Royal Caribbean Cruises 10-Q 2022-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2022

OR

For the transition period from to

Commission File Number: 1-11884

ROYAL CARIBBEAN CRUISES LTD.

(Exact name of registrant as specified in its charter)

1050 Caribbean Way, Miami, Florida 33132

(Address of principal executive offices) (zip code)

(305) 539-6000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 254,956,303 shares of common stock outstanding as of May 2, 2022.

ROYAL CARIBBEAN CRUISES LTD.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited; in thousands, except per share data)

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

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

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

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Cautionary Note Concerning Forward-Looking Statements

The discussion under this caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, business and industry prospects or future results of operations or financial position, made in this Quarterly Report on Form 10-Q are forward-looking. Words such as "anticipate," "believe," "considering," "could," "driving," "estimate," "expect," "goal," "intend," "may," "plan," "project," "seek," "should," "will," "would," and similar expressions are intended to further identify any of these forward-looking statements. Forward-looking statements reflect management's current expectations but they are based on judgments and are inherently uncertain. Furthermore, they are subject to risks, uncertainties and other factors that could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q and, in particular, the risks discussed under the caption "Risk Factors" in Part II, Item 1A herein.

All forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date of this filing. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

The discussion and analysis of our financial condition and results of operations is organized to present the following:

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

• a discussion of our results of operations for the quarter ended March 31, 2022, compared to the same period in 2021;

• a discussion of our business outlook; and

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

Critical Accounting Policies and Estimates

For a discussion of our critical accounting policies and estimates, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report on Form 10-K for the year ended December 31, 2021.

Seasonality

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

Recent Developments

Return to Healthy Sailing

During 2021, we restarted our global cruise operations in a phased manner, following our voluntary suspension of global cruise operations that commenced in March of 2020 in response to the COVID-19 pandemic. Since then, we have steadily increased the number of ships that have returned to service. As of March 31, 2022, we operated 54 of our Global and Partner Brand ships, representing close to 90% of our worldwide capacity. We expect that the rest of the fleet will return to operations before the summer season. Our return to service efforts incorporate our enhanced health and safety protocols, and the requirements of regulatory agencies, which has resulted in reduced guest occupancy, modified itineraries and vaccination protocols.

Uncertainties remain as to the continuing effects COVID-19 will have on our operations, including potential increases in infection rates, new variants, and renewed governmental action to slow the spread of COVID-19, which may lead us to cancel or modify certain of our Global Brands’ cruise sailings. Additionally, there is uncertainty surrounding consumer behavior and demand for cruising. The continuing effects of COVID-19 on our resumption of guest cruise operations and the increased uncertainty given the current war in Ukraine, including its effect on the price of fuel and food, are collectively having a material negative impact on our business, including our liquidity, financial position and results of operations.

Continued Fleet Ramp-up

Wonder of the Seas and Celebrity Beyond were delivered and commenced operations in the first quarter and second quarter, respectively, which expanded our total fleet size, including our Partner Brands, to 63 ships.

We are currently offering cruise itineraries in the majority of our destinations. Australia, one of the last remaining countries to re-open, has announced the resumption of cruising effective April 2022. We expect to return to Australia for the local summer season during the fourth quarter of 2022. China remains closed to cruising, resulting in the redeployment of ships planned for China to other markets.

Operating Costs

As we resume our return to service, we are experiencing inflationary and supply chain challenges, mainly related to fuel and food costs, as well as transitory costs related to our health and safety protocols. We expect these challenges to have an adverse impact to our 2022 operating costs.

Update on Bookings

Booking volumes in the first quarter of 2022 have improved consistently week-over-week and reached typical, peak booking season ("Wave") levels at the end of the quarter. Bookings have now been surpassing comparable 2019 levels for the last two months, with particularly strong trends for North America based itineraries. Additionally, the elevated cancellations experienced earlier in the year attributable to the Omicron variant returned to pre-Omicron levels as COVID-19 cases subsided in February 2022.

While load factors for sailings in the second half of 2022 are currently slightly below historical levels, consumers are booking their cruises closer to sailing and we are capitalizing on the close-in demand to improve load factors.

Bookings for Europe sailings improved throughout the first quarter but softened due to the war in Ukraine, with a bigger impact on Baltic itineraries. While bookings for Europe are now exceeding 2019 levels for the same period, the situation in Ukraine is expected to weigh on load factors in Europe this summer.

As of March 31, 2022 we had $3.6 billion in customer deposits. Approximately 27% of the customer deposit balance as of March 31, 2022 is related to FCCs compared to 32% of the customer deposit balance as of December 31, 2021, a positive trend indicating new demand.

Update on Recent Liquidity Actions and Ongoing Uses of Cash

Refer to Funding Needs and Sources for discussion regarding our recent liquidity actions and ongoing uses of cash.

Capital Expenditures

Refer to Future Capital Commitments for discussion on capital expenditures.

Debt Maturities, New Financings and Other Liquidity Actions

During the quarter ended March 31, 2022, we continued to take actions to further improve our liquidity position and manage cash flow. In particular, we:

• issued $1.0 billion of senior notes (the "January 2022 Unsecured Notes") due in 2027 for net proceeds of approximately $990.0 million. Interest accrues on the January 2022 Unsecured Notes at a fixed rate of 5.375% per annum and is payable semi-annually in arrears; and

• entered into certain agreements with Morgan Stanley & Co., LLC (“MS”) where MS agrees to provide backstop committed financing to refinance, repurchase and/or repay in whole or in part our existing and outstanding 10.875% Senior Secured Notes due 2023, 9.125% Senior Priority Guaranteed Notes due 2023 (the "Priority Guaranteed Notes"), and 4.25% Convertible Notes due 2023. We may, at our sole option, issue and sell to MS (subject to the satisfaction of certain conditions) five-year senior unsecured notes with gross proceeds of up to $3.15 billion at any time between April 1, 2023 and June 29, 2023, to refinance the aforementioned notes.

Expected debt maturities for the remainder of 2022 are $2.2 billion and $5.7 billion for 2023. We continue to identify and evaluate further actions to enhance our liquidity and support our recovery. These include and are not limited to further reductions in capital expenditures, operating expenses and administrative costs and additional financings.

Results of Operations

Summary

Net Loss and Adjusted Net Loss for the first quarter of 2022 were $(1.17) billion and $(1.16) billion, or $(4.58) and $(4.57) per share on a diluted basis, respectively, reflecting the ramp up of our return to operations, and increased sales and marketing expenses, compared to Net Loss and Adjusted Net Loss of $(1.13) billion and $(1.08) billion, or $(4.66) and $(4.44) per share on a diluted basis, respectively, for the first quarter of 2021.

Significant items for the quarter ended March 31, 2022 include:

• Total revenues, excluding the effect of changes in foreign currency exchange rates, increased $1.0 billion for the quarter ended March 31, 2022 as compared to the same period in 2021, The increase reflects the ramp up in our return to operations in 2022 compared to 2021 when the suspension of our global cruise operations was in effect. APCDs for the first quarter ended March 31, 2022 were 7,692,906 compared to 384,224 in the same period in 2021.

• Total cruise operating expenses, excluding the effect of changes in foreign currency exchange rates, increased $0.9 billion for the quarter ended March 31, 2022 as compared to the same period in 2021. The increase reflects the ramp up in our return to operations in 2022 compared to 2021 when the suspension of our global cruise operations was in effect.

*•*In January 2022, we took delivery of Wonder of the Seas.

• In January 2022, we issued the January 2022 Unsecured Notes. Refer to Note 6. Debt to our consolidated financial statements under Part I. Item 1. Financial Statements for further information regarding this transaction.

• In February 2022, we entered into certain agreements with MS where MS agrees to provide backstop committed financing. Refer to Note 6. Debt to our consolidated financial statements under Part I. Item 1. Financial Statements for further information regarding this transaction.

Operating results for the quarter ended March 31, 2022 compared to the same period in 2021 are shown in the following table (in thousands, except per share data):

Adjusted Net Loss and Adjusted Loss per Share were calculated as follows (in thousands, except per share data):

(1)Represents the amortization of non-cash debt discount on our convertible notes. For further information regarding the adoption of ASU 2020-06 as of January 1, 2022, which impacts the accounting of the non-cash debt discount on convertible notes, refer to Note 2. Summary of Significant Accounting Policies to our consolidated financial statements.

(2)Represents estimated cash refunds expected to be paid to Pullmantur guests as part of the Pullmantur S.A. reorganization.

(3)Represents equity investment asset impairments primarily for TUI Cruises GmbH in 2021 as a result of the impact of COVID-19.

(4)Represents net insurance recoveries related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas.

Selected statistical information is shown in the following table:

(1)Due to the elimination of the Silversea Cruises three-month reporting lag in October 2021, we included Silversea Cruises' metrics from January 1, 2022 through March 31, 2022 in the quarter ended March 31, 2022.

(2)Due to the three-month reporting lag, we included Silversea Cruises' metrics from October 1, 2020 through December 31, 2020 in the quarter ended March 31, 2021.

2022 Outlook

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

Financial Presentation

Description of Certain Line Items

Revenues

Our revenues are comprised of the following:

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

• Onboard and other revenues, which consist primarily of revenues from the sale of goods and/or services onboard our ships not included in passenger ticket prices, cancellation fees, sales of vacation protection insurance, pre- and post-cruise tours and fees for operating certain port facilities. Onboard and other revenues also include revenues we receive from independent third-party concessionaires that pay us a percentage of their revenues in exchange for the right to provide selected goods and/or services onboard our ships, as well as revenues received for procurement and management related services we perform on behalf of our unconsolidated affiliates.

