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Fair Value Measurements and Derivative Instruments (Tables)

12 Months Ended

Dec. 31, 2017

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, 2017 Using										Fair Value Measurements at December 31, 2016 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⁾	$	120,112	$	120,112	$	120,112	$	—	$	—	$	132,603	$	132,603	$	132,603	$	—	$	—
Total Assets	$	120,112	$	120,112	$	120,112	$	—	$	—	$	132,603	$	132,603	$	132,603	$	—	$	—
Liabilities:
Long-term debt (including current portion of long-term debt)⁽⁵⁾	$	7,506,312	$	8,038,092	$	—	$	8,038,092	$	—	$	9,347,051	$	9,859,266	$	—	$	9,859,266	$	—
Total Liabilities	$	7,506,312	$	8,038,092	$	—	$	8,038,092	$	—	$	9,347,051	$	9,859,266	$	—	$	9,859,266	$	—

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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, 2017 and December 31, 2016.


(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. This does not include our capital lease obligations.

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, 2017 Using								Fair Value Measurements at December 31, 2016 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⁾	$	320,385	$	—	$	320,385	$	—	$	19,397	$	—	$	19,397	$	—
Investments⁽⁵⁾	3,340		3,340		—		—		3,576		3,576		—		—
Total Assets	$	323,725	$	3,340	$	320,385	$	—	$	22,973	$	3,576	$	19,397	$	—
Liabilities:
Derivative financial instruments⁽⁶⁾	$	115,961	$	—	$	115,961	$	—	$	373,497	$	—	$	373,497	$	—
Total Liabilities	$	115,961	$	—	$	115,961	$	—	$	373,497	$	—	$	373,497	$	—

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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. 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, 2017 and December 31, 2016.


(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.

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, 2017									As of December 31, 2016
	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	$	320,385	$	(104,751	)	$	—	$	215,634	$	19,397	$	(19,397	)	$	—	$	—
Total	$	320,385	$	(104,751	)	$	—	$	215,634	$	19,397	$	(19,397	)	$	—	$	—

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, 2017										As of December 31, 2016
	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	$	(115,961	)	$	104,751	$	—	$	(11,210	)	$	(373,497	)	$	19,397	$	7,213	$	(346,887	)
Total	$	(115,961	)	$	104,751	$	—	$	(11,210	)	$	(373,497	)	$	19,397	$	7,213	$	(346,887	)

Schedule of Cash Flows From Derivative Instruments

The following table presents information on the Company's cash flows from derivative instruments classified as investing activities in our Consolidated Statements of Cash Flows (in thousands):



	For the Years Ended December 31,
	2017			2016			2015
Cash received on settlement of derivative financial instruments	$	63,777		$	110,637		$	2,148
Cash paid on settlement of derivative financial instruments	(553		)	(323,839		)	(180,745		)
Cash received (paid) on settlement of derivative financial instruments	$	63,224		$	(213,202	)	$	(178,597	)

Fuel Swap Agreements

As of December 31, 2017 and 2016, we had the following outstanding fuel swap agreements:



	Fuel Swap Agreements
	As of December 31, 2017	As of December 31, 2016
	(metric tons)
2017	—	799,065
2018	673,700	616,300
2019	668,500	521,000
2020	531,200	306,500
2021	224,900	—



	Fuel Swap Agreements
	As of December 31, 2017		As of December 31, 2016
	(% hedged)
Projected fuel purchases for year:
2017	—		60	%
2018	50	%	44	%
2019	46	%	35	%
2020	36	%	20	%
2021	14	%	—	%

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, 2017		As of December 31, 2016		Balance Sheet Location	As of December 31, 2017		As of December 31, 2016
	Balance Sheet Location	Fair Value		Fair Value		Balance Sheet Location	Fair Value		Fair Value
(In thousands)
Derivatives designated as hedging instruments under ASC 815-20⁽¹⁾
Interest rate swaps	Other assets	$	7,330	$	5,246	Other long-term liabilities	$	46,509	$	57,679
Foreign currency forward contracts	Derivative financial instruments	68,352		—		Derivative financial instruments	—		5,574
Foreign currency forward contracts	Other assets	158,879		—		Other long-term liabilities	6,625		68,165
Fuel swaps	Derivative financial instruments	13,137		—		Derivative financial instruments	38,488		129,486
Fuel swaps	Other assets	51,265		13,608		Other long-term liabilities	13,411		95,125
Total derivatives designated as hedging instruments under ASC 815-20		298,963		18,854			105,033		356,029
Derivatives not designated as hedging instruments under ASC 815-20
Foreign currency forward contracts	Derivative Financial Instruments	9,945		—		Derivative financial instruments	2,933		—
Foreign currency forward contracts	Other assets	2,793		—		Other long-term liabilities	1,139		—
Fuel swaps	Derivative financial instruments	7,886		—		Derivative financial instruments	6,043		11,532
Fuel swaps	Other assets	798		543		Other long-term liabilities	813		5,936
Total derivatives not designated as hedging instruments under ASC 815-20		21,422		543			10,928		17,468
Total derivatives		$	320,385	$	19,397		$	115,961	$	373,497

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(1)	Accounting Standard Codification 815-20 "Derivatives and Hedging."

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, 2017		As of December 31, 2016
(In thousands)
Foreign currency debt	Current portion of long-term debt	$	70,097	$	61,601
Foreign currency debt	Long-term debt	225,226		249,624
		$	295,323	$	311,225

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, 2017			Year Ended December 31, 2016			Year Ended December 31, 2017		Year Ended December 31, 2016
(In thousands)
Foreign Currency Debt	$	(38,971	)	$	20,295	Other expense	$	—	$	—
	$	(38,971	)	$	20,295		$	—	$	—

Not Designated as Hedging Instrument

Derivative instruments disclosure

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, 2017			Year Ended December 31, 2016
(In thousands)
Foreign currency forward contracts	Other expense	$	61,952		$	(51,029	)
Fuel swaps	Other expense	(1,133		)	(1,000		)
		$	60,819		$	(52,029	)

Fair value hedging

Derivative instruments disclosure

Schedule of Interest Rate Derivatives

At December 31, 2017 and December 31, 2016, we maintained interest rate swap agreements on the following fixed-rate debt instruments:



Debt Instrument	Swap Notional as of December 31, 2017 (In thousands)		Maturity	Debt Fixed Rate	Swap Floating Rate: LIBOR plus	All-in Swap Floating Rate as of December 31, 2017
Oasis of the Seas term loan	$	140,000	October 2021	5.41%	3.87%	5.44%
Unsecured senior notes	650,000		November 2022	5.25%	3.63%	5.05%
	$	790,000

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, 2017			Year Ended December 31, 2016			Year Ended December 31, 2017		Year Ended December 31, 2016
(In thousands)
Interest rate swaps	Interest expense, net of interest capitalized	$	3,007		$	7,448		$	—	$	7,203
Interest rate swaps	Other expense	(3,139		)	(3,625		)	6,065		5,072
		$	(132	)	$	3,823		$	6,065	$	12,275

Cash flow hedge

Derivative instruments disclosure

Schedule of Interest Rate Derivatives

At December 31, 2017 and December 31, 2016, we maintained interest rate swap agreements on the following floating-rate debt instruments:



Debt Instrument	Swap Notional as of December 31, 2017 (In thousands)		Maturity	Debt Floating Rate		All-in Swap Fixed Rate
Celebrity Reflection term loan	$	381,792	October 2024	LIBOR plus	0.40%	2.85%
Quantum of the Seas term loan	551,250		October 2026	LIBOR plus	1.30%	3.74%
Anthem of the Seas term loan	573,958		April 2027	LIBOR plus	1.30%	3.86%
Ovation of the Seas term loan	726,250		April 2028	LIBOR plus	1.00%	3.16%
Harmony of the Seas term loan ⁽¹⁾	728,373		May 2028	EURIBOR plus	1.15%	2.26%
	$	2,961,623

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(1)	Interest rate swap agreements hedging the Euro-denominated term loan for Harmony of the Seas include a EURIBOR zero-floor matching the hedged debt EURIBOR zero-floor. Amount presented is based on the exchange rate as of December 31, 2017.

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, 2017			Year Ended December 31, 2016				Year Ended December 31, 2017			Year Ended December 31, 2016				Year Ended December 31, 2017		Year Ended December 31, 2016
(In thousands)
Interest rate swaps	$	(13,312	)	$	(31,049	)	Interest expense	$	(31,603	)	$	(41,480	)	Other expense	$	—	$	—
Foreign currency forward contracts	276,573			(51,092		)	Depreciation and amortization expenses	(10,840		)	(8,114		)	Other expense	131		—
Foreign currency forward contracts	—			—			Other expense	(9,472		)	(14,342		)	Other expense	—		(59		)
Foreign currency forward contracts	—			—			Other indirect operating expenses	—			(207		)	Other expense	—		—
Foreign currency collar options	—			—			Depreciation and amortization expenses	(2,408		)	(2,408		)	Other expense	—		—
Fuel swaps	—			—			Other expense	7,382			13,685			Other expense	—		—
Fuel swaps	118,604			156,139			Fuel	(141,689		)	(284,384		)	Other expense	2,738		(751		)
	$	381,865		$	73,998			$	(188,630	)	$	(337,250	)		$	2,869	$	(810	)