UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | |||
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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 | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Revenue |
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Passenger ticket | $ | | $ | | $ | | $ | | ||||
Onboard and other |
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Total revenue |
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Cruise operating expense |
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Commissions, transportation and other |
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Onboard and other |
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Payroll and related |
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Fuel |
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Food |
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Other |
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Total cruise operating expense |
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Other operating expense |
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Marketing, general and administrative |
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Depreciation and amortization |
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Total other operating expense |
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Operating income |
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Non-operating income (expense) |
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Interest expense, net |
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Other income (expense), net |
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Total non-operating income (expense) |
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Net income before income taxes |
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Income tax benefit (expense) |
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Net income | $ | | $ | | $ | | $ | | ||||
Weighted-average shares outstanding |
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Basic |
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Diluted |
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Earnings per share |
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Basic | $ | $ | $ | $ | ||||||||
Diluted | $ | $ | $ | $ |
The accompanying notes are an integral part of these consolidated financial statements.
3
Norwegian Cruise Line Holdings Ltd.
Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands)
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Net income | $ | | $ | | $ | | $ | | ||||
Other comprehensive income (loss): |
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Shipboard Retirement Plan |
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Cash flow hedges: |
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Net unrealized gain (loss) |
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Amount realized and reclassified into earnings |
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Total other comprehensive income (loss) |
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Total comprehensive income | $ | | $ | | $ | | $ | |
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)
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
Assets |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net |
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Inventories |
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Prepaid expenses and other assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Trade names |
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Other long-term assets |
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Total assets | $ | | $ | | ||
Liabilities and shareholders’ equity |
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Current liabilities: |
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Current portion of long-term debt | $ | | $ | | ||
Accounts payable |
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Accrued expenses and other liabilities |
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Advance ticket sales |
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Total current liabilities |
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Long-term debt |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 11) |
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Shareholders’ equity: |
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Ordinary shares, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
| ( |
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Accumulated deficit |
| ( |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity | $ | | $ | |
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)
Nine Months Ended | ||||||
September 30, | ||||||
| 2024 |
| 2023 | |||
Cash flows from operating activities |
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Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization expense | |
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(Gain) loss on derivatives | ( | | ||||
Loss on extinguishment of debt |
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Provision for bad debts and inventory obsolescence |
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Gain on involuntary conversion of assets | ( | ( | ||||
Share-based compensation expense |
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Net foreign currency adjustments on euro-denominated debt |
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Changes in operating assets and liabilities: |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other assets |
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Accounts payable |
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Accrued expenses and other liabilities |
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Advance ticket sales |
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Net cash provided by operating activities |
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Cash flows from investing activities |
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Additions to property and equipment, net |
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Cash paid on settlement of derivatives | — | ( | ||||
Acquisition, net of cash acquired | ( | — | ||||
Other | | | ||||
Net cash used in investing activities |
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Cash flows from financing activities |
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Repayments of long-term debt |
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Proceeds from long-term debt |
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Proceeds from employee related plans |
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Net share settlement of restricted share units |
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Early redemption premium |
| ( |
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Deferred financing fees |
| ( |
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Net cash provided by (used in) financing activities |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period | $ | | $ | |
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 September 30, 2024 | |||||||||||||||
Accumulated | |||||||||||||||
Additional | Other | Total | |||||||||||||
Ordinary | Paid-in | Comprehensive | Accumulated | Shareholders’ | |||||||||||
Shares |
| Capital |
| Income (Loss) |
| Deficit |
| Equity | |||||||
Balance, June 30, 2024 |
| $ | | $ | | $ | ( | $ | ( | $ | | ||||
Share-based compensation |
| — | | — | — | | |||||||||
Net share settlement of restricted share units |
| — | ( | — | — | ( | |||||||||
Other comprehensive loss, net |
| — | — | ( | — | ( | |||||||||
Net income |
| — | — | — | | | |||||||||
Balance, September 30, 2024 | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Nine Months Ended September 30, 2024 | |||||||||||||||
Accumulated | |||||||||||||||
Additional | Other | Total | |||||||||||||
Ordinary | Paid-in | Comprehensive | Accumulated | Shareholders’ | |||||||||||
| Shares |
| Capital |
| Income (Loss) |
| Deficit |
| Equity | ||||||
Balance, December 31, 2023 |
| $ | | $ | | $ | ( | $ | ( | $ | | ||||
Share-based compensation |
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Issuance of shares under employee related plans |
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Common share issuance for NCLC exchangeable notes | | | — | — | | ||||||||||
Net share settlement of restricted share units |
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| ( |
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Other comprehensive loss, net |
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Net income |
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Balance, September 30, 2024 | $ | | $ | | $ | ( | $ | ( | $ | |
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 September 30, 2023 | |||||||||||||||
Accumulated |
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Additional | Other | Total | |||||||||||||
Ordinary | Paid-in | Comprehensive | Accumulated | Shareholders’ | |||||||||||
Shares |
| Capital |
| Income (Loss) |
| Deficit |
| Equity | |||||||
Balance, June 30, 2023 |
| $ | | $ | | $ | ( | $ | ( | $ | | ||||
Share-based compensation |
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Issuance of shares under employee related plans |
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Net share settlement of restricted share units |
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Common share issuance for NCLC exchangeable notes | — | | — | — | | ||||||||||
Other comprehensive income, net |
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Net income |
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Balance, September 30, 2023 | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Nine Months Ended September 30, 2023 | |||||||||||||||
| Accumulated |
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Additional | Other | Total | |||||||||||||
Ordinary | Paid-in | Comprehensive | Accumulated | Shareholders’ | |||||||||||
| Shares |
| Capital |
| Income (Loss) |
| Deficit |
| Equity | ||||||
Balance, December 31, 2022 |
| $ | | $ | | $ | ( | $ | ( | $ | | ||||
Share-based compensation |
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Issuance of shares under employee related plans |
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Common share issuance for NCLC exchangeable notes | — | | — | — | | ||||||||||
Net share settlement of restricted share units |
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| ( |
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Other comprehensive income, net | — |
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Net income |
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Balance, September 30, 2023 | $ | | $ | | $ | ( | $ | ( | $ | |
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 September 30, 2024, we had
We have
2. Summary of Significant Accounting Policies
Liquidity
As of September 30, 2024, we had liquidity of approximately $
We will continue to pursue various opportunities to refinance future debt maturities to reduce interest expense and/or to extend the maturity dates associated with our existing indebtedness and obtain relevant financial covenant amendments or waivers, if needed.
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. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2023, which are included in our most recent Annual Report on Form 10-K filed with the SEC on February 28, 2024.
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Earnings Per Share
Basic earnings per share is computed by dividing net income by the basic weighted-average number of shares outstanding during each period. Diluted earnings per share is computed by dividing net income and assumed conversion of exchangeable notes by diluted weighted-average shares outstanding.
A reconciliation between basic and diluted earnings per share was as follows (in thousands, except share and per share data):
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Net income - Basic EPS | $ | | $ | | $ | | $ | | ||||
Effect of dilutive securities - exchangeable notes | | | | | ||||||||
Net income and assumed conversion of exchangeable notes - Diluted EPS | $ | | $ | | $ | | $ | | ||||
Basic weighted-average shares outstanding |
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Dilutive effect of share awards |
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Dilutive effect of exchangeable notes | | | | | ||||||||
Diluted weighted-average shares outstanding |
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Basic EPS | $ | | $ | | $ | | $ | | ||||
Diluted EPS | $ | | $ | | $ | | $ | |
Each exchangeable note (see Note 8 – “Long-Term Debt”) is individually evaluated for its dilutive or anti-dilutive impact on EPS as determined under the if-converted method. Only the interest expense and weighted average shares for exchangeable notes that are dilutive are included in the effect of dilutive securities above. During the nine months ended September 30, 2023, the 2024 Exchangeable Notes, 2025 Exchangeable Notes and 2027 2.5% Exchangeable Notes were anti-dilutive. Share awards are evaluated for a dilutive or anti-dilutive impact on EPS using the treasury stock method. For the three months ended September 30, 2024 and 2023, a total of
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 a loss of $
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 $
10
Recently Issued Accounting Guidance
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 includes additional disclosures on an interim and annual basis and requires that the disclosures be applied to public entities that have a single reportable segment. These provisions are effective for fiscal years beginning after December 15, 2023 and interim periods after December 15, 2024. ASU 2023-07 shall be applied retrospectively unless it is impracticable to do so. We do not expect the adoption of ASU 2023-07 to have a material impact on our consolidated financial statements other than the expanded footnote disclosure.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information as well as certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this update are effective for annual periods beginning after December 15, 2024 and should be applied on a prospective basis. We are evaluating the impact of ASU 2023-09 on our notes to the consolidated financial statements.
3. Acquisition
On April 25, 2024, Norwegian acquired
The preliminary purchase price was allocated as follows (in thousands):
Assets, other than goodwill | $ | | |
Goodwill |
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Liabilities |
| ( | |
Total consideration allocated, net of $ | $ | |
As of September 30, 2024, the measurement period pertaining to the acquisition remains open and is subject to further adjustment. The acquisition includes deferred consideration, which is currently considered probable of payment in full; however, if new information arises, a change in consideration could impact our goodwill or liabilities. The acquisition of IMA does not have a material impact on the Company’s consolidated statements of operations.
4. 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 | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
North America | $ | | $ | | $ | | $ | | ||||
Europe |
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Asia-Pacific |
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Other | | | | | ||||||||
Total revenue | $ | | $ | | $ | | $ | |
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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. Other includes all other international territories.
Segment Reporting and Geographic Concentration
We have concluded that our business has a single 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 through the U.S. Revenue attributable to U.S.-sourced guests has approximated
Contract Balances
Receivables from customers are included within accounts receivable, net. As of September 30, 2024 and December 31, 2023, our receivables from customers were $
Future cruise credits that have been issued as face value reimbursement for cancelled bookings due to COVID-19 are approximately $
Our contract liabilities are included within advance ticket sales. As of September 30, 2024 and December 31, 2023, our contract liabilities were $
5. Leases
Operating lease balances were as follows (in thousands):
| Balance Sheet location |
| September 30, 2024 |
| December 31, 2023 | |||
Operating leases |
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Right-of-use assets |
| $ | | $ | | |||
Current operating lease liabilities |
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Non-current operating lease liabilities |
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6. Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income (loss) for the nine months ended September 30, 2024 was as follows (in thousands):
Nine Months Ended September 30, 2024 | ||||||||||
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| 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 | $ | ( | $ | ( | $ | |
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Current period other comprehensive loss before reclassifications |
| ( |
| ( |
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| — |
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Amounts reclassified into earnings |
| ( |
| ( | (1) |
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Accumulated other comprehensive income (loss) at end of period | $ | ( | $ | ( | (3) | $ | |
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Nine Months Ended September 30, 2023 | ||||||||||
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| Change |
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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 |
| $ | ( | $ | ( | $ | |
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Current period other comprehensive income before reclassifications |
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| — |
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Amounts reclassified into earnings |
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| ( |
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| ( | (1) |
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Accumulated other comprehensive income (loss) at end of period |
| $ | ( |
| $ | ( | $ | |
|
(1) | We refer you to Note 9 – “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 $ |
7.Property and Equipment, Net
Property and equipment, net increased $
8. Long-Term Debt
In February 2024, NCLC and the purchasers named therein (collectively, the “Commitment Parties”) entered into a third amended and restated commitment letter (the “third amended commitment letter”), which became effective in March 2024. The third amended commitment letter amended and restated the commitment letter dated February 22, 2023 and extended the commitments thereunder through March 2025. Pursuant to the third amended commitment letter, the Commitment Parties have agreed to purchase from NCLC an aggregate principal amount of $
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subject to a one-time structuring fee of
In connection with the execution of the third amended commitment letter, NCLC agreed to repurchase all of the outstanding $
In November 2023, we executed an agreement for a commitment of €
In September 2024, NCLC issued $
The net proceeds for the 2030 Notes, after deducting the initial purchasers’ discount but before deducting estimated fees and expenses, together with cash on hand, were used to redeem $
Exchangeable Notes
The following is a summary of NCLC’s exchangeable notes as of September 30, 2024 (in thousands):
Unamortized | ||||||||||||||
| Principal | Deferred | Net Carrying | Fair Value | ||||||||||
| Amount |
| Financing Fees |
| Amount |
| Amount |
| Leveling | |||||
2025 Exchangeable Notes (1) | $ | | $ | ( | $ | | $ | | Level 2 | |||||
2027 1.125% Exchangeable Notes | | ( | | | Level 2 | |||||||||
2027 2.5% Exchangeable Notes | |