Cruise Operating Expenses

Our cruise operating expenses are comprised of the following:

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

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

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

*•*Food expenses, which include food costs for both guests and crew;

*•*Fuel expenses, which include fuel and related delivery, storage and emission consumable costs and the financial impact of fuel swap agreements; and

• Other operating expenses, which consist primarily of operating costs such as repairs and maintenance, port costs that do not vary with passenger head counts, vessel related insurance, entertainment and gains and/or losses related to the sale of our ships, if any.

We do not allocate payroll and related expenses, food expenses, fuel expenses or other operating expenses to the expense categories attributable to passenger ticket revenues or onboard and other revenues since they are incurred to provide the total cruise vacation experience.

Selected Operational and Financial Metrics

We utilize a variety of operational and financial metrics which are defined below to evaluate our performance and financial condition. As discussed in more detail herein, certain of these metrics are non-GAAP financial measures. These non-GAAP financial measures are provided along with the related GAAP financial measures as we believe they provide useful information to investors as a supplement to our consolidated financial statements, which are prepared and presented in accordance with GAAP. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Adjusted Loss per Share ("Adjusted EPS") represents Adjusted Net Loss (as defined below) divided by weighted average shares outstanding or by diluted weighted average shares outstanding, as applicable. We believe that this non-GAAP measure is meaningful when assessing our performance on a comparative basis.

Adjusted Net Loss represents net loss excluding certain items that we believe adjusting for is meaningful when assessing our performance on a comparative basis. For the periods presented, these items included (i) impairment and credit losses (recoveries); (ii) restructuring charges and other initiative expenses; (iii) the amortization of the Silversea Cruises intangible assets resulting from the Silversea Cruises acquisition in 2018; (iv) the amortization of non-cash debt discount on our convertible notes; (v) the estimated cash refunds expected to be paid to Pullmantur guests as part of the Pullmantur S.A. reorganization in 2020; (vi) loss on the extinguishment of debt; (vii) equity investment asset impairments; (viii) net insurance recoveries related to the collapse of the drydock structure at the Grand Bahama Shipyard involving Oasis of the Seas; and (ix) the net gain recognized in the first quarter of 2021 in relation to the sale of the Azamara brand.

Available Passenger Cruise Days (“APCD”) is our measurement of capacity and represents double occupancy per cabin multiplied by the number of cruise days for the period, which excludes canceled cruise days and cabins not available for sale. We use this measure to perform capacity and rate analysis to identify our main non-capacity drivers that cause our cruise revenue and expenses to vary.

Occupancy ("Load Factor"), in accordance with cruise vacation industry practice, occupancy is calculated by dividing Passenger Cruise Days (as defined below) by APCD. A percentage in excess of 100% indicates that three or more passengers occupied some cabins.

Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.

Although discussed in previous periods, we did not disclose or reconcile in this report our Gross Yields, Net Yields, Gross Cruise Costs, Net Cruise Costs and Net Cruise Costs Excluding Fuel, as defined in our Annual Report on Form 10-K for the year ended December 31, 2019. Historically, we have utilized these financial metrics to measure relevant rate comparisons to other periods. However, our 2022 and 2021 reduction in capacity and revenues and the shift in the nature of our running costs, due to the impact of the COVID-19 pandemic on our operations, do not allow for a meaningful analysis and comparison of these metrics and as such these metrics have been excluded from this report.

Quarter Ended March 31, 2022 Compared to Quarter Ended March 31, 2021

In this section, references to 2022 refer to the quarter ended March 31, 2022 and references to 2021 refer to the quarter ended March 31, 2021.

Revenues

Total revenues for 2022 increased $1.0 billion to $1.1 billion from $42.0 million in 2021.

Passenger ticket revenues comprised 61.5% of our 2022 total revenues. Passenger ticket revenues for 2022 increased by $0.6 billion to $0.7 billion from $20.8 million in 2021, and were partially offset by unfavorable movements in foreign currency exchange rates related to our revenue transactions denominated in currencies other than the United States dollar of $1.9 million.

The remaining 38.5% of 2022 total revenues was comprised of Onboard and other revenues, which increased $386.2 million to $407.4 million in 2022 from $21.2 million in 2021, and was partially offset by unfavorable movements in foreign currency exchange rates related to our revenue transactions denominated in currencies other than the United States dollar of $0.7 million.

The increase in revenues was due to the return of operations in 2022, in which the majority of our fleet was in service, compared to 2021, when the suspension of our global cruise operations was in effect. Occupancy in 2022 was 57.4% compared to 37.7% in 2021.

Onboard and other revenues included concession revenues of $48.4 million in 2022 and $0.7 million in 2021.

