What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-08 compared with 2022-08-09 · 96 added, 87 removed, 336 unchanged (35% of the section changed)

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● implementing precautions in coordination with regulators and global public health authorities to protect the health, safety and security of guests, crew and the communities we visit and to comply with regulatory restrictions related to the pandemic;

● legislation prohibiting companies from verifying vaccination status;

● our indebtedness and restrictions in the agreements governing our indebtedness that require us to maintain minimum levels of liquidity and be in compliance with maintenance covenants and otherwise limit our flexibility in operating our business, including the significant portion of assets that are collateral under these agreements;

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● Term Loan A Facility .

The senior secured term loan A facility having an outstanding principal amount of approximately $1.5 billion as of June 30, 2022.

The senior secured term loan A facility having an outstanding principal amount of approximately $1.5 billion as of September 30, 2022.

Non-GAAP Financial Measures

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In measuring our ability to control costs in a manner that positively impacts net income (loss), we believe changes in Adjusted Gross Margin, Net Cruise Cost and Adjusted Net Cruise Cost Excluding Fuel to be the most relevant indicators of our performance.

As a result of our voluntary suspension of sailings from March 2020 until July 2021 and our gradual phased return to service beginning in July 2021, per Capacity Day data is not meaningful for the three and six months ended June 30, 2022 or June 30, 2021 and is not presented herein.

As our business includes the sourcing of passengers and deployment of vessels outside of the U.S., a portion of our revenue and expenses are denominated in foreign currencies, particularly British pound, Canadian dollar, Euro and Australian dollar which are subject to fluctuations in currency exchange rates versus our reporting currency, the U.S.

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In evaluating our non-GAAP financial measures, you should be aware that in the future we may incur expenses similar to the adjustments in our presentation.

Our non-GAAP financial measures have limitations as analytical tools, and you should not consider these

measures in isolation or as a substitute for analysis of our results as reported under GAAP.

Our non-GAAP financial measures have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP.

Our presentation of our non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Our non-GAAP financial measures may not be comparable to other companies.

Please see a historical reconciliation of these measures to the most comparable GAAP measure presented in our consolidated financial statements below in the “Results of Operations” section.

historical reconciliation of these measures to the most comparable GAAP measure presented in our consolidated financial statements below in the “Results of Operations” section.

Financial Presentation

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Russia’s Invasion of Ukraine

The conflict from Russia’s invasion of Ukraine resulted in the cancellation or modification of approximately 60 sailings in 2022, which included all voyages with calls to ports in Russia.

Three ships were redeployed as a result of the conflict

including Norwegian Getaway to Port Canaveral, Oceania Cruises’ Marina to the British Isles and Regent’s Seven Seas Splendor to Northern Europe.

The conflict from Russia’s ongoing invasion of Ukraine resulted in the cancellation or modification of approximately 60 sailings in 2022, which included all voyages with calls to ports in Russia.

Three ships were redeployed as a result of the conflict including Norwegian Getaway to Port Canaveral, Oceania Cruises’ Marina to the British Isles and Regent’s Seven Seas Splendor to Northern Europe.

In addition, the Company has also removed all calls to ports in Russia from its itineraries in 2023 and 2024.

In addition to the direct impacts noted above, the conflict has also had indirect impacts to customer demand (see “Update on Bookings”) and the cost of fuel and could continue to have an impact on travel and consumer discretionary spending.

In addition to the direct impacts noted above, the conflict has also had indirect adverse

impacts on customer demand (see “Update on Bookings”) and the cost of fuel and could continue to have an impact on travel and consumer discretionary spending.

Update Regarding COVID-19 Pandemic

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In early May 2022, the Company completed the phased relaunch of its entire fleet with all ships now in operation with guests on board.

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, our ability to staff certain ships and additionally the impact of other events impacting travel or consumer discretionary spending, such as Russia’s invasion of Ukraine, and general macroeconomic conditions discussed below under “Macroeconomic Trends and Uncertainties.”

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, our ability to staff certain ships and additionally the impact of other events impacting travel or consumer discretionary spending, such as Russia’s ongoing invasion of Ukraine, and general macroeconomic conditions discussed below under “Macroeconomic Trends and Uncertainties.”

The Company continues to benefit from significant improvements in the public health environment.

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The Company continues to operate under its science-backed SailSAFE health and safety program which will evolve along with the public health environment.

Effective September 3, 2022, vaccinated guests aged 12 and over will no longer have any pre-cruise COVID-19 related protocols and unvaccinated travelers may embark with a negative COVID-19 test taken within 72 hours prior to departure.

On Oceania Cruises, vaccinated guests aged 12 and over will no longer have any pre-cruise COVID-19 related protocols and unvaccinated travelers may embark with a negative COVID-19 test taken within 72 hours prior to departure.

Guests 11 and under will be exempt from all vaccination and testing requirements.

Requirements may differ for guests traveling on voyages departing from or visiting destinations with specific local regulations, including but not limited to Canada, Greece and Bermuda.

On Regent, fully vaccinated guests are not required to test prior to embarkation and unvaccinated guests or those unwilling to present proof of vaccination must present a negative COVID-19 test prior to embarkation.

Effective October 4, 2022, Norwegian updated its global health and safety protocols to remove all COVID-19 testing, masking and vaccination requirements for guests.

Requirements may differ for guests traveling on voyages departing from or visiting destinations with specific local regulations.

The Company will continue to evaluate its protocols and modify as needed as the public health environment evolves.

The Company follows applicable local protocols at the ports and destinations it visits.

The Company continues to follow applicable travel guidelines and local protocols as required by the ports and destinations it visits.

We continue to work with federal agencies, public health authorities and national and local governments in areas where we operate to take all necessary measures to protect our guests, crew and the communities visited.

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These programs are in place for cruises booked through specific time periods specified by brand.

Certain cruises booked for certain periods, will be permitted a 60-day or 75-day cancellation window for refunds.

The future cruise credits issued under these programs are generally valid for any sailing through December 31, 2022, and we may extend the length of time these future cruise credits may be redeemed.

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

The f uture 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 the length of time these future cruise credits may be redeemed.

The use of such credits may prevent us from garnering certain future cash collections as staterooms booked by guests with such credits will not be available for sale, resulting in less cash collected from bookings to new guests.

We may incur incremental commission expense for the use of these future cruise credits.

In addition, to provide more flexibility to our guests, we modified our final payment schedules to require payment 60 days prior to embarkation versus the standard 120 days for most voyages on Regent Seven Seas Cruises through July 31, 2022 and for certain voyages on Oceania Cruises through September 30, 2022.

Financing Transactions

In 2022, we have continued to take actions to bolster our financial condition while the global cruise environment remains challenging.

To enhance our liquidity profile and financial flexibility, in February 2022, we received additional financing through various debt financings, collectively totaling $2.1 billion in gross proceeds, which has been, or will be, used to redeem 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.

To enhance our liquidity profile and financial flexibility, in February 2022, we received additional financing through various debt financings, collectively totaling $2.1 billion in gross proceeds, which has been used to redeem 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.

In July 2022, the Company amended its $1 billion commitment, which provides additional liquidity to the Company, extending the commitment through March 31, 2023.

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Update on Bookings

As expected, the Company’s current cumulative booked position for the second half of 2022 remains below the comparable 2019 period but at higher prices even when including the dilutive impact of future cruise credits and despite the impact in the third quarter of the Russia-Ukraine conflict on premium-priced Baltic and Eastern Mediterranean itineraries.

Booking trends for full year 2023 remain positive with cumulative booked position in line with a record 2019 inclusive of the Company’s 20% increase in capacity.

Pricing continues to be significantly higher than that of 2019 at a similar point in time and thus at record levels for full year 2023.

Sequentially, net booking volumes continue to increase as the Company’s brands ramp up to sail at historical load factor levels;

As expected, the Company’s current cumulative booked position for the fourth quarter of 2022 is below the comparable 2019 period but at higher prices even when including the dilutive impact of future cruise credits.

Booking trends for full year 2023 remain positive with cumulative booked position equal to record 2019 levels inclusive of the Company’s increase in capacity.

Pricing is higher than that of 2019 at a similar point in time for full year 2023.

Net booking volumes continue to be at the pace needed to reach historical Occupancy Percentage levels in 2023;

however, our full fleet may not achieve historical occupancy levels on our expected schedule and as a result, current booking data may not be informative.

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There are remaining uncertainties about when our full fleet will be back at historical occupancy levels and, accordingly, we cannot estimate the impact on our business, financial condition or near- or longer-term financial or operational results with certainty;

however, we will report a net loss for the third quarter of 2022.

however, we will report a net loss for the fourth quarter of 2022.

Macroeconomic Trends and Uncertainties

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.

Our costs have been and are expected to be impacted by these increases.

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.

Our costs have been, and are expected to continue to be, impacted by these increases.

To attempt to mitigate the risk of adverse changes in fuel prices and interest expense, we have used and may continue to use derivative s .

In an attempt to mitigate risks related to inflation, our Supply Chain Department has negotiated contracts with varying terms, with a goal of providing us with the ability to take advantage of cost declines as and when they occur, and diversified our sourcing options.

In an attempt to mitigate risks related to inflation, our Supply Chain Department has negotiated contracts with varying terms, with a goal of providing us with the ability to take advantage of cost declines when they occur, and diversified our sourcing options.

Due to the dynamic nature of the current economic landscape, the severity and duration of the impact of these conditions on our business cannot be predicted.

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We expect to incur significant expenses related to these regulatory requirements, which may include expenses related to greenhouse gas emissions reduction initiatives and the purchase of emissions allowances, among other things.

If requirements become more stringent, we may be required to change certain

operating procedures, for example slowing the speed of our ships, which could adversely impact our operations.

If requirements become more stringent, we may be required to change certain operating procedures, for example slowing the speed of our ships, which could adversely impact our operations.

We are evaluating the effects of climate change related requirements, which are still evolving, and, consequently, the full impact to the Company is not yet known.

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Quarterly Overview

Three months ended June 30, 2022 (“2022”) compared to three months ended June 30, 2021 (“2021”)

Three months ended September 30, 2022 (“2022”) compared to three months ended September 30, 2021 (“2021”)

● Total revenue increased to $1.6 billion compared to $153.1 million.

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● Gross margin was $202.2 million compared to $(445.8) million.

Adjusted Gross Margin was $834.8 million compared to $(3.5) million.

Adjusted Gross Margin was $1.1 billion compared to $101.4 million.

● Adjusted Net Loss and Adjusted EPS were $(268.3) million and $(0.64), respectively, in 2022, which included $27.1 million of adjustments primarily related to share-based compensation.

Adjusted Net Loss and Adjusted EPS were $(714.7) million and $(1.93), respectively, in 2021, which included $3.1 million of adjustments primarily related to share-based compensation and offset by losses on extinguishment and modifications of debt.

Adjusted Net Loss and Adjusted EPS were $(801.4) million and $(2.17), respectively, in 2021, which included $44.5 million of adjustments primarily related to share-based compensation.

● Adjusted EBITDA improved 105.9% to $28.1 million compared to $(475.0) million.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Passengers carried

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Total revenue

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Total cruise operating expense

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Non-GAAP Adjustments:

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Interest expense, net

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(1) In 2022, primarily consists of gains and losses, net for foreign currency remeasurements.

In 2021, primarily consists of gains and losses, net for fuel swaps not designated as hedges.

In 2021, primarily consists of gains and losses, net for fuel swaps not designated as hedges and foreign currency remeasurements.

(2) Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related expense.

(3) Non-cash share-based compensation expenses related to equity awards, which are included in marketing, general and administrative expense and payroll and related expense.

Three months ended June 30, 2022 (“2022”) compared to three months ended June 30, 2021 (“2021”)

Three months ended September 30, 2022 (“2022”) compared to three months ended September 30, 2021 (“2021”)

Total revenue increased to $1.6 billion in 2022 compared to $153.1 million in 2021.

In 2022, revenue increased as we returned to service with 3.0 million Passenger Cruise Days.

In 2021, voyages were cancelled due to the COVID-19 pandemic.

In 2022, revenue increased as we had returned to service with 4.0 million Passenger Cruise Days compared to 0.4 million in 2021.

Total cruise operating expense increased 181.7% in 2022 compared to 2021.

In 2022, the second quarter started with 23 ships operating with guests onboard and ended with the entire 28-ship fleet in service compared to 2021, during which all voyages were cancelled.

In 2022, the third quarter had the entire 29-ship fleet in service compared to 2021, which began with no ships in service and ended with only 8 ships returned to service.

In 2022, our cruise operating expenses were increased due to the resumption of voyages, resulting in higher payroll, fuel, and direct variable costs of fully operating ships.

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Additionally, in 2022, there was an increase in COVID-19 related costs, including testing.

Gross Cruise Cost increased 222.2% in 2022 compared to 2021 primarily related to the change in costs described above plus an increase in marketing, general and administrative expenses primarily related to increased marketing costs as we returned to service.

Gross Cruise Cost increased 141.3% in 2022 compared to 2021 primarily related to the change in costs described above plus an increase in marketing, general and administrative expenses primarily related to increased marketing costs.

Total other operating expense increased 39.6% in 2022 compared to 2021 primarily due to the increase in marketing, general and administrative expenses.

Interest expense, net was $152.3 million in 2022 compared to $161.2 million in 2021.

Interest expense in 2021 reflects a $20.4 million gain recognized from extinguishment of debt.

Excluding this gain, interest expense decreased as a result of lower interest expense in connection with recent refinancings, partially offset by higher debt balances and higher LIBOR rates.

Interest expense decreased primarily as a result of lower interest expense in connection with recent refinancings and higher interest income, partially offset by higher debt balances and higher rates.

Other income (expense), net was income of $31.5 million in 2022 compared to $4.7 million in 2021.

In 2022, the income primarily related to gains on foreign currency remeasurements.

In 2021, the income primarily related to gains on fuel swaps not designated as hedges.

Six months ended June 30, 2022 (“2022”) compared to six months ended June 30, 2021 (“2021”)

In 2021, the income primarily related to gains on fuel swaps not designated as hedges and foreign currency remeasurements.

Nine months ended September 30, 2022 (“2022”) compared to nine months ended September 30, 2021 (“2021”)

Total revenue increased to $3.3 billion in 2022 compared to $160.5 million in 2021.

In 2022, revenue increased as we returned to service with 4.4 million Passenger Cruise Days.

In 2021, voyages were cancelled due to the COVID-19 pandemic.

In 2022, revenue increased as we returned to service with 8.4 million Passenger Cruise Days compared to 0.4 million in 2021.

Total cruise operating expense increased 242.3% in 2022 compared to 2021.

In 2022, the six months started with 16 ships operating with guests onboard and ended with the entire 28-ship fleet in service compared to 2021, during which all voyages were cancelled.

In 2022, the nine months started with 16 ships operating with guests onboard and ended with the entire 29-ship fleet in service compared to 2021, during which only 8 ships were returned to service in the third quarter.

In 2022, our cruise operating expenses were increased due to the resumption of voyages, resulting in higher payroll, fuel, and direct variable costs of fully operating ships.

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Total other operating expense increased 36.3% in 2022 compared to 2021 primarily due to the increase in marketing, general and administrative expenses.

Interest expense, net was $472.1 million in 2022 compared to $961.7 million in 2021.

The decrease in interest expense reflects lower net losses in 2022 from extinguishment of debt and debt modification costs, which were $188.4 million in 2022 compared to $653.7 million in 2021.

Excluding these losses, interest expense decreased as a result of lower interest expense in connection with the recent refinancings, partially offset by higher debt balances and higher LIBOR rates.

Interest expense, net was $624.4 million in 2022 compared to $1.1 billion in 2021.

The decrease in interest expense reflects lower losses in 2022 from extinguishment of debt and debt modification costs, which were $188.4 million in 2022 compared to $657.2 million in 2021.

Excluding these losses, interest expense decreased primarily as a result of lower interest expense in connection with the recent refinancings, partially offset by higher debt balances and higher rates.

Other income (expense), net was income of $100.6 million in 2022 compared to $57.5 million in 2021.

In 2022, the income primarily related to gains on foreign currency remeasurements.

In 2021, the income primarily related to gains on fuel swaps not designated as hedges.

In 2021, the income primarily related to gains on fuel swaps not designated as hedges and foreign currency remeasurements.

Liquidity and Capital Resources

As of June 30, 2022, our liquidity consisted of cash and cash equivalents of $1.9 billion and a $1 billion undrawn commitment less related fees.

As of September 30, 2022, our liquidity consisted of cash and cash equivalents of $1.2 billion and a $1 billion undrawn commitment less related fees.

Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service.

In February 2022, we received additional financing through various debt financings, collectively totaling $2.1 billion in gross proceeds, which has been, or will be, used to redeem 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.

In February 2022, we received additional financing through various debt financings, collectively totaling $2.1 billion in gross proceeds, which has been used to redeem 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.

Refer to Note 7 – “Long-Term Debt” for further information.

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Refer to “Item 1A.

Risk Factors” for further details regarding uncertainty related to Russia’s invasion of Ukraine.

There can be no assurance that the accuracy of the assumptions used to estimate our liquidity requirements will be correct, and our ability to be predictive is uncertain due to the dynamic nature of the current operating environment, including the impacts of the COVID-19 global pandemic, Russia’s invasion of Ukraine and current macroeconomic conditions such as inflation, rising fuel prices and rising interest rates.

Risk Factors” for further details regarding uncertainty related to Russia’s ongoing invasion of Ukraine and “Item 1A.

Risk Factors” in our Annual Report on Form 10-K for other risks and uncertainties that may cause our results to differ from our expectations.

There can be no assurance that the accuracy of the assumptions used to estimate our liquidity requirements will be correct, and our ability to be predictive is uncertain due to the dynamic nature of the current operating environment, including the impacts of the COVID-19 global pandemic, Russia’s ongoing invasion of Ukraine and current macroeconomic conditions such as inflation, rising fuel prices and rising interest rates.

Based on the liquidity estimates and our current resources, we have concluded we have sufficient liquidity to satisfy our obligations for at least the next 12 months.

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We have received amendments to certain financial and other debt covenants and added new free liquidity requirements.

The relief offered by the debt covenant amendments is generally in effect through December 31, 2022.

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

At 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 the covenants.

The Company is currently taking steps to further amend certain financial and other debt covenants.

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

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Since March 2020, Moody’s has downgraded our long-term issuer rating to B2, our senior secured rating to B1 and our senior unsecured rating to Caa1.

Since April 2020, S&P Global has downgraded our issuer credit rating to B, lowered our issue-level rating on our $875 million Revolving Loan Facility and $1.5 billion Term Loan A Facility to BB-, our issue-level rating on our other senior secured notes to B+ and our senior unsecured rating to B-.

If our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our rating levels, our industry, or

us, our access to capital and the cost of any debt or equity financing will be further negatively impacted.

In September 2022, Moody’s reaffirmed our current ratings.

Since April 2020, S&P Global has downgraded our issuer credit rating to B, lowered our issue-level rating on our $875 million Revolving Loan

Facility and $1.5 billion Term Loan A Facility to BB-, our issue-level rating on our other senior secured notes to B+ and our senior unsecured rating to B-.

If our credit ratings were to be further downgraded, or general market conditions were to ascribe higher risk to our rating levels, our industry, or us, our access to capital and the cost of any debt or equity financing will be further negatively impacted.

We also have capacity to incur additional indebtedness under our debt agreements and may issue additional ordinary shares from time to time, subject to our authorized number of ordinary shares.

However, there is no guarantee that debt or equity financings will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations.

As of June 30, 2022, we had advance ticket sales of $2.5 billion, including the long-term portion, which included approximately $0.4 billion of future cruise credits.

We also have agreements with our credit card processors that, as of June 30, 2022, governed approximately $2.1 billion in advance ticket sales that had been received by the Company relating to future voyages.

As of September 30, 2022, we had advance ticket sales of $2.5 billion, including the long-term portion, which included approximately $258 million of future cruise credits.

We also have agreements with our credit card processors that, as of September 30, 2022, governed approximately $2.1 billion in advance ticket sales that had been received by the Company relating to future voyages.

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

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

As of June 30, 2022, we had cash collateral 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 September 30, 2022, we had cash collateral 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.

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

Sources and Uses of Cash

In this section, references to “2022” refer to the six months ended June 30, 2022 and references to “2021” refer to the six months ended June 30, 2021.

In this section, references to “2022” refer to the nine months ended September 30, 2022 and references to “2021” refer to the nine months ended September 30, 2021.

Net cash used in operating activities was $26.6 million in 2022 as compared to net cash used in operating activities of $2.2 billion in 2021.

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Advance ticket sales increased by $713.4 million in 2022.

Advance ticket sales increased by $191.6 million in 2021 while the change in accounts receivable, net and prepaid expenses and other assets, which contain our reserves with credit card processors, decreased cash by $408.1 million and $242.6 million, respectively, in 2021.

Net cash used in investing activities was $81.1 million in 2022 and $700.2 million in 2021.

The net cash used in investing activities was primarily related to newbuild payments and ship improvement projects offset by proceeds from maturities of short-term investments in 2022.

The net cash used in investing activities was primarily related to purchases of short-term investments and newbuild payments in 2021.

Net cash provided by financing activities was $0.6 billion in 2022 primarily due to the proceeds of $2.1 billion from our various note offerings partially offset by debt repayments and related redemption premiums associated with extinguishment of certain senior secured notes.

Advance ticket sales increased by $469.6 million in 2021 while the change in accounts receivable, net, which includes our reserves with credit card processors, decreased cash by $979.9 million in 2021.

Net cash used in investing activities was $1.6 billion in 2022 and $1.1 billion in 2021.

The net cash used in investing activities was primarily related to the delivery of Norwegian Prima in 2022.

The net cash used in investing activities was primarily related to purchases of short-term investments, newbuild payments and ship improvement projects partially offset by proceeds from maturities of short-term investments in 2021.

Net cash provided by financing activities was $1.3 billion in 2022 primarily due to newbuild loans and the proceeds of $2.1 billion from our various note offerings partially offset by debt repayments and related redemption premiums associated with extinguishment of certain senior secured notes.

Net cash provided by financing activities was $1.3 billion in 2021 primarily due to the proceeds of $2.7 billion from our various note and equity offerings partially offset by debt repayments and a related redemption premium associated with extinguishment of the Private Exchangeable Notes.

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Future capital commitments consist of contracted commitments, including ship construction contracts.

Anticipated expenditures related to ship construction contracts were $1.5 billion for the remainder of 2022 and $2.5 billion and $1.3 billion for the years ending December 31, 2023 and 2024, respectively.

The Company has export credit financing in place for the anticipated expenditures related to ship construction contracts of $1.0 billion for the remainder of 2022 and $2.0 billion and $0.6 billion for the years ending December 31, 2023 and 2024, respectively.

Anticipated non-newbuild capital expenditures for the remainder of 2022 are approximately $0.25 billion.

Anticipated expenditures related to ship construction contracts were $84.5 million for the remainder of 2022 and $2.4 billion and $0.5 billion for the years ending December 31, 2023 and 2024, respectively, reflecting delays in certain scheduled ship delivery dates.

The Company has export credit financing in place for the anticipated expenditures related to ship construction contracts of $1.9 billion and $0.1 billion for the years ending December 31, 2023 and 2024, respectively.

Anticipated non-newbuild capital expenditures for the remainder of 2022 are approximately $155 million.

Future expected capital expenditures will significantly increase our depreciation and amortization expense.

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 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, 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 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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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.

Capitalized interest for the three months ended June 30, 2022 and 2021 was $14.8 million and $9.9 million, respectively, and for the six months ended June 30, 2022 and 2021 was $28.1 million and $18.0 million, respectively, primarily associated with the construction of our newbuild ships.

Capitalized interest for the three months ended September 30, 2022 and 2021 was $17.0 million and $12.5 million, respectively, and for the nine months ended September 30, 2022 and 2021 was $45.1 million and $30.6 million, respectively, primarily associated with the construction of our newbuild ships.

Material Cash Requirements

As of June 30, 2022, our material cash requirements for debt and ship construction were as follows (in thousands):

As of September 30, 2022, our material cash requirements for debt and ship construction were as follows (in thousands):

Long-term debt (1)

Ship construction contracts (2)

(1) Includes principal as well as estimated interest payments with LIBOR held constant as of June 30, 2022.

(1) Includes principal as well as estimated interest payments with LIBOR held constant as of September 30, 2022.

Includes exchangeable notes which can be settled in shares.

Excludes the impact of any future possible refinancings and undrawn export-credit backed facilities.

(2) Ship construction contracts are for our newbuild ships based on the euro/U.S.

dollar exchange rate as of June 30, 2022.

As of June 30, 2022, we have committed undrawn export-credit backed facilities of approximately $6.5 billion which funds approximately 80% of our ship construction contracts.

dollar exchange rate as of September 30, 2022.

As of September 30, 2022, we have committed undrawn export-credit backed facilities of approximately $5.4 billion which funds approximately 80% of our ship construction contracts.

After giving effect to delays in certain scheduled ship delivery dates revised subsequent to September 30, 2022, our material cash requirements for ship construction contracts are as follows (in thousands):

Ship construction contracts

Funding Sources

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We have received amendments to certain financial and other debt covenants and added new free liquidity requirements.

After taking into account such amendments, we believe we were in compliance with these covenants as of June 30, 2022.

After taking into account such amendments, we believe we were in compliance with these covenants as of September 30, 2022.

In addition, our existing debt agreements restrict, and any of our future debt arrangements may restrict, among other things, the ability of our subsidiaries, including NCLC, to make distributions and/or pay dividends to NCLH and NCLH’s ability to pay cash dividends to its shareholders.

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However, we do not believe that these restrictions have had or are expected to have an impact on our ability to meet any cash obligations.

to issue debt securities or additional equity securities, will be sufficient to fund operations, debt payment requirements, capital expenditures and maintain compliance with covenants under our debt agreements over the next 12-month period.

Certain debt covenant waivers and modifications were received in 2021 to enable the Company to maintain this compliance.

We believe our cash on hand, the net impact of the undrawn $1 billion commitment less related fees, the expected return of a portion of the cash collateral from our credit card processors, expected future operating cash inflows and our ability to issue debt securities or additional equity securities, will be sufficient to fund operations, debt payment requirements, capital expenditures and maintain compliance with covenants under our debt agreements over the next 12-month period.

Certain debt covenants were previously amended in 2021 to enable the Company to maintain compliance, and the Company is currently taking steps to further amend certain financial and other debt covenants.

Refer to “—Liquidity and Capital Resources—General” for further information regarding the debt covenant waivers and liquidity requirements.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis