UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q/A~~10-Q

(Mark One)



☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~August~~May 31, ~~2016~~2017



☐	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)		(Exact name of registrant as specified in its charter)

Republic of Panama		England and Wales
(State or other jurisdiction of incorporation or organization)		(State or other jurisdiction of incorporation or organization)

59-1562976		98-0357772
(I.R.S. Employer Identification No.)		(I.R.S. Employer Identification No.)

3655 N.W. 87th Avenue Miami, Florida 33178-2428		Carnival House, 100 Harbour Parade, Southampton SO15 1ST, United Kingdom
(Address of principal executive offices) (Zip Code)		(Address of principal executive offices) (Zip Code)

(305) 599-2600		011 44 23 8065 5000
(Registrant’s telephone number, including area code)		(Registrant’s telephone number, including area code)

None		None
(Former name, former address and former fiscal year, if changed since last report)		(Former name, former address and former fiscal year, if changed since last report)

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, or smaller reporting companies, or emerging growth companies. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company” and ~~“smaller reporting~~“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. Yes ☐ No ☐

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑



At ~~September~~June 23, ~~2016,~~2017, Carnival Corporation had outstanding ~~537,602,085~~536,656,235 shares of Common Stock, $0.01 par value.		At ~~September~~June 23, ~~2016,~~2017, Carnival plc had outstanding ~~216,457,117~~213,388,487 Ordinary Shares $1.66 par value, one Special Voting Share, GBP 1.00 par value and ~~537,602,085,~~213,388,487 Trust Shares of beneficial interest in the P&O Princess Special Voting Trust.

~~Explanatory Note~~CARNIVAL CORPORATION & PLC

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CARNIVAL CORPORATION & PLC

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in millions, except per share data)



	Three Months Ended May 31,						Six Months Ended May 31,
	2017			2016			2017			2016
Revenues
Cruise
Passenger tickets	$	2,872		$	2,696		$	5,676		$	5,414
Onboard and other	1,036			978			2,014			1,901
Tour and other	37			31			46			42
	3,945			3,705			7,736			7,357
Operating Costs and Expenses
Cruise
Commissions, transportation and other	513			495			1,082			1,077
Onboard and other	129			123			253			240
Payroll and related	513			502			1,032			994
Fuel	310			196			607			383
Food	253			248			504			495
Other ship operating	685			667			1,346			1,271
Tour and other	33			27			46			41
	2,436			2,258			4,870			4,501
Selling and administrative	553			532			1,102			1,083
Depreciation and amortization	456			437			896			861
	3,445			3,227			6,868			6,445
Operating Income	500			478			868			912
Nonoperating Income (Expense)
Interest income	2			2			4			3
Interest expense, net of capitalized interest	(50		)	(57		)	(101		)	(108		)
(Losses) gains on fuel derivatives, net	(53		)	171			(27		)	(65		)
Other (expense) income, net	(15		)	13			(7		)	8
	(116		)	129			(131		)	(162		)
Income Before Income Taxes	384			607			737			750
Income Tax Expense, Net	(5		)	(2		)	(7		)	(3		)
Net Income	$	379		$	605		$	730		$	747
Earnings Per Share
Basic	$	0.52		$	0.81		$	1.01		$	0.99
Diluted	$	0.52		$	0.80		$	1.00		$	0.98
Dividends Declared Per Share	$	0.40		$	0.35		$	0.75		$	0.65

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

CARNIVAL CORPORATION & PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in millions)



	Three Months Ended May 31,				Six Months Ended May 31,
	2017		2016		2017		2016
Net Income	$	379	$	605	$	730	$	747
Items Included in Other Comprehensive Income
Change in foreign currency translation adjustment	257		280		257		72
Other	29		15		43		21
Other Comprehensive Income	286		295		300		93
Total Comprehensive Income	$	665	$	900	$	1,030	$	840

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

CARNIVAL CORPORATION & PLC

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in millions, except par values)



	May 31, 2017			November 30, 2016
ASSETS
Current Assets
Cash and cash equivalents	$	597		$	603
Trade and other receivables, net	319			298
Inventories	351			322
Prepaid expenses and other	507			466
Total current assets	1,774			1,689
Property and Equipment, Net	33,823			32,429
Goodwill	2,953			2,910
Other Intangibles	1,286			1,275
Other Assets	615			578
	$	40,451		$	38,881
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term borrowings	$	675		$	457
Current portion of long-term debt	1,108			640
Accounts payable	690			713
Accrued liabilities and other	1,807			1,740
Customer deposits	4,778			3,522
Total current liabilities	9,058			7,072
Long-Term Debt	7,635			8,302
Other Long-Term Liabilities	794			910
Contingencies
Shareholders’ Equity
Common stock of Carnival Corporation, $0.01 par value; 1,960 shares authorized; 655 shares at 2017 and 654 shares at 2016 issued	7			7
Ordinary shares of Carnival plc, $1.66 par value; 217 shares at 2017 and 2016 issued	358			358
Additional paid-in capital	8,673			8,632
Retained earnings	22,026			21,843
Accumulated other comprehensive loss	(2,154		)	(2,454		)
Treasury stock, 118 shares at 2017 and 2016 of Carnival Corporation and 30 shares at 2017 and 27 shares at 2016 of Carnival plc, at cost	(5,946		)	(5,789		)
Total shareholders’ equity	22,964			22,597
	$	40,451		$	38,881

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

CARNIVAL CORPORATION & PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in millions)



	Six Months Ended May 31,
	2017			2016
OPERATING ACTIVITIES
Net income	$	730		$	747
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	896			861
Losses on fuel derivatives, net	27			65
Share-based compensation	34			28
Other, net	36			22
	1,723			1,723
Changes in operating assets and liabilities
Receivables	(8		)	(40		)
Inventories	(19		)	16
Prepaid expenses and other	(28		)	4
Accounts payable	(38		)	36
Accrued liabilities and other	(20		)	(84		)
Customer deposits	1,239			1,026
Net cash provided by operating activities	2,849			2,681
INVESTING ACTIVITIES
Additions to property and equipment	(1,859		)	(1,966		)
Proceeds from sales of ships	—			19
Payments of fuel derivative settlements	(99		)	(170		)
Collateral payments for fuel derivatives	—			(25		)
Other, net	24			(31		)
Net cash used in investing activities	(1,934		)	(2,173		)
FINANCING ACTIVITIES
Proceeds from short-term borrowings, net	182			379
Principal repayments of long-term debt	(907		)	(869		)
Proceeds from issuance of long-term debt	467			934
Dividends paid	(507		)	(459		)
Purchases of treasury stock	(152		)	(1,401		)
Sales of treasury stock	—			40
Other, net	(18		)	(5		)
Net cash used in financing activities	(935		)	(1,381		)
Effect of exchange rate changes on cash and cash equivalents	14			(3		)
Net decrease in cash and cash equivalents	(6		)	(876		)
Cash and cash equivalents at beginning of period	603			1,395
Cash and cash equivalents at end of period	$	597		$	519

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

CARNIVAL CORPORATION & PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – General

The consolidated financial statements include the accounts of Carnival Corporation and Carnival plc and their respective subsidiaries. Together with their consolidated subsidiaries, they are referred to collectively in these consolidated financial statements and elsewhere in this joint Quarterly Report on Form 10-Q as “Carnival Corporation & plc,” “our,” “us” and “we.”

Basis of Presentation

The Consolidated Statements of Income and the Consolidated Statements of Comprehensive Income for the three and six months ended May 31, 2017 and 2016, the Consolidated Balance Sheet at May 31, 2017 and the Consolidated Statements of Cash Flows for the six months ended May 31, 2017 and 2016 are unaudited and, in the opinion of our management, contain all 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 2016 joint Annual Report on Form 10-K (“Form 10-K”) filed with the U.S. Securities and Exchange Commission on January 30, 2017. Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire year.

Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued amended guidance regarding accounting for Interest - Imputation of Interest, which simplifies the presentation of debt issuance costs and which clarifies the presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. The guidance requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability. On December 1, 2016, we adopted this guidance using the retrospective approach and reclassified $55 million from Other Assets to Long-Term Debt on our November 30, 2016 Consolidated Balance Sheet.

The FASB issued amended guidance regarding Compensation - Stock Compensation - Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. On December 1, 2016, we early adopted this guidance using the modified retrospective transition method. The impact of adopting this guidance was primarily related to forfeitures and immaterial to our consolidated financial statements.

The FASB issued amended guidance regarding accounting for Intangibles - Goodwill and Other - Internal-Use Software,which clarifies the accounting for fees paid in a cloud computing arrangement. The amendments provide guidance to customers about whether a cloud computing arrangement includes a software license or if the arrangement should be accounted for as a service contract. The amendments impact the accounting for software licenses but will not change a customer’s accounting for service contracts. On December 1, 2016, we adopted this guidance on a prospective basis, and it did not have a material impact to our consolidated financial statements.

The FASB issued amended guidance regarding accounting for Derivatives and Hedging - Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, which clarifies that a change in the counterparty to a derivative instrument that has been designated as a hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. On March 1, 2017, we early adopted this guidance on a prospective basis, and it did not have a material impact to our consolidated financial statements.

The FASB issued amended guidance regarding accounting for Derivatives and Hedging - Contingent Put and Call Options in Debt Instruments, which clarifies the requirements for assessing whether contingent call and put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts or whether the embedded call and put options should be bifurcated from the related debt instrument and accounted for separately as a derivative. This guidance is required to be adopted by us in the first quarter of 2018 and must be applied using a modified retrospective approach. Early adoption is permitted, including adoption in an interim period. We are ~~filing~~currently evaluating the impact this ~~amendment~~guidance will have on our consolidated financial statements.

The FASB issued guidance regarding Presentation of Financial Statements - Going Concern,which requires management to ~~Item 2. Management's Discussion~~evaluate, at each annual and ~~Analysis~~interim reporting period, whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued and to provide related disclosures. This guidance is required to be adopted by us at November 30, 2017. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact to our consolidated financial statements.

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

The FASB issued guidance regarding Business Combinations - ~~Liquidity, Financial Condition~~Clarifying the Definition of a Business,which assists entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is required to be adopted by us in the first quarter of 2019 on a prospective basis. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

The FASB issued amended guidance regarding Statement of Cash Flows - Classification of Certain Cash Receipts and ~~Capital Resources, Future Commitments~~Cash Payments, which clarifies how certain cash receipts and ~~Funding Sources to correct~~cash payments are presented and classified in the statement ~~“estimated improvements~~of cash flows. The amendments are aimed at reducing the existing diversity in practice. The guidance is required to ~~existing ships~~be adopted by us in the first quarter of 2019 and ~~shoreside~~should be applied using a retrospective transition method for each period presented. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

The FASB issued guidance regarding 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 transition method 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 guidance regarding Compensation - Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires the bifurcation of net benefit cost. This guidance is required to be adopted by us in the first quarter of 2019. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact to our consolidated financial statements.

The FASB issued guidance regarding accounting for Leases, which requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. This guidance is required to be adopted by us in the first quarter of 2020. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

The FASB issued guidance regarding Intangibles - Goodwill and Other - Simplifying the Accounting for Goodwill Impairment, which simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test requiring a hypothetical purchase price allocation. This guidance is required to be adopted by us in the first quarter of 2021 on a prospective basis. Early adoption is permitted for any impairment tests performed after January 1, 2017. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

Other

Cruise passenger ticket revenues include fees, taxes and charges collected by us from our guests. The portion of these fees, taxes and charges included in passenger ticket revenues and commissions, transportation and other costs were $136 million and $123 million and $279 million and $259 million for the three and six months ended May 31, 2017 and 2016, respectively.

NOTE 2 – Unsecured Debt

At May 31, 2017, our short-term borrowings included euro-denominated commercial paper of $670 million.

In January 2017, we borrowed $100 million under a floating rate bank loan, due in January 2022.

In January 2017, we entered into an approximately $800 million export credit facility, which may be drawn in euros or U.S. dollars in 2021 and will be due in semi-annual installments through 2033. The interest rate on this export credit facility can be fixed or floating, at our discretion.

In April 2017, we entered into two euro-denominated export credit facilities totaling $1.6 billion. The facilities are expected to be ~~$2.0 billion~~drawn in 2021 and 2022 and will be due in semi-annual installments through 2033 and 2034, respectively. The interest rate on these export credit facilities can be fixed or floating, at our discretion.

In May 2017, we repaid $620 million of export credit facilities prior to their 2025 and 2026 maturity dates.

In May 2017, we borrowed $367 million under an export credit facility. The facility is due in semi-annual installments through April 2028.

For the six months ended May 31, 2017, we had borrowings of $111 million and repayments of $364 million of commercial paper with original maturities greater than three months.

We use the net proceeds from our borrowings for general corporate purposes and purchases of new ships.

NOTE 3 – Contingencies

Litigation

In the normal course of our business, various claims and lawsuits have been filed or are pending against us. Most of these claims and lawsuits are covered by insurance and the maximum amount of our liability, net of any insurance recoverables, is typically limited to our self-insurance retention levels. We believe the ultimate outcome of these claims and lawsuits will not have a material impact on our consolidated financial statements.

Contingent Obligation – Lease Out and Lease Back Type Transaction

At May 31, 2017, we had an estimated contingent obligation of $122 million. At the inception of the lease, we paid the aggregate of the net present value of the obligation to a group of major financial institutions, who agreed to act as payment undertakers and directly pay this obligation. As a result, this contingent obligation is considered extinguished and neither the funds nor the contingent obligation have been included in our Consolidated Balance Sheets. In January 2016, we exercised our option to terminate, at no cost, this transaction as of January 2, 2018.

Contingent Obligations – Indemnifications

Some of the debt contracts we enter into include indemnification provisions obligating us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes or changes in laws which increase our lender’s costs. The indemnification clauses are often standard contractual terms and were entered into in the normal course of business. There are no stated or notional amounts included in the indemnification clauses, and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses. We have not been required to make any material payments under such indemnification clauses in the past and we do not believe a request for material future indemnification payments is probable.

NOTE 4 – Fair Value Measurements, Derivative Instruments and Hedging Activities

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 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 ~~remainder~~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 ~~2016”~~the assets or liabilities.

Considerable judgment may be required in interpreting market data used to ~~“estimated improvements~~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.

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

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



	May 31, 2017								November 30, 2016
	Carrying Value		Fair Value						Carrying Value		Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Carrying Value		Level 1		Level 2		Level 3
Assets
Long-term other assets (a)	$	139	$	—	$	54	$	81	$	99	$	1	$	68	$	31
Total	$	139	$	—	$	54	$	81	$	99	$	1	$	68	$	31
Liabilities
Fixed rate debt (b)	$	5,604	$	—	$	5,943	$	—	$	5,436	$	—	$	5,727	$	—
Floating rate debt (b)	3,870		—		3,900		—		4,018		—		4,048		—
Total	$	9,474	$	—	$	9,843	$	—	$	9,454	$	—	$	9,775	$	—


(a)	Long-term other assets are substantially all comprised of notes and other receivables. The fair values of our Level 2 notes and other receivables were based on estimated future cash flows discounted at appropriate market interest rates. The fair values of our Level 3 notes receivable were estimated using risk-adjusted discount rates.

(b)

The debt amounts above do not include the impact of interest rate swaps or debt issuance costs. The fair values of our publicly-traded notes were based on their unadjusted quoted market prices in markets that are not sufficiently active to be Level 1 and, accordingly, are considered Level 2. The fair values of our other debt were estimated based on appropriate market interest rates being applied to this debt.

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

Valuation of Goodwill and Other Intangibles

The reconciliation of the changes in the carrying amounts of our goodwill was as follows (in millions):



	North America Segment		EAA (a) Segment		Total
Balance at November 30, 2016	$	1,898	$	1,012	$	2,910
Foreign currency translation adjustment	—		43		43
Balance at May 31, 2017	$	1,898	$	1,055	$	2,953

(a) Europe, Australia & Asia (“EAA”)

The reconciliation of the changes in the carrying amounts of our other intangible assets not subject to ~~existing~~amortization, which represent trademarks, was as follows (in millions):



	North America Segment		EAA Segment		Total
Balance at November 30, 2016	$	927	$	279	$	1,206
Foreign currency translation adjustment	—		9		9
Balance at May 31, 2017	$	927	$	288	$	1,215

At July 31, 2016, we performed our annual goodwill and trademark impairment reviews and there was no impairment.

The determination of our reporting unit goodwill and trademark fair values includes numerous assumptions that are subject to various risks and uncertainties. We believe that we have made reasonable estimates and judgments. A change in the conditions, circumstances or strategy, including decisions about the allocation of new ships amongst brands and ~~shoreside~~the transfer of ships between brands (influencing fair values in the future), may result in a need to recognize an impairment charge.

The reconciliation of the changes in the net carrying amounts of our other intangible assets subject to amortization, which represent port usage rights and other amortizable intangibles, was as follows (in millions):



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

Financial Instruments that are Measured at Fair Value on a Recurring Basis

The estimated fair value and basis of valuation of our financial instrument assets and liabilities measured at fair value on a recurring basis were as follows (in millions):



	May 31, 2017						November 30, 2016
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents (a)	$	597	$	—	$	—	$	603	$	—	$	—
Restricted cash	16		—		—		60		—		—
Short-term investments (b)	—		—		—		—		—		21
Marketable securities held in rabbi trusts (c)	92		4		—		93		4		—
Derivative financial instruments	—		10		—		—		15		—
Total	$	705	$	14	$	—	$	756	$	19	$	21
Liabilities
Derivative financial instruments	$	—	$	313	$	—	$	—	$	434	$	—
Total	$	—	$	313	$	—	$	—	$	434	$	—


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


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


(c)	At May 31, 2017, marketable securities held in rabbi trusts were comprised of Level 1 bonds, frequently-priced mutual funds invested in common stocks and money market funds and Level 2 other investments. Their use is restricted to funding certain deferred compensation and non-qualified U.S. pension plans.

Derivative Instruments and Hedging Activities

The estimated fair values of our derivative financial instruments and their location in the Consolidated Balance Sheets were as follows (in millions):



	Balance Sheet Location	May 31, 2017		November 30, 2016
Derivative assets
Derivatives designated as hedging instruments
Net investment hedges (a)	Prepaid expenses and other	$	9	$	12
	Other assets	—		3
Foreign currency zero cost collars (c)	Other assets	1		—
Total derivative assets		$	10	$	15
Derivative liabilities
Derivatives designated as hedging instruments
Net investment hedges (a)	Accrued liabilities and other	$	—	$	26
	Other long-term liabilities	14		—
Interest rate swaps (b)	Accrued liabilities and other	10		10
	Other long-term liabilities	20		23
Foreign currency zero cost collars (c)	Accrued liabilities and other	—		12
	Other long-term liabilities	—		21
		44		92
Derivatives not designated as hedging instruments
Fuel (d)	Accrued liabilities and other	184		198
	Other long-term liabilities	85		144
		269		342
Total derivative liabilities		$	313	$	434

(a)

We had foreign currency forwards totaling $11 million at May 31, 2017 and $456 million at November 30, 2016 that are designated as hedges of our net investments in foreign operations, which have a euro-denominated functional currency. At May 31, 2017, these foreign currency forwards settle through July 2017. We also had foreign currency swaps totaling $306 million at May 31, 2017 and $291 million at November 30, 2016 that are designated as hedges of our net investments in foreign operations, which have a euro-denominated functional currency. At May 31, 2017, these foreign currency swaps settle through 2019.

(b)

We have euro interest rate swaps designated as cash flow hedges whereby we receive floating interest rate payments in exchange for making fixed interest rate payments. These interest rate swap agreements effectively changed $489 million at May 31, 2017 and $500 million at November 30, 2016 of EURIBOR-based floating rate euro debt to fixed rate euro debt. At May 31, 2017, these interest rate swaps settle through 2025.


(c)	At May 31, 2017 and November 30, 2016, we had foreign currency derivatives consisting of foreign currency zero cost collars that are designated as foreign currency cash flow hedges for a portion of our euro-denominated shipbuilding payments. See “Newbuild Currency Risks” below for additional information regarding these derivatives.


(d)	At May 31, 2017 and November 30, 2016, we had fuel derivatives consisting of zero cost collars on Brent crude oil (“Brent”) to cover a portion of our estimated fuel consumption through 2018. See “Fuel Price Risks” below for additional information regarding these derivatives.

Our derivative contracts include rights of offset with our counterparties. We have elected to net certain of our derivative assets and liabilities within counterparties. The amounts recognized within assets and liabilities were as follows (in millions):



	May 31, 2017
	Gross Amounts		Gross Amounts Offset in the Balance Sheet		Total Net Amounts Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet			Net Amounts
Assets	$	10	$	—	$	10	$	(9	)	$	1
Liabilities	$	313	$	—	$	313	$	(9	)	$	304

	November 30, 2016
	Gross Amounts		Gross Amounts Offset in the Balance Sheet		Total Net Amounts Presented in the Balance Sheet		Gross Amounts not Offset in the Balance Sheet			Net Amounts
Assets	$	15	$	—	$	15	$	(15	)	$	—
Liabilities	$	434	$	—	$	434	$	(15	)	$	419

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



	Three Months Ended May 31,						Six Months Ended May 31,
	2017			2016			2017			2016
Net investment hedges	$	(17	)	$	(4	)	$	(16	)	$	(17	)
Foreign currency zero cost collars – cash flow hedges	$	27		$	9		$	35		$	19
Interest rate swaps – cash flow hedges	$	3		$	6		$	4		$	3

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 May 31, 2017 and November 30, 2016, 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 ~~$1.0 billion~~reclassified to earnings in the next twelve months is not significant. We have not provided additional disclosures of the impact that derivative instruments and hedging activities have on our consolidated financial statements as of May 31, 2017 and November 30, 2016 and for the ~~remainder~~three and six months ended May 31, 2017 and 2016 where such impacts were not significant.

Fuel Price Risks

Substantially all of ~~2016.” Included~~our exposure to market risk for changes in fuel prices relates to the consumption of fuel on our ships. We have Brent call options and Brent put options, collectively referred to as zero cost collars, that establish ceiling and floor prices and mitigate a portion of our economic risk attributable to potential fuel price increases. To maximize operational flexibility we utilized derivative markets with significant trading liquidity.

Our zero cost collars are based on Brent prices whereas the actual fuel used on our ships is marine fuel. Changes in the Brent prices may not show a high degree of correlation with changes in our underlying marine fuel prices. We will not realize any economic gain or loss upon the monthly maturities of our zero cost collars unless the average monthly price of Brent is above the ceiling price or below the floor price. We believe that these zero cost collars will act as economic hedges; however, hedge accounting is ~~Item 2~~not applied.

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



	Three Months Ended May 31,						Six Months Ended May 31,
	2017			2016			2017			2016
Unrealized (losses) gains on fuel derivatives, net	$	(2	)	$	242		$	69		$	96
Realized losses on fuel derivatives, net	(51		)	(71		)	(96		)	(161		)
(Losses) gains on fuel derivatives, net	$	(53	)	$	171		$	(27	)	$	(65	)

At May 31, 2017, our outstanding fuel derivatives consisted of zero cost collars on Brent as follows:



Maturities (a)	Transaction Dates	Barrels (in thousands)	Weighted-Average Floor Prices		Weighted-Average Ceiling Prices
Fiscal 2017 (3Q - 4Q)
	February 2013	1,638	$	80	$	115
	April 2013	1,014	$	75	$	110
	January 2014	900	$	75	$	114
	October 2014	510	$	80	$	113
		4,062
Fiscal 2018
	January 2014	2,700	$	75	$	110
	October 2014	3,000	$	80	$	114
		5,700


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

Foreign Currency Exchange Rate Risks

Overall Strategy

We manage our exposure to fluctuations in foreign currency exchange rates through our normal operating and financing activities, including netting certain exposures to take advantage of any natural offsets and, when considered appropriate, through the use of derivative and non-derivative financial instruments. Our primary focus is to monitor our exposure to, and manage, the economic foreign currency exchange risks faced by our operations and realized if we exchange one currency for another. We currently only hedge certain of our ship commitments and net investments in foreign operations. The financial impacts of the hedging instruments we do employ generally offset the changes in the underlying exposures being hedged.

Operational Currency Risks

Our EAA segment operations generate significant revenues and incur significant expenses in their functional currencies, which subjects us to “foreign currency translational” risk related to these currencies. Accordingly, exchange rate fluctuations in their functional currencies against the U.S. dollar will affect our reported financial results since the reporting currency for our consolidated financial statements is the U.S. dollar. Any strengthening of the U.S. dollar against these foreign currencies has the financial statement effect of decreasing the U.S. dollar values reported for this segment’s revenues and expenses. Any weakening of the U.S. dollar has the opposite effect.

Substantially all of our operations also have non-functional currency risk related to their international sales. In addition, we have a portion of our operating expenses denominated in non-functional currencies. Accordingly, we also have “foreign currency transactional” risks related to changes in the exchange rates for our revenues and expenses that are in a currency other than the functional currency. The revenues and expenses which occur in the same non-functional currencies create some degree of natural offset.

Investment Currency Risks

We consider our investments in foreign operations to be denominated in stable currencies. Our investments in foreign operations are of a long-term nature. We have $5.8 billion and $251 million of euro- and sterling-denominated debt, respectively, including the effect of foreign currency swaps, 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 of our foreign currency intercompany payables in our foreign operations’ functional currencies.

Newbuild Currency Risks

Our shipbuilding contracts are typically denominated in euros. Our decision to hedge a non-functional currency ship commitment for our cruise brands is made on a case-by-case basis, considering the ~~corrected information.~~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 May 31, 2017, we had foreign currency zero cost collars that are designated as cash flow hedges for a portion of euro-denominated shipyard payments for the following newbuilds:



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

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

At May 31, 2017, our remaining newbuild currency exchange rate risk primarily relates to euro-denominated newbuild contract payments, which represent a total unhedged commitment of $5.9 billion and substantially relates to newbuilds to be delivered during 2019 through 2022 to non-euro functional currency brands.

The cost of shipbuilding orders that we may place in the future that is denominated in a different currency than our cruise brands’ will be affected by foreign currency exchange rate fluctuations. These foreign currency exchange rate fluctuations may affect our desire to order new cruise ships.

Interest Rate Risks

We manage our exposure to fluctuations in interest rates through our debt portfolio management and investment strategies. We evaluate our debt portfolio to determine whether to make periodic adjustments to the mix of fixed and floating rate debt through the use of interest rate swaps and the issuance of new debt or the early retirement of existing debt.

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



	May 31, 2017		November 30, 2016
Fixed rate	29	%	28	%
Euro fixed rate	35	%	35	%
Floating rate	7	%	14	%
Euro floating rate	26	%	23	%
GBP floating rate	3	%	—	%

Concentrations of Credit Risk

As part of our ongoing control procedures, we monitor concentrations of credit risk associated with financial and other institutions with which we conduct significant business. We seek to minimize these credit risk exposures, including counterparty nonperformance primarily associated with our cash equivalents, investments, committed financing facilities, contingent obligations, derivative instruments, insurance contracts and new ship progress payment guarantees, by:

Conducting business with large, well-established financial institutions, insurance companies and export credit agencies

Diversifying our counterparties

Having guidelines regarding credit ratings and investment maturities that we follow to help safeguard liquidity and minimize risk

Generally requiring collateral and/or guarantees to support notes receivable on significant asset sales, long-term ship charters and new ship progress payments to shipyards

We currently believe the risk of nonperformance by any of our significant counterparties is remote. At May 31, 2017, our exposures under foreign currency and fuel derivative contracts and interest rate swap agreements were not material.

We also monitor the creditworthiness of travel agencies and tour operators in Asia, Australia and Europe, which includes charter-hire agreements in Asia, and credit and debit card providers to which we extend credit in the normal course of our business prior to sailing. Our credit exposure also includes contingent obligations related to cash payments received directly by travel agents and tour operators for cash collected by them on cruise sales in Australia and most of Europe where we are obligated to honor our guests’ cruise payments made by them to their travel agents and tour operators regardless of whether we have received these payments. Concentrations of credit risk associated with these trade receivables, charter-hire agreements and contingent obligations are not considered to be material, principally due to the large number of unrelated accounts, the nature of these contingent obligations and their short maturities. We have not experienced significant credit losses on our trade receivables, charter-hire agreements and contingent obligations. We do not normally require collateral or other security to support normal credit sales.

NOTE 5 – Segment Information

We have four reportable segments that are comprised of (1) North America, (2) EAA, (3) Cruise Support and (4) Tour and Other. Our segments are reported on the same basis as the internally reported information that is provided to our chief operating decision maker (“CODM”), who is the President and Chief Executive Officer of Carnival Corporation and Carnival plc. The CODM assesses performance and makes decisions to allocate resources for Carnival Corporation & plc based upon review of the results across all of our segments.

Our North America segment includes Carnival Cruise Line, Holland America Line, Princess Cruises and Seabourn. Our EAA segment includes AIDA Cruises, Costa Cruises, Cunard, P&O Cruises (Australia) and P&O Cruises (UK).The operations of these reporting units have been aggregated into two reportable segments based on the similarity of their economic and other characteristics, including types of customers, regulatory environment, maintenance requirements, supporting systems and processes and products and services they provide. Our Cruise Support segment represents certain of our port and related facilities and other services that are provided for the benefit of our cruise brands. Our Tour and Other segment represents the hotel and transportation operations of Holland America Princess Alaska Tours and other operations.

Selected information for our segments and the reconciliation to the consolidated financial statement amounts was as follows (in millions):



	Three Months Ended May 31,
	Revenues			Operating costs and expenses			Selling and administrative		Depreciation and amortization		Operating income (loss)
2017
North America	$	2,581		$	1,534		$	319	$	285	$	443
EAA	1,309			874			172		150		113
Cruise Support	34			11			56		12		(45		)
Tour and Other	37			33			6		9		(11		)
Intersegment elimination	(16		)	(16		)	—		—		—
	$	3,945		$	2,436		$	553	$	456	$	500
2016
North America	$	2,320		$	1,386		$	292	$	263	$	379
EAA	1,339			853			178		151		157
Cruise Support	29			6			60		13		(50		)
Tour and Other	31			27			2		10		(8		)
Intersegment elimination	(14		)	(14		)	—		—		—
	$	3,705		$	2,258		$	532	$	437	$	478

	Six Months Ended May 31,
	Revenues			Operating costs and expenses			Selling and administrative		Depreciation and amortization		Operating income (loss)
2017
North America	$	4,986		$	3,003		$	639	$	559	$	785
EAA	2,648			1,820			344		296		188
Cruise Support	72			17			111		23		(79		)
Tour and Other	46			46			8		18		(26		)
Intersegment elimination	(16		)	(16		)	—		—		—
	$	7,736		$	4,870		$	1,102	$	896	$	868
2016
North America	$	4,538		$	2,700		$	603	$	519	$	716
EAA	2,728			1,763			352		299		314
Cruise Support	63			11			123		23		(94		)
Tour and Other	42			41			5		20		(24		)
Intersegment elimination	(14		)	(14		)	—		—		—
	$	7,357		$	4,501		$	1,083	$	861	$	912

A portion of the North America segment’s revenues includes revenues for the tour portion of a cruise when a cruise and land tour package are sold together by Holland America Line and Princess Cruises. These intersegment tour revenues, which are also included in our Tour and Other segment, are eliminated by the North America segment’s revenues and operating expenses in the line “Intersegment elimination.”

NOTE 6 – Earnings Per Share

Our basic and diluted earnings per share were computed as follows (in millions, except per share data):



	Three Months Ended May 31,				Six Months Ended May 31,
	2017		2016		2017		2016
Net income for basic and diluted earnings per share	$	379	$	605	$	730	$	747
Weighted-average shares outstanding	724		751		724		758
Dilutive effect of equity plans	3		2		3		3
Diluted weighted-average shares outstanding	727		753		727		761
Basic earnings per share	$	0.52	$	0.81	$	1.01	$	0.99
Diluted earnings per share	$	0.52	$	0.80	$	1.00	$	0.98

NOTE 7 – Shareholders’ Equity

On April 6, 2017, the Boards of Directors approved a modification of the general authorization to repurchase Carnival Corporation common stock and/or Carnival plc ordinary shares (the “Repurchase Program”), which replenished the remaining authorized repurchases at the time of the approval to $1.0 billion. During the six months ended May 31, 2017, we repurchased 2.8 million shares of Carnival plc ordinary shares for $156 million under the Repurchase Program. At May 31, 2017, the remaining availability under the Repurchase Program was $989 million.

During the three months ended May 31, 2017, our Boards of Directors declared a dividend to holders of Carnival Corporation common stock and Carnival plc ordinary shares of $0.40 per share, which was an increase from the prior dividend of $0.35.

NOTE 8 – Property and Equipment

In April 2017, we transferred an EAA segment 1,550-passenger capacity ship under a bareboat charter agreement to an unrelated entity which was accounted for as a sale.

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 ~~joint Quarterly Report on Form 10-Q~~document are “forward-looking statements” that involve risks, uncertainties and assumptions with respect to us, including some statements concerning future results, outlooks, plans, goals 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”~~“indicate,” “outlook” and similar expressions of future intent or the negative of such terms.

Forward-looking statements include those statements that ~~may impact~~relate to our outlook and financial position including, among other things, the forecasting of our net revenue yields; booking levels; pricing; occupancy; operating, financing and tax costs, including fuel expenses; currency exchange rates; net cruise costs excluding fuel per available lower berth day; estimates of ship depreciable lives and residual values; liquidity; goodwill, ship and trademark fair values and adjusted earnings per share. but not limited to, statements regarding:



• Net revenue yields	• 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 ~~in this joint Quarterly Report on Form 10-Q.~~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 statements and adversely affect our business, results of operations and financial position. 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:

Incidents, such as ship incidents, security incidents, the spread of contagious diseases and threats thereof, adverse weather conditions or other natural disasters and the related adverse publicity affecting our reputation and the health, safety, security and satisfaction of guests and ~~crew;~~

crew

Economic conditions and adverse world events affecting the safety and security of travel, such as civil unrest, armed conflicts and terrorist ~~attacks;~~

attacks

Changes in and compliance with laws and regulations relating to the environment, health, safety, security, tax and anti-corruption under which we ~~operate;~~

operate

Disruptions and other damages to our information technology and other networks and operations, and breaches in data ~~security;~~

security

Ability to recruit, develop and retain qualified ~~personnel;~~

personnel

Increases in fuel ~~prices;~~

prices

Fluctuations in foreign currency exchange ~~rates;~~

rates

Misallocation of capital among our ship, joint venture and other strategic ~~investments;~~

investments

Future operating cash flow may not be sufficient to fund future obligations and we may be unable to obtain ~~financing;~~

financing

Overcapacity in the cruise ship and land-based vacation industry

Deterioration of our cruise ~~brands'~~brands’ strengths and our inability to implement our ~~strategies;~~

strategies

Continuing financial viability of our travel agent distribution system, air service providers and other key vendors in our supply chain and reductions in the availability of, and increases in the prices for, the services and products provided by these ~~vendors;~~

vendors

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

ages

Failure to keep pace with developments in ~~technology;~~

technology

Geographic regions in which we try to expand our business may be slow to develop and ultimately not develop how we expect and our international operations are subject to additional risks not generally applicable to our U.S. ~~operations;~~

operations

Competition from ~~and overcapacity in~~ the cruise ship and land-based vacation ~~industry;~~

industry

Economic, market and political factors that are beyond our control ~~which could increase our operating, financing and other costs;~~

~~Changes in global consumer confidence and impacts to various foreign currency exchange rates as a result of the June 24, 2016 UK electorate vote to withdraw from the European Union (“EU”);~~

~~Friction in travel, changes to international tax treaties and changes to laws and regulations that could result from the exit of the UK from the EU;~~

Litigation, enforcement actions, fines or ~~penalties;~~

penalties

Lack of continuing availability of attractive, convenient and safe port destinations on terms that are favorable or consistent with our ~~expectations;~~

expectations

Union disputes and other employee relationship ~~issues;~~

issues

Decisions to self-insure against various risks or the inability to obtain insurance for certain risks at reasonable ~~rates;~~

rates

Reliance on third-party providers of various services integral to the operations of our ~~business;~~

business

Business activities that involve our co-investment with third ~~parties;~~

parties

Disruptions in the global financial markets or other events that may negatively affect the ability of our counterparties and others to perform their obligations to ~~us;~~

Our shareholders may be subject to the uncertainties of a foreign legal system since Carnival Corporation and Carnival plc are not U.S. ~~corporations;~~

corporations

Small group of shareholders may be able to effectively control the outcome of shareholder ~~voting;~~

voting

Provisions in Carnival Corporation’s and Carnival plc’s constitutional documents may prevent or discourage takeovers and business combinations that our shareholders might consider to be in their best interests ~~and~~

The ~~DLC~~dual listed company arrangement involves risks not associated with the more common ways of combining the operations of two ~~companies.~~companies

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 ~~joint Quarterly Report on Form 10-Q,~~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.

Outlook

On ~~September 26, 2016,~~June 22, 2017, we said in our earnings release that we expected our adjusted ~~diluted~~ earnings per share for the ~~2016 fourth~~2017 third quarter to be in the range of ~~$0.55~~$2.16 to ~~$0.59~~$2.20 and ~~2016~~2017 full year to be in the range of ~~$3.33~~$3.60 to ~~$3.37~~$3.70 (see “Key Performance Non-GAAP Financial Indicators”). Our guidance was based on the following assumptions:

2016 Fourth Quarter

2016 Full Year

2017 Third Quarter

2017 Full Year

Fuel cost per metric ton consumed

$332

$285

Fuel price per metric ton

$372

$367

Currencies

U.S. dollar to euro

$1.11 to €1

$1.12 to €1

$1.10 to €1

U.S. dollar to sterling

$1.30 to £1

$1.38 to £1

$1.27 to £1

$1.26 to £1

U.S. dollar to Australian dollar

$0.76 to A$1

$0.74 to A$1

$0.75 to A$1

U.S. dollar to Canadian dollar

$0.76 to C$1

The fuel and currency assumptions used in our guidance change daily and, accordingly, our forecasts change daily based on the changes in these assumptions. We dohave not ~~provide guidance on~~provided a reconciliation of forecasted U.S. GAAP ~~basis because it would be too difficult to prepare without unreasonable effort.~~

We benefited from lower than the annual average dry-dock days in 2016 and are planning for an increase in dry-dock days in 2017. With capital expenditure reinvestment in the existing vessels and other areas of our business to drive yield improvement, we expect depreciation expense to increase from 2016 to 2017 by a higher percentage than the increase in capacity. We are currently expecting depreciation expense for full year 2017 to be approximately $1.9 billion. Furthermore, using recent fuel prices and foreign currency exchange rates, we expect the 2017 versus 2016 impact on our earnings per share to forecasted adjusted earnings per share because preparation of meaningful U.S. GAAP forecasts of 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, including~~prices. While we forecast realized gains and losses on fuel derivatives by applying current Brent prices to ~~be an unfavorable $0.24 per share and~~the derivatives that settle in the forecast period, we do not forecast the impact of ~~foreign currency exchange rate fluctuations~~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 ~~be an unfavorable $0.04 per share.~~determine the future impact of gains or losses on ships sales, restructuring expenses and other non-core gains and charges.

The above forward-looking statements involve risks, uncertainties and assumptions with respect to us. There are many factors that could cause our actual results to differ materially from those expressed above. You should read the above forward-looking statements together with the discussion of the risks under “Cautionary Note Concerning Factors That May Affect Future Results.”

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 ~~2015~~ Form 10-K.

Seasonality

Our revenues from the sale of passenger tickets are seasonal. Historically, demand for cruises has been greatest during our third quarter, which includes the Northern Hemisphere summer months. 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. In addition, substantially all of Holland America Princess Alaska Tours’ revenue and net income is generated from May through September in conjunction with the Alaska cruise season.

Statistical Information


	Three Months Ended August 31,						Nine Months Ended August 31,						Three Months Ended May 31,						Six Months Ended May 31,
	2016			2015			2016			2015			2017			2016			2017			2016
Available Lower Berth Days ("ALBDs") (in thousands) (a) (b)	20,572			19,795			59,555			57,686
Available Lower Berth Days (“ALBDs”) (in thousands) (a) (b)													20,397			19,693			40,421			38,983
Occupancy percentage (c)	111.4		%	110.9		%	106.6		%	105.6		%	104.1		%	104.1		%	104.3		%	104.1		%
Passengers carried (in thousands)	3,265			3,068			8,606			8,138			2,906			2,781			5,675			5,340
Fuel consumption in metric tons (in thousands)	793			786			2,417			2,379			830			808			1,649			1,623
Fuel consumption in metric tons per thousand ALBDs	38.6			39.7			40.6			41.2			40.7			41.0			40.8			41.6
Fuel cost per metric ton consumed	$	335		$	439		$	268		$	418		$	374		$	243		$	368		$	236
Currencies
U.S. dollar to euro	$	1.12		$	1.11		$	1.11		$	1.13		$	1.08		$	1.13		$	1.07		$	1.11
U.S. dollar to sterling	$	1.34		$	1.56		$	1.41		$	1.54		$	1.26		$	1.44		$	1.25		$	1.44
U.S. dollar to Australian dollar	$	0.75		$	0.75		$	0.74		$	0.78		$	0.75		$	0.75		$	0.75		$	0.73
U.S. dollar to Canadian dollar	$	0.77		$	0.78		$	0.76		$	0.80

(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 ~~August~~May 31, ~~2016~~2017 compared to the three months ended ~~August~~May 31, ~~2015,~~2016, we had a ~~3.9%~~3.6% capacity increase in ALBDs comprised of a ~~6.4% capacity increase in our EAA segment and a 2.3%~~5.6% capacity increase in our North America ~~segment.~~segment while capacity in our EAA segment increased slightly by 0.6%.

Our ~~EAA segment's~~North America segment’s capacity increase was ~~caused~~driven by:

~~full quarter impact from one AIDA 3,286-passenger capacity ship delivered in 2016;~~

~~full quarter impact from the transfer of two Holland America Line 1,260-passenger capacity ships to P&O Cruises (Australia) in 2015.~~

~~Our North America segment's capacity increase was caused by:~~

~~full quarter impact from one Carnival Cruise Line 3,934-passenger capacity ship delivered in 2016;~~

~~full~~Partial quarter impact from one Holland America Line 2,650-passenger capacity ship ~~delivered~~that entered into service in April 2016 ~~partially offset by~~

~~full~~Partial quarter impact from one Carnival Cruise Line 3,930-passenger capacity ship that entered into service in May 2016

Partial quarter impact from one Princess Cruises 3,560-passenger capacity ship that entered into service in April 2017

Our EAA segment’s capacity increase was driven by the ~~transfer of two Holland America Line 1,260-passenger~~partial quarter impact from one AIDA Cruises 3,290-passenger capacity ~~ships to~~ship that entered into service in April 2016, which was offset by the partial quarter impact from one P&O Cruises (Australia) 1,550-passenger capacity ship removed from service in ~~2015.~~April 2017.

For the ~~nine~~six months ended ~~August~~May 31, ~~2016~~2017 compared to the ~~nine~~six months ended ~~August~~May 31, ~~2015,~~2016, we had a ~~3.2%~~3.7% capacity increase in ALBDs comprised of a ~~7.9% capacity increase in our EAA segment and a slight~~5.4% capacity increase in our North America ~~segment.~~

~~Our EAA segment's~~segment and a 1.2% capacity increase ~~was caused by:~~

~~full period impact from the transfer of two Holland America Line 1,260-passenger capacity ships to P&O Cruises~~

~~(Australia)~~ in ~~2015;~~

~~partial period impact from one AIDA 3,286-passenger capacity ship delivered in 2016;~~

~~partial period impact from one P&O Cruises (UK) 3,647-passenger capacity ship delivered in 2015 and~~

~~fewer ship dry-dock days in 2016 compared to 2015.~~our EAA segment.

Our North America ~~segment's~~segment’s capacity increase was ~~caused~~driven by:

~~partial period impact from one Carnival Cruise Line 3,934-passenger capacity ship delivered in 2016;~~

~~partial~~Partial period impact from one Holland America Line 2,650-passenger capacity ship ~~delivered~~that entered into service in April 2016 ~~partially offset by~~

~~full~~Partial period impact from one Carnival Cruise Line 3,930-passenger capacity ship that entered into service in May 2016

Partial period impact from one Princess Cruises 3,560-passenger capacity ship that entered into service in April 2017

Our EAA segment’s capacity increase was caused by the ~~transfer of two Holland America Line 1,260-passenger~~partial period impact from one AIDA Cruises 3,290-passenger capacity ~~ships to~~ship that entered into service in April 2016, which was offset by the partial period impact from one P&O Cruises (Australia) 1,550-passenger capacity ship removed from service in ~~2015.~~April 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 ~~August~~May 31, ~~2016~~2017 (“~~2016”~~2017”) Compared to Three Months Ended ~~August~~May 31, ~~2015~~2016 (“~~2015”~~2016”)

Revenues

Consolidated

Cruise passenger ticket revenues made up ~~75%~~73% of our ~~2016~~2017 total revenues. Cruise passenger ticket revenues increased by ~~$172~~$176 million, or ~~4.8%~~6.5%, to ~~$3.8~~$2.9 billion in ~~2016~~2017 from ~~$3.6~~$2.7 billion in ~~2015.~~2016.

This increase was caused by:

$~~143 million - 3.9% capacity increase in ALBDs;~~

$38 million - an accounting reclassification in our EAA segment, which has no impact on our operating income as the increase in passenger ticket revenues is fully offset by an increase in operating expenses (“accounting reclassification”);

~~$28 million - increase in air transportation revenues from guests who purchased their tickets from us;~~

~~$17~~156 million - increase in cruise ticket ~~prices,~~revenue, driven primarily by price improvements in our Caribbean, European and ~~Alaskan~~Alaska programs for our North America segment and European and Caribbean programs for our EAA segment, partially offset by ~~yield reductions~~decreases in ~~Asia and Australia deployments and unfavorable foreign currency transactional movements and~~our China programs

$1696 million - ~~a slight~~3.6% capacity increase in ~~occupancy.~~ALBDs

These increases were partially offset by the foreign currency translational impact from a stronger U.S. dollar against the ~~euro, sterling and the Australian dollar ("~~functional currencies of our foreign operations (“foreign currency translational ~~impact"~~impact”), which accounted for ~~$62~~$72 million.

The remaining ~~25%~~27% of ~~2016~~2017 total revenues were substantially all comprised of onboard and other cruise revenues, which increased by ~~$44~~$58 million, or ~~4.0%~~5.9%, ~~and remained at $1.1 billion~~to $1,036 million in ~~both 2016 and 2015.~~ 2017 from $978 million in 2016.

This increase was ~~driven~~caused by:

•$39 million - higher onboard spending by ~~3.9%~~our guests

•$35 million - 3.6% capacity increase in ALBDs

These increases were partially offset by the foreign currency translational impact, which accounted for ~~$43~~$15 million.

~~Onboard~~Concession revenues, which are included in onboard and other revenues, ~~included concession revenues that decreased~~increased by $5 million, or 2.3%, to ~~$321~~$245 million in ~~2016~~2017 from ~~$334~~$240 million in ~~2015~~.2016.

North America Segment

Cruise passenger ticket revenues made up ~~75%~~71% of our North America ~~segment's 2016~~segment’s 2017 total revenues. Cruise passenger ticket revenues increased by ~~$133~~$198 million, or ~~5.9%~~12.2%, to ~~$2.4~~$1.8 billion in ~~2016~~2017 compared to ~~$2.2~~$1.6 billion in ~~2015.~~2016.

~~The~~This increase was caused by:

$5292 million - ~~2.3%~~5.6% capacity increase in ~~ALBDs;~~ALBDs

$~~39 million - increase in air transportation revenues from guests who purchased their tickets from us;~~

~~$30~~83 million - increase in cruise ticket ~~pricing, partially offset~~revenue, driven primarily by ~~unfavorable foreign currency transactional impacts~~price improvements in the Caribbean, European and Alaska programs

$1223 million - ~~a slight~~1.5 percentage point increase in ~~occupancy.~~occupancy

The remaining ~~25%~~29% of our North America ~~segment's 2016~~segment’s 2017 total revenues were comprised of onboard and other cruise revenues, which increased by ~~$36~~$61 million, or ~~4.7%~~9.0%, to ~~$808~~$738 million in ~~2016~~2017 from ~~$772~~$677 million in ~~2015.~~2016.

~~This~~

The increase was ~~driven~~caused by:

$1838 million - ~~2.3%~~5.6% capacity increase in ALBDs ~~and~~

$1319 million - higher onboard spending by our ~~guests.~~guests

$10 million - 1.5 percentage point increase in occupancy

~~Onboard~~Concession revenues, which are included in onboard and other revenues, ~~included concession revenues that decreased~~increased by $14 million, or 8.9%, to ~~$223~~$176 million in ~~2016~~2017 from ~~$231~~$162 million in ~~2015.~~2016.

EAA Segment

Cruise passenger ticket revenues made up ~~83%~~80% of our EAA ~~segment's 2016~~segment’s 2017 total revenues. Cruise passenger ticket revenues ~~increased~~decreased by ~~$43~~$29 million, or ~~3.1%~~2.7%, and ~~remained at $1.4~~was $1.1 billion in both ~~2016~~2017 and ~~2015.~~2016.

This ~~increase~~decrease was caused by:

$~~90 million - 6.4% capacity increase in ALBDs and~~

~~$38 million - the accounting reclassification.~~

~~These increases were partially offset by:~~

~~$62~~72 million - foreign currency translational ~~impact;~~impact

$1927 million - 2.5 percentage point decrease in occupancy driven primarily by the China programs

These decreases were partially offset by a $59 million increase in cruise ticket ~~pricing~~revenue driven primarily by ~~unfavorable foreign currency transactional impacts~~price improvements in the Caribbean and

~~$12 million - decrease~~ European programs, partially offset by decreases in ~~air transportation revenues from guests who purchased their tickets from us.~~the China programs.

The remaining ~~17%~~20% of our EAA ~~segment's 2016~~segment’s 2017 total revenues were comprised of onboard and other cruise revenues, which ~~increased~~slightly decreased by $4$1 million, ~~or 1.2%, to $300~~and was $259 million in ~~2016 from $296~~2017 and $260 million in ~~2015. The increase was caused by a 6.4% capacity increase in ALBDs, which accounted for $19 million, partially offset by foreign currency translational impact, which accounted for $12 million.~~2016.

~~Onboard~~Concession revenues, which are included in onboard and other revenues, ~~included concession revenues that~~ decreased by $9 million, or 12%, to ~~$98~~$69 million in ~~2016~~2017 from ~~$103~~$78 million in ~~2015.~~2016.

Costs and Expenses

Consolidated

Operating costs and expenses increased by ~~$73~~$178 million, or ~~3.0%~~7.9%, to ~~$2.6~~$2.4 billion in ~~2016~~2017 from ~~$2.5~~$2.3 billion in ~~2015.~~2016.

This increase was caused by:

$95109 million - ~~3.9%~~higher fuel prices

$80 million - 3.6% capacity increase in ~~ALBDs;~~ALBDs

$4014 million - higher ~~dry-dock expenses~~commissions, transportation and other ~~ship repair and maintenance expenses;~~

~~$38 million - the accounting reclassification and~~

~~$26 million - higher air costs.~~

These increases were partially offset ~~by:~~

~~$83 million - lower fuel prices;~~

~~$33 million -~~by the foreign currency translational impact, ~~and~~

~~$11 million - lower fuel consumption.~~which accounted for $49 million.

Selling and administrative expenses increased by ~~$45~~$21 million, or ~~9.4%~~3.9%, to ~~$529~~$553 million in ~~2016~~2017 from ~~$484~~$532 million in ~~2015.~~

~~This increase was caused by:~~

~~$33 million - various selling and administrative initiatives and~~

~~$19 million - 3.9% capacity increase in ALBDs.~~2016.

Depreciation and amortization expenses increased by ~~$44~~$19 million, or ~~10.8%~~4.3%, to ~~$443~~$456 million in ~~2016~~2017 from ~~$399~~$437 million in ~~2015. This increase was due to changes in capacity and improvements to existing ships and shoreside assets.~~

~~Total costs and expenses as a percentage of revenues remained at 69% in both 2016 and 2015.~~2016.

North America Segment

Operating costs and expenses increased by ~~$17~~$148 million, or ~~1.1%~~10.7%, to ~~$1.6 billion in 2016 from~~ $1.5 billion in ~~2015.~~2017 from $1.4 billion in 2016.

This increase was ~~caused~~driven by:

$3677 million - ~~2.3%~~5.6% capacity increase in ~~ALBDs;~~ALBDs

$3670 million - higher ~~air costs and~~

~~$25 million - higher ship repair and maintenance expenses.~~

~~These increases were partially offset by lower~~ fuel prices ~~which accounted for $50 million, and quarterly timing of various other operating expenses, net, which accounted for $30 million.~~

Selling and administrative expenses increased by ~~$22~~$27 million, or ~~8.0%~~9.2%, to ~~$293~~$319 million in ~~2016~~2017 from ~~$271~~$292 million in ~~2015. This increase was driven by various selling and administrative initiatives.~~2016.

Depreciation and amortization expenses increased by ~~$30~~$22 million, or ~~12.3%~~8.4%, to ~~$272~~$285 million in ~~2016~~2017 from ~~$242~~$263 million in ~~2015. This increase was caused by changes in capacity and improvements to existing ships and shoreside assets.~~2016.

~~Total costs and expenses as a percentage of revenues decreased to 67% in 2016 from 68% in 2015.~~

EAA Segment

Operating costs and expenses increased by ~~$51~~$21 million, or ~~6.0%~~2.5%, to ~~$903~~$874 million in ~~2016~~2017 from ~~$852~~$853 million in ~~2015.~~2016.

This increase was caused by:

$~~55 million - 6.4% capacity increase in ALBDs;~~

$38 million - ~~the accounting reclassification;~~higher fuel prices

$2435 million - ~~higher dry-dock expenses and other ship repair and maintenance expenses and~~

~~$11 million - quarterly timing of~~increases in various other ~~operating expenses, net.~~costs

These increases were partially offset ~~by:~~

~~$33 million - lower fuel prices;~~

~~$33 million -~~by the foreign currency translational impact, ~~and~~which accounted for $49 million.

~~$11~~

Selling and administrative expenses decreased by $6 million, ~~- lower air costs.~~or 3.4%, to $172 million in 2017 from $178 million in 2016.

Depreciation and amortization expenses ~~increased~~decreased by ~~$12~~$1 million ~~or 8.2%,~~ to ~~$152~~$150 million in ~~2016~~2017 from ~~$140~~$151 million in ~~2015. This increase was due to changes in capacity and improvements to existing ships and shoreside assets.~~

~~Total costs and expenses as a percentage of revenues increased to 70% in 2016 from 68% in 2015.~~2016.

Operating Income

Our consolidated operating income increased by ~~$52~~$22 million, or ~~3.4%~~4.6%, to ~~$1.6 billion~~$500 million in ~~2016~~2017 from ~~$1.5 billion~~$478 million in ~~2015.~~2016. Our North America ~~segment's~~segment’s operating income increased by ~~$100~~$64 million, or ~~11%~~17%, to ~~$1.1 billion in 2016 from $951~~$443 million in ~~2015,~~2017 from $379 million in 2016, and our EAA ~~segment's~~segment’s operating income decreased by ~~$15~~$44 million, or ~~2.7%~~28%, to ~~$522~~$113 million in ~~2016~~2017 from ~~$537~~$157 million in ~~2015.~~2016. These changes were primarily due to the reasons discussed above.

Nonoperating ~~Expense~~Income (Expense)

~~Losses~~(Losses) gains on fuel derivatives, net were comprised of the following (in millions):

Three Months Ended
August 31,
2016 2015
Unrealized gains(losses) on fuel derivatives, net $ 25
$ (137 )
Realized losses on fuel derivatives (61 ) (60 )
Losses on fuel derivatives, net $ (36 ) $ (197 )



	Three Months Ended May 31,
	2017			2016
Unrealized (losses) gains on fuel derivatives, net	$	(2	)	$	242
Realized (losses) on fuel derivatives, net	(51		)	(71		)
(Losses) gains on fuel derivatives, net	$	(53	)	$	171

Key Performance Non-GAAP Financial Indicators

Non-GAAP Financial Measures

We use net cruise revenues per ALBD (“net revenue yields”), net cruise costs excluding fuel per ALBD, adjusted net income 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 and U.S. GAAP net income and U.S. GAAP earnings per share.

We believe that gains and losses on ship sales and ship impairments and restructuring and certain other expenses are not part of our core operating business and, therefore, are not an indication of our future earnings performance. As such, we exclude these items from non-GAAP measures. Net revenue yields and net cruise costs excluding fuel per ALBD ~~as significant non-GAAP financial measures of our cruise segments’ financial performance. These measures~~ enable us to separate the impact of predictable capacity or ALBD changes from ~~the more unpredictable rate~~price and other changes that affect our ~~business; gains and losses on ship sales and ship impairments, net; and restructuring and other expenses that are not part of our core operating~~ 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.

