What changed in this filing

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Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 207 added, 125 removed, 549 unchanged (38% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Passenger ticket

13 unchanged sentences

( 1,176,370 )

( 2,419,472 )

Non-operating income (expense)

15 unchanged sentences

Three Months Ended

Six Months Ended

( 2,087,981 )

( 2,596,215 )

Other comprehensive loss:

Other comprehensive income (loss):

Shipboard Retirement Plan

Cash flow hedges:

Net unrealized loss

Net unrealized gain (loss)

Amount realized and reclassified into earnings

Total other comprehensive loss

Total other comprehensive income (loss)

Total comprehensive loss

25 unchanged sentences

Ordinary shares, $ 0.001 par value;

490,000,000 shares authorized;

369,932,865 shares issued and outstanding at March 31, 2021 and 315,636,032 shares issued and outstanding at December 31, 2020

980,000,000 shares authorized, 369,935,977 shares issued and outstanding at June 30, 2021 and 490,000,000 shares authorized, 315,636,032 shares issued and outstanding at December 31, 2020

Additional paid-in capital

8 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

18 unchanged sentences

Net cash used in operating activities

( 1,482,055 )

( 1,328,380 )

Cash flows from investing activities

12 unchanged sentences

Effect of exchange rates on cash and cash equivalents

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

4 unchanged sentences

(in thousands)

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Comprehensive

1 unchanged sentence

Income (Loss)

Balance, March 31, 2021

( 1,660,011 )

Share-based compensation

Common share issuance proceeds, net

Net share settlement of restricted share units

Other comprehensive income, net

Balance, June 30, 2021

( 2,377,800 )

Six Months Ended June 30, 2021

Comprehensive

Shareholders’

Income (Loss)

Balance, December 31, 2020

4 unchanged sentences

Cumulative change in accounting policy

Other comprehensive loss, net

Other comprehensive income, net

( 2,087,981 )

Balance, June 30, 2021

( 2,377,800 )

The accompanying notes are an integral part of these consolidated financial statements.

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity - Continued

(in thousands)

Three Months Ended June 30, 2020

Comprehensive

Shareholders’

Income (Loss)

Balance, March 31, 2020

( 1,253,926 )

Three Months Ended March 31, 2020

Share-based compensation

Common share issuance proceeds, net

Net share settlement of restricted share units

Beneficial conversion feature

Other comprehensive income, net

Balance, June 30, 2020

( 1,253,926 )

Six Months Ended June 30, 2020

Comprehensive

5 unchanged sentences

Issuance of shares under employee related plans

Common share issuance proceeds, net

Net share settlement of restricted share units

Beneficial conversion feature

Cumulative change in accounting policy

2 unchanged sentences

( 2,596,215 )

Balance, March 31, 2020

Balance, June 30, 2020

( 1,253,926 )

2 unchanged sentences

Notes to Consolidated Financial Statements

Unless otherwise indicated or the context otherwise requires, references in this report to (i) the “Company,” “we,” “our” and “us” refer to NCLH (as defined below) and its subsidiaries (including Prestige (as defined below), except for periods prior to the consummation of the Acquisition of Prestige (as defined below)), (ii) “NCLC” refers to NCL Corporation Ltd., (iii) “NCLH” refers to Norwegian Cruise Line Holdings Ltd., (iv) “Norwegian Cruise Line” or “Norwegian” refers to the Norwegian Cruise Line brand and its predecessors, and (v) “Prestige” refers to Prestige Cruises International S.

Unless otherwise indicated or the context otherwise requires, references in this report to (i) the “Company,” “we,” “our” and “us” refer to NCLH (as defined below) and its subsidiaries (including Prestige (as defined below), (ii) “NCLC” refers to NCL Corporation Ltd., (iii) “NCLH” refers to Norwegian Cruise Line Holdings Ltd., (iv) “Norwegian Cruise Line” or “Norwegian” refers to the Norwegian Cruise Line brand and its predecessors, and (v) “Prestige” refers to Prestige Cruises International S.

(formerly Prestige Cruises International, Inc.), together with its consolidated subsidiaries, including Prestige Cruise Holdings S.

8 unchanged sentences

We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands.

As of March 31, 2021, we had 28 ships with approximately 59,150 Berths and had orders for nine additional ships to be delivered through 2027.

Due to the novel coronavirus (“COVID-19”), we have temporarily suspended all global cruise voyages through June 2021 and announced a limited resumption of cruises beginning in July 2021.

As of June 30, 2021, we had 28 ships with approximately 59,150 Berths and had orders for nine additional ships to be delivered through 2027.

Due to the novel coronavirus (“COVID-19”), we temporarily suspended all global cruise voyages from March 2020 through June 2021 and began resuming cruise voyages in July 2021 on a limited basis.

We refer you to Note 2 – “Summary of Significant Accounting Policies” for further information.

6 unchanged sentences

Liquidity and Management’s Plan

Due to the continued spread of COVID-19, ongoing 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.

As of the date of this filing and through June 2021, we have temporarily suspended all global cruise voyages and announced a limited resumption of cruises beginning in July 2021.

Due to the impact of COVID-19, ongoing 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.

As of June 30, 2021, none of our ships were operating with guests on board;

however, all of our brands have announced resumption of cruise voyages by September 30, 2021 as part of our phased return to service and two ships have currently commenced voyages.

Significant events affecting travel, including COVID-19, typically have an impact on demand for cruise vacations, with the full extent of the impact generally determined by the length of time the event influences travel decisions.

7 unchanged sentences

Refer to Note 6 – “Long-Term Debt” for further details of the above transactions.

In April 2021, we announced a limited relaunch of certain cruise voyages embarking outside of the U.S.

beginning in July 2021 with our ships initially operating at reduced occupancy levels.

The timing for bringing our ships back to service 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 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, port availability, travel restrictions, bans and advisories, and our ability to re-staff our ships and implement new health and safety protocols.

In the second quarter of 2021, we announced a phased relaunch of certain cruise voyages beginning in July 2021 with our ships initially operating at reduced occupancy levels.

The Company has announced its phased relaunch plans for all 28 ships across its three brands which began with Norwegian Jade on July 25, 2021 and continues through April 1, 2022.

The first cruise to commence in the U.S.

was on August 7, 2021 with Norwegian Encore sailing to Alaska from Seattle.

The Company expects to have approximately 40% of capacity operating by September 30, 2021 and approximately 75% by December 31, 2021 with the full fleet expected to be back in operation by April 1, 2022.

The timing for bringing our ships back to service 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, port availability, travel restrictions, bans and advisories, and our ability to re-staff our ships and implement new health and safety protocols.

The estimation of our future cash flow projections includes numerous assumptions that are subject to various risks and uncertainties.

Upon the relaunch of cruise voyages, our principal assumptions for future cash flow projections include:

● Expected gradual phased relaunch at reduced occupancy levels;

● Expected gradual phased relaunch at reduced occupancy levels, increasing over time until we reach historical occupancy levels;

● Forecasted cash collections primarily upon completion of future voyages and the payment of cash refunds for any further cancellations, in accordance with the terms of our credit card processing agreements (see Note 9 - “Commitments and Contingencies”);

● Expected incremental expenses for resumption of cruise voyages, including the maintenance of and compliance with additional health and safety protocols.

Due to the unknown duration and extent of the COVID-19 pandemic, travel restrictions, bans and advisories, uncertainties around our ability to comply with governmental regulations, the potential unavailability of ports and/or destinations, voyage cancellations and timing of redeployments, and a general impact on consumer sentiment regarding cruise travel, we cannot predict when our full fleet will be back in service at historical occupancy levels.

Until our phased relaunch begins, our projected liquidity requirements reflect our principal assumptions surrounding the costs of the announced limited relaunch of certain cruise voyages, ongoing operating costs during the suspension of cruise voyages, as well as liquidity requirements for financing costs and necessary capital expenditures, and our ability to continue to implement cash conservation strategies, including, but not limited to:

● Moving our ships that are not in service to minimum manning levels, which we expect would result in further reductions in crew payroll costs, fuel consumption, and maintenance costs;

● Further reductions in general operating expenses;

● Further reductions in discretionary capital expenditures including cancellation or reduction in scope of certain Dry-docks.

We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change due to the unique and unpredictable nature of the pandemic.

Accordingly, the full effect of our suspension of cruise voyages on our financial performance and financial condition cannot be quantified at this time.

We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change due to the unique and unpredictable nature of the pandemic, including its magnitude and duration.

Accordingly, the full effect of the COVID-19 pandemic on our financial performance and financial condition cannot be quantified at this time.

We have made reasonable estimates and judgments of the impact of COVID-19 within our financial statements and there may be material changes to those estimates in future periods.

We will report a net loss for the three months ending June 30, 2021 and expect to report a net loss until we are able to resume regular voyages, including for the year ending December 31, 2021.

Based on these actions and assumptions regarding the impact of COVID-19, and considering our available liquidity including cash and cash equivalents of $ 3.5 billion at March 31, 2021, we have concluded that after implementing the above cash conservation strategies, we have sufficient liquidity to satisfy our obligations for at least the next twelve months even in the event we do not resume cruise voyages during that period.

Subsequent to the liquidity assessment period (twelve months from the issuance of these financial statements), the Company may require additional liquidity to meet ongoing obligations, including debt amortization payments and ship milestone payments net of export-credit financing, of approximately $ 670 million that are due in July 2022 and its minimum liquidity covenant requirements.

The Company plans to take additional steps following the issuance of these financial statements to increase its liquidity, which may include additional debt and/or equity financing and potential further renegotiations of its debt amortization payments, newbuild payments and covenants.

The extent of these actions to increase the Company’s liquidity will be dependent in part on the timing of the resumption of cruise voyages, which despite the Company’s expectations for a limited relaunch beginning July 2021, is uncertain.

There can be no assurances that the Company will be successful in generating the additional liquidity necessary to meet its obligations beyond twelve months from the issuance of these financial statements on terms acceptable to the Company or at all.

If the Company is unable to satisfy or renegotiate its minimum liquidity covenant requirements, it could have a significant adverse effect on the Company’s business, financial condition and operating results.

We will report a net loss for the three months ending September 30, 2021 and expect to report a net loss until we are able to resume regular voyages, including for the year ending December 31, 2021.

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 and to refinance our debt to reduce interest expense and extend maturities.

Based on these actions and assumptions regarding the impact of COVID-19, and considering our available liquidity including cash and cash equivalents of $ 2.8 billion as of June 30, 2021, we have concluded that we have sufficient liquidity to satisfy our obligations for at least the next twelve months .

Basis of Presentation

2 unchanged sentences

Historically, demand for cruises has been strongest during the Northern Hemisphere’s summer months;

however, our cruise voyages have been completely suspended since March 2020 due to the COVID-19 pandemic.

The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 26, 2021.

Reclassifications

Certain amounts in prior periods have been reclassified to conform to the current period presentation.

however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic.

The interim consolidated financial statements should be read in conjunction with the audited consolidated

financial statements for the year ended December 31, 2020, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 26, 2021.

Loss Per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

( 2,087,981 )

5 unchanged sentences

Diluted loss per share

For the three months ended March 31, 2021 and 2020, a total of 120.8 million and 7.0 million shares, respectively, have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

For the three months ended June 30, 2021 and 2020, a total of 99.2 million and 59.2 million, respectively, and for the six months ended June 30, 2021 and 2020, a total of 110.0 million and 33.1 million, respectively, shares have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

Foreign Currency

2 unchanged sentences

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 gains of $ 4.8 million and $ 19.9 million for the three months ended March 31, 2021 and 2020, respectively, related to transactions denominated in other currencies.

We recognized a gain of $ 0.2 million and a loss of $ 10.2 million for the three months ended June 30, 2021 and 2020, respectively, and gains of $ 5.0 million and $ 9.7 million for the six months ended June 30, 2021 and 2020, respectively, related to transactions denominated in other currencies.

Depreciation and Amortization Expense

1 unchanged sentence

however, for purposes of the consolidated statements of operations they are included in interest expense, net.

Accounts Receivable, Net

Accounts receivable, net includes $ 400.7 million due from credit card processors as of June 30, 2021, which is expected to be collected within the next 12 months.

Prior to the resumption of cruise operations, these amounts were classified in other long-term assets as a result of the uncertainty surrounding the timing of their collection.

Recently Issued Accounting Guidance

4 unchanged sentences

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, 2021, we have not adopted any expedients and exceptions under ASU 2020-04.

As of June 30, 2021, 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.

4 unchanged sentences

Three Months Ended

Six Months Ended

North America

1 unchanged sentence

Total revenue

Amounts for the three months ended March 31, 2021 were excluded as the information was not meaningful.

Amounts for the three and six months ended June 30, 2021 were excluded as the information was not meaningful.

North America includes the U.S., the Caribbean, Canada and Mexico.

8 unchanged sentences

Although we sell cruises on an international basis, our passenger ticket revenue is primarily attributed to U.S.-sourced guests who make reservations in the U.S.

Revenue attributable to U.S.-sourced guests has historically approximated 75 - 85 %.

Revenue attributable to U.S.-sourced guests has historically approximated 75 - 85 % of total revenue.

No other individual country’s revenues exceed 10% in any given period.

1 unchanged sentence

Receivables from customers are included within accounts receivable, net.

As of March 31, 2021 and December 31, 2020, our receivables from customers were $ 1.1 million and $ 1.0 million, respectively.

As of June 30, 2021 and December 31, 2020, our receivables from customers were $ 0.9 million and $ 1.0 million, respectively.

Beginning in March 2020, our brands launched new cancellation policies to permit our guests to cancel cruises which are not part of the Company’s temporary suspension of voyages up to 15 days prior to departure.

These programs are currently in place for cruises booked through specific time periods specified by brand, and for cruises scheduled to embark through specified time periods, depending on the brand.

These programs are currently in place for cruises booked through specific time periods specified by brand, and for cruises scheduled to embark through October 31, 2021.

Certain cruises booked for certain periods, will be permitted a 60-day cancellation window for refunds.

Future cruise credits that have been issued are valid for any sailing through December 31, 2022, and we may extend this offer.

The future cruise credits are not contracts, and therefore, guests who elected this option are excluded from our contract liability balance;

however, the credit for the original amount paid is included in advance ticket sales.

however, the credit for the original amount paid is included in advance ticket sales or other long-term liabilities as applicable.

Our contract liabilities are included within advance ticket sales.

As of March 31, 2021 and December 31, 2020, our contract liabilities were $ 29.3 million and $ 23.1 million, respectively.

Of the amounts included within advance ticket sales, the vast majority of deposits held were refundable in accordance with our cancellation policies and it is uncertain to what extent guests may request refunds.

As of June 30, 2021 and December 31, 2020, our contract liabilities were $ 50.5 million and $ 23.1 million, respectively.

Of the amounts included within advance ticket sales, the vast majority of deposits held are refundable in accordance with our cancellation policies and it is uncertain to what extent guests may request refunds.

Refunds payable to guests are included in accounts payable.

For the three months ended March 31, 2021, no revenue recognized was included in the contract liability balance at the beginning of the period.

The revenue recognized in the three months ended March 31, 2020 that was included in contract liabilities as of the beginning of the period was $ 0.9 billion.

For cruise vacations that had been cancelled by us due to COVID-19, approximately $ 14.8 million and $ 92.0 million in costs to obtain these contracts, consisting of protected commissions, including those paid to employees, and credit card fees, were recognized in earnings during the three months ended March 31, 2021 and 2020, respectively.

For the six months ended June 30, 2021, no revenue recognized was included in the contract liability balance at the beginning of the period.

The revenue recognized in the six months ended June 30, 2020 that was included in contract liabilities as of the beginning of the period was $ 0.9 billion.

For cruise vacations that had been cancelled by us due to COVID-19, during the three months ended June 30, 2021 and 2020, approximately $ 11.2 million and $ 38.6 million, respectively, and during the six months ended June 30, 2021 and 2020, approximately $ 26.0 million and $ 130.6 million, respectively, in costs to obtain these contracts, consisting of protected commissions, including those paid to employees, and credit card fees, were recognized in earnings.

In April 2020, the FASB issued interpretive guidance relating to the accounting for lease concessions provided as a result of COVID-19.

2 unchanged sentences

In relation to our rights to use port facilities, we have elected the approach consistent with resolving a contingency, which allows us to remeasure the lease liability and recognize the amount of change in the lease liability as an adjustment to the carrying amount of the associated right-of-use asset.

During the three months ended March 31, 2021, our port facilities were remeasured with a downward adjustment of $ 5.2 million to both other long-term assets and accrued expenses and other liabilities.

Another $ 1.9 million was reclassified from accrued expenses and other liabilities to other long-term assets as a result of contractual extensions.

As the full amount of the concession will not be determinable until the force majeure period under the related arrangements have ended, further remeasurements will be required.

As the full amount of the concession will not be determinable until the force majeure period under the related arrangements have ended, periodic remeasurements will be required.

During the contingency period, we are recognizing lease expense for these port facilities as incurred.

1 unchanged sentence

Balance Sheet location

March 31, 2021

June 30, 2021

December 31, 2020

14 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) for the three months ended March 31, 2021 was as follows (in thousands):

Three Months Ended March 31, 2021

Accumulated other comprehensive income (loss) for the six months ended June 30, 2021 was as follows (in thousands):

Six Months Ended June 30, 2021

Comprehensive

4 unchanged sentences

Accumulated other comprehensive income (loss) at end of period

Accumulated other comprehensive income (loss) for the three months ended March 31, 2020 was as follows (in thousands):

Three Months Ended March 31, 2020

Accumulated other comprehensive income (loss) for the six months ended June 30, 2020 was as follows (in thousands):

Six Months Ended June 30, 2020

Comprehensive

8 unchanged sentences

Long-Term Debt

Modifications

Credit Facilities

In January 2021, NCLC entered into an amendment agreement (the “First Amendment”), which amends the Amended and Restated Credit Agreement, dated as of May 8, 2020 (the “Fifth ARCA” and, as amended by the First Amendment, the “Senior Secured Credit Facility”).

The First Amendment provides that, among other things, (a) amortization payments due between the First Amendment effective date and prior to June 30, 2022 (the “First Amendment Deferral Period”) on the Legacy Term Loan A and Term Loan A-1 held by lenders that have consented to such deferral (the “First Amendment Deferring Lenders”) are deferred and such deferred principal amount constitutes a separate tranche of loans (the “Deferred Term Loan A-1”) and (b) the tranche of loans held by certain lenders (the “Fifth ARCA Deferring Lenders”) on which amortization payments due within the first year after effectiveness of the Fifth ARCA were deferred (the “Deferred Term Loan A”) of First Amendment Deferring Lenders were converted into Deferred Term Loan A-1 loans.

Facility that is held by lenders other than the Fifth ARCA Deferring Lenders (the “Legacy Term Loan A”) that were held by the First Amendment Deferring Lenders (other than amounts converted into the Deferred Term Loan A-1) constitute a separate tranche of loans (the “Term Loan A-2”), with the same terms as the Legacy Term Loan A and Term Loan A-1 under the Fifth ARCA, except that amortization payments on the Term Loan A-2 shall be deferred during the First Amendment Deferral Period and thereafter such Term Loan A-2 will amortize in an aggregate principal amount equal to approximately 5.88 % per annum and the interest rate for Term Loan A-2 shall be modified as described below.

The class of loans constituting the Term Loan A Facility (other than the Deferred Term Loan A) held by the Fifth ARCA Deferring Lenders (the “Term Loan A-1”) and the class of loans constituting the portion of the Term Loan A Facility that is held by lenders other than the Fifth ARCA Deferring Lenders (the “Legacy Term Loan A”) that were held by the First Amendment Deferring Lenders (other than amounts converted into the Deferred Term Loan A-1) constitute a separate tranche of loans (the “Term Loan A-2”), with the same terms as the Legacy Term Loan A and Term Loan A-1 under the Fifth ARCA, except that amortization payments on the Term Loan A-2 shall be deferred during the First Amendment Deferral Period and thereafter such Term Loan A-2 will amortize in an aggregate principal amount equal to approximately 5.88 % per annum and the interest rate for Term Loan A-2 shall be modified as described below.

The Deferred Term Loan A-1 will accrue interest (x) in the case of Eurocurrency loans, at a per annum rate based on LIBOR plus a margin of 2.50 % or (y) in the case of base rate loans, at a per annum rate based on the base rate plus a margin of 1.50 %.

3 unchanged sentences

The First Amendment provides that, (a) from the First Amendment effective date to and including December 31, 2022 (the “Covenant Relief Period”) the testing of the loan to value, debt to capitalization and EBITDA to debt service covenants under the Senior Secured Credit Facility will be suspended and the free liquidity test will be replaced by a covenant to maintain at least $ 200 million in free liquidity, certified on a monthly basis.

During the Covenant Relief Period the interest rate for Term Loan A-2 and revolving loans held by Lenders that consented to the First Amendment will be LIBOR plus 2.00 % (or base rate plus 1.00 %) with decreases subject to a leverage-based pricing grid.

During the Covenant Relief

Period the interest rate for Term Loan A-2 and revolving loans held by Lenders that consented to the First Amendment will be LIBOR plus 2.00 % (or base rate plus 1.00 %) with decreases subject to a leverage-based pricing grid.

The First Amendment also makes certain other changes to the Senior Secured Credit Facility, including tightening certain of the baskets applicable to our ability to make certain asset dispositions, investments and restricted payments.

15 unchanged sentences

The amendments also made certain other changes to the facilities, including imposing further restrictions on NCLC’s ability to incur debt, create security, issue equity and make dividends and other distributions.

The amendments of the agreements described above resulted in aggregate modification expenses of $ 52.1 million, which is recognized in interest expense, net.

In April 2021, an agreement was executed to defer certain newbuild related debt amortization to July 2022.

The aggregate amount of debt amortization that was deferred was € 31.2 million, or $ 37.0 million based on the euro/U.S.

dollar exchange rate as of June 30, 2021.

The interest rate on the newbuild related debt was increased to 4.5 % per annum.

The amendments of the agreements described above resulted in aggregate modification expenses of $ 52.1 million for the six months ended June 30, 2021, which is recognized in interest expense, net.

In May 2021, NCLC entered into a € 28.8 million loan facility for newbuild related payments.

The facility bears interest at a rate of 4.5 % per annum.

As of June 30, 2021, € 9.6 million, or $ 11.4 million based on the euro/U.S.

dollar exchange rate as of June 30, 2021, was drawn under this facility, which matures on July 1, 2022.

Unsecured Notes

2 unchanged sentences

The 2026 Senior Unsecured Notes pay interest at 5.875 % per annum, semiannually on March 15 and September 15 of each year, to holders of record at the close of business on the immediately preceding March 1 and September 1, respectively.

NCLC may redeem the 2026 Senior Unsecured Notes, in whole or part, at any time prior to December 15, 2025, at a price equal to 100 % of the principal amount of the notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date and a “make-whole premium.” NCLC may redeem the 2026 Senior Unsecured Notes, in whole or in part, on or after December 15, 2025, at a price equal to 100 % of the principal amount of the notes plus accrued and unpaid interest to, but excluding, the redemption date.

may redeem the 2026 Senior Unsecured Notes, in whole or part, at any time prior to December 15, 2025, at a price equal to 100 % of the principal amount of the notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date and a “make-whole premium.” NCLC may redeem the 2026 Senior Unsecured Notes, in whole or in part, on or after December 15, 2025, at a price equal to 100 % of the principal amount of the notes plus accrued and unpaid interest to, but excluding, the redemption date.

At any time and from time to time prior to December 15, 2022, NCLC may choose to redeem up to 40 % of the aggregate principal amount of the 2026 Senior Unsecured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 105.875 % of the principal amount of the 2026 Senior Unsecured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60 % of the aggregate principal amount of the 2026 Senior Unsecured Notes issued remains outstanding following such redemption.

The proceeds from the March 2021 issuance were used to repay the $ 230.0 million Pride of America Credit Facility and the remaining $ 222.6 million of the Jewel Credit Facility.

The repayment of these debt agreements resulted in losses on extinguishment of debt of $ 1.1 million, which is recognized in interest expense, net.

The repayment of these debt agreements resulted in losses on extinguishment of debt of $ 1.1 million for the six months ended June 30, 2021, which is recognized in interest expense, net.

In March 2021, NCL Finance, Ltd., an indirect, wholly-owned subsidiary of NCLH and NCLC, additionally conducted a private offering of $ 525.0 million aggregate principal amount of 6.125 % senior unsecured notes due March 15, 2028 (the “2028 Senior Unsecured Notes”).

11 unchanged sentences

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which reduces the number of accounting

models for convertible debt instruments and enhances transparency in disclosures.

One model which is being eliminated is the bifurcation of embedded conversion features that are not accounted for separately as derivatives.

Each of the 2024 Exchangeable Notes, 2025 Exchangeable Notes, and Private Exchangeable Notes (as defined below) contain conversion options that may be settled with NCLH’s ordinary shares.

Each of the 2024 Exchangeable Notes, 2025 Exchangeable Notes, and Private Exchangeable Notes (as defined below) contain or contained conversion options that may be settled with NCLH’s ordinary shares.

As the options will be both indexed to and settled in our ordinary shares, they are not accounted for separately as derivatives.

3 unchanged sentences

As a result, the $ 131.2 million beneficial conversion feature previously recognized was reclassified from additional paid-in capital to long-term debt, and the discount amortization of $ 5.6 million was adjusted through retained earnings (deficit).

As of March 31, 2021, NCLC has outstanding $ 862.5 million aggregate principal amount of 6.00 % exchangeable senior notes due May 15, 2024 (the “2024 Exchangeable Notes”).

NCLC has outstanding $ 862.5 million aggregate principal amount of 6.00 % exchangeable senior notes due May 15, 2024 (the “2024 Exchangeable Notes”).

The 2024 Exchangeable Notes are guaranteed by NCLH on a senior basis.

5 unchanged sentences

The 2024 Exchangeable Notes pay interest at 6.00 % per annum, semiannually on May 15 and November 15 of each year, to holders of record at the close of business on the immediately preceding May 1 and November 1, respectively.

As of March 31, 2021, NCLC also has outstanding $ 450.0 million aggregate principal amount of 5.375 % exchangeable senior notes due August 1, 2025 (the “2025 Exchangeable Notes”).

NCLC also has outstanding $ 450.0 million aggregate principal amount of 5.375 % exchangeable senior notes due August 1, 2025 (the “2025 Exchangeable Notes”).

The 2025 Exchangeable Notes are guaranteed by NCLH on a senior basis.

13 unchanged sentences

Approximately $ 1.0 billion of the cash proceeds from the offering were used to repurchase the Private Exchangeable Notes and extinguish the debt.

The resulting loss on extinguishment was $ 620.8 million, which is recognized in interest expense, net.

The following is a summary of NCLC’s convertible debt instruments as of March 31, 2021 (in thousands):

The resulting loss on extinguishment, which is recognized in interest expense, net, was $ 600.4 million for the six months ended June 30, 2021, of which $( 20.4 ) million was recognized during the three months ended June 30, 2021.

The following is a summary of NCLC’s convertible debt instruments as of June 30, 2021 (in thousands):

Financing Fees

10 unchanged sentences

In addition, as of December 31, 2020, we had recognized a $ 19.3 million premium for payment-in-kind interest as additional paid-in capital for the Private Exchangeable Notes.

As a result of the extinguishment of the Private Exchangeable Notes, we derecognized the amounts recorded as additional paid-in capital.

The following provides a summary of the interest expense of NCLC’s convertible debt instruments (in thousands):

Ended March 31, 2021

Ended June 30,

Coupon interest

Amortization of deferred financing fees

Prior to the adoption of ASU 2020-06, interest expense, including amortization of debt discounts and coupon interest, recognized related to the 2024 Exchangeable Notes and Private Exchangeable Notes was $ 12.5 million for the three and six months ended June 30, 2020.

The effective interest rate is 7.07 % and 5.97 % for the 2024 Exchangeable Notes and 2025 Exchangeable Notes, respectively.

As of March 31, 2021, the if-converted value above par was $ 868.1 million on available shares of 62.7 million and $ 212.2 million on available shares of 24.0 million for the 2024 Exchangeable Notes and the 2025 Exchangeable Notes, respectively.

As of June 30, 2021, the if-converted value above par was $ 982.3 million on available shares of 62.7 million and $ 255.8 million on available shares of 24.0 million for the 2024 Exchangeable Notes and the 2025 Exchangeable Notes, respectively.

Debt Repayments

The following are scheduled principal repayments on our long-term debt including finance lease obligations as of March 31, 2021 for each of the following periods (in thousands):

The following are scheduled principal repayments on our long-term debt including finance lease obligations as of June 30, 2021 for each of the following periods (in thousands):

Remainder of 2021

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We have received certain financial and other debt covenant waivers through December 31, 2022 and added new free liquidity requirements.

At March 31, 2021, taking into account such waivers, we were in compliance with all of our debt covenants.

If we do not continue to remain in compliance with our covenants, including following the expiration of any current waivers, we would have to seek additional amendments to our covenants.

At June 30, 2021, taking into account such waivers, we were in compliance with all of our debt covenants.

If we do not continue to remain in compliance with our covenants, including following the expiration of any

current waivers, we would have to seek additional amendments to our covenants.

However, no assurances can be made that such amendments would be approved by our lenders.

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Cash flows from the derivatives are classified in the same category as the cash flows from the underlying hedged transaction.

If it is determined that the hedged forecasted transaction is no longer probable of occurring, then the amount recognized in accumulated other

comprehensive income (loss) is released to earnings.

If it is determined that the hedged forecasted transaction is no longer probable of occurring, then the amount recognized in accumulated other comprehensive income (loss) is released to earnings.

There are no amounts excluded from the assessment of hedge effectiveness and there are no credit-risk-related contingent features in our derivative agreements.

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We do not anticipate non-performance by any of our significant counterparties.

As of March 31, 2021, we had fuel swaps which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately 366 thousand metric tons of our projected fuel purchases, maturing through December 31, 2023 .

As of June 30, 2021, we had fuel swaps which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately 366 thousand metric tons of our projected fuel purchases, maturing through December 31, 2023 .

On January 1, 2021, our fuel swaps designated as hedges for marine gas oil maturing through December 31, 2021 were dedesignated as cash flow hedges.

As of March 31, 2021, we had, in aggregate with previously dedesignated fuel swaps, approximately 405 thousand metric tons which were not designated as cash flow hedges maturing through December 31, 2022 .

As of March 31, 2021, we had foreign currency forward contracts, matured foreign currency options and matured foreign currency collars which are used to mitigate the financial impact of volatility in foreign currency exchange rates related to our ship construction contracts denominated in euros.

As of June 30, 2021, we had, in aggregate with previously dedesignated fuel swaps, approximately 206 thousand metric tons which were not designated as cash flow hedges maturing through December 31, 2022 .

As of June 30, 2021, we had foreign currency forward contracts, matured foreign currency options and matured foreign currency collars which are used to mitigate the financial impact of volatility in foreign currency exchange rates related to

our ship construction contracts denominated in euros.

The notional amount of our foreign currency forward contracts was € 1.8 billion, or $ 2.1 billion based on the euro/U.S.

dollar exchange rate as of March 31, 2021.

As of March 31, 2021, we had interest rate swaps and collars, which are used to hedge our exposure to interest rate movements and manage our interest expense.

The notional amount of our outstanding debt associated with the interest rate swaps and collars was $ 0.6 billion as of March 31, 2021.

dollar exchange rate as of June 30, 2021.

As of June 30, 2021, we had interest rate swaps and collars, which are used to hedge our exposure to interest rate movements and manage our interest expense.

The notional amount of our outstanding debt associated with the interest rate swaps and collars was $ 0.6 billion as of June 30, 2021.

The derivatives measured at fair value and the respective location in the consolidated balance sheets include the following (in thousands):

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The following table discloses the gross and net amounts recognized within assets and liabilities (in thousands):

March 31, 2021

June 30, 2021

December 31, 2020

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(Loss) into Income (Expense)

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Fuel contracts

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Total gain (loss) recognized in other comprehensive loss

Location of Gain

(Loss) Reclassified

from Accumulated

Amount of Gain (Loss) Reclassified

Amount of Gain (Loss)

Other Comprehensive

from Accumulated Other

Recognized in Other

Income (Loss) into

Comprehensive Income

Comprehensive Loss

Income (Expense)

(Loss) into Income (Expense)

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Fuel contracts

Other income (expense), net

Foreign currency contracts

Depreciation and amortization

Interest rate contracts

Interest expense, net

Total gain (loss) recognized in other comprehensive loss

The effects of cash flow hedge accounting on the consolidated statements of operations include the following (in thousands):

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020

( Expense), net

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Fuel contracts

Six Months Ended June 30, 2021

Six Months Ended June 30, 2020

( Expense), net

Total amounts of income and expense line items presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense)

Fuel contracts

Foreign currency contracts

Interest rate contracts

Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense) as a result that a forecasted transaction is no longer probable of occurring

Fuel contracts

The effects of derivatives not designated as hedging instruments on the consolidated statements of operations include the following (in thousands):

Amount of Gain (Loss) Recognized in Income

Three Months Ended

Six Months Ended

Location of Gain (Loss)

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Long-Term Debt

As of March 31, 2021 and December 31, 2020, the fair value of our long-term debt, including the current portion, was $ 13,911.7 million and $ 14,197.8 million, respectively, which was $ 1,478.7 million higher and $ 2,176.1 million higher, respectively, than the carrying values, excluding deferred financing costs.

As of June 30, 2021 and December 31, 2020, the fair value of our long-term debt, including the current portion, was $ 14.2 billion, which was $ 1.8 billion higher and $ 2.2 billion higher, respectively, than the carrying values, excluding deferred financing costs.

The difference between the fair value and carrying value of our long-term debt is due to our fixed and variable rate debt obligations carrying interest rates that are above or below market rates at the measurement dates as well as the beneficial conversion feature recognized on the Private Exchangeable Notes as of December 31, 2020.

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and share prices, tenors, and historical and implied volatilities which are sourced from observable market data.

The inputs are considered to be Level 2 in the fair value hierarchy.

Market risk associated with our long-term

variable rate debt is the potential increase in interest expense from an increase in interest rates or from an increase in share values.

The inputs are considered to be Level

2 in the fair value hierarchy.

Market risk associated with our long-term variable rate debt is the potential increase in interest expense from an increase in interest rates or from an increase in share values.

The carrying amounts reported in the consolidated balance sheets of all other financial assets and liabilities approximate fair value.

Employee Benefits and Compensation Plans

In January 2013, NCLH adopted the 2013 Performance Incentive Plan, which provided for the issuance of up to 15,035,106 of NCLH’s ordinary shares pursuant to awards granted under the plan.

In May 2016, the plan was amended and restated (“Restated 2013 Plan”) pursuant to approval from the Board of Directors and NCLH’s shareholders.

Among other things, under the Restated 2013 Plan, the number of NCLH’s ordinary shares that may be delivered pursuant to all awards granted under the plan was increased by an additional 12,430,000 shares to a new maximum aggregate limit of 27,465,106 shares.

In May 2021, the Restated 2013 Plan was further amended and restated to increase the number of NCLH ordinary shares that may be delivered by 4,910,000 shares to 32,375,106 shares.

Share Option Awards

The following is a summary of option activity under NCLH’s Amended and Restated 2013 Performance Incentive Plan for the three months ended March 31, 2021:

The following is a summary of option activity under NCLH’s Restated 2013 Plan for the six months ended June 30, 2021:

Number of Share Option Awards

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Forfeited and cancelled

Outstanding as of March 31, 2021

Outstanding as of June 30, 2021

Restricted Share Unit Awards

The following is a summary of restricted share unit activity for the three months ended March 31, 2021:

In June 2021, NCLH granted 3.1 million time-based restricted share unit awards to our employees, which primarily vest in substantially equal installments each March 1 over three years .

Additionally, in June 2021, NCLH granted 0.7 million performance-based restricted share units to certain members of our management team, which vest upon the achievement of certain pre-established performance targets established through 2023 and the satisfaction of an additional time-based vesting requirement that generally requires continued employment through March 1, 2024.

The following is a summary of restricted share unit activity for the six months ended June 30, 2021:

Average Grant

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Forfeited or expired

Non-vested as of March 31, 2021

Non-vested as of June 30, 2021

The compensation expense recognized for share-based compensation for the periods presented include the following (in thousands):

Three Months Ended

Six Months Ended

Payroll and related expense

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For the Regent brand, we have an order for one Explorer Class Ship to be delivered in 2023, which will be approximately 55,000 Gross Tons and 750 Berths.

For the Oceania Cruises brand, we have orders for two Allura Class Ships to be delivered in 2023

For the Oceania Cruises brand, we have orders for two Allura Class Ships to be delivered in 2023 and 2025.

Each of the Allura Class Ships will be approximately 67,000 Gross Tons and 1,200 Berths.

The impacts of COVID-19 on the shipyards where our ships are under construction (or will be constructed) have resulted in some delays in expected ship deliveries, and the impacts of COVID-19 could result in additional delays in ship deliveries in the future, which may be prolonged.

The combined contract prices of the nine ships on order for delivery as of March 31, 2021 was approximately € 7.2 billion, or $ 8.4 billion based on the euro/U.S.

dollar exchange rate as of March 31, 2021.

The combined contract prices of the nine ships on order for delivery as of June 30, 2021 was approximately € 7.6 billion, or $ 9.0 billion based on the euro/U.S.

dollar exchange rate as of June 30, 2021.

We have obtained export credit financing which is expected to fund approximately 80 % of the contract price of each ship, subject to certain conditions.

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However, if any such events were to occur, it could result in, among other things, the forfeiture of prior deposits or payments made by us and potential claims and impairment losses which may materially impact our business, financial condition and results of operations.

In July 2021, we amended nine credit facilities for our newbuild agreements and increased the combined commitments under such credit facilities by approximately $ 770 million to cover owner’s supply (generally consists of provisions for the ship), modifications and financing premiums.

Class Actions

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The complaint sought unspecified damages and an award of costs and expenses, including reasonable attorneys’ fees, on behalf of a purported class of purchasers of our ordinary shares between February 20, 2020 and March 10, 2020.

On April 10, 2021, the case was dismissed and closed.

The plaintiffs have the right to appeal.

We believe that the allegations contained in the complaint were without merit and intend to defend the matter vigorously if appealed.

We cannot predict at this point the length of time that this action will be ongoing or the liability, if any, which may arise therefrom.

On April 10, 2021, the case was dismissed and closed, and the plaintiffs no longer have the right to appeal.

In addition, in March 2020 the Florida Attorney General announced an investigation related to the Company’s marketing during the COVID-19 pandemic.

Following the announcement of the investigation by the Florida Attorney General, we received notifications from other attorneys general and governmental agencies that they are conducting similar investigations.

Following the announcement of the investigation by the Florida Attorney General, we

received notifications from other attorneys general and governmental agencies that they are conducting similar investigations.

The Company is cooperating with these ongoing investigations, the outcomes of which cannot be predicted at this time.

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On September 1, 2020, the Court entered an order staying all case deadlines and administratively closed the Garcia-Bengochea matter pending the outcome of the appeal in a related case brought by the same plaintiff.

We believe we have meritorious defenses to the claims and intend to vigorously defend

these matters.

As of March 31, 2021, we are unable to reasonably estimate any potential contingent loss from these matters due to a lack of legal precedent.

We believe we have meritorious defenses to the claims and intend to vigorously defend these matters.

As of June 30, 2021, we are unable to reasonably estimate any potential contingent loss from these matters due to a lack of legal precedent.

In the normal course of our business, various other claims and lawsuits have been filed or are pending against us.

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Other Contingencies

The Company also has agreements with its credit card processors that govern approximately $ 1.1 billion at March 31, 2021 in advance ticket sales that have been received by the Company relating to future voyages.

The Company also has agreements with its credit card processors that govern approximately $ 1.2 billion at June 30, 2021 in advance ticket sales that have been received by the Company relating to future voyages.

These agreements allow the credit card processors to require under certain circumstances, including the existence of a material adverse change, excessive chargebacks and other triggering events, that the Company maintain a reserve which would be satisfied by posting collateral.

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Any cash reserve or collateral requested could be increased or decreased.

As of March 31, 2021, we had a reserve of approximately $ 580 million with a credit card processor recognized in other long-term assets.

As of June 30, 2021, we had a reserve of approximately $ 800 million with a credit card processor recognized in accounts receivable, net or other long-term assets.

Additionally, we are required to fund all refunds until further notice and 100 % of incoming advance ticket sales deposits with this credit card processor will be withheld and are not expected to be released until the credit card processor’s exposure is fully collateralized.

As of March 31, 2021, the exposure was approximately $ 840 million.

As of June 30, 2021, the exposure was approximately $ 940 million.

The reserve shortfall of approximately $ 140 million will decrease as refunds are funded, cruises are provided and amounts withheld by the credit card processor are allocated to the reserve rather than remitted to the Company.

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Other Income (Expense), Net

For the three months ended March 31, 2021, other income (expense), net consisted of income of $ 27.2 million primarily due to gains on fuel swaps not designated as hedges and foreign currency exchange.

For the three months ended March 31, 2020, other income (expense), net was income of $ 5.8 million primarily due to gains on foreign currency exchange offset by losses on fuel hedges recognized in earnings as a result of the forecasted transactions no longer being probable.

For the three and six months ended June 30, 2021, other income (expense), net consisted of income of $ 25.5 million and $ 52.7 million, respectively, primarily due to gains on fuel swaps not designated as hedges.

For the three months ended June 30, 2020, other income (expense), net consisted of an expense of $ 14.4 million primarily due to losses from foreign currency exchange and losses on fuel hedges released into earnings as a result of the forecasted transactions no longer being probable.

For the six months ended June 30, 2020, other income (expense), net consisted of expense of $ 8.6 million primarily due to losses on fuel hedges released into earnings as a result of the forecasted transactions no longer being probable offset by gains from foreign currency exchange.

Supplemental Cash Flow Information

For the three months ended March 31, 2021 and 2020, we had non-cash investing activities consisting of changes in accruals related to property and equipment of $ 20.8 million and $ 12.0 million, respectively.

For the six months ended June 30, 2021 and 2020, we had non-cash investing activities consisting of changes in accruals related to property and equipment of $ 49.1 million and $ 7.2 million, respectively.

Related Party Disclosures

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The terms of the Private Exchangeable Notes are more fully described under Note 6 — “Long-Term Debt”.

Based on the initial exchange rate, the Private Investor beneficially owned approximately 10 % of NCLH’s outstanding

ordinary shares as of December 31, 2020.

Based on the initial exchange rate for the Private Exchangeable Notes, the Private Investor beneficially owned approximately 10 % of NCLH’s outstanding ordinary shares as of December 31, 2020.

The initial exchange rate for the Private Exchangeable Notes could have been adjusted in the event of certain make-whole fundamental changes or tax redemption events (each, as described in the Indenture), but the maximum number of NCLH ordinary shares issuable upon an exchange in the event of such an adjustment would not have exceeded 46,577,947 .

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Notwithstanding the termination, we and the Private Investor agreed that certain provisions related to indemnification and expense reimbursement would survive in accordance with their terms.

Subsequent Event

In April 2021, agreements were executed to defer certain newbuild related payments as well as certain newbuild related debt amortization to July 2022.

The aggregate amount of payments that were deferred was approximately € 269.1 million, or $ 315.7 million based on the euro/U.S.

dollar exchange rate as of March 31, 2021.

The interest rate on the newbuild related payments was increased to 4.5 %.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements