasonal. Historically, demand for cruises has been greatest during our third quarter, which includes the Northern Hemisphere summer months. This higher demand during the third quarter results in higher ticket prices and occupancy levels and, accordingly, the largest share of our operating income is typically earned during this period. This historical trend was disrupted in 2020 by the pause and in 2021 by the ongoing resumption of guest cruise operations. In addition, substantially all of Holland America Princess Alaska Tours’ revenue and net income (loss) is generated from May through September in conjunction with Alaska’s cruise season.

Known Trends and Uncertainties

We believe the increasing cost of fuel, liquefied natural gas (LNG) and other related costs are reasonably likely to impact our profitability in both the short and long-term. This effect is increased in the shorter term by the current invasion of Ukraine, including its effect on the price of fuel. In addition, the increasing global focus on climate change, including the reduction of carbon emissions and new and evolving regulatory requirements, is reasonably likely to materially impact our future costs, capital expenditures and revenues and/or the relationship between them, if enacted. The full impact of climate change to our business is not yet known.

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Statistical Information
Three Months Ended
February 28,
20222021
Passenger Cruise Days (“PCDs”) (in thousands) (a)7,229 27 
Available Lower Berth Days (“ALBDs”) (in thousands) (b)13,322 173 
Occupancy percentage (c)54 %16 %
Passengers carried (in thousands)1,011 
Fuel consumption in metric tons (in thousands)566 262 
Fuel cost per metric ton consumed$648 $392 
Currencies (USD to 1)
AUD$0.72 $0.77 
CAD$0.79 $0.78 
EUR$1.13 $1.21 
GBP$1.35 $1.36 

The ongoing resumption of guest cruise operations is continuing to have a material impact on all aspects of our business, including the above statistical information.

Notes to Statistical Information

(a)PCD represents the number of cruise passengers on a voyage multiplied by the number of revenue-producing ship operating days for that voyage.

(b)ALBD is a standard measure of passenger capacity for the period that we use to approximate rate and capacity variances, based on consistently applied formulas that we use to perform analyses to determine the main non-capacity driven factors that cause our cruise revenues and expenses to vary. ALBDs assume that each cabin we offer for sale accommodates two passengers and is computed by multiplying passenger capacity by revenue-producing ship operating days in the period.

(c)Occupancy, in accordance with cruise industry practice, is calculated using a numerator of PCDs and denominator of ALBDs, which assumes two passengers per cabin even though some cabins can accommodate three or more passengers. Percentages in excess of 100% indicate that on average more than two passengers occupied some cabins.


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Results of Operations
Consolidated
Three Months Ended
February 28,
% increase (decrease)
(in millions)20222021Change
Revenues
    Passenger ticket$873 $$870 31,952 %
    Onboard and other750 23 727 3,193 %
1,623 26 1,598 6,263 %
Operating Costs and Expenses
    Commissions, transportation and other251 15 236 1,596 %
    Onboard and other209 202 2,884 %
    Payroll and related506 218 287 132 %
    Fuel365 103 262 256 %
    Food136 11 124 1,090 %
    Ship and other impairments— 100 %
    Other operating557 181 376 208 %
2,030 535 1,495 280 %
    Selling and administrative530 462 68 15 %
    Depreciation and amortization554 552 — %
3,114 1,549 1,565 101 %
Operating Income (Loss)(1,491)(1,524)32 (2)%
Nonoperating Income (Expense)
Interest income— %
Interest expense, net of capitalized interest(368)(398)30 (7)%
Gains (losses) on debt extinguishment, net— (2)(100)%
Other income (expense), net(32)(62)30 (49)%
(397)(455)58 (13)%
Income (Loss) Before Income Taxes$(1,888)$(1,979)$91 (5)%

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