The presentation of our non-GAAP financial information is not intended to be considered in isolation from, as a 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. ~~Substantially all of our remaining cruise costs are largely fixed, except for the impact of changing prices and food expenses, once our ship capacity levels have been determined.~~

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 passenger ticket revenue yields and net onboard and other revenue yields are computed by dividing net passenger ticket revenues and net onboard and other revenues by ALBDs.~~

Net cruise costs ~~per ALBD and net cruise costs~~ excluding fuel per ALBD ~~are~~ is the ~~most significant measures~~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 ~~with and~~ without fuel to avoid duplicating these variable costs in our non-GAAP financial measures. ~~We believe that gains and losses on ship sales and ship impairments, net and restructuring expenses and other expenses are not part~~Substantially all of our ~~core operating business and, therefore, are not an indication of our future earnings performance. As such, we exclude these items from our calculation of~~ net cruise costs ~~with and without fuel. We also believe it is more meaningful~~excluding fuel are largely fixed, except for gains and losses on ship sales and ship impairments, net and restructuring and other expenses 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 items.the impact of changing prices, once the number of ALBDs has been determined.

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 ~~it would be too difficult to prepare reliable~~preparation of meaningful U.S. GAAP forecasts of gross cruise revenues, ~~and~~ gross cruise costs, net income and earnings per share would require unreasonable effort. We are unable to predict, without unreasonable ~~effort.~~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

~~In addition, our~~Our EAA segment and Cruise Support segment operations utilize the euro, sterling and Australian dollar as their functional currencies to measure their results and financial condition. This subjects us to foreign currency translational risk. Our North America, EAA and Cruise Support segment operations also have revenues and expenses that are in a currency other than their functional currency. This subjects us to foreign currency transactional risk.

We report ~~non-GAAP financial measures~~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 ~~2016 periods'~~2017 periods’ currency exchange rates have remained constant with the ~~2015 periods'~~2016 periods’ rates. These metrics facilitate a comparative view for the changes in our business in an environment with fluctuating exchange rates.

Constant dollarreporting is a non-GAAP financial measure that removes only the impact of changes in exchange rates on the

translation of our EAA segment and Cruise Support segment operations.

Constant currencyreporting is a non-GAAP financial measure that removes the impact of changes in exchange rates on the translation of our EAA segment and Cruise Support segment 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 for our North America, EAA and Cruise Support segments.

Examples:

The translation of our EAA segment operations 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.

Our North ~~America~~American segment operations have a U.S. dollar functional currency but also have revenue and expense transactions in currencies other than the U.S. dollar. If the U.S. dollar strengthens against these other currencies, it reduces the U.S. dollar revenues and expenses. If the U.S. dollar weakens against these other currencies, it increases the U.S. dollar revenues and expenses.

Our EAA segment operations have euro, sterling and Australian dollar functional currencies but also 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.

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.

~~While we forecast realized~~We believe that gains and losses on ~~fuel derivatives by applying current Brent prices to the derivatives that settle in the forecast period, we do~~ship sales and ship impairments and restructuring and other expenses are not ~~forecast the impact~~part of ~~unrealized gains~~our core operating business and ~~losses on fuel derivatives because we do~~are not ~~believe they are~~ an indication of our future earnings performance. ~~Accordingly,~~Therefore, we believe it is more meaningful for gains and losses on ship sales and ship impairments and restructuring and other non-core gains and charges to be excluded from our net income and earnings ~~guidance is presented on an~~per share and, accordingly, we present adjusted ~~basis only.~~

~~Our consolidated financial statements are prepared in accordance with U.S. GAAP. We have not provided a reconciliation between forecasted~~net income and adjusted earnings per share guidance and forecasted U.S. GAAP earnings per share guidance because it would be too difficult to prepare reliable U.S. GAAP guidance without unreasonable effort. We are unable to predict, without unreasonable effort, the future movement of foreign exchange rates or the future impact of gains or losses on ship sales, restructuring expenses or other non-core gains and charges. 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 usingexcluding these ~~measures to compare us to other companies.~~

items.

Consolidated gross and net revenue yields were computed by dividing the gross and net cruise revenues by ALBDs as follows (dollars in millions, except yields):


	Three Months Ended August 31,									Three Months Ended May 31,
	2016			2016 Constant Dollar			2015			2017			2017 Constant Dollar			2016

Passenger ticket revenues	$	3,803		$	3,866		$	3,631		$	2,872		$	2,944		$	2,696
Onboard and other revenues	1,146			1,158			1,102			1,036			1,051			978
Gross cruise revenues	4,949			5,024			4,733			3,908			3,995			3,674
Less cruise costs
Commissions, transportation and other	(646		)	(654		)	(603		)	(513		)	(526		)	(495		)
Onboard and other	(171		)	(173		)	(170		)	(129		)	(131		)	(123		)
	(817		)	(827		)	(773		)	(642		)	(657		)	(618		)
Net passenger ticket revenues	3,157			3,212			3,028			2,359			2,418			2,201
Net onboard and other revenues	975			985			932			907			920			855
Net cruise revenues	$	4,132		$	4,197		$	3,960		$	3,266		$	3,338		$	3,056
ALBDs	20,572,112			20,572,112			19,794,882			20,396,773			20,396,773			19,693,362

Gross revenue yields	$	240.60		$	244.22		$	239.10		$	191.59		$	195.89		$	186.55
% increase vs. 2015	0.6		%	2.1		%
% increase vs. 2016										2.7		%	5.0		%
Net revenue yields	$	200.87		$	204.03		$	200.04		$	160.15		$	163.67		$	155.21
% increase vs. 2015	0.4		%	2.0		%
% increase vs. 2016										3.2		%	5.5		%
Net passenger ticket revenue yields	$	153.47		$	156.14		$	152.96		$	115.66		$	118.55		$	111.78
% increase vs. 2015	0.3		%	2.1		%
% increase vs. 2016										3.5		%	6.1		%
Net onboard and other revenue yields	$	47.39		$	47.89		$	47.09		$	44.49		$	45.12		$	43.43
% increase vs. 2015	0.7		%	1.7		%
% increase vs. 2016										2.4		%	3.9		%


	Three Months Ended August 31,								Three Months Ended May 31,
	2016			2016 Constant Currency			2015		2017			2017 Constant Currency			2016
Net passenger ticket revenues	$	3,157		$	3,246		$	3,028	$	2,359		$	2,409		$	2,201
Net onboard and other revenues	975			981			932		907			917			855
Net cruise revenues	$	4,132		$	4,227		$	3,960	$	3,266		$	3,326		$	3,056
ALBDs	20,572,112			20,572,112			19,794,882		20,396,773			20,396,773			19,693,362

Net revenue yields	$	200.87		$	205.46		$	200.04	$	160.15		$	163.05		$	155.21
% increase vs. 2015	0.4		%	2.7		%
% increase vs. 2016									3.2		%	5.1		%
Net passenger ticket revenue yields	$	153.47		$	157.76		$	152.96	$	115.66		$	118.10		$	111.78
% increase vs. 2015	0.3		%	3.1		%
% increase vs. 2016									3.5		%	5.7		%
Net onboard and other revenue yields	$	47.39		$	47.69		$	47.09	$	44.49		$	44.94		$	43.43
% increase vs. 2015	0.7		%	1.3		%
% increase vs. 2016									2.4		%	3.5		%

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 (dollars in millions, except costs per ALBD):

Three Months Ended August 31,
2016 2016
Constant
Dollar 2015

Cruise operating expenses $ 2,479
$ 2,513
$ 2,408

Cruise selling and administrative expenses 527
534
482

Gross cruise costs 3,006
3,047
2,890

Less cruise costs included above
     Commissions, transportation and other (646 ) (654 ) (603 )
     Onboard and other (171 ) (173 ) (170 )
     Gain on ship sale —
—
2

     Restructuring expenses —
—
(14 )
     Other (a) (18 ) (18 ) —

Net cruise costs 2,171
2,202
2,105

Less fuel (265 ) (265 ) (345 )
Net cruise costs excluding fuel $ 1,906
$ 1,937
$ 1,760

ALBDs 20,572,112
20,572,112
19,794,882

Gross cruise costs per ALBD $ 146.18
$ 148.11
$ 145.95

% increase vs. 2015 0.2 % 1.5 %

   Net cruise costs per ALBD $ 105.54
$ 107.00
$ 106.28

   % (decrease) increase vs. 2015 (0.7 )% 0.7 %

   Net cruise costs excluding fuel per ALBD $ 92.63
$ 94.10
$ 88.84

   % increase vs. 2015 4.3 % 5.9 %

~~(a) Insignificant costs were included in the income statement in previous periods.~~



	Three Months Ended May 31,
	2017			2017 Constant Dollar			2016

Cruise operating expenses	$	2,403		$	2,451		$	2,231
Cruise selling and administrative expenses	548			559			530
Gross cruise costs	2,951			3,010			2,761
Less cruise costs included above
Commissions, transportation and other	(513		)	(526		)	(495		)
Onboard and other	(129		)	(131		)	(123		)
Gain on ship sale	4			4			—
Restructuring expenses	—			—			(2		)
Other	(1		)	(1		)	(5		)
Net cruise costs	2,312			2,356			2,136
Less fuel	(310		)	(310		)	(196		)
Net cruise costs excluding fuel	$	2,002		$	2,046		$	1,940
ALBDs	20,396,773			20,396,773			19,693,362

Gross cruise costs per ALBD	$	144.63		$	147.58		$	140.18
% increase vs. 2016	3.2		%	5.3		%
Net cruise costs excluding fuel per ALBD	$	98.11		$	100.29		$	98.49
% (decrease) increase vs. 2016	(0.4		)%	1.8		%


	Three Months Ended August 31,								Three Months Ended May 31,
	2016			2016 Constant Currency			2015		2017			2017 Constant Currency			2016
Net cruise costs excluding fuel	$	1,906		$	1,929		$	1,760	$	2,002		$	2,039		$	1,940
ALBDs	20,572,112			20,572,112			19,794,882		20,396,773			20,396,773			19,693,362

Net cruise costs excluding fuel per ALBD	$	92.63		$	93.77		$	88.84	$	98.11		$	99.99		$	98.49
% increase vs. 2015	4.3		%	5.5		%
% (decrease) increase vs. 2016									(0.4		)%	1.5		%

Adjusted fully diluted earnings per share was computed as follows (in millions, except per share data):

Three Months Ended
August 31,
2016 2015
Net income
     U.S. GAAP net income $ 1,424
$ 1,216

     Unrealized (gains) losses on fuel derivatives, net (25 ) 137

     Gain on ship sale —
(2 )
     Restructuring expenses —
14

     Other (a) 18
—

     Adjusted net income $ 1,417
$ 1,365

Weighted-average shares outstanding 739
781

Earnings per share
     U.S. GAAP earnings per share $ 1.93
$ 1.56

     Unrealized (gains) on fuel derivatives, net (0.03 ) 0.17

     Gain on ship sale —
—

     Restructuring expenses —
0.02

     Other (a) 0.02
—

     Adjusted earnings per share $ 1.92
$ 1.75

~~(a) Insignificant costs were included in the income statement in previous periods.~~



	Three Months Ended
	May 31,
	2017			2016
Net income
U.S. GAAP net income	$	379		$	605
Unrealized losses (gains) on fuel derivatives, net	2			(242		)
(Gain) on ship sale	(4		)	—
Restructuring expenses	—			2
Other	1			5
Adjusted net income	$	378		$	370
Weighted-average shares outstanding	727			753

Earnings per share
U.S. GAAP earnings per share	$	0.52		$	0.80
Unrealized losses (gains) on fuel derivatives, net	—			(0.32		)
(Gain) on ship sale	—			—
Restructuring expenses	—			—
Other	—			0.01
Adjusted earnings per share	$	0.52		$	0.49

Net cruise revenues increased by ~~$172~~$210 million, or ~~4.4%~~6.9%, to ~~$4.1~~$3.3 billion in ~~2016~~2017 from ~~$4.0~~$3.1 billion in ~~2015.~~2016.

The increase in net cruise revenues was caused by:

$~~156~~160 million - ~~3.9% capacity increase in ALBDs and~~

~~$111 million - 2.7%~~5.1% increase in constant currency net revenue ~~yields.~~yields

$109 million - 3.6% capacity increase in ALBDs

These increases were partially offset by foreign currency impacts (including both the foreign currency translational and transactional impacts), which accounted for ~~$94~~$59 million.

The ~~2.7%~~5.1% increase in net revenue yields on a constant currency basis was due to a ~~3.1%~~5.7% increase in net passenger ticket revenue yields and a ~~1.3%~~3.5% increase in net onboard and other revenue yields.

The ~~3.1%~~5.7% increase in net passenger ticket revenue yields was driven primarily by price improvements in our Caribbean, European and ~~Alaskan~~Alaska programs for our North America segment and European and Caribbean programs for our EAA segment, partially offset by ~~yield reductions~~decreases in ~~Asia and Australia and 1.0 percentage points of this yield increase resulted from the accounting reclassification.~~our China programs. This ~~3.1%~~5.7% increase in net passenger ticket revenue yields was comprised of a ~~3.9%~~6.4% increase from our North America segment and a ~~2.3%~~3.2% increase from our EAA segment.

The ~~1.3%~~3.5% increase in net onboard and other revenue yields was caused by ~~a 2.8% increase from~~similar increases in our North America ~~segment, partially offset by a 1.9% decrease from our~~and EAA ~~segment.~~segments.

Gross cruise revenues increased by ~~$216~~$234 million, or ~~4.6%~~6.4%, to ~~$4.9~~$3.9 billion in 2017 from $3.7 billion in 2016 ~~from $4.7 billion in 2015~~ for largely the same reasons as discussed above.

Net cruise costs excluding fuel increased by ~~$146~~$62 million, or ~~8.4%~~3.2%, to $2.0 billion in 2017 from $1.9 billion in ~~2016 from $1.8 billion in 2015.~~2016.

The increase in net cruise costs excluding fuel was caused by:

$~~101~~69 million - ~~5.5%~~3.6% capacity increase in ALBDs

$31 million - 1.5% increase in constant currency net cruise costs excluding fuel ~~and~~

~~$69 million - 3.9% capacity increase in ALBDs.~~

These increases were partially offset by foreign currency impacts (including both the foreign currency translational and transactional impacts), which accounted for ~~$23~~$38 million.

~~The 5.5% increase in constant currency net~~Net cruise costs excluding fuel per ALBD ~~was principally due to higher repair and maintenance and dry-dock expenses, timing of advertising expense and a 1.7 percentage point increase that resulted from the accounting reclassification.~~increased by 1.5%.

Fuel costs ~~decreased~~increased by ~~$80~~$114 million, or ~~23%~~58%, to ~~$265~~$310 million in ~~2016~~2017 from ~~$345~~$196 million in ~~2015.~~

~~The decrease~~2016. This increase was ~~caused by:~~

~~$83 million - lower~~driven by higher fuel prices, ~~and~~

~~$11 million - lower fuel consumption.~~

~~These decreases were partially offset by 3.9% capacity increase in ALBDs,~~ which accounted for ~~$14~~$109 million.

Gross cruise costs increased by ~~$116~~$190 million, or ~~4.0%~~6.9%, to $3.0 billion in ~~2016~~2017 from ~~$2.9~~$2.8 billion in ~~2015~~2016 for ~~principally~~largely the same reasons as discussed above.

~~Nine~~

Six Months Ended ~~August~~May 31, 2017 (“2017”) Compared to Six Months Ended May 31, 2016 (“2016”~~) Compared to Nine Months Ended August 31, 2015 (“2015”~~)

Revenues

Consolidated

Cruise passenger ticket revenues made up ~~74%~~73% of our ~~2016~~2017 total revenues. Cruise passenger ticket revenues increased by ~~$326~~$262 million, or ~~3.7%~~4.8%, to ~~$9.2~~$5.7 billion in ~~2016~~2017 from ~~$8.9~~$5.4 billion in ~~2015.~~2016.

This increase was caused by:

$~~288~~227 million - ~~3.2%~~increase in cruise ticket revenue, driven primarily by price improvements in our Caribbean, European and Alaska programs for our North America segment and European and Caribbean programs for our EAA segment, partially offset by decreases in our China programs

$200 million - 3.7% capacity increase in ~~ALBDs;~~

~~$101 million - the accounting reclassification and~~

~~$79 million - slight increase in occupancy.~~ALBDs

These increases were partially offset byby:

$149 million - foreign currency translational impact ~~which accounted for $145 million.~~

$27 million - decrease in air transportation revenues from guests who purchased their tickets from us

The remaining ~~26%~~27% of ~~2016~~2017 total revenues were substantially all comprised of onboard and other cruise revenues, which increased by ~~$129~~$113 million, or ~~4.4%~~5.9%, to ~~$3.0~~$2.0 billion in ~~2016~~2017 from ~~$2.9~~$1.9 billion in ~~2015.~~2016.

This increase was caused by:

$9570 million - ~~3.2%~~3.7% capacity increase in ~~ALBDs;~~ALBDs

$3970 million - higher onboard spending by our guests ~~and~~

~~$26 million - slight increase in occupancy.~~

These increases were partially offset by the foreign currency translational impact, which accounted for ~~$32~~$30 million.

~~Onboard~~Concession revenues, which are included in onboard and other revenues, ~~included concession revenues that decreased~~increased slightly by $5 million to ~~$788~~$472 million in ~~2016~~2017 from ~~$823~~$467 million in ~~2015.~~2016.

North America Segment

Cruise passenger ticket revenues made up ~~73%~~71% of our North America ~~segment's 2016~~segment’s 2017 total revenues. Cruise passenger ticket revenues increased by ~~$184~~$330 million, or ~~3.4%~~10%, to ~~$5.6~~$3.5 billion in ~~2016~~2017 from ~~$5.4~~$3.2 billion in ~~2015.~~2016.

The increase was ~~driven~~caused by:

$56174 million - 5.4% capacity increase in ALBDs

$122 million - increase in cruise ticket ~~pricing, partially offset~~revenue, driven primarily by ~~unfavorable foreign currency transactional impacts;~~price improvements in the Caribbean, European and Alaska programs

$5132 million - ~~1.0~~1.1 percentage point increase in occupancy ~~and~~

~~$48 million - increase in air transportation revenues from guests who purchased their tickets from us.~~

The remaining ~~27%~~29% of our North America ~~segment's 2016~~segment’s 2017 total revenues were comprised of onboard and other cruise revenues, which increased by ~~$67~~$115 million, or ~~3.3%~~8.8%, to ~~$2.1~~$1.4 billion in ~~2016~~2017 from ~~$2.0~~$1.3 billion in ~~2015. This~~2016.

The increase was ~~driven by~~caused by:

$71 million - 5.4% capacity increase in ALBDs

$40 million - higher onboard spending by our guests

Concession revenues, which ~~accounted for $36 million.~~

~~Onboard~~are included in onboard and other revenues, ~~included concession revenues that decreased~~increased by $18 million, or 5.8%, to ~~$536~~$331 million in ~~2016~~2017 from ~~$571~~$313 million in ~~2015.~~ 2016.

EAA Segment

Cruise passenger ticket revenues made up ~~82%~~81% of our EAA ~~segment's 2016~~segment’s 2017 total revenues. Cruise passenger ticket revenues ~~increased~~decreased by ~~$155~~$79 million, or ~~4.4%~~3.6%, to ~~$3.7~~$2.1 billion in ~~2016~~2017 from ~~$3.5~~$2.2 billion in ~~2015.~~

2016.

This ~~increase~~decrease was caused by:

$~~276~~149 million - ~~7.9% capacity increase in ALBDs;~~foreign currency translational impact

$~~101 million - the accounting reclassification and~~

~~$36~~23 million - 1.0 percentage point ~~increase in occupancy.~~

~~These increases were partially offset by:~~

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

~~$76 million -~~ decrease in ~~cruise ticket pricing,~~occupancy driven primarily by ~~unfavorable foreign currency impacts and~~the China programs

$4621 million - decrease in air transportation revenues from guests who purchased their tickets from ~~us.~~us

These decreases were partially offset by:

$78 million - increase in cruise ticket revenue, driven primarily by price improvements in the Caribbean and European programs, partially offset by decreases in the China programs

$26 million - 1.2% capacity increase in ALBDs

The remaining ~~18%~~19% of our EAA ~~segment's 2016~~segment’s 2017 total revenues were comprised of onboard and other cruise revenues, which ~~increased~~slightly decreased by ~~$37~~$1 million ~~or 4.8%,~~ to ~~$813~~$513 million in ~~2016~~2017 from ~~$776~~$514 million in ~~2015.~~2016. This ~~increase~~decrease was caused by ~~a 7.9% capacity increase in ALBDs, which accounted for $61~~$30 million ~~partially offset by the~~of foreign currency translational impact, partially offset by higher onboard spending by our guests, which accounted for ~~$32~~$25 million.

~~Onboard~~Concession revenues, which are included in onboard and other revenues, ~~included concession revenues that remained at $252~~decreased by $13 million, or 8.6%, to $141 million in ~~both 2016~~2017 from and ~~2015.~~$154 million in 2016.

Costs and Expenses

Consolidated

Operating costs and expenses ~~decreased~~increased by ~~$165~~$369 million, or ~~2.3%~~8.2%, to ~~$7.1~~$4.9 billion in ~~2016~~2017 from ~~$7.2~~$4.5 billion in ~~2015.~~2016.

This ~~decrease~~increase was caused by:

$~~363~~218 million - ~~lower~~higher fuel ~~prices;~~prices

$95164 million - 3.7% capacity increase in ALBDs

$41 million - higher ship port costs

$28 million - higher cruise payroll and related expenses

$22 million - higher dry-dock expenses

These increases were partially offset by:

$105 million - foreign currency translational impact ~~and~~

$6030 million - ~~lower dry-dock expenses.~~

~~These~~decrease in air transportation costs related to the decreases ~~were partially offset by:~~

~~$230 million - 3.2% capacity increase~~ in ~~ALBDs;~~

~~$101 million - the accounting reclassification and~~

~~$25 million - slight increase in occupancy.~~revenues from guests who purchased their tickets from us

Selling and administrative expenses increased by ~~$109~~$19 million, or ~~7.3% to $1.6~~1.8%, and remained at $1.1 billion in ~~2016 from $1.5 billion in 2015.~~

~~This increase was caused by:~~

~~$80 million - various selling~~both 2017 and ~~administrative initiatives and~~

~~$49 million - 3.2% capacity increase in ALBDs.~~

~~These increases were partially offset by the foreign currency translational impact, which accounted for $19 million.~~2016.

Depreciation and amortization expenses increased by ~~$97~~$35 million, or ~~8.0%~~4.1%, to ~~$1.3 billion~~$896 million in ~~2016~~2017 from ~~$1.2 billion~~$861 million in ~~2015. This increase was due to changes in capacity and improvements to existing ships and shoreside assets.~~2016.

Total costs and expenses as a percentage of revenues decreased to 80% in 2016 from 83% in 2015. Lower fuel prices in 2016 compared to 2015 caused the three percentage point decrease in our total costs and expenses as a percentage of revenues.

North America Segment

Operating costs and expenses ~~decreased~~increased by ~~$191~~$301 million, or ~~4.3%~~11%, to ~~$4.3~~$3.0 billion in ~~2016~~2017 from ~~$4.4~~$2.7 billion in ~~2015.~~2016.

This ~~decrease~~increase was caused by:

$~~226~~145 million - ~~lower~~5.4% capacity increase in ALBDs

$140 million - higher fuel prices ~~and~~

~~$25 million - lower dry-dock expenses.~~

~~These decreases were partially offset by higher air costs, which accounted for $43 million.~~

Selling and administrative expenses increased by ~~$67~~$36 million, or ~~8.1%~~6.0%, to ~~$897~~$639 million in ~~2016~~2017 from ~~$830~~$603 million in ~~2015. This was caused by various selling and administrative initiatives, which accounted for $65 million.~~2016.

Depreciation and amortization expenses increased by ~~$53~~$40 million, or ~~7.1%~~7.7%, to ~~$791~~$559 million in ~~2016~~2017 from ~~$738~~$519 million in ~~2015. This increase was due to changes in capacity and improvements to existing ships and shoreside assets.~~2016.

Total costs and expenses as a percentage of revenues decreased to 77% in 2016 from 81% in 2015. The four percentage point decrease in our total costs and expenses as a percentage of revenues was principally due to lower fuel prices in 2016 compared to 2015.

EAA Segment

Operating costs and expenses ~~slightly decreased~~increased by ~~$22~~$57 million, ~~to $2.7~~or 3.2%, and was $1.8 billion in ~~2016 from $2.6 billion in 2015.~~both 2017 and 2016.

This ~~decrease~~increase was caused by:

$~~136~~78 million - ~~lower~~higher fuel ~~prices;~~prices

$9541 million - higher dry-dock expenses and ship repair and maintenance expenses

$23 million - higher ship port costs

$21 million - 1.2% capacity increase in ALBDs

$19 million - higher cruise payroll and related expenses

These increases were partially offset by:

$105 million - foreign currency translational ~~impact;~~impact

$5527 million - decrease in air transportation costs related to the decrease in revenues from guests who purchased their tickets from us ~~and~~

~~$33 million - lower dry-dock expenses.~~

~~These decreases were partially offset by:~~

~~$209 million - 7.9% capacity increase in ALBDs and~~

~~$101 million - the accounting reclassification.~~

Selling and administrative expenses ~~slightly increased~~decreased by $2$8 million, or 2.3%, to ~~$513~~$344 million in ~~2016~~2017 from ~~$511~~$352 million in ~~2015.~~2016.

Depreciation and amortization expenses ~~increased~~slightly decreased by ~~$33~~$3 million ~~or 8.1%,~~ to ~~$450~~$296 million in ~~2016~~2017 from ~~$417~~$299 million in ~~2015. This increase was caused by 7.9% capacity increase in ALBDs, which accounted for $33 million.~~

Total costs and expenses as a percentage of revenues decreased to 81% in 2016 from 84% in 2015. The three percentage point decrease in our total costs and expenses as a percentage of revenues was principally due to lower fuel prices in 2016 compared to 2015.2016.

Operating Income

Our consolidated operating income ~~increased~~decreased by ~~$410~~$44 million, or ~~20%~~4.8%, to ~~$2.5 billion~~$868 million in ~~2016~~2017 from ~~$2.1 billion~~$912 million in ~~2015.~~2016. Our North America segment’s operating income increased by ~~$323~~$69 million, or ~~22%~~9.6%, to ~~$1.8 billion~~$785 million in ~~2016~~2017 from ~~$1.4 billion~~$716 million in ~~2015,~~2016, and our EAA segment’s operating income ~~increased~~decreased by ~~$136~~$126 million, or ~~19%~~40%, to ~~$837~~$188 million in ~~2016~~2017 from ~~$701~~$314 million in ~~2015.~~2016. These changes were primarily due to the reasons discussed above.

Nonoperating ~~Expense~~Income (Expense)

Losses on fuel derivatives, net were comprised of the following (in millions):

Nine Months Ended August 31,

2016 2015
Unrealized gains (losses) on fuel derivatives, net $ 121
$ (215 )
Realized losses on fuel derivatives (223 ) (163 )
Losses on fuel derivatives, net $ (102 ) $ (378 )



	Six Months Ended May 31,
	2017			2016
Unrealized gains on fuel derivatives, net	$	69		$	96
Realized losses on fuel derivatives, net	(96		)	(161		)
Losses on fuel derivatives, net	$	(27	)	$	(65	)

Key Performance Non-GAAP Financial Indicators

Consolidated gross and net revenue yields were computed by dividing the gross and net cruise revenues by ALBDs as follows (dollars in millions, except yields):


	Nine Months Ended August 31,									Six Months Ended May 31,
	2016			2016 Constant Dollar			2015			2017			2017 Constant Dollar			2016

Passenger ticket revenues	$	9,217		$	9,362		$	8,891		$	5,676		$	5,825		$	5,414
Onboard and other revenues	3,047			3,080			2,918			2,014			2,044			1,901
Gross cruise revenues	12,264			12,442			11,809			7,690			7,869			7,315
Less cruise costs
Commissions, transportation and other	(1,723		)	(1,751		)	(1,671		)	(1,082		)	(1,114		)	(1,077		)
Onboard and other	(411		)	(416		)	(395		)	(253		)	(258		)	(240		)
	(2,134		)	(2,167		)	(2,066		)	(1,335		)	(1,372		)	(1,317		)
Net passenger ticket revenues	7,494			7,611			7,220			4,594			4,711			4,337
Net onboard and other revenues	2,636			2,664			2,523			1,761			1,786			1,661
Net cruise revenues	$	10,130		$	10,275		$	9,743		$	6,355		$	6,497		$	5,998
ALBDs	59,555,384			59,555,384			57,685,594			40,420,819			40,420,819			38,983,272

Gross revenue yields	$	205.94		$	208.91		$	204.72		$	190.25		$	194.68		$	187.65
% increase vs. 2015	0.6		%	2.0		%
% increase vs. 2016										1.4		%	3.7		%
Net revenue yields	$	170.10		$	172.52		$	168.91		$	157.21		$	160.74		$	153.87
% increase vs. 2015	0.7		%	2.1		%
% increase vs. 2016										2.2		%	4.5		%
Net passenger ticket revenue yields	$	125.84		$	127.80		$	125.17		$	113.65		$	116.56		$	111.25
% increase vs. 2015	0.5		%	2.1		%
% increase vs. 2016										2.2		%	4.8		%
Net onboard and other revenue yields	$	44.26		$	44.72		$	43.74		$	43.56		$	44.18		$	42.61
% increase vs. 2015	1.2		%	2.2		%
% increase vs. 2016										2.2		%	3.7		%


	Nine Months Ended August 31,								Six Months Ended May 31,
	2016			2016 Constant Currency			2015		2017			2017 Constant Currency			2016
Net passenger ticket revenues	$	7,494		$	7,778		$	7,220	$	4,594		$	4,716		$	4,337
Net onboard and other revenues	2,636			2,672			2,523		1,761			1,778			1,661
Net cruise revenues	$	10,130		$	10,450		$	9,743	$	6,355		$	6,494		$	5,998
ALBDs	59,555,384			59,555,384			57,685,594		40,420,819			40,420,819			38,983,272

Net revenue yields	$	170.10		$	175.46		$	168.91	$	157.21		$	160.65		$	153.87
% increase vs. 2015	0.7		%	3.9		%
% increase vs. 2016									2.2		%	4.4		%
Net passenger ticket revenue yields	$	125.84		$	130.60		$	125.17	$	113.65		$	116.68		$	111.25
% increase vs. 2015	0.5		%	4.3		%
% increase vs. 2016									2.2		%	4.9		%
Net onboard and other revenue yields	$	44.26		$	44.86		$	43.74	$	43.56		$	43.98		$	42.61
% increase vs. 2015	1.2		%	2.6		%
% increase vs. 2016									2.2		%	3.2		%

Nine Months Ended August 31,
2016 2016
Constant
Dollar 2015
Cruise operating expenses $ 6,939
$ 7,034
$ 7,100

Cruise selling and administrative expenses 1,606
1,626
1,497

Gross cruise costs 8,545
8,660
8,597

Less cruise costs included above
     Commissions, transportation and other (1,723 ) (1,751 ) (1,671 )
     Onboard and other (411 ) (416 ) (395 )
     Gain on ship sale 2
2
6

     Restructuring expenses (2 ) (2 ) (21 )
     Other (a) (39 ) (39 ) —

Net cruise costs 6,372
6,454
6,516

Less fuel (648 ) (648 ) (996 )
Net cruise costs excluding fuel $ 5,724
$ 5,806
$ 5,520

ALBDs 59,555,384
59,555,384
57,685,594

Gross cruise costs per ALBD $ 143.50
$ 145.42
$ 149.03

% decrease vs. 2015 (3.7 )% (2.4 )%

   Net cruise costs per ALBD $ 106.99
$ 108.37
$ 112.96

   % decrease vs. 2015 (5.3 )% (4.1 )%

   Net cruise costs excluding fuel per ALBD $ 96.10
$ 97.48
$ 95.70

   % increase vs. 2015 0.4 % 1.9 %

~~(a) Insignificant costs were included in the income statement in previous periods.~~



	Six Months Ended May 31,
	2017			2017 Constant Dollar			2016
Cruise operating expenses	$	4,824		$	4,929		$	4,460
Cruise selling and administrative expenses	1,094			1,117			1,079
Gross cruise costs	5,918			6,046			5,539
Less cruise costs included above
Commissions, transportation and other	(1,082		)	(1,114		)	(1,077		)
Onboard and other	(253		)	(258		)	(240		)
Gain on ship sale	4			4			2
Restructuring expenses	—			—			(2		)
Other	—			—			(21		)
Net cruise costs	4,587			4,678			4,201
Less fuel	(607		)	(607		)	(383		)
Net cruise costs excluding fuel	$	3,980		$	4,071		$	3,818
ALBDs	40,420,819			40,420,819			38,983,272

Gross cruise costs per ALBD	$	146.42		$	149.57		$	142.08
% increase vs. 2016	3.1		%	5.3		%
Net cruise costs excluding fuel per ALBD	$	98.46		$	100.71		$	97.93
% increase vs. 2016	0.5		%	2.8		%


	Nine Months Ended August 31,								Six Months Ended May 31,
	2016			2016 Constant Currency			2015		2017			2017 Constant Currency			2016
Net cruise costs excluding fuel	$	5,724		$	5,793		$	5,520	$	3,980		$	4,051		$	3,818
ALBDs	59,555,384			59,555,384			57,685,594		40,420,819			40,420,819			38,983,272

Net cruise costs excluding fuel per ALBD	$	96.10		$	97.27		$	95.70	$	98.46		$	100.23		$	97.93
% increase vs. 2015	0.4		%	1.6		%
% increase vs. 2016									0.5		%	2.3		%

Adjusted fully diluted earnings per share was computed as follows (in millions, except per share data):

Nine Months Ended
August 31,
2016 2015
Net income
     U.S. GAAP net income $ 2,171
$ 1,487

     Unrealized (gains) losses on fuel derivatives, net (121 ) 215

     Gain on ship sale (2 ) (6 )
     Restructuring expenses 2
21

     Other (a) 39
—

     Adjusted net income $ 2,089
$ 1,717

Weighted-average shares outstanding 754
781

Earnings per share

     U.S. GAAP earnings per share $ 2.88
$ 1.91

     Unrealized (gains) losses on fuel derivatives, net (0.16 ) 0.27

     Gain on ship sale —
(0.01 )
     Restructuring expenses —
0.03

     Other 0.05
—

     Adjusted earnings per share $ 2.77
$ 2.20

~~(a) Insignificant costs were included in the income statement in previous periods.~~



	Six Months Ended
	May 31,
	2017			2016
Net income
U.S. GAAP net income	$	730		$	747
Unrealized (gains) losses on fuel derivatives, net	(69		)	(96		)
(Gain) on ship sale	(4		)	(2		)
Restructuring expenses	—			2
Other	—			21
Adjusted net income	$	657		$	672
Weighted-average shares outstanding	727			761

Earnings per share
U.S. GAAP earnings per share	$	1.00		$	0.98
Unrealized (gains) losses on fuel derivatives, net	(0.10		)	(0.13		)
(Gain) on ship sale	—			—
Restructuring expenses	—			—
Other	—			0.03
Adjusted earnings per share	$	0.90		$	0.88

Net cruise revenues increased by ~~$387~~$357 million, or ~~4.0%~~6.0%, to ~~$10.1~~$6.4 billion in ~~2016~~2017 from ~~$9.7~~$6.0 billion in ~~2015.~~2016.

The increase in net cruise revenues was caused by:

$~~390~~275 million - ~~3.9%~~4.4% increase in constant currency net revenue yields ~~and~~

$~~316~~221 million - ~~3.2%~~3.7% capacity increase in ~~ALBDs.~~ALBDs

These increases were partially offset by foreign currency impacts (including both the foreign currency translational and transactional impacts), which accounted for ~~$319~~$140 million.

The ~~3.9%~~4.4% increase in net revenue yields on a constant currency basis was due to a ~~4.3%~~4.9% increase in net passenger ticket revenue yields and a ~~2.6%~~3.2% increase in net onboard and other revenue yields.

The ~~4.3%~~4.9% increase in net passenger ticket revenue yields was driven primarily by price improvements in our Caribbean, European and ~~Alaskan~~Alaska programs for our North America segment and European and Caribbean programs for our EAA segment, ~~and 1.1 percentage points of this yield increase resulted from the accounting reclassification.~~partially offset by decreases in our China programs. This ~~4.3%~~4.9% increase in net passenger ticket revenue yields was comprised of a ~~5.5%~~4.9% increase from our North America segment and a ~~3.2%~~4.0% increase from our EAA segment.

The ~~2.6%~~3.2% increase in net onboard and other revenue yields was caused by ~~a 3.7% increase from~~similar increases in our North America ~~segment~~ and ~~a 1.0% increase from our~~ EAA ~~segment.~~segments.

Gross cruise revenues increased by ~~$455~~$375 million, or ~~3.9%~~5.1%, to ~~$12.3~~$7.7 billion in 2017 from $7.3 billion in 2016 ~~from $11.8 billion in 2015~~ for largely the same reasons as discussed above.

Net cruise costs excluding fuel increased by ~~$204~~$162 million, or ~~3.7%~~4.2%, to ~~$5.7~~$4.0 billion in ~~2016~~2017 from ~~$5.5~~$3.8 billion in ~~2015.~~2016.

The increase in net cruise costs excluding fuel was caused ~~by a 3.2%~~by:

$141 million - 3.7% capacity increase in ALBDs ~~which accounted for $179~~

$93 million - 2.3% increase in constant currency net cruise costs excluding fuel

These increases were partially offset by foreign currency impacts (including both the foreign currency translational and transactional impacts), which accounted for ~~$70~~$72 million.

~~The 1.6% increase in constant currency net~~Net cruise costs excluding fuel per ALBD ~~was principally due to higher repair and maintenance and dry-dock partially offset~~increased by ~~a 1.4 percentage point increase that resulted from the accounting reclassification.~~2.3%.

Fuel costs ~~decreased~~increased by ~~$348~~$224 million, or ~~35%~~58%, to ~~$648~~$607 million in ~~2016~~2017 from ~~$996~~$383 million in ~~2015.~~2016. This was ~~caused~~driven by ~~lower~~higher fuel prices, which accounted for ~~$363 million, partially offset by a 3.2% capacity increase in ALBDs, which accounted for $32~~$218 million.

Gross cruise costs ~~slightly~~ decreased by ~~$52~~$379 million, or 6.8%, to ~~$8.5~~$5.9 billion in 2017 from $5.5 billion in 2016 ~~from 8.6 billion in 2015~~ for ~~principally~~largely the same reasons as discussed above.

Liquidity, Financial Condition and Capital Resources

Our primary financial goals are to profitably grow our cruise business and increase our return on invested capital (“ROIC”), reaching double digit returns, ~~within the next two years,~~ while maintaining a strong balance sheet and strong investment grade credit ratings. We define ROIC as the twelve month adjusted earnings before interest divided by the monthly average of debt plus equity minus construction-in-progress. Our ability to generate significant operating cash ~~flows~~flow allows us to internally fund our capital investments. We are committed to returning free cash flow to 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 and strong investment grade credit ratings.~~metrics. This will allow us to return both free cash ~~flows~~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 that is spread out over a number of years.~~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 us with the ability, in most financial credit market environments, to obtain debt financing. Our future operating cash flows and our ability to issue debt can be adversely impacted by numerous factors outside our control including, but not limited to, some of those noted under “Cautionary Note Concerning Factors That May Affect Future Results.” If our long-term senior unsecured credit ratings were to be downgraded or assigned a negative outlook, our access to and cost of debt financing may be negatively impacted.

~~At August 31, 2016, we~~

We had a working capital deficit of ~~$5.5 billion. This deficit included $3.6~~$7.3 billion as of current customer deposits, which represent the passenger revenues already collected for cruises departing over the next twelve months and, accordingly, are substantially more like deferred revenue balances rather than actual current cash liabilities. Our AugustMay 31, ~~2016~~2017 compared to a working capital deficit ~~also included $1.0~~of $5.4 billion as of current debt obligations. We continue to generate significant cash from operations and have a strong balance sheet. This strong balance sheet provides us with the ability to refinance our current debt obligations before, or as they become due,November 30, 2016. The increase in most financial credit market environments. We also have our revolving credit facilities available to provide long-term rollover financing should the need arise, or if we choose to do so. After excluding current customer deposits and current debt obligations from our August 31, 2016 working capital deficit balance, our adjusted working capital deficit was ~~$0.9 billion. Our~~mainly due to the increase in customer deposits and our net current portion of our borrowings. We operate with a substantial working capital deficit. This deficit is mainly attributable to the fact that, under our business model, ~~along~~a vast majority of our passenger ticket receipts are collected in advance of the applicable sailing date. These advance passenger receipts 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 ~~strong balance sheet~~borrowings and ~~unsecured revolving credit facilities, allows~~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 investments or any other use of cash. Included within our working capital deficit are $4.8 billion and $3.5 billion of customer deposits as of May 31, 2017 and November 30, 2016, respectively. 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 ~~operate with a~~maintain this working capital deficit and still meet our operating, investing and financing needs. We ~~believe~~expect that we will continue to have working capital deficits ~~for~~in the ~~foreseeable~~ future.

At November 30, 2015, the U.S. dollar was $1.50 to sterling, $1.06 to the euro and $0.72 to the Australian dollar. Had these November 30, 2015 currency exchange rates been used to translate our August 31, 2016 non-U.S. dollar functional currency operations’ assets and liabilities instead of the August 31, 2016 U.S. dollar exchange rates of $1.31 to sterling, $1.12 to the euro and $0.76 to the Australian dollar, our total assets would have been higher by $99 million and our total liabilities would have been lower by $256 million.

Sources and Uses of Cash

Operating Activities

Our business provided ~~$4.1~~$2.8 billion of net cash from operations during the ~~nine~~six months ended ~~August~~May 31, ~~2016,~~2017, an increase of ~~$543 million,~~$0.2 billion, or ~~15%~~6%, compared to ~~$3.6~~$2.7 billion for the same period in ~~2015.~~2016. This increase was caused by ~~more cash being provided from~~an increase in our ~~operating results.~~customer deposits.

