Property and Equipment

12 Months Ended

Dec. 31, 2022

Property, Plant and Equipment [Abstract]

Property and Equipment

Note 6. Property and Equipment

Property and equipment consists of the following (in thousands):

	As of December 31,
	2022		2021
Ships	$	34,343,826	$	31,357,703
Ship improvements	2,367,289		2,152,457
Ships under construction	1,060,736		1,180,486
Land, buildings and improvements, including leasehold improvements and port facilities	771,739		746,785
Computer hardware and software, transportation equipment and other	1,531,837		1,650,249
Total property and equipment	40,075,427		37,087,680
Less—accumulated depreciation and amortization(1)	(12,528,982)		(11,179,731)
	$	27,546,445	$	25,907,949

(1)Amount includes accumulated depreciation and amortization for assets in service.

Ships under construction include progress payments for the construction of new ships as well as planning, design, capitalized interest and other associated costs. We capitalized interest costs of $64.1 million, $58.8 million, and $59.1 million for the years ended December 31, 2022, 2021 and 2020, respectively.

In January of 2022 and April 2022, we took delivery of Wonder of the Seas and Celebrity Beyond, respectively. Refer to Note 8. Debt for further information on the financings for Wonder of the Seas and Celebrity Beyond. In our consolidated statement of cash flows for the year ended December 31, 2022, the acceptance of the ships and satisfaction of our obligations under the shipbuilding contract were classified as outflows and constructive disbursements within Investing Activities while the amounts novated and effectively advanced from our lenders under our previously committed financing arrangements were classified as inflows and constructive receipts within Financing Activities.

In July 2022, we purchased the Silver Endeavour for our Silversea Cruises brand for $277 million, including transaction fees. The ship entered service during the fourth quarter of 2022. For information regarding the financing of the ship, refer to Note 8. Debt.

During 2021, we took delivery of Odyssey of the Seas and Silver Dawn. The November 2021 delivery and related financing for the Silver Dawn was reported in our consolidated financial statements as of and for the year ended December 31, 2021, as a result of the elimination of the Silversea Cruises three month reporting lag. Refer to Note 9. Leases for for further information on the Silver Dawn finance lease.

Long-lived Assets impairments

We review our long-lived assets for impairment whenever events or circumstances indicate potential impairment losses exist. No triggering events were identified during the years ended December 31, 2022 and 2021.

During 2020, a number of vessels were found to have net carrying values in excess of their estimated undiscounted future cash flows and, as such, were subject to fair value assessments. Fair value was determined based on our intended use of the identified vessels and, as such, we used a combination of discounted cash flows, replacement cost, scrap and residual value techniques to estimate fair value. Differences between the estimated fair values and the net carrying values were recorded as an impairment charge within the period the loss was identified. Consequently, we recorded $635.5 million of impairment losses during the year ended 2020. Included in this 2020 amount are $171.3 million impairment losses recorded for the three ships that we chartered to Pullmantur Holdings, prior to its filing for reorganization. Refer to Note 7. Other Assets for further information regarding Pullmantur's reorganization. During the quarter ended September 30, 2020, we sold the ships previously chartered to Pullmantur Holdings to third parties for amounts approximating their carrying values and no further impairment was recorded. Also included in the $635.5 million impairment loss for the year ended December 31, 2020, is a $166.8 million impairment charge for the three Azamara ships included in the sale of the Azamara brand, effective March 19, 2021.

Our principal assumptions used in our undiscounted cash flows consisted of:

•Changes in market conditions and port or other restrictions;

•Forecasted revenues net of our most significant variable costs, which are commissions, transportation and other expenses, and onboard and other expenses;

•Occupancy rates; and

•Intended use of the vessel for the remaining useful life.

We believe we have made reasonable estimates and judgements as part of our assessments. A change in principal assumptions may result in a need to perform additional impairment reviews.

During the years ended December 31, 2022, 2021, and 2020 we also determined that certain construction in progress projects would be reduced in scope or would no longer be completed as a result of our capital cost containment measures in response to the COVID-19 impact on our liquidity. We recorded property and equipment impairment charges of $10.2 million and $55.2 million, and $91.5 million, during the years ended December 31, 2022, 2021, and 2020, respectively, which primarily related to construction in progress assets.

These impairment charges were reported within Impairment and Credit Losses in our consolidated statements of comprehensive loss.