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Item 7. Management’s Discussion and Analysis

2022-03-01 compared with 2021-02-26 · 339 added, 423 removed, 360 unchanged (68% of the section changed)

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The discussion under this caption “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this document, includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical fact, including statements regarding our expectations for the first quarter and full year of 2021, business and industry prospects or future results of operations or financial position, made in this Annual Report on Form 10-K are forward-looking.

Words such as "anticipate," "believe," "could," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "will," "driving" and similar expressions are intended to further identify any of these forward-looking statements.

All statements other than statements of historical fact, including statements regarding our expectations for future periods, business and industry prospects or future results of operations or financial position, made in this Annual Report on Form 10-K are forward-looking.

Words such as “anticipate,” “believe,” “considering,” “could,” “driving,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “will” and similar expressions are intended to further identify any of these forward-looking statements.

Forward-looking statements reflect management's current expectations but they are based on judgments and are inherently uncertain.

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The discussion and analysis of our financial condition and results of operations is organized to present the following:

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

• a review of our critical accounting policies and estimates and 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 year ended December 31, 2021 compared to the same period in 2020;

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A discussion of our results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019 is included in Part II.

Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 25, 2020 , as updated by our Current Report on Form 8-K dated May 13, 2020, and is incorporated by reference into this Form 10-K.

Critical Accounting Policies

Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10 -K for the year ended December 31, 2020 , f iled with the SEC on February 26, 2021 and is incorporated by reference into this Form 10-K.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

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We have discussed these accounting policies and estimates with the audit committee of our board of directors.

We believe our most critical accounting policies are as follows:

We believe our most critical accounting policies and estimates are as follows:

Liquidity and COVID-19

The effects of COVID-19 have had and continue to have a material negative impact on our operations, financial results and liquidity.

The full extent of the impact will be determined by the length of time COVID-19 influences our industry and our eventual gradual return to service.

The full extent of the impact will be determined by the length of time COVID-19 influences our industry and our gradual return to service.

Given the ongoing effects of COVID-19 on our operations and global bookings, we have identified the estimation of our future liquidity requirements as a critical accounting policy.

The estimation of our future liquidity requirements includes numerous assumptions that are subject to various risks and uncertainties.

The principal assumptions used to estimate our future liquidity requirements during our out-of-service period consist of:

• Expected date of return to operations;

• Expected gradual resumption of cruise operations;

• Expected lower than comparable historical occupancy levels during the resumption of cruise operations;

• Expected incremental expenses for the resumption of cruise operations, for the maintenance of additional public health protocols and procedures for additional regulations.

The assumptions used to estimate our liquidity requirements are frequently and continuously evaluated because of the unprecedented non-operational environment we are experiencing due to COVID-19.

• Expected continued gradual resumption of cruise operations;

• Expected sustained increase in revenue per available passenger cruise day during our continued resumption of cruise operations;

• Expected lower than comparable historical occupancy levels during our continued resumption of cruise operations, increasing over time until we reach historical occupancy levels;

• Expected spend during our continued resumption of cruise operations, including returning our crew members to our vessels and maintaining enhanced health and safety protocols.

The assumptions used to estimate our liquidity requirements are frequently and continuously evaluated because of the unprecedented environment that we are experiencing due to COVID-19.

In addition, the magnitude, duration and speed of the global pandemic continues to be uncertain.

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• Reduction of capital expenditures;

• Reduction of operating expenses (including furloughing staff and laying up vessels);

• Reduction of operating expenses in 2020 and 2021 during the suspension of our global cruise operations (including furloughing staff and laying up vessels);

• Amending credit agreements to defer payments and covenant requirements, as well as extend maturity dates;

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We do not identify and track depreciation by ship component systems, but instead utilize these estimates to determine the net cost basis of assets replaced or refurbished.

Improvement costs that we believe add value to our ships are capitalized as additions to the ship and depreciated over the shorter of the improvements' estimated useful lives or that of the associated ship.

The estimated cost and accumulated depreciation of replaced or refurbished ship components are written

off and any resulting losses are recognized within Cruise operating expenses in our Consolidated Statements of Comprehensive Income (Loss).

Improvement costs that we believe add value to our ships are capitalized as additions to the ship and depreciated over the shorter of the improvements' estimated useful lives or that

of the associated ship.

The estimated cost and accumulated depreciation of replaced or refurbished ship components are written off and any resulting losses are recognized within Cruise operating expenses in our Consolidated Statements of Comprehensive Loss.

We periodically review estimated useful lives and residual values for ongoing reasonableness, considering long term views on our intended use of each class of ships and the planned level of improvements to maintain and enhance vessels within those classes.

In the event a factor is identified that may trigger a change in the estimated useful lives and residual values of our ships, a review of the estimate is completed.

In the fourth quarter of 2019, we completed a modernization of the Oasis of the Seas under our ship upgrade program.

The level of capital investment, as well as planned investment levels in the other ships within the Oasis class, triggered a review of the estimated useful lives and residual values of the Oasis-class ships.

Following a review of the estimate, considering the intended use of the vessel and assessment of the estimated lives of component assets forming the Oasis class ships, we concluded a change to the estimated lives and residual values of Oasis class ships was required.

Effective fourth quarter of 2019, we revised the estimated useful lives and residual values of the Oasis-class ships from 30 years with a 15% residual value to 35 years with a 10% residual value.

The change in the estimated useful lives and residual values was accounted for prospectively as a change in accounting estimate.

For further information regarding this change in accounting estimate, refer to Note 2 .

Summary of Significant Accounting Policies to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data.

We use the deferral method to account for drydocking costs.

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We use judgment when estimating the period between drydocks, which can result in adjustments to the estimated amortization of drydock costs.

If the vessel is disposed of before the next drydock, the remaining balance in deferred drydock is written-off to the gain or loss upon disposal of vessel in the period in which the sale takes place.

If the vessel is disposed of before the next drydock, the remaining balance in deferred drydock is written-off to the gain or loss on disposal of vessel in the period in which the sale takes place.

We also use judgment when identifying costs incurred during a drydock which are necessary to maintain the vessel's Class certification as compared to those costs attributable to repairs and maintenance which are expensed as incurred.

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If our ships were estimated to have no residual value, depreciation expense for 2021 would have increased by approximately $261.7 million.

We have evaluated our estimated ship useful lives and projected residual values in light of our current environment and determined that there are no changes to these estimates based on our return to service expectations.

Business Combinations

On July 31, 2018, we acquired a 66.7% equity stake in Silversea Cruises for $1.02 billion in cash and contingent consideration.

Refer to Note 3.

Business Combination to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for further information on the acquisition.

On July 31, 2018, we acquired a 66.7% equity stake ("the 2018 acquisition") in Silversea Cruises, previously known as Silversea Cruises Holding Ltd., an ultra-luxury and expedition cruise line, from Heritage Cruise Holding Ltd.

("Heritage"), previously known as Silversea Cruises Group Ltd.

The purchase price for the 2018 acquisition consisted of $1.02 billion in cash, net of assumed liabilities, and contingent consideration due to Heritage.

The fair value of the contingent consideration at the time of the 2018 acquisition was $44.0 million.

Changes to the fair value of the contingent consideration were recorded in our results of operations, if any, in the period of the change prior to its termination.

On July 9, 2020, we acquired the remaining 33.3% interest in Silversea Cruises that we did not already own (the "noncontrolling interest") from Heritage.

As a result of the acquisition of the noncontrolling interest, Silversea Cruises is now a wholly owned cruise brand.

As consideration for the noncontrolling interest, we issued to Heritage 5.2 million shares of common stock, par value $0.01 per share, of Royal Caribbean Cruises Ltd.

Pursuant to the agreement governing the acquisition, among other things, the parties terminated any existing obligation to issue Heritage any contingent consideration, at fair value, in connection with our acquisition of a 66.7% interest in Silversea Cruises on July 31, 2018.

The share purchase did not result in a change of control.

The purchase was accounted for as an equity transaction and no gain or loss was recognized in earnings.

Refer to Note 1.

Redeemable Noncontrolling Interest to our consolidated financial statements under Item 8.

Statements and Supplementary Data for further information regarding our acquisition of Silversea Cruises' noncontrolling interest.

General to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for further information regarding acquisition of Silversea Cruises' noncontrolling interest.

We account for business combinations in accordance with ASC 805, Business Combinations , by applying the acquisition method of accounting.

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Significant estimates and assumptions are made by management to value such assets and liabilities based on third party valuations such as appraisals or internal valuations based on discounted cash flow analyses or other valuation techniques.

Although we believe that those estimates and assumptions are reasonable and appropriate, they are inherently uncertain and subject to change.

Although we believe that those estimates and assumptions are

reasonable and appropriate, they are inherently uncertain and subject to change.

If during the measurement period (not to exceed one year), additional information is obtained about facts and circumstances that existed as of the acquisition date related to the fair value of the assets acquired and liabilities assumed, we may adjust our estimates to account for subsequent adjustments to the provisional amounts recognized at the acquisition date, resulting in an offsetting adjustment to the goodwill associated with the business acquired.

Uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date.

Our purchase price measurement period for the Silversea Cruises 2018 acquisition was closed during 2019.

Any contingent consideration is estimated at fair value at the acquisition date.

Uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date.

Additionally, any contingent consideration is estimated at fair value at the acquisition date.

Liability-classified contingent consideration is remeasured each reporting period, with changes in fair value recognized in earnings until the contingent consideration is settled.

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The goodwill impairment analysis consists of a comparison of the fair value of the reporting unit with its carrying value.

We typically estimate the fair value of our reporting units using a probability-weighted discounted cash flow model, which may also include a combination of a market-based valuation approach.

We typically estimate the fair value of our reporting units using a discounted cash flow model, which may also include a combination of a market-based valuation approach.

The estimation of fair value utilizing discounted expected future cash flows includes numerous uncertainties which require our significant judgment when making assumptions of expected revenues, operating costs, marketing, selling and administrative expenses, interest rates, ship additions and retirements as well as assumptions regarding the cruise vacation industry's competitive environment and general economic and business conditions, among other factors.

The principal assumptions used in the discounted cash flow model for our 2021 impairment assessments were:

• The timing of our return to service, changes in market conditions and port or other restrictions;

• Forecasted net revenues, primarily the timing of returning to normalized operations, occupancy rates from existing and expected ship deliveries, including options, and terminal growth rate;

• Forecasted net revenues, primarily the timing of returning to normalized operations, occupancy rates from existing and expected ship deliveries, and terminal growth rate;

• Weighted average cost of capital (i.e., discount rate).

The discounted cash flow model uses the most current projected operating results for the upcoming fiscal year as a base.

To that base, we add future years' cash flows based on multiple revenue and expense scenarios reflecting the impact of various return to service management assumptions beyond the base year on the reporting unit.

We discount the projected cash flows using rates specific to the reporting unit based on its weighted-average cost of capital.

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The principal assumptions used in the discounted cash flow model for our 2021 impairment assessments were:

• Forecasted net revenues, primarily the timing of returning to normalized operations, occupancy rates from existing and expected ship deliveries, including options, and terminal growth rate;

• Forecasted net revenues, primarily the timing of returning to normalized operations, occupancy rates from existing and expected ship deliveries and terminal growth rate;

• Royalty rate;

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Financial Statements and Supplemental Data for further information on indefinite-life intangible assets.

We review our ships and other long-lived assets for impairment whenever events or changes in circumstances indicate, based on estimated undiscounted future cash flows, that the carrying value of these assets may not be fully recoverable.

We review our ships and other long-lived assets for impairment whenever events or changes in circumstances indicate, based on recent and projected cash flow performance and remaining useful lives, that the carrying value of these assets may not be fully recoverable.

We evaluate asset impairment at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

The lowest level for which we maintain identifiable cash flows that are independent of the cash flows of other assets and liabilities is at the ship level for our ships.

If estimated future cash flows are less than the carrying value of an asset, an impairment charge is recognized to the extent its carrying value exceeds fair value.

If estimated undiscounted future cash flows are less than the carrying value of an asset, an impairment charge is recognized to the extent its carrying value exceeds fair value.

Refer to Note 6 .

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Accordingly, we estimate the fair value of a reporting unit and an indefinite-life intangible asset using an expected present value technique.

The outbreak of COVID-19 has resulted in an unprecedented global response to contain the spread and control the resurgence of the disease.

These global efforts have resulted in travel restrictions and created significant uncertainty regarding worldwide port closures and availability of ports and destinations generally.

As part of the global containment effort, the Company previously announced a voluntary suspension of its Global Brands' cruise operations through at least April 30, 2021, for most of our cruise operations.

As a result of the developments in 2020, we performed interim impairment evaluations, in addition to our annual impairment reviews, of certain of our goodwill, indefinite-lived intangible assets and long-lived assets in connection with the preparation of our 2020 quarterly and annual financial statements, as further discussed below.

As a result of our voluntary suspension of global cruise operations effective March 2020 in response to the COVID-19 outbreak and our gradual resumption of cruise operations during 2021, we performed interim impairment evaluations, in addition to our annual impairment reviews, of certain of our goodwill, indefinite-lived intangible assets and long-lived assets in connection with the preparation of our 2021 and 2020 quarterly and annual financial statements, as further discussed below.

Royal Caribbean International Reporting Unit

Our extended suspension of our operations and the possibility of further extensions created some uncertainty in forecasting the operating results and future cash flows used in our impairment analyses.

We performed interim impairment evaluations of Royal Caribbean International’s goodwill in connection with the preparation of our quarterly financial statements for the periods ended March 31, 2020 and June 30, 2020 due to the significant impact that COVID-19 had on our projected cash flows and triggering events identified in those quarters.The fair value of the Royal Caribbean International reporting unit as of March 31, 2020 was determined using a probability-weighted discounted cash flow model and for June 30, 2020 we used a probability-weighted discounted cash flow model in combination with a market-based valuation approach.

As a result of the tests, we determined that the fair value of the Royal Caribbean International reporting unit exceeded its carrying value by approximately 30% and 8% as of March 31, 2020 and June 30, 2020, respectively, resulting in no impairment to the Royal Caribbean International goodwill in those periods.

The fair value of the Royal Caribbean International reporting unit as of March 31, 2020 was determined using a discounted cash flow model and a probability-weighted discounted cash flow model in combination with a market based valuation approach for the June 30, 2020 and November 30, 2020 assessments.

We did not perform interim impairment evaluation of Royal Caribbean International's goodwill during the quarter ended September 30, 2020 as no triggering events were identified.

During the fourth quarter of 2020, we performed our annual impairment review of goodwill for Royal Caribbean International's reporting unit.

We did not perform a qualitative assessment but instead proceeded directly to the goodwill impairment test.

As a result of the test, we determined the fair value of the Royal Caribbean International reporting unit exceeded its carrying value by approximately 14% resulting in no impairment to Royal Caribbean International's goodwill.

As of December 31, 2020, the carrying value of goodwill attributable to our Royal Caribbean reporting unit was $296.6 million.

We did not perform an interim impairment evaluation of Royal Caribbean International's goodwill subsequent to the quarter ended June 30, 2020 during 2020 or 2021, as no triggering events were identified.

During the fourth quarters of 2021 and 2020, we performed our annual impairment review of goodwill for Royal Caribbean International's reporting unit.

We did not perform qualitative assessments but instead proceeded directly to the goodwill impairment tests.

As of November 30, 2021, the fair value of the Royal Caribbean International reporting unit was determined using a discounted cash flow model in combination with a market-based valuation approach.

As November 30, 2020, we used a probability-weighted discounted cash flow model in combination with a market-based valuation approach.

As a result of the tests, we determined the fair value of the Royal Caribbean International reporting unit exceeded its carrying value by approximately 38% and 14% as of November 30, 2021 and 2020, respectively, resulting in no impairment to Royal Caribbean International's goodwill.

The carrying value of goodwill attributable to our Royal Caribbean reporting unit was $296.5 million and $296.6 million as of December 31, 2021 and 2020, respectively.

Silversea Cruises Reporting Unit

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Similarly, we determined that the carrying value of Silversea Cruises’ trade name exceeded its fair value.

Accordingly, upon the completion of the impairment test, we recognized impairment charges of $576.2 million and $30.8 million for goodwill and the trade name, respectively, during the

quarter ended March 31, 2020.

Accordingly, upon the completion of the impairment tests, we recognized impairment charges of $576.2 million and $30.8 million for goodwill and the trade name, respectively, during the quarter ended March 31, 2020.

We estimated the fair value of the Silversea Cruises reporting unit using a probability-weighted discounted cash flow model in combination with a market-based valuation approach.

We did not perform interim impairment evaluations of Silversea Cruises' reporting unit or trade names during the quarters ended June 30, 2020 and September 30, 2020 as no triggering events were identified.

During the fourth quarter of 2020, we performed our annual impairment review of Silversea Cruises' goodwill.

We did not perform a qualitative assessment but instead proceeded directly to the goodwill impairment test.

As a result of the test, we determined the fair value of the Silversea Cruises reporting unit exceeded its carrying value by approximately 12%, resulting in no impairment to Silversea Cruises' goodwill.

As of December 31, 2020, the carrying value of goodwill attributable to our Silversea Cruises reporting unit was $508.6 million.

During the fourth quarter of 2020, we performed our annual impairment review of Silversea Cruises' trade name.

As a result of the quantitative test, we determined that the fair value of the Silversea Cruises' trade name exceeded its carrying value by approximately 3%, resulting in no impairment to Silversea Cruises' tr ade name.

We will continue to closely monitor the change in fair value of the Silversea Cruises' trade name.

Any further adverse developments due to COVID-19 or other events affecting the projected cash flows for Silversea Cruises may lead to further impairment of the Silversea Cruises' trade name.

As of December 31, 2020 and 2019, the carrying value of indefinite-life intangible assets was $321.5 million and $352.3 million, respectively, which primarily relates to the Silversea Cruises trade name.

We did not perform an interim impairment evaluation of Silversea Cruises's goodwill or trade names subsequent to the quarter ended March 31, 2020 during 2020 or 2021, as no triggering events were identified.

During the fourth quarters of 2021 and 2020, we performed our annual impairment review of Silversea Cruises goodwill.

We did not perform qualitative assessments but instead proceeded directly to the goodwill impairment tests.

As of November 30, 2021, the fair value of the Silversea Cruises reporting unit was determined using a discounted cash flow model in combination with a market-based valuation approach.

As of November 30, 2020, we used a probability-weighted discounted cash flow model in combination with a market-based valuation approach.

As a result of the tests, we determined the fair value

of the Silversea Cruises reporting unit exceeded its carrying value by approximately 35% and 12% as of November 30, 2021 and 2020, respectively, resulting in no impairment to Silversea Cruises' goodwill.

The carrying value of goodwill attributable to our Silversea Cruises reporting unit was $508.6 million as of December 31, 2021 and December 31, 2020.

During the fourth quarters of 2021 and 2020, we performed our annual impairment reviews of Silversea Cruises trade name.

As a result of the quantitative tests, we determined that the fair value of the Silversea Cruises' trade name exceeded its carrying value by approximately 19% and 3%, as of November 30, 2021 and November 30, 2020, respectively, resulting in no impairment to Silversea Cruises' tr ade name.

As of December 31, 2021 and 2020, the carrying value of indefinite-life intangible assets was $321.5 million, which primarily relates to the Silversea Cruises trade name.

Long-lived Assets

Events surrounding the COVID-19 pandemic negatively impacted the expected undiscounted cash flows of certain of our long-lived assets.

We evaluated these assets during the year ended 2020 pursuant to our long-lived asset impairment test which resulted in an impairment charge of $464.2 million during the year ended December 31, 2020, to write down certain ships operated by our Global Brands to their estimated fair values.

We evaluated these assets during the years ended 2021 and 2020 pursuant to our long-lived asset impairment test which resulted in no impairment charges for the year ended December 31, 2021 and $464.2 million of impairment charges during the year ended December 31, 2020 to write down certain ships operated by our Global Brands to their estimated fair values.

The amount also includes impairment charges for ships that our Global Brands disposed of during 2020 as well as the three Azamara ships.

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During the quarter ended September 30, 2020, we sold the ships to third parties for amounts approximating their carrying values and no further impairment was recorded.

During the year ended December 31, 2020, we also determined that certain construction in progress projects would be reduced in scope or would no longer be completed as a result of our capital cost containment measures in response to the COVID-19 impact on our liquidity.

This led to an impairment charge of $91.5 million of construction in progress assets reported in Property and equipment, net.

Refer to Note 6.

Property and Equipment and Note 7 .

Other Assets to our consolidated financial statements under Item 8.

Financial Statements and Supplemental Data for further information regarding impairment of the ships and Pullmantur's reorganization.

During the years ended December 31, 2021 and 2020, we also determined that certain construction in progress projects would be reduced in scope or would no longer be completed due to the impact COVID-19 has had on our operations.

This led to impairment charges of construction in progress assets of $51.6 million and $91.5 million during 2021 and 2020, respectively, as reported in Property and equipment, net.

In addition, during the year ended December 31, 2020, we identified that the undiscounted cash flows for certain right-of-use assets were less than their carrying values due to the negative impact of COVID-19.

We evaluated these assets pursuant to our long-lived asset impairment test, resulting in an impairment charge of $65.9 million to write down these assets to their estimated fair values during the year ended December 31, 2020.

The combined impairment charge of $1.5 billion primarily related to our goodwill, trademarks and trade names, vessels, construction in progress, and right-of-use assets were recognized in earnings during the year ended December 31, 2020 and is reported within Impairment and credit losses within our consolidate d statements of comprehensive income (loss).

For the year ended December 31, 2021, there was no resulting impairment to right-of-use assets.

The combined impairment charge of $55.2 million for the year ended December 31, 2021, related to construction in progress and other long-lived assets, and $1.5 billion for the year ended December 31, 2020, primarily related to our goodwill, trademarks and trade names, vessels, construction in progress, and right-of-use assets, are reported within Impairment and credit losses within our consolidate d statements of comprehensive (loss) income.

These impairment assessments and the resulting charges were determined based on management’s current estimates and projections using information through the time of the issuance of these financial statements.

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We also use non-derivative financial instruments designated as hedges of our net investment in our foreign operations and investments.

Although certain of our derivative financial instruments do not qualify or are not accounted for under hedge accounting, we do not hold or issue derivative financial instruments for trading or other speculative purposes.

Although some of our derivative financial instruments do not qualify for hedge accounting or are not accounted for under hedge accounting, we do not hold or issue derivative financial instruments for trading or other speculative purposes.

We account for derivative financial instruments in accordance with authoritative guidance.

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Summary of Significant Accounting Policies and Note 16.

Commitments and Contingencies to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for more information on related authoritative guidance, the Company's hedging programs and derivative financial instruments.

On a regular basis, we enter into foreign currency forward contracts, interest rate and fuel swaps and options with third-party institutions in over-the-counter markets.

Fair Value Measurements and Derivative Instruments to our consolidated financial statements under Item 8.

Financial Statements and Supplementary

Data for more information on related authoritative guidance, the Company's hedging programs and derivative financial instruments.

On a regular basis, we enter into foreign currency forward contracts, interest rate swaps, fuel swaps and options with third-party institutions in over-the-counter markets.

We estimate the fair value of our foreign currency forward contracts and interest rate swaps using expected future cash flows based on the instruments' contract terms and published forward prices for foreign currency exchange and interest rates.

We value floors which are embedded within our interest rate swaps using standard option pricing models with inputs based on the options’ contract terms, such as exercise price and maturity, and readily available market data, such as forward interest rates and interest rate volatility.

We apply present value techniques and LIBOR or EURIBOR-based discount rates to convert the expected future cash flows to the current fair value of the instruments.

We apply present value techniques to convert the expected future cash flows to the current fair value of the instruments.

We estimate the fair value of our fuel swaps using expected future cash flows based on the swaps' contract terms and forward prices.

We derive forward prices from published forward fuel curves which in turn are based on actual market transactions and published price quotes for similar assets.

We apply present value techniques and LIBOR-based discount rates to convert the expected future cash flows to the current fair value of the instruments.

We apply present value techniques to convert the expected future cash flows to the current fair value of the instruments.

We also corroborate our fair value estimates using valuations provided by our counterparties.

We adjust the valuation of our derivative financial instruments to incorporate credit risk.

We believe it is unlikely that materially different estimates for the fair value of our foreign currency forward contracts and interest rate and fuel swaps and options would be derived from other appropriate valuation models using similar assumptions, inputs or conditions suggested by actual historical experience.

The current suspension of our cruise operations due to the COVID-19 pandemic and our 2020 and expected 2021 ship disposals resulted in reductions to our forecasted fuel purchases.

As of December 31, 2020, we discontinued cash flow hedge accounting on 0.6 million metric tons of our fuel swap agreements maturing in 2020 and 2021, which resulted in the reclassification of a net $104.4 million loss from Accumulated other comprehensive loss to Other expense during the year ended December 31, 2020.

Changes in the fair value of fuel swaps for which cash flow hedge accounting was discontinued are currently recognized in Other expense each reporting period.

We believe it is unlikely that materially different estimates for the fair value of our foreign currency forward contracts, interest rate swaps, fuel swaps and options would be derived from other appropriate valuation models using similar assumptions, inputs or conditions suggested by actual historical experience.

The prior suspension of our cruise operations due to the COVID-19 pandemic and our gradual resumption of cruise operations has resulted in reductions to our forecasted fuel purchases.

During the year ended December 31, 2021, we discontinued cash flow hedge accounting on 0.2 million metric tons of our fuel swap agreements maturing in 2021 and 2022, which resulted in the reclassification of a net $0.7 million loss from Accumulated other comprehensive loss to Other income (expense) .

During the year ended December 31, 2020, we discontinued cash flow hedge accounting on 0.6 million metric tons of our fuel swap agreements maturing in 2020 and 2021, which resulted in the reclassification of a net $104.4 million loss from Accumulated other comprehensive loss to Other income (expense) .

Changes in the fair value of fuel swaps for which cash flow hedge accounting was discontinued are currently recognized in Other income (expense) each reporting period through the maturity dates of the fuel swaps.

Future s uspension of our operations or modifications to our itineraries may affect our expected forecasted fuel purchases which could result in further discontinuance of fuel swap cash flow hedge accounting and the reclassification of deferred gains or losses from Accumulated other comprehensive loss into earnings .

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On an ongoing basis, we assess the potential liabilities related to any lawsuits or claims brought against us.

While it is typically very difficult to determine the timing and ultimate outcome of such actions, we use our best judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made.

While it is typically difficult to determine the timing and ultimate outcome of such actions, we use our best judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made.

In assessing probable losses, we take into consideration estimates of the amount of insurance recoveries, if any, which are recorded as assets when recoverability is probable.

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• Onboard and other revenues , which consist primarily of revenues from the sale of goods and/or services onboard our ships not included in passenger ticket prices, cancellation fees, sales of vacation protection insurance, pre- and post-cruise tours and fees for operating certain port facilities.

bareboat charter, procurement and management related services we perform on behalf of our unconsolidated affiliates.

Onboard and other revenues also include revenues we receive from independent third party concessionaires that pay us a percentage of their revenues in exchange for the right to provide selected goods and/or services onboard our ships, as well as revenues received for our bareboat charter, procurement and management related services we perform on behalf of our unconsolidated affiliates.

Cruise Operating Expenses

Our cruise operating expenses are comprised of the following:

• Commissions, transportation and other expenses , which consist of those costs directly associated with passenger ticket revenues, including travel agent commissions, air and other transportation expenses, port costs that vary with passenger head counts and related credit card fees;

• Commissions, transportation and other expenses , which consist of those costs directly associated with passenger ticket revenues, including travel advisor commissions, air and other transportation expenses, port costs that vary with passenger head counts and related credit card fees;

• Onboard and other expenses , which consist of the direct costs associated with onboard and other revenues, including the costs of products sold onboard our ships, vacation protection insurance premiums, costs associated with pre- and post-cruise tours and related credit card fees as well as the minimal costs associated with concession revenues, as the costs are mostly incurred by third-party concessionaires and costs incurred for the procurement and management related services we perform on behalf of our unconsolidated affiliates;

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Adjusted (Loss) Earnings per Share ("Adjusted EPS") represents Adjusted Net (Loss) Income attributable to Royal Caribbean Cruises Ltd.

divided by weighted average shares outstanding or by diluted weighted average shares outstanding, as applicable.

(as defined below) divided by weighted average shares outstanding or by diluted weighted average shares outstanding, as applicable.

We believe that this non-GAAP measure is meaningful when assessing our performance on a comparative basis.

Adjusted Net (Loss) Income represents net (loss) income less net income attributable to noncontrolling interest excluding certain items that we believe adjusting for is meaningful when assessing our performance on a comparative basis.

For the periods presented, these items included (i) asset impairment and credit losses recorded in 2020 as a result of the impact of COVID-19;

(ii) equity investment impairment charges recorded in the first quarter of 2020 as a result of the impact of COVID-19;

(iii) currency translation losses recognized in connection with the ships that were previously chartered to Pullmantur;

(iv) the estimated cash refund expected to be paid to Pullmantur guests and other expenses incurred as part of the Pullmantur S.A.

Adjusted Net (Loss) Income attributable to Royal Caribbean Cruises Ltd.

represents net (loss) income less net income attributable to noncontrolling interest excluding certain items that we believe adjusting for is meaningful when assessing our

performance on a comparative basis.

For the periods presented, these items included (i) loss on the extinguishment of debt;

(ii) the amortization of non-cash debt discount on our convertible notes;

(iii) the estimated cash refund expected to be paid to Pullmantur guests and other expenses incurred as part of the Pullmantur S.A.

reorganization;

(v) restructuring charges incurred in relation to the reduction in our U.S.

workforce and other initiatives expenses in 2020 and the reorganization of our international sales and marketing structure primarily in 2019;

(vi) the amortization of non-cash debt discount on our convertible notes;

(vii) loss on the extinguishment of debt;

(viii) the amortization of the Silversea Cruises intangible assets resulting from the 2018 acquisition;

(iv) impairment and credit losses recognized as a result of the impact of COVID-19;

(v) equity investment asset impairments;

(vi) net insurance recoveries related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas, or for 2019, incidental costs, net of insurance recoveries, related to drydock structure incidents Grand Bahama Shipyard;

(vii) restructuring charges incurred in relation to the reduction in our U.S.

workforce and other initiative expenses, and the reorganization of our international sales and marketing structure in 2019;

(viii) the change in the fair value in the Silversea Cruises contingent consideration, the amortization of the Silversea Cruises intangible assets resulting from our acquisition of a 66.7% interest in Silversea Cruises in 2018, and transaction and integration costs related to the 2018 Silversea Cruises acquisition;

(ix) the noncontrolling interest adjustment to exclude the impact of the contractual accretion requirements associated with the put option held by Heritage Cruise Holding Ltd.

("Heritage"), prior to the July 2020 noncontrolling interest purchase;

(x) the change in fair value in the Silversea Cruises contingent consideration;

(xi) net insurance recoveries or costs related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas;

(xii) transaction costs related to the 2018 Silversea Cruises acquisition;

(xiii) the impairment loss and other costs related to the exit of our tour operations business;

(xiv) the impairment loss related to Skysea Holding;

and (xv) the impact of the change in accounting principle related to the recognition of stock-based compensation expense from the graded attribution method to the straight-line attribution method for time-based stock awards.

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 and drydock days.

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 by APCD.

(previously known as Silversea Cruises Group Ltd.) noncontrolling interest in Silversea Cruises, which noncontrolling interest we acquired on July 9, 2020;

(x) the net gain recognized in the first quarter of 2021 in relation to the sale of the Azamara brand;

(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;

and, (xii) the net loss recognized in the fourth quarter of 2021 related to the elimination of the three-month reporting lag for Silversea Cruises.

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 ("Load factor") , in accordance with cruise vacation industry practice, occupancy 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.

Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.

Although discussed in prior periods, we did not report nor reconcile our Gross Yields, Net Revenues, Net Yields, Gross Cruise Costs, Net Cruise Costs and Net Cruise Costs Excluding Fuel, as defined in our Annual Report on Form 10-K for twelve months ended December 31, 2019.

Although discussed in prior periods, we do not disclose or reconcile in this report our Gross Yields, Net Yields, Gross Cruise Costs, Net Cruise Costs and Net Cruise Costs Excluding Fuel, as defined in our Annual Report on Form 10-K for the year ended December 31, 2019.

Historically, we have utilized these financial metrics to measure relevant rate comparisons to other periods.

However, our 2020 reduction in capacity and revenues and the shift in the nature of our running costs due to the suspension of our operations as a result of the COVID-19 pandemic ("COVID-19") do not allow for a meaningful comparison to the prior period metrics and as such these metrics have been excluded from this report.

However, our 2020 and 2021 reduction in capacity and revenues and the shift in the nature of our running costs, due to the impact of the COVID-19 pandemic on our operations, do not allow for a meaningful analysis and comparison of these metrics and as such these metrics have been excluded from this report.

Recent Developments:

The disruptions to our operations resulting from COVID-19 have had, and continue to have, a material negative impact on our financial condition and results of operations.

The outbreak of COVID-19 has resulted in an unprecedented global response to contain the spread of the disease.

These global efforts have resulted in travel restrictions and created significant uncertainty regarding worldwide port closures and availability of ports and destinations generally.

As part of the global containment effort, we previously announced a voluntary suspension of our Global Brands’ cruise operations beginning March 13, 2020, which has been extended through at least April 30, 2021, for most of our cruise operations.

We continue to work with government and health authorities across the globe to address the unique public health challenges posed by COVID-19 and expect to re-start our global cruise operation in a phased manner.

Notably, we resumed limited cruise operations outside of the U.S.

in July and September with TUI Cruises and Hapag-Lloyd, respectively, for a limited period.

Recently, we also received approval from the Singaporean Government to resume sailings out of Singapore.

As a result, Quantum of the Seas , a ship from the Royal Caribbean International fleet, resumed cruising from Singapore in December 2020.

These initial cruises are and will most likely continue to take place with reduced guest occupancy, modified itineraries and enhanced health protocols developed in collaboration with governments and health authorities.

CDC Framework for Conditional Sailing Order

On and effective as of October 30, 2020, the U.S.

Centers for Disease Control and Prevention ("CDC") issued a Framework for Conditional Sailing Order (the “Conditional Order”) that will conditionally permit cruise ship passenger operations in U.S.

waters under certain conditions and using a phased approach.

The Conditional Order replaces the CDC’s No Sail Order that expired on October 31, 2020 and will remain in effect until the earlier of (1) the expiration of the Secretary of Health and Human Services’ declaration that COVID-19 constitutes a public health emergency, (2) the rescission or modification by the CDC Director of the Conditional Order based on specific public health or other considerations, or (3) November 1, 2021.

Business - Regulation for further details on the Conditional Order.

We are working with both the CDC and the Healthy Sail Panel ("HSP"), formed in June 2020 by us and Norwegian Cruise Line Holdings Ltd.

and composed of leading experts in relevant fields, including epidemiology, infectious diseases, public policy and regulation, engineering and general health safety, to prepare and develop our plan to meet the framework for the Conditional Order.

While the Conditional Order represents an important step in our return to service, many uncertainties remain as to the specifics, timing and costs of administering and implementing 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 described above will be further determined based on public health considerations, including the trajectory of the pandemic and the ability of cruise ship operators to successfully employ measures that mitigate the risk of COVID-19.

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

Return to Healthy Sailing

We have restarted our global cruise operations in a phased manner, following our voluntary suspension of global cruise operations that commenced in March of 2020 in response to the COVID-19 outbreak.

Our return to service efforts incorporate our enhanced health and safety protocols, and the requirements of regulatory agencies, which has resulted in reduced guest occupancy, modified itineraries and vaccination protocols.

By the end of December 2021, we operated 50 of our Global and Partner Brand ships, representing over 85% of worldwide capacity, and carried approximately 1.3 million guests since we resumed operations.

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 its variants, 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.

Business - Regulation for an update on the U.S.

Centers for Disease Control and Prevention's ("CDC") Framework for Conditional Sailing Order.

Continued fleet ramp-up

We experienced service disruptions and cancelled several sailings in the first quarter of 2022 due to the impact from the Omicron variant ("Omicron").

Service disruptions have abated as COVID-19 cases have declined.

Despite these service disruptions and cancellations, the overall trajectory of our return to service remains unchanged.

We expect that by the end of the first quarter of 2022, 53 out of 62 of our Global and Partner Brand ships, including Wonder of the Seas, which was delivered in

January 2022, will have been brought back to service.

Additionally, we expect that the rest of the fleet will return to operations before the summer season.

We expect load factors in the first quarter of 2022 to be lower than initially anticipated due to the Omicron impact on bookings and cancellations, particularly on January sailings.

As such, we anticipate load factors on core itineraries of approximately 60% during the first quarter of 2022, with sequential monthly improvement, and approximately 7.7 million APCDs for the first quarter of 2022.

Core itineraries exclude sailings during the early ramp-up period of up to four weeks and exclude new itineraries implemented during the COVID period.

Additionally, we expect total cash flow from ships in operation in the first quarter to be positive.

Update on Bookings

Booking activity for the second half of 2021 is aligned with our anticipated resumption of cruises.

Pricing on these bookings is higher than 2019 both including and excluding the dilutive impact of future cruise credits (FCCs).

While the brands are still in the process of opening for sale the remainder of their 2022/2023 seasons, first and second quarter 2022 sailings have been open for some time.

Cumulative advance bookings for the first half of 2022 are within historical ranges and at higher prices.

