Summary of Significant Accounting Policies
|3 Months Ended|
Mar. 31, 2022
|Accounting Policies [Abstract]|
|Summary of Significant Accounting Policies||
2. Summary of Significant Accounting Policies
Liquidity and Management’s Plan
Due to the impact of COVID-19, travel restrictions and limited access to ports around the world, in March 2020, the Company implemented a voluntary suspension of all cruise voyages across its three brands. In the third quarter of 2021, we began a phased relaunch of certain cruise voyages with our ships initially operating at reduced occupancy levels. As of May 7, 2022, all of our ships were operating with guests on board.
Significant events affecting travel typically have an impact on demand for cruise vacations, with the full extent of the impact determined by the length of time the event influences travel decisions. The level of occupancy on our ships and the percentage of our fleet in service will depend on a number of factors including, but not limited to, the duration and extent of the COVID-19 pandemic, further resurgences and new more contagious and/or vaccine-resistant variants of COVID-19, the availability, distribution, rate of public acceptance and efficacy of vaccines and therapeutics for COVID-19, our ability to comply with governmental regulations and implement new health and safety protocols, port availability, travel restrictions, bans and advisories, our ability to staff our ships, and the impact of other events impacting travel or consumer discretionary spending, such as inflation, the price of fuel, or Russia’s recent invasion of Ukraine and the actions taken by the United States and other governments in response to the invasion. We believe the ongoing effects of these events on our operations and global bookings have had, and will continue to have, a significant impact on our financial results and liquidity.
The estimation of our future cash flow projections includes numerous assumptions that are subject to various risks and uncertainties. Our principal assumptions for future cash flow projections include:
We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change due to the unique and ongoing unpredictable nature of the events, including the magnitude and duration. Accordingly, the full effect of the COVID-19 pandemic and other events impacting travel and consumer discretionary spending, including Russia’s recent invasion of Ukraine, on our financial performance and financial condition cannot be quantified at this time. We have made reasonable estimates and judgments of the impact of these events within our financial statements and there may be material changes to those estimates in future periods. We have taken actions to improve our liquidity, including completing various capital market transactions and making capital expenditure and operating expense reductions, and we expect to continue to pursue other opportunities to improve our liquidity.
Based on these actions and assumptions regarding the impact of COVID-19 and other events impacting travel and consumer discretionary spending, including Russia’s recent invasion of Ukraine, and considering our available liquidity of $3.1 billion as of March 31, 2022, including cash and cash equivalents and our $1 billion undrawn commitment, we have concluded that we have sufficient liquidity to satisfy our obligations for at least the next twelve months.
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; however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages was phased in gradually. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021, which are included in our most recent Annual Report on Form 10-K filed with the SEC on March 1, 2022.
Revisions to Previously Reported Quarterly Financial Statements
During the fourth quarter of 2021, the Company identified an error in its Consolidated Balance Sheet as of March 31, 2021 and Consolidated Statement of Cash Flows for the three months ended March 31, 2021. Based on their nature, certain amounts shown as cash and cash equivalents should have been classified as short-term investments. We have determined that these errors were not material to the previously issued interim financial statements for the period ended March 31, 2021.
As a result of the error, the amounts previously reported as cash and cash equivalents have been reclassified to cash flows from investing activities in the Consolidated Statement of Cash Flows for the three months ended March 31, 2021 as follows (in thousands):
Loss Per Share
A reconciliation between basic and diluted loss per share was as follows (in thousands, except share and per share data):
For the three months ended March 31, 2022 and 2021, a total of 86.4 million and 120.8 million, respectively, shares have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.
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. Gains or losses resulting from transactions denominated in other currencies are recognized in our consolidated statements of operations within other income (expense), net. We recognized a gain of $8.4 million and $4.8 million for the three months ended March 31, 2022 and 2021, respectively, related to transactions denominated in other currencies.
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.
Accounts Receivable, Net
Accounts receivable, net included $426.2 million and $1.1 billion due from credit card processors as of March 31, 2022 and December 31, 2021, respectively.
Recently Issued Accounting Guidance
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provided guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions
impacted by reference rate reform. The provisions apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 are optional and are effective from March 12, 2020 through December 31, 2022. As of March 31, 2022, we have not adopted any expedients and exceptions under ASU 2020-04. We will continue to evaluate the impact of ASU 2020-04 on our consolidated financial statements.
The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef