What changed in this filing

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Item 1. Financial Statements

2023-10-26 compared with 2023-07-27 · 197 added, 157 removed, 774 unchanged (31% of the section changed)

3 unchanged sentences

in thousands, except per share data)

Quarter Ended June 30,

Quarter Ended September 30,

Passenger ticket revenues $ 2,941,481 $ 2,020,974

11 unchanged sentences

Depreciation and amortization expenses 365,473 355,085

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

Operating Income 1,265,104 298,425

Other income (expense):

1 unchanged sentence

Interest expense, net of interest capitalized ( 340,620 ) ( 352,187 )

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

Equity investment income 86,627 73,997

Other (expense) income ( 7,905 ) 780

( 254,426 ) ( 265,457 )

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

Net Income 1,010,678 32,968

Net Income attributable to noncontrolling interest 1,602 —

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

Net Income attributable to Royal Caribbean Cruises Ltd.

$ 1,009,076 $ 32,968

Earnings (Loss) per Share:

Earnings per Share:

Basic $ 3.94 $ 0.13

4 unchanged sentences

Comprehensive Income (Loss)

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

Net Income $ 1,010,678 $ 32,968

Other comprehensive income (loss):

2 unchanged sentences

Gain (loss) on cash flow derivative hedges 19,561 ( 259,949 )

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

Total other comprehensive income (loss) 35,028 ( 241,225 )

Comprehensive Income (Loss) 1,045,706 ( 208,257 )

Comprehensive Income attributable to noncontrolling interest 1,602 —

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

$ 1,044,104 $ ( 208,257 )

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

2 unchanged sentences

in thousands, except per share data)

Six Months Ended June 30,

Nine Months Ended September 30,

Passenger ticket revenues $ 7,281,503 $ 4,091,035

15 unchanged sentences

Interest expense, net of interest capitalized ( 1,055,519 ) ( 932,552 )

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

Equity investment income 149,112 29,759

Other (expense) income ( 8,676 ) 4,699

15 unchanged sentences

Change in defined benefit plans 3,700 34,991

(Loss) Gain on cash flow derivative hedges ( 26,709 ) 111,408

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

Loss on cash flow derivative hedges ( 7,148 ) ( 148,541 )

Total other comprehensive loss ( 1,762 ) ( 81,592 )

Comprehensive Income (Loss) 1,423,316 ( 1,737,348 )

Comprehensive Income attributable to noncontrolling interest 5,151 —

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

$ 1,418,165 $ ( 1,737,348 )

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

2 unchanged sentences

(in thousands, except share data)

June 30, December 31,

September 30, December 31,

Current assets

Cash and cash equivalents $ 600,117 $ 1,935,005

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

Trade and other receivables, net of allowances of $ 7,899 and $ 11,612 at September 30, 2023 and December 31, 2022, respectively

360,151 531,066

6 unchanged sentences

Goodwill 809,206 809,277

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

Other assets, net of allowances of $ 62,777 and $ 71,614 at September 30, 2023 and December 31, 2022, respectively

1,794,412 1,678,074

19 unchanged sentences

500,000,000 shares authorized;

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

284,483,109 and 283,257,102 shares issued, September 30, 2023 and December 31, 2022, respectively)

Paid-in capital 7,422,041 7,284,852

1 unchanged sentence

Accumulated other comprehensive loss ( 644,976 ) ( 643,214 )

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

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

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

8 unchanged sentences

(unaudited, in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Activities

2 unchanged sentences

Net deferred income tax benefit ( 2,723 ) ( 14,345 )

(Gain) loss on derivative instruments not designated as hedges ( 11,675 ) 87,245

Loss on derivative instruments not designated as hedges 30,904 175,686

Share-based compensation expense 79,315 24,285

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

Equity investment income ( 149,112 ) ( 29,759 )

Amortization of debt issuance costs, discounts and premiums 84,015 129,957

2 unchanged sentences

Decrease (increase) in trade and other receivables, net 131,199 ( 173,555 )

Decrease (increase) in inventories 8,101 ( 78,884 )

Increase in inventories, net ( 17,506 ) ( 86,962 )

Increase in prepaid expenses and other assets ( 43,721 ) ( 108,429 )

Increase in accounts payable trade 62,007 79,249

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

(Decrease) increase in accrued expenses and other liabilities ( 247,065 ) 3,080

Increase in customer deposits 864,332 613,632

5 unchanged sentences

Cash paid on settlement of derivative financial instruments ( 66,272 ) ( 389,387 )