This was achieved with minimal sales and marketing spend, which we believe highlights a strong long-term demand for cruising.

Since our last quarterly filing, approximately 75% of bookings made for 2021 are new and the rest are due to the redemption of FCCs and our “Lift & Shift” program.

We continue to provide guests who were booked on a suspended sailing with the option to request a refund, to receive an FCC, or to “lift and shift” their booking to the following year.

As of December 31, 2020, we had $1.8 billion in customer deposits of which approximately 50% are FCCs and the rest are related to new bookings.

Approximately 53% of the guests booked on cancelled sailings since our suspension of operations have requested cash refunds.

We experienced a softening in booking volumes and an increase in near-term cancellations as a result of the significant short-term disruptions experienced by the travel industry due to Omicron.

The disruptions intensified during the holiday season and in early January with the spread of the variant.

Load factors for sailings in the first half of 2022 are expected to remain below historical levels, consistent with our return to service schedule, which includes the Omicron impact.

Load factors for sailings in the second half of 2022 continue to be booked within historical ranges, at higher prices with and without FCCs.

We have observed cancellations subside and bookings improve to pre-Omicron levels, and we have adjusted our sales and marketing efforts in anticipation of a delayed and extended WAVE period.

As of December 31, 2021, we had approximately $3.2 billion in customer deposits.

Approximately 32% of the customer deposit balance as of December 31, 2021 is related to FCCs compared to 35% of the customer deposit balance as of September 30, 2021, a positive trend indicating new demand.

Update on Recent Liquidity Actions and Ongoing Uses of Cash

As of December 31, 2020, we had liquidity of approximately $4.4 billion in the form of cash and cash equivalents of $3.7 billion and a $0.7 billion one-year commitment through August 12, 2021, for a 364-day term loan facility .

As of December 31, 2020, our revolving credit facilities were fully utilized through a combination of amounts drawn and letters of credit issued under the facilities.

Given the current environment, we continue to prioritize and bolster liquidity through significant cost and capital expenditure reductions, cash conservation and additional financing sources, as described below, to ensure that we are well positioned for recovery .

As of December 31, 2021, we had liquidity of approximately $3.5 billion in the form of cash and cash equivalents of $2.7 billion, $0.1 billion of undrawn revolving credit facility capacity, and a $0.7 billion commitment for a 364-day term loan facility available to draw on at any ti me 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 December 31, 2021.

We temporarily applied the net proceeds of the $1.0 billion January 2022 Unsecured Notes to repay borrowings under our revolving credit facilities, bringing our undrawn revolving credit facility capacity to $1.1 billion as of the date of the issuance of this report, from $0.1 billion as of December 31, 2021.

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

Reduced Operating Expenses

We have taken 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:

• significantly reduced ship operating expenses, including crew payroll, food, fuel, insurance and port charges;

• further reduced operating expenses as the Company’s ships transitioned during the year into various levels of layup;

• eliminated or significantly reduced marketing and selling expenses in 2020;

• reduced and furloughed our workforce, with approximately 23% of our US shoreside employee base being impacted;

• further reduced operating expenses as the Company’s ships were transitioned into various levels of layup with several ships in the fleet transitioning into cold layup;

• significantly reduced marketing and selling expenses;

• reduced and furloughed our workforce, with approximately 23% of our US shoreside employee base being impacted in 2020;

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

We may seek to further reduce our average monthly expenses under a further prolonged non-revenue scenario and during the restart of operations.

This includes consideration of additional vessels heading to cold layup as well as further assessment of our shoreside workforce, including those coming back from furlough.

Reduced Capital Expenditures

Since the start of February 2020, we have identified approximately $4.2 billion of total capital expenditure reductions or deferrals in 2020 and 2021.

The reductions or deferrals of capital expenditures are comprised of the following:

• $1.4 billion of non-newbuild, discretionary capital expenditures; and

• $2.8 billion in reduced spend or deferred installment payments for newbuild related payments which we are currently finalizing.

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

During 2021, the Company expects the delivery of Odyssey of the Seas and Silver Dawn during the first and fourth quarters, respectively.

As it relates to 2022, the Company has two ship deliveries scheduled:

Wonder of the Seas and Celebrity Beyond .

The exact durations of the ship delivery delays are currently under discussion with the impacted shipyards.

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.

We take into account a number of variables in determining when to bring ships back into service, including deployment opportunities, commercial potential, cost of operations and cash flow.

Capital Expenditures

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

As of December 31, 2021, we anticipate that overall full year capital expenditures, based on our

existing ships on order, will be approximately $3.1 billion for 2022.

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

We took delivery of Wonder of the Seas during the first quarter of 2022 and expect delivery of Celebrity Beyond during the second quarter of 2022.

For 2023, we have three ship deliveries scheduled:

Icon of the Seas, Celebrity Ascent and Silver Nova .

Debt Maturities, New Financings and Other Liquidity Actions

Since the start of February 2020, we have taken several additional actions to further improve our liquidity position and manage cash flow.

During the year ended December 31, 2021, we continued to take actions to further improve our liquidity position and manage cash flow.

In particular, we:

• increased the capacity under our unsecured revolving credit facilities by $0.6 billion, and fully drew on both facilities;

• entered into a $2.35 billion 364-day senior secured loan agreement in March of 2020, which was repaid in May of 2020 with proceeds from the $3.32 billion senior secured notes ("Secured Notes") discussed below;

• issued $3.32 billion in Secured Notes, of which $1.0 billion is due in 2023 and $2.32 billion is due in 2025.

The previously mentioned $2.35 billion, 364-day senior secured loan was repaid in its entirety with a portion of the proceeds of these notes.

The Secured Notes are unconditionally guaranteed by Celebrity Cruises Holdings Inc., Celebrity Cruises Inc.

and certain of our wholly-owned vessel-owning subsidiaries.

$1.66 billion of the obligations under the Secured Notes and the related guarantees are secured by first priority security interests in collateral, which includes certain of our material intellectual property, a pledge of 100% of the equity interests of certain of our vessel-owning subsidiaries and mortgages on the 28 vessels owned by such subsidiaries;

• secured deferrals of existing debt amortization under our export-credit backed debt facilities which increased the Company’s liquidity by an additional $1.5 billion;

• issued $1.0 billion senior guaranteed notes (“Unsecured Notes”) maturing 2023;

• issued $1.725 billion senior convertible notes maturing 2023;

• qualified for a government commercial paper program by the Bank of England and issued £300.0 million, or approximately $409.9 million, of unsecured commercial paper thereunder;

• secured a commitment for a $700.0 million 364-day term loan facility available for draw any time prior to August 12, 2021;

• issued approximately 22.6 million shares of common stock for approximately $1.6 billion;

• agreed with certain of our lenders that we will not pay dividends or engage in stock repurchases until at least the end of the third quarter of 2022.

Expected debt maturities for 2021 are $0.4 billion, assuming completion of a remaining $0.4 billion in ship principal amortization deferrals.

We estimate our cash burn to be, on average, in the range of approximately $250 million to $290 million per month during a prolonged suspension of operations.

This range includes all interest expenses, ongoing ship operating expenses, administrative expenses, hedging costs, expected necessary capital expenditures (net of committed financings in the case of newbuilds) and excludes changes in customer deposits, commissions, principal repayments, and fees and collateral postings related to financing and hedging activities.

As we return our fleet into service, we have incurred, as it relates to existing operations, and will incur incremental spend as we bring the ships out of their various levels of layup, return the crew to our vessels, take the necessary steps to ensure compliance with the recommended protocols and gear up our sales and marketing activities.

• 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 term 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 at any time prior to August 12, 2022;

• issued $1.50 billion of 5.5% senior unsecured notes due in 2028 for net proceeds of approximately $1.48 billion, which were used to repay principal payments on debt maturing or required to be paid in 2021 and 2022, with the remaining for general corporate purposes;

• 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 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 (or approximately $199.7 million based on the exchange rate at December 31, 2021), 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 fourth quarter of 2022 and defer $1.15 billion of principal payments due between April 2021 and April 2022;

• amended $7.3 billion of outstanding export-credit financing plus committed export-credit facilities to modify financial covenant levels for 2023 and 2024, following the waiver period through and including the fourth quarter of 2022.

Refer to Note 8 .

Debt, Note 10 .

Shareholders' Equity, and Note 17.

Commitments and Contingencies , to our consolidated financial statements under Item 8.

Financial Statements and Supplemental Data for further information on these financing transactions and our debt covenants.

Expected debt maturities for 2022 are $2.2 billion.

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

These include and are not limited to further reductions in capital expenditures, operating expenses and administrative costs and additional financings and refinancings.

Both our non-export credit agency facilities and our export credit agency (“ECA”) 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%, and under certain facilities, to maintain minimum shareholders’ equity.

During the course of 2020, we amended our export credit facilities, substantially all of our non-export credit facilities totaling an outstanding amount of $11.2 billion as of December 31, 2020, and our credit card processing agreements in order to waive the applicable financial covenants through and including the fourth quarter of 2021.

The remainder of our credit facilities with financial covenants (totaling $130 million as of December 31, 2020) benefit from a financial covenant waiver through and including the first quarter of 2021.

Certain of these amended agreements impose a monthly-tested liquidity covenant.

As of December 31, 2020, the minimum liquidity requirement was $350.0 million.

Pursuant to these amendments, we have also agreed that we will not pay cash dividends or effectuate share repurchases during the waiver period unless we are in compliance with the fixed charge coverage covenant as of the end of the most recently completed quarter for the duration of the waiver period.

During the first quarter of 2021, we 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 or, if earlier, that date falling after January 1, 2022 on which we elect to comply with the modified covenants.

In addition, pursuant to the amendments, 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.

The amendments also increase the monthly-tested minimum liquidity covenant to $500 million for the duration of the waiver period (subject to reduction to $350 million, if we raise at least $500 million of additional capital).

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

As of December 31, 2020, 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.

Refer to Note 9.

Debt for further information regarding our debt covenants.

During the first quarter of 2021, we also amended $6.2 billion of our export credit facilities to extend the waiver of the financial covenants through and including at least the end of the third quarter of 2022.

These amendments also allow for the deferral of up to $1.1 billion of principal payments due between April 2021 and April 2022 subject to the satisfaction of various conditions precedent.

As of February 19, 2021, the conditions precedent have been satisfied for 13 of the 15 amended facilities, which will allow us to defer $0.8 billion of amortization payments due during this period.

There can be no assurances that the conditions precedent will be met for the remaining two facilities.

The deferred amounts will be repayable semi-annually over a

five-year period starting in April 2022.

Pursuant to these amendments, we have agreed to implement the same liquidity covenant that applies in our non-export credit facilities.

The amendments also provide for mandatory prepayment of the deferred amounts upon the taking of certain actions.

Subject to a number of carve-outs, these include, but are not limited to, issuance of dividends, completion of share repurchases, issuances of debt other than for crisis and recovery purposes, the making of loans and the sale of assets other than at arm’s length.

In addition, in the fourth quarter of 2020 and the first quarter of 2021, we entered into amendments to our drawn and undrawn ECA facilities to provide for the issuance of guarantees in satisfaction of existing obligations under these facilities.

Following issuance, which in the case of the undrawn facilities, will occur once the debt is drawn, the guarantees will be released under certain circumstances as other debt is repaid or refinanced on an unsecured and unguaranteed basis.

In connection with and following the issuance of the guarantees, the guarantor subsidiaries are restricted from issuing additional guarantees in favor of lenders, other than those lenders who are party to the ECA facilities, and certain of the guarantor subsidiaries are restricted from incurring additional debt.

In addition, the ECA facilities will benefit from guarantees to be issued by intermediary parent companies of subsidiaries that take delivery of any new vessels subject to export-credit backed financing.

Executive Overview

During 2020, the world was heavily impacted by the COVID-19 pandemic.

As part of the containment effort resulting from the global pandemic, we implemented a voluntary suspension of our cruise operation beginning March 13, 2020, which has been extended through at least April 30, 2021, for most of our cruise operations.

As a result, we cancelled almost 2,000 sailings that were originally scheduled to sail in 2020.

Throughout the COVID-19 pandemic, our focus has been on the safety and well-being of our guests and crew, the care of our fleet, and the strength of our liquidity position.

We repatriated 46,998 crew members, moved our whole fleet into various level of lay-up and formed an expert panel with Norwegian Cruise Line Holdings, called the Healthy Sail Panel ("HSP"), to develop a comprehensive set of enhanced health and safety protocols.

Based on the detailed scientific recommendations of the HSP we were able to successfully resume operations in Singapore, with Quantum of the Seas , and in Europe with TUI Cruises and Hapag-Lloyd.

Since the suspension of our global cruise operation, we have taken aggressive actions to enhance our liquidity, preserve cash and obtain additional financing.

During 2020, we raised approximately $9.3 billion of new capital through a combination of bond issuances, common stock public offerings and other loan facilities.

We also reduced our steady-state monthly cruise operating expenses by approximately 80% and reduced the 2020 capital expenditures by $3.0 billion.

In addition, in the second quarter of 2020 and the first quarter of 2021, we amended our export credit facilities to allow for the deferral of $1.5 billion of principal amortization through April 2022.

We also amended over $11 billion of commercial bank and export credit facilities to provide covenant waivers through at least the third quarter of 2022.

Given the current environment, we continue to prioritize and bolster our liquidity, working to ensure we are well positioned for recovery.

Our average cash burn rate continues to be within the range of $250 million - $290 million per month during this prolonged suspension of operations, despite increased interest expenses from additional financing.

During the year ended December 31, 2020, we executed several measures to structurally reduce our cost base, realign our capital allocation and improve our scale and margins.

Besides working on reducing our G&A expenses and streamlining our procurement efforts, we successfully divested three of our oldest and less efficient ships, Empress of the Seas , Majesty of the Seas and Celebrity Xperience and are assisting in the reorganization in Spanish courts of Pullmantur Cruceros.

We also acquired the remaining share of Silversea without impacting our liquidity and expanded our joint-venture with TUI Cruises to include Hapag-Lloyd Cruises.

Despite disruptions in shipyard operations, we successfully took delivery of three new ships – Celebrity Apex , Silver Moon and Silver Origin .

Moreover, in January 2021, we entered into a definitive agreement to sell our Azamara brand to Sycamore Partners in an all-cash transaction which is expected to close in the first quarter of 2021.

The deal includes Azamara’s three-ship fleet and associated intellectual property.

By reshaping our fleet’s efficiency and the corporations’ cost structure we are aligning our company to better support our operating leverage and earnings growth during our recovery.

As the pandemic persists, we will continue to search for further opportunities in our operations.

As important, we are also focusing on our healthy return-to-service program, as well as returning to financial health.

We continue to work and collaborate with the HSP, epidemiological and policy experts, health authorities and various governments around the globe to ensure a healthy and safe return to cruising for guests, crew and the communities we visit.

Regarding the resumption of operations out of the U.S., we continue to prepare and develop our plan to meet the Framework for Conditional Sailing Order issued by the U.S.

Centers for Disease Control and Prevention (CDC).

Overall, and due to the challenges posed by the pandemic, we expect to re-start our global cruise operation in a phased manner with reduced guest occupancy, modified itineraries and enhanced health and safety protocols.

While 2021 proved to be another challenging year for our company and industry, it also marked our successful return to service.

Starting in June, we began our return to cruising with 50 ships back in service by year end, representing more than 85% of our capacity.

We delivered safe and memorable experiences to approximately 1.3 million guests at record guest satisfaction scores.

The out-of-service period in the first half of the year, the costs of returning our ships and crew to operations, the revamping of sales and marketing and the costs to execute on health protocols all had a significant impact on our financial results.

Although we generated a fraction of normal revenue levels in 2021, total revenue per passenger cruise day in the fourth quarter was up 10% compared to record 2019 levels.

The increase was driven by strong onboard revenue performance seen across every revenue stream.

Since resuming operations, our focus has been on the safety and well-being of our guests and crew.

As Delta and Omicron variants started to spread, they created short-term operational challenges as well as an increase in cancellations.

However, our health and safety protocols, including our crew and guest vaccination requirements, proved to be successful as only 0.19% of our guests tested positive for COVID-19.

As infection rates decline and localities lift COVID-19 protocols, we will continue to work closely with health authorities to maintain protocols that promote the health and safety of our guests, crew, and communities we visit.

As part of this commitment, we have opted-in to the CDC’s new voluntary program in the “Highly Vaccinated Ship” category for health and safety protocols.

During 2021, we remained focused on managing costs, improving our balance sheet and preserving liquidity.

We ended the year with approximately $3.5 billion in liquidity, which includes cash and cash equivalents, undrawn revolving credit facility capacity, and a $0.7 billion commitment for a loan facility.

We re-established access to unsecured debt markets and successfully refinanced $2.3 billion of secured or guaranteed high coupon debt, in some instances reducing the coupon by up to 600 basis points.

Given the current environment and anticipated inflationary pressures, we continue to take numerous actions to reshape our cost structure, with a goal of further improving upon our leading pre-COVID margins.

New hardware is a key pillar to supporting our recovery and a driver of quality demand and financial performance.

This past year we successfully took delivery of Celebrity Apex, Odyssey of the Seas and Silver Dawn , all poised to significantly contribute to our yield growth, profitability, and cash generation.

Additionally, we look forward to welcoming two new ships in 2022, Wonder of the Seas and Celebrity Beyond .

We expect to return the full fleet before the summer season of 2022 and load factors to reach pre-COVID levels in the third quarter.

Although Omicron has caused service disruptions, several cancelled sailings and a likely delay in our return to profitability by a few months, we currently expect to be generating net income in the second half of 2022.

As we focus on setting the foundation for a strong recovery and long-term profitable growth, we remain driven to innovate our product and maintain a strong competitive advantage.

We finished the year stronger than we started and continue to manage the challenges related to Omicron, as well as search for further operational opportunities on our journey back to financial health.

Results of Operations

In addition to the items discussed above under "Executive Overview," significant items for 2021 include:

• Our Net (Loss) Income attributable to Royal Caribbean Cruises Ltd.

and Adjusted Net (Loss) Income for the year ended December 31, 2020 was $(5.8) billion and $(3.9) billion, or $(27.05) and $(18.31) per share on a diluted basis, respectively, as compared to Net Income attributable to Royal Caribbean Cruises Ltd.

and Adjusted Net Income of $1.9 billion and $2.0 billion, or $8.95 and $9.54 per share on a diluted basis, respectively, for the year ended December 31, 2019.

• Total revenues, excluding the effect of changes in foreign currency rates, decreased by $8.7 billion for the year ended December 31, 2020 compared to the same period in 2019 reflecting the volume impact of our cancelled sailings during 2020 as a result of the COVID-19 pandemic.

• 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 a decrease in total revenues of $22.0 million for the year ended December 31, 2020 compared to the same period in 2019.

• Total cruise operating expenses, excluding the effect of changes in foreign currency rate, decreased by $3.3 billion for the year ended December 31, 2020 compared to the same period in 2019 due to our cancelled sailings in 2020.

• The effect of changes in foreign currency exchange rates related to our cruise operating expenses, denominated in currencies other than the United States dollar, resulted in a decrease in total operating expenses of $11.2 million for the year ended December 31, 2020 compared to the same period in 2019.

• During the year ended December 31, 2020, as a result of the current and expected ongoing impact of the COVID-19 pandemic on our operations and cash flows, we recorded total impairment and credit losses of $1.6 billion.

The impairment charges related to our goodwill, trademarks and trade names, long-lived assets, including right-of-use assets, and credit losses related to our notes receivable.

• Our consolidated results of operations include Silversea Cruises’ results of operations on a three-month reporting lag from October 1, 2019 through September 30, 2020 for the twelve months ended December 31, 2020, from October 1, 2018 through September 30, 2019 in our consolidated results of operations for the year ended December 31, 2019 and from the date of acquisition of July 31, 2018 to September 30, 2018 in our consolidated results of operations for the year ended December 31, 2018.

• Our Net Loss attributable to Royal Caribbean Cruises Ltd.

and Adjusted Net Loss attributable to Royal Caribbean Cruises Ltd.

for the year ended December 31, 2021 was $(5.3) billion and $(4.8) billion, or $(20.89) and $(19.19) per share on a diluted basis, respectively, as compared to Net Loss attributable to Royal Caribbean Cruises Ltd.

and Adjusted Net Loss attributable to Royal Caribbean Cruises Ltd.

of $(5.8) billion and $(3.9) billion, or $(27.05) and $(18.31) per share on a diluted basis, respectively, for the year ended December 31, 2020.

• Total revenues, excluding the effect of changes in foreign currency rates, decreased by $686.1 million for the year ended December 31, 2021 compared to the same period in 2020 resulting from a 52.6% decrease in occupancy in 2021 while we gradually returned to service compared to 2020 when the majority of our fleet was operational 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 $9.5 million for the year ended December 31, 2021 compared to the same period in 2020.

• Total cruise operating expenses, excluding the effect of changes in foreign currency rate, decreased by $114.9 million for the year ended December 31, 2021 compared to the same period in 2020, which reflects the decrease in occupancy mentioned above.

• The effect of changes in foreign currency exchange rates related to our cruise operating expenses, denominated in currencies other than the United States dollar, resulted in an increase in total operating expenses of $7.3 million for the year ended December 31, 2021 compared to the same period in 2020.

• During the year ended December 31, 2021 and 2020, as a result of ongoing impact of the COVID-19 pandemic on our operations and cash flows, we recorded total impairment and credit losses of $82.0 million and $1.6 billion, respectively, related to long-lived assets and credit losses related to our notes receivable, net of recoveries, in 2021, and to goodwill, trademarks and trade names, long-lived assets, including right-of-use assets, and credit losses related to our notes receivable in 2020.

• Effective October 1, 2021, we eliminated the Silversea Cruises three-month reporting lag to be consistent with the fiscal calendar of the Company.

The effect of this change was an increase to net loss of $62.6 million, or a $0.25 per share loss on a basic and diluted basis, and this amount is reported within Other (expense) income in our consolidated statements of comprehensive income (loss) for the year ended December 31, 2021.

Refer to Note 1.

General to our consolidated financial statements under Item 8.

Financial Statements for further information on this three-month reporting lag.

• During the year ended December 31, 2020, we executed and amended various financing arrangements, as summarized below.

Financial Statements and Supplementary Data for further information on the elimination of the Silversea Cruises reporting lag.

• During the year ended December 31, 2021, we executed and amended various financing arrangements.

Refer to Note 8 .

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Shareholders' Equity , to our consolidated financial statements under Item 8.

Financial Statements and Supplemental Data for further information on the following underlying financing transactions:

• a $0.6 billion increase in the capacity available under our revolving credit facilities;

• additional liquidity of $6.8 billion through the issuance of new debt, including convertible debt, net of repayments, and the securing of a one-year $700 million commitment for a 364-day term loan facility;

• £300.0 million, or $409.9 million, based on exchange rates as of December 31, 2020, of available and issued liquidity under an unsecured government commercial paper program with the Bank of England;

• the deferral of $0.9 million of existing debt amortization under our export-credit backed ship debt facilities through April 2021, which will be paid over a period of four years after the deferral period;

• 22.6 million shares of common stock for approximately $1.6 billion.

We reported Net Income attributable to Royal Caribbean Cruises Ltd, Adjusted Net Income, earnings per share and Adjusted Earnings per Share as shown in the following table (in thousands, except per share data):

Financial Statements and Supplemental Data for further information on our 2021 financing activity.

We reported Net (Loss) Income attributable to Royal Caribbean Cruises Ltd., Adjusted Net (Loss) Income attributable to Royal Caribbean Cruises Ltd., (Loss) Earnings per Share and Adjusted (Loss) Earnings per Share as shown in the following table (in thousands, except per share data):

Year Ended December 31,

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Net Adjustments to Net (Loss) Income attributable to Royal Caribbean Cruises Ltd.

- Increase $ 1,872,883 $ 123,960 $ 62,321

$ 427,610 $ 1,872,883 $ 123,960

Adjustments to Net (Loss) Income attributable to Royal Caribbean Cruises Ltd.:

Impairment and credit losses (1) $ 1,566,380 $ — $ —

Equity investment impairment (2) 39,735 — —

Recognition of deferred currency translation adjustment loss on sale of assets (3) 69,044 — —

Loss on extinguishment of debt (1) $ 138,759 $ 41,109 $ 6,326

Convertible debt amortization of debt discount (2) 104,291 46,546 —

Pullmantur reorganization settlement (3) 10,242 21,637 —

Impairment and credit losses (4) 82,001 1,566,380 —

Equity investment impairment (5) 31,344 39,735 —

Oasis of the Seas incident, Grand Bahama's drydock write-off and other incidental expenses (6)

(6,584) (1,938) 35,239

Loss on extinguishment of debt (7) 41,109 6,326 —

Change in the fair value of contingent consideration and amortization of Silversea Cruises intangible assets related to Silversea Cruises acquisition (8) (33,814) 30,675 2,046

Restructuring charges and other initiatives expense (7) 1,831 51,853 13,707

Transaction and integration costs related to the Silversea Cruises acquisition (8) — 2,048 31,759

Change in the fair value of contingent consideration and amortization of Silversea Cruises intangible assets related to Silversea Cruises acquisition (8) 6,493 (33,814) 30,675

Noncontrolling interest adjustment (9) — 72,331 35,965

Impairment loss related to Skysea Holding (11) — — 23,343

Impairment and other costs related to exit of tour operations business (12) — — 11,255

Impact of change in accounting principle (13) — — (9,238)

Net gain related to the sale of Azamara brand (10) (3,371) — —

Currency translation adjustment losses (11) — 69,044 —

Net Loss related to the elimination of the Silversea reporting lag (12) 62,604 — —

Transaction and integration costs related to the Silversea Cruises acquisition (8) — — 2,048

Net Adjustments to Net (Loss) Income attributable to Royal Caribbean Cruises Ltd.

