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 ~~February 28, 2018~~August 31, 2020



☐			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

Carnival plc

(Exact name of registrant as
specified in its charter)

~~Commission file number: 001-9610~~

~~Commission file number: 001-15136~~

~~Carnival Corporation~~

~~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.)

3655 N.W. 87th Avenue

~~Miami, Florida 33178-2428~~

Carnival House, 100 Harbour Parade

~~Southampton SO15 1ST, United Kingdom~~

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~~

~~(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)~~


(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:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.01 par value)	CCL	New York Stock Exchange, Inc.
Ordinary Shares each represented by American Depository 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	CUK	New York Stock Exchange, Inc.
1.625% Senior Notes due 2021	CCL21	New York Stock Exchange LLC
1.875% Senior Notes due 2022	CUK22	New York Stock Exchange LLC
1.000% Senior Notes due 2029	CUK29	New York Stock Exchange LLC

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 ~~and posted on their corporate Web sites, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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 ~~March 15, 2018,~~October 2, 2020, Carnival Corporation had outstanding ~~534,352,222~~720,568,437 shares of Common Stock, $0.01 par value.						At ~~March 15, 2018,~~October 2, 2020, Carnival plc had outstanding ~~207,338,276~~182,672,360 Ordinary Shares $1.66 par value, one Special Voting Share, GBP 1.00 par value and ~~534,352,222~~720,568,437 Trust Shares of beneficial interest in the P&O Princess Special Voting Trust.

Table of Contents

CARNIVAL CORPORATION & PLC

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

~~Page~~

~~PART I - FINANCIAL INFORMATION~~

~~Item 1.~~

~~Financial Statements~~

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1630

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2641

Item 4.

Controls and Procedures

2742

PART II - OTHER INFORMATION

Item 1.

Item 1A.

��

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CARNIVAL CORPORATION & PLC

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(UNAUDITED)

(in millions, except per share data)


	Three Months Ended August 31,						Nine Months Ended August 31,
	2020		2019		2020		2019
Revenues
Passenger ticket	$	0	$	4,477	$	3,680	$	10,934
Onboard and other	31		2,056		1,881		5,110
	31		6,533		5,561		16,043
Operating Costs and Expenses
Commissions, transportation and other	34		803		1,098		2,125
Onboard and other	9		668		593		1,620
Payroll and related	248		548		1,563		1,671
Fuel	121		401		718		1,204
Food	19		284		404		821
Ship and other impairments	910		23		1,829		24
Other operating	208		805		1,349		2,367
	1,549		3,532		7,556		9,833
Selling and administrative	265		563		1,435		1,813
Depreciation and amortization	551		548		1,698		1,607
Goodwill impairment	0		0		2,096		0
	2,364		4,643		12,784		13,252
Operating Income (Loss)	(2,333)		1,890		(7,223)		2,791
Nonoperating Income (Expense)
Interest income	3		8		15		16
Interest expense, net of capitalized interest	(310)		(52)		(547)		(157)

Other income (expense), net	(221)		(19)		(260)		(27)
	(528)		(63)		(793)		(168)
Income (Loss) Before Income Taxes	(2,861)		1,827		(8,016)		2,624
Income Tax Benefit (Expense), Net	2		(47)		2		(56)
Net Income (Loss)	$	(2,858)	$	1,780	$	(8,014)	$	2,567
Earnings Per Share
Basic	$	(3.69)	$	2.58	$	(11.03)	$	3.72
Diluted	$	(3.69)	$	2.58	$	(11.03)	$	3.71

Three Months Ended
February 28,
2018 2017
Revenues
Cruise
Passenger ticket $ 3,148
$ 2,804
Onboard and other 1,071
978
Tour and other 13
9
4,232
3,791
Operating Costs and Expenses
Cruise
Commissions, transportation and other 663
569
Onboard and other 140
125
Payroll and related 558
519
Fuel 359
297
Food 264
251
Other ship operating 711
661
Tour and other 14
13
2,709
2,435
Selling and administrative 616
549
Depreciation and amortization 488
439
3,813
3,423
Operating Income 419
368
Nonoperating Income (Expense)
Interest income 3
2
Interest expense, net of capitalized interest (48 ) (51 )
Gains on fuel derivatives, net 16
27
Other income, net 1
8
(28 ) (14 )
Income Before Income Taxes 390
354
Income Tax Expense, Net —
(2 )
Net Income $ 391
$ 352
Earnings Per Share
Basic $ 0.54
$ 0.48
Diluted $ 0.54
$ 0.48
Dividends Declared Per Share $ 0.45
$ 0.35

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

Table of Contents

CARNIVAL CORPORATION & PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in millions)

Three Months Ended
February 28,
2018 2017
Net Income $ 391
$ 352
Items Included in Other Comprehensive Income

Change in foreign currency translation adjustment 292
1
Other 3
14
Other Comprehensive Income 295
15
Total Comprehensive Income $ 686
$ 367


	Three Months Ended August 31,						Nine Months Ended August 31,
	2020		2019		2020		2019
Net Income (Loss)	$	(2,858)	$	1,780	$	(8,014)	$	2,567
Items Included in Other Comprehensive Income (Loss)
Change in foreign currency translation adjustment	519		(101)		567		(215)
Other	4		(6)		60		(19)
Other Comprehensive Income (Loss)	524		(107)		627		(234)
Total Comprehensive Income (Loss)	$	(2,335)	$	1,674	$	(7,387)	$	2,333

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

Table of Contents

CARNIVAL CORPORATION & PLC

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in millions, except par values)


	August 31, 2020		November 30, 2019
ASSETS
Current Assets
Cash and cash equivalents	$	8,176	$	518
Trade and other receivables, net	376		444
Inventories	349		427
Prepaid expenses and other	367		671
Total current assets	9,268		2,059
Property and Equipment, Net	36,926		38,131
Operating Lease Right-of-Use Assets (a)	1,379		—
Goodwill	807		2,912
Other Intangibles	1,186		1,174
Other Assets	1,252		783
	$	50,818	$	45,058
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term borrowings	$	3,374	$	231
Current portion of long-term debt	2,621		1,596
Current portion of operating lease liabilities (a)	150		—
Accounts payable	691		756
Accrued liabilities and other	1,199		1,809
Customer deposits	2,150		4,735
Total current liabilities	10,184		9,127
Long-Term Debt	18,916		9,675
Long-Term Operating Lease Liabilities (a)	1,281		—
Other Long-Term Liabilities	934		890
Contingencies and Commitments
Shareholders’ Equity
Common stock of Carnival Corporation, $0.01 par value; 1,960 shares authorized; 830 shares at 2020 and 657 shares at 2019 issued	8		7
Ordinary shares of Carnival plc, $1.66 par value; 217 shares at 2020 and 2019 issued	361		358
Additional paid-in capital	10,680		8,807
Retained earnings	18,297		26,653
Accumulated other comprehensive income (loss) (“AOCI”)	(1,439)		(2,066)
Treasury stock, 130 shares at 2020 and 2019 of Carnival Corporation and 60 shares at 2020 and 2019 of Carnival plc, at cost	(8,404)		(8,394)
Total shareholders’ equity	19,503		25,365
	$	50,818	$	45,058

February 28,
2018 November 30,
2017
ASSETS
Current Assets
Cash and cash equivalents $ 453
$ 395
Trade and other receivables, net 345
312
Inventories 394
387
Prepaid expenses and other 475
502
Total current assets 1,667
1,596
Property and Equipment, Net 35,027
34,430
Goodwill 3,014
2,967
Other Intangibles 1,198
1,200
Other Assets 535
585
$ 41,441
$ 40,778
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term borrowings $ 1,108
$ 485
Current portion of long-term debt 1,006
1,717
Accounts payable 795
762
Accrued liabilities and other 1,653
1,877
Customer deposits 4,288
3,958
Total current liabilities 8,851
8,800
Long-Term Debt 7,445
6,993
Other Long-Term Liabilities 764
769
Contingencies

Shareholders’ Equity
Common stock of Carnival Corporation, $0.01 par value; 1,960 shares authorized; 656 shares at 2018 and 655 shares at 2017 issued 7
7
Ordinary shares of Carnival plc, $1.66 par value; 217 shares at 2018 and 2017 issued 358
358
Additional paid-in capital 8,708
8,690
Retained earnings 23,360
23,292
Accumulated other comprehensive loss (1,486 ) (1,782 )
Treasury stock, 122 shares at 2018 and 2017 of Carnival Corporation and 35 shares at 2018 and 32 shares at 2017 of Carnival plc, at cost (6,565 ) (6,349 )
Total shareholders’ equity 24,382
24,216
$ 41,441
$ 40,778

(a)We adopted the provisions of Leases on December 1, 2019.

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

Table of Contents

CARNIVAL CORPORATION & PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in millions)


	Nine Months Ended August 31,
	2020		2019
OPERATING ACTIVITIES
Net income (loss)	$	(8,014)	$	2,567
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization	1,698		1,607
Impairments	3,925		26
Loss on repurchase of Convertible Notes	224		0
Share-based compensation	52		38
(Gain) loss on ship sales and other, net	164		29
	(1,951)		4,266
Changes in operating assets and liabilities
Receivables	25		(101)
Inventories	71		22
Prepaid expenses and other	9		(220)
Accounts payable	(97)		(25)
Accrued liabilities and other	(169)		63
Customer deposits	(2,539)		409
Net cash provided by (used in) operating activities	(4,649)		4,414
INVESTING ACTIVITIES
Purchases of property and equipment	(1,899)		(3,448)
Proceeds from sales of ships	271		15
Purchase of minority interest	(81)		0
Derivative settlements and other, net	257		116
Net cash provided by (used in) investing activities	(1,452)		(3,317)
FINANCING ACTIVITIES
Proceeds from (repayments of) short-term borrowings, net	3,141		(600)
Principal repayments of long-term debt	(896)		(472)
Proceeds from issuance of long-term debt	11,468		1,722
Dividends paid	(689)		(1,041)
Purchases of treasury stock	(12)		(472)

Issuance of common stock, net	778		4
Other, net	(91)		(53)
Net cash provided by (used in) financing activities	13,699		(912)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	63		(11)
Net increase (decrease) in cash, cash equivalents and restricted cash	7,661		174
Cash, cash equivalents and restricted cash at beginning of period	530		996
Cash, cash equivalents and restricted cash at end of period	$	8,191	$	1,170

Three Months Ended February 28,
2018 2017
OPERATING ACTIVITIES
Net income $ 391
$ 352
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 488
439
Gains on fuel derivatives, net (16 ) (27 )
Share-based compensation 18
20
Other, net 24
20
904
804
Changes in operating assets and liabilities
Receivables (30 ) (2 )
Inventories 1
(35 )
Prepaid expenses and other 98
(10 )
Accounts payable 19
(47 )
Accrued liabilities and other (198 ) 3
Customer deposits 271
219
Net cash provided by operating activities 1,064
932
INVESTING ACTIVITIES
Purchases of property and equipment (574 ) (412 )
Payments of fuel derivative settlements (21 ) (52 )
Other, net 4
(10 )
Net cash used in investing activities (591 ) (474 )
FINANCING ACTIVITIES
Proceeds from (repayments of) short-term borrowings, net 611
(289 )
Principal repayments of long-term debt (963 ) (101 )
Proceeds from issuance of long-term debt 469
100
Dividends paid (323 ) (254 )
Purchases of treasury stock (218 ) (69 )
Other, net (4 ) (2 )
Net cash used in financing activities (428 ) (615 )
Effect of exchange rate changes on cash and cash equivalents 12
(9 )
Net increase (decrease) in cash and cash equivalents 58
(166 )
Cash and cash equivalents at beginning of period 395
603
Cash and cash equivalents at end of period $ 453
$ 437

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

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, 2019	$	7	$	358	$	8,785	$	25,138	$	(2,076)	$	(8,104)	$	24,108
Net income (loss)	—		—		—		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

At May 31, 2020	$	7	$	360	$	9,683	$	21,155	$	(1,962)	$	(8,404)	$	20,840
Net income (loss)	—		—		—		(2,858)		—		—		(2,858)
Other comprehensive income (loss)	—		—		—		—		524		—		524
Issuance of common stock related to the repurchase of Convertible Notes	—		—		222		—		—		—		222
Repurchase of Convertible Notes	1		—		765		—		—		—		766
Other	—		—		9		—		—		—		9
At August 31, 2020	$	8	$	361	$	10,680	$	18,297	$	(1,439)	$	(8,404)	$	19,503

Table of Contents


	Nine Months Ended
	Common stock		Ordinary shares		Additional paid-in capital		Retained earnings		AOCI		Treasury stock		Total shareholders’ equity
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 (loss)	—		—		—		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

At November 30, 2019	$	7	$	358	$	8,807	$	26,653	$	(2,066)	$	(8,394)	$	25,365
Net income (loss)	—		—		—		(8,014)		—		—		(8,014)
Other comprehensive income (loss)	—		—		—		—		627		—		627
Cash dividends declared ($0.50 per share)	—		—		—		(342)		—		—		(342)
Issuance of common stock	1		—		777		—		—		—		778
Issuance and repurchase of Convertible Notes	1		—		1,051		—		—		—		1,052
Purchases of treasury stock under the Repurchase Program and other	—		2		44		—		—		(10)		36
At August 31, 2020	$	8	$	361	$	10,680	$	18,297	$	(1,439)	$	(8,404)	$	19,503

(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.

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.”

Liquidity and Management’s Plans

Due to the spread of COVID-19, we paused our global cruise operations in mid-March 2020. In September 2020 we began the resumption of limited guest operations as part of our anticipated phased-in return to service. Significant events affecting travel, including COVID-19, typically have an impact on booking patterns, with the full extent of the impact generally determined by the length of time the event influences travel decisions. We believe that the ongoing effects of COVID-19 on our operations and global bookings will continue to have a material negative impact on our financial results and liquidity, and such negative impact may continue well beyond the containment of such outbreak.

We cannot assure you that our assumptions used to estimate our liquidity requirements will be correct because we have never previously experienced a complete cessation of our guest cruise operations, and as a consequence, our ability to be predictive is uncertain. In addition, the magnitude, duration and speed of the global pandemic are uncertain. As a consequence, we cannot estimate the impact on our business, financial condition or near- or longer-term financial or operational results with reasonable certainty, but we continue to expect a net loss on both a U.S. GAAP and adjusted basis for the quarter and year ending November 30, 2020. We have taken and continue to take actions to improve our liquidity, including capital expenditure and operating expense reductions, accelerating the removal of certain ships from our fleet, suspending dividend payments on, and the repurchase of, common stock of Carnival Corporation and ordinary shares of Carnival plc and pursuing various capital market transactions.

Based on these actions and assumptions regarding the impact of COVID-19, we have concluded that we will be able to generate sufficient liquidity to satisfy our obligations for at least the next twelve months.

Basis of Presentation

The Consolidated Statements of Income ~~and~~(Loss), the Consolidated Statements of Comprehensive Income (Loss), and the Consolidated Statements of Shareholders’ Equity for the three and nine months ended ~~February 28, 2018~~August 31, 2020 and ~~2017,~~2019, Consolidated Statement of Cash Flows for the nine months ended August 31, 2020 and 2019, and the Consolidated Balance Sheet at ~~February 28, 2018 and the Consolidated Statements of Cash Flows for the three months ended February 28, 2018 and 2017~~August 31, 2020 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 ~~2017~~2019 joint Annual Report on Form 10-K and Form 10-K/A (“Form 10-K”) filed with the U.S. Securities and Exchange Commission on January ~~29, 2018. Our~~28, 2020 and March 31, 2020, respectively.

For the three and nine months ended August 31, 2019, we reclassified $200 million and $299 million from tour and other revenues to onboard and other revenues as well as $109 million and $198 million from tour and other costs and expenses to other operating cost and expenses in order to conform to the current year presentation.

COVID-19 Use of Estimates and Risks and Uncertainty

The preparation of our interim consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported and disclosed. The full extent to which the effects of COVID-19 will directly or indirectly impact our business, operations, results of operations and financial condition, including our valuation of goodwill and trademarks, impairment of ships, collectability of trade and notes receivables as well as provisions for pending litigation, will depend on future developments that are ~~seasonal~~highly uncertain. We believe that we have made reasonable estimates and ~~results for interim periods are not necessarily indicative~~judgments of the ~~results for the entire year.~~impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods.

Table of Contents

Accounting Pronouncements

~~The Financial Accounting Standards Board (the “FASB”) issued amended guidance,~~ ~~Compensation - Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires the bifurcation of service costs and other components of net benefit cost. The presentation of the other components of net benefit cost have been recorded in other income.~~ On December 1, ~~2017,~~2019, we adopted ~~this~~the FASB issued guidance,Leases, using the modified retrospective ~~transition method for~~approach, which allows entities to either apply the ~~presentation~~new lease standard to the beginning of the ~~service cost component and other components of net benefit cost. The impact of adopting this guidance was immaterial~~earliest period presented or only to ~~our~~the consolidated financial statements in the period of adoption without restating prior periods. We have elected to apply the new guidance at the date of adoption without restating prior periods.

We have implemented changes to our internal controls to address the collection, recording, and accounting for leases in accordance with the new guidance. Upon adoption of the new guidance, the most significant impact was the recognition of $1.4 billion of right-of-use assets and lease liabilities relating to operating leases, reported within operating lease right-of-use assets and long-term operating lease liabilities, with the current portion of the liability reported within current portion of operating lease liabilities, in our Consolidated Balance Sheet as ~~such, prior period information~~of December 1, 2019. There was ~~not revised.~~no cumulative effect of applying the new standard and accordingly there was no adjustment to our retained earnings upon adoption. This guidance had an immaterial impact on our Consolidated Statements of Income (Loss), Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Cash Flows and the compliance with debt covenants under our current agreements.

The FASB issued amended guidance,~~Revenue from Contracts with Customers~~ Intangibles - Goodwill and Other - Internal-Use Software,which requires ~~an entity~~a customer in a cloud computing arrangement that is a service contract to ~~recognize~~follow the ~~amount of revenue~~internal-use software guidance to determine which ~~it expects~~implementation costs to capitalize as assets or expense as incurred. The expense related to deferred implementation costs is required to be ~~entitled~~presented in the same net income (loss) 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 Consolidated Statements of Cash Flows as payments 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.related hosting fees. This guidance is required to be adopted by us in the first quarter of ~~2019~~2021 and ~~can be applied~~we have elected to apply the guidance using ~~either~~ a ~~retrospective or a modified retrospective~~prospective approach. ~~Based on our assessment to date,~~We do not expect the adoption of this guidance ~~is not expected~~ to have a ~~material impact to the timing of our recognition of revenue and will require additional disclosures. We are currently evaluating if this guidance will have any other~~significant impact on our consolidated financial statements.

The FASB issued amended guidance, ~~Business Combinations~~Financial Instruments - ~~Clarifying~~Credit Losses, which requires an entity to present the ~~Definition~~net amount expected to be collected for certain financial assets, including trade receivables. On initial recognition and at each reporting period, this guidance will require an entity to recognize an allowance that reflects the entity's current estimate of ~~a Business~~,~~which assists entities with evaluating whether transactions should~~credit losses expected to be ~~accounted for as acquisitions (or disposals)~~incurred over the life of ~~assets or businesses.~~the financial instrument. This guidance is required to be adopted by us in the first quarter of ~~2019 on~~2021 and will be applied prospectively with a ~~prospective basis. Early adoption is permitted, including adoption in an interim period. The adoption of~~cumulative-effect adjustment to retained earnings. We are currently evaluating the impact this guidance ~~is not expected to~~will have ~~a material impact to~~on our consolidated financial statements.

The FASB issued ~~amended~~ guidance,~~Statement of Cash Flows~~ Debt - ~~Classification of Certain Cash Receipts~~Debt with Conversion and ~~Cash Payments~~Other Options and Derivative and Hedging - Contracts in Entity's Own Equity, which ~~clarifies how~~simplifies the accounting for convertible instruments. This guidance eliminates certain ~~cash receipts and cash payments are presented and classified~~models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the ~~statement~~diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash ~~flows. The amendments are aimed at reducing the existing diversity in practice.~~or shares, except for certain liability-classified share-based payment awards. This guidance is required to be adopted by us in the first quarter of ~~2019~~2023 and must be applied using a retrospective approach 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,~~ ~~Statement of Cash Flows - Restricted Cash~~, which requires restricted cash to be presented with cash and cash equivalents in the statement of cash flows. This guidance is required to be adopted by us in the first quarter of 2019 and must be applied using a retrospective approach to 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,~~ ~~Service Concession Arrangements,~~ ~~which clarifies that the grantor in a service arrangement should be considered the customer of the operating entity in all cases. This guidance is required to be adopted by~~

~~us in the first quarter of 2019 and can be applied using~~ either a ~~retrospective~~modified or ~~a modified~~full retrospective approach. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

NOTE 2 – Revenue and Expense Recognition

Guest cruise deposits 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 ~~FASB issued guidance,~~ ~~Leases, which requires an entity~~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 and onboard and other revenues based upon the estimated standalone selling prices of those goods and services. Guest cancellation fees, when applicable, are recognized in passenger ticket revenues at the time of cancellation.

Our sales to ~~recognize both assets~~guests of air and ~~liabilities arising~~other transportation to and from ~~financing~~airports near the home ports of our ships are included in passenger ticket revenues, and ~~operating leases, along with additional qualitative~~the related costs of purchasing these services are included in transportation costs. The proceeds that we collect from the sales of third-party shore excursions are included in onboard and ~~quantitative disclosures. This guidance is required~~other revenues and the related costs are included in onboard and other costs. The amounts collected on behalf of our onboard concessionaires, net of the amounts

Table of Contents

remitted to ~~be adopted by us~~them, are included in ~~the first quarter~~onboard and other revenues as concession revenues. All of ~~2020 and must be applied using~~these amounts are recognized on a modified retrospective approach. Early adoption is permitted. Based on our assessment to date, the initial adoption of this guidance is expected to increase both our total assets and total liabilities and will require additional disclosures. We are currently evaluating if this guidance will have any other impact on our consolidatedcompleted voyage or pro rata basis as discussed above.

~~financial statements.~~

~~The FASB issued 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. This guidance is required to be adopted by us in the first quarter of 2020 and must be applied using a modified retrospective approach. Early adoption is permitted. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

~~Other~~

~~Cruise passenger~~Passenger ticket revenues include fees, taxes and charges collected by us from our guests. ~~The~~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, fees, taxes, and charges included in ~~passenger ticket revenues and~~ commissions, transportation and other costs were ~~$148~~not significant and $213 million in 2020 and $186 million and ~~$143~~$503 million in 2019. The remaining portion of fees, taxes and charges are expensed in other 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. 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 are providing flexibility to guests with bookings on sailings cancelled due to the pause in cruise operations by allowing guests to receive enhanced future cruise credits ("FCC") or elect to receive refunds in cash. We have paid and expect to continue to pay cash refunds of customer deposits with respect to a portion of these cancelled cruises. The amount of cash refunds to be paid may depend on the level of guest acceptance of FCCs and future cruise cancellations. We record a liability for FCCs to the ~~three~~extent we have received cash from guests with bookings on cancelled sailings. We had customer deposits of $2.4 billion as of August 31, 2020 and $4.9 billion as of November 30, 2019. The current portion of our customer deposits was $2.1 billion as of August 31, 2020, the majority of which are FCCs. These amounts include deposits related to cancelled cruises prior to the election of a cash refund by guests. Refunds payable to guests who have elected cash refunds are recorded in accounts payable. Due to the uncertainty associated with the duration and extent of COVID-19, we are unable to estimate the amount of the August 31, 2020 customer deposits that will be recognized in earnings compared to amounts that will be refunded to customers or issued as a credit for future travel. During the nine months ended ~~February 28, 2018~~August 31, 2020 and ~~2017, respectively.~~2019, we recognized revenues of $3.3 billion and $4.1 billion related to our customer deposits as of November 30, 2019 and December 1, 2018. Historically, our customer deposits balance changes due to the seasonal nature of cash collections, the recognition of revenue, refund of customer deposits 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 or at the time of voyage cancellation. We have contract assets of $17 million and $154 million as of August 31, 2020 and November 30, 2019.

Table of Contents

NOTE 23 – ~~Unsecured~~ Debt

Short-Term Borrowings

At ~~February 28, 2018,~~August 31, 2020, our short-term borrowings consisted primarily of ~~euro- and U.S. dollar-denominated~~$3.0 billion borrowing under our multicurrency revolving credit facility (the “Revolving Facility”), $314 million of commercial paper, $20 million of ~~$862~~euro-denominated commercial paper and $33 million ~~and a euro-denominated bank loan~~ of ~~$246 million due in 2019.~~sterling-denominated commercial paper. For the ~~three~~nine months ended ~~February 28, 2018 and 2017,~~August 31, 2020, we had borrowings of ~~$2 million and $111~~$525 million and repayments of ~~$0 million and $240~~$192 million of commercial paper with original maturities greater than three months. For the nine months ended August 31, 2019, there were no borrowings or repayments of commercial paper with original maturities greater than three months.

Export Credit Facility Borrowings

In December ~~2017,~~2019, we borrowed ~~$469~~$823 million under an export credit facility due in semi-annual installments through 2032.

In September 2020, we borrowed $610 million under an export credit facility due in semi-annual installments through 2032.

2023 Secured Notes

In April 2020, we issued $4.0 billion aggregate principal amount of 11.5% first-priority senior secured notes due in 2023 (the “2023 Secured Notes”). The 2023 Secured Notes mature on April 1, 2023 unless earlier redeemed or repurchased. They are guaranteed by Carnival plc and certain of our subsidiaries that own or operate our vessels and material intellectual property, and are secured by collateral, which includes vessels and material intellectual property with a net book value of $27.9 billion as of August 31, 2020 and certain other assets. Upon the occurrence of certain change of control events, we are required to offer to repurchase the 2023 Secured Notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest to the purchase date.

The indenture governing the 2023 Secured Notes contains covenants that limit our ability to, among other things: (i) incur additional indebtedness or issue certain preferred shares; (ii) make dividend payments on or make other distributions in respect of our capital stock or make other restricted payments; (iii) make certain investments; (iv) sell certain assets; (v) create liens on assets; (vi) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and (vii) enter into certain transactions with our affiliates. These covenants are subject to a number of important limitations and exceptions.

Convertible Notes

In April 2020, we issued $2.0 billion aggregate principal amount of 5.75% convertible senior notes due 2023 (the “Convertible Notes”). The Convertible Notes mature on April 1, 2023, unless earlier repurchased or redeemed by us or earlier converted in accordance with their terms prior to the maturity date. The Convertible Notes are guaranteed on a senior unsecured basis by Carnival plc, Carnival Finance, LLC and our subsidiaries that guarantee the 2023 Secured Notes.

The Convertible Notes are convertible by holders, subject to the conditions described below, into cash, shares of Carnival Corporation common stock, or a combination thereof, at our election. The Convertible Notes have an initial conversion rate of 100 shares of Carnival Corporation common stock per $1,000 principal amount of the Convertible Notes, equivalent to an initial conversion price of $10 per share of common stock. The initial conversion price is subject to certain anti-dilutive adjustments and may also increase if the Convertible Notes are converted in connection with a tax redemption or certain corporate events.

The Convertible Notes are convertible at any time prior to the close of business on the business day immediately preceding January 1, 2023, only under the following circumstances:

•during any fiscal quarter, (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•during the 5 business day period after any 5 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of common stock and the conversion rate on each such trading day;

Table of Contents

•prior to the close of business on the second scheduled trading day immediately preceding any tax redemption date; or

•upon the occurrence of specified corporate events.

On or after January 1, 2023, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Convertible Notes at any time.

If we undergo certain corporate events (each, a “fundamental change”), subject to certain conditions, holders may require us to

repurchase for cash all or any portion of their Convertible Notes at a price equal to 100% of the principal amount of the

Convertible Notes to be repurchased, plus accrued and unpaid interest to the fundamental change repurchase date.

We may redeem the Convertible Notes, in whole but not in part, at any time on or prior to December 31, 2022 at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, if we or any guarantor would have to pay any additional amounts on the Convertible Notes due to a change in tax laws, regulations or rulings or a change in the official application, administration or interpretation thereof.

As of August 31, 2020, a condition allowing holders of the Convertible Notes to convert has been met and therefore the notes are convertible. The holders are entitled to convert all or any portion of their Convertible Notes at any time during the three months starting on September 1, 2020 and ending on November 30, 2020, at the conversion rate of 100 shares of Carnival Corporation common stock per $1,000 principal amount of Convertible Notes.

In August 2020, we completed a registered direct offering of 99.2 million shares of Carnival Corporation common stock at a price of $14.02 per share to a limited number of holders of the Convertible Notes. We used the proceeds of the stock offering to repurchase from such holders $886 million aggregate principal amount of the Convertible Notes in privately negotiated transactions, (such registered direct offering and the use of proceeds to repurchase the Convertible Notes, the “Convertible Notes Repurchase Transaction”). We recognized a $224 million extinguishment loss as a result of these transactions in other income (expense), net.

We account for the Convertible Notes as separate liability and equity components. We determined the carrying amount of the liability component as the present value of its cash flows.

The carrying amount of the equity component representing the conversion option was $286 million on the date of issuance and was calculated by deducting the carrying value of the liability component from the initial proceeds from the Convertible Notes. The excess of the principal amount of the Convertible Notes over the carrying amount of the liability component represents a debt discount that is amortized to interest expense over the term of the Convertible Notes under the effective interest rate method using an effective interest rate of 12.9%. The carrying amount of the equity component was reduced to $0 in conjunction with the partial repurchase of Convertible Notes in August 2020 because at the time of repurchase, the fair value of the equity component for the portion of the Convertible Notes that was repurchased, exceeded the total amount of the equity component recorded at the time the Convertible Notes were issued.

The net carrying value of the liability component of the Convertible Notes was as follows:


(in millions)	August 31, 2020
Principal	$	1,127
Less: Unamortized debt discount and transaction costs	(173)
	$	954

The interest expense recognized related to the Convertible Notes was as follows:


(in millions)	Three Months Ended August 31, 2020		Nine Months Ended August 31, 2020
Contractual interest expense	$	26	$	43
Amortization of debt discount and transaction costs	22		37
	$	47	$	80

Table of Contents

We had no Convertible Notes in 2019.

2025 Secured Term Loan

In June 2020, we borrowed an aggregate principal amount of $2.8 billion in 2 tranches ($1.9 billion and €800 million), under a first-priority senior secured term loan facility that matures on June 30, 2025 (the “2025 Secured Term Loan”). The U.S. dollar tranche bears interest at a rate per annum equal to adjusted LIBOR (with a 1% floor) plus 7.5%. The euro tranche bears interest at a rate per annum equal to EURIBOR (with a 0% floor) plus 7.5%. The 2025 Secured Term Loan is guaranteed by Carnival plc and the same subsidiaries that currently guarantee, and are secured on a first-priority basis by substantially the same collateral that currently secures, the 2023 Secured Notes, the 2026 Secured Notes and the 2027 Secured Notes. The 2025 Secured Term Loan contains covenants that are substantially similar to the covenants in the indenture governing the 2023 Secured Notes. These covenants are subject to a number of important limitations and exceptions.

2026 Secured Notes

In July 2020, we issued an aggregate principal amount of $1.3 billion in 2 tranches ($775 million and €425 million), under second-priority senior secured notes that mature on February 1, 2026 (the “2026 Secured Notes”). The U.S. dollar tranche bears interest at a rate of 10.5% per year. The euro tranche bears interest at a rate of 10.1% per year. The 2026 Secured Notes are guaranteed by Carnival plc and the same subsidiaries that currently guarantee, and are secured on a second-priority basis by substantially the same collateral that currently secures, the 2023 Secured Notes, the 2025 Secured Term Loan and the 2027 Secured Notes. The indenture governing the 2026 Secured Notes contains covenants that are substantially similar to the covenants in the indenture governing the 2023 Secured Notes and the 2027 Secured Notes. These covenants are subject to a number of important limitations and exceptions.

2027 Secured Notes

In August 2020, we issued an aggregate principal amount of $900 million of second-priority senior secured notes that mature on August 1, 2027 (the “2027 Secured Notes”). The 2027 Secured Notes bear interest at a rate of 9.9% per year. The 2027 Secured Notes are guaranteed by Carnival plc and the same subsidiaries that currently guarantee, and are secured on a second-priority basis by substantially the same collateral that currently secures, the 2023 Secured Notes, the 2025 Secured Term Loan and the 2026 Secured Notes. The indenture governing the 2027 Secured Notes contains covenants that are substantially similar to the covenants in the indenture governing the 2023 Secured Notes and the 2026 Secured Notes. These covenants are subject to a number of important limitations and exceptions.

Modifications and Other

In February 2020, we extended a $452 million sterling-denominated floating rate bank loan, ~~due~~originally maturing in 2022, ~~and repaid a $500 million bond.~~to 2025 with an option to extend to 2026.

In ~~January 2018,~~April 2020, we ~~repaid $365~~amended and extended a $166 million ofeuro-denominated fixed rate bank loan, originally maturing in September 2020, to a floating rate loan maturing in March 2021.

In July 2020, we extended a $337 million euro-denominated floating rate bank loan originally maturing in 2021 to 2022.

As of August 31, 2020, we repurchased in the open market $86 million aggregate principal amount of our $700 million 4.0% notes due in 2020 and $123 million aggregate principal amount of our $555 million 1.6% euro notes due in 2021. We recognized a related gain on early extinguishment of debt of $5 million. This gain is included in other income (expense), net in the accompanying Consolidated Statements of Income (Loss).

Certain export credit agencies have offered 12-month debt amortization and a financial covenant holiday (the “Debt Holiday”). We have entered into supplemental agreements or side letters for the Debt Holiday amendments to defer certain principal repayments otherwise due through March 31, 2021 through the creation of separate tranches of loans ~~prior~~with repayments made over the following four years.

As of August 31, 2020, the scheduled annual maturities of our outstanding debt were as follows:

Table of Contents


(in millions) Year	Principal Payments (a)
Remainder of 2020	$	1,048
2021 (b)	1,702
2022	2,539
2023	6,686
2024	1,174
Thereafter	9,382
	$	22,532

(a)Excluding the Revolving Facility. As of August 31, 2020, borrowings under the Revolving Facility were $3.0 billion, which were drawn in March 2020 for an initial term of six months. The maturities for these borrowings were extended in September 2020 for an additional six months through March 2021. We may re-borrow such amounts subject to satisfaction of the conditions in the Revolving Facility Agreement.

(b)We have a principal balance of $0.5 billion and $0.8 billion of debt outstanding as of August 31, 2020, otherwise due through 2032, for which covenant waivers expire during the second quarter 2021 and fourth quarter 2021, respectively. We are working on extending these covenant waivers. If the covenant waiver extensions are not received, we would be required to prepay the outstanding principal balance.

Debt Covenant Compliance

Many of our debt agreements contain one or more financial covenants that require us to:

•Maintain minimum debt service coverage

•Maintain minimum shareholders' equity

•Limit our debt to capital ratio

•Limit the amounts of our secured and other indebtedness

Under the terms of certain of our debt facilities, we are required to maintain minimum debt service coverage (EBITDA to consolidated net interest charges for the most recently ended four fiscal quarters) of not less than 3.0 to 1.0 at the end of each fiscal quarter (the “Financial Covenant”). As of August 31, 2020, we have entered into supplemental agreements or side letters to amend our agreements with respect to this Financial Covenant to:

•Waive compliance for all of our funded export credit facilities through March 31, 2021, August 31, 2021 or December 31, 2021, as applicable.

•Waive compliance through November 30, 2021 for certain of our bank loans. We will be required to comply beginning with the next testing date of February 28, 2022.

•Waive compliance for the remaining applicable bank loans through their ~~2018 and 2021~~respective maturity dates.

~~We use~~At August 31, 2020, we were in compliance with the ~~net proceeds~~applicable debt covenants.

Subsequent to August 31, 2020, we extended the Financial Covenant waivers for our funded export credit facilities through at least November 30, 2021 (with the next testing date of February 28, 2022) except that for 3 of our funded export credit facilities with Financial Covenant waivers through March 31, 2021 (with the next testing date of May 31, 2021) or August 31, 2021 (with the next testing date of November 30, 2021), with total aggregate indebtedness of $1.3 billion as of August 31, 2020, we are currently engaged in discussions to extend the waivers for these facilities through November 30, 2021 (with the next testing date of February 28, 2022).

Any covenant waiver may lead to increased costs, increased interest rates, additional restrictive covenants and other available lenderprotections that would be applicable. There can be no assurance that we would be able to obtain additional waivers in a timely manner, or on acceptable terms at all. If we were not able to obtain additional waivers or repay the debt facilities, this would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contract payables. As a result, the failure to obtain the additional waivers would have a material adverse effect on us.

Table of Contents

Credit Ratings Update

Since March 2020, Moody’s and S&P Global have downgraded our credit ratings to be below investment grade. Our current short-term commercial paper credit rating prevents us from ~~our borrowings for payments related to the purchases of new ships and general corporate purposes.~~issuing additional commercial paper.

NOTE 34 – Contingencies and Commitments

Litigation

We are routinely involved in legal proceedings, claims, disputes, regulatory matters and governmental inspections or investigations arising in the ~~normal~~ordinary course of or incidental to our business, ~~various~~including those noted below. Additionally, as a result of the impact of COVID-19, litigation claims, enforcement actions, regulatory actions and ~~lawsuits~~investigations, including, but not limited to, those arising from personal injury and loss of life, have been ~~filed or are pending~~and may, in the future, be asserted against us. ~~Most~~Many of the existing assertions are in their initial stages. We expect many of these claims and ~~lawsuits are~~actions, or any settlement of these claims and actions, to be covered by insurance and historically the maximum amount of our liability, net of any insurance recoverables, ~~is typically~~has been limited to our self-insurance retention levels.

We record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.

Legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could involve substantial monetary damages. In addition, in matters for which conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices or requiring other remedies. An unfavorable outcome might result in a material adverse impact on our business, results of operations, financial position or liquidity.

As previously disclosed, on May 2, 2019, 2 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. On July 9, 2020, the court granted our motion for judgment on the pleadings in the action filed by Javier Garcia Bengochea, and dismissed plaintiff’s action with prejudice. On August 6, 2020, Bengochea filed a notice of appeal. On September 14, 2020, the court denied our motion to dismiss the amended action filed by Havana Docks Corporation. We continue to believe ~~the ultimate outcome~~we have a meritorious defense to these actions and we believe that any liability which may arise as a result of these ~~claims and lawsuits~~actions 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~~the 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.

Other Contingencies

We have agreements with a number of credit card processors that transact customer deposits related to our cruise vacations. Certain of these agreements allow the credit card processors to request under certain circumstances that we provide a reserve fund in cash. Although the agreements vary, these requirements may generally be satisfied either through a withheld percentage of customer payments or providing cash funds directly to the card processor. As of August 31, 2020, we have been requested to provide reserve funds of $27 million and have had $200 million of customer deposits withheld to satisfy these requirements. These reserve funds are included within other assets. We expect the funds withheld under these agreements will be approximately $65 million per month up to a maximum of $600 million. In September 2020, we placed $136 million of cash collateral to be held in escrow.

Table of Contents

COVID-19 Actions

We have been named in a number of actions related to COVID-19. The following purported class actions have been brought by former guests from Ruby Princess, Diamond Princess, Grand Princess, Coral Princess, Costa Luminosa, Carnival Ecstasy orZaandam. Both the previously disclosed and newly filed actions seek compensation based on a variety of tort claims, including, but not limited to, negligence and failure to warn, physical injuries and severe emotional distress associated with being exposed and/or contracting COVID-19 onboard. Below are material updates to the previously disclosed class actions, individual actions and governmental inquiries and investigations, and a description of newly filed COVID-19 actions.

Previously Disclosed Class Actions

As previously disclosed, on April 7, 2020, Paul Turner, a former guest from Costa Luminosa, filed a purported class action against Costa Crociere, S.p.A. (“Costa”) and Costa Cruise Line, Inc. in the U.S. District Court of the Southern District of Florida. On September 10, 2020, the court granted Costa’s motion to dismiss based upon forum non conveniens, and directed that the action be filed in Italy. The plaintiff has appealed the order.

As previously disclosed, on April 8, 2020, numerous former guests from Grand Princess filed a purported class action against Carnival Corporation and Carnival plc and two of our subsidiaries, Princess Cruise Lines, Ltd. (“Princess Cruises”) and Fairline Shipping International Corporation, Ltd. On September 22, 2020, the court granted our motions to dismiss plaintiffs’ second amended complaint in part. The court granted our motion to dismiss plaintiffs’ negligence-based claims without prejudice and with leave to amend and granted our motion to dismiss plaintiffs’ request for injunctive relief without prejudice. The court denied our motion to dismiss plaintiffs’ claims for intentional infliction of emotional distress. On October 2, 2020, plaintiffs filed a third amended complaint.

As previously disclosed, on May 27, 2020, Service Lamp Corporation Profit Sharing Plan filed a purported class action against Carnival Corporation, Arnold W. Donald and David Bernstein on behalf of all purchasers of Carnival Corporation securities between January 28 and May 1, 2020. As previously disclosed, on June 3, 2020, John P. Elmensdorp filed a purported class action against the same defendants, and included Micky Arison as a defendant. This action is on behalf of all purchasers of Carnival Corporation securities between September 26, 2019 and April 30, 2020. These actions allege that the defendants violated Sections 10(b) and 20(a) of the U.S. Securities and Exchange Act of 1934 by making misrepresentations and omissions related to Carnival Corporation’s COVID-19 knowledge and response, and seek to recover unspecified damages and equitable relief for the alleged misstatements and omissions. On July 21, 2020, Abraham Atachbarian filed a purported class action against the same defendants as Elmensdorp action. The Atachbarian action is on behalf of all purchasers of Carnival Corporation options between January 27 and May 1, 2020 and allege the same set of factual theories presented in the class actions described above.

As previously disclosed, on June 4, 2020, Gregory Eicher, a former guest from Grand Princess filed a purported class action against Princess Cruises. On September 10, 2020, this action was voluntarily dismissed.

As previously disclosed, on June 4, 2020, numerous former guests from Ruby Princess filed a purported class action against Princess Cruises. Princess Cruises filed a motion to dismiss, in response to which the plaintiffs amended their action to remove their class action allegations and seek recovery on behalf of 2 guests who allege that they contracted COVID-19 while on Ruby Princess.

As previously disclosed, on June 24, 2020, Leonard C. Lindsay and Carl E.W. Zehner, former guests from Zaandam, filed a purported class action against Carnival Corporation, Carnival plc, Holland America Line, Inc. and Holland America Line – U.S.A., Inc. On September 11, 2020, the plaintiffsfiled an amended class action on behalf of all persons in the U.S. who were guests from Zaandam who embarked on March 8, 2020.

Newly Filed Class Actions

As discussed above, these newly filed actions also seek compensation based on economic losses, alleged personal injury and emotional distress for guests who either contracted or feared contracting COVID-19 and assert claims for negligence and intentional infliction of emotional distress.

On July 13, 2020, Kathleen O’Neill, a former guest from Coral Princess filed a purported class action in the U.S. District Court for the Central District of California against Princess Cruises, Carnival Corporation, and Carnival plc. We have filed a motion to dismiss.

Table of Contents

On July 13, 2020, another group of former guests from Grand Princess filed a purported class action in the U.S. District Court for the Central District of California against Princess Cruises, Carnival Corporation and Carnival plc. We have filed a motion to dismiss plaintiff’s amended action.

On July 23, 2020, Susan Karpik, a former guest from Ruby Princess filed a purported class action against Carnival plc and Princess Cruises in the Federal Court of Australia.

We believe that the claims asserted in these actions are without merit and are taking proper actions to defend against them.

Individual Actions

Since March 9, 2020, more than 100 former U.S. guests who sailed onboard various vessels, including, but not limited to, Diamond Princess, Grand Princess, Ruby Princess, or Coral Princess, filed individual actions against Princess Cruises and, in some actions, also against Carnival Corporation and/or Carnival plc, including actions previously disclosed. Both the previously disclosed and newly filed actions include tort claims based on a variety of theories, including negligence and failure to warn. The plaintiffs in these actions allege a variety of injuries: some plaintiffs allege only emotional distress, while others allege injuries arising from testing positive for COVID-19. A smaller number of actions include wrongful death claims.

Previously Disclosed Individual Actions

Motions to dismiss were filed on June 2, 2020 in the individual actions brought against Princess Cruises prior to such date and that allege only emotional distress associated with exposure to COVID-19 while onboard. All courts that considered those motions to date have granted them. Princess Cruises has filed motions to dismiss in all other matters in which a responsive pleading has been due. Several courts have granted the various motions to dismiss, with leave for the plaintiffs to amend.

As previously disclosed, between April 7 and July 7, 2020, former U.S. guests from Costa Luminosa filed individual actions against Costa in the U.S. District Court for the Southern District of Florida or the Circuit Court in and for the 11^th Judicial Circuit in and for Miami-Dade County. These actions have been voluntarily dismissed with and without prejudice, respectively. The action brought in the U.S. District Court for the Southern District of Florida may be pursued in Italy.

As previously disclosed, on June 16, 2020, Patricia Vickers, on behalf of the Estate of Jessie Vickers, a former guest from Carnival Ecstasy, filed an action against Carnival Corporation. The case was dismissed by the court without prejudice.

As previously disclosed, on June 30, 2020, Kenneth and Nora Hook, former guests from Zaandam, filed an action against Holland America Line N.V. A motion to dismiss is pending and on September 3, 2020, the court denied plaintiff’s motion for an expedited trial date.

Newly Filed Individual Actions

On July 16, 2020, Toyling Maa, individually and as personal representative of the estate of Wilson Maa, a former guest from Coral Princess, and the estate of Wilson Maa, filed an action in the U.S. District Court for the Central District of California against Carnival Corporation, Carnival plc and Princess Cruises seeking compensation for damages for Ms. Maa allegedly contracting COVID-19 and alleging wrongful death as a result of Mr. Maa contracting COVID-19. The action asserts claims for negligence. On September 21, 2020, the court denied plaintiffs’ motion to remand and granted defendants’ motion to dismiss without prejudice and with leave to amend.

On July 23, 2020, an action was filed on behalf of the estate of Carl Weidner, a former guest from Grand Princess, in the U.S. District Court for the Northern District of California against Carnival Corporation, Carnival plc and Princess Cruises seeking compensation based on a claim alleging wrongful death as a result of contracting COVID-19. The action asserts claims for negligence. The action also alleges that the forum selection clause in the guest’s ticket contract that specifies venue in the Central District of California is unenforceable.

These individual actions seek monetary and punitive damages but do not specify exact amounts. We are taking proper actions to defend against them.

Governmental Inquiries and Investigations

Table of Contents

Federal and non-U.S. governmental agencies and officials are investigating or otherwise seeking information, testimony and/or documents, regarding COVID-19 incidents and related matters, including, but not limited to, those noted below. We are investigating these matters internally and are cooperating with all requests. The investigations could result in the imposition of civil and criminal penalties in the future.

As previously disclosed, in March and April, 2020, there were several inquiries or investigations initiated by foreign governmental authorities related to Ruby Princess, including authorities in Australia and New Zealand. The New South Wales Commission of Inquiry Report dated August 14, 2020, concluded that no recommendations were directed towards Princess Cruises or Carnival Australia.

At this time, we continue to believe we have a meritorious defense to the aforementioned claims and while we are unable to estimate a potential range of damages, we do not believe that the ultimate outcome of these proceedings will have any material impact on our consolidated financial statements.

Ship Commitments

As of August 31, 2020, we expect the timing of our new ship growth capital commitments to be as follows:


(in millions) Year
Remainder of 2020	$	1,776
2021	3,122
2022	4,609
2023	3,226
2024	780
Thereafter	1,061
	$	14,574

NOTE 45 – 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.

Table of Contents

Financial Instruments that are not Measured at Fair Value on a Recurring Basis


	February 28, 2018								November 30, 2017									August 31, 2020																		November 30, 2019
	Carrying Value		Fair Value						Carrying Value		Fair Value							Carrying Value		Fair Value														Carrying Value		Fair Value
(in millions)			Level 1		Level 2		Level 3				Level 1		Level 2		Level 3		(in millions)					Level 1			Level 2			Level 3					Level 1					Level 2	Level 3
Assets																	Assets
Long-term other assets (a)	$	117	$	—	$	43	$	71	$	126	$	—	$	49	$	75	Long-term other assets (a)	$	46	$	0		$	24		$	14		$	181	$	0		$	31	$	149
Total	$	117	$	—	$	43	$	71	$	126	$	—	$	49	$	75	Total	$	46	$	0		$	24		$	14		$	181	$	0		$	31	$	149
Liabilities																	Liabilities
Fixed rate debt (b)	$	5,168	$	—	$	5,418	$	—	$	5,588	$	—	$	5,892	$	—	Fixed rate debt (b)	$	14,250	$	0		$	13,789		$	0		$	7,438	$	0		$	7,782	$	0
Floating rate debt (b)	4,442		—		4,488		—		3,658		—		3,697		—		Floating rate debt (b)	11,287		0			10,291			0			4,195		0			4,248		0
Total	$	9,610	$	—	$	9,906	$	—	$	9,246	$	—	$	9,589	$	—	Total	$	25,537	$	0		$	24,080		$	0		$	11,634	$	0		$	12,030	$	0


~~(a)~~	Long-term other assets are comprised of notes receivable. 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.

(a)Long-term other assets are comprised of notes receivable, which at November 30, 2019, included 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, 2020										November 30, 2019
(in millions)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	8,176	$	—	$	—	$	518	$	—	$	—
Restricted cash	15		—		—		13		—		—

Derivative financial instruments	—		1		—		—		58		—
Total	$	8,191	$	1	$	—	$	530	$	58	$	—
Liabilities
Derivative financial instruments	$	—	$	11	$	—	$	—	$	25	$	—
Total	$	—	$	11	$	—	$	—	$	25	$	—

February 28, 2018 November 30, 2017
(in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets
Cash and cash equivalents $ 453
$ —
$ —
$ 395
$ —
$ —
Restricted cash 29
—
—
26
—
—
Marketable securities held in rabbi trusts (a) 6
—
—
97
—
—
Derivative financial instruments —
17
—
—
15
—
Total $ 488
$ 17
$ —
$ 518
$ 15
$ —
Liabilities
Derivative financial instruments $ —
$ 130
$ —
$ —
$ 161
$ —
Total $ —
$ 130
$ —
$ —
$ 161
$ —


~~(a)~~	~~The use of marketable securities held in rabbi trusts is restricted to funding certain deferred compensation and non-qualified U.S. pension plans.~~

Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis

Valuation of Goodwill and ~~Other Intangibles~~Trademarks

Goodwill
(in millions) NAA (a)
Segment EA (b)
Segment Total
At November 30, 2017 $ 1,898
$ 1,069
$ 2,967
Foreign currency translation adjustment —
47
47
At February 28, 2018 $ 1,898
$ 1,115
$ 3,014


~~(a)~~	~~North America & Australia (“NAA”)~~


~~(b)~~	~~Europe & Asia (“EA”)~~

As a result of the effect of COVID-19 on our expected future operating cash flows, we performed interim discounted cash flow analyses for certain reporting units with goodwill as of February 29, 2020 and for all reporting units with goodwill as of May 31, 2020. Consequently, prior to our annual test date of July 31, 2020, we determined that the estimated fair values of 2 of our North America & Australia (“NAA”) segment reporting units and 2 of our Europe & Asia (“EA”) segment reporting units no longer exceeded their carrying values. We recognized goodwill impairment charges of $731 million and $1.3 billion for those reporting units during the first and second quarters of 2020, respectively, and have no remaining goodwill for those reporting units. As of July 31, 2020, we performed our annual goodwill and trademark impairment reviews, which covered updates since the last test date of May 31, 2020, and we determined there was no impairment for goodwill or trademarks at our annual test date.

Trademarks
(in millions) NAA
Segment EA
Segment Total
At November 30, 2017 $ 927
$ 252
$ 1,179
Foreign currency translation adjustment —
11
11
At February 28, 2018 $ 927
$ 263
$ 1,190

The determination of our reporting ~~unit~~units' goodwill and trademark fair values includes numerous assumptions that are subject to various risks and uncertainties. The principal assumptions, all of which are considered Level 3 inputs, used in our cash flow analyses consisted of:

•Changes in market conditions, port or other restrictions, or strategy, including decisions about the allocation of new ships amongst brands and the transfer of ships between brands

Table of Contents

•Forecasted future operating results, including net revenue yields and fuel expenses

•Weighted-average cost of capital of market participants, adjusted for the risk attributable to the geographic regions in which these cruise brands operate

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), which influence determinations of fair value, may result in a need to recognize an additional impairment charge. Refer to Note 1 - “General, COVID-19 Use of Estimates and Risks and Uncertainty” for additional discussion.


	Goodwill
(in millions)	NAA Segment		EA Segment		Total
At November 30, 2019	$	1,898	$	1,014	$	2,912
Impairment charges	(1,319)		(777)		(2,096)
Foreign currency translation adjustment	0		(10)		(10)
At August 31, 2020	$	579	$	228	$	807


	Trademarks
(in millions)	NAA Segment		EA Segment		Total
At November 30, 2019	$	927	$	240	$	1,167
Foreign currency translation adjustment	0		12		13
At August 31, 2020	$	927	$	253	$	1,180

Impairment of Ships

We review our long-lived assets for impairment whenever events or circumstances indicate potential impairment. As a result of the effect of COVID-19 on our expected future operating cash flows and our decisions to dispose of certain ships, we determined certain impairment triggers had occurred. Accordingly, we performed undiscounted cash flow analyses on some ships in our fleet as of February 29, 2020, May 31, 2020 and during the quarter ended and as of August 31, 2020. Based on these undiscounted cash flow analyses, we determined that certain ships had net carrying values that exceeded their estimated undiscounted future cash flows. We estimated the fair values of these ships based on their discounted cash flows or estimated selling value. We then compared these estimated fair values to the net carrying values and, as a result, we recognized the following:

•$836 million and $2 million of ship impairment charges in the NAA and EA segments, respectively, for the three months ended August 31, 2020.

•$1.4 billion and $311 million of ship impairment charges in the NAA and EA segments, respectively, for the nine months ended August 31, 2020.

The principal assumptions used in our analyses consisted of changes in strategy (including decisions about the sale of ships, estimated sale proceeds and timing, as well as the transfer of ships between brands), return to service, forecasted future operating results, including net revenue yields and fuel expenses. All principal assumptions are considered Level 3 inputs. Refer to Note 1 - “General, COVID-19 Use of Estimates and Risks and Uncertainty” for additional discussion.

Table of Contents

Derivative Instruments and Hedging Activities



(in millions)	Balance Sheet Location	February 28, 2018		November 30, 2017		(in millions)	Balance Sheet Location	August 31, 2020		November 30, 2019
Derivative assets						Derivative assets
Derivatives designated as hedging instruments						Derivatives designated as hedging instruments
Net investment hedges (a)	Prepaid expenses and other	$	4	$	3
Cross currency swaps (a)						Cross currency swaps (a)	Prepaid expenses and other	$	0	$	32
							Other assets	0		25
Foreign currency zero cost collars (b)	Prepaid expenses and other	13		12		Foreign currency zero cost collars (b)	Prepaid expenses and other	1		0
Total derivative assets		$	17	$	15	Total derivative assets		$	1	$	58
Derivative liabilities						Derivative liabilities
Derivatives designated as hedging instruments						Derivatives designated as hedging instruments
Net investment hedges (a)	Accrued liabilities and other	$	17	$	13
	Other long-term liabilities	21		17
Cross currency swaps (a)						Cross currency swaps (a)	Accrued liabilities and other	$	0	$	1
							Other long-term liabilities	—		9
Foreign currency zero cost collars (b)						Foreign currency zero cost collars (b)	Accrued liabilities and other	0		1
Interest rate swaps (c)	Accrued liabilities and other	10		10		Interest rate swaps (c)	Accrued liabilities and other	5		6
	Other long-term liabilities	14		17			Other long-term liabilities	6		9
		63		57
Derivatives not designated as hedging instruments
Fuel (d)	Accrued liabilities and other	67		95
	Other long-term liabilities	—		9
		67		104
Total derivative liabilities		$	130	$	161	Total derivative liabilities		$	11	$	25


~~(a)~~	At February 28, 2018 and November 30, 2017, we had foreign currency swaps totaling $337 million and $324 million, respectively, that are designated as hedges of our net investments in foreign operations with a euro-denominated functional currency. At February 28, 2018, these foreign currency swaps settle through September 2019.


~~(b)~~	At February 28, 2018 and November 30, 2017, we had foreign currency derivatives consisting of foreign currency zero cost collars that are designated as foreign currency cash flow hedges for a portion of our euro-denominated shipbuilding payments. See “Newbuild Currency Risks” below for additional information regarding these derivatives.

~~(c)~~

We have euro interest rate swaps designated as cash flow hedges whereby we receive floating interest rate payments in exchange for making fixed interest rate payments. These interest rate swap agreements effectively changed $485 million at February 28, 2018 and $479 million at November 30, 2017 of EURIBOR-based floating rate euro debt to fixed rate euro debt. At February 28, 2018, these interest rate swaps settle through March 2025.


~~(d)~~	At February 28, 2018 and November 30, 2017, we had fuel derivatives consisting of zero cost collars on Brent crude oil (“Brent”) to cover a portion of our estimated fuel consumption through 2018. See “Fuel Price Risks” below for additional information regarding these derivatives.

(a)At August 31, 2020, we had no cross currency swaps. At November 30, 2019, we had cross currency swaps totaling $1.9 billion that were designated as hedges of our net investment in foreign operations with a euro-denominated functional currency.

(b)At August 31, 2020 and November 30, 2019, we had foreign currency derivatives consisting of foreign currency zero cost collars designated as foreign currency cash flow hedges for a portion of our euro-denominated shipbuilding payments. See “Newbuild Currency Risks” below for additional information regarding these derivatives.

(c)We have 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 $273 million at August 31, 2020 and $300 million at November 30, 2019 of EURIBOR-based floating rate euro debt to fixed rate euro debt. At August 31, 2020, these interest rate swaps settle through 2025.

Our derivative contracts include rights of offset with our counterparties. We have elected to net certain of our derivative assets and liabilities within counterparties.


	August 31, 2020
(in millions)	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	$	2	$	(1)	$	1	$	0	$	1
Liabilities	$	12	$	(1)	$	11	$	0	$	11

	November 30, 2019
(in millions)	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	$	58	$	0	$	58	$	(4)	$	54
Liabilities	$	25	$	0	$	25	$	(4)	$	21

February 28, 2018
(in millions) 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 $ 17
$ —
$ 17
$ (5 ) $ 12
Liabilities $ 130
$ —
$ 130
$ (5 ) $ 125

November 30, 2017
(in millions) 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
$ (8 ) $ 7
Liabilities $ 161
$ —
$ 161
$ (8 ) $ 153

Table of Contents

The ~~effective gain (loss) portions~~effect of our derivatives qualifying and designated as hedging instruments recognized in other comprehensive income ~~were~~(loss) and in net income (loss) was as follows:


	Three Months Ended August 31,						Nine Months Ended August 31,
(in millions)	2020		2019		2020		2019
Gains (losses) recognized in AOCI:
Cross currency swaps - net investment hedges - included component	$	0	$	16	$	131	$	36
Cross currency swaps - net investment hedges - excluded component	$	0	$	3	$	(1)	$	2
Foreign currency zero cost collars - cash flow hedges	$	3	$	(4)	$	2	$	(5)
Foreign currency forwards - cash flow hedges	$	0	$	0	$	53	$	0
Interest rate swaps - cash flow hedges	$	1	$	(1)	$	5	$	(1)
Gains (losses) reclassified from AOCI - cash flow hedges:
Interest rate swaps - Interest expense, net of capitalized interest	$	(1)	$	(2)	$	(4)	$	(6)
Foreign currency zero cost collars - Depreciation and amortization	$	0	$	0	$	0	$	1
Gains (losses) recognized on derivative instruments (amount excluded from effectiveness testing – net investment hedges)
Cross currency swaps - Interest expense, net of capitalized interest	$	0	$	6	$	12	$	16

Three Months Ended
February 28,
(in millions) 2018 2017
Net investment hedges $ (6 ) $ 1
Foreign currency zero cost collars – cash flow hedges $ 1
$ 8
Interest rate swaps – cash flow hedges $ 4
$ 2

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 February 28, 2018 and November 30, 2017, no collateral was required to be posted to or 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.

Financial Risks

Fuel Price Risks

We manage our exposure to fuel price risk by managing our consumption of fuel. 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~~manage fuel consumption through ship maintenance practices, modifying our itineraries 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.implementing innovative technologies.

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.

Three Months Ended
February 28,
(in millions) 2018
2017
Unrealized gains on fuel derivatives, net $ 32

$ 72
Realized losses on fuel derivatives, net (16 )
(45 )
Gains on fuel derivatives, net $ 16
$ 27

~~At February 28, 2018, 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 2018
January 2014 2,025
$ 75
$ 110
October 2014 2,250
$ 80
$ 114
4,275


~~(a)~~	~~Fuel derivatives mature evenly over each month in 2018.~~

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 operations primarily utilize the U.S. dollar, Australian dollar, euro or sterling as their functional currencies. Our operations also have revenue and expenses denominated in non-functional currencies. Movements in foreign currency exchange rates ~~will~~ affect our financial statements.

Investment Currency Risks

We consider our investments in foreign operations to be denominated in stable ~~currencies. Our investments in foreign operations are~~currencies and of a long-term nature. We partially mitigate the currency exposure of our investments in foreign operations by designating a portion of our foreign currency debt and derivatives as hedges of these investments. As of August 31, 2020, we have ~~$5.6 billion and $924~~designated $883 million of ~~euro- and~~our sterling-denominated debt ~~respectively, including~~as non-derivative hedges of our net investments in foreign operations. For the ~~effect~~three and nine months ended August 31, 2020, we recognized $66 million and $29 million of ~~foreign currency swaps,~~loss on these non-derivative net investment hedges in the cumulative translation adjustment section of other comprehensive income (loss). We also have $7.0 billion of euro-denominated debt, which provides an economic offset for our operations with euro ~~and sterling~~ functional currency. ~~We also partially mitigate our net investment currency exposures by denominating a portion~~

Table of ~~our foreign currency intercompany payables in our foreign operations’ functional currencies.~~ Contents

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 to manage foreign currency exchange rate risk for some of our ship construction payments. At ~~February 28, 2018,~~August 31, 2020, for the following ~~newbuilds,~~newbuild, we had foreign currency ~~zero cost collars~~contracts for a portion of our euro-denominated shipyard payments. These ~~collars~~contracts are designated as cash flow hedges.

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


	Entered Into	Matures In	Weighted-Average Floor Rate		Weighted- Average Ceiling Rate
Foreign currency zero cost collars
Mardi Gras	2020	December 2020	$	1.12	$	1.28

If the spot rate is between the ceiling and floor rates on the date of maturity, then we would not owe or receive any payments under ~~these~~the zero cost collars.

At ~~February 28, 2018,~~August 31, 2020, our remaining newbuild currency exchange rate risk primarily relates to euro-denominated newbuild contract payments to non-euro functional currency brands, which represent a total unhedged commitment of ~~$8.2~~$8.4 billion ~~and substantially relates to~~for newbuilds scheduled to be delivered ~~in 2019~~from 2020 through ~~2022 to non-euro functional currency brands.~~2025.

The cost of shipbuilding orders that we may place in the future that is denominated in a different currency than our cruise brands’ will be affected by foreign currency exchange rate fluctuations. These foreign currency exchange rate fluctuations may affect our decision 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, issuance of new debt, amendment of existing debt or early retirement of existing debt.

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~~manage these credit risk exposures, including counterparty nonperformance primarily associated with our cash equivalents, investments, ~~committed~~notes receivables, future financing facilities, contingent obligations, derivative instruments, insurance contracts, long-term ship charters 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 ~~February 28, 2018,~~August 31, 2020, our exposures under ~~foreign currency and fuel~~ derivative ~~contracts and interest rate swap agreements~~instruments 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. Concentrations of credit risk associated with trade receivables and other 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. Normally, we have not required collateral or other security to support normal credit sales. Historically, we have not experienced significant credit losses, including counterparty nonperformance. Because of the impact COVID-19 is having on economies, we have experienced, and expect to continue to experience, an increase in credit losses.

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

Table of Contents

guests’ cruise payments made by them to their travel agents and tour operators regardless of whether we have received these payments. ~~Concentrations~~

NOTE 6 – Leases

Substantially all of ~~credit risk associated with these trade receivables, charter-hire agreements~~our leases for which we are the lessee are operating leases of port facilities and ~~contingent obligations~~real estate and are ~~not considered to be material, principally due to the large number~~included within operating lease right-of-use assets, long-term operating lease liabilities and current portion of ~~unrelated accounts, the nature~~operating lease liabilities in our Consolidated Balance Sheet as of ~~these contingent obligations and their short maturities.~~ August 31, 2020.

We have ~~not experienced significant credit losses on our trade receivables, charter-hire~~port facilities and real estate lease agreements with lease and ~~contingent obligations.~~ non-lease components, and in such cases, we account for the components as a single lease component.

We do not ~~normally require~~recognize lease assets and lease liabilities for any leases with an original term of less than one year. For some of our port facilities and real estate lease agreements, we have the option to extend our current lease term by 1 to 10 years. Generally, we do not include renewal options as a component of our present value calculation as we are not reasonably certain that we will exercise the options.

As most of our leases do not have a readily determinable implicit rate, we estimate the incremental borrowing rate ("IBR") to determine the present value of lease payments. We apply judgment in estimating the IBR including considering the term of the lease, the currency in which the lease is denominated, and the impact of collateral orand our credit risk on the rate. For leases that were in place upon adoption of Leases, we used the remaining lease term as of December 1, 2019 in determining the IBR. For the initial measurement of the lease liabilities for leases commencing after the adoption, the IBR at the lease commencement date was applied.

We amortize our lease assets on a straight-line basis over the lease term. The components of expense were as follows:


(in millions)	Three months ended August 31, 2020		Nine months ended August 31, 2020
Operating lease expense	$	51	$	153
Variable lease expense (a) (b)	$	(36)	$	(26)

(a)Variable lease expense represents costs associated with our multi-year preferential berthing agreements, which vary based on the number of passengers. These costs are recorded within commission, transportation and other ~~security~~in our Consolidated Statements of Income (Loss). Variable and short-term lease costs related to ~~support normal credit sales.~~operating leases, other than the port facilities, were not material to our consolidated financial statements.

(b)Several of our preferential berthing agreements have force majeure provisions. We have treated the concessions granted under such provision as variable payment adjustments. If our interpretation of the force majeure provisions is disputed, we could be required to record and make additional guarantee payments.

We have multiple agreements, with a total undiscounted minimum commitment of approximately $440 million, that have been executed but the lease term has not commenced as of August 31, 2020. These are substantially all related to our rights to use certain port facilities. The leases are expected to commence between 2020 and 2022.

During the nine months ended August 31, 2020, we obtained $126 million of right-of-use assets in exchange for new operating lease liabilities. The cash outflow for leases was materially consistent with the lease expense recognized during the three and nine months ended August 31, 2020.

Weighted average of the remaining lease terms and weighted average discount rates are as follows:


	August 31, 2020
Weighted average remaining lease term - operating leases (in years)	13
Weighted average discount rate - operating leases	3.2	%

Table of Contents

As of August 31, 2020, maturities of operating lease liabilities were as follows:


(in millions) Year
Remainder of 2020	$	36
2021	197
2022	162
2023	156
2024	147
Thereafter	1,074
Total lease payments	1,773
Less: Present value discount	(342)
Present value of lease liabilities	$	1,431

Under ASC 840, Leases, future minimum lease payments under non-cancelable operating leases of port facilities and other assets as of November 30, 2019 were as follows:


(in millions) Year
2020	$	219
2021	196
2022	161
2023	173
2024	167
Thereafter	1,408
	$	2,324

For time charter arrangements where we are the lessor and for transactions with cruise guests related to the use of cabins, we do not separate lease and non-lease components. As the non-lease components are the predominant components in the agreements, we account for these transactions under the Revenue Recognition guidance.

NOTE 57 – Segment Information

We revised our operating segments due to changes in our internal reporting as a result of the recent strategic realignment of our business in Australia. The presentation of prior period segment information has been revised to reflect this change.

Our operating 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 ~~four~~4 reportable segments are comprised of (1) ~~North America and Australia~~NAA cruise operations, ~~(“NAA”),~~ (2) ~~Europe and Asia~~EA cruise operations, ~~(“EA”),~~ (3) Cruise Support and (4) Tour and Other.

The operating segments within each of our NAA and EA reportable segments have been aggregated based on the similarity of their economic and other ~~characteristics.~~characteristics, including geographic guest sourcing. Our Cruise Support segment ~~represents~~includes our portfolio of leading port destinations and other services, all of which are operated 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 other operations.

Table of Contents


													Three Months Ended August 31,
(in millions)												(in millions)	Revenues		Operating costs and expenses		Selling and administrative		Depreciation and amortization		Operating income (loss)
2020												2020
NAA												NAA	$	15	$	1,292	$	144	$	348	$	(1,770)
EA												EA	(4)		225		71		165		(465)
Cruise Support												Cruise Support	1		12		44		32		(86)
Tour and Other												Tour and Other	20		20		5		6		(11)
													$	31	$	1,549	$	265	$	551	$	(2,333)
2019												2019
NAA												NAA	$	4,256	$	2,327	$	339	$	345	$	1,246
EA												EA	2,035		1,058		150		165		662
Cruise Support												Cruise Support	42		39		65		29		(92)
Tour and Other												Tour and Other	200		109		9		9		74
													$	6,533	$	3,532	$	563	$	548	$	1,890

	Three Months Ended February 28,												Nine Months Ended August 31,
(in millions)	Revenues		Operating costs and expenses		Selling and administrative		Depreciation and amortization		Operating income (loss)			(in millions)	Revenues		Operating costs and expenses		Selling and administrative		Depreciation and amortization		Operating income (loss)
2018
2020												2020
NAA	$	2,684	$	1,658	$	367	$	299	$	360		NAA	$	3,612	$	5,197	$	841	$	1,081	$	(4,827)	(a)
EA	1,503		1,005		188		157		154			EA	1,785		2,314		404		499		(2,208)		(b)
Cruise Support	32		33		55		23		(78		)	Cruise Support	67		(22)		170		96		(177)
Tour and Other	13		14		6		10		(17		)	Tour and Other	96		67		19		22		(12)
Intersegment elimination	—		—		—		—		—
	$	4,232	$	2,709	$	616	$	488	$	419			$	5,561	$	7,556	$	1,435	$	1,698	$	(7,223)
2017
2019												2019
NAA	$	2,517	$	1,557	$	333	$	289	$	338		NAA	$	10,495	$	6,370	$	1,034	$	1,012	$	2,079
EA	1,226		859		159		130		78			EA	5,122		3,166		540		483		933
Cruise Support	39		6		55		11		(33		)	Cruise Support	128		99		217		84		(272)
Tour and Other	9		13		2		9		(15		)	Tour and Other	299		198		21		28		52
Intersegment elimination	—		—		—		—		—
	$	3,791	$	2,435	$	549	$	439	$	368			$	16,043	$	9,833	$	1,813	$	1,607	$	2,791

~~A portion~~(a) Includes $1.3 billion of ~~the NAA segment’s revenues includes revenues for the tour portion~~goodwill impairment charges.

(b) Includes $777 million of ~~a cruise when a cruise and land tour package are sold together~~goodwill impairment charges.

Revenue by ~~Holland America Line and Princess Cruises. These intersegment tour revenues,~~geographic areas, which are ~~also included in~~based on where our ~~Tour and Other segment,~~guests are ~~eliminated by the NAA segment’s revenues and operating expenses in the line “Intersegment elimination.”~~sourced, were as follows:


	Three Months Ended August 31,						Nine Months Ended August 31,
(in millions)	2020		2019		2020		2019
North America	$	14	$	3,751	$	3,065	$	8,910
Europe	5		1,738		1,622		4,486
Australia and Asia	1		937		681		2,261
Other	10		107		192		385
	$	31	$	6,533	$	5,561	$	16,043

Table of Contents

NOTE 68 – Earnings Per Share


	Three Months Ended August 31,						Nine Months Ended August 31,
(in millions, except per share data)	2020		2019		2020		2019
Net income (loss) for basic and diluted earnings per share	$	(2,858)	$	1,780	$	(8,014)	$	2,567
Weighted-average shares outstanding	775		689		727		691
Dilutive effect of equity plans	0		2		0		2
Diluted weighted-average shares outstanding	775		691		727		693
Basic earnings per share	$	(3.69)	$	2.58	$	(11.03)	$	3.72
Diluted earnings per share	$	(3.69)	$	2.58	$	(11.03)	$	3.71

Three Months Ended
February 28,
(in millions, except per share data) 2018 2017
Net income for basic and diluted earnings per share $ 391
$ 352
Weighted-average shares outstanding 717
725
Dilutive effect of equity plans 2
3
Diluted weighted-average shares outstanding 719
728
Basic earnings per share $ 0.54
$ 0.48
Diluted earnings per share $ 0.54
$ 0.48

Antidilutive shares excluded from diluted earnings per share computations were as follows:


(in millions)	Three Months Ended August 31, 2020	Nine Months Ended August 31, 2020
Equity awards	0	1
Convertible Notes	186	102
Total antidilutive securities	186	103

There were no antidilutive shares excluded from our 2019 diluted earnings per share computations.

NOTE 79 – ~~Shareholders’ Equity~~Supplemental Cash Flow Information

~~During~~


(in millions)	August 31, 2020		November 30, 2019
Cash and cash equivalents (Consolidated Balance Sheets)	$	8,176	$	518
Restricted cash included in prepaid expenses and other and other assets	15		13
Total cash, cash equivalents and restricted cash (Consolidated Statements of Cash Flows)	$	8,191	$	530

In connection with the ~~three months ended February 28, 2018,~~Convertible Notes Repurchase Transaction, as an administrative convenience, we ~~repurchased 3.0~~permitted the purchasers of 83.3 million ~~shares of Carnival plc ordinary shares and 0.2 million shares~~ of Carnival Corporation common stock to offset the purchase price payable to us against our obligation to pay the purchase price for ~~$204~~$744 million aggregate principal amount of the Convertible Notes held by them, which is reflected as a non-cash transaction for the nine months ended August 31, 2020.

NOTE 10 – Other Assets

We have a minority interest in CSSC Carnival Cruise Shipping Limited (“CSSC-Carnival”), a China-based cruise company which will operate its own fleet designed to serve the Chinese market. Our investment in CSSC-Carnival was $135 million as of August 31, 2020 and $48 million as of November 30, 2019. In December 2019, we sold to CSSC-Carnival a controlling interest in an entity with full ownership of 2 EA segment ships and recognized a related gain of $107 million, included in other operating expenses in our Consolidated Statements of Income (Loss). We will continue to operate each of these ships under bareboat charter agreements through December 2020 and May 2021, respectively.

NOTE 11 – Defined Benefit Pension Plans and Restructuring Costs

We have several single-employer defined benefit pension plans, which cover some of our shipboard and shoreside employees. The U.S. and UK shoreside employee plans are closed to new membership and are funded at or above the level required by U.S. or UK regulations. As required by UK regulations, the UK employee plan is undergoing its triennial valuation. Due to the COVID-19 pandemic and its impact on the economic environment and our operations, the finalization of the valuation may result in a plan deficit, which would then trigger a funding obligation under UK regulations. The remaining defined benefit plans are primarily unfunded. In determining all of our plans’ benefit obligations at November 30, 2019 and 2018, we assumed a weighted-average discount rate of 2.4% for 2019 and 3.4% for 2018.

Table of Contents

In May 2020, we announced a combination of layoffs, furloughs and salary reductions across the company in response to the extended pause in our global cruise operations. For the three and nine months ended August 31, 2020, we incurred restructuring costs of $3 million and ~~$12~~$42 million, ~~respectively, under~~principally consisting of severance and our ~~general authorization~~continued payment of health benefits to ~~repurchase~~affected employees. These costs are included in the selling and administrative line item within our Consolidated Statements of Income (Loss).

NOTE 12 – Property and Equipment

Ship Sales

During 2020, we sold 7 NAA segment ships and 3 EA segment ships, which represents a passenger-capacity reduction of 11,560 for our NAA segment and 5,510 for our EA segment. In addition, we have either entered into agreements to sell or expect to sell 6 NAA segment ships and 2 EA segment ships, which represents a passenger-capacity reduction of 9,620 for our NAA segment and 4,320 for our EA segment.

NOTE 13 – Subsequent Events

Public Equity Offering

On September 15, 2020, we entered into an equity distribution agreement with sales agents pursuant to which we may, from time to time, offer and sell shares of Carnival ~~Corporation~~Corporation's common stock ~~and/or Carnival plc ordinary~~having an aggregate offering price of up to $1.0 billion through the sales agents (the “ATM Offering”). We have filed a prospectus supplement with the Securities and Exchange Commission in connection with the ATM Offering on September 15, 2020. As of October 2, 2020, we sold 23 million shares ~~(the “Repurchase Program”). At February 28, 2018, the remaining availability~~for net proceeds of $352 million and paid $4 million in compensation with respect of such sales of shares under the ~~Repurchase Program was $370 million.~~ATM Offering.

~~During the three months ended February 28, 2018, our Boards~~

Table of ~~Directors declared a dividend to holders of Carnival Corporation common stock and Carnival plc ordinary shares of $0.45 per share.~~Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Note Concerning Factors That May Affect Future Results

Some of the statements, estimates or projections contained in this document are “forward-looking statements” that involve risks, uncertainties and assumptions with respect to us, including some statements concerning future results, operations, outlooks, plans, goals, reputation, cash flows, liquidity and other events which have not yet occurred. These statements are intended to qualify for the safe harbors from liability provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts are statements that could be deemed forward-looking. These statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate and the beliefs and assumptions of our management. We have tried, whenever possible, to identify these statements by using words like “will,” “may,” “could,” “should,” “would,” “believe,” “depends,” “expect,” “goal,” “anticipate,” “forecast,” “project,” “future,” “intend,” “plan,” “estimate,” “target,” “indicate,” ~~“outlook”~~“outlook,” and similar expressions of future intent or the negative of such terms.

Forward-looking statements include those statements that relate to our outlook and financial position including, but not limited to, statements regarding:



•Net revenue yields		•Estimates of ship depreciable lives and residual values
•Booking levels		•Goodwill, ship and trademark fair values
•Pricing and occupancy		•Liquidity
•Interest, tax and fuel expenses		•Adjusted earnings per share
•Currency exchange rates		•Impact of the COVID-19 coronavirus global pandemic on our financial condition and results of operations
•Net cruise costs, excluding fuel per available lower berth day
• ~~Booking levels~~	• ~~Estimates of ship depreciable lives and residual values~~
• ~~Pricing and occupancy~~	• ~~Goodwill, ship and trademark fair values~~
• ~~Interest, tax and fuel expenses~~	• ~~Liquidity~~
• ~~Currency exchange rates~~	• ~~Adjusted earnings per share~~

Because forward-looking statements involve risks and uncertainties, there are many factors that could cause our actual results, performance or achievements to differ materially from those expressed or implied by our forward-looking statements. This note contains important cautionary statements of the known factors that we consider could materially affect the accuracy of our ~~forward-looking~~forward looking statements and adversely affect our business, results of operations and financial position. Additionally, many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the COVID-19 outbreak. It is not possible to predict or identify all such risks. There may be additional risks that we consider immaterial or which are unknown. These factors include, but are not limited to, the following:

•COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from operations. The current, and uncertain future, impact of the COVID-19 outbreak, including its effect on the ability or desire of people to travel (including on cruises), is expected to continue to impact our results, operations, outlooks, plans, goals, growth, reputation, litigation, cash flows, liquidity, and stock price

~~The demand~~•As a result of the COVID-19 outbreak, we may be out of compliance with a maintenance covenant in certain of our debt facilities, for ~~cruises may decline due to adverse world~~which we have waivers for the period through March 31, 2021 with the next testing date of May 31, 2021

•World events impacting the ability or desire of people to travel ~~including conditionsaffecting the safety and security of travel, government regulations and requirements, and~~may lead to a decline in ~~consumer confidence~~

demand for cruises

•Incidents ~~such~~concerning our ships, guests or the cruise vacation industry as ~~ship incidents, security incidents, the spread of contagious diseases and threats thereof,~~well as adverse weather conditions orand other natural disasters ~~and~~may impact the ~~related adverse publicity affecting our reputation and the health, safety, security and~~ satisfaction of our guests and crew and lead to reputational damage

•Changes in and ~~compliance~~non-compliance with laws and regulations under which we operate, such as those relating to health, environment, ~~health,~~ safety and security, data privacy and protection, ~~tax~~anti-corruption, economic sanctions, trade protection and ~~anti-corruption under which we operate~~tax may lead to ~~litigations,~~litigation, enforcement actions, fines, or penalties, and reputational damage

~~Disruptions~~•Breaches in data security and lapses in data privacy as well as disruptions and other damages to our principal offices, information technology operations and ~~other~~system networks, ~~and operations, breaches in data security, lapses in data privacy,~~including the recent ransomware incident, and failure to keep pace with developments in technology may adversely impact our business operations, the satisfaction of our guests and crew and lead to reputational damage

•Ability to recruit, develop and retain qualified shipboard personnel who live ~~on ships~~ away from home for extended periods of time may adversely impact our business operations, guest services and satisfaction

•Increases in fuel prices, changes in the types of fuel consumed and availability of fuel supply may adversely impact our scheduled itineraries and costs

•Fluctuations in foreign currency exchange rates may adversely impact our financial results

•Overcapacity and competition in the cruise ~~ship~~ and land-based vacation industry

~~Continuing financial viability of our travel agent distribution system, air service providers and other key vendors~~ may lead to a decline in our ~~supply chain, as well as reductions in the availability~~cruise sales, pricing and destination options

Table of ~~and increases in the prices for, the services and products provided by these vendors~~Contents

Inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments on terms that are favorable or consistent with our expectations, as well as increases to our repairs and maintenance expenses and refurbishment costs as our fleet ages

•Geographic regions in which we try to expand our business may be slow to develop ~~and~~or ultimately not develop how we expect

•Inability to implement our shipbuilding programs and ship repairs, maintenance and refurbishments may adversely impact our business operations and the satisfaction of our guests

The ordering of the risk factors set forth above is not intended to reflect our indication of priority or likelihood.

Forward-looking statements should not be relied upon as a prediction of actual results. Subject to any continuing obligations under applicable law or any relevant stock exchange rules, we expressly disclaim any obligation to disseminate, after the date of this document, any updates or revisions to any such forward-looking statements to reflect any change in expectations or events, conditions or circumstances on which any such statements are based.

Recent Developments

Resumption of Guest Operations

In the face of the global impact of COVID-19, we paused our guest cruise operations in mid-March. We resumed limited guest operations in September 2020, with Costa Cruises ("Costa") successful voyages on two of our ships, Costa Deliziosa and Costa Diadema. We are continuing the limited resumption of our guest cruise operations with sailings on additional Costa ships shortly, as well as with sailings on AIDA Cruises ("AIDA") which are anticipated to begin in mid-October 2020. These brands are beginning our anticipated gradual, phased-in resumption of guest cruise operations. The initial cruises will continue to take place with adjusted passenger capacity and enhanced health protocols developed with government and health authorities, and guidance from our roster of medical and scientific experts.

Other brands and ships are expected to return to service over time to provide guests with unmatched joyful vacations in a manner consistent with our highest priorities, which are compliance, environmental protection and the health, safety and well-being of our guests, crew, shoreside employees and the people in the communities our ships visit. Many of our brands source the majority of their guests from the geographical region in which they operate. In the current environment, we believe this will benefit us in resuming guest cruise operations.

Health and Safety Protocols

Working with global and national health authorities and medical experts, Costa and AIDA have a comprehensive set of health and hygiene protocols to help facilitate a safe and healthy return to cruise vacations. Both brands are providing guests with detailed information about enhanced protocols, which are modeled after shoreside health and mitigation guidelines as provided by each brand's respective country, and approved by the flag state, Italy. Protocols will be updated based on evolving scientific and medical knowledge related to mitigation strategies.

Costa is the first cruise company to earn the Biosafety Trust Certification from Registro Italiano Navale ("RINA"). The certification process examined all aspects of life onboard and ashore and assessed the compliance of the system with procedures aimed at the prevention and control of infections. Costa's comprehensive set of measures and procedures implemented on the ships that resumed operations cover key areas such as crew health and safety, the booking process, guest activities, entertainment and dining, and medical care on board, as well as pre-boarding, embarkation and disembarkation operations, which includes testing for all guests prior to embarkation.

More broadly, as the understanding of COVID-19 continues to evolve, we have been working with a number of world-leading public health, epidemiological and policy experts to support our ongoing efforts with enhanced protocols and procedures for the return of cruise vacations. These advisors will continue to provide guidance based on the latest scientific evidence and best practices for protection and mitigation.

Optimizing the Future Fleet

We expect future capacity to be moderated by the phased re-entry of our ships, the removal of capacity from our fleet and delays in new ship deliveries. Since the pause in guest operations, we have accelerated the removal of ships in fiscal 2020 which were previously expected to be sold over the ensuing years. We now expect to dispose of 18 ships, 10 of which have already left the fleet. In total, the 18 ships represent approximately 12 percent of pre-pause capacity and only three percent of operating income in 2019. The sale of less efficient ships will result in future operating expense efficiencies of approximately two percent per available lower berth day ("ALBD") and a reduction in fuel consumption of approximately one percent per ALBD. We expect only two of the four ships originally scheduled for delivery in 2020, following the start of the pause, to be delivered prior to the end of fiscal 2020, including Enchanted Princess which was delivered in September 2020. We currently expect only five of the nine ships originally scheduled for delivery in fiscal 2020 and 2021 to be delivered prior to the end of fiscal year 2021. We currently expect nine cruise ships and two smaller expedition ships of the 13 ships originally scheduled for delivery prior to the end of fiscal year 2022 to be delivered by then.

Based on the actions taken to date and the scheduled newbuild deliveries through 2022, our fleet will be more efficient with a roughly 13 percent larger average berth size per ship and an average age of 12 years in 2022 versus 13 years, in each case as compared to 2019.


	Ships expected to return to service as of August 31, 2020 (a)
	Passenger Capacity	Percentage of Total Capacity		Number of Cruise Ships
NAA Segment
Carnival Cruise Line	66,440	30	%	23
Princess Cruises	38,950	18		13
Holland America Line	20,260	9		10
P&O Cruises (Australia)	7,230	3		3
Seabourn	2,570	1		5
	135,450	61		54

EA Segment
Costa Cruises ("Costa")	34,980	16		11
AIDA Cruises ("AIDA")	31,930	14		14
P&O Cruises (UK)	13,810	6		5
Cunard	6,830	3		3
	87,550	39		33
	223,000	100	%	87

(a) Excludes 18 ships that we expect to dispose. Ten ships have left the fleet and we expect six ships to leave the fleet by December 2020, one by February 2021 and one by May 2021.

Update on Bookings

While we believe bookings in the first half of 2021 reflect expectations of the phased resumption of our guest cruise operations and anticipated itinerary changes, as of September 20, 2020, cumulative advanced bookings for the second half of 2021 capacity currently available for sale are at the higher end of the historical range. We believe this demonstrates the long-term potential demand for cruising. Pricing on these bookings are lower by mid-single digits versus the second half of 2019, on a comparable basis, reflecting the effect of FCCs from previously cancelled cruises being applied. We continue to take bookings for both 2021 and 2022.

We are providing flexibility to guests with bookings on sailings cancelled by allowing guests to receive enhanced FCCs or elect to receive refunds in cash. Enhanced FCCs increase the value of the guest's original booking or provide incremental onboard credits. As of September 20, 2020, approximately 45 percent of guests affected by our schedule changes have received enhanced FCCs and approximately 55 percent have requested refunds.

Total customer deposits balance at August 31, 2020, was $2.4 billion, the majority of which are FCCs, compared to total customer deposits balance of $2.9 billion at May 31, 2020. The decline in customer deposits is consistent with previous

expectations. As of August 31, 2020, the current portion of customer deposits was $2.1 billion with $0.1 billion relating to fourth quarter sailings. Approximately 60 percent of bookings taken during the three weeks ended September 20, 2020 were new bookings, as opposed to FCC re-bookings, despite minimal advertising or marketing.

Update on Liquidity

Refer to “Liquidity, Financial Condition and Capital Resources.”

Refer to “Risk Factors” - “COVID-19 has had, and is expected to continue to have, a significant impact on our financial condition and operations, which impacts our ability to obtain acceptable financing to fund resulting reductions in cash from operations. The current, and uncertain future, impact of the COVID-19 outbreak, including its effect on the ability or desire of people to travel (including on cruises), is expected to continue to impact our results, operations, outlooks, plans, goals, growth, reputation, litigation, cash flows, liquidity, and stock price.”

