What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-10-29 compared with 2021-08-05 · 174 added, 154 removed, 383 unchanged (46% of the section changed)

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• a review of our financial presentation, including discussion of certain operational and financial metrics we utilize to assist us in managing our business;

• a discussion of our results of operations for the quarter and six months ended June 30, 2021, compared to the same periods in 2020;

• a discussion of our results of operations for the quarter and nine months ended September 30, 2021, compared to the same periods in 2020;

• a discussion of our business outlook;

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As discussed in more detail herein, certain of these metrics are non-GAAP financial measures.

These non-GAAP financial measures are provided along with the related GAAP financial measures as we believe they provide useful information

to investors as a supplement to our consolidated financial statements, which are prepared and presented in accordance with GAAP.

These non-GAAP financial measures are provided along with the related GAAP financial measures as we believe they provide useful

information to investors as a supplement to our consolidated financial statements, which are prepared and presented in accordance with GAAP.

The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

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and (xi) currency translation losses recognized during the second quarter of 2020, in connection with the ships classified as assets held-for-sale that were previously chartered to Pullmantur.

Available Passenger Cruise Days ( “APCD” ) is our measurement of capacity and represents double occupancy per cabin multiplied by the number of cruise days for the period, which excludes canceled cruise days, simulated voyage cruise days and drydock days.

We use this measure to perform capacity and rate analysis to identify our main non-capacity drivers that cause our cruise revenue and expenses to vary.

Occupancy , in accordance with cruise vacation industry practice, is calculated by dividing Passenger Cruise Days (as defined below) by APCD.

Occupancy ("Load Factor") , in accordance with cruise vacation industry practice, is calculated by dividing Passenger Cruise Days (as defined below) by APCD.

A percentage in excess of 100% indicates that three or more passengers occupied some cabins.

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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.

Our Global Brands have returned to service from U.S.

ports, and 12 of our ships have sailed or are expected to sail from these U.S.

ports by August 31, 2021.

More broadly, a total of 36 of our 60 Global and Partner Brand ships have resumed sailing or have announced their intention to resume sailing by August 31, 2021.

Additionally, we anticipate having 80% of the fleet in service by end of year 2021.

By the end of September 2021, we operated 38 of our Global and Partner Brand ships, representing 63% of our fleet, and sailed over 500,000 passengers since we resumed operations.

We expect to operate approximately 80% of our fleet and anticipate serving over 1 million passengers by December 31, 2021.

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

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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.

Continued Fleet Ramp-Up

We anticipate load factors on core itineraries to increase to 65-70% during the fourth quarter of 2021.

We anticipate 6.9 million APCDs for the fourth quarter of 2021 with overall load factors of 60-65% and expect that all ships on core itineraries in the fourth quarter of 2021 will be cash flow accretive, even when including start-up costs.

Core itineraries exclude sailings during our early resumption of operations of up to four weeks and also exclude specialized itineraries that were implemented during the COVID-19 period (e.g.

Singapore, Cyprus).

By the end of the year, we expect that 50 of our 61 Global Brand ships will have returned to service, representing almost 100% of core itinerary capacity and approximately 80% of worldwide capacity.

Our remaining Global Brand ships are expected to return to service by the spring of 2022 and we expect to return to historical load factors in the third quarter of 2022.

Mainland China is expected to resume in the spring and we have assumed lower load factors as this important long term market ramps-up.

On October 25, 2021, the U.S.

Centers for Disease Control and Prevention (“CDC”) issued a temporary extension and modification of the Conditional Sail Order (“Conditional Order”) effective November 1, 2021 through January 15, 2022, and expressed its intention to transition to a voluntary program thereafter, in coordination with interested cruise ship operators.

We plan to continue to operate under the Conditional Order where required, and to voluntarily comply with the Conditional Order for ships home ported or calling in Florida ports.

Also on October 25, 2021, the U.S.

President issued a proclamation effective on November 8, 2021 that rescinds all previous proclamations suspending entry into the U.S.

of non-citizen non-immigrants.

We expect these recent developments to support our return to service and anticipated load factors.

Update on Bookings

Overall booking volumes have improved, and pricing remains strong.

During the second quarter of 2021, we received about 50% more new bookings compared to the first quarter of 2021, with trends improving from one month to the next.

By June, we were receiving about 90% more bookings each week when compared to the first quarter of 2021, with improvements of a similar magnitude for both 2021 and 2022 sailings.

Overall, the booking activity for 2021 sailings is consistent with our expected capacity and occupancy ramp up, at prices that are higher than in 2019.

While it’s too early to make any definitive conclusions of the impact of the Delta variant on bookings, we have seen a modest impact on closer-in bookings.

However, 2022 continues to remain strong;

in particular the spring and summer months are performing well.

As of June 30, 2021 we had $2.4 billion in customer deposits, which has increased by $530 million from the March 31, 2021 balance.

Approximately 40% of the customer deposit balance is related to future cruise credits.

Booking volumes have improved significantly since the slowdown this summer due to the Delta variant (the "Delta Dip").

We attracted more bookings in the third quarter compared to the second quarter.

September was particularly strong, with new bookings for 2022 sailings more than 60% higher than the monthly average during the second quarter of 2021.

Sailings for the full year 2022 are booked within historical ranges and at higher prices than 2019.

Sailings further out are experiencing more normalized booking trends than sailings closer in.

As such, load factors for sailings in the first quarter of 2022 are lower than historical levels;

are improving but still below average in the second quarter of 2022;

and are solidly within historical levels in the second half of 2022.

Pricing remains strong throughout 2022, with or without future cruise credits ("FCC").

As of September 30, 2021, we had $2.8 billion in customer deposits, which represents an improvement by $0.4 billion from the June 30, 2021 balance despite the $300 million of revenue that was recognized during the quarter.

Approximately 35% of the customer deposit balance is related to FCCs.

This has dropped from 40% in the prior quarter, indicating net new demand.

Customer deposits for cruises taking place in the second quarter of 2022 and onward are higher than customer deposits on the same three brands for cruises taking place in the same time horizon as of September 30, 2019.

Update on Recent Liquidity Actions and Ongoing Uses of Cash

As of June 30, 2021, we had liquidity of approximately $5.0 billion in the form of cash and cash equivalents of $4.3 billion and a $0.7 billion commitment expiring on August 12, 2022 for a 364-day term loan facility.

As of June 30, 2021, our revolving credit facilities were mostly utilized through a combination of amounts drawn and letters of credit issued under the facilities.

As of September 30, 2021, we had liquidity of $4.1 billion, including $0.1 billion of undrawn revolving credit facility capacity, $3.3 billion in cash and cash equivalents, and a $0.7 billion commitment for a 364-day term loan facility available to draw on at any time prior to August 12, 2022.

