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

9 Months Ended

Aug. 31, 2017

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

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



	August 31, 2017								November 30, 2016
	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
Long-term other assets (a)	$	133	$	—	$	54	$	75	$	99	$	1	$	68	$	31
Total	$	133	$	—	$	54	$	75	$	99	$	1	$	68	$	31
Liabilities
Fixed rate debt (b)	$	5,755	$	—	$	6,108	$	—	$	5,436	$	—	$	5,727	$	—
Floating rate debt (b)	3,470		—		3,553		—		4,018		—		4,048		—
Total	$	9,225	$	—	$	9,661	$	—	$	9,454	$	—	$	9,775	$	—


(a)	Long-term other assets are comprised of notes and other receivables. The fair values of our 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.

(b)

The debt amounts above do not include the impact of interest rate swaps or debt issuance costs. 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.

Reconciliation of Changes in Carrying Amounts of Goodwill

The reconciliations of the changes in the carrying amounts of our goodwill, trademarks, and amortizable intangibles were as follows:



	Goodwill
(in millions)	North America Segment		EAA (a) Segment			Total
Balance at November 30, 2016	$	1,898	$	1,012		$	2,910
Impairment charge	—		(38		)	(38		)
Foreign currency translation adjustment	—		85			85
Balance at August 31, 2017	$	1,898	$	1,059		$	2,957

(a) Europe, Australia & Asia (“EAA”)

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



	Trademarks
(in millions)	North America Segment		EAA Segment			Total
Balance at November 30, 2016	$	927	$	279		$	1,206
Impairment charge	—		(50		)	(50		)
Foreign currency translation adjustment	—		19			19
Balance at August 31, 2017	$	927	$	248		$	1,175

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



	Amortizable Intangibles
(in millions)	Cruise Support Segment			EAA Segment		Tour and Other Segment			Total
Balance at November 30, 2016	$	57		$	12	$	—		$	69
Additions	—			—		4			4
Amortization	(2		)	—		(1		)	(3		)
Foreign currency translation adjustment	—			1		—			1
Balance at August 31, 2017	$	55		$	13	$	3		$	71

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 measured at fair value on a recurring basis were as follows (in millions):



	August 31, 2017						November 30, 2016
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents (a)	$	489	$	—	$	—	$	603	$	—	$	—
Restricted cash	31		—		—		60		—		—
Short-term investments (b)	—		—		—		—		—		21
Marketable securities held in rabbi trusts (c)	91		4		—		93		4		—
Derivative financial instruments	—		22		—		—		15		—
Total	$	611	$	26	$	—	$	756	$	19	$	21
Liabilities
Derivative financial instruments	$	—	$	265	$	—	$	—	$	434	$	—
Total	$	—	$	265	$	—	$	—	$	434	$	—


(a)	Cash and cash equivalents are comprised of cash and marketable securities with maturities of less than 90 days.


(b)	The fair value of the auction rate security included in short-term investments, as of November 30, 2016, was based on a broker quote in an inactive market, which is considered a Level 3 input. This auction-rate security was sold in December 2016.


(c)	At August 31, 2017, 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.

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	August 31, 2017		November 30, 2016
Derivative assets
Derivatives designated as hedging instruments
Net investment hedges (a)	Prepaid expenses and other	$	3	$	12
	Other assets	—		3
Foreign currency zero cost collars (c)	Prepaid expenses and other	8		—
	Other assets	11		—
Total derivative assets		$	22	$	15
Derivative liabilities
Derivatives designated as hedging instruments
Net investment hedges (a)	Accrued liabilities and other	$	13	$	26
	Other long-term liabilities	16		—
Interest rate swaps (b)	Accrued liabilities and other	11		10
	Other long-term liabilities	21		23
Foreign currency zero cost collars (c)	Accrued liabilities and other	—		12
	Other long-term liabilities	—		21
		61		92
Derivatives not designated as hedging instruments
Fuel (d)	Accrued liabilities and other	159		198
	Other long-term liabilities	45		144
		204		342
Total derivative liabilities		$	265	$	434


(a)	We had foreign currency swaps totaling $328 million at August 31, 2017 and $291 million at November 30, 2016 that are designated as hedges of our net investments in foreign operations, which have a euro-denominated functional currency. At August 31, 2017, these foreign currency swaps settle through 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 $511 million at August 31, 2017 and $500 million at November 30, 2016 of EURIBOR-based floating rate euro debt to fixed rate euro debt. At August 31, 2017, these interest rate swaps settle through 2025.


(c)	At August 31, 2017 and November 30, 2016, 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 August 31, 2017 and November 30, 2016, 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):



	August 31, 2017
	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	$	22	$	—	$	22	$	(9	)	$	13
Liabilities	$	265	$	—	$	265	$	(9	)	$	256

	November 30, 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	$	15	$	—	$	15	$	(15	)	$	—
Liabilities	$	434	$	—	$	434	$	(15	)	$	419

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 income (loss) were as follows (in millions):



	Three Months Ended August 31,					Nine Months Ended August 31,
	2017			2016		2017			2016
Net investment hedges	$	(17	)	$	—	$	(33	)	$	(17	)
Foreign currency zero cost collars – cash flow hedges	$	17		$	2	$	52		$	21
Interest rate swaps – cash flow hedges	$	1		$	—	$	5		$	3

Unrealized (losses) gains on fuel derivatives, net

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



	Three Months Ended August 31,						Nine Months Ended August 31,
	2017			2016			2017			2016
Unrealized gains on fuel derivatives, net	$	65		$	25		$	134		$	121
Realized losses on fuel derivatives, net	(57		)	(61		)	(153		)	(223		)
Gains (losses) on fuel derivatives, net	$	7		$	(36	)	$	(19	)	$	(102	)

Fuel/Foreign Currency Derivatives Outstanding

At August 31, 2017, 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 2017 (4Q)
	February 2013	819	$	80	$	115
	April 2013	507	$	75	$	110
	January 2014	450	$	75	$	114
	October 2014	255	$	80	$	113
		2,031
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.

At August 31, 2017, we had foreign currency zero cost collars that are designated as cash flow hedges for a portion of euro-denominated shipyard payments for the following newbuilds:



	Entered Into	Matures in	Weighted-Average Floor Rate		Weighted- Average Ceiling Rate
Carnival Horizon	2016	March 2018	$	1.02	$	1.25
Seabourn Ovation	2016	April 2018	$	1.02	$	1.25
Holland America Nieuw Statendam	2016	November 2018	$	1.05	$	1.25