What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-09 · 160 added, 128 removed, 628 unchanged (31% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Passenger ticket

16 unchanged sentences

Interest expense, net

( 1,122,905 )

Other income (expense), net

Total non-operating income (expense)

( 1,065,441 )

Net loss before income taxes

11 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

( 2,933,866 )

13 unchanged sentences

(in thousands, except share data)

September 30,

Current assets:

18 unchanged sentences

Ordinary shares, $ 0.001 par value;

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

980,000,000 shares authorized, 370,032,455 shares issued and outstanding at September 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)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

35 unchanged sentences

Net increase (decrease) in cash and cash equivalents

( 1,365,666 )

Cash and cash equivalents at beginning of period

4 unchanged sentences

(in thousands)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Comprehensive

1 unchanged sentence

Income (Loss)

Balance, March 31, 2021

Balance, June 30, 2021

( 2,377,800 )

Share-based compensation

Common share issuance proceeds, net

Issuance of shares under employee related plans

Net share settlement of restricted share units

Other comprehensive income, net

Balance, June 30, 2021

Other comprehensive loss, net

Balance, September 30, 2021

( 3,223,685 )

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Comprehensive

7 unchanged sentences

Cumulative change in accounting policy

Other comprehensive income, net

Other comprehensive loss, net

( 2,933,866 )

Balance, June 30, 2021

Balance, September 30, 2021

( 3,223,685 )

3 unchanged sentences

(in thousands)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Comprehensive

1 unchanged sentence

Income (Loss)

Balance, March 31, 2020

Balance, June 30, 2020

( 1,253,926 )

Share-based compensation

Issuance of shares under employee related plans

Common share issuance proceeds, net

Net share settlement of restricted share units

Beneficial conversion feature

Other comprehensive income, net

Balance, June 30, 2020

Balance, September 30, 2020

( 1,253,926 )

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Comprehensive

12 unchanged sentences

( 3,273,581 )

Balance, June 30, 2020

Balance, September 30, 2020

( 1,253,926 )

13 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 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.

As of September 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 until July 2021, when we resumed cruise voyages 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 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.

Due to the impact of COVID-19, 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 hereof, 11 of our ships were operating with guests on board as part of our phased return to service.

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.

2 unchanged sentences

In February 2021, we amended certain of our export-credit backed facilities to further defer amortization payments through March 31, 2022, and we amended all of our export-credit backed facilities to suspend certain financial covenants through December 31, 2022.

In connection with such amendments of our Senior Secured Credit Facility and our export-credit backed facilities,

our minimum liquidity requirement was increased to $ 200 million and such requirement applies through December 31, 2022.

In March 2021, the Company received additional financing through various debt financings and an equity offering, collectively totaling approximately $ 2.7 billion in gross proceeds.

In connection with such amendments of our Senior Secured Credit Facility and our export-credit backed facilities, our minimum liquidity requirement was increased to $ 200 million and such requirement applies through December 31, 2022.

In March 2021, the Company received additional financing through various debt financings and an equity offering,

collectively totaling approximately $ 2.7 billion in gross proceeds.

From the proceeds, approximately $ 1.5 billion was used to extinguish debt.

In November 2021, the Company executed a $ 1 billion commitment through August 15, 2022 that provides additional liquidity to the Company.

Refer to Note 7 – “Long-Term Debt” for further details of the above transactions.

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.

In the third quarter of 2021, we began a phased relaunch of certain cruise voyages with our ships initially operating at reduced occupancy levels.

The Company continues to execute on the phased relaunch plans for its 28 -ship fleet.

The Company expects to have approximately 75 % of capacity operating 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, the level of occupancy on our ships 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, increasing over time until we reach historical occupancy levels;

Our principal assumptions for future cash flow projections include:

● Expected gradual phased return to service 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 10 - “Commitments and Contingencies”);

3 unchanged sentences

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

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 .

Based on these actions and assumptions regarding the impact of COVID-19, and considering our available liquidity, including cash and cash equivalents of $ 1.9 billion as of September 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 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.

however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages will be phased in gradually as described under “—Liquidity and Management’s Plan” above.

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

Nine Months Ended

September 30,

( 2,933,866 )

5 unchanged sentences

Diluted loss per share

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.

For the three months ended September 30, 2021 and 2020, a total of 98.9 million and 124.0 million, respectively, and for the nine months ended September 30, 2021 and 2020, a total of 106.3 million and 63.4 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 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.

We recognized a gain of $ 9.9 million and a loss of $ 12.3 million for the three months ended September 30, 2021 and 2020, respectively, and a gain of $ 14.9 million and a loss of $ 2.6 million for the nine months ended September 30, 2021 and 2020, respectively, related to transactions denominated in other currencies.

Depreciation and Amortization Expense

2 unchanged sentences

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.

Accounts receivable, net includes $ 964.7 million due from credit card processors as of September 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.

5 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 June 30, 2021, we have not adopted any expedients and exceptions under ASU 2020-04.

As of September 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

Nine Months Ended

September 30,

North America

1 unchanged sentence

Total revenue

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.

12 unchanged sentences

Receivables from customers are included within accounts receivable, net.

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

As of September 30, 2021 and December 31, 2020, our receivables from customers were $ 7.8 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 October 31, 2021.

These programs were 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.

3 unchanged sentences

Our contract liabilities are included within advance ticket sales.

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.

As of September 30, 2021 and December 31, 2020, our contract liabilities were $ 234.0 million and $ 23.1 million, respectively.

Of the amounts included within contract liabilities, approximately 25 % were refundable in accordance with our cancellation policies.

Of the deposits included within advance ticket sales, the vast majority 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 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.

For the nine months ended September 30, 2021, no revenue recognized was included in the contract liability balance at the

beginning of the period.

The revenue recognized in the nine months ended September 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 September 30, 2021 and 2020, approximately $ 0.9 million and $ 15.5 million, respectively, and during the nine months ended September 30, 2021 and 2020, approximately $ 26.9 million and $ 160.4 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.

6 unchanged sentences

Balance Sheet location

June 30, 2021

September 30, 2021

December 31, 2020

13 unchanged sentences

Long-term debt

During the three and nine months ended September 30, 2021, right-of-use assets obtained in exchange for lease obligations were $ 501.4 million for operating leases to use certain port facilities.

The leases had terms ranging from approximately 20 years to 32 years and incremental borrowing rates ranging from 4.3 % to 5.8 %.

As of September 30, 2021, maturities of lease liabilities were as follows (in thousands):

Remainder of 2021

Present value discount

Present value of lease liabilities

Accumulated Other Comprehensive Income (Loss)

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

Six Months Ended June 30, 2021

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

Nine Months Ended September 30, 2021

Comprehensive

4 unchanged sentences

Accumulated other comprehensive income (loss) at end of period

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

Six Months Ended June 30, 2020

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

Nine Months Ended September 30, 2020

Comprehensive

7 unchanged sentences

(3) Includes $ 2.6 million of loss expected to be reclassified into earnings in the next 12 months.

Property and Equipment, net

Property and equipment, net increased $ 68.9 million for the nine months ended September 30, 2021 primarily due to ships under construction and ship improvement projects.

Long-Term Debt

1 unchanged sentence

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.

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.

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.

4 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.

17 unchanged sentences

The aggregate amount of debt amortization that was deferred was € 31.2 million, or $ 36.1 million based on the euro/U.S.

dollar exchange rate as of June 30, 2021.

dollar exchange rate as of September 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.

The amendments of the agreements described above resulted in aggregate modification expenses of $ 52.1 million for the nine months ended September 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.

As of September 30, 2021, € 19.2 million, or $ 22.2 million based on the euro/U.S.

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

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.

Subsequently, in September 2021, excess commitments totaling approximately $ 230 million were cancelled under two of the credit facilities as a result of hedging euro below the rate used to determine the maximum commitments in U.S.

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.

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.

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.

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 for the six months ended June 30, 2021, 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 nine months ended September 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”).

The 2028 Senior Unsecured Notes pay interest at 6.125 % per annum, semiannually on March 15 and September 15 of each year, commencing on September 15, 2021, to holders of record at the close of business on the immediately preceding March 1 and September 1, respectively.

The 2028 Senior Unsecured Notes pay interest at 6.125 % 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.

NCL Finance may redeem the 2028 Senior Unsecured Notes, in whole or part, at any time prior to December 15, 2027, 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.” NCL Finance may redeem the 2028 Senior Unsecured Notes, in whole or in part, on or after December 15, 2027, 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 March 15, 2024, NCL Finance may choose to redeem up to 40 % of the aggregate principal amount of the 2028 Senior Unsecured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 106.125 % of the principal amount of the 2028 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 2028 Senior Unsecured Notes issued remains outstanding following such redemption.

offerings, subject to certain restrictions, at a redemption price equal to 106.125 % of the principal amount of the 2028 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 2028 Senior Unsecured Notes issued remains outstanding following such redemption.

The indentures governing the 2026 Senior Unsecured Notes and 2028 Senior Unsecured Notes include requirements that, among other things and subject to a number of qualifications and exceptions, restrict the ability of NCLC and its restricted subsidiaries, as applicable, to (i) incur or guarantee additional indebtedness;

5 unchanged sentences

and (vii) consolidate, merge or transfer all or substantially all of their assets.

In November 2021, the Company executed a $ 1 billion commitment through August 15, 2022 that provides additional liquidity to the Company.

If drawn, this commitment will convert into an unsecured note paying interest at 8.0 % per annum, semiannually, and maturing in April 2024.

As of the date hereof, the Company has not drawn under this commitment.

Exchangeable Notes

22 unchanged sentences

The maximum exchange rate is 66.6666 and reflects potential adjustments to the initial exchange rate, which would only be made in the event of certain make-whole fundamental changes or tax redemption events.

The exchange rate referred to above is also subject to adjustment for any stock split, stock dividend or similar transaction.

The exchange rate referred to above is also subject to

adjustment for any stock split, stock dividend or similar transaction.

The 2025 Exchangeable Notes pay interest at 5.375 % per annum, semiannually on February 1 and August 1 of each year, to holders of record at the close of business on the immediately preceding January 15 and July 15, respectively.

7 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, 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):

The resulting loss on extinguishment, which is recognized in interest expense, net, was $ 600.4 million for the nine months ended September 30, 2021.

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

Financing Fees

12 unchanged sentences

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

Ended June 30,

Ended September 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.

Prior to the adoption of ASU 2020-06, interest expense, including amortization of debt discounts and coupon interest, recognized related to the convertible debt instruments was $ 29.5 million and $ 42.0 million for the three and nine months ended September 30, 2020, respectively.

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

As of September 30, 2021, the if-converted value above par was $ 812.9 million on available shares of 62.7 million and $ 191.0 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 June 30, 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 September 30, 2021 for each of the following periods (in thousands):

Remainder of 2021

1 unchanged sentence

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

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.

At September 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.

17 unchanged sentences

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

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 .

As of September 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 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.

As of September 30, 2021, we had, in aggregate with previously dedesignated fuel swaps, approximately 153 thousand metric tons which were not designated as cash flow hedges maturing through December 31, 2022 .

As of September 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 € 2.3 billion, or $ 2.7 billion based on the euro/U.S.

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.

dollar exchange rate as of September 30, 2021.

As of September 30, 2021, we had an interest rate swap, which is 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 swap was $ 0.2 billion as of September 30, 2021.

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

September 30,

Balance Sheet Location

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

June 30, 2021

September 30, 2021

December 31, 2020

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(Loss) into Income (Expense)

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Fuel contracts

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(Loss) into Income (Expense)

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Fuel contracts

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

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020

Three Months Ended September 30, 2021

Three Months Ended September 30, 2020

( Expense), net

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Fuel contracts

Six Months Ended June 30, 2021

Six Months Ended June 30, 2020

Amount of gain recognized in income as a result of failing effectiveness tests

Fuel contracts

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020

( Expense), net

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Fuel contracts

Amount of gain recognized in income as a result of failing effectiveness tests

Fuel contracts

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

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Location of Gain (Loss)

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Long-Term Debt

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.

As of September 30, 2021 and December 31, 2020, the fair value of our long-term debt, including the current portion, was $ 14.2 billion, which was $ 1.6 billion higher and $ 2.2 billion higher, respectively, than the carrying values, excluding deferred financing costs.

measurement dates as well as the beneficial conversion feature recognized on the Private Exchangeable Notes as of December 31, 2020.

The fair value of our long-term revolving and term loan facilities was calculated based on estimated rates for the same or similar instruments with similar terms and remaining maturities.

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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.

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.

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Share Option Awards

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

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

Number of Share Option Awards

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Forfeited and cancelled

Outstanding as of June 30, 2021

Outstanding as of September 30, 2021

Restricted Share Unit Awards

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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:

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

Average Grant

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Forfeited or expired

Non-vested as of June 30, 2021

Non-vested as of September 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

Nine Months Ended

September 30,

Payroll and related expense

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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 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.

The combined contract prices of the nine ships on order for delivery as of September 30, 2021 was approximately € 7.6 billion, or $ 8.8 billion based on the euro/U.S.

dollar exchange rate as of September 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.

Class Actions

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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.

Investigations

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.

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

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in the United States District Court for the Southern District of Florida under Title III of the Cuban Liberty and Solidarity (Libertad) Act of 1996, also known as the Helms-Burton Act.

The complaint filed by Havana Docks Corporation alleges it holds an interest in the Havana Cruise Port Terminal and the complaint filed by Javier Garcia-Bengochea alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban Government.

The complaint filed by Havana Docks Corporation (the “Havana Docks Matter”) alleges it holds an interest in the Havana Cruise Port Terminal and the complaint filed by Javier Garcia-Bengochea (the “Garcia-Bengochea Matter”) alleges that he holds an interest in the Port of Santiago, Cuba, both of which were expropriated by the Cuban Government.

The complaints further allege that the Company “trafficked” in those properties by embarking and disembarking passengers at these facilities.

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On April 24, 2020, we filed a motion seeking permission to appeal the district court’s order which was subsequently denied.

Discovery in the Havana Docks Matter has now concluded and appropriate motions for summary judgment have been filed.

Trial for the Havana Docks Matter is scheduled for March 2022.

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

As of September 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 $ 1.2 billion at June 30, 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 $ 1.5 billion in advance ticket sales at September 30, 2021 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 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 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.

We may be required to pledge additional collateral and/or post cash reserves or take other actions that may further reduce our liquidity.

As of September 30, 2021, we had cash reserves of approximately $ 1.2 billion with credit card processors recognized in accounts receivable, net or other long-term assets.

Subsequent to September 30, 2021, $ 388.3 million in cash reserves have been released to the Company.

required to pledge additional collateral and/or post additional cash reserves or take other actions that may further reduce our liquidity.

Other Income (Expense), Net

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.

For the three and nine months ended September 30, 2021, other income (expense), net consisted of income of $ 4.7 million and $ 57.5 million, respectively, primarily related to gains on fuel swaps not designated as hedges and foreign currency exchange.

For the three and nine months ended September 30, 2020, other income (expense), net consisted of an expense of $ 23.7 million and $ 32.3 million, respectively, 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.

Supplemental Cash Flow Information

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.

For the nine months ended September 30, 2021 and 2020, we had non-cash investing activities consisting of changes in accruals related to property and equipment of $ 64.6 million and $ 29.1 million, respectively.

Related Party Disclosures

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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