Cash received on loans to unconsolidated affiliates 10,939 8,700

Investments in and loans to unconsolidated affiliates ( 21,997 ) ( 614 )

Cash received on loans from unconsolidated affiliates 35,583 14,030

Other, net 9,021 5,328

11 unchanged sentences

Cash and cash equivalents at end of period $ 600,117 $ 1,566,213

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

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Nine Months Ended September 30,

Supplemental Disclosure

3 unchanged sentences

Purchase of property and equipment included in accounts payable and accrued expenses and other liabilities $ 24,394 $ 26,026

Acquisition of property and equipment from assumed debt $ — $ 275,000

Non-cash Financing Activity

Debt related to purchase of property and equipment $ — $ 275,000

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

3 unchanged sentences

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

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

Activity related to employee stock plans 1 14,479 — — — — 14,480

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

Changes related to cash flow derivative hedges — — — 19,561 — — 19,561

1 unchanged sentence

Foreign currency translation adjustments — — — 11,495 — — 11,495

Sale of noncontrolling interest — 744 — — — — 744

Noncontrolling interest — — — — — 2,179 2,179

Dividends from noncontrolling interest — — — — — ( 6,400 ) ( 6,400 )

Net Income attributable to Royal Caribbean Cruises Ltd.

— — 1,009,076 — — — 1,009,076

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

Balance at September 30, 2023 $ 2,845 $ 7,422,041 $ ( 287,502 ) $ ( 644,976 ) $ ( 2,069,432 ) $ 173,213 $ 4,596,189

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

8 unchanged sentences

Noncontrolling interest — — — — — 5,810 5,810

Dividends to noncontrolling interest — — — — — ( 6,400 ) ( 6,400 )

Net Income attributable to Royal Caribbean Cruises Ltd.

— — 1,419,927 — — — 1,419,927

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

Balance at September 30, 2023 $ 2,845 $ 7,422,041 $ ( 287,502 ) $ ( 644,976 ) $ ( 2,069,432 ) $ 173,213 $ 4,596,189

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

3 unchanged sentences

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

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

Activity related to employee stock plans 1 15,582 — — — 15,583

2 unchanged sentences

Foreign currency translation adjustments — — — 11,498 — 11,498

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

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

Net Income — — 32,968 — — 32,968

Balance at September 30, 2022 $ 2,832 $ 7,270,521 $ ( 1,207,223 ) $ ( 792,477 ) $ ( 2,068,229 ) $ 3,205,424

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

7 unchanged sentences

Net Loss — — ( 1,655,756 ) — — ( 1,655,756 )

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

Balance at September 30, 2022 $ 2,832 $ 7,270,521 $ ( 1,207,223 ) $ ( 792,477 ) $ ( 2,068,229 ) $ 3,205,424

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

15 unchanged sentences

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 June 30, 2023.

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

As of September 30, 2023, we had liquidity of $ 3.3 billion, including $ 2.7 billion of undrawn revolving credit facility capacity, and $ 0.6 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.

Refer to Note 6 .

Debt for further information regarding refinancing transactions and the applicable financial covenants.

We will continue to pursue various opportunities to raise capital to fund obligations associated with future debt maturities and/or to extend the maturity dates associated with our existing indebtedness or facilities.

Debt for further information regarding refinancing transactions and our applicable financial covenants.

We will continue to pursue, as appropriate, various opportunities to raise capital to fund obligations associated with future debt maturities and/or to extend the maturity dates associated with our existing indebtedness or facilities.

Basis for Preparation of Consolidated Financial Statements

22 unchanged sentences

The adoption did not have a material impact to our consolidated financial statements and related disclosures.

Recent Accounting Pronouncements

In August 2023, the FASB issued ASU No.

2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement.

This ASU provides guidance requiring a joint venture to initially measure all contributions received upon its formation at fair value.

The guidance is intended to provide users of joint venture financial statements with more decision-useful information.

This ASU is effective for joint venture entities with a formation date on or after January 1, 2025 on a prospective basis.

Early adoption is permitted, and joint ventures formed prior to the adoption date may elect to apply the new guidance retrospectively back to their original formation date.

We are currently evaluating the impact of the new guidance on our consolidated financial statements.

Reclassifications

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

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

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

(Decrease) increase in accrued interest;

1 unchanged sentence

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

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

( Decrease) increase in accrued expenses and other liabilities;

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

8 unchanged sentences

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 $ 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.

The amounts of port costs charged to our guests and included within Passenger ticket revenues on a gross basis were $ 252.3 million and $ 210.2 million for the quarters ended September 30, 2023 and 2022, respectively, and $ 0.7 billion and $ 446.3 million for the nine months ended September 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.

3 unchanged sentences

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

Quarter Ended June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

14 unchanged sentences

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

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

Quarter Ended June 30,

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

Quarter Ended September 30,

Passenger ticket revenues:

United States 72 % 71 %

United Kingdom 10 % 11 %

All other countries (1) 18 % 18 %

Six Months Ended June 30,

Nine Months Ended September 30,

Passenger ticket revenues:

1 unchanged sentence

All other countries (1) 26 % 25 %

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

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

Customer Deposits and Contract Liabilities

1 unchanged sentence

Deposits received on sales of passenger cruises are initially recorded as Customer deposits in our consolidated balance sheets and subsequently recognized as passenger ticket revenues or onboard revenues during the duration of the cruise.

ASC 606, Revenues from Contracts with Customers , defines a “contract liability” as an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration from the customer.

Revenues from Contracts with Customers , defines a “contract liability” as an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration from the customer.

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 $ 2.8 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.

Customer deposits presented in our consolidated balance sheets include contract liabilities of $ 2.2 billion and $ 1.8 billion as of September 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 (“FCCs”).

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

Our FCCs are not refundable and do not have expiration dates.

Based upon our analysis of historical redemption experience, we believe a portion of our FCCs are not probable of being used in future periods.

Based on our current estimates, we recognized an immaterial amount of FCC breakage revenue during the quarter ended September 30, 2023.

We will continue to monitor changes in redemption behavior and estimate and record revenue associated with breakage when the likelihood of the customer exercising their remaining rights becomes remote.

Contract Receivables and Contract Assets

5 unchanged sentences

Our credit card processors agreements require us, under certain circumstances, to maintain a reserve that can be satisfied by posting collateral.

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 June 30, 2023.

As of September 30, 2023, none of our credit card processors required us to maintain a reserve.

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

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.

As of September 30, 2023 and December 31, 2022, our contract assets were $ 168.1 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.

1 unchanged sentence

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 $ 291.3 million as of June 30, 2023 and $ 177.5 million as of December 31, 2022.

Prepaid travel advisor commissions and prepaid credit and debit card fees were $ 230.5 million as of September 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).

1 unchanged sentence

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,

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

12 unchanged sentences

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

We use the if-converted method to calculate the impact of our convertible notes that may be settled in cash or shares.

To the extent dilutive, shares related to our convertible notes are assumed to be converted into common stock at the beginning of the reporting period, and we add back the interest expense to the numerator.

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 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.

T here were no antidilutive shares for the quarter and nine months ended September 30, 2023, compared to 30,532,145 and 31,085,736 antidilutive shares from our stock-based awards and convertible notes for the quarter and nine months ended September 30, 2022, respectively.

Investments and Other Assets

8 unchanged sentences

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 the entity which owns our terminal at PortMiami.

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

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

In addition, the partnership will pursue additional port infrastructure developments, including future plans to own, develop, and manage an infrastructure project in the U.S.

In addition, the partnership has plans to pursue additional port infrastructure developments, including future plans to own, develop, and manage an infrastructure project in the U.S.

Virgin Islands.

5 unchanged sentences

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

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 September 30, 2023, the net book value of our investment in TUIC was $ 586.7 million, primarily consisting of $ 498.5 million in equity and a loan of € 75.3 million, or approximately $ 79.7 million based on the exchange rate at September 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.

8 unchanged sentences

We have determined that we are not the primary beneficiary of this facility as we do not have the power to direct the activities that most significantly impact the facility’s economic performance.

Accordingly, we do not consolidate this entity.

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

As part of the transaction with iCON, we sold our controlling interest in two Italian entities for an immaterial amount of net proceeds and recognized an immaterial gain on the sale.

2 unchanged sentences

We have determined that we are not the primary beneficiary for either of these entities as we do not have the power to direct the activities that most significantly impact the economic performance.

Accordingly, we do not consolidate these entities.

Accordingly, we do not consolidate these entities and account for these investments under the equity method of accounting.

For further information on the measurements used to estimate the fair value of our equity method investments, refer to Note 11 .

1 unchanged sentence

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 June 30, Six Months Ended June 30,

Quarter Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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

Share of equity income from investments $ 86,627 $ 73,997 $ 149,112 $ 29,759

Dividends received (1) $ 628 $ — $ 4,455 $ 986

(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

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

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

Total notes receivable due from equity investments $ 100,752 $ 101,392

10 unchanged sentences

Credit Losses

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

We reviewed our notes receivable for credit losses in connection with the preparation of our financial statements for the quarter ended September 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 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.

Our credit loss allowance beginning and ending balances as of September 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):

Six Months Ended June 30,

Nine Months Ended September 30,

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

4 unchanged sentences

Interest Rate (1)

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

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

Fixed rate debt:

24 unchanged sentences

Long-term portion $ 17,924,927 $ 21,303,480

(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.

(1) Interest rates based on outstanding loans as of September 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.

1 unchanged sentence

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 June 30, 2023, the maximum interest rates under the $ 1.9 billion facility and the $ 1.1 billion facility was 7.29 %.

Based on applicable Term SOFR rates, as of September 30, 2023, the maximum interest rates under the $ 1.9 billion facility and the $ 1.1 billion facility was 7.47 %.

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

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

(4) At September 30, 2023 and December 31, 2022, the weighted average interest rate for total debt was 6.40 % and 6.23 %, respectively .

Unsecured revolving credit facilities

In January 2023, we amended and extended the majority of our two unsecured revolving credit facilities.

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 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.

In January 2023, we amended and extended our two unsecured revolving credit facilities.

The amendments 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.

As of September 30, 2023, we had undrawn capacity of $ 2.7 billion under our unsecured revolving credit facilities.

In October 2023, we refinanced both unsecured revolving credit facilities as well as the $ 501.6 million unsecured term loan scheduled to fully mature in October 2024.

Following this refinancing, our aggregate revolving credit commitments are $ 3.5 billion.

Of this amount, $ 1.6 billion is scheduled to mature in October 2028, $ 1.6 billion is scheduled to mature in October 2026, $ 242.5 million is scheduled to mature in April 2025 and the remaining balance is scheduled to mature in April 2024.

Convertible Notes

2 unchanged sentences

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

In August 2023, we notified the holders of our 2.875 % Convertible Senior Notes due November 15, 2023 of our irrevocable election to settle notes to which holders elect to convert with a combination of cash and shares of our common stock.

Debt financing transactions

5 unchanged sentences

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.

During the third quarter of 2023, we repaid an additional $ 500 million of these notes due in June 2025, resulting in a total loss on extinguishment of debt of $ 37.9 million that was recognized within Interest expense, net of interest capitalized within our consolidated statements of comprehensive income (loss) for the quarter and nine months ended September 30, 2023.

In October 2023, we issued an irrevocable notice to redeem in early November 2023 the remaining $ 500 million balance of our 11.50 % senior secured notes due June 2025.

This redemption will be funded with existing liquidity.

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 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.

As of September 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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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)

As of September 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 September 30, 2023 for each of the next five years (in thousands):

Year As of September 30, 2023 (1)

Remainder of 2023 $ 735,423

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Thereafter 8,170,157

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

(1) Debt denominated in other currencies is calculated based on the applicable exchange rate at September 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 June 30, 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 October 2023 and Silversea Cruises does not intend to renew the lease.

The operating lease for Silver Explorer will expire in the fourth quarter of 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 June 30, 2023 and December 31, 2022.

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 $ 56.4 million and $ 55.5 million as of June 30, 2023 and December 31, 2022, respectively.

The total aggregate amount of the finance lease liabilities recorded for this Master Lease was $ 56.8 million and $ 55.5 million as of September 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 $ 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 total aggregate amount of finance lease liabilities recorded for this ship was $ 250.6 million and $ 264.8 million as of September 30, 2023 and December 31, 2022, respectively.

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

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

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

Consolidated Statement of Comprehensive Income (Loss) Classification Quarter Ended September 30, 2023 Nine Months Ended September 30, 2023

Operating lease costs Commission, transportation and other $ 32,925 $ 127,897

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Total lease costs $ 57,270 $ 200,647

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

Consolidated Statement of Comprehensive Income (Loss) Classification Quarter Ended September 30, 2022 Nine Months Ended September 30, 2022

Operating lease costs Commission, transportation and other $ 26,924 $ 77,646

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

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.

During the quarter and nine months ended September 30, 2023, we had $ 13.2 million and $ 72.1 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss), respectively, compared to $ 12.6 million and $ 32.0 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss) during the quarter and nine months ended September 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

As of September 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):

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

Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

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

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Financing cash flows from finance leases $ 25,135 $ 42,791

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

As of September 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 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:

As of September 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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Icon of the Seas Meyer Turku Oy 4th Quarter 2023 5,600

Unnamed Meyer Turku Oy 2nd Quarter 2025 5,600

Star of the Seas Meyer Turku Oy 2nd Quarter 2025 5,600

Unnamed Meyer Turku Oy 2nd Quarter 2026 5,600

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

Unnamed Fincantieri 4th Quarter 2024 4,100

Mein Schiff Relax Fincantieri 4th Quarter 2024 4,100

Unnamed Fincantieri 2nd Quarter 2026 4,100

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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.

In June 2023, we amended the credit agreement for Celebrity Ascent, to increase the maximum loan amount by € 32.1 million or $ 34.0 million based on the exchange rate at September 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.

In September 2023, we amended the credit agreement for Icon of the Seas , to increase the maximum loan amount by € 96.8 million or $ 102.5 million based on the exchange rate at September 30, 2023.

Interest on the incremental portion of the loan will accrue at a floating rate equal to Term SOFR plus 1.10 %.

In October 2023, we amended the credit agreement for Silver Ray , to increase the maximum loan amount by € 30.3 million or $ 32.1 million based on the exchange rate at September 30, 2023 At our election, interest on the incremental portion will accrue either (1) at a fixed rate of 6.77 % (inclusive of the applicable margin) or (2) at a floating rate equal to Term SOFR plus 1.40 %.

As of September 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 $ 10.9 billion, of which we had deposited $ 1.1 billion as of such date.

Refer to Note 11 .

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As previously reported, a lawsuit was filed against us in August 2019 in the U.S.

District Court for the Southern District of Florida (the "Court") under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act.

District Court for the Southern District of Florida (the "Court") under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton

The complaint filed by Havana Docks Corporation alleges it holds an interest in the Havana Cruise Port Terminal, which was expropriated by the Cuban government.

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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.

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

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Shareholders' Equity

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

We did not declare any dividends during the nine months ended September 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.

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We sold 80 % of the entity which owns our terminal at 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 for the six months ended June 30, 2023.

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 for the nine months ended September 30, 2023.

Refer to Note 5 .

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Changes in Accumulated Other Comprehensive Loss

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

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

Accumulated Other Comprehensive Loss for the Nine Months Ended September 30, 2023 Accumulated Other Comprehensive Loss for the Nine Months Ended September 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 $ ( 645,159 ) $ ( 4,221 ) $ 4,404 $ ( 644,976 ) $ ( 795,014 ) $ ( 21,844 ) $ 24,381 $ ( 792,477 )

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):

The following table presents reclassifications out of accumulated other comprehensive loss for the quarters and nine months ended September 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 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

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

Comprehensive Income (Loss)

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

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

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

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(3) Inputs that are unobservable.

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

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

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

Fair Value Measurements at September 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 June 30, 2023 and December 31, 2022.

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

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

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

1 unchanged sentence

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 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.

Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of September 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 June 30, 2023.

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

Master Netting Agreements

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See Credit Related Contingent Features for further discussion on contingent collateral requirements for our derivative instruments.

The following table presents information about the Company’s offsetting of financial assets under master netting agreements with derivative counterparties (in thousands):

The following table presents information about the Company’s offsetting of financial assets and liabilities under master netting agreements with derivative counterparties (in thousands):

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

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

As of September 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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Total $ 217,881 $ ( 124,669 ) $ — $ 93,212 $ 203,802 $ ( 105,228 ) $ — $ 98,574

The following table presents information about the Company’s offsetting of financial liabilities under master netting agreements with derivative counterparties (in thousands):

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

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 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.

As of September 30, 2023, we had counterparty credit risk exposure under our derivative instruments of $ 110.9 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.

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

For all 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).

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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 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.

At September 30, 2023 and December 31, 2022, approximately 85 % 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.

1 unchanged sentence

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

At September 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 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

At September 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 September 30, 2023 (in thousands) Maturity Debt Floating Rate (3)

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

Amount presented is based on the exchange rate as of September 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.

1 unchanged sentence

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 June 30, 2023 and December 31, 2022 was $ 1.7 billion and $ 1.9 billion, respectively.

The notional amount of interest rate swap agreements related to outstanding debt as of September 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 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.

As of September 30, 2023, the aggregate cost of our ships on order was $ 10.9 billion, of which we had deposited $ 1.1 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.

1 unchanged sentence

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

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.

At September 30, 2023 and December 31, 2022, approximately 40.1 % 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 second quarter of 2023 and 2022 the average notional amount of foreign currency forward contracts was approximately $ 1.3 billion, respectively.

During the third quarter of 2023 and 2022 the average notional amount of foreign currency forward contracts was approximately $ 1.4 billion and $ 1.2 billion, respectively.

These instruments are not designated as hedging instruments.

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.

For the quarters ended September 30, 2023 and 2022, changes in the fair value of the foreign currency forward contracts resulted in losses of $ 42.8 million and $ 88.4 million, respectively, which offset gains arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies in those same periods of $ 38.5 million and $ 84.0 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.

For the nine months ended September 30, 2023 and 2022, changes in the fair value of the foreign currency forward contracts resulted in losses of $ 30.4 million and $ 176.3 million, respectively, which offset gains arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies in those same periods of $ 11.2 million and $ 169.7 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.

The notional amount of outstanding foreign exchange contracts, excluding the forward contracts entered into to minimize remeasurement volatility, as of September 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 € 461.8 million, or approximately $ 503.9 million, as of June 30, 2023.

We had designated debt as a hedge of our net investments primarily in TUI Cruises of € 554.8 million, or approximately $ 587.3 million, as of September 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.

4 unchanged sentences

In the case that our hedged forecasted fuel consumption is not probable of occurring, hedge accounting will be discontinued and the related accumulated other comprehensive gain or loss will be reclassified to Other income (expense) immediately.

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.

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 (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:

For the quarter ended September 30, 2023, we discontinued cash flow hedge accounting on certain fuel swap agreements, which resulted in an immaterial gain.

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

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

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

Fuel Swap Agreements

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

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

Designated as hedges:

4 unchanged sentences

Fuel Swap Agreements

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

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

Designated hedges as a % of projected fuel purchases:

2 unchanged sentences

2025 39 % — %

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.

As of September 30, 2023, there was $ 55.6 million of estimated unrealized net gain 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 June 30, 2023 As of December 31, 2022 Balance Sheet Location As of June 30, 2023 As of December 31, 2022

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

Fair Value Fair Value Fair Value Fair Value

6 unchanged sentences

Total derivatives designated as hedging instruments under 815-20 $ 216,297 $ 203,802 $ 172,948 $ 135,608

Derivatives not designated as hedging instruments under ASC 815-20

Fuel swaps Other Assets 1,584 — Other long-term liabilities — —

Total derivatives not designated as hedging instruments under 815-20 1,584 — — —

Total derivatives $ 217,881 $ 203,802 $ 172,948 $ 135,608

(1) Subtopic 815-20 “ Hedging-General ” under ASC 815.

2 unchanged sentences

Non-derivative instrument designated as

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

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

Foreign currency debt Current portion of long-term debt $ 61,806 $ 62,282

7 unchanged sentences

Income on Hedged Item

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

Quarter Ended September 30, 2023 Quarter Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Quarter Ended September 30, 2023 Quarter Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

Interest rate swaps Interest expense, net of interest capitalized $ — $ 966 $ — $ ( 3,569 ) $ — $ ( 4,417 ) $ — $ 4,534

4 unchanged sentences

Comprehensive Loss on Derivatives

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

Quarter Ended September 30, 2023 Quarter Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

Interest rate swaps $ 22,639 $ 55,016 $ 35,439 $ 159,132

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 Income (Loss)

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

Non-derivative instruments under ASC 815-20 Net

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

Investment Hedging Relationships Quarter Ended September 30, 2023 Quarter Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

Foreign Currency Debt $ 18,262 $ 22,464 $ 7,024 $ 42,023

1 unchanged sentence

The effect of derivatives not designated as hedging instruments on the consolidated financial statements was as follows (in thousands):

Amount of Gain (Loss) Recognized in Income on Derivatives

Amount of (Loss) Gain Recognized in Income on Derivatives

Derivatives Not Designated as Hedging

1 unchanged sentence

Gain (Loss) Recognized in

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

Income on Derivatives Quarter Ended September 30, 2023 Quarter Ended September 30, 2022 Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022

Foreign currency forward contracts Other (expense) income $ ( 42,786 ) $ ( 88,440 ) $ ( 30,414 ) $ ( 176,322 )

6 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 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;

As of September 30, 2023, our senior unsecured debt credit rating was BB- by Standard & Poor's and B1 by Moody's.

As of September 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