ROYAL CARIBBEAN CRUISES LTD [RCL] Filings

10-Q 1 rcl-20220331.htm 10-Q rcl-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-11884

ROYAL CARIBBEAN CRUISES LTD.

(Exact name of registrant as specified in its charter)


Republic of Liberia						98-0081645
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1050 Caribbean Way, Miami, Florida 33132

(Address of principal executive offices) (zip code)

(305) 539-6000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

RCL

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 254,956,303 shares of common stock outstanding as of May 2, 2022.

Table of Contents

ROYAL CARIBBEAN CRUISES LTD.

TABLE OF CONTENTS


			Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements			1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			33

Item 3. Quantitative and Qualitative Disclosures About Market Risk			46

Item 4. Controls and Procedures			46

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			47

Item 1A. Risk Factors			47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			61

Item 6. Exhibits			62

SIGNATURES			63

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited; in thousands, except per share data)


	Quarter Ended March 31,
	2022		2021
Passenger ticket revenues	$	651,858	$	20,844
Onboard and other revenues	407,373		21,170
Total revenues	1,059,231		42,014
Cruise operating expenses:
Commissions, transportation and other	150,343		2,949
Onboard and other	74,439		4,481
Payroll and related	349,618		96,636
Food	100,184		8,472
Fuel	188,480		41,822
Other operating	321,705		129,127
Total cruise operating expenses	1,184,769		283,487
Marketing, selling and administrative expenses	394,030		258,041
Depreciation and amortization expenses	339,467		310,166
Impairment and credit losses (recoveries)	173		(449)
Operating Loss	(859,208)		(809,231)
Other income (expense):
Interest income	3,322		4,861
Interest expense, net of interest capitalized	(277,659)		(272,514)
Equity investment loss	(31,059)		(59,871)
Other (expense) income	(2,538)		5,033
	(307,934)		(322,491)
Net Loss	$	(1,167,142)	$	(1,131,722)
Loss per Share:
Basic	$	(4.58)	$	(4.66)
Diluted	$	(4.58)	$	(4.66)
Weighted-Average Shares Outstanding:
Basic	254,821		243,004
Diluted	254,821		243,004
Comprehensive Loss
Net Loss	$	(1,167,142)	$	(1,131,722)
Other comprehensive income:
Foreign currency translation adjustments	7,778		9,722
Change in defined benefit plans	12,597		10,463
Gain on cash flow derivative hedges	195,901		10,302
Total other comprehensive income	216,276		30,487
Comprehensive Loss	$	(950,866)	$	(1,101,235)

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

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	As of
	March 31,		December 31,
	2022		2021
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,968,504	$	2,701,770
Trade and other receivables, net of allowances of $6,099 and $13,411 at March 31, 2022 and December 31, 2021, respectively	506,160		408,067
Inventories	179,466		150,224
Prepaid expenses and other assets	344,648		286,026
Derivative financial instruments	178,161		54,184
Total current assets	3,176,939		3,600,271
Property and equipment, net	26,940,867		25,907,949
Operating lease right-of-use assets	535,532		542,128
Goodwill	809,435		809,383
Other assets, net of allowances of $86,594 and $86,781 at March 31, 2022 and December 31, 2021, respectively	1,477,225		1,398,624
Total assets	$	32,939,998	$	32,258,355
Liabilities and Shareholders’ Equity
Current liabilities
Current portion of long-term debt	$	2,558,463	$	2,243,131
Current portion of operating lease liabilities	74,234		68,922
Accounts payable	668,158		545,978
Accrued interest	263,347		251,974
Accrued expenses and other liabilities	774,007		887,575
Derivative financial instruments	101,554		127,236
Customer deposits	3,567,401		3,160,867
Total current liabilities	8,007,164		7,285,683
Long-term debt	19,943,513		18,847,209
Long-term operating lease liabilities	523,924		534,726
Other long-term liabilities	476,469		505,181
Total liabilities	28,951,070		27,172,799

Shareholders’ equity
Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding)	—		—
Common stock ($0.01 par value; 500,000,000 shares authorized; 282,973,716 and 282,703,246 shares issued, March 31, 2022 and December 31, 2021, respectively)	2,830		2,827
Paid-in capital	7,267,545		7,557,297
Retained (deficit) earnings	(718,609)		302,276
Accumulated other comprehensive loss	(494,609)		(710,885)
Treasury stock (28,018,385 and 27,882,987 common shares at cost, March 31, 2022 and December 31, 2021, respectively)	(2,068,229)		(2,065,959)
Total shareholders’ equity	3,988,928		5,085,556
Total liabilities and shareholders’ equity	$	32,939,998	$	32,258,355

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


ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
	Three Months Ended March 31,
	2022		2021
Operating Activities
Net Loss	$	(1,167,142)	$	(1,131,722)
Adjustments:
Depreciation and amortization	339,467		310,166
Impairment and credit losses (recoveries)	173		(449)
Net deferred income tax benefit	(3,067)		(3,556)
Loss on derivative instruments not designated as hedges	10,873		491
Share-based compensation expense	22,839		18,834
Equity investment loss	31,059		59,871
Amortization of debt issuance costs	39,341		35,581
Amortization of debt discounts and premiums	3,849		29,304
Changes in operating assets and liabilities:
Increase in trade and other receivables, net	(32,236)		(72,397)
Increase in inventories	(29,242)		(3,708)
Increase in prepaid expenses and other assets	(124,394)		(26,118)
Increase (decrease) in accounts payable	112,426		(7,499)
Increase (decrease) in accrued interest	11,373		(15,726)
Decrease in accrued expenses and other liabilities	(130,441)		(134,113)
Increase in customer deposits	406,534		95,923
Other, net	(20,259)		35,935
Net cash used in operating activities	(528,847)		(809,183)
Investing Activities
Purchases of property and equipment	(1,363,086)		(1,061,691)
Cash received on settlement of derivative financial instruments	5,650		3,758
Cash paid on settlement of derivative financial instruments	(77,853)		(27,362)
Investments in and loans to unconsolidated affiliates	—		(70,369)
Cash received on loans to unconsolidated affiliates	4,444		12,519
Proceeds from the sale of property and equipment and other assets	65		175,439
Other, net	(12,361)		146
Net cash used in investing activities	(1,443,141)		(967,560)
Financing Activities
Debt proceeds	2,349,969		2,494,077
Debt issuance costs	(93,763)		(82,115)
Repayments of debt	(1,007,632)		(427,978)
Repayments of commercial paper notes	—		(414,570)
Proceeds from common stock issuances	—		1,617,234
Other, net	(10,843)		(2,724)
Net cash provided by financing activities	1,237,731		3,183,924
Effect of exchange rate changes on cash	991		(192)
Net (decrease) increase in cash and cash equivalents	(733,266)		1,406,989

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


ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
	Three Months Ended March 31,
	2022		2021
Cash and cash equivalents at beginning of period	2,701,770		3,684,474
Cash and cash equivalents at end of period	$	1,968,504	$	5,091,463
Supplemental Disclosure
Cash paid during the period for:
Interest, net of amount capitalized	$	225,771	$	228,877
Non-cash Investing Activities
Notes receivable issued upon sale of property and equipment and other assets	$	—	$	16,000
Purchase of property and equipment included in accounts payable and accrued expenses and other liabilities	$	31,899	$	26,882

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

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited; in thousands)


	Common Stock		Paid-in Capital		Retained Earnings (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
Activity related to employee stock plans	3		17,888		37		—		—		17,928

Cumulative effect of adoption of Accounting Standards Update 2020-06	—		(307,640)		146,220		—		—		(161,420)


Changes related to cash flow derivative hedges	—		—		—		195,901		—		195,901
Change in defined benefit plans	—		—		—		12,597		—		12,597
Foreign currency translation adjustments	—		—		—		7,778		—		7,778
Purchase of treasury stock	—		—		—		—		(2,270)		(2,270)
Net Loss	—		—		(1,167,142)		—		—		(1,167,142)
Balance at March 31, 2022	$	2,830	$	7,267,545	$	(718,609)	$	(494,609)	$	(2,068,229)	$	3,988,928


	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total Shareholders' Equity
Balance at January 1, 2021	$	2,652	$	5,998,574	$	5,562,775	$	(739,341)	$	(2,063,991)	$	8,760,669
Activity related to employee stock plans	2		18,638		—		—		—		18,640
Common stock issuance	170		1,496,106		—		—		—		1,496,276
Changes related to cash flow derivative hedges	—		—		—		10,302		—		10,302
Change in defined benefit plans	—		—		—		10,463		—		10,463
Foreign currency translation adjustments	—		—		—		9,722		—		9,722
Purchase of treasury stock	—		—		—		—		(1,968)		(1,968)
Net Loss	—		—		(1,131,722)		—		—		(1,131,722)
Balance at March 31, 2021	$	2,824	$	7,513,318	$	4,431,053	$	(708,854)	$	(2,065,959)	$	9,172,382

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

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

As used in this Quarterly Report on Form 10-Q, the terms “Royal Caribbean,” "Royal Caribbean Group," the “Company,” “we,” “our” and “us” refer to Royal Caribbean Cruises Ltd. and, depending on the context, Royal Caribbean Cruises Ltd.’s consolidated subsidiaries and/or affiliates. The terms “Royal Caribbean International,” “Celebrity Cruises,” and "Silversea Cruises" refer to our wholly owned global cruise brands. Throughout this Quarterly Report on Form 10-Q, we also refer to our partner brands in which we hold an ownership interest, including “TUI Cruises” and "Hapag-Lloyd Cruises." However, because these partner brands are unconsolidated investments, our operating results and other disclosures herein do not include these brands unless otherwise specified. In accordance with cruise vacation industry practice, the term “berths” is determined based on double occupancy per cabin even though many cabins can accommodate three or more passengers. This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021.

This Quarterly Report on Form 10-Q also includes trademarks, trade names and service marks of other companies. Use or display by us of other parties’ trademarks, trade names or service marks is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, these other parties other than as described herein.

Note 1. General

Description of Business

We are a global cruise company. We own and operate three global cruise brands: Royal Caribbean International, Celebrity Cruises and Silversea Cruises (collectively, our "Global Brands"). We also own a 50% joint venture interest in TUI Cruises GmbH ("TUIC"), which operates the German brands TUI Cruises and Hapag-Lloyd Cruises (collectively, our "Partner Brands"). 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 62 ships as of March 31, 2022. Our ships offer a selection of worldwide itineraries that call on more than 1,000 destinations on all seven continents.

Management's Plan and Liquidity

During 2021, we restarted our global cruise operations in a phased manner, following our voluntary suspension of global cruise operations that commenced in March of 2020 in response to the COVID-19 pandemic. Since then, we have steadily increased the number of ships that have returned to service. As of March 31, 2022, we returned to service 54 of our Global and Partner Brand ships, representing close to 90% of our worldwide capacity. Our return to service efforts incorporate our enhanced health and safety protocols, and the requirements of regulatory agencies, which has resulted in reduced guest occupancy, modified itineraries and vaccination protocols.

Uncertainties remain as to the continuing effects COVID-19 will have on our operations, including potential increases in infection rates, new variants, and renewed governmental action to slow the spread of COVID-19, which may lead us to cancel or modify certain of our Global Brands’ cruise sailings. Additionally, there is uncertainty surrounding consumer behavior and demand for cruising. The continuing effects of COVID-19 to our guest cruise operations and the increased uncertainty given the current war in Ukraine, including its effect on the price of fuel and food, are collectively having a material negative impact on our business, including our liquidity, financial position and results of operations.

Significant events affecting travel, including COVID-19, typically impact the booking pattern for cruise vacations, with the full extent of the impact generally determined by the length of time the event influences travel decisions. The estimation of our future liquidity requirements include numerous assumptions that are subject to various risks and uncertainties. The principal assumptions used to estimate our future liquidity requirements consist of:

•Expected continued resumption of cruise operations and timing of cash collections for cruise bookings;

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

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

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

There can be no assurance that our assumptions and estimates are accurate due to the uncertainties noted above. Since the start of the pandemic, we have implemented a number of proactive measures to mitigate the financial and operational impacts of COVID-19, including reduction of capital expenditures and operating expenses, the issuance of debt and shares of our common stock, the amendment of credit agreements to defer payments, the waiver and/or modification of covenant requirements and the suspension of dividend payments. Additionally, we expect to continue to pursue refinancing opportunities to reduce interest expense and extend maturities.

As of March 31, 2022, we had liquidity of $3.8 billion, including $1.1 billion of undrawn revolving credit facility capacity, $2.0 billion in cash and cash equivalents, and a $0.7 billion commitment for a 364-day term loan facility available to draw on at any time prior to August 12, 2022. Our revolving credit facilities were partially utilized through a combination of amounts drawn and letters of credit issued under the facilities as of March 31, 2022.

As of March 31, 2022, we were in compliance with our financial covenants and we estimate we will be in compliance for the next twelve months. Refer to Note 6. Debt for further information regarding the amendments made to our debt facilities and credit card processing agreements, including related covenants.

Based on our assumptions regarding the impact of COVID-19 and our resumption of operations, as well as our present financial condition, we believe that we have sufficient financial resources to fund our obligations for at least the next twelve months from the issuance of these financial statements.

Beyond the next 12 months, in June of 2023, approximately $3.2 billion of long- term debt will become due. Accordingly, in addition to our $3.8 billion liquidity as of March 31 2022, in February 2022 we entered into certain agreements with Morgan Stanley & Co., LLC (“MS”) where MS agreed to provide backstop committed financing to refinance, repurchase and/or repay in whole or in part our existing and outstanding 10.875% Senior Secured Notes due 2023, 9.125% Senior Priority Guaranteed Notes due 2023 (the "Priority Guaranteed Notes"), and 4.25% Convertible Notes due 2023. Pursuant to the agreements, we may, at our sole option, issue and sell to MS (subject to the satisfaction of certain conditions) five-year senior unsecured notes with gross proceeds of up to $3.15 billion at any time between April 1, 2023 and June 29, 2023, to refinance the aforementioned notes.

If the Company is unable to maintain the required minimum level of liquidity or negotiate its minimum liquidity requirements, it could have a significant adverse effect on the Company’s business, financial condition and operating results.

Basis for Preparation of Consolidated Financial Statements

The unaudited consolidated financial statements are presented pursuant to the rules and regulations of the Securities and Exchange Commission. In our opinion, these statements include all adjustments necessary for a fair statement of the results of the interim periods reported herein. Adjustments consist only of normal recurring items, except for any items discussed in the notes below. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted as permitted by such Securities and Exchange Commission rules and regulations. Estimates are required for the preparation of financial statements in accordance with these principles. Actual results could differ from these estimates. Refer to Note 2. Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of our significant accounting policies.

All significant intercompany accounts and transactions are eliminated in consolidation. We consolidate entities over which we have control, usually evidenced by a direct ownership interest of greater than 50%, and variable interest entities where we are determined to be the primary beneficiary. Refer to Note 5. 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.

Effective March 19, 2021, we sold our wholly-owned brand, Azamara Cruises ("Azamara"), including its three-ship fleet and associated intellectual property, to Sycamore Partners for $201 million, subject to closing adjustments. The March 2021 sale of Azamara did not represent a strategic shift that will have a major effect on our operations and financial results, as we continue to provide similar itineraries to and source passengers from the markets served by the Azamara business. Therefore, the sale of Azamara did not meet the criteria for discontinued operations reporting. Effective March 19, 2021, we no longer consolidate Azamara's balance sheet nor recognize its results of operations in our consolidated financial statements. We recognized an immaterial gain on the sale during the quarter ended March 31, 2021 and have agreed to provide certain transition services to Azamara for a period of time for a fee.

Prior to October 1, 2021, we consolidated the operating results of Silversea Cruises on a three-month reporting lag to allow for more timely preparation of our consolidated financial statements. Effective October 1, 2021, we eliminated the three-

month reporting lag to reflect Silversea Cruises' financial position, results of operations and cash flows concurrently and consistently with the fiscal calendar of the Company ("elimination of the Silversea reporting lag"). The elimination of the Silversea reporting lag represents a change in accounting principle which we believe to be preferable because it provides more current information to the users of our financial statements. A change in accounting principle requires retrospective application, if material. The impact of the elimination of the reporting lag was immaterial to prior periods and was immaterial for our fiscal year ended December 31, 2021. As a result, we have accounted for this change in accounting principle in our consolidated results for the quarter and year ended December 31, 2021. Accordingly, the results of Silversea Cruises from January 1, 2022 through March 31, 2022 are included in our consolidated statement of comprehensive loss for the quarter ended March 31, 2022 and the results of Silversea Cruises from October 1, 2020 through December 31, 2020 are included in our consolidated statement of comprehensive loss for the quarter ended March 31, 2021.

Note 2. Summary of Significant Accounting Policies

Adoption of Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) ("ASU 2020-06"), which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815 or for convertible debt issued at a substantial premium. The ASU removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception, permitting more contracts to qualify for it. In addition, the guidance eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The guidance also decreases interest expense due to the reversal of the remaining non-cash convertible debt discount. On January 1, 2022, we adopted this pronouncement using the modified retrospective approach to recognize our convertible notes as single liability instruments given they do not qualify as derivatives under ASC 815, nor were they issued at a substantial premium. Accordingly, as of January 1, 2022, we recorded a $161.4 million increase to debt, primarily as a result of the reversal of the remaining non-cash convertible debt discount, as well as a reduction of $307.6 million to additional paid in capital, which resulted in a cumulative effect on adoption of approximately $146.2 million to increase retained earnings.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB") issued Accounting Standard Update (“ASU") No. 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions to the current guidance on contract modifications and hedging relationships to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. Subsequently, in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which presents amendments to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The guidance in both ASUs was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We are currently evaluating the impact of the new guidance on our consolidated financial statements. The impact, if any, will be dependent on the terms of any future contract modifications related to a change in reference rate.

Note 3. Revenues

Revenue Recognition

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. Our performance obligation under these contracts is to provide a cruise vacation in exchange for the ticket price. We satisfy this performance obligation and recognize revenue over the duration of each cruise, which generally range from two to 25 nights.

Passenger ticket revenues include charges to our guests for port costs that vary with passenger head counts. 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 $76.9 million and $1.5 million for the quarters ended March 31, 2022 and 2021, 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 passengers during a cruise and recognize revenue over the duration of the related cruise.

As a practical expedient, we have omitted disclosures on our remaining performance obligations as the duration of our contracts with customers is less than a year.

Disaggregated Revenues

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


	Quarter Ended March 31,
	2022		2021
Revenues by itinerary
North America (1)	$	889,087	$	—
Asia/Pacific	34,633		29,885
Europe	1,425		—
Other regions(2)	79,633		810
Total revenues by itinerary	1,004,778		30,695
Other revenues(3)	54,453		11,319
Total revenues	$	1,059,231	$	42,014

(1)Includes the United States, Canada, Mexico and the Caribbean.

(2) Includes seasonality impacted itineraries primarily in South and Latin American countries.

(3) Includes revenues primarily related to cancellation fees, vacation protection insurance, pre- and post-cruise tours and fees for operating certain port facilities. Amounts also include revenues related to procurement and management related services we perform on behalf of our unconsolidated affiliates. Refer to Note 5. Other Assets for more information on our unconsolidated affiliates.

Passenger ticket revenues are attributed to geographic areas based on where the reservation originates. For the quarters ended March 31, 2022 and 2021, our guests were sourced from the following areas:


	Quarter Ended March 31,
	2022		2021
Passenger ticket revenues:
United States	84	%	—	%
Singapore	4	%	69	%
China	—	%	31	%
All other countries (1)	12	%	—	%

(1)No other individual country's revenue exceeded 10% for the quarters ended March 31, 2022 and 2021.

Customer Deposits and Contract Liabilities

Our payment terms generally require an upfront deposit to confirm a reservation, with the balance due prior to the cruise. 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 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. 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 $1.2 billion and $0.8 billion as of March 31, 2022 and December 31, 2021, respectively.

The COVID-19 pandemic has impacted the predictability of bookings and the associated customer deposits received. During the onset of the COVID-19 pandemic and subsequent emergence of related variants, we experienced significant cancellations, which led to the issuance of cash refunds to customers or credits for future cruises. As of March 31, 2022, refunds due to customers were $35.2 million compared to $38.8 million as of December 31, 2021, and are included within Accounts payable in our consolidated balance sheets.

We have provided flexibility to guests with bookings on sailings cancelled due to COVID-19 by allowing guests to receive future cruise credits (“FCC”) or elect to receive refunds in cash. As of March 31, 2022, our customer deposit balance includes approximately $0.6 billion of unredeemed FCCs. As of March 31, 2022, the expiration date of the FCCs was extended through December 31, 2022, or one year from the original sailing date, whichever is later. Given the uncertainty of travel demand caused by COVID-19 and lack of comparable historical experience of FCC redemptions, we are unable to estimate the number of FCCs that may expire unused in future periods and get recognized as breakage. We will update our breakage analysis as future information is received.

Contract Receivables and Contract Assets

Although we generally require full payment from our customers prior to their cruise, we grant credit terms to a relatively small portion of our revenue sourced in select markets outside of the United States. 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 voyage. In addition, we have receivables due from concessionaires onboard our vessels. These receivables are included within Trade and other receivables, net in our consolidated balance sheets.

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, 2022 and December 31, 2021, our contract assets were $95.4 million and $52.9 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.

Assets Recognized from the Costs to Obtain a Contract with a Customer

Prepaid travel advisor commissions 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 were $94.7 million as of March 31, 2022 and $75.4 million as of December 31, 2021. Substantially all of our prepaid travel advisor commissions at December 31, 2021 were expensed and reported primarily within Commissions, transportation and other in our consolidated statements of comprehensive loss for the quarter ended March 31, 2022.

Note 4. (Loss) Per Share

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


	Quarter Ended March 31,
	2022		2021
Net (Loss) for basic and diluted loss per share	$	(1,167,142)	$	(1,131,722)
Weighted-average common shares outstanding	254,821		243,004
Diluted weighted-average shares outstanding	254,821		243,004
Basic (loss) per share	$	(4.58)	$	(4.66)
Diluted (loss) per share	$	(4.58)	$	(4.66)

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. As we had net losses for the three months ended March 31, 2022 and March 31, 2021, all potential common shares were determined to be antidilutive, resulting in the same basic and diluted net loss per share amounts for both these periods. There were approximately 23,407,179 and 413,501 antidilutive shares for the quarters ended March 31, 2022 and March 31, 2021, respectively.

Effective January 1, 2022, ASU 2020-06 eliminated the treasury stock method and instead required the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share when the instruments may be settled in cash or shares. Under the if-converted method, shares related to our convertible notes, to the extent dilutive, are assumed to be converted into common stock at the beginning of the reporting period. The required use of the if-converted

method did not impact our diluted net loss per share as the Company was in a net loss position. For further information regarding the adoption of ASU 2020-06, refer to Note 2. Summary of Significant Accounting Policies.

Note 5. Other Assets

A Variable Interest Entity (“VIE”) is an entity in which the equity investors have not provided enough equity to finance the entity’s activities or the equity investors: (1) cannot directly or indirectly make decisions about the entity’s activities through their voting rights or similar rights; (2) do not have the obligation to absorb the expected losses of the entity; (3) do not have the right to receive the expected residual returns of the entity; or (4) have voting rights that are not proportionate to their economic interests and the entity’s activities involve or are conducted on behalf of an investor with a disproportionately small voting interest.

We have determined that TUI Cruises GmbH ("TUIC"), our 50%-owned joint venture, which operates the brands TUI Cruises and Hapag-Lloyd Cruises, is a VIE. We have determined that we are not the primary beneficiary of TUIC. We believe that the power to direct the activities that most significantly impact TUIC’s economic performance is shared between ourselves and TUI AG, our joint venture partner. All the significant operating and financial decisions of TUIC require the consent of both parties, which we believe creates shared power over TUIC. Accordingly, we do not consolidate this entity and account for this investment under the equity method of accounting.

As of March 31, 2022, the net book value of our investment in TUIC was $404.0 million, primarily consisting of $286.2 million in equity and a loan of €99.1 million, or approximately $110.2 million based on the exchange rate at March 31, 2022. As of December 31, 2021, the net book value of our investment in TUIC was $444.4 million, primarily consisting of $322.4 million in equity and a loan of €103.0 million, or approximately $117.2 million based on the exchange rate at December 31, 2021. The loan, which was made in connection with the sale of Splendour of the Seas in April 2016, accrues interest at a rate of 6.25% per annum and is payable over 10 years. This loan is 50% guaranteed by TUI AG and is secured by a first priority mortgage on the ship. The majority of these amounts were included within Other assets in our consolidated balance sheets. During the quarter ended March 31, 2021, we and TUI AG each contributed €59.5 million, or approximately $69.9 million based on the exchange rate at March 31, 2021, of additional equity through a combination of cash contributions and conversion of existing receivables.

TUIC has various ship construction and financing agreements which include certain restrictions on each of our and TUI AG’s ability to reduce our current ownership interest in TUI Cruises below 37.55% through May 2033. Our investment amount and outstanding term loan are substantially our maximum exposure to loss in connection with our investment in TUIC.

We have determined that Grand Bahama Shipyard Ltd. ("Grand Bahama"), a ship repair and maintenance facility in which we have a 40% noncontrolling interest, is a VIE. This facility serves cruise and cargo ships, oil and gas tankers and offshore units. We utilize this facility, among other ship repair facilities, for our regularly scheduled drydocks and certain emergency repairs as may be required. During the quarter ended March 31, 2022, we made payments of $3.7 million to Grand Bahama for ship repair and maintenance services. 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.

As of March 31, 2022, we had exposure to credit loss in Grand Bahama consisting of a $10.6 million loan. Our loan to Grand Bahama matures March 2026 and bears interest at LIBOR plus 3.5% to 3.75%, capped at 5.75%. Interest payable on the loan is due on a semi-annual basis. During the quarter ended March 31, 2021, we received principal and interest payments of $8.9 million related to a term loan that had fully matured. We did not receive principal and interest payments during the quarter ended March 31, 2022. The outstanding loan balance is in non-accrual status and is included within Trade and other receivables, net and Other assets in our consolidated balance sheets. In addition, we are currently recognizing our share of net accumulated equity method losses against the carrying value of our loan receivable from Grand Bahama. We monitor credit risk associated with the loan through our participation on Grand Bahama’s board of directors along with our review of Grand Bahama’s financial statements and projected cash flows.

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,
	2022		2021
Share of equity (loss) income from investments	$	(31,059)	$	(59,871)
Dividends received (1)	$	423	$	—

(1) Represents dividends received from our investments accounted for under the equity method of accounting for the quarters ended March 31, 2022 and March 31, 2021.


	As of March 31, 2022		As of December 31, 2021
Total notes receivable due from equity investments	$	123,157	$	130,587
Less-current portion (1)	21,069		21,508
Long-term portion (2)	$	102,088	$	109,079

(1)Included within Trade and other receivables, net in our consolidated balance sheets.

(2)Included within Other assets in our consolidated balance sheets.

We also provide ship management services to TUIC and recorded the following as it relates to these services in our operating results within our consolidated statements of comprehensive income (loss) (in thousands):


	Quarter Ended March 31,
	2022		2021
Revenues	$	6,372	$	5,231
Expenses	$	1,826	$	1,275

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, 2022. 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. Based on these credit loss estimation factors, during the quarter ended March 31, 2022, we recorded a loss provision of $0.7 million. Our credit loss allowance beginning and ending balances as of January 1, 2022 and March 31, 2022 primarily relate to credit losses recognized on notes receivable for the previous sale of our property and equipment of $81.6 million and other receivable balances primarily related to loans due from travel advisors of $12.6 million.

The following table summarizes our credit loss allowance related to receivables for the three months ended March 31, 2022 (in thousands):


	Credit Loss Allowance
Beginning balance January 1, 2022	$	100,192
Loss provision for receivables	653
Write-offs	(8,152)
Ending balance March 31, 2022	$	92,693

Note 6. Debt

Debt consist of the following (in thousands):


	Interest Rate (1)	Maturities Through	As of March 31, 2022		As of December 31, 2021
Fixed rate debt:
Unsecured senior notes	3.70% to 9.13%	2022 - 2028	$	6,598,558	$	5,604,498
Secured senior notes	10.88% to 11.50%	2023 - 2025	2,357,803		2,354,037
Unsecured term loans	2.53% to 5.89%	2028 - 2034	4,114,508		2,860,567
Convertible notes	2.88% to 4.25%	2023	1,725,000		1,558,780
Total fixed rate debt			14,795,869		12,377,882
Variable rate debt:
Unsecured revolving credit facilities (2)	1.75% to 2.15%	2022 - 2024	1,909,342		2,899,342
USD unsecured term loan	1.84% to 4.95%	2022 - 2033	5,114,768		5,018,740
Euro unsecured term loan	1.15% to 2.25%	2022 - 2028	670,500		685,633
Total variable rate debt			7,694,610		8,603,715
Finance lease liabilities			428,387		472,275
Total debt (3)			22,918,866		21,453,872
Less: unamortized debt issuance costs			(416,890)		(363,532)
Total debt, net of unamortized debt issuance costs			22,501,976		21,090,340
Less—current portion			(2,558,463)		(2,243,131)
Long-term portion			$	19,943,513	$	18,847,209

(1) Interest rates based on outstanding loan balance as of March 31, 2022 and, for variable rate debt, include either LIBOR or EURIBOR plus the applicable margin.

(2) Includes $1.9 billion facility and $1.3 billion facility, the vast majority of which is due in 2024. Our $1.9 billion facility accrues interest at LIBOR plus a maximum interest rate margin of 1.30%, which interest was 1.75% as of March 31, 2022 and is subject to a facility fee of a maximum of 0.20%. Our $1.3 billion facility accrues interest at LIBOR plus a maximum interest rate margin of 1.70%, which interest was 2.15% as of March 31, 2022 and is subject to a facility fee of a maximum of 0.30%.

(3) At March 31, 2022 and December 31, 2021, the weighted average interest rate for total debt was 5.61% and 5.47%, respectively.

In January 2022, we took delivery of Wonder of the Seas. To finance the delivery, we borrowed a total of $1.3 billion under a credit agreement novated to us upon delivery of the ship in January 2022, resulting in an unsecured term loan which is 100% guaranteed by Bpifrance Assurance Export ("BpiFAE"), the official export credit agency ("ECA") of France. The unsecured loan amortizes semi-annually over 12 years and bears interest at a fixed rate of 3.18% per annum.

In January 2022, we issued $1.0 billion of senior notes (the "January 2022 Unsecured Notes") due in 2027 for net proceeds of approximately $990.0 million. Interest accrues on the January 2022 Unsecured Notes at a fixed rate of 5.375% per annum and is payable semi-annually in arrears. The proceeds from the January 2022 Unsecured Notes will be used to repay principal payments on debt maturing in 2022 (including to pay fees and expenses in connection with such repayments). Pending such debt maturities, we have temporarily applied the proceeds to repay borrowings under our revolving credit facilities, bringing our undrawn revolving credit facility capacity to $1.1 billion as of March 31, 2022.

In February 2022, we entered into certain agreements with MS where MS agreed to provide backstop committed financing to refinance, repurchase and/or repay in whole or in part our existing and outstanding 10.875% Senior Secured Notes due 2023, Priority Guaranteed Notes and 4.25% Convertible Notes due 2023. Pursuant to the agreements, we may, at our sole option, issue and sell to MS (subject to the satisfaction of certain conditions) five-year senior unsecured notes with gross proceeds of up to $3.15 billion at any time between April 1, 2023 and June 29, 2023, to refinance the aforementioned notes.

In April 2022, we took delivery of Celebrity Beyond. To finance the delivery, we borrowed a total of €0.7 billion under a credit agreement novated to us upon delivery of the ship in April 2022, resulting in an unsecured term loan which is 100% guaranteed by BpiFAE. The unsecured loan amortizes semi-annually over 12 years and bears interest at a fixed rate of 1.28% per annum.

As of March 31, 2022, our aggregate revolving borrowing capacity was $3.2 billion and was partially utilized through a combination of amounts drawn and letters of credits issued under the facilities. Certain of our surety agreements with third party providers for the benefit of certain agencies and associations that provide travel related bonds, allow the sureties to request collateral. We also have agreements with our credit card processors relating to customer deposits received by us for future voyages. These agreements allow the credit card processors to require us, under certain circumstances, to maintain a reserve that can be satisfied by posting collateral. As of March 31, 2022, we have posted letters of credit as collateral with our sureties and credit card processors under our revolving credit facilities in the amount of $117.2 million

Executed amendments are in place for the majority of our credit card processors, waiving reserve requirements tied to the breach of our financial covenants through at least September 30, 2022, with modified covenants thereafter, and as such, we do not anticipate any incremental collateral requirements for the processors covered by these waivers in the next 12 months. We have a reserve with a processor where the agreement was amended in the first quarter of 2021, such that proceeds are withheld in reserve, until the sailing takes place or the funds are refunded to the customer. The maximum projected exposure with the processor, including amounts currently withheld and reported in Trade and other receivables, is approximately $293.9 million. The amount and timing are dependent on future factors that are uncertain, such as the date we return to operations, volume and value of future deposits and whether we transfer our business to other processors. If we require additional waivers on the credit card processing agreements and are not able to obtain them, this could lead to the termination of these agreements or the trigger of reserve requirements.

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, 2022, 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. We classify these fees within Amortization of debt issuance costs in our consolidated statements of cash flows. Prior to the loan being drawn, we present these fees within Other assets in our consolidated balance sheets. Once the loan is drawn, such fees are classified as a discount to the related loan, or contra-liability account, within Current portion of long-term debt or long-term debt.

The following is a schedule of annual maturities on our total debt, net of debt issuance costs and including finance leases, as of March 31, 2022 for each of the next five years (in thousands):


Year
Remainder of 2022			2,273,401
2023			5,665,482
2024			3,128,924
2025			2,417,492
2026			2,614,571
Thereafter			6,402,106
			22,501,976

Note 7. Leases

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, 2022 and December 31, 2021. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. Our operating leases include Silver Explorer, operated by Silversea Cruises. The operating lease for Silver Explorer will expire in 2023.

For some of our real estate leases and berthing agreements, we do have the option to extend our current lease term. For those lease agreements with renewal options, the renewal periods for real estate leases range from one to 10 years and the renewal periods for berthing agreements range from one to 20 years. Generally, we do not include renewal options as a component of our present value calculation for berthing agreements. However, for certain real estate leases, we include them.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate in determining the present value of lease payments. We estimate our incremental borrowing rates based on LIBOR and U.S. Treasury note rates corresponding to lease terms increased by the Company’s credit risk spread and reduced by the estimated impact of collateral. In addition, we have lease agreements with lease and non-lease components, which are generally accounted for separately. However, for berthing agreements, we account for the lease and non-lease components as a single lease component.

Finance Leases

In June 2019, the Company entered into a new master lease agreement (“Master Lease”) with Miami-Dade County related to the buildings and surrounding land located at its Miami headquarters, which has been classified as a finance lease in accordance with ASC 842, Leases. In January of 2022, we executed a modification to the Master Lease to extend the expiration of the lease from 2072 to 2074, which continues to include the two five-year options to extend the lease. We continue to consider the probability of exercising the two five-year options as reasonably certain. The modification of the Master Lease did not change the classification of the lease. The total aggregate amount of the finance lease liabilities recorded for this Master Lease are $100.3 million and $127.0 million as of March 31, 2022 and December 31, 2021, 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. Due to the bargain purchase option at the end of the lease term in 2036, whereby Silversea Cruises is reasonably certain of obtaining ownership of the ship, Silver Dawn is accounted for as a finance lease. 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 are $279.0 million and $283.7 million as of March 31, 2022 and December 31, 2021, respectively.

Silversea Cruises operates the Silver Whisper under a finance lease. The finance lease for Silver Whisper will expire in 2023, subject to an option to purchase the ship. Additionally, certain scheduled payments have been deferred and are reflected in Long-term debt in our Consolidated Balance Sheet as of March 31, 2022 and December 31, 2021. The total aggregate amount of the finance lease liabilities recorded for this ship was $16.6 million and $24.1 million at March 31, 2022 and December 31, 2021, respectively. The lease payments on the Silver Whisper are subject to adjustments based on the LIBOR rate.

The carrying amounts of these ships are reported within Property and equipment, net in our Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021.

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


	Consolidated Statement of Comprehensive Loss Classification	Quarter Ended March 31, 2022		Quarter Ended March 31, 2021
Lease costs:
Operating lease costs	Commission, transportation and other	$	22,729	$	—
Operating lease costs	Other operating expenses	5,471		5,130
Operating lease costs	Marketing, selling and administrative expenses	4,776		6,035
Financial lease costs:
Amortization of right-of-use-assets	Depreciation and amortization expenses	6,093		3,744
Interest on lease liabilities	Interest expense, net of interest capitalized	4,600		310
Total lease costs		$	43,669	$