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Item 1. Financial Statements

2023-07-27 compared with 2023-05-04 · 267 added, 165 removed, 664 unchanged (39% of the section changed)

1 unchanged sentence

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

in thousands, except per share data)

Quarter Ended March 31,

Quarter Ended June 30,

Passenger ticket revenues $ 2,443,506 $ 1,418,203

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Operating Income (Loss) 771,581 ( 218,644 )

Other (expense) income:

Other income (expense):

Interest income 9,583 6,490

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Equity investment income (loss) 42,014 ( 13,179 )

Other (expense) income ( 5,386 ) 6,457

( 309,301 ) ( 302,938 )

Net Income (Loss) $ 462,280 $ ( 521,582 )

Net Income attributable to noncontrolling interest 3,519 —

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

$ 458,761 $ ( 521,582 )

Earnings (Loss) per Share:

Basic $ 1.79 $ ( 2.05 )

Diluted $ 1.70 $ ( 2.05 )

Weighted-Average Shares Outstanding:

Basic 255,805 254,964

Diluted 281,913 254,964

Comprehensive Income (Loss)

Net Income (Loss) $ 462,280 $ ( 521,582 )

Other comprehensive income (loss):

Foreign currency translation adjustments ( 3,263 ) 12,682

Change in defined benefit plans ( 3,785 ) 15,168

Gain (loss) on cash flow derivative hedges 4,988 ( 84,493 )

Total other comprehensive loss ( 2,060 ) ( 56,643 )

Comprehensive Income (Loss) $ 460,220 $ ( 578,225 )

The accompanying notes are an integral part of these consolidated financial statements

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

in thousands, except per share data)

Six Months Ended June 30,

Passenger ticket revenues $ 4,340,022 $ 2,070,061

Onboard and other revenues 2,068,106 1,173,412

Total revenues 6,408,128 3,243,473

Cruise operating expenses:

Commissions, transportation and other 918,937 480,202

Onboard and other 378,950 230,009

Payroll and related 594,370 676,759

Food 402,086 255,410

Fuel 577,431 463,659

Other operating 876,007 758,822

Total cruise operating expenses 3,747,781 2,864,861

Marketing, selling and administrative expenses 895,703 765,455

Depreciation and amortization expenses 721,450 691,009

Operating Income (Loss) 1,043,194 ( 1,077,852 )

Other income (expense):

Interest income 24,391 9,812

Interest expense, net of interest capitalized ( 714,899 ) ( 580,365 )

Equity investment income (loss) 62,485 ( 44,238 )

Other (expense) income ( 771 ) 3,919

( 628,794 ) ( 610,872 )

Net Loss $ ( 47,910 ) $ ( 1,167,142 )

Loss per Share:

Net Income (Loss) 414,400 ( 1,688,724 )

Net Income attributable to noncontrolling interest 3,549 —

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

$ 410,851 $ ( 1,688,724 )

Earnings (Loss) per Share:

Basic $ 1.61 $ ( 6.63 )

3 unchanged sentences

Diluted 258,741 254,893

Comprehensive Loss

Net Loss $ ( 47,910 ) $ ( 1,167,142 )

Other comprehensive (loss) income:

Comprehensive Income (Loss)

Net Income (Loss) $ 414,400 $ ( 1,688,724 )

Other comprehensive income (loss):

Foreign currency translation adjustments ( 9,809 ) 20,460

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Total other comprehensive (loss) income ( 36,790 ) 159,633

Comprehensive loss $ ( 82,640 ) $ ( 950,866 )

Comprehensive Income (Loss) $ 377,610 $ ( 1,529,091 )

The accompanying notes are an integral part of these consolidated financial statements

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(in thousands, except share data)

March 31, December 31,

June 30, December 31,

Current assets

Cash and cash equivalents $ 726,424 $ 1,935,005

Trade and other receivables, net of allowances of $ 10,483 and $ 11,612 at March 31, 2023 and December 31, 2022, respectively

Trade and other receivables, net of allowances of $ 10,027 and $ 11,612 at June 30, 2023 and December 31, 2022, respectively

375,357 531,066

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Goodwill 809,250 809,277

Other assets, net of allowances of $ 63,102 and $ 71,614 at March 31, 2023 and December 31, 2022, respectively

Other assets, net of allowances of $ 62,833 and $ 71,614 at June 30, 2023 and December 31, 2022, respectively

1,657,807 1,678,074

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500,000,000 shares authorized;

283,979,907 and 283,257,102 shares issued, March 31, 2023 and December 31, 2022, respectively)

284,405,911 and 283,257,102 shares issued, June 30, 2023 and December 31, 2022, respectively)

Paid-in capital 7,406,818 7,284,852

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Accumulated other comprehensive loss ( 680,004 ) ( 643,214 )

Treasury stock ( 28,248,125 and 28,018,385 common shares at cost, March 31, 2023 and December 31, 2022, respectively)

Treasury stock ( 28,248,125 and 28,018,385 common shares at cost, June 30, 2023 and December 31, 2022, respectively)

( 2,069,432 ) ( 2,068,229 )

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(unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating Activities

Net Loss $ ( 47,910 ) $ ( 1,167,142 )

Net Income (Loss) $ 414,400 $ ( 1,688,724 )

Depreciation and amortization 721,450 691,009

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Increase in accounts payable trade 30,287 221,746

Decrease in accrued expenses and other liabilities ( 258,713 ) ( 119,068 )

(Decrease) increase in accrued liabilities ( 62,957 ) 16,818

Increase in customer deposits 1,508,345 1,007,876

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Common Stock Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock Noncontrolling Interest Total Shareholders' Equity

Balance at April 1, 2023 $ 2,840 $ 7,351,493 $ ( 1,755,339 ) $ ( 677,944 ) $ ( 2,069,432 ) $ 173,803 $ 3,025,421

Activity related to employee stock plans — 43,140 — — — — 43,140

Convertible notes settlement 4 12,185 — — — — 12,189

Changes related to cash flow derivative hedges — — — 4,988 — — 4,988

Change in defined benefit plans — — — ( 3,785 ) — — ( 3,785 )

Foreign currency translation adjustments — — — ( 3,263 ) — — ( 3,263 )

Noncontrolling interest — — — — — 3,631 3,631

Net Income attributable to Royal Caribbean Cruises Ltd.

— — 458,761 — — — 458,761

Balance at June 30, 2023 $ 2,844 $ 7,406,818 $ ( 1,296,578 ) $ ( 680,004 ) $ ( 2,069,432 ) $ 177,434 $ 3,541,082

Common Stock Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock Noncontrolling Interest Total Shareholders' Equity

Balance at January 1, 2023 $ 2,832 $ 7,284,852 $ ( 1,707,429 ) $ ( 643,214 ) $ ( 2,068,229 ) $ — $ 2,868,812

Activity related to employee stock plans 8 64,483 — — — — 64,491

Convertible notes settlement 4 12,185 — — — — 12,189

Changes related to cash flow derivative hedges — — — ( 26,709 ) — — ( 26,709 )

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Purchase of treasury stock — — — — ( 1,203 ) — ( 1,203 )

Sale of noncontrolling interest — 45,298 — — — 173,803 219,101

Noncontrolling interest — — — — — 3,631 3,631

Net Income attributable to Royal Caribbean Cruises Ltd.

— — 410,851 — — — 410,851

Balance at June 30, 2023 $ 2,844 $ 7,406,818 $ ( 1,296,578 ) $ ( 680,004 ) $ ( 2,069,432 ) $ 177,434 $ 3,541,082

The accompanying notes are an integral part of these consolidated financial statements

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

in thousands)

Common Stock Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock Total Shareholders' Equity

Balance at April 1, 2022 $ 2,830 $ 7,267,545 $ ( 718,609 ) $ ( 494,609 ) $ ( 2,068,229 ) $ 3,988,928

Activity related to employee stock plans 1 ( 12,606 ) — — — ( 12,605 )

Changes related to cash flow derivative hedges — — — ( 84,493 ) — ( 84,493 )

Change in defined benefit plans — — — 15,168 — 15,168

Foreign currency translation adjustments — — — 12,682 — 12,682

Net Loss — — ( 521,582 ) — — ( 521,582 )

Balance at March 31, 2023 $ 2,840 $ 7,351,493 $ ( 1,755,339 ) $ ( 677,944 ) $ ( 2,069,432 ) $ 173,803 $ 3,025,421

Common Stock Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Treasury Stock Noncontrolling Interest Total Shareholders' Equity

Balance at June 30, 2022 $ 2,831 $ 7,254,939 $ ( 1,240,191 ) $ ( 551,252 ) $ ( 2,068,229 ) $ 3,398,098

Common Stock Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss Treasury Stock Total Shareholders' Equity

Balance at January 1, 2022 $ 2,827 $ 7,557,297 $ 302,276 $ ( 710,885 ) $ ( 2,065,959 ) $ 5,085,556

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Net Loss — — ( 1,688,724 ) — — ( 1,688,724 )

Balance at March 31, 2022 $ 2,830 $ 7,267,545 $ ( 718,609 ) $ ( 494,609 ) $ ( 2,068,229 ) $ — $ 3,988,928

Balance at June 30, 2022 $ 2,831 $ 7,254,939 $ ( 1,240,191 ) $ ( 551,252 ) $ ( 2,068,229 ) $ 3,398,098

The accompanying notes are an integral part of these consolidated financial statements

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We account for our investments in our Partner Brands under the equity method of accounting.

Together, our Global Brands and our Partner Brands have a combined fleet of 64 ships as of March 31, 2023.

Together, our Global Brands and our Partner Brands have a combined fleet of 64 ships as of June 30, 2023.

Our ships offer a selection of worldwide itineraries that call on more than 1,000 destinations in over 120 countries on all seven continents.

As a result of the global pandemic impact of COVID-19, we paused our guest cruise operations in March 2020 and began resuming guest cruise operations in 2021, with our full fleet in service by June 2022.

During this period of time, we have taken proactive measures to manage our liquidity, including issuing debt and shares of our common stock, amending credit agreements to defer payments, obtaining relevant modification of covenant requirements and waivers, and reducing operating expenses and capital expenditures.

As of March 31, 2023, we had liquidity of $ 3.9 billion, including $ 2.6 billion of undrawn revolving credit facility capacity, and $ 1.2 billion in cash and cash equivalents.

As of June 30, 2023, we had liquidity of $ 3.7 billion, including $ 3.0 billion of undrawn revolving credit facility capacity, and $ 0.7 billion in cash and cash equivalents.

We believe that we have sufficient liquidity to fund our obligations for at least the next twelve months from the issuance of these financial statements.

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Investments and Other Assets for further information regarding our variable interest entities.

For affiliates we do not control but over which we have significant influence on

financial and operating policies, usually evidenced by a direct ownership interest from 20% to 50%, the investment is accounted for using the equity method.

For affiliates we do not control but over which we have significant influence on financial and operating policies, usually evidenced by a direct ownership interest from 20% to 50%, the investment is accounted for using the equity method.

Summary of Significant Accounting Policies

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Reclassifications

For the quarter ended March 31, 2023, we no longer separately present Accrued interest in our consolidated balance sheets.

For the six months ended June 30, 2023, we no longer separately present Accrued interest in our consolidated balance sheets.

As a result, amounts presented in prior periods were reclassified to Accrued expenses and other liabilities to conform to the current year presentation.

For the quarter ended March 31, 2023, we no longer separately present Impairments and Credit losses in our consolidated statements of comprehensive loss.

For the quarter and six months ended June 30, 2023, we no longer separately present Impairments and Credit losses in our consolidated statements of comprehensive income (loss).

As a result, amounts presented in prior periods were reclassified to Other Operating to conform to the current year presentation.

For the quarter ended March 31, 2023, we no longer separately present Amortization of debt discounts and premiums;

For the six months ended June 30, 2023, we no longer separately present Amortization of debt discounts and premiums;

(Decrease) increase in accrued interest;

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As a result, amounts presented in prior periods were reclassified to Amortization of debt issuance costs, discounts and premiums;

Decrease in accrued expenses and other liabilities;

(d ecrease) increase in accrued expenses and other liabilities;

and Other, net, respectively, within Operating Activities to conform to the current year presentation.

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Revenues are measured based on consideration specified in our contracts with customers and are recognized as the related performance obligations are satisfied.

The majority of our revenues are derived from passenger cruise contracts which are reported within Passenger ticket revenues in our consolidated statements of comprehensive loss.

The majority of our revenues are derived from passenger cruise contracts which are reported within Passenger ticket revenues in our consolidated statements of comprehensive income (loss).

Our performance obligation under these contracts is to provide a cruise vacation in exchange for the ticket price.

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These type of port costs, along with port costs that do not vary by passenger head counts, are included in our cruise operating expenses.

The amounts of port costs charged to our guests and included within Passenger ticket revenues on a gross basis were $ 203.4 million and $ 76.9 million for the quarters ended March 31, 2023 and 2022, respectively.

Our total revenues also include O nboard and other revenues , which consist primarily of revenues from the sale of goods and services onboard our ships that are not included in passenger ticket prices.

The amounts of port costs charged to our guests and included within Passenger ticket revenues on a gross basis were $ 226.1 million and $ 159.2 million for the quarters ended June 30, 2023 and 2022, respectively, and $ 429.5 million and $ 236.1 million for the six months ended June 30, 2023 and 2022, respectively.

Our total revenues also include Onboard and other revenues , which consist primarily of revenues from the sale of goods and services onboard our ships that are not included in passenger ticket prices.

We receive payment before or concurrently with the transfer of these goods and services to cruise passengers and recognize revenue over the duration of the related cruise.

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The following table disaggregates our total revenues by geographic regions where we provide cruise itineraries (in thousands):

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Revenues by itinerary

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Passenger ticket revenues are attributed to geographic areas based on where the reservation originates.

For the quarters ended March 31, 2023 and 2022, our guests were sourced from the following areas:

Quarter Ended March 31,

For the quarter and six months ended June 30, 2023 and 2022, our guests were sourced from the following areas:

Quarter Ended June 30,

Passenger ticket revenues:

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All other countries (1) 24 % 22 %

(1) No other individual country's revenue exceeded 10% for the quarters ended March 31, 2023 and 2022.

Six Months Ended June 30,

Passenger ticket revenues:

United States 76 % 80 %

All other countries (1) 24 % 20 %

(1) No other individual country's revenue exceeded 10% for the quarter and six months ended June 30, 2023 and 2022.

Customer Deposits and Contract Liabilities

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We do not consider customer deposits to be a contract liability until the customer no longer retains the unilateral right, resulting from the passage of time, to cancel such customer's reservation and receive a full refund.

Customer deposits presented in our consolidated balance sheets include contract liabilities of $ 2.5 billion and $ 1.8 billion as of March 31, 2023 and December 31, 2022, respectively.

We have provided flexibility to guests with bookings on sailings cancelled due to COVID-19 by allowing guests to receive future cruise credits (“FCC”).

As of March 31, 2023, our customer deposit balance includes approximately $ 0.5 billion of unredeemed FCCs.

Given the lack of comparable historical experience of FCC redemptions, as of March 31, 2023 we are unable to estimate the number of FCCs that may not be used in future periods and get recognized as breakage.

Customer deposits presented in our consolidated balance sheets include contract liabilities of $ 2.8 billion and $ 1.8 billion as of June 30, 2023 and December 31, 2022, respectively.

During the pandemic we provided flexibility to guests with bookings on sailings cancelled due to COVID-19 by allowing guests to receive future cruise credits (“FCC”).

As of June 30, 2023, our customer deposit balance includes approximately $ 0.4 billion of unredeemed FCCs.

Given the lack of comparable historical experience of FCC redemptions, as of June 30, 2023

we are unable to estimate the number of FCCs that may not be used in future periods and get recognized as breakage.

We will update our breakage analysis as future information is received.

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As a result, we have outstanding receivables from passenger cruise contracts in those markets.

We also have receivables from credit card merchants for cruise ticket purchases and goods and services sold to guests during cruises that are collected before, during or shortly after the cruise

We also have receivables from credit card merchants for cruise ticket purchases and goods and services sold to guests during cruises that are collected before, during or shortly after the cruise voyage.

In addition, we have receivables due from concessionaires onboard our vessels.

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One of our processors currently holds a portion of our customer deposits in reserve until the sailings take place or the funds are refunded to the customer.

The cash reserve held by the processor was immaterial as of March 31, 2023.

The cash reserve held by the processor was immaterial as of June 30, 2023.

We have contract assets that are conditional rights to consideration for satisfying the construction services performance obligations under a service concession arrangement.

As of March 31, 2023 and December 31, 2022, our contract assets were $ 167.7 million and $ 167.9 million, respectively, and were included within Other assets in our consolidated balance sheets.

As of June 30, 2023 and December 31, 2022, our contract assets were $ 165.5 million and $ 167.9 million, respectively, and were included within Other assets in our consolidated balance sheets.

Given the short duration of our cruises and our collection terms, we do not have any other significant contract assets.

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Prepaid travel advisor commissions and prepaid credit and debit card fees are an incremental cost of obtaining contracts with customers that we recognize as an asset and include within Prepaid expenses and other assets in our consolidated balance sheets.

Prepaid travel advisor commissions and prepaid credit and debit card fees were $ 244.9 million as of March 31, 2023 and $ 177.5 million as of December 31, 2022.

Our prepaid travel advisor commissions, and prepaid credit and debit card fees are recognized at the time of revenue recognition or at the time of voyage cancellation, and are reported primarily within Commissions, transportation and other in our consolidated statements of comprehensive loss.

Loss Per Share

Basic and diluted loss per share is as follows (in thousands, except per share data):

Quarter Ended March 31,

Net loss for basic and diluted loss per share $ ( 47,910 ) $ ( 1,167,142 )

Prepaid travel advisor commissions and prepaid credit and debit card fees were $ 291.3 million as of June 30, 2023 and $ 177.5 million as of December 31, 2022.

Our prepaid travel advisor commissions and prepaid credit and debit card fees are recognized at the time of revenue recognition or at the time of voyage cancellation, and are reported primarily within Commissions, transportation and other in our consolidated statements of comprehensive income (loss).

Earnings (Loss) Per Share

Basic and diluted earnings (loss) per share is as follows (in thousands, except per share data):

Quarter Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

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

for basic earnings (loss) per share $ 458,761 $ ( 521,582 ) $ 410,851 $ ( 1,688,724 )

Add convertible notes interest 21,323 — 4,214 —

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

for diluted earnings (loss) per share 480,084 ( 521,582 ) 415,065 ( 1,688,724 )

Weighted-average common shares outstanding 255,805 254,964 255,636 254,893

Dilutive effect of stock-based awards 348 — 378 —

Dilutive effect of convertible notes 25,760 — 2,727 —

Diluted weighted-average shares outstanding 281,913 254,964 258,741 254,893

Basic loss per share $ ( 0.19 ) $ ( 4.58 )

Diluted loss per share $ ( 0.19 ) $ ( 4.58 )

Basic loss per share is computed by dividing Net Loss by the weighted-average number of common stock outstanding during each period.

Diluted loss per share incorporates the incremental shares issuable upon the assumed exercise of stock options and conversion of potentially dilutive securities.

Basic earnings (loss) per share $ 1.79 $ ( 2.05 ) $ 1.61 $ ( 6.63 )

Diluted earnings (loss) per share $ 1.70 $ ( 2.05 ) $ 1.60 $ ( 6.63 )

Basic earnings (loss) per share is computed by dividing Net Income (Loss) by the weighted-average number of common stock outstanding during each period.

Diluted earnings (loss) per share incorporates the incremental shares issuable upon the assumed exercise of stock options and conversion of potentially dilutive securities.

If we have a net loss for the period, all potential common shares will be considered antidilutive, resulting in the same basic and diluted net loss per share amounts for those periods.

T here were approximately 30,994,718 and 23,407,179 antidilutive shares for the quarters ended March 31, 2023 and March 31, 2022, respectively.

As we had net loss for the quarters ended March 31, 2023 and March 31, 2022, all potential common shares were determined to be antidilutive, resulting in the same basic and diluted net loss per share amounts for the period.

T here were no antidilutive shares for the quarter ended June 30, 2023 and approximately 25,459,641 antidilutive shares from our convertible notes for the six months ended June 30, 2023, compared to 23,526,181 and 23,597,611 antidilutive shares from our stock-based awards and convertible notes for the quarter and six months ended June 30, 2022, respectively.

Investments and Other Assets

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This partnership will own, develop, and manage cruise terminal facilities and infrastructure in key ports of call, initially including several development projects in Italy and Spain.

As part of the transaction with iCON we also agreed to sell 80 % of PortMiami.

As part of the transaction with iCON we also agreed to sell 80 % of the entity which owns our terminal at PortMiami.

Refer below to equity method investments and controlled subsidiarie s for further information on the transaction.

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Accordingly, we do not consolidate this entity and account for this investment under the equity method of accounting.

As of March 31, 2023, the net book value of our investment in TUIC was $ 483.9 million, primarily consisting of $ 384.6 million in equity and a loan of € 83.2 million, or approximately $ 90.4 million based on the exchange rate at March 31, 2023.

As of June 30, 2023, the net book value of our investment in TUIC was $ 508.3 million, primarily consisting of $ 415.4 million in equity and a loan of € 79.3 million, or approximately $ 86.5 million based on the exchange rate at June 30, 2023.

As of December 31, 2022, the net book value of our investment in TUIC was $ 466.0 million, primarily consisting of $ 361.5 million in equity and a loan of € 87.2 million, or approximately $ 93.0 million based on the exchange rate at December 31, 2022.

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The following tables set forth information regarding our investments accounted for under the equity method of accounting, including the entities discussed above (in thousands):

Quarter Ended March 31,

Quarter Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Share of equity income (loss) from investments $ 42,014 $ ( 13,179 ) $ 62,485 $ ( 44,238 )

Dividends received (1) $ 3,025 $ 563 $ 3,827 $ 986

(1) Represents dividends received from our investments accounted for under the equity method of accounting during the quarters ended March 31, 2023 and March 31, 2022.

The amounts included in the table above are net of tax withholdings.

As of March 31, 2023 As of December 31, 2022

(1) Represents dividends received net of tax withholdings during the quarters and six months ended June 30, 2023 and June 30, 2022.

As of June 30, 2023 As of December 31, 2022

Total notes receivable due from equity investments $ 106,586 $ 101,392

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Consolidated investments ("controlled subsidiaries")

As part of the transaction with iCON, we sold noncontrolling interest in two controlled subsidiaries, comprised of PortMiami and one entity in Spain.

The majority of the proceeds comes from selling 80 % of PortMiami for $ 208.9 million and

retained a 20 % minority interest.

We have determined PortMiami is a VIE, and we are the primary beneficiary as we have the power to direct the activities that most significantly impact the facility’s economic performance.

Accordingly, we will continue to consolidate this entity.

The cash consideration received, net of transaction costs, was allocated between paid in capital and noncontrolling interest using the net book value of PortMiami as of March 31, 2023, as presented in the statement of shareholders' equity.

As part of the transaction with iCON, we sold an 80 % interest in the entity which owns our terminal at PortMiami for $ 208.9 million and retained a 20 % minority interest, effective March 31, 2023.

We also sold a noncontrolling interest in another entity which is developing a port project in Spain for an immaterial amount.

We have determined that both of these entities are VIEs, and we are the primary beneficiary as we have the power to direct the activities that most significantly impact the facility’s economic performance.

Accordingly, we will continue to consolidate both entities.

The cash consideration received for the sale of the PortMiami terminal company, net of transaction costs, was allocated between paid in capital and noncontrolling interest using the net book value of our investment in the PortMiami terminal, as presented in the statement of shareholders' equity.

Credit Losses

We reviewed our notes receivable for credit losses in connection with the preparation of our financial statements for the quarter ended March 31, 2023.

We reviewed our notes receivable for credit losses in connection with the preparation of our financial statements for the quarter ended June 30, 2023.

In evaluating the allowance, management considered factors such as historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions.

Our credit loss allowance beginning and ending balances as of March 31, 2023 and 2022 primarily relate to credit losses recognized on notes receivable for the previous sale of certain property and equipment of $ 81.6 million.

The notes receivable for the previous sale of our property and equipment are related to loans that were originated in 2015 and 2020.

Our credit loss allowance beginning and ending balances as of June 30, 2023 and 2022 primarily relate to credit losses recognized on notes receivable for the previous sale of certain property and equipment of $ 81.6 million.

The notes receivable associated with previous sale of our property and equipment are related to loans that were originated in 2015 and 2020.

The following table summarizes our credit loss allowance related to receivables (in thousands):

Quarter Ended March 31,

Six Months Ended June 30,

Balance, beginning of period $ 83,227 $ 100,192

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Interest Rate (1)

Maturities Through As of March 31, 2023 As of December 31, 2022

Maturities Through As of June 30, 2023 As of December 31, 2022

Fixed rate debt:

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Long-term portion $ 18,685,633 $ 21,303,480

(1) Interest rates based on outstanding loans as of March 31, 2023, and for variable rate debt include either LIBOR, EURIBOR or Term SOFR plus the applicable margin.

(1) Interest rates based on outstanding loans as of June 30, 2023, and for variable rate debt include either LIBOR, EURIBOR or Term SOFR plus the applicable margin.

(2) During the quarter ended June 30, 2023, we completed our transition from LIBOR to Term SOFR rates for substantially all of our variable rate facilities, with such transition to take effect at the next respective interest reset date for each such facility.

(3) Advances under our $ 1.9 billion facility accrue interest at Term SOFR plus an interest rate margin ranging from 1.30 % to 2.05 %.

Advances under our $ 1.1 billion facility accrue interest at Term SOFR plus an interest rate margin ranging from 1.70 % to 2.05 %.

Based on applicable Term SOFR rates, as of March 31, 2023, the interest rates under the $ 1.9 billion facility and the $ 1.1 billion facility were 6.20 % and 6.95 %, respectively.

Based on applicable Term SOFR rates, as of June 30, 2023, the maximum interest rates under the $ 1.9 billion facility and the $ 1.1 billion facility was 7.29 %.

We also pay a facility fee for each facility ranging from 0.20 % to 0.30 % of the total commitments under such facility.

(3) At March 31, 2023 and December 31, 2022, the weighted average interest rate for total debt was 6.35 % and 6.23 %, respectively .

(4) At June 30, 2023 and December 31, 2022, the weighted average interest rate for total debt was 7.16 % and 6.23 %, respectively .

Unsecured revolving credit facilities

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The amendment extended the maturities of $ 2.3 billion of the $ 3.0 billion aggregate revolving credit capacity by one year to April 2025, with the remainder maturing in April 2024.

Additionally, during the quarter ended March 31, 2023 we repaid $ 2.4 billion under our revolving credit facilities, resulting in an aggregate borrowing capacity of $ 2.6 billion under our unsecured revolving credit facilities as of March 31, 2023.

Our revolving credit facilities were partially utilized through a combination of amounts drawn and letters of credit issued under the facilities as of March 31, 2023.

Additionally, during the six months ended June 30, 2023 we repaid $ 2.7 billion under our revolving credit facilities, resulting in an aggregate borrowing capacity of $ 3.0 billion under our unsecured revolving credit facilities as of June 30, 2023.

Convertible Notes

In June 2023, $ 350 million of our 4.25 % Convertible Senior Notes matured.

The notes were settled using a combination of $ 337.8 million in cash, and the issuance of approximately 374,000 shares of common stock.

The issuance of equity increased additional paid in capital by $ 12.2 million.

Debt financing transactions

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In addition, the remaining $ 350 million backstop committed financing was also terminated upon closing, which resulted in an immaterial loss on extinguishment of debt.

In June 2023, we took delivery of Silver Nova .

To finance the delivery, we borrowed a total of $ 503.2 million under the committed financing agreement, resulting in an unsecured term loan which is 95 % guaranteed by Euler Hermes.

The unsecured loan amortizes semi-annually over 12 years and bears interest at a fixed rate of 4.21 % per annum.

In June 2023, we repaid $ 392.0 million of our 11.50 % secured senior notes due in June 2025, which resulted in a total loss on extinguishment of debt of $ 30.2 million that was recognized within Interest expense, net of interest capitalized within our consolidated statements of comprehensive income (loss) for the quarter and six months ended June 30, 2023.

In July 2023, we repaid an additional $ 300 million of our 11.50 % secured senior notes due in June 2025.

Export credit agency guarantees

Except for the term loans we incurred to acquire Celebrity Flora and Silver Moon, all of our unsecured ship financing term loans are guaranteed by the export credit agency in the respective country in which the ship is constructed.

For the majority of the loans as of March 31, 2023, we pay to the applicable export credit agency, depending on the financing agreement, an upfront fee of 2.35 % to 5.48 % of the maximum loan amount in consideration for these guarantees.

For the majority of the loans as of June 30, 2023, we pay to the applicable export credit agency, depending on the financing agreement, an upfront fee of 2.35 % to 5.48 % of the maximum loan amount in consideration for these guarantees.

We amortize the fees that are paid upfront over the life of the loan.

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Debt covenants

Our export credit facilities and our non-export credit facilities have an outstanding principal amount of approximately $ 9.4 billion as of March 31, 2023.

These facilities, as well as certain of our credit card processing agreements, contain covenants that require us, among other things, to maintain a fixed charge coverage ratio, limit our net debt-to-capital ratio, maintain minimum liquidity, and under certain facilities, to maintain a minimum stockholders' equity.

As of March 31, 2023, we were in compliance with our debt covenants and we estimate we will be in compliance for the next twelve months.

The following is a schedule of annual maturities on our total debt, including finance leases, as of March 31, 2023 for each of the next five years (in thousands):

Year As of March 31, 2023 (1)

Our revolving credit facilities, the majority of our term loans, and certain of our credit card processing agreements, contain covenants that require us, among other things, to maintain a fixed charge coverage ratio, limit our net debt-to-capital ratio, maintain minimum liquidity, and under certain facilities, to maintain a minimum stockholders' equity.

As of June 30, 2023, we were in compliance with our debt covenants and we estimate we will be in compliance for the next twelve months.

The following is a schedule of annual maturities on our total debt, including finance leases, as of June 30, 2023 for each of the next five years (in thousands):

Year As of June 30, 2023 (1)

Remainder of 2023 $ 1,016,304

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Thereafter 8,183,102

(1) Debt denominated in other currencies is calculated based on the applicable exchange rate at March 31, 2023.

(1) Debt denominated in other currencies is calculated based on the applicable exchange rate at June 30, 2023.

Operating Leases

Our operating leases primarily relate to preferred berthing arrangements, real estate and shipboard equipment, and are included within Operating lease right-of-use assets , and Long-term operating lease liabilities with the current portion of the liability included within Current portion of operating lease liabilities in our consolidated balance sheets as of March 31, 2023 and December 31, 2022.

Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheet.

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Our operating leases include Silver Explorer , operated by Silversea Cruises.

The operating lease for Silver Explorer will expire in August 2023.

The operating lease for Silver Explorer will expire in October 2023 and Silversea Cruises does not intend to renew the lease.

For some of our real estate leases and berthing agreements, we do have the option to extend our current lease term.

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Our finance leases primarily relate to buildings and surrounding land located at our Miami headquarters and our lease for the Silver Dawn ship.

Finance leases are included within Property and Equipment , net and Long-term debt with the current portion of the liability included within Current portion of long-term debt in our consolidated balance sheets as of March 31, 2023 and December 31, 2022.

During the quarter ended March 31, 2023 we executed the bargain purchase option for the Silver Whisper.

The Company's master lease agreement (“Master Lease”) with Miami-Dade County related to the buildings and surrounding land located at our Miami headquarters is classified as a finance lease in accordance with ASC 842, Leases .

The Master Lease includes two five-year options to extend the lease which we are reasonably certain to exercise.

The total aggregate amount of the finance lease liabilities recorded for this Master Lease was $ 56.0 million and $ 55.5 million as of March 31, 2023 and December 31, 2022, respectively.

The total aggregate amount of the finance lease liabilities recorded for this Master Lease was $ 56.4 million and $ 55.5 million as of June 30, 2023 and December 31, 2022, respectively.

Silversea Cruises operates Silver Dawn under a sale-leaseback agreement with a bargain purchase option at the end of the 15-year lease term.

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The lease includes other purchase options beginning in year three, none of which are reasonably certain of being exercised at this time.

The total aggregate amount of finance lease liabilities recorded for this ship was $ 260.1 million and $ 264.8 million as of March 31, 2023 and December 31, 2022, respectively.

The total aggregate amount of finance lease liabilities recorded for this ship was $ 255.3 million and $ 264.8 million as of June 30, 2023 and December 31, 2022, respectively.

The lease payments on the Silver Dawn are subject to adjustments based on the LIBOR rate.

The components of lease expense were as follows (in thousands):

Consolidated Statement of Comprehensive Loss Classification Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

Consolidated Statement of Comprehensive Income (Loss) Classification Quarter Ended June 30, 2023 Six Months Ended June 30, 2023

Operating lease costs Commission, transportation and other $ 39,872 $ 94,972

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Total lease costs $ 63,978 $ 143,377

Consolidated Statement of Comprehensive Income (Loss) Classification Quarter Ended June 30, 2022 Six Months ended June 30, 2022

Operating lease costs Commission, transportation and other $ 27,993 $ 50,722

Operating lease costs Other operating expenses 5,523 10,994

Operating lease costs Marketing, selling and administrative expenses 4,870 9,646

Financial lease costs:

Amortization of right-of-use-assets Depreciation and amortization expenses 6,102 12,195

Interest on lease liabilities Interest expense, net of interest capitalized 4,654 9,254

Total lease costs $ 49,142 $ 92,811

In addition, certain of our berthing agreements include variable lease costs based on the number of passengers berthed.

During the quarters ended March 31, 2023, and 2022 we had $ 37.7 million and $ 7.5 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive loss, respectively.

The w eighted average of the remaining lease terms and weighted average discount rates are as follows:

As of March 31, 2023 As of December 31, 2022

During the quarter and six months ended June 30, 2023, we had $ 21.2 million and $ 58.9 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss), respectively, compared to $ 11.9 million and $ 19.4 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss) during the quarter and six months ended June 30, 2022, respectively.

The weighted average of the remaining lease terms and weighted average discount rates are as follows:

As of June 30, 2023 As of December 31, 2022

Weighted average of the remaining lease term in years

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Supplemental cash flow information related to leases is as follows (in thousands):

Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Cash paid for amounts included in the measurement of lease liabilities:

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Financing cash flows from finance leases $ 19,409 $ 22,455

As of March 31, 2023, maturities related to lease liabilities were as follows (in thousands):

As of June 30, 2023, maturities related to lease liabilities were as follows (in thousands):

Year Operating Leases Finance Leases

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Our future capital commitments consist primarily of new ship orders.

As of March 31, 2023, the dates that the ships on order by our Global and Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:

As of June 30, 2023, the dates that the ships on order by our Global and Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:

Ship Shipyard Expected delivery Approximate

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Celebrity Ascent Chantiers de l'Atlantique 4th Quarter 2023 3,250

Unnamed Chantiers de l'Atlantique 4th Quarter 2025 3,250

Silversea Cruises —

Evolution Class:

Silver Nova Meyer Werft 2nd Quarter 2023 730

Silver Ray Meyer Werft 2nd Quarter 2024 730

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Total Berths 40,830

In addition, as of March 31, 2023, we have an agreement in place with Chantiers de l'Atlantique to build an additional Edge-class ship, estimated for delivery in 2025, which is contingent upon completion of conditions precedent and financing.

As of March 31, 2023, the aggregate cost of our ships on order presented in the table above, not including any ships on order by our Partner Brands, was approximately $ 10.2 billion, of which we had deposited $ 0.9 billion as of such date.

Approximately 49.2 % of the aggregate cost was exposed to fluctuations in the Euro exchange rate at March 31, 2023.

During the quarter ended June 30, 2023, we received commitments for the unsecured financing of the fifth Edge-class ship for up to 80 % of the ship’s contract price and our building contract with Chantiers de l'Atlantique became effective.

Bpifrance Assurance Export, the official French export credit agency, has agreed to guarantee to the lenders 100 % of the financing.

In June 2023, we amended the credit agreement for Celebrity Ascent, to increase the maximum loan amount by € 32.1 million or $ 35.0 million based on the exchange rate at June 30, 2023.

Interest on the incremental portion of the loan will accrue at a floating rate equal to Term SOFR plus 1.45 %.

As of June 30, 2023, the aggregate cost of our ships on order presented in the table above, not including any ships on order by our Partner Brands, was approximately $ 11.0 billion, of which we had deposited $ 1.0 billion as of such date.

Refer to Note 11 .

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The Court entered final judgment in December 2022 in favor of the plaintiff and awarded damages and attorneys' fees to the plaintiff in the aggregate amount of approximately $ 112 million.

We have appealed the judgment to the United States Court of Appeals for the 11th Circuit and the plaintiff has cross-appealed with regards to the interest calculation used for purposes of determining damages.

We have appealed the judgment to the United States Court of Appeals for the 11th Circuit and the plaintiff has cross-appealed with regards to the interest calculation used for purposes of

determining damages.

We believe we have meritorious grounds for and intend to vigorously pursue our appeal.

During the fourth quarter of 2022, we recorded a charge of approximately $ 130.0 million to Other income (expense) within our consolidated statements of comprehensive loss related to the Havana Docks Action, including post-judgment interest and related legal defense costs and bonding fees.

During the fourth quarter of 2022, we recorded a charge of approximately $ 130.0 million to Other (expense) income within our consolidated statements of comprehensive income (loss) related to the Havana Docks Action, including post-judgment interest and related legal defense costs and bonding fees.

In addition, we are routinely involved in claims typical within the cruise vacation industry.

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Shareholders' Equity

We did not declare any dividends during the quarters ended March 31, 2023 and March 31, 2022.

During the first quarter of 2022, we were restricted under certain of our credit facilities from paying dividends while waivers to the financial covenants within such facilities were in effect.

We did not declare any dividends during the six months ended June 30, 2023 and 2022.

We were previously restricted under certain of our credit facilities from paying dividends while waivers to the financial covenants within such facilities were in effect.

While the waivers have now expired, in the event we declare a dividend, we will need to repay the principal amounts deferred under our export credit facilities.

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Effective March 31, 2023, we closed the previously announced partnership with iCON.

We sold 80 % of PortMiami for $ 208.9 million and retained a 20 % minority interest.

The cash consideration received, net of transaction costs, was allocated between paid in capital and noncontrolling interest in the accompanying consolidated statement of shareholders' equity as of March 31, 2023.

We sold 80 % of the entity which owns our terminal at PortMiami for $ 208.9 million and retained a 20 % minority interest.

Refer to Note 5 .

Investments and Other Assets for further information on the transaction.

The Net Loss attributable to noncontrolling interest was immaterial during the quarters ended March 31, 2023 and March 31, 2022.

Changes in Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss by component for the quarters ended March 31, 2023 and 2022 (in thousands):

Accumulated Other Comprehensive Loss for the Quarter Ended March 31, 2023 Accumulated Other Comprehensive Loss for the Quarter Ended March 31, 2022

The following table presents the changes in accumulated other comprehensive loss by component for the six months ended June 30, 2023 and 2022 (in thousands):

Accumulated Other Comprehensive Loss for the Six Months Ended June 30, 2023 Accumulated Other Comprehensive Loss for the Six Months Ended June 30, 2022

Changes related to cash flow derivative hedges Changes in defined benefit plans Foreign currency translation adjustments Accumulated other comprehensive loss Changes related to cash flow derivative hedges Changes in defined benefit plans Foreign currency translation adjustments Accumulated other comprehensive loss

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Ending balance $ ( 664,720 ) $ ( 8,193 ) $ ( 7,091 ) $ ( 680,004 ) $ ( 535,065 ) $ ( 29,070 ) $ 12,883 $ ( 551,252 )

The following table presents reclassifications out of accumulated other comprehensive loss for the quarters ended March 31, 2023 and 2022 (in thousands):

The following table presents reclassifications out of accumulated other comprehensive loss for the quarters and six months ended June 30, 2023 and 2022 (in thousands):

Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income

Details About Accumulated Other Comprehensive Loss Components Quarter Ended March 31, 2023 Quarter Ended March 31, 2022 Affected Line Item in Statements of

Comprehensive Loss

Details About Accumulated Other Comprehensive Loss Components Quarter Ended June 30, 2023 Quarter Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 Affected Line Item in Statements of

Comprehensive Income (Loss)

Gain (loss) on cash flow derivative hedges:

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Foreign currency forward contracts ( 4,363 ) ( 4,294 ) ( 8,726 ) ( 8,359 ) Depreciation and amortization expenses

Foreign currency forward contracts ( 501 ) ( 1,218 ) Other income (expense)

Fuel swaps — ( 369 ) Other income (expense)

Foreign currency forward contracts ( 9,518 ) ( 471 ) ( 10,019 ) ( 1,689 ) Other (expense) income

Fuel swaps — 15 — ( 354 ) Other (expense) income

Fuel swaps ( 12,068 ) 77,181 ( 15,732 ) 121,985 Fuel

( 15,458 ) 67,279 ( 14,038 ) 95,998

Amortization of defined benefit plans:

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The estimated fair value of our financial instruments that are not measured at fair value, categorized based upon the fair value hierarchy, are as follows (in thousands):

Fair Value Measurements at March 31, 2023 Fair Value Measurements at December 31, 2022

Fair Value Measurements at June 30, 2023 Fair Value Measurements at December 31, 2022

Description Total Carrying Amount Total Fair Value Level 1 (1)

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The valuation model also takes into account the creditworthiness of the Company.

We valued our senior notes and convertible notes using a quoted market price, which is considered a Level 2 input as it is observable in the market;

however, these instruments have a limited trading volume and as such this fair value estimate is not necessarily indicative of the value at which the instruments could be retired or transferred.

(3) Inputs that are unobservable.

The Company did not use any Level 3 inputs as of March 31, 2023 and December 31, 2022.

The Company did not use any Level 3 inputs as of June 30, 2023 and December 31, 2022.

(4) Consists of cash and marketable securities with original maturities of less than 90 days.

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Other Financial Instruments

The carrying amounts of accounts receivable, accounts payable, accrued interest and accrued expenses approximate fair value at March 31, 2023 and December 31, 2022.

The carrying amounts of accounts receivable, accounts payable, accrued interest and accrued expenses approximate fair value at June 30, 2023 and December 31, 2022.

Assets and liabilities that are recorded at fair value have been categorized based upon the fair value hierarchy.

The following table presents information about the Company’s financial instruments recorded at fair value on a recurring basis (in thousands):

Fair Value Measurements at March 31, 2023 Fair Value Measurements at December 31, 2022

Fair Value Measurements at June 30, 2023 Fair Value Measurements at December 31, 2022

Description Total Level 1 (1)

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Valuation of these items does not entail a significant amount of judgment.

No Level 1 inputs were used in fair value measurements of other financial instruments as of March 31, 2023 and December 31, 2022.

No Level 1 inputs were used in fair value measurements of other financial instruments as of June 30, 2023 and December 31, 2022.

(2) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

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(3) Inputs that are unobservable.

No Level 3 inputs were used in fair value measurements of other financial instruments as of March 31, 2023 and December 31, 2022.

(4) Consists of foreign currency forward contracts, interest rate and fuel swaps.

Refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type.

No Level 3 inputs were used in fair value measurements of other financial instruments as of June 30, 2023 and December 31, 2022.

(4) Consists of foreign currency forward contracts, interest rate and fuel swaps.

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The reported fair values are based on a variety of factors and assumptions.

Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of March 31, 2023 or December 31, 2022, or that will be realized in the future, and do not include expenses that could be incurred in an actual sale or settlement.

Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of June 30, 2023 or December 31, 2022, or that will be realized in the future, and do not include expenses that could be incurred in an actual sale or settlement.

Nonfinancial Instruments Recorded at Fair Value on a Nonrecurring Basis

Nonfinancial instruments include items such as goodwill, indefinite-lived intangible assets, long-lived assets, right-of-use assets and equity method investments that are measured at fair value on a nonrecurring basis when events and circumstances indicate the carrying value is not recoverable.

There were no nonfinancial instruments recorded at fair value as of March 31, 2023.

There were no nonfinancial instruments recorded at fair value as of June 30, 2023.

Master Netting Agreements

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Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements

As of March 31, 2023 As of December 31, 2022

As of June 30, 2023 As of December 31, 2022

Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet Gross Amount of Eligible Offsetting

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Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements

As of March 31, 2023 As of December 31, 2022

As of June 30, 2023 As of December 31, 2022

Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet Gross Amount of Eligible Offsetting

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Credit risk, including, but not limited to, counterparty nonperformance under derivative instruments, our credit facilities and new ship progress payment guarantees, is not considered significant, as we primarily conduct business with large, well-established financial institutions, insurance companies and export credit agencies many of which we have long-term relationships with and which have credit risks acceptable to us or where the credit risk is spread out among a large number of counterparties.

As of March 31, 2023, we had counterparty credit risk exposure under our derivative instruments of $ 88.5 million, which was limited to the cost of replacing the contracts in the event of non-performance by the counterparties to the contracts, the majority of which are currently our lending banks.

As of June 30, 2023, we had counterparty credit risk exposure under our derivative instruments of $ 98.9 million, which was limited to the cost of replacing the contracts in the event of non-performance by the counterparties to the contracts, the majority of which are currently our lending banks.

We do not anticipate nonperformance by any of our significant counterparties.

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For our net investment hedges, we use the dollar offset method to measure effectiveness.

For all other hedging programs, we use the long-haul method to assess hedge effectiveness using regression analysis for each hedge relationship.

other hedging programs, we use the long-haul method to assess hedge effectiveness using regression analysis for each hedge relationship.

The methodology for assessing hedge effectiveness is applied on a consistent basis for each one of our hedging programs (i.e., interest rate, foreign currency ship construction, foreign currency net investment and fuel).

For our regression analyses, we use an observation period of

up to three years , utilizing market data relevant to the hedge horizon of each hedge relationship.

For our regression analyses, we use an observation period of up to three years , utilizing market data relevant to the hedge horizon of each hedge relationship.

High effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the changes in the fair values of the derivative instrument and the hedged item.

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Our exposure to market risk for changes in interest rates primarily relates to our debt obligations, including future interest payments.

At March 31, 2023 and December 31, 2022, approximately 84 % and 75 %, respectively, of our debt was effectively fixed-rate debt, which is net of our interest rate swap agreements.

At June 30, 2023 and December 31, 2022, approximately 86 % and 75 %, respectively, of our debt was effectively fixed-rate debt, which is net of our interest rate swap agreements.

We use interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense.

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We use interest rate swap agreements that effectively convert a portion of our fixed-rate debt to a floating-rate basis to manage this risk.

At March 31, 2023 and December 31, 2022 , there were no interest rate swap agreements for fixed-rate debt instruments.

At June 30, 2023 and December 31, 2022 , there were no interest rate swap agreements for fixed-rate debt instruments.

We use interest rate swap agreements that effectively convert a portion of our floating-rate debt to a fixed-rate basis to manage the market risk of increasing interest rates.

At March 31, 2023 and December 31, 2022, we maintained interest rate swap agreements on the following floating-rate debt instruments:

Debt Instrument Swap Notional as of March 31, 2023 (in thousands) Maturity Debt Floating Rate All-in Swap Fixed Rate as of March 31, 2023

At June 30, 2023 and December 31, 2022, we maintained interest rate swap agreements on the following floating-rate debt instruments:

Debt Instrument Swap Notional as of June 30, 2023 (in thousands) Maturity Debt Floating Rate (3)

All-in Swap Fixed Rate as of June 30, 2023

Celebrity Reflection term loan

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(1) Interest rate swap agreements hedging the Euro-denominated term loan for Harmony of the Seas include EURIBOR zero-floors matching the hedged debt EURIBOR zero-floor.

Amount presented is based on the exchange rate as of March 31, 2023.

Amount presented is based on the exchange rate as of June 30, 2023.

(2) Interest rate swap agreements hedging the term loan of Odyssey of the Seas include LIBOR zero-floors matching the debt LIBOR zero-floor.

Amount presented is based on the exchange rate as of March 31, 2023.

(3) During the quarter ended June 30, 2023, we completed our transition from LIBOR to Term SOFR rates for substantially all of our Interest rate swap agreements, with such transition to take effect at the next respective interest reset date for each such agreement.

These interest rate swap agreements are accounted for as cash flow hedges.

The notional amount of interest rate swap agreements related to outstanding debt as of March 31, 2023 and December 31, 2022 was $ 1.9 billion, respectively.

The notional amount of interest rate swap agreements related to outstanding debt as of June 30, 2023 and December 31, 2022 was $ 1.7 billion and $ 1.9 billion, respectively.

Foreign Currency Exchange Rate Risk

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We enter into foreign currency forward contracts to manage portions of the exposure to movements in foreign currency exchange rates.

As of March 31, 2023, the aggregate cost of our ships on order was $ 10.2 billion, of which we had deposited $ 922.5 million as of such date.

As of June 30, 2023, the aggregate cost of our ships on order was $ 11.0 billion, of which we had deposited $ 1.0 billion as of such date.

These amounts do not include any ships placed on order that are contingent upon completion of conditions precedent and/or financing and any ships on order by our Partner Brands.

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Commitments and Contingencies , for further information on our ships on order.

At March 31, 2023 and December 31, 2022, approximately 49.2 % and 52.3 %, respectively, of the aggregate cost of the ships under construction was exposed to fluctuations in the Euro exchange rate.

At June 30, 2023 and December 31, 2022, approximately 42.3 % and 52.3 %, respectively, of the aggregate cost of the ships under construction was exposed to fluctuations in the Euro exchange rate.

Our foreign currency forward contract agreements are accounted for as cash flow or net investment hedges depending on the designation of the related hedge.

On a regular basis, we enter into foreign currency forward contracts and, from time to time, we utilize cross-currency swap agreements and collar options to minimize the volatility resulting from the remeasurement of net monetary assets and liabilities denominated in a currency other than our functional currency or the functional currencies of our foreign subsidiaries.

During the first quarter of 2023 and 2022 the average notional amount of foreign currency forward contracts was approximately $ 1.2 billion and $ 0.8 billion, respectively.

During the second quarter of 2023 and 2022 the average notional amount of foreign currency forward contracts was approximately $ 1.3 billion, respectively.

These instruments are not designated as hedging instruments.

For the quarters ended March 31, 2023 and 2022, changes in the fair value of the foreign currency forward contracts resulted in gains (losses) of $ 4.1 million and $( 7.0 ) million, respectively, which offset (losses) gains arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies in those same periods of $( 11.1 ) million and $ 7.2 million, respectively.

These amounts were recognized in earnings within Other income (expense) in our consolidated statements of comprehensive loss.

The notional amount of outstanding foreign exchange contracts, excluding the forward contracts entered into to minimize remeasurement volatility, as of March 31, 2023 and December 31, 2022 was $ 3.3 billion and $ 2.9 billion, respectively.

For the quarters ended June 30, 2023 and 2022, changes in the fair value of the foreign currency forward contracts resulted in gains (losses) of $ 8.3 million and $( 80.9 ) million, respectively, which offset (losses) gains arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies in those same periods of $( 16.3 ) million and $ 78.6 million, respectively.

These amounts were recognized in earnings within Other (expense) income in our consolidated statements of comprehensive income (loss).

For the six months ended June 30, 2023 and 2022, changes in the fair value of the foreign currency forward contracts resulted in gain (losses) of $ 12.4 million and $( 87.9 ) million, respectively, which offset (losses) gains arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies in those same periods of $( 27.3 ) million and $ 85.8 million, respectively.

These amounts were recognized in earnings within Other (expense) income in our consolidated statements of comprehensive income (loss).

The notional amount of outstanding foreign exchange contracts, excluding the forward contracts entered into to minimize remeasurement volatility, as of June 30, 2023 and December 31, 2022 was $ 4.0 billion and $ 2.9 billion, respectively.

Non-Derivative Instruments

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We address the exposure of our investments in foreign operations by denominating a portion of our debt in our subsidiaries’ and investments’ functional currencies and designating it as a hedge of these subsidiaries and investments.

We had designated debt as a hedge of our net investments primarily in TUI Cruises of € 446.9 million, or approximately $ 485.5 million, as of March 31, 2023.

We had designated debt as a hedge of our net investments primarily in TUI Cruises of € 461.8 million, or approximately $ 503.9 million, as of June 30, 2023.

As of December 31, 2022, we had designated debt as a hedge of our net investments primarily in TUI Cruises of € 433.0 million, or approximately $ 461.9 million.

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For hedged forecasted fuel consumption that remains possible of occurring, hedge accounting will be discontinued and the related accumulated other comprehensive gain or loss will remain in accumulated other comprehensive gain or loss until the underlying hedged transactions are recognized in earnings or the related hedged forecasted fuel consumption is deemed probable of not occurring.

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

For the quarter ended March 31, 2023 and March 31, 2022, we did not discontinue cash flow hedge accounting on any of our fuel swap agreements.

At March 31, 2023, we have hedged the variability in future cash flows for certain forecasted fuel transactions occurring through 2024.

As of March 31, 2023 and December 31, 2022, we had the following outstanding fuel swap agreements:

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

For the quarter ended June 30, 2023 and June 30, 2022, we did not discontinue cash flow hedge accounting on any of our fuel swap agreements.

At June 30, 2023, we have hedged the variability in future cash flows for certain forecasted fuel transactions occurring through 2024 and 2025.

As of June 30, 2023 and December 31, 2022, we had the following outstanding fuel swap agreements:

Fuel Swap Agreements

As of March 31, 2023 As of December 31, 2022

As of June 30, 2023 As of December 31, 2022

Designated as hedges:

2 unchanged sentences

2024 791,051 —

2025 456,000 —

Fuel Swap Agreements

As of March 31, 2023 As of December 31, 2022

As of June 30, 2023 As of December 31, 2022

Designated hedges as a % of projected fuel purchases:

1 unchanged sentence

2024 45 % — %

As of March 31, 2023, there was $ 34.1 million of estimated unrealized net loss associated with our cash flow hedges pertaining to fuel swap agreements that is expected to be reclassified to earnings from Accumulated other comprehensive loss within the next twelve months when compared to $ 7.9 million of estimated unrealized net loss at December 31, 2022.

2025 25 % — %

As of June 30, 2023, there was $ 31.7 million of estimated unrealized net loss associated with our cash flow hedges pertaining to fuel swap agreements that is expected to be reclassified to earnings from Accumulated other comprehensive loss within the next twelve months when compared to $ 7.9 million of estimated unrealized net loss at December 31, 2022.

Reclassification is expected to occur as the result of fuel consumption associated with our hedged forecasted fuel purchases.

2 unchanged sentences

Asset Derivatives Liability Derivatives

Balance Sheet Location As of March 31, 2023 As of December 31, 2022 Balance Sheet Location As of March 31, 2023 As of December 31, 2022

Balance Sheet Location As of June 30, 2023 As of December 31, 2022 Balance Sheet Location As of June 30, 2023 As of December 31, 2022

Fair Value Fair Value Fair Value Fair Value

10 unchanged sentences

Non-derivative instrument designated as

hedging instrument under ASC 815-20 Balance Sheet Location As of March 31, 2023 As of December 31, 2022

hedging instrument under ASC 815-20 Balance Sheet Location As of June 30, 2023 As of December 31, 2022

Foreign currency debt Current portion of long-term debt $ 63,712 $ 62,282

1 unchanged sentence

$ 503,893 $ 461,859

The effect of derivative instruments qualifying and designated as hedging instruments and the related hedged items in fair value hedges on the consolidated statements of comprehensive loss was as follows (in thousands):

Derivatives and Related Hedged Items under ASC 815-20 Fair Value Hedging Relationships Location of Gain (Loss) Recognized in Income on Derivative and Hedged Item Amount of Gain (Loss)

3 unchanged sentences

Income on Hedged Item

Quarter Ended March 31, 2023 Quarter Ended March 31, 2022 Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

Quarter Ended June 30, 2023 Quarter Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 Quarter Ended June 30, 2023 Quarter Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Interest rate swaps Interest expense, net of interest capitalized $ — $ ( 1,170 ) $ — $ ( 4,535 ) $ — $ 2,927 $ — $ 8,951

4 unchanged sentences

Comprehensive Loss on Derivatives

Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

Quarter Ended June 30, 2023 Quarter Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Interest rate swaps $ 23,419 $ 29,251 $ 12,800 $ 104,116

3 unchanged sentences

The effect of non-derivative instruments qualifying and designated as net investment hedging instruments on the consolidated financial statements was as follows (in thousands):

Amount of (Loss) Gain Recognized in Other Comprehensive Loss

Amount of (Loss) Gain Recognized in Other Comprehensive Income (Loss)

Non-derivative instruments under ASC 815-20 Net

Investment Hedging Relationships Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

Investment Hedging Relationships Quarter Ended June 30, 2023 Quarter Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Foreign Currency Debt $ ( 2,258 ) $ 16,814 $ ( 11,238 ) $ 19,559

5 unchanged sentences

Gain (Loss) Recognized in

Income on Derivatives Quarter Ended March 31, 2023 Quarter Ended March 31, 2022

Foreign currency forward contracts Other income (expense) $ 4,118 $ ( 6,985 )

Fuel swaps Other income (expense) — ( 7 )

Income on Derivatives Quarter Ended June 30, 2023 Quarter Ended June 30, 2022 Six Months Ended June 30, 2023 Six Months Ended June 30, 2022

Foreign currency forward contracts Other (expense) income $ 8,255 $ ( 80,897 ) $ 12,372 $ ( 87,882 )

Fuel swaps Other (expense) income — 273 — 266

$ 8,255 $ ( 80,624 ) $ 12,372 $ ( 87,616 )

4 unchanged sentences

If our credit rating for our senior unsecured debt is subsequently equal to or above BBB- by Standard & Poor’s or Baa3 by Moody’s, then any collateral posted at such time will be released to us and we will no longer be required to post collateral unless we meet the collateral trigger requirement, generally, at the next fifth-year anniversary.

As of March 31, 2023, our senior unsecured debt credit rating was B by Standard & Poor's and B3 by Moody's.

As of March 31, 2023, five of our interest rate derivative hedges had reached their fifth-year anniversary;

As of June 30, 2023, our senior unsecured debt credit rating was B by Standard & Poor's and B3 by Moody's.

As of June 30, 2023, five of our interest rate derivative hedges had reached their fifth-year anniversary;

however, the net market value for these derivative hedges were in a net asset position, and accordingly, we were not required to post any collateral as of such date.

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 1. Financial Statements