Annual report pursuant to Section 13 and 15(d)

Leases

v3.22.4
Leases
12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases

5.   Leases

Nature of Leases

We have operating leases primarily for port facilities and also corporate offices, warehouses, and certain equipment. Many of our leases include both lease and non-lease components. We have adopted the practical expedient which allows us to combine lease and non-lease components by class of asset. We have applied this expedient for office leases, port facilities, and certain equipment.

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

    

Year Ended

    

Year Ended

    

Year Ended

 

December 31, 2022

 

December 31, 2021

 

December 31, 2020

Operating lease expense

$

47,558

$

17,534

$

19,406

Variable lease expense

29,886

12,414

9,705

Short-term lease expense

38,476

6,421

11,076

Lease balances were as follows (in thousands):

    

Balance Sheet location

    

December 31, 2022

December 31, 2021

Operating leases

 

  

 

  

  

Right-of-use assets

 

Other long-term assets

$

707,086

$

794,187

Current operating lease liabilities

 

Accrued expenses and other liabilities

39,689

34,407

Non-current operating lease liabilities

 

Other long-term liabilities

588,064

670,688

Supplemental cash flow and non-cash information related to leases was as follows (in thousands):

Year Ended

    

Year Ended

    

Year Ended

December 31, 2022

 

December 31, 2021

 

December 31, 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash outflows from operating leases

$

47,828

$

31,385

$

70,555

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

(76,173)

506,761

823

The right-of-use assets obtained in exchange for lease obligations for the year ended December 31, 2022 decreased primarily related to a modification of a port facility agreement.

Other supplemental information related to leases was as follows:

Year Ended

    

Year Ended

    

Year Ended

    

December 31, 2022

 

December 31, 2021

 

December 31, 2020

 

Weighted average remaining lease term (years) - operating leases

 

22.90

 

24.28

 

7.36

Weighted average discount rate - operating leases

7.33

%  

5.41

%  

3.96

%  

As of December 31, 2022, maturities of lease liabilities were as follows (in thousands):

Operating

    

leases

2023

$

80,239

2024

 

69,638

2025

 

66,855

2026

 

67,059

2027

 

66,359

Thereafter

 

1,013,732

Total

 

1,363,882

Less: Present value discount

 

(736,129)

Present value of lease liabilities

$

627,753

Sales-Type Lease

We have one sales-type lease for constructed land-based transportation equipment and infrastructure. The term of the lease is 20 years. At the end of the lease term, the assets shall be conveyed to the lessee. As of December 31, 2022, the lease receivable is $43.5 million and is recognized within accounts receivable, net and other long-term assets. The maturities of the lease receivable as of December 31, 2022 were as follows (in thousands):

Sales-type

    

lease

2023

$

3,720

2024

 

2,481

2025

 

2,481

2026

 

2,481

2027

 

2,481

Thereafter

 

29,856

Total

$

43,500

Significant Assumptions and Judgments in Applying Topic 842 and Practical Expedients Elected

Our leases contain both fixed and variable payments. Fixed payments and variable lease payments that depend on a rate or index are included in the calculation of the right-of-use asset. Other variable payments are excluded from the calculation unless there is an unavoidable fixed minimum cost related to those payments such as a minimum annual guarantee. Our lease assets are amortized on a straight-line basis except for our rights to use port facilities. The expenses related to port facilities are amortized based on passenger counts as this basis represents the pattern in which the economic benefit is derived from the right to use the underlying asset.

For non-consecutive lease terms, which relate to our rights to use certain port facilities, the term of the lease is based on the number of days on which we have the right to use a specified asset. We have adopted the practical expedient to exclude leases with terms of less than one year from being included on the balance sheet. Lease expense for agreements that are short-term are disclosed below and include both fixed and variable payments.

Certain leases include one or more options to extend or terminate and are primarily in five-year increments. Lease extensions and terminations, including auto-renewing lease terms, were only included in the calculation of the right-of-use asset to the extent that the right to renew or terminate was at the option of the lessor only or where there was a more than insignificant penalty for termination.

As our leases do not have a readily determinable implicit rate, we estimated our incremental borrowing rate to determine the net present value of the lease payments at the commencement date. Our incremental borrowing rate was estimated based on the rate we would have obtained if we had borrowed collateralized debt over the lease term to purchase the asset.

We have also adopted the practical expedient which allows us, by class of asset, to not separate lease and non-lease components when we are the lessor in the underlying transaction, the transactions would otherwise be accounted for under ASC 606–Revenue Recognition and the non-lease components are the predominant components of the agreements. We have applied this practical expedient to transactions with cruise passengers and concession service providers related to the use of our ships. We refer you to Note 3 – “Revenue and Expense from Contracts with Customers.”

Leases That Have Not Yet Commenced

We have one agreement related to our rights to use a port facility which is under construction. The lease term for this agreement has not commenced as of December 31, 2022. Although we may have provided design input or advances related to these assets, we have determined that we do not control the assets during the period of construction. The lease

is expected to commence in 2024. This port facility has undiscounted minimum annual guarantees of approximately $141.1 million of passenger fees.