Item 1. Financial Statements

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Item 1. Financial Statements

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited; in thousands, except per share data)


	Quarter Ended September 30,
	2023		2022
Passenger ticket revenues	$	2,941,481	$	2,020,974
Onboard and other revenues	1,218,972		972,101
Total revenues	4,160,453		2,993,075
Cruise operating expenses:
Commissions, transportation and other	632,075		484,054
Onboard and other	261,225		220,216
Payroll and related	293,629		304,369
Food	211,709		194,966
Fuel	272,408		316,214
Other operating	465,814		446,630
Total cruise operating expenses	2,136,860		1,966,449
Marketing, selling and administrative expenses	393,016		373,116
Depreciation and amortization expenses	365,473		355,085
Operating Income	1,265,104		298,425
Other income (expense):
Interest income	7,472		11,953
Interest expense, net of interest capitalized	(340,620)		(352,187)
Equity investment income	86,627		73,997
Other (expense) income	(7,905)		780
	(254,426)		(265,457)
Net Income	1,010,678		32,968
Less: Net Income attributable to noncontrolling interest	1,602		—
Net Income attributable to Royal Caribbean Cruises Ltd.	$	1,009,076	$	32,968
Earnings per Share:
Basic	$	3.94	$	0.13
Diluted	$	3.65	$	0.13
Weighted-Average Shares Outstanding:
Basic	256,188		255,071
Diluted	281,876		255,378
Comprehensive Income (Loss)
Net Income	$	1,010,678	$	32,968
Other comprehensive income (loss):
Foreign currency translation adjustments	11,495		11,498
Change in defined benefit plans	3,972		7,226
Gain (loss) on cash flow derivative hedges	19,561		(259,949)
Total other comprehensive income (loss)	35,028		(241,225)
Comprehensive Income (Loss)	1,045,706		(208,257)
Less: Comprehensive Income attributable to noncontrolling interest	1,602		—
Comprehensive Income (Loss) attributable to Royal Caribbean Cruises Ltd.	$	1,044,104	$	(208,257)

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

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited; in thousands, except per share data)


	Nine Months Ended September 30,
	2023		2022
Passenger ticket revenues	$	7,281,503	$	4,091,035
Onboard and other revenues	3,287,078		2,145,513
Total revenues	10,568,581		6,236,548
Cruise operating expenses:
Commissions, transportation and other	1,551,012		964,256
Onboard and other	640,175		450,225
Payroll and related	887,999		981,128
Food	613,795		450,376
Fuel	849,839		779,873
Other operating	1,341,821		1,205,452
Total cruise operating expenses	5,884,641		4,831,310
Marketing, selling and administrative expenses	1,288,719		1,138,571
Depreciation and amortization expenses	1,086,923		1,046,094
Operating Income (Loss)	2,308,298		(779,427)
Other income (expense):
Interest income	31,863		21,765
Interest expense, net of interest capitalized	(1,055,519)		(932,552)
Equity investment income	149,112		29,759
Other (expense) income	(8,676)		4,699
	(883,220)		(876,329)
Net Income (Loss)	1,425,078		(1,655,756)
Less: Net Income attributable to noncontrolling interest	5,151		—
Net Income (Loss) attributable to Royal Caribbean Cruises Ltd.	$	1,419,927	$	(1,655,756)
Earnings (Loss) per Share:
Basic	$	5.55	$	(6.49)
Diluted	$	5.24	$	(6.49)
Weighted-Average Shares Outstanding:
Basic	255,822		254,953
Diluted	283,847		254,953
Comprehensive Income (Loss)
Net Income (Loss)	$	1,425,078	$	(1,655,756)
Other comprehensive income (loss):
Foreign currency translation adjustments	1,686		31,958
Change in defined benefit plans	3,700		34,991
Loss on cash flow derivative hedges	(7,148)		(148,541)
Total other comprehensive loss	(1,762)		(81,592)
Comprehensive Income (Loss)	1,423,316		(1,737,348)
Less: Comprehensive Income attributable to noncontrolling interest	5,151		—
Comprehensive Income (Loss) attributable to Royal Caribbean Cruises Ltd.	$	1,418,165	$	(1,737,348)

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

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	As of
	September 30,		December 31,
	2023		2022
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	600,117	$	1,935,005
Trade and other receivables, net of allowances of $7,899 and $11,612 at September 30, 2023 and December 31, 2022, respectively	360,151		531,066
Inventories	241,522		224,016
Prepaid expenses and other assets	508,832		455,836
Derivative financial instruments	70,087		59,083
Total current assets	1,780,709		3,205,006
Property and equipment, net	27,854,624		27,546,445
Operating lease right-of-use assets	529,721		537,559
Goodwill	809,206		809,277
Other assets, net of allowances of $62,777 and $71,614 at September 30, 2023 and December 31, 2022, respectively	1,794,412		1,678,074
Total assets	$	32,768,672	$	33,776,361
Liabilities and Shareholders’ Equity
Current liabilities
Current portion of long-term debt	$	2,043,965	$	2,087,711
Current portion of operating lease liabilities	80,983		79,760
Accounts payable	715,386		646,727
Accrued expenses and other liabilities	1,210,858		1,459,957
Derivative financial instruments	158,165		131,312
Customer deposits	5,032,328		4,167,997
Total current liabilities	9,241,685		8,573,464
Long-term debt	17,924,927		21,303,480
Long-term operating lease liabilities	517,337		523,006
Other long-term liabilities	488,534		507,599
Total liabilities	28,172,483		30,907,549

Shareholders’ equity
Preferred stock ($0.01 par value; 20,000,000 shares authorized; none outstanding)	—		—
Common stock ($0.01 par value; 500,000,000 shares authorized; 284,483,109 and 283,257,102 shares issued, September 30, 2023 and December 31, 2022, respectively)	2,845		2,832
Paid-in capital	7,422,041		7,284,852
Accumulated deficit	(287,502)		(1,707,429)
Accumulated other comprehensive loss	(644,976)		(643,214)
Treasury stock (28,248,125 and 28,018,385 common shares at cost, September 30, 2023 and December 31, 2022, respectively)	(2,069,432)		(2,068,229)
Total shareholders’ equity attributable to Royal Caribbean Cruises Ltd.	4,422,976		2,868,812
Noncontrolling Interests	173,213		—
Total shareholders’ equity	4,596,189		2,868,812
Total liabilities and shareholders’ equity	$	32,768,672	$	33,776,361

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


ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
	Nine Months Ended September 30,
	2023		2022
Operating Activities
Net Income (Loss)	$	1,425,078	$	(1,655,756)
Adjustments:
Depreciation and amortization	1,086,923		1,046,094
Net deferred income tax benefit	(2,723)		(14,345)
Loss on derivative instruments not designated as hedges	30,904		175,686
Share-based compensation expense	79,315		24,285
Equity investment income	(149,112)		(29,759)
Amortization of debt issuance costs, discounts and premiums	84,015		129,957
Loss on extinguishment of debt	81,441		16,449
Changes in operating assets and liabilities:
Decrease (increase) in trade and other receivables, net	131,199		(173,555)
Increase in inventories, net	(17,506)		(86,962)
Increase in prepaid expenses and other assets	(43,721)		(108,429)
Increase in accounts payable trade	62,007		79,249
(Decrease) increase in accrued expenses and other liabilities	(247,065)		3,080
Increase in customer deposits	864,332		613,632
Other, net	(24,082)		(114,367)
Net cash provided by (used in) operating activities	3,361,005		(94,741)
Investing Activities
Purchases of property and equipment	(1,328,643)		(2,543,266)
Cash received on settlement of derivative financial instruments	23,096		42,958
Cash paid on settlement of derivative financial instruments	(66,272)		(389,387)
Investments in and loans to unconsolidated affiliates	(21,997)		(614)
Cash received on loans from unconsolidated affiliates	35,583		14,030
Other, net	9,021		5,328
Net cash used in investing activities	(1,349,212)		(2,870,951)
Financing Activities
Debt proceeds	1,808,177		7,207,566
Debt issuance costs	(56,150)		(222,787)
Repayments of debt	(5,305,966)		(5,135,323)


Proceeds from sale of noncontrolling interest	209,320		—
Other, net	(815)		(16,556)
Net cash (used in) provided by financing activities	(3,345,434)		1,832,900
Effect of exchange rate changes on cash and cash equivalents	(1,247)		(2,765)
Net decrease in cash and cash equivalents	(1,334,888)		(1,135,557)
Cash and cash equivalents at beginning of period	1,935,005		2,701,770
Cash and cash equivalents at end of period	$	600,117	$	1,566,213

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


ROYAL CARIBBEAN CRUISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
	Nine Months Ended September 30,
	2023		2022
Supplemental Disclosure
Cash paid during the period for:
Interest, net of amount capitalized	$	1,064,031	$	752,623
Non-cash Investing Activities

Purchase of property and equipment included in accounts payable and accrued expenses and other liabilities	$	24,394	$	26,026
Acquisition of property and equipment from assumed debt	$	—	$	275,000
Non-cash Financing Activity
Debt related to purchase of property and equipment	$	—	$	275,000

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

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited; in thousands)


	Common Stock		Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock		Noncontrolling Interest		Total Shareholders' Equity
Balance at July 1, 2023	$	2,844	$	7,406,818	$	(1,296,578)	$	(680,004)	$	(2,069,432)	$	177,434	$	3,541,082
Activity related to employee stock plans	1		14,479		—		—		—		—		14,480

Changes related to cash flow derivative hedges	—		—		—		19,561		—		—		19,561
Change in defined benefit plans	—		—		—		3,972		—		—		3,972
Foreign currency translation adjustments	—		—		—		11,495		—		—		11,495

Sale of noncontrolling interest	—		744		—		—		—		—		744
Noncontrolling interest	—		—		—		—		—		2,179		2,179
Dividends from noncontrolling interest	—		—		—		—		—		(6,400)		(6,400)
Net Income attributable to Royal Caribbean Cruises Ltd.	—		—		1,009,076		—		—		—		1,009,076
Balance at September 30, 2023	$	2,845	$	7,422,041	$	(287,502)	$	(644,976)	$	(2,069,432)	$	173,213	$	4,596,189


	Common Stock		Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock		Noncontrolling Interest		Total Shareholders' Equity
Balance at January 1, 2023	$	2,832	$	7,284,852	$	(1,707,429)	$	(643,214)	$	(2,068,229)	$	—	$	2,868,812
Activity related to employee stock plans	9		78,962		—		—		—		—		78,971
Convertible notes settlement	4		12,185		—		—		—		—		12,189
Changes related to cash flow derivative hedges	—		—		—		(7,148)		—		—		(7,148)
Change in defined benefit plans	—		—		—		3,700		—		—		3,700
Foreign currency translation adjustments	—		—		—		1,686		—		—		1,686
Purchase of treasury stock	—		—		—		—		(1,203)		—		(1,203)
Sale of noncontrolling interest	—		46,042		—		—		—		173,803		219,845
Noncontrolling interest	—		—		—		—		—		5,810		5,810
Dividends to noncontrolling interest	—		—		—		—		—		(6,400)		(6,400)
Net Income attributable to Royal Caribbean Cruises Ltd.	—		—		1,419,927		—		—		—		1,419,927
Balance at September 30, 2023	$	2,845	$	7,422,041	$	(287,502)	$	(644,976)	$	(2,069,432)	$	173,213	$	4,596,189

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

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited; in thousands)


	Common Stock		Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock		Total Shareholders' Equity
Balance at July 1, 2022	$	2,831	$	7,254,939	$	(1,240,191)	$	(551,252)	$	(2,068,229)	$	3,398,098
Activity related to employee stock plans	1		15,582		—		—		—		15,583
Changes related to cash flow derivative hedges	—		—		—		(259,949)		—		(259,949)
Change in defined benefit plans	—		—		—		7,226		—		7,226
Foreign currency translation adjustments	—		—		—		11,498		—		11,498
Net Income	—		—		32,968		—		—		32,968
Balance at September 30, 2022	$	2,832	$	7,270,521	$	(1,207,223)	$	(792,477)	$	(2,068,229)	$	3,205,424


	Common Stock		Paid-in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Treasury Stock		Total Shareholders' Equity
Balance at January 1, 2022	$	2,827	$	7,557,297	$	302,276	$	(710,885)	$	(2,065,959)	$	5,085,556
Activity related to employee stock plans	5		20,864		37		—		—		20,906
Cumulative effect of adoption of Accounting Standards Update 2020-06	—		(307,640)		146,220		—		—		(161,420)
Changes related to cash flow derivative hedges	—		—		—		(148,541)		—		(148,541)
Change in defined benefit plans	—		—		—		34,991		—		34,991
Foreign currency translation adjustments	—		—		—		31,958		—		31,958
Purchase of treasury stock	—		—		—		—		(2,270)		(2,270)
Net Loss	—		—		(1,655,756)		—		—		(1,655,756)
Balance at September 30, 2022	$	2,832	$	7,270,521	$	(1,207,223)	$	(792,477)	$	(2,068,229)	$	3,205,424

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

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

As used in this Quarterly Report on Form 10-Q, the terms “Royal Caribbean,” "Royal Caribbean Group," the “Company,” “we,” “our” and “us” refer to Royal Caribbean Cruises Ltd. and, depending on the context, Royal Caribbean Cruises Ltd.’s consolidated subsidiaries and/or affiliates. The terms “Royal Caribbean International,” “Celebrity Cruises,” and "Silversea Cruises" refer to our wholly owned global cruise brands. Throughout this Quarterly Report on Form 10-Q, we also refer to our partner brands in which we hold an ownership interest, including “TUI Cruises” and "Hapag-Lloyd Cruises." However, because these partner brands are unconsolidated investments, our operating results and other disclosures herein do not include these brands unless otherwise specified. In accordance with cruise vacation industry practice, the term “berths” is determined based on double occupancy per cabin even though many cabins can accommodate three or more passengers. This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022.

This Quarterly Report on Form 10-Q also includes trademarks, trade names and service marks of other companies. Use or display by us of other parties’ trademarks, trade names or service marks is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, these other parties other than as described herein.

Note 1**. General**

Description of Business

We are a global cruise company. We own and operate three global cruise brands: Royal Caribbean International, Celebrity Cruises and Silversea Cruises (collectively, our "Global Brands"). We also own a 50% joint venture interest in TUI Cruises GmbH ("TUIC"), which operates the German brands TUI Cruises and Hapag-Lloyd Cruises (collectively, our "Partner Brands"). We account for our investments in our Partner Brands under the equity method of accounting. Together, our Global Brands and our Partner Brands have a combined fleet of 64 ships as of September 30, 2023. Our ships offer a selection of worldwide itineraries that call on more than 1,000 destinations in over 120 countries on all seven continents.

Liquidity

As of September 30, 2023, we had liquidity of $3.3 billion, including $2.7 billion of undrawn revolving credit facility capacity, and $0.6 billion in cash and cash equivalents. We believe that we have sufficient liquidity to fund our obligations for at least the next twelve months from the issuance of these financial statements. Refer to Note 6*. Debt* for further information regarding refinancing transactions and our applicable financial covenants.

We will continue to pursue, as appropriate, various opportunities to raise capital to fund obligations associated with future debt maturities and/or to extend the maturity dates associated with our existing indebtedness or facilities.

Basis for Preparation of Consolidated Financial Statements

The unaudited consolidated financial statements are presented pursuant to the rules and regulations of the Securities and Exchange Commission. In our opinion, these statements include all adjustments necessary for a fair statement of the results of the interim periods reported herein. Adjustments consist only of normal recurring items, except for any items discussed in the notes below. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted as permitted by such Securities and Exchange Commission rules and regulations. Estimates are required for the preparation of financial statements in accordance with these principles. Actual results could differ from these estimates. Refer to Note 2*. Summary of Significant Accounting Policies* in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of our significant accounting policies.

All significant intercompany accounts and transactions are eliminated in consolidation. We consolidate entities over which we have control, usually evidenced by a direct ownership interest of greater than 50%, and variable interest entities where we are determined to be the primary beneficiary. Refer to Note 5*. Investments and Other Assets* for further information regarding our variable interest entities. For affiliates we do not control but over which we have significant influence on financial and operating policies, usually evidenced by a direct ownership interest from 20% to 50%, the investment is accounted for using the equity method.

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

Adoption of Accounting Pronouncements

In September 2022, the FASB issued ASU No. 2022-04, Liabilities-Supplier Finance Programs (Subtopic 405-50) - Disclosure of Supplier Finance Program Obligations. This ASU requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. This ASU is expected to improve financial reporting by requiring new disclosures about the programs, thereby allowing financial statement users to better consider the effect of the programs on an entity’s working capital, liquidity, and cash flows. This ASU is effective for fiscal years beginning after December 15, 2022, except for the amendment on roll forward information which is effective for fiscal years beginning after December 15, 2023. We adopted ASU No. 2022-04 effective January 1, 2023. The adoption did not have a material impact to our consolidated financial statements and related disclosures.

Recent Accounting Pronouncements

In August 2023, the FASB issued ASU No. 2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. This ASU provides guidance requiring a joint venture to initially measure all contributions received upon its formation at fair value. The guidance is intended to provide users of joint venture financial statements with more decision-useful information. This ASU is effective for joint venture entities with a formation date on or after January 1, 2025 on a prospective basis. Early adoption is permitted, and joint ventures formed prior to the adoption date may elect to apply the new guidance retrospectively back to their original formation date. We are currently evaluating the impact of the new guidance on our consolidated financial statements.

Reclassifications

For the quarter and nine months ended September 30, 2023, we no longer separately present Impairments and Credit losses in our consolidated statements of comprehensive income (loss). As a result, amounts presented in prior periods were reclassified to Other Operating to conform to the current year presentation.

For the nine months ended September 30, 2023, we no longer separately present Accrued interest in our consolidated balance sheets. As a result, amounts presented in prior periods were reclassified to Accrued expenses and other liabilities to conform to the current year presentation.

For the nine months ended September 30, 2023, we no longer separately present Amortization of debt discounts and premiums; (Decrease) increase in accrued interest; and Impairments and Credit losses in our cash flows from Operating Activities within our consolidated statements of cash flows. As a result, amounts presented in prior periods were reclassified to Amortization of debt issuance costs, discounts and premiums; (Decrease) increase in accrued expenses and other liabilities; and Other, net, respectively, within Operating Activities to conform to the current year presentation. Additionally, we no longer separately present Proceeds from the sale of property and equipment and other assets in our cash flows from Investing Activities within our consolidated statements of cash flows. As a result, amounts presented in prior periods were reclassified to Other, net within Investing Activities to conform to the current year presentation.

Note 3**. Revenues**

Revenue Recognition

Revenues are measured based on consideration specified in our contracts with customers and are recognized as the related performance obligations are satisfied.

The majority of our revenues are derived from passenger cruise contracts which are reported within Passenger ticket revenues in our consolidated statements of comprehensive income (loss). Our performance obligation under these contracts is to provide a cruise vacation in exchange for the ticket price. We satisfy this performance obligation and recognize revenue over the duration of each cruise, which generally ranges from two to 23 nights.

Passenger ticket revenues include charges to our guests for port costs that vary with passenger head counts. These type of port costs, along with port costs that do not vary by passenger head counts, are included in our cruise operating expenses. The amounts of port costs charged to our guests and included within Passenger ticket revenues on a gross basis were $252.3 million and $210.2 million for the quarters ended September 30, 2023 and 2022, respectively, and $0.7 billion and $446.3 million for the nine months ended September 30, 2023 and 2022, respectively.

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

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

Disaggregated Revenues

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


	Quarter Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues by itinerary
North America (1)	$	2,275,292	$	1,638,226	$	6,620,877	$	3,871,356
Asia/Pacific	118,238		46,137		589,747		125,986
Europe	1,375,478		1,002,936		2,272,277		1,531,495
Other regions(2)	181,367		169,200		580,979		408,222
Total revenues by itinerary	3,950,375		2,856,499		10,063,880		5,937,059
Other revenues(3)	210,078		136,576		504,701		299,489
Total revenues	$	4,160,453	$	2,993,075	$	10,568,581	$	6,236,548

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

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

(3) Includes revenues primarily related to cancellation fees, vacation protection insurance, casino operations, pre- and post-cruise tours and fees for operating certain port facilities. Amounts also include revenues related to procurement and management related services we perform on behalf of our unconsolidated affiliates. Refer to Note 5*. Investments and Other Assets* for more information on our unconsolidated affiliates.

Passenger ticket revenues are attributed to geographic areas based on where the reservation originates. For the quarter and nine months ended September 30, 2023 and 2022, our guests were sourced from the following areas:


	Quarter Ended September 30,
	2023		2022
Passenger ticket revenues:
United States	72	%	71	%
United Kingdom	10	%	11	%
All other countries (1)	18	%	18	%


	Nine Months Ended September 30,
	2023		2022
Passenger ticket revenues:
United States	74	%	75	%
All other countries (1)	26	%	25	%

(1)No other individual country's revenue exceeded 10% for the quarter and nine months ended September 30, 2023 and 2022.

Customer Deposits and Contract Liabilities

Our payment terms generally require an upfront deposit to confirm a reservation, with the balance due prior to the cruise. Deposits received on sales of passenger cruises are initially recorded as Customer deposits in our consolidated balance sheets and subsequently recognized as passenger ticket revenues or onboard revenues during the duration of the cruise. ASC 606,

Revenues from Contracts with Customers, defines a “contract liability” as an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration from the customer. We do not consider customer deposits to be a contract liability until the customer no longer retains the unilateral right, resulting from the passage of time, to cancel such customer's reservation and receive a full refund. Customer deposits presented in our consolidated balance sheets include contract liabilities of $2.2 billion and $1.8 billion as of September 30, 2023 and December 31, 2022, respectively.

During the pandemic we provided flexibility to guests with bookings on sailings cancelled due to COVID-19 by allowing guests to receive future cruise credits (“FCCs”). As of September 30, 2023, our customer deposit balance includes approximately $0.4 billion of unredeemed FCCs. Our FCCs are not refundable and do not have expiration dates. Based upon our analysis of historical redemption experience, we believe a portion of our FCCs are not probable of being used in future periods. Based on our current estimates, we recognized an immaterial amount of FCC breakage revenue during the quarter ended September 30, 2023. We will continue to monitor changes in redemption behavior and estimate and record revenue associated with breakage when the likelihood of the customer exercising their remaining rights becomes remote.

Contract Receivables and Contract Assets

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

Our credit card processors agreements require us, under certain circumstances, to maintain a reserve that can be satisfied by posting collateral. As of September 30, 2023, none of our credit card processors required us to maintain a reserve.

We have contract assets that are conditional rights to consideration for satisfying the construction services performance obligations under a service concession arrangement. As of September 30, 2023 and December 31, 2022, our contract assets were $168.1 million and $167.9 million, respectively, and were included within Other assets in our consolidated balance sheets. Given the short duration of our cruises and our collection terms, we do not have any other significant contract assets.

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

Prepaid travel advisor commissions and prepaid credit and debit card fees are an incremental cost of obtaining contracts with customers that we recognize as an asset and include within Prepaid expenses and other assets in our consolidated balance sheets. Prepaid travel advisor commissions and prepaid credit and debit card fees were $230.5 million as of September 30, 2023 and $177.5 million as of December 31, 2022. Our prepaid travel advisor commissions and prepaid credit and debit card fees are recognized at the time of revenue recognition or at the time of voyage cancellation, and are reported primarily within Commissions, transportation and other in our consolidated statements of comprehensive income (loss).

Note 4. Earnings (Loss) Per Share

Basic and diluted earnings (loss) per share is as follows (in thousands, except per share data):


	Quarter Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. for basic earnings (loss) per share	$	1,009,076	$	32,968	$	1,419,927	$	(1,655,756)
Add convertible notes interest	20,269		—		67,605		—
Net Income (Loss) attributable to Royal Caribbean Cruises Ltd. for diluted earnings (loss) per share	1,029,345		32,968		1,487,532		(1,655,756)
Weighted-average common shares outstanding	256,188		255,071		255,822		254,953
Dilutive effect of stock-based awards	857		307		586		—
Dilutive effect of convertible notes	24,831		—		27,439		—
Diluted weighted-average shares outstanding	281,876		255,378		283,847		254,953
Basic earnings (loss) per share	$	3.94	$	0.13	$	5.55	$	(6.49)
Diluted earnings (loss) per share	$	3.65	$	0.13	$	5.24	$	(6.49)

Basic earnings (loss) per share is computed by dividing Net Income (Loss) by the weighted-average number of common stock outstanding during each period. Diluted earnings (loss) per share incorporates the incremental shares issuable upon the assumed exercise of stock options and conversion of potentially dilutive securities. We use the if-converted method to calculate the impact of our convertible notes that may be settled in cash or shares. To the extent dilutive, shares related to our convertible notes are assumed to be converted into common stock at the beginning of the reporting period, and we add back the interest expense to the numerator.

