What changed in this filing

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Item 1A. Risk Factors

2021-08-05 compared with 2021-04-29 · 91 added, 126 removed, 386 unchanged (36% of the section changed)

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We have been, and will continue to be, negatively impacted by the COVID-19 pandemic, including impacts that resulted or may result from actions taken in response to the outbreak, including the occurrence and spread of related variants.

Examples of these include, but are not limited to:

travel bans and cruising advisories and the resulting temporary suspension of our Global Brands' operations, which is expected to continue through at least June 30, 2021, for most of our cruise operations;

Examples of these actions include, but are not limited to:

travel bans and cruising advisories that resulted in the temporary suspension of our Global Brands' operations, and from which we have resumed limited operations;

restrictions on the movement and gathering of people;

social distancing measures;

shelter-in-place/stay-at-home orders;

and disruptions to businesses in our supply chain.

In addition to the imposed restrictions affecting our business, the extent, duration, and

magnitude of the COVID-19 pandemic’s effect on the economy and consumer demand for cruising and travel is still rapidly fluctuating and difficult to predict.

As such, these impacts may persist for an extended period of time or even become more pronounced, even after we are permitted to and/or begin to resume operations.

shelter-in-place/stay-at-home orders and disruptions to businesses in our supply chain.

In addition to the imposed restrictions affecting our business, the extent, duration, and magnitude of the COVID-19 pandemic’s effect on the economy and consumer demand for cruising and travel is still rapidly fluctuating and difficult to predict.

As such, these impacts may persist for an extended period of time or even become more pronounced, as we are permitted to and/or continue to resume operations.

The COVID-19 pandemic also has elevated risks affecting significant parts of our business:

• Operations:

Due to the global public health circumstances, we have decided to extend the suspension of sailings of our Global Brands' fleet through at least June 30, 2021, for most of our cruise operations.

We have begun certain limited operations and have announced additional, limited cruise operations, in each case, outside of the U.S.

with reduced guest occupancy, modified itineraries, and enhanced health, safety and vaccination protocols for our crew and guests.

There is no assurance that our return to service efforts will be successful and without material setbacks.

Our voluntary suspension of our global cruise operations commenced in March 2020 in response to the COVID-19 outbreak.

We have restarted our global cruise operations in a phased manner, following the requirements and recommendations of regulatory agencies, with reduced guest occupancy, modified itineraries and enhanced health, safety and vaccination protocols.

There is no assurance that our plan to resume operations will be successful and without material setbacks, including our ability to conduct sailings in consideration the requirements and recommendations of regulatory agencies.

It is possible that future COVID-19 outbreaks could occur onboard and, even if controlled and contained, it is uncertain as to whether we will need to suspend additional sailings and to what extent in such event.

An outbreak could result in possible illness among our guests and crew, incremental costs, guest refunds and negative publicity and media attention.

In addition, we may face challenges in executing our return to service plans from new homeports as a result of new and evolving operating protocols and possible changes in regulations in the countries in which we operate and plan to operate.

We continue to work with the U.S.

Center for Disease Control and Prevention (“CDC”), other U.S.

regulatory agencies and the Healthy Sail Panel (“HSP”) to develop a plan to return to service in consideration of global vaccination efforts.

For cruise ship operations in U.S.

waters, our return to service plan also considers the requirements of the CDC’s Framework for the Conditional Sailing Order (the “Conditional Order”), issued on October 30, 2020, including recently issued technical instructions under the Conditional Order.

This includes the CDC letter issued to members of the cruising industry on April 28, 2021 that provides clarifications to its previously issued technical instructions regarding several matters including port operations and COVID-19 testing and vaccination protocols.

While the Conditional Order and subsequent CDC guidance represents an important step in our return to service, many uncertainties remain as to the specifics and timing of implementation, administration and costs of the requirements of the Conditional Order, some of which may be significant.

Further, the Conditional Order contemplates that the CDC may issue additional requirements through technical instructions or orders as needed and that the phases required to resume operations will be further determined based on public health considerations, including the trajectory of the pandemic and the ability of the Company and other cruise ship operators to successfully employ measures that mitigate the risk of COVID-19 and its variants.

In addition, the Conditional Order contains requirements that could negatively impact our results of operations, such as:

laboratory testing of crew members and guests;

simulated voyages;

and the certification process, including implementing the required testing protocols, the prohibition on itineraries longer than seven days, and the demonstration at each port where a ship intends to dock of approval with U.S.

port and local health authorities, which requires medical care agreements addressing evacuation to onshore hospitals, housing agreements with onshore facilities for isolation and quarantine of COVID-19 cases, and port agreements to limit the number of cruise ships at any single port.

