Item 16. Form 10-K Summary

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Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


ROYAL CARIBBEAN CRUISES LTD. (Registrant)
By:			/s/ JASON T. LIBERTY
			Jason T. Liberty Executive Vice President, Chief Financial Officer (Principal Financial Officer and duly authorized signatory)

February 26, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 26, 2021.


/s/ RICHARD D. FAIN
Richard D. Fain Director, Chairman and Chief Executive Officer (Principal Executive Officer)

/s/ JASON T. LIBERTY
Jason T. Liberty Executive Vice President, Chief Financial Officer (Principal Financial Officer)

/s/ HENRY L. PUJOL
Henry L. Pujol Senior Vice President, Chief Accounting Officer (Principal Accounting Officer)

*
John F. Brock Director

*
Stephen R. Howe Jr. Director

*
William L. Kimsey Director

*
Maritza G. Montiel Director

*
Ann S. Moore Director
*
Eyal M. Ofer Director


*
William K. Reilly Director

*
Vagn O. Sørensen Director

*
Donald Thompson Director

*
Arne Alexander Wilhelmsen Director
*

Amy C. McPherson Director
*


*By:			/s/ JASON T. LIBERTY
			Jason T. Liberty, as Attorney-in-Fact

ROYAL CARIBBEAN CRUISES LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


			Page
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Statements of Comprehensive (Loss) Income			F-6
Consolidated Balance Sheets			F-7
Consolidated Statements of Cash Flows			F-8
Consolidated Statements of Shareholders' Equity			F-10
Notes to the Consolidated Financial Statements			F-11

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Royal Caribbean Cruises Ltd.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Royal Caribbean Cruises Ltd. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive (loss) income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Emphasis of Matter

As discussed in Note 1 to the consolidated financial statements, the impact to the Company’s global bookings resulting from the COVID-19 pandemic will continue to have a material negative impact on the Company’s results of operations and liquidity. Further, in April 2022, approximately $1.0 billion of long- term debt will need to be refinanced or extended should the commencement of operations be delayed beyond management’s current estimate. Management’s evaluation of the events and conditions and management’s plans to mitigate these matters are also described in Note 1.

F-2

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment Assessments – Royal Caribbean International & Silversea Cruises Reporting Units Goodwill and Silversea Cruises Indefinite-lived Intangible Asset Trade Name

As described in Notes 2, 5 and 6 to the consolidated financial statements, the Company’s consolidated goodwill balance was $809.5 million and the indefinite-lived intangible assets balance was $321.5 million as of December 31, 2020. The Royal Caribbean International reporting unit goodwill was $296.6 million, the Silversea Cruises reporting unit goodwill was $508.6 million and the Silversea Cruises’ indefinite-lived intangible asset trade name was $318.7 million, respectively, as of December 31, 2020. Management reviews goodwill and indefinite-lived intangible assets for impairment at the reporting unit level and asset level, respectively, annually or, when events or circumstances dictate, more frequently. The impairment analysis consists of a comparison of the fair value of the reporting unit or asset with its carrying value.

The impact of COVID-19 on management’s operating plans and projected cash flows resulted in the completion of (i) an interim impairment assessment for the Royal Caribbean International reporting unit as of March 31, 2020 and June 30, 2020, and the Silversea Cruises reporting unit as of March 31, 2020; and (ii) an interim impairment assessment in respect to the Silversea Cruises trade name as of March 31, 2020. As a result of management’s interim impairment assessments, management recognized a goodwill impairment charge associated with the Silversea Cruises reporting unit of $576.2 million and an impairment charge of $30.8 million charge for the Silversea Cruises trade name for the quarter ended March 31, 2020. As of November 30, 2020, management performed the annual goodwill impairment reviews and determined no incremental impairment losses existed at the date of this annual assessment for the Royal Caribbean International reporting unit or the Silversea Cruises reporting unit and trade name. The fair value of the Silversea Cruises reporting unit was determined by management using a probability-weighted discounted cash flow model in combination with a market based valuation approach for all periods assessed. The fair value of the Royal Caribbean International reporting unit as of March 31, 2020 was determined using a discounted cash flow model and a probability-weighted discounted cash flow model in combination with a market based valuation approach for the June 30, 2020 and November 30, 2020 assessments. The principal assumptions used in the discounted cash flow analyses that support the Silversea Cruises and Royal Caribbean International reporting units’ impairment assessments consisted of the timing of management’s return to service; changes in market conditions; and port or other restrictions; 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 the weighted average cost of capital (i.e., discount rate). Management estimates the fair value of the intangible assets using a discounted cash flow model and various valuation methods depending on the nature of the intangible asset, such as the relief-from-royalty method for trade names. The principal assumptions used in the discounted cash flow analyses that support the Silversea Cruises trade name impairment

F-3

assessments consisted of 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; the royalty rate; and the weighted average cost of capital (i.e., discount rate).

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the Royal Caribbean International and Silversea Cruises reporting units and the indefinite-lived intangible asset impairment assessments of the Silversea Cruises trade name is a critical audit matter are (i) the significant judgment by management when determining the fair value estimates; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to 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 the discount rate for the goodwill and trade name impairment assessments; and the royalty rate assumption for the trade name impairment assessments; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill and indefinite-lived intangible asset impairment assessments, including controls over the valuation of the Royal Caribbean International & Silversea Cruises reporting units and Silversea Cruises trade name. These procedures also included, among others, (i) testing management’s process for developing the fair value estimates; (ii) evaluating the appropriateness of the discounted future cash flow model, market based valuation approach and the relief-from-royalty model; (iii) testing the completeness and accuracy of underlying data used in the fair value estimates; and (iv) evaluating the reasonableness of the significant assumptions used by management related to 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 the discount rate for the goodwill and the trade name impairment assessments and the royalty rate assumption for the Silversea Cruises trade name impairment assessments. Evaluating management’s assumptions related to forecasted net revenues, primarily the timing of returning to normalized operations, occupancy rates from existing and expected ship deliveries, including options, and the terminal growth rate involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit and trade name; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of discounted cash flow model, relief-from-royalty and market based valuation approach and the discount rates and royalty rate assumptions.

Certain Ship Impairment Assessments

As described in Notes 2 and 7 to the consolidated financial statements, the Company’s consolidated ships and ship improvements balance was $32.0 billion as of December 31, 2020. Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate, based on estimated undiscounted future cash flows, that the carrying value of these assets may not be fully recoverable. The impact of COVID-19 on the Company’s expected future operating cash flows and management’s decision to dispose of certain vessels, resulted in management identifying impairment triggers for certain vessels. Management estimated the recoverability of certain vessels using undiscounted cash flow analyses at interim dates throughout 2020 and again at December 31, 2020. A number of vessels were found to have net carrying values in excess of their estimated undiscounted future cash flows, and as such, were subject to fair value assessments. Management determined fair value of the vessels based on intended use of the identified vessels, and as such, management used a combination of discounted cash flows, replacement cost, scrap and residual value techniques to estimate fair value. Consequently, management recognized $635.5 million of impairment losses during the year ended 2020. The suspension of operations and the possibility of further suspensions create uncertainty in forecasting undiscounted cash flows, which are used by management to determine if a vessel is at risk of impairment. Management’s principal assumptions used in the undiscounted cash flows consisted of the timing of management’s return to service; changes in market conditions; and port or other restrictions; forecasted net revenues, primarily the timing of returning to normalized operations, and occupancy rates; and management’s intended use of the vessel for its remaining useful life.

The principal considerations for our determination that performing procedures relating to certain ship impairment assessments is a critical audit matter are (i) the significant judgment by management in developing the undiscounted cash flow analyses for the ships with triggering events; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to forecasted net revenues, primarily the timing of returning to normalized operations, and occupancy rates and management’s intended use of the vessel for its remaining useful life.

F-4

Liquidity - Impact of COVID-19

As described in Note 1 to the consolidated financial statements, the Company voluntarily suspended its global cruise operations effective March 13, 2020, and this suspension remains in effect through at least April 30, 2021 for most of its cruise operations. The suspension of operations and the impact to the Company’s global bookings resulting from the COVID-19 pandemic will continue to have a material negative impact on the Company’s results of operations and liquidity, which may be prolonged beyond containment of the disease. Management has and will continue undertaking several proactive measures to mitigate the financial and operational impacts of COVID-19, including reduction of capital expenditures and operating expenses (reduction and furloughing of workforce and laying up of vessels), issuing of debt and shares of our common stock, amending of credit agreements to defer payments and covenant requirements and suspending of dividend payments. As of December 31, 2020, the Company had liquidity of $4.4 billion, consisting of cash and cash equivalents of $3.7 billion and a $0.7 billion one-year commitment for a 364-day term loan facility. Based on management’s actions described above, and management’s assumptions regarding the impact of COVID-19 and the suspension of operations, as well as the Company’s present financial condition, management believes the available liquidity will be sufficient to fund the Company’s obligations for at least the next twelve months from the issuance of the consolidated financial statements. The principal assumptions used by management’s to estimate future liquidity requirements consist of (i) the expected date of return to operations; (ii) the expected resumption of operations; (iii) the expected occupancy levels; and (iv) the expected incremental expenses for the resumption of guest cruise operations for the maintenance of additional public health protocols and complying with additional regulations.

The principal considerations for our determination that performing procedures relating to the impact of COVID-19 on the Company’s liquidity is a critical audit matter are (i) the significant judgment by management when evaluating the uncertainty related to the effects of COVID-19 on the Company’s financial results and liquidity, which impacts the Company’s forecasted financial results and estimated liquidity requirements to satisfy its obligations; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s liquidity assessment to satisfy obligations for at least the next twelve months from the issuance of the consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

Miami, Florida February 26, 2021

We have served as the Company’s auditor since at least 1989, which includes periods before the Company became subject to SEC reporting requirements. We have not been able to determine the specific year we began serving as auditor of the Company.

F-5

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands, except per share data)


	Year Ended December 31,
	2020		2019		2018
Passenger ticket revenues	$	1,504,569	$	7,857,057	$	6,792,716
Onboard and other revenues	704,236		3,093,604		2,701,133
Total revenues	2,208,805		10,950,661		9,493,849
Cruise operating expenses:
Commissions, transportation and other	344,625		1,656,297		1,433,739
Onboard and other	157,213		639,782		537,355
Payroll and related	788,273		1,079,121		924,985
Food	161,750		583,905		520,909
Fuel	371,015		697,962		710,617
Other operating	942,232		1,405,698		1,134,602
Total cruise operating expenses	2,765,108		6,062,765		5,262,207
Marketing, selling and administrative expenses	1,199,620		1,559,253		1,303,144
Depreciation and amortization expenses	1,279,254		1,245,942		1,033,697
Impairment and credit losses	1,566,380		—		—



Operating (Loss) Income	(4,601,557)		2,082,701		1,894,801
Other income (expense):
Interest income	21,036		26,945		32,800
Interest expense, net of interest capitalized	(844,238)		(408,513)		(333,672)
Equity investment (loss) income	(213,286)		230,980		210,756

Other (expense) income	(137,085)		(24,513)		11,107
	(1,173,573)		(175,101)		(79,009)
Net (Loss) Income	(5,775,130)		1,907,600		1,815,792
Less: Net Income attributable to noncontrolling interest	22,332		28,713		4,750
Net (Loss) Income attributable to Royal Caribbean Cruises Ltd.	$	(5,797,462)	$	1,878,887	$	1,811,042
(Loss) Earnings per Share:
Basic	$	(27.05)	$	8.97	$	8.60

Diluted	$	(27.05)	$	8.95	$	8.56
Comprehensive (Loss) Income
Net (Loss) Income	$	(5,775,130)	$	1,907,600	$	1,815,792
Other comprehensive (loss) income:
Foreign currency translation adjustments	40,346		869		(14,251)
Change in defined benefit plans	(19,984)		(19,535)		7,643
Gain (loss) on cash flow derivative hedges	38,010		(151,313)		(286,861)
Total other comprehensive income (loss)	58,372		(169,979)		(293,469)
Comprehensive (Loss) Income	$	(5,716,758)	$	1,737,621	$	1,522,323
Less: Comprehensive Income attributable to noncontrolling interest	22,332		28,713		4,750
Comprehensive (Loss) Income attributable to Royal Caribbean Cruises Ltd.	$	(5,739,090)	$	1,708,908	$	1,517,573

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

F-6

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS


	As of December 31,
	2020		2019
	(in thousands, except share data)
Assets
Current assets
Cash and cash equivalents	$	3,684,474	$	243,738
Trade and other receivables, net of allowances of $3,867 and $5,635 at December 31, 2020 and December 31, 2019, respectively	284,149		305,821
Inventories	118,703		162,107
Prepaid expenses and other assets	154,339		429,211
Derivative financial instruments	70,082		21,751
Total current assets	4,311,747		1,162,628
Property and equipment, net	25,246,595		25,466,808
Operating lease right-of-use assets	599,985		687,555
Goodwill	809,480		1,385,644
Other assets, net of allowances of $81,580 and $0 at December 31, 2020 and December 31, 2019, respectively	1,497,380		1,617,649
Total assets	$	32,465,187	$	30,320,284
Liabilities, redeemable noncontrolling interest and shareholders' equity
Current liabilities
Current portion of long-term debt	$	961,768	$	1,186,586
Commercial paper	409,319		1,434,180
Current portion of operating lease liabilities	102,677		96,976
Accounts payable	353,422		563,706
Accrued interest	252,668		70,090
Accrued expenses and other liabilities	615,750		1,078,345
Derivative financial instruments	56,685		94,875
Customer deposits	1,784,832		3,428,138
Total current liabilities	4,537,121		7,952,896
Long-term debt	17,957,956		8,414,110
Long-term operating lease liabilities	563,876		601,641
Other long-term liabilities	645,565		617,810
Total liabilities	23,704,518		17,586,457
Commitments and contingencies (Note 19)
Redeemable noncontrolling interest	—		569,981
Shareholders' equity
Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding)	—		—
Common stock ($0.01 par value; 500,000,000 shares authorized; 265,198,371 and 236,547,842 shares issued, December 31, 2020 and December 31, 2019, respectively)	2,652		2,365
Paid-in capital	5,998,574		3,493,959
Retained earnings	5,562,775		11,523,326
Accumulated other comprehensive loss	(739,341)		(797,713)
Treasury stock (27,799,775 and 27,746,848 common shares at cost, December 31, 2020 and December 31, 2019, respectively)	(2,063,991)		(2,058,091)
Total shareholders' equity	8,760,669		12,163,846
Total liabilities, redeemable noncontrolling interest and shareholders’ equity	$	32,465,187	$	30,320,284

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

F-7

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
	2020		2019		2018
	(in thousands)
Operating Activities
Net (Loss) Income	$	(5,775,130)	$	1,907,600	$	1,815,792
Adjustments:
Depreciation and amortization	1,279,254		1,245,942		1,033,697
Impairment and credit losses	1,566,380		—		33,651

Net deferred income tax (benefit) expense	(8,791)		7,745		(2,679)
Loss (gain) on derivative instruments not designated as hedges	49,316		(1,431)		61,148
Share-based compensation expense	39,779		75,930		46,061
Equity investment loss (income)	213,286		(230,980)		(210,756)
Amortization of debt issuance costs	89,442		31,991		41,978
Amortization of debt discounts and premiums	66,776		31,616		11,004
Loss on extinguishment of secured senior term loan	41,109		6,326		—
Change in fair value of contingent consideration	(45,126)		18,400		—
Recognition of deferred currency translation adjustment loss on sale of assets	69,044		—		—
Gain on sale of unconsolidated affiliate	—		—		(13,680)
Recognition of deferred gain	—		—		(21,794)
Changes in operating assets and liabilities:
Decrease (increase) in trade and other receivables, net	121,055		(9,898)		(9,573)
Decrease (increase) in inventories	27,077		(8,533)		(23,849)
Decrease (increase) in prepaid expenses and other assets	295,876		15,669		(71,770)

(Decrease) increase in accounts payable	(133,815)		75,281		91,737
Increase (decrease) in accrued interest	182,578		(4,460)		18,773
(Decrease) increase in accrued expenses and other liabilities	(180,479)		96,490		42,937
(Decrease) increase in customer deposits	(1,643,560)		280,139		385,990

Dividends received from unconsolidated affiliates	2,215		150,177		243,101
Other, net	12,061		28,362		7,371
Net cash (used in) provided by operating activities	(3,731,653)		3,716,366		3,479,139
Investing Activities
Purchases of property and equipment	(1,965,131)		(3,024,663)		(3,660,028)

Cash received on settlement of derivative financial instruments	15,874		7,621		76,529
Cash paid on settlement of derivative financial instruments	(161,335)		(68,836)		(98,074)
Investments in and loans to unconsolidated affiliates	(100,609)		(25,569)		(27,172)
Cash received on loans to unconsolidated affiliates	21,086		32,870		124,238
Proceeds from the sale of property and equipment	27,796		—		—
Proceeds from the sale of unconsolidated affiliate	—		—		13,215

Acquisition of Silversea Cruises, net of cash acquired	—		—		(916,135)
Other, net	(16,247)		(12,829)		(1,731)
Net cash used in investing activities	(2,178,566)		(3,091,406)		(4,489,158)

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

F-8

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED


	Year Ended December 31,
	2020		2019		2018

	(in thousands)
Financing Activities
Debt proceeds	13,547,189		3,525,564		8,590,740
Debt issuance costs	(374,715)		(50,348)		(81,959)
Repayments of debt	(3,845,133)		(4,060,244)		(6,963,511)
Proceeds from issuance of commercial paper notes	6,765,816		26,240,540		4,730,286
Repayments of commercial paper notes	(7,837,635)		(25,613,111)		(3,965,450)
Purchase of treasury stock	—		(99,582)		(575,039)
Dividends paid	(326,421)		(602,674)		(527,494)
Proceeds from common stock issuances	1,431,375		—		—

Other, net	(10,688)		(10,516)		(9,500)
Net cash provided by (used in) financing activities	9,349,788		(670,371)		1,198,073
Effect of exchange rate changes on cash	1,167		1,297		(20,314)
Net increase (decrease) in cash and cash equivalents	3,440,736		(44,114)		167,740
Cash and cash equivalents at beginning of year	243,738		287,852		120,112
Cash and cash equivalents at end of year	$	3,684,474	$	243,738	$	287,852
Supplemental Disclosures
Cash paid during the year for:
Interest, net of amount capitalized	$	418,164	$	246,312	$	252,466
Non-Cash Investing Activities
Contingent consideration for the acquisition of Silversea Cruises	$	—	$	—	$	44,000
Purchases of property and equipment included in accounts payable and accrued expenses and other liabilities	$	16,189	$	86,155	$	—
Notes receivable issued upon sale of property and equipment	$	53,419	$	—	$	—
Non-Cash Financing Activities
Acquisition of Silversea Cruises non-controlling interest	$	592,313	$	—	$	—
Termination of Silversea Cruises contingent consideration obligation	$	16,564	$	—	$	—
Common stock issuances pending cash settlement and included in trade receivables	$	121,352	$	—	$	—

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

F-9

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders' Equity
	(in thousands, except per share data)
Balances at January 1, 2018	$	2,352	$	3,390,117	$	9,022,405	$	(334,265)	$	(1,378,306)	$	10,702,303
Cumulative effect of accounting changes	—		—		(23,476)		—		—		(23,476)
Activity related to employee stock plans	6		30,783		—		—		—		30,789
Common stock dividends, $2.60 per share	—		—		(546,689)		—		—		(546,689)

Changes related to cash flow derivative hedges	—		—		—		(286,861)		—		(286,861)
Change in defined benefit plans	—		—		—		7,643		—		7,643
Foreign currency translation adjustments	—		—		—		(14,251)		—		(14,251)
Purchases of treasury stock	—		—		—		—		(575,039)		(575,039)
Net Income attributable to Royal Caribbean Cruises Ltd.	—		—		1,811,042		—		—		1,811,042
Balances at December 31, 2018	2,358		3,420,900		10,263,282		(627,734)		(1,953,345)		11,105,461
Activity related to employee stock plans	7		73,059		—		—		(5,164)		67,902
Common stock dividends, $2.96 per share	—		—		(618,843)		—		—		(618,843)

Changes related to cash flow derivative hedges	—		—		—		(151,313)		—		(151,313)
Change in defined benefit plans	—		—		—		(19,535)		—		(19,535)
Foreign currency translation adjustments	—		—		—		869		—		869
Purchases of treasury stock	—		—		—		—		(99,582)		(99,582)


Net Income attributable to Royal Caribbean Cruises Ltd.	—		—		1,878,887		—		—		1,878,887
Balances at December 31, 2019	2,365		3,493,959		11,523,326		(797,713)		(2,058,091)		12,163,846
Activity related to employee stock plans	9		29,750		—		—		—		29,759
Common stock issuance	226		1,552,500		—		—		—		1,552,726
Equity component of convertible notes, net of issuance costs	—		307,640		—		—		—		307,640
Acquisition of Silversea non-controlling interest	52		608,825		—		—		—		608,877
Common stock dividends, $0.78 per share	—		—		(163,089)		—		—		(163,089)

Changes related to cash flow derivative hedges	—		—		—		38,010		—		38,010
Change in defined benefit plans	—		—		—		(19,984)		—		(19,984)
Foreign currency translation adjustments	—		—				40,346		—		40,346
Purchases of treasury stock	—		5,900		—		—		(5,900)		—


Net Loss attributable to Royal Caribbean Cruises Ltd.	—		—		(5,797,462)		—		—		(5,797,462)
Balances at December 31, 2020	$	2,652	$	5,998,574	$	5,562,775	$	(739,341)	$	(2,063,991)	$	8,760,669

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

F-10

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1**. General**

Description of Business

We are a global cruise company. We own and operate four global cruise brands: Royal Caribbean International, Celebrity Cruises, Azamara and Silversea Cruises (collectively, our "Global Brands"). We also own a 50% joint venture interest in TUI Cruises GmbH ("TUIC"), that operates the German brands TUI Cruises and Hapag-Lloyd Cruises (collectively, our "Partner Brands"). On June 30, 2020, TUIC acquired Hapag-Lloyd Cruises, a luxury and expedition brand for German-speaking guests, from TUI AG for approximately €1.2 billion, or $1.3 billion as of the purchase date. See Note 8*. Other Assets* for further information on the acquisition. We account for our investments in our Partner Brands under the equity method of accounting. Together, our Global Brands and our Partner Brands operate a combined 61 ships as of December 31, 2020. Our ships offer a selection of worldwide itineraries that call on more than 1,000 destinations on all seven continents.

In 2020, Pullmantur Holdings S.L. ("Pullmantur Holdings"), in which we own a 49% non-controlling interest, and certain of its other subsidiaries filed for reorganization in Spain under the terms of the Spanish insolvency laws (the "Pullmantur reorganization") due to the negative impact of the COVID-19 pandemic on the company. The Pullmantur brand has cancelled all of its scheduled ship operations. We suspended equity method accounting for Pullmantur Holdings during the second quarter of 2020. Refer to Note 8*. Other Assets* for further information regarding Pullmantur's reorganization filing and its impact to the Company.

On July 9, 2020, we acquired the remaining 33.3% interest in Silversea Cruises that we did not already own (the "noncontrolling interest") from Heritage Cruise Holding Ltd. ("Heritage"). As a result of the acquisition of the noncontrolling interest, Silversea Cruises is now a wholly owned cruise brand. As consideration for the noncontrolling interest, we issued to Heritage 5.2 million shares of common stock, par value $0.01 per share, of Royal Caribbean Cruises Ltd. Pursuant to the agreement governing the acquisition, among other things, the parties terminated any existing obligation to issue Heritage any contingent consideration, at fair value, in connection with our acquisition of a 66.7% interest in Silversea Cruises on July 31, 2018. The share purchase did not result in a change of control. The purchase was accounted for as an equity transaction and no gain or loss was recognized in earnings. See Note 11*. Redeemable Noncontrolling Interest* for further information regarding our acquisition of the noncontrolling interest.

On January 19, 2021, we announced that we entered into a definitive agreement to sell the Azamara brand, including its three-ship fleet and associated intellectual property to Sycamore Partners in an all-cash carve-out transaction for $201.0 million. The transaction is subject to customary conditions and is expected to close in the first quarter of 2021.

Management's Plan and Liquidity

As part of our response to the COVID-19 pandemic, we voluntarily suspended our global cruise operations effective March 13, 2020 and this suspension remains in effect through at least April 30, 2021, for most of our cruise operations.

We are working with both the U.S. Center for Disease Control and Prevention (“CDC”) and the Healthy Sail Panel (“HSP”), formed in June 2020 by us and Norwegian Cruise Line Holdings Ltd. and composed of leading experts in relevant fields, including epidemiology, infectious diseases, public policy and regulation, engineering and general health safety, to prepare and develop a plan to meet the requirements of the CDC’s Framework for the Conditional Sailing Order (the “Conditional Order”). The Conditional Order permits cruise ship passenger operations in U.S. waters under certain conditions and following the establishment of certain protocols and procedures, with the order remaining in effect until the earlier of (1) the expiration of the Secretary of Health and Human Services’ declaration that COVID-19 constitutes a public health emergency; (2) the CDC Director rescinds or modifies the Conditional Order based on specific public health or other considerations, or (3) November 1, 2021.

Many uncertainties remain as to the specifics, timing and costs of administering and implementing the requirements of the Conditional Order, some of which may be significant, as well as the extent of any additional requirements the CDC may issue as it provides further guidance on the requirements of the Conditional Order. We expect to re-start our global cruise operations in a phased manner once we fulfill the requirements of the Conditional Order, with cruises having reduced guest occupancy, modified itineraries and enhanced health and safety protocols. Based on our assessment of these conditions or for other reasons, we may determine it necessary to further extend our voluntary suspension of our Global Brands’ cruise sailings which currently extends through at least April 30, 2021, for most of our cruise operations. As such, we believe the suspension of our operations

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

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and the impact to our global bookings resulting from the COVID-19 pandemic will continue to have a material negative impact on our results of operations and liquidity, which may be prolonged beyond containment of the disease.

As of December 31, 2020, we had liquidity of $4.4 billion, consisting of cash and cash equivalents of $3.7 billion and a $0.7 billion one-year commitment for a 364-day term loan facility. As of December 31, 2020, our revolving credit facilities were fully utilized through a combination of amounts drawn and letters of credit issued under the facilities.

As of December 31, 2020, financial covenant testing on our amended export-credit and non-export credit facilities, totaling and outstanding principal amount of $11.2 billion, and on our credit card processing agreements, was waived through the fourth quarter of 2021 following amendments to the agreements during 2020.

During the first quarter of 2021, we further amended $4.9 billion of our non-export credit facilities and $6.2 billion of our export credit facilities, and certain credit card processing agreements to extend the waiver of our financial covenants through and including at least the third quarter of 2022. In addition, during the first quarter of 2021, we amended our export credit facilities to defer an additional $0.8 billion of principal payments due under these export facilities between April 2021 and March 2022. Pursuant to the covenant amendments for the non-export facilities and certain of the credit card processing agreements, we have modified the manner in which such covenants are calculated, temporarily in certain cases and permanently in others, as well as the levels at which our net debt to capitalization covenant will be tested during the period commencing immediately following the end of the waiver period and continuing through the end of 2023. The amendments also impose a monthly-tested minimum liquidity covenant of $500.0 million for the duration of the waiver period subject to reduction to $350.0 million if we raise at least $500.0 million of additional capital, which can be satisfied through previously undrawn facilities. In addition, the amendments place restrictions on paying cash dividends and effectuating share repurchases through at least the end of the third quarter of 2022. As of December 31, 2020, we were in compliance with the applicable minimum liquidity covenant and we estimate that we will be in compliance for at least the next twelve months. Refer to Note 9*. Debt* for further information regarding our debt covenants.

Significant events affecting travel, including COVID-19 and our suspension of 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 includes numerous assumptions that are subject to various risks and uncertainties. The principal assumptions used to estimate our future liquidity requirements consist of:

Expected date of return to operations;
Expected gradual resumption of cruise operations;
Expected lower than comparable historical occupancy levels during the resumption of cruise operations; and
Expected incremental expenses for the resumption of cruise operations, for the maintenance of additional public health protocols and procedures for additional regulations.

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 the CDC’s interpretation and application of the requirements in the Conditional Order and subsequent changes to those requirements, our ability to meet these requirements , some of which may be significant, and whether efforts by other countries to contain the disease will further restrict our ability to commence operations. We have and will continue undertaking several proactive measures to mitigate the financial and operational impacts of COVID-19, including reduction of capital expenditures and operating expenses (reduction and furloughing of workforce and laying up of vessels), issuing of debt and shares of our common stock, amending of credit agreements to defer payments and covenant requirements and suspending of dividend payments.

Based on these actions and our assumptions regarding the impact of COVID-19 and our suspension of operations, as well as our present financial condition, we believe that our available liquidity as described above will be sufficient to fund our obligations for at least the next twelve months from the issuance of these financial statements. Beyond the next 12 months, in April 2022, approximately $1.0 billion of long- term debt will need to be refinanced or extended should the commencement of operations be delayed beyond the summer of 2021, in order to maintain the Company's liquidity position. We are working on refinancing or negotiating extension of the obligation, which we expect to have completed in advance of the April 2022 due date. There can be no assurances that the Company will be successful in completing the refinancing or extension necessary to meet its obligations beyond twelve months from the issuance of these financial statements on terms acceptable to the Company. If the Company is unable to maintain the required minimum level of liquidity or negotiate its minimum liquidity requirements, it could have a significant adverse effect on the Company’s business, financial condition and operating results.

Any further covenant waivers may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections as may be agreed with our lenders. There can be no assurance that we would be able to obtain additional waivers in a timely manner, or on acceptable terms. If we require additional waivers and are not able to obtain them

F-12

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

or repay the debt facilities, this would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contracts.

The Company also has agreements with its credit card processors relating to customer deposits received by the Company for future voyages. These agreements allow the credit card processors to require, under certain circumstances, including breach of the financial covenants, the existence of other material adverse changes, excessive chargebacks, and other triggering events, the Company to maintain a reserve that can be satisfied by posting collateral.

Executed amendments are in place for the majority of these providers, waiving collateral posting and reserve requirements tied to breach of our financial covenants through at least March 31, 2022 or September 30, 2022 depending on the agreement, 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 approximately $75.0 million held in reserve with a processor where the agreement was amended in the first quarter of 2021, such that future proceeds will be withheld in reserve, of which the maximum exposure is approximately $200.0 million. The amount and timing are dependent on future factors that are uncertain, such as the date we return to operations, volume and value of future deposits and whether we transfer our business to other processors. If we require additional waivers on the credit card processing agreements and are not able to obtain them, this could lead to the termination of these agreements or the trigger of reserve requirements.

Basis for Preparation of Consolidated Financial Statements

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). 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* 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 8*. 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. With the exception of the October 2020 delivery of the Silver Moon which is reported in our consolidated financial statements as of and for the year ended December 31, 2020, no material events or other transactions involving Silversea Cruises have occurred from September 30, 2020 through December 31, 2020. Refer to Note 7*. Property and Equipment, and* Note 9*. Debt* for further information on the delivery of Silver Moon.

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.

Note 2**. Summary of Significant Accounting Policies**

Revenues and Expenses

Deposits received on sales of passenger cruises are initially recorded as customer deposit liabilities on our balance sheet. Customer deposits are subsequently recognized as passenger ticket revenues, together with revenues from onboard and other goods and services and all associated cruise operating expenses of a voyage. For further information on revenue recognition, refer to Note 4*. Revenues*.

Cash and Cash Equivalents

Cash and cash equivalents include cash and marketable securities with original maturities of less than 90 days.

Inventories

Inventories consist of provisions, supplies and fuel carried at the lower of cost (weighted-average) or net realizable value.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. We capitalize interest as part of the cost of acquiring certain assets. Improvement costs that we believe add value to our ships are capitalized as additions to the ship, the useful lives of the improvements are estimated and depreciated over the shorter of the improvements' estimated useful lives or that of the associated ship, and the replaced assets are disposed of on a net cost basis. The estimated cost and accumulated depreciation of replaced or refurbished ship components are written off and any resulting losses are recognized in

F-13

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cruise operating expenses. Liquidated damages received from shipyards as a result of the late delivery of a new ship are recorded as reductions to the cost basis of the ship.

Depreciation of property and equipment is computed using the straight-line method over the estimated useful life of the asset. The useful lives of our ships are generally 30-35 years, net of a 10%-15% projected residual value. The 30-35-year useful life and 10%-15% residual value are based on the weighted-average of all major components of a ship. Our useful life and residual value estimates take into consideration the impact of anticipated technological changes, long-term cruise and vacation market conditions and historical useful lives of similarly-built ships. In addition, we take into consideration our estimates of the weighted-average useful lives of the ships' major component systems, such as hull, superstructure, main electric, engines and cabins. We employ a cost allocation methodology at the component level, in order to support the estimated weighted-average useful lives and residual values, as well as to determine the net cost basis of assets being replaced. Given the very large and complex nature of our ships, our accounting estimates related to ships and determinations of ship improvement costs to be capitalized require considerable judgment and are inherently uncertain. Depreciation for assets under capital leases is computed using the shorter of the lease term or related asset life.

Depreciation of property and equipment is computed utilizing the following useful lives:


			Years
Ships			generally, 30-35
Ship improvements			3-25
Buildings and improvements			10-40
Computer hardware and software			3-10
Transportation equipment and other			3-30
Leasehold improvements			Shorter of remaining lease term or useful life 3-30

We periodically review estimated useful lives and residual values for ongoing reasonableness, considering long term views on our intended use of each class of ships and the planned level of improvements to maintain and enhance vessels within those classes. In the event a factor is identified that may trigger a change in the estimated useful lives and residual values of our ships, a review of the estimate is completed. In the fourth quarter of 2019, we completed a modernization of the Oasis of the Seas under our ship upgrade program. We spent $538.0 million under this ship upgrade program for the year ended December 31, 2019, with the Oasis of the Seas representing approximately $170.0 million. As a result of this capital investment and future planned investments in our Oasis-class ships, we performed a review of the estimated useful lives and residual values of Oasis-class ships, concluding in a change to the estimate. Effective fourth quarter of 2019, we revised the estimated useful lives of our Oasis-class ships from 30 years with a 15% residual value to 35 years with a 10% residual value. The change in the estimated useful lives and residual values was accounted for prospectively as a change in accounting estimate. The 35-year useful life with a 10% residual value is based on revised estimates of the weighted-average useful life of all major ship components for the Oasis-class ships. The change in estimate is consistent with our recent investments in and long term future plans to continue to invest in the upgrade of these ships, resulting in the use of certain ship components longer than originally estimated. In determining the change in estimated useful life and residual value, we utilized quantitative and qualitative analysis, including historical and projected usage patterns, industry benchmarks, planned maintenance programs and projected operational and financial performance of the class. The change allows us to better match depreciation expense with the periods these assets are expected to be in use. For the year ended December 31, 2019, this change increased operating income and net income by approximately $4.6 million and increased earnings per share by $0.02 per share on a basic and diluted basis.

We review long-lived assets for impairment whenever events or changes in circumstances indicate, based on estimated undiscounted future cash flows, that the carrying value of these assets may not be fully recoverable. For purposes of recognition and measurement of an impairment loss, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The lowest level for which we maintain identifiable cash flows that are independent of the cash flows of other assets and liabilities is at the ship level for our ships. If estimated future cash flows are less than the carrying value of an asset, an impairment charge is recognized to the extent its carrying value exceeds fair value. Refer to Note 7. Property and Equipment for further information on determination of fair value for long-lived assets.

We use the deferral method to account for drydocking costs. Under the deferral method, drydocking costs incurred are deferred and charged to expense on a straight-line basis over the period to the next scheduled drydock, which we estimate to be a period of thirty to sixty months based on the vessel's age as required by Class. Deferred drydock costs consist of the costs to drydock the vessel and other costs incurred in connection with the drydock which are necessary to maintain the vessel's Class certification. Class certification is necessary in order for our cruise ships to be flagged in a specific country, obtain liability

F-14

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

insurance and legally operate as passenger cruise ships. The activities associated with those drydocking costs cannot be performed while the vessel is in service and, as such, are done during a drydock as a planned major maintenance activity. The significant deferred drydock costs consist of hauling and wharfage services provided by the drydock facility, hull inspection and related activities (e.g., scraping, pressure cleaning, bottom painting), maintenance to steering propulsion, thruster equipment and ballast tanks, port services such as tugs, pilotage and line handling, and freight associated with these items. We perform a detailed analysis of the various activities performed for each drydock and only defer those costs that are directly related to planned major maintenance activities necessary to maintain Class. The costs deferred are related to activities not otherwise routinely periodically performed to maintain a vessel's designed and intended operating capability. Repairs and maintenance activities are charged to expense as incurred.

Goodwill

Goodwill represents the excess of cost over the fair value of net tangible and identifiable intangible assets acquired. We review goodwill for impairment at the reporting unit level annually or, when events or circumstances dictate, more frequently. The impairment review for goodwill consists of a qualitative assessment of whether it is more-likely-than-not that a reporting unit's fair value is less than its carrying value, and if necessary, a goodwill impairment test. Factors to consider when performing the qualitative assessment include general economic conditions, limitations on accessing capital, changes in forecasted operating results, changes in fuel prices and fluctuations in foreign exchange rates. If the qualitative assessment demonstrates that it is more-likely-than-not that the estimated fair value of the reporting unit exceeds its carrying value, it is not necessary to perform the goodwill impairment test. We may elect to bypass the qualitative assessment and proceed directly to step one, for any reporting unit, in any period. On a periodic basis, we elect to bypass the qualitative assessment and proceed to step one to corroborate the results of recent years' qualitative assessments. We can resume the qualitative assessment for any reporting unit in any subsequent period.

The goodwill impairment analysis consists of a comparison of the fair value of the reporting unit with its carrying value. We typically estimate the fair value of our reporting units using a probability-weighted discounted cash flow model, which may also include a combination of a market-based valuation approach. The estimation of fair value utilizing discounted expected future cash flows includes numerous uncertainties which require our significant judgment when making assumptions of expected revenues, operating costs, marketing, selling and administrative expenses, interest rates, ship additions and retirements as well as assumptions regarding the cruise vacation industry's competitive environment and general economic and business conditions, among other factors. The principal assumptions used in the discounted cash flow model for our 2020 impairment assessments 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 uses the most current projected operating results for the upcoming fiscal year as a base. To that base, we add future years' cash flows based on multiple revenue and expense scenarios reflecting the impact of various return to service management assumptions beyond the base year on the reporting unit. We discount the projected cash flows using rates specific to the reporting unit based on its weighted-average cost of capital. If the fair value of the reporting unit exceeds its carrying value, no write-down of goodwill is required. As amended by ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment, if the fair value of the reporting unit is less than the carrying value of its net assets, an impairment is recognized based on the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to such reporting unit.

Intangible Assets

In connection with our acquisitions, we have acquired certain intangible assets to which value has been assigned based on our estimates. Intangible assets that are deemed to have an indefinite life are not amortized, but are subject to an annual impairment test, or when events or circumstances dictate, more frequently. The impairment review for indefinite-life intangible assets can be performed using a qualitative or quantitative impairment assessment. The quantitative assessment consists of a comparison of the fair value of the asset with its carrying value. We estimate the fair value of these assets using a discounted cash flow model and various valuation methods depending on the nature of the intangible asset, such as the relief-from-royalty method for trademarks and trade names. The principal assumptions used in the discounted cash flows model for our 2020 impairment assessments 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) royalty rate; and (iii) weighted average cost of capital (i.e., discount rate). If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If the fair value exceeds its carrying value, the indefinite-life intangible asset is not considered impaired.

Other intangible assets assigned finite useful lives are amortized on a straight-line basis over their estimated useful lives.

F-15

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingencies — Litigation

On an ongoing basis, we assess the potential liabilities related to any lawsuits or claims brought against us. While it is typically very difficult to determine the timing and ultimate outcome of such actions, we use our best judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made. In assessing probable losses, we take into consideration estimates of the amount of insurance recoveries, if any, which are recorded as assets when recoverability is probable. We accrue a liability when we believe a loss is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertainties related to the eventual outcome of litigation and potential insurance recoveries, it is possible that certain matters may be resolved for amounts materially different from any provisions or disclosures that we have previously made.

Advertising Costs

Advertising costs are expensed as incurred except those costs which result in tangible assets, such as brochures, which are treated as prepaid expenses and charged to expense as consumed. Advertising costs consist of media advertising as well as brochure, production and direct mail costs.

Media advertising was $138.1 million, $309.4 million and $255.7 million, and brochure, production and direct mail costs were $69.1 million, $156.0 million and $133.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Derivative Instruments

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. 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.

At inception of the hedge relationship, a derivative instrument that hedges the exposure to changes in the fair value of a firm commitment or a recognized asset or liability is designated as a fair value hedge. A derivative instrument that hedges a forecasted transaction or the variability of cash flows related to a recognized asset or liability is designated as a cash flow hedge.

Changes in the fair value of derivatives that are designated as fair value hedges are offset against changes in the fair value of the underlying hedged assets, liabilities or firm commitments. Gains and losses on derivatives that are designated as cash flow hedges are recorded as a component of Accumulated other comprehensive loss until the underlying hedged transactions are recognized in earnings. The foreign currency transaction gain or loss of our non-derivative financial instruments and the changes in the fair value of derivatives designated as hedges of our net investment in foreign operations and investments are recognized as a component of Accumulated other comprehensive loss along with the associated foreign currency translation adjustment of the foreign operation or investment. In certain hedges of our net investment in foreign operations and investments, we exclude forward points from the assessment of hedge effectiveness and we amortize the related amounts directly into earnings.

On an ongoing basis, we assess whether derivatives used in hedging transactions are "highly effective" 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.

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Foreign Currency Translations and Transactions

We translate assets and liabilities of our foreign subsidiaries whose functional currency is the local currency, at exchange rates in effect at the balance sheet date. We translate revenues and expenses at weighted-average exchange rates for the period. Equity is translated at historical rates and the resulting foreign currency translation adjustments are included as a component of Accumulated other comprehensive loss, which is reflected as a separate component of Shareholders' equity. Exchange gains or losses arising from the remeasurement of monetary assets and liabilities denominated in a currency other than the functional currency of the entity involved are immediately included in our earnings, except for certain liabilities that have been designated to act as a hedge of a net investment in a foreign operation or investment. Exchange gains (losses) were $(1.5) million, $0.4 million and $57.6 million for the years ended December 31, 2020, 2019 and 2018, respectively, and were recorded within Other income (expense). The majority of our transactions are settled in United States dollars. Gains or losses resulting from transactions denominated in other currencies are recognized in income at each balance sheet date.

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 December 31, 2020, we had $26.9 million counterparty credit risk exposure under our derivative instruments which was limited to the cost of replacing the contracts in the event of non-performance by the counterparties to the contracts, the majority of which are currently our lending banks. As of December 31, 2019, we had no counterparty credit risk exposure under our derivative instruments. We do not anticipate nonperformance by any of our significant counterparties. In addition, we have established guidelines we follow regarding credit ratings and instrument maturities to maintain safety and liquidity. We do not normally require collateral or other security to support credit relationships; however, in certain circumstances this option is available to us.

(Loss) Earnings Per Share

Basic (loss) earnings per share is computed by dividing Net (Loss) Income attributable to Royal Caribbean Cruises Ltd. by the weighted-average number of shares of common stock outstanding during each period. Diluted (loss) earnings per share incorporates the incremental shares issuable upon the assumed exercise of stock options and conversion of potentially dilutive securities.

Stock-Based Employee Compensation

We measure and recognize compensation expense at the estimated fair value of employee stock awards. Compensation expense for awards and the related tax effects are recognized as they vest. We use the estimated amount of expected forfeitures to calculate compensation costs for all outstanding awards.

Segment Reporting

As of December 31, 2020, we controlled and operated four global cruise brands: Royal Caribbean International, Celebrity Cruises, Azamara and Silversea Cruises. We also own a 50% joint venture interest in TUIC, that operates the German brands TUI Cruises and Hapag-Lloyd Cruises. We believe our brands possess the versatility to enter multiple cruise market segments within the cruise vacation industry. Although each of these brands has its own marketing style as well as ships and crews of various sizes, the nature of the products sold and services delivered by these brands share a common base (i.e., the sale and provision of cruise vacations). Our brands also have similar itineraries as well as similar cost and revenue components. In addition, our brands source passengers from similar markets around the world and operate in similar economic environments with a significant degree of commercial overlap. As a result, our brands have been aggregated as a single reportable segment based on the similarity of their economic characteristics, types of consumers, regulatory environment, maintenance requirements, supporting systems and processes as well as products and services provided. Our Chairman and Chief Executive

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Officer has been identified as the chief operating decision-maker and all significant operating decisions including the allocation of resources are based upon the analyses of the Company as one segment. Refer to Note 4*. Revenues* for passenger ticket revenue information by geographic area.

Adoption of Accounting Pronouncements

On January 1, 2019, we adopted the guidance codified in Accounting Standard Codification ("ASC") 842, Leases ("ASC 842") using the modified retrospective approach and elected the optional transition method, which allows entities to initially apply the standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Upon adoption, we applied the guidance to all existing leases.

For leases with a term greater than 12 months, the new guidance requires the lease rights and obligations arising from the leasing arrangements, including operating leases, to be recognized as assets and liabilities on the balance sheet. Upon adoption of the new guidance, the most significant impact was the recognition of right-of-use assets and lease liabilities relating to operating leases in the amounts of $801.8 million and $820.5 million, respectively, reported within Operating lease right-of-use assets and Long-term operating lease liabilities, respectively, with the current portion of the liability reported within Current portion of operating lease liabilities, in our consolidated balance sheet as of January 1, 2019. Accounting for finance leases remained substantially unchanged and continues to be reported within Property and equipment, net and Long-term debt, with the current portion of the debt reported within Current portion of debt, in our consolidated balance sheets. There was no cumulative effect of applying the new standard and accordingly there was no adjustment to our retained earnings upon adoption. The comparative information presented has not been recast and continues to be reported under the accounting standards in effect for those periods. For further information on leases, refer to Note 10. Leases.

This guidance did not have a material impact to our consolidated statements of comprehensive income (loss), consolidated statements of cash flows and our debt-covenants calculations under our current agreements.

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments. This ASU, along with subsequent ASUs issued to clarify certain of its provisions, introduces new guidance which makes substantive changes to the accounting model for financial assets subject to credit losses that are measured at amortized cost, as well as certain off-balance sheet credit exposures. The updates include the introduction of a new current expected credit loss (“CECL”) model that is based on expected rather than incurred losses. On January 1, 2020, we adopted these updates using the modified retrospective approach. The adoption did not have a material impact to our consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivative and Hedging (Topic 815), which clarifies the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance clarifies how to account for the transition into and out of the equity method of accounting when considering observable transactions under the measurement alternative. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. We adopted the guidance during the quarter ended December 31, 2020. The adoption did not have a material impact to our consolidated financial statements.

Recent Accounting Pronouncements

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

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.

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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 extent of the impact of the new guidance on our consolidated financial statements.

Reclassifications

For the year ended December 31, 2020, we separately presented Amortization of debt discounts and premiums, which includes amortization of commercial paper notes discount, in our consolidated statements of cash flows. 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 year ended December 31, 2020, we no longer separately presented 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. Business Combination

On July 31, 2018, we acquired a 66.7% equity stake ("the 2018 acquisition") in Silversea Cruise Holding Ltd. ("Silversea Cruises"), an ultra-luxury and expedition cruise line, from Heritage Cruise Holding Ltd. ("Heritage"), previously known as Silversea Cruises Group Ltd.

The purchase price for the 2018 acquisition consisted of $1.02 billion in cash, net of assumed liabilities, and contingent consideration due to Heritage for which any obligation was terminated upon our acquisition of the noncontrolling interest in 2020. The fair value of the contingent consideration at the time of the 2018 acquisition was $44.0 million. Changes to the fair value of the contingent consideration were recorded in our results of operations, if any, in the period of the change prior to its termination. Refer to Note 18*. Fair Value Measurements and Derivative Instruments* for further information on the valuation of the contingent consideration.

To finance a portion of the 2018 acquisition purchase price, we drew in full on a $700 million unsecured credit agreement and the remainder of the transaction consideration was financed through the use of our revolving credit facilities.

We have accounted for the Silversea Cruises acquisition under the provisions of ASC 805, Business Combinations. The purchase price for the 2018 acquisition was allocated based on estimates of the fair value of assets acquired and liabilities assumed at the acquisition date, with the excess allocated to goodwill. Goodwill is not deductible for tax purposes and consisted primarily of the opportunity to expand our cruise operations in strategic growth areas. Our purchase price allocation was final during 2019. There were no material measurement period adjustments recorded for the year ended December 31, 2019.

On July 9, 2020, we acquired the remaining 33.3% interest in Silversea Cruises that we did not already own (the "noncontrolling interest") from Heritage. As a result of the acquisition of the noncontrolling interest, Silversea Cruises is now a wholly owned cruise brand. As consideration for our acquisition of the noncontrolling interest, we issued to Heritage 5.2 million shares of common stock, par value $0.01 per share, of Royal Caribbean Cruises Ltd. Pursuant to the agreement governing the acquisition of the noncontrolling interest, among other things, the parties terminated any existing obligation to issue Heritage any contingent consideration, at fair value, in connection with the 2018 acquisition. The share purchase did not result in a change of control. The purchase was accounted for as an equity transaction and no gain or loss was recognized in earnings. Refer to Note 11*. Redeemable Noncontrolling Interest* to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data for further information regarding our acquisition of the noncontrolling interest.

For reporting purposes, we included Silversea Cruises’ results of operations on a three-month reporting lag from October 1, 2019 through September 30, 2020 in our consolidated results of operations for the year ended December 31, 2020; from October 1, 2018 through September 30, 2019 in our consolidated results of operations for the year ended December 31, 2019 and from the July 31, 2018 date of acquisition through September 30, 2018 in our consolidated results of operations for the year ended December 31, 2018. We have included Silversea Cruises' balance sheets as of September 30, 2020 and 2019 in our consolidated balance sheets as of December 31, 2020 and 2019, respectively. Refer to Note 1*. General* for further information on this three-month reporting lag.

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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The majority of our revenues are derived from passenger cruise contracts which are reported within Passenger ticket revenues in our consolidated statements of comprehensive income (loss). Our performance obligation under these contracts is to provide a cruise vacation in exchange for the ticket price. We satisfy this performance obligation and recognize revenue over the duration of each cruise, which generally 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 operating expenses. The amounts of port costs charged to our guests and included within Passenger ticket revenues on a gross basis were $125.0 million,$666.8 million and $611.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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


	Year Ended December 31,
	2020		2019		2018
Revenues by itinerary
North America(1)	$	1,342,429	$	6,392,354	$	5,399,951
Asia/Pacific(2)	411,865		1,529,898		1,463,083
Europe(3)	18,604		1,942,057		1,914,549
Other regions	241,590		567,904		348,145
Total revenues by itinerary	2,014,488		10,432,213		9,125,728
Other revenues(4)	194,317		518,448		368,121
Total revenues	$	2,208,805	$	10,950,661	$	9,493,849

(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., the Nordics, Germany, France, Italy, Spain and the United Kingdom).

(4)Includes revenues primarily related to cancellation fees, vacation protection insurance and pre- and post-cruise tours and fees for operating certain port facilities. Amounts also include revenues related to our bareboat charter, procurement and management related services we perform on behalf of our unconsolidated affiliates. Refer to Note 8*. Other Assets* for more information on our unconsolidated affiliates.

Passenger ticket revenues are attributed to geographic areas based on where the reservation originates. For the years ended December 31, 2020, 2019 and 2018, our guests were sourced from the following areas:


	Year Ended December 31,
	2020		2019		2018
Passenger ticket revenues:
United States	67	%	65	%	61	%
United Kingdom	7	%	9	%	10	%

All other countries (1)	26	%	26	%	29	%

(1)No other individual country's revenue exceeded 10% for the years ended December 31, 2020, 2019 and 2018.

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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. Additionally, refunds payable to guests who have elected cash refunds for cancelled sailings are recorded in Accounts Payable. 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 the COVID-19 pandemic has resulted in an unprecedented low level of advance bookings and the associated customer deposits received. At the same time, we experienced significant cancellations beginning in the second half of March 2020, which has led to issuance of refunds to customers, while other customers have been rebooked on future cruises or received credits in lieu of cash refunds.

As of December 31, 2020, refunds due to customers mostly as a result of booking cancellations were $95.8 million compared to $9.8 million as of December 31, 2019 and are included within Accounts payable in our consolidated balance sheets. Customer deposits also include deposits related to cancelled cruises prior to the election of a cash refund by guests. Due to the uncertainty around our return to sailing and the future demand for cruising, we are unable to estimate the amount of the December 31, 2020 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 $124.8 million and $1.7 billion as of December 31, 2020 and December 31, 2019, respectively.

Contract Receivables and Contract Assets

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

We have contract assets that are conditional rights to consideration for satisfying the construction services performance obligations under a service concession arrangement. As of December 31, 2020 and 2019, our contract assets were $53.7 million and $55.5 million, respectively, and were included within Other assets in our consolidated balance sheets. Given the short duration of our cruises and our collection terms, we do not have any other significant contract assets.

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

Prepaid travel 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 $1.1 million and $163.2 million as of December 31, 2020 and 2019, respectively. Our prepaid travel agent commissions at December 31, 2019 were expensed and reported primarily within Other operating in our consolidated statements of comprehensive income (loss) during the year ended December 31, 2020.

Note 5**. Goodwill**

The impact of COVID-19 on our operating plans and projected cash flows resulted in the completion of interim impairment assessments in respect of certain reporting units as of March 31, 2020 and June 30, 2020, in addition to our annual goodwill impairment assessment performed as of November 30, 2020. Refer to Note 1. General for further information regarding COVID-19 and its impact to the Company.

As a result of our evaluations, we determined that the fair value of the Royal Caribbean International reporting unit exceeded its carrying value as of March 31, 2020 and June 30, 2020 by approximately 30% and 8%, respectively, resulting in no impairment to the Royal Caribbean International goodwill in those periods. We did not perform an interim impairment evaluation of Royal Caribbean International's goodwill during the quarter ended September 30, 2020 as no triggering events were identified. In respect to the Silversea Cruises reporting unit, we determined the carrying value of the reporting unit

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

exceeded its fair value as of March 31, 2020. Accordingly, we recognized a goodwill impairment charge of $576.2 million for the quarter ended March 31, 2020. We did not perform interim impairment evaluations of Silversea Cruises' reporting unit during the quarters ended June 30, 2020 and September 30, 2020 as no triggering events were identified.

As of November 30, 2020, we performed our annual goodwill impairment reviews and determined no incremental impairment losses existed at the date of this annual assessment. We determined the fair value of the Royal Caribbean International and Silversea Cruises reporting units exceeded their carrying values by approximately 14% and 12% respectively at the date of this annual assessment.

The suspension of operations, as further discussed in Note 1. General, and possibility of further suspensions create uncertainty in forecasting operating cash flows. The fair value of the Royal Caribbean International reporting unit as of March 31, 2020 was determined using a discounted cash flow model and a probability-weighted discounted cash flow model in combination with a market based valuation approach for the June 30, 2020 and November 30, 2020 assessments. For the Silversea reporting unit a probability-weighted discounted cash flow model in combination with a market based valuation approach was used for all periods assessed. This requires the use of assumptions that are subject to risk and uncertainties. The principal assumptions used in the discounted cash flow analyses that support our Royal Caribbean International and Silversea Cruises reporting unit impairment assessments consisted of:

The timing of our return to service, changes in market conditions and port or other restrictions;

*•*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

Weighted average cost of capital (i.e., discount rate).

