What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-07-10 compared with 2020-04-03 · 367 added, 162 removed, 398 unchanged (57% of the section changed)

3 unchanged sentences

(in millions, except per share data)

Three Months Ended

February 29/28,

Three Months Ended May 31, Six Months Ended

2020 2019 2020 2019

Passenger ticket $ 446 $ 3,257 $ 3,680 $ 6,456

Onboard and other 294 1,580 1,849 3,054

740 4,838 5,529 9,511

Operating Costs and Expenses

2 unchanged sentences

Payroll and related 705 566 1,315 1,123

Fuel 201 423 598 804

Food 108 269 385 538

Ship and other impairments 589 — 919 —

Other operating 471 803 1,142 1,562

2,484 3,159 6,007 6,301

Selling and administrative 492 621 1,170 1,250

1 unchanged sentence

Goodwill impairment 1,364 — 2,096 —

4,918 4,323 10,420 8,609

Operating Income (Loss) ( 4,177 ) 515 ( 4,891 ) 902

5 unchanged sentences

Income (Loss) Before Income Taxes ( 4,385 ) 459 ( 5,155 ) 797

Income Tax Expense, Net ( 11 ) ( 2 )

Income Tax Benefit (Expense), Net 11 ( 8 ) — ( 10 )

Net Income (Loss) $ ( 4,374 ) $ 451 $ ( 5,155 ) $ 787

6 unchanged sentences

(in millions)

Three Months Ended

February 29/28,

Three Months Ended May 31, Six Months Ended

2020 2019 2020 2019

Net Income (Loss) $ ( 4,374 ) $ 451 $ ( 5,155 ) $ 787

1 unchanged sentence

Change in foreign currency translation adjustment 23 ( 194 ) 48 ( 114 )

Other 43 ( 13 ) 56 ( 13 )

Other Comprehensive Income (Loss) 65 ( 207 ) 103 ( 127 )

4 unchanged sentences

(in millions, except par values)

February 29, 2020 November 30, 2019

2020 November 30, 2019

Current Assets

41 unchanged sentences

(in millions)

Three Months Ended

February 29/28,

Six Months Ended

OPERATING ACTIVITIES

4 unchanged sentences

Share-based compensation 38 27

Other, net ( 73 ) 12

Gain on ship sales and other, net 56 7

( 900 ) 1,883

Changes in operating assets and liabilities

5 unchanged sentences

Customer deposits ( 1,987 ) 1,516

Net cash provided by operating activities 916 1,116

Net cash provided by (used in) operating activities ( 1,804 ) 3,169

INVESTING ACTIVITIES

2 unchanged sentences

Payments of fuel derivative settlements — ( 6 )

Other, net ( 61 ) 76

Purchase of minority interest ( 81 ) —

Derivative settlements and other, net 257 103

Net cash provided by (used in) investing activities ( 1,256 ) ( 2,918 )

5 unchanged sentences

Purchases of treasury stock ( 12 ) ( 316 )

Issuance of common stock, net 558 2

Other, net ( 56 ) ( 45 )

8 unchanged sentences

(in millions)

Three Months Ended

stock Ordinary

3 unchanged sentences

stock Total shareholders’ equity

At February 28, 2019 $ 7 $ 358 $ 8,776 $ 25,033 $ ( 1,869 ) $ ( 8,063 ) $ 24,241

Net income (loss) — — — 451 — — 451

Other comprehensive income (loss) — — — — ( 207 ) — ( 207 )

Cash dividends declared ($ 0.50 per share)

— — — ( 346 ) — — ( 346 )

Purchases of treasury stock under the Repurchase Program and other — — 9 — — ( 41 ) ( 32 )

At May 31, 2019 $ 7 $ 358 $ 8,785 $ 25,138 $ ( 2,076 ) $ ( 8,104 ) $ 24,108

At February 29, 2020 $ 7 $ 358 $ 8,829 $ 25,527 $ ( 2,028 ) $ ( 8,404 ) $ 24,290

Net income (loss) — — — ( 4,374 ) — — ( 4,374 )

Other comprehensive income (loss) — — — — 65 — 65

Issuance of common stock through underwritten public offering (net of offering expenses and underwriters’ discount) 1 — 555 — — — 556

Equity component of Convertible Senior Notes — — 286 — — — 286

Purchases of treasury stock under the Repurchase Program and other — 2 12 2 — — 16

At May 31, 2020 $ 7 $ 360 $ 9,683 $ 21,155 $ ( 1,962 ) $ ( 8,404 ) $ 20,840

Six Months Ended

stock Ordinary

shares Additional

capital Retained

earnings AOCI Treasury

shareholders’

At November 30, 2018 $ 7 $ 358 $ 8,756 $ 25,066 $ ( 1,949 ) $ ( 7,795 ) $ 24,443

5 unchanged sentences

Purchases of treasury stock under the Repurchase Program and other — — 29 — — ( 310 ) ( 280 )

At February 28, 2019 $ 7 $ 358 $ 8,776 $ 25,033 $ ( 1,869 ) $ ( 8,063 ) $ 24,241

At May 31, 2019 $ 7 $ 358 $ 8,785 $ 25,138 $ ( 2,076 ) $ ( 8,104 ) $ 24,108

At November 30, 2019 $ 7 $ 358 $ 8,807 $ 26,653 $ ( 2,066 ) $ ( 8,394 ) $ 25,365

3 unchanged sentences

— — — ( 342 ) — — ( 342 )

Issuance of common stock through underwritten public offering (net of offering expenses and underwriters’ discount) 1 — 555 — — — 556

Equity component of Convertible Senior Notes — — 286 — — — 286

Purchases of treasury stock under the Repurchase Program and other — 2 35 — — ( 10 ) 27

At February 29, 2020 $ 7 $ 359 $ 8,829 $ 25,527 $ ( 2,028 ) $ ( 8,404 ) $ 24,290

At May 31, 2020 $ 7 $ 360 $ 9,683 $ 21,155 $ ( 1,962 ) $ ( 8,404 ) $ 20,840

(a) We adopted the provisions of Revenue from Contracts with Customers and Derivatives and Hedging on December 1, 2018.

6 unchanged sentences

Liquidity and Management’s Plans

Due to the spread of COVID-19 and the effects of growing port restrictions around the world, we previously announced a voluntary pause of our global fleet cruise operations.

Due to the spread of COVID-19, we previously announced a pause of our global cruise operations.

Significant events affecting travel, including COVID-19, typically have an impact on booking patterns, with the full extent of the impact generally determined by the length of time the event influences travel decisions.

We believe the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have a material negative impact on our financial results and liquidity, and such negative impact may continue well beyond the containment of such outbreak.

We cannot assure you that our assumptions used to estimate our liquidity requirements will be correct because we have never previously experienced a complete cessation of our cruising operations, and as a consequence, our ability to be predictive is uncertain.

In addition, the magnitude, duration and speed of the global pandemic is uncertain.

As a consequence, we cannot estimate the impact on our business, financial condition or near- or longer-term financial or operational results with reasonable certainty, but we expect a net loss on both a U.S.

GAAP and adjusted basis for the fiscal year ending November 30, 2020.

On March 13, 2020, we fully drew down our $ 3.0 billion multi-currency revolving credit facility (the “Existing Multicurrency Facility”).

We are taking further actions to improve our liquidity, including capital expenditure and operating expense reductions, suspending dividend payments on, and the repurchase of, the common stock of Carnival Corporation and the ordinary shares of Carnival plc and pursuing additional financing.

Based on these actions and assumptions regarding the impact of COVID-19, we have concluded that we will be able to generate sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants for the next twelve months prior to giving effect to any additional financing that may occur.

At February 29, 2020, we were in compliance with all of our debt covenants.

After considering the effect of COVID-19 on our consolidated EBITDA, the actions we have taken and the other options available to us, we expect to remain in compliance with our current minimum debt service coverage ratio in certain of our debt instruments that requires a minimum of 3 :1 ratio of EBITDA to Consolidated Net Interest Charges.

If we expected to be out of compliance, we would seek waivers from the lenders prior to any covenant violation.

Any covenant waiver may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable.

There can be no assurance that we would be able to obtain waivers in a timely manner, or on acceptable terms at all.

If we were not able to obtain waivers or repay the debt facilities, this would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contract payables.

As a result, the failure to obtain waivers would have a material adverse effect on us.

On April 1, 2020, we announced the pricing of the private offerings of $ 4.0 billion first-priority senior secured notes due 2023 (“Secured Notes”) and $ 1.75 billion senior convertible notes due 2023 ($ 2.0125 billion if the initial purchasers exercise their option to purchase additional notes) (“Convertible Notes”), and a public offering of $ 500 million of common stock ($ 575 million if the underwriters exercise their option to purchase additional shares in full) of Carnival Corporation (“Public Equity Offering”), collectively referred to within this document as the “April 1 financing transactions”.

The closings of these offerings are subject to customary conditions and are expected to occur in early April.

The net proceeds from the offering of Secured Notes will be deposited in to a segregated escrow account, pending the releases in accordance with certain collateral perfection thresholds.

We believe that the effects of COVID-19 on our operations and global bookings will continue to have a material negative impact on our financial results and liquidity, and such negative impact may continue well beyond the containment of such outbreak.

We cannot assure you that our assumptions used to estimate our liquidity requirements will be correct because we have never previously experienced a complete cessation of our guest cruise operations, and as a consequence, our ability to be predictive is uncertain.

In addition, the magnitude, duration and speed of the global pandemic are uncertain.

GAAP and adjusted basis for the second half of 2020.

We have taken and continue to take actions to improve our liquidity, including capital expenditure and operating expense reductions, suspending dividend payments on, and the repurchase of, common stock of Carnival Corporation and ordinary shares of Carnival plc and pursuing various financing transactions.

In May 2020, we announced a combination of layoffs, furloughs and salary reductions across the company, including senior management.

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

Basis of Presentation

The Consolidated Statements of Income (Loss), the Consolidated Statements of Comprehensive Income (Loss), the Consolidated Statements of Cash Flows and the Consolidated Statements of Shareholders’ Equity for the three months ended February 29/28, 2020 and 2019, and the Consolidated Balance Sheet at February 29, 2020 are unaudited and, in the opinion of our management, contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement.

Our interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Carnival Corporation & plc 2019 joint Annual Report on Form 10-K (“Form 10-K”) filed with the U.S.

Securities and Exchange Commission on January 28, 2020.

Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire year.

For the three months ended February 28, 2019, we reclassified $ 29 million from tour and other revenues to onboard and other revenues as well as $ 29 million from tour and other costs and expenses to other operating cost and expenses in order to conform to the current year presentation.

The Consolidated Statements of Income (Loss), the Consolidated Statements of Comprehensive Income (Loss), the Consolidated Statements of Cash Flows and the Consolidated Statements of Shareholders’ Equity for the three and six months ended May 31, 2020 and 2019, and the Consolidated Balance Sheet at May 31, 2020 are unaudited and, in the opinion of our management, contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement.

Securities and Exchange Commission on January 28, 2020 and March 31, 2020, respectively.

For the three and six months ended May 31, 2019, we reclassified $ 71 million and $ 99 million from tour and other revenues to onboard and other revenues as well as $ 61 million and $ 90 million from tour and other costs and expenses to other operating cost and expenses in order to conform to the current year presentation.

COVID-19 Use of Estimates and Risks and Uncertainty

The preparation of our interim consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) requires management to make estimates and assumptions that affect the amounts reported and disclosed.

The full extent to which the effects of COVID-19 will directly or indirectly impact our business, operations, results of operations and financial condition, including our valuation of goodwill and trademarks, impairment of ships, collectability of trade and notes receivables as well as provisions for pending litigation, will depend on future developments that are highly uncertain.

We believe that we have made reasonable estimates and judgments of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods.

Accounting Pronouncements

17 unchanged sentences

NOTE 2 – Revenue and Expense Recognition

Guest cruise deposits represent unearned revenues and are initially included in customer deposit liabilities when received.

Guest cruise deposits are initially included in customer deposit liabilities when received.

Customer deposits are subsequently recognized as cruise revenues, together with revenues from onboard and other activities, and all associated direct costs and expenses of a voyage are recognized as cruise costs and expenses, upon completion of voyages with durations of ten nights or less and on a pro rata basis for voyages in excess of ten nights.

The impact of recognizing these shorter duration cruise revenues and costs and expenses on a completed voyage basis versus on a pro rata basis is not significant.

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

Future travel discount vouchers are included as a reduction of cruise passenger ticket revenues when such vouchers are utilized.

Guest cancellation fees are recognized in cruise passenger ticket revenues at the time of cancellation.

Our sale to guests of air and other transportation to and from airports near the home ports of our ships are included in passenger ticket revenues, and the related cost of purchasing these services are included in transportation costs.

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

Guest cancellation fees, when applicable, are recognized in cruise passenger ticket revenues at the time of cancellation.

Our sales to guests of air and other transportation to and from airports near the home ports of our ships are included in passenger ticket revenues, and the related costs of purchasing these services are included in transportation costs.

The proceeds that we collect from the sales of third-party shore excursions are included in onboard and other revenues and the related costs are included in onboard and other costs.

3 unchanged sentences

A portion of these fees, taxes and charges vary with guest head counts and are directly imposed on a revenue-producing arrangement.

This portion of the fees,

taxes and charges is expensed in commissions, transportation and other costs when the corresponding revenues are recognized.

For the three months ended February 29/28, fees, taxes and charges included in commissions, transportation and other costs were $ 174 million in 2020 and $ 163 million and in 2019.

This portion of the fees, taxes and charges is expensed in commissions, transportation and other costs when the corresponding revenues are recognized.

For the three and six months ended May 31, fees, taxes and charges included in commissions, transportation and other costs were $ 41 million and $ 215 million in 2020 and $ 154 million and $ 317 million in 2019.

The remaining portion of fees, taxes and charges are expensed in other operating expenses when the corresponding revenues are recognized.

5 unchanged sentences

These amounts include refundable deposits.

We had customer deposits of $ 4.9 billion as of February 29, 2020 and November 30, 2019.

During the three months ended February 28/29, 2020 and 2019, we recognized revenues of $ 3.0 billion related to our customer deposits as of November 30, 2019 and December 1, 2018.

Our customer deposits balance changes due to the seasonal nature of cash collections, the recognition of revenue, refund of customer deposits and foreign currency translation.

We are providing flexibility to guests with bookings on sailings cancelled due to the pause in cruise operations by allowing guests to receive enhanced future cruise credits ("FCC") or elect to receive refunds in cash.

We expect to be required to pay cash refunds of customer deposits with respect to a portion of these cancelled cruises.

The amount of cash refunds to be paid may depend on the length of the pause and level of guest acceptance of FCCs.