Investing Activities

During the ~~nine~~six months ended ~~August~~May 31, 2017, net cash used in investing activities was $1.9 billion. This was substantially due to:

Capital expenditures of $945 million for our ongoing new shipbuilding program

Capital expenditures of $955 million for ship improvements and replacements, information technology, buildings and improvements and other assets

Payments of $99 million of fuel derivative settlements

During the six months ended May 31, 2016, net cash used in investing activities was ~~$2.6~~$2.2 billion. This was comprised of:

~~Our~~Capital expenditures ~~for capital projects,~~ of ~~which $1.5~~$1.4 billion ~~was spent on~~for our ongoing new shipbuilding program ~~substantially for~~ ~~AIDAprima,~~ ~~net of liquidated damages,and Holland America Line's~~ ~~Koningsdam~~ ~~and~~ ~~Carnival Vista~~;

Capital expenditures of ~~$657~~$590 million for ship improvements and ~~replacements;~~

~~Capital expenditures of $257 million for~~replacements, information technology, buildings and improvements and other ~~assets;~~assets

~~Payment of $231~~$170 million of fuel derivative settlements ~~and~~

~~Payment of $22~~$25 million of collateral to one of our fuel derivative ~~counterparties.~~counterparties

~~During the nine months ended August 31, 2015, net cash used in investing activities was $1.8 billion. This was caused by:~~

~~Our expenditures for capital projects, of which $728 million was spent on our ongoing new shipbuilding program, primarily for P&O Cruises (UK)'s~~ ~~Britannia~~;

~~Capital expenditures of $790 million for ship improvements and replacements;~~

~~Capital expenditures of $187 million for information technology, buildings and improvements and other assets;~~

~~Cash installments of $25 million from the sales of~~ ~~Ocean Princess~~, ~~Seabourn Legend~~ ~~and~~ ~~Seabourn Spirit~~ ~~and~~

~~$139 million of fuel derivative settlements.~~

Financing Activities

During the ~~nine~~six months ended ~~August~~May 31, ~~2016,~~2017, net cash used in financing activities of ~~$2.4 billion~~$935 million was substantially due to the following:

~~borrowed $301 million of~~Net proceeds from short-term borrowings ~~net~~ of ~~repayments,~~$182 million in connection with our availability of, and needs for, cash at various times throughout the ~~period;~~period

~~repaid $971~~Repayments of $907 million of long-term ~~debt;~~debt

~~issued~~Issuances of $100 million of long-term debt under a term loan

Proceeds of $367 million of long-term debt under an export credit facility

Payments of cash dividends of $507 million

Purchases of $152 million of Carnival plc ordinary shares in open market transactions under our Repurchase Program

During the six months ended May 31, 2016, net cash used in financing activities of $1.4 billion was substantially due to the following:

Net proceeds from short-term borrowings of $379 million in connection with our availability of, and needs for, cash at various times throughout the period

Repayments of $869 million of long-term debt

Issuances of $555 million of euro-denominated publicly-traded notes, which net proceeds ~~were~~are being used for general corporate ~~purposes;~~purposes

~~borrowed~~Proceeds of $379 million of long-term debt under an export credit ~~facility;~~facility

~~borrowed $110 million~~Payments of ~~long-term debt under euro-denominated bank loans;~~

~~paid~~ cash dividends of ~~$721 million;~~$459 million

~~purchased $2.1~~Purchases of $1.4 billion of shares of Carnival Corporation common stock in open market transactions of which ~~$2.1~~$1.4 billion were repurchased under our Repurchase Program and $39 million were repurchased under our Stock Swap ~~and~~Programs

~~sold~~Sales of $40 million of treasury stock under our Stock Swap ~~program.~~

~~During the nine months ended August 31, 2015, net cash used in financing activities of $1.5 billion was substantially due to the following:~~

~~repaid a net $625 million of short-term borrowings in connection with our availability of, and needs for, cash at various times throughout the period;~~

~~repaid $772 million of long-term debt;~~

~~borrowed $472 million of long-term debt under an export credit facility;~~

~~paid cash dividends of $584 million;~~

~~purchased $166 million shares of Carnival Corporation common stock in open market transactions under our Stock Swap and Repurchase~~ Programs ~~and~~

~~sold $167 million of treasury stock under our Stock Swap program.~~

Future Commitments and Funding Sources

Our contractual cash obligations as of August 31, 2016 have changed compared to November 30, 2015 primarily as a result of our debt borrowings and repayments and new ship payments as noted above under “Sources and Uses of Cash.” In addition, during the nine months ended August 31, 2016, we finalized the agreement with Italian shipbuilder, Fincantieri S.p.A, for the construction of Princess Cruises 3,560-passenger capacity Royal-class vessel to be delivered in 2020. Furthermore, on September 5, 2016, we signed a Memorandum of Agreement ("MOA") with German and Finnish shipbuilders, Meyer Werft and Meyer Turku, that will add a total of three new cruise ships to our fleet through 2022. This MOA is consistent with our long-term strategy of measured capacity growth over time and is subject to several conditions, including obtaining satisfactory financing.

~~As of August 31, 2016, our~~ total annual capital expenditures consist of ships under contract for construction ~~including the three ships ordered under the MOA,~~entered into through June 23, 2017, and estimated improvements to existing ships and shoreside assets and are expected to be ~~$1.0 billion for the remainder of 2016, $3.1 billion in 2017, $3.7 billion in 2018, $4.5 billion in 2019, $4.4 billion in 2020, $2.9 billion in 2021 and $2.0 billion in 2022.~~(in billions):



	2017		2018		2019		2020		2021		2022
Total annual capital expenditures	$	3.0	$	3.8	$	4.8	$	4.6	$	3.6	$	2.8

The year-over-year percentage ~~increase in our capacity is currently expected to be 4.5% for the 2016 fourth quarter. The year-over-year percentage increase~~increases in our annual capacity ~~is currently expected to be 3.6% in 2016, 2.6% in 2017, 3.0% in 2018, 5.3% in 2019, 8.0% in 2020, 5.5% in 2021 and 2.8% in 2022. These percentage increases~~ are expected to result primarily from contracted new ships entering service ~~including the three ships ordered under the MOA,~~ and ~~exclude any unannounced future~~are currently expected to be:



	2017		2018		2019		2020		2021		2022
Annual capacity increase (a)	3.0	%	2.5	%	5.6	%	8.2	%	6.4	%	3.3	%

(a) These percentage increases include only contracted ship orders, ~~acquisitions, retirements, charters or sales.~~sales and other dispositions.

At ~~August~~May 31, ~~2016,~~2017, we had liquidity of ~~$10.8~~$11.9 billion. Our liquidity consisted of ~~$220~~$348 million of cash and cash equivalents, which excludes ~~$242~~$249 million of cash ~~on hand, $2.9~~used for current operations, $2.3 billion available for borrowing under our revolving credit ~~and bank loan~~ facilities, net of our outstanding commercial paper borrowings, and ~~$7.7~~$9.3 billion under our committed future financings, which are ~~substantially~~ comprised of ship export credit facilities. Of this $7.7 billion, $0.9 billion is available for funding in 2017, $2.0 billion in 2018, $2.5 billion in 2019 and $2.3 billion in 2020. At August 31, 2016, all of our revolving credit facilities are scheduled to mature in 2021, except for $300 million that matures in 2020. These commitments are from numerous large and well-established banks and export credit agencies, which we believe will honor their contractual agreements with us. The committed future financing will be available as follows (in millions):



	2018		2019		2020		2021		2022
Availability of committed future financing at May 31, 2017	$	1,957	$	2,548	$	2,266	$	1,689	$	875

At May 31, 2017, all of our revolving credit facilities are scheduled to mature in 2021, except for $300 million that matures in 2020.

Substantially all of our debt agreements contain financial covenants as described in Note 6 - “Unsecured Debt” in the annual consolidated financial statements, which is included within our ~~2015~~ Form 10-K. At ~~August~~May 31, ~~2016,~~2017, we were in compliance with

our 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 4 - “Fair Value Measurements, Derivative Instruments and Hedging Activities” 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

We have foreign operations that have functional currencies other than the U.S. dollar, which result in foreign currency translational impacts. We execute transactions in a number of currencies other than their functional currencies, which result in foreign currency transactional impacts. Based on a 10% change in all currency exchange rates that were used in our June 22, 2017 guidance, we estimate that our adjusted diluted earnings per share June 22, 2017 guidance would change by the following:

$0.14 per share for the remaining two quarters of 2017

$0.09 per share for the third quarter of 2017

Interest Rate Risks

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



	May 31, 2017		November 30, 2016
Fixed rate	29	%	28	%
Euro fixed rate	35	%	35	%
Floating rate	7	%	14	%
Euro floating rate	26	%	23	%
GBP floating rate	3	%	—	%

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 June 22, 2017 guidance, we estimate that our adjusted diluted earnings per share June 22, 2017 guidance would change by the following:

$0.08 per share for the remaining two quarters of 2017

$0.04 per share for the third quarter of 2017

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 June 22, 2017 guidance, we estimate that our adjusted diluted earnings per share June 22, 2017 guidance would change by the following:

$0.03 per share for the remaining two quarters of 2017

$0.01 per share for the third quarter of 2017

At May 31, 2017, the unrealized losses on our outstanding fuel derivative contracts were $252 million.

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 May 31, 2017, 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 May 31, 2017 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

As previously disclosed, in 2015, the Alaska Department of Environmental Conservation issued Notices of Violations to all of the major cruise lines who had operated in the state of Alaska, including Carnival Cruise Line, Holland America Line and Princess Cruises, for alleged violations of the Alaska Marine Vessel Visible Emission Standards. On May 22, 2017, Holland America Line and Princess Cruises entered into settlement agreements settling all claims. Carnival Cruise Line settled its claims on August 6, 2016.

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 is conducting an investigation. We believe the ultimate outcome will not have a material impact on our consolidated financial statements.

Item 1A. Risk Factors.

The risk factors that affect our business and financial results are discussed in “Item 1A. Risk Factors,” included in the 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 the risk factors discussed in “Item 1A. Risk Factors,” included in the Form 10-K, and those described elsewhere in this report or other Securities and Exchange Commission filings, could cause future results to differ materially from those stated in any forward-looking statements. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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

A. Repurchase Program

Under a share repurchase program effective 2004, we are authorized to repurchase Carnival Corporation common stock and Carnival plc ordinary shares (the “Repurchase Program”). On April 6, 2017, the Boards of Directors 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 and may be discontinued by our Boards of Directors at any time.

No shares of Carnival Corporation common stock were repurchased pursuant to the Repurchase Program during the three months ended May 31, 2017. During this period, repurchases of Carnival plc ordinary shares pursuant to the Repurchase Program were as follows:



Period	Total Number of Shares of Carnival plc Purchased	Average Price Paid per Share of Carnival plc		Maximum Dollar Value of Shares That May Yet Be Purchased Under the Repurchase Program
	(in millions)			(in millions)
March 1, 2017 through March 31, 2017	1.1	$	55.75	$	266
April 1, 2017 through April 30, 2017	0.4	$	57.18	$	989
May 1, 2017 through May 31, 2017	—	$	—	$	989
Total	1.5	$	56.14

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

B. Stock Swap Programs

In addition to the Repurchase Program, we also 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 Corporation common stock is trading at a discount to Carnival plc ordinary shares (the “Stock Swap Programs”). For example:

In the event that Carnival Corporation common stock trades at a premium to Carnival plc ordinary shares, we may from time to time elect to issue and sell shares of Carnival Corporation common stock through a sales agent, at prevailing market prices in ordinary brokers’ transactions, and use the sale proceeds to repurchase Carnival plc ordinary shares in the UK market on an equivalent basis.

In the event that Carnival Corporation common stock trades at a discount to Carnival plc ordinary shares, we may from time to time elect to sell ordinary shares of Carnival plc, with such sales made by Carnival Corporation or Carnival Investments Limited (“CIL”) through its sales agent, at prevailing market prices in ordinary brokers’ transactions, and use the sale proceeds to repurchase shares of Carnival Corporation common stock in the U.S. market on an equivalent basis.

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 issue and 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. We had 22.0 million shares remaining under this authorization at May 31, 2017.

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. We had 26.0 million shares remaining under this authorization at May 31, 2017.

During the three months ended May 31, 2017, no Carnival Corporation common stock or Carnival plc ordinary shares were sold or repurchased under the Stock Swap Programs. Any sales of Carnival Corporation shares and Carnival plc ordinary shares have been or will be registered under the Securities Act of 1933.

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 million ordinary shares and is valid until the earlier of the conclusion of the Carnival plc 2018 annual general meeting or July 4, 2018. At May 31, 2017, the remaining Carnival plc availability under the Repurchase Program and the Stock Swap Programs was 21.4 million ordinary shares.

Item 6. Exhibits.



INDEX TO EXHIBITS

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

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	Employment Contract dated April 21, 2017 between Carnival plc and Michael Olaf Thamm.	8-K	10.1	4/27/2017
10.2	Form of Non-Employee Director Restricted Stock Award Agreement for the Carnival Corporation 2011 Stock Plan.				X
10.3	Form of Performance-Based Restricted Share 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



INDEX TO EXHIBITS

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

Articles of incorporation and by-laws
Interactive Data File

101	The consolidated financial statements from Carnival Corporation & plc’s joint Quarterly Report on Form 10-Q for the quarter ended May 31, 2017, as filed with the Securities and Exchange Commission on June 30, 2017, formatted in XBRL, are as follows:
	(i) the Consolidated Statements of Income for the three and six months ended May 31, 2017 and 2016;				X
	(ii) the Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended May 31, 2017 and 2016;				X
	(iii) the Consolidated Balance Sheets at May 31, 2017 and November 30, 2016;				X
	(iv) the Consolidated Statements of Cash Flows for the six months ended May 31, 2017 and 2016 and				X
	(v) the notes to the consolidated financial statements, tagged in summary and detail.				X




*	These items are furnished and not filed.

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:/s/ Arnold W. Donald		By:/s/ Arnold W. Donald
Arnold W. Donald		Arnold W. Donald
President and Chief Executive Officer		President and Chief Executive Officer

By:/s/ David Bernstein		By:/s/ David Bernstein
David Bernstein		David Bernstein
Chief Financial Officer and Chief Accounting Officer		Chief Financial Officer and Chief Accounting Officer

Date: ~~October 5, 2016~~June 30, 2017		Date: ~~October 5, 2016~~June 30, 2017



		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	39

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 6.	Exhibits	41

SIGNATURES		43



	Three Months Ended
	August 31,
	2016			2015
Net income
U.S. GAAP net income	$	1,424		$	1,216
Unrealized (gains) losses on fuel derivatives, net	(25		)	137
Gain on ship sale	—			(2		)
Restructuring expenses	—			14
Other (a)	18			—
Adjusted net income	$	1,417		$	1,365
Weighted-average shares outstanding	739			781

Earnings per share
U.S. GAAP earnings per share	$	1.93		$	1.56
Unrealized (gains) on fuel derivatives, net	(0.03		)	0.17
Gain on ship sale	—			—
Restructuring expenses	—			0.02
Other (a)	0.02			—
Adjusted earnings per share	$	1.92		$	1.75



	Nine Months Ended
	August 31,
	2016			2015
Net income
U.S. GAAP net income	$	2,171		$	1,487
Unrealized (gains) losses on fuel derivatives, net	(121		)	215
Gain on ship sale	(2		)	(6		)
Restructuring expenses	2			21
Other (a)	39			—
Adjusted net income	$	2,089		$	1,717
Weighted-average shares outstanding	754			781

Earnings per share
U.S. GAAP earnings per share	$	2.88		$	1.91
Unrealized (gains) losses on fuel derivatives, net	(0.16		)	0.27
Gain on ship sale	—			(0.01		)
Restructuring expenses	—			0.03
Other	0.05			—
Adjusted earnings per share	$	2.77		$	2.20