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 Quarterly 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, 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," "could," "driving," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "will," "would," "considering" 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 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 is 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 endedSeptember 30, 2021 , compared to the same periods in 2020; •a discussion of our business outlook; and •a discussion of our liquidity and capital resources, including our future capital and contractual commitments and potential funding sources. 33 -------------------------------------------------------------------------------- Critical Accounting Policies For a discussion of our critical accounting policies, refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report on Form 10-K for the year endedDecember 31, 2020 . Seasonality Historically, our revenues are seasonal based on demand for cruises. Demand has 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 focused on deployment to theCaribbean ,Asia andAustralia during that period. 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 air transportation to and from our ships; and •Onboard and other revenues, which consist primarily of revenues from the sale of goods and/or services onboard our ships not included in passenger ticket prices, cancellation fees, sales of vacation protection insurance, pre- and post-cruise tours and fees for operating certain port facilities. Onboard and other revenues also include revenues we receive from independent third party concessionaires that pay us a percentage 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 and third parties. 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 ticket revenues, 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, including the 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; •Fuel expenses, which include fuel and related delivery, storage and emission consumable costs and the financial impact of fuel swap agreements; 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, 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. 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 34 -------------------------------------------------------------------------------- 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 Loss per Share ("Adjusted EPS") represents Adjusted Net Loss attributable toRoyal Caribbean Cruises Ltd. (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 Loss attributable toRoyal Caribbean Cruises Ltd. represents net loss less net income attributable to noncontrolling interest 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 (i) gain or loss on the extinguishment of debt; (ii) the amortization of non-cash debt discount on our convertible notes; (iii) the estimated cash refund expected to be paid to Pullmantur guests and other expenses incurred as part of the Pullmantur reorganization; (iv) impairment and credit losses recognized as a result of the impact of COVID-19; (v) equity investment asset impairments; (vi) net insurance recoveries related to the collapse of the drydock structure at theGrand Bahama Shipyard involving Oasis of the Seas; (vii) restructuring charges incurred in relation to the reduction in ourU.S. workforce and other initiative expenses; (viii) the change in the fair value in theSilversea Cruises contingent consideration and the amortization of theSilversea Cruises intangible assets resulting from our acquisition of a 66.7% interest inSilversea Cruises in 2018; (ix) the noncontrolling interest adjustment to exclude the impact of the contractual accretion requirements associated with the put option held byHeritage Cruise Holding Ltd.'s (previously known asSilversea Cruises Group Ltd. ) noncontrolling interest inSilversea Cruises , which noncontrolling interest we acquired onJuly 9, 2020 ; (x) the net gain recognized in the first quarter of 2021 in relation to the sale of the Azamara brand; and (xi) currency translation losses recognized during the second quarter of 2020, in connection with the ships classified as assets held-for-sale that were previously chartered to Pullmantur. Available Passenger Cruise Days ("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 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. Occupancy ("Load Factor"), in accordance with cruise vacation industry practice, 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. Although discussed in previous periods, we do not disclose or reconcile in this report our Gross Yields, Net Yields, Gross Cruise Costs, Net Cruise Costs and Net Cruise Costs Excluding Fuel, as defined in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . Historically, we have utilized these financial metrics to measure relevant rate comparisons to other periods. However, our 2020 and 2021 reduction in capacity and revenues and the shift in the nature of our running costs, due to the impact of the COVID-19 pandemic on our operations, do not allow for a meaningful analysis and comparison of these metrics and as such these metrics have been excluded from this report. Recent Developments: COVID-19 Return toHealthy Sailing Our voluntary suspension of our global cruise operations commenced inMarch 2020 in response to the COVID-19 outbreak. We have restarted our global cruise operations in a phased manner, following the requirements and recommendations of regulatory agencies, with reduced guest occupancy, modified itineraries and enhanced health, safety and vaccination protocols. By the end ofSeptember 2021 , we operated 38 of our Global and Partner Brand ships, representing 63% of our fleet, and sailed over 500,000 passengers since we resumed operations. We expect to operate approximately 80% of our fleet and anticipate serving over 1 million passengers byDecember 31, 2021 . Uncertainties remain as to the specifics, timing and costs of administering and implementing our health and safety measures, some of which may be significant. Based on our assessment of these requirements and recommendations, the status of COVID-19 infection and/or vaccination rates in theU.S. or globally or for other reasons, we may determine it necessary to cancel or modify certain of our Global Brands' cruise sailings. We believe the impact to our global bookings resulting from COVID-19 will continue to have a material negative impact on our results of operations and liquidity, which may be prolonged beyond containment of the disease and its variants. 35 -------------------------------------------------------------------------------- Continued Fleet Ramp-Up We anticipate load factors on core itineraries to increase to 65-70% during the fourth quarter of 2021. We anticipate 6.9 million APCDs for the fourth quarter of 2021 with overall load factors of 60-65% and expect that all ships on core itineraries in the fourth quarter of 2021 will be cash flow accretive, even when including start-up costs. Core itineraries exclude sailings during our early resumption of operations of up to four weeks and also exclude specialized itineraries that were implemented during the COVID-19 period (e.g.Singapore ,Cyprus ). By the end of the year, we expect that 50 of our 61 Global Brand ships will have returned to service, representing almost 100% of core itinerary capacity and approximately 80% of worldwide capacity. Our remaining Global Brand ships are expected to return to service by the spring of 2022 and we expect to return to historical load factors in the third quarter of 2022. MainlandChina is expected to resume in the spring and we have assumed lower load factors as this important long term market ramps-up. OnOctober 25, 2021 , theU.S. Centers for Disease Control and Prevention ("CDC") issued a temporary extension and modification of the Conditional Sail Order ("Conditional Order") effectiveNovember 1, 2021 throughJanuary 15, 2022 , and expressed its intention to transition to a voluntary program thereafter, in coordination with interested cruise ship operators. We plan to continue to operate under the Conditional Order where required, and to voluntarily comply with the Conditional Order for ships home ported or calling inFlorida ports. Also onOctober 25, 2021 , theU.S. President issued a proclamation effective onNovember 8, 2021 that rescinds all previous proclamations suspending entry into theU.S. of non-citizen non-immigrants. We expect these recent developments to support our return to service and anticipated load factors. Update on Bookings Booking volumes have improved significantly since the slowdown this summer due to the Delta variant (the "Delta Dip"). We attracted more bookings in the third quarter compared to the second quarter. September was particularly strong, with new bookings for 2022 sailings more than 60% higher than the monthly average during the second quarter of 2021. Sailings for the full year 2022 are booked within historical ranges and at higher prices than 2019. Sailings further out are experiencing more normalized booking trends than sailings closer in. As such, load factors for sailings in the first quarter of 2022 are lower than historical levels; are improving but still below average in the second quarter of 2022; and are solidly within historical levels in the second half of 2022. Pricing remains strong throughout 2022, with or without future cruise credits ("FCC"). As ofSeptember 30, 2021 , we had$2.8 billion in customer deposits, which represents an improvement by$0.4 billion from theJune 30, 2021 balance despite the$300 million of revenue that was recognized during the quarter. Approximately 35% of the customer deposit balance is related to FCCs. This has dropped from 40% in the prior quarter, indicating net new demand. Customer deposits for cruises taking place in the second quarter of 2022 and onward are higher than customer deposits on the same three brands for cruises taking place in the same time horizon as ofSeptember 30, 2019 . Update on Recent Liquidity Actions and Ongoing Uses of Cash As ofSeptember 30, 2021 , we had liquidity of$4.1 billion , including$0.1 billion of undrawn revolving credit facility capacity,$3.3 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 toAugust 12, 2022 . Our revolving credit facilities were mostly utilized through a combination of amounts drawn and letters of credit issued under the facilities as ofSeptember 30, 2021 . We continue to prioritize and bolster liquidity while taking steps to improve our balance sheet and reduce its interest costs to be well positioned for recovery. Reduced Operating Expenses We took significant actions in early 2020 to reduce operating expenses during the suspension of our global cruise operations. In particular, we: • significantly reduced ship operating expenses, including crew payroll, food, fuel, insurance and port charges; • further reduced operating expenses as the Company's ships are currently transitioning into various levels of layup with several ships in the fleet transitioning into cold layup; • significantly reduced marketing and selling expenses; • reduced and furloughed our workforce, with approximately 23% of our US shoreside employee base being impacted in 2020; and • suspended travel for shoreside employees and instituted a hiring freeze across the organization. 36 -------------------------------------------------------------------------------- During our ramp up of operations, we have incurred and will continue to incur incremental spend related to bringing ships back to operating status, returning crew members to ships and implementing enhanced health and safety protocols. We also collected and will continue to collect deposits related to those sailings and for future cruises. The decision to bring ships back into service considers many variables, including deployment opportunities, commercial potential, cost of operations and cash flow. Capital Expenditures COVID-19 has impacted shipyard operations, which have and may continue to result in delays of our previously contracted ship deliveries. As ofSeptember 30, 2021 , we anticipate that overall full year capital expenditures, based on our existing ships on order, will be approximately$2.1 billion for 2021. This amount does not include any ships on order by our Partner Brands. We took delivery of Odyssey of the Seas during the first quarter of 2021 and expect delivery ofSilver Dawn during the fourth quarter of 2021. For 2022, we have two ship deliveries scheduled: Wonder of the Seas and Celebrity Beyond. Excluding newbuild deliveries, our capital expenditures for 2022 will depend on our schedule to return to service. Debt Maturities, New Financings and Other Liquidity Actions During the nine months endedSeptember 30, 2021 , the Company continued to take actions to further improve its liquidity position and manage cash flow. In particular, we: • extended the maturity date or termination date, as applicable, of certain of the advances and commitments held by consenting lenders under our$1.0 billion unsecured loan dueApril 2022 and our$1.55 billion unsecured revolving credit facility dueOctober 2022 , each by 18 months toOctober 2023 andApril 2024 , respectively; • extended the period during which we may draw upon our binding commitment for a$700.0 million 364-day term loan facility by one year, which is now available for draw at any time prior toAugust 12, 2022 ; • issued$1.5 billion of 5.5% senior unsecured notes due in 2028 for net proceeds of approximately$1.48 billion ; •issued$650.0 million of 4.25% senior unsecured notes due in 2026 for net proceeds of approximately$640.6 million , which were used to fully repay the Silversea Notes, in the amount of$619.8 million , and to pay the related call premiums, accrued interest and fees; •issued$1.0 billion of 5.50% senior notes due in 2026 for net proceeds of approximately$986.0 million which were used to replenish our capital as a result of the redemption of a portion of the 11.50% senior secured notes due 2025 in the amount of$928.0 million , and to pay the related call premiums and accrued interest; •amended the credit agreements for the unsecured financings of our first and second Evolution-class ships, increasing their maximum loan amounts by €175.6 million in the aggregate to finance ship design modifications that incorporate innovative sustainability features and additional premium cabins; •issued 16.9 million shares of common stock for approximately$1.5 billion ; •amended$4.9 billion of our non-export-credit facilities and certain of our credit card processing agreements to extend the waiver of the financial covenants through and including the third quarter of 2022 and to implement modified covenants for the period starting fourth quarter of 2022 and extending through and including the fourth quarter of 2023; and • amended$6.3 billion of our export-credit facilities to extend the waiver of the financial covenants through and including the fourth quarter of 2022 and defer$1.15 billion of principal payments due betweenApril 2021 andApril 2022 . As of the date of this report, there are no scheduled debt maturities for the remainder of 2021, and scheduled debt maturities of$2.2 billion for 2022. We continue to identify and evaluate further actions to enhance our liquidity and support our recovery. These include and are not limited to further reductions in capital expenditures, operating expenses and administrative costs and additional financings and refinancings. Results of Operations 37