- Increase $ 1,872,883 $ 123,960 $ 62,321

$ 427,610 $ 1,872,883 $ 123,960

(Loss) Earnings per Share $ (20.89) $ (27.05) $ 8.97

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Diluted 251,812 214,335 209,930

(1) Represents asset impairment and credit losses recorded in 2020 as a result of the impact of COVID-19.

(2) Represents equity investment asset impairment, primarily for our investment in Grand Bahama Shipyard, recorded in the first quarter of 2020 as a result of the impact of COVID-19.

(3) Represents currency translation losses recognized in connection with the ships sold in 2020 that were previously chartered to Pullmantur.

Refer to Note 8 .

Other Assets to our consolidated financial statements under Item 1.

Financial Statements and Supplementary Data for further information.

(1) In 2021, represents the net loss on the partial repayment of the 11.50% senior secured notes due 2025, the net gain on the full repayment of the Silversea Notes and the loss on the partial repayment of the $1.55 billion unsecured revolving credit facility.

In 2020, represents the loss on the extinguishment of the $2.2 billion Senior Secured Term Loan.

In 2019, represents the loss on the extinguishment of the $700 million 364-day loan related to the 2018 Silversea Cruises acquisition and the remaining balance of the unsecured term loan originally incurred in 2010 to purchase Allure of the Seas .

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

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reorganization.

(6) In 2020, amount includes net insurance recoveries related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas.

In 2019, amount includes incidental costs, net of insurance recoveries, of $14.5 million related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas , which were reported primarily within Other operating expenses in our consolidated statements of comprehensive income (loss) for the year ended December 31, 2019;

and $20.7 million regarding the Grand Bahama incident involving one of its drydocks, included in Equity investment income within our consolidated statements of comprehensive income (loss) for the year ended December 31, 2019.

Refer to Note 8 .

Other Assets to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for information.

(7) In 2020, represents the loss on the extinguishment of the $2.35 billion 364-day senior secured term loan.

(8) Related to the 2018 Silversea Cruises acquisition.

Refer to Note 1 .

General and Note 11 .

Redeemable Noncontrolling Interest to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for information on the Silversea Cruises acquisition.

(9) Represents restructuring charges incurred in relation to the reduction in our U.S.

workforce and other initiatives expenses in 2020 and the reorganization of our international sales and marketing structure primarily in 2019.

(4) In 2021 and 2020, represents asset impairment and credit losses as a result of the impact of COVID-19.

In 2021, amounts are net of the recovery of credit losses recognized in 2020.

(5) Represents equity investment asset impairment, primarily for our investments in TUI Cruises GmbH, in 2021 and Grand Bahama Shipyard in 2020, as a result of the impact of COVID-19.

(6) In 2021 and 2020, amounts include net insurance recoveries related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas.

In 2019, amount includes incidental costs, net of insurance recoveries, of $14.5 million related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas , which were reported primarily within Other operating expenses in our consolidated statements of comprehensive (loss) income for the year ended December 31, 2019;

and $20.7 million regarding the Grand Bahama incident involving one of its drydocks, included in Equity investment income (loss) within our consolidated statements of comprehensive income (loss) for the year ended December 31, 2019.

(7) Represents primarily restructuring charges incurred in relation to the reduction in our U.S.

workforce and other initiatives expenses in 2020 and 2021.

Refer to Note 18 .

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Financial Statements and Supplementary Data for further information on the restructuring activities.

(10) Adjustment made to exclude the impact of the contractual accretion requirements associated with the put option held by Silversea Cruises Group Ltd.'s noncontrolling interest.

In 2019, represents primarily the reorganization of our international sales and marketing structure.

(8) Related to the 2018 Silversea Cruises acquisition.

Refer to Note 1 .

Redeemable Noncontrolling Interest to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for further information on noncontrolling interest.

(11) Represents an impairment loss related to Skysea Holding recorded in 2018.

(12) In 2014, we created a tour operations business that focused on developing, marketing and selling land based tours around the world through an e-commerce platform.

During the second quarter of 2018, we decided to cease operations and exit this business.

As a result, we incurred exit costs, primarily consisting of fixed asset impairment charges and severance expense.

(13) In January 2018, we elected to change our accounting policy from the graded attribution method to the straight-line attribution method for time-based stock awards.

General to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for information on the Silversea Cruises acquisition.

(9) Adjustment made to exclude the impact of the contractual accretion requirements associated with the put option held by Heritage Cruise Holding Ltd.'s (previously known as Silversea Cruises Group Ltd.) noncontrolling interest, which noncontrolling interest we acquired on July 9, 2020.

(10) Represents the net gain recognized in the first quarter of 2021 in relation to the sale of the Azamara brand.

(11) Represents currency translation losses recognized in connection with the ships sold in 2020 that were previously chartered to Pullmantur.

Refer to Note 7 .

Summary of Significant Accounting Policies to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for further information on our accounting policy.

Other Assets to our consolidated financial statements under Item 1.

Financial Statements and Supplementary Data for further information.

(12) Represents the net loss related to the elimination of the Silversea Cruises reporting lag.

The following table presents operating results as a percentage of total revenues for the last three years:

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Equity investment (loss) income (8.8) % (9.7) % 2.1 %

Other (expense) income (6.2) % (0.2) % 0.1 %

Other income (expense) 1.3 % (6.2) % (0.2) %

(90.7) % (53.1) % (1.6) %

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___________________________________________________________________

(1) We acquired Silversea Cruises on July 31, 2018 and report their results on a three-month reporting lag.

As a result, 2020 figures include October 2019 through September 2020 Silversea Cruises amounts, 2019 figures include October 2018 through September 2019 Silversea Cruises amounts and 2018 figures include August and September 2018 Silversea Cruises amounts.

(1) Due to the elimination of the Silversea Cruises three-month reporting lag in October of 2021, we include Silversea Cruises' metrics from October 1, 2020 through June 30, 2021 and October 1 through December 31, 2021 in the year ended December 31, 2021.

The year ended December 31, 2021 does not include July, August, and September 2021 statistics as Silversea Cruises' results of operations for those months are included within Other (expense) income in our consolidated statements of comprehensive loss for the year ended December 31, 2021.

Refer to Note 1.

General and Note 3.

Business Combination to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for further information on the three-month reporting lag.

On March 10, 2020, we withdrew our full-year 2020 guidance due to the heightened impact and uncertainty of changes in the magnitude, duration and geographic reach of COVID-19.

The magnitude, duration and speed of COVID-19 and related disruptions remain uncertain.

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

General to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for more information on the three-month reporting lag.

(2) Due to the three-month reporting lag effective through September 30, 2021, we include Silversea Cruises' metrics from October 1, 2019 through September 30, 2020 in the year ended December 31, 2020 and from October 1, 2018 through September 30, 2019 in the year ended December 31, 2019.

(3) For the year ended December, 31, 2021, we include Azamara Cruises' metrics through March 19, 2021, the effective sale date of the brand.

Refer to Note 1.

General to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data for more information on the sale of the Azamara Cruises brand.

The Company’s operations are still impacted by COVID-19 and its related variants.

The adverse impact of the COVID-19 pandemic on our revenues, consolidated results of operations, cash flows and financial condition has been and will continue to be material in 2022.

We expect to incur a net loss on both a US GAAP and adjusted basis for our first quarter of 2021, the extent of which will depend on many factors including the timing and extent of our return to service.

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

GAAP and adjusted basis for the first quarter and the first half of 2022 and a return to profitability in the second half of 2022.

See Recent Developments:

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

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

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

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Passenger ticket revenues decreased by $0.6 billion, or 37.4% from 2020.

The decrease was primarily due to a 79.4% decrease in capacity driven by our cancelled sailings resulting from the suspension of our global fleet operations since mid-March 2020 in response to the COVID-19 pandemic.

Passenger ticket revenues also decreased by $15.7 million due to the unfavorable effect of changes in foreign currency exchange rates related to our revenues in currencies other than the United States dollar.

The decrease in Passenger ticket reflects a 52.6% decrease in occupancy for the period in 2021 during which we gradually returned to service compared to occupancy during 2020 when we operated the majority of our fleet, up through our global suspension in March of 2020.

The decrease to Passenger ticket revenues was slightly offset by the $5.0 million favorable effect of changes in foreign currency exchange rates related to our revenues in currencies other than the United States dollar.

The remaining 38.6% of 2021 total revenues was comprised of Onboard and other revenues , which decreased $0.1 billion, or 16.1%.

The decrease in Onboard and other revenues was primarily due to the 79.4% decrease in capacity noted above.

Additionally, Onboard and other revenues includes, to a much lesser extent, the unfavorable 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 $6.4 million.

This decrease was primarily due to the 52.6% decrease in occupancy noted above and a decrease in cancellation fees in 2021.

These decreases more than offset a strong onboard revenue per passenger cruise day performance during our gradual resumption of operations in 2021 as well as 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 included concession revenues of $72.0 million in 2021 and $76.0 million in 2020.

Cruise Operating Expenses

Total cruise operating expenses for 2020 decreased $3.3 billion, or 54.4%, to $2.8 billion in 2020 from $6.1 billion in 2019.

The majority of the decrease was due to the 79.4% decrease in capacity noted above as a result of our cancelled sailings, including:

• a $1.3 billion decrease in Commissions, transportation and other primarily due to lower commission and variable passenger tax expenses;

• a $482.6 million decrease in Onboard and other expenses mostly due to lower shore excursion costs and beverage costs;

• a $463.5 million decrease in Other operating expenses mostly due to lower port fees and a decrease in ship maintenance and consumable costs;

• a $422.2 million decrease in Food expenses;

• a $326.9 million decrease in Fuel expenses;

• a $290.8 million decrease in Payroll and related expenses resulting from reduced onboard staffing levels;

• the favorable effect of changes in foreign currency exchange rates related to our expense transactions denominated in currencies other than the United States dollar of $11.2 million.

Total C r uise operating expenses for 2021 decreased $0.1 billion, or 3.9%, to $2.7 billion in 2021 from $2.8 billion in 2020.

The decrease was primarily due to a $137.1 million decrease in Commissions, transportation and other expenses and a $40.3 million decrease in Onboard and other expenses due to the decrease in revenues and occupancy noted above.

The decrease in Cruise operating expenses was partially offset by an increase on Payroll and related expenses of $49.8 million due to our return to service during 2021, and the unfavorable effect of changes in foreign currency exchange rates related to our expense transactions denominated in currencies other than the United States dollar of $7.3 million.

Marketing, Selling and Administrative Expenses

Marketing, selling and administrative expenses for 2020 decreased $359.6 million, or 23.1% to $1.2 billion from $1.6 billion in 2019.

The decrease was primarily due to the reduction and deferral of global sales and marketing activities due to the suspension of our operations.

Marketing, selling and administrative expenses for 2021 increased $170.5 million, or 14.2% to $1.4 billion from $1.2 billion in 2020.

The increase is due to the ramp up of our global sales and marketing efforts in the second half of 2021 as we commenced our resumption of operations.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for 2021 increased $13.6 million, or 1.1%, to $1.3 billion.

The increase was primarily due to the additions of Celebrity Apex and Silver Origin in the first and second quarters of 2020, respectively, and a full year of depreciation in 2020 for Spectrum of the Seas.

Additionally, the increase is also attributable to new shipboard additions in 2019 associated with our ship modernization projects and additions related to our shoreside projects.

The increase was primarily due to the addition of Odyssey of the Seas to our fleet in the first quarter of 2021, a full year of depreciation in 2021 for Celebrity Apex, Silver Moon and Silver Origin which were added to our fleet during 2020, and to a lesser extent, the addition of Silver Dawn to our fleet in the fourth quarter of 2021.

The increases in depreciation in 2021 were partially offset by lower depreciation resulting from vessel disposals and asset impairments during 2020 and 2021.

Impairment and Credit Losses

For the year ended December 31, 2020, as a result of the current and expected ongoing impact of the COVID-19 pandemic on our operations and cash flows, we recorded total impairment and credit losses of $1.6 billion, most of which was recorded during the three months ended March 31, 2020, related to the impairment of goodwill, intangibles, long-lived assets and credit losses related to the sale of our property and equipment.

For the year ended December 31, 2021 and 2020, as a result of the ongoing impact of the COVID-19 pandemic on our operations and cash flows, we recorded total impairment and credit losses of $82.0 million and $1.6 billion, respectively,

primarily related to construction in progress, other long-lived assets and credit loss allowances related to our notes receivable in 2021, and to our goodwill, trademarks and trade names, vessels, construction in progress, right-of-use assets and credit loss allowances related to our notes receivable in 2020.

Other Income (Expense)

Interest expense, net of interest capitalized , increased $435.7 million, or 106.7%, to $844.2 million in 2020 from $408.5 million in 2019.

The increase was primarily due to new debt issuances in 2020, a higher average balance on our revolver balances and a loss on extinguishment of the $2.35 billion senior secured term loan of $41.1 million.

Equity investment (loss) income decreased $444.3 million, or 192.3%, to a loss of $213.3 million in 2020 from income of $231.0 million in 2019 mainly due to losses reported by our equity investments as a result of the adverse impact of COVID-19 on their operations and earnings and a $39.7 million impairment charge of equity investments, recorded during the three months ended March 31, 2020, primarily for our investment in Grand Bahama Shipyard.

Other expense was $137.1 million in 2020 compared to $24.5 million in 2019.

The increase in expense of $112.6 million includes 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 in 2020 as we no longer have significant involvement in Pullmantur's operations.

We also recognized $21.6 million of expense during the second quarter of 2020, approximating the estimated total cash refund 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 Refer to Note 8 .

Other Assets to our consolidated financial statements under Item 8.

Financial Statements and Supplemental Data for further information on our investment in Pullmantur.

In addition, we recorded a net $92.0 million loss related to the change in fair value of mostly fuel swap derivative instruments with no hedge accounting.

These expenses were partially offset by income of $45.1 million for the change in contingent consideration payable in 2020 to Heritage, the former minority shareholder of Silversea Cruises, and a decrease of $47.6 million in net tax expense mostly attributable to the suspension in our operations.

Interest expense, net of interest capitalized , increased $447.5 million, or 53.0%, to $1.3 billion in 2021 from $844.2 million in 2020.

The increase was primarily due to new debt issuances in 2021 and 2020, a higher average balance on our revolver debt and a loss on extinguishment of debt of $138.8 million.

Equity investment (loss) improved by $77.8 million, or 36.5%, to a loss of $135.5 million in 2021 from a loss of $213.3 million in 2020 mainly due to decreased losses reported by our equity investments as a result of their return to operations during 2021 and receipt of local government grants by one of our equity investments.

Other income was $20.3 million in 2021 compared to Other expense of $137.1 million in 2020.

The improvement of $157.4 million includes an increase in income of $110.6 million related to the change in the fair value of fuel swap derivative instruments that are not designated under hedge accounting, a one-time $14.4 million tax benefit recognized in 2021, and a $13.8 million decrease in foreign exchange losses from the remeasurement of monetary assets and liabilities denominated in foreign currency compared to 2020.

Additionally in 2020, we recognized a deferred currency translation adjustment loss of $69.0 million related to the Pullmantur brand as we no longer have significant involvement in Pullmantur's operations, which did not recur in 2021, and a $20.0 million expense representing the cash refund expected to be paid to Pullmantur guests as part of the brand's reorganization, compared to a $5.0 million expense in 2021.

The 2021 increases in income were partially offset by a $62.6 million loss recognized in 2021 resulting from the elimination of the Silversea Cruises three-month reporting lag effective October 1, 2021.

Other Comprehensive Income (Loss)

Other comprehensive income in 2020 was $58.4 million compared to Other comprehensive loss of $170.0 million in 2019.

The change of $228.4 million in 2020 was primarily due to a Gain on cash flow derivative hedges in 2020 of $38.0 million compared to a Loss on cash flow derivative hedges of $151.3 million in 2019.

The decrease was primarily due to an increase in the fair value of our foreign currency forward contracts in 2020 compared to a decrease in fair value of our foreign currency contracts in 2019.

Other comprehensive income in 2021 was $28.5 million compared to $58.4 million in 2020.

The decrease of $29.9 million in 2021 was primarily due to a decrease in Gain on cash flow derivative hedges in 2021 of $34.0 million.

Gain on cash flow derivative hedges decreased in 2021 primarily due to the reclassification of fuel swap gains from Accumulated Other Comprehensive Loss into the Consolidated Statement of Comprehensive (Loss) Income in 2021, compared to the reclassification of fuel swap losses during 2020.

This decrease was partially offset by a net increase in the fair value of our cash flow derivative hedges, mostly driven by increases in the fair value of our fuel and interest rate swaps in 2021.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

A discussion of our results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019 is included in Part II.

Item 7 of our Annual Report on Form 10-K for the year ended Decem ber 3 1 , 2 01 9 , filed with the SEC on February 25, 2020, as updated by our Current Report on Form 8-K dated May 13, 2020, and is incorporated by reference into this Form 10-K.

Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020 , filed with the SEC on February 26, 2021 , and is incorporated by reference into this Form 10-K.

Future Application of Accounting Standards

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Sources and Uses of Cash

As a result of the COVID-19 impact on our business, including the suspension of global sailings, we have experienced a decrease in bookings and an increase in customer deposit refunds since the first quarter of 2020, which has significantly affected our liquidity and cash flow.

Net cash (used in) provided by operating activities decreased $7.4 billion to cash used of $(3.7) billion for the twelve months ended December 31, 2020, compared to cash provided of $3.7 billion in 2019.

The current disruptions to our business led to a decrease in collections from our guests as well as an increase of refunds to guests for cancelled sailings during the twelve months ended December 31, 2020 compared to the same period in 2019.

Net cash provided by operating activities increased $237.2 million to $3.7 billion in 2019 compared to $3.5 billion in 2018.

The increase in cash provided by operating activities was primarily attributable to an increase in proceeds from customer deposits, an increase in cash receipts from onboard spending and a decrease in fuel costs in 2019 compared to 2018.

Additionally, dividends received from unconsolidated affiliates decreased by $92.9 million.

Net cash used in investing activities decreased $0.9 billion to $2.2 billion in 2020 compared to $3.1 billion in 2019.

Net cash (used in) operating activities decreased by $1.9 billion to cash used of $1.9 billion for the year ended December 31, 2021, compared to cash used of $3.7 billion for the same period in 2020.

Our gradual resumption of operations in 2021 generated increased guest ticket collections, resulting in an increase of customer deposits of $1.4 billion for the twelve months ended December 31, 2021, compared to a decrease of customer deposits of $1.6 billion during the same period in 2020, during our suspension of global operations.

The increase in customer deposits was offset by increased expenses for our vessels that resumed cruise operations in 2021, including start up costs.

Net cash (used in) operating activities was $3.7 billion in 2020 compared to Net cash provided of $3.7 billion in 2019 reflecting a change of $7.4 billion in 2020.

The 2020 disruptions to our business led to a decrease in collections from our guests as well as an increase of refunds to guests for cancelled sailings during the year ended December 31, 2020 compared to the same period in 2019.

Net cash used in investing activities decreased $33.8 million to cash used of $2.1 billion for the year ended December 31, 2021, compared to cash used of $2.2 billion for the same period in 2020.

The decrease in cash used in investing activities was primarily attributable to an increase in proceeds from the sale of property and equipment and other assets of $148.2 million in 2021 compared to 2020, and a decrease in cash paid on settlement of derivative financial instruments of $87.1 million, partially offset by an increase in capital expenditures of $264.6 million mostly due to our purchase of Terminal A at PortMiami in 2021 .

Net cash used in investing activities decreased $0.9 billion to cash used $2.2 billion in 2020 compared to cash used $3.1 billion in 2019.

The decrease in investing activities was primarily attributable to a decrease in capital expenditures of $1.1 billion.

Net cash used in investing activities decreased $1.4 billion to $3.1 billion in 2019 compared to $4.5 billion in 2018.

The decrease was primarily attributable to the $916.1 million of cash paid for the acquisition of Silversea Cruises, net of cash acquired, in 2018, which did not recur in 2019 and a decrease in capital expenditures of $635.4 million due mostly to the delivery of two more ships in 2018 compared to 2019, partially offset by higher fleet modernization costs in 2019 compared to 2018.

Net cash provided by financing activities was $9.3 billion in 2020 compared to Net cash used in financing activities of $0.7 billion in 2019.

The change was primarily attributable to an increase in debt proceeds of $10.0 billion in 2020 compared to the same period in 2019, and $1.4 million in proceeds from common stock issuances on 2020.

Net cash provided by financing activities was $3.0 billion in 2021 compared to cash provided of $9.3 billion in 2020.

The decrease of $6.3 billion was primarily attributable to higher debt proceeds and issuance of commercial paper notes of $15.8 billion during the twelve months ended December 31, 2020, compared to the same period in 2021, offset by higher debt and commercial paper repayments of $9.0 billion during the twelve months ended December 31, 2020, compared to the same period in 2021.

Additionally, dividends paid of $326.4 million during the twelve months ended December 31, 2020, compared to none during the same period in 2021.

Net cash provided by financing activities was $9.3 billion in 2020 compared to Net cash used of $0.7 billion in 2019.

The change was primarily attributable to an increase in debt proceeds of $10.0 billion in 2020 compared to the same period in 2019, and $1.4 billion in proceeds from common stock issuances in 2020.

These proceeds were partially offset by net repayments of commercial paper of $1.1 billion during the twelve months ended December 31, 2020 compared to net borrowings of commercial paper of $0.6 billion during the same period in 2019.

Net cash used by financing activities was $0.7 billion in 2019 compared to Net cash provided in financing activities of $1.2 billion in 2018.

The change was primarily attributable to a decrease in debt proceeds of $5.1 billion in 2019 compared to 2018 primarily due to a decrease in borrowings on our revolving credit facilities and less unsecured term loan borrowings resulting from less ship deliveries in 2019 and the financing of the acquisition of Silversea Cruises in 2018.

This decrease in proceeds was partially offset by a decrease in repayments of debt of $2.9 billion and a decrease in stock repurchases of $475.5 million in 2019 compared to 2018.

Future Capital Commitments

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Our future capital commitments consist primarily of new ship orders.

As of December 31, 2020, we have two Oasis-class ships, one Quantum-class ship, and three ships of a new generation, known as our Icon-class, on order for our Royal Caribbean International brand with an aggregate capacity of approximately 32,400 berths.

As of December 31, 2021, we have two Oasis-class ships, and three ships of a new generation, known as our Icon-class, on order for our Royal Caribbean International brand with an aggregate capacity of approximately 28,200 berths.

As of December 31, 2021, we have two Edge-class ships on order for our Celebrity Cruises brand, with an aggregate capacity of approximately 6,500 berths.

Additionally, as of December 31, 2020, we have three ships on order for our Silversea Cruises brand with an aggregate capacity of approximately 1,750 berths.

Additionally, as of December 31, 2021, we have two ships on order for our Silversea Cruises brand with an aggregate capacity of approximately 1,460 berths.

Refer to Item 1.

Business-Operations for further information on our ships on order.

For the 15 ships on order we have committed financing arrangements in place covering 80% of the cost of the ship, almost all of which include sovereign financing guarantees.

We have committed financing arrangements in place covering 80% of the cost of the ship for the nine ships on order for our Global Brands, almost all of which include sovereign financing guarantees.

Additionally, we have an agreement in place with Chantiers de l’Atlantique to build an additional Edge-class ship for delivery in 2025, which is contingent upon completion of conditions precedent and financing.

As of December 31, 2020, the aggregate cost of our ships on order, not including any ships on order by our Partner Brands and the Silversea Cruises ships that remain contingent upon final documentation and financing, was approximately $14.2 billion, of which we had deposited $684.8 million as of such date.

As of December 31, 2021, the aggregate cost of our ships on order, not including any ships on order by our Partner Brands, was approximately $12.4 billion, of which we had deposited $800.2 million as of such date.

Approximately 59.0% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at December 31, 2021.

Refer to Note 16.

Fair Value Measurements and Derivative Instruments and Note 19 .

Measurements and Derivative Instruments and Note 17.

Commitments and Contingencies to our consolidated financial statements under Item 8.

Financial Statements and Supplementary Data .

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

Decreased demand for cruising as a result of concerns regarding the COVID-19 pandemic 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, 2021 and 2022 capital expenditures.

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These amounts do not include any ships on order by our Partner Brands.

Contractual Obligations

As of December 31, 2020, our contractual obligations were as follows (in thousands):

Material Cash Requirements

As of December 31, 2021, our material cash requirements were as follows (in thousands):

Payments due by period

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Financing Activities:

Commercial paper (5)

409,319 409,319 — — —

Debt obligations (5)

20,618,065 2,191,620 9,345,412 4,781,668 4,299,365

Capital lease obligations (7)

Finance lease obligations (6)

472,275 51,511 57,497 44,896 318,371

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Amounts represent contractual obligations with initial terms in excess of one year.

(2) Debt obligations mature at various dates through fiscal year 2032 and bear interest at fixed and variable rates.

(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 December 31, 2021.

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(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.

Included in the 1-3 year figure is estimated cash collateral of $181.1 million that we are required to deliver on or before July 18, 2021 in connection with our Port of Miami terminal operating lease.

See Note 10 .

Leases to our consolidated financial statements under Item 1.

Financial Statements for further information on the collateral requirement

(4) Amounts are based on contractual installment and delivery dates for our ships on order.

Included in these figures are $7.9 billion in final contractual installments, which have committed financing.

COVID-19 has impacted shipyard operations which have and will result in delays for our previously contracted ship deliveries.

The exact duration of the ship delivery delays are currently under discussion with the impacted shipyards.

COVID-19 has impacted shipyard operations which have and may result in delays for 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.

Additionally, amounts do not include activity related to Silversea Cruises, including ships placed on order, if any, during the three-month reporting lag period.

(5) In June 2020, RCL Cruises Ltd., we established a commercial paper facility under the Joint HM Treasury and Bank of England’s COVID Corporate Financing Facility commercial paper program in an aggregate principal amount up to £300.0 million.

Refer to Note 9 .

Debt to our consolidated financial statements under Item 8.

Financial Statements and Supplemental Data to our consolidated financial statements for further information.

(5) Debt denominated in other currencies is calculated based on the applicable exchange rate at December 31, 2021.

In addition, debt obligations presented above are net of debt issuance costs of $363.5 million as of December 31, 2021.

(7) Amounts represent capital lease obligations with initial terms in excess of one year.

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

(7) Amounts represent fees payable to sovereign guarantors in connection with certain of our export credit debt facilities and facility fees on our revolving credit facilities.

Please refer to Funding Needs and Sources below for discussion on the planned funding of the above contractual obligations.

Please refer to Funding Needs and Sources below for discussion on the planned funding of the above material contractual obligations.

As a normal part of our business, depending on market conditions, pricing and our overall growth strategy, we continuously consider opportunities to enter into contracts for the building of additional ships.

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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.

We have a residual value guarantee associated with our operating lease of a terminal at Port of Miami in Miami, Florida that approximates a percentage of cost of the asset as of the inception of the lease.

We consider the possibility of incurring costs associated with the residual value guarantee to be remote.

Also in connection with the Port of Miami terminal operating lease, we are required to deliver on or before July 18, 2021, cash collateral in an amount equal to the lesser of our residual value guarantee or the aggregate balance of the lessors' terminal construction debt, estimated at $181.1 million as of December 31, 2020.

The collateral is to be issued to an escrow agent and pledged to the benefit of the terminal construction debt lenders until all amounts due by us under the lease have been paid in full.

Since the COVID-19 pandemic began, our senior unsecured ratings from Moody’s and S&P have been downgraded and are currently B2 and B, respectively.

These downgrades reduce our ability to incur secured indebtedness by reducing the amount of indebtedness that we are permitted to secure, and may negatively impact our access to, and cost of, debt financing.

Additionally, as a result of Moody’s downgrade of the Silversea Notes from Baa3 to Ba2 on August 31, 2020 and S&P’s downgrade of Silversea Cruises' Notes from BBB- to BB on August 31, 2020, certain covenants of the indenture governing the Silversea Notes have been reinstated.

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

The Company also has agreements with its credit card processors relating to customer deposits received by the Company for future voyages.

These agreements allow the credit card processors to require, under certain circumstances, including breach

of the financial covenants, the existence of other material adverse changes, excessive chargebacks, and other triggering events, the Company to maintain a reserve that can be satisfied by posting collateral.

Executed amendments are in place for the majority of these providers, waiving reserve requirements tied to breach of our financial covenants through at least March 31, 2022 or September 30, 2022 depending on the agreement, 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 $75.0 million held in reserve with a processor where the agreement was amended in the first quarter of 2021, such that future proceeds will be withheld in reserve, of which the maximum projected exposure is approximately $200.0 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.

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.

Certain of our surety agreements with third party providers for the benefit of certain agencies and associations that provide travel related bonds, allow the sureties to request collateral.

We also have agreements with our credit card processors relating to customer deposits received by us for future voyages.

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 December 31, 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 $193.3 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 $285.0 million.

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.

Certain of our surety agreements with third party providers for the benefit of certain agencies and associations that provide travel related bonds allow the surety to request collateral in the form of cash or letters of credit.

As of December 31, 2020, we have posted collateral in the amount of approximately $91 million.

As of December 31, 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.

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Historically, we relied on a combination of cash flows provided by operations, draw-downs under our available credit facilities, the incurrence of additional debt and/or the refinancing of our existing debt and the issuance of additional shares of equity securities to fund our obligations.

The impact of COVID-19 resulted in our previously announced voluntary suspension

of Global Brands' cruise operations from March 13, 2020, which has been extended through at least April 30, 2021, for most of our cruise operations.

This suspension of operations has strained our sources of cash flow and liquidity, causing us to take actions resulting in reductions in our operating expenses, reductions in our capital expenses and new financings and other liquidity actions.

The impact of COVID-19 resulted in our voluntary suspension of global cruise operations from March 2020 up to our gradual resumption of operations primarily in 2021.

The suspension of operations strained our sources of cash flow and liquidity, causing us to take actions resulting in reductions in our operating expenses, reductions in our capital expenses and new financings and other liquidity actions.

The Company continues to identify and evaluate further actions to improve its liquidity.

These include, and are not limited to further reductions in capital expenditures, operating expenses and administrative costs and additional financings.

See further discussion on these liquidity actions at Recent Developments :

See further discussion on these liquidity actions at Recent Developments - COVID-19.

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 December 31, 2020, we had $11.6 billion of committed financing for our ships on order.

As of December 31, 2020, we had $3.9 billion in contractual obligations due through December 31, 2021, of which approximately $1.3 billion relates to debt maturities, $0.9 billion relates to interest on debt and $1.3 billion relates to progress payments on our ship orders and the final installments payable due upon the delivery of Odyssey of the Seas .

As of December 31, 2020, we had liquidity of $4.4 billion, consisting of cash and cash equivalents of $3.7 billion and a $0.7 billion one-year commitment for a 364-day term loan facility .

As of December 31, 2020, our revolving credit facilities were fully utilized through a combination of amounts drawn and letters of credit issued under the facilities.

In connection with our debt covenant waiver extensions, we agreed with certain of our lenders not to pay dividends or engage in stock repurchases.

As of December 31, 2021, we had approximately $10.0 billion of committed financing for our ships on order.

As of December 31, 2021, we had $5.8 billion in contractual obligations due through December 31, 2022, of which approximately $2.2 billion relates to debt maturities, $0.9 billion relates to interest on debt and $2.3 billion relates to progress payments on our ship orders and the final installments payable due upon the delivery of Wonder of the Seas and Celebrity Beyond .

As of December 31, 2021, we had liquidity of $3.5 billion, including $0.1 billion of undrawn revolving credit facility capacity, $2.7 billion in cash and cash equivalents, and a $0.7 billion commitment for a 364-day term loan facility available to draw at any time prior to August 12, 2022.

As of December 31, 2021, our revolving credit facilities were mostly utilized through a combination of amounts drawn and letters of credit issued under the facilities.

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

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.

Refer to Note 10 .

Shareholders' Equity to our consolidated financial statements under Item 8.

Financial Statements for further information.

Based on our assumptions and estimates and our financial condition, we believe that the liquidity resulting from the actions mentioned above will be sufficient to fund our liquidity requirements over at least the next twelve months from the issuance of these financial statements.

Shareholders' Equity to our consolidated financial statements for further information.

If any person acquires ownership of more than 50% of our common stock or, subject to certain exceptions, during any 24-month period, a majority of our board of directors is no longer comprised of individuals who were members of our board of directors on the first day of such period, we may be obligated to prepay indebtedness outstanding under our credit facilities, which we may be unable to replace on similar terms.

Our public debt securities also contain change of control provisions that would be triggered by a third-party acquisition of greater than 50% of our common stock coupled with a ratings downgrade.

If this were to occur, it would have an adverse impact on our liquidity and operations.

However, there is no assurance that our assumptions and estimates are accurate due to possible unknown variables related to this unprecedented suspension of our operations and, as such, there is inherent uncertainty in our ability to predict future liquidity requirements.

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Financial Statements for further information.

Under certain of our agreements, the contractual interest rate, facility fee and/or export credit agency fee vary with our debt rating.

On August 24, 2020, Moody’s downgraded our senior unsecured rating from Ba2 to B2, and on August 31, 2020, S&P Global downgraded our senior unsecured rating from BB to B+, thereby increasing the contractual interest rate, facility fee and export credit agency fee across various facilities.

On February 25, 2021, S&P Global further downgraded our senior unsecured rating from B+ to B, which had no further financial impact.

Our public debt securities also contain change of control provisions that would be triggered by a third-party acquisition of greater than 50% of our common stock coupled with a ratings downgrade.

If this were to occur, it would have an adverse impact on our liquidity and operations.

Beyond the next 12 months, in June of 2023, approximately $3.2 billion of long-term debt will need to be refinanced in order to maintain the Company's liquidity position.

In February 2022, we entered into certain agreements with Morgan Stanley & Co., LLC (“MS”) where MS agrees to provide backstop committed financing to refinance, repurchase and/or repay in whole or in part our existing and outstanding 10.875% Senior Secured Notes due 2023, 9.125% Priority Guaranteed Notes due 2023, and 4.25% Convertible Notes due 2023.

Pursuant to the agreements, we may, at our sole option, issue and sell to MS (subject to the satisfaction of certain conditions) five-year senior unsecured notes with gross proceeds of up to $3.15 billion at any time between April 1, 2023 and June 29, 2023, to refinance the aforementioned notes.

Debt Covenants

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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 .

As of December 31, 2020, financial covenant testing on our export-credit and non-export credit facilities totaling $11.2 billion of, and our credit card processing agreements was waived through the fourth quarter of 2021 following amendments to the agreements during 2020.

During the first quarter of 2021, we further amended $4.9 billion of our non-export credit facilities and $6.2 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.

capitalization covenant will be tested during the period commencing immediately following the end of the waiver period and continuing through the end of 2023.

The amendments impose a monthly-tested minimum liquidity covenant of $500.0 million for the duration of the waiver period, subject to reduction to $350.0 million if we raise at least $500.0 million of additional capital, which can be satisfied through previously undrawn facilities.

During 2020, we amended all of our export credit facilities, all of our non-export credit facilities and certain of our credit card processing agreements which contain financial covenants to extend the financial covenant waiver through and including the fourth quarter of 2021.

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.

During the fourth quarter of 2021, we amended $7.3 billion of outstanding export-credit facilites plus committed export-credit facilities to

modify financial covenant levels for 2023 and 2024, following the waiver period through and including 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.

The amendments impose a monthly-tested minimum liquidity covenant of $350.0 million, which in the case of the non-export credit facilities terminates at the end of the waiver period and in the case of the export credit facilities terminates either in July 2025, or when we pay off all deferred amounts, whichever is earlier.

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 December 31, 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.

In addition to the above, during 2020, we amended our Port of Miami Terminal "A" operating lease agreement to increase the lien basket in line with our debt facilities.

In the first quarter of 2021, we also amended this lease to obtain a financial covenant waiver through the end of the third quarter of 2022, on the same terms as apply to the non-export credit facilities.

As of December 31, 2020, we were in compliance with the amended covenants under the lease agreement.

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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If we require additional waivers and are not able to obtain them or repay the debt facilities, this would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contracts.

During the first quarter of 2020 we declared a cash dividend on our common stock of $0.78 per share which was paid in the second quarter of 2020.

During the second quarter of 2020, we agreed with certain of our lenders not to pay dividends or engage in common stock repurchases for so long as our debt covenant waivers are in effect.

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 as part of the principal amortization deferral provided in 2020 and the first quarter of 2021.

Accordingly, we did not declare any additional dividends during 2020.

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 seventh consecutive quarters ending December 31, 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.

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-K

Item 7. Management’s Discussion and Analysis