What changed in this filing

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Item 1. Financial Statements

2020-10-08 compared with 2020-07-10 · 274 added, 216 removed, 549 unchanged (47% of the section changed)

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(in millions, except per share data)

Three Months Ended May 31, Six Months Ended

Three Months Ended August 31, Nine Months Ended

2020 2019 2020 2019

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(in millions)

Three Months Ended May 31, Six Months Ended

Three Months Ended August 31, Nine Months Ended

2020 2019 2020 2019

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Other Long-Term Liabilities 934 890

Contingencies

Contingencies and Commitments

Shareholders’ Equity

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(in millions)

Six Months Ended

Nine Months Ended

OPERATING ACTIVITIES

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Impairments 3,925 26

Loss on repurchase of Convertible Notes 224 —

Share-based compensation 52 38

Gain on ship sales and other, net 56 7

(Gain) loss on ship sales and other, net 164 29

( 1,951 ) 4,266

10 unchanged sentences

Proceeds from sales of ships 271 15

Payments of fuel derivative settlements — ( 6 )

Purchase of minority interest ( 81 ) —

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stock Total shareholders’ equity

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

Net income (loss) — — — 1,780 — — 1,780

3 unchanged sentences

Purchases of treasury stock under the Repurchase Program and other — — 13 — — ( 157 ) ( 144 )

At August 31, 2019 $ 7 $ 358 $ 8,798 $ 26,576 $ ( 2,183 ) $ ( 8,261 ) $ 25,295

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

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

Net income (loss) — — — ( 2,858 ) — — ( 2,858 )

Other comprehensive income (loss) — — — — 524 — 524

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

Issuance of common stock related to the repurchase of Convertible Notes — — 222 — — — 222

Repurchase of Convertible Notes 1 — 765 — — — 766

Other — — 9 — — — 9

At August 31, 2020 $ 8 $ 361 $ 10,680 $ 18,297 $ ( 1,439 ) $ ( 8,404 ) $ 19,503

Nine Months Ended

stock Ordinary

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Purchases of treasury stock under the Repurchase Program and other — — 42 — — ( 467 ) ( 424 )

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

At August 31, 2019 $ 7 $ 358 $ 8,798 $ 26,576 $ ( 2,183 ) $ ( 8,261 ) $ 25,295

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

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

Issuance of common stock 1 — 777 — — — 778

Issuance and repurchase of Convertible Notes

1 — 1,051 — — — 1,052

Purchases of treasury stock under the Repurchase Program and other — 2 44 — — ( 10 ) 36

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

At August 31, 2020 $ 8 $ 361 $ 10,680 $ 18,297 $ ( 1,439 ) $ ( 8,404 ) $ 19,503

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

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Liquidity and Management’s Plans

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

Due to the spread of COVID-19, we paused our global cruise operations in mid-March 2020.

In September 2020 we began the resumption of limited guest operations as part of our anticipated phased-in return to service.

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

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

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

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

GAAP and adjusted basis for the 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.

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

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

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

Basis of Presentation

The Consolidated Statements of Income (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.

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”) and Form 10-K/A filed with the U.S.

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

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

Securities and Exchange Commission on January 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.

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

COVID-19 Use of Estimates and Risks and Uncertainty

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Additionally, the payments for deferred implementation costs are required to be presented in the same line item in the Consolidated Statements of Cash Flows as payments for the related hosting fees.

This guidance is required to be adopted by us in the first quarter of 2021 and must be applied using either a prospective or a retrospective approach.

Early adoption is permitted.

We are currently evaluating the impact this guidance will have on our consolidated financial statements.

This guidance is required to be adopted by us in the first quarter of 2021 and we have elected to apply the guidance using a prospective approach.

We do not expect the adoption of this guidance to have a significant impact on our consolidated financial statements.

The FASB issued amended guidance, Financial Instruments - Credit Losses , which requires an entity to present the net amount expected to be collected for certain financial assets, including trade receivables.

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This guidance is required to be adopted by us in the first quarter of 2021 and will be applied prospectively with a cumulative-effect adjustment to retained earnings.

Early adoption is permitted.

We are currently evaluating the impact this guidance will have on our consolidated financial statements.

The FASB issued guidance, Debt - Debt with Conversion and Other Option s and Derivative and Hedging - Contracts in Entity's Own Equity , which simplifies the accounting for convertible instruments.

This guidance eliminates certain models that require separate accounting for embedded conversion features, in certain cases.

Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity.

The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards.

This guidance is required to be adopted by us in the first quarter of 2023 and must be applied using either a modified or full retrospective approach.

We are currently evaluating the impact this guidance will have on our consolidated financial statements.

NOTE 2 – Revenue and Expense Recognition

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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.

Guest cancellation fees, when applicable, are recognized in 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.

The amounts collected on behalf of our onboard concessionaires, net of the amounts remitted to them, are included in onboard and other revenues as concession revenues.

The amounts collected on behalf of our onboard concessionaires, net of the amounts

remitted to them, are included in onboard and other revenues as concession revenues.

All of these amounts are recognized on a completed voyage or pro rata basis as discussed above.

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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.

For the three and nine months ended August 31, fees, taxes, and charges included in commissions, transportation and other costs were not significant and $ 213 million in 2020 and $ 186 million and $ 503 million in 2019.

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

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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 have paid and expect to continue to pay cash refunds of customer deposits with respect to a portion of these cancelled cruises.

The amount of cash refunds to be paid may depend on the level of guest acceptance of FCCs and future cruise cancellations.

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

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.

We had customer deposits of $ 2.4 billion as of August 31, 2020 and $ 4.9 billion as of November 30, 2019.

The current portion of our customer deposits was $ 2.1 billion as of August 31, 2020, the majority of which are FCCs.

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

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

Due to the uncertainty associated with the duration and extent of COVID-19, we are unable to estimate the amount of the 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.

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

During the nine months ended August 31, 2020 and 2019, we recognized revenues of $ 3.3 billion and $ 4.1 billion related to our customer deposits as of November 30, 2019 and December 1, 2018.

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

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

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

We have contract assets of $ 17 million and $ 154 million as of August 31, 2020 and November 30, 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.

Short-Term Borrowings

At August 31, 2020, our short-term borrowings consisted primarily of $ 3.0 billion borrowing under our multicurrency revolving credit facility (the “Revolving Facility”), $ 314 million of commercial paper, $ 20 million of euro-denominated commercial paper and $ 33 million of sterling-denominated commercial paper.

For the nine months ended August 31, 2020, we had borrowings of $ 525 million and repayments of $ 192 million of commercial paper with original maturities greater than three months.

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

Export Credit Facility Borrowings

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

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

2023 Secured Notes

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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.

They are guaranteed by Carnival plc and certain of our subsidiaries that own or operate our vessels and material intellectual property, and are secured by collateral, which includes vessels and material intellectual property with a net book value of $ 27.9 billion as of August 31, 2020 and certain other assets.

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

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

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

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

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

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

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

• during the 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;

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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

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

As of August 31, 2020, a condition allowing holders of the Convertible Notes to convert has been met and therefore the notes are convertible.

The holders are entitled to convert all or any portion of their Convertible Notes at any time during the three months starting on September 1, 2020 and ending on November 30, 2020, at the conversion rate of 100 shares of Carnival Corporation common stock per $ 1,000 principal amount of Convertible Notes.

In August 2020, we completed a registered direct offering of 99.2 million shares of Carnival Corporation common stock at a price of $ 14.02 per share to a limited number of holders of the Convertible Notes.

We used the proceeds of the stock offering to repurchase from such holders $ 886 million aggregate principal amount of the Convertible Notes in privately negotiated transactions, (such registered direct offering and the use of proceeds to repurchase the Convertible Notes, the “Convertible Notes Repurchase Transaction”).

We recognized a $ 224 million extinguishment loss as a result of these transactions in other income (expense), net.

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

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

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

The carrying amount of the equity component was reduced to $ 0 in conjunction with the partial repurchase of Convertible Notes in August 2020 because at the time of repurchase, the fair value of the equity component for the portion of the Convertible Notes that was repurchased, exceeded the total amount of the equity component recorded at the time the Convertible Notes were issued.

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

(in millions) May 31, 2020

(in millions) August 31, 2020

Principal $ 1,127

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

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

(in millions) Three Months Ended August 31, 2020 Nine Months Ended August 31, 2020

Contractual interest expense $ 26 $ 43

Amortization of debt discount and transaction costs 22 37

Modifications

We had no Convertible Notes in 2019.

2025 Secured Term Loan

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

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

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

The 2025 Secured Term Loan is guaranteed by Carnival plc and the same subsidiaries that currently guarantee, and are secured on a first-priority basis by substantially the same collateral that currently secures, the 2023 Secured Notes, the 2026 Secured Notes and the 2027 Secured Notes.

The 2025 Secured Term Loan contains covenants that are substantially similar to the covenants in the indenture governing the 2023 Secured Notes.

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

2026 Secured Notes

In July 2020, we issued an aggregate principal amount of $ 1.3 billion in two tranches ($ 775 million and € 425 million), under second-priority senior secured notes that mature on February 1, 2026 (the “2026 Secured Notes”).

dollar tranche bears interest at a rate of 10.5 % per year.

The euro tranche bears interest at a rate of 10.1 % per year.

The 2026 Secured Notes are guaranteed by Carnival plc and the same subsidiaries that currently guarantee, and are secured on a second-priority basis by substantially the same collateral that currently secures, the 2023 Secured Notes, the 2025 Secured Term Loan and the 2027 Secured Notes.

The indenture governing the 2026 Secured Notes contains covenants that are substantially similar to the covenants in the indenture governing the 2023 Secured Notes and the 2027 Secured Notes.

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

2027 Secured Notes

In August 2020, we issued an aggregate principal amount of $ 900 million of second-priority senior secured notes that mature on August 1, 2027 (the “2027 Secured Notes”).

The 2027 Secured Notes bear interest at a rate of 9.9 % per year.

The 2027 Secured Notes are guaranteed by Carnival plc and the same subsidiaries that currently guarantee, and are secured on a second-priority basis by substantially the same collateral that currently secures, the 2023 Secured Notes, the 2025 Secured Term Loan and the 2026 Secured Notes.

The indenture governing the 2027 Secured Notes contains covenants that are substantially similar to the covenants in the indenture governing the 2023 Secured Notes and the 2026 Secured Notes.

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

Modifications and Other

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

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.

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

As of August 31, 2020, we repurchased in the open market $ 86 million aggregate principal amount of our $ 700 million 4.0 % notes due in 2020 and $ 123 million aggregate principal amount of our $ 555 million 1.6 % euro notes due in 2021.

We recognized a related gain on early extinguishment of debt of $ 5 million.

This gain is included in other income (expense), net in the accompanying Consolidated Statements of Income (Loss).

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

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

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

(in millions)

Principal Payments (a)

Remainder of 2020 $ 1,048

2021 (b) 1,702

Thereafter 9,382

(a) Excluding the Revolving Facility.

As of August 31, 2020, borrowings under the Revolving Facility were $ 3.0 billion, which were drawn in March 2020 for an initial term of six months.

The maturities for these borrowings were extended in September 2020 for an additional six months through March 2021.

We may re-borrow such amounts subject to satisfaction of the conditions in the Revolving Facility Agreement.

(b) We have a principal balance of $ 0.5 billion and $ 0.8 billion of debt outstanding as of August 31, 2020, otherwise due through 2032, for which covenant waivers expire during the second quarter 2021 and fourth quarter 2021, respectively.

We are working on extending these covenant waivers.

If the covenant waiver extensions are not received, we would be required to prepay the outstanding principal balance.

Debt Covenant Compliance

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• 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.

As of August 31, 2020, we have entered into supplemental agreements or side letters to amend our agreements with respect to this Financial Covenant to:

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

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

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

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

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

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.

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

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

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.

Since March 2020, Moody’s and S&P Global have downgraded our credit ratings to be below investment grade.

Our current short-term commercial paper credit rating prevents us from issuing additional commercial paper.

NOTE 4 – Contingencies and Commitments

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.

Many of 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.

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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.

As previously disclosed, on May 2, 2019, two lawsuits were filed against Carnival Corporation in the U.S.

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

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.

On July 9, 2020, the court granted our motion for judgment on the pleadings in the action filed by Javier Garcia Bengochea, and dismissed plaintiff’s action with prejudice.

On August 6, 2020, Bengochea filed a notice of appeal.

On September 14, 2020, the court denied our motion to dismiss the amended action filed by Havana Docks Corporation.

We continue to believe we have a meritorious defense to these actions and we believe that any liability which may arise as a result of these actions will not have a material impact on our consolidated financial statements.

Contingent Obligations – Indemnifications

Some of the debt contracts we enter into include indemnification provisions obligating us to make payments to the counterparty if certain events occur.

These contingencies generally relate to changes in taxes or changes in laws which increase our lender’s costs.

These contingencies generally relate to changes in taxes or changes in laws which increase the lender’s costs.

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

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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.

As of August 31, 2020, we have been requested to provide reserve funds of $ 27 million and have had $ 200 million of customer deposits withheld to satisfy these requirements.

These reserve funds are included within other assets.

We expect the funds withheld under these agreements will be approximately $ 65 million per month up to a maximum of $ 600 million.

In September 2020, we placed $ 136 million of cash collateral to be held in escrow.

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.

We have been named in a number of actions related to COVID-19.

The following purported class actions have been brought by former guests from Ruby Princess, Diamond Princess, Grand Princess, Coral Princess , Costa Luminosa, Carnival Ecstasy or Zaandam .

Both the previously disclosed and newly filed actions seek compensation based on a variety of tort claims, including, but not limited to, negligence and failure to warn, physical injuries and severe emotional distress associated with being exposed and/or contracting COVID-19 onboard.

Below are material updates to the previously disclosed class actions, individual actions and governmental inquiries and investigations, and a description of newly filed COVID-19 actions.

Previously Disclosed Class Actions

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

(“Costa”) and Costa Cruise Line, Inc.

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.

District Court of the Southern District of Florida.

On September 10, 2020, the court granted Costa ’ s motion to dismiss based upon forum non conveniens, and directed that the action be filed in Italy.

The plaintiff has appealed the order.

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

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

On September 22, 2020, the court granted our motions to dismiss plaintiffs ’ second amended complaint in part.

The court granted our motion to dismiss plaintiffs’ negligence-based claims without prejudice and with leave to amend and granted our motion to dismiss plaintiffs’ request for injunctive relief without prejudice.

The court denied our motion to dismiss plaintiffs’ claims for intentional infliction of emotional distress.

On October 2, 2020, plaintiffs filed a third amended complaint.

As previously disclosed, on May 27, 2020, Service Lamp Corporation Profit Sharing Plan filed a purported class action against Carnival Corporation, Arnold W.

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

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.

As previously disclosed, on June 3, 2020, John P.

Elmensdorp filed a purported class action against the same defendants, and included Micky Arison as a defendant.

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

These 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.

These actions allege that the defendants violated Sections 10(b) and 20(a) of the U.S.

Securities and Exchange Act of 1934 by making misrepresentations and omissions related to Carnival Corporation’s COVID-19 knowledge and response, and seek to recover unspecified damages and equitable relief for the alleged misstatements and omissions.

On July 21, 2020, Abraham Atachbarian filed a purported class action against the same defendants as Elmensdorp action.

The Atachbarian action is on behalf of all purchasers of Carnival Corporation options between January 27 and May 1, 2020 and allege the same set of factual theories presented in the class actions described above.

As previously disclosed, on June 4, 2020, Gregory Eicher, a former guest from Grand Princess filed a purported class action against Princess Cruises.

On September 10, 2020, this action was voluntarily dismissed.

As previously disclosed, on June 4, 2020, numerous former guests from Ruby Princess filed a purported class action against Princess Cruises.

Princess Cruises filed a motion to dismiss, in response to which the plaintiffs amended their action to remove their class action allegations and seek recovery on behalf of two guests who allege that they contracted COVID-19 while on Ruby Princess .

As previously disclosed, on June 24, 2020, Leonard C.

Lindsay and Carl E.W.

Zehner, former guests from Zaandam filed a purported class action 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.

Zehner, former guests from Zaandam, filed a purported class action against Carnival Corporation, Carnival plc, Holland America Line, Inc.

and Holland America Line – U.S.A., Inc.