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Summary
Net Loss attributable toRoyal Caribbean Cruises Ltd. and Adjusted Net Loss attributable toRoyal Caribbean Cruises Ltd. for the third quarter of 2021 were$(1.4) billion and$(1.2) billion , or$(5.59) and$(4.91) per share on a diluted basis, respectively, reflecting the ramp up of our return to operations, and increased sales and marketing expenses during the quarter, compared to Net Loss attributable toRoyal Caribbean Cruises Ltd. and Adjusted Net Loss attributableRoyal Caribbean Cruises Ltd. of$(1.3) billion and$(1.2) billion , or$(6.29) and$(5.62) per share on a diluted basis, respectively, for the third quarter of 2020. Net Loss attributable toRoyal Caribbean Cruises Ltd. and Adjusted Net Loss attributable toRoyal Caribbean Cruises Ltd. for the nine months endedSeptember 30, 2021 were$(3.9) billion and$(3.6) billion , or$(15.56) and$(14.41) per share on a diluted basis, respectively, compared to Net Loss attributable toRoyal Caribbean Cruises Ltd. and Adjusted Net Loss attributableRoyal Caribbean Cruises Ltd. of$(4.4) billion and$(2.8) billion , or$(21.01) and$(13.26) per share on a diluted basis, respectively, for the nine months endedSeptember 30, 2020 . Significant items for the quarter and nine months endedSeptember 30, 2021 include: •Total revenues, excluding the effect of changes in foreign currency exchange rates, increased$487.0 million and decreased$1,633.5 million , respectively, for the quarter and nine months endedSeptember 30, 2021 , as compared to the same periods in 2020. The increase in total revenues in the third quarter of 2021 reflects the ramp up in our return to operations compared to the third quarter of 2020, during which we continued to observe our global cruise suspension. For the nine months endedSeptember 30, 2021 , the decrease in total revenues reflects a 41.1% capacity decrease compared to the same period in 2020 reflecting the lay-up of the majority of our fleet during the first half of 2021, compared to the operation of the majority of our fleet up through our global suspension in March of 2020. •The effect of changes in foreign currency exchange rates related to our passenger ticket and onboard and other revenue transactions, denominated in currencies other thanthe United States dollar, resulted in an increase in total revenues of$3.6 million and$8.7 million for the quarter and nine months endedSeptember 30, 2021 , respectively, compared to the same periods in 2020. •Total cruise operating expenses, excluding the effect of changes in foreign currency exchange rates, increased$503.3 million and decreased$987.6 million for the quarter and nine months endedSeptember 30, 2021 , respectively, as compared to the same periods in 2020. The increase in total cruise operating expenses in the third quarter of 2021 reflects the ramp up of our operations compared to our suspension of cruise operations in 2020. The decrease during the nine months endedSeptember 30, 2021 compared to the same period in 2020 reflects the capacity decrease mentioned above. •The effect of changes in foreign currency exchange rates related to our cruise operating expenses, denominated in currencies other than theU.S. dollar, resulted in an increase in total operating expenses of$1.8 million and$9.7 million , respectively, for the quarter and nine months endedSeptember 30, 2021 , compared to the same periods in 2020. •Our consolidated results of operations includeSilversea Cruises' results of operations on a three-month reporting lag for April, May andJune 2021 , for the quarter endedSeptember 30, 2021 , and fromOctober 1, 2020 throughJune 30, 2021 for the nine months endedSeptember 30, 2021 . •InMarch 2021 , we extended the maturity date or termination date of certain of the advances and commitments, as applicable, held by consenting lenders under our$1.0 billion unsecured loan dueApril 2022 and our$1.55 billion unsecured revolving credit facility dueOctober 2022 , by 18 months toOctober 2023 andApril 2024 , respectively. •InMarch 2021 , we extended our binding commitment for a$700.0 million 364-day term loan facility by one year which is currently available for draw at any time prior toAugust 12, 2022 . •InMarch 2021 , we issued$1.5 billion of senior unsecured notes due in 2028. Interest on the senior notes accrues at 5.5% and is payable semi-annually. 38 -------------------------------------------------------------------------------- •InMarch 2021 , we issued 16.9 million shares of common stock, par value$0.01 per share, at an average price of$91.00 per share for net proceeds of$1.5 billion . •InMarch 2021 , we amended$4.9 million of our non-export-credit facilities and certain of our credit card processing agreements to extend the waiver of the financial covenants through and including the third quarter of 2022. •InMarch 2021 , we amended$6.3 million of our export-credit facilities to extend the waiver of the financial covenants through and including the third quarter of 2022, and subsequently in the third quarter of 2021, we entered into a letter agreement to extend the waiver period to the end of the fourth quarter of 2022; including the deferral of up to$1.15 billion of principal payments due betweenApril 2021 andApril 2022 . •InMarch 2021 , we entered into amendments to our drawn and undrawn ECA facilities to provide for the issuance of guarantees in satisfaction of existing obligations under these facilities. •InMarch 2021 , we took delivery of Odyssey of the Seas. •InJune 2021 , we issued$650.0 million of senior unsecured notes due in 2026 for net proceeds of approximately$640.6 million , which were used to fully repay the Silversea Notes in the amount of$619.8 million and to pay the related call premiums, accrued interest and fees. Interests on the Silversea Notes accrued at 7.25% per annum and was payable semi-annually. •InJune 2021 , Hapag-Lloyd took delivery of Hanseatic Spirit. •InAugust 2021 , we issued$1.0 billion of 5.50% senior unsecured notes due in 2026 for net proceeds of approximately$986.0 million , which we used to replenish capital as a result of the redemption of a portion of the 11.50% senior secured notes due 2025, in the amount of$928.0 million plus call premiums, accrued interest, and fees. 39 --------------------------------------------------------------------------------
