7 unchanged sentences
Our revenue is seasonal based on demand for cruises, which has historically been strongest during the Northern Hemisphere’s summer months;
−Removed: however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages will be phased in gradually as described under “—Update Regarding COVID-19 Pandemic” below.
+Added: however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages was phased in gradually, with full operation of our fleet resumed in May 2022 as described under “—Update Regarding COVID-19 Pandemic” below.
Passenger ticket revenue primarily consists of revenue for accommodations, meals in certain restaurants on the ship, certain onboard entertainment, port fees and taxes and includes revenue for service charges and air and land transportation to and from the ship to the extent guests purchase these items from us.
−Removed: Onboard and other revenue primarily consists of revenue from casino, beverage sales, shore excursions, specialty dining, retail sales, spa services and photo services.
+Added: Onboard and other revenue primarily consists of revenue from casino, beverage sales, shore excursions, specialty dining, retail sales, spa services and Wi-Fi services.
Our onboard revenue is derived from onboard activities we perform directly or that are performed by independent concessionaires, from which we receive a share of their revenue.
13 unchanged sentences
Actual results could differ materially from these estimates.
−Removed: We believe that the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of our consolidated
−Removed: financial statements.
+Added: We believe that the following
+Added: critical accounting policies reflect the significant estimates and assumptions used in the preparation of our consolidated financial statements.
These critical accounting policies, which are presented in detail in our notes to our audited consolidated financial statements, relate to liquidity, ship accounting and asset impairment.
We make several critical accounting estimates with respect to our liquidity.
−Removed: Significant events affecting travel, including COVID-19, typically have an impact on demand for cruise vacations, with the full extent of the impact generally determined by the length of time the event influences travel decisions.
−Removed: We believe the ongoing effects of COVID-19 on our operations and global bookings have had, and will continue to have, a significant impact on our financial results and liquidity, and such negative impact may continue beyond the containment of the pandemic.
+Added: Significant events affecting travel typically have an impact on demand for cruise vacations, with the full extent of the impact determined by the length of time the event influences travel decisions.
+Added: The level of occupancy on our ships will depend on a number of factors including, but not limited to, the conditions discussed below under “Macroeconomic Trends and Uncertainties”, further resurgences of COVID-19 or the emergence of other public health crises and any related governmental regulations and new health and safety protocols, port availability, travel restrictions, bans and advisories, and our ability to staff our ships.
+Added: 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 experienced significant volatility and disruptions, including increases in inflation rates, fuel prices, and interest rates.
+Added: These conditions have resulted, and may continue to result, in increased expenses and also have impacted travel and consumer discretionary spending.
+Added: We believe the ongoing effects of the foregoing factors and events on our operations and global bookings have had, and will continue to have, a significant impact on our financial results and liquidity.
The estimation of our future cash flow projections includes numerous assumptions that are subject to various risks and uncertainties.
Our principal assumptions for future cash flow projections include:
−Removed: ● Expected gradual phased return to service at reduced occupancy levels, increasing over time until we reach historical occupancy levels;
+Added: ● Expected gradual return to historical occupancy levels;
● Expected increase in revenue per passenger cruise day through a combination of both passenger ticket and onboard revenue as compared to 2019;
● Forecasted cash collections in accordance with the terms of our credit card processing agreements (see Note 13 - “Commitments and Contingencies”);
−Removed: ● Expected incremental expenses for resumption of cruise voyages, including the maintenance of and compliance with additional health and safety protocols.
−Removed: Due to the duration and extent of the COVID-19 pandemic, further resurgences and new more contagious and/or vaccine-resistant variants of COVID-19, the availability, distribution, rate of public acceptance and efficacy of vaccines and therapeutics for COVID-19, our ability to comply with governmental regulations and implement new health and safety protocols, port availability, travel restrictions, bans and advisories and our ability to re-staff certain ships, we cannot predict with certainty when our full fleet will be back in service at historical occupancy levels.
−Removed: Our projected liquidity requirements reflect our principal assumptions surrounding ongoing operating costs, as well as liquidity requirements for financing costs and necessary capital expenditures.
−Removed: We cannot make assurances that our assumptions used to estimate our liquidity requirements may not change because we have never experienced a complete cessation and resumption of our cruise voyages.
−Removed: Accordingly, the full effect of our suspension of cruise voyages on our financial performance and financial condition cannot be quantified at this time.
−Removed: We have made reasonable estimates and judgments of the impact of COVID-19 within our financial statements and there may be material changes to those estimates in future periods.
−Removed: The Company has taken and will continue to take proactive cost reduction and cash conservation measures to mitigate the financial and operational impacts of COVID-19.
+Added: ● Expected sustained higher fuel prices and the impact of inflation.
+Added: Our projected liquidity requirements also reflect our principal assumptions surrounding ongoing operating costs, as well as liquidity requirements for financing costs and necessary capital expenditures.
+Added: We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change materially due to the dynamic nature of the current economic landscape.
+Added: 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.
+Added: We have made reasonable estimates and judgments of the impact of these events within our financial statements;
+Added: however, there may be material changes to those estimates in future periods.
+Added: We have taken actions to improve our liquidity, including completing various capital market and financing transactions and making capital expenditure and operating expense reductions, and we expect to continue to pursue further opportunities to improve our liquidity.
Ship Accounting
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Depreciation of ships is computed on a straight-line basis over the weighted average useful lives of primarily 30 years after a 15% reduction for the estimated residual value of the ship.
+Added: Our residual value is established based on our long-term estimates of the expected remaining future benefit at the end of the ships’ weighted average useful lives.
+Added: In the third quarter of 2022, the Company took delivery of Norwegian’s first Prima Class Ship.
+Added: Based on the design, structure and technological advancements made to this new class of ship and the analysis of its major components, which is generally performed upon the introduction of a new class of ship, we have assigned the Prima Class Ships a weighted-average
+Added: useful life of 35 years with a residual value of 10%.
Ship improvement costs that we believe add value to our ships are capitalized to the ship and depreciated over the shorter of the improvements’ estimated useful lives or the remaining useful life of the ship.
2 unchanged sentences
We account for Dry-dock costs under the direct expense method which requires us to expense all Dry-dock costs as incurred.
−Removed: 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.
−Removed: The useful lives of ship improvements are estimated based on the economic lives of the new components.
−Removed: In addition, to determine the useful lives of the ship or ship components, we consider the impact of the historical useful lives of similar assets, manufacturer recommended lives and anticipated changes in technological conditions.
+Added: We determine the weighted average useful lives of our ships based primarily on our estimates of the costs and 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.
+Added: The useful lives of components of new ships and ship improvements are estimated based on the economic lives of the new components.
+Added: In addition, to determine the useful lives of the major components of new ships and ship improvements, we consider the impact of the historical useful lives of similar assets, manufacturer recommended lives, planned maintenance programs and anticipated changes in technological conditions.
Given the large and complex nature of our ships, our accounting estimates related to ships and determinations of ship improvement costs to be capitalized require judgment and are uncertain.
4 unchanged sentences
If circumstances cause us to change our assumptions in making determinations as to whether ship improvements should be capitalized, the amounts we expense each year as repairs and maintenance costs could increase, partially offset by a decrease in depreciation expense.
−Removed: If we reduced our estimated weighted average 30-year ship service life by one year, depreciation expense for the year ended December 31, 2021 would have increased by $16.2 million.
+Added: If we reduced our estimated weighted average ship service life by one year, depreciation expense for the year ended December 31, 2022 would have increased by $18.8 million.
In addition, if our ships were estimated to have no residual value, depreciation expense for the same period would have increased by $82.8 million.
33 unchanged sentences
For our annual impairment evaluation, we performed a qualitative assessment for the Regent Seven Seas reporting unit and of each brand’s trade names.
−Removed: As part of our analysis, we performed an assessment of the key assumptions impacting the quantitative tests performed in 2020 and performed sensitivities on cash flow projections, discount rates and royalty rates.
+Added: As part of our analysis, we performed an assessment of current factors compared to key assumptions impacting the quantitative tests performed in 2020.