We record a liability for FCCs to the extent we have received cash from guests with bookings on cancelled sailings.

We had customer deposits of $ 2.9 billion as of May 31, 2020 and $ 4.9 billion as of November 30, 2019.

The current portion of our customer deposits was $ 2.6 billion as of May 31, 2020.

These amounts include deposits related to cancelled cruises prior to the election of a cash refund by guests.

Refunds payable to guests who have elected cash refunds are recorded in accounts payable.

Due to the uncertainty associated with the duration and extent of COVID-19, we are unable to estimate the amount of the May 31, 2020 customer deposits that will be recognized in earnings compared to amounts that will be refunded to customers or issued as a credit for future travel .

During the six months ended May 31, 2020 and 2019, we recognized revenues of $ 3.5 billion and $ 3.7 billion related to our customer deposits as of November 30, 2019 and December 1, 2018.

Historically, our customer deposits balance changes due to the seasonal nature of cash collections, the recognition of revenue, refund of customer deposits and foreign currency translation.

Contract Receivables

3 unchanged sentences

Contract Assets

Contract assets are amounts paid prior to the start of a voyage, which we record as an asset within prepaid expenses and other and which are subsequently recognized as commissions, transportation and other at the time of revenue recognition.

We have contract assets of $ 134 million and $ 154 million as of February 29, 2020 and December 1, 2019.

NOTE 3 – Unsecured Debt

At February 29, 2020, our short-term borrowings consisted of euro-denominated commercial paper of $ 1.0 billion.

For the three months ended February 29/28, 2020 and 2019, there were no borrowings or repayments of commercial paper with original maturities greater than three months.

We have contract assets of $ 9 million and $ 154 million as of May 31, 2020 and December 1, 2019.

NOTE 3 – Debt

At May 31, 2020, our short-term borrowings consisted primarily of $ 3.0 billion borrowing under our multicurrency revolving credit facility (the “Revolving Facility”), $ 467 million commercial paper, $ 58 million euro-denominated commercial paper and $ 31 million sterling-denominated commercial paper.

For the six months ended May 31, 2020, we had borrowings of $ 525 million and no repayments of commercial paper with original maturities greater than three months.

For the six months ended May 31, 2019, there were no borrowings or repayments of commercial paper with original maturities greater than three months.

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

2023 Secured Notes

In April 2020, we issued $ 4.0 billion aggregate principal amount of 11.5 % first-priority senior secured notes due in 2023 (the “2023 Secured Notes”).

The 2023 Secured Notes mature on April 1, 2023 unless earlier redeemed or repurchased.

They are guaranteed by Carnival plc and certain of our subsidiaries that own or operate our vessels and material intellectual property, and are secured by collateral, which includes vessels and intellectual property with a net book value of $ 28.3 billion as of May 31, 2020 and certain other assets.

Prior to January 1, 2023, we may redeem the 2023 Secured Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount, plus a “make-whole” premium and accrued and unpaid interest to the redemption date.

On or after January 1, 2023, we may redeem the 2023 Secured Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount, plus accrued and unpaid interest to the redemption date.

We may also redeem the 2023 Secured Notes, in whole but not in part, at a redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest to the redemption date, if Carnival Corporation or any guarantor would have to pay any additional amounts on the 2023 Secured Notes due to a change in tax laws, regulations or rulings or a change in the official application, administration or interpretation thereof.

Upon the occurrence of certain change of control events, we are required to offer to repurchase the 2023 Secured Notes at a price equal to 101 % of the principal amount, plus accrued and unpaid interest to the purchase date.

The indenture governing the 2023 Secured Notes contains covenants that limit our ability to, among other things:

(i) incur additional indebtedness or issue certain preferred shares;

(ii) make dividend payments on or make other distributions in respect of our capital stock or make other restricted payments;

(iii) make certain investments;

(iv) sell certain assets;

(v) create liens on assets;

(vi) consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

and (vii) enter into certain transactions with our affiliates.

These covenants are subject to a number of important limitations and exceptions.

Convertible Notes

In April 2020, we issued $ 2.0 billion aggregate principal amount of 5.75 % convertible senior notes due 2023 (the “Convertible Notes”).

The Convertible Notes mature on April 1, 2023, unless earlier repurchased or redeemed by us or earlier converted in accordance with their terms prior to the maturity date.

The Convertible Notes are guaranteed on a senior unsecured basis by Carnival plc and our subsidiaries that guarantee the 2023 Secured Notes.

The Convertible Notes are convertible by holders, subject to the conditions described below, into cash, shares of our common stock, or a combination thereof, at our election.

The Convertible Notes have an initial conversion rate of 100 shares of our common stock per $ 1,000 principal amount of the Convertible Notes, equivalent to an initial conversion price of $ 10 per share of common stock.

The initial conversion price is subject to certain anti-dilutive adjustments and may also increase if the Convertible Notes are converted in connection with a tax redemption or certain corporate events.

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

• during any fiscal quarter commencing after the fiscal quarter ended on May 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

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

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

• upon the occurrence of specified corporate events.

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

As of May 31, 2020, the conditions allowing holders of the Convertible Notes to convert have not been met and therefore the Convertible Notes are not yet convertible.

Subsequent to May 31, 2020, the holders are entitled to convert all or any portion of their Convertible Notes at any time during the calendar quarter starting on July 1, 2020 and ending on September 30, 2020, at the conversion rate of 100 shares of common stock per $ 1,000 principal amount of Convertible Notes.

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

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

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

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

We account for the Convertible Notes as separate liability and equity components.

We determined the carrying amount of the liability component as the present value of its cash flows.

The carrying amount of the equity component representing the conversion option was $ 286 million and was calculated by deducting the carrying value of the liability component from the initial proceeds from the Convertible Notes.

The excess of the principal amount of the Convertible Notes over the carrying amount of the liability component represents a debt discount that is amortized to interest expense over the term of the Convertible Notes under the effective interest rate method using an effective

interest rate of 12.9 %.

The equity component is not re-measured as long as it continues to meet the conditions for equity classification.

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

(in millions) May 31, 2020

Principal $ 2,013

Unamortized debt discount and transaction costs ( 333 )

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

(in millions) Three and Six Months ended May 31, 2020

Contractual interest expense $ 17

Amortization of debt discount and transaction costs 15

Modifications

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

Refer to Note 11 - "Subsequent Events" for a discussion of events that occurred subsequent to February 29, 2020 .

In April 2020, we amended and extended a $ 166 million euro-denominated fixed rate bank loan, originally maturing in September 2020, to a floating rate loan maturing in March 2021.

Certain export credit agencies have offered 12-month debt amortization and a financial covenant holiday ("Debt Holiday").

We entered into supplemental agreements or side letters for Debt Holiday amendments to defer certain principal repayments otherwise due through March 31, 2021 through the creation of separate tranches of loans under the facilities with repayments made over the following four years.

Debt Covenant Compliance

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

• Maintain minimum debt service coverage

• Maintain minimum shareholders' equity

• Limit our debt to capital ratio

• Limit the amounts of our secured and other indebtedness

At May 31, 2020, we were in compliance with all of our debt covenants.

Under the terms of certain of our debt facilities, we are required to maintain minimum debt service coverage (EBITDA to consolidated net interest charges for the most recently ended four fiscal quarters) of not less than 3.0 to 1.0 at the end of each fiscal quarter.

We have entered into supplemental agreements or side letters to amend our agreements with respect to this covenant to:

• Waive compliance, in conjunction with the Debt Holiday, for our export credit facilities through March 31, 2021, August 31, 2021 or December 31, 2021, as applicable.

We will be required to comply beginning with the next testing date of May 31, 2021, November 30, 2021 or February 28, 2022, respectively.

• Waive compliance through November 30, 2021 for certain of our bank loans.

We will be required to comply beginning with the next testing date of February 28, 2022.

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

Any covenant waiver may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections that would be applicable.

There can be no assurance that we would be able to obtain additional waivers in a timely manner, or on acceptable terms at all.

If we were not able to obtain additional waivers or repay the debt facilities, this

would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contract payables.

As a result, the failure to obtain the additional waivers would have a material adverse effect on us.

Secured Term Loan Facility

In June 2020, we borrowed an aggregate principal amount of $ 2.8 billion in two tranches ($ 1.9 billion and € 800 million), under a first-priority senior secured term loan facility that matures on June 30, 2025 (the "Secured Term Loan Facility").

dollar tranche bears interest at a rate per annum equal to adjusted LIBOR (with a 1 % floor) plus 7.5 %.

The euro tranche bears interest at a rate per annum equal to EURIBOR (with a 0 % floor) plus 7.5 %.

Both tranches of the Secured Term Loan Facility are prepayable, in whole or in part, at our option at a price equal to the face value plus a customary make-whole amount for the first year after closing, 102 % of the face value for the second year after closing and par thereafter.

The Secured Term Loan Facility is guaranteed by Carnival plc and the same subsidiaries that currently guarantee, and is secured on a first-priority basis by the same collateral that currently secures, the 2023 Secured Notes.

The Secured Term Loan Facility contains covenants that are substantially similar to the covenants in the indenture governing the 2023 Secured Notes.

These covenants are subject to a number of important limitations and exceptions.

Credit Ratings Update

In March and April 2020, Moody’s and S&P Global downgraded our long-term issuer, senior secured and senior unsecured debt ratings.

Our short-term commercial paper credit ratings were also downgraded.

In May and June 2020, Moody's and S&P Global further downgraded our long-term issuer rating and our short-term rating, which prevents us from issuing additional commercial paper except for government-backed programs.

In addition, our long-term ratings were placed on review for further downgrade by both rating agencies.

NOTE 4 – Contingencies

On May 2, 2019, two lawsuits were filed against Carnival Corporation in the U.S.

We are routinely involved in legal proceedings, claims, disputes, regulatory matters and governmental inspections or investigations arising in the ordinary course of or incidental to our business, including those noted below in this section.

Additionally, as a result of the impact of COVID-19, litigation claims, enforcement actions, regulatory actions and investigations, including, but not limited to, those arising from personal injury and loss of life, have been and may, in the future, be asserted against us.

The existing assertions are in their initial stages.

We expect many of these claims and actions, or any settlement of these claims and actions, to be covered by insurance and historically the maximum amount of our liability, net of any insurance recoverables, has been limited to our self-insurance retention levels.

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

Legal proceedings and government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur.

Unfavorable resolutions could involve substantial monetary damages.

In addition, in matters for which conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices or requiring other remedies.

An unfavorable outcome might result in a material adverse impact on our business, results of operations, financial position or liquidity.

As previously disclosed, on May 2, 2019, an action was filed against Carnival Corporation in the U.S.

District Court for the Southern District of Florida under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act.

The complaint filed by Havana Docks Corporation alleges it holds an interest in the Havana Cruise Port Terminal and the complaint filed by Javier Garcia-Bengochea alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban Government.

The complaints further allege that Carnival Cruise Line “trafficked” in those properties by embarking and disembarking passengers at these facilities.

The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs.

The court denied our motion to dismiss the complaint filed by Javier Garcia-Bengochea, on August 26, 2019.

While on August 28, 2019, the court denied our motion to dismiss the complaint filed by Havana Docks Corporation, later on January 6, 2020, it dismissed virtually identical cases brought by Havana Docks Corporation against other cruise lines, on the grounds raised in our motion to dismiss.

In doing so, the court explicitly reversed its position on the issue and acknowledged the conflict with our case.

Therefore, on January 6, 2020, we asked the court to formally dismiss the Havana Docks Corporation complaint.

We believe we have meritorious defenses to the claims and we intend to vigorously defend against them.

We do not believe that it is likely that the outcome of these matters will be material, but litigation is inherently unpredictable and there can be no assurances that the final outcome of the case might not be material to our operating results or financial condition.

Additionally, in the normal course of our business, various claims and lawsuits have been filed or are pending against us.

Most of these claims and lawsuits, or any settlement of claims and lawsuits, are covered by insurance and the maximum amount of our liability, net of any insurance recoverables, is typically limited to our self-insurance retention levels.

We believe the ultimate outcome of these claims, lawsuits and settlements, as applicable, each and in the aggregate, will not have a material impact on our consolidated financial statements.

On April 17, 2020, the court reversed its dismissal of the virtually identical cases brought by Havana Docks Corporation against other cruise lines, and at that time, denied our pending motion for reconsideration on our prior motion to dismiss and allowed the plaintiff to file an amended complaint.

As a result, on April 27, 2020, we filed a motion seeking leave to appeal.

On May 18, 2020, we filed a motion to dismiss the plaintiff’s amended complaint and the briefing is now complete.

On June 26, 2020, the court denied our motion seeking leave to appeal and denied our motion to stay discovery for 90 days.

Contingent Obligations – Indemnifications

2 unchanged sentences

There are no stated or notional amounts included in the indemnification clauses, and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses.

Other Contingencies

We have agreements with a number of credit card processors that transact customer deposits related to our cruise vacations.

Certain of these agreements allow the credit card processors to request under certain circumstances that we provide a reserve fund in cash.

Although the agreements vary, these requirements may generally be satisfied either through a withheld percentage of customer payments or providing cash funds directly to the card processor.

As of May 31, 2020, we have been requested to provide reserve funds of $ 27 million and have had $ 14 million of customer deposits withheld to satisfy these requirements.

We expect the funds withheld under these agreements will be approximately $ 80 million per month up to a maximum of $ 600 million.

COVID-19 Actions

Class Actions

On April 7, 2020, Paul Turner, a former guest from Costa Luminosa, filed a purported class action against Costa Crociere, S.p.A.

(“Costa”) and Costa Cruise Line, Inc.

District Court for the Southern District of Florida seeking compensation based on alleged severe emotional distress associated with being exposed to COVID-19 onboard and/or alleged physical injuries and severe emotional distress associated with contracting COVID-19 onboard.

The action asserts claims for negligence, negligent infliction of emotional distress, intentional infliction of emotional distress, misleading advertising in violation of Florida Statute § 817.41, and negligent misrepresentation.

On April 8, 2020, numerous former guests from Grand Princess filed a purported class action against Carnival Corporation & plc and two of our subsidiaries, Princess Cruise Lines Ltd.

(“Princess”) and Fairline Shipping International Corporation, Ltd.

(“Fairline”), seeking compensation based on alleged severe emotional distress associated with being exposed to COVID-19 onboard, contracting COVID-19 onboard, and/or contracting COVID-19 while onboard and subsequently passing away as a result of COVID-19.

The complaint asserts claims for negligence and gross negligence.

This action was originally filed in the U.S.

District Court for the Northern District of California, however, on May 4, 2020, the parties entered into a stipulation, which was approved by the court on May 5, 2020, that the case be transferred to the U.S.

