Fair Value Measurements and Derivative Instruments (Tables)
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12 Months Ended |
Dec. 31, 2022 |
Derivative instruments disclosure |
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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, 2022 | | Fair Value Measurements at December 31, 2021 | 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) | $ | 1,935,005 | | | $ | 1,935,005 | | | $ | 1,935,005 | | | $ | — | | | $ | — | | | $ | 2,701,770 | | | $ | 2,701,770 | | | $ | 2,701,770 | | | $ | — | | | $ | — | | Total Assets | $ | 1,935,005 | | | $ | 1,935,005 | | | $ | 1,935,005 | | | $ | — | | | $ | — | | | $ | 2,701,770 | | | $ | 2,701,770 | | | $ | 2,701,770 | | | $ | — | | | $ | — | | Liabilities: | | | | | | | | | | | | | | | | | | | | Long-term debt (including current portion of long-term debt)(5) | $ | 23,039,859 | | | $ | 22,856,306 | | | $ | — | | | $ | 22,856,306 | | | $ | — | | | $ | 20,618,065 | | | $ | 22,376,480 | | | $ | — | | | $ | 22,376,480 | | | $ | — | | Total Liabilities | $ | 23,039,859 | | | $ | 22,856,306 | | | $ | — | | | $ | 22,856,306 | | | $ | — | | | $ | 20,618,065 | | | $ | 22,376,480 | | | $ | — | | | $ | 22,376,480 | | | $ | — | |
___________________________________________________________________ (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, 2022 and 2021. (4)Consists of cash and marketable securities with original maturities of less than 90 days. (5)Consists of unsecured revolving credit facilities, senior notes, term loans and convertible notes. These amounts do not include our finance lease obligations. The following table presents information about the Company’s nonfinancial instruments recorded at fair value on a nonrecurring basis (in thousands): | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2022 | Description | Total Carrying Amount | Total Fair Value | Level 3 | Total Impairment for the year ended December 31, 2022 (1) | Long-lived assets | — | | — | | — | | $ | 10,186 | | Total | — | | — | | — | | $ | 10,186 | |
(1) Amount is primarily composed of construction in progress assets that were impaired during the year ended December 31, 2022 due to a reduction in scope or the decision to not complete the projects. The impairments were calculated based on orderly liquidation values. The fair value of these assets was estimated as of the date the assets were last impaired.
| | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2021 | Description | Total Carrying Amount | Total Fair Value | Level 3 | Total Impairment for the year ended December 31, 2021 (1) | Long-lived assets | — | | — | | — | | $ | 55,213 | | Total | — | | — | | — | | $ | 55,213 | |
(1) Amount is primarily composed of construction in progress assets that were impaired during the year ended 2021 due to a reduction in scope or the decision to not complete the projects. The impairments were calculated based on orderly liquidation values. The fair value of these assets was estimated as of the date the assets were last impaired.
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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, 2022 | | Fair Value Measurements at December 31, 2021 | 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) | $ | 203,802 | | | $ | — | | | $ | 203,802 | | | $ | — | | | $ | 69,808 | | | $ | — | | | $ | 69,808 | | | $ | — | | | | | | | | | | | | | | | | | | Total Assets | $ | 203,802 | | | $ | — | | | $ | 203,802 | | | $ | — | | | $ | 69,808 | | | $ | — | | | $ | 69,808 | | | $ | — | | Liabilities: | | | | | | | | | | | | | | | | Derivative financial instruments(5) | $ | 135,608 | | | $ | — | | | $ | 135,608 | | | $ | — | | | $ | 200,541 | | | $ | — | | | $ | 200,541 | | | $ | — | | Total Liabilities | $ | 135,608 | | | $ | — | | | $ | 135,608 | | | $ | — | | | $ | 200,541 | | | $ | — | | | $ | 200,541 | | | $ | — | |
___________________________________________________________________ (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 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. Derivative instrument fair values take into account the creditworthiness of the counterparty and the Company. (3)Inputs that are unobservable. No Level 3 inputs were used in fair value measurements of other financial instruments as of December 31, 2022 and 2021 (4)Consists of foreign currency forward contracts, interest rate and fuel swaps. Refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type. (5)Consists of foreign currency forward contracts, interest rate and fuel swaps. Refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type.
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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 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements | | | As of December 31, 2022 | | As of December 31, 2021 | | | 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 Liabilities | | Cash Collateral Received | | Net Amount of Derivative Assets | | | | | | | | | | | | | | | | | | Derivatives subject to master netting agreements | | $ | 203,802 | | | $ | (105,228) | | | $ | — | | | $ | 98,574 | | | $ | 69,808 | | | $ | (67,995) | | | $ | — | | | $ | 1,813 | | Total | | $ | 203,802 | | | $ | (105,228) | | | $ | — | | | $ | 98,574 | | | $ | 69,808 | | | $ | (67,995) | | | $ | — | | | $ | 1,813 | |
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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 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements | | | As of December 31, 2022 | | As of December 31, 2021 | | | 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 Assets | | Cash Collateral Pledged | | Net Amount of Derivative Liabilities | | | | | | | | | | | | | | | | | | Derivatives subject to master netting agreements | | $ | (135,608) | | | $ | 105,228 | | | $ | — | | | $ | (30,380) | | | $ | (200,541) | | | $ | 67,995 | | | $ | 44,411 | | | $ | (88,135) | | Total | | $ | (135,608) | | | $ | 105,228 | | | $ | — | | | $ | (30,380) | | | $ | (200,541) | | | $ | 67,995 | | | $ | 44,411 | | | $ | (88,135) | |
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Fuel Swap Agreements |
As of December 31, 2022 and December 31, 2021, we had the following outstanding fuel swap agreements: | | | | | | | | | | | | | Fuel Swap Agreements | | As of December 31, 2022 | | As of December 31, 2021 | | (metric tons) | Designated as hedges: | | | | 2023 | 825,651 | | | 249,050 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Fuel Swap Agreements | | As of December 31, 2022 | | As of December 31, 2021 | | (% hedged) | Designated hedges as a % of projected fuel purchases: | | | | 2023 | 50 | % | | 15 | % | | | | | | | | | | | | | | | | |
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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 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value of Derivative Instruments | | Asset Derivatives | | Liability Derivatives | | Balance Sheet Location | | As of December 31, 2022 | | As of December 31, 2021 | | Balance Sheet Location | | As of December 31, 2022 | | As of December 31, 2021 | | | Fair Value | | Fair Value | | | Fair Value | | Fair Value | Derivatives designated as hedging instruments under ASC 815-20(1) | | | | | | | | | | | | Interest rate swaps | Other assets | | $ | 115,049 | | | $ | — | | | Other long-term liabilities | | $ | — | | | $ | 62,080 | | Interest rate swaps | Derivative financial instruments | | — | | | 6,478 | | | Derivative Financial Instruments | | — | | | — | | Foreign currency forward contracts | Derivative financial instruments | | 18,892 | | | 7,357 | | | Derivative financial instruments | | 84,953 | | | 116,027 | | Foreign currency forward contracts | Other assets | | 25,504 | | | 2,070 | | | Other long-term liabilities | | 150 | | | 8,813 | | Fuel swaps | Derivative financial instruments | | 40,191 | | | 31,919 | | | Derivative financial instruments | | 46,359 | | | 7,944 | | Fuel swaps | Other assets | | 4,166 | | | 13,452 | | | Other long-term liabilities | | 4,147 | | | 1,202 | | Total derivatives designated as hedging instruments under ASC 815-20 | | | 203,802 | | | 61,276 | | | | | 135,609 | | | 196,066 | | Derivatives not designated as hedging instruments under ASC 815-20 | | | | | | | | | | | | Fuel swaps | Derivative financial instruments | | — | | | 8,430 | | | Derivative financial instruments | | — | | | 3,264 | | Fuel swaps | Other assets | | — | | | 102 | | | Other long-term liabilities | | — | | | 1,211 | | Total derivatives not designated as hedging instruments under ASC 815-20 | | | — | | | 8,532 | | | | | — | | | 4,475 | | Total derivatives | | | $ | 203,802 | | | $ | 69,808 | | | | | $ | 135,609 | | | $ | 200,541 | |
___________________________________________________________________ (1)Subtopic 815-20 “Hedging-General” under ASC 815. The fair value and line item caption of derivative instruments recorded within our consolidated balance sheets for the cumulative basis adjustment for fair value hedges were as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | Line Item in the Statement of Financial Position Where the Hedged Item is Included | | Carrying Amount of the Hedged Liabilities | | Cumulative amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities | | As of December 31, 2022 | | As of December 31, 2021 | | As of December 31, 2022 | | As of December 31, 2021 | Current portion of long-term debt and Long-term debt | | $ | — | | | $ | 655,502 | | | $ | — | | | $ | 6,428 | | | | $ | — | | | $ | 655,502 | | | $ | — | | | $ | 6,428 | |
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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 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | Carrying Value | Non-derivative instrument designated as hedging instrument under ASC 815-20 | | Balance Sheet Location | | As of December 31, 2022 | | As of December 31, 2021 | Foreign currency debt | | Current portion of long-term debt | | $ | 62,282 | | | $ | 75,518 | | Foreign currency debt | | Long-term debt | | 399,577 | | | 34,795 | | | | | | $ | 461,859 | | | $ | 110,313 | |
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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 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) | Non-derivative instruments under ASC 815-20 Net Investment Hedging Relationships | | Year Ended December 31, 2022 | | Year Ended December 31, 2021 | | Year Ended December 31, 2020 | Foreign Currency Debt | | $ | 4,757 | | | $ | 7,837 | | | $ | (28,062) | | | | $ | 4,757 | | | $ | 7,837 | | | $ | (28,062) | |
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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 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Amount of Gain (Loss) Recognized in Income on Derivative | Derivatives Not Designated as Hedging Instruments under ASC 815-20 | | Location of Gain (Loss) Recognized in Income on Derivative | | Year Ended December 31, 2022 | | Year Ended December 31, 2021 | | Year Ended December 31, 2020 | Foreign currency forward contracts | | Other (expense) income | | $ | (101,837) | | | $ | (30,903) | | | $ | (18,961) | | Fuel swaps | | Other (expense) income | | (108) | | | 33,720 | | | (102,740) | | | | | | $ | (101,945) | | | $ | 2,817 | | | $ | (121,701) | |
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Fair value hedging |
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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 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 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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, 2022 | | Year Ended December 31, 2021 | | Year Ended December 31, 2020 | | Year Ended December 31, 2022 | | Year Ended December 31, 2021 | | Year Ended December 31, 2020 | Interest rate swaps | | Interest expense, net of interest capitalized | | $ | (3,569) | | | $ | (1,349) | | | $ | 23,819 | | | $ | 4,534 | | | $ | 11,083 | | | $ | (18,813) | | | | | | $ | (3,569) | | | $ | (1,349) | | | $ | 23,819 | | | $ | 4,534 | | | $ | 11,083 | | | $ | (18,813) | |
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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, 2022, we maintained interest rate swap agreements on the following floating-rate debt instruments: | | | | | | | | | | | | | | | | | | Debt Instrument | Swap Notional as of December 31, 2022 (In thousands) | Maturity | Debt Floating Rate | All-in Swap Fixed Rate | Celebrity Reflection term loan | $ | 109,083 | | October 2024 | LIBOR plus | 0.40% | 2.85% | Quantum of the Seas term loan | 245,000 | | October 2026 | LIBOR plus | 1.30% | 3.74% | Anthem of the Seas term loan | 271,875 | | April 2027 | LIBOR plus | 1.30% | 3.86% | Ovation of the Seas term loan | 380,417 | | April 2028 | LIBOR plus | 1.00% | 3.16% | Harmony of the Seas term loan (1) | 338,990 | | May 2028 | EURIBOR plus | 1.15% | 2.26% | Odyssey of the Seas term loan(2) | 383,333 | | October 2032 | LIBOR plus | 0.96% | 3.21% | Odyssey of the Seas term loan(2) | 191,667 | | October 2032 | LIBOR plus | 0.96% | 2.84% | | $ | 1,920,365 | | | | | |
___________________________________________________________________ (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, 2022. (2) Interest rate swap agreements hedging the term loan of Odyssey of the Seas include LIBOR zero-floors matching the debt LIBOR zero-floor. The effective dates of the $383.3 million and $191.7 million interest rate swap agreements are October 2020 and October 2022, respectively. The unsecured term loan for the financing of Odyssey of the Seas was drawn on March 2021.
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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 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss) on Derivative | Derivatives under ASC 815-20 Cash Flow Hedging Relationships | | Year Ended December 31, 2022 | | Year Ended December 31, 2021 | | Year Ended December 31, 2020 | Interest rate swaps | | $ | 165,377 | | | $ | 45,572 | | | $ | (112,960) | | Foreign currency forward contracts | | (145,832) | | | (203,129) | | | 130,426 | | Fuel swaps | | 151,495 | | | 140,890 | | | (58,575) | | | | $ | 171,040 | | | $ | (16,667) | | | $ | (41,109) | |
The table below represents amounts excluded from the assessment of effectiveness for our net investment hedging instruments for which the difference between changes in fair value and periodic amortization is recorded in accumulated other comprehensive loss (in thousands): | | | | | | | | | Gain (Loss) Recognized in Income (Net Investment Excluded Components) | | Year Ended December 31, 2022 | Net inception fair value at January 1, 2022 | | $ | (554) | | Amount of gain recognized in income on derivatives for the year ended December 31, 2022 | | 554 | | Amount of loss remaining to be amortized in accumulated other comprehensive loss as of December 31, 2022 | | — | | Fair value at December 31, 2022 | | $ | — | |
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