Results of operations for the quarter and nine months ended
compared to the same periods in 2020 are presented in the following tables (in thousands, except data per share):
Quarter Ended September 30,
2021 2020
% of Total % of Total
Revenues Revenues
Passenger ticket revenues $ 280,153 61.3 % $ 3,204 (9.5) %
Onboard and other revenues 176,805 38.7 % (36,892) 109.5 %
Total revenues 456,958 100.0 % (33,688) 100.0 %
Cruise operating expenses:
Commissions, transportation and other 64,780 14.2 % (3,321) 9.9 %
Onboard and other 42,703 9.3 % 6,036 (17.9) %
Payroll and related 265,974 58.2 % 119,213 (353.9) %
Food 48,950 10.7 % 5,640 (16.7) %
Fuel 118,127 25.9 % 53,815 (159.7) %
Other operating 273,157 59.8 % 127,226 (377.7) %
Total cruise operating expenses 813,691 178.1 % 308,609 (916.1) %
Marketing, selling and administrative expenses 323,422 70.8 % 246,779 (732.5) %
Depreciation and amortization expenses 325,907 71.3 % 317,139 (941.4) %
Impairment and credit losses (238) (0.1) % 89,899 (266.9) %
Operating Loss (1,005,824) (220.1) % (996,114) 2,956.9 %
Other (expense) income:
Interest income 3,786 0.8 % 5,017 (14.9) %
Interest expense, net of interest capitalized (430,661) (94.2) % (259,349) 769.9 %
Equity investment loss (29,085) (6.4) % (78,013) 231.6 %
Other income (expense) 37,230 8.1 % (10,853) 32.2 %
(418,730) (91.6) % (343,198) 1,018.8 %
Net Loss (1,424,554) (311.7) % (1,339,312) 3,975.6 %
Less: Net Income attributable to noncontrolling
interest - - % 7,444 (22.1) %
Net loss attributable to
(311.7) %$ (1,346,756) 3,997.7 % Diluted Loss per Share$ (5.59) $ (6.29) 40
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Nine Months Ended September 30,
2021 2020
% of Total % of Total
Revenues Revenues
Passenger ticket revenues $ 323,782 58.9 % $ 1,487,077 68.4 %
Onboard and other revenues 226,104 41.1 % 687,590 31.6 %
Total revenues 549,886 100.0 % 2,174,667 100.0 %
Cruise operating expenses:
Commissions, transportation and other 72,917 13.3 % 342,632 15.8 %
Onboard and other 55,782 10.1 % 151,333 7.0 %
Payroll and related 530,250 96.4 % 693,480 31.9 %
Food 74,618 13.6 % 154,439 7.1 %
Fuel 219,058 39.8 % 327,275 15.0 %
Other operating 569,383 103.5 % 830,689 38.2 %
Total cruise operating expenses 1,522,008 276.8 % 2,499,848 115.0 %
Marketing, selling and administrative expenses 867,021 157.7 % 944,087 43.4 %
Depreciation and amortization expenses 959,512 174.5 % 961,226 44.2 %
Impairment and credit losses 39,934 7.3 % 1,354,514 62.3 %
Operating Loss (2,838,589) (516.2) % (3,585,008) (164.9) %
Other income (expense):
Interest income 13,317 2.4 % 15,757 0.7 %
Interest expense, net of interest capitalized (1,007,986) (183.3) % (571,149) (26.3) %
Equity investment loss (137,044) (24.9) % (140,258) (6.4) %
Other income (expense) 66,771 12.1 % (127,537) (5.9) %
(1,064,942) (193.7) % (823,187) (37.9) %
Net Loss $ (3,903,531) (709.9) % $ (4,408,195) (202.7) %
Less: Net Income attributable to noncontrolling
interest - - % 22,332 1.0 %
Net Loss attributable to Royal Caribbean Cruises
Ltd. $ (3,903,531) (709.9) % $ (4,430,527) (203.7) %
Diluted Loss per Share $ (15.56) $ (21.01)
41
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Adjusted net loss attributable to
Quarter Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net loss attributable to
Adjusted net loss attributable to
(1,249,701) (1,204,350) (3,615,102) (2,797,335) Net Adjustments to Net Loss attributable to Royal Caribbean Cruises Ltd.$ 174,853 $ 142,406 $ 288,429$ 1,633,192 Adjustments to Net Loss attributable toRoyal Caribbean Cruises Ltd. : Loss on extinguishment of debt (1)$ 141,915 $ 774 $ 138,759 41,109 Convertible debt amortization of debt discount (2) 26,073 17,750 78,219 21,934 Pullmantur reorganization settlement (3) 5,242 - 10,242 21,637 Impairment and credit losses (4) (237) 89,899 39,934 1,354,514 Equity investment impairments (5) - - 26,042 39,735
Incident of the Oasis of the Seas,
- - (6,584) (1,938)
Restructuring and other initiative expenses (7)
74 5,720 1,721 50,745
Change in the fair value of contingent consideration and amortization of
1,623 2,548 4,869 (35,919) Noncontrolling interest adjustment (9) - 25,715 - 72,331 Net gain related to the sale of the Azamara brand (10) 163 - (4,773) - Currency translation adjustment losses (11) - - - 69,044 Net Adjustments to Net Loss attributable to Royal Caribbean Cruises Ltd.$ 174,853 $ 142,406 $ 288,429$ 1,633,192 Basic: Loss per Share $ (5.59)$ (6.29) $ (15.56)$ (21.01) Adjusted Loss per Share $ (4.91)$ (5.62) $ (14.41)$ (13.26) Diluted: Loss per Share $ (5.59)$ (6.29) $ (15.56)$ (21.01) Adjusted Loss per Share $ (4.91)$ (5.62) $ (14.41)$ (13.26) Weighted-Average Shares Outstanding: Basic 254,713 214,163 250,808 210,894 Diluted 254,713 214,163 250,808 210,894 (1)For the three months endedSeptember 30, 2021 , represents the net loss on the partial repayment of the 11.50% senior secured notes due 2025 in the amount of$928.0 million . For the nine months endedSeptember 30, 2021 , represents the net loss on the partial repayment of the 11.50% senior secured notes due 2025, the second quarter 2021 net gain on the full repayment of the Silversea Notes and the first quarter 2021 loss on the partial repayment of the$1.55 billion unsecured revolving credit facility. For the nine months endedSeptember 30, 2020 , represents a loss on the extinguishment of the$2.2 billion Senior Secured Term Loan. (2)Represents the amortization of non-cash debt discount on our convertible notes. (3)Represents estimated cash refunds expected to be paid to Pullmantur guests and other expenses incurred as part of the Pullmantur reorganization. (4)In 2021 and 2020, represents asset impairment and credit losses as a result of the impact of COVID-19. In 2021, amounts are net of the recovery of credit losses recognized in 2020. 42 -------------------------------------------------------------------------------- (5)Represent equity investment asset impairments, primarily for our investments inTUI Cruises GmbH in 2021 andGrand Bahama Shipyard in 2020, as a result of the impact of COVID-19. (6)Amounts include net insurance recoveries related to the collapse of the drydock structure at theGrand Bahama Shipyard involving Oasis of the Seas. (7)Represents primarily restructuring charges incurred in relation to the reduction in ourU.S. workforce and other initiatives expenses. Refer to Note 13. Restructuring Charges to our consolidated financial statements under Item 1. Financial Statements for further information on the restructuring activities. (8)Related to theSilversea Cruises acquisition. (9)Adjustment made to exclude the impact of the contractual accretion requirements associated with the put option held byHeritage Cruise Holding Ltd.'s (previously known asSilversea Cruises Group Ltd. ) noncontrolling interest, which noncontrolling interest we acquired onJuly 9, 2020 . (10)Represents the net gain recognized in the first quarter of 2021 in relation to the sale of the Azamara brand. (11)Represents currency translation losses recognized during the second quarter of 2020, in connection with the ships classified as assets held-for-sale that were previously chartered to Pullmantur.
