Fair Value Measurements and Derivative Instruments (Tables)
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12 Months Ended |
Dec. 31, 2016 |
Fair Value Disclosures [Abstract] |
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Estimated Fair Value of Financial Instruments that are not Measured at Fair Value on Recurring Basis |
The estimated fair value of our financial instruments that are not measured at fair value, categorized based upon the fair value hierarchy, are as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2016 Using | | Fair Value Measurements at December 31, 2015 Using | Description | Total Carrying Amount | | Total Fair Value | | Level 1(1) | | Level 2(2) | | Level 3(3) | | Total Carrying Amount | | Total Fair Value | | Level 1(1) | | Level 2(2) | | Level 3(3) | Assets: | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents(4) | $ | 132,603 |
| | $ | 132,603 |
|
| $ | 132,603 |
| | $ | — |
| | $ | — |
| | $ | 121,565 |
| | $ | 121,565 |
| | $ | 121,565 |
| | $ | — |
| | $ | — |
| Total Assets | $ | 132,603 |
| | $ | 132,603 |
|
| $ | 132,603 |
| | $ | — |
| | $ | — |
| | $ | 121,565 |
| | $ | 121,565 |
| | $ | 121,565 |
| | $ | — |
| | $ | — |
| Liabilities: | | | | | | | | | | | | | | | | | | | | Long-term debt (including current portion of long-term debt)(5) | $ | 9,347,051 |
| | $ | 9,859,266 |
|
| $ | — |
| | $ | 9,859,266 |
| | $ | — |
| | $ | 8,478,473 |
| | $ | 8,895,009 |
| | $ | — |
| | $ | 8,895,009 |
| | $ | — |
| Total Liabilities | $ | 9,347,051 |
| | $ | 9,859,266 |
|
| $ | — |
| | $ | 9,859,266 |
| | $ | — |
| | $ | 8,478,473 |
| | $ | 8,895,009 |
| | $ | — |
| | $ | 8,895,009 |
| | $ | — |
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___________________________________ | | (1) | Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment. |
| | (2) | Inputs other than quoted prices included within Level 1 that are observable for the liability, either directly or indirectly. For unsecured revolving credit facilities and unsecured term loans, fair value is determined utilizing the income valuation approach. This valuation model takes into account the contract terms of our debt such as the debt maturity and the interest rate on the debt. The valuation model also takes into account the creditworthiness of the Company. |
| | (3) | Inputs that are unobservable. The Company did not use any Level 3 inputs as of December 31, 2016 and December 31, 2015. |
| | (4) | Consists of cash and marketable securities with original maturities of less than 90 days. |
| | (5) | Consists of unsecured revolving credit facilities, senior notes, senior debentures and term loans. Does not include our capital lease obligations. |
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Company's Financial Instruments Recorded at Fair Value on Recurring Basis |
The following table presents information about the Company's financial instruments recorded at fair value on a recurring basis (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2016 Using | | Fair Value Measurements at December 31, 2015 Using | Description | Total Fair Value | | Level 1(1) | | Level 2(2) | | Level 3(3) | | Total Fair Value | | Level 1(1) | | Level 2(2) | | Level 3(3) | Assets: | | | | | | | | | | | | | | | | Derivative financial instruments(4) | $ | 19,397 |
| | $ | — |
| | $ | 19,397 |
| | $ | — |
| | $ | 134,574 |
| | $ | — |
| | $ | 134,574 |
| | $ | — |
| Investments(5) | $ | 3,576 |
| | 3,576 |
| | — |
| | — |
| | $ | 3,965 |
| | 3,965 |
| | — |
| | — |
| Total Assets | $ | 22,973 |
| | $ | 3,576 |
| | $ | 19,397 |
| | $ | — |
| | $ | 138,539 |
| | $ | 3,965 |
| | $ | 134,574 |
| | $ | — |
| Liabilities: | | | | | | | | | | | | | | | | Derivative financial instruments(6) | $ | 373,497 |
| | $ | — |
| | $ | 373,497 |
| | $ | — |
| | $ | 1,044,292 |
| | $ | — |
| | $ | 1,044,292 |
| | $ | — |
| Total Liabilities | $ | 373,497 |
| | $ | — |
| | $ | 373,497 |
| | $ | — |
| | $ | 1,044,292 |
| | $ | — |
| | $ | 1,044,292 |
| | $ | — |
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___________________________________ | | (1) | Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment. |
| | (2) | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. For foreign currency forward contracts, interest rate swaps, cross currency swaps and fuel swaps, fair value is derived using valuation models that utilize the income valuation approach. These valuation models take into account the contract terms, such as maturity as well as other inputs, such as foreign exchange rates and curves, fuel types, fuel curves and interest rate yield curves. Fair value for foreign currency collar options is determined by using standard option pricing models with inputs based on the options' contract terms, such as exercise price and maturity, and readily available public market data, such as foreign exchange curves, foreign exchange volatility levels and discount rates. All derivative instrument fair values take into account the creditworthiness of the counterparty and the Company. |
| | (3) | Inputs that are unobservable. The Company did not use any Level 3 inputs as of December 31, 2016 and December 31, 2015. |
| | (4) | Consists of foreign currency forward contracts, interest rate swaps and fuel swaps. Please refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type. |
| | (5) | Consists of exchange-traded equity securities and mutual funds reported within Other assets in our consolidated balance sheets. |
| | (6) | Consists of foreign currency forward contracts, interest rate swaps and fuel swaps. Please refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type. |
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Schedule of the Company's goodwill, indefinite-life intangible assets and long-lived assets for Pullmantur reporting unit recorded at fair value on a nonrecurring basis |
The following table presents information about the Company's goodwill, indefinite-life intangible assets and long-lived assets for our Pullmantur reporting unit, further discussed in Note 3. Goodwill and Note 4. Intangible Assets, recorded at fair value on a nonrecurring basis (in thousands): | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2015 Using | Description | | Total Carrying Amount | | Total Fair Value | | Level 3 | | Total Impairment | Pullmantur Goodwill (1) | | $ | — |
| | $ | — |
| | — |
| | $ | 123,814 |
| Indefinite-life intangible asset-Pullmantur trademarks and trade names (2) | | $ | — |
| | $ | — |
| | — |
| | $ | 174,285 |
| Long-lived assets — Pullmantur aircraft and vessels (3) | | $ | 140,846 |
| | $ | 140,846 |
| | $ | 140,846 |
| | $ | 113,168 |
| Total | | $ | 140,846 |
| | $ | 140,846 |
| | $ | 140,846 |
| | $ | 411,267 |
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___________________________________ | | (1) | We estimated the fair value of the Pullmantur reporting unit using a probability-weighted discounted cash flow model. The principal assumptions used in the discounted cash flow model are projected operating results, weighted-average cost of capital and terminal value. Significantly impacting these assumptions was the decision to reduce the size of Pullmantur's fleet. The discounted cash flow model used our 2016 projected operating results as a base. To that base we added future years’ cash flows through 2020 assuming multiple revenue and expense scenarios that reflect the impact of different global economic environments for this period on Pullmantur’s reporting unit. We assigned a probability to each revenue and expense scenario. We discounted the projected cash flows using rates specific to Pullmantur’s reporting unit based on its weighted-average cost of capital, which was determined to be 11%. The fair value of Pullmantur's goodwill was estimated as of August 31, 2015, the date of the last impairment test, at which point it was fully impaired. |
| | (2) | We estimated the fair value of our indefinite-life intangible asset using a discounted cash flow model and the relief-from-royalty method. These trademarks and trade names relate to Pullmantur and we have used a discount rate of 11.5%, comparable to the rate used in valuing the Pullmantur reporting unit. The fair value of these assets were estimated as of August 31, 2015, the date of the last impairment test, at which point they were fully impaired. |
| | (3) | We estimated the fair value of our long-lived assets using the market approach for the aircraft and a blended indication from the cost and market approaches for the vessels as of August 31, 2015, the date of the last impairment test, including depreciation through December 31, 2015. We believe this amount estimates fair value as of December 31, 2015. A significant input in performing the fair value assessments for these assets was comparable market transactions. |
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Offsetting Assets |
The following table presents information about the Company’s offsetting of financial assets under master netting agreements with derivative counterparties:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements | | | As of December 31, 2016 | | As of December 31, 2015 | | | Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet | | Gross Amount of Eligible Offsetting Recognized Derivative Liabilities | | Cash Collateral Received | | Net Amount of Derivative Assets | | Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet | | Gross Amount of Eligible Offsetting Recognized Derivative Assets | | Cash Collateral Received | | Net Amount of Derivative Assets | (In thousands) | | | | | | | | | | | | | | | | | Derivatives subject to master netting agreements | | $ | 19,397 |
| | $ | (19,397 | ) | | $ | — |
| | $ | — |
| | $ | 134,574 |
| | $ | (129,815 | ) | | $ | — |
| | $ | 4,759 |
| Total | | $ | 19,397 |
| | $ | (19,397 | ) | | $ | — |
| | $ | — |
| | $ | 134,574 |
| | $ | (129,815 | ) | | $ | — |
| | $ | 4,759 |
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Offsetting Liabilities |
The following table presents information about the Company’s offsetting of financial liabilities under master netting agreements with derivative counterparties:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements | | | As of December 31, 2016 | | As of December 31, 2015 | | | Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet | | Gross Amount of Eligible Offsetting Recognized Derivative Assets | | Cash Collateral Pledged | | Net Amount of Derivative Liabilities | | Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet | | Gross Amount of Eligible Offsetting Recognized Derivative Liabilities | | Cash Collateral Pledged | | Net Amount of Derivative Liabilities | (In thousands) | | | | | | | | | | | | | | | | | Derivatives subject to master netting agreements | | $ | (373,497 | ) | | $ | 19,397 |
| | $ | 7,213 |
| | $ | (346,887 | ) | | $ | (1,044,292 | ) | | $ | 129,815 |
| | $ | — |
| | $ | (914,477 | ) | Total | | $ | (373,497 | ) | | $ | 19,397 |
| | $ | 7,213 |
| | $ | (346,887 | ) | | $ | (1,044,292 | ) | | $ | 129,815 |
| | $ | — |
| | $ | (914,477 | ) |
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Fuel Swap Agreements |
As of December 31, 2016 and 2015, we had the following outstanding fuel swap agreements: | | | | | | | | Fuel Swap Agreements | | As of December 31, 2016 | | As of December 31, 2015 | | (metric tons) | 2016 | — |
| | 930,000 |
| 2017 | 799,065 |
| | 854,000 |
| 2018 | 616,300 |
| | 583,000 |
| 2019 | 521,000 |
| | 231,000 |
| 2020 | 306,500 |
| | — |
|
| | | | | | | | Fuel Swap Agreements | | As of December 31, 2016 | | As of December 31, 2015 | | (% hedged) | Projected fuel purchases for year: | | | | 2016 | — |
| | 65 | % | 2017 | 60 | % | | 59 | % | 2018 | 44 | % | | 40 | % | 2019 | 35 | % | | 15 | % | 2020 | 20 | % | | — | % |
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Fair Value And Line item Caption of Derivative Instruments |
The fair value and line item caption of derivative instruments recorded within our consolidated balance sheets were as follows: | | | | | | | | | | | | | | | | | | | | | | Fair Value of Derivative Instruments | | Asset Derivatives | | Liability Derivatives | | Balance Sheet Location | | As of December 31, 2016 | | As of December 31, 2015 | | Balance Sheet Location | | As of December 31, 2016 | | As of December 31, 2015 | | | Fair Value | | Fair Value | | | Fair Value | | Fair Value | (In thousands) | | | | | | | | | | | | Derivatives designated as hedging instruments under ASC 815-20(1) | | | | | | | | | | | | Interest rate swaps | Other assets | | $ | 5,246 |
| | $ | — |
| | Other long-term liabilities | | $ | 57,679 |
| | $ | 67,371 |
| Foreign currency forward contracts | Derivative financial instruments | | — |
| | 93,996 |
| | Derivative financial instruments | | 5,574 |
| | 320,873 |
| Foreign currency forward contracts | Other assets | | — |
| | — |
| | Other long-term liabilities | | 68,165 |
| | — |
| Fuel swaps | Derivative financial instruments | | — |
| | — |
| | Derivative financial instruments | | 129,486 |
| | 307,475 |
| Fuel swaps | Other assets | | 13,608 |
| | — |
| | Other long-term liabilities | | 95,125 |
| | 325,055 |
| Total derivatives designated as hedging instruments under ASC 815-20 | | | 18,854 |
| | 93,996 |
| | | | 356,029 |
| | 1,020,774 |
| Derivatives not designated as hedging instruments under ASC 815-20 | | | | | | | | | | | | Foreign currency forward contracts | Derivative Financial Instruments | | — |
| | 32,339 |
| | Derivative financial instruments | | — |
| | — |
| Fuel swaps | Derivative financial instruments | | — |
| | 8,239 |
| | Derivative financial instruments | | 11,532 |
| | 23,518 |
| Fuel swaps | Other assets | | 543 |
| | — |
| | Other long-term liabilities | | 5,936 |
| | — |
| Total derivatives not designated as hedging instruments under ASC 815-20 | | | 543 |
| | 40,578 |
| | | | 17,468 |
| | 23,518 |
| Total derivatives | | | $ | 19,397 |
| | $ | 134,574 |
| | | | $ | 373,497 |
| | $ | 1,044,292 |
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___________________________________ | | (1) | Accounting Standard Codification 815-20 "Derivatives and Hedging." |
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Fair Value and Line Item Caption of Non-derivative Instruments |
The carrying value and line item caption of non-derivative instruments designated as hedging instruments recorded within our consolidated balance sheets were as follows: | | | | | | | | | | | | | | | | Carrying Value | Non-derivative instrument designated as hedging instrument under ASC 815-20 | | Balance Sheet Location | | As of December 31, 2016 | | As of December 31, 2015 | (In thousands) | | | | | | | Foreign currency debt | | Current portion of long-term debt | | $ | 61,601 |
| | $ | — |
| Foreign currency debt | | Long-term debt | | 249,624 |
| | — |
|
| |
| | $ | 311,225 |
| | $ | — |
|
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Effect of Non-derivative Instruments Qualifying and Designated as Hedging Instruments in Net Investment Hedges on Consolidated Financial Statements |
The effect of non-derivative instruments qualifying and designated as net investment hedging instruments on the consolidated financial statements was as follows: | | | | | | | | | | | | | | | | | | | | | | Amount of Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion) | | Location of Gain (Loss) in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing) | | Amount of Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing) | Non-derivative instruments under ASC 815-20 Net Investment Hedging Relationships | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | (In thousands) | |
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| |
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| |
| Foreign Currency Debt | | $ | 20,295 |
| | $ | 8,955 |
| | Other income (expense) | | $ | — |
| | $ | — |
| | | $ | 20,295 |
| | $ | 8,955 |
| |
| | $ | — |
| | $ | — |
|
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Not Designated as Hedging Instrument |
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Derivative instruments disclosure |
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Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance |
The effect of derivatives not designated as hedging instruments on the consolidated financial statements was as follows: | | | | | | | | | | | | | | | | Amount of Gain (Loss) Recognized in Income on Derivatives | Derivatives Not Designated as Hedging Instruments under ASC 815-20 | | Location of Gain (Loss) Recognized in Income on Derivatives | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | (In thousands) | | | | | | | Foreign currency forward contracts | | Other income (expense) | | $ | (51,029 | ) | | $ | (55,489 | ) | Fuel swaps | | Other income (expense) | | (1,000 | ) | | (175 | ) |
| |
| | $ | (52,029 | ) | | $ | (55,664 | ) |
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Fair value hedging |
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Derivative instruments disclosure |
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Schedule of Interest Rate Derivatives |
At December 31, 2016 and December 31, 2015, we maintained interest rate swap agreements on the following fixed-rate debt instruments: | | | | | | | | | Debt Instrument | Swap Notional as of December 31, 2016 (In thousands) | Maturity | Debt Fixed Rate | Swap Floating Rate: LIBOR plus | All-in Swap Floating Rate as of December 31, 2016 | Oasis of the Seas term loan | $ | 175,000 |
| October 2021 | 5.41% | 3.87% | 5.13% | Unsecured senior notes | 650,000 |
| November 2022 | 5.25% | 3.63% | 4.54% | | $ | 825,000 |
| | | | |
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Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance |
The effect of derivative instruments qualifying and designated as hedging instruments and the related hedged items in fair value hedges on the consolidated statements of comprehensive income (loss) was as follows: | | | | | | | | | | | | | | | | | | | | | | Location of Gain (Loss) Recognized in Income on Derivative and Hedged Item | | Amount of Gain (Loss) Recognized in Income on Derivative | | Amount of Gain (Loss) Recognized in Income on Hedged Item | Derivatives and Related Hedged Items under ASC 815-20 Fair Value Hedging Relationships | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | (In thousands) | | | | | | | | | | | Interest rate swaps | | Interest expense, net of interest capitalized | | $ | 7,448 |
| | $ | 11,276 |
| | $ | 7,203 |
| | $ | 15,743 |
| Interest rate swaps | | Other income (expense) | | (3,625 | ) | | 10,779 |
| | 5,072 |
| | (7,533 | ) |
| |
| | $ | 3,823 |
| | $ | 22,055 |
| | $ | 12,275 |
| | $ | 8,210 |
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Cash flow hedge |
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Derivative instruments disclosure |
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Schedule of Interest Rate Derivatives |
At December 31, 2016 and December 31, 2015, we maintained interest rate swap agreements on the following floating-rate debt instruments: | | | | | | | | | Debt Instrument | Swap Notional as of December 31, 2016 (In thousands) | Maturity | Debt Floating Rate | All-in Swap Fixed Rate | Celebrity Reflection term loan |
| $436,333 |
| October 2024 | LIBOR plus | 0.40% | 2.85% | Quantum of the Seas term loan | 612,500 |
| October 2026 | LIBOR plus | 1.30% | 3.74% | Anthem of the Seas term loan | 634,375 |
| April 2027 | LIBOR plus | 1.30% | 3.86% | Ovation of the Seas term loan | 795,417 |
| April 2028 | LIBOR plus | 1.00% | 3.16% | Harmony of the Seas term loan (1) | 701,056 |
| May 2028 | EURIBOR plus | 1.15% | 2.26% | | $ | 3,179,681 |
| | | | |
(1) Interest rate swap agreements hedging the Euro-denominated term loan for Harmony of the Seas include EURIBOR zero-floors matching the hedged debt EURIBOR zero-floor. Amount presented is based on the exchange rate as of December 31, 2016.
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Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance |
The effect of derivative instruments qualifying and designated as cash flow hedging instruments on the consolidated financial statements was as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion) | | Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | | Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion) | | Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) | | Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness testing) | Derivatives under ASC 815-20 Cash Flow Hedging Relationships | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | (In thousands) | | | | | | | | | | | | | | | | | Interest rate swaps | | (31,049 | ) | | (52,602 | ) | | Interest expense | | (41,480 | ) | | (36,401 | ) | | Other income (expense) | | — |
| | 38 |
| Foreign currency forward contracts | | (51,092 | ) | | (141,470 | ) | | Depreciation and amortization expenses | | (8,114 | ) | | (2,871 | ) | | Other income (expense) | | — |
| | — |
| Foreign currency forward contracts | | — |
| | — |
| | Other income (expense) | | (14,342 | ) | | 7,580 |
| | Other income (expense) | | (59 | ) | | — |
| Foreign currency forward contracts | | — |
| | — |
| | Other indirect operating expenses | | (207 | ) | | — |
| | Other income (expense) | | — |
| | — |
| Foreign currency collar options | | — |
| | (64,559 | ) | | Depreciation and amortization expenses | | (2,408 | ) | | (1,605 | ) | | Other income (expense) | | — |
| | — |
| Fuel swaps | | — |
| | — |
| | Other income (expense) | | 13,685 |
| | (9,583 | ) | | Other income (expense) | | — |
| | — |
| Fuel swaps | | 156,139 |
| | (439,040 | ) | | Fuel | | (284,384 | ) | | (248,744 | ) | | Other income (expense) | | (751 | ) | | (487 | ) | | | $ | 73,998 |
| | $ | (697,671 | ) | | | | $ | (337,250 | ) | | $ | (291,624 | ) | | | | $ | (810 | ) | | $ | (449 | ) |
|