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Item 1A. Risk Factors

2022-07-29 compared with 2022-05-05 · 122 added, 171 removed, 284 unchanged (51% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations for a cautionary note regarding forward-looking statements.

COVID-19 and Financial Risks

Macroeconomic, Business, Market and Operational Risks

The COVID-19 pandemic has had, and continues to have, a material adverse impact on our business, results of operations and liquidity.

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

Examples of these include, but are not limited to, cruising advisories and required or voluntary travel restrictions, that resulted in the temporary suspension of our Global Brands' operations, from which we have resumed limited operations;

restrictions on the movement and gathering of people;

social distancing measures;

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

and disruptions to businesses in our supply chain.

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

As such, these impacts may persist for an extended period of time or become more pronounced, even as we resume operations.

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

• Operations:

While we have restarted our global cruise operations in a phased manner, following the March 2020 suspension of our global cruise operations, there is no assurance that our plan to resume operations will be successful.

Examples of these include, but are not limited to, cruising advisories and required or voluntary travel restrictions.

In addition, the extent, duration, and magnitude of the COVID-19 pandemic’s effect on the economy and consumer demand for cruising and travel is evolving and difficult to predict.

As such, the effects of COVID-19 may persist for an extended period of time or become more pronounced on our cruise operations.

While we have resumed our global cruise operations, following the March 2020 suspension of our global cruise operations, there is no assurance that our cruise operations will continue uninterrupted.

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

Onboard cases have resulted in illness among our guests and crew, incremental costs, guest refunds and negative publicity and media attention.

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

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

In addition, we may face challenges related to possible new and evolving operating protocols, including protocols in the countries in which we operate and plan to operate.

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

These measures also may negatively impact guest satisfaction.

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

In addition, there is no guarantee that the vaccines will continue to be effective.

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

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

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

shoreside employee base being impacted in 2020.

Our ships and our shipboard crew are gradually being notified about new assignments as operations resume over time.

We may be challenged in rebuilding the rest of our workforce which could delay our phased resumption of operations.

In addition, we have reduced our planned capital spending through 2022, which may negatively impact or delay our execution of planned growth strategies, particularly as it relates to investments in our ships, technology, and our expansion of land-based developments.

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

If we are unable to satisfy the safety standards applicable to our sailings, our operations may be negatively impacted and we could be exposed to reputational and legal risks.

Due to the unprecedented and uncertain nature of the COVID-19 pandemic and related regulatory landscape, it is difficult to predict the impact of further disruptions and their magnitude.

In addition, we have never previously experienced a complete cessation of our cruising operations or a subsequent phased resumption of operations, and as a consequence, we are unable to predict with certainty the impact of such a cessation or phased resumption of operations on our brands and future prospects.

• Results of Operations:

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

We have incurred and will continue to incur significant costs as we accommodate passengers due to cancelled sailings.

In addition, we have incurred and will likely continue to incur significant overhead costs associated with the return to service of our fleet and enhanced COVID-19 related cleaning, testing, vaccination and other mitigation procedures.

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

In turn, these negative impacts to our financial performance have resulted and may continue to result in impairments of our long-lived and intangible assets, which has influenced our decision making relating to early disposal, sale or retirement of assets.

Following the resumption of operations, our Global Brands and our Partner Brands may be subject to the continued impact of the COVID-19 pandemic.

Additionally, any future profitability will be impacted by increased debt service costs as a result of our liquidity actions.

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

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

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

If we raise additional funds by issuing debt, we may be subject to additional limitations on our operations due to restrictive covenants, which may be more restrictive than the covenants in our existing debt agreements, and we may be required to further encumber our assets.

Also, as a result of our additional debt issuances, we will require a significant amount of cash to service our debt and sustain operations.

Our ability to generate cash depends on factors beyond our control and we may be unable to repay or repurchase debt at maturity.

If adequate funds are not available on acceptable terms, or at all, we may be unable to fund our operations, or respond to competitive pressures, any of which could negatively affect our business.

There is no guarantee that financing will be available in the future or that such financing will be available with similar terms or terms that are commercially acceptable to us.

We may not be able to obtain sufficient financing or capital for our needs or may not be able to do so on terms that are acceptable or consistent with our expectations.

To fund our capital expenditures (including new ship orders), operations and scheduled debt payments, we have historically relied on a combination of cash flows provided by operations, drawdowns under available credit facilities, the incurrence of additional indebtedness and the sale of equity or debt securities in private or public securities markets.

Any circumstance or event which leads to a decrease in consumer cruise spending, such as worsening global economic conditions or significant incidents impacting the cruise industry, such as the COVID-19 pandemic, negatively affects our operating cash flows.

We had net cash outflows from operations for the three months ended March 31, 2022.

As result of the COVID-19 pandemic and the resulting suspension of our operations, we have experienced credit rating downgrades, which have reduced 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.

Our ability to access additional funding as and when needed, our ability to timely refinance and/or replace our outstanding debt securities and credit facilities on acceptable terms and our cost of funding will depend upon numerous factors including, but not limited to, the strength of the financial markets, our recovery and financial performance, the recovery and performance of our industry in general and the size, scope and timing of our financial needs.

In addition, even where financing commitments have been secured, significant disruptions in the capital and credit markets could cause our banking and other counterparties to breach their contractual obligations to us or could cause the conditions to the availability of such funding not to be satisfied.

This could include failures of banks or other financial service companies to fund required borrowings under our loan agreements or to pay us amounts that may become due or return collateral that is refundable under our derivative contracts for hedging of fuel prices, interest rates and foreign currencies or other agreements.

If any of the foregoing occurs for a prolonged period of time it will have a long-term negative impact on our cash flows and our ability to meet our financial obligations.

Our substantial debt requires a significant amount of cash to service and could adversely affect our financial condition.

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

As of March 31, 2022, we had total debt of $22.5 billion.

Our substantial debt has required us to dedicate a large portion of our cash flow from operations to service debt and fund repayments on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate expenses.

Our ability to make future scheduled payments on our debt service obligations or refinance our debt depends on our future operating and financial performance and ability to generate cash.

This will be affected by our ability to successfully implement our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control, such as the disruption caused by the COVID-19 pandemic.

If we cannot generate sufficient cash to meet our debt service obligations or fund our other business needs, we may, among other things, need to refinance all or a portion of our debt, obtain additional financing, delay planned capital expenditures or sell assets.

We cannot assure that we will be able to generate sufficient cash through any of the foregoing.

If we are not able to refinance any of our debt, obtain additional financing or sell assets on commercially reasonable terms or at all, we may not be able to satisfy our obligations with respect to our debt.

Our substantial debt could also result in other negative consequences for us.

For example, it could increase our vulnerability to adverse general economic or industry conditions;

limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;

place us at a competitive disadvantage compared to our competitors that have less debt;

make us more vulnerable to downturns in our business, the economy or the industry in which we operate, including the current downturn related to COVID-19;

limit our ability to raise additional debt or equity capital in the future to satisfy our requirements relating to working capital, capital expenditures, development projects, strategic initiatives or other purposes;

restrict us from making strategic acquisitions, introducing new technologies or exploiting business opportunities;

limit or restrict our ability to obtain and maintain performance bonds to cover our financial responsibility requirements in various jurisdictions for non-performance of guest travel, casualty and personal injury;

make it difficult for us to satisfy our obligations with respect to our debt;

and increase our exposure to the risk of increased interest rates as certain of our borrowings are (and may in the future be) at a variable rate of interest.

Despite our leverage, we may incur more debt, which could adversely affect our business.

We may incur substantial additional debt in the future.

Except for the restrictions under the indentures governing our Secured Notes, our Priority Guaranteed Notes, and certain of our other debt instruments, including our unsecured bank and export credit facilities, we are not restricted under the terms of our debt instruments from incurring additional debt.

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

In the event that we execute and borrow under the

$0.7 billion commitment available to draw on at any time prior to August 12, 2022 for a 364-day term loan facility, the credit agreement that would govern such term loan facility would impose substantially similar restrictions (including the related qualifications and exceptions) as are set forth in the indenture governing the Priority Guaranteed Notes.

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

As of March 31, 2022, we have commitments for approximately $8.4 billion of debt to finance the purchase of 8 ships on order by our Royal Caribbean International, Celebrity Cruises and Silversea Cruises brands, all of which are guaranteed by the export credit agencies in the countries in which the ships are being built.

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

We are subject to restrictive debt covenants that may limit our ability to finance our future operations and capital needs and to pursue business opportunities and activities.

In addition, if we fail to comply with any of these restrictions, it could have a material adverse effect on us.

Certain of our debt instruments, including our indentures and our unsecured bank and export credit facilities, limit our flexibility in operating our business.

For example, certain of our loan agreements and indentures restrict or limit our and our subsidiaries’ ability to, among other things, incur or guarantee additional indebtedness;

pay dividends or distributions on, or redeem or repurchase capital stock and make other restricted payments;

make investments;

consummate certain asset sales;

engage in certain transactions with affiliates;

grant or assume certain liens;

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

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

In addition, our ECA facilities also require us to maintain minimum liquidity and a minimum stock holders' equity.

Refer to Note 6 .

Debt to our consolidated financial statements under Part I, Item 1, Financial Statements for further discussion on our covenants and existing waivers.

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

Despite these exceptions and qualifications, we cannot assure you that the operating and financial restrictions and covenants in certain of our debt instruments will not adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest.

Any future indebtedness may include similar or other restrictive terms.

In addition, our ability to comply with these covenants and restrictions may be affected by events beyond our control.

These include prevailing economic, financial and industry conditions.

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

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

Borrowings under other debt instruments that contain cross-default provisions also may be accelerated or become payable on demand.

In these circumstances, our assets may not be sufficient to repay in full that indebtedness and our other indebtedness then outstanding.

In addition, our ability to maintain our credit facilities may also be impacted by changes in our ownership base.

More specifically, we may be required to prepay our non-ECA and ECA facilities 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.

Our 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, which would require us to offer to repurchase our debt securities in the event of such change of control.

If we elect to settle conversions of our convertible notes in shares of our common stock or a combination of cash and shares of our common stock, conversions of our convertible notes will result in dilution for our existing shareholders.

We have an aggregate principal amount of $1.725 billion in convertible notes outstanding.

If note holders elect to convert, the notes will be converted into our shares of common stock, cash, or a combination of common stock and cash, at our discretion.

Prior to March 15 and August 15, 2023, our convertible notes issued in June 2020 and October 2020, respectively, will be convertible at the option of holders during certain periods only upon satisfaction of certain conditions.

Beyond those dates, the convertible notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding their maturity date.

Conversions of our convertible notes into shares of our common stock or a combination of common stock and cash, will result in dilution to our shareholders.

We did not declare quarterly dividends on our common stock in the quarter ended March 31, 2022 and do not expect to pay dividends on our common stock for the foreseeable future.

No cash dividends were declared on our common stock during the eight consecutive quarters ended March 31, 2022.

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

We do not expect to pay

cash dividends on our common stock for the foreseeable future due to our agreement with certain of our lenders not to pay dividends until the end of the third quarter of 2022.

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

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

Increased regulatory oversight, and the phasing out of LIBOR may adversely affect the value of a portion of our indebtedness.

The publication of certain LIBOR settings ceased after December 31, 2021, and uncertainty regarding alternative reference rates remains as many market participants await a wider adoption of replacement products prior to the cessation of the remaining USD LIBOR tenors (currently scheduled for June 30, 2023).

When LIBOR ceases to exist, the level of interest payments on the portion of our indebtedness that bears interest at variable rates might be affected if we, the agent, and/or the lenders holding a majority of the outstanding loans or commitments under such indebtedness fail to amend such indebtedness to implement a replacement rate.

Regardless, such replacement rate will give due consideration to any evolving or then-existing conventions for similar credit facilities, which may result in different than expected interest payments.

Macroeconomic, Business, Market and Operational Risks

The impact to our global bookings resulting from COVID-19 may 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.

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

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Given the global nature of our business, we are exposed to many different economies, and our business could be hurt by challenging conditions in any of our markets.

Additionally, the continued impact of COVID-19 on the financial markets is uncertain and we cannot predict its effect on geopolitical events and/or international trade policies as countries attempt to mitigate the impact of the pandemic and as they re-open their economies or re-implement lockdown measures.

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

Our operating costs, including fuel, food, payroll and benefits, airfare, taxes, insurance, and security costs, can be and have been subject to increases due to market forces and economic or geopolitical conditions or other factors beyond our control, including global inflationary pressures, which have increased our operating costs.

In connection with the COVID-19 pandemic, we' have incurred increased operating costs, including as a result of rerouting itineraries due to ports closing or not accepting passengers.

In connection with the COVID-19 pandemic, we have incurred increased operating costs and could continue to incur additional costs.

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

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We evaluate goodwill for impairment on an annual basis, or more frequently when circumstances indicate that the carrying value of a reporting unit may not be recoverable.

A challenging operating environment (such as is currently being experienced due to the impact of COVID-19), conditions affecting consumer demand or spending, the deterioration of general macroeconomic conditions, or other factors could result in a change to the future cash flows we expect to derive from our operations.

A challenging operating environment, conditions affecting consumer demand or spending, the deterioration of general macroeconomic conditions, or other factors could result in a change to the future cash flows we expect to derive from our operations.

Reductions of cash flows used in the valuation analyses may result in the recording of impairments, which could adversely affect our financial condition and operating results.

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Increases in the price of airfare would increase the overall price of the cruise vacation to our guests, which may adversely impact demand for our cruises.

In addition, changes in the availability and/or regulations governing commercial airline services, including those resulting from the COVID-19 pandemic, have adversely affected and could continue to adversely affect our guests’ ability to obtain air travel, as well as our ability to transfer our guests to or from our cruise ships, which could adversely affect our results of operations.

In addition, changes in the availability and/or regulations governing commercial airline services could adversely affect our guests’ ability to obtain air travel, as well as our ability to transfer our guests to or from our cruise ships, which could adversely affect our results of operations.

Terrorist attacks, war, and other similar events could have a material adverse impact on our business and results of operations.

We are susceptible to a wide range of adverse events, including terrorist attacks, war, conflicts, civil unrest and other hostilities, such as the outbreak of armed conflict between Russia and Ukraine.

We are susceptible to a wide range of adverse events, including terrorist attacks, war, conflicts, civil unrest and other hostilities, such as the armed conflict between Russia and Ukraine.

The occurrence of these events or an escalation in the frequency or severity of them, and the resulting political instability, travel restrictions and advisories and concerns over safety and security aspects of traveling or the fear of any of the foregoing, have had, and could have in the future, a significant adverse impact on demand and pricing in the travel and vacation industry.

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In addition, we may be subject to increased concerns that cruises are more susceptible than other vacation alternatives to the spread of infectious diseases, such as COVID-19.

In response to disease outbreaks, our industry, including our passengers and crew, may be subject to enhanced health and safety requirements in the future which may be costly and take a significant amount of time to implement across our fleet.

implement across our fleet.

For example, local governments may establish their own set of rules for self-quarantines and/or require proof of individuals health status or vaccination prior to or upon visiting.

The impact of any of these factors could have a material adverse effect on our business and results of operations.

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

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

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

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

Increases in the frequency, severity or duration of these types of events could exacerbate their impact and disrupt our operations or make certain destinations less desirable or

unavailable impacting our revenues and profitability further.

Increases in the frequency, severity or duration of these types of events could exacerbate their impact and disrupt our operations or make certain destinations less desirable or unavailable impacting our revenues and profitability further.

Any of the foregoing could have an adverse impact on our results of operations and on industry performance.

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

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

The effects of the COVID-19 pandemic on the shipyards, their subcontractors, and our suppliers have resulted in delays in our previously scheduled ship deliveries.

Suspensions and/or slowdowns of work at shipyards, has impacted and could continue to impact our ability to construct new ships when and as planned, our ability to timely and cost-effectively procure new capacity, and our ability to execute scheduled drydocks and/or fleet modernizations.

For instance, the effects of the COVID-19 pandemic on the shipyards, their subcontractors, and our suppliers have resulted in delays in our previously scheduled ship deliveries.

Variations from our plan could have a significant negative impact on our business operations and financial condition.

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

As of March 31, 2022, a total of 76 new ships with approximately 178,000 berths were on order for delivery through 2027 in the cruise industry, including 11 ships currently scheduled to be delivered to us.

As of June 30, 2022, a total of 66 new ships with approximately 161,000 berths were on order for delivery through 2027 in the cruise industry, including 10 ships currently scheduled to be delivered to us.

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

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We believe that port destinations are a major reason why guests choose to go on a particular cruise or on a cruise vacation.

on port development, exclusivity arrangements that ports may have with our competitors, geopolitical developments and local governmental regulations.

In light of the COVID-19 pandemic, port availability could also be subject to immediate change depending on local and/or onboard disease cases or other government restrictions as well as limited availability during the resumption of operations.

The availability of ports and destinations is affected by a number of factors, including industry demand and competition for key ports and destinations, existing capacity constraints, constraints related to the size of certain ships, security, financial limitations on port development, exclusivity arrangements that ports may have with our competitors, geopolitical developments, local governmental regulations and governmental response to disease outbreaks.

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

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

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

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

In certain destinations, countermeasures to limit the volume of tourists have been contemplated and/or put into effect, including proposed limits on cruise ships and cruise passengers, which could limit the itinerary and destination options we can offer our passengers going forward.

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

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We face significant competition from other cruise lines on the basis of cruise pricing, travel advisor preference and also in terms of the nature of ships, services and destinations that we offer to guests.

Our principal competitors within the cruise vacation industry include Carnival Corporation & plc, which owns, among others, Aida Cruises, Carnival Cruise Line, Costa Cruises, Cunard Line, Holland America Line, P&O Cruises, Princess Cruises and Seabourn;

Disney Cruise Line;

and Norwegian Cruise Line Holdings Ltd, which owns Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises.

Our revenues are sensitive to the actions of other cruise lines in many areas including pricing, scheduling, capacity and promotions, which can have a substantial adverse impact not only on our revenues, but also on overall industry revenues.

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There can be no assurance that our strategies will be successful, which could adversely impact our business, financial condition and results of operations.

For example, our ownership and operation of older tonnage, in particular during the business disruption caused by COVID-19, has resulted in impaired asset values due to expected returns that we will not be able to recover.

Our attempts to expand our business into new markets and new ventures may not be successful.

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We have invested, either directly or indirectly through joint ventures and partnerships, in a growing portfolio of key land-based projects including port and terminal facilities, private destinations and multi-brand destination projects.

These investments can increase our exposure to certain key risks depending on the scope, location, and the ownership and

management structure of these projects.

These investments can increase our exposure to certain key risks depending on the scope, location, and the ownership and management structure of these projects.

These risks include susceptibility to weather events, exposure to local political/regulatory developments and policies, logistical challenges and human resource and labor risks and safety, environmental, and health risks, including challenges posed by the COVID-19 pandemic and its effects locally where we have these projects and relationships.

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These or other issues related to our co-investments with third parties could adversely impact our operations or liquidity.

Due to the COVID-19 pandemic, Pullmantur S.A.

filed for reorganization under the terms of the Spanish insolvency laws.

The Company may be required to continue to provide funding for these affiliated entities and it is unclear when and to what extent these entities will fully resume operations and our ability to provide such funding will be limited by the level and terms of our outstanding indebtedness.

Further, due to the arrangements we have in place with our partners in these ventures, we are limited in our ability to control the strategy of these ventures if and when they resume operations, or their use of capital and other key factors to their results of operation which could adversely affect our investments and impact our results of operations.

Further, due to the arrangements we have in place with our partners in these ventures, we are limited in our ability to control the strategy of these ventures, or their use of capital and other key factors to their results of operation which could adversely affect our investments and impact our results of operations.

Past or pending business acquisitions or potential acquisitions that we may decide to pursue in the future carry inherent risks which could adversely impact our financial performance and condition.

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We rely on supply chain vendors and third-party service providers who are integral to the operations of our businesses.

These vendors and service providers are also affected by COVID-19 and may be unable or unwilling to deliver on their commitments or may act in ways that could harm our business.

These vendors and service providers may be unable or unwilling to deliver on their commitments or may act in ways that could harm our business.

We rely on supply chain vendors to deliver key products to the operations of our businesses around the world.

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Any such interruptions to our supply chain could increase our costs and could limit the availability of products critical to our operations.

In order to achieve cost and operational efficiencies, we outsource to third-party vendors certain services that are integral to the operations of our global businesses, such as our onboard concessionaires, certain of our call center operations, guest port services, logistics distribution and operation of a large part of our information technology systems, all of which are also affected

by the COVID-19 pandemic.

We are subject to the risk that certain decisions are subject to the control of our third-party service providers and that these decisions may adversely affect our activities.

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Additionally, if we or other insureds sustain significant losses, the result may be higher insurance premiums, cancellation of coverage, or the inability to obtain coverage.

The COVID-19 pandemic, for example, depending on its duration and the associated insurance claims volumes, may potentially impact the insurance markets we rely on for coverage and could adversely impact both the coverage options available to us in the future as well as the premium costs we are required to pay for those coverages.

Such events could adversely affect our financial condition or results of operations.

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Wilhelmsen AS and Cruise Associates and their permitted transferees, from acquiring beneficial ownership of more than 4.9% of our outstanding shares without the consent of our board of directors.

Financial Risks

We may not be able to obtain sufficient financing or capital for our needs or may not be able to do so on terms that are acceptable or consistent with our expectations.

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

Our ability to access additional funding as and when needed, our ability to timely refinance and/or replace our outstanding debt securities and credit facilities on acceptable terms and our cost of funding will depend upon numerous factors including, but not limited to, the strength of the financial markets, global inflationary pressures, interest rate fluctuations, our recovery and financial performance, the recovery and performance of our industry in general and the size, scope and timing of our financial needs.

If any of the foregoing occurs for a prolonged period of time it will have a long-term negative impact on our cash flows and our ability to meet our financial obligations.

Our substantial debt requires a significant amount of cash to service and could adversely affect our financial condition.

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

As of June 30, 2022, we had total debt of $23.2 billion.

Our ability to make future scheduled payments on our debt service obligations or refinance our debt depends on our future operating and financial performance and ability to generate cash.

We cannot assure that we will be able to generate sufficient cash

through any of the foregoing.

Our substantial debt could also result in other negative consequences for us.

For example, it could increase our vulnerability to adverse general economic or industry conditions;

limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;

place us at a competitive disadvantage compared to our competitors that have less debt;

make us more vulnerable to downturns in our business, the economy or the industry in which we operate;

restrict us from making strategic acquisitions, introducing new technologies or exploiting business opportunities;

make it difficult for us to satisfy our obligations with respect to our debt;

and increase our exposure to the risk of increased interest rates as certain of our borrowings are (and may in the future be) at a variable rate of interest.

Despite our leverage, we may incur more debt, which could adversely affect our business.

We may incur substantial additional debt in the future.

In the event that we execute and borrow under the $0.7 billion commitment available to draw on at any time prior to August 12, 2022 for a 364-day term loan facility, the credit agreement that would govern such term loan facility would impose substantially similar restrictions (including the related qualifications and exceptions) as are set forth in the indenture governing the Priority Guaranteed Notes.

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

Additionally, there is no guarantee that financing will be available in the future or that such financing will be available with similar terms or terms that are commercially acceptable to us.

As of June 30, 2022, we have commitments for approximately $7.5 billion of debt to finance the purchase of 7 ships on order by our Royal Caribbean International, Celebrity Cruises and Silversea Cruises brands, all of which are guaranteed by the export credit agencies in the countries in which the ships are being built.

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

We are subject to restrictive debt covenants that may limit our ability to finance our future operations and capital needs and to pursue business opportunities and activities.

In addition, if we fail to comply with any of these restrictions, it could have a material adverse effect on us.

Certain of our debt instruments, including our indentures and our unsecured bank and export credit facilities, limit our flexibility in operating our business.

For example, certain of our loan agreements and indentures restrict or limit our and our subsidiaries’ ability to, among other things, incur or guarantee additional indebtedness;

pay dividends or distributions on, or redeem or repurchase capital stock and make other restricted payments;

make investments;

consummate certain asset sales;

engage in certain transactions with affiliates;

grant or assume certain liens;

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

In addition, our ECA facilities also require us to maintain minimum liquidity and a minimum stock holders' equity.

Refer to Note 7 .

Debt to our consolidated financial statements under Part I, Item 1, Financial Statements for further discussion on our covenants and existing waivers.

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

Any future indebtedness may include similar or other restrictive terms and we may be required to further encumber our assets.

In addition, our ability to comply with these covenants and restrictions may be affected by events beyond our control.

These include prevailing economic, financial and industry conditions.

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

Borrowings under other debt instruments that contain cross-default provisions also may be accelerated or become payable on

In these circumstances, our assets may not be sufficient to repay in full that indebtedness and our other indebtedness then outstanding.

In addition, our ability to maintain our credit facilities may also be impacted by changes in our ownership base.

Furthermore, new equity or convertible debt issuances will also result in dilution for our existing shareholders.

We have an aggregate principal amount of $1.725 billion in convertible notes outstanding.

If note holders elect to convert, the notes will be converted into our shares of common stock, cash, or a combination of common stock and cash, at our discretion.

Beyond those dates, the convertible notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding their maturity date.

Conversions of our convertible notes into shares of our common stock or a combination of common stock and cash, will result in dilution to our shareholders.

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

We did not declare quarterly dividends on our common stock in the quarter ended June 30, 2022 and do not expect to pay dividends on our common stock for the foreseeable future.

No cash dividends were declared on our common stock during the nine consecutive quarters ended June 30, 2022.

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

We do not expect to pay cash dividends on our common stock for the foreseeable future.

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

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

Increased regulatory oversight, and the phasing out of LIBOR may adversely affect the value of a portion of our indebtedness.

Compliance and Regulatory Risks

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

In addition, some countries have adopted restrictions

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

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

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However, there are very few judicial cases in Liberia interpreting the Business Corporation Act of Liberia.

While the Business Corporation Act of Liberia provides that it is to be applied and construed to make the laws of Liberia, with respect of the subject matter of the Business Corporation Act of Liberia, uniform with the laws of the State of Delaware and other states with substantially similar legislative provisions (and adopts their case law to the extent it is non-conflicting), there have been few Liberian court cases interpreting the Business Corporation Act of Liberia, and we cannot predict whether Liberian courts would reach the same conclusions as United States courts.

While the Business Corporation Act of Liberia provides that it is to be applied and construed to make the laws of Liberia, with

respect of the subject matter of the Business Corporation Act of Liberia, uniform with the laws of the State of Delaware and other states with substantially similar legislative provisions (and adopts their case law to the extent it is non-conflicting), there have been few Liberian court cases interpreting the Business Corporation Act of Liberia, and we cannot predict whether Liberian courts would reach the same conclusions as United States courts.

We understand that legislation has been proposed but not yet adopted by the Liberian legislature which amends the provisions regarding the adoption of non-Liberian law to, among other things, provide for the adoption of the statutory and case law of Delaware and not also states with substantially similar legislative provisions, and potentially provide the courts of Liberia discretion in application of non-statutory corporation law of Delaware in cases when the laws of Liberia are silent.

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General Risk Factors

Conducting business globally may result in increased costs and other risks.

Conducting business globally results in increased costs and other risks.

We operate our business globally, which exposes us to a number of risks, including increased exposure to a wider range of regional and local economic conditions, volatile local political conditions, potential changes in duties and taxes, including changing and/or uncertain interpretations of existing tax laws and regulations, required compliance with additional laws and policies affecting cruising, vacation or maritime businesses or governing the operations of foreign-based companies, currency fluctuations, interest rate movements, difficulties in operating under local business environments, port quality and availability in certain regions, U.S.

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Factors that will be critical to our success in these markets include our ability to continue to raise awareness of our products and our ability to adapt our offerings to best suit rapidly evolving consumer demands.

This risk is further heightened by the COVID-19 pandemic, as authorities in many of these markets have implemented numerous measures to contain the spread and impact of COVID-19, such as travel bans and restrictions, shelter-in-place/stay-at-home orders, and other limitations on business activity, including business closures.

In addition, these measures could change unpredictably and/or could be scaled up or down in response to evolving intensity or resurgence of COVID-19 and related variants in or around these markets.

The execution of our planned growth strategies is dependent on meeting the governmental and regulatory measures and policies in each of these markets.

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In many parts of the world, including countries in which we operate, practices in the local business communities might not conform to international business standards.

These legal and regulatory requirements and standards may change in response to the COVID-19 pandemic, and there may be greater uncertainty as to the interpretation and enforcement of applicable laws and regulations, including those introduced in response to the COVID-19 pandemic.

We cannot guarantee consistent interpretation, application, and enforcement of rules and regulations put in place in response to the COVID-19 pandemic, which could place limits on our operations or increase our costs, as well as negatively impact our future growth strategies in our key growth markets.

We cannot guarantee consistent interpretation, application, and enforcement of newly issued rules and regulations, which could place limits on our operations or increase our costs, as well as negatively impact our future growth strategies in our key growth markets.

We must adhere to policies designed to promote legal and regulatory compliance as well as applicable laws and regulations.

However, we might not be successful in ensuring that our employees, agents, representatives and other third parties with whom we associate properly adhere to applicable laws and regulations.

In addition, we may be exposed to the risk of penalties and other liabilities if we fail to comply with all applicable legal and regulatory requirements introduced in response to the COVID-19 pandemic, which may be subject to frequent and rapid change.

In addition, we may be exposed to the risk of penalties and other liabilities if we fail to comply with all applicable legal and regulatory requirements.

Failure by us, our employees or any of these third parties to adhere to our policies or applicable laws or regulations could result in penalties, sanctions, damage to our reputation and related costs, which in turn could negatively affect our results of operations and cash flows.

As a global operator, our business also may be impacted by changes in U.S.

policy or priorities in areas such as trade, immigration (including any continuation of any of the immigration policies put in place by the U.S.

government in response to the COVID-19 pandemic) and/or environmental or labor regulations, among others.

policy or priorities in areas such as trade, immigration and/or environmental or labor regulations, among others.

Depending on the nature and scope of any such changes, they could impact our domestic and international business operations.

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

As of March 31, 2022, we had approximately $6.5 billion of indebtedness that bears interest at variable rates.

As of June 30, 2022, we had approximately $6.8 billion of indebtedness that bears interest at variable rates.

This amount represented approximately 28.7% of our total indebtedness.

As of March 31, 2022, a hypothetical 1% increase in prevailing interest rates would increase our forecasted 2022 interest expense by approximately $29.4 million.

As of June 30, 2022, a hypothetical 1% increase in prevailing interest rates would increase our forecasted 2022 interest expense by approximately $28.4 million.

Additionally, the value of our earnings in foreign currencies is adversely impacted by a strong U.S.

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As demand for qualified personnel in the industry grows, we must continue to effectively recruit, train, motivate and retain our employees, both shoreside and on our ships, in order to effectively compete in our industry, maintain our current business and support our projected global growth.

We are experiencing difficulty in recruiting and retaining qualified personnel as a result of COVID-19, the reduction in our workforce during our suspension of cruise operations, general macroeconomic conditions and a competitive labor market.

We are experiencing difficulty in recruiting and retaining qualified personnel primarily due to a competitive labor market.

Our ability to rehire crew may be negatively impacted by increasing demands related to our health and safety protocols, including vaccine requirements, and by a reduced labor supply as previous crew may have obtained alternative employment during our suspension of cruise operations.

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The shortage and competitive labor market may result in increased costs if we need to hire temporary personnel, and/or increased wages and/or benefits in order to attract and retain employees, all of which may negatively impact our results of operations.

As of March 31, 2022, approximately 85% of our shipboard employees were covered by collective bargaining agreements.

As of June 30, 2022, approximately 88% of our shipboard employees were covered by collective bargaining agreements.

A dispute under our collective bargaining agreements could result in a work stoppage of those employees covered by the agreements.

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We may also be subject to or affected by work stoppages unrelated to our business or collective bargaining agreements.

Any such work

stoppages or potential work stoppages could have a material adverse effect on our financial results, as could a loss of key employees, our inability to recruit or retain qualified personnel or disruptions among our personnel.

Any such work stoppages or potential work stoppages could have a material adverse effect on our financial results, as could a loss of key employees, our inability to recruit or retain qualified personnel or disruptions among our personnel.

If we are unable to keep pace with developments in technology, including technology in response to the COVID-19 pandemic, our operations or competitive position could become impaired.

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Any breach, theft, loss, or fraudulent use of guest, employee, third-party or company data, could adversely impact our reputation and brand and our ability to retain or attract new customers, and expose us to risks of data loss, business disruption, governmental investigation, litigation and other liability, any of which could adversely affect our business.

Significant capital investments and other expenditures could be required to remedy the problem and prevent future breaches, including costs

associated with additional security technologies, personnel, experts and credit monitoring services for those whose data has been breached.

Significant capital investments and other expenditures could be required to remedy the problem and prevent future breaches, including costs associated with additional security technologies, personnel, experts and credit monitoring services for those whose data has been breached.

Further, if we or our vendors experience significant data security breaches or fail to detect and appropriately respond to significant data security breaches, we could be exposed to government enforcement actions and private litigation.

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

What changed 10-Q

Item 1A. Risk Factors