Our ability to meet the requirements under the Conditional Order will determine the timing and implementation of our plans to return to service for the rest of our operations, which we expect to be gradual.

We are currently reviewing and assessing the uncertainties relating to the Conditional Order’s requirements and are in dialogue with the CDC.

Based on our assessment of these conditions or for other reasons, we may determine it necessary to extend our voluntary suspension of our Global Brands’ cruise sailings which currently extends through at least June 30 , 2021, for most of our cruise operations.

It is difficult to predict our ability to meet the requirements of the Conditional Order and the costs associated with compliance, some of which could be significant.

The suspension of sailings and the expected reduction in demand for future cruising has led to a significant decline in our revenues and cash inflows, which has required us to take cost and capital expenditure containment actions.

Consequently, we have reduced and furloughed some of our workforce, with approximately 23% of our U.S.

shoreside employee base being impacted and, except for the minimum safe manning shipboard crew required to operate our ships subject to suspension of operations, our shipboard crew were notified that their contracts ended early and are gradually being notified about new assignments as operations resume over time.

As a result of these actions, we may be challenged in rebuilding and vaccinating our workforce which could further delay our return to service.

Furthermore, our efforts to vaccinate returning crew members could be hindered if vaccine availability does not keep pace with the timing of our phased return to service.

In addition, we have reduced our planned capital spending through 2021, which may negatively impact our execution of planned growth strategies, particularly as it relates to investments in our ships, technology, and our expansion of land-based developments.

Furthermore, we have taken

actions to monitor and mitigate changes in our supply chain, and port destination availability, which may strain relationships with our vendors and port partners.

If we are unable to satisfy the requirements of the Conditional Order our operations may be negatively impacted and we could be exposed to reputational and legal risks.

An outbreak could result in possible illness among our guests and crew, incremental costs, guest refunds and negative publicity and

media attention.

In addition, we may face challenges in executing our return to service plans from new homeports as a result of new and evolving operating protocols, including the impact of state regulations and litigation regarding proof of passenger vaccination, and possible changes in regulations in the countries in which we operate and plan to operate.

Uncertainties remain as to the specifics, timing and costs of administering and implementing our health and safety measures, some of which may be significant.

Based on our assessment of these requirements and recommendations, the status of COVID-19 infection and/or vaccination rates in the U.S.

or globally or for other reasons, we may determine it necessary to cancel or modify certain of our Global Brands’ cruise sailings.

We believe the impact to our global bookings resulting from COVID-19 will continue to have a material negative impact on our results of operations and liquidity, which may be prolonged beyond containment of the disease and its variants.

Our previous suspension of sailings and our gradual resumption of operations has led to a significant decline in our revenues and cash inflows, which required us to take cost and capital expenditure containment actions.

Consequently, we reduced and furloughed some of our workforce, with approximately 23% of our U.S.

shoreside employee base being impacted in 2020 and, except for the minimum safe manning shipboard crew required to operate our ships, our shipboard crew are gradually being notified about new assignments as operations resume over time.

As a result of these actions, we may be challenged in rebuilding and vaccinating the rest of our workforce which could further delay our resumption of operations.

Furthermore, our efforts to vaccinate returning crew members could be hindered if vaccine availability does not keep pace with the timing of our phased resumption of operations.

In addition, we have reduced our planned capital spending through 2021, which may negatively impact or delay our execution of planned growth strategies, particularly as it relates to investments in our ships, technology, and our expansion of land-based developments.

We also have taken actions to monitor and mitigate changes in our supply chain, and port destination availability, which may strain relationships with our vendors and port partners.

If we are unable to satisfy the guidance and recommendations of the Conditional Order, our operations may be negatively impacted and we could be exposed to reputational and legal risks.

Due to the unprecedented and uncertain nature of the COVID-19 pandemic and CDC or Department of State guidance, it is difficult to predict the impact of further disruptions and their magnitude.

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• Results of Operations:

Our suspensions of sailings have materially impacted the results of our operations.

We have incurred and will continue to incur significant costs associated with cancellations as we accommodate passengers with refunds and future cruise credits.

In addition, although the majority of our cruise operations are currently suspended, we have incurred and will likely continue to incur significant overhead costs associated with layup of our fleet and enhanced COVID-19 related cleaning, testing, vaccination and other mitigation procedures.

Our previous suspension of sailings materially impacted the results of our operations.

We have incurred and will continue to incur significant costs as we accommodate passengers with future cruise credits.

In addition, we have incurred and will likely continue to incur significant overhead costs associated with layup of our fleet that has not resumed operations and enhanced COVID-19 related cleaning, testing, vaccination and other mitigation procedures.