Cruise Operating Expenses

Total Cruise operating expenses for 2022 increased $0.9 billion to $1.2 billion from $283.5 million in 2021. The increase was primarily due to:

• a $253.0 million increase in Payroll and related;

• a $147.4 million increase in Commissions, transportation and other expenses;

• a $146.7 million increase in Fuel expense*;*

*•*a $91.7 million increase in Food expense ; and

• a $70.0 million increase in Onboard and other expenses.

The increase in operating expenses noted above was driven by the return to operations in 2022, with the majority of our fleet in service, compared to 2021, when the suspension of our global cruise operations was in effect. The 2022 operating expenses include the overhead costs associated with bringing our ships back to service and our crew back on board our ships. Additionally, as discussed above in Recent Developments, high inflation has impacted our operating costs, especially in fuel and food expense. Our cost of fuel (net of the financial impact of fuel swap agreements) for 2022 increased 55% per metric ton compared to 2021 mainly due to fuel price increase.

The increase in Cruise operating expenses was partially offset by the favorable effect of changes in foreign currency exchange rates related to our cruise operating expenses denominated in currencies other than the United States dollar of $4.9 million.

Marketing, Selling and Administrative Expenses

Marketing, selling and administrative expenses for 2022 increased $136.0 million, or 52.7%, to $394.0 million from $258.0 million in 2021. The increase was primarily due to the ramp up of our global sales and marketing efforts starting in the second half of 2021 as we commenced our resumption of operations.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for 2022 increased $29.3 million, or 9.4%, to $339.5 million from $310.2 million in 2021. The increase was primarily due to the addition of Wonder of the Seas to our fleet in January 2022 and a full quarter of depreciation for Odyssey of the Seas and Silver Dawn, which were delivered in March 2021 and November 2021, respectively.

Impairment and Credit Losses (Recoveries)

There were no significant Impairment and credit losses (recoveries) for 2022 and 2021.

Other Income (Expense)

Interest expense, net of interest capitalized for 2022 increased $5.1 million, or 1.9%, to $277.7 million from $272.5 million in 2021. The increase was primarily due to new debt issuances after the first quarter of 2021 and through the first quarter of 2022, partially offset by the lower cost of debt in 2022 attributable to the partial repayment of the 11.50% Senior Secured Notes due 2025 during the third quarter of 2021 and the decrease in interest expense associated with the adoption of ASU 2020-06. Refer to Note 2*. Summary of Significant Accounting Policies* to our consolidated financial statements for further information on ASU 2020-06.

Equity investment loss decreased by $28.8 million, or 48.1%, to $31.1 million from $59.9 million primarily due to a reduction in losses for TUI Cruises, one of our equity investments, in 2022 compared to 2021.

Other (expense) income. We recognized Other (expense) of $2.5 million in 2022, compared to Other income of $5.0 million in 2021. The $7.6 million increase in expense was primarily due to the 2021 recognition of a $13.4 million gain related to the change in fair value of our fuel swap derivative instruments with no hedge accounting, which did not recur in 2022, which was partially offset by an increase of $9.3 million in foreign exchange gain on remeasurement of our monetary assets, net of hedging.

Other Comprehensive Income (Loss)

Other comprehensive income for 2022 increased $185.8 million or 609.4%, to $216.3 million from $30.5 million in 2021. The increase was primarily due to a Gain on cash flow derivative hedges in 2022 of $195.9 million compared to $10.3 million in 2021, mostly as a result of a significant increase in the fair value of our fuel swaps in 2022 compared to 2021.

Future Application of Accounting Standards

Refer to Note 2*. Summary of Significant Accounting Policies* to our consolidated financial statements for further information on Recent Accounting Pronouncements.

Liquidity and Capital Resources

Sources and Uses of Cash

Net cash used by operating activities decreased $280.3 million to cash used of $0.5 billion for the first quarter of 2022 compared to cash used of $0.8 billion for the same period in 2021. Our continued resumption of cruise operations in 2022 has generated an increase in guest ticket collections, resulting in an increase in customer deposits of $406.5 million during the first three months in 2022, compared to an increase of $95.9 million during the same period in 2021, when our global operations were suspended. The increase in customer deposits was partially offset by an increase in cruise operating expenses during the three months ended March 31, 2022, reflecting the associated costs of returning our fleet to service.

Net cash used in investing activities increased $475.6 million to cash used of $1.4 billion for the first three months in 2022, compared to cash used of $1.0 billion for the same period in 2021. The increase was primarily attributable to an increase in capital expenditures of $301.4 million during the first quarter of 2022, compared to the same period in 2021, and a decrease in proceeds from the sale of property and equipment and other assets of $175.4 million during the first quarter of 2021, which did not recur in 2022.

Net cash provided by financing activities was $1.2 billion for the first quarter of 2022, compared to cash provided of $3.2 billion for the same period in 2021. The decrease of $1.9 billion was primarily attributable to $1.6 billion of proceeds from common stock issuances during the three months ended March 31, 2021, which did not recur during the three months ended March 31, 2022, and higher repayments of debt of $0.6 billion during the first quarter of 2022, compared to the same period in 2021. These decreases were partially offset by repayments of commercial paper notes of $414.6 million during the first quarter of 2021, which did not recur in 2022.

Future Capital Commitments

Capital Expenditures

COVID-19 has impacted shipyard operations which have and may continue to result in delays of our previously contracted ship deliveries. As of March 31, 2022, the dates that the ships on order by our Global and Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:

We took delivery of Celebrity Beyond in April of 2022. In addition, as of March 31, 2022, we have an agreement in place with Chantiers de l’Atlantique to build an additional fifth Edge-class ship with capacity of approximately 3,250, estimated for delivery in 2025, which is contingent upon completion of conditions precedent and financing.

Our future capital commitments consist primarily of new ship orders. As of March 31, 2022, the aggregate expected cost of our ships on order presented in the table above, excluding any ships on order by our Partner Brands, was $10.7 billion, of which we had deposited $0.6 billion. Approximately 61.8% of the aggregate cost was exposed to fluctuations in the Euro exchange rate at March 31, 2022.

The continuing effects of COVID-19, including uncertainties related to demand for cruising, has had, and is expected to continue to have, a material impact on our cash flows, liquidity and financial position. In order to preserve liquidity throughout the suspension of our global cruise operations and gradual resumption of operations, we deferred a significant portion of our planned 2020, 2021 and 2022 capital expenditures. As of March 31, 2022, we anticipate overall full year capital expenditures, based on our existing ships on order, will be approximately $3.0 billion for 2022. This amount does not include any ships on order by our Partner Brands.

Material Cash Requirements

As of March 31, 2022, our material cash requirements were as follows (in thousands):

(1) We are obligated under noncancelable operating leases primarily for preferred berthing arrangements, real estate and shipboard equipment. Amounts represent contractual obligations with initial terms in excess of one year.

(2) Long-term debt obligations mature at various dates through fiscal year 2034 and bear interest at fixed and variable rates. Interest on variable-rate debt is calculated based on forecasted debt balances, including the impact of interest rate swap agreements using the applicable rate at March 31, 2022. Debt denominated in other currencies is calculated based on the applicable exchange rate at March 31, 2022.

(3) Amounts primarily represent future commitments with remaining terms in excess of one year to pay for our usage of certain port facilities, marine consumables, services and maintenance contracts.

(4) Amounts are based on contractual installment and delivery dates for our ships on order. Included in these figures are $6.5 billion in final contractual installments, which have committed financing. COVID-19 has impacted shipyard operations which have and may result in delays for our previously contracted ship deliveries. Amounts do not include potential obligations which remain subject to cancellation at our sole discretion or any agreements entered for ships on order that remain contingent upon completion of conditions precedent.

(5) Debt denominated in other currencies is calculated based on the applicable exchange rate at March 31, 2022. In addition, debt obligations presented above are net of debt issuance costs of $416.9 million as of March 31, 2022.

(6) Amounts represent finance lease obligations with initial terms in excess of one year.

(7) Amounts represent fees payable to sovereign guarantors in connection with certain of our export credit debt facilities and facility fees on our revolving credit facilities.

Please refer to Funding Needs and Sources for discussion on the planned funding of the above material cash requirements.

As a normal part of our business, depending on market conditions, pricing and our overall growth strategy, we continuously consider opportunities to enter into contracts for the building of additional ships. We may also consider the sale of ships or the purchase of existing ships. We continuously consider potential acquisitions and strategic alliances. If any of these were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional shares of equity securities or through cash flows from operations.

Off-Balance Sheet Arrangements

TUI Cruises has entered into various ship construction and credit agreements that include certain restrictions on each of our and TUI AG’s ability to reduce our current ownership interest in TUI Cruises below 37.55% through May 2033.

Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes, increased lender capital costs and other similar costs. The indemnification clauses are often standard contractual terms and are entered into in the normal course

of business. There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses. We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification obligation is probable.

Certain of our surety agreements with third party providers for the benefit of certain agencies and associations that provide travel related bonds, allow the sureties to request collateral. We also have agreements with our credit card processors relating to customer deposits received by us for future voyages. These agreements allow the credit card processors to require us, under certain circumstances, including breach of the financial covenants, the existence of other material adverse changes, excessive chargebacks, and other triggering events, to maintain a reserve that can be satisfied by posting collateral. As of March 31, 2022, we have posted letters of credit as collateral with our sureties and credit card processors under our revolving credit facilities in the amount of $117.2 million.

Executed amendments are in place for the majority of our credit card processors, waiving reserve requirements tied to breach of our financial covenants through at least September 30, 2022, with modified covenants thereafter, and as such, we do not anticipate any incremental collateral requirements for the processors covered by these waivers in the next 12 months. We have a reserve with a processor where the agreement was amended in the first quarter of 2021, such that proceeds are held in reserve until the sailing takes place or the funds are refunded to the customer. The maximum projected exposure with the processor, including amounts currently withheld and reported in Trade and other receivables, is approximately $293.9 million. The amount and timing are dependent on future factors that are uncertain, such as pace of resumption of our cruise operations, the volume of future deposits and whether we transfer our business to other processors. If we require additional waivers on the credit card processing agreements and are not able to obtain them, this could lead to the termination of these agreements or the trigger of reserve requirements.

As of March 31, 2022, other than the items described above, we are not party to any other off-balance sheet arrangements, including guarantee contracts, retained or contingent interest, certain derivative instruments and variable interest entities, that either have, or are reasonably likely to have, a current or future material effect on our financial position.

Funding Needs and Sources

Historically, we relied on a combination of cash flows provided by operations, draw-downs under our available credit facilities, the incurrence of additional debt and/or the refinancing of our existing debt and the issuance of additional shares of equity securities to fund our obligations. COVID-19 resulted in our voluntary suspension of global cruise operations from March 2020 up to our gradual resumption of operations commencing in 2021. The suspension of operations strained our sources of cash flow and liquidity, causing us to take actions resulting in reductions in our operating expenses, reductions in our capital expenses and new financings and other liquidity actions.

The Company continues to identify and evaluate further actions to improve its liquidity. These include and are not limited to: further reductions in capital expenditures, operating expenses and administrative costs and additional financings. See further discussion on these liquidity actions at Recent Developments - COVID-19.

We have significant contractual obligations of which our debt service obligations and the capital expenditures associated with our ship purchases represent our largest funding needs. As of March 31, 2022, we had $8.4 billion of committed financing for our ships on order.

As of March 31, 2022, we had $5.6 billion in contractual obligations due through March 31, 2023, of which approximately $2.5 billion relates to debt maturities, $1.5 billion relates to interest on debt and $1.2 billion relates to progress payments on our ship orders and the final installment payable due upon the delivery of Celebrity Beyond.

As of March 31, 2022, we had liquidity of $3.8 billion, in the form of cash and cash equivalents of $2.0 billion, $1.1 billion of undrawn revolving credit facility capacity, and a $0.7 billion commitment for a 364-day term loan facility available to draw on at any time prior to August 12, 2022. Our revolving credit facilities were partially utilized through a combination of amounts drawn and letters of credit issued under the facilities as of March 31, 2022.

Beyond the next 12 months, in June of 2023, approximately $3.2 billion of long- term debt will become due. Accordingly, in addition to our $3.8 billion liquidity as of March 31, 2022, in February 2022 we entered into certain agreements with MS where MS agrees to provide backstop committed financing to refinance, repurchase and/or repay in whole or in part our existing and outstanding 10.875% Senior Secured Notes due 2023, the Priority Guaranteed Notes, and 4.25% Convertible Notes due 2023. Pursuant to the agreements, we may, at our sole option, issue and sell to MS (subject to the satisfaction of certain conditions) five-year senior unsecured notes with gross proceeds of up to $3.15 billion at any time between April 1, 2023 and June 29, 2023, to refinance the aforementioned notes.

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 debt securities also contain change of control provisions that would be triggered by a third-party acquisition of greater than 50% of our common stock coupled with a ratings downgrade. If this were to occur, it would have an adverse impact on our liquidity and operations.

Based on our assumptions and estimates and our financial condition, we believe that the liquidity resulting from the actions mentioned above will be sufficient to fund our liquidity requirements over at least the next twelve months. However, there is no assurance that our assumptions and estimates are accurate due to possible unknown variables related to this unprecedented suspension and gradual ramp up of our operations and, as such, there is inherent uncertainty in our ability to predict future liquidity requirements. Refer to Note 1*. General, Management’s Plan and Liquidity,* to our consolidated financial statements under Part I. Item 1. Financial Statements for further information.

Debt Covenants

Both our export credit facilities and our non-export credit facilities contain covenants that require us, among other things, to maintain a fixed charge coverage ratio of at least 1.25x and limit our net debt-to-capital ratio to no more than 62.5%, and under certain facilities, to maintain a minimum level of shareholders' equity. The fixed charge coverage ratio is calculated by dividing net cash from operations for the past four quarters by the sum of dividend payments plus scheduled principal debt payments in excess of any new financings for the past four quarters. Our minimum net worth and maximum net debt-to-capital calculations exclude the impact of Accumulated other comprehensive loss on Total shareholders’ equity.

During the first quarter of 2021, we amended $4.9 billion of our non-export credit facilities and $6.3 billion of our export credit facilities, and certain credit card processing agreements, to extend the waiver of our financial covenants through and including at least the third quarter of 2022, and subsequently in the third quarter of 2021, we entered into a letter agreement to extend the waiver period for our export credit facilities to the end of the fourth quarter of 2022. During the fourth quarter of 2021, we amended $7.3 billion of outstanding export-credit facilities plus committed export-credit facilities to modify financial covenant levels for 2023 and 2024, following the waiver period through and including the fourth quarter of 2022.

In addition, pursuant to the amendments for the non-export credit facilities, we have modified the manner in which such covenants are calculated, temporarily in certain cases and permanently in others, as well as the levels at which our net debt to capitalization covenant will be tested during the period commencing immediately following the end of the waiver period and continuing through the end of 2023.

The amendments impose a monthly-tested minimum liquidity covenant of $350 million, which in the case of the non-export credit facilities terminates at the end of the waiver period and in the case of the export credit facilities terminates either in July 2025, or when we pay off all deferred amounts, whichever is earlier. In addition, the amendments to the non-export credit facilities place restrictions on paying cash dividends and effectuating share repurchases through the end of the third quarter of 2022, while the export credit facility amendments require us to prepay any deferred amounts if we elect to issue dividends or complete share repurchases. As of March 31, 2022, we were in compliance with our financial covenants and we estimate that we will be in compliance for at least the next twelve months.

Any further covenant waivers may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections as may be agreed with our lenders. There can be no assurance that we would be able to obtain additional waivers in a timely manner, or on acceptable terms. If we require additional waivers and are not able to obtain them or repay the debt facilities, this would lead to an event of default and potential acceleration of amounts due under all of our outstanding debt and derivative contracts.

Dividends

During the second quarter of 2020, we agreed with certain of our lenders not to pay dividends or engage in common stock repurchases for so long as our debt covenant waivers are in effect. In addition, in the event we declare a dividend or engage in share repurchases, we will need to repay the amounts deferred under our export credit facilities. Accordingly, we did not declare a dividend during the eight consecutive quarters ended March 31, 2022. Pursuant to amendments made to these agreements during the first quarter of 2021, the restrictions on paying cash dividends and effectuating share repurchases were extended through and including the third quarter of 2022.

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

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that those disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission (the "SEC")..

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rule 13a-15(d) during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

As previously reported, two lawsuits were filed against us in August 2019 in the U.S. District Court for the Southern District of Florida ("the "Court") under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton Act. The complaint filed by Havana Docks Corporation ("Havana Docks Action") alleges it holds an interest in the Havana Cruise Port Terminal and the complaint filed by Javier Garcia-Bengochea (the "Port of Santiago Action") alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban government. The complaints further allege that we trafficked in those properties by embarking and disembarking passengers at these facilities. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs. The Court dismissed the Port of Santiago Action with prejudice on the basis that the plaintiff lacked standing, and the plaintiff’s appeal of the dismissal is awaiting a decision by the appellate court. In the Havana Docks Action, on March 21, 2022, the Court granted summary judgement in favor of the plaintiff as to liability, which we have sought permission from the Court to immediately appeal, and a trial on damages has been scheduled for September 2022. We believe we have meritorious defenses to the claims alleged in both the Havana Docks Action and the Port of Santiago Action, and we intend to vigorously defend ourselves against them. The outcome of the litigation is inherently unpredictable and subject to significant uncertainties, and there can be no assurances that the final outcome of either case will not be material.

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

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

COVID-19 and Financial Risks

The COVID-19 pandemic has had, and continues to have, a material adverse impact on our business, results of operations and liquidity. The global spread of COVID-19, the unprecedented responses by governments and other authorities to control and contain the disease, including related variants, and challenges to global vaccination efforts, have caused significant disruptions, created new risks, and exacerbated existing risks to our business.

We have been, and continue to be, negatively impacted by the COVID-19 pandemic, including impacts that resulted or may result from actions taken in response to the outbreak and the occurrence and spread of related variants. Examples of these include, but are not limited to, cruising advisories and required or voluntary travel restrictions, that resulted in the temporary suspension of our Global Brands' operations, from which we have resumed limited operations; restrictions on the movement and gathering of people; social distancing measures; shelter-in-place/stay-at-home orders; and disruptions to businesses in our supply chain. In addition to the restrictions affecting our business, the extent, duration, and magnitude of the COVID-19 pandemic’s effect on the economy and consumer demand for cruising and travel is evolving and difficult to predict. As such, these impacts may persist for an extended period of time or become more pronounced, even as we resume operations.

The COVID-19 pandemic also has elevated risks affecting significant parts of our business:

• Operations:** While we have restarted our global cruise operations in a phased manner, following the March 2020 suspension of our global cruise operations, there is no assurance that our plan to resume operations will be successful. It is possible that future COVID-19 cases could occur onboard and, even if controlled and contained, it is uncertain whether we will need to suspend additional sailings and to what extent in such event. Onboard cases have resulted in illness among our guests and crew, incremental costs, guest refunds and negative publicity and media attention. In addition, we may face challenges in executing our return to service plans as a result of new and evolving operating protocols, including due to state laws regarding proof of vaccination requirements and related litigation, and possible changes in regulations in the countries in which we operate and plan to operate.

Uncertainties remain as to the specifics, timing and costs of administering and implementing our health and safety measures, some of which may be significant. These measures also may negatively impact guest satisfaction. Based on our assessment of these requirements and recommendations, the status of COVID-19 infection and/or vaccination rates in the U.S. or globally or for other reasons, we may determine it necessary to cancel or modify certain of our Global Brands’ cruise sailings. In addition, there is no guarantee that the vaccines will continue to be effective. We believe the impact to our global bookings resulting from COVID-19 will continue to have a material negative impact on our results of operations and liquidity, which may be prolonged beyond containment of the disease and its variants

Our previous suspension of sailings and our gradual resumption of operations have led to a significant decline in our revenues and cash inflows, which required us to take cost and capital expenditure containment actions. Consequently, we reduced and furloughed some of our workforce, with approximately 23% of our U.S. shoreside employee base being impacted in 2020. Our ships and our shipboard crew are gradually being notified about new assignments as operations resume over time. We may be challenged in rebuilding the rest of our workforce which could delay our phased resumption of operations. In addition, we have reduced our planned capital spending through 2022, which may negatively impact or delay our execution of planned growth strategies, particularly as it relates to investments in our ships, technology, and our expansion of land-based developments. We also have taken actions to monitor and mitigate changes in our supply chain, and port destination availability, which may strain relationships with our vendors and port partners.

If we are unable to satisfy the safety standards applicable to our sailings, our operations may be negatively impacted and we could be exposed to reputational and legal risks. Due to the unprecedented and uncertain nature of the COVID-19 pandemic and related regulatory landscape, it is difficult to predict the impact of further disruptions and their magnitude. In addition, we have never previously experienced a complete cessation of our cruising operations or a subsequent phased resumption of operations, and as a consequence, we are unable to predict with certainty the impact of such a cessation or phased resumption of operations on our brands and future prospects.

• Results of Operations:** Our suspensions of sailings have materially impacted the results of our operations. We have incurred and will continue to incur significant costs as we accommodate passengers due to cancelled sailings. In addition, we have incurred and will likely continue to incur significant overhead costs associated with the return to service of our fleet and enhanced COVID-19 related cleaning, testing, vaccination and other mitigation procedures. We may experience volatility in demand for cruising for an indeterminable length of time due to the uncertain nature of the COVID-19 pandemic and ongoing concerns about health and safety, and we cannot predict with certainty when we will return to pre-pandemic demand or fare pricing or if we will return to such levels in the foreseeable future. In turn, these negative impacts to our financial performance have resulted and may continue to result in impairments of our long-lived and intangible assets, which has influenced our decision making relating to early disposal, sale or retirement of assets. Following the resumption of operations, our Global Brands and our Partner Brands may be subject to the continued impact of the COVID-19 pandemic. Additionally, any future profitability will be impacted by increased debt service costs as a result of our liquidity actions.

• Liquidity:** Our ability to raise additional financing, whether or not secured, could be limited if our credit rating is further downgraded, and/or if we fail to comply with applicable covenants governing our outstanding indebtedness, and/or if overall financial market conditions worsen. Additionally, due to the complexity of the pandemic’s impact to the economy and uncertainty of its duration, we cannot guarantee that assumptions used to project our liquidity needs will be correct, which may result in the need for additional financing and/or may result in the inability to satisfy covenants required by our current credit facilities. If we raise additional funds through equity or convertible debt issuances, our shareholders could experience dilution of their ownership interest, and these equity or convertible debt securities could have rights, preferences, and privileges that are superior to that of holders of our common stock. If we raise additional funds by issuing deb

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Interactive Data File

101 The following financial statements of Royal Caribbean Cruises Ltd. for the period ended March 31, 2022, formatted in iXBRL (Inline extensible Reporting Language) are filed herewith:

(i) the Consolidated Statements of Comprehensive Income (Loss) for the quarter ended March 31, 2022 and 2021;

(ii) the Consolidated Balance Sheets at March 31, 2022 and December 31, 2021;

(iii) the Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021; and

(iv) the Notes to the Consolidated Financial Statements, tagged in summary and detail.

104 Cover page interactive data file (the cover page XBRL tags are embedded within the Inline XBRL document).

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.