Our revolving credit facilities were mostly utilized through a combination of amounts drawn and letters of credit issued under the facilities as of September 30, 2021.

We continue to prioritize and bolster liquidity while taking steps to improve our balance sheet and reduce its interest costs to be well positioned for recovery.

Reduced Operating Expenses

We took significant actions to reduce operating expenses during the suspension of our global cruise operations.

We took significant actions in early 2020 to reduce operating expenses during the suspension of our global cruise operations.

In particular, we:

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• suspended travel for shoreside employees and instituted a hiring freeze across the organization.

The average monthly cash burn rate for the second quarter of 2021 was approximately $330 million.

This is slightly higher than the previous quarter as we have additional ships in operation.

As we continue to ramp up operations, we expect to incur incremental spend related to bringing ships back to operating status, returning crew members to ships and implementing enhanced health and safety protocols.

We also expect to continue to collect deposits related to those sailings and for future cruises.

During our ramp up of operations, we have incurred and will continue to incur incremental spend related to bringing ships back to operating status, returning crew members to ships and implementing enhanced health and safety protocols.

We also collected and will continue to collect deposits related to those sailings and for future cruises.

The decision to bring ships back into service considers many variables, including deployment opportunities, commercial potential, cost of operations and cash flow.

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COVID-19 has impacted shipyard operations, which have and may continue to result in delays of our previously contracted ship deliveries.

As of June 30, 2021, we anticipate overall full year capital expenditures, based on our existing ships on order, will be approximately $2.1 billion for 2021.

As of September 30, 2021, we anticipate that overall full year capital expenditures, based on our existing ships on order, will be approximately $2.1 billion for 2021.

This amount does not include any ships on order by our Partner Brands.

We took delivery of Odyssey of the Seas during the first quarter ended March 31, 2021 and expect delivery of Silver Dawn during the fourth quarter of 2021.

We took delivery of Odyssey of the Seas during the first quarter of 2021 and expect delivery of Silver Dawn during the fourth quarter of 2021.

For 2022, we have two ship deliveries scheduled:

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Debt Maturities, New Financings and Other Liquidity Actions

During the six months ended June 30, 2021, the Company continued to take actions to further improve its liquidity position and manage cash flow.

During the nine months ended September 30, 2021, the Company continued to take actions to further improve its liquidity position and manage cash flow.

In particular, we:

• extended the maturity date or termination date, as applicable, of certain of the advances and commitments held by consenting lenders under our $1.0 billion unsecured loan due April 2022 and our $1.55 billion unsecured revolving credit facility due October 2022, each by 18 months to October 2023 and April 2024, respectively;

• extended the period during which we may draw upon our binding commitment for a $700.0 million 364-day term loan facility by one year, which is now available for draw any time prior to August 12, 2022;

• extended the period during which we may draw upon our binding commitment for a $700.0 million 364-day term loan facility by one year, which is now available for draw at any time prior to August 12, 2022;

• issued $1.5 billion of 5.5% senior unsecured notes due in 2028 for net proceeds of approximately $1.48 billion;

• issued $650.0 million of 4.25% senior unsecured notes due in 2026 for net proceeds of approximately $640.6 million, which were used to fully repay the Silversea Notes, in the amount of $619.8 million, and to pay the related call premiums, accrued interest and fees;

• issued $1.0 billion of 5.50% senior notes due in 2026 for net proceeds of approximately $986.0 million which were used to replenish our capital as a result of the redemption of a portion of the 11.50% senior secured notes due 2025 in the amount of $928.0 million, and to pay the related call premiums and accrued interest;

• amended the credit agreements for the unsecured financings of our first and second Evolution-class ships, increasing their maximum loan amounts by €175.6 million in the aggregate to finance ship design modifications that incorporate innovative sustainability features and additional premium cabins;

• issued 16.9 million shares of common stock for approximately $1.5 billion;

• amended $4.9 billion of our non-export-credit facilities and certain of our credit card processing agreements to extend the waiver of the financial covenants through and including the third quarter of 2022 and to implement modified covenants for the period starting fourth quarter of 2022 and extending through and including the fourth quarter of 2023;

• amended $6.3 billion of our export-credit facilities to extend the waiver of the financial covenants through and including the third quarter of 2022 and defer $1.15 billion of principal payments due between April 2021 and April 2022.

As of the date of this report, expected debt maturities for the remainder of 2021 are $0.02 billion and $2.2 billion for 2022.

• amended $6.3 billion of our export-credit facilities to extend the waiver of the financial covenants through and including the fourth quarter of 2022 and defer $1.15 billion of principal payments due between April 2021 and April 2022.

As of the date of this report, there are no scheduled debt maturities for the remainder of 2021, and scheduled debt maturities of $2.2 billion for 2022.

We continue to identify and evaluate further actions to enhance our liquidity and support our recovery.

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and Adjusted Net Loss attributable to Royal Caribbean Cruises Ltd.

for the second quarter of 2021 were $(1.35) billion and $(1.29) billion, or $(5.29) and $(5.06) per share on a diluted basis, respectively, reflecting the impact of the continued suspension of the majority of our sailings, compared to Net Loss attributable to Royal Caribbean Cruises Ltd.

for the third quarter of 2021 were $(1.4) billion and $(1.2) billion, or $(5.59) and $(4.91) per share on a diluted basis, respectively, reflecting the ramp up of our return to operations, and increased sales and marketing expenses during the quarter, compared to Net Loss attributable to Royal Caribbean Cruises Ltd.

and Adjusted Net Loss attributable Royal Caribbean Cruises Ltd.

of $(1.64) billion and $(1.28) billion, or $(7.83) and $(6.13) per share on a diluted basis, respectively, for the second quarter of 2020.

of $(1.3) billion and $(1.2) billion, or $(6.29) and $(5.62) per share on a diluted basis, respectively, for the third quarter of 2020.

Net Loss attributable to Royal Caribbean Cruises Ltd.

and Adjusted Net Loss attributable to Royal Caribbean Cruises Ltd.

for the six months ended June 30, 2021 were $(2.48) billion and $(2.37) billion, or $(9.96) and $(9.51) per share on a diluted basis, respectively, compared to Net Loss attributable to Royal Caribbean Cruises Ltd.

for the nine months ended September 30, 2021 were $(3.9) billion and $(3.6) billion, or $(15.56) and $(14.41) per share on a diluted basis, respectively, compared to Net Loss attributable to Royal Caribbean Cruises Ltd.

and Adjusted Net Loss attributable Royal Caribbean Cruises Ltd.

of $(3.08) billion and $(1.59) billion, or $(14.74) and $(7.61) per share on a diluted basis, respectively, for the six months ended June 30, 2020.

Significant items for the quarter and six months ended June 30, 2021 include:

• Total revenues, excluding the effect of changes in foreign currency exchange rates, decreased $127.3 million and $2.1 billion, respectively, for the quarter and six months ended June 30, 2021, as compared to the same periods in 2020.

The decrease in total revenues in the second quarter of 2021 reflects a 57% decrease in occupancy compared to the second quarter of 2020.

Our occupancy in the second of quarter 2020 includes Silversea Cruises' first quarter 2020 sailings prior to the suspension of our global sailings in March of 2020, reported on a one quarter lag.

For the six months ended June 30, 2021, the decrease in total revenues reflects a 89.9% capacity decrease compared to the same period in 2020 reflecting the lay-up of the majority of our fleet during the six months ended 2021, compared to the operation of the majority of our fleet up through our global suspension in March of 2020.

Higher ticket pricing for the Silversea brand also resulted in higher total revenues for the quarter and six months ended June 30, 2020.

• The effect of changes in foreign currency exchange rates related to our passenger ticket and onboard and other revenue transactions, denominated in currencies other than the United States dollar, resulted in an increase in total revenues of $2.6 million and $5.1 million for the quarter and six months ended June 30, 2021, respectively, compared to the same periods in 2020.

• Total cruise operating expenses, excluding the effect of changes in foreign currency exchange rates, decreased $259.4 million and $1.5 billion for the quarter and six months ended June 30, 2021, respectively, as compared to the same periods in 2020.

The decrease was primarily due to lower costs incurred as a result of the continued suspension of the majority of our operations due to COVID-19 during the quarter and six months ended June 30, 2021.

of $(4.4) billion and $(2.8) billion, or $(21.01) and $(13.26) per share on a diluted basis, respectively, for the nine months ended September 30, 2020.

Significant items for the quarter and nine months ended September 30, 2021 include:

• Total revenues, excluding the effect of changes in foreign currency exchange rates, increased $487.0 million and decreased $1,633.5 million, respectively, for the quarter and nine months ended September 30, 2021, as compared to the same periods in 2020.

The increase in total revenues in the third quarter of 2021 reflects the ramp up in our return to operations compared to the third quarter of 2020, during which we continued to observe our global cruise suspension.

For the nine months ended September 30, 2021, the decrease in total revenues reflects a 41.1% capacity decrease compared to the same period in 2020 reflecting the lay-up of the majority of our fleet during the first half of 2021, compared to the operation of the majority of our fleet up through our global suspension in March of 2020.

• The effect of changes in foreign currency exchange rates related to our passenger ticket and onboard and other revenue transactions, denominated in currencies other than the United States dollar, resulted in an increase in total revenues of $3.6 million and $8.7 million for the quarter and nine months ended September 30, 2021, respectively, compared to the same periods in 2020.

• Total cruise operating expenses, excluding the effect of changes in foreign currency exchange rates, increased $503.3 million and decreased $987.6 million for the quarter and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020.

The increase in total cruise operating expenses in the third quarter of 2021 reflects the ramp up of our operations compared to our suspension of cruise operations in 2020.

The decrease during the nine months ended September 30, 2021 compared to the same period in 2020 reflects the capacity decrease mentioned above.

• The effect of changes in foreign currency exchange rates related to our cruise operating expenses, denominated in currencies other than the U.S.

dollar, resulted in an increase in total operating expenses of $3.8 million and $7.9 million, respectively, for the quarter and six months ended June 30, 2021, compared to the same periods in 2020.

• Our consolidated results of operations include Silversea Cruises’ results of operations on a three-month reporting lag for January, February and March 2021, for the quarter ended June 30, 2021, and from October 1, 2020 through March 31, 2021 for the six months ended June 30, 2021.

dollar, resulted in an increase in total operating expenses of $1.8 million and $9.7 million, respectively, for the quarter and nine months ended September 30, 2021, compared to the same periods in 2020.

• Our consolidated results of operations include Silversea Cruises’ results of operations on a three-month reporting lag for April, May and June 2021, for the quarter ended September 30, 2021, and from October 1, 2020 through June 30, 2021 for the nine months ended September 30, 2021.

• In March 2021, we extended the maturity date or termination date of certain of the advances and commitments, as applicable, held by consenting lenders under our $1.0 billion unsecured loan due April 2022 and our $1.55 billion unsecured revolving credit facility due October 2022, by 18 months to October 2023 and April 2024, respectively.

• In March 2021, we extended our binding commitment for a $700.0 million 364-day term loan facility by one year which is currently available for draw any time prior to August 12, 2022.

• In March 2021, we extended our binding commitment for a $700.0 million 364-day term loan facility by one year which is currently available for draw at any time prior to August 12, 2022.

• In March 2021, we issued $1.5 billion of senior unsecured notes due in 2028.

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• In March 2021, we amended $4.9 million of our non-export-credit facilities and certain of our credit card processing agreements to extend the waiver of the financial covenants through and including the third quarter of 2022.

• In March 2021, we amended $6.3 million of our export-credit facilities to extend the waiver of the financial covenants through and including the third quarter of 2022;

• In March 2021, we amended $6.3 million of our export-credit facilities to extend the waiver of the financial covenants through and including the third quarter of 2022, and subsequently in the third quarter of 2021, we entered into a letter agreement to extend the waiver period to the end of the fourth quarter of 2022;

including the deferral of up to $1.15 billion of principal payments due between April 2021 and April 2022.

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• In June 2021, Hapag-Lloyd took delivery of Hanseatic Spirit.

Operating results for the quarter and six months ended June 30, 2021 compared to the same periods in 2020 are shown in the following tables (in thousands, except per share data):

Quarter Ended June 30,

• In August 2021, we issued $1.0 billion of 5.50% senior unsecured notes due in 2026 for net proceeds of approximately $986.0 million, which we used to replenish capital as a result of the redemption of a portion of the 11.50% senior secured notes due 2025, in the amount of $928.0 million plus call premiums, accrued interest, and fees.

Operating results for the quarter and nine months ended September 30, 2021 compared to the same periods in 2020 are shown in the following tables (in thousands, except per share data):

Quarter Ended September 30,

Revenues % of Total

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Diluted Loss per Share $ (5.59) $ (6.29)

Six Months Ended June 30,

Nine Months Ended September 30,

Revenues % of Total

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were calculated as follows (in thousands, except per share data):

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Adjustments to Net Loss attributable to Royal Caribbean Cruises Ltd.:

(Gain) Loss on extinguishment of debt (1)

Loss on extinguishment of debt (1)

$ 141,915 $ 774 $ 138,759 41,109

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Currency translation adjustment losses (11)

— 69,044 — 69,044

Net Adjustments to Net Loss attributable to Royal Caribbean Cruises Ltd.

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Diluted 254,713 214,163 250,808 210,894

(1) For the three months ended June 30, 2021, represents the net gain on the full repayment of the Silversea Notes in the amount of $619.8 million.

For the six months ended June 30, 2021, represents the net gain on the full repayment of the Silversea Notes and the first quarter 2021 loss on the partial repayment of the $1.55 billion unsecured revolving credit facility.

For the quarter and six months ended June 30, 2020, represents a loss on the extinguishment of the $2.2 billion Senior Secured Term Loan.

(1) For the three months ended September 30, 2021, represents the net loss on the partial repayment of the 11.50% senior secured notes due 2025 in the amount of $928.0 million.

For the nine months ended September 30, 2021, represents the net loss on the partial repayment of the 11.50% senior secured notes due 2025, the second quarter 2021 net gain on the full repayment of the Silversea Notes and the first quarter 2021 loss on the partial repayment of the $1.55 billion unsecured revolving credit facility.

For the nine months ended September 30, 2020, represents a loss on the extinguishment of the $2.2 billion Senior Secured Term Loan.

(2) Represents the amortization of non-cash debt discount on our convertible notes.

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Selected statistical information is shown in the following table (1) :

Quarter Ended June 30, (1)

Six Months Ended June 30, (1)

Quarter Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Occupancy 36.4 % 100.0 % 35.7 % 102.6 %

(1) Due to the three-month reporting lag, we include Silversea Cruises' results of operations from January 1 through March 31 for the quarters ended June 30, 2021 and 2020 and from October 1 through March 31 for the six months ended June 30, 2021 and 2020.

(1) Due to the three-month reporting lag, we include Silversea Cruises' results of operations from April 1 through June 30 for the quarters ended September 30, 2021 and 2020 and from October 1 through June 30 for the nine months ended September 30, 2021 and 2020.

Refer to Note 1 .

General to our consolidated financial statements for more information on the three-month reporting lag.

The Company’s operations are still heavily impacted by the magnitude, duration, speed and geographic reach of COVID-19 and its related variants.

The Company’s operations are still impacted by the magnitude, duration, speed and geographic reach of COVID-19 and its related variants.

As a consequence, we cannot reasonably estimate the impact of COVID-19 on our business, financial condition or near or longer-term financial or operational results.

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We expect to incur a net loss on both a U.S.

GAAP and adjusted basis for our third quarter and our 2021 fiscal year, the extent of which will depend on many factors including the timing and extent of our return to service.

GAAP and adjusted basis for our fourth quarter and our 2021 fiscal year, the extent of which will depend on many factors including the timing and extent of our return to service.

See Recent Developments:

COVID-19 – Update on Bookings for further indication of the booking environment for 2021 and 2022.

Quarter Ended June 30, 2021 Compared to Quarter Ended June 30, 2020

In this section, references to 2021 refer to the quarter ended June 30, 2021 and references to 2020 refer to the quarter ended June 30, 2020.

Total revenues for 2021 decreased $124.7 million, or 71.0%, to $50.9 million from $175.6 million in 2020.

COVID-19 – Continued Fleet Ramp-Up and Update on Bookings for further indications on our resumption of operations and the booking environment.

Quarter Ended September 30, 2021 Compared to Quarter Ended September 30, 2020

In this section, references to 2021 refer to the quarter ended September 30, 2021 and references to 2020 refer to the quarter ended September 30, 2020.

Total revenues for 2021 increased $490.6 million, or 1,456.4%, to $457.0 million from $(33.7) million in 2020.

Passenger ticket revenues comprised 61.3% of our 2021 total revenues.

Passenger ticket revenues for 2021 decreased by $84.2 million, or 78.7%, from 2020.

The decrease in Passenger ticket revenues in the second quarter of 2021 reflects a 57% decrease in occupancy compared to the second quarter of 2020.

Our occupancy in the second of quarter 2020 includes Silversea Cruises' first quarter 2020 sailings prior to the suspension of our global sailings in March of 2020, reported on a one quarter la g.

Higher ticket pricing for the Silversea brand also resulted in higher Passenger ticket revenues for the quarter ended June 30, 2020.

The remaining 55.2% of 2021 total revenues was comprised of Onboard and other revenues , which decreased $40.5 million, or 59.0%, to $28.1 million in 2021 from $68.6 million in 2020.

The decrease in Onboard and other revenues was primarily due to the decrease in occupancy noted above.

Favorable movements in foreign currency exchange rates related to our revenue transactions denominated in currencies other than the United States dollar increased Onboard and other revenues by $1.9 million.

Passenger ticket revenues for 2021 increased by $276.9 million to $280.2 million from $3.2 million in 2020.

The increase in Passenger ticket revenues in the third quarter of 2021 reflects the expansion of our global return to service compared to our continued suspension of cruise operations in the third quarter of 2020.

Favorable movements in foreign currency exchange rates related to our revenue transactions denominated in currencies other than the United States dollar increased Passenger ticket revenues by $3.0 million.

The remaining 38.7% of 2021 total revenues was comprised of Onboard and other revenues , which increased $213.7 million, or 579.3%, to $176.8 million in 2021 from $(36.9) million in 2020.

The increase in Onboard and other revenues was due to the ramp up of our return to service noted above.

Onboard and other revenues for the quarter ended September 30, 2020 includes a charge of $67.9 million to correct cancellation revenue, for certain immaterial bookings, that was incorrectly recognized during the six months ended June 30, 2020.

The charge is offsetting cancellation and other revenue recognized during the quarter ended September 30, 2020 and is considered immaterial to our financial statements.

Onboard and other revenues included concession revenues of $22.9 million in 2021 and $0.4 million in 2020.

Cruise Operating Expenses

Total Cruise operating expenses for 2021 decreased $255.6 million, or 37.6%, to $424.8 million from $680.4 million in 2020.

The decrease was primarily due to:

• a decrease in commissions as a result of sailing cancellations, including those reported in Other operating;

• a $76.2 million decrease in Payroll and related;

Total Cruise operating expenses for 2021 increased $505.1 million, or 163.7%, to $813.7 million from $308.6 million in 2020.

The increase was primarily due to:

• a $145.9 million increase in Other operating expenses primarily due to increased hotel and vessel maintenance and consumables;

• a $146.8 million increase in Payroll and related ;

• a $68.1 million increase in Commissions, transportation and other expenses ;

• a $64.3 million increase in Fuel expenses ;

• a $13.0 million decrease in Onboard and other expenses and $10.3 million decrease in Food due to the decrease in capacity discussed above.

The decrease Cruise operating expenses was partially offset by the unfavorable effect of changes in foreign currency exchange rates related to our cruise operating expenses denominated in currencies other than the United States dollar of $3.8 million.

• a $43.3 million increase in Food expenses;

• a $36.7 million increase in Onboard and other expenses.

Marketing, Selling and Administrative Expenses

Marketing, selling and administrative expenses for 2021 decreased $15.9 million, or 5.3%, to $285.6 million from $301.4 million in 2020.

The decrease was primarily due to the reduction and deferral of global sales and marketing activities due to the suspension of our operations and a decrease in payroll and benefits due to our reduced headcount.

The decrease is partially offset by the impact of a higher stock price year-over-year on our performance share awards.

Marketing, selling and administrative expenses for 2021 increased $76.6 million, or 31.1%, to $323.4 million from $246.8 million in 2020.

The increase in 2021 was primarily due to increases in marketing and sales activities related to our return to service.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for 2021 were in line with prior year expenses, with an increase of $3.7 million, or 1.2%, to $323.4 million from $319.8 million in 2020.

Depreciation and amortization expenses for 2021 increased by $8.8 million, or 2.8%, to $325.9 million from $317.1 million in 2020 primarily due to the addition of Odyssey of the Seas to our fleet during the first quarter of 2021.

Impairment and Credit Losses

Impairment and credit losses for 2021 decreased by $115.9 million as a result of charges recorded during the quarter ended June 30, 2020 due to the impact of COVID-19 on our operations and cash flows, which adversely impacted our long-lived assets related to vessels and operating lease right-of-use assets, and resulted in credit losses.

Impairment and credit losses for 2021 decreased by $90.1 million compared to impairment losses of $83.9 million recognized during the quarter ended September 30, 2020 due to the impact of COVID-19 on our operations and cash flows primarily related to our Property and equipment, net .

Additionally, credit losses of $6.0 million were recognized during the third quarter of 2020 related to our notes receivable.

Other Income (Expense)

Interest expense, net of interest capitalized for 2021 increased $171.3 million, or 66.1%, to $430.7 million from $259.3 million in 2020.

The increase was primarily due to new debt issuances during and after the second quarter of 2020 and through the second quarter of 2021, and to a lesser extent higher interest rates.

Equity investment loss in 2021 was generally consistent with the prior year, with a slight decrease of $3.8 million, to $48.1 million from $51.9 million in 2020.

Other income (expense) We recognized Other income of $24.5 million in 2021, compared to Other expense of $83.8 million in 2020.

The $108.3 million increase in income was primarily due to the 2020 recognition of a deferred currency translation adjustment loss of $69.0 million in the quarter ended June 30, 2020 related to the 2016 sale of our majority interest in the Pullmantur brand.

We recognized the deferred currency translation loss as we no longer have significant involvement in Pullmantur's operations.

In June 2020, we terminated the agreements chartering our ships to the Pullmantur brand as a result of its reorganization filing under Spanish law.

We also recognized $20.0 million of expense during the second quarter of 2020, approximating the estimated total cash refunds expected to be paid to Pullmantur guests and other expenses incurred as part of a settlement agreement with our joint venture partner as part of the brand's reorganization.

In 2021, we recognized $15.1 million in income related to the change in fair value of fuel swap derivative instruments with no hedge accounting compared with an expense of $8.3 million recognized in 2020, resulting in a change of $23.4 million.

Other Comprehensive Income (Loss)

Other comprehensive income in 2021 was $44.9 million compared to Other comprehensive income of $144.4 million in 2020.

The decrease in income of $99.5 million was primarily due to a decrease in Gain on cash flow derivative hedges of $72.9 million in 2021 compared to 2020, primarily due to a decrease in the fair value of our foreign currency forwards and interest rate swaps in 2021 compared to an increase in their fair values in 2020.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

In this section, references to 2021 refer to the six months ended June 30, 2021 and references to 2020 refer to the six months ended June 30, 2020.

The increase was primarily due to a debt extinguishment loss of $141.9 million recognized in the third quarter of 2021 associated with the partial repayment of the 11.50% senior secured notes due 2025.

Refer to Note 7.

Debt to our consolidated financial statements for further information.

Additionally, a higher average cost of debt compared to 2020 contributed to the 2021 increase in Interest expense, net of interest capitalized .

Equity investment loss in 2021 decreased by $48.9 million, to $29.1 million from $78.0 million in 2020 primarily due to a reduction in losses for TUI Cruises, one of our equity investments, during the third quarter of 2021 compared to 2020.

Other income (expense) was $37.2 million in 2021, compared to $(10.9) million in 2020.

The $48.1 million increase in income was primarily due to a $22.0 million tax benefit recognized in 2021, a $12.4 million decrease in expense compared to 2020 related to the change in fair value of fuel swap derivative instruments with no hedge accounting, and a decrease of $8.0 million in foreign exchange losses from the remeasurement of monetary assets and liabilities denominated in foreign currency compared to 2020.

Other Comprehensive (Loss) Income

Other comprehensive loss in 2021 was $11.9 million compared to Other comprehensive income of $82.1 million in 2020.

The decrease in income of $94.0 million was primarily due to our recognition of a Loss on cash flow derivative hedges of $13.3 million in 2021 compared to a Gain on cash flow derivative hedges of $66.1 million in 2020, primarily due to a decrease in the fair value of our foreign currency forwards in 2021 compared to an increase in 2020.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

In this section, references to 2021 refer to the nine months ended September 30, 2021 and references to 2020 refer to the nine months ended September 30, 2020.

Total revenues for 2021 decreased $1.6 billion, or 74.7%, to $549.9 million from $2.2 billion in 2020.

Passenger ticket revenues comprised 58.9% of our 2021 total revenues.

Passenger ticket revenues for 2021 decreased by $1.4 billion, or 97.1%, from 2020.

The decrease in Passenger ticket revenues was due to a 89.9% decrease in capacity driven by the lay-up of the majority of our fleet during the six months ended 2021 compared to the operation of the majority of our fleet up through our global suspension in March of 2020.

Our results of operations for the six months ended June 2020 include Silversea Cruises' fourth quarter 2019 and first quarter 2020 sailings, reported on a one quarter lag.

Additionally, higher ticket pricing for the Silversea brand also resulted in higher Passenger ticket revenues for the six months ended June 30, 2020.

Passenger ticket revenues also increased by $1.2 million due to the favorable effect of changes in foreign currency exchange rates related to our revenues in currencies other than the United States dollar.

Passenger ticket revenues for 2021 decreased by $1.2 billion, or 78.2%, to $0.3 billion in 2021 from $1.5 billion in 2020.

The decrease in Passenger ticket revenues was due to a 41.1% decrease in capacity driven by the lay-up of the majority of our fleet during the first half of 2021 compared to the operation of the majority of our fleet up through our global suspension in March of 2020.

Our results of operations for the nine months ended September 30, 2020 include Silversea Cruises' fourth quarter 2019 and first and second quarter 2020 sailings, reported on a one quarter lag.

The remaining 41.1% of 2021 total revenues was comprised of Onboard and other revenues , which decreased $461.5 million, or 67.1%, to $226.1 million in 2021 from $687.6 million in 2020.

The decrease in Onboard and other revenues was primarily due to the decrease in capacity noted above and offset by the favorable effect of changes in foreign currency exchange rates related to our onboard and other revenues denominated in currencies other than the United States dollar of $4.5 million.

Onboard and other revenues for the nine months ended September 30, 2020 also includes a charge of $67.9 million recorded in the quarter ended September 30, 2020 to correct cancellation revenue, for certain immaterial bookings, which was incorrectly recognized during the six months ended June 30, 2020.

The charge is considered immaterial to our financial statements.

Onboard and other revenues included concession revenue of $25.3 million in 2021 and $75.1 million in 2020.

Cruise Operating Expenses

Total cruise operating expenses for 2021 decreased $1.5 billion, or 67.7%, to $708.3 million from $2.2 billion in 2020.

The majority of the decrease was due to the 89.9% decrease in capacity noted above as a result of our cancelled sailings as follows:

• a decrease in commissions as a result of sailing cancellations, including those reported in Other operating;

Total cruise operating expenses for 2021 decreased $1.0 billion, or 39.1%, to $1.5 billion from $2.5 billion in 2020.

The decrease was primarily due to:

• a $269.7 million decrease in Commissions, transportation and other expenses ;

• a $261.3 million decrease in Other operating expenses;

• a $163.2 million decrease in Payroll and related expense;

• a $132.2 million decrease in Onboard and other expenses mostly due to lower shore excursion costs and beverage costs;

• a $108.2 million decrease in Fuel expenses;

• a $95.6 million decrease in Onboard and other expenses;

• a $79.8 million decrease in Food expenses;

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Marketing, selling and administrative expenses decreased $77.1 million, or 8.2%, to $867.0 million from $944.1 million in 2020.

The decrease was due to the reduction and deferral of global sales and marketing activities due to the COVID-19 impact on our operations.

The decrease was due to the reduction and deferral of general and administrative and global sales and marketing activities primarily during the first half of 2021 due to the impact of COVID-19 on our operations and a reduction in payroll and benefits as a result of our April 2020 reduction in workforce.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for 2021 decreased $10.5 million, or 1.6%, to $633.6 million from $644.1 million in 2020.

The decrease was primarily due to the sale of Azamara ships and other asset dispositions after the second quarter of 2020, offset by the addition of Odyssey of the Seas in the first quarter of 2021 and Celebrity Apex in the first quarter of 2020.

Depreciation and amortization expenses for 2021 remained in line with 2020 with a decrease of $1.7 million, or 0.2%.

Impairment and Credit Losses

Impairment and credit losses for 2021 decreased by $1.2 billion as a result of charges recorded during the six months ended June 30, 2020 due to the impact of COVID-19 on our operations and cash flows, which impacted our long-lived assets related to goodwill, intangibles, vessels and operating lease right-of-use asset, and resulted in credit losses.

Impairment and credit losses for 2021 decreased by $1.3 billion compared to charges recorded during the nine months ended September 30, 2020 due to the impact of COVID-19 on our operations and cash flows, which impacted our long-lived assets related to goodwill, intangibles, vessels and operating lease right-of-use asset, and resulted in credit losses.

Other Income (Expense)

Interest expense, net of interest capitalized, for 2021 increased $265.5 million, or 85.2%, to $577.3 million from $311.8 million in 2020.

The increase was due to interest expense related to new debt issuances in 2020 and 2021, a higher average balance on our revolver and higher interest rates.

Equity investment loss increased $45.7 million, or 73.4%, to a loss of $108.0 million in 2021 from a loss of $62.2 million in 2020 mainly as a result of the continued adverse impact of COVID-19 on our equity investees' operations and a $26.0 million impairment charge of our investee's long-lived assets, partially offset with a $39.7 million impairment charge of equity investments in 2020, primarily for our investment in Grand Bahama Shipyard.

Other income (expense) We recognized Other income of $29.5 million in 2021 compared to Other expense of $116.7 million in 2020.

Interest expense, net of interest capitalized for 2021 increased $436.8 million, or 76.5%, to $1.0 billion from $571.1 million in 2020.

Refer to Note 7.

Debt to our consolidated financial statements for further information.

Additionally, a higher average debt level compared to 2020 related to new debt issuances in 2020 and 2021 coupled with a higher average cost of debt contributed to the 2021 increase in Interest expense, net of interest capitalized .

Equity investment loss decreased $3.2 million, or 2.3%, to a loss of $137.0 million in 2021 from a loss of $140.3 million in 2020 mainly as a result of a 2021 $26.0 million impairment charge of our investee's long-lived assets, compared to a $39.7 million impairment charge of equity investments in 2020 primarily for our investment in Grand Bahama Shipyard.

Other income (expense) was $66.8 million in 2021, compared to $(127.5) million in 2020.

The $194.3 million change was primarily due to a $127.4 million year-over-year increase in the fair value of fuel swaps with no hedge accounting.

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The increases in Other income were partially offset by income reported in 2020 of $45.1 million for the change in contingent consideration payable to Heritage in 2020, which did not recur in 2021.

Other Comprehensive (Loss)

Other Comprehensive Income (Loss)

Other comprehensive income in 2021 was $63.5 million compared to Other comprehensive loss of $71.4 million in 2020.

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Sources and Uses of Cash

Net cash used in operating activities decreased $0.8 billion to $(1.3) billion for the first six months of 2021 compared to Net cash used in operating activities of $(2.0) billion for the same period in 2020.

Our gradual resumption of operations during the first half of 2021 and our announcement for the resumption of future operations has generated increased guest ticket collections, resulting in an increase of customer deposits of $0.6 billion during the six months ended June 30, 2021, compared to a decrease of customer deposits of $(1.6) billion during the six months ended June 30, 2020, when the suspension of our global operations commenced.

The increase in customer deposits was offset by increased service expenses for certain ships in

our fleet during the first half of 2021, reflecting our resumption of limited cruise operations globally and preparations for our announced sailings in the near term.

Net cash used in investing activities decreased $0.4 billion to $1.2 billion for the first six months in 2021, compared to $1.6 billion for the same period in 2020.

The decrease was primarily attributable to an increase in proceeds from the sale of property and equipment and other assets of $175.4 million during the first six months of 2021 compared to 2020 and a decrease in capital expenditures of $105.7 million during the first six months of 2021, compared to the same period in 2020.

Net cash provided by financing activities were $3.0 billion for the first six months of 2021, compared to $7.5 billion for the same period in 2020.

The decrease of $4.5 billion was primarily attributable to higher debt proceeds and issuance of commercial paper notes of $16.3 billion during the first six months of 2020, partially offset by lower repayments of debt and commercial paper notes of $9.7 billion during the first six months of 2021 and $1.6 billion of proceeds from common stock issuances in the first quarter of 2021.

Net cash used in operating activities decreased $1.2 billion to $1.7 billion for the nine months ended September 30, 2021 compared to Net cash used in operating activities of $2.9 billion for the same period in 2020.

Our gradual resumption of operations in 2021 and our announcement for the resumption of future operations has generated increased guest ticket collections, resulting in an increase of customer deposits of $1.0 billion during the nine months ended September 30, 2021, compared to a decrease of customer deposits of $(1.6) billion during the nine months ended September 30, 2020, while our global operations were suspended.

The increase in customer deposits was offset by increased service expenses for certain ships in our fleet during the nine months ended September 30, 2021, reflecting our resumption of cruise operations globally and preparations for our announced sailings in the near term.

Net cash used in investing activities decreased $0.2 billion to $1.6 billion for the nine months ended September 30, 2021, compared to $1.8 billion for the same period in 2020.

The decrease was primarily attributable to an increase in proceeds from the sale of property and equipment and other assets of $175.4 million during the nine months ended September 30, 2021 compared to 2020 and a decrease in cash paid on settlement of derivative financial instruments of $85.0 million, partially offset by an increase in capital expenditures of $81.0 million during the nine months ended September 30, 2021 compared to the same period in 2020.

Net cash provided by financing activities were $2.8 billion for the nine months ended September 30, 2021, compared to $7.5 billion for the same period in 2020.

The decrease of $4.6 billion was primarily attributable to higher debt proceeds and issuance of commercial paper notes of $15.3 billion, during the nine months ended September 30, 2020, compared to the same period in 2021, offset by higher debt and commercial paper repayments of $8.6 billion during the nine months ended September 30, 2020, compared to the same period in 2021.

Additionally during the nine months ended September 30, 2021, we received $1.6 billion in proceeds from common stock issuances compared to none during the same period in 2020.

Future Capital Commitments

Capital Expenditures

COVID-19 has impacted shipyard operations, which have resulted and may continue to result in delays of our previously contracted ship deliveries.

As of June 30, 2021, the dates that the ships on order by our Global and Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:

COVID-19 has impacted shipyard operations, which has resulted and may continue to result in delays of our previously contracted ship deliveries.

As of September 30, 2021, the dates that the ships on order by our Global and Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:

Ship Shipyard Expected Delivery Date Approximate

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Mein Schiff 7 Meyer Turku Oy 2nd Quarter 2024 2,900

Unnamed Fincantieri 3rd Quarter 2024 4,100

Unnamed Fincantieri 1st Quarter 2026 4,100

Unnamed Fincantieri 4th Quarter 2024 4,100

Unnamed Fincantieri 2nd Quarter 2026 4,100

Total Berths 47,860

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The order with Chantiers de l’Atlantique is contingent upon completion of conditions precedent and financing.

In September 2021, we amended the credit agreements for the first and second Evolution-class ships to increase their maximum loan amounts by €175.6 million on an aggregate basis, or approximately $203.5 million based on the exchange rate at September 30, 2021.

The increase in the loan amounts will finance ship design modifications that incorporate innovative sustainability features and additional premium cabins, increasing the capacity for each ship to 730 berths.

At our election, interest on the incremental portion of Evolution 1 and Evolution 2 will accrue either (1) at a fixed rate of 4.34% and 4.38%, respectively (inclusive of the applicable margin) or (2) at a floating rate equal to LIBOR plus 0.99% and 1.03%, respectively.

Our future capital commitments consist primarily of new ship orders.

As of June 30, 2021, the aggregate cost of our ships on order presented in the table above, excluding any ships on order by our Partner Brands, was $12.9 billion, of which we had

deposited $739.5 million.

Approximately 70.1% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at June 30, 2021.

As of September 30, 2021, the aggregate cost of our ships on order presented in the table above, excluding any ships on order by our Partner Brands, was $12.8 billion, of which we had deposited $784.8 million.

Approximately 62.5% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at September 30, 2021.

Decreased demand for cruising as a result of concerns regarding COVID-19 has had, and is expected to continue to have, a material impact on our cash flows, liquidity and financial position.

In order to preserve liquidity throughout the COVID-19 pandemic, we deferred a significant portion of our planned 2020 and 2021 capital expenditures.

As of June 30, 2021, we anticipate overall full year capital expenditures, based on our existing ships on order, will be approximately $2.1 billion for 2021.

As of September 30, 2021, we anticipate overall full year capital expenditures, based on our existing ships on order, will be approximately $2.1 billion for 2021.

This amount does not include any ships on order by our Partner Brands.

Contractual Obligations

As of June 30, 2021, our contractual obligations were as follows (in thousands):

As of September 30, 2021, our contractual obligations were as follows (in thousands):

Payments due by period

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(2) Long-term debt obligations mature at various dates through fiscal year 2033 and bear interest at fixed and variable rates.

Interest on variable-rate debt is calculated based on forecasted debt balances, including the impact of interest rate swap agreements using the applicable rate at June 30, 2021.

Debt denominated in other currencies is calculated based on the applicable exchange rate at June 30, 2021.

Interest on variable-rate debt is calculated based on forecasted debt balances, including the impact of interest rate swap agreements using the applicable rate at September 30, 2021.

Debt denominated in other currencies is calculated based on the applicable exchange rate at September 30, 2021.

(3) Amounts primarily represent future commitments with remaining terms in excess of one year to pay for our usage of certain port facilities, marine consumables, services and maintenance contracts.

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Included in these figures are $8.2 billion in final contractual installments, which have committed financing.

COVID-19 has impacted shipyard operations and we expect that this will result in delivery delays of ships on order and will adjust the timing of our contractual ship deliveries.

COVID-19 has impacted shipyard operations, which has resulted and may continue to result in delays of our previously contracted ship deliveries.

Amounts do not include potential obligations which remain subject to cancellation at our sole discretion or any agreements entered for ships on order that remain contingent upon completion of conditions precedent.

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(5) Amounts represent debt obligations with initial terms in excess of one year.

Debt denominated in other currencies is calculated based on the applicable exchange rate at June 30, 2021.

In addition, debt obligations presented above are net of debt issuance costs of $367.0 million as of June 30, 2021.

Debt denominated in other currencies is calculated based on the applicable exchange rate at September 30, 2021.

In addition, debt obligations presented above are net of debt issuance costs of $359.1 million as of September 30, 2021.

(6) Amounts represent finance lease obligations with initial terms in excess of one year, net of imputed interest.

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We continuously consider potential acquisitions and strategic alliances.

If any of these

were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional shares of equity securities or through cash flows from operations.

If any of these were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional shares of equity securities or through cash flows from operations.

Off-Balance Sheet Arrangements

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We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification obligation is probable.

In June of 2021, we issued a notice to SMBC Leasing and Finance, Inc (the "Lessor"), exercising our existing option under our operating lease with the Lessor to purchase Terminal A at PortMiami in July of 2021 for the pre-agreed purchase price of $220.0 million.

In June of 2021, we exercised our option under our operating lease with SMBC Leasing and Finance, Inc (the "Lessor") to purchase Terminal A at PortMiami in July 2021 for the pre-agreed purchase price of $220.0 million.

Upon purchase of the terminal lease in July 2021, the underlying asset was recorded as a leasehold improvement within Property and equipment, net.

Our July 2021 purchase of the Port of Miami terminal eliminated the residual value guarantee and a requirement under the lease to post $181.1 million of cash collateral on or before July 18, 2021.

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 a portion of the proceeds from the $650 million Unsecured Notes) from BB to BB-.

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 Secured Notes and Silversea Notes, which were fully repaid in June 2021 with a portion of the proceeds from the $650 million June Unsecured Notes, from BB to BB-.

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

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These agreements allow the credit card processors to require us, under certain circumstances, including breach of the financial covenants, the existence of other material adverse changes, excessive chargebacks, and other triggering events, to maintain a reserve that can be satisfied by posting collateral.

As of June 30, 2021, we have posted letters of credit as collateral with our sureties and credit card processors under our revolving credit facilities in the amount of $164.2 million.

Executed amendments are in place for the majority of our credit card processors, waiving reserve requirements tied to breach of our financial covenants through at least September 30, 2022, and as such, we do not anticipate any incremental collateral requirements for the processors covered by these waivers in the next 12 months.

We have a reserve with a processor where the agreement was amended in the first quarter of 2021, such that proceeds are withheld in reserve until the sailing takes place or the funds are refunded to the customer.

As of September 30, 2021, we have posted letters of credit as collateral with our sureties and credit card processors under our revolving credit facilities in the amount of $162.3 million.

Executed amendments are in place for the majority of our credit card processors, waiving reserve requirements tied to breach of our financial covenants through at least September 30, 2022, with modified covenants thereafter, and as such, we do not anticipate any incremental collateral requirements for the processors covered by these waivers in the next 12 months.

We have a reserve with a processor where the agreement was amended in the first quarter of 2021, such that proceeds are held in reserve until the sailing takes place or the funds are refunded to the customer.

The maximum projected exposure with the processor, including amounts currently withheld and reported in Trade and other receivables , is approximately $237.7 million.

The amount and timing are dependent on future factors that are uncertain, such as the date we return to operations, volume and value of future deposits and whether we transfer our business to other processors.

The amount and timing are dependent on future factors that are uncertain, such as the pace of resumption of our cruise operations, the volume of future deposits and whether we transfer our business to other processors.

If we require additional waivers on the credit card processing agreements and are not able to obtain them, this could lead to the termination of these agreements or the trigger of reserve requirements.

As of June 30, 2021, other than the items described above, we are not party to any other off-balance sheet arrangements, including guarantee contracts, retained or contingent interest, certain derivative instruments and variable interest entities, that either have, or are reasonably likely to have, a current or future material effect on our financial position.

As of September 30, 2021, other than the items described above, we are not party to any other off-balance sheet arrangements, including guarantee contracts, retained or contingent interest, certain derivative instruments and variable interest entities, that either have, or are reasonably likely to have, a current or future material effect on our financial position.

Funding Needs and Sources

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We have significant contractual obligations of which our debt service obligations and the capital expenditures associated with our ship purchases represent our largest funding needs.

As of June 30, 2021, we had $10.5 billion of committed financing for final delivery installments on our ships on order.

As of June 30, 2021, we had $4.7 billion in contractual obligations due through June 30, 2022, of which approximately $0.7 billion relates to debt maturities, $1.0 billion relates to interest on debt and $2.5 billion relates to progress payments on our ship orders and the final installments payable due upon the delivery of Silver Dawn, Wonder of the Seas and Celebrity Beyond , based on their expected delivery dates.

As of June 30, 2021, we had liquidity of $5.0 billion, consisting of cash and cash equivalents of $4.3 billion and a $0.7 billion commitment through August 12, 2022 for a 364-day term loan facility.

As of June 30, 2021, our revolving credit facilities were mostly utilized through a combination of amounts drawn and letters of credit issued under the facilities.

As of September 30, 2021, we had 10.3 billion of committed financing for final delivery installments on our ships on order.

As of September 30, 2021, we had $4.7 billion in contractual obligations due through September 30, 2022, of which approximately $0.9 billion relates to debt maturities, $0.9 billion relates to interest on debt and $2.7 billion relates to progress

payments on our ship orders and the final installments payable due upon the delivery of Silver Dawn, Wonder of the Seas and Celebrity Beyond .

Our revolving credit facilities were mostly utilized through a combination of amounts drawn and letters of credit issued under the facilities as of September 30, 2021.

We have agreed with certain of our lenders not to pay dividends or engage in stock repurchases.

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Our minimum net worth and maximum net debt-to-capital calculations exclude the impact of Accumulated other comprehensive loss on total shareholders’ equity.

During the first quarter of 2021, we amended $4.9 billion of our non-export credit facilities and $6.3 billion of our export credit facilities, and certain credit card processing agreements, to extend the waiver of our financial covenants through and including at least the third quarter of 2022, and subsequently in the third quarter of 2021, we entered into a letter agreement to extend the waiver period for our export credit facilities to the end of the fourth quarter of 2022.

In addition, pursuant to the amendments for the non-export credit facilities, we have modified the manner in which such covenants are calculated, temporarily in certain cases and permanently in others, as well as the levels at which our net debt to capitalization covenant will be tested during the period commencing immediately following the end of the waiver period and continuing through the end of 2023.

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In addition, the amendments to the non-export credit facilities place restrictions on paying cash dividends and effectuating share repurchases through the end of the third quarter of 2022, while the export credit facility amendments require us to prepay any deferred amounts if we elect to issue dividends or complete share repurchases.

As of June 30, 2021, we were in compliance with the applicable minimum liquidity covenant and we estimate that we will be in compliance for at least the next twelve months.

As of September 30, 2021, we were in compliance with the applicable minimum liquidity covenant and we estimate that we will be in compliance for at least the next twelve months.

Any further covenant waivers may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections as may be agreed with our lenders.

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

Accordingly, we did not declare a dividend during the five consecutive quarters ending June 30, 2021.

Accordingly, we did not declare a dividend during the six consecutive quarters ending September 30, 2021.

Pursuant to amendments made to these agreements during the first quarter of 2021, the restrictions on paying cash dividends and effectuating share repurchases were extended through and including the third quarter of 2022.

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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 2. Management’s Discussion and Analysis