01—Abstract
Summary
Summary of the 10-Q filed June 28, 2021. Cited figures are marked; the original filing is the authoritative source.
Carnival Corporation & plc reported significant revenue declines in the three and six months ended May 31, 2021, as the company continued its phased resumption of cruise operations following the global pause due to COVID-19.
While only a fraction of its fleet was operational, the company maintained substantial liquidity, ending the period with $9.3 billiona in cash and short-term investments. Management stated they have sufficient liquidity to meet obligations for at least the next twelve months, supported by ongoing capital market transactions and cost-saving measures. Despite the operational challenges, Carnival secured waivers for certain debt covenants and has a clear roadmap for fleet reactivation, with over 50% of capacity expected to resume by the end of Q4 2021 and full fleet operation anticipated by Spring 2022.
However, significant operational losses continued, and the company anticipates further net losses for the remainder of fiscal year 2021. Investors should note the substantial increase in debt, reflecting financing activities undertaken to navigate the pandemic's impact.
While the company has taken steps to manage its debt profile and covenants, the path to profitability remains tied to the successful and sustained resumption of global cruise operations, alongside careful management of ongoing costs and potential future disruptions. The company also faces ongoing legal proceedings and cyber security concerns, which are being actively managed.
02—Key points
Key Highlights
- Total revenues for the three months ended May 31, 2021, were $50 million, a 93% decrease from $740 million in the prior year period, reflecting the ongoing impact of the COVID-19 pandemic on cruise operations.
- Net loss for the three months ended May 31, 2021, was $2.07 billion, compared to a net loss of $4.37 billion in the same period of 2020. Diluted EPS was $(1.83) vs $(6.07).
- The company reported $7.07 billion in cash and cash equivalents and $2.20 billion in short-term investments as of May 31, 2021, totaling $9.27 billion in liquidity.
- Carnival successfully issued $3.5 billion in Senior Unsecured Notes in February 2021 and raised $996 million through a public offering of common stock, bolstering its financial position.
- The company has a clear plan for fleet resumption, with 42 ships (over 50% of capacity) expected to be operational by the end of the fourth quarter of 2021, and the full fleet anticipated to be back in operation by Spring 2022.
- Significant debt remains a key factor, with long-term debt totaling $25.97 billion and current portion of long-term debt at $1.71 billion as of May 31, 2021.
- The company obtained waivers for certain debt covenants, easing immediate compliance pressures, but future compliance remains dependent on operational recovery and financial performance.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed June 28, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $50.00M$740.00M | −93.2% |
| Cost of Revenue | $681.00M$2.48B | −72.6% |
| Gross Profit | -$631.00M-$1.74B | +63.8% |
| SG&A Expenses | $417.00M$492.00M | −15.2% |
| Operating Expenses | $1.67B$4.92B | −66.1% |
| Operating Income | -$1.62B-$4.18B | +61.3% |
| Interest Expense | $437.00M$182.00M | +140.1% |
| Net Income | -$2.07B-$4.37B | +52.6% |
| EPS (Basic) | $-1.83$-6.07 | +69.9% |
| EPS (Diluted) | $-1.83$-6.07 | +69.9% |
| Shares Outstanding (Basic) | 1.13B721.00M | +57.0% |
| Shares Outstanding (Diluted) | 1.13B721.00M | +57.0% |
05—Questions
Frequently Asked Questions
What is Carnival's current financial health and liquidity position?
As of May 31, 2021, Carnival Corporation & plc reported $9.3 billion in cash and short-term investments, providing significant liquidity. The company stated this is sufficient to meet its obligations for at least the next twelve months. However, the company has a substantial amount of long-term debt ($25.97 billion) and has undertaken significant financing activities to manage its cash burn during the pandemic.
What is the outlook for revenue and profitability given the phased return to service?
The company experienced substantial revenue declines in the first half of 2021, with essentially no revenue for the three and six months ended May 31, 2021. This resulted in significant operating losses. Carnival expects to continue incurring net losses for the remainder of fiscal year 2021. Profitability is contingent on the successful and sustained resumption of guest operations, achieving higher occupancy levels, and managing incremental costs associated with enhanced health and safety protocols.
How is Carnival managing its debt obligations and covenants?
Carnival has raised substantial capital through debt issuance and equity offerings to bolster liquidity. The company has also secured waivers for certain debt covenants that were temporarily suspended due to the pandemic's impact. However, these waivers have end dates, and future compliance will depend on operational recovery. The company is actively pursuing refinancing opportunities to manage its debt maturity profile and reduce interest expense.
What are the key risks and uncertainties facing Carnival going forward?
The primary risk remains the ongoing impact of the COVID-19 pandemic, including potential future disruptions, the pace of global vaccination efforts, evolving travel restrictions, and changes in consumer demand. Other risks include the significant debt burden, potential increases in fuel costs, cybersecurity threats, and ongoing legal proceedings related to the pandemic and other matters.
06—Continue