Note 13. Fair Value Measurements and Derivative Instruments

Fair Value Measurements

The estimated fair value of our financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows (in thousands):

	Fair Value Measurements at December 31, 2012 Using								Fair Value Measurements at December 31, 2011 Using

Description	Total		Level 1⁽¹⁾		Level 2⁽²⁾		Level 3⁽³⁾		Total		Level 1⁽¹⁾		Level 2⁽²⁾		Level 3⁽³⁾
Assets:
Cash and cash equivalents⁽⁴⁾	$	194,855		194,855		—		—	$	262,186		262,186		—		—

Total Assets	$	194,855	$	194,855	$	—	$	—	$	262,186	$	262,186	$	—	$	—

Liabilities:
Long-term debt (including current portion of long-term debt)⁽⁵⁾	$	8,859,310		3,917,398		4,941,912		—	$	8,557,095		3,424,722		5,132,373		—

Total Liabilities	$	8,859,310	$	3,917,398	$	4,941,912	$	—	$	8,557,095	$	3,424,722	$	5,132,373	$	—

(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 our creditworthiness based on publicly available credit default swap rates.
(3): Inputs that are unobservable. The Company did not use any Level 3 inputs as of December 31, 2012 and December 31, 2011.
(4): Consists of cash and marketable securities with original maturities of less than 90 days.
(5): Consists of unsecured revolving credit facilities, unsecured senior notes, senior debentures and unsecured term loans. Does not include our capital lease obligations.

Other Financial Instruments

The carrying amounts of accounts receivable, accounts payable, accrued interest and accrued expenses approximate fair value at December 31, 2012 and December 31, 2011.

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 December 31, 2012 Using								Fair Value Measurements at December 31, 2011 Using

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⁾	$	96,489		—		96,489		—	$	201,130		—		201,130		—
Investments⁽⁵⁾	$	6,231		6,231		—		—	$	6,941		6,941		—		—

Total Assets	$	102,720	$	6,231	$	96,489	$	—	$	208,071	$	6,941	$	201,130	$	—

Liabilities:
Derivative financial instruments⁽⁶⁾	$	85,119		—		85,119		—	$	84,344		—		84,344		—

Total Liabilities	$	85,119	$	—	$	85,119	$	—	$	84,344	$	—	$	84,344	$	—

(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. For fuel call options, fair value is determined by using the prevailing market price for the instruments consisting of published price quotes for similar assets based on recent transactions in an active market. 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, 2012 and December 31, 2011.
(4): Consists of foreign currency forward contracts and collar options, interest rate swaps, cross currency swaps, fuel swaps and purchased fuel call options. 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.
(6): Consists of interest rate swaps, fuel swaps, foreign currency forward contracts and sold fuel call options. Please refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type.

The reported fair values are based on a variety of factors and assumptions. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of December 31, 2012 or December 31, 2011, or that will be realized in the future, and do not include expenses that could be incurred in an actual sale or settlement.

The following table presents information about the Company's goodwill, indefinite-life intangible assets and long-lived assets for our Pullmantur reporting unit recorded at fair value on a nonrecurring basis (in thousands):

	Fair Value Measurements at December 31, 2012 Using

Description	Total		Level 1		Level 2		Level 3		Total Impairment
Pullmantur Goodwill⁽¹⁾	$	145,539		—		—		145,539	$	319,214
Indefinite-life intangible asset—Pullmantur trademarks and trade names⁽²⁾	$	204,866		—		—		204,866	$	17,356
Long-lived assets—Pullmantur aircraft⁽³⁾	$	62,288		—		—		62,288	$	48,874

(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 were the anticipated future transfer of vessels from our other cruise brands to Pullmantur. The discounted cash flow model used our 2013 projected operating results as a base. To that base we added future years' cash flows through 2017 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 10%.
(2): We estimated the fair value of our indefinite-life intangible asset using a discounted cash flow model and the relief-from-royalty method. We used a royalty rate of 3% based on comparable royalty agreements in the tourism and hospitality industry. These trademarks and trade names relate to Pullmantur and we have used a discount rate of 11%, comparable to the rate used in valuing the Pullmantur reporting unit.
(3): We estimated the fair value of our long-lived assets using an undiscounted cash flow model. A significant assumption in performing the undiscounted cash flow test was the number of years during which we expect to use these aircraft.

Goodwill and indefinite-life intangible assets related to Pullmantur with a carrying amount of $459.1 million and $218.9 million, respectively, were written down to its implied fair value of $145.5 million and its fair value of $204.9 million, respectively. The impairment charges, totaling approximately $336.6 million, were recognized during the fourth quarter of 2012 and are reported within Impairment of Pullmantur related assets in our consolidated statements of comprehensive income (loss). Pullmantur's goodwill and indefinite-life intangible assets are reported within goodwill and other assets, respectively, in our consolidated balance sheets.

Long-lived assets with a carrying amount of $116.3 million, were written down to their fair value of $62.3 million, resulting in a loss of $48.9 million which was recognized during the fourth quarter of 2012 and is reported within Impairment of Pullmantur related assets in our consolidated statements of comprehensive income (loss). Long-lived assets are reported within property and equipment, net in our consolidated balance sheets.

Derivative Instruments

We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We manage these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments pursuant to our hedging practices and policies. The financial impact of these hedging instruments is primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the amount, term and conditions of the derivative instrument with the underlying risk being hedged. Although certain of our derivative financial instruments do not qualify or are not accounted for under hedge accounting, we do not hold or issue derivative financial instruments for trading or other speculative purposes. We monitor our derivative positions using techniques including market valuations and sensitivity analyses.

We enter into various forward, swap and option contracts to manage our interest rate exposure and to limit our exposure to fluctuations in foreign currency exchange rates and fuel prices. These instruments are recorded on the balance sheet at their fair value and the vast majority are designated as hedges. We also have non-derivative financial instruments designated as hedges of our net investment in our foreign operations and investments.

At inception of the hedge relationship, a derivative instrument that hedges the exposure to changes in the fair value of a firm commitment or a recognized asset or liability is designated as a fair value hedge. A derivative instrument that hedges a forecasted transaction or the variability of cash flows related to a recognized asset or liability is designated as a cash flow hedge.

Changes in the fair value of derivatives that are designated as fair value hedges are offset against changes in the fair value of the underlying hedged assets, liabilities or firm commitments. Gains and losses on derivatives that are designated as cash flow hedges are recorded as a component of accumulated other comprehensive (loss) income until the underlying hedged transactions are recognized in earnings. The foreign currency transaction gain or loss of our non-derivative financial instruments designated as hedges of our net investment in foreign operations and investments are recognized as a component of accumulated other comprehensive (loss) income along with the associated foreign currency translation adjustment of the foreign operation.

On an ongoing basis, we assess whether derivatives used in hedging transactions are "highly effective" in offsetting changes in the fair value or cash flow of hedged items. We use the long-haul method to assess hedge effectiveness using regression analysis for each hedge relationship under our interest rate, foreign currency and fuel hedging programs. We apply the same methodology on a consistent basis for assessing hedge effectiveness to all hedges within each hedging program (i.e. interest rate, foreign currency and fuel). We perform regression analyses over an observation period commensurate with the contractual life of the derivative instrument, up to three years for interest rate and foreign currency relationships and four years for fuel relationships. High effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the changes in the fair values of the derivative instrument and the hedged item. The determination of ineffectiveness is based on the amount of dollar offset between the change in fair value of the derivative instrument and the change in fair value of the hedged item at the end of the reporting period. If it is determined that a derivative is not highly effective as a hedge or hedge accounting is discontinued, any change in fair value of the derivative since the last date at which it was determined to be effective is recognized in earnings. In addition, the ineffective portion of our highly effective hedges is recognized in earnings immediately and reported in other income (expense) in our consolidated statements of comprehensive income (loss).

Cash flows from derivative instruments that are designated as fair value or cash flow hedges are classified in the same category as the cash flows from the underlying hedged items. In the event that hedge accounting is discontinued, cash flows subsequent to the date of discontinuance are classified within investing activities. Cash flows from derivative instruments not designated as hedging instruments are classified as investing activities.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates to our long-term debt obligations including future interest payments. At December 31, 2012, approximately 45.8% of our long-term debt was effectively fixed as compared to 40% as of December 31, 2011. We use interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense.

Market risk associated with our long-term fixed rate debt is the potential increase in fair value resulting from a decrease in interest rates. We use interest rate swap agreements that effectively convert a portion of our fixed-rate debt to a floating-rate basis to manage this risk. At December 31, 2012 and 2011, we maintained interest rate swap agreements on the $420.0 million fixed rate portion of our Oasis of the Seas unsecured amortizing term loan. The interest rate swap agreements effectively changed the interest rate on the balance of the unsecured term loan, which was $315.0 million as of December 31, 2012, from a fixed rate of 5.41% to a LIBOR-based floating rate equal to LIBOR plus 3.87%, currently approximately 4.42%. These interest rate swap agreements are accounted for as fair value hedges.

During 2012, we terminated our interest rate swap agreements that effectively changed $350.0 million of debt with a fixed rate of 7.25% to LIBOR-based floating rate debt. The swaps were designated as fair value hedges and terminating the swaps did not result in a gain or loss. We received net cash proceeds of approximately $60.6 million upon termination. A $60.1 million increase to the carrying value of the debt is being amortized to reduce interest expense over the remaining life of the debt.

Market risk associated with our long-term floating rate debt is the potential increase in interest expense from an increase in interest rates. We use interest rate swap agreements that effectively convert a portion of our floating-rate debt to a fixed-rate basis to manage this risk. During 2012, we entered into forward-starting interest rate swap agreements that hedge the anticipated unsecured amortizing term loans that will finance our purchase of Quantum of the Seas and Anthem of the Seas. Forward-starting interest rate swaps hedging the Quantum of the Seas loan will effectively convert the interest rate for $735.0 million of the anticipated loan balance from LIBOR plus 1.30% to a fixed rate of 3.74% (inclusive of margin) beginning in October 2014. Forward-starting interest rate swaps hedging the Anthem of the Seas loan will effectively convert the interest rate for $725.0 million of the anticipated loan balance from LIBOR plus 1.30% to a fixed rate of 3.86% (inclusive of margin) beginning in April 2015. These interest rate swap agreements are accounted for as cash flow hedges.

In addition, at December 31, 2012 and 2011, we maintained forward-starting interest rate swap agreements that beginning April 2013 effectively convert the interest rate on a portion of the Celebrity Reflection unsecured amortizing term loan balance for approximately $627.2 million from LIBOR plus 0.40% to a fixed-rate (including applicable margin) of 2.85% through the term of the loan. These interest rate swap agreements are accounted for as cash flow hedges.

The notional amount of interest rate swap agreements related to outstanding debt and on our current unfunded financing arrangements as of December 31, 2012 and 2011 was $2.4 billion and $1.3 billion, respectively.

Foreign Currency Exchange Rate Risk

Derivative Instruments

Our primary exposure to foreign currency exchange rate risk relates to our ship construction contracts denominated in euros and our growing international business operations. We enter into foreign currency forward contracts, collar options and cross currency swap agreements to manage portions of the exposure to movements in foreign currency exchange rates. As of December 31, 2012, the aggregate cost of our ships on order was approximately $3.6 billion, of which we had deposited $131.0 million as of such date. Approximately 49.7% and 43.3% of the aggregate cost of the ships under construction was exposed to fluctuations in the euro exchange rate at December 31, 2012 and December 31, 2011, respectively. The majority of our foreign currency forward contracts, collar options and cross currency swap agreements are accounted for as cash flow or fair value hedges depending on the designation of the related hedge.

We terminated a portion of our foreign currency forward contracts for Celebrity Reflection prior to the ship's delivery in 2012 because the forward contract maturity dates were not aligned with the ship's delivery date. The terminated contracts were designated as cash flow hedges. Simultaneously, we entered into new foreign currency forward contracts that were aligned with the ship's delivery date and designated the contracts as cash flow hedges. We effected the termination of the contracts by entering into offsetting foreign currency forward contracts. Neither the original nor the offsetting foreign currency forward contracts were designated as hedging instruments. As a result, subsequent changes in the fair value of the original and offsetting foreign currency forward contracts were recognized in earnings immediately and were reported within other income (expense) in our consolidated statements of comprehensive income (loss). We deferred a loss of $10.8 million within accumulated other comprehensive income (loss) and a gain of $1.7 million within property and equipment, net for the terminated contracts. During the fourth quarter of 2012, we began recognition of the net deferred loss of $9.1 million to depreciation expense over the estimated useful life of the vessel.

During 2012, we entered into foreign currency collar options to hedge a portion of our foreign currency exposure on the construction contract price of Anthem of the Seas. These foreign currency collar options are accounted for as cash flow hedges and mature in April 2015.

During 2012, we terminated our cross currency swap agreements that effectively changed €150.0 million of our €1.0 billion unsecured senior notes which bear interest at a fixed rate of 5.625%, to $190.9 million with a fixed rate of 6.68%. We received net cash proceeds of approximately $9.1 million and deferred a loss of $2.6 million within accumulated other comprehensive income (loss) which we will recognize within interest expense, net of capitalized interest over the remaining life of the debt.

On a regular basis, we enter into foreign currency forward contracts to minimize the volatility resulting from the remeasurement of net monetary assets and liabilities denominated in a currency other than our functional currency or the functional currencies of our foreign subsidiaries. During 2012, we maintained an average of approximately $334.7 million of these foreign currency forward contracts. These instruments are not designated as hedging instruments. Changes in the fair value of the foreign currency forward contracts, of approximately $7.7 million, are recognized in earnings within other income (expense) in our consolidated statements of comprehensive income (loss).

The notional amount of outstanding foreign exchange contracts including our forward contracts, cross currency swap agreements and collar options as of December 31, 2012 and December 31, 2011 was $1.2 billion and $0.9 billion, respectively.

Non-Derivative Instruments

We consider our investments in our foreign operations to be denominated in relatively stable currencies and of a long-term nature. We partially address the exposure of our investments in foreign operations by denominating a portion of our debt in our subsidiaries' and investments' functional currencies and designating it as a hedge of these subsidiaries and investments. We had assigned debt as a hedge of our net investments in Pullmantur and TUI Cruises of approximately €481.7 million and €665.0 million, or approximately $635.1 million and $863.2 million, through December 31, 2012 and 2011, respectively.

Fuel Price Risk

Our exposure to market risk for changes in fuel prices relates primarily to the consumption of fuel on our ships. We use fuel swap agreements and fuel call options to mitigate the financial impact of fluctuations in fuel prices.

Our fuel swap agreements are accounted for as cash flow hedges. At December 31, 2012, we have hedged the variability in future cash flows for certain forecasted fuel transactions occurring through 2016. As of December 31, 2012 and 2011, we had entered into the following fuel swap agreements:

	Fuel Swap Agreements

	As of December 31, 2012		As of December 31, 2011
	(metric tons)
2012		—		738,000
2013		755,000		644,000
2014		635,000		418,000
2015		363,000		284,000
2016		104,000		—

	Fuel Swap Agreements

	As of December 31, 2012			As of December 31, 2011
	(% hedged)
Projected fuel purchases for year:
2012		0	%		55	%
2013		55	%		47	%
2014		45	%		30	%
2015		25	%		20	%
2016		7	%		—

At December 31, 2012 and 2011, $47.2 million and $78.5 million, respectively, of estimated unrealized net gains associated with our cash flow hedges pertaining to fuel swap agreements were expected to be reclassified to earnings from other accumulated comprehensive (loss) income within the next twelve months. Reclassification is expected to occur as the result of fuel consumption associated with our hedged forecasted fuel purchases.

During 2012, we terminated our remaining fuel call options by selling offsetting fuel call options. We received net cash proceeds of approximately $10.7 million upon termination. Subsequent to the termination, neither the original nor the offsetting fuel call options are designated as hedging instruments and changes in their fair value are recognized in earnings immediately and are reported in other income (expense) in our consolidated statements of comprehensive income (loss).

The fair value and line item caption of derivative instruments recorded were as follows:

	Fair Value of Derivative Instruments

	Asset Derivatives					Liability Derivatives
		As of December 31, 2012		As of December 31, 2011			As of December 31, 2012		As of December 31, 2011
	Balance Sheet Location	As of December 31, 2012		As of December 31, 2011		Balance Sheet Location	As of December 31, 2012		As of December 31, 2011
	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	$	5,099	$	65,531	Other long-term liabilities	$	55,471	$	11,369
Cross currency swaps	Other Assets		—		2,914	Other long-term liabilities		—		—
Foreign currency forward contracts	Derivative Financial Instruments		951		1,895	Accrued expenses and other liabilities		338		31,775
Foreign currency forward contracts	Other Assets		11,564		—	Other long-term liabilities		1,000		—
Foreign currency collar options	Other Assets		8,974		—	Other long-term liabilities		—		—
Fuel swaps	Derivative Financial Instruments		48,624		82,747	Accrued expenses and other liabilities		1,761		—
Fuel swaps	Other Assets		8,585		26,258	Other long-term liabilities		6,369		29,213

Total derivatives designated as hedging instruments under 815-20			83,797		179,345			64,939		72,357

Derivatives not designated as hedging instruments under ASC 815-20
Foreign currency forward contracts	Other Assets	$	4,440	$	5,414	Other long-term liabilities	$	11,475	$	11,987
Fuel swaps	Derivative Financial Instruments		—		—	Accrued expenses and other liabilities		475		—
Fuel call options	Derivative Financial Instruments		8,252		—	Accrued expenses and other liabilities		8,230		—
Fuel call options	Other Assets		—		16,371	Other long-term liabilities		—		—

Total derivatives not designated as hedging instruments under 815-20			12,692		21,785			20,180		11,987

Total derivatives		$	96,489	$	201,130		$	85,119	$	84,344

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

The fair value and line item caption of non-derivative instruments recorded was as follows:

		Carrying Value

Non-derivative instrument designated as hedging instrument under ASC 815-20	Balance Sheet Location	As of December 31, 2012		As of December 31, 2011
In thousands
Foreign currency debt	Current portion of long-term debt	$	17,516	$	17,246
Foreign currency debt	Long-term debt		617,593		845,971

		$	635,109	$	863,217

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, 2012			Year Ended December 31, 2011		Year Ended December 31, 2012		Year Ended December 31, 2011
In thousands
Interest rate swaps	Interest expense, net of interest capitalized	$	13,682		$	18,278	$	32,389	$	31,045
Interest rate swaps	Other income (expense)		(1,763	)		7,817		2,070		(7,223	)
Interest rate swaps	Extinguishment of unsecured senior notes		—			—		9,698		—
Foreign currency forward contracts	Other income (expense)		—			22,901		—		(23,720	)

		$	11,919		$	48,996	$	44,157	$	102

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

															Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness testing)

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)							Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)						Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
							Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
Derivatives under ASC 815-20 Cash Flow Hedging Relationships	Year Ended December 31, 2012			Year Ended December 31, 2011				Year Ended December 31, 2012			Year Ended December 31, 2011				Year Ended December 31, 2012			Year Ended December 31, 2011
In thousands
Cross currency swaps	$	851		$	(6,013	)	Other income (expense)	$	2,505		$	(15,011	)	Other income (expense)	$	—		$	—
Cross currency swaps		—			—		Interest Expense		(2,209	)		—		Other income (expense)		—			—
Interest rate swaps		(44,971	)		(10,131	)	Other income (expense)		—			—		Other income (expense)		(348	)		(21	)
Foreign currency forward contracts		11,928			(22,263	)	Depreciation and amortization expenses		(953	)		(734	)	Other income (expense)		—			(1,015	)
Foreign currency forward contracts		—			(12,375	)	Other income (expense)		(953	)		(285	)	Other income (expense)		—			—
Foreign currency collar options		3,316			—		Depreciation and amortization expenses		—			—		Other income (expense)		—			—
Fuel swaps		87,014			121,262		Fuel		110,995			162,616		Other income (expense)		(1,041	)		7,086

	$	58,138		$	70,480			$	109,385		$	146,586			$	(1,389	)	$	6,050

The effect of non-derivative instruments qualifying and designated as hedging instruments in net investment hedges on the consolidated financial statements was as follows:

							Amount of Gain (Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)

	Amount of Gain (Loss) Recognized in OCI (Effective Portion)					Location of Gain (Loss) 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, 2012			Year Ended December 31, 2011			Year Ended December 31, 2012		Year Ended December 31, 2011
In thousands
Foreign Currency Debt	$	(11,065	)	$	13,241	Other income (expense)	$	—	$	—

	$	(11,065	)	$	13,241		$	—	$	—

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 Derivative

Derivatives Not Designated as Hedging Instruments under ASC 815-20	Location of Gain (Loss) Recognized in Income on Derivative	Year Ended December 31, 2012			Year Ended December 31, 2011
In thousands
Foreign currency forward contracts	Other income (expense)	$	7,152		$	4,633
Fuel swaps	Other income (expense)		(3,058	)		—
Fuel call options	Other income (expense)		(5,613	)		18,915

		$	(1,519	)	$	23,548

Credit Related Contingent Features

Our current interest rate derivative instruments may require us to post collateral if our Standard & Poor's and Moody's credit ratings remain below specified levels. Specifically, if on the fifth anniversary of entering into a derivative transaction and on all succeeding fifth-year anniversaries our credit ratings for our senior unsecured debt were to be below BBB- by Standard & Poor's and Baa3 by Moody's, then each counterparty to such derivative transaction with whom we are in a net liability position that exceeds the applicable minimum call amount may demand that we post collateral in an amount equal to the net liability position. The amount of collateral required to be posted following such event will change each time our net liability position increases or decreases by more than the applicable minimum call amount. If our credit rating for our senior debt is subsequently equal to, or above BBB- by Standard & Poor's or Baa3 by Moody's, then any collateral posted at such time will be released to us and we will no longer be required to post collateral unless we meet the collateral trigger requirement at the next fifth-year anniversary. Currently, our senior unsecured debt credit rating is BB with a stable outlook by Standard & Poor's and Ba1 with a stable outlook by Moody's. We currently have four interest rate derivative hedges that have a term of at least five years. The aggregate fair values of all derivative instruments with such credit-related contingent features in net liability positions as of December 31, 2012 and December 31, 2011 were $55.5 million and $11.4 million, respectively, which do not include the impact of any such derivatives in net asset positions. The earliest that any of the four interest rate derivative hedges will reach their fifth anniversary is November 2016. Therefore, as of December 31, 2012, we were not required to post collateral for any of our derivative transactions.