EX-13 6 a2016ex-13.htm EX-13 Exhibit

Exhibit 13
CARNIVAL CORPORATION & PLC
EXHIBIT 13 TO FORM 10-K
FOR THE YEAR ENDED NOVEMBER 30, 2016
TABLE OF CONTENTS
 

F-1

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
 
 
Years Ended November 30,
 
2016
 
2015
 
2014
Revenues
 
 
 
 
 
Cruise
 
 
 
 
 
Passenger tickets
$
12,090

 
$
11,601

 
$
11,889

Onboard and other
4,068

 
3,887

 
3,780

Tour and other
231

 
226

 
215

 
16,389

 
15,714

 
15,884

Operating Costs and Expenses
 
 
 
 
 
Cruise
 
 
 
 
 
Commissions, transportation and other
2,240

 
2,161

 
2,299

Onboard and other
553

 
526

 
519

Payroll and related
1,993

 
1,859

 
1,942

Fuel
915

 
1,249

 
2,033

Food
1,005

 
981

 
1,005

Other ship operating
2,525

 
2,516

 
2,463

Tour and other
152

 
155

 
160

 
9,383

 
9,447

 
10,421

Selling and administrative
2,197

 
2,067

 
2,054

Depreciation and amortization
1,738

 
1,626

 
1,637

 
13,318

 
13,140

 
14,112

Operating Income
3,071

 
2,574

 
1,772

Nonoperating Income (Expense)
 
 
 
 
 
Interest income
6

 
8

 
8

Interest expense, net of capitalized interest
(223
)
 
(217
)
 
(288
)
Losses on fuel derivatives, net
(47
)
 
(576
)
 
(271
)
Other income, net
21

 
10

 
4

 
(243
)
 
(775
)
 
(547
)
Income Before Income Taxes
2,828

 
1,799

 
1,225

Income Tax Expense, Net
(49
)
 
(42
)
 
(9
)
Net Income
$
2,779

 
$
1,757

 
$
1,216

Earnings Per Share
 
 
 
 
 
Basic
$
3.73

 
$
2.26

 
$
1.57

Diluted
$
3.72

 
$
2.26

 
$
1.56

Dividends Declared Per Share
$
1.35

 
$
1.10

 
$
1.00

The accompanying notes are an integral part of these consolidated financial statements.

F-2

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
 
 
Years Ended November 30,
 
2016
 
2015
 
2014
Net Income
$
2,779

 
$
1,757

 
$
1,216

Items Included in Other Comprehensive Income (Loss)
 
 
 
 
 
Change in foreign currency translation adjustment
(675
)
 
(1,078
)
 
(746
)
Other
(38
)
 
(47
)
 
(31
)
Other Comprehensive Loss
(713
)
 
(1,125
)
 
(777
)
Total Comprehensive Income
$
2,066

 
$
632

 
$
439

The accompanying notes are an integral part of these consolidated financial statements.


F-3

CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(in millions, except par values)
 
 
November 30,
 
2016
 
2015
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
603

 
$
1,395

Trade and other receivables, net
298

 
303

Inventories
322

 
330

Prepaid expenses and other
466

 
423

Total current assets
1,689

 
2,451

Property and Equipment, Net
32,429

 
31,818

Goodwill
2,910

 
3,010

Other Intangibles
1,275

 
1,308

Other Assets
633

 
650

 
$
38,936

 
$
39,237

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current Liabilities
 
 
 
Short-term borrowings
$
457

 
$
30

Current portion of long-term debt
640

 
1,344

Accounts payable
713

 
627

Accrued liabilities and other
1,740

 
1,683

Customer deposits
3,522

 
3,272

Total current liabilities
7,072

 
6,956

Long-Term Debt
8,357

 
7,413

Other Long-Term Liabilities
910

 
1,097

Commitments and Contingencies

 

Shareholders’ Equity
 
 
 
Common stock of Carnival Corporation, $0.01 par value; 1,960 shares authorized; 654 shares at 2016 and 653 shares at 2015 issued
7

 
7

Ordinary shares of Carnival plc, $1.66 par value; 217 shares at 2016 and 216 share at 2015 issued
358

 
358

Additional paid-in capital
8,632

 
8,562

Retained earnings
21,843

 
20,060

Accumulated other comprehensive loss
(2,454
)
 
(1,741
)
Treasury stock, 118 shares at 2016 and 70 shares at 2015 of Carnival Corporation and 27 shares at 2016 and 2015 of Carnival plc, at cost
(5,789
)
 
(3,475
)
Total shareholders’ equity
22,597

 
23,771

 
$
38,936

 
$
39,237

The accompanying notes are an integral part of these consolidated financial statements.


F-4

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
 
 
Years Ended November 30,
 
2016
 
2015
 
2014
OPERATING ACTIVITIES
 
 
 
 
 
Net income
$
2,779

 
$
1,757

 
$
1,216

Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
1,738

 
1,626

 
1,637

(Gains) losses on ship sales and ship impairments, net
(2
)
 
(8
)
 
2

Losses on fuel derivatives, net
47

 
576

 
271

Share-based compensation
55

 
55

 
52

Other, net
73

 
40

 
35

 
4,690

 
4,046

 
3,213

Changes in operating assets and liabilities
 
 
 
 
 
Receivables
(22
)
 
4

 
75

Inventories
1

 
5

 
1

Prepaid expenses and other
11

 
131

 
422

Accounts payable
109

 
36

 
9

Accrued and other liabilities
(21
)
 
(31
)
 
(382
)
Customer deposits
366

 
354

 
92

Net cash provided by operating activities
5,134

 
4,545

 
3,430

INVESTING ACTIVITIES
 
 
 
 
 
Additions to property and equipment
(3,062
)
 
(2,294
)
 
(2,583
)
Proceeds from sale of ships
26

 
25

 
42

Payments of fuel derivative settlements
(291
)
 
(219
)
 
(2
)
Other, net
4

 
10

 
36

Net cash used in investing activities
(3,323
)
 
(2,478
)
 
(2,507
)
FINANCING ACTIVITIES
 
 
 
 
 
Proceeds from (repayments of) short-term borrowings, net
447

 
(633
)
 
617

Principal repayments of long-term debt
(1,278
)
 
(1,238
)
 
(2,466
)
Proceeds from issuance of long-term debt
1,542

 
2,041

 
1,626

Dividends paid
(977
)
 
(816
)
 
(776
)
Purchases of treasury stock
(2,340
)
 
(533
)
 
—

Sales of treasury stock
40

 
264

 
—

Other, net
(25
)
 
(27
)
 
(29
)
Net cash used in financing activities
(2,591
)
 
(942
)
 
(1,028
)
Effect of exchange rate changes on cash and cash equivalents
(12
)
 
(61
)
 
(26
)
Net (decrease) increase in cash and cash equivalents
(792
)
 
1,064

 
(131
)
Cash and cash equivalents at beginning of year
1,395

 
331

 
462

Cash and cash equivalents at end of year
$
603

 
$
1,395

 
$
331

The accompanying notes are an integral part of these consolidated financial statements.


F-5

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions)
 
 
Common
stock
 
Ordinary
shares
 
Additional
paid-in
capital
 
Retained
earnings
 
Accumulated other
comprehensive income (loss)
 
Treasury
stock
 
Total
shareholders’
equity
Balances at November 30, 2013
$
7

 
$
358

 
$
8,325

 
$
18,718

 
$
161

 
$
(3,077
)
 
$
24,492

Net income
—

 
—

 
—

 
1,216

 
—

 
—

 
1,216

Other comprehensive loss
—

 
—

 
—

 
—

 
(777
)
 
—

 
(777
)
Cash dividends declared
—

 
—

 
—

 
(777
)
 
—

 
—

 
(777
)
Other
—

 
—

 
59

 
1

 
—

 
(10
)
 
50

Balances at November 30, 2014
7

 
358

 
8,384

 
19,158

 
(616
)
 
(3,087
)
 
24,204

Net income
—

 
—

 
—

 
1,757

 
—

 
—

 
1,757

Other comprehensive loss
—

 
—

 
—

 
—

 
(1,125
)
 
—

 
(1,125
)
Cash dividends declared
—

 
—

 
—

 
(855
)
 
—

 
—

 
(855
)
Purchases and sales under the Stock Swap program, net
—

 
—

 
119

 
—

 
—

 
(112
)
 
7

Purchases of treasury stock under the Repurchase Program and other
—

 
—

 
59

 
—

 
—

 
(276
)
 
(217
)
Balances at November 30, 2015
7

 
358

 
8,562

 
20,060

 
(1,741
)
 
(3,475
)
 
23,771

Net income
—

 
—

 
—

 
2,779

 
—

 
—

 
2,779

Other comprehensive loss
—

 
—

 
—

 
—

 
(713
)
 
—

 
(713
)
Cash dividends declared
—

 
—

 
—

 
(996
)
 
—

 
—

 
(996
)
Purchases and sales under the Stock Swap program, net
—

 
—

 
14

 
—

 
—

 
(13
)
 
1

Purchases of treasury stock under the Repurchase Program and other
—

 
—

 
56

 
—

 
—

 
(2,301
)
 
(2,245
)
Balances at November 30, 2016
$
7

 
$
358

 
$
8,632

 
$
21,843

 
$
(2,454
)
 
$
(5,789
)
 
$
22,597

The accompanying notes are an integral part of these consolidated financial statements.


F-6

CARNIVAL CORPORATION & PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – General
Description of Business
Carnival Corporation was incorporated in Panama in 1972 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, but each has retained its separate legal identity. Each company’s shares are publicly traded; on the New York Stock Exchange (“NYSE”) for Carnival Corporation and the London Stock Exchange for Carnival plc. In addition, Carnival plc American Depository Shares are traded on the NYSE (see Note 3 - "DLC Arrangement").
We are among the largest, most profitable and financially strong leisure travel companies in the world. We are also the largest cruise company and a leading provider of vacations to all major cruise destinations throughout the world. We operate over 100 cruise ships within a portfolio of leading global, regional and national cruise brands that sell tailored cruise products, services and vacation experiences in all the world’s most important vacation geographic areas. The consolidated financial statements include the accounts of Carnival Corporation and Carnival plc and their respective subsidiaries. Together with their consolidated subsidiaries, they are referred to collectively in these consolidated financial statements and elsewhere in this 2016 Annual Report as “Carnival Corporation & plc,” “our,” “us” and “we.”

NOTE 2 – Summary of Significant Accounting Policies
Basis of Presentation
We consolidate entities over which we have control, as typically evidenced by a voting control of greater than 50% or for which we are the primary beneficiary, whereby we have the power to direct the most significant activities and the obligation to absorb significant losses or receive significant benefits from the entity (see Note 3 - "DLC Arrangement"). We do not separately present our noncontrolling interests in the consolidated financial statements since the amounts are insignificant. For affiliates we do not control but where significant influence over financial and operating policies exists, as typically evidenced by a voting control of 20% to 50%, the investment is accounted for using the equity method (see Note 5 - “Other Assets”).
Preparation of Financial Statements
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported and disclosed in our financial statements. Actual results may differ from the estimates used in preparing our consolidated financial statements. All significant intercompany balances and transactions are eliminated in consolidation. Certain prior period amounts have been reclassified in the Consolidated Balance Sheets to conform to the current period presentation.
Cash and Cash Equivalents
Cash and cash equivalents include investments with maturities of three months or less at acquisition, which are stated at cost. 
Inventories
Inventories consist substantially of food and beverages, hotel and restaurant products and supplies, fuel and gift shop merchandise held for resale, which are all carried at the lower of cost or market. Cost is determined using the weighted-average or first-in, first-out methods.

F-7

Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization were computed using the straight-line method over our estimates of useful lives and residual values, as a percentage of original cost, as follows:
 
Years
 
Residual
Values
Ships
30
 
15%
Ship improvements
3-30
 
  0%
Buildings and improvements
10-40
 
0% or 10%
Computer hardware and software
3-12
 
0% or 10%
Transportation equipment and other
3-20
 
0% or 10%
Leasehold improvements, including port facilities
Shorter of lease term or related asset life (3-30)
 
0%
The cruise industry is very capital intensive, and at January 19, 2017, we operated 102 cruise ships. We have a capital program for the improvement of our ships and for asset replacements in order to enhance the effectiveness and efficiency of our operations; to comply with, or exceed all relevant legal and statutory requirements related to health, environment, safety, security and sustainability; and to gain strategic benefits or provide newer improved product innovations to our guests.
We account for ship improvement costs by capitalizing those costs we believe add value to our ships and have a useful life greater than one year and depreciate those improvements over its estimated useful life. The costs of repairs and maintenance, including minor improvement costs and dry-dock expenses, are charged to expense as incurred and included in other ship operating expenses. Dry-dock costs primarily represent planned major maintenance activities that are incurred when a ship is taken out-of-service for scheduled maintenance. We capitalize interest as part of the cost of acquiring ships and other capital projects during their construction period. The specifically identified or estimated cost and accumulated depreciation of previously capitalized ship components are written-off upon retirement, which may result in a loss on disposal that is also included in other ship operating expenses. Liquidated damages received from shipyards as a result of late ship delivery are recorded as reductions to the cost basis of the ship.
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. Upon the occurrence of a triggering event, the assessment of possible impairment is based on our ability to recover the carrying value of our asset from the asset’s estimated undiscounted future cash flows. If these estimated undiscounted future cash flows are less than the carrying value of the asset, an impairment charge is recognized for the excess, if any, of the asset’s carrying value over its estimated fair value. The lowest level for which we maintain identifiable cash flows that are independent of the cash flows of other assets and liabilities is at the individual ship level. A significant amount of judgment is required in estimating the future cash flows and fair values of our cruise ships.
Intangibles
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business acquisition. We review our goodwill for impairment at least annually and as events or circumstances dictate. All of our goodwill has been allocated to our reporting units. The impairment review for goodwill allows us to first assess qualitative factors to determine whether it is necessary to perform the more detailed two-step quantitative goodwill impairment test. We would perform the quantitative test if our qualitative assessment determined it is more-likely-than-not that a reporting unit’s estimated fair value is less than its carrying amount. We may also elect to bypass the qualitative assessment and proceed directly to the quantitative test for any reporting unit. When performing the quantitative test, if the estimated fair value of the reporting unit exceeds its carrying value, no further analysis or write-down of goodwill is required. However, if the estimated fair value of the reporting unit is less than the carrying value of its net assets, the estimated fair value of the reporting unit is assigned to all its underlying assets and liabilities, including both recognized and unrecognized tangible and intangible assets, based on their fair values. If necessary, goodwill is then written down to its implied fair value.

Trademarks represent substantially all of our other intangibles. For certain acquisitions, we have allocated a portion of the purchase prices to the acquiree’s identified trademarks. Trademarks are estimated to have an indefinite useful life and are not amortizable but are reviewed for impairment at least annually and as events or circumstances dictate. The impairment review for trademarks also allows us to first assess qualitative factors to determine whether it is necessary to perform a more detailed quantitative trademark impairment test. We would perform the quantitative test if our qualitative assessment determined it was more-likely-than-not that the trademarks are impaired. We may also elect to bypass the qualitative assessment and proceed

F-8

directly to the quantitative test. Our trademarks would be considered impaired if their carrying value exceeds their estimated fair value. The costs of developing and maintaining our trademarks are expensed as incurred.
A significant amount of judgment is also required in estimating the fair values of our reporting units and trademarks.
Revenue and Expense Recognition
Guest cruise deposits represent unearned revenues and are initially included in customer deposit liabilities when received. Customer deposits are subsequently recognized as cruise revenues, together with revenues from onboard and other activities, and all associated direct costs and expenses of a voyage are recognized as cruise costs and expenses, upon completion of voyages with durations of ten nights or less and on a pro rata basis for voyages in excess of ten nights. The impact of recognizing these shorter duration cruise revenues and costs and expenses on a completed voyage basis versus on a pro rata basis is not significant. Future travel discount vouchers are included as a reduction of cruise passenger ticket revenues when such vouchers are utilized. Guest cancellation fees are recognized in cruise passenger ticket revenues at the time of cancellation. Revenue is recognized net of expected discounts.
Our sale to guests of air and other transportation to and from airports near the home ports of our ships are included in cruise passenger ticket revenues, and the related cost of purchasing these services are included in cruise transportation costs. The proceeds that we collect from the sales of third-party shore excursions and on behalf of our onboard concessionaires, net of the amounts remitted to them, are included in onboard and other cruise revenues as concession revenues. All of these amounts are recognized on a completed voyage or pro rata basis as discussed above.
Cruise passenger ticket revenues include fees, taxes and charges collected by us from our guests. A portion of these fees, taxes and charges vary with guest head counts and are directly imposed on a revenue-producing arrangement. This portion of the fees, taxes and charges is expensed in commissions, transportation and other costs when the corresponding revenues are recognized. These fees, taxes and charges included in passenger ticket revenues and commissions, transportation and other costs were $540 million in 2016, $524 million in 2015 and $532 million in 2014. The remaining portion of fees, taxes and charges are also included in cruise passenger ticket revenues and are expensed in other ship operating expenses when the corresponding revenues are recognized.
Revenues and expenses from our hotel and transportation operations, which are included in our Tour and Other segment, are recognized at the time the services are performed or expenses are incurred. Revenues from the long-term leasing of ships, which are also included in our Tour and Other segment, are recognized ratably over the term of the agreement.
Insurance
We maintain insurance to cover a number of risks including illness and injury to crew, guest injuries, pollution, other third-party claims in connection with our cruise activities, damage to hull and machinery for each of our ships, war risks, workers compensation, directors' and officers' liability, property damage and general liability for shoreside third-party claims. We recognize insurance recoverables from third-party insurers for recorded losses at the time the recovery is probable and upon settlement for amounts in excess of the recorded losses. All of our insurance policies are subject to coverage limits, exclusions and deductible levels. The liabilities associated with crew illnesses and crew and guest injury claims, including all legal costs, are estimated based on the specific merits of the individual claims or actuarially estimated based on historical claims experience, loss development factors and other assumptions.
Selling and Administrative Expenses
Selling expenses include a broad range of advertising, marketing and promotional expenses. Advertising is charged to expense as incurred, except for media production costs, which are expensed upon the first airing of the advertisement. Selling expenses totaled $630 million in 2016, $627 million in 2015 and $623 million in 2014. Administrative expenses represent the costs of our shoreside ship support, reservations and other administrative functions, and include salaries and related benefits, professional fees and building occupancy costs, which are typically expensed as incurred.
Foreign Currency Translations and Transactions
Each business determines its functional currency by reference to its primary economic environment. We translate the assets and liabilities of our foreign operations that have functional currencies other than the U.S. dollar at exchange rates in effect at the balance sheet date. Revenues and expenses of these foreign operations are translated at weighted-average exchange rates for the period. Their equity is translated at historical rates and the resulting foreign currency translation adjustments are included as a component of accumulated other comprehensive income (“AOCI”), which is a separate component of shareholders’ equity. Therefore, the U.S. dollar value of the non-equity translated items in our consolidated financial statements will fluctuate from period to period, depending on the changing value of the U.S. dollar versus these currencies.

F-9

We execute transactions in a number of different currencies. Exchange rate gains and losses arising from changes in foreign currency exchange rates between the time an expense is recorded and when it is settled are recognized currently in other income, net. The remeasurement of monetary assets and liabilities denominated in a currency other than the functional currency of the entity involved are also recognized in other income, net, unless such monetary liabilities have been designated to act as hedges of net investments in our foreign operations. The net gains or losses resulting from foreign currency transactions were insignificant in 2016, 2015 and 2014. In addition, the unrealized gains or losses on our long-term intercompany receivables which are denominated in a non-functional currency and which are not expected to be repaid in the foreseeable future are recorded as foreign currency translation adjustments.
Share-Based Compensation
We recognize compensation expense for all share-based compensation awards using the fair value method. For time-based share awards, we recognize compensation cost ratably using the straight-line attribution method over the expected vesting period or to the retirement eligibility date, if less than the vesting period. For performance-based share awards, we estimate compensation cost based on the probability of the performance condition being achieved and recognize expense ratably using the straight-line attribution method over the expected vesting period. If all or a portion of the performance condition is not expected to be met, the appropriate amount of previously recognized compensation expense will be reversed and future compensation expense will be adjusted accordingly. For market-based share awards, we recognize compensation cost ratably using the straight-line attribution method over the expected vesting period. If the target market conditions are not expected to be met, compensation expense will still be recognized. In addition, we estimate the amount of expected forfeitures based on historical forfeiture experience when calculating compensation cost. We revise our forfeiture estimates, if the actual forfeitures that occur are significantly different from our estimates.
Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares and common stock equivalents outstanding during each period. For earnings per share purposes, Carnival Corporation common stock and Carnival plc ordinary shares are considered a single class of shares since they have equivalent rights (see Note 3 - "DLC Arrangement").
Accounting Pronouncements

Amended guidance was issued by the Financial Accounting Standards Board (“FASB”) regarding the accounting for Service Concession Arrangements. The new guidance defines a service concession as an arrangement between a public-sector grantor, such as a port authority, and a company that will operate and maintain the grantor's infrastructure for a specified period of time. In exchange, the company may be given a right to charge the public, such as our cruise guests, for the use of the infrastructure. This guidance required us to record certain of the infrastructure we had constructed to be used by us pursuant to a service concession arrangement outside of property and equipment. On December 1, 2015, we adopted this guidance and, accordingly, reclassified $70 million from Property and Equipment, Net to Other Intangibles on our November 30, 2015 Consolidated Balance Sheet (see Note 11 - “Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis”).

The FASB issued amended guidance regarding accounting for Interest - Imputation of Interest, which simplifies the presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability. We will adopt this guidance in the first quarter of 2017 on a retrospective basis. Adoption will not have a material impact to our Consolidated Balance Sheets.

The FASB issued amended guidance regarding accounting for Intangibles - Goodwill and Other - Internal-Use Software, which clarifies the accounting for fees paid in a cloud computing arrangement. The amendments provide guidance to customers about whether a cloud computing arrangement includes a software license or if the arrangement should be accounted for as a service contract. The amendments will impact the accounting for software licenses but will not change a customer's accounting for service contracts. We will adopt this guidance in the first quarter of 2017 on a prospective basis. Adoption will not have a material impact to our consolidated financial statements.

The FASB issued amended guidance regarding Compensation - Stock Compensation - Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash

F-10

flows. We intend to early adopt this guidance in the first quarter of fiscal 2017 on a modified retrospective basis. Adoption will not have a material impact to our consolidated financial statements.

The FASB issued amended guidance regarding accounting for Derivatives and Hedging - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, which clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. This guidance is required to be adopted by us in the first quarter of 2018 and can be applied on either a prospective or modified retrospective basis. Early adoption is permitted, including adoption in an interim period. The adoption of this guidance is not expected to have a material impact to our consolidated financial statements.

The FASB issued amended guidance regarding accounting for Derivatives and Hedging - Contingent Put and Call Options in Debt Instruments, which clarifies the requirements for assessing whether contingent call and put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts or whether the embedded call and put options should be bifurcated from the related debt instrument and accounted for separately as a derivative. This guidance is required to be adopted by us in the first quarter of 2018 and must be applied using a modified retrospective approach. Early adoption is permitted, including adoption in an interim period. The adoption of this guidance is not expected to have a material impact to our consolidated financial statements.

The FASB issued amended guidance regarding Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which clarifies how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are aimed at reducing the existing diversity in practice. The guidance is required to be adopted by us in the first quarter of fiscal 2019 and should be applied using a retrospective transition method for each period presented. Early adoption is permitted, including adoption in an interim period. The adoption of this guidance is not expected to have a material impact to our consolidated financial statements.

The FASB issued amended guidance regarding accounting for Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. When effective, this standard will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles (“U.S. GAAP”). The standard also requires more detailed disclosures and provides additional guidance for transactions that were not comprehensively addressed in U.S. GAAP. This guidance is required to be adopted by us in the first quarter of fiscal 2019 by either recasting all years presented in our financial statements or by recording the impact of adoption as an adjustment to retained earnings at the beginning of the year of adoption. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

The FASB issued guidance regarding accounting for Leases, which requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. This guidance is required to be adopted by us in the first quarter of fiscal 2020. We are currently evaluating the impact this guidance will have on our consolidated financial statements.
NOTE 3 – DLC Arrangement
In 2003, Carnival Corporation and Carnival plc completed a DLC transaction, which implemented Carnival Corporation and Carnival plc’s DLC arrangement. The contracts governing the DLC arrangement provide that Carnival Corporation and Carnival plc each continue to have separate boards of directors, but the boards and senior executive management of both companies are identical. The constitutional documents of each of the companies also provide that, on most matters, the holders of the common equity of both companies effectively vote as a single body. On specified matters where the interests of Carnival Corporation’s shareholders may differ from the interests of Carnival plc’s shareholders (a “class rights action” such as transactions primarily designed to amend or unwind the DLC arrangement), each shareholder body will vote separately as a class. Generally, no class rights action will be implemented unless approved by both shareholder bodies.

Upon the closing of the DLC transaction, Carnival Corporation and Carnival plc also executed the Equalization and Governance Agreement, which provides for the equalization of dividends and liquidation distributions based on an equalization ratio and contains provisions relating to the governance of the DLC arrangement. Because the equalization ratio is 1 to 1, one Carnival plc ordinary share is entitled to the same distributions, subject to the terms of the Equalization and Governance Agreement, as one share of Carnival Corporation common stock. In a liquidation of either company or both companies, if the hypothetical potential per share liquidation distributions to each company’s shareholders are not equivalent, taking into account the relative value of the two companies’ assets and the indebtedness of each company, to the extent that one company has greater net assets so that any liquidation distribution to its shareholders would not be equivalent on a per share basis, the

F-11

company with the ability to make a higher net distribution is required to make a payment to the other company to equalize the possible net distribution to shareholders, subject to certain exceptions.
At the closing of the DLC transaction, Carnival Corporation and Carnival plc also executed deeds of guarantee. Under the terms of Carnival Corporation’s deed of guarantee, Carnival Corporation has agreed to guarantee all indebtedness and certain other monetary obligations of Carnival plc that are incurred under agreements entered into on or after the closing date of the DLC transaction. The terms of Carnival plc’s deed of guarantee mirror those of Carnival Corporation’s. In addition, Carnival Corporation and Carnival plc have each extended their respective deeds of guarantee to the other’s pre-DLC indebtedness and certain other monetary obligations, or alternatively have provided standalone guarantees in lieu of utilization of these deeds of guarantee, thus effectively cross guaranteeing all Carnival Corporation and Carnival plc indebtedness and certain other monetary obligations. Each deed of guarantee provides that the creditors to whom the obligations are owed are intended third-party beneficiaries of such deed of guarantee.
The deeds of guarantee are governed and construed in accordance with the laws of the Isle of Man. Subject to the terms of the deeds of guarantee, the holders of indebtedness and other obligations that are subject to the deeds of guarantee will have recourse to both Carnival plc and Carnival Corporation, though a Carnival plc creditor must first make written demand on Carnival plc and a Carnival Corporation creditor on Carnival Corporation. Once the written demand is made by letter or other form of notice, the holders of indebtedness or other obligations may immediately commence an action against the relevant guarantor. Accordingly, there is no requirement under the deeds of guarantee to obtain a judgment, take other enforcement actions or wait any period of time prior to taking steps against the relevant guarantor. All actions or proceedings arising out of or in connection with the deeds of guarantee must be exclusively brought in courts in England.
Under the terms of the DLC transaction documents, Carnival Corporation and Carnival plc are permitted to transfer assets between the companies, make loans to or investments in each other and otherwise enter into intercompany transactions. The companies have entered into some of these types of transactions and may enter into additional transactions in the future to take advantage of the flexibility provided by the DLC arrangement, and to operate both companies as a single unified economic enterprise in the most effective manner. In addition, under the terms of the Equalization and Governance Agreement and the deeds of guarantee, the cash flows and assets of one company are required to be used to pay the obligations of the other company, if necessary.
Given the DLC arrangement, we believe that providing separate financial statements for each of Carnival Corporation and Carnival plc would not present a true and fair view of the economic realities of their operations. Accordingly, separate financial statements for both Carnival Corporation and Carnival plc have not been presented.
NOTE 4 – Property and Equipment
Property and equipment consisted of the following (in millions):
 
 
November 30,
 
 
2016
 
2015
 
Ships, including ship improvements
$
44,122

  
$
42,401

  
Ships under construction
725

  
839

  
 
44,847

  
43,240

  
Land, buildings and improvements, including leasehold improvements and port
     facilities
1,086

  
1,067

(b) 
Computer hardware and software, transportation equipment and other
1,591

  
1,389

  
Total property and equipment
47,524

  
45,696

(b) 
Less accumulated depreciation and amortization
(15,095
)
 
(13,878
)
(b)
 
$
32,429

(a) 
$
31,818

(a) (b)
 
(a)
At November 30, 2016 and 2015, the net carrying values of ships and ships under construction for our North America, EAA, Cruise Support and Tour and Other segments were $19.5 billion, $11.2 billion, $0.3 billion and $0.1 billion and $18.5 billion, $11.7 billion, $0.3 billion and $0.1 billion, respectively.
(b)
On December 1, 2015, we adopted the amended guidance issued by FASB regarding accounting for Service Concession Arrangements and, accordingly, reclassified $70 million from Property and Equipment, Net to Other Intangibles on our November 30, 2015 Consolidated Balance Sheet (see "Note 2 - Summary of Significant Accounting Policies").

F-12

Ships under construction include progress payments for the construction of new ships, as well as design and engineering fees, capitalized interest, construction oversight costs and various owner supplied items. Capitalized interest amounted to $26 million in 2016, $22 million in 2015 and $21 million in 2014.
Repairs and maintenance expenses, including minor improvement costs and dry-dock expenses, were $963 million in 2016, $1.0 billion in 2015 and $936 million in 2014.

Sales of Ships

In March 2016, we entered into a bareboat charter/sale agreement for a 1,550-passenger capacity ship, which will be chartered to an unrelated entity from April 2017 through 2027. Under this agreement, ownership of the ship will be transferred to the buyer in 2027.

In 2014, we entered into a bareboat charter/sale agreement for a 1,490-passenger capacity ship, which was chartered to an unrelated entity from December 2014 through August 2021. Under this agreement, ownership of the ship will be transferred to the buyer in August 2021. We are recognizing the charter revenue over the term of the agreement.

In 2014, we sold a 670-passenger capacity ship for a total gain of $24 million, of which $14 million was recognized in the fourth quarter of 2014 as a reduction in other ship operating expenses. We provided $66 million of financing to the buyer, which is due in semi-annual installments through November 2019. The remaining gain of $10 million was recognized as a reduction in other ship operating expenses over the term of the bareboat charter agreement through March 2016.
In 2014, we entered into a bareboat charter/sale agreement for a 1,440-passenger capacity ship, which was chartered to an unrelated entity from January 2015 through March 2025. Under this agreement, ownership of the ship will be transferred to the buyer in March 2025. We are recognizing the charter revenue for this agreement over the term of the agreement.

During the second quarter of 2014, an 830-passenger capacity ship was sold and we recognized a $37 million gain as a reduction in other ship operating expenses.
See Note 11 - “Fair Value Measurements, Derivative Instruments and Hedging Activities” for a discussion regarding ship impairments.
NOTE 5 – Other Assets
We have a 40% noncontrolling interest in Grand Bahama Shipyard Ltd. ("Grand Bahama"), a ship repair and maintenance facility. Grand Bahama provided services to us of $58 million in 2016, $33 million in 2015 and $41 million in 2014.

F-13

NOTE 6 – Unsecured Debt
Long-term debt and short-term borrowings consisted of the following (in millions):
 
 
November 30, 2016
 
November 30,
 
Interest Rates
 
Maturities Through
 
2016
 
2015
Long-Term Debt
 
 
 
 
 
 
 
Export Credit Facilities
 
 
 
 
 
 
 
Fixed rate
2.4% to 5.0%
 
2027
 
$
941

 
$
1,032

Euro fixed rate
3.8% to 4.5%
 
2025
 
233

 
261

Floating rate
1.6% to 2.1%
 
2026
 
793

 
688

Euro floating rate
0.0% to 0.8%
 
2027
 
1,649

 
1,864

Bank Loans
 
 
 
 
 
 
 
Euro fixed rate
0.6% to 3.9%
 
2021
 
612

 
160

Floating rate
1.3% to 1.8%
 
2021
 
800

 
800

Euro floating rate
0.4% to 0.8%
 
2021
 
319

 
212

Private Placement Notes
 
 
 
 
 
 
 
Fixed rate
—%
 
2016
 
—

 
42

Euro fixed rate
7.3%
 
2018
 
51

 
130

Publicly-Traded Notes
 
 
 
 
 
 
 
Fixed rate
1.9% to 7.2%
 
2028
 
1,717

 
2,219

Euro fixed rate
1.1% to 1.9%
 
2022
 
1,857

 
1,324

Other
5.5% to 7.3%
 
2030
 
25

 
25

Short-Term Borrowings
 
 
 
 
 
 
 
Euro floating rate commercial paper
(0.1)%
 
2017
 
451

 
—

Euro floating rate bank loans
0.9%
 
2017
 
6

 
30

Total Debt

 

 
9,454

 
8,787

Less short-term borrowings

 

 
(457
)
 
(30
)
Less current portion of long-term debt

 

 
(640
)
 
(1,344
)
Total Long-term Debt

 

 
$
8,357

 
$
7,413


The debt table does not include the impact of our foreign currency and interest rate swaps. The composition of our debt, including the effect of foreign currency swaps and interest rate swaps, was as follows:
 
November 30,
 
2016
 
2015
Fixed rate
28
%
 
32
%
Euro fixed rate
35
%
 
28
%
Floating rate
14
%
 
18
%
Euro floating rate
23
%
 
22
%
Substantially all of our fixed rate debt can be called or prepaid by incurring additional costs. In addition, substantially all of our debt agreements, including our main revolving credit facility, contain one or more financial covenants that require us, among other things, to maintain minimum debt service coverage and minimum shareholders’ equity and to limit our debt to capital and debt to equity ratios and the amounts of our secured assets and secured and other indebtedness. Generally, if an event of default under any debt agreement occurs, then pursuant to cross default acceleration clauses, substantially all of our outstanding debt and derivative contract payables (see Note 11 - “Fair Value Measurements, Derivative Instruments and Hedging Activities”) could become due, and all debt and derivative contracts could be terminated. At November 30, 2016, we were in compliance with all of our debt covenants.

F-14

The interest rates on some of our debt, and in the case of our main revolver its commitment fees, fluctuate based on the applicable rating of senior unsecured long-term securities of Carnival Corporation or Carnival plc.

We use the net proceeds from our borrowings for general corporate purposes and purchases of new ships. At November 30, 2016, the scheduled annual maturities of our debt were as follows (in millions):
 
Fiscal
 
 
 
 
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
Short-term borrowings
$
457

 
 
 
 
 
 
 
 
 
 
 
$
457

Long-term debt
640

 
$
2,071

 
$
1,595

 
$
1,303

 
$
1,082

 
$
2,306

 
8,997

 
$
1,097

 
$
2,071

 
$
1,595

 
$
1,303

 
$
1,082

 
$
2,306

 
$
9,454

Subsequent to November 30, 2016, we entered into an approximately $800 million export credit facility, which may be drawn in euro or U.S. dollars in 2021 and will be due in semi-annual installments through 2033. The interest rate on this export credit facility can be fixed or floating, at our discretion.
Debt issuance costs are generally amortized to interest expense using the straight-line method, which approximates the effective interest method, over the term of the debt. In addition, all debt issue discounts are amortized to interest expense using the effective interest rate method over the term of the notes.
Committed Ship Financings
We have unsecured euro and U.S. dollar long-term export credit committed ship financings. These commitments, if drawn at the time of ship delivery, are generally repayable semi-annually over 12 years. We have the option to cancel each one at specified dates prior to the underlying ship’s delivery date.

