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Fair Value Measurements, Derivative Instruments and Hedging Activities | 9 Months Ended
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Aug. 31, 2013
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Fair Value Measurements, Derivative Instruments and Hedging Activities | Fair Value Measurements, Derivative Instruments and Hedging Activities Fair Value Measurements U.S. accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
• | Level 1 measurements are based on unadjusted quoted prices 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.
• | Level 2 measurements are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or market data other than quoted prices that are observable for the assets or liabilities.
• | Level 3 measurements are based on unobservable data that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable market participants at the measurement date. Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect those that we believe market participants would use in pricing the asset or liability at the measurement date. The fair value measurement of a financial asset or financial liability must reflect the nonperformance risk of the counterparty and us. Therefore, the impact of our counterparty’s creditworthiness was considered when in an asset position, and our creditworthiness was considered when in a liability position in the fair value measurement of our financial instruments. Creditworthiness did not have a significant impact on the fair values of our financial instruments at August 31, 2013 and November 30, 2012. Both the counterparties and we are expected to continue to perform under the contractual terms of the instruments. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, certain estimates of fair values presented herein are not necessarily indicative of the amounts that could be realized in a current or future market exchange. Financial Instruments that are not Measured at Fair Value on a Recurring Basis The estimated carrying and fair values and basis of valuation of our financial instrument assets and liabilities that are not measured at fair value on a recurring basis were as follows (in millions):
|  | August 31, 2013 |  | November 30, 2012
|  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
|  |  | Level 1 |  | Level 2 |  |  | Level 1 |  | Level 2
Assets |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents (a) |  | $ | 442 |  |  | $ | 442 |  |  | $ | — |  |  | $ | 269 |  |  | $ | 269 |  |  | $ | — |
Short-term investments (b) |  | 66 |  |  | 66 |  |  | — |  |  | — |  |  | — |  |  | — |
Long-term other assets (c) |  | 66 |  |  | 1 |  |  | 62 |  |  | 39 |  |  | 1 |  |  | 36 |
Total |  | $ | 574 |  |  | $ | 509 |  |  | $ | 62 |  |  | $ | 308 |  |  | $ | 270 |  |  | $ | 36 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Fixed rate debt (d) |  | $ | 5,968 |  |  | $ | — |  |  | $ | 6,308 |  |  | $ | 5,195 |  |  | $ | — |  |  | $ | 5,825 |
Floating rate debt (d) |  | 4,050 |  |  | — |  |  | 4,034 |  |  | 3,707 |  |  | — |  |  | 3,706 |
Total |  | $ | 10,018 |  |  | $ | — |  |  | $ | 10,342 |  |  | $ | 8,902 |  |  | $ | — |  |  | $ | 9,531 |
(a) | Cash and cash equivalents are comprised of cash on hand and time deposits and, due to their short maturities, the carrying values approximate their fair values.
(b) | Short-term investments are comprised of time deposits and, due to their short maturities, the carrying values approximate their fair values.
(c) | At August 31, 2013 and November 30, 2012, substantially all of our long-term other assets were comprised of notes and other receivables. The fair values of notes and other receivables were based on estimated future cash flows discounted at appropriate market interest rates.
(d) | The net difference between the fair value of our fixed rate debt and its carrying value was due to the market interest rates in existence at August 31, 2013 and November 30, 2012 being lower than the fixed interest rates on these debt obligations, including the impact of changes in our credit ratings, if any. At August 31, 2013, the net difference between the fair value of our floating rate debt and its carrying value was due to the market interest rates in existence at August 31, 2013 being slightly higher than the floating interest rates on these debt obligations, including the impact of changes in our credit ratings, if any. The fair values of our publicly-traded notes were based on their unadjusted quoted market prices in markets that are not sufficiently active to be Level 1. The fair values of our other debt were estimated based on appropriate market interest rates being applied to this debt.
Financial Instruments that are Measured at Fair Value on a Recurring Basis The estimated fair value and basis of valuation of our financial instrument assets and liabilities that are measured at fair value on a recurring basis were as follows (in millions):
|  | August 31, 2013 |  | November 30, 2012
|  | Level 1 |  | Level 2 |  | Level 1 |  | Level 2
Assets |  |  |  |  |  |  |  |
Cash equivalents (a) |  | $ | 539 |  |  | $ | — |  |  | $ | 196 |  |  | $ | — |
Restricted cash (b) |  | 30 |  |  | — |  |  | 28 |  |  | — |
Marketable securities held in rabbi trusts (c) |  | 107 |  |  | 10 |  |  | 104 |  |  | 16 |
Derivative financial instruments (d) |  | — |  |  | 51 |  |  | — |  |  | 48 |
Total |  | $ | 676 |  |  | $ | 61 |  |  | $ | 328 |  |  | $ | 64 |
Liabilities |  |  |  |  |  |  |  |
Derivative financial instruments (d) |  | $ | — |  |  | $ | 33 |  |  | $ | — |  |  | $ | 43 |
Total |  | $ | — |  |  | $ | 33 |  |  | $ | — |  |  | $ | 43 |
(a) | Cash equivalents are comprised of money market funds.
(b) | Restricted cash is substantially all comprised of money market funds.
(c) | Level 1 and 2 marketable securities are held in rabbi trusts and are principally comprised of frequently-priced mutual funds invested in common stocks and other investments, respectively. Their use is restricted to funding certain deferred compensation and non-qualified U.S. pension plans.
(d) | See “Derivative Instruments and Hedging Activities” section below for detailed information regarding our derivative financial instruments.
We measure our derivatives using valuations that are calibrated to the initial trade prices. Subsequent valuations are based on observable inputs and other variables included in the valuation models such as interest rate, yield and commodity price curves, forward currency exchange rates, credit spreads, maturity dates, volatilities and netting arrangements. We use the income approach to value derivatives for foreign currency options and forwards, interest rate swaps and fuel derivatives using observable market data for all significant inputs and standard valuation techniques to convert future amounts to a single present value amount, assuming that participants are motivated, but not compelled to transact. We also corroborate our fair value estimates using valuations provided by our counterparties. Nonfinancial Instruments that are Measured at Fair Value on a Nonrecurring Basis Ship Impairments Due to the ongoing challenging economic environment in Europe and certain ship-specific facts and circumstances, such as their size, age, condition, viable alternative itineraries and historical operating cash flows, we performed undiscounted future cash flow analyses on all of our Ibero Cruises ("Ibero") ships and two of our smaller Costa Cruises ("Costa") ships as of July 31, 2013 to determine if these ships were impaired. The principal assumptions used in our undiscounted cash flow analyses consisted of forecasted future operating results, including net revenue yields and net cruise costs including fuel prices, estimated residual values and the expected November 2013 rebranding of Ibero's Grand Mistral into the Costa fleet, which are all considered Level 3 inputs. Based on these undiscounted cash flow analyses, we determined that the net carrying value of the two Costa ships exceeded their estimated undiscounted future cash flows. Accordingly, we then estimated the July 31, 2013 fair value of these ships based on their discounted future cash flows and compared this estimated fair value to their net carrying value. As a result, we recognized $176 million of ship impairment charges in other ship operating expenses during the three months ended August 31, 2013. Valuation of Goodwill and Other Intangibles The reconciliation of the changes in the carrying amounts of our goodwill, which goodwill has been allocated to our North America and Europe, Australia and Asia ("EAA") cruise brands, was as follows (in millions):
| North America Cruise Brands |  | EAA Cruise Brands |  | Total |
Balance at November 30, 2012 | $ | 1,898 |  |  | $ | 1,276 |  |  | $ | 3,174 |  |
Foreign currency translation adjustment | — |  |  | (14 | ) |  | (14 | ) |
Balance at August 31, 2013 | $ | 1,898 |  |  | $ | 1,262 |  |  | $ | 3,160 |  |
