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Business Combination | 9 Months Ended
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Sep. 30, 2018
Business Combinations [Abstract] |
Business Combination | Business Combination On July 31, 2018, we acquired a 66.7% equity stake in Silversea Cruises, an ultra-luxury and expedition cruise line. Silversea Cruises enhances our presence in the ultra-luxury and expedition markets and provides us with an opportunity to drive long-term capacity growth in these markets. The purchase price consisted of $1.02 billion in cash, net of assumed liabilities, and contingent consideration that can range from zero up to a maximum of approximately 472,000 shares of our common stock, and is payable upon achievement of certain 2019-2020 performance metrics by Silversea Cruises. The fair value of the contingent consideration at the acquisition date was $44.0 million and is recorded within Other liabilities in our consolidated balance sheets. Subsequent changes in the fair value of the contingent consideration will be recorded in our results of operations in the period of the change. Refer to Note 12. Fair Value Measurements and Derivative Instruments for further information on the valuation of the contingent consideration. To finance a portion of the purchase price, we entered into and drew in full on a $700 million credit agreement. Refer to Note 8. Debt for further information on the credit agreement. The remainder of the transaction consideration was financed through the use of our revolving credit facilities. We have accounted for this transaction under the provisions of ASC 805, Business Combinations. The purchase price for the Silversea Cruises acquisition was allocated based on preliminary estimates of the fair value of assets acquired and liabilities assumed at the acquisition date, with the excess allocated to goodwill. Goodwill is not deductible for tax purposes and consisted primarily of the opportunity to expand our cruise operations in strategic growth areas. For reporting purposes, beginning with our fourth quarter 2018, we will include Silversea Cruises’ results of operations on a three-month reporting lag from the acquisition date through September 30, 2018. We have included Silversea Cruises' balance sheet as of the acquisition date in our consolidated balance sheet as of September 30, 2018. Refer to Note 1. General for further information on this three-month reporting lag. The following table summarizes the purchase price allocation based on preliminary estimated fair value of the assets acquired and liabilities assumed related to the Silversea Cruises acquisition. We have not finalized the allocation of the purchase price as it requires extensive use of accounting estimates and valuation methodologies in the determination of such fair values.
(in thousands) |  |
Assets |  |
Cash and cash equivalents |  | $ | 103,865 |
Trade and other receivables, net |  | 5,640 |
Inventories |  | 19,004 |
Prepaid expenses and other assets(1) |  | 119,920 |
Derivative financial instruments |  | 2,886 |
Property and equipment, net(2) |  | 1,109,467 |
Goodwill |  | 1,086,539 |
Other assets(3) |  | 494,657 |
Total assets acquired |  | 2,941,978 |
Liabilities |  |
Current portion of long-term debt(4) |  | 26,851 |
Accounts payable |  | 36,960 |
Accrued interest |  | 1,773 |
Accrued expenses and other liabilities |  | 80,571 |
Customer deposits |  | 453,798 |
Long-term debt(4) |  | 727,935 |
Other long-term liabilities |  | 12,320 |
Total liabilities assumed |  | 1,340,208 |
Redeemable noncontrolling interest |  | 537,770 |
Total purchase price |  | $ | 1,064,000 |
(1) | Amount includes $32.0 million of cash held as collateral with credit card processors.
(2) | Property and equipment, net includes two ships under capital lease agreements amounting to $140.0 million. The respective capital lease liabilities are reported within Long-term debt. Refer to Note 8. Debt for further information on the capital lease financing arrangements.
(3) | Amount includes $490.8 million of intangible assets. Refer to Note 4. Goodwill and Intangible Assets for further information on the intangible assets acquired.
(4) | Refer to Note 8. Debt for further information on long-term debt assumed.
In connection with the acquisition of Silversea Cruises, we recorded a redeemable noncontrolling interest of $537.8 million due to the put options held by SCG. The put options may require us to purchase SCG's remaining interest, or 33.3% of Silversea Cruises, upon the occurrence or nonoccurence of certain future events that are not solely within our control. At the acquisition date, the estimated fair value of the redeemable noncontrolling interest is based on 33.3% of Silversea Cruises' equity value, which was determined based on the transaction price paid for 66.7% of Silversea Cruises. As of September 30, 2018, SCG's interest is presented as Redeemable noncontrolling interest and is classified outside of shareholders' equity in our consolidated balance sheets. Additionally, the noncontrolling interest will be subject to contractual accretion requirements. Similar to our other ship-operating and vessel-owning subsidiaries, Silversea Cruises is currently exempt from U.S. corporate tax on U.S. source income from the international operation of ships pursuant to Section 883 of the Internal Revenue Code. Additionally, the deferred tax liability recognized in connection with the acquisition of Silversea Cruises was not material to our consolidated financial statements and there were no Net Operating Losses recognized as of September 30, 2018. For the quarter and nine months ended September 30, 2018, our results of operations included transaction-related costs of $25.9 million and $30.6 million, respectively, which were included primarily within Marketing, selling and administrative expenses in our consolidated statements of comprehensive income (loss). Pro-forma financial results relating to the Silversea Cruises acquisition are not presented, as this acquisition is not material to our consolidated results of operations.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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