The selected statistical information is presented in the following table (1):
Quarter Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Passengers Carried 251,744 1,230 327,226 1,261,075
Passenger Cruise Days 1,496,609 5,424 1,771,087 8,653,799
APCD 4,112,256 5,424 4,967,078 8,437,003
Occupancy 36.4 % 100.0 % 35.7 % 102.6 %
(1)Due to the three-month reporting lag, we include Silversea Cruises' results
of operations from April 1 through June 30 for the quarters ended September 30,
2021 and 2020 and from October 1 through June 30 for the nine months ended
September 30, 2021 and 2020. Refer to Note 1. General to our consolidated
financial statements for more information on the three-month reporting lag.
43
-------------------------------------------------------------------------------- 2021 Outlook The Company's operations are still impacted by the magnitude, duration, speed and geographic reach of COVID-19 and its related variants. As a consequence, we cannot reasonably estimate the impact of COVID-19 on our business, financial condition or near or longer-term financial or operational results. 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 2021. We expect to incur a net loss on both aU.S. GAAP and adjusted basis for our fourth quarter and our 2021 fiscal year, the extent of which will depend on many factors including the timing and extent of our return to service. See Recent Developments: COVID-19 - Continued Fleet Ramp-Up and Update on Bookings for further indications on our resumption of operations and the booking environment. 44
-------------------------------------------------------------------------------- Quarter EndedSeptember 30, 2021 Compared to Quarter EndedSeptember 30, 2020 In this section, references to 2021 refer to the quarter endedSeptember 30, 2021 and references to 2020 refer to the quarter endedSeptember 30, 2020 . Revenues Total revenues for 2021 increased$490.6 million , or 1,456.4%, to$457.0 million from$(33.7) million in 2020. Passenger ticket revenues comprised 61.3% of our 2021 total revenues. Passenger ticket revenues for 2021 increased by$276.9 million to$280.2 million from$3.2 million in 2020. The increase in Passenger ticket revenues in the third quarter of 2021 reflects the expansion of our global return to service compared to our continued suspension of cruise operations in the third quarter of 2020. Favorable movements in foreign currency exchange rates related to our revenue transactions denominated in currencies other thanthe United States dollar increased Passenger ticket revenues by$3.0 million . The remaining 38.7% of 2021 total revenues was comprised of Onboard and other revenues, which increased$213.7 million , or 579.3%, to$176.8 million in 2021 from$(36.9) million in 2020. The increase in Onboard and other revenues was due to the ramp up of our return to service noted above. Onboard and other revenues for the quarter endedSeptember 30, 2020 includes a charge of$67.9 million to correct cancellation revenue, for certain immaterial bookings, that was incorrectly recognized during the six months endedJune 30, 2020 . The charge is offsetting cancellation and other revenue recognized during the quarter endedSeptember 30, 2020 and is considered immaterial to our financial statements. Onboard and other revenues included concession revenues of$22.9 million in 2021 and$0.4 million in 2020. Cruise Operating Expenses Total Cruise operating expenses for 2021 increased$505.1 million , or 163.7%, to$813.7 million from$308.6 million in 2020. The increase was primarily due to: •a$145.9 million increase in Other operating expenses primarily due to increased hotel and vessel maintenance and consumables; •a$146.8 million increase in Payroll and related; •a$68.1 million increase in Commissions, transportation and other expenses; •a$64.3 million increase in Fuel expenses; •a$43.3 million increase in Food expenses; and •a$36.7 million increase in Onboard and other expenses. Marketing, Selling and Administrative Expenses Marketing, selling and administrative expenses for 2021 increased$76.6 million , or 31.1%, to$323.4 million from$246.8 million in 2020. The increase in 2021 was primarily due to increases in marketing and sales activities related to our return to service. Depreciation and Amortization Expenses Depreciation and amortization expenses for 2021 increased by$8.8 million , or 2.8%, to$325.9 million from$317.1 million in 2020 primarily due to the addition of Odyssey of the Seas to our fleet during the first quarter of 2021. Impairment and Credit Losses Impairment and credit losses for 2021 decreased by$90.1 million compared to impairment losses of$83.9 million recognized during the quarter endedSeptember 30, 2020 due to the impact of COVID-19 on our operations and cash flows primarily related to our Property and equipment, net. Additionally, credit losses of$6.0 million were recognized during the third quarter of 2020 related to our notes receivable. 45
-------------------------------------------------------------------------------- Other Income (Expense) Interest expense, net of interest capitalized for 2021 increased$171.3 million , or 66.1%, to$430.7 million from$259.3 million in 2020. The increase was primarily due to a debt extinguishment loss of$141.9 million recognized in the third quarter of 2021 associated with the partial repayment of the 11.50% senior secured notes due 2025. Refer to Note 7. Debt to our consolidated financial statements for further information. Additionally, a higher average cost of debt compared to 2020 contributed to the 2021 increase in Interest expense, net of interest capitalized. Equity investment loss in 2021 decreased by$48.9 million , to$29.1 million from$78.0 million in 2020 primarily due to a reduction in losses forTUI Cruises , one of our equity investments, during the third quarter of 2021 compared to 2020. Other income (expense) was$37.2 million in 2021, compared to$(10.9) million in 2020. The$48.1 million increase in income was primarily due to a$22.0 million tax benefit recognized in 2021, a$12.4 million decrease in expense compared to 2020 related to the change in fair value of fuel swap derivative instruments with no hedge accounting, and a decrease of$8.0 million in foreign exchange losses from the remeasurement of monetary assets and liabilities denominated in foreign currency compared to 2020. Other Comprehensive (Loss) Income Other comprehensive loss in 2021 was$11.9 million compared to Other comprehensive income of$82.1 million in 2020. The decrease in income of$94.0 million was primarily due to our recognition of a Loss on cash flow derivative hedges of$13.3 million in 2021 compared to a Gain on cash flow derivative hedges of$66.1 million in 2020, primarily due to a decrease in the fair value of our foreign currency forwards in 2021 compared to an increase in 2020. Nine Months EndedSeptember 30, 2021 Compared to Nine Months EndedSeptember 30, 2020 In this section, references to 2021 refer to the nine months endedSeptember 30, 2021 and references to 2020 refer to the nine months endedSeptember 30, 2020 . Revenues Total revenues for 2021 decreased$1.6 billion , or 74.7%, to$549.9 million from$2.2 billion in 2020. Passenger ticket revenues comprised 58.9% of our 2021 total revenues. Passenger ticket revenues for 2021 decreased by$1.2 billion , or 78.2%, to$0.3 billion in 2021 from$1.5 billion in 2020. The decrease in Passenger ticket revenues was due to a 41.1% decrease in capacity driven by the lay-up of the majority of our fleet during the first half of 2021 compared to the operation of the majority of our fleet up through our global suspension in March of 2020. Our results of operations for the nine months endedSeptember 30, 2020 includeSilversea Cruises' fourth quarter 2019 and first and second quarter 2020 sailings, reported on a one quarter lag. Favorable movements in foreign currency exchange rates related to our revenue transactions denominated in currencies other thanthe United States dollar increased Passenger ticket revenues by$4.2 million The remaining 41.1% of 2021 total revenues was comprised of Onboard and other revenues, which decreased$461.5 million , or 67.1%, to$226.1 million in 2021 from$687.6 million in 2020. The decrease in Onboard and other revenues was primarily due to the decrease in capacity noted above and offset by the favorable effect of changes in foreign currency exchange rates related to our onboard and other revenues denominated in currencies other thanthe United States dollar of$4.5 million . Onboard and other revenues for the nine months endedSeptember 30, 2020 also includes a charge of$67.9 million recorded in the quarter endedSeptember 30, 2020 to correct cancellation revenue, for certain immaterial bookings, which was incorrectly recognized during the six months endedJune 30, 2020 . The charge is considered immaterial to our financial statements. Onboard and other revenues included concession revenue of$25.3 million in 2021 and$75.1 million in 2020. Cruise Operating Expenses Total cruise operating expenses for 2021 decreased$1.0 billion , or 39.1%, to$1.5 billion from$2.5 billion in 2020. The decrease was primarily due to: •a$269.7 million decrease in Commissions, transportation and other expenses; •a$261.3 million decrease in Other operating expenses; •a$163.2 million decrease in Payroll and related expense; 46 -------------------------------------------------------------------------------- •a$108.2 million decrease in Fuel expenses; •a$95.6 million decrease in Onboard and other expenses; •a$79.8 million decrease in Food expenses; and •the unfavorable effect of changes in foreign currency exchange rates related to our expense transactions denominated in currencies other thanthe United States dollar of$9.7 million . Marketing, Selling and Administrative Expenses Marketing, selling and administrative expenses decreased$77.1 million , or 8.2%, to$867.0 million from$944.1 million in 2020. The decrease was due to the reduction and deferral of general and administrative and global sales and marketing activities primarily during the first half of 2021 due to the impact of COVID-19 on our operations and a reduction in payroll and benefits as a result of ourApril 2020 reduction in workforce. Depreciation and Amortization Expenses Depreciation and amortization expenses for 2021 remained in line with 2020 with a decrease of$1.7 million , or 0.2%. Impairment and Credit Losses Impairment and credit losses for 2021 decreased by$1.3 billion compared to charges recorded during the nine months endedSeptember 30, 2020 due to the impact of COVID-19 on our operations and cash flows, which impacted our long-lived assets related to goodwill, intangibles, vessels and operating lease right-of-use asset, and resulted in credit losses. Other Income (Expense) Interest expense, net of interest capitalized for 2021 increased$436.8 million , or 76.5%, to$1.0 billion from$571.1 million in 2020. The increase was primarily due to a debt extinguishment loss of$141.9 million recognized in the third quarter of 2021 associated with the partial repayment of the 11.50% senior secured notes due 2025. Refer to Note 7. Debt to our consolidated financial statements for further information. Additionally, a higher average debt level compared to 2020 related to new debt issuances in 2020 and 2021 coupled with a higher average cost of debt contributed to the 2021 increase in Interest expense, net of interest capitalized. Equity investment loss decreased$3.2 million , or 2.3%, to a loss of$137.0 million in 2021 from a loss of$140.3 million in 2020 mainly as a result of a 2021$26.0 million impairment charge of our investee's long-lived assets, compared to a$39.7 million impairment charge of equity investments in 2020 primarily for our investment inGrand Bahama Shipyard . Other income (expense) was$66.8 million in 2021, compared to$(127.5) million in 2020. The$194.3 million change was primarily due to a$127.4 million year-over-year increase in the fair value of fuel swaps with no hedge accounting. Additionally, we recorded a deferred currency translation adjustment loss of$69.0 million in the quarter endedJune 30, 2020 related to the 2016 sale of our majority interest in the Pullmantur brand. We recognized the deferred currency translation loss as we no longer have significant involvement in Pullmantur's operations. InJune 2020 , we terminated the agreements chartering our ships to the Pullmantur brand as a result of its reorganization filing under Spanish law. We also recognized$20.0 million of expense during the second quarter of 2020, approximating the estimated total cash refund expected to be paid to Pullmantur guests and other expenses incurred as part of a settlement agreement with our joint venture partner as part of the brand's reorganization. The increases in Other income were partially offset by income reported in 2020 of$45.1 million for the change in contingent consideration payable to Heritage in 2020, which did not recur in 2021. Other Comprehensive Income (Loss) Other comprehensive income in 2021 was$63.5 million compared to Other comprehensive loss of$71.4 million in 2020. The change of$134.9 million , or 189.0%, was primarily due to a Gain on cash flow derivative hedges in 2021 of$48.5 million , compared to a Loss on cash flow derivative hedges of$110.1 million in 2020 primarily due to an increase in the fair value of our fuel swaps in 2021 compared to a decrease in 2020. 