UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(Mark One) | | | | | |
| ☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended November 30, 20172022 or
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¨☐ | 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 |
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Commission file number: 001-9610Carnival Corporation | | Commission file number: 001-15136Carnival plc |
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Carnival Corporation | Carnival plc |
(Exact name of registrant as
specified in its charter)
| (Exact name of registrant as
specified in its charter)
|
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| Republic of Panama | England and Wales |
(State or other jurisdiction of
incorporation or organization)
| (State or other jurisdiction of
incorporation or organization)
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| 59-1562976 | 98-0357772 |
| (I.R.S. Employer Identification No.) | (I.R.S. Employer Identification No.) |
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3655 N.W. 87th Avenue Miami, Florida 33178-2428
| Carnival House, 100 Harbour Parade, Southampton SO15 1ST, United Kingdom
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Miami, | Florida | 33178-2428 | Southampton | SO15 1ST, | United Kingdom |
| (Address of principal
executive offices
and zip code)
| (Address of principal
executive offices
and zip code)
|
Commission file number: 001-15136
| | | | | | | | | | | | | | |
| (305) | 599-2600 | | 011 | 44 23 8065 5000 |
(Registrant’s telephone number,
including area code) | | (Registrant’s telephone number,
including area code) |
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
| |
(305) 599-2600 | 011 44 23 8065 5000 |
(Registrant’s telephone number,
including area code)
| (Registrant’s telephone number,
including area code)
|
| |
Securities registered pursuant
to Section 12(b) of the Act:
| Securities registered pursuant
to Section 12(b) of the Act:
|
| |
| Title of each class | TitleTrading Symbol(s) | Name of each classexchange on which registered |
Common Stock ($ ($0.01 par value)
| CCL | New York Stock Exchange, Inc. |
| Ordinary Shares each represented by American Depositary Shares ($ ($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 |
| |
Name of each exchange on which registered | Name of each exchange on which registered |
New York Stock Exchange, Inc. | CUK | New York Stock Exchange, Inc. |
| 1.000% Senior Notes due 2029 | CUK29 | New York Stock Exchange LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.
Yes þ☑No ¨☐
Indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ¨☐No þ☑
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 þ ☑No ¨☐
Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ☑ No ¨☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
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.
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| Large accelerated filers | þ☑ | 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 registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☑No ☐
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Act). Yes ¨ ☐No þ☑
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The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold was $25.6The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold was $12.1 billion as of the last business day of the registrant’s most recently completed second fiscal quarter. | | The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold was $11.9 billion as of the last business day of the registrant’s most recently completed second fiscal quarter. |
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At January 18, 2018, Carnival Corporation had outstanding 534,171,562 shares of its Common Stock, $0.01 par value. | | At January 18, 2018, Carnival plc had outstanding 209,345,279 Ordinary Shares $1.66 par value, one Special Voting Share GBP 1.00 par value and 534,171,562 Trust Shares of beneficial interest in the P&O Princess Special Voting Trust. |
At January 12, 2023, Carnival Corporation had outstanding 1,113,479,515 shares of its Common Stock, $0.01 par value.
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold was $2.3 billion as of the last business day of the registrant’s most recently completed second fiscal quarter.
At January 12, 2023, Carnival plc had outstanding 186,136,095 Ordinary Shares $1.66 par value, one Special Voting Share GBP 1.00 par value and 1,113,479,515 Trust Shares of beneficial interest in the P&O Princess Special Voting Trust.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 20172022 Annual Report and 20182023 joint definitive Proxy Statement are incorporated by reference into Part II and Part III of this report.
CARNIVAL CORPORATION & PLC
FORM 10-K
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 20172022
TABLE OF CONTENTS
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| PART I | | |
PART I | | |
| Item 1. | | |
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| Item 1A. | | |
| Item 1B. | | |
| Item 2. | | |
| Item 3. | | |
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| Item 2.4. | | |
| Item 3. | | |
| Item 4. | | |
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| PART II | | | |
| PART II | | |
| Item 5. | | |
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| Item 6. | | |
| Item 7. | | |
| Item 7A. | | |
| Item 8. | | |
| Item 9. | | |
| Item 9A. | | |
| Item 9B. | | |
| Item 9C. | | | |
| PART III | | |
| PART III | | |
| Item 10. | | |
| Item 11. | | |
| Item 12. | | |
| Item 13. | | |
| Item 14. | | |
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| PART IV | | |
| Item 15. | | |
| Item 16. | | |
DOCUMENTS INCORPORATED BY REFERENCE
The information described below and contained in the Registrants’ 20172022 Annual Report to shareholders to be furnished to the U.S. Securities and Exchange Commission pursuant to Rule 14a-3(b) of the Securities Exchange Act of 1934 is shown in Exhibit 13 and is incorporated by reference into this joint 20172022 Annual Report on Form 10-K (“Form 10-K”).
Part and Item of the Form 10-K
Part II
Item 5(a). 5. Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities –
- Market Information, Holders and Performance Graph.Graph.
Item 6. Selected Financial Data.Reserved.
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Portions of the Registrants’ 20182023 joint definitive Proxy Statement, to be filed with the U.S. Securities and Exchange Commission, are incorporated by reference into this Form 10-K under the items described below.
Part and Item of the Form 10-K
Part III
Item 10.Directors, Executive Officers and Corporate Governance.
Item 11.Executive Compensation.
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13.Certain Relationships and Related Transactions, and Director Independence.
Item 14.Principal Accountant Fees and Services.
PART I
Item 1. Business.
A. Overview
I.Summary
Carnival Corporation was incorporated in Panama in 19721974 and Carnival plc was incorporated in England and Wales in 2000. Carnival Corporation and Carnival plc operate a dual listed company (“DLC”), whereby the businesses of Carnival Corporation and Carnival plc are combined through a number of contracts and through provisions in Carnival Corporation’s Articles of Incorporation and By-Laws and Carnival plc’s Articles of Association. The two companies operate as if they are a single economic enterprise with a single senior executive management team and identical Boards of Directors, (“BODs”), but each has retained its separate legal identity. Carnival Corporation and Carnival plc are both public companies with separate stock exchange listings and their own shareholders. Together with their consolidated subsidiaries, Carnival Corporation and Carnival plc are referred to collectively in this Form 10-K as “Carnival Corporation & plc,” “company,” “our,” “us” and “we.”
We are the world’s largest leisure travelglobal cruise company and among the most profitable and financially strong in thelargest leisure travel companies with a portfolio of world-class cruise and vacation industries. We are also the largest cruise company, carrying nearly half of global cruise guests, and a leading provider of vacations to all major cruise destinations throughout the world.lines. With operations in North America, Australia, Europe Australia, and Asia, our portfolio features - AIDA Cruises, Carnival Cruise Line, Costa Cruises, Cunard, Holland America Line, Princess Cruises, P&O Cruises (Australia), P&O Cruises (UK) and Seabourn.
II.Mission (Purpose), Vision, Values and Priorities
Mission (Purpose)
To deliver unforgettable happiness to our guests by providing extraordinary cruise vacations, while honoring the integrity of every ocean we sail, place we visit and life we touch.
Vision
As the global leader in the cruise industry, we will lead the way in innovative and sustainable cruising to deliver memorable vacations and build borderless connections.
Culture Essentials (our Core Values)
•Speak Up - Our voice is our strength. Every one of us, regardless of level or role, speaks up when we have questions, comments, concerns, or new ideas. If we see something wrong or that doesn’t seem right, we say something and trust our voices will be heard without fear of retaliation.
•Respect & Protect - The health, safety and well-being of our people and the planet are vital. We choose to take decisive actions to respect and protect every life we touch, the places we sail and the laws that govern us.
•Empower - We and our team members have the time, tools and support we need to do our best work. We’re empowered to take personal ownership and accountability to succeed, and we take pride in our work.
•Improve - Our business is built on forward motion. We have the courage to dream big, driving innovation and continuous improvement in guest and team member experiences, operations, compliance, sustainability and beyond.
•Listen & Learn - We listen actively and seek to understand before responding, because the more perspectives we have, the better decisions we make. We value and respect the words and ideas of others, keeping an open mind, and learning from our successes and failures.
•Communicate - We openly share our knowledge, skills and information across brands, functions and the entire company to further our collective success. Together we champion our mission, vision, values and company priorities.
Priorities
Ensure each of our world-class brands owns its space in the vacation market by delivering extraordinary experiences tailored to its guests.
We understand vacation expectations and preferences vary widely among our diverse audience of potential guests. To fulfill our mission, and in the process achieve outstanding guest satisfaction levels, industry-leading demand and greatly improved pricing, each of our brands must carve out a distinct identity for delivering cruise experiences. Our brands must effectively market their uniqueness to existing and potential guests and deliver on their promise across the entire guest journey.
Become travel and leisure’s employer of choice.
We celebrate our diverse team of over 160,000 team members representing approximately 150 countries and are committed to providing a welcoming and inclusive environment where people from different backgrounds, experiences and walks of life can succeed. We care deeply for our team members and must always cultivate an atmosphere of openness, respect and trust. We know our team members are at the heart of inspiring unforgettable happiness, so we strive to be the world’s number-one choice for hospitality, travel and leisure careers.
Maintain our commitment to seek excellence in compliance, environmental protection and in looking after the safety, health and well-being of every life we touch.
Achieving our mission depends on being good corporate citizens and stewards of the environment. Safeguarding the planet we call home, our guests, the communities we serve, and our Carnival family, and complying with the laws and regulations that govern our business, is vital to our success.
Set the pace with the industry’s smartest solutions that deliver on our sustainability roadmap to 2030.
Our earth, ecosystem and environment mean everything to us. Without the incredible communities and scenic spaces we operate over 100in, our mission of inspiring unforgettable happiness would be impossible. We’re determined to lead the way in sustainable cruising by promoting positive climate action, contributing to a circular economy, partnering with the communities we sail to and from and reducing our carbon footprint. To do this, we are investing in technology upgrades and fleet improvements, piloting alternative fuel types, optimizing itineraries and cultivating a workforce that mirrors the diversity of the communities we encounter along the way.
Strengthen our balance sheet and deliver long-term shareholder value.
In recent years, travel and leisure has endured volatility unlike anything seen in modern history, including unique obstacles that disproportionally affected the cruise ships within a portfolioindustry. With our operations now approaching full strength and the continued support of leading global, regionalour guests, team members, investors and national cruise brands that sell tailored cruise products, servicesother stakeholders, we are focused on our financial fitness. We’re determined to drive revenue, operate effectively and vacation experiences in all the world’s most desirable destinations.
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II. | Vision, Goals and Related Strategies
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Our vision is “Together we deliver unmatched joyful vacation experiencesefficiently at scale, generate record levels of cash from operations and breakthrough shareholder returns by exceeding guest expectations and leveraginginvest our scale.”capital wisely. We believe our portfolio of brands is instrumental to achieving our vision and maintaining our cruise industry leadership positions. Our primary financial goals are to profitably grow our cruise business and increase our return on invested capital, while maintaining our strong investment grade credit ratings and balance sheet. Health, environment, safety, security (“HESS”) and sustainability is a core focus for our operations and these matters directly influence how we measure our performance.
To reach our primary financial goals, we continue to implement initiatives to create additional demand for our brands in excess of measured capacity growth, ultimately leading to higher revenue yields. Wethis will continue to identify opportunities to enhance our cruise products and services and optimize our cost structure while preserving the unique identities of our individual brands. We have made significant investments in performing customer segmentation analyses and data analytics to gain insight into our guests’ decision-making process and vacation needs enablingallow us to identify new marketing opportunitiesresponsibly reduce our debt over time and further grow our sharereturn to strong profitability and investment-grade credit ratings.
B. Global Cruise Industry
I. Overview
In the face of their vacation spend. We have also implemented strategies to grow demand by increasing consumer awareness and consideration of our cruise brands and the global impact of COVID-19, we paused our guest cruise industry through our ongoing marketing, public relationsoperations in March 2020 and began resuming guest experience efforts.
We continue to identify and implement new strategies and tactics to strengthen our cruise ticket revenue management processes and systems across our portfolio of brands, such as optimizing our pricing methodologies and improving our pricing models. We are currently rolling-out our state-of-the-art revenue management system across six brands and expect the roll-out to be completedoperations in 2018. We also continue to implement initiatives to better coordinate and optimize our brands’ global deployment strategies to maximize guest satisfaction and profits.
We are building new, innovative, purpose-built ships that are larger, more fuel efficient, have an improved mix of guest accommodations and present a wider range of onboard amenities and features. These ships further enhance the attractiveness of a cruise vacation while achieving greater economies of scale and resulting in improved returns on invested capital. 2021. As of November 30, 2017, we have a total2022, 97% of 18 cruise ships scheduled to be delivered between 2018 and 2022. Some of these ships will replace existingour capacity as less efficient ships exit our fleet. Since 2006, we have removed 19 ships from our fleet, and our newbuild program has been designed to consider an expected acceleration in our fleet replacement cycle over time. Furthermore, we continue to make substantial investments in our existing ship enhancement programs to improve our onboard product offerings and enrich our guests’ vacation experiences.is currently serving guests.
We continue to grow our presence in established markets and increase our penetration in developing markets, such as Asia. We believe that our most significant long-term growth opportunity in Asia is in China, due to its large and growing middle-class
population, expansion of its international tourism and the government’s plan to support the cruise industry. During 2018, we expect 5% of our total capacity to be deployed in China.
With over 100 ships and 12.1 million guests in 2017, we have the scale to optimize our structure by utilizing our combined purchasing volumes and common technologies as well as accelerating progress on our cross-brand initiatives aimed at cost containment. We have and continue to integrate certain back office functions to achieve the full benefits of our scale. Having global leaders in communications, innovation, maritime, procurement, revenue management and strategy supports collaboration and communication across our brands and helps coordinate our global efforts.
Our ability to generate significant operating cash flow allows us to internally fund our capital investments. This allows us to manage our debt level in a manner consistent with maintaining our strong credit metrics and strong investment grade credit ratings while returning free cash flow and more to our shareholders in the form of dividends and share buybacks. In 2017, we increased our quarterly dividend to $0.45 per share from $0.35 per share, representing over $1 billion in annual dividends. Since resuming our stock repurchase program in late 2015, we repurchased approximately 63 million shares for $3.1 billion.
Our vision is based on four key pillars:
Health, environment, safety, security and sustainability
Guests
Employees
Shareholders and other stakeholders
Health, Environment, Safety, Security and Sustainability
Our uncompromising commitment to the safety and comfort of our guests and crew is paramount to the success of our business. We are committed to operating a safe and reliable fleet and protecting the health, safety and security of our guests, employees and all others working on our behalf. We continue to focus on further enhancing the safety measures onboard all of our ships. We are dedicated to fully complying with, or exceeding, all legal and statutory requirements related to health, environment, safety, security and sustainability throughout our business.
We are committing resources across the entire corporation to further improve how we operate to protect and preserve our oceans. We have implemented important fleet-wide changes and enhancements to our environmental processes and procedures, all with the goal to improve our operations, oversight and compliance with our previously disclosed December 2016 plea agreement. Since 2013, we have restructured our fleet operations organization including strengthening its leadership. We also increased the scope and frequency of our training, and invested millions of dollars to upgrade our equipment to new ship standards to ensure compliance with all environmental regulations.
Guests
Our goal is to consistently exceed our guests’ expectations while providing them with a wide variety of exceptional vacation experiences. We believe that we can achieve this goal by continually focusing our efforts on helping our guests choose the cruise brand that will best meet their unique needs and desires, improving their overall vacation experiences and building state-of-the-art ships with innovative onboard offerings and providing unequaled guest services. We enhance our guest experience by offering high quality destinations around the world including a portfolio of private destinations that are uniquely tailored to our guests’ preferences.
Employees
Our goal is to recruit, develop and retain the finest employees. A team of highly motivated and engaged employees is key to delivering vacation experiences that exceed our guests’ expectations. Understanding the critical skills that are needed for outstanding performance is crucial in order to hire and train our officers, crew and shoreside personnel. We believe in listening to and acting upon our employees’ perspectives and ideas and use employee feedback tools to monitor and improve our progress in this area. We are a diverse organization and value and support our talented and diverse employee base. We are committed to employing people from around the world and hiring them based on the quality of their experience, skills, education and character, without regard for their identification with any group or classification of people.
Shareholders and Other Stakeholders
We value the relationships we have with our shareholders and other stakeholders, including travel agents, trade associations, communities, regulatory bodies, media, creditors, insurers, shipbuilders, governments and suppliers. We believe that engaging stakeholders in a mutually beneficial manner is critical to our long-term success. As part of this effort, we believe we must continue to be an outstanding corporate citizen in the communities in which we operate. Our brands work to meet or exceed their economic, environmental, ethical and legal responsibilities.
Strong relationships with our travel agent partners are especially vital to our success. We continue to strengthen our relationship with the travel agent community by increasing our communication and outreach, implementing changes based on their feedback and improving our educational programs to assist agents in stimulating cruise demand.
B. Global Cruise Industry
I. Overview
Cruisingcruising offers a broad range of products and services to suit vacationing guests of many ages, backgrounds and interests. Each brand in our portfolio meets the needs of a unique set of consumer psychographics and vacation needs which allows us to penetrate large addressable customer segments. The mobility of cruise ships enables us to move our vessels between regions in order to meet changing demand across different geographic areas.
Cruise brands can be broadly classified as offering contemporary, premium and luxury cruise experiences. The contemporary experience typicallyhas a more casual ambiance and historically includes cruises that last seven days or less, have a more casual ambiance and are less expensive than premium or luxury cruises.less. The premium experience typicallyemphasizes quality, comfort, style and more destination-focused itineraries and appeals to those who are more affluent. The premium experience generally includes cruises that last from seven to 14 days and appeal to those who are more affluent and older. Premium cruises emphasize quality, comfort, style and more destination-focused itineraries, and the average pricing is normally higher than contemporary cruises.days. The luxury experience is usually characterized by smaller vessel size, very high standards of accommodation and service, higher pricessmaller vessel size and exotic itineraries to ports that are inaccessible toby larger ships. We have product and service offerings in each of these three broad classifications. Notwithstanding these classifications, there
II. Passenger Capacity by Ocean Going Vessels
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| | Passenger Capacity as of December 31 (a) (b) |
| Calendar Year | | Global Cruise
Industry (c) | | Carnival
Corporation & plc |
| 2019 | | 589,820 | | | 254,010 | |
| 2020 | | 607,500 | | | 246,450 | |
| 2021 | | 636,270 | | | 253,950 | |
| 2022 | | 663,970 | | | 259,060 | |
| 2023 | | 701,490 | | | 263,730 | |
| 2024 | | 729,820 | | | 268,050 | |
| 2025 | | 764,440 | | | 272,360 | |
(a)Includes ships which have resumed guest cruise operations and ships expected to resume guest cruise operations.
2023 - 2025 excludes four ships which will be removed from our fleet. 2023-2025 data is generally overlapestimated based on announced newbuilds and competition among all cruise productsship retirements and services.does not include an estimate for unannounced ship retirements.
II. Favorable Characteristics of the Global Cruise Industry
a. High Guest Satisfaction Rates
Cruise guests tend to rate their overall satisfaction(b)In accordance with a cruise vacation higher than comparable land-based hotel and resort vacations. According to industry surveys, the cruise experience consistently exceeds expectations of repeat and first-time cruisers. Cruising continues to receive high guest satisfaction rates because of the unique vacation experiences it offers, including visiting multiple destinations without having to pack and unpack, all-inclusive product offerings and state-of-the-art cruise ships with entertainment, relaxation and fun, all at an outstanding value.
b. Positive Demand Trends
Social media has a powerful impact on consumer behavior. Technology allows people to instantly share travel experiences within their social networks. Seeing others embrace travel and experience the world in new ways inspires people to plan and book their own travel. Consumers are demanding more enriched lives and personal fulfillment through experience and learning and prefer to spend money on experiences rather than on material things. Today’s travelers are looking to travel in ways that are immersive, meaningful and memorable. While it is useful for the cruise industry to consider travel markets across demographic groups, the ability to identify and address target markets based on “psychographics” or attitudes that cut across demographicspractice, passenger capacity is even more meaningful. We believe the cruise industry is well positioned to meet travelers’ desires and has the ability to tailor experiences for each guest based on their unique wants and needs, which should foster growth for the cruise industry.
From a demographic perspective, two age groups, the Baby Boomers and the Millennial generations, have in recent years experienced trends that positively affect demand for cruising. The Baby Boomer generation likes to pursue an active lifestyle and has the desire and the means to travel and enjoys multi-generational cruising. The Millennial generation has now surpassed the size of the Baby Boomer generation and represents the fastest growing demographic segment of the vacation industry. This group expresses a strong desire to travel and share new experiences, a mindset that should continue to foster growth for the industry. A recent study by the American Society of Travel Agents (“ASTA”) indicates that the Millennial generation has as positive a view of cruising as the Baby Boomer generation.
These changes in consumer behavior and demographics, along with growing populations, increasing wealth in developing countries and increased spending by consumers on experience versus products, will continue to drive demand for travel and the
global cruise industry. These groups of consumers are becoming eager to experience the world through travel, which provides significant growth opportunity for the cruise industry within and beyond the established markets.
c. Wide Appeal
Cruising appeals to a broad range of ages and income levels. Cruising provides something for every generation, from kids’ clubs to an array of onboard entertainment designed to appeal to teens and adults. Cruising also offers transportation to a variety of destinations and a diverse range of ship types and sizes, as well as price points, to attract guests with varying tastes and income levels. To encourage first-time and repeat cruisers and better compete with other vacation alternatives the cruise industry has in the recent years refocused its marketing efforts, enhanced training of travel agents and collaborated with well-known brands and offers the following:
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• Expanded entertainment options and shipboard activities | • Enhanced internet and communication capabilities |
• Flexible dining options including open-seating dining | • Beverage package options |
• Branded specialty restaurants, bars and cafés | • Money-back guarantees |
d. Large Addressable Markets
The global cruise industry is a relatively small part of the wider global vacation industry, which includes a large variety of land-based vacation alternatives. Therefore, we believe there are large, addressable markets with low penetration rates. The penetration rates below were computedcalculated based on the 2016 global cruise guests carried from G.P. Wild (International Limited) (“G.P. Wild”), an independent cruise research company, as a percentageassumption of total population:two passengers per cabin even though some cabins can accommodate three or more passengers.
4.9% for Australia and New Zealand
3.4% for the United States (“U.S.”) and Canada
2.9% for the United Kingdom (“UK”)
1.9% for Germany and Italy
We also believe Asia is a large addressable market, where economic growth has raised discretionary income levels, fueling an increasing demand for travel.
e. Exceptional Value Proposition
We believe the cost of a cruise vacation represents an exceptional value in comparison to alternative land-based vacations. Cruising delivers many relatively unique benefits, such as transportation to various destinations while also providing accommodations, a generous diversity of food choices and a selection of daily entertainment options for one all-inclusive, competitive price. To make cruising even more cost effective and more easily accessible to vacationers, the(c)Global cruise industry typically offers a number of drive-to home ports, which enables many cruise guests to reduce their overall vacation costs by eliminating or reducing air and other transportation costs.data was obtained from Cruise Industry News.
f. Ship Mobility
The mobility of cruise ships enables cruise companies to move their vessels between regions in order to maximize profitability and to meet changing demand. For example, brands can change itineraries over time in order to cater to our guests’ tastes or as general economic or geopolitical conditions warrant. In addition, cruise companies have the flexibility to reposition capacity to areas with growing demand. We believe that this unique ability to move ships provides the cruise industry with a competitive advantage compared to other land-based vacation alternatives.
III. Passenger Capacity and Cruise Guests Carried by Ocean Going Vessels
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| (in thousands) | Average Passenger (Lower Berth) Capacity (a) | | Cruise Guests Carried |
Year | Global Cruise Industry (b) | | Carnival Corporation & plc | | Global Cruise Industry (c) | | Carnival Corporation & plc |
| 2015 | 450 | | 215 | | 23,000 | | 10,840 |
| 2016 | 470 | | 220 | | 24,700 | | 11,520 |
| 2017 | 490 | | 230 | | 26,000 | | 12,100 |
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(a) | In accordance with cruise industry practice, passenger capacity is calculated based on the assumption of two passengers per cabin even though some cabins can accommodate three or more passengers. |
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(b) | Amounts were based on internal estimates using public industry data. |
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(c) | The global cruise guests carried for 2015 and 2016 were obtained from G.P. Wild, an independent cruise research company. The estimates for global cruise guests carried for 2017 are internally developed. |
The global cruise industry and our compound annual passenger capacity growth rates are estimated to be 6.8% and 5.6%, respectively, from 2017 to 2021. Our estimates of future passenger capacity only include assumptions related to announced ship withdrawals and, accordingly, our estimates likely indicate a higher growth rate than will actually occur.
C. Our Global Cruise Business
I. Segment Information | | | | | | | | | | | | | | | | | | | |
| Ships in Service or Expected to Return to Service as of November 30, 2022 (a) |
| Passenger Capacity | | | | Percentage of Total Capacity | | Number of Cruise Ships |
| North America and Australia (“NAA”) Segment | | | | | | | |
| Carnival Cruise Line | 75,530 | (b) | | | 30 | % | | 24 |
| Princess Cruises | 46,280 | | | | 18 | | | 15 |
| Holland America Line | 22,920 | | | | 9 | | | 11 |
| P&O Cruises (Australia) | 7,230 | | | | 3 | | | 3 |
| Seabourn | 2,840 | | | | 1 | | | 6 |
| 154,800 | | | | 61 | | | 59 | |
| | | | | | | |
| Europe and Asia (“EA”) Segment | | | | | |
| Costa Cruises (“Costa”) | 39,580 | (b) (c) | | | 16 | | | 11 |
| AIDA Cruises (“AIDA”) | 33,540 | (d) | | | 13 | | | 12 |
| P&O Cruises (UK) | 19,020 | | | | 7 | | | 6 |
| Cunard | 6,820 | | | | 3 | | | 3 |
| 98,960 | | | | 39 | | | 32 | |
| 253,760 | | | | 100 | % | | 91 | |
(a)As of January 12, 2023, includes three Costa ships, with a passenger capacity of 10,880, which are not in guest cruise operations and are expected to return to service.
(b)Costa Venezia with a passenger capacity of 4,200 and Costa Firenze with a passenger capacity of 4,240 will be transferred to Carnival Cruise Line in 2023 and 2024, respectively.
(c)Excludes Costa Magica, with a passenger capacity of 2,700, which will not resume guest cruise operations.Includes Costa Fortuna, with a passenger capacity of 2,700, which is expected to stop guest cruise operations in April 2023.
(d)Excludes AIDAvita, with a passenger capacity of 1,270, which will not resume guest cruise operations. Includes AIDAaura, with a passenger capacity of 1,270, which is expected to stop guest cruise operations in September 2023.
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| | | | | |
| | November 30, 2017 |
| Passenger Capacity | | Percentage of Total Capacity | | Number of Cruise Ships |
| North America Segment | | | | | |
| Carnival Cruise Line | 66,380 | | 29% | | 25 |
| Princess Cruises | 45,230 | | 20 | | 17 |
| Holland America Line | 23,820 | | 10 | | 14 |
| Seabourn | 1,970 | | 1 | | 4 |
| | 137,400 | | 60 | | 60 |
| | | | | | |
| Europe, Australia & Asia (“EAA”) Segment | | | | | |
| Costa Cruises ("Costa") | 35,920 | | 15 | | 15 |
| AIDA Cruises ("AIDA") | 25,250 | | 11 | | 12 |
| P&O Cruises (UK) | 18,380 | | 8 | | 8 |
| P&O Cruises (Australia) | 7,790 | | 3 | | 5 |
| Cunard | 6,830 | | 3 | | 3 |
| | 94,170 | | 40 | | 43 |
| | 231,570 | | 100% | | 103 |
We also have a Cruise Support segment that representsincludes our portfolio of leading port destinations and private islands,other services, all of which are operated for the benefit of our cruise brands. Cruise Support also includes other services that are provided for the benefit of all our cruise brands.
In addition to our cruise operations, we own Holland America Princess Alaska Tours, the leading tour company in Alaska and the Canadian Yukon, which complements our Alaska cruise operations. Our tour company owns and operates hotels, lodges, glass-domed railcars and motorcoaches. This tour company and cruise ships,motorcoaches which we charter-outunder long-term leases, comprise our Tour and Other segment.
II. Passengers Carried
In 2022, we carried 7.7 million passengers, consisting of 5.6 million carried by our NAA segment and 2.1 million carried by our EA segment, which was lower than our historical levels as a result of the pause and subsequent resumption of our guest cruise operations. In 2019, our most recent full year of guest cruise operations, our brands carried 12.9 million passengers, 8.6 million carried by our NAA segment and 4.2 million carried by our EA segment.
III. Ships Under Contract for Construction
As of November 30, 2017,2022, we have a total of 186 cruise ships scheduledexpected to be delivered between 2018 and 2022.through 2025. Our ship construction contracts are with Fincantieri and MARIOTTI in Italy and Meyer Werft in Germany and Meyer Turku in Finland.Germany.
| | | | | | | | | | | |
| Expected Delivery Date | | Passenger Capacity
Lower Berth |
| Carnival Cruise Line | | | |
| | | |
Carnival Jubilee (a) | Scheduled Delivery DateDecember 2023 | | Passenger Capacity5,370 | |
Carnival Cruise Line | | | |
Carnival Horizon | March 2018 | | 3,950 |
Carnival Panorama | October 2019 | | 3,950 |
Newbuild | August 2020 | | 5,250 |
Newbuild | October 2022 | | 5,250 |
| Princess Cruises | | | |
Sky Princess | October 2019 | | 3,660 |
Newbuild | July 2020 | | 3,660 |
Newbuild | February 2022 | | 3,660 |
Holland America Line | | | |
Nieuw Statendam | November 2018 | | 2,670 |
Newbuild | May 2021 | | 2,670 |
Seabourn | | | |
Seabourn Ovation | April 2018 | | 600 |
Costa | | | |
Costa Venezia (intended for Asia)Sun Princess (a)
| February 2019January 2024 | | 4,2004,320 | |
Costa SmeraldaNewbuild (a) | October 2019July 2025 | | 5,2204,320 | |
Newbuild (intended for Asia) Seabourn | September 2020 | | 4,200 |
NewbuildSeabourn Pursuit | May 2021July 2023 | | 5,220260 | |
AIDA | | | |
AIDAnova | November 2018 | | 5,230 |
Newbuild | May 2021 | | 5,230 |
| P&O Cruises (UK) | | | |
NewbuildArvia (a) | May 2020December 2022 | | 5,2005,290 | |
| Cunard | | | |
NewbuildQueen Anne | April 20222024 | | 3,000 | |
III. (a)Powered by LNG
IV. Cruise Brands
Founded in 1972, Carnival Cruise Line is a leader in contemporary cruising“The World’s Most Popular Cruise Line®” and operates 25 ships designedhas provided multi-generational family entertainment at exceptional value to provide fun and exceptional vacation experiences that appeal to a wide variety of consumers at an outstanding value.its guests for 50 years. Carnival Cruise Line is onecreates an environment where guests can be their most playful selves on ships that are designed to inspire the experience of the most recognizable brands in the cruise industry and carried 5.0 millionbringing people together, with limitless opportunities for guests in 2017. Carnival Cruise Line identifies their target customers as those who like to live life to the fullest, look at the glass as half full, feel comfortable in their own skin and makecreate their own fun. Carnival Cruise Line’s cruises have a broad appeal to families, couples, singles, and seniors and carried more than 800,000 children in 2017. In 2017, Carnival Cruise Line was voted “Best-Value-For-Money” by Expedia CruiseShipCenters and “Best Domestic Cruise Line” by Travel Weekly. In addition, Carnival Cruise Line also earned “Most Trusted Cruise Line” by Readers Digest for the third consecutive year. Carnival Cruise Line is scheduledteaming up with Costa Cruises to take deliverycreate a new concept for Carnival’s North American guests when Carnival Fun Italian StyleTM debuts in the spring of two 3,950-passenger capacity ships, 2023. Carnival Horizon Fun Italian StyleTM will marry the great service, food and Carnival Panorama, in 2018entertainment that Carnival’s guests enjoy with Costa’s Italian design features.
For over 55 years, Princess has sailed the world connecting guests to what matters most – the people they love, the people they meet and 2019, respectively, and two 5,250-passenger capacity ships in 2020 and 2022, which will be the largest in its fleet.
Carnival Cruise Line offers cruises generally from three to eight days with almost all of its ships departing from 16 convenient U.S. home ports located along the East, Gulf and West coasts, Puerto Rico and Hawaii. Carnival Cruise Line is the leading provider of year-round cruises in The Bahamas, the Caribbean and Mexico and also operates seasonal cruises in Canada, Alaska, Hawaii and Europe. In addition, Carnival Cruise Line deploys two ships in Australia offering cruises tailoreddestinations they visit. Princess delivers effortless, personalized cruising thanks to the Australian market.Princess Medallion, a revolutionary wearable that anticipates guests’ needs, wants and desires so guests can enjoy more of what they love.
The brand’s focus continues to be on enhancing its products and services with innovations that appeal to new consumers, as well as past guests. In 2018, Carnival Cruise Line will launch Carnival Horizon featuring the first Dr. Seuss WaterWorks, a vibrant water park inspired by the legendary children’s author. Carnival Horizon will continue the expansion of the line’s Fun Ship® 2.0 enhancement program with many of the same ground-breaking features in addition to new offerings such as Guy Fieri’s Pig & Anchor Bar-B-Que Smokehouse and Brewhouse and an expanded Bonsai Sushi restaurant with the cruise line’s first teppanyaki dining option.
Princess Cruises began operations in 1965 and today operates a fleet of 17 modern ships that offer more than 150 itineraries visiting over 360 destinations around the globe. Awarded Best Cruise Itineraries 11 times by Recommend magazine, Princess Cruises sails to nearly every corner of the earth, from Alaska to Asia and Australia, the Caribbean and Mexico, Europe, the Panama Canal, South America and more. The line offers cruises ranging from three to 20 days with longer exotic sailings from 25 to 111 days, including two world cruises. Princess Cruises has three 3,660-passenger capacity ships scheduled to be delivered from 2019 through 2022.
Princess Cruises Come Back NewTM Promise has enhanced the guest experience by providing guests with lifelong memories and meaningful stories to share from their cruise vacation. The program features several products and services, such as:
| |
• | Unique destination experiences including our top rated Alaska onboard and land based program. Caribbean vacations featuring Princess Cays®, our award winning private beach in The Bahamas, exclusive shore excursions in partnership with Discovery and Animal Planet, and More Ashore late night as well as overnight port stays
|
Designed for Fresh cuisine featuring a variety of dining options, including traditional, anytime and specialty dining venues, such as the award-winning restaurant SHARE by international chef & TV host Curtis Stone,our Chocolate Journeys dessert experience featuring delicacies from Master Chocolatier Norman Love, and specialty dining restaurants from multiple Michelin star chefs. Princess Cruises also offers tasty casual offerings including on-deck pizza voted the best pizza at sea
Interactive onboard activities and shore excursions designed in collaboration with Discovery Channel and local experts in key regional destinations to provide guests with authentic and exclusive experience on board and ashore and to entertain and delight them about the nature, wildlife, history and culture of the regions they visit. In addition, Camp Discovery, the newly redesigned youth and teen centers on board select ships, offers the line’s youngest guests the opportunity to connect, play and learn
At the forefront of innovation, Ocean Medallion VacationsTM, our newly developed guest experience platform, designed to elevate service levels through enhanced guest experiences before and during cruise vacations, was introduced on Regal Princess in November 2017. At the center of the platform is the Ocean Medallion™, a first-of-its-kind wearable device designed to enable a personal concierge, Ocean CompassTM, to deliver a personalized experience not previously considered possible. With this innovation, from the moment our guests first engage with us, their experiences are powered by their preferences and are delivered seamlessly, in real time.
Holland America Line has been providing cruises since 1873exploring the world for 150 years and currently operates awas the first cruise line to offer adventures in Alaska and Yukon. Its fleet of 14 premiumoffers an ideal mid-sized ships. Its ships visit over 400 ports of call in almost 100 countries and territories on all seven continents.ship experience. Holland America Line’s cruisesships feature a diverse range of enriching experiences focused on destination exploration and personalized travel. Live music at sea fills each evening at Music Walk, and dining venues feature exclusive selections from threea Culinary Council of world-famous chefs.
For 90 years, P&O Cruises (Australia) has taken Australians & New Zealanders on dream holidays to 35 daysthe most incredible destinations along the Australian coast as well as the idyllic South Pacific. The home-grown cruise line delivers a holiday with longer, exotic Grand Voyages from 55great entertainment, world-class dining and unforgettable onboard experiences. Delivered in the Aussie way, guests can choose to 116 days, including an annual Grand World Voyage. Holland America Line ships generally sail in Alaska, Europe, the Caribbean and Australia. In 2017, Holland America Line celebrated the 20th anniversary of its award-winning private island in The Bahamas, Half Moon Cay, known for its pristine beaches, diverse shore excursions, exclusive beach cabanas and family-friendly activities.do everything, or nothing at all, with P&O Cruises (Australia).
Holland America Line is scheduled to take delivery of two 2,670-passenger capacity ships, Nieuw Statendam and her sister ship, in 2018 and 2021. In addition, Holland America Line is continuing its brand enhancement efforts across the fleet, with more than $100 million invested in 2017 and approximately $200 million remaining to be invested over the next year. The upgrades include new furnishing, decor and amenities in its suites, retail space renovations and enhanced ship entertainment areas.
Holland America Line guests are avid, engaged world travelers, and value authentic, unique experiences wherever they go. To enhance the guest experience and further differentiate from other cruise brands, Holland America Line has entered into several marquee partnerships:
O, The Oprah Magazine partnership rolled-out across the brand’s North America fleet; featuring O Magazine-inspired activities, including meditation, tai chi, healthy cooking demonstrations, an onboard book club and more
America’s Test Kitchen, a popular cooking show on American television, is producing several live cooking shows and hands-on workshops
BBC Earth brings enriching and entertaining programming such as Frozen Planet Liveto guests while onboard
AFAR Media, an experiential travel expert, provides Destination Guides, on the brand’s website covering nearly 400 Holland America Line ports around the globe to help guests dream, plan and prepare for journeys tailored to their personal tastes and interests
Seabourn, which began operations in 1988, provides the world’s finest ultra-luxury cruising vacations onmost modern luxury fleet at sea, sails to legendary cities and less-traveled ports. Its smaller, more intimate ships that focus on highly personalized service and guest recognition. The line currently operates four ultra-luxury ships and is scheduledallow guests to take delivery of one 600-passenger capacity ship, Seabourn Ovation,in 2018. Seabourn offers spacious all-suite accommodations, award-winning gourmet dining, complimentary drinks and fine wines, unique experiences such asdiscover the Officer on Deck culinary event and shopping with the Chef excursions. Seabourn’s ships generally sail in Europe, Asia, the South Pacific Islands, Australia and New Zealand, the Americas and Antarctica, with cruises generally from seven to 14 days.
Seven out of the last 11 years, Seabourn has been voted the “Best Small-Ship Cruise Line” by readers of Travel + Leisure. In addition, Saveur named Seabourn “Best Culinary Cruise Line” three out of the last five years by its panel of travel experts and editors. Seabourn pampers its guests with complimentary value-added extras such as Massage MomentsSM on deck and Caviar in the SurfSM beach parties. All of the Seabourn ships have a high service ratio of staff members to guest and an intimate, sociable atmosphere that has been the hallmark of the Seabourn lifestyle.
To enhance the guest experience and further differentiate from other ultra-luxury cruise brands, Seabourn has entered into several partnerships to offer a number of innovative programs:
“An Evening with Tim Rice”, the new evening entertainment experience created exclusively for the line in association with Belinda King Creative Productions
Spa and Wellness with Dr. Andrew Weil, offering guests a holistic spa and wellness experience that integrates physical, social, environmental and spiritual well-being
The Grill by Thomas Keller, reminiscent of the classic American restaurant from the 50’s and 60’s. Exclusive to Seabourn, The Grill is a unique culinary concept for Chef Keller, focusing on updated versions of iconic dishes
A multi-year agreement with the United Nations Educational Scientific and Cultural Organization (“UNESCO”) to support its mission of safeguarding unique cultural and natural features aroundunexpected—about the world and promote sustainable tourism, thus providingabout themselves. Guests enjoy ocean-front suites and epicurean dining is theirs on demand. With nearly one team member for every guest, its guests with unique accessmake meaningful connections. With Seabourn, they go further, deeper and experience luxury in action. On a voyage so seamless, so all-inclusive and so far beyond compare, guests never want it to end.
For more than 150 World Heritage Sites
Costa has been providing cruises since 1948 and today visits more than 260 ports around70 years, Costa’s ships have sailed the world. In 2017, its ships carried over 2 million guests. The brand operates a fleetseas of 15 contemporary ships and has two 5,220-passenger capacity ships, Costa Smeralda and her sister ship, and two 4,200-passenger capacity ships, Costa Venezia and her sister ship, scheduled to be delivered between 2019 and 2021.
Costa is a leading cruise line in Italy, France and Spain where it boasts a tradition spanning close to seven decades. Its ships are deployed in the Mediterranean Sea, Northern Europe, the Caribbean, Brazil, Argentina, Japan and China, the Arabian Gulf and the Indian Ocean. The line offers a wide range of unique itineraries, with cruises generally ranging from seven to 20 days and also has longer exotic sailings from 20 to 30 days and one world cruise. Most of its cruises sailing in China are four to five days and cater to Chinese guests.
Costa, known as Italy’s Finest, brings Italy to the world, withoffering a diverse choice of cruise holidays. Costa primarily serves guests from Continental Europe, enriching them through the exploration of the most beautiful destinations on
five continents. Costa brings a modern Italian lifestyle to its ships and diverse itineraries around the globe. Its ships represent the best of Italy by offering beautifulprovides guests with a true European experience that embodies a uniquely Italian art, unique interior decorations with superb Italian mosaicspassion for life through warm hospitality, entertainment and precious Murano chandeliers, fine Italian wines, excellent Mediterranean food selections and unique shopsgastronomy, that carry well-known Italian fashion brands.makes Costa attracts international guests due to its multi-lingual service and is considered to be a top vacation provider in Europe.
To enhance the guest experience and further differentiatedifferent from any other cruise brands, Costa has recently introduced a variety of innovative programs:experience.
Excursions to small unexplored Italian towns of artistic and cultural interest to guests, promoting local history, traditions, craft activities and cuisine through its partnership with Associazione de I Borghi più belli d’Italia
Dining options created by chef Bruno Barbieri, who has earned multiple Michelin Stars
Enriched entertainment including the Voice of the Sea shows and Peppa Pig-branded kids games and educational activities
Immersive and digitized onboard experience with the WeChat Mini Program, a social mobile application that allows guests to enjoy hassle-free entertainment booking and payment onboard Costa’s ships sailing in China
AIDA which began operating in 1996, is the leader and most recognized cruise brand in the German cruise industry. AIDA currently operates 12 premium ships and is scheduled to take delivery of two 5,230-passenger capacity next-generation ships, AIDAnova and her sister ship, in 2018 and 2021. With its “Green Cruising” concept, AIDA will be the first cruise brand in the world that can power its next-generation of cruise ships entirely with liquefied natural gas (‘’LNG’’).
AIDA’s ships visit over 230 ports, with cruises generally from three to 23 days, including its first world cruise of over 100 days beginning in October 2017. AIDA ships generally sail in the North Sea, the Baltic Sea, the Atlantic Isles, the Mediterranean Sea, the Caribbean, Southeast Asia, the Arabian Gulf, Central America and the Indian Ocean. Since February 2017, the three smallest AIDA vessels are operating under the premium tagline “AIDA selection” offering cruises to more exclusive and exotic destinations.
AIDA offers an exceptional experience for all generations with an emphasis on a healthy and youthful lifestyle, choice, informality, family friendliness and activity. AIDA’s guests live and love the unique AIDA feeling. They enjoy being part of the AIDA family and feel at home anywhere in the world. This feeling is cultivated by the friendliness of the crew and by having German as the onboard language. AIDA’s dining experience is enhanced through partnerships with famous German TV chef and restaurateur Tim Mälzer, multi award-winning chef Stefan Marquard, world champion pastry chef Andrea Schirmaier-Huber, experienced sommelier Otto Gourmet and one of the youngest chefs in Germany to win a Michelin star, Benjamin Maerz. The line’s newest ship, AIDAperla, also introduced a variety of onboard activities and world-class entertainment facilities:
The Organic Spa, featuring five saunas, indoor and outdoor jacuzzis, as well as a Nail Spa and Wellness Oasis
Beerhouse, an onboard brewery that sells its own draft beers using purified seawater for brewing beer
Beach Club, a two-deck high relaxation oasis, covered with a glass dome for a tropical beach-like experience with live plants and palm trees; in the evenings, the club is transformed into a party zone
Sports Deck area, featuring combined sports courts, a putting green area, golf simulator, rock climbing wall, high ropes course, power walking/jogging track and water slides, which can convert into an ice skating rink during the winter
P&O Cruises (UK), which began operations back in 1837, is the leading and most recognized cruise brand in the UK. German cruise market. AIDA delivers unique travel experiences with modern comfort, where guests of all ages feel at home and enjoy consistently excellent service accompanied by the AIDA smile. Guests across generations enjoy the German-inspired modern premium lifestyle cruise experience with a wide variety of culinary delights, first-class entertainment, unforgettable shore excursions, numerous sports activities, and spacious wellness areas to relax.
P&O Cruises (UK) operatesis Britain’s biggest cruise line, welcoming guests to extraordinary travel experiences designed in a fleetdistinctively British way - through a blend of eight premium shipsdiscovery, relaxation and has one 5,200-passenger capacity ship scheduled to be delivered in 2020. Three of its ships offer holidays exclusively for adults while the balance of its ships are perfect for families.exceptional service catered towards British tastes. P&O Cruises (UK)’s fleet of premium ships visit over 200 destinations worldwide, with cruises generally from seven to 17 daysdeliver authentic travel experiences around the globe, combining style, quality and a number of longer voyages, including one world cruise of 99 days in 2018. P&O Cruises (UK)’s ships generally sail to the Mediterranean Sea, Scandinavia, the Baltic Sea, New England, Canada, the Atlantic Isles, the Caribbean and the Canary Islands.
P&O Cruises (UK) delivers exceptional service, dining, exploration and entertainment uniquely tailored to British tastes. The dining experience is enhanced through partnerships with its Food Heroes, a line-up of British food and wine celebrities including Marco Pierre White and Olly Smith. In 2017, several new entertainment shows were launched including one produced by West End and Broadway star Ruthie Henshall written exclusively for P&O Cruises (UK). Additionally, the brand strengthened its partnership with the UK’s most popular weekend TV programme, Strictly Come Dancing and will now offer more exciting and new guest experiences including one-to-one dance lessons with pro dancers from the show and dinners hosted by the stars.
In June 2017, Oceana was showcased during five days of live TV broadcasts for the UK’s highest rating breakfast program, Lorraine’s Cruise Control on Good Morning Britain, and in November 2017, the line’s newest ship Britannia was the backdrop location for the award winning BBC One show The Apprentice.
P&O Cruises (Australia) began cruising from Australia in 1932. The onboard atmosphere is relaxedinnovation with a focus on contemporary design, great food, friendly servicesense of occasion and attention to detail, to create a variety of exciting activities and entertainment. The line, which currently operates a fleet of five ships, was voted “Best Cruise Line” in the 2017 International Traveller Readers’ Choice Awards. In June 2017, P&O Cruises (Australia) held the inaugural voyage of the 2,000-passenger capacity Pacific Explorer.truly memorable holiday.
P&O Cruises (Australia) sails to more destinations in Australia and the South Pacific than any other cruise line and offers cruises, generally from three to 16 days, from multiple home ports in Australia and New Zealand. In addition, the line’s itineraries include remote idyllic ports of Papua New Guinea and Solomon Islands as well as a “taste” of Asia. P&O Cruises (Australia) offers itineraries based around prominent Australian events including Melbourne Cup, Australian Open Tennis and Rugby League State of Origin.
P&O Cruises (Australia) recently partnered with leading restaurateur and celebrity chef, Luke Mangan, for its signature fine-dining restaurant, Salt Grill, and a casual dining option, Luke’s. The line’s newest ship, Pacific Explorer, introduced a variety of onboard activities, including exclusive dinner and show packages and a spectacular aerial circus artistry production show, Love Riot. The recent refurbishments of Pacific Explorer included the addition of new waterslides, a waterpark and replaced the traditional cruise ship buffet with an international market place of fresh food outlets reflecting the many flavors Australians love to eat.
Founded in 1840,For over 180 years, the iconic Cunard fleet has perfected the timeless art of luxury ocean travel. While onboard, Cunard guests experience unique signature moments, from Cunard’s white gloved afternoon tea service to spectacular gala evening balls to its renowned Insights Speaker program. Guest expectations are exceeded through Cunard’s exemplary White Star Service®. From the moment a guest steps onboard, every detail of their voyage is globally renownedcurated to ensure they feel special and are inspired by unique events. Onboard Cunard, guests are free to do as operating the most famous ocean liners in the world and for offering legendary travel experiences with a heritage of iconic ships and outstanding service. Cunard has a unique and distinct position within the luxury travel market and received the coveted Travel + Leisure 2016 World’s Best Award. The line operates three premium/luxury ships, Queen Elizabeth, Queen Mary 2 and Queen Victoria. Cunard offers cruises to destinations in Northern Europe, the Mediterranean Sea, New England and Canada,much or as welllittle as their iconic transatlantic voyages on Queen Mary 2. Most of Cunard’s cruises are from seven to 14 days with world cruises of over 100 days.they please.
Cunard’s appeal is a combination of British elegance, exemplary service and sophistication and attracts an international mix of guests with nearly 50% of guests expected to be sourced from markets outside the UK. The brand sits in a unique space offering something no one else can; luxury on a grand scale.Guests enjoy a unique experience that celebrates the line’s British heritage including an enviable association with the British Royal Family. Her Majesty the Queen is Godmother to both Queen Elizabeth and Queen Mary 2.
Following the $130 million remastering of the flagship Queen Mary 2 in 2016, the design philosophy, being contemporary in feel yet taking inspiration from the great Cunard liners of the past, was carried over to Queen Victoria during her $40 million refurbishment in 2017. This included the addition of cabins and an extended terrace area as well as the introduction of new bar concepts and Britannia club staterooms with dedicated dining. A new 3,000-passenger capacity ship is scheduled for delivery in 2022, heralding the next generation of Cunard vessel.
IV. V. Principal Source Geographic Areas
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Carnival Corporation & plc
Cruise Guests Carried | | |
| (in thousands) | | 2022 | | 2021 | | 2019 | | Brands Mainly Serving |
| United States and Canada | | 5,140 | | 660 | | 7,170 | | Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn and Cunard |
| Continental Europe | | 1,610 | | 390 | | 2,590 | | Costa and AIDA |
| United Kingdom | | 660 | | 170 | | 780 | | P&O Cruises (UK) and Cunard |
| Australia and New Zealand | | 230 | | 0 | | 920 | | Carnival Cruise Line, Princess Cruises and
P&O Cruises (Australia) |
| Asia | | 10 | | — | | 1,110 | | Princess Cruises and Costa |
| Other | | 80 | | 10 | | 300 | | |
| Total | | 7,730 | | 1,220 | | 12,870 | | |
As a result of the resumption of guest cruise operations, data for 2022 and 2021 is not representative of a full year of operations. Due to the pause of our guest cruise operations, data for 2020 is not meaningful and is not included in the table. We have provided 2019 data as it is our most recent full year of guest cruise operations.
|
| | | | | | | |
| | Carnival Corporation & plc Cruise Guests Carried | | |
| (in thousands) | 2017 | | 2016 | | 2015 | | Brands Mainly Serving |
| United States and Canada | 6,440 | | 6,100 | | 6,110 | | Carnival Cruise Line, Holland America Line, Princess Cruises, Seabourn and Cunard |
| | | | | | | | |
| Continental Europe | | | | | | | AIDA and Costa |
| Germany | 1,150 | | 1,070 | | 980 | | |
| Italy | 420 | | 400 | | 430 | | |
| Other | 720 | | 700 | | 740 | | |
| | 2,290 | | 2,170 | | 2,150 | | |
| | | | | | | | |
| United Kingdom | 800 | | 840 | | 790 | | P&O Cruises (UK) and Cunard |
| Australia and New Zealand | 1,060 | | 1,010 | | 820 | | P&O Cruises (Australia), Princess Cruises and Carnival Cruise Line |
| Asia | 1,240 | | 1,130 | | 700 | | Costa and Princess Cruises |
| Other | 270 | | 270 | | 270 | | |
| Total | 12,100 | | 11,520 | | 10,840 | | |
V. VI. Cruise Programs
| | | | | | | | | | | | | | | | | | | | |
| | Carnival Corporation & plc
Percentage of Passenger Capacity by Itinerary |
| | 2022 | | 2021 | | 2019 |
| Caribbean | | 34 | % | | 32 | % | | 32 | % |
| Europe without Mediterranean | | 20 | | | 23 | | | 14 | |
| Mediterranean | | 18 | | | 29 | | | 13 | |
| Alaska | | 8 | | | 4 | | | 6 | |
| Australia and New Zealand | | 3 | | | — | | | 7 | |
| China | | — | | | — | | | 4 | |
| Other | | 18 | | | 12 | | | 25 | |
| | 100 | % | | 100 | % | | 100 | % |
Due to the resumption of guest cruise operations, data for 2022 and 2021 is not representative of a full year of operations. Due to the pause of our guest cruise operations, data for 2020 is not meaningful and is not included in the table. We have provided 2019 data as it is our most recent full year of guest cruise operations.
|
| | | | | | | | | |
| | | Carnival Corporation & plc Percentage of Passenger Capacity Deployed |
| | | 2018 | | 2017 | | 2016 |
| Caribbean | | 33 | % | | 32 | % | | 32 | % |
| Europe without Mediterranean | | 14 |
| | 13 |
| | 13 |
|
| Mediterranean | | 13 |
| | 13 |
| | 15 |
|
| Australia and New Zealand | | 8 |
| | 8 |
| | 8 |
|
| Alaska | | 6 |
| | 5 |
| | 5 |
|
| China | | 5 |
| | 6 |
| | 5 |
|
| Other | | 21 |
| | 23 |
| | 22 |
|
| | | 100 | % | | 100 | % | | 100 | % |
VI. VII. Cruise Pricing and Payment Terms
Each of our cruise brands publishes prices for the upcoming seasons primarily through the internet, although published materials such as brochures and direct mailings are also used. Our brands have multiple pricing levels that vary by source market, category of guest accommodation, ship, season, duration and itinerary. Cruise prices frequently change in a dynamic pricing environment and are impacted by a number of factors, including the number of available cabins for sale in the marketplace and the level of guest demand. Some cruise prices are increased due to higher demand. Conversely, some cruise prices are reduced throughWe offer a variety of special promotions, andincluding early booking, past guest recognition and travel agent programs and other programs. We continue to identify and implement new strategies and tactics to strengthen our cruise ticket revenue management processes and systems across our portfolio of brands, such as optimizing our pricing methodologies and improving our pricing models. We are currently rolling-out our state-of-the-art revenue management system across six brands and expect the roll-out to be completed in 2018. We also continue to implement initiatives to better coordinate and optimize our brands’ global deployment strategies to maximize guest satisfaction and profits.
Our bookings are generally taken several months in advance of the cruise departure date. Typically,Generally, the longer the cruise itinerary the further in advance the bookings are made. This lead time allows us to manage our prices in relation to demand for available cabins through the use of advanced revenue management capabilities and other initiatives, with the typical strategy of marketing our ships to fill them while achieving the highest possible overall net revenue yields.initiatives.
The cruise ticket price typically includes the following:
•Accommodations
•Most meals, including snacks at numerous venues
•Access to amenities such as swimming pools, water slides, water parks, whirlpools, a health club, and sun decks
•Child care and supervised youth programs
•Entertainment, such as theatrical and comedy shows, live music and nightclubs
•Visits to multiple destinations
At times, weWe offer value added packages to induce ticket sales to guests and groups and to encourage advance purchase of certain onboard items. These packages are bundled with cruise tickets and sold to guests for a single price rather than as a separate package and include:may include one or more of the following:
|
| | | | |
• Alcoholic/non-alcoholic beverage Beverage packages | |
| |
| • Onboard spending credits |
| Service charges |
Our brands’ payment terms generally require that a guest pay a deposit to confirm their reservation and then pay the balance due before the departure date. Our guests are subject to a cancellation fee if they cancel their cruise within a pre-defined period before sailing, unless they purchase a vacation protection package for the ability to obtain a refund.
As a convenience to our guests, we offer to arrange air transportation to and from airports near the home ports of our ships. In 2017, approximately 9% of our guests purchased scheduled or chartered air transportation from us. We also offer ground transfers from and to the airport near the ship’s home port as part of our transfer programs.
VII. 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 typically results in higher ticket prices and occupancy levels and, accordingly, the largest share of our operating income is typically earned during this period. The seasonalityThis historical trend was disrupted in 2020 by the pause and in 2021 and 2022 by the subsequent resumption of our results also increases due to ships being taken out-of-service for maintenance, which we schedule during non-peak demand periods.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.
VIII.
IX. Onboard and Other Revenues
Onboard and other activities are provided either directly by us or by independent concessionaires, from which we receive either a percentage of their revenues or a fee. Concession revenues do not have direct expenses because the costs and services incurred for concession revenues are borne by our concessionaires. In 2017,2022, we earned 25%42% of our cruise revenues from onboard and other revenue activitiesgoods and services not included in the cruise ticket price including the following:
including: |
| | | | |
• Substantially all liquor and some non-alcoholic beverage Beverage sales
| • Internet and communication services
|
• Casino gaming | • Full service spas |
• Shore excursions
| • Specialty restaurants
|
• Gift shop Retail sales | • Art sales |
• Photo sales | • Laundry and dry cleaning services |
We enhanceIn 2019, our guests’ onboard experiences and increasemost recent full year of guest cruise operations, we earned 30% of our onboardcruise revenues by offering all-inclusive beverage packages, spa packages and specialty restaurants. We are also implementing initiatives to strengthen our onboard revenue programs, such as bar and casino programs. We use various marketing and promotional tools and are supported by point-of-sale systems permitting “cashless” transactions for the sale of thesefrom onboard and other products and services. As a convenience to our guests, all our brands allow their guests to pre-book, and in most cases, pre-pay certain of their onboard and other revenue-producing activities in advance of the cruise.revenues.
We offer a variety of shore excursions at each ship’s ports-of-call that include beach experiences, general sightseeing, cultural tours, adventure outings and local boat rides. We typically utilize local operators who provide shore excursions with guides who speak the same languages as most of our shore excursion guests. For our sailings to destinations in Alaska, shore excursions are operated by our wholly-owned company, Holland America Princess Alaska Tours, or provided by local independent operators. Fathom, the company’s social impact brand, offers cruisers the opportunity to connect deeply, build community onboard and onshore, and enter communities to participate with locals through unique experiences. We also offer revenue-producing activities on the private islands and port destinations that we operate that include beach bars and restaurants, water sports, cabana rentals, chair lifts and surf rider attractions.
Our casinos are all owned and operated directly by us and are equipped according to the unique requirements of our brands and their guests. We offer a wide variety of slot machines and a diverse mix of both traditional and specialty table games all designed to meet the desires of our guests. We have also developed marketing and promotional arrangements with land-based casino companies in order to increase the number of casino players onboard several of our brands. The casinos are generally open when our ships are at sea in international waters.
In conjunction with our cruise vacations, many of our cruise brands sell pre-and post-cruise land packages that include guided tours, hotel accommodations and related transportation services. In Alaska and the Canadian Yukon, we utilize, to a large extent, our own hotel and transportation assets. Additionally, we earn revenues from various promotional and other programs with destination retailers, parking facilities, credit card providers and other destination-based incentives.
IX. X. Marketing Activities
Guest feedback and research support the development of our overall marketing and business strategies to drive demand for cruises and increase the number of first-time cruisers. Our goal ishas always been to increase the portionconsumer awareness for cruise vacations and further grow our share of consumer’s vacations targeted on cruises and grow “share of suitcaseTM” for cruising on our brands.their vacation spend. We measure and evaluate key drivers of guest loyalty and their satisfaction with our products and services that provide valuable insights about guests’ cruise experiences. We closely monitor our net promoter scores, which reflect the likelihood that our guests will recommend our brands’ cruise products and services to friends and family. We also regularly initiate customer research studies among guests, travel agent partners, tour operators and others for input on business decisions that enhance ourfamily, including those new-to-cruise.
During 2022, in connection with the resumption of guest cruise products and services for our guests.
We continue to improve the coordination ofoperations, we increased our marketing strategies across brands, which enables us to drive demand for cruising while generating significant efficiencies in media costs. We continue to perform psychographic segmentation studies that allow us to better understand our guests’ needs, wants and expectations. The results of these studies shape how we communicateadvertising programs after significantly reducing both during 2020 and market, as well as refine the booking process, overall onboard experience and post-cruise interactions. Our ability to identify the psychographic segments is a powerful differentiator, which allows us to guide guests to the right experiences with the appropriate brands and build advocates for life. In addition, we have tools and are implementing data analytic solutions that identify new market growth opportunities to expand our customer base.
