Norwegian Cruise Line Holdings Ltd. 10-Q

Item 1. Financial Statements Norwegian Cruise Line Holdings Ltd. Consolidated Statements of Operations (Unaudited) (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 Revenue ​ ​ Passenger ticket ​ $ 342,455 ​ $ 166 Onboard and other ​ 179,485 ​ 2,934 Total revenue ​ 521,940 ​ 3,100 Cruise operating expense ​ ​ Commissions, transportation and other ​ 87,958 ​ 9,033 Onboard and other ​ 32,550 ​ 1,259 Payroll and related ​ 240,727 ​ 82,138 Fuel ​ 135,509 ​ 42,603 Food ​ 39,516 ​ 6,308 Other ​ 199,153 ​ 59,514 Total cruise operating expense ​ 735,413 ​ 200,855 Other operating expense ​ ​ Marketing, general and administrative ​ 296,207 ​ 203,195 Depreciation and amortization ​ 179,076 ​ 170,316 Total other operating expense ​ 475,283 ​ 373,511 Operating loss ​ ( 688,756 ) ​ ( 571,266 ) Non-operating income (expense) ​ ​ ​ ​ Interest expense, net ​ ( 327,685 ) ​ ( 824,441 ) Other income (expense), net ​ 38,120 ​ 27,243 Total non-operating income (expense) ​ ( 289,565 ) ​ ( 797,198 ) Net loss before income taxes ​ ( 978,321 ) ​ ( 1,368,464 ) Income tax expense ​ ( 4,393 ) ​ ( 1,728 ) Net loss ​ $ ( 982,714 ) ​ $ ( 1,370,192 ) Weighted-average shares outstanding ​ ​ Basic ​ 417,734,591 ​ 329,377,207 Diluted ​ 417,734,591 ​ 329,377,207 Loss per share ​ ​ Basic ​ $ ( 2.35 ) ​ $ ( 4.16 ) Diluted ​ $ ( 2.35 ) ​ $ ( 4.16 ) ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 3 Table of Contents Norwegian Cruise Line Holdings Ltd. Consolidated Statements of Comprehensive Loss (Unaudited) (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 Net loss ​ $ ( 982,714 ) ​ $ ( 1,370,192 ) Other comprehensive income (loss): ​ ​ Shipboard Retirement Plan ​ 2,476 ​ 98 Cash flow hedges: ​ ​ ​ ​ Net unrealized gain (loss) ​ 39,304 ​ ( 73,037 ) Amount realized and reclassified into earnings ​ ( 7,502 ) ​ 21,838 Total other comprehensive income (loss) ​ 34,278 ​ ( 51,101 ) Total comprehensive loss ​ $ ( 948,436 ) ​ $ ( 1,421,293 ) ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 4 Table of Contents Norwegian Cruise Line Holdings Ltd. Consolidated Balance Sheets (Unaudited) (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ 2022 2021 Assets ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 2,136,840 ​ $ 1,506,647 Short-term investments ​ ​ — ​ ​ 240,000 Accounts receivable, net ​ 544,961 ​ 1,167,473 Inventories ​ 141,956 ​ 118,205 Prepaid expenses and other assets ​ 390,753 ​ 269,243 Total current assets ​ 3,214,510 ​ 3,301,568 Property and equipment, net ​ 13,532,399 ​ 13,528,806 Goodwill ​ 98,134 ​ 98,134 Trade names ​ 500,525 ​ 500,525 Other long-term assets ​ 1,909,924 ​ 1,300,804 Total assets ​ $ 19,255,492 ​ $ 18,729,837 Liabilities and shareholders’ equity ​ ​ Current liabilities: ​ ​ Current portion of long-term debt ​ $ 1,009,741 ​ $ 876,890 Accounts payable ​ 91,786 ​ 233,172 Accrued expenses and other liabilities ​ 1,097,828 ​ 1,059,034 Advance ticket sales ​ 1,977,325 ​ 1,561,336 Total current liabilities ​ 4,176,680 ​ 3,730,432 Long-term debt ​ 12,563,518 ​ 11,569,700 Other long-term liabilities ​ 1,007,692 ​ 997,055 Total liabilities ​ 17,747,890 ​ 16,297,187 Commitments and contingencies (Note 9) ​ ​ Shareholders’ equity: ​ ​ Ordinary shares, $ 0.001 par value; 980,000,000 shares authorized; 419,100,690 shares issued and outstanding at March 31, 2022 and 416,891,915 shares issued and outstanding at December 31, 2021 ​ 419 ​ 417 Additional paid-in capital ​ 7,537,111 ​ 7,513,725 Accumulated other comprehensive income (loss) ​ ( 250,808 ) ​ ( 285,086 ) Accumulated deficit ​ ( 5,779,120 ) ​ ( 4,796,406 ) Total shareholders’ equity ​ 1,507,602 ​ 2,432,650 Total liabilities and shareholders’ equity ​ $ 19,255,492 ​ $ 18,729,837 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 5 Table of Contents Norwegian Cruise Line Holdings Ltd. Consolidated Statements of Cash Flows (Unaudited) (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 Cash flows from operating activities ​ ​ Net loss ​ $ ( 982,714 ) ​ $ ( 1,370,192 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ Depreciation and amortization expense ​ ​ 195,464 ​ 183,808 Gain on derivatives ​ ​ ( 19,779 ) ​ ​ ( 18,687 ) Loss on extinguishment of debt ​ 188,433 ​ 621,894 Provision for bad debts and inventory obsolescence ​ 1,294 ​ 4,329 Gain on involuntary conversion of assets ​ ​ — ​ ​ ( 418 ) Share-based compensation expense ​ 32,792 ​ 26,601 Net foreign currency adjustments ​ ( 4,126 ) ​ ( 5,141 ) Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable, net ​ 618,853 ​ ( 2,648 ) Inventories ​ ( 24,141 ) ​ ( 2,351 ) Prepaid expenses and other assets ​ ( 632,610 ) ​ ( 406,807 ) Accounts payable ​ ( 136,767 ) ​ 6,626 Accrued expenses and other liabilities ​ ( 25,587 ) ​ 35,341 Advance ticket sales ​ 417,877 ​ 75,634 Net cash used in operating activities ​ ( 371,011 ) ​ ( 852,011 ) Cash flows from investing activities ​ ​ Additions to property and equipment, net ​ ( 165,284 ) ​ ( 136,350 ) Purchases of short-term investments ​ ​ — ​ ​ ( 205,000 ) Proceeds from maturities of short-term investments ​ ​ 240,000 ​ ​ — Cash paid on settlement of derivatives ​ ​ — ​ ​ ( 4,642 ) Other ​ ​ 4,940 ​ ​ 2,726 Net cash provided by (used in) investing activities ​ 79,656 ​ ( 343,266 ) Cash flows from financing activities ​ ​ Repayments of long-term debt ​ ( 935,444 ) ​ ( 870,396 ) Proceeds from long-term debt ​ 2,073,175 ​ 1,161,672 Common share issuance proceeds, net ​ ​ — ​ ​ 1,558,412 Proceeds from employee related plans ​ 2,557 ​ 1,089 Net share settlement of restricted share units ​ ( 11,961 ) ​ ( 16,043 ) Early redemption premium ​ ( 172,012 ) ​ ( 611,164 ) Deferred financing fees ​ ( 34,767 ) ​ ( 25,742 ) Net cash provided by financing activities ​ 921,548 ​ 1,197,828 Net increase in cash and cash equivalents ​ 630,193 ​ 2,551 Cash and cash equivalents at beginning of period ​ 1,506,647 ​ 3,300,482 Cash and cash equivalents at end of period ​ $ 2,136,840 ​ $ 3,303,033 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 6 Table of Contents Norwegian Cruise Line Holdings Ltd. Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ Total ​ ​ Ordinary ​ Paid-in ​ Comprehensive ​ Accumulated ​ Shareholders’ ​ Shares Capital Income (Loss) Deficit Equity Balance, December 31, 2021 $ 417 ​ $ 7,513,725 ​ $ ( 285,086 ) ​ $ ( 4,796,406 ) ​ $ 2,432,650 Share-based compensation ​ — ​ 32,792 ​ — ​ — ​ 32,792 Issuance of shares under employee related plans ​ 2 ​ 2,555 ​ — ​ — ​ 2,557 Net share settlement of restricted share units ​ — ​ ( 11,961 ) ​ — ​ — ​ ( 11,961 ) Other comprehensive income, net ​ — ​ — ​ 34,278 ​ — ​ 34,278 Net loss ​ — ​ — ​ — ​ ( 982,714 ) ​ ( 982,714 ) Balance, March 31, 2022 ​ $ 419 ​ $ 7,537,111 ​ $ ( 250,808 ) ​ $ ( 5,779,120 ) ​ $ 1,507,602 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2021 ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ Total ​ ​ Ordinary ​ Paid-in ​ Comprehensive ​ Accumulated ​ Shareholders’ ​ Shares Capital Income (Loss) Deficit Equity Balance, December 31, 2020 $ 316 ​ $ 4,889,355 ​ $ ( 240,117 ) ​ $ ( 295,449 ) ​ $ 4,354,105 Share-based compensation ​ — ​ 26,601 ​ — ​ — ​ 26,601 Issuance of shares under employee related plans ​ — ​ 1,089 ​ — ​ — ​ 1,089 Common share issuance proceeds, net ​ 54 ​ ​ 1,558,358 ​ ​ — ​ ​ — ​ ​ 1,558,412 Net share settlement of restricted share units ​ — ​ ( 16,043 ) ​ — ​ — ​ ( 16,043 ) Cumulative change in accounting policy ​ ​ — ​ ​ ( 131,240 ) ​ ​ — ​ ​ 5,630 ​ ​ ( 125,610 ) Other comprehensive loss, net ​ ​ — ​ — ​ ( 51,101 ) ​ — ​ ( 51,101 ) Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 1,370,192 ) ​ ​ ( 1,370,192 ) Balance, March 31, 2021 ​ $ 370 ​ $ 6,328,120 ​ $ ( 291,218 ) ​ $ ( 1,660,011 ) ​ $ 4,377,261 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ 7 Table of Contents Norwegian Cruise Line Holdings Ltd. Notes to Consolidated Financial Statements (Unaudited) 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. de R.L. (formerly Prestige Cruises International, Inc.), together with its consolidated subsidiaries, including Prestige Cruise Holdings S. de R.L. (formerly Prestige Cruise Holdings, Inc.), Prestige’s direct wholly-owned subsidiary, which in turn is the parent of Oceania Cruises S. de R.L. (formerly Oceania Cruises, Inc.) (“Oceania Cruises”) and Seven Seas Cruises S. de R.L. (“Regent”) (Oceania Cruises also refers to the brand by the same name and Regent also refers to the brand Regent Seven Seas Cruises). References to the “U.S.” are to the United States of America, and “dollar(s)” or “$” are to U.S. dollars, the “U.K.” are to the United Kingdom and “euro(s)” or “€” are to the official currency of the Eurozone. We refer you to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations— Terminology” for the capitalized terms used and not otherwise defined throughout these notes to consolidated financial statements. 1. Description of Business and Organization 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, 2022, we had 28 ships with approximately 59,150 Berths and had orders for nine additional ships to be delivered through 2027. Due to 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. We have six Prima Class Ships on order with expected delivery dates from 2022 through 2027. We have one Explorer Class Ship on order for delivery in 2023. We have two Allura Class Ships on order for delivery in 2023 and 2025. These additions to our fleet will increase our total Berths to approximately 83,000 . ​ ​ 2. Summary of Significant Accounting Policies Liquidity and Management’s Plan 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. In the third quarter of 2021, we began a phased relaunch of certain cruise voyages with our ships initially operating at reduced occupancy levels. As of May 7, 2022, all of our ships were operating with guests on board. Significant events affecting travel typically have an impact on demand for cruise vacations, with the full extent of the impact determined by the length of time the event influences travel decisions. 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 and implement new health and safety protocols, port availability, travel restrictions, bans and advisories, our ability to staff our ships, and the impact of other events impacting travel or consumer discretionary spending, such as inflation, the price of fuel, or Russia’s recent invasion of Ukraine and the actions taken by the United States and other governments in response to the invasion. We believe the ongoing effects of these events on our operations and global bookings have had, and will continue to have, a significant impact on our financial results and liquidity. ​ 8 Table of Contents The estimation of our future cash flow projections includes numerous assumptions that are subject to various risks and uncertainties. Our principal assumptions for future cash flow projections include: ● Expected gradual return to historical occupancy levels; ● Expected increase in revenue per passenger cruise day through a combination of both passenger ticket and onboard revenue as compared to 2019; ● Forecasted cash collections in accordance with the terms of our credit card processing agreements (see Note 9 - “Commitments and Contingencies”); ● Expected continued expenses to maintain and comply with additional health and safety protocols; and ● Expected increases in fuel prices and the impact of inflation. We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change due to the unique and ongoing unpredictable nature of the events, including the magnitude and duration. Accordingly, the full effect of the COVID-19 pandemic and other events impacting travel and consumer discretionary spending, including Russia’s recent invasion of Ukraine, on our financial performance and financial condition cannot be quantified at this time. We have made reasonable estimates and judgments of the impact of these events within our financial statements and there may be material changes to those estimates in future periods. 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. Based on these actions and assumptions regarding the impact of COVID-19 and other events impacting travel and consumer discretionary spending, including Russia’s recent invasion of Ukraine, and considering our available liquidity of $ 3.1 billion as of March 31, 2022, including cash and cash equivalents and our $ 1 billion undrawn commitment, we have concluded that we have sufficient liquidity to satisfy our obligations for at least the next twelve months . Basis of Presentation The accompanying consolidated financial statements are unaudited and, in our opinion, contain all normal recurring adjustments necessary for a fair statement of the results for the periods presented. Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire fiscal year. 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 and our resumption of cruise voyages was phased in gradually. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021, which are included in our most recent Annual Report on Form 10-K filed with the SEC on March 1, 2022. Revisions to Previously Reported Quarterly Financial Statements During the fourth quarter of 2021, the Company identified an error in its Consolidated Balance Sheet as of March 31, 2021 and Consolidated Statement of Cash Flows for the three months ended March 31, 2021. Based on their nature, certain amounts shown as cash and cash equivalents should have been classified as short-term investments. We have determined that these errors were not material to the previously issued interim financial statements for the period ended March 31, 2021. ​ ​ ​ ​ ​ ​ ​ ​ 9 Table of Contents As a result of the error, the amounts previously reported as cash and cash equivalents have been reclassified to cash flows from investing activities in the Consolidated Statement of Cash Flows for the three months ended March 31, 2021 as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, 2021 ​ ​ Previously ​ As ​ ​ Reported ​ Adjustments ​ Reported Cash flows from investing activities ​ ​ ​ ​ Purchases of short-term investments ​ $ — ​ $ ( 205,000 ) ​ $ ( 205,000 ) Net cash used in investing activities ​ ​ ( 138,266 ) ​ ​ ( 205,000 ) ​ ​ ( 343,266 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net increase (decrease) in cash and cash equivalents ​ ​ 207,551 ​ ​ ( 205,000 ) ​ ​ 2,551 Cash and cash equivalents at end of period ​ ​ 3,508,033 ​ ​ ( 205,000 ) ​ ​ 3,303,033 ​ Loss Per Share A reconciliation between basic and diluted loss per share was as follows (in thousands, except share and per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 Net loss ​ $ ( 982,714 ) ​ $ ( 1,370,192 ) Basic weighted-average shares outstanding ​ 417,734,591 ​ 329,377,207 Dilutive effect of share awards ​ — ​ — Diluted weighted-average shares outstanding ​ 417,734,591 ​ 329,377,207 Basic loss per share ​ $ ( 2.35 ) ​ $ ( 4.16 ) Diluted loss per share ​ $ ( 2.35 ) ​ $ ( 4.16 ) ​ For the three months ended March 31, 2022 and 2021, a total of 86.4 million and 120.8 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 The majority of our transactions are settled in U.S. dollars. We remeasure assets and liabilities denominated in foreign currencies at exchange rates in effect at the balance sheet date. 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 $ 8.4 million and $ 4.8 million for the three months ended March 31, 2022 and 2021, respectively, related to transactions denominated in other currencies. Depreciation and Amortization Expense The amortization of deferred financing fees is included in depreciation and amortization expense in the consolidated statements of cash flows; however, for purposes of the consolidated statements of operations they are included in interest expense, net. Accounts Receivable, Net Accounts receivable, net included $ 426.2 million and $ 1.1 billion due from credit card processors as of March 31, 2022 and December 31, 2021, respectively. Recently Issued Accounting Guidance In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provided guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions 10 Table of Contents impacted by reference rate reform. The provisions apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. 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, 2022, 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. ​ 3. Revenue Recognition Disaggregation of Revenue Revenue and cash flows are affected by economic factors in various geographical regions. Revenues by destination were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 North America ​ $ 487,435 Europe ​ 24,797 Asia-Pacific ​ 8,292 South America ​ ​ 1,416 Total revenue ​ $ 521,940 ​ Amounts for the comparative three months ended March 31, 2021 are excluded as the information is not meaningful. North America includes the U.S., the Caribbean, Canada and Mexico. Europe includes the Baltic region, Canary Islands and Mediterranean. Asia-Pacific includes Australia, New Zealand and Asia. Other includes all other international territories. Segment Reporting We have concluded that our business has a single reportable segment. Each brand, Norwegian, Oceania Cruises and Regent, constitutes a business for which discrete financial information is available and management regularly reviews the brand level operating results and, therefore, each brand is considered an operating segment. Our operating segments have similar economic and qualitative characteristics, including similar long-term margins and similar products and services; therefore, we aggregate all of the operating segments into one reportable segment. 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 approximated 80 - 87 % of total revenue over the preceding three fiscal years. No other individual country’s revenues exceed 10% in any given period. Contract Balances Receivables from customers are included within accounts receivable, net. As of March 31, 2022, our receivables from customers were $ 53.3 million. ​ Our cancellation policies permit guests to cancel cruises booked within certain windows for specified time periods up to 15 days prior to departure, and the guests will receive future cruise credits. Certain cruises booked for certain periods will be permitted a 60-day or 75-day cancellation window for refunds. Future cruise credits that have been issued are generally 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. ​ Our contract liabilities are included within advance ticket sales. As of March 31, 2022 and December 31, 2021, our contract liabilities were $ 1.0 billion and $ 161.8 million, respectively. Of the amounts included within contract liabilities, 11 Table of Contents approximately 40 % 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 three months ended March 31, 2022, $ 97.0 million of revenue recognized was included in the contract liability balance at the beginning of the period. ​ For cruise vacations that had been cancelled by us due to COVID-19, during the three months ended March 31, 2022 and 2021, approximately $ 0.3 million and $ 14.8 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. ​ ​ ​ 4. Leases Operating lease balances were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance Sheet location March 31, 2022 December 31, 2021 Operating leases ​ ​ ​ Right-of-use assets Other long-term assets ​ $ 798,885 ​ $ 794,187 Current operating lease liabilities Accrued expenses and other liabilities ​ ​ 36,487 ​ ​ 34,407 Non-current operating lease liabilities Other long-term liabilities ​ ​ 671,082 ​ ​ 670,688 ​ ​ ​ 5. Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) for the three months ended March 31, 2022 was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2022 ​ ​ ​ ​ ​ ​ ​ Change ​ ​ ​ Accumulated ​ Change ​ Related to ​ ​ ​ Other ​ Related to ​ Shipboard ​ ​ ​ Comprehensive ​ Cash Flow ​ Retirement ​ ​ Income (Loss) Hedges ​ Plan ​ Accumulated other comprehensive income (loss) at beginning of period ​ $ ( 285,086 ) ​ $ ( 279,696 ) ​ $ ( 5,390 ) Current period other comprehensive income before reclassifications ​ 41,685 ​ 39,304 2,381 Amounts reclassified into earnings ​ ( 7,407 ) ​ ( 7,502 ) (1) 95 (2) Accumulated other comprehensive income (loss) at end of period ​ $ ( 250,808 ) ​ $ ( 247,894 ) (3) $ ( 2,914 ) ​ ​ 12 Table of Contents Accumulated other comprehensive income (loss) for the three months ended March 31, 2021 was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2021 ​ ​ ​ ​ ​ ​ ​ Change ​ ​ Accumulated ​ Change ​ Related to ​ ​ ​ Other ​ Related to ​ Shipboard ​ ​ ​ Comprehensive ​ Cash Flow ​ Retirement ​ ​ Income (Loss) Hedges ​ Plan ​ Accumulated other comprehensive income (loss) at beginning of period $ ( 240,117 ) ​ $ ( 234,334 ) ​ $ ( 5,783 ) Current period other comprehensive loss before reclassifications ( 73,037 ) ( 73,037 ) — Amounts reclassified into earnings 21,936 21,838 (1) 98 (2) Accumulated other comprehensive income (loss) at end of period $ ( 291,218 ) $ ( 285,533 ) ​ $ ( 5,685 ) (1) We refer you to Note 7 – “Fair Value Measurements and Derivatives” for the affected line items in the consolidated statements of operations. (2) Amortization of prior-service cost and actuarial loss reclassified to other income (expense), net. (3) Includes $ 72.9 million of gain expected to be reclassified into earnings in the next 12 months. ​ ​ ​ ​ 6. Long-Term Debt In February 2022, NCLC conducted a private offering (the “Notes Offering”) of $ 1,000 million in aggregate principal amount of 5.875 % senior secured notes due 2027 (the “2027 Secured Notes”) and $ 600 million in aggregate principal amount of 7.750 % senior notes due 2029 (the “2029 Unsecured Notes”). The 2027 Secured Notes are jointly and severally guaranteed on a senior secured basis by Pride of Hawaii, LLC, Norwegian Epic, Ltd. and Sirena Acquisition. The 2027 Secured Notes and the related guarantees are secured by a first-priority interest in, among other things and subject to certain agreed security principles, three of our vessels, namely the Norwegian Jade vessel, the Norwegian Epic vessel and the Sirena vessel. NCLC may redeem the 2027 Secured Notes at its option, in whole or in part, at any time and from time to time prior to February 15, 2024, at a “make-whole” redemption price, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. NCLC may redeem the 2027 Secured Notes at its option, in whole or in part, at any time and from time to time on or after February 15, 2024, at the redemption prices set forth in the indenture governing the 2027 Secured Notes, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. At any time and from time to time prior to February 15, 2024, NCLC may choose to redeem up to 40 % of the aggregate principal amount of the 2027 Secured 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 2027 Secured 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 2027 Secured Notes issued remains outstanding following such redemption. NCLC may redeem the 2029 Unsecured Notes at its option, in whole or in part, at any time and from time to time prior to November 15, 2028, at a “make-whole” redemption price, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. NCLC may redeem the 2029 Unsecured Notes at its option, in whole or in part, at any time and from time to time on or after November 15, 2028, at a redemption price equal to 100 % of the principal amount of 2029 Unsecured Notes redeemed, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. At any time and from time to time prior to February 15, 2025, NCLC may choose to redeem up to 40 % of the aggregate principal amount of the 2029 Unsecured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 107.750 % of the principal amount of the 2029 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 2029 Unsecured Notes issued remains outstanding following such redemption. 13 Table of Contents The indentures governing the 2027 Secured Notes and the 2029 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; (ii) pay dividends or distributions on, or redeem or repurchase, equity interests and make other restricted payments; (iii) make investments; (iv) consummate certain asset sales; (v) engage in certain transactions with affiliates; (vi) grant or assume certain liens; and (vii) consolidate, merge or transfer all or substantially all of their assets. In February 2022, NCLC also conducted a private offering (the “Exchangeable Notes Offering”) of $ 473.2 million in aggregate principal amount of 2.5 % exchangeable senior notes due 2027 (the “2027 2.5% Exchangeable Notes”). The 2027 2.5% Exchangeable Notes are guaranteed by NCLH on a senior basis. Holders may exchange their 2027 2.5% Exchangeable Notes at their option into redeemable preference shares of NCLC. Upon exchange, the preference shares will be immediately and automatically exchanged, for each $ 1,000 principal amount of exchanged 2027 2.5% Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate. The exchange rate will initially be 28.9765 ordinary shares per $ 1,000 principal amount of 2027 2.5% Exchangeable Notes (equivalent to an initial exchange price of approximately $ 34.51 per ordinary share). The maximum exchange rate is 44.1891 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 2027 2.5% Exchangeable Notes pay interest at 2.5 % per annum, semiannually on February 15 and August 15 of each year, to holders of record at the close of business on the immediately preceding February 1 and August 1, respectively. NCLC has used, or will use, the net proceeds from the Notes Offering and the Exchangeable Notes Offering to redeem (the “Redemption”) all of the outstanding 2024 Senior Secured Notes and 2026 Senior Secured Notes and to make scheduled principal payments on debt maturing in 2022, including, in each case, to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses. Simultaneously with the Redemption, and pursuant to certain provisions contained in the indentures governing the 2026 Senior Unsecured Notes and the 2028 Senior Unsecured Notes, each of the guarantors party to such indentures were released from their obligations thereunder. The resulting losses on extinguishments, which are recognized in interest expense, net, were $ 188.4 million for the three months ended March 31, 2022. Exchangeable Notes The following is a summary of NCLC’s exchangeable notes as of March 31, 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unamortized ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal ​ Deferred ​ Net Carrying ​ Fair Value ​ Amount Financing Fees Amount Amount Leveling 2024 Exchangeable Notes ​ $ 146,601 ​ $ ( 3,110 ) ​ $ 143,491 ​ $ 258,692 ​ Level 2 2025 Exchangeable Notes ​ ​ 450,000 ​ ​ ( 8,074 ) ​ ​ 441,926 ​ ​ 654,773 ​ Level 2 2027 1.125% Exchangeable Notes ​ ​ 1,150,000 ​ ​ ( 27,647 ) ​ ​ 1,122,353 ​ ​ 1,082,840 ​ Level 2 2027 2.5% Exchangeable Notes ​ ​ 473,175 ​ ​ ( 11,982 ) ​ ​ 461,193 ​ ​ 465,112 ​ Level 2 The following is a summary of NCLC’s exchangeable notes as of December 31, 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unamortized Debt ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Discount, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal ​ including Deferred ​ Net Carrying ​ Fair Value ​ Amount Financing Fees Amount Amount Leveling 2024 Exchangeable Notes ​ $ 146,601 ​ $ ( 3,408 ) ​ $ 143,193 ​ $ 249,358 ​ Level 2 2025 Exchangeable Notes ​ ​ 450,000 ​ ​ ( 8,525 ) ​ ​ 441,475 ​ ​ 642,591 ​ Level 2 2027 1.125% Exchangeable Notes ​ ​ 1,150,000 ​ ​ ( 28,948 ) ​ ​ 1,121,052 ​ ​ 1,088,510 ​ Level 2 ​ 14 Table of Contents The following provides a summary of the interest expense of NCLC’s exchangeable notes (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ 2022 2021 Coupon interest ​ $ 12,992 ​ $ 24,140 Amortization of deferred financing fees ​ ​ 2,275 ​ ​ 2,893 Total ​ $ 15,267 ​ $ 27,033 ​ The effective interest rate is 7.07 %, 5.97 %, 1.64 % and 3.06 % for the 2024 Exchangeable Notes, 2025 Exchangeable Notes, 2027 1.125% Exchangeable Notes and 2027 2.5% Exchangeable Notes, respectively. ​ Debt Repayments The following are scheduled principal repayments on our long-term debt including finance lease obligations as of March 31, 2022 for each of the following periods (in thousands): ​ ​ ​ ​ ​ Year Amount Remainder of 2022 ​ $ 865,990 2023 ​ 937,406 2024 ​ 3,686,473 2025 ​ 1,070,923 2026 ​ 1,974,309 2027 ​ ​ 3,025,297 Thereafter ​ 2,205,433 Total ​ $ 13,765,831 ​ Debt Covenants During the year ended December 31, 2021, we received certain financial and other debt covenant waivers, added new free liquidity requirements and modified other financial covenants. As of March 31, 2022, 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. Generally, if an event of default under any debt agreement occurs, then pursuant to cross default and/or cross acceleration clauses, substantially all of our outstanding debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated, which would have a material adverse impact on our operations and liquidity. 7. Fair Value Measurements and Derivatives Fair value is defined as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability). Fair Value Hierarchy The following hierarchy for inputs used in measuring fair value should maximize the use of observable inputs and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available: Level 1 Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement dates. Level 2 Significant other observable inputs that are used by market participants in pricing the asset or liability based on market data obtained from independent sources. 15 Table of Contents Level 3 Significant unobservable inputs we believe market participants would use in pricing the asset or liability based on the best information available. Derivatives We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We attempt to minimize these risks through a combination of our normal operating and financing activities and through the use of derivatives. We assess whether derivatives used in hedging transactions are “highly effective” in offsetting changes in the cash flow of our hedged forecasted transactions. We use regression analysis for this hedge relationship and high effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the fair values of the derivative and the hedged forecasted transaction. 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. There are no amounts excluded from the assessment of hedge effectiveness and there are no credit-risk-related contingent features in our derivative agreements. We monitor concentrations of credit risk associated with financial and other institutions with which we conduct significant business. Credit risk, including but not limited to counterparty non-performance under derivatives, is not considered significant, as we primarily conduct business with large, well-established financial institutions with which we have established relationships, and which have credit risks acceptable to us, or the credit risk is spread out among many creditors. We do not anticipate non-performance by any of our significant counterparties. As of March 31, 2022, we had fuel swaps, which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately 347 thousand metric tons of our projected fuel purchases, maturing through December 31, 2023 . As of March 31, 2022, we had approximately 164 thousand metric tons which were not designated as cash flow hedges maturing through December 31, 2023 . As of March 31, 2022, 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 € 2.4 billion, or $ 2.7 billion based on the euro/U.S. dollar exchange rate as of March 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ 16 Table of Contents The derivatives measured at fair value and the respective location in the consolidated balance sheets include the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Assets ​ Liabilities ​ ​ ​ ​ March 31, ​ December 31, ​ March 31, ​ December 31, ​ Balance Sheet Location 2022 2021 2022 2021 Derivative Contracts Designated as Hedging Instruments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fuel contracts ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prepaid expenses and other assets ​ $ 81,704 ​ $ 29,349 ​ $ — ​ $ — ​ ​ Other long-term assets ​ ​ 36,764 ​ ​ 19,554 ​ ​ — ​ ​ — Foreign currency contracts ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prepaid expenses and other assets ​ 1,478 ​ 4,898 ​ — ​ — ​ ​ Accrued expenses and other liabilities ​ 558 ​ — ​ 134,845 ​ 98,592 ​ ​ Other long-term liabilities ​ — ​ — ​ 87,560 ​ 73,496 Interest rate contracts ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accrued expenses and other liabilities ​ — ​ — ​ — ​ 469 Total derivatives designated as hedging instruments ​ $ 120,504 ​ $ 53,801 ​ $ 222,405 ​ $ 172,557 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Derivative Contracts Not Designated as Hedging Instruments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fuel contracts ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prepaid expenses and other assets ​ $ 26,743 ​ $ 10,836 ​ $ — ​ $ — ​ ​ Other long-term assets ​ ​ 9,146 ​ ​ 3,476 ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total derivatives not designated as hedging instruments ​ $ 35,889 ​ $ 14,312 ​ $ — ​ $ — Total derivatives ​ ​ ​ $ 156,393 ​ $ 68,113 ​ $ 222,405 ​ $ 172,557 ​ The fair values of swap and forward contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The Company determines the value of options and collars utilizing an option pricing model based on inputs that are either readily available in public markets or can be derived from information available in publicly quoted markets. The option pricing model used by the Company is an industry standard model for valuing options and is used by the broker/dealer community. The inputs to this option pricing model are the option strike price, underlying price, risk-free rate of interest, time to expiration, and volatility. The fair value of option contracts considers both the intrinsic value and any remaining time value associated with those derivatives that have not yet settled. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. Our derivatives and financial instruments were categorized as Level 2 in the fair value hierarchy, and we had no derivatives or financial instruments categorized as Level 1 or Level 3. Our derivative contracts include rights of offset with our counterparties. We have elected to net certain assets and liabilities within counterparties when the rights of offset exist. We are not required to post cash collateral related to our derivative instruments. The following table discloses the gross and net amounts recognized within assets and liabilities (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ Gross ​ Amounts ​ Total Net ​ Amounts ​ ​ ​ March 31, 2022 Amounts Offset Amounts Not Offset Net Amounts Assets ​ $ 155,835 ​ $ — ​ $ 155,835 ​ $ ( 155,835 ) ​ $ — Liabilities ​ ​ 222,405 ​ ​ ( 558 ) ​ ​ 221,847 ​ ​ ( 196,068 ) ​ ​ 25,779 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ ​ ​ ​ Gross ​ ​ ​ ​ ​ Gross ​ Amounts ​ Total Net ​ Amounts ​ ​ ​ December 31, 2021 Amounts Offset Amounts Not Offset Net Amounts Assets ​ $ 68,113 ​ $ — ​ $ 68,113 ​ $ ( 68,113 ) ​ $ — Liabilities ​ ​ 172,557 ​ ​ — ​ ​ 172,557 ​ ​ ( 172,557 ) ​ ​ — ​ 17 Table of Contents The effects of cash flow hedge accounting on accumulated other comprehensive income (loss) were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 Derivatives Comprehensive Loss Income (Expense) (Loss) into Income (Expense) ​ ​ Three Months ​ Three Months ​ ​ ​ Three Months ​ Three Months ​ ​ Ended ​ Ended ​ ​ ​ Ended ​ Ended ​ March 31, 2022 March 31, 2021 ​ March 31, 2022 March 31, 2021 Fuel contracts ​ $ 92,483 ​ $ 24,050 Fuel ​ $ 8,809 ​ $ ( 8,171 ) Fuel contracts ​ ​ — ​ ​ — ​ Other income (expense), net ​ ​ — ​ ​ ( 10,190 ) Foreign currency contracts ​ ( 53,179 ) ​ ( 97,441 ) Depreciation and amortization ​ ( 1,267 ) ​ ( 1,267 ) Interest rate contracts ​ — ​ 354 Interest expense, net ​ ( 40 ) ​ ( 2,210 ) Total gain (loss) recognized in other comprehensive loss ​ $ 39,304 ​ $ ( 73,037 ) ​ $ 7,502 ​ $ ( 21,838 ) ​ The effects of cash flow hedge accounting on the consolidated statements of operations include the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, 2022 ​ Three Months Ended March 31, 2021 ​ ​ ​ ​ ​ Depreciation ​ ​ ​ ​ ​ ​ ​ Depreciation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ and ​ Interest ​ ​ ​ ​ and ​ Interest ​ Other Income ​ Fuel Amortization Expense, net Fuel Amortization Expense, net ( 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 ​ $ 135,509 ​ $ 179,076 ​ $ 327,685 ​ $ 42,603 ​ $ 170,316 ​ $ 824,441 ​ $ 27,243 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (expense) ​ ​ ​ ​ ​ ​ ​ Fuel contracts ​ 8,809 ​ — ​ — ​ ( 8,171 ) ​ — ​ — ​ ​ — Foreign currency contracts ​ — ​ ​ ( 1,267 ) ​ — ​ — ​ ( 1,267 ) ​ — ​ ​ — Interest rate contracts ​ — ​ — ​ ( 40 ) ​ — ​ — ​ ( 2,210 ) ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 10,190 ) ​ 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 ​ ​ ​ March 31, ​ Location of Gain (Loss) 2022 2021 Derivatives not designated as hedging instruments ​ ​ ​ Fuel contracts Other income (expense), net ​ $ 29,743 ​ $ 32,172 ​ ​ 18 Table of Contents Long-Term Debt As of March 31, 2022 and December 31, 2021, the fair value of our long-term debt, including the current portion, was $ 13.1 billion and $ 12.5 billion, respectively, which was $ 0.7 billion and $ 0.1 billion lower, 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. 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. The fair value of our exchangeable notes considers observable risk-free rates; credit spreads of the same or similar instruments; 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. Other The carrying amounts reported in the consolidated balance sheets of all other financial assets and liabilities approximate fair value. ​ ​ 8. Employee Benefits and Compensation Plans Restricted Share Unit Awards In March 2022, NCLH granted 4.8 million time-based restricted share unit awards to our employees, which primarily vest in substantially equal installments over three years . Additionally, in March 2022, NCLH granted 1.9 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 2024 and the satisfaction of an additional time-based vesting requirement that generally requires continued employment through March 1, 2025. The following is a summary of restricted share unit activity for the three months ended March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ Weighted- ​ Number of ​ Weighted- ​ Number of ​ Weighted- ​ ​ Time-Based ​ Average Grant ​ Performance- ​ Average Grant ​ Market- ​ Average Grant ​ Awards Date Fair Value Based Awards Date Fair Value Based Awards Date Fair Value Non-vested as of January 1, 2022 7,771,623 ​ $ 27.02 1,841,113 ​ $ 35.68 50,000 ​ $ 59.43 Granted 4,818,563 ​ ​ 18.52 ​ 1,857,750 ​ ​ 18.48 — ​ ​ — Vested ( 2,535,711 ) ​ ​ 36.15 ​ ( 186,339 ) ​ ​ 55.27 — ​ ​ — Forfeited or expired ( 84,504 ) ​ ​ 24.49 ​ ( 292,043 ) ​ ​ 35.59 — ​ ​ — Non-vested as of March 31, 2022 9,969,971 ​ ​ 20.62 3,220,481 ​ ​ 24.63 50,000 ​ ​ 59.43 ​ The compensation expense recognized for share-based compensation for the periods presented include the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ 2022 2021 Payroll and related expense ​ $ 6,204 ​ $ 4,965 Marketing, general and administrative expense ​ 26,588 ​ 21,636 Total share-based compensation expense ​ $ 32,792 ​ $ 26,601 ​ ​ ​ 9. Commitments and Contingencies Ship Construction Contracts For the Norwegian brand, we have six Prima Class Ships on order, each ranging from approximately 140,000 to 156,300 Gross Tons with approximately 3,215 to 3,550 Berths, with expected delivery dates from 2022 through 2027. For the 19 Table of Contents 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 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 and/or Russia’s recent invasion of Ukraine 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, 2022 was approximately € 7.7 billion, or $ 8.5 billion based on the euro/U.S. dollar exchange rate as of March 31, 2022. We have obtained export credit financing which is expected to fund approximately 80 % of the contract price of each ship, subject to certain conditions. We do not anticipate any contractual breaches or cancellations to occur. 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. Litigation 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. ​ Helms-Burton Act On August 27, 2019, two lawsuits were filed against Norwegian Cruise Line Holdings Ltd. 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 (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, as well as profiting from the Cuban Government’s possession of the property. The plaintiffs seek all available statutory remedies, including the value of the expropriated property, plus interest, treble damages, attorneys’ fees and costs. On January 7, 2020, the United States District Court for the Southern District of Florida dismissed the claim by Havana Docks Corporation. On April 14, 2020, the district court granted Havana Docks Corporation’s motion to reconsider and vacated its order dismissing the claim, allowing Havana Docks Corporation to file an amended complaint on April 16, 2020. 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. On March 21, 2022, the court in the Havana Docks Matter issued an order granting the plaintiff’s motion for summary judgment on the issue of liability and scheduled a trial on damages only for September 2022. The Company has filed a motion for interlocutory appeal seeking to have the appellate court review the district court’s order granting summary judgment and that motion remains pending. On September 1, 2020, the court in the Garcia-Bengochea Matter entered an order staying all case deadlines and administratively closed the case pending the outcome of an 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, 2022, we are unable to reasonably estimate any potential loss or range of losses from these matters. The ability to make such estimates and judgments can be affected by various factors including, among other things: lack of legal precedent, stage of the proceedings, legal uncertainties inherent within the litigation process and involvement of numerous parties. However, if the plaintiffs prevail in the final outcome of these matters, there may be a material adverse impact on the Company’s financial condition or results of operations and cash flows. ​ ​ 20 Table of Contents Other In the normal course of our business, various other claims and lawsuits have been filed or are pending against us. Most of these claims and lawsuits are covered by insurance and, accordingly, the maximum amount of our liability is typically limited to our deductible amount. Nonetheless, the ultimate outcome of these claims and lawsuits that are not covered by insurance cannot be determined at this time. We have evaluated our overall exposure with respect to all of our threatened and pending litigation and, to the extent required, we have accrued amounts for all estimable probable losses associated with our deemed exposure. We are currently unable to estimate any other potential losses beyond those accrued, as discovery is not complete nor is adequate information available to estimate such range of loss or potential recovery. However, based on our current knowledge, we do not believe that the aggregate amount or range of reasonably possible losses with respect to these matters will be material to our consolidated results of operations, financial condition or cash flows. We intend to vigorously defend our legal position on all claims and, to the extent necessary, seek recovery. ​ Other Contingencies ​ The Company also has agreements with its credit card processors that govern approximately $ 1.7 billion in advance ticket sales at March 31, 2022 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. Although the agreements vary, these requirements may generally be satisfied either through a percentage of customer payments withheld or providing cash funds directly to the card processor. Any cash reserve or collateral requested could be increased or decreased. As of March 31, 2022, we had cash reserves of approximately $ 1.1 billion with credit card processors, of which approximately $ 426.2 million is recognized in accounts receivable, net and approximately $ 665.3 million in other long-term assets. As of March 31, 2022, a portion of the cash reserves is classified as long-term due to a change in terms to a static reserve, as currently required by a credit card processor, subject to periodic review. We may be required to pledge additional collateral and/or post additional cash reserves or take other actions that may further reduce our liquidity. ​ ​ 10. Other Income (Expense), Net For the three months ended March 31, 2022 and 2021 other income (expense), net consisted of income of $ 38.1 million and $ 27.2 million, respectively, primarily due to gains on fuel swaps not designated as hedges and foreign currency exchange. ​ 11. Supplemental Cash Flow Information For the three months ended March 31, 2022 and 2021, we had non-cash investing activities consisting of changes in accruals related to property and equipment of $ 17.4 million and $ 20.8 million, respectively. ​ 12. Related Party Disclosures ​ NCLC, as issuer, NCLH, as guarantor, and U.S. Bank National Association, as trustee, were all parties to an indenture, dated May 28, 2020 (the “Indenture”) related to the Private Exchangeable Notes, which were held by an affiliate of L Catterton (the “Private Investor”). 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 . The Private Exchangeable Notes also contained certain anti-dilution provisions that could have subjected the exchange rate to additional adjustment if certain events had occurred. ​ 21 Table of Contents NCLH, NCLC and the Private Investor also entered into an investor rights agreement, dated May 28, 2020 (the “Investor Rights Agreement”), which provided that, among other things, the Private Investor was entitled to nominate one person for appointment to the board of directors of NCLH until the first date on which the Private Investor no longer beneficially owned in the aggregate at least 50 % of the number of NCLH’s ordinary shares issuable upon exchange of the Private Exchangeable Notes beneficially owned by the Private Investor in the aggregate as of May 28, 2020 (subject to certain adjustments). ​ The Investor Rights Agreement also provided for customary registration rights for the Private Investor and its affiliates, including demand and piggyback registration rights, contained customary transfer restrictions and provided that the Private Investor and its affiliates were subject to a voting agreement with respect to certain matters during a specified period of time. ​ In a privately negotiated transaction among NCLH, NCLC and the Private Investor, NCLC agreed to repurchase all of the outstanding Private Exchangeable Notes for an aggregate repurchase price of approximately $ 1.0 billion (the “Repurchase”). On March 9, 2021, in connection with the settlement of the Repurchase, the trustee cancelled the aggregate principal amount outstanding under the Private Exchangeable Notes and confirmed that NCLC had satisfied and discharged its obligations under the Indenture. In connection with the Repurchase, we and the Private Investor agreed to terminate the Investor Rights Agreement effective upon the consummation of the Repurchase. 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. ​ 22 Table of Contents ​ ​