2016 Annual Report for Norwegian Cruiseline Holdings - F-19

transaction is no longer probable of occurring, then the amount recognized in accumulated other comprehensive income (loss) is released to
earnings. In addition, the ineffective portion of our highly effective hedges is recognized in earnings immediately and reported in other income
(expense), net in our consolidated statements of operations. There are no amounts excluded from the assessment of hedge effectiveness and there
are no credit-risk-related contingent features in our derivative agreements.
We monitor concentrations of credit risk associated with financial and other institutions with which we conduct significant business. Credit risk,
including but not limited to counterparty non-performance under derivatives and our New Revolving Loan Facility, is not considered significant,
as we primarily conduct business with large, well-established financial institutions that we have established relationships with and that have credit
risks acceptable to us or the credit risk is spread out among a large number of creditors. We do not anticipate non-performance by any of our
significant counterparties. The following table sets forth our derivatives measured at fair value and discloses the balance sheet location (in
thousands):
The following table sets forth our derivatives measured at fair value and discloses the balance sheet location (in thousands):
Asset
December 31,
2016

Balance Sheet location

Liability
December 31,
December 31,
2016
2015

December 31,
2015

Fuel swaps designated as hedging
instruments
Prepaid expenses and other
assets
$

20,288

Accrued expenses and
other liabilities

$

-

$

-

$

-

-

-

44,271

128,740

13,237

-

38,608

132,494

Other long-term assets

14

3,446

-

1,370

Accrued expenses and
other liabilities

-

-

61,788

8,737

Other long-term liabilities

-

551

88,920

24,181

Accrued expenses and
other liabilities

-

-

-

42,993

Accrued expenses and
other liabilities

-

-

3,331

4,079

Other long-term liabilities

-

-

1,151

3,395

Other long-term liabilities
Foreign currency forward contracts
designated as hedging instruments

Foreign currency collar not designated as a
hedging instrument
Interest rate swaps designated as hedging
instruments

The fair values of swap and forward contracts are determined based on inputs that are readily available in public markets or can be derived from
information available in publicly quoted markets. The Company determines the value of options and collars utilizing an option pricing model
based on inputs that are either readily available in public markets or can be derived from information available in publicly quoted markets. The
option pricing model used by the Company is an industry standard model for valuing options and is used by the broker/dealer community. The
inputs to this option pricing model are the option strike price, underlying price, risk-free rate of interest, time to expiration, and volatility. The fair
value of option contracts considers both the intrinsic value and any remaining time value associated with those derivatives that have not yet
settled. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. Our
derivatives and financial instruments were categorized as Level 2 in the fair value hierarchy, and we had no derivatives or financial instruments
categorized as Level 1 or Level 3.
Our derivative contracts include rights of offset with our counterparties. We have elected to net certain assets and liabilities within counterparties
when the rights of offset exist. We are not required to post cash collateral related to our derivative instruments.
The following table discloses the gross and net amounts recognized within assets and liabilities (in thousands):

December 31, 2016

Assets
Liabilities

Gross
Amounts
Offset

Gross Amounts

$

20,302
238,069
F-19

$

- $
(13,237)

Gross
Amounts Not
Offset

Total Net
Amounts

20,302
224,832

$

(14) $
(155,190)

Net Amounts

20,288
69,642
Table of Contents for the Digital Edition of 2016 Annual Report for Norwegian Cruiseline Holdings