If we have a net loss for the period, all potential common shares will be considered antidilutive, resulting in the same basic and diluted net loss per share amounts for those periods. There were no antidilutive shares for the quarter and nine months ended September 30, 2023, compared to 30,532,145 and 31,085,736 antidilutive shares from our stock-based awards and convertible notes for the quarter and nine months ended September 30, 2022, respectively.

Note 5**. Investments and Other Assets**

A Variable Interest Entity (“VIE”) is an entity in which the equity investors have not provided enough equity to finance the entity’s activities or the equity investors: (1) cannot directly or indirectly make decisions about the entity’s activities through their voting rights or similar rights; (2) do not have the obligation to absorb the expected losses of the entity; (3) do not have the right to receive the expected residual returns of the entity; or (4) have voting rights that are not proportionate to their economic interests and the entity’s activities involve or are conducted on behalf of an investor with a disproportionately small voting interest. We hold equity interests in ventures related to our cruise operations. We account for the majority of these investments as either an equity method investment or a controlled subsidiary.

Effective March 31, 2023, we closed on the previously announced partnership agreement with iCON Infrastructure Partners VI, L.P. ("iCON"). This partnership will own, develop, and manage cruise terminal facilities and infrastructure in key ports of call, initially including several development projects in Italy and Spain. As part of the transaction with iCON we also sold 80% of the entity which owns our terminal at PortMiami to the partnership. Refer below to equity method investments and controlled subsidiaries for further information on the transaction. In addition, the partnership has plans to pursue additional port infrastructure developments, including future plans to own, develop, and manage an infrastructure project in the U.S. Virgin Islands.

Unconsolidated investments ("equity method investments")

We have determined that TUI Cruises GmbH ("TUIC"), our 50%-owned joint venture, which operates the 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 is shared between ourselves and TUI AG, our joint venture partner. All the significant operating and financial decisions of TUIC require the consent of both parties, which we believe creates shared power over TUIC. Accordingly, we do not consolidate this entity and account for this investment under the equity method of accounting.

As of September 30, 2023, the net book value of our investment in TUIC was $586.7 million, primarily consisting of $498.5 million in equity and a loan of €75.3 million, or approximately $79.7 million based on the exchange rate at September 30, 2023. As of December 31, 2022, the net book value of our investment in TUIC was $466.0 million, primarily consisting of $361.5 million in equity and a loan of €87.2 million, or approximately $93.0 million based on the exchange rate at December 31, 2022. The loan, which was made in connection with the sale of Splendour of the Seas in April 2016, accrues interest at a rate of 6.25% per annum and is payable over 10 years. This loan is 50% guaranteed by TUI AG and is secured by a first priority mortgage on the ship.

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 TUI Cruises below 37.55% through May 2033. Our investment amount and outstanding term loan are substantially our maximum exposure to loss in connection with our investment in TUIC.

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 and certain emergency repairs as may be required. We have determined that we are not the primary beneficiary of this facility as we do not have the power to direct the activities that most significantly impact the facility’s economic performance. Accordingly, we do not consolidate this entity and account for this investment under the equity method of accounting.

As part of the transaction with iCON, we sold our controlling interest in two Italian entities for an immaterial amount of net proceeds and recognized an immaterial gain on the sale. At closing, we have determined that the partnership and both Italian entities are VIE's. These entities in Italy represent development projects to own, develop, and manage cruise terminal facilities in key ports of call. We have determined that we are not the primary beneficiary for either of these entities as we do not have the power to direct the activities that most significantly impact the economic performance. Accordingly, we do not consolidate these entities and account for these investments under the equity method of accounting.

For further information on the measurements used to estimate the fair value of our equity method investments, refer to Note 11*. Fair Value Measurements and Derivative Instruments*.

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


	Quarter Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Share of equity income from investments	$	86,627	$	73,997	$	149,112	$	29,759
Dividends received (1)	$	628	$	—	$	4,455	$	986

(1) Represents dividends received net of tax withholdings during the quarters and nine months ended September 30, 2023 and September 30, 2022.


	As of September 30, 2023		As of December 31, 2022
Total notes receivable due from equity investments	$	100,752	$	101,392
Less-current portion (1)	17,907		18,406
Long-term portion (2)	$	82,845	$	82,986

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

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

Consolidated investments ("controlled subsidiaries")

As part of the transaction with iCON, we sold an 80% interest in the entity which owns our terminal at PortMiami for $208.9 million and retained a 20% minority interest, effective March 31, 2023. We also sold a noncontrolling interest in another entity which is developing a port project in Spain for an immaterial amount. We have determined that both of these entities are VIEs, and we are the primary beneficiary as we have the power to direct the activities that most significantly impact the facility’s economic performance. Accordingly, we will continue to consolidate both entities. The cash consideration received for the sale of the PortMiami terminal company, net of transaction costs, was allocated between paid-in capital and noncontrolling interest using the net book value of our investment in the PortMiami terminal, as presented in the statement of shareholders' equity.

Other Assets

Credit Losses

We reviewed our notes receivable for credit losses in connection with the preparation of our financial statements for the quarter ended September 30, 2023. In evaluating the allowance, management considered factors such as historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, peer group information and prevailing economic conditions. Our credit loss allowance beginning and ending balances as of September 30, 2023 and 2022 primarily relate to credit losses recognized on notes receivable for the previous sale of certain property and equipment of $81.6 million. The notes receivable associated with previous sale of our property and equipment are related to loans that were originated in 2015 and 2020.

The following table summarizes our credit loss allowance related to receivables (in thousands):


	Nine Months Ended September 30,
	2023		2022
Balance, beginning of period	$	83,227	$	100,192
Credit loss (recovery), net	(9,975)		(8,466)
Write-offs	(2,576)		(9,024)
Balance, end of period	$	70,676	$	82,702

Note 6**. Debt**

Debt consists of the following (in thousands):


	Interest Rate (1)	Maturities Through	As of September 30, 2023		As of December 31, 2022
Fixed rate debt:
Unsecured senior notes	3.70% to 11.63%	2026 - 2030	$	7,898,670	$	7,199,331
Secured senior notes	8.25% to 11.50%	2025 - 2029	1,495,027		2,370,855
Unsecured term loans	1.28% to 5.89%	2027 - 2035	4,682,402		4,561,129
Convertible notes	2.88% to 6.00%	2023 - 2025	1,375,000		1,725,000
Total fixed rate debt			15,451,099		15,856,315
Variable rate debt(2):
Unsecured revolving credit facilities (3)	6.72% to 7.47%	2024 - 2025	350,000		2,744,105
USD unsecured term loan	6.30% to 10.05%	2023 - 2037	3,768,383		4,335,973
Euro unsecured term loan	5.28% to 6.11%	2023 - 2028	477,558		534,589
Total variable rate debt			4,595,941		7,614,667
Finance lease liabilities			327,334		351,332
Total debt (4)			20,374,374		23,822,314
Less: unamortized debt issuance costs			(405,482)		(431,123)
Total debt, net of unamortized debt issuance costs			19,968,892		23,391,191
Less—current portion			(2,043,965)		(2,087,711)
Long-term portion			$	17,924,927	$	21,303,480

(1) Interest rates based on outstanding loans as of September 30, 2023, and for variable rate debt include either LIBOR, EURIBOR or Term SOFR plus the applicable margin.

(2) During the quarter ended June 30, 2023, we completed our transition from LIBOR to Term SOFR rates for substantially all of our variable rate facilities, with such transition to take effect at the next respective interest reset date for each such facility.

(3) Advances under our $1.9 billion facility accrue interest at Term SOFR plus an interest rate margin ranging from 1.30% to 2.05%. Advances under our $1.1 billion facility accrue interest at Term SOFR plus an interest rate margin ranging from 1.70% to 2.05%. Based on applicable Term SOFR rates, as of September 30, 2023, the maximum interest rates under the $1.9 billion facility and the $1.1 billion facility was 7.47%. We also pay a facility fee for each facility ranging from 0.20% to 0.30% of the total commitments under such facility.

(4) At September 30, 2023 and December 31, 2022, the weighted average interest rate for total debt was 6.40% and 6.23%, respectively.

Unsecured revolving credit facilities

In January 2023, we amended and extended our two unsecured revolving credit facilities. The amendments extended the maturities of $2.3 billion of the $3.0 billion aggregate revolving credit capacity by one year to April 2025, with the remainder maturing in April 2024. As of September 30, 2023, we had undrawn capacity of $2.7 billion under our unsecured revolving credit facilities. In October 2023, we refinanced both unsecured revolving credit facilities as well as the $501.6 million unsecured term loan scheduled to fully mature in October 2024. Following this refinancing, our aggregate revolving credit commitments are $3.5 billion. Of this amount, $1.6 billion is scheduled to mature in October 2028, $1.6 billion is scheduled to mature in October 2026, $242.5 million is scheduled to mature in April 2025 and the remaining balance is scheduled to mature in April 2024.

Convertible Notes

In June 2023, $350 million of our 4.25% Convertible Senior Notes matured. The notes were settled using a combination of $337.8 million in cash, and the issuance of approximately 374,000 shares of common stock. The issuance of equity increased additional paid-in capital by $12.2 million.

In August 2023, we notified the holders of our 2.875% Convertible Senior Notes due November 15, 2023 of our irrevocable election to settle notes to which holders elect to convert with a combination of cash and shares of our common stock.

Debt financing transactions

In February 2023, we issued $700 million aggregate principal amount of 7.25% senior guaranteed notes due January 2030 ("7.25% Priority Guaranteed Notes"). Upon closing, we terminated our commitment for the $700 million 364-day term loan facility. In addition, the remaining $350 million backstop committed financing was also terminated upon closing, which resulted in an immaterial loss on extinguishment of debt.

In June 2023, we took delivery of Silver Nova. To finance the delivery, we borrowed a total of $503.2 million under the committed financing agreement, resulting in an unsecured term loan which is 95% guaranteed by Euler Hermes. The unsecured loan amortizes semi-annually over 12 years and bears interest at a fixed rate of 4.21% per annum.

In June 2023, we repaid $392.0 million of our 11.50% secured senior notes due in June 2025, which resulted in a total loss on extinguishment of debt of $30.2 million that was recognized within Interest expense, net of interest capitalized within our consolidated statements of comprehensive income (loss) for the nine months ended September 30, 2023. During the third quarter of 2023, we repaid an additional $500 million of these notes due in June 2025, resulting in a total loss on extinguishment of debt of $37.9 million that was recognized within Interest expense, net of interest capitalized within our consolidated statements of comprehensive income (loss) for the quarter and nine months ended September 30, 2023.

In October 2023, we issued an irrevocable notice to redeem in early November 2023 the remaining $500 million balance of our 11.50% senior secured notes due June 2025. This redemption will be funded with existing liquidity.

Export credit agency guarantees

Except for the term loans we incurred to acquire Celebrity Flora and Silver Moon, all of our unsecured ship financing term loans are guaranteed by the export credit agency in the respective country in which the ship is constructed. As of September 30, 2023, we pay to the applicable export credit agency, depending on the financing agreement, an upfront fee of 2.35% to 5.48% of the maximum loan amount in consideration for these guarantees. We amortize the fees that are paid upfront over the life of the loan. We classify these fees within Amortization of debt issuance costs, discounts and premiums in our consolidated statements of cash flows. Prior to the loan being drawn, we present these fees within Other assets in our consolidated balance sheets. Once the loan is drawn, such fees are classified as a discount to the related loan, or contra-liability account, within Current portion of long-term debt or long-term debt.

Debt covenants

Our revolving credit facilities, the majority of our term loans, and certain of our credit card processing agreements, contain covenants that require us, among other things, to maintain a fixed charge coverage ratio, limit our net debt-to-capital ratio, maintain minimum liquidity, and under certain facilities, to maintain a minimum stockholders' equity. As of September 30, 2023, we were in compliance with our debt covenants and we estimate we will be in compliance for the next twelve months.

The following is a schedule of annual maturities on our total debt, including finance leases, as of September 30, 2023 for each of the next five years (in thousands):


Year	As of September 30, 2023 (1)
Remainder of 2023	$	735,423
2024	2,308,807
2025	2,828,609
2026	2,797,022
2027	3,534,356
Thereafter	8,170,157
	$	20,374,374

(1) Debt denominated in other currencies is calculated based on the applicable exchange rate at September 30, 2023.

Note 7**. Leases**

Operating Leases

Our operating leases primarily relate to preferred berthing arrangements, real estate and shipboard equipment, and are included within Operating lease right-of-use assets, and Long-term operating lease liabilities with the current portion of the liability included within Current portion of operating lease liabilities in our consolidated balance sheets as of September 30, 2023 and December 31, 2022. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. Our operating leases include Silver Explorer, operated by Silversea Cruises. The operating lease for Silver Explorer will expire in the fourth quarter of 2023 and Silversea Cruises does not intend to renew the lease.

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

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

Finance Leases

Our finance leases primarily relate to buildings and surrounding land located at our Miami headquarters and our lease for the Silver Dawn ship. Finance leases are included within Property and Equipment, net and Long-term debt with the current portion of the liability included within Current portion of long-term debt in our consolidated balance sheets as of September 30, 2023 and December 31, 2022.

The Company's master lease agreement (“Master Lease”) with Miami-Dade County related to the buildings and surrounding land located at our Miami headquarters is classified as a finance lease in accordance with ASC 842, Leases. The Master Lease includes two five-year options to extend the lease which we are reasonably certain to exercise. The total aggregate amount of the finance lease liabilities recorded for this Master Lease was $56.8 million and $55.5 million as of September 30, 2023 and December 31, 2022, respectively.

Silversea Cruises operates Silver Dawn under a sale-leaseback agreement with a bargain purchase option at the end of the 15-year lease term. Due to the bargain purchase option at the end of the lease term in 2036, whereby Silversea Cruises is reasonably certain of obtaining ownership of the ship, Silver Dawn is accounted for as a finance lease. The lease includes other purchase options beginning in year three, none of which are reasonably certain of being exercised at this time. The total aggregate amount of finance lease liabilities recorded for this ship was $250.6 million and $264.8 million as of September 30, 2023 and December 31, 2022, respectively. The lease payments on the Silver Dawn are subject to adjustments based on the Term SOFR rate.

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


	Consolidated Statement of Comprehensive Income (Loss) Classification	Quarter Ended September 30, 2023		Nine Months Ended September 30, 2023
Lease costs:
Operating lease costs	Commission, transportation and other	$	32,925	$	127,897
Operating lease costs	Other operating expenses	5,545		16,636
Operating lease costs	Marketing, selling and administrative expenses	5,350		16,354
Financial lease costs:
Amortization of right-of-use-assets	Depreciation and amortization expenses	5,792		17,374
Interest on lease liabilities	Interest expense, net of interest capitalized	7,658		22,386
Total lease costs		$	57,270	$	200,647


	Consolidated Statement of Comprehensive Income (Loss) Classification	Quarter Ended September 30, 2022		Nine Months Ended September 30, 2022
Lease costs:
Operating lease costs	Commission, transportation and other	$	26,924	$	77,646
Operating lease costs	Other operating expenses	5,545		16,540
Operating lease costs	Marketing, selling and administrative expenses	4,545		14,191
Financial lease costs:
Amortization of right-of-use-assets	Depreciation and amortization expenses	6,115		18,311
Interest on lease liabilities	Interest expense, net of interest capitalized	5,942		15,196
Total lease costs		$	49,071	$	141,884

In addition, certain of our berthing agreements include variable lease costs based on the number of passengers berthed. During the quarter and nine months ended September 30, 2023, we had $13.2 million and $72.1 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss), respectively, compared to $12.6 million and $32.0 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss) during the quarter and nine months ended September 30, 2022, respectively.

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


	As of September 30, 2023		As of December 31, 2022
Weighted average of the remaining lease term in years
Operating leases	17.73		17.69
Finance leases	19.49		19.26
Weighted average discount rate
Operating leases	7.36	%	6.92	%
Finance leases	6.48	%	6.43	%

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


	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	130,746	$	92,859
Operating cash flows from finance leases	22,386		15,196
Financing cash flows from finance leases	$	25,135	$	42,791

As of September 30, 2023, maturities related to lease liabilities were as follows (in thousands):


Year	Operating Leases		Finance Leases
Remainder of 2023	$	33,596	$	11,892
2024	116,417		45,318
2025	108,407		44,827
2026	96,260		38,838
2027	76,559		37,358
Thereafter	830,371		707,296
Total lease payments	1,261,610		885,529
Less: Interest	(663,290)		(558,195)
Present value of lease liabilities	$	598,320	$	327,334

Note 8**. Commitments and Contingencies**

Ship Purchase Obligations

Our future capital commitments consist primarily of new ship orders. As of September 30, 2023, the dates that the ships on order by our Global and Partner Brands are expected to be delivered, subject to change in the event of construction delays, and their approximate berths are as follows:


Ship	Shipyard	Expected delivery	Approximate Berths
Royal Caribbean International —
Oasis-class:
Utopia of the Seas	Chantiers de l'Atlantique	2nd Quarter 2024	5,700
Icon-class:
Icon of the Seas	Meyer Turku Oy	4th Quarter 2023	5,600
Star of the Seas	Meyer Turku Oy	2nd Quarter 2025	5,600
Unnamed	Meyer Turku Oy	2nd Quarter 2026	5,600
Celebrity Cruises —
Edge-class:
Celebrity Ascent	Chantiers de l'Atlantique	4th Quarter 2023	3,250
Unnamed	Chantiers de l'Atlantique	4th Quarter 2025	3,250
Silversea Cruises —
Evolution Class:
Silver Ray	Meyer Werft	2nd Quarter 2024	730
TUI Cruises (50% joint venture) —
Mein Schiff 7	Meyer Turku Oy	2nd Quarter 2024	2,900
Mein Schiff Relax	Fincantieri	4th Quarter 2024	4,100
Unnamed	Fincantieri	2nd Quarter 2026	4,100
Total Berths			40,830

During the quarter ended June 30, 2023, we received commitments for the unsecured financing of the fifth Edge-class ship for up to 80% of the ship’s contract price and our building contract with Chantiers de l'Atlantique became effective. Bpifrance Assurance Export, the official French export credit agency, has agreed to guarantee to the lenders 100% of the financing.

In June 2023, we amended the credit agreement for Celebrity Ascent, to increase the maximum loan amount by €32.1 million or $34.0 million based on the exchange rate at September 30, 2023. Interest on the incremental portion of the loan will accrue at a floating rate equal to Term SOFR plus 1.45%.

In September 2023, we amended the credit agreement for Icon of the Seas, to increase the maximum loan amount by €96.8 million or $102.5 million based on the exchange rate at September 30, 2023. Interest on the incremental portion of the loan will accrue at a floating rate equal to Term SOFR plus 1.10%.

In October 2023, we amended the credit agreement for Silver Ray, to increase the maximum loan amount by €30.3 million or $32.1 million based on the exchange rate at September 30, 2023 At our election, interest on the incremental portion will accrue either (1) at a fixed rate of 6.77% (inclusive of the applicable margin) or (2) at a floating rate equal to Term SOFR plus 1.40%.

As of September 30, 2023, the aggregate cost of our ships on order presented in the table above, not including any ships on order by our Partner Brands, was approximately $10.9 billion, of which we had deposited $1.1 billion as of such date. Refer to Note 11*. Fair Value Measurements and Derivative Instruments* for further information.

Litigation

As previously reported, a lawsuit was filed against us in August 2019 in the U.S. District Court for the Southern District of Florida (the "Court") under Title III of the Cuban Liberty and Democratic Solidarity Act, also known as the Helms-Burton

Act. The complaint filed by Havana Docks Corporation alleges it holds an interest in the Havana Cruise Port Terminal, which was expropriated by the Cuban government. The complaint further alleges that we trafficked in the terminal by embarking and disembarking passengers at these facilities. The plaintiff seeks all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs.

The Court entered final judgment in December 2022 in favor of the plaintiff and awarded damages and attorneys' fees to the plaintiff in the aggregate amount of approximately $112 million. We have appealed the judgment to the United States Court of Appeals for the 11th Circuit. We believe we have meritorious grounds for and intend to vigorously pursue our appeal. During the fourth quarter of 2022, we recorded a charge of approximately $130.0 million to Other (expense) income within our consolidated statements of comprehensive income (loss) related to the Havana Docks Action, including post-judgment interest and related legal defense costs and bonding fees.

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

Other

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

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

Note 9**. Shareholders' Equity**

Dividends

We did not declare any dividends during the nine months ended September 30, 2023 and 2022. We were previously restricted under certain of our credit facilities from paying dividends while waivers to the financial covenants within such facilities were in effect. While the waivers have now expired, in the event we declare a dividend, we will need to repay the principal amounts deferred under our export credit facilities.

Noncontrolling Interests

Effective March 31, 2023, we closed the previously announced partnership with iCON. We sold 80% of the entity which owns our terminal at PortMiami for $208.9 million and retained a 20% minority interest. The cash consideration received, net of transaction costs, was allocated between paid-in capital and noncontrolling interest in the accompanying consolidated statement of shareholders' equity for the nine months ended September 30, 2023. Refer to Note 5*. Investments and Other Assets* for further information on the transaction.

Note 10**. Changes in Accumulated Other Comprehensive Loss**

The following table presents the changes in accumulated other comprehensive loss by component for the nine months ended September 30, 2023 and 2022 (in thousands):


	Accumulated Other Comprehensive Loss for the Nine Months Ended September 30, 2023								Accumulated Other Comprehensive Loss for the Nine Months Ended September 30, 2022
	Changes related to cash flow derivative hedges		Changes in defined benefit plans		Foreign currency translation adjustments		Accumulated other comprehensive loss		Changes related to cash flow derivative hedges		Changes in defined benefit plans		Foreign currency translation adjustments		Accumulated other comprehensive loss
Accumulated comprehensive loss at beginning of the year	$	(638,011)	$	(7,921)	$	2,718	$	(643,214)	$	(646,473)	$	(56,835)	$	(7,577)	$	(710,885)
Other comprehensive income (loss) before reclassifications	5,873		3,010		1,686		10,569		(18,061)		32,504		31,958		46,401
Amounts reclassified from accumulated other comprehensive loss	(13,021)		690		—		(12,331)		(130,480)		2,487		—		(127,993)
Net current-period other comprehensive income (loss)	(7,148)		3,700		1,686		(1,762)		(148,541)		34,991		31,958		(81,592)
Ending balance	$	(645,159)	$	(4,221)	$	4,404	$	(644,976)	$	(795,014)	$	(21,844)	$	24,381	$	(792,477)

The following table presents reclassifications out of accumulated other comprehensive loss for the quarters and nine months ended September 30, 2023 and 2022 (in thousands):


	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
Details About Accumulated Other Comprehensive Loss Components	Quarter Ended September 30, 2023		Quarter Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022		Affected Line Item in Statements of Comprehensive Income (Loss)
Gain (loss) on cash flow derivative hedges:
Interest rate swaps	$	14,951	$	(4,197)	$	35,389	$	(19,782)	Interest expense, net of interest capitalized
Foreign currency forward contracts	(4,379)		(4,363)		(13,105)		(12,722)		Depreciation and amortization expenses
Foreign currency forward contracts	—		(466)		(10,019)		(2,155)		Other (expense) income
Fuel swaps	—		18		—		(336)		Other (expense) income
Fuel swaps	16,485		43,490		756		165,475		Fuel
	27,057		34,482		13,021		130,480
Amortization of defined benefit plans:
Actuarial loss	—		(829)		(690)		(2,487)		Payroll and related
	—		(829)		(690)		(2,487)
Total reclassifications for the period	$	27,057	$	33,653	$	12,331	$	127,993

Note 11**. Fair Value Measurements and Derivative Instruments**

Fair Value Measurements

The estimated fair value of our financial instruments that are not measured at fair value, categorized based upon the fair value hierarchy, are as follows (in thousands):


	Fair Value Measurements at September 30, 2023										Fair Value Measurements at December 31, 2022
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)	$	600,117	$	600,117	$	600,117	$	—	$	—	$	1,935,005	$	1,935,005	$	1,935,005	$	—	$	—
Total Assets	$	600,117	$	600,117	$	600,117	$	—	$	—	$	1,935,005	$	1,935,005	$	1,935,005	$	—	$	—
Liabilities:
Long-term debt (including current portion of debt)(5)	$	19,641,558	$	20,856,937	$	—	$	20,856,937	$	—	$	23,039,859	$	22,856,306	$	—	$	22,856,306	$	—
Total Liabilities	$	19,641,558	$	20,856,937	$	—	$	20,856,937	$	—	$	23,039,859	$	22,856,306	$	—	$	22,856,306	$	—

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

(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. We valued our senior notes and convertible notes using a quoted market price, which is considered a Level 2 input as it is observable in the market; however, these instruments have a limited trading volume and as such this fair value estimate is not necessarily indicative of the value at which the instruments could be retired or transferred.