On September 11, 2020, the plaintiffs filed an amended class action on behalf of all persons in the U.S.

who were guests from Zaandam who embarked on March 8, 2020.

Newly Filed Class Actions

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

On July 13, 2020, Kathleen O’Neill, a former guest from Coral Princess filed a purported class action in the U.S.

District Court for the Central District of California against Princess Cruises, Carnival Corporation, and Carnival plc.

We have filed a motion to dismiss.

On July 13, 2020, another group of former guests from Grand Princess filed a purported class action in the U.S.

District Court for the Central District of California against Princess Cruises, Carnival Corporation and Carnival plc.

We have filed a motion to dismiss plaintiff’s amended action.

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

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

Individual Actions

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:

Since March 9, 2020, more than 100 former U.S.

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

Both the previously disclosed and newly filed actions include tort claims based on a variety of theories, including negligence and failure to warn.

The plaintiffs in these actions allege a variety of injuries:

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

A smaller number of 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.

A smaller number of actions include wrongful death claims.

Previously Disclosed Individual Actions

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

All courts that considered those motions to date have granted them.

Princess Cruises has filed motions to dismiss in all other matters in which a responsive pleading has been due.

Several courts have granted the various motions to dismiss, with leave for the plaintiffs to amend.

As previously disclosed, between April 7 and July 7, 2020, former U.S.

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

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

These 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 actions have been voluntarily dismissed with and without prejudice, respectively.

The action brought in the U.S.

District Court for the Southern District of Florida may be pursued in Italy.

As previously disclosed, on June 16, 2020, Patricia Vickers, on behalf of the Estate of Jessie Vickers, a former guest from Carnival Ecstasy , filed an action against Carnival Corporation.

The case was dismissed by the court without prejudice.

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

A motion to dismiss is pending and on September 3, 2020, the court denied plaintiff’s motion for an expedited trial date.

Newly Filed Individual Actions

On July 16, 2020, Toyling Maa, individually and as personal representative of the estate of Wilson Maa, a former guest from Coral Princess , and the estate of Wilson Maa, filed an action in the U.S.

District Court for the Central District of California against Carnival Corporation, Carnival plc and Princess Cruises seeking compensation for damages for Ms.

Maa allegedly contracting COVID-19 and alleging wrongful death as a result of Mr.

Maa contracting COVID-19.

The action asserts claims for negligence.

On September 21, 2020, the court denied plaintiffs’ motion to remand and granted defendants’ motion to dismiss without prejudice and with leave to amend.

On July 23, 2020, an action was filed on behalf of the estate of Carl Weidner, a former guest from Grand Princess, in the U.S.

District Court for the Northern District of California against Carnival Corporation, Carnival plc and Princess Cruises seeking compensation based on a claim alleging wrongful death as a result of contracting COVID-19.

The action asserts claims for negligence.

The action also alleges that the forum selection clause in the guest’s ticket contract that specifies venue in the Central District of California is unenforceable.

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

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Governmental Inquiries and Investigations

Federal, state and non-U.S.

Federal and non-U.S.

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

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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.

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

The New South Wales Commission of Inquiry Report dated August 14, 2020, concluded that no recommendations were directed towards Princess Cruises or Carnival Australia.

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

Ship Commitments

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

(in millions)

Remainder of 2020 $ 1,776

Thereafter 1,061

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

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

May 31, 2020 November 30, 2019

August 31, 2020 November 30, 2019

Value Fair Value Carrying

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Total $ 25,537 $ — $ 24,080 $ — $ 11,634 $ — $ 12,030 $ —

(a) Long-term other assets are comprised of notes receivables, which include loans on ship sales.

The fair values of our Level 2 notes receivables were based on estimated future cash flows discounted at appropriate market interest rates.

(a) Long-term other assets are comprised of notes receivable, which at November 30, 2019, included loans on ship sales.

The fair values of our Level 2 notes receivable were based on estimated future cash flows discounted at appropriate market interest rates.

The fair values of our Level 3 notes receivable were estimated using risk-adjusted discount rates.

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

May 31, 2020 November 30, 2019

August 31, 2020 November 30, 2019

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

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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.

Consequently, prior to our annual test date of July 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 $ 731 million and $ 1.3 billion for those reporting units during the first and second quarters of 2020, respectively, and have no remaining goodwill for those reporting units.

As of July 31, 2020, we performed our annual goodwill and trademark impairment reviews, which covered updates since the last test date of May 31, 2020, and we determined there was no impairment for goodwill or trademarks at our annual test date.

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

The principal assumptions, all of which are considered Level 3 inputs, used in our cash flow analyses consisted of:

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

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

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

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Foreign currency translation adjustment — ( 10 ) ( 10 )

At May 31, 2020 $ 579 $ 211 $ 790

At August 31, 2020 $ 579 $ 228 $ 807

(in millions) NAA

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Foreign currency translation adjustment — 12 13

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

At August 31, 2020 $ 927 $ 253 $ 1,180

Impairment of Ships

We review our long-lived assets for impairment whenever events or circumstances indicate potential impairment.

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

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

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

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

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

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

We then compared these estimated fair values to the net carrying values and, as a result, we recognized the following 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.

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

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

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

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

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Derivative Instruments and Hedging Activities

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

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

Derivative assets

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Other assets — 25

Foreign currency zero cost collars (b) Prepaid expenses and other 1 —

Total derivative assets $ 1 $ 58

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Total derivative liabilities $ 11 $ 25

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

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

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

(b) At 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.

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

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

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

These interest rate swap agreements effectively changed $ 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.

These interest rate swap agreements effectively changed $ 273 million at August 31, 2020 and $ 300 million at November 30, 2019 of EURIBOR-based floating rate euro debt to fixed rate euro debt.

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

Our derivative contracts include rights of offset with our counterparties.

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

August 31, 2020

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

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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 May 31, Six Months Ended

Three Months Ended August 31, Nine Months Ended

(in millions) 2020 2019 2020 2019

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Interest rate swaps - Interest expense, net of capitalized interest $ ( 1 ) $ ( 2 ) $ ( 4 ) $ ( 6 )

Foreign currency zero cost collars - Depreciation and amortization $ — $ — $ — $ 1

Gains (losses) recognized on derivative instruments (amount excluded from effectiveness testing – net investment hedges)

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Our operations also have revenue and expenses denominated in non-functional currencies.

Movements in foreign currency exchange rates will affect our financial statements.

Movements in foreign currency exchange rates affect our financial statements.

Investment Currency Risks

We consider our investments in foreign operations to be denominated in stable currencies and are of a long-term nature.

We consider our investments in foreign operations to be denominated in stable currencies and of a long-term nature.

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

As of 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).

As of August 31, 2020, we have designated $ 883 million of our sterling-denominated debt as non-derivative hedges of our net investments in foreign operations.

For the three and nine months ended August 31, 2020, we recognized $ 66 million and $ 29 million of loss on these non-derivative net investment hedges in the cumulative translation adjustment section of other comprehensive income (loss).

We also have $ 7.0 billion of euro-denominated debt, which provides an economic offset for our operations with euro functional currency.

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

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

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

These contracts are designated as cash flow hedges.

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Foreign currency zero cost collars

Enchanted Princess 2019 June 2020 $ 1.04 $ 1.28

Mardi Gras 2019 October 2020 $ 1.05 $ 1.28

Mardi Gras 2020 December 2020 $ 1.12 $ 1.28

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

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.

At August 31, 2020, our remaining newbuild currency exchange rate risk primarily relates to euro-denominated newbuild contract payments to non-euro functional currency brands, which represent a total unhedged commitment of $ 8.4 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.

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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, notes receivables, committed financing facilities, contingent obligations, derivative instruments, insurance contracts, long-term ship charters and new ship progress payment guarantees, by:

We seek to manage these credit risk exposures, including counterparty nonperformance primarily associated with our cash equivalents, investments, notes receivables, future financing facilities, contingent obligations, derivative instruments, insurance contracts, long-term ship charters and new ship progress payment guarantees, by:

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

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

At August 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.

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

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

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 May 31, 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.

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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.

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

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

The components of expense were as follows:

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

(in millions) Three months ended August 31, 2020 Nine months ended August 31, 2020

Operating lease expense $ 51 $ 153

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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.

We have multiple agreements, with a total undiscounted minimum commitment of approximately $ 440 million, that have been executed but the lease term has not commenced as of August 31, 2020.

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

The leases are expected to commence between 2020 and 2022.

During the 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.

During the nine months ended August 31, 2020, we obtained $ 126 million of right-of-use assets in exchange for new operating lease liabilities.

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

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

August 31, 2020

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

Weighted average discount rate - operating leases 3.2 %

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

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

(in millions)

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As the non-lease components are the predominant components in the agreements, we account for these transactions under the Revenue Recognition guidance.

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

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

NOTE 7 – Segment Information

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

Three Months Ended May 31,

Three Months Ended August 31,

(in millions) Revenues Operating costs and

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income (loss)

NAA $ 457 $ 1,631 $ 297 $ 369 $ ( 2,860 ) (a)

EA 238 773 126 168 ( 1,174 ) (b)

NAA $ 15 $ 1,292 $ 144 $ 348 $ ( 1,770 )

EA ( 4 ) 225 71 165 ( 465 )

Cruise Support 1 12 44 32 ( 86 )

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$ 6,533 $ 3,532 $ 563 $ 548 $ 1,890

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

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

Six Months Ended May 31,

Nine Months Ended August 31,

(in millions) Revenues Operating costs and

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income (loss)

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

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

NAA $ 3,612 $ 5,197 $ 841 $ 1,081 $ ( 4,827 ) (a)

EA 1,785 2,314 404 499 ( 2,208 ) (b)

Cruise Support 67 ( 22 ) 170 96 ( 177 )

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$ 16,043 $ 9,833 $ 1,813 $ 1,607 $ 2,791

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

(a) Includes $ 1.3 billion of goodwill impairment charges.

(b) 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 May 31, Six Months Ended May 31,

Three Months Ended August 31, Nine Months Ended August 31,

(in millions) 2020 2019 2020 2019

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Three Months Ended

May 31, Six Months Ended

August 31, Nine Months Ended

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

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(in millions) Three Months Ended

May 31, 2020 Six Months Ended

August 31, 2020 Nine Months Ended

August 31, 2020

Equity awards — 1

Convertible senior notes 120 60

Convertible Notes 186 102

Total antidilutive securities 186 103

1 unchanged sentence

NOTE 9 – Supplemental Cash Flow Information

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

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

Cash and cash equivalents (Consolidated Balance Sheets) $ 8,176 $ 518

1 unchanged sentence

Total cash, cash equivalents and restricted cash (Consolidated Statements of Cash Flows) $ 8,191 $ 530

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.

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

NOTE 10 – Other Assets

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

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

Our investment in CSSC-Carnival was $ 135 million as of August 31, 2020 and $ 48 million as of November 30, 2019.

In December 2019, we sold to CSSC-Carnival a controlling interest in an entity with full ownership of 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.

We will continue to operate each of these ships under bareboat charter agreements through December 2020 and May 2021, respectively.

NOTE 11 – Defined Benefit Pension Plans and Restructuring Costs

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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.

For the three and nine months ended August 31, 2020, we incurred restructuring costs of $ 3 million and $ 42 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 – Property and Equipment

During 2020, we sold seven NAA segment ships and three EA segment ships, which represents a passenger-capacity reduction of 11,560 for our NAA segment and 5,510 for our EA segment.

In addition, we have either entered into agreements to sell or expect to sell six NAA segment ships and two EA segment ships, which represents a passenger-capacity reduction of 9,620 for our NAA segment and 4,320 for our EA segment.

NOTE 13 – Subsequent Events

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.

Public Equity Offering

On September 15, 2020, we entered into an equity distribution agreement with sales agents pursuant to which we may, from time to time, offer and sell shares of Carnival Corporation's common stock having an aggregate offering price of up to $ 1.0 billion through the sales agents (the “ATM Offering”).

We have filed a prospectus supplement with the Securities and Exchange Commission in connection with the ATM Offering on September 15, 2020.

As of October 2, 2020, we sold 23 million shares for net proceeds of $ 352 million and paid $ 4 million in compensation with respect of such sales of shares under the ATM Offering.

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