Carnival Corp. (CCL) Reports Prelim. Q4 Results

Carnival Corporation & plc (NYSE/LSE: CCL; NYSE: CUK) provides preliminary financial information for the fourth quarter ended November 30, 2020.

• U.S. GAAP net loss of $2.2 billion and adjusted net loss of $1.9 billion for the fourth quarter of 2020.
• Fourth quarter 2020 ended with $9.5 billion of cash and cash equivalents.
• Cash burn rate in the fourth quarter 2020 was slightly better than expected due to the timing of capital expenditures.
• The company has accelerated the removal of 19 less efficient ships, 15 of which have already left the fleet.
• Cumulative advanced bookings for the first half of 2022 are ahead of 2019, despite minimal advertising or marketing.

Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted, "2020 has proven to be a true testament to the resilience of our company. We took aggressive actions to implement and optimize a complete pause in our guest cruise operations across all brands globally, and developed protocols to begin our staggered resumption, first in Italy for our Costa brand, then followed by Germany for our AIDA brand. We are now working diligently towards resuming operations in Asia, Australia, the UK and the U.S. over the course of 2021."

Donald added, "With the aggressive actions we have taken, managing the balance sheet and reducing capacity, we are well positioned to capitalize on pent up demand and to emerge a leaner, more efficient company, reinforcing our industry leading position."

Resumption of Guest Operations

Costa Cruises ("Costa") and AIDA Cruises ("AIDA") have resumed limited guest cruise operations and other brands and ships are expected to return to service over time to provide guests with unmatched joyful vacations in a manner consistent with the company's highest priorities, which are compliance, environmental protection and the health, safety and well-being of its guests, crew, shoreside employees and the people in the communities its ships visit. The initial cruises will continue to take place with adjusted passenger capacity and enhanced health protocols developed with government and health authorities, and guidance from our roster of medical and scientific experts. Many of the company's brands source the majority of their guests from the geographical region in which they operate. In the current environment, the company believes this will benefit it in resuming guest cruise operations.

Health and Safety Protocols

The company has been working with a number of world-leading public health, epidemiological and policy experts to support its ongoing efforts with enhanced protocols and procedures to help protect against and mitigate the impact of COVID-19 during cruise vacations. These advisors will continue to provide guidance based on the latest scientific evidence and best practices for protection and mitigation.

Working with governments, national health authorities and medical experts, Costa and AIDA have a comprehensive set of health and hygiene protocols that has helped facilitate a safe and healthy return to cruise vacations. These enhanced protocols are modeled after shoreside health and mitigation guidelines as provided by each brand's respective country, and approved by all relevant regulatory authorities of the flag state, Italy. Protocols will be updated based on evolving scientific and medical knowledge related to mitigation strategies. Costa is the first cruise company to earn the Biosafety Trust Certification from Registro Italiano Navale ("RINA"). The certification process examined all aspects of life onboard and ashore and assessed the compliance of the system with procedures aimed at the prevention and control of infections.

The company is also working directly with the Centers for Disease Control and Prevention ("CDC") on the development of protocols necessary to resume cruising from the United States. The company, in conjunction with its advisors, is currently evaluating the requirements set forth in the CDC's Framework for Conditional Sailing Order effective as of October 30, 2020. The framework consists of several initial requirements that cruise ship operators will need to follow prior to resuming guest operations. Further, the framework is subject to additional technical instructions and orders from the CDC and may change based on public health considerations. While the framework represents an important step in our return to service, many uncertainties remain as to the specifics, timing, and cost of implementing the requirements. The company continues to work closely with governments and health authorities in other parts of the world to ensure that its health and safety protocols will also comply with the requirements of each location.

Optimizing the Future Fleet

The company expects future capacity to be moderated by the phased re-entry of its ships, the removal of capacity from its fleet and delays in new ship deliveries. Since the pause in guest operations, the company has accelerated the removal of ships in fiscal 2020 which were previously expected to be sold over the ensuing years. The company now expects to dispose of 19 ships, 15 of which have already left the fleet. In total, the 19 ships represent approximately 13 percent of pre-pause capacity and only three percent of operating income in 2019. The sale of less efficient ships will result in future operating expense efficiencies of approximately two percent per available lower berth day ("ALBD") and a reduction in fuel consumption of approximately one percent per ALBD. The company recently took delivery of two ships and expects only one more ship to be delivered in fiscal 2021 compared to five ships that were originally scheduled for delivery in fiscal 2021.

Based on the actions taken to date and the scheduled newbuild deliveries through 2022, the company's fleet will be more efficient with a roughly 14 percent larger average berth size per ship and an average age of 12 years in 2022 versus 13 years, in each case as compared to 2019.

Update on Bookings

Carnival Corporation & plc President and Chief Executive Officer Arnold Donald noted, "The booking trends that we have consistently experienced throughout this period affirm the strong fundamental demand for our brands which will facilitate our staggered resumption and support the long-term growth of our company."