As of December 31, 2022, there was $98.1 million of goodwill remaining for the Regent Seven Seas reporting unit.
2 unchanged sentences
Non-GAAP Financial Measures
−Removed: We use certain non-GAAP financial measures, such as Net Cruise Cost, Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted EPS, to enable us to analyze our performance.
+Added: We use certain non-GAAP financial measures, such as Adjusted Gross Margin, Net Cruise Cost, Adjusted Net Cruise Cost Excluding Fuel, Adjusted EBITDA, Adjusted Net Loss and Adjusted EPS, to enable us to analyze our performance.
See “Terms Used in this Annual Report” for the definitions of these and other non-GAAP financial measures.
−Removed: We utilize Net Cruise Cost and Adjusted Net Cruise Cost Excluding Fuel to manage our business on a day-to-day basis.
−Removed: In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Cost and Adjusted Net Cruise Cost Excluding Fuel to be the most relevant indicators of our performance.
−Removed: As a result of our voluntary suspension of sailings from March 2020 until July 2021, we did not have any Capacity Days during the suspension period.
−Removed: Accordingly, we have not presented herein per Capacity Day data for the years ended December 31, 2021 or 2020.
+Added: We utilize Adjusted Gross Margin to manage our business on a day-to-day basis because it reflects revenue earned net of certain direct variable costs.
+Added: We also utilize Net Cruise Cost and Adjusted Net Cruise Cost Excluding Fuel to manage our business on a day-to-day basis.
+Added: In measuring our ability to control costs in a manner that positively impacts our results of operations, 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 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.
−Removed: In order to monitor results excluding these fluctuations, we calculate certain non-GAAP measures on a Constant Currency basis, whereby current period revenue and expenses denominated in foreign currencies are converted to U.S.
+Added: In order to monitor results excluding these fluctuations, we calculate certain non-GAAP measures on a Constant
+Added: Currency basis, whereby current period revenue and expenses denominated in foreign currencies are converted to U.S.
dollars using currency exchange rates of the comparable period.
3 unchanged sentences
Adjusted EBITDA is not a defined term under GAAP nor is it intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income, as it does not take into account certain requirements such as capital expenditures and related depreciation, principal and interest payments and tax payments and it includes other supplemental adjustments.
−Removed: In addition, Adjusted Net Income (Loss) and Adjusted EPS are non-GAAP financial measures that exclude certain amounts and are used to supplement GAAP net income (loss) and EPS.
−Removed: We use Adjusted Net Income (Loss) and Adjusted EPS as key performance measures of our earnings performance.
+Added: In addition, Adjusted Net Loss and Adjusted EPS are non-GAAP financial measures that exclude certain amounts and are used to supplement GAAP net loss and EPS.
+Added: We use Adjusted Net Loss and Adjusted EPS as key performance measures of our earnings performance.
We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods.
2 unchanged sentences
The amounts excluded in the presentation of these non-GAAP financial measures may vary from period to period;
−Removed: accordingly, our presentation of Adjusted Net Income (Loss) and Adjusted EPS may not be indicative of future adjustments or results.
−Removed: For example, for the year ended December 31, 2020, we incurred $1.6 billion related to impairment losses.
−Removed: We included this as an adjustment in the reconciliation of Adjusted Net Income (Loss) since the expenses are not representative of our day-to-day operations;
+Added: accordingly, our presentation of Adjusted Net Loss and Adjusted EPS may not be indicative of future adjustments or results.
+Added: For example, for the year ended December 31, 2022, we incurred $12.1 million related to restructuring costs or charges.
+Added: We included this as an adjustment in the reconciliation of Adjusted Net Loss since the expenses are not representative of our day-to-day operations;
however, this adjustment did not occur and is not included in the comparative period presented within this Form 10-K.
6 unchanged sentences
Update Regarding COVID-19 Pandemic
−Removed: Suspension of Cruise Voyages
−Removed: Due to the impact of COVID-19, travel restrictions and limited access to ports around the world, in March 2020, the Company implemented a voluntary suspension of all cruise voyages across our three brands.
+Added: Safe Resumption of Operations
+Added: Due to the impact of COVID-19, travel restrictions and limited access to ports around the world, in March 2020, we implemented a voluntary suspension of all cruise voyages across our three brands.
In the third quarter of 2021, we began a phased relaunch of certain cruise voyages with ships initially operating at reduced occupancy levels.
−Removed: Beginning in December 2021, the spread of the Omicron variant of COVID-19, with its increased transmissibility, caused several operational challenges and disruptions, including new travel restrictions and increased protocols in ports of call limiting port availability, which led to the cancellation of certain voyages in the fourth quarter of 2021 and first quarter of 2022, and the postponement of the restart of certain vessels.
−Removed: As of the date hereof, 16 of our 28 ships, or 70% of our Berth capacity, are operating with guests on board.
−Removed: This excludes a vessel which was paused from service beginning December 2021 due to the cancellation of its South Africa and related itineraries as a result of travel restrictions and other operational challenges due to the Omicron variant.
−Removed: We continue to execute on the phased relaunch plans for our 28-ship fleet.
−Removed: We expect to have approximately 85% of capacity operating by the end of the first quarter of 2022 with the full fleet expected to be back in operation during the early part of the second quarter of 2022.
−Removed: Refer to “Item 1A.
−Removed: Risk Factors” for further details regarding the uncertainties of returning to sailing at full fleet capacity, and “Item 1A.
−Removed: Risk Factors—If our phased restart of cruise operations does not resume as planned, we may not be in compliance with maintenance covenants in certain of our debt facilities” for details regarding the potential effect of delays on our debt covenants.
−Removed: In connection with the expiration of the Temporary Extension and Modification of Framework for Conditional Sailing Order on January 15, 2022, the CDC announced that it would be implementing the COVID-19 Program for Cruise Ships Operating in U.S.
−Removed: Waters (the “Program”), a voluntary COVID-19 risk mitigation program for foreign-flagged cruise ships operating in U.S.
−Removed: The CDC released details regarding the Program in February 2022, which we have reviewed.
−Removed: We currently remain opted into the Program.
−Removed: As part of our SailSAFE health and safety program, our SailSAFE Global Health and Wellness Council, chaired by former head of the U.S.
−Removed: Food and Drug Administration, Dr.
−Removed: Scott Gottlieb, continues to advise the Company on health and safety protocols in light of advancements in medicine and technology.
−Removed: As a result of the unprecedented circumstances caused by the pandemic, we are not able to predict the full impact of the pandemic on our Company.
−Removed: Refer to “Item 1A.
−Removed: Risk Factors” for further details regarding the significant impact the COVID-19 pandemic has had, and is expected to continue to have, on our financial condition and operations.
+Added: In early May 2022, we completed the phased relaunch of our entire fleet with all ships now in operation with guests on board.
+Added: Occupancy levels have sequentially increased in recent quarters, most recently averaging 87% in the fourth quarter 2022, with the Company expecting to return to historical Occupancy levels for the second quarter of 2023.
+Added: During 2022, we benefitted from significant improvements in the public health environment which allowed for the removal of most COVID-19 related health and safety protocols by year-end, unless required by local jurisdictions.
+Added: For example, in July 2022, the CDC announced that its voluntary COVID-19 Program for Cruise Ships Operating in U.S.
+Added: Waters was no longer in effect.
+Added: We will continue to modify and evolve our health and safety protocols as needed along with the broader public health and regulatory environments.
+Added: We continue to prioritize the health and safety of our guests, crew and communities we visit and follow applicable travel guidelines and local protocols as required by the ports and destinations we visit.
+Added: The relaxation of protocols, continued easing of travel restrictions and reopening of most ports around the globe to cruise ships has improved travel experiences, expanded the addressable cruise market, allowed us to expand the variety of our itineraries and provided additional catalysts on the road to recovery.
Modified Policies
−Removed: Our brands have launched cancellation policies for certain sailings booked during certain time periods to permit our guests to cancel cruises which were not part of a temporary suspension of voyages up to 15 days or 48 hours prior, depending on the brand, to embarkation and receive a refund in the form of a credit to be applied toward a future cruise.
