Company Quick10K Filing
Quick10K
Carnival
10-Q 2019-08-31 Quarter: 2019-08-31
10-Q 2019-02-28 Quarter: 2019-02-28
10-K 2018-11-30 Annual: 2018-11-30
10-Q 2018-08-31 Quarter: 2018-08-31
10-Q 2018-02-28 Quarter: 2018-02-28
10-K 2017-11-30 Annual: 2017-11-30
10-Q 2017-05-31 Quarter: 2017-05-31
10-Q 2016-05-31 Quarter: 2016-05-31
10-K 2015-11-30 Annual: 2015-11-30
10-Q 2015-08-31 Quarter: 2015-08-31
10-Q 2015-05-31 Quarter: 2015-05-31
10-Q 2015-02-28 Quarter: 2015-02-28
10-K 2014-11-30 Annual: 2014-11-30
10-Q 2014-08-31 Quarter: 2014-08-31
10-Q 2014-05-31 Quarter: 2014-05-31
10-Q 2014-02-28 Quarter: 2014-02-28
10-K 2013-11-30 Annual: 2013-11-30
8-K 2019-10-28 Other Events, Exhibits
8-K 2019-09-26 Earnings, Exhibits
8-K 2019-06-20 Earnings, Exhibits
8-K 2019-03-26 Earnings, Exhibits
8-K 2019-01-14 Officers, Exhibits
8-K 2018-12-20 Earnings, Exhibits
8-K 2018-09-27 Earnings, Exhibits
8-K 2018-06-25 Earnings, Exhibits
8-K 2018-04-11 Shareholder Vote
GD General Dynamics 54,733
SSW Seaspan 1,795
MATX Matson 1,527
DAC Danaos 1,515
FRO Frontline 1,476
TGP Teekay Lng Partners 1,162
DHT DHT Holdings 783
GMLP Golar Lng Partners 707
INSW International Seaways 503
TNP Tsakos Energy Navigation 264
CUK 2019-08-31
Part I - Financial Information
Item 1. Financial Statements.
Note 1 - General
Note 2 - Revenue and Expense Recognition
Note 3 - Unsecured Debt
Note 4 - Contingencies
Note 5 - Fair Value Measurements, Derivative Instruments and Hedging Activities and Financial Risks
Note 6 - Segment Information
Note 7 - Earnings per Share
Note 8 - Supplemental Cash Flow Information
Note 9 - Property and Equipment
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits.
EX-10.1 ex101q32019.htm
EX-31.1 ex311q32019.htm
EX-31.2 ex312q32019.htm
EX-31.3 ex313q32019.htm
EX-31.4 ex314q32019.htm
EX-32.1 ex321q32019.htm
EX-32.2 ex322q32019.htm
EX-32.3 ex323q32019.htm
EX-32.4 ex324q32019.htm

Carnival Earnings 2019-08-31

CUK 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             

Commission file number: 001-9610
 

Commission file number: 001-15136
Carnival Corporation
image0a03.jpg
Carnival plc
(Exact name of registrant as
specified in its charter)
(Exact name of registrant as
specified in its charter)
 
 
 
 
 
 
Republic of Panama
England and Wales
(State or other jurisdiction of
incorporation or organization)
(State or other jurisdiction of
incorporation or organization)
 
 
 
 
 
 
59-1562976
98-0357772
(I.R.S. Employer Identification No.)
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
3655 N.W. 87th Avenue
Carnival House, 100 Harbour Parade,
Miami,
Florida
33178-2428
Southampton
SO15 1ST,
United Kingdom
(Address of principal
executive offices)
(Zip Code)
(Address of principal
executive offices)
(Zip Code)
(305)
599-2600
 
011
44 23 8065 5000
(Registrant’s telephone number,
including area code)
 
(Registrant’s telephone number,
including area code)
 
 
 
 
 
None
 
None
(Former name, former address
and former fiscal year, if
changed since last report)
 
(Former name, former address
and former fiscal year, if
changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock
($0.01 par value)
 
Ordinary Shares each represented
by American Depositary Shares
($1.66 par value), Special Voting Share,
GBP 1.00 par value and Trust Shares
of beneficial interest in the
P&O Princess Special Voting Trust
(Title of each class)
(Title of each class)
 
 
CCL
CUK
(Trading Symbol)
(Trading Symbol)
 
 
New York Stock Exchange, Inc.
New York Stock Exchange, Inc.
(Name of each exchange on which registered)
(Name of each exchange on which registered)

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files). Yes No



Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, smaller reporting companies, or emerging growth companies. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filers
Accelerated filers
Non-accelerated filers
Smaller reporting companies
Emerging growth companies
If emerging growth companies, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes No

At September 18, 2019, Carnival Corporation had outstanding 527,055,158 shares of Common Stock, $0.01 par value.
 
At September 18, 2019, Carnival plc had outstanding 185,488,171 Ordinary Shares $1.66 par value, one Special Voting Share, GBP 1.00 par value and 527,055,158 Trust Shares of beneficial interest in the P&O Princess Special Voting Trust.
 


Table of Contents

CARNIVAL CORPORATION & PLC
TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 1A.
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 
 
 

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Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in millions, except per share data)
 
 
Three Months Ended
August 31,
 
Nine Months Ended
August 31,
 
2019

2018
 
2019
 
2018
Revenues
 
 
 
 
 
 
 
Cruise
 
 
 
 
 
 
 
  Passenger ticket
$
4,477

 
$
4,353

 
$
10,934

 
$
10,694

  Onboard and other
1,855

 
1,316

 
4,811

 
3,509

Tour and other
200

 
167

 
299

 
222

 
6,533

 
5,836

 
16,043

 
14,425

Operating Costs and Expenses
 
 
 
 
 
 
 
Cruise
 
 
 
 
 
 
 
  Commissions, transportation and other
803

 
760

 
2,125

 
2,000

  Onboard and other
668

 
207

 
1,620

 
485

  Payroll and related
548

 
537

 
1,671

 
1,638

  Fuel
401

 
434

 
1,204

 
1,166

  Food
284

 
275

 
821

 
804

  Other ship operating
719

 
655

 
2,192

 
2,115

Tour and other
109

 
90

 
198

 
140

 
3,532

 
2,958

 
9,833

 
8,348

Selling and administrative
563

 
573

 
1,813

 
1,794

Depreciation and amortization
548

 
511

 
1,607

 
1,510

 
4,643

 
4,042

 
13,252

 
11,653

Operating Income
1,890

 
1,794

 
2,791

 
2,772

Nonoperating Income (Expense)
 
 
 
 
 
 
 
Interest income
8

 
5

 
16

 
10

Interest expense, net of capitalized interest
(52
)
 
(49
)
 
(157
)
 
(147
)
Gains on fuel derivatives, net

 
4

 

 
61

Other income (expense), net
(19
)
 
(9
)
 
(27
)
 
2

 
(63
)
 
(50
)
 
(168
)
 
(74
)
Income Before Income Taxes
1,827

 
1,744

 
2,624

 
2,699

Income Tax Expense, Net
(47
)
 
(37
)
 
(56
)
 
(40
)
Net Income
$
1,780

 
$
1,707

 
$
2,567

 
$
2,659

Earnings Per Share
 
 
 
 
 
 
 
Basic
$
2.58

 
$
2.42

 
$
3.72

 
$
3.73

Diluted
$
2.58

 
$
2.41

 
$
3.71

 
$
3.72

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

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Table of Contents

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in millions)
 
 
Three Months Ended
August 31,
 
Nine Months Ended
August 31,
 
2019
 
2018
 
2019
 
2018
Net Income
$
1,780

 
$
1,707

 
$
2,567

 
$
2,659

Items Included in Other Comprehensive Income (Loss)
 
 

 
 
 
 
Change in foreign currency translation adjustment
(101
)
 
15

 
(215
)
 
(50
)
Other
(6
)
 

 
(19
)
 
(9
)
Other Comprehensive Income (Loss)
(107
)
 
14

 
(234
)
 
(59
)
Total Comprehensive Income
$
1,674

 
$
1,722

 
$
2,333

 
$
2,600

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


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Table of Contents

CARNIVAL CORPORATION & PLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except par values)
 
 
August 31,
2019
 
November 30,
2018
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
1,153

 
$
982

Trade and other receivables, net
441

 
358

Inventories
482

 
450

Prepaid expenses and other
635

 
436

  Total current assets
2,712

 
2,225

Property and Equipment, Net
36,466

 
35,336

Goodwill
2,886

 
2,925

Other Intangibles
1,166

 
1,176

Other Assets
771

 
738

 
$
44,001

 
$
42,401

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current Liabilities
 
 
 
Short-term borrowings
$
238

 
$
848

Current portion of long-term debt
1,607

 
1,578

Accounts payable
695

 
730

Accrued liabilities and other
1,718

 
1,654

Customer deposits
4,674

 
4,395

  Total current liabilities
8,932

 
9,204

Long-Term Debt
8,893

 
7,897

Other Long-Term Liabilities
882

 
856

Contingencies

 

Shareholders’ Equity
 
 
 
Common stock of Carnival Corporation, $0.01 par value; 1,960 shares authorized; 657 shares at 2019 and 656 shares at 2018 issued
7

 
7

Ordinary shares of Carnival plc, $1.66 par value; 217 shares at 2019 and 2018 issued
358

 
358

Additional paid-in capital
8,798

 
8,756

Retained earnings
26,576

 
25,066

Accumulated other comprehensive income (loss) (“AOCI”)
(2,183
)
 
(1,949
)
Treasury stock, 130 shares at 2019 and 129 shares at 2018 of Carnival Corporation and 57 shares at 2019 and 48 shares at 2018 of Carnival plc, at cost
(8,261
)
 
(7,795
)
  Total shareholders’ equity
25,295

 
24,443

 
$
44,001

 
$
42,401

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

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Table of Contents

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
 
 
Nine Months Ended
August 31,
 
2019
 
2018
OPERATING ACTIVITIES
 
 
 
Net income
$
2,567

 
$
2,659

Adjustments to reconcile net income to net cash provided by (used in) operating activities
 
 
 
Depreciation and amortization
1,607

 
1,510

Impairments
26

 
16

Gains on fuel derivatives, net

 
(61
)
Share-based compensation
38

 
49

Other, net
29

 
(22
)
 
4,266

 
4,151

Changes in operating assets and liabilities
 
 
 
Receivables
(101
)
 
(61
)
Inventories
22

 
(19
)
Prepaid expenses and other
(220
)
 
76

Accounts payable
(25
)
 
(94
)
Accrued liabilities and other
63

 
(166
)
Customer deposits
409

 
549

Net cash provided by (used in) operating activities
4,414

 
4,436

INVESTING ACTIVITIES
 
 
 
Purchases of property and equipment
(3,448
)
 
(2,784
)
Proceeds from sales of ships
15

 
282

Payments of fuel derivative settlements
(6
)
 
(37
)
Other, net
122

 
(79
)
Net cash provided by (used in) investing activities
(3,317
)
 
(2,617
)
FINANCING ACTIVITIES
 
 
 
Proceeds from (repayments of) short-term borrowings, net
(600
)
 
182

Principal repayments of long-term debt
(472
)
 
(1,271
)
Proceeds from issuance of long-term debt
1,722

 
1,618

Dividends paid
(1,041
)
 
(1,003
)
Purchases of treasury stock
(472
)
 
(1,205
)
Other, net
(49
)
 
(28
)
Net cash provided by (used in) financing activities
(912
)
 
(1,707
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(11
)
 
7

Net increase (decrease) in cash, cash equivalents and restricted cash
174

 
120

Cash, cash equivalents and restricted cash at beginning of period
996

 
422

Cash, cash equivalents and restricted cash at end of period
$
1,170

 
$
541

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



6

Table of Contents

CARNIVAL CORPORATION & PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
(in millions)

 
Three Months Ended
 
Common
stock
 
Ordinary
shares
 
Additional
paid-in
capital
 
Retained
earnings
 
AOCI
 
Treasury
stock
 
Total shareholders’ equity
At May 31, 2018
$
7

 
$
358

 
$
8,721

 
$
23,564

 
$
(1,855
)
 
$
(6,862
)
 
$
23,933

Net income

 

 

 
1,707

 

 

 
1,707

Other comprehensive income (loss)

 

 

 

 
14

 

 
14

Cash dividends declared ($0.50 per share)

 

 

 
(350
)
 

 

 
(350
)
Purchases of treasury stock under the Repurchase Program and other

 

 
19

 

 

 
(670
)
 
(651
)
At August 31, 2018
$
7

 
$
358

 
$
8,741

 
$
24,921

 
$
(1,840
)
 
$
(7,533
)
 
$
24,654

 
 
 
 
 
 
 
 
 
 
 
 
 
 
At May 31, 2019
$
7

 
$
358

 
$
8,785

 
$
25,138

 
$
(2,076
)
 
$
(8,104
)
 
$
24,108

Net income

 

 

 
1,780

 

 

 
1,780

Other comprehensive income (loss)

 

 

 

 
(107
)
 

 
(107
)
Cash dividends declared ($0.50 per share)

 

 

 
(342
)
 

 

 
(342
)
Purchases of treasury stock under the Repurchase Program and other

 

 
13

 

 

 
(157
)
 
(144
)
At August 31, 2019
$
7

 
$
358

 
$
8,798

 
$
26,576

 
$
(2,183
)
 
$
(8,261
)
 
$
25,295

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Common
stock
 
Ordinary
shares
 
Additional
paid-in
capital
 
Retained
earnings
 
AOCI
 
Treasury
stock
 
Total
shareholders’
equity
At November 30, 2017
$
7

 
$
358

 
$
8,690

 
$
23,292

 
$
(1,782
)
 
$
(6,349
)
 
$
24,216

Net income

 

 

 
2,659

 

 

 
2,659

Other comprehensive income (loss)

 

 

 

 
(59
)
 

 
(59
)
Cash dividends declared ($1.45 per share)

 

 

 
(1,029
)
 

 

 
(1,029
)
Purchases of treasury stock under the Repurchase Program and other

 

 
51

 

 

 
(1,184
)
 
(1,133
)
At August 31, 2018
$
7

 
$
358

 
$
8,741

 
$
24,921

 
$
(1,840
)
 
$
(7,533
)
 
$
24,654

 
 
 
 
 
 
 
 
 
 
 
 
 
 
At November 30, 2018
$
7

 
$
358

 
$
8,756

 
$
25,066

 
$
(1,949
)
 
$
(7,795
)
 
$
24,443

Changes in accounting principles (a)

 

 

 
(24
)
 

 

 
(24
)
Net income

 

 

 
2,567

 

 

 
2,567

Other comprehensive income (loss)

 

 

 

 
(234
)
 

 
(234
)
Cash dividends declared ($1.50 per share)

 

 

 
(1,034
)
 

 

 
(1,034
)
Purchases of treasury stock under the Repurchase Program and other

 

 
42

 

 

 
(467
)
 
(424
)
At August 31, 2019
$
7

 
$
358

 
$
8,798

 
$
26,576

 
$
(2,183
)
 
$
(8,261
)
 
$
25,295


(a)
We adopted the provisions of Revenue from Contracts with Customers and Derivatives and Hedging on December 1, 2018.
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents


CARNIVAL CORPORATION & PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – General

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 joint Quarterly Report on Form 10-Q as “Carnival Corporation & plc,” “our,” “us” and “we.”

Basis of Presentation
The Consolidated Statements of Income, the Consolidated Statements of Comprehensive Income, the Consolidated Statements of Cash Flows and the Consolidated Statements of Shareholders’ Equity for the three and nine months ended August 31, 2019 and 2018, and the Consolidated Balance Sheet at August 31, 2019 are unaudited and, in the opinion of our management, contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement. Our interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Carnival Corporation & plc 2018 joint Annual Report on Form 10-K (“Form 10-K”) filed with the U.S. Securities and Exchange Commission on January 28, 2019. Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire year.
Accounting Pronouncements

The Financial Accounting Standards Board (the “FASB”) issued guidance, Revenue from Contracts with Customers (“ASC 606”), 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. On December 1, 2018, we adopted this guidance using the modified retrospective method for all contracts as of the adoption date. Results for reporting periods beginning after December 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under ASC 605.

The impact of the adoption of ASC 606 on our consolidated financial statements primarily relates to the gross presentation of prepaid travel agent commissions (Consolidated Balance Sheet), shore excursions and other onboard revenues and costs (Consolidated Statement of Income) which were historically presented net. As of December 1, 2018, we recorded a cumulative effect adjustment of $24 million to retained earnings related to the accounting for our loyalty programs.


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Table of Contents

The following tables summarize the impacts of ASC 606 adoption on our consolidated financial statements:
 
Three Months Ended August 31, 2019
(in millions)
Prior to adoption of ASC 606
 
Adjustments
 
As Reported
Consolidated Statement of Income
 
 
 
 
 
Onboard and other (Revenues)
$
1,407

 
$
449

 
$
1,855

Revenues (Total)
$
6,084

 
$
449

 
$
6,533

Onboard and other (Operating Costs and Expenses)
$
219

 
$
449

 
$
668

Operating Costs and Expenses (Total)
$
4,194

 
$
449

 
$
4,643

Operating Income
$
1,890

 
$

 
$
1,890

Net Income
$
1,780

 
$

 
$
1,780

 
 
 
 
 
 
 
Nine Months Ended August 31, 2019
(in millions)
Prior to adoption of ASC 606
 
Adjustments
 
As Reported
Consolidated Statement of Income
 
 
 
 
 
Onboard and other (Revenues)
$
3,696

 
$
1,115

 
$
4,811

Revenues (Total)
$
14,929

 
$
1,115

 
$
16,043

Onboard and other (Operating Costs and Expenses)
$
506

 
$
1,115

 
$
1,620

Operating Costs and Expenses (Total)
$
12,137

 
$
1,115

 
$
13,252

Operating Income
$
2,791

 
$

 
$
2,791

Net Income
$
2,567

 
$

 
$
2,567

 
 
 
 
 
 
 
At August 31, 2019
(in millions)
Prior to adoption of ASC 606
 
Adjustments
 
As Reported
Consolidated Balance Sheet
 
 
 
 
 
Prepaid expenses and other
$
488

 
$
147

 
$
635

Total current assets
$
2,565

 
$
147

 
$
2,712

Customer deposits
$
4,527

 
$
147

 
$
4,674

Total current liabilities
$
8,784

 
$
147

 
$
8,932

 
 
 
 
 
 
 
Nine Months Ended August 31, 2019
(in millions)
Prior to adoption of ASC 606
 
Adjustments
 
As Reported
Consolidated Statement of Cash Flows
 
 
 
 
 
Prepaid expenses and other
$
(73
)
 
$
(147
)
 
$
(220
)
Customer deposits
$
262

 
$
147

 
$
409

Net cash provided by operating activities
$
4,414

 
$

 
$
4,414



The FASB issued amended guidance, Business Combinations - Clarifying the Definition of a Business, which assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. On December 1, 2018, we adopted this guidance using the prospective transition method. The adoption of this guidance had no impact on our consolidated financial statements.

The FASB issued amended guidance, 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. On December 1, 2018, we adopted this guidance using the retrospective method for each period presented. The adoption of this guidance had no impact on our consolidated financial statements.


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The FASB issued amended guidance, Statement of Cash Flows - Restricted Cash. On December 1, 2018, we adopted this guidance using the retrospective method for each period presented. As a result, we now present restricted cash with cash and cash equivalents in the statement of cash flows. The reclassification of restricted cash balances from investing activities to changes in cash, cash equivalents and restricted cash was not material for the period presented.

The FASB issued amended guidance, Service Concession Arrangements, which clarifies that the grantor in a service arrangement should be considered the customer of the operating entity in all cases. On December 1, 2018, we adopted this guidance using the modified retrospective method. The adoption of this guidance had no impact on our consolidated financial statements.

The FASB issued amended guidance, Derivatives and Hedging, which targeted improvements to accounting for hedging activities such as hedging strategies, effectiveness assessments and recognition of derivative gains or losses. On December 1, 2018, we early adopted this guidance using the modified retrospective approach, which did not have a material impact on our financial statements. At the time of adoption, we changed the method by which we assess effectiveness for outstanding net investment hedges from the forward method to the spot method. Under the spot method, the change in fair value of the hedging instrument attributable to hedge effectiveness remains in AOCI until the net investment is sold or liquidated, while the impact attributable to components excluded from the assessment of hedge effectiveness is recorded in interest expense, net of capitalized interest, on a systematic and rational basis. Previous gains or losses incurred under the forward method related to net investment hedges will remain in AOCI within the foreign currency translation adjustments component and will be reclassified to earnings when the net investment is sold or liquidated. As required by this guidance, we have also added certain disclosures about hedging activities and their effect on our consolidated financial statements.

The FASB issued guidance, 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 2020 and must be applied using a modified retrospective approach which allows entities to either apply the new lease standard to the beginning of the earliest period presented or only to the current period consolidated financial statements. The initial adoption of this guidance is expected to increase both our total assets and total liabilities, reflecting the lease rights and obligations arising from our lease arrangements, and will require additional disclosures. We are evaluating certain contractual arrangements to determine if they contain an implicit right to use an asset that would qualify as a leasing arrangement under the new guidance.

The FASB issued amended guidance, Intangibles - Goodwill and Other - Internal-Use Software, which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance to determine which implementation costs to capitalize as assets or expense as incurred. The expense related to deferred implementation costs is required to be presented in the same income statement line item as the related hosting fees. Additionally, the payments for deferred implementation costs are required to be presented in the same line item in the statement of cash flows as payments for the related hosting fees. This guidance is required to be adopted by us in the first quarter of 2021 and must be applied using either a prospective or a retrospective approach. Early adoption is permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

NOTE 2 – 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. Certain of our product offerings are bundled and we allocate the value of the bundled services and goods between passenger ticket revenues, onboard and other revenues and tour and other revenues based upon the estimated standalone selling prices of those goods and services.

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.

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 are included in onboard and other revenues and the related costs are included in onboard and other costs. The amounts collected on behalf of our onboard concessionaires, net of

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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. For the three and nine months ended August 31, the fees, taxes and charges included in passenger ticket revenues and commissions, transportation and other costs were $186 million and $503 million in 2019 and $174 million and $465 million in 2018. 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.
                
Customer Deposits

Our payment terms generally require an initial deposit to confirm a reservation, with the balance due prior to the voyage. Cash received from guests in advance of the cruise is recorded in customer deposits and in other long-term liabilities on our Consolidated Balance Sheets. These amounts include refundable deposits. We had customer deposits of $4.9 billion and $4.7 billion as of August 31, 2019 and December 1, 2018. During the nine months ended August 31, 2019, we recognized revenues of $4.1 billion related to our customer deposits as of December 1, 2018. Our customer deposits balance changes due to the seasonal nature of cash collections, the recognition of revenue and foreign currency translation.

Contract Receivables

Although we generally require full payment from our customers prior to or concurrently with their cruise, we grant credit terms to a relatively small portion of our revenue source. We also have receivables from credit card merchants for cruise ticket purchases and onboard revenue. These receivables are included within trade and other receivables, net.

Contract Assets

Contract assets are amounts paid prior to the start of a voyage, which we record as an asset within prepaid expenses and other and which are subsequently recognized as commissions, transportation and other at the time of revenue recognition. We have contract assets of $147 million and $151 million as of August 31, 2019 and December 1, 2018.

NOTE 3 – Unsecured Debt

At August 31, 2019, our short-term borrowings consisted of euro-denominated commercial paper of $238 million. For the nine months ended August 31, 2019, there were no borrowings or repayments of commercial paper with original maturities greater than three months. For the nine months ended August 31, 2018, we had borrowings of $2 million and repayments of $2 million of commercial paper with original maturities greater than three months.

In December 2018, we borrowed $852 million under an export credit facility due in semi-annual installments through 2031.

In February 2019, we borrowed $587 million under a euro-denominated export credit facility due in semi-annual installments through 2031. We also entered into an $899 million export credit facility, which may be drawn in euro or U.S. dollars in 2023 and will be due in semi-annual installments through 2035. The interest rate on this export credit facility can be fixed or floating, at our discretion.

In March 2019, we borrowed $283 million under two euro-denominated floating rate bank loans due in 2023.

In August 2019, we amended and restated our existing multi-currency revolving credit facility which was scheduled to expire in 2021. The amended and restated five-year multi-currency revolving credit facility of $3.0 billion (comprised of $1.7 billion, 1.0 billion and £150 million) expires in 2024.


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NOTE 4 – Contingencies
Litigation
On May 2, 2019, two lawsuits were filed against Carnival Corporation in the U.S. District Court for the Southern District of Florida under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation alleges it holds an interest in the Havana Cruise Port Terminal and the complaint filed by Javier Garcia-Bengochea alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban Government. The complaints further allege that Carnival Cruise Line “trafficked” in those properties by embarking and disembarking passengers at these facilities. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs. The court denied our motion to dismiss the complaints filed by Havana Docks Corporation and Javier Garcia-Bengochea, on August 28, 2019 and August 26, 2019, respectively.
We believe we have meritorious defenses to the claims and intend to vigorously defend against them. We do not believe that it is likely that the outcome of these matters will be material, but litigation is inherently unpredictable and there can be no assurances that the final outcome of the case might not be material to our operating results or financial condition.
Additionally, 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, or any settlement of claims and lawsuits, are covered by insurance and the maximum amount of our liability, net of any insurance recoverables, is typically limited to our self-insurance retention levels. We believe the ultimate outcome of these claims, lawsuits and settlements, as applicable, each and in the aggregate, will not have a material impact on our consolidated financial statements.
Contingent Obligations – Indemnifications
Some of the debt contracts 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 our lender’s costs. 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.

NOTE 5 – Fair Value Measurements, Derivative Instruments and Hedging Activities and Financial Risks
Fair Value Measurements
Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured using inputs in one of the following three categories:
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.
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.


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Financial Instruments that are not Measured at Fair Value on a Recurring Basis 
 
August 31, 2019
 
November 30, 2018
 
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
(in millions)
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 

 
 
 
 
 
 
 

Long-term other assets (a)
$
186

 
$

 
$
31

 
$
154

 
$
127

 
$

 
$
30

 
$
95

Total
$
186

 
$

 
$
31

 
$
154

 
$
127

 
$

 
$
30

 
$
95

Liabilities
 
 
 
 
 
 

 
 
 
 
 
 
 

Fixed rate debt (b)
$
6,560

 
$

 
$
6,947

 
$

 
$
5,699

 
$

 
$
5,799

 
$

Floating rate debt (b)
4,278

 

 
4,338

 

 
4,695

 

 
4,727

 

Total
$
10,839

 
$

 
$
11,285

 
$

 
$
10,394

 
$

 
$
10,526

 
$

 
(a)
Long-term other assets are comprised of notes receivables, which include loans on ship sales. The fair values of our Level 2 notes receivable were based on estimated future cash flows discounted at appropriate market interest rates. The fair values of our Level 3 notes receivable were estimated using risk-adjusted discount rates.
(b)
The debt amounts above do not include the impact of interest rate swaps or debt issuance costs. The fair values of our publicly-traded notes were based on their unadjusted quoted market prices in markets that are not sufficiently active to be Level 1 and, accordingly, are considered Level 2. The fair values of our other debt were estimated based on current market interest rates being applied to this debt.

Financial Instruments that are Measured at Fair Value on a Recurring Basis
 
August 31, 2019
 
November 30, 2018
(in millions)
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,153

 
$

 
$

 
$
982

 
$

 
$

Restricted cash
16

 

 

 
14

 

 

Derivative financial instruments

 
37

 

 

 

 

Total
$
1,170

 
$
37

 
$

 
$
996

 
$

 
$

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Derivative financial instruments
$

 
$
25

 
$

 
$

 
$
29

 
$

Total
$

 
$
25

 
$

 
$

 
$
29

 
$



Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis
Valuation of Goodwill and Trademarks 
 
Goodwill
(in millions)
NAA (a)
Segment
 
EA (b)
Segment
 
Total
At November 30, 2018
$
1,898

 
$
1,027

 
$
2,925

Foreign currency translation adjustment

 
(39
)
 
(39
)
At August 31, 2019
$
1,898

 
$
988

 
$
2,886

(a)    North America & Australia (“NAA”)
(b)    Europe & Asia (“EA”)

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Table of Contents

 
Trademarks
(in millions)
NAA
Segment
 
EA
Segment
 
Total
At November 30, 2018
$
927

 
$
242

 
$
1,169

Foreign currency translation adjustment

 
(10
)
 
(10
)
At August 31, 2019
$
927

 
$
232

 
$
1,159



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. A change in the conditions, circumstances or strategy, including decisions about the allocation of new ships amongst brands and the transfer of ships between brands (influencing fair values in the future), may result in a need to recognize an impairment charge.

Derivative Instruments and Hedging Activities  

(in millions)
Balance Sheet Location
 
August 31, 2019
 
November 30, 2018
Derivative assets
 
 
 
 
 
Derivatives designated as hedging instruments