At July 31, 2013, all of our cruise brands carried goodwill, except for Ibero and Seabourn. As of that date, we performed our annual goodwill impairment reviews, which included performing a qualitative assessment for all cruise brands that carried goodwill, except for Carnival Cruise Lines and Costa. Qualitative factors such as industry and market conditions, macroeconomic conditions, changes to the weighted-average cost of capital (“WACC”), overall financial performance, changes in fuel prices and capital expenditures were considered in the qualitative assessment to determine how changes in these factors would affect each of these cruise brands' estimated fair values. Based on our qualitative assessments, we determined it was more-likely-than-not that each of these cruise brands' estimated fair values exceeded their carrying values and, therefore, we did not proceed to the two-step quantitative goodwill impairment reviews. As of July 31, 2013, we also performed our annual goodwill impairment reviews of Carnival Cruise Lines' and Costa's goodwill. We did not perform a qualitative assessment but instead proceeded directly to step one of the two-step goodwill impairment review and compared each of Carnival Cruise Lines' and Costa's estimated fair value to the carrying value of their allocated net assets. Both Carnival Cruise Lines' and Costa's estimated cruise brand fair value was based on a discounted future cash flow analysis. The principal assumptions used in our cash flow analyses consisted of forecasted future operating results, including net revenue yields and net cruise costs including fuel prices, capacity changes, including the expected deployment of vessels into, or out of, Carnival Cruise Lines and Costa, capital expenditures, WACC for comparable publicly-traded companies, adjusted for the risk attributable to the geographic regions in which Carnival Cruise Lines and Costa operate, and terminal values, which are all considered Level 3 inputs. The forecasted net revenue yields were assumed to recover over the next few years compared to current levels as we continue to rebuild both of these brands. Based on the discounted cash flow analyses, we determined that each of Carnival Cruise Lines' and Costa's estimated fair value significantly exceeded their carrying value and, therefore, we did not proceed to step two of the impairment reviews. At August 31, 2013, accumulated goodwill impairment charges were $153 million, which was for our 2012 Ibero goodwill impairment charge. The reconciliation of the changes in the carrying amounts of our intangible assets not subject to amortization, which represent trademarks that have been allocated to our North America and EAA cruise brands, was as follows (in millions):
| North America Cruise Brands |  | EAA Cruise Brands |  | Total |
Balance at November 30, 2012 | $ | 927 |  |  | $ | 372 |  |  | $ | 1,299 |  |
Ibero trademarks impairment charge | — |  |  | (13 | ) |  | (13 | ) |
Foreign currency translation adjustment | — |  |  | (13 | ) |  | (13 | ) |
Balance at August 31, 2013 | $ | 927 |  |  | $ | 346 |  |  | $ | 1,273 |  |
At July 31, 2013, our cruise brands that have significant trademarks recorded include AIDA Cruises ("AIDA"), P&O Cruises (Australia), P&O Cruises (UK) and Princess Cruises ("Princess"). We performed our annual trademark impairment reviews for these cruise brands as of July 31, 2013, which included performing a qualitative assessment. Qualitative factors such as industry and market conditions, macroeconomic conditions, changes to the WACC, changes in royalty rates and overall financial performance were considered in the qualitative assessment to determine how changes in these factors would affect the estimated fair values for each of our cruise brands' recorded trademarks. Based on our qualitative assessments, we determined it was more likely-than-not that the estimated fair value for each of these cruise brands' recorded trademarks exceeded their carrying value, and therefore, none of these trademarks were impaired. During the three months ended August 31, 2013, we also recognized $27 million of additional impairment charges, which was comprised of $13 million related to Ibero's remaining trademarks' carrying value and $14 million related to an investment. At August 31, 2013 and November 30, 2012, our intangible assets subject to amortization are not significant to our consolidated financial statements. The determination of our cruise brand, cruise ship and trademark fair values includes numerous assumptions that are subject to various risks and uncertainties. We believe that we have made reasonable estimates and judgments in determining whether our goodwill, cruise ships and trademarks have been impaired. However, if there is a change in assumptions used or if there is a change in the conditions or circumstances influencing fair values in the future, then we may need to recognize an impairment charge. Derivative Instruments and Hedging Activities We utilize derivative and nonderivative financial instruments, such as foreign currency forwards, options and swaps, foreign currency debt obligations and foreign currency cash balances, to manage our exposure to fluctuations in certain foreign currency exchange rates, and interest rate swaps to manage our interest rate exposure in order to achieve a desired proportion of fixed and floating rate debt. In addition, we utilize our fuel derivatives program to mitigate a portion of the risk to our future cash flows attributable to potential fuel price increases, which we define as our “economic risk.” Our policy is to not use any financial instruments for trading or other speculative purposes. All derivatives are recorded at fair value. The changes in fair value are recognized currently in earnings if the derivatives do not qualify as effective hedges, or if we do not seek to qualify for hedge accounting treatment, such as for our fuel derivatives. If a derivative is designated as a fair value hedge, then changes in the fair value of the derivative are offset against the changes in the fair value of the underlying hedged item. If a derivative is designated as a cash flow hedge, then the effective portion of the changes in the fair value of the derivative is recognized as a component of accumulated other comprehensive income ("AOCI") until the underlying hedged item is recognized in earnings or the forecasted transaction is no longer probable. If a derivative or a nonderivative financial instrument is designated as a hedge of our net investment in a foreign operation, then changes in the fair value of the financial instrument are recognized as a component of AOCI to offset a portion of the change in the translated value of the net investment being hedged, until the investment is sold or liquidated. We formally document hedging relationships for all derivative and nonderivative hedges and the underlying hedged items, as well as our risk management objectives and strategies for undertaking the hedge transactions. We classify the fair values of all our derivative contracts as either current or long-term, depending on whether the maturity date of the derivative contract is within or beyond one year from the balance sheet date. The cash flows from derivatives treated as hedges are classified in our Consolidated Statements of Cash Flows in the same category as the item being hedged. Our cash flows related to fuel derivatives are classified within investing activities. The estimated fair values of our derivative financial instruments and their location on the Consolidated Balance Sheets were as follows (in millions):
|  |  | August 31, |  | November 30,
| Balance Sheet Location |  | 2013 |  | 2012
Derivative assets |  |  |  |  |
Derivatives designated as hedging instruments |  |  |  |  |
Net investment hedges (a) | Prepaid expenses and other |  | $ | 1 |  |  | $ | 1 |
| Other assets – long-term |  | 4 |  |  | 6 |
Foreign currency zero cost collars (b) | Prepaid expenses and other |  | — |  |  | 11 |
| Other assets – long-term |  | 14 |  |  | 5 |
Interest rate swaps (c) | Prepaid expenses and other |  | 1 |  |  | — |
| Other assets – long-term |  | 10 |  |  | — |
|  |  | 30 |  |  | 23 |
Derivatives not designated as hedging instruments |  |  |  |  |
Fuel (d) | Prepaid expenses and other |  | 13 |  |  | — |
| Other assets – long-term |  | 8 |  |  | 25 |
|  |  | 21 |  |  | 25 |
Total derivative assets |  |  | $ | 51 |  |  | $ | 48 |
Derivative liabilities |  |  |  |  |
Derivatives designated as hedging instruments |  |  |  |  |
Interest rate swaps (c) | Accrued liabilities and other |  | $ | 10 |  |  | $ | 7 |
| Other long-term liabilities |  | 13 |  |  | 17 |
|  |  | 23 |  |  | 24 |
Derivatives not designated as hedging instruments |  |  |  |  |
Fuel (d) | Accrued liabilities and other |  | 1 |  |  | 16 |
| Other long-term liabilities |  | 9 |  |  | 3 |
|  |  | 10 |  |  | 19 |
Total derivative liabilities |  |  | $ | 33 |  |  | $ | 43 |
(a) | At August 31, 2013 and November 30, 2012, we had foreign currency forwards totaling $115 million and $235 million, respectively, that are designated as hedges of our net investments in foreign operations, which have a euro-denominated functional currency. At August 31, 2013, these outstanding foreign currency forwards mature through July 2017.
(b) | At August 31, 2013 and November 30, 2012, we had foreign currency derivatives consisting of foreign currency zero cost collars that are designated as foreign currency cash flow hedges for a portion of our euro-denominated shipbuilding payments. See “Newbuild Currency Risks” below for additional information regarding these derivatives.
(c) | We have euro interest rate swaps designated as cash flow hedges whereby we receive floating interest rate payments in exchange for making fixed interest rate payments. At August 31, 2013 and November 30, 2012, these interest rate swap agreements have or will effectively change $885 million and $269 million, respectively, of EURIBOR-based floating rate euro debt to fixed rate debt. These interest rate swaps settle through March 2025. In addition, at August 31, 2013 we had U.S. dollar interest rate swaps designated as fair value hedges whereby we receive fixed interest rate payments in exchange for making floating interest rate payments. These interest rate swap agreements effectively changed $500 million of fixed rate debt to U.S. dollar LIBOR-based floating rate debt. These interest rate swaps settle through February 2016.
(d) | At August 31, 2013, we had fuel derivatives consisting of zero cost collars on Brent crude oil (“Brent”) to cover a portion of our estimated fuel consumption through 2017. See “Fuel Price Risks” below for additional information regarding these fuel derivatives. At November 30, 2012, we had fuel derivatives consisting of zero cost collars on Brent to cover a portion of our estimated fuel consumption through 2016.
The effective portions of our derivatives qualifying and designated as hedging instruments recognized in other comprehensive income (loss) were as follows (in millions):
|  | Three Months Ended August 31, |  | Nine Months Ended August 31,
|  | 2013 |  | 2012 |  | 2013 |  | 2012
Net investment hedges |  | $ | (2 | ) |  | $ | (2 | ) |  | $ | (4 | ) |  | $ | 53 |
Foreign currency zero cost collars – cash flow hedges |  | $ | (1 | ) |  | $ | 3 |  |  | $ | 6 |  |  | $ | 3 |
Interest rate swaps – cash flow hedges |  | $ | 10 |  |  | $ | (1 | ) |  | $ | 13 |  |  | $ | (11 | )
There are no credit risk related contingent features in our derivative agreements, except for bilateral credit provisions within our fuel derivative counterparty agreements. These provisions require interest-bearing, non-restricted cash to be posted or received as collateral to the extent the fuel derivative fair value payable to or receivable from an individual counterparty, respectively, exceeds $100 million. At August 31, 2013 and November 30, 2012, no collateral was required to be posted to or received from our fuel derivative counterparties. The amount of estimated cash flow hedges’ unrealized gains and losses that are expected to be reclassified to earnings in the next twelve months is not significant. We have not provided additional disclosures of the impact that derivative instruments and hedging activities have on our consolidated financial statements as of August 31, 2013 and November 30, 2012 and for the three and nine months ended August 31, 2013 and 2012 where such impacts were not significant. Foreign Currency Exchange Rate Risks Overall Strategy We manage our exposure to fluctuations in foreign currency exchange rates through our normal operating and financing activities, including netting certain exposures to take advantage of any natural offsets and, when considered appropriate, through the use of derivative and nonderivative financial instruments. Our primary focus is to manage the economic foreign currency exchange risks faced by our operations, which are the ultimate foreign currency exchange risks that would be realized by us if we exchanged one currency for another, and not accounting risks. Accordingly, we do not currently hedge foreign currency exchange accounting risks with derivative financial instruments. The financial impacts of the hedging instruments we do employ generally offset the changes in the underlying exposures being hedged. Operational and Investment Currency Risks Our European and Australian cruise brands subject us to foreign currency translation risk related to the euro, sterling and Australian dollar because these brands generate significant revenues and incur significant expenses in euro, sterling or the Australian dollar. Accordingly, exchange rate fluctuations of the euro, sterling and Australian dollar against the U.S. dollar will affect our reported financial results since the reporting currency for our consolidated financial statements is the U.S. dollar. Any strengthening of the U.S. dollar against these foreign currencies has the financial statement effect of decreasing the U.S. dollar values reported for cruise revenues and expenses. Any weakening of the U.S. dollar has the opposite effect. Most of our brands also have non-functional currency risk related to their international sales operations, which has become an increasingly larger part of most of their businesses over time, and primarily includes the euro, sterling and Australian, Canadian and U.S. dollars. In addition, all of our brands have non-functional currency expenses for a portion of their operating expenses. Accordingly, these brands’ revenues and expenses in non-functional currencies create some degree of natural offset for recognized transactional currency gains and losses due to currency exchange movements. We consider our investments in foreign operations to be denominated in relatively stable currencies and of a long-term nature. We partially mitigate our net investment currency exposures by denominating a portion of our foreign currency intercompany payables in our foreign operations’ functional currencies, principally sterling. At August 31, 2013 and November 30, 2012, we have designated $1.9 billion and $1.8 billion, respectively, of our foreign currency intercompany payables as nonderivative hedges of our net investments in foreign operations. Accordingly, we have included $327 million and $243 million of cumulative foreign currency transaction nonderivative gains in the cumulative translation adjustment component of AOCI at August 31, 2013 and November 30, 2012, respectively, which offsets a portion of the losses recorded in AOCI upon translating our foreign operations’ net assets into U.S. dollars. During the three and nine months ended August 31, 2013 and 2012, we recognized foreign currency nonderivative transaction (losses) and gains of $(22) million ($2 million in 2012) and $83 million ($69 million in 2012), respectively, in the cumulative translation adjustment component of AOCI. Newbuild Currency Risks Our shipbuilding contracts are typically denominated in euros. Our decisions regarding whether or not to hedge a non-functional currency ship commitment for our cruise brands are made on a case-by-case basis, taking into consideration the amount and duration of the exposure, market volatility, currency exchange rate correlation, economic trends, our overall expected net cash flows by currency and other offsetting risks. We use foreign currency derivative contracts and have used nonderivative financial instruments to manage foreign currency exchange rate risk for some of our ship construction payments. In July 2012, we entered into foreign currency zero cost collars that are designated as cash flow hedges for a portion of P&O Cruises (UK)'s Britannia’s euro-denominated shipyard payments. These collars mature in February 2015 at a weighted-average ceiling rate of £0.83 to the euro, or $284 million, and a weighted-average floor rate of £0.77 to the euro, or $264 million. If the spot rate is between these two rates on the date of maturity, then we would not owe or receive any payments under these collars. In May 2013, we settled our foreign currency zero cost collars that were designated as cash flow hedges for the final euro-denominated shipyard payments of Royal Princess prior to their maturity date, which resulted in an insignificant gain being recognized in other comprehensive income (loss) during the second quarter of 2013. Concurrently with the settlement of these foreign currency zero cost collars, we entered into foreign currency forwards for $552 million that were also designated as cash flow hedges for the final euro-denominated shipyard payments of Royal Princess due in May 2013. These foreign currency forwards settled in May 2013, and we recognized a $6 million gain in other comprehensive income (loss) during the second quarter of 2013. At August 31, 2013, substantially all of our remaining newbuild currency exchange rate risk relates to euro-denominated newbuild construction payments for Regal Princess and a portion of Britannia, which represent a total commitment of $1.0 billion. The cost of shipbuilding orders that we may place in the future that is denominated in a different currency than our cruise brands’ or the shipyards’ functional currency is expected to be affected by foreign currency exchange rate fluctuations. These foreign currency exchange rate fluctuations may affect our desire to order new cruise ships. Interest Rate Risks We manage our exposure to fluctuations in interest rates through our investment and debt portfolio management strategies. These strategies include purchasing high quality short-term investments with floating interest rates, and evaluating our debt portfolio as to whether to make periodic adjustments to the mix of fixed and floating rate debt through the use of interest rate swaps and the issuance of new debt or the early retirement of existing debt. At August 31, 2013, 57% and 43% (61% and 39% at November 30, 2012 ) of our debt bore fixed and floating interest rates, respectively, including the effect of interest rate swaps. Fuel Price Risks Our exposure to market risk for changes in fuel prices substantially all relate to the consumption of fuel on our ships. We use our fuel derivatives program to mitigate a portion of our economic risk attributable to potential fuel price increases. We designed our fuel derivatives program to maximize operational flexibility by utilizing derivative markets with significant trading liquidity and our program currently consists of zero cost collars on Brent. All of our derivatives are based on Brent prices whereas the actual fuel used on our ships is marine fuel. Changes in the Brent prices may not show a high degree of correlation with changes in our underlying marine fuel prices. We will not realize any economic gain or loss upon the monthly maturities of our zero cost collars unless the average monthly price of Brent is above the ceiling price or below the floor price. We believe that these derivatives will act as economic hedges, however hedge accounting is not applied. As part of our fuel derivatives program, we will continue to evaluate various derivative products and strategies. Accordingly, during the second quarter of 2013 we reduced the spread between the floor and ceiling prices for certain of our fuel derivatives that mature in 2014 and 2015. At August 31, 2013, our outstanding fuel derivatives consisted of zero cost collars on Brent to cover a portion of our estimated fuel consumption as follows:
Maturities (a) | Transaction Dates |  | Barrels (in thousands) |  | Weighted-Average Floor Prices |  | Weighted-Average Ceiling Prices |  | Percent of Estimated Fuel Consumption Covered
Fiscal 2013 - Q4 |  |  |  |  |  |  |  |  |
| November 2011 |  | 528 |  |  | $ | 74 |  |  | $ | 132 |  |  |
| February 2012 |  | 528 |  |  | $ | 98 |  |  | $ | 127 |  |  |
| March 2012 |  | 1,056 |  |  | $ | 100 |  |  | $ | 130 |  |  |
|  |  | 2,112 |  |  |  |  |  |  | 42%
Fiscal 2014 |  |  |  |  |  |  |  |  |
| November 2011 |  | 2,112 |  |  | $ | 85 |  |  | $ | 114 |  |  |
| February 2012 |  | 2,112 |  |  | $ | 88 |  |  | $ | 125 |  |  |
| June 2012 |  | 2,376 |  |  | $ | 71 |  |  | $ | 116 |  |  |
| May 2013 |  | 1,728 |  |  | $ | 85 |  |  | $ | 108 |  |  |
|  |  | 8,328 |  |  |  |  |  |  | 42%
Fiscal 2015 |  |  |  |  |  |  |  |  |
| November 2011 |  | 2,160 |  |  | $ | 80 |  |  | $ | 114 |  |  |
| February 2012 |  | 2,160 |  |  | $ | 80 |  |  | $ | 125 |  |  |
| June 2012 |  | 1,236 |  |  | $ | 74 |  |  | $ | 110 |  |  |
| April 2013 |  | 1,044 |  |  | $ | 80 |  |  | $ | 111 |  |  |
| May 2013 |  | 1,884 |  |  | $ | 80 |  |  | $ | 110 |  |  |
|  |  | 8,484 |  |  |  |  |  |  | 42%
Fiscal 2016 |  |  |  |  |  |  |  |  |
| June 2012 |  | 3,564 |  |  | $ | 75 |  |  | $ | 108 |  |  |
| February 2013 |  | 2,160 |  |  | $ | 80 |  |  | $ | 120 |  |  |
| April 2013 |  | 3,000 |  |  | $ | 75 |  |  | $ | 115 |  |  |
|  |  | 8,724 |  |  |  |  |  |  | 43%
Fiscal 2017 |  |  |  |  |  |  |  |  |
| February 2013 |  | 3,276 |  |  | $ | 80 |  |  | $ | 115 |  |  |
| April 2013 |  | 2,028 |  |  | $ | 75 |  |  | $ | 110 |  |  |
|  |  | 5,304 |  |  |  |  |  |  | 26%
(a) | Fuel derivatives mature evenly over each month within the above fiscal periods.
Concentrations of Credit Risk As part of our ongoing control procedures, we monitor concentrations of credit risk associated with financial and other institutions with which we conduct significant business. Our maximum exposure under foreign currency and fuel derivative contracts and interest rate swap agreements that are in-the-money, which were [not] significant at August 31, 2013, is the replacement cost, net of any collateral received, in the event of nonperformance by the counterparties to the contracts, all of which are currently our lending banks. We seek to minimize credit risk exposure, including counterparty nonperformance primarily associated with our cash equivalents, investments, committed financing facilities, contingent obligations, derivative instruments, insurance contracts and new ship progress payment guarantees, by normally conducting business with large, well-established financial institutions, insurance companies and export credit agencies, and by diversifying our counterparties. In addition, we have guidelines regarding credit ratings and investment maturities that we follow to help safeguard liquidity and minimize risk. We normally do require collateral and/or guarantees to support notes receivable on significant asset sales, long-term ship charters and new ship progress payments to shipyards. We currently believe the risk of nonperformance by any of our significant counterparties is remote. We also monitor the creditworthiness of travel agencies and tour operators in Europe and credit card providers to which we extend credit in the normal course of our business. Our credit exposure includes contingent obligations related to cash payments received directly by travel agents and tour operators for cash collected by them on cruise sales in most of Europe where we are obligated to extend credit in a like amount to these guests even if we do not receive payment from the travel agents or tour operators. Concentrations of credit risk associated with these receivables and contingent obligations are not considered to be material, primarily due to the large number of unrelated accounts within our customer base, the amount of these contingent obligations and their short maturities. We have experienced only minimal credit losses on our trade receivables and related contingent obligations. We do not normally require collateral or other security to support normal credit sales.

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