10-Q 1 nclh-20220630x10q.htm 10-Q
0001513761--12-312022Q2http://fasb.org/us-gaap/2022#OtherAssetsNoncurrenthttp://www.nclhltd.com/20220630#AccruedLiabilitiesAndOtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesNoncurrent0.001419116812416891915P60DP75Dhttp://fasb.org/us-gaap/2022#OtherAssetsNoncurrenthttp://www.nclhltd.com/20220630#AccruedLiabilitiesAndOtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2022#OtherLiabilitiesNoncurrentfalse9800000000001513761us-gaap:CommonStockMember2021-01-012021-06-300001513761us-gaap:CommonStockMember2022-01-012022-06-300001513761us-gaap:RetainedEarningsMember2022-06-300001513761us-gaap:CommonStockMember2022-06-300001513761us-gaap:AdditionalPaidInCapitalMember2022-06-300001513761us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001513761us-gaap:RetainedEarningsMember2022-03-310001513761us-gaap:CommonStockMember2022-03-310001513761us-gaap:AdditionalPaidInCapitalMember2022-03-310001513761us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-3100015137612022-03-310001513761us-gaap:RetainedEarningsMember2021-12-310001513761us-gaap:CommonStockMember2021-12-310001513761us-gaap:AdditionalPaidInCapitalMember2021-12-310001513761us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001513761us-gaap:RetainedEarningsMember2021-06-300001513761us-gaap:CommonStockMember2021-06-300001513761us-gaap:AdditionalPaidInCapitalMember2021-06-300001513761us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001513761srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-06-300001513761us-gaap:RetainedEarningsMember2021-03-310001513761us-gaap:CommonStockMember2021-03-310001513761us-gaap:AdditionalPaidInCapitalMember2021-03-310001513761us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-3100015137612021-03-310001513761us-gaap:RetainedEarningsMember2020-12-310001513761us-gaap:CommonStockMember2020-12-310001513761us-gaap:AdditionalPaidInCapitalMember2020-12-310001513761us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001513761nclh:Restated2013PerformanceIncentivePlanMember2022-06-300001513761nclh:Restated2013PerformanceIncentivePlanMember2021-05-310001513761srt:MaximumMembernclh:PerformanceIncentivePlan2013Member2013-01-310001513761nclh:Restated2013PerformanceIncentivePlanMember2022-06-012022-06-300001513761us-gaap:RestrictedStockUnitsRSUMemberus-gaap:PerformanceSharesMember2022-06-300001513761us-gaap:RestrictedStockUnitsRSUMembernclh:TimeBasedUnitsMember2022-06-300001513761us-gaap:RestrictedStockUnitsRSUMembernclh:MarketBasedRestrictedStockUnitsMember2022-06-300001513761us-gaap:RestrictedStockUnitsRSUMemberus-gaap:PerformanceSharesMember2021-12-310001513761us-gaap:RestrictedStockUnitsRSUMembernclh:TimeBasedUnitsMember2021-12-310001513761us-gaap:RestrictedStockUnitsRSUMembernclh:MarketBasedRestrictedStockUnitsMember2021-12-310001513761srt:ManagementMembernclh:AwardedOnJune2021Membernclh:PerformanceBasedUnitsMember2022-03-012022-03-310001513761us-gaap:RestrictedStockUnitsRSUMemberus-gaap:PerformanceSharesMember2022-01-012022-06-300001513761us-gaap:RestrictedStockUnitsRSUMembernclh:TimeBasedUnitsMember2022-01-012022-06-300001513761us-gaap:RestrictedStockUnitsRSUMembernclh:MarketBasedRestrictedStockUnitsMember2022-01-012022-06-300001513761nclh:EmployeeMembernclh:AwardedOnJune2021Membernclh:TimeBasedUnitsMember2022-03-012022-03-310001513761us-gaap:PassengerMember2022-04-012022-06-300001513761srt:SouthAmericaMember2022-04-012022-06-300001513761srt:NorthAmericaMember2022-04-012022-06-300001513761srt:EuropeMember2022-04-012022-06-300001513761srt:AsiaPacificMember2022-04-012022-06-300001513761us-gaap:PassengerMember2022-01-012022-06-300001513761srt:SouthAmericaMember2022-01-012022-06-300001513761srt:NorthAmericaMember2022-01-012022-06-300001513761srt:EuropeMember2022-01-012022-06-300001513761srt:AsiaPacificMember2022-01-012022-06-300001513761us-gaap:PassengerMember2021-04-012021-06-300001513761us-gaap:PassengerMember2021-01-012021-06-300001513761srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2021-06-300001513761nclh:PrivateExchangeableNotesMember2021-03-012021-03-310001513761us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-01-012021-06-300001513761us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001513761us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-06-300001513761us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001513761us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-06-300001513761us-gaap:CashFlowHedgingMembernclh:FuelExpenseMember2022-04-012022-06-300001513761us-gaap:CashFlowHedgingMembernclh:DepreciationAndAmortizationExpenseMember2022-04-012022-06-300001513761us-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestExpenseMember2022-01-012022-06-300001513761us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMembernclh:DepreciationAndAmortizationExpenseMember2022-01-012022-06-300001513761nclh:FuelContractMemberus-gaap:CashFlowHedgingMembernclh:FuelExpenseMember2022-01-012022-06-300001513761us-gaap:CashFlowHedgingMemberus-gaap:InterestExpenseMember2022-01-012022-06-300001513761us-gaap:CashFlowHedgingMembernclh:FuelExpenseMember2022-01-012022-06-300001513761us-gaap:CashFlowHedgingMembernclh:DepreciationAndAmortizationExpenseMember2022-01-012022-06-300001513761us-gaap:CashFlowHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMember2021-04-012021-06-300001513761us-gaap:CashFlowHedgingMemberus-gaap:InterestExpenseMember2021-04-012021-06-300001513761us-gaap:CashFlowHedgingMembernclh:FuelExpenseMember2021-04-012021-06-300001513761us-gaap:CashFlowHedgingMembernclh:DepreciationAndAmortizationExpenseMember2021-04-012021-06-300001513761us-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:InterestExpenseMember2021-01-012021-06-300001513761us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMembernclh:DepreciationAndAmortizationExpenseMember2021-01-012021-06-300001513761nclh:FuelContractMemberus-gaap:CashFlowHedgingMembernclh:FuelExpenseMember2021-01-012021-06-300001513761us-gaap:CashFlowHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMember2021-01-012021-06-300001513761us-gaap:CashFlowHedgingMemberus-gaap:InterestExpenseMember2021-01-012021-06-300001513761us-gaap:CashFlowHedgingMembernclh:FuelExpenseMember2021-01-012021-06-300001513761us-gaap:CashFlowHedgingMembernclh:DepreciationAndAmortizationExpenseMember2021-01-012021-06-300001513761us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMember2022-04-012022-06-300001513761nclh:FuelContractMemberus-gaap:CashFlowHedgingMember2022-04-012022-06-300001513761us-gaap:CashFlowHedgingMember2022-04-012022-06-300001513761us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMember2022-01-012022-06-300001513761nclh:FuelContractMemberus-gaap:CashFlowHedgingMember2022-01-012022-06-300001513761us-gaap:CashFlowHedgingMember2022-01-012022-06-300001513761us-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMember2021-04-012021-06-300001513761us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMember2021-04-012021-06-300001513761nclh:FuelContractMemberus-gaap:CashFlowHedgingMember2021-04-012021-06-300001513761us-gaap:CashFlowHedgingMember2021-04-012021-06-300001513761us-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMember2021-01-012021-06-300001513761us-gaap:ForeignExchangeForwardMemberus-gaap:CashFlowHedgingMember2021-01-012021-06-300001513761nclh:FuelContractMemberus-gaap:CashFlowHedgingMember2021-01-012021-06-300001513761us-gaap:CashFlowHedgingMember2021-01-012021-06-300001513761us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-01-012022-06-300001513761us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2021-01-012021-06-3000015137612020-03-012020-03-310001513761us-gaap:RetainedEarningsMember2022-04-012022-06-300001513761us-gaap:RetainedEarningsMember2022-01-012022-06-300001513761us-gaap:RetainedEarningsMember2021-04-012021-06-300001513761us-gaap:RetainedEarningsMember2021-01-012021-06-300001513761nclh:FuelContractMemberus-gaap:CashFlowHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMember2021-04-012021-06-300001513761nclh:FuelContractMemberus-gaap:CashFlowHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMember2021-01-012021-06-3000015137612019-08-272019-08-270001513761nclh:ExchangeableSeniorNotesTwoDue2027Memberus-gaap:FairValueInputsLevel2Member2022-06-300001513761nclh:ExchangeableSeniorNotesDue2027Memberus-gaap:FairValueInputsLevel2Member2022-06-300001513761nclh:ExchangeableSeniorNotesDue2025Memberus-gaap:FairValueInputsLevel2Member2022-06-300001513761nclh:ExchangeableSeniorNotesDue2024Memberus-gaap:FairValueInputsLevel2Member2022-06-300001513761nclh:ExchangeableSeniorNotesDue2027Memberus-gaap:FairValueInputsLevel2Member2021-12-310001513761nclh:ExchangeableSeniorNotesDue2025Memberus-gaap:FairValueInputsLevel2Member2021-12-310001513761nclh:ExchangeableSeniorNotesDue2024Memberus-gaap:FairValueInputsLevel2Member2021-12-310001513761us-gaap:UnfundedLoanCommitmentMember2022-06-300001513761nclh:ForeignExchangeForwardContractForAccruedShipConstructionPaymentsMemberus-gaap:NondesignatedMember2022-06-300001513761us-gaap:ForeignExchangeForwardMember2022-06-300001513761nclh:FuelContractMemberus-gaap:NondesignatedMember2022-06-300001513761nclh:FuelContractMember2022-06-300001513761nclh:FuelContractMemberus-gaap:NondesignatedMember2022-01-012022-06-300001513761nclh:FuelContractMember2022-01-012022-06-300001513761us-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2022-04-012022-06-300001513761nclh:FuelContractMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2022-04-012022-06-300001513761us-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2022-01-012022-06-300001513761nclh:FuelContractMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2022-01-012022-06-300001513761us-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2021-04-012021-06-300001513761nclh:FuelContractMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2021-04-012021-06-300001513761us-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2021-01-012021-06-300001513761nclh:FuelContractMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2021-01-012021-06-300001513761us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-01-012022-06-300001513761us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:ForeignExchangeForwardMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-06-300001513761nclh:AccruedExpensesAndOtherLiabilitiesMemberus-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMember2022-06-300001513761nclh:AccruedExpensesAndOtherLiabilitiesMemberus-gaap:ForeignExchangeForwardMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-06-300001513761us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:ForeignExchangeForwardMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-12-310001513761nclh:AccruedExpensesAndOtherLiabilitiesMemberus-gaap:InterestRateContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-12-310001513761nclh:AccruedExpensesAndOtherLiabilitiesMemberus-gaap:ForeignExchangeForwardMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-12-310001513761us-gaap:PrepaidExpensesAndOtherCurrentAssetsMembernclh:FuelContractMemberus-gaap:NondesignatedMember2022-06-300001513761us-gaap:PrepaidExpensesAndOtherCurrentAssetsMembernclh:FuelContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-06-300001513761us-gaap:OtherNoncurrentAssetsMembernclh:FuelContractMemberus-gaap:NondesignatedMember2022-06-300001513761us-gaap:OtherNoncurrentAssetsMembernclh:FuelContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2022-06-300001513761us-gaap:NondesignatedMember2022-06-300001513761us-gaap:DesignatedAsHedgingInstrumentMember2022-06-300001513761us-gaap:DerivativeMember2022-06-300001513761us-gaap:PrepaidExpensesAndOtherCurrentAssetsMemberus-gaap:ForeignExchangeForwardMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-12-310001513761us-gaap:PrepaidExpensesAndOtherCurrentAssetsMembernclh:FuelContractMemberus-gaap:NondesignatedMember2021-12-310001513761us-gaap:PrepaidExpensesAndOtherCurrentAssetsMembernclh:FuelContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-12-310001513761us-gaap:OtherNoncurrentAssetsMembernclh:FuelContractMemberus-gaap:NondesignatedMember2021-12-310001513761us-gaap:OtherNoncurrentAssetsMembernclh:FuelContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2021-12-310001513761us-gaap:NondesignatedMember2021-12-310001513761us-gaap:DesignatedAsHedgingInstrumentMember2021-12-310001513761us-gaap:DerivativeMember2021-12-310001513761nclh:DebtRedemptionPriorToFebruary152025Membernclh:SeniorUnsecuredNotesDue2029Member2022-02-012022-02-280001513761nclh:DebtRedemptionPriorToFebruary152024Membernclh:SeniorSecuredNotesDue2027Member2022-02-012022-02-280001513761nclh:DebtRedemptionOnOrAfterNovember152028Membernclh:SeniorUnsecuredNotesDue2029Member2022-02-012022-02-280001513761nclh:LeonardoNewbuildOneLoanMemberus-gaap:SubsequentEventMember2022-07-310001513761nclh:SeniorUnsecuredNotesDue2025Or2026Member2022-07-310001513761nclh:SeniorSecuredNotesDue2025Member2022-07-310001513761nclh:CommitmentLetterMember2022-07-310001513761nclh:SeniorUnsecuredNotesDue2029Member2022-02-280001513761nclh:SeniorSecuredNotesDue2027Member2022-02-280001513761nclh:CommitmentLetterMember2021-11-300001513761srt:MaximumMembernclh:ExchangeableSeniorNotesTwoDue2027Member2022-02-012022-02-280001513761nclh:ExchangeableSeniorNotesTwoDue2027Member2022-02-280001513761nclh:ExchangeableSeniorNotesTwoDue2027Member2022-06-300001513761nclh:ExchangeableSeniorNotesDue2027Member2022-06-300001513761nclh:ExchangeableSeniorNotesDue2025Member2022-06-300001513761nclh:ExchangeableSeniorNotesDue2024Member2022-06-300001513761nclh:ExchangeableSeniorNotesDue2027Member2021-12-310001513761nclh:ExchangeableSeniorNotesDue2025Member2021-12-310001513761nclh:ExchangeableSeniorNotesDue2024Member2021-12-310001513761us-gaap:ServiceOtherMember2022-04-012022-06-300001513761us-gaap:FoodAndBeverageMember2022-04-012022-06-300001513761nclh:PayrollAndRelatedMember2022-04-012022-06-300001513761nclh:OnboardAndOtherMember2022-04-012022-06-300001513761nclh:FuelExpenseMember2022-04-012022-06-300001513761nclh:CommissionsTransportationAndOtherMember2022-04-012022-06-300001513761us-gaap:ServiceOtherMember2022-01-012022-06-300001513761us-gaap:FoodAndBeverageMember2022-01-012022-06-300001513761nclh:PayrollAndRelatedMember2022-01-012022-06-300001513761nclh:OnboardAndOtherMember2022-01-012022-06-300001513761nclh:FuelExpenseMember2022-01-012022-06-300001513761nclh:CommissionsTransportationAndOtherMember2022-01-012022-06-300001513761us-gaap:ServiceOtherMember2021-04-012021-06-300001513761us-gaap:FoodAndBeverageMember2021-04-012021-06-300001513761nclh:PayrollAndRelatedMember2021-04-012021-06-300001513761nclh:OnboardAndOtherMember2021-04-012021-06-300001513761nclh:FuelExpenseMember2021-04-012021-06-300001513761nclh:CommissionsTransportationAndOtherMember2021-04-012021-06-300001513761us-gaap:ServiceOtherMember2021-01-012021-06-300001513761us-gaap:FoodAndBeverageMember2021-01-012021-06-300001513761nclh:PayrollAndRelatedMember2021-01-012021-06-300001513761nclh:OnboardAndOtherMember2021-01-012021-06-300001513761nclh:FuelExpenseMember2021-01-012021-06-300001513761nclh:CommissionsTransportationAndOtherMember2021-01-012021-06-300001513761srt:MaximumMembernclh:PrivateExchangeableNotesMembernclh:NclCorporationLtdMember2020-05-282020-05-280001513761srt:MinimumMemberus-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-06-300001513761srt:MaximumMemberus-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-06-300001513761us-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-06-300001513761srt:RevisionOfPriorPeriodReclassificationAdjustmentMembernclh:ErrorCorrectionShortTermInvestmentsClassificationMember2021-01-012021-06-300001513761srt:ScenarioPreviouslyReportedMember2021-01-012021-06-300001513761srt:RevisionOfPriorPeriodReclassificationAdjustmentMembernclh:ErrorCorrectionShortTermInvestmentsClassificationMember2021-06-300001513761srt:ScenarioPreviouslyReportedMember2021-06-300001513761us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-04-012022-06-300001513761nclh:PayrollAndRelatedMember2022-04-012022-06-300001513761us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-012022-06-300001513761nclh:PayrollAndRelatedMember2022-01-012022-06-300001513761us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-04-012021-06-300001513761nclh:PayrollAndRelatedMember2021-04-012021-06-300001513761us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-06-300001513761nclh:PayrollAndRelatedMember2021-01-012021-06-300001513761srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AdditionalPaidInCapitalMember2021-01-012021-06-300001513761us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-06-300001513761us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-06-300001513761us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2021-12-310001513761us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-12-310001513761us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2021-06-300001513761us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-06-3000015137612021-06-300001513761us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-12-310001513761us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-12-3100015137612020-12-310001513761us-gaap:SalesChannelThroughIntermediaryMember2021-12-310001513761nclh:SeniorUnsecuredNotesDue2029Member2022-02-012022-02-280001513761nclh:SeniorSecuredNotesDue2027Member2022-02-012022-02-280001513761us-gaap:AccountsReceivableMemberus-gaap:SalesChannelThroughIntermediaryMember2022-06-300001513761nclh:OtherLongTermAssetsMemberus-gaap:SalesChannelThroughIntermediaryMember2022-06-300001513761us-gaap:SalesChannelThroughIntermediaryMember2022-06-300001513761nclh:ShipsLaunchingPeriodIn2023Through2027Membernclh:ShipConstructionContractsMember2022-06-300001513761nclh:ShipsLaunchingPeriodThrough2027Member2022-06-300001513761nclh:ShipsLaunchingPeriodIn2023Through2027Member2022-06-300001513761nclh:ShipsLaunchingPeriodIn2023Member2022-06-300001513761nclh:ShipsLaunchingPeriodIn2023And2025Member2022-06-300001513761srt:MinimumMembernclh:LCattertonMember2020-05-280001513761nclh:ShipsLaunchingPeriodIn2023Through2027Membersrt:MinimumMembernclh:ShipConstructionContractsMember2022-06-300001513761nclh:ShipsLaunchingPeriodIn2023Through2027Membersrt:MaximumMembernclh:ShipConstructionContractsMember2022-06-300001513761nclh:ShipsLaunchingPeriodIn2023Through2025Membernclh:ShipConstructionContractsMember2022-06-300001513761nclh:ShipsLaunchingPeriodIn2023Membernclh:ShipConstructionContractsMember2022-06-300001513761nclh:ShipsLaunchingPeriodIn2022Membernclh:ShipConstructionContractsMember2022-06-300001513761us-gaap:SubsequentEventMember2022-07-310001513761nclh:ExchangeableSeniorNotesTwoDue2027Member2022-02-012022-02-280001513761srt:MaximumMembernclh:CommitmentLetterMember2022-07-012022-07-310001513761nclh:SeniorSecuredNotesDue2025Member2022-07-012022-07-310001513761nclh:SeniorUnsecuredNotesDue2025Or2026Member2022-07-012022-07-310001513761nclh:ShipConstructionContractsMember2022-06-300001513761nclh:LCattertonMember2020-12-310001513761us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-3000015137612022-04-012022-06-300001513761us-gaap:AdditionalPaidInCapitalMember2022-01-012022-06-300001513761us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-3000015137612021-04-012021-06-300001513761us-gaap:AdditionalPaidInCapitalMember2021-01-012021-06-3000015137612021-01-012021-06-3000015137612022-06-3000015137612021-12-3100015137612022-07-3100015137612022-01-012022-06-30xbrli:sharesiso4217:USDxbrli:pureiso4217:EURnclh:itemiso4217:USDxbrli:sharesutr:Tnclh:segment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-35784

NORWEGIAN CRUISE LINE HOLDINGS LTD.

(Exact name of registrant as specified in its charter)

Bermuda

    

98-0691007

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

7665 Corporate Center Drive, Miami, Florida 33126

33126

(Address of principal executive offices)

(zip code)

(305) 436-4000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Ordinary shares, par value $0.001 per share

 

NCLH

 

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

There were 421,389,216 ordinary shares outstanding as of July 31, 2022.

TABLE OF CONTENTS

  

    

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

Item 4.

Controls and Procedures

41

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

42

Item 6.

Exhibits

42

SIGNATURES

44

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Revenue

 

  

 

  

 

  

 

  

Passenger ticket

$

793,892

$

1,584

$

1,136,347

$

1,750

Onboard and other

 

393,289

 

2,784

 

572,774

 

5,718

Total revenue

 

1,187,181

 

4,368

 

1,709,121

 

7,468

Cruise operating expense

 

  

 

  

 

  

 

  

Commissions, transportation and other

 

256,190

 

6,564

 

344,148

 

15,597

Onboard and other

 

96,155

 

1,276

 

128,705

 

2,535

Payroll and related

 

262,580

 

86,647

 

503,307

 

168,785

Fuel

 

181,189

 

54,090

 

316,698

 

96,693

Food

 

61,157

 

4,334

 

100,673

 

10,642

Other

 

216,045

 

96,816

 

415,198

 

156,330

Total cruise operating expense

 

1,073,316

 

249,727

 

1,808,729

 

450,582

Other operating expense

 

  

 

  

 

  

 

  

Marketing, general and administrative

 

329,080

 

185,483

 

625,287

 

388,678

Depreciation and amortization

 

181,587

 

174,262

 

360,663

 

344,578

Total other operating expense

 

510,667

 

359,745

 

985,950

 

733,256

Operating loss

 

(396,802)

 

(605,104)

 

(1,085,558)

 

(1,176,370)

Non-operating income (expense)

 

 

 

 

Interest expense, net

 

(144,377)

 

(137,259)

 

(472,062)

 

(961,700)

Other income (expense), net

 

30,991

 

25,501

 

69,111

 

52,744

Total non-operating income (expense)

 

(113,386)

 

(111,758)

 

(402,951)

 

(908,956)

Net loss before income taxes

 

(510,188)

 

(716,862)

 

(1,488,509)

 

(2,085,326)

Income tax benefit (expense)

 

867

 

(927)

 

(3,526)

 

(2,655)

Net loss

$

(509,321)

$

(717,789)

$

(1,492,035)

$

(2,087,981)

Weighted-average shares outstanding

 

  

 

  

 

  

 

  

Basic

 

419,107,330

 

369,933,159

 

418,424,753

 

349,767,216

Diluted

 

419,107,330

 

369,933,159

 

418,424,753

 

349,767,216

Loss per share

 

  

 

  

 

  

 

  

Basic

$

(1.22)

$

(1.94)

$

(3.57)

$

(5.97)

Diluted

$

(1.22)

$

(1.94)

$

(3.57)

$

(5.97)

The accompanying notes are an integral part of these consolidated financial statements.

3

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Comprehensive Loss

(Unaudited)

(in thousands)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Net loss

$

(509,321)

$

(717,789)

$

(1,492,035)

$

(2,087,981)

Other comprehensive income (loss):

 

  

 

  

 

  

 

  

Shipboard Retirement Plan

 

94

 

99

 

2,570

 

197

Cash flow hedges:

 

 

 

 

Net unrealized gain (loss)

 

(90,503)

 

44,674

 

(51,199)

 

(28,363)

Amount realized and reclassified into earnings

 

(36,075)

 

13,542

 

(43,577)

 

35,380

Total other comprehensive income (loss)

 

(126,484)

 

58,315

 

(92,206)

 

7,214

Total comprehensive loss

$

(635,805)

$

(659,474)

$

(1,584,241)

$

(2,080,767)

The accompanying notes are an integral part of these consolidated financial statements.

4

Norwegian Cruise Line Holdings Ltd.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)

June 30, 

December 31, 

    

2022

    

2021

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

1,903,238

$

1,506,647

Short-term investments

240,000

Accounts receivable, net

 

598,256

 

1,167,473

Inventories

 

154,397

 

118,205

Prepaid expenses and other assets

 

475,856

 

269,243

Total current assets

 

3,131,747

 

3,301,568

Property and equipment, net

 

13,641,345

 

13,528,806

Goodwill

 

98,134

 

98,134

Trade names

 

500,525

 

500,525

Other long-term assets

 

1,741,449

 

1,300,804

Total assets

$

19,113,200

$

18,729,837

Liabilities and shareholders’ equity

 

  

 

  

Current liabilities:

 

  

 

  

Current portion of long-term debt

$

1,005,198

$

876,890

Accounts payable

 

100,336

 

233,172

Accrued expenses and other liabilities

 

1,596,725

 

1,059,034

Advance ticket sales

 

2,331,203

 

1,561,336

Total current liabilities

 

5,033,462

 

3,730,432

Long-term debt

 

12,239,362

 

11,569,700

Other long-term liabilities

 

938,561

 

997,055

Total liabilities

 

18,211,385

 

16,297,187

Commitments and contingencies (Note 10)

 

  

 

  

Shareholders’ equity:

 

  

 

  

Ordinary shares, $0.001 par value; 980,000,000 shares authorized; 419,116,812 shares issued and outstanding at June 30, 2022 and 416,891,915 shares issued and outstanding at December 31, 2021

 

419

 

417

Additional paid-in capital

 

7,567,129

 

7,513,725

Accumulated other comprehensive income (loss)

 

(377,292)

 

(285,086)

Accumulated deficit

 

(6,288,441)

 

(4,796,406)

Total shareholders’ equity

 

901,815

 

2,432,650

Total liabilities and shareholders’ equity

$

19,113,200

$

18,729,837

The accompanying notes are an integral part of these consolidated financial statements.

5

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

Six Months Ended

June 30, 

    

2022

    

2021

Cash flows from operating activities

 

  

 

  

Net loss

$

(1,492,035)

$

(2,087,981)

Adjustments to reconcile net loss to net cash used in operating activities:

 

  

 

  

Depreciation and amortization expense

391,320

 

372,445

(Gain) loss on derivatives

47

(22,534)

Loss on extinguishment of debt

 

188,433

 

601,539

Provision for bad debts and inventory obsolescence

 

2,500

 

7,211

Gain on involuntary conversion of assets

(1,880)

(1,817)

Share-based compensation expense

 

62,840

 

49,052

Net foreign currency adjustments

 

(12,063)

 

(3,767)

Changes in operating assets and liabilities:

 

 

Accounts receivable, net

 

566,265

 

(408,120)

Inventories

 

(36,748)

 

(9,956)

Prepaid expenses and other assets

 

(542,730)

 

(242,630)

Accounts payable

 

(127,188)

 

26,205

Accrued expenses and other liabilities

 

137,225

 

46,689

Advance ticket sales

 

755,189

 

191,609

Net cash used in operating activities

 

(108,825)

 

(1,482,055)

Cash flows from investing activities

 

  

 

  

Additions to property and equipment, net

 

(326,303)

 

(309,481)

Purchases of short-term investments

(385,000)

Proceeds from maturities of short-term investments

240,000

Cash paid on settlement of derivatives

(8,559)

Other

5,237

2,825

Net cash used in investing activities

 

(81,066)

 

(700,215)

Cash flows from financing activities

 

  

 

  

Repayments of long-term debt

 

(1,268,888)

 

(879,679)

Proceeds from long-term debt

 

2,073,175

 

1,223,110

Common share issuance proceeds, net

1,558,396

Proceeds from employee related plans

 

2,557

 

1,089

Net share settlement of restricted share units

 

(11,991)

 

(16,658)

Early redemption premium

 

(172,012)

 

(611,164)

Deferred financing fees

 

(36,359)

 

(28,166)

Net cash provided by financing activities

 

586,482

 

1,246,928

Net increase (decrease) in cash and cash equivalents

 

396,591

 

(935,342)

Cash and cash equivalents at beginning of period

 

1,506,647

 

3,300,482

Cash and cash equivalents at end of period

$

1,903,238

$

2,365,140

The accompanying notes are an integral part of these consolidated financial statements.

6

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(in thousands)

Three Months Ended June 30, 2022

Accumulated 

Additional

Other

Total

Ordinary 

Paid-in 

Comprehensive

Accumulated

Shareholders’

Shares

    

Capital

    

Income (Loss)

    

Deficit

    

Equity

Balance, March 31, 2022

 

$

419

$

7,537,111

$

(250,808)

$

(5,779,120)

$

1,507,602

Share-based compensation

 

30,048

30,048

Net share settlement of restricted share units

 

(30)

(30)

Other comprehensive loss, net

 

(126,484)

(126,484)

Net loss

 

(509,321)

(509,321)

Balance, June 30, 2022

$

419

$

7,567,129

$

(377,292)

$

(6,288,441)

$

901,815

Six Months Ended June 30, 2022

Accumulated 

Additional

Other

Total

Ordinary 

Paid-in 

Comprehensive

Accumulated

Shareholders’

    

Shares

    

Capital

    

Income (Loss)

    

Deficit

    

Equity

Balance, December 31, 2021

 

$

417

$

7,513,725

$

(285,086)

$

(4,796,406)

$

2,432,650

Share-based compensation

 

 

62,840

 

 

 

62,840

Issuance of shares under employee related plans

 

2

 

2,555

 

 

 

2,557

Net share settlement of restricted share units

 

 

(11,991)

 

 

 

(11,991)

Other comprehensive loss, net

 

 

 

(92,206)

 

 

(92,206)

Net loss

 

 

 

 

(1,492,035)

 

(1,492,035)

Balance, June 30, 2022

$

419

$

7,567,129

$

(377,292)

$

(6,288,441)

$

901,815

The accompanying notes are an integral part of these consolidated financial statements.

7

Norwegian Cruise Line Holdings Ltd.

Consolidated Statements of Changes in Shareholders’ Equity - Continued

(Unaudited)

(in thousands)

Three Months Ended June 30, 2021

Accumulated 

    

    

Additional

Other

Total

Ordinary 

Paid-in 

Comprehensive

Accumulated

Shareholders’

Shares

    

Capital

    

Income (Loss)

    

Deficit

    

Equity

Balance, March 31, 2021

 

$

370

$

6,328,120

$

(291,218)

$

(1,660,011)

$

4,377,261

Share-based compensation

 

 

22,451

 

 

 

22,451

Common share issuance proceeds, net

(16)

(16)

Net share settlement of restricted share units

 

 

(615)

 

 

 

(615)

Other

(20,355)

(20,355)

Other comprehensive income, net

 

 

 

58,315

 

 

58,315

Net loss

 

(717,789)

(717,789)

Balance, June 30, 2021

$

370

$

6,329,585

$

(232,903)

$

(2,377,800)

$

3,719,252

Six Months Ended June 30, 2021

    

Accumulated 

    

    

Additional

Other

Total

Ordinary 

Paid-in 

Comprehensive

Accumulated

Shareholders’

    

Shares

    

Capital

    

Income (Loss)

    

Deficit

    

Equity

Balance, December 31, 2020

 

$

316

$

4,889,355

$

(240,117)

$

(295,449)

$

4,354,105

Share-based compensation

 

 

49,052

 

 

 

49,052

Issuance of shares under employee related plans

 

 

1,089

 

 

 

1,089

Common share issuance proceeds, net

 

54

1,558,342

1,558,396

Net share settlement of restricted share units

 

 

(16,658)

 

 

 

(16,658)

Cumulative change in accounting policy

(131,240)

5,630

(125,610)

Other

(20,355)

(20,355)

Other comprehensive income, net

 

 

7,214

 

 

7,214

Net loss

 

(2,087,981)

(2,087,981)

Balance, June 30, 2021

$

370

$

6,329,585

$

(232,903)

$

(2,377,800)

$

3,719,252

The accompanying notes are an integral part of these consolidated financial statements.

8

Norwegian Cruise Line Holdings Ltd.

Notes to Consolidated Financial Statements

(Unaudited)

Unless otherwise indicated or the context otherwise requires, references in this report to (i) the “Company,” “we,” “our” and “us” refer to NCLH (as defined below) and its subsidiaries, (ii) “NCLC” refers to NCL Corporation Ltd., (iii) “NCLH” refers to Norwegian Cruise Line Holdings Ltd., (iv) “Norwegian Cruise Line” or “Norwegian” refers to the Norwegian Cruise Line brand and its predecessors, (v) “Oceania Cruises” refers to the Oceania Cruises brand and (vi) “Regent” refers to the Regent Seven Seas Cruises brand.

References to the “U.S.” are to the United States of America, and “dollar(s)” or “$” are to U.S. dollars, the “U.K.” are to the United Kingdom and “euro(s)” or “€” are to the official currency of the Eurozone. We refer you to “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations— Terminology” for the capitalized terms used and not otherwise defined throughout these notes to consolidated financial statements.

1.   Description of Business and Organization

We are a leading global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. As of June 30, 2022, we had 28 ships with approximately 59,150 Berths and had orders for nine additional ships to be delivered through 2027. Due to COVID-19, we temporarily suspended all global cruise voyages from March 2020 until July 2021, when we resumed cruise voyages on a limited basis. We refer you to Note 2 – “Summary of Significant Accounting Policies” for further information.

Norwegian Prima was delivered in July 2022. We refer you to Note 14 – “Subsequent Event” for additional

information. We have five additional Prima Class Ships on order with expected delivery dates from 2023 through 2027. We have one Explorer Class Ship on order for delivery in 2023. We have two Allura Class Ships on order for delivery in 2023 and 2025. These additions to our fleet will increase our total Berths to approximately 83,000.

2.   Summary of Significant Accounting Policies

Liquidity and Management’s Plan

Due to the impact of COVID-19, travel restrictions and limited access to ports around the world, in March 2020, the Company implemented a voluntary suspension of all cruise voyages across its three brands. In the third quarter of 2021, we began a phased relaunch of certain cruise voyages with our ships initially operating at reduced occupancy levels. In early May 2022, the Company completed the phased relaunch of its entire fleet with all ships now in operation with guests on board.

Significant events affecting travel typically have an impact on demand for cruise vacations, with the full extent of the impact determined by the length of time the event influences travel decisions. The level of occupancy on our ships and the percentage of our fleet in service will depend on a number of factors including, but not limited to, the duration and extent of the COVID-19 pandemic, further resurgences of COVID-19 or the emergence of other public health crises, our ability to comply with governmental regulations and implement new health and safety protocols, port availability, travel restrictions, bans and advisories, and our ability to staff our ships. In addition, as a result of conditions associated with the COVID-19 pandemic and other global events, such as Russia’s invasion of Ukraine and actions taken by the United States and other governments in response to the invasion, the global economy, including the financial and credit markets, has recently experienced significant volatility and disruptions, including increases in inflation rates, fuel prices, and interest rates. These conditions have resulted, and may continue to result, in increased expenses and may also impact travel or consumer discretionary spending. 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.

9

The estimation of our future cash flow projections includes numerous assumptions that are subject to various risks and uncertainties. Our principal assumptions for future cash flow projections include:

Expected gradual return to historical occupancy levels;
Expected increase in revenue per passenger cruise day through a combination of both passenger ticket and onboard revenue as compared to 2019;
Forecasted cash collections in accordance with the terms of our credit card processing agreements (see Note 10 - “Commitments and Contingencies”);
Expected continued expenses to maintain and comply with evolving health and safety protocols; and
Expected continued higher fuel prices and the impact of inflation.

We cannot make assurances that our assumptions used to estimate our liquidity requirements will not change due to the dynamic nature of the current economic landscape. Accordingly, the full effect of the COVID-19 pandemic and other global events impacting macroeconomic conditions and travel and consumer discretionary spending, including Russia’s invasion of Ukraine, on our financial performance and financial condition cannot be quantified at this time. We have made reasonable estimates and judgments of the impact of these events within our financial statements and there may be material changes to those estimates in future periods. We have taken actions to improve our liquidity, including completing various capital market transactions and making capital expenditure and operating expense reductions, and we expect to continue to pursue further opportunities to improve our liquidity.

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

Basis of Presentation

The accompanying consolidated financial statements are unaudited and, in our opinion, contain all normal recurring adjustments necessary for a fair statement of the results for the periods presented.

Our operations are seasonal and results for interim periods are not necessarily indicative of the results for the entire fiscal year. Historically, demand for cruises has been strongest during the Northern Hemisphere’s summer months; however, our cruise voyages were completely suspended from March 2020 until July 2021 due to the COVID-19 pandemic and our resumption of cruise voyages was phased in gradually. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2021, which are included in our most recent Annual Report on Form 10-K filed with the SEC on March 1, 2022.

Revisions to Previously Reported Quarterly Financial Statements

During the fourth quarter of 2021, the Company identified an error in its consolidated balance sheet as of June 30, 2021 and consolidated statement of cash flows for the six months ended June 30, 2021. Based on their nature, certain amounts shown as cash and cash equivalents should have been classified as short-term investments. We have determined that these errors were not material to the previously issued interim financial statements for the period ended June 30, 2021. 

10

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

Six months ended June 30, 2021

Previously

    

    

As

Reported

Adjustments

Reported

Cash flows from investing activities

 

  

  

 

  

Purchases of short-term investments

$

$

(385,000)

$

(385,000)

Net cash used in investing activities

(315,215)

(385,000)

(700,215)

Net increase (decrease) in cash and cash equivalents

(550,342)

(385,000)

(935,342)

Cash and cash equivalents at end of period

2,750,140

(385,000)

2,365,140

Loss Per Share

A reconciliation between basic and diluted loss per share was as follows (in thousands, except share and per share data):

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Net loss

$

(509,321)

$

(717,789)

$

(1,492,035)

$

(2,087,981)

Basic weighted-average shares outstanding

 

419,107,330

 

369,933,159

 

418,424,753

 

349,767,216

Dilutive effect of share awards

 

 

 

 

Diluted weighted-average shares outstanding

 

419,107,330

 

369,933,159

 

418,424,753

 

349,767,216

Basic loss per share

$

(1.22)

$

(1.94)

$

(3.57)

$

(5.97)

Diluted loss per share

$

(1.22)

$

(1.94)

$

(3.57)

$

(5.97)

For the three months ended June 30, 2022 and 2021, a total of 97.7 million and 99.2 million, respectively, and for the six months ended June 30, 2022 and 2021, a total of 92.1 million and 110.0 million, respectively, shares have been excluded from diluted weighted-average shares outstanding because the effect of including them would have been anti-dilutive.

Foreign Currency

The majority of our transactions are settled in U.S. dollars. We remeasure assets and liabilities denominated in foreign currencies at exchange rates in effect at the balance sheet date. The resulting gains or losses are recognized in our consolidated statements of operations within other income (expense), net. We recognized gains of $36.4 million and $0.2 million for the three months ended June 30, 2022 and 2021, respectively, and gains of $44.7 million and $5.0 million for the six months ended June 30, 2022 and 2021, respectively, related to remeasurement of assets and liabilities denominated in foreign currencies.

Depreciation and Amortization Expense

The amortization of deferred financing fees is included in depreciation and amortization expense in the consolidated statements of cash flows; however, for purposes of the consolidated statements of operations they are included in interest expense, net.

Accounts Receivable, Net

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

Recently Issued Accounting Guidance

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial

11

Reporting (“ASU 2020-04”), which provided guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying GAAP to contracts, hedging relationships and other transactions impacted by reference rate reform. The provisions apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 are optional and are effective from March 12, 2020 through December 31, 2022. As of June 30, 2022, we have not adopted any expedients and exceptions under ASU 2020-04. We will continue to evaluate the impact of ASU 2020-04 on our consolidated financial statements.

3.   Revenue Recognition

Disaggregation of Revenue

Revenue and cash flows are affected by economic factors in various geographical regions. Revenues by destination were as follows (in thousands):

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2022

North America

$

673,503

$

1,160,938

Europe

 

499,917

 

524,714

Asia-Pacific

 

13,362

 

21,654

South America

399

1,815

Total revenue

$

1,187,181

$

1,709,121

Amounts for the comparative three and six months ended June 30, 2021 are excluded as the information is not meaningful. North America includes the U.S., the Caribbean, Canada and Mexico. Europe includes the Baltic region, Canary Islands and Mediterranean. Asia-Pacific includes Australia, New Zealand and Asia.

Segment Reporting

We have concluded that our business has a single reportable segment. Each brand, Norwegian, Oceania Cruises and Regent, constitutes a business for which discrete financial information is available and management regularly reviews the brand level operating results and, therefore, each brand is considered an operating segment. Our operating segments have similar economic and qualitative characteristics, including similar long-term margins and similar products and services; therefore, we aggregate all of the operating segments into one reportable segment.

Although we sell cruises on an international basis, our passenger ticket revenue is primarily attributed to U.S.-sourced guests who make reservations in the U.S. Revenue attributable to U.S.-sourced guests has approximated 80-87% of total revenue over the preceding three fiscal years. No other individual country’s revenues exceed 10% in any given period.

Contract Balances

Receivables from customers are included within accounts receivable, net. As of June 30, 2022, our receivables from customers were $62.5 million.

Our cancellation policies permit certain guests to cancel cruises booked within certain windows for specified time periods up to 15 days prior to departure or in the event of a positive COVID-19 test, and the guests will receive future cruise credits. Certain cruises booked for certain periods will be permitted a 60-day or 75-day cancellation window for refunds. Future cruise credits that have been issued are generally valid for any sailing through December 31, 2022, and we may extend this offer. The future cruise credits are not contracts, and therefore, guests who elected this option are excluded from our contract liability balance; however, the credit for the original amount paid is included in advance ticket sales.

12

Our contract liabilities are included within advance ticket sales. As of June 30, 2022 and December 31, 2021, our contract liabilities were $1.4 billion and $161.8 million, respectively. Of the amounts included within contract liabilities as of June 30, 2022, approximately 40% were refundable in accordance with our cancellation policies. Of the deposits included within advance ticket sales, the vast majority are refundable in accordance with our cancellation policies and it is uncertain to what extent guests may request refunds. Refunds payable to guests are included in accounts payable. For the six months ended June 30, 2022, $120.2 million of revenue recognized was included in the contract liability balance at the beginning of the period.

For cruise vacations that had been cancelled by us due to COVID-19, during the three months ended June 30, 2021, approximately $11.2 million, and during the six months ended June 30, 2022 and 2021, approximately $0.3 million and $26.0 million, respectively, in costs to obtain these contracts, consisting of protected commissions, including those paid to employees, and credit card fees, were recognized in earnings.

4.   Leases

Operating lease balances were as follows (in thousands):

    

Balance Sheet location

    

June 30, 2022

 

December 31, 2021

Operating leases

 

  

 

  

  

Right-of-use assets

 

Other long-term assets

$

794,680

$

794,187

Current operating lease liabilities

 

Accrued expenses and other liabilities

40,278

34,407

Non-current operating lease liabilities

 

Other long-term liabilities

667,126

670,688

5.   Accumulated Other Comprehensive Income (Loss)

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

Six Months Ended June 30, 2022

    

    

Change

Accumulated

Change

Related to

Other

Related to

Shipboard

Comprehensive

Cash Flow

Retirement

    

Income (Loss)

    

Hedges

 Plan

Accumulated other comprehensive income (loss) at beginning of period

$

(285,086)

$

(279,696)

$

(5,390)

  

Current period other comprehensive income (loss) before reclassifications

 

(48,818)

 

(51,199)

  

 

2,381

  

Amounts reclassified into earnings

 

(43,388)

 

(43,577)

(1)

 

189

(2)

Accumulated other comprehensive income (loss) at end of period

$

(377,292)

$

(374,472)

(3)

$

(2,820)

  

13

Accumulated other comprehensive income (loss) for the six months ended June 30, 2021 was as follows (in thousands):

Six Months Ended June 30, 2021

    

    

Change

 

Accumulated

Change

Related to

Other

Related to

Shipboard

Comprehensive

Cash Flow

Retirement

    

Income (Loss)

    

Hedges

 Plan

Accumulated other comprehensive income (loss) at beginning of period

 

$

(240,117)

$

(234,334)

$

(5,783)

 

Current period other comprehensive loss before reclassifications

 

 

(28,363)

 

 

(28,363)

  

 

 

Amounts reclassified into earnings

 

 

35,577

 

 

35,380

(1)

 

197

(2)

Accumulated other comprehensive income (loss) at end of period

 

$

(232,903)

 

$

(227,317)

$

(5,586)

 

(1)We refer you to Note 8 “Fair Value Measurements and Derivatives” for the affected line items in the consolidated statements of operations.
(2)Amortization of prior-service cost and actuarial loss reclassified to other income (expense), net.
(3)Includes $87.9 million of gain expected to be reclassified into earnings in the next 12 months.

6.   Property and Equipment, net

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

7.   Long-Term Debt

In February 2022, NCLC conducted a private offering (the “Notes Offering”) of $1,000 million in aggregate principal amount of 5.875% senior secured notes due 2027 (the “2027 Secured Notes”) and $600 million in aggregate principal amount of 7.750% senior notes due 2029 (the “2029 Unsecured Notes”).

The 2027 Secured Notes are jointly and severally guaranteed on a senior secured basis by Pride of Hawaii, LLC, Norwegian Epic, Ltd. and Sirena Acquisition. The 2027 Secured Notes and the related guarantees are secured by a first-priority interest in, among other things and subject to certain agreed security principles, three of our vessels, namely the Norwegian Jade vessel, the Norwegian Epic vessel and the Sirena vessel.