The adverse impact COVID-19 will continue to have on our business, operating results, cash flows and overall financial condition is uncertain and may result in changes to the assumptions used in the impairment tests discussed above, which may result in impairments to these assets in the future.

The carrying value of goodwill attributable to our Royal Caribbean International, Celebrity Cruises and Silversea Cruises reporting units and the changes in such balances during the years ended December 31, 2020 and 2019 were as follows (in thousands):


	Royal Caribbean International		Celebrity Cruises		Silversea Cruises		Total
Balance at December 31, 2018	$	286,711	$	1,632	$	1,090,010	$	1,378,353

Silversea Goodwill adjustment (1)	—		—		(5,224)		(5,224)
Goodwill attributable to the purchase of photo operation onboard our ships (2)	12,518		—		—		12,518
Foreign currency translation adjustment	(3)		—		—		(3)
Balance at December 31, 2019	299,226		1,632		1,084,786		1,385,644
Impairment charge	—		—		(576,208)		(576,208)
Transfer of goodwill attributable to the 2019 purchase of photo operations onboard our ships	(2,694)		2,694		—		—
Foreign currency translation adjustment	44		—		—		44
Balance at December 31, 2020	$	296,576	$	4,326	$	508,578	$	809,480

(1)In 2018, we acquired a 66.7% equity stake in Silversea Cruises. Our controlling interest purchase price allocation was final during 2019. In 2020, we acquired the remaining 33.3% minority interest, making Silversea Cruises a wholly owned brand. Refer to Note 1*. General,* Note 3. Business Combination, and Note 11*. Redeemable Noncontrolling Interest* for further information.

(2)In 2019, we purchased the photo operations onboard our ships from our former concessionaire. The acquisition was accounted for as a business purchase combination using the purchase method of accounting which requires the use of fair value measurements. The business combination, including purchase transaction and assets acquired, was immaterial to our consolidated financial statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 6. Intangible Assets

Intangible assets consist of finite and indefinite life assets and are reported within Other assets in our consolidated balance sheets.

The impact of COVID-19 on our operating plans and projected cash flows resulted in the completion of an interim impairment assessment for the Silversea Cruises trade name as of March 31, 2020, in addition to our annual indefinite-lived intangible asset impairment assessment performed as of November 30, 2020. Refer to Note 1. General for further information regarding COVID-19 and its impact to the Company.

As a result of our evaluation, we determined the carrying value of the Silversea Cruises trade name exceeded its fair value as of March 31, 2020. Accordingly, we recognized an impairment charge of $30.8 million for the quarter ended March 31, 2020. We did not perform interim impairment evaluations of Silversea Cruises' trade name during the quarters ended June 30, 2020 and September 30, 2020 as no triggering events were identified.

As of November 30, 2020, we performed our annual trade name impairment review and determined no incremental impairment losses existed at the date of this annual assessment. We determined the fair value of the Silversea Cruises trade name exceeded its carrying value by approximately 3% at the date of this annual assessment. The adverse impact COVID-19 will continue to have on our business, operating results, cash flows and overall financial condition is uncertain and may result in changes to the assumptions used in the impairment tests discussed above. In addition, further suspension beyond 2021 or changes to our planned ship deliveries could adversely impact our expected occupancy rates and may result in additional impairment charges of the Silversea Cruises trade name in the future.

The suspension of operations, as further discussed in Note 1. General, and possibility of further suspensions create uncertainty in forecasting operating cash flows. The determination of our trade name fair values using a discounted cash flow model and various valuation methods depending on the nature of the intangible asset, such as the relief-from-royalty method, require the use of assumptions that are subject to risk and uncertainties. The principal assumptions used in the discounted cash flow analyses that support the Silversea Cruises trade name impairment assessments consisted of:

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;
Royalty rate; and
Weighted average cost of capital (i.e., discount rate).

The following is a summary of our intangible assets as of December 31, 2020 (in thousands, except weighted average amortization period), with Silversea Cruises' trade name representing approximately $318.7 million of the indefinite-lived intangible asset balance:


	As of December 31, 2020
	Remaining Weighted Average Amortization Period (Years)	Gross Carrying Value		Accumulated Amortization		Accumulated Impairment Losses		Net Carrying Value
Finite-life intangible assets:
Customer relationships	12.8	$	97,400	$	14,069	$	—	$	83,331
Galapagos operating license	23.8	47,669		7,621		—		40,048
Other finite-life intangible assets	0	11,560		11,560		—		—
Total finite-life intangible assets		156,629		33,250		—		123,379
Indefinite-life intangible assets (1)		352,275		—		30,800		321,475
Total intangible assets, net		$	508,904	$	33,250	$	30,800	$	444,854

(1) Primarily relates to the Silversea Cruises trade name.

The following is a summary of our intangible assets as of December 31, 2019 (in thousands, except weighted average amortization period):

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	As of December 31, 2019
	Remaining Weighted Average Amortization Period (Years)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Finite-life intangible assets:
Customer relationships	13.8	$	97,400	$	7,576	$	89,824
Galapagos operating license	24.7	47,669		6,010		41,659
Other finite-life intangible assets	0.8	11,560		6,743		4,817
Total finite-life intangible assets		156,629		20,329		136,300
Indefinite-life intangible assets (1)		352,275		—		352,275
Total intangible assets, net		$	508,904	$	20,329	$	488,575

(1) Primarily relates to the Silversea Cruises trade name.

The estimated future amortization for finite-life intangible assets for each of the next five years is as follows (in thousands):


Year

2021	$	8,179
2022	$	8,179
2023	$	8,179
2024	$	8,179
2025	$	8,179

Note 7**. Property and Equipment**

Property and equipment consists of the following (in thousands):


	As of December 31,
	2020		2019
Ships	$	29,872,655	$	28,348,088
Ship improvements	2,108,922		3,920,800
Ships under construction	1,078,243		1,110,962
Land, buildings and improvements, including leasehold improvements and port facilities	524,849		472,067
Computer hardware and software, transportation equipment and other	1,678,903		1,698,007
Total property and equipment	35,263,572		35,549,924
Less—accumulated depreciation and amortization(1)	(10,016,977)		(10,083,116)
	$	25,246,595	$	25,466,808

(1)Amount includes accumulated depreciation and amortization for assets in service.

Ships under construction include progress payments for the construction of new ships as well as planning, design, capitalized interest and other associated costs. We capitalized interest costs of $59.1 million, $56.5 million and $49.6 million for the years ended December 31, 2020, 2019 and 2018, respectively.

During 2020, we took delivery of Celebrity Apex, Silver Origin and Silver Moon. Refer to Note 9*. Debt* for further information on the financings for Celebrity Apex and Silver Moon. The October 2020 Silversea Cruises delivery and related financing for the Silver Moon was reported in our consolidated financial statements as of and for the year ended December 31, 2020, regardless of the three month reporting lag for Silversea Cruises, due to the materiality of the transaction.

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During the first quarter 2020, we determined that the lease for Silver Explorer, operated by Silversea Cruises and previously classified as a finance lease, was an operating lease based on modification of the terms of the lease. Accordingly, Silver Explorer is included within Operating lease right-of use assets, Current portion of operating lease liabilities, and Long term lease liabilities in our consolidated balance sheets. Refer to Note 10*. Leases* for further information.

During 2019, we took delivery of Spectrum of the Seas and Celebrity Flora. Refer to Note 9*. Debt* for further information. During 2019 Silversea Cruises terminated the operating lease for Silver Discover.

Long-lived Assets impairments

We review our long-lived assets for impairment whenever events or circumstances indicate potential impairment losses exist. The impact of COVID-19 on our expected future operating cash flows, as well as decisions to dispose of certain vessels, resulted in the identification of impairment triggers for certain vessels. Refer to Note 1. General for further information regarding COVID-19 and its impact to the Company.

We estimated the recoverability of certain vessels using undiscounted cash flow analyses at interim dates throughout 2020 and again at December 31,2020. A number of vessels were found to have net carrying values in excess of their estimated undiscounted future cash flows and, as such, were subject to fair value assessments. Fair value was determined based on our intended use of the identified vessels and, as such, we used a combination of discounted cash flows, replacement cost, scrap and residual value techniques to estimate fair value. Differences between the estimated fair values and the net carrying values were recorded as an impairment charge within the period the loss was identified. Consequently, we recorded $635.5 million of impairment losses during the year ended 2020. Included in this amount are $171.3 million impairment losses recorded for the three ships that we chartered to Pullmantur Holdings, prior to its filing for reorganization. Refer to Note 8*. Other Assets* for further information regarding Pullmantur's reorganization. During the quarter ended September 30, 2020, we sold the ships previously chartered to Pullmantur Holdings to third parties for amounts approximating their carrying values and no further impairment was recorded. Also included in the $635.5 million impairment loss for the year ended December 31, 2020, is a $166.8 million impairment charge for the three Azamara ships to be included in the sale of the Azamara brand that is expected to close in the first quarter of 2021.

The suspension of operations, as discussed in Note 1. General, and the possibility of further suspensions create uncertainty in forecasting undiscounted cash flows, which are used to determine if a vessel is at risk of impairment and in estimating the fair value of our ships. Our principal assumptions used in our undiscounted cash flows consisted of:

The timing of our return to service, changes in market conditions and port or other restrictions;
Forecasted net revenues, primarily the timing of returning to normalized operations, and occupancy rates; and
Intended use of the vessel for the remaining useful life.

During the year ended December 31, 2020, we also determined that certain construction in progress projects would be reduced in scope or would no longer be completed as a result of our capital cost containment measures in response to the COVID-19 impact on our liquidity. This led to an impairment charge of $91.5 million of construction in progress assets.

These impairment charges were reported within Impairment and Credit Losses in our consolidated statements of comprehensive (loss) income.

Note 8**. Other Assets**

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

We have determined that TUI Cruises GmbH ("TUIC"), our 50%-owned joint venture, which operates the brands TUI Cruises and Hapag-Lloyd Cruises, is a VIE. We have determined that we are not the primary beneficiary of TUIC. We believe that the power to direct the activities that most significantly impact TUIC’s economic performance are shared between ourselves and TUI AG, our joint venture partner. All the significant operating and financial decisions of TUIC require the

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

On June 30, 2020, TUIC acquired Hapag-Lloyd Cruises, a luxury and expedition brand for German-speaking guests, from TUI AG for approximately €1.2 billion, or approximately $1.3 billion as of the purchase date. Hapag-Lloyd Cruises operates two luxury liners and two smaller expedition ships. We and TUI AG each made an equity contribution of €75.0 million, or approximately $84.2 million to TUIC to fund a portion of the purchase price, the remainder of which was financed by third-party financing.

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. As of December 31, 2019, the net book value of our investment in TUIC was $598.1 million, primarily consisting of $443.1 million in equity and a loan of €133.2 million, or approximately $149.5 million, based on the exchange rate at December 31, 2019. The loan, which was made in connection with the sale of Splendour of the Seas in April 2016, accrues interest at a rate of 6.25% per annum and is payable over 10 years. This loan is 50% guaranteed by TUI AG and is secured by a first priority mortgage on the ship. The majority of these amounts were included within Other assets in our consolidated balance sheets. TUIC has various ship construction and financing agreements which include certain restrictions on each of our and TUI AG’s ability to reduce our current ownership interest in TUIC 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.

In March 2009, we sold Celebrity Galaxy to TUI Cruises for €224.4 million, or $290.9 million as of the sale date, to serve as the original Mein Schiff 1. Due to the related party nature of this transaction, the gain on the sale of the ship of $35.9 million was deferred and was being recognized over the remaining life of the ship which was estimated to be 23 years. In April 2018, TUI Cruises sold the original Mein Schiff 1 and as a result we accelerated the recognition of the remaining balance of the deferred gain, which was $21.8 million. This amount is included within Other income (expense) in our consolidated statements of comprehensive income (loss) for the year ended December 31, 2018.

We 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 the COVID-19 pandemic on the companies. 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 lost our ability to exert significant influence over the entity's activities as a result of the reorganization process.

In connection with the reorganization, we terminated the agreements chartering three of our ships to Pullmantur Holdings and sold the ships to third parties during the quarter ended September 30, 2020 for amounts approximating their carrying values. Refer to Note 7. Property and Equipment for further discussion on the impact of the ships' sale on our consolidated financial statements. In addition, we recognized a loss of $69.0 million within Other expense in our consolidated statements of comprehensive (loss) income, during the quarter ended June 30, 2020 representing deferred currency translation adjustment losses, net of hedging, as we no longer had significant involvement in the Pullmantur operation.

During the quarter ended June 30, 2020, we entered into an agreement with Springwater Capital LLC to settle the guarantees previously issued by them and for costs that we incurred as a result of Pullmantur S.A.'s reorganization. As part of this settlement, we agreed to provide Pullmantur guests the option to apply their paid deposits toward a Royal Caribbean International or Celebrity Cruises sailing, or request a cash refund. An amount of $21.6 million, approximating the estimated total cash refund expected to be paid to Pullmantur guests and other expenses incurred as part of the reorganization, was recorded in Other expense in our consolidated statements of comprehensive (loss) income for the quarter ended June 30, 2020.

As of December 31, 2020, we did not have any exposure to credit loss in Pullmantur Holdings. As of December 31, 2019, our maximum exposure to loss in Pullmantur Holdings was $49.7 million, consisting of loans and other receivables. These amounts were included within Trade and other receivables, net and Other assets in our consolidated balance sheets.

We have determined that Grand Bahama Shipyard Ltd. ("Grand Bahama"), a ship repair and maintenance facility in which we have a 40% noncontrolling interest, is a VIE. This facility serves cruise and cargo ships, oil and gas tankers and offshore units. We utilize this facility, among other ship repair facilities, for our regularly scheduled drydocks, ship upgrades and certain emergency repairs as may be required. During the years ended December 31, 2020 and 2019, we made payments of $0.2 million. and $45.7 million, respectively, to Grand Bahama for ship repair and maintenance services. We have determined

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Given the impact of the COVID-19 pandemic to our business, we evaluated whether our equity method investments were other than temporarily impaired. 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 bringing our investment balance to zero. 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 equity method losses against the carrying value of our loans receivable from Grand Bahama.

For further information on the measurements used to estimate the fair value of our equity investments, refer to Note 18. Fair Value Measurements and Derivative Instruments.

As of December 31, 2020, we had exposure to credit loss in Grand Bahama consisting of $19.1 million in loans. Our loans to Grand Bahama mature between December 2020 and March 2026 and bear interest at LIBOR plus 2.0% to 3.75%, capped at 5.75% for the majority of the outstanding loan balance. Interest payable on the loans is due on a semi-annual basis. We did not receive principal and interest payments during the year ended December 31, 2020. During the year ended December 31, 2019, we received principal and interest payments of $8.6 million. The loan balances are included within Trade and other receivables, net and Other assets in our consolidated balance sheets.

We monitor credit risk associated with the loans 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 year ended December 31, 2020, no credit losses were recorded related to these loans.

In April 2019, Grand Bahama experienced an incident involving one of its drydocks where Oasis of the Seas was undergoing maintenance. The damage from the incident resulted in a write-off of the related drydock by Grand Bahama. Our equity investment income for the year ended December 31, 2019 reflects our equity share of the write-off and other incidental expenses. Grand Bahama's management is working with its insurance underwriter to determine coverage under their existing policies.

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


	Year ended December 31,
	2020		2019		2018
Share of equity (loss) income from investments	$	(213,286)	$	230,980	$	210,756
Dividends received (1)	$	2,215	$	150,177	$	243,101

(1) For the year ended December 31, 2019, TUI Cruises paid us dividends totaling €170.0 million, or approximately $190.3 million, based on the exchange rates at the time of the transactions. The amounts included in the table above are net of tax withholdings.


	As of December 31,
	2020		2019
Total notes receivable due from equity investments	$	164,596	$	184,558
Less-current portion (1)	29,501		25,933
Long-term portion (2)	$	135,095	$	158,625

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

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

We also provide ship management services to TUI Cruises GmbH and provided management services to Pullmantur Holdings (which filed for reorganization in Spain in June 2020) and Skysea Holding (which ceased cruising operations in September 2018). 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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 income (loss) (in thousands):


	Year ended December 31,
	2020		2019		2018








Revenues	$	21,372	$	47,242	$	54,705
Expenses	$	4,986	$	4,304	$	11,531

Summarized financial information for our affiliates accounted for under the equity method of accounting was as follows (in thousands):


	As of December 31,
	2020		2019
Current assets	$	488,329	$	435,152
Non-current assets	5,456,061		4,019,394
Total assets	$	5,944,390	$	4,454,546

Current liabilities	$	1,106,700	$	1,094,552
Non- current liabilities	3,771,992		2,267,936
Total liabilities	$	4,878,692	$	3,362,488

Equity attributable to:
Noncontrolling interest	$	—	$	1,784


	Year ended December 31,
	2020		2019		2018
Total revenues	$	619,795	$	2,354,744	$	2,255,352
Total expenses	(939,481)		(1,875,952)		(1,779,160)
Net income	$	(319,686)	$	478,792	$	476,192

Credit Losses

We reviewed our notes receivable for credit losses in connection with the preparation of our financial statements. In evaluating the credit loss allowance, management considered factors such as historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions. Based on these credit loss estimation factors, during the year ended December 31, 2020, we recorded a loss provision of $187.1 million primarily on notes receivable of approximately $81.6 million related to our previous sales of property and equipment to third parties and on receivables of approximately $103.5 million mostly related to loans and other receivables due from Pullmantur Holdings. We also wrote-off a credit loss allowance amount of $107.3 million during 2020, primarily due to loans and other receivables related to Pullmantur Holdings.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes our credit loss allowance related to receivables for the year ended December 31, 2020 (in thousands):


	Credit Loss Allowance
Balance at January 1, 2020	$	5,635
Loss provision for receivables	187,128
Write-offs	(107,316)
Balance at December 31, 2020	$	85,447

Our credit loss allowance balance for the year ended December 31, 2020 primarily related to a $81.6 million loss provision recognized during 2020 on notes receivable related to our previous sale of property and equipment mostly to third parties.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9**. Debt**

Debt consists of the following (in thousands):


			As of December 31,
	Interest Rate(1)	Maturities Through	2020		2019
Fixed rate debt:
Unsecured senior notes	2.65% - 9.13%	2020 - 2028	$	2,464,994	$	1,746,280
Secured senior notes	7.25% - 11.50%	2023 - 2025	3,895,166		662,398
Unsecured term loans	2.53% - 5.41%	2021 - 2032	3,210,161		2,806,774
Convertible notes	2.88% - 4.25%	2023	1,454,488		—
Total fixed rate debt			11,024,809		5,215,452
Variable rate debt:
Unsecured revolving credit facilities(2)	1.45%	2022 - 2024	3,289,000		165,000
Unsecured UK Commercial paper		2021	409,319		—
USD Commercial paper	—%	—	—		1,434,180
USD unsecured term loan	0.74% - 4.05%	2020- 2028	4,002,249		3,519,853
Euro unsecured term loan	1.15% -1.58%	2021 - 2028	705,064		676,740
Total variable rate debt			8,405,632		5,795,773
Finance lease liabilities			213,365		230,258
Total debt (3)			19,643,806		11,241,483
Less: unamortized debt issuance costs			(314,763)		(206,607)
Total debt, net of unamortized debt issuance costs			19,329,043		11,034,876
Less—current portion including commercial paper			(1,371,087)		(2,620,766)
Long-term portion			$	17,957,956	$	8,414,110

(1)Interest rates based on outstanding loan balance as of December 31, 2020 and, for variable rate debt, include either LIBOR or EURIBOR plus the applicable margin.

(2)Includes $1.9 billion facility due in 2024 and $1.6 billion facility due in 2022, each of which accrue interest at LIBOR plus 1.30%, which interest rate was 1.54%, as of December 31, 2020 and each is subject to a facility fee of 0.20%.

(3)At December 31, 2020 and 2019, the weighted average interest rate for total debt was 6.02% and 3.99%, respectively.

In March 2020, we increased the capacity of our $1.7 billion and $1.2 billion unsecured revolving credit facilities due in 2024 and 2022, by $200 million and $400 million, respectively, utilizing their respective accordion features. As of December 31, 2020, our aggregate revolving borrowing capacity was $3.5 billion and was fully 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 surety to request collateral in the form of cash or letters of credit. As of December 31, 2020, we have posted collateral in the amount of approximately $91 million.

In March 2020, we took delivery of Celebrity Apex. To finance the purchase, we borrowed $722.2 million under a previously committed unsecured term loan which is 100% guaranteed by BpiFrance Assurance Export, the official export credit agency of France. The loan amortizes semi-annually over 12 years and bears interest at a fixed rate of 3.23% per annum. In the second quarter of 2020 and the first quarter of 2021, we amended the agreement to defer the payment of all principal payments due between April 2020 and March 2022. The deferred amounts will be repayable starting in 2022 over a five year period.

In March 2020, we borrowed $2.2 billion pursuant to a 364-day senior secured term loan agreement. In May 2020, this secured term loan was increased by an additional $150 million through the exercise of the accordion feature. The increased secured term loan balance was repaid with proceeds from the $3.32 billion Secured Notes (as described below) issued in May 2020. This secured term loan would have matured 364 days after funding and could have been extended at our option for an additional 364 days subject to customary conditions, including the payment of a 1.00% extension fee. Interest accrued at

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

LIBOR plus a margin of 2.25% which would have increased to 2.50% and 2.75% at 180 days and 365 days, respectively, after funding. We would have also been required to pay a duration fee in an amount equal to 0.25% of the aggregate loan principal amount every 60 days. Additionally, two of our board members each purchased a participation interest equal to $100 million. The repayment of this secured term loan in May 2020 resulted in a total loss on the extinguishment of debt of $41.1 million, which was recognized within Interest expense, net of interest capitalized within our consolidated statements of comprehensive income (loss).

In May 2020, we issued $3.32 billion of senior secured notes (the "Secured Notes") for net proceeds of approximately $3.2 billion. We repaid the $2.35 billion, 364-day senior secured term loan in its entirety with a portion of the proceeds of the Secured Notes. $1.0 billion of the notes accrue interest at 10.875% and mature in 2023 (the "2023 Secured Notes"). The remaining $2.32 billion of the Secured Notes accrue interest at 11.5% and mature in 2025 (the "2025 Secured Notes"). The Secured Notes are fully and unconditionally guaranteed by Celebrity Cruises Holdings Inc., Celebrity Cruises Inc., and certain of our wholly-owned vessel-owning subsidiaries. $1.66 billion of the obligations under the Secured Notes and the related guarantees are secured by first priority security interests in the collateral (which generally includes certain of our material intellectual property, a pledge of 100% of the equity interests of certain of our vessel-owning subsidiaries, the collateral account established pursuant to the indenture governing the Secured Notes (the "Secured Notes Indenture"), mortgages on the 28 vessels owned by such subsidiaries, and an assignment of insurance and earnings in respect of such vessels, subject to permitted liens and certain exclusions and release provisions), subject to certain adjustments after the date of issuance based on our debt rating as of the date of issuance and our lien basket amount in certain of our credit facilities. Prior to March 1, 2023, we may, at our option, redeem some or all of the 2023 Secured Notes at 100% of the principal amount thereof plus accrued and unpaid interest plus the applicable “make-whole premium” described in the Secured Notes Indenture. On or after March 1, 2023, we may, at our option, redeem some or all of the 2023 Secured Notes at a redemption price equal to 100% of the principal amount of the 2023 Secured Notes to be redeemed plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Prior to June 1, 2022, we may, at our option, redeem some or all of the 2025 Secured Notes at 100% of the principal amount plus accrued and unpaid interest plus the applicable “make-whole premium” described in the Secured Notes Indenture. On or after June 1, 2022, we may, at our option, redeem some or all of the 2025 Secured Notes at the applicable redemption prices set forth in the Secured Notes Indenture. In addition, on or prior to June 1, 2022, we may, at our option, redeem up to 40% of the 2025 Secured Notes with the proceeds from certain equity offerings at the redemption price listed in the Secured Notes Indenture. In addition, we may redeem all, but not part, of the Secured Notes upon the occurrence of specified tax events set forth in the Secured Notes Indenture.

In June 2020, we issued $1.0 billion of senior unsecured notes which accrue interest at 9.125% and mature in 2023. The notes are fully and unconditionally guaranteed by RCI Holdings LLC, which owns 100% of the equity interests in certain of our wholly-owned vessel-owning subsidiaries.

In June 2020, we issued $1.15 billion of convertible notes which accrue interest at 4.25% and mature in 2023. The notes are convertible into our shares of common stock, cash, or a combination of common stock and cash, at our election. The initial conversion rate per $1,000 principal amount of the convertible notes is 13.8672 shares of our common stock, which is equivalent to an initial conversion price of approximately $72.11 per share, subject to adjustment in certain circumstances. Prior to March 15, 2023, the convertible notes will be convertible at the option of holders during certain periods, and only under the following conditions:

during any calendar quarter after September 30, 2020, if the last reported sale price per share of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
the trading price per $1,000 principal amount of notes is less than 98% of the product of the last reported sale price per share of our common stock and the conversation rate for ten consecutive trading days (in which case the notes are convertible at any time during the five business day period following the 10 consecutive trading day period);
if we call the notes for a tax redemption; or
upon the occurrence of specified corporate events.

On or after March 15, 2023, the convertible notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding their maturity date.

Holders of the convertible notes may require us, upon the occurrence of certain events that constitute a fundamental change under the indenture, to offer to repurchase the convertible notes at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We allocated $907.9 million of the convertible notes' proceeds, net of debt issue costs, to Long-term debt and $209.0 million to Paid-in-capital on our Consolidated Balance Sheet. We recognized the equity component by ascribing the difference between the proceeds and the fair value of the convertible notes' debt component to Paid-in-capital and the corresponding debt discount will be amortized to interest expense over the term of the convertible notes using the straight-line method, which approximates the effective interest method. The fair value of the convertible notes' debt component was determined utilizing a present value calculation. Debt issuance costs on the convertible notes were allocated to the debt and equity components in proportion to the allocation of proceeds to those components. We incurred total debt issue costs of $33.1 million on the issuance of the debt and allocated $6.2 million to Paid-in-capital. Debt issuance costs attributable to debt will be amortized to interest expense over the term of the convertible notes.

In October 2020, we issued $575 million of senior convertible notes which accrue interest at 2.875% and mature in 2023. The notes are convertible into shares of our common stock, cash, or a combination of common stock and cash, at our election. The initial conversion rate per $1,000 principal amount of the convertible notes is 12.1212 shares of our common stock, which is equivalent to an initial conversion price of approximately $82.50 per share, subject to adjustment in certain circumstances. Prior to August 15, 2023, the convertible notes will be convertible at the option of holders during certain periods, and only under the following conditions:

during any calendar quarter after December 31, 2020, if the last reported sale price per share of our common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
the trading price per $1,000 principal amount of notes is less than 98% of the product of the last reported sale price per share of our common stock and the conversation rate for ten consecutive trading days (in which case the notes are convertible at any time during the five business day period following the ten consecutive trading day period);
if we call the notes for a tax redemption; or
upon the occurrence of specified corporate events.

On or after August 15, 2023, the convertible notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding their maturity date.

We allocated $463.0 million of the convertible notes' proceeds, net of debt issue costs, to Long-term debt and $101.9 million to Paid-in-capital on our Consolidated Balance Sheet. We recognized the equity component by ascribing the difference between the proceeds and the fair value of the convertible notes' debt component to Paid-in-capital and the corresponding debt discount will be amortized to interest expense over the term of the convertible notes using the straight-line method, which approximates the effective interest method. The fair value of the convertible notes' debt component was determined utilizing a present value calculation. Debt issuance costs on the convertible notes were allocated to the debt and equity components in proportion to the allocation of proceeds to those components. We incurred total debt issue costs of $10.1 million on the issuance of the debt and allocated $1.8 million to Paid-in-capital. Debt issuance costs attributable to debt will be amortized to interest expense over the term of the convertible notes.

The net carrying value of the liability component of the convertible notes was as follows:


(in thousands)	As of December 31, 2020
Principal	$	1,725,000
Less: Unamortized debt discount and transaction costs	312,117
	$	1,412,883

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The interest expense recognized related to the convertible notes was as follows:


(in thousands)	As of December 31, 2020
Contractual interest expense	$	30,832
Amortization of debt discount and transaction costs	52,518
	$	83,350

In June 2020, RCL Cruises Ltd., our subsidiary that operates and manages our business in the United Kingdom, established a commercial paper facility for the purpose of issuing short-term, unsecured Sterling-denominated notes that are eligible for purchase under the Joint HM Treasury and Bank of England’s COVID Corporate Financing Facility commercial paper program in an aggregate principal amount up to £300.0 million. The maturities of the commercial paper notes can vary by note, but cannot exceed 364 days from the date of issuance. As of December 31, 2020, we had £300.0 million, or approximately $409.9 million, based on the exchange rate at December 31, 2020, of commercial paper notes outstanding under this program.

In August 2020, we secured a binding commitment from Morgan Stanley Senior Funding Inc. for a $700 million term loan facility. We may draw on the facility at any time prior to August 12, 2021. Once drawn, the loan will bear interest at LIBOR + 3.75% and will mature 364 days from funding. The facility 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 million from time to time subject to the receipt of additional or increased commitments and the issuance of guarantees from additional subsidiaries.

In October 2020, we took delivery of Silver Moon. To finance the purchase, Silversea Cruise Holding Ltd., our wholly owned subsidiary, borrowed $300 million under a previously committed unsecured term loan facility, guaranteed by us, to pay a portion of the ship's contract price. The loan is due and payable at maturity in June 2028, provided however, that each lender may elect to cause us to repay the outstanding amount of any advances held by such lender on June 2026 upon 90 days advance notice. The loan amortizes semi-annually starting six months after funding, with 1/24th of the outstanding principal payable every six months and the balance payable upon maturity. Interest on the loan currently accrues at LIBOR plus 2.00%. The financing to purchase Silver Moon is reflected in our Consolidated Balance Sheet for the year ended December 31, 2020.

During 2020, we amended certain export-credit backed ship debt facilities to benefit from a 12-month debt amortization deferral (the "Debt Deferral"). Under the Debt Deferral, deferred debt amortization of approximately $0.9 billion will be paid over a period of 4 years after the 12-month deferral period. The Debt Deferral was offered by certain export credit agencies as a result of the current impact to cruise-line borrowers as a result of COVID-19. During the first quarter of 2021, we further amended our export-credit backed ship debt facilities and deferred an additional $0.8 billion of principal payments due under these export facilities between April 2021 and March 2022. The new amounts being deferred are scheduled to be repaid over a five year period starting in April 2022.

Except for the financings incurred to acquire Celebrity Flora, Azamara Pursuit 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. As of December 31, 2020, in consideration for these guarantees, depending on the financing arrangement, we pay to the applicable export credit agency (1) a fee of 2.97% per annum based on the outstanding loan balance semi-annually over the term of the loan (subject to adjustments based upon our credit ratings) or (2) an upfront fee of 2.35% to 2.37% of the maximum loan amount. 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. 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 debt or long-term debt. In our consolidated statements of cash flows, we classify these fees within Amortization of debt issuance costs.

Both our export credit facilities and our non-export credit facilities totaling an outstanding principal amount of approximately $11.2 billion as of December 31, 2020 contain covenants that, among other things, require us to maintain financial ratios, including in certain cases, a fixed charge coverage ratio of at least 1.25x and/or minimum shareholders' equity and limit our net debt-to-capital ratio.

During 2020, we amended all of our export credit facilities, all of our non-export credit facilities and certain of our credit card processing agreements which contain financial covenants, with the exception of a $130.0 million term loan due 2023, to

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

extend the financial covenant waiver through and including the fourth quarter of 2021. The $130.0 million term loan, which remains subject to a covenant waiver through the end of the first quarter of 2021, is prepayable at any time without penalty.

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, that date falling after January 1, 2022 on which we elect to comply with the modified covenants. In addition, 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. The amendments also increase the monthly-tested minimum liquidity covenant to $500 million for the duration of the waiver period (subject to reduction to $350 million if we raise at least $500 million of additional capital). As of the date of these financial statements, we were in compliance with the applicable minimum liquidity covenant. Pursuant to these 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 $6.2 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. These amendments also allow for the deferral of up to $1.1 billion of principal payments due between April 2021 and April 2022 subject to the satisfaction of various conditions precedent. As of February 19, 2021, the conditions precedent have been satisfied for 13 of the 15 amended facilities, which will allow us to defer $0.8 billion of amortization payments due during this period. There can be no assurances that the conditions precedent will be met for the remaining two facilities. 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 also provide for mandatory prepayment of the deferred amounts upon the taking of certain actions. Subject to a number of carveouts, these include, but are not limited to, issuance of dividends, 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.

For information related to the covenants in our Port of Miami Terminal "A" operating lease agreement, refer to Note 10*. Leases*.

Under certain of our agreements, the contractual interest rate, facility fee and/or export credit agency fee vary with our debt rating. On August 24, 2020, Moody’s downgraded our senior unsecured rating from Ba2 to B2, and on August 31, 2020, S&P Global downgraded our senior unsecured rating from BB to B+. On February 25, 2021, S&P Global further downgraded our senior unsecured rating from B+ to B.

In April 2019, we amended our $1.4 billion unsecured revolving credit facility due in 2020 to extend the termination date through April 2024, increase the facility size to $1.7 billion and reduce pricing. The interest rate and facility fee vary with our senior debt rating set at LIBOR plus 1.0% per annum and 0.125% per annum, respectively. These amendments did not result in the extinguishment of debt. In addition, in May 2019, we amended our $1.15 billion unsecured revolving credit facility due in 2022 to reduce pricing to match pricing on our $1.7 billion unsecured revolving credit facility due in 2024.

In April 2019, we entered into and drew in full on an unsecured three-year term loan agreement in the amount of $1.0 billion. The loan accrues interest at a floating rate of LIBOR plus an applicable margin, which varies with our senior debt rating set at 1.075% per annum. Proceeds of this loan were used to repay the $700 million 364-day loan due July 2019 related to the acquisition of Silversea Cruises and the remaining balance of the unsecured term loan originally incurred in 2010 to purchase Allure of the Seas. The repayment of these loans resulted in a total loss on the extinguishment of debt of $6.3 million, which was recognized within Other (expense) income within our consolidated statements of comprehensive income (loss) for the twelve months ended December 31, 2019.

In April 2019, we took delivery of Spectrum of the Seas. To finance the purchase, we borrowed $908.0 million under a previously committed unsecured term loan which is 95% guaranteed by Euler Hermes Aktiengesellschaft, the official export credit agency of Germany. The loan amortizes semi-annually over 12 years and bears interest at a fixed rate of 3.45% per

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

annum. In the second quarter of 2020 and the first quarter of 2021, we amended the agreement to defer the payment of all principal payments due between April 2020 and March 2022. The deferred amounts will be repayable starting in 2022 over a five year period.

In May 2019, we took delivery of Celebrity Flora. The purchase was financed through an unsecured term loan facility entered into in November 2017 in an amount up to €80.0 million, or approximately $97.9 million based on the exchange rate at December 31, 2020. As of December 31, 2020, we had fully drawn on this facility. The loan is due and payable at maturity in November 2024. Interest on the loan accrues at a floating rate based on EURIBOR plus the applicable margin. The applicable margin varies with our debt rating and was 1.195% as of December 31, 2019.

In June 2018, we established a commercial paper program pursuant to which we may issue short-term unsecured notes from time to time in an aggregate amount of up to $1.2 billion, which was increased to $2.9 billion in August 2019. The commercial paper issued is backstopped by our revolving credit facilities. As of December 31, 2019 we had $1.4 billion of commercial paper notes outstanding with a weighted average interest rate of 2.19% and a weighted average maturity of approximately 21 days. We terminated this commercial paper program as of August 5, 2020.

Following is a schedule of annual maturities on our total debt net of debt issuance costs, and including finance leases and commercial paper, as of December 31, 2020 for each of the next five years (in thousands):


Year
2021	$	1,371,087
2022	4,143,884
2023	4,433,261
2024	2,862,486
2025	3,480,961
Thereafter	3,037,364
	$	19,329,043

Note 10**. 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 sheet as of December 31, 2020. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. During the first quarter of 2020, we determined that the lease for Silver Explorer, operated by Silversea Cruises and previously classified as a finance lease, was an operating lease based on modification of the terms of the lease. The operating lease for Silver Explorer will expire in 2023.

In June 2019, the Company entered into a new master lease agreement (“Master Lease”) with Miami-Dade County relating to the buildings and surrounding land located at its Miami headquarters, which are classified as finance leases in accordance with ASC 842. Prior to entering into the Master Lease, the buildings were classified as operating lease assets. The finance lease for the buildings and land will expire in 2072, which includes an initial 43 years lease term and two five-year options to extend the lease. We consider the possibility of exercising the two five-year options reasonably certain.