We may experience volatility in demand for cruising for an indeterminable length of time due to the uncertain nature of the COVID-19 pandemic and to ongoing concerns about health and safety, and we cannot predict when we will return to pre-outbreak demand or fare pricing or if we will return to such levels in the foreseeable future.

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As a result, we have taken actions to increase our liquidity through a combination of capital and operating expense reductions and financing activities.

During the quarter ended March 31, 2021, we executed and amended various financing arrangements including the issuance of $1.5 billion in senior notes and the issuance of 16.9 million shares of common stock for approximately $1.5 billion.

Additionally, we extended the draw date for our $700 million 364-day facility for an additional year, extended more than $2.0 billion in debt and revolving credit due in 2022, and deferred $1.2 billion of debt amortization under our export-credit backed loan facilities over a five-year period starting in April 2022.

Refer to Note 7 .

Debt to our consolidated financial statements under Item 1.

Financial Statements for further discussion of our 2021 financing activities.

We have agreed with certain of our lenders that we will not pay dividends or engage in stock repurchases until after the third quarter of 2022.

Thereafter, in the event we declare a dividend or engage in stock repurchases we will need to repay the amounts deferred under our export credit facilities.

On February 25, 2021, S&P Global downgraded our senior unsecured rating from B+ to B, which had no financial impact, and downgraded our $3.32 billion Senior Secured Notes and Silversea Notes , which were fully repaid in June 2021 with the proceeds from the $650 million Unsecured Notes, from BB to BB-.

This downgrade had no impact on the terms of the notes.

Our ability to raise additional financing, whether or not secured, could be limited if our credit rating is further downgraded, and/or if we fail to comply with applicable covenants governing our outstanding indebtedness, and/or if overall financial market conditions worsen.

Additionally, due to the complexity of the pandemic’s impact to the economy and uncertainty of its duration, we cannot guarantee that assumptions used to project our liquidity needs will be correct, which may result in the need for additional financing and/or may result in the inability to satisfy covenants required by our current credit facilities.

Additionally, due to the complexity of the pandemic’s impact to the economy and

uncertainty of its duration, we cannot guarantee that assumptions used to project our liquidity needs will be correct, which may result in the need for additional financing and/or may result in the inability to satisfy covenants required by our current credit facilities.

If we continue to raise additional funds through equity or convertible debt issuances, our shareholders could experience dilution of their ownership interest, and these securities could have rights, preferences, and privileges that are superior to that of holders of our ordinary shares.

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We have a substantial amount of debt and significant debt service obligations.

As of March 31, 2021, we had total debt of $20.9 billion.

As of June 30, 2021, we had total debt of $21.0 billion.

Our substantial debt could have important negative consequences for us.

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We may incur substantial additional debt in the future.

Except for the restrictions under the indentures governing our Secured Notes (as defined below) and our 9.125% Senior Guaranteed Notes due 2023 (the “Unsecured Notes”) and certain of our other debt instruments, including our unsecured bank and export credit facilities, we are not restricted under the terms of our debt instruments from incurring additional debt.

Except for the restrictions under the indentures governing our Secured Notes (as defined below) and our 9.125% Senior Guaranteed Notes due in 2023 (the “Unsecured Notes”) and certain of our other debt instruments, including our unsecured bank and export credit facilities, we are not restricted under the terms of our debt instruments from incurring additional debt.

Although the indentures governing the Secured Notes, the Unsecured Notes, and certain of our other debt instruments, including our unsecured bank and export credit facilities, contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances the amount of debt that could be incurred in compliance with these restrictions could be substantial.

Our debt instruments do not and will not prevent us from incurring liabilities that do not constitute “Indebtedness” as defined therein.

In the event that we execute and borrow under the $700M commitment expiring on August 12, 2022 for a 364-day term loan facility, the credit agreement that would govern such term loan facility would impose substantially similar restrictions (including the related qualifications and exceptions) as are set forth in the indenture governing the Unsecured Notes.

Our debt instruments also do not and will not prevent us from incurring liabilities that do not constitute “Indebtedness” as defined therein.

In the event that we execute and borrow under the $700 million commitment expiring on August 12, 2022 for a 364-day term loan facility, the credit agreement that would govern such term loan facility would impose substantially similar restrictions (including the related qualifications and exceptions) as are set forth in the indenture governing the Unsecured Notes.

If new debt is added to our existing debt levels, the related risks that we now face would increase.

As of March 31, 2021, we have commitments for approximately $10.6 billion of debt to finance the purchase of 10 ships on order by our Royal Caribbean International, Celebrity Cruises and Silversea Cruises brands, nine of which are guaranteed by the export credit agencies in the countries in which the ships are being built.

As of June 30, 2021, we have commitments for approximately $10.5 billion of debt to finance the purchase of 10 ships on order by our Royal Caribbean International, Celebrity Cruises and Silversea Cruises brands, nine of which are guaranteed by the export credit agencies in the countries in which the ships are being built.

The ultimate size of each facility will depend on the final contract price (including change orders and owner’s supply) as well as fluctuations in the EUR/USD exchange rate.

The terms of existing debt financing gives, and any future preferred equity or debt financing may give, holders of any preferred securities or debt securities rights that are senior to rights of our common shareholders or impose more stringent operating restrictions on our company.

The terms of existing debt financing give, and any future preferred equity or debt financing may give, holders of any preferred securities or debt securities rights that are senior to rights of our common shareholders or impose more stringent operating restrictions on our company.

The holders of our existing debt have rights, preferences and privileges senior to those of holders of our common stock in the event of liquidation.

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and consolidate, merge or transfer all or substantially all of our assets.

Both our export credit facilities and our non-export credit facilities contain covenants that require us, among other things, to maintain a fixed charge coverage ratio of at least 1.25x and limit our net debt-to-capital ratio to no more than 62.5%.

Both our export credit facilities and our non-export credit facilities contain covenants that will, once our current waivers expire, require us, among other things, to maintain a specified minimum fixed charge coverage ratio and limit our net debt-to-capital ratio.

Refer to Note 7 .

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Financial Statements for further discussion on our covenants and existing waivers.

On February 25, 2021, S&P Global downgraded the Silversea Cruises’ Notes from BB to BB-, which had no impact with respect to the Silversea Cruises’ Notes.

The Silversea Notes are guaranteed by the Company on a senior unsecured basis.

Any event of default or acceleration of the indebtedness under the Silversea Notes could cause the borrowings under other of our debt instruments that contain cross-default provisions to be accelerated or become payable on demand.

All of these limitations are subject to significant exceptions and qualifications.

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These include prevailing economic, financial and industry conditions.

If we breach any of these covenants or restrictions, we could be in default under such indebtedness and certain of our other debt instruments and the relevant debt holders or lenders could elect to declare the debt, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral securing that debt.

If we breach any of these covenants or restrictions, we could be in default under

such indebtedness and certain of our other debt instruments and the relevant debt holders or lenders could elect to declare the debt, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral securing that debt.

If the debt under certain of our debt instruments that we enter into were to be accelerated, our liquid assets may be insufficient to repay in full such indebtedness.

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If we elect to settle conversions of our convertible notes, if any, in shares of our common stock or a combination of common stock and cash, conversions of our convertible notes may result in significant dilution to our shareholders.

We did not declare dividends on our common stock in the quarter ended March 31, 2021 and do not expect to pay dividends on our common stock for the foreseeable future.

No cash dividends were declared on our common stock during the four consecutive quarters ended March 31, 2021.

We did not declare dividends on our common stock in the quarter ended June 30, 2021 and do not expect to pay dividends on our common stock for the foreseeable future.

No cash dividends were declared on our common stock during the five consecutive quarters ended June 30, 2021.

We expect that any income received from operations will be devoted to our future operations and recovery.

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Payment of dividends would, in any case, depend upon our profitability at the time, cash available for those dividends, and other factors as our board of directors may consider relevant.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly

Increased regulatory oversight, changes in the method pursuant to which the LIBOR rates are determined and potential phasing out of LIBOR after 2021 may adversely affect the value of a portion of our indebtedness.

A portion of our indebtedness bears interest at variable rates that are linked to changing market interest rates.

As a result, an increase in market interest rates would increase our interest expense and our debt service obligations.

As of March 31, 2021, we had approximately $6.9 billion of indebtedness that bears interest at variable rates.

As of June 30, 2021, we had approximately $7.0 billion of indebtedness that bears interest at variable rates.

This amount represented approximately 32.2% of our total indebtedness.

As of March 31, 2021, a hypothetical 1% increase in prevailing interest rates would increase our forecasted 2021 interest expense by approximately $40.9 million.

As of June 30, 2021, a hypothetical 1% increase in prevailing interest rates would increase our forecasted 2021 interest expense by approximately $29.3 million.

In addition, on July 27, 2017, the United Kingdom’s Financial Conduct Authority ("FCA"), which regulates the London Interbank Offered Rate (“LIBOR”), announced that it will no longer persuade or compel banks to submit LIBOR rates after 2021.

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regulators continue to encourage banks to cease entering into new contracts that use USD LIBOR as a reference rate by December 31, 2021.

However, uncertainty remains as many market participants await the development of term SOFR products, i.e., forward-looking rates, and benchmark providers are developing indices that might co-exist with SOFR.

However, uncertainty remains as many market participants await the development of term SOFR

products, i.e., forward-looking rates, and benchmark providers are developing indices that might co-exist with SOFR.

If LIBOR ceases to exist, the level of interest payments on the portion of our indebtedness that bears interest at variable rates would be affected, which may materially impact the amount of our interest payments under such debt.

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Macroeconomic, Business, Market and Operational Risks

trademarks and other assets and potentially affecting other critical accounting estimates where the change may be material to our operating results.

Adverse worldwide economic or other conditions could reduce the demand for cruises and passenger spending, adversely impacting our operating results, cash flows and financial condition including impairing the value of our goodwill, ships, trademarks and other assets and potentially affecting other critical accounting estimates where the change may be material to our operating results.

In addition to health and safety concerns, demand for cruises is affected by international, national, and local economic conditions.

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Our operating costs could increase due to market forces and economic or geopolitical factors beyond our control.

Our operating costs, including fuel, food, payroll and benefits, airfare, taxes, insurance, and security costs, are all subject to increases due to market forces and economic or geopolitical conditions or other factors beyond our control, including as a result of rerouting itineraries due to ports closing or not accepting passengers in connection with the COVID-19 pandemic.

Increases in these operating costs could adversely affect our future profitability when an economic recovery begins.

Our operating costs, including fuel, food, payroll and benefits, airfare, taxes, insurance, and security costs, can be, and have been, subject to increases due to market forces and economic or geopolitical conditions or other factors beyond our control, including as a result of rerouting itineraries due to ports closing or not accepting passengers in connection with the COVID-19 pandemic.

Increases in these operating costs could adversely affect our future profitability.

Any further impairment of our goodwill, long-lived assets, equity investments and notes receivable could adversely affect our financial condition and operating results.

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Disease outbreaks and increased concern related to illness when traveling to, from, and on our ships could cause a drop in demand for cruises, guest cancellations, travel restrictions, an unavailability of ports and/or destinations, cruise cancellations, ship redeployments and an inability to source our crew, provisions or supplies from certain places.

Due to the complex and evolving nature of the COVID-19 pandemic, we cannot predict the duration of the effect of the current pandemic, and the magnitude is dependent on the development of future events and responses from governments, other authorities, and individual

Our industry, including our passengers and crew, may be subject to enhanced health and safety requirements in the future which may be costly and take a significant amount of time to implement across our fleet and we may be subject to concerns that cruises are susceptible to the spread of infectious diseases such as COVID-19.

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In addition, the new operating protocols we are developing and any other health protocol we may develop or that may be required by law in the future in response to COVID-19, and related variants, or other infectious diseases may be costly to implement and less effective than we expected in reducing the risk of infection and spread of such disease on our cruise ships, which will negatively impact our operations and expose us to reputational and legal risks.

Incidents on ships, at port facilities, land destinations and/or affecting the cruise vacation industry in general, and the associated negative media coverage and publicity, could affect our reputation and impact our sales and results of operations.

The ownership and/or operation of cruise ships, private destinations, port facilities and shore excursions involves the risk of accidents, illnesses, mechanical failures, environmental incidents and other incidents which may bring into question safety, health, security and vacation satisfaction and can negatively impact our sales, operations and reputation.

Incidents on ships, at port facilities, land destinations and/or affecting the cruise vacation industry in general, and the associated negative media coverage and publicity, have affected and could continue to affect our reputation and impact our sales and results of operations.

Cruise ships, private destinations, port facilities and shore excursions operated and/or offered by us and third parties involve the risk of accidents, illnesses, mechanical failures, environmental incidents and other incidents which may bring into question safety, health, security and vacation satisfaction and negatively impact our sales, operations and reputation.

Incidents involving cruise ships, and, in particular the safety, health and security of guests and crew and the media coverage thereof, including those related to the COVID-19 pandemic, have impacted and could continue to impact demand for our cruises and pricing in the industry.

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Significant weather, climate events and/or natural disasters could adversely impact our business and results from operations.

Natural disasters (e.g.

earthquakes, volcanos, wild fires), weather and/or climate events (including hurricanes and typhoons) could impact our source markets and operations resulting in travel restrictions, guest cancellations, an inability to source our crew or our provisions and supplies from certain places.

Natural disasters (e.g., earthquakes, volcanos, wild fires), weather and/or climate events (including hurricanes and typhoons) could impact our source markets and operations resulting in travel restrictions, guest cancellations, an inability to source our crew or our provisions and supplies from certain places.

We are often forced to alter itineraries and occasionally cancel a cruise or a series of cruises or to redeploy our ships due to these types of events, which could have an adverse effect on our sales, operating costs and profitability in the current and future periods.