At December 20, 2020, cumulative advanced bookings for the second half of 2021 are within the historical range. Additionally, the cumulative advanced bookings for the first half of 2022 are ahead of 2019. (Due to the pause in guest cruise operations in 2020, the company's future booking trends will be compared to 2019.) The company believes the continued build in cumulative advanced bookings for this twelve month period ending May 2022 demonstrates the long-term demand for cruising. The company highlights this level of bookings was achieved with minimal advertising and marketing.

The company is providing flexibility to guests with bookings on sailings cancelled by allowing guests to receive enhanced future cruise credits ("FCCs") or elect to receive refunds in cash. Enhanced FCCs increase the value of the guest's original booking or provide incremental onboard credits. As of November 30, 2020, approximately 45 percent of guests affected by the company's schedule changes have received enhanced FCCs and approximately 55 percent have requested refunds.

Total customer deposits balance at November 30, 2020, was $2.2 billion, the majority of which are FCCs, compared to the total customer deposits balance of $2.4 billion at August 31, 2020. The decline in customer deposits is less than previous expectations. As of November 30, 2020, the current portion of customer deposits was $1.9 billion with minimal bookings relating to first quarter of 2021 sailings. Approximately 60 percent of bookings taken during the quarter ended November 30, 2020 for fiscal year 2021 were new bookings as opposed to FCCs re-bookings, despite minimal advertising or marketing.

Increasing Liquidity

Carnival Corporation & plc Chief Financial Officer David Bernstein noted, "We ended the year with $9.5 billion in cash and have the liquidity in place to sustain ourselves throughout 2021, even in a zero-revenue environment. While we raised capital mainly through debt this year, in the last few months we opportunistically strengthened our capital structure by raising $2.5 billion through at-the-market equity offering programs and by the early conversion of $1.5 billion of convertible debt. As we return to full operations, our cash flow will be the primary driver to return to investment grade credit over time, creating greater shareholder value."

Due to the pause in guest operations, the company has taken significant actions to preserve cash and secure additional financing to increase its liquidity. Since March, the company has raised $19 billion through a series of transactions, including the following transactions since August 31, 2020:

• Borrowed $3.0 billion under export credit facilities in September, October and December 2020.
• Completed $1.0 billion "at-the-market" equity offering program ("ATM") that was announced in September 2020.
• Completed $1.5 billion ATM that was announced in November 2020.
• Retired $590 million of its convertible notes through the issuance of common stock in November 2020.
• Issued $2.0 billion of senior unsecured notes in November 2020.

As of November 30, 2020, the company has a total of $9.5 billion of cash and cash equivalents. During fiscal 2021, the company expects to enter into financial transactions to optimize its capital structure which may include opportunistically enhancing liquidity.

Currently, the company is unable to predict when the entire fleet will return to normal operations, and as a result, unable to provide an earnings forecast. The pause in guest operations continues to have a material negative impact on all aspects of the company's business, including the company's liquidity, financial position and results of operations. The company expects a net loss on both a U.S. GAAP and adjusted basis for the first quarter and full year ending November 30, 2021.

The company's monthly average cash burn rate for the fourth quarter 2020 was $500 million, which was slightly better than expected due to the timing of capital expenditures. The company expects the monthly average cash burn rate for the first quarter 2021 to be approximately $600 million. This rate includes ongoing ship operating and administrative expenses, working capital changes (excluding changes in customer deposits), interest expense and capital expenditures (net of unfunded export credit facilities) and also excludes scheduled debt maturities as well as other cash collateral to be provided (which may increase in the future). The company continues to explore opportunities to reduce its monthly cash burn rate.

As of November 30, 2020, the company's outstanding debt maturities are as follows:

Other Information

The company is actively addressing an IT security incident affecting two of its brands. Based on preliminary assessment and on the information currently known, the company does not believe the incident will have a material impact on its business, operations or financial results.

Conference Call The company has scheduled a conference call with analysts at 10:00 a.m. EDT (3:00 p.m. GMT) today to provide a business update. This call can be listened to live, and additional information can be obtained, via Carnival Corporation & plc's website at www.carnivalcorp.com and www.carnivalplc.com.

Carnival Corporation & plc is one of the world's largest leisure travel companies with a portfolio of nine of the world's leading cruise lines. With operations in North America, Australia, Europe and Asia, its portfolio features – Carnival Cruise Line, Princess Cruises, Holland America Line, P&O Cruises (Australia), Seabourn, Costa Cruises, AIDA Cruises, P&O Cruises (UK) and Cunard.

Additional information can be found on www.carnivalcorp.com, www.carnivalsustainability.com, www.carnival.com, www.princess.com, www.hollandamerica.com, www.pocruises.com.au, www.seabourn.com, www.costacruise.com, www.aida.de, www.pocruises.com and www.cunard.com.

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