For some of our real estate leases and berthing agreements, we do have the option to extend our current lease term. For those lease agreements with renewal options, the renewal periods for real estate leases range from one to 10 years and the renewal periods for berthing agreements range from one year 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.

We have a residual value guarantee associated with our Port of Miami Terminal "A" operating lease agreement ("Port of Miami terminal lease") that approximates a percentage of the cost of the asset as of the inception of the lease. We consider the possibility of incurring costs associated with the residual value guarantee to be remote.

Also in connection with the Port of Miami terminal lease, we are required to deliver on or before July 18, 2021, cash collateral in an amount equal to the lesser of our residual value guarantee or the aggregate balance of the lenders' terminal

F-35

construction debt, estimated at $181.1 million as of December 31, 2020. The collateral is to be returned when all amounts due by us under the lease have been paid in full.

During the second quarter of 2020, we amended our Port of Miami terminal lease to increase the lien basket in line with our debt facilities. We further amended this lease in the first quarter of 2021 to and obtain a financial covenant waiver through the third quarter of 2022. This obligation is prepayable at any time without penalty. As of December 31, 2020, we were in compliance with the amended covenants under the lease agreement.

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. We used the incremental borrowing rate as of the adoption date for operating leases that commenced prior to that date. 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.

Commencing in 2016 when we sold our 51% interest in the Pullmantur brand to Pullmantur Holdings, and continuing through the quarter ended June 30, 2020, we bareboat chartered to Pullmantur Holdings the vessels operated by the Pullmantur brand. On June 22, 2020, Pullmantur S.A., a subsidiary of Pullmantur Holdings, filed for reorganization in Spain, at which time we terminated these bareboat charters. See Note 8. Other Assets for further discussion of Pullmantur Holdings. We accounted for the bareboat charters of these vessels as operating leases for which we were the lessor.

Finance Leases

Silversea Cruises operates the Silver Whisper, under a finance lease. The finance lease for the Silver Whisper will expire in 2022, subject to an option to purchase the ship. The total aggregate amount of the finance lease liabilities recorded for this ship was $31.5 million and $55.6 million at December 31, 2020 and December 31, 2019, respectively. The lease payments on the Silver Whisper are subject to adjustments based on the LIBOR rate.

Supplemental balance sheet information for leases was as follows (in thousands):


	As of December 31, 2020		As of December 31, 2019
Lease assets:
Finance lease right-of-use assets, net:
Property and equipment, gross	$	364,910	$	376,159
Accumulated depreciation	(71,288)		(57,955)
Property and equipment, net	293,622		318,204
Operating lease right-of-use assets	599,985		687,555
Total lease assets	$	893,607	$	1,005,759
Lease liabilities:
Finance lease liabilities:
Current portion of debt	51,856		33,561
Long-term debt	161,509		196,697
Total finance lease liabilities	213,365		230,258
Operating lease liabilities:
Current portion of operating lease liabilities	102,677		96,976
Long-term operating lease liabilities	563,876		601,641
Total operating lease liabilities	666,553		698,617
Total lease liabilities	$	879,918	$	928,875

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

F-36


	Consolidated Statement of Comprehensive Income (Loss) Classification	Year ended December 31, 2020		Year ended December 31, 2019
Lease costs:
Operating lease costs	Commission, transportation and other	$	38,349	$	76,226
Operating lease costs	Other operating expenses	30,955		27,868
Operating lease costs	Marketing, selling and administrative expenses	21,971		18,837
Finance lease costs:
Amortization of right-of-use-assets	Depreciation and amortization expenses	6,901		22,044
Interest on lease liabilities	Interest expense, net of interest capitalized	4,429		8,355
Total lease costs		$	102,605	$	153,330

In addition, certain of our berth agreements include variable lease costs based on the number of passengers berthed. During the twelve months ended December 31, 2020, we had $24.3 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss).

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


	As of December 31, 2020		As of December 31, 2019
Weighted average of the remaining lease term
Operating leases	7.8		10.3
Finance leases	41.2		30.22
Weighted average discount rate
Operating leases	4.59	%	4.65	%
Finance leases	6.89	%	4.47	%

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


	Year ended December 31, 2020		Year ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	89,179	$	125,307
Operating cash flows from finance leases	$	4,429	$	8,355
Financing cash flows from finance leases	$	19,778	$	32,090

F-37

As of December 31, 2020, maturities related to lease liabilities were as follows (in thousands):


Years	Operating Leases		Finance Leases

2021	$	124,108	$	62,501
2022	117,698		23,822
2023	109,125		12,789
2024	81,696		12,529
2025	72,123		12,566
Thereafter	368,666		395,007
Total lease payments	873,416		519,214
Less: Interest	(206,863)		(305,849)
Present value of lease liabilities	$	666,553	$	213,365

Operating lease payments do not include any costs related to options to extend lease terms as none are reasonably certain of being exercised.

Under ASC 840, Leases, future minimum lease payments under noncancelable operating leases, primarily for offices, warehouses and motor vehicles, as of December 31, 2018 were as follows (in thousands):


Year
2019	$	67,682
2020	64,237
2021	56,142
2022	52,759
2023	52,522
Thereafter	383,974
	$	677,316

Total expense for operating leases, primarily for offices, warehouses and motor vehicles amounted to $32.2 million for the year ended December 31, 2018.

In July 2016, we executed an agreement with Miami Dade County (“MDC”), which was simultaneously assigned to Sumitomo Banking Corporation (“SMBC”), to lease land from MDC and construct a new cruise terminal of approximately 170,000 square feet at PortMiami in Miami, Florida, which was completed during the fourth quarter of 2018 and serves as a homeport. During the construction period, SMBC funded the costs of the terminal’s construction and land lease. Once the terminal was substantially completed, we commenced operating and leasing the terminal from SMBC for a five-year term. We determined that the lease arrangement between SMBC and us should be accounted for as an operating lease.

Right-of-use assets impairments

During the year ended December 31, 2020, we identified that the undiscounted cash flows for certain right-of-use assets were less than their carrying values due to the negative impact of COVID-19. We evaluated these assets pursuant to our long-lived asset impairment test, resulting in an impairment charge of $65.9 million to write down these assets to their estimated fair values during the year ended December 31, 2020.

Note 11**. Redeemable Noncontrolling Interest**

In connection with the 2018 Silversea Cruises acquisition, we recorded redeemable noncontrolling interest due to the put options held by the noncontrolling interest shareholder. At the date of the 2018 acquisition, the estimated fair value of the noncontrolling interest was based on 33.3% of Silversea Cruises' equity value, which was determined based on the transaction price paid for 66.7% of Silversea Cruises in the 2018 acquisition.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On July 9, 2020, we acquired the remaining 33.3% noncontrolling interest in Silversea Cruises from Heritage in exchange for 5.2 million shares of common stock, par value $0.01 per share, of Royal Caribbean Cruises Ltd. Pursuant to the agreement governing the acquisition of the noncontrolling interest, among other things, the parties terminated any existing obligation to issue Heritage any contingent consideration, at fair value, in connection with our acquisition of a 66.7% interest in Silversea Cruises in 2018. The purchase of the noncontrolling interest was accounted for as an equity transaction during the quarter ended September 30, 2020 and no gain or loss was recognized in earnings. The carrying amount of the noncontrolling interest was adjusted to zero and the difference between the carrying amount of the noncontrolling interest and the fair value of the consideration paid was recognized as additional paid in capital.

The noncontrolling interest's share in the net earnings (loss) and contractual accretion requirements associated with the put options, for periods prior to our acquisition of the noncontrolling interest, are included in Net income attributable to noncontrolling interest in our consolidated statements of comprehensive income (loss). As of December 31, 2019, the noncontrolling interest shareholder's interest is presented as Redeemable noncontrolling interest and is classified outside of shareholders' equity in our consolidated balance sheets.

The following table presents changes in the redeemable noncontrolling interest as of December 31, 2020 (in thousands):


Balance as of January 1, 2019	$	542,020
Net income attributable to noncontrolling interest, including the contractual accretion of the put options	28,713
Distribution to noncontrolling interest	(752)
Balance at December 31, 2019	$	569,981
Net income attributable to noncontrolling interest, including the contractual accretion of the put options	22,332
Acquisition of noncontrolling interest	(592,313)

Balance at December 31, 2020	$	—

Note 12. Shareholders' Equity

Common Stock Issued

During October 2020, we issued 9.6 million shares of common stock, par value $0.01 per share, at a price of $60.00 per share. We received net proceeds of $557.4 million from the sale of our common stock, after deducting the underwriters’ discount and the estimated offering expenses payable by us.

During December 2020, we issued 13.0 million shares of common stock, par value $0.01 per share, at an average price of $76.65 per share. We received net proceeds of $994.6 million after deducting the underwriters’ discount and the estimated offering expenses payable by us. Of the total proceeds, $868.6 million was received as of December 31, 2020 and the remainder was received in January of 2021.

Dividends Declared

During the first quarter of 2020 we declared a cash dividend on our common stock of $0.78 per share which was paid in the second quarter of 2020.

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 as part of the Debt Deferral. Accordingly, we did not declare a dividend during the second, third, and fourth quarters of 2020. 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 fourth and third quarters of 2019, we declared a cash dividend on our common stock of $0.78 per share which was paid in the first quarter of 2020 and fourth quarter of 2019, respectively. During the first and second quarters of 2019, we declared a cash dividend on our common stock of $0.70 per share which was paid in the second and third quarters of 2019, respectively.

Common Stock Repurchase Program

During the quarter ended on June 30, 2020, the 24-month common stock repurchase program authorized by our board of directors on May 9, 2018 had expired. In connection with our debt covenant waivers, we agreed with our lenders not to engage

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

in stock repurchases for so long as our debt covenant waivers are in effect. Effective in the first quarter of 2021, the agreement with our lenders to suspend stock repurchases is extended through the third quarter of 2022.

During the year ended December 31, 2019, we repurchased 0.9 million shares of our common stock under this program, for a total of $99.6 million, in open market transactions that were recorded within Treasury stock in our consolidated balance sheets.

Note 13. Stock-Based Employee Compensation

We currently have awards outstanding under one stock-based compensation plan, our 2008 Equity Plan, which provides for awards to our officers, directors and key employees. The plan consists of a 2008 Equity Plan, as amended, provides for the issuance of up to 14,000,000 shares of our common stock pursuant to grants of (i) incentive and non-qualified stock options, (ii) stock appreciation rights, (iii) stock awards (including time-based and/or performance-based stock awards) and (iv) restricted stock units (including time-based and performance-based restricted stock units). During any calendar year, no one individual (other than non-employee members of our board of directors) may be granted awards of more than 500,000 shares and no non-employee member of our board of directors may be granted awards with a value in excess of $500,000 at the grant date. Options and restricted stock units outstanding as of December 31, 2020 generally vest in equal installments over four years from the date of grant. In addition, performance shares and performance share units generally vest in three years. With certain limited exceptions, awards are forfeited if the recipient ceases to be an employee before the shares vest.

Prior to 2012, our officers received a combination of stock options and restricted stock units. Beginning in 2012, our officers instead receive their long-term incentive awards through a combination of performance share units and restricted stock units. Each performance share unit award is expressed as a target number of performance share units based upon the fair market value of our common stock on the date the award is issued. The actual number of shares underlying each award (not to exceed 200% of the target number of performance share units) will be determined based upon the Company's achievement of a specified performance target range. In 2020, we issued a target number of 245,417 performance share units, which will vest approximately three years following the award issue date. The performance payout of these grants will be based on return on our invested capital ("ROIC") and earnings per share ("EPS") for the year ended December 31, 2022, as may be adjusted by the Talent and Compensation Committee of our board of directors in early 2023 for events that are outside of management's control.

Beginning in 2016, our senior officers meeting certain minimum age and service criteria receive their long-term incentive awards through a combination of restricted stock awards and restricted stock units. The restricted stock awards are subject to both performance and time-based vesting criteria while the restricted stock units are subject only to time-based vesting criteria. Each restricted stock award is issued in an amount equal to 200% of the target number of shares underlying the award based upon the fair market value of our common stock on the date the award is issued. Declared dividends accrue (but do not get paid) on the restricted stock awards during the vesting period, with the accrued amounts to be paid out following vesting only on the number of shares underlying the award which actually vest based on satisfaction of the performance criteria. The actual number of shares that vest (not to exceed 200% of the shares) will be determined based upon the Company's achievement of a specified performance target range. In 2020, we issued 260,924 restricted stock awards, representing 200% of the target number of shares underlying the award, all of which are considered issued and outstanding from the date of issuance, however; grantees will only retain those shares earned as the result of the Company achieving the performance goals during the measurement period. The performance payout of the 2020 awards will be based on ROIC and EPS for the year ended December 31, 2022, as may be adjusted by the Talent and Compensation Committee of our board of directors in early 2023 for events that are outside of management's control.

On January 24, 2018, the Company issued a one-time bonus award for all non-officer employees. These awards vest, in equal installments, over the 3 years following the award issue date. For shoreside eligible employees, awards were issued as equity-settled restricted stock units. As of December 31, 2020, these awards have fully vested.

We also provide an Employee Stock Purchase Plan ("ESPP") to facilitate the purchase by employees of up to 1,300,000 shares of common stock in the aggregate. Offerings to employees are made on a quarterly basis. Subject to certain limitations, the purchase price for each share of common stock is equal to 85% of the average of the market prices of the common stock as reported on the New York Stock Exchange on the first business day of the purchase period and the last business day of each month of the purchase period. During the years ended December 31, 2020, 2019 and 2018, 184,936, 91,586 and 74,100 shares of our common stock were purchased under the ESPP at a weighted-average price of $48.08, $98.20 and $97.50, respectively.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Total compensation expense recognized for employee stock-based compensation for the years ended December 31, 2020, 2019 and 2018 was as follows (in thousands):


	Employee Stock-Based Compensation
Classification of expense	2020		2019		2018
Marketing, selling and administrative expenses	$	39,780	$	75,930	$	46,061

Total compensation expense	$	39,780	$	75,930	$	46,061

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The estimated fair value of stock options, less estimated forfeitures, is amortized over the vesting period using the graded-vesting method. We did not issue any stock options during the years ended December 31, 2020, 2019 and 2018.

Stock option activity and information about stock options outstanding are summarized in the following table:


Stock Option Activity	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value(1)
				(years)	(in thousands)
Outstanding at January 1, 2020	64,987	$	41.22	0.87	$	5,990
Granted	—	—		—	—
Exercised	(15,340)	$	25.18	—	—
Canceled	—	$	—	—	—
Outstanding at December 31, 2020	49,647	$	46.18	0.11	$	1,355
Vested at December 31, 2020	49,647	$	46.18	0.11	$	1,355
Options Exercisable at December 31, 2020	49,647	$	46.18	0.11	$	1,355

(1)The intrinsic value represents the amount by which the fair value of stock exceeds the option exercise price.

The total intrinsic value of stock options exercised during the years ended December 31, 2020, 2019 and 2018 was $1.5 million, $8.1 million and $11.1 million, respectively. As of December 31, 2020, there was no unrecognized compensation cost, net of estimated forfeitures, related to stock options granted under our stock incentive plan.

Restricted stock units are converted into shares of common stock upon vesting or, if applicable, are settled on a one-for-one basis. The cost of these awards is determined using the fair value of our common stock on the date of the grant, and compensation expense is recognized over the vesting period. Restricted stock activity is summarized in the following table:


Restricted Stock Units Activity	Number of Awards	Weighted- Average Grant Date Fair Value
Non-vested share units as of January 1, 2020	801,835	108.48
Granted	598,433	78.51
Vested	(315,541)	104.38
Canceled	(112,135)	109.43
Non-vested share units as of December 31, 2020	972,592	91.26

The weighted-average estimated fair value of restricted stock units granted during the years ended December 31, 2019 and 2018 was $112.13 and $122.12, respectively. The total fair value of shares released on the vesting of restricted stock units during the years ended December 31, 2020, 2019 and 2018 was $31.2 million, $30.8 million, and $33.9 million, respectively. As of December 31, 2020, we had $42.3 million of total unrecognized compensation expense, net of estimated forfeitures, related to restricted stock unit grants, which will be recognized over the weighted-average period of 1.15 years.

Performance share units are converted into shares of common stock upon vesting on a one-for-one basis. We estimate the fair value of each performance share when the grant is authorized and the related service period has commenced. We remeasure

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the fair value of our performance shares in each subsequent reporting period until the grant date has occurred, which is the date when the performance conditions are satisfied. We recognize compensation cost over the vesting period based on the probability of the service and performance conditions being achieved adjusted for each subsequent fair value measurement until the grant date. If the specified service and performance conditions are not met, compensation expense will not be recognized and any previously recognized compensation expense will be reversed. Performance share units activity is summarized in the following table:


Performance Share Units Activity	Number of Awards	Weighted- Average Grant Date Fair Value
Non-vested share units as of January 1, 2020	286,017	105.76
Granted	245,417	95.81
Vested	(221,016)	89.41
Canceled	(42,696)	110.72
Non-vested share units as of December 31, 2020	267,722	109.34

The weighted-average estimated fair value of performance share units granted during the years ended December 31, 2019 and 2018 was $87.39 and $97.98, respectively. The total fair value of shares released on the vesting of performance share units during the years ended December 31, 2020, 2019 and 2018 was $24.6 million, $23.0 million and $27.3 million, respectively. As of December 31, 2020, we had $7.0 million of total unrecognized compensation expense, net of estimated forfeitures, related to performance share unit grants, which will be recognized over the weighted-average period of 1.32 year.

The shares underlying our restricted stock awards to age and service eligible senior officers are issued as of the grant date in an amount equal to 200% of the target number of shares. Following the vesting date, the restrictions will lift with respect to the number of shares for which the performance criteria was met and any excess shares will be canceled. Dividends will accrue on the issued restricted shares during the vesting period, but will not be paid to the recipient until the awards vest and the final number of shares underlying the award is determined, at which point, the dividends will be paid in cash only on the earned shares. We estimate the fair value of each restricted stock award when the grant is authorized and the related service period has commenced. We remeasure the fair value of these restricted stock awards in each subsequent reporting period until the grant date has occurred, which is the date when the performance conditions are satisfied. We recognize compensation cost over the vesting period based on the probability of the service and performance conditions being achieved adjusted for each subsequent fair value measurement until the grant date. If the specified service and performance conditions are not met, compensation expense will not be recognized, any previously recognized compensation expense will be reversed, and any unearned shares will be returned to the Company. Restricted stock awards activity is summarized in the following table:


Restricted Stock Awards Activity	Number of Awards	Weighted- Average Grant Date Fair Value
Non-vested share units as of January 1, 2020	452,456	114.01
Granted	260,924	110.21
Vested	(137,948)	95.04
Canceled	—	—
Non-vested share units as of December 31, 2020	575,432	116.83

The weighted-average estimated fair value of restricted stock awards granted during the years ended December 31, 2019 and 2018 was $118.08 and $129.23, respectively. As of December 31, 2020, we had $2.2 million of total unrecognized compensation expense, net of estimated forfeitures, related to restricted stock award grants, which will be recognized over the weighted-average period of 1.37 years.

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14**. (Loss) Earnings Per Share**

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


	Year Ended December 31,
	2020		2019		2018
Net (Loss) Income attributable to Royal Caribbean Cruises Ltd. for basic and diluted (loss) earnings per share	$	(5,797,462)	$	1,878,887	$	1,811,042
Weighted-average common shares outstanding	214,335		209,405		210,570
Dilutive effect of stock-based awards	—		525		984
Diluted weighted-average shares outstanding	214,335		209,930		211,554
Basic (loss) earnings per share	$	(27.05)	$	8.97	$	8.60
Diluted (loss) earnings per share	$	(27.05)	$	8.95	$	8.56

There were approximately 282,118 antidilutive shares for the year ended December 31, 2020, compared to no antidilutive shares for the years ended December 31, 2019 and 2018.

Since the Company expects to settle in cash the principal outstanding under our convertible notes that mature in 2023, we currently use the treasury stock method when calculating their potential dilutive effect, if any. While no shares of the convertible notes are currently convertible, they would be anti-dilutive for the year ended December 31, 2020.

Note 15**. Retirement Plan**

We maintain a defined contribution plan covering shoreside employees. Effective January 1, 2016, we commenced annual, non-elective contributions to the plan on behalf of all eligible participants equal to 3% of participants' eligible earnings. Remaining annual contributions to the plan are discretionary and are based on fixed percentages of participants' salaries and years of service, not to exceed certain maximums. Contribution expenses were $18.4 million, $21.2 million and $18.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Note 16**. Income Taxes**

We are subject to corporate income taxes in countries where we have operations or subsidiaries. We and the majority of our ship-operating and vessel-owning subsidiaries are currently exempt from U.S. corporate income tax on U.S. source income from the international operation of ships pursuant to Section 883 of the Internal Revenue Code. Regulations under Section 883 have limited the activities that are considered the international operation of a ship or incidental thereto. Accordingly, our provision for U.S. federal and state income taxes includes taxes on certain activities not considered incidental to the international operation of our ships.

Additionally, one of our ship-operating subsidiaries is subject to tax under the tonnage tax regime of the United Kingdom. Under this regime, income from qualifying activities is subject to corporate income tax, but the tax is computed by reference to the tonnage of the ship or ships registered under the relevant provisions of the tax regimes (the "relevant shipping profits"), which replaces the regular taxable income base. Income from activities not considered qualifying activities, which we do not consider significant, remains subject to United-Kingdom corporate income tax.

For the year ended December 31, 2020, we had an income tax benefit of approximately $15 million primarily driven by items not qualifying under Section 883. For the years ended December 31, 2019 and 2018, income tax expense was $32.6 million and $20.9 million, respectively, for items not qualifying under Section 883, tonnage tax and income taxes for the remainder of our subsidiaries. Income taxes are recorded within Other income (expense). In addition, all interest expense and penalties related to income tax liabilities are classified as income tax expense within Other income (expense).

For a majority of our subsidiaries, we do not expect to incur income taxes on future distributions of undistributed earnings. Accordingly, no deferred income taxes have been provided for the distribution of these earnings. Where we do expect to incur income taxes on future distributions of undistributed earnings, we have provided for deferred taxes, which we do not consider significant to our operations.

As of December 31, 2020, the Company had deferred tax assets for U.S. and foreign net operating losses (“NOLs”) of approximately $41.2 million. We have provided a valuation allowance for approximately $28.6 million of these NOLs. $18.3 million of the NOLs are subject to expire between 2021 and 2030.

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Our deferred tax assets and deferred tax liabilities and corresponding valuation allowances related to our operations were not material as of December 31, 2020 and 2019.

We regularly review deferred tax assets for recoverability based on our history of earnings, expectations of future earnings, and tax planning strategies. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income to support the amount of deferred taxes. A valuation allowance is recorded in those circumstances in which we conclude it is not more-likely-than-not we will recover the deferred tax assets prior to their expiration.

Note 17**. Changes in Accumulated Other Comprehensive Income (Loss)**

The following table presents the changes in accumulated other comprehensive loss by component for the years ended December 31, 2020, 2019 and 2018 (in thousands):


	Changes related to cash flow derivative hedges		Changes in defined benefit plans		Foreign currency translation adjustments		Accumulated other comprehensive (loss) income

Accumulated comprehensive loss at January 1, 2018	$	(250,355)	$	(33,666)	$	(50,244)	$	(334,265)
Other comprehensive income (loss) before reclassifications	(297,994)		6,156		(14,251)		(306,089)
Amounts reclassified from accumulated other comprehensive loss	11,133		1,487		—		12,620
Net current-period other comprehensive income (loss)	(286,861)		7,643		(14,251)		(293,469)

Accumulated comprehensive loss at January 1, 2019	(537,216)		(26,023)		(64,495)		(627,734)
Other comprehensive income (loss) before reclassifications	(146,108)		(20,314)		869		(165,553)
Amounts reclassified from accumulated other comprehensive loss	(5,205)		779		—		(4,426)
Net current-period other comprehensive (loss) income	(151,313)		(19,535)		869		(169,979)

Accumulated comprehensive loss at January 1, 2020	(688,529)		(45,558)		(63,626)		(797,713)
Other comprehensive (loss) income before reclassifications	(41,109)		(22,051)		(28,698)		(91,858)
Amounts reclassified from accumulated other comprehensive loss	79,119		2,067		69,044		150,230
Net current-period other comprehensive (loss) income	38,010		(19,984)		40,346		58,372

Accumulated comprehensive loss at December 31, 2020	$	(650,519)	$	(65,542)	$	(23,280)	$	(739,341)

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents reclassifications out of accumulated other comprehensive loss for the years ended December 31, 2020, 2019 and 2018 (in thousands):


	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into (Loss) Income
Details about Accumulated Other Comprehensive Loss Components	Year Ended December 31, 2020		Year Ended December 31, 2019		Year Ended December 31, 2018		Affected Line Item in Statements of Comprehensive Income (Loss)
Gain (loss) on cash flow derivative hedges:


Interest rate swaps	(25,267)		(4,289)		(10,931)		Interest expense, net of interest capitalized
Foreign currency forward contracts	(14,679)		(14,063)		(12,843)		Depreciation and amortization expenses
Foreign currency forward contracts	(7,315)		(5,080)		12,855		Other income (expense)



Fuel swaps	3,549		(1,292)		(1,580)		Other income (expense)
Fuel swaps	(35,407)		29,929		1,366		Fuel
	(79,119)		5,205		(11,133)
Amortization of defined benefit plans:
Actuarial loss	(2,067)		(779)		(1,487)		Payroll and related
Prior service costs	—		—		—		Payroll and related
	(2,067)		(779)		(1,487)
Release of foreign cumulative translation due to sale or liquidation of businesses:
Foreign cumulative translation	(69,044)		—		—		Other operating
Total reclassifications for the period	$	(150,230)	$	4,426	$	(12,620)

During the year ended December 31, 2020, a $69.0 million net loss was recorded within Other expense in our consolidated statements of comprehensive (loss) income. The amount was recognized in earnings in connection with the Pullmantur reorganization, as we no longer have significant involvement in the Pullmantur operations and these amounts were previously deferred in Accumulated other comprehensive loss. The net loss consisted 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. 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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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 18**. 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 December 31, 2020										Fair Value Measurements at December 31, 2019
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)	$	3,684,474	$	3,684,474	$	3,684,474	—		—		$	243,738	$	243,738	$	243,738	—		—
Total Assets	$	3,684,474	$	3,684,474	$	3,684,474	$	—	$	—	$	243,738	$	243,738	$	243,738	$	—	$	—
Liabilities:
Long-term debt (including current portion of long-term debt)(5)	$	18,706,359	$	20,981,040	—		$	20,981,040	—		$	9,370,438	$	10,059,055	—		$	10,059,055	—
Total Liabilities	$	18,706,359	$	20,981,040	$	—	$	20,981,040	$	—	$	9,370,438	$	10,059,055	$	—	$	10,059,055	$	—

(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 December 31, 2020 and 2019.

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

(5)Consists of unsecured revolving credit facilities, senior notes, senior debentures, term loans and convertible notes. These amounts do not include our capital 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 as of December 31, 2020 and 2019.

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 December 31, 2020								Fair Value Measurements at December 31, 2019
Description	Total Fair Value		Level 1(1)		Level 2(2)		Level 3(3)		Total Fair Value		Level 1(1)		Level 2(2)		Level 3(3)
Assets:
Derivative financial instruments(4)	$	108,539	$	—	$	108,539	$	—	$	39,994	$	—	$	39,994	$	—

Total Assets	$	108,539	$	—	$	108,539	$	—	$	39,994	$	—	$	39,994	$	—
Liabilities:
Derivative financial instruments(5)	$	259,705	$	—	$	259,705	$	—	$	257,728	$	—	$	257,728	$	—
Contingent consideration(6)	—		—		—		—		62,400		—		—		62,400
Total Liabilities	$	259,705	$	—	$	259,705	$	—	$	320,128	$	—	$	257,728	$	62,400

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(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.

(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.

(6)Any obligation under the contingent consideration related to the 2018 Silversea Cruises acquisition was terminated during the quarter ended September 30, 2020 as a result of our purchase of the remaining 33.3% non-controlling interest in Silversea Cruises. In prior periods, the contingent consideration was estimated by applying a Monte-Carlo simulation method using our closing stock price along with significant inputs not observable in the market, including the probability of achieving the milestones and estimated future operating results. The Monte-Carlo simulation is a generally accepted statistical technique used to generate a defined number of valuation paths in order to develop a reasonable estimate of fair value. Refer to Note 1*. General,* Note 3. Business Combination, and Note 11*. Redeemable Noncontrolling Interest* for further information on the Silversea Cruises acquisitions. For the twelve months ended December 31, 2020, we recorded income for the change in fair value of the contingent consideration of $45.1 million within Other (expense) income in our consolidated statements of comprehensive income (loss).

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 December 31, 2020 or 2019, 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 table presents information about the Company’s nonfinancial instruments recorded at fair value on a nonrecurring basis (in thousands):


	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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(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 our 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 were 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 8*. 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 December 31, 2020								As of December 31, 2019
	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	$	108,539	$	(80,743)	$	—	$	27,796	$	39,994	$	(39,994)	$	—	$	—

Total	$	108,539	$	(80,743)	$	—	$	27,796	$	39,994	$	(39,994)	$	—	$	—

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 December 31, 2020								As of December 31, 2019
	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	$	(259,705)	$	80,743	$	57,273	$	(121,689)	$	(257,728)	$	39,994	$	—	$	(217,734)

Total	$	(259,705)	$	80,743	$	57,273	$	(121,689)	$	(257,728)	$	39,994	$	—	$	(217,734)

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 December 31, 2020, we had counterparty credit risk exposure under our derivative instruments of $26.9 million, which was limited to the cost of replacing the contracts in the event of non-performance by the counterparties to the contracts, the majority of which are currently our lending banks. 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.

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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Interest Rate Risk

Our exposure to market risk for changes in interest rates primarily relates to our debt obligations including future interest payments. At December 31, 2020 and 2019, approximately 64.5% and 62.1%, 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 December 31, 2020, we maintained interest rate swap agreements on the following fixed-rate debt instruments:


Debt Instrument	Swap Notional as of December 31, 2020 (In thousands)		Maturity	Debt Fixed Rate	Swap Floating Rate: LIBOR plus	All-in Swap Floating Rate as of December 31, 2020
Oasis of the Seas term loan	$	35,000	October 2021	5.41%	3.87%	4.12%
Unsecured senior notes	650,000		November 2022	5.25%	3.63%	3.85%
	$	685,000

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 December 31, 2020, we maintained interest rate swap agreements on the following floating-rate debt instruments:


Debt Instrument	Swap Notional as of December 31, 2020 (In thousands)		Maturity	Debt Floating Rate		All-in Swap Fixed Rate
Celebrity Reflection term loan	$	218,167	October 2024	LIBOR plus	0.40%	2.85%
Quantum of the Seas term loan	367,500		October 2026	LIBOR plus	1.30%	3.74%
Anthem of the Seas term loan	392,708		April 2027	LIBOR plus	1.30%	3.86%
Ovation of the Seas term loan	518,750		April 2028	LIBOR plus	1.00%	3.16%
Harmony of the Seas term loan (1)	530,191		May 2028	EURIBOR plus	1.15%	2.26%
Odyssey of the Seas term loan(2)	460,000		October 2032	LIBOR plus	0.95%	3.20%
Odyssey of the Seas term loan(2)	191,667		October 2032	LIBOR plus	0.95%	2.83%
	$	2,678,983

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Interest rate swap agreements hedging the Euro-denominated term loan for Harmony of the Seas include EURIBOR zero-floors matching the hedged debt EURIBOR zero-floor. Amount presented is based on the exchange rate as of December 31, 2020.

(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 $460.0 million and $191.7 million interest rate swap agreements are October 2020 and October 2022, respectively. The anticipated unsecured term loan for the financing of Odyssey of the Seas was initially expected to be drawn in October 2020. However, due to the impact of COVID-19 to shipyard operations, there is a delay in the ship delivery.

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 December 31, 2020 and 2019 was $3.4 billion and $3.5 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 December 31, 2020, the aggregate cost of our ships on order, was $14.2 billion, of which we had deposited $684.8 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 19*. Commitments and Contingencies*, for further information on our ships on order. At December 31, 2020 and 2019, approximately 66.3% and 65.9%, 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 year ended December 31, 2020, we maintained an average of approximately $364.0 million of these foreign currency forward contracts. These instruments are not designated as hedging instruments. For the years ended December 31, 2020, 2019 and 2018, changes in the fair value of the foreign currency forward contracts resulted in gains (losses) of $(19.0) million, $1.4 million and $(62.4) million, respectively, which offset gains (losses) arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies in those same years of $(1.5) million, $0.4 million and $57.6 million, respectively. These amounts were recognized in earnings within Other income (expense) in our consolidated statements of comprehensive income (loss).

We consider our investments in our foreign operations to be denominated in relatively stable currencies and of a long-term nature. As of December 31, 2020, we maintained foreign currency forward contracts and designated them as hedges of a portion of our net investments primarily in TUI Cruises of €245.0 million, or approximately $299.7 million based on the exchange rate at December 31, 2020. 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 December 31, 2020 and 2019 was $3.1 billion and $2.9 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 €215.0 million, or approximately $263.0 million, as of December 31, 2020. As of December 31, 2019, we had designated debt as a hedge of our net investments primarily in TUI Cruises of €319.0 million, or approximately $358.1 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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 current suspension of our cruise operations due to the COVID-19 pandemic and our 2020 and expected 2021 ship disposals resulted in reductions to our forecasted fuel purchases. As of December 31, 2020, we discontinued cash flow hedge accounting on 0.6 million metric tons of our fuel swap agreements maturing in 2020 and 2021, which resulted in the reclassification of a net $104.4 million loss from Accumulated other comprehensive loss to Other expense during the year ended December 31, 2020. Changes in the fair value of fuel swaps for which cash flow hedge accounting was discontinued are currently recognized in Other expense each reporting period.

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 1, Item 1A. for further discussion on risks related to the COVID-19 pandemic.

At December 31, 2020, we have hedged the variability in future cash flows for certain forecasted fuel transactions occurring through 2023. As of December 31, 2020 and December 31, 2019, we had the following outstanding fuel swap agreements:


	Fuel Swap Agreements
	As of December 31, 2020	As of December 31, 2019
	(metric tons)
Designated as hedges:
2021	385,050	488,900
2022	389,650	322,900
2023	82,400	82,400


	Fuel Swap Agreements
	As of December 31, 2020		As of December 31, 2019
	(% hedged)
Designated hedges as a % of projected fuel purchases:
2021	40	%	30	%
2022	23	%	19	%
2023	5	%	5	%


	Fuel Swap Agreements
	As of December 31, 2020	As of December 31, 2019
	(metric tons)
Not designated as hedges:
2021	229,850	—
2022	14,650	—

At December 31, 2020 there was $13.1 million of estimated unrealized net loss associated with our cash flow hedges pertaining to fuel swap agreements to be reclassified to earnings from Accumulated other comprehensive loss within the next twelve months when compared to none at December 31, 2019. Reclassification is expected to occur as the result of fuel consumption associated with our hedged forecasted fuel purchases.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 December 31, 2020			As of December 31, 2019		Balance Sheet Location	As of December 31, 2020		As of December 31, 2019
		Fair Value			Fair Value			Fair Value	Fair Value
Derivatives designated as hedging instruments under ASC 815-20(1)
Interest rate swaps	Other assets		$	17,271		$	11	Other long-term liabilities	$	144,653	$	64,168
Interest rate swaps	Derivative financial instruments		261			—		Derivative Financial Instruments	—		—
Foreign currency forward contracts	Derivative financial instruments		63,894			—		Derivative financial instruments	13,294		75,260
Foreign currency forward contracts	Other assets		20,836			9,380		Other long-term liabilities	7,306		64,711


Fuel swaps	Derivative financial instruments		5,093			16,922		Derivative financial instruments	25,203		16,901
Fuel swaps	Other assets		350			8,677		Other long-term liabilities	50,117		33,965
Total derivatives designated as hedging instruments under ASC 815-20			107,705			34,990			240,573		255,005
Derivatives not designated as hedging instruments under ASC 815-20
Foreign currency forward contracts	Derivative financial Instruments		—			3,186		Derivative financial instruments	160		2,419
Foreign currency forward contracts	Other assets		—			—		Other long-term liabilities	—		—
Fuel swaps	Derivative financial instruments		834			1,643		Derivative financial instruments	18,028		295
Fuel swaps	Other assets		—			175		Other long-term liabilities	944		9
Total derivatives not designated as hedging instruments under ASC 815-20			834			5,004			19,132		2,723
Total derivatives			$	108,539		$	39,994		$	259,705	$	257,728

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


				Year Ended December 31, 2020								Year Ended December 31, 2019
				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				$371,015		$1,279,254		$(823,202)		$	(137,085)	$697,962		$1,245,942		$(381,568)		$	(24,513)
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		$	(18,813)	—		n/a		n/a		(23,464)		$	—
			Derivatives designated as hedging instruments	n/a		n/a		$	23,819	—		n/a		n/a		$	16,607	$	—
	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		$	(25,267)	n/a		n/a		n/a		$	(4,289)	n/a

		Commodity contracts
			Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income	$	(35,407)	n/a		n/a		$	3,549	$	29,929	n/a		n/a		$	(1,292)

		Foreign exchange contracts
			Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income	n/a		$	(14,679)	n/a		$	(7,315)	n/a		$	(14,063)	n/a		$	(5,080)


				Year Ended December 31, 2018
				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				$	710,617	$	1,033,697	$	(300,872)	$	11,107
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		$	4,673	$	—
			Derivatives designated as hedging instruments	n/a		n/a		$	(8,854)	$	—
	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		$	(10,931)	n/a

		Commodity contracts
			Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income	$	1,366	n/a		n/a		$	(1,580)

		Foreign exchange contracts
			Amount of gain or (loss) reclassified from accumulated other comprehensive loss into income	n/a		$	(12,843)	n/a		$	12,855

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 December 31, 2020		As of December 31, 2019
Foreign currency debt	Current portion of long-term debt	$	43,696	$	73,572
Foreign currency debt	Long-term debt	219,335		284,506
		$	263,031	$	358,078

The effect of derivative instruments qualifying and designated as hedging instruments and the related hedged items in fair value hedges on the consolidated statements of comprehensive income (loss) was as follows (in thousands):


	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
Derivatives and related Hedged Items under ASC 815-20 Fair Value Hedging Relationships	Year Ended December 31, 2020	Year Ended December 31, 2019		Year Ended December 31, 2018		Year Ended December 31, 2020		Year Ended December 31, 2019		Year Ended December 31, 2018
Interest rate swaps	Interest expense (income), net of interest capitalized	$	23,819	$	16,607	$	(8,854)	$	(18,813)	$	(23,464)	$	4,673


		$	23,819	$	16,607	$	(8,854)	$	(18,813)	$	(23,464)	$	4,673

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


Line Item in the Statement of Financial Position Where the Hedged Item is 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 December 31, 2020			As of December 31, 2019			As of December 31, 2020			As of December 31, 2019
Current portion of long-term debt and Long-term debt		$	700,331		$	715,234		$	17,512		$	(1,301)
		$	700,331		$	715,234		$	17,512		$	(1,301)

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


	Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss) on Derivative						Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Derivatives under ASC 815-20 Cash Flow Hedging Relationships	Year Ended December 31, 2020		Year Ended December 31, 2019		Year Ended December 31, 2018			Year Ended December 31, 2020			Year Ended December 31, 2019			Year Ended December 31, 2018


Interest rate swaps	$	(112,960)	$	(72,732)	$	18,578	Interest expense		$	(25,267)		$	(4,289)		$	(10,931)
Foreign currency forward contracts	130,426		(148,881)		(222,645)		Depreciation and amortization expenses		(14,679)			(14,063)			(12,843)
Foreign currency forward contracts	—		—		—		Other income (expense)		(7,315)			(5,080)			12,855

Foreign currency forward contracts	—		—		—		Other indirect operating expenses		—			—			—
Foreign currency collar options	—		—		—		Depreciation and amortization expenses		—			—			—
Fuel swaps	—		—		—		Other income (expense)		3,549			(1,292)			(1,580)
Fuel swaps	(58,575)		75,505		(93,927)		Fuel		(35,407)			29,929			1,366
	$	(41,109)	$	(146,108)	$	(297,994)			$	(79,119)		$	5,205		$	(11,133)

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


Gain (Loss) Recognized in Income (Net Investment Excluded Components)	Year Ended December 31, 2020
Net inception fair value at January 1, 2020	$	(8,008)
Amount of gain recognized in income on derivatives for the year ended December 31, 2020	6,620
Amount of loss remaining to be amortized in accumulated other comprehensive loss as of December 31, 2020	(528)
Fair value at December 31, 2020	$	(1,916)

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 Income (Loss)
Non-derivative instruments under ASC 815-20 Net Investment Hedging Relationships	Year Ended December 31, 2020		Year Ended December 31, 2019		Year Ended December 31, 2018
Foreign Currency Debt	$	(28,062)	$	6,111	$	13,210
	$	(28,062)	$	6,111	$	13,210

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 Derivative
Derivatives Not Designated as Hedging Instruments under ASC 815-20	Location of Gain (Loss) Recognized in Income on Derivative	Year Ended December 31, 2020		Year Ended December 31, 2019		Year Ended December 31, 2018
Foreign currency forward contracts	Other income (expense)	$	(18,961)	$	1,356	$	(62,423)
Fuel swaps	Fuel	—		(37)		1,161
Fuel swaps	Other income (expense)	(102,740)		112		114
		$	(121,701)	$	1,431	$	(61,148)

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.

As of December 31, 2020, our senior unsecured debt credit rating was B+ by Standard & Poor's and B2 by Moody's. As of December 31, 2020, seven of our interest rate derivative hedges had a term of at least five years requiring us to post collateral of $57.3 million to satisfy our obligations under our interest rate derivative agreements, taking into account collateral waivers issued by certain banks. On February 25, 2021, Standard & Poor's further downgraded our senior unsecured debt credit rating from B+ to B. We believe the maximum additional collateral we may need to provide under these agreements in the next twelve months is approximately $33.3 million.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 19**. Commitments and Contingencies**

Ship Purchase Obligations

Our future capital commitments consist primarily of new ship orders. As of December 31, 2020, we had one Quantum-class ship, two Oasis-class ships and three ships of a new generation, known as our Icon-class, on order for our Royal Caribbean International brand with an aggregate capacity of approximately 32,400 berths. As of December 31, 2020, we had two Edge-class ships on order for our Celebrity brand with an aggregate capacity of approximately 6,500 berths. Additionally as of December 31, 2020, we had three ships on order with an aggregate capacity of approximately 1,750 berths for our Silversea Cruises brand. The following provides further information on recent developments with respect to our ship orders.

In September 2019, Silversea Cruises entered into two credit agreements, guaranteed by us, for the unsecured financing of the first and second Evolution-class ships for an amount of up to 80% of each ship's contract price through facilities to be guaranteed 95% by Euler Hermes, the official export credit agency of Germany. The maximum loan amount under each facility is not to exceed the United States dollar equivalent of €351.6 million in the case of the first Evolution-class ship and €359.0 million in the case of the second Evolution-class ship, or approximately $430.1 million and $439.2 million, respectively, based on the exchange rate at December 31, 2020. Each loan, once funded, will amortize semi-annually and will mature 12 years following the delivery of each ship. At our election, interest on each loan will accrue either (1) at a fixed rate of 4.14% and 4.18%, respectively (inclusive of the applicable margin) or (2) at a floating rate equal to LIBOR plus 0.79% and 0.83%, respectively. The first and second Evolution-class ships will each have a capacity of approximately 600 berths.

In December 2019, we entered into a credit agreement for the unsecured financing of the sixth Oasis-class ship for up to 80% of the ship’s contract price through a facility to be guaranteed 100% by BpiFrance Assurance Export, the official export credit agency of France. Under the financing arrangement, we have the right, but not the obligation, to satisfy the obligations to be incurred upon delivery and acceptance of the ship under the shipbuilding contract by assuming, at delivery and acceptance, the debt indirectly incurred by the shipbuilder during the construction of the ship. The maximum loan amount under the facility is not to exceed the United States dollar equivalent of €1.3 billion, or approximately $1.6 billion based on the exchange rate at December 31, 2020. The loan will amortize semi-annually and will mature 12 years following delivery of the ship. Interest on the loan will accrue at a fixed rate of 3.00% (inclusive of margin). The sixth Oasis-class ship will have a capacity of approximately 5,700 berths.

In December 2019, we entered into a credit agreement for the unsecured financing of the third Icon-class ship for up to 80% of the ship’s contract price. Finnvera plc, the official export credit agency of Finland, has agreed to guarantee 95% of the substantial majority of the financing, with a smaller portion of the financing to be 95% guaranteed by Euler Hermes, the official German export credit agency. The maximum loan amount under the facility is not to exceed the United States dollar equivalent of €1.4 billion, or approximately $1.7 billion based on the exchange rate at December 31, 2020. The loan, once funded, will amortize semi-annually and will mature 12 years following the delivery of the ship. Approximately 60% of the loan will accrue interest at a fixed rate of 3.29%. The balance of the loan will accrue interest at a floating rate of LIBOR plus 0.85%. The third Icon-class ship will have a capacity of approximately 5,600 berths.

During 2017, we entered into credit agreements for the unsecured financing of the two Icon-class ships for up to 80% of each ship’s contract price. For each ship, the official Finnish export credit agency, Finnvera plc, has agreed to guarantee 100% of a substantial majority of the financing to the lenders, with a smaller portion of the financing to be 95% guaranteed by Euler Hermes, the official German export credit agency. The maximum loan amount under each facility is not to exceed €1.4 billion, or approximately $1.7 billion, based on the exchange rate at December 31, 2020. Interest on approximately 75% of each loan will accrue at a fixed rate of 3.56% and 3.76% for the first and the second Icon-class ships, respectively, and the balance will accrue interest at a floating rate ranging from LIBOR plus 1.10% to 1.15% and LIBOR plus 1.15% to 1.20% for the first and the second Icon-class ships, respectively. Each loan will amortize semi-annually and will mature 12 years following delivery of each ship. The first and second Icon-class ships will each have a capacity of approximately 5,600 berths.

During 2017, we entered into credit agreements for the unsecured financing of the third and fourth Edge-class ships and the fifth Oasis-class ship for up to 80% of each ship’s contract price through facilities to be guaranteed 100% by Bpifrance Assurance Export, the official export credit agency of France. Under these financing arrangements, we have the right, but not the obligation, to satisfy the obligations to be incurred upon delivery and acceptance of each ship under the shipbuilding contract by assuming, at delivery and acceptance, the debt indirectly incurred by the shipbuilder during the construction of each ship. The maximum loan amount under each facility is not to exceed €684.2 million in the case of the third Edge-class ship and the United States dollar equivalent of €714.6 million and €1.1 billion in the case of the fourth Edge-class ship and fifth Oasis-class ship, or approximately $874.2 million and $1.3 billion, respectively, based on the exchange rate at December 31, 2020. The loans will amortize semi-annually and will mature 12 years following delivery of each ship. Interest on the loans will accrue at a fixed rate of 1.28% for the third Edge-class ship and at a fixed rate of 3.18% for both, the fourth Edge-class ship and

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the fifth Oasis-class ship. The third and fourth Edge-class ships, each of which will have a capacity of approximately 3,250 berths. The fifth Oasis-class ship will have a capacity of approximately 5,700 berths.

During 2015, we entered into a credit agreement for the unsecured financing of Odyssey of the Seas for up to 80% of the ship’s contract price, through a facility to be guaranteed 95% by Euler Hermes, official export credit agency of Germany. Hermes has agreed to guarantee to the lender payment of 95% of the financing. The ship will have a capacity of approximately 4,200 berths. This credit agreement makes available to us an unsecured term loan in an amount up to the United States dollar equivalent of €777.5 million, or approximately $951.2 million, based on the exchange rate at December 31, 2020. The loan will amortize semi-annually and will mature 12 years following delivery of the ship. At our election, prior to delivery of the ship, interest on the loans will accrue either (1) at a fixed rate of 3.45% (inclusive of the applicable margin) or (2) at a floating rate equal to LIBOR plus 0.95%.

Our future capital commitments consist primarily of new ship orders. As of December 31, 2020, our Global and Partner Brands have the following ships on order. COVID-19 has impacted shipyard operations which have and may continue to result in delays of our previously contracted ship deliveries. As of December 31, 2020, the expected dates that the ships on order are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:


Ship	Shipyard	Expected to be delivered	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
Quantum-class:
Odyssey of the Seas	Meyer Werft	1st Quarter 2021	4,200
Icon-class:
Unnamed	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	550
Evolution-class:
Unnamed	Meyer Werft	1st Quarter 2022	600
Unnamed	Meyer Werft	1st Quarter 2023	600
TUI Cruises (50% joint venture) —
Mein Schiff 7	Meyer Turku Oy	2nd Quarter 2023	2,900
Unnamed	Fincantieri	3rd Quarter 2024	4,100
Unnamed	Fincantieri	1st Quarter 2026	4,100
Hapag-Lloyd Cruises (50% joint venture) —
Hanseatic Spirit	Vard Fincantieri	2nd Quarter 2021	230
Total Berths			51,980

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(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 December 31, 2020, 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.

As of December 31, 2020, the aggregate cost of our ships on order, not including any ships on order by our Partner Brands and the Silversea Cruises ships that remain contingent upon final documentation and financing, was approximately $14.2 billion, of which we had deposited $684.8 million as of such date. Approximately 66.3% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at December 31, 2020. Refer to Note 18*. Fair Value Measurements and Derivative Instruments* for further information.

Litigation

As previously reported, two lawsuits were filed against Royal Caribbean Cruises Ltd. in August 2019 in the U.S. District Court for the Southern District of Florida 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 Royal Caribbean Cruises Ltd. 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. Royal Caribbean Cruises Ltd. filed its answer to each complaint in October 2019 and on October 15, 2020, and the Court dismissed the Port of Santiago Action with prejudice on the basis that the plaintiffs in that action lacked standing to bring the claim. This decision has been appealed by the plaintiffs. 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 that it is unlikely that 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 this case will not be material.

As previously reported, on October 7, 2020, a shareholder filed a putative class action complaint against us, and three officers, Richard Fain, Jason Liberty and Michael Bayley, in the United States District Court for the Southern District of Florida (the "Court"), alleging misrepresentations relating to COVID-19 in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, seeking unspecified damages on behalf of a purported class consisting of all persons and entities (subject to specified exceptions) that purchased or otherwise acquired our securities from February 4, 2020 through March 17, 2020. As previously disclosed, on October 27, 2020, a second complaint was filed by another shareholder against us and these same officers in the Court alleging the same misrepresentations relating to COVID-19. As is the case with the first action, the second action seeks unspecified damages on behalf of a purported class consisting of all persons and entities (subject to specified exceptions) that purchased or otherwise acquired our securities from February 4, 2020 through March 17, 2020. On December 23, 2020, these cases were consolidated with a new lead plaintiff, Indiana Public Retirement System. We cannot predict the duration or outcome of this lawsuit at this time, although management believes the claims are without merit. Depending on how this case progresses, it could be costly to defend and could divert the attention of management and other resources from operations. Accordingly, even if ultimately resolved in our favor, this action could have a material adverse effect on our business, financial condition, results of operations and liquidity. On February 25, 2021, the lead plaintiff filed with the Court a voluntary dismissal of the action without prejudice.

We are routinely involved in other claims, regulatory investigations and inquiries, and consumer complaints, including those related to COVID-19, that are typical within the travel and tourism industry. The majority of these claims are covered by insurance. We believe the outcome of such claims, net of expected insurance recoveries, will not have a material adverse impact on our financial condition or results of operations and cash flows.

Other

Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes, increased lender capital costs and other similar costs. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business. There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses. We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification in any material amount is probable.

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ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

At December 31, 2020, we have future commitments to pay for our usage of certain port facilities, marine consumables, services and maintenance contracts as follows (in thousands):


Year
2021	$	202,618
2022	299,347
2023	28,324
2024	6,911
2025	7,273
Thereafter	22,720
	$	567,193

Note 20**. Restructuring Charges**

Centralization of Global Sales and Marketing Structure

During the year ended December 31, 2019, we implemented a strategy related to the restructuring and centralization of our international sales and marketing structure. Activities related to this strategy focused on moving from a multi-brand sales model to a brand dedicated sales model, which resulted in the consolidation of some of our international offices and personnel reorganization among our sales and marketing teams. The personnel reorganization resulted in the recognition of a liability for one-time termination benefits during the twelve months ended December 31, 2019. We also incurred contract termination costs related to the closure of some of our international offices and other related costs consisting of legal and consulting fees to implement this initiative. As a result of these actions, we incurred restructuring exit costs of $12.0 million for the year ended December 31, 2019, which were reported within Marketing, selling and administrative expenses in our consolidated statements of comprehensive income (loss). As of December 31, 2020, we incurred $22.7 million restructuring costs as it relates to the restructuring activities of this strategy.

The following table summarizes our restructuring exit costs (in thousands):


	Beginning Balance January 1, 2020		Accruals		Payments		Ending Balance December 31, 2020		Cumulative Charges Incurred
Termination benefits	$	8,389	$	2,711	$	3,192	$	7,908	$	11,591
Contract termination costs	338		—		—		338		338
Other related costs	2,785		7,989		9,473		1,301		10,797
Total	$	11,512	$	10,700	$	12,665	$	9,547	$	22,726

Operating Expense Reduction in Workforce

In April 2020, we reduced our US 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 as it relates to the April 2020 reduction in our workforce (in thousands):

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	Beginning Balance January 1, 2020		Accruals		Payments		Ending Balance December 31, 2020		Cumulative Charges Incurred
Termination benefits	$	—	$	27,953	$	23,696	$	4,257	$	27,953


Total	$	—	$	27,953	$	23,696	$	4,257	$	27,953

Note 21. Quarterly Selected Financial Data (Unaudited)


	(In thousands, except per share data)
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter
	2020		2019		2020		2019		2020		2019		2020		2019
Total revenues(1)(2)	$	2,032,750	$	2,439,767	$	175,605	$	2,806,631	$	(33,688)	$	3,186,850	$	34,138	$	2,517,413
Operating (Loss) income	$	(1,306,407)	$	318,831	$	(1,282,487)	$	573,653	$	(996,114)	$	890,792	$	(1,016,549)	$	299,425
Net (Loss) Income attributable to Royal Caribbean Cruises Ltd.	$	(1,444,479)	$	249,681	$	(1,639,292)	$	472,830	$	(1,346,756)	$	883,240	$	(1,366,935)	$	273,136
(Loss) Earnings per share
Basic	$	(6.91)	$	1.19	$	(7.83)	$	2.26	$	(6.29)	$	4.21	$	(6.09)	$	1.31
Diluted	$	(6.91)	$	1.19	$	(7.83)	$	2.25	$	(6.29)	$	4.20	$	(6.09)	$	1.30
Dividends declared per share	$	0.78	$	0.70	$	—	$	0.70	$	—	$	0.78	$	—	$	0.78

(1)Our revenues are seasonal based on the demand for cruises. Demand is strongest for cruises during the Northern Hemisphere's summer months and holidays.

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

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