Revolving Credit Facilities
At November 30, 2016, we had $2.9 billion of total revolving credit facilities comprised of a $2.6 billion ($1.9 billion, €500 million and £169 million) multi-currency revolving credit facility that expires in 2021 (the "Facility") and a $300 million revolving credit facility that expires in 2020. A total of $2.4 billion of this capacity was available for drawing, which is net of outstanding commercial paper. The Facility currently bears interest at LIBOR/EURIBOR plus a margin of 30 basis points (“bps”). The margin varies based on changes to Carnival Corporation’s and Carnival plc’s long-term senior unsecured credit ratings. We are required to pay a commitment fee of 35% of the margin per annum on any undrawn portion. We will also incur an additional utilization fee of 10 bps, 20 bps or 40 bps if equal to or less than one-third, more than one-third or more than two-thirds of the Facility, respectively, is drawn on the total amount outstanding.
NOTE 7 – Commitments
Ship Commitments
At November 30, 2016, including ship construction contracts entered into through January 19, 2017, we had 19 ships under contract for construction. The estimated total future commitments, including the contract prices with the shipyards, design and engineering fees, capitalized interest, construction oversight costs and various owner supplied items, are $1.4 billion in 2017, $2.6 billion in 2018, $3.4 billion in 2019, $3.3 billion in 2020, $2.4 billion in 2021 and $1.6 billion in 2022.
Operating Leases, Port Facilities and Other Commitments
Rent expense under our operating leases, primarily for office and warehouse space, was $67 million in 2016, $70 million in 2015 and $63 million in 2014.
At November 30, 2016, minimum amounts payable for our operating leases, with initial or remaining terms in excess of one year, and for the annual usage of port facilities and other non-cancelable contractual commitments with remaining terms in excess of one year, were as follows (in millions):
 
Fiscal
 
 
 
 
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
Operating leases
$
47

 
$
42

 
$
38

 
$
36

 
$
30

 
$
198

 
$
391

Port facilities and other
228

 
195

 
117

 
108

 
102

 
875

 
1,625

 
$
275

 
$
237

 
$
155

 
$
144

 
$
132

 
$
1,073

 
$
2,016


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NOTE 8 – Contingencies
Litigation
In the normal course of our business, various claims and lawsuits have been filed or are pending against us. Most of these claims and lawsuits are covered by insurance and, accordingly, the maximum amount of our liability, net of any insurance recoverables, is typically limited to our self-insurance retention levels. Management believes the ultimate outcome of these claims and lawsuits will not have a material impact on our consolidated financial statements.
Contingent Obligations – Lease Out and Lease Back Type (“LILO”) Transactions
At November 30, 2016, we had estimated contingent obligations totaling $366 million, excluding termination payments as discussed below, to participants in LILO transactions for two of our ships. At the inception of these leases, we paid the aggregate of the net present value of these obligations to a group of major financial institutions, who agreed to act as payment undertakers and directly pay these obligations. As a result, these contingent obligations are considered extinguished and neither the funds nor the contingent obligations have been included in our Consolidated Balance Sheets.
In the event that we were to default on our contingent obligations and assuming performance by all other participants, we estimate that we would, as of November 30, 2016, be responsible for a termination payment of $13 million. In January 2016, we exercised our options to terminate, at no cost, the LILO transactions on January 1, 2017 for one ship and January 1, 2018 for the second ship.
In advance of the termination dates, if the credit rating of one of the financial institutions who is directly paying the contingent obligations falls below AA-, or below A- for the other financial institution, then we will be required to replace the applicable financial institution with another financial institution whose credit rating is at least AA or meets other specified credit requirements. In such circumstances, we would incur additional costs, although we estimate that they would not be significant to our consolidated financial statements. The financial institution payment undertaker subject to the AA- credit rating threshold has a credit rating of AA, and the financial institution subject to the A- credit rating threshold has a credit rating of A+. If our credit rating, which is A-, falls below BBB, we will be required to provide a standby letter of credit for $27 million, or, alternatively, provide mortgages for this aggregate amount on these two ships.
Contingent Obligations – Indemnifications
Some of the debt contracts that we enter into include indemnification provisions obligating us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes or changes in laws which increase lenders' costs. The indemnification clauses are often standard contractual terms and were entered into in the normal course of business. There are no stated or notional amounts included in the indemnification clauses, and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses. We have not been required to make any material payments under such indemnification clauses in the past and we do not believe a request for material future indemnification payments is probable.
NOTE 9 – Taxation

A summary of our principal taxes and exemptions in the jurisdictions where our significant operations are located is as follows:
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.
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

F-16

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.
We believe that the U.S. source transportation income earned by Carnival plc and its Italian resident subsidiary currently qualifies for exemption from U.S. federal income tax under applicable bilateral U.S. income tax treaties.
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.
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.
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%.
Substantially all of AIDA’s earnings are exempt from German income taxes by virtue of the Germany/Italy income tax treaty.
Income and Other Taxes in Asian Countries
Substantially all of our brands’ income from their international operation in Asian countries is exempt from local corporation tax by virtue of relevant income tax treaties.
Other
We recognize income tax benefits for uncertain tax positions, based solely on their technical merits, when it is more likely than not to be sustained upon examination by the relevant tax authority. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate resolution. All interest expense related to income tax liabilities is included in income tax expense. Based on all known facts and circumstances and current tax law, we

F-17

believe that the total amount of our uncertain income tax position liabilities and related accrued interest are not significant to our financial position.

We do not expect to incur income taxes on future distributions of undistributed earnings of foreign subsidiaries and, accordingly, no deferred income taxes have been provided for the distribution of these earnings. 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, and these taxes, fees and other charges are included in commissions, transportation and other costs and other ship operating expenses.
NOTE 10 – Shareholders’ Equity
Carnival Corporation’s Articles of Incorporation authorize its Board of Directors, at its discretion, to issue up to 40 million shares of preferred stock. At November 30, 2016 and 2015, no Carnival Corporation preferred stock had been issued and only a nominal amount of Carnival plc preference shares had been issued. Our Boards of Directors have authorized, subject to certain restrictions, the repurchase of up to an aggregate of $1.0 billion of Carnival Corporation common stock and/or Carnival plc ordinary shares (the “Repurchase Program”). On January 28, 2016 and on June 27, 2016, the Boards of Directors approved modifications of the Repurchase Program authorization that increased the remaining authorized repurchases at the time of each approval by $1.0 billion. The Repurchase Program does not have an expiration date and may be discontinued by our Boards of Directors at any time. Our repurchases under the Repurchase Program were as follows (in millions):
 
Carnival Corporation
 
Carnival plc
 
Number of Shares Repurchased
 
Dollar Amount Paid for Shares Repurchased
 
Number of Shares Repurchased
 
Dollar Amount Paid for Shares Repurchased
2016
47.8

 
$2,264
 
0.7

 
$35
2015
5.3

 
$276
 
—

 
—

In 2014, there were no repurchases of Carnival Corporation common stock or Carnival plc ordinary shares under the Repurchase Program. From December 1, 2016 through January 19, 2017, we repurchased 0.2 million shares of Carnival plc ordinary shares for approximately $10 million under the Repurchase Program. At January 19, 2017, the remaining Carnival Corporation availability under the Repurchase Program was $389 million.
In addition to the Repurchase Program, the Boards of Directors authorized, in January 2017, the repurchase of up to 22.0 million Carnival plc ordinary shares and, in February 2016, the repurchase of up to 26.9 million shares of Carnival Corporation common stock under the Stock Swap ("Stock Swap") programs described below. Under the Stock Swap programs, we sell shares of Carnival Corporation common stock or Carnival plc ordinary shares and use a portion of the net proceeds to purchase an equivalent number of Carnival plc ordinary shares or shares of Carnival Corporation common stock, as applicable. We use the Stock Swap programs in situations where we can obtain an economic benefit because either Carnival Corporation common stock or Carnival plc ordinary shares are trading at a price that is at a premium or discount to the price of Carnival plc ordinary shares or Carnival Corporation common stock. 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.
Carnival plc ordinary share repurchases under both the Repurchase Program and the Stock Swap programs require annual shareholder approval. The existing shareholder approval is limited to a maximum of 21.5 million ordinary shares and is valid until the earlier of the conclusion of the Carnival plc 2017 annual general meeting or July 13, 2017. At January 19, 2017, the remaining availability under the Stock Swap programs was 22.0 million Carnival plc ordinary shares and 26.0 million shares of Carnival Corporation common stock. At January 19, 2017, the remaining Carnival plc availability under the Repurchase Program was 20.6 million ordinary shares.
During 2016 and 2015, under the Stock Swap programs, Carnival Investments Limited ("CIL"), a subsidiary of Carnival Corporation, sold 0.9 million and 5.1 million of Carnival plc ordinary shares for net proceeds of $40 million and $264 million, respectively. Substantially all of the net proceeds from these sales were used to purchase 0.9 million shares in 2016 and 5.1 million shares in 2015 of Carnival Corporation common stock. Carnival Corporation sold these Carnival plc ordinary shares owned by CIL only to the extent it was able to repurchase shares of Carnival Corporation common stock in the U.S. on at least an equivalent basis. During 2016 and 2015, there were no sales of Carnival Corporation common stock or repurchases of Carnival plc ordinary shares under the Stock Swap program. During 2014, there were no sales or repurchases of Carnival Corporation common stock or Carnival plc ordinary shares under the Stock Swap programs.

