Quarterly report [Sections 13 or 15(d)]

Summary of Significant Accounting Policies (Policies)

v3.25.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2025
Accounting Policies [Abstract]  
Liquidity, Basis of Presentation

Liquidity

As of March 31, 2025, we had liquidity of approximately $1.4 billion, including cash and cash equivalents of $184.4 million, $1.0 billion available under our Revolving Loan Facility and a €200 million commitment that can be used for future newbuild payments through July 2025. We believe that we have sufficient liquidity to fund our obligations and expect to remain in compliance with our financial covenants for at least the next twelve months from the issuance of these financial statements.

We will continue to pursue various opportunities to optimize our liquidity, refinance future debt maturities to reduce interest expense and/or to extend the maturity dates associated with our existing indebtedness and obtain relevant financial covenant amendments or waivers, if needed.

Basis of Presentation

The accompanying consolidated financial statements are unaudited and, in our opinion, contain all normal recurring adjustments necessary for a fair statement of the results for the periods presented.

Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire fiscal year. Historically, demand for cruises has been strongest during the Northern Hemisphere’s summer months. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2024, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 27, 2025.

Earnings (Loss) Per Share

Earnings Per Share

Basic earnings per share is computed by dividing net income by the basic weighted-average number of shares outstanding during each period. Diluted earnings per share is computed by dividing net income and assumed conversion of exchangeable notes by diluted weighted-average shares outstanding.

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

Three Months Ended

March 31, 

    

2025

    

2024

Net income (loss)

$

(40,295)

$

17,353

Basic weighted-average shares outstanding

 

441,147,186

 

426,803,519

Dilutive effect of share awards

 

 

4,215,687

Diluted weighted-average shares outstanding

 

441,147,186

 

431,019,206

Basic EPS

$

(0.09)

$

0.04

Diluted EPS

$

(0.09)

$

0.04

Each exchangeable note (see Note 7 – “Long-Term Debt”) is individually evaluated for its dilutive or anti-dilutive impact on EPS as determined under the if-converted method. Only the interest expense and weighted average shares for exchangeable notes that are dilutive are included in the effect of dilutive securities. During the three months ended March 31, 2025 and 2024, each of the exchangeable notes were anti-dilutive. Share awards are evaluated for a dilutive or anti-dilutive impact on EPS using the treasury stock method. For the three months ended March 31, 2025 and 2024, a total of 79.6 million and 91.1 million shares, respectively, have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

Foreign Currency

Foreign Currency

The majority of our transactions are settled in U.S. dollars. We remeasure assets and liabilities denominated in foreign currencies at exchange rates in effect at the balance sheet date. The resulting gains or losses are recognized in our consolidated statements of operations within other income (expense), net. We recognized losses of $22.5 million and gains of $13.3 million for the three months ended March 31, 2025 and 2024, respectively, related to remeasurement of assets and liabilities denominated in foreign currencies. Remeasurements of foreign currency related to operating activities are recognized within changes in operating assets and liabilities in the consolidated statement of cash flows.

Depreciation and Amortization Expense

Depreciation and Amortization Expense

The amortization of deferred financing fees is included in depreciation and amortization expense in the consolidated statements of cash flows; however, for purposes of the consolidated statements of operations they are included in interest expense, net.

Segment Reporting

Segment Reporting

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which aims to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 has been applied retrospectively.

The below table includes our calculation of adjusted operating income, our significant segment expenses therein, and a reconciliation of adjusted operating income to net income (loss) before income taxes (in thousands):

Three Months Ended

March 31, 

    

2025

    

2024

Total revenue

$

2,127,553

$

2,191,215

Cruise operating expense

Commissions, transportation and other

395,343

436,210

Onboard and other

138,858

132,036

Adjusted payroll and related (1)

329,127

338,948

Fuel

175,014

197,734

Food

75,588

84,708

Other

184,631

192,454

Adjusted total cruise operating expense

1,298,561

1,382,090

Other operating expense

Adjusted marketing, general and administrative (2)

375,919

345,135

Depreciation and amortization

231,297

222,929

Adjusted total other operating expense

607,216

568,064

Adjusted operating income

$

221,776

$

241,061

Adjusted operating income

$

221,776

$

241,061

Non-cash compensation (3)

(20,834)

(22,667)

Interest expense, net

(217,872)

(218,177)

Other income (expense), net

(24,505)

18,137

Net income (loss) before income taxes

$

(41,435)

$

18,354

(1) Excludes non-cash share-based compensation expenses related to equity awards for shipboard officers (see Note 9 – “Employee Benefits and Compensation Plans”) and non-cash deferred compensation expenses related to the crew pension plan as follows (in thousands):

Three Months Ended

March 31, 

    

2025

    

2024

Service cost

$

553

$

719

(2) Excludes non-cash share-based compensation expenses related to equity awards for corporate employees (see Note 9 – “Employee Benefits and Compensation Plans”).
(3) Includes non-cash deferred compensation expenses related to the crew pension plan and non-cash share-based compensation expenses related to equity awards, which are included in payroll and related expense and marketing, general and administrative expense.
Recently Issued Accounting Guidance

Recently Issued Accounting Guidance

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information as well as certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this update are effective for annual periods beginning after December 15, 2024 and will be applied on a prospective basis. We are evaluating the impact of ASU 2023-09 on our notes to the consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disaggregation of certain costs and expenses, including employee compensation, and requires other improvements to disclosures. The amendments in this update are effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The update may be applied on a prospective or retrospective basis. We are evaluating the impact of ASU 2024-03 on our notes to the consolidated financial statements.