Fair Value Measurements and Derivative Instruments (Tables)

12 Months Ended

Dec. 31, 2012

Fair Value Measurements and Derivative Instruments

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 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.

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, 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.

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 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.

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	%		—

Fair Value And Line item Caption of Derivative Instruments

	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".

Fair Value and Line Item Caption of Non-derivative Instruments

		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

Effect of Non-derivative Instruments Qualifying and Designated as Hedging Instruments in Net Investment Hedges on Consolidated Financial Statements

							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		$	—	$	—

Not Designated as Hedging Instrument

Derivative Instruments

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

		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

Fair Value Hedging

Derivative Instruments

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

	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

Cash flow hedge

Derivative Instruments

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

															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