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and there are a limited number of shipyards with the capability and capacity to build, repair, maintain and/or upgrade our ships.

As such, any disruptions effecting the newbuild or fleet modernization supply chain will adversely impact our business as there are limited substitutes.

As such, any disruptions affecting the newbuild or fleet modernization supply chain will adversely impact our business as there are limited substitutes.

The COVID-19 pandemic has led to suspensions and/or slowdowns of work at certain shipyards, which impacts our ability to construct new ships when and as planned, our ability to timely and cost-effectively procure new capacity, and our ability to execute scheduled drydocks and/or fleet modernizations.

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In addition, the prices of labor and/or various commodities that are used in the construction of ships can be subject to volatile price changes, including the impact of fluctuations in foreign exchange rates.

Shipyards, their subcontractors, and/or our suppliers may

encounter financial, technical or design problems when doing these jobs.

Shipyards, their subcontractors, and/or our suppliers may encounter financial, technical or design problems when doing these jobs.

If materialized, these problems could impact the timely delivery or costs of new ships or the ability of shipyards to repair and upgrade our fleet in accordance with our needs or expectations.

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Although our ships can be redeployed, cruise sales and/or pricing may be impacted by the introduction of new ships into the marketplace, reductions in cruise capacity, overall market growth and deployment decisions of ourselves and our competitors.

As of March 31, 2021, a total of 109 new ships with approximately 219,300 berths were on order for delivery through 2027 in the cruise industry, including 11 ships currently scheduled to be delivered to us.

As of June 30, 2021, a total of 91 new ships with approximately 198,186 berths were on order for delivery through 2027 in the cruise industry, including 13 ships currently scheduled to be delivered to us.

The further net growth in capacity from these new ships and future orders, without an increase in the cruise industry’s demand and/or share of the vacation market, could depress cruise prices and impede our ability to achieve yield improvement.

Additionally, due to our global suspension of operations and the suspension of operations by other cruise operators, cruise prices and yield improvement are further at risk depending on how, when, and where global operations resume.

Further, cruise prices and yield improvement could face additional pressure due to the pace at which we and other cruise line operators return to service.

In addition, to the extent that we or our competitors deploy ships to a particular itinerary/region and the resulting capacity in that region exceeds the demand, we may lower pricing and profitability may be lower than anticipated.

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and in light of the COVID-19 pandemic, port availability could also be subject to immediate change depending on local and/or onboard disease outbreaks or other government restrictions as well as limited availability when sailing resumes.

In addition, higher fuel costs may adversely impact the destinations we choose to call upon on certain of our itineraries as they become too costly to include.

Increased demand and competition for key ports of call or destinations, limitations on the availability or feasibility of use of specific ports of call and/or constraints on the availability of shore excursions and other service providers at such ports or destinations could adversely affect our results of operations.

Higher fuel costs also may adversely impact the destinations we choose to call upon on certain of our itineraries as they become too costly to include.

In addition, certain ports and destinations have faced a surge of both cruise and non-cruise tourism which, in certain cases, has fueled anti-tourism sentiments and related countermeasures to limit the volume of tourists allowed in these destinations.

In certain destinations, countermeasures to limit the volume of tourists have been contemplated and/or put into effect, including proposed limits on cruise ships and cruise passengers.

Potential restrictions in ports and destinations such as Venice, Barcelona or Key West, could limit the itinerary and destination options we can offer our passengers going forward.

We may lose business to competitors throughout the vacation market.

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There can be no assurance that we can successfully balance these goals with our cost management and capital allocation strategies.

Our business also requires us to make capital allocation decisions across a broad scope of investment options with varying return profiles and time horizons for

value realization.

Our business also requires us to make capital allocation decisions across a broad scope of investment options with varying return profiles and time horizons for value realization.

These include significant capital investment decisions such as ordering new ships, upgrading our existing fleet, enhancing our technology and/or data capabilities, and expanding our portfolio of land-based assets, based on expected market preferences, competition and projected demand.

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In addition, the travel agent industry is sensitive to economic conditions that impact discretionary income of consumers.

Significant disruptions, such as those caused by the COVID-19 pandemic, or contractions in the industry could reduce the number of travel agencies available for us to market and sell our cruises, which could have an adverse impact on our financial condition and results of operations.

condition and results of operations.

Additionally, the strength of our recovery from suspended operations could be delayed if we are not aligned and partnered with key travel agencies.

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We seek to maintain appropriate insurance coverage at commercially reasonable rates.

We normally insure based on the cost of an asset rather than replacement value and we also elect to self-insure, co-insure, or use deductibles in certain circumstances for certain risks such as loss of use of a ship or other business interruption.

We normally insure based on the cost of an asset rather than replacement value and we also elect to self-insure, co-insure, or use deductibles in certain

circumstances for certain risks such as loss of use of a ship or other business interruption.

The limits of insurance coverage we purchase are based on the availability of the coverage, evaluation of our risk profile and cost of coverage.

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Actual or threatened natural disasters (e.g., hurricanes/typhoons, earthquakes, tornadoes, fires or floods), municipal lockdowns, curfews, quarantines, or similar events in these locations may have a material impact on our business continuity, reputation and results of operations.

For instance, all Company shoreside operations are working remotely due to the COVID-19 pandemic, which has posed increased technological risks.

In addition, substantial or repeated information system failures, computer viruses or cyber attacks impacting our shoreside or shipboard operations could adversely impact our business.

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Changes in U.S.

or other countries’ foreign travel policy may affect our results of operations.

or other countries’ foreign travel policy have affected, and may continue to affect, our results of operations.

Changes in U.S.

foreign policy could result in the imposition of travel restrictions or travel bans on U.S.

persons to certain countries or result in the imposition of U.S.

travel advisories, warnings, rules, regulations or legislation that could expose us to penalties or claims of monetary damages.

The timing and scope of these changes are unpredictable, and they could cause us to cancel scheduled sailings, possibly on short notice, or could result in possible litigation against us.

This, in turn, could decrease our revenue, increase our operating costs and otherwise impair our profitability.

For instance, in June 2019, the U.S.

government announced that cruise ships would no longer be allowed to travel between the U.S.

This required us to change our high yielding Cuba sailings on short notice, which impacted our earnings.

Moreover, in May 2019, the U.S.

government activated Title III of the Cuban Liberty and Solidarity (Libertad) Act of 1996, popularly known as the Helms-Burton Act.

This allowed certain individuals whose property was confiscated by the Cuban government to sue in U.S.

courts anyone who “traffics” in the property in question.

The activation of Title III has resulted in litigation against us and others in the tourism industry.

Additionally, in the first quarter of 2020, the U.S.

Department of State, along with other governments, including Canada, issued travel advisories warning against cruise travel as a result of the COVID-19 pandemic and subsequently imposed restrictions on those entering the U.S.

and many nations imposed strict temporary restrictions on international travel.

This, combined with other factors, ultimately lead to the company voluntarily suspending the sailings of our fleet globally and may limit or slow our ability to resume operations in the near term.

In addition to the loss of revenues, our financial condition is affected by refund requests, future cruise credit issuances, and other costs associated with returning passengers and crew home safely.

Furthermore, many countries have adopted restrictions against U.S.

foreign policy have in the past and could in the future result in the imposition of travel restrictions or travel bans on U.S.

persons to certain countries or result in the imposition of travel advisories, warnings, rules, regulations or legislation exposing us to penalties or claims of monetary damages.

In addition, many countries have adopted restrictions against U.S.

travelers, and we currently cannot predict when those restrictions will be eased.

Growing anti-tourism sentiments and environmental concerns related to cruising could adversely impact our operations.

Certain ports and destinations are facing a surge of both cruise and non-cruise tourism which, in certain cases, has fueled anti-tourism sentiments and related countermeasures to limit the volume of tourists allowed in these destinations.

In certain destinations, countermeasures to limit the volume of tourists are being contemplated and/or put into effect, including proposed limits on cruise ships and cruise passengers.

Potential restrictions in ports and destinations such as Venice, Barcelona or Key West, could limit the itinerary and destination options we can offer our passengers going forward.

Some environmental groups have also generated negative publicity about the environmental impact of the cruise vacation industry and are advocating for more stringent regulation of ship emissions at berth and at sea.

These anti-tourism sentiments and growing environmental scrutiny of the cruise industry and any related countermeasures could adversely impact our operations and financial results and subject us to increasing compliance costs.

Environmental, labor, health and safety, financial responsibility and other maritime regulations could affect operations and increase operating costs.

and various state and foreign government or regulatory agencies have enacted or may enact environmental regulations or policies, such as requiring the use of low sulfur fuels (e.g.

IMO 2020), that could increase our direct cost to operate in certain markets, increase our cost for fuel, limit the supply of compliant fuel, cause us to incur significant expenses to purchase and/or develop new equipment and adversely impact the cruise vacation industry.

While we have taken and expect to continue to take a number of actions to mitigate the potential impact of certain of these regulations, there can be no assurances that these efforts will be successful over the long term.

The timing and scope of these changes and regulations can be unpredictable, and they could cause us to cancel scheduled sailings, possibly on short notice, or could result in litigation against us.

This, in turn, could decrease our revenue, increase our operating costs and otherwise impair our profitability.

Environmental, labor, health and safety, financial responsibility and other maritime regulations and measures could affect operations and increase operating costs.

and various state and foreign government or regulatory agencies have enacted or may enact environmental regulations or policies, such as requiring the use of low sulfur fuels (e.g., IMO 2020), that could increase our direct cost to operate in certain markets, increase our cost for fuel, limit the supply of compliant fuel, cause us to incur significant expenses to purchase and/or develop new equipment and adversely impact the cruise vacation industry.

While we have taken and expect to

continue to take a number of actions to mitigate the potential impact of certain of these regulations, there can be no assurances that these efforts will be successful over the long term.

There is increasing global regulatory focus on climate change, greenhouse gas and other emissions.

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This could result in the enactment of more stringent regulation of cruise ships that could subject us to increasing compliance costs in the future.

Some environmental groups also have generated negative publicity about the environmental impact of the cruise vacation industry and are advocating for more stringent regulation of ship emissions at berth and at sea.

Growing environmental scrutiny of the cruise industry and any related measures could adversely impact our operations and financial results and subject us to increasing compliance costs.

A change in our tax status under the U.S.

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A failure to adopt the appropriate technology, a failure or obsolescence in the technology that we do adopt, or a failure in our safety procedures could adversely affect our results of operations.

We are exposed to cyber security attacks, which have significantly increased in frequency and complexity, and data breaches, including the risks and costs associated with protecting our systems and maintaining integrity and security of our business information, as well as personal data of our guests, employees and business partners.

We are exposed to cyber security attacks, data breaches and the risks and costs associated with protecting our systems and maintaining data integrity and security.

We are subject to cyber security attacks.

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The attacks can encompass a wide range of methods and intent, including phishing attacks, illegitimate requests for payment, theft of intellectual property, theft of confidential or non-public information, installation of malware, installation of ransomware and theft of personal or business information.

The breadth and scope of these attacks, as well as the techniques and sophistication used to conduct these attacks, have grown over time.

The frequency and sophistication of, and methods used to conduct, these attacks have increased over time.

A successful cyber security attack may target us directly, or it may be the result of a third party’s inadequate care.

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Furthermore, responding to such an attack and mitigating the risk of future attacks could result in additional operating and capital costs in systems technology, personnel, monitoring and other investments.

In addition, we are also subject to various risks associated with the collection, handling, storage and transmission of sensitive information.

In the course of doing business, we collect large volumes of employee, customer and other third-party data, including personally identifiable information and individual credit data, for various business purposes.

Although we have

policies and procedures in place to safeguard such sensitive information, this information has been and could be subject to cyber security attacks and the aforementioned risks.

We are subject to federal, state and international laws (including the European Union General Data Protection Regulation), as well as industry standards, relating to the collection, use, retention, security and transfer of personally identifiable information and individual credit data.

In many cases, these laws apply not only to third-party transactions, but also to transfers of information between the Company and its subsidiaries, and among the Company, its subsidiaries and other parties with which the Company has commercial relations.

Several jurisdictions have passed laws in this area, and other jurisdictions are considering imposing additional restrictions.

These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction.

Complying with emerging and changing international requirements has caused, and may cause us to incur substantial costs or require us to change our business practices.

If we fail to comply with the various applicable data collection and privacy laws, we could be exposed to fines, penalties, restrictions, litigation or other expenses, and our business could be adversely impacted.

We are also subject to various risks associated with the collection, handling, storage and transmission of sensitive information.

In the regular course of business, we collect employee, customer and other third-party data, including personally identifiable information and individual credit card data, for various business purposes.

Although we have policies and procedures in place to safeguard such sensitive information, this information has been and could be subject to cyber security attacks and the aforementioned risks.

In addition, we are subject to federal, state and international laws relating to the

collection, use, retention, security and transfer of personally identifiable information and individual credit card data.

Those laws include, among others, the European Union General Data Protection Regulation and regulations of the New York State Department of Financial Services and similar state agencies that impose additional cyber security requirements on us as a result of our provision of certain insurance products.

Complying with these and other applicable laws has caused, and may cause, us to incur substantial costs or require us to change our business practices, and our failure to do so may expose us to substantial fines, penalties, restrictions, litigation or other expenses and adversely affect our business.

Further, any changes to laws or regulations, including new restrictions or requirements applicable to our business, or an increase in enforcement of existing laws and regulations, could expose us to additional costs and liability and could limit our use and disclosure of such information.

While we continue to evolve our cyber security practices in line with our business’ reliance on technology and the changing external threat landscape, and we invest time, effort and financial resources to secure our systems, networks and communications, our security measures cannot provide absolute assurance that we will be successful in preventing or responding to all cyber security attacks.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors