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):
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|
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):
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|
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 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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):
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|
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 |
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|
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 |
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|
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 |
|
Balance Sheet
Location |
|
|
|
Fair Value |
|
Fair Value |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cash flow hedge
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Derivative Instruments |
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Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance |
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Amount of Gain (Loss)
Recognized in Income
on Derivative (Ineffective
Portion and
Amount
Excluded from
Effectiveness testing) |
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Amount of Gain (Loss)
Recognized in OCI
on Derivative
(Effective Portion) |
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Amount of Gain (Loss)
Reclassified from Accumulated
OCI into Income
(Effective Portion) |
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Location of Gain
(Loss) Recognized
in Income on
Derivative
(Ineffective
Portion and Amount Excluded from
Effectiveness
Testing) |
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Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion) |
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Derivatives under
ASC 815-20 Cash Flow
Hedging Relationships |
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Year Ended
December 31,
2012 |
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Year Ended
December 31,
2011 |
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Year Ended
December 31,
2012 |
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Year Ended
December 31,
2011 |
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Year Ended
December 31,
2012 |
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Year Ended
December 31,
2011 |
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In thousands
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Cross currency swaps |
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$ |
851 |
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$ |
(6,013 |
) |
Other income (expense) |
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$ |
2,505 |
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$ |
(15,011 |
) |
Other income (expense) |
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$ |
— |
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$ |
— |
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Cross currency swaps |
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— |
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— |
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Interest Expense |
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(2,209 |
) |
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— |
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Other income (expense) |
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— |
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— |
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Interest rate swaps |
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(44,971 |
) |
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(10,131 |
) |
Other income (expense) |
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— |
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— |
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Other income (expense) |
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(348 |
) |
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(21 |
) |
Foreign currency forward contracts |
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11,928 |
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(22,263 |
) |
Depreciation and amortization expenses |
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(953 |
) |
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(734 |
) |
Other income (expense) |
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— |
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(1,015 |
) |
Foreign currency forward contracts |
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— |
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(12,375 |
) |
Other income (expense) |
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(953 |
) |
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(285 |
) |
Other income (expense) |
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— |
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— |
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Foreign currency collar options |
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3,316 |
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— |
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Depreciation and amortization expenses |
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— |
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— |
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Other income (expense) |
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— |
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— |
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Fuel swaps |
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87,014 |
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121,262 |
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Fuel |
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110,995 |
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162,616 |
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Other income (expense) |
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(1,041 |
) |
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7,086 |
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$ |
58,138 |
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$ |
70,480 |
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$ |
109,385 |
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$ |
146,586 |
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$ |
(1,389 |
) |
$ |
6,050 |
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