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

3 Months Ended

Feb. 29, 2016

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):



	February 29, 2016								November 30, 2015
	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)	$	579	$	579	$	—	$	—	$	647	$	647	$	—	$	—
Restricted cash (b)	3		3		—		—		7		7		—		—
Long-term other assets (c)	117		1		86		31		119		1		87		31
Total	$	699	$	583	$	86	$	31	$	773	$	655	$	87	$	31
Liabilities
Fixed rate debt (d)	$	5,203	$	—	$	5,463	$	—	$	5,193	$	—	$	5,450	$	—
Floating rate debt (d)	3,865		—		3,796		—		3,594		—		3,589		—
Total	$	9,068	$	—	$	9,259	$	—	$	8,787	$	—	$	9,039	$	—


(a)	Cash and cash equivalents are comprised of cash on hand, and at November 30, 2015 also included a money market deposit account and time deposits. 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 February 29, 2016 and November 30, 2015, 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 February 29, 2016 and November 30, 2015 being lower than the fixed interest rates on these debt obligations, including the impact of any changes in our credit ratings. At February 29, 2016 and November 30, 2015, 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 February 29, 2016 and November 30, 2015 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):



	February 29, 2016						November 30, 2015
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Cash equivalents (a)	$	199	$	—	$	—	$	748	$	—	$	—
Restricted cash (b)	23		—		—		22		—		—
Marketable securities held in rabbi trusts (c)	97		6		—		105		8		—
Derivative financial instruments (d)	—		14		—		—		29		—
Long-term other asset (e)	—		—		21		—		—		21
Total	$	319	$	20	$	21	$	875	$	37	$	21
Liabilities
Derivative financial instruments (d)	$	—	$	718	$	—	$	—	$	625	$	—
Total	$	—	$	718	$	—	$	—	$	625	$	—


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


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


(c)	At February 29, 2016 and November 30, 2015, 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 three months ended February 29, 2016, 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 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, 2015	$	1,898	$	1,112		$	3,010
Foreign currency translation adjustment	—		(30		)	(30		)
Balance at February 29, 2016	$	1,898	$	1,082		$	2,980

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 other 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, 2015	$	927	$	307		$	1,234
Foreign currency translation adjustment	—		(10		)	(10		)
Balance at February 29, 2016	$	927	$	297		$	1,224

Reconciliation of Changes in Carrying Amounts of Intangible Assets Subject to Amortization, Which Represents Port Usage Rights

The reconciliation of the changes in the net carrying amounts of our other intangible assets subject to amortization, which represent port usage rights, was as follows (in millions):



	Cruise Support			EAA Cruise Brands		Total
Balance at November 30, 2015 (See "Note 1 - General")	$	62		$	12	$	74
Amortization	(1		)	—		(1		)
Foreign currency translation adjustment	(3		)	—		(3		)
Balance at February 29, 2016	$	58		$	12	$	70

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	February 29, 2016		November 30, 2015
Derivative assets
Derivatives designated as hedging instruments
Net investment hedges (a)	Prepaid expenses and other	$	11	$	14
	Other assets – long-term	3		13
Interest rate swaps (b)	Prepaid expenses and other	—		2
Total derivative assets		$	14	$	29
Derivative liabilities
Derivatives designated as hedging instruments
Net investment hedges (a)	Accrued liabilities and other	$	2	$	—
	Other long-term liabilities	4		—
Interest rate swaps (b)	Accrued liabilities and other	12		11
	Other long-term liabilities	32		27
Foreign currency zero cost collars (c)	Accrued liabilities and other	3		—
	Other long-term liabilities	13		26
		66		64
Derivatives not designated as hedging instruments
Fuel (d)	Accrued liabilities and other	240		227
	Other long-term liabilities	412		334
		652		561
Total derivative liabilities		$	718	$	625

(a)

We had foreign currency forwards totaling $186 million at February 29, 2016 and $43 million at November 30, 2015 that are designated as hedges of our net investments in foreign operations, which have a euro-denominated functional currency. At February 29, 2016, these foreign currency forwards settle through July 2017. We also had foreign currency swaps totaling $399 million at February 29, 2016 and $387 million at November 30, 2015 that are designated as hedges of our net investments in foreign operations, which have a euro-denominated functional currency. At February 29, 2016 and November 30, 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 $575 million at February 29, 2016 and $568 million at November 30, 2015 of EURIBOR-based floating rate euro debt to fixed rate euro debt. These interest rate swaps settle through March 2025. In addition, at November 30, 2015, 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 November 30, 2015, 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 settled in February 2016.


(c)	At February 29, 2016 and November 30, 2015, 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 February 29, 2016 and November 30, 2015, 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 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):



	February 29, 2016
	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	$	20	$	(6	)	$	14	$	(14	)	$	—
Liabilities	$	724	$	(6	)	$	718	$	(14	)	$	704

	November 30, 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	$	73	$	(44	)	$	29	$	(29	)	$	—
Liabilities	$	669	$	(44	)	$	625	$	(29	)	$	596

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

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



	Three Months Ended February 29/28,
	2016			2015
Net investment hedges	$	(13	)	$	39
Foreign currency zero cost collars – cash flow hedges	$	10		$	(37	)
Interest rate swaps – cash flow hedges	$	(3	)	$	(2	)

(Losses) gains on fuel derivatives, net

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



	Three Months Ended February 29/28,
	2016		2015
Unrealized losses on fuel derivatives	$	145	$	112
Realized losses on fuel derivatives	91		57
Losses on fuel derivatives	$	236	$	169

Fuel Derivatives Outstanding

At February 29, 2016, our outstanding fuel derivatives consisted of zero cost collars on Brent as follows:



Maturities (a)	Transaction Dates	Barrels (in thousands)	Weighted-Average Floor Prices		Weighted-Average Ceiling Prices
Fiscal 2016 (Q2 - Q4)
	June 2012	2,673	$	75	$	108
	February 2013	1,620	$	80	$	120
	April 2013	2,250	$	75	$	115
		6,543
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
Fiscal 2018
	January 2014	2,700	$	75	$	110
	October 2014	3,000	$	80	$	114
		5,700


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