Annual report pursuant to Section 13 and 15(d)

Leases

v3.22.0.1
Leases
12 Months Ended
Dec. 31, 2021
Leases [Abstract]  
Leases

5.   Leases

Nature of Leases

We have finance leases for certain ship equipment and a corporate office. 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, 2021

 

December 31, 2020

 

December 31, 2019

Operating lease expense

$

17,534

$

19,406

$

31,596

Variable lease expense

12,414

9,705

14,284

Short-term lease expense

6,421

11,076

50,832

Finance lease cost:

Amortization of right-of-use assets

1,428

1,924

1,765

Interest on lease liabilities

793

1,072

1,239

Lease balances were as follows (in thousands):

    

Balance Sheet location

    

December 31, 2021

December 31, 2020

Operating leases

 

  

 

  

  

Right-of-use assets

 

Other long-term assets

$

794,187

$

209,037

Current operating lease liabilities

 

Accrued expenses and other liabilities

34,407

17,700

Non-current operating lease liabilities

 

Other long-term liabilities

670,688

185,414

Finance leases

 

  

Right-of-use assets

 

Property and equipment, net

9,820

11,948

Current finance lease liabilities

 

Current portion of long-term debt

3,866

5,143

Non-current finance lease liabilities

 

Long-term debt

1,847

4,648

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

    

Year Ended

    

Year Ended

    

Year Ended

 

December 31, 2021

 

December 31, 2020

 

December 31, 2019

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

Operating cash outflows from operating leases

$

31,385

$

70,555

$

75,539

Operating cash outflows from finance leases

579

898

1,051

Financing cash outflows from finance leases

4,315

4,078

2,826

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

Operating leases

506,761

823

24,834

Finance leases

265

705

The right-of-use assets obtained in exchange for lease obligations for the year ended December 31, 2021 was primarily for port facilities.

Other supplemental information related to leases was as follows:

Year Ended

    

Year Ended

    

Year Ended

    

December 31, 2021

 

December 31, 2020

 

December 31, 2019

 

Weighted average remaining lease term (years) - operating leases

 

24.28

 

7.36

 

8.30

Weighted average remaining lease term (years) - finance leases

 

2.37

2.89

3.65

Weighted average discount rate - operating leases

5.41

%  

3.96

%  

3.76

%  

Weighted average discount rate - finance leases

7.36

%

7.75

%

7.47

%

As of December 31, 2021, maturities of lease liabilities were as follows (in thousands):

Operating

Finance 

 

    

leases

    

leases

 

2022

$

46,179

$

4,096

2023

 

61,675

 

753

2024

 

65,727

 

630

2025

 

66,773

 

544

2026

 

66,226

 

38

Thereafter

 

1,031,088

 

Total

 

1,337,668

6,061

Less: Present value discount

 

(632,573)

(348)

Present value of lease liabilities

$

705,095

$

5,713

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, 2021, 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, 2021 were as follows (in thousands):

Sales-type

    

lease

2022

$

3,916

2023

 

4,563

2024

 

4,682

2025

 

4,799

2026

 

2,947

Thereafter

 

22,595

Total

$

43,502

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.”

Impact of COVID-19

In April 2020, the FASB issued interpretive guidance relating to the accounting for lease concessions provided as a result of COVID-19. In this guidance, entities can elect not to apply lease modification accounting with respect to such lease concessions and instead, treat the concession as if it was a part of the existing contract. The Company has elected to not evaluate leases under the lease modification accounting framework for concessions that result from effects of the COVID-19 pandemic. In relation to our rights to use port facilities, we have elected the approach consistent with resolving a contingency, which allows us to remeasure the lease liability and recognize the amount of change in the lease liability as an adjustment to the carrying amount of the associated right-of-use asset. During the contingency period, we recognized lease expense for these port facilities as incurred.