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

3 Months Ended

Feb. 28, 2013

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

The estimated carrying and 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 28, 2013						November 30, 2012
	Carrying		Fair Value				Carrying		Fair Value
	Value		Level 1		Level 2		Value		Level 1		Level 2
Assets
Cash and cash equivalents (a)	$	274	$	274	$	-	$	269	$	269	$	-
Long-term other assets (b)		44		1		40		39		1		36
Total	$	318	$	275	$	40	$	308	$	270	$	36
Liabilities
Fixed rate debt (c)	$	6,142	$	-	$	6,703	$	5,195	$	-	$	5,825
Floating rate debt (c)		3,245		-		3,237		3,707		-		3,706
Total	$	9,387	$	-	$	9,940	$	8,902	$	-	$	9,531

(a) Cash and cash equivalents are comprised of cash on hand and time deposits and, due to their short maturities, the carrying values approximate their fair values.

(b) At February 28, 2013 and November 30, 2012, substantially all of our long-term other assets were comprised of notes and other receivables. The fair values of notes and other receivables were based on estimated future cash flows discounted at appropriate market interest rates.

(c) 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 28, 2013 and November 30, 2012 being lower than the fixed interest rates on these debt obligations, including the impact of changes in our credit ratings, if any. 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 28, 2013 and November 30, 2012 being slightly higher than the floating interest rates on these debt obligations, including the impact of changes in our credit ratings, if any. The fair values of our publicly-traded notes were based on their unadjusted quoted market prices in active markets. 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 28, 2013				November 30, 2012
	Level 1		Level 2		Level 1		Level 2
Assets
Cash equivalents (a)	$	202	$	-	$	196	$	-
Restricted cash (b)		25		-		28		-
Marketable securities held in rabbi trusts (c)		111		10		104		16
Derivative financial instruments (d)		-		39		-		48
Total	$	338	$	49	$	328	$	64
Liabilities
Derivative financial instruments (d)	$	-	$	49	$	-	$	43
Total	$	-	$	49	$	-	$	43

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

(b) Restricted cash is comprised of money market funds.

(c) Level 1 and 2 marketable securities are held in rabbi trusts and are primarily comprised of frequently-priced mutual funds invested in common stocks and other investments, respectively. 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.

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 and Asia (“EAA”) cruise brands, was as follows (in millions):

	North America Cruise Brands		EAA Cruise Brands			Total
Balance at November 30, 2012	$	1,898	$	1,276		$	3,174
Foreign currency translation adjustment		-		(31	)		(31	)
Balance at February 28, 2013	$	1,898	$	1,245		$	3,143

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, 2012	$	927	$	372		$	1,299
Foreign currency translation adjustment		-		(11	)		(11	)
Balance at February 28, 2013	$	927	$	361		$	1,288

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 on the Consolidated Balance Sheets were as follows (in millions):

	Balance Sheet Location	February 28, 2013		November 30, 2012
Derivative assets
Derivatives designated as hedging instruments
Net investment hedges (a)	Prepaid expenses and other	$	1	$	1
	Other assets – long-term		5		6
Foreign currency zero cost collars (b)	Prepaid expenses and other		10		11
	Other assets – long-term		17		5
Interest rate swaps (c)	Prepaid expenses and other		1		-
			34		23
Derivatives not designated as hedging instruments
Fuel (d)	Other assets – long-term		5		25
Total derivative assets		$	39	$	48
Derivative liabilities
Derivatives designated as hedging instruments
Interest rate swaps (c)	Accrued liabilities and other	$	7	$	7
	Other long-term liabilities		16		17
			23		24
Derivatives not designated as hedging instruments
Fuel (d)	Accrued liabilities and other		11		16
	Other long-term liabilities		15		3
			26		19
Total derivative liabilities		$	49	$	43

(a) At February 28, 2013 and November 30, 2012, we had foreign currency forwards totaling $129 million and $235 million, respectively, that are designated as hedges of our net investments in foreign operations, which have a euro-denominated functional currency. At February 28, 2013, the $129 million of outstanding foreign currency forwards mature through July 2017.

(b) At February 28, 2013 and November 30, 2012, 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.

(c) 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. At February 28, 2013 and November 30, 2012, these interest rate swap agreements effectively changed $257 million and $269 million, respectively, of EURIBOR-based floating rate euro debt to fixed rate debt. These interest rate swaps settle through February 2022. In addition, at February 28, 2013, 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. 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.

(d) At February 28, 2013, we had fuel derivatives consisting of zero cost collars on Brent crude oil (“Brent”) to cover a portion of our estimated fuel consumption through 2017. See “Fuel Price Risks” below for additional information regarding these fuel derivatives. At November 30, 2012, we had fuel derivatives consisting of zero cost collars on Brent to cover a portion of our estimated fuel consumption through 2016. There were no realized gains or losses recognized in the three months ended February 28/29, 2013 and 2012 on our fuel derivatives.

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

	Three Months Ended February 28/29,
	2013			2012
Net investment hedges	$	(3	)	$	1
Foreign currency zero cost collars – cash flow hedges	$	13		$	-
Interest rate swaps – cash flow hedges	$	2		$	(7	)

Fuel Derivatives Outstanding

At February 28, 2013, 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 2013 (Q2-Q4)
	November 2011		1,584	$	74	$	132
	February 2012		1,584	$	98	$	127
	March 2012		3,168	$	100	$	130
			6,336					40%
Fiscal 2014
	November 2011		2,112	$	71	$	128
	February 2012		2,112	$	88	$	125
	June 2012		2,376	$	71	$	116
			6,600					32%
Fiscal 2015
	November 2011		2,160	$	71	$	125
	February 2012		2,160	$	80	$	125
	June 2012		1,236	$	74	$	110
			5,556					27%
Fiscal 2016
	June 2012		3,564	$	75	$	108
	February 2013		2,160	$	80	$	120
			5,724					27%
Fiscal 2017
	February 2013		3,276	$	80	$	115	16%

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