F-18

Accumulated other comprehensive loss was as follows (in millions):
 
November 30,
 
2016
 
2015
Cumulative foreign currency translation adjustments, net
$
(2,266
)
 
$
(1,591
)
Unrecognized pension expenses
(120
)
 
(82
)
Unrealized losses on marketable securities
(3
)
 
(3
)
Net losses on cash flow derivative hedges
(65
)
 
(65
)
 
$
(2,454
)
 
$
(1,741
)
During 2016 and 2015, $7 million and $13 million of unrecognized pension expenses were reclassified out of accumulated other comprehensive loss, of which $4 million and $8 million were included in payroll and related expenses and $3 million and $5 million were included in selling and administrative expenses, respectively.
During 2016, our Board of Directors declared a 17% dividend increase to holders of Carnival Corporation common stock and Carnival plc ordinary shares from $0.30 per share to $0.35 per share. On October 20, 2016, our Board of Directors declared a $0.35 per share dividend ($254 million) for the fourth quarter of fiscal 2016 for shareholders of record on November 25, 2016, which was paid on December 16, 2016.
NOTE 11 – Fair Value Measurements, Derivative Instruments and Hedging Activities
Fair Value Measurements
U.S. accounting standards establish a fair value hierarchy prioritizing the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
•
Level 1 measurements are based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment.
•
Level 2 measurements are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or market data other than quoted prices that are observable for the assets or liabilities.
•
Level 3 measurements are based on unobservable data that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable market participants. When quoted prices are not readily available, our own assumptions are set to reflect those that we believe market participants would use in pricing the asset or liability.
The fair value measurement of a financial asset or financial liability reflects the nonperformance risk of both parties to the contract. Therefore, the fair value measurement of our financial instruments reflects the impact of our counterparty’s creditworthiness for asset positions and our creditworthiness for liability positions. Creditworthiness did not have a significant impact on the fair values of our financial instruments at November 30, 2016 and 2015. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, certain estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized in a current or future market exchange.


F-19

Financial Instruments that are 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 not measured at fair value on a recurring basis were as follows (in millions):
 
November 30, 2016
 
November 30, 2015
 
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
 
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 

 
 
 
 
 
 
 

Cash and cash equivalents (a)
$
256

 
$
256

 
$
—

 
$
—

 
$
647

 
$
647

 
$
—

 
$
—

Restricted cash (b)
41

 
41

 
—

 
—

 
7

 
7

 
—

 
—

Long-term other assets (c)
99

 
1

 
68

 
31

 
119

 
1

 
87

 
31

Total
$
396

 
$
298

 
$
68

 
$
31

 
$
773

 
$
655

 
$
87

 
$
31

Liabilities
 
 
 
 
 
 

 
 
 
 
 
 
 

Fixed rate debt (d)
$
5,436

 
$
—

 
$
5,727

 
$
—

 
$
5,193

 
$
—

 
$
5,450

 
$
—

Floating rate debt (d)
4,018

 
—

 
4,048

 
—

 
3,594

 
—

 
3,589

 
—

Total
$
9,454

 
$
—

 
$
9,775

 
$
—

 
$
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 and at November 30, 2016 also included funds held in escrow.
(c)
Long-term other assets are substantially all 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.
(d)
Debt does not include the impact of interest rate swaps. 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.
Financial Instruments that are Measured at Fair Value on a 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):
 
 
November 30, 2016
 
November 30, 2015
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents (a)
$
347

 
$
—

 
$
—

 
$
748

 
$
—

 
$
—

Restricted cash (b)
19

 
—

 
—

 
22

 
—

 
—

Short-term investments (c)
—

 
—

 
21

 
—

 
—

 
—

Marketable securities held in rabbi trusts (d)
93

 
4

 
—

 
105

 
8

 
—

Derivative financial instruments (e)
—

 
15

 
—

 
—

 
29

 
—

Long-term other asset (c)
—

 
—

 
—

 
—

 
—

 
21

Total
$
459

 
$
19

 
$
21

 
$
875

 
$
37

 
$
21

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Derivative financial instruments (e)
$
—

 
$
434

 
$
—

 
$
—

 
$
625

 
$
—

Total
$
—

 
$
434

 
$
—

 
$
—

 
$
625

 
$
—

 
(a)
Cash equivalents are comprised of money market funds.
(b)
Restricted cash is substantially all comprised of money market funds.
(c)
The fair value of auction rate security included in short-term investments and long-term other asset was based on a broker quote in an inactive market, which is considered a Level 3 input. During fiscal 2016, there were no purchases or sales pertaining to this auction-rate security. This auction-rate security was sold in December 2016.

F-20

(d)
At November 30, 2016 and 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.
(e)
See “Derivative Instruments and Hedging Activities” section below for detailed information regarding our derivative financial instruments.

We measure our derivatives using valuations that are calibrated to the initial trade prices. Subsequent valuations are based on observable inputs and other variables included in the valuation models such as interest rate, yield and commodity price curves, forward currency exchange rates, credit spreads, maturity dates, volatilities and netting arrangements. We use the income approach to value derivatives for foreign currency options and forwards, interest rate swaps and fuel derivatives using observable market data for all significant inputs and standard valuation techniques to convert future amounts to a single present value amount, assuming that participants are motivated, but not compelled to transact.
Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis
Impairments of Ships
As a result of the 2014 bareboat charter/sale agreement for a 1,440-passenger capacity ship, we performed a ship impairment review and recognized a $31 million impairment charge in other ship operating expenses during the fourth quarter of 2014. The estimated fair value of the ship was substantially all determined based on the expected collectability of the bareboat charter payments, which is considered a Level 3 input. See Note 4 - “Property and Equipment” for a discussion regarding ship sales.

Due to the expected absorption of Ibero Cruises’ (“Ibero”) operations into Costa in 2014, and certain ship specific facts and circumstances, such as size, age, condition, viable alternative itineraries and historical operating cash flows, we performed an undiscounted future cash flow analysis of a 1,490-passenger capacity ship as of May 31, 2014. The principal assumptions used in our undiscounted cash flow analysis consisted of forecasted future operating results, including net revenue yields and net cruise costs including fuel prices, and the estimated residual value, which are all considered Level 3 inputs. Based on its undiscounted cash flow analysis, we determined that the net carrying value for the ship exceeded its estimated undiscounted future cash flows. Accordingly, we then estimated the May 31, 2014 fair value of this ship based on its discounted future cash flows and recognized a $22 million ship impairment charge in other ship operating expenses during 2014.
Valuation of Goodwill and Other Intangibles
The reconciliation of the changes in the carrying amounts of our goodwill was as follows (in millions):
 
North America
Segment
 
EAA
Segment
 
Total
Balance at November 30, 2014
$
1,898

 
$
1,229

 
$
3,127

Foreign currency translation adjustment
—

 
(117
)
 
(117
)
Balance at November 30, 2015
1,898

 
1,112

 
3,010

Foreign currency translation adjustment
—

 
(100
)
 
(100
)
Balance at November 30, 2016
$
1,898

 
$
1,012

 
$
2,910

 
At July 31, 2016, we performed our annual goodwill impairment reviews, which included performing a qualitative assessment for AIDA, Carnival Cruise Line, Cunard, P&O Cruises (UK) and Princess. Qualitative factors such as industry and market conditions, macroeconomic conditions, changes to the weighted-average cost of capital (“WACC”), overall financial performance, changes in fuel prices and capital expenditures were considered in the qualitative assessment to determine how changes in these factors would affect each of these cruise brands’ estimated fair values. Based on our qualitative assessments, we determined it was more-likely-than-not that each of these cruise brands’ estimated fair values exceeded their carrying values and, therefore, we did not proceed to the two-step quantitative goodwill impairment reviews.

As of July 31, 2016, we also performed our annual goodwill impairment reviews for Costa, Holland America Line and P&O Cruises (Australia). As part of our periodic process, we did not perform a qualitative assessment but instead proceeded directly to step one of the two-step quantitative goodwill impairment review and compared each of Costa's, Holland America Line's and P&O Cruises (Australia)’s estimated fair value to the carrying value of their allocated net assets. Their estimated fair values were based on discounted future cash flow analyses. The principal assumptions used in our cash flow analyses consisted of:
•
Forecasted operating results, including net revenue yields and net cruise costs including fuel prices
•
Capacity changes, including the expected rotation of vessels into, or out of, Costa, Holland America Line and P&O Cruises (Australia)

F-21

•
WACC of market participants, adjusted for the risk attributable to the geographic regions in which Costa, Holland America Line and P&O Cruises (Australia) operate
•
Capital expenditures, proceeds from forecasted dispositions of ships and terminal values, which are all considered Level 3 inputs
Based on the discounted cash flow analyses, we determined that each of Costa's, Holland America Line’s and P&O Cruises (Australia)’s estimated fair value significantly exceeded their carrying value and, therefore, we did not proceed to step two of the impairment reviews.
The reconciliation of the changes in the carrying amounts of our other intangible assets not subject to amortization, which represent trademarks, was as follows (in millions):
 
North America
Segment
 
EAA
Segment
 
Total
Balance at November 30, 2014
$
927

 
$
338

 
$
1,265

Foreign currency translation adjustment
—

 
(31
)
 
(31
)
Balance at November 30, 2015
927

 
307

 
1,234

Foreign currency translation adjustment
—

 
(28
)
 
(28
)
Balance at November 30, 2016
$
927

 
$
279

 
$
1,206

 
At July 31, 2016, our cruise brands that had significant trademarks recorded included AIDA, P&O Cruises (Australia), P&O Cruises (UK) and Princess. As of that date, we performed our annual trademark impairment reviews for these cruise brands, which included performing a qualitative assessment for AIDA, P&O Cruises (UK) and Princess. Qualitative factors such as industry and market conditions, macroeconomic conditions, changes to the WACC, changes in royalty rates and overall financial performance were considered in the qualitative assessment to determine how changes in these factors would affect the estimated fair value for AIDA's, P&O Cruises (UK)'s and Princess' recorded trademarks. Based on our qualitative assessment, we determined it was more likely-than-not that the estimated fair value for AIDA's, P&O Cruises (UK)’s and Princess's recorded trademarks exceeded their carrying value and, therefore, none of these trademarks were impaired.

As of July 31, 2016, we did not perform a qualitative assessment for P&O Cruises (Australia)'s trademarks but instead proceeded directly to the quantitative trademark impairment reviews. Our quantitative assessment included estimating P&O Cruises (Australia)'s trademarks fair value based upon a discounted future cash flow analysis, which estimated the amount of royalties that we are relieved from having to pay for use of the associated trademarks, based upon forecasted cruise revenues and a market participant’s royalty rate. The royalty rate was estimated primarily using comparable royalty agreements for similar industries. Based on our quantitative assessment, we determined that the estimated fair values for P&O Cruises (Australia)’s trademarks significantly exceeded their carrying values and, therefore, none of these trademarks were impaired.

The determination of our reporting unit goodwill and trademark fair values includes numerous assumptions that are subject to various risks and uncertainties. We believe that we have made reasonable estimates and judgments. If there is a change in the conditions or circumstances influencing fair values in the future, then we may need to recognize an impairment charge.

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
Segment
 
EAA
Segment
 
Total
Balance at November 30, 2015 (a)
$
62

 
$
12

 
$
74

Additions
—

 
1

 
1

Amortization
(3
)
 
(1
)
 
(4
)
Foreign currency translation adjustment
(2
)
 
—

 
(2
)
Balance at November 30, 2016
$
57

 
$
12

 
$
69

(a) See "Note 2 - Summary of Significant Accounting Policies"
Derivative Instruments and Hedging Activities
We utilize derivative and non-derivative financial instruments, such as foreign currency forwards, options and swaps, foreign currency debt obligations and foreign currency cash balances, to manage our exposure to fluctuations in certain foreign currency exchange rates. We use interest rate swaps to manage our interest rate exposure to achieve a desired proportion of

F-22

fixed and floating rate debt. In addition, we have fuel derivatives settling in 2017 and 2018 to mitigate a portion of the risk to our future cash flows attributable to potential fuel price increases, which we define as our “economic risk.” Our policy is to not use any financial instruments for trading or other speculative purposes.
All derivatives are recorded at fair value. The changes in fair value are recognized currently in earnings if the derivatives do not qualify as effective hedges, or if we do not seek to qualify for hedge accounting treatment, such as for our fuel derivatives. If a derivative is designated as a fair value hedge, then changes in the fair value of the derivative are offset against the changes in the fair value of the underlying hedged item. If a derivative is designated as a cash flow hedge, then the effective portion of the changes in the fair value of the derivative is recognized as a component of AOCI until the underlying hedged item is recognized in earnings or the forecasted transaction is no longer probable. If a derivative or a non-derivative financial instrument is designated as a hedge of our net investment in a foreign operation, then changes in the fair value of the financial instrument are recognized as a component of AOCI to offset a portion of the change in the translated value of the net investment being hedged, until the investment is sold or substantially liquidated. We formally document hedging relationships for all derivative and non-derivative hedges and the underlying hedged items, as well as our risk management objectives and strategies for undertaking the hedge transactions.
We classify the fair values of all our derivative contracts as either current or long-term, depending on the maturity date of the derivative contract. The cash flows from derivatives treated as hedges are classified in our Consolidated Statements of Cash Flows in the same category as the item being hedged. Our cash flows related to fuel derivatives are classified within investing activities.
The estimated fair values of our derivative financial instruments and their location in the Consolidated Balance Sheets were as follows (in millions):
 
 
 
November 30,
 
Balance Sheet Location
 
2016
 
2015
Derivative assets
 
 
 
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
Net investment hedges (a)
Prepaid expenses and other
 
$
12

 
$
14

 
Other assets – long-term
 
3

 
13

Interest rate swaps (b)
Prepaid expenses and other
 
—

 
2

Total derivative assets
 
 
$
15

 
$
29

Derivative liabilities
 
 
 
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
Net investment hedges (a)
Accrued liabilities and other
 
$
26

 
$
—

Interest rate swaps (b)
Accrued liabilities and other
 
10

 
11

 
Other long-term liabilities
 
23

 
27

Foreign currency zero cost collars (c)
Accrued liabilities and other
 
12

 
—

 
Other long-term liabilities
 
21

 
26

 
 
 
92

 
64

Derivatives not designated as hedging instruments
 
 
 
 
 
Fuel (d)
Accrued liabilities and other
 
198

 
227

 
Other long-term liabilities
 
144

 
334

 
 
 
342

 
561

Total derivative liabilities
 
 
$
434

 
$
625

 
(a)
At November 30, 2016 and 2015, we had foreign currency forwards totaling $456 million and $43 million, respectively, that are designated as hedges of our net investments in foreign operations, which have a euro-denominated functional currency. At November 30, 2016, these foreign currency forwards settle through July 2017. At November 30, 2016 and 2015, we also had foreign currency swaps totaling $291 million and $387 million, respectively, that are designated as hedges of our net investments in foreign operations, which have a euro-denominated functional currency. At November 30, 2016, 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 $500 million at November 30, 2016 and $568 million at November 30, 2015 of EURIBOR-based floating rate euro debt to

F-23

fixed rate euro debt. At November 30, 2016, 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 November 30, 2016 and 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 November 30, 2016 and 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 fuel derivatives.

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):
 
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

 
 
 
 
 
 
 
 
 
 
 
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

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):
 
November 30,
 
2016
 
2015
 
2014
Net investment hedges
$
(33
)
 
$
58

 
$
25

Foreign currency zero cost collars – cash flow hedges
$
(8
)
 
$
(57
)
 
$
(10
)
Interest rate swaps – cash flow hedges
$
8

 
$
2

 
$
(28
)
There are no credit risk related contingent features in our derivative agreements, except for bilateral credit provisions within our fuel derivative counterparty agreements. These provisions require cash collateral to be posted or received to the extent the fuel derivative fair value payable to or receivable from an individual counterparty exceeds $100 million. At November 30, 2016, no collateral was required to be posted to or received from our fuel derivative counterparties. At November 30, 2015, we had $25 million of collateral posted to one of our fuel derivative counterparties. At November 30, 2015, no collateral was required to be received from our fuel derivative counterparties.
The amount of estimated cash flow hedges’ unrealized gains and losses that are expected to be reclassified to earnings in the next twelve months is not significant. We have not provided additional disclosures of the impact that derivative instruments and hedging activities have on our consolidated financial statements as of November 30, 2016 and 2015 and for the years ended November 30, 2016, 2015 and 2014 where such impacts were not significant.

F-24

Fuel Price Risks
Substantially all of our exposure to market risk for changes in fuel prices relates to the consumption of fuel on our ships. We have Brent call options and Brent put options, collectively referred to as zero cost collars, that establish ceiling and floor prices and mitigate a portion of our economic risk attributable to potential fuel price increases. To maximize operational flexibility we utilized derivative markets with significant trading liquidity.

Our zero cost collars are based on Brent prices whereas the actual fuel used on our ships is marine fuel. Changes in the Brent prices may not show a high degree of correlation with changes in our underlying marine fuel prices. We will not realize any economic gain or loss upon the monthly maturities of our zero cost collars unless the average monthly price of Brent is above the ceiling price or below the floor price. We believe that these zero cost collars will act as economic hedges; however, hedge accounting is not applied.

Our unrealized and realized gains (losses), net on fuel derivatives were as follows (in millions):
 
November 30,
 
2016
 
2015
 
2014
Unrealized gains (losses) on fuel derivatives, net
$
236

 
$
(332
)
 
$
(268
)
Realized losses on fuel derivatives, net
(283
)
 
(244
)
 
(3
)
Losses on fuel derivatives, net
$
(47
)
 
$
(576
)
 
$
(271
)
At November 30, 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 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.

F-25

Foreign Currency Exchange Rate Risks
Overall Strategy
We manage our exposure to fluctuations in foreign currency exchange rates through our normal operating and financing activities, including netting certain exposures to take advantage of any natural offsets and, when considered appropriate, through the use of derivative and non-derivative financial instruments. Our primary focus is to monitor our exposure to and manage the economic foreign currency exchange risks faced by our operations and realized if we exchange one currency for another. We currently only hedge certain of our ship commitments and net investments in foreign operations. The financial impacts of the hedging instruments we do employ generally offset the changes in the underlying exposures being hedged.
Operational Currency Risks
Our EAA segment operations generate significant revenues and incur significant expenses in their functional currencies, which subjects us to “foreign currency translational” risk related to these currencies. Accordingly, exchange rate fluctuations in their functional currencies against the U.S. dollar will affect our reported financial results since the reporting currency for our consolidated financial statements is the U.S. dollar. Any strengthening of the U.S. dollar against these foreign currencies has the financial statement effect of decreasing the U.S. dollar values reported for these segment’s revenues and expenses. Any weakening of the U.S. dollar has the opposite effect.

Substantially all of our operations also have non-functional currency risk related to their international sales. In addition, we have a portion of our operating expenses denominated in non-functional currencies. Accordingly, we also have “foreign currency transactional” risks related to changes in the exchange rates for our revenues and expenses that are in a currency other than the functional currency. The revenues and expenses which occur in the same non-functional currencies create some degree of natural offset.
Investment Currency Risks
We consider our investments in foreign operations to be denominated in stable currencies. Our investments in foreign operations are of a long-term nature. We have $5.5 billion of euro-denominated debt, including the effect of foreign currency swaps, which provides an economic offset for our operations with euro functional currency. We also partially mitigate our net investment currency exposures by denominating a portion of our foreign currency intercompany payables in our foreign operations’ functional currencies. 
Newbuild Currency Risks
Our shipbuilding contracts are typically denominated in euros. Our decision to hedge a non-functional currency ship commitment for our cruise brands is made on a case-by-case basis, considering the amount and duration of the exposure, market volatility, economic trends, our overall expected net cash flows by currency and other offsetting risks. We use foreign currency derivative contracts and have used non-derivative financial instruments to manage foreign currency exchange rate risk for some of our ship construction payments.
At November 30, 2016, 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
Majestic Princess
2015
 
March 2017
 
$
1.07

 
$
1.25

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

If the spot rate is between the weighted-average ceiling and floor rates on the date of maturity, then we would not owe or receive any payments under these collars.
In November 2016, we settled our foreign currency zero cost collars that were designated as cash flow hedges for the final euro-denominated shipyard payments of Seabourn Encore, which didn't result in any gain or loss in other comprehensive income.

F-26

At January 19, 2017, our remaining newbuild currency exchange rate risk primarily relates to euro-denominated newbuild contract payments, which represent a total unhedged commitment of $5.7 billion and substantially relates to newbuilds scheduled to be delivered 2019 through 2022 to non-euro functional currency brands.
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 desire to order new cruise ships.
Interest Rate Risks
We manage our exposure to fluctuations in interest rates through our debt portfolio management and investment strategies. We evaluate our debt portfolio to determine whether to make periodic adjustments to the mix of fixed and floating rate debt through the use of interest rate swaps and the issuance of new debt or the early retirement of existing debt.
The composition of our debt, including the effect of foreign currency swaps and interest rate swaps, was as follows:
 
November 30,
 
2016
 
2015
Fixed rate
28
%
 
32
%
Euro fixed rate
35
%
 
28
%
Floating rate
14
%
 
18
%
Euro floating rate
23
%
 
22
%
Concentrations of Credit Risk
As part of our ongoing control procedures, we monitor concentrations of credit risk associated with financial and other institutions with which we conduct significant business. We seek to minimize these credit risk exposures, including counterparty nonperformance primarily associated with our cash equivalents, investments, committed financing facilities, contingent obligations, derivative instruments, insurance contracts and new ship progress payment guarantees, by:
•
Conducting business with large, well-established financial institutions, insurance companies and export credit agencies
•
Diversifying our counterparties
•
Having guidelines regarding credit ratings and investment maturities that we follow to help safeguard liquidity and minimize risk
•
Generally requiring collateral and/or guarantees to support notes receivable on significant asset sales, long-term ship charters and new ship progress payments to shipyards 
We currently believe the risk of nonperformance by any of our significant counterparties is remote. At November 30, 2016, our exposures under foreign currency and fuel derivative contracts and interest rate swap agreements were not material.
We also monitor the creditworthiness of travel agencies and tour operators in Asia, Australia and Europe, which includes charter-hire agreements in Asia, and credit and debit card providers to which we extend credit in the normal course of our business prior to sailing. Our credit exposure also includes contingent obligations related to cash payments received directly by travel agents and tour operators for cash collected by them on cruise sales in Australia and most of Europe where we are obligated to honor our guests' cruise payments made by them to their travel agents and tour operators regardless of whether we have received these payments. Concentrations of credit risk associated with these trade receivables, charter-hire agreements and contingent obligations are not considered to be material, principally due to the large number of unrelated accounts, the nature of these contingent obligations and their short maturities. We have not experienced significant credit losses on our trade receivables, charter-hire agreements and contingent obligations. We do not normally require collateral or other security to support normal credit sales.


F-27

NOTE 12 – Segment Information
We have four reportable segments that are comprised of (1) North America, (2) EAA (3) Cruise Support and (4) Tour and Other. Our segments are reported on the same basis as the internally reported information that is provided to our chief operating decision maker (“CODM”), who is the President and Chief Executive Officer of Carnival Corporation and Carnival plc. The CODM assesses performance and makes decisions to allocate resources for Carnival Corporation & plc based upon review of the results across all of our segments.
Our North America segment includes Carnival Cruise Line, Holland America Line, Princess and Seabourn. Our EAA segment includes AIDA, Costa, Cunard, P&O Cruises (Australia), P&O Cruises (UK). The operations of these reporting units have been aggregated into two reportable segments based on the similarity of their economic and other characteristics, including types of customers, regulatory environment, maintenance requirements, supporting systems and processes and products and services they provide. Our Cruise Support segment represents certain of our port and related facilities and other services that are provided for the benefit of our cruise brands.
Our Tour and Other segment represents the hotel and transportation operations of Holland America Princess Alaska Tours and ships that we bareboat charter to unaffiliated entities.
Selected information for our segments as of and for the years ended November 30 was as follows (in millions):
 
 
Revenues
 
Operating costs and
expenses
 
Selling
and
administrative
 
Depreciation
and
amortization
 
Operating
income  (loss)
Capital
expenditures
 
Total
assets
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
North America (a)
$
10,267

 
$
5,786

 
$
1,220

 
$
1,056

 
$
2,205

$
2,069

 
$
23,454

  
EAA
5,906

 
3,524

 
691

 
599

 
1,092

667

 
13,456

  
Cruise Support
131

 
67

 
278

 
42

 
(256
)
310

 
1,568

  
Tour and Other (a)
231

 
152

 
8

 
41

 
30

16

 
458

(b) 
Intersegment elimination (a)
(146
)
 
(146
)
 
—

 
—

 
—

—

 
—

  
 
$
16,389

 
$
9,383

 
$
2,197

 
$
1,738

 
$
3,071

$
3,062

 
$
38,936

  
2015
 
 
 
 
 
 
 
 
 
 
 
 
 
North America (a)
$
9,866

 
$
5,925

 
$
1,140

 
$
994

 
$
1,807

$
854

 
$
22,420

  
EAA
5,636

 
3,442

 
695

 
561

 
938

1,265

 
14,076

  
Cruise Support
119

 
58

 
223

 
27

 
(189
)
162

 
2,248

  
Tour and Other (a)
226

 
155

 
9

 
44

 
18

13

 
493

(b) 
Intersegment elimination (a)
(133
)
 
(133
)
 
—

 
—

 
—

—

 
—

  
 
$
15,714

 
$
9,447

 
$
2,067

 
$
1,626

 
$
2,574

$
2,294

 
$
39,237

  
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
North America (a)
$
9,559

 
$
6,436

 
$
1,121

 
$
961

 
$
1,041

$
1,315

 
$
22,681

  
EAA
6,148

 
3,914

 
725

 
616

 
893

1,054

 
15,228

  
Cruise Support
90

 
39

 
200

 
25

 
(174
)
156

 
1,023

  
Tour and Other (a)
215

 
160

 
8

 
35

 
12

58

 
516

(b) 
Intersegment elimination (a)
(128
)
 
(128
)
 
—

 
—

 
—

—

 
—

  
 
$
15,884

 
$
10,421

 
$
2,054

 
$
1,637

 
$
1,772

$
2,583

 
$
39,448

  
 
(a)
A portion of the North America segment's revenues includes revenues for the tour portion of a cruise when a land tour package is sold along with a cruise by either Holland America Line or Princess. These intersegment tour revenues, which are included in our Tour and Other segment, are eliminated directly against the North America segment's revenues and operating expenses in the line “Intersegment elimination.”
(b)
Tour and Other segment assets primarily include hotels and lodges in the state of Alaska and the Canadian Yukon, motorcoaches used for sightseeing and charters, glass-domed railcars, which run on the Alaska Railroad, and our owned ships that we leased out under long-term charters to unaffiliated entities.



F-28

Our non-U.S. revenues represent sales generated from outside the U.S. principally by non-U.S. travel agents and tour operators. Substantially all of our long-lived assets are located outside of the U.S. and consist of our ships and ships under construction.
Revenues by geographic areas, which are based on where our guests are sourced, were as follows (in millions):
 
  
Years Ended November 30,
 
2016
 
2015
 
2014
North America
$
8,327

 
$
8,015

 
$
7,762

Europe
5,254