XML 30 R15.htm IDEA: XBRL DOCUMENT
v3.20.2

Leases | 9 Months Ended
--- | ---
Sep. 30, 2020
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 sheets as of September 30, 2020 and December 31, 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. During the three months ended March 31, 2020, we determined that the lease for Silver Explorer, operated by Silversea Cruises and previously classified as a finance lease, is an operating lease based on modification of the terms of the lease during the quarter. Due to the three-month reporting lag for Silversea Cruises, the reclassification of the lease to an operating lease was reflected in our Consolidated Balance Sheet as of June 30, 2020. The operating lease for Silver Explorer will expire in 2023. During the first quarter ended March 31, 2020, we identified that the undiscounted cash flows of certain right-of-use assets, were less than their carrying values. Events surrounding the COVID-19 pandemic negatively impacted the expected undiscounted cash flows of these assets. As a result of this determination, we evaluated these assets pursuant to our long-lived asset impairment test, which resulted in an impairment charge of $45.9 million to write down these right-of-use assets to their estimated fair values during the quarter ended March 31, 2020. Due to the continuing effect of COVID-19, we updated our analysis during the second quarter ended June 30, 2020, which resulted in an impairment of the Silver Explorer right-of-use asset of $13.3 million to write down the asset to its estimated fair value as of June 30, 2020. For the quarter ended September 30, 2020, we had no further indication of impairment to the carrying amount of our right of use assets. Our finance leases include Silver Whisper, operated by Silversea Cruises, and 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. The finance lease for Silver Whisper will expire in 2022, subject to an option to purchase the ship. 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 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. We have a residual value guarantee associated with our Port of Miami Terminal "A" operating lease agreement ("Port of Miami terminal lease") that approximates a percentage of the 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. Also in connection with the Port of Miami terminal lease, we are required to deliver on or before July 18, 2021, cash collateral in an amount equal to the lesser of our residual value guarantee or the aggregate balance of the lenders' terminal construction debt, estimated at $181.1 million as of September 30, 2020. The collateral is to be returned when all amounts due by us under the lease have been paid in full. During the quarter ended June 30, 2020, we amended our Port of Miami terminal lease to increase the lien basket in line with our debt facilities and obtain a financial covenant waiver to the first quarter of 2021. This obligation is prepayable at any time without penalty. As of September 30, 2020, we were in compliance with the amended covenants under the lease agreement. 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. 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. Commencing in 2016 when we sold our 51% interest in the Pullmantur brand to Pullmantur Holdings, and continuing through the quarter ended June 30, 2020, we bareboat chartered to Pullmantur Holdings the vessels operated by the Pullmantur brand. On June 22, 2020, Pullmantur S.A., a subsidiary of Pullmantur Holdings, filed for reorganization in Spain, at which time we terminated these bareboat charters. See Note 6. Other Assets for further discussion of Pullmantur. We accounted for the bareboat charters of these vessels as operating leases for which we were the lessor. The components of lease expense were as follows (in thousands):
| Consolidated Statement of Comprehensive Income (Loss) Classification | Quarter Ended September 30, 2020 |  | Nine Months Ended September 30, 2020
Lease costs: |  |  |  |
Operating lease costs | Commission, transportation and other | $ | 17,648 |  |  | $ | 50,268 |
Operating lease costs | Other operating expenses | 7,179 |  |  | 21,920 |
Operating lease costs | Marketing, selling and administrative expenses | 5,686 |  |  | 16,716 |
Financial lease costs: |  |  |  |
Amortization of right-of-use-assets | Depreciation and amortization expenses | 946 |  |  | 2,941 |
Interest on lease liabilities | Interest expense, net of interest capitalized | 557 |  |  | 3,754 |
Total lease costs |  | $ | 32,016 |  |  | $ | 95,599 |
In addition, certain of our berthing agreements include variable lease costs based on the number of passengers berthed. During the nine months ended September 30, 2020, we had $25.6 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss). For the quarter ended September 30, 2020 there were no variable lease costs as a result of the ongoing suspension of our cruise operations. During the quarter and nine months ended September 30, 2019, we had $17.3 million and $73.1 million, respectively, of variable lease costs recorded within C ommission, 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 September 30, 2020 |  |
Weighted average years of the remaining lease term |  |  |
Operating leases | 7.8 |  |
Finance leases | 40.4 |  |
Weighted average discount rate |  |  |
Operating leases | 4.36 | % |  |
Finance leases | 6.75 | % |  |
Supplemental cash flow information related to leases is as follows (in thousands):
| Nine Months Ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows from operating leases | $ | 97,903 |
Operating cash flows from finance leases | $ | 3,754 |
Financing cash flows from finance leases | $ | 13,291 |
As of September 30, 2020, maturities related to lease liabilities were as follows (in thousands):
Year | Operating Leases |  | Finance Leases
Remainder of 2020 | $ | 34,259 |  |  | $ | 34,862 |
2021 | 122,125 |  |  | 35,132 |
2022 | 110,127 |  |  | 23,480 |
2023 | 104,240 |  |  | 12,539 |
2024 | 75,622 |  |  | 12,529 |
Thereafter | 417,143 |  |  | 407,078 |
Total lease payments | 863,516 |  |  | 525,620 |
Less: Interest | (214,771) |  |  | (308,667) |
Present value of lease liabilities | $ | 648,745 |  |  | $ | 216,953 |
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 sheets as of September 30, 2020 and December 31, 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. During the three months ended March 31, 2020, we determined that the lease for Silver Explorer, operated by Silversea Cruises and previously classified as a finance lease, is an operating lease based on modification of the terms of the lease during the quarter. Due to the three-month reporting lag for Silversea Cruises, the reclassification of the lease to an operating lease was reflected in our Consolidated Balance Sheet as of June 30, 2020. The operating lease for Silver Explorer will expire in 2023. During the first quarter ended March 31, 2020, we identified that the undiscounted cash flows of certain right-of-use assets, were less than their carrying values. Events surrounding the COVID-19 pandemic negatively impacted the expected undiscounted cash flows of these assets. As a result of this determination, we evaluated these assets pursuant to our long-lived asset impairment test, which resulted in an impairment charge of $45.9 million to write down these right-of-use assets to their estimated fair values during the quarter ended March 31, 2020. Due to the continuing effect of COVID-19, we updated our analysis during the second quarter ended June 30, 2020, which resulted in an impairment of the Silver Explorer right-of-use asset of $13.3 million to write down the asset to its estimated fair value as of June 30, 2020. For the quarter ended September 30, 2020, we had no further indication of impairment to the carrying amount of our right of use assets. Our finance leases include Silver Whisper, operated by Silversea Cruises, and 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. The finance lease for Silver Whisper will expire in 2022, subject to an option to purchase the ship. 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 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. We have a residual value guarantee associated with our Port of Miami Terminal "A" operating lease agreement ("Port of Miami terminal lease") that approximates a percentage of the 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. Also in connection with the Port of Miami terminal lease, we are required to deliver on or before July 18, 2021, cash collateral in an amount equal to the lesser of our residual value guarantee or the aggregate balance of the lenders' terminal construction debt, estimated at $181.1 million as of September 30, 2020. The collateral is to be returned when all amounts due by us under the lease have been paid in full. During the quarter ended June 30, 2020, we amended our Port of Miami terminal lease to increase the lien basket in line with our debt facilities and obtain a financial covenant waiver to the first quarter of 2021. This obligation is prepayable at any time without penalty. As of September 30, 2020, we were in compliance with the amended covenants under the lease agreement. 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. 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. Commencing in 2016 when we sold our 51% interest in the Pullmantur brand to Pullmantur Holdings, and continuing through the quarter ended June 30, 2020, we bareboat chartered to Pullmantur Holdings the vessels operated by the Pullmantur brand. On June 22, 2020, Pullmantur S.A., a subsidiary of Pullmantur Holdings, filed for reorganization in Spain, at which time we terminated these bareboat charters. See Note 6. Other Assets for further discussion of Pullmantur. We accounted for the bareboat charters of these vessels as operating leases for which we were the lessor. The components of lease expense were as follows (in thousands):
| Consolidated Statement of Comprehensive Income (Loss) Classification | Quarter Ended September 30, 2020 |  | Nine Months Ended September 30, 2020
Lease costs: |  |  |  |
Operating lease costs | Commission, transportation and other | $ | 17,648 |  |  | $ | 50,268 |
Operating lease costs | Other operating expenses | 7,179 |  |  | 21,920 |
Operating lease costs | Marketing, selling and administrative expenses | 5,686 |  |  | 16,716 |
Financial lease costs: |  |  |  |
Amortization of right-of-use-assets | Depreciation and amortization expenses | 946 |  |  | 2,941 |
Interest on lease liabilities | Interest expense, net of interest capitalized | 557 |  |  | 3,754 |
Total lease costs |  | $ | 32,016 |  |  | $ | 95,599 |
In addition, certain of our berthing agreements include variable lease costs based on the number of passengers berthed. During the nine months ended September 30, 2020, we had $25.6 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss). For the quarter ended September 30, 2020 there were no variable lease costs as a result of the ongoing suspension of our cruise operations. During the quarter and nine months ended September 30, 2019, we had $17.3 million and $73.1 million, respectively, of variable lease costs recorded within C ommission, 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 September 30, 2020 |  |
Weighted average years of the remaining lease term |  |  |
Operating leases | 7.8 |  |
Finance leases | 40.4 |  |
Weighted average discount rate |  |  |
Operating leases | 4.36 | % |  |
Finance leases | 6.75 | % |  |
Supplemental cash flow information related to leases is as follows (in thousands):
| Nine Months Ended September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities: |
Operating cash flows from operating leases | $ | 97,903 |
Operating cash flows from finance leases | $ | 3,754 |
Financing cash flows from finance leases | $ | 13,291 |
As of September 30, 2020, maturities related to lease liabilities were as follows (in thousands):
Year | Operating Leases |  | Finance Leases
Remainder of 2020 | $ | 34,259 |  |  | $ | 34,862 |
2021 | 122,125 |  |  | 35,132 |
2022 | 110,127 |  |  | 23,480 |
2023 | 104,240 |  |  | 12,539 |
2024 | 75,622 |  |  | 12,529 |
Thereafter | 417,143 |  |  | 407,078 |
Total lease payments | 863,516 |  |  | 525,620 |
Less: Interest | (214,771) |  |  | (308,667) |
Present value of lease liabilities | $ | 648,745 |  |  | $ | 216,953 |

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