Update on Cyber Incident

On August 15, 2020, we detected a ransomware attack and unauthorized access to our information technology systems. We engaged a major cybersecurity firm to investigate the matter and notified law enforcement and regulators of the incident. While the investigation is ongoing, early indications are that the unauthorized third-party gained access to certain personal information relating to some guests, employees and crew for some of our operations. There is currently no indication of any misuse of this information. While at this time we do not believe that this information will be misused going forward or that this incident will have a material adverse effect on our business, operations or financial results, no assurances can be given and further we may be subject to future attacks or incidents that could have such a material adverse effect.

New Accounting Pronouncements

Refer to ~~our~~Note 1 - “General, Accounting Pronouncements” of the consolidated financial statements for ~~further information on~~ ~~Accounting Pronouncements~~.additional discussion regarding accounting pronouncements.

Critical Accounting Estimates

For a discussion of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that is included in the Form 10-K. A discussion of our goodwill impairment charges recognized during the first and second quarters of 2020, and ship impairment charges recognized during 2020 is included in the accompanying consolidated financial statements.

Seasonality

Our ~~revenues from the sale of~~ passenger ~~tickets~~ticket revenues are seasonal. Historically, demand for cruises has been greatest during our third quarter, which includes the Northern Hemisphere summer ~~months.~~months, although 2020 will continue to be adversely impacted by COVID-19. This higher demand during the third quarter results in higher ticket prices and occupancy levels and, accordingly, the largest share of our operating income is earned during this period. ~~The seasonality of our results also increases due to ships being taken out-of-service for maintenance, which we schedule during non-peak demand periods.~~This historical trend has been disrupted by the pause in global cruise operations. In addition, substantially all of Holland America Princess Alaska Tours’ revenue and net income (loss) is generated from May through September in conjunction with Alaska's cruise season. During 2020, the Alaska cruise ~~season.~~season was adversely impacted by the effects of COVID-19.

Table of Contents

Statistical Information


	Three Months Ended August 31,									Nine Months Ended August 31,
	2020			2019			2020			2019
ALBDs (in thousands) (a)	—			22,727			25,598			65,671
Occupancy percentage (b)	—		%	113.0		%	103.1		%	107.8		%
Passengers carried (in thousands)	—			3,752			3,489			9,790

Fuel consumption in metric tons (in thousands)	325			822			1,639			2,487
Fuel cost per metric ton consumed	$	371		$	487		$	438		$	484

Currencies (USD to 1)
AUD	$	0.70		$	0.69		$	0.67		$	0.70
CAD	$	0.74		$	0.76		$	0.74		$	0.75
EUR	$	1.15		$	1.12		$	1.12		$	1.13
GBP	$	1.28		$	1.24		$	1.27		$	1.28
RMB	$	0.14		$	0.14		$	0.14		$	0.15

Three Months Ended
February 28,
2018 2017
Available Lower Berth Days ("ALBDs") (in thousands) (a) (b) 20,462
20,024
Occupancy percentage (c) 104.7 % 104.6 %
Passengers carried (in thousands) 2,860
2,769
Fuel consumption in metric tons (in thousands) 821
818
Fuel consumption in metric tons per thousand ALBDs 40.1
40.9
Fuel cost per metric ton consumed $ 437
$ 362
Currencies (USD to 1)
AUD $ 0.78
$ 0.75
CAD $ 0.79
$ 0.76
EUR $ 1.21
$ 1.06
GBP $ 1.37
$ 1.24
RMB $ 0.15
$ 0.15

~~(a)~~

ALBD is a standard measure of passenger capacity for the period that we use to approximate rate and capacity variances, based on consistently applied formulas that we use to perform analyses to determine the main non-capacity driven factors that cause our cruise revenues and expenses to vary. ALBDs assume that each cabin we offer for sale accommodates two passengers and is computed by multiplying passenger capacity by revenue-producing ship operating days in the period.


~~(b)~~	For the three months ended February 28, 2018 compared to the three months ended February 28, 2017, we had a 2.2% capacity increase in ALBDs comprised of a 1.4% capacity increase in our NAA segment and a 3.5% capacity increase in our EA segment.

~~Our NAA capacity increase was caused by:~~

~~Full~~We paused our guest operations in mid-March 2020 and have been in a pause for a majority of the second quarter ~~impact from one Princess Cruises 3,560-passenger capacity ship that entered into service~~and all of the third quarter. The pause in ~~April 2017~~

~~Partially offset by the full quarter impact by one P&O Cruises (Australia) 1,550-passenger capacity ship removed from the service in April 2017~~

~~Our EA segment’s capacity increase was caused by:~~

~~Full quarter impact from one AIDA Cruises 3,290-passenger capacity ship that entered into service in June 2017~~


~~(c)~~	In accordance with cruise industry practice, occupancy is calculated using a denominator of ALBDs, which assumes two passengers per cabin even though some cabins can accommodate three or more passengers. Percentages in excess of 100% indicate that on average more than two passengers occupied some cabins.

~~Three Months Ended February 28, 2018 (“2018”) Compared~~guest operations is continuing to ~~Three Months Ended February 28, 2017 (“2017”)~~

~~Revenues~~

~~Consolidated~~

~~Cruise passenger ticket revenues made up 74%~~have material negative impacts on all aspects of our ~~2018 total revenues. Cruise~~business, including the above statistical information.

Notes to Statistical Information

(a)ALBD is a standard measure of passenger ~~ticket~~capacity for the period that we use to approximate rate and capacity variances, based on consistently applied formulas that we use to perform analyses to determine the main non-capacity driven factors that cause our cruise revenues ~~increased~~and expenses to vary. ALBDs assume that each cabin we offer for sale accommodates two passengers and is computed by ~~$345 million,~~multiplying passenger capacity by revenue-producing ship operating days in the period.

(b)In accordance with cruise industry practice, occupancy is calculated using a denominator of ALBDs, which assumes two passengers per cabin even though some cabins can accommodate three or ~~12%, to $3.1 billion~~more passengers. Percentages in ~~2018 from $2.8 billion~~excess of 100% indicate that on average more than two passengers occupied some cabins.

Table of Contents

Results of Operations


Consolidated
	Three Months Ended August 31,								% increase (decrease)			Nine Months Ended August 31,								% increase (decrease)
(in millions)	2020		2019		Change						2020			2019			Change
Revenues
Passenger ticket	$	—	$	4,477	$	(4,477)	(100)	%	$	3,680		$	10,934		$	(7,254)		(66)	%
Onboard and other	31		2,056		(2,024)		(98)	%	1,881			5,110			(3,229)			(63)	%
	31		6,533		(6,501)		(100)	%	5,561			16,043			(10,483)			(65)	%
Operating Costs and Expenses
Commissions, transportation and other	34		803		(769)		(96)	%	1,098			2,125			(1,027)			(48)	%
Onboard and other	9		668		(659)		(99)	%	593			1,620			(1,027)			(63)	%
Payroll and related	248		548		(300)		(55)	%	1,563			1,671			(108)			(6)	%
Fuel	121		401		(280)		(70)	%	718			1,204			(486)			(40)	%
Food	19		284		(265)		(93)	%	404			821			(417)			(51)	%
Ship and other impairments	910		23		887		3838	%	1,829			24			1,806			7682	%
Other operating	208		805		(597)		(74)	%	1,349			2,367			(1,018)			(43)	%
	1,549		3,532		(1,983)		(56)	%	7,556			9,833			(2,277)			(23)	%

Selling and administrative	265		563		(298)		(53)	%	1,435			1,813			(378)			(21)	%
Depreciation and amortization	551		548		3		—	%	1,698			1,607			91			6	%
Goodwill impairment	—		—		—		—	%	2,096			—			2,096			100	%
	2,364		4,643		(2,279)		(49)	%	12,784			13,252			(468)			(4)	%
Operating Income (Loss)	$	(2,333)	$	1,890	$	(4,223)	(223)	%	$	(7,223)		$	2,791		$	(10,015)		(359)	%


NAA
	Three Months Ended August 31,								% increase (decrease)			Nine Months Ended August 31,								% increase (decrease)
(in millions)	2020		2019		Change						2020			2019			Change
Revenues
Passenger ticket	$	5	$	2,896	$	(2,891)	(100)	%	$	2,329		$	6,976		$	(4,647)		(67)	%
Onboard and other	9		1,361		(1,351)		(99)	%	1,283			3,519			(2,236)			(64)	%
	15		4,256		(4,242)		(100)	%	3,612			10,495			(6,883)			(66)	%

Operating Costs and Expenses	1,292		2,327		(1,034)		(44)	%	5,197			6,370			(1,172)			(18)	%
Selling and administrative	144		339		(194)		(57)	%	841			1,034			(193)			(19)	%
Depreciation and amortization	348		345		3		1	%	1,081			1,012			69			7	%
Goodwill impairment	—		—		—		—	%	1,319			—			1,319			100	%
	1,785		3,010		(1,225)		(41)	%	8,439			8,416			23			—	%
Operating Income (Loss)	$	(1,770)	$	1,246	$	(3,016)	(242)	%	$	(4,827)		$	2,079		$	(6,906)		(332)	%

Table of Contents


EA
	Three Months Ended August 31,								% increase (decrease)			Nine Months Ended August 31,								% increase (decrease)
(in millions)	2020		2019		Change						2020			2019			Change
Revenues
Passenger ticket	$	(4)	$	1,609	$	(1,613)	(100)	%	$	1,393		$	4,021		$	(2,628)		(65)	%
Onboard and other	—		426		(426)		(100)	%	393			1,101			(708)			(64)	%
	(4)		2,035		(2,039)		(100)	%	1,785			5,122			(3,336)			(65)	%

Operating Costs and Expenses	225		1,058		(833)		(79)	%	2,314			3,166			(852)			(27)	%
Selling and administrative	71		150		(79)		(53)	%	404			540			(136)			(25)	%
Depreciation and amortization	165		165		—		—	%	499			483			16			3	%
Goodwill impairment	—		—		—		—	%	777			—			777			100	%
	461		1,373		(912)		(66)	%	3,994			4,189			(195)			(5)	%
Operating Income (Loss)	$	(465)	$	662	$	(1,127)	(170)	%	$	(2,208)		$	933		$	(3,141)		(337)	%

We paused our guest operations in ~~2017.~~

~~This increase was driven by:~~

~~$149 million - foreign currency translational impact from~~mid-March 2020 and as a ~~weaker U.S. dollar against~~result have been in a pause for a majority of the ~~functional currencies~~second quarter and all of the third quarter. We resumed limited guest cruise operations in September 2020 as part of our ~~foreign~~phased-in return to service. The partial pause in guest operations ~~(“foreign currency translational impact”)~~is continuing to have material negative impacts on all aspects of our business. The longer the partial pause in guest operations continues, the greater the impact on our liquidity and financial position.

~~$76 million - increase in cruise ticket revenues, driven primarily by price improvements~~

As a result of the pause in our ~~Caribbean, Australian, European~~guest cruise operations, we have experienced essentially no revenue for the three months ended and ~~various other programs including World Cruises~~

~~$61 million - 2.2% capacity increase~~meaningfully lower revenues for the nine months ended August 31, 2020 compared to the prior year periods resulting in ~~ALBDs~~

~~$36 million - increase in air transportation revenues~~

~~$18 million - increase in other passenger revenue~~

~~The remaining 26% of 2018 total revenues were substantially all comprised of onboard and other cruise revenues, which increased by $93 million, or 9.5%,~~operating losses for the current periods. We are unable to ~~$1.1 billion in 2018 from $1.0 billion in 2017.~~

~~This increase was driven by:~~

•~~$33 million - foreign currency translational impact~~

•~~$31 million - higher onboard spending by our guests~~

•~~$21 million - 2.2% capacity increase in ALBDs~~

~~Concession revenues, which are included in onboard and other revenues, increased by $21 million, or 9.1%, to $247 million in 2018 from $227 million in 2017.~~

~~NAA Segment~~

~~Cruise passenger ticket revenues made up 71%~~definitively predict the timing of our ~~NAA segment’s 2018 total revenues. Cruise passenger ticket revenues increased by $117 million, or 6.5%,~~complete return to ~~$1.9 billion in 2018 compared~~service. As a result, we are currently unable to ~~$1.8 billion in 2017.~~ provide an earnings forecast. We expect a net loss on both a U.S. GAAP and adjusted basis for the quarter and year ending November 30, 2020.

~~This increase was driven by:~~

~~$74 million - increase in cruise ticket revenues, driven primarily by price improvements in the Caribbean~~While maintaining compliance, environmental protection and ~~Australian programs~~

~~$26 million - 1.4% capacity increase in ALBDs~~

The remaining 29% of our NAA segment’s 2018 total revenues were comprised of onboard and other cruise revenues, which increased by $50 million, or 6.9%, to $767 million in 2018 from $718 million in 2017.

~~This increase was driven by:~~

~~$33 million - higher onboard spending by our guests~~

~~$10 million - 1.4% capacity increase in ALBDs~~

~~Concession revenues, which are included in onboard and other revenues, increased by $10 million, or 6.0%, to $172 million in 2018 from $162 million in 2017.~~

~~EA Segment~~

Cruise passenger ticket revenues made up 82% of our EA segment’s 2018 total revenues. Cruise passenger ticket revenues increased by $232 million, or 23%, to $1.2 billion in 2018 compared to $1.0 billion in 2017.

~~This increase was driven by:~~

~~$145 million - foreign currency translational impact~~

~~$35 million - 3.5% capacity increase in ALBDs~~

~~$25 million - increase in air transportation revenues~~

~~$17 million - increase in cruise ticket revenues, driven primarily by price improvements in the European and various other programs~~safety, we significantly reduced ship operating expenses, including ~~World Cruises~~

The remaining 18% of our EA segment’s 2018 total revenues were comprised of onboard and other cruise revenues, which increased by $45 million, or 21%, and were $265 million in 2018 and $220 million in 2017. This increase was driven by the foreign currency translational impact, which accounted for $31 million.

~~Concession revenues, which are included in onboard and other revenues, increased by $11 million, or 17%, to $76 million in 2018 from $65 million in 2017.~~

~~Costs and Expenses~~

~~Consolidated~~

~~Operating costs and expenses increased by $275 million, or 11%, to $2.7 billion in 2018 from $2.4 billion in 2017.~~

~~This increase was driven by:~~

~~$108 million - foreign currency translational impact~~

~~$61 million - higher fuel prices~~

~~$53 million - 2.2% capacity increase in ALBDs~~

~~$39 million - higher commissions, transportation and other~~

~~Selling and administrative expenses increased by $67 million, or 12%, to $616 million in 2018 from $549 million in 2017.~~

~~This increase was driven by:~~

~~$25 million - higher administrative expenses~~

~~$22 million - foreign currency translational impact~~

~~$12 million - 2.2% capacity increase in ALBDs~~

~~Depreciation and amortization expenses increased by $49 million, or 11%, to $488 million in 2018 from $439 million in 2017.~~

~~This increase was caused by:~~

~~$21 million - fleet enhancements and investments in shoreside assets~~

~~$19 million - foreign currency translational impact~~

~~$10 million - 2.2% capacity increase in ALBDs~~

~~NAA Segment~~

~~Operating costs and expenses increased by $101 million, or 6.5%, to $1.7 billion in 2018 from $1.6 billion in 2017.~~

~~This increase was caused by:~~

~~$42 million - higher fuel prices~~

~~$22 million - 1.4% capacity increase in ALBDs~~

~~$15 million - higher commissions, transportation and other~~

~~$13 million - higher~~ cruise payroll and related expenses, food, fuel, insurance and port charges by transitioning ships into paused status, either at anchor or in port and staffed at a safe manning level. We continue to seek ways to further reduce our ongoing ship operating expenses.

~~$12 million - higher port expenses~~

~~Selling~~In addition, during the nine months ended August 31, 2020, we incurred incremental COVID-19 related costs associated with repatriating guests and ~~administrative expenses increased by $34 million, or 10%, to $367 million in 2018 from $333 million in 2017.~~

~~This increase was driven by:~~

~~$15 million - higher advertising~~crew members, enhancing health protocols and ~~promotion expenses~~

~~$14 million - higher administrative expenses~~

~~Depreciation and amortization expenses increased by $10 million, or 3.5%, to $299 million in 2018 from $289 million in 2017.~~

~~EA Segment~~

~~Operating~~sanitizing our ships, restructuring costs and ~~expenses increased by $146 million, or 17%,~~defending lawsuits.

As a result of the effects of COVID-19 on our expected future operating cash flows, we recognized goodwill impairment charges of $2.1 billion during the nine months ended August 31, 2020. In addition, we recognized ship impairment charges of $0.8 billion and $1.7 billion during the three and nine months ended August 31, 2020, respectively.

Table of Contents

Key Performance Non-GAAP Financial Indicators

The table below reconciles Adjusted net income (loss) and Adjusted EBITDA to ~~$1.0 billion in 2018 from $0.9 billion in 2017.~~Net Income (loss) and Adjusted earnings per share to Earnings per share for the periods presented:

~~This increase was caused by:~~

~~$104 million - foreign currency translational impact~~


	Three Months Ended						Nine Months Ended
	August 31,						August 31,
(in millions, except per share data)	2020		2019		2020		2019
Net income (loss)
U.S. GAAP net income (loss)	$	(2,858)	$	1,780	$	(8,014)	$	2,567
(Gains) losses on ship sales and impairments	937		14		3,819		—
Restructuring expenses	3		—		42		—
Other	220		25		223		47
Adjusted net income (loss)	$	(1,699)	$	1,819	$	(3,930)	$	2,614
Interest expense, net of capitalized interest	310		52		547		157
Interest income	(3)		(8)		(15)		(16)
Income tax expense, net	(2)		47		(2)		56
Depreciation and amortization	551		548		1,698		1,607
Adjusted EBITDA	$	(844)	$	2,458	$	(1,702)	$	4,418
Weighted-average shares outstanding	775		691		727		693

Earnings per share
U.S. GAAP diluted earnings per share	$	(3.69)	$	2.58	$	(11.03)	$	3.71
(Gains) losses on ship sales and impairments	1.21		0.02		5.26		—
Restructuring expenses	—		—		0.06		—
Other	0.28		0.04		0.31		0.07
Adjusted earnings per share	$	(2.19)	$	2.63	$	(5.41)	$	3.77

~~$30 million - 3.5% capacity increase in ALBDs~~

~~$25 million - higher commissions, transportation and other~~

~~$20 million - higher fuel prices~~

~~These increases were partially offset by:~~

~~$12 million - lower dry-dock expenses and repair and maintenance expenses~~

~~$10 million - lower cruise payroll and related expenses~~

Selling and administrative expenses increased by $29 million, or 18%, to $188 million in 2018 from $159 million in 2017. This increase was driven by foreign currency translational impact, which accounted for $22 million.

Depreciation and amortization expenses increased by $27 million, or 20%, to $157 million in 2018 from $130 million in 2017. This increase was driven by foreign currency translational impact, which accounted for $18 million.

~~Operating Income~~

Our consolidated operating income increased by $51 million, or 14%, to $419 million in 2018 from $368 million in 2017. Our NAA segment’s operating income increased by $22 million, or 6.4%, to $360 million in 2018 from $338 million in 2017, and our EA segment’s operating income increased by $76 million, or 97%, to $154 million in 2018 from $78 million in 2017. These changes were primarily due to the reasons discussed above.

~~Nonoperating Income (Expense)~~

Three Months Ended February 28,
(in millions) 2018 2017
Unrealized gains on fuel derivatives, net $ 32
$ 72
Realized losses on fuel derivatives, net (16 ) (45 )
Gains on fuel derivatives, net $ 16
$ 27

Explanations of Non-GAAP Financial Measures

~~Non-GAAP Financial Measures~~

We use ~~net cruise revenues per ALBD (“net revenue yields”), net cruise costs excluding fuel per ALBD,~~ adjusted net income (loss) and adjusted earnings per share as non-GAAP financial measures of our cruise segments’ and the company’s financial performance. These non-GAAP financial measures are provided along with U.S. GAAP ~~gross cruise revenues per ALBD (“gross revenue yields”), gross cruise costs per ALBD~~net income (loss) and U.S. GAAP ~~net income and U.S. GAAP~~diluted earnings per share.

Net revenue yields and net cruise costs excluding fuel per ALBD enable us to separate the impact of predictable capacity or ALBD changes from price and other changes that affect our business. We believe these non-GAAP measures provide useful information to investors and expanded insight to measure our revenue and cost performance as a supplement to our U.S. GAAP consolidated financial statements.

Under U.S. GAAP, the realized and unrealized gains and losses on fuel derivatives not qualifying as fuel hedges are recognized currently in earnings. We believe that unrealized gains and losses on fuel derivatives are not an indication of our earnings performance since they relate to future periods and may not ultimately be realized in our future earnings. Therefore, we believe it is more meaningful for the unrealized gains and losses on fuel derivatives to be excluded from our net income and earnings per share and, accordingly, we present adjusted net income and adjusted earnings per share excluding these unrealized gains and losses.

We believe that gains and losses on ship sales, impairment charges, restructuring costs and other ~~expenses~~gains and losses are not part of our core operating business and are not an indication of our future earnings performance. Therefore, we believe it is more meaningful for ~~gains and losses on ship sales, impairment charges, and restructuring and other non-core gains and charges~~these items to be excluded from our net income (loss) and earnings per share and, accordingly, we present adjusted net income (loss) and adjusted earnings per share excluding these items.

Adjusted EBITDA is a non-GAAP measure, and we believe that the presentation of Adjusted EBITDA provides additional information to investors about our operating profitability adjusted for certain non-cash items and other gains and expenses that we believe are not part of our core operating business and are not an indication of our future earnings performance. Further, we believe that the presentation of Adjusted EBITDA provides additional information to investors about our ability to operate our business in compliance with the restrictions set forth in our debt agreements. We define Adjusted EBITDA as adjusted net income (loss) adjusted for (i) interest, (ii) taxes and (iii) depreciation and amortization. There are material limitations to using Adjusted EBITDA. Adjusted EBITDA does not take into account certain significant items that directly affect our net income (loss). These limitations are best addressed by considering the economic effects of the excluded items independently, and by considering Adjusted EBITDA in conjunction with net income (loss) as calculated in accordance with U.S. GAAP.

The presentation of our non-GAAP financial information is not intended to be considered in isolation from, as substitute for, or superior to the financial information prepared in accordance with U.S. GAAP. It is possible that our non-GAAP financial measures may not be exactly comparable to the like-kind information presented by other companies, which is a potential risk associated with using these measures to compare us to other companies.

~~Net revenue yields~~ are commonly used in the cruise industry to measure a company’s cruise segment revenue performance and for revenue management purposes. We use “net cruise revenues” rather than “gross cruise revenues” to calculate net revenue yields. We believe that net cruise revenues is a more meaningful measure in determining revenue yield than gross cruise revenues because it reflects the cruise revenues earned net of our most significant variable costs, which are travel agent commissions, cost of air and other transportation, certain other costs that are directly associated with onboard and other revenues and credit and debit card fees.

~~Net passenger ticket revenues~~ ~~reflect gross passenger ticket revenues, net of commissions, transportation and other costs.~~

~~Net onboard and other revenues~~ ~~reflect gross onboard and other revenues, net of onboard and other cruise costs.~~

~~Net cruise costs excluding fuel per ALBD~~ is the measure we use to monitor our ability to control our cruise segments’ costs rather than gross cruise costs per ALBD. We exclude the same variable costs that are included in the calculation of net cruise revenues as well as fuel expense to calculate net cruise costs without fuel to avoid duplicating these variable costs in our non-GAAP financial measures. Substantially all of our net cruise costs excluding fuel are largely fixed, except for the impact of changing prices, once the number of ALBDs has been determined.

~~Reconciliation of Forecasted Data~~

We have not provided a reconciliation of forecasted gross cruise revenues to forecasted net cruise revenues or forecasted gross cruise costs to forecasted net cruise costs without fuel or forecasted U.S. GAAP net income to forecasted adjusted net income or forecasted U.S. GAAP earnings per share to forecasted adjusted earnings per share because preparation of meaningful U.S. GAAP forecasts of gross cruise revenues, gross cruise costs, net income and earnings per share would require unreasonable effort. We are unable to predict, without unreasonable effort, the future movement of foreign exchange rates and fuel prices. While we forecast realized gains and losses on fuel derivatives by applying current Brent prices to the derivatives that settle in the forecast period, we do not forecast the impact of unrealized gains and losses on fuel derivatives because we do not believe they are an indication of our future earnings performance. We are unable to determine the future impact of gains or losses on ships sales, restructuring expenses and other non-core gains and charges.

~~Constant Dollar and Constant Currency~~

Our operations primarily utilize the U.S. dollar, Australian dollar, euro and sterling as functional currencies to measure results and financial condition. Functional currencies other than the U.S. dollar subject us to foreign currency translational risk. Our operations also have revenues and expenses that are in currencies other than their functional currency, which subject us to foreign currency transactional risk.

We report net revenue yields, net passenger revenue yields, net onboard and other revenue yields and net cruise costs excluding fuel per ALBD on a “constant dollar” and “constant currency” basis assuming the 2018 periods’ currency exchange rates have remained constant with the 2017 periods’ rates. These metrics facilitate a comparative view for the changes in our business in an environment with fluctuating exchange rates.

~~Constant dollarreporting removes only the impact of changes in exchange rates on the translation of our operations.~~

~~Constant currency~~reporting removes the impact of changes in exchange rates on the translation of our operations (as in constant dollar) plus the transactional impact of changes in exchange rates from revenues and expenses that are denominated in a currency other than the functional currency.

~~Examples:~~

~~The translation~~

Table of our operations with functional currencies other than U.S. dollar to our U.S. dollar reporting currency results in decreases in reported U.S. dollar revenues and expenses if the U.S. dollar strengthens against these foreign currencies and increases in reported U.S. dollar revenues and expenses if the U.S. dollar weakens against these foreign currencies.Contents

Our operations have revenue and expense transactions in currencies other than their functional currency. If their functional currency strengthens against these other currencies, it reduces the functional currency revenues and expenses. If the functional currency weakens against these other currencies, it increases the functional currency revenues and expenses.

~~Consolidated gross and net revenue yields were computed by dividing the gross and net cruise revenues by ALBDs as follows:~~

Three Months Ended February 28,
(dollars in millions, except yields) 2018 2018
Constant
Dollar 2017
Passenger ticket revenues $ 3,148
$ 2,999
$ 2,804
Onboard and other revenues 1,071
1,038
978
Gross cruise revenues 4,219
4,037
3,782
Less cruise costs
Commissions, transportation and other (663 ) (621 ) (569 )
Onboard and other (140 ) (135 ) (125 )
(803 ) (756 ) (694 )
Net passenger ticket revenues 2,485
2,378
2,235
Net onboard and other revenues 931
903
853
Net cruise revenues $ 3,416
$ 3,280
$ 3,088
ALBDs 20,461,582
20,461,582
20,024,045

Gross revenue yields $ 206.20
$ 197.29
$ 188.87
% increase 9.2 % 4.5 %
Net revenue yields $ 166.95
$ 160.32
$ 154.22
% increase 8.3 % 4.0 %
Net passenger ticket revenue yields $ 121.46
$ 116.21
$ 111.60
% increase 8.8 % 4.1 %
Net onboard and other revenue yields $ 45.50
$ 44.11
$ 42.62
% increase 6.8 % 3.5 %

Three Months Ended February 28,
(dollars in millions, except yields) 2018 2018
Constant
Currency 2017
Net passenger ticket revenues $ 2,485
$ 2,374
$ 2,235
Net onboard and other revenues 931
906
853
Net cruise revenues $ 3,416
$ 3,280
$ 3,088
ALBDs 20,461,582
20,461,582
20,024,045

Net revenue yields $ 166.95
$ 160.31
$ 154.22
% increase 8.3 % 3.9 %
Net passenger ticket revenue yields $ 121.46
$ 116.04
$ 111.60
% increase 8.8 % 4.0 %
Net onboard and other revenue yields $ 45.50
$ 44.27
$ 42.62
% increase 6.8 % 3.9 %

~~Consolidated gross and net cruise costs and net cruise costs excluding fuel per ALBD were computed by dividing the gross and net cruise costs and net cruise costs excluding fuel by ALBDs as follows:~~

Three Months Ended February 28,
(dollars in millions, except costs per ALBD) 2018 2018
Constant
Dollar 2017
Cruise operating expenses $ 2,695
$ 2,587
$ 2,422
Cruise selling and administrative expenses 610
587
546
Gross cruise costs 3,305
3,175
2,968
Less cruise costs included above
Commissions, transportation and other (663 ) (621 ) (569 )
     Onboard and other (140 ) (135 ) (125 )
     (Losses) gains on ship sales and impairments (16 ) (16 ) —
     Restructuring expenses —
—
—
     Other —
—
1
Net cruise costs 2,485
2,402
2,275
Less fuel (359 ) (359 ) (297 )
Net cruise costs excluding fuel $ 2,127
$ 2,044
$ 1,978
ALBDs 20,461,582
20,461,582
20,024,045

Gross cruise costs per ALBD $ 161.51
$ 155.16
$ 148.24
% increase 9.0 % 4.7 %
Net cruise costs excluding fuel per ALBD $ 103.92
$ 99.84
$ 98.81
% increase 5.2 % 1.0 %

Three Months Ended February 28,
(dollars in millions, except costs per ALBD) 2018 2018
Constant
Currency 2017
Net cruise costs excluding fuel $ 2,127
$ 2,042
$ 1,978
ALBDs 20,461,582
20,461,582
20,024,045

Net cruise costs excluding fuel per ALBD $ 103.92
$ 99.81
$ 98.81
% increase 5.2 % 1.0 %

~~Adjusted fully diluted earnings per share was computed as follows:~~

Three Months Ended
February 28,
(in millions, except per share data) 2018 2017
Net income
     U.S. GAAP net income $ 391
$ 352
     Unrealized (gains) losses on fuel derivatives, net (32 ) (72 )
     (Gains) losses on ship sales and impairments 16
—
     Restructuring expenses —
—
     Other —
(1 )
     Adjusted net income $ 375
$ 279
Weighted-average shares outstanding 719
728

Earnings per share
     U.S. GAAP earnings per share $ 0.54
$ 0.48
     Unrealized (gains) losses on fuel derivatives, net (0.05 ) (0.10 )
     (Gains) losses on ship sales and impairments 0.02
—
     Restructuring expenses —
—
     Other —
—
     Adjusted earnings per share $ 0.52
$ 0.38

~~Net cruise revenues increased by $328 million, or 11%, to $3.4 billion in 2018 from $3.1 billion in 2017.~~

~~The increase was caused by:~~

~~$136 million - foreign currency impacts (including both the foreign currency translational and transactional impacts)~~

~~$125 million - 3.9% increase in constant currency net revenue yields~~

~~$67 million - 2.2% capacity increase in ALBDs~~

~~The 3.9% increase in net revenue yields on a constant currency basis was due to a 4.0% increase in net passenger ticket revenue yields and a 3.9% increase in net onboard and other revenue yields.~~

The 4.0% increase in net passenger ticket revenue yields was driven primarily by price improvements in our Caribbean, Australian, European and various other programs including World Cruises. This 4.0% increase in net passenger ticket revenue yields was comprised of a 3.9% increase from our NAA segment and a 4.5% increase from our EA segment.

~~The 3.9% increase in net onboard and other revenue yields was caused by similar increases in our NAA and EA segments.~~

~~Gross cruise revenues increased by $437 million, or 12%, to $4.2 billion in 2018 from $3.8 billion in 2017 for largely the same reasons as discussed above.~~

~~Net cruise costs excluding fuel increased by $148 million, or 7.5%, to $2.1 billion in 2018 from $2.0 billion in 2017.~~

~~The increase was driven by:~~

~~$84 million - foreign currency impacts (including both the foreign currency translational and transactional impacts)~~

~~$43 million - 2.2% capacity increase in ALBDs~~

~~$20 million - 1.0% increase in constant currency net cruise costs excluding fuel~~

~~Fuel costs increased by $62 million, or 21%, to $359 million in 2018 from $297 million in 2017. This increase was driven by higher fuel prices, which accounted for $61 million.~~

~~Gross cruise costs increased by $337 million, or 11%, to $3.3 billion in 2018 from $3.0 billion in 2017 for largely the same reasons as discussed above.~~

Liquidity, Financial Condition and Capital Resources

We have taken, and continue to take, significant actions to preserve cash and secure additional financing to increase our liquidity. Since March 2020, we have raised $12.5 billion through a series of financing transactions through October 2, 2020. We have completed the following transactions:

•In March 2020, we fully drew down our $3.0 billion Revolving Facility.

•In March 2020, we settled outstanding derivatives resulting in proceeds of $220 million.

•In April 2020, we completed (i) a public offering of 71,875,000 shares of Carnival Corporation’s common stock at a price per share of $8.00, resulting in net proceeds of $556 million and (ii) a private offering of $2.0 billion aggregate principal amount of 5.75% Convertible Notes.

•In April 2020, we completed a private offering of $4.0 billion aggregate principal amount of 11.5% 2023 Secured Notes that mature on April 1, 2023.

•In April 2020, we extended a $166 million euro-denominated bank loan, originally maturing in 2020, to March 2021.

•Certain of the counterparties to our export credit facilities have offered the Debt Holiday. We have entered into supplemental agreements or side letters for the Debt Holiday amendments to defer certain principal repayments otherwise due through March 31, 2021 through the creation of separate tranches of loans with repayments made over the following four years. We have also entered into supplemental agreements or side letters to waive the Financial Covenant for our funded export credit facilities through March 31, 2021, August 31, 2021, November 30, 2021 or December 31, 2021, as applicable. We will be required to comply with the Financial Covenant beginning with the next testing date of May 31, 2021, November 30, 2021, February 28, 2022 or February 28, 2022, respectively.

•Subsequent to August 31, 2020, we extended the Financial Covenant waivers for our funded export credit facilities through at least November 30, 2021 (with the next testing date of February 28, 2022) except that for three of our funded export credit facilities with Financial Covenant waivers through March 31, 2021 (with the next testing date of May 31, 2021) or August 31, 2021 (with the next testing date of November 30, 2021), with total aggregate indebtedness of $1.3 billion as of August 31, 2020, we are currently engaged in discussions to extend the waivers for these facilities through November 30, 2021 (with the next testing date of February 28, 2022).

•We obtained waivers of the Financial Covenant for certain of our bank loans through November 2021. We will be required to comply with the covenant beginning with the next testing date of February 28, 2022. We have also obtained waivers of the covenant for the remaining applicable bank loans through their respective maturity dates.

•To further enhance our liquidity, as well as comply with the dividend restrictions contained in our recent debt agreements, we have suspended the payment of dividends on, and the repurchase of, the common stock of Carnival Corporation and the ordinary shares of Carnival plc.

•In June 2020, we borrowed an aggregate principal amount of $2.8 billion in two tranches ($1.9 billion and €800 million), under the 2025 Secured Term Loan that matures on June 30, 2025. The U.S. dollar tranche bears interest at a rate per annum equal to adjusted LIBOR (with a 1% floor) plus 7.5%. The euro tranche bears interest at a rate per annum equal to EURIBOR (with a 0% floor) plus 7.5%.

•In July 2020, we extended a $337 million euro-denominated floating rate bank loan originally maturing in 2021 to 2022.

•In July 2020, we issued an aggregate principal amount of $1.3 billion in two tranches ($775 million and €425 million), under 2026 Secured Notes, that mature on February 1, 2026. The U.S. dollar tranche bears interest at a rate of 10.5% per year. The euro tranche bears interest at a rate of 10.1% per year.

•In August 2020, we completed a registered direct offering of 99.2 million shares of Carnival Corporation's common stock at a price per share of $14.02 to a limited number of holders of the Convertible Notes (the "Registered Direct Offering"). We used the proceeds from the Registered Direct Offering to repurchase $886 million aggregate principal amount of the Convertible Notes and pay accrued interest thereon in privately negotiated transactions.

•In August 2020, we issued an aggregate principal amount of $900 million of second-priority senior secured notes that mature on August 1, 2027. The 2027 Secured Notes bear interest at a rate of 9.9% per year.

•On September 15, 2020, we entered into an equity distribution agreement with sales agents pursuant to which we may, from time to time, offer and sell shares of Carnival Corporation's common stock having an aggregate offering price of up to $1.0 billion through the sales agents. We have filed a prospectus supplement with the Securities and Exchange Commission in connection with the ATM Offering on September 15, 2020. As of October 2, 2020, we sold 23 million shares for net proceeds of $352 million and paid $4 million in compensation with respect of such sales of shares under the ATM Offering.

•In September 2020, we borrowed $610 million under an export credit facility due in semi-annual installments through 2032.

Table of Contents

As of August 31, 2020, we had a total of $8.2 billion of cash and cash equivalents.

Our primary financial goals are to profitably grow our cruise business and increase our return on invested capital (“ROIC”), reaching double-digit returns, while maintaining a strong balance sheet and strong investment grade credit ratings.monthly average cash burn rate for the third quarter 2020 was $770 million, which was in line with the anticipated monthly cash burn rate. We ~~define ROIC as the twelve month adjusted earnings before interest divided by~~expect the monthly average cash burn rate for the fourth quarter of 2020 to be approximately $530 million. This results in an average monthly burn rate for the second half of the year of $650 million, as previously disclosed. This rate includes approximately $250 million of ongoing ship operating and administrative expenses, working capital changes (excluding changes in customer deposits), interest expense and committed capital expenditures (net of unfunded export credit facilities) and also excludes scheduled debt maturities as well as other cash collateral to be provided. We continue to explore opportunities to further reduce our monthly cash burn rate.

We estimate non-newbuild capital expenditures during the fourth quarter of 2020 to be approximately $130 million. Our scheduled debt maturities, for debt outstanding as of August 31, 2020, are as follows:


(in billions)	4Q 2020		1Q 2021		2Q 2021			3Q 2021		4Q 2021
Principal Payments (a)	$	1.0	$	0.5	$	0.3	(b)	$	0.6	$	0.2	(b)

(b)We have a principal balance of $0.5 billion and $0.8 billion of debt ~~plus equity minus construction-in-progress. Our ability to generate significant operating cash flow allows us to internally fund our capital investments.~~outstanding as of August 31, 2020, otherwise due through 2032, for which covenant waivers expire during the second quarter 2021 and fourth quarter 2021, respectively. We are ~~committed~~working on extending these covenant waivers. If the covenant waiver extensions are not received, we would be required to prepay the outstanding principal balance.

~~returning free cash flow to~~Since March 2020, Moody’s and S&P Global have downgraded our shareholders in the form of dividends and/or share repurchases. As we continue to profitably grow our cruise business, we plan to increase our debt level in a manner consistent with maintaining our strong credit metrics. This will allow us to return both free cash flow and incremental debt proceeds to our shareholders in the form of dividends and/or share repurchases. Other objectives of our capital structure policy are to maintain a sufficient level of liquidity with our available cash and cash equivalents and committed financings for immediate and future liquidity needs, and a reasonable debt maturity profile.

Based on our historical results, projections and financial condition, we believe that our future operating cash flows and liquidity will be sufficient to fund all of our expected capital projects including shipbuilding commitments, ship improvements, debt service requirements, working capital needs and other firm commitments over the next several years. We believe that our ability to generate significant operating cash flows and our strong balance sheet, as evidenced by our investment grade credit ratings ~~provide~~to be below investment grade. Our current short-term commercial paper credit rating prevents us ~~with the ability, in most financial credit market environments, to obtain debt financing.~~from issuing additional commercial paper.

We had a working capital deficit of ~~$7.2~~$916 million as of August 31, 2020 compared to a working capital deficit of $7.1 billion as of ~~February 28, 2018 and~~ November 30, ~~2017. We~~2019. The decrease in working capital deficit was caused by an increase in cash and cash equivalents and a decrease in customer deposits, partially offset by increases in short-term borrowings and the current portion of long-term debt. Historically, we operate with a substantial working capital deficit. This deficit is mainly attributable to the fact that, under our business model, substantially all of our passenger ticket receipts are collected in advance of the applicable sailing date. These advance passenger receipts generally remain a current liability until the sailing date. The cash generated from these advance receipts is used interchangeably with cash on hand from other sources, such as our borrowings and other cash from operations. The cash received as advanced receipts can be used to fund operating expenses, pay down our debt, ~~invest in long term~~make long-term investments or any other use of cash. Included within our working capital deficit ~~are $4.3~~were $2.1 billion and ~~$4.0~~$4.7 billion of customer deposits as of ~~February 28, 2018~~August 31, 2020 and November 30, ~~2017,~~2019, respectively. We are providing flexibility to guests with bookings on sailings cancelled due to the pause by allowing guests to receive enhanced FCCs or elect to receive refunds in cash. We have paid and expect to continue to pay cash refunds of customer deposits with respect to a portion of these cancelled cruises. The amount of cash refunds to be paid may depend on the level of guest acceptance of FCCs and future cruise cancellations. We record a liability for FCCs to the extent we have received cash from guests with bookings on cancelled sailings. As of August 31, 2020, approximately 55% of guests affected have requested cash refunds.In addition, we have a relatively low-level of accounts receivable and limited investment in inventories. We generate substantial cash flows from operations and our business model has historically allowed us to maintain this working capital deficit and still meet our operating, investing and financing needs. We expect that we will continue to have working capital deficits in the future.

Refer to Note 1 - “General, Liquidity and Management's Plans” of the consolidated financial statements for additional discussion regarding our liquidity.

Sources and Uses of Cash

Operating Activities

Our business ~~provided $1.1~~used $4.6 billion of net cash ~~from operations~~flows in operating activities during the ~~three~~nine months ended ~~February 28, 2018, an increase~~August 31, 2020, a decrease of ~~$132 million,~~$9.1 billion, or ~~14%~~205%, compared to ~~$0.9~~$4.4 billion of net cash provided for the same period in ~~2017. This increase was caused by an increase in our revenues less expenses settled in cash and an increase in customer deposits.~~2019.

Investing Activities

Table of Contents

During the ~~three~~nine months ended ~~February 28, 2018,~~August 31, 2020, net cash used in investing activities was ~~$591 million.~~$1.5 billion. This was caused ~~by:~~by the following:

•Capital expenditures of ~~$97 million~~$1.0 billion for our ongoing new shipbuilding program

•Capital expenditures of ~~$477~~$855 million for ship improvements and replacements, information technology and buildings and improvements

~~Payments~~•Proceeds from sale of ~~$21~~ships of $271 million ~~for fuel derivative settlements~~

•Proceeds of $220 million from the settlement of outstanding derivatives

During the ~~three~~nine months ended ~~February 28, 2017,~~August 31, 2019, net cash used in investing activities was ~~$474 million.~~$3.3 billion. This was ~~driven by:~~caused by the following:

•Capital expenditures of ~~$36 million~~$2.2 billion for our ongoing new shipbuilding program

•Capital expenditures of ~~$376 million~~$1.2 billion for ship improvements and replacements, information technology and buildings and improvements

~~Payments~~•Proceeds from sale of ~~$52~~ships of $15 million ~~for fuel derivative settlements~~

Financing Activities

During the ~~three~~nine months ended ~~February 28, 2018,~~August 31, 2020, net cash provided by financing activities of $13.7 billion was caused by the following:

•Net proceeds from short-term borrowings of $3.1 billion in connection with our availability of, and needs for, cash at various times throughout the period, including proceeds of $3.0 billion from the Revolving Facility

•Repayments of $896 million of long-term debt, including the $222 million that was cash settled to repurchase a portion of the Convertible Notes

•Issuances of $11.5 billion of long-term debt, including net proceeds of $3.9 billion from the issuance of the 2023 Secured Notes, net proceeds of $2.6 billion from the issuance of the 2025 Secured Term Loan, net proceeds of $2.0 billion from the issuance of Convertible Notes, net proceeds of $1.2 billion from the issuance of the 2026 Secured Notes and net proceeds of $0.9 billion from the issuance of the 2027 Secured Notes.

•Payments of cash dividends of $689 million

•Purchases of $12 million of Carnival plc ordinary shares in open market transactions under our Repurchase Program

•Net proceeds of $556 million from our public offering of Carnival Corporation common stock

•Net proceeds of $222 million from a registered direct offering of Carnival Corporation common stock used to repurchase a portion of the Convertible Notes

During the nine months ended August 31, 2019, net cash used in financing activities of ~~$428~~$912 million was ~~substantially due to~~caused by the following:

•Net ~~proceeds~~repayments of short-term borrowings of ~~$611~~$600 million in connection with our availability of, and needs for, cash at various times throughout the period

•Repayments of ~~$963~~$472 million of long-term debt

•Issuances of ~~$469 million~~$1.7 billion of long-term debt ~~under a term loan~~

•Payments of cash dividends of ~~$323 million~~$1.0 billion

•Purchases of ~~$218~~$472 million of Carnival Corporation common stock and Carnival plc ordinary shares in open market transactions under our Repurchase Program

Table of Contents

~~During the three months ended February 28, 2017, net cash used in financing activities of $615 million was substantially due to the following:~~

~~Net repayments of short-term borrowings of $289 million in connection with our availability of, and needs for, cash at various times throughout the period~~

~~Payments of cash dividends of $254 million~~

~~Purchases of $69 million of Carnival plc ordinary shares in open market transactions under our Repurchase Program~~

~~Future Commitments and~~ Funding Sources

~~Our total annual capital expenditures consist~~

As of ~~ships under contract for construction and estimated improvements to existing ships and shoreside assets which are currently expected to be:~~

(in billions) 2018 2019 2020 2021 2022 2023
Total annual capital expenditures $ 4.7
$ 5.3
$ 5.5
$ 5.1
$ 4.3
$ 2.5

~~The year-over-year percentage increases in our annual capacity are expected to result primarily from contracted new ships entering service and are currently expected to be:~~

2018 2019 2020 2021 2022 2023
Annual capacity increase (a) 2.0 % 5.5 % 7.4 % 7.6 % 5.3 % 3.9 %

~~(a) These percentage increases include only contracted ship orders and dispositions.~~

~~At February 28, 2018,~~August 31, 2020, we had ~~liquidity of $14.4 billion. Our liquidity consisted of $157 million~~$8.2 billion of cash and cash ~~equivalents, which excludes $296 million~~equivalents. In addition, we had $9.4 billion of ~~cash used for current operations, $2.1 billion available for borrowing under our revolving~~export credit facilities ~~net~~to fund ship deliveries planned through 2024.


(in billions)	2020		2021		2022		2023		2024
Future export credit facilities at August 31, 2020 (a)	$	1.5	$	2.0	$	3.4	$	1.9	$	0.6

(a)Under the terms of ~~our outstanding commercial paper borrowings, and $12.1 billion under our committed future financings, which are comprised of ship~~these export credit ~~facilities. These commitments~~facilities, we are ~~from numerous large and well-established banks and~~required to comply with the Financial Covenant. We have entered into supplemental agreements or side letters to amend our agreements with respect to the Financial Covenant for our unfunded export credit ~~agencies,~~facilities to waive compliance through August 31, 2021 (with the next testing date of November 30, 2021) for aggregate principal of $2.7 billion, through November 30, 2021 (with the next testing date of February 28, 2022) for aggregate principal of $1.2 billion (of which we ~~believe will honor their contractual agreements with us.~~

(in billions) 2018 2019 2020 2021 2022
Availability of committed future financing at February 28, 2018 $ 2.2
$ 2.8
$ 3.1
$ 3.1
$ 1.0

Atborrowed $610 million to fund delivery of a ship in September 2020), and through December 31, 2021 (with the next testing date of February 28, ~~2018, all~~2022) for aggregate principal of ~~our revolving~~$3.7 billion. For the remaining three unfunded export credit facilities with an aggregate principal of $1.8 billion, we are ~~scheduled~~engaged in discussions with the counterparties to ~~mature in~~waive the Financial Covenant through March 31, 2021 ~~except~~(with the next testing date of May 31, 2021). Simultaneously with obtaining the initial waivers for ~~$300 million that matures in 2020.~~these three unfunded export credit facilities, we have also requested extension of waivers for these facilities through November 30, 2021 (with the next testing date of February 28, 2022).

~~Substantially all~~Many of our debt agreements contain various other financial covenants, asincluding those described in Note 3 - “Debt” and in Note 5 - ~~“Unsecured Debt”~~“Deb” in the annual consolidated financial statements, which are included within our Form 10-K. At ~~February 28, 2018,~~August 31, 2020, we were in compliance with ~~our~~the applicable debt covenants. In addition, based on, among other things, our forecasted operating results, financial condition and cash flows, we expect to be in compliance with our debt covenants for the foreseeable future. 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 could become due, and all debt and derivative contracts could be terminated.

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements, including guarantee contracts, retained or contingent interests, certain derivative instruments and variable interest entities that either have, or are reasonably likely to have, a current or future material effect on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

For a discussion of our hedging strategies and market risks, see the discussion below and Note 410 - “Fair Value Measurements, Derivative Instruments and Hedging ~~Activities”~~Activities and Financial Risks” in our consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations within our Form 10-K.

~~Operational Currency Risks~~

~~Based on a 10% change in all currency exchange rates that were used in our March 22, 2018 guidance, we estimate that our adjusted diluted earnings per share guidance would change by the following:~~

~~$0.32 per share for the remaining three quarters of 2018~~

~~$0.06 per share for the second quarter of 2018~~

Interest Rate Risks

The composition of our debt, including the effect of ~~foreign currency swaps and~~ interest rate swaps, was as follows:



	~~February 28, 2018~~August 31, 2020
Fixed rate	2144	%
EUR fixed rate	3813	%
Floating rate	1125	%
EUR floating rate	2014	%
GBP floating rate	104	%

~~Fuel Price Risks~~

Based on a 10% change in fuel prices versus the current spot price that was used to calculate fuel expense in our March 22, 2018 guidance, we estimate that our adjusted diluted earnings per share guidance would change by the following:

~~$0.15 per share for the remaining three quarters~~Table of ~~2018~~Contents

~~$0.05 per share for the second quarter of 2018~~

Based on a 10% change in Brent prices versus the current spot price that was used to calculate realized gains (losses) on fuel derivatives in our March 22, 2018 guidance, we estimate that our adjusted diluted earnings per share guidance would change by the following:

~~$0.04 per share for the remaining three quarters of 2018~~

~~$0.01 per share for the second quarter of 2018~~

Item 4. Controls and Procedures.

A. Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported, within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Our President and Chief Executive Officer and our Chief Financial Officer and Chief Accounting Officer have evaluated our disclosure controls and procedures and have concluded, as of ~~February 28, 2018,~~August 31, 2020, that they are effective at a reasonable level of assurance, as described above.

B. Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended ~~February 28, 2018~~August 31, 2020 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

In addition to the proceeding described below, the legal proceedings described in Note 4 – “Contingencies and Commitments” of our consolidated financial statements, including those described under “COVID-19 Actions,” are incorporated in this “Legal Proceedings” section by reference.

As previously disclosed, on May 19, 2017, Holland America Line and Princess Cruises notified the National Oceanic and Atmospheric Administration (“NOAA”) regarding discharges made by certain vessels in the recently expanded area of the National Marine Sanctuary in the Farallones ~~Islands. NOAA continues~~Island. On February 7, 2020, Carnival Corporation received an assessment for a civil penalty of $1.4 million for these discharges. The parties are negotiating a final settlement.

As previously disclosed, in June and August of 2018, Holland America Line received four Notices of Violation from the Alaska Department of Environmental Conservation (“ADEC”) alleging that four ships violated the Alaska state visible emissions standards while docked in Skagway, Haines and Ketchikan. On July 8, 2020, ADEC waived opacity penalties for two vessels and proposed a settlement of $112,500 to ~~conduct an investigation. We believe the ultimate outcome will not have a material impact~~resolve all outstanding penalties, which Holland America Line accepted on ~~our consolidated financial statements.~~July 31, 2020.

Item 1A. Risk Factors.

The risk factors ~~that affect our business and financial results are discussed~~ in ~~“Item 1A. Risk Factors,” included in the~~this Form ~~10-K, and there has been no material change to these risk factors since the Form 10-K filing. We wish to caution the reader that~~10-Q below should be carefully considered, including the risk factors discussed in ~~“Item 1A. Risk Factors,” included~~“Risk Factors” and other risks discussed in our Form 10-K, our Form 10-Q for the quarters ended February 29, 2020 and May 31, 2020 and other filings with the SEC since the date of the Form ~~10-K,~~10-K. These risks could materially and ~~those described elsewhere in this report or other Securities~~adversely affect our results, operations, outlooks, plans, goals, growth, reputation, cash flows, liquidity, and ~~Exchange Commission filings,~~stock price. Our business also could ~~cause future results to differ materially from those stated in any forward-looking statements. Additional~~be affected by risks ~~and uncertainties~~that we are not ~~currently known to us~~presently aware of or that we currently ~~deem~~consider immaterial to our operations.

The spread of COVID-19 and the recent developments surrounding the global pandemic are having material negative impacts on all aspects of our business. We implemented a pause of our guest cruise operations in mid-March 2020 across all brands. Although we have begun the resumption of limited guest operations in September 2020, such partial pause may be prolonged. In addition, we have been, and will continue to be ~~immaterial~~further, negatively impacted by related developments, including heightened governmental regulations and travel advisories, recommendations by the U.S. Department of State, the Centers for Disease Control and Prevention and other regulatory authorities, and travel bans and restrictions, each of which has impacted, and is expected to continue to significantly impact, global guest sourcing and our access to various ports of call.

To date we have incurred significant costs as we paused our guest cruise operations, provided air transportation to return our passengers to their home destinations, repatriated shipboard team members and assisted some of our crew that were unable to return home, with food and housing. We will continue to incur COVID-19 related costs as we sanitize our ships and implement additional hygiene-related protocols to our ships, as well as prepare for the continued resumption of guest operations. In addition, the industry may be subject to enhanced health and hygiene requirements in attempts to counteract future outbreaks, which requirements may be costly and take a significant amount of time to implement across our global fleet cruise operations.

Due to the outbreak of COVID-19 on some of our ships, and the resulting illness and loss of life in certain instances, we have been the subject of negative publicity, which could have a long term impact on the appeal of our brands, which would diminish demand for vacations on our vessels. We cannot predict how long the negative impact of media attention on our brands will last, or the level of investment that will be required to address the concerns of potential travelers through marketing and pricing actions.

We have received, and may continue to receive, lawsuits, other governmental investigations and other actions stemming from COVID-19. We cannot predict the quantum or outcome of any such proceedings, some of which could result in the imposition of civil and criminal penalties in the future, and the impact that they will have on our financial results, but any such impact may be material. We also remain subject to extensive, complex, and closely monitored obligations under the court-ordered

Table of Contents

environmental compliance plan supervised by the U.S. District Court for the Southern District of Florida, as a result of the previously disclosed settlement agreement relating to the violation of probation conditions for a plea agreement entered into by Princess Cruises and the U.S. Department of Justice in 2016. We remain fully committed to satisfying those obligations. COVID-19 presents enormous challenges for the company, which could result in material adverse impacts.

We have insurance coverage for certain liabilities, costs and expenses related to COVID-19 through our participation in Protection and Indemnity (“P&I”) clubs, including coverage for direct and incremental costs including, but not limited to, certain quarantine expenses and for certain liabilities to passengers and crew. P&I clubs are mutual indemnity associations owned by members. There is a $10 million deductible per occurrence (meaning per outbreak on a particular ship). We cannot assure you that we will receive insurance proceeds that will compensate us fully for our liabilities, costs and expenses under these policies. We have no insurance coverage for loss of revenues or earnings from our ships or other operations.

In connection with our capacity optimization strategy, we have accelerated the removal of ships from our fleet in 2020 which were previously expected to be sold over the ensuing years. We have sold, expect to sell or have agreements for the disposal of various vessels. Some of these agreements or preliminary agreements for the disposal of vessels are for recycling. When we choose to dispose of a ship, there can be no assurance that there will be a viable buyer to purchase it at a price that exceeds our net book value, which could result in ship impairment charges and losses on ship disposals.

The effects of COVID-19 on the operations of shipyards where our ships are under construction will result in a delay in ship deliveries, which we cannot predict and may ~~materially~~be prolonged.

We cannot predict the timing of our complete return to service and when various ports will reopen to our ships. If we are delayed in recommencing guest cruise operations or there is a future pause in the resumption of limited guest operations, it could negatively impact our liquidity. Moreover, even as travel advisories and restrictions are lifted, demand for cruises may remain weak for a significant length of time and we cannot predict if and when each brand will return to pre-outbreak demand or fare pricing. In particular, our bookings may be negatively impacted by the adverse changes in the perceived or actual economic climate, including higher unemployment rates, declines in income levels and loss of personal wealth resulting from the impact of COVID-19. In addition, we cannot predict the impact COVID-19 will have on our partners, such as travel agencies, suppliers and other vendors, counterparties and joint ventures. We may be adversely impacted as a result of the adverse impact our partners, counterparties and joint ventures suffer.

We have never previously experienced a complete cessation of our guest cruise operations, and as a consequence, our ability to be predictive regarding the impact of such a cessation on our brands and future prospects is uncertain. In particular, we cannot predict the impact on our financial performance and our cash flows required for cash refunds of deposits as a result of the current partial pause in our global fleet cruise operations, which may be prolonged, and the public’s concern regarding the health and safety of travel, especially by cruise ship, and related decreases in demand for travel and cruising. Moreover, our ability to attract and retain guests and our ability to hire and the amounts we must pay our crew depends, in part, upon the perception and reputation of our company and our brands and the public’s concerns regarding the health and safety of travel generally, as well as regarding the cruising industry and our ships specifically. As a result, we expect a net loss on both a U.S. GAAP and adjusted basis for the quarter and year ending November 30, 2020, and our ability to forecast our cash inflows and additional capital needs is hampered.

As a result of all of the foregoing, we have raised, and expect to be required to further raise, significant additional capital, including additional equity capital. Our access to and cost of financing depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects and our credit ratings. As a result of COVID-19's effects on our liquidity, since March 2020, Moody’s and S&P Global have downgraded our credit ratings to be below investment grade. Our current short-term commercial paper credit rating prevents us from issuing additional commercial paper.

If our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our rating levels, our industry, or us, our access to capital and the cost of any debt financing will be further negatively impacted. In addition, the terms of future debt agreements could include more restrictive covenants, or require incremental collateral, which may further restrict our business operations or be unavailable due to our covenant restrictions then in effect. There is no guarantee that debt financings will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations. Additionally, the impact of COVID-19 on the financial markets is expected to adversely impact our ability to raise funds through equity financings.

In addition, the COVID-19 outbreak has significantly increased economic and demand uncertainty. The current outbreak and continued spread of COVID-19 could cause a global recession, which would have a further adverse impact on our financial

Table of Contents

condition and operations. In past recessions, demand for our cruise vacations has been significantly negatively impacted which has resulted in lower occupancy rates and adverse pricing, with a corresponding increase in the use of credits and other means to attract travelers. Current economic forecasts for significant increases in unemployment in the U.S. and other regions due to the adoption of physical distancing and other policies to slow the spread of the virus is likely to have a negative impact on booking demand for our global fleet cruise operations, and these impacts could exist for an extensive period of time.

The extent of the effects of the outbreak on our business and the cruising industry at large is highly uncertain and will ultimately depend on future developments, including, but not limited to, the duration and severity of the outbreak, the length of time it takes for demand and pricing to return and normal economic and operating conditions to resume. To the extent COVID-19 adversely affects our business, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks described in Item 1A. “Risk Factors” included in our Form 10-K.

•Any potential government disaster relief assistance could impose significant limitations on our corporate activities and may not be available to us on terms that are favorable or at all.

If any government provides or agrees to provide disaster relief assistance, it may impose certain requirements on the recipients of the aid including restrictions on executive officer compensation, share buybacks, dividends, prepayment of debt, incurrence of additional indebtedness and other similar restrictions until the aid is repaid or redeemed in full. In addition, the government may change the terms of the assistance or the eligibility requirements. We cannot assure you that any such government disaster relief assistance will not significantly limit our corporate activities or, even if we qualify for a program, will be available to us on terms that are favorable or at all. For example, we initially qualified for a government commercial paper program providing over $700 million of available liquidity, and in September 2020, the relevant government agency paused our access to further drawings, and the ability to roll over existing drawings, under the government commercial paper program. Any restrictions, terms and inability to access government disaster relief assistance could adversely impact our business, operations, liquidity and financial condition.

•Our substantial debt could adversely affect our financial health and operating flexibility.

We have a substantial amount of debt and significant debt service obligations.

Our substantial debt could have important negative consequences for us. Our substantial debt could:

◦require us to dedicate a large portion of our cash flow from operations to service debt and fund repayments

on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures

and other general corporate purposes;

◦increase our vulnerability to adverse general economic or industry conditions;

◦limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;

◦place us at a competitive disadvantage compared to our competitors that have less debt;

◦make us more vulnerable to downturns in our business, the economy or the industry in which we operate;

◦limit our ability to raise additional debt or equity capital in the future to satisfy our requirements relating to

working capital, capital expenditures, development projects, strategic initiatives or other purposes;

◦restrict us from making strategic acquisitions, introducing new technologies or exploiting business

opportunities;

◦make it difficult for us to satisfy our obligations with respect to our debt; and

◦expose us to the risk of increased interest rates as certain of our borrowings are (and may be in the future) at

a variable rate of interest.

•Despite our leverage, we may incur more debt, which could adversely affect our business and prevent us from fulfilling our obligations with respect to our debt.

We may be able to incur substantial additional debt in the future. Although the instruments governing our existing indebtedness contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of debt that could be incurred in compliance with these restrictions could be substantial and a portion of such debt could be secured. The instruments governing our existing indebtedness do not prevent us from incurring liabilities that do not constitute “Indebtedness” as defined therein. If new debt is added to our existing debt levels, our business could be adversely affected, which may prevent us from fulfilling our obligations with respect to our debt.

•We are subject to restrictive debt covenants that may limit our ability to finance future operations and capital needs and to

Table of Contents

pursue business opportunities and activities. In addition, if we fail to comply with any of these restrictions, it could have a material adverse effect on the company.

Certain of our debt instruments limit our flexibility in operating our business. For example, some of our debt instruments limit the ability of Carnival Corporation, Carnival plc and certain of their respective subsidiaries to, among other things:

◦incur or guarantee additional indebtedness;

◦pay dividends or distributions on, or redeem or repurchase capital stock and make other restricted payments;

◦make certain investments;

◦consummate certain asset sales;

◦engage in certain transactions with affiliates;

◦grant or assume certain liens; and

◦consolidate, merge or transfer all or substantially all of our assets.

All of these limitations are subject to significant exceptions and qualifications. Despite these exceptions and qualifications, we cannot assure you that the operating and financial ~~condition~~restrictions and covenants in certain of our debt instruments will not adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest. Any future ~~results.~~indebtedness may include similar or other restrictive terms. In addition, many of our debt agreements contain one or more financial covenants that require us to maintain minimum debt service coverage, maintain minimum shareholders equity and/or limit our debt to capital ratio. Our ability to comply with our debt covenants, including the financial maintenance covenants described above, and restrictions may be affected by events beyond our control. These include prevailing economic, financial and industry conditions. If we breach any of these covenants or restrictions, we could be in default under the terms of certain of our debt facilities and the relevant lenders could elect to declare the debt, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral, if any, securing that debt. If the debt under certain of our debt instruments that we enter into were to be accelerated, our assets may be insufficient to repay in full our debt. Borrowings under other debt instruments that contain cross-default provisions also may be accelerated or become payable on demand. In these circumstances, our assets may not be sufficient to repay in full our indebtedness then outstanding.

•We require a significant amount of cash to service our debt and sustain our operations. Our ability to generate cash depends on many factors beyond our control, and we may not be able to generate cash required to service our debt.

Our ability to meet our debt service obligations or refinance our debt depends on our future operating and financial performance and ability to generate cash. This will be affected by our ability to successfully implement our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control, such as the disruption caused by the COVID-19 pandemic. If we cannot generate sufficient cash to meet our debt service obligations or fund our other business needs, we may, among other things, need to refinance all or a portion of our debt, obtain additional financing, delay planned capital expenditures or sell assets. We cannot assure you that we will be able to generate sufficient cash through any of the foregoing. If we are not able to refinance any of our debt, obtain additional financing or sell assets on commercially reasonable terms or at all, we may not be able to satisfy our obligations with respect to our debt. Refer to “Liquidity, Financial Condition and Capital Resources.”

•Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under certain of our facilities are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on certain of our variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

In addition, in July 2017, the United Kingdom's Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), announced that it will no longer persuade or compel banks to submit LIBOR rates after 2021. It is unclear whether or not, at that time, LIBOR will cease to exist and a satisfactory replacement rate developed or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of, among other entities, large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index that measures the cost of borrowing cash overnight, backed by U.S. Treasury securities (“SOFR”). SOFR is observed and backward-looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members. Whether or not SOFR attains market traction as a LIBOR replacement rate remains in question.

Table of Contents

As such, the future of LIBOR at this time is uncertain. If LIBOR ceases to exist, the level of interest payments on the portion of our indebtedness that bears interest at variable rates would be affected, which may adversely impact the amount of our interest payments under such debt.

We have entered into, and in the future we will continue to enter into, interest rate swaps that involve the exchange of floating for fixed-rate interest payments to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any such swaps may not fully mitigate our interest rate risk, may prove disadvantageous, or may create additional risks.

•As a result of the COVID-19 outbreak, we may be out of compliance with a maintenance covenant in certain of our debt facilities, for which we have waivers for the period through March 31, 2021 with the next testing date of May 31, 2021.

Under the terms of certain of our debt facilities, we are required to maintain minimum debt service coverage (EBITDA to consolidated net interest charges for the most recently ended four fiscal quarters) of not less than 3.0 to 1.0 at the end of each fiscal quarter. As of August 31, 2020, we have entered into supplemental agreements or side letters to amend our agreements with respect to this Financial Covenant to:

•Waive compliance for all of our funded export credit facilities through March 31, 2021, August 31, 2021 or December 31, 2021, as applicable.

•Waive compliance through November 30, 2021 for certain of our bank loans. We will be required to comply beginning with the next testing date of February 28, 2022.

•Waive compliance for the remaining applicable bank loans through their respective maturity dates.

At August 31, 2020, we were in compliance with the applicable debt covenants.

Subsequent to August 31, 2020, we extended the Financial Covenant waivers for our funded export credit facilities through at least November 30, 2021 (with the next testing date of February 28, 2022) except that for three of our funded export credit facilities with Financial Covenant waivers through March 31, 2021 (with the next testing date of May 31, 2021) or August 31, 2021 (with the next testing date of November 30, 2021), with total aggregate indebtedness of $1.3 billion as of August 31, 2020, we are currently engaged in discussions to extend the waivers for these facilities through November 30, 2021 (with the next testing date of February 28, 2022).

In addition, we have entered into supplemental agreements or side letters to amend our agreements with respect to the Financial Covenant for our unfunded export credit facilities to waive compliance through August 31, 2021 (with the next testing date of November 30, 2021) for aggregate principal of $2.7 billion, through November 30, 2021 (with the next testing date of February 28, 2022) for aggregate principal of $1.2 billion (of which we borrowed $610 million to fund delivery of a ship in September 2020), and through December 31, 2021 (with the next testing date of February 28, 2022) for aggregate principal of $3.7 billion. For the remaining three unfunded export credit facilities with an aggregate principal of $1.8 billion, we are engaged in discussions with the counterparties to waive the Financial Covenant through March 31, 2021 (with the next testing date of May 31, 2021). Simultaneously with obtaining the initial waivers for these three unfunded export credit facilities, we have also requested extension of waivers for these facilities through November 30, 2021 (with the next testing date of February 28, 2022).

Although highly unlikely, if the covenant waiver for any unfunded facility for which we have not yet obtained a waiver is not obtained, the lender under that facility could terminate it if we did not comply with the Financial Covenant for any fiscal quarter ending on or after August 31, 2020.

Even though we have or expect to have waivers in place with respect to this covenant, we may be out of compliance with the Financial Covenant following March 31, 2021 with the next testing date of May 31, 2021 or in future periods for certain agreements because of the pause in our guest operations. If we expected to be out of compliance, we would again seek waivers from the lenders under the applicable facilities prior to any covenant violation.

Covenant waivers have led and may continue to lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable to us under these debt facilities, and such increased costs, restrictions and modifications may vary among debt facilities. Our ability to provide additional lender protections under these facilities, including the granting of security interests in collateral, will be limited by the restrictions in our indebtedness. There can be no assurance that we would be able to obtain waivers in a timely manner, on acceptable terms or at all. If we were not able to obtain a covenant waiver under any one or more of these debt facilities, we would be in default of such agreements, which could result in cross defaults to our other debt agreements. As a consequence, we would need to refinance or repay the applicable debt facility or facilities, and would be required to raise additional debt or equity capital, or divest assets, to refinance

Table of Contents

or repay such facility or facilities. If we were to be unable to obtain a covenant waiver under any one or more of these debt facilities, there can be no assurance that we would be able to raise sufficient debt or equity capital, or divest assets, to refinance or repay such facility or facilities.

With respect to each of these debt facilities, if we were not to obtain a waiver or refinance or repay such debt facilities, it would lead to an event of default under such facilities, which could lead to an acceleration of the indebtedness under such debt facilities. In turn, this would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contract payables. As a result, the failure to obtain the covenant waivers described above would have a material adverse effect.

•The covenants in certain of our debt facilities may require us to secure those facilities in the future.

Certain of our debt facilities contain provisions which may require that we provide a security interest in certain assets. In certain of our debt facilities, there is a requirement that if the credit rating of our senior indebtedness should fall below investment grade (which occurred on June 24, 2020) and at such time we have granted liens or security interests in respect of indebtedness in an amount exceeding 25% of our total assets (excluding for these purposes the value of any intangible assets) as shown in our most recent Consolidated Balance Sheet, then we will be required to provide a first-priority security interest in certain designated assets. In addition, under our export credit facilities, there is a requirement that if a security interest or lien is granted in respect of a vessel to secure borrowed money under certain other debt facilities, then a first-priority security interest will be required to be provided over certain designated vessels.

If the events described above were to occur, we may be unable to comply with this requirement and expect to seek waivers from the lenders under the relevant facilities. Any such waiver may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable to us under these debt facilities, and such increased costs, restrictions and modifications may vary among debt facilities. Our ability to give additional lender protections under these facilities, including the granting of security interests in collateral, will be limited by the restrictions in our indebtedness and security interest we have already granted. If we were not able to obtain a waiver, the occurrence of such events may result in an event of default under these facilities and other debt facilities that contain cross default provisions that would be triggered.

•Breaches in data security and lapses in data privacy as well as disruptions and other damages to our principal offices, information technology operations and system networks, including the recent ransomware incident, and failure to keep pace with developments in technology may adversely impact our business operations, the satisfaction of our guests and crew and lead to reputational damage

We have been and may continue to be impacted by breaches in data security and lapses in data privacy, which occur from time to time. These can vary in scope and intent from economically motivated attacks to malicious attacks intended to disrupt or compromise our shoreside and shipboard operations by targeting our key operating systems. Breach or circumvention of our systems or the systems of third parties, including by ransomware or other attacks, results in disruptions to our business operations; unauthorized access to (or the loss of company access to) competitively sensitive, confidential or other critical data (including sensitive financial, medical or other personal or business information) or systems; loss of customers; financial losses; regulatory enforcement actions and fines; litigation and misuse or corruption of critical data and proprietary information, any of which could be material.

Our principal offices, information technology operations and system networks may be impacted by actual or threatened natural

disasters (for example, hurricanes, earthquakes, floods, fires, tornadoes, tsunamis, typhoons and volcanic eruptions) or other

disruptive events. Our maritime and/or shoreside operations, including our ability to manage our inventory of cabins held for

sale and set pricing, control costs, and serve our guests, depends on the reliability of our information technology operations and

system networks as well as our ability to refine and update to more advanced systems and technologies.

Table of Contents

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

A. Repurchase Program

Under a share repurchase program effective 2004, we ~~are~~had been authorized to repurchase Carnival Corporation common stock and Carnival plc ordinary shares (the “Repurchase Program”). ~~On April 6, 2017,~~Effective August 2018, the ~~Boards of Directors~~company approved a modification of the general authorization under the Repurchase Program, which replenished the remaining authorized repurchases at the time of the approval to $1.0 billion. ~~The Repurchase Program does not have an expiration date~~To enhance our liquidity and ~~may be discontinued by~~comply with restrictions in our recent financing transactions, on June 15, 2020, the Boards of Directors ~~at any time.~~

terminated the Repurchase Program. During the three months ended ~~February 28, 2018, repurchases~~August 31, 2020, no shares of Carnival Corporation common stock or Carnival plc ordinary shares were repurchased pursuant to the Repurchase ~~Program were as follows:~~Program.

Period Total Number of Shares of Carnival Corporation Common Stock Purchased (in millions) Average Price Paid per Share of Carnival Corporation Common Stock Maximum Dollar Value of Shares That May Yet Be Purchased Under the Repurchase Program
(in millions)
December 1, 2017 through December 31, 2017 0.1
$ 66.01
$ 515
January 1, 2018 through January 31, 2018 0.1
$ 69.06
$ 440
February 1, 2018 through February 28, 2018 —
$ 64.97
$ 370
Total 0.2
$ 67.53

~~During the three months ended February 28, 2018, repurchases of Carnival plc ordinary shares pursuant to the Repurchase Program were as follows:~~

Period Total Number of Shares of Carnival plc Purchased (in millions) Average Price Paid per Share of Carnival plc Maximum Dollar Value of Shares That May Yet Be Purchased Under the Repurchase Program
(in millions)
December 1, 2017 through December 31, 2017 1.0
$ 65.44
$ 515
January 1, 2018 through January 31, 2018 1.0
$ 68.23
$ 440
February 1, 2018 through February 28, 2018 1.0
$ 68.15
$ 370
Total 3.0
$ 67.25

No shares of Carnival Corporation common stock and Carnival plc ordinary shares were purchased outside of publicly announced plans or programs.

B. ~~Stock Swap Programs~~

In addition to the Repurchase Program, we have programs that allow us to obtain an economic benefit when either Carnival Corporation common stock is trading at a premium to the price of Carnival plc ordinary shares or Carnival plc ordinary shares are trading at a premium to Carnival Corporation common stock (the “Stock Swap Programs”). For example:

In the event Carnival Corporation common stock trades at a premium to Carnival plc ordinary shares, we may elect to sell shares of Carnival Corporation common stock, at prevailing market prices in ordinary brokers’ transactions and repurchase an equivalent number of Carnival plc ordinary shares in the UK market.

In the event Carnival plc ordinary shares trade at a premium to Carnival Corporation common stock, we may elect to sell ordinary shares of Carnival plc, at prevailing market prices in ordinary brokers’ transactions and repurchase an equivalent number of shares of Carnival Corporation common stock in the U.S. market.

~~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.~~

~~Under the Stock Swap Programs effective 2008, the Boards of Directors have made the following authorizations:~~

~~In January 2017, to sell up to 22.0 million shares of Carnival Corporation common stock in the U.S. market and repurchase up to 22.0 million of Carnival plc ordinary shares in the UK market.~~

~~In February 2016, to sell up to 26.9 million of existing Carnival plc ordinary shares in the UK market and repurchase up to 26.9 million shares of Carnival Corporation common stock in the U.S. market.~~

Any sales of Carnival Corporation shares and Carnival plc ordinary shares have been or will be registered under the Securities Act of 1933. During the three months ended February 28, 2018, no Carnival Corporation common stock or Carnival plc ordinary shares were sold or repurchased under the Stock Swap Programs.

C. Carnival plc Shareholder Approvals

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 ~~21.6~~18.2 million ordinary shares and is valid until the earlier of the conclusion of the Carnival plc ~~2018~~2021 annual general meeting or ~~July 4, 2018.~~October 5, 2021. To enhance our liquidity and comply with restrictions in our recent financing transactions, we have terminated the Repurchase Program.

Table of Contents

Item 6. Exhibits.

INDEX TO EXHIBITS

Incorporated by Reference

Filed/
Furnished
Herewith

Exhibit
Number

Exhibit Description

Form

Exhibit

Filing
Date

Articles of incorporation and by-laws

3.1

Third Amended and Restated Articles of Incorporation of Carnival Corporation

8-K

3.1

4/17/2003

3.2

Third Amended and Restated By-Laws of Carnival Corporation

8-K

3.1

4/20/2009

3.3

Articles of Association of Carnival plc

8-K

3.3

4/20/2009

Material Contracts

10.1

Second Supplemental Indenture dated as of July 8, 2020 among Carnival Corporation as issuer, Carnival plc, the Subsidiary Guarantors and U.S. Bank, National Association, as trustee, relating to the 5.75% Convertible Senior Notes due 2023

10.2

Indenture dated as of July 20, 2020 among Carnival Corporation as issuer, Carnival plc, the other Guarantors party thereto and U.S. Bank, National Association, as trustee, security agent, principal paying agent, transfer agent and registrar, relating to the 10.500% Second-Priority Senior Secured Notes due 2026 and the 10.125% Second-Priority Senior Secured Notes due 2026 **

10.3

Indenture dated as of August 18, 2020 among Carnival Corporation as issuer, Carnival plc, the other Guarantors party thereto and U.S. Bank, National Association, as trustee, security agent, principal paying agent, transfer agent and registrar, relating to the 9.875% Second-Priority Senior Secured Notes due 2027 **

10.4

Form of Special Performance-Based Restricted Stock Unit Agreement for the Carnival Corporation 2020 Stock Plan

10.5

Form of Special Performance-Based Restricted Share Unit Agreement for the Carnival plc 2014 Employee Share Plan

10.6

For m of Retention Time-Based Restricted Stock Unit Agreement for the Carnival Corporation 2020 Stock Plan

10.7

Form of Special Time-Based Restricted Share Unit Agreement for the Carnival plc 2014 Employee Share Plan

Rule 13a-14(a)/15d-14(a) certifications

31.1

Certification of President and Chief Executive Officer of Carnival Corporation pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

INDEX TO EXHIBITS

Incorporated by Reference
Filed/
Furnished
Herewith
Exhibit
Number
Exhibit Description Form Exhibit
Filing
Date

Articles of incorporation and by-laws

3.1
Third Amended and Restated Articles of Incorporation of Carnival Corporation.
   8-K 3.1 4/17/2003
3.2
Third Amended and Restated By-Laws of Carnival Corporation.
   8-K 3.1 4/20/2009
3.3
Articles of Association of Carnival plc.
   8-K 3.3 4/20/2009

Material contracts
10.1
Form of Management Incentive Plan Tied Restricted Stock Unit Agreement for the Carnival Corporation 2011 Stock Plan.
X
10.2
Form of Management Incentive Plan Tied Restricted Share Unit Agreement for the Carnival plc 2014 Employee Share Plan.
X
10.3
Form of Performance-Based Restricted Stock Unit Agreement for the Carnival Corporation 2011 Stock Plan.
X
10.4
Form of Performance-Based Restricted Share Unit Agreement for the Carnival plc 2014 Employee Share Plan.
X

Statement regarding computations of ratios

12
Ratio of Earnings to Fixed Charges.
X

Rule 13a-14(a)/15d-14(a) certifications

31.1
Certification of President and Chief Executive Officer of Carnival Corporation pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Certification of Chief Financial Officer and Chief Accounting Officer of Carnival Corporation pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.3
Certification of President and Chief Executive Officer of Carnival plc pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.4
Certification of Chief Financial Officer and Chief Accounting Officer of Carnival plc pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X

Section 1350 certifications

32.1*
Certification of President and Chief Executive Officer of Carnival Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2*
Certification of Chief Financial Officer and Chief Accounting Officer of Carnival Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.3*
Certification of President and Chief Executive Officer of Carnival plc pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.4*
Certification of Chief Financial Officer and Chief Accounting Officer of Carnival plc pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X

Table of Contents

INDEX TO EXHIBITS

Incorporated by Reference

Filed/

Furnished

Herewith

Exhibit

Number

Exhibit Description

Form

Exhibit

Filing

Date

31.2

Certification of Chief Financial Officer and Chief Accounting Officer of Carnival Corporation pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.3

Certification of President and Chief Executive Officer of Carnival plc pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.4

Certification of Chief Financial Officer and Chief Accounting Officer of Carnival plc pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Section 1350 certifications

32.1*

Certification of President and Chief Executive Officer of Carnival Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification of Chief Financial Officer and Chief Accounting Officer of Carnival Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.3*

Certification of President and Chief Executive Officer of Carnival plc pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.4*

Certification of Chief Financial Officer and Chief Accounting Officer of Carnival plc pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Interactive Data File

101

The consolidated financial statements from Carnival Corporation & plc’s joint Quarterly Report on Form 10-Q for the quarter ended ~~February 28, 2018,~~August 31, 2020, as filed with the Securities and Exchange Commission on ~~March 22, 2018,~~October 8, 2020, formatted in Inline XBRL, are as follows:

(i) the Consolidated Statements of Income (Loss) for the three and nine months ended ~~February 28, 2018~~August 31, 2020 and ~~2017;~~2019;

(ii) the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended ~~February 28, 2018~~August 31, 2020 and ~~2017;~~2019;

(iii) the Consolidated Balance Sheets at ~~February 28, 2018~~August 31, 2020 and November 30, ~~2017;~~2019;

(iv) the Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~February 28, 2018~~August 31, 2020 and ~~2017 and~~2019;

(v) the Consolidated Statements of Shareholders’ Equity for the three and nine months ended August 31, 2020 and 2019;

(vi) the notes to the consolidated financial statements, tagged in summary and detail.

104

The cover page from Carnival Corporation & plc’s joint Quarterly Report on Form 10-Q for the quarter ended August 31, 2020, as filed with the Securities and Exchange Commission on October 8, 2020, formatted in Inline XBRL (included as Exhibit 101)

Table of Contents



*
*	These items are furnished and not filed.
**		Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K.

~~SIGNATURES~~

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CARNIVAL CORPORATION

CARNIVAL PLC

By:

~~CARNIVAL CORPORATION~~

~~CARNIVAL PLC~~

~~By:~~

/s/ Arnold W. Donald

By:

/s/ Arnold W. Donald

Arnold W. Donald

President and Chief Executive Officer

By:

/s/ David Bernstein

By:

/s/ David Bernstein

David Bernstein

Chief Financial Officer and Chief Accounting Officer

Date: ~~March 22, 2018~~October 8, 2020



	Three Months Ended February 28,
	2018			2017
Revenues
Cruise
Passenger ticket	$	3,148		$	2,804
Onboard and other	1,071			978
Tour and other	13			9
	4,232			3,791
Operating Costs and Expenses
Cruise
Commissions, transportation and other	663			569
Onboard and other	140			125
Payroll and related	558			519
Fuel	359			297
Food	264			251
Other ship operating	711			661
Tour and other	14			13
	2,709			2,435
Selling and administrative	616			549
Depreciation and amortization	488			439
	3,813			3,423
Operating Income	419			368
Nonoperating Income (Expense)
Interest income	3			2
Interest expense, net of capitalized interest	(48		)	(51		)
Gains on fuel derivatives, net	16			27
Other income, net	1			8
	(28		)	(14		)
Income Before Income Taxes	390			354
Income Tax Expense, Net	—			(2		)
Net Income	$	391		$	352
Earnings Per Share
Basic	$	0.54		$	0.48
Diluted	$	0.54		$	0.48
Dividends Declared Per Share	$	0.45		$	0.35



	February 28, 2018			November 30, 2017
ASSETS
Current Assets
Cash and cash equivalents	$	453		$	395
Trade and other receivables, net	345			312
Inventories	394			387
Prepaid expenses and other	475			502
Total current assets	1,667			1,596
Property and Equipment, Net	35,027			34,430
Goodwill	3,014			2,967
Other Intangibles	1,198			1,200
Other Assets	535			585
	$	41,441		$	40,778
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term borrowings	$	1,108		$	485
Current portion of long-term debt	1,006			1,717
Accounts payable	795			762
Accrued liabilities and other	1,653			1,877
Customer deposits	4,288			3,958
Total current liabilities	8,851			8,800
Long-Term Debt	7,445			6,993
Other Long-Term Liabilities	764			769
Contingencies
Shareholders’ Equity
Common stock of Carnival Corporation, $0.01 par value; 1,960 shares authorized; 656 shares at 2018 and 655 shares at 2017 issued	7			7
Ordinary shares of Carnival plc, $1.66 par value; 217 shares at 2018 and 2017 issued	358			358
Additional paid-in capital	8,708			8,690
Retained earnings	23,360			23,292
Accumulated other comprehensive loss	(1,486		)	(1,782		)
Treasury stock, 122 shares at 2018 and 2017 of Carnival Corporation and 35 shares at 2018 and 32 shares at 2017 of Carnival plc, at cost	(6,565		)	(6,349		)
Total shareholders’ equity	24,382			24,216
	$	41,441		$	40,778



	Goodwill
(in millions)	NAA (a) Segment		EA (b) Segment		Total
At November 30, 2017	$	1,898	$	1,069	$	2,967
Foreign currency translation adjustment	—		47		47
At February 28, 2018	$	1,898	$	1,115	$	3,014



Maturities (a)	Transaction Dates	Barrels (in thousands)	Weighted-Average Floor Prices		Weighted-Average Ceiling Prices
Fiscal 2018
	January 2014	2,025	$	75	$	110
	October 2014	2,250	$	80	$	114
		4,275



	Three Months Ended February 28,
(dollars in millions, except yields)	2018			2018 Constant Dollar			2017
Passenger ticket revenues	$	3,148		$	2,999		$	2,804
Onboard and other revenues	1,071			1,038			978
Gross cruise revenues	4,219			4,037			3,782
Less cruise costs
Commissions, transportation and other	(663		)	(621		)	(569		)
Onboard and other	(140		)	(135		)	(125		)
	(803		)	(756		)	(694		)
Net passenger ticket revenues	2,485			2,378			2,235
Net onboard and other revenues	931			903			853
Net cruise revenues	$	3,416		$	3,280		$	3,088
ALBDs	20,461,582			20,461,582			20,024,045

Gross revenue yields	$	206.20		$	197.29		$	188.87
% increase	9.2		%	4.5		%
Net revenue yields	$	166.95		$	160.32		$	154.22
% increase	8.3		%	4.0		%
Net passenger ticket revenue yields	$	121.46		$	116.21		$	111.60
% increase	8.8		%	4.1		%
Net onboard and other revenue yields	$	45.50		$	44.11		$	42.62
% increase	6.8		%	3.5		%



	Three Months Ended February 28,
(dollars in millions, except costs per ALBD)	2018			2018 Constant Dollar			2017
Cruise operating expenses	$	2,695		$	2,587		$	2,422
Cruise selling and administrative expenses	610			587			546
Gross cruise costs	3,305			3,175			2,968
Less cruise costs included above
Commissions, transportation and other	(663		)	(621		)	(569		)
Onboard and other	(140		)	(135		)	(125		)
(Losses) gains on ship sales and impairments	(16		)	(16		)	—
Restructuring expenses	—			—			—
Other	—			—			1
Net cruise costs	2,485			2,402			2,275
Less fuel	(359		)	(359		)	(297		)
Net cruise costs excluding fuel	$	2,127		$	2,044		$	1,978
ALBDs	20,461,582			20,461,582			20,024,045

Gross cruise costs per ALBD	$	161.51		$	155.16		$	148.24
% increase	9.0		%	4.7		%
Net cruise costs excluding fuel per ALBD	$	103.92		$	99.84		$	98.81
% increase	5.2		%	1.0		%



	Three Months Ended
	February 28,
(in millions, except per share data)	2018			2017
Net income
U.S. GAAP net income	$	391		$	352
Unrealized (gains) losses on fuel derivatives, net	(32		)	(72		)
(Gains) losses on ship sales and impairments	16			—
Restructuring expenses	—			—
Other	—			(1		)
Adjusted net income	$	375		$	279
Weighted-average shares outstanding	719			728

Earnings per share
U.S. GAAP earnings per share	$	0.54		$	0.48
Unrealized (gains) losses on fuel derivatives, net	(0.05		)	(0.10		)
(Gains) losses on ship sales and impairments	0.02			—
Restructuring expenses	—			—
Other	—			—
Adjusted earnings per share	$	0.52		$	0.38



Period	Total Number of Shares of Carnival Corporation Common Stock Purchased (in millions)	Average Price Paid per Share of Carnival Corporation Common Stock		Maximum Dollar Value of Shares That May Yet Be Purchased Under the Repurchase Program (in millions)
December 1, 2017 through December 31, 2017	0.1	$	66.01	$	515
January 1, 2018 through January 31, 2018	0.1	$	69.06	$	440
February 1, 2018 through February 28, 2018	—	$	64.97	$	370
Total	0.2	$	67.53



Period	Total Number of Shares of Carnival plc Purchased (in millions)	Average Price Paid per Share of Carnival plc		Maximum Dollar Value of Shares That May Yet Be Purchased Under the Repurchase Program (in millions)
December 1, 2017 through December 31, 2017	1.0	$	65.44	$	515
January 1, 2018 through January 31, 2018	1.0	$	68.23	$	440
February 1, 2018 through February 28, 2018	1.0	$	68.15	$	370
Total	3.0	$	67.25