(3) Inputs that are unobservable. The Company did not use any Level 3 inputs as of September 30, 2023 and December 31, 2022.

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

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

Other Financial Instruments

The carrying amounts of accounts receivable, accounts payable, accrued interest and accrued expenses approximate fair value at September 30, 2023 and December 31, 2022.

Assets and liabilities that are recorded at fair value have been categorized based upon the fair value hierarchy. The following table presents information about the Company’s financial instruments recorded at fair value on a recurring basis (in thousands):


	Fair Value Measurements at September 30, 2023								Fair Value Measurements at December 31, 2022
Description	Total		Level 1(1)		Level 2(2)		Level 3(3)		Total		Level 1(1)		Level 2(2)		Level 3(3)
Assets:
Derivative financial instruments(4)	$	217,881	$	—	$	217,881	$	—	$	203,802	$	—	$	203,802	$	—
Total Assets	$	217,881	$	—	$	217,881	$	—	$	203,802	$	—	$	203,802	$	—
Liabilities:
Derivative financial instruments(4)	$	172,948	$	—	$	172,948	$	—	$	135,608	$	—	$	135,608	$	—
Total Liabilities	$	172,948	$	—	$	172,948	$	—	$	135,608	$	—	$	135,608	$	—

(1)Inputs based on quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment. No Level 1 inputs were used in fair value measurements of other financial instruments as of September 30, 2023 and December 31, 2022.

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

(3)Inputs that are unobservable. No Level 3 inputs were used in fair value measurements of other financial instruments as of September 30, 2023 and December 31, 2022.

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

The reported fair values are based on a variety of factors and assumptions. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of September 30, 2023 or December 31, 2022, or that will be realized in the future, and do not include expenses that could be incurred in an actual sale or settlement.

Nonfinancial Instruments Recorded at Fair Value on a Nonrecurring Basis

Nonfinancial instruments include items such as goodwill, indefinite-lived intangible assets, long-lived assets, right-of-use assets and equity method investments that are measured at fair value on a nonrecurring basis when events and circumstances indicate the carrying value is not recoverable. There were no nonfinancial instruments recorded at fair value as of September 30, 2023.

Master Netting Agreements

We have master International Swaps and Derivatives Association (“ISDA”) agreements in place with our derivative instrument counterparties. These ISDA agreements generally provide for final close out netting with our counterparties for all positions in the case of default or termination of the ISDA agreement. We have determined that our ISDA agreements provide us with rights of setoff on the fair value of derivative instruments in a gain position and those in a loss position with the same counterparty. We have elected not to offset such derivative instrument fair values in our consolidated balance sheets.

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 and liabilities under master netting agreements with derivative counterparties (in thousands):


	Gross Amounts not Offset in the Consolidated Balance Sheet that are Subject to Master Netting Agreements
	As of September 30, 2023								As of December 31, 2022
	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	$	217,881	$	(124,669)	$	—	$	93,212	$	203,802	$	(105,228)	$	—	$	98,574
Total	$	217,881	$	(124,669)	$	—	$	93,212	$	203,802	$	(105,228)	$	—	$	98,574
	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	$	(172,948)	$	124,669	$	—	$	(48,279)	$	(135,608)	$	105,228	$	—	$	(30,380)
Total	$	(172,948)	$	124,669	$	—	$	(48,279)	$	(135,608)	$	105,228	$	—	$	(30,380)

Concentrations of Credit Risk

We monitor our credit risk associated with financial and other institutions with which we conduct significant business, and to minimize these risks, we select counterparties with credit risks acceptable to us and we seek to limit our exposure to an individual counterparty. Credit risk, including, but not limited to, counterparty nonperformance under derivative instruments, our credit facilities and new ship progress payment guarantees, is not considered significant, as we primarily conduct business with large, well-established financial institutions, insurance companies and export credit agencies many of which we have long-term relationships with and which have credit risks acceptable to us or where the credit risk is spread out among a large number of counterparties. As of September 30, 2023, we had counterparty credit risk exposure under our derivative instruments of $110.9 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.

We enter into various forward, swap and option contracts to manage our interest rate exposure and to limit our exposure to fluctuations in foreign currency exchange rates and fuel prices. These instruments are recorded on the balance sheet at their fair value and the vast majority are designated as hedges. We also use non-derivative financial instruments designated as hedges of our net investment in our foreign operations and investments.

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

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

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

Cash flows from derivative instruments that are designated as fair value or cash flow hedges are classified in the same category as the cash flows from the underlying hedged items. In the event that hedge accounting is discontinued, cash flows subsequent to the date of discontinuance are classified within investing activities. Cash flows from derivative instruments not designated as hedging instruments are classified as investing activities.

We consider the classification of the underlying hedged item’s cash flows in determining the classification for the designated derivative instrument’s cash flows. We classify derivative instrument cash flows from hedges of benchmark interest rate or hedges of fuel expense as operating activities due to the nature of the hedged item. Likewise, we classify derivative instrument cash flows from hedges of foreign currency risk on our newbuild ship payments as investing activities.

Interest Rate Risk

Our exposure to market risk for changes in interest rates primarily relates to our debt obligations, including future interest payments. At September 30, 2023 and December 31, 2022, approximately 85% and 75%, respectively, of our debt was effectively fixed-rate debt, which is net of our interest rate swap agreements. We use interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense.

Market risk associated with our fixed-rate debt is the potential increase in fair value resulting from a decrease in interest rates. We use interest rate swap agreements that effectively convert a portion of our fixed-rate debt to a floating-rate basis to manage this risk. At September 30, 2023 and December 31, 2022, there were no interest rate swap agreements for fixed-rate debt instruments.

We use interest rate swap agreements that effectively convert a portion of our floating-rate debt to a fixed-rate basis to manage the market risk of increasing interest rates. At September 30, 2023 and December 31, 2022, we maintained interest rate swap agreements on the following floating-rate debt instruments:


Debt Instrument	Swap Notional as of September 30, 2023 (in thousands)		Maturity	Debt Floating Rate (3)		All-in Swap Fixed Rate as of September 30, 2023
Celebrity Reflection term loan	$	81,813	October 2024	LIBOR plus	0.40%	2.85%
Quantum of the Seas term loan	214,375		October 2026	LIBOR plus	1.30%	3.74%
Anthem of the Seas term loan	241,667		April 2027	LIBOR plus	1.30%	3.86%
Ovation of the Seas term loan	345,833		April 2028	LIBOR plus	1.00%	3.16%
Harmony of the Seas term loan (1)	305,818		May 2028	EURIBOR plus	1.15%	2.26%
Odyssey of the Seas term loan (2)	364,167		October 2032	LIBOR plus	0.96%	3.21%
Odyssey of the Seas term loan (2)	182,083		October 2032	LIBOR plus	0.96%	2.84%
	$	1,735,756

(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 September 30, 2023.

(2)Interest rate swap agreements hedging the term loan of Odyssey of the Seas include LIBOR zero-floors matching the debt LIBOR zero-floor.

(3)During the quarter ended June 30, 2023, we completed our transition from LIBOR to Term SOFR rates for substantially all of our Interest rate swap agreements, with such transition to take effect at the next respective interest reset date for each such agreement.

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

The notional amount of interest rate swap agreements related to outstanding debt as of September 30, 2023 and December 31, 2022 was $1.7 billion and $1.9 billion, respectively.

Foreign Currency Exchange Rate Risk

Derivative Instruments

Our primary exposure to foreign currency exchange rate risk relates to our ship construction contracts denominated in Euros, our foreign currency denominated debt and our international business operations. We enter into foreign currency forward contracts to manage portions of the exposure to movements in foreign currency exchange rates. As of September 30, 2023, the aggregate cost of our ships on order was $10.9 billion, of which we had deposited $1.1 billion as of such date. These amounts do not include any ships placed on order that are contingent upon completion of conditions precedent and/or financing and any ships on order by our Partner Brands. Refer to Note 8*. Commitments and Contingencies*, for further information on our ships on order. At September 30, 2023 and December 31, 2022, approximately 40.1% and 52.3%, respectively, of the aggregate cost of the ships under construction was exposed to fluctuations in the Euro exchange rate. Our foreign currency forward contract agreements are accounted for as cash flow or net investment hedges depending on the designation of the related hedge.

On a regular basis, we enter into foreign currency forward contracts and, from time to time, we utilize cross-currency swap agreements and collar options to minimize the volatility resulting from the remeasurement of net monetary assets and liabilities denominated in a currency other than our functional currency or the functional currencies of our foreign subsidiaries. During the third quarter of 2023 and 2022 the average notional amount of foreign currency forward contracts was approximately $1.4 billion and $1.2 billion, respectively. These instruments are not designated as hedging instruments. For the quarters ended September 30, 2023 and 2022, changes in the fair value of the foreign currency forward contracts resulted in losses of $42.8 million and $88.4 million, respectively, which offset gains arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies in those same periods of $38.5 million and $84.0 million, respectively. These amounts were recognized in earnings within Other (expense) income in our consolidated statements of comprehensive income (loss). For the nine months ended September 30, 2023 and 2022, changes in the fair value of the foreign currency forward contracts resulted in losses of $30.4 million and $176.3 million, respectively, which offset gains arising from the remeasurement of monetary assets and liabilities denominated in foreign currencies in those same periods of $11.2 million and $169.7 million, respectively. These amounts were recognized in earnings within Other (expense) income in our consolidated statements of comprehensive income (loss).

The notional amount of outstanding foreign exchange contracts, excluding the forward contracts entered into to minimize remeasurement volatility, as of September 30, 2023 and December 31, 2022 was $4.0 billion and $2.9 billion, respectively.

Non-Derivative Instruments

We consider our investment in our foreign operations to be denominated in relatively stable currencies and to be of a long-term nature. We 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 €554.8 million, or approximately $587.3 million, as of September 30, 2023. As of December 31, 2022, we had designated debt as a hedge of our net investments primarily in TUI Cruises of €433.0 million, or approximately $461.9 million.

Fuel Price Risk

Our exposure to market risk for changes in fuel prices relates primarily to the consumption of fuel on our ships. We use fuel swap agreements to mitigate the financial impact of fluctuations in fuel prices.

Our fuel swap agreements are generally accounted for as cash flow hedges. In the case that our hedged forecasted fuel consumption is not probable of occurring, hedge accounting will be discontinued and the related accumulated other comprehensive gain or loss will be reclassified to Other income (expense) immediately. For hedged forecasted fuel consumption that remains possible of occurring, hedge accounting will be discontinued and the related accumulated other comprehensive gain or loss will remain in accumulated other

comprehensive gain or loss until the underlying hedged transactions are recognized in earnings or the related hedged forecasted fuel consumption is deemed probable of not occurring.

Changes in the fair value of fuel swaps for which cash flow hedge accounting was discontinued are currently recognized in Other (expense) income for each reporting period through the maturity dates of the fuel swaps. For the quarter ended September 30, 2023, we discontinued cash flow hedge accounting on certain fuel swap agreements, which resulted in an immaterial gain. For the quarter ended September 30, 2022, we did not discontinue cash flow hedge accounting on any of our fuel swap agreements.

At September 30, 2023, we have hedged the variability in future cash flows for certain forecasted fuel transactions occurring through 2024 and 2025. As of September 30, 2023 and December 31, 2022, we had the following outstanding fuel swap agreements:


	Fuel Swap Agreements
	As of September 30, 2023	As of December 31, 2022
Designated as hedges:	(metric tons)
2023	224,100	825,651
2024	1,054,501	—
2025	685,400	—


	Fuel Swap Agreements
	As of September 30, 2023		As of December 31, 2022
Designated hedges as a % of projected fuel purchases:	(% hedged)
2023	54	%	50	%
2024	60	%	—	%
2025	39	%	—	%

As of September 30, 2023, there was $55.6 million of estimated unrealized net gain associated with our cash flow hedges pertaining to fuel swap agreements that is expected to be reclassified to earnings from Accumulated other comprehensive loss within the next twelve months when compared to $7.9 million of estimated unrealized net loss at December 31, 2022. Reclassification is expected to occur as the result of fuel consumption associated with our hedged forecasted fuel purchases.

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


	Fair Value of Derivative Instruments
	Asset Derivatives							Liability Derivatives
	Balance Sheet Location		As of September 30, 2023			As of December 31, 2022		Balance Sheet Location	As of September 30, 2023		As of December 31, 2022
		Fair Value			Fair Value			Fair Value	Fair Value
Derivatives designated as hedging instruments under ASC 815-20(1)
Interest rate swaps	Other assets		$	114,101		$	115,049	Other long-term liabilities	$	—	$	—
Foreign currency forward contracts	Derivative financial instruments		13,041			18,892		Derivative financial instruments	156,714		84,953
Foreign currency forward contracts	Other assets		8,587			25,504		Other long-term liabilities	14,332		149
Fuel swaps	Derivative financial instruments		57,046			40,191		Derivative financial instruments	1,451		46,359
Fuel swaps	Other assets		23,522			4,166		Other long-term liabilities	451		4,147
Total derivatives designated as hedging instruments under 815-20			$	216,297		$	203,802		$	172,948	$	135,608
Derivatives not designated as hedging instruments under ASC 815-20



Fuel swaps	Other Assets		1,584			—		Other long-term liabilities	—		—
Total derivatives not designated as hedging instruments under 815-20			1,584			—			—		—
Total derivatives			$	217,881		$	203,802		$	172,948	$	135,608

(1)Subtopic 815-20 “Hedging-General” under ASC 815.

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


		Carrying Value
Non-derivative instrument designated as hedging instrument under ASC 815-20	Balance Sheet Location	As of September 30, 2023		As of December 31, 2022
Foreign currency debt	Current portion of long-term debt	$	61,806	$	62,282
Foreign currency debt	Long-term debt	525,450		399,577
		$	587,256	$	461,859

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


Derivatives and Related Hedged Items under ASC 815-20 Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivative and Hedged Item	Amount of Gain (Loss) Recognized in Income on Derivative								Amount of Gain (Loss) Recognized in Income on Hedged Item
Quarter Ended September 30, 2023	Quarter Ended September 30, 2022	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022		Quarter Ended September 30, 2023		Quarter Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Interest rate swaps	Interest expense, net of interest capitalized	$	—	$	966	$	—	$	(3,569)	$	—	$	(4,417)	$	—	$	4,534
		$	—	$	966	$	—	$	(3,569)	$	—	$	(4,417)	$	—	$	4,534

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


Derivatives under ASC 815-20 Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in Accumulated Other Comprehensive Loss on Derivatives
Quarter Ended September 30, 2023	Quarter Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Interest rate swaps	$	22,639	$	55,016	$	35,439	$	159,132
Foreign currency forward contracts	(133,669)		(148,275)		(120,921)		(311,252)
Fuel swaps	157,650		(132,208)		91,355		134,059
	$	46,620	$	(225,467)	$	5,873	$	(18,061)

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	Quarter Ended September 30, 2023		Quarter Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Foreign Currency Debt	$	18,262	$	22,464	$	7,024	$	42,023
	$	18,262	$	22,464	$	7,024	$	42,023

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


		Amount of (Loss) Gain Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments under ASC 815-20	Location of Gain (Loss) Recognized in Income on Derivatives	Quarter Ended September 30, 2023		Quarter Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Foreign currency forward contracts	Other (expense) income	$	(42,786)	$	(88,440)	$	(30,414)	$	(176,322)
Fuel swaps	Other (expense) income	592		(230)		592		36
		$	(42,194)	$	(88,670)	$	(29,822)	$	(176,286)

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 September 30, 2023, our senior unsecured debt credit rating was BB- by Standard & Poor's and B1 by Moody's. As of September 30, 2023, five of our interest rate derivative hedges had reached their fifth-year anniversary; however, the net market value for these derivative hedges were in a net asset position, and accordingly, we were not required to post any collateral as of such date.

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