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Leases | 12 Months Ended
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Dec. 31, 2023
Leases [Abstract] |
Leases | Note 9. Leases Operating leases Our operating leases primarily relate to preferred berthing arrangements, real estate, and shipboard equipment which are included within Operating lease right-of-use asset s 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 December 31, 2023 and 2022. 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. Our operating leases included the operating lease for Silver Explorer which expired in the fourth quarter of 2023 and the ship was returned to the lessor. In November 2023 we executed a modification to our preferred berthing agreement with Miami-Dade County ("County") to extend the expiration from 2027 to 2042, inclusive of development plans for the County to finance the construction of a new and improved cruise Terminal G at PortMiami. The total aggregate amount of the operating lease liabilities recorded for this berthing agreements was $167 million and $79 million as of December 31, 2023 and December 31, 2022, respectively. In addition, there will be future remeasurements as the County completes several construction milestones throughout the term of the extended lease. The most significant of which will be for Terminal G, which will include a remeasurement of the operating lease in 2027 or later, when the County satisfies substantial completion, as the minimum lease payments will increase to approximately $55 million per year, with expected 3% annual increases thereafter. 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 primarily range from one to 10 years and the renewal periods for berthing agreements primarily 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. 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 Term SOFR 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. Finance leases Our finance leases primarily relate to buildings and surrounding land located at our Miami headquarters, and our lease for Silver Dawn. Finance leases are included within Property, and Equipment, net, and Long-term debt with the current portion of the liability included within Current portion of long-term debt in our consolidated balance sheets as of December 31, 2023 and 2022. The Company's master lease agreement (“Master Lease”) with Miami-Dade County related to the buildings and surrounding land located at our Miami headquarters is classified as a finance lease in accordance with ASC 842, Leases. The Master Lease includes two five-year options to extend the lease which we are reasonably certain to exercise. In November 2023 we executed a modification to the Master Lease agreement to extend its expiration from 2076 to 2077 after coming to an agreement with Miami-Dade County on the financing plans to finalize the development of the buildings and land. The modification of the Master Lease did not change the classification of the lease. The total aggregate amount of the finance lease liabilities recorded for this Master Lease was $104 million and $56 million as of December 31, 2023 and December 31, 2022, respectively. The development of the new campus buildings are expected to be completed in 2026, and the lease components will be recorded within our consolidated financial statements upon commencement. Silversea Cruises operates Silver Dawn under a sale-leaseback agreement with a bargain purchase option at the end of the 15 year lease term. Due to the bargain purchase option at the end of the lease term in 2036 whereby Silversea Cruises is reasonably certain of obtaining ownership of the ship, Silver Dawn is accounted for as a finance lease. The lease includes other purchase options beginning in year three, none of which are reasonably certain of being exercised at this time. The total aggregate amount of finance lease liabilities recorded for this ship was $246 million and $265 million as of December 31, 2023 and December 31, 2022, respectively. The lease payments on the Silver Dawn are subject to adjustments based on the Term SOFR rate. Supplemental balance sheet information for leases was as follows (in millions):
| As of December 31, 2023 |  | As of December 31, 2022
Lease assets: |  |  |
Finance lease right-of-use assets, net: |  |  |
Property and equipment, gross | $ | 520 |  |  | $ | 669 |
Accumulated depreciation | (69) |  |  | (124) |
Property and equipment, net | 451 |  |  | 545 |
Operating lease right-of-use assets | 611 |  |  | 538 |
Total lease assets | $ | 1,062 |  |  | $ | 1,083 |
Lease liabilities: |  |  |
Finance lease liabilities: |  |  |
Current portion of debt | $ | 26 |  |  | $ | 34 |
Long-term debt | 343 |  |  | 317 |
Total finance lease liabilities | 369 |  |  | 351 |
Operating lease liabilities: |  |  |
Current portion of operating lease liabilities | 65 |  |  | 80 |
Long-term operating lease liabilities | 613 |  |  | 523 |
Total operating lease liabilities | 678 |  |  | 603 |
Total lease liabilities | $ | 1,047 |  |  | $ | 954 |
The components of lease costs were as follows (in millions):
| Consolidated Statement of Comprehensive Income (Loss) Classification |  | Year Ended December 31, 2023 |  | Year Ended December 31, 2022 |  | Year Ended December 31, 2021
Lease costs: |  |  |  |  |  |  |
Operating lease costs | Commission, transportation and other |  | $ | 183 |  |  | $ | 127 |  |  | $ | 19 |
Operating lease costs | Other operating expenses |  | 22 |  |  | 22 |  |  | 23 |
Operating lease costs | Marketing, selling and administrative expenses |  | 21 |  |  | 19 |  |  | 18 |
Finance lease costs: |  |  |  |  |  |  |
Amortization of right-of-use-assets | Depreciation and amortization expenses |  | 22 |  |  | 24 |  |  | 17 |
Interest on lease liabilities | Interest expense, net of interest capitalized |  | 30 |  |  | 22 |  |  | 3 |
Total lease costs |  |  | $ | 278 |  |  | $ | 214 |  |  | $ | 80 |
In addition, certain of our berthing agreements include variable lease costs based on the number of passengers berthed. During the twelve months ended December 31, 2023 and December 31, 2022, we had $85 million and $66 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss), respectively. These variable lease costs are included within the balances presented above. The weighted average of the remaining lease terms and weighted average discount rates are as follows:
| As of December 31, 2023 |  | As of December 31, 2022
Weighted average of the remaining lease term |  |  |
Operating leases | 19.43 |  | 17.69
Finance leases | 23.92 |  | 19.26
Weighted average discount rate |  |  |
Operating leases | 7.53 | % |  | 6.92 | %
Finance leases | 5.83 | % |  | 6.43 | %
Supplemental cash flow information related to leases is as follows (in millions):
| Year Ended December 31, 2023 |  | Year Ended December 31, 2022 |  | Year Ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |
Operating cash flows from operating leases | $ | 178 |  |  | $ | 127 |  |  | $ | 43 |
Operating cash flows from finance leases | 30 |  |  | 22 |  |  | 3 |
Financing cash flows from finance leases | $ | 31 |  |  | $ | 48 |  |  | $ | 24 |
As of December 31, 2023, maturities related to lease liabilities were as follows (in millions):
Years | Operating Leases |  | Finance Leases
2024 | $ | 113 |  |  | $ | 47 |
2025 | 106 |  |  | 45 |
2026 | 96 |  |  | 39 |
2027 | 76 |  |  | 38 |
2028 | 69 |  |  | 37 |
Thereafter | 1,030 |  |  | 683 |
Total lease payments | 1,490 |  |  | 889 |
Less: Interest | (812) |  |  | (520) |
Present value of lease liabilities | $ | 678 |  |  | $ | 369 |
Leases | Note 9. Leases Operating leases Our operating leases primarily relate to preferred berthing arrangements, real estate, and shipboard equipment which are included within Operating lease right-of-use asset s 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 December 31, 2023 and 2022. 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. Our operating leases included the operating lease for Silver Explorer which expired in the fourth quarter of 2023 and the ship was returned to the lessor. In November 2023 we executed a modification to our preferred berthing agreement with Miami-Dade County ("County") to extend the expiration from 2027 to 2042, inclusive of development plans for the County to finance the construction of a new and improved cruise Terminal G at PortMiami. The total aggregate amount of the operating lease liabilities recorded for this berthing agreements was $167 million and $79 million as of December 31, 2023 and December 31, 2022, respectively. In addition, there will be future remeasurements as the County completes several construction milestones throughout the term of the extended lease. The most significant of which will be for Terminal G, which will include a remeasurement of the operating lease in 2027 or later, when the County satisfies substantial completion, as the minimum lease payments will increase to approximately $55 million per year, with expected 3% annual increases thereafter. 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 primarily range from one to 10 years and the renewal periods for berthing agreements primarily 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. 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 Term SOFR 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. Finance leases Our finance leases primarily relate to buildings and surrounding land located at our Miami headquarters, and our lease for Silver Dawn. Finance leases are included within Property, and Equipment, net, and Long-term debt with the current portion of the liability included within Current portion of long-term debt in our consolidated balance sheets as of December 31, 2023 and 2022. The Company's master lease agreement (“Master Lease”) with Miami-Dade County related to the buildings and surrounding land located at our Miami headquarters is classified as a finance lease in accordance with ASC 842, Leases. The Master Lease includes two five-year options to extend the lease which we are reasonably certain to exercise. In November 2023 we executed a modification to the Master Lease agreement to extend its expiration from 2076 to 2077 after coming to an agreement with Miami-Dade County on the financing plans to finalize the development of the buildings and land. The modification of the Master Lease did not change the classification of the lease. The total aggregate amount of the finance lease liabilities recorded for this Master Lease was $104 million and $56 million as of December 31, 2023 and December 31, 2022, respectively. The development of the new campus buildings are expected to be completed in 2026, and the lease components will be recorded within our consolidated financial statements upon commencement. Silversea Cruises operates Silver Dawn under a sale-leaseback agreement with a bargain purchase option at the end of the 15 year lease term. Due to the bargain purchase option at the end of the lease term in 2036 whereby Silversea Cruises is reasonably certain of obtaining ownership of the ship, Silver Dawn is accounted for as a finance lease. The lease includes other purchase options beginning in year three, none of which are reasonably certain of being exercised at this time. The total aggregate amount of finance lease liabilities recorded for this ship was $246 million and $265 million as of December 31, 2023 and December 31, 2022, respectively. The lease payments on the Silver Dawn are subject to adjustments based on the Term SOFR rate. Supplemental balance sheet information for leases was as follows (in millions):
| As of December 31, 2023 |  | As of December 31, 2022
Lease assets: |  |  |
Finance lease right-of-use assets, net: |  |  |
Property and equipment, gross | $ | 520 |  |  | $ | 669 |
Accumulated depreciation | (69) |  |  | (124) |
Property and equipment, net | 451 |  |  | 545 |
Operating lease right-of-use assets | 611 |  |  | 538 |
Total lease assets | $ | 1,062 |  |  | $ | 1,083 |
Lease liabilities: |  |  |
Finance lease liabilities: |  |  |
Current portion of debt | $ | 26 |  |  | $ | 34 |
Long-term debt | 343 |  |  | 317 |
Total finance lease liabilities | 369 |  |  | 351 |
Operating lease liabilities: |  |  |
Current portion of operating lease liabilities | 65 |  |  | 80 |
Long-term operating lease liabilities | 613 |  |  | 523 |
Total operating lease liabilities | 678 |  |  | 603 |
Total lease liabilities | $ | 1,047 |  |  | $ | 954 |
The components of lease costs were as follows (in millions):
| Consolidated Statement of Comprehensive Income (Loss) Classification |  | Year Ended December 31, 2023 |  | Year Ended December 31, 2022 |  | Year Ended December 31, 2021
Lease costs: |  |  |  |  |  |  |
Operating lease costs | Commission, transportation and other |  | $ | 183 |  |  | $ | 127 |  |  | $ | 19 |
Operating lease costs | Other operating expenses |  | 22 |  |  | 22 |  |  | 23 |
Operating lease costs | Marketing, selling and administrative expenses |  | 21 |  |  | 19 |  |  | 18 |
Finance lease costs: |  |  |  |  |  |  |
Amortization of right-of-use-assets | Depreciation and amortization expenses |  | 22 |  |  | 24 |  |  | 17 |
Interest on lease liabilities | Interest expense, net of interest capitalized |  | 30 |  |  | 22 |  |  | 3 |
Total lease costs |  |  | $ | 278 |  |  | $ | 214 |  |  | $ | 80 |
In addition, certain of our berthing agreements include variable lease costs based on the number of passengers berthed. During the twelve months ended December 31, 2023 and December 31, 2022, we had $85 million and $66 million of variable lease costs recorded within Commission, transportation and other in our consolidated statement of comprehensive income (loss), respectively. These variable lease costs are included within the balances presented above. The weighted average of the remaining lease terms and weighted average discount rates are as follows:
| As of December 31, 2023 |  | As of December 31, 2022
Weighted average of the remaining lease term |  |  |
Operating leases | 19.43 |  | 17.69
Finance leases | 23.92 |  | 19.26
Weighted average discount rate |  |  |
Operating leases | 7.53 | % |  | 6.92 | %
Finance leases | 5.83 | % |  | 6.43 | %
Supplemental cash flow information related to leases is as follows (in millions):
| Year Ended December 31, 2023 |  | Year Ended December 31, 2022 |  | Year Ended December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |
Operating cash flows from operating leases | $ | 178 |  |  | $ | 127 |  |  | $ | 43 |
Operating cash flows from finance leases | 30 |  |  | 22 |  |  | 3 |
Financing cash flows from finance leases | $ | 31 |  |  | $ | 48 |  |  | $ | 24 |
As of December 31, 2023, maturities related to lease liabilities were as follows (in millions):
Years | Operating Leases |  | Finance Leases
2024 | $ | 113 |  |  | $ | 47 |
2025 | 106 |  |  | 45 |
2026 | 96 |  |  | 39 |
2027 | 76 |  |  | 38 |
2028 | 69 |  |  | 37 |
Thereafter | 1,030 |  |  | 683 |
Total lease payments | 1,490 |  |  | 889 |
Less: Interest | (812) |  |  | (520) |
Present value of lease liabilities | $ | 678 |  |  | $ | 369 |

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