What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-08 · 97 added, 77 removed, 314 unchanged (36% of the section changed)

3 unchanged sentences

federal securities laws intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical facts contained, or incorporated by reference, in this report, including, without limitation, those regarding our business strategy, financial position, results of operations, plans, prospects, actions taken or strategies being considered with respect to our liquidity position, valuation and appraisals of our assets and objectives of management for future operations (including those regarding expected fleet additions, our expectations regarding macroeconomic conditions, our expectations regarding cruise voyage occupancy, the implementation of and effectiveness of our health and safety protocols, operational position, demand for voyages, plans or goals for our sustainability program and decarbonization efforts, our expectations for future cash flows and profitability, financing opportunities and extensions, and future cost mitigation and cash conservation efforts and efforts to reduce operating expenses and capital expenditures) are forward-looking statements.

All statements other than statements of historical facts contained, or incorporated by reference, in this report, including, without limitation, those regarding our business strategy, financial position, results of operations, plans, prospects, actions taken or strategies being considered with respect to our liquidity position, valuation and appraisals of our assets and objectives of management for future operations (including those regarding expected fleet additions, our expectations regarding the impact of macroeconomic conditions and recent global events, our expectations regarding cruise voyage occupancy, operational position, demand for voyages, plans or goals for our sustainability program and decarbonization efforts, our expectations for future cash flows and profitability, financing opportunities and extensions, and efforts to reduce operating expenses and capital expenditures) are forward-looking statements.

Many, but not all, of these statements can be found by looking for words like “expect,” “anticipate,” “goal,” “project,” “plan,” “believe,” “seek,” “will,” “may,” “forecast,” “estimate,” “intend,” “future” and similar words.

13 unchanged sentences

● trends in, or changes to, future bookings and our ability to take future reservations and receive deposits related thereto;

● adverse events impacting the security of travel, or customer perceptions of the security of travel, such as terrorist acts, armed conflict, such as Russia’s invasion of Ukraine, and threats thereof, acts of piracy, and other international events;

● adverse events impacting the security of travel, or customer perceptions of the security of travel, such as terrorist acts, armed conflict, such as Russia’s invasion of Ukraine or the Israel-Hamas war, or threats thereof, acts of piracy, and other international events;

● adverse incidents involving cruise ships;

74 unchanged sentences

● Revolving Loan Facility.

$875.0 million senior secured revolving credit facility.

$875 million senior secured revolving credit facility as of September 30, 2023, which was increased to $1.2 billion in October 2023.

Securities and Exchange Commission.

4 unchanged sentences

● Term Loan A Facility .

The senior secured term loan A facility having an outstanding principal amount of approximately $0.8 billion as of June 30, 2023.

The senior secured term loan A facility having an outstanding principal amount of approximately $0.8 billion as of September 30, 2023.

The Term Loan A Facility was fully repaid in October 2023.

Non-GAAP Financial Measures

1 unchanged sentence

See “Terminology” for the definitions of these and other non-GAAP financial measures.

We utilize Adjusted Gross Margin and Net Yield to manage our business on a day-to-day basis because it reflects revenue earned net of certain direct variable costs.

We utilize Adjusted Gross Margin and Net Yield to manage our business on a day-to-day basis because they reflect revenue earned net of certain direct variable costs.

We also utilize Net Cruise Cost and Adjusted Net Cruise Cost Excluding Fuel to manage our business on a day-to-day basis.

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

Per Capacity Day data is not considered meaningful for the three or six months ended June 30, 2022 due to our phased restart of cruise operations, which was completed in May 2022, and is not presented herein.

Per Capacity Day data is not presented for the three or nine months ended September 30, 2022 as we do not consider it meaningful for comparison purposes due to our phased restart of cruise operations, which was completed in May 2022.

We believe that Adjusted EBITDA is appropriate as a supplemental financial measure as it is used by management to assess operating performance.

21 unchanged sentences

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.

Onboard and other revenue primarily consists of revenue from casino, beverage sales, shore excursions, specialty dining, retail sales, spa services

and Wi-Fi services.

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.

14 unchanged sentences

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 9.75% senior secured notes due 2028.

NCLC will use the net proceeds for general corporate purposes.

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.

In April 2023, $82.5 million in aggregate principal amount of the Revolving Loan Facility that was not previously extended was assigned to a new lender under the same terms as the existing lenders who extended commitments in December 2022 under Amendment No.

4 to the Senior Secured Credit Facility.

NCLC used the net proceeds for general corporate purposes.

In October 2023, NCLC issued $790 million aggregate principal amount of 8.125% senior secured notes due 2029.

The proceeds from the notes, together with cash on hand, were used to repay the Term Loan A Facility, including to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses.

Also in October 2023, the Senior Secured Credit Facility was amended and restated, which among other things, increased the aggregate amount of the lenders’ revolving facility commitments from $875 million to $1.2 billion.

No term loans remain outstanding.

See Note 7 – “Long-Term Debt” for more information.

Update on Bookings

Occupancy reached approximately 105% for the three months ended June 30, 2023, in line with our expectations and marking a significant milestone with the phased ramp-up now complete.

As expected, Occupancy for the three months ended June 30, 2023 is slightly lower compared to the same period in 2019, reflecting the Company’s strategic shift to longer, more immersive itineraries.

This shift naturally results in lower Occupancy levels and is expected to attract higher quality guests, generate higher Net Yield, improve guest satisfaction and cultivate stronger loyalty over time.

The Company continues to experience strong and resilient consumer demand.

The cumulative booked position for the second half of 2023 is ahead of 2019 levels at continued higher pricing.

On a 12-month forward basis, the Company continues to be in its optimal booked position of approximately 60-65%.

The Company continues to experience healthy consumer demand with the cumulative booked position for the fourth quarter of 2023 ahead of 2019 levels at continued higher pricing.

On a 12-month forward basis the Company also continues to be within its optimal booked position and at higher pricing.

However, because of our cancellation policies, bookings may not be representative of actual revenues.

Onboard revenue generation remains robust with broad-based strength across all revenue streams.

The Company continues to focus on increasing its pre-sold revenue from guests prior to sailing, as this typically results in higher overall spend throughout the cruise journey as well as earlier and more predictable cash inflow.

During the third quarter and into the fourth quarter, the Company experienced operational impacts from global events including the wildfires in Maui and the escalating conflict in Israel.

Pride of America, which offers year-round inter-island Hawaii itineraries, modified certain itineraries in August to avoid stressing local resources in Maui.

Beginning in early September, with the guidance and encouragement of the Hawaii Governor and Hawaii Tourism Authority, the Company resumed scheduled weekly calls to Kahului, Maui.

However, following the wildfires the Company experienced a temporary slowdown in close-in bookings for sailings in Hawaii, primarily concentrated in the fourth quarter of 2023.

Demand has improved in recent weeks and is now approaching normalized levels.

In addition to Pride of America, the Company also had one additional ship operating in the region, Norwegian Spirit, bringing total capacity with calls to Hawaii to approximately 6% for the fourth quarter of 2023.

In addition, as a result of the escalation of the conflict in Israel, the Company has cancelled and redirected all calls to Israel and certain calls to the surrounding region for the remainder of 2023.

The Company is also in the process of cancelling all calls to Israel in 2024 as well and will continue to closely monitor and evaluate future sailings and adjust as needed.

Prior to the conflict, approximately 7% of capacity in the fourth quarter of 2023 and 4% of capacity for the full year 2024 visited the Middle East, which includes Bahrain, Cyprus, Egypt, Israel, Jordan, Oman, Qatar, Saudi Arabia, and United Arab Emirates.

Occupancy averaged 106.1% for the third quarter of 2023 reflective of the Company’s strategic shift to longer, more immersive itineraries.

Full year 2023 Occupancy is expected to average 102.6%, which includes temporary disruptions impacting the fourth quarter.

Macroeconomic Trends and Uncertainties

As a result of conditions associated with global events, including the lingering 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 impacts to inflation rates, fuel prices, foreign currencies and interest rates.

As a result of conditions associated with global macroeconomic events, the global economy, including the financial and credit markets, has experienced volatility and disruptions, including impacts to inflation rates, fuel prices, foreign currencies and interest rates.

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

We have used, and may continue to use, derivative instruments to attempt to mitigate the risk of volatility in fuel prices and interest rates.

The Company currently has hedged approximately 45%, 36% and 8% of its total projected metric tons of fuel consumption for the remainder of 2023, 2024 and 2025, respectively.

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.

These strategies may not fully offset the impact of current macroeconomic conditions;

however, cost savings from our ongoing margin enhancement initiative were realized earlier than anticipated, and as a result, we expect operating costs per Capacity Day to show continued improvement in 2023.

however, during the third quarter of 2023, we continued to see progress from our ongoing margin enhancement initiative.

The Company continues to prioritize identifying and evaluating a variety of initiatives to improve its cost structure and margin profile, while preserving its brand equity and optimal guest satisfaction levels.

Furthermore, we are exposed to fluctuations in the euro exchange rate for certain portions of ship construction contracts that have not been hedged.

3 unchanged sentences

We believe the increasing focus on climate change, including the Company’s recently established targets for greenhouse gas reductions, and evolving regulatory requirements will materially impact our future capital expenditures and results of operations.

We are now targeting a reduction in greenhouse gas intensity of 10% by 2026 and 25% by 2030, compared to a 2019 baseline and measured on a per Capacity Day basis (the targets cover the Company’s emissions from its fleet of ships, islands and facilities (Scopes 1 & 2) as well as upstream fuel- and energy-related activities, including well-to-tank emissions (a portion of Scope 3).

We are now targeting a reduction in greenhouse gas intensity of 10% by 2026 and 25% by 2030, compared

to a 2019 baseline and measured on a per Capacity Day basis (the targets cover the Company’s emissions from its fleet of ships, islands and facilities (Scopes 1 & 2) as well as upstream fuel- and energy-related activities, including well-to-tank emissions (a portion of Scope 3).

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

7 unchanged sentences

Quarterly Overview

Three months ended June 30, 2023 (“2023”) compared to three months ended June 30, 2022 (“2022”)

Three months ended September 30, 2023 (“2023”) compared to three months ended September 30, 2022 (“2022”)

● Total revenue increased to $2.5 billion compared to $1.6 billion.

2 unchanged sentences

● Gross margin was $862.7 million compared to $202.2 million.

Adjusted Gross Margin was $1.5 billion compared to $834.8 million.

Adjusted Gross Margin was $1.8 billion compared to $1.1 billion.

● Adjusted Net Income and Adjusted EPS were $388.0 million and $0.76, respectively, in 2023, which included $24.6 million of adjustments primarily related to share-based compensation.

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Passengers carried

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Total revenue

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Total cruise operating expense

18 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

12 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

10 unchanged sentences

(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, 2023 (“2023”) compared to three months ended June 30, 2022 (“2022”)

Three months ended September 30, 2023 (“2023”) compared to three months ended September 30, 2022 (“2022”)

Total revenue increased to $2.5 billion in 2023 compared to $1.6 billion in 2022.

1 unchanged sentence

Total cruise operating expense increased 19.7% in 2023 compared to 2022.

In 2023, our cruise operating expenses increased due to the resumption of voyages, resulting in higher direct variable costs of fully operating ships.

In 2022, the three months started with 23 ships operating with guests onboard and ended with the full fleet in service.

In 2023, our cruise operating expenses increased due to the phased Occupancy ramp-up, resulting in higher direct variable costs of fully operating ships.

Additionally, cruise operating expenses increased as a result of the deliveries of Norwegian Prima, Norwegian Viva and Oceania Cruises’ Vista in 2022 and 2023.

Gross Cruise Cost increased 12.0% in 2023 compared to 2022 primarily related to the change in costs described above.

Total other operating expense increased 7.6% in 2023 compared to 2022 primarily due to an increase in salaries and benefits, which includes higher share-based compensation expenses as well as other expenses related to the retirement of our prior President and Chief Executive Officer.

Total other operating expense decreased 5.7% in 2023 compared to 2022 primarily due to a decrease in marketing costs.

Interest expense, net was $181.2 million in 2023 compared to $152.3 million in 2022.

The increase in interest expense is primarily as a result of higher rates.

Other income (expense), net was expense of $8.0 million in 2023 compared to income of $31.0 million in 2022.

The income and expense primarily related to net gains and losses on foreign currency remeasurements.

Six months ended June 30, 2023 (“2023”) compared to six months ended June 30, 2022 (“2022”)

Other income (expense), net was income of $12.1 million in 2023 compared to $31.5 million in 2022.

The income primarily related to net gains and losses on foreign currency remeasurements.

Nine months ended September 30, 2023 (“2023”) compared to nine months ended September 30, 2022 (“2022”)

Total revenue increased to $6.6 billion in 2023 compared to $3.3 billion in 2022.

2 unchanged sentences

In 2023, our cruise operating expenses increased due to the resumption of voyages, resulting in higher payroll, food and direct variable costs of fully operating ships.

In 2022, the six months started with 16 ships operating with guests onboard and ended with the full fleet in service.

In 2022, the nine months started with 16 ships operating with guests onboard and ended with the full fleet in service, which was completed in May 2022.

Gross Cruise Cost increased 27.5% in 2023 compared to 2022 primarily related to the change in costs described above.

Total other operating expense increased 9.6% in 2023 compared to 2022 primarily due to an increase in salaries and benefits, which includes higher share-based compensation expenses as well as other expenses related to the retirement of our prior President and Chief Executive Officer.

Marketing costs also increased in 2023 compared to 2022 as we returned to historical Occupancy and prepared for three new ship deliveries in 2023.

Total other operating expense increased 4.0% in 2023 compared to 2022 primarily due to higher depreciation expense as a result of the deliveries of Norwegian Prima, Norwegian Viva and Oceania Cruises’ Vista in 2022 and 2023.

Interest expense, net was $530.2 million in 2023 compared to $624.4 million in 2022.

4 unchanged sentences

Liquidity and Capital Resources

As of June 30, 2023, our liquidity was approximately $2.4 billion, including cash and cash equivalents of $899.1 million and borrowings available under our $875 million fully undrawn Revolving Loan Facility and $650 million undrawn commitment less related fees.

As of September 30, 2023, our liquidity was approximately $2.2 billion, including cash and cash equivalents of $681.6 million and borrowings available under our $875 million fully undrawn Revolving Loan Facility and $650 million undrawn commitment less related fees.

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

3 unchanged sentences

NCLC will use the net proceeds for general corporate purposes.

4 to the Senior Secured Credit Facility.

NCLC used the net proceeds for general corporate purposes.

In October 2023, NCLC issued $790 million aggregate principal amount of 8.125% senior secured notes due 2029.

No term loans remain outstanding.

See Note 7 – “Long-Term Debt” for more information on 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.

Refer to Note 2 – “Summary of Significant Accounting Policies” in our Annual Report on Form 10-K for further information on liquidity.

Refer to “Item 1A.

Risk Factors” in our Annual Report on Form 10-K for 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 any residual 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.

Risk Factors” herein and in our Annual Report on Form 10-K for 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 any current macroeconomic events and 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.

3 unchanged sentences

We have received amendments to certain financial and other debt covenants, including the modification of our free liquidity requirements.

At June 30, 2023, taking into account such amendments, we were in compliance with all of our debt covenants.

At September 30, 2023, 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.

1 unchanged sentence

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.

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 $0.8 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.

Our Moody’s long-term issuer rating is B2, our senior secured rating is B1 and our senior unsecured rating is Caa1.

Our S&P Global issuer credit rating is B, our issue-level rating on our $1.2 billion Revolving Loan Facility, 2028 Senior Secured Notes and 2029 Senior Secured Notes is BB-, our issue-level rating on our other senior secured notes is B+ and our senior unsecured rating is CCC+.

If our credit ratings were to be 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, 2023, we had advance ticket sales of $3.5 billion, including the long-term portion, which included approximately $81.2 million of future cruise credits.

We also have agreements with our credit card processors that, as of June 30, 2023, governed approximately $3.2 billion in advance ticket sales that had been received by the Company relating to future voyages.

As of September 30, 2023, we had advance ticket sales of $3.1 billion, including the long-term portion, which included approximately $71.3 million of future cruise credits.

We also have agreements with our credit card processors that, as of September 30, 2023, governed approximately $2.8 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.

1 unchanged sentence

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

As of June 30, 2023, we had cash collateral reserves of approximately $31.5 million with credit card processors recognized in accounts receivable, net.

During the three months ended June 30, 2023, the Company received a return of cash collateral from one credit card processor of $500 million, which was previously classified as other long-term assets.

As of September 30, 2023, we had cash collateral reserves of approximately $42.0 million with credit card processors recognized in accounts receivable, net.

During the nine months ended September 30, 2023, the Company received a return of cash collateral from one credit card processor of $500 million, which was previously classified as other long-term assets.

We may be required to pledge additional collateral and/or post additional cash reserves or take other actions in the future that may adversely affect our liquidity.

Sources and Uses of Cash

In this section, references to “2023” refer to the six months ended June 30, 2023 and references to “2022” refer to the six months ended June 30, 2022.

In this section, references to “2023” refer to the nine months ended September 30, 2023 and references to “2022” refer to the nine months ended September 30, 2022.

Net cash provided by operating activities was $1.7 billion in 2023 as compared to net cash used in operating activities of $26.6 million in 2022.

The net cash provided by operating activities included net losses and timing differences in cash receipts and payments relating to operating assets and liabilities.

The net cash provided by (used in) operating activities included net income (losses) and timing differences in cash receipts and payments relating to operating assets and liabilities.

The net cash provided by operating activities includes the return of $500 million cash collateral from one credit card processor in 2023.

Advance ticket sales increased by $419.4 million in 2023 and by $713.4 million in 2022.

The net losses also include losses on extinguishment of debt of $188.4 million in 2022.

Net cash used in investing activities was $992.2 million in 2023 and $81.1 million in 2022.

The net loss also includes losses on extinguishment of debt of $188.4 million in 2022.

Net cash used in investing activities was $2.2 billion in 2023 and $1.6 billion in 2022.

The net cash used in investing activities was primarily related to newbuild payments in 2023.

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.

Net cash used in financing activities was $592.3 million in 2023 primarily due to debt repayments and a net decrease in our Revolving Loan Facility balance, partially offset by the proceeds from newbuild loan facilities and $850 million from our various note offerings.

Net cash provided by financing activities was $586.5 million 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.

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

Net cash provided by financing activities was $194.5 million in 2023 primarily due to newbuild loans and $850 million from our various note offerings, partially offset by debt repayments and a net decrease in our Revolving Loan Facility balance.

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.

Future Capital Commitments

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

Anticipated expenditures related to ship construction contracts as of June 30, 2023 were $1.7 billion for the remainder of 2023, including Norwegian Viva, and $0.4 billion and $2.0 billion for the years ending December 31, 2024 and 2025, respectively, reflecting delays in certain scheduled ship delivery dates.

As of June 30, 2023, the Company has export

credit financing in place for the anticipated expenditures related to ship construction contracts of $1.4 billion for the remainder of 2023 and $0.2 billion and $1.5 billion for the years ending December 31, 2024 and 2025, respectively.

Anticipated non-newbuild capital expenditures for the remainder of 2023 are approximately $0.2 billion.

Anticipated expenditures related to ship construction contracts as of September 30, 2023 were $0.6 billion for the remainder of 2023 and $0.4 billion and $1.9 billion for the years ending December 31, 2024 and 2025, respectively, reflecting delays in certain scheduled ship delivery dates.

As of September 30, 2023, the Company has export credit financing in place for the anticipated expenditures related to ship construction contracts of $0.5 billion for the remainder of 2023 and $0.2 billion and $1.4 billion for the years ending December 31, 2024 and 2025, respectively.

Anticipated non-newbuild

capital expenditures for the remainder of 2023 are approximately $135 million.

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

For the Norwegian brand, the second Prima Class Ship, Norwegian Viva, at approximately 143,500 Gross Tons and 3,100 Berths, was delivered in August 2023.

For the Norwegian brand, we have four Prima Class Ships on order, each ranging from approximately 156,300 to 169,000 Gross Tons with 3,450 or more Berths, with currently scheduled delivery dates from 2025 through 2028.

1 unchanged sentence

For the Oceania Cruises brand, we have an order for one additional Allura Class Ship to be delivered in 2025, which 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), Russia’s ongoing invasion of Ukraine, initiatives to improve environmental sustainability and modifications the Company plans to make to its newbuilds and/or other macroeconomic events have resulted in delays in expected ship deliveries.

The impacts of initiatives to improve environmental sustainability and modifications the Company plans to make to its newbuilds and/or other macroeconomic conditions and events have resulted in delays in expected ship deliveries.

These and other impacts could result in additional delays in ship deliveries in the future, which may be prolonged.

As of June 30, 2023, the combined contract prices of the seven ships on order for delivery, including Norwegian Viva, was approximately €7.4 billion, or $8.1 billion based on the euro/U.S.

dollar exchange rate as of June 30, 2023.

As of September 30, 2023, the combined contract prices, including amendments and change orders, of the six ships on order for delivery was approximately €6.3 billion, or $6.7 billion based on the euro/U.S.

dollar exchange rate as of September 30, 2023.

We have obtained export credit financing which is expected to fund approximately 80% of the contract price of each ship and related financing premiums, subject to certain conditions.

1 unchanged sentence

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, 2023 and 2022 was $16.6 million and $14.8 million, respectively, and for the six months ended June 30, 2023 and 2022 was $31.3 million and $28.1 million, respectively, primarily associated with the construction of our newbuild ships.

Capitalized interest for the three months ended September 30, 2023 and 2022 was $13.4 million and $17.0 million, respectively, and for the nine months ended September 30, 2023 and 2022 was $44.7 million and $45.1 million, respectively, primarily associated with the construction of our newbuild ships.

Material Cash Requirements

As of June 30, 2023, our material cash requirements for debt and ship construction were as follows (in thousands):

As of September 30, 2023, 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 Term SOFR held constant as of June 30, 2023.

(1) Includes principal as well as estimated interest payments with Term SOFR held constant as of September 30, 2023.

Includes exchangeable notes which can be settled in shares.

1 unchanged sentence

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

dollar exchange rate as of June 30, 2023.

As of June 30, 2023, we have committed undrawn export-credit backed facilities of approximately $7.0 billion which funds approximately 80% of our ship construction contracts.

dollar exchange rate as of September 30, 2023.

As of September 30, 2023, we have committed undrawn export-credit backed facilities of approximately $5.8 billion which funds approximately 80% of our ship construction contracts.

Funding Sources

2 unchanged sentences

We have received amendments to certain financial and other debt covenants, including the modification of our free liquidity requirements.

After taking into account such amendments, we believe we were in compliance with these covenants as of June 30, 2023.

After taking into account such amendments, we believe we were in compliance with these covenants as of September 30, 2023.

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.

1 unchanged sentence

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.

We believe our cash on hand, the availability under the Revolving Loan Facility and undrawn commitment less related fees, the backstop financing available from October 4, 2023 through January 2, 2024, 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.

We believe our cash on hand, the availability under the Revolving Loan Facility and undrawn commitment less related fees, 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.

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

6 unchanged sentences

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