Royal Caribbean Cruise Lines 2010 Annual Report Download - page 86

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ROYAL CARIBBEAN CRUISES LTD. 83
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 OCI
(Effective Portion) Location of Gain (Loss) in
Amount of Gain (Loss)
Recognized in Income
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
Non-derivative instruments under Subtopic 815-20
Net Investment Hedging Relationships
Year Ended
December 31,
2010
Year Ended
December 31,
2009
Income (Ineffective Portion
and Amount Excluded from
Effectiveness Testing)
Year Ended
December 31,
2010
Year Ended
December 31,
2009
In thousands
Foreign Currency Debt  () Other income (expense) — —
 () — —
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 Subtopic 815-20
Location of Gain (Loss)
Recognized in Income on
Derivative
Year Ended
December 31, 2010
Year Ended
December 31, 2009
In thousands
Foreign exchange contracts Other income (expense)   () 
Fuel call options Other income (expense) () ()
() ()
Credit Related Contingent Features
Starting in 2012, our current interest rate derivative
instruments may require us to post collateral if our
Standard & Poor’s and Moody’s credit ratings are
below specified levels. Specifically, if on the fifth anni-
versary of entering into a derivative transaction and
on all succeeding fifth-year anniversaries our credit
ratings for our senior debt were to be below BBB– by
Standard & Poor’s and Baa3 by Moody’s, then each
counterparty to such derivatives with whom we are
in a net liability position that exceeds the applicable
minimum call amount may demand that we post col-
lateral in an amount equal to the net liability position.
The amount of collateral required to be posted follow-
ing 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 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 Ba2 with a stable outlook by
Moody’s. Only our interest rate instruments have a term
of at least five years and will not reach their fifth anni-
versary until July 2012. Therefore, as of December 31,
2010, we are not required to post any collateral for our
derivative instruments.
NOTE 14. COMMITMENTS AND
CONTINGENCIES
Capital Expenditures
Our future capital commitments consist primarily of
new ship orders. As of December 31, 2010, we had two
Solstice-class ships, designated for Celebrity Cruises,
on order for an aggregate additional capacity of
approximately 5,850 berths. The aggregate cost of
the two ships including amounts due to the shipyard
and other ship related costs is approximately $1.8 bil-
lion, of which we have deposited $199.3 million as of
December 31, 2010. Approximately 2.2% of the aggre-
gate cost of the ships on order was exposed to fluctu-
ations in the euro exchange rate at December 31, 2010.
(See Note 13. Fair Value Measurements and Derivative
Instruments). As of December 31, 2010, we anticipated
overall capital expenditures, including the two ships
on order, will be approximately $1.0 billion for 2011,
$1.0 billion for 2012 and $350.0 million for 2013.
In February 2011, we reached a conditional agreement
with Meyer Werft to build the first of a new generation
of Royal Caribbean International cruise ships. The ship
will have a capacity of approximately 4,100 berths
based on double occupancy and is expected to enter
service in the fourth quarter of 2014. The agreement
will become definitive upon satisfaction of several
conditions, including financing. We also have an option
to construct a second ship of the same class which
will expire on February 28, 2012, subject to earlier
acceleration under certain circumstances. Including the
conditional agreement for the first ship, our anticipated