We have implemented strategies to generate new demand by targeting new cruisers who typically vacation at land-based destinations. Our multiple brand marketing initiatives continue to drive increased consideration with print, TV, digital, social and field marketing elements with the goal of inspiring consumers to purchase a cruise vacation with us. We continue our efforts to expand our original media content portfolio, which features three award winning TV shows and two new digital shows, all to be featured on our own digital channel, OceanViewTM. Our programs airing on major networks and digital video on-demand platforms, have reached over 200 million viewers to date. The series creates compelling experiential content that engages all audiences while inspiring them to travel the world. The expansion of our TV lineup across networks allows us to continue to educate consumers about the cruise experience. Our portfolio of brands featured in iconic global destinations continues to drive demand among our consumers.
2021. Our brands have comprehensive marketing and advertising programs across diverse mediums to promote their products and services to vacationers and our travel agent partners. Each brand’s marketing activities arehave generally been designed to reach a local region in the local language. We continueare focused on driving further brand differentiation and clarity around each of our brand’s optimal target segments, ensuring that our creative marketing speaks to expand oureach brand’s target audience and launching more effective digital performance marketing and lead generation approaches. Our marketing efforts historically have allowed us to attract new guests online by leveraging the reach and impact of digital marketing and social media. Over time, we have invested in new marketing technologies to deliver more engaging and personalized communications. This helpshas helped us cultivate guests as advocates of our brands, ships, itineraries and onboard products and services. We also have blogs hosted by ship captains, cruise and entertainment directors, executive pursers and special guests.
AllSubstantially all of our cruise brands offer past guest recognition programs that reward repeat guests with special incentives such as reduced fares, gifts, onboard activity discounts, complimentary laundry and internet services, expedited ship embarkation and disembarkation and special onboard activities.
X. XI. Sales RelationshipsChannels
We sell our cruises mainly through travel agents, and tour operators, that servecompany vacation planners and our guests in their local regions.websites. Our individual cruise brands’ relationships with their travel agentsagent partners are generally independent of each of our other brands. Our travel agents relationships are generally not exclusive and travel agents generally receive a base commission, plus the potential of additional commissions, including discounts or complimentary tour conductor cabins, based on the achievement of pre-defined sales volumes.
Travel agent partners are an integral part of our long-term cruise distribution network and are critical to our success. We utilize local sales teams to motivate travel agents to support our products and services with competitive sales and pricing, promotional policies and joint marketing and advertising programs. During fiscal 2017,2022, no controlled group of travel agencies under common control accounted for 10% or more of our revenues. We also employ a wide variety of educational programs, including websites, seminars and videos, to train agents on our cruise brands and their products and services. In 2022, we held a variety of virtual and in-person trainings and educational programs to continue to support and develop our travel agent partners, including ship visits to familiarize our travel agent partners with our enhanced health and safety protocols.
All of our brands have internet booking engines to allow travel agents to book our cruises. We also support travel agent booking capabilities through global distribution systems. AllAdditionally, all of our cruise brands have their own consumer websites that provide access to information about their products and services to users and enable their guests to quickly and easily book cruises and other products and services online. These sites interface with our brands’ social networks, blogs and other social media sites, which allow them to develop greater contact and interaction with their guests before, during and after their cruise. We also employ vacation planners who support our sales initiatives by offering our guests one-on-one cruise planning expertise and other services.
We are a customer service driven company
XII. Human Capital Management and continue to invest in our service organization to assist travel agents and guests before, during and after their cruise. We believe that our support systems and infrastructure are among the strongest in the vacation industry. Our investment in customer service includes the development of employees, processes and systems. We continually improve our systems within the reservations and customer relationship management functions, emphasizing the continuing support and training of the travel agency community.Employees
XI. Sustainability
Our reputation and success depend on having sustainable and transparent operations. Our commitment and actions to keep our guests and crew members safe and comfortable, protect the environment, develop and provide opportunities for our workforce, strengthen stakeholder relations and enhance both the communities where we work as well as the port communities that our ships visit are vital to our success as a business enterprise and reflective of our core values. We strive to be a company that people want to work for and to be an exemplary global corporate citizen.
We voluntarily publish Sustainability Reports that address governance, stakeholder engagement, environmental, labor, human rights, society, product responsibility, economic and other sustainability-related issues and performance indicators. These reports, which are not incorporated in this Form 10-K but can be viewed at www.carnivalcorp.com and www.carnivalplc.com,
were developed in accordance with the Sustainability Reporting Guidelines established by the Global Reporting Initiative, the global standard for reporting on environmental, social and governance policies, practices and performance. We have been publishing Sustainability Reports since 2011 and recently launched our sustainability website that can be viewed at www.carnivalsustainability.com.
In order to support our environmental strategy, all of our brands’ environmental management systems are certified in accordance with ISO 14001. We have also developed a set of 2020 sustainability goals reinforcing our commitment to the environment, our guests, our employees and the communities in which we operate. Our ten goals listed below are aimed at reducing our environmental footprint while enhancing the health, safety and security of our guests and crew members and ensuring sustainable business practices across our brands and business partners:
Environmental Goals
| |
• | Reduce intensity of carbon dioxide equivalent (“CO2e”) emissions from operations by 25% by 2020 relative to our 2005 baseline
|
Continue to improve the quality of our emissions into the air by developing, deploying and operating exhaust gas cleaning systems (“EGCS”) across our fleet
Increase usage of ship-to-shore power connection capabilities
Increase Advanced Wastewater Purification Systems coverage of our fleet capacity by 10 percentage points by 2020 relative to our 2014 baseline
Continue to improve our shipboard operations’ water use efficiency by 5% by 2020 relative to our 2010 baseline
Continue to reduce waste generated by our shipboard operations by 5% by 2020 relative to our 2010 baseline
Health, Safety and Security Goals
Continue to build on our commitment to protect the health, safety and security of guests, employees and all others working on our behalf
Sustainable Workforce and Community Goals
Continue to build a diverse and inclusive workforce and provide all employees with a positive work environment and opportunities to build a rewarding career to further drive employee engagement
Further develop and implement vendor assurance procedures ensuring compliance with Carnival Corporation & plc’s Business Partner Code of Conduct and Ethics
Continue to work on initiatives and partnerships that support and sponsor a broad range of organizations for the benefit of the communities where we operate
Reflecting our commitment to sustainability and to play a leading role in matters of environmental protection in the cruise industry, we are expanding our investment in the use of low carbon fuels, in particular, liquefied natural gas (“LNG”). We have seven next-generation cruise ships on order that will be the first in the industry to be powered at sea by LNG. Pioneering a new era in the use of low carbon fuels, these new ships will use LNG to generate 100 percent of their power both in port and on the open sea - an innovation that will reduce air emissions to help protect the environment.
In addition, we continue our partnership with The Nature Conservancy, one of the world’s leading conservation organizations. They are leveraging our partnership in their efforts to restore coral reefs, protect marine ecosystems and promote natural habitats for marine environments to help reduce the impact of storms and rising sea levels in coastal communities.
XII. Employees
Our shipboard and shoreside employees are sourced from over 100approximately 150 countries. ExcludingIn connection with our resumption of guest cruise operations in 2022, we increased the number of employees onboard our ships from the reduced levels during 2021 and 2020. In 2022, we had an average of 75,000 employees onboard our ships, excluding employees on leave. Our shoreside operations had an annual average of 10,000 full-time and 2,000 part-time/seasonal employees. In 2019, our most recent full year of guest cruise operations, we had an average of 92,000 employees on our ships, excluding employees on leave we employand our shoreside operations had an annual average of 86,000 shipboard employees onboard the 103 ships we operate, which includes crew members and officers. Our shoreside operations have an average of 11,00012,000 full-time and 2,2002,000 part-time/seasonal employees, including seasonal employees ofemployees. Holland America Princess Alaska Tours which significantly increases its work force during the late spring and summer months in connection with the AlaskanAlaska’s cruise season.
Gender Diversity:
| | | | | | | | | | | |
| Approximate Average for 2022 (a) |
| Female | | Male |
| Shoreside Employees | 7,000 | | 5,000 |
| Shipboard Employees | 13,000 | | 62,000 |
| Total Employees | 20,000 | | 67,000 |
| | | | | | | | | | | |
| As of November 30, 2022 |
| Female | | Male |
| Boards of Directors | 4 | | 9 |
| Non-Director Senior Management and Company Secretary | 6 | | 7 |
| Non-Director Senior Management and Company Secretary Direct Reports | 27 | | 57 |
(a) These amounts are approximations and at times, fluctuate significantly due to the seasonality of our business.
We have entered into agreements with unions covering certain employees on our ships and in our shoreside hotel and transportation operations. The percentages of our shipboard and shoreside employees that are represented by collective bargaining agreements are 55% and 20%24%, respectively. We consider our employee and union relationships to be strong.
A team of highly motivated and engaged employees is key to providing extraordinary cruise vacations. To facilitate the recruitment, development and retention of our valuable employees, we strive to make Carnival Corporation & plc a diverse, inclusive and safe workplace, with opportunities for our employees to grow and develop in their careers.
a.Talent Development
We sourcebelieve in the investment in our shipboard officers primarily from Italy,team members through the UK, the Netherlands, Germanytraining and Norway. The remaining crew positions are sourced from around the world, with the largest contingent from the Philippines, Indonesiadevelopment of both shoreside and India. We utilize a limited number of manning agencies to help locate and hire most of our shipboard employees.
XIII. Training
Our cruise brands are committed to providing appropriate hotel We leverage a combination of virtual and marine-relatedin-person training to ensure that our teams are well-prepared to carry out their individual and collective responsibilities.
For our shipboard crew, including officers, have the knowledge and skills to properly perform their jobs. We provide a diverse range of shoreside and shipboard training foremployees, our hotel staff before and after they join our ships to further enhance their skills. Specifically, we provide bar, entertainment, guest service, housekeeping, leadership, management and restaurant training. Depending on the brand, we will also provide our hotel staff with in-depth English, German and Italian language training. All our hotel staff also undergo extensive safety training and, depending on their position, will pursue advanced safety certifications. We partner closely with manning agencies to help provide this training in Manila, Philippines; Jakarta, Indonesia; and Mumbai, India.
Our goal is to be a leader in delivering high quality professional maritime training. In 2016, we expanded our training, operations with the opening ofas evidenced by the Arison Maritime Center. The centerpiece of the campusCenter is home to the Center for Simulator Maritime Training (“CSMART”). The leading-edge CSMART Academy features the most advanced bridge and engine room simulator technology and equipment available, with the capacity to provide annual professional training for all our bridge, engineering and engineeringenvironmental officers. CSMART participants receive a maritime training experience that fosters advanced knowledge and skills development, critical thinking and problem solving, ethical decision making and skill development. In May 2017,solving; all in a professional learning environment where our corporate culture is reinforced. CSMART launchedalso offers training related to liquefied natural gas (“LNG”) technology as well as an environmental officer training program and began offering additional environmental courses for bridge and engineering officers to further enhance our training on socialenvironmental awareness and protection.
b.Succession Planning
Our Boards of Directors believe that planning for succession is an important function. Our multi-brand structure enhances our succession planning process. At the corporate level, a highly-skilled management team oversees a collection of cruise brands. We continually strive to foster the professional development of management and team members in other critical roles. As a result, we have developed a very experienced and strong group of leaders, with their performance subject to ongoing monitoring and evaluation, as potential successors to all of our executive positions, including our CEO.
In August 2022, Josh Weinstein, previously our Chief Operations Officer, was appointed President, CEO and Chief Climate Officer. Josh Weinstein has a long history of success in critical senior-level roles for our company. In his most recent assignment for the past two years as Chief Operations Officer he oversaw all major operational functions including global maritime, global ports and destinations, global sourcing, global IT and global auditing. During this time, he also oversaw Carnival UK, the operating company for P&O Cruises (UK) and Cunard, which he previously managed directly for three years as president. Prior to his role with Carnival UK, he was our company’s treasurer for 10 years.
XIII. Port Destinations and Private Islands
We operate a portfolio of port destinations and private islands enabling us to offer exceptional guest experiences by creating a wide variety of high quality destinations around the world that are uniquely tailored to our guests’ preferences. In addition, to secure preferential berth access to third-party ports, we enter into berthing agreements and commitments.
In May 2022, Carnival Cruise Line broke ground on its new Carnival Grand Bahama cruise port destination, expected to open in 2025 and located on the south side of Grand Bahama Island. The new cruise port development will include a pier able to accommodate up to two of our largest ships simultaneously, welcoming guests to a stunning beach and further expanding our experience offerings for our guests. Additionally, our investment in this cruise port destination will support our efforts to design more energy efficient itineraries based on its strategic location. Carnival Grand Bahama will be an important addition to our current portfolio of six corporate operated ports and destinations in the Caribbean:
•Puerta Maya in Cozumel, Mexico
•Grand Turk Cruise Center in Turks & Caicos
•Mahogany Bay in Isla Roatan, Honduras
•Amber Cove in the Dominican Republic
•Half Moon Cay, a private island in The Bahamas
•Princess Cay, a private island in The Bahamas
XIV. Ethics and Compliance
We believe a strong ethics and compliance culture is imperative for the success of any company. Our compliance framework includes a Global Ethics and Compliance (“GE&C”) department, which is led by our Chief Risk and Compliance Officer who leads the effort to promote and monitor a strong ethics and compliance culture throughout the company. The main responsibilities of the GE&C department are to collaboratively:
•Identify, assess, monitor, prevent, detect and report on compliance risk
•Ensure compliance accountabilities and responsibilities are clear across the company
•Promote a strong culture of ethics and compliance
•Drive ethics and compliance continuous improvements
To further heighten the focus on ethics and compliance, our Boards of Directors have Compliance Committees, which oversee the GE&C department and maintain regular communications with our Chief Risk and Compliance Officer.
XV. Sustainability
We strive to be a company that people want to work for and to be an exemplary global corporate citizen. Our commitment and actions to keep our guests and crew members safe and well, protect the environment, develop and provide opportunities for our workforce, strengthen stakeholder relations and enhance both the communities where we work as well as the port communities that our ships visit, are reflective of our brands’ core values and vital to our success.
In 2021, we established goals for 2030 which incorporate six key focus areas listed below that align with elements of the United Nation’s Sustainable Development Goals and build on the momentum of our successful achievement of our 2020 sustainability goals.
Sustainability Goals Progress
The tables below represent our progress on each of our six key focus areas:
| | | | | | | | |
| 2030 Climate Action Goals | Status (a) | Our Progress |
Achieve 20% carbon intensity reduction relative to our 2019 baseline measured in both grams of CO2e per ALB-km and kilograms of CO2e per ALBD | On Track | Achieved 2% carbon intensity reduction on an ALB-km basis and 4% on an ALBD basis. For ships in guest cruise operations, achieved 11% carbon intensity reduction on an ALB-km basis and 13% on an ALBD basis |
| Reduce absolute particulate matter air emissions by 50% relative to our 2015 baseline | Achieved | |
| Increase fleet shore power connection capability to 60% of the fleet | On Track | 57% of the fleet has shore power connection capability |
| Expand our LNG program | On Track | Seven LNG ships across the fleet |
| Optimize the reach and performance of our Advanced Air Quality System program | On Track | 93% of the fleet has Advanced Air Quality Systems installed (b) |
| Expand battery, fuel cell and biofuel capabilities | Ongoing | Piloted the use of biofuels as a replacement for fossil fuel on two ships |
| Reduce Scope 3 (indirect) emissions associated with food procurement and waste management | Ongoing | Completed an inventory of our Scope 3 emissions. Following the Greenhouse Gas Protocol, we estimate that our Scope 3 emissions represent approximately half of our total emissions |
| Identify carbon offset options only when energy efficiency options have been exhausted | Ongoing | Continuing to monitor the carbon offset market and options, as well as exploring carbon capture and storage opportunities |
| | | | | | | | |
| 2030 Circular Economy Goals | Status (a) | Our Progress |
| Achieve 50% single-use plastic item reduction in 2021 | Achieved | |
| Achieve 30% unit food waste reduction by 2022 and 50% unit food waste reduction by 2030 | • 2022 goal achieved
• 2030 goal on track |
•Established interim goal to achieve 40% unit food waste reduction by 2025 |
| Increase Advanced Waste Water Treatment System coverage to >75% of our fleet capacity | On Track | Achieved 64% coverage of fleet capacity |
| Send a larger percentage of waste to waste-to-energy facilities where practical | Ongoing | Completed a baseline of our waste programs in the U.S. |
| Partner with primary vendors to reduce upstream packaging volumes | Ongoing | Completed a packaging reduction pilot program with our primary engine supplier and achieved a reduction of approximately 44% |
| | | | | | | | |
| 2030 Good Health and Well-Being Goals | Status (a) | Our Progress |
| Committed to continued job creation | Ongoing | •Increased the number of employees on board our ships from the reduced levels during the pause in guest cruise operations •Opened and filled a significant number of shoreside positions |
| Establish measurable Company Culture metrics and set annual improvement targets | Ongoing | Established Company Culture metrics with semi-annual Culture surveys and are in the process of establishing improvement targets |
| Implement global well-being standards by 2023 | Ongoing | •Continued to work with authorities to arrange for COVID-19 vaccinations and boosters for our crew members, many of whom may not have had access to vaccines •Maintained and evolved onboard public health protocols to reflect the changing nature of the pandemic while protecting our guests and crew members responsibly |
| Reduce the number of guest and crew work-related injuries | Ongoing | Continued to implement initiatives to prevent guest and crew injuries |
| | | | | | | | |
| 2030 Sustainable Tourism Goals | Status (a) | Our Progress |
Animal Welfare – responsible sourcing •Achieve 100% cage free eggs by the end of 2025. •Achieve 100% responsible chicken sourcing by the end of 2025 •Achieve 100% gestation crate-free pork by the end of 2025
| On Track | Continued to work with our supply chain and met our glidepath targets for FY2022 - achieved 58% cage free eggs, 25% responsible chicken and 29% gestation crate-free pork purchases |
| Establish partnerships with destinations focused on sustainable economic development, preservation of local traditions, and capacity management | Ongoing | •Broke ground on a new cruise port destination on Grand Bahama Island, which is expected to open in 2025. The new port will provide business opportunities for the residents of Grand Bahama with an estimated 1,000 local jobs •Working with ports of Miami, Galveston, Barcelona, Savona and Genoa to support their shore power development efforts •Joined the Alaska Green Corridor partnership to explore methods to accelerate the reduction of greenhouse gas emissions •Costa Cruises continued with the “Traditions in the Future” project which supports the preservation of traditional arts and crafts to a new generation of artisans |
| Continue to support disaster resilience, relief, and recovery efforts | Ongoing | •Provided temporary housing for 1,500 Ukrainian refugees on a Holland America Line ship for five months •Launched brand specific projects and provided overall support to our Ukrainian crew members and their families |
| Build stronger community relationships in our employment bases and destinations via employee volunteering programs | Ongoing | Conducted multiple costal cleanups involving shipboard- and shoreside employees and partners in various locations around the world |
| | | | | | | | |
| 2030 Biodiversity and Conservation Goals | Status (a) | Our Progress |
| Support biodiversity and conservation initiatives through select NGO partnerships | Ongoing | Continued working with the Ocean 100 Dialogues to support ocean stewardship with a focus on climate change and biodiversity |
| Conduct audits and monitor animal encounter excursions regularly | Ongoing | Published Animal Welfare Statement for Excursions & Experiences on our website |
| | | | | | | | |
| 2030 Diversity, Equity and Inclusion Goals | Status (a) | Our Progress |
| Ensure our overall shipboard and shoreside employee base reflects the diversity of the world | Ongoing | Continued to employ shipboard crew members from approximately 150 countries around the world |
| Expand shipboard and shoreside diversity, equity, and inclusion across all ranks and departments | Ongoing | •Half of the global direct reports to our CEO are women •Named as one of the World’s Top Female-Friendly Companies by Forbes •Named as one of the World’s Best Employers by Forbes •Recognized as one of America’s Best Employers for Diversity by Forbes •Named among Best Companies for Latinos to Work by Latino Leaders Magazine •Earned a perfect score of 100 from the Human Rights Campaign (HRC) and designation as one of the Best Places to Work for LGBTQ+ equality |
(a)On Track - Quantifiable/numerical goals that are showing a positive trend towards achieving the goal.
Ongoing - Qualitative/non-numerical goals which are currently in progress.
(b)Excluding LNG ships.
A key focus of our sustainability efforts is climate action, which includes our commitment to reduce carbon emissions and our aspiration to achieve net carbon-neutral operations. We have made significant progress towards our 2030 carbon intensity reduction goals of 40% from a 2008 baseline, measured in both grams of CO2e per available lower berth kilometer (“ALB-km”) and kilograms of CO2e per available lower berth day (“ALBD”). During 2022, we updated the baseline year for both goals to 2019 from 2008. Both 2030 goals now require a 20% improvement from 2019. With the updated baseline year, we strengthened our 2030 goal measured in kilograms of CO2e per ALBD since the initial 2030 goal would only have required a further 15% reduction from 2019 levels. Our goal measured in grams of CO2e per ALB-km remains the same. In addition, this new baseline year helps us better communicate recent progress against our climate goals to our investors and stakeholders as well as modernize our disclosures in alignment with developing best practice and reporting standards.
We plan to achieve our 2030 carbon intensity goals based on the following planned actions:
•The delivery of larger-more efficient ships, as part of our ongoing newbuild program, some of which will replace existing ships in our fleet
•Designing more energy-efficient itineraries
•Investing in port and destination projects
•Continuing to invest in new technologies and energy efficiency projects for our existing fleet; since 2016, we have invested over $350 million
We have considered the above planned actions in connection with the preparation of our financial statements and any estimates used in the preparation of our financial statements, include projections (where applicable) consistent with the above planned actions.
In addition to our 2030 sustainability goals, we are committed to continuing our reduction of carbon emissions and have aspirations to achieve net carbon-neutral operations by 2050, well ahead of current International Maritime Organization (“IMO”) targets. While fossil fuels are currently the only viable option for our industry, we are closely monitoring technology developments and partnering with key organizations to help identify and scale new technologies not yet ready for the cruise industry. For example, we are piloting maritime scale battery technology and methanol powered fuel cells and working with classification societies and other stakeholders to assess lower carbon fuel options for cruise ships, which includes methanol, bioLNG, eLNG, hydrogen, and biofuels. During 2022, we piloted the use of biofuel as a replacement for fossil fuel on two of our ships. AIDAprima became the first larger-scale cruise ship to be powered with a blend of marine biofuel, made from 100% sustainable raw materials, and marine gasoil (“MGO”). Additionally, Holland America Line completed two pilots on Volendam, one using a blend of marine biofuel and another using 100% biofuel, becoming the first larger-scale cruise ship to be powered 100% by biofuel. The certified biofuels used in these pilots offer environmental benefits compared to using fossil fuels alone through their lifecycle CO2 reductions. These biofuels can be used in existing ship engines without modifications to the engine or fuel infrastructure, including on ships already in service. While alternative fuels may provide a path to decarbonization for the maritime industry, there are significant supply challenges that must be resolved before viability is reached. We are working with suppliers to encourage investment in a reliable supply infrastructure.
During 2022, we also announced the global rollout of Service Power Packages, a comprehensive set of technology upgrades, which will be implemented over the next several years across a portion of the fleet. These upgrades include the following elements designed to reduce both fuel usage and greenhouse gas (“GHG”) emissions while also contributing to cost savings:
•Comprehensive upgrades to each ship’s hotel HVAC systems
•Technical systems upgrades on each ship
•State-of-the-art LED lighting systems
•Remote monitoring and optimization of energy usage and performance
The Service Power Package upgrades are part of our ongoing energy efficiency investment program and are expected to further improve energy savings and reduce fuel consumption. Upon completion, these upgrades are expected to deliver an average of 5-10% fuel savings per ship.
In addition, we have five Air Lubrication Systems (“ALS”) currently operating in our fleet, we are currently installing ALS on six ships and we are planning at least eight more installations. ALS cushion the flat bottom of a ship’s hull with air bubbles, which reduces the ship’s frictional resistance and the propulsive power required to drive the ship through the water, which is expected to generate approximately 5% savings in fuel consumption and reductions in carbon emissions on ALS equipped ships.
As part of our plan for carbon footprint reduction, we have 11 LNG powered cruise ships that are expected to join the fleet through 2025, including seven ships already in operation as of November 30, 2022. In total, these ships are expected to represent 20% of our total future capacity by summer 2025. All of our LNG ships also have the capability to run on conventional fuels. The price of LNG in certain markets has been unattractive compared to other alternatives, and as such, at times we use conventional fuels to power our LNG ships.
LNG is a fossil fuel and generates carbon emissions. Its direct CO2 emissions are lower than those of conventional fuels and it emits effectively zero sulfur oxides (only the sulfur in the pilot fuel is present), reducing nitrogen oxides by 85% and particulate matter by 95%-100%. The types of engines that we use are subject to small amounts of methane slip (the passage of un-combusted methane through the engine). There are different views relating to the measurement of the environmental impact of LNG, including the methane slip. Our disclosures report our emissions, including methane slip, as part of our total carbon emissions (reported as CO2e) using the 100-year global warming potential time frame and measured on a “tank to wake” basis. We are working closely with our engine manufacturers and other technology providers to further mitigate methane slip, and have recently joined the Methane Abatement in Maritime (“MAM”) Innovation Initiative, where we will partner with other major maritime players to seek solutions for this challenge.
We pioneered the use of Advanced Air Quality Systems on board our ships to aid in the reduction of sulfur and lifecycle GHG emissions and are promoting the use of shore power. Shore power enables our ships to use shoreside electric power, where available, while in port rather than running their engines to power their onboard services, resulting in reduced ship air emissions. We have continued our work with several local port authorities to utilize cruise ship shore power connections.
As part of our sustainability strategy, we have voluntarily reported our carbon footprint via the CDP (formerly, the Carbon Disclosure Project) each year since 2006. The CDP rates companies on the depth and scope of their disclosures and the quality of their reporting. We developed a GHG inventory management plan in 2010 in accordance with the requirements of International Organization for Standardization (“ISO”) 14064-1:2018(E) standard and The Greenhouse Gas Protocol. Our submission includes details of our most recently compiled emissions data and reduction efforts, along with the results of an independent, third-party verification of our GHG emissions inventory. We also disclose our water stewardship through the CDP water program.
Carnival Corporation & plc’s environmental management system is certified in accordance with the ISO 14001:2015 Environmental Management System standard.
We voluntarily publish Sustainability Reports that address governance, stakeholder engagement, environmental, labor, human rights, society, product responsibility, economic and environmental protection.other sustainability-related issues and performance indicators. These reports, which are not incorporated in this document but can be viewed at www.carnivalcorp.com, www.carnivalplc.com and www.carnivalsustainability.com, were developed in accordance with the Global Reporting Initiative (“GRI”) Standards, the global standard for sustainability reporting.
a. Climate-Related Financial Disclosures
Under the UK Listing Rule LR 9.8.6R, Carnival plc is required to report certain climate-related financial disclosures for the year ended November 30, 2022, and with a goal towards transparency and consistent disclosure amongst our filings and stakeholders, we are including the UK required disclosures in our Form 10-K filing. Accordingly, we set out below our climate-related financial disclosures fully consistent with 10 out of the 11 Task Force on Climate-Related Financial Disclosures (“TCFD”) Recommendations and Recommended disclosures. For Metrics and Targets recommended disclosures b), we are partially consistent, as further work is underway to fully measure and disclose our Scope 3 GHG emissions, which we expect to disclose in our 2023 Strategic Report. Our consistency with the TCFD’s four pillars, Governance, Strategy, Risk Management and Metrics and Targets, and the recommendations thereof, are represented in the table below.
| | | | | | | | |
| TCFD Pillar | Recommended disclosures | Section Reference |
| Governance | a) Describe the Boards’ oversight of climate-related risks and opportunities. | Governance |
| b) Describe management’s role in assessing and managing climate-related risks and opportunities. |
| Strategy | a) Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term. | Strategy: Qualitative scenario analysis |
| b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning. | Strategy: Quantitative Scenario Analysis |
| c) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario. |
| Risk Management | a) Describe the organisation’s processes for identifying and assessing climate-related risks. | Risk Management: Climate Risk and Opportunity Identification, Owner Assignment and Assessment |
| b) Describe the organisation’s processes for managing climate-related risks. | Risk Management: Climate Risk and Opportunity Monitoring, Management and Reporting |
| c) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management. | Risk Management: Integration into our overall risk management |
| Metrics and Targets | a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process. | Metrics and Targets |
| b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions, and the related risks. |
| c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets. |
Governance
The Chief Climate Officer (“CCO”) and the Boards of Directors are responsible for the oversight of climate-related matters and are directly supported by members of executive management. In addition, the CCO and the Boards of Directors set the tone at the top with regards to embedding a climate risk culture through fulfilling their responsibilities as outlined in the climate risk management framework.
In January 2022, the Boards of Directors appointed Arnold Donald, President and CEO at the time, to the additional role of CCO. In August 2022, Josh Weinstein, our Chief Operations Officer assumed the roles of President, CEO and CCO. The CCO leads the identification of climate-related risks and opportunities and oversees how these are embedded in our strategic decision-making and risk management processes.
To further support our climate-related efforts, we created a Strategic Risk Evaluation (“SRE”) Committee. The SRE Committee consists of members of executive management and an advisor and reports to the CEO, who in turn, reports to the Boards of Directors. At its establishment in January 2022, the SRE Committee was comprised of David Bernstein (Chief Financial Officer), Josh Weinstein (then Chief Operations Officer), William Burke (Chief Maritime Officer), and Stein Kruse (Advisor to the CEO & Chair of the Boards). Following the August 2022 changes in leadership, Richard Brilliant (Chief Risk and Compliance Officer) was added to the SRE Committee, David Bernstein was appointed as Chair of the SRE Committee, and Josh Weinstein, who remained on the SRE Committee, assumed the role of CCO. The primary responsibility of the SRE Committee is to assist the CCO in fulfilling his responsibility to identify, monitor and review the management of climate-related risks and opportunities. Common recurring activities of the SRE Committee include:
•Discussing climate considerations in the planning processes to further support its focus on decarbonization, such as the recently adopted Corporate Itinerary Decarbonization Reviews.
•Considering if any new climate risks or opportunities should be included in the list of identified climate risks and opportunities.
•Ensuring appropriate assignment of identified climate risks and opportunities to risk owners, who are responsible for their day-to-day evaluation and management.
•Obtaining at least annual reporting from the risk owners on the monitoring and management of identified risks and opportunities and reviewing, scrutinizing and challenging management of climate risks and opportunities.
•Reviewing and approving the climate risk management framework.
An SRE Committee Charter was adopted and 12 SRE Committee meetings have taken place between its creation in January 2022 and November 2022. From these discussions, the SRE Committee has provided a quarterly update to the Boards of Directors on climate-related matters such as:
•Resetting our GHG baseline year to 2019 from 2008 and a strengthening of our 2030 goals relative to the new baseline.
•Establishment of a climate risk framework.
•Completion of the qualitative and quantitative scenario analysis assessments.
•Commissioning of the port analysis study.
Board Education Program
To enable the CCO and Boards of Directors to fulfil their responsibility to oversee climate-related risks and opportunities, a Board Environmental, Social and Governance (“ESG”) and TCFD education program has been established, with core education components and optional self-study courses. This ESG and TCFD education program has been developed with support from external advisors and the Senior Independent Director. The core education components of the program were completed in November 2022. An annual refresher education program, including updates to ESG and TCFD considerations, has been established.
Strategy
During 2022, we performed a qualitative and quantitative scenario analysis to assess our climate-related risks and opportunities over the short, medium and long term.
Qualitative scenario analysis
We qualitatively applied two (and quantitatively applied three) distinct plausible climate scenarios, global warming limited to below 1.5oC above pre-industrial levels by 2100 “Steady Path to Sustainability” and global warming of 2.8oC above pre-industrial levels by 2100 “Regional Rivalry.” The scenarios were used to generate the climate-related risks and opportunities listed in the table below.
As part of our qualitative scenario analysis, a series of workshops with the SRE Committee and a cross-section of management was conducted to identify material climate-related risks and opportunities, based on likelihood and degree of potential financial impact, over the following time horizons:
•Present – 2025 (short-term) - consistent with the period we use for our short-term planning
•2025 – 2035 (medium-term) - aligns with our existing sustainability goals
•2035 – 2050 (long-term) - consistent with the useful life of our ships
Following the workshops, the SRE Committee selected certain risks and opportunities for further assessment and quantification. The process of selecting these risks and opportunities included an in-depth assessment by each participant of the proposed risks and opportunities. The process incorporated the use of a feasibility matrix and subsequent group discussion to arrive at consensus on which risks and opportunities were most appropriate for quantification. Feasibility was evaluated on the availability of internal and external climate-related data, the estimated number of assumptions required and the magnitude of impact and likelihood of occurrence.
Climate-related risks identified through qualitative scenario analysis
Our initial selected risks and opportunities for quantification are in bold:
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| TCFD risk categories | Risk summary | Impact time horizon |
| Markets and Products / Shifting Markets (1) | Cruising no longer aligns to consumers’ climate values | Medium Term |
| Reduced availability and access to fuel* | Long Term |
| Unable to meet climate-related requirements reduces access to capital / insurance | Medium Term |
| Policy and Legal (1) | Increased costs driven by climate-related regulations* | Short-Medium Term |
| Risk is that cruising (as a carbon-intensive industry) is severely restricted or subject to bans | Medium Term |
| Reputation (1) | Failure to attract and retain talent due to climate credentials | Medium Term |
| Increased demand for reducing carbon-intensive practices | Short Term |
| Technology (1) | Lack of viable low carbon technology to replace fossil fuels | Medium Term |
| Physical | Chronic climate change impacting supply chain availability and price | Medium Term with expected increases in the Long Term |
| Itineraries are not viable due to extreme weather and/or sea level rise | Medium Term with expected increases in the Long Term |
(1) Transition Risks
*Due to the similar nature of these risks, we have combined them for the quantitative analysis into a combined risk: “How does a low-carbon transition impact the price of the fuels needed to power our ship engines?”
Climate-related opportunities identified through qualitative scenario analysis
| | | | | | | | |
| TCFD opportunity categories | Opportunity summary | Realisation time horizon |
| Energy Source | Support the adaptation of sustainable technological advances for the cruise industry | Medium Term |
| Market Access | Access to new financing options available for organisations working on decarbonisation | Short-Medium Term |
| Access to private destinations or islands with infrastructure built by us | Short-Medium Term |
| Attract and retain new customers and improve reputation through sustainable itineraries and activities for changing climate-induced preferences | Short-Medium Term |
| Positioning as a sustainability leader | Short-Medium Term |
| Products & Services | Opportunities for the ship to be the destination | Long Term |
| Resilience | Engage with more sustainable and economically favourable alternative suppliers | Short Term |
| Improve resilience to physical climate risk through adaptation of itinerary routes and investment in port infrastructure | Short Term |
| Resource Efficiency | Improved operational efficiencies arising from technological advancements | Medium Term |
| Increased fuel efficiency through alternative itinerary planning and reduced energy use | Short - Medium Term |
| Increased resource efficiency through reduced on-board energy demand and consumption | Medium Term |
We presently consider transition risks to be the most significant in terms of likelihood and impact. The risks with the highest impact and likelihood of occurrence are associated with the transition to a low-carbon emission future, in a scenario where low-carbon technologies do not exist, or where we have not been able to access these technologies and where we have reduced availability and access to fuel.
The climate-related opportunities with the highest impact are a mix of mitigation and adaptation opportunities. These include the positive impacts of supporting the adaptation of sustainable technological advances for our business, improved operational efficiencies from technological advancements, and more energy efficient itineraries from investing in port and destination projects.
Quantitative Scenario Analysis
We quantitatively applied three distinct plausible climate scenarios to determine the potential impacts of the risks and opportunities assessed. Using transition scenario assumptions from the International Energy Agency (“IEA”) and climate and transition scenarios from the Intergovernmental Panel on Climate Change (“IPCC”), we utilised two interlocking types of pathways, the Representative Concentration Pathways (“RCPs”) and Shared Socioeconomic Pathways (“SSPs”) to create three sets of scenarios to understand the relative materiality and possible range of impacts to the business from the selected climate-related risks and opportunities under different potential futures.
Scenario 1: Steady Path to Sustainability (average temperature increase limited to 1.5°C above pre-industrial levels by 2100)SSP1 / RCP1.9
| | |
| Under this scenario, the world takes the rapid and strong policy measures required to meet the ambition of the 2015 Paris Agreement (keep mean annual temperature rise well below 2°C warming above pre-industrial levels by 2100). Under this scenario, low carbon technologies take over from fossil-fuels, and reduced economic growth is also important for reaching net zero emissions by 2050 |
We selected this scenario, as it provides us insight into a low-carbon world that would benefit us and our Climate Action Goals. Under this scenario, transition risks identified are material and our resilience is dependent on our ability to effectively adopt low carbon technologies. This would help us adhere to increasing decarbonization requirements, including existing and emerging regulations, consumer preferences, and talent market expectations. Our most impactful opportunity is the enhancement of our reputation and competitiveness, by supporting the adaptation of sustainable technological advances for the cruise industry. This would also further help us to mitigate our transition risks.
Scenario 2:Regional Rivalry (average temperature increase limited to below 2.8°C above pre-industrial levels by 2100)SSP3 / RCP7.0
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| This scenario explores a possible route in which the world is seeing an emergence of tribalism and nationalism. Low international priority for addressing environmental concerns leads to strong environmental degradation in some regions. The combination of impeded development and limited environmental concern results in poor progress toward climate sustainability. Growing resource intensity and fossil fuel dependency along with difficulty in achieving international cooperation and slow technological change imply high challenges to mitigation. |
We selected this scenario, as it provides an indication of the world we would operate in if we do not achieve the Paris Agreement target. This scenario presents a higher emissions future where physical risks are material. Business resilience under this scenario is dependent on our ability to adapt to extreme weather events and chronic physical risks. Under this scenario we can remain resilient by taking advantage of the mobility of our cruise ships, which enables us to move our vessels between regions and adapt itineraries in cases of extreme weather events. Additionally, based on a study performed, we are well placed to respond to increased physical risks at our new port development projects, see Investment in Port and Destination Projects.
Scenario 3:Fossil-fueled growth (average temperature increase limited to below 4°C above pre-industrial levels by 2100) SSP5 / RCP8.5
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| The 4°C scenario explores a possible route in which as countries emerge from the coronavirus pandemic, governments around the world focus on restoring growth through direct support to fossil fuels and reverting to the tried and tested methods of the past. |
This scenario presents the highest emissions future where physical risks have the potential to be most significant and would therefore allow us to model the impact of these extreme climate risks. Akin to Scenario 2, business resilience under Scenario 3 will be dependent on our ability to adapt to extreme weather events and chronic physical risks as well as the impacts to our supply chain across different geographical areas. Our experience with the current supply chain crisis suggests that under this scenario, we would be resilient to these supply chain risks given our ability to adapt to supply chain disruptions.
Key assumptions and limitations
The results of our quantitative scenario analysis have a high degree of uncertainty as there are assumptions made for all modelling inputs. This means that results should be taken as an indicative "order of risk". Furthermore, the analysis assumes that the future conditions from climate change are shifted to today to contextualize impacts in relation to the current business size. The analysis does not include:
•Forward-looking forecasting of our business operations; or
•Potential mitigation or adaptation measures that could be taken either by us, or by other parties over the period considered (e.g., sustainable ship fuel development, governments building flood defenses).
Estimations and projections
We completed several scenario analyses over three time horizons (2025, 2030, and 2050). Any assumption made about fuel prices acknowledges the current energy crisis and assumes that by 2025, oil prices will stabilize in line with IEA price projections. We have also projected physical and transition risks at a global level due to the high mobility of our assets.
The degree of potential impact was determined on a linear scale range of “Low”, having no material impact or “High” having a material impact on Carnival Corporation & plc’s financial statements.
Results of the Quantitative Scenario Analysis: Potential Impact on Operating Income
How does a low-carbon transition impact the price of the fuels needed to power our ship engines?
While fossil fuels are currently the only viable option for our industry at present, we are closely monitoring technology developments and partnering with key organizations to help identify and scale new technologies not yet ready for the cruise industry. Refer to XV. Sustainability.
How would changing consumer sentiments drive changes in demand for our offering?
To mitigate the impact of this risk, our short and medium-term decarbonization goals focus on reducing carbon emissions per ALBD and carbon emissions per ALB-km. In addition, we are committed to our reduction of carbon emissions and have aspirations to be net carbon-neutral ship operations by 2050. Refer to XV. Sustainability.
How are our profits affected by an increase in commodity prices?
Under Scenarios 1 and 2, the impacts on food prices are indistinguishable from the historical commodity market volatility. Under Scenario 3, we could face higher food costs which may impact our value chain and operating profit. Our existing supply chain management strategies have remained resilient through the more recent supply chain issues experienced globally, demonstrating our ability to mitigate global-scale disruptions. In addition, our Circular Economy 2030 Goals include achieving a 30% food waste reduction per person by 2022 and 50% by 2030. Refer to XV. Sustainability and XVII. Supply Chain.
What are the future savings associated with operational efficiency improvements?
Under each scenario, the estimated total price of the fuel is the same, but the amount of fuel demanded differs based on assumptions about operational efficiency improvements. To capture this potential upside, we are investing in projects that improve the energy efficiency of our fleet. An Internal Decarbonization Premium is being added to the cost of fuel during the itinerary, strategic and capital planning processes and is used to evaluate the payback period and return on investment for capital projects. We are also ensuring that our brands design more energy efficient itineraries through our Corporate Itinerary Decarbonization Reviews. For further details of our strategies in place to capture this opportunity, refer to XV. Sustainability.
How could providing a service geared towards changing consumer sentiment drive long-term growth for us?
Under scenarios 2 and 3, an immaterial number of consumers would align to low-carbon services. Under Scenario 1, from 2025 to 2050 across all countries, there is an increase in the expected price per Passenger Cruise Days that we will be able to charge. By continuing to reduce our carbon emissions through our strategies such as investing in energy efficiency projects, fleet changes, itinerary changes, and port developments, we can remain resilient under Scenario 1. For further details of our strategies in place to capture this opportunity, refer to XV. Sustainability.
Investment in Port and Destination Projects
Utilizing the latest IPCC 6 report, a climate study was undertaken, by a third party, for two of our port development projects at Grand Port (Grand Bahama Island) and Half Moon Cay Pier Project (The Bahamas), to enhance climate resilience. Based on the results of this study, we are well placed to respond to the physical risks of climate change at the two planned port locations and that we will have a number of measures in place to address physical climate impacts. These results were reviewed by the SRE Committee and presented to the Boards of Directors for an investment decision. Furthermore, our investments in these ports and destinations will support our efforts to design more energy efficient itineraries based on their strategic locations.
Risk Management
We utilize a process for managing our climate risks and opportunities which begins with climate risk and opportunity identification then follows with owner assignment, assessment, monitoring, management and reporting. This process is ongoing and iterative.
Climate Risk and Opportunity Identification, Owner Assignment and Assessment
The qualitative scenario analysis is the foundation of our climate risk and opportunities identification and assessment process and began with the evaluation of a long list of climate-related risks and opportunities we may face, to generate an initial list of possible risks and opportunities. As discussed above, we considered a high-carbon and a low-carbon scenario. Input from key stakeholders in the business was obtained through facilitated workshops to identify additional climate risks and opportunities and refine the list before prioritizing those identified. Assessment of these risks and opportunities was performed by the SRE Committee and a cross section of management, who qualitatively evaluated the impact and likelihood of these risks and opportunities. Certain financial, regulatory, reputational and physical risks and opportunities were then selected for more detailed quantitative scenario analysis.
The SRE Committee reviews the selected risks and opportunities from our qualitative scenario analysis quarterly and considers if any risks or opportunities no longer need monitoring, and if any new climate risks or opportunities should be identified. Each
climate risk has been assigned an owner who has responsibility for the day-to-day evaluation and management of the risk. Following the climate risk identification process, climate risks are assessed based onexpected impact, likelihood, time horizon and speed of onset.
Climate Risk and Opportunity Monitoring, Management and Reporting
The primary method for review, scrutiny, and challenge of climate risks, involves the risk owners monitoring, assessing and reporting how each risk and opportunity is changing over time based on climate risk indicators and discussing options with the SRE Committee to reduce, accept, avoid or transfer risk.
Integration into our overall risk management
Overall, the Boards of Directors are responsible for determining the strategic direction of the company and the nature and extent of the risk assumed by it. Within our risk management framework, the Boards of Directors have ultimate oversight of climate-related risks, which have been identified as a principal risk. Refer to the Governance pillar for a description of how climate-related risks are overseen.
Metrics and Targets
Our most material risks quantified, are the transition risks. To mitigate the impact of these risks, we have identified four strategic actions, including energy efficiency projects, fleet changes, itinerary changes, and port developments, to reduce our reliance on fossil fuels. The metrics and Climate Action Goals associated with these risks and opportunities, are outlined above within XV. Sustainability. To demonstrate our commitment to achieving our Climate Action Goals, we will be updating our executive compensation target linked to our progress toward achieving certain of our 2030 Sustainability Goals.
Our Scope 1 and 2 emissions are disclosed in our Carnival plc Annual Report but are not incorporated by reference into this Form 10-K. We quantify and report, using the GHG Protocol and obtain third-party assurance (under ISO-14064-3:2006) of our GHG emissions, including our direct (Scope 1) and indirect (Scope 2) emissions. During 2022, we performed an inventory of our Scope 3 GHG emissions using a baseline year of 2019 (our last full year of guest cruise operations) and determined that Scope 3 emissions were estimated to be approximately one half of our total emissions. We expect to train approximately 6,000 bridgedisclose our Scope 3 emissions in our 2023 Carnival plc Annual Report. We plan to review the cross-industry metrics recommended by TCFD’s 2021 Implementation Guidance and engineering officers at CSMART every year.will consider additional relevant metrics in 2023.
We have made progress over the past 15 years reducing our carbon emission intensity and achieved our 2020 goal three years early (in 2017). We have also made progress towards our 2030 carbon intensity reduction goals of 40% from a 2008 baseline, measured in both grams of CO2e per ALB-km and kilograms of CO2e per ALBD. Through 2019, we reduced our carbon emission intensity on a lower berth distance basis by 25% relative to 2008 all while growing our capacity by 48%. Furthermore, because of our efforts, we peaked our absolute Scope 1 and 2 emissions in 2011. XIV.
During 2022, we updated the baseline year for both goals to 2019 from 2008. This new baseline year will help us better communicate recent progress against our Climate Action Goals to our investors and stakeholders and modernizes our disclosures in alignment with developing best practice and reporting standards. Both 2030 goals require a 20% decrease from 2019. With the updated baseline year, we have strengthened our goal measured in kilograms of CO2e per ALBD since the initial 2030 goal would only have required a further 15% reduction from 2019 levels. Our goal measured in grams of CO2e per ALB-km remains the same.
To support the mitigation of the climate-related risks identified relating to the restriction of carbon-intensive industries and fossil fuels, we have set 2030 Climate Action Goals.
XVI. Information Technology
With the increasing size and sophistication of cruise ships, the technologies employed to createenhance guest experiences and operate ships have grown ever more complex and integrated. We have a Chief Information Officer (“CIO”) who is responsible for leading three critical global functions across our brands: information technology, innovation, and cybersecurity/compliance. Our Boards of Directors have Audit Committees whose responsibility includes oversight of risk management relating to information technology, cybersecurity and data privacy. The CIO briefs the Audit Committees on these matters on a regular basis and generally at least quarterly.
Our global information technology model is designed to contribute to exceeding expectations of our guests, crew, shoreside employeesteam members and other stakeholders. This model is focused on supporting exceptional guest experiencesAll of our brands are actively collaborating to maximize the business value of our information technology solutions, standards and processes to eliminate redundancies and drive process efficiencies, while increasingly leveraging our scale and common technologies to drive process efficiency and effectiveness across our portfolio of brands.technologies. In order to achieve our goals, we are focusing on several key factors including applications, compliance, connectivity, cybersecurity, data privacy, infrastructure, modernization and innovation.
In response to the increasing threat of continuallycontinuously evolving cybersecurity risks, we are strivinghave continued to provide protection of guest, employee, companyinvest in our information technology and other dataoperational technology cybersecurity programs, managing risk and develop best practices that focus onprotecting our company’s business operations through targeted people, process and technologytechnology-focused improvements. This includes the implementation of routine data privacy and security focused training for our shoreside and certain shipboard team members. We have a Chief Information Security Officer who reports to combat threatsthe CIO and malicious activity. is responsible for leading global cybersecurity risk reduction efforts and compliance.
In addition,light of numerous jurisdictional data privacy and security laws/regulations, we have recently establisheddata privacy and security standards across the corporation. We have a committee to furtherChief Privacy Officer and Data Protection Officers who oversee our focus on minimization and protectionthe proper processing of private data.personal information in alignment with our Privacy Policy.
All of our brands are actively collaborating on our global information technology solutions, standards and processes. By aligning technology planning, infrastructure, security, privacy and applications, we continue to maximize the business value of our information technology investments by eliminating redundancies and driving synergies across the brands while identifying and leveraging best practices and establishing common standards.
XV. Innovation
We have successfully delivered innovation to our guests for more than four decades. Our continuous innovation with ship design allows our guests to enjoy carefully crafted experiences while effortlessly en-route to their next port-of-call. Our leading port development has opened new locations and experiences to our guests.
Our innovation pursuit is focused on creating amazing guest experiences and leveraging our enterprise scale. This focus has driven the creation of our newly developed “Experience Platform”. The guest centric experience platform leverages multiple proprietary technologies that work together to power guest experiences.
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• | Ocean MedallionTM - a revolutionary wearable device that enables a highly personalized vacation experience that works in conjunction with a portfolio of digital experiences all focused on simplifying guest access to experiences and facilitating a more immersive vacation
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• | xiOTTM - an invisible network of interactive intelligent sensors and embedded devices mounted throughout the ship, home ports and destinations that uses a guest-centric, Internet of Things approach to enable a seamless guest experience
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In 2017, we opened the second of three planned state-of-the-art Fleet Operations Centers (“FOC”) with the most advanced ship to shore communications technology available. We are developing, implementing and utilizing cutting-edge proprietary technology at these centers to enhance our ability to monitor ship nautical and technical performance in real time, including fuel
consumption, engine performance and air emissions. The centers allow for improved communications between the ship and shore, and immediate support to our ships for route planning, maritime safety and risk management.
We continue to leverage our state-of-the-art revenue management system across six brands and expect the roll-out of its capabilities for the six brands to be completed in 2018.
XVI. XVII. Supply Chain
We incur expenses for goods and services to deliver exceptional cruise experiences to our guests. In addition, we incur significant capital expenditures for materials to support the refurbishment and enhancements of our vessels as well as to build new ships. We approach our spend strategically and look for suppliers who demonstrate the ability to help us leverage our scale in terms of cost, quality, service, innovation and innovation.sustainability. We are focused on the creation of strategic partnerships and will streamline our supplier base where it is prudent and on a risk-based basis. Our largest capital investments are for the construction of new ships.
Global supply markets and supply chains have been impacted by certain events, resulting in shortages, extended lead times and increased inflation impacting our operations and profitability. We have agreements in place forcontinue to apply a number of different strategies to mitigate the constructionimpact of 18 cruise ships with three shipyards.these challenges on our operations, including extending our demand planning, placing purchase orders earlier, leveraging corporate contracts, utilizing short-term or long-term contracts as needed, seeking alternative sources, utilizing substitute products and leveraging our supplier relationships.
XVII. XVIII. Insurance
a.General
We maintain insurance to cover a number of risks associated with owning and operating our vessels and other non-ship related risks. All such insurance policies are subject to coverage limits, exclusions and deductible levels. Insurance premiums are dependent on our own loss experience and the general premium requirements of our insurers. We maintain certain levels of deductibles for substantially all the below-mentioned coverages. We may increase our deductibles to mitigate future premium increases. We do not carry coverage related to loss of earnings or revenues from our ships or other operations.
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b. | Protection and Indemnity (“P&I”) Coverages |
b.Protection and Indemnity (“P&I”) Coverages
Liabilities, costs and expenses for illness and injury to crew, guest injury, pollution and other third partythird-party claims in connection with our cruise activities are covered by our P&I clubs, which are mutual indemnity associations owned by ship owners.
We are members of three P&I clubs, Gard, Steamship Mutual and UK Club, which are part of a worldwide group of 13 P&I clubs, known as the International Group of P&I Clubs (the “IG”). The IG insures directly, and through broad and established reinsurance markets, a large portion of the world’s shipping fleets. Coverage is subject to the P&I clubs’ rules and the limits of coverage are determined by the IG.
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c. | Hull and Machinery Insurance |
c.Hull and Machinery Insurance
We maintain insurance on the hull and machinery of each of our ships for reasonable amounts as determined by management. The coverage for hull and machinery is provided by large and well-established international marine insurers. Insurers make it a condition for insurance coverage that a ship be certified as “in class” by a classification society that is a member of the International Association of Classification Societies (“IACS”). All of our ships are routinely inspected and certified to be in class by an IACS member.
d.War Risk Insurance
We maintainuse a combination of insurance and self-insurance to cover war risk insurance for legal liability to crew, guests and other third parties as well as loss or damage to our vessels arising from war or war-like actions, including terrorist incidents. Items excluded from this coverage are claims arising from chemical, nuclear and biological attacks.actions. Our primary war risk insurance coverage is provided by international marine insurers and our excess war risk insurance is provided by our three P&I clubs. Under the terms of our war risk insurance coverage, which are typical for war risk policies in the marine industry, insurers can give us sevenno less than three days’ notice that the insurance policies will be cancelled.canceled. However, the policies canmay be reinstated at different premium rates. This gives insurers the ability to increase our premiums following events that they determine have increased their risk.
e.Other Insurance
We maintain property insurance covering our shoreside assets and casualty insurance covering liabilities to third parties arising from our hotel and transportation business, shore excursion operations and shoreside operations, including our port and related commercial facilities. We also maintain worker’s compensation, director’s and officer’s liability and other insurance coverages.
XVIII. Port Destinations and Private Islands
In select geographies around the world we operate a portfolio of leading port destinations and private islands to grow demand and create relative scarcity. This enables us to offer exceptional guest experiences by creating a wide variety of high quality destinations around the world that are uniquely tailored to our guests’ preferences. In addition, to secure preferential berth access to third party ports, we coordinate across brands to negotiate berthing agreements and to ‘lock-in’ preferred access through shared agreements and commitments.
XIX. Governmental Regulations
a. Maritime Regulations
1. General
Our ships are regulated by numerous international, national, state and local laws, regulations, treaties and other legal requirements, thatas well as voluntary agreements, which govern health, environmental, safety and security matters in relation to our guests, crew and ships. These requirements change regularly, sometimes on a daily basis, depending on the itineraries of our ships and the ports and countries visited. If we violate or fail to comply with any of these laws, regulations, treaties and other requirements, we could be fined or otherwise sanctioned by regulators. We are committed to complying with, or exceeding, all relevant maritime requirements.
The primary regulatory bodies that establish maritime laws and requirements applicable to our ships include:
The International Maritime Organization (“IMO”):IMO: All of our ships, and the maritime industry as a whole, are subject to the maritime safety, security and environmental regulations established by the IMO, a specialized agency of the United Nations. The IMO’s principal sets of requirements are mandated through its International Convention for the Safety of Life at Sea (“SOLAS”) and its International Convention for the Prevention of Pollution from Ships (“MARPOL”).
Flag States: Our ships are registered, or flagged, in The Bahamas, Bermuda, Italy, Malta, the Netherlands, Panama and the UK, which are also referred to as Flag States. Our ships are regulated by these Flag States through international conventions that govern, among other things, health, environmental, safety and security matters in relation to our guests, crew and ships. Representatives of each Flag State conduct periodic inspections, surveys and audits to verify compliance with these requirements.
Ship classification societies: Class certification is one of the necessary documents required for our cruise ships to be flagged in a specific country, obtain liability insurance and legally operate as passenger cruise ships. Our ships are subject to periodic class surveys, including dry-dockingdry-dock inspections, by ship classification societies to verify that our ships have been maintained in accordance with the rules of the classification societies and that recommended repairs have been satisfactorily completed. Dry-dock frequency is a statutory requirement mandated by SOLAS. Our ships dry-dock once or twice every five years, depending on the age of the ship.
National, regional state and localother authorities: We are subject to the decrees, directives, regulations and requirements of the European Union (“EU”), the UK, the U.S., U.S. statesother countries and more than 400hundreds of other authorities, including international ports that our ships visit every year.
Port regulatory authorities (Port State Control): Our ships are also subject to inspection by the port regulatory authorities, which are also referred to as Port State Control, in the various countries that they visit. Such inspections include verification of compliance with the maritime safety, security, environmental, customs, immigration, health and labor requirements applicable to each port, as well as with regional, national and international requirements. Many countries have joined together to form regional port regulatoryPort State Control authorities.
As members of the Cruise LineLines International Association (“CLIA”), we helped to develop and have implemented policies that are intended to enhance shipboard safety and environmental protection throughout the cruise industry. In some cases, this calls for implementing best practices, which are in excess ofexceed existing legal requirements. Further details on these and other policies, which are not incorporated into this document, can be found on www.cruising.org.
Our Boards of Directors have HESSHealth, Environment, Safety and Security (“HESS”) Committees, which are currently eachwere comprised of foursix independent directors.directors as of November 30, 2022. The principal function of the HESS Committees is to assist the boards in fulfilling their responsibility to supervise and monitor our health, environment, safety, security and sustainability related policies, programs and initiatives at sea and ashore and
compliance with related legal and regulatory requirements. The HESS Committees and our management team review all significant HESS relevant risks or exposures and associated mitigating actions.
We are committed to implementing appropriate measures to manage identified risks effectively. As part of our commitment, weWe have a Chief Maritime Officer who is a retired Vice Admiral from the U.S. Navy, to oversee our global maritime operations, including maritime quality assurance and policy, maritime affairs, environmental compliance,maritime standards, training, shipbuilding, ship refitsasset management, health operations, and research and development. In addition, we have a Chief Risk and Compliance Officer who leads the effort to promote and monitor a strong ethics and compliance culture throughout the company, including all areas of HESS.
To help ensure that we are compliant with legal and regulatory requirements and that these areas of our business operate in an efficient and effective manner, we:
•Provide regular health, environmental, safety and security support, training, guidance and information to guests, employeesteam members and others working on our behalf
•Develop and implement effective and verifiable management systems to fulfill our health, environmental, safety, security and sustainability commitments
•Perform regular shoreside and shipboard audits and take appropriate action when deficiencies are identified
•Report and investigate all health, environmental, safety and security incidents and strive to take appropriate action to prevent recurrence
•Identify those employeesteam members responsible for managing health, environment, safety, environment, security and sustainability programs and ensure that there areaim to establish clear lines of accountability
•Identify the aspects of our business thatwith potential to impact the environment and continue to take appropriate action to minimize that impact
•Monitor an anonymous hotline for any reported allegations or concerns and the related responses
•Review and work to improve policies and procedures designed to prevent, detect, respond and correct various regulatory violations and other misconduct
2. Maritime Safety Regulations
The IMO has adopted safety standards as part of SOLAS. To help ensure guest and crew safety, SOLAS establishes requirements for the following:
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• Vessel design and structural features | • Life-saving and other equipment |
• Construction and materials | • Fire protection and detection |
• Refurbishment standards | • Safe management and operation |
• Radio communications | • Musters |
All of our crew undergo regular safety training that meets or exceeds all international maritime regulations, including SOLAS requirements, which are periodically revised.
SOLAS requires implementation of the International Safety Management Code (“ISM Code”), which provides an international standard for the safe management and operation of ships and for pollution prevention. The ISM Code is mandatory for passenger vessel operators. Under the ISM Code, vessel operators are required to:
•Develop and implement a Safety Management System (“SMS”) that includes, among other things, the adoption of safety and environmental protection policies setting forth instructions and procedures for operating vessels safely and describing procedures for responding to emergencies and protecting the environmentenvironment. In addition, our SMS includes health and security procedures
•Obtain a Document of Compliance (“DOC”) for the vessel operator, as well as a Safety Management Certificate (“SMC”) for each vessel they operate. These documents are issued by the vessel’s Flag State and evidence compliance with the ISM Code and the SMS
•Verify or renew DOCs and SMCs periodically in accordance with the ISM Code
We have implemented and continue to enhancedevelop policies and procedures that demonstratewe believe enhance our commitment to the safety of our guests and crew. These policies and proceduresinitiatives include the following:
Expansion and acceleration of the training•Training of our bridge, engineering and engineeringenvironmental officers in maritime related best practices atfacilitated by our new CSMART Academy, the Center for Simulator Maritime Training located within our Arison Maritime Center in Almere, Netherlands
•Further standardization of our detailed bridge and engine resource management procedures on all of our ships
•Expansion of our existing oversight function to monitor bridge and engine roomassist operations through our state-of-the-art fleet operations centers in Miami and Hamburg
•Identifying and standardizingpromoting the use of international standards and best-practice policies and procedures in health, environment,environmental, safety and security disciplines across the entire organization including on all our ships
•Further enhancement of our processes for auditing our HESS performance throughout our operations
3. Maritime Security Regulations
Our ships are subject to numerous security requirements. These requirements include the International Ship and Port Facility Security Code, which is part of SOLAS, the U.S. Maritime Transportation Security Act of 2002, which addresses U.S. port and waterway security and the U.S. Cruise Vessel Security and Safety Act of 2010, which applies to all of our ships that embark or disembark passengers in the U.S. These regulations include requirements as to the following:
•Implementation of specific security measures, including onboard installation of a ship security alert system
•Assessment of vessel security
•Efforts to identify and deter security threats
•Training, drills and exercises
•Security plans that may include guest, vehicle and baggage screening procedures, security patrols, establishment of restricted areas, personnel identification procedures, access control measures and installation of surveillance equipment
•Establishment of procedures and policies for reporting and managing allegations of crimes
4. Maritime Environmental Regulations
We are subject to numerous international, multi-national, national, state and local environmental laws, regulations and treaties that govern air emissions, waste discharges, water management, and disposal, and the storage, handling, use and disposal of hazardous substances such as chemicals, solvents and paints.
As a means of managing and improving our environmental performance and compliance, we adhere to standards set by ISO,the International Organization for Standardization (“ISO”), an international standard-setting body, which produces worldwide industrial and commercial standards. The environmental management systemssystem of our brandscompany and ships areis certified in accordance with ISO 14001, the environmental management standard that was developed to help organizations manage the environmental impacts of their processes, products and services. ISO 14001 defines an approach to setting and achieving environmental objectives and targets, within a structured management framework.
i. International Regulations
The principal international convention governing marine pollution prevention and response is MARPOL.
a. Preventing and Minimizing Pollution
MARPOL includes six annexes, four annexesof which are applicable to our cruise ships, containing requirements designed to prevent and minimize both accidental and operational pollution by oil, sewage, garbage and air emissions and sets forth specific requirements related to vessel operations, equipment, recordkeeping and reporting that are designed to prevent and minimize pollution. All of our ships must carry an International Oil Pollution Prevention Certificate, an International Sewage Pollution Prevention Certificate, an International Air Pollution Prevention Certificate and a Garbage Management Plan. The ship’s Flag State issues these certificates, which evidence their compliance with the MARPOL regulations regarding prevention of pollution by oil, sewage, garbage and air emissions. Certain jurisdictions have not adopted all of these MARPOL annexes but have established various national, regional or local laws and regulations that apply to these areas.
As noted above, MARPOL governs the prevention of pollution by oil from operational measures, as well as from accidental discharges. MARPOL requires that discharges of machinery space bilge water pass through pollution prevention equipment that separates oil from the water and monitors the discharged water to ensure that the effluent does not exceed 15 parts per million oil content. During 2019, we voluntarily completed the upgrade of oily water separation equipment to the latest MARPOL standards as set forth by the IMO onboard all of our ships. Our ships must have oily water separators with oil content monitors installed and must maintain a record of certain engine room operations in an Oil Record Book. In addition, we have voluntarily installed redundant systems on all of our ships that monitor processed bilge water througha second time prior to discharge to help ensure that it contains no more than 15 parts per million oil content. This voluntary system also provides additional controls to prevent improper bilge water discharges. MARPOL also requires that our ships have Shipboard Oil Pollution Emergency Plans.
MARPOL also governs the discharge of sewage from ships and contains regulations regarding the ships’ equipment and systems for the control of sewage discharge, the provision of facilities at ports and terminals for the reception of sewage and requirements for survey and certification.
MARPOL also governs the discharge of garbage from ships and requires the implementation of Garbage Management Plan and the maintenance of a Garbage Record Book.
Furthermore, MARPOL addresses air emissions from vessels, establishes requirements for the prevention of air pollution from ships to reduce emissions of sulfur oxides (“SOx”), nitrogen oxides (“NOx”), particulate matter and particulate matter.GHG emissions. It also contains restrictions on the use of ozone depleting substances (“ODS”) and requires the recording of ODS use, equipment containing ODS and the emission of ODS.
b. Sulfur Emissions
MARPOL also addresses air emissions from vessels in both auxiliary and main propulsion diesel engines on ships and further specifies requirements for Emission Control Areas (“ECAs”) with stricter limitations on sulfur emissions in these areas. Since January 2015, ships operating in a number of regions throughout the world have been required to use fuel with a sulfur content of no more than 0.1% or 0.5% (depending on the ECA), or to use alternative emission reduction methods, such as EGCS. Additional local and regional ECAs have come into force since 2015.
The International Maritime Organization’s Marine Environment Protection CommitteeIMO has agreed to implementadopted a global 0.5% sulfur cap for marine fuel beginningwhich began in January 2020. The EU Parliament and Council havehas also set a January 2020 implementation date for theiradopted 0.5% sulfur content fuel requirement (the “EU Sulfur Directive”). The options to comply with both the global 0.5% sulfur cap and the EU Sulfur Directive include the installation of Advanced Air Quality Systems, or the use of low sulfur fuel, installation of EGCS, or the use of alternative fuels.
MARPOL addresses air emissions from both auxiliary and main propulsion diesel engines on ships and further specifies requirements for Emission Control Areas (“ECAs”) with stricter limitations on sulfur emissions content in these areas, requiring ships to use fuel with a sulfur content of no more than 0.1%, or to use alternative emission reduction methods, such as Advanced Air Quality Systems.
We have been installing EGCSAdvanced Air Quality Systems on most of our ships. These effortsships, which are aiding in partially mitigating much of the financial impact from the 2015 ECAECAs and post-2015global 0.5% sulfur requirements. However, we have,We use Advanced Air Quality Systems wherever possible subject to local laws and will, incur additional EGCS operating expensesregulations. Additionally, Advanced Air Quality Systems used with heavy fuel oil (“HFO”) results in as we benefit fromgood or better SOx, NOx, and particulate emissions compared to MGO while also resulting in a marginal reduction of well-to-wake carbon emissions. These refer to the use of this technology.
c. Other Ship Emission Abatement Methods
Inemissions generated throughout the long-term, the cost impacts of meeting progressively lower sulfur emission requirements may be further mitigated by the favorable impact of future changes in the supply and demand balance for marine and other typesentire process of fuel future developments ofproduction, delivery and investments in improved sulfur emission abatement technologies, the use of alternative lower cost and lower emission fuels and our continued efforts to improve the overall fuel efficiency across our fleet. Since 2007, we have achieved approximately 29% cumulative reduction in unit fuel consumption by focusing on more efficient itineraries, a wide variety of ships’ system hardware and software, energy-efficiency upgrades (including hull coatings, air conditioning and engine performance improvement), creating collaborative energy-savings groups across operating lines and ship’s staff energy use awareness and training.onboard ships.
As part of our emission abatement program, we have continued our work with several local port authorities to utilize cruise ship shore power connections and have equipped 44 ships with the capability to utilize shore power technology. This technology enables our ships to use power from the local electricity provider rather than running their engines while in port to power their onboard services, thus reducing our ship air emissions.
Similarly, in an effort to extend our commitment to sustainability and to play a leading role in matters of environmental protection in the cruise industry, we are expanding our investment in the use of low carbon fuels, in particular, LNG:
AIDA now uses an LNG hybrid barge as an ecologically friendly and flexible power supply and an alternative to shore power, while its ships are moored in the port of Hamburg, Germany
AIDAprima is the first cruise ship in the world that regularly uses dual-fuel engines for an energy supply with LNG while in ports on her Northern European deployment. Her sister ship AIDAperla was delivered in April, 2017 with the same technology32
We have seven next-generation cruise ships on order that will be the first in the industry to be powered at sea by LNG. Pioneering a new era in the use of low carbon fuels, these new ships will use LNG to generate 100 percent of their power both in port and on the open sea - an innovation that will reduce exhaust emissions to help protect the environment
d. c. Greenhouse Gas Emissions (“GHG”)
In 2013, the IMO approved measures to improve energy efficiency and reduce emissions of GHGs from international shipping by adopting technical and operational measures for all ships. The technical measures apply to the design of new vessels, and the operational reduction measures apply to all vessels. Operational reduction measures have been implemented through a variety of means, including a Ship Energy Efficiency Management Plan, improved voyage planning and more frequent propeller and hull cleanings. We have established objectives within the ISO 14001 environmental management systems ofsystem for each of our brands to further reduce fuel consumption rates and the resulting GHG emissions.
In October 2016, the IMO approved the implementation of a mandatory data collection system (“DCS”) for fuel oil consumption. This amendment will requireThe DCS requires ships of 5,000 gross tons and above to provide fuel oil consumption data to their respective flagFlag State at the end of each calendar year, formally beginning in 2019. Flag States will then validate the data and transfer it to an IMO database. The IMO will produce ana summary annual report with anonymous data. TheIn 2018, the IMO has also committedset aspirations to developing aachieve several shipping industry GHG emission reduction roadmap by April 2018.
e. Ballast Water
Asgoals with 2030 and 2050 target dates. In November 2020, the IMO’s Marine Environment Protection Committee approved further MARPOL changes in support of September 8, 2017, MARPOL began to governits GHG emission reduction goals, which have entered into force on January 1, 2023 and include the discharge of ballast water from ships throughCarbon Intensity Indicator (“CII”), an annual ship-level CO2 intensity emissions performance measure, and the MARPOL Ballast Water Management Convention. However, amendments were madeEnergy Efficiency Existing Ship Index (“EEXI”), a one-off measure similar to the Energy Efficiency Design Index (“EEDI”) for newbuilds, that confirms for a specific condition that a ship meets a target CO2 emission intensity. The EEXI is not expected to have a material impact and the impact for CII is uncertain as the enforcement mechanism of the regulation is still to be defined. In addition, the IMO is currently considering various other proposals which aim to reduce GHG emissions within the global shipping industry. These proposals include a range of measures including possible fuel standards and market-based measures, such as a carbon levy, that, effectively extend the implementation date for existing ships by two years. if enacted, could result in changes to itineraries or increased compliance related costs which may individually and collectively have a material impact on our profitability.
d. Ballast Water
Ballast water is seawaterwater used to stabilize ships at sea and maintain safe operating conditions throughout a voyage. Ballast water can carry a multitude of marine species. In 2017, the IMO’s Ballast Water Management Convention entered into force, which governs the discharge of ballast water from ships. Subsequent amendments effectively extended the implementation date for installation of ballast water management systems for existing ships by about two years, though other requirements went into effect immediately, including requirements for ballast water exchange, record keeping, and maintaining an approved Ballast Water Management Plan. The Convention is designed to regulate the treatment of ballast water prior to discharging overboard in order to avoid the transfer of marine species to new environments.environments, as well as establishing other ballast water management practices for monitoring and environmental protection.
ii. U.S. Federal and State Regulations
The Act to Prevent Pollution from Ships authorizes the implementation ofimplements several MARPOL Annexes in the U.S. and imposes numerous requirements on our ships, as discussed above. Administrative, civil and criminal penalties may be assessed for violations.
The Oil Pollution Act of 1990 (“OPA 90”) established a comprehensive federal liability regime, as well as prevention and response requirements, relating to discharges of oil in U.S. waters. The major requirements include demonstrating financial responsibility up to the liability limits set by OPA 90 and having oil spill response plans in place. We have Certificates of Financial Responsibility (“COFR”) that demonstrate our ability to meet the maximum amountliability limits of OPA 90 related liability thatbased on the gross tonnage of our ships could be subject to for removal costs and damages, such as from an oil spill or a releasespill. The COFR also covers releases of a hazardous substance.substances. It is possible, however, for our liability limits to be broken, which could expose us to unlimited liability. Under OPA 90, owners or operators of vessels operating in U.S. waters must file Vessel Response Plans with the U.S. Coast Guard (“USCG”) and must operate and conduct any response action in compliance with these plans. As OPA 90 expressly allows coastal states to impose liabilities and requirements beyond those imposed under federal law, many U.S. states have enacted laws more stringent than OPA 90. Some of these state laws impose unlimited liability for oil spills and contain more stringent financial responsibility and contingency planning requirements. Most coastal states have also enacted environmental regulations that impose strict liability for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance, similar to OPA 90.
The Clean Water Act (“CWA”) provides the U.S. Environmental Protection Agency (“EPA”) with the authority to regulate incidental discharges from commercial vessels’ incidentalvessels, including discharges of ballast water, bilge water, gray water, anti-fouling paints and other substances during normal operations within the U.S. three mile territorial sea and inland waters. Pursuant to the CWA authority, the U.S. National Pollutant Discharge Elimination System was designed to minimize pollution within U.S. territorial waters. For our affected ships, all of the incidental discharge requirements are laid outset forth in EPA’s Vessel General Permit
(“VGP”) for discharges incidental to the normal operations of vessels. The VGP establishes effluent limits for 27 specific discharges incidental to the normal operation of a vessel.vessel, many of which apply to our cruise ships. In addition to the requirements associated with these dischargedischarges and vessel specificmore stringent vessel-specific requirements, the VGP includes requirements for inspections, monitoring, reporting and record-keeping. In 2018, the Vessel Incidental Discharge Act (“VIDA”) was signed into law and was intended to clarify and streamline discharge requirements for the incidental discharges covered by the VGP and certain USCG regulations for ballast water. More specifically, a new section was added to the CWA called “Uniform National Standards for Discharges Incidental to Normal Operation of Vessels.” Once fully implemented, VIDA will replace the VGP; however, while the standards and regulations are being developed the 2013 VGP has been administratively extended and will remain in effect. VIDA requires the standards and regulations to be at least as stringent as the existing requirements in the 2013 VGP and USCG regulations, unless information becomes available that was not reasonably available when the initial standard of performance was issued, and that information would have justified a less stringent standard. In October 2020, the EPA posted its notice of proposed rulemaking to set standards for 20 types of vessel discharges incidental to normal operations. The discharge standards are organized into three categories: (1) general operation and maintenance; (2) biofouling management; and (3) oil management. These standards mandate overall minimization of discharges and prescribe associated best management practices. No training or education requirements are included, as these will be set by the USCG in its rulemaking once EPA’s standards are finalized. Notably, EPA incorporated discharge standards applicable to exhaust gas cleaning system discharges based substantially on applicable IMO guidelines, which better harmonizes the VGP and IMO requirements. While the proposed rule provides clarity into the likely structure of VIDA, there is uncertainty over the mechanism through which state-specific standards may be implemented.
We are subject to the requirements of the U.S. Resource Conservation and Recovery Act for the transportation and disposal of both hazardous and non-hazardous solid wastes that are generated by our ships. In general, vessel owners are required to determine if their wastes are hazardous and, when landing waste ashore, comply with certain standards for the proper management of hazardous wastes, andincluding the use of hazardous waste manifests for shipments to approved disposal facilities.
The U.S. National Invasive Species Act (“NISA”) was enacted in 1996 in response to growing reports of harmful organisms being released into U.S. waters through ballast water taken on by vessels in foreign waters. The U.S. Coast GuardUSCG adopted regulations under NISA that impose mandatory ballast water management practices for all vessels equipped with ballast water tanks
entering U.S. waters. TheseDepending on a vessel’s compliance date for installation of a USCG type-approved ballast water management system, these requirements canmay now be met by performing mid-ocean ballast exchange, by retaining ballast water onboard the vessel or by using environmentally sounda ballast water treatment methodsmanagement system authorized or approved by the U.S. Coast Guard.USCG. In the near future, ballast exchange will no longer be permissible. These USCG regulations, however, will ultimately be replaced with the new regulatory regime being developed under VIDA, which is expected to contain similar requirements.
Most U.S. states that border navigable waterways or sea coasts have also enacted environmental regulations that impose strict liability for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance.
The state of Alaska has enacted legislation that prohibits certain discharges in designated Alaskan waters and sets effluent limits on others.others, which are applicable to cruise ships. Further, the state of Alaska requires that certain discharges be reported and monitored to verify compliance with the standards established by the legislation. Environmental regimes in Alaska are more stringent than the U.S. federal requirements with regard to discharges from vessels. The legislation also provides that repeat violators of the regulations could be prohibited from operating in Alaskan waters. The state of California also has environmental requirements significantly more stringent than federal requirements for water discharges and air emissions.
iii. EU Regulations
The EU has adopted a broad range of substantial environmental measures aimed at improving the quality of the environment for European citizens. To support the implementation and enforcement of European environmental legislation, the EU has adopted directives on environmental liability and enforcement and a recommendation providing for minimum criteria for environmental inspections.
The European Commission’s (“EC”) strategy is to reduce atmospheric emissions from ships. The EC strategy seeks to implement SOx Emission Control Areas set out in MARPOL, as discussed above.above via their own Sulphur Directive.
The European CommissionEC has also implemented regulations aimed at reducing GHG emissions from maritime shipping through a Monitoring, Reporting and Verification (“MRV”) regulation, which will collectinvolves collecting emissions data from ships over 5,000 gross tons to monitor and report their carbon emissions on all voyages to, from and between European Union ports,ports.
The EU is in the process of adopting a series of significant carbon reforms as a part of its Fit for 55 package to meet its 2030 emissions reduction goal. The main instruments for reducing emissions are the Emissions Trading System (“ETS”), Energy Taxation Directive (“ETD”) and the newly proposed FuelEU Maritime initiative as well as amendments to the alternative fuels infrastructure and renewable energy directives.
The ETS regulates carbon emissions through a “cap and trade” principle, where a cap is set on the total amount of certain GHGs that can be emitted. The recently agreed inclusion of the maritime shipping sector within the scope of ETS will become effective from January 2024 and introduces a mechanism whereby we will be required to procure carbon emission allowances covering 40% of emissions inside EU waters, to be surrendered in 2025, 70% of 2025 emissions to be surrendered in 2026 and 100% of annual emissions thereafter, to be surrendered in the following year.
The ETD is a framework for the taxation of energy products and sets minimum rates of excise duty to encourage a low-carbon economy. Proposed amendments to the ETD will introduce new tax rates based on the energy content and environmental impact rather than volume. If adopted, these amendments will also widen the directive to include maritime fuels, which were previously exempt.
The recently proposed FuelEU Maritime initiative is a long-term framework to reduce maritime emissions by increasing the use of sustainable alternative fuels, and for the cruise industry, the use of shore power. The proposal also requires compliance with the maximum limits of GHG intensity of energy used on board. The stringency of these limits increases over time and there are financial penalties for non-compliance. The initiative also includes requirements for ships to connect to shore power when at EU ports.
The Fit for 55 regulations may individually and collectively result in increased costs and have an impact on our profitability beginning in 2018.2024, and increasing to have a material impact on our profitability beginning in 2025. The exact impact is uncertain as elements of the proposals have not yet been finalized and enacted and the costs of ETS allowances will depend on future markets.
5. Maritime Health Regulations
We are committed to providing a healthy environment for all of our guests and crew. We collaborate with public health inspection programs throughout the world, such as the Centers for Disease Control and Prevention (“CDC”) in the U.S. (“CDC”) and the SHIPSAN Project in the EU, to ensure that development of these programs leads to enhanced health and hygiene onboard our ships. Through our collaborative efforts, we work with the authorities to develop and revise guidelines, review plans and conduct on-site inspections for all newbuilds and significant ship renovations. We work closely with governments and health authorities around the world to ensure that our health and safety protocols comply with the requirements of each location. In addition, we continue to maintain our ships by meeting, and often exceeding, applicable public health guidelines and requirements, complying with inspections, reporting communicable illnesses and conducting regular crew training and guest education programs.
6. Maritime Labor Regulations
In 2006, theThe International Labor Organization an agency of the United Nations that develops and oversees international labor
standards, adopted a Consolidated Maritime Labor Convention (“MLC 2006”). MLC 2006 contains a comprehensive set of global standards and includes a broad range of requirements, such as the definition of a seafarer, minimum age of seafarers, medical certificates, recruitment practices, training, repatriation, food, recreational facilities, health and welfare, hours of work and rest, accommodations, wages and entitlements. In August 2013, MLC 2006 became effective in certain countries in which we operate.
The International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, as amended, establishes additional minimum standards relating to training, including security training, certification and watchkeeping for our seafarers.
b. Consumer Financial ResponsibilityOther Governmental Regulations
Compliance with GHG regulations and the associated potential cost is complicated by the fact that various countries and regions are following different approaches to climate-related regulations.
In most major countries where we source the majority of our guests, we are required to establish financial responsibility, such as obtaining a guarantee from financially stable financial institutions and insurance companies, to satisfy liability in cases of our non-performance of obligations to our guests. The amount of financial responsibility varies by jurisdiction based on the amount mandated by the applicable local legislation, regulatory agenciesagency or association.
In Australia and most of Europe, we may be obligated to honor our guests’ cruise payments made by them to their travel agents and tour operators regardless of whether we receive these payments.
We are, or may in the future become, subject to other laws and regulations which require our compliance, including those addressing antitrust, anti-money laundering, bribery, corruption, data privacy, human rights, securities and sanctions, reporting on sustainability matters, as well as human resources related matters.
XX. Taxation
A summary of our principal taxes and exemptions in the jurisdictions where our significant operations are located is as follows:
a.U.S. Income Tax
We are primarily foreign corporations engaged in the business of operating cruise ships in international transportation. We also own and operate, among other businesses, the U.S. hotel and transportation business of Holland America Princess Alaska Tours through U.S. corporations.
Our North American cruise ship businesses and certain ship-owning subsidiaries are engaged in a trade or business within the U.S. Depending on its itinerary, any particular ship may generate income from sources within the U.S. We believe that our U.S. source income and the income of our ship-owning subsidiaries, to the extent derived from, or incidental to, the international operation of a ship or ships, is currently exempt from U.S. federal income and branch profit taxes.
Our domestic U.S. operations, principally the hotel and transportation business of Holland America Princess Alaska Tours, are subject to federal and state income taxation in the U.S.
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1. | Application of Section 883 of the Internal Revenue Code |
We do not believe we were a passive foreign investment company (“PFIC”), within the meaning of Section 1297 of the
Internal Revenue Code, for the 2022 taxable year and do not currently expect to be a PFIC in the 2023 taxable year.
1.Application of Section 883 of the Internal Revenue Code
In general, under Section 883 of the Internal Revenue Code, certain non-U.S. corporations (such as our North American cruise ship businesses) are not subject to U.S. federal income tax or branch profits tax on U.S. source income derived from, or incidental to, the international operation of a ship or ships. Applicable U.S. Treasury regulations provide in general that a foreign corporation will qualify for the benefits of Section 883 if, in relevant part, (i) the foreign country in which the foreign corporation is organized grants an equivalent exemption to corporations organized in the U.S. in respect of each category of shipping income for which an exemption is being claimed under Section 883 (an “equivalent exemption jurisdiction”) and (ii) the foreign corporation meets a defined publicly-traded corporation stock ownership test (the “publicly-traded test”). Subsidiaries of foreign corporations that are organized in an equivalent exemption jurisdiction and meet the publicly-traded test also benefit from Section 883. We believe that Panama is an equivalent exemption jurisdiction and that Carnival Corporation currently satisfies the publicly-traded test under the regulations. Accordingly, substantially all of Carnival Corporation’s income is exempt from U.S. federal income and branch profit taxes.
Regulations under Section 883 list certain activities that the Internal Revenue Service (“IRS”) does not consider to be incidental to the international operation of ships and, therefore, the income attributable to such activities, to the extent such income is U.S. source, does not qualify for the Section 883 exemption. Among the activities identified as not incidental are income from the sale of air transportation, transfers, shore excursions and pre- and post-cruise land packages to the extent earned from sources within the U.S.
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2. | Exemption Under Applicable Income Tax Treaties |
2.Exemption Under Applicable Income Tax Treaties
We believe that the U.S. source transportation income earned by Carnival plc and its subsidiaries currently qualifies for exemption from U.S. federal income tax under applicable bilateral U.S. income tax treaties.
3.U.S. State Income Tax
Carnival Corporation, and Carnival plc and certain of their subsidiaries are subject to various U.S. state income taxes generally imposed on each state’s portion of the U.S. source income subject to U.S. federal income taxes. However, the state of Alaska imposes an income tax on its allocated portion of the total income of our companies doing business in Alaska and certain of their subsidiaries.
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b. | UK and Australian Income Tax
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b.UK and Australian Income Tax
Cunard, P&O Cruises (UK) and P&O Cruises (Australia) are divisions of Carnival plc and have elected to enter the UK tonnage tax under a rolling ten-year term and, accordingly, reapply every year. Companies to which the tonnage tax regime applies pay corporation taxes on profits calculated by reference to the net tonnage of qualifying ships. UK corporation tax is not chargeable under the normal UK tax rules on these brands’ relevant shipping income. Relevant shipping income includes income from the operation of qualifying ships and from shipping related activities.
For a company to be eligible for the regime, it must be subject to UK corporation tax and, among other matters, operate qualifying ships that are strategically and commercially managed in the UK. Companies within UK tonnage tax are also subject to a seafarer training requirement.
Our UK non-shipping activities that do not qualify under the UK tonnage tax regime remain subject to normal UK corporation tax. Dividends received from subsidiaries of Carnival plc doing business outside the UK are generally exempt from UK corporation tax.
P&O Cruises (Australia) and all of the other cruise ships operated internationally by Carnival plc for the cruise segment of the Australian vacation region are exempt from Australian corporation tax by virtue of the UK/Australian income tax treaty.
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c. | Italian and German Income Tax
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c.Italian and German Income Tax
In early 2015, Costa and AIDA re-elected to enter the Italian tonnage tax regime through 2024 and can reapply for an additional ten-year period beginning in early 2025. Companies to which the tonnage tax regime applies pay corporation taxes on shipping profits calculated by reference to the net tonnage of qualifying ships.
Most of Costa’s and AIDA’s earnings that are not eligible for taxation under the Italian tonnage tax regime will be taxed at an effective tax rate of 5.5%.4.8% in 2022 and 2021.
Substantially all of AIDA’s earnings are exempt from German income taxes by virtue of the Germany/Italy income tax treaty.
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d. | Asian Countries Income and Other Taxes |
Substantially all of our brands’ income from their international operation in Asian countries is exempt from income tax by virtue of relevant income tax treaties. In addition, the income is exempt from indirect taxes in China under relevant income tax treaties and other circulars.d.Other
In addition to or in place of income taxes, virtually all jurisdictions where our ships call impose taxes, fees and other charges based on guest counts, ship tonnage, passenger capacity or some other measure.
XXI. Trademarks and Other Intellectual Property
We own, use and/or have registered or licensed numerous trademarks, patents and patent pending designs and technology, copyrights and domain names, which have considerable value and some of which are widely recognized throughout the world. These intangible assets enable us to distinguish our cruise products and services, ships and programs from those of our competitors. We own or license the trademarks for the trade names of our cruise brands, each of which we believe is a widely-recognized brand in the cruise industry, as well as our ship names and a wide variety of cruise products and services.
XXII. Competition
We compete with land-based vacation alternatives throughout the world, such as hotels, resorts (including all-inclusive resorts), theme parks, organized tours, casinos, vacation ownership properties, and other internet-based alternative lodging sites. Based on the most recent G.P. Wild2022 Cruise Industry Statistical Review,News statistics, as of December 31, 2022, we, along with our principal cruise competitors Royal Caribbean Cruises Ltd.,Group, Norwegian Cruise Line Holdings, Ltd. and MSC Cruises, carryrepresented approximately 87%80% of all globalthe cruise guests.industry capacity, including ships operating with guests onboard and ships in pause status expected to return to guest cruise operations.
D. Website Access to Carnival Corporation & plc SEC Reports
We use our websites as channels of distribution of company information. Our Form 10-K, joint Quarterly Reports on Form 10-Q, joint Current Reports on Form 8-K, joint Proxy Statement related to our annual shareholders meeting, Section 16 filings and all amendments to those reports are available free of charge at www.carnivalcorp.com and www.carnivalplc.com and on the SEC’s website at www.sec.gov as soon as reasonably practicable after we have electronically filed or furnished these reports with the SEC. In addition, you may automatically receive email alerts and other information when you enroll your email address by visiting the Investor Services section of our websites. The content of any website referred to in this document is not incorporated by reference into this document.
E. Industry and Market Data
This document includes market share and industry data and forecasts that we obtained from industry publications, third-party surveys and internal company surveys. Industry publications, including those from CLIA, G.P. Wild,Cruise Industry News, and surveys and forecasts, including those from ASTA, generally state that the information contained therein has been obtained from sources believed to be reliable. CLIACruise Industry News is a non-profit marketingfor profit magazine company that covers all aspects of cruise operations. Their magazines and training organization formed in 1975 to promote cruising and offer support and training for the travel agent community in North America. CLIA participates in the regulatory and policy development process while supporting measures that foster a safe, secure and healthyannual report cover all cruise ship environment. In addition, CLIA facilitates strategic relationships between cruise industry suppliers and organizations, cruise lines ports and shipyards and provides a forum for interaction with governmental agencies. All CLIA information, obtained from the CLIA website www.cruising.org, relates to the CLIA member cruise lines. In 2017, CLIA represents 60 cruise brands that operate more than 95%report on all aspects of cruise industry capacity. G.P Wild is an authoritative source of cruise industry statistics and publishes a number of reports and industry reviews. All G.P. Wild information is obtained from their annual Cruise Industry Statistical Review.operations including relevant issues, financial results, ship building, ship reviews, etc. All other references to third party information are publicly available at nominal or no cost. We use the most currently available industry and market data to support statements as to our market positions. Although we believe that the industry publications and third-party sources are reliable, we have not independently verified any of the data. Similarly, while we believe our internal estimates with respect to our industry are reliable, they have not been verified by any independent sources. While we are not aware of any misstatements regarding any industry data presented herein, our estimates, in particular as they relate to market share and our general expectations, involve risks and uncertainties and are subject to change based on various factors, including those discussed under Part I, Item 1A. Risk Factors and Exhibit 13, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Form 10-K.
Item 1A. Risk Factors.Factors.
You should carefully consider the specificfollowing discussion of material factors, events and uncertainties that make an investment in the company’s securities risky and provide important information for the understanding of the “forward-looking” statements discussed in this Form 10-K and elsewhere. These risk factors set forth below and theshould be read in conjunction with other information contained or incorporated by reference in this document, asForm 10-K.
The events and consequences discussed in these risk factors could have a material adverse effect on the company’s business, financial condition, operating results and stock price. These risk factors do not identify all risks that the company faces; operations could also be affected by factors, events, or uncertainties that are important factorsnot presently known to the company or that could causethe company currently does not consider to present material risks to its operations. In addition to the effects of the COVID-19 pandemic and resulting global disruptions on our actual results, performance or achievements to differ materially from our expected or historical results. The orderingbusiness and letteringoperations discussed in Item 7 of this Form 10-K and in the risk factors set forth below, is not intendedadditional or unforeseen effects from our substantial debt balance as a result of the pause of our guest cruise operations could give rise to reflect any Company indicationor amplify many of priority or likelihood.the risks discussed below. Some of the statements in this item and elsewhere in this document are “forward-looking statements.” For a discussion of those statements and of other factors to consider see the “Cautionary Note Concerning Factors That May Affect Future Results” section below.section.
a. The demand for cruises may decline dueordering and lettering of the risk factors set forth below is not intended to adversereflect any company indication of priority or likelihood.
Operating Risk Factors
a.Events and conditions around the world, eventsincluding war and other military actions, such as the invasion of Ukraine, inflation, higher fuel prices, higher interest rates and other general concerns impacting the ability or desire of people to travel including conditions affectinghave led, and may in the future lead, to a decline in demand for cruises, impacting our operating costs and profitability.
We have been, and may continue to be, impacted by the public’s concerns regarding the health, safety and security of travel, including government regulations and requirements, and declines in consumer confidence
Demand for cruises and other vacation options has been and is expected to continue to be affected by the public’s concerns over the safety and security of travel. Government travel advisories and emerging travel restrictions, political instability and civil unrest, terrorist attacks, war and military action, most recently the invasion of Ukraine, and other general concerns over the safetyconcerns. The invasion of Ukraine and security of traveling have had a significant adverse
its resulting impacts, including supply chain disruptions, increased fuel prices, impact on demand for cruises to neighboring regions and pricing in the travelinternational sanctions and vacation industry in the pastother measures that have been imposed, have adversely affected, and may continue to adversely affect, our business. These factors may also have an adverse impact in the future.
Governmental actionseffect of heightening many other risks to our business, any of which increase global travel regulationscould materially and restrictionsadversely affect our business and results of operations. Additionally, we have been, and may adversely impact demand for cruises. Heightenedcontinue to be, impacted by heightened regulations around customs and border control, travel bans to and from certain geographical areas, voluntary changes to our itineraries in light of geopolitical events, government policies increasing the difficulty of travel and limitations on issuing international travel visas could reduce the ability or desire of people to travel.
Demand for cruises is in part dependent on consumer confidence in the economic condition of the countries from which cruise companies source their guests. Adversevisas. We may be impacted by adverse changes in the perceived or actual economic climate, such as inflation, global or regional recessions, higher unemployment and underemployment rates and declines in income levelslevels.
b. Pandemics have in the past and may in the future have a significant negative impact on our financial condition and operations.
Pandemics have in the past and may in the future have a significant negative impact on our financial condition and operations. We could:
•be forced to re-implement a pause of our guest cruise operations
•be negatively impacted by travel advisories, restrictions, recommendations and regulations set by various governmental authorities, which could reduceimpact our potential vacationers’ customer confidenceoccupancy levels
•be subject to enhanced health and hygiene requirements in attempts to counteract future outbreaks, and these requirements may be costly, take a significant amount of their discretionary incomes. Consequently, thistime to implement across our global cruise operations and may negatively affect demand for vacations, includingresult in disruptions in guest cruise vacations,operations, incremental costs and loss of revenue
•be subject to negative publicity, along with the cruise industry, which arecould have a discretionary purchase. long-term impact on the appeal of our cruises
•be subject to lawsuits, other governmental investigations and other actions
Decreases in demand•reassess our ship deployment options and our fleet, which could lead to price reductions which,the removal of additional ships from our fleet and may result in turn, could reduceincremental ship impairment charges and losses on ship sales
•be negatively impacted as a result of the profitabilityadverse impact on our partners, counterparties and joint ventures
•be negatively impacted by the inability to attract and retain the loyalty of our business.guests and hire and retain our crew
b.c. Incidents such as ship incidents, security incidents,concerning our ships, guests or the spread of contagious diseasescruise industry have in the past and threats thereof, adverse weather conditions or other natural disasters andmay, in the related adverse publicity affecting our reputation andfuture, negatively impact the health, safety, security and satisfaction of our guests and crew and lead to reputational damage.
The operation of cruise ships, hotels, land tours, port and related commercial facilities and shore excursionsOur operations involve the risk of incidents including those caused byand media coverage thereof. Such incidents include, but are not limited to, the improper operation or maintenance of ships, motorcoaches and trains; guest and crew illnesses, such as from the spread of contagious diseases;illnesses; mechanical failures, fires and collisions; repair delays; groundings;delays, groundings and navigational errors; oil spills and other maritime and environmental issues; missing passengers andissues as well as other incidents at sea, or while in port or on land which may generate negative publicity or cause injury and death, guest and crew discomfort, alteration of itinerariesinjury, or cancellation of a cruise or series of cruises or tours.death. Although our uncompromising commitment to the safety and comfort of our guests and crew is paramount to the success of our business, our ships have been involved in outbreaks, accidents and other incidents in the past. Wepast and we may experience similar or other incidents in the future. Our ability to attract and retain the loyalty of our guests, our ability to hire and the amounts we must pay our crew depend, in part, upon the perception and reputation of our company and our brands and the public’s concerns regarding the health and safety of travel generally, as well as the cruising industry and our ships specifically. In addition, these and any other events which impact the travel industry more generally may negatively impact our guests’ and/or crew’s ability or desire to travel to or from our ships and/or interrupt the supply of critical goods and services.
d. 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, labor and employment, and tax have in the past and may, in the future, lead to litigation, enforcement actions, fines, penalties and reputational damage.
We are subject to numerous international, national, state and local laws, regulations, treaties and other legal requirements that govern health, environmental, safety and security matters in relation to our guests, crew and ships. These typesrequirements change regularly, depending on the itineraries of our ships and the ports and countries visited. Implementing these and any subsequent requirements may be costly and take time to implement across our global cruise operations. In addition, the accelerating pace of regulatory changes may affect our ability to comply in the future. If we violate or fail to comply with any of these laws, regulations, treaties and other requirements we could be, and have previously been, fined, placed on probation or otherwise sanctioned by regulators. In addition, there is increased global focus on climate change, which may lead to additional regulatory requirements. Refer to Operating Risk Factor “e.” below for additional discussion on climate change regulation risks. We were subject to a court-ordered environmental compliance plan supervised by the U.S. District Court for the Southern District of Florida, which was operative until April 2022 and subjected our operations to additional review and other obligations.
We are subject to laws and requirements related to the treatment and protection of personal, sensitive and/or other regulated data in the jurisdictions where we operate. Various governments, agencies and regulatory organizations have enacted or are considering new rules and regulations and we expect to continue to incur costs to comply with these rules and regulations. In the course of doing business, we collect guest, team member, company and other third-party data, including personally identifiable information and other sensitive data. We have incurred legal and other costs in connection with cyber incidents relating to such sensitive data. Refer to Operating Risk Factor “g.” below for additional discussion of data security risks.
Our operations subject us to potential liability under anti-corruption laws and regulations. We may bring into question guestalso be affected by economic sanctions, trade protection laws, policies and crew health, safety, securityother regulatory requirements affecting trade and satisfactioninvestment.
We are subject to compliance with tax laws, regulations and treaties in the jurisdictions in which we are incorporated or operate. These tax laws, regulations and treaties are subject to change at any time, which may result in substantially higher tax expense. For example, the Organization for Economic Co-operation and Development (“OECD”) has proposed a multi-jurisdictional inclusive framework to address base erosion and profit sharing that, if enacted by relevant jurisdictions, may result in increased tax expense.
e. 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.
Growing concerns regarding climate change have resulted in increased global regulatory focus on GHG and other emissions which may have material impacts on our business. For example, the EU’s Fit for 55 package, which includes recently agreed updates to the ETS relating to the need to acquire carbon emission allowances for maritime shipping related emissions inside EU waters, proposed reforms to the EU’s ETD, which imposes taxes on fuel purchased in the EU, as well as a new regulatory proposal, the FuelEU Maritime initiative, which sets out a long-term framework to reduce emissions by increasing the use of sustainable alternative fuels and shore power. In addition, the IMO is currently considering various other proposals which aim to reduce emissions within the global shipping industry. If finalized and enacted, these regulations and reforms may individually or collectively have a material impact on our operating costs and profitability. Regulatory efforts, both internationally and in the U.S., are evolving, including the international alignment of such efforts, and we cannot determine what final regulations will be enacted or their ultimate impact on our business. Climate change-related regulatory activity and developments that require us to reduce our emissions, which includes both the EU and IMO proposals discussed above, may adversely affect our brands’ reputationsbusiness and the demandfinancial results by requiring us to make capital investments in new equipment or technologies, pay for carbon emissions, purchase carbon offset credits, or otherwise incur additional costs or take additional actions related to our brands and cruising in general, whichemissions. Such activity may affectalso impact us indirectly by increasing our net revenue yields and profitability,operating costs, including fuel costs. Regulatory developments may also result in additional coststhe inability to our business, and result in litigation against us and increasing government or other regulatory oversight.
Our ability to effectively and efficiently operate shipboard and shoreside activities may be impacted by widespread public health issues/illnesses or health warnings resulting in, among other things, reduced demand for cruises and cruise and ship charter cancellations and employee absenteeismships that could have an adverse effect on our net revenue yields and profitability. For example, a severe outbreakdo not meet certain standards, the acceleration of the influenza virus or some other pandemic could, among other things, disruptremoval of less fuel-efficient ships from our ability to embark/disembark passengersfleet and crew, require changes to cruise itinerary, disrupt air and ground travel to and from ports, increase costs for prevention and treatment and adversely affect our supply chain and distribution systems. This could also adversely impact cruise demand in areas unaffected by such an outbreak.
Our ships are subject to the risks of mechanical failures and accidents, for which we have had to incur repair and equipment replacement expenditures. If these occur in the future, we may be unable to procure spare parts or new equipment when needed or make repairs without incurring significant expenditures or suspension of service. A significant performance problem on anyresale value of our ships couldin the future. In addition, regulatory developments may restrict or limit our access to certain destinations and/or countries or curtail our freedom to operate.
Growing recognition among consumers globally of the negative effects of climate change and the impact of GHG and other emissions may lead to material changes in consumer preferences. For instance, our guests may choose a vacation option that they perceive as operating in a manner that is more sustainable for the climate, seek alternative methods of travel, or reduce the amount and frequency of their travel. In addition, some environmental focused groups have an adverse effectand may continue to generate negative publicity regarding the environmental impact of the cruise industry and are advocating for more stringent regulation of ship emissions while the ship is docked and at sea. Growing environmental scrutiny of our operations and the industry from the investment community, other stakeholders, and the media have impacted and may continue to impact how we are perceived, which may have a material impact on our operations and financial conditionresults. Certain climate-related actions and profitability.investments we make today may not lead us to our intended future emissions related goals or may not be favorably perceived in future years based on continuing evolving regulations and perceptions around effective emissions mitigation strategies and technologies.
Our cruise ships, hotels, land tours, port and related commercial facilities and shore excursions have been and may continue to be impacted by adverse weather patterns or other natural disasters, such as hurricanes, earthquakes, floods, fires, tornados,tornadoes, tsunamis, typhoons and volcanic eruptions. These events could resultClimate change is expected to increase the frequency and intensity of certain adverse weather patterns, possibly making certain destinations less desirable or impacting our business in among other things, increased port relatedways. We have been forced to, and other costs in our supply chain. It is possible that we couldthe future may be forced to, alter itineraries or cancel a cruise or a series of cruises or tours due to these or other factors,types of disruptions. The physical climate-related risks to our business include increased hurricane/typhoon intensity and frequency, increases in global temperatures and rising sea levels which would have an adverse effect on our net revenue yields and profitability.
Extreme weather events such as hurricanes, floods and typhoons may not only cause disruption, alteration, or cancellation of cruises but may also adversely impact commercial airline flights, other transportour shoreside facilities, our investments in ports or the availability or desirability of ports and shore excursion activities or prevent our guests from electing to cruise altogether. Such extreme weather eventsdestinations in which we operate. These effects may also disrupt the supply of provisions, fuelcritical goods and shore power,services to our facilities and ships. Any of these events could have a material impact on our business and profitability.
f. Inability to meet or achieve our sustainability related goals, aspirations, initiatives, and our public statements and disclosures regarding them, may limitexpose us to risks that may adversely impact our business.
We have developed and will continue to establish goals, targets, aspirations, and other objectives (“sustainability objectives”) related to sustainability matters. These statements reflect our current plans and do not constitute a guarantee that they will be achieved. Our efforts to research, establish, accomplish, and accurately report on these sustainability objectives expose us to numerous operational, reputational, financial, legal, and other risks, any of which could have a negative impact on our business. Our ability to achieve any of our stated sustainability objectives, particularly with respect to environmental emissions, is subject to numerous factors and conditions, many of which are outside of our control. Examples of such factors include the availability
and costs of low- or non-carbon-based energy sources, evolving regulatory requirements affecting sustainability standards or disclosures, the availability of future financing and the availability of suppliers that can meet our sustainability standards.
Our business may face increased scrutiny from our guests, our team members, the investment community, governments, regulators, destinations and other stakeholders that we serve related to our sustainability activities, including the sustainability objectives that we adopt, our methodologies and timelines for pursuing them and our ability to safely embarkdocument and disembarksupport the achievement of those objectives. If our guests. In addition, these extreme weather conditions could result in increased wave and wind activity, which would make it more challengingsustainability practices do not meet, or are perceived to sail and dockfall short of, the expectations of our ships and could cause sea/motion sickness among guests, and crew. These events could have an adverse impact on the safety and satisfaction ofteam members, investors or other stakeholders, demand for cruising, and could have an adverse impact on our net revenue yields and profitability. Additionally, these extreme weather conditions could cause property damage to our ships, port and related commercial and business facilities and other assets and impactreputation, our ability to provideattract or retain team members, and our cruise products and servicesattractiveness as an investment could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our sustainability objectives within the timelines we announce, or at all, could have the same negative impacts as well as expose us to obtain insurance coverage for operationsgovernment enforcement actions and private litigation.
g. Breaches in such areas at reasonable rates.
Incidents involving cruise ships,data security and lapses in particular our cruise ships, and media coverage thereof,data privacy as well as adverse media publicity concerning the cruise vacation industry in general, or unusual weather patterns ordisruptions and other natural disasters or disruptions, such as hurricanes and earthquakes, could impact demand for our cruises. In addition, any incidents which impact the travel industry more generally may negatively impact guests’ ability or desire to travel to or from our ships or interrupt our ability to obtain services and goods from key vendors in our supply chain. Any of the foregoing could have an adverse impact on our net revenue yields and profitability.
Maintaining a good reputation is criticaldamages to our business. Reportsprincipal offices, information technology operations and media coverage of ship incidents at sea or whilesystem networks and failure to keep pace with developments in port, including missing guests, improper conduct bytechnology may adversely impact our employees, guests or agents, crimes, dissatisfied guests, crew and guest illnesses, such as incidents of stomach flu and other contagious diseases, security breaches, terrorist threats and attacks and other adverse events can result in negative publicity, which could lead to a negative perception regarding the safety of our ships andbusiness operations, the satisfaction of our guests. In addition, negative publicity regarding adverse environmental impacts of cruising, such as climate changeguests and oil spills, could diminish our reputation. The considerable expansion in the use of social media over recent years has increased the ways in which our reputation can be impacted,crew and the speed with which it can occur. Anything that damages our reputation, whether or not justified, could have an adverse impact on demand, which could lead to price reductions and a reduction in our net revenue yields and profitability.
c. Changes in and compliance with laws and regulations relating to environment, health, safety, security, data privacy and protection, tax and anti-corruption under which we operate may lead to litigation, enforcement actions, fines, or penaltiesreputational damage.
We are subject to numerous international, national, statehave been and local laws, regulations and treaties covering many areas, including social issues, health, safety, security, data privacy and protection, and tax. Failure to comply with these laws, regulations, treaties and agreements, including local cabotage requirements, could lead and has led to enforcement actions, fines, civil or criminal penalties or the assertion of litigation claims and damages. These issues are, and we believe willmay continue to be an areaimpacted by breaches in data security and lapses in data privacy, which occur from time to time. These can vary in scope and intent from motivated driven attacks to malicious attacks intended to disrupt or compromise our shoreside and shipboard operations by targeting our key operating systems. Breach or circumvention of focusour systems or the systems of third parties, including by ransomware or malware, through vulnerabilities in licensed software or hardware, or as a result of other attacks, results in disruptions to our business operations; unauthorized access to (or the relevant authorities throughout the world. Accordingly, new legislation, regulationsloss of company access to) competitively sensitive, confidential or treaties,other critical data (including sensitive financial, medical or changes thereto,other personal or business information) or systems; loss of customers; financial losses; regulatory investigations, enforcement actions and fines; litigation and misuse or corruption of critical data and proprietary information, any of which could impact our operationsbe material.
We have been subject to past attacks which resulted in unauthorized access to systems and/or data and would likely subject us to increased complianceregulatory investigations regarding such incidents. We have incurred legal, settlement and other costs in the future. In addition, training of crew may become more time consuming and may increase our operating costs due to increasing regulatory and other requirements.
Environmental laws and regulations or liabilities arising from past or future releases of, or exposure to, hazardous substances or vessel discharges, including ballast water and waste disposal, could materially increase our cost of compliance or otherwise adversely affectconnection with cyber incidents that have impacted us. While these incidents did not have a material adverse effect on our business, profitabilityoperations or financial results, no assurances can be given about future incidents, attacks and financial condition. Some environmental groupsrelated litigation or regulatory investigations that could have lobbied for more stringent regulation of cruise ships. Various agenciessuch a material adverse effect.
Our principal offices, information technology operations, system networks and regulatory organizations have enacted or are considering new regulations or policies, such as stricter emission limits to reduce GHG effects, which could adversely impact the cruise industry.
Our guest and employee relationships provide us with access to sensitive data. We are subject to laws and requirements related to the treatment and protection of sensitive data. Wevarious remote work locations may be subject to legal liabilityimpacted by actual or threatened natural disasters (for example, hurricanes, earthquakes, floods, fires, tornadoes, tsunamis and reputational damage if we do not comply with data privacy and protection regulations. Various governments, agencies and regulatory organizations have enacted and are considering new regulations and implementation of rules for existing regulations. Additional requirements could negatively impacttyphoons) or other disruptive events. Our maritime and/or shoreside operations, including our ability to market cruises to consumersmanage our inventory of cabins held for sale and increase our costs.
We are also subject to compliance with income tax laws, regulations and income tax treaties in the jurisdictions where we operate. We believe that substantially all of the income earned by Carnival Corporation, Carnival plc and their ship owning or operating subsidiaries qualifies for taxation based on ship tonnage, is exempt from taxation or is otherwise subject to minimal taxes in the jurisdictions where the entities are incorporated or do business.
We believe that Panama and the jurisdictions where the ship owning and operating subsidiaries of Carnival Corporation are formed are equivalent exemption jurisdictions for purposes of Section 883 of the Internal Revenue Code. The laws of Panama and the other jurisdictions where our ships are owned or operated are subject to change and, in the future, may no longer qualify as equivalent exemption jurisdictions. Moreover, changes could occur in the future with respect to the trading volume or trading frequency of Carnival Corporation shares, affecting Carnival Corporation’s status as a publicly-traded corporation for purposes of Section 883.
The IRS interpretation of Section 883 could also differ materially from ours. In addition, provisions of the Internal Revenue Code, including Section 883, are subject to legislative change at any time. Accordingly, it is possible that Carnival Corporation and its ship-owning or operating subsidiaries whose tax exemption is based on Section 883 could lose this exemption.
There is no authority that directly addresses the effect, if any, of a DLC arrangement on the availability of benefits under treaties and, accordingly, their application to our operations is not free from doubt. The applicable treaties may be revoked by either applicable country, replaced or modified with new agreements that treat income from international operation of ships differently than the agreements currently in force or may be interpreted by one of its countries differently from us.
If we did not qualify for tonnage tax, exemption, treaties or minimal taxes, or if the laws that provide for these tax systems were changed, we would have significantly higher income tax expense. In many jurisdictions, the benefit of tonnage tax or preferential tax regimes would be replaced with taxation at normal statutory rates. In the absence of Section 883 or an applicable income tax treaty in the U.S., we would be subject to the net income and branch profits tax regimes of Section 882 and Section 884 of the Internal Revenue Code. In combination, these provisions would result in the taxation of our U.S. source shipping income, net of applicable deductions, at a current federal corporate income tax rate of up to 35% (as of November 30, 2017), state income tax rates would vary and our net after-tax income would be potentially subject to a further branch profits tax of 30% (as of November 30, 2017), unless a lower treaty rate applies.
We are subject to the examination of our income tax returns by tax authorities in the jurisdictions where we operate. There can be no assurance that the outcome from these examinations will not adversely affect our profitability.
As budgetary constraints continue to adversely impact the jurisdictions in which we operate, increases in income or other taxes affecting our operations may be imposed. Some social activist groups have lobbied for more taxation on income generated by cruise companies. Certain groups have also generated negative publicity for us. In recent years, certain members of the U.S. Congress have proposed various forms of legislation that would result in higher taxation on income generated by cruise companies.
Our global operations subject us to potential liability under anti-corruption, economic sanctions, and other laws and regulations. The Foreign Corrupt Practices Act, the UK Bribery Act and other anti-corruption laws and regulations (“Anti-Corruption Laws”) prohibit corrupt payments by our employees, vendors, or agents. While we devote substantial resources to our global compliance programs and have implemented policies, training, and internal controls designed to reduce the risk of corrupt payments, our employees, vendors, or agents may violate our policies. Our failure to comply with Anti-Corruption Laws could result in significant fines and penalties, criminal sanctions against us, our officers, or our employees, prohibitions or limitations on the conduct of our business, and damage to our reputation. Operations outside the U.S. may also be affected by changes in economic sanctions, trade protection laws, policies, and other regulatory requirements affecting trade and investment. We may be subject to legal liability and reputational damage if we improperly sell goods or otherwise operate improperly in areas subject to economic sanctions such as Crimea, Iran, North Korea, Cuba, Sudan, and Syria or if we improperly engage in business transactions with persons subject to economic sanctions.
These various international laws and regulations could lead and has led to enforcement actions, fines, civil or criminal penalties or the assertion of litigation claims and damages. In addition, improper conduct by our employees or agents could damage our reputation and lead to litigation or legal proceedings that could result in significant awards or settlements to plaintiffs and civil or criminal penalties, including substantial monetary fines. Such events could lead to an adverse impact on our financial condition or profitability, even if the monetary damage is mitigated by our insurance coverage.
As a result of our ship or other incidents, litigation claims, enforcement actions and regulatory actions and investigations, including, but not limited to, those arising from personal injury, loss of life, loss of or damage to personal property, business
interruption losses or environmental damage to any affected coastal waters and the surrounding areas, may be asserted or brought against various parties including us. The time and attention of our management may also be diverted in defending such claims, actions and investigations. We may also incur costs both in defending against any claims, actions and investigations and for any judgments, fines, civil or criminal penalties if such claims, actions or investigations are adversely determined and not covered by our insurance policies.
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d. | Disruptions and other damages to our information technology and other networks and operations, breaches in data security, lapses in data privacy, and failure to keep pace with developments in technology |
Our business continues to demand the use of sophisticated systems and technology. Our ability to increase revenues andset pricing, control costs as well asand serve our ability to serve guests, most effectively depends in part on the reliability of our information technology operations and system networks, andas well as our ability to refine and update to more advanced systems and technologies. IfIn addition, we aremay be unable to do so onobtain appropriate technology in a timely basismanner or within reasonable cost parameters,at all or we may incur significant costs in doing so. A failure to adopt the appropriate technology, or a failure or obsolescence in the technology that we do adopt, could have adverse effects on our business could suffer.business.
We use communication applications, information technology and other systemsh. The loss of key team members, our inability to manage our inventory of cabins held for sale and set pricing in order to maximize our revenue yields and to optimize the effectiveness and efficiency of ourrecruit or retain qualified shoreside and shipboard operations. Possible system outagesteam members and the resulting downtimeincreased labor costs could have an adverse consequenceseffect on our business and results of operations.
Our success depends, in large part, on the skills and contributions of our team members, and on our ability to runrecruit, develop and manageretain high quality, diverse team members. We may not be successful in recruiting, developing or retaining key or other highly qualified team members. In addition, carbon-intensive industries may become a less attractive employment opportunity. As a result of the reduction in our business.
Gaining unauthorized accessworkforce during our pause in guest cruise operations, general macroeconomic factors and an increasingly competitive labor market, at times we may experience difficulty in hiring sufficient qualified team members. For example, there is particularly high competition for recruiting and retaining qualified team members needed to digitalsupport our information technology systems and networks for purposes of misappropriating assets or sensitive financial, medical or other personal or business information, corrupting data, causing shoreside or shipboard operational disruptions and other cyber attack risks could adversely impactinfrastructure which is critical to our reputation, guest services and satisfaction, employee relationships, business plans, ship safety and costs.successful operations.
As the use of the internet and sensitive data expands, regulators are addressing the risks related to technology and cybersecurity with enhanced regulations. We have initiated a global program to meet the compliance requirements for EU data privacy regulations. IfIn addition, we or our vendors experience significant data security breaches, privacy failures, or fail to detect and appropriately respond, we could be exposed to government enforcement actions and private litigation.
Our principal offices are located in Australia, Germany, Italy, the UK and the U.S. Although we have developed disaster recovery and similar business contingency plans, actual or threatened natural disasters (for example, hurricanes, earthquakes, floods, fires, tornados, tsunamis, typhoons and volcanic eruptions) or similar events in these locations may have a material impact on our business continuity, reputation and profitability.
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e. | Ability to recruit, develop and retain qualified shipboard personnel who live on ships away from home for extended periods of time
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Our success is dependent upon our personnel and our ability to recruit and train high quality employees. We hire a significant number of new crewqualified shipboard team members each year and, thus, our ability to adequately recruit, develop and retain our crewthese individuals is critical to our cruise business. We must continue to recruit, develop, retain and motivate our shipboard personnel to enable us to maintain our current business and support our projected growth.
We believe that incidentssuccess. Incidents involving cruise ships, including disease outbreaks on our ships and increasing demand as a result of the related adverse media publicity, adverse economic conditions thatindustry’s projected growth could negatively affect our profitability and overcapacity in the vacation region could also impact our ability to recruit, develop and retain sufficient qualified personnel. shipboard team members.
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f. | Increases in fuel prices and availability of fuel supply |
Economic,A prolonged shortage of qualified shoreside and shipboard team members and/or increased turnover rates has in the past inhibited, and in the future could inhibit, our ability to operate our business in an optimal manner. The competitive labor market is resulting in increased costs from the need to hire temporary personnel and we are often required to increase wages and/or benefits in order to attract and retain team members, all of which may negatively impact our results of operations. In connection
with our resumption of guest cruise operations, we have hired and intend to continue hiring a significant number of qualified team members for the foreseeable future, and we expect to continue to face these challenges.
i. Increases in fuel prices, changes in the types of fuel consumed and availability of fuel supply may adversely impact our scheduled itineraries and costs.
We have been and may continue to be impacted, by economic, market and political conditions around the world, such as fuel demand, regulatory requirements including climate-induced regulations, supply disruptions and related infrastructure needs, which make it difficult to predict the future price and availability of fuel. The supply and availability of different fuel types in various markets in which we operate have experienced increased volatility and have led to increased fuel prices and reduced profitability. Future increases in the global price of fuel would increase the cost of our cruise ship operations as well as some of our other expenses, such as crew travel, freight and commodity prices. Furthermore, volatilityIncreases in airfares, such as those resulting from increases in the price of fuel, priceswould increase our guests’ overall vacation costs and could reduce demand for cruises, as many of our guests depend on airlines to transport them to or from the airports near the ports where our cruises embark and disembark.
Many of our vessels have a material adverse effectexhaust gas cleaning systems that allow them to operate on our operations, financial condition and liquidity. We may be unable to implement additionalhigh sulfur fuel conservation initiatives, increase ticket prices or collectoil that is less expensive than low sulfur fuel; however, the significant drop in demand for higher sulfur fuel supplements to help fully or partially offset these fuel price increases.
Various agencies and regulatory authorities have issued rulesdirectly related to emissions. The cost and availability of appropriate fuel supplies or the effectivenesspause in guest cruise operations has made it more difficult to source going forward which may result in higher operating costs. Additionally, certain of our emissions mitigation equipment may negatively impact our operations, increasing costs and reducing profitability.
Certain of our newbuilds that entered into service in 2016 and thereafterships are designed to use LNG as atheir primary fuel source. At thisThe price of LNG in certain markets has been and may continue to be unattractive compared to other alternatives, and as such, at times we have used and may continue to use conventional fuels to power our LNG ships. Refer to Operating Risk Factor “e.” for additional discussion on the impact of climate change and regulation changes on fuel costs.
j. 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 negatively impact our business.
We rely on supply chain vendors to deliver key products to the operations of our businesses around the world. Any event impacting a vendor’s ability to deliver quality goods at the location and time there is not a liquid spot market for marine LNG and purchasing LNG is usually made through long-term contracts. Further,needed could negatively impact our ability to operate our business. Events impacting our supply chain could be caused by factors beyond the marine LNGcontrol of our suppliers or us, including labor actions, increased demand, problems in production or distribution infrastructure isand/or disruptions in the early stages of development and there are a limited number of suppliers.third-party logistics, information technology or transportation systems. In addition, wethe effects from COVID-19 and other global events have resulted in widespread global supply chain disruptions to vendors including critical supply chain shortages, labor shortages, significant material cost inflation and extended lead times for items that are required for our operations. Any such interruptions to our supply chain could increase our costs and could limit the availability of products critical to our operations.
k. Fluctuations in foreign currency exchange rates may be subject to new regulations covering the use and storage of LNG onboardadversely impact our ships and we may experience difficulties in operating and maintaining new LNG-based engine technology. The pricing, availability and regulations for LNG could adversely affect our profitability by changing itineraries and increasing costs.financial results.
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g. | Fluctuations in foreign currency exchange rates |
We earn revenues, pay expenses, purchase and own assets and incur liabilities in currencies other than the U.S. dollar, resultingdollar. Additionally, our shipbuilding contracts are typically denominated in translationaleuros. Movements in foreign currency exchange rates, which have recently been more volatile, will affect our financial results.
l. Overcapacity and transactional currency risks (“currency risk”).
We report currency transactionscompetition in the functional currencies ofcruise and land-based vacation industry may negatively impact our reporting units. Because our consolidated financial statements are presentedcruise sales, pricing and destination options.
We may be impacted by increases in U.S. dollars, we translate revenues and expenses into U.S dollars at exchange rates in effect during the reporting period, and translate assets and liabilities into U.S. dollars at exchange rates in effect at the end of each reporting period. This subjects us to “foreign currency translational” risk. The strengthening of the U.S. dollar against the functional currencies of our foreign operations will adversely affect our U.S. dollar financial results.
Substantially all of our operations also have non-functional currency risk related to their international net revenue yields. In addition, a portion of our operating expenses is denominated in non-functional currencies. Accordingly, we have “foreign currency transactional” risk related to changescapacity in the exchange ratescruise and land-based vacation industry, which may result in capacity growth beyond demand, either globally or for our revenues and expenses that are in a currency other than the entity’s functional currency. The strengthening of the functional currency against other currencies will reduce the functional currency revenues and expenses and will generally adversely affect our profitability.
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h. | Overcapacity and competition in the cruise ship and land-based vacation industry |
Sinceregion, or for a particular itinerary. For example, Asia, specifically China, remains closed to the cruise industry relies on long-lived ships, we face the risk that our industry’s capacity will grow beyond its demand. The wider vacation industry may also face increases in land-based vacation capacity, which may impact us as well. We typically aim to fill our new capacity at favorable revenue yields despite the new competing cruise and land-based capacity growth. Also, to the extent that weit is uncertain when or our competitors deploy ships to a particular itinerary and the resulting capacity in that region exceeds the demand, we may lower pricing and our profitability may be lower than initially anticipated. Furthermore, the used cruise ship market is small and as new cruise ships enter the industry, older ships become less competitive. Accordingly, if we needwill resume operations in the region. As a result, we along with other cruise operators, have had to dispose of a ship, we cannot be assured of finding a viable buyer to purchase it at a pricefind itineraries in alternative regions for the ships that meets our expectations,were previously serving the Asia market, which could resultlead to overcapacity in ship impairment charges and losses on ship disposals. Should net revenue yields be negatively impacted, our profitability and financial condition could be adversely affected. In addition, increased cruise capacity could impact our ability to recruit, develop and retain qualified crew, including officers, at competitive rates and, therefore, increase our shipboard employee costs.
other regions. We face competition from other cruise brands on the basis of cruise pricing, travel agent preference and theoverall experience, destinations, types and sizes of ships and cabins, servicestravel agent partner preferences and value. We also compete with land-based vacation alternatives throughout the world on the basis of overall experience, destinations and value. In addition, certain ports and destinations being offered by themhave faced a surge of both cruise and non-cruise tourism and in certain destinations, countermeasures to limit the number of tourists have been contemplated and/or put into effect, including proposed limits on cruise guests. In addition, newships and cruise competitors with existing brand appealpassengers. Potential restrictions in ports and destinations could limit the itinerary and destination options we can offer our passengers going forward.
m. Inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments may choose to enter the cruise industry or there may be other new cruise competitors that may choose to enter the established or emerging regions. We try to differentiate ourselves from our cruise competitors by offering a wide variety of brands, itineraries, products and services to our guests, but the acceptance of each offering is not certain and consumers’ preferences are always subject to change. In addition, we operate in the wider vacation industry and we risk losing business, not only to other cruise lines, but also to land-based vacation operators. In the event that we do not compete effectively with other cruise companies and other vacation alternatives, our profitability and financial condition could be adversely affected.
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i. | Continuing financial viability of our travel agent distribution system, air service providers and other key vendors in our supply chain, as well as reductions in the availability of, and increases in the prices for, the services and products provided by these vendors |
Our guests primarily book their cruises through independent travel agents and tour operators. These parties generally sell and market our cruises on a nonexclusive basis. Our competitors may offer higher commissions and incentives and thus adversely impact our business. Significant disruptions, contractions or consolidations to our travel agents distribution system, such as those caused by a reduction in travelbusiness operations and related commission income as a result of an economic slowdown could have an adverse effect on our net revenue yields and profitability. In addition, we currently rely on our travel agents and tour operators to source and arrange for our guests, if such agents and operators cannot successfully source guests, it will adversely impact our cash flows and operations.
Manythe satisfaction of our guests and substantially all our crew depend on scheduled or chartered commercial airline services to transport them to or from the airports near the ports where our cruises embark and disembark. Changes or disruptions in commercial or chartered airline services as a result of strikes, labor unrest, financial instability or viability, adverse weather conditions, airport delays, consolidation of carriers, or other events or the lack of availability due to schedule changes or a high level of airline bookings could adversely affect our ability to deliver guests and crew to or from our cruise ships and increase our costs which would, in turn, have an adverse effect on our profitability. In addition, increases in the prices of airfares would increase the overall vacation price to our guests.
Economic downturnsWe may impact the financial viability of other key vendors in our supply chain and the interruption in the services or goods we purchase from them could adversely impact our operations and profitability.
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j. | Inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments on terms that are favorable or consistent with our expectations, as well as increases to our repairs and maintenance expenses and refurbishment costs as our fleet ages |
The construction, repair, maintenance and refurbishment of cruise ships are complex processes and involve risks similar to those encountered in other large and sophisticated construction, repair, maintenance and refurbishment projects. As our fleet ages, our repair and maintenance expenses will increase. In addition, otherbe impacted by unforeseen events, such as work stoppages, other labor actions,supply chain issues, insolvencies, “force majeure” events or other financial difficulties experienced at theby shipyards, and their subcontractors and suppliers who build, repair, maintainour suppliers. This may result in less shipyard availability resulting in delays or refurbish our ships could also delay or preventpreventing the delivery of our ships under construction and prevent and/or delay the completion of the repair, maintenance or refurbishment repair and maintenance of our existing ships in our fleet. These events could adversely affect our profitability, includingships. This may lead to potential delays or cancellations of cruises or unscheduled dry-docks and repairs. In addition, the consolidation of the control of certain cruise shipyards or cruise shipyard voluntary capacity reductions or insolvencies could result in less shipyard availability thus reducing competition and increasing prices. Furthermore, the lack of qualified shipyard repair facilities could result in the inability to repair and maintain our ships on a timely basis, which could also result in reduced profitability.
The cost of shipbuilding orders that we may place in the future that is denominated in a different currency than our cruise brands’ or the shipyards’ functional currency is expected to be affected by foreign currency exchange rate fluctuations. These foreign currency exchange rate fluctuations may affect our decisions to order new cruise ships.cruises. In addition, the prices of various commodities that are used in the construction of ships and for repair, maintenance and refurbishment of existing ships, such as steel, can beare subject to volatile price changes and, accordingly, the cost of future newbuildsvolatility which may increase whichour costs.
Debt Related Risk Factors
a. Failure to successfully implement our business strategy following our resumption of guest cruise operations would negatively impact the occupancy levels and pricing of our cruises and could have ana material adverse impacteffect on our profitability.
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k. | Geographic regions in which we try to expand our business may be slow to develop and ultimately not develop how we expect |
As we continuebusiness. We require a significant amount of cash to expandservice our global presence, it requires, among other things, significant levels of management resources, capitaldebt and other investments. For example, we may be requiredsustain our operations. Our ability to localizegenerate cash depends on many factors, including those beyond our cruise products and services to conform to local cultures, standards, policies and regulations. As a result, it may be more difficult for us to replicate our successful core business modelscontrol, and we may not be able to recovergenerate cash required to service our investmentsdebt and sustain our operations.
Our ability to meet our debt service obligations, refinance our debt or sustain our business needs and operations depends on our future operating and financial performance and our ability to generate cash. This will be affected by our ability to successfully implement our business strategy, which if unsuccessful, would negatively impact the occupancy levels and pricing of our cruises, as well as general macroeconomic, financial, geopolitical, competitive, regulatory and other factors beyond our control, such as the disruption caused by the COVID-19 pandemic, the invasion of Ukraine, inflation, higher fuel prices and higher interest rates. If we cannot generate sufficient cash to meet our debt service obligations or fund our other business needs, we may, among other things, need to refinance all or a portion of our debt, obtain additional financing, delay planned capital expenditures or sell assets. We cannot make assurances that we will be able to generate sufficient cash through any of the foregoing. If we are not able to refinance any of our debt, obtain additional financing or sell assets on commercially reasonable terms or at all, we may not be able to satisfy our obligations with respect to our debt. Refer to “Liquidity, Financial Condition and Capital Resources”.
b. Our substantial debt could adversely affect our financial health and operating flexibility.
We have a substantial amount of debt and significant debt service obligations. Our substantial debt has had and could continue to have important negative consequences for us. Our substantial debt could:
•require us to dedicate a large portion of our cash flow from operations to service debt and fund repayments on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;
•increase our vulnerability to adverse general economic or industry conditions;
•limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;
•place us at a disadvantage compared to others that have less debt;
•make us more vulnerable to downturns in our business, the economy or the industry in which we operate;
•limit our ability to raise additional debt or equity capital in the future to satisfy our requirements relating to working capital, capital expenditures, development projects, strategic initiatives or other purposes;
•restrict us from making strategic acquisitions, introducing new technologies or exploiting business opportunities;
•make it difficult for us to satisfy our obligations with respect to our debt; and
•expose us to the risk of increased interest rates as certain of our borrowings are (and may be in the future) at a variable rate of interest.
c. Despite our leverage, we may incur more debt, subject to certain restrictions, which could adversely affect our business and prevent us from fulfilling our obligations with respect to our debt.
We may incur additional debt in the future. Although the instruments governing our existing indebtedness contain restrictions on the incurrence of additional debt, including certain additional restrictions which went into effect in 2023, these markets. restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of debt that could be incurred in compliance with these restrictions could be substantial and a portion of such debt currently is, and may in the future be, secured. The instruments governing our existing indebtedness do not prevent us from incurring liabilities that do not constitute “Indebtedness” as defined therein. If new debt is added to our existing debt levels, our business could be adversely affected, which may prevent us from fulfilling our obligations with respect to our debt.
d. We are subject to maintenance covenants, as well as restrictive debt covenants, that may limit our ability to finance future operations and capital needs and pursue business opportunities and activities. We are also subject to financial covenants that could lead to an acceleration of the indebtedness of our debt facilities if we fail to comply. If we fail to comply with any of these covenants, it could have a material adverse effect on our business.
Certain of our debt instruments limit our flexibility in operating our business. For example, some of our debt instruments limit the ability of Carnival Corporation, Carnival plc and certain of their respective subsidiaries to, among other things:
•incur or guarantee additional indebtedness;
•pay dividends or distributions on or redeem or repurchase capital stock and make other restricted payments;
•make certain investments;
•consummate certain asset sales;
•engage in certain transactions with affiliates;
•grant or assume certain liens; and
•consolidate, merge or transfer all or substantially all of our assets.
All of these limitations are subject to significant exceptions and qualifications. Despite these exceptions and qualifications, we cannot provide assurance that the operating and financial restrictions and covenants in certain of our debt instruments will not adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest. Any future indebtedness may include similar or other restrictive terms.
In addition, many of our debt agreements contain one or more financial covenants that require us to maintain a minimum liquidity, interest coverage, and shareholders’ equity and/or limit our debt to capital percentage. Our ability to comply with our debt covenants, including the financial maintenance covenants described above, and restrictions may be affected by events beyond our control, including global macroeconomic, financial and industry conditions, such as the continued resumption of our guest cruise operations and our ability to issue additional equity. If we breach any of these covenants or restrictions and are not able to receive waivers for these covenants, we could be in default under the terms of certain of our debt facilities and the relevant lenders would have the right to declare the debt, together with accrued and unpaid interest and other fees, if any, immediately due and payable (or cancel any unfunded commitments, if applicable) and proceed against any collateral, if any, securing that debt. If the debt under certain of our debt instruments that we enter into were to be accelerated, our assets may be insufficient to repay our debt in full. Borrowings under other debt instruments that contain cross-default provisions may also be accelerated or become payable on demand. In these circumstances, our assets may not be sufficient to repay our indebtedness then outstanding in full.
At November 30, 2022, we were in compliance with the applicable covenants under our debt agreements. However, we cannot provide assurance that we will be certain that these markets,able to maintain compliance with such debt facilities as China, will ultimately developof future testing dates. Failure to comply with the financial covenants of our debt facilities would have a material adverse effect as we expect,described above. Refer to Note 5 - Debt for additional information.
e. Our variable rate indebtedness exposes us to interest rate volatility, which could alsocause our debt service obligations to increase significantly.
Borrowings under certain of our facilities are at variable rates of interest and expose us to interest rate volatility. As interest rates increase, our debt service obligations on certain of our variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.
At the end of 2021, the ICE Benchmark Administration, the administrator for London Interbank Offered Rate (“LIBOR”), ceased publishing one-week and two-month U.S. dollar LIBOR and will cease publishing all remaining U.S. dollar LIBOR tenors in mid-2023. Concurrently, the United Kingdom’s Financial Conduct Authority announced the cessation or loss of representativeness of the U.S. dollar LIBOR tenors from those dates. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of, among other entities, large U.S. financial institutions, has recommended replacing U.S. dollar LIBOR with a new index that measures the cost of borrowing cash overnight, backed by U.S. Treasury securities (“SOFR”). SOFR is observed and backward-looking, which stands in contrast with LIBOR, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. While we continue to monitor market developments to assess replacement rate options, the consequences of these developments with respect to LIBOR cannot be entirely predicted and may result in the level of interest payments on the portion of our indebtedness that bears interest at variable rates to be affected, which may adversely impact the growth and profitabilityamount of our business.interest payments under such debt.
f. The covenants in certain of our export credit facilities may require us to secure those facilities in the future.
Our export credit facilities contain provisions which may require that we provide a security interest in certain assets and in particular the relevant vessels that are the subject matter of those financings (or a comparable vessel). In certain of our export credit facilities, there is a requirement that if the credit rating of our senior indebtedness falls below investment grade (which occurred on June 24, 2020 and remained the case as of November 30, 2022) and at such time we have granted liens or security interests in respect of indebtedness exceeding 25% of our total assets (excluding for these purposes the value of any intangible assets) as shown in our most recent Consolidated Balance Sheet, we will be required to provide a first-priority security interest in the relevant vessel that is the subject matter of that export credit facility (or a comparable vessel). In addition, under all our export credit facilities, there is also a requirement that if a security interest or lien is granted in respect of a vessel to secure borrowed money under any other export credit facility, then a first-priority security interest may be required to be provided over the relevant vessel which is the subject matter of that export credit facility (or a comparable vessel).
If the events described above were to occur, we may be unable to comply with this requirement and would expect to seek covenant amendments from the lenders under the relevant facilities.Any such amendment may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable to us under these debt facilities, and such increased costs, restrictions and modifications may vary among debt facilities.Our ability to give additional lender protections under these facilities, including the granting of security interests in collateral, will be limited by the restrictions in our indebtedness and security interest we have already granted.If we were not able to obtain amendments, the occurrence of such events may result in an event of default under these facilities and other debt facilities that contain cross default provisions that would be triggered.
Cautionary Note Concerning Factors That May Affect Future Results
Some of the statements, estimates or projections contained in this Form 10-Kdocument 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 1934.1934, 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”“indicate,” “outlook,” and similar expressions of future intent or the negative of such terms.
Forward-looking statements include those statements that may impactrelate to our outlook and financial position including, but not limited to, the forecasting of our:
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• Net revenue yieldsPricing | • Net cruise costs, excluding fuel per available lower berth dayLiquidity and credit ratings |
•Booking levels | •Adjusted earnings per share |
•Occupancy | •Adjusted EBITDA |
•Interest, tax and fuel expenses | •Adjusted Net Income (Loss) |
•Currency exchange rates | •Estimates of ship depreciable lives and residual values |
• Pricing and occupancy | •Goodwill, ship and trademark fair values
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• Interest, tax and fuel expenses
| • Liquidity
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• Currency exchange rates
| • Adjusted earnings per share
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Certain of the risks we are exposed to are identified in this Item 1A. “Risk Factors.” This item contains important cautionary statements and a discussion 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, and in the future may continue to be, amplified by our substantial debt balance as a result of the pause of our guest cruise operations. It is not possible to predict or identify all such risks. There may be additional risks that we consider immaterial or which are unknown.
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 Form 10-K,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- and climate-related statements may be based on standards and tools for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions and predictions that are subject to change in the future and may not be generally shared.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
As of November 30, 2017,2022, the Carnival Corporation and Carnival plc headquarters and our larger shoreside locations are as follows:
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| Location | | Square Footage (in thousands) | | Own/Lease | | Principal Operations |
| Miami, FL, U.S.A. | | 463/5518 | | Own/Lease | | Carnival Corporation & plc and Carnival Cruise Line |
| Genoa, Italy | | 246/66229/46 | | Own/Lease | | AIDACosta and CostaAIDA |
Santa Clarita, CA,Almere, Netherlands | | 253 | | Own | | Arison Maritime Center |
| Rostock, Germany | | 224 | | Own | | Costa and AIDA |
| Seattle, WA, U.S.A. | | 311175 | | Lease | | Princess Cruises, Holland America Line Princess Cruises and Seabourn |
Almere, Netherlands | | 253 | | Own | | Arison Maritime Center |
Rostock, Germany | | 224 | | Own | | AIDA and Costa |
Seattle, WA, U.S.A. | | 175 | | Lease | | Holland America Line, Princess Cruises and Seabourn |
| Southampton, England | | 150 | | Lease | | Carnival plc, P&O Cruises (UK) and Cunard |
Hamburg, GermanySanta Clarita, CA, U.S.A. | | 137134 | | Lease | | AIDAPrincess Cruises, Holland America Line and CostaSeabourn |
| Hamburg, Germany | | 108 | | Lease | | Costa and AIDA |
| Fort Lauderdale, FL, U.S.A. | | 61 | | Lease | | Princess Cruises |
| Sydney, NSW, Australia | | 37 | | Lease | | Princess Cruises and P&O Cruises (Australia) and Princess Cruises |
Information about our cruise ships, including the number each of our cruise brands operate, as well as information regarding our cruise ships under construction may be found under Part I. Item 1. Business. C. “Our Global Cruise Business.” In addition, we own, lease or have controlling interests in port destinations, private islands, hotels, and lodges.
Item 3. Legal Proceedings.Proceedings.
As previously disclosed, on May 19, 2017, Holland America LineThe legal proceedings described in Note 7 – “Contingencies”, including those described under “COVID-19 Actions,” are shown in Exhibit 13 and are incorporated by reference into this Form 10-K. Additionally, SEC rules require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that we believe will exceed $1 million for such proceedings.
On June 20, 2022, Princess Cruises notified the National OceanicAustralian Maritime Safety Authorization (“AMSA”) and Atmospheric Administration (“NOAA”)the flag state, Bermuda, regarding discharges madeapproximately six cubic meters of comminuted food waste (liquid biodigester effluent) inadvertently discharged by certain vessels inCoral Princess inside the recently expanded areaGreat Barrier Reef Marine Park. On June 23, 2022, the UK P&I Club N.V. provided a letter of undertaking for approximately $1.9 million (being the National Marine Sanctuary in the Farallones Islands. NOAA continues to conduct an investigation.estimated maximum combined penalty). We believe the ultimate outcome will not have a material impact on our consolidated financial statements.
Item 4. Mine Safety Disclosures.Disclosures.
None.
Executive Officers of the Registrants
The table below sets forth the name, age, years of service and title of each of our executive officers. Titles listed relate to positions within Carnival Corporation and Carnival plc unless otherwise noted.
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Age | | Years of Service (a) | | Title |
| Micky Arison | 68 | | 46 | | Chairman of the Boards of Directors |
| David Bernstein | 60 | | 19 | | Chief Financial Officer and Chief Accounting Officer |
| Arnold W. Donald | 63 | | 17 | | President and Chief Executive Officer and Director |
| Stein Kruse | 59 | | 18 | | Group Chief Executive Officer of Holland America Group and Carnival UK |
| Arnaldo Perez | 57 | | 25 | | General Counsel and Secretary |
| Michael Thamm | 54 | | 24 | | Group Chief Executive Officer of Costa Group and Carnival Asia |
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(a) | Years of service with us or Carnival plc predecessor companies. |
Business Experience of Executive Officers
Micky Arison has been Chairman of the Boards of Directors since 1990 and a Director since 1987. He was Chief Executive Officer from 1979 to 2013.
David Bernstein has been Chief Financial Officer since 2007 and Chief Accounting Officer since 2016. From 2003 to 2007, he was Treasurer.
Arnold W. Donald has been President and Chief Executive Officer since 2013. He has been a Director since 2001.
Stein Kruse has been the Group Chief Executive Officer of Holland America Group and Carnival UK since July 2017. He was Chief Executive Officer of Holland America Group from 2013 to July 2017. From 2004 to 2013, he was President and Chief Executive Officer of Holland America Line.
Arnaldo Perez has been General Counsel and Secretary since 1995.
Michael Thamm has been Group Chief Executive Officer of Costa Group since 2012 and of Carnival Asia since December 2016.
PART II
Item 5. Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
A. Market Information
The information required by Item 201(a) of Regulation S-K, Market Information, is shown in Exhibit 13 and is incorporated by reference into this Form 10-K.
B. Holders
The information required by Item 201(b) of Regulation S-K, Holders, is shown in Exhibit 13 and is incorporated by reference into this Form 10-K.
C. Dividends
C. Dividends
Carnival Corporation and Carnival plc declared quarterly cashOn March 30, 2020, we suspended the payment of dividends on all of their common stock and ordinary shares as follows:
|
| | | | | | | | | | | | | | | |
| | Quarters Ended |
| | February 28/29 | | May 31 | | August 31 | | November 30 |
| 2017 | $ | 0.35 |
| | $ | 0.40 |
| | $ | 0.40 |
| | $ | 0.45 |
|
| 2016 | $ | 0.30 |
| | $ | 0.35 |
| | $ | 0.35 |
| | $ | 0.35 |
|
All dividends for both Carnival Corporation and Carnival plc are declared in U.S. dollars. If declared, holders of Carnival Corporation common stock and Carnival plc American Depository Shares receive a dividend payable in U.S. dollars. The dividends payable for Carnival plc ordinary shares are payable in sterling, unless the shareholders elect to receive the dividends in U.S. dollars. Dividends payable in sterling will be converted from U.S. dollars into sterling at the U.S. dollar to sterling exchange rate quoted by the Bank of England in London at 12:00 p.m. on the next combined U.S. and UK business day that follows the quarter end.shares.
The payment and amount of any future dividend is within the discretion of the Boards of Directors. Our dividends were and will be based on a number of factors, including our earnings, liquidity position, financial condition, booking trends, capital requirements, credit ratings and the availability and cost of obtaining new debt. We cannot be certain that Carnival Corporation and Carnival plc will continue their dividend in the future, and if so, the amount and timing of such future dividends are not determinable and may be different than the levels and have a different timing than are disclosed above.
D. Securities Authorized for Issuance under Equity Compensation Plans
The information required by Item 201(d) of Regulation S-K is incorporated by reference to Part III. Item 12 of this Form 10-K.
E. Performance Graph
The information required by Item 201(e) of Regulation S-K, Performance Graph, is shown in Exhibit 13 and is incorporated by reference into this Form 10-K.
F. Issuer Purchases of Equity Securities; Use of Proceeds from Registered Securities
I. Repurchase Program
Under a share repurchase program effective 2004, we are authorized to repurchase Carnival Corporation common stock and Carnival plc ordinary shares (the “Repurchase Program”). On April 6, 2017, the Boards of Directors approved a modification of the general authorization under the Repurchase Program, which replenished the remaining authorized repurchases at the time of the approval to $1.0 billion. The Repurchase Program does not have an expiration date and may be discontinued by our Boards of Directors at any time.
During the three months ended November 30, 2017, repurchases of Carnival Corporation common stock pursuant to the Repurchase Program were as follows:
|
| | | | | | | | | | | |
| Period | | Total Number of Shares of Carnival Corporation Common Stock Purchased (in millions) | | Average Price Paid per Share of Carnival Corporation Common Stock | | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Repurchase Program (in millions) |
| September 1, 2017 through September 30, 2017 | | 0.8 |
| | $ | 66.31 |
| | $ | 760 |
|
| October 1, 2017 through October 31, 2017 | | 0.1 |
| | $ | 66.25 |
| | $ | 673 |
|
| November 1, 2017 through November 30, 2017 | | 0.1 |
| | $ | 64.87 |
| | $ | 587 |
|
| | | 1.0 |
| | $ | 66.23 |
| | |
During the three months ended November 30, 2017, repurchases of Carnival plc ordinary shares pursuant to the Repurchase Program were as follows:
|
| | | | | | | | | | | |
| Period | | Total Number of Shares of Carnival plc Purchased (in millions) | | Average Price Paid per Share of Carnival plc | | Maximum Dollar Value of Shares That May Yet Be Purchased Under the Repurchase Program (in millions) |
| September 1, 2017 through September 30, 2017 | | 0.2 |
| | $ | 64.41 |
| | $ | 760 |
|
| October 1, 2017 through October 31, 2017 | | 1.2 |
| | $ | 65.20 |
| | $ | 673 |
|
| November 1, 2017 through November 30, 2017 | | 1.3 |
| | $ | 65.44 |
| | $ | 587 |
|
| | | 2.7 |
| | $ | 65.24 |
| | |
No shares of Carnival Corporation common stock or Carnival plc ordinary shares were purchased outside of publicly announced plans or programs.
II. Stock Swap ProgramsProgram
In addition to the Repurchase Program, weWe have programsa program that allowallows us to obtain an economicrealize a net cash benefit when either Carnival Corporation common stock is trading at a premium to the price of Carnival plc ordinary shares. Under the Stock Swap Program, we may elect to offer and sell shares orof Carnival Corporation common stock at prevailing market prices in ordinary brokers’ transactions and repurchase an equivalent number of Carnival plc ordinary shares in the UK market.
Under the Stock Swap Program effective June 2021, the Boards of Directors authorized the sale of up to $500 million of shares of Carnival Corporation common stock in the U.S. market and the repurchase of an equivalent number of Carnival plc ordinary shares.
We may in the future implement a program to allow us to realize a net cash benefit when Carnival plc ordinary shares are trading at a premium to Carnival Corporation common stock (the “Stock Swap Programs”). For example:
| |
Ÿ | In the event Carnival Corporation common stock trades at a premium to Carnival plc ordinary shares, we may elect to sell shares of Carnival Corporation common stock, at prevailing market prices in ordinary brokers’ transactions and repurchase an equivalent number of Carnival plc ordinary shares in the UK market.
|
| |
Ÿ | In the event Carnival plc ordinary shares trade at a premium to Carnival Corporation common stock, we may elect to sell ordinary shares of Carnival plc, at prevailing market prices in ordinary brokers’ transactions and repurchase an equivalent number of shares of Carnival Corporation common stock in the U.S. |
Any realized economic benefit under the Stock Swap Programs is used for general corporate purposes, which could include repurchasing additional stock under the Repurchase Program.
Under the Stock Swap Programs effective 2008, the Boards of Directors have made the following authorizations:
In January 2017, to sell up to 22.0 millionprice of Carnival Corporation common stock in the U.S. market and repurchase up to 22.0 million of Carnival plc ordinary shares in the UK market.stock.
In February 2016, to sell up to 26.9 million of existing shares of Carnival plc in the UK market and repurchase up to 26.9 million shares of Carnival Corporation common stock in the U.S. market.
Any sales of Carnival Corporation sharescommon stock and Carnival plc ordinary shares have been or will be registered under the Securities Act of 1933.1933, as amended. During the three months ended November 30, 2017, no2022, under the Stock Swap Program, we sold 0.8 million shares of Carnival Corporation common stock orand repurchased the same amount of Carnival plc ordinary shares, resulting in net proceeds of $0.4 million which were sold or repurchased underused for general corporate purposes. Since the beginning of the Stock Swap Programs.Program, first authorized in June 2021, we have sold 14.9 million shares of Carnival Corporation common stock and repurchased the same amount of Carnival plc ordinary shares, resulting in net proceeds of $27 million.
| | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Shares of Carnival plc Ordinary Shares Purchased (a)
(in millions) | | Average Price Paid per Share of Carnival plc Ordinary Share | | Maximum Number of Carnival plc Ordinary Shares That May Yet Be Purchased
(in millions) |
| September 1, 2022 through September 30, 2022 | | — | | | $ | — | | | 4.4 | |
| October 1, 2022 through October 31, 2022 | | 0.8 | | | $ | 6.42 | | | 3.6 | |
| November 1, 2022 through November 30, 2022 | | — | | | $ | — | | | 3.6 | |
| | 0.8 | | | $ | 6.42 | | | |
(a) No ordinary shares of Carnival plc were purchased outside of publicly announced plans or programs.
II. Carnival plc Shareholder Approvals
Carnival plc ordinary share repurchases under both the Repurchase Program and the Stock Swap ProgramsProgram require annual shareholder approval. The existing shareholder approval iswas limited to a maximum of 21.618.5 million ordinary shares and is valid until the earlier of the conclusion of the Carnival plc 20182023 annual general meeting or July 4, 2018.October 7, 2023.
Item 6. Selected Financial DataReserved.
The information required by Item 6. Selected Financial Data, is shown in Exhibit 13 and is incorporated by reference into this Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The information required by Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, is shown in Exhibit 13 and is incorporated by reference into this Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The information required by Item 7A. Quantitative and Qualitative Disclosures About Market Risk, is shown in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Exhibit 13 and is incorporated by reference into this Form 10-K.
Item 8. Financial Statements and Supplementary Data.
The financial statements, together with the report thereon of PricewaterhouseCoopers LLP (PCAOB ID 238), dated January 29, 2018, and the Selected Quarterly Financial Data (Unaudited)27, 2023, are shown in Exhibit 13 and are incorporated by reference into this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
A. Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Our President, Chief Executive Officer and Chief ExecutiveClimate Officer and our Chief Financial Officer and Chief Accounting Officer have evaluated our disclosure controls and procedures and have concluded, as of November 30, 2017,2022, that they are effective as described above.
B. Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Our management, with the participation of our President, Chief Executive Officer and Chief ExecutiveClimate Officer and our Chief Financial Officer and Chief Accounting Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 Internal Control – Integrated Framework (the “COSO Framework”). Based on this evaluation under the COSO Framework, our management concluded that our internal control over financial reporting was effective as of November 30, 2017.2022.
PricewaterhouseCoopers LLP, the independent registered certified public accounting firm that audited our consolidated financial statements incorporated in this Form 10-K, has also audited the effectiveness of our internal control over financial reporting as of November 30, 20172022 as stated in their report, which is shown in Exhibit 13 and is incorporated by reference into this Form 10-K.
C. Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended November 30, 20172022 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
We have adoptedDirectors
Information regarding our directors, as required by Item 10, is incorporated herein by reference from the Carnival Corporation and Carnival plc joint definitive Proxy Statement to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the close of the 2022 fiscal year.
Information About Our Executive Officers
The table below sets forth the name, age, years of service and title of each of our executive officers as of January 27, 2023. Titles listed relate to positions within Carnival Corporation and Carnival plc unless otherwise noted. | | | | | | | | | | | | | | | | | |
|
Age | | Years of Service (a) | | Title |
| Micky Arison | 73 | | 51 | | Chair of the Boards of Directors |
| David Bernstein | 65 | | 24 | | Chief Financial Officer and Chief Accounting Officer |
| Vice Admiral William R. Burke (Ret.) | 66 | | 9 | | Chief Maritime Officer |
| Enrique Miguez | 58 | | 25 | | General Counsel |
| Michael Thamm | 59 | | 29 | | Group Chief Executive Officer of Costa Group and Carnival Asia |
| Josh Weinstein | 48 | | 20 | | President, Chief Executive Officer and Chief Climate Officer |
(a)Years of service with us or Carnival plc predecessor companies.
Business Experience of Executive Officers
Micky Arison has been Chair of the Boards of Directors since 1990 and a Code of Business ConductDirector since 1987. He was Chief Executive Officer from 1979 to 2013.
David Bernstein has been Chief Financial Officer since 2007 and Ethics that applies to ourChief Accounting Officer since 2016.
William R. Burke, retired Vice Admiral, has been Chief Maritime Officer since 2013.
Enrique Miguez has been General Counsel since 2021. He was Vice President and Deputy General Counsel from 2003 to 2021.
Michael Thamm has been Group Chief Executive Officer of Costa Group since 2012 and of Carnival Asia since 2017.
Josh Weinstein has been President, Chief Executive Officer and senior financial officers, including the Chief FinancialClimate Officer since August 2022. He was Chief Operations Officer from 2020 to July 2022, President of Carnival UK from 2017 to 2022 and Chief Accounting Officer and other persons performing similar functions. Treasurer from 2007 to 2017.
Corporate Governance
Our Code of Business Conduct and Ethics applies to all our team members and our Boards of Directors and states our commitment to conduct business ethically, without the influence of bribes or acts of corruption. We are committed to complying with the laws prohibiting bribery and other employeescorrupt practices that apply everywhere we operate. Additionally, we provide trainings on anti-corruption laws and regulations and how to identify bribery to our directors as well.team members. This Code of Business Conduct and Ethics is posted on our website, which is located at www.carnivalcorp.com and www.carnivalplc.com. We intend to satisfy the disclosure requirement under Item 5.05 of the Form 8-K regarding any amendments to, or waivers from, provisions of this Code of Business Conduct and Ethics by posting such information on our website, at the addresses specified above.
The additional information required by Item 10 is incorporated herein by reference from the Carnival Corporation and Carnival plc joint definitive Proxy Statement to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the close of the 20172022 fiscal year, except that the information concerning the Carnival Corporation and Carnival plc executive officers called for by Item 401(b) of Regulation S-K is included in Part I of this Form 10-K.year.
Item 11. Executive Compensation.
The information required by Item 11 is incorporated herein by reference from the Carnival Corporation and Carnival plc joint definitive Proxy Statement to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the close of the 20172022 fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
A. Securities Authorized for Issuance under Equity Compensation Plans
I. Carnival Corporation
Set forth below is a table that summarizes compensation plans (including individual compensation arrangements) under which Carnival Corporation equity securities are authorized for issuance as of November 30, 2017.2022. | | | | | | | | | | | | | | | | | | | | | | | |
| Plan category | | Number of securities to be issued upon exercise of warrants and rights
(in millions) | | Weighted-average exercise price of outstanding warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1))
(in millions) | |
| | (1) | | | | | |
| Equity compensation plans approved by security holders | | 4.9 | (a) | — | | | 13.7 | (b) |
| Equity compensation plans not approved by security holders | | — | | | — | | | — | | |
| | 4.9 | | — | | | 13.7 | |
(a)Represents 4.9 million of restricted share units outstanding under the Carnival Corporation 2011 Stock Plan and Carnival Corporation 2020 Stock Plan.
(b)Includes Carnival Corporation common stock available for issuance as of November 30, 2022 as follows: 1.3 million under the Carnival Corporation Employee Stock Purchase Plan, which includes 255,546 subject to purchase during the current purchase period and 12.4 million under the Carnival Corporation 2020 Stock Plan.
|
| | | | | | | | | |
| Plan category | | Number of securities to be issued upon exercise of warrants and rights (in millions) | | Weighted-average exercise price of outstanding warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) (in millions) | |
| | | (1) | | | | | |
| Equity compensation plans approved by security holders | | 2.3 |
| (a) | - | | 10.0 |
| (b) |
| Equity compensation plans not approved by security holders | | — |
| |
- | | — |
| |
| | | 2.3 |
| | - | | 10.0 |
| |
| |
(a) | Represents 2.3 million of restricted share units outstanding under the Carnival Corporation 2011 Stock Plan. |
| |
(b) | Includes Carnival Corporation common stock available for issuance as of November 30, 2017 as follows: 2.1 million under the Carnival Corporation Employee Stock Purchase Plan, which includes 28,839 shares subject to purchase during the current purchase period and 7.9 million under the Carnival Corporation 2011 Stock Plan. |
II. Carnival plc
Set forth below is a table that summarizes compensation plans (including individual compensation arrangements) under which Carnival plc equity securities are authorized for issuance as of November 30, 2017.2022. | | | | | | | | | | | | | | | | | | | | |
Plan category | | Number of securities to be issued upon exercise of warrants and rights
(in millions) | | Weighted-average exercise price of outstanding warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1))
(in millions) |
| | (1) | | | | |
| Equity compensation plans approved by security holders | | 1.3 | (a) | — | | | 4.3 |
| Equity compensation plans not approved by security holders | | — | | | — | | | — | |
| | 1.3 | | — | | | 4.3 |
|
| | | | | | | | |
Plan category | | Number of securities to be issued upon exercise of warrants and rights (in millions) | | Weighted-average exercise price of outstanding warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) (in millions) |
| | | (1) | | | | |
| Equity compensation plans approved by security holders | | 0.7 |
| (a) | - | | 7.6 |
|
| Equity compensation plans not approved by security holders | | — |
| |
- | | — |
|
| | | 0.7 |
| | - | | 7.6 |
|
| |
(a) | Represents 0.7 million restricted share units outstanding under the Carnival plc 2005 Employee Share Plan and Carnival plc 2014 Employee Share Plan. |
The additional information required by Item 12 is incorporated herein by reference to the Carnival Corporation and Carnival plc joint definitive Proxy Statement to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the close of the 20172022 fiscal year.
Items 13 and 14.Certain Relationships and Related Transactions, and Director Independence and Principal Accountant Fees and Services.
The information required by Items 13 and 14 is incorporated herein by reference from the Carnival Corporation and Carnival plc joint definitive Proxy Statement to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the close of the 20172022 fiscal year.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) (1) Financial Statements
The financial statements shown in Exhibit 13 are incorporated herein by reference into this Form 10-K.
(2) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instruction or are inapplicable and, therefore, have been omitted.
(3) Exhibits
The exhibits listed below on the Index to Exhibits are filed or incorporated by reference as part of this Form 10-K.
|
| | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| | | | | | | | |
| Articles of incorporation and by-laws | | | | | | | |
| | | | | | | | | |
| 3.1 | | 8-K | | 3.1 | | 4/17/03 | | |
| | | | | | | | | |
| 3.2 | | 8-K | | 3.1 | | 4/20/09 | | |
| | | | | | | | | |
| 3.3 | | 8-K | | 3.3 | | 4/20/09 | | |
| | | | | | | | | |
| Instruments defining the rights of security holders, including indenture | | | | | | |
| | | | | | | | | |
| 4.1 | | | | | | | | X |
| | | | | | | | | |
| 4.2 | | 10-Q | | 4.1 | | 10/15/03 | | |
| | | | | | | | | |
| 4.3 | | 10-Q | | 4.2 | | 10/15/03 | | |
| | | | | | | | | |
| 4.4 | | S-4 | | 4.3 | | 5/30/03 | | |
| | | | | | | | | |
| 4.5 | | S-3 & F-3 | | 4.10 | | 6/19/03 | | |
| | | | | | | | | |
| 4.6 | | S-3 & F-3 | | 4.16 | | 6/19/03 | | |
| | | | | | | | | |
| 4.7 | | 8-K | | 4.1 | | 4/17/03 | | |
| | | | | | | | | |
| 4.8 | | 8-K | | 4.2 | | 4/17/03 | | |
| | | | | | | | | |
| 4.9 | | 8-K | | 4.3 | | 4/17/03 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| | | | | | | |
| Articles of incorporation and by-laws | | | | | | | |
| | | | | | | | |
| 3.1 | | 8-K | | 3.1 | | 4/17/03 | | |
| | | | | | | | |
| 3.2 | | 8-K | | 3.1 | | 4/20/09 | | |
| | | | | | | | |
| 3.3 | | 8-K | | 3.3 | | 4/20/09 | | |
| | | | | | | | |
| Instruments defining the rights of security holders, including indenture | | | | | | |
| | | | | | | | |
| 4.1 | | | | | | | | X |
| | | | | | | | |
| 4.2 | | 10-Q | | 4.1 | | 10/15/03 | | |
| | | | | | | | |
| 4.3 | | 10-Q | | 4.2 | | 10/15/03 | | |
| | | | | | | | |
| 4.4 | | S-4 | | 4.3 | | 5/30/03 | | |
| | | | | | | | |
| 4.5 | | S-3 & F-3 | | 4.10 | | 6/19/03 | | |
| | | | | | | | |
| 4.6 | | S-3 & F-3 | | 4.16 | | 6/19/03 | | |
| | | | | | | | |
| 4.7 | | 8-K | | 4.1 | | 4/17/03 | | |
| | | | | | | | |
| 4.8 | | 8-K | | 4.2 | | 4/17/03 | | |
| | | | | | | | |
| 4.9 | | 8-K | | 4.3 | | 4/17/03 | | |
| | | | | | | | |
|
| | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| | | | | | | | | |
| 4.10 | | Post
Amend-
ment to
Form F-6 | | 99-a | | 4/15/03 | | |
| | | | | | | | | |
| 4.11 | | S-3 | | 4.1 | | 7/2/09 | | |
Material contracts | | | | | | | |
| | | | | | | | | |
| 10.1* | | 10-Q | | 10.1 | | 9/28/07 | | |
| | | | | | | | | |
| 10.2 | | 10-Q | | 10.1 | | 10/3/14 | | |
| | | | | | | | | |
| 10.3* | |
10-Q | | 10.1 | | 6/27/08 | | |
| | | | | | | | | |
| 10.4* | | 10-Q | | 10.2 | | 6/27/08 | | |
| | | | | | | | | |
| 10.5* | | 10-Q | | 10.1 | | 4/2/09 | | |
| | | | | | | | | |
| 10.6 | | 10-Q | | 10.2 | | 7/12/02 | | |
| | | | | | | | | |
| 10.7* | | 10-K | | 10.23 | | 1/30/17 | | |
| | | | | | | | | |
| 10.8* | | 10-Q | | 10.2 | | 3/30/12 | | |
| | | | | | | | | |
| 10.9* | | 10-Q | | 10.2 | | 10/3/14 | | |
| | | | | | | | | |
| 10.10* | | 10-K | | 10.39 | | 1/30/17 | | |
| | | | | | | | | |
| 10.11* | | 10-Q | | 10.1 | | 7/1/15 | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| 4.10 | | Post
Amend-
ment to
Form F-6 | | 99-a | | 4/15/03 | | |
| | | | | | | | |
| 4.11 | | S-3 | | 4.1 | | 7/2/09 | | |
| | | | | | | | |
| 4.12 | | 10-K | | 4.12 | | 1/28/20 | | |
| | | | | | | | |
| 4.13 | | 10-K | | 4.15 | | 1/28/20 | | |
| | | | | | | | |
Material contracts | | | | | | | |
| | | | | | | | |
| 10.1* | | 10-Q | | 10.1 | | 9/28/07 | | |
| | | | | | | | |
| 10.2* | |
10-Q | | 10.1 | | 6/27/08 | | |
| | | | | | | | |
| 10.3* | | 10-Q | | 10.2 | | 6/27/08 | | |
| | | | | | | | |
| 10.4 | | 10-Q | | 10.2 | | 7/12/02 | | |
| | | | | | | | |
| 10.5* | | 10-Q | | 10.2 | | 10/3/14 | | |
| | | | | | | | |
| 10.6* | | 10-Q | | 10.3 | | 7/1/15 | | |
| | | | | | | | |
| 10.7* | | 8-K | | 99.1 | | 10/21/16 | | |
| | | | | | | | |
| 10.8* | | 8-K | | 10.1 | | 4/27/17 | | |
| | | | | | | | |
| 10.9* | | 10-Q | | 10.3 | | 4/9/19 | | |
| | | | | | | | |
| 10.10* | | 10-Q | | 10.4 | | 4/9/19 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| | | | | | | | |
INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
10.12*10.11* | | 10-Q | | 10.2 | | 7/1/15 | | |
| | | | | | | | |
10.13* | | 10-Q | | 10.3 | | 7/1/15 | | |
| | | | | | | | |
10.14* | Amendment to Facilities Agreement dated May 18, 2016 among Carnival Corporation, Carnival plc and certain of Carnival Corporation and Carnivalplc subsidiaries, Bank of America Merrill Lynch International Limited, as facilities agent, and KfW IPEX-Bank GmbH, Bayerische Landesbank, New York Branch and DZ BANK AG, Deutsche Zentral Genossenschaftsbank, Frankfurt am Main, New York Branch, as new lenders. | 10-Q | | 10.1 | | 7/1/16 | | |
| | | | | | | | |
10.15* | | 10-Q | | 10.3 | | 7/1/16 | | |
| | | | | | | | |
10.16* | | 10-Q | | 10.4 | | 7/1/16 | | |
| | | | | | | | |
10.17* | | 8-K | | 99.1 | | 10/21/16 | | |
| | | | | | | | |
10.18* | | 10-Q | | 10.1 | | 3/30/17 | | |
| | | | | | | | |
10.19* | | 10-Q | | 10.2 | | 3/30/17 | | |
| | | | | | | | |
10.20* | | 10-Q | | 10.310.5 | | 3/30/174/9/19 | | |
| | | | | | | | |
10.21*10.12* | | 10-Q | | 10.1 | | 6/24/19 | | |
| | | | | | | | |
| 10.13* | | 8-K10-Q | | 10.110.2 | | 4/27/176/24/19 | | |
| | | | | | | | |
10.22*10.14* | | 10-Q | | 10.210.3 | | 6/30/1724/19 | | |
| | | | | | | | |
10.23*10.15* | | 10-Q | | 10.1 | | 9/26/19 | | |
| | | | | | | | |
| 10.16* | | 10-Q | | 10.310.1 | | 6/30/174/1/20 | | |
| | | | | | | | |
10.24*10.17* |
| 10-Q | | 10.410.2 | | 6/30/174/1/20 | | |
| | | | | | | | |
|
| | | | | | | | |
| 10.18* |
| 10-Q | | 10.3 | | 4/1/20 | | |
| | | | | | | | |
| 10.19* | | 10-Q | | 10.3 | | 7/10/20 | | |
| | | | | | | | |
| 10.20* | | 10-Q | | 10.5 | | 7/10/20 | | |
| | | | | | | | |
| 10.21*** | Term Loan Agreement dated as of June 30, 2020 among Carnival Finance, LLC and Carnival Corporation, as borrowers, Carnival plc and the other Guarantors party hereto, the various financial institutions as are or shall become parties hereto, JPMorgan Chase Bank, N.A., as administrative agent for the lenders, and U.S. Bank National Association, as security agent. | 10-Q | | 10.6 | | 7/10/20 | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| 10.22 | Amendment No. 1, dated as of December 3, 2020 to Term Loan Agreement dated as of June 30, 2020 among Carnival Finance, LLC and Carnival Corporation, as borrowers, Carnival plc and the other Guarantors party hereto, the various financial institutions as are or shall become parties hereto, JPMorgan Chase Bank, N.A., as administrative agent for the lenders, and U.S. Bank. | 10-K | | 10.42 | | 1/26/21 | | |
| | | | | | | | |
| 10.23 | | 10-Q | | 10.7 | | 7/10/20 | | |
| | | | | | | | |
| 10.24 | | 10-Q | | 10.9 | | 7/10/20 | | |
| | | | | | | | |
| 10.25 | | 10-Q | | 10.1 | | 10/8/20 | | |
| | | | | | | | |
| 10.26*** | | 10-Q | | 10.2 | | 10/8/20 | | |
| | | | | | | | |
| 10.27 | | 10-K | | 10.49 | | 1/26/21 | | |
| | | | | | | | |
| 10.28*** | | 10-Q | | 10.3 | | 10/8/20 | | |
| | | | | | | | |
| 10.29 | | 10-K | | 10.51 | | 1/26/21 | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| 10.30 | | 10-K | | 10.52 | | 1/26/21 | | |
| | | | | | | | |
| 10.31* | | 10-Q | | 10.4 | | 10/8/20 | | |
| | | | | | | | |
| 10.32* | | 10-Q | | 10.5 | | 10/8/20 | | |
| | | | | | | | |
| 10.33* | | 10-Q | | 10.6 | | 10/8/20 | | |
| | | | | | | | |
| 10.34* | | 10-Q | | 10.7 | | 10/8/20 | | |
| | | | | | | | |
| 10.35 | | 8-K | | 10.1 | | 1/6/21 | | |
| | | | | | | | |
| 10.36 | | 10-Q | | 10.1 | | 4/7/21 | | |
| | | | | | | | |
| 10.37 | | 10-Q | | 10.2 | | 4/7/21 | | |
| | | | | | | | |
| 10.38 | | 10-Q | | 10.3 | | 4/7/21 | | |
| | | | | | | | |
| 10.39 | | 10-Q | | 10.1 | | 6/28/21 | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| 10.40 | | 10-Q | | 10.2 | | 6/28/21 | | |
| | | | | | | | |
| 10.41 | Amendment No. 2 to Term Loan Agreement, dated as of June 30, 2021, among Carnival Corporation and Carnival Finance, LLC, as borrowers, Carnival plc, as a guarantor, certain other subsidiary guarantors party thereto and JPMorgan Chase Bank, N.A., as administrative agent for the lenders. | 8-K | | 10.1 | | 6/30/21 | | |
| | | | | | | | |
| 10.42 | Indenture dated as of July 26, 2021, among Carnival Corporation, as issuer, Carnival plc, the other Guarantors party hereto and U.S. Bank National Association, as trustee, principal paying agent, transfer agent, registrar and security agent, relating to the 4.00% First-Priority Senior Secured Notes due 2028. | 10-Q | | 10.3 | | 9/30/21 | | |
| | | | | | | | |
| 10.43 | Indenture dated as of November 2, 2021, among Carnival Corporation, as issuer, Carnival plc, the other Guarantors party hereto and U.S. Bank National Association, as trustee, principal paying agent, transfer agent, registrar and security agent, relating to the 6.000% Senior Unsecured Notes due 2029.
| 8-K | | 10.1 | | 11/2/21 | | |
| | | | | | | | |
| 10.44 | Amendment Agreement dated September 30, 2021 to the Multicurrency Revolving Facilities Agreement originally dated May 18, 2011, as amended and restated on August 6, 2019, as further amended on December 31, 2020 and May 11, 2021, among Carnival Corporation, Carnival plc and certain of Carnival Corporation and Carnival plc subsidiaries, Bank of America Europe Designated Activity Company as facilities agent and a syndicate of financial institutions. | 10-K | | 10.41 | | 1/27/22 | | |
| | | | | | | | |
| 10.45 | Amendment No. 3 to Term Loan Agreement, by and among Carnival Corporation and Carnival Finance, LLC, as borrowers, Carnival plc, as a guarantor, certain other subsidiary guarantors party thereto, JPMorgan Chase Bank, N.A., as administrative agent for the lenders and the lenders party thereto, dated as of October 5, 2021. | 10-K | | 10.45 | | 1/27/22 | | |
| | | | | | | | |
| 10.46 | Incremental Assumption Agreement and Amendment No. 4 to Term Loan Agreement, by and among Carnival Corporation Carnival Finance, LLC, as borrowers, Carnival plc, as a guarantor, certain other subsidiary guarantors party thereto, and JPMorgan Chase Bank, N.A., as administrative agent and as incremental term lender, dated as of October 18, 2021. | 10-K | | 10.46 | | 1/27/22 | | |
| | | | | | | | |
| 10.47 | | 10-Q | | 10.1 | | 3/28/22 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| | | | | | | | |
| 10.48*** | Amendment Agreement dated February 11, 2022 to the Multicurrency Revolving Facilities Agreement originally dated May 18, 2011, as amended and restated on August 6, 2019 and as further amended on December 31, 2020, May 11, 2021 and September 30, 2021, among Carnival Corporation, Carnival plc and certain of Carnival Corporation and Carnival plc subsidiaries, Bank of America Europe Designated Activity Company as facilities agent and a syndicate of financial institutions. | 10-Q | | 10.2 | | 3/28/22 | | |
| | | | | | | | |
| 10.49 | | 10-Q | | 10.3 | | 3/28/22 | | |
| | | | | | | | |
| 10.50 | | 10-Q | | 10.4 | | 3/28/22 | | |
| | | | | | | | |
| 10.51 | | 10-Q | | 10.5 | | 3/28/22 | | |
| | | | | | | | |
| 10.52 | Indenture, dated as of May 25, 2022, among Carnival Corporation, as issuer, Carnival plc, the other Guarantors party hereto and U.S. Bank Trust Company, National Association, as trustee, principal paying agent, transfer agent, registrar and security agent, relating to the 10.500% Senior Unsecured Notes due 2030. | 8-K | | 10.1 | | 5/25/22 | | |
| | | | | | | | |
| 10.53 | | 10-Q | | 10.1 | | 6/29/22 | | |
| | | | | | | | |
| 10.54 | | 8-K | | 4.1 | | 8/22/22 | | |
| | | | | | | | |
| 10.55 | | 10-Q | | 10.2 | | 9/30/22 | | |
| | | | | | | | |
| 10.56 | Indenture dated as of October 25, 2022, among Carnival Holdings (Bermuda) Limited, as issuer, Carnival Corporation, Carnival plc, the other Guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee, principal paying agent, transfer agent and registrar, relating to the 10.375% Senior Unsecured Notes due 2028. | 8-K | | 10.1 | | 10/25/22 | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| 10.57 | | 8-K | | 4.1 | | 11/1/22 | | |
| | | | | | | | |
| 10.58 | | 8-K | | 10.1 | | 11/3/22 | | |
| | | | | | | | |
| 10.59 | | 8-K | | 10.1 | | 11/18/22 | | |
| | | | | | | | |
| Annual report to security holders | | | | | | | |
| | | | | | | | |
| 13 | | | | | | | | X |
| | | | | | | | |
| Subsidiaries of the registrants | | | | | | | |
| | | | | | | | |
| 21 | | | | | | | | X |
| | | | | | | |
| Consents of experts and counsel | | | | | | | |
| | | | | | | | |
| 23 | | | | | | | | X |
| | | | | | | | |
| Power of attorney | | | | | |
| | | | | | |
| 24 | | | | | | X |
| | | | | | |
| Rule 13a-14(a)/15d-14(a) certifications | | | | | |
| | | | | | |
| 31.1 | | | | | | X |
| | | | | |
| 31.2 | | | | | | X |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
Statements regarding computations of ratios | | | | | | | |
| | | | | | | | |
1231.3 | | | | | | | | X |
| | | | | | | |
Annual report to security holders | | | | | | | |
| | | | | | | | |
13 | | | | | | | | X |
| | | | | | | | |
Subsidiaries of the registrants | | | | | | | |
| | | | | | | | |
21 | | | | | | | | X |
| | | | | | | |
Consents of experts and counsel | | | | | | | |
| | | | | | | | |
23 | | | | | | | | X |
| | | | | | | | |
Power of attorney | | | | | |
| | | | | | |
24 | | | | | | X |
| | | | | | |
Rule 13a-14(a)/15d-14(a) certifications | | | | | |
| | | | | | |
31.1 | | | | | | X |
| | | | | |
31.2 | | | | | | X |
| | | | | | |
31.3 | | | | | | X |
| | | | | | |
| 31.4 | | | | | | X |
| | | | | |
| Section 1350 certifications | | | | | |
| | | | | |
| | | | | |
| | | | | |
|
| | | | | | | | |
INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
Section 1350 certifications | | | | | |
| | | | | | |
| 32.1** | | | | | | X |
| | | | | | |
| 32.2** | | | | | | X |
| | | | | | |
| 32.3** | | | | | | X |
| | | | | | |
| 32.4** | | | | | | X |
| | | | | |
| Interactive data file | | | | | |
| 101 | The consolidated financial statements from Carnival Corporation & plc’s Form 10-K for the year ended November 30, 2017,2022, as filed with the SEC on January 29, 201827, 2023 formatted in Inline XBRL, are as follows: | | | | | |
| (i) the Consolidated Statements of Income for the years ended November 30, 2017, 20162022, 2021 and 2015;2020; | | | | | X |
| (ii) the Consolidated Statements of Comprehensive Income for the years ended November 30, 2017, 20162022, 2021 and 2015;2020; | | | | | X |
| (iii) the Consolidated Balance Sheets at November 30, 20172022 and 2016;2021; | | | | | X |
| (iv) the Consolidated Statements of Cash Flows for the years ended November 30, 2017, 20162022, 2021 and 2015;2020; | | | | | X |
| (v) the Consolidated Statements of Shareholders’ Equity for the years ended November 30, 2017, 20162022, 2021 and 2015 2020
and | | | | | X |
| (vi) the notes to the consolidated financial statements, tagged in summary and detail. | | | | | X |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| INDEX TO EXHIBITS | | | | | | |
| | Incorporated by Reference |
| Exhibit Number | Exhibit Description | Form | | Exhibit | | Filing Date | | Filed Herewith |
| | | | | | | | |
| 104 | The cover page from Carnival Corporation & plc’s Form 10-K for the year ended November 30, 2022, as filed with the Securities and Exchange Commission on January 27, 2023, formatted in Inline XBRL (included as Exhibit 101) | | | | | |
*Indicates a management contract or compensation plan or arrangement.
**These items are furnished and not filed.
***Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.
Item 16. Form 10-K Summary.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| | | | |
| CARNIVAL CORPORATION | CARNIVAL PLC |
/s/ Arnold W. DonaldJosh Weinstein | /s/ Arnold W. DonaldJosh Weinstein |
| Josh Weinstein | Josh Weinstein |
President, and Chief Executive Officer and | President, and Chief Executive Officer and |
| Chief Climate Officer and Director | Chief Climate Officer and Director |
January 29, 201827, 2023 | January 29, 201827, 2023 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of each of the registrants and in the capacities and on the dates indicated.
| | | | | |
| CARNIVAL CORPORATION | CARNIVAL PLC |
| /s/ Josh Weinstein | /s/ Josh Weinstein |
| Josh Weinstein | Josh Weinstein |
| President, Chief Executive Officer and | President, Chief Executive Officer and |
| Chief Climate Officer and Director | Chief Climate Officer and Director |
| January 27, 2023 | January 27, 2023 |
| |
CARNIVAL CORPORATION | CARNIVAL PLC |
/s/ Arnold W. Donald | /s/ Arnold W. Donald |
President and Chief Executive Officer and | President and Chief Executive Officer and |
Director | Director |
January 29, 2018 | January 29, 2018 |
| |
| /s/ David Bernstein | /s/ David Bernstein |
| David Bernstein | David Bernstein |
| Chief Financial Officer and Chief Accounting Officer | Chief Financial Officer and Chief Accounting Officer |
January 29, 201827, 2023 | January 29, 2018 |
| |
/s/*Micky Arison | /s/*Micky Arison |
Micky Arison | Micky Arison |
Chairman of the Board of | Chairman of the Board of |
Directors | Directors |
January 29, 2018 | January 29, 2018 |
| |
/s/*Sir Jonathon Band | /s/*Sir Jonathon Band |
Sir Jonathon Band | Sir Jonathon Band |
Director | Director |
January 29, 2018 | January 29, 2018 |
| |
/s/*Jason Glen Cahilly | /s/*Jason Glen Cahilly |
Jason Glen Cahilly | Jason Glen Cahilly |
Director | Director |
January 29, 2018 | January 29, 2018 |
| |
/s/*Helen Deeble | /s/*Helen Deeble |
Helen Deeble | Helen Deeble |
Director | Director |
January 29, 2018 | January 29, 2018 |
| |
| |
| |
| |
| 27, 2023 |
| |
| /s/*Micky Arison | /s/*Micky Arison |
| Micky Arison | Micky Arison |
| Chair of the Board of | Chair of the Board of |
| Directors | Directors |
| January 27, 2023 | January 27, 2023 |
| |
| /s/*Sir Jonathon Band | /s/*Sir Jonathon Band |
| Sir Jonathon Band | Sir Jonathon Band |
| Director | Director |
| January 27, 2023 | January 27, 2023 |
| |
| /s/*Jason Glen Cahilly | /s/*Jason Glen Cahilly |
| Jason Glen Cahilly | Jason Glen Cahilly |
| Director | Director |
| January 27, 2023 | January 27, 2023 |
| |
| /s/*Helen Deeble | /s/*Helen Deeble |
| Helen Deeble | Helen Deeble |
| Director | Director |
| January 27, 2023 | January 27, 2023 |
| |
| | | | | |
| /s/*Jeffrey J. Gearhart | /s/*Jeffrey J. Gearhart |
| Jeffrey J. Gearhart | Jeffrey J. Gearhart |
| Director | Director |
| January 27, 2023 | January 27, 2023 |
| |
| /s/*Richard J. Glasier | /s/*Richard J. Glasier |
| Richard J. Glasier | Richard J. Glasier |
| Director | Director |
| January 27, 2023 | January 27, 2023 |
| |
| /s/*Katie Lahey | /s/*Katie Lahey |
| Katie Lahey | Katie Lahey |
| Director | Director |
January 29, 201827, 2023 | January 29, 201827, 2023 |
| |
/s/*Debra Kelly-EnnisSara Mathew | /s/*Debra Kelly-EnnisSara Mathew |
Debra Kelly-EnnisSara Mathew | Debra Kelly-EnnisSara Mathew |
| Director | Director |
January 29, 201827, 2023 | January 29, 201827, 2023 |
| |
| /s/*Sir John Parker | /s/*Sir John Parker |
| Sir John Parker | Sir John Parker |
| Director | Director |
January 29, 201827, 2023 | January 29, 201827, 2023 |
| |
| /s/*Stuart Subotnick | /s/*Stuart Subotnick |
| Stuart Subotnick | Stuart Subotnick |
| Director | Director |
January 29, 201827, 2023 | January 29, 201827, 2023 |
| |
| /s/*Laura Weil | /s/*Laura Weil |
| Laura Weil | Laura Weil |
| Director | Director |
January 29, 201827, 2023 | January 29, 201827, 2023 |
| |
/s/*Randall J. Weisenburger | /s/*Randall J. Weisenburger |
Randall J. Weisenburger | Randall J. Weisenburger |
| Director | Director |
January 29, 201827, 2023 | January 29, 201827, 2023 |
| |
*By: /s/ Arnaldo PerezEnrique Miguez | *By: /s/ Arnaldo PerezEnrique Miguez |
Arnaldo PerezEnrique Miguez | Arnaldo PerezEnrique Miguez |
| (Attorney-in-fact) | (Attorney-in-fact) |
January 29, 201827, 2023 | January 29, 201827, 2023 |