NCLC may redeem the 2027 Secured Notes at its option, in whole or in part, at any time and from time to time prior to February 15, 2024, at a “make-whole” redemption price, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. NCLC may redeem the 2027 Secured Notes at its option, in whole or in part, at any time and from time to time on or after February 15, 2024, at the redemption prices set forth in the indenture governing the 2027 Secured Notes, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. At any time and from time to time prior to February 15, 2024, NCLC may choose to redeem up to 40% of the aggregate principal amount of the 2027 Secured Notes with the net proceeds of certain equity offerings, subject to certain restrictions, at a redemption price equal to 105.875% of the principal amount of the 2027 Secured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60% of the aggregate principal amount of the 2027 Secured Notes issued remains outstanding following such redemption.

NCLC may redeem the 2029 Unsecured Notes at its option, in whole or in part, at any time and from time to time prior to November 15, 2028, at a “make-whole” redemption price, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. NCLC may redeem the 2029 Unsecured Notes at its option, in whole or in part, at any time and from time to time on or after November 15, 2028, at a redemption price equal to 100% of the principal amount of 2029 Unsecured Notes redeemed, plus accrued and unpaid interest and additional amounts, if any, to, but excluding, the redemption date. At any time and from time to time prior to February 15, 2025, NCLC may choose to redeem up to 40% of the aggregate principal amount of the 2029 Unsecured Notes with the net proceeds of certain

14

equity offerings, subject to certain restrictions, at a redemption price equal to 107.750% of the principal amount of the 2029 Unsecured Notes redeemed plus accrued and unpaid interest to, but excluding, the redemption date, so long as at least 60% of the aggregate principal amount of the 2029 Unsecured Notes issued remains outstanding following such redemption.

The indentures governing the 2027 Secured Notes and the 2029 Unsecured Notes include requirements that, among other things and subject to a number of qualifications and exceptions, restrict the ability of NCLC and its restricted subsidiaries, as applicable, to (i) incur or guarantee additional indebtedness; (ii) pay dividends or distributions on, or redeem or repurchase, equity interests and make other restricted payments; (iii) make investments; (iv) consummate certain asset sales; (v) engage in certain transactions with affiliates; (vi) grant or assume certain liens; and (vii) consolidate, merge or transfer all or substantially all of their assets.

In February 2022, NCLC also conducted a private offering (the “Exchangeable Notes Offering”) of $473.2 million in aggregate principal amount of 2.5% exchangeable senior notes due February 15, 2027 (the “2027 2.5% Exchangeable Notes”). The 2027 2.5% Exchangeable Notes are guaranteed by NCLH on a senior basis. At their option, holders may exchange their 2027 2.5% Exchangeable Notes for, at the election of NCLC, cash, ordinary shares of NCLH or a combination of cash and ordinary shares of NCLH, at any time prior to the close of business on the business day immediately preceding August 15, 2026, subject to the satisfaction of certain conditions and during certain periods, and on or after August 15, 2026 until the close of business on the business day immediately preceding the maturity date, regardless of whether such conditions have been met. If NCLC elects to satisfy its exchange obligation solely in ordinary shares or in a combination of ordinary shares and cash, upon exchange, the 2027 2.5% Exchangeable Notes will convert into redeemable preference shares of NCLC, which will be immediately and automatically exchanged, for each $1,000 principal amount of exchanged 2027 2.5% Exchangeable Notes, into a number of NCLH’s ordinary shares based on the exchange rate. The exchange rate will initially be 28.9765 ordinary shares per $1,000 principal amount of 2027 2.5% Exchangeable Notes (equivalent to an initial exchange price of approximately $34.51 per ordinary share). The maximum exchange rate is 44.1891 and reflects potential adjustments to the initial exchange rate, which would only be made in the event of certain make-whole fundamental changes or tax redemption events. The exchange rate referred to above is also subject to adjustment for any stock split, stock dividend or similar transaction. The 2027 2.5% Exchangeable Notes pay interest at 2.5% per annum, semiannually on February 15 and August 15 of each year, to holders of record at the close of business on the immediately preceding February 1 and August 1, respectively.

NCLC has used, or will use, the net proceeds from the Notes Offering and the Exchangeable Notes Offering to redeem (the “Redemption”) all of the outstanding 2024 Senior Secured Notes and 2026 Senior Secured Notes and to make scheduled principal payments on debt maturing in 2022, including, in each case, to pay any accrued and unpaid interest thereon, as well as related premiums, fees and expenses. Simultaneously with the Redemption, and pursuant to certain provisions contained in the indentures governing the 2026 Senior Unsecured Notes and the 2028 Senior Unsecured Notes, each of the guarantors party to such indentures were released from their obligations thereunder. The resulting losses on extinguishments, which are recognized in interest expense, net, were $188.4 million for the six months ended June 30, 2022.

In July 2022, NCLC entered into a $1 billion amended and restated commitment letter with the purchasers named therein (collectively, the “Commitment Parties”), which supersedes a $1 billion commitment letter previously executed in November 2021. The amended commitment has been extended through March 31, 2023. Under the amended commitment, the Commitment Parties have agreed to purchase an aggregate of $1 billion of notes at NCLC’s option. NCLC has the option to make up to two draws, in which case NCLC will issue an aggregate of (i) $450 million principal amount of 8.0% senior secured notes due 2025 (the “Secured Notes”) and (ii) $550 million principal amount of 8.0% senior notes due three years after the issue date (the “Unsecured Notes” and, together with the Secured Notes, the “Notes”). The Secured Notes must be issued prior to the Unsecured Notes, and the principal amount of Secured Notes issuable will be increased to the extent that NCLC obtains an increase in obligations that may be secured by liens on collateral pursuant to the terms and conditions of NCLC’s debt agreements (with the principal amount of Unsecured Notes decreased commensurately). If drawn, the Secured Notes will be secured by first-priority interests in, among other things and subject to certain agreed security principles, shares of capital stock in certain guarantors, our material intellectual property and two islands that we use in the operations of our cruise business. The Secured Notes will also be guaranteed by our subsidiaries that own the property that secures the Secured Notes as well as certain additional

15

subsidiaries whose assets do not secure the Secured Notes if drawn. If drawn, the Notes will be subject to a quarterly duration fee of 1.5% with respect to the Secured Notes and a semi-annual duration fee of 3.0% with respect to the Unsecured Notes, as well as draw fees of 3.0% with respect to the Secured Notes and 5.0% with respect to the Unsecured Notes. As of August 9, 2022, the Company has not drawn under this commitment.

Exchangeable Notes

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