What changed in this filing

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Item 1. Financial Statements

2022-11-08 compared with 2022-08-09 · 178 added, 132 removed, 532 unchanged (37% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Passenger ticket

15 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,

( 1,787,429 )

( 2,933,866 )

Other comprehensive income (loss):

Other comprehensive loss:

Shipboard Retirement Plan

Cash flow hedges:

Net unrealized gain (loss)

Net unrealized loss

Amount realized and reclassified into earnings

Total other comprehensive income (loss)

Total other comprehensive loss

Total comprehensive loss

5 unchanged sentences

(in thousands, except share data)

September 30,

Current assets:

20 unchanged sentences

980,000,000 shares authorized;

419,116,812 shares issued and outstanding at June 30, 2022 and 416,891,915 shares issued and outstanding at December 31, 2021

421,393,338 shares issued and outstanding at September 30, 2022 and 416,891,915 shares issued and outstanding at December 31, 2021

Additional paid-in capital

9 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

3 unchanged sentences

Depreciation and amortization expense

(Gain) loss on derivatives

Gain on derivatives

Loss on extinguishment of debt

2 unchanged sentences

Share-based compensation expense

Net foreign currency adjustments

Net foreign currency adjustments on euro-denominated debt

Changes in operating assets and liabilities:

8 unchanged sentences

Additions to property and equipment, net

( 1,628,442 )

Purchases of short-term investments

2 unchanged sentences

Net cash used in investing activities

( 1,591,486 )

( 1,107,971 )

Cash flows from financing activities

8 unchanged sentences

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

( 1,930,666 )

Cash and cash equivalents at beginning of period

4 unchanged sentences

(in thousands)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Comprehensive

1 unchanged sentence

Income (Loss)

Balance, March 31, 2022

Balance, June 30, 2022

( 6,288,441 )

Share-based compensation

Issuance of shares under employee related plans

Net share settlement of restricted share units

Other comprehensive loss, net

Balance, June 30, 2022

Balance, September 30, 2022

( 6,583,835 )

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Comprehensive

9 unchanged sentences

( 1,787,429 )

Balance, June 30, 2022

Balance, September 30, 2022

( 6,583,835 )

3 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 )

9 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, 2022, we had 28 ships with approximately 59,150 Berths and had orders for nine additional ships to be delivered through 2027.

As of September 30, 2022, we had 29 ships with approximately 62,000 Berths and had orders for eight additional ships to be delivered through 2027.

We have converted some double occupancy cabins to studio cabins and we expect to convert an additional 900 cabins in early 2023.

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.

1 unchanged sentence

Norwegian Prima was delivered in July 2022.

We refer you to Note 14 – “Subsequent Event” for additional

We have five additional Prima Class Ships on order with expected delivery dates from 2023 through 2027.

We have five additional Prima Class Ships on order with currently scheduled delivery dates from 2023 through 2027.

We have one Explorer Class Ship on order for delivery in 2023.

8 unchanged sentences

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 of COVID-19 or the emergence of other public health crises, our ability to comply with governmental regulations and implement new health and safety protocols, port availability, travel restrictions, bans and advisories, and our ability to staff our ships.

In addition, as a result of conditions associated with the COVID-19 pandemic and other global events, such as Russia’s invasion of Ukraine and actions taken by the United States and other governments in response to the invasion, the global economy, including the financial and credit markets, has recently experienced significant volatility and disruptions, including increases in inflation rates, fuel prices, and interest rates.

In addition, as a result of conditions associated with the COVID-19 pandemic and other global events, such as Russia’s ongoing invasion of Ukraine and actions taken by the United States and other governments in response to the invasion, the global economy, including the financial and credit markets, has recently experienced significant volatility and disruptions, including increases in inflation rates, fuel prices, and interest rates.

These conditions have resulted, and may continue to result, in increased expenses and may also impact travel or consumer discretionary spending.

5 unchanged sentences

● Forecasted cash collections in accordance with the terms of our credit card processing agreements (see Note 10 - “Commitments and Contingencies”);

● Expected continued expenses to maintain and comply with evolving health and safety protocols;

● Expected continued higher 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 dynamic nature of the current economic landscape.

Accordingly, the full effect of the COVID-19 pandemic and other global events impacting macroeconomic conditions and travel and consumer discretionary spending, including Russia’s invasion of Ukraine, on our financial performance and financial condition cannot be quantified at this time.

Accordingly, the full effect of the COVID-19 pandemic and other global events impacting macroeconomic conditions and travel and consumer discretionary spending, including Russia’s ongoing 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 further opportunities to improve our liquidity.

Based on these actions and assumptions as discussed above, and considering our cash and cash equivalents of $ 1.9 billion as of June 30, 2022 and the net impact of our $ 1 billion undrawn commitment less related fees (see Note 7 – “Long-Term Debt”), 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 as discussed above, and considering our cash and cash equivalents of $ 1.2 billion as of September 30, 2022 and the net impact of our $ 1 billion undrawn commitment less related fees (see Note 7 – “Long-Term Debt”), we have concluded that we have sufficient liquidity to satisfy our obligations for at least the next twelve months .

Subsequent to the liquidity assessment period (twelve months from the issuance of these financial statements), the

Company has approximately $ 2.2 billion of debt that will mature in January 2024.

The Company is currently taking steps to address this maturity.

Basis of Presentation

5 unchanged sentences

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 June 30, 2021 and consolidated statement of cash flows for the six months ended June 30, 2021.

During the fourth quarter of 2021, the Company identified an error in its consolidated balance sheet as of September 30, 2021 and consolidated statement of cash flows for the nine months ended September 30, 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 June 30, 2021.

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 six months ended June 30, 2021 as follows (in thousands):

Six months ended June 30, 2021

We have determined that these errors were not material to the previously issued interim financial statements for the period ended September 30, 2021.

As a result of the error, the amounts previously reported as cash and cash equivalents have been reclassified to cash flows used in investing activities in the consolidated statement of cash flows for the nine months ended September 30, 2021 as follows (in thousands):

Nine months ended September 30, 2021

Cash flows from investing activities

Purchases of short-term investments

Proceeds from maturities of short-term investments

Net cash used in investing activities

Net increase (decrease) in cash and cash equivalents

( 1,107,971 )

Net decrease in cash and cash equivalents

( 1,365,666 )

( 1,930,666 )

Cash and cash equivalents at end of period

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

( 1,787,429 )

5 unchanged sentences

Diluted loss per share

For the three months ended June 30, 2022 and 2021, a total of 97.7 million and 99.2 million, respectively, and for the six months ended June 30, 2022 and 2021, a total of 92.1 million and 110.0 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, 2022 and 2021, a total of 96.3 million and 98.9 million, respectively, and for the nine months ended September 30, 2022 and 2021, a total of 93.5 million and 106.3 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

The resulting gains or losses are recognized in our consolidated statements of operations within other income (expense), net.

We recognized gains of $ 36.4 million and $ 0.2 million for the three months ended June 30, 2022 and 2021, respectively, and gains of $ 44.7 million and $ 5.0 million for the six months ended June 30, 2022 and 2021, respectively, related to remeasurement of assets and liabilities denominated in foreign currencies.

We recognized gains of $ 34.7 million and $ 9.9 million for the three months ended September 30, 2022 and 2021, respectively, and gains of $ 79.4 million and $ 14.9 million for the nine months ended September 30, 2022 and 2021, respectively, related to remeasurement of assets and liabilities denominated in foreign currencies.

Remeasurements of foreign currency related to operating activities are recognized within changes in operating assets and liabilities in the consolidated statement of cash flows.

Depreciation and Amortization Expense

2 unchanged sentences

Accounts Receivable, Net

Accounts receivable, net included $ 455.4 million and $ 1.1 billion due from credit card processors as of June 30, 2022 and December 31, 2021, respectively.

Accounts receivable, net included $ 237.0 million and $ 1.1 billion due from credit card processors as of September 30, 2022 and December 31, 2021, respectively.

Recently Issued Accounting Guidance

1 unchanged sentence

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 impacted by reference rate reform.

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 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 June 30, 2022, we have not adopted any expedients and exceptions under ASU 2020-04.

As of September 30, 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.

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

North America

South America

Total revenue

Amounts for the comparative three and six months ended June 30, 2021 are excluded as the information is not meaningful.

Amounts for the comparative three and nine months ended September 30, 2021 are excluded as the information is not meaningful.

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

1 unchanged sentence

Asia-Pacific includes Australia, New Zealand and Asia.

Other includes all other international territories.

Segment Reporting

8 unchanged sentences

Receivables from customers are included within accounts receivable, net.

As of June 30, 2022, our receivables from customers were $ 62.5 million.

As of September 30, 2022, our receivables from customers were $ 58.5 million.

Our cancellation policies permit certain guests to cancel cruises booked within certain windows for specified time periods up to 15 days prior to departure or in the event of a positive COVID-19 test, 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.

Standard cancellation penalties apply for all sailings after September 30, 2022.

Future cruise credits that

have been issued as face value reimbursement for cancelled bookings due to COVID-19 are generally valid for any sailing through June 30, 2023, and we may further extend this offer.

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

1 unchanged sentence

Our contract liabilities are included within advance ticket sales.

As of June 30, 2022 and December 31, 2021, our contract liabilities were $ 1.4 billion and $ 161.8 million, respectively.

Of the amounts included within contract liabilities as of June 30, 2022, 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.

As of September 30, 2022 and December 31, 2021, our contract liabilities were $ 1.6 billion and $ 161.8 million, respectively.

Of the amounts included within contract liabilities as of September 30, 2022, approximately 40 % were refundable in accordance with our cancellation policies.

Of the deposits included within advance ticket sales, the 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, 2022, $ 120.2 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 June 30, 2021, approximately $ 11.2 million, and during the six months ended June 30, 2022 and 2021, approximately $ 0.3 million and $ 26.0 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, 2022, $ 123.1 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 September 30, 2021, approximately $ 0.9 million, and during the nine months ended September 30, 2022 and 2021, approximately $ 0.3 million and $ 26.9 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.

In this guidance, entities can elect not to apply lease modification accounting with respect to such lease concessions and instead, treat the concession as if it was a part of the existing contract.

In 2020, the Company elected to not evaluate leases under the lease modification accounting framework for concessions that result from effects of the COVID-19 pandemic.

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

As of September 30, 2022, certain of our port facilities were remeasured with an increase of $ 35.2 million to other long-term assets and other long-term liabilities.

Operating lease balances were as follows (in thousands):

Balance Sheet location

June 30, 2022

September 30, 2022

December 31, 2021

7 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) for the six months ended June 30, 2022 was as follows (in thousands):

Six Months Ended June 30, 2022

Accumulated other comprehensive income (loss) for the nine months ended September 30, 2022 was as follows (in thousands):

Nine Months Ended September 30, 2022

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, 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

8 unchanged sentences

Property and Equipment, net

Property and equipment, net increased $ 112.5 million for the six months ended June 30, 2022 primarily due to ships under construction.

Property and equipment, net increased $ 1.0 billion for the nine months ended September 30, 2022 primarily due to the delivery of Norwegian Prima.

We determine the weighted average useful lives of our ships based primarily on our estimates of the useful lives of the ships’ major component systems on the date of acquisition, such as cabins, main diesels, main electric, superstructure and hull, and their related proportional weighting to the ship as a whole.

We have assessed the weighted-average useful life of the components of Norwegian Prima and assigned a useful life of 35 year s with a 10 % residual value to the Prima Class Ships.

The useful life and residual value consider the historical useful lives of similar assets, manufacturer recommended lives, planned maintenance programs, anticipated changes in technological conditions and the related proportional weighting of the major components of the Prima Class Ships.

Long-Term Debt

8 unchanged sentences

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.

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.

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;

5 unchanged sentences

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 February 15, 2027 (the “2027 2.5% Exchangeable Notes”).

The 2027 2.5% Exchangeable Notes are guaranteed by NCLH on a senior basis.

5 unchanged sentences

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.

NCLC has used 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 six months ended June 30, 2022.

The resulting losses on extinguishments, which are recognized in interest expense, net, were $ 188.4 million for the nine months ended September 30, 2022.

In July 2022, NCLC entered into a $ 1 billion amended and restated commitment letter with the purchasers named therein (collectively, the “Commitment Parties”), which supersedes a $ 1 billion commitment letter previously executed in November 2021.

4 unchanged sentences

If drawn, the Secured Notes will be secured by first-priority interests in, among other things and subject to certain agreed security principles, shares of capital stock in certain guarantors, our material intellectual property and two islands that we use in the operations of our cruise business.

The Secured Notes will also be guaranteed by our subsidiaries that own the property that secures the Secured Notes as well as certain additional

subsidiaries whose assets do not secure the Secured Notes if drawn.

The Secured Notes will also be guaranteed by our subsidiaries that own the property that secures the Secured Notes as well as certain additional subsidiaries whose assets do not secure the Secured Notes if drawn.

If drawn, the Notes will be subject to a quarterly duration fee of 1.5 % with respect to the Secured Notes and a semi-annual duration fee of 3.0 % with respect to the Unsecured Notes, as well as draw fees of 3.0 % with respect to the Secured Notes and 5.0 % with respect to the Unsecured Notes.

As of August 9, 2022, the Company has not drawn under this commitment.

As of November 8, 2022, the Company has not drawn under this commitment.

We had export credit financing in place for 80 % of the contract price for Norwegian Prima, for which we took delivery in July 2022.

The associated $ 1.1 billion term loan bears interest at a fixed rate of 2.68 % with a maturity date of July 31, 2034.

Principal and interest payments are payable semiannually.

Exchangeable Notes

The following is a summary of NCLC’s exchangeable notes as of June 30, 2022 (in thousands):

The following is a summary of NCLC’s exchangeable notes as of September 30, 2022 (in thousands):

Financing Fees

12 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Coupon interest

Amortization of deferred financing fees

The effective interest rate is 7.04 %, 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.

As of September 30, 2022, the effective interest rate is 7.04 %, 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 June 30, 2022 for each of the following periods (in thousands):

The following are scheduled principal repayments on our long-term debt including exchangeable notes which can be settled in shares and finance lease obligations as of September 30, 2022 (in thousands):

Remainder of 2022

1 unchanged sentence

During the year ended December 31, 2021, we amended certain financial and other debt covenants and added new free liquidity requirements.

As of June 30, 2022, taking into account such amendments, we were in compliance with all of our debt covenants.

As of September 30, 2022, taking into account such amendments, we were in compliance with all

of our debt covenants.

If we do not continue to remain in compliance with our covenants, we would have to seek additional amendments to or waivers of our covenants.

11 unchanged sentences

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.

We use qualitative assessments or regression analysis for hedge relationships 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.

There are no amounts excluded from the assessment of hedge effectiveness, except when the hedged item is a contractually specified component, 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.

1 unchanged sentence

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

As of June 30, 2022, we had fuel swaps, which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately 286 thousand metric tons of our projected fuel purchases, maturing through December 31, 2023 .

As of June 30, 2022, we had approximately 173 thousand metric tons which were not designated as cash flow hedges maturing through December 31, 2023 .

As of June 30, 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.

As of September 30, 2022, we had fuel swaps, which are used to mitigate the financial impact of volatility of fuel prices pertaining to approximately 452 thousand metric tons of our projected fuel purchases, maturing through December 31, 2023 .

As of September 30, 2022, we had fuel swaps pertaining to approximately 15 thousand metric tons of our projected fuel purchases which were not designated as cash flow hedges maturing through December 31, 2023 .

As of September 30, 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 hedged foreign currency forward contracts was € 1.7 billion, or $ 1.7 billion based on the euro/U.S.

dollar exchange rate as of June 30, 2022.

During the three months ended June 30, 2022, we entered into foreign currency forward contracts used as economic hedges to mitigate the financial impact of volatility in foreign currency exchange rates related to our accrued ship construction payments denominated in euros.

As of June 30, 2022, the notional amount of these foreign currency forward contracts was € 0.3 billion, or $ 0.3 billion based on the euro/U.S.

dollar exchange rate as of June 30, 2022.

dollar exchange rate as of September 30, 2022.

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

3 unchanged sentences

Other long-term assets

Accrued expenses and other liabilities

Other long-term liabilities

Foreign currency contracts

9 unchanged sentences

Other long-term assets

Foreign currency contracts

Accrued expenses and other liabilities

Other long-term liabilities

Total derivatives not designated as hedging instruments

11 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

13 unchanged sentences

(Loss) into Income (Expense)

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Fuel contracts

19 unchanged sentences

(Loss) into Income (Expense)

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Fuel contracts

7 unchanged sentences

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

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

( 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

5 unchanged sentences

Fuel contracts

Six Months Ended June 30, 2022

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2022

Nine Months Ended September 30, 2021

( 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

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Location of Gain (Loss)

5 unchanged sentences

Long-Term Debt

As of June 30, 2022 and December 31, 2021, the fair value of our long-term debt, including the current portion, was $ 11.6 billion and $ 12.5 billion, respectively, which was $ 1.8 billion and $ 0.1 billion lower, respectively, than the carrying values, excluding deferred financing costs.

As of September 30, 2022 and December 31, 2021, the fair value of our long-term debt, including the current portion, was $ 12.0 billion and $ 12.5 billion, respectively, which was $ 2.2 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.

8 unchanged sentences

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

In May 2016 and May 2021, the plan was amended and restated (“Restated 2013 Plan”) pursuant to approval from the Board of Directors and NCLH’s shareholders.

In May 2016 and May 2021, the plan was amended and restated (the “Restated 2013 Plan”) pursuant to approval from the Board of Directors and NCLH’s shareholders.

Among other things, under the Restated 2013 Plan, the number of NCLH’s ordinary shares that may be delivered pursuant to all awards granted under the plan was increased to a maximum aggregate limit of 32,375,106 shares.

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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 six months ended June 30, 2022:

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 nine months ended September 30, 2022:

Average Grant

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Forfeited or expired

Non-vested as of June 30, 2022

Non-vested as of September 30, 2022

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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For the Norwegian brand, the first Prima Class Ship, Norwegian Prima, at approximately 143,500 Gross Tons and with 3,100 Berths, was delivered in July 2022.

We refer you to Note 14 – “Subsequent Event” for additional information.

We have five additional Prima Class Ships on order, each ranging from approximately 143,500 to 156,300 Gross Tons with approximately 3,100 to 3,550 Berths, with expected delivery dates from 2023 through 2027.

We have five additional Prima Class Ships on order, each ranging from approximately 143,500 to 156,300 Gross Tons with approximately 3,100 to 3,550 Berths, with currently scheduled delivery dates from 2023 through 2027.

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

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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, Russia’s invasion of Ukraine and/or other macroeconomic events are expected to 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, including Norwegian Prima, as of June 30, 2022 was approximately € 7.7 billion, or $ 8.1 billion based on the euro/U.S.

dollar exchange rate as of June 30, 2022.

The impacts of COVID-19 on the shipyards where our ships are under construction (or will be constructed), Russia’s ongoing invasion of Ukraine and/or other macroeconomic events, have already resulted in some delays in expected ship deliveries.

These impacts along with other potential modifications the Company may make to its newbuilds, including potential initiatives to improve environmental sustainability, are expected to result in additional delays in ship deliveries in the future, which may be prolonged.

The combined contract prices of the eight ships on order for delivery as of September 30, 2022 was approximately € 6.7 billion, or $ 6.6 billion based on the euro/U.S.

dollar exchange rate as of September 30, 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.

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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 were 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, which was subsequently delayed until November 2022.

The Company filed a motion for interlocutory appeal seeking to have the appellate court review the district court’s order granting summary judgment which was subsequently denied.

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 June 30, 2022, we are unable to reasonably estimate any potential loss or range of losses from these matters.

In the Havana Docks Matter, after various motions challenging the sufficiency of plaintiff’s complaint were resolved and voluminous discovery was completed, both sides filed motions for summary judgment.

On March 21, 2022, the court issued an order granting plaintiff’s motion for summary judgment on the issue of liability.

The court scheduled a trial on determination of damages only for November 2022.

The plaintiff elected to seek what the court ruled to be its baseline statutory damage amount, which is the amount of the certified claim plus interest, trebled and with attorneys’ fees.

Given this, there is no fact issue to be tried, and the matter was removed from the trial calendar.

The parties are presently engaged in pre-judgment briefing which the court will need to resolve before it enters a final judgment and the Company takes its plenary appeal.

We believe that the likelihood of loss is reasonably possible but not probable at this time, therefore, no liability has been recorded.

Based on the calculation of the baseline statutory damages motions that were granted, the damage award reflected in final judgment, exclusive of plaintiff’s attorney’s fees and costs, may be approximately $ 110 million.

The entry of final judgment is expected in late December 2022 or early 2023.

For the Garcia Bengochea Matter, we are unable to reasonably estimate any potential loss or range of losses.

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.

lack of legal precedent, stage of the proceedings, legal uncertainties inherent within the litigation process, availment of appellate remedies, and involvement of numerous parties.

We continue to believe we have meritorious defenses to these matters and plan to appeal the Havana Docks Matter.

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, results of operations and/or cash flows.

We are a party to a claim against a vendor which has resulted in a verdict of approximately $ 159 million in favor of the Company in October 2022.

At this time, there can be no assurance that the Company will ultimately prevail in the final outcome of this claim as the verdict may be appealed and no receivable has been recognized.

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 $ 2.1 billion in advance ticket sales at June 30, 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.

The Company also has agreements with its credit card processors that govern approximately $ 2.1 billion in advance ticket sales at September 30, 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 June 30, 2022, we had cash reserves of approximately $ 1.0 billion with credit card processors, of which approximately $ 455.4 million is recognized in accounts receivable, net and approximately $ 508.2 million in other long-term assets.

As of June 30, 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.

As of September 30, 2022, we had cash reserves of approximately $ 742.5 million with credit card processors, of which approximately $ 237.0 million is recognized in accounts receivable, net and approximately $ 505.5 million in other long-term assets.

As of September 30, 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.

Other Income (Expense), Net

For the three and six months ended June 30, 2022 other income (expense), net consisted of income of $ 31.0 million and $ 69.1 million, respectively, primarily due to gains on foreign currency remeasurements.

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 and nine months ended September 30, 2022 other income (expense), net consisted of income of $ 31.5 million and $ 100.6 million, respectively, primarily due to gains on foreign currency remeasurements.

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 due to gains on fuel swaps not designated as hedges and foreign currency remeasurements.

Supplemental Cash Flow Information

For the six months ended June 30, 2022 and 2021, we had non-cash investing activities consisting of changes in accruals related to property and equipment of $ 145.5 million and $ 49.1 million, respectively.

For the nine months ended September 30, 2022 and 2021, we had non-cash investing activities consisting of changes in accruals related to property and equipment of $ 101.7 million and $ 64.6 million, respectively.

Related Party Disclosures

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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.

Subsequent Event

In July 2022, we took delivery of Norwegian Prima.

We had export credit financing in place for 80 % of the contract price.

The associated $ 1.1 billion term loan bears interest at a fixed rate of 2.68 % with a maturity date of July 31, 2034.

Principal and interest payments are payable semiannually.

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.

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