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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 SeptemberJune 30, 20172023

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 214,088,950256,173,359 shares of common stock outstanding as of October 30, 2017.July 24, 2023.


























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Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited; in thousands, except per share data)
Quarter Ended June 30,
 20232022
Passenger ticket revenues$2,443,506 $1,418,203 
Onboard and other revenues1,079,476 766,039 
Total revenues3,522,982 2,184,242 
Cruise operating expenses:  
Commissions, transportation and other516,007 329,859 
Onboard and other220,315 155,570 
Payroll and related284,372 327,141 
Food202,695 155,226 
Fuel275,918 275,179 
Other operating455,569 436,944 
Total cruise operating expenses1,954,876 1,679,919 
Marketing, selling and administrative expenses434,848 371,425 
Depreciation and amortization expenses361,677 351,542 
Operating Income (Loss)771,581 (218,644)
Other income (expense):  
Interest income9,583 6,490 
Interest expense, net of interest capitalized(355,512)(302,706)
Equity investment income (loss)42,014 (13,179)
Other (expense) income(5,386)6,457 
 (309,301)(302,938)
Net Income (Loss)$462,280 $(521,582)
Less: Net Income attributable to noncontrolling interest3,519 — 
Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.$458,761 $(521,582)
Earnings (Loss) per Share:  
Basic$1.79 $(2.05)
Diluted$1.70 $(2.05)
Weighted-Average Shares Outstanding:  
Basic255,805 254,964 
Diluted281,913 254,964 
Comprehensive Income (Loss)  
Net Income (Loss)$462,280 $(521,582)
Other comprehensive income (loss):  
Foreign currency translation adjustments(3,263)12,682 
Change in defined benefit plans(3,785)15,168 
Gain (loss) on cash flow derivative hedges4,988 (84,493)
Total other comprehensive loss(2,060)(56,643)
Comprehensive Income (Loss)$460,220 $(578,225)



The accompanying notes are an integral part of these consolidated financial statements
1

ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited; in thousands, except per share data)
Six Months Ended June 30,
20232022
Passenger ticket revenues$4,340,022 $2,070,061 
Onboard and other revenues2,068,106 1,173,412 
Total revenues6,408,128 3,243,473 
Cruise operating expenses:
Commissions, transportation and other918,937 480,202 
Onboard and other378,950 230,009 
Payroll and related594,370 676,759 
Food402,086 255,410 
Fuel577,431 463,659 
Other operating876,007 758,822 
Total cruise operating expenses3,747,781 2,864,861 
Marketing, selling and administrative expenses895,703 765,455 
Depreciation and amortization expenses721,450 691,009 
Operating Income (Loss)1,043,194 (1,077,852)
Other income (expense):
Interest income24,391 9,812 
Interest expense, net of interest capitalized(714,899)(580,365)
Equity investment income (loss)62,485 (44,238)
Other (expense) income(771)3,919 
(628,794)(610,872)
Net Income (Loss)414,400 (1,688,724)
Less: Net Income attributable to noncontrolling interest3,549 — 
Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.$410,851 $(1,688,724)
Earnings (Loss) per Share:
Basic$1.61 $(6.63)
Diluted$1.60 $(6.63)
Weighted-Average Shares Outstanding:
Basic255,636 254,893 
Diluted258,741 254,893 
Comprehensive Income (Loss)
Net Income (Loss)$414,400 $(1,688,724)
Other comprehensive income (loss):
Foreign currency translation adjustments(9,809)20,460 
Change in defined benefit plans(272)27,765 
(Loss) Gain on cash flow derivative hedges(26,709)111,408 
Total other comprehensive (loss) income(36,790)159,633 
Comprehensive Income (Loss)$377,610 $(1,529,091)
 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

2
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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
 June 30,December 31,
 20232022
 (unaudited) 
Assets  
Current assets  
Cash and cash equivalents$726,424 $1,935,005 
Trade and other receivables, net of allowances of $10,027 and $11,612 at June 30, 2023 and December 31, 2022, respectively375,357 531,066 
Inventories215,915 224,016 
Prepaid expenses and other assets604,623 455,836 
Derivative financial instruments46,516 59,083 
Total current assets1,968,835 3,205,006 
Property and equipment, net27,935,922 27,546,445 
Operating lease right-of-use assets551,534 537,559 
Goodwill809,250 809,277 
Other assets, net of allowances of $62,833 and $71,614 at June 30, 2023 and December 31, 2022, respectively1,657,807 1,678,074 
Total assets$32,923,348 $33,776,361 
Liabilities and Shareholders’ Equity  
Current liabilities  
Current portion of long-term debt$1,713,299 $2,087,711 
Current portion of operating lease liabilities81,797 79,760 
Accounts payable692,011 646,727 
Accrued expenses and other liabilities1,391,553 1,459,957 
Derivative financial instruments111,864 131,312 
Customer deposits5,676,341 4,167,997 
Total current liabilities9,666,865 8,573,464 
Long-term debt18,685,633 21,303,480 
Long-term operating lease liabilities537,641 523,006 
Other long-term liabilities492,127 507,599 
Total liabilities29,382,266 30,907,549 
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; 284,405,911 and 283,257,102 shares issued, June 30, 2023 and December 31, 2022, respectively)2,844 2,832 
Paid-in capital7,406,818 7,284,852 
Accumulated deficit(1,296,578)(1,707,429)
Accumulated other comprehensive loss(680,004)(643,214)
Treasury stock (28,248,125 and 28,018,385 common shares at cost, June 30, 2023 and December 31, 2022, respectively)(2,069,432)(2,068,229)
Total shareholders’ equity attributable to Royal Caribbean Cruises Ltd.3,363,648 2,868,812 
Noncontrolling Interests177,434 — 
Total shareholders’ equity3,541,082 2,868,812 
Total liabilities and shareholders’ equity$32,923,348 $33,776,361 

 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

3
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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)
Six Months Ended June 30,
 20232022
Operating Activities  
Net Income (Loss)$414,400 $(1,688,724)
Adjustments:  
Depreciation and amortization721,450 691,009 
Net deferred income tax benefit(6,139)(9,205)
(Gain) loss on derivative instruments not designated as hedges(11,675)87,245 
Share-based compensation expense65,721 10,134 
Equity investment (income) loss(62,485)44,238 
Amortization of debt issuance costs, discounts and premiums58,144 84,734 
Loss on extinguishment of debt43,518 — 
Changes in operating assets and liabilities:  
Decrease (increase) in trade and other receivables, net131,865 (201,605)
Decrease (increase) in inventories8,101 (78,884)
Increase in prepaid expenses and other assets(139,249)(168,948)
Increase in accounts payable trade30,287 221,746 
(Decrease) increase in accrued liabilities(62,957)16,818 
Increase in customer deposits1,508,345 1,007,876 
Other, net1,939 (66,641)
Net cash provided by (used in) operating activities2,701,265 (50,207)
Investing Activities  
Purchases of property and equipment(1,048,389)(2,317,747)
Cash received on settlement of derivative financial instruments17,581 36,073 
Cash paid on settlement of derivative financial instruments(13,960)(265,047)
Cash received on loans to unconsolidated affiliates10,939 8,700 
Other, net11,680 10,474 
Net cash used in investing activities(1,022,149)(2,527,547)
Financing Activities  
Debt proceeds1,208,177 3,831,566 
Debt issuance costs(52,610)(133,946)
Repayments of debt(4,249,101)(1,706,807)
Proceeds from sale of noncontrolling interest209,320 — 
Other, net(3,928)(11,050)
Net cash (used in) provided by financing activities(2,888,142)1,979,763 
Effect of exchange rate changes on cash and cash equivalents445 (1,574)
Net decrease in cash and cash equivalents(1,208,581)(599,565)
Cash and cash equivalents at beginning of period1,935,005 2,701,770 
Cash and cash equivalents at end of period$726,424 $2,102,205 
Supplemental Disclosure  
Cash paid during the period for:  
Interest, net of amount capitalized$560,023 $425,119 
Non-cash Investing Activities  
Purchase of property and equipment included in accounts payable and accrued expenses and other liabilities$17,790 $33,189 
 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

4
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ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWSSHAREHOLDERS' EQUITY
(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


Common StockPaid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTreasury StockNoncontrolling InterestTotal Shareholders' Equity
Balance at April 1, 2023$2,840 $7,351,493 $(1,755,339)$(677,944)$(2,069,432)$173,803 $3,025,421 
Activity related to employee stock plans— 43,140 — — — — 43,140 
Convertible notes settlement4 12,185 — — — — 12,189 
Changes related to cash flow derivative hedges— — — 4,988 — — 4,988 
Change in defined benefit plans— — — (3,785)— — (3,785)
Foreign currency translation adjustments— — — (3,263)— — (3,263)
Noncontrolling interest— — — — — 3,631 3,631 
Net Income attributable to Royal Caribbean Cruises Ltd.— — 458,761 — — — 458,761 
Balance at June 30, 2023$2,844 $7,406,818 $(1,296,578)$(680,004)$(2,069,432)$177,434 $3,541,082 
(1) Amount includes $26.0 million in 2016 related to cash included in the divestiture of our 51% interest in Pullmantur Holdings.


Common StockPaid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTreasury StockNoncontrolling InterestTotal Shareholders' Equity
Balance at January 1, 2023$2,832 $7,284,852 $(1,707,429)$(643,214)$(2,068,229)$— $2,868,812 
Activity related to employee stock plans8 64,483 — — — — 64,491 
Convertible notes settlement4 12,185 — — — — 12,189 
Changes related to cash flow derivative hedges— — — (26,709)— — (26,709)
Change in defined benefit plans— — — (272)— — (272)
Foreign currency translation adjustments— — — (9,809)— — (9,809)
Purchase of treasury stock— — — — (1,203)— (1,203)
Sale of noncontrolling interest— 45,298 — — — 173,803 219,101 
Noncontrolling interest— — — — — 3,631 3,631 
Net Income attributable to Royal Caribbean Cruises Ltd.— — 410,851 — — — 410,851 
Balance at June 30, 2023$2,844 $7,406,818 $(1,296,578)$(680,004)$(2,069,432)$177,434 $3,541,082 










The accompanying notes are an integral part of these consolidated financial statements.statements
Table of Contents5


ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited; in thousands)


Common StockPaid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTreasury StockTotal Shareholders' Equity
Balance at April 1, 2022$2,830 $7,267,545 $(718,609)$(494,609)$(2,068,229)$3,988,928 
Activity related to employee stock plans1 (12,606)— — — (12,605)
Changes related to cash flow derivative hedges— — — (84,493)— (84,493)
Change in defined benefit plans— — — 15,168 — 15,168 
Foreign currency translation adjustments— — — 12,682 — 12,682 
Net Loss— — (521,582)— — (521,582)
Balance at June 30, 2022$2,831 $7,254,939 $(1,240,191)$(551,252)$(2,068,229)$3,398,098 




Common StockPaid-in CapitalRetained Earnings (Accumulated 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 plans4 5,282 37 — — 5,323 
Cumulative effect of adoption of Accounting Standards Update 2020-06— (307,640)146,220 — — (161,420)
Changes related to cash flow derivative hedges— — — 111,408 — 111,408 
Change in defined benefit plans— — — 27,765 — 27,765 
Foreign currency translation adjustments— — — 20,460 — 20,460 
Purchase of treasury stock— — — — (2,270)(2,270)
Net Loss— — (1,688,724)— — (1,688,724)
Balance at June 30, 2022$2,831 $7,254,939 $(1,240,191)$(551,252)$(2,068,229)$3,398,098 
The accompanying notes are an integral part of these consolidated financial statements
6


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.
2022.
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 three 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 64 ships as of June 30, 2023. Our ships offer a selection of worldwide itineraries that call on more than 1,000 destinations in over 120 countries on all seven continents.

Liquidity
PriorAs of June 30, 2023, we had liquidity of $3.7 billion, including $3.0 billion of undrawn revolving credit facility capacity, and $0.7 billion in cash and cash equivalents. We believe that we have sufficient liquidity to August 2016, Pullmantur Holdings S.L. ("Pullmantur Holdings"),fund our obligations for at least the parent companynext twelve months from the issuance of these financial statements. Refer to Note 6. Debt for further information regarding refinancing transactions and 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% ofapplicable financial covenants.
We will continue to pursue various opportunities to raise capital to fund obligations associated with future debt maturities and/or to extend the maturity dates associated with our interest in Pullmantur Holdings. We retain a 49% interest in Pullmantur Holdings as well as full ownership of the four vessels currently operated by the Pullmantur brand under bareboat charter arrangements. We account for the bareboat charters of the vessels to Pullmantur Holdings as operating leases. We also provide certain ship management services and other related services to Pullmantur Holdings.

existing indebtedness or facilities.
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, 20162022 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. Investments and Other Assets for further information regarding our variable interest entities. For affiliates we do not control but over which we have significant influence on financial and operating policies, usually evidenced by a direct ownership interest from 20% to 50%, the investment is accounted for using the equity method.

Prior to January 1, 2016, we consolidated the operating results of Pullmantur Holdings on a two-month reporting lag to allow for more timely preparation of our consolidated financial statements. Effective January 1, 2016, we eliminated the two-month reporting lag to reflect Pullmantur Holding's financial position, results of operations and cash flows concurrently and consistently with the fiscal calendar of the Company (the "elimination of the Pullmantur reporting lag"). The elimination of the Pullmantur reporting lag represented a change in accounting principle which we believed to be preferable because it provided 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. As a result, we have accounted for this change in accounting principle in our consolidated results for the first quarter of 2016. Accordingly, the results of Pullmantur Holdings for November and December 2015 are included in our statement of comprehensive income (loss) for the nine months ended September 30, 2016. The effect of this change was a decrease to net income of $21.7 million, which has been reported within Other expense in our consolidated statements of comprehensive income (loss) for the nine months ended September 30, 2016.


Note 2.2. Summary of Significant Accounting Policies

RecentAdoption of Accounting Pronouncements

Revenue from Contracts with Customers

In May 2014, amended GAAP guidance wasSeptember 2022, the FASB issued ASU No. 2022-04, Liabilities-Supplier Finance Programs (Subtopic 405-50) - Disclosure of Supplier Finance Program Obligations. This ASU requires that a buyer in a supplier finance program disclose sufficient information about the program to clarify the principles used to recognize revenue for all entities. The guidance also requires more detailed disclosures and provides additional guidance for transactions that were not comprehensively addressed in the prior accounting guidance. This guidance must be applied using oneallow a user of two retrospective application methods and will be effective for our annual reporting period beginning after 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 to understand the program’s nature, activity during the fourth quarter of fiscal 2017. Based on our assessmentperiod, changes from period to date, we do not expectperiod, and potential magnitude. This ASU is expected to improve financial reporting by requiring new disclosures about the adoptionprograms, thereby allowing financial statement users to better consider the effect 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.programs on an entity’s working capital, liquidity, and cash flows. 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 beASU is effective for financial statements issued for fiscal years beginning after December 15, 2018 and interim periods within those years. Early adoption2022, except for the amendment on roll forward information which is permitted. We are currently evaluating the impact of the adoption of this newly issued guidance to 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 and will be effective for annual periodsfiscal years beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period.2023. We intend to adopt the guidance on the date of initial application,adopted ASU No. 2022-04 effective January 1, 2018.2023. The adoption of this newly issued guidance isdid not expected to have a material impact to our consolidated financial statements.statements and related disclosures.

Reclassifications
Intra-Entity Transfers of Assets Other Than Inventory

In October 2016, amended GAAP guidance was issued that requiresFor 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 effective 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 tosix months ended June 30, 2023, we no longer separately present Accrued interest in 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.balance sheets. 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 interimamounts presented in prior periods therein. Early adoption is permitted in any interim period after issuance of this guidance. All transition requirementswere reclassified to Accrued expenses 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 guest head counts. The amounts of such port costs included in Passenger ticket revenues on a gross basis were $135.9 million and $158.7 million for the third quarters of 2017 and 2016, respectively, and $413.7 million and $443.1 million for the nine months ended September 30, 2017 and 2016, respectively.

Reclassifications

For the third quarter 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 expenses in the consolidated statements of comprehensive income (loss) in orderother liabilities to conform to the current year presentation.

For the ninequarter and six months ended SeptemberJune 30, 2016, share-based compensation expense of $22.0 million, equity investment income of $94.8 million2023, we no longer separately present Impairments and amortization of debt issuance costs of $22.9 million, have been reclassifiedCredit losses in theour consolidated statements of cash flows from comprehensive income (loss). As a result, amounts presented in prior periods were reclassified to 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 orderOperating to conform to the current year presentation.

Additionally, forFor the ninesix months ended SeptemberJune 30, 2016, amortization2023, we no longer separately present Amortization of debt discounts and premiums;(Decrease) increase in accrued interest; and Impairments and Credit losses in our cash flows from Operating Activities within our consolidated statements of cash flows. As a result, amounts presented in prior periods were reclassified to Amortization of debt issuance costs, of $11.3 milliondiscounts and $5.3 million, have been reclassified from Decrease(increase) in prepaid expenses and other assets and from Increasepremiums; (decrease) increase in accrued expenses and other liabilities, liabilities; and Other, net, respectively, in the consolidated statements of cash flows to Amortization of debt issuance costs, within Net cash provided by operating activities in order Operating Activities to conform to the current year presentation.Additionally, we no longer separately present Proceeds from the sale of property and equipment and other assets in our cash flows from Investing Activities within our consolidated statements of cash flows. As a result, amounts presented in prior periods were reclassified to Other, net within Investing Activities to conform to the current year presentation.

Note 3. Revenues
Revenue Recognition
Revenues are measured based on consideration specified in our contracts with customers and are recognized as the related performance obligations are satisfied.
The majority of our revenues are derived from passenger cruise contracts which are reported within Passenger ticket revenues in our consolidated statements of comprehensive income (loss). Our performance obligation under these contracts is to provide a cruise vacation in exchange for the ticket price. We satisfy this performance obligation and recognize revenue over the duration of each cruise, which generally ranges from two to 23 nights.
Passenger ticket revenues include charges to our guests for port costs that vary with passenger head counts. These type of port costs, along with port costs that do not vary by passenger head counts, are included in our cruise operating expenses. The amounts of port costs charged to our guests and included within Passenger ticket revenues on a gross basis were $226.1 million and $159.2 million for the quarters ended June 30, 2023 and 2022, respectively, and $429.5 million and $236.1 million for the six months ended June 30, 2023 and 2022, respectively.
Our total revenues also include Onboard and other revenues, which consist primarily of revenues from the sale of goods and services onboard our ships that are not included in passenger ticket prices. We receive payment before or concurrently with the transfer of these goods and services to cruise passengers and recognize revenue over the duration of the related cruise.
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.
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Disaggregated Revenues
The following table disaggregates our total revenues by geographic regions where we provide cruise itineraries (in thousands):
Quarter Ended June 30,Six Months Ended June 30,
2023202220232022
Revenues by itinerary
North America (1)$2,136,503 $1,344,043 $4,329,512 $2,233,130 
Asia/Pacific169,394 45,216 502,404 79,849 
Europe840,740 527,134 842,637 528,559 
Other regions(2)227,285 159,390 441,774 239,022 
Total revenues by itinerary3,373,922 2,075,783 6,116,327 3,080,560 
Other revenues(3)149,060 108,459 291,801 162,913 
Total revenues$3,522,982 $2,184,242 $6,408,128 $3,243,473 
(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, casino operations, 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 3. 5. Investments and 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 quarter and six months ended June 30, 2023 and 2022, our guests were sourced from the following areas:
Quarter Ended June 30,
20232022
Passenger ticket revenues:
United States76 %78 %
All other countries (1)24 %22 %

Six Months Ended June 30,
20232022
Passenger ticket revenues:
United States76 %80 %
All other countries (1)24 %20 %
(1)No other individual country's revenue exceeded 10% for the quarter and six months ended June 30, 2023 and 2022.
Customer Deposits and Contract Liabilities
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 or onboard revenues during the duration of the cruise. ASC 606, Revenues from Contracts with Customers, defines a “contract liability” as an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration from the customer. We do not consider customer deposits to be a contract liability until the customer no longer retains the unilateral right, resulting from the passage of time, to cancel such customer's reservation and receive a full refund. Customer deposits presented in our consolidated balance sheets include contract liabilities of $2.8 billion and $1.8 billion as of June 30, 2023 and December 31, 2022, respectively.
During the pandemic we provided flexibility to guests with bookings on sailings cancelled due to COVID-19 by allowing guests to receive future cruise credits (“FCC”). As of June 30, 2023, our customer deposit balance includes approximately $0.4 billion of unredeemed FCCs. Given the lack of comparable historical experience of FCC redemptions, as of June 30, 2023
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we are unable to estimate the number of FCCs that may not be used in future periods and get recognized as breakage. We will update our breakage analysis as future information is received.
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.
Our credit card processors agreements require us, under certain circumstances, to maintain a reserve that can be satisfied by posting collateral. One of our processors currently holds a portion of our customer deposits in reserve until the sailings take place or the funds are refunded to the customer. The cash reserve held by the processor was immaterial as of June 30, 2023.
We have contract assets that are conditional rights to consideration for satisfying the construction services performance obligations under a service concession arrangement. As of June 30, 2023 and December 31, 2022, our contract assets were $165.5 million and $167.9 million, respectively, and were included within Other assets in our consolidated balance sheets. 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 and prepaid credit and debit card fees are an incremental cost of obtaining contracts with customers that we recognize as an asset and include within Prepaid expenses and other assets in our consolidated balance sheets. Prepaid travel advisor commissions and prepaid credit and debit card fees were $291.3 million as of June 30, 2023 and $177.5 million as of December 31, 2022. Our prepaid travel advisor commissions and prepaid credit and debit card fees are recognized at the time of revenue recognition or at the time of voyage cancellation, and are reported primarily within Commissions, transportation and other in our consolidated statements of comprehensive income (loss).
Note 4. Earnings (Loss) Per Share
A reconciliation between basicBasic and diluted earnings (loss) per share is as follows (in thousands, except per share data):
Quarter Ended June 30,Six Months Ended June 30,
 2023202220232022
Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. for basic earnings (loss) per share$458,761 $(521,582)$410,851 $(1,688,724)
Add convertible notes interest21,323 — 4,214 — 
Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. for diluted earnings (loss) per share480,084 (521,582)415,065 (1,688,724)
Weighted-average common shares outstanding255,805 254,964 255,636 254,893 
Dilutive effect of stock-based awards348 — 378 — 
Dilutive effect of convertible notes25,760 — 2,727 — 
Diluted weighted-average shares outstanding281,913 254,964 258,741 254,893 
Basic earnings (loss) per share$1.79 $(2.05)$1.61 $(6.63)
Diluted earnings (loss) per share$1.70 $(2.05)$1.60 $(6.63)
 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
ThereBasic earnings (loss) per share is computed by dividing Net Income (Loss) by the weighted-average number of common stock outstanding during each period. Diluted earnings (loss) per share incorporates the incremental shares issuable upon the assumed exercise of stock options and conversion of potentially dilutive securities. If we have a net loss for the period, all potential common shares will be considered antidilutive, resulting in the same basic and diluted net loss per share amounts for those periods. There were no antidilutive shares for thequarters quarter ended June 30, 2023 and nine month periods ended September 30, 2017and September 30, 2016.
Note 4. Property and Equipment

In March 2017, we sold Legend of the Seas to an affiliate of TUI AG,approximately 25,459,641 antidilutive shares from our joint venture partner in TUI Cruises. The sale resulted in a gain of $30.9 million and is reported within Other operating within Cruise operating expenses in our consolidated statements of comprehensive income (loss)convertible notes for the ninesix months ended SeptemberJune 30, 2017.

In April 2016, we sold Splendour of the Seas2023, compared 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 to23,526,181 and 23,597,611 antidilutive shares from our consolidated financial statementsstock-based awards and was also reported in Other operating within Cruise operating expenses in our consolidated statements of comprehensive income (loss)convertible notes for the ninequarter and six months ended SeptemberJune 30, 2016.2022, respectively.



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Note 5.5. Investments and 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 hold equity interests in ventures related to our cruise operations. We account for the majority of these investments as either an equity method investment or a controlled subsidiary.

Effective March 31, 2023, we closed on the previously announced partnership agreement with iCON Infrastructure Partners VI, L.P. ("iCON"). This partnership will own, develop, and manage cruise terminal facilities and infrastructure in key ports of call, initially including several development projects in Italy and Spain. As part of the transaction with iCON we also agreed to sell 80% of the entity which owns our terminal at PortMiami. Refer below to equity method investments and controlled subsidiaries for further information on the transaction. In addition, the partnership will pursue additional port infrastructure developments, including future plans to own, develop, and manage an infrastructure project in the U.S. Virgin Islands.
Unconsolidated investments ("equity method investments")
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 SeptemberJune 30, 2017,2023, the net book value of our investment in TUI CruisesTUIC was approximately $582.5$508.3 million, primarily consisting of $379.3$415.4 million in equity and a loan of €170.4€79.3 million, or approximately $201.5$86.5 million based on the exchange rate at SeptemberJune 30, 2017.2023. As of December 31, 2016,2022, the net book value of our investment in TUI CruisesTUIC was approximately $517.0$466.0 million, primarily consisting of $323.5$361.5 million in equity and a loan of €182.3€87.2 million, or approximately $192.4$93.0 million based on the exchange rate at December 31, 2016.2022. 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, 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 €100.4 million, or approximately $118.7 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 quarterly 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 guarantee of this bank loan are probable.

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, we made payments of $1.9 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 entityentity.
As part of the transaction with iCON, we sold our controlling interest in two Italian entities for an immaterial amount of net proceeds and we account for this investment under the equity method of accounting. As of September 30, 2017, the net book value of our investment in Grand Bahama was approximately $50.4 million, consisting of $30.8 million in equity and a loan of $19.6 million. As of December 31, 2016, the net book value of our investment in Grand Bahama was approximately $47.0 million, consisting of $23.2 million in equity and a loan of $23.8 million. These amounts represent our maximum exposure 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%. Interest payablerecognized an immaterial gain on the loan is due on a semi-annual basis. We continue to classify the loan, as modified, as non-accrual status. The loan balance is included within Other assets in our consolidated balance sheets. 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,sale. At closing, 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"),the partnership and both Italian entities are VIE's. These entities in which we have a 36% noncontrolling interest, is a VIE. During the second quarterItaly represent development projects to own, develop, and manage cruise terminal facilities in key ports 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.call. We have determined that we are not the primary beneficiary for either of Skysea Holdingthese entities 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 mortgagesentities.
For further information on the ship, Golden Era. As of September 30, 2017,measurements used to estimate the net bookfair value of our investment in Skysea Holdingequity method investments, refer to Note 11. Fair Value Measurements 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.

Derivative Instruments.
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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 June 30,Six Months Ended June 30,
2023202220232022
Share of equity income (loss) from investments$42,014 $(13,179)$62,485 $(44,238)
Dividends received (1)$3,025 $563 $3,827 $986 
  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 net of tax withholdings during the quarters and six months ended June 30, 2023 and June 30, 2022.

As of June 30, 2023As of December 31, 2022
Total notes receivable due from equity investments$106,586 $101,392 
Less-current portion (1)38,237 18,406 
Long-term portion (2)$68,349 $82,986 
(1)Included within Trade and other receivables, net in our consolidated balance sheets.
(2)Included within Other assets in our consolidated balance sheets.
Consolidated investments ("controlled subsidiaries")
As part of the transaction with iCON, we sold an 80% interest in the entity which owns our terminal at PortMiami for $208.9 million and retained a 20% minority interest, effective March 31, 2023. We also provide ship management servicessold a noncontrolling interest in another entity which is developing a port project in Spain for an immaterial amount. We have determined that both of these entities are VIEs, and we are the primary beneficiary as we have the power to TUI Cruises GmbH, Pullmantur Holdings and Skysea Holding. Additionally,direct the activities that most significantly impact the facility’s economic performance. Accordingly, we bareboat charterwill continue to Pullmantur Holdings the vessels currently operated by its brands, which were retained by us followingconsolidate both entities. The cash consideration received for the sale of the PortMiami terminal company, net of transaction costs, was allocated between paid in capital and noncontrolling interest using the net book value of our 51% interestinvestment in Pullmantur Holdings. the PortMiami terminal, as presented in the statement of shareholders' equity.
Other Assets
Credit Losses
We recordedreviewed our notes receivable for credit losses in connection with the preparation of our financial statements for the quarter ended June 30, 2023. In evaluating the allowance, management considered factors such as historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions. Our credit loss allowance beginning and ending balances as of June 30, 2023 and 2022 primarily relate to credit losses recognized on notes receivable for the previous sale of certain property and equipment of $81.6 million. The notes receivable associated with previous sale of our property and equipment are related to loans that were originated in 2015 and 2020.
The following table summarizes our credit loss allowance related to receivables (in thousands):
Six Months Ended June 30,
20232022
Balance, beginning of period$83,227 $100,192 
Credit loss (recovery), net(7,868)(10,623)
Write-offs(2,499)(9,024)
Balance, end of period$72,860 $80,545 






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Note 6. Debt
Debt consists of the following (in thousands):
Interest Rate (1)
Maturities ThroughAs of June 30, 2023As of December 31, 2022
Fixed rate debt:
Unsecured senior notes3.70% to 11.63%2026 - 2030$7,898,588 $7,199,331 
Secured senior notes8.25% to 11.50%2025 - 20291,988,564 2,370,855 
Unsecured term loans1.28% to 5.89%2027 - 20354,837,257 4,561,129 
Convertible notes2.88% to 6.00%2023 - 20251,375,000 1,725,000 
Total fixed rate debt16,099,409 15,856,315 
Variable rate debt(2):
Unsecured revolving credit facilities (3)
6.54% to 7.29%2024 - 2025— 2,744,105 
USD unsecured term loan6.16% to 10.05%2023 - 20373,906,095 4,335,973 
Euro unsecured term loan5.05% to 5.68%2023 - 2028492,289 534,589 
Total variable rate debt4,398,384 7,614,667 
Finance lease liabilities331,130 351,332 
Total debt (4)
20,828,923 23,822,314 
Less: unamortized debt issuance costs(429,991)(431,123)
Total debt, net of unamortized debt issuance costs20,398,932 23,391,191 
Less—current portion(1,713,299)(2,087,711)
Long-term portion$18,685,633 $21,303,480 
(1) Interest rates based on outstanding loans as it relatesof June 30, 2023, and for variable rate debt include either LIBOR, EURIBOR or Term SOFR plus the applicable margin.
(2) During the quarter ended June 30, 2023, we completed our transition from LIBOR to these servicesTerm SOFR rates for substantially all of our variable rate facilities, with such transition to take effect at the next respective interest reset date for each such facility.
(3) Advances under our $1.9 billion facility accrue interest at Term SOFR plus an interest rate margin ranging from 1.30% to 2.05%. Advances under our $1.1 billion facility accrue interest at Term SOFR plus an interest rate margin ranging from 1.70% to 2.05%. Based on applicable Term SOFR rates, as of June 30, 2023, the maximum interest rates under the $1.9 billion facility and the $1.1 billion facility was 7.29%. We also pay a facility fee for each facility ranging from 0.20% to 0.30% of the total commitments under such facility.
(4) At June 30, 2023 and December 31, 2022, the weighted average interest rate for total debt was 7.16% and 6.23%, respectively.
Unsecured revolving credit facilities
In January 2023, we amended and extended the majority of our two unsecured revolving credit facilities. The amendment extended the maturities of $2.3 billion of the $3.0 billion aggregate revolving credit capacity by one year to April 2025, with the remainder maturing in April 2024. Additionally, during the six months ended June 30, 2023 we repaid $2.7 billion under our operating resultsrevolving credit facilities, resulting in an aggregate borrowing capacity of $3.0 billion under our unsecured revolving credit facilities as of June 30, 2023.
Convertible Notes
In June 2023, $350 million of our 4.25% Convertible Senior Notes matured. The notes were settled using a combination of $337.8 million in cash, and the issuance of approximately 374,000 shares of common stock. The issuance of equity increased additional paid in capital by $12.2 million.


13

Debt financing transactions
In February 2023, we issued $700 million aggregate principal amount of 7.25% senior guaranteed notes due January 2030 ("7.25% Priority Guaranteed Notes"). Upon closing, we terminated our commitment for the $700 million 364-day term loan facility. In addition, the remaining $350 million backstop committed financing was also terminated upon closing, which resulted in an immaterial loss on extinguishment of debt.
In June 2023, we took delivery of Silver Nova. To finance the delivery, we borrowed a total of $503.2 million under the committed financing agreement, resulting in an unsecured term loan which is 95% guaranteed by Euler Hermes. The unsecured loan amortizes semi-annually over 12 years and bears interest at a fixed rate of 4.21% per annum.
In June 2023, we repaid $392.0 million of our 11.50% secured senior notes due in June 2025, which resulted in a total loss on extinguishment of debt of $30.2 million that was recognized within Interest expense, net of interest capitalized within our consolidated statements of comprehensive income (loss) for the quarter and six months ended June 30, 2023. In July 2023, we repaid an additional $300 million of our 11.50% secured senior notes due in June 2025.
Export credit agency guarantees
Except for the term loans we incurred to acquire Celebrity Flora and Silver Moon, all of our unsecured ship financing term loans are guaranteed by the export credit agency in the respective country in which the ship is constructed. For the majority of the loans as of June 30, 2023, we pay to the applicable export credit agency, depending on the financing agreement, an upfront fee of 2.35% to 5.48% of the maximum loan amount in consideration for these guarantees. We amortize the fees that are paid upfront over the life of the loan. We classify these fees within Amortization of debt issuance costs, discounts and premiums 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.
Debt covenants
Our revolving credit facilities, the majority of our term loans, and certain of our credit card processing agreements, contain covenants that require us, among other things, to maintain a fixed charge coverage ratio, limit our net debt-to-capital ratio, maintain minimum liquidity, and under certain facilities, to maintain a minimum stockholders' equity. As of June 30, 2023, we were in compliance with our debt covenants and we estimate we will be in compliance for the next twelve months.

The following is a schedule of annual maturities on our total debt, including finance leases, as of June 30, 2023 for each of the next five years (in thousands):
YearAs of June 30, 2023 (1)
Remainder of 2023$1,016,304 
20241,960,853 
20253,329,844 
20262,801,075 
20273,537,745 
Thereafter8,183,102 
$20,828,923 
  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. Long-Term(1)    Debt

In October 2017, we amended and restated our $1.2 billion unsecured revolving credit facility due August 2018. The amendment reduced denominated in other currencies is calculated based on the applicable marginexchange rate at June 30, 2023.








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Note 7. Leases
Operating Leases
Our operating leases primarily relate to preferred berthing arrangements, real estate and extended the termination date to October 2022. The applicable margin 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 June 30, 2023 and December 31, 2022. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheet. 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 October 2023 and Silversea Cruises does not intend to renew the lease.
For some of our real estate leases and berthing agreements, we do have the 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 present value of lease payments. We estimate our incremental borrowing rates based on Term SOFR and U.S. Treasury note rates corresponding to lease terms increased by the Company’s credit risk spread and reduced by the estimated impact of collateral.In addition, we have lease agreements with lease and non-lease components, which are generally accounted for separately. However, for berthing agreements, we account for the lease and non-lease components as a single lease component.
Finance Leases
Our finance leases primarily relate to buildings and surrounding land located at our Miami headquarters and our lease for the Silver Dawn ship. Finance leases are included within Property and Equipment, net and Long-term debt with the current portion of the amended facility by an additional $500 million, subjectliability included within Current portion of long-term debt in our consolidated balance sheets as of June 30, 2023 and December 31, 2022.
The Company's master lease agreement (“Master Lease”) with Miami-Dade County related to the receipt of additional or increased lender commitments,buildings and surrounding land located at our Miami headquarters is classified as a finance lease in accordance with ASC 842, Leases. The Master Lease includes two five-year options to extend the termination date by uplease which we are reasonably certain to two years,exercise. The total aggregate amount of the finance lease liabilities recorded for this Master Lease was $56.4 million and $55.5 million as of June 30, 2023 and December 31, 2022, respectively.
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 was $255.3 million and $264.8 million as of June 30, 2023 and December 31, 2022, respectively. The lease payments on the Silver Dawn are subject to lender consent. These amendments did not resultadjustments based on the LIBOR rate.




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The components of lease expense were as follows (in thousands):
Consolidated Statement of Comprehensive Income (Loss) ClassificationQuarter Ended June 30, 2023Six Months Ended June 30, 2023
Lease costs:
Operating lease costsCommission, transportation and other$39,872 $94,972 
Operating lease costsOther operating expenses5,545 11,090 
Operating lease costsMarketing, selling and administrative expenses5,544 11,005 
Financial lease costs:
Amortization of right-of-use-assetsDepreciation and amortization expenses5,791 11,582 
Interest on lease liabilitiesInterest expense, net of interest capitalized7,226 14,728 
Total lease costs$63,978 $143,377 

Consolidated Statement of Comprehensive Income (Loss) ClassificationQuarter Ended June 30, 2022Six Months ended June 30, 2022
Lease costs:
Operating lease costsCommission, transportation and other$27,993 $50,722 
Operating lease costsOther operating expenses5,523 10,994 
Operating lease costsMarketing, selling and administrative expenses4,870 9,646 
Financial lease costs:
Amortization of right-of-use-assetsDepreciation and amortization expenses6,102 12,195 
Interest on lease liabilitiesInterest expense, net of interest capitalized4,654 9,254 
Total lease costs$49,142 $92,811 
In addition, certain of our berthing agreements include variable lease costs based on the number of passengers berthed. During the quarter and six months ended June 30, 2023, we had $21.2 million and $58.9 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss), respectively, compared to $11.9 million and $19.4 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss) during the extinguishmentquarter and six months ended June 30, 2022, respectively.
The weighted average of debt.the remaining lease terms and weighted average discount rates are as follows:

As of June 30, 2023As of December 31, 2022
Weighted average of the remaining lease term in years
Operating leases17.4617.69
Finance leases19.6319.26
Weighted average discount rate
Operating leases7.35 %6.92 %
Finance leases6.46 %6.43 %




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Supplemental cash flow information related to leases is as follows (in thousands):
Six Months Ended June 30, 2023Six Months Ended June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$90,801 $56,270 
Operating cash flows from finance leases14,728 $9,254 
Financing cash flows from finance leases$19,409 $22,455 
As of June 30, 2023, maturities related to lease liabilities were as follows (in thousands):
YearOperating LeasesFinance Leases
Remainder of 2023$64,671 $23,048 
2024116,585 44,465 
2025108,572 43,974 
202696,330 38,412 
202776,629 37,358 
Thereafter830,976 706,887 
Total lease payments1,293,763 894,144 
Less: Interest(674,325)(563,014)
Present value of lease liabilities$619,438 $331,130 

















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Note 7.8. Commitments and Contingencies

Ship Purchase Obligations

Our future capital commitments consist primarily of new ship orders. As of SeptemberJune 30, 2017, we had two Quantum-class ships, two Oasis-class ships and two ships of a new generation of ships, known as "Project Icon," on order for our Royal Caribbean International brand with an aggregate capacity of approximately 30,500 berths. Additionally, as of September 30, 2017, we have four Edge-class2023, the dates that the ships on order forby our Celebrity Cruises brand with an aggregate capacityGlobal and Partner Brands are expected to be delivered, subject to change in the event of approximately 11,600 berths. The following provides further information on recent developments with respect to our ship orders.construction delays, and their approximate berths are as follows:

ShipShipyardExpected deliveryApproximate
Berths
Royal Caribbean International —
Oasis-class:
Utopia of the SeasChantiers de l'Atlantique2nd Quarter 20245,700
Icon-class:
Icon of the SeasMeyer Turku Oy4th Quarter 20235,600
UnnamedMeyer Turku Oy2nd Quarter 20255,600
UnnamedMeyer Turku Oy2nd Quarter 20265,600
Celebrity Cruises —
Edge-class:
Celebrity AscentChantiers de l'Atlantique4th Quarter 20233,250
UnnamedChantiers de l'Atlantique4th Quarter 20253,250
Silversea Cruises —
Evolution Class:
Silver RayMeyer 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 Berths40,830
During the second quarter of 2017,ended June 30, 2023, we entered into agreements with Meyer Turku to build two "Project Icon" ships. Subsequently, in October 2017, we entered into credit agreementsreceived commitments for the unsecured financing of these shipsthe fifth Edge-class ship for up to 80% of eachthe ship’s contract price. For each ship,price and our building contract with Chantiers de l'Atlantique became effective. Bpifrance Assurance Export, the official FinnishFrench export credit agency, Finnvera, plc, has agreed to guarantee to the lenders a substantial majority100% of the financing, with a smaller portion offinancing.
In June 2023, we amended the financingcredit agreement for Celebrity Ascent, to be 95% guaranteed by Euler Hermes,increase the official German export credit agency. The maximum loan amount under each facility is not to exceed €1.4 billion,by €32.1 million or approximately $1.7 billion,$35.0 million based on the exchange rate at SeptemberJune 30, 2017.2023. Interest on approximately 75%the incremental portion of eachthe 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 LIBORequal to Term SOFR 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 a capacity of approximately 5,650 berths and are expected to enter service in the second quarters of 2022 and 2024, respectively.1.45%.

In July 2017, we entered into credit agreements for the unsecured financing of the third and fourth Edge-class ships and the fifth Oasis-class ship for up to 80% 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 delivery 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 third
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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 SeptemberJune 30, 2017,2023, the aggregate cost of our ships on order presented in the table above, not including any ships on order by our Partner Brands, was approximately $13.0$11.0 billion, of which we had deposited $323.2 million$1.0 billion as of such date. Approximately 53.8% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at September 30, 2017. Refer to Note 10. 11. Fair Value Measurements and Derivative Instruments for further information.

Litigation

As previously reported, a lawsuit was filed against us in August 2019 in the U.S. District Court for the Southern District of Florida (the "Court") under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation alleges it holds an interest in the Havana Cruise Port Terminal, which was expropriated by the Cuban government. The complaint further alleges that we trafficked in the terminal by embarking and disembarking passengers at these facilities. The plaintiff seeks all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs.
The Court entered final judgment in December 2022 in favor of the plaintiff and awarded damages and attorneys' fees to the plaintiff in the aggregate amount of approximately $112 million. We have appealed the judgment to the United States Court of Appeals for the 11th Circuit and the plaintiff has cross-appealed with regards to the interest calculation used for purposes of
18

determining damages. We believe we have meritorious grounds for and intend to vigorously pursue our appeal. During the fourth quarter of 2022, we recorded a charge of approximately $130.0 million to Other (expense) income within our consolidated statements of comprehensive income (loss) related to the Havana Docks Action, including post-judgment interest and related legal defense costs and bonding fees.
In addition, we are routinely involved in claims typical within the cruise vacation industry. 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.

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

Dividends
In September 2017,We did not declare any dividends during the six months ended June 30, 2023 and 2022. We were previously restricted under certain of our credit facilities from paying dividends while waivers to the financial covenants within such facilities were in effect. While the waivers have now expired, in the event we declareddeclare a dividend, we will need to repay the principal amounts deferred under our export credit facilities.
Noncontrolling Interests
Effective March 31, 2023, we closed the previously announced partnership with iCON. We sold 80% of the entity which owns our terminal at PortMiami for $208.9 million and retained a 20% minority interest. The cash dividend on our common stockconsideration received, net of $0.60 per share whichtransaction costs, was allocated between paid in October 2017. Duringcapital and noncontrolling interest in the firstaccompanying consolidated statement of shareholders' equity for the six months ended June 30, 2023. Refer toNote 5. Investments 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, we also paid a cash dividend on our common stock of $0.48 per share which was declared during the fourth quarter of 2016.

During 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.

In April 2017, our board of directors authorized a 12-month common stock repurchase program Other Assets 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 timefurther information 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.transaction.


