XML 47 R28.htm IDEA: XBRL DOCUMENT

Fair Value Measurements and Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2023

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 September 30, 2023										Fair Value Measurements at December 31, 2022
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)	$	600,117	$	600,117	$	600,117	$	—	$	—	$	1,935,005	$	1,935,005	$	1,935,005	$	—	$	—
Total Assets	$	600,117	$	600,117	$	600,117	$	—	$	—	$	1,935,005	$	1,935,005	$	1,935,005	$	—	$	—
Liabilities:
Long-term debt (including current portion of debt)(5)	$	19,641,558	$	20,856,937	$	—	$	20,856,937	$	—	$	23,039,859	$	22,856,306	$	—	$	22,856,306	$	—
Total Liabilities	$	19,641,558	$	20,856,937	$	—	$	20,856,937	$	—	$	23,039,859	$	22,856,306	$	—	$	22,856,306	$	—

(1) Inputs based on quoted prices (unadjusted) in active markets for identical assets 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. We valued our senior notes and convertible notes using a quoted market price, which is considered a Level 2 input as it is observable in the market; however, these instruments have a limited trading volume and as such this fair value estimate is not necessarily indicative of the value at which the instruments could be retired or transferred.

(3) Inputs that are unobservable. The Company did not use any Level 3 inputs as of September 30, 2023 and December 31, 2022.

(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.

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Assets and liabilities that are recorded at fair value have been categorized based upon the fair value hierarchy. 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 September 30, 2023								Fair Value Measurements at December 31, 2022
Description	Total		Level 1(1)		Level 2(2)		Level 3(3)		Total		Level 1(1)		Level 2(2)		Level 3(3)
Assets:
Derivative financial instruments(4)	$	217,881	$	—	$	217,881	$	—	$	203,802	$	—	$	203,802	$	—
Total Assets	$	217,881	$	—	$	217,881	$	—	$	203,802	$	—	$	203,802	$	—
Liabilities:
Derivative financial instruments(4)	$	172,948	$	—	$	172,948	$	—	$	135,608	$	—	$	135,608	$	—
Total Liabilities	$	172,948	$	—	$	172,948	$	—	$	135,608	$	—	$	135,608	$	—

(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. No Level 1 inputs were used in fair value measurements of other financial instruments as of September 30, 2023 and December 31, 2022.

(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 September 30, 2023 and December 31, 2022.

(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.

Offsetting Assets

The following table presents information about the Company’s offsetting of financial assets and 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 September 30, 2023								As of December 31, 2022
	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	$	217,881	$	(124,669)	$	—	$	93,212	$	203,802	$	(105,228)	$	—	$	98,574
Total	$	217,881	$	(124,669)	$	—	$	93,212	$	203,802	$	(105,228)	$	—	$	98,574
	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	$	(172,948)	$	124,669	$	—	$	(48,279)	$	(135,608)	$	105,228	$	—	$	(30,380)
Total	$	(172,948)	$	124,669	$	—	$	(48,279)	$	(135,608)	$	105,228	$	—	$	(30,380)

Offsetting Liabilities

The following table presents information about the Company’s offsetting of financial assets and 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 September 30, 2023								As of December 31, 2022
	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	$	217,881	$	(124,669)	$	—	$	93,212	$	203,802	$	(105,228)	$	—	$	98,574
Total	$	217,881	$	(124,669)	$	—	$	93,212	$	203,802	$	(105,228)	$	—	$	98,574
	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	$	(172,948)	$	124,669	$	—	$	(48,279)	$	(135,608)	$	105,228	$	—	$	(30,380)
Total	$	(172,948)	$	124,669	$	—	$	(48,279)	$	(135,608)	$	105,228	$	—	$	(30,380)

Schedule of Price Risk Derivatives

As of September 30, 2023 and December 31, 2022, we had the following outstanding fuel swap agreements:


	Fuel Swap Agreements
	As of September 30, 2023	As of December 31, 2022
Designated as hedges:	(metric tons)
2023	224,100	825,651
2024	1,054,501	—
2025	685,400	—


	Fuel Swap Agreements
	As of September 30, 2023		As of December 31, 2022
Designated hedges as a % of projected fuel purchases:	(% hedged)
2023	54	%	50	%
2024	60	%	—	%
2025	39	%	—	%

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

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 September 30, 2023		As of December 31, 2022		Balance Sheet Location	As of September 30, 2023		As of December 31, 2022
		Fair Value		Fair Value			Fair Value		Fair Value
Derivatives designated as hedging instruments under ASC 815-20(1)
Interest rate swaps	Other assets	$	114,101	$	115,049	Other long-term liabilities	$	—	$	—
Foreign currency forward contracts	Derivative financial instruments	13,041		18,892		Derivative financial instruments	156,714		84,953
Foreign currency forward contracts	Other assets	8,587		25,504		Other long-term liabilities	14,332		149
Fuel swaps	Derivative financial instruments	57,046		40,191		Derivative financial instruments	1,451		46,359
Fuel swaps	Other assets	23,522		4,166		Other long-term liabilities	451		4,147
Total derivatives designated as hedging instruments under 815-20		$	216,297	$	203,802		$	172,948	$	135,608
Derivatives not designated as hedging instruments under ASC 815-20



Fuel swaps	Other Assets	1,584		—		Other long-term liabilities	—		—
Total derivatives not designated as hedging instruments under 815-20		1,584		—			—		—
Total derivatives		$	217,881	$	203,802		$	172,948	$	135,608

(1)Subtopic 815-20 “Hedging-General” under ASC 815.

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 September 30, 2023		As of December 31, 2022
Foreign currency debt	Current portion of long-term debt	$	61,806	$	62,282
Foreign currency debt	Long-term debt	525,450		399,577
		$	587,256	$	461,859

Non Derivative Instruments Qualifying and Designated as Hedging Instruments in Net Investment Hedges

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	Quarter Ended September 30, 2023		Quarter Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Foreign Currency Debt	$	18,262	$	22,464	$	7,024	$	42,023
	$	18,262	$	22,464	$	7,024	$	42,023

Not Designated as Hedging Instrument

Derivative Instruments

Derivative Instruments, Gain (Loss)

The effect of derivatives not designated as hedging instruments on the consolidated financial statements was as follows (in thousands):


		Amount of (Loss) Gain Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments under ASC 815-20	Location of Gain (Loss) Recognized in Income on Derivatives	Quarter Ended September 30, 2023		Quarter Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Foreign currency forward contracts	Other (expense) income	$	(42,786)	$	(88,440)	$	(30,414)	$	(176,322)
Fuel swaps	Other (expense) income	592		(230)		592		36
		$	(42,194)	$	(88,670)	$	(29,822)	$	(176,286)

Cash flow hedge

Derivative Instruments

Schedule of Interest Rate Derivatives

At September 30, 2023 and December 31, 2022, we maintained interest rate swap agreements on the following floating-rate debt instruments:


Debt Instrument	Swap Notional as of September 30, 2023 (in thousands)		Maturity	Debt Floating Rate (3)		All-in Swap Fixed Rate as of September 30, 2023
Celebrity Reflection term loan	$	81,813	October 2024	LIBOR plus	0.40%	2.85%
Quantum of the Seas term loan	214,375		October 2026	LIBOR plus	1.30%	3.74%
Anthem of the Seas term loan	241,667		April 2027	LIBOR plus	1.30%	3.86%
Ovation of the Seas term loan	345,833		April 2028	LIBOR plus	1.00%	3.16%
Harmony of the Seas term loan (1)	305,818		May 2028	EURIBOR plus	1.15%	2.26%
Odyssey of the Seas term loan (2)	364,167		October 2032	LIBOR plus	0.96%	3.21%
Odyssey of the Seas term loan (2)	182,083		October 2032	LIBOR plus	0.96%	2.84%
	$	1,735,756

(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 September 30, 2023.

(2)Interest rate swap agreements hedging the term loan of Odyssey of the Seas include LIBOR zero-floors matching the debt LIBOR zero-floor.

(3)During the quarter ended June 30, 2023, we completed our transition from LIBOR to Term SOFR rates for substantially all of our Interest rate swap agreements, with such transition to take effect at the next respective interest reset date for each such agreement.

Derivative Instruments, Gain (Loss)

The effect of derivative instruments qualifying and designated as cash flow hedging instruments on the consolidated financial statements was as follows (in thousands):


Derivatives under ASC 815-20 Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Loss on Derivatives
	Quarter Ended September 30, 2023		Quarter Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Interest rate swaps	$	22,639	$	55,016	$	35,439	$	159,132
Foreign currency forward contracts	(133,669)		(148,275)		(120,921)		(311,252)
Fuel swaps	157,650		(132,208)		91,355		134,059
	$	46,620	$	(225,467)	$	5,873	$	(18,061)

Fair Value Hedging

Derivative Instruments

Derivative Instruments, Gain (Loss)

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):


Derivatives and Related Hedged Items under ASC 815-20 Fair Value Hedging Relationships	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
		Quarter Ended September 30, 2023		Quarter Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022		Quarter Ended September 30, 2023		Quarter Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Interest rate swaps	Interest expense, net of interest capitalized	$	—	$	966	$	—	$	(3,569)	$	—	$	(4,417)	$	—	$	4,534
		$	—	$	966	$	—	$	(3,569)	$	—	$	(4,417)	$	—	$	4,534