Published: 2021-10-29 00:00:00 ET

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Note 1. General

Description of Business

We are a global cruise company. We own and operate three global cruise brands: Royal Caribbean International, Celebrity Cruises and Silversea Cruises (collectively, our "Global Brands"). We also own 50% of TUI Cruises GmbH ("TUIC"), which operates the German brands TUI Cruises and Hapag-Lloyd Cruises (collectively, our "Partner Brands"). We account for our investment in TUIC under the equity method of accounting. Together, our Global Brands and our Partner Brands operate a combined 60 ships as of September 30, 2021. Our ships offer a selection of worldwide itineraries that call on more than 1,000 destinations on all seven continents.

Management's Plan and Liquidity

We voluntarily suspended our global cruise operations effective March 2020 in response to the COVID-19 outbreak. We have restarted our global cruise operations in a phased manner, following the requirements and recommendations of regulatory agencies, with reduced guest occupancy, modified itineraries and enhanced health, safety and vaccination protocols.

By the end of September 2021, we operated 38 of our Global and Partner Brand ships, representing 63% of our fleet, and sailed over 500,000 passengers since we resumed operations. We expect to operate approximately 80% of our fleet by December 31, 2021.

Uncertainties remain as to the specifics, timing and costs of administering and implementing our health and safety measures, some of which may be significant. Based on our assessment of these requirements and recommendations, the status of COVID-19 infection and/or vaccination rates in the U.S. or globally or for other reasons, we may determine it necessary to cancel or modify certain of our Global Brands’ cruise sailings. We believe the impact to our global bookings resulting from COVID-19 will continue to have a material negative impact on our results of operations and liquidity, which may be prolonged beyond containment of the disease and its variants.

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

•Expected gradual resumption of cruise operations;

•Expected lower than comparable historical occupancy levels during the resumption of cruise operations; and

•Expected incremental spend for our resumption of cruise operations, including bringing our vessels out of layup status, returning our crew members to our ships and implementing and maintaining of health and safety protocols.

There can be no assurance that our assumptions and estimates are accurate due to possible variables, including, but not limited to, the uncertainties associated with regulatory requirements and recommendations, subsequent changes to and/or enforceability of those requirements and recommendations, our ability to meet the requirements and recommendations, and

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whether efforts by countries to contain the disease and its variants will further restrict our ability to resume operations. We have implemented a number of proactive measures to mitigate the financial and operational impacts of COVID-19, including reduction of capital expenditures and operating expenses, the issuance of debt and shares of our common stock, the amendment of credit agreements to defer payments, the waiver and/or modification of covenant requirements and the suspension of dividend payments. Additionally, we expect to continue to pursue refinancing opportunities to reduce interest expense and extend maturities.

As of September 30, 2021, we had liquidity of $4.1 billion, including $0.1 billion of undrawn revolving credit facility capacity, $3.3 billion in cash and cash equivalents, and a $0.7 billion commitment for a 364-day term loan facility available to draw at any time prior to August 12, 2022. Our revolving credit facilities were mostly utilized through a combination of amounts drawn and letters of credit issued under the facilities as of September 30, 2021.

During the three months ended March 31, 2021, we extended our $1.0 billion unsecured loan due April 2022 and our $1.6 billion unsecured revolving credit facility due October 2022 to October 2023 and April 2024, respectively. As of September 30, 2021, we were in compliance with our financial covenants. Refer to Note 7. Debt for further information regarding the amendments made to our debt facilities and credit card processing agreements, including related covenants, and for further discussion of our 2021 financing activities.

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

Basis for Preparation of Consolidated Financial Statements

The unaudited consolidated financial statements are presented pursuant to the rules and regulations of the Securities and Exchange Commission. In our opinion, these statements include all adjustments necessary for a fair statement of the results of the interim periods reported herein. Adjustments consist only of normal recurring items, except for any items discussed in the notes below. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted as permitted by such Securities and Exchange Commission rules and regulations. Estimates are required for the preparation of financial statements in accordance with these principles. Actual results could differ from these estimates. Refer to Note 2. Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2020 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 6. Other Assets for further information regarding our variable interest entities. We consolidate the operating results of Silversea Cruises on a three-month reporting lag to allow for more timely preparation of our consolidated financial statements. No material events or other transactions involving Silversea Cruises have occurred from June 30, 2021 through September 30, 2021, that would require further disclosure or adjustment to our consolidated financial statements as of and for the quarter ended September 30, 2021.

For affiliates we do not control but over which we have significant influence on financial and operating policies, usually evidenced by a direct ownership interest from 20% to 50%, the investment is accounted for using the equity method.

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

On July 9, 2020, we acquired the 33.3% interest in Silversea Cruises that we did not already own from Heritage Cruise Holding Ltd. See Note 11. Redeemable Noncontrolling Interest in our Annual Report on Form 10-K for the year ended December 31, 2020 for further information regarding our acquisition of Silversea Cruises' noncontrolling interest.

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Note 2. Summary of Significant Accounting Policies

Recent Accounting Pronouncements

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

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815 or for convertible debt issued at a substantial premium. The ASU removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception, permitting more contracts to qualify for it. In addition, the guidance eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The ASU is effective for annual reporting periods beginning after December 15, 2021, including interim reporting periods within those annual periods, with early adoption permitted no earlier than the fiscal year beginning after December 15, 2020. The guidance is expected to have an impact on our consolidated financial statements given the recent issuance of convertible notes; however, we are still evaluating the magnitude of the new guidance on our consolidated financial statements.

Reclassifications

For the nine months ended September 30, 2021, we separately presented Amortization of debt discounts and premiums, which includes amortization of commercial paper notes discount, in our consolidated statements of cash flows within Operating Activities. As a result, the prior year amortization amounts were reclassified from Other, net within Operating Activities to conform to the current year presentation. Also, for the nine months ended September 30, 2021, we no longer separately present Proceeds from exercise of common stock options in our consolidated statements of cash flows. As a result, the prior year amounts were reclassified to Other, net within Financing Activities to conform to the current year presentation.

Note 3. Impairments and Credit Losses

The challenges related to COVID-19 have significantly impacted our expected investments, operating plans and projected cash flows. Refer to Note 1. General for further information regarding COVID-19 and its impact to the Company. As a result of these events, we performed interim impairment evaluations during 2020 on certain assets.

During the quarter and nine months ended September 30, 2020, we recognized combined impairment and credit losses of $89.9 million and $1.4 billion, respectively, which are reported within Impairment and credit losses within our consolidated statements of comprehensive loss. For the quarter ended September 30, 2020, we recognized impairment losses of $83.9 million primarily related to our property and equipment, net. We recognized impairment losses of $1.2 billion during the nine months ended September 30, 2020 primarily related to goodwill, trademarks and trade names, property and equipment, net and right-of-use assets. The credit losses of $6.0 million and $135.7 million recognized during the quarter and nine months ended September 30, 2020, respectively, related to our notes receivable.

In addition, an impairment charge of $39.7 million related to our equity investments was recognized in earnings during the quarter ended March 31, 2020 and is reported within Equity investment loss within our consolidated statements of comprehensive loss for the nine months ended September 30, 2020.

For the quarters ended March 31, 2021 and September 30, 2021, we had no indication of impairment. During the quarter ended June 30, 2021, we determined that certain construction in progress projects would be reduced in scope or would no longer be completed due to the impact COVID-19 has had on our operations. This led to an impairment of $40.6 million of construction in progress assets previously reported in Property and equipment, net. This impairment charge is reported within

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Note 4. 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.

Historically, the majority of our revenues when we are operating are derived from passenger cruise contracts that are reported within Passenger ticket revenues in our consolidated statements of comprehensive loss. Our performance obligation under these contracts is to provide a cruise vacation in exchange for the ticket price. We satisfy this performance obligation and recognize revenue over the duration of each cruise, which generally range from two to 24 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 $29.3 million for the quarter September 30, 2021 compared to no port costs charged for the quarter ended September 30, 2020. Port costs charged to our guest and included within Passenger ticket revenues were $33.9 million and $124.5 million for the nine months ended September 30, 2021 and 2020, respectively.

Our total revenues also include Onboard and other revenues, which historically have consisted primarily of revenues from the sale of goods and services onboard our ships that are not included in passenger ticket prices. We receive payment before or concurrently with the transfer of these goods and services to passengers during a cruise and recognize revenue at the time of transfer over the duration of the related cruise.

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

Disaggregated Revenues

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

			Quarter Ended September 30,												Nine Months Ended September 30,
			2021						2020(6)						2021						2020(6)
Revenues by itinerary
North America(1)			$	279,339					$	(11,781)					$	290,971					$	1,338,365
Asia/Pacific(2)			22,651						(3,441)						71,854						397,496
Europe(3)			111,054						—						114,819						18,129
Other regions(4)			8,561						6,576						11,270						239,112
Total revenues by itinerary			421,605						(8,646)						488,914						1,993,102
Other revenues(5)			35,353						(25,042)						60,972						181,565
Total revenues			$	456,958					$	(33,688)					$	549,886					$	2,174,667

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

(2)Includes Southeast Asia (e.g., Singapore, Thailand and the Philippines), East Asia (e.g., China and Japan), South Asia (e.g., India and Pakistan) and Oceania (e.g., Australia and Fiji Islands) regions.