−Removed: These programs were in place for cruises booked through specific time periods specified by brand.
−Removed: Certain cruises booked for certain periods, will be permitted a 60-day cancellation window for refunds.
−Removed: 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.
+Added: We have launched cancellation policies for certain sailings booked during certain time periods to permit certain guests to cancel cruises which were not part of a temporary suspension of voyages up to 15 days prior to embarkation for cruises embarking prior to December 31, 2022 or in the event of a positive COVID-19 test and receive a refund in the form of a credit to be applied toward a future cruise.
+Added: Standard payment schedules and cancellation penalties apply for all sailings after December 31, 2022.
+Added: 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.
−Removed: In addition, to provide more flexibility to our guests, we have also extended our modified final payment schedule for most voyages on Regent Seven Seas Cruises through July 31, 2022, for certain voyages on Oceania Cruises through June 30, 2022 and for all voyages on Norwegian Cruise Line through April 30, 2022, which now requires payment 60 days prior to embarkation versus the standard 120 days.
−Removed: Update on Bookings
−Removed: Net booking volumes at the beginning of the fourth quarter of 2021 continued to demonstrate substantial week-over-week sequential growth after the slowdown in booking activity caused by the Delta variant of COVID-19.
−Removed: Net booking volumes in the latter part of the fourth quarter of 2021 began to be negatively impacted by the Omicron variant of COVID-19, primarily for close-in voyages in the first and second quarters of 2022.
−Removed: In recent weeks, as the Omicron wave subsided, net booking trends have improved sequentially.
−Removed: As a result, the Company’s current cumulative booked position for the first half of 2022 is below the strong levels of 2019 at higher prices even when including the dilutive impact of future cruise credits, while booked position for the second half, when the full fleet is expected to be back in operation, is in line with the comparable 2019 period and at higher prices, also including the impact of future cruise credits.
−Removed: Booked position for each quarter compared to the comparable quarter in 2019 improves sequentially through the year.
−Removed: Booking trends for 2023 demonstrate continued strong demand for sailings with booked position and pricing higher and at record levels when compared to bookings for 2020 in 2019.
−Removed: Our full fleet may not resume operations on our expected schedule and as a result, current booking data may not be informative.
−Removed: In addition, because of our updated cancellation policies, bookings may not be representative of actual cruise revenues.
−Removed: There are remaining uncertainties about when our full fleet will be back in service 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;
−Removed: however, we expect to report a net loss until we are able to resume regular voyages.
−Removed: As a result of Omicron variant-related impacts to operations in the first quarter of 2022, we now expect net cash provided by operating activities to be positive during the second quarter of 2022.
−Removed: Refer to “Item 1A.
−Removed: Risk Factors” for further details regarding the significant impact the COVID-19 pandemic has had, and is expected to continue to have, on our financial condition and operations.
−Removed: Financing Transactions and Cost Containment Measures
−Removed: In 2021 and 2022, we continued to take actions to bolster our financial condition while our global cruise voyages are disrupted.
−Removed: We have taken the following additional actions to enhance our liquidity profile and financial flexibility:
−Removed: ● In March 2021, we received additional financing through various debt financings and an equity offering, collectively totaling $2.7 billion in gross proceeds.
−Removed: From the proceeds, approximately $1.5 billion was used to extinguish debt.
−Removed: ● In November 2021, we executed a $1 billion commitment through August 15, 2022 that provides additional liquidity to the Company.
−Removed: The Company has not drawn and currently does not intend to draw under this commitment.
−Removed: If drawn, this commitment will convert into an unsecured note maturing in April 2024.
−Removed: ● In November 2021, we repurchased $715.9 million aggregate principal amount of our 2024 Exchangeable Notes for approximately $1.4 billion.
−Removed: ● In November 2021, NCLC issued $1.15 billion aggregate principal amount of 1.125% exchangeable senior notes due 2027, which includes the full exercise of the initial purchasers’ greenshoe option.
−Removed: The proceeds were used to repurchase a portion of our 2024 Exchangeable Notes.
−Removed: ● In November 2021, NCLH issued 46,858,854 ordinary shares to certain holders of the exchangeable senior notes due 2024 in a registered direct offering.
−Removed: The proceeds of such offering were used to redeem $236.25 million aggregate principal amount of our 2024 Senior Secured Notes and $262.50 million aggregate principal amount of our 2026 Senior Secured Notes, including any accrued but unpaid interest thereon, to pay related premiums, fees and expenses and for general corporate purposes, including the repurchase of a portion of our 2024 Exchangeable Notes.
−Removed: ● In addition, in February 2022, we received additional financing through various debt financings, collectively totaling $2.1 billion in gross proceeds, all of 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 principal payments on debt maturing in the short-term, including, in each case, to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses.
+Added: Financing Transactions
+Added: In 2022 and 2023, we continued to take actions to bolster our financial condition as part of our long-term post-pandemic financial recovery strategy.
+Added: In February 2022, we received additional financing through various debt financings, collectively totaling $2.1 billion in gross proceeds, which was 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.
+Added: In December 2022, we amended the Senior Secured Credit Facility to extend approximately $1.4 billion of maturities by one year to January 2025.
+Added: The amendment also updated certain financial covenants and increased our ability to incur additional debt.
+Added: Each of our export-credit backed facilities were also amended to conform the financial covenants with the Senior Secured Credit Facility.
+Added: In February 2023, a commitment of $82.5 million in aggregate principal amount of the Revolving Loan Facility that was not previously extended was obtained to assign the commitment to a new lender under the same terms as the extending lenders.
+Added: In February 2023, NCLC issued $600 million aggregate principal amount of 8.375% senior secured notes due 2028.
+Added: The proceeds from the notes were used to repay the loans outstanding under our Term Loan A Facility that otherwise would have become due in January 2024, including to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses.
+Added: In July 2022, we amended our $1 billion commitment, which provided additional liquidity to the Company through March 31, 2023.
+Added: In February 2023, the commitment was further extended through February 2024, with an option for NCLC to further extend the commitments through February 2025 at its election.
+Added: Simultaneously, the amount of the commitment was reduced to $650 million, which may be drawn in up to two draws, and in connection with the execution of the amended commitment letter, NCLC issued $250 million aggregate principal amount of senior secured notes due 2028.
+Added: NCLC will use the net proceeds for general corporate purposes.
+Added: In February 2023, NCLC entered into a Backstop Agreement with MS, pursuant to which MS has agreed to provide backstop committed financing to refinance and/or repay in whole or in part up to $300 million of amounts outstanding under the Senior Secured Credit Facility.
Refer to Note 8 – “Long-Term Debt” for further details about the above transactions.
−Removed: We undertook several proactive cost reduction and cash conservation measures to mitigate the financial and operational impacts of the COVID-19 pandemic, including the reduction of capital expenditures and deferral of debt amortization as well as a reduction in operating expenses, including ship operating expenses and selling, general and administrative expenses.
−Removed: Cost savings initiatives to reduce selling, general and administrative expenses, which had already been implemented at the beginning of 2021, included the significant reduction or deferral of marketing expenditures, the implementation of hiring freezes, a 20% salary or hours reduction for certain shoreside team members, a pause in our 401(k) matching contributions, corporate travel freezes for shoreside employees, and employee furloughs.
−Removed: savings initiatives have now been discontinued as we resume cruise voyages.
−Removed: See “—Liquidity and Capital Resources” below for more information.
−Removed: We have been experiencing some cost pressure in our supply chain due to inflation.
−Removed: 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, and diversified our sourcing options.
+Added: Update on Bookings
+Added: The Company entered the year with a record cumulative booked position of approximately 62% for full year 2023, in line with previously outlined expectations and within the Company’s optimal 60% to 65% range, and at higher prices than 2019 at a similar point in time.
+Added: Booking volumes have accelerated in recent months buoyed by strong WAVE season demand.
+Added: The Company’s brands achieved several booking records in recent months including at Norwegian Cruise Line which reached an all-time record booking month in November, boosted by Black Friday and Cyber Monday, which was subsequently exceeded in January 2023.
+Added: As a result, full year 2023 cumulative booked position is ahead of 2019 levels inclusive of the Company’s approximately 19% increase in capacity, at continued higher pricing.
+Added: Net booking volumes continue to be at the pace needed to reach historical Occupancy levels for the second quarter of 2023 and beyond;
+Added: 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.
+Added: In addition, because of our cancellation policies, bookings may not be representative of actual cruise revenues.
+Added: There are 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;
+Added: however, we will report a net loss for the first quarter of 2023.
+Added: Macroeconomic Trends and Uncertainties
+Added: As a result of conditions associated with global events, including the downstream effects of the COVID-19 pandemic and 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 experienced significant volatility and disruptions, including increases in inflation rates, fuel prices, and interest rates.
+Added: Our costs have been, and are expected to continue to be, adversely impacted by these increases.
+Added: We have used, and may continue to use, derivative instruments to attempt to mitigate the risk of adverse changes in fuel prices and interest expense.
+Added: 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.
+Added: These strategies may not fully offset the impact of current macroeconomic conditions.
+Added: Furthermore, we are exposed to fluctuations in the euro exchange rate for certain portions of ship construction contracts that have not been hedged.
+Added: See “Item 1A—Risk Factors” for additional information.
+Added: Climate Change
+Added: We believe the increasing focus on climate change and evolving regulatory requirements will materially impact our future capital expenditures and results of operations.
+Added: 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.
+Added: 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.
+Added: We are evaluating the effects of global climate change related requirements, which are still evolving, including our ability to mitigate certain future expenses through initiatives to reduce greenhouse gas emissions;
+Added: consequently, the full impact to the Company is not yet known.
+Added: Additionally, our ships, port facilities, corporate offices and island destinations have in the past and may again be adversely affected by an increase in the frequency and intensity of adverse weather conditions caused by climate change.
+Added: For example, certain ports have become temporarily unavailable to us due to hurricane damage and other destinations have either considered or implemented restrictions on cruise operations due to environmental concerns.
+Added: See Item 1A, “Risk Factors” for additional information.
Executive Overview
−Removed: The ongoing effects of COVID-19 on our operations and global bookings have had a significant adverse effect on our results of operations.
−Removed: Total revenue decreased 49.4% to $0.6 billion for the year ended December 31, 2021 compared to $1.3 billion for the year ended December 31, 2020.
−Removed: Capacity Days decreased by 18.1%.
+Added: Total revenue increased 647.5% to $4.8 billion for the year ended December 31, 2022 compared to $0.6 billion for the year ended December 31, 2021.
+Added: Capacity Days increased by 420.2%.
For the year ended December 31, 2022, we had net loss and diluted EPS of $(2.3) billion and $(5.41), respectively.
1 unchanged sentence
Operating loss decreased 39.2% to $(1.6) billion for the year ended December 31, 2022 from $(2.6) billion for the year ended December 31, 2021.
−Removed: We had Adjusted Net Loss and Adjusted EPS of $(2.9) billion and $(8.07), respectively, for the year ended December 31, 2021, including $1.6 billion of adjustments primarily consisting of losses on the extinguishment and modification of debt, compared to Adjusted Net Loss and Adjusted EPS of $(2.2) billion and $(8.64), respectively, for the year ended December 31, 2020.
−Removed: A 65.0% decrease in Adjusted EBITDA was incurred for the same period.
−Removed: We refer you to our “Results of Operations” below for a calculation of Adjusted Net Income (Loss), Adjusted EPS and Adjusted EBITDA.
+Added: We had Adjusted Net Loss and Adjusted EPS of $(1.9) billion and $(4.64), respectively, for the year ended December 31, 2022, including $0.3 billion of adjustments primarily consisting of losses on the extinguishment and modification of debt and share-based compensation, compared to Adjusted Net Loss and Adjusted EPS of $(2.9) billion and $(8.07), respectively, for the year ended December 31, 2021.
+Added: A 60.9% improvement in Adjusted EBITDA was incurred for the same period.
+Added: We refer you to our “Results of Operations” below for a calculation of Adjusted Net Loss, Adjusted EPS and Adjusted EBITDA.
Results of Operations
−Removed: We reported total revenue, total cruise operating expense, operating income and net income as follows (in thousands, except per share data):
+Added: The discussion below compares the results of operations for the year ended December 31, 2022 to the year ended December 31, 2021.
+Added: You should read this discussion in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this annual report.
+Added: For a comparison of the Company’s results of operations for the fiscal years ended December 31, 2021 to the year ended December 31, 2020, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the U.S.
+Added: Securities and Exchange Commission on March 1, 2022.
+Added: We reported total revenue, total cruise operating expense, operating loss and net loss as follows (in thousands, except per share data):
Year Ended December 31,
1 unchanged sentence
Total cruise operating expense
−Removed: Operating income (loss)
−Removed: Net income (loss)
+Added: Operating loss
The following table sets forth operating data as a percentage of total revenue:
11 unchanged sentences
Depreciation and amortization
−Removed: Impairment loss
Total other operating expense
−Removed: Operating income (loss)
+Added: Operating loss
Non-operating income (expense)
2 unchanged sentences
Total non-operating income (expense)
−Removed: Net income (loss) before income taxes
+Added: Net loss before income taxes
Income tax benefit (expense)
−Removed: Net income (loss)
The following table sets forth selected statistical information:
4 unchanged sentences
Occupancy Percentage
−Removed: Gross Cruise Cost, Net Cruise Cost, Net Cruise Cost Excluding Fuel and Adjusted Net Cruise Cost Excluding Fuel were calculated as follows (in thousands, except Capacity Days and per Capacity Day data):
+Added: (1) Excludes certain capacity on Pride of America which was temporarily unavailable.
+Added: Adjusted Gross Margin was calculated as follows (in thousands):
Year Ended December 31,
+Added: Total revenue
Total cruise operating expense
+Added: Ship depreciation
+Added: Ship depreciation
+Added: Payroll and related
+Added: Adjusted Gross Margin
+Added: Gross Cruise Cost, Net Cruise Cost, Net Cruise Cost Excluding Fuel and Adjusted Net Cruise Cost Excluding Fuel were calculated as follows (in thousands):
+Added: Year Ended December 31,
+Added: Total cruise operating expense
Marketing, general and administrative expense
7 unchanged sentences
Non-cash share-based compensation (2)
−Removed: Severance payments and other fees (3)
−Removed: Redeployment of Norwegian Joy (4)
+Added: Restructuring costs (3)
Adjusted Net Cruise Cost Excluding Fuel
−Removed: Capacity Days
−Removed: Gross Cruise Cost per Capacity Day
−Removed: Net Cruise Cost per Capacity Day
−Removed: Net Cruise Cost Excluding Fuel per Capacity Day
−Removed: Adjusted Net Cruise Cost Excluding Fuel per Capacity Day
Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses, which are included in payroll and related expense.
Non-cash share-based compensation expenses related to equity awards, which are included in marketing, general and administrative expense and payroll and related expense.
−Removed: Severance payments related to restructuring costs are included in marketing, general and administrative expense.
−Removed: Expenses related to the redeployment of Norwegian Joy from Asia to the U.S.
−Removed: and the closing of the Shanghai office, which are included in other cruise operating expense and marketing, general and administrative expense.
−Removed: Adjusted Net Income (Loss) and Adjusted EPS were calculated as follows (in thousands, except share and per share data):
+Added: Restructuring costs related to the workforce reduction are included in marketing, general and administrative expense.
+Added: Adjusted Net Loss and Adjusted EPS were calculated as follows (in thousands, except share and per share data):
Year Ended December 31,
−Removed: Net income (loss)
Non-GAAP Adjustments:
1 unchanged sentence
Non-cash share-based compensation (2)
−Removed: Severance payments and other fees (3)
+Added: Restructuring costs (3)
Extinguishment and modification of debt (4)
−Removed: Amortization of intangible assets (5)
−Removed: Redeployment of Norwegian Joy (6)
−Removed: Impairment loss (7)
−Removed: Non-cash interest on beneficial conversion feature and payment-in-kind premium (8)
−Removed: Adjusted Net Income (Loss)
−Removed: Diluted weighted-average shares outstanding - Net income (loss) and Adjusted Net Income (Loss)
+Added: Adjusted Net Loss
+Added: Diluted weighted-average shares outstanding - Net loss and Adjusted Net Loss
Diluted loss per share
1 unchanged sentence
Non-cash share-based compensation expenses related to equity awards are included in marketing, general and administrative expense and payroll and related expense.
−Removed: Severance payments related to restructuring costs are included in marketing, general and administrative expense.
+Added: Restructuring costs related to the workforce reduction are included in marketing, general and administrative expense.
(4) Losses on extinguishments and modifications of debt are primarily included in interest expense, net.
−Removed: (5) Amortization of intangible assets related to the Acquisition of Prestige are included in depreciation and amortization expense.
−Removed: (6) Expenses related to the redeployment of Norwegian Joy from Asia to the U.S.
−Removed: and the closing of the Shanghai office, which are included in other cruise operating expense, marketing, general and administrative expense and depreciation and amortization expense.
−Removed: Impairment loss consists of goodwill, trade name and property and equipment impairments.
−Removed: The impairments of goodwill and trade names are included in impairment loss and the impairment of property and equipment is included in depreciation and amortization expense.
−Removed: (8) Non-cash interest expense related to a beneficial conversion feature recognized on our exchangeable notes and additional payment-in-kind interest recognized upon transfer to the debt principal, which is recognized in interest expense, net.
EBITDA and Adjusted EBITDA were calculated as follows (in thousands):
Year Ended December 31,
−Removed: Net income (loss)
Interest expense, net
2 unchanged sentences
Other (income) expense, net (1)
−Removed: Non-GAAP Adjustments:
+Added: Other Non-GAAP Adjustments:
Non-cash deferred compensation (2)
Non-cash share-based compensation (3)
−Removed: Severance payments and other fees (4)
−Removed: Redeployment of Norwegian Joy (5)
−Removed: Impairment loss (6)
+Added: Restructuring costs (4)
Adjusted EBITDA
−Removed: (1) In 2021 and 2020, primarily consists of gains and losses, net for forward currency exchanges and derivatives not designated as hedges.
−Removed: In 2019, primarily consists of gains and losses, net for forward currency exchanges and proceeds from insurance and litigation settlements.
+Added: (1) Primarily consists of gains and losses, net of foreign currency remeasurements and derivatives not designated as hedges.
Non-cash deferred compensation expenses related to the crew pension plan and other crew expenses are included in payroll and related expense.
Non-cash share-based compensation expenses related to equity awards are included in marketing, general and administrative expense and payroll and related expense.
−Removed: Severance payments related to restructuring costs are included in marketing, general and administrative expense.
−Removed: (5) Expenses related to the redeployment of Norwegian Joy from Asia to the U.S.
−Removed: and the closing of the Shanghai office, which are included in other cruise operating expense and marketing, general and administrative expense.
−Removed: Impairment loss consists of goodwill and trade name impairments.
−Removed: Year Ended December 31, 2021 (“2021”) Compared to Year Ended December 31, 2020 (“2020”)
−Removed: Total revenue decreased 49.4% to $0.6 billion in 2021 compared to $1.3 billion in 2020.
−Removed: The adverse impact on revenue was due to the suspension of all cruise voyages in March 2020 through the first half of 2021 and the phased relaunch of certain cruise voyages with ships initially operating at reduced occupancy levels in the second half of 2021 as a result of the COVID-19 pandemic, which resulted in an 18.1% decrease in Capacity Days.
−Removed: Total cruise operating expense decreased 5.0% in 2021 compared to 2020.
−Removed: In 2021, our cruise operating expenses prior to the resumption of cruise voyages were primarily related to crew costs, including salaries, food and other travel costs;
−Removed: and other ongoing costs such as insurance and ship maintenance, including Dry-dock expenses.
−Removed: The reduction in cruise operating expense in 2021 reflects lower direct costs, such as commissions, in the second half of 2021 due to fewer Capacity Days partially offset by increases in expenses related to our return to service, such as costs related to crew and passenger testing for COVID-19.
−Removed: In 2020, our cruise operating expenses subsequent to the suspension of cruise voyages on March 13, 2020 primarily included the cost of protected commissions and crew costs, including salaries, food and other repatriation costs;
−Removed: and other ongoing costs such as insurance and ship maintenance.
−Removed: Gross Cruise Cost increased 2.5% in 2021 compared to 2020, primarily related to the change in costs described above offset by an increase in marketing, general and administrative expenses primarily related to the discontinuation of cost-saving initiatives described under “Update Regarding COVID-19 Pandemic—Financing Transactions and Cost Containment Measures” as we return to service.
−Removed: Total other operating expense decreased 48.2% in 2021 compared to 2020 primarily due to the impairment of goodwill and trade names triggered by the COVID-19 pandemic in 2020.
−Removed: Depreciation and amortization expense decreased primarily due to a $25.5 million impairment loss recognized in 2020.
−Removed: Interest expense, net was $2.1 billion in 2021 compared to $482.3 million in 2020.
−Removed: The increase in 2021 primarily reflects losses on extinguishment of debt and debt modification costs of $1.4 billion related to the repurchase of certain exchangeable notes as well as additional debt outstanding at higher interest rates, partially offset by lower LIBOR.
−Removed: 2020 included losses on extinguishment of debt and debt modification costs of $27.8 million.
−Removed: Other income (expense), net was income of $124.0 million in 2021 compared to expense of $33.6 million in 2020.
−Removed: Other income in 2021 was primarily due to gains from derivatives not designated as hedges and foreign currency exchange.
−Removed: Other expense in 2020 was primarily due to losses from foreign currency exchange and fuel hedges recognized in earnings as a result of the forecasted transactions no longer being probable or no longer designated as hedges.
−Removed: Income tax benefit (expense) was an expense of $5.3 million in 2021 compared to $12.5 million in 2020.
−Removed: In 2020, the tax expense is primarily due to a valuation allowance of $39.6 million recognized in the fourth quarter on certain net operating loss carryforwards partially offset by operating losses.
+Added: Restructuring costs related to the workforce reduction are included in marketing, general and administrative expense.
Year Ended December 31, 2022 (“2022”) Compared to Year Ended December 31, 2021 (“2021”)
−Removed: Total revenue decreased 80.2% to $1.3 billion in 2020 compared to $6.5 billion in 2019.
−Removed: The adverse impact on revenue was due to the cancellation of the vast majority of sailings in 2020 as a result of the COVID-19 pandemic, which resulted in a 78.6% decrease in Capacity Days.
−Removed: Total cruise operating expense decreased 53.8% in 2020 compared to 2019.
−Removed: In 2020, our expenses subsequent to the suspension of voyages primarily included the cost of protected commissions and crew costs, including salaries, food and other repatriation costs;
−Removed: and other ongoing costs such as insurance and ship maintenance.
−Removed: To repatriate crew as fast as possible, the Company leveraged certain ships in its fleet to assist with the repatriation efforts along with utilizing scheduled chartered flights.
−Removed: Additionally, during the first quarter of 2020, there was a notable increase from 2019 in fuel expense associated with the International Maritime Organization’s 2020 regulations, and cruise operating expense increased due to the addition of Norwegian Encore and Seven Seas Splendor to the fleet.
−Removed: Gross Cruise Cost decreased 47.4% in 2020 compared to 2019, due to a decrease in total cruise operating expense described above in addition to a 23.5% decrease in marketing, general and administrative expenses primarily due to cost savings initiatives in connection with the COVID-19 pandemic as described under “Update Regarding COVID-19 Pandemic—Financing Transactions and Cost Containment Measures.” Total other operating expense increased 89.4% in 2020 compared to 2019 primarily due to the impairment of goodwill and trade names triggered by the COVID-19 pandemic.
−Removed: Depreciation and amortization expense also increased primarily due to the delivery of Norwegian Encore in the fourth quarter of 2019 and Seven Seas Splendor in the first quarter of 2020 as well as ship improvement projects.
−Removed: Interest expense, net was $482.3 million in 2020 compared to $272.9 million in 2019.
−Removed: The increase in 2020 is driven by additional debt outstanding at higher interest rates, partially offset by lower LIBOR.
−Removed: In 2020, interest expense also reflects losses on extinguishment of debt and debt modification costs of $27.8 million.
−Removed: 2019 included losses on extinguishment of debt and debt modification costs of $16.7 million.
−Removed: Other income (expense), net was expense of $33.6 million in 2020 compared to income of $6.2 million in 2019.
−Removed: Other expense in 2020 was primarily due to losses from foreign currency exchange and fuel hedges recognized in earnings as a result of the forecasted transactions no longer being probable or no longer designated as hedges.
−Removed: Other income in 2019 was primarily due to gains from insurance proceeds and a litigation settlement partially offset by losses on foreign currency exchange.
−Removed: Income tax benefit (expense) was an expense of $12.5 million in 2020 compared to a benefit of $18.9 million in 2019.
−Removed: In 2020, the tax expense is primarily due to a valuation allowance of $39.6 million recognized in the fourth quarter on certain net operating loss carryforwards partially offset by operating losses.
−Removed: During 2018, we implemented certain tax restructuring strategies that created our ability to utilize the net operating loss carryforwards of Prestige, for which we had previously provided a full valuation allowance.
−Removed: As a result, we recorded a tax benefit of $35.7 million in connection with the reversal of substantially all of the valuation allowance in 2019.
+Added: Total revenue increased 647.5% to $4.8 billion in 2022 compared to $0.6 billion in 2021.
+Added: In 2022, revenue primarily increased as we returned to service with 12.8 million Passenger Cruise Days compared to 1.8 million in 2021.
+Added: Total cruise operating expense increased 165.4% in 2022 compared to 2021.
+Added: In 2022, the year started with 16 ships operating with guests onboard and ended with the entire 29-ship fleet in service compared to 2021, during which only 16 ships were returned to service in the second half of the year.
+Added: In 2022, our cruise operating expenses increased as more ships resumed voyages, resulting in higher payroll, fuel, and direct variable costs of fully operating ships.
+Added: Costs for certain items such as food, fuel and logistics also increased related to inflation.
+Added: Gross Cruise Cost increased 125.9% 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.
+Added: Total other operating expense increased 33.7% in 2022 compared to 2021 primarily due to the increase in marketing, general and administrative expenses.
+Added: Interest expense, net was $0.8 billion in 2022 compared to $2.1 billion in 2021.
+Added: The decrease in 2022 primarily reflects lower losses from extinguishment of debt and debt modification costs, which were $1.4 billion in 2021.
+Added: Excluding these losses, interest expense increased primarily as a result of higher debt balances and higher rates partially offset by lower interest expense in connection with refinancings.
+Added: Other income (expense), net was income of $76.6 million in 2022 compared to $124.0 million in 2021.
+Added: Other income in 2022 and 2021 was primarily due to gains on fuel swaps not designated as hedges and foreign currency remeasurements.
Liquidity and Capital Resources
−Removed: As of December 31, 2021, our liquidity was $2.7 billion, consisting of cash and cash equivalents, short-term investments and a $1 billion commitment available through August 15, 2022.
+Added: As of December 31, 2022, our liquidity consisted of cash and cash equivalents of $0.9 billion and a $1 billion undrawn commitment, less related fees, available through March 31, 2023.
Our primary ongoing liquidity requirements are to finance working capital, capital expenditures and debt service.
As of December 31, 2022, we had a working capital deficit of $3.2 billion.
−Removed: This deficit included $1.6 billion of advance ticket sales, which represents the total revenue we collect in advance of sailing dates and accordingly are substantially more like deferred revenue balances rather than actual current cash liabilities.
+Added: This deficit included $2.5 billion of advance ticket sales, which represents the total revenue we collected in advance of sailing dates and accordingly are substantially more like deferred revenue balances rather than actual current cash liabilities.
Our business model, along with our liquidity and undrawn export-credit backed facilities , allows us to operate with a working capital deficit and still meet our operating, investing and financing needs.
−Removed: During 2021 and 2022, the Company completed various debt financings and equity offerings totaling $7.0 billion in gross proceeds, of which $5.5 billion was used, or will be used, to extinguish debt and make principal payments maturing in the short-term.
−Removed: The NCLH equity offerings in March and November 2021 resulted in 99,436,801 ordinary shares being issued, which does not include any ordinary shares that may be issued pursuant to our exchangeable notes.
−Removed: See Note 8 – “Long-Term Debt” for further information.
−Removed: In January 2021, we amended our Senior Secured Credit Facility to further defer certain amortization payments due prior to June 30, 2022 and to waive certain financial and other covenants through December 31, 2022.
−Removed: In connection with such amendment, our minimum liquidity requirement was increased to $200 million and such requirement applies through December 31, 2022.
−Removed: In November 2021, the Company further amended the Senior Secured Credit Facility to provide that among other things, certain financial covenants shall be modified to provide that following the covenant relief period ending on December 31, 2022, (a) free liquidity shall be required to be greater than or equal to $200,000,000 at any time, (b) the ratio of total net funded debt to total capitalization shall be required to be not greater than 0.86 to 1.00 on March 31, 2023, 0.85 to 1.00 on June 30, 2023 and 0.83 to 1.00 thereafter, and (c) the ratio of EBITDA to consolidated debt service shall be required to be greater than or equal to 1.25 to 1.00 unless free liquidity is greater than $200,000,000.
−Removed: This amendment also included changes to certain baskets providing the ability to make certain investments and incur debt.
−Removed: In addition, in February 2021, we amended certain of our export-credit backed facilities to defer amortization payments aggregating approximately $680 million through March 31, 2022.
−Removed: We also amended all of our export-credit backed facilities to provide that, from the effective date of the amendments to and including December 31, 2022, certain of the financial covenants under such facilities will be suspended and the free liquidity test will be replaced by a covenant to maintain at least $200 million in free liquidity.
−Removed: The amendments also made certain other changes to the facilities, including imposing further restrictions on NCLC’s ability to incur debt, create security, issue equity and make dividends and other distributions.
−Removed: Additionally, in December 2021, our export-credit backed facilities were amended to provide for, among other things, the expiration of certain provisions upon repayment in full of certain amortization payments that are the subject of previous deferral arrangements and the modification of certain financial covenants to apply from January 1, 2023 until September 30, 2025, including the covenant to maintain at least $200 million in free liquidity, which was previously imposed until December 31, 2022.
−Removed: The amendments also made certain additional changes, including the relaxation of certain restrictions on our ability to incur and repay or prepay debt, create security and make dividends and other distributions.
−Removed: In July 2021, we amended nine credit facilities for our newbuild agreements and increased the combined commitments under such credit facilities by approximately $770 million to cover owner’s supply (generally consisting of provisions for the ship), modifications and financing premiums.
−Removed: In November 2021, the Company executed a $1 billion commitment through August 15, 2022 that provides additional liquidity to the Company.
−Removed: The Company has not drawn and currently does not intend to draw under this commitment.
−Removed: If drawn, this commitment will convert into an unsecured note maturing in April 2024.
−Removed: The Company's monthly average cash burn for the fourth quarter of 2021 was approximately $345 million, slightly below the prior estimate of approximately $350 million.
−Removed: Looking ahead, the Company expects the first quarter of 2022 monthly average cash burn to increase to approximately $390 million driven by the continued phased relaunch of additional vessels.
−Removed: This cash burn rate does not include expected cash inflows from new and existing bookings or contribution from ships that have re-entered service.
−Removed: Cash burn rates include ongoing ship operating expenses, administrative operating expenses, interest expense, taxes, debt deferral fees and expected non-newbuild capital expenditures and excludes cash refunds of customer deposits as well as cash inflows from new and existing bookings, newbuild related capital expenditures and other working capital changes.
−Removed: Future cash burn rate estimates also exclude unforeseen expenses.
−Removed: The fourth quarter of 2021 cash burn rate and first quarter of 2022 estimate reflect the previously agreed to deferral of debt amortization and newbuild related payments.
−Removed: We continue to expect a gradual phased relaunch of our ships, with our ships initially operating at reduced occupancy levels as described in “Update Regarding COVID-19 Pandemic.” Refer to “Item 1A.
−Removed: Risk Factors” for further details regarding the significant impact the COVID-19 pandemic has had, and is expected to continue to have, on our financial condition and operations.
+Added: In February 2022, we received additional financing through various debt financings, collectively totaling $2.1 billion in gross proceeds, which was 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.
+Added: In December 2022, we amended our Senior Secured Credit Facility to extend approximately $1.4 billion of maturities by one year to January 2025, subject to, if a one-time minimum liquidity threshold is not satisfied on September 16, 2024, a springing maturity date of September 16, 2024.
+Added: The amendment also updated certain financial covenants and increased our ability to incur additional debt.
+Added: Each of our export-credit backed facilities were also amended to conform the financial covenants with the Senior Secured Credit Facility.
+Added: In February 2023, a commitment of $82.5 million in aggregate principal amount of the Revolving Loan Facility that was not previously extended was obtained to assign the commitment to a new lender under the same terms as the extending lenders.
+Added: In February 2023, NCLC issued $600 million aggregate principal amount of 8.375% senior secured notes due 2028.
+Added: The proceeds from the notes were used to repay the loans outstanding under our Term Loan A Facility that otherwise would have become due in January 2024, including to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses.
+Added: In July 2022, we amended our $1 billion commitment, which provided additional liquidity to the Company through March 31, 2023.
+Added: In February 2023, the commitment was further extended through February 2024, with an option for NCLC to further extend the commitments through February 2025 at its election.
+Added: Simultaneously, the amount of the commitment was reduced to $650 million, which may be drawn in up to two draws, and in connection with the execution
+Added: of the amended commitment letter, NCLC issued $250 million aggregate principal amount of senior secured notes due 2028.
+Added: NCLC will use the net proceeds for general corporate purposes.
+Added: In February 2023, NCLC entered into a Backstop Agreement with MS, pursuant to which MS has agreed to provide backstop committed financing to refinance and/or repay in whole or in part up to $300 million of amounts outstanding under the Senior Secured Credit Facility at any time between October 4, 2023 and January 2, 2024.
+Added: Refer to Note 8 – “Long-Term Debt” for further details about the above financing transactions.
The estimation of our future cash flow projections includes numerous assumptions that are subject to various risks and uncertainties.
Refer to Note 2 – “Summary of Significant Accounting Policies” for further information on liquidity and management’s plan.
−Removed: 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 unknown magnitude and duration of the COVID-19 global pandemic.
+Added: Refer to Item 1A, “Risk Factors” for further details regarding uncertainty related to Russia’s ongoing invasion of Ukraine and other risks and uncertainties that may cause our results to differ from our expectations.
+Added: 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.
−Removed: Nonetheless, we anticipate that we will need additional equity and/or debt financing to fund our operations in the future if we are unable to resume our cruise voyages on the schedule expected, and particularly if a substantial portion of our fleet continues to have suspended cruise voyages or operate at significantly reduced occupancy levels for a prolonged period.
+Added: Nonetheless, we anticipate that we will need additional equity and/or debt financing to fund our operations in the future if a substantial portion of our fleet suspends cruise voyages or operates at reduced occupancy levels for a prolonged period.
There is no assurance that cash flows from operations and additional financings will be available in the future to fund our future obligations.
−Removed: Beyond 12 months, we will pursue refinancings and other balance sheet optimization transactions from time to time in order to reduce interest rates and extend debt maturities.
+Added: Beyond 12 months, we will pursue refinancings and other balance sheet optimization transactions from time to time in order to reduce interest expense or extend debt maturities.
We expect to collaborate with financing institutions regarding these refinancing and optimization transactions as opportunities arise in the short-term to amend long-term arrangements.
−Removed: We have received certain financial and other debt covenant waivers and added new free liquidity requirements.
−Removed: At December 31, 2021, taking into account such waivers, we were in compliance with all of our debt covenants.
−Removed: If we do not continue to remain in compliance with our covenants, we would have to seek to amend the covenants.
−Removed: However, no assurances can be made that such amendments would be approved by our lenders.
+Added: We have received amendments to certain financial and other debt covenants, including the modification of our free liquidity requirements.
+Added: At December 31, 2022, taking into account such amendments, we were in compliance with all of our debt covenants.
+Added: 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.
+Added: However, no assurances can be made that such amendments or waivers would be approved by our lenders.
Generally, if an event of default under any debt agreement occurs, then pursuant to cross default and/or cross acceleration clauses, substantially all of our outstanding debt and derivative contract payables could become due, and all debt and derivative contracts could be terminated, which would have a material adverse impact to our operations and liquidity.
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.
+Added: 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.
−Removed: We also have significant 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.
+Added: 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.
−Removed: As of December 31, 2021, we had advance ticket sales of $1.8 billion, including the long-term portion, which included approximately $0.7 billion of future cruise credits.
+Added: As of December 31, 2022, we had advance ticket sales of $2.7 billion, including the long-term portion, which included approximately $144.0 million of future cruise credits.
We also have agreements with our credit card processors that, as of December 31, 2022, governed approximately $2.4 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.
−Removed: 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.
+Added: Although the agreements vary, these requirements may generally be satisfied either through a percentage of customer payments withheld or providing cash
+Added: funds directly to the card processor.
Any cash reserve or collateral requested could be increased or decreased.
−Removed: As of December 31, 2021, we had cash collateral reserves of approximately $1.2 billion with credit card processors recognized in accounts receivable, net or other long-term assets.
+Added: As of December 31, 2022, we had cash collateral reserves of approximately $622.0 million with credit card processors, of which approximately $118.4 million is recognized in accounts receivable, net and approximately $503.6 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 reduce our liquidity.
Sources and Uses of Cash
−Removed: In this section, references to 2021 refer to the year ended December 31, 2021, references to 2020 refer to the year ended December 31, 2020 and references to 2019 refer to the year ended December 31, 2019.
−Removed: Net cash used in operating activities was $2.5 billion in 2021 compared to net cash used in operating activities of $2.6 billion in 2020 and net cash provided by operating activities of $1.8 billion in 2019.
−Removed: The net cash used in operating activities included net losses due to the suspension of global cruise voyages from March 2020 through July 2021 and timing differences in cash receipts and payments relating to operating assets and liabilities.
−Removed: The net cash used in operating activities in 2021 included net loss of $(4.5) billion and a decrease of $1.2 billion in cash from accounts receivable, which includes our collateral reserves with credit card processors, offset by an increase in advance ticket sales of $521.9 million and loss on extinguishment of $1.4 billion.
−Removed: The net cash used in operating activities in 2020 includes net loss of $(4.0) billion, a decrease in advance ticket sales of $811.8 million and timing differences in cash receipts and payments relating to various operating assets and liabilities, which was offset primarily by a $1.6 billion impairment loss.
−Removed: The net cash provided by operating activities in 2019 includes net income of $0.9 billion as well as timing differences in cash receipts and payments relating to various operating assets and liabilities, including an increase in advance ticket sales of $347.4 million.
+Added: In this section, references to 2022 refer to the year ended December 31, 2022, references to 2021 refer to the year ended December 31, 2021.
+Added: Net cash provided by operating activities was $210.0 million in 2022 compared to net cash used in operating activities of $2.5 billion in 2021.
+Added: The net cash used in operating activities included net losses due to the suspension of global cruise voyages from March 2020 through July 2021, the subsequent resumption of cruise voyages through May 2022 and the timing differences in cash receipts and payments relating to operating assets and liabilities.
+Added: The net cash provided by operating activities in 2022 included net losses of $(2.3) billion, an increase in advance ticket sales of $928.9 million and loss on extinguishment of $188.8 million.
+Added: The net cash used in operating activities in 2021 included net losses of $(4.5) billion and a decrease of $1.2 billion in cash from accounts receivable, which includes our collateral reserves with credit card processors, offset by an increase in advance ticket sales of $521.9 million and loss on extinguishment of $1.4 billion.
+Added: Net cash used in investing activities was $1.8 billion in 2022, primarily related to the delivery of Norwegian Prima.
Net cash used in investing activities was $1.0 billion in 2021, primarily related to newbuild payments and ship improvement projects and net purchases and maturities of short-term investments.
−Removed: Net cash used in investing activities was $1.0 billion in 2020, primarily related to payments for the delivery of Seven Seas Splendor, ships under construction, ship improvement projects and shoreside projects.
−Removed: Net cash used in investing activities was $1.7 billion in 2019, primarily related to payments for the delivery of Norwegian Encore, ships under construction, ship improvements and shoreside projects.
+Added: Net cash provided by financing activities was $1.0 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 $1.7 billion in 2021, primarily due to $2.6 billion in proceeds from the issuance of debt and $2.7 billion in proceeds from issuance of NCLH’s ordinary shares offset by $2.1 billion of debt principal repayments and $1.4 billion of early redemption premiums.
−Removed: Net cash provided by financing activities was $6.6 billion in 2020, primarily due to $6.1 billion in proceeds from the issuance of debt and $1.5 billion in proceeds from issuance of NCLH’s ordinary shares.
−Removed: Net cash used in financing activities was $53.4 million in 2019, primarily due to the repurchase of $349.9 million of NCLH’s ordinary shares, net repayments of our Revolving Loan Facility and the net refinancing of term loans partially offset by the issuance of new debt.
+Added: For the Company’s cash flow activities for the fiscal year ended December 31, 2020, see “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the U.S.
+Added: Securities and Exchange Commission on March 1, 2022.
Future Capital Commitments
2 unchanged sentences
We have export-credit backed financing in place for the anticipated expenditures related to ship construction contracts of $1.9 billion, $0.1 billion and $1.1 billion for the years ending December 31, 2023, 2024 and 2025, respectively.
−Removed: Anticipated non-newbuild capital expenditures are $0.5 billion for the year ended December 31, 2022, which includes health and safety investments.
+Added: Anticipated non-newbuild capital expenditures are $0.4 billion for the year ended December 31, 2023.
Future expected capital expenditures will significantly increase our depreciation and amortization expense.
−Removed: For the Norwegian brand, we have six Prima Class Ships on order, each ranging from approximately 140,000 to 156,300 Gross Tons with approximately 3,215 to 3,550 Berths, with expected delivery dates from 2022 through 2027.
+Added: For the Norwegian brand, we have five Prima Class Ships on order, each ranging from approximately 143,500 to 169,000 Gross Tons with 3,100 or more Berths, with currently scheduled delivery dates from 2023 through 2028.
For the Regent brand, we have one Explorer Class Ship on order 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.
−Removed: The combined contract prices of the nine ships on order for delivery was approximately €7.7 billion, or $8.8 billion based on the euro/U.S.
+Added: As of December 31, 2022, the combined contract prices of the eight ships on order for delivery was approximately €6.7 billion, or $7.2 billion based on the euro/U.S.
dollar exchange rate as of December 31, 2022.
−Removed: We have obtained export-credit backed financing which is expected to fund approximately 80% of the contract price of each ship, subject to certain conditions.
+Added: Contract amendments for certain of our ships that are or will become effective subsequent to December 31, 2022 will increase the contract cost by €1.2 billion, of which $0.5 billion is included in the anticipated expenditures related to ship construction contracts discussed above.
+Added: We have obtained or expect to obtain fixed rate export-credit backed financing which is expected to fund approximately 80% of the contract price of each ship, subject to certain conditions.
We do not anticipate any contractual breaches or cancellations to occur.
However, if any such events were to occur, it could result in, among other things, the forfeiture of prior deposits or payments made by us and potential claims and impairment losses which may materially impact our business, financial condition and results of operations.
−Removed: Capitalized interest for the year ended December 31, 2021, 2020 and 2019 was $43.6 million, $25.2 million, and $32.9 million, respectively, primarily associated with the construction of our newbuild ships.
+Added: Capitalized interest for the year ended December 31, 2022 and 2021 was $58.4 million and $43.6 million, respectively, primarily associated with the construction of our newbuild ships.
Material Cash Requirements
2 unchanged sentences
Ship construction contracts (2)
−Removed: (1) Includes principal as well as estimated interest payments with LIBOR held constant as of December 31, 2021.
+Added: (1) Includes principal as well as estimated interest payments with LIBOR/SOFR held constant as of December 31, 2022.
+Added: Includes exchangeable notes which can be settled in shares.
Excludes the impact of any future possible refinancings and undrawn export-credit backed facilities.
−Removed: Subsequent to December 31, 2021, we received additional financing through various debt financings, collectively totaling $2.1 billion in gross proceeds, all of 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 principal payments on debt maturing in the short-term, including, in each case, to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses.
+Added: Subsequent to December 31, 2022, we completed various capital market and financing transactions, including issuing two series of notes totaling an aggregate principal amount of $850 million of senior secured notes due in 2028, of which approximately $600 million was used to repay the loans outstanding under our Term Loan A Facility that otherwise would have become due in January 2024.
+Added: Additionally, a commitment of $82.5 million in aggregate principal amount of the Revolving Loan Facility was obtained, which will extend the maturity date of the assigned commitments by one year to January 2025.
See Note 8 – “Long-Term Debt” for further information.
2 unchanged sentences
As of December 31, 2022, we have committed undrawn export-credit backed facilities of $5.6 billion which funds approximately 80% of our ship construction contracts.
+Added: After giving effect to an amendment to our newbuild agreements for the last two Prima Class Ships subsequent to December 31, 2022, our material cash requirements for ship construction contracts are as follows (in thousands):
+Added: Ship construction contracts
+Added: Excludes the impact of expected future ship construction contract amendments noted above.
For other operational commitments for lease and port obligations we refer you to Note 5 – “Leases” and Note 13 – “Commitments and Contingencies,” respectively, for further information.
1 unchanged sentence
Certain of our debt agreements contain covenants that, among other things, require us to maintain a minimum level of liquidity, as well as limit our net funded debt-to-capital ratio and maintain certain other ratios.
−Removed: Substantially all of our ships are pledged as collateral for certain of our debt.
−Removed: We have received certain financial and other debt covenant waivers through December 31, 2022 and added new free liquidity requirements.
−Removed: We believe we were in compliance with these covenants as of December 31, 2021.
+Added: Approximately $13.7 billion of our assets are pledged as collateral for certain of our debt.
+Added: We have received amendments to certain financial
+Added: and other debt covenants, including the modification of our free liquidity requirements.
+Added: After taking into account such amendments, we believe we were in compliance with these covenants as of December 31, 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.
−Removed: NCLH is a holding company and depends upon its subsidiaries
−Removed: for their ability to pay distributions to it to finance any dividend or pay any other obligations of NCLH.
+Added: NCLH is a holding company and depends upon its subsidiaries for their ability to pay distributions to it to finance any dividend or pay any other obligations of NCLH.
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.
−Removed: In light of the measures described under "Update Regarding COVID-19 Pandemic—Financing Transactions and Cost Containment Measures", we believe our cash on hand, short-term investments, the undrawn $1 billion commitment, 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.
−Removed: Certain debt covenant waivers and modifications were received in 2021 to enable the Company to maintain this compliance.
−Removed: Refer to “—Liquidity and Capital Resources” for further information regarding the debt covenant waivers and liquidity requirements.
+Added: We believe our cash on hand, the impact of the undrawn commitment less related fees, the backstop financing available from October 4, 2023 through January 2, 2024, 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.
+Added: Refer to “—Liquidity and Capital Resources—General” for further information regarding the debt covenant waivers and liquidity requirements.
Certain service providers may require collateral in the normal course of our business.
3 unchanged sentences
If any of these transactions were to occur, they may be financed through the incurrence of additional permitted indebtedness, through cash flows from operations, or through the issuance of debt, equity or equity-related securities.
−Removed: We refer you to “—Liquidity and Capital Resources” for information regarding collateral provided to our credit card processors.
+Added: We refer you to “—Liquidity and Capital Resources—General” for information regarding collateral provided to our credit card processors.
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.