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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 ninesix months ended SeptemberJune 30, 20172023 and 20162022 (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 Six Months Ended June 30, 2023Accumulated Other Comprehensive Loss for the Six Months Ended June 30, 2022
Changes
related to
cash flow
derivative
hedges		 Changes in
defined
benefit plans		 Foreign
currency
translation
adjustments		 Accumulated other
comprehensive loss		 Changes
related to
cash flow
derivative
hedges		 Changes in
defined
benefit plans		 Foreign
currency
translation
adjustments		 Accumulated other
comprehensive loss		 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) $(1,328,433)Accumulated comprehensive loss at beginning of the year$(638,011)$(7,921)$2,718 $(643,214)$(646,473)$(56,835)$(7,577)$(710,885)
Other comprehensive income (loss) before reclassifications230,341
 (7,130) 14,210
 237,421
 (9,150) (13,521) 8,423
 (14,248)Other comprehensive income (loss) before reclassifications(40,747)(962)(9,809)(51,518)207,406 26,107 20,460 253,973 
Amounts reclassified from accumulated other comprehensive loss151,319
 850
 —
 152,169
 263,774
 1,373
 —
 265,147
Amounts reclassified from accumulated other comprehensive loss14,038 690 — 14,728 (95,998)1,658 — (94,340)
Net current-period other comprehensive income (loss)381,660
 (6,280) 14,210
 389,590
 254,624
 (12,148) 8,423
 250,899
Net current-period other comprehensive income (loss)(26,709)(272)(9,809)(36,790)111,408 27,765 20,460 159,633 
Ending balance$(439,190) $(34,363) $(53,341) $(526,894) $(977,449) $(38,595) $(61,490) $(1,077,534)Ending balance$(664,720)$(8,193)$(7,091)$(680,004)$(535,065)$(29,070)$12,883 $(551,252)


The following table presents reclassifications out of accumulated other comprehensive income (loss)loss for the quarters and ninesix months ended SeptemberJune 30, 20172023 and 20162022 (in thousands):

 Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income 
Details About Accumulated Other Comprehensive Loss ComponentsQuarter Ended June 30, 2023Quarter Ended June 30, 2022Six Months Ended June 30, 2023Six Months Ended June 30, 2022Affected Line Item in Statements of
Comprehensive Income (Loss)
Gain (loss) on cash flow derivative hedges:  
Interest rate swaps$10,491 $(5,152)$20,439 $(15,585)Interest expense, net of interest capitalized
Foreign currency forward contracts(4,363)(4,294)(8,726)(8,359)Depreciation and amortization expenses
Foreign currency forward contracts(9,518)(471)(10,019)(1,689)Other (expense) income
Fuel swaps— 15 — (354)Other (expense) income
Fuel swaps(12,068)77,181 (15,732)121,985 Fuel
 (15,458)67,279 (14,038)95,998  
Amortization of defined benefit plans:  
Actuarial loss(345)(930)(690)(1,658)Payroll and related
 (345)(930)(690)(1,658) 
Total reclassifications for the period$(15,803)$66,349 $(14,728)$94,340  

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 June 30, 2023Fair Value Measurements at December 31, 2022
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)
$726,424 $726,424 $726,424 $— $— $1,935,005 $1,935,005 $1,935,005 $— $— 
Total Assets$726,424 $726,424 $726,424 $— $— $1,935,005 $1,935,005 $1,935,005 $— $— 
Liabilities:
Long-term debt (including current portion of debt)(5)
$20,067,802 $21,873,063 $— $21,873,063 $— $23,039,859 $22,856,306 $— $22,856,306 $— 
Total Liabilities$20,067,802 $21,873,063 $— $21,873,063 $— $23,039,859 $22,856,306 $— $22,856,306 $— 
  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 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. We valued our senior notes and convertible notes using a quoted market price, which is considered a Level 2 input as it is observable in the market; however, these instruments have a limited trading volume and as such this fair value estimate is not necessarily indicative of the value at which the instruments could be retired or transferred.

(3) Inputs that are unobservable. The Company did not use any Level 3 inputs as of June 30, 2023 and December 31, 2022.
(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.
Other Financial Instruments
The carrying amounts of accounts receivable, accounts payable, accrued interest and accrued expenses approximate fair value at SeptemberJune 30, 20172023 and December 31, 2016.
2022.
Assets and liabilities that are recorded at fair value have been categorized based upon the fair value hierarchy. The following table presents information about the Company’s financial instruments recorded at fair value on a recurring basis (in thousands):
 Fair Value Measurements at June 30, 2023Fair Value Measurements at December 31, 2022
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)
$171,629 $— $171,629 $— $203,802 $— $203,802 $— 
Total Assets$171,629 $— $171,629 $— $203,802 $— $203,802 $— 
Liabilities:        
Derivative financial instruments(4)
$141,832 $— $141,832 $— $135,608 $— $135,608 $— 
Total Liabilities$141,832 $— $141,832 $— $135,608 $— $135,608 $— 
  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. No Level 1 inputs were used in fair value measurements of other financial instruments as of June 30, 2023 and December 31, 2022.

(2)Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. 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” 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.
(3)Inputs that are unobservable. No Level 3 inputs were used in fair value measurements of other financial instruments as of June 30, 2023 and December 31, 2022.
(4)Consists of foreign currency forward contracts, interest rate and fuel swaps. Refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type.

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 SeptemberJune 30, 20172023 or December 31, 2016,2022, or that will be realized in the future, and do not include expenses that could be incurred in an actual sale or settlement.

Nonfinancial Instruments Recorded at Fair Value on a Nonrecurring Basis
Nonfinancial instruments include items such as goodwill, indefinite-lived intangible assets, long-lived assets, right-of-use assets and equity method investments that are measured at fair value on a nonrecurring basis when events and circumstances indicate the carrying value is not recoverable. There were no nonfinancial instruments recorded at fair value as of June 30, 2023.
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 June 30, 2023As of December 31, 2022
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$171,629 $(83,061)$— $88,568 $203,802 $(105,228)$— $98,574 
Total$171,629 $(83,061)$— $88,568 $203,802 $(105,228)$— $98,574 
  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 June 30, 2023As of December 31, 2022
 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
 $(346,887)Derivatives subject to master netting agreements$(141,832)$83,061 $— $(58,771)$(135,608)$105,228 $— $(30,380)
Total $(189,163) $117,065
 $—
 $(72,098) $(373,497) $19,397
 $7,213
 $(346,887)Total$(141,832)$83,061 $— $(58,771)$(135,608)$105,228 $— $(30,380)
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 SeptemberJune 30, 2017,2023, we had counterparty credit risk exposure under our derivative instruments of approximately $101.6$98.9 million, which was limited to the cost of replacing the contracts in the event of non-performance by the counterparties to the contracts, the majority of which are currently our lending banks. As of 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 highly 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 SeptemberJune 30, 20172023 and December 31, 2016,2022, approximately 48.8%86% and 40.5%75%, respectively, of our long-term debt was effectively fixed.fixed-rate debt, which is net of our interest rate swap agreements. We use interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense.
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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 SeptemberJune 30, 2017 2023and December 31, 2016, we maintained2022, there were no interest rate swap agreements on the followingfor fixed-rate debt instruments: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, 2017
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%
 $807,500
    

These interest rate swap agreements are accounted for as fair value hedges.

Market risk associated with our long-term floating 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.the market risk of increasing interest rates. At SeptemberJune 30, 20172023 and December 31, 2016,2022, we maintained interest rate swap agreements on the following floating-rate debt instruments:
Debt InstrumentSwap Notional as of June 30, 2023 (in thousands)Maturity
Debt Floating Rate (3)
All-in Swap Fixed Rate as of June 30, 2023
Celebrity Reflection term loan
$81,813 October 2024LIBOR plus0.40%2.85%
Quantum of the Seas term loan
214,375 October 2026LIBOR plus1.30%3.74%
Anthem of the Seas term loan
241,667 April 2027LIBOR plus1.30%3.86%
Ovation of the Seas term loan
345,833 April 2028LIBOR plus1.00%3.16%
Harmony of the Seas term loan (1)
315,251 May 2028EURIBOR plus1.15%2.26%
Odyssey of the Seas term loan (2)
364,167 October 2032LIBOR plus0.96%3.21%
Odyssey of the Seas term loan (2)
182,083 October 2032LIBOR plus0.96%2.84%
$1,745,189 
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-floors matching the hedged debt EURIBOR zero-floor. Amount presented is based on the exchange rate as of SeptemberJune 30, 2017.2023.

(2)Interest rate swap agreements hedging the term loan of Odyssey of the Seas include LIBOR zero-floors matching the debt LIBOR zero-floor.
(3)During the quarter ended June 30, 2023, we completed our transition from LIBOR to Term SOFR rates for substantially all of our Interest rate swap agreements, with such transition to take effect at the next respective interest reset date for each such agreement.
These interest rate swap agreements are accounted for as cash flow hedges.
The notional amount of interest rate swap agreements related to outstanding debt as of SeptemberJune 30, 20172023 and December 31, 20162022 was $3.9$1.7 billion and $4.0$1.9 billion, respectively.
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 SeptemberJune 30, 2017,2023, 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$11.0 billion, of which we had deposited $323.2 million$1.0 billion as of such date. These amounts do not include any ships placed on order that are contingent upon completion of conditions precedent and/or financing and any ships on order by our Partner Brands. Refer to Note 8. Commitments and Contingencies, for further information on our ships on order. At SeptemberJune 30, 20172023 and December 31, 2016,2022, approximately 53.8%42.3% and 66.7%52.3%, 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 thirdsecond quarter of 2017, we maintained an2023 and 2022 the average notional amount of approximately $823.0 million of these foreign currency forward contracts.contracts was approximately $1.3 billion, respectively. These instruments are not designated as hedging instruments. ChangesFor the quarters ended June 30, 2023 and 2022, changes in the fair value of the foreign currency forward contracts resulted in a gain (loss),gains (losses) of approximately $22.0$8.3 million and $(2.5)$(80.9) million, duringrespectively, which offset (losses) 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 $(16.3) million and $(11.8)$78.6 million, during the nine months ended September 30, 2017 and September 30, 2016, respectively, thatrespectively. These amounts were recognized in earnings within Other expense (expense) income in our consolidated statements of comprehensive income (loss). For the six months ended June 30, 2023 and 2022, changes in the fair value of the foreign currency forward contracts resulted in gain (losses) of $12.4 million and $(87.9) million, respectively, which offset (losses) gains arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies in those same periods of $(27.3) million and $85.8 million, respectively. These amounts were recognized in earnings within Other (expense) income in our consolidated statements of comprehensive income (loss).

The notional amount of outstanding foreign exchange contracts, excluding the forward contracts entered into to minimize remeasurement volatility, as of June 30, 2023 and December 31, 2022 was $4.0 billion and $2.9 billion, respectively.
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Non-Derivative Instruments
We consider our investmentsinvestment in our foreign operations to be denominated in relatively stable currencies and to be of a long-term nature. As of September 30, 2017, we maintained foreign currency forward contracts and designated them as hedges of a portion of our net investment in TUI cruises of €101.0 million, or approximately $119.4 million based on the exchange rate at September 30, 2017. These forward currency contracts mature in October 2021.

The notional amount of outstanding foreign exchange contracts including our forward contracts as of September 30, 2017 and December 31, 2016 was $4.1 billion and $1.3 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€461.8 million, or approximately $284.9$503.9 million, as of SeptemberJune 30, 2017.2023. As of December 31, 2022, we had designated debt as a hedge of our net investments primarily in TUI Cruises of €433.0 million, or approximately $461.9 million.

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.
Changes in the fair value of fuel swaps for which cash flow hedge accounting was discontinued are currently recognized in Other (expense) income foreach reporting period through the maturity dates of the fuel swaps. For the quarter ended June 30, 2023 and June 30, 2022, we did not discontinue cash flow hedge accounting on any of our fuel swap agreements.
At SeptemberJune 30, 2017,2023, we have hedged the variability in future cash flows for certain forecasted fuel transactions occurring through 2021.2024 and 2025. As of SeptemberJune 30, 20172023 and December 31, 2016,2022, we had the following outstanding fuel swap agreements:
 Fuel Swap Agreements
 As of June 30, 2023As of December 31, 2022
Designated as hedges:(metric tons)
2023448,100 825,651 
2024791,051 — 
2025456,000 — 
 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 June 30, 2023As of December 31, 2022
Designated hedges as a % of projected fuel purchases:(% hedged)
202354 %50 %
202445 %— %
202525 %— %

 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% —
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At SeptemberJune 30, 2017 and December 31, 2016, $81.72023, there was $31.7 million and $138.5 million, respectively, of estimated unrealized net loss associated with our cash flow hedges pertaining to fuel swap agreements werethat is expected to be reclassified to earnings from Accumulated other comprehensive loss within the next twelve months.months when compared to $7.9 million of estimated unrealized net loss at December 31, 2022. Reclassification is expected to occur as the result of fuel consumption associated with our hedged forecasted fuel purchases.

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 June 30, 2023As of December 31, 2022Balance Sheet LocationAs of June 30, 2023As of December 31, 2022
Fair ValueFair ValueFair ValueFair Value
Derivatives designated as hedging instruments under ASC 815-20(1)
Interest rate swapsOther assets$106,608 $115,049 Other long-term liabilities$— $— 
Foreign currency forward contractsDerivative financial instruments33,357 18,892 Derivative financial instruments67,836 84,953 
Foreign currency forward contractsOther assets17,806 25,504 Other long-term liabilities3,106 150 
Fuel swapsDerivative financial instruments13,159 40,191 Derivative financial instruments44,028 46,359 
Fuel swapsOther assets699 4,166 Other long-term liabilities26,862 4,147 
Total derivatives designated as hedging instruments under 815-20$171,629 $203,802 $141,832 $135,609 
  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 CodificationSubtopic 815-20 “Derivatives and Hedging.Hedging-General”

under ASC 815.
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 June 30, 2023As of December 31, 2022
Foreign currency debtCurrent portion of long-term debt$63,712 $62,282 
Foreign currency debtLong-term debt440,181 399,577 
$503,893 $461,859 
The effect of derivative instruments qualifying and designated as hedging instruments and the related hedged items in fair value hedges on the consolidated statements of comprehensive income (loss) was as follows:follows (in thousands):
Derivatives and Related Hedged Items under ASC 815-20 Fair Value Hedging RelationshipsLocation of Gain (Loss) Recognized in Income on Derivative and Hedged ItemAmount of Gain (Loss)
Recognized in
Income on Derivative		Amount of Gain (Loss)
Recognized in
Income on Hedged Item
Quarter Ended June 30, 2023Quarter Ended June 30, 2022Six Months Ended June 30, 2023Six Months Ended June 30, 2022Quarter Ended June 30, 2023Quarter Ended June 30, 2022Six Months Ended June 30, 2023Six Months Ended June 30, 2022
Interest rate swapsInterest expense, net of interest capitalized$— $(1,170)$— $(4,535)$— $2,927 $— $8,951 
$— $(1,170)$— $(4,535)$— $2,927 $— $8,951 
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 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 June 30, 2023Quarter Ended June 30, 2022Six Months Ended June 30, 2023Six Months Ended June 30, 2022
Interest rate swaps$23,419 $29,251 $12,800 $104,116 
Foreign currency forward contracts(8,672)(122,915)12,748 (162,977)
Fuel swaps(25,216)76,451 (66,295)266,267 
 $(10,469)$(17,213)$(40,747)$207,406 
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)

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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 (Loss) Gain Recognized in Other Comprehensive Income (Loss)
Non-derivative instruments under ASC 815-20 Net
Investment Hedging Relationships		Quarter Ended June 30, 2023Quarter Ended June 30, 2022Six Months Ended June 30, 2023Six Months Ended June 30, 2022
Foreign Currency Debt$(2,258)$16,814 $(11,238)$19,559 
 $(2,258)$16,814 $(11,238)$19,559 
  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 and nine months ended September 30, 2017and September 30, 2016, respectively.


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 June 30, 2023Quarter Ended June 30, 2022Six Months Ended June 30, 2023Six Months Ended June 30, 2022
(In thousands)    
  
  
  
Foreign currency forward contracts Other expense $21,951
 $(2,464) $57,019
 $(11,712)Foreign currency forward contractsOther (expense) income$8,255 $(80,897)$12,372 $(87,882)
Fuel swaps Other expense (175) (1,172) (255) (1,224)Fuel swapsOther (expense) income— 273 — 266 
   $21,776
 $(3,636) $56,764
 $(12,936)  $8,255 $(80,624)$12,372 $(87,616)
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
As of June 30, 2017, four of our interest rate derivative instruments had reached their fifth anniversary; however,2023, our senior unsecured debt credit rating was BBB-B by Standard & Poor’sPoor's and Baa3B3 by Moody’sMoody's. As of June 30, 2023, five of our interest rate derivative hedges had reached their fifth-year anniversary; however, the net market value for these derivative hedges were in a net asset position, and accordingly, we were not required to post any collateral as of such date. As of December 31, 2016, two of our interest rate derivative instruments had reached their fifth anniversary. As 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 of our interest rate derivatives instruments, all collateral that was posted with our counterparties was returned upon reaching investment grade.
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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),future periods, 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 ninesix months ended SeptemberJune 30, 20172023, compared to the same periodsperiod in 2016;2022; and

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

•a discussion of our liquidity and capital resources, including our future capital and contractual commitmentsmaterial cash requirements 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, 2016.2022.