(3)Includes European countries (e.g., Nordics, Germany, France, Italy, Spain and the United Kingdom).

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

(5)Includes revenues primarily related to cancellation fees, vacation protection insurance, pre- and post-cruise tours and fees for operating certain port facilities. Amounts also include revenues related to our bareboat charter, which was terminated when Pullmantur

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Holdings filed for reorganization in Spain in 2020, and procurement and management related services we perform on behalf of our unconsolidated affiliates and third parties. Refer to Note 6. Other Assets for more information on our unconsolidated affiliates.

(6)Onboard and other revenues for the quarter and nine months ended September 30, 2020 includes a charge of $67.9 million to correct cancellation revenue, for certain immaterial bookings, which was incorrectly recognized during the six months ended June 30, 2020. The charge is considered immaterial to our financial statements.

Passenger ticket revenues are attributed to geographic areas based on where the reservation originates. For the quarters and nine months ended September 30, 2021 and 2020, our guests were sourced from the following areas:

			Quarter Ended September 30,
			2021						2020
Passenger ticket revenues:
United States			74		%				66		%
United Kingdom			14		%				14		%
All other countries (1)			12		%				20		%

			Nine Months Ended September 30,
			2021						2020
Passenger ticket revenues:
United States			67		%				67		%
United Kingdom			13		%				7		%
Singapore			13		%				—		%
All other countries (1)			7		%				26		%

(1)No other individual country's revenue exceeded 10% for the quarters and nine months ended September 30, 2021 and 2020.

Customer Deposits and Contract Liabilities

Our payment terms generally require an upfront deposit to confirm a reservation, with the balance due prior to the cruise. Deposits received on sales of passenger cruises are initially recorded as Customer deposits in our consolidated balance sheets and subsequently recognized as passenger ticket revenues during the duration of the cruise. ASC 606, Revenues from Contracts with Customers, defines a “contract liability” as an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration from the customer. We do not consider customer deposits to be a contract liability until the customer no longer retains the unilateral right, resulting from the passage of time, to cancel such customer's reservation and receive a full refund.

The current reduction in demand for cruising due to COVID-19 resulted in an unprecedented low level of advance bookings and the associated customer deposits received. At the same time, we have experienced significant cancellations as a result of the COVID-19 pandemic, which has led to issuance of refunds to customers, while the remainder have been rebooked on future cruises or received credits in lieu of cash refunds.

As of September 30, 2021, refunds due to customers mostly as a result of booking cancellations were $44.6 million compared to $95.8 million as of December 31, 2020. Due to the uncertainty around the return of demand for cruising, we are unable to estimate the amount of the September 30, 2021 customer deposits that will be recognized in earnings compared to amounts that will be refunded to customers or issued as a credit for future travel through the end of 2021. Customer deposits presented in our consolidated balance sheets include contract liabilities of $538.6 million and $124.8 million as of September 30, 2021 and December 31, 2020, respectively.

We have provided flexibility to guests with bookings on sailings cancelled due to COVID-19 by allowing guests to receive enhanced future cruise credits (“FCC”) or elect to receive refunds in cash. As of September 30, 2021, our customer deposit balance includes approximately $650.0 million of unredeemed FCCs. In January 2021, we extended the expiration date of the FCCs until April 2022 for sailings departing on or before December 2022. Given the uncertainty of travel demand caused by COVID-19 and lack of comparable historical experience of FCC redemptions, we are unable to estimate the number of FCCs that may expire unused in future periods and get recognized as breakage. We will update our breakage analysis as future information is received.

Contract Receivables and Contract Assets

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Although we generally require full payment from our customers prior to their cruise, we grant credit terms to a relatively small portion of our revenue sourced in select markets outside of the United States. As a result, we have outstanding receivables from passenger cruise contracts in those markets. We also have receivables from credit card merchants for cruise ticket purchases and goods and services sold to guests during cruises that are collected before, during or shortly after the cruise voyage. In addition, we have receivables due from concessionaires onboard our vessels. These receivables are included within Trade and other receivables, net in our consolidated balance sheets.

We have contract assets that are conditional rights to consideration for satisfying the construction services performance obligations under a service concession arrangement. As of September 30, 2021 and December 31, 2020, our contract assets were $53.7 million 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 agent commissions are an incremental cost of obtaining contracts with customers that we recognize as an asset and include within Prepaid expenses and other assets in our consolidated balance sheets. Prepaid travel agent commissions were $51.4 million as of September 30, 2021 and $1.1 million as of December 31, 2020. Substantially all of our prepaid travel agent commissions at December 31, 2020 were expensed and reported primarily within Commissions, transportation and other in our consolidated statements of comprehensive loss for the nine months ended September 30, 2021.

Note 5. (Loss) Per Share

A reconciliation between basic and diluted (loss) per share is as follows (in thousands, except per share data):

			Quarter Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
Net (Loss) attributable to Royal Caribbean Cruises Ltd. for basic and diluted loss per share			$	(1,424,554)					$	(1,346,756)					$	(3,903,531)					$	(4,430,527)
Weighted-average common shares outstanding			254,713						214,163						250,808						210,894
Diluted weighted-average shares outstanding			254,713						214,163						250,808						210,894
Basic (loss) per share			$	(5.59)					$	(6.29)					$	(15.56)					$	(21.01)
Diluted (loss) per share			$	(5.59)					$	(6.29)					$	(15.56)					$	(21.01)

 

There were approximately 339,835 and 433,705 antidilutive shares for the quarter and nine months ended September 30, 2021, respectively, compared to 192,981 and 265,606 for the quarter and nine months ended September 30, 2020, respectively.

Since the Company expects to settle in cash the principal outstanding on the convertible notes that mature in 2023, we currently use the treasury stock method when calculating their potential dilutive effect, if any. While the criteria for conversion of the convertible notes has not been met, the shares that would be issued upon conversion of the notes would be antidilutive for the quarter and nine months ended September 30, 2021.

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

We have determined that TUI Cruises GmbH ("TUIC"), our 50%-owned joint venture, which operates the brands TUI Cruises and Hapag-Lloyd Cruises, is a VIE. In addition, 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.

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As of September 30, 2021, the net book value of our investment in TUIC was $449.2 million, primarily consisting of $316.6 million in equity and a loan of €107.0 million, or approximately $124.0 million based on the exchange rate at September 30, 2021. As of December 31, 2020, the net book value of our investment in TUIC was $538.4 million, primarily consisting of $387.5 million in equity and a loan of €118.9 million, or approximately $145.5 million based on the exchange rate at December 31, 2020. 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 TUIC, and is secured by a first priority mortgage on the ship. The majority of these amounts were included within Other assets in our consolidated balance sheets. During the quarter ended March 31, 2021, we and TUI AG each contributed €59.5 million, or approximately $69.9 million based on the exchange rate at March 31, 2021, of additional equity through a combination of cash contributions and conversion of existing receivables. In June 2021, Hapag-Lloyd Cruises received delivery of the Hanseatic Spirit, a 230 berth luxury expedition cruise vessel.

TUIC has various ship construction and financing 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 May 2033. Our investment amount and outstanding term loan are substantially our maximum exposure to loss in connection with our investment in TUIC.

TUI Cruises and Hapag-Lloyd Cruises, our Partner Brands, have been adversely affected by COVID-19, resulting in the suspension of the majority of the brands' cruise operations. TUI Cruises and Hapag-Lloyd Cruises have resumed cruises and announced resumption of additional cruise operations in Europe. The brands' suspension of operations during the COVID-19 pandemic has resulted in a material negative impact to the brands' results of operations and liquidity. The brands have executed cost containment actions and liquidity measures, including the issuance of new financing, such as the April 2021 and October 2021 issuances of €300.0 million senior unsecured bonds due in 2026 and €223.5 million senior unsecured bonds due in 2026, respectively, and the deferral of existing financing, to mitigate the impact of COVID-19 until normal operations resume.

We have determined that Pullmantur Holdings, in which we have a 49% noncontrolling interest and Springwater Capital LLC has a 51% interest, is a VIE for which we 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. In 2020, Pullmantur Holdings and certain of its subsidiaries filed for reorganization under the terms of the Spanish insolvency laws due to the negative impact of COVID-19 on the companies, and on July 15, 2021 Pullmantur Holdings and certain of its subsidiaries filed for liquidation. We suspended the equity method of accounting for Pullmantur Holdings during the second quarter of 2020 as we do not intend to fund the entity's future losses and we lost our ability to exert significant influence over the entity's activities as a result of the liquidation process.

We have determined that Grand Bahama, a ship repair and maintenance facility in which we have a 40% noncontrolling interest, is a VIE. This facility serves cruise and cargo ships, oil and gas tankers and offshore units.  We utilize this facility, among other ship repair facilities, for our regularly scheduled drydocks and certain emergency repairs as may be required. We have determined that we are not the primary beneficiary of this facility as we do not have the power to direct the activities that most significantly impact the facility’s economic performance. Accordingly, we do not consolidate this entity.

During the quarter ended March 31, 2020, we performed an impairment evaluation on our investment in Grand Bahama. As a result of the evaluation, we did not deem our investment balance to be recoverable and recorded an impairment charge of $30.1 million. The impairment assessment and the resulting charge on our equity method investment in Grand Bahama were determined based on management’s estimates and projections. We are currently recognizing our share of net accumulated equity method losses against the carrying value of our loans receivable from Grand Bahama.

As of September 30, 2021, we had exposure to credit loss in Grand Bahama consisting of a $12.3 million loan. Our loan to Grand Bahama matures March 2026 and bears interest at LIBOR plus 3.5% to 3.75%, capped at 5.75%. Interest payable on the loan is due on a semi-annual basis. During the nine months ended September 30, 2021, we received principal and interest payments of $8.9 million related to a term loan that had fully matured. We did not receive principal and interest payments during the quarter and nine months ended September 30, 2020. The outstanding loan balance is included within Trade and other receivables, net and 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. Effective April 1, 2020, we placed the loans in non-accrual status based on our review of Grand Bahama's projected cash flows, which have been adversely affected by impacts to their operations caused by the 2019 crane accident related to Oasis of the Seas, Hurricane Dorian and most recently, COVID-19. During the quarter and nine months ended September 30, 2021, no credit losses were recorded related to these loans.

For further information on the measurements used to estimate the fair value of our equity investments, refer to Note 12. Fair Value Measurements and Derivative Instruments.

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The following tables set forth information regarding our investments accounted for under the equity method of accounting, including the entities discussed above (in thousands):

						Quarter Ended September 30,												Nine Months Ended September 30,
						2021						2020						2021						2020
Share of equity (loss) income from investments						$	(29,085)					$	(78,013)					$	(137,044)					$	(140,258)
Dividends received (1)						$	—					$	—					$	—					$	2,215

(1)There were no dividends received from TUI Cruises for the quarters and nine months ended September 30, 2021 and September 30, 2020.

						As of September 30, 2021						As of December 31, 2020
Total notes receivable due from equity investments						$	136,255					$	164,596
Less-current portion (1)						19,627						29,501
Long-term portion (2)						$	116,628					$	135,095

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

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

We also provide ship management services to TUIC and provided management services to Pullmantur Holdings (which filed for reorganization in Spain in June 2020). Additionally, we bareboat chartered to Pullmantur Holdings the vessels previously operated by its brands, which were retained by us following the sale of our 51% interest in Pullmantur Holdings. These bareboat charters were terminated when Pullmantur Holdings filed for reorganization in Spain. We recorded the following as it relates to these services in our operating results within our consolidated statements of comprehensive loss (in thousands):

						Quarter Ended September 30,												Nine Months Ended September 30,
						2021						2020						2021						2020
Revenues						$	7,835					$	5,619					$	18,979					$	15,837
Expenses						$	1,749					$	1,223					$	4,738					$	3,369

Credit Loss Allowance

We reviewed our notes receivable for credit losses in connection with the preparation of our financial statements as of September 30, 2021. In evaluating the allowance for loan losses, 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.

The following table summarizes our credit loss allowance related to receivables for the nine months ended September 30, 2021 (in thousands):

						Credit Loss Allowance
Beginning balance January 1, 2021						$	85,447
Loss provision for receivables						16,734
Write-offs						(4,723)
Ending balance September 30, 2021						$	97,458

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Debt consist of the following (in thousands):

						Interest Rate (1)						Maturities Through						Quarter Ended September 30, 2021						Year Ended December 31, 2020
Fixed rate debt:
Unsecured senior notes						3.70% to 9.13%						2022 - 2028						$	5,608,385					$	2,464,994
Secured senior notes						10.88% to 11.50%						2023 - 2025						2,350,270						3,895,166
Unsecured term loans						2.53% to 5.41%						2021 - 2033						2,938,196						3,210,161
Convertible notes						2.88% to 4.25%						2023						1,532,707						1,454,488
Total fixed rate debt																		12,429,558						11,024,809
Variable rate debt:
Unsecured revolving credit facilities (2)						1.43% to 1.83%						2022 - 2024						2,919,342						3,289,000
Unsecured UK Commercial paper						—						2021						—						409,319
USD unsecured term loan						0.59% to 3.33%						2021 - 2033						4,953,628						4,002,249
Euro unsecured term loan						1.15% to 2.25%						2021 - 2028						698,655						705,064
Total variable rate debt																		8,571,625						8,405,632
Finance lease liabilities																		197,407						213,365
Total debt (3)																		21,198,590						19,643,806
Less: unamortized debt issuance costs																		(359,087)						(314,763)
Total debt, net of unamortized debt issuance costs																		20,839,503						19,329,043
Less—current portion including commercial paper																		(956,743)						(1,371,087)
Long-term portion																		$	19,882,760					$	17,957,956

(1) Interest rates based on outstanding loan balance as of September 30, 2021 and, for variable rate debt, include either LIBOR or EURIBOR plus the applicable margin.

(2) Includes $1.9 billion facility and $1.3 billion facility, the vast majority of which is due in 2024. Our $1.9 billion facility accrues interest at LIBOR plus a maximum interest rate margin of 1.30%, which interest was 1.43% as of September 30, 2021 and is subject to a facility fee of a maximum of 0.20%. Our $1.3 billion facility accrues interest at LIBOR plus a maximum interest rate margin of 1.70%, which interest was 1.83% as of September 30, 2021 and is subject to a facility fee of a maximum of 0.30%.

(3) At September 30, 2021 and December 31, 2020, the weighted average interest rate for total debt was 5.65% and 6.02%, respectively.

In March 2021, we amended our $1.55 billion unsecured revolving credit facility due October 2022 and our $1.0 billion unsecured loan due April 2022. These amendments, among other things, extend the maturity date or termination date of certain of the advances and commitments, as applicable, under the facilities held by consenting lenders by 18 months and increase the interest rate margin and/or the facility fee, as applicable, with respect to advances and commitments held by such lenders. Consenting lenders also received a prepayment and commitment reduction equal to 20% of their respective outstanding advances and commitments. Following these amendments, the aggregate revolving capacity of the revolving credit facility is approximately $1.3 billion, with approximately $0.2 billion terminating in October 2022 and approximately $1.1 billion terminating in April 2024 and the aggregate principal balance of the term loan is approximately $0.9 billion, with approximately $0.3 billion maturing in April 2022 and approximately $0.6 billion maturing in October 2023.

As of September 30, 2021, our aggregate revolving borrowing capacity was $3.2 billion and was mostly utilized through a combination of amounts drawn and letters of credit issued under the facilities. Certain of our surety agreements with third party providers for the benefit of certain agencies and associations that provide travel related bonds, allow the sureties to request collateral. We also have agreements with our credit card processors relating to customer deposits received by us for future voyages. These agreements allow the credit card processors to require us, under certain circumstances, to maintain a reserve

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that can be satisfied by posting collateral. As of September 30, 2021, we have posted letters of credit as collateral with our sureties and credit card processors under our revolving credit facilities in the amount of $162.3 million.

Executed amendments are in place for the majority of our credit card processors, waiving reserve requirements tied to breach of our financial covenants through at least September 30, 2022, with modified covenants thereafter, and as such, we do not anticipate any incremental collateral requirements for the processors covered by these waivers in the next 12 months. We have a reserve with a processor where the agreement was amended in the first quarter of 2021, such that proceeds are held in reserve until the sailing takes place or the funds are refunded to the customer. The maximum projected cash exposure with the processor, including amounts currently held and reported in Trade and other receivables, is approximately $237.7 million. The amount and timing are dependent on future factors that are uncertain, such as the pace of resumption of cruise operations, volume of future deposits and whether we transfer our business to other processors. If we require additional waivers on the credit card processing agreements and are not able to obtain them, this could lead to the termination of these agreements or the trigger of reserve requirements.

In March 2021, we took delivery of Odyssey of the Seas. To finance the purchase, we borrowed $994.1 million under a previously committed unsecured term loan which is 95% guaranteed by Euler Hermes Aktiengesellschaft (“Hermes”), the official export credit agency of Germany. The loan amortizes semi-annually over 12 years and bears interest at a floating rate equal to LIBOR plus a margin of 0.96%. Prior to delivery during the first quarter of 2021, we amended the credit agreement to (i) increase the maximum loan amount under the facility to make available to us a maximum amount equal to the US dollar equivalent of 80% of the vessel purchase price plus 100% of the premium payable to Hermes and (ii) defer the payment of all principal payments due between April 2021 and April 2022, which amounts will be repayable semi-annually over a five year period starting in April 2022.

In March 2021, we issued $1.50 billion of senior unsecured notes that mature in 2028, for net proceeds of $1.48 billion. Interest on the senior notes accrues at 5.5% per annum and is payable semi-annually.

In March 2021, we extended our binding commitment for a $700.0 million term loan facility by one year. As amended, we may draw on the facility at any time prior to August 12, 2022. Once drawn, the loan will bear interest at LIBOR plus 3.75% and will mature 364 days from funding. In addition, the facility, once drawn, will be guaranteed by RCI Holdings, LLC, our wholly owned subsidiary that owns the equity interests in subsidiaries that own seven of our vessels. We have the ability to increase the capacity of the facility by an additional $300.0 million from time to time subject to the receipt of additional or increased commitments and the issuance of guarantees from additional subsidiaries.

We repaid in full £300.0 million of Sterling-denominated notes issued under the Joint HM Treasury and Bank of England’s COVID Corporate Financing Facility and a $130 million term loan during the first and second quarters of 2021, respectively.

In June 2021, we issued $650.0 million of senior unsecured notes due in 2026 (the "June Unsecured Notes") for net proceeds of approximately $640.6 million. Interest accrues on the June Unsecured Notes at a fixed rate of 4.25% per annum and is payable semi-annually in arrears. We fully repaid the Silversea Cruises 7.25% senior secured notes due in 2025 (the "Silversea Notes"), in the amount of $619.8 million, with a portion of the proceeds from the June Unsecured Notes. We also funded call premiums, fees and expenses in connection with the redemption of the Silversea Notes with proceeds from the June Unsecured Notes.

In August 2021, we issued $1.0 billion of senior notes due in 2026 (the "August Unsecured Notes") for net proceeds of approximately $986.0 million. Interest accrues on the August Unsecured Notes at a fixed rate of 5.50% per annum and is payable semi-annually in arrears. We used the proceeds of the August Unsecured Notes to replenish our capital as a result of the redemption of a portion of the 11.50% senior secured notes due 2025, in the amount of $928.0 million plus accrued interest and call premiums. The repayment of the 11.50% senior secured notes due 2025 resulted in a total loss on the extinguishment of debt of $141.9 million, which was recognized within Interest expense, net of interest capitalized within our consolidated statements of comprehensive loss for the quarter and nine months ended September 30, 2021.

During the first quarter of 2021, we amended $4.9 billion of our non-export credit facilities and certain of our credit card processing agreements to extend the waiver of the financial covenants through and including the third quarter of 2022 or, if earlier, the date falling after January 1, 2022 on which we elect to comply with the modified covenants. Pursuant to the amendments, we have modified the manner in which such covenants are calculated (temporarily in certain cases and permanently in others) as well as the levels at which our net debt to capitalization covenant will be tested during the period commencing immediately following the end of the waiver period and continuing through the end of 2023. As of September 30, 2021, the monthly-tested minimum liquidity covenant was $350 million for the duration of the waiver period. As of the date of these financial statements, we were in compliance with the applicable minimum liquidity covenant. Pursuant to these

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amendments, the restrictions on paying cash dividends and effectuating share repurchases were extended through and including the third quarter of 2022.

During the first quarter of 2021, we also amended $6.3 billion of our export credit facilities to extend the waiver of the financial covenants through and including at least the end of the third quarter of 2022, and subsequently in the third quarter of 2021, we entered into a letter agreement to extend the waiver period to the end of the fourth quarter of 2022. These amendments defer $1.15 billion of principal payments due between April 2021 and April 2022. The deferred amounts will be repayable semi-annually over a five-year period starting in April 2022. Pursuant to these amendments, we have agreed to implement the same liquidity covenant that applies in our non-export credit facilities. The amendments provide for mandatory prepayment of the deferred amounts upon the taking of certain actions. Subject to a number of carve outs, these include, but are not limited to, the issuance of dividends, the completion of share repurchases, issuances of debt other than for crisis and recovery purposes, the making of loans and the sale of assets other than at arm’s length.

In the fourth quarter of 2020 and the first quarter of 2021, we entered into amendments to our drawn and undrawn ECA facilities to provide for the issuance of guarantees in satisfaction of existing obligations under these facilities. Following issuance (which, in the case of the undrawn facilities, will occur once the debt is drawn), the guarantees will be released under certain circumstances as other debt is repaid or refinanced on an unsecured and unguaranteed basis. In connection with and following the issuance of the guarantees, the guarantor subsidiaries are restricted from issuing additional guarantees in favor of lenders (other than those lenders who are party to the ECA facilities), and certain of the guarantor subsidiaries are restricted from incurring additional debt. In addition, the ECA facilities will benefit from guarantees to be issued by intermediary parent companies of subsidiaries that take delivery of any new vessels subject to export-credit backed financing.

Under certain of our agreements, the contractual interest rate, facility fee and/or export credit agency fee vary with our debt rating. On February 25, 2021, S&P Global downgraded our senior unsecured rating from B+ to B, which had no financial impact, and downgraded our $3.32 billion 10.875% senior secured notes due 2023 and our 11.50% senior secured notes due 2025 (collectively, "the "Secured Notes") and our Silversea Notes which were fully repaid in June 2021 with proceeds from the $650 million June Unsecured Notes, from BB to BB-. This downgrade had no impact on the terms of the notes.

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 September 30, 2021, 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. For one of our loans, we pay to the applicable export credit agency a fee of 2.97% per annum, based on the outstanding loan balance. The fee is paid semi-annually over the term of the loan (subject to adjustments based upon our credit ratings). We amortize the fees that are paid upfront over the life of the loan and those that are paid semi-annually over each respective payment period. We classify these fees within Amortization of debt issuance costs in our consolidated statements of cash flows. Prior to the loan being drawn, we present these fees within Other assets in our consolidated balance sheets. Once the loan is drawn, such fees are classified as a discount to the related loan, or contra-liability account, within Current portion of long-term debt or long-term debt.

The following is a schedule of annual maturities on our total debt net of debt issuance costs, and including finance leases, as of September 30, 2021 for each of the next five years (in thousands):

Year
Remainder of 2021			$	12,932
2022			2,182,569
2023			5,372,397
2024			4,006,923
2025			2,276,602
Thereafter			6,988,080
			$	20,839,503

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Note 8. Leases

Operating leases

Our operating leases primarily relate to preferred berthing arrangements, real estate and shipboard equipment and are included within Operating lease right-of-use assets, and Long-term operating lease liabilities with the current portion of the liability included within Current portion of operating lease liabilities in our consolidated balance sheets as of September 30, 2021 and December 31, 2020. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. Our operating leases include Silver Explorer, operated by Silversea Cruises. The operating lease for Silver Explorer will expire in 2023.

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

In June of 2021, we exercised our option under our operating lease with SMBC Leasing and Finance, Inc (the "Lessor") to purchase Terminal A at PortMiami in July 2021 for the pre-agreed purchase price of $220.0 million. Upon purchase of the terminal lease in July 2021, the underlying asset was recorded as a leasehold improvement within Property and equipment, net. Our July 2021 purchase of the Port of Miami terminal eliminated the residual value guarantee and a requirement under the lease to post $181.1 million of cash collateral on or before July 18, 2021.

Additionally, we remeasured the ground lease related to the Terminal A lease based on a reassessed lease term resulting from our purchase option exercise. We determined that the ground lease should remain as an operating lease with adjustments to the operating lease liability and the related right-of-use asset in our Consolidated Balance Sheet.

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

Finance Leases

Silversea Cruises operates the Silver Whisper under a finance lease. In May 2021, the finance lease for the Silver Whisper expiring in 2022 was amended to extend its expiration by 12 months and will now expire in 2023, subject to an option to purchase the ship. Additionally, certain scheduled payments have been deferred and are reflected in Long-term debt in our Consolidated Balance Sheet as of September 30, 2021. The total aggregate amount of the finance lease liabilities recorded for this ship was $31.5 million at September 30, 2021 and December 31, 2020. The lease payments on the Silver Whisper are subject to adjustments based on the LIBOR rate.

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

			Consolidated Statement of Comprehensive Loss Classification			Quarter Ended September 30, 2021						Nine Months Ended September 30, 2021
Lease costs:
Operating lease costs			Commission, transportation and other			$	1,626					$	1,626
Operating lease costs			Other operating expenses			5,424						15,365
Operating lease costs			Marketing, selling and administrative expenses			5,957						14,468
Financial lease costs:
Amortization of right-of-use-assets			Depreciation and amortization expenses			3,790						11,517
Interest on lease liabilities			Interest expense, net of interest capitalized			1,095						1,769
Total lease costs						$	17,892					$	44,745

			Consolidated Statement of Comprehensive Loss Classification			Quarter Ended September 30, 2020						Nine Months Ended September 30, 2020
Lease costs:
Operating lease costs			Commission, transportation and other			$	17,648					$	50,268
Operating lease costs			Other operating expenses			7,179						21,920
Operating lease costs			Marketing, selling and administrative expenses			5,686						16,716
Financial lease costs:
Amortization of right-of-use-assets			Depreciation and amortization expenses			946						2,941
Interest on lease liabilities			Interest expense, net of interest capitalized			557						3,754
Total lease costs						$	32,016					$	95,599

In addition, certain of our berthing agreements include variable lease costs based on the number of passengers berthed. During the quarter and nine months ended September 30, 2021, we had no variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive loss.

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Weighted average of the remaining lease terms and weighted average discount rates are as follows:

			As of September 30, 2021						As of December 31, 2020
Weighted average of the remaining lease term
Operating leases			17.9						7.8
Finance leases			42.7						41.2
Weighted average discount rate
Operating leases			6.48		%				4.59		%
Finance leases			6.54		%				6.89		%

Supplemental cash flow information related to leases is as follows (in thousands):

			Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	20,682		$	97,903
Operating cash flows from finance leases			$	1,769		$	3,754
Financing cash flows from finance leases			$	15,058		$	13,291

As of September 30, 2021, maturities related to lease liabilities were as follows (in thousands):

Year			Operating Leases						Finance Leases
Remainder of 2021			$	31,647					$	23,133
2022			96,341						31,732
2023			104,195						21,918
2024			85,064						12,529
2025			79,782						12,566
Thereafter			900,471						396,171
Total lease payments			1,297,500						498,049
Less: Interest			(677,060)						(300,642)
Present value of lease liabilities			$	620,440					$	197,407

Note 9. Commitments and Contingencies

Ship Purchase Obligations

Our future capital commitments consist primarily of new ship orders. As of September 30, 2021, two Oasis-class ships and three ships of a new generation, known as our Icon-class, are on order for our Royal Caribbean International brand with an aggregate capacity of approximately 28,200 berths. As of September 30, 2021, we had two Edge-class ships on order for our Celebrity Cruises brand with an aggregate capacity of approximately 6,500 berths. Additionally, as of September 30, 2021, we have three ships on order for our Silversea Cruises brand with an aggregate capacity of approximately 2,060 berths.

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COVID-19 has impacted shipyard operations which has and may continue to result in delays of our previously contracted ship deliveries. As of September 30, 2021, the dates that the ships on order by our Global and Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:

Ship

Shipyard

Expected Delivery Dates

Approximate Berths

Royal Caribbean International —

Oasis-class:

Wonder of the Seas

Chantiers de l'Atlantique

1st Quarter 2022

5,700

Unnamed

Chantiers de l'Atlantique

2nd Quarter 2024

5,700

Icon-class:

Icon of the Seas

Meyer Turku Oy

3rd Quarter 2023

5,600

Unnamed

Meyer Turku Oy

2nd Quarter 2025

5,600

Unnamed

Meyer Turku Oy

2nd Quarter 2026

5,600

Celebrity Cruises —

Edge-class:

Celebrity Beyond

Chantiers de l'Atlantique

2nd Quarter 2022

3,250

Unnamed

Chantiers de l'Atlantique

4th Quarter 2023

3,250

Silversea Cruises — (1)

Muse-Class:

Silver Dawn

Fincantieri

4th Quarter 2021

600

Evolution Class:

Unnamed

Meyer Werft

2nd Quarter 2023

730

Unnamed

Meyer Werft

2nd Quarter 2024

730

TUI Cruises (50% joint venture)

Mein Schiff 7

Meyer Turku Oy

2nd Quarter 2024

2,900

Unnamed

Fincantieri

4th Quarter 2024

4,100

Unnamed

Fincantieri

2nd Quarter 2026

4,100

Total Berths

47,860

(1)    The revenue impact from Silversea Cruises' new ships will be recognized on a three-month reporting lag from when the ships enter service. Refer to Note 1. General for further information.

In addition, as of September 30, 2021, we have an agreement in place with Chantiers de l'Atlantique to build an additional Edge-class ship for delivery in 2025, which is contingent upon completion of conditions precedent and financing.

In September 2021, we amended the credit agreements for the first and second Evolution-class ships to increase their maximum loan amounts by €175.6 million on an aggregate basis, or approximately $203.5 million based on the exchange rate at September 30, 2021. The increase in the loan amounts will finance ship design modifications that incorporate innovative sustainability features and additional premium cabins, increasing the capacity for each ship to 730 berths. At our election, interest on incremental portion of each loan will accrue either (1) at a fixed rate of 4.34% and 4.38%, respectively (inclusive of the applicable margin) or (2) at a floating rate equal to LIBOR plus 0.99% and 1.03%, respectively.

As of September 30, 2021, the aggregate cost of our ships on order presented in the table above, excluding any ships on order by our Partner Brands, was approximately $12.8 billion, of which we had deposited $784.8 million as of such date. Approximately 62.5% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at September 30, 2021. Refer to Note 12. Fair Value Measurements and Derivative Instruments for further information.

Litigation

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As previously reported, two lawsuits were filed against us in August 2019 in the U.S. District Court for the Southern District of Florida (the "Court") under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation ("Havana Docks Action") alleges it holds an interest in the Havana Cruise Port Terminal, and the complaint filed by Javier Garcia-Bengochea (the "Port of Santiago Action") alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban government. The complaints further allege that we trafficked in those properties by embarking and disembarking passengers at these facilities. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs. In the Havana Docks Action, we and the plaintiff have filed motions for summary judgment, which remain pending, and the trial has been scheduled for February 28, 2022. The Court dismissed the Port of Santiago Action with prejudice on the basis that the plaintiff lacked standing, and the plaintiff’s appeal of the dismissal is awaiting a decision by the appellate court. We believe we have meritorious defenses to the claims alleged in both the Havana Docks Action and the Port of Santiago Action, and we intend to vigorously defend ourselves against them. We believe it is unlikely the outcome of either action will have a material adverse impact to our financial condition, results of operations or cash flows. However, the outcome of litigation is inherently unpredictable and subject to significant uncertainties, and there can be no assurances that the final outcome of either case will not be material.

We are also routinely involved in claims typical within the cruise vacation industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected insurance recoveries, will not have a material adverse impact on our financial condition or results of operations and cash flows.

Other

If any person acquires ownership of more than 50% of our common stock or, subject to certain exceptions, during any 24-month period, a majority of our board of directors is no longer comprised of individuals who were members of our board of directors on the first day of such period, we may be obligated to prepay indebtedness outstanding under our credit facilities, which we may be unable to replace on similar terms. Our public debt securities also contain change of control provisions that would be triggered by a third-party acquisition of greater than 50% of our common stock coupled with a ratings downgrade. If this were to occur, it would have an adverse impact on our liquidity and operations.

Note 10. Shareholders' Equity

Common Stock Issued

During March 2021, we issued 16.9 million shares of common stock, par value $0.01 per share, at a price of $91.00 per share. We received net proceeds of $1.5 billion from the sale of our common stock, after deducting the estimated offering expenses payable by us.

Dividends

During the second quarter of 2020, we agreed with certain of our lenders not to pay dividends or engage in common stock repurchases for so long as our debt covenant waivers are in effect. In addition, in the event we declare a dividend or engage in share repurchases, we will need to repay the amounts deferred under our export credit facilities. Accordingly, we did not declare a dividend during the third quarter of 2021. Pursuant to amendments made to these agreements during the first quarter of 2021, the restrictions on paying cash dividends and effectuating share repurchases were extended through and including the third quarter of 2022.

During the first quarter of 2020, we declared a cash dividend on our common stock of $0.78 per share, which was paid in April 2020. During the first quarter of 2020, we also paid a cash dividend on our common stock of $0.78 per share, which was declared during the fourth quarter of 2019.

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Note 11. Changes in Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2021 and 2020 (in thousands):

			Accumulated Other Comprehensive Loss for the Nine Months Ended September 30, 2021																								Accumulated Other Comprehensive Loss for the Nine Months Ended September 30, 2020
			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
Accumulated comprehensive loss at beginning of the year			$	(650,519)					$	(65,542)					$	(23,280)					$	(739,341)					$	(688,529)					$	(45,558)					$	(63,626)					$	(797,713)
Other comprehensive income (loss) before reclassifications			23,752						313						11,255						35,320						(172,323)						(18,503)						(13,346)						(204,172)
Amounts reclassified from accumulated other comprehensive loss			24,762						3,435						—						28,197						62,184						1,550						69,044						132,778
Net current-period other comprehensive income (loss)			48,514						3,748						11,255						63,517						(110,139)						(16,953)						55,698						(71,394)
Ending balance			$	(602,005)					$	(61,794)					$	(12,025)					$	(675,824)					$	(798,668)					$	(62,511)					$	(7,928)					$	(869,107)

The following table presents reclassifications out of accumulated other comprehensive loss for the quarters and nine months ended September 30, 2021 and 2020 (in thousands):

						Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
Details About Accumulated Other Comprehensive Loss Components						Quarter Ended September 30, 2021						Quarter Ended September 30, 2020						Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020						Affected Line Item in Statements of Comprehensive Loss
Gain (loss) on cash flow derivative hedges:
Interest rate swaps						$	(11,418)					$	(6,532)					$	(32,376)					$	(15,939)					Interest expense, net of interest capitalized
Foreign currency forward contracts						(3,905)						(3,782)						(11,541)						(10,899)						Depreciation and amortization expenses
Foreign currency forward contracts						(505)						(1,511)						(2,311)						(5,855)						Other income (expense)
Fuel swaps						(2)						536						(416)						3,029						Other income (expense)
Fuel swaps						10,600						(5,598)						21,882						(32,520)						Fuel
						(5,230)						(16,887)						(24,762)						(62,184)
Amortization of defined benefit plans:
Actuarial loss						(1,145)						(517)						(3,435)						(1,550)						Payroll and related
						(1,145)						(517)						(3,435)						(1,550)
Release of net foreign cumulative translation due to sale or liquidation of businesses:
Foreign cumulative translation						—						(34,697)						—						(69,044)						Other operating
Total reclassifications for the period						$	(6,375)					$	(52,101)					$	(28,197)					$	(132,778)

During the nine months ended September 30, 2020, a $69.0 million loss was recorded within Other expense in our consolidated statements of comprehensive (loss) income, consisting of a $92.6 million loss resulting from the recognition of a currency translation adjustment, partially offset by the recognition of a deferred $23.6 million foreign exchange gain related to the Pullmantur net investment hedge. In connection with the Pullmantur reorganization in 2020, we no longer have significant involvement in the Pullmantur operations and these amounts previously deferred in Accumulated other comprehensive loss were recognized in earnings. Of the $69.0 million loss, $34.3 million and $34.7 million was released from Accumulated other comprehensive loss during the quarters ended June 30, 2020 and September 30, 2020, respectively.

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Note 12. 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 September 30, 2021 Using																														Fair Value Measurements at December 31, 2020 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)						$	3,289,326					$	3,289,326					$	3,289,326					$	—					$	—					$	3,684,474					$	3,684,474					$	3,684,474					$	—					$	—
Total Assets						$	3,289,326					$	3,289,326					$	3,289,326					$	—					$	—					$	3,684,474					$	3,684,474					$	3,684,474					$	—					$	—
Liabilities:
Long-term debt (including current portion of debt)(5)						$	20,642,096					$	22,889,378					$	—					$	22,889,378					$	—					$	18,706,359					$	20,981,040					$	—					$	20,981,040					$	—
Total Liabilities						$	20,642,096					$	22,889,378					$	—					$	22,889,378					$	—					$	18,706,359					$	20,981,040					$	—					$	20,981,040					$	—

(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 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, 2021 and December 31, 2020.

(4) Consists of cash and marketable securities with original maturities of less than 90 days.

(5) Consists of unsecured revolving credit facilities, senior notes, term loans and convertible notes. These amounts do not include our finance lease obligations or commercial paper.

Other Financial Instruments 

The carrying amounts of accounts receivable, accounts payable, accrued interest, accrued expenses and commercial paper approximate fair value at September 30, 2021 and December 31, 2020.

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 September 30, 2021 Using																								Fair Value Measurements at December 31, 2020 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)						$	97,519					$	—					$	97,519					$	—					$	108,539					$	—					$	108,539					$	—
Total Assets						$	97,519					$	—					$	97,519					$	—					$	108,539					$	—					$	108,539					$	—
Liabilities:
Derivative financial instruments(5)						$	173,193					$	—					$	173,193					$	—					$	259,705					$	—					$	259,705					$	—
Total Liabilities						$	173,193					$	—					$	173,193					$	—					$	259,705					$	—					$	259,705					$	—

(1)Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment.

(2)Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. For foreign currency forward contracts, interest rate swaps and fuel swaps, fair value is derived using valuation models that utilize the income valuation approach. These valuation models take into account the contract terms, such as maturity, as well as other inputs, such as foreign exchange rates and curves, fuel types, fuel curves and interest rate yield curves. Derivative instrument fair values take into account the creditworthiness of the counterparty and the Company.

(3)Inputs that are unobservable. No Level 3 inputs were used in fair value measurements of Other financial instruments as of September 30, 2021 and December 31, 2020.

(4)Consists of foreign currency forward contracts, interest rate swaps and fuel swaps. Refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type.

(5) Consists of foreign currency forward contracts, interest rate swaps and fuel swaps. Refer to the "Fair Value of Derivative Instruments" table for breakdown by instrument type.

The reported fair values are based on a variety of factors and assumptions. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of September 30, 2021 or December 31, 2020, 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

The following tables present information about the Company’s nonfinancial instruments recorded at fair value on a nonrecurring basis (in thousands):

			Fair Value Measurements at September 30, 2021 Using
Description			Total Carrying Amount			Total Fair Value			Level 3			Total Impairment for the nine months ended September 30, 2021
Long-lived assets(1)			—			—			—			$	40,643
Total			—			—			—			$	40,643

(1) During the quarter ended June 30, 2021, certain construction in progress assets were impaired due to a reduction in scope or the decision to not complete the projects. The impairment was calculated based on orderly liquidation values. The fair value of these assets was estimated as of June 30, 2021.

			Fair Value Measurement at December 31, 2020 Using
Description			Total Carrying Amount			Total Fair Value			Level 3			Total Impairment for the year ended December 31, 2020
Silversea Goodwill(1)			$	508,578		$	508,578		$	508,578		$	576,208
Indefinite-life intangible asset(2)			318,700			318,700			318,700			30,800
Long-lived assets(3)			577,193			577,193			577,193			727,063
Right-of-use assets(4)			67,265			67,265			67,265			65,909
Equity-method investments(5)			—			—			—			39,735
Total			$	1,471,736		$	1,471,736		$	1,471,736		$	1,439,715

___________________________________________________________________________________________________

(1) We estimated the fair value of the Silversea Cruises reporting unit using a probability-weighted discounted cash flow model in combination with a market based valuation approach. The principal assumptions used in the discounted cash flow model were (i) the timing of our return to service, changes in market conditions and port or other restrictions; (ii) forecasted net revenues, primarily the timing of returning to normalized operations, occupancy rates from existing and expected ship deliveries, including options, and terminal growth rate; and (iii) weighted average cost of capital (i.e., discount rate). The discounted cash flow model used our 2020 projected operating results as a base. To that base we added future years’ cash flows through 2030 assuming multiple revenue and expense scenarios that reflect the impact of different global economic

environments for this period on the Silversea Cruises' reporting unit. We assigned a probability to each revenue and expense scenario. We discounted the projected cash flows using rates specific to the Silversea Cruises' reporting unit based on its weighted-average cost of capital, which was determined to be 12.75%. The fair value of Silversea Cruises’ goodwill was estimated as of March 31, 2020, the date the asset was last impaired.

(2) Amount represents the Silversea Cruises trade name which makes up the majority of our indefinite-life intangible assets, totaling $321.5 million. We estimated the fair value of the Silversea Cruises trade name using a discounted cash flow model and the relief-from-royalty method and used a discount rate of 13.25%. Significant inputs in performing the fair value assessment for the trade name were (i) forecasted net revenues, primarily the timing of returning to normalized operations, occupancy rates from existing and expected ship deliveries, including options, and terminal growth rate; (ii) the royalty rate of 3.0%; and (iii) weighted average cost of capital (i.e., discount rate). The fair value of the Silversea Cruises trade name was estimated as of March 31, 2020, the date the asset was last impaired.

(3) Impairments primarily relate to certain vessels during 2020. In addition, certain construction in progress projects generated impairments during the quarter ended September 30, 2020 and quarter ended December 31, 2020. For the vessels impaired during the quarter ended March 31, 2020, we estimated the fair value of two of our vessels using a blended indication from the income and cost approaches and the fair value of the remaining vessels was estimated primarily based on their orderly liquidation values. For the vessels impaired during the quarter ended June 30, 2020, we estimated the fair value of the vessels using a modified market approach based on the carrying values and orderly liquidation values of the vessels. For the vessels impaired during the quarter ended December 31, 2020, we estimated the fair value of the three Azamara vessels using a market approach. A significant input in performing the fair value assessments for these vessels was management's expected use of the vessels, which takes into consideration forecasted operating results. During the quarter ended September 30, 2020 and quarter ended December 31, 2020, construction in progress assets were impaired due to a reduction in scope or the decision to not complete the projects. The impairment was calculated based on orderly liquidation values. The fair value of these assets was estimated as of the date the asset was last impaired.

(4) Impairments to our right-of-use assets relate to certain of our berthing arrangements and a ship operating lease. We estimated the fair value of the berthing arrangements using estimated projected discounted cash flows and the fair value of the ship operating lease was estimated using a market approach. The fair value of the berthing arrangements was estimated as of March 31, 2020, the date these assets were last impaired. A significant input in performing the fair value assessments for these assets was our expected passenger headcount. The fair value of the ship operating lease was estimated as of December 31, 2020, the date this asset was last impaired, and significant inputs in performing the fair value assessment using the market approach for this asset were the expected rate of return and remaining lease payments.

(5) We estimated the fair value of our other than temporarily impaired equity-method investments using a discounted cash flow model. A significant input in performing the fair value assessments for these assets was forecasted operating results for these investments. The fair value of these equity-method investments was estimated as of March 31, 2020, the date these assets were last impaired. For further information on our equity method investments, refer to Note 6. Other Assets.

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.

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

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

						Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements
						As of September 30, 2021																								As of December 31, 2020
						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 Liabilities						Cash Collateral Received						Net Amount of Derivative Assets
Derivatives subject to master netting agreements						$	97,519					$	(66,874)					$	—					$	30,645					$	108,539					$	(80,743)					$	—					$	27,796
Total						$	97,519					$	(66,874)					$	—					$	30,645					$	108,539					$	(80,743)					$	—					$	27,796

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

						Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements
						As of September 30, 2021																								As of December 31, 2020
						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 Assets						Cash Collateral Pledged						Net Amount of Derivative Liabilities
Derivatives subject to master netting agreements						$	(173,193)					$	66,874					$	65,581					$	(40,738)					$	(259,705)					$	80,743					$	57,273					$	(121,689)
Total						$	(173,193)					$	66,874					$	65,581					$	(40,738)					$	(259,705)					$	80,743					$	57,273					$	(121,689)

Concentrations of Credit Risk

We monitor our credit risk associated with financial and other institutions with which we conduct significant business and to minimize these risks, we select counterparties with credit risks acceptable to us and we seek to limit our exposure to an individual counterparty. Credit risk, including but not limited to counterparty nonperformance under derivative instruments, our credit facilities and new ship progress payment guarantees, is not considered significant, as we primarily conduct business with large, well-established financial institutions, insurance companies and export credit agencies many of which we have long-term relationships with and which have credit risks acceptable to us or where the credit risk is spread out among a large number of counterparties. As of September 30, 2021, we had counterparty credit risk exposure under our derivative instruments of $17.8 million, which were limited to the cost of replacing the contracts in the event of non-performance by the counterparties to the contracts, the majority of which are currently our lending banks. We do not anticipate nonperformance by any of our significant counterparties. 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.

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, with the amortization of excluded components affecting earnings. 

On an ongoing basis, we assess whether derivatives used in hedging transactions are "highly effective" in offsetting changes in the fair value or cash flow of hedged items. For 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. The methodology for assessing hedge effectiveness is applied on a consistent basis for each one of our hedging programs (i.e., interest

rate, foreign currency ship construction, foreign currency net investment and fuel). For our regression analyses, we 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. If it is determined that a derivative is not highly effective as a hedge or hedge accounting is discontinued, any change in fair value of the derivative since the last date at which it was determined to be effective is recognized in earnings.

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.

Interest Rate Risk

Our exposure to market risk for changes in interest rates primarily relates to our debt obligations including future interest payments. At September 30, 2021 and December 31, 2020, approximately 67.5% and 64.5%, respectively, of our debt was effectively fixed. We use interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense.

Market risk associated with our fixed-rate debt is the potential increase in fair value resulting from a decrease in interest rates. We use interest rate swap agreements that effectively convert a portion of our fixed-rate debt to a floating-rate basis to manage this risk. At September 30, 2021 and December 31, 2020, we maintained interest rate swap agreements on the following fixed-rate debt instruments:

Debt Instrument			Swap Notional as of September 30, 2021 (in thousands)			Maturity			Debt Fixed Rate			Swap Floating Rate: LIBOR plus			All-in Swap Floating Rate as of September 30, 2021
Oasis of the Seas term loan			$	17,500		October 2021			5.41%			3.87%			4.08%
Unsecured senior notes			650,000			November 2022			5.25%			3.63%			3.76%
			$	667,500

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. At September 30, 2021 and December 31, 2020, we maintained interest rate swap agreements on the following floating-rate debt instruments:

Debt Instrument			Swap Notional as of September 30, 2021 (in thousands)			Maturity			Debt Floating Rate						All-in Swap Fixed Rate
Celebrity Reflection term loan			$	190,896		October 2024			LIBOR plus			0.40%			2.85%
Quantum of the Seas term loan			336,875			October 2026			LIBOR plus			1.30%			3.74%
Anthem of the Seas term loan			362,500			April 2027			LIBOR plus			1.30%			3.86%
Ovation of the Seas term loan			484,167			April 2028			LIBOR plus			1.00%			3.16%
Harmony of the Seas term loan (1)			468,736			May 2028			EURIBOR plus			1.15%			2.26%
Odyssey of the Seas term loan (2)			440,833			October 2032			LIBOR plus			0.96%			3.21%
Odyssey of the Seas term loan (2)			191,667			October 2032			LIBOR plus			0.96%			2.84%
			$	2,475,674

(1)Interest rate swap agreements hedging the Euro-denominated term loan for Harmony of the Seas include EURIBOR zero-floor matching the hedged debt EURIBOR zero-floor. Amount presented is based on the exchange rate as of September 30, 2021.

(2)Interest rate swap agreements hedging the term loan of Odyssey of the Seas include LIBOR zero-floors matching the debt LIBOR zero-floor. The effective dates of the $440.8 million and $191.7 million interest rate swap agreements are October 2020 and October 2022, respectively. The unsecured term loan for the financing of Odyssey of the Seas was drawn on March 2021.

These interest rate swap agreements are accounted for as cash flow hedges.

The notional amount of interest rate swap agreements related to outstanding debt and our current unfunded financing arrangements as of September 30, 2021 and December 31, 2020 was $3.1 billion and $3.4 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 to manage portions of the exposure to movements in foreign currency exchange rates. As of September 30, 2021, the aggregate cost of our ships on order was $12.8 billion, of which we had deposited $784.8 million as of such date. These amounts do not include any ships placed on order that are contingent upon completion of conditions precedent and/or financing, any ships on order by our Partner Brands and any ships on order placed by Silversea Cruises during the reporting lag period. Refer to Note 9. Commitments and Contingencies, for further information on our ships on order.  At September 30, 2021 and December 31, 2020, approximately 62.5% and 66.3%, respectively, of the aggregate cost of the ships under construction was exposed to fluctuations in the Euro exchange rate. Our foreign currency forward contract agreements are accounted for as cash flow or net investment hedges depending on the designation of the related hedge.

On a regular basis, we enter into foreign currency forward contracts and, from time to time, we utilize cross-currency swap agreements and collar options to minimize the volatility resulting from the remeasurement of net monetary assets and liabilities denominated in a currency other than our functional currency or the functional currencies of our foreign subsidiaries. During the third quarter of 2021, we maintained an average of approximately $508.8 million of these foreign currency forward contracts. These instruments are not designated as hedging instruments. For the quarters ended September 30, 2021 and 2020, changes in the fair value of the foreign currency forward contracts resulted in a loss and a gain of $12.9 million and $4.9 million, respectively. For the nine months ended September 30, 2021 and 2020, changes in the fair value of the foreign currency forward contracts resulted in a loss of $25.9 million and $35.3 million, respectively. These amounts were recognized in earnings within Other income (expense) in our consolidated statements of comprehensive loss.

We consider our investments in our foreign operations to be denominated in relatively stable currencies and to be of a long-term nature. As of September 30, 2021, we maintained foreign currency forward contracts and designated them as hedges of a portion of our net investments in TUI Cruises of €245.0 million, or approximately $283.9 million based on the exchange rate at September 30, 2021. These forward currency contracts mature in October 2021.

The notional amount of outstanding foreign exchange contracts, excluding the forward contracts entered into to minimize remeasurement volatility, as of both September 30, 2021 and December 31, 2020 was $3.0 billion and $3.1 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 €93.0 million, or approximately $107.8 million, as of September 30, 2021. As of December 31, 2020, we had designated debt as a hedge of our net investments in TUI Cruises of €215.0 million, or approximately $263.0 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.

The prior suspension of our cruise operations due to the COVID-19 pandemic and our gradual resumption of cruise operations has resulted in reductions to our forecasted fuel purchases. During the quarter and nine months ended September 30, 2021, we discontinued cash flow hedge accounting on 48.1 thousand and 95.8 thousand metric tons of fuel swap agreements, respectively, maturing in 2021 and 2022, which resulted in the reclassification of a net $2.4 million gain and $1.9 million loss from Accumulated other comprehensive loss to Other income (expense), respectively. During the quarter and nine months ended September 30, 2020, we discontinued cash flow hedge accounting on 0.2 million and 0.5 million metric tons of our fuel swap agreements maturing in 2020 and 2021, respectively, which resulted in the reclassification of net losses of $7.9 million and $76.3 million in 2020 and 2021, respectively, from Accumulated other

comprehensive loss to Other income (expense). Changes in the fair value of fuel swaps for which cash flow hedge accounting was discontinued are currently recognized in Other income (expense) each reporting period through the maturity dates of the fuel swaps.

Future suspension of our operations or modifications to our itineraries may affect our expected forecasted fuel purchases which could result in further discontinuance of fuel swap cash flow hedge accounting and the reclassification of deferred gains or losses from Accumulated other comprehensive loss into earnings. Refer to Risk Factors in Part II, Item 1A. for further discussion on risks related to COVID-19.

At September 30, 2021, we have hedged the variability in future cash flows for certain forecasted fuel transactions occurring through 2023. As of September 30, 2021 and December 31, 2020, we had the following outstanding fuel swap agreements:

			Fuel Swap Agreements
			As of September 30, 2021						As of December 31, 2020
Designated as hedges:			(metric tons)
2021			124,050						385,050
2022			419,700						389,650
2023			82,400						82,400

			Fuel Swap Agreements
			As of September 30, 2021						As of December 31, 2020
			(% hedged)
Designated hedges as a % of projected fuel purchases:
2021			43		%				40		%
2022			28		%				23		%
2023			5		%				5		%

			Fuel Swap Agreements
			As of September 30, 2021						As of December 31, 2020
Not designated as hedges:			(metric tons)
2021			21,900						229,850
2022			62,750						14,650

As of September 30, 2021, $42.9 million of estimated unrealized gain associated with our cash flow hedges pertaining to fuel swap agreements is expected to be reclassified to earnings from Accumulated other comprehensive loss within the next twelve months. 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 (in thousands):

						Fair Value of Derivative Instruments
						Asset Derivatives																		Liability Derivatives
						Balance Sheet Location						As of September 30, 2021						As of December 31, 2020						Balance Sheet Location						As of September 30, 2021						As of December 31, 2020
												Fair Value						Fair Value												Fair Value						Fair Value
Derivatives designated as hedging instruments under ASC 815-20(1)
Interest rate swaps						Other assets						$	10,407					$	17,271					Other long-term liabilities						$	88,891					$	144,653
Interest rate-swaps						Derivative financial instruments						16						261						Derivative financial instruments						—						—
Foreign currency forward contracts						Derivative financial instruments						19,143						63,894						Derivative financial instruments						79,305						13,294
Foreign currency forward contracts						Other assets						—						20,836						Other long-term liabilities						4,997						7,306
Fuel swaps						Derivative financial instruments						42,902						5,093						Derivative financial instruments						—						25,203
Fuel swaps						Other assets						16,080						350						Other long-term liabilities						—						50,117
Total derivatives designated as hedging instruments under 815-20												$	88,548					$	107,705											$	173,193					$	240,573
Derivatives not designated as hedging instruments under ASC 815-20
Foreign currency forward contracts						Derivative financial instruments						$	—					$	—					Derivative financial instruments						$	—					$	160
Fuel swaps						Derivative financial instruments						8,346						834						Derivative financial instruments						—						18,028
Fuel swaps						Other Assets						625						—						Other long-term liabilities						—						944
Total derivatives not designated as hedging instruments under 815-20												8,971						834												—						19,132
Total derivatives												$	97,519					$	108,539											$	173,193					$	259,705

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

The location and amount of gain or (loss) recognized in income on fair value and cash flow hedging relationships were as follows (in thousands):

Quarter Ended September 30, 2021

Quarter Ended September 30, 2020

Fuel Expense

Depreciation and Amortization Expenses

Interest Income (Expense)

Other Income (Expense)

Fuel Expense

Depreciation and Amortization Expenses

Interest Income (Expense)

Other Income (Expense)

Total amounts of income and expense line items presented in the statement of financial performance in which the effects of fair value or cash flow hedges are recorded

$118,127

$325,907

$(426,875)

$37,230

$53,815

$317,139

$(254,332)

$(10,853)

The effects of fair value and cash flow hedging:

Gain or (loss) on fair value hedging relationships in Subtopic 815-20

Interest contracts

Hedged items

n/a

n/a

$2,100

$—

n/a

n/a

$2,379

$—

Derivatives designated as hedging instruments

n/a

n/a

$383

$—

n/a

n/a

$39

$—

Gain or (loss) on cash flow hedging relationships in Subtopic 815-20

Interest contracts

Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income

n/a

n/a

$(11,418)

n/a

n/a

n/a

$(6,532)

n/a

Commodity contracts

Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income

$10,600

n/a

n/a

$(2)

$(5,598)

n/a

n/a

$536

Foreign exchange contracts

Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income

n/a

$(3,905)

n/a

$(505)

n/a

$(3,782)

n/a

$(1,511)

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020

Fuel Expense

Depreciation and Amortization Expenses

Interest Income (Expense)

Other Income (Expense)

Fuel Expense

Depreciation and Amortization Expenses

Interest Income (Expense)

Other Income (Expense)

Total amounts of income and expense line items presented in the statement of financial performance in which the effects of fair value or cash flow hedges are recorded

$219,058

$959,512

$(994,669)

$66,771

$327,275

$961,226

$(555,392)

$(127,537)

The effects of fair value and cash flow hedging:

Gain or (loss) on fair value hedging relationships in Subtopic 815-20

Interest contracts

Hedged items

n/a

n/a

$7,098

—

n/a

n/a

$(20,855)

$—

Derivatives designated as hedging instruments

n/a

n/a

$148

—

n/a

n/a

$23,338

$—

Gain or (loss) on cash flow hedging relationships in Subtopic 815-20

Interest contracts

Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income

n/a

n/a

$(32,375)

n/a

n/a

n/a

$(15,939)

n/a

Commodity contracts

Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income

$21,882

n/a

n/a

$(416)

$(32,520)

n/a

n/a

$3,029

Foreign exchange contracts

Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income

n/a

$(11,541)

n/a

$(2,311)

n/a

$(10,899)

n/a

$(5,855)

The carrying value and line item caption of non-derivative instruments designated as hedging instruments recorded within our consolidated balance sheets were as follows (in thousands):

												Carrying Value
Non-derivative instrument designated as hedging instrument under ASC 815-20						Balance Sheet Location						As of September 30, 2021						As of December 31, 2020
Foreign currency debt						Current portion of debt						$	39,207					$	43,696
Foreign currency debt						Long-term debt						68,566						219,335
												$	107,773					$	263,031

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 loss was as follows (in thousands):

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, 2021						Quarter Ended September 30, 2020						Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020						Quarter Ended September 30, 2021						Quarter Ended September 30, 2020						Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
Interest rate swaps						Interest expense, net of interest capitalized						$	383					$	39					$	148					$	23,338					$	2,100					$	2,379					$	7,098					$	(20,855)

e fair value and line item caption of derivative instruments recorded within our consolidated balance sheets for the cumulative basis adjustment for fair value hedges were as follows (in thousands):

Line Item in the Statement of Financial Position Where the Hedged Item is Included						Carrying Amount of the Hedged Liabilities												Cumulative amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities
						As of September 30, 2021						As of December 31, 2020						As of September 30, 2021						As of December 31, 2020
Current portion of debt and Long-term debt						$	659,209					$	700,331					$	10,413					$	17,512

The effect of derivative instruments qualifying and designated as cash flow hedging instruments on the consolidated financial statements was as follows (in thousands):.

Derivatives under ASC 815-20  Cash Flow Hedging Relationships						Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Loss on Derivatives																								Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income						Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
						Quarter Ended September 30, 2021						Quarter Ended September 30, 2020						Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020												Quarter Ended September 30, 2021						Quarter Ended September 30, 2020						Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
Interest rate swaps						$	1,534					$	(42,488)					$	29,228					$	(90,677)					Interest expense, net of interest capitalized						$	(11,418)					$	(6,532)					$	(32,376)					$	(15,939)
Foreign currency forward contracts						(48,221)						96,821						(150,376)						39,161						Depreciation and amortization expenses						(3,905)						(3,782)						(11,541)						(10,899)
Foreign currency forward contracts						—						—						—						—						Other income (expense)						(505)						(1,511)						(2,311)						(5,855)
Fuel swaps						—						—						—						—						Other income (expense)						(2)						536						(416)						3,029
Fuel swaps						28,193						(5,085)						144,900						(120,807)						Fuel						10,600						(5,598)						21,882						(32,520)
						$	(18,494)					$	49,248					$	23,752					$	(172,323)											$	(5,230)					$	(16,887)					$	(24,762)					$	(62,184)

The table below represents amounts excluded from the assessment of effectiveness for our net investment hedging instruments for which the difference between changes in fair value and periodic amortization is recorded in accumulated other comprehensive loss (in thousands):

Gain (Loss) Recognized in Income (Net Investment Excluded Components)												Nine Months Ended September 30, 2021
Net inception fair value at January 1, 2021												$	(1,915)
Amount of gain recognized in income on derivatives for the nine month period ended September 30, 2021												4,966
Amount of gain (loss) remaining to be amortized in accumulated other comprehensive loss, as of September 30, 2021												(3,141)
Fair value at September 30, 2021												$	(90)

The effect of non-derivative instruments qualifying and designated as net investment hedging instruments on the consolidated financial statements was as follows (in thousands):

						Amount of Gain (Loss) Recognized in Other Comprehensive Loss
Non-derivative instruments under ASC 815-20 Net Investment Hedging Relationships						Quarter Ended September 30, 2021						Quarter Ended September 30, 2020						Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
Foreign Currency Debt						$	2,585					$	(16,732)					$	5,593					$	(16,784)

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

												Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments under ASC 815-20						Location of Gain (Loss) Recognized in Income on Derivatives						Quarter Ended September 30, 2021						Quarter Ended September 30, 2020						Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
Foreign currency forward contracts						Other income (expense)						$	(12,880)					$	4,907					$	(25,854)					$	(35,265)
Fuel swaps						Other income (expense)						8,222						(13,112)						35,858						(89,471)
												$	(4,658)					$	(8,205)					$	10,004					$	(124,736)

Credit Related Contingent Features

Our current interest rate derivative instruments require us to post collateral if our Standard & Poor’s and Moody’s credit ratings fall 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 is rated below BBB- by Standard & Poor’s and Baa3 by Moody’s, then the counterparty will 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 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.

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Note 13. Restructuring Charges

In April 2020, we reduced our U.S. shoreside workforce by approximately 23% through permanent layoffs. We incurred severance costs of $28.0 million during the year ended December 31, 2020.

The following table summarizes our restructuring costs during the nine months ended September 30, 2021 as it relates to the April 2020 reduction in our workforce (in thousands):

			Beginning balance January 1, 2021						Accruals						Payments						Ending balance September 30, 2021						Cumulative Charges Incurred						Expected Additional Expenses to be Incurred
Termination benefits			$	4,257					$	643					$	4,311					$	589					$	28,596					$	—
Total			$	4,257					$	643					$	4,311					$	589					$	28,596					$	—

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