District Court for the Central District of California pursuant to the terms of the plaintiffs’ ticket contracts.

Following the transfer, the plaintiffs filed a First Amended Complaint on June 2, 2020 that named Carnival Corporation and Carnival plc as defendants in place of Carnival Corporation & plc and removed Fairline as a defendant, and also added claims for negligent and intentional infliction of emotional distress.

On May 27, 2020, Service Lamp Corporation Profit Sharing Plan filed a purported class action in the U.S.

District Court for the Southern District of Florida against Carnival Corporation, Arnold W.

Donald and David Bernstein on behalf of all purchasers of Carnival Corporation securities between January 28 and May 1, 2020.

On June 3, 2020, John P.

Elmensdorp filed a purported class action in the U.S.

District Court for the Southern District of Florida against the same defendants, and adding Micky Arison as a defendant.

This action is on behalf of all purchasers of Carnival Corporation securities between September 26, 2019 and April 30, 2020.

These complaints allege that the defendants violated Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 by making misrepresentations and omissions related to Carnival Corporation’s COVID-19 knowledge and response, and seek to recover unspecified damages and equitable relief for the alleged misstatements and omissions.

On June 4, 2020, another group of former guests from Grand Princess filed a purported class action against Carnival Corporation, Carnival plc, and Princess in the U.S.

District Court for the Central District of California, seeking compensation based on the same factual theories presented in the class actions described above.

The action asserts claims for negligence, gross negligence, negligent infliction of emotional distress and intentional infliction of emotional distress.

On June 4, 2020, Gregory Eicher, a former guest from Grand Princess filed a purported class action against Princess in the U.S.

District Court for the Central District of California, seeking compensation based on alleged severe emotional distress associated with being exposed to COVID-19 onboard and/or alleged physical injuries and severe emotional distress associated with contracting COVID-19 onboard.

The action asserts claims for negligence, negligent infliction of emotional distress and intentional infliction of emotional distress.

On June 4, 2020, numerous former guests from Ruby Princess filed a purported class action against Princess in the U.S.

The action asserts claims for negligence, negligent infliction of emotional distress, and intentional infliction of emotional distress.

On June 24, 2020, Leonard C.

Lindsay and Carl E.W.

Zehner, former guests from Zaandam filed a purported class action in the U.S.

District Court for the Western District of Washington at Seattle against Carnival Corporation, Carnival plc, Holland America Line, Inc., and Holland American Line – U.S.A., Inc.

seeking compensation based on alleged serious personal injury and emotional distress, for those contracting COVID-19 and those claiming exposure to COVID-19.

The action asserts claims for negligence, gross negligence, negligent infliction of emotional distress and intentional infliction of emotional distress.

This case also seeks injunctive relief in the form of certain disclosures to passengers and medical monitoring.

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

Individual Actions

Between March 9, 2020 and July 7, 2020, more than 100 former U.S.

guests who sailed onboard various vessels, including, but not limited to, Diamond Princess , Grand Princess , or Ruby Princess, filed individual actions against Princess, and in some actions also against Carnival Corporation and/or Carnival plc in the U.S.

District Court for the Central District of California.

On June 11, 2020, a former guest who sailed onboard Coral Princess filed an action against Princess, Carnival Corporation and Carnival plc in the Superior Court of California, County of Los Angeles.

These lawsuits include tort claims based on a variety of theories, including but not limited to negligence and failure to warn.

The plaintiffs in these cases allege a variety of injuries:

some plaintiffs allege only emotional distress, while others allege injuries arising from testing positive for COVID-19.

A smaller number of cases include wrongful death claims.

The defendants will respond to each of these complaints individually.

Motions to dismiss were filed on June 2, 2020 in the individual actions against Princess that allege emotional distress associated with exposure to COVID-19 while onboard.

In addition, between April 7, 2020 and July 7, 2020, four former U.S.

guests from Costa Luminosa filed individual actions against Costa in the U.S.

District Court for the Southern District of Florida or the Circuit Court in and for the 11 th Judicial Circuit in and for Miami-Dade County.

These plaintiffs seek compensation on factual allegations similar to those presented by the former U.S.

guests who have filed the purported class actions described above.

The defendants will respond to each of these complaints individually.

On June 16, 2020, Patricia Vickers, on behalf of the Estate of Jessie Vickers, a former guest from Carnival Ecstasy , filed an action against Carnival Corporation in the U.S.

District Court for the Southern District of Georgia seeking compensation based on a claim alleging wrongful death as a result of contracting COVID-19.

The action asserts a claim for negligence.

On June 30, 2020, Kenneth and Nora Hook, former guests from Zaandam , filed an action against Holland America Line N.V.

District Court for the Western District of Washington at Seattle seeking compensation in the form of economic and non-economic damages relating to Mr.

Hook contracting COVID-19 and punitive damages.

The action asserts a claim for negligence.

These individual actions seek monetary and punitive damages but do not specify exact amounts.

We are taking proper actions to defend against them.

Governmental Inquiries and Investigations

Federal, state and non-U.S.

governmental agencies and officials are investigating or otherwise seeking information, testimony and/or documents, regarding COVID-19 incidents and related matters, including, but not limited to, those noted below.

We are investigating these matters internally and are cooperating with all requests.

The investigations could result in the imposition of civil and criminal penalties in the future.

In March and April, 2020, there were several inquiries or investigations initiated by foreign governmental authorities related to Ruby Princess , including authorities in Australia and New Zealand.

In May 2020, we received requests for information from the U.S.

House of Representatives Transportation and Infrastructure Committee and the Senate Committee on Commerce, Science, and Transportation related to COVID-19 matters.

In April 2020, the Federal Maritime Commission announced that it would lead a fact finding investigation to identify commercial measures passengers cruise lines can adopt to mitigate COVID-19 related impacts.

NOTE 5 – Fair Value Measurements, Derivative Instruments and Hedging Activities and Financial Risks

8 unchanged sentences

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

February 29, 2020 November 30, 2019

May 31, 2020 November 30, 2019

Value Fair Value Carrying

13 unchanged sentences

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

February 29, 2020 November 30, 2019

May 31, 2020 November 30, 2019

(in millions) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

7 unchanged sentences

Valuation of Goodwill and Trademarks

As a result of the effect of COVID-19 on our expected future operating cash flows, we performed discounted cash flow analyses and determined that the estimated fair values of a North America & Australia (“NAA”) segment reporting unit, and a Europe & Asia (“EA”) segment reporting unit, no longer exceeded their carrying values.

We recognized goodwill impairment charges of $ 731 million for these reporting units during the first quarter of 2020.

As a result of the effect of COVID-19 on our expected future operating cash flows, we performed interim discounted cash flow analyses for certain reporting units with goodwill as of February 29, 2020 and for all reporting units with goodwill as of May 31, 2020.

During the six months ended May 31, 2020, we determined that the estimated fair values of two of our North America & Australia (“NAA”) segment reporting units and two of our Europe & Asia (“EA”) segment reporting units no longer exceeded their carrying values.

We recognized goodwill impairment charges of $ 1.4 billion and $ 2.1 billion during the three and six months ended May 31, 2020, respectively and have no remaining goodwill for those reporting units.

We also performed trademark impairment reviews and determined there was no impairment to our trademarks.

The determination of our reporting units' goodwill and trademark fair values includes numerous assumptions that are subject to various risks and uncertainties.