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.

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, casino operations, 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 agentadvisor 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;

•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 EBITDA is a non-GAAP measure that represents EBITDA (as defined below) excluding certain items that we believe adjusting for is meaningful when assessing our profitability on a comparative basis. For the 2023 and 2022 periods, these items included (i) other (income) expense; (ii) gain on sale of controlling interest; (iii) recovery of losses from one of our equity method investees; (iv) impairment and credit losses (recoveries); and (v) restructuring charges and other initiative expenses. A reconciliation of Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. to Adjusted EBITDA is provided below under Results of Operations.
Adjusted Earnings (Loss) per Share ("Adjusted EPS") is a non-GAAP measure thatrepresents Adjusted Net Income (Loss) attributable to Royal 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. A reconciliation of Earnings (Loss) per Share to Adjusted Loss per share is provided below under Results of Operations.
Adjusted Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. is a non-GAAP measure that represents net incomeNet Income (Loss) attributable to Royal Caribbean Cruises Ltd. 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) loss on the net loss related toextinguishment of debt; (ii) gain on sale of controlling interest; (iii) tax on the eliminationsale of PortMiami noncontrolling interest; (iv) Silver Whisper deferred tax liability release; (v) recovery of losses from one of our equity method investees; (vi) impairment and credit losses (recoveries); (vii) the amortization of the Pullmantur reporting lag,Silversea Cruises intangible assets resulting from the net gain related to the 51% sale of the PullmanturSilversea Cruises acquisition in 2018; and CDF Croisières de France ("CDF") brands,(viii) restructuring charges and other initiative costs relatedexpenses. A reconciliation of Net Income (Loss) attributable to our Pullmantur right-sizing strategy and other restructuring initiatives.Royal Caribbean Cruises Ltd. to Adjusted Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. Loss is provided below under Results of Operations.

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.
EBITDA is a non-GAAP measure that represents Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. excluding (i) interest income; (ii) interest expense, net of interest capitalized; (iii) depreciation and amortization expenses; and (iv) income tax benefit or expense. We believe that this non-GAAP measure is meaningful when assessing our operating performance on a comparative basis. A reconciliation of Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. to EBITDA is provided below under Results of Operations.
Gross Cruise Costsrepresent 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 and Net Cruise Costs Excluding Fuel are non-GAAP measures that 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.Operations. For the periods presented, Net Cruise Costs and Net Cruise Costs Excluding Fuel excludes (i) the net gain related to the 51%on sale of the Pullmanturcontrolling interest; (ii) impairment and CDF brands, credit losses (recoveries); and (iii) restructuring charges and other initiative costsexpenses.
Gross Margin Yield represent Gross Margin per APCD.
Adjusted Gross Margin represent Gross Margin, adjusted for payroll and related, food, fuel, other operating expenses, and depreciation and amortization. Gross Margin is calculated pursuant to our Pullmantur right-sizing strategy and other restructuring initiatives.

Net Revenues representGAAP as total revenues less commissions, transportation and othertotal cruise operating expenses, and onboarddepreciation and other expenses (each of which is described above under the Description of Certain Line Items heading).amortization.
24

Net Yields represent Net RevenuesAdjusted Gross Margin per APCD. We utilize Net RevenuesAdjusted Gross Margin 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, 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 believe Net Yields, Net 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 if the current periods’ currency exchange rates had remained constant with the comparable prior periods’ rates, or on a “Constant Currency” basis.
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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 change the impact of the purely currency-based fluctuations.
The use 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 standard GAAP based financial measures. There are no specific rules or regulations for determining non-GAAP and Constant Currency measures, and as such, there exists the possibility that they may not be comparable to other companies within the industry.

We havehave not provided a quantitative reconciliation of (i) projected Total revenuesnon-GAAP financial measures 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 Sharethe most comparable GAAP financial measures because preparation of meaningful U.S. GAAP projections of Total 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 of our related hedging programs. In addition, we are unable to determine the future impact of restructuring expenses or other non-core business related gains and losses which may result from strategic initiatives. These items are uncertain and could be material to our results of operations in accordance with U.S 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 incomeNet Income attributable to Royal Caribbean Cruises Ltd. and Adjusted Net Income attributable to Royal Caribbean Cruises Ltd. for the thirdsecond quarter of 2017 were $752.82023 was $458.8 million or $3.49 per share on a diluted basisand $491.7 million, reflecting our full operations at higher occupancy in 2023, compared to net incomeNet Loss and Adjusted Net Loss of $(521.6) million and $(530.0) million, respectively, for the second quarter of 2022.
Net Income attributable to Royal Caribbean Cruises Ltd. and Adjusted Net Income of $693.3attributable to Royal Caribbean Cruises Ltd. for the six months ended June 30, 2023 was $410.9 million and $690.9$432.8 million, or $3.21compared to Net Loss and $3.20 per share on a diluted basis,Adjusted Net Loss of $1,688.7 million and $1,694.4 million, respectively, for the third quarter of 2016.

Both our net income and Adjusted Net Income for the ninesix months ended SeptemberJune 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.

2022.
Significant items for the quarter and ninesix months ended SeptemberJune 30, 20172023 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•Total revenues, increased $1.3 billion and Adjusted Net Income$3.2 billion, respectively, for the quarter and ninesix months ended SeptemberJune 30, 2017.

The effect of changes 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 in total revenues of $14.8 million for the quarter and a decrease of $16.6 million for the nine months ended September 30, 2017, respectively,2023 as compared to the same periodsperiod in 2016.2022. The increase reflects our full operations in 2023 including a 13.7% and 27.5% higher capacity, and a 28.0% and 44.9% higher occupancy for the quarter ended and six months ended June 30, 2023, respectively, as well as an increase in ticket prices, compared to a partial return to operations during the same period in 2022.

•Total revenues, excluding the effect of changes in foreign currency exchange rates, decreased $9.0 millioncruise operating expenses, increased $0.3 billion and increased $203.2 million$0.9 billion, respectively, for the quarter and ninesix months ended SeptemberJune 30, 2017, respectively,2023 as compared to the same periodsperiod in 2016.2022. The decreaseincrease reflects our full operations in 2023 at higher capacity and occupancy, compared to a partial return to operations during the quarter was duesame period in 2022.
•In January 2023, we amended and extended the majority of our two unsecured revolving credit facilities. The amendment has extended the maturities of $2.3 billion of the $3.0 billion aggregate revolving capacity by one year to April 2025, with the decreaseremainder maturing in capacity, including the hurricane-related disruptionsApril 2024. Additionally, during the third quartersix months ended June 30, 2023, we repaid $2.7 billion under our revolving credit facilities, resulting in an aggregate borrowing capacity of 2017,$3.0 billion under the facilities as of June 30, 2023.
•In February 2023, we issued $700 million aggregate principal amount of 7.25% Priority Guaranteed Notes. Upon closing, we terminated our commitment for the $700 million 364-day term loan facility. In addition, the remaining $350 million backstop committed financing was also terminated upon closing.
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•Effective March 31, 2023, we closed on the previously announced partnership with iCON. As part of the transaction, we sold 80% of PortMiami for $208.9 million and retained a 20% minority interest. The partnership will own, develop, and manage cruise terminal facilities and infrastructure in key ports of call, initially including several development projects in Italy, Spain, and the increase during the nine months was primarily due to an increase in ticket prices and onboard spending on a per passenger basis, which are further discussed below.

Total cruise operating expenses decreased $21.9 million and $141.4 million for the quarter and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The decreases were primarily due to 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.

The effect of changes in foreign currency exchange rates related to our cruise operating expenses, denominated in currencies other than the United States dollar, was immaterial to our consolidated statements of comprehensive income (loss) for the quarter and nine months ended September 30, 2017.
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Other Items

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

During the second quarter of 2017, we entered into agreements with Meyer Turku to build two "Project Icon" ships. 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.U.S. Virgin Islands. Refer to Note 7. Commitments5. Investments and Contingencies toOther Assets in our consolidated financial statements for further information.
information on the transaction.

During the third quarter of 2017,•In June 2023, we entered into an agreement to purchase a ship for our Azamara Club Cruises brand. The sale is expected to be completed with thetook delivery of Silver Nova.
•In June 2023, we repaid $392.0 million of our 11.50% secured senior notes due in June 2025.
•In June 2023, our 4.25% Convertible Senior Notes with an outstanding balance of $350 million were settled using a combination of $337.8 million in cash, and the ship scheduled for March 2018.issuance of approximately 374,000 shares of common stock. The issuance of equity increased additional paid in capital by $12.1 million.

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For further information regarding the debt transactions discussed above, refer to Note 6. Debt to our consolidated financial statements.
Operating results for the quarter and ninesix months ended SeptemberJune 30, 20172023 compared to the same period in 20162022 are shown in the following table (in thousands, except per share data):
 Quarter Ended June 30,
 20232022
% of Total
Revenues		% of Total
Revenues
Passenger ticket revenues$2,443,506 69.4 %$1,418,203 64.9 %
Onboard and other revenues1,079,476 30.6 %766,039 35.1 %
Total revenues3,522,982 100.0 %2,184,242 100.0 %
Cruise operating expenses:
Commissions, transportation and other516,007 14.6 %329,859 15.1 %
Onboard and other220,315 6.3 %155,570 7.1 %
Payroll and related284,372 8.1 %327,141 15.0 %
Food202,695 5.8 %155,226 7.1 %
Fuel275,918 7.8 %275,179 12.6 %
Other operating455,569 12.9 %436,944 20.0 %
Total cruise operating expenses1,954,876 55.5 %1,679,919 76.9 %
Marketing, selling and administrative expenses434,848 12.3 %371,425 17.0 %
Depreciation and amortization expenses361,677 10.3 %351,542 16.1 %
Operating Income (Loss)771,581 21.9 %(218,644)(10.0)%
Other income (expense):
Interest income9,583 0.3 %6,490 0.3 %
Interest expense, net of interest capitalized(355,512)(10.1)%(302,706)(13.9)%
Equity investment income (loss)42,014 1.2 %(13,179)(0.6)%
Other (expense) income(5,386)(0.2)%6,457 0.3 %
(309,301)(8.8)%(302,938)(13.9)%
Net Income (Loss)$462,280 13.1 %$(521,582)(23.9)%
Less: Net Income attributable to noncontrolling interest3,519 0.1 %— — %
Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.$458,761 13.0 %$(521,582)(23.9)%
Diluted Earnings (Loss) per Share$1.70 $(2.05)


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Quarter Ended September 30, Nine months ended September 30,Six Months Ended June 30,
2017 2016 2017 201620232022
  % of Total
Revenues		   % of Total
Revenues		   % 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 %Passenger ticket revenues$4,340,022 67.7 %$2,070,061 63.8 %
Onboard and other revenues676,392
 26.3 % 663,785
 25.9 % 1,880,618
 27.8 % 1,792,145
 27.2 %Onboard and other revenues2,068,106 32.3 %1,173,412 36.2 %
Total revenues2,569,544
 100.0 % 2,563,741
 100.0 % 6,773,378
 100.0 % 6,586,798
 100.0 %Total revenues6,408,128 100.0 %3,243,473 100.0 %
Cruise operating expenses: 
  
  
  
  
  
  
  
Cruise operating expenses:
Commissions, transportation and other409,597
 15.9 % 400,933
 15.6 % 1,060,176
 15.7 % 1,060,391
 16.1 %Commissions, transportation and other918,937 14.3 %480,202 14.8 %
Onboard and other157,041
 6.1 % 159,887
 6.2 % 395,472
 5.8 % 399,739
 6.1 %Onboard and other378,950 5.9 %230,009 7.1 %
Payroll and related210,764
 8.2 % 214,081
 8.4 % 636,861
 9.4 % 671,955
 10.2 %Payroll and related594,370 9.3 %676,759 20.9 %
Food126,223
 4.9 % 125,732
 4.9 % 369,198
 5.5 % 371,759
 5.6 %Food402,086 6.3 %255,410 7.9 %
Fuel160,752
 6.3 % 178,772
 7.0 % 508,914
 7.5 % 531,283
 8.1 %Fuel577,431 9.0 %463,659 14.3 %
Other operating253,892
 9.9 % 260,718
 10.2 % 780,257
 11.5 % 857,161
 13.0 %Other operating876,007 13.7 %758,822 23.4 %
Total cruise operating expenses1,318,269
 51.3 % 1,340,123
 52.3 % 3,750,878
 55.4 % 3,892,288
 59.1 %Total cruise operating expenses3,747,781 58.5 %2,864,861 88.3 %
Marketing, selling and administrative expenses273,637
 10.6 % 259,327
 10.1 % 874,957
 12.9 % 852,435
 12.9 %Marketing, selling and administrative expenses895,703 14.0 %765,455 23.6 %
Depreciation and amortization expenses240,150
 9.3 % 229,328
 8.9 % 710,836
 10.5 % 661,712
 10.0 %Depreciation and amortization expenses721,450 11.3 %691,009 21.3 %
Operating Income737,488
 28.7 % 734,963
 28.7 % 1,436,707
 21.2 % 1,180,363
 17.9 %
Operating Income (Loss)Operating Income (Loss)1,043,194 16.3 %(1,077,852)(33.2)%
Other income (expense): 
  
  
  
  
  
  
  
Other income (expense):
Interest income4,693
 0.2 % 6,472
 0.3 % 16,756
 0.2 % 14,875
 0.2 %Interest income24,391 0.4 %9,812 0.3 %
Interest expense, net of interest capitalized(73,233) (2.9)% (82,610) (3.2)% (230,182) (3.4)% (226,803) (3.4)%Interest expense, net of interest capitalized(714,899)(11.2)%(580,365)(17.9)%
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)%
Equity investment income (loss)Equity investment income (loss)62,485 1.0 %(44,238)(1.4)%
Other (expense) incomeOther (expense) income(771)— %3,919 0.1 %
15,354
 0.6 % (41,706) (1.6)% (99,613) (1.5)% (158,061) (2.4)%(628,794)(9.8)%(610,872)(18.8)%
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
  
Net Income (Loss)Net Income (Loss)$414,400 6.5 %$(1,688,724)(52.1)%
Less: Net Income attributable to noncontrolling interestLess: Net Income attributable to noncontrolling interest3,549 0.1 %— — %
Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.$410,851 6.4 %$(1,688,724)(52.1)%
Diluted Earnings (Loss) per ShareDiluted Earnings (Loss) per Share$1.60 $(6.63)




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Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. and Adjusted Net Income and Adjusted Earnings per Share(Loss) attributable to Royal Caribbean Cruises Ltd, were calculated as follows (in thousands, except per share data):
 Quarter Ended June 30,Six Months Ended June 30,
 2023202220232022
Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.$458,761 $(521,582)$410,851 $(1,688,724)
Loss on extinguishment of debt30,229 — 43,518 — 
Gain on sale of controlling interest (1)— — (3,130)— 
PortMiami tax on sale of noncontrolling interest (2)— — 10,020 — 
Silver Whisper deferred tax liability release (3)— — (25,784)— 
Recovery of losses from one of our equity method investees(4,228)— (4,228)— 
Impairment and credit losses (recoveries) (4)— (10,943)(6,990)(10,770)
Amortization of Silversea Cruises intangible assets resulting from the Silversea Cruises acquisition (5)1,623 1,623 3,246 3,246 
Restructuring charges and other initiative expenses5,288 902 5,288 1,875 
Adjusted Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.$491,673 $(530,000)$432,791 $(1,694,373)
Basic:  
Earnings (Loss) per Share$1.79 $(2.05)$1.61 $(6.63)
Adjusted Earnings (Loss) per Share$1.92 $(2.08)$1.69 $(6.65)
Diluted:
Earnings (Loss) per Share (6)$1.70 $(2.05)$1.60 $(6.63)
Adjusted Earnings (Loss) per Share (6)$1.82 $(2.08)$1.69 $(6.65)
Weighted-Average Shares Outstanding:
Basic255,805 254,964 255,636 254,893 
Diluted281,913 254,964 258,741 254,893 
(1)Represents gain on sale of controlling interest in cruise terminal facilities in Italy. These amounts are included in Other operating within our consolidated statements of comprehensive income (loss).
(2)Represents tax on the PortMiami sale of noncontrolling interest. These amounts are included in Other (expense) income in our consolidated statements of comprehensive income (loss). Refer to Note 5. Investments and Other Assets to our consolidated financial statements for further information on the transaction.
(3)Represents the release of the deferred tax liability subsequent to the execution of the bargain purchase option for the Silver Whisper. These amounts are included in Other (expense) income within our consolidated statements of comprehensive income (loss).
(4)Represents asset impairments and credit loss recoveries for notes receivables for which credit losses were previously recorded. These amounts are included in Other operating within our consolidated statements of comprehensive income (loss).
(5)Represents the amortization of the Silversea Cruises intangible assets resulting from the 2018 Silversea Cruises acquisition.
(6)Diluted EPS and Adjusted Diluted EPS includes the add-back of dilutive interest expense related to our convertible notes of $21.3 million and $4.2 million for the quarter and six months ended June 30, 2023, respectively. Refer to Note 4. Earnings (Loss) Per Share to our consolidated financial statements for further information.

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 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 June 30,Six Months Ended June 30,
 2023202220232022
Passengers Carried1,900,810 1,340,622 3,707,079 2,075,431 
Passenger Cruise Days12,297,290 8,443,745 23,772,032 12,862,644 
APCD11,708,837 10,295,996 22,942,326 17,988,902 
Occupancy105.0 %82.0 %103.6 %71.5 %

EBITDA and Adjusted EBITDA were calculated as follows (in thousands):
 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%
Quarter Ended June 30,Six Months Ended June 30,
2023202220232022
Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.$458,761 $(521,582)$410,851 $(1,688,724)
Interest income(9,583)(6,490)(24,391)(9,812)
Interest expense, net of interest capitalized355,512 302,706 714,899 580,365 
Depreciation and amortization expenses361,677 351,542 721,450 691,009 
Income tax expense (benefit) (1)7,806 (2,025)(537)4,553 
EBITDA1,174,173 124,151 1,822,272 (422,609)
Other (income) expense (2)(2,420)(4,432)1,308 (8,472)
Gain on sale of controlling interest (3)— — (3,130)— 
Recovery of losses from one of our equity method investees(4,228)— (4,228)— 
Impairment and credit losses (recoveries) (4)— (10,943)(6,990)(10,770)
Restructuring charges and other initiative expenses5,288 902 5,288 1,875 
Adjusted EBITDA$1,172,813 $109,678 $1,814,520 $(439,976)

(1) Does not include November and December 2015    These amounts for Pullmantur as the net Pullmantur result for those months wasare included within in Other expense in(expense) income within our consolidated statements of comprehensive income (loss).
(2) Represents net non-operating income or expense. For the periods reported, primarily relates to gains or losses arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies. The amount excludes income tax expense (benefit), included in the EBITDA calculation above.
(3)    Represents gain on sale of controlling interest in cruise terminal facilities in Italy. These amounts are included in Other operating within our consolidated statements of comprehensive income (loss).
(4) Represents asset impairments and credit loss recoveries for the nine months ended September 30, 2016, as a resultnotes receivables for which credit losses were previously recorded. These amounts are included in Other operating within our consolidated statements 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.comprehensive income (loss).

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Gross Margin Yields and Net Yields were calculated by dividing Gross Margin and Adjusted Gross Margin by APCD as follows (in thousands, except APCD and Yields):

Quarter Ended June 30,Six Months Ended June 30,
2023202220232022
Total revenue$3,522,982 $2,184,242 $6,408,128 $3,243,473 
Less:
Cruise operating expenses1,954,876 1,679,919 3,747,781 2,864,861 
Depreciation and amortization expenses361,677 351,542 721,450 691,009 
Gross Margin1,206,429 152,781 1,938,897 (312,397)
Add:
Payroll and related284,372 327,141 594,370 676,759 
Food202,695 155,226 402,086 255,410 
Fuel275,918 275,179 577,431 463,659 
Other operating455,569 436,944 876,007 758,822 
Depreciation and amortization expenses361,677 351,542 721,450 691,009 
Adjusted Gross Margin$2,786,660 $1,698,813 $5,110,241 $2,533,262 
APCD11,708,837 10,295,996 22,942,326 17,988,902 
Gross Margin Yields$103.04 $14.84 $84.51 $(17.37)
Net Yields$238.00 $165.00 $222.74 $140.82 

`
30
 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 June 30,Six Months Ended June 30,
2023202220232022
Total cruise operating expenses$1,954,876 $1,679,919 $3,747,781 $2,864,861 
Marketing, selling and administrative expenses434,848 371,425 895,703 765,455 
Gross Cruise Costs2,389,724 2,051,344 4,643,484 3,630,316 
Less:
Commissions, transportation and other516,007 329,859 918,937 480,202 
Onboard and other220,315 155,570 378,950 230,009 
Net Cruise Costs Including Other Costs1,653,402 1,565,915 3,345,597 2,920,105 
Less:
Gain on sale of controlling interest (1)— — (3,130)— 
Impairment and credit recoveries (2)— (10,943)(6,990)(10,770)
Restructuring charges and other initiative expenses (3)5,288 902 5,288 1,875 
Net Cruise Costs1,648,114 1,575,956 3,350,429 2,929,000 
Less:
Fuel275,918 275,179 577,431 463,659 
Net Cruise Costs Excluding Fuel$1,372,196 $1,300,777 $2,772,998 $2,465,341 
APCD11,708,837 10,295,996 22,942,326 17,988,902 
Gross Cruise Costs per APCD$204.10 $199.24 $202.40 $201.81 
Net Cruise Costs per APCD$140.76 $153.06 $146.04 $162.82 
Net Cruise Costs Excluding Fuel per APCD$117.19 $126.34 $120.87 $137.05 
(1)    Represents gain on sale of controlling interest in cruise terminal facilities in Italy. These amounts are included in Other operating within our consolidated statements of comprehensive income (loss).
(2) Represents asset impairments and credit losses recoveries for notes receivables for which credit losses were previously recorded. These amounts are included in Other operating within our consolidated statements of comprehensive income (loss).
(3) These amounts are included in Marketing, selling and administrative expenses within our consolidated statements of comprehensive income (loss).

31
 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) ForQuarter Ended June 30, 2023 Compared to Quarter Ended June 30, 2022
In this section, references to 2023 refer to the quarter ended June 30, 2023 and ninereferences to 2022 refer to the quarter ended June 30, 2022.
Revenues
Total revenues for 2023 increased $1.3 billion to $3.5 billion from $2.2 billion in 2022.
Passenger ticket revenues comprised 69.4% of our 2023 total revenues. Passenger ticket revenues for 2023 increased by $1.0 billion, or 72.3% to $2.4 billion from $1.4 billion in 2022. The increase was primarily due to increase in ticket prices, and 28.0% higher occupancy in 2023 compared to the same period in 2022.
The remaining 30.6% of 2023 total revenues was comprised of Onboard and other revenues, which increased $0.3 billion, or 40.9% to $1.1 billion in 2023 from $766.0 million in 2022. The increase was primarily due to an increase in occupancy noted above in 2023 compared to the same period in 2022.
The increase in revenues reflect our full operations in 2023, compared to a partial return to operations during the same period in 2022. Occupancy in 2023 was 105.0% compared to 82.0% in 2022.
Onboard and other revenues included concession revenues of $115.2 million in 2023 and $80.6 million in 2022.
Cruise Operating Expenses
Total Cruise operating expenses for 2023 increased $0.3 billion to $2.0 billion from $1.7 billion in 2022. The increase was primarily due to:
•a $186.1 million increase in Commissions, transportation and other expenses;
•a $64.7 million increase in Onboard and other expenses; and
•a $47.5 million increase in Food expense.
The increase in operating expenses noted above reflects our full operations in 2023; at higher occupancy compared to the same period in 2022, as well as inflationary pressures on food expense.
Marketing, Selling and Administrative Expenses
Marketing, selling and administrative expenses for 2023 increased $63.4 million, or 17.1%, to $434.8 million from $371.4 million in 2022. The increase was primarily due to higher benefits expense related to our performance share awards driven by higher stock prices in 2023 compared to the same period in 2022.
Depreciation and Amortization Expenses
Depreciation and amortization expenses for 2023 increased $10.1 million, or 2.9%, to $361.7 million from $351.5 million in 2022. The increase was primarily due to depreciation expenses for Silver Endeavour, which was not part of our fleet during the same period in 2022.
Other (Expense) Income
Interest expense, net of interest capitalized for 2023increased $52.8 million, or 17.4%, to $355.5 million from $302.7 million in 2022. The increase was primarily due to loss on extinguishment of debt of $30.2 million, higher rates on refinancing transactions during the second half of 2022, as well as the impact of higher rates on floating-rate debt.
Equity investment income was $42.0 million for 2023 compared to Equity investment loss of$13.2 million in 2022. The increase in income was primarily due to income from TUI Cruises, one of our equity investments, in 2023 compared to losses in 2022.
Other Comprehensive Income (Loss)
Other comprehensive (loss) was $(2.1) millionin 2023 compared to $(56.6) million for the same period in 2022. The decrease in loss of $54.6 million, or 96.4% was primarily due to a Gain on cash flow derivative hedges in 2023 of $5.0 million compared to a Loss on cash flow derivative hedges in 2022 of $(84.5) million, mostly as a result of a significant decrease in fair value of our fuel swaps in 2023 compared to 2022.
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Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
In this section, references to 2023 refer to the six months ended SeptemberJune 30, 2016, amounts do not include restructuring charges of $1.9 million2023 and $6.6 million, respectively.

(2) Forreferences to 2022 refer to the ninesix months ended SeptemberJune 30, 2016, amount does not include fuel expense2022
Revenues
Total revenues for 2023 increased $3.2 billion to $6.4 billion from $3.2 billion in 2022.
Passenger ticket revenues comprised 67.7% of $0.4 million included within other initiative costs associated with the redeploymentour 2023 total revenues. Passenger ticket revenues for 2023 increased by $2.3 billion to $4.3 billion from $2.1 billion in 2022. The increase was primarily due to increase in ticket prices, 44.9% higher occupancy, and higher capacity of Pullmantur’s Empress27.5% compared to the Royal Caribbean International brand.same period in 2022.
TableThe remaining 32.3% of Contents

2017 Outlook

2023 total revenues was comprised of Onboard and other revenues, which increased $0.9 billion to $2.1 billion in 2023 from $1.2 billion in 2022. The increase was primarily due to an increase in occupancy and higher capacity as noted above, in 2023 compared to the same period in 2022.
The Company doesincrease in revenues reflect our full operations in 2023, compared to a partial return to operations during the same period in 2022. Occupancy in 2023 was 103.6% compared to 71.5% in 2022.
Onboard and other revenues included concession revenues of $221.5 million in 2023 and $128.9 million in 2022.
Cruise Operating Expenses
Total Cruise operating expenses for 2023 increased $0.9 billion to $3.7 billion from $2.9 billion in 2022. The increase was primarily due to:
•a $438.7 million increase in Commissions, transportation and other expenses;
•a $148.9 million increase in Onboard and other expenses;
•a $146.7 million increase in Food expense; and
•a $113.8 million increase in Fuel expense.
The increase in operating expenses noted above reflects our to full operations in 2023; including additional capacity and higher occupancy compared to the same period in 2022, as well as inflationary pressures on food expense.
Marketing, Selling and Administrative Expenses
Marketing, selling and administrative expenses for 2023 increased $130.2 million, or 17.0%, to $0.9 billion from $0.8 billion in 2022. The increase was primarily due to an increase in payroll due to the additional capacity and higher occupancy, and to higher benefits expense related to our performance share awards driven by higher stock prices in 2023 compared to the same period in 2022.
Depreciation and Amortization Expenses
Depreciation and amortization expenses for 2023 increased $30.4 million, or 4.4%, compared to 2022. The increase was primarily due to depreciation expenses for the Celebrity Beyond which entered service in the second quarter of 2022, and Silver Endeavour which was not make predictions aboutpart of our fleet during the same period in 2022.
Other (Expense) Income
Interest expense, net of interest capitalized for 2023 increased $134.5 million, or 23.2%, to $714.9 million from $580.4 million in 2022. The increase was primarily due to higher rates on refinancing transactions during the first half of 2023, as well as the impact of higher rates on floating-rate debt, and loss on extinguishment of debt of $43.5 million during the first half of 2023.
Equity investment Income for 2023 was $62.5 million compared to Equity investment loss of $(44.2) million in 2022. The increase in income was primarily due to income from TUI Cruises, one of our equity investments, in 2023 compared to losses in 2022.
33


Other Comprehensive (Loss) Income
Other comprehensive (loss) for 2023 was $(36.8) million compared to Other comprehensive income of $159.6 million in 2022. The change was primarily due to a Loss on cash flow derivative hedges in 2023 of $(26.7) million compared to a Gain on cash flow derivative hedges in 2022 of $111.4 million, which was mostly as a result of a significant decrease in fair value of our fuel pricing, interest rates or currency exchange rates but does provide guidance about its future business activities. On November 7, 2017, we announcedswaps in 2023 compared to 2022.

Future Application of Accounting Standards
Refer to Note 2. Summary of Significant Accounting Policies to our consolidated financial statements.
Liquidity and Capital Resources
Sources and Uses of Cash
Net cash provided by operating activities was $2.7 billion for the following full yearsix months ended June 30, 2023, compared to cash used of $0.1 billion for the same period in 2022. The increase of $2.8 billion was primarily attributable to higher bookings, and fourth quarter 2017 guidance basedoccupancy in 2023 compared to the same period in 2022.
Net cash used in investing activities decreased $1.5 billionto cash used of $1.0 billion for the six months ended June 30, 2023, compared to cash used of $2.5 billion for the same period in 2022. The decrease was primarily attributable to a decrease in capital expenditures of $1.3 billion during 2023, compared to the same period in 2022, due to the delivery of Wonder of the Seas and Celebrity Beyond in 2022 compared to the delivery of Silver Nova during the same period in 2023, and a decrease in cash paid on the then current fuel pricing,settlement of derivative financial instruments of $251.1 million during 2023, compared to the same period in 2022.
Net cash used in financing activities was$2.9 billion for the six months ended June 30, 2023, compared to cash provided by financing activities of $2.0 billion for the same period in 2022. The change of $4.9 billion was primarily attributable to a decrease of $2.6 billion in debt proceeds in 2023 compared to the same period in 2022, and an increase in repayments of debt of $2.5 billion in 2023 compared to the same period in 2022. The change is partially offset by proceeds received of $209.3 million for the sale of noncontrolling interest ratesof PortMiami during the six months ended June 30, 2023.
34


Future Capital Commitments
Capital Expenditures
Our future capital commitments consist primarily of new ship orders. As of June 30, 2023, the dates that the ships on order by our Global and currency exchange rates:

Full Year 2017
Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as 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

Table of Contents

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 deliveryQ2Q3Q4FY 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 Oy1st4th 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:
Celebrity AscentChantiers de l'Atlantique4th Quarter 202020234,150
3,250
Project Icon:UnnamedChantiers de l'Atlantique4th Quarter 20253,250
UnnamedSilversea Cruises2nd Quarter 20225,650
UnnamedEvolution Class:
Silver RayMeyer 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 Berths40,830

During the second quarter of 2017,ended June 30, 2023, we entered into agreements with Meyer Turku to build two ships of a new generation of ships for Royal Caribbean International, known as “Project Icon.” Subsequently, in October 2017, we entered into credit agreementsreceived commitments for the unsecured financing of these shipsthe fifth Edge-class ship, estimated for up to 80% of each ship's contract price. Refer to Note 7. Commitments and Contingencies to our consolidated financial statements under Item 1. Financial Statements for further information.delivery in 2025.

Our future capital commitments consist primarily of new ship orders. As of SeptemberJune 30, 2017,2023, 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$11.0 billion, of which we had deposited $323.2 million as of such date.$1.0 billion. Approximately 53.8%42.3% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at SeptemberJune 30, 2017.2023. Refer to Note 10. 8. Commitments and Contingencies and Note 11. Fair Value Measurements and Derivative Instrumentsto 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 with the delivery of the ship, scheduled for March 2018.

statement.
As of SeptemberJune 30, 2017,2023, we anticipate overall full year capital expenditures, not including the TUI Cruises'based on our existing ships on order, will be approximately $0.6$4.2 billion for 2017, $3.2 billion for 2018, $2.1 billion for 2019, $2.5 billion for 2020 and $2.5 billion for 2021.2023. This amount does not include any ships on order by our Partner Brands.

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35



Contractual Obligations

Material Cash Requirements
As of SeptemberJune 30, 2017,2023, our contractual obligationsmaterial cash requirements were as follows (in thousands):
Remainder of
20232024202520262027ThereafterTotal
Operating Activities:
Interest on debt(1)$703,166 $1,183,256 $1,076,694 $856,261 $720,304 $1,303,130 $5,842,811 
Other(2)63,105 119,279 112,926 116,485 118,721 885,929 1,416,445 
Investing Activities:
Ship purchase obligations(3)2,224,453 1,963,603 2,194,747 1,261,700 — — 7,644,503 
Total$2,990,724 $3,266,138 $3,384,367 $2,234,446 $839,025 $2,189,059 $14,903,759 
 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)  Long-term debt obligations mature at various dates through fiscal year 2037 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 June 30, 2023. Debt denominated in other currencies is calculated based on the applicable exchange rate at June 30, 2023.

(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)(2) 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.

Please refer(3)    Amounts are based on contractual installment and delivery dates for our ships on order. Included in these figures are $6.2 billion in final contractual installments, which have committed financing covering 80% of the cost of the ships on order for our Global Brands, almost all of which include sovereign financing guarantees. 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.
Refer to Note 6. Debt for maturities related to debt.
Refer to Note 7. Leases for maturities related to lease liabilities.
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

WeRefer to Note 5. Investments and TUI AG have each guaranteed repayment of 50% of a bank loan providedOther Assets for ownership restrictions related to TUI Cruises which is due 2022. Notwithstanding this, the lenders have agreedCruises.
Refer 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 factsNote 3. Revenues for credit card processor agreements for export credit agency guarantees.
Refer to Note 8. Commitments 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 SMBCContingencies 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.

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.
agreements.
As of SeptemberJune 30, 2017,2023, other than the items describedreferenced 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.

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Funding Needs and Sources
WeHistorically, 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, 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 theseour obligations.

We had a workingThe Company continually identifies and evaluates actions to maintain adequate liquidity. These include, and are not limited to: reductions in capital deficit of $4.3 billion and $3.7 billion as of September 30, 2017 and December 31, 2016, respectively. Included within our working capital deficit is $1.5 billion and $1.3 billion of current portion of long-term debt, including capital leases, as of September 30, 2017 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 majority 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 fundexpenditures, 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 operationsadministrative costs 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 thatadditional financings. Additionally, we will continue to pursue various opportunities to raise capital to fund obligations associated with future debt maturities and/or to extend the maturity dates associated with our existing indebtedness or facilities. If needed, actions to raise capital may include issuances of debt, convertible debt or equity in private or public transactions or entering into new or extended credit facilities.
We have workingsignificant contractual obligations of which our debt service obligations and the capital deficits in the future.

expenditures associated with our ship purchases represent our largest funding needs. As of SeptemberJune 30, 2017,2023, we had $8.3 billion of committed financing for our ships on order.
As of June 30, 2023, our obligations due through June 30, 2024 primarily consisted of $1.7 billion related to debt maturities, $1.3 billion related to interest on debt and $4.1 billion related to progress payments on our ship orders and, based on the expected delivery date, the final installment payable due upon the delivery of Icon of the Seas, Celebrity Ascent, Utopia of the Seas, and Silver Ray.
As of June 30, 2023, we had liquidity of $1.9$3.7 billion, consisting of approximately $140.0 million inincluding cash and cash equivalents of $0.7 billion, and $1.8$3.0 billion availableof undrawn revolving credit facility capacity. We have agreed with certain of our lenders not to pay dividends or engage in stock repurchases unless we repay the remaining principal payments that were deferred under our unsecured revolvingexport credit facilities. We anticipate that our cash flows from operationsfacilities in 2020 and our current financing arrangements, as described above, will be adequate to meet our capital expenditures and debt repayments over the next twelve-month period.

In April 2017, Moody's changed our senior unsecured debt credit rating to Baa3 with a stable outlook.  Consistent with 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.

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.2021. Refer to Note 8. 6. Debt and Note 9. 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 we have sufficient financial resources to fund our obligations for at least the next twelve months from the issuance of Contents


these financial statements. However, there is no assurance that our assumptions and estimates are accurate as there is inherent uncertainty in our ability to predict future liquidity requirements. Refer to Note 1. General, to our consolidated financial statements under Part I. Item 1. Financial Statements for further information.
Debt Covenants
CertainOur export credit facilities and our non-export credit facilities, and certain of our financingcredit card processing agreements 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, and maintain a minimum liquidity, and under certain facilities, to no more than 62.5%.  The fixed charge coverage ratio is calculated by dividing net cash from operations for the past four quarters by the summaintain a minimum level of dividend payments plus scheduled principal debt payments in excess of any new financings for the past four quarters.shareholders' equity. Our minimum net worthstockholders' equity and maximum net debt-to-capital calculations exclude the impact of Accumulated other comprehensive losson Total shareholders’ equity. WeIn 2021 and 2022, the financial covenant levels were wellmodified for 2023 and 2024. As of June 30, 2023, we were in excess of all debt covenant requirements as of September 30, 2017. The specificcompliance with our financial covenants and related definitions canwe estimate that we will be found in compliance for at least the applicable debt agreements, the majority of which have been previously filed with the Securities and Exchange Commission.

next twelve months.
Dividends

The declaration of dividends shall at all times be subject to the final determination of our board of directors that a dividend is prudent at that time in consideration of the needs of the business. In September 2017,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 have not 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. Duringsince the first quarter of 2017, we also paid a cash dividend on our common stock of $0.48 per share which was declared during the fourth quarter of 2016.2020.




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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. There2022. There have been no significant developments or material changes to our exposure to market risks since the date of our 2022 Annual Report.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our ChairmanPresident 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 ChairmanPresident and Chief Executive Officer and Chief Financial Officer concluded that those 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 ChairmanPresident 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 SeptemberJune 30, 20172023 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, a lawsuit was filed against us in August 2019 in the U.S. District Court for the Southern District of Florida (the "Court") under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation alleges it holds an interest in the Havana Cruise Port Terminal, which was expropriated by the Cuban government. The complaint further alleges that we trafficked in the terminal by embarking and disembarking passengers at these facilities. The plaintiff seeks all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs.
The Court entered final judgment in December 2022 in favor of the plaintiff and awarded damages and attorneys' fees to the plaintiff in the aggregate amount of approximately $112 million. We have appealed the judgment to the United States Court of Appeals for the 11th Circuit and the plaintiff has cross-appealed with regards to the interest calculation used for purposes of determining damages. We believe we have meritorious grounds for and intend to vigorously pursue our appeal. During the fourth quarter of 2022, we recorded a charge of approximately $130.0 million to Other (expense) income within our consolidated statements of comprehensive income (loss) related to the Havana Docks Action, including post-judgment interest and related legal defense costs and bonding fees.
In addition, we are routinely involved in claims typical within the cruise vacation industry. 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.

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 potentially impairing the value of our goodwill, ships, trademarks and other assets.assets and potentially affecting other critical accounting estimates where the impact may be material to our operating results.

The demandDemand 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 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 exposed to many different economies, and our business could be hurtnegatively impacted by challenging conditions in any of our markets. Any significant deterioration of global, national or local economic conditions could resultthe markets 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 negative impact on our results of operations.

Events such as terrorist attacks, war (or war-like conditions), conflicts (domestic or cross-border), civil unrest and other hostilities, including an escalation in the frequency or severity of incidents, 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. In view of our global operations,which we are susceptible to a wide range of adverse events. These events could also result in additional security measures taken by local authorities which may potentially impact access to portsoperate, and/or destinations.

related reactions by our competitors in such markets.
Our operating costs could increase due to market forces and economic or geo-politicalgeopolitical factors beyond our control.

Our operating costs, including fuel, food, payroll and benefits, airfare, taxes, insurance, and security costs, are allcan be and have been subject to increases due to market forces and economic or politicalgeopolitical conditions or other factors beyond our control.control, including global inflationary pressures, which have increased our operating costs. Increases in these operating costs couldhave affected, and may continue to adversely affect, our future profitability.

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. The value of our earnings in foreign currencies is adversely impacted by a strong United States dollar. In addition, any significant increaseparticular, increases in fuel prices have and could continue to materially and adversely affect our business as fuel prices impact 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 globallyMandatory fuel restrictions may result in increased costs and other risks.

We operate our business globally. Operating internationally exposes usalso create uncertainty related 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 qualityprice 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 itinerariesfuel types potentially 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 in the local business communities might not conform to international business standards. 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 throughout the world properly adhere to them. 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.

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 be 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.
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Price increases for commercial airline serviceservices for our guests or major changes or reduction in commercial airline serviceservices 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 ofand/or regulations governing commercial airline services could adversely affect our guests’ ability to obtain airfare,air travel, as well as our ability to flytransfer our guests to or from our cruise ships, which could adversely affect our results of operations.

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. 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 newbuild construction and fleet modernization efforts, any of which could materially 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, and may cause significant disruptions, create new risks, and exacerbate existing risks.
Disease outbreaks and increased concern related to illness when traveling to, from, and on our ships such as COVID-19 could cause a 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. For example, the unprecedented responses by governments and other authorities to control and contain the COVID-19 outbreak, including related variants, led to our voluntary suspension of our global cruise operations starting in March 2020. While we have resumed our global cruise operations, there is no assurance that our cruise operations will continue uninterrupted. 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. Based on our assessment of these requirements and recommendations, or for other reasons, we may determine it necessary to cancel or modify certain of our Global Brands’ cruise sailings. The impact of any of these factors could have a material adverse effect on our business and results of operations. In addition, any operating or health protocols that 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 or adverse publicity concerning ouron ships, at port facilities, land destinations and/or passengers oraffecting the cruise vacation industry in general, unusual weather conditions and other natural disasters or disruptionsthe associated negative media coverage and publicity, have affected and could continue to affect our reputation as well asand impact our sales and results of operations.

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The ownership and/or operation of cruiseCruise ships, airplanes, private destinations, port facilities and shore excursions involvesoperated 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 maycould bring into question safety, health, security and vacation satisfaction which couldand 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 in the futurecontinue 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
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considerable expansion in the use of social media and digital marketing over recent yearsmedia has compounded the potential scope and reach 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,certain cases, potential litigation.

Our cruise ships and port facilities may also be adversely impacted by unusualSignificant weather, patterns 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 disruptions, such as hurricanes.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 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,types of events, which could have an adverse effect on our sales, operating costs and profitability. For example, the 2017 hurricane season was particularly impactful to our operationsprofitability in the Caribbean.current and future periods. Increases in the frequency, severity or duration of severe weatherthese types of events including those related to climate change, could exacerbate thetheir impact and cause further disruption todisrupt our operations. In addition, theseoperations or make certain destinations less desirable or unavailable impacting our revenues and any other events which impact the travel industry more generally may negatively impact our ability to deliver guests or crew to our cruises and/or interrupt our ability to obtain services and goods from key vendors in our supply chain.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 stakeholders' evolving expectations and standards, our customer and employee retention, our access to certain types of capital, including export credit financing, 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.
Suspensions and/or slowdowns of work at shipyards, have impacted and could continue to impact our ability to construct new ships as planned, our ability to timely and cost-effectively procure new capacity, and our ability to execute scheduled drydocks and/or fleet modernizations. For instance, 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 involves 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 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. These problems have impacted and may in the future impact the timely delivery or cost of new ships or the ability of shipyards to repair 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 introduction 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,June 30, 2023, a total of 6246 new ships with approximately 173,00091,677 berths arewere on order for delivery through 20212028 in the cruise industry.industry, including 10 ships currently scheduled to be delivered to our Global and Partner Brands. The further
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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.

In addition, to the extent that we or our competitors deploy ships to a particular itineraryitinerary/region and the resulting capacity in that region exceeds the demand, weit may lowernegatively affect our pricing and profitability may 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.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.

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, environmental and health concerns, adverse weather conditions and natural disasters, financial limitations on port development, exclusivity arrangements that ports may have with our competitors, geopolitical developments, local governmental regulations, environmental regulations, and local community concerns about port development and other adverse impacts on their communities from additional tourists. In addition,governmental response to disease outbreaks. Higher fuel costs also may adversely impact the destinations on certain of our itineraries. Anyitineraries 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, which 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 ouruse 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 results of operations.operations and financial results.

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 risks 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 or, in more severe situations, new ship orders, or necessitate unscheduled drydocks and repairs of ships. These events and any related adverse publicity could result in lost revenue, increased operating expenses, or both, and thus adversely affect our results of operations.

We may lose business to competitors throughout the vacation market.

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 agentadvisor preference and also in terms of the nature of ships, services and servicesdestinations 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 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 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 operations and financial position could be adversely affected.

If we are unable to appropriately manage our cost and capital allocation strategies with our goal of satisfying guest expectations, it may adversely impact our business success.
We strive 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, 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. For example, our ownership and operation of older tonnage, in particular during the business disruption caused by COVID-19, has resulted in impaired asset values due to expected returns less than the carrying value of the assets.
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 destinations 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 may be unable to execute our attempts to expand our business. 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.
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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 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 advisors to sell and market our cruises exposes us to certain risks which could adversely impact our business.
We rely on travel advisors to generate bookings for our ships. Accordingly, we must maintain competitive commission rates and incentive 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, which could adversely impact our operating results. Our reliance on third-party sellers is particularly pronounced in certain markets. In addition, the travel advisor community is sensitive to economic conditions that impact discretionary income of consumers. Significant disruptions, such as those caused by the COVID-19 pandemic, or contractions in the industry could reduce the number of travel advisors available for us to market and sell our cruises, which could have an adverse impact on our financial condition and results of operations. Additionally, the strength of our recovery from suspended operations could be delayed if we are not aligned and partnered with key travel advisors.
Business activities that involve our co-investments with third parties may subject us to additional risks.
Partnerships, joint ventures and other business structures involving our co-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 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. In addition to financial risks, our co-investment activities have also presented managerial and operational risks and expose us to reputational or legal concerns. These or other issues related to our co-investments with third parties could adversely impact our operations or liquidity. 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, 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 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 expected 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, cybersecurity events, and/or disruptions in third-party logistics or transportation systems, 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 addition, increased regulation or stakeholder
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expectations regarding sourcing practices, or supplier conduct that does not meet such standards, could cause our operating costs to increase or result in publicity that negatively affects our reputation.
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. 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.
The potential unavailability of insurance coverage, 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 obtain 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 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
We are members of four Protection and Indemnity (“P&I”) clubs, which are part of a worldwide group of 12 P&I clubs, known as the International Group of P&I Clubs (the “IG”). P&I coverage provided by the clubs is on a mutual basis, and we are subject to additional premium calls in the event of a catastrophic loss incurred by any member of the 12 P&I clubs, whereby the reinsurance limits purchased by the IG are exhausted. We are also subject to additional premium calls based on investment and underwriting shortfalls experienced by our own individual insurers.
We cannot be certain that insurance and reinsurance coverage will be available to us and at commercially reasonable rates in the 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. 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.
We may not be able to achieve our fiscal 2025 financial and climate-related performance goals.
In November 2022, we announced that we are targeting certain financial and climate-related performance goals for fiscal 2025. Our ability to achieve these goals is dependent on a number of factors, including the other risk factors described in this section. If we are not able to achieve these goals, the price of our common stock and reputation may be negatively affected.

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Financial Risks
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…”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 canmay negatively impact our access to, and cost of, debt financing. Additionally, our ability to raise additional financing, whether or not secured, could be no assuranceslimited if our credit rating is further downgraded, and/or if we fail to that effect. comply with applicable covenants governing our outstanding indebtedness, and/or if overall financial market conditions worsen.
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, global market conditions, including inflationary pressures, interest rate fluctuations, 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 interest rate derivative contracts for hedging of fuel prices, interest rates and foreign currenciesinstruments 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 June 30, 2023, we had total debt of $20.4 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; 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.



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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. If new debt is added to our existing debt levels, the related risks that we now face would increase. Additionally, there is no guarantee that financing will be available in the future or that such financing will be available with similar terms or terms that are commercially acceptable to us. As of June 30, 2023, we have commitments for approximately $8.3 billion of debt to finance the purchase of 7 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. Refer to Note 6. Debt to our consolidated financial statements under Item 1. Financial Statements for further information regarding our "Secured Notes" and "Priority Guaranteed Notes".
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 require us, among other things, to maintain a minimum liquidity, 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 a minimum stockholders' equity. Refer to Note 6. Debt to our consolidated financial statements under 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 and we may be required to further encumber our assets. 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. Furthermore, new equity or convertible debt issuances will also result in dilution for our existing shareholders.
We have an aggregate principal amount of $1.4 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
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discretion. Prior to August 15, 2023, and May 15, 2025, our convertible notes issued in October 2020, and August 2022, 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. Additionally, if we raise additional funds through equity or convertible debt issuances, our shareholders could experience dilution of their ownership interest, and these equity or convertible debt securities could have rights, preferences, and privileges that are superior to that of holders of our common stock.
We did not declare quarterly dividends on our common stock in the quarter ended June 30, 2023 and do not expect to pay dividends on our common stock for the foreseeable future.
We have not declared a dividend since the first quarter of 2020. We expect that any income received from operations will be devoted to our future operations and recovery. We do not expect to pay cash dividends on our common stock for the foreseeable future.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.
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. and other countries' foreign policy have in the past and could in the future result in the imposition of travel restrictions or travel bans on 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 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.
Factors associated with climate change, including an increasing global regulatory focus, could adversely affect our business.
There is increasing global regulatory focus on climate change, greenhouse gas and other emissions. These regulatory efforts, both internationally and in the U.S., are still developing, including the international alignment of such efforts, and we cannot yet determine what the final regulatory programs or their impact will be on our business. 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, pay for our emissions, modify our itineraries 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. For example, the European Union has proposed and enacted parts of a series of significant carbon reforms under its Fit for 55 package designed to meet its 2030 emission goals, which would require us, among other things, to increase the use of low carbon fuel onboard our vessels as well as connectivity to shore power. Part of the reforms that were enacted includes updates to the European Union Emission Trading System that imposes requirements on us to purchase carbon emission allowances for our emissions beginning in 2024. In addition, the U.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 Sulfur Limit) or the incoming carbon intensity indicator regulation, that have or could increase our direct cost to operate in certain markets, increase our cost of 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. If enacted, these regulations may individually or collectively have a material adverse effect on our business and results of operations due to increased costs associated with compliance and modified itineraries in the affected regions.
There has also been growing environmental scrutiny of the environmental impact of the cruise vacation industry, and some environmental groups are advocating for more stringent regulation of ship emissions at berth and at sea. This negative publicity of the cruise industry and any related measures may lead to changes in consumer preferences, such as methods or frequency of travel, which could adversely impact our operations and financial results and subject us to reputational impacts and costs.
Labor, health and safety, financial responsibility and other maritime regulations and measures could affect operations and increase operating costs.
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
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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 and may increase our exposure, if any, to environmental-related litigation.
A change in our tax status under the U.S. Internal Revenue Code, or other jurisdictions, may have adverse effects on our results of operations.
Royal 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 U.S. In connection with the year end audit, each year, Faegre Drinker Biddle & Reath LLP, our U.S. tax counsel, delivers 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 ships.
Our failureability 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 they no longer qualify as equivalent exemption 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.
Numerous countries are considering implementation of the OECD’s 15% global minimum tax, which may materially impact us. In addition, as budgetary constraints may adversely impact fiscal policy in the jurisdictions in which we operate, we may be subject to changes in our existing tax treatment or other tax reform, as well as increased tax audits.
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 results 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
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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. 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. We cannot guarantee consistent interpretation, application, and enforcement of newly issued rules and regulations, 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 the termsall applicable legal and regulatory requirements. Failure by us, our employees or any of these third parties to adhere to our debt facilitiespolicies or applicable laws or regulations could result in an eventpenalties, sanctions, damage to our reputation and related costs, which in turn could negatively affect our results of default. Generally, if an eventoperations and cash flows.
As a global operator, our business also may be 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 default under any debt agreement occurs, then pursuantsuch changes, they could impact our domestic and international business operations. Any such changes, and any international response to cross default acceleration clauses, our outstanding debt and derivative contract payablesthem, could become duepotentially introduce new barriers to passenger or crew travel and/or terminated. In addition, in such events,cross border transactions, impact our credit card processors could hold back payments to create a reserve. We cannot provide assurances that we would have sufficient liquidity to repay, guest experience and/or the ability to refinance the debt if such amounts were accelerated upon an event of default.

increase our operating costs.
If we are unable to appropriately balanceaddress these risks adequately, 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 us 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, such as ordering new ships and/or upgrading our existing fleet, based on expected market preferences and projected demand. There can be no assurance that our strategies will be successful, which could adversely impact our business, financial conditionposition and results of operations. Investmentsoperations 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 older tonnage,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 particular, run the riskevent of not meeting expected returnsliquidation. 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 diluting related asset values.

Our attempts to expandinterest rates could affect our business into new markets and new ventures may not be successful.

financial results.
We opportunistically seek to grow our business through, among other things, expansion into new destination 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. 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.

Our reliance on travel agencies to sell and market our cruises exposes us to certain risks which, if realized, could adversely impact our business.

We rely on travel agencies to generate the majority of bookings for our ships. Accordingly, we must ensure that our commission rates and incentive structures remain competitive. If we fail to offer competitive compensation packages, 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. In addition, the travel agent industry is sensitive to economic conditions that impact discretionary income. Significant disruptions, especially disruptions impacting those agencies that sell a high volume of our business, or contractions in the industry could reduce the number of travel agencies available for usare exposed to market risk attributable to changes in foreign currency exchange rates, fuel prices and sell our cruises, whichinterest rates. Significant changes in any of the foregoing could have an adverse impact on our financial condition and results of operations.

Disruptions in 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, reputationfinancial 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 operations. In addition, substantial or repeated information systems failures, computer viruses or cyber-attacks impactingthese factors
A portion of our shoreside or shipboard operationsindebtedness 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 June 30, 2023, we had approximately $2.9 billion of indebtedness that bears interest at variable rates, which is net of our interest rate swap agreements. This amount represented approximately 14.0% of our total indebtedness. As of June 30, 2023, a hypothetical 1% increase in prevailing interest rates would increase our forecasted 2023 interest expense by approximately $13.3 million. Additionally, the value of our earnings in foreign currencies is adversely impacted by a strong U.S. dollar.
Any further impairment of our goodwill, long-lived assets, equity investments and notes receivable could adversely impactaffect our business. financial condition and operating results.
We doevaluate goodwill for impairment on an annual basis, or more frequently when circumstances indicate that the carrying value of a reporting unit may not generally carry business interruption insurance forbe recoverable. A challenging operating environment, conditions affecting consumer demand or spending, the deterioration of general macroeconomic conditions, expected ship deliveries, or other factors could
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result in a change to the future cash flows we expect to derive from our shoreside operations oroperations. Reductions of cash flows used in the valuation analyses may result in the recording of impairments, which could adversely affect our information systems. As such, any losses or damages incurred by us could have an adverse impact on our results of operations.

financial condition and operating results.
The loss of 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.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.
TableWe have in the past and may in the future experience difficulty recruiting and retaining qualified personnel primarily due to competitive labor markets. A prolonged shortage of Contents

qualified personnel and/or increased turnover may inhibit our ability to operate our business in an optimal manner, and 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 December 31, 2016, 85%June 30, 2023, approximately 87% 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.

Business activities that involve our co-investment with third parties may subject us to additional risks.

Partnerships, joint ventures, and other business structures involving our co-investment 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 thatIf we 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 may also present managerial and operational risks and expose us to reputational or legal concerns. These or other issues related to our co-investment with third parties could adversely impact our 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 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 required 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, increased demand, problems in production or distribution and/or disruptions in third party logistics or transportation systems. Interruptions to our supply chain could increase 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 and operation of a large part of our information technology systems. 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, design, and implementation in technology or technological obsolescence could impair, our operations or competitive position.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.expectations as well as to process our information effectively. If we are unable to do so in a timely manner or within reasonable cost parameters, if there are any disruptions, delays or deficiencies in design 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 sowhich could result in higher than anticipated costs or could impair our operating results.

We may be unable to procure 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 have adopted, could adversely affect our results of operations.
We are exposed to cyber security attacks and data breaches and the risks and costs associated with cyber securityprotecting our systems and maintaining data privacy, including protecting the integrity and security of our guests’, employees’ and business partners’ personal information.

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, 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.information. In the regular course of doing business, we collect large volumes of internalemployee, customer, and customerother third-party data, including personally identifiable information and individual creditpayment data, for various business purposes. WeAlthough we have policies and procedures
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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 (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 creditpayment data. In many cases,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 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 Companyapplicable laws has commercial relations. Several jurisdictions have passed laws in this area,caused, 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 failpractices, and our failure to comply with the various applicable data collection and privacy laws, we could be exposeddo 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 adversely impacted.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.

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, third-party 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 may adversely affect our financial condition or results of operations.

We seek to maintain appropriate insurance coverage at commercially reasonable rates. We normally insure 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. The limits of insurance coverage we purchase are based on the availability of the coverage, evaluation of our risk profile and cost of coverage. Accordingly, we are not protected against all risks which could result in an unexpected decrease in our revenue and results of operations in the event of an incident.

Our protection and indemnity (“P&I”) liability insurance is placed on a mutual basis and we are subject to additional premium calls in amounts based on claim records of all members of the P&I Club. We are also subject to additional premium assessments including, but not limited to, investment or underwriting shortfalls experienced by the P&I Club.

We cannot be certain that insurance and reinsurance coverage will be available to us and at commercially reasonable rates in the future. 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. Such events could adversely affect our financial condition or results of operations.

Environmental, labor, health and safety, financial responsibility and other maritime regulations could affect operations and increase operating costs.

The United States 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, that could increase our direct cost to operate in certain markets, increase our cost for 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.

There is increasing global regulatory focus on climate change and greenhouse gas (GHG) emissions. These regulatory efforts, both internationally and in the United States 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. 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. 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.

A change in our tax status under the United States Internal Revenue Code, or other jurisdictions, may have adverse effects on our income.

We 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. Drinker Biddle & Reath LLP, our U.S. tax counsel, has delivered 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 such that it no longer qualifies as an equivalent exemption jurisdiction, 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.

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.

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 presentsThere were no repurchases of common stock during the total number ofquarter ended June 30, 2023. In the event we repurchase shares of our common stock, that we repurchasedwill need to repay the amounts deferred under our export credit facilities as part of the principal amortization deferrals agreed with our lenders during 2020 and 2021.

Item 5. Other Information
Rule 10b5-1 Plan Elections

On June 7, 2023, Michael W. Bayley, the quarter ended September 30, 2017:

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 boardPresident and Chief Executive Officer of directors authorizedRoyal Caribbean International, entered into a 12-month common stock repurchase program10b5-1 trading plan (the “Trading Plan”). The Trading Plan provides for the sale of 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. During the third quarter of 2017, we repurchased 1.0 million27,800 shares of our common stock for a totalthe Company’s Common Stock between September 6, 2023 and January 31, 2024. The Trading Plan was entered into during an open insider trading window and is intended to satisfy the affirmative defense of $125.0 million in open market transactions that were recorded within Treasury stock in our consolidated balance sheet. RepurchasesRule 10b5-1(c) under the program may be made at management's discretion from time to time onExchange Act and the open market or through privately negotiatedCompany’s policies regarding insider transactions.


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Item 6. Exhibits
10.1
10.2 
10.3 
10.4 
10.5 
10.6 
10.7 
10.8 
10.2
31.1 
10.3
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*1934
31.2 
31.2
32.1 
32.1

**Filed herewith
**Furnished herewith
Interactive Data File
101The following financial statements of Royal Caribbean Cruises Ltd. for the period ended SeptemberJune 30, 2017,2023, formatted in XBRLiXBRL (Inline extensible Reporting Language) are filed herewith:
(i)the Consolidated Statements of Comprehensive Income (Loss) for the quarterquarters and ninesix months ended SeptemberJune 30, 20172023 and 2016;2022;

(ii)the Consolidated Balance Sheets at September 30, 2017 and December 31, 2016;
(ii)    the Consolidated Balance Sheets at June 30, 2023 and December 31, 2022;
(iii)the Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20172023 and 2016;2022; 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, 2017July 27, 2023(Principal Financial Officer and duly authorized signatory)



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