Fair Value Measurements, Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

May. 31, 2015

Estimated Carrying and Fair Values of Financial Instrument Assets and (Liabilities) Not Measured at Fair Value on a Recurring Basis

The carrying values and estimated fair values and basis of valuation of our financial instrument assets and liabilities that are not measured at fair value on a recurring basis were as follows (in millions):



	May 31, 2015								November 30, 2014
	Carrying Value		Fair Value						Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Carrying Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents (a)	$	248	$	248	$	—	$	—	$	240	$	240	$	—	$	—
Restricted cash (b)	7		7		—		—		11		11		—		—
Long-term other assets (c)	140		1		99		38		156		1		103		49
Total	$	395	$	256	$	99	$	38	$	407	$	252	$	103	$	49
Liabilities
Fixed rate debt (d)	$	4,157	$	—	$	4,458	$	—	$	4,433	$	—	$	4,743	$	—
Floating rate debt (d)	4,112		—		4,094		—		4,655		—		4,562		—
Total	$	8,269	$	—	$	8,552	$	—	$	9,088	$	—	$	9,305	$	—


(a)	Cash and cash equivalents are comprised of cash on hand, and at May 31, 2015, also included a money market deposit account. Due to their short maturities, the carrying values approximate their fair values.


(b)	Restricted cash is comprised of a money market deposit account.


(c)	At May 31, 2015 and November 30, 2014, long-term other assets were substantially all comprised of notes and other receivables. The fair values of our Level 1 and Level 2 notes and other receivables were based on estimated future cash flows discounted at appropriate market interest rates. The fair values of our Level 3 notes receivable were estimated using risk-adjusted discount rates.

(d)

Debt does not include the impact of interest rate swaps. The net difference between the fair value of our fixed rate debt and its carrying value was due to the market interest rates in existence at May 31, 2015 and November 30, 2014 being lower than the fixed interest rates on these debt obligations, including the impact of any changes in our credit ratings. At May 31, 2015 and November 30, 2014, the net difference between the fair value of our floating rate debt and its carrying value was due to the market interest rates in existence at May 31, 2015 and November 30, 2014 being slightly higher than the floating interest rates on these debt obligations, including the impact of any changes in our credit ratings. The fair values of our publicly-traded notes were based on their unadjusted quoted market prices in markets that are not sufficiently active to be Level 1, and accordingly, are considered Level 2. The fair values of our other debt were estimated based on appropriate market interest rates being applied to this debt.

Estimated Fair Value and Basis of Valuation of Financial Instrument Assets and (Liabilities) Measured at Fair Value on Recurring Basis

The estimated fair value and basis of valuation of our financial instrument assets and liabilities that are measured at fair value on a recurring basis were as follows (in millions):



	May 31, 2015						November 30, 2014
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Cash equivalents (a)	$	50	$	—	$	—	$	91	$	—	$	—
Restricted cash (b)	23		—		—		19		—		—
Marketable securities held in rabbi trusts (c)	106		15		—		113		9		—
Derivative financial instruments (d)	—		20		—		—		14		—
Long-term other asset (e)	—		—		20		—		—		20
Total	$	179	$	35	$	20	$	223	$	23	$	20
Liabilities
Derivative financial instruments (d)	$	—	$	369	$	—	$	—	$	278	$	—
Total	$	—	$	369	$	—	$	—	$	278	$	—


(a)	Cash equivalents are comprised of money market funds.


(b)	The majority of restricted cash is comprised of money market funds.


(c)	At May 31, 2015 and November 30, 2014, marketable securities held in rabbi trusts were comprised of Level 1 bonds, frequently-priced mutual funds invested in common stocks and money market funds and Level 2 other investments. Their use is restricted to funding certain deferred compensation and non-qualified U.S. pension plans.


(d)	See “Derivative Instruments and Hedging Activities” section below for detailed information regarding our derivative financial instruments.


(e)	Long-term other asset is comprised of an auction-rate security. The fair value was based on a broker quote in an inactive market, which is considered a Level 3 input. During the six months ended May 31, 2015, there were no purchases or sales pertaining to this auction rate security.

Reconciliation of Changes in Carrying Amounts of Goodwill

The reconciliation of the changes in the carrying amounts of our goodwill, which goodwill has been allocated to our North America and Europe, Australia & Asia (“EAA”) cruise brands, was as follows (in millions):



	North America Cruise Brands		EAA Cruise Brands			Total
Balance at November 30, 2014	$	1,898	$	1,229		$	3,127
Foreign currency translation adjustment	—		(86		)	(86		)
Balance at May 31, 2015	$	1,898	$	1,143		$	3,041

Reconciliation of Changes in Carrying Amounts of Intangible Assets Not Subject to Amortization, which Represents Trademarks

The reconciliation of the changes in the carrying amounts of our intangible assets not subject to amortization, which represent trademarks that have been allocated to our North America and EAA cruise brands, was as follows (in millions):



	North America Cruise Brands		EAA Cruise Brands			Total
Balance at November 30, 2014	$	927	$	338		$	1,265
Foreign currency translation adjustment	—		(22		)	(22		)
Balance at May 31, 2015	$	927	$	316		$	1,243

Estimated Fair Values of Derivative Financial Instruments and Location on Consolidated Balance Sheets

The estimated fair values of our derivative financial instruments and their location in the Consolidated Balance Sheets were as follows (in millions):



	Balance Sheet Location	May 31, 2015		November 30, 2014
Derivative assets
Derivatives designated as hedging instruments
Net investment hedges (a)	Prepaid expenses and other	$	9	$	6
	Other assets – long-term	9		6
Interest rate swaps (b)	Prepaid expenses and other	2		1
	Other assets – long-term	—		1
Total derivative assets		$	20	$	14
Derivative liabilities
Derivatives designated as hedging instruments
Net investment hedges (a)	Accrued liabilities and other	$	4	$	—
	Other long-term liabilities	4		—
Interest rate swaps (b)	Accrued liabilities and other	12		13
	Other long-term liabilities	28		35
Foreign currency zero cost collars (c)	Accrued liabilities and other	—		1
	Other long-term liabilities	16		—
		64		49
Derivatives not designated as hedging instruments
Fuel (d)	Accrued liabilities and other	106		90
	Other long-term liabilities	199		139
		305		229
Total derivative liabilities		$	369	$	278

(a)

We had foreign currency forwards totaling $451 million at May 31, 2015 and $403 million at November 30, 2014 that are designated as hedges of our net investments in foreign operations, which have a euro- and sterling-denominated functional currency. At May 31, 2015, these foreign currency forwards settle through July 2017. At May 31, 2015, we also had foreign currency swaps totaling $401 million that are designated as hedges of our net investments in foreign operations, which have a euro-denominated functional currency. At May 31, 2015, these foreign currency swaps settle through September 2019.

(b)

We have euro interest rate swaps designated as cash flow hedges whereby we receive floating interest rate payments in exchange for making fixed interest rate payments. These interest rate swap agreements effectively changed $626 million at May 31, 2015 and $750 million at November 30, 2014 of EURIBOR-based floating rate euro debt to fixed rate euro debt. These interest rate swaps settle through March 2025. In addition, at May 31, 2015 and November 30, 2014 we had U.S. dollar interest rate swaps designated as fair value hedges whereby we receive fixed interest rate payments in exchange for making floating interest rate payments. At May 31, 2015 and November 30, 2014, these interest rate swap agreements effectively changed $500 million of fixed rate debt to U.S. dollar LIBOR-based floating rate debt. These interest rate swaps settle through February 2016.


(c)	At May 31, 2015 and November 30, 2014, we had foreign currency derivatives consisting of foreign currency zero cost collars that are designated as foreign currency cash flow hedges for a portion of our euro-denominated shipbuilding payments. See “Newbuild Currency Risks” below for additional information regarding these derivatives.


(d)	At May 31, 2015 and November 30, 2014, we had fuel derivatives consisting of zero cost collars on Brent crude oil (“Brent”) to cover a portion of our estimated fuel consumption through 2018. See “Fuel Price Risks” below for additional information regarding these fuel derivatives.

Offsetting Derivative Instruments

Our derivative contracts include rights of offset with our counterparties. We have elected to net certain of our derivative assets and liabilities within counterparties. The amounts recognized within assets and liabilities were as follows (in millions):



	May 31, 2015
	Gross Amounts		Gross Amounts Offset in the Balance Sheet			Total Net Amounts Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet			Net Amounts
Assets	$	34	$	(14	)	$	20	$	(20	)	$	—
Liabilities	$	383	$	(14	)	$	369	$	(20	)	$	349

	November 30, 2014
	Gross Amounts		Gross Amounts Offset in the Balance Sheet			Total Net Amounts Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet			Net Amounts
Assets	$	78	$	(64	)	$	14	$	(14	)	$	—
Liabilities	$	342	$	(64	)	$	278	$	(14	)	$	264

Derivatives Qualifying and Designated as Hedging Instruments Recognized in Other Comprehensive Income

The effective portions of our derivatives qualifying and designated as hedging instruments recognized in other comprehensive (loss) income were as follows (in millions):



	Three Months Ended May 31,						Six Months Ended May 31,
	2015			2014			2015			2014
Net investment hedges	$	6		$	(1	)	$	46		$	—
Foreign currency zero cost collars – cash flow hedges	$	(10	)	$	(3	)	$	(48	)	$	(6	)
Interest rate swaps – cash flow hedges	$	5		$	(10	)	$	3		$	(14	)

(Losses) gains on fuel derivatives, net

Our unrealized and realized gains (losses), net on fuel derivatives were as follows (in millions):



	Three Months Ended May 31,					Six Months Ended May 31,
	2015			2014		2015			2014
Unrealized gains (losses) on fuel derivatives, net	$	34		$	10	$	(78	)	$	(7	)
Realized (losses) gains on fuel derivatives	(47		)	1		(103		)	1
(Losses) gains on fuel derivatives, net	$	(13	)	$	11	$	(181	)	$	(6	)

Fuel Derivatives Outstanding

At May 31, 2015, our outstanding fuel derivatives consisted of zero cost collars on Brent to cover a portion of our estimated fuel consumption as follows:



Maturities (a)	Transaction Dates	Barrels (in thousands)	Weighted-Average Floor Prices		Weighted-Average Ceiling Prices		Percent of Estimated Fuel Consumption Covered
Fiscal 2015 (Q3-Q4)
	November 2011	1,080	$	80	$	114
	February 2012	1,080	$	80	$	125
	June 2012	618	$	74	$	110
	April 2013	522	$	80	$	111
	May 2013	942	$	80	$	110
	October 2014	960	$	79	$	110
		5,202					50%
Fiscal 2016
	June 2012	3,564	$	75	$	108
	February 2013	2,160	$	80	$	120
	April 2013	3,000	$	75	$	115
		8,724					46%
Fiscal 2017
	February 2013	3,276	$	80	$	115
	April 2013	2,028	$	75	$	110
	January 2014	1,800	$	75	$	114
	October 2014	1,020	$	80	$	113
		8,124					43%
Fiscal 2018
	January 2014	2,700	$	75	$	110
	October 2014	3,000	$	80	$	114
		5,700					30%


(a)	Fuel derivatives mature evenly over each month within the above fiscal periods.