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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2017March 31, 2022

OR
o☐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 Liberia98-0081645
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareRCLNew 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 ý☒  No o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes ý☒  No o☐
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 x☒
Accelerated filer o☐
Non-accelerated filer o☐
Smaller reporting company o
☐
Emerging growth company o
☐		(Do not check if a smaller reporting 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. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o☐  No ý
☒
There were 214,088,950254,956,303 shares of common stock outstanding as of October 30, 2017.May 2, 2022.


























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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements


ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)LOSS
(unaudited; in thousands, except per share data)
Quarter Ended March 31,
 20222021
Passenger ticket revenues$651,858 $20,844 
Onboard and other revenues407,373 21,170 
Total revenues1,059,231 42,014 
Cruise operating expenses:  
Commissions, transportation and other150,343 2,949 
Onboard and other74,439 4,481 
Payroll and related349,618 96,636 
Food100,184 8,472 
Fuel188,480 41,822 
Other operating321,705 129,127 
Total cruise operating expenses1,184,769 283,487 
Marketing, selling and administrative expenses394,030 258,041 
Depreciation and amortization expenses339,467 310,166 
Impairment and credit losses (recoveries)173 (449)
Operating Loss(859,208)(809,231)
Other income (expense):  
Interest income3,322 4,861 
Interest expense, net of interest capitalized(277,659)(272,514)
Equity investment loss(31,059)(59,871)
Other (expense) income(2,538)5,033 
 (307,934)(322,491)
Net Loss$(1,167,142)$(1,131,722)
Loss per Share:  
Basic$(4.58)$(4.66)
Diluted$(4.58)$(4.66)
Weighted-Average Shares Outstanding:  
Basic254,821 243,004 
Diluted254,821 243,004 
Comprehensive Loss  
Net Loss$(1,167,142)$(1,131,722)
Other comprehensive income:  
Foreign currency translation adjustments7,778 9,722 
Change in defined benefit plans12,597 10,463 
Gain on cash flow derivative hedges195,901 10,302 
Total other comprehensive income216,276 30,487 
Comprehensive Loss$(950,866)$(1,101,235)


 Quarter Ended September 30,
 2017 2016
Passenger ticket revenues$1,893,152
 $1,899,956
Onboard and other revenues676,392
 663,785
Total revenues2,569,544
 2,563,741
Cruise operating expenses: 
  
Commissions, transportation and other409,597
 400,933
Onboard and other157,041
 159,887
Payroll and related210,764
 214,081
Food126,223
 125,732
Fuel160,752
 178,772
Other operating253,892
 260,718
Total cruise operating expenses1,318,269
 1,340,123
Marketing, selling and administrative expenses273,637
 259,327
Depreciation and amortization expenses240,150
 229,328
Operating Income737,488
 734,963
Other income (expense): 
  
Interest income4,693
 6,472
Interest expense, net of interest capitalized(73,233) (82,610)
Equity investment income85,120
 46,539
Other expense(1,226) (12,107)
 15,354
 (41,706)
Net Income$752,842
 $693,257
Earnings per Share: 
  
Basic$3.51
 $3.23
Diluted$3.49
 $3.21
Weighted-Average Shares Outstanding: 
  
Basic214,694
 214,819
Diluted215,824
 215,667
Comprehensive Income 
  
Net Income$752,842
 $693,257
Other comprehensive income (loss): 
  
Foreign currency translation adjustments5,889
 4,043
Change in defined benefit plans(1,990) (5,051)
Gain on cash flow derivative hedges230,245
 95,536
Total other comprehensive income234,144
 94,528
Comprehensive Income$986,986
 $787,785
The accompanying notes are an integral part of these consolidated financial statements.statements

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ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)BALANCE SHEETS
(unaudited; in thousands, except per share data)
 As of
 March 31,December 31,
 20222021
 (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, respectively506,160 408,067 
Inventories179,466 150,224 
Prepaid expenses and other assets344,648 286,026 
Derivative financial instruments178,161 54,184 
Total current assets3,176,939 3,600,271 
Property and equipment, net26,940,867 25,907,949 
Operating lease right-of-use assets535,532 542,128 
Goodwill809,435 809,383 
Other assets, net of allowances of $86,594 and $86,781 at March 31, 2022 and December 31, 2021, respectively1,477,225 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 liabilities74,234 68,922 
Accounts payable668,158 545,978 
Accrued interest263,347 251,974 
Accrued expenses and other liabilities774,007 887,575 
Derivative financial instruments101,554 127,236 
Customer deposits3,567,401 3,160,867 
Total current liabilities8,007,164 7,285,683 
Long-term debt19,943,513 18,847,209 
Long-term operating lease liabilities523,924 534,726 
Other long-term liabilities476,469 505,181 
Total liabilities28,951,070 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 capital7,267,545 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’ equity3,988,928 5,085,556 
Total liabilities and shareholders’ equity$32,939,998 $32,258,355 

 Nine Months Ended September 30,
 2017 2016
Passenger ticket revenues$4,892,760
 $4,794,653
Onboard and other revenues1,880,618
 1,792,145
Total revenues6,773,378
 6,586,798
Cruise operating expenses: 
  
Commissions, transportation and other1,060,176
 1,060,391
Onboard and other395,472
 399,739
Payroll and related636,861
 671,955
Food369,198
 371,759
Fuel508,914
 531,283
Other operating780,257
 857,161
Total cruise operating expenses3,750,878
 3,892,288
Marketing, selling and administrative expenses874,957
 852,435
Depreciation and amortization expenses710,836
 661,712
Operating Income1,436,707
 1,180,363
Other income (expense): 
  
Interest income16,756
 14,875
Interest expense, net of interest capitalized(230,182) (226,803)
Equity investment income120,359
 94,832
Other expense (including a $21.7 million loss related to the first quarter 2016 elimination of the Pullmantur reporting lag)(6,546) (40,965)
 (99,613) (158,061)
Net Income$1,337,094
 $1,022,302
Earnings per Share: 
  
Basic$6.22
 $4.74
Diluted$6.19
 $4.72
Weighted-Average Shares Outstanding: 
  
Basic214,882
 215,663
Diluted215,905
 216,575
Comprehensive Income 
  
Net Income$1,337,094
 $1,022,302
Other comprehensive income (loss): 
  
Foreign currency translation adjustments14,210
 8,423
Change in defined benefit plans(6,280) (12,148)
Gain on cash flow derivative hedges381,660
 254,624
Total other comprehensive income389,590
 250,899
Comprehensive Income$1,726,684
 $1,273,201
The accompanying notes are an integral part of these consolidated financial statements.statements

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ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three Months Ended March 31,
 20222021
Operating Activities  
Net Loss$(1,167,142)$(1,131,722)
Adjustments:  
Depreciation and amortization339,467 310,166 
Impairment and credit losses (recoveries)173 (449)
Net deferred income tax benefit(3,067)(3,556)
Loss on derivative instruments not designated as hedges10,873 491 
Share-based compensation expense22,839 18,834 
Equity investment loss31,059 59,871 
Amortization of debt issuance costs39,341 35,581 
Amortization of debt discounts and premiums3,849 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 payable112,426 (7,499)
Increase (decrease) in accrued interest11,373 (15,726)
Decrease in accrued expenses and other liabilities(130,441)(134,113)
Increase in customer deposits406,534 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 instruments5,650 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 affiliates4,444 12,519 
Proceeds from the sale of property and equipment and other assets65 175,439 
Other, net(12,361)146 
Net cash used in investing activities(1,443,141)(967,560)
Financing Activities  
Debt proceeds2,349,969 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 activities1,237,731 3,183,924 
Effect of exchange rate changes on cash991 (192)
Net (decrease) increase in cash and cash equivalents(733,266)1,406,989 
 As of
 September 30, December 31,
 2017 2016
 (unaudited)  
Assets 
  
Current assets 
  
Cash and cash equivalents$139,950
 $132,603
Trade and other receivables, net285,332
 291,899
Inventories119,949
 114,087
Prepaid expenses and other assets200,125
 209,716
Derivative financial instruments52,796
 —
Total current assets798,152
 748,305
Property and equipment, net19,688,872
 20,161,427
Goodwill288,517
 288,386
Other assets1,323,773
 1,112,206
 $22,099,314
 $22,310,324
Liabilities and Shareholders’ Equity 
  
Current liabilities   
Current portion of long-term debt$1,515,708
 $1,285,735
Accounts payable384,536
 305,313
Accrued interest92,914
 46,166
Accrued expenses and other liabilities748,442
 692,322
Derivative financial instruments89,333
 146,592
Customer deposits2,226,179
 1,965,473
Total current liabilities5,057,112
 4,441,601
Long-term debt6,076,499
 8,101,701
Other long-term liabilities530,215
 645,610
Commitments and contingencies (Note 7)

 

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; 235,134,180 and 234,613,486 shares issued, September 30, 2017 and December 31, 2016, respectively)2,351
 2,346
Paid-in capital3,375,969
 3,328,517
Retained earnings8,862,369
 7,860,341
Accumulated other comprehensive loss(526,894) (916,484)
Treasury stock (21,059,191 and 20,019,237 common shares at cost, September 30, 2017 and December 31, 2016, respectively)(1,278,307) (1,153,308)
Total shareholders’ equity10,435,488
 9,121,412
 $22,099,314
 $22,310,324
The accompanying notes are an integral part of these consolidated financial statements.statements

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ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Three Months Ended March 31,
 20222021
Cash and cash equivalents at beginning of period2,701,770 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 
ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
 Nine Months Ended September 30,
 2017 2016
Operating Activities 
  
Net income$1,337,094
 $1,022,302
Adjustments: 
  
Depreciation and amortization710,836
 661,712
Net deferred income tax expense516
 1,601
(Gain) loss on derivative instruments not designated as hedges(56,836) 6,353
Share-based compensation expense52,469
 22,041
Equity investment income(120,359) (94,832)
Amortization of debt issuance costs37,562
 39,425
Gain on sale of property and equipment(30,902) —
Changes in operating assets and liabilities: 
  
Decrease in trade and other receivables, net16,245
 9,823
Increase in inventories(6,131) (6,379)
Decrease (increase) in prepaid expenses and other assets10,211
 (8,794)
Increase (decrease) in accounts payable77,436
 (17,313)
Increase in accrued interest46,748
 56,787
Increase in accrued expenses and other liabilities12,870
 17,929
Increase in customer deposits256,855
 197,277
Dividends received from unconsolidated affiliates107,267
 71,370
Other, net2,720
 21,650
Net cash provided by operating activities2,454,601
 2,000,952
Investing Activities 
  
Purchases of property and equipment(387,335) (2,313,831)
Cash received (paid) on settlement of derivative financial instruments57,004
 (172,878)
Investments in and loans to unconsolidated affiliates—
 (8,611)
Cash received on loans to unconsolidated affiliates31,633
 22,470
Proceeds from the sale of property and equipment230,000
 —
Other, net (1)
(9,313) (44,709)
Net cash used in investing activities(78,011) (2,517,559)
Financing Activities 
  
Debt proceeds3,682,000
 6,038,560
Debt issuance costs(25,987) (83,793)
Repayments of debt(5,598,198) (4,818,262)
Purchases of treasury stock(124,999) (299,959)
Dividends paid(309,162) (243,557)
Proceeds from exercise of common stock options2,499
 1,782
Other, net4,137
 2,179
Net cash (used in) provided by financing activities(2,369,710) 596,950
Effect of exchange rate changes on cash467
 (23,480)
Net increase in cash and cash equivalents7,347
 56,863
Cash and cash equivalents at beginning of period132,603
 121,565
Cash and cash equivalents at end of period$139,950
 $178,428
Supplemental Disclosure 
  
Cash paid during the period for: 
  
Interest, net of amount capitalized$147,789
 $140,335
Non-cash Investing Activities 
  
Notes receivable issued upon sale of property and equipment$—
 $213,042

(1) Amount includes $26.0 million in 2016 related to cash included in the divestiture of our 51% interest in Pullmantur Holdings.

The accompanying notes are an integral part of these consolidated financial statements.statements
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ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited; in thousands)
Common StockPaid-in CapitalRetained Earnings (Deficit)Accumulated Other Comprehensive LossTreasury StockTotal 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 plans3 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 StockPaid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal 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 plans2 18,638 — — — 18,640 
Common stock issuance170 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
5


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”Cruises,” and “Azamara Club Cruises”"Silversea Cruises" refer to our wholly-ownedwholly owned global cruise brands. Throughout this Quarterly Report on Form 10-Q, we also refer to regionalour partner brands in which we hold an ownership interest, including “TUI Cruises,” “Pullmantur”Cruises” and “SkySea"Hapag-Lloyd Cruises.”" However, because these regionalpartner 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, 2016, including the audited consolidated financial statements and related notes included therein.
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
Note 1. General

Description of Business
We are a global cruise company. As of September 30, 2017, weWe own and operate three3 global cruise brands: Royal Caribbean International, Celebrity Cruises and Azamara ClubSilversea Cruises (collectively, our "Global Brands"). We also own a 50% joint venture interest in TUI Cruises GmbH ("TUIC"), which operates the German brandbrands TUI Cruises a 49% interest in the Spanish brand Pullmantur and have a minority interest in the Chinese brand SkySeaHapag-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 7 continents.

Management's Plan and Liquidity
PriorDuring 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.
6

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 2016, Pullmantur Holdings S.L. ("Pullmantur Holdings"),12, 2022. Our revolving credit facilities were partially utilized through a combination of amounts drawn and letters of credit issued under the parent companyfacilities 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 Pullmantur brand (formerly known as Royal Caribbean Holdings de España S.L.), was wholly owned by us. Effective July 31, 2016, we sold 51%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 interest in Pullmantur Holdings. We retain a 49% interest in Pullmantur Holdingsresumption of operations, as well as full ownershipour 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 four vessels currently operated bynext 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 Pullmantur brand under bareboat charter arrangements. We account foragreements, we may, at our sole option, issue and sell to MS (subject to the bareboat charterssatisfaction 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 vesselsaforementioned notes.
If the Company is unable to Pullmantur Holdings asmaintain 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 leases. We also provide certain ship management services and other related services to Pullmantur Holdings.

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 GAAP and actualthese principles. Actual results could differ from these estimates. Refer to Note 2. 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, 20162021 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. 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 3-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 JanuaryOctober 1, 2016,2021, we consolidated the operating results of Pullmantur HoldingsSilversea Cruises on a two-monththree-month reporting lag to allow for more timely preparation of our consolidated financial statements. Effective JanuaryOctober 1, 2016,2021, we eliminated the two-monththree-
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month reporting lag to reflect Pullmantur Holding'sSilversea Cruises' financial position, results of operations and cash flows concurrently and consistently with the fiscal calendar of the Company (the "elimination("elimination of the PullmanturSilversea reporting lag"). The elimination of the PullmanturSilversea reporting lag representedrepresents a change in accounting principle which we believedbelieve to be preferable because it providedprovides more current
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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 Pullmantur reporting lag was immaterial to prior periods and was immaterial for our fiscal year ended December 31, 2016.2021. As a result, we have accounted for this change in accounting principle in our consolidated results for the first quarter of 2016.and year ended December 31, 2021. Accordingly, the results of Pullmantur Holdings for November and December 2015Silversea Cruises from January 1, 2022 through March 31, 2022 are included in our consolidated statement of comprehensive income (loss)loss for the nine monthsquarter ended September 30, 2016. The effectMarch 31, 2022 and the results of this change was a decrease to net income of $21.7 million, which has been reported within Other expenseSilversea Cruises from October 1, 2020 through December 31, 2020 are included in our consolidated statementsstatement of comprehensive income (loss)loss for the nine monthsquarter ended September 30, 2016.March 31, 2021.

Note 2.2. 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

RevenueIn 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 Contracts with Customers

In May 2014, amended GAAP guidance wasLIBOR 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 principles used to recognize revenue for all entities.discounting transition. The guidance also requires more detailed disclosuresin both ASUs was effective upon issuance and provides additional guidance for transactions that were not comprehensively addressed in the prior accounting guidance. This guidance mustmay be applied using one of two retrospective application methodsprospectively to contract modifications made and will be effective for our annual reporting period beginning afterhedging relationships entered into or evaluated on or before December 15, 2017, including interim periods therein.

We have made significant progress toward completing our evaluation of potential changes to our core revenues using the five-step model supported by the new revenue standard. Currently, we are in the process of finalizing our analysis and quantifying the effects of adoption, if any, on how we account for our customer loyalty programs and promotional offerings, as the new standard has changed the method of accounting for loyalty points from a cost-based model to a revenue deferral model using a relative stand-alone selling price method. We expect to complete this analysis and conclude our evaluation on the impact of adopting this new standard on our consolidated financial statements during the fourth quarter of fiscal 2017. Based on our assessment to date, we do not expect the adoption of the new standard to materially change the timing of recognition of our core revenues, but we do anticipate enhancing our disclosures with respect to our revenue recognition policies in compliance with the new standard.

Upon adoption, we intend to elect the modified retrospective method. This will involve applying the guidance retrospectively only to the most current period presented in the consolidated financial statements and recognizing the cumulative effect of initially applying the guidance as an adjustment to the January 1, 2018 opening balance of retained earnings.
Leases

In February 2016, amended GAAP guidance was issued to increase the transparency and comparability of lease accounting among organizations. For leases with a term greater than 12 months, the amendments require the lease rights and obligations arising from the leasing arrangements, including operating leases, to be recognized as assets and liabilities on the balance sheet. The amendments also expand the required disclosures surrounding leasing arrangements. The guidance must be applied using a retrospective application method and will be effective for financial statements issued for fiscal years beginning after December 15, 2018 and interim periods within those years. Early adoption is permitted.31, 2022. We are currently evaluating the impact of the adoption of this newly issuednew guidance toon our consolidated financial statements.

Classification of Certain Cash Receipts and Cash Payments

In August 2016, amended GAAP guidance was issued to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments are aimed at reducing the existing diversity in practice. The guidance should be applied using a retrospective transition method to each period presented andimpact, if any, will be effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. We intend to adopt the guidancedependent on the dateterms of initial application, January 1, 2018. 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 adoptionmajority 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 newly issued guidance is not expectedperformance obligation and recognize revenue over the duration of each cruise, which generally range from two to have a material impact25 nights.
Passenger ticket revenues include charges to our consolidated financial statements.

Intra-Entity Transfers of Assets Other Than Inventory

In October 2016, amended GAAP guidance was issued that requires the income tax consequences of an intra-entity transfer of an asset, other than inventory, to be recognized at the time that the transfer occurs, rather than when the asset is sold to an outside party. The new guidance is effectiveguests for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements have not been issued. The guidance is required to be adopted retrospectively by recording a cumulative-effect adjustment to retained earnings as of the beginning of
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the adoption period. The adoption of this newly issued guidance is not expected to have a material impact to our consolidated financial statements.

Service Concession Arrangements

In May 2017, amended GAAP guidance was issued to clarify who should be viewed as the customer under service concession arrangements. A service concession arrangement is an arrangement under which a public sector entity (“grantor”), such as a Port Authority,  grants a private entity (“operator”), such as the Company, the right to operate the grantor's infrastructure for a specified period of time. The amended guidance will require the Company to evaluate the relationship with the grantor and identify the multiple performance obligations that may exist under these concession arrangements, including consideration of construction services that may be performed, operational services, and any other maintenance or ancillary services performed under the service concession. In addition, the amended guidance will require that all revenue streams identified under such arrangements be evaluated with the grantor as the customer, irrespective of whether some of the revenues are paid by third-party users of the infrastructure under concession. The clarification will enable a more consistent application of the new Revenue from Contracts with Customers guidance,  which along with this clarification guidance, will be effective for our annual reporting period beginning after December 15, 2017, including interim periods therein. This guidance must be applied using one of two retrospective application methods. We are currently evaluating the impact of the adoption of this newly issued guidance to our consolidated financial statements.

Derivatives and Hedging

In August 2017, amended GAAP guidance was issued to simplify and improve the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements. In addition to changes in designation and measurement for qualifying hedge relationships, the guidance requires an entity to report the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is reported. As a result, hedge ineffectiveness will no longer be separately measured or reported. This guidance will be effective for our annual reporting period beginning after December 15, 2018, including interim periods therein. Early adoption is permitted in any interim period after issuance of this guidance. All transition requirements and elections should be applied to hedging relationships existing on the date of adoption. The effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. We are currently evaluating the impact of the adoption of this newly issued guidance to our consolidated financial statements.

Other
Revenues and expenses include port costs that vary with guestpassenger 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
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amounts of such port costs charged to our guests and included in within Passenger ticket revenues on a gross basis were $135.9$76.9 million and $158.7$1.5 million for the third quarters ended March 31, 2022 and 2021, respectively.
Our total revenues also include Onboard and other revenues, which consist primarily of 2017revenues from the sale of goods and 2016,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,
20222021
Revenues by itinerary
North America (1)$889,087 $— 
Asia/Pacific34,633 29,885 
Europe1,425 — 
Other regions(2)79,633 810 
Total revenues by itinerary1,004,778 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,
20222021
Passenger ticket revenues:
United States84 %— %
Singapore4 %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.
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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 $413.7were 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 $443.1$75.4 million for the nine months ended September 30, 2017as of December 31, 2021. Substantially all of our prepaid travel advisor commissions at December 31, 2021 were expensed and 2016, respectively.

Reclassifications

For the third quarterreported primarily within Commissions, transportation and nine months ended September 30, 2016, restructuring charges of $1.9 million and $6.6 million, respectively, have been reclassified into Marketing, selling and administrative expensesother in theour consolidated statements of comprehensive income (loss) in order to conform to the current year presentation.

For the nine months ended September 30, 2016, share-based compensation expense of $22.0 million, equity investment income of $94.8 million and amortization of debt issuance costs of $22.9 million, have been reclassified in the consolidated statements of cash flows from Other, net to Share-based compensation expense, Equity investment income and Amortization of debt issuance costs, respectively, within Net cash provided by operating activities in order to conform to the current year presentation.

Additionally,loss for the nine monthsquarter ended September 30, 2016, amortization of debt issuance costs of $11.3 million and $5.3 million, have been reclassified from Decrease(increase) in prepaid expenses and other assets and from Increase in accrued expenses and other liabilities, respectively, in the consolidated statements of cash flows to Amortization of debt issuance costs, within Net cash provided by operating activities in order to conform to the current year presentation.March 31, 2022.

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Note 3. Earnings4. (Loss) Per Share
A reconciliation between basicBasic and diluted earnings(loss) per share is as follows (in thousands, except per share data):
Quarter Ended March 31,
 20222021
Net (Loss) for basic and diluted loss per share$(1,167,142)$(1,131,722)
Weighted-average common shares outstanding254,821 243,004 
Diluted weighted-average shares outstanding254,821 243,004 
Basic (loss) per share$(4.58)$(4.66)
Diluted (loss) per share$(4.58)$(4.66)
 Quarter Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income for basic and diluted earnings per share$752,842
 $693,257
 $1,337,094
 $1,022,302
Weighted-average common shares outstanding214,694
 214,819
 214,882
 215,663
Dilutive effect of stock options, performance share awards and restricted stock awards1,130
 848
 1,023
 912
Diluted weighted-average shares outstanding215,824
 215,667
 215,905
 216,575
Basic earnings per share$3.51
 $3.23
 $6.22
 $4.74
Diluted earnings per share$3.49
 $3.21
 $6.19
 $4.72
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 noapproximately 23,407,179 and 413,501 antidilutive shares for thequarters ended March 31, 2022 and nine month periods ended September 30, 2017March 31, 2021, respectively.
Effective January 1, 2022, ASU 2020-06 eliminated the treasury stock method and September 30, 2016.
Note 4. Property and Equipment

In March 2017, we sold Legendinstead required the application of the Seasif-converted method to an affiliatecalculate the impact of TUI AG,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 joint venture partner in TUI Cruises.convertible notes, to the extent dilutive, are assumed to be converted into common stock at the beginning of the reporting period. The sale resultedrequired use of the if-converted
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method did not impact our diluted net loss per share as the Company was in a gainnet loss position. For further information regarding the adoption of $30.9 million and is reported within Other operating within Cruise operating expenses in our consolidated statementsASU 2020-06, refer to Note 2. Summary of comprehensive income (loss) for the nine months ended September 30, 2017.Significant Accounting Policies.


In April 2016, we sold Splendour of the Seas to TUI Cruises. Concurrent with the acquisition, TUI Cruises leased the ship to the same TUI AG affiliate mentioned above, which now operates the ship. The gain recognized did not have a material effect to our consolidated financial statements and was also reported in Other operating within Cruise operating expenses in our consolidated statements of comprehensive income (loss) for the nine months ended September 30, 2016.

Note 5.5. 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 brandbrands 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 September 30, 2017,March 31, 2022, the net book value of our investment in TUI CruisesTUIC was approximately $582.5$404.0 million, primarily consisting of $379.3$286.2 million in equity and a loan of €170.4€99.1 million, or approximately $201.5$110.2 million based on the exchange rate at September 30, 2017.March 31, 2022. As of December 31, 2016,2021, the net book value of our investment in TUI CruisesTUIC was approximately $517.0$444.4 million, primarily consisting of $323.5$322.4 million in equity and a loan of €182.3€103.0 million, or approximately $192.4$117.2 million based on the exchange rate at December 31, 2016.2021. 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 our joint venture partner in TUI Cruises, and is secured by a first priority mortgage on the ship. Refer to Note 4. Property and Equipment for further information. The majority of these amounts were included within Other assets in our consolidated balance sheets.

 In addition, During the quarter ended March 31, 2021, we and TUI AG have each guaranteed the repayment by TUI Cruises of 50% of a bank loan. As of September 30, 2017, the outstanding principal amount of the loan was €100.4contributed €59.5 million, or approximately $118.7$69.9 million based on the exchange rate at September 30, 2017. While this loan matures in May 2022, the lenders have agreed to release each shareholder's guarantee if certain conditions are met by April 2018. The loan amortizes quarterlyMarch 31, 2021, of additional equity through a combination of cash contributions and is secured by first mortgages on the Mein Schiff 1 and Mein Schiff 2 vessels. Based on current facts and circumstances, we do not believe potential obligations under our guaranteeconversion of this bank loan are probable.existing receivables.

Our investment amount, outstanding term loan and the potential obligations under the bank loan guarantee are substantially our maximum exposure to loss in connection with our investment in TUI Cruises. We have determined that we are not the primary beneficiary of TUI Cruises. We believe that the power to direct the activities that most significantly impact TUI Cruises’ economic performance are shared between ourselves and TUI AG. All the significant operating and financial decisions of TUI Cruises require
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the consent of both parties, which we believe creates shared power over TUI Cruises. Accordingly, we do not consolidate this entity and account for this investment under the equity method of accounting.

TUI CruisesTUIC has two newbuild ships on order scheduled to be delivered in each of 2018 and 2019. TUI Cruises has in place agreements for the secured financing of each of the ships on order for up to 80% of the contract price. The remaining portion of the contract price of the ships is expected to be funded through an existing €150.0 million bank facility and TUI Cruises’ cash flows from operations. The 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 2021.

We have determined that Pullmantur Holdings, in which we have a 49% noncontrolling interest, is a VIE for which we May 2033. Our investment amount and outstanding term loan are not the primary beneficiary, as we do not have the power to direct the activities that most significantly impact the entity's economic performance. Accordingly, following the sale of our 51% interest in Pullmantur Holdings to Springwater Capital LLC ("Springwater"), we do not consolidate this entity and we account for this investment under the equity method of accounting. As of September 30, 2017,substantially our maximum exposure to loss in Pullmantur Holdings was approximately $50.9 million consisting of loans and other receivables. As of December 31, 2016,connection with our maximum exposure to lossinvestment in Pullmantur Holdings was approximately $40.3 million consisting of loans and other receivables. These amounts were included within Trade and other receivables, net and Other assets in our consolidated balance sheets.TUIC.

In conjunction with the sale of our 51% interest in Pullmantur Holdings, we agreed to provide a non-revolving working capital facility to a Pullmantur Holdings subsidiary in the amount of up to €15.0 million or approximately $17.7 million based on the exchange rate at September 30, 2017. Proceeds of the facility, which may be drawn through July 2018, will bear interest at the rate of 6.5% per annum and are payable through 2022. Springwater has guaranteed repayment of 51% of the outstanding amounts under the facility. As of September 30, 2017, no amounts had been drawn on this facility.

We have determined that Grand Bahama Shipyard Ltd. (“("Grand Bahama”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 and nine months ended September 30, 2017,March 31, 2022, we made payments of $1.9$3.7 million and $7.5 million, respectively, 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 and we account for this investment under the equity method of accounting. entity.
As of September 30, 2017, the net book value of our investmentMarch 31, 2022, we had exposure to credit loss in Grand Bahama was approximately $50.4 million, consisting of $30.8a $10.6 million in equity and aloan. Our loan of $19.6 million. As of December 31, 2016, the net book value of our investment into Grand Bahama was approximately $47.0 million, consisting of $23.2 million in equitymatures March 2026 and a loan of $23.8 million. These amounts represent our maximum exposurebears interest at LIBOR plus 3.5% to loss related to our investment in Grand Bahama. Our debt agreement with Grand Bahama was amended during the quarter ended March 31, 2016 to extend the maturity by 10 years and increase the applicable interest rate to the lower of (i) LIBOR plus 3.50% and (ii) 5.5%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 continue to classifydid 0t receive principal and interest payments during the loan, as modified, as non-accrual status.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.  Based on this review, we believe the risk of loss associated with the outstanding loan is not probable as of September 30, 2017.

We have determined that Skysea Holding International Ltd. ("Skysea Holding"), in which we have a 36% noncontrolling interest, is a VIE. During the second quarter of 2017, we made an equity contribution of $7.1 million which increased our equity interest from 35% to 36%. The contribution was made pursuant to a funding arrangement in which the entity's three largest investors agreed to contribute a total of $30.0 million in proportion to their equity interest in a series of installments. We have determined that we are not the primary beneficiary of Skysea Holding as we do not have the power to direct the activities that most significantly impact the entity's economic performance. Accordingly, we do not consolidate this entity and we account for this investment under the equity method of accounting. In December 2014, we and Ctrip.com International Ltd, which also owns 36% of Skysea Holding, each provided a debt facility to a wholly owned subsidiary of Skysea Holding in the amount of $80.0 million. Interest under these facilities, which mature in January 2030, currently accrues at a rate of 6.5% per annum. The facilities, which are pari passu to each other, are each 100% guaranteed by Skysea Holding and are secured by first priority mortgages on the ship, Golden Era. As of September 30, 2017, the net book value of our investment in Skysea Holding and its subsidiaries was approximately $97.3 million, consisting of $6.5 million in equity and loans and other receivables of $90.8 million. As of December 31, 2016, the net book value of our investment in Skysea Holding and its subsidiaries was approximately $98.0 million, consisting of $9.2 million in equity and loans and other receivables of $88.8 million. The majority of these amounts were included within Other assets in our consolidated balance sheets and represent our maximum exposure to loss related to our investment in Skysea Holding.


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The following table setstables 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,
20222021
Share of equity (loss) income from investments$(31,059)$(59,871)
Dividends received (1)$423 $— 
  Quarter Ended September 30, 2017 Quarter Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
Share of equity income from investments $85,120
 $46,539
 $120,359
 $94,832
Dividends received $49,865
 $47,491
 $107,267
 $71,370
(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, 2022As 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 TUI Cruises GmbH, Pullmantur HoldingsTUIC and Skysea Holding. Additionally, we bareboat charter to Pullmantur Holdings the vessels currently operated by its brands, which were retained by us following the sale of our 51% interest in Pullmantur Holdings. We 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,
20222021
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 receivables653
Write-offs(8,152)
Ending balance March 31, 2022$92,693 





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  Quarter Ended September 30, 2017 Quarter Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
Revenues $14,054
 $9,300
 $39,987
 $17,888
Expenses $3,770
 $2,410
 $11,503
 $8,930
Note 6. Debt

Debt consist of the following (in thousands):
Interest Rate (1)
Maturities ThroughAs of March 31, 2022As of December 31, 2021
Fixed rate debt:
Unsecured senior notes3.70% to 9.13%2022 - 2028$6,598,558 $5,604,498 
Secured senior notes10.88% to 11.50%2023 - 20252,357,803 2,354,037 
Unsecured term loans2.53% to 5.89%2028 - 20344,114,508 2,860,567 
Convertible notes2.88% to 4.25%20231,725,000 1,558,780 
Total fixed rate debt14,795,869 12,377,882 
Variable rate debt:
Unsecured revolving credit facilities (2)
1.75% to 2.15%2022 - 20241,909,342 2,899,342 
USD unsecured term loan1.84% to 4.95%2022 - 20335,114,768 5,018,740 
Euro unsecured term loan1.15% to 2.25%2022 - 2028670,500 685,633 
Total variable rate debt7,694,610 8,603,715 
Finance lease liabilities428,387 472,275 
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 costs22,501,976 21,090,340 
Less—current portion(2,558,463)(2,243,131)
Long-term portion$19,943,513 $18,847,209 
Note 6. Long-Term Debt(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 October 2017,January 2022, we amendedissued $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 restatedis 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 $1.2 billion unsecuredrevolving 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 August 2018.2023, 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.
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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 amendment reducedunsecured 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 marginexport 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 extendedincluding finance leases, as of March 31, 2022 for each of the termination datenext five years (in thousands):
Year
Remainder of 20222,273,401 
20235,665,482 
20243,128,924 
20252,417,492 
20262,614,571 
Thereafter6,402,106 
22,501,976 










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Note 7. Leases
Operating Leases
Our operating leases primarily relate to October 2022. The applicable marginpreferred berthing arrangements, real estate and facility fee vary with our debt ratingshipboard equipment, and are currently 1.175%included within Operating lease right-of-use assets, and 0.20%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 SilverExplorer, respectively. Weoperated 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 abilityoption to increaseextend our current lease term. For those lease agreements with renewal options, the capacityrenewal 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 amended facilitypresent 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 an additional $500 million, subjectthe 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 receiptbuildings 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 additional or increased lender commitments, and2022, we executed a modification to the Master Lease to extend the termination date by upexpiration of the lease from 2072 to two years,2074, which continues to include the 2 five-year options to extend the lease. We continue to consider the probability of exercising the 2 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 lender consent. These amendments did not resultan 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 extinguishmentfinance 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.









15

The carrying amounts of debt.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 ClassificationQuarter Ended March 31, 2022Quarter Ended March 31, 2021
Lease costs:
Operating lease costsCommission, transportation and other$22,729 $— 
Operating lease costsOther operating expenses5,471 5,130 
Operating lease costsMarketing, selling and administrative expenses4,776 6,035 
Financial lease costs:
Amortization of right-of-use-assetsDepreciation and amortization expenses6,093 3,744 
Interest on lease liabilitiesInterest expense, net of interest capitalized4,600 310 
Total lease costs$43,669 $15,219 
In addition, certain of our berthing agreements include variable lease costs based on the number of passengers berthed. During the quarter ended March 31, 2022, we had $7.5 million variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive loss.
Weighted average of the remaining lease terms and weighted average discount rates are as follows:
As of March 31, 2022As of December 31, 2021
Weighted average of the remaining lease term in years
Operating leases18.0418.18
Finance leases22.9023.96
Weighted average discount rate
Operating leases6.53 %6.52 %
Finance leases5.95 %5.54 %
Supplemental cash flow information related to leases is as follows (in thousands):
Quarter Ended March 31, 2022Quarter Ended March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$28,193 $5,531 
Operating cash flows from finance leases$4,600 $310 
Financing cash flows from finance leases$17,034 $4,305 







16



As of March 31, 2022, maturities related to lease liabilities were as follows (in thousands):
YearOperating LeasesFinance Leases
Remainder of 2022$79,074 $49,240 
2023108,241 53,069 
202489,214 44,348 
202581,594 43,986 
202675,519 38,843 
Thereafter825,818 704,535 
Total lease payments1,259,460 934,021 
Less: Interest(661,302)(505,634)
Present value of lease liabilities$598,158 $428,387 

Note 7.8. Commitments and Contingencies

Ship Purchase Obligations

Our future capital commitments consist primarily of new ship orders. As of September 30, 2017, we had two Quantum-class ships, twoMarch 31, 2022, 1 Oasis-class shipsship and two3 ships of a new generation, of ships, known as "Project Icon,"our Icon-class, are on order for our Royal Caribbean International brand with an aggregate capacity of approximately 30,50022,500 berths. Additionally, asAs of September 30, 2017,March 31, 2022, we have fourhad 2 Edge-class ships on order for our Celebrity Cruises brand with an aggregate capacity of approximately 11,6006,500 berths. The following provides further informationAdditionally, as of March 31, 2022, we have 2 ships on recent developmentsorder for our Silversea Cruises brand with respect to our ship orders.

During the second quarter of 2017, we entered into agreements with Meyer Turku to build two "Project Icon" ships. Subsequently, in October 2017, we entered into credit agreements for the unsecured financing of these ships for up to 80% of each ship’s contract price. For each ship, the official Finnish export credit agency, Finnvera, plc, has agreed to guarantee to the lenders a substantial majority of the financing, with a smaller portion of the financing to be 95% guaranteed by Euler Hermes, the official German export credit agency. The maximum loan amount under each facility is not to exceed €1.4 billion, or approximately $1.7 billion, based on the exchange rate at September 30, 2017. Interest on approximately 75% of each loan will accrue at a fixed rate of 3.56% and 3.76% for the first and the second Icon-class ships, respectively, and the balance will accrue interest at a floating rate ranging from LIBOR plus 1.10% to 1.15% and LIBOR plus 1.15% to 1.20% for the first and the second Icon-class ships, respectively. Each loan will amortize semi-annually and will mature 12 years following delivery of each ship. The first and second Icon-class ships will each have aan aggregate capacity of approximately 5,650 berths1,460 berths.
COVID-19 has impacted shipyard operations which have and may continue to result in delays of our previously contracted ship deliveries. As of March 31, 2022, the dates that the ships on order by our Global and Partner Brands are expected to enter servicebe delivered, subject to change in the second quartersevent of construction delays, and their approximate berths are as follows:
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ShipShipyardExpected to be deliveredApproximate
Berths
Royal Caribbean International —
Oasis-class:
Utopia of the SeasChantiers de l'Atlantique2nd Quarter 20245,700
Icon-class:
Icon of the SeasMeyer Turku Oy3rd Quarter 20235,600
UnnamedMeyer Turku Oy2nd Quarter 20255,600
UnnamedMeyer Turku Oy2nd Quarter 20265,600
Celebrity Cruises —
Edge-class:
Celebrity BeyondChantiers de l'Atlantique2nd Quarter 20223,250
Celebrity AscentChantiers de l'Atlantique4th Quarter 20233,250
Silversea Cruises
Evolution Class:
Silver NovaMeyer Werft2nd Quarter 2023730
UnnamedMeyer Werft2nd Quarter 2024730
TUI Cruises (50% joint venture)
Mein Schiff 7Meyer Turku Oy2nd Quarter 20242,900
UnnamedFincantieri4th Quarter 20244,100
UnnamedFincantieri2nd Quarter 20264,100
Total Berths41,560
We took delivery of Celebrity Beyond in April of 2022. In addition, as of March 31, 2022, and 2024, respectively.

In July 2017, we entered into credit agreements for the unsecured financing of the third and fourthhave an agreement in place with Chantiers de l'Atlantique to build an additional Edge-class ships and the fifth Oasis-class ship for up to 80%delivery in 2025, which is contingent upon completion of each ship’s contract price through facilities to be guaranteed 100% by Bpifrance Assurance Export, the official export credit agency of France. Under these financing arrangements, we have the right, but not the obligation, to satisfy the obligations to be incurred upon deliveryconditions precedent and acceptance of each ship under the shipbuilding contract by assuming, at delivery and acceptance, the debt indirectly incurred by the shipbuilder during the construction of each ship. The maximum loan amount under each facility is not to exceed €684.2 million in the case of the third Edge-class ship and the United States dollar equivalent of €714.6 million and €1.1 billion in the case of the fourth Edge-class ship and fifth Oasis-class ship, or approximately $844.7 million and $1.3 billion, respectively, based on the exchange rate at September 30, 2017. The loans will amortize semi-annually and will mature 12 years following delivery of each ship. Interest on the loans will accrue at a fixed rate of 1.28% for the third Edge-class ship and at a fixed rate of 3.18% for both, the fourth Edge-class ship and the fifth Oasis-class ship. The thirdfinancing.
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and fourth Edge-class ships, each of which will have a capacity of approximately 2,900 berths, are expected to enter service in the fourth quarters of 2021 and 2022, respectively. The fifth Oasis-class ship will have a capacity of approximately 5,450 berths and is expected to enter service in the second quarter of 2021.

In September 2017, we entered into an agreement to purchase a ship for our Azamara Club Cruises brand. The sale is expected to be completed with the delivery of the ship scheduled for March 2018.

As of September 30, 2017,March 31, 2022, the aggregate cost of our ships on order not includingpresented in the table above, excluding any ships on order by our Partner Brands, was approximately $13.0$10.7 billion, of which we had deposited $323.2 million$0.6 billion as of such date. Approximately 53.8%61.8% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at September 30, 2017.March 31, 2022. Refer to Note 10. 11. Fair Value Measurements and Derivative Instruments for further information.

Litigation

As previously reported, 2 lawsuits were 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. The complaint filed by Havana Docks Corporation ("Havana Docks Action") alleges it holds an interest in the Havana Cruise Port Terminal, and the complaint filed by Javier Garcia-Bengochea (the "Port of Santiago Action") alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban government. The complaints further allege that we trafficked in those properties by embarking and disembarking passengers at these facilities. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs. The Court dismissed the Port of Santiago Action with prejudice on the basis that the plaintiff lacked standing, and the plaintiff’s appeal of the dismissal is awaiting a decision by the appellate court. In the Havana Docks Action, on March 21, 2022, the Court granted summary judgement in favor of the plaintiff as to liability, which we have sought permission from the Court to immediately appeal, and a trial on damages has been scheduled for September 2022. We believe we have meritorious defenses to the claims alleged in both the Havana Docks Action and the Port of Santiago Action, and we intend to vigorously defend ourselves against them. Given that the outcome of the litigation is inherently unpredictable and subject to significant uncertainties, there can be no assurances that the final outcome of either case will not be material, and we cannot reasonably estimate the potential loss or range of loss, if any, associated with the litigation.
We are routinely involved in claims typical within the cruise vacation industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected insurance recoveries, will not have a material adverse impact on our financial condition or results of operations and cash flows.

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Other
Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes, increased lender capital costs and other similar costs. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business. There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses. We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification in any material amount is probable.
If any person acquires ownership of more than 50% of our common stock or, subject to certain exceptions, during any 24-month period, a majority of the Boardour board of directors is no longer comprised of individuals who were members of the Boardour board of directors on the first day of such period, we may be obligated to prepay indebtedness outstanding under our credit facilities, which we may be unable to replace on similar terms. Our public debt securities also contain change of control provisions that would be triggered by a third-party acquisition of greater than 50% of our common stock coupled with a ratings downgrade. If this were to occur, it would have an adverse impact on our liquidity and operations.



Note 8. Shareholders’9. Shareholders' Equity

On January 1, 2022, we adopted ASU 2020-06 using the modified retrospective approach to recognize our convertible notes as single liability instruments. As a result of the adoption of this pronouncement, the cumulative effect to Shareholders' equity was a reduction of $161.4 million. For further information regarding the entry recorded and the adoption of ASU 2020-06, refer to Note 2. Summary of Significant Accounting Policies.
In September 2017,Common Stock Issued
During March 2021, we declaredissued 16.9 million shares of common stock, par value $0.01 per share, at a cash dividend onprice of $91.00 per share. We received net proceeds of $1.5 billion from the sale of our common stock, of $0.60 per share which was paid in October 2017. after deducting the estimated offering expenses payable by us.
Dividends
During the first and second quartersquarter of 2017,2020, we declared a cash dividend onagreed with certain of our lenders not to pay dividends or engage in common stock of $0.48 perrepurchases for so long as our debt covenant waivers are in effect. In addition, in the event we declare a dividend or engage in share which was paid in April 2017repurchases, we will need to repay the amounts deferred under our export credit facilities. Accordingly, during the three months ended March 31, 2021 and July 2017, respectively. During2022, we did not declare dividends. Pursuant to amendments made to these agreements during the first quarter of 2017, we also paid a2021, the restrictions on paying cash dividend on our common stock of $0.48 perdividends and effectuating share which was declared during the fourth quarter of 2016.

Duringrepurchases were extended through and including the third quarter of 2016, we declared a cash dividend on our common stock of $0.48 per share which was paid in October 2016. During the first and second quarters of 2016, we declared and paid a cash dividend on our common stock of $0.375 per share. During the first quarter of 2016, we also paid a cash dividend on our common stock of $0.375 per share which was declared during the fourth quarter of 2015.2022.


In April 2017, our board of directors authorized a 12-month common stock repurchase program for up to $500 million. The timing and number of shares to be repurchased will depend on a variety of factors including price and market conditions. Repurchases under the program may be made at management's discretion from time to time on the open market or through privately negotiated transactions. During the third quarter of 2017, we repurchased 1.0 million shares of our common stock for a total of $125.0 million in open market transactions that were recorded within Treasury stock in our consolidated balance sheets. With these repurchases, we have $375.0 million that remain available for future stock repurchase transactions under our Board approved program.













19

Note 9.10. Changes in Accumulated Other Comprehensive Income (Loss)
Loss
The following table presents the changes in accumulated other comprehensive income (loss)loss by component for the nine monthsquarters ended September 30, 2017March 31, 2022 and 20162021 (in thousands):
Accumulated Other Comprehensive Income (Loss) for the Nine Months Ended September 30, 2017 Accumulated Other Comprehensive Income (Loss) for the Nine Months Ended September 30, 2016Accumulated Other Comprehensive Loss for the Quarter Ended March 31, 2022Accumulated Other Comprehensive Loss for the Quarter Ended March 31, 2021
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		 Changes related to cash flow derivative hedgesChanges in defined benefit plansForeign currency translation adjustmentsAccumulated  other comprehensive lossChanges related to cash flow derivative hedgesChanges in defined benefit plansForeign currency translation adjustmentsAccumulated  other comprehensive loss
Accumulated comprehensive loss at beginning of the year$(820,850) $(28,083) $(67,551) $(916,484) $(1,232,073) $(26,447) $(69,913) $(1,328,433)Accumulated comprehensive loss at beginning of the year$(646,473)$(56,835)$(7,577)$(710,885)$(650,519)$(65,542)$(23,280)$(739,341)
Other comprehensive income (loss) before reclassifications230,341
 (7,130) 14,210
 237,421
 (9,150) (13,521) 8,423
 (14,248)Other comprehensive income (loss) before reclassifications224,619 11,869 7,778 244,266 (927)9,720 9,722 18,515 
Amounts reclassified from accumulated other comprehensive loss151,319
 850
 —
 152,169
 263,774
 1,373
 —
 265,147
Amounts reclassified from accumulated other comprehensive loss(28,718)728 — (27,990)11,229 743 — 11,972 
Net current-period other comprehensive income (loss)381,660
 (6,280) 14,210
 389,590
 254,624
 (12,148) 8,423
 250,899
Net current-period other comprehensive income (loss)195,901 12,597 7,778 216,276 10,302 10,463 9,722 30,487 
Ending balance$(439,190) $(34,363) $(53,341) $(526,894) $(977,449) $(38,595) $(61,490) $(1,077,534)Ending balance$(450,572)$(44,238)$201 $(494,609)$(640,217)$(55,079)$(13,558)$(708,854)
The following table presents reclassifications out of accumulated other comprehensive income (loss)loss for the quarters ended March 31, 2022 and nine months ended September 30, 2017 and 20162021 (in thousands):
 Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income 
Details About Accumulated Other Comprehensive Loss ComponentsQuarter Ended March 31, 2022Quarter Ended March 31, 2021Affected Line Item in Statements of
Comprehensive Loss
Gain (loss) on cash flow derivative hedges:  
Interest rate swaps$(10,434)$(9,509)Interest expense, net of interest capitalized
Foreign currency forward contracts(4,065)(3,781)Depreciation and amortization expenses
Foreign currency forward contracts(1,218)(1,291)Other income (expense)
Fuel swaps(369)(407)Other income (expense)
Fuel swaps44,804 3,759 Fuel
 28,718 (11,229) 
Amortization of defined benefit plans:  
Actuarial loss(728)(743)Payroll and related
 (728)(743) 
Total reclassifications for the period$27,990 $(11,972) 

20
  Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income  
Details About Accumulated  Other Comprehensive Income (Loss) Components Quarter Ended September 30, 2017 Quarter Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Affected Line Item in  Statements of
Comprehensive Income (Loss)
Loss on cash flow derivative hedges:  
    
    
Interest rate swaps $(7,860) $(11,953) $(24,580) $(32,019) Interest expense, net of interest capitalized
Foreign currency forward contracts (2,710) (2,710) (8,130) (5,408) Depreciation and amortization expenses
Foreign currency forward contracts (1,512) (3,465) (9,187) (10,206) Other expense
Foreign currency forward contracts —
 —
 —
 (207) Other operating
Foreign currency collar options (602) (601) (1,806) (1,806) Depreciation and amortization expenses
Fuel swaps 1,758
 2,760
 6,533
 9,356
 Other expense
Fuel swaps (32,386) (64,654) (114,149) (223,484) Fuel
  (43,312) (80,623) (151,319) (263,774)  
Amortization of defined benefit plans:  
        
Actuarial loss (293) (285) (850) (1,373) Payroll and related
  (293) (285) (850) (1,373)  
Total reclassifications for the period $(43,605) $(80,908) $(152,169) $(265,147)  
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Note 10.11. Fair Value Measurements and Derivative Instruments
Fair Value Measurements
The estimated fair value of our financial instruments that are not measured at fair value, categorized based upon the fair value hierarchy, are as follows (in thousands): 
Fair Value Measurements at March 31, 2022Fair Value Measurements at December 31, 2021
DescriptionTotal Carrying AmountTotal Fair Value
Level 1(1)
Level 2(2)
Level 3(3)
Total Carrying AmountTotal Fair Value
Level 1(1)
Level 2(2)
Level 3(3)
Assets:
Cash and cash equivalents(4)
$1,968,504 $1,968,504 $1,968,504 $— $— $2,701,770 $2,701,770 $2,701,770 $— $— 
Total Assets$1,968,504 $1,968,504 $1,968,504 $— $— $2,701,770 $2,701,770 $2,701,770 $— $— 
Liabilities:
Long-term debt (including current portion of debt)(5)
$22,073,589 $23,323,063 $— $23,323,063 $— $20,618,065 $22,376,480 $— $22,376,480 $— 
Total Liabilities$22,073,589 $23,323,063 $— $23,323,063 $— $20,618,065 $22,376,480 $— $22,376,480 $— 
  Fair Value Measurements at September 30, 2017 Using Fair Value Measurements at December 31, 2016 Using
Description Total Carrying Amount Total Fair Value 
Level 1(1)
 
Level 2(2)
 
Level 3(3)
 Total Carrying Amount Total Fair Value 
Level 1(1)
 
Level 2(2)
 
Level 3(3)
Assets:                    
Cash and cash equivalents(4)
 $139,950
 $139,950
 $139,950
 $—
 $—
 $132,603
 $132,603
 $132,603
 $—
 $—
Total Assets $139,950
 $139,950
 $139,950
 $—
 $—
 $132,603
 $132,603
 $132,603
 $—
 $—
Liabilities:                    
Long-term debt (including current portion of long-term debt)(5)
 $7,557,801
 $8,111,168
 $—
 $8,111,168
 $—
 $9,347,051
 $9,859,266
 $—
 $9,859,266
 $—
Total Liabilities $7,557,801
 $8,111,168
 $—
 $8,111,168
 $—
 $9,347,051
 $9,859,266
 $—
 $9,859,266
 $—
(1) Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment.

(1)Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment.
(2)(2) Inputs other than quoted prices included within Level 1 that are observable for the liability, either directly or indirectly. For unsecured revolving credit facilities and unsecured term loans, fair value is determined utilizing the income valuation approach. This valuation model takes into account the contract terms of our debt such as the debt maturity and the interest rate on the debt. The valuation model also takes into account the creditworthiness of the Company.
(3)Inputs that are unobservable. The Company did not use any Level 3 inputs as of September 30, 2017 and December 31, 2016.
(4)Consists of cash and marketable securities with original maturities of less than 90 days.
(5)Consists of unsecured revolving credit facilities, senior notes, senior debentures and term loans. This does not include our capital lease obligations.
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our debt such as the debt maturity and the interest rate on the debt. The valuation model also takes into account the creditworthiness of the Company.

(3) Inputs that are unobservable. The Company did not use any Level 3 inputs as of March 31, 2022 and December 31, 2021.
(4) Consists of cash and marketable securities with original maturities of less than 90 days.
(5) Consists of unsecured revolving credit facilities, senior notes, term loans and convertible notes. These amounts do not include our finance lease obligations or commercial paper.
Other Financial Instruments
The carrying amounts of accounts receivable, accounts payable, accrued interest and accrued expenses approximate fair value at September 30, 2017March 31, 2022 and December 31, 2016.
2021.
Assets and liabilities that are recorded at fair value have been categorized based upon the fair value hierarchy. The following table presents information about the Company’s financial instruments recorded at fair value on a recurring basis (in thousands):
 Fair Value Measurements at March 31, 2022Fair Value Measurements at December 31, 2021
DescriptionTotal
Level 1(1)
Level 2(2)
Level 3(3)
Total
Level 1(1)
Level 2(2)
Level 3(3)
Assets:        
Derivative financial instruments(4)
$241,254 $— $241,254 $— $69,808 $— $69,808 $— 
Total Assets$241,254 $— $241,254 $— $69,808 $— $69,808 $— 
Liabilities:        
Derivative financial instruments(5)
$117,708 $— $117,708 $— $200,541 $— $200,541 $— 
Total Liabilities$117,708 $— $117,708 $— $200,541 $— $200,541 $— 
  Fair Value Measurements at September 30, 2017 Using Fair Value Measurements at December 31, 2016 Using
Description Total 
Level 1(1)
 
Level 2(2)
 
Level 3(3)
 Total 
Level 1(1)
 
Level 2(2)
 
Level 3(3)
Assets:  
  
  
  
  
  
  
  
Derivative financial instruments(4)
 $221,258
 $—
 $221,258
 $—
 $19,397
 $—
 $19,397
 $—
Investments(5)
 $3,237
 3,237
 —
 —
 $3,576
 3,576
 —
 —
Total Assets $224,495
 $3,237
 $221,258
 $—
 $22,973
 $3,576
 $19,397
 $—
Liabilities:  
  
  
  
  
  
  
  
Derivative financial instruments(6)
 $189,163
 $—
 $189,163
 $—
 $373,497
 $—
 $373,497
 $—
Total Liabilities $189,163
 $—
 $189,163
 $—
 $373,497
 $—
 $373,497
 $—
(1)Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment.

(2)Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. For foreign currency forward contracts, interest rate swaps and fuel swaps, fair value is derived using valuation models that utilize the income valuation approach. These valuation models take into account the contract terms, such as maturity, as well as other inputs, such as foreign exchange rates and curves, fuel types, fuel curves and interest rate yield curves. Derivative instrument fair values take into account the creditworthiness of the counterparty and the Company.
(1)Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment.
(2)Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. For foreign currency forward contracts, interest rate swaps, cross currency swaps and fuel swaps, fair value is derived using valuation models that utilize the income valuation approach. These valuation models take into account the contract terms, such as maturity, as well as other inputs, such as foreign exchange rates and curves, fuel types, fuel curves and interest rate yield curves. Fair value for foreign currency collar options is determined by using standard option pricing models with inputs based on the options’ contract terms, such as exercise price and maturity, and readily available public market data, such as foreign exchange curves, foreign exchange volatility levels and discount rates. All derivative instrument fair values take into account the creditworthiness of the counterparty and the Company.
(3)Inputs that are unobservable. The Company did not use any Level 3 inputs as of September 30, 2017 and December 31, 2016.
(4)Consists of foreign currency forward contracts, interest rate swaps and fuel swaps. Please refer to the “Fair Value of Derivative Instruments”
(3)Inputs that are unobservable. No Level 3 inputs were used in fair value measurements of Other financial instruments as of March 31, 2022 and December 31, 2021.
(4)Consists of foreign currency forward contracts, interest rate swaps and fuel swaps. Refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type.
(5) Consists of foreign currency forward contracts, interest rate swaps and fuel swaps. Refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type.
(5)
Consists of exchange-traded equity securities and mutual funds reported within Other assets in our consolidated balance sheets.
(6)Consists of foreign currency forward contracts, interest rate swaps and fuel swaps. Please refer to the “Fair Value of Derivative Instruments” table for breakdown by instrument type.
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 September 30, 2017March 31, 2022 or December 31, 2016,2021, 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. The following table presents information about the Company’s nonfinancial instruments recorded at fair value on a nonrecurring basis (in thousands):
Fair Value Measurements at December 31, 2021
DescriptionTotal Carrying AmountTotal Fair ValueLevel 3Total Impairment for the Year Ended December 31, 2021 (1)
Long-lived assets— — — 55,213 
Total— — — 55,213 
(1) Amount is primarily composed of construction in progress assets that were impaired during the year ended 2021 due to a reduction in scope or the decision to not complete the projects. The impairments were calculated based on orderly liquidation values. The fair value of these assets was estimated as of the date the assets were last impaired.
There were no nonfinancial instruments recorded at fair value as of March 31, 2022.
Master Netting Agreements
We have master International Swaps and Derivatives Association (“ISDA”) agreements in place with our derivative instrument counterparties. These ISDA agreements generally provide for final close out netting with our counterparties for all positions in the case of default or termination of the ISDA agreement. We have determined that our ISDA agreements provide us with rights of setoff on the fair value of derivative instruments in a gain position and those in a loss position with the same counterparty. We have elected not to offset such derivative instrument fair values in our consolidated balance sheets.
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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:counterparties (in thousands):
Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements
As of March 31, 2022As of December 31, 2021
Gross Amount of Derivative Assets Presented in the Consolidated Balance SheetGross Amount of Eligible Offsetting
Recognized
Derivative Liabilities		Cash Collateral
Received		Net Amount of
Derivative Assets		Gross Amount of Derivative Assets Presented in the Consolidated Balance SheetGross Amount of Eligible Offsetting
Recognized
Derivative Liabilities		Cash Collateral
Received		Net Amount of
Derivative Assets
Derivatives subject to master netting agreements$241,254 $(68,784)$— $172,470 $69,808 $(67,995)$— $1,813 
Total$241,254 $(68,784)$— $172,470 $69,808 $(67,995)$— $1,813 
  Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements
  As of September 30, 2017 As of December 31, 2016
  Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet Gross Amount of Eligible Offsetting
Recognized
Derivative Liabilities		 Cash Collateral
Received		 Net Amount of
Derivative Assets		 Gross Amount of Derivative Assets Presented in the Consolidated Balance Sheet Gross Amount of Eligible Offsetting
Recognized
Derivative Assets		 Cash Collateral
Received		 Net Amount of
Derivative Assets
(In thousands)                
Derivatives subject to master netting agreements $221,258
 $(117,065) $—
 $104,193
 $19,397
 $(19,397) $—
 $—
Total $221,258
 $(117,065) $—
 $104,193
 $19,397
 $(19,397) $—
 $—


The following table presents information about the Company’s offsetting of financial liabilities under master netting agreements with derivative counterparties:counterparties (in thousands):
Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements
 Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting AgreementsAs of March 31, 2022As of December 31, 2021
 As of September 30, 2017 As of December 31, 2016Gross Amount of Derivative Liabilities Presented in the Consolidated Balance SheetGross Amount of Eligible Offsetting
Recognized
Derivative Assets		Cash Collateral
Pledged		Net Amount of
Derivative Liabilities		Gross Amount of Derivative Liabilities Presented in the Consolidated Balance SheetGross Amount of Eligible Offsetting
Recognized
Derivative Assets		Cash Collateral
Pledged		Net Amount of
Derivative Liabilities
 Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet Gross Amount of Eligible Offsetting
Recognized
Derivative Assets		 Cash Collateral
Pledged		 Net Amount of
Derivative Liabilities		 Gross Amount of Derivative Liabilities Presented in the Consolidated Balance Sheet Gross Amount of Eligible Offsetting
Recognized
Derivative Liabilities		 Cash Collateral
Pledged		 Net Amount of
Derivative Liabilities
(In thousands)                
Derivatives subject to master netting agreements $(189,163) $117,065
 $—
 $(72,098) $(373,497) $19,397
 $7,213
 $(346,887)Derivatives subject to master netting agreements$(117,708)$68,784 $16,668 $(32,256)$(200,541)$67,995 $44,411 $(88,135)
Total $(189,163) $117,065
 $—
 $(72,098) $(373,497) $19,397
 $7,213
 $(346,887)Total$(117,708)$68,784 $16,668 $(32,256)$(200,541)$67,995 $44,411 $(88,135)
Concentrations of Credit Risk
We monitor our credit risk associated with financial and other institutions with which we conduct significant business, and to minimize these risks, we select counterparties with credit risks acceptable to us and we seek to limit our exposure to an individual counterparty. 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 September 30, 2017,March 31, 2022, we had counterparty credit risk exposure under our derivative instruments of approximately $101.6$157.7 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 December 31, 2016, we did not have any exposure under our derivative instruments. We do not anticipate nonperformance by any of our significant counterparties. In addition, we have established guidelines we follow regarding credit ratings and instrument maturities to maintain safety and liquidity. We do not normally require collateral or other security to support credit relationships; however, in certain circumstances this option is available to us.
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Derivative Instruments
We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We try to mitigate these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments pursuant to our hedging practices and policies. The financial impact of these hedging instruments is primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the notional amount, term and conditions of the derivative instrument with the underlying risk being hedged. Although certain of our derivative financial instruments do not qualify or are not accounted for under hedge accounting, our objective is not to hold or issue derivative financial instruments for trading or other speculative purposes. 
We enter into various forward, swap and option contracts to manage our interest rate exposure and to limit our exposure to fluctuations in foreign currency exchange rates and fuel prices. These instruments are recorded on the balance sheet at their fair value and
the vast majority are designated as hedges. We also use non-derivative financial instruments designated as hedges of our net investment in our foreign operations and investments.
At inception of the hedge relationship, a derivative instrument that hedges the exposure to changes in the fair value of a firm commitment or a recognized asset or liability is designated as a fair value hedge. A derivative instrument that hedges a forecasted transaction or the variability of cash flows related to a recognized asset or liability is designated as a cash flow hedge.
Changes in the fair value of derivatives that are designated as fair value hedges are offset against changes in the fair value of the underlying hedged assets, liabilities or firm commitments. Gains and losses on derivatives that are designated as cash flow hedges are recorded as a component of Accumulated other comprehensive loss until the underlying hedged transactions are recognized in earnings. The foreign currency transaction gain or loss of our non-derivative financial instruments and the changes in the fair value of derivatives designated as hedges of our net investment in foreign operations and investments are recognized as a component of Accumulated other comprehensive loss along with the associated foreign currency translation adjustment of the foreign operation or investment. In certain hedges of our net investment in foreign operations and investments, we exclude forward points from the assessment of hedge effectiveness and we amortize the related amounts directly into earnings.
On an ongoing basis, we assess whether derivatives used in hedging transactions are “highly effective”"highly effective" in offsetting changes in the fair value or cash flow of hedged items. WeFor our net investment hedges, we use the dollar offset method to measure effectiveness. For all other hedging programs, we use the long-haul method to assess hedge effectiveness using regression analysis for each hedge relationship under our interest rate, foreign currency and fuel hedging programs. We apply the samerelationship. The methodology for assessing hedge effectiveness is applied on a consistent basis for assessing hedge effectiveness to all hedges within each one of our hedging programprograms (i.e., interest rate, foreign currency ship construction, foreign currency net investment and fuel). We performFor our regression analyses, overwe use an observation period of up to three years, utilizing market data relevant to the hedge horizon of each hedge relationship. High effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the changes in the fair values of the derivative instrument and the hedged item. The determination of ineffectiveness is based on the amount of dollar offset between the change in fair value of the derivative instrument and the change in fair value of the hedged item at the end of the reporting period. If it is determined that a derivative is not highly effective as a hedge or hedge accounting is discontinued, any change in fair value of the derivative since the last date at which it was determined to be effective is recognized in earnings. In addition, the ineffective portion of our highly effective hedges is immediately recognized in earnings and reported in Other expense in our consolidated statements of comprehensive income (loss).
Cash flows from derivative instruments that are designated as fair value or cash flow hedges are classified in the same category as the cash flows from the underlying hedged items. In the event that hedge accounting is discontinued, cash flows subsequent to the date of discontinuance are classified within investing activities. Cash flows from derivative instruments not designated as hedging instruments are classified as investing activities.
 
We consider the classification of the underlying hedged item’s cash flows in determining the classification for the designated derivative instrument’s cash flows. We classify derivative instrument cash flows from hedges of benchmark interest rate or hedges of fuel expense as operating activities due to the nature of the hedged item. Likewise, we classify derivative instrument cash flows from hedges of foreign currency risk on our newbuild ship payments as investing activities and derivative instrument cash flows from hedges of foreign currency risk on debt payments as financing activities.
Interest Rate Risk
Our exposure to market risk for changes in interest rates primarily relates to our long-term debt obligations, including future interest payments. At September 30, 2017March 31, 2022 and December 31, 2016,2021, approximately 48.8%71.6% and 40.5%65.7%, respectively, of our long-term debt was effectively fixed.fixed-rate debt. We use interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense.
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Market risk associated with our long-term fixed ratefixed-rate debt is the potential increase in fair value resulting from a decrease in interest rates. 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 September 30, 2017March 31, 2022 and December 31, 2016,2021, we maintained interest rate swap agreements on the following fixed-rate debt instruments:
Debt Instrument
Swap Notional as of September 30, 2017 (In thousands)
MaturityDebt Fixed RateSwap Floating Rate: LIBOR plusAll-in Swap Floating Rate as of September 30, 2017Debt InstrumentSwap Notional as of March 31, 2022 (in thousands)MaturityDebt Fixed RateSwap Floating Rate: LIBOR plusAll-in Swap Floating Rate as of March 31, 2022
Oasis of the Seas term loan
$157,500
October 20215.41%3.87%5.29%
Unsecured senior notes650,000
November 20225.25%3.63%4.95%Unsecured senior notes650,000 November 20225.25%3.63%4.14%
$807,500
 $650,000 
These interest rate swap agreements are accounted for as fair value hedges.

Market risk associated with our long-term floating ratefloating-rate debt is the potential increase in interest expense from an increase in interest rates. We use interest rate swap agreements that effectively convert a portion of our floating-rate debt to a fixed-rate basis to manage this risk. At September 30, 2017March 31, 2022 and December 31, 2016,2021, we maintained interest rate swap agreements on the following floating-rate debt instruments:
Debt InstrumentSwap Notional as of March 31, 2022 (in thousands)MaturityDebt Floating RateAll-in Swap Fixed Rate
Celebrity Reflection term loan
$163,625 October 2024LIBOR plus0.40%2.85%
Quantum of the Seas term loan
306,250 October 2026LIBOR plus1.30%3.74%
Anthem of the Seas term loan
332,292 April 2027LIBOR plus1.30%3.86%
Ovation of the Seas term loan
449,583 April 2028LIBOR plus1.00%3.16%
Harmony of the Seas term loan (1)
417,714 May 2028EURIBOR plus1.15%2.26%
Odyssey of the Seas term loan (2)
421,667 October 2032LIBOR plus0.96%3.21%
Odyssey of the Seas term loan (2)
191,667 October 2032LIBOR plus0.96%2.84%
$2,282,798 
Debt Instrument
Swap Notional as of September 30, 2017 (In thousands)
MaturityDebt Floating RateAll-in Swap Fixed Rate
Celebrity Reflection term loan
$409,063
October 2024LIBOR plus0.40%2.85%
Quantum of the Seas term loan
581,875
October 2026LIBOR plus1.30%3.74%
Anthem of the Seas term loan
604,167
April 2027LIBOR plus1.30%3.86%
Ovation of the Seas term loan 
760,833
April 2028LIBOR plus1.00%3.16%
Harmony of the Seas term loan (1)
751,362
May 2028EURIBOR plus1.15%2.26%
 $3,107,300
    

(1)Interest rate swap agreements hedging the Euro-denominated term loan for Harmony of the Seas include EURIBOR zero-floorszero-floor matching the hedged debt EURIBOR zero-floor. Amount presented is based on the exchange rate as of September 30, 2017.March 31, 2022.

(2)Interest rate swap agreements hedging the term loan of Odyssey of the Seas include LIBOR zero-floors matching the debt LIBOR zero-floor. The effective dates of the $421.7 million and $191.7 million interest rate swap agreements are October 2020 and October 2022, respectively. The unsecured term loan for the financing of Odyssey of the Seas was drawn on March 2021.
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 September 30, 2017March 31, 2022 and December 31, 20162021 was $3.9 billion and $4.0 billion, respectively.
$2.9 billion.
Foreign Currency Exchange Rate Risk

Derivative Instruments
Our primary exposure to foreign currency exchange rate risk relates to our ship construction contracts denominated in Euros, our foreign currency denominated debt and our international business operations. We enter into foreign currency forward contracts collar options and cross currency swap agreements to manage portions of the exposure to movements in foreign currency exchange rates. As of September 30, 2017,March 31, 2022, the aggregate cost of our ships on order not including the TUI Cruises' ships on order and those subject to conditions to effectiveness, was approximately $13.0$10.7 billion, of which we had deposited $323.2$618.5 million 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. Refer to Note 8. Commitments and Contingencies, for further information on our ships on order. At September 30, 2017March 31, 2022 and December 31, 2016,2021, approximately 53.8%61.8% and 66.7%59.0%, respectively, of the aggregate cost of the ships under construction was exposed to fluctuations in the Euro exchange rate. The majority of ourOur foreign currency forward contracts, collar options and cross currency swapcontract agreements are accounted for as cash flow fair value 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 thirdfirst quarter of 2017,2022, we maintained an average of approximately $823.0 million$0.8 billion of these foreign currency forward contracts. These instruments are not designated as hedging instruments. ChangesFor the quarters ended March 31, 2022 and 2021, changes in the fair value of the foreign currency forward contracts resulted in a gain (loss),losses of approximately $22.0$7.0 million and $(2.5)$13.5 million, duringrespectively, which offset gains arising from the quarters ended September 30, 2017remeasurement of monetary assets and September 30, 2016, respectively, and approximately $57.1liabilities denominated in foreign currencies in those same periods of $7.2 million and $(11.8)$4.4 million, during the nine months ended September 30, 2017 and September 30, 2016, respectively, thatrespectively. These amounts were recognized in earnings within Other expense income (expense) in our consolidated statements of comprehensive income (loss).

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loss.
We consider our investments in our foreign operations to be denominated in relatively stable currencies and to be of a long-term nature. As of September 30, 2017,March 31, 2022, we maintained a foreign currency forward contractscontract and designated themit as hedgesa hedge of a portion of our net investmentinvestments in TUI cruisesCruises of €101.0€245.0 million, or approximately $119.4$272.5 million based on the exchange rate at September 30, 2017. TheseMarch 31, 2022. This forward currency contracts maturecontract matured in October 2021.

April 2022.
The notional amount of outstanding foreign exchange contracts, including ourexcluding the forward contracts entered into to minimize remeasurement volatility, as of September 30, 2017March 31, 2022 and December 31, 20162021 was $4.1$2.8 billion and $1.3$3.4 billion, respectively.

Non-Derivative Instruments

We also 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 approximately €241.0€99.0 million, or approximately $284.9$110.1 million, as of September 30, 2017.March 31, 2022. As of

December 31, 2021, we had designated debt as a hedge of our net investments in TUI Cruises of €97.0 million, or approximately $110.3 million.
Fuel Price Risk
Our exposure to market risk for changes in fuel prices relates primarily to the consumption of fuel on our ships. We use fuel swap agreements to mitigate the financial impact of fluctuations in fuel prices.
Our fuel swap agreements are generally accounted for as cash flow hedges. 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.
Prior suspension of our cruise operations due to the COVID-19 pandemic and our gradual resumption of cruise operations has resulted in reductions to our forecasted fuel purchases. During the quarter ended March 31, 2021, we discontinued cash flow hedge accounting on 48 thousand metric tons of our fuel swap agreements maturing in 2021, which resulted in the reclassification of a net $4.4 million loss from Accumulated other comprehensive loss to Other income (expense). For the quarter ended March 31, 2022, we did not discontinue cash flow hedge accounting on any of our fuel swap agreements. Changes in the fair value of fuel swaps for which cash flow hedge accounting was discontinued are currently recognized in Other income (expense) each reporting period through the maturity dates of the fuel swaps.
Future suspension of our operations or modifications to our itineraries may affect our expected forecasted fuel purchases which could result in further discontinuance of fuel swap cash flow hedge accounting and the reclassification of deferred gains or losses from Accumulated other comprehensive loss into earnings. Refer to Risk Factors in Part II, Item 1A. for further discussion on risks related to COVID-19.
At September 30, 2017,March 31, 2022, we have hedged the variability in future cash flows for certain forecasted fuel transactions occurring through 2021.2023. As of September 30, 2017March 31, 2022 and December 31, 2016,2021, we had the following outstanding fuel swap agreements:
 Fuel Swap Agreements
 As of March 31, 2022As of December 31, 2021
Designated as hedges:(metric tons)
2022660,650 821,850 
2023249,050 249,050 
 Fuel Swap Agreements
 As of September 30, 2017 As of December 31, 2016
 (metric tons)
2017218,600
 799,065
2018756,700
 616,300
2019668,500
 521,000
2020531,200
 306,500
2021224,900
 —
 Fuel Swap Agreements
 As of March 31, 2022As of December 31, 2021
 (% hedged)
Designated hedges as a % of projected fuel purchases:  
202255 %54 %
202315 %15 %
Fuel Swap Agreements
As of March 31, 2021As of December 31, 2021
Not designated as hedges:(metric tons)
2022(1)139,100 231,900 
2023— — 
 Fuel Swap Agreements
 As of September 30, 2017 As of December 31, 2016
 (% hedged)
Projected fuel purchases: 
  
201765% 60%
201856% 44%
201947% 35%
202036% 20%
202114% —
(1)As of March 31, 2022, 69,550 metric tons relate to fuel swap agreements with discontinued hedge accounting, in which we effectively pay fixed prices and receive floating prices from the counterparty. The remaining 69,550 tons relate to fuel swap agreements that were not designated as hedges since inception, in which we effectively pay floating prices and receive fixed prices from the counterparty.
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At September 30, 2017 and DecemberMarch 31, 2016, $81.72022, there was $145.6 million and $138.5 million, respectively, of estimated unrealized net lossgain associated with our cash flow hedges pertaining to fuel swap agreements wereis expected to be reclassified to earnings from Accumulated other comprehensive loss within the next twelve months.months when compared to $23.8 million of estimated unrealized net gain at December 31, 2021. Reclassification is expected to occur as the result of fuel consumption associated with our hedged forecasted fuel purchases.

The fair value and line item caption of derivative instruments recorded within our consolidated balance sheets were as follows:follows (in thousands):
Fair Value of Derivative Instruments
Asset DerivativesLiability Derivatives
Balance Sheet LocationAs of March 31, 2022As of December 31, 2021Balance Sheet LocationAs of March 31, 2022As of December 31, 2021
Fair ValueFair ValueFair ValueFair Value
Derivatives designated as hedging instruments under ASC 815-20(1)
Interest rate swapsOther assets$23,791 $— Other long-term liabilities$1,072 $62,080 
Interest rate-swapsDerivative financial instruments741 6,478 Derivative financial instruments— — 
Foreign currency forward contractsDerivative financial instruments15,133 7,357 Derivative financial instruments84,872 116,027 
Foreign currency forward contractsOther assets3,932 2,070 Other long-term liabilities15,082 8,813 
Fuel swapsDerivative financial instruments145,456 31,919 Derivative financial instruments— 7,944 
Fuel swapsOther assets35,370 13,452 Other long-term liabilities— 1,202 
Total derivatives designated as hedging instruments under 815-20$224,423 $61,276 $101,026 $196,066 
Derivatives not designated as hedging instruments under ASC 815-20
Foreign currency forward contractsDerivative financial instruments$— $— Derivative financial instruments$— $— 
Foreign currency forward contractsOther assets— — Other long-term liabilities— — 
Fuel swapsDerivative financial instruments16,831 8,430 Derivative financial instruments16,682 3,264 
Fuel swapsOther Assets— 102 Other long-term liabilities— 1,211 
Total derivatives not designated as hedging instruments under 815-2016,831 8,532 16,682 4,475 
Total derivatives$241,254 $69,808 $117,708 $200,541 
  Fair Value of Derivative Instruments
  Asset Derivatives Liability Derivatives
  Balance Sheet Location As of September 30, 2017 As of December 31, 2016 Balance Sheet Location As of September 30, 2017 As of December 31, 2016
   Fair Value Fair Value  Fair Value Fair Value
(In thousands)            
Derivatives designated as hedging instruments under ASC 815-20(1)
            
Interest rate swaps Other assets $1,760
 $5,246
 Other long-term liabilities $52,611
 $57,679
Foreign currency forward contracts Derivative financial instruments 45,583
 —
 Derivative financial instruments —
 5,574
Foreign currency forward contracts Other assets 136,534
 —
 Other long-term liabilities 4,479
 68,165
Fuel swaps Derivative financial instruments 7,213
 —
 Derivative financial instruments 81,981
 129,486
Fuel swaps Other assets 29,721
 13,608
 Other long-term liabilities 40,517
 95,125
Total derivatives designated as hedging instruments under 815-20   220,811
 18,854
   179,588
 356,029
Derivatives not designated as hedging instruments under ASC 815-20            
Fuel swaps Derivative financial instruments —
 —
 Derivative financial instruments 7,352
 11,532
Fuel swaps Other Assets 447
 543
 Other long-term liabilities 2,223
 5,936
Total derivatives not designated as hedging instruments under 815-20   447
 543
   9,575
 17,468
Total derivatives   $221,258
 $19,397
   $189,163
 $373,497

(1)Accounting Standard Codification 815-20 “Derivatives and Hedging.”

The carrying value and line item caption of non-derivative instruments designated as hedging instruments recorded within our consolidated
balance sheets were as follows:follows (in thousands):
    Carrying Value
Non-derivative instrument designated as
hedging instrument under ASC 815-20		 Balance Sheet Location As of September 30, 2017 As of December 31, 2016
(In thousands)      
Foreign currency debt Current portion of long-term debt $69,023
 $61,601
Foreign currency debt Long-term debt 215,863
 249,624
    $284,886
 $311,225
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Carrying Value
Non-derivative instrument designated as
hedging instrument under ASC 815-20		Balance Sheet LocationAs of March 31, 2022As of December 31, 2021
Foreign currency debtCurrent portion of debt$64,938 $75,518 
Foreign currency debtLong-term debt45,165 34,795 
$110,103 $110,313 
The effect of derivative instruments qualifying and designated as hedging instruments and the related hedged items in fair value hedges on the consolidated statements of comprehensive income (loss)loss was as follows:follows (in thousands):
Derivatives and Related Hedged Items under ASC 815-20 Fair Value Hedging RelationshipsLocation of Gain (Loss) Recognized in Income on Derivative and Hedged ItemAmount of Gain (Loss)
Recognized in
Income on Derivative		Amount of Gain (Loss)
Recognized in
Income on Hedged Item
Quarter Ended March 31, 2022Quarter Ended March 31, 2021Quarter Ended March 31, 2022Quarter Ended March 31, 2021
Interest rate swapsInterest expense (income), net of interest capitalized$(3,365)$(552)$6,024 $2,930 
$(3,365)$(552)$6,024 $2,930 
Derivatives and Related Hedged Items under ASC 815-20 Fair Value Hedging Relationships Location of Gain (Loss) Recognized in Income on Derivative and Hedged Item Amount of Gain (Loss)
Recognized in
Income on Derivative		 Amount of Gain (Loss)
Recognized in
Income on Hedged Item
Quarter Ended September 30, 2017 Quarter Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016 Quarter Ended September 30, 2017 Quarter Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
(In thousands)                  
Interest rate swaps Interest expense, net of interest capitalized $600
 $1,737
 $2,642
 $6,075
 $—
 $—
 $—
 $7,203
Interest rate swaps Other expense (545) (7,662) 3,275
 28,592
 1,013
 7,423
 (841) (24,878)
    $55
 $(5,925) $5,917
 $34,667
 $1,013
 $7,423
 $(841) $(17,675)
The fair value and line item caption of derivative instruments recorded within our consolidated balance sheets for the cumulative basis adjustment for fair value hedges were as follows (in thousands):

Line Item in the Statement of Financial Position Where the Hedged Item is IncludedCarrying Amount of the Hedged LiabilitiesCumulative amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities
As of March 31, 2022As of December 31, 2021As of March 31, 2022As of December 31, 2021
Current portion of debt and Long-term debt$649,755 $655,502 $404 $6,428 
$649,755 $655,502 $404 $6,428 
The effect of derivative instruments qualifying and designated as cash flow hedging instruments on the consolidated financial statements was as follows:follows (in thousands):
Derivatives under ASC 815-20 Cash Flow Hedging RelationshipsAmount of Gain (Loss) Recognized in
Accumulated Other
Comprehensive Loss on Derivatives 
Quarter Ended March 31, 2022Quarter Ended March 31, 2021
Interest rate swaps$74,865 $43,408 
Foreign currency forward contracts(40,062)(99,581)
Fuel swaps189,816 55,246 
 $224,619 $(927)
Derivatives
under ASC 815-20 Cash Flow Hedging Relationships		 
Amount of Gain (Loss) Recognized in
Accumulated Other
Comprehensive Income (Loss) on Derivative 
(Effective Portion)
 Location of
Gain (Loss)
Reclassified
from
Accumulated
Other Comprehensive
Loss into Income
(Effective
Portion)		 Amount of Gain (Loss) Reclassified from
Accumulated Other Comprehensive Income (Loss) into Income  (Effective Portion)
Quarter Ended September 30, 2017 Quarter Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016  Quarter Ended September 30, 2017 Quarter Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
(In thousands)  
  
  
  
    
  
  
  
Interest rate swaps $(3,154) $6,598
 $(24,703) $(126,505) Interest expense, net of interest capitalized $(7,860) $(11,953) $(24,580) $(32,019)
Foreign currency forward contracts 122,211
 11,405
 221,861
 22,715
 Depreciation and amortization expenses (2,710) (2,710) (8,130) (5,408)
Foreign currency forward contracts —
 —
 —
 —
 Other expense (1,512) (3,465) (9,187) (10,206)
Foreign currency forward contracts —
 —
 —
 —
 Other operating —
 —
 —
 (207)
Foreign currency collar options —
 —
 —
 —
 Depreciation and amortization expenses (602) (601) (1,806) (1,806)
Fuel swaps —
 —
 —
 —
 Other expense 1,758
 2,760
 6,533
 9,356
Fuel swaps 67,878
 (3,090) 33,183
 94,640
 Fuel (32,386) (64,654) (114,149) (223,484)
  $186,935
 $14,913
 $230,341
 $(9,150)   $(43,312) $(80,623) $(151,319) $(263,774)
The table below represents amounts excluded from the assessment of effectiveness for our net investment hedging instruments for which the difference between changes in fair value and periodic amortization is recorded in accumulated other comprehensive income (loss) (in thousands):

Gain (Loss) Recognized in Income (Net Investment Excluded Components)Three Months Ended March 31, 2022
Net inception fair value at January 1, 2022$(554)
Amount of gain recognized in income on derivatives for the period ended March 31, 2022577 
Amount of gain (loss) remaining to be amortized in accumulated other comprehensive loss, as of March 31, 2022(39)
Fair value at March 31, 2022$(16)
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Derivatives under ASC 815-20 
Cash Flow Hedging Relationships
 Location of Gain (Loss)
Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)		 Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Quarter Ended September 30, 2017 Quarter Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
(In thousands)    
  
  
  
Interest rate swaps Other expense —
 90
 —
 (1,152)
Foreign currency forward contracts Other expense 75
 —
 100
 (57)
Fuel swaps Other expense 3,351
 (8) 1,014
 (3,949)
    $3,426
 $82
 $1,114
 $(5,158)




The effect of non-derivative instruments qualifying and designated as net investment hedging instruments on the consolidated financial statements was as follows:follows (in thousands):
Amount of Gain (Loss) Recognized in Other Comprehensive Loss
Non-derivative instruments under ASC 815-20 Net
Investment Hedging Relationships		Quarter Ended March 31, 2022Quarter Ended March 31, 2021
Foreign Currency Debt$2,745 $5,822 
 $2,745 $5,822 
  Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)
Non-derivative instruments under ASC 815-20 Net
Investment Hedging Relationships		 Quarter Ended September 30, 2017 Quarter Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
(In thousands)  
  
  
  
Foreign Currency Debt $7,949
 $(3,382) $34,206
 $1,313
  $7,949
 $(3,382) $34,206
 $1,313

There was no amount recognized in income (ineffective portion and amount excluded from effectiveness testing) for thequarters ended March 31, 2022 and nine months ended September 30, 2017and September 30, 2016, respectively.

March 31, 2021.
The effect of derivatives not designated as hedging instruments on the consolidated financial statements was as follows:follows (in thousands):
   Amount of Gain (Loss) Recognized in Income on Derivatives  Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives Not Designated as Hedging
Instruments under ASC 815-20		 Location of
Gain (Loss) Recognized in
Income on Derivatives		 Quarter Ended September 30, 2017 Quarter Ended September 30, 2016 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016Derivatives Not Designated as Hedging
Instruments under ASC 815-20		Location of
Gain (Loss) Recognized in
Income on Derivatives		Quarter Ended March 31, 2022Quarter Ended March 31, 2021
(In thousands)    
  
  
  
Foreign currency forward contracts Other expense $21,951
 $(2,464) $57,019
 $(11,712)Foreign currency forward contractsOther income (expense)$(6,985)$(13,498)
Fuel swaps Other expense (175) (1,172) (255) (1,224)Fuel swapsOther income (expense)(7)12,655 
   $21,776
 $(3,636) $56,764
 $(12,936)  $(6,992)$(843)
Credit Related Contingent Features
Our current interest rate derivative instruments may require us to post collateral if our Standard & Poor’s and Moody’s credit ratings arefall below specified levels. Specifically, under most of our agreements, if on the fifth anniversary of executing a derivative instrument, or on any succeeding fifth-year anniversary, our credit ratings for our senior unsecured debt were to beis rated below BBB- by Standard & Poor’s and Baa3 by Moody’s, then the counterparty maywill periodically have the right to demand that we post collateral in an amount equal to the difference between (i) the net market value of all derivative transactions with such counterparty that have reached their fifth year anniversary, to the extent negative, and (ii) the applicable minimum call amount.

The amount of collateral required to be posted following such event will change as, and to the extent, our net liability position increases or decreases by more than the applicable minimum call amount. 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. At September 30, 2017, four
As of our interest rate derivative instruments had reached their fifth anniversary; however,March 31, 2022, our senior unsecured debt credit rating was BBB-B by Standard & Poor’sPoor's and Baa3B2 by Moody’s and, accordingly, we were not required to post any collateral as of such date.Moody's. As of DecemberMarch 31, 2016, two2022, 6 of our interest rate derivative instrumentshedges had reached their fifth anniversary. Asa term of at least five years requiring us to post collateral of $16.7 million to satisfy our unsecured debt credit rating at December 31, 2016 was below BBB-/Baa3, we had posted $7.2 million in collateral as of such date. Consistent with the provisions ofobligations under our interest rate derivatives instruments, allderivative agreements, taking into account collateral waivers issued by certain banks. We expect that was posted with our counterparties was returned upon reaching investment grade.we will not need to provide additional collateral under these agreements in the next twelve months.
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21


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Concerning Forward-Looking Statements
The discussion under this caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this documentQuarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding guidance (including our expectations for the fourth quarter and full year of 2017 and our earnings and yield estimates for 2017 set forth under the heading "Outlook" below), business and industry prospects or future results of operations or financial position, made in this Quarterly Report on Form 10-Q are forward-looking. Words such as "anticipate," "believe," "considering," "could," "driving," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "will," "driving""would," and similar expressions are intended to further identify any of these forward-looking statements. Forward-looking statements reflect management's current expectations but they are based on judgments and are inherently uncertain. Furthermore, they are subject to risks, uncertainties and other factors that could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the caption "Risk Factors" in Part II, Item 1A herein.
All forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date of this document.filing.  Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
The discussion and analysis of our financial condition and results of operations has beenis organized to present the following:

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

•a discussion of our results of operations for the quarter and nine months ended September 30, 2017March 31, 2022, compared to the same periodsperiod in 2016;2021;

•a discussion of our business outlook, including our expectations for selected financial items for the fourth quarteroutlook; and full year of 2017; and

•a discussion of our liquidity and capital resources, including our future capital and contractual commitments and potential funding sources.
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Critical Accounting Policies and Estimates

For a discussion of our critical accounting policies and estimates, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operationswithin our Annual Report on Form 10-K for the year ended December 31, 2016.2021.


Seasonality
Our revenues are seasonal based on demand for cruises. Demand ishas historically been strongest for cruises during the Northern Hemisphere’s summer months and holidays. In order to mitigate the impact of the winter weather in the Northern Hemisphere and to capitalize on the summer season in the Southern Hemisphere, our brands have historically focused on deployment to the Caribbean, Asia and Australia during that period. This seasonal trend was disrupted with the voluntary suspension of our global cruise operations effective March 2020 in response to the COVID-19 outbreak and through the gradual resumption of global cruise operations commencing in the second half of 2021.

Recent Developments
Return to Healthy Sailing
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 operated 54 of our Global and Partner Brand ships, representing close to 90% of our worldwide capacity. We expect that the rest of the fleet will return to operations before the summer season. 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 on our resumption of 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.
Continued Fleet Ramp-up
Wonder of the Seas and Celebrity Beyond were delivered and commenced operations in the first quarter and second quarter, respectively, which expanded our total fleet size, including our Partner Brands, to 63 ships.
We are currently offering cruise itineraries in the majority of our destinations. Australia, one of the last remaining countries to re-open, has announced the resumption of cruising effective April 2022. We expect to return to Australia for the local summer season during the fourth quarter of 2022. China remains closed to cruising, resulting in the redeployment of ships planned for China to other markets.
Operating Costs
As we resume our return to service, we are experiencing inflationary and supply chain challenges, mainly related to fuel and food costs, as well as transitory costs related to our health and safety protocols. We expect these challenges to have an adverse impact to our 2022 operating costs.
Update on Bookings
Booking volumes in the first quarter of 2022 have improved consistently week-over-week and reached typical, peak booking season ("Wave") levels at the end of the quarter. Bookings have now been surpassing comparable 2019 levels for the last two months, with particularly strong trends for North America based itineraries. Additionally, the elevated cancellations experienced earlier in the year attributable to the Omicron variant returned to pre-Omicron levels as COVID-19 cases subsided in February 2022.
While load factors for sailings in the second half of 2022 are currently slightly below historical levels, consumers are booking their cruises closer to sailing and we are capitalizing on the close-in demand to improve load factors.
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Bookings for Europe sailings improved throughout the first quarter but softened due to the war in Ukraine, with a bigger impact on Baltic itineraries. While bookings for Europe are now exceeding 2019 levels for the same period, the situation in Ukraine is expected to weigh on load factors in Europe this summer.
As of March 31, 2022 we had $3.6 billion in customer deposits. Approximately 27% of the customer deposit balance as of March 31, 2022 is related to FCCs compared to 32% of the customer deposit balance as of December 31, 2021, a positive trend indicating new demand.
Update on Recent Liquidity Actions and Ongoing Uses of Cash
Refer to Funding Needs and Sources for discussion regarding our recent liquidity actions and ongoing uses of cash.
Capital Expenditures
Refer to Future Capital Commitments for discussion on capital expenditures.
Debt Maturities, New Financings and Other Liquidity Actions
During the quarter ended March 31, 2022, we continued to take actions to further improve our liquidity position and manage cash flow. In particular, 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; and
•entered into certain agreements with Morgan Stanley & Co., LLC (“MS”) where MS agrees to provide backstop committed financing to refinance, repurchase and/or repay in whole or in part our existing and outstanding 10.875% Senior Secured Notes due 2023, 9.125% Senior Priority Guaranteed Notes due 2023 (the "Priority Guaranteed Notes"), and 4.25% Convertible Notes due 2023. 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.
Expected debt maturities for the remainder of 2022 are $2.2 billion and $5.7 billion for 2023. We continue to identify and evaluate further actions to enhance our liquidity and support our recovery. These include and are not limited to further reductions in capital expenditures, operating expenses and administrative costs and additional financings.
Results of Operations
Summary
Net Lossand Adjusted Net Loss for the first quarter of 2022 were $(1.17) billion and $(1.16) billion, or $(4.58) and $(4.57) per share on a diluted basis, respectively, reflecting the ramp up of our return to operations, and increased sales and marketing expenses, compared to Net Loss and Adjusted Net Loss of $(1.13) billion and $(1.08) billion, or $(4.66) and $(4.44) per share on a diluted basis, respectively, for the first quarter of 2021.
Significant items for the quarter ended March 31, 2022 include:
•Total revenues, excluding the effect of changes in foreign currency exchange rates, increased $1.0 billion for the quarter ended March 31, 2022 as compared to the same period in 2021, The increase reflects the ramp up in our return to operations in 2022 compared to 2021 when the suspension of our global cruise operations was in effect. APCDs for the first quarter ended March 31, 2022 were 7,692,906 compared to 384,224 in the same period in 2021.
•Total cruise operating expenses, excluding the effect of changes in foreign currency exchange rates, increased $0.9 billion for the quarter ended March 31, 2022 as compared to the same period in 2021. The increase reflects the ramp up in our return to operations in 2022 compared to 2021 when the suspension of our global cruise operations was in effect.
•In January 2022, we took delivery of Wonder of the Seas.
•In January 2022, we issued the January 2022 Unsecured Notes. Refer to Note 6. Debt to our consolidated financial statements under Part I. Item 1. Financial Statements for further information regarding this transaction.
•In February 2022, we entered into certain agreements with MS where MS agrees to provide backstop committed financing. Refer to Note 6. Debt to our consolidated financial statements under Part I. Item 1. Financial Statements for further information regarding this transaction.
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Operating results for the quarter ended March 31, 2022 compared to the same period in 2021 are shown in the following table (in thousands, except per share data):
 Quarter Ended March 31,
 20222021
  % of Total
Revenues		 % of Total
Revenues
Passenger ticket revenues$651,858 61.5 %$20,844 49.6 %
Onboard and other revenues407,373 38.5 %21,170 50.4 %
Total revenues1,059,231 100.0 %42,014 100.0 %
Cruise operating expenses:    
Commissions, transportation and other150,343 14.2 %2,949 7.0 %
Onboard and other74,439 7.0 %4,481 10.7 %
Payroll and related349,618 33.0 %96,636 230.0 %
Food100,184 9.5 %8,472 20.2 %
Fuel188,480 17.8 %41,822 99.5 %
Other operating321,705 30.4 %129,127 307.3 %
Total cruise operating expenses1,184,769 111.9 %283,487 674.7 %
Marketing, selling and administrative expenses394,030 37.2 %258,041 614.2 %
Depreciation and amortization expenses339,467 32.0 %310,166 738.2 %
Impairment and credit losses173 — %(449)(1.1)%
Operating Loss(859,208)(81.1)%(809,231)(1,926.1)%
Other (expense) income:    
Interest income3,322 0.3 %4,861 11.6 %
Interest expense, net of interest capitalized(277,659)(26.2)%(272,514)(648.6)%
Equity investment loss(31,059)(2.9)%(59,871)(142.5)%
Other (expense) income(2,538)(0.2)%5,033 12.0 %
 (307,934)(29.1)%(322,491)(767.6)%
Net Loss(1,167,142)(110.2)%(1,131,722)(2,693.7)%
Diluted Loss per Share$(4.58) $(4.66) 











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Adjusted Net Loss and Adjusted Loss per Share were calculated as follows (in thousands, except per share data):
 Quarter Ended March 31,
 20222021
Net Loss$(1,167,142)$(1,131,722)
Adjusted Net Loss(1,164,373)(1,078,279)
Net Adjustments to Net Loss$2,769 $53,443 
Adjustments to Net Loss:
Impairment and credit losses (recoveries)$173 $(449)
Restructuring charges and other initiatives expense973 1,317 
Amortization of Silversea Cruises intangible assets related to Silversea Cruises acquisition1,623 1,623 
Convertible debt amortization of debt discount (1)
— 26,073 
Pullmantur reorganization settlement (2)
— 5,000 
Loss on extinguishment of debt— 1,314 
Equity investment impairment (3)
— 26,042 
Oasis of the Seas incident (4)
— (1,321)
Net gain related to the sale of the Azamara brand— (6,156)
Net Adjustments to Net Loss$2,769 $53,443 
Basic:  
   Loss per Share$(4.58)$(4.66)
   Adjusted Loss per Share$(4.57)$(4.44)
Diluted:
   Loss per Share$(4.58)$(4.66)
   Adjusted Loss per Share$(4.57)$(4.44)
Weighted-Average Shares Outstanding:
Basic254,821 243,004 
Diluted254,821 243,004 
(1)Represents the amortization of non-cash debt discount on our convertible notes. For further information regarding the adoption of ASU 2020-06 as of January 1, 2022, which impacts the accounting of the non-cash debt discount on convertible notes, refer to Note 2. Summary of Significant Accounting Policies to our consolidated financial statements.
(2)Represents estimated cash refunds expected to be paid to Pullmantur guests as part of the Pullmantur S.A. reorganization.
(3)Represents equity investment asset impairments primarily for TUI Cruises GmbH in 2021 as a result of the impact of COVID-19.
(4)Represents net insurance recoveries related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas.

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Selected statistical information is shown in the following table:
 Quarter Ended March 31,
 2022 (1)2021 (2)
Passengers Carried734,809 41,209 
Passenger Cruise Days4,418,899 144,916 
APCD7,692,906 384,224 
Occupancy57.4 %37.7 %
(1)Due to the elimination of the Silversea Cruises three-month reporting lag in October 2021, we included Silversea Cruises' metrics from January 1, 2022 through March 31, 2022 in the quarter ended March 31, 2022.
(2)Due to the three-month reporting lag, we included Silversea Cruises' metrics from October 1, 2020 through December 31, 2020 in the quarter ended March 31, 2021.

2022 Outlook
The Company’s operations are still impacted by COVID-19 and its related variants. The adverse impact of the COVID-19 pandemic on our revenues, consolidated results of operations, cash flows and financial condition has been and will continue to be material in 2022. We expect to incur a net loss on both a U.S. GAAP and adjusted basis for our second quarter of 2022 and a return to profitability for the second half of 2022. See Recent Developments– Continued Fleet Ramp-Up and Update on Bookings for further indication on our resumption of operations and the booking environment.

Financial Presentation
Description of Certain Line Items
Revenues
Our revenues are comprised of the following:

•Passenger ticket revenues, which consist of revenue recognized from the sale of passenger tickets and the sale of airtransportation to and from our ships; and

•Onboard and other revenues, which consist primarily of revenues from the sale of goods and/or services onboard ourships not included in passenger ticket prices, cancellation fees, sales of vacation protection insurance, and pre- and post-cruise tours. tours and fees for operating certain port facilities. Onboard and other revenues also includesinclude revenues we receive from independent third partythird-party concessionaires that pay us apercentage of their revenues in exchange for the right to provide selected goods and/or services onboard our ships, as well as revenues received for our bareboat charter, procurement and management related services we perform on behalf of our unconsolidated affiliates.
Cruise Operating Expenses
Our cruise operating expenses are comprised of the following:

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

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

•Payroll and related expenses, which consist of costs for shipboard personnel (costs associated with our shoreside personnel are included in Marketing, selling and administrative expenses);

•Food expenses, which include food costs for both guests and crew;
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•Fuel expenses, which include fuel and related delivery, storage and emission consumable costs and the financial impact of fuel swapagreements; and

•Other operating expenses, which consist primarily of operating costs such as repairs and maintenance, port costs that do not vary with passenger head counts, vessel related insurance, entertainment and gains and/or losses related to the sale of our ships.
ships, if any.  
We do not allocate payroll and related expenses, food expenses, fuel expenses or other operating expenses to the expense categories attributable to passenger ticket revenues or onboard and other revenues since they are incurred to provide the total cruise vacation experience.
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Selected Operational and Financial Metrics
We utilize a variety of operational and financial metrics which are defined below to evaluate our performance and financial condition. As discussed in more detail herein, certain of these metrics are non-GAAP financial measures. These non-GAAP financial measures are provided along with the related GAAP financial measures as we believe they provide useful information to investors as a supplement to our consolidated financial statements, which are prepared and presented in accordance with GAAP. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
Adjusted EarningsLoss per Share ("Adjusted EPS") represents Adjusted Net IncomeLoss (as defined below) divided by weighted average shares outstanding or by diluted weighted average shares outstanding, as applicable. We believe that this non-GAAP measure is meaningful when assessing our performance on a comparative basis.
Adjusted Net Income Loss represents net incomeloss excluding certain items that we believe adjusting for is meaningful when assessing our performance on a comparative basis. For the periods presented, these items included the net loss related to the elimination of the Pullmantur reporting lag, the net gain related to the 51% sale of the Pullmantur(i) impairment and CDF Croisières de France ("CDF") brands,credit losses (recoveries); (ii) restructuring charges and other initiative costsexpenses; (iii) the amortization of the Silversea Cruises intangible assets resulting from the Silversea Cruises acquisition in 2018; (iv) the amortization of non-cash debt discount on our convertible notes; (v) the estimated cash refunds expected to be paid to Pullmantur guests as part of the Pullmantur S.A. reorganization in 2020; (vi) loss on the extinguishment of debt; (vii) equity investment asset impairments; (viii) net insurance recoveries related to our Pullmantur right-sizing strategythe collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas; and other restructuring initiatives.(ix) the net gain recognized in the first quarter of 2021 in relation to the sale of the Azamara brand.

Available Passenger Cruise Days (“APCD” (“APCD”) is our measurement of capacity and represents double occupancy per cabin multiplied by the number of cruise days for the period, which excludes canceled cruise days and drydock days.cabins not available for sale. We use this measure to perform capacity and rate analysis to identify our main non-capacity drivers that cause our cruise revenue and expenses to vary.
Gross Cruise Costs represent the sum of total cruise operating expenses plus marketing, selling and administrative expenses.
Gross Yields represent total revenues per APCD.
Net Cruise Costs and Net Cruise Costs Excluding Fuel represent Gross Cruise Costs excluding commissions, transportation and other expenses and onboard and other expenses and, in the case of Net Cruise Costs Excluding Fuel, fuel expenses (each of which is described above under the Description of Certain Line Items heading). In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs and Net Cruise Costs Excluding Fuel to be the most relevant indicators of our performance. A reconciliation of historical Gross Cruise Costs to Net Cruise Costs and Net Cruise Costs Excluding Fuel is provided below under Results of Operations. For the periods presented, Net Cruise Costs excludes the net gain related to the 51% sale of the Pullmantur and CDF brands, restructuring charges and other initiative costs related to our Pullmantur right-sizing strategy and other restructuring initiatives.

Net Revenues represent total revenues less commissions, transportation and other expenses and onboard and other expenses (each of which is described above under the Description of Certain Line Items heading).
Net Yields represent Net Revenues per APCD. We utilize Net Revenues and Net Yields to manage our business on a day-to-day basis as we believe that they are the most relevant measures of our pricing performance because they reflect the cruise revenues earned by us net of our most significant variable costs, which are commissions, transportation and other expenses and onboard and other expenses. A reconciliation of historical Gross Yields to Net Yields is provided below under Results of Operations. Net Yields excludes initiative costs related to the sale of the Pullmantur and CDF brands.
Occupancy ("Load Factor"), in accordance with cruise vacation industry practice, occupancy is calculated by dividing Passenger Cruise Days (as defined below) by APCD. A percentage in excess of 100% indicates that three or more passengers occupied some cabins.
Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.
We believeAlthough discussed in previous periods, we did not disclose or reconcile in this report our Gross Yields, Net Yields, NetGross Cruise Costs, and Net Cruise Costs Excluding Fuel are our most relevant non-GAAP financial measures. However, a significant portion of our revenue and expenses are denominated in currencies other than the United States dollar. Because our reporting currency is the United States dollar, the value of these revenues and expenses can be affected by changes in currency exchange rates. Although such changes in local currency prices is just one of many elements impacting our revenues and expenses, it can be an important element. For this reason, we also monitor Net Yields, Net Cruise Costs and Net Cruise Costs Excluding Fuel, as ifdefined in our Annual Report on Form 10-K for the current periods’ currency exchange rates had remained constant withyear ended December 31, 2019. Historically, we have utilized these financial metrics to measure relevant rate comparisons to other periods. However, our 2022 and 2021 reduction in capacity and revenues and the comparable prior periods’ rates, or on a “Constant Currency” basis.
Tableshift in the nature of Contents

It should be emphasized that Constant Currency is primarily used for comparing short-term changes and/or projections. Changes in guest sourcing and shifting the amount of purchases between currencies can changeour running costs, due to the impact of the purely currency-based fluctuations.
The useCOVID-19 pandemic on our operations, do not allow for a meaningful analysis and comparison of certain significant non-GAAP measures, such as Net Yields, Net Cruise Costs and Net Cruise Costs Excluding Fuel, allows us to perform capacity and rate analysis to separate the impact of known capacity changes from other less predictable changes which affect our business. We believe these non-GAAP measures provide expanded insight to measure revenue and cost performance in addition to the GAAP based financial measures. There are no specific rules or regulations for determining non-GAAP and Constant Currency measures,metrics and as such there existsthese metrics have been excluded from this report.
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Quarter Ended March 31, 2022 Compared to Quarter Ended March 31, 2021
In this section, references to 2022 refer to the possibility that they may not be comparablequarter ended March 31, 2022 and references to other companies within2021 refer to the industry.quarter ended March 31, 2021.

Revenues
We have not provided a quantitative reconciliation of (i) projected Total revenues for 2022 increased $1.0 billion to projected Net Revenues, (ii) projected Gross Yields to projected Net Yields, (iii) projected Gross Cruise Costs to projected Net Cruise Costs and projected Net Cruise Costs Excluding Fuel and (iv) projected Net Income and Earnings per Share to projected Adjusted Net Income and Adjusted Earnings per Share because preparation of meaningful GAAP projections of Total$1.1 billion from $42.0 million in 2021.
Passenger ticket revenues, Gross Yields, Gross Cruise Costs, Net Income and Earnings per Share would require unreasonable effort. Due to significant uncertainty, we are unable to predict, without unreasonable effort, the future movement of foreign exchange rates, fuel prices and interest rates inclusive comprised 61.5% of our related hedging programs. In addition, we are unable2022 total revenues. Passenger ticket revenues for 2022 increased by $0.6 billion to determine the future impact of restructuring expenses or other non-core business related gains$0.7 billion from $20.8 million in 2021, and losses which may result from strategic initiatives. These items are uncertain and could be material to our results of operations in accordance with GAAP. Due to this uncertainty, we do not believe that reconciling information for such projected figures would be meaningful.

Results of Operations
Summary
Both our net income and Adjusted Net Income for the third quarter of 2017 were $752.8 million, or $3.49 per share on a diluted basis compared to net income and Adjusted Net Income of $693.3 million and $690.9 million, or $3.21 and $3.20 per share on a diluted basis, respectively, for the third quarter of 2016.

Both our net income and Adjusted Net Income for the nine months ended September 30, 2017 were $1.3 billion, or $6.19 per share on a diluted basis as compared to net income and Adjusted Net Income of $1.0 billion and $1.1 billion, or $4.72 and $4.85, per share on a diluted basis, respectively, for the nine months ended September 30, 2016.

Significant items for the quarter and nine months ended September 30, 2017 include:

The estimated negative impact resulting from third quarter 2017 hurricane-related disruptions was approximately $0.20 per share on a diluted basis to our net income and Adjusted Net Income for the quarter and nine months ended September 30, 2017.

The effect of changespartially offset by unfavorable movements in foreign currency exchange rates related to our passenger ticket and onboard and other revenue transactions denominated in currencies other than the United States dollar resulted in an increase inof $1.9 million.
The remaining 38.5% of 2022 total revenues was comprised of $14.8Onboard and other revenues, which increased $386.2 million for the quarterto $407.4 million in 2022 from $21.2 million in 2021, and a decrease of $16.6 million for the nine months ended September 30, 2017, respectively, as compared to the same periods in 2016.

Total revenues, excluding the effect of changeswas partially offset by unfavorable movements in foreign currency exchange rates decreased $9.0 million and increased $203.2 million forrelated to our revenue transactions denominated in currencies other than the quarter and nine months ended September 30, 2017, respectively, as compared to the same periodsUnited States dollar of $0.7 million.
The increase in 2016. The decrease during the quarterrevenues was due to the decreasereturn of operations in capacity, including2022, in which the hurricane-related disruptions duringmajority of our fleet was in service, compared to 2021, when the third quartersuspension of 2017,our global cruise operations was in effect. Occupancy in 2022 was 57.4% compared to 37.7% in 2021.
Onboard and theother revenues included concession revenues of $48.4 million in 2022 and $0.7 million in 2021.
Cruise Operating Expenses
Total Cruise operating expenses for 2022 increased $0.9 billion to $1.2 billion from $283.5 million in 2021. The increase during the nine months was primarily due to anto:
•a $253.0 million increase in ticket pricesPayroll and onboard spending on related;
•a per passenger basis, which are further discussed below.$147.4 million increase in Commissions, transportation and other expenses;

•a $146.7 million increase in Fuel expense;
•a $91.7 million increase in Food expense ; and
Total cruise•a $70.0 million increase in Onboard and other expenses.
The increase in operating expenses decreased $21.9 million and $141.4 million fornoted above was driven by the quarter and nine months ended September 30, 2017, respectively, asreturn to operations in 2022, with the majority of our fleet in service, compared to 2021, when the same periodssuspension of our global cruise operations was in 2016.effect. The decreases were primarily2022 operating expenses include the overhead costs associated with bringing our ships back to service and our crew back on board our ships. Additionally, as discussed above in Recent Developments, high inflation has impacted our operating costs, especially in fuel and food expense. Our cost of fuel (net of the financial impact of fuel swap agreements) for 2022 increased 55% per metric ton compared to 2021 mainly due to fuel price increase.
The increase in Cruise operating expenses was partially offset by the decrease in capacity, which is further discussed below. Additionally, we recognized a $30.9 million gain on the sale of Legend of the Seas in March 2017.

Thefavorable effect of changes in foreign currency exchange rates related to our cruise operating expenses denominated in currencies other than the United States dollar of $4.9 million.
Marketing, Selling and Administrative Expenses
Marketing, selling and administrative expenses for 2022 increased $136.0 million, or 52.7%, to $394.0 million from $258.0 million in 2021. The increase was immaterialprimarily due to the ramp up of our global sales and marketing efforts starting in the second half of 2021 as we commenced our resumption of operations.
Depreciation and Amortization Expenses
Depreciation and amortization expenses for 2022 increased $29.3 million, or 9.4%, to $339.5 million from $310.2 million in 2021. The increase was primarily due to the addition of Wonder of the Seas to our consolidated statementsfleet in January 2022 and a full quarter of comprehensive income (loss)depreciation for Odyssey of the quarterSeas and nine months ended September 30, 2017.Silver Dawn, which were delivered in March 2021 and November 2021, respectively.
Impairment and Credit Losses (Recoveries)
There were no significant Impairment and credit losses (recoveries) for 2022 and 2021.
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Other ItemsIncome (Expense)

In May 2017, TUI Cruises, our 50% joint venture, took deliveryInterest expense, net of Mein Schiff 6.

Duringinterest capitalized for 2022increased $5.1 million, or 1.9%, to $277.7 million from $272.5 million in 2021. The increase was primarily due to new debt issuances after the secondfirst quarter of 2017, we entered into agreements2021 and through the first quarter of 2022, partially offset by the lower cost of debt in 2022 attributable to the partial repayment of the 11.50% Senior Secured Notes due 2025 during the third quarter of 2021 and the decrease in interest expense associated with Meyer Turku to build two "Project Icon" ships. In October 2017, we entered into credit agreements for the unsecured financingadoption of these ships for up to 80% of each ship's contract price.ASU 2020-06. Refer to Note 7. Commitments and Contingencies2. Summary of Significant Accounting Policies to our consolidated financial statements for further information.
information on ASU 2020-06.

Equity investment loss decreased by $28.8 million, or 48.1%, to $31.1 million from $59.9 million primarily due to a reduction in losses for TUI Cruises, one of our equity investments, in 2022 compared to 2021.
DuringOther (expense) income. We recognized Other (expense) of $2.5 million in 2022, compared to Other income of $5.0 million in 2021. The $7.6 million increase in expense was primarily due to the third2021 recognition of a $13.4 million gain related to the change in fair value of our fuel swap derivative instruments with no hedge accounting, which did not recur in 2022, which was partially offset by an increase of $9.3 million in foreign exchange gain on remeasurement of our monetary assets, net of hedging.
Other Comprehensive Income (Loss)
Other comprehensive income for 2022 increased $185.8 million or 609.4%, to $216.3 million from $30.5 million in 2021. The increase was primarily due to a Gain on cash flow derivative hedges in 2022 of $195.9 million compared to $10.3 million in 2021, mostly as a result of a significant increase in the fair value of our fuel swaps in 2022 compared to 2021.
Future Application of Accounting Standards
Refer to Note 2. Summary of Significant Accounting Policies to our consolidated financial statements for further information on Recent Accounting Pronouncements.
Liquidity and Capital Resources
Sources and Uses of Cash
Net cash used by operating activities decreased $280.3 million to cash used of $0.5 billion for the first quarter of 2017, we entered into an agreement2022 compared to purchase a ship for our Azamara Club Cruises brand. The sale is expected to be completed with the deliverycash used of the ship scheduled for March 2018.

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Operating results$0.8 billion for the quarter and ninesame period in 2021. Our continued resumption of cruise operations in 2022 has generated an increase in guest ticket collections, resulting in an increase in customer deposits of $406.5 million during the first three months in 2022, compared to an increase of $95.9 million during the same period in 2021, when our global operations were suspended. The increase in customer deposits was partially offset by an increase in cruise operating expenses during the three months ended September 30, 2017March 31, 2022, reflecting the associated costs of returning our fleet to service.
Net cash used in investing activities increased $475.6 millionto cash used of $1.4 billion for the first three months in 2022, compared to cash used of $1.0 billion for the same period in 2021. The increase was primarily attributable to an increase in capital expenditures of $301.4 million during the first quarter of 2022, compared to the same period in 20162021, and a decrease in proceeds from the sale of property and equipment and other assets of $175.4 million during the first quarter of 2021, which did not recur in 2022.
Net cash provided by financing activities was$1.2 billion for the first quarter of 2022, compared to cash provided of $3.2 billion for the same period in 2021. The decrease of $1.9 billion was primarily attributable to $1.6 billion of proceeds from common stock issuances during the three months ended March 31, 2021, which did not recur during the three months ended March 31, 2022, and higher repayments of debt of $0.6 billion during the first quarter of 2022, compared to the same period in 2021. These decreases were partially offset by repayments of commercial paper notes of $414.6 million during the first quarter of 2021, which did not recur in 2022.
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Future Capital Commitments
Capital Expenditures
COVID-19 has impacted shipyard operations which have and may continue to result in delays of our previously contracted ship deliveries. As of March 31, 2022, the dates that the ships on order by our Global and Partner Brands are shownexpected to be delivered, subject to change in the following table (in thousands, except per share data):
 Quarter Ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
   % of Total
Revenues		   % of Total
Revenues		   % of Total
Revenues		   % of Total
Revenues
Passenger ticket revenues$1,893,152
 73.7 % $1,899,956
 74.1 % $4,892,760
 72.2 % $4,794,653
 72.8 %
Onboard and other revenues676,392
 26.3 % 663,785
 25.9 % 1,880,618
 27.8 % 1,792,145
 27.2 %
Total revenues2,569,544
 100.0 % 2,563,741
 100.0 % 6,773,378
 100.0 % 6,586,798
 100.0 %
Cruise operating expenses: 
  
  
  
  
  
  
  
Commissions, transportation and other409,597
 15.9 % 400,933
 15.6 % 1,060,176
 15.7 % 1,060,391
 16.1 %
Onboard and other157,041
 6.1 % 159,887
 6.2 % 395,472
 5.8 % 399,739
 6.1 %
Payroll and related210,764
 8.2 % 214,081
 8.4 % 636,861
 9.4 % 671,955
 10.2 %
Food126,223
 4.9 % 125,732
 4.9 % 369,198
 5.5 % 371,759
 5.6 %
Fuel160,752
 6.3 % 178,772
 7.0 % 508,914
 7.5 % 531,283
 8.1 %
Other operating253,892
 9.9 % 260,718
 10.2 % 780,257
 11.5 % 857,161
 13.0 %
Total cruise operating expenses1,318,269
 51.3 % 1,340,123
 52.3 % 3,750,878
 55.4 % 3,892,288
 59.1 %
Marketing, selling and administrative expenses273,637
 10.6 % 259,327
 10.1 % 874,957
 12.9 % 852,435
 12.9 %
Depreciation and amortization expenses240,150
 9.3 % 229,328
 8.9 % 710,836
 10.5 % 661,712
 10.0 %
Operating Income737,488
 28.7 % 734,963
 28.7 % 1,436,707
 21.2 % 1,180,363
 17.9 %
Other income (expense): 
  
  
  
  
  
  
  
Interest income4,693
 0.2 % 6,472
 0.3 % 16,756
 0.2 % 14,875
 0.2 %
Interest expense, net of interest capitalized(73,233) (2.9)% (82,610) (3.2)% (230,182) (3.4)% (226,803) (3.4)%
Equity investment income85,120
 3.3 % 46,539
 1.8 % 120,359
 1.8
 94,832
 1.4 %
Other expense(1,226) — % (12,107) (0.5)% (6,546) (0.1)% (40,965) (0.6)%
 15,354
 0.6 % (41,706) (1.6)% (99,613) (1.5)% (158,061) (2.4)%
Net Income$752,842
 29.3 % $693,257
 27.0 % $1,337,094
 19.7 % $1,022,302
 15.5 %
Diluted Earnings per Share$3.49
  
 $3.21
  
 $6.19
  
 $4.72
  
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Adjusted Net Incomeconstruction delays, and Adjusted Earnings per Share were calculatedtheir approximate berths are as follows (in thousands, except per share data):
 Quarter Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net Income$752,842
 $693,257
 $1,337,094
 $1,022,302
Adjusted Net income752,842
 690,911
 1,337,094
 1,050,031
Net Adjustments to Net Income- (Decrease) Increase$—
 $(2,346) $—
 $27,729
Adjustments to Net Income:       
Net loss related to the elimination of the Pullmantur reporting lag$—
 $—
 —
 21,656
Net gain related to the sale of the Pullmantur and CDF Croisières de France brands—
 (3,834) —
 (3,834)
Restructuring charges—
 1,897
 —
 6,627
Other initiative costs—
 (409) —
 3,280
Net Adjustments to Net Income- (Decrease) Increase$—
 $(2,346) $—
 $27,729
        
Basic: 
  
  
  
   Earnings per Share$3.51
 $3.23
 $6.22
 $4.74
   Adjusted Earnings per Share$3.51
 $3.22
 $6.22
 $4.87
        
Diluted:       
   Earnings per Share$3.49
 $3.21
 $6.19
 $4.72
   Adjusted Earnings per Share$3.49
 $3.20
 $6.19
 $4.85
        
Weighted-Average Shares Outstanding:       
Basic214,694
 214,819
 214,882
 215,663
Diluted215,824
 215,667
 215,905
 216,575

Selected statistical information is shown in the following table:
 Quarter Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 
2016(1)
Passengers Carried1,512,363
 1,558,224
 4,371,235
 4,365,144
Passenger Cruise Days10,189,900
 10,727,918
 30,100,035
 30,367,048
APCD9,214,470
 9,766,482
 27,646,779
 28,503,681
Occupancy110.6% 109.8% 108.9% 106.5%

(1) Does not include November and December 2015 amounts for Pullmantur as the net Pullmantur result for those months was included within Other expense in our consolidated statements of comprehensive income (loss) for the nine months ended September 30, 2016, as a result of the elimination of the Pullmantur reporting lag, and did not affect Gross Yields, Net Yields, Gross Cruise Costs, Net Cruise Costs and Net Cruise Costs Excluding Fuel.
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Gross Yields and Net Yields were calculated as follows (in thousands, except APCD and Yields):
 Quarter Ended September 30, Nine Months Ended September 30,
 2017 2017 On a Constant Currency Basis 2016 2017 2017 On a Constant Currency Basis 2016
Passenger ticket revenues$1,893,152
 $1,880,360
 $1,899,956
 $4,892,760
 $4,907,927
 $4,794,653
Onboard and other revenues676,392
 674,382
 663,785
 1,880,618
 1,882,049
 1,792,145
Total revenues2,569,544
 2,554,742
 2,563,741
 6,773,378
 6,789,976
 6,586,798
Less: 
  
  
  
  
  
Commissions, transportation and other409,597
 406,500
 400,933
 1,060,176
 1,062,632
 1,060,391
Onboard and other157,041
 155,818
 159,887
 395,472
 394,316
 399,739
Net Revenues including other initiative costs2,002,906
 1,992,424
 2,002,921
 5,317,730
 5,333,028
 5,126,668
Less:           
Other initiative costs included within Net Revenues—
 —
 (1,843) —
 —
 (1,843)
Net Revenues$2,002,906
 $1,992,424
 $2,004,764
 $5,317,730
 $5,333,028
 $5,128,511
            
APCD9,214,470
 9,214,470
 9,766,482
 27,646,779
 27,646,779
 28,503,681
Gross Yields$278.86
 $277.25
 $262.50
 $245.00
 $245.60
 $231.09
Net Yields$217.37
 $216.23
 $205.27
 $192.35
 $192.90
 $179.92
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Gross Cruise Costs, Net Cruise Costs and Net Cruise Costs Excluding Fuel were calculated as follows (in thousands, except APCD and costs per APCD):
 Quarter Ended September 30, Nine Months Ended September 30,
 2017 2017 On a Constant Currency Basis 2016 2017 2017 On a Constant Currency Basis 2016
Total cruise operating expenses$1,318,269
 $1,311,964
 $1,340,123
 $3,750,878
 $3,753,441
 $3,892,288
Marketing, selling and administrative expenses(1)
273,637
 273,121
 257,430
 874,957
 881,067
 845,808
Gross Cruise Costs1,591,906
 1,585,085
 1,597,553
 4,625,835
 4,634,508
 4,738,096
Less: 
  
  
  
  
  
Commissions, transportation and other409,597
 406,500
 400,933
 1,060,176
 1,062,632
 1,060,391
Onboard and other157,041
 155,818
 159,887
 395,472
 394,316
 399,739
Net Cruise Costs including other initiative costs1,025,268
 1,022,767
 1,036,733
 3,170,187
 3,177,560
 3,277,966
Less: 
  
  
  
  
  
Net gain related to the sale of Pullmantur and CDF Croisières de France brands included within other operating expenses—
 —
 (3,834) —
 —
 (3,834)
Other initiative costs included within cruise operating expenses and marketing, selling and administrative expenses—
 —
 (2,252) —
 —
 1,073
Net Cruise Costs1,025,268
 1,022,767
 1,042,819
 3,170,187
 3,177,560
 3,280,727
Less:           
Fuel(2)
160,752
 160,751
 178,772
 508,914
 508,911
 530,859
Net Cruise Costs Excluding Fuel$864,516
 $862,016
 $864,047
 $2,661,273
 $2,668,649
 $2,749,868
            
APCD9,214,470
 9,214,470
 9,766,482
 27,646,779
 27,646,779
 28,503,681
Gross Cruise Costs per APCD$172.76
 $172.02
 $163.58
 $167.32
 $167.63
 $166.23
Net Cruise Costs per APCD$111.27
 $111.00
 $106.78
 $114.67
 $114.93
 $115.10
Net Cruise Costs Excluding Fuel per APCD$93.82
 $93.55
 $88.47
 $96.26
 $96.53
 $96.47

(1) For the quarter and nine months ended September 30, 2016, amounts do not include restructuring charges of $1.9 million and $6.6 million, respectively.

(2) For the nine months ended September 30, 2016, amount does not include fuel expense of $0.4 million included within other initiative costs associated with the redeployment of Pullmantur’s Empress to the Royal Caribbean International brand.
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2017 Outlook

The Company does not make predictions about fuel pricing, interest rates or currency exchange rates but does provide guidance about its future business activities. On November 7, 2017, we announced the following full year and fourth quarter 2017 guidance based on the then current fuel pricing, interest rates and currency exchange rates:

Full Year 2017
follows:
As ReportedConstant Currency
Net YieldsApprox. 6.0%Approx. 6.0%
Net Cruise Costs per APCD1.0% to 1.5%Approx. 1.5%
Net Cruise Costs per APCD, Excluding FuelApprox. 2.0%Approx. 2.0%
Capacity Decrease(2.4%)
Depreciation and AmortizationApprox. $950 million
Interest Expense, netApprox. $280 million
Fuel Consumption (metric tons)1,315,800
Fuel Expenses$686 million
Percent Hedged (fwd consumption)65%
Impact of 10% change in fuel prices$7 million
1% Change in Currency$4 million
1% Change in Net Yield$16 million
1% Change in NCC ex Fuel$9 million
1% Change in LIBOR$6 million
Adjusted Earnings per Share-Diluted$7.35 to $7.40

Fourth Quarter 2017
As ReportedConstant Currency
Net YieldsApprox. 3.5%2.0% to 2.5%
Net Cruise Costs per APCDApprox. 7.0%Approx. 6.5%
Net Cruise Costs per APCD, Excluding FuelApprox. 9.0%Approx. 8.5%
Capacity Decrease(0.6%)
Depreciation and AmortizationApprox. $240 million
Interest Expense, netApprox. $65 million
Fuel Consumption (metric tons)334,800
Fuel Expenses$177 million
Percent Hedged (fwd consumption)65%
Impact of 10% change in fuel prices$7 million
1% Change in Currency$4 million
1% Change in Net Yield$16 million
1% Change in NCC ex Fuel$9 million
1% Change in LIBOR$6 million
Adjusted Earnings per Share-Diluted$1.15 to $1.20

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Volatility in foreign currency exchange rates affects the US dollar value of our earnings. Based on our highest net exposure for each quarter and the full year 2017, the top five foreign currencies are ranked below. For example, the Australian Dollar is the most impactful currency in the first and fourth quarters of 2017. The first, second and third quarters of 2017 rankings are based on actual results. Rankings for the fourth quarter and full year are based on estimated net exposures.
RankingShipShipyardQ1Expected Delivery DateQ2Q3Q4FY 2017Approximate
Berths
1Royal Caribbean International —AUDGBPGBPAUDGBP
2Oasis-class:CADCNHCNHGBPAUD
3Utopia of the SeasChantiers de l'AtlantiqueGBP2nd Quarter 2024AUDEURCADCAD5,700
4CNHCADCADEURCNH
5BRLMXNMXNCNHEUR

The currency abbreviations above are defined as follows:
Currency AbbreviationCurrency
AUDAustralian Dollar
BRLBrazilian Real
CADCanadian Dollar
CNHChinese Yuan
EUREuro
GBPBritish Pound
MXNMexican Peso

Quarter Ended September 30, 2017 Compared to Quarter Ended September 30, 2016
In this section, references to 2017 refer to the quarter ended September 30, 2017 and references to 2016 refer to the quarter ended September 30, 2016.
Revenues
Total revenues for 2017 increased $5.8 million, or 0.2%, from 2016.
Passenger ticket revenues comprised 73.7% of our 2017 total revenues and decreased by $6.8 million, or 0.4%, from 2016. The decrease was primarily driven by a 5.7% decrease in capacity, which decreased passenger ticket revenues by $107.4 million primarily due to the sale of our majority interest in Pullmantur Holdings during the third quarter of 2016, and to a lesser extent, the sale of Legend of the Seas in the first quarter of 2017, as well as the impact of canceled sailings resulting from hurricane-related disruptions during the third quarter of 2017.

The decrease was partially offset by:

an $88.0 million increase in ticket prices driven by the improvement in our ticket price on a per passenger basis due to the exit of the Pullmantur ships, as well as higher pricing on North America and Europe sailings. The increase in ticket prices was partially offset by lower pricing on Asia/Pacific sailings; and

a favorable effect of changes in foreign currency exchange rates related to our revenue transactions denominated in currencies other than the United States dollar of approximately $12.8 million.

The remaining 26.3% of 2017 total revenues was comprised of onboard and other revenues, which increased $12.6 million, or 1.9%, to $676.4 million in 2017 from $663.8 million in 2016. The increase in onboard and other revenues was primarily due to:

a $30.7 million increase in onboard revenue attributable to higher spending on a per passenger basis due to our revenue enhancing initiatives, including beverage package sales and promotions, new strategies and promotion on specialty restaurants and the increased revenue associated with internet and other telecommunication services. The increase is also attributable to port activities mainly due to itinerary changes; and
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a $13.8 million increase in other revenue primarily due to charter revenue and management fees earned from Pullmantur Holdings.

The increase was partially offset by a $36.8 million decrease attributable to the 5.7% decrease in capacity noted above, including the impact of canceled sailings resulting from hurricane-related disruptions during the third quarter of 2017.

Onboard and other revenues included concession revenues of $87.3 million in 2017 and $86.6 million in 2016.

Cruise Operating Expenses

Total cruise operating expenses for 2017 decreased $21.9 million, or 1.6%, from 2016. The decrease was primarily due to a $75.5 million decrease attributable to the 5.7% decrease in capacity noted above.

The decrease was partially offset by:

a $14.6 million increase in commissions expense mainly due to the increase in ticket prices discussed above and changes in commission incentives;

a $10.2 million increase in head taxes due to itinerary changes;

a $9.6 million increase in other operating expenses primarily due to an immaterial gain recognized in 2016 as a result of the sale of our majority interest in Pullmantur Holdings; and

an $8.7 million increase in payroll and related expenses due to an increase in crew benefits.

Marketing, Selling and Administrative Expenses

Marketing, selling and administrative expenses for 2017 increased $14.3 million, or 5.5%, to $273.6 million from $259.3 million in 2016. The increase was primarily due to an increase in payroll and benefits driven by higher stock prices year over year related to our performance share awards, partially offset by a decrease in expenses due to the sale of our majority interest in Pullmantur Holdings.

Depreciation and Amortization Expenses
Depreciation and amortization expenses for 2017 increased $10.8 million, or 4.7%, to $240.2 million from $229.3 million in 2016. The increase was primarily due to new shipboard additions associated with our ship upgrade projects and to a lesser extent, additions related to shoreside projects, partially offset by the decrease in depreciation associated with the sale of Legend of the Seas in the first quarter of 2017.

Other Income (Expense)
Interest expense, net of interest capitalized for 2017decreased $9.4 million, or 11.4%, to $73.2 million from $82.6 million in 2016. The decrease was primarily due to a lower average debt in 2017 compared to 2016, partially offset by higher interest rates in 2017 compared to 2016.

Equity investment income increased $38.6 million, or 82.9%, to $85.1 million in 2017 from $46.5 million in 2016 primarily due to an increase in income from TUI Cruises.

Other expense decreased $10.9 million, or 89.9%, to $1.2 million in 2017 from $12.1 million in 2016 primarily due to fuel hedge ineffectiveness gains in 2017 compared to losses in 2016 and a decrease in foreign exchange losses in 2017, net of hedges.

Gross and Net Yields
Gross Yields and Net Yields increased 6.2% and 5.9% in 2017, respectively, compared to 2016 primarily due to the increase in passenger ticket and onboard and other revenues discussed above. Gross Yields and Net Yields, on a Constant Currency basis, increased 5.6% and 5.3% in 2017, respectively, compared to 2016.
Gross and Net Cruise Costs
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Gross Cruise Costs in 2017 was consistent with 2016 and Net Cruise Costs decreased 1.7% in 2017 compared to 2016 primarily due to the decrease in capacity discussed above. Gross Cruise Costs per APCD and Net Cruise Costs per APCD increased 5.6% and 4.2% in 2017, respectively, compared to 2016. Net Cruise Costs Excluding Fuel per APCD increased 6.0% in 2017 compared to 2016. The increases in 2017 were primarily due to the increase in cruise operating expenses discussed above. Additionally, the hurricane-related disruptions during the third quarter of 2017 reduced our capacity; however, certain operating expenses were still incurred, negatively impacting our metrics per APCD.

Other Comprehensive Income

Other comprehensive income in 2017 was $234.1 million compared to $94.5 million in 2016. The increase of $139.6 million, or 147.7%, was primarily due to the Gain on cash flow derivative hedges in 2017 of $230.2 million compared to $95.5 million in 2016. The increase of $134.7 million in 2017 was primarily due to higher foreign currency forward contract and fuel swap instrument values in 2017 compared to 2016, partially offset by lower amounts of fuel swap losses reclassified to income in 2017 .

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

In this section, references to 2017 refer to the nine months ended September 30, 2017 and references to 2016 refer to the nine months ended September 30, 2016.

Revenues
Total revenues for 2017 increased $186.6 million, or 2.8%, from 2016.
Passenger ticket revenues comprised 72.2% of our 2017 total revenues. Passenger ticket revenues for 2017 increased by $98.1 million, or 2.0%, from 2016, despite the impact of canceled sailings resulting from hurricane-related disruptions during the third quarter of 2017. The increase was primarily due to an increase of $258.1 million in ticket prices primarily driven by the improvement in our ticket price on a per passenger basis due to the exit of the Pullmantur ships and the addition of Harmony of the Seas and Ovation of the Seas, as well as higher pricing on North America and Europe sailings. The increase in ticket prices on these itineraries was partially offset by lower pricing on Asia/Pacific sailings.

The increase was partially offset by:

a 3.0% decrease in capacity, which decreased passenger ticket revenues by$144.2 million primarily due to the sale of our majority interest in Pullmantur Holdings during the third quarter of 2016, the sale of Splendour of the Seas in the second quarter of 2016 and the sale of Legend of the Seas in first quarter of 2017, which was partially offset by an increase in capacity due to the addition of Ovation of the Seas and Harmony of the Seas into our fleet during the second quarter of 2016; and

an approximate $15.2 million unfavorable effect of changes in foreign currency exchange rates related to our passenger ticket revenue transactions denominated in currencies other than the United States dollar.

The remaining 27.8% of 2017 total revenues was comprised of onboard and other revenues, which increased $88.5 million, or 4.9%, in 2017 from 2016. The increase in onboard and other revenues was primarily due to:

a $99.8 million increase in onboard revenue attributable to higher spending on a per passenger basis primarily due to our revenue enhancing initiatives, including beverage package sales and promotions, gaming initiatives, new strategies and promotions on specialty restaurants and the increased revenue associated with internet and other telecommunication services. The increase is also attributable to port activities mainly due to itinerary changes; and

a $39.4 million increase in other revenue primarily due to charter revenue and management fees earned from Pullmantur Holdings.

The increase was partially offset by a $53.1 million decrease attributable to the 3.0% decrease in capacity noted above, including the impact of canceled sailings resulting from hurricane-related disruptions during the third quarter of 2017.

Onboard and other revenues included concession revenues of $244.4 million in 2017 and $240.8 million in 2016.

Cruise Operating Expenses
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Total cruise operating expenses for 2017 decreased $141.4 million, or 3.6%, from 2016. 

The decrease was primarily due to:

a $116.6 million decrease attributable to the 3.0% decrease in capacity noted above;

a $30.9 million gain resulting from the sale of Legend of the Seas in 2017 compared to an immaterial gain from the sale of Splendour of the Seas in 2016;

a $32.6 million decrease in air expense due to itinerary changes and lower ticket costs; and

a $23.9 million decrease in vessel maintenance primarily due to the timing of scheduled drydocks.

The net decrease was partially offset by an increase in commissions expense of $26.0 million mainly due to the increase in ticket prices discussed above.

Marketing, Selling and Administrative Expenses

Marketing, selling and administrative expenses for 2017 increased $22.5 million, or 2.6%, to $875.0 million from $852.4 million in 2016. The increase was primarily due to an increase in payroll and benefits which was driven by an increase in our stock price year over year related to our performance share awards, partially offset by a decrease in expenses due to the sale of our majority interest in Pullmantur Holdings.

Depreciation and Amortization Expenses
Depreciation and amortization expenses for 2017 increased $49.1 million, or 7.4%, to $710.8 million from $661.7 million in 2016. The increase was primarily due to the addition of Ovation of the Seas and Harmony of the Seas in the second quarter of 2016 into our fleet, and to a lesser extent, new shipboard additions associated with our ship upgrade projects. The increase was partially offset by the decrease in depreciation associated with the sale of Splendour of the Seas in the second quarter of 2016 and the sale of Legend of the Seas in first quarter of 2017.
Other Income (Expense)
Interest expense, net of interest capitalized, for 2017increased $3.4 million, or 1.5%, to $230.2 million from $226.8 million in 2016. The increase was primarily due to higher interest rates in 2017 compared to 2016, partially offset by lower average debt in 2017 compared to 2016.

Equity investment income increased $25.5 million, or 26.9%, to $120.4 million in 2017 from $94.8 million in 2016 primarily due to an increase in income from TUI Cruises, partially offset by losses associated with Pullmantur Holdings in 2017. Effective July 31, 2016, as a result of the sale of 51% of our interest in Pullmantur Holdings, we account for our investment in Pullmantur Holdings under the equity method of accounting.

Other expense decreased $34.4 million, or 84.0%, to $6.5 million in 2017 from $41.0 million in 2016 primarily due to the 2016 net loss of $21.7 million related to the elimination of the Pullmantur reporting lag that did not recur in 2017.
Gross and Net Yields
Gross Yields and Net Yields increased 6.0% and 6.9% in 2017, respectively, compared to 2016 primarily due to the increase in passenger ticket and onboard and other revenues discussed above. Gross Yields and Net Yields, on a Constant Currency basis, increased 6.3% and 7.2% in 2017, respectively, compared to 2016.

Gross and Net Cruise Costs

Gross Cruise Costs and Net Cruise Costs decreased 2.4% and 3.4% in 2017, respectively compared to 2016 primarily due to the decrease in capacity and cruise operating expenses discussed above. In 2017, Gross Cruise Costs per APCD, Net Cruise Costs per APCD and Net Cruise Costs Excluding Fuel were consistent with 2016, as reported and on a Constant Currency basis. The hurricane-related disruptions during the third quarter of 2017 reduced our capacity; however, certain operating expenses were still incurred, negatively impacting our metrics per APCD.
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Other Comprehensive Income (Loss)

Other comprehensive income in 2017 was $389.6 million compared to $250.9 million in 2016. The increase of $138.7 million, or 55.3%, was primarily due to the Gain on cash flow derivative hedges in 2017 of $381.7 million compared to $254.6 million in 2016. The increase of $127.1 million in 2017 was primarily due to higher foreign currency forward contract and interest rate swap instrument values in 2017 compared to 2016, partially offset by lower fuel swap instrument values and lower amounts of fuel swap losses reclassified to income in 2017.


Future Application of Accounting Standards
Refer to Note 2. Summary of Significant Accounting Policies to our consolidated financial statements for further information on Recent Accounting Pronouncements.
Liquidity and Capital Resources
Sources and Uses of Cash

Cash flow generated from operations provides us with a significant source of liquidity. Net cash provided by operating activities increased $453.6 million to $2.5 billion for the first nine months in 2017 compared to $2.0 billion for the same period in 2016. The increase in cash provided by operating activities was primarily attributable to an increase in proceeds from customer deposits during the first nine months in 2017 compared to the same period in 2016. Additionally, dividends received from unconsolidated affiliates increased by $35.9 million.
Net cash used in investing activities decreased$2.4 billionto $78.0 millionfor the first nine months in 2017 compared to $2.5 billion for the same period in 2016. The decrease was primarily attributable to a decrease in capital expenditures of $1.9 billion due to ship deliveries in 2016, Ovation of the Seas and Harmony of the Seas, compared to no ship deliveries in 2017. In addition, we received $230.0 million of proceeds from the sale of property and equipment in 2017 which did not occur in 2016. Furthermore, during 2017, we received cash of $57.0 million on settlements on our foreign currency forward contracts compared to cash paid of $172.9 million during 2016.
Net cash used in financing activities was $2.4 billion for the first nine months in 2017 compared to Net cash provided in financing activities of $0.6 billion for the same period in 2016. The change was primarily attributable to a decrease in debt proceeds of $2.4 billion, an increase in debt repayments of $0.8 billion and a higher amount of dividends paid during the first nine months of 2017 compared to the same period in 2016, partially offset by a decrease of stock repurchases of $175.0 million during the first nine months of 2017 compared to the same period in 2016. The decrease in debt proceeds was primarily due to the $841.8 million unsecured term loan borrowed in April 2016 to finance Ovation of the Seas and the €700.7 million and $226.1 million unsecured term loans borrowed in May 2016 to finance Harmony of the Seas that did not recur in 2017and lower drawings on our revolving credit facilities during the first nine months of 2017 compared to the same period in 2016.
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Future Capital Commitments

Capital Expenditures
As of September 30, 2017, our Global Brands and our Partner Brands have 12 ships on order. The expected dates that these ships will enter service and their approximate berths are as follows:
Icon-class:
Ship
Expected to Enter
Service
Approximate
Berths
Royal Caribbean International —
Oasis-class:
SymphonyIcon of the SeasMeyer Turku Oy1st3rd Quarter 201820235,450
5,600
UnnamedMeyer Turku Oy2nd Quarter 202120255,450
5,600
Quantum-class:UnnamedMeyer Turku Oy2nd Quarter 2026
5,600
Spectrum of the SeasCelebrity Cruises —2nd Quarter 20194,150
UnnamedEdge-class:4th Quarter 20204,150
Project Icon:Celebrity BeyondChantiers de l'Atlantique
Unnamed2nd Quarter 20225,650
3,250
UnnamedCelebrity AscentChantiers de l'Atlantique4th Quarter 20233,250
Silversea Cruises
Evolution Class:
Silver NovaMeyer Werft2nd Quarter 2023730
UnnamedMeyer Werft2nd Quarter 20245,650
730
Celebrity Cruises — Edge-class:
Celebrity Edge4th Quarter 20182,900
Celebrity Beyond2nd Quarter 20202,900
Unnamed4th Quarter 20212,900
Unnamed4th Quarter 20222,900
TUI Cruises (50% joint venture)(1)—

Unnamed2nd Quarter 20182,850
Unnamed1st Quarter 20192,850
Total Berths47,800

(1)
TUI Cruises plans to offset this additional capacity through the planned transfer of the their first two ships, Mein Schiff 1 and Mein Schiff 2, to an affiliate of TUI AG, our joint venture partner in TUI Cruises, in 2018 and 2019, respectively.
7		Meyer Turku Oy2nd Quarter 20242,900
UnnamedFincantieri4th Quarter 20244,100
UnnamedFincantieri2nd Quarter 20264,100
Total Berths41,560

During the second quarter
We took delivery of 2017,Celebrity Beyond in April of 2022. In addition, as of March 31, 2022, we entered into agreementshave an agreement in place with Meyer TurkuChantiers de l’Atlantique to build two shipsan additional fifth Edge-class ship with capacity of a new generationapproximately 3,250, estimated for delivery in 2025, which is contingent upon completion of ships for Royal Caribbean International, known as “Project Icon.” Subsequently, in October 2017, we entered into credit agreements for the unsecured financing of these ships for up to 80% of each ship's contract price. Refer to Note 7. Commitmentsconditions precedent and Contingencies to our consolidated financial statements under Item 1. Financial Statements for further information.financing.

Our future capital commitments consist primarily of new ship orders. As of September 30, 2017,March 31, 2022, the aggregate expected cost of our ships on order not includingpresented in the TUI Cruises'table above, excluding any ships on order by our Partner Brands, was approximately $13.0$10.7 billion, of which we had deposited $323.2 million as of such date.$0.6 billion. Approximately 53.8%61.8% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at September 30, 2017. ReferMarch 31, 2022.
The continuing effects of COVID-19, including uncertainties related to Note 10. Fair Value Measurementsdemand for cruising, has had, and Derivative Instruments to our consolidated financial statements under Item 1. Financial Statements for further information.

In September 2017, we entered into an agreement to purchase a ship for our Azamara Club Cruises brand. The sale is expected to be completed withcontinue to have, a material impact on our cash flows, liquidity and financial position. In order to preserve liquidity throughout the deliverysuspension of the ship, scheduled for March 2018.

our global cruise operations and gradual resumption of operations, we deferred a significant portion of our planned 2020, 2021 and 2022 capital expenditures. As of September 30, 2017,March 31, 2022, we anticipate overall full year capital expenditures, not including the TUI Cruises'based on our existing ships on order, will be approximately $0.6$3.0 billion for 2017, $3.2 billion for 2018, $2.1 billion for 2019, $2.5 billion for 2020 and $2.5 billion for 2021.2022. This amount does not include any ships on order by our Partner Brands.  





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Contractual Obligations

Material Cash Requirements
As of September 30, 2017,March 31, 2022, our contractual obligationsmaterial cash requirements were as follows (in thousands):
 Payments due by period
  Less than1-33-5More than
 Total1 yearyearsyears5 years
Operating Activities:     
Operating lease obligations(1)$1,259,460 $106,539 $190,653 $150,551 $811,716 
Interest on debt(2)6,429,812 1,548,190 2,278,074 1,488,442 1,115,106 
Other(3)693,702 206,408 180,781 130,679 175,834 
Investing Activities:0    
Ship purchase obligations(4)8,397,542 1,170,446 4,624,835 2,602,261 — 
Financing Activities:0    
Debt obligations(5)22,073,589 2,507,929 8,711,141 4,974,445 5,880,074 
Finance lease obligations(6)428,387 50,534 49,968 43,755 284,130 
Other(7)14,611 7,388 7,223 — — 
Total$39,297,103 $5,597,434 $16,042,675 $9,390,133 $8,266,860 
 Payments due by period
   Less than 1-3 3-5 More than
 Total 1 year years years 5 years
Operating Activities: 
  
  
  
  
Operating lease obligations(1)
$242,989
 $28,742
 $42,299
 $24,910
 $147,038
Interest on long-term debt(2)
1,073,803
 233,134
 352,304
 246,912
 241,453
Other(3)
850,768
 170,063
 297,523
 165,395
 217,787
Investing Activities:0
  
  
  
  
Ship purchase obligations(4)
10,692,368
 1,658,774
 2,751,170
 4,230,704
 2,051,720
Financing Activities:0
  
  
  
  
Long-term debt obligations(5)
7,557,801
 1,511,773
 1,991,501
 1,209,893
 2,844,634
Capital lease obligations(6)
34,406
 3,935
 7,051
 8,272
 15,148
Other(7)
33,684
 8,525
 20,012
 5,147
 —
Total$20,485,819
 $3,614,946
 $5,461,860
 $5,891,233
 $5,517,780
(1)     We are obligated under noncancelable operating leases primarily for preferred berthing arrangements, real estate and shipboard equipment. Amounts represent contractual obligations with initial terms in excess of one year.

(1)
We are obligated under noncancelable operating leases primarily for offices, warehouses and motor vehicles. Amounts represent contractual obligations with initial terms in excess of one year.
(2)
Long-term debt obligations mature at various dates through fiscal year 2028 and bear interest at fixed and variable rates. Interest on variable-rate debt is calculated based on forecasted debt balances, including the impact of interest rate swap agreements using the applicable rate at September 30, 2017. Debt denominated in other currencies is calculated based on the applicable exchange rate at September 30, 2017.
(3)Amounts primarily represent future commitments with remaining terms in excess of one year to pay for our usage of certain port facilities, marine consumables, services and maintenance contracts.
(4)Amounts do not include potential obligations which remain subject to cancellation at our sole discretion.
(5)Amounts represent debt obligations with initial terms in excess of one year.
(6)Amounts represent capital lease obligations with initial terms in excess of one year.
(7)Amounts represent fees payable to sovereign guarantors in connection with certain of our export credit debt facilities and facility fees on our revolving credit facilities.

(2)      Long-term debt obligations mature at various dates through fiscal year 2034 and bear interest at fixed and variable rates. Interest on variable-rate debt is calculated based on forecasted debt balances, including the impact of interest rate swap agreements using the applicable rate at March 31, 2022. Debt denominated in other currencies is calculated based on the applicable exchange rate at March 31, 2022.
(3)    Amounts primarily represent future commitments with remaining terms in excess of one year to pay for our usage of certain port facilities, marine consumables, services and maintenance contracts.
(4)    Amounts are based on contractual installment and delivery dates for our ships on order. Included in these figures are $6.5 billion in final contractual installments, which have committed financing. COVID-19 has impacted shipyard operations which have and may result in delays for our previously contracted ship deliveries. Amounts do not include potential obligations which remain subject to cancellation at our sole discretion or any agreements entered for ships on order that remain contingent upon completion of conditions precedent.
(5)    Debt denominated in other currencies is calculated based on the applicable exchange rate at March 31, 2022. In addition, debt obligations presented above are net of debt issuance costs of $416.9 million as of March 31, 2022.
(6)    Amounts represent finance lease obligations with initial terms in excess of one year.
(7)    Amounts represent fees payable to sovereign guarantors in connection with certain of our export credit debt facilities and facility fees on our revolving credit facilities.
Please refer to Funding Needs and Sources for discussion on the planned funding of the above contractual obligations.
material cash requirements.
As a normal part of our business, depending on market conditions, pricing and our overall growth strategy, we continuously consider opportunities to enter into contracts for the building of additional ships. We may also consider the sale of ships or the purchase of existing ships. We continuously consider potential acquisitions and strategic alliances. If any of these were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional shares of equity securities or through cash flows from operations.

Off-Balance Sheet Arrangements

We and TUI AG have each guaranteed repayment of 50% of a bank loan provided to TUI Cruises which is due 2022. Notwithstanding this, the lenders have agreed to release each shareholder’s guarantee if certain conditions are met by April 2018. As of September 30, 2017, €100.4 million, or approximately $118.7 million based on the exchange rate at September 30, 2017, remains outstanding. Based on current facts and circumstances, we do not believe potential obligations under this guarantee are probable.
TUI Cruises has entered into various ship construction and credit agreements that 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 2021.

In July 2016, we executed an agreement with Miami Dade County (“MDC”), which was simultaneously assigned to Sumitomo Banking Corporation (“SMBC”), to lease land from MDC and construct a new cruise terminal at PortMiami in Miami, Florida. The terminal is expected to be approximately 170,000 square feet and will serve as a homeport. During the construction period, SMBC will fund the costs of the terminal’s construction and land lease. Upon completion of the terminal's construction, we will
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operate and lease the terminal from SMBC for a five-year term. We determined that the lease arrangement between SMBC and us should be accounted for as an operating lease upon completion of the terminal.

May 2033.
Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes, increased lender capital costs and other similar costs. The indemnification clauses are often standard contractual terms and are entered into in the normal course
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of business.  There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses. We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification obligation is probable.
Certain of our surety agreements with third party providers for the benefit of certain agencies and associations that provide travel related bonds, allow the sureties to request collateral. We also have agreements with our credit card processors relating to customer deposits received by us for future voyages. These agreements allow the credit card processors to require us, under certain circumstances, including breach of the financial covenants, the existence of other material adverse changes, excessive chargebacks, and other triggering events, to maintain a reserve that can be satisfied by posting collateral. As of 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 breach of our financial covenants through at least September 30, 2022, with modified covenants thereafter, and as such, we do not anticipate any incremental collateral requirements for the processors covered by these waivers in the next 12 months. We have a reserve with a processor where the agreement was amended in the first quarter of 2021, such that proceeds are held in reserve until the sailing takes place or the funds are refunded to the customer. The maximum projected exposure with the processor, including amounts currently withheld and reported in Trade and other receivables, is approximately $293.9 million. The amount and timing are dependent on future factors that are uncertain, such as pace of resumption of our cruise operations, the volume of future deposits and whether we transfer our business to other processors. If we require additional waivers on the credit card processing agreements and are not able to obtain them, this could lead to the termination of these agreements or the trigger of reserve requirements.
As of September 30, 2017,March 31, 2022, other than the items described above, we are not party to any other off-balance sheet arrangements, including guarantee contracts, retained or contingent interest, certain derivative instruments and variable interest entities, that either have, or are reasonably likely to have, a current or future material effect on our financial position.

Funding Needs and Sources
We have significant contractual obligations of which our debt service obligations and the capital expenditures associated with our ship purchases represent our largest funding needs. As of September 30, 2017,Historically, we had approximately $3.6 billion in contractual obligations due through September 30, 2018, of which approximately $1.5 billion relates to debt maturities, $233.1 million relates to interest on long-term debt and $1.7 billion relates to ship purchase payments, including the final installment payable due upon delivery of Symphony of the Seas in the first quarter of 2018. We have historically relied on a combination of cash flows provided by operations, drawdownsdraw-downs under our available credit facilities, the incurrence of additional debt and/or the refinancing of our existing debt and the issuance of additional shares of equity securities to fund our obligations. COVID-19 resulted in our voluntary suspension of global cruise operations from March 2020 up to our gradual resumption of operations commencing in 2021. The suspension of operations strained our sources of cash flow and liquidity, causing us to take actions resulting in reductions in our operating expenses, reductions in our capital expenses and new financings and other liquidity actions.
The Company continues to identify and evaluate further actions to improve its liquidity. These include and are not limited to: further reductions in capital expenditures, operating expenses and administrative costs and additional financings. See further discussion on these obligations.

liquidity actions at Recent Developments - COVID-19.
We have significant contractual obligations of which our debt service obligations and the capital expenditures associated with our ship purchases represent our largest funding needs. As of March 31, 2022, we had a working capital deficit$8.4 billion of $4.3committed financing for our ships on order.
As of March 31, 2022, we had $5.6 billion and $3.7in contractual obligations due through March 31, 2023, of which approximately $2.5 billion as of September 30, 2017 and December 31, 2016, respectively. Included within our working capital deficit isrelates to debt maturities, $1.5 billion relates to interest on debt and $1.3$1.2 billion of current portion of long-term debt, including capital leases, as of September 30, 2017relates to progress payments on our ship orders and December 31, 2016, respectively. Similar to others in our industry, we operate with a substantial working capital deficit. This deficit is mainly attributable to the fact that, under our business model, a vast majorityfinal installment payable due upon the delivery of our passenger ticket receipts are collected in advance of the applicable sailing date. These advance passenger receipts remain a current liability until the sailing date. The cash generated from these advance receipts is used interchangeably with cash on hand from other sources, such as our revolving credit facilities and other cash from operations. The cash received as advanced receipts can be used to fund operating expenses for the applicable future sailing or otherwise, pay down our revolving credit facilities, invest in long term investments or any other use of cash. In addition, we have a relatively low-level of accounts receivable and rapid turnover results in a limited investment in inventories. We generate substantial cash flows from operations and our business model, along with our unsecured revolving credit facilities, has historically allowed us to maintain this working capital deficit and still meet our operating, investing and financing needs. We expect that we will continue to have working capital deficits in the future.

Celebrity Beyond.
As of September 30, 2017,March 31, 2022, we had liquidity of $1.9$3.8 billion, consistingin the form of approximately $140.0 million in cash and cash equivalents and $1.8of $2.0 billion, available under our unsecured$1.1 billion of undrawn revolving credit facilities. We anticipate that our cash flows from operationsfacility capacity, and our current financing arrangements,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 described above, will be adequate to meet our capital expenditures and debt repayments overof March 31, 2022.
Beyond the next twelve-month period.

In April 2017, Moody's changed12 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 MS where MS agrees to provide backstop committed financing to refinance, repurchase and/or repay in whole or in part our existing and outstanding 10.875% Senior Secured Notes due 2023, 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 debt credit ratingnotes with gross proceeds of up to Baa3 with a stable outlook.  Consistent with$3.15 billion at any time between April 1, 2023 and June 29, 2023, to refinance the provisions of our interest rate derivatives instruments, all collateral that was posted with our counterparties as of that date was returned in April 2017.aforementioned notes.

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We have $375.0 million that remains available for future common stock repurchase transactions under our Board approved program. Future repurchases may be made at management's discretion from time to time on the open market or through privately negotiated transactions. Repurchases under the program are expected to be funded from available cash or borrowings under our revolving credit facilities. Refer to Note 8. Shareholders' Equity to our consolidated financial statements for further information.


If any person acquires ownership of more than 50% of our common stock or, subject to certain exceptions, during any 24-month period, a majority of the Boardour board of directors is no longer comprised of individuals who were members of the Boardour board of directors on the first day of such period, we may be obligated to prepay indebtedness outstanding under our credit facilities, which we may be unable to replace on similar terms. Our public debt securities also contain change of control provisions that would be triggered by a third-party acquisition of greater than 50% of our common stock coupled with a ratings downgrade. If this were to occur, it would have an adverse impact on our liquidity and operations.
TableBased on our assumptions and estimates and our financial condition, we believe that the liquidity resulting from the actions mentioned above will be sufficient to fund our liquidity requirements over at least the next twelve months. However, there is no assurance that our assumptions and estimates are accurate due to possible unknown variables related to this unprecedented suspension and gradual ramp up of Contents


our operations and, as such, there is inherent uncertainty in our ability to predict future liquidity requirements. Refer to Note 1. General, Management’s Plan and Liquidity, to our consolidated financial statements under Part I. Item 1. Financial Statements for further information.
Debt Covenants
Certain ofBoth our financing agreementsexport credit facilities and our non-export credit facilities contain covenants that require us, among other things, to maintain minimum net worth of at least $7.9 billion, a fixed charge coverage ratio of at least 1.25x and limit our net debt-to-capital ratio to no more than 62.5%., and under certain facilities, to maintain a minimum level of shareholders' equity. The fixed charge coverage ratio is calculated by dividing net cash from operations for the past four quarters by the sum of dividend payments plus scheduled principal debt payments in excess of any new financings for the past four quarters. Our minimum net worth and maximum net debt-to-capital calculations exclude the impact of Accumulated other comprehensive loss on Total shareholders’ equity. We were well in excess of all debt covenant requirements as of September 30, 2017. The specific covenants and related definitions can be found in the applicable debt agreements, the majority of which have been previously filed with the Securities and Exchange Commission.equity.

Dividends

In September 2017, we declared a cash dividend on our common stock of $0.60 per share which was paid in October of 2017. During the first and second quarters of 2017, we declared a cash dividend on our common stock of $0.48 per share which was paid in April 2017 and July 2017, respectively. During the first quarter of 2017,2021, we also paidamended $4.9 billion of our non-export credit facilities and $6.3 billion of our export credit facilities, and certain credit card processing agreements, to extend the waiver of our financial covenants through and including at least the third quarter of 2022, and subsequently in the third quarter of 2021, we entered into a cash dividend onletter agreement to extend the waiver period for our common stockexport credit facilities to the end of $0.48 per share which was declared during the fourth quarter of 2016.2022. During the fourth quarter of 2021, we amended $7.3 billion of outstanding export-credit facilities plus committed export-credit facilities to modify financial covenant levels for 2023 and 2024, following the waiver period through and including the fourth quarter of 2022.

In addition, pursuant to the amendments for the non-export credit facilities, we have modified the manner in which such covenants are calculated, temporarily in certain cases and permanently in others, as well as the levels at which our net debt to capitalization covenant will be tested during the period commencing immediately following the end of the waiver period and continuing through the end of 2023.
The amendments impose a monthly-tested minimum liquidity covenant of $350 million, which in the case of the non-export credit facilities terminates at the end of the waiver period and in the case of the export credit facilities terminates either in July 2025, or when we pay off all deferred amounts, whichever is earlier. In addition, the amendments to the non-export credit facilities place restrictions on paying cash dividends and effectuating share repurchases through the end of the third quarter of 2022, while the export credit facility amendments require us to prepay any deferred amounts if we elect to issue dividends or complete share repurchases. As of March 31, 2022, we were in compliance with our financial covenants and we estimate that we will be in compliance for at least the next twelve months.
Any further covenant waivers may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections as may be agreed with our lenders. There can be no assurance that we would be able to obtain additional waivers in a timely manner, or on acceptable terms. If we require additional waivers and are not able to obtain them or repay the debt facilities, this would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contracts.
Dividends
During the second quarter of 2020, we agreed with certain of our lenders not to pay dividends or engage in common stock repurchases for so long as our debt covenant waivers are in effect. In addition, in the event we declare a dividend or engage in share repurchases, we will need to repay the amounts deferred under our export credit facilities. Accordingly, we did not declare a dividend during the eight consecutive quarters ended March 31, 2022. Pursuant to amendments made to these agreements during the first quarter of 2021, the restrictions on paying cash dividends and effectuating share repurchases were extended through and including the third quarter of 2022.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk
For a discussion of our market risks, refer to Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the year ended December 31, 2016. There2021. There have been no significant developments or material changes to our exposure to market risks since the date of our 2021 Annual Report.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chairman and Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chairman and Chief Executive Officer and Chief Financial Officer concluded that those disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chairman and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.
forms of the Securities and Exchange Commission (the "SEC")..
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) during the quarter ended September 30, 2017March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Readers are cautionedIt should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

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PART II. OTHER INFORMATION


Item 1. Legal Proceedings
As previously reported, two lawsuits were 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. The complaint filed by Havana Docks Corporation ("Havana Docks Action") alleges it holds an interest in the Havana Cruise Port Terminal and the complaint filed by Javier Garcia-Bengochea (the "Port of Santiago Action") alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban government. The complaints further allege that we trafficked in those properties by embarking and disembarking passengers at these facilities. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs. The Court dismissed the Port of Santiago Action with prejudice on the basis that the plaintiff lacked standing, and the plaintiff’s appeal of the dismissal is awaiting a decision by the appellate court. In the Havana Docks Action, on March 21, 2022, the Court granted summary judgement in favor of the plaintiff as to liability, which we have sought permission from the Court to immediately appeal, and a trial on damages has been scheduled for September 2022. We believe we have meritorious defenses to the claims alleged in both the Havana Docks Action and the Port of Santiago Action, and we intend to vigorously defend ourselves against them. The outcome of the litigation is inherently unpredictable and subject to significant uncertainties, and there can be no assurances that the final outcome of either case will not be material.
We are also routinely involved in claims typical within the cruise vacation industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected insurance recoveries, will not have a material adverse impact on our financial condition or results of operations and cash flows.


Item 1A. Risk Factors

The risk factors set forth below and elsewhere in this Quarterly Report on Form 10-Q are important factors that could cause actual results to differ from expected or historical results. It is not possible to predict or identify all such risks. There may be additional risks that we consider not to be material, or which are not known, and any of these risks could have the effects set forth below.affect our operations.The ordering of the risk factors set forth below is not intended to reflect any Company indication of prioritya risk's potential likelihood or likelihood.magnitude. See Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for a cautionary note regarding forward-looking statements.

Adverse worldwide economic or other conditions could reduce the demand for cruisesCOVID-19 and passenger spending, adversely impacting our operating results, cash flows and financial condition including potentially impairing the value of our ships and other assets.

Financial Risks
The demand for cruises is affected by international, nationalCOVID-19 pandemic has had, and local economic conditions. Weak or uncertain economic conditions impact consumer confidence and pose a risk as vacationers may postpone or reduce discretionary spending. This, in turn, may result in cruise booking slowdowns, decreased cruise prices and lower onboard revenues. Given the global nature of our business, we are exposedcontinues to many different economies and our business could be hurt by challenging conditions in any of our markets. Any significant deterioration of global, national or local economic conditions could result in a prolonged period of booking slowdowns, depressed cruise prices and reduced onboard revenues.

Fears of terrorist attacks, war, and other hostilities could have, a negativematerial adverse impact on our business, results of operations.

Events such as terrorist attacks, war (or war-like conditions), conflicts (domestic or cross-border), civil unrestoperations and liquidity. The global spread of COVID-19, the unprecedented responses by governments and other hostilities,authorities to control and contain the disease, including an escalationrelated variants, and challenges to global vaccination efforts, have caused significant disruptions, created new risks, and exacerbated existing risks to our business.
We have been, and continue to be, negatively impacted by the COVID-19 pandemic, including impacts that resulted or may result from actions taken in response to the outbreak and the occurrence and spread of related variants. Examples of these include, but are not limited to, cruising advisories and required or voluntary travel restrictions, that resulted in the frequency or severitytemporary suspension of incidents,our Global Brands' operations, from which we have resumed limited operations; restrictions on the movement and gathering of people; social distancing measures; shelter-in-place/stay-at-home orders; and disruptions to businesses in our supply chain. In addition to the resulting political instability, travel restrictions affecting our business, the extent, duration, and advisories, and concerns over safety and security aspects of traveling or the fear of anymagnitude of the foregoingCOVID-19 pandemic’s effect on the economy and consumer demand for cruising and travel is evolving and difficult to predict. As such, these impacts may persist for an extended period of time or become more pronounced, even as we resume operations.
The COVID-19 pandemic also has elevated risks affecting significant parts of our business:
•Operations: While we have had, and could haverestarted our global cruise operations in a phased manner, following the future, a significant adverse impact on demand and pricing in the travel and vacation industry. In viewMarch 2020 suspension of our global cruise operations, there is no assurance that our plan to resume operations will be successful. It is possible that future COVID-19 cases could occur onboard and, even if controlled and contained, it is uncertain whether we are susceptiblewill need to suspend additional sailings and to what extent in such event. Onboard cases have resulted in illness among our guests and crew, incremental costs, guest refunds and negative publicity and media attention. In addition, we may face challenges in executing our return to service plans as a wide rangeresult of adverse events. These events could also result in additional security measures taken by local authorities which may potentially impact access to ports and/or destinations.

Ournew and evolving operating costs could increaseprotocols, including due to market forcesstate laws regarding proof of vaccination requirements and economic or geo-political factors beyond our control.

Our operating costs, including fuel, food, payrollrelated litigation, and benefits, airfare, taxes, insurance and security costs are all subject to increases due to market forces and economic or political conditions or other factors beyond our control. Increases in these operating costs could adversely affect our profitability.

Fluctuations in foreign currency exchange rates, fuel prices and interest rates could affect our financial results.

We are exposed to market risk attributable topossible changes in foreign currency exchange rates, fuel prices and interest rates. Significant changesregulations in any of the foregoing could have a material impact on our financial results, net of the impact of our hedging activities and natural offsets. Our operating results have been and will continue to be impacted, often significantly, by changes in each of these factors. The value of our earnings in foreign currencies is adversely impacted by a strong United States dollar. In addition, any significant increase in fuel prices could materially and adversely affect our business as fuel prices not only impact our fuel costs, but also some of our other expenses, such as crew travel, freight and commodity prices. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for more information.

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

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

Our future growth strategies increasingly depend on the growth and sustained profitability of certain international markets, such as China. Some factors that will be critical to our success in developing these markets may be different than those affecting our more-established North American and European markets. In the Chinese market, in particular, our future success depends on our ability to continue to raise awareness of our products, evolve the available distribution channels and adapt our offerings to best suit the Chinese consumer. China’s economy differs from the economies of other developed countries in many respects and, as the legal and regulatory system in China continues to evolve, there may be greater uncertainty as to the interpretation and enforcement of applicable laws and regulations. In March 2017, China's National Tourism Administration issued a directive to travel agents to halt sales of holiday packages to South Korea. This travel restriction has had a direct impact on our related itineraries impacting the overall performance of our China business. It is uncertain what the ultimate scope and duration of this restriction will be, but to the extent that this or similar sanctions affecting regional travel and/or tourism continues or are put in place, it may impact local demand, available cruise itineraries and the overall financial performance of the China market.

Operating globally also exposes us to numerous and sometimes conflicting legal, regulatory and tax requirements. In many parts of the world, including countries in which we operate practices inand plan to operate.
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Uncertainties remain as to the local business communities might not conform to international business standards. We must adhere to policies designed to promote legalspecifics, timing and regulatory compliance as well as applicable lawscosts of administering and regulations. However, we might not be successful in ensuring thatimplementing our employees, agents, representativeshealth and other third parties with whom we associate throughout the world properly adhere to them. Failure by us, our employees or anysafety measures, some of these third parties to adhere to our policies or applicable laws or regulations could result in penalties, sanctions, damage to our reputation and related costs which in turn could negatively affect our results of operations and cash flows.

We have operations in and source passengers from the United Kingdom and other member countries of the European Union. In March 2017, the United Kingdom notified the European Council of its intent to withdraw from the European Union. Since the initial referendum in June 2016, the proposed withdrawal has resulted in increased volatility in the global financial markets and, in particular, in global currency exchange rates. The withdrawal could potentially adversely affect tax, legal and regulatory regimes to which our business in the region is subject. The withdrawal could also, among other potential outcomes, disrupt the free movement of goods, services and people between the United Kingdom and the European Union. Further, uncertainty around these issues could lead to adverse effects on the economy of the United Kingdom and the other economies in which we operate, making it more difficult to source passengers from these regions. These risks may be exacerbated if voters of other countries within the European Union similarly elect to exit the European Union in future referendums.

As a global operator, our business may besignificant. These measures also impacted by changes in U.S. policy or priorities in areas such as trade, immigration and/or environmental or labor regulations, among others. Depending on the nature and scope of these changes, they could impact our domestic and international business operations. While still unclear, these changes, and any international response to them, could potentially introduce new barriers to passenger or crew travel and/or cross border transactions, impact our guest experience and/or increase our operating costs.

If we are unable to address these risks adequately, our financial position and results of operations could be adversely affected, including potentially impairing the value of our ships and other assets.

Price increases for commercial airline service for our guests or major changes or reduction in commercial airline service and/or availability could adversely impact the demand for cruises and undermine our ability to provide reasonably priced vacation packages to our guests.

Many of our guests depend on scheduled commercial airline services to transport them to or from the ports where our cruises embark or disembark. Increases in the price of airfare would increase the overall price of the cruise vacation to our guests, which may adversely impact demand for our cruises. In addition, changes in the availability of commercial airline services could adversely affect our guests’ ability to obtain airfare, as well as our ability to fly our guests to or from our cruise ships, which could adversely affect our results of operations.

Incidents or adverse publicity concerning our ships and/or passengers or the cruise vacation industry in general, unusual weather conditions and other natural disasters or disruptions could affect our reputation as well as impact our sales and results of operations.

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The ownership and/or operation of cruise ships, airplanes, private destinations, port facilities and shore excursions involves the risk of accidents, illnesses, mechanical failures, environmental incidents and other incidents which may bring into question safety, health, security and vacation satisfaction which could negatively impact our reputation. Incidents involving cruise ships, and, in particular the safety, health and security of guests and crew and media coverage thereof have impacted and could in the future impact demand for our cruises and pricing in the industry. Our reputation and our business could also be damaged by negative publicity regarding the cruise industry in general, including publicity regarding the spread of contagious disease and the potentially adverse environmental impacts of cruising. The considerable expansion in the use of social media and digital marketing over recent years has compounded the potential scope of any negative publicity. If any such incident or news cycle occurs during a time of high seasonal demand, the effect could disproportionately impact our results of operations for the year. In addition, incidents involving cruise ships may result in additional costs to our business, increasing government or other regulatory oversight and, in the case of incidents involving our ships, potential litigation.

Our cruise ships and port facilities may also be adversely impacted by unusual weather patterns or natural disasters or disruptions, such as hurricanes. We are often forced to alter itineraries and occasionally cancel a cruise or a series of cruises or to redeploy our ships due to these or other factors, which could have an adverse effect on our sales and profitability. For example, the 2017 hurricane season was particularly impactful to our operations in the Caribbean. Increases in the frequency, severity or duration of severe weather events, including those related to climate change, could exacerbate the impact and cause further disruption to our operations. In addition, these and any other events which impact the travel industry more generally may negatively impact guest satisfaction. Based on our abilityassessment of these requirements and recommendations, the status of COVID-19 infection and/or vaccination rates in the U.S. or globally or for other reasons, we may determine it necessary to deliver guestscancel or crewmodify certain of our Global Brands’ cruise sailings. In addition, there is no guarantee that the vaccines will continue to be effective. We believe the impact to our cruises and/or interrupt our abilityglobal bookings resulting from COVID-19 will continue to obtain services and goods from key vendors in our supply chain. Any of the foregoing could have an adversea material negative impact on our results of operations and on industry performance.liquidity, which may be prolonged beyond containment of the disease and its variants

An increaseOur previous suspension of sailings and our gradual resumption of operations have led to a significant decline in capacity worldwideour revenues and cash inflows, which required us to take cost and capital expenditure containment actions. Consequently, we reduced and furloughed some of our workforce, with approximately 23% of our U.S. shoreside employee base being impacted in 2020. Our ships and our shipboard crew are gradually being notified about new assignments as operations resume over time. We may be challenged in rebuilding the rest of our workforce which could delay our phased resumption of operations. In addition, we have reduced our planned capital spending through 2022, which may negatively impact or excess capacitydelay our execution of planned growth strategies, particularly as it relates to investments in a particular market could adversely impact our cruise sales and/or pricing.

Although our ships, cantechnology, and our expansion of land-based developments. We also have taken actions to monitor and mitigate changes in our supply chain, and port destination availability, which may strain relationships with our vendors and port partners.
If we are unable to satisfy the safety standards applicable to our sailings, our operations may be redeployed, cruise sales and/negatively impacted and we could be exposed to reputational and legal risks. Due to the unprecedented and uncertain nature of the COVID-19 pandemic and related regulatory landscape, it is difficult to predict the impact of further disruptions and their magnitude. In addition, we have never previously experienced a complete cessation of our cruising operations or a subsequent phased resumption of operations, and as a consequence, we are unable to predict with certainty the impact of such a cessation or phased resumption of operations on our brands and future prospects.
•Results of Operations: Our suspensions of sailings have materially impacted the results of our operations. We have incurred and will continue to incur significant costs as we accommodate passengers due to cancelled sailings. In addition, we have incurred and will likely continue to incur significant overhead costs associated with the return to service of our fleet and enhanced COVID-19 related cleaning, testing, vaccination and other mitigation procedures. We may experience volatility in demand for cruising for an indeterminable length of time due to the uncertain nature of the COVID-19 pandemic and ongoing concerns about health and safety, and we cannot predict with certainty when we will return to pre-pandemic demand or fare pricing or if we will return to such levels in the foreseeable future. In turn, these negative impacts to our financial performance have resulted and may continue to result in impairments of our long-lived and intangible assets, which has influenced our decision making relating to early disposal, sale or retirement of assets. Following the resumption of operations, our Global Brands and our Partner Brands may be subject to the continued impact of the COVID-19 pandemic. Additionally, any future profitability will be impacted by the introductionincreased debt service costs as a result of new ships into the marketplace, reductions in cruise capacity, overall market growth and deployment decisions of ourselves and our competitors. As of December 31, 2016, a total of 62 new ships with approximately 173,000 berths are on order for delivery through 2021 in the cruise industry. Theliquidity actions.
•Liquidity: Our ability to raise additional financing, whether or not secured, could be limited if our credit rating is further net growth in capacity from these new ships and future orders, without an increase in the cruise industry’s demanddowngraded, and/or shareif we fail to comply with applicable covenants governing our outstanding indebtedness, and/or if overall financial market conditions worsen. Additionally, due to the complexity of the vacation market, could depress cruise prices and impede our ability to achieve yield improvement.

In addition,pandemic’s impact to the extenteconomy and uncertainty of its duration, we cannot guarantee that we orassumptions used to project our competitors deploy ships to a particular itinerary and the resulting capacity in that region exceeds the demand, we may lower pricing and profitability mayliquidity needs will be lower than anticipated. This risk exists in emerging cruise markets, such as China, where capacity has grown rapidly over the past few years and in mature markets where excess capacity is typically redeployed. Any of the foregoing could have an adverse impact on our results of operations, cash flows and financial condition, including potentially impairing the value of our ships and other assets.

Unavailability of ports of call may adversely affect our results of operations.

We believe that port destinations are a major reason why guests choose to go on a particular cruise or on a cruise vacation. The availability of ports is affected by a number of factors, including existing capacity constraints, constraints related to the size of certain ships, security, environmental and health concerns, adverse weather conditions and natural disasters, financial limitations on port development, exclusivity arrangements that ports may have with our competitors, local governmental regulations and local community concerns about port development and other adverse impacts on their communities from additional tourists. In addition, fuel costs may adversely impact the destinations on certain of our itineraries. Any limitations on the availability or feasibility of our ports of call or on the availability of shore excursions and other service providers at such ports could adversely affect our results of operations.

Our reliance on shipyards and their subcontractors to implement our newbuild and ship upgrade programs and to repair and maintain our ships exposes us to riskscorrect, which if realized, could adversely impact our business.

We rely on shipyards and their subcontractors to effectively construct our new ships and to repair, maintain and upgrade our existing ships on a timely basis and in a cost effective manner.

There are a limited number of shipyards with the capability and capacity to build our new ships and, accordingly, increased demand for available new construction slots and/or continued consolidation in the cruise shipyard industry (including completion of Italian shipbuilder Fincantieri's bid for STX France) could impact our ability to construct new ships when and as planned, cause us to continue to commit to new ship orders earlier than we have historically done so and/or result in stronger bargaining power
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on the part of the shipyards and the export credit agencies providing financing for the project.  Our inability to timely and cost-effectively procure new capacity could have a significant negative impact on our future business plans and results of operations.

Building, repairing, maintaining and/or upgrading a ship is sophisticated work that involves significant risks, and shipyards and/or their subcontractors may encounter financial, technical or design problems when doing these jobs.  If materialized, these problems could impact the timely delivery or costs of new ships or the ability of shipyards to repair and upgrade our fleet in accordance with our needs or expectations.  In addition, delays or mechanical faults may result in cancellation of cruises the need for additional financing and/or in more severe situations, new ship orders, or necessitate unscheduled drydocks and repairs of ships. These events and any related adverse publicity couldmay result in lost revenue, increased operating expenses,the inability to satisfy covenants required by our current credit facilities. If we raise additional funds through equity or both,convertible debt issuances, our shareholders could experience dilution of their ownership interest, and thus adverselythese equity or convertible debt securities could have rights, preferences, and privileges that are superior to that of holders of our common stock. If we raise additional funds by issuing debt, we may be subject to additional limitations on our operations due to restrictive covenants, which may be more restrictive than the covenants in our existing debt agreements, and we may be required to further encumber our assets. Also, as a result of our additional debt issuances, we will require a significant amount of cash to service our debt and sustain operations. Our ability to generate cash depends on factors beyond our control and we may be unable to repay or repurchase debt at maturity. If adequate funds are not available on acceptable terms, or at all, we may be unable to fund our operations, or respond to competitive pressures, any of which could negatively affect our results of operations.

We may lose business to competitors throughout the vacation market.

We operatebusiness. There is no guarantee that financing will be available in the vacation market and cruising is one of many alternatives for people choosing a vacation. We therefore risk losing business not onlyfuture or that such financing will be available with similar terms or terms that are commercially acceptable to other cruise lines, but also to other vacation operators, which provide other leisure options including hotels, resorts, internet-based alternative lodging sites and package holidays and tours.us.

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We face significant competition from other cruise lines on the basis of cruise pricing, travel agent preference and also in terms of the nature of ships and services we offer to guests. Our principal competitors within the cruise vacation industry include Carnival Corporation & plc, which owns, among others, Aida Cruises, Carnival Cruise Line, Costa Cruises, Cunard Line, Holland America Line, P&O Cruises and Princess Cruises; Disney Cruise Line; MSC Cruises; and Norwegian Cruise Line Holdings Ltd, which owns Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises. Our revenues are sensitive to the actions of other cruise lines in many areas including pricing, scheduling, capacity and promotions, which can have a substantial adverse impact not only on our revenues, but on overall industry revenues.


In the event that we do not effectively market or differentiate our cruise brands from our competitors or otherwise compete effectively with other vacation alternatives and new or existing cruise companies, our results of operations and financial position could be adversely affected.

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

To fund our capital expenditures (including new ship orders), operations and scheduled debt payments, we have historically relied on a combination of cash flows provided by operations, drawdowns under available credit facilities, the incurrence of additional indebtedness and the sale of equity or debt securities in private or public securities markets. Any circumstance or event which leads to a decrease in consumer cruise spending, such as worsening global economic conditions or significant incidents impacting the cruise industry, couldsuch as the COVID-19 pandemic, negatively affectaffects our operating cash flows. See “-Adverse worldwide economic, geopolitical or other conditions…”We had net cash outflows from operations for the three months ended March 31, 2022. As result of the COVID-19 pandemic and “-Incidents or adverse publicity concerning our ships and/or passengers or the cruise vacation industry…” for more information.

Although we believe we can access sufficient liquidity to fundresulting suspension of our operations, investmentswe have experienced credit rating downgrades, which have reduced our ability to incur secured indebtedness by reducing the amount of indebtedness that we are permitted to secure, and obligations as expected, there can be no assurancesmay negatively impact our access to, that effect. and cost of, debt financing.
Our ability to access additional funding as and when needed, our ability to timely refinance and/or replace our outstanding debt securities and credit facilities on acceptable terms and our cost of funding will depend upon numerous factors including, but not limited to, the vibrancystrength of the financial markets, our recovery and financial performance, the recovery and performance of our industry in general and the size, scope and timing of our financial needs. In addition, even where financing commitments have been secured, significant disruptions in the capital and credit markets could cause our banking and other counterparties to breach their contractual obligations to us.us or could cause the conditions to the availability of such funding not to be satisfied. This could include failures of banks or other financial service companies to fund required borrowings under our loan agreements or to pay us amounts that may become due or return collateral that is refundable under our derivative contracts for hedging of fuel prices, interest rates and foreign currencies or other agreements. If any of the foregoing occurs for a prolonged period of time it maywill have a long-term negative impact on our cash flows includingand our ability to meet our obligations, our resultsfinancial obligations.
Our substantial debt requires a significant amount of operationscash to service and could adversely affect our financial condition.

We have a substantial amount of debt and significant debt service obligations. As of March 31, 2022, we had total debt of $22.5 billion. Our substantial debt has required us to dedicate a large portion of our cash flow from operations to service debt and fund repayments on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate expenses.
Our liquidity couldability to make future scheduled payments on our debt service obligations or refinance our debt depends on our future operating and financial performance and ability to generate cash. This will be adversely impacted if we are unable to satisfy the covenants requiredaffected by our credit facilities.

Our debt agreements contain covenants, including covenants restricting our ability to takesuccessfully implement our business strategy, as well as general economic, financial, competitive, regulatory and other factors beyond our control, such as the disruption caused by the COVID-19 pandemic. If we cannot generate sufficient cash to meet our debt service obligations or fund our other business needs, we may, among other things, need to refinance all or a portion of our debt, obtain additional financing, delay planned capital expenditures or sell assets. We cannot assure that we will be able to generate sufficient cash through any of the foregoing. If we are not able to refinance any of our debt, obtain additional financing or sell assets on commercially reasonable terms or at all, we may not be able to satisfy our obligations with respect to our debt.
Our substantial debt could also result in other negative consequences for us. For example, it could increase our vulnerability to adverse general economic or industry conditions; limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate; place us at a competitive disadvantage compared to our competitors that have less debt; make us more vulnerable to downturns in our business, the economy or the industry in which we operate, including the current downturn related to COVID-19; limit our ability to raise additional debt or equity capital in the future to satisfy our requirements relating to working capital, capital expenditures, development projects, strategic initiatives or other purposes; restrict us from making strategic acquisitions, introducing new technologies or exploiting business opportunities; limit or restrict our ability to obtain and maintain performance bonds to cover our financial responsibility requirements in various jurisdictions for non-performance of guest travel, casualty and personal injury; make it difficult for us to satisfy our obligations with respect to our debt; and increase our exposure to the risk of increased interest rates as certain actionsof our borrowings are (and may in the future be) at a variable rate of interest.
Despite our leverage, we may incur more debt, which could adversely affect our business.
We may incur substantial additional debt in the future. Except for the restrictions under the indentures governing our Secured Notes, our Priority Guaranteed Notes, and certain of our other debt instruments, including our unsecured bank and export credit facilities, we are not restricted under the terms of our debt instruments from incurring additional debt. Although the indentures governing the Secured Notes, the Priority Guaranteed Notes, and certain of our other debt instruments, including our unsecured bank and export credit facilities, contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances the amount of debt that could be incurred in compliance with these restrictions could be substantial. In the event that we execute and borrow under the
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$0.7 billion commitment available to draw on at any time prior to August 12, 2022 for a 364-day term loan facility, the credit agreement that would govern such term loan facility would impose substantially similar restrictions (including the related qualifications and exceptions) as are set forth in the indenture governing the Priority Guaranteed Notes. If new debt is added to our existing debt levels, the related risks that we now face would increase. As of March 31, 2022, we have commitments for approximately $8.4 billion of debt to finance the purchase of 8 ships on order by our Royal Caribbean International, Celebrity Cruises and Silversea Cruises brands, all of which are guaranteed by the export credit agencies in the countries in which the ships are being built. The ultimate size of each facility will depend on the final contract price (including change orders and owner’s supply) as well as fluctuations in the EUR/USD exchange rate.
We are subject to restrictive debt covenants that may limit our ability to finance our future operations and capital needs and to pursue business opportunities and activities. In addition, if we fail to comply with any of these restrictions, it could have a material adverse effect on us.
Certain of our debt instruments, including our indentures and our unsecured bank and export credit facilities, limit our flexibility in operating our business. For example, certain of our loan agreements and indentures restrict or limit our and our subsidiaries’ ability to, among other things, incur or guarantee additional indebtedness; pay dividends or distributions on, or redeem or repurchase capital stock and make other restricted payments; make investments; consummate certain asset sales; engage in certain transactions with affiliates; grant or assume certain liens; and consolidate, merge or transfer all or substantially all of our assets. In addition, both our export credit facilities and our non-export credit facilities contain covenants that will, once our current waivers expire, require us, among other things, to maintain a specified minimum fixed charge coverage ratio and limit our net debt-to-capital ratio. In addition, our ECA facilities also require us to maintain minimum liquidity and a minimum stock holders' equity. Refer to Note 6. Debt to our consolidated financial statements under Part I, Item 1, Financial Statements for further discussion on our covenants and existing waivers.
All of these limitations are subject to significant exceptions and qualifications. Despite these exceptions and qualifications, we cannot assure you that the operating and financial covenants.restrictions and covenants in certain of our debt instruments will not adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest. Any future indebtedness may include similar or other restrictive terms. In addition, our ability to make borrowingscomply with these covenants and restrictions may be affected by events beyond our control. These include prevailing economic, financial and industry conditions. If we breach any of these covenants or restrictions, we could be in default under such indebtedness and certain of our available credit facilities is subjectother debt instruments, and the relevant debt holders or lenders could elect to declare the absencedebt, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral securing that debt. If the debt under certain of material adverse changesour debt instruments that we enter into were to be accelerated, our liquid assets may be insufficient to repay in full such indebtedness. Borrowings under other debt instruments that contain cross-default provisions also may be accelerated or become payable on demand. In these circumstances, our business. Ourassets may not be sufficient to repay in full that indebtedness and our other indebtedness then outstanding.
In addition, our ability to maintain our credit facilities may also be impacted by changes in our ownership base. More specifically, we may be required to prepay our bank financingnon-ECA and ECA facilities if any person acquires ownership of more than 50% of our common stock or, subject to certain exceptions, during any 24-month period, a majority of the Boardour board of directors is no longer
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comprised of individuals who were members of the Boardour board of directors on the first day of such period. Our public debt securities also contain change of control provisions that would be triggered by a third-party acquisition of greater than 50% of our common stock coupled with a ratings downgrade.downgrade, which would require us to offer to repurchase our debt securities in the event of such change of control.

If we elect to settle conversions of our convertible notes in shares of our common stock or a combination of cash and shares of our common stock, conversions of our convertible notes will result in dilution for our existing shareholders.
We have an aggregate principal amount of $1.725 billion in convertible notes outstanding. If note holders elect to convert, the notes will be converted into our shares of common stock, cash, or a combination of common stock and cash, at our discretion. Prior to March 15 and August 15, 2023, our convertible notes issued in June 2020 and October 2020, respectively, will be convertible at the option of holders during certain periods only upon satisfaction of certain conditions. Beyond those dates, the convertible notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding their maturity date. Conversions of our convertible notes into shares of our common stock or a combination of common stock and cash, will result in dilution to our shareholders.
We did not declare quarterly dividends on our common stock in the quarter ended March 31, 2022 and do not expect to pay dividends on our common stock for the foreseeable future.
No cash dividends were declared on our common stock during the eight consecutive quarters ended March 31, 2022. We expect that any income received from operations will be devoted to our future operations and recovery. We do not expect to pay
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cash dividends on our common stock for the foreseeable future due to our agreement with certain of our lenders not to pay dividends until the end of the third quarter of 2022.In addition, in the event we thereafter declare a dividend, we will need to repay our amounts deferred under the export credit facilities. Payment of dividends would, in any case, depend upon our profitability at the time, cash available for those dividends, and other factors as our board of directors may consider relevant.
Increased regulatory oversight, and the phasing out of LIBOR may adversely affect the value of a portion of our indebtedness.
The publication of certain LIBOR settings ceased after December 31, 2021, and uncertainty regarding alternative reference rates remains as many market participants await a wider adoption of replacement products prior to the cessation of the remaining USD LIBOR tenors (currently scheduled for June 30, 2023). When LIBOR ceases to exist, the level of interest payments on the portion of our indebtedness that bears interest at variable rates might be affected if we, the agent, and/or the lenders holding a majority of the outstanding loans or commitments under such indebtedness fail to amend such indebtedness to implement a replacement rate. Regardless, such replacement rate will give due consideration to any evolving or then-existing conventions for similar credit facilities, which may result in different than expected interest payments.
Macroeconomic, Business, Market and Operational Risks
Adverse worldwide economic or other conditions could reduce the demand for cruises and passenger spending, adversely impacting our operating results, cash flows and financial condition including impairing the value of our goodwill, ships, trademarks and other assets and potentially affecting other critical accounting estimates where the change may be material to our operating results.
In addition to health and safety concerns, demand for cruises is affected by international, national, and local economic conditions. Weak or uncertain economic conditions may impact consumer confidence and pose a risk as vacationers postpone or reduce discretionary spending. This, in turn, may result in cruise booking slowdowns, decreased cruise prices and lower onboard revenues. Given the global nature of our business, we are exposed to many different economies, and our business could be hurt by challenging conditions in any of our markets. Additionally, the continued impact of COVID-19 on the financial markets is uncertain and we cannot predict its effect on geopolitical events and/or international trade policies as countries attempt to mitigate the impact of the pandemic and as they re-open their economies or re-implement lockdown measures.
Our failureoperating costs could increase due to complymarket forces and economic or geopolitical factors beyond our control.
Our operating costs, including fuel, food, payroll and benefits, airfare, taxes, insurance, and security costs, can be and have been subject to increases due to market forces and economic or geopolitical conditions or other factors beyond our control, including global inflationary pressures which have increased our operating costs. In connection with the termsCOVID-19 pandemic, we' have incurred increased operating costs, including as a result of rerouting itineraries due to ports closing or not accepting passengers. Increases in these operating costs could adversely affect our future profitability.
Any further impairment of our debt facilitiesgoodwill, long-lived assets, equity investments and notes receivable could adversely affect our financial condition and operating results.
We evaluate goodwill for impairment on an annual basis, or more frequently when circumstances indicate that the carrying value of a reporting unit may not be recoverable. A challenging operating environment (such as is currently being experienced due to the impact of COVID-19), conditions affecting consumer demand or spending, the deterioration of general macroeconomic conditions, or other factors could result in an eventa change to the future cash flows we expect to derive from our operations. Reductions of default. Generally, if an eventcash flows used in the valuation analyses may result in the recording of default under any debt agreement occurs, then pursuant to cross default acceleration clauses,impairments, which could adversely affect our outstanding debtfinancial condition and derivative contract payables could become dueoperating results.
Price increases for commercial airline services for our guests or major changes or reduction in commercial airline services and/or terminated.availability could adversely impact the demand for cruises and undermine our ability to provide reasonably priced vacation packages to our guests.
Many of our guests depend on scheduled commercial airline services to transport them to or from the ports where our cruises embark or disembark. Increases in the price of airfare would increase the overall price of the cruise vacation to our guests, which may adversely impact demand for our cruises. In addition, changes in the availability and/or regulations governing commercial airline services, including those resulting from the COVID-19 pandemic, have adversely affected and could continue to adversely affect our guests’ ability to obtain air travel, as well as our ability to transfer our guests to or from our cruise ships, which could adversely affect our results of operations.
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Terrorist attacks, war, and other similar events could have a material adverse impact on our business and results of operations.
We are susceptible to a wide range of adverse events, including terrorist attacks, war, conflicts, civil unrest and other hostilities, such as the outbreak of armed conflict between Russia and Ukraine. The occurrence of these events or an escalation in the frequency or severity of them, and the resulting political instability, travel restrictions and advisories and concerns over safety and security aspects of traveling or the fear of any of the foregoing, have had, and could have in the future, a significant adverse impact on demand and pricing in the travel and vacation industry. These events could also result in additional security measures taken by local authorities which have, and may in the future, impact access to ports and/or destinations. In addition, such events have led, and could lead, to disruptions, instability and volatility in global markets, supply chains and industries, increased operating costs, such as fuel and food, and disruptions affecting our credit card processorsnewbuild construction and fleet modernization efforts, any of which could hold back paymentsmaterially and adversely impact our business and results of operations. Further, such events could have the effect of heightening the other risks we have described in this report, any of which also could materially and adversely affect our business and results of operations.
Disease outbreaks and an increase in concern about the risk of illness could adversely impact our business and results of operations.
Disease outbreaks and increased concern related to createillness when traveling to, from, and on our ships could cause a reserve.drop in demand for cruises, guest cancellations, travel restrictions, an unavailability of ports and/or destinations, cruise cancellations, ship redeployments and an inability to source our crew, provisions or supplies from certain places. In addition, we may be subject to increased concerns that cruises are more susceptible than other vacation alternatives to the spread of infectious diseases such as COVID-19. In response to disease outbreaks, our industry, including our passengers and crew, may be subject to enhanced health and safety requirements in the future which may be costly and take a significant amount of time to implement across our fleet. For example, local governments may establish their own set of rules for self-quarantines and/or require proof of individuals health status or vaccination prior to or upon visiting. The impact of any of these factors could have a material adverse effect on our business and results of operations. In addition, the new operating protocols we are developing and any other health protocol we may develop or that may be required by law in the future in response to infectious diseases may be costly to develop and implement and may be less effective than we expected in reducing the risk of infection and spread of such disease on our cruise ships, all of which will negatively impact our operations and expose us to reputational and legal risks.
Incidents on ships, at port facilities, land destinations and/or affecting the cruise vacation industry in general, and the associated negative media coverage and publicity, have affected and could continue to affect our reputation and impact our sales and results of operations.
Cruise ships, private destinations, port facilities and shore excursions operated and/or offered by us and third parties may be susceptible to the risk of accidents, illnesses, mechanical failures, environmental incidents and other incidents which could bring into question safety, health, security and vacation satisfaction and negatively impact our sales, operations and reputation. Incidents involving cruise ships, and, in particular the safety, health and security of guests and crew and the media coverage thereof, including those related to the COVID-19 pandemic, have impacted and could continue to impact demand for our cruises and pricing in the industry. In particular, we cannot predict the impact on our financial performance and the public’s concern regarding the health and safety of travel, especially by cruise ship, and related decreases in demand for travel and cruising. Moreover, our ability to attract and retain guests and crew depends, in part, upon the perception and reputation of our company and our brands and the public’s concerns regarding the health and safety of travel generally, as well as regarding the cruising industry and our ships specifically. Our reputation and our business could also be damaged by continued or additional negative publicity regarding the cruise industry in general, including publicity regarding the spread of contagious disease such as COVID-19, over-tourism in key ports and destinations and the potentially adverse environmental impacts of cruising. The considerable expansion in the use of social and digital media has compounded the potential scope and reach of any negative publicity. In addition, incidents involving cruise ships may result in additional costs to our business, increasing government or other regulatory oversight and, in certain cases, potential litigation.
Significant weather, climate events and/or natural disasters could adversely impact our business and results of operations.
Natural disasters (e.g., earthquakes, volcanos, wildfires), weather and/or climate events (including hurricanes and typhoons) could impact our source markets and operations resulting in travel restrictions, guest cancellations, an inability to source our crew or our provisions and supplies from certain places. We cannot provide assurancesare often forced to alter itineraries and occasionally cancel a cruise or a series of cruises or to redeploy our ships due to these types of events, which could have an adverse effect on our sales, operating costs and profitability in the current and future periods. Increases in the frequency, severity or duration of these types of events could exacerbate their impact and disrupt our operations or make certain destinations less desirable or
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unavailable impacting our revenues and profitability further. Any of the foregoing could have an adverse impact on our results of operations and on industry performance.
Our sustainability activities, including environmental, social and governance (ESG) matters, could result in reputational risks, increased costs and other risks.
Customers, investors, lenders, regulators and other industry stakeholders have placed increasing importance on corporate ESG practices and on the implications and social cost of their investments, which could cause us to incur additional costs and changes to our operations. If our ESG practices or disclosures do not meet investor or industry stakeholders' evolving expectations and standards, our customer, employee and supply chain vendor retention, and our brands and reputation, may be negatively impacted, which could affect our business operations and financial condition. We could also incur additional costs and require additional resources to monitor, report and comply with various ESG practices, which could increase our operating costs and affect our results of operations and financial condition.
In addition, from time to time, we communicate certain initiatives regarding climate change and other ESG matters. We could fail or be perceived to fail to achieve such initiatives, which may negatively affect our reputation. The future adoption of new technology or processes to achieve the initiatives could also result in the impairment of existing assets.
Our reliance on shipyards, their subcontractors and our suppliers to implement our newbuild and ship upgrade programs and to repair and maintain our ships exposes us to risks which could adversely impact our business.
We rely on shipyards, their subcontractors and our suppliers to effectively construct our new ships and to repair, maintain, and upgrade our existing ships on a timely basis and in a cost effective manner. There are a limited number of shipyards with the capability and capacity to build, repair, maintain and/or upgrade our ships. As such, any disruptions affecting the newbuild or fleet modernization supply chain will adversely impact our business as there are limited substitutes.
The COVID-19 pandemic has led to suspensions and/or slowdowns of work at certain shipyards, which impacts our ability to construct new ships when and as planned, our ability to timely and cost-effectively procure new capacity, and our ability to execute scheduled drydocks and/or fleet modernizations. The effects of the COVID-19 pandemic on the shipyards, their subcontractors, and our suppliers have resulted in delays in our previously scheduled ship deliveries. Variations from our plan could have a significant negative impact on our business operations and financial condition.
Building, repairing, maintaining and/or upgrading a ship is sophisticated work that we would have sufficient liquidityinvolves significant risks. Material increases in commodity and raw material prices, and other cost pressures impacting the construction of a new ship, such as the cost of labor and financing, could adversely impact the shipyard’s ability to repay,build the ship on a cost-effective basis. We may be impacted if shipyards, their subcontractors, and/or our suppliers encounter financial difficulties, supply chain, technical or design problems when building or repairing a ship. If materialized, these problems could impact the timely delivery or cost of new ships or the ability of shipyards to refinancerepair and upgrade our fleet in accordance with our needs or expectations. In addition, delays, mechanical faults and/or unforeseen incidents may result in cancellation of cruises or delays of new ship orders or necessitate unscheduled drydocks. Such events could result in lost revenue, increased operating expenses, or both, and thus adversely affect our results of operations.
An increase in capacity worldwide or excess capacity in a particular market could adversely impact our cruise sales and/or pricing.
Although our ships can be redeployed, cruise sales and/or pricing may be impacted by the debt ifintroduction of new ships into the marketplace, reductions in cruise capacity, overall market growth and deployment decisions of ourselves and our competitors. As of March 31, 2022, a total of 76 new ships with approximately 178,000 berths were on order for delivery through 2027 in the cruise industry, including 11 ships currently scheduled to be delivered to us. The further net growth in capacity from these new ships and future orders, without an increase in the cruise industry’s demand and/or share of the vacation market, could depress cruise prices and impede our ability to achieve yield improvement. Further, cruise prices and yield improvement could face additional pressure due to the pace at which we and other cruise line operators return to service.
In addition, to the extent that we or our competitors deploy ships to a particular itinerary/region and the resulting capacity in that region exceeds the demand, it may negatively affect our pricing and profitability. Any of the foregoing could have an adverse impact on our results of operations, cash flows and financial condition, including potentially impairing the value of our ships and other assets
Unavailability of ports of call may adversely affect our results of operations.
We believe that port destinations are a major reason why guests choose to go on a particular cruise or on a cruise vacation. The availability of ports and destinations is affected by a number of factors, including industry demand and competition for key ports and destinations, existing capacity constraints, constraints related to the size of certain ships, security, financial limitations
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on port development, exclusivity arrangements that ports may have with our competitors, geopolitical developments and local governmental regulations. In light of the COVID-19 pandemic, port availability could also be subject to immediate change depending on local and/or onboard disease cases or other government restrictions as well as limited availability during the resumption of operations. Higher fuel costs also may adversely impact the destinations on certain of our itineraries as they become too costly to include.
In addition, certain ports and destinations have faced a surge of both cruise and non-cruise tourism which, in certain cases, has fueled anti-tourism sentiments and related countermeasures to limit the volume of tourists allowed in these destinations. In certain destinations, countermeasures to limit the volume of tourists have been contemplated and/or put into effect, including proposed limits on cruise ships and cruise passengers. Potential restrictions in ports and destinations, such amounts were accelerated upon anas Venice, Barcelona or Key West, could limit the itinerary and destination options we can offer our passengers going forward.
Increased demand and competition for key ports of call or destinations, limitations on the availability or feasibility of use of specific ports of call and/or constraints on the availability of shore excursions and other service providers at such ports or destinations could adversely affect our operations and financial results.
We may lose business to competitors throughout the vacation market.
We operate in the vacation market and cruising is one of many alternatives for people choosing a vacation. We therefore risk losing business not only to other cruise lines, but also to other vacation operators, which provide other leisure options, including hotels, resorts, internet-based alternative lodging sites and package holidays and tours.
We face significant competition from other cruise lines on the basis of cruise pricing, travel advisor preference and also in terms of the nature of ships, services and destinations that we offer to guests. Our principal competitors within the cruise vacation industry include Carnival Corporation & plc, which owns, among others, Aida Cruises, Carnival Cruise Line, Costa Cruises, Cunard Line, Holland America Line, P&O Cruises, Princess Cruises and Seabourn; Disney Cruise Line; MSC Cruises; and Norwegian Cruise Line Holdings Ltd, which owns Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises. Our revenues are sensitive to the actions of other cruise lines in many areas including pricing, scheduling, capacity and promotions, which can have a substantial adverse impact not only on our revenues, but also on overall industry revenues.
In the event that we do not effectively market or differentiate our cruise brands from our competitors or otherwise compete effectively with other vacation alternatives and new or existing cruise companies, our results of default.

operations and financial position could be adversely affected.
If we are unable to appropriately balance our cost management and capital allocation strategies with our goal of satisfying guest expectations, it may adversely impact our business success.

Our goals call for usare to provide high quality products and deliver high quality services. There can be no assurance that we can successfully balance these goals with our cost management and capital allocation strategies. Our business also requires us to make capital allocation decisions across a broad scope of investment options with varying return profiles and time horizons for value realization. These include significant capital investment decisions such as ordering new ships, and/or upgrading our existing fleet, enhancing our technology and/or data capabilities and expanding our portfolio of land-based assets, based on expected market preferences, competition and projected demand. There can be no assurance that our strategies will be successful, which could adversely impact our business, financial condition and results of operations. Investments inFor example, our ownership and operation of older tonnage, in particular runduring the risk of not meetingbusiness disruption caused by COVID-19, has resulted in impaired asset values due to expected returns and diluting related asset values.

that we will not be able to recover.
Our attempts to expand our business into new markets and new ventures may not be successful.

We opportunistically seek to grow our business through, among other things, expansion into new destinationdestinations or source markets and establishment of new ventures complementary to our current offerings. These attempts to expand our business increase the complexity of our business, require significant levels of investment and can strain our management, personnel, operations and systems. In addition, we have been unable to execute our attempts to expand our business as a result of the impacts of the COVID-19 pandemic, as described elsewhere herein. There can be no assurance that these business expansion efforts will develop as anticipated or that we will succeed, and if we do not, we may be unable to recover our investment, which could adversely impact our business, financial condition and results of operations.

Risks associated with our development and operation of key land-based destination projects may adversely impact our business or results of operations.
We have invested, either directly or indirectly through joint ventures and partnerships, in a growing portfolio of key land-based projects including port and terminal facilities, private destinations and multi-brand destination projects. These investments can increase our exposure to certain key risks depending on the scope, location, and the ownership and
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management structure of these projects. These risks include susceptibility to weather events, exposure to local political/regulatory developments and policies, logistical challenges and human resource and labor risks and safety, environmental, and health risks, including challenges posed by the COVID-19 pandemic and its effects locally where we have these projects and relationships.
Our reliance on travel agenciesadvisors to sell and market our cruises exposes us to certain risks which if realized, could adversely impact our business.

We rely on travel agenciesadvisors to generate the majority of bookings for our ships. Accordingly, we must ensure that ourmaintain competitive commission rates and incentive structures remain competitive.structures. If we fail to offer competitive compensation packages or fail to maintain our relationships, these agencies may be incentivized to sell cruises offered by our competitors, to our detriment, which could adversely impact our operating results. Our reliance on third-party sellers is particularly pronounced in certain markets, such as China, where we have a large number of travel agent charter and group sales and less retail agency and direct booking.markets. In addition, the travel agent industryadvisor community is sensitive to economic conditions that impact discretionary income.income of consumers. Significant disruptions, especially disruptions impactingsuch as those agencies that sell a high volume of our business,caused by the COVID-19 pandemic, or contractions in the industry could reduce the number of travel agenciesadvisors available for us to market and sell our cruises, which could have an adverse impact on our financial condition and results of operations.

Disruptions in Additionally, the strength of our shoreside operations or our information systems may adversely affect our results of operations.

Our principal executive office and principal shoreside operations are located in Florida, and we have shoreside offices throughout the world. Actual or threatened natural disasters (e.g., hurricanes/typhoons, earthquakes, tornadoes, fires or floods) or similar events in these locations may have a material impact on our business continuity, reputation and results of operations. In addition, substantial or repeated information systems failures, computer viruses or cyber-attacks impacting our shoreside or shipboardrecovery from suspended operations could adversely impact our business. We dobe delayed if we are not generally carry business interruption insurance for our shoreside operations or our information systems. As such, any losses or damages incurred by us could have an adverse impact on our results of operations.

The loss ofaligned and partnered with key personnel, our inability to recruit or retain qualified personnel, or disruptions among our shipboard personnel due to strained employee relations could adversely affect our results of operations.

Our success depends, in large part, on the skills and contributions of key executives and other employees, and on our ability to recruit, develop and retain high quality personnel. As demand for qualified personnel in the industry grows, we must continue to effectively recruit, train, motivate and retain our employees, both shoreside and on our ships, in order to effectively compete in our industry, maintain our current business and support our projected global growth.
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As of December 31, 2016, 85% of our shipboard employees were covered by collective bargaining agreements. A dispute under our collective bargaining agreements could result in a work stoppage of those employees covered by the agreements. We may not be able to satisfactorily renegotiate these collective bargaining agreements when they expire. In addition, existing collective bargaining agreements may not prevent a strike or work stoppage on our ships. We may also be subject to or affected by work stoppages unrelated to our business or collective bargaining agreements. Any such work stoppages or potential work stoppages could have a material adverse effect on our financial results, as could a loss of key employees, our inability to recruit or retain qualified personnel or disruptions among our personnel.

travel advisors.
Business activities that involve our co-investmentco-investments with third parties may subject us to additional risks.

Partnerships, joint ventures and other business structures involving our co-investmentco-investments with third parties generally include some form of shared control over the operations of the business and create additional risks, including the possibility that other investors in such ventures could become bankrupt or otherwise lack the financial resources to meet their obligations or could have or develop business interests, policies or objectives that are inconsistent with ours. With the sale of 51% of our interest in Pullmantur Holdings in July 2016, we continue to expand the breadth of our co-investment activities, which also include TUI Cruises, SkySea Cruises, Grand Bahama Shipyard and minority ownership investments in various port development and other projects. In addition to financial risks, our co-investment activities mayhave also presentpresented managerial and operational risks and expose us to reputational or legal concerns. These or other issues related to our co-investmentco-investments with third parties could adversely impact our operations or liquidity. Due to the COVID-19 pandemic, Pullmantur S.A. filed for reorganization under the terms of the Spanish insolvency laws. The Company may be required to continue to provide funding for these affiliated entities and it is unclear when and to what extent these entities will fully resume operations and our ability to provide such funding will be limited by the level and terms of our outstanding indebtedness. Further, due to the arrangements we have in place with our partners in these ventures, we are limited in our ability to control the strategy of these ventures if and when they resume operations, or their use of capital and other key factors to their results of operation which could adversely affect our investments and impact our results of operations.

Past or pending business acquisitions or potential acquisitions that we may decide to pursue in the future carry inherent risks which could adversely impact our financial performance and condition.
The Company, from time to time, has engaged in acquisitions and may pursue acquisitions in the future, which are subject to, among other factors, the Company’s ability to identify attractive business opportunities and to negotiate favorable terms for such opportunities. Accordingly, the Company cannot make any assurances that potential acquisitions will be completed timely or at all, or that if completed, we would realize the anticipated benefits of such acquisitions. Acquisitions also carry inherent risks such as, among others: (i) the potential delay or failure of our efforts to successfully integrate business processes and realizing expected synergies; (ii) difficulty in aligning procedures, controls and/or policies; and (iii) future unknown liabilities and costs that may be associated with an acquisition. In addition, acquisitions may adversely impact our liquidity and/or debt levels, and the recognized value of goodwill and other intangible assets can be negatively affected by unforeseen events and/or circumstances, which may result in an impairment charge. Any of the foregoing events could adversely impact our financial condition and results of operations.
We rely on supply chain vendors and third-party service providers who are integral to the operations of our businesses. These vendors and service providers are also affected by COVID-19 and may be unable or unwilling to deliver on their commitments or may act in ways that could harm our business.

We rely on supply chain vendors to deliver key products to the operations of our businesses around the world. Any event impacting a vendor’s ability to deliver goods of the requiredexpected quality at the location and time needed could negatively impact our ability to deliver our cruise experience. Events impacting our supply chain could be caused by factors beyond the control of our suppliers or us, including inclement weather, natural disasters, new laws and regulations, labor actions, increased demand, problems in production or distribution and/or disruptions in third partythird-party logistics or transportation systems. Interruptionssystems, including those caused by the COVID-19 pandemic. Any such interruptions to our supply chain could increase our costs and could limit the availability of products critical to our operations.

In order to achieve cost and operational efficiencies, we outsource to third-party vendors certain services that are integral to the operations of our global businesses, such as our onboard concessionaires, certain of our call center operations, guest port services, logistics distribution and operation of a large part of our information technology systems.systems, all of which are also affected
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by the COVID-19 pandemic. We are subject to the risk that certain decisions are subject to the control of our third-party service providers and that these decisions may adversely affect our activities. A failure to adequately monitor a third-party service provider’s compliance with a service level agreement or regulatory or legal requirements could result in significant economic and reputational harm to us. There is also a risk the confidentiality, privacy and/or security of data held by third parties or communicated over third-party networks or platforms could become compromised.

A failure to keep pace with developments in technology or technological obsolescence could impair our operations or competitive position.

Our business continues to demand the use of sophisticated technology and systems. These technologies and systems require significant investment and must be proven, refined, updated, and/or replaced with more advanced systems in order to continue to meet our customers’ demands and expectations. If we are unable to do so in a timely manner or within reasonable cost parameters or if we are unable to appropriately and timely train our employees to operate any of these new systems, our business could suffer. We also may not achieve the benefits that we anticipate from any new technology or system, and a failure to do so could result in higher than anticipated costs or could impair our operating results.

We may be exposed to risks and costs associated with cyber security and data privacy, including protecting the integrity and security of our guests’, employees’ and business partners’ personal information.

We are subject to various risks associated with the collection, handling, storage and transmission of sensitive information, including risks related to compliance with applicable laws and other contractual obligations, as well as the risk that our systems collecting such information could be compromised. In the course of doing business, we collect large volumes of internal and customer data, including personally identifiable information and individual credit data, for various business purposes. We are subject to federal, state and international laws (including the European Union General Data Protection Regulation which is expected to take effect in May 2018), as well as industry standards, relating to the collection, use, retention, security and transfer of personally identifiable information and individual credit data. In many cases, these laws apply not only to third-party transactions, but also
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to transfers of information between the Company and its subsidiaries, and among the Company, its subsidiaries and other parties with which the Company has commercial relations. Several jurisdictions have passed laws in this area, and other jurisdictions are considering imposing additional restrictions. These laws continue to develop and may be inconsistent from jurisdiction to jurisdiction. Complying with emerging and changing international requirements may cause us to incur substantial costs or require us to change our business practices. If we fail to comply with the various applicable data collection and privacy laws, we could be exposed to fines, penalties, restrictions, litigation or other expenses, and our business could be adversely impacted.

In addition, even if we are fully compliant with legal and/or industry standards and any relevant contractual requirements, we still may not be able to prevent security breaches involving sensitive data and/or critical systems. Any breach, theft, loss, or fraudulent use of guest, employee or company data, or breach of any critical systems used in our land based or marine operations, could adversely impact our reputation and brand and our ability to retain or attract new customers, and expose us to risks of data loss, business disruption, governmental investigation, litigation and other liability, any of which could adversely affect our business.

Significant capital investments and other expenditures could be required to remedy the problem and prevent future breaches, including costs associated with additional security technologies, personnel, experts and credit monitoring services for those whose data has been breached. Further, if we or our vendors experience significant data security breaches or fail to detect and appropriately respond to significant data security breaches, we could be exposed to government enforcement actions and private litigation. Additionally, the techniques and sophistication used to conduct cyber-attacks and breaches of information technology systems, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks are launched or have been in place for a period of time. Our security measures cannot provide assurance that we will be successful in preventing or identifying such breaches.

The potential unavailability of insurance coverage, or an inability to obtain insurance coverage at commercially reasonable rates or our failure to have coverage in sufficient amounts to cover our incurred losses may adversely affect our financial condition or results of operations.

We seek to maintain appropriate insurance coverage at commercially reasonable rates. We normally insureobtain insurance based on the cost of an asset rather than replacement value, and we also elect to self-insure, co-insure, or use deductibles in certain circumstances for certain risks such as loss of use of a ship or a cyber-security breach.other business interruption. The limits of insurance coverage we purchase are based on the availability of the coverage, evaluation of our risk profile and cost of coverage. We do not carry business interruption insurance and accordingly we have no insurance coverage for loss of revenues or earnings from our ships or other operations. Accordingly, we are not protected against all risks and cannot be certain that our coverage will be adequate for liabilities actually incurred which could result in an unexpected decrease in our revenue and results of operations in the event of an incident.incident

Our protectionWe are members of four Protection and indemnityIndemnity (“P&I”) liability insuranceclubs, which are part of a worldwide group of 13 P&I clubs, known as the International Group of P&I Clubs (the “IG”). P&I coverage provided by the clubs is placed on a mutual basis, and we are subject to additional premium calls in amounts based on claim recordsthe event of all membersa catastrophic loss incurred by any member of the 13 P&I Club.clubs, whereby the reinsurance limits purchased by the IG are exhausted. We are also subject to additional premium assessments including, but not limited to,calls based on investment orand underwriting shortfalls experienced by theour own individual insurers. Certain liabilities, costs, and expenses associated with COVID-19 cases identified on or traced to our vessels are eligible for insurance coverage under our participation in these P&I Club.

clubs
We cannot be certain that insurance and reinsurance coverage will be available to us and at commercially reasonable rates in the future.future or at all or, if available, that it will be sufficient to cover potential claims. Additionally, if we or other insureds sustain significant losses, the result may be higher insurance premiums, cancellation of coverage, or the inability to obtain coverage. The COVID-19 pandemic, for example, depending on its duration and the associated insurance claims volumes, may potentially impact the insurance markets we rely on for coverage and could adversely impact both the coverage options available to us in the future as well as the premium costs we are required to pay for those coverages. Such events could adversely affect our financial condition or results of operations.

Disruptions in our shoreside or shipboard operations or our information systems may adversely affect our results of operations.
Our principal executive office and principal shoreside operations are located in Florida, and we have shoreside offices throughout the world. Actual or threatened natural disasters (e.g., hurricanes/typhoons, earthquakes, tornadoes, fires or floods), municipal lockdowns, curfews, quarantines, or similar events in these locations may have a material impact on our business continuity, reputation and results of operations. In addition, substantial or repeated information system failures, computer viruses or cyber attacks impacting our shoreside or shipboard operations could adversely impact our business. We do not generally carry business interruption insurance for our shoreside or shipboard operations or our information systems. As such, any losses or damages incurred by us could have an adverse impact on our results of operations.
Provisions of our Articles of Incorporation, By-Laws and Liberian law could inhibit a change of control and may prevent efforts by our shareholders to change our management.
Certain provisions of our Articles of Incorporation and By-Laws and Liberian law may inhibit third parties from effectuating a change of control of the Company without approval from our board of directors which could result in the entrenchment of current management. These include provisions in our Articles of Incorporation that prevent third parties, other than A. Wilhelmsen AS and Cruise Associates and their permitted transferees, from acquiring beneficial ownership of more than 4.9% of our outstanding shares without the consent of our board of directors.
Compliance and Regulatory Risks
Changes in U.S. or other countries’ foreign travel policy have affected, and may continue to affect our results of operations.
Changes in U.S. foreign policy have in the past and could in the future result in the imposition of travel restrictions or travel bans on U.S. persons to certain countries or result in the imposition of travel advisories, warnings, rules, regulations or legislation exposing us to penalties or claims of monetary damages. In addition, some countries have adopted restrictions
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against U.S. travelers, and we currently cannot predict when those restrictions will be eased. The timing and scope of these changes and regulations can be unpredictable, and they could cause us to cancel scheduled sailings, possibly on short notice, or could result in litigation against us. This, in turn, could decrease our revenue, increase our operating costs and otherwise impair our profitability.
Environmental, labor, health and safety, financial responsibility and other maritime regulations and measures could affect operations and increase operating costs.

The United StatesU.S. and various state and foreign government or regulatory agencies have enacted or may enact environmental regulations or policies, such as requiring the use of low sulfur fuels (e.g., IMO 2020), that could increase our direct cost to operate in certain markets, increase our cost forof fuel, limit the supply of compliant fuel, cause us to incur significant expenses to purchase and/or develop new equipment and adversely impact the cruise vacation industry. While we have taken and expect to continue to take a number of actions to mitigate the potential impact of certain of these regulations, there can be no assurances that these efforts will be successful or completed on a timely basis.

over the long term.
There is increasing global regulatory focus on climate change, and greenhouse gas (GHG)and other emissions. These regulatory efforts, both internationally and in the United StatesU.S., are still developing, and we cannot yet determine what the final regulatory programs or their impact will be in any jurisdiction where we do business.be. However, such climate change-related regulatory activity in the future may adversely affect our business and financial results by requiring us to reduce our emissions, purchase allowances or otherwise pay for our emissions.emissions and may increase our exposure, if any, to climate change-related litigation. Such activity may also impact us by increasing our operating costs, including fuel costs.

Some environmental groups have also lobbied for more stringent regulation of cruise ships and have generated negative publicity about the cruise vacation industry and its environmental impact. See Item 1. Business-Regulation-Environmental Regulations of our Annual Report on Form 10-K for the year ended December 31, 2016.

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In addition, we are subject to various international, national, state and local laws, regulations and treaties that govern, among other things, discharge from our ships, safety standards applicable to our ships, treatment of disabled persons, health and sanitary standards applicable to our guests, security standards on board our ships and at the ship/port interface areas, and financial responsibilities to our guests. These issues are, and we believe will continue to be, an area of focus by the relevant authorities throughout the world. This could result in the enactment of more stringent regulation of cruise ships that could subject us to increasing compliance costs in the future.future and may increase our exposure, if any, to environmental-related litigation.

Some environmental groups also have generated negative publicity about the environmental impact of the cruise vacation industry and are advocating for more stringent regulation of ship emissions at berth and at sea. Growing environmental scrutiny of the cruise industry and any related measures could adversely impact our operations and financial results and subject us to reputational impacts and costs.
A change in our tax status under the United StatesU.S. Internal Revenue Code, or other jurisdictions, may have adverse effects on our income.results of operations.

WeRoyal Caribbean Cruises Ltd. and a number of our subsidiaries are foreign corporations that derive income from a U.S. trade or business and/or from sources within the United States.U.S. In connection with the year end audit, each year, Faegre Drinker Biddle & Reath LLP, our U.S. tax counsel, has delivereddelivers to us an opinion, based on certain representations and assumptions set forth in it, to the effect that this income, to the extent derived from or incidental to the international operation of a ship or ships, is excluded from gross income for U.S. federal income tax purposes pursuant to Section 883 of the Internal Revenue Code. We believe that most of our income (including that of our subsidiaries) is derived from or incidental to the international operation of a ship or ships.

Our ability to rely on Section 883 could be challenged or could change in the future. Provisions of the Internal Revenue Code, including Section 883, are subject to legislative change at any time. Moreover, changes could occur in the future with respect to the identity, residence or holdings of our direct or indirect shareholders, trading volume or trading frequency of our shares, or relevant foreign tax laws of Liberia or the Bahamas, such that itthey no longer qualifiesqualify as an equivalent exemption jurisdiction,jurisdictions, that could affect our eligibility for the Section 883 exemption. Accordingly, there can be no assurance that we will continue to be exempt from U.S. income tax on U.S. source shipping income in the future. If we were not entitled to the benefit of Section 883, we and our subsidiaries would be subject to U.S. taxation on a portion of the income derived from or incidental to the international operation of our ships, which would reduce our net income.

Additionally, portions of our business are operated by companies that are within the United Kingdom tonnage tax regime. Further, some of our operations are conducted in jurisdictions where we rely on tax treaties to provide exemption from taxation. To the extent the United Kingdom tonnage tax laws change or we do not continue to meet the applicable qualification requirements or if tax treaties are changed or revoked, we may be required to pay higher income tax in these jurisdictions, adversely impacting our results of operations.

As budgetary constraints continue to adversely impact the jurisdictions in which we operate, increases in income tax regulations, tax audits or tax reform affecting our operations may be imposed.

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We are not a U.S. corporation and, as a result, our shareholders may be subject to the uncertainties of a foreign legal system in protecting their interests.
Our corporate affairs are governed by our Articles of Incorporation and By-Laws and by the Business Corporation Act of Liberia. The provisions of the Business Corporation Act of Liberia resemble provisions of the corporation laws of a number of states in the U.S. However, there are very few judicial cases in Liberia interpreting the Business Corporation Act of Liberia. While the Business Corporation Act of Liberia provides that it is to be applied and construed to make the laws of Liberia, with respect of the subject matter of the Business Corporation Act of Liberia, uniform with the laws of the State of Delaware and other states with substantially similar legislative provisions (and adopts their case law to the extent it is non-conflicting), there have been few Liberian court cases interpreting the Business Corporation Act of Liberia, and we cannot predict whether Liberian courts would reach the same conclusions as United States courts. We understand that legislation has been proposed but not yet adopted by the Liberian legislature which amends the provisions regarding the adoption of non-Liberian law to, among other things, provide for the adoption of the statutory and case law of Delaware and not also states with substantially similar legislative provisions, and potentially provide the courts of Liberia discretion in application of non-statutory corporation law of Delaware in cases when the laws of Liberia are silent. The right of shareholders to bring a derivative action in Liberian courts may be more limited than in U.S. jurisdictions. There may also be practical difficulties for shareholders attempting to bring suit in Liberia, and Liberian courts may or may not recognize and enforce foreign judgments. Thus, our shareholders may have more difficulty challenging actions taken by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a U.S. jurisdiction.
General Risk Factors
Conducting business globally may result in increased costs and other risks.
We operate our business globally, which exposes us to a number of risks, including increased exposure to a wider range of regional and local economic conditions, volatile local political conditions, potential changes in duties and taxes, including changing and/or uncertain interpretations of existing tax laws and regulations, required compliance with additional laws and policies affecting cruising, vacation or maritime businesses or governing the operations of foreign-based companies, currency fluctuations, interest rate movements, difficulties in operating under local business environments, port quality and availability in certain regions, U.S. and global anti-bribery laws and regulations, imposition of trade barriers and restrictions on repatriation of earnings.
Our future growth strategies increasingly depend on the growth and sustained profitability of international markets. Factors that will be critical to our success in these markets include our ability to continue to raise awareness of our products and our ability to adapt our offerings to best suit rapidly evolving consumer demands. This risk is further heightened by the COVID-19 pandemic, as authorities in many of these markets have implemented numerous measures to contain the spread and impact of COVID-19, such as travel bans and restrictions, shelter-in-place/stay-at-home orders, and other limitations on business activity, including business closures. In addition, these measures could change unpredictably and/or could be scaled up or down in response to evolving intensity or resurgence of COVID-19 and related variants in or around these markets. The execution of our planned growth strategies is dependent on meeting the governmental and regulatory measures and policies in each of these markets. Our ability to realize our future growth strategy is highly dependent on our ability to satisfy country-specific policies and requirements in order to return to service, as well as meet the needs of region-specific consumer preferences as services come back online. These factors may cause us to reevaluate some of our international business strategies.
Operating globally also exposes us to numerous and sometimes conflicting legal, regulatory and tax requirements. In many parts of the world, including countries in which we operate, practices in the local business communities might not conform to international business standards. These legal and regulatory requirements and standards may change in response to the COVID-19 pandemic, and there may be greater uncertainty as to the interpretation and enforcement of applicable laws and regulations, including those introduced in response to the COVID-19 pandemic. We cannot guarantee consistent interpretation, application, and enforcement of rules and regulations put in place in response to the COVID-19 pandemic, which could place limits on our operations or increase our costs, as well as negatively impact our future growth strategies in our key growth markets. We must adhere to policies designed to promote legal and regulatory compliance as well as applicable laws and regulations. However, we might not be successful in ensuring that our employees, agents, representatives and other third parties with whom we associate properly adhere to applicable laws and regulations. In addition, we may be exposed to the risk of penalties and other liabilities if we fail to comply with all applicable legal and regulatory requirements introduced in response to the COVID-19 pandemic, which may be subject to frequent and rapid change. Failure by us, our employees or any of these third parties to adhere to our policies or applicable laws or regulations could result in penalties, sanctions, damage to our reputation and related costs, which in turn could negatively affect our results of operations and cash flows.
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As a global operator, our business also may be impacted by changes in U.S. policy or priorities in areas such as trade, immigration (including any continuation of any of the immigration policies put in place by the U.S. government in response to the COVID-19 pandemic) and/or environmental or labor regulations, among others. Depending on the nature and scope of any such changes, they could impact our domestic and international business operations. Any such changes, and any international response to them, could potentially introduce new barriers to passenger or crew travel and/or cross border transactions, impact our guest experience and/or increase our operating costs.
If we are unable to address these risks adequately, our financial position and results of operations could be adversely affected, including impairing the value of our ships and other assets.
The terms of our existing debt financing gives, and any future preferred equity or debt financing may give, holders of any preferred securities or debt securities rights that are senior to rights of our common shareholders.
The holders of our existing debt have rights, preferences and privileges senior to those of holders of our common stock in the event of liquidation. If we incur additional debt or raise equity through the issuance of preferred stock or convertible securities, the terms of the debt or the preferred stock issued may give the holders rights, preferences and privileges senior to those of holders of our common stock, particularly in the event of liquidation. If we raise funds through the issuance of additional equity, the ownership percentage of our existing shareholders would be diluted.
Fluctuations in foreign currency exchange rates, fuel prices and interest rates could affect our financial results.
We are exposed to market risk attributable to changes in foreign currency exchange rates, fuel prices and interest rates. Significant changes in any of the foregoing could have a material impact on our financial results, net of the impact of our hedging activities and natural offsets. Our operating results have been and will continue to be impacted, often significantly, by changes in each of these factors
A portion of our indebtedness bears interest at variable rates that are linked to changing market interest rates. As a result, an increase in market interest rates would increase our interest expense and our debt service obligations. As of March 31, 2022, we had approximately $6.5 billion of indebtedness that bears interest at variable rates. This amount represented approximately 28.4% of our total indebtedness. As of March 31, 2022, a hypothetical 1% increase in prevailing interest rates would increase our forecasted 2022 interest expense by approximately $29.4 million.
Additionally, the value of our earnings in foreign currencies is adversely impacted by a strong U.S. dollar. In addition, any significant increase in fuel prices could materially and adversely affect our business as fuel prices impact not only our fuel costs, but also some of our other expenses, such as crew travel, freight, and commodity prices. Mandatory fuel restrictions may also create uncertainty related to the price and availability of certain fuel types potentially impacting operating costs and the value of our related hedging instruments.
The loss of key personnel, our inability to recruit or retain qualified personnel, or disruptions among our shipboard personnel could adversely affect our results of operations.
Our success depends, in large part, on the skills and contributions of key executives and other employees and on our ability to recruit, develop and retain high quality personnel as well as having adequate succession plans and back-up operating plans for when critical executives are unable to serve. As demand for qualified personnel in the industry grows, we must continue to effectively recruit, train, motivate and retain our employees, both shoreside and on our ships, in order to effectively compete in our industry, maintain our current business and support our projected global growth.
We are experiencing difficulty in recruiting and retaining qualified personnel as a result of COVID-19, the reduction in our workforce during our suspension of cruise operations, general macroeconomic conditions and a competitive labor market. Our ability to rehire crew may be negatively impacted by increasing demands related to our health and safety protocols, including vaccine requirements, and by a reduced labor supply as previous crew may have obtained alternative employment during our suspension of cruise operations. A prolonged shortage of qualified personnel and/or increased turnover could decrease our ability to operate our business in an optimal manner. The shortage and competitive labor market may result in increased costs if we need to hire temporary personnel, and/or increased wages and/or benefits in order to attract and retain employees, all of which may negatively impact our results of operations.
As of March 31, 2022, approximately 85% of our shipboard employees were covered by collective bargaining agreements. A dispute under our collective bargaining agreements could result in a work stoppage of those employees covered by the agreements. We may not be able to satisfactorily renegotiate these collective bargaining agreements when they expire. In addition, existing collective bargaining agreements may not prevent a strike or work stoppage on our ships. We may also be subject to or affected by work stoppages unrelated to our business or collective bargaining agreements. Any such work
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stoppages or potential work stoppages could have a material adverse effect on our financial results, as could a loss of key employees, our inability to recruit or retain qualified personnel or disruptions among our personnel.
If we are unable to keep pace with developments in technology, including technology in response to the COVID-19 pandemic, our operations or competitive position could become impaired.
Our business continues to demand the use of sophisticated technology and systems. These technologies and systems require significant investment and must be proven, refined, updated, upgraded and/or replaced with more advanced systems in order to continue to meet our customers’ demands and expectations. If we are unable to do so in a timely manner or within reasonable cost parameters or if we are unable to appropriately and timely train our employees to operate any of these new systems, our business could suffer. We also may not achieve the benefits that we anticipate from any new technology or system, which could result in higher than anticipated costs or impair our operating results.
In response to COVID-19, we have relied on technology to assist with mitigating the risk of COVID-19 for our passengers and crew. For example, we have deployed our patented eMuster technology across our fleet in an effort to minimize congregate settings onboard. Additionally, on certain vessels we have deployed our patented contact tracing technology in an effort to quickly identify close contacts of cases onboard. As this technology continues to develop we may be faced with technical constraints or development decisions. We may be unable to obtain appropriate technology in a timely manner or at all or we may incur significant costs in doing so. A failure to adopt the appropriate technology, or a failure or obsolescence in the technology that we do adopt, could adversely affect our results of operations.
We are exposed to cyber security attacks and data breaches and the risks and costs associated with protecting our systems and maintaining data integrity and security.
We are subject to cyber security attacks. These cyber attacks can vary in scope and intent from attacks with the objective of compromising our systems, networks, and communications for economic gain or with the objective of disrupting, disabling or otherwise compromising our maritime and/or shoreside operations. The attacks can encompass a wide range of methods and intent, including phishing attacks, illegitimate requests for payment, theft of intellectual property, theft of confidential or non-public information, installation of malware, installation of ransomware and theft of personal or business information. The frequency and sophistication of, and methods used to conduct, these attacks, have increased over time.
A successful cyber security attack may target us directly, or it may be the result of a third party’s inadequate care, or resulting from vulnerabilities in licensed software. In either scenario, the Company may suffer damage to its systems and data that could interrupt our operations, adversely impact our brand reputation, and expose us to increased risks of governmental investigation, litigation, fines, and other liability, any of which could adversely affect our business. Furthermore, responding to such an attack and mitigating the risk of future attacks could result in additional operating and capital costs in technology, personnel, monitoring and other investments.
We are also subject to various risks associated with the collection, handling, storage, and transmission of sensitive information. In the regular course of business, we collect employee, customer, and other third-party data, including personally identifiable information and individual payment data, for various business purposes. Although we have policies and procedures in place to safeguard such sensitive information, this information has been and could be subject to cyber security attacks and the aforementioned risks. In addition, we are subject to federal, state, and international laws relating to the collection, use, retention, security and transfer of personally identifiable information and individual payment data. Those laws include, among others, the European Union General Data Protection Regulation and regulations of the New York State Department of Financial Services and similar state agencies that impose additional cyber security requirements as a result of our provision of certain insurance products. Complying with these and other applicable laws has caused, and may cause, us to incur substantial costs or require us to change our business practices, and our failure to do so may expose us to substantial fines, penalties, restrictions, litigation, or other expenses and adversely affect our business. Further, any changes to laws or regulations, including new restrictions or requirements applicable to our business, or an increase in enforcement of existing laws and regulations, could expose us to additional costs and liability and could limit our use and disclosure of such information.
While we continue to evolve our cyber security practices in line with our business’ reliance on technology and the changing external threat landscape, and we invest time, effort and financial resources to secure our systems, networks and communications, our security measures cannot provide absolute assurance that we will be successful in preventing or defending from all cyber security attacks impacting our operation. There can be no assurance that any breach or incident will not have a material impact on our operations and financial results.
Any breach, theft, loss, or fraudulent use of guest, employee, third-party or company data, could adversely impact our reputation and brand and our ability to retain or attract new customers, and expose us to risks of data loss, business disruption, governmental investigation, litigation and other liability, any of which could adversely affect our business. Significant capital investments and other expenditures could be required to remedy the problem and prevent future breaches, including costs
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associated with additional security technologies, personnel, experts and credit monitoring services for those whose data has been breached. Further, if we or our vendors experience significant data security breaches or fail to detect and appropriately respond to significant data security breaches, we could be exposed to government enforcement actions and private litigation.
Litigation, enforcement actions, fines or penalties could adversely impact our financial condition or results of operations and/or damage our reputation.

Our business is subject to various United StatesU.S. and international laws and regulations that could lead to enforcement actions, fines, civil or criminal penalties or the assertion of litigation claims and damages. In addition, improper conduct by our employees, agents or joint venture partners could damage our reputation and/or lead to litigation or legal proceedings that could result in civil or criminal penalties, including substantial monetary fines. In certain circumstances it may not be economical to defend against such matters and/or aour legal strategy may not ultimately result in us prevailing in a matter. Such events could lead to an adverse impact on our financial condition or results of operations.

In addition, we have experienced, and may continue to experience, increases in litigation pertaining to the COVID-19 crisis, including potential claims for non-refundable cash deposits. We are not a United States corporationcannot predict the quantum or outcome of any such proceedings and the impact that they will have on our shareholdersfinancial results, but any such impact may be subject to the uncertaintiesmaterial. While some of a foreign legal system in protecting their interests.

Our corporate affairsthese claims are governedcovered by our Articlesinsurance, we cannot be certain that all of Incorporation and By-Laws and by the Business Corporation Act of Liberia. The provisions of the Business Corporation Act of Liberia resemble provisions of the corporation laws of a number of states in the United States. However, while most states have a fairly well developed body of case law interpreting their respective corporate statutes, there are very few judicial cases in Liberia interpreting the Business Corporation Act of Liberia. As such, the rights and fiduciary responsibilities of directors under Liberian law are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in certain United States jurisdictions. For example, the right of shareholders to bring a derivative action in Liberian courts maythem will be, more limited than in United States jurisdictions. There may also be practical difficulties for shareholders attempting to bring suit in Liberia and Liberian courts may or may not recognize and enforce foreign judgments. Thus, our public shareholders may have more difficulty in protecting their interests with respect to actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction.
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Provisions of our Articles of Incorporation, By-Laws and Liberian law could inhibit others from acquiring us, prevent a change of control, and may prevent efforts by our shareholders to change our management.

Certain provisions of our Articles of Incorporation and By-Laws and Liberian law may inhibit third parties from effectuating a change of control of the Company without Board approval which could result in the entrenchmenthave an adverse impact on our financial condition or results of current management. These include provisions in our Articles of Incorporation that prevent third parties, other than A. Wilhelmsen AS. and Cruise Associates, from acquiring beneficial ownership of more than 4.9% of our outstanding shares without the consent of our Board of Directors.operations.


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

Share Repurchases

The following table presents the total numberprovides information about our repurchase of shares of our common stock that we repurchased during the quarter ended September 30, 2017:March 31, 2022.

PeriodTotal number of shares purchased Average price paid per share 
Total number of shares purchased as part of publicly announced plans or programs(1)
 Approximate dollar value of shares that may yet be purchased under the plans or programs
July 1, 2017 - July 31, 2017— — — $500,000,000
August 1, 2017 - August 31, 2017827,826 $120.78 827,826 $400,000,000
September 1, 2017 - September 30, 2017212,128 $117.83 212,128 $375,000,000
Total1,039,954   1,039,954  

(1)On April 28, 2017, we announced that our boardThere were no repurchases of directors authorized a 12-month common stock repurchase programduring the quarter ended March 31, 2022. In connection with our debt covenant waivers, we agreed with our lenders not to engage in stock repurchases for upso long as our debt covenant waivers are in effect. In addition, in the event we engage in share repurchases, we will need to $500 million. The timingrepay the amounts deferred under our export credit facilities.
Period
Total number of shares purchased (1)
Average price paid per shareTotal number of shares purchased as part of publicly announced plans or programsApproximate dollar value of shares that may yet be purchased under the plans or programs
January 1, 2022 - January 31,2022— — — $— 
February 1, 2022 - February 28, 2022135,398 16.77 — $— 
March 1, 2022 - March 31, 2022— — — $— 
Total135,398 $16.77 
(1) Includes shares related to employee stock plans; primarily 106,965 performance shares issued that did not vest as the performance criteria was not met and numberwere repurchased at par value of $0.01 per share. Additionally, shares were withheld by us to be repurchased will depend on a varietycover withholding taxes due at the election of factors including price and market conditions. During the third quarter of 2017, we repurchased 1.0 million shares of our common stock for a total of $125.0 million in open market transactions that were recorded within Treasury stock in our consolidated balance sheet. Repurchases under the program may be made at management's discretion from time to time on the open market or through privately negotiated transactions.certain holders.


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Item 6. Exhibits
10.13.1 
Novation Agreement, dated as of July 24, 2017, between Hibisyeu Finance Ltd., Royal Caribbean Cruises Ltd., Citibank Europe Plc, UK Branch, Citicorp Trustee Company Limited, Citibank N.A., London Branch, HSBC France, Sumitomo Mitsui Banking Corporation Europe Limited, Paris BranchAmended and the banks and financial institutions as lender parties theretoRestated By-laws (incorporated by reference to Exhibit 10.13.1 to the Company's Current Report on Form 8-K filed on February 11, 2022).
4.1 
Indenture, dated March 29, 2021, among the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, principal paying agent, transfer agent, registrar and security agent (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 28, 2017)March 30, 2021).
10.210.1 
Hull L34 Credit Agreement, dated as of July 24, 2017, as novated, amended and restated on the Actual Delivery Date pursuant to a Novation Agreement, dated as of July 24, 2017, by and between Hoediscus Finance Ltd., Royal Caribbean Cruises Ltd., Citibank Europe Plc, UK Branch, Citicorp Trustee Company Limited, Citibank N.A., London Branch, HSBC France, Sumitomo Mitsui Banking CorporationSMBC Bank International plc, Citibank Europe Limited, Paris Branchplc, and the banks and financial institutions as lender parties thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 28, 2017).thereto*
10.331.1 
10.4
Icon 1 Hull No. S-1400 Credit Agreement, dated as of October 11, 2017, between Royal Caribbean Cruises Ltd., as the Borrower, the Lenders from time to time party thereto, KfW IPEX-Bank GmbH, as Hermes Agent, Facility Agent, Documentation Agent and Initial Mandated Lead Arranger and BNP Paribas Fortis SA/NV as Finnvera Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 17, 2017).

��
10.5
Icon 2 Hull No. S-1401 Credit Agreement, dated as of October 11, 2017, between Royal Caribbean Cruises Ltd., as the Borrower, the Lenders from time to time party thereto, KfW IPEX-Bank GmbH, as Hermes Agent, Facility Agent, Documentation Agent and Initial Mandated Lead Arranger and BNP Paribas Fortis SA/NV as Finnvera Agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 17, 2017).

10.6
Amendment to the Credit Agreement, dated as of October 12, 2017, among Royal Caribbean Cruises Ltd., the various financial institutions as are or shall become parties thereto and Nordea Bank AB (PUBL), New York branch, as administrative agent for the lender parties (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 17, 2017).

10.7
Form of 2008 Equity Incentive Plan Restricted Stock Unit Agreement - Executive Officer Grants (Non-Vesting Into Retirement)*

31.1
Certification of the Chairman and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
31.2
32.1

*Filed herewith
**Furnished herewith
Interactive Data File
101The following financial statements of Royal Caribbean Cruises Ltd. for the period ended September 30, 2017,March 31, 2022, formatted in XBRLiXBRL (Inline extensible Reporting Language) are filed herewith:
(i)the Consolidated Statements of Comprehensive Income (Loss) for the quarter ended March 31, 2022 and nine months ended September 30, 20172021;
(ii)    the Consolidated Balance Sheets at March 31, 2022 and 2016;December 31, 2021;

(ii)the Consolidated Balance Sheets at September 30, 2017 and December 31, 2016;
(iii)the Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017March 31, 2022 and 2016;2021; and
(iv)the Notes to the Consolidated Financial Statements, tagged in summary and detail.
104      Cover page interactive data file (the cover page XBRL tags are embedded within the Inline XBRL document).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ROYAL CARIBBEAN CRUISES LTD.
(Registrant)
/s/ JASON T. LIBERTYNAFTALI HOLTZ
Jason T. LibertyNaftali Holtz
Executive Vice President, Chief Financial Officer
November 7, 2017May 5, 2022(Principal Financial Officer and duly authorized signatory)



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