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 47 -------------------------------------------------------------------------------- Net cash used in operating activities decreased$1.2 billion to$1.7 billion for the nine months endedSeptember 30, 2021 compared to Net cash used in operating activities of$2.9 billion for the same period in 2020. Our gradual resumption of operations in 2021 and our announcement for the resumption of future operations has generated increased guest ticket collections, resulting in an increase of customer deposits of$1.0 billion during the nine months endedSeptember 30, 2021 , compared to a decrease of customer deposits of$(1.6) billion during the nine months endedSeptember 30, 2020 , while our global operations were suspended. The increase in customer deposits was offset by increased service expenses for certain ships in our fleet during the nine months endedSeptember 30, 2021 , reflecting our resumption of cruise operations globally and preparations for our announced sailings in the near term. Net cash used in investing activities decreased$0.2 billion to$1.6 billion for the nine months endedSeptember 30, 2021 , compared to$1.8 billion for the same period in 2020. The decrease was primarily attributable to an increase in proceeds from the sale of property and equipment and other assets of$175.4 million during the nine months endedSeptember 30, 2021 compared to 2020 and a decrease in cash paid on settlement of derivative financial instruments of$85.0 million , partially offset by an increase in capital expenditures of$81.0 million during the nine months endedSeptember 30, 2021 compared to the same period in 2020. Net cash provided by financing activities were$2.8 billion for the nine months endedSeptember 30, 2021 , compared to$7.5 billion for the same period in 2020. The decrease of$4.6 billion was primarily attributable to higher debt proceeds and issuance of commercial paper notes of$15.3 billion , during the nine months endedSeptember 30, 2020 , compared to the same period in 2021, offset by higher debt and commercial paper repayments of$8.6 billion during the nine months endedSeptember 30, 2020 , compared to the same period in 2021. Additionally during the nine months endedSeptember 30, 2021 , we received$1.6 billion in proceeds from common stock issuances compared to none during the same period in 2020. 48 -------------------------------------------------------------------------------- Future Capital Commitments Capital Expenditures COVID-19 has impacted shipyard operations, which has resulted and may continue to result in delays of our previously contracted ship deliveries. As ofSeptember 30, 2021 , the dates that the ships on order by our Global and Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows: Approximate Ship Shipyard Expected Delivery Date BerthsRoyal Caribbean International - Oasis-class: Wonder of the Seas Chantiers de l'Atlantique 1st Quarter 2022 5,700 Unnamed Chantiers de l'Atlantique 2nd Quarter 2024 5,700
Icon class:
Icon of the Seas Meyer Turku Oy 3rd Quarter 2023 5,600 Unnamed Meyer Turku Oy 2nd Quarter 2025 5,600 Unnamed Meyer Turku Oy 2nd Quarter 2026 5,600Celebrity Cruises - Edge-class: Celebrity Beyond Chantiers de l'Atlantique 2nd Quarter 2022 3,250 Unnamed Chantiers de l'Atlantique 4th Quarter 2023 3,250 Silversea Cruises Muse-Class: Silver Dawn Fincantieri 4th Quarter 2021 600 Evolution Class: Unnamed Meyer Werft 2nd Quarter 2023 730 Unnamed Meyer Werft 2nd Quarter 2024 730TUI Cruises (50% joint venture) Mein Schiff 7 Meyer Turku Oy 2nd Quarter 2024 2,900 Unnamed Fincantieri 4th Quarter 2024 4,100 Unnamed Fincantieri 2nd Quarter 2026 4,100 Total Berths 47,860 InApril 2019 , we entered into an agreement with Chantiers de l'Atlantique to build the fifth Edge-class ship forCelebrity Cruises . The ship is expected to have an aggregate capacity of approximately 3,250 berths and is expected to enter service in the fourth quarter of 2025. The order with Chantiers de l'Atlantique is contingent upon completion of conditions precedent and financing. InSeptember 2021 , we amended the credit agreements for the first and second Evolution-class ships to increase their maximum loan amounts by €175.6 million on an aggregate basis, or approximately$203.5 million based on the exchange rate atSeptember 30, 2021 . The increase in the loan amounts will finance ship design modifications that incorporate innovative sustainability features and additional premium cabins, increasing the capacity for each ship to 730 berths. At our election, interest on the incremental portion of Evolution 1 and Evolution 2 will accrue either (1) at a fixed rate of 4.34% and 4.38%, respectively (inclusive of the applicable margin) or (2) at a floating rate equal to LIBOR plus 0.99% and 1.03%, respectively. Our future capital commitments consist primarily of new ship orders. As ofSeptember 30, 2021 , the aggregate cost of our ships on order presented in the table above, excluding any ships on order by our Partner Brands, was$12.8 billion , of which we had deposited$784.8 million . Approximately 62.5% of the aggregate cost was exposed to fluctuations in the Euro exchange rate atSeptember 30, 2021 . Decreased demand for cruising as a result of concerns regarding COVID-19 has had, and is expected to continue to have, a material impact on our cash flows, liquidity and financial position. In order to preserve liquidity throughout the COVID-19 pandemic, we deferred a significant portion of our planned 2020 and 2021 capital expenditures. As ofSeptember 30, 2021 , we anticipate overall full year capital expenditures, based on our existing ships on order, will be approximately$2.1 billion for 2021. This amount does not include any ships on order by our Partner Brands. 49 --------------------------------------------------------------------------------
Contractual obligations from
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) $ 1,297,500 $
31 647
Interest on debt (2)
3,670,097 935,853 1,361,541 736,777 635,926 Other(3) 432,787 123,112 96,011 58,107 155,557 Investing Activities: 0 Ship purchase obligations(4) 10,282,754 2,682,967 4,796,104 2,803,683 - Financing Activities: 0 Debt obligations(5) 20,642,096 924,453 10,140,513 4,983,076 4,594,054 Finance lease obligations(6) 197,407 32,291 27,808 8,187 129,121 Other(7) 20,128 9,435 10,693 - - Total$ 36,542,769 $ 4,739,758 $ 16,633,207 $ 8,754,676 $ 6,415,128 (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. (2) Long-term debt obligations mature at various dates through fiscal year 2033 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 atSeptember 30, 2021 . Debt denominated in other currencies is calculated based on the applicable exchange rate atSeptember 30, 2021 . (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$8.2 billion in final contractual installments, which have committed financing. COVID-19 has impacted shipyard operations, which has resulted and may continue to result in delays of 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. Additionally, amounts do not include activity related toSilversea Cruises , including ships placed on order, if any, during the three-month reporting lag period. (5) Amounts represent debt obligations with initial terms in excess of one year. Debt denominated in other currencies is calculated based on the applicable exchange rate atSeptember 30, 2021 . In addition, debt obligations presented above are net of debt issuance costs of$359.1 million as ofSeptember 30, 2021 . (6) Amounts represent finance lease obligations with initial terms in excess of one year, net of imputed interest. (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. 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 ArrangementsTUI 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 inTUI Cruises below 37.55% throughMay 2033 . 50 -------------------------------------------------------------------------------- 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 obligation is probable. In June of 2021, we exercised our option under our operating lease withSMBC Leasing and Finance, Inc (the "Lessor") to purchase Terminal A at PortMiami inJuly 2021 for the pre-agreed purchase price of$220.0 million . Upon purchase of the terminal lease inJuly 2021 , the underlying asset was recorded as a leasehold improvement within Property and equipment, net. OurJuly 2021 purchase of thePort of Miami terminal eliminated the residual value guarantee and a requirement under the lease to post$181.1 million of cash collateral on or beforeJuly 18, 2021 . OnFebruary 25, 2021 , S&P Global downgraded our senior unsecured rating from B+ to B, which had no financial impact, and downgraded our$3.32 billion Secured Notes and Silversea Notes, which were fully repaid inJune 2021 with a portion of the proceeds from the$650 million June Unsecured Notes, from BB to BB-. This downgrade had no impact on the terms of the notes. 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 ofSeptember 30, 2021 , we have posted letters of credit as collateral with our sureties and credit card processors under our revolving credit facilities in the amount of$162.3 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 leastSeptember 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$237.7 million . The amount and timing are dependent on future factors that are uncertain, such as the 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 ofSeptember 30, 2021 , 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 Historically, we relied on a combination of cash flows provided by operations, drawdowns 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. The impact of COVID-19 has resulted in our voluntary suspension of global cruise operations fromMarch 2020 up to our recent gradual resumption of operations. 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 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 ofSeptember 30, 2021 , we had 10.3 billion of committed financing for final delivery installments on our ships on order. As ofSeptember 30, 2021 , we had$4.7 billion in contractual obligations due throughSeptember 30, 2022 , of which approximately$0.9 billion relates to debt maturities,$0.9 billion relates to interest on debt and$2.7 billion relates to progress 51 -------------------------------------------------------------------------------- payments on our ship orders and the final installments payable due upon the delivery ofSilver Dawn , Wonder of the Seas and Celebrity Beyond. As ofSeptember 30, 2021 , we had liquidity of$4.1 billion , including$0.1 billion of undrawn revolving credit facility capacity,$3.3 billion in cash and cash equivalents, and a$0.7 billion commitment for a 364-day term loan facility available to draw at anytime prior toAugust 12, 2022 . Our revolving credit facilities were mostly utilized through a combination of amounts drawn and letters of credit issued under the facilities as ofSeptember 30, 2021 . We have agreed with certain of our lenders not to pay dividends or engage in stock repurchases. Refer to Note 10. 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 our board of directors is no longer comprised of individuals who were members of our board of directors on the first day of such period, 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. Based 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 of our operations and, as such, there is inherent uncertainty in our ability to predict future liquidity requirements. Debt Covenants Both our export credit facilities and our non-export credit facilities contain covenants that require us, among other things, to maintain 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. During the first quarter of 2021, we amended$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 letter agreement to extend the waiver period for our export credit facilities to the end of 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 . 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 ofSeptember 30, 2021 , we were in compliance with the applicable minimum liquidity covenant 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. 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. Dividends 52
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During the first quarter of 2020, we declared a cash dividend on our common stock of$0.78 per share, which was paid inApril 2020 . During the first quarter of 2020, we also paid a cash dividend on our common stock of$0.78 per share, which was declared during the fourth quarter of 2019. 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 six consecutive quarters endingSeptember 30, 2021 . 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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