2 unchanged sentences

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

• Weighted-average cost of capital of market participants, adjusted for the risk attributable to the geographic regions in

which these cruise brands operate

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

We believe that we have made reasonable estimates and judgments.

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

Refer to Note 11 - "Subsequent Events" for a discussion of events that occurred subsequent to February 29, 2020 .

Refer to Note 1 - "General, COVID-19 Use of Estimates and Risks and Uncertainty" for additional discussion.

(in millions) NAA

3 unchanged sentences

Foreign currency translation adjustment — ( 26 ) ( 26 )

At February 29, 2020 $ 1,598 $ 578 $ 2,176

At May 31, 2020 $ 579 $ 211 $ 790

(in millions) NAA

2 unchanged sentences

Foreign currency translation adjustment — ( 6 ) ( 6 )

At February 29, 2020 $ 927 $ 240 $ 1,167

At May 31, 2020 $ 927 $ 234 $ 1,162

Impairment of Ships

1 unchanged sentence

As a result of the effect of COVID-19 on our expected future operating cash flows, we determined certain impairment triggers had occurred.

Accordingly, we performed undiscounted cash flow analyses on certain ships as of February 29, 2020.

Accordingly, we performed undiscounted cash flow analyses on some ships in our fleet as of February 29, 2020 and May 31, 2020.

Based on these undiscounted cash flow analyses, we determined that certain ships had net carrying values that exceeded their estimated undiscounted future cash flows.

We estimated the February 29, 2020 fair values of these ships based on their discounted cash flows.

We then compared these estimated fair values to the net carrying values and, as a result, we recognized $ 172 million and $ 158 million of ship impairment charges in the NAA and EA segments, respectively, included in other operating expenses of our Consolidated Statements of Income (Loss) for the first quarter of 2020.

The principal assumptions used in our analyses consisted of changes in strategy (including decisions about the sale of ships, estimated sale proceeds and timing, as well as the transfer of ships between brands), forecasted future operating results, including net revenue yields and fuel expenses.

We estimated the fair values of these ships based on their discounted cash flows or estimated selling value.

We then compared these estimated fair values to the net carrying values and, as a result, we recognized the following ship impairment charges:

• $ 348 million and $ 150 million of ship impairment charges in the NAA and EA segments, respectively for the three months ended May 31, 2020.

• $ 520 million and $ 308 million of ship impairment charges in the NAA and EA segments, respectively for the six months ended May 31, 2020.

The principal assumptions used in our analyses consisted of changes in strategy (including decisions about the sale of ships, estimated sale proceeds and timing, as well as the transfer of ships between brands), return to service, forecasted future operating results, including net revenue yields and fuel expenses.

All principal assumptions are considered Level 3 inputs.

Refer to Note 1 - "General, COVID-19 Use of Estimates and Risks and Uncertainty" for additional discussion.

Derivative Instruments and Hedging Activities

(in millions) Balance Sheet Location February 29, 2020 November 30, 2019

(in millions) Balance Sheet Location May 31, 2020 November 30, 2019

Derivative assets

2 unchanged sentences

Other assets — 25

Foreign currency forwards (b) Prepaid expenses and other 14 —

Total derivative assets $ — $ 58

7 unchanged sentences

Total derivative liabilities $ 12 $ 25

(a) At February 29, 2020 and November 30, 2019, we had cross currency swaps totaling $ 1.9 billion, respectively, that are designated as hedges of our net investment in foreign operations with a euro-denominated functional currency.

At February 29, 2020, these cross currency swaps settle through 2031.

(b) At February 29, 2020, we had foreign currency derivatives consisting of foreign currency zero cost collars and foreign currency forwards that are designated as foreign currency cash flow hedges for a portion of our euro-denominated shipbuilding payments.

(a) At May 31, 2020, we had no cross currency swaps.

At November 30, 2019, we had cross currency swaps totaling $ 1.9 billion that were designated as hedges of our net investment in foreign operations with a euro-denominated functional currency.

(b) At May 31, 2020 and November 30, 2019, we had foreign currency derivatives consisting of foreign currency zero cost collars designated as foreign currency cash flow hedges for a portion of our euro-denominated shipbuilding payments.

See “Newbuild Currency Risks” below for additional information regarding these derivatives.

(c) We have interest rate swaps designated as cash flow hedges whereby we receive floating interest rate payments in exchange for making fixed interest rate payments.

These interest rate swap agreements effectively changed $ 288 million at February 29, 2020 and $ 300 million at November 30, 2019 of EURIBOR-based floating rate euro debt to fixed rate euro debt.

At February 29, 2020, these interest rate swaps settle through 2025.

These interest rate swap agreements effectively changed $ 266 million at May 31, 2020 and $ 300 million at November 30, 2019 of EURIBOR-based floating rate euro debt to fixed rate euro debt.

At May 31, 2020, these interest rate swaps settle through 2025.

Our derivative contracts include rights of offset with our counterparties.

We have elected to net certain of our derivative assets and liabilities within counterparties.

February 29, 2020

(in millions) Gross Amounts Gross Amounts Offset in the Balance Sheet Total Net Amounts Presented in the Balance Sheet Gross Amounts not Offset in the Balance Sheet Net Amounts

6 unchanged sentences

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

Three Months Ended

February 29/28,

Three Months Ended May 31, Six Months Ended

(in millions) 2020 2019 2020 2019

10 unchanged sentences

The amount of estimated cash flow hedges’ unrealized gains and losses that are expected to be reclassified to earnings in the next twelve months is not significant.

Refer to Note 11 - "Subsequent Events" for a discussion of derivative transactions that occurred subsequent to February 29, 2020 .

Financial Risks

3 unchanged sentences

We manage fuel consumption through ship maintenance practices, modifying our itineraries and implementing innovative technologies.

We are also adding new, more fuel efficient ships to our fleet and are strategically disposing of smaller, less fuel efficient ships.

Foreign Currency Exchange Rate Risks

12 unchanged sentences

We partially mitigate the currency exposure of our investments in foreign operations by designating a portion of our foreign currency debt and derivatives as hedges of these investments.

As of February 29, 2020, we have designated $ 852 million of our sterling-denominated debt as non-derivative hedges of our net investments in foreign operations and for the three months ended February 29, 2020, we recognized $ 2 million of gains on these non-derivative net investment hedges in the cumulative translation adjustment section of other comprehensive income (loss).

We also have $ 8.2 billion of euro-denominated debt,

including the effect of cross currency swaps, which provides an economic offset for our operations with euro functional currency.

As of May 31, 2020, we have designated $ 816 million of our sterling-denominated debt as non-derivative hedges of our net investments in foreign operations and for the three and six months ended May 31, 2020, we recognized $ 36 million and $ 38 million of gains on these non-derivative net investment hedges in the cumulative translation adjustment section of other comprehensive income (loss).

We also have $ 5.3 billion of euro-denominated debt, which provides an economic offset for our operations with euro functional currency.

Newbuild Currency Risks

2 unchanged sentences

We use foreign currency derivative contracts to manage foreign currency exchange rate risk for some of our ship construction payments.

At February 29, 2020, for the following newbuilds, we had foreign currency contracts for a portion of our euro-denominated shipyard payments.

At May 31, 2020, for the following newbuilds, we had foreign currency contracts for a portion of our euro-denominated shipyard payments.

These contracts are designated as cash flow hedges.

Entered Into Matures In Weighted-Average Floor Rate Weighted- Average Ceiling Rate Weighted-Average Forward Rate

Entered Into Matures In Weighted-Average Floor Rate Weighted- Average Ceiling Rate

Foreign currency zero cost collars

1 unchanged sentence

Mardi Gras 2019 October 2020 $ 1.05 $ 1.28

Foreign currency forwards

Iona 2020 May 2020 £ 0.85

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

At February 29, 2020, our remaining newbuild currency exchange rate risk primarily relates to euro-denominated newbuild contract payments to non-euro functional currency brands, which represent a total unhedged commitment of $ 6.4 billion for newbuilds scheduled to be delivered from 2020 through 2025.

At May 31, 2020, our remaining newbuild currency exchange rate risk primarily relates to euro-denominated newbuild contract payments to non-euro functional currency brands, which represent a total unhedged commitment of $ 7.3 billion for newbuilds scheduled to be delivered from 2020 through 2025.

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

10 unchanged sentences

• 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

At February 29, 2020, our exposures under derivative instruments were not material.

At May 31, 2020, our exposures under derivative instruments were not material.

We also monitor the creditworthiness of travel agencies and tour operators in Asia, Australia and Europe, which includes charter-hire agreements in Asia and credit and debit card providers to which we extend credit in the normal course of our business.

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 trade receivables and other receivables, charter-hire agreements and contingent obligations are not considered to be material, principally due to the large number of unrelated accounts, the nature of these contingent obligations and their short maturities.

We have not historically experienced significant credit losses on our trade receivables, notes receivables, charter-hire agreements and contingent obligations.

Because of the impact the COVID-19 outbreak is having on economies, we could experience an increase in future credit losses.

We have not normally required collateral or other security to support normal credit sales.

Normally, we have not required collateral or other security to support normal credit sales.

Historically, we have not experienced significant credit losses, including counterparty nonperformance.

Because of the impact COVID-19 is having on economies, we have experienced, and expect to continue to experience, an increase in credit losses.

NOTE 6 – Leases

Substantially all of our leases for which we are the lessee are operating leases of port facilities and real estate and are included within operating lease right-of-use assets, long-term operating lease liabilities and current portion of operating lease liabilities in our Consolidated Balance Sheet as of February 29, 2020.

We have port facilities and real estate lease agreements with lease and non-lease components, and in such cases, we account for the components as a single lease component.

4 unchanged sentences

We apply judgment in estimating the IBR including considering the term of the lease, the currency in which the lease is denominated, and the impact of collateral and our credit risk on the rate.

For leases that were in place upon adoption, we used the remaining lease term as of December 1, 2019 in determining the IBR.

For leases that were in place upon adoption of Leases , we used the remaining lease term as of December 1, 2019 in determining the IBR.

For the initial measurement of the lease liabilities for leases commencing after December 1, 2019, the IBR at the lease commencement date was applied.

We amortize our lease assets on a straight-line basis over the lease term.

During the quarter ended February 29, 2020, we recognized $ 17 million of operating lease costs, including lease amortization and imputed interest, related to all of our leases other than the port facilities, as operating lease expense.

The components of expense were as follows:

(in millions) Three months ended May 31, 2020 Six months ended May 31, 2020

Operating lease expense $ 55 $ 103

Variable lease expense (a) (b) $ ( 21 ) $ 10

(a) Variable lease expense represents costs associated with our multi-year preferential berthing agreements which vary based on the number of passengers.

These costs are recorded within commission, transportation and other in our Consolidated Statements of Income (Loss).

Variable and short-term lease costs related to operating leases, other than the port facilities, were not material to our consolidated financial statements.

We have multi-year preferential berthing agreements which are operating leases.

During the quarter ended February 29, 2020, we had $ 30 million of lease asset amortization expense and imputed interest expense and $ 31 million of variable port costs, which vary based on the number of passengers, recorded within commission, transportation and other in our Consolidated Statements of Income (Loss).

We have multiple agreements, with a total undiscounted minimum commitment of approximately $ 454 million, that have been executed but the lease term has not commenced as of February 29, 2020.

(b) Several of our preferential berthing agreements have Force Majeure provisions.

We have treated the concessions granted under such provision as variable payment adjustments.

If our interpretation of the Force Majeure provisions is disputed, we could be required to record and make additional guarantee payments.

We have multiple agreements, with a total undiscounted minimum commitment of approximately $ 430 million, that have been executed but the lease term has not commenced as of May 31, 2020.

These are substantially all related to our rights to use certain port facilities.

The leases are expected to commence between 2020 and 2022.

During the quarter ended February 29, 2020, we obtained $ 107 million of right-of-use assets in exchange for new operating lease liabilities.

During the six months ended May 31, 2020, we obtained $ 124 million of right-of-use assets in exchange for new operating lease liabilities.

The cash outflow for leases was materially consistent with the lease expense recognized during the three and six months ended May 31, 2020.

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

February 29, 2020

Weighted average remaining lease term - operating leases (in years) 13

Weighted average discount rate - operating leases 3.2 %

As of February 29, 2020, maturities of lease liabilities were as follows:

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

(in millions)

Total Operating

Remainder of 2020 $ 92

5 unchanged sentences

(in millions)

Total Operating

Thereafter 1,408

2 unchanged sentences

We have sales-type leases of ships for which we are the lessor.

As of February 29, 2020, the net investment related to these leases was $ 127 million.

As of May 31, 2020, the net investment related to these leases was $ 48 million.

NOTE 7 – Segment Information

5 unchanged sentences

Our Tour and Other segment represents the hotel and transportation operations of Holland America Princess Alaska Tours and other operations.

Three Months Ended February 29/28,

Three Months Ended May 31,

(in millions) Revenues Operating costs and

13 unchanged sentences

$ 4,838 $ 3,159 $ 621 $ 542 $ 515

(a) Includes $ 300 million of goodwill impairment charges.

(a) Includes $ 1.0 billion of goodwill impairment charges.

(b) Includes $ 345 million of goodwill impairment charges.

Six Months Ended May 31,

(in millions) Revenues Operating costs and

expenses Selling

administrative Depreciation

amortization Operating

income (loss)

NAA $ 3,597 $ 3,904 $ 697 $ 733 $ ( 3,056 ) (c)

EA 1,790 2,090 333 334 ( 1,743 ) (d)

Cruise Support 66 ( 34 ) 126 64 ( 91 )

Tour and Other 76 47 14 16 —

$ 5,529 $ 6,007 $ 1,170 $ 1,147 $ ( 4,891 )

NAA $ 6,239 $ 4,043 $ 695 $ 667 $ 833

EA 3,087 2,108 390 318 270

Cruise Support 86 60 152 55 ( 180 )

Tour and Other 99 90 13 19 ( 22 )

$ 9,511 $ 6,301 $ 1,250 $ 1,059 $ 902

(d) Includes $ 777 million of goodwill impairment charges.

Revenue by geographic areas, which are based on where our guests are sourced, were as follows:

Three Months Ended February 29/28

Three Months Ended May 31, Six Months Ended May 31,

(in millions) 2020 2019 2020 2019

6 unchanged sentences

Three Months Ended

February 29/28,

May 31, Six Months Ended

(in millions, except per share data) 2020 2019 2020 2019

5 unchanged sentences

Diluted earnings per share $ ( 6.07 ) $ 0.65 $ ( 7.34 ) $ 1.13

Antidilutive equity awards excluded from diluted earnings per share computations 1 —

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

(in millions) Three Months Ended

May 31, 2020 Six Months Ended

Equity awards — 1

Convertible senior notes 120 60

Total antidilutive securities 120 61

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

NOTE 9 – Supplemental Cash Flow Information

(in millions) February 29, 2020 November 30, 2019

(in millions) May 31, 2020 November 30, 2019

Cash and cash equivalents (Consolidated Balance Sheets) $ 6,881 $ 518

1 unchanged sentence

Total cash, cash equivalents and restricted cash (Consolidated Statements of Cash Flows) $ 6,896 $ 530

We did not issue notes receivable upon sale of ships during the three months ended February 29/28, 2020 and 2019.

We did no t issue notes receivable upon sale of ships during the six months ended May 31, 2020.

For the six months ended May 31, 2019, we issued notes receivable upon sale of ships of $ 104 million.

NOTE 10 – Other Assets

We have a minority interest in CSSC Carnival Cruise Shipping Limited (“CSSC-Carnival”), a China-based cruise company which will operate its own fleet designed to serve the Chinese market.

Our investment in CSSC-Carnival was $ 132 million as of February 29, 2020 and $ 48 million as of November 30, 2019.

Our investment in CSSC-Carnival was $ 131 million as of May 31, 2020 and $ 48 million as of November 30, 2019.

In December 2019, we sold to CSSC-Carnival a controlling interest in an entity with full ownership of two EA segment ships and recognized a related gain of $ 107 million, included in other operating expenses in our Consolidated Statements of Income (Loss).

We will continue to operate both ships under bareboat charter agreements into 2021.

NOTE 11 – Defined Benefit Pension Plans and Restructuring Costs

We have several single-employer defined benefit pension plans, which cover some of our shipboard and shoreside employees.

and UK shoreside employee plans are closed to new membership and are funded at or above the level required by U.S.

or UK regulations.

As required by UK regulations, the UK employee plan is undergoing its triennial valuation.

Due to the COVID-19 pandemic and its impact on the economic environment and our operations, the finalization of the valuation may result in a plan deficit which would then trigger a funding obligation under UK regulations.

The remaining defined benefit plans are primarily unfunded.

In determining all of our plans’ benefit obligations at November 30, 2019 and 2018, we assumed a weighted-average discount rate of 2.4 % for 2019 and 3.4 % for 2018.

In May 2020, we announced a combination of layoffs, furloughs and salary reductions across the company in response to the extended pause in our global cruise operations.

We incurred restructuring costs of $ 39 million principally consisting of severance and our continued payment of health benefits to affected employees.

These costs are included in the selling and administrative line item within our Consolidated Statements of Income (Loss).

NOTE 12 – Subsequent Events

The spread of COVID-19 and the recent developments surrounding the global pandemic are having material negative impacts on all aspects of our business.

On March 13, 2020, we announced voluntary pauses of our global fleet cruise operations across all brands.

The duration of the pauses will be dependent in part on various travel restrictions and travel bans issued by countries around the world.

As of April 1, 2020, substantially all our ships have disembarked their passengers.

There are approximately 6,000 passengers onboard ships still at sea that are expected to disembark their passengers by the end of April.

Some of our crew is unable to return home, and we will be providing them with food and housing.

We have updated our cancellation policies, the terms of which vary widely by brand and sailing date, to permit cruisers to cancel certain upcoming cruises and elect to receive refunds in cash or future cruise credits.

As an incentive to accept the future cruise credits, our brands have offerings which vary widely in terms but generally increase the value of the future cruise credits or onboard credits (credits that can be used as onboard spending money on a future sailing).

The volume and pace of cash refunds could have a material adverse effect on our liquidity and capital resources.

We believe the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have, a material negative impact on our financial results and liquidity, and such negative impact may continue well beyond the containment of such outbreak.

We have never previously experienced a complete cessation of our cruising operations, and as a consequence, our ability to be predictive regarding the impact of such a cessation on our brands and future prospects is uncertain.

In addition, the magnitude, duration and speed of the global pandemic is uncertain.

As a consequence, we cannot estimate the impact on our business, financial condition or near- or longer-term financial or operational results with certainty, but we expect a net loss on both a U.S.

GAAP and adjusted basis for the fiscal year ending November 30, 2020.

The effects of further decreases in estimated future operating cash flows could result in the need to recognize additional impairment charges in future periods.

In March and April 2020, Moody’s and S&P Global downgraded our long-term issuer and senior unsecured debt ratings.

In addition, our long-term ratings were placed on review for further downgrade by both rating agencies.

Our short-term commercial paper credit ratings were downgraded and also placed on review for further downgrade.

In March 2020, we fully drew down our $ 3.0 billion Existing Multicurrency Facility.

In March 2020, we early settled all outstanding cross currency swaps designated as net investment hedges and received proceeds of $ 180 million, of which $ 167 million will remain in AOCI until either the sale or substantially complete liquidation of the related subsidiary.

We also early settled our foreign currency forwards that were designated as cash flow hedges and

received proceeds of $ 53 million which will remain in AOCI until recognized in earnings proportionately to the related depreciation expense of the underlying vessel that was hedged.

On April 1, 2020, we announced the pricing terms of offerings of $ 4.0 billion of the Secured Notes, $ 1.75 billion Convertible Notes and a public offering of $ 500 million of common stock in the Public Equity Offering.

In connection with the Convertible Notes offering, we granted the initial purchasers of the Convertible Notes an option to purchase on or before April 18, 2020, up to an additional $ 262.5 million aggregate principal amount of Convertible Notes.

In connection with the Public Equity Offering, we granted the underwriters an option to purchase up to 9,375,000 of additional shares of common stock, which option must be exercised on or before May 1, 2020.

The Secured Notes will pay interest semi-annually on April 1 and October 1 of each year, beginning on October 1, 2020, at a rate of 11.5 % per year.

The Secured Notes will mature on April 1, 2023.

The Convertible Notes will pay interest semi-annually on April 1 and October 1 of each year, beginning on October 1, 2020, at a rate of 5.75 % per year.

The Convertible Notes will mature on April 1, 2023, unless earlier converted, redeemed or repurchased.

The initial conversion rate per $ 1,000 principal amount of Convertible Notes is equivalent to 100 shares of common stock of the Corporation, which is equivalent to a conversion price of approximately $ 10 per share, subject to adjustment in certain circumstances.

The Public Equity Offering consists of 62,500,000 shares of common stock, par value $ 0.01 per share, of Carnival Corporation, at a price of $ 8 per share.

The Public Equity Offering, the Convertible Notes offering and the Secured Notes offering are expected to be completed in early April, subject to customary closing conditions.

The net proceeds from the offering of Secured Notes will be deposited in to a segregated escrow account, pending the releases in accordance with certain collateral perfection thresholds.

None of the closings of the Public Equity Offering and the offerings of the Secured Notes or the Convertible Notes is conditioned upon the closing of any of the other offerings or vice versa.

One of our directors purchased 1.25 million shares of our common stock as part of the Public Equity Offering for a purchase price of approximately $ 10 million.

Property and Equipment

In June 2020, we entered into an agreement to sell an NAA segment 1,350 -passenger capacity ship.

In June 2020, we entered into an agreement to sell an NAA segment 1,260 -passenger capacity ship.

In June 2020, we entered into an agreement to sell an EA segment 2,010 -passenger capacity ship.

In June 2020, we sold and transferred an EA segment 1,930 -passenger capacity ship.

In July 2020, we entered into an agreement to sell an NAA segment 2,060 -passenger capacity ship.

In July 2020, we entered into an agreement to sell an NAA segment 2,050 -passenger capacity ship.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements