XML 27 R16.htm IDEA: XBRL DOCUMENT
v3.19.2

Leases | 6 Months Ended
--- | ---
Jun. 30, 2019
Leases [Abstract] |
Leases | 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 sheet as of June 30, 2019. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. Refer to Note 2. Summary of Significant Accounting Policies, for further information on the adoption of ASC 842. Finance leases are included within Property and equipment, net and Long-term debt, with the current portion of the debt reported within Current portion of debt, in our consolidated balance sheets. Our finance leases include two ships, Silver Whisper and Silver Explorer, operated by Silversea Cruises. The finance lease for Silver Whisper will expire in 2022, subject to an option to purchase the ship, and the finance lease for Silver Explorer will expire in 2021, subject to an option to extend the lease for up to an additional 6 years. In June 2019, the Company entered into a new master lease agreement (“Master Lease”) with Miami-Dade County relating to the buildings and surrounding land located at its Miami headquarters, which are classified as finance leases in accordance with ASC 842 Leases. Prior to entering into the Master Lease, the buildings were classified as operating lease assets. The finance lease for the buildings and land will expire in 2072, which includes an initial 43 years lease term and two five-year options to extend the lease. We consider the possibility of exercising the two five-year options reasonably certain. 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 year 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. Additionally, we do have a residual value guarantee associated with our lease of a terminal at PortMiami in Miami, Florida that approximates a percentage of cost of the asset as of the inception of the lease. We consider the possibility of incurring costs associated with the residual value guarantee to be remote. 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 LIBOR 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. We used the incremental borrowing rate as of the adoption date for operating leases that commenced prior to that date. 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. Additionally, we bareboat charter to Pullmantur Holdings the vessels currently operated by its brands, which were retained by us following the sale of our 51% interest in Pullmantur Holdings in 2016. We account for the bareboat charters of these vessels as operating leases for which we are the lessor. The remaining payments and term of these leases are immaterial to our consolidated financial statements. Supplemental balance sheet information for leases was as follows (in thousands):
| As of June 30, 2019
Lease assets: |
Finance lease right-of-use assets, net: |
Property and equipment, gross | $ | 373,867 |
Accumulated depreciation | (45,412 | )
Property and equipment, net | 328,455 |
Operating lease right-of-use assets | 720,854 |
Total lease assets | $ | 1,049,309 |
Lease liabilities: |
Finance lease liabilities: |
Current portion of debt | $ | 24,573 |
Long-term debt | 218,106 |
Total finance lease liabilities | 242,679 |
Operating lease liabilities: |
Current portion of operating lease liabilities | 92,523 |
Long-term operating lease liabilities | 644,088 |
Total operating lease liabilities | 736,611 |
Total lease liabilities | $ | 979,290 |
The components of lease expense were as follows (in thousands):
| Consolidated Statement of Comprehensive Income (Loss) Classification | Quarter Ended June 30, 2019 | Six Months Ended June 30, 2019
Lease costs: |  |  |
Operating lease costs | Commission, transportation and other | $ | 19,057 |  | $ | 38,113 |
Operating lease costs | Other operating expenses | 6,930 |  | 13,861 |
Operating lease costs | Marketing, selling and administrative expenses | 5,018 |  | 10,225 |
Finance lease costs: |  |  |
Amortization of right-of-use-assets | Depreciation and amortization expenses | 5,529 |  | 8,724 |
Interest on lease liabilities | Interest expense, net of interest capitalized | 1,570 |  | 2,166 |
Total lease costs |  | $ | 38,104 |  | $ | 73,089 |
In addition, certain of our berth agreements include variable lease costs based on the number of passengers berthed. During the quarter and six months ended June 30, 2019, we had $21.5 million and $55.8 million, respectively, of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss). Weighted average of the remaining lease terms and weighted average discount rates are as follows:
| As of June 30, 2019
Weighted average of the remaining lease term |
Operating leases | 10.7 years |
Finance leases | 28.6 years |
Weighted average discount rate |
Operating leases | 4.65 | %
Finance leases | 4.40 | %
Supplemental cash flow information related to leases is as follows (in thousands):
| Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows from operating leases | $ | 63,221 |
Operating cash flows from finance leases | $ | 2,166 |
Financing cash flows from finance leases | $ | 14,607 |
Supplemental noncash information: |
Right-of-use assets obtained in exchange for lease obligations: |
Finance leases | $ | 122,237 |
As of June 30, 2019, maturities related to lease liabilities were as follows (in thousands):
Year | Operating Leases |  | Finance Leases
Remainder of 2019 | $ | 61,702 |  |  | $ | 23,619 |
2020 | 122,781 |  |  | 43,411 |
2021 | 110,025 |  |  | 45,934 |
2022 | 103,561 |  |  | 22,832 |
2023 | 101,442 |  |  | 11,891 |
Thereafter | 492,551 |  |  | 414,104 |
Total lease payments | 992,062 |  |  | 561,791 |
Less: Interest | (255,451 | ) |  | (319,112 | )
Present value of lease liabilities | $ | 736,611 |  |  | $ | 242,679 |
Operating lease payments do not include any costs related to options to extend lease terms as none are reasonably certain of being exercised. Under ASC 840, Leases, future minimum lease payments under noncancelable operating leases as of December 31, 2018 were as follows (in thousands):
Year |
2019 | $ | 67,682 |
2020 | 64,237 |
2021 | 56,142 |
2022 | 52,759 |
2023 | 52,522 |
Thereafter | 383,974 |
| $ | 677,316 |
Leases | 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 sheet as of June 30, 2019. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. Refer to Note 2. Summary of Significant Accounting Policies, for further information on the adoption of ASC 842. Finance leases are included within Property and equipment, net and Long-term debt, with the current portion of the debt reported within Current portion of debt, in our consolidated balance sheets. Our finance leases include two ships, Silver Whisper and Silver Explorer, operated by Silversea Cruises. The finance lease for Silver Whisper will expire in 2022, subject to an option to purchase the ship, and the finance lease for Silver Explorer will expire in 2021, subject to an option to extend the lease for up to an additional 6 years. In June 2019, the Company entered into a new master lease agreement (“Master Lease”) with Miami-Dade County relating to the buildings and surrounding land located at its Miami headquarters, which are classified as finance leases in accordance with ASC 842 Leases. Prior to entering into the Master Lease, the buildings were classified as operating lease assets. The finance lease for the buildings and land will expire in 2072, which includes an initial 43 years lease term and two five-year options to extend the lease. We consider the possibility of exercising the two five-year options reasonably certain. 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 year 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. Additionally, we do have a residual value guarantee associated with our lease of a terminal at PortMiami in Miami, Florida that approximates a percentage of cost of the asset as of the inception of the lease. We consider the possibility of incurring costs associated with the residual value guarantee to be remote. 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 LIBOR 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. We used the incremental borrowing rate as of the adoption date for operating leases that commenced prior to that date. 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. Additionally, we bareboat charter to Pullmantur Holdings the vessels currently operated by its brands, which were retained by us following the sale of our 51% interest in Pullmantur Holdings in 2016. We account for the bareboat charters of these vessels as operating leases for which we are the lessor. The remaining payments and term of these leases are immaterial to our consolidated financial statements. Supplemental balance sheet information for leases was as follows (in thousands):
| As of June 30, 2019
Lease assets: |
Finance lease right-of-use assets, net: |
Property and equipment, gross | $ | 373,867 |
Accumulated depreciation | (45,412 | )
Property and equipment, net | 328,455 |
Operating lease right-of-use assets | 720,854 |
Total lease assets | $ | 1,049,309 |
Lease liabilities: |
Finance lease liabilities: |
Current portion of debt | $ | 24,573 |
Long-term debt | 218,106 |
Total finance lease liabilities | 242,679 |
Operating lease liabilities: |
Current portion of operating lease liabilities | 92,523 |
Long-term operating lease liabilities | 644,088 |
Total operating lease liabilities | 736,611 |
Total lease liabilities | $ | 979,290 |
The components of lease expense were as follows (in thousands):
| Consolidated Statement of Comprehensive Income (Loss) Classification | Quarter Ended June 30, 2019 | Six Months Ended June 30, 2019
Lease costs: |  |  |
Operating lease costs | Commission, transportation and other | $ | 19,057 |  | $ | 38,113 |
Operating lease costs | Other operating expenses | 6,930 |  | 13,861 |
Operating lease costs | Marketing, selling and administrative expenses | 5,018 |  | 10,225 |
Finance lease costs: |  |  |
Amortization of right-of-use-assets | Depreciation and amortization expenses | 5,529 |  | 8,724 |
Interest on lease liabilities | Interest expense, net of interest capitalized | 1,570 |  | 2,166 |
Total lease costs |  | $ | 38,104 |  | $ | 73,089 |
In addition, certain of our berth agreements include variable lease costs based on the number of passengers berthed. During the quarter and six months ended June 30, 2019, we had $21.5 million and $55.8 million, respectively, of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss). Weighted average of the remaining lease terms and weighted average discount rates are as follows:
| As of June 30, 2019
Weighted average of the remaining lease term |
Operating leases | 10.7 years |
Finance leases | 28.6 years |
Weighted average discount rate |
Operating leases | 4.65 | %
Finance leases | 4.40 | %
Supplemental cash flow information related to leases is as follows (in thousands):
| Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows from operating leases | $ | 63,221 |
Operating cash flows from finance leases | $ | 2,166 |
Financing cash flows from finance leases | $ | 14,607 |
Supplemental noncash information: |
Right-of-use assets obtained in exchange for lease obligations: |
Finance leases | $ | 122,237 |
As of June 30, 2019, maturities related to lease liabilities were as follows (in thousands):
Year | Operating Leases |  | Finance Leases
Remainder of 2019 | $ | 61,702 |  |  | $ | 23,619 |
2020 | 122,781 |  |  | 43,411 |
2021 | 110,025 |  |  | 45,934 |
2022 | 103,561 |  |  | 22,832 |
2023 | 101,442 |  |  | 11,891 |
Thereafter | 492,551 |  |  | 414,104 |
Total lease payments | 992,062 |  |  | 561,791 |
Less: Interest | (255,451 | ) |  | (319,112 | )
Present value of lease liabilities | $ | 736,611 |  |  | $ | 242,679 |
Operating lease payments do not include any costs related to options to extend lease terms as none are reasonably certain of being exercised. Under ASC 840, Leases, future minimum lease payments under noncancelable operating leases as of December 31, 2018 were as follows (in thousands):
Year |
2019 | $ | 67,682 |
2020 | 64,237 |
2021 | 56,142 |
2022 | 52,759 |
2023 | 52,522 |
Thereafter | 383,974 |
| $ | 677,316 |

X
- References No definition available. + Details
Name: | us-gaap_LeasesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
Name: | us-gaap_LesseeFinanceLeasesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
Name: | us